Coyote Blog

Blue Cross just wrote me that our current health insurance policy will not be renewable for next year.  Unfortunately, I have actual health insurance rather than pre-paid medical care (meaning that it has a high deductible and pays for catastrophic things rather than aromatherapy visits).  Kathleen Sebelius does not think what I have is "real insurance" so she and Obama have banned it, despite promising that if I like my health insurance I would be able to keep it.

The Florida auditor sitting in my one-man office was shocked to learn I would not be in the rest of the week.  I said you scheduled the audit visit for today, so I changed my plans and am in the office today, but leave tomorrow.  Apparently she assumed that the audit schedule gave her the right to stay as long as she wanted.  She was planning to sit in my office for another 2-5 days.  I told her sorry, but if she wanted to book 5 days, she should have booked five days.  And by the way, if she had tried in advance to make me sit dormant in my office all week, I would not have agreed to the visit.

This is just insane in an Internet world.  Everything she asked for in advance was sent to her electronically.  Even though she is sitting right next to me, her requests to me for more data have come by email.  I can't figure any reason why she is even here, unless Florida finds it cheaper to fly her around and use other people's offices rather than provide her with one of her own.

By the way, this is fairly typical of a lot of government workers in my experience.  If they block a meeting on their calendar for the whole afternoon, they want it to last the whole afternoon.  There are a lot of jobs out there where people are most comfortable proving their worth by showing that their calendars are always full.

It took into the mid-1960's for the Federal government to accumulate $328 billion in debt (yeah, I know, nominal dollars).  It rose that much in one day last week.

Every three years I have to endure a sales tax audit from the State of Florida.  This year they actually sent me well in advance a list of all the paperwork they needed.  I sent everything to them electronically weeks ago.  So why do they have their auditor fly to Phoenix, stay in a hotel, and do her analysis of this paperwork on her laptop in my office?  In the hour since she has been here she has not asked me for one thing.  It is just bizarre.  Given that I have been audited by them twice in the past and never owed more than forty or fifty bucks in back taxes from computation errors, I am pretty sure her flight cost way more than the expected value of her trip, particularly since she had done nothing so far she could not have done (better probably) in her own office.

The #1 trouble with polls is that the questions can be easily manipulated to shift the results quite a bit by small changes in wording.

But another problem in interpretation is that "opposition" to certain public policy goals is not well parsed.  Kevin Drum gives an example where "opposition" to Obamacare includes a lot of people who don't like it because they wanted it to be even more radical, believing the government should have gone even further or stopped short of the full policy prescription required.  But these numbers are typically just lumped in as "opposed" and the conclusion is frequently that all opposed thought the law went too far or should not have been passed.

My gut feel is that this is a non-partisan issue.  Just as easily folks could be opposed to, say, tax cuts or the government shutdown because they did not think it went far enough.

As far as Obamacare goes, it will be interesting to see what those numbers look like in 2 months.

Don Boudreax writes:

Here’s a project for all unemployed young people – say, ages 18 through 21 – in America today.  Go to a nearby supermarket or restaurant or lawn-care company or pet store and ask for a job at the minimum wage.  If you are denied, offer to work for $4.00 per hour.  The owner or manager will almost surely decline, saying that it’s against the law.

“Would you like to hire me at $4.00?” you ask.

“Well yes I would” is the answer you’re likely to get in reply.

“So, hire me at that wage.  I’m an adult, I’m sober, and I have no mental issues.  I’m willing to work for $4.00 per hour.”

“You don’t get it, kid.  I can’t hire you at that wage.  I’ll get fined, or worse.  Go away.”

“Ok, I’ll leave.  But no one – including you – will hire me at $7.25 per hour.  What am I supposed to do?”

“Look kid.  That’s your problem.  I’m sorry.  I don’t make the laws, but I gotta follow them.  Go away now.”

I know that this is a realistic scenario because I have this conversation with employees all the time.  Except in my case, applicants are generally not 18 years old but 70 years old.

