Coyote Blog

It's a topic we have discussed many times on this blog -- are politicians at fault for handing out taxpayer money, or are corporations at fault for taking it?  Are businesses at fault for asking for special favors or politicians at fault for granting them.  This article from the Federalist discusses this conundrum in the context of sports stadium subsidies.

Its a chicken and egg problem that I see more and more, and my general answer is everyone.  The real answer is that the fault lies with having given government these powers in the first place.  If the government has the power to transfer wealth and regulate by decree, then some businesses are going to access that power to squash their competitors and politicians are going to use that power to get reelected.

The classic retort that "if we only had the right people in office..." wears thin.  There are no right people.  Good people are naturally corrupted by the incentives of the office.   Further, they are increasingly weeded out of the political process -- when wielding power to aid political cronies is a prerequisite for winning office, then it is hard to fathom how we possibly could ever get people in power who will not ... wield power to aid political cronies.   According to the Left, this Administration was to be, finally, the perfect group that would wield power as it was meant to be wielded.  And the corporate state is worse than ever.

Well, we have completed our response to minimum wage increases in California.   As a review, California is raising its minimum wage from $8 to $10 (or 25%)  in two steps starting this July 1.  I will confess that in some of these cases the causes are complex, and are not just due to minimum wage changes but also other creeping California regulatory issues (particularly the first two).

• Suspended operation and closed on large campground in Ventura County that employed about 25 people
• Suspended investment / expansion plans at two other campgrounds
• Raised prices everywhere else, on average adding $3 to a $20 camping fee.   (this is inevitable when wages are increased 25% in a business where more than half the costs are tied to wages and margins are around 5%)

The only reason I take the time to write this is that I think this tends to demonstrate that 1) minimum wage increases can have a real economic impact and 2) just looking at job losses after the date the wage takes effect can miss most of this economic impact.

To this latter point, a lot of the impact is not necessarily job losses.  We see lost investment, which perhaps means fewer jobs in the future but there is no way to measure that.  We see price increases, which affects consumers and disposable income.  And we see some job losses, but note that the job losses were 6 months before the law goes into effect.

We are left with a certainty that the minimum wage had a real economic effect but a suspicion that, at least in this case, that effect would not be measured.

By the way, there may also be a lesson here for those who believe that the entire problem in the economy is one of not enough aggregate demand.  In the last month I walked away from a million dollars a year of demand, because it was impossible to serve profitably, in large part due to regulatory issues.

The orrery watch.

For a mere $245,000.

Seriously, though, if someone could make a wall clock like this for a hundredth of the price, I might buy it.  Of course this is comes from the person who has this on his wall, so I am a sucker for unique clocks.

I friend sent me a note analyzing data on NFL quarterbacks past and present, and came up with this top five based on a points system that ranked the top 40 all time quarterbacks on a number of dimensions, such that the lowest score is the best:

1. Joe Montana - 54 Points

1. Tom Brady - 54 Points

3. John Elway - 68 Points

4. Terry Bradshaw - 84 Points

5. Peyton Manning - 86 Points

Peyton gets dinged for being a poor bad-weather quarterback.  I am not sure if the numbers support this hypothesis, but he would have to go a long way to being worse than Aikman was.  I was in Dallas during their three Aikman-era superbowls (actually I lived in Denver for their 2, and St Louis for theirs, and Arizona for theirs, all of which is payback for growing up an Oiler fan).   Aikman always disappointed in bad weather.  The one year of their four year run in the 90's that they did not go to the Superbowl, they lost to SF in the Conference championships.  That day, the moment I saw it was raining, I knew the Cowboys were doomed.

I have written here any number of times about the crazy ongoing subsidies by Glendale, Arizona (a 250,000 resident suburb of Phoenix) to an NHL franchise.  The city last year was teetering at the edge of bankruptcy from past hockey subsidies, but decided to double down committing to yet more annual payments to the new ownership of the team.

Surprisingly, throwing more money into an entreprise that has run through tens of millions of taxpayer money without any hint of a turnaround turns out to be a bad investment

Revenue from the Phoenix Coyotes is coming up short for Glendale, which approved a $225 million deal to keep the National Hockey League franchise in 2013.

