Coyote Blog

We already have an economic, utility-scale electrical generation technology that does not produce CO2 -- nuclear power.  We do not have a second choice that is anywhere close to ready.  Wind is stupid, for reasons I have written about before.   Solar has its uses and I am all for the march of technology on solar panels.  But they are not going to keep the world's economy growing or, more importantly, prevent wholesale poverty and starvation and misery from energy shortages.

Most peoples' negative perceptions of nuclear come because the technology that is still in use is over 60 years old.  It is not one generation out of date but two or three behind the capabilities that currently exist to build safe, clean reactors. I have for years made the argument that government forcing of certain endeavors (nuclear power, space flight, transcontinental railroad) ahead of their natural development curve actually tends to set back the commercial development of them, and I think this was the case with nuclear.  To the extent that waste and safety problems persist with nuclear (and they really don't), R&D to solve them would be much more productive and less expensive than investments in Solyndra.

Of course we probably won't do this, because "knuckling under to the irrational fears of your Left-leaning political base" is the new definition of "following the science."

By the way, here is a way to think about the nuclear waste problem:  We all pay attention to nuclear waste because it and its negative effects are concentrated in small, heavily-impacted sites.  We don't pay attention to coal-burning waste, or didn't until recently, because it is distributed all around the world's atmosphere.  But I would argue the nuclear waste problem is much better, because it is much easier to mitigate harmful problems in a 100-acre site, rather than in the entire Earth's atmosphere.**

**Postscript -- pretty sure I first heard this expressed way back in the late 1970s, when US energy policy (under both Ford and Carter) was to promote coal, even to the extent of banning new power plants using cleaner fuels.  I wish I can remember who said it and give them credit because it really was prescient.

So apparently Disney and the Mandalorian team have kicked Gina Carano off the show.  In the past she has aggravated the Left by expressing skepticism about modern Transgender ideology.  But according to the WSJ, the immediate cause for the final parting of the ways was this:

On Tuesday, Ms. Carano shared an Instagram story, or a post that disappears, that read in part: “most people today don’t realize that to get to the point where Nazi soldiers could easily round up thousands of Jews, the government first made their own neighbors hate them simply for being Jews. How is that any different from hating someone for their political views,” according to a report in Variety on Wednesday.

Perhaps this is missing some context, but I have a hard time disagreeing much with this statement, much less advocating someone be subject to the modern woke blacklist.  As I understand the modern Hollywood rules,

• It is wrong to employ any actor for a role, say, as a deaf gay Aleut unless the actor is also deaf, gay and Aleut
• It is simultaneously wrong to cast a tough, blunt, unsubtle, possibly non-empathetic actress who has  strong feelings on totalitarian governments as a character that is tough, blunt, unsubtle, not particularly empathetic, and has strong feelings about the totalitarian Imperial government.

Of course, another thing the Nazis did was blacklist Jews from the public square and most any sort of employment.

I just bought a company with a few seasonal gift shops and camp stores but they have this expensive kludgy NCR Point of sale system they use.  It reminds me of doing business with IBM in the 80's.   Apparently every piece of hardware costs a fortune -- I kid you not an add-on credit card chip reader was priced at $1000 -- and they have to have their own server somewhere running software rather than a cloud solution.

I want a simple cloud-based POS system that might be appropriate to a 3000-sq-ft store with a half million in sales a year.  Anyone have good experience with one.  Hit the contact button or email me at coyote - at - this blogs name dot com.   Needs to be more capable than square, maybe several hundreds sku's, but not some mainframe system that might have been developed for Sears.  I am not a merchandising / retail guy at heart so I don't even know where to start.

COVID has not been easy, but our service business has managed to continue to serve customers in the same ways we always have.  As I have written before, other companies in the service sector seem to have a different attitude and to be mailing it in, with the average loss of corporate IQ being about 20 points, and probably 40 points in the financial services sector.  I have been working every day until after midnight because I have to spend my 8-5 job tediously coaching service providers through their jobs so our company can get what it needs.  I have a 40+ person reminder list on my desk of service providers I have to call every day to remind them they owe me something.  I then start my real day in the evening, getting done the actual work I have to do for my company.

Here are two stories from this morning:

@FISGlobal, formerly Worldpay and a bunch of other names, is a large credit card processor with who we have about 7-8 accounts.  I just was set up on their online portal last month and tried to log in the first time.  I had the user name and password right (everyone should use Lastpass or something like it), but they insist on also asking me challenge questions (eg name of first pet) that I get wrong for the obvious reason that I have not set them yet.  You can set them the first time you log in, but either I did not or I have not logged in yet.  I tried every reset mechanism they have but none of these will proceed without... wait for it... answering the challenge questions.  So I tried to call.  No luck. Absolutely no phone number.  So I emailed.  Two days later I have had no response.  It is simply astounding that one of the top merchant processors in the world cannot manage to fix a 60-second log in problem on less than a 48 hour (and counting) turnaround cycle.

So I tried today to find a phone number.  I finally called the Worldpay general number and they said they could not help me.  I asked for the correct phone number, they said they could not give it to me.  I insisted.  I got grumpy.  They finally gave me an 800 number.  It turned out it was the number for office depot.  I almost have to respect the customer service agent for giving me a fake number like I was some creepy dude in a bar, but I still cannot log in.  As soon as things get better, I am switching providers.  The other merchant processors may have been just as bad in COVID, but at least their support is reachable (I have had good experience with stripe in my online accounts).

@USbank.  These guys are really headed to the hall of fame of service fail, even against the low bar of other banks.  Previously I wrote about my experience last month, where I needed their deposit slip template for the MICR data on the slip so I could get deposit slips made by a 3rd party printer.  I have accounts with 44 banks, including some really small ones, and 43 immediately produced this when asked.  For US Bank I went to every branch of theirs in town and NO ONE had ever heard of such a thing nor could they produce it.  I waited on hold for 4 hours with their customer service and they had no idea, but read up in some book and decided that I could have one for the cost of $500.  LOL.  Finally I just bought $19 of their own deposit slips that I was never going to use but I could send to the printer as a template.

So over the same period I have been trying to change our corporate name on an account to reflect our post-merger status (same FEIN, different name and structure).  I again go to the local branch folks, and to the 800 number, and they promise service, but nothing happens.  So I call back and they have never heard of the request and we start over.  In the middle of this I now need to open a second account (we have campgrounds in rural locations and in two places US Bank is the only reasonably close choice).  So I go to the branch (the world of banking makes you show up in person to open a corporate checking account, even if you have to fly across country to do it) to open the second account and all seems well, they ask me to come back.  So I come back the next day, and it is not ready.  We set an appointment, and I come back then.  Again it is not ready -- they tell me (wait for it) that my corporate name has changed with the state.  No shit, I answer.  I am pretty sure the dude I am talking to is one of the ones who I had asked for the name change to be done earlier and dropped the ball.  He says they are going to have to close all the accounts and start over.  When I seem impatient, he gets mad at me and tells me it is my fault for, get this, not telling them the corporate name has changed.  Aaarrggghh.  But bankers are one millimeter from government workers and you have to be obsequious and pretend that they are infallible and so I said yes sir thank you sir when can I come back yet again for the new accounts?

Postscript:  Please!  Will someone please come up with a way that I can convert cash and personal checks in rural locations into dollars in my Phoenix bank account?  I pay credit card processors about 3%, I would happily pay 3% to Walmart or someone else to do cash concentration for us.

Over the past year, I have spent a staggering amount of my time trying to get service providers who are supposed to be the leaders of their business to do their damn job.  I literally keep a list at my desk with a list of reminders I need to send out to service providers to do what they promised.  This list is never less than 30 names long.

More than the COVID life disruptions, more than the fear-mongering, more even than our merger, the most exhausting thing for me over the last year has been the utter inability to reliably delegate anything to a third party without constantly having to coach them through their job.

I see many reasons this is occurring.  These include:

• Lack of employees due to either sickness or else difficulty in competing against high unemployment payments.
• Closure and elimination of services that companies always wanted to eliminate but they can now blame on COVID.  For example
  • Hotels stopping maid services and room service
  • Banks closing tellers and branches
  • Airlines not serving meals or drinks
• Unwillingness to adjust to the current reality.  Banks are high on this list, demanding things they have always demanded but that are impossible to do in the last year

But these do not encompass the whole problem.  There are a lot of companies in their core functionality that seem to have simply forgotten how to do what they do.  Even after 6 phone calls, Amerigas can't take and fulfill a simple order for bulk propane delivery;  Iron Mountain, who I like and invest in, can't reliably provide any of their core services accurately and on the first try; I don't think Intuit even picks up the phone anymore.

My hypothesis is that people are getting too far ahead of themselves in saying that COVID proves that the centralized workplace is dead.   I think we are going to find that this is not true at all, that there are networks in the office that spread both knowledge and accountability that are lost with all this home work.

I have run a company for 20 years where every employee works out of their home, or more accurately, where every employee moves their home (RV) to the workplace.  My employees work in over 400 spots.  And one thing I have learned vs. years of working in Fortune 50 offices is that you have to build a special process for this situation.   In particular, my constant focus is how how to centralize complexity.  I keep trying to take complexity out of field locations and managers and centralize it in a few office people where it is easier to train and build tools and create backups, etc.

My hypothesis is that companies did OK for the first month or two with work at home as well-trained employees carried the momentum of office work styles to their house.  But as time passes, and the staff turns over, the lack of traditional knowledge-sharing, support networks, and accountability systems are causing service functionality to degrade.

For most of the past year I have been hammering on the media for their destructive COVID fear-mongering.  By always cherry-picking the most alarmist opinion on every topic, and filling articles with carefully calibrated fear-provoking language, they have made us all dumber.

Let me give you one example.  For literally months, day after day, our AZ papers have been screaming that emergency rooms are filling up and telling the public they may soon be lying untreated on some hallway floor or not allowed into a hospital at all.  The articles were in my email every morning -- maybe some day I need to piece together a supercut montage of them all but my guess is most of you have experienced something similar.