A bit of background:  My company operates campground and other recreation areas mainly using retired people who live on-site in their own RV's.  Few of my 400+ employees are under 65 and several are over 90.

There are several reasons this conversation occurs:

• As my employees get older, and perhaps sicker with various disabilities, their work slows down to the point that it falls under our productivity expectations.  Employees may come to me saying they want to stay busy but they know they don't work very fast but they would be happy to work for $5 or $4 an hour if they could just keep this job they love.  (There is a Federal law that allows waiving of minimum wages for disability situations.  We tried it -- once.  The paperwork was daunting and the approval came 7 months after the application -- 2 months after the seasonal employee had already gone home for the year).
• Many people like to stay busy but face wage caps where they begin to lose their Social Security.  They want to keep their total income under the wage cap.  We try to create some jobs that require fewer hours so they can get their wages down that way, but in many cases we have a limited number of on-site living spots and a fixed amount of work such that each person occupying a living spot must do a certain amount of work to make sure it all gets done.  So at some point we can't give them fewer hours, and then they will ask for lower pay.

I frequently have to tell people I simply cannot pay them less.  They ask if they can sign a paper saying they want to be paid less, and I tell them something like "no, the law assumes you are a gullible rube and that I am evil and infinitely powerful so that if you sign a paper, it just means I forced you to do it."  Which is all true, that is exactly the logic of the law.

People look at me funny sometimes when I say the minimum wage law limits employee rights by putting a floor on what they may charge for their labor.  This is an odd way of putting it for them, because minimum wage laws are generally explained in the oppressor-oppressed model, but it makes perfect sense from my experience.

You know how someone does an amazing trick, and then they show you how, and you say, "Oh, I see, that was easy once you know the trick."  Well, that is not the case with this art, at least for me.  

One problem with art books is they will have some exercise to draw a face, and step one will be an oval and step two will be a few more ovals, and I am following along well, and then step three the whole face is suddenly drawn in where the ovals were.   Art books all do this and it drives me crazy.    Well, at least the guy in the linked video shows every single little step.  And it still seems a miracle that the picture emerges.

How is this a scandal?

While fans can also purchase pink [NFL Branded] clothing and accessories to support the cause, a shockingly small amount of the fans' money is actually going towards cancer research.

According to data obtained from the NFL by Darren Rovell of ESPN, the NFL "takes a 25% royalty from the wholesale price (1/2 retail), donates 90% of royalty to American Cancer Society."

In other words, for every $100 in pink merchandise sold, $12.50 goes to the NFL. Of that, $11.25 goes to the American Cancer Society (ACS) and the NFL keeps the rest. The remaining money is then divided up by the company that makes the merchandise (37.5%) and the company that sells the merchandise (50.0%), which is often the NFL and the individual teams.

How is this "shockingly small"?  A donation of 11.25% of the retail price, and 22.5% of the wholesale price,  of a piece of clothing is a pretty hefty.  What do they expect?  All the author is doing is demonstrating his (her?)  ignorance of retail and clothing net profit margins.  In particular, how can you try to make the NFL the bad guy for donating 90% of the money they actually get?  It's their program, they can't donate the clothing manufacturer's money.

And besides, the NFL should be congratulated for being open about the numbers -- there is often zero transparency in such charitable promotional programs.  How much of the money in the last charity gala you attended do you think actually made it to the charity rather than just help fund the self-aggrandizement of their socialite sponsors?

OK, actually, they did not use the words "trivial" and "unmeasurable."  But they could have.  What they actually said in a story splashed across the front page:

The 16-day government shutdown cost the economy jobs, delayed mortgages and lost retail sales — at least $12 billion worth, and maybe as much as $24 billion

$12-24 Billion is between 0.08% and 0.15% of GDP.  This is for a shutdown of the government for 4.4% of the year (16 days divided by 365).   That hardly seems like a substantial impact, and not at all in line with the scare stories in advance of the shutdown.  (And this is coming from someone who was impacted a lot, though due to illegal actions by the administration).