City leaders expected to see at least $6.8 million in revenue annually from the team to help offset the $15 million the city pays each year for team owners to manage Jobing.com Arena. The revenue comes from ticket surcharges, parking fees and a split of naming rights for the arena.

Halfway through the fiscal year, the city has collected $1.9 million from those sources, and nearly $2.3 million when including sales-tax revenue from the arena.

Even including the rent payments on the publicly-funded stadium, Glendale is still losing money each year on the deal.

The source of the error in forecasting is actually pretty funny.  Glendale assumed that it could charge very high monopoly parking fees for the arena spaces ($10-$30 a game).  In some circumstances, such fees would have stuck.  But in this case, two other entities (a mall and another sports stadium) have adjoining lots, and once parking for hockey was no longer free, these other entities started competing parking operations which held down parking rates and volumes (I always find it hilarious when the government attempts to charge exorbitant monopoly prices and the free market undercuts them).

Had the parking rates stuck at the higher level, one can assume they still would have missed their forecast.  The Coyotes hockey team already has among the worst attendance numbers in the league, and hockey ticket buyers are particularly price sensitive, such that a $20 increase in the cost of attending a game likely would have driven attendance, and thus parking fees and city ticket surcharges and sales taxes, down.  Many private companies who are used to market dynamics still fail to forecast competitive and customer reaction to things like price increases well, and the government never does it well.

I have little tolerance for enforced patriotism of any sort.  In fact, having loyalty oaths and singing songs and genuflecting to flags all seem more consistent with totalitarianism than the values of liberty that patriots are nominally trying to promote.  If I were rotting in a crappy Phoenix jail for being caught with marijuana or busted for driving while Mexican, I would be even less patriotic

Dozens of Arizona inmates will eat nothing but bread and water for at least seven days in the latest punishment by one of America's toughest sheriffs.

Maricopa County Sheriff Joe Arpaio handed down the sentence after inmates defaced American flags hung in each jail cell. He says the men tore the flags, wrote or stepped on them and threw them in the toilet.

The flags are part of a push for patriotism in county jail cells. Arpaio has ordered thatGod Bless America and the national anthem be played daily in every jail facility.

This isn't Arpaio's first controversial move. He made headlines for keeping thousands of inmates outdoors in repurposed military tents in weather that was hotter than 117 degrees. He also made male inmates wear pink underwear.

He banned smoking, coffee and movies in all jails. And he's even put his stamp on mealtime. Inmates are fed only twice a day, and he stopped serving salt and pepper – all to save taxpayers money, he says.

Why?  Well, as one example, if you have ever scanned a document and then emailed it, this company thinks you are violating its patent and wants a license fee.

The other day, when criticizing an incredibly facile minimum wage analysis in the Arizona Republic, I had meant to observe that since minimum wage jobs are such a tiny (1.5% if include jobs that work for tips) portion of the workforce, one should look at more targeted metrics to assess the effect of minimum wage hikes, such as teen employment.

Kevin Erdmann has such an analysis.  He observes, "Is there any other issue where the data conforms so strongly to basic economic intuition, and yet is widely written off as a coincidence?"

Note that there is still some danger, as I wrote before, in measuring employment effects from the implementation date. Businesses plan ahead an many job losses may be occurring between the announcement and the implementation date.  I know we have made all the job cuts we plan to make in response to California minimum wage increases six months ahead of the actual date the wage takes effect.

Update:  The charts are obviously far from a smoking gun.  That is the nature of economic analysis.  In complex and chaotic multi-multi-variable systems, controlled studies are almost impossible and direct correlations are hard to find, and even when found may be coincidence.  As an employer who hires a lot of summer seasonal employees in parks, I would obviously be a natural employer of teens.  But I no longer do so, and it is important to understand that wages are only a part of the equation.  Another major issue is one of liability.  Increasingly, the legal system makes the employer liable for any action of their employees, no matter how boneheaded or how much the action is against all policy and training.   I have enough trouble with employees that have years of good work history -- I am not really excited about taking a chance on an unproven 17-year-old.

This is a topic I have hit on for a while, but now we have even more startling data.  Apparently, most of the people buying from the exchanges already had insurance:

Early signals suggest the majority of the 2.2 million people who sought to enroll in private insurance through new marketplaces through Dec. 28 were previously covered elsewhere, raising questions about how swiftly this part of the health overhaul will be able to make a significant dent in the number of uninsured.

