The NEW Sacramento Children's Museum

Yesterday we went to the new Sacramento Children's Museum with our younger grandson.   When you enter you are told that the kids are the guides - and indeed they are.    We spent about two hours in all sorts of venues.  There are some science experiments and some places like the one above which is a recreation of a store (the type changes every few months - currently a Japanese store - in December it was Mexican).  It is unclear whether some of the other exhibits will change over time.  There is a water play area, a painting area, a couple of opportunities to dress up in various professions, a solar project, a couple of elementary motion experiments and a flow project which uses a clear tube system to move things around like scarves and soft balls.

The colors are bright and cheery and our grandson seemed to have a wonderful time.  It is a superb new resource for kids in the city.

The Trabant in the US - Green jobs and bailouts

The announcement today about the third failure of a company that the Obama administration bet on made me begin to think about the effects of this administration's industrial policy.   These guys believe they can actually pick winners - companies that will produce what they think consumers will buy and will conform to their narrow vision of markets.   Ener1 cost the American taxpayer $118 million; Beacon Power cost the taxpayers another $43 million and Solyndra cost us $528 million.  In the State of the Union the President claimed that he wanted to produce a lot more "Steve Jobs."   You may remember that the former Apple CEO once said "If Henry Ford had asked consumers what they wanted he would have heard faster horses."   That is exactly the point.     From the record this set of policies has not produced even mildly positive results.

Frederic Bastiat discussed the "seen and the unseen" (knowing that some choices result in tradeoffs which are not properly accounted for).   So look at the major bet that this Administration.   The original cost of the bailout of GM and Chrysler was estimated at $80 billion.   The government owns 500 million shares of GM at this point (about a third of the total capitalization).   The government pushed GM to produce an electric car (the Volt) which to this point has been something of a colossal failure (about 6000 units sold).


During the coming campaign you will hear the Administration claim that its bailout of the auto industry saved 1 million jobs.   Voters should not let them get away with those claims.  Would the American auto industry have gone away if the government had not injected $80 billion dollars?   It is not clear what would have happened.  Ford certainly would have remained and if the market had been able to operate some remnant of GM or Chrysler would have survived.   But the distorting effects of the bailout remain.  The chart is Ford (blue) v GM (red) since the start of the administration.   Some stock traders argue that GM's price is partially depressed because of the worry that investors have for the company - with a third of their outstanding shares being held by the government.

Would the economy continued to spiral down, as the Administration's inside and outside commentators claim or would we have had a more normal recovery curve?   We'll never know.  But the failures in having the government pick winners in other parts of the economy does not suggest a positive result.

Warren Buffett - Mercantilist

Think a bit about the proposed Buffett Rule.     He argues that for "tax fairness" we should raise rates for the richest taxpayers (there is some dispute about what "the richest" actually means).   Buffett has had a pretty good run but look at how he made Berkshire Hathaway the company it is.

He had the good sense to rigorously look for companies, especially family owned companies, that were in need of a change in leadership.  Many of his most successful investments were in places like Borsheim's which was a mid-sized family run firm in the midwest that needed a transaction to get the family out of confiscatory estate taxes.   Then there was his touting of Fannie Mae - where he was a very heavy investor.   Not all of his investments have been based on utilizing government policy, but many have been.  

Classic mercantilism was linked more to foreign trade - mercantilists were granted special favors by the state to run a particular good or franchise.   But the key principle was the use of state power to alter the market.   Estate taxes, when utilized effectively as Buffett has done, are as close to a mercantilist grant as you can come.  Higher income tax rates would also have the effect of altering behaviors.  They would encourage fewer taxpayers to take risks in the marketplace.   With the diminished importance of estate taxes, they would also encourage more high wealth individuals to consider complex strategies to avoid taxes.

Facebook Ads and Nonsense

Sometimes Facebook ads amuse me.  Take this one "Congressman Garamendi is working to rebuild U.S. manufacturing, to 'Make it in America' again. Like to hear what he is doing for jobs." "Congressman Garamendi is working to rebuild U.S. manufacturing, to 'Make It In America' again. Like to hear what he's doing for jobs."  
Congressman Garamendi was first elected to public office in 1974 - he then served in the California legislature for 16 years (including a stint as Senate leader) - during that time he ran for a couple of other offices including a couple of unsuccessful runs for Governor.  He was the state's first elected insurance commissioner.  (A job that many of us believe should not be elected.)  And during that first service he made some controversial decisions that many believe were questionable (at best).   He left that to join the Clinton administration in the Department of the Interior.   He came back for a second dip at Insurance Commissioner.   From that biography he has spent his entire career on the public payroll (he was actually a Peace Corps volunteer before he began to run for office).


Prior to his first election he was in the family cattle ranch in a small city east of Sacramento.  He serves on the Natural Resource and Armed Services Committees in the House.  He holds a BA from Berkeley and a Harvard MBA.


None of this is to run down his record as a public servant.   But I simply cannot see anything in his background that would qualify him to understand even the basics of manufacturing.   So just how is he "working" except to propose yet another set of new laws?  I purposely did not include a link to this - it will only encourage more silliness.