The day of the launch of iOS7, I warned my whole family in an email not to upgrade until it had some time to prove itself.  This is why.  Apparently it is a mess, at least for some users. 

The sort of funny part is that they defend themselves by saying "at least it is not as bad as Microsoft OS launch."  We certainly have latched onto a new form of accountability in the Obama age:  "Don't criticize me because I am not as bad as the other guy."

By the way, as someone who is had been royally pissed off at Microsoft many times in the past, Microsoft has to accommodate thousands of hardware configurations and a much more loosely controlled development community.  There are fewer excuses for Apple, which develops for a single hardware platform that it totally controls.

Also, there is one other difference -- when I am unhappy with a Microsoft OS, as I was with Vista, I can simply roll back to the previous version (in that case XP).   Apple does not give users any way to roll back their iPhone OS.

We can't seem to get Congress or the President to ban domestic spying on our emails and phone records, so let's let Kathleen Sibelius run the NSA.  Let's make sure she takes personal control of the development of new computer systems.  We will be safe for decades.

Let's suppose a Fortune 500 company went through a rancorous internal debate about strategic priorities, perhaps even resulting in proxy fights and such (think Blackberry, HP, and many other examples).  The debate and uncertainty makes investors nervous.  So when the debate has been settled, what does the CEO say?  My guess is that he or she will do everything they can to calm investors, explain that the internal debate was a sign of a healthy response to adversity, and reiterate to the markets that the company is set to be stronger than ever.  The CEO is going to do everything they can to rebuild confidence and downplay the effects of the internal debate.

Here is President Obama today, talking about the budget battle

“Probably nothing has done more damage to America’s credibility in the world than the spectacle we’ve seen these past few weeks,” the president said in an impassioned White House appearance.

Good God, its like he's urging a sell order on his own stock.   I was early in observing the Republican strategy was stupid and doomed to failure, but you have to show a little statesmanship as President.

Postscript:  

Standard & Poor’s estimated the shutdown has taken $24 billion out of the economy.

If this is true, this number is trivial.  0.15% of GDP (and this from someone hurt more than most) loss from a government shutdown about 4.4% of the year (16/365)

My daughter and I did the whole college visit thing last week -- 8 colleges in five days.  In doing so, I was struck by the fact that all these great schools we visited, with one exception, were founded by rich people no more recently than the 19th century.  Seriously, can you name a college top students are trying to get into that was founded since 1900?  I think Rice University in Houston was founded in the 20th century but it is still over 100 years old.

The one exception, by the way, was SCAD, an art school in Savannah, Georgia.  SCAD is new enough that it is still being run by its founder.  I am not sure I am totally comfortable in the value proposition of an expensive art school, but I will say that this was -- by far -- the most dynamic school we visited.

So here is what I would do:  Create a new not-for-profit university aimed at competing at the top levels, e.g. with the Ivy League.  I would find a nice bit of land for it in a good climate, avoiding big cities.  The Big Island of Hawaii would be a nice spot, though that may be too remote.   Scottsdale would not be a bad choice since its bad weather is during the summer out of the normal school year and land is relatively cheap.

Then, I would take the top academic kids, period.  No special breaks for athletes or tuba players.  It would have some reasonable school non-academic programs just to remain competitive for students - maybe some intramurals or club sports, but certainly no focus on powerhouse athletics.  We could set a pool of money aside to help fund clubs and let students drive and run most of the extra-curriculars, from singing groups to debate clubs.  If students are passionate enough to form and lead these activities, they would happen.

And now I need a reader promise here - if you are going to read the next sentence, you have to read the whole rest of the article before flying into any tizzies.

And for the most part we would scrap affirmative action and diversity goals.  We are going to take the best students.  This does not mean its pure SAT's - one can certainly look at a transcript and SAT in the context of the school kids went to, so that smart kids are not punished for going to a crap public high school.