Insurers, brokers and consultants estimate at least two-thirds of those consumers previously bought their own coverage or were enrolled in employer-backed plans.

The data, based on surveys of enrollees, are preliminary. But insurers say the tally of newly insured consumers is falling short of their expectations, a worrying trend for an industry looking to the law to expand the ranks of its customers.

… Only 11% of consumers who bought new coverage under the law were previously uninsured, according to a McKinsey & Co. survey of consumers thought to be eligible for the health-law marketplaces.

So, we know that 80% of the people are getting subsidized on the exchanges, and now we know that 70-90% of those previously had a unsubsidized policy beforehand.   This means that what the exchanges are doing is NOT insuring the uninsured, but converting people previously responsible for their own health care into government dependents.  The more cynical out there will argue that was the whole point in the first place.

I have a couple of quotes in this article on the difficulty of doing business in California.

On the same topic, Megan McArdle quoted extensively from my post on leaving Ventura County, and has some comments of her own.

I like digging through the raw data in the Obamacare report rather than just accepting the bits the New York Times wants to report.  As a business guy, I was looking at the data from a sales-conversion perspective -- ie, who is buying and who is not?  And of course, why?

When I was in the marketing world, we used to call the process of sales conversion the sales funnel.  For the exchanges this means some percentage of the available market actually show up at the exchange, and then some percentage of those actually complete the arduous sign-up process, and some percentage of those actually select a policy, and presumably some percentage of those actually pay, though we don't know what that latter percentage is.  At each step, we ask ourselves what people are we converting from one step to the next, and why.

Here is the Obamacare exchange sales funnel through December (as has become tradition, it is a scavenger hunt to fill this in and the data locations move around from month to month).

As you can see, of the nearly 3.7 million people who have selected a private plan or been put in Medicaid or CHIP, fully 88% are on the government dole (subsidized or full Medicare).

The interesting new data is on the plan selection breakdown between subsidized and un-subsidized.   This leads to an interesting finding that is a bit non-obvious from the report itself because the data is spread all over the report.  But lets look at conversion of applicants to plan selection based on whether folks are subsidized or subsidized.

For the 2,383,131 applicants who find they are no going to be subsidized, only 436,603 have selected a plan, for a 18% conversion rate

For the 2,756,667 applicants who find they will get supported by the taxpayer, 1,646,237 selected a plan, far a 60% conversion rate.

In essence, applicants are more than 3 times more likely to sign up if they are getting taxpayer money.  The exchanges are not selling health care, they are selling subsidies.  People sign up, check to see if they have money coming, and go away if they don't and stay if they do.

The next really interesting piece of data would be the demographics and health status of the 18% who did sign up for an unsubsidized plan.  I would not be at all surprised if the demographics there were far, far worse than the average.  Emerging hypothesis:  People come to the exchange, and sign up if they get a subsidy, or if they have health problems or high risk.

Apparently when prices for things are arbitrarily doubled, the demand for them goes down.  

On Monday, about 175 employees of the buffet restaurant in the slot-machine and electronic gambling casino in Ozone Park learned that the restaurant had been closed and that their jobs no longer existed. The casino had received plaudits when, in late October, a labor arbitrator issued a ruling that doubled the average pay of workers.

...

“Everything is done,” said Mariano Cano, 45, a server at the buffet for the past two years. “They just threw us out like dogs. They just gave us a couple of dollars to shut up, and that’s it.”

In October, Mr. Cano’s pay went from just over $5 an hour, plus tips for the drinks he delivered to the tables and dishes he cleared, to around $12, because of the living wage agreement.

This is one of those regulatory overreach paired with corporate cronyism stories, so I won't express any sympathy for the business involved -- it is earning huge rents from insider political deals it cut, and though the NYT does not explain it very well, my sense is that the arbitration requirement on wages was part of that political deal.

But it is amazing to me how much the Left has simply hypnotized itself into believing that minimum wage increases don't affect employment.  If we go back a number of months and look at the article where the NYT announced the arbitration decision, there is not one single mention that there might be some job security issues with forcing a doubling of wages.