I know zero about hospital management but even I can look at ICU data and see that the narrative is substantially more complex than what is in the media.  Here is the AZ state tracking report on state ICU bed utilization -- dark gray is total and red is COVID-related in some way.

The implication in the media is always that a 80% full ICU plus the equivalent of 30% of the beds with new COVID patients = zero capacity and people dying with no treatment.  But that is clearly not what happens.  AZ ICU's have run at 80+% capacity utilization since June 1, while COVID bed use in that time has drifted from 10% to 60% but we were never out of capacity.

There is clearly some complex management process the goes on with the management of ICU capacity.  In fact, it seems like someone knows what they are doing here.  Why don't we ever, ever get to hear that story?   I can't think of one hospital administrator I have seen interviewed in our local papers discussing how this management process works.  The only people they ever interview seems to be that one nurse with PTSD screaming that her hospital is a dystopian nightmare.

Perhaps this capacity management is being done with little cost, deferring non-urgent cases.  Perhaps someone is missing out on care to defer to the COVID folks.  Perhaps this is entirely normal in every winter flu season.  We don't know because apparently the media has decided it is not interesting, or at least not as interesting as the reactions they get when they have everyone as scared as possible.

In my transpartisan climate plan the other day, I wrote this:

Point 3:  Eliminate all the stupid stuff

Oddly enough, this might be the hardest part politically because every subsidy, no matter how idiotic, has a hard core of beneficiaries who will defend it to the death -- this the the concentrated benefits, dispersed cost phenomena that makes it hard to change many government programs.  But never-the-less I propose that we eliminate all the current Federal subsidies, mandates, and prohibitions that have been justified by climate change. Ethanol rules and mandates, solar subsidies, wind subsidies, EV subsidies, targeted technology investments, coal plant bans, pipeline bans, drilling bans -- it all should go.  The carbon tax does the work.

So what do I mean by "stupid stuff."  Well a good place to start is solar roads, but I have already flogged that not-dead-enough-yet horse many times. So let's find a new example -- cash for clunkers.  The original cash-for-clunkers program that paid fixed government payments for old cars that would then be destroyed was billed as both a stimulus (sells cars!) and a CO2 reduction (newer cars mostly all more efficient than older cars).

In fact, it did neither.  It turned out that the stimulus was virtually non-existent, as it just pulled forward sales that were already going to happen.  And while there might have been a teenie bit of CO2 reduction, it occurred at ridiculously high cost-per-ton (meaning the same investment in any number of other approaches would have reduced a lot more CO2).

Incredibly, given all this, Kevin Drum wrote recently:

Cash for Clunkers! My favorite stimulus program of all time. Sure, I agree with the experts who say that it’s not all that great purely as stimulus, but as a way of making stimulus popular it couldn’t be beat. More like this, please.

This is the man who, on not one but two occasions, responded to a detailed critique of mine on something he wrote by saying he had "science" on his side.  Are these guys even trying any more?

A few thoughts in follow-up to this post on GME and short-selling

1.  The general celebratory air around the story of Gamestop (GME) is driven, I think, in large part because no one other than a few hedge funds who had naked unhedged short positions in GME.  But recognize we are still only in the middle of this story.    This is like reporting on the Titanic after the first lifeboats were away successfully but before the first drownings.  There is no WAY that Gamestop is going to remain over $300, or even over $100.  Gamestop has almost nothing you would want to own -- bricks and mortar retail locations that sell digital product -- and yet its valuation is higher than even the hottest of retailers.  It is something like 6-8x the valuation on a price-to-revenue basis (so such thing as a PE as it loses a ton of money) of other similarly threatened retailers like Best Buy.  Its valuation is even well above players like Home Depot, which unlike Gamestop a) makes a profit b) sells a bunch of stuff that can't be sold easily online and c) is growing rather than shrinking.  Within 30 days or less GME will be back under $40 is my guess.
2. This stock windfall is thus essentially a pyramid, no different than other attempts to corner a limited market, and will eventually fall to Earth.  Those in and out early will win -- and those are the folks winning praise and love across the media.  Those out late will lose out.  Had I been in the stock, I would never ever have stayed in the stock past the market close on Friday
3. Every professional investor and institution that does not have a lockup or some portfolio rule that keeps them in Gamestop is out.  I would fire any professional that did not take the opportunity to unload this bankrupt dog worth $20 or less at a price over $300.  So all that is left are redditors who are keeping the stock afloat by turning over more than the entire stock float every day, thus elevating it by some investor version of Boyles law.
4. If the folks in the stock now are like the other redditors who got in early, they are very leveraged.  This leverage allowed folks to claim huge gains with small investments, but in turn will leave small investors at the end with huge losses.

My prediction is that 30 days from now, we will look back on this story very differently.  Perhaps I am just a member of the HBS-educated elite and can't see past my traditional views on investing, but I STILL don't think that highly leveraged momentum investments on near-bankrupt stocks in collusion with other investors of whom one knows nothing is a good approach for the typical small investor.

Update:  Aaaaaand it only took 2 days.  Do we still feel like this is a heroically great story for the everyman?  We got to enjoy regular dudes making a fortune on the way up with highly-leveraged investments in a pyramid / pump-and-dump scheme.  Do we get to see stories of people holding leveraged positions at $400?

A group of day traders who congregate and coordinate on various online platforms made a name for themselves over the past week running up the stock price of struggling Gamestop (GME), in the process laying some epic losses on a few high-profile short sellers.  As might be expected in the current political age, the entire body of both economic thought and 90 years of stock market regulatory theory have been thrown out in the ensuing brouhaha in favor of an in-group / out-group narrative, ie underdog economic losers against entrenched billionaire elite insiders.  As Glenn Greenwald describes it:

Although it may be more complex than this once all the facts are all known, this is being treated — by those excited by it and those aghast — as a type of populist uprising, a David v. Goliath tale in which ordinary people united to brilliantly beat Wall Street at its own game, thereby transferring plutocratic wealth back to the public. Oligarchs and their media spokespeople spent all day on CNBC and other pro-Wall-Street outlets expressing outrage and demanding government intervention to protect them from what they regard as this grave injustice.

Given this narrative is already fixed firmly in place, it is almost impossible to comment thoughtfully or discuss it with anyone.  On the one hand these traders aren't doing anything that Carl Icahn did not do to Bill Ackman at Herbalife, and I can' see any reason why their communication channels or ability to trade certain stocks should be shut down.  On the other hand, this sort of crazy volatility is not good for confidence in markets.  Remember that driving GME to unrealistic levels produces everyman millionaires of the folks who were first in and driving the train, but there is no way the stock price levels are sustainable and just as surely a lot of other regular folks, just like the last ones into a pyramid scheme, are going to lose a lot of money.  I will say that this whole narrative of the stock market suddenly becoming a path for the downtrodden common man to make a fortune has a very 1928 vibe to it.

By the way, to understand what is going on, basically these guys attempted and succeeded for a time in cornering the market in GME stock, really no different from any attempt to corner a market in a commodity and drive the price up.  In this case, the wallstreetbets folks are seeking out companies with a very small "float" -- companies that may have a lot of stock outstanding but only a small amount trades actively because of insider and founder shares and shares that have been borrowed and shorted.  Combining a small float with a large short interest can lead to a sharp rise in prices that is accelerated as short-sellers are forced to cover as their losses mount.  As with any such attempt,  whether by the Hunts in silver or these guys in GME, eventually the pyramid can't be sustained and the price collapses again.  When presented this way, it is amazing to me that socialists like Greenwald are cheering on this kind of behavior.  It is a seeming contradiction but I think I know the answer:  short-selling.

I may be overreading this, but a LOT of the support for the WallSteetbets bros seems to be due to the fact that they took down a bunch of prominent short-sellers, who are considered by the public to be barely one step above child molesters on the ethics scale.  Glenn Greenwald, for example, wrote that this is a story about heterodox groups that "unite in opposition to hedge fund short sellers, who contribute nothing of value."  Had these folks united instead to hammer a popular stock like Apple or Tesla down, I am pretty sure the receptions would have been VERY different, even though the basic narrative would be identical.

So is short-selling really a plague that contributes nothing of value?  I have argued many times that it is very valuable.  But let me try again.

Markets don't have a purpose per se beyond the facilitation of individual goals.  Individuals come together in mutually beneficial trades that create value for both parties.  This is ultimately true of capital markets like any other market -- some people want a place where their savings can earn more than in a checking account, and other parties need these funds to support their business operations and growth.  Individual investors shift their money around as the perceive better risk/reward opportunities for their investment.  This is what capital markets were created for, not to serve some higher macro-economic purpose.

But they do serve a higher purpose, and the reason is at the heart of the magic of capitalism.  Because we know that well-functioning markets with clearly understood and consistent rules populated by folks just trying to look after themselves are critical to a productive, growing economy.  At the heart of this magic is the market's role in the efficient allocation of capital to the most productive enterprises.  Again, this all occurs bottom up.   If there are two widget manufacturers making identical products, but one produces them twice as expensively as the other, we are all going to be better off long-term if the more efficient company thrives.  This tends to happen naturally in the capital markets -- more productive companies get more capital, less productive companies do not.

One of the worst things that can happen in an economy is to have scarce capital misallocated, by some market inefficiency, to unproductive or less productive purposes.   And herein lies the societal benefit of short-sellers. I will not say it is their "purpose", because their purpose is to make money (though a lot of short-sellers are driven by righteous ethical indignation about fraud and ironically often have a higher ethical component to their investment choices than do the longs).  But the larger benefit of the actions of short-sellers is to shift capital away from unproductive companies, because every dollar in capital poured into these companies is a dollar that is not invested in something that creates more wealth and benefits for the world.

Something folks may not know but investors are well aware of it -- there is a large raft of "zombie" corporations out there that shamble along unproductively but still consume huge amounts of scarce capital.   Some have government support (eg Boeing).  Others continue to survive for years eating the seed corn of their past reputation, market position, and infrastructure.  Almost all of them are being supported by the Fed's huge money-printing program that tries to keep both the DJIA and the Fortune 500 afloat.