Realize I say this with the expectation that the largest group of students who will be getting affirmative action over the next 20 years are... white males.

What?  How can this be?  Well it is already nearly true.  Sure, historically everyone has focused on reverse discrimination against white males when colleges were dealing with having twice as many men than women and they had few qualified black or hispanic candidates.  But my sense is that few white males any more lose their spot in college due to competition from under-qualified minority candidates.

That is because there is an enormous demographic shift going on in college.  In fact there are three:

1. Girls rule high school and higher education.  Yes, I know that women steeped in "Failing at Fairness" will find this hard to believe, but undergraduates are something like 56% women nowadays.  As we toured Ivy League schools, we were on tours with about 6 prospective female students for every one guy.  Back when my son played high school basketball, on the walls of various high schools he played at were pictures of their honor societies.  Time and again I saw pictures of 20 girls and one or two forlorn boys.  If top schools want to keep their gender numbers even, then they are going to have to start affirmative action for boys, if they have not done so already (I suspect they have).
2. Asians are being actively discriminated against.  Schools will never ever admit it, because they are getting sued by Asian prospective students (I know Princeton has been sued) but reverse discrimination against Asian students is becoming more and more intense.  The bar for Asia females already is way higher than the bar for white males in top schools, and it likely will only get worse
3. Foreign students bring in the cash.  Ivy League schools have a ton of international students, which makes sense as they strive to be international institutions.  But one thing they will not tell you is that there is another reason for bringing in foreign students:  For most schools, their need-blind admissions policies and increasingly generous financial aid packages do not apply to foreign students, or apply on a much more limited basis.  The average tuition paid by international students is thus much higher.  I suspect, but cannot prove, that under the cover of diversity these schools are lowering their standards to bring in students who bring the cash.

So we scrap all this.  If the school ends up 80% Asian women, fine.  Every forum in one's life does not have to have perfect diversity (whatever the hell that is), and besides there are plenty of other market choices for students who are seeking different racial and ethnic mixes in their college experience.   We just want the best.  And whatever money we can raise, we make sure  a lot of it goes to financial aid rather than prettier buildings (have you seen what they are building at colleges these days?) so we can make sure the best can afford to attend.  Getting good faculty might be the challenge at first, but tenure tracks have dried up so many places that my gut feel is that there are plenty of great folks out there who can't get tenure where they are and would jump at a chance to move.  You won't have Paul Krugman or Bill McKibben type names at first, but is that so bad?

We know the business community hires from Ivy League schools in part because they can essentially outsource their applicant screening to the University admissions office.  So we will go them one better and really sell this.   Hire any of our graduates and you know you are getting someone hard-working and focused and very smart.

I don't know if it would work, but hell, I am a billionaire, what's the risk in trying?

I find it funny that Obama used the phrase "completely unnecessary damage" vis a vis the shutdown, since that seems to have been his staff's explicit marching orders:  Inflict completely unnecessary damage.  It was pretty clear there was never justification for the Administration to close our privately-funded parks.  Over the last week, case after case in court overturned similar orders in the NPS and USFS.  I just wish our TRO request had come to court a bit sooner so we could have had the precedent in hand.

Anyway, we are opening today, and readers will be spared more posts on our situation.  I know some of our customers are reading this site for updates.  The updated status of all our Forest Service campgrounds and parks and when they are opening is here.

Oddly enough, this is perhaps the most frequent argument I have with people on the Left in cocktail party conversations.

It begins this way -- some abuse of "private enterprise" is cited.  Almost every time, I have to point out that the abuse in question could not occur if private companies were not availing themselves of government's coercive power to [fill in the blank: step on competitors, limit choice, keep prices high, rake in subsidies, etc.] Michael Moore's Capitalism: A Love Story is very much in this mold, blaming bad outcomes that result in government interventions on free market capitalism.

Kevin Drum has a great example of this.  Asthma inhalers are expensive because certain companies used the government to ban less expensive competitive products.

