Sunday, April 30, 2006
AMLO decided not to attend the first presidential debate and that may have been a significant mistake. Calderon seems to have won the debate without AMLO there in pretty good fashion. The various polls now show either a 2% lead for AMLO or a 3% lead for Calderon. Madrazo seems to have about a quarter of the vote and has not moved. But even without the duck in the debate AMLO's momentum seems to have stalled.
While I was in Merida I saw several political ads, interestingly enough none for Calderon - that may be because he is not advertising there. The AMLO ads are soft - they show a bunch of people in various settings and then close with a request for the vote. The Madrazo ads looked a bit strident to me - he looked a bit scary and his speech was high rhetoric. The lack of Calderon ads may be partially because of a decision by the Federal Election Commission to ask them to pull an ad which ended with the tagline - Lopez Obrador, a danger to Mexico. They may simply be out of cycle at this point with ads.
Among the people I came in contact with there is a pretty high level of interest in the election. Most of my friends are concerned that AMLO is a Hugo Chavez clone. Fox has made that assertion in a number of venues and it seems to be beginning to stick. As I said in the earlier post, there are a few PRD people in places that I have visited who are uncomfortable with AMLO.
What continues to impress me is the energy with which people are approaching the election. The change in 2000 was a fundamental one. While the political system is far from perfect there are some very good signs in a lot of places in Mexico that officials are thinking creatively about what the system could become. As I think I have noted, in my work with a couple of governors and in conversations with a host of officials from at least a dozen states there are serious and varied efforts at improving state government. There is real interest and activity in making state governments more transparent and better dedicated to serving their constituents.
One of the worries expressed early in this campaign was the notion that if AMLO was elected the country would regress back into an earlier era. At this point I have at least two reasons to believe that even if the worst comments about AMLO are correct and if he wins - that will not happen. First, the positive efforts in many states will serve as a counterpoint to any extreme. I have been very impressed with the Governors (like Luis Armando Reynoso Femat in Aguascalientes) and state officials (from places as diverse as Zacatecas, Yucatan, Quintana Roo, Veracruz and Campeche) who seem to have really thought out how to move their areas forward. These are not always in a perfect straight line - no democratic system is capable of that - but there are serious efforts to achieve results. Second, the inherent conservatism (not necessarily political conservatism) of the Mexican people will restrain any extremes. I came back from this trip more optimistic about the future.
1) The Endorsement Strengthens the Governor - this was clearly a win for the left side of the party. Westley did work with the Governor on a couple of projects and is clearly more pragmatic than Angelides. But all those democrats in the state who would be turned off by Angelides stridency will have no place to go in November. The Governor needs to continue to look like a moderate alternative to Angelides and he will win those voters.
2) Westley may be able to use this - clearly this was a victory for the unions who support Angelides. To the extent that the democratic party will include voters who are not sympathetic to the union causes, Westley has an issue. He has the money to press it forward.
3) It strengthens Angelides - Angelides has a united party, albeit with about a third who did not support him but will be brought back in November, and he moves forward and wins in June and November.
Of the three, I have listed them in their most likely order. Clearly, this gives the Governor an opening. While California has voted increasingly to the left on a number of issues, candidates who promise to raise taxes have not been successful. I doubt whether the agenda advanced by Angelides will be popular with more than 50% of the voters. The Governor will also have the advantage of being able to be subtle about the power of the unions. Most of the recent Field and PPIC polls express Californian's increasing concern of the public employee unions - they don't like the pension programs that are throwing cities into bankruptcy, they don't like the schools and they don't like the deterioration of infrastructure. Angelides simply does not have an answer to that. He then becomes increasingly popular to a minority of voters.
By the way, the LA Times poll showed Westly up by 13 points on Angelides and the stronger candidate to take on the Governor. But evidently among the democratic hard core such data does not seem to matter.
I originally turned to talk radio because I was annoyed by the consistent bias of network news and its repetitive nature. But then along came podcasts. Podcast was the Oxford dictionary word of the year last year. It is an asynchronous method of communication - does not (yet) have the feedback mechanism that was so important for talk radio in the beginning. A podcast works like this - you sign up for the feeds that can be found on iTunes or on websites and then download the programs into your iPod or other music player (the inferior brands) and then can listen to them at your leisure. When the podcaster creates a new program your computer picks it up and then when you synchronize your iPod you get it downloaded ready to listen to.
I looked around a bit and found several that are quite interesting. For example, a guy in Oregon named Chris Gandalf, publishes something called the Invisible Hand which is basically a set of pretty well done interviews with authors of books in management and economics. Econtalk is a part of the increasingly useful economics resource called Econlib.org - which also has RSS feeds (blogs) and a wonderful library of major economics texts that are in the public domain. (For example, if you want to find a copy of Bastiat's works that is the place to do it.) Econtalk recently had a couple of podcasts on aspects of the economics of sports including scalping - I thought both programs were very interesting. There are an increasing range of these programs on a variety of other topics - including a lot on how to learn or relearn a language (German, Chinese, Japanese, Spanish, Russian) or other skills (play the guitar) or topics of interest. There are tons on the iTunes website under podcasts and a lot more on websites. There are even some that use video content (vodcasts). The quality of the feeds is mostly pretty good. They would be great resources for drive time (or fly time) when you want to listen to something interesting but are tired of what AM and FM have. What's more, at this point, they are also free. Some have begun to charge nominal amounts for the feed but most are still free.
About a decade ago Kevin Kelly, of WIred Magazine and George Gilder began to discuss the idea of narrowcasting - creating content for a specific group of people. The web and cable allow those kinds of things to happen - podcasts are a good example of narrowcasting that is just at the beginning of its reach (so are blogs, by the way) - the possibilities are endless.
Saturday, April 29, 2006
The Times relates a story that when he was young and in Canada his father strode atop a pile of manure (calling it the "Tory" platform) to give a political speech. Galbraith was every bit as combative as his father. The Boston Globe, his home town paper, related his theory of how to practice his profession - ''I never imagined that there was any point to being an economist if no one was aware of what you were thinking," he once said. ''Nothing so protects error as an absence of readers or understanding."