Jeannine Nixon looked as if she had hit the jackpot. Ms. Nixon, a customer relations representative at  in Queens, had just learned that she would be making $40,000 a year, up from $22,300.

“It’s life-changing,” Ms. Nixon, her voice cracking, said on Thursday. “I can finally feel relieved.”

It is amazing to me that it did not even occur to any at the NYT to think that a doubling of worker pay might be anything but a pure bonanza.  I suppose they were blinded by a sense that casino margins were so high (though I find that the public consistently overestimates margins of many businesses, confusing revenues with profits).  Even if the casino is wildly profitable, one had to consider that all activities in the casino were not equally profitable.   Restaurants often have thin margins and 20-30% labor costs.  There is simply no room for doubling them in a business that typically has single digit margins at best (in fact, most restaurants lose money).

There are a number of reasons why people can fool themselves into thinking that minimum wage increases have no effect on employment

1. The biggest reason is that only about 3% of American workers earn the minimum wage.  So even a large drop in minimum wage job prospects, say by 10%, might only affect total US employment by a few tenths of a percent, a number that might not be seen in the general economic noise.
2. Minimum wage increases are typically implemented in small steps and announced well in advance.  Looking at employment the day after vs. the day before the actual date of change likely misses most of the effect.  For example, California announced almost a year in advance that minimum wages were going up by 25% in July of 2014.  Our company closed one operation and made substantial reductions in our work force in response, but we made these changes in December 2013, months before the change actually took effect.

Which makes this article in the Arizona Republic by Ronald Hansen one of the worst, most facile bits of economic analysis I have ever seen.

But, at the most basic level, there is good reason to think the minimum wage doesn’t kill jobs.

The minimum wage has gone up 22 times since it was instituted in 1938. There is complete seasonally adjusted data from the U.S. Bureau of Labor Statistics available for 21 of those hikes.

In 15 of those 21 cases, the U.S. economy added jobs in the year after the minimum wage went up.

On 11 occasions, it added more jobs after the hike than it did in the year before the raise went into effect.

This alone suggests that raising the minimum wage isn’t an automatic drag on employment growth.

This is simply absurd for all the reasons I listed above.   I understand how I might find this kind of "analysis" in the comments section of the Daily Kos, but how does one get this past an editor?

Christopher Monkton has been a very public supporter of the climate skeptic position.  I think he sometimes gets his science wrong, but he is glib and entertaining and by his position as peer of the realm he gets media space not available to many of us.

But this is bad, bad, bad.  He is calling for using British libel law against an alarmist who merely disagrees.  I have not problem with most of his factual defenses of Richard Lindzen.  But the points he labels "lies" are more accurately described as areas where people disagree on data source and interpretation.  Turning this into libel, under the egregiously onerous British libel laws, is a terrible precedent.

The climate debate is already over-full with vilification and ad hominem attacks.  The last thing we need is to throw British courts into the equation.

The proletatrianization of the middle class has been a Marxist goal from the beginning.  To this end, Obamacare is making great strides.  I will get my new Obamacare enrollment summary out soon, but apparently 79% of the people buying private policies are subsidized.  Add to this all the people who are being added to Medicare, and my guess is that over 90% of enrollments are into plans fully or partially funded by taxpayers.  Since almost by definition, these are all people who were paying their own way before, these are all people converted from individual responsibility to wards of the state.

And don't forget my 9 predictions for Obamacare stories in 2014.  Remember this one?

3.  Despite fewer exchange enrollments than expected, total Federal subsidy payments higher than expected

After the Rodney King verdict, the general conclusion was that a jury would not convict police for crimes against minorities.  Now we know better.  Apparently, juries will not convict police of any crimes whatsoever.  Add to this the fact that police departments themselves are so successful covering-up crimes and prevent most from coming to trial, and I wonder if police are beyond accountability.

I know there are a lot of folks who fetishize the police, but in my mind if we give police special powers, then they should have more accountability, not less.  I think police should be on camera, for example, every minute of their work day.

The economics of large-scale solar projects still don't work without massive subsidies and mandates that consumers pay above-market rates for solar power.