Nick Baumann picks up the story from there:

The pharma consortium transformed from primarily an R&D outfit searching for substitutes for CFC-based inhalers into a lobbying group intent on eliminating the old inhalers. It set up shop in the K Street offices of Drinker Biddle, a major DC law firm. Between 2005 and 2010, it spent $520,000 on lobbying. (It probably spent even more; as a trade group, it's not required to disclose all of its advocacy spending.) Meanwhile, IPAC lobbied for other countries to enact similar bans, arguing that CFC-based inhalers should be eliminated for environmental reasons and replaced with the new, HFC-based inhalers.

The lobbying paid off. In 2005, the Food and Drug Administration (FDA) approved an outright ban on many CFC-based inhalers starting in 2009. This June, the agency's ban on Aerobid, an inhaler used for acute asthma, took effect. Combivent, another popular treatment, will be phased out by the end of 2013.

In other words, pharmaceutical companies didn't just take advantage of this situation, they actively worked to create this situation. Given the minuscule impact of CFC-based inhalers on the ozone layer, it's likely that an exception could have been agreed to if pharmaceutical companies hadn't lobbied so hard to get rid of them. The result is lower-quality inhalers and fantastically higher profits for Big Pharma.

Rosenthal has a lot more detail in her piece about how the vagaries of patent law make this all even worse, and it's worth reading. But she misses the biggest story of all: none of this would matter if drug companies hadn't worked hard to make sure the old, cheap inhalers were banned. How's your blood doing now, Dr. Saunders?

No one has more disdain than I for companies that attempt to use the coercive power of the government as a competitive weapon in their favor.  Heck, I have barely gone 2 hours since the last time I bashed an industry for doing so.

But the implication that this is all the fault of corporations is just wrong, as is the the inevitable Progressive conclusion that somehow more government regulation and powers are necessary to combat this.

The Left has been the prime cheerleader over the past decades in creating the Federal behemoth that not only allows this to happen, but actively facilitates it.   We have created a government whose primary purpose is to redistribute spoils from one group to another.

Just look at the example he uses.  These drug manufacturers could have protected their markets and products the free market way, by investing tens of millions in more research, manufacturing cost reduction, and customer marketing.   But instead, we have a system where - entirely legally - a company can spend a fraction of this (the chump change amount of half a million dollars) to market to a few dozen people in DC and get the same benefits as investing tens of millions in satisfying customers.    The wonder is not that losers like these drug companies go this route, but that anybody at all still has enough sense of honor to actually invest in the customer rather than in DC bureaucrats.

I put it this way - "invest in customers rather than DC bureaucrats" - because every new regulation, every new government power over commerce is essentially a dis-empowerment of consumers in the marketplace.  Nowhere is this more true than in pharmaceuticals, where the government tells consumers what they can and cannot buy.

In a free market, accountability is enforced by consumers defending their own best interests and new competitors seeking fortunes by striving to serve consumers better than market incumbents.  Every government intervention is essentially saying to consumers that the government is going to make yet another decision for them.  So, having taken over so many decisions of consumers in those huge office buildings in DC, is it any wonder that companies go to DC to market to bureaucrats rather than bother marketing to consumers?

The problem, then, is not that some corporations avail themselves of legal shortcuts to profits.  The problem is that these legal shortcuts exist at all.  The problem is the coercive power of government to intervene in markets, chill competition through incensing, subsidize one competitor over another, etc.  These kinds of stories are going to proliferate endlessly until  that power is scaled back.

The Progressives I argue with come back with one of two answers.

This is a crock, and is the worst bit of enablement for a bad system ever invented.   The folks in government are not bad people -- they are normal people with bad information and bad incentives, and that is never going to change.  After all, something that Drum glosses over here, the agency in hid example went along and did the industry's bidding.  I know why the industry was doing what it did, but why did the agency roll over?  The whole theory is that these are public spirited people without commercial incentives.  Yet they rolled over none-the-less.  And it's not like these government employees are Rothbardian libertarians.  I work with the government all the time.  Their employees are there because they believe in public solutions over private ones.  In outlook and biases and beliefs they look a lot more like Kevin Drum than myself.  So why do they get a pass?  Of the two people here -- the drug company guy and the regulator guy -- which one is not doing his job right for his constituents?  So why does the drug company get the blame?