Perhaps the best known book of his many was the Affluent Society. Amartya Sen in the Times said it was so full of well quoted tidbits that it was a lot like reading Hamlett and then commenting that it was full of quotes. I found it a bit less interesting. It argued that a) affluence was destroying the fabric of the society, b) that all these consumer goods were some how bads and would destroy society and c) that all this consumption created "private opulence and public squalor" (He did know how to turn a phrase). He was a consistent supporter of more government and a firm believer in the power of government to alleviate poverty. Even after evidence mounted of the bizarre negative incentives of welfare and poverty programs he remained resolute in his belief. I finished reading a book today on political experts (by Phillip Tetlock) which compared foxes (know a little about a lot of things) and hedgehogs (know a lot about one silo of information). Tetlock makes the point that foxes are better able to make predictions - Galbraith was clearly a hedgehog. Note - the fox/hedgehog discussion is an old one that others have written extensively about - Tetlock simply used it to advance his theories on the reliability of experts. He went on to write The New Industrial State - it can be argued that book was an important foundation for the left's aversion to the power of corporations. He argued for the public purpose of economic entities - although I think that commitment confused governmental obligations and public ones.
Galbraith was combative. He was also prolific - at least three of his books were best sellers. Yet he never won the Nobel in Economics. He did win a Medal of Freedom from Clinton. He advised several presidents. He taught generations of students. so his contribution to the dialogue was significant. Even if many of his observations on economics were simply mistaken that should not diminish his contributions to policy discussions for at least seven decades. My first copy of the Affluent Society was well marked up - with comments about how most of his theory was baloney. Affluence is not a curse; corporations do not have a propensity to evil.
What intrigued me about Galbraith, even though I disagreed with most of what he wrote, was his consistent dedication to the intellectual life. He, like Hayek, believed that the narrow brand of economics practiced by many today - which ignores the human dimension for numbers, was wrong headed. But like some others of the time he was first a public figure and not an economist. Unlike Hayek or Friedman - nothing in Galbraith's writings advanced the profession of economics. Even with that his writings assisted the development of a couple of generations of liberal politicians.
For the last couple of days I have been in Merida at Universidad del Mayab. It is a university I know well. I have taught there once and have worked with several people there on a variety of projects. My friend Guillermo Hernandez, who is now the rector of Universidad Politecnica de Aguascalientes, was one of the first persons I met at the Mayab. The rector is Spanish and seems to run the place with a gentle but firm hand. He is soft spoken but he has built the place into a regional powerhouse. The SEP (Secretary of Public Education) gave an award for quality to the university on Friday and I was invited, as a friend and collaborator, to participate in the ceremony.
This was the first time I have attempted to give a speech in public entirely in Spanish. Most of the people I spoke to after my speech were gracious and said I did pretty well. It is an interesting experience to try to give a public speech in another language. I brought the English with me in case I chickened out. (I did not) I stumbled over a couple of words - I normally speak mostly extemporaneously so reading in any language is a bit of a chore. Before the speech, Guillermo was kind enough to sharpen the words a bit - por and para (for in Spanish) and ser and estar (to be) continue to plague me. So do articles - sometimes you use them and sometimes you do not. But it was all in all a fun experience.
I was struck with one other thing. Fr. Sabin seemed to accept the award with grace but I do not think he thought it very important. His real concern seems to be building the university and to the extent that the SEP recognizes their positive steps that is wonderful - but without the award he would continue to try to build the university to a place of international standards. In the end that orientation, that commitment to qualities is more important than plaques.
Here is what I said in Spanish and then in English.
En una ocasión tan importante, tengo el gusto de estar aquí, yo deseó hablar palabras exactas. Así que estoy leyendo esto - aunque las palabras salen del mi corazón. Debo confesar que soy el principiante más lento del mundo del español. Pero igual con mi español limitado entiendo las cualidades esenciales de esta universidad.
Hace doce años tuve una idea. Pensé que era importante que los miembros de mi asociación comiencen más actividades con las universidades mexicanas de calidad similar. Mi asociación tiene muchas universidades prominentes incluyendo USC y Stanford y muchas que son menos prominentes, sin embargo, todas están interesadas en calidad. Comenzamos una búsqueda para las universidades que cabrían en nuestro molde. Nuestro molde no es de un solo tamaño e intereses. Todas nuestras universidades son privadas. Deseamos concentrarnos en México debido a su proximidad con la geografía y la historia de California.
Debo confesar que no fui sorprendido con el reconocimiento a la Universidad del Mayab por su calidad. He trabajado con el Mayab desde hace tiempo y he conocido a sus profesores, sus estudiantes y sus administradores. Si la Universidad del Mayab se instalara en California, seria automáticamente parte de mi asociación. Entonces, he disfrutado nuestra asociación con el Mayab.
Las universidades del mundo se pueden dividir en dos clases. El primero son los que exigen estándares de la clase mundial de todos sus participantes - estudiantes, profesores y administración. Son parte de una red internacional de la calidad. El segundo no es digno de mencionar.
Obviamente, la universidad del Mayab está en el primer grupo. Cuando enseñé aquí hace algunos años, mis estudiantes prepararon un estudio de caso de la fusión de Hewlett Packard que estaba entre los mejores proyectos que he encontrado como profesor. Felicitaciones a la universidad y a toda la gente que contribuyó a esta concesión.
Gracias Padre Sabin por invitarme a que comparta esta celebración. Miro hacia adelante nuestro trabajo conjunto.
In an occasion as important as this one, I would like to have my words be exact. So I am going to read this – but be assured that the words are from my heart. I have to confess that I am the world’s slowest student in Spanish, but even with my limited Spanish I can understand the essential qualities of this university.