They were once America’s corporate titans. Beloved household names. Case studies in success.

But now, they’re increasingly looking like something else -- zombies. And their numbers are swelling.

From Boeing Co., Carnival Corp. and Delta Air Lines Inc. to Exxon Mobil Corp. and Macy’s Inc., many of the nation’s most iconic companies aren’t earning enough to cover their interest expenses (a key criterion, as most market experts define it, for zombie status).

More than 200 corporations have joined the ranks of so-called zombie firms since the onset of the pandemic, according to a Bloomberg analysis of financial data from 3,000 of the country’s largest publicly-traded companies. In fact, zombies now account for nearly a quarter of those firms. Even more stark, they’ve added almost $1 trillion of debt to their balance sheets in the span, bringing total obligations to $1.98 trillion. That’s more than the roughly $1.58 trillion zombie companies owed at the peak of the financial crisis.

The consequences for America’s economic recovery are profound. The Federal Reserve’s effort to stave off a rash of bankruptcies by purchasing corporate bonds might very well have prevented another depression. But in helping hundreds of ailing companies gain virtually unfettered access to credit markets, policy makers may inadvertently be directing the flow of capital to unproductive firms, depressing employment and growth for years to come, according to economists.

Even if only half of that is misallocated, that's a trillion dollars of investment capital that could have been better deployed elsewhere.  It's a dead loss to the economy.  Short-sellers are our gladiators trying to bring down some of these zombies.

So let's consider Gamestop (GME).   GME is mainly a group of bricks and mortar stores selling digital content.  Huh?  Stores that sell freaking refrigerators have been hammered by online sales, do we really think that GME makes any sense any more?  But by driving up the price 20x, these supposedly heroic momentum investors are sending a capital market signal that this is the place, in physical stores selling digital content, that the world should put its scarce capital -- not in new bioscience investments, not in electric vehicles, not in new forms of energy technology -- but right here in physical locations next to a Safeway to allow people to buy stuff they could download less expensively in 5 minutes in their own home.  In this context, the GME shorts were freaking heroic.

Updates:

1. To be clear, because I know how these "with us or against us" issues go, just because I am defending the action of short-selling does not mean that I support restrictions on these day traders.  I think Robinhood is making a mistake in restricting trading of its members in GME and I don't like talk of restricting certain Reddit investment forums any more than I support any other proposed restrictions on online speech.  I do think the WallStreetBets folks are being irresponsible to ordinary investors, and high-profile stories of big leveraged wins by some blue collar day traders in momentum strategies is going to result in some huge losses for other small traders getting caught holding the bag at the end of the run.
2. Essentially, the Tesla run up has just been a slow motion duplicate of the GME runnup, with day-traders who ignore any value metric making gains due to the small float, potentially with added manipulation in the call option market.
3. GME is currently down almost $100 per share or 28% from yesterday's close, and down $200 from today's intra-day high.  I wonder if Greenwald wants to celebrate all those underdog investors that bought in <4 hours ago at $200 higher.

Update 2: I do want to thank some group of momentum knuckleheads for driving up the price of mall owner Macerich yesterday.  I sold right at the intraday high (which was 2x the price just 2 days before) and got out whole from a crappy loss position when I thought I was going to have to wait that one out for years.

I need some alert service that says the momentum bros are playing games with such and such stock, get out now while the bagholders are buying.

Update 3:  At one point today GME was trading at 5.5x 2019 revenues -- as a bricks and mortar retailer.  Best Buy, for reference, is trading today at 0.68x 2019 revenues.  And for all its problems, if I had to choose, I would rather own Best Buy than Gamestop.

I have gone about a week now without even opening Twitter, which makes me both mentally healthier as well as slower to post my thoughts on various issues.  But those who were reading me on Twitter earlier in the month know that I am far more worried about the reaction to the events at the Capitol on January 6 (J6) than I ever was about the events themselves.

We are experiencing a weird moment in history as a great number of people, IMO, are grossly over-reacting to what would have been called a "protest gone wrong", a "riot", or a "building occupation" in almost any other circumstances.  Instead, there seems to be a consensus to call the storming of the capital by a bunch of crazy painted selfie-taking, souvenir-hunting knuckleheads an "insurrection."  Even moderates and free speech defenders (I am thinking of folks like Ken White at Popehat) -- people who should know the dangers of using such inflammatory language to drive an exaggerated reaction -- are using this term.  Folks online tell me that this was "Literally the definition of insurrection."  In turn I would say that this is literally the first time the general public has used this term to describe ... anything since the Civil War.  The Native Americans that took over Alcatraz weren't described as insurrectionists.  The Bundies and the Branch Davidians weren't insurrectionists.  Nixon wasn't an insurrectionist.  The Antifa and anarchist folks declaring independent nations in the center of Seattle weren't insurrectionists.  But by God the dude in the Fred Flintstone water buffalo hat was an insurrectionist.

Since I tend to criticize people for assuming single-dimension solutions to complex issues, I can think of multiple reasons why reactions to J6 might be exaggerated:

• Some folks are nearly insane on any topic touching Trump.  I am going to write my retrospective on Trump later, but in short I consider him to be a bully with bad policy instincts who gathered followers by bullying folks on the Left that the Right doesn't like.  He was a disaster for the dignity of the office and public discourse -- though his opposition has some blame too for the latter -- but (consistent with my contention that our system is robust to tyrants) who did remarkably little damage from an actual policy standpoint.  But given that the anti-Trump media has been incredibly harsh on perfectly peaceful Trump gatherings, a riot and occupation of the capital is going to send some folks into orbit.
• There is a clear asymmetry in how the media covers protests from the Left vs. form the Right.  I believe I can state this as a fact without bias, particularly since I tend to be more sympathetic to the drivers behind 2020 Leftish protests and violence  than to the motives of the J6 rioters.
• The US Capitol building obviously has special symbolic value, though I think this targeting is more a function of how dumb this J6 group was rather than any special evil on its part.  I think many, many other groups Left and Right might have tried this themselves if they thought it was possible.  But who believed that the Capitol police, which has more officers than some large cities just to cover about 4 buildings, would show all the defensive prowess of an NBA all-star game?
• I do think that a lot of the overwrought response to this is because it happened inside the beltway.  If this happened in Portland (and a mini version seems to happen there most evenings), it might not make the news.
• I hate to be cynical, but I do also think there is an element who have focused-grouped the "insurrection" word and inserted it in the narrative in order to prepare the ground for the maximum amount of ex post political retribution and speech restrictions.  These are the folks who are essentially emulating that greatest of all 20th century de-platforming events, the Reichstag Fire Decree.  The lesson from those events and many others in history:  Hang the actions of one mentally ill Dutchman with a lighter on all your tens of millions of political enemies.  Pretend every person of goodwill who disagrees with you is personally responsible for the actions of extremist yahoos.

So in response to all this I was going to write about an article Will Wilkinson wrote at the Niskanen Center the other day (I would describe both Wilkinson and Niskanen as Leftish but at least within sight of the middle of the road but both have had some of the quality of their work reduced over the last 2 years with what I consider an irrational level of Trump hatred).  Given this source from a long-time member of the libertarian community, I found this article he wrote hugely depressing (since I first read it, Wilkinson's byline has been removed, probably for reasons we will get to in a moment).

I am going to leave aside the Trump impeachment stuff, which is a lot of the article.  I will just note the absolutely over-dramatic presentation and suggest there is a deep deep anger here that is simply not compatible with the policy role he wants to play.   I guess if you demanded I take a side, I would say that prosecuting your political enemies that you beat in the last election is a bad precedent.   Even the Republicans in Congress, after the unseemly "lock her up" campaign chants in 2016, managed to mostly avoid the temptation with Clinton and others.   Before I move on, I have to present this bit from the impeachment portion of his piece:

There is too much at stake to further delay mounting a trial, or to draw it out for days or weeks past Biden’s inauguration. There is no need for a lengthy Senate trial because the facts that justify impeachment and removal are not obscure.

It is interesting to see the Niskanen center parroting the words of every law-and-order Conservative demanding some dude get lynched because "we all know he's guilty."  I think it is clear to most folks that Trump was insufficiently diligent in restraining the fringes of his party.  But to convict Trump of  "[sending] his mob to the Capitol to make that threat vivid in the minds of legislators" is a stretch, and does actually need to be proved and not asserted.  I actually am not sure Trump is guilty of an act of commission for J6 -- I see him more as the sorcerer's apprentice, messing with forces he didn't really understand and having it spin out of control.  Which is a good reason to get him out of office, but not necessarily sufficient for Congress to attempt a bill of attainder against Trump under the banner of an impeachment of a dude who is already gone.

But it is the part that followed that really depressed me, leaving me to wonder if there is any intellectual support for the First Amendment any more:

Blame for the insurrectionary riots cannot be laid entirely at Donald Trump’s feet. Many Congress members actively encouraged Americans to believe that the election was tainted by fraud, that Biden may not have been legitimately elected, and that our democracy could be irreparably harmed should he be allowed to take office. They should be held responsible for the dire consequences of propagating these lies. The worst offenders may merit official censure or worse. Most deserve to be abandoned by donors, saddled with strong primary challengers, and punished by voters at the ballot box.

It appears that some Republican members did more than amplify destabilizing falsehoods. Some may have actively planned to bring a mob to the Capitol steps with the intent of influencing the electoral count. If that is the case, they should be removed from Congress and face criminal prosecution.

However, it is essential that any such sanctions imposed on Congress members be grounded in a scrupulous, comprehensive accounting of the factors that contributed to the siege. This disaster was caused by the opportunistic deployment of lies for political gain. If we are to have any hope of restoring stable, functional, constitutional government, the process by which we investigate these events and mete out justice must be a model of careful, proper procedure.

Amy Zegart and Herbert Lin of Stanford University have developed a careful proposal for a commission on January 6, based on an extensive assessment of past commissions (including the 9/11 commission). Congress should expeditiously create such a commission and commit across the aisle to follow its findings, wherever they may lead.