The journal Nature has finally caught up to the fact that ocean cycles may influence global surface temperature trends.  Climate alarmists refused to acknowledge this when temperatures were rising and the cycles were in their warm phase, but now are grasping at these cycles for an explanation of the 15+ year hiatus in warming as a way to avoid abandoning high climate sensitivity assumptions  (ie the sensitivity of global temperatures to CO2 concentrations, which IMO are exaggerated by implausible assumptions of positive feedback).

Here is the chart from Nature:

I cannot find my first use of this chart, but here is a version I was using over 5 years ago.  I know I was using it long before that

It will be interesting to see if they find a way to blame cycles for cooling in the last 10-15 years but not for the warming in the 80's and 90's.

Next step -- alarmists have the same epiphany about the sun, and blame non-warming on a low solar cycle without simultaneously giving previous high solar cycles any credit for warming.  For Nature's benefit, here is another chart they might use (from the same 2008 blog post).  The number 50 below is selected arbitrarily, but does a good job of highlighting solar activity in the second half of the 20th century vs. the first half.

I have not updated this story in a while, but we continue to litigate against the Federal Government over the closure of privately-operated and privately-funded parks on public lands.  The closure is over, obviously, but it is a situation that is very likely to recur and we are attempting to fight this battle now to set a precedent.   The Wall Street Journal's law blog is running an update on the story here.

You can find all my posts from the shutdown here.

Climate alarmists have mastered the trick of portraying opposition to their theories as not just being wrong, but being anti-science.  For years many scientists who have not looked into climate science at all have reflexively signed petitions supporting the alarmists, in the belief they were supporting science against anti-science. (By the way, time and again when these physicists and Earth scientists have actually later looked at the quality of climate science work, they have been astounded at the really poor quality garbage they were implicitly supporting -- I know, I am in that camp myself).

It looks like Paul Krugman, the most politicized economist ever(TM), is trying to bring the same style argumentation to economics.  If you don't agree with him, you are not just wrong, you are anti-science.  He is Galileo, and you are the ill-informed mystic.

So let me summarize: we had a scientific revolution in economics, one that dramatically increased our comprehension of the world and also gave us crucial practical guidance about what to do in the face of depressions. The broad outlines of the theory devised during that revolution have held up extremely well in the face of experience, while those rejecting the theory because it doesn’t correspond to their notion of common sense have been wrong every step of the way.

Yet a large part of both the political establishment and the economics establishment rejects the whole thing out of hand, because they don’t like the conclusions.

Galileo wept.

There are two other similarities between economics and climate that support this kind of blind (but unwarranted) certainty:

1. There are few if any opportunities for controlled experiments to truly test cause and effect
2. There are near infinite numbers of moving parts and variables, such that one can almost always find an analysis that shows your favored variable correlated to something good or bad -- as long, of course, as you are willing to pretend that a zillion other variables weren't changing at the same time which could have equally likely been part of the causation.

via the Federalist

One of my favorites writers Megan McArdle comments on my post about the regulatory excess in California.  The same post was linked by Reason as well.  The Reason post got the attention of Ron Paul, who will be interviewing me for his radio show next week.

I posted a few updates on the article today:

Wow, reading this again, I left out so much!  An employee once sued us at this location for harassment and intimidation by her manager -- when the manager was her sister!  It cost me over $20,000 in legal expenses to get the case dismissed.  I had an older couple file a state complaint for age discrimination when they were terminated -- despite the fact that our entire business model is to hire retired people and the vast majority of our employees are 70 and older.  And how could I have forgotten the process of getting a liquor license?  I suppose I left it out because while tedious (my wife and I had to fly to California to get fingerprinted, for example), it is not really worse than in other places -- liquor license processes are universally bad, a feature and not a bug for the established businesses one is trying to compete with.   We gave the license up pretty quickly, when we saw how crazy and irresponsible much of the customer base was.  Trying to make the place safer and more family friendly, we banned alcohol from the lake area, and faced a series of lawsuit threats over that.

This is hilarious.  Apparently the polar vortex proves whatever hypothesis you are trying to prove, either cooling or warming:

Steven Goddard of the Real Science blog has the goods on Time magazine.  From the 1974 Time article “Another Ice Age?”:

Scientists have found other indications of global cooling. For one thing there has been anoticeable expansion of the great belt of dry, high-altitude polar winds —the so-calledcircumpolar vortex—that sweep from west to east around the top and bottom of the world.