Is the President Real?

In the State of the Union, the President made the claim that he would work to find common ground with his GOP colleagues.    Taxes are a place where the President could walk the walk.   The President claims it is essential to increase rates on high income taxpayers.  He clearly would like to raise a bit more tax revenue.   But if he were serious about this he might take some of the ideas of former GOP Presidential candidate Jon Huntsman and reduce rates and eliminate deductions and credits.

When that was last done (1986) a couple of things happened.  First, tax revenues increased.  Second, rich people (the guys that Obama wants to target) actually paid more taxes.

If he is using this as a political ploy - then he will not try to think about how to co-opt the GOP - we get gridlock and lousy tax policy and he thinks he can win re-election with that nonsense.

Setting the Record Straight

In 2007 one of the better movies was about a debate team from a historically Black college (HBCU) called Wiley College.  The movie, produced by Oprah Winfrey, told the story of a dedicated professor (Melvin B. Tolson) and his efforts to get his debate team some recognition among predominantly white colleges in 1935.   It ends with Wiley being invited to Harvard.   Trouble is the story is not true.   Wiley did have a superb debate team in that era.  And they did do some debates including one at USC.  For some reason the writers of the movie thought moviegoers could not understand anything but Harvard.   That debate will be replayed, according to the Bee, in Wiley, Texas.

Chris Medina, Wiley's director of forensics commented "I think it is an incredible opportunity for the two teams to get together once again. We owe a debt of gratitude to USC for being groundbreakers in allowing us, an HBCU, to really, at that point, achieve legitimacy.  They were one of the few white colleges that would debate with us."

The article goes on to say that while there was not a national debate championship at the time USC was a powerhouse.

Harry Truman he is not

Last night's State of the Union was an odd mix.  Clearly the President has decided to tack left to assure his re-election.  At the same time he tried (I believe unsuccessfully) to invoke the 1948 campaign of Harry Truman.


Near the end of his address he used a Lincoln quote that may come back to haunt him.  He said he believed in the sixteenth president's maxim "That government should do for people only what they cannot do better by themselves, and no more.”


The focus of the whole speech was "fairness."  As the President defined that term he envisaged a much more activist government.   When you poll the American people about the issues of fairness a lot of the responses depend heavily on how the term is discussed.   The State of the Union was announced by the President's handlers as the opening salvo in the 2012 campaign.   It sounded a lot like one.  Obama's tone was more combative than 2008, which I think was a conscious decision.   It may or may not work.


The contrast here will be interesting.  Whoever the GOP nominee is will need to present an alternative message of fairness.  Obama's is based on more government and more income redistribution.   Neither is especially popular at this point.  Were I advising the GOP nominee I would keep bringing up Lincoln's quote and then ask - did more government actually help?  Was the stimulus successful?  Did all those new regulations (show a picture of a year's worth of federal regulations) actually help get things fairer?   Do you really trust the elites (media and government) to solve your problems?  I think the President will have a hard time running on his record.


One other theme which I found odd.  He suggests that the rich should pay more to solve the deficit problem.  Any candidate from the other side would be able to point to the sorry state of European economies (who have relatively high tax regimes) as a response to the goodness of that strategy.


Every election is about the middle 20%.  A lot of where that group will go in the coming election depends on which narrative they choose.  At this point in the campaign, neither story is well cemented.  But based on prior elections the more the President is perceived as veering left, the less successful he is likely to be.  


I fully expect a lot more twists in this story over the next few months.

Wishes and Care

Yesterday's rather stunning win by former Speaker Gingrich raises two sets of questions.  First, why did he win?   And second, what happens next?

A lot of my friends on the left have been quite smug about the results.   They believe (as the picture from one Facebook post suggests) that Gingrich will be easy to defeat.   As I thought about both the results and the next steps in this race, I believe there is a lot to suggest that the smugness is misplaced.  In politics be careful what you wish for - you may get it.

Why did Gingrich win?  There are two possible explanations on why he won.  The first, which many pundits have advanced, is that the vote was a confirmation that Romney is not acceptable to a large portion of the GOP electorate.   That may well be true. But it may not explain why Gingrich won.  There is a second and much more credible reason that Gingrich won - his response to the first question of the debate on the nineteenth to John King (ABC).   The nation was buzzing about revelations about comments by Gingrich's former wives.  (The kind of smut which many in the media cannot wait to publish, especially about conservatives.)  Instead of cowering, Gingrich took on King (who by the way has served as a useful foil more than once in this season).  The exit polls suggest that the former speaker got a goodly percentage of last minute voters.   His Thursday night performance may have clinched the deal.

The President believes that he will be successful by appealing to "fairness" but his definition of fairness includes significant redistribution - which seems to appeal to only about 40% of the population.  You'll hear an opening salvo in his State of the Union on Tuesday night.  But I think a "Give em hell, Harry redux" campaign might well be a hard sell to the American people.  The President is counting on the low numbers of congress to make his case.  The problem is his numbers are not significantly better. Tracking polls suggest that by an almost 2:1 margin voters disapprove of Obama's job as president.