Wilkinson can use words like "careful", "thoughtful", and "proper" all he wants but the fact is he is advocating asymmetrical punishment (even if the punishment is just the process) for what is fairly normal political invective.  Had Republicans called for a 9/11 commission to investigate Congressional Democrats who voiced support for riots last year that turned violent, I am positive Mr Wilkinson would have blown a gasket.  Raising questions of election fraud is well within the bounds of acceptable political discourse.  As often happens in politics, the discourse can become overheated, with words slipping from "potential fraud" to "illegitimate."  But this again is fairly normal.  Why, we would have to go all the way back to the distant election of 2016 to see a similar example, where many many prominent Democrats argued Trump's election was tainted by fraud (RUSSIA!) and he was illegitimate.  In fact, there were many protesters in DC on Jan 20, 2017 protesting exactly that and a number of them turned violent.  In fact, we might even cite Wilkinson himself, who has written similar things about Trump many times, including this in Vox:

Trump’s presidency has been dogged with doubts about legitimacy from the beginning. There’s a real possibility that he would have lost but for Russian interference. At this point, however, that in itself is not the biggest stain on Trump’s legitimacy.

This is the problem with all calls for speech limitation or retribution of some sort -- they are always asymmetric.  My protest is entirely justified and important -- yours is trivial and a super-spreader event.  My invective is "passion" while my enemy's nearly identical invective is "violent and threatening."   If nothing else, 2020 has been a giant lesson in the hypocrisy of our elites, both public and private.

Which brings us to the rest of the story, where someone turned the irony dial to 11:

Will Wilkinson is a vice president at the left-leaning Niskanen Center, a contributing writer at The New York Times, and someone who has frequently quarreled with me about so-called cancel culture. (I think it's generally bad when people are fired, expelled, or dragged on social media for saying stupid or poorly phrased things they quickly come to regret; Wilkinson has suggested to me that I've made too much of this problem.)

On Wednesday, Wilkinson tweeted, "If Biden really wanted unity, he'd lynch Mike Pence."

Lynching humor is virtually never a good idea, and this joke was especially badly executed. (Wilkinson said he was making a joke not at the former vice president's expense, but in reference to the Capitol rioters who had expressed a similar sentiment. The joke being that this time it was the far right calling for violence against a Republican official rather than the left.)

Nevertheless, widespread outrage—some of it stoked by conservative news sites like The Federalist and The Daily Caller—ensued on social media. Wilkinson apologized, describing his tweet as a lapse in judgment.

"It was sharp sarcasm, but looked like a call for violence," said Wilkinson. "That's always wrong, even as a joke."

Nevertheless, the Niskanen Center fired Wilkinson and made it clear that they did so explicitly because of the tweet. "The Niskanen Center appreciates and encourages interesting and provocative online discourse," wrote Niskanen President Jerry Taylor in a statement. "However we draw the line at statements that are, or can in any way be interpreted as, condoning or promoting violence."

I guess it would be sort of satisfying to react by saying that I was happy to see him hoist on his own petard, but really I am not.  I am not sure how we are going to do it but everyone has to just chill the hell out and accept speech as speech, and not as violence.   I am subscribed to Glen Greenwald's newsletter because he is one of the few folks on the Left who is willing to call out this ridiculous anti-speech culture that is developing.  He has a good column on Wilkinson's firing here, including:

So a completely ordinary and unassuming liberal commentator is in jeopardy of having his career destroyed because of a tweet that no person in good faith could possibly believe was actually advocating violence and which, at worst, could be said to be irresponsibly worded. And this is happening even though everyone knows it is all based on a totally fictitious understanding of what he said.

Greenwald does not say it, but it has become a habit of Trump critics to take his every statement and read it, no matter what the obvious meaning of the words, in the worst possible light.  While this is something folks have been doing in the editorial business since time immemorial, the migration of this pattern in the Trump era to the news division has been toxic.  It started way back at with the treatment of Trump's Charlottesville comments -- these actually surprised me as I for years had accepted that Trump had defended neo-Nazis as was portrayed on every news feed until I actually read his actual comments.  Trump wasn't supporting nazis and Wilkinson wasn't threatening the VP.  Any reasonable person reading either set of comments in context would agree, but we are living in a word dominated by post-modernist narrative.   Greenwald ends with this warning to both sides:

Unleash this monster and one day it will come for you. And you’ll have no principle to credibly invoke in protest when it does. You’ll be left with nothing more than lame and craven pleading that your friends do not deserve the same treatment as your enemies. Force, not principle, will be the sole factor deciding the outcome.

I will end with a few tweets from the same source, because I think he was been spot-on during the past few weeks:

By the way, drafts of Biden's plans released so far has him doing almost the polar opposite of every step I suggest.  The cancellation of individual pipeline projects is just stupid political micro-managing to absolutely no benefit.  (First published September, 2018)

While I am not deeply worried about man-made climate change, I am appalled at all the absolutely stupid, counter-productive things the government has implemented in the name of climate change, all of which have costly distorting effects on the economy while doing extremely little to affect man-made greenhouse gas production.  For example:

• Corn ethanol mandates and subsidies, which study after study have shown to have zero net effect on CO2 emissions, and which likely still exist only because the first Presidential primary is in Iowa.  Even Koch Industries, who is one of the largest beneficiaries of this corporate welfare, has called for their abolition
• Electric car subsidies, 90% of which go to the wealthy to help subsidize their virtue signalling, and which require more fossil fuels to power than an unsubsidized Prius or even than a SUV.
• Wind subsidies, which are promoting the stupidist form for power ever, whose unpredictabilty means fossil fuel plants still have to be kept running on hot backup and whose blades are the single largest threat to endangered bird species.
• Bad government technology bets like the massive public subsidies of failed Solyndra

Even when government programs do likely have an impact of CO2, they are seldom managed intelligently.  For example, the government subsidizes solar panel installations, presumably to reduce their cost to consumers, but then imposes duties on imported panels to raise their price (indicating that the program has become more of a crony subsidy for US solar panel makers, which is typical of these types of government interventions).  Obama's coal power plan, also known as his war on coal, will certainly reduce some CO2 from electricity generation but at a very high cost to consumers and industries.  Steps like this are taken without any idea of whether this is the lowest cost approach to reducing CO2 production -- likely it is not given the arbitrary aspects of the program.

These policy mess is also an opportunity -- it affords us the ability to substantially reduce CO2 production at almost no cost.

The Plan

Point 1: Impose a Federal carbon tax on fuel.

I am open to a range of actual tax amounts, as long as point #2 below is also part of the plan.  Something that prices CO2 between $25 and $45 a ton seems to match the mainstream estimates of the social costs of CO2.  I think methane's greenhouse effects are exaggerated, but one could make an adjustment to the natural gas tax numbers to take into account methane leakage in the production chain.   I am even open to making the tax=0 on biofuels given these fuels are recycling carbon from the atmosphere.

So what is the best way to reduce CO2 -- by substituting gas for coal?   By more conservation?  By solar, or wind?  With biofuels?  With a carbon tax, we don't have to figure it out or have politicians picking winners.  This is why a Pigovian tax on carbon in fuels is going to be the most efficient possible way to reduce CO2 production.   Different approaches will be tested in the marketplace.  Cap and trade could theoretically do the same thing, but while this worked well in some niche markets (like SO2 emissions), it has not worked at all in European markets for CO2.   There has just been too many opportunities for cronyism, too much weird accounting for things like offsets that is hard to do well, and too much temptation to pick winners and losers.

When I first crafted early drafts of this plan several years ago, I had assumed that Progressives championed a carbon tax for the reasons I listed above, ie that it is the most efficient means to allow markets to reduce emissions.  However, the referendum a couple of years ago in Washington State demonstrated that many Progressives may not understand this at all.  You can read a lot more about this debate here.  I fail the ideological Turing test on this one, because I don't know if the Progressives who were strongly for CO2 reduction but opposed the Washington State carbon tax did so because they did not understand economics or because they cared less about global warming than funding other Progressive causes.

Point 2:  Offset 100% of carbon tax proceeds against the payroll tax

Yes, there are likely many politicians, given their incentives, that would love a big new pool of money they could use to send largess, from more health care spending to more aircraft carriers, to their favored constituent groups.  But we simply are not going to get Conservatives (and libertarians) on board for a net tax increase, particularly one to address an issue folks on the Right may not agree is an issue at all.  So our plan will use carbon tax revenues to reduce other Federal taxes.

I think the best choice would be to reduce the payroll tax.  Why?  Because, the carbon tax will necessarily be regressive (as are most consumption taxes) and the most regressive other major Federal tax we have are payroll taxes.  Offsetting income taxes would likely be a non-starter on the Left, as no matter how one structures the tax reduction the rich would get most of it since they pay most of the income taxes.

There is another benefit of reducing the payroll tax -- it would mean that we are replacing a consumption tax on labor with a consumption tax on fuel. It is always dangerous to make gut-feel assessments of complex systems like the economy, but my sense is that this swap might even have net benefits for the economy -- so much so that we might want to do it even if there was no such thing as greenhouse gas warming.  In theory, labor and fuel are economically equivalent in that they are both production raw materials. But in practice, they are treated entirely differently by the public.   Few people care about the full productive employment of our underground fuel reserves, but nearly everybody cares about the full productive employment of our labor force.   After all, for most people, the primary single metric of economic health is the unemployment rate.  So replacing a disincentive to hire with a disincentive to use fuel could well be popular.

Point 3:  Eliminate all the stupid stuff

Oddly enough, this might be the hardest part politically because every subsidy, no matter how idiotic, has a hard core of beneficiaries who will defend it to the death -- this the the concentrated benefits, dispersed cost phenomena that makes it hard to change many government programs.  But never-the-less I propose that we eliminate all the current Federal subsidies, mandates, and prohibitions that have been justified by climate change. Ethanol rules and mandates, solar subsidies, wind subsidies, EV subsidies, targeted technology investments, coal plant bans, pipeline bans, drilling bans -- it all should go.  The carbon tax does the work.