12 years ago I thought it was important to initiate more activities between institutions in my association and ones in Mexico that were similar in quality. My association has prominent universities like USC and Stanford and it also includes less prominent universities. But all of them are concerned with quality. So we began a search for institutions in a similar mold. Without question our institutions are not of a similar size or interest. All of our universities are private. We decided to concentrate our search in Mexico because of the obvious geographic and historic ties between our two regions.
I need to confess that I was not surprised by the recognition of the Mayab University for its quality. During the time I have worked with the Mayab, I have come to know the professors, the students and the administrators. Were the Mayab to be moved to California it would immediately be a member of our association. I have enjoyed our association with the Mayab.
The universities in the world are divided into two classes. The first work within world-class standards among all their participants – including students, professors and administration. They are part of an international network of quality. The second is not worth mentioning.
Obviously the Mayab University is a part of the first group. When I taught here a few years ago, my students prepared a case on the Hewlett Packard merger that was among the best that I have ever encountered as a professor. Congratulations to the university and to all the individuals who contributed to this recognition.
Thank you Fr. Sabin for your invitation to share in this celebration and I look forward to continuing our work together.
Wednesday, April 26, 2006
In the Plame affair it supports some in the press who would like to totally discredit the Administration. In the second, ditto. There is some truth to the conclusion. Plame was not outed and even if she was, her husband was discredited as a liar with a heavy political agenda - Plame's husband had/has a political agenda. McCarthy, with a supposedly higher motive, leaked information that was classified in an effort to discredit the Administration. The Administration should have had the tools to respond to Plame's husband's assertions AND it should have the ability to fire an insubordinate employee who violates national security policy. But most of the press ignores both imperatives.
The Journal points out that there are plenty of other examples each with the same types ideological cuts. That is not helpful.
Tuesday, April 25, 2006
Even if we should not try to work on "excess profits taxes" or other silly panderings there are some political decisions that have contributed to our current problems -
1) We have reduced the refining capacity in the US over the last decade - indeed in 1981 there were twice as many refineries in the US as today. There are currently only 149 refineries in the US. That means we have to run the existing plants at higher capacity and we have a smaller margin of error. The enviromentalists would argue that the reduced capacity is a good thing. But if we want to even begin to satisfy demand we will need to have more refining capacity.
2) We have artificially reduced our supply. We now get about 38% of our oil from instate wells and another 21% from Alaska. What kind of situation would we be in if we had opened up the Alaska plots to limited drilling or if we had opened the land off the California coast. Not producing oil has its consequences. The increases in the price of Alaska crude is worth about 70¢ per gallon alone. In early 2005 the price was just under $2 per gallon. Demand for gasoline in the state is expected to increase by about 20% before the end of the decade. We should be willing to increase supply in two ways - first we should be more flexible about the places we are willing to drill - even if we need to have fairly stringent environmental regulations. But second, we should think about methods to encourage the development of alternative fuels. Iraq's capacity has also been reduced by something like 1% of world supply.
3) The economics of gasoline are interesting - a buck in the cost of a barrel of crude amounts to about 2.5¢ per gallon. Taxes are more than 36¢ per gallon plus sales taxes - thus the tax on gasoline in the state a) rises with increases in crude prices and b) amounts to roughly more than 60¢ per gallon - by any count that is a pretty stiff rate.
Finally there is a comment on history. In the first Arab oil embargo, I worked in the White House for William Simon the first federal energy czar. At one point his key staff had an argument about the elasticity of demand for gasoline. I argued that there was not much elasticity of demand - some people had to drive and they would pay any price. Simon took the free market view - that gasoline was an elastic commodity. I was wrong and Bill was right. As prices increased from 25¢ per gallon to $1.50 demand was dampened substantially. At the same time consumer buying habits on cars moved quickly. I suspect this too will happen again. The Bureau of Economic Affairs offers one possible explanation about why this rise seems a bit less painful than earlier ones. 25 years ago energy amounted to about 10% of our discretionary spending - now it is about one dollar in sixteen. Even with that change some politicians seem to think they can get their taxes in.
The solution to this problem requires a conscientious look at other alternatives that will increase supply. ANWR and Enthanol will only be a small change for the current problem - but in the long term they offer some real possibility. The most prudent policy here would be to buy a lot of duct tape and use it for all of the politicians who talk about "excess profits" or any other fanciful notion and ignore the possibilities of alternative fuel sources.
These kinds of things happen. There was the inevitable talk among some passengers about "never flying United again." What balderdash. Yesterday, I flew Southwest and was a total of more than 2 hours late on two flights. I would prefer that my airlines think of safety first. Sometimes these things happen. My answer for that is OK, so deal with it.
Sunday, April 23, 2006
As we drove through the district yesterday we saw a ton of signs imploring voters to "stand by" the congressman. Does that mean we should stand by him completely, or should we simply stand by him with a 15% deduction? I am not sure who about his opponents. In the primary (and this is a GOP district - Doolittle has schemed at least twice with the democrats to get a district to his liking - even at the expense of making other GOP seats more vulnerable) he is facing the Vice Mayor of Auburn. But Doolittle will be loaded with cash and the size of the district makes it hard to oust an incumbent. It's too bad that someone like Doolittle cannot be held a bit more accountable. That may be too much to wish for.
Crash won the academy award for best picture, and I wonder why. It is a compelling series of stories around human relations - mostly Black/White but with some other things mixed in. The cross currents in the movie are very well developed and the stories are mostly real. But there were two things that were disturbing. First, the music floats in and out throughout the movie - often obscuring dialogue. I guess the effect here was to tell the audience that the dialogue was not important. And indeed you do get some visual effects even with the notion that the dialogue is just so much talk. But I found the music annoying and the technique less than successful. Second, a couple of the assumptions in the movie were too stereotypical for my taste. Matt Damon plays a racist cop who has a father with a serious illness who eventually saves a woman that he molested on a street stop from a car crash. An immigrant shop keeper's daughter buys a gun for protection of their store and mistakenly buys blanks so that when the immigrant goes to shoot the locksmith who he believes mis-handled a door repair (the shop keeper get's broken into after the repair guy said fixing the lock isn't sufficient) and his adorable daughter jumps in front of the (non)bullet. Get the picture? There are just too many loops in the movie to make it credible.