Response 2:  We just need to ban lobbying and contact with the regulated industry.  The whole theory of regulation is that the regulators are totally knowledgeable about the industry, but they have different incentives so they can work in the public interest.  But how are they going to be totally knowledgeable about the industry without frequent contact?  Or even experience in the industry?  And as to lobbying, lobbying is just speech.  It would be Constitutionally impossible to ban lobbying, and wrong anyway.  Think of it this way-- let's say you ran a restaurant but had to get a government agency's permission for each change in your menu (just as drug companies have to get permission for each change in their product offering).  Would you be happy with a situation in which the government made decisions on your menu without consulting you?  You would want to explain your desired changes and the logic behind them, right?   That's called lobbying, and you would not be happy to see it banned.

In New York, the local hotel industry is freaking out.  Hotels, in a wearyingly familiar pattern, want the city to ban competitors using new business models (in this case companies like Airbnb).  Of course, they can't say that they are demanding government action to block competition.  So they come up with other BS.   This statement is right out of the corporate state paybook

NYC & Company, the city’s official tourism agency, issued a statement saying, “This illegal practice takes away much needed hotel tax revenue from city coffers with no consumer protections against fire- and health-code violations.” Neither city officials nor hotel organizations would estimate how much revenue hotels and the city might be losing.

The tax argument is absurd.  There is no reason that the city could not apply lodging or some sort of new tax to the rentals if that were their real concern.  The part about fire and health regulations is equally absurd.  New York apartment and building owners would be very surprised to learn that they are suddenly somehow unregulated.  Is the implication really that New York hotels are safe but New York apartments are Triangle Shirtwaist fires waiting to happen?

This is a great example of industry capture.  A true city tourism agency should be saying "It is great that this city is developing even more options for visitors.  A diversity of lodging experiences and price levels can only help spur tourism in New York.  There may be a few regulatory tweaks that are needed to accommodate this model, but we welcome this new lodging model with open arms."  Instead, though, they are acting as government paid lobbyists for existing hotel interests.

One organization does not ask applicants about race and hires through a race-blind process.  The other organization hires teams of "race raters" to guess applicants' race from their name and picture.  Guess which one is suing the other for being racist.

When old guys like me go out to play pickup basketball, we all lay out our excuses before we start playing:  My knee is acting up, my job gives me no time to practice, etc. -- you know the drill.

So here are my excuses for the following video:  I had just arrived in Orlando to run a 10 mile race with my daughter, it was really early in the morning, I was jetlagged, I only had 4 hours of sleep, live TV is hard, live TV from a remote broadcast staring into the camera is harder, my earpiece was loose, I didn't like the questions they asked, etc.

That being said, here I am

Also, I missed it on Monday but I got a brief mention in the USA Today editorial.

My competitor Eric Mart does a great job explaining the issues.

Reason rightly highlights this story about a kid in Georgia facing 10 years in jail because his school found his fishing tackle box in his car and in it was, gasp, his fishing knife.

But what the local news story fails to make a point about is the absurdly low bar school officials have to clear to search student's cars.

Williams, a senior at Allatoona High School, became the subject of a warrantless search after a fellow student told a campus police officer that he or she saw smoke rising from Williams’ car in the student parking lot and it smelled like marijuana. An assistant principal searched the car and did not find any marijuana but did find a pocket knife in the center console, enough to get Williams suspended for 10 days and possibly expelled, while facing felony criminal charges.

Smoke was rising from the car?  Really?  Like Spiccoli's van in Fast Times for Ridgemont High?  I am sure glad this kind of administrative lawlessness was not allowed when I was in school.  I wouldn't be surprised if the original student report to the school wasn't a pure fabrication out of spite against this student.