States can continue to do whatever they want -- we don't need the Feds to step on states any more than they do already, and I continue to like the 50 state laboratory concept.  If California wants to continue to subsidize wind generators, let them do it.  That is between the state and its taxpayers (and for those who think the California legislature is crazy or that the Texas legislature is in thrall to oil companies, that is what U-Haul is for).

Point 4:  Revamp our nuclear regulatory regime

As much as alternative energy enthusiasts would like to deny it, the world needs reliable, 24-hour baseload power -- and wind and solar are not going to do it (without a change in storage technology of at least 2 orders of magnitude in cost).  The only carbon-free baseload power technology that is currently viable is nuclear.

I will observe that nuclear power suffers under some of the same problems as commercial space flight -- the government helped force the technology faster than it might have grown organically on its own, which paradoxically has slowed its long-term development.  Early nuclear power probably was not ready for prime time, and the hangover from problems and perceptions of this era have made it hard to proceed even when better technologies now exist.   We are at least 2 generations of technology past what is in most US nuclear plants.  Small air-cooled thorium reactors and other technologies exist that could provide reliable safe power for over 100 years.  I am not an expert on nuclear regulation, but it strikes me that a regime similar to aircraft safety, where a few designs are approved and used over and over makes sense.  France, which has the strongest nuclear base in the world, followed this strategy.  Using thorium could also have the advantage of making the technology more exportable, since its utility in weapons production would be limited.

Point 5: Help clean up Chinese, and Asian, coal production

One of the hard parts about fighting CO2 emissions, vs. all the other emissions we have tackled in the past (NOx, SOx, soot/particulates, unburned hydrocarbons, etc), is that we simply don't know how to combust fossil fuels without creating CO2 -- CO2 is inherent to the base chemical reaction of the combustion.  But we do know how to burn coal without tons of particulates and smog and acid rain -- and we know how to do it economically enough to support a growing, prosperous modern economy.

In my mind it is utterly pointless to ask China to limit their CO2 growth.  China has seen the miracle over the last 30 years of having almost a billion people exit poverty.  This is an event unprecedented in human history, and they have achieved it in part by burning every molecule of fossil fuels they can get their hands on, and they are unlikely to accept limitations on fossil fuel consumption that will derail this economic progress.  But I think it is reasonable to help China stop making their air unbreathable, a goal that is entirely compatible with continued economic growth.  In 20 years, when we have figured out and started to build some modern nuclear designs, I am sure the Chinese will be happy to copy these and start working on their CO2 output, but for now their Maslov hierarchy of needs should point more towards breathable air.

As a bonus, this would pay one immediate climate change benefit that likely would dwarf the near-term effect of CO2 reduction.  Right now, much of this soot from Asian coal plants lands on the ice in the Arctic and Greenland.  This black carbon changes the albedo of the ice, causing it to reflect less sunlight and absorb more heat.  The net effect is more melting ice and higher Arctic temperatures.  A lot of folks, including myself, think that the recent melting of Arctic sea ice and rising Arctic temperatures is more attributable to Asian black carbon pollution than to CO2 and greenhouse gas warming (particularly since similar warming and sea ice melting is not seen in the Antarctic, where there is not a problem with soot pollution).

Final Thoughts

At its core, this is a very low cost, even negative cost, climate insurance policy.  I am convinced this policy, taken as a whole, would still make sense even if CO2 turns out to be as harmless as nitrogen.  The carbon tax combined with a market economy does the work of identifying the most efficient ways to reduce CO2 production.   The economy benefits from the removal of a myriad of distortions and crony give-aways, while also potentially benefiting from the replacement of a consumption tax on labor with a consumption tax on fuel.  The near-term effect on CO2 is small (since the US is only a small part of the global emissions picture), but actually larger than the near-term effect of all the haphazard current programs, and almost certainly cheaper to obtain.  As an added benefit, if you can help China with its soot problem, we could see immediate improvements in probably the most visible front of man-made climate change:  in the Arctic.

Postscript

Perhaps the hardest thing to overcome in reaching a compromise here is the tribalism of modern politics.  I believe this is  a perfectly sensible plan that even those folks who believe man-made global warming is  a total myth ( a group to which I do not belong) could sign up for.  The barrier, though, is tribal.  I consider myself to be pretty free of team politics but my first reaction when thinking about this kind of plan was, "What? We can't let those guys win.  They are totally full of sh*t.  In the past they have even threatened to throw me in jail for my opinions."  Since I first published this plan I have had very prominent skeptics contact me to criticize me for "giving in to the warmists."

So a $15 national minimum wage will almost certainly be on the table in Congress this year, and if past such legislative efforts are any guide the Republicans will probably eventually go along in exchange for reducing the $15 to a lower number and slowing the rollout.

I have talked a lot about the negative effects of higher minimum wages on low-skill workers.  Two good example background posts are here and here.  I covered how a broad range of labor regulation hurts unskilled workers in a cover story for Regulation magazine a few years back.  Unfortunately, in a country where the average American buys about $1000 in lottery tickets each year, the willingness to believe we can get something for nothing is strong.

But I want to talk specifically about a Federal minimum wage increase, where one other problem emerges.  The best way to state this is -- how can one possibly set the same minimum wage for San Francisco at the same rate as one does for rural Mississippi?  Here is one source for comparative state cost of living.  Doing this by county would make the curve even wider.

Cost of living in Hawaii is more than 2x that of Mississippi.  CA and NY are not far behind.  A minimum wage that might comfortably be accommodated in San Francisco (and note even there the rise to $15 was ending service jobs in that city long before COVID), would be an economic disaster for rural Alabama.  I don't tend to think primarily along racial lines as seems to be the case on the Left today, but basically this is a policy driven by rich white tech guys in San Francisco that is going to devastate the employment prospects of rural blacks.

Whatever one's misgivings about minimum wages, it is certainly true that allowing states to take the lead on setting minimum wages (counties would make even more sense) makes a lot more sense that trying to take action at the national level.  Even with state action there are disparities.  Look at this unemployment map of the rural counties in CA vs. the tech. enclaves in the Bay Area (the chart below is January 2020, I wanted to dial back pre-COVID).  Those rural counties are being slaughtered by the $15 minimum wage.  Just think about rural areas in states less costly than CA.

So a state by state approach is WAY better. There are three reasons, in increasing order of cynicism, why Democrats in Congress will still insist on a higher national minimum wage.

1. Democrats in Congress believe they are carrying salvation to the powerless masses in Alabama who are held in slavery by state Republicans.  Democracy and the "will of the people as expressed at the ballot box" are only sacred when it's our team in charge.
2. Folks in Congress did not spend a career fighting to win a seat in that body only to find that there is something that would be best done by state legislators.  They didn't work to get promoted to have LESS power (though that is exactly how the country was originally designed).  This is the enemy of all Federalist notions
3. The fact that a $15 minimum wage will devastate many rural areas, mostly Republican bastions, may be a feature and not a bug for some.  Think of the $15 minimum wage as Democratic revenge at the heart of red states for the Trump reductions of SALT deductions in the tax code (which were a dagger at the blue state model).

I am completing what is for me a large and complicated acquisition/merger that we have been working on all through 2020.  I fiddle around with Twitter once in a while but have not had time for long-form blogging.  But I will be back, I just need a few more weeks away.

I have been pointing out since April that stay at home orders tend to be supported by folks who either a) are rich with lots of savings; b) have professional jobs and can work from home (eg journalists) or c) get paid even if they don't work (eg government workers and teachers).  A lot of folks on the Left that lecture the rest of us constantly on privilege have shown zero self-awareness in advocating for the most privilege-biased government order in my memory.

So it should not be shocking that the results of the COVID business lockdowns have disproportionately hit lower income and less educated workers.  From the WSJ:

A two-track recovery is emerging from the country’s pandemic-driven economic contraction. Some workers, companies and regions show signs of coming out fine or even stronger. The rest are mired in a deep decline with an uncertain path ahead.

Just months ago, economists were predicting a V-shaped recovery—a rapid rebound from a steep fall—or a U-shaped path—a prolonged downturn before healing began.

What has developed is more like a K. On the upper arm of the K are well-educated and well-off people, businesses tied to the digital economy or supplying domestic necessities, and regions such as tech-forward Western cities. By and large, they are prospering.

On the bottom arm are lower-wage workers with fewer credentials, old-line businesses and regions tied to tourism and public gatherings. They can expect to bear years-long scars from the crisis.

The divergence helps explain the striking disconnect of a stock market and household wealth near record highs, while lines stretch at food banks and applications for jobless benefits continue to grow.

After a few false starts, and prodding from several readers, I finally got this creaky 16-year-old blog (yes, started in October of 2004) onto SSL and HTTPS.  Hopefully you will not get security and safety warnings any more and will see that comforting little lock symbol by the URL.

There was one advantage to waiting so long -- the process is now ridiculously easy.  Cpanel will provide free auto-SSL certificates for all the domains on my server, but I went ahead a splurged for a paid key and that can be done entirely automatically now too.  Then, I installed a little WordPress plugin called "really simple ssl" which was in fact just that -- installed the plugin, pressed a button, and all the work was done.   It detected my certificate and did all the setup and without doing another thing, we were good to go.  It doesn't seem to have blown anything up like comments, but email me or DM me on Twitter if you see a problem.

From reading various comments on Trump's taxes, it is clear to me that many people do not understand even the basics of corporate accounting and taxes.  I sometimes forget, as the owner of a medium-size business, that everyone does not live and breath this stuff.  The following is meant to illustrate a few concepts I see the most confusion about.  This article is not written to be exculpatory of Trump's tax or business practices -- in fact I did not even read the NY Times article because at this time of year the last thing I need to do is spend time burying myself in someone else's taxes.

We are going to take a very simple example from my world.  Let's imagine my startup company has a piece of land we acquired years and years ago.  Suddenly in the pandemic we have an idea -- we are going to buy 50 Airstream trailers (as if we could actually obtain them in this market, but ignore that) and put them on our land and rent them out.  Let's say in the first year we bought them all on January 1 for $5 million using $5 million of bank debt (banks actually are happy to finance this sort of asset) and they ended up generating a net income (after expenses and interest) of $1 million.

So how do we account for the year?  We know we have a million dollars of operating income, but what do we do about the $5 million in capital spending on the trailers?  By GAAP accounting, capital investments of this sort that have a long service life are not expensed immediately.  They are depreciated over the life of the asset. So if we say these trailers have a 20 year life, we would expense 1/20th or 5% of their cost each year.  For our $5 million investment, that is $250,000 a year in depreciation.  In this case our final income statement for  the year would show $1 million in operating income less $250,000 in depreciation expense for a net income of $750,000.  One might expect that is what we report to the IRS and pay taxes on.

But we live in a more complicated world.  Our Congress loves to express its preferences for how business should operate in the form of changes to the tax code.  For example, Congress prefers we buy electric vehicles and solar panels, so it gives special tax credits for these.  Relevant to our example, Congress strongly prefers that companies reinvest their profits in new capital spending.  It provides incentives for this by allowing accelerated depreciation for capital investment in certain types of assets and equipment.  We can argue about the tax code -- I have not checked this particular example with my CPA -- but it is very likely that current law would allow us to depreciate our $5 million investment in trailers not in 20 years but in one.

So how does this change our example?  Well suddenly, in year one, we still have a million dollars in operating income but $5 million (100%) depreciation expense for taxes.  This means we have a $4 million loss we will report to the IRS.  This loss is carried over and used as a credit in later years.  If we continue to make a million dollars in operating profit a year, this means we will go five years without paying taxes.  The owners, for example if it is an S-corp or LLC with no double taxation of distributions, might be pulling hundreds of thousands of dollars out of the company every year, living the dream, while neither they nor the corporation pay any taxes.

This is what everyone is calling a "loophole" but I think that is a misnomer.  "Loophole" implies people are taking advantage of some drafting error or unanticipated use of an IRS rule.  That happens all the time, but our example is not an unanticipated use.  In our example we are using IRS rules exactly as Congress intended -- the company is being rewarded by Congress for the investment it made in new equipment with a multi-year tax deferral.

Note that this is only a deferral.  Once the five years is up, the company will pay its full taxes on the million dollars (unless it makes more investments with the profits which would allow it to defer more taxes).  Even if the company keeps investing and keeps getting accelerated depreciation, eventually when it sells the business it will have a large tax bill in the form either of depreciation recapture or goodwill in the business.

There are of course many other tax dodges that range from legal but ugly to outright fraudulent.  I don't know what Trump was doing.  But I wanted to show an example of how it is perfectly possible to legally (and I suppose socially responsibly) pay no taxes while generating a lot of income.  The key in this case is to reinvest profits, a behavior Congress has chosen to reward.

Long-time readers will know that I am interested, to the point of obsession, in incentives.   One should always be suspicious of bad outcomes described as irrational or the nefarious actions of bad people.  In both cases, if one looks carefully, the outcomes usually turn out to be the perfectly rational outcomes of perfectly normal people responding to bad incentives, assumptions, and/or information.

I personally believe the COVID response in this country (and others) is exaggerated and counter-productive.  But for this post I am not going to ask you to agree or disagree with my skepticism.  Instead, I am going to focus on incentives, and show how media, academia, and government all have incentives, assumptions, and information asymmetries that push them towards exaggerated COVID responses.

The following list is not necessarily complete and the items here are not independent of each other.  Having completed this post, they now look a little random but this is sometimes the way I clarify my thinking on things -- to write and publish and get feedback and maybe be more structured the next time.

Incentives

• Political incentives to "do something" about the issue of the moment.  We see this after every high-profile "bad thing" that happens.  There is immense pressure on politicians to do something -- pass some law (often with a person's name in it) or, if the legislative process is perceived as to slow, fire off some executive order.  In the heat of battle these actions are often taken without regard to efficacy, cost, or unintended consequences.  In the heat of these frenzies, a multi-dimensional decision is magically redefined as having only one dimension that matters.  Anyone who focuses on costs or unintended consequences or even efficacy problems of the proposed solution are cast as heartless and uncaring, potentially even evil and nefarious.
• Politicians always legislate to first-order metrics, never second-order metrics.  Politicians know that the public and the media is looking at their country or state every day and publishing the number of COVID cases and deaths.  No one is publishing the number of additional suicides, or cancer deaths from people too scared to go to the hospital, or increased starvation and disease deaths in poorer countries as food prices rise and aid from rich countries dries up. These second order effects are real but hard to prove or measure.  They are what we call "unintended consequences" but should instead call "ignored but entirely predictable consequences."
• Political incentives to expand power.  Every politician in every branch of government is always working to expand their own power (this is not unique to government, you can say the same thing of executives and functional departments in many large corporations).  When the public is scared and panicky, politicians are able to break through past limits and norms and establish new precedents.  The best example of this is that governments in Western democracies all expanded their power during the 20th century wars, expansions that largely stuck and were not reversed in peace time (except for a few fortunate examples like locking up whole ethnic groups in internment camps).  When the public is scared, power is to be had and it is the unusual politician that will say in such a situation that the right solution is to do nothing.
• Political incentives not to admit error.  Politicians simply cannot admit error.  To some extent this is due to the personality and ego traits that the political process sorts for, and to some extent this is based on day to day political incentives.  But think about any President in your lifetime and try to think of even the smallest issue on which they said something like "I tried X, over time X has not worked and now I realize we should do something other than X."  We would actually hope this is the kind of person we have leading the country, but simultaneously our own behaviors don't allow it.  Presidents frequently admit past errors of others (eg, a current President saying the war in Afghanistan was a mistake) but they can never turn against any policy of their own.  So if, say, lockdowns were the response to wave 1 of the virus, lockdowns are damn well going to be the response in successive waves.  Because not doing so is essentially an admission that it was a mistake the first time.
• If it bleeds, it leads.  This one takes little explanation, because I think most of us understand the strong incentives of news organizations to create and amplify emergencies to increase the attention and viewership they get.  Cable news had a huge spike in viewership after 9/11 and again in the early days of the Gulf War, and they are constantly jonesing for the same sort of hit.  Remember that the media has accurately called 11 of the last 2 pandemics, earlier predicting disaster from swine flu (dating myself here), bird flu, ebola, zika, mad cow, and probably several I can't remember.
• Reference to personal circumstances when making national trade-offs.  I would say that the number 1 thing that drives me crazy about statists on the Left and Right and which makes me a libertarian is the tendency to impose solutions to tradeoffs on everyone in the country based on how you would personally make decisions for yourself.   If one-size-fits-all public policy decisions are going to be made, I want them to be made in a way that suits me.  For example, a politician in Chicago might say they would never feel comfortable letting thier kids walk to school on their own, so no parent should be allowed to let their kids walk to school alone.  Applying this to COVID, we know there is a large contingent in media, academia, and politics who will say that is is wrong to consider economic damage when evaluating COVID lockdowns.  What do all these folks have in common who tend to be advocating strongest for lockdowns?  They still have their jobs, are still getting paid, can still be productive over the Internet, and are comfortable getting their social interaction over zoom.  Note that these are the same folks that constantly tell us to check our privilege, but then tell us to ignore the economic hardships of lockdowns that they are too privileged to experience.  Only by the most extreme action do the voices of the less privileged who are suffering the most under lock-downs get heard (and even then, like the hair dresser in TX and later in SF, they get mocked by the elite).

Assumptions

• Trump is so bad that no price is too high to get rid of him.  I have told folks for years that every generation thinks their current era is uniquely politically toxic.  I don't think we have yet risen even to 1968 levels of discord, but one exception is the hatred for Trump that exists in some quarters.  I personally have never seen anything like it.  The nadir was when Trump mentioned that HCQ looked like a promising COVID treatment and the governors of MI and NV immediately banned HCQ without evidence to make Trump look bad (a desire I assume stems from a perception that Tump is so dangerous and represents such an existential threat that any action to undermine him or make his re-election less likely should be pursued).  A prominent study was essentially made up out of whole cloth to prove HCQ was dangerous and thus Trump bad, a conclusion that should have made zero sense to everyone as HCQ is used by millions every day as a malaria prophylactic.   I find Trump distasteful but trust the American system to limit the damage of tyrants, but many are working from a very different assumption.
• Humans have conquered nature.  I will confess to having an almost Victorian confidence in progress, but even I accept that sometimes nature throws things at us that are a) not our fault and b) we can't yet stop.  But throughout our COVID responses there seems to be, particularly in Western nations, an assumption that we should be able to prevent death from this thing -- ie that any death should be judged as a failure of our response.  But diseases still kill people.  Last year communicable diseases killed at least 15 million people in the world.  And many of our Western deaths have been among the very old in care facilities where the average life expectancy pre-COVID was numbered in months.

Information

• Good cause skewing of data, or "fake but accurate."  Decades ago, there was a stat that there were a million homeless people in the US.  Everyone repeated it as gospel.  Someone tracked it down, and eventually discovered that it was just made up by a homeless advocate who just picked a round large number.  When this was presented to a well-respected reporter on NPR, that the "fact" she was quoting was no such thing, she just shrugged.  She said homelessness was clearly a problem and if the number she was quoting (as a reporter!) was exaggerated, then it was in the good cause of increasing attention to homelessness.  This was the first example I can remember of something that was considered fake but accurate, but there have been many more since.   During COVID, this has caused outlets like Goggle and Facebook to actually censor opinions the tend to be skeptical of the severity of the disease or efficacy of mitigation steps like lockdowns.  They claim to be doing so for a good cause, believing it is better to err on the side of having the public too cautious rather than insufficiently cautious.
• Asymmetric public exposure to experts.  Throughout COVID we have been told that the experts all say X, that there is a consensus for X.  And sure enough, we mostly only hear X on the news.  But anyone in academia can tell you that this sort of homogeneity of opinion can't possibly be true.  As in other science, on issues such as mask or lockdown effectiveness or herd immunity thresholds, academics hold a wide range of opinions and there are a wide range of findings in the literature.  But this heterodoxy in opinions never really gets full public view due to media incentives, political incentives, and good cause skewing.  The most extreme voices on the end of the academic scale that support the media's and politicians' desire to create fear are selected for public exposure.  Then, these selected academics are retroactively crafted into leading experts.  Any of you folks every heard of Anthony Fauci before this started?  How about whatever expert your governor is using?  No, you had not -- these are prominent people in their field but just one of ten or twenty equally qualified persons who could have been selected and presented as experts.  They are then retroactively reinvented not as one of ten folks with a wide variety of opinions but as the one leading true unassailable expert.
• Social media amplification of tail-of-the-distribution events.  One of the features of social media independent of these incentives is that it tends to spread and amplify tail of the distribution events/risks.  The problem is that there seems to be two personality types in people -- one, and I would include myself in this -- who are knee-jerk skeptical of such stories.  Did it really happen?  Did A really cause B?  Is this really anything more than one bizarre outlier?  But there is a second type of person, and I would say that they are WAY more prevalent than I would have believed a year ago, who sees a story that someone's gynecologist's hairdresser's uncle claimed to have had heart issues after getting COVID and suddenly "everyone who gets COVID has permanent heart damage!"  Even before the Internet, Americans were very bad at parsing relative risks and now they just seem terrible at it.

Via Andrew Sullivan

What Freddie [DeBoer] is arguing is that, far from treating genetic inequality as a taboo, the left should actually lean into it to argue for a more radical re-ordering of society. They shouldn’t ignore genetics, or treat it as unmentionable, or go into paroxysms of fear and alarm over “eugenics” whenever the subject comes up. They should accept that inequality is natural, and construct a politics radical enough to counter it.

For DeBoer, that means ending meritocracy — for “what could be crueler than an actual meritocracy, a meritocracy fulfilled?” It means a revolutionary transformation in which there are no social or cultural rewards for higher intelligence, no higher after-tax income for the brainy, and in which education, with looser standards, is provided for everyone on demand — for the sake of nothing but itself.

This has been coming for years in the labor movement -- requirements to use seniority over performance for layoffs, ban the box laws, lawsuits over reference checks, attacks on gig economy where rewards are tied to performance, etc.  Way back in 2010 I worried that the increasing restrictions on what information could be used in hiring stemmed from this same desire

That being said, as someone who has 500 service employees working for me, I understand the insatiable desire for information on employee reliability and conscientiousness.  A large number of our employees we hire who interview well tend to get released within 60 days of their hire.  I can't tell you how many people who seem totally normal and friendly turn out to be raving maniacs in stressful customer contact situations.

The elephant in the room that neither McArdle or folks like Kevin Drum mention is that businesses are starved for [reliable] information on potential employees.  It used to be the best source was to check job references.  Nowadays, though, very few employers will give a honest job reference, or will provide any information at all.  I know I am guilty of that -- my company does not allow any manager to give out performance data on past employees.  I only needed to be sued once over somehow interfering with someone's living by giving honest information about that employee's reliability to change my behavior.

I understand that this is exactly what the Left is shooting for - an environment where the competent have no advantage over the incompetent.  If employers are resorting to FICO scores, it just demonstrates how all the other reasonable avenues of obtaining information have been closed to them.

A number of folks thought the bit in bold overwrought, but I still feel this is directionally correct.  Clearly DeBoer defines an extreme.  I think the actual goal of the Left could be better stated as wanting to make all employment decisions based not so much on competence but on credentials, credentials that are awarded via processes and institutions controlled by the Left (and that might over time be awarded as much for political orthodoxy as for learning relevant skills).  Which, by the way, is pretty much exactly how the Soviet Union worked.  And is pretty much how tenure works at most universities today.

• I found the immediate arguments about filling the Supreme Court vacancy literally seconds after the announcement of her death to be extremely distasteful.
• I think the idea that she somehow betrayed her supporters by not retiring when a Democratic President was in office with a Senate majority is outrageous.  Court justices shouldn't be in the mode of actively managing the Court's ideological makeup.  That's a political process.  And yes, I say this despite the fact that I would not choose to have the Trump-McConnell axis filling the Court.
• I know several young people who looked to her as a role model, which in the judiciary likely puts her in a Venn diagram circle of one person (unless someone is selling a set of 9th circuit trading cards that I have missed).
• As with most libertarians, I liked some of her decisions and disagreed with others.  Of the latter, Kelo (in the majority) and Citizens United (in the minority, fortunately) stick most in my mind as betrayals of individual rights in the face of expanding government power.
• I think people would be surprised (given the tone of media coverage of the Supreme Court) how many decisions are 9-0
• The way we focus on the Supreme Court almost solely through the abortion lens is frustrating to me.  Can't we have a second Supreme Court, whose job is just to twiddle the abortion knob and the original can be left alone to handle the 99% of the other business the Court addresses?

If you want to get right down to the core of the disagreement on responses to COVID, this post by Kevin Drum illustrates it perfectly.  Start with this:

My usual daily look at COVID-19 deaths was posted a few minutes ago, but I thought it might be worthwhile to also give you a quick look at COVID-19 cases. As you can see, they’re going up all over the place. Spain, France, and the Netherlands are skyrocketing. The United States skyrocketed back in July and looks like it’s now turning upward for a third time. The UK is going up, and so was Switzerland until a week ago, when it suddenly slammed the brakes on. Even Germany is rising a bit.

If we weed out exaggerated language like "skyrocketing" and ignore things like testing sensitivity and frequency, this statement is largely true.  The difference is how people interpret it, and the world splits into the Whitmer clan and the Sweden clan.  Drum speaks for the Whitmer tribe:

it sure looks as if even a modest re-opening quickly causes cases to boil over. ... Still, it’s obvious that we shouldn’t let up. The only way to keep cases and deaths down is to rigorously maintain social distancing precautions. If only we could get our president to agree.

For Drum and the Whitmer tribe, evidence that loosening of harsh lockdowns is followed by increasing COVID cases is proof that we should never stop lockdowns, at least until everyone is vaccinated with a vaccine that does not exist, may not exist, and will not exist for most of us until well into next year.

For those of us in the Sweden tribe, we come to exactly the opposite conclusion from the same evidence:  that lockdowns only pointlessly drag out the pandemic and artificially increase its costs, since no matter how long we hide, the disease is still there to infect us when we come out.  As I wrote last week:

All lockdowns do is delay the onset of the disease, not avoid it, and thus add severe economic dislocation, increased poverty, domestic violence, alcoholism, suicide and any number of other negative lockdown effects to the inevitable toll of the disease.  If we are doing anything at all to affect the course of the disease, we are stretching out the misery.

I go on to write that lockdowns make protection of the vulnerable harder.  I have two examples -- my 85+ year old mother-in-law and a bunch of immune compromised kids we support via Care Camps.  In both cases it's easy to keep them locked away for a few months.  But what happens when that stretches to 7 months?  Does my mother-in-law want to spend her all too precious remaining days locked inside?  Are we helping sick kids by essentially imprisoning them alone?

This may sound over-the-top, but I could argue that it is the duty of all of us who are under 60 and in good health to go out and risk exposure to the disease and get our society to herd immunity so the vulnerable can be safe and stop self-incarcerating.  I say this knowing the Mr. Drum may be among the immune compromised and particularly vulnerable.

My Now-Standard COVID Postscript:  I am not a fan of "check your privilege" retorts, but if one accepts that framework for a moment, one might notice just how privileged the exhortation to "Lock down, work from home, and stay in touch with friends over Zoom" really is.  Listen to the folks rooting for lockdowns and you will find that the vast majority

• have professional jobs that can be done from home
• continue to get paid even when they don't work at all (e.g. teachers and politicians)
• have a lot of savings

A large number also tend to ignore the rules they foist on everyone else.

Update:  I am still working on data, but the declaration of second and third waves is often BS.  In most cases, these so-called second waves are the first waves in areas that were not affected earlier.  New York has had one wave.  Arizona has had one wave, just later.  Louisiana has had two waves, but it is a unique case due to the timing of Mardi Gras.

There is a debate raging between the usual suspects as to whether the larger fires in California are the inevitable result of manmade climate change or whether they are the result of poor forest management practices.  For this post I actually am not going to weigh in right on this , except to say that long-time readers will know I am skeptical of most claims that tie tail-of-the-distribution events to manmade CO2 and I find it hard to correlate large fire loss years with actual temperature / drought data for the same year.

For a moment, let's accept that the fires this year are due to the climate change effects from rising manmade CO2.    As of today, CO2 makes up 412.55 ppm of the atmosphere (0.0412%).  To the extent that this number is driven upwards mainly by manmade CO2 (it was about 370 or 0.037% at the turn of the century), this is the lowest this number is going to be in your lifetime.   Even fast, drastic action in the US is only going to lower our CO2 emissions somewhat (as long as we stop short of sending the economy back to the stone age).  And even if we do go full paleo on the economy, India and China will continue emitting away.  This number will keep rising for decades, and even if we get to the point of reversing the rise, that would take decades more to get back to where it is today.  Note how far we have dialed back the world economy in 2020, and you can't even see a difference in the slope of the CO2 concentration curve.

I personally don't believe that manmade CO2 is the primary control knob on the climate, but for those of you who do, the temperature and drought conditions in California (by your assumptions) are the best this year that they will ever be again in your lifetime, even with dramatic climate action.

So do your thing on CO2 -- I have proposed a carbon tax plan that works here -- but using the need for climate action as an excuse for avoiding the forest management issues is absolutely irresponsible.  As I have shown above, if this is caused by CO2 then the need for mitigation and defensive actions to make forests more robust to fire is more rather than less crucial because CO2 is only going to go up in the coming years.