The Bishop's WIfe is the original movie from which The Preacher's WIfe was remade. In this case Cary Grant, Loretta Young and David Niven play the angel, the wife and the bishop. It is a nicely made movie. Nothing heavy here, like the remake (which was also nicely made).
Dinner at Eight is a movie of the Moss Hart play, which by all account should be dated by now. It includes a bevy of major actors in the thirties - two Barrymores, Marie Dressler, Wallace Berry and Jean Harlow. The plot surrounds a society matron planning a dinner party for eight where each has a story. The father (Lionel Barrymore) is a shipping magnate during the depression. Berry is a somewhat corrupt financial type who is married to Harlow. The interactions, like the ones in Crash, are a bit contrived - but the stories are a bit better developed than in Crash. You never get to the dinner party in the end but get a lot of stories around the participants. The movie has three parts. The first is the introduction of the characters. The second is some pretty good comedic lines and the final part is a series of dramatic twists between and among the characters. The divisions are not exactly clean - but I was struck by the change in tone from the comedy to the drama. At the end, as the group is walking into dinner Marie Dressler (Carlotta, playing the old and wise actress) and Jean Harlow (playing the dumb blond wife of Berry named Kitty) exchange the best lines -
Kitty: I was reading a book the other day.
Carlotta: Reading a book?
Kitty: Yes. It's all about civilization or something. A nutty kind of a book. Do you know that the guy says that machinery is going to take the place of every profession?
Carlotta: Oh, my dear, that's something you need never worry about.
Saturday, April 22, 2006
During the first seven years that the entity was in existence (2 years before and my five years ) the organization did some pretty good things. But in the subsequent year it has stalled. That is partially a result of changes in policy at the federal level and partially because the entrepreneurial spirit of the place has been almost entirely drained. Here is the record for the first seven years - this entity grew from about $1.7 billion in activity to $7 billion. At the same time the start up capital grew from $20 million to more than $160 million - that was in spite of paying out more than $500 million in benefits to students. During the period the major indicator of success (in this case defaults in student loans) was improved (or reduced) by a third. Finally, even with all the growth, the entity reduced its operating costs by 11%. By any account that is a phenomenal set of statistics.
When non-profit was created after two failed attempts to run the function as a state agency. Since the non-profit was created, if anything, the competitive conditions and challenges have grown. So there is a real question about how to best manage this function. There are several alterantives - exclusively as a state agency, in the current model, selling off the non-profit and having the buyer submit a residual back to the state, or moving all the functions including the current ones to a non-profit where some additional state oversight might be still in place. Clearly, based on my experience with the board, something in the structure needs to change.
The conflict between the state and agency and the non-profit was continuous. That was caused in part by a clash in cultures. The state agency wanted to operate like a state agency and the entrepreneurial entity needed to operate much differently. But the state culture did not serve the entity well. Remember, this non-profit operates in a very competitive environment - there are lots of competitors and most have a wider range of revenue centers than the one in California. Four examples might illustrate the problem. Several years ago, the board, as a part of a long range planning process, began discussions with a for profit entity. We made a proposal to acquire the entity for a present value price of about $250 million. The state control entities began picking the deal apart. Ultimately, they denied the ability to make the buy. A few months later the company went on to do an IPO that amounted to more than $1 billion. That left a substantial amount of additional resources off the table and at the same time continued the business in its one area. After that experience the company's board along with the state agency worked hard on a business diversification strategy. The issue was vetted as carefully as something like this could be. Yet, in the end the agency's board rejected the proposal - even though several of the leadership in the agency had supported the proposal. Another example, and what precipitated the eventual change in the board, a competing entity wanted to join with the company on some joint projects and a possible merger. The state would have realized a huge sum. But again the state organization could not figure out how to do the due diligence to figure out whether the right sum was being offered. In all of these cases the state could not figure out how to deal with a quick changing situation.
What was most frustrating about the process from my perspective was a complete lack of ability to follow through in a timely fashion. The final straw was a six-eight month process to look at ways to diversify the business activities of the company. Again the process thoroughly vetted a variety of models. But again, the board of the agency ultimately was unable to act in a timely fashion.
Admittedly, there were some personalities involved here that clashed. There were also some fundamental conflicts based on the statutory construction that created the non-profit. But there were also some interesting personalities - some very dedicated to the purposes of the entity and the broader purposes of the state agency and some very dedicated to the narrow political agendas of their own invention.
When the board was dismissed, a lot of grumpiness emerged. Amazingly, I was not in that crowd. I was pleased to relinquish the role - although I think I added some value while I was there. Some key legislators joined in the discussion. Two important ones supported the dismissed board and one other took the side of the executive in the state agency. Ultimately, legislator in support of the state agency director asked the Bureau of State Audits to do an audit of the non-profit. The BSA released its report this week with three main conclusions. The BSA audit is in addition to a whole host of other audits done on the entity by internal and independent auditors and by all sorts of other entities. The point is the BSA audit was not the first. The BSA audit was very narrowly drawn. It did not audit the business position of the entity nor did it look carefully at the the broader issues that might be examined in a normal audit. It did look at how the entity spent its money and it ultimately made some comment on the organizational structure of the entities. So my impression of the audit is that it was technically correct on the issues but failed to recognize the unique structure of the non-profit or the conditions under which it operates. The three conclusions were not surprising.
The first was that somehow the Commission and the non-profit was not as careful as it should have been with expenses. They detail the costs of several meetings and their associated expenses. They cite some meetings and events that cost a total of slightly less than $700,000 over four years. The examples cited include a series of activities including an employee motivational event (held once a year) which cost something in the range of $100 per person - that included food and gifts and speakers fees. It was a high motivational event. Then there were some holiday party expenses. There the costs were in the range of $40 per person. Thus between the two events, employee motivation expenses amounted to $140 per employee. For a highly motivated organization that grew like the non-profit did - that seems like a small amount.