UPDATE:  Mea culpa.  One point in the original post was dead wrong.  It is possible, contrary to what I wrote below, to get something like a 0.7%  difference in annual growth rates with the assumptions he has in the chart below (Drum still exaggerated when he called it 1%).  I don't know if the model is valid (I have little faith in any macro models) but I was wrong on this claim.  Using the 0.7% and working more carefully by quarter we get a cumulative GDP addition a bit lower than the cumulative debt addition.  There is still obviously a reasonable question even at a multiplier near 1 whether $1 of economic activity today is worth $1 of debt repayment plus interest in the future.  

I am not a believer, obviously, in cyclical tweaking of the economy by the Feds.  To my thinking, the last recession was caused by a massive government-driven mis-allocation of capital so further heavy-handed government allocation of capital seems like a poor solution.  But what really drives me crazy is that most folks on the Left will seductively argue that now is not the time to reduce debt levels, implying sometime in the future when the economy is better will be the appropriate time.  But when, in any expansion, have you heard anyone on the Left say, "hey, its time to reduce spending and cut debt because we need the fiscal flexibility next time the economy goes wrong."

I will leave the stuff in error below in the post because I don't think it is right to disappear mistakes.  For transparency, my spreadsheet reconstruction both confirming the 0.7% and with the updated numbers below is here:   reconstruction.xls.

Kevin Drum is flogging the austerity horse again

I see that Macroecomic Advisors has produced a comprehensive estimate of the total effect of bad fiscal policies. Their conclusion: austerity policies since the start of 2011 have cut GDP growth by about 1 percentage point per year.

Something seemed odd to me -- when I opened up the linked study, it said the "lost" government discretionary spending is about 2% of GDP.  Is Drum really arguing that we should be spending 2% of GDP to increase GDP by 1%?

Of course, the math does not work quite this way given compounding and such, but it did cause me to check things out.  The first thing I learned is that Drum partook of some creative rounding.  The study actually said reductions in discretionary spending as a percent of GDP reduced GDP growth rates since the beginning of 2011 by 0.7% a year, not 1% (the study does mention a 1% number but this includes other effects as well).

But it is weirder than that, because here is the chart in the study that is supposed to support the 0.7% number:

Note that in the quarterly data, only 2 quarters appear to show a 0.7% difference and all the others are less.  I understand that compounding can do weird things, but how can the string of numbers represented by the green bars net to 0.7%?  What it looks like they did is just read off the last bar, which would be appropriate if they were doing some sort of cumulative model, but that is not how the chart is built.  If we interpolate actual values and are relatively careful about getting the compounding right, the difference is actually about 0.45%.  So now we are down to less than half the number Drum quoted see update above (I sent an email to the study author for clarification but have not heard back.  Update:  he was nice enough to send me a quick email).

So let's accept this 0.45% 0.7% number for a moment.  If GDP started somewhere around 16 trillion in 2010, if we apply a 0.45% the quarterly growth numbers from his chart, we get an incremental economic activity from 2011 through 2013:Q2 of about $333 billion.

So now look at the spending side.  The source says that discretionary spending fell by about 2% of GDP over this period.  From the graph above, it seems to bite pretty early, but we will assume it fell 1/12 of this 2% figure each quarter, so that by the end of 2013 or beginning of 2014 we get a fall in spending by 2% of GDP.  Cumulatively, this would be a reduction in spending over the 2.5 years vs. some "non-austere" benchmark of $388 billion.

Thus, in exchange for running up $677 billion $388 billion in additional debt, we would have had $445 billion $333 billion in incremental economic activity.  A couple of reactions:

1. Having the government borrow money and spend it definitely increases near-term GDP.  No one disputes that.  It is not even in question.  Those of us who favor reigning in government spending acknowledge this.  The question is, at what cost in terms of future obligations.  In fact, this very study Drum is quoting says
   

   Economists agree that failure to shrink prospective deficits and debt will bestow significant economic consequences and risks on future generations. Federal deficits drive up interest rates, “crowding out” private investment. If government borrowing supports consumption (e.g., through Social Security and major health programs) rather than public investment, the nation’s overall capital stock declines, undermining our standard of living. The process is slow but the eventual impact is large.2 In addition, accumulating debt raises the risk of a fiscal crisis. No one can say when this might occur but, unlike crowding out, a debt crisis could develop unexpectedly once debt reached high levels.

   High deficits and debt also undermine the efficacy of macroeconomic policies and reduce policymakers’ flexibility to respond to unexpected events. For example, in a recession, it would be harder to provide fiscal stimulus if deficits and debt already were high. Furthermore, fiscal stimulus might be less effective then. Additional deficit spending could be seen as pushing the nation closer to crisis, thereby forcing up interest rates and undercutting the effects of the stimulus. With fiscal policy hamstrung, the burden of counter-cyclical policy is thrust on the Federal Open Market Committee (FOMC) but, particularly in a low interest-rate environment, the FOMC may be unable (or unwilling) to provide additional monetary
   stimulus.
   

2. I guess we have pretty much given up on the >1 multiplier, huh?  Beggaring our children for incremental economic growth today is a risky enough strategy, but particularly so with the implied .66 .85 multiplier here.

This is not the first time Drum has taken, uh, creative data approaches to cry "austerity" during a mad spending spree. 

I get egregious amounts of spam related to my blogs, but this was a new one:

I wanted to touch base with COYOTE to obtain some more background
information, mission statement, goals, history and interview for a
piece I am writing for CORSET magazine on sexual issues. The interview
will be conducted via email and ental approximately 10 questions for
the piece.

The Competitive Enterprise Institute has been all over the shutdown of private businesses that take no money from the Federal government, but have been closed by the Administration none-the-less.  The Daily Caller has an article up that includes some quotes from yours truly

During the government shutdown, the Obama administration has forced the closure of privately owned parks, stoking calls from lawyers for park owners to take legal action against the federal government.

“As a lawyer who once worked for the government, I assume there is no legal authority for this because these private tourist attractions were not shut down in prior ‘government shutdowns,’ even under Bill Clinton, who understood how to play political hardball,” Hans Bader, senior attorney at the Competitive Enterprise Institute wrote in an email.

A lawyer with the conservative Heritage Foundation said that the Obama administration’s actions were likely illegal and that business owners forced to close shop should sue.

“They should immediately file a lawsuit and seek a temporary injunction against the government,” said Former Justice Department lawyer Hans Von Spakovsky.

Which is what we are doing right at this moment.  Several other groups are winning similar suits.

Another example (though I am told the Cliff House case was greatly aided by connections they had with Nancy Pelosi).

From the awesome Ken White at Popehat:

NYPD Officer Craig Matthews complained about an illegal quota system for stops and arrests. As anyone familiar with NYPD culture could predict, he experienced retaliation from his superiors for doing so. When he sued, the NYPD hit him with an argument that's outrageous but very likely legally correct: it's your job to report misconduct, so the First Amendment doesn't prohibit us from retaliating against you for doing so.

Wait, what?

The Association of Lawless Broomstick-Fetishist Brown-Person-Groping Can't-Shoot-Straight Thugs has a point. Because their employer is the government, public employees have limited First Amendment rights to be free of employer retaliation for their speech. But in in Garcetti v. Ceballos the Supreme Court said that right protects speech on matters of public concern unless the speech is part of a job duty:

We hold that when public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline.

Thus in Garcetti the Court said a Deputy DA had no right to be free of retaliation for pointing out perjury in an arrest warrant application because doing so was his job. I explained how this doctrine works — and how courts have made an exception for professors at public colleges — in this post.

The result is that an entity like the NYPD can argue that its officers are required by their job to report unlawful activity by their superiors and fellow officers, and that therefore their act of reporting such misconduct enjoys no First Amendment protection.