And guess what Time is saying this week?  Yup:

But not only does the cold spell not disprove climate change, it may well be that global warming could be making the occasional bout of extreme cold weather in the U.S. even more likely. Right now much of the U.S. is in the grip of a polar vortex, which is pretty much what it sounds like: a whirlwind of extremely cold, extremely dense air that forms near the poles. Usually the fast winds in the vortex—which can top 100 mph (161 k/h)—keep that cold air locked up in the Arctic. But when the winds weaken, the vortex can begin to wobble like a drunk on his fourth martini, and the Arctic air can escape and spill southward, bringing Arctic weather with it. In this case, nearly the entire polar vortex has tumbled southward, leading to record-breaking cold.

I have seen this fact a number of times and am always amazed when I read it, since poverty figures are never, ever presented with this bit of context

LBJ promised that the war on poverty would be an "investment" that would "return its cost manifold to the entire economy." But the country has invested $20.7 trillion in 2011 dollars over the past 50 years. What does America have to show for its investment? Apparently, almost nothing: The official poverty rate persists with little improvement.

That is in part because the government's poverty figures are misleading. Census defines a family as poor based on income level but doesn't count welfare benefits as a form of income. Thus, government means-tested spending can grow infinitely while the poverty rate remains stagnant.

Rector argues that poor today is very different than poor in  Johnson's day, and that perhaps we might celebrate a bit

Not even government, though, can spend $9,000 per recipient a year and have no impact on living standards. And it shows: Current poverty has little resemblance to poverty 50 years ago. According to a variety of government sources, including census data and surveys by federal agencies, the typical American living below the poverty level in 2013 lives in a house or apartment that is in good repair, equipped with air conditioning and cable TV. His home is larger than the home of the average nonpoor French, German or English man. He has a car, multiple color TVs and a DVD player. More than half the poor have computers and a third have wide, flat-screen TVs. The overwhelming majority of poor Americans are not undernourished and did not suffer from hunger for even one day of the previous year.

Remember what I presented a while back.  This is what the Left thinks, or wants us to think, American income inequality looks like -- our rich are richer than comparable European welfare states because our poor are poorer.

And this is what income inequality in the US actually looks like -- our rich and middle class are richer, but our poor are not poorer.  A less redistributionist approach floats all boats.  I compared the US to many European welfare states, using the Left's own data source.  Here is an example, but hit the link to see it all.

Give people power and they will abuse it.  I don't care if it is Chicago Democrats or New Jersey Republicans.  Most recent example:

A top aide to Gov. Chris Christie told an executive at the Port Authority of New York and New Jersey it was "time for some traffic problems in Fort Lee" before the authority closed lanes onto the George Washington Bridge in September, triggering a week of massive traffic jams, documents show.

The aide, Bridget Anne Kelly, sent the email, dated Aug. 13, to David Wildstein, a political ally of the governor who was the authority's director of interstate capital projects.

Mr. Wildstein, replied: "Got it."

Apparently this conversation occurred in response to Fort Lee's mayor Mark Sokolich refusing to endorse Christie in last year's governor race

[Mr. Wildasin said] in an apparent reference to Fort Lee Mayor Mark Sokolich: "It will be a tough November for this little Serbian."

Mr. Sokolich said in an interview Wednesday, "I didn't sign up for this petty political insanity."

Mr. Sokolich said he was now convinced he'd been the target of retribution for not endorsing Mr. Christie. "I've been punished not for something I've done, but for something I didn't do," Mr. Sokolich said. "This is the behavior of a bully in a schoolyard. It is the greatest example of political payback."

Also, Mr. Sokolich said he is Croatian.

Mr. Wildasin seens to have been teleported out of a Sopranos episode.

So after spending billions to subsidize the construction and operation of wind farms, Britain has discovered that their output variability is a problem and that they produce too much of their power at night (issues many of us predicted long before they were built).  So now England is facing the policy choice of either a) paying wind farm owners to NOT product power or b) paying factory owners to switch their operations to night time.  Seriously.  For most areas, wind is among the worst possible electricity source.