My company operates over a hundred Forest Service campgrounds in California, and over a hundred more in Oregon and Washington.  My employees live right in the middle of these forests you see burning down on the news -- the Sierra, the Sequoia, the Mt Hood, etc.  We see the condition of these forests up close, and it is terrible.  There is fuel laying everywhere, in part due to massive bark beetle tree kills and in part due to the natural aging of forests.   These forests are like houses with matches and oily rags lying all over the floor.  They need to be cleaned up.

I know environmentalists have a beautiful vision of our forests returning to their primeval state, free of active human intervention.  But that is never going to happen, at least in California.  There are simply too many people living in and around the forests.  In fact, we have increasingly found ourselves in a position that is worse than either total non-intervention or active management.  We intervene to put out small fires that burn up fuel when the fuel loads are low, thus letting fuel build up until we get catastrophic fires.

Real estate investment trusts (REIT's) have had their stock values pounded in the last six months, and is it any wonder?  Many have tenants who aren't even allowed to open, who are slowly (or quickly) going bankrupt and not paying their rent bills.  Industrial REITs are doing OK (particularly those that specialize in data centers and e-commerce warehouses), but will shopping malls ever come back under the Amazon/COVID 1-2 punch?  Will office real estate survive now that many companies are getting more comfortable with work at home?

I picked up a few REIT stocks at the bottom I thought had been pounded too far, and was lucky to have Warren Buffet jump into one of them after me ($STOR).  Which got me to looking at office REITs.  We have seen stories like the ones of REI giving up their entire headquarters for work at home.  Many people reading this may still be working at home.  Large companies may continue to pay their rent until their leases run out, but will anyone be renewing those leases in the future?

At first, my answer was that the commercial office real estate business was going to suck for many years, and I have not totally changed my mind on that (relatively obvious) conclusion.  But then I started to think about a few things that have happened to me in the last few weeks

• My banker, who was working at home, was unable to complete a couple of tasks I needed from him because Bank of America would not allow him to handle certain confidential information in his home or via his home computer
• I rented an extra office for a new HR director I have added to my own company -- not because she really wants an office or uses it much -- but because we had to have a secure locked location to store confidential employee files
• Working with my attorney on a deal has been inefficient because he does not have access to files and certain resources at the law firm

This raises a question -- is some amount of commercial real estate necessary just for security concerns (banking, financial data, employee data, HIPAA, legal correspondence)?  Perhaps in the near term.  But if we really get more comfortable with working remotely, then the ultimate solution is not to keep expensive office space for file cabinets and secure networks but to create document and data management models that secure data even when everyone is working remotely.  There are a lot of pieces to this, but some of them include

• Hardware/Software solutions to secure notoriously poorly secured home networks and computers
• More commitment to HRIS and on-boarding systems to move all employee paperwork off paper and into the cloud
• A return to some of the "paperless office" services that really did not catch on.  For example, services that receive all company mail and scan it and then distribute it digitally.
• For old dead tree documents, which I guarantee will still exist, more use of 3rd party / remote file management and storage solutions

I am quite convinced there are going to be some new businesses here -- and so far we have zoom and not much else.  If I was in technology, I would be thinking if I had the technology or the position to solve problems in this space.

One company that intrigues me is Iron Mountain ($IRM).  They have said nothing that I have seen in their marketing about post-COVID opportunities, but their business model (a combination of paper and digital document management and storage solutions) seems a good fit.  I think they are sitting in a very interesting spot to benefit from the post-COVID work environment, and I have bought a block for my portfolio (which is not that painful to hold on the come because it also pays an 8.5% dividend).

PS-  I am not an investment advisor and just have fun casually thinking out loud about investments and markets, from time to time.  The vast majority of my money is invested in my own business, which, through absolutely no foresight on my part, happens to be in one of the few retail segments and virtually the only hospitality segment to see record revenues this year (camping).  I am trying to think about long positions because, like someone who only recently gave up smoking, I am trying my absolute best to give up on shorting stocks -- it is just too painful in this nutty market *cough* Tesla *cough*.   With my skepticism I bring to most things, shorting is a natural fit for me but there is only so much pain I am willing to endure to fight an overly-active Fed and an overly-dormant SEC (this article plus my personal experience caused me to capitulate).  I do still have a few shorts on the books, including $tsla of course for tradition sake, but these now amount to what are essentially bar bets.

I saw this story in my feed reader today:  

the Dallas Cowboys cheerleader reality show — consider it the Hard Knocks of cheerleading — is back for its 15th season. CMT announced today it’s bringing back Dallas Cowboys Cheerleaders: Making the Team for one of the more interesting seasons in show history due to COVID-19.

I have never even heard of this show, much less seen it, and it is on its 15th season**.  In my youth, any show on its 15th season would have been known to all, whether one watched it or not.  Fewer than 10 prime-time series before the year 2000 even made it to 15 seasons, and even the ones that made only 9 or 10 seasons were part of the national zeitgeist and familiar to about everyone (e.g. Gunsmoke, MASH, Cheers, Hawaii 5-0, Perry Mason, Beverly Hillbillies, etc.).  It's amazing to me how niche shows can find an audience and continue to make economic sense today in a totally different way than used to be possible.

Modern music, of course, has been through roughly the same changes.  Of the eleven albums with the longest runs as Billboard #1, only one (Adele 21) was released in this millenium and only one other after 1990.

Quick:  According to Wikipedia, what is the longest running show on cable at 44 seasons?  That is 5 more seasons than ESPN SportsCenter.  I could not have named it if you had given me 200 guesses.

** I am not dissing the show or its audience.  If you love this show, there likely is another example out there of a show on its 15th season of which you have never heard.

Well, it is that time of the year when Valley Metro, the Phoenix area transit authority, publishes its fiscal year (July-June) ridership numbers, and boy are they awful this year.

In past installments, I have pointed out how our shift to funding a ridiculous light rail system in one of the least dense cities in the world has killed transit ridership.  Since rail costs more than 10x per passenger mile to move riders vs busses, the shift to light rail tends to starve bus funding in every city it has been tried, leading to net losses (even pre-Covid) in total ridership numbers -- yes even in Portlandia.  This is all discussed more in our 2019 transit report.  Here is a brief bit:

The problem with light rail (and the reason it is popular with government officials) is that it is an upper middle class boondoggle.  There can be no higher use of transit than to provide mobility to poorer people who can't afford reliable automobiles.  Buses fulfill this goal better than any mode of transit.  They are flexible and can reach into many corners of the city.  The problem with buses, from the perspective of government officials, is that upper middle class people don't like to ride on them.  They like trains.  So the government builds hugely expensive trains for these influential, wealthier voters. Since the trains are so expensive, the government can only build a few routes, so those routes end up being down upper middle class commuting corridors.  As the costs mount for the trains, the bus routes that serve the poor and their dispersed commuting destinations are steadily cut.

Without further delay, here are the updated numbers including 2020. (Tellingly, Valley Metro has for some reason failed to update its chart on its ridership web page to include 2020 numbers.   I wonder why?)

As you can see, even before COVID we were trending towards a total system ridership decline vs. the days before the commitment to light rail.  And we certainly had killed the growth in system ridership we had seen prior to light rail.  But now, with 3-4 months of COVID in the numbers, ridership has fallen off the map.  Boy, I sure bet we would be better off right now with a bus only system where capacity is easier to add, subtract, and relocate vs. light rail whose costs and routes are literally sunk in the ground.  I have no opinion on whether transit ridership will return to pre-COVID levels but I am sure that such massive disruptions in the system are far easier to economically manage in a bus network than in a rail network.

But you will be happy to know that Valley Metro is still spending money to put rails in the ground -- in fact, it has accelerated its spending post-COVID if you can believe it:

Phoenix is ramping up its light rail system despite record-breaking declines in ridership spurred by COVID-19.

Light rail ridership is down a little over 50% from where it was pre-COVID-19, according to Valley Metro CEO Scott Smith. Bus ridership is down about 40%.

Light rail construction hasn't slowed, however. In fact, Valley Metro has accelerated some projects, taking advantage of less vehicle traffic on the road while more people stay home.

Does this make a bit of sense?  Here is the defense:

But with ridership at all-time lows and no indication as to when ridership will return at pre-pandemic levels, is it smart to continue with pricey expansion of the light rail system?

"I think if we used that same logic, we'd say 'Let's go tear down all the movie theaters and all the stadiums.' Nobody expects this to be around forever. We're going to at some point in time, whether it be in the next month or the next year, return to some normalcy," Smith said.

Ooh, @Scott_SmithAZ has obviously had an expensive education that includes lessons in how to defend a bad position using logical fallacies.  Comparing expanding light rail to tearing down movie theaters is a false analogy.  No one is talking about tearing out light rail (well, maybe except for me).  The appropriate comparison is to ask if anyone is saying "let's go build a bunch of new movie theaters and sports stadiums" right now, and the answer is definitely no.

But don't despair, Phoenix taxpayers.  Because Valley Metro is clearly carefully considering its routes and is only building those to locations they are sure will be super popular both during and after COVID.  For example, one current expansion is to connect the existing network to... an aging shopping mall.

A couple of years ago I wrote about the 1994 Myra Sadker book "Failing at Fairness,"  a book that tried to make the case that girls were getting hosed (as compared to boys) by the US educational system.  Leaving aside my general sense that all kids of all races and genders are getting hosed by the current public school system, the idea that girls were doing worse in education was already wrong in 1994 and is demonstrably ridiculous today.  I showed these charts at the time.  First from the indispensable Mark Perry:

In this second chart, even the New York Times has noticed

Really, one only needs to go look at the unemployed knuckleheads living in their parents' house and rioting for Antifa to know we have a boy problem today, not a girl problem.  But I wanted to add one more piece of data, from some research I cannot vouch for in Self.  The income results for young women are about what you would expect from the education data above, and the crossover (somewhat coincidentally because it is dependent on start date chose) almost exactly matches the crossover in the education data.

Perhaps it has always been so, but we live in a time when our social science mythology is really divorced from social science data.