 The remaining voters find the idea of redistribution, in the way the President would implement it, appalling.     An alternative way to get to the populist base was presented in a speech given by Sarah Palin in Indianola which received precious little coverage.   Palin slammed the "elitists" in the media and the political class.   Gingrich's stunt ignited the same kind of visceral response.   If the GOP candidate can make this election about the role of the elites - the President's assured election will be very much in doubt.    There is a large enough fraction of the electorate that is a) skeptical of his performance and b) distrustful of his definition of "fairness" that could make his tack to the left a colossal mistake.

What happens next?  Predicting the future in this year is especially tough.   But from my perspective there are at least three different scenarios that might happen.   First, Romney might win Florida and this momentary block in his path to the nomination would soon be forgotten.   Were this to happen it is hard to make a case that Romney could motivate the same anti-elite notions that Gingrich seems to have stirred up.   From my view, Obama might well prefer to have Romney because it fits into his campaign story.  At this point, Romney has a pretty significant lead in polling.  But the upset in South Carolina could have changed things.

Second, Florida produces another Gingrich win.   In that case Gingrich has a chance to become the nominee.  Depending on who he chooses for VP, he could have a shot at defeating the President with a populist from the right campaign.  I think that is the least likely scenario.

Third, Florida results are not dispositive.   In that case we could see some new candidates emerging.   Clearly, Gingrich has significant liabilities along with his assets and his seeming sparking of populist notions.  Romney, in many ways like his dad, seems unable to close the deal on his nomination.   At the same time, a lot of GOP leaders are saying privately that Romney may not be as strong a candidate as they would like.

2012 is fundamentally different from 2008.    If it becomes apparent that the President's numbers do not improve, it might well draw in candidates from unexpected places.   It might also lead to a deadlocked convention and a dark horse emerging from the convention.

At this point I do not believe that Gingrich will be the nominee.   But from my perspective the President is a far cry from closing the deal.

What is lacking in today's political class

One of my occupations for the last couple of years has been to read and comment on a Facebook group called the Wheelspinners - which is a selection of former reporters, political consultants and others who range in political philosophy from right to left.    This morning one of our reporters mused about what is different about today's political class.  He suggested that three of Reagan's key staff people (Ed Meese, Lyn Nofziger and Jim Baker) were  "not only helpful in understanding what was going on but also to be genuinely good people."   He lamented that the GOP of that time had leaders like Everett Dirksen,Thurston Morton, Margaret Chase Smith, George Aiken, Hugh Scott and Clifford Case.   He concluded that what  "we need most is some adults in the political equation and not petulant poseurs."


There was a lot that I agreed with in the post.  I actually worked with a couple of those senators (especially Aiken when I worked for the other Vermont senator at the time).   But there are a couple of assumptions that I think were flawed.   First, I think one of the key variables in the Reagan team was that they understood the difference between principles and policies.  Reagan had a series of well developed (although many democrats then and now belittled them) principles which guided his actions.   And I think he was rarely willing to compromise principle.  He was even willing often to make statements that many in the political class found troubling (for example - Mr. Gorbachev, Tear down this wall!)   But he was willing and able to compromise policies.  The 1986 Tax Act is a superb example - Reagan started with a couple of principles (lower rates) but was willing to change policies that had been cornerstones of GOP politicians.  I think many politicians today lack a set of clear principles.


The second slight disagreement I had with the post is that I think part of the people he mentioned (including Hugh Scott and Everett Dirksen) were classic politicians.  Their first goal was to get elected and re-elected.   I am not sure that they started, as I believe Reagan did, with a set of principles.   I think the need to be re-elected has often trumped politicians who start with principles.


Third, I think the post ignores (he went on to lambast the Tea Party people) that the ideologues inhabit both sides of the aisle.  How many democrats in the national leadership would dare to violate the absolute right of choice on the abortion issue?


It is a dilemma that all of us should think about.  One of the promises of the current president was that he would try to work with the other side.  He clearly has not tried to do that.  We would have had a much better set of policies (health care, economic recovery, financial regulation) had he simply followed his original promise.  Had the President done that I think he would be in the position of being almost unbeatable.   


In my opinion, although many GOP theorists believe that the President will win, this election is still undecided.  The last couple of days of the GOP debates, may have begun to turn a tide against a strong GOP nominee.   The original point of the reporter's note is still worth considering.

Crossover Artist

Johnny Otis died on Tuesday.  Many will not remember the author of "Willie and the Hand Jive" or the launcher of a number of big singing careers (Big Mama Thornton, Etta James - to name two).  He grew up in Berkeley.  He was white but was closely associated with Rhythm and Blues. Most people thought he was Black.  Over his life he did varied things - he was an artist, worked for Merv Dymally (former California Lieutenant Governor), he even helped his son sell organic vegetables.   He was married to his wife for 70 years.   In one of the articles about him he was quoted as saying "The music isn't just the notes, it's the culture — the way grandma cooked, the way grandpa told stories, the way the kids walked and talked,"   Here he is with the Three Tons of Joy. (One of his backup groups)   What I liked about him was (as one friend said) "he never seemed to get bogged down."