The costs of joint meetings and board meetings is also analyzed. Near the end of the tenure on the board there was a flareup about a meeting. The Executive Director of the state agency (who was a good deal of the problem - with no relevant business experience and a lot of political attitude) grumped about the place that the meeting was to be held. I asked the president of the company to look at the alternative that the Executive Director was suggesting. Our analysis suggested that the "cheaper" alternative would have actually cost about $2000 more. The logistics person for the non-profit was good at searching out nice locations that were relatively inexpensive. The land costs were always done American plan and one of the board members always paid for expenses that would not be covered under a state agency (like drinks at dinner). Sure, the costs of those meetings could have been less - but they were clearly in line with other non-profit entities and significantly less than for profit entity expenses in the same general line of business.
Finally, there is a discussion about the bonuses that were paid to the non-profit's executives and employees. A basic understanding of the authorizing statute was that employees should be incentivized. That was a primary reason for establishing the non-profit. One year the CEO of the organization was paid a $30,000 bonus in a year when the bottom line increase amounted to $60 million. That amounted to an incentive payment of about 14% of the CEOs salary - which in the world of for profits is more like a tip. The bonus structure in the non-profit was always a small percentage of total salaries. At the same time the board's compensation committee did a rigorous evaluation of both the perfomance of the executive team and the comparability of salaries in similar entities. What was interesting about the process from my perspective is that the comparative market scan and the rigorous employee analysis anticipated some of the standards established in the relatively new intermediate sanctions regulations of the Internal Revenue Service. The due dilligence by the board is not noted in the audit.
Ultimately the BSA audit got the numbers right but missed important issues about how to operate in a very competitive environment. An alternative review was done by the Legislative Analyst. This was not a formal audit but rather a policy analysis. As opposed to the BSA process which did a lot of counts of activities but missed the energy and dynamics of the organization - the LAO process looked at how to make the organization continue to offer continued benefits to the state and students. Their report suggested some alternatives that looked at how to make the organization work better - it suggested that the best way to solve the problems would be to eliminate one of the boards and move the entire entity into a non-profit. That idea makes a lot of sense.
I come back to the politics of the situation. For one who has operated in and around political activity over the last four decades - the politics here often outweighed the business purpose. Narrow agendas of board members and the executive director of the agency often took precedence over the broader long term goals of the entity. That is unfortunate. The key leaders of the non-profit (in the CEO, CFO and General Counsel) soon found other positions. An interim was installed who is probably the best kind of leader the non-profit could obtain at this time - a person with a lot of experience and knowledge about the area but without the entrepreneurial drive of the person who left.
So can a state agency manage an entreprenuerial entity? The experience from my five years and from the subsequent year since I left suggests that the culture of bureaucracies cannot be successful and probably should not try. That offers a couple of lessons. The non-profit only idea from the LAO has a lot of merit it might reduce the frictions established by the two entities and yet keep the public service nature of the two organizations in view (the non-profit had a strict public service mission but not a governmental one). Or the state could simply let the entity fade away over time - ignoring the manifold number of missed opportunities to benefit students. In either case the result is a troubling one.
Friday, April 21, 2006
But in the review there is a great quote from LBJ. LBJ was reviewing a speech on economics that Galbraith had had a part in creating and he said "‘Did y’ever think, Ken, that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else." I did not like LBJ either, but that is a funny line.
The minimum wage is clearly aimed primarily at young people. Few jobs for employees over 25 get a minimum wage (in this economy few jobs for employees get the minimum wage either - but that is another story). So the decision on changing the level really affects younger workers almost exclusively. I would argue that it really concentrates on employees who could still be in school. The latest Statistical Abstract suggests that only .4% of all workers (about 520,000 nationwide) work in minimum wage jobs. So the discussion here is an interesting one from a policy sense but possibly not large in terms of economic consequences.
Bainbridge reviews the literature and finds that young people fairly consistently make short term choices that fail to recognize their long term effects. For example, they may value the current wage they get over the longer term effects of higher wages that would be produced by staying in school. In essence, the fail to properly value the current foregone income versus the future wages produced by geting more education.
The consequences of dropping out of school are huge. There is a huge literature on the value of completing college (more than $1 million over a lifetime in additional wages). But the other side of the equation is that the real value of employment for workers with less education has actually declined in real terms over the last several decades. So policies which encourage students to stay in school are good for them and good for society in general.
Bainbridge makes two arguments. First, increases in the minimum wage may exacerbate those differences - because of the momentary apparent increase in current wages. Thus, while an increase in the minimum wage might make some jobs more attractive, those changes might marginally increase the number of students who make the wrong choice and drop out of school. Second, he argues that an indexing of the minimum wage would reduce that tendency by reducing the big bumps in apparent income.
There is obviously a third choice - that is to eliminate the minimum wage entirely as an anachronism. That one might be politically unpalatable but it might be the best incentive to encourage potential dropouts to stay in school. The harsh realities of a first job would present a starker choice for those people on the cusp. Employers would probably pay a starting wage in most situations that is pretty close to what the minimum wage is now and we would reduce a lot of the paperwork in the enforcement of wage and hour guidelines. That might a) decrease the dropout rate - to the extent that Bainbridge's arguments are correct and b) increase efficiency in the economy.
Wednesday, April 19, 2006
The options seem to be
Option 1: the woman is telling the truth and the players are convicted of rape and sent to prison
Option 2a: the woman is telling the truth and the players get off
Option 2b: the woman is lying and the players are exonerated
Option 3: the woman is lying and the players are convicted of rape and sent to prison
There are a couple of things that bother me about this issue.
First, why does Jesse Jackson need to poke his nose in everything? His comments were meant to be inflammatory and were. The goal here should be justice - if the boys are guilty of the crime they should be convicted. Jackson heated up his rhetoric right at the time that we should be trying to figure out what happened here. This is not primarily a race crime. But Jackson has tied it to that genre because of his statements. That will make everything else suspect by one or more groups watching it.
Second, I am bothered by the actions of the DA Mike Nifrong - who seems to be in electoral trouble. If he brought these charges to help his re-election, he violated his legal cannons of ethics and should be disbarred, as well as voted out of office. It is unclear why he thought this was necessary to bring charges so quickly and so seemingly before his election day. It could be that he has been able to turn the third potential defendent in this case - although the strong defense mounted by the entire team suggests otherwise. I look at the way some DAs work and believe that this could be a political prosecution. A telling point will be if he loses his race - what the steps after that might say a lot. The statement he issued after the indictment seems to suggest that he is rushing just a bit. He said -
"It had been my hope to be able to charge all three of the assailants at the same time, but the evidence available to me at this moment does not permit that. Investigation into the identity of the third assailant will continue in the hope that he can also be identified with certainty. It is important that we not only bring the assailants to justice, but also that we lift the cloud of suspicion from those team members who were not involved in the assault."
Third, would it be too much to ask tragedy TV to butt out? This is a serious case where the lives of either the accuser or the players will be ruined - wouldn't it be better to let the court system sort this one out. The lack of DNA evidence is suspicious but not dispositive. And there may indeed be other evidence that we do not know about. But the courts are designed to think this one out. I am already tired of supposed experts prattling about this or that theory. This is a delicate matter and should be handled that way for both sides. Duke's president made a good statement on these issues -
"Many lives have been touched by this case. It has brought pain and suffering to all involved, and it deeply challenges our ability to balance judgment with compassion. As the legal process unfolds, we must hope that it brings a speedy resolution and that the truth of the events is fully clarified."
FInally, there are the stereotypes - the rich frat club lacrosse players, the poor Black stripper college student. These charactures are undoubtedly far from reality on both sides. There have been a couple of good commentaries about the stereotypes in the case and how those help to disserve the legal issues. Perhaps the best was from
Joye Brown at Newsday. Stereotypes will not help society sort out the facts in the case and that is exactly what we should be trying to do. If option 1 is true - then the students should pay for their crime. But if one of the other options in this charged atmosphere comes about the results of this trial will not do anything to a) stop the intensity of the news blabbers that will eventually reduce our respect for the legal system, b) improve racial relations, c) encourage women who are actually assaulted to come forward with their allegations.
The first couple of starts for him are not promising.
The batting was not up to recent standards either - the Cats filled the bases twice late in the game without producing a run. The 7-1 result - which brings us to 7-5 was not even reflective of the lack of focus that the team had. The Raniers have been a problem for the Cats for the last couple of years - I am not sure what their overall record is but in key places the Tacoma franchise has done pretty well.
About the only bright spot was Ron Flores who pitched one inning- after the game was lost and did a 1-2-3. Oh, and then there was the weather - it is starting to get away from the early April cold games where you need a couple of layers of clothes - and that is always a plus. Last night a couple in our section had a Merlino's Freeze - which is usually reserved for a bit later in the season.
When one thinks about the state's "big five" (computers, biotech, entertainment, foreign trade and professional services) you can see how they inter-relate - technology accounts for 41% of the state's exports.
Monday, April 17, 2006
The oil for food boondoggle, audited by Paul Volker, seems to have diverted something in the range of $12+ billion. The Secretary General's office received more than $1.4 billion to run the program over its seven year existence.
Among the expenditures of the Secretary General are $85 million in PR for the UN - that is the audited total although it probably includes even more dough. They also seem to generate about $100 million + in lobbying expenditures to help advance the cause of the UN in US public policy. So we get criticized for our "stinginess" and at the same time get rolled in Congress for more dough.
The Financial Times estimated that for tsunami relief in Asia that the overhead of the UN for their pitiful efforts was three times that of private entities.
Her conclusion sounds about right. " All the more reason, then, to force ourselves at long last to take what the institution has in fact become, put aside the lengthy and futile quest for its reform and begin to think more concretely about how, with or without, we can best work to advance the interests and values of ourselves and other members of the civilized world."
As used by its supporters a flat tax has two meanings. They are either a) a tax system with very simplified rates where a single rate is attached to all taxpayers or b) a simplified system where taxes are applied to a broad base without lots of credits, deductions and other preferences.
The premise of the headline is false on its face. The tax system is not flat but riddled with complex and odd items. The rate system has not changed substantially since the 1986 Tax Act or the Clinton tax act with the exception of the enhancement of the AMT. Two items that hit home most are the increasing importance of the Alternative Minimum Tax and the shadow bracket. Yes, indeed there are fewer brackets but the system is far from flat. To the extent that it could be described as flatter, it remains (contrary to critics of simplified taxation) quite progressive. The story points out that for most taxpayers their highest federal burden is the Social Security tax which is flat on income up to about $90k.
But here are some facts that the article does not include -
#1 - 43 million taxpayers are entirely excluded from the income tax (a third of all single taxpayers, a bit more than 20% of all married and two thirds of all head of households are in this status). The number has increased from 18% in the early 1980s. For those taxpayers the flat rate is zero.
#2 - Reliance on dividends and capital gains tends to grow with age. That is to be expected as people who accumulate wealth for their old age begin to use that wealth. Low income seniors tend to have more dividend than capital gains income but that rises as incomes rise (so old people with wealth also have more capital gains). For those taxpayers the Bush reforms allow them to keep more of their gains with a single rate.
#3 - Single taxpayers are about a third of the total filings and they have a smaller income than married taxpayers. (Think two earners)
#4 - A majority of Americans support a simpler income tax. 2% think the income tax is fine the way it is. While 77% believe it should be completely overhauled or have major changes. Evidently, most Americans have not seen the simple system that the article wants us to believe has begun to happen.
#5 - The top 1% of all taxpayers have 16.77% of all AGI (adjusted gross income) and pay 34.27% of all income taxes. The top 5% have 31.18% of all AGI and pay 54.36% of all taxes. (By any stretch of the imagination that is a very progressive system.)
But late in the story the payoff lines come out. Near the end of the article it states "No such system was adopted or even seriously considered." (It then goes on to claim that the change in capital gains and dividend taxation comes close to the ideal.) The article states " The health of the economy as a whole has not translated into gains for most workers." And "for most Americans whatever nominal pay increases (not specified) they have received in the past three years were more often than not offset by higher costs for things such as health care." (no data included on any part of this assertion) It then quotes an assistant special education teacher from Concord who comments (again without data) "The rich absolutely do not pay enough in taxes." OK, so the real point of the story is that a) the economy with the changes that Bush wrought have not been successful - they have screwed the middle class, b) the rich don't pay enough tax, c) the rich don't pay enough tax and if we had a flat system they would pay even less. Wouldn't it be fun to see the LA Times or the Bee do a straight news story?
By the way Tax Freedom Day is this year on April 26 - that is the day that most Americans quit working to pay their taxes.
Sunday, April 16, 2006
I was disappointed a bit to see two of last year's stars back in the lineup - not because I do not like them but because they deserve to go to the next level. Matt Watson and Ron Flores (a good all around player and a great reliever) were sent up at the end of the season only to come back down. They should be in the show. Friday night Ron had one innning with one hit and two strike outs. Matt is batting over .300.
On Saturday night they won 17-4 - it was a fun game. Early in the season, on both home games and on the road trip where they started out a little bumpy - they showed a lot of spirit. The game started out with the 51s getting a three run lead - only to have the cats come right back and tie it up. They then began to pile it on. In the fifth and seventh they added five runs each. At that point the game was not in doubt. Opening night saw almost 14,000 fans, Saturday saw only about 10,000. The Cats are batting .306 but they show a lot more heart than last year's team.
Capital gains is an odd concept because the government gets to recognize all of your profits even though they take some of them through inflation but they only participate in part of your losses. I sold a big chunk of Apple last year (albeit a bit too early) and so got socked. I understand the concept of income here but income is not static you don't earn it in one taxable year- thus, it should have some recognition of the cuts that our government has made in the true value of the asset. Pure inflation would be harder to calculate so they go to a reduced rate - although there is good theory behind taxing capital at lower rates.
The tax system needs to be thought about more carefully - lower rates, which Bush helped to implement at the federal level, are always a start. But a lot of the complexity needs to be brushed away too. The Alternative Minimum Tax was established originally to ensnare very rich people who were thought not to be paying their "fair" share of taxes. In reality, as most items in the code designed to do this have done, it moved down into the ranks of the middle class and now gets a whole lot of people. Were the code to be simplified there would be no need to have an AMT.
I liked most of what the tax panel proposed earlier in the year. It limited mortgage deductions, generally cut away a lot of the underbrush that infests the Internal Revenue Code and changed the charitable deduction to a modified credit. (Assuming everyone gives something to charity and that after a modest floor, people could get credit for their gifts.) But the administration has shown itself, like it did on social security reform, to be woefully inadequate in advancing a reform agenda. Perhaps, one should look more to Secretary Snow and less to Rumsfeld (or perhaps both) in yammering about who should go.
Anyway, Happy Easter.
Wednesday, April 12, 2006
75% of those polled agree with the notion that immigrants who came to this country without legal documents and have lived here for 5 years be granted the opportunity to become citizens if they remain employed, learn English and pay any back taxes.
60% support a guest worker program and by a similar number support that if a person has lived here for two years they could go to a port of entry and be classified as temporary workers.
But they oppose by 57% (with about a third supporting) and by about the same numbers proposals to charge undocumenteds with a felony or to grant them driver's licenses. By a small majority they support offering in state tuition to children of illegals who have graduated from a California high school.
In spite of attempts by the extremes on both sides the voters seem to understand both the values of immigration and the demands of citizenship. It is too bad the politicians can't follow the lead of the voters.
Monday, April 10, 2006
The immigration issue has grown to white hot intensity. I have been disappointed generally in the level and quality of rhetoric. The best posts I have seen about it come from a blog called Aysmmetrical Information - the author Jane Galt said the following on March 29 -
"The three-quarters of my forebears who were Irish probably didn't speak English when they got here, and showed no particular interest in learning how to do so. Cramming themselves into tenements ten or more to a room, they were willing to work longer hours for lower pay than native-born Americans. Having brought a rich, and very foreign, culture with them, they clustered in urban areas so that they could preserve it, including a drinking culture that horrified the Protestants then flocking to temperance reform. None of them showed much propensity for assimilating; they established their own churches, schools, social organizations, and businesses, allowing their descendants to live in a little parallel Irish world that kept them out of the mainstream. More than 100 years after they landed in North America, my father's family was still living in an Irish neighbourhood in Boston (though by then they had learned how to speak English). Then, as soon as there were enough of them, they took over the political apparatus of the cities they lived in, and began running it for the benefit of the immigrant communities swelling the tenements, instead of the native-born. This separatism was so complete, so pervasive, so stubborn that America is still riven by the threat of . . . gay Irishmen marching in the St. Patrick's Day Parade.
This makes Pat Buchanan's anti-immigrant ranting look just a tiny bit thick. And frankly, if the main contributions your ancestors made to the great American melting pot are bleary renditions of "Danny Boy" and the fine old tradition of getting blind drunk and sleeping in the gutter every March 17th, you should think thrice before complaining that "our culture" is under assault. If American culture could be assaulted, Irish-Americans would be doing 5-10 at Sing-Sing for attempted murder.
Most of the rest of my ancestors fled England so that they could puritanize in peace, and distinguished themselves largely by squatting on the same hunks of farmland for the next four hundred years. Somehow this is supposed to be more illustrious than walking the thousand or so miles from Honduras to pick fruit so you can afford to feed and educate your kids."
You should read the whole post - her thoughts are balanced and reflect some interesting nuances.
In the Beach Chalet at Ocean Beach in San Francisco (we had friends from Mexico visiting and showed them the city over the weekend) there is a mural that is evocative of the Mexican muralists. Those painters started in the early twentieth century but were in their highest period about the same time that the Resettlement Administration and the Works Progress Administration helped to create similar styles in the US. A lot of the public art in the US evokes similar style. The one in the Beach Chalet was done in 1931 - there is a similar mural at Coit Tower (for photos see Coit Tower Photos or other photos of Coit Tower with a history) Rivera was in San Francisco for an extended period in the late 1930s to see the Golden Gate International Exposition and did two murals (one in CCSF and one at the San Francisco Art Institute). But there were clear ties to him well before his visit to the city. I wonder how the style evolved.
Look at GDP growth in Europe's powers in recent years and you can see clearly the effects of this or the idiotic additional constraints that might have been created as a result of last year's proposed European constitution which had a series of labor "rights" that would have enshrined this kind of nanny state in a permanent state. Yet the French leaders (and many of our own left of center commentators who think these kinds of systems are really heaven on earth) just don't get the underlying message. Thnk of commentators like Anthony (The Third Way) Giddens from the UK or Paul (The Great Unraveling) Krugman to see examples of this heady nonsense.
It is refreshing to wake up and to read that a group of writers/thinkers who you think just don't get it, still keep to their (1% GDP or less) ways in spite of overwhelming evidence. Too bad for their people. By the way Friday's US job report showed unemployment at 4.7% - Germany and France are more than twice that rate and then some.
Saturday, April 08, 2006
Couric is not as bad as Bryant Gumble was in his today era with phony glasses and all (Gumble went on to become the host of an entirely forgettable sports show where he changed from the mild mannered "intellectual" to a sports mad dog - one wonders how the network execs think these things up). Couric's stridency on a number of issues is off putting at least to me and I suspect to a larger audience. I am not sure how CBS thinks putting her into the new role will abate the concern than many have raised about the Rather network. Couric's successor at today seems to be an interchangable persona with a bit different orientation - both could have probably been one of the briefcase carriers on Deal or No Deal in their younger days.
Ellis argues that Fox could benefit from having a network news outlet - although I am not sure I agree with his judgment - the divisions between cable and network are continuing to blur. Cable is becoming almost universal and the role of broadband here could change the way any channel broadcasts. But his overall assessment - that CBS has no way to produce the revenues to make the system profitable - was revealing and I believe in the short term accurate.
Wednesday, April 05, 2006
Brown lacks the intellectual capacity to think an issue through so he flits from policy notion to policy notion. He is so hip he has a blog, but like most of what he does the thing lasted for a couple of months and then he dropped it (last post October 2005) although it is now posted over to his site for Attorney General. For much of his career he has conscientiously worked in symbols. Yet, Schrag in a mostly complimentary piece suggests that Californians should be fooled again.
Brown started with a trip to the seminary but he soon dropped out of that. His educational record is spotty. He graduated from Berkeley and then Yale Law School but had trouble passing the bar. Delgadillo grew up in real poverty and attended Harvard and Columbia Law School. And throughout Brown's career he seems to have moved around a lot. He ran for President several times - mostly without any real hope of winning. He is a master of pulling at the current intellectual fashion. He seems to have lighted on this race because his dad did the job and because there was not something else in his view. But as Schrag points out his record as governor included an appointment that came about because he heard someone talking loud in a restaurant. Brown has "regrets" about some of his appointments but he has moved on from that.
The most curious part of the the piece is his offhand comment that Brown has no significant opposition in the primary. In the last political filing. Rocky Delgadillo, who is the former LA City Attorney and who had a lot of press in Southern California, had about $2.6 million on hand while Brown had $4.2 million. The endorsements for each are interesting the California Labor Federation endorsed Delgadillo but several of its members endorsed Brown (California Faculty Association). Surprisingly while a lot of the liberal elites of the Bay Area endorsed Brown, most of the Oakland labor organizations endorsed Delgadillo. The CTA has also endorsed Delgadillo. The LA liberal elites seem to have been pretty consistent for Delgadillo (although some like Marta Escutia endorsed Brown). So when you look at the race it looks pretty even. While Brown could be expected to have statewide name recognition a lot of that is negative. Delgadillo has gotten a lot of press in LA and thus should be pretty well known where the votes are.
I am not sure why Schrag wrote the piece that he did. Was this one last shot in favor of the mild system of entertainment that Brown has provided the state (most often at our expense) over the last 30+ years? Who knows. But his commentary on this one seems a bit off.
In the end whoever wins the primary needs to face State Senator Chuck Poochigian who has had a distinguished legislative career- a good deal of his career (as opposed to Brown) has been to work on the tough issues in the state with some noticable positive results. He also has a record of working across party lines effectively. Poochigian had about $2.7 million in the bank at the last filing date and will not spend any significant amount in the primary.
Tuesday, April 04, 2006
"I have received many honors in my lifetime, however none touch my heart as much as being recognized by the people of my home state Louisiana," - That is what he said when he received the new honor. And that is a mark of who the guy really seems to be. He had a profound effect on rock and roll yet he still lives in the 9th Ward of New Orleans - where he has lived for most of his life. He does not seem driven either by his music or by fame or recognition. A 2002 interview showed his true modesty. In that interview he commented that he did not like rap because "he did not like the words."
For a while after Katrina there was speculation that Fats had died in the storm. He stayed in his home with his ill wife and was ultimately rescued. But again, not moved by the publicity, he went about his business of life. Mayor Nagin could have learned something from him. He (Fats) is a class guy.
Monday, April 03, 2006
One of the roles of a party chief is to whip up the faithful. But there should also be a larger role to help make the political system function. Dean, and many of his counterparts in the political yabberati (this is not just on one side of the aisle) seem to think that they can say anything and as long as somebody prints it - it is ok.