Monday, December 31, 2007

John McCain

My natural reluctance on John McCain is based on two factors. I realize his story is a heroic one. But I believe his role in the Senate has been less than positive. I do not think his role in campaign finance or in the gang of 14 helped advance a better government, indeed his collusion on the gang of 14 probably limited a couple of very good judges from being confirmed. That was inside DC politics but I think they were fundamentally negative. His prescription on health care is to "bring costs under control." I wonder if he or his team have thought carefully at all about why costs are rising. I am also skeptical about his response to taxes - while the general principle of keeping taxes in line with spending restraint is a good one - the democrats are often willing to raise taxes and increase spending. And I think at times he has been supportive of at least part of that equation.

His support of a strong military and an aggressive foreign policy is a real positive. He certainly would not retreat from our current situation in the world - either in confronting terrorism or in our general approach to markets.

But I wonder about his age and stamina. I voted for Reagan in 1984 and although I am sure he was not the president I thought he was in his first term - even with all the problems he was certainly better than Mondale would have been. But McCain lacks a lot of the grace that Ronald Reagan had.

Would I vote for McCain - a lot depends on who is nominated. I am also intrigued whether he an Lieberman might team up in a third party race. I believe that this electoral season will be a lot like the last college football season - filled with surprises. So that outlandish possibility is not as silly as it would seem at first glance. But for now I am not excited about his candidacy.

Is there really something new in Obama?

A lot of my democrat friends have opted for Senator Obama. I am not sure what I think they see in him. Indeed, he is new. In November I heard George Stephanopoulos speak at a meeting in Washington, he quipped "the problem with Obama is not that he is Black it is that he is green.' I believe the vast majority of the American people are ready to vote for a Black candidate. Had Colin Powell run at some point, he would have been very strong. But I suspect that as we get to know more about Obama his allure will diminish. When you look at his policy proposals a lot seems scripted.

On the economy "As president, Barack Obama will implement a 21st century economic agenda to help ensure that America can compete in a global economy, and ensure the middle class is thriving and growing. He will increase investments in infrastructure, energy independence, education, and research and development; modernize and simplify our tax code so it provides greater opportunity and relief to more Americans; and implement trade policies that benefit American workers and increase the export of American goods."

On education "Our schools must prepare students not only to meet the demands of the global economy, but also help students take their place as committed and engaged citizens. It must ensure that all students have a quality education regardless of race, class, or background. Barack Obama is committed to strengthening our public schools to maximize our country's greatest natural resource - the American people. Obama believes that we must equip poor and struggling districts, both rural and urban, with the support and resources they need to provide disadvantaged students with an opportunity to reach their full potential."

Obama makes a big thing about the role of faith including a statement on his website that describes a speech he gave in June of 2006 "Senator Obama delivered what was called the most important speech on religion and politics in 40 years. Speaking before an evangelical audience, Senator Obama candidly discussed his own religious conversion and doubts, and the need for a deeper, more substantive discussion about the role of faith in American life." When one reads the speech there is considerably less than meets the standard described on his website. The speech was in response to his campaign for the US Senate against Allen Keyes, who styles himself as a moralist but who I have always found as a blowhard.

The speech suggests that for Obama the role of religion in American society devolves into a power for social justice. He addresses the uneasiness of democrats to deal with the deep underlying faith of the American people. But then he goes on to suggest two other things. First, a vision of the role of religion that harkens back to the obligatory multi-cultural mantra of liberal democrats "Moreover, given the increasing diversity of America's population, the dangers of sectarianism have never been greater. Whatever we once were, we are no longer just a Christian nation; we are also a Jewish nation, a Muslim nation, a Buddhist nation, a Hindu nation, and a nation of nonbelievers." While we should honor all faith traditions, it is foolish to suggest that all religious traditions have a uniform influence on American life. There is an inherent tension in the First Amendment which Obama seems to misunderstand.

The most profound statement in the speech for me was "Democracy demands that the religiously motivated translate their concerns into universal, rather than religion-specific, values. It requires that their proposals be subject to argument, and amenable to reason. I may be opposed to abortion for religious reasons, but if I seek to pass a law banning the practice, I cannot simply point to the teachings of my church or evoke God's will. I have to explain why abortion violates some principle that is accessible to people of all faiths, including those with no faith at all." I agree with that statement, but as I read the speech on his site, I was struck with how significantly the speech seems far short of the speech that Mitt Romney gave more than a year later.

What would we get with Obama, were he to be successful? Based on his promises, because his record is far too brief to conclude much of anything, we would get an activist who proposes to expand the size and scope of the federal government. But we would also get, as perhaps we are likely to get with almost any candidate, a passel of advisors (in this case who are much more liberal (Obama showing a significant lack of candor refers to himself as a "progressive" because he knows what the American people think of people who call themselves the "l" word.)

Could I vote for him? Not likely, but again depending on who the GOP nominates possibly. But between him and Senator Clinton, the two leading democrat candidates, I am more likely to vote for Clinton than Obama under the principle of the "devil you know, versus the devil you don't."

Sunday, December 30, 2007

Can we stand another governor from a small southern state?

Like Senator Clinton, Governor Huckabee, has roots in a small southern state. (Arkansas) His campaign has (momentarily) caught fire, at least in Iowa. But I look at his unscripted moments - especially as they relate to the assassination of Bhutto - and wonder whether we can afford to have a GOP clone of Jimmy Carter. Some of his ideas are interesting - others seem crafted by a religious spinmeister. For example, his veterans "bill of rights" is fundamental lunacy - He states on his website that benefits should be include "The right to a mandatory rather than a discretionary mechanism for funding veterans' health care" While I believe it is important to assure good care for our veterans I am not sure it should become an entitlement over all other parts of federal spending. His tax policies (" I am running to completely eliminate all federal income and payroll taxes.") would replace the current broken system with a national sales tax. Ultimately the nation should move more toward consumption based taxes but a pure sales tax is probably not the way to accomplish that. "Fair" taxes are always in the eyes of the beholder.

His health care ideas ("The health care system in this country is irrevocably broken, in part because it is only a "health care" system, not a "health" system. We don't need universal health care mandated by federal edict or funded through ever-higher taxes. We do need to get serious about preventive health care instead of chasing more and more dollars to treat chronic disease, which currently gobbles up 80% of our health care costs, and yet is often avoidable.") are simple pandering. How would he implement a system without a system?

He says he believes in the global economy but then argues for an agricultural policy thusly "A nation must provide its citizens freedom and security. To accomplish this, a nation must be able to defend itself and feed itself. We have learned how disastrous it is to be dependent on other countries for our energy needs – we must never be dependent for our food needs." Those two ideas are in fundamental conflict.

What bothers me most about his campaign is the notion of "vertical politics." - which is described as follows "I meet voters with a real thirst for a healthy discussion of the issues. Ultimately, people don't care whether an issue comes from the left or the right. What they want to talk about are ideas that lift America up and make us better. It's what I call "Vertical Politics" and it is why we felt it was so important to set a "Vertical Day" aside to focus on the issues." The last politician who talked like that was Jerry Brown with his canoe analogy (you paddle a bit to the left and then to the right). I believe the American people are tired of strict left of right politics. At the same time, I believe many of his ideas would lead to an even larger role for the federal government. I still believe in the maxim that one of the greatest lies of all time is "I'm from the federal government and I'm here to help."

The religious tie is also a troubling one. It is important to me that a politician is grounded in faith - almost any faith. At the same time, however, I think religious expression is very personal. Politicians often err when they attempt to move that set of personal beliefs into the political realm. Government policies should have some moral basis but care is very important - the balance in the first sixteen words of the First Amendment is critical to our national standing.

I can't say I would never vote for Huckabee - but he would be well down on my list.

The most labyrinthine candidate

For me, the most labyrinthine candidate to untangle is Hillary. Senator Dodd, yesterday, made a stunning (but I believe accurate) comment - that being first lady qualifies you for nothing. Hillary plays up her experience in the first Clinton Administration. But I wonder why. For me in the two most important initiatives in those eight years (NAFTA and Welfare Reform) there is little evidence that she had any role. In addition, her major responsibility early in the Administration, health care, was a huge failure. Her secret task forces were the height of hubris - assuming that this complex problem could simply be solved by closeting a bunch of supposed experts in meetings was laughable. The results show how silly the idea was - her task force produced an odd amalgam of ideas that would have made Rube Goldberg happy. Then there is her role in travelgate - where a bunch of minor functionaries in the White House travel office were dismissed under curious circumstances.

Quite frankly, I am also troubled by her seeming accommodation to her husband's bimbo eruptions. I think I understand the cross tensions here but the mix between the injured wife and the attack squad against the bimbos does not add up to me.

I am also troubled by her roles in Arkansas. The commodities trades, where as an amateur she guessed right on a series of turns in the market is beyond credibility. Arkansas was (and possibly still is) a feudal kingdom and her jobs with law firms and turns in the commodities markets are a demonstration of that. She clearly mishandled disclosures in Whitewater. Whether there was criminal intent here or simply sloppiness is not a distinction which I believe important. A good lawyer would a) read all the documents that she or her client signed and b) would not try to attempt to understand the financial position of an entity before certifying that the entity was in reasonable financial shape. A lot of good people have been lured by their position into ethical lapses, but that does not excuse them.

We then come to her career in the Senate. She has shown some interesting skills in this job. Most observers credit her with a good sense of policy and while she has been a little squirrelly on some issues (especially her vote on Iraq) I will concede that she should be credited well in this responsibility.

So how would she be as a president? First, I think she would probably be about as good as her husband was although I am not sure she has the flexibility that he showed when confronted with a GOP majority. I am always concerned about who any democrat would appoint to the Supreme Court. (Although my least favorite member was appointed by a Republican). Second, it is pretty clear that the establishment of the Democratic party would be comfortable with her - which may or may not be a plus. Third, her issues are predictable for a moderate democrat although one caught me by surprise. On her site one of her areas is comprehensive governmental reform. Her site states "Americans are ready for a government that puts competence ahead of cronyism." I am always skeptical about "reform" agendas - going back to one proceeded her as a New York senator. Roscoe Conkling worried that reform was even a better refuge for "scalawags and scofflaws" than was patriotism. Her record in Arkansas and with the White House travel office suggest that this may be rhetoric. And even if it were not, one of the first Clinton administration's big PR pushes "Reinventing Government" (Al Gore's horse before he got onto global warming) was a lot of rhetoric and not many results.

Could I vote for her? That depends on who the GOP nominates although the answer is probably no.

Saturday, December 29, 2007

No Choice #1

A few days ago I commented that I could not vote for Bill Richardson. His performance since the assassination of Benazir Bhutto has only confirmed my thinking. About ten months ago Richardson urged the Administration to support Pakistani President Pervez Musharraf. He was quoted in the NYT as saying ""I think the vice president is right. You have to lean on Musharraf, who is our ally. And what you don't want to do is provoke a situation, even though he's not a great champion of human rights, democracy, et cetera, to have somebody replace him who is less friendly to us, who would cause us real problems." Today the Times quoted him as saying (about Bush) "He needed to choose whether to support the dictator or the Pakistani people. He chose the dictator. Repeatedly. And by doing so, he has let down both the American and the Pakistani people."

Anyone with that kind of long term vision has no business being president.

He makes a great lapdog for Clinton but someone should tell him that his chances of being nominated for the job he is actually running for (VP) are very small.

Friday, December 28, 2007

So who am I going to vote for? (Not yet)

The answer here is more complex than the previous post on who I am not going to vote for.

Before I discuss the rest of the candidates, I would like to offer four ideas about an ideal presidential candidate. These are really places where I am skeptical of the current crop and they suggest that I will have a very hard time making a decision.

#1 - I am skeptical that any senator can be a good president. Very few members of the US Senate are ever elected to the presidency. The last, directly, was JFK and indirectly LBJ. There are some good reasons for that. Senators feel, whether rightly or wrongly, that they have a major hand in government. The filibuster and other less visible devices like the "hold" give them the aura of authority. In recent years, it is my opinion that those tendencies to imperial status have increased. I don't think that offers much hope for someone who can negotiate the complex waters of Washington. Senators also spend a lot of time competing for bandwidth - some more than others - but that makes it harder for them to see the long term nature of most political issues. Again, the 24-7 news cycle has increased that tendency. Think of Charles Schumer as the archetype of a bandwidth seeker.
#2 - I am skeptical of new kids on the block. The worst president in my lifetime was Jimmy Carter who came from a small state with limited experience. But generally I would not want to hire a person for a job with all the issues of the US Presidency who had little experience in similar responsibilities. Some would argue that Governor Huckabee has relevant experience but his comment yesterday on the assassination of Mrs. Bhutto (He first offered "apologies" for her death, he then stumbled on the issue of "political games" - we can't afford a president who is learning on the job).
#3 - I am skeptical of the breadth of the capabilities of the federal government (actually any government). Which leads to two other conclusions. First, I am not sure that I like any candidate who has an answer for every malady. At the same time I generally reject the idea that a good president is a good wonk ( a person who is overly fascinated by details). Carter knew who was on the White House Tennis Courts but hadn't a clue about the economy or foreign policy.
#4 - I am skeptical of anyone who does not have a normal life. I understand the demands of politics. The life of a good politician is not normal. But I want people to have a sense of reality. One of the failings of Bush 41 was his inability to understand normal things - like grocery scanners. I distrust anyone who says they will commit their entire lives to my needs or to the job.

Obviously, were I strict about all four of these I would be voting for NOTA (None of the above) and that is not a reasonable option for me.

Wednesday, December 26, 2007

The Decline of Defined Benefits

The Pew Trust released a report recently on the state of public pensions in the US. The report is not real good. Under the Government Accounting Standards Board public agencies, like their private counterparts, are required to account for future liabilities, funded and unfunded. As the rule was phased into effect it became clear that public pensions were on a rocky road. Nationally Pew estimates that pensions are actually pretty well funded for their future obligations. The future obligations we owe to public employees amount to $2.35 Trillion. To cover that obligation there is about $1.99 Trillion saved, leaving an unfunded liability of $360 million. (About 85%)

The California obligations are in the range of $355.5 billion and about 87% of that has been set aside.

But the problems come from other benefits, primarily health benefits. Pension costs are relatively predictable over time. Health benefits less so. The estimate of the health liabilities amounts to $381 billion, but of that obligation only $11 billion has been set aside for the health and similar benefits. That amounts to an unfunded liability of $370 billion. California's portion of that $381 billion is $48 billion - and none of the future obligations are funded. California at least has been thinking about this issue and should have a report to the legislature back by the first of the year. When you add these two together for public employees the unfunded liability becomes almost $100 billion for the state - or a bit less than 25% of the total obligations of the state in this area.

An EEOC ruling today makes this an even more interesting. The Commission ruled that employers can eliminate post retirement health benefits when their employees become eligible for Medicare. Not all public employees are eligible for Medicare and it is unclear whether the ruling will cover public employees - but the direction of the action is clear.

In the long term, public pension systems are going to have to get rid of defined benefits plans - whether that goes prospectively to future employees or whether the unfunded liabilities especially of health costs are reduced quickly remains to be seen. But the reductions are sure to come.

Originally, the rather generous pensions were offered with the rationale that public employees were less well compensated. But current compensation rates for most public employees no longer generate these long term liabilities whether they are funded or not.

The Full Report,Promises with a Price, can be found on the Pew site. It is a good piece of research.

Who I am not voting for for President

In eight days the Presidential season officially begins with the Iowa caucuses. The evidence I have seen and the people I have talked with are not excited about having a perpetual campaign to choose the nation's leader - but they seem not to have been given a choice here.

As I thought about the choices we are being offered, I find I am not excited about anyone who is running - although some encourage a bit more excitement than others. Thus, as a first step, I have eliminated all of the following candidates for president (not listed in order of non-preference):

#1 - Dennis Kuchinich - His personal and intellectual stature seem to be matched perfectly. This is the guy who says the public sector has a "moral responsibility" to provide jobs. He would, presumably by fiat, double our use of renewable energy sources by 2010. Before coming to congress he was mayor of Cleveland and a hospital orderly, newspaper copy boy, teacher, consultant, television analyst and author. If these were in order, the first two are definitely in the correct position. (and even possibly #3).
#2 - John Edwards - This guy would lose my vote simply by his callous disregard of his wife's health - even if he weren't as looney as Kuchinich. He had a mediocre record as a senator and before that was an extortionist trial lawyer.
#3 - Bill Richardson - Hillary's lapdog actually has a couple of good ideas including support for the blue pencil (the line item veto) but his pathetic performance as a candidate (where he seems to try to snuggle up to Hillary at every event) is embarrassing. He is one of the leaders of the cut and run faction of the democrats.
#4 - Joe Biden - Biden would divide Iraq into three regions. He is often on the looney tunes side of the ledger (he was the guy who in a campaign stop in Delaware said you had to be Indian to run a donut franchise in his home state.
#5 - Mike Gravel - Does anyone think he is more than a buffoon?
#6 - Ron Paul - This is an odd campaign - an intellectual approach to politics being run by a doctrinaire ideologue. Ayn Rand would be proud but most people look at his ideas and giggle.
#7 - Duncan Hunter - This is the least likely of all to be put on this list. Congressman Hunter is a fairly reliable conservative voice who has at times provided leadership but there is a time in every politician's life when someone must say - sorry sir you have not got a snowball's chance in hell of being elected.
#8 - I might have put in Christopher Dodd - and he probably should be there. Most US Senators make lousy presidents.

At some time in the future, I will go through the remaining candidates to explain who I might vote for. But I can only stand so much at a time.

Tuesday, December 25, 2007

Christmas Present

The photo on my profile was not taken in the last few years. It was taken when I was about 4 in the city of my birth. When our son was about the same age we had the same picture taken, again in the city of his birth. Today, one of my gifts was the same picture taken of Mason, our grandson. He is a bit older than either my son or I were when those shots were taken. The three were arrayed side by side in a fetching frame. It was a wonderful gift.

Monday, December 24, 2007

Your Tax Dollars at Work

The Internal Revenue Service issued a 70 page memorandum attempting to debunk tax protester arguments that at least from my perspective no one but nut cases have ever taken seriously.

I am all for assuring that Americans comply with the tax laws. But I am unsure why the issuance of this memorandum will help to accomplish that goal. Those people who are foolish enough to believe that somehow the IRS is a creation of the devil or unconstitutional are unlikely to read the paper. The paper, like many other work of the Service, has no introduction. Its first paragraph states "Some assert that they are not required to file federal tax returns because the filing of a tax return is voluntary. Proponents point to the fact that the IRS itself tells taxpayers in the Form 1040 instruction book that the tax system is voluntary." I've also encountered people on the street that believe that Tinkerbell is real. But I wonder whether it would be worthwhile to have the service publish a memorandum which debunks that myth too.

Ultimately, the real problem with the tax system is not that there are some crackpot ideas about how we do not have to comply but that the real policy makers make the assumption that elements in the tax code are interchangeable and have no secondary effects. Thus, if they worry that a very small number of taxpayers occasionally don't pay their fair share they adopt something called the Alternative Minimum Tax which now snares a very broad range of taxpayers.

Then there is the fiction that the cost of compliance with the tax code is minimal and at least according to the IRS data is diminishing. A paper on the IRS site suggests that more and more people are using computers to prepare returns (what is unsaid is that there is still a very high percentage of people who feel it necessary to have a preparer do their returns).

What really matters here is not that some nut cases think the system is voluntary but that the system is as complex as it is without very good reason and that the costs of keeping up with all the jot and tiddles in the system diminishes the economic productivity of our economic system. But then I would not expect the Service to publish a paper like that.

More on the Fence

Also yesterday I listened to the Econtalk podcast with Peter Boettke trying to explain Austrian economics. That school starts with Karl Menger and other more famous economists like Von Mises and Hayek. Boettke came up with a quip which I thought was very applicable to the debate about the fence. He argued that advancement depends on the three "s's" - Smith, Schumpeter and Stupidity.

Adam Smith wrote about the gains from trade in The Wealth of Nations. We benefit from economic systems that encourage interchanges, not under the stifled rules of mercantilism but trade which is robust. Both the left and the right, in different ways, want to "perfect" trade by adding a couple of rules that will actually inhibit it. We need to resist those cunning arguments.

Schumpeter wrote in Capitalism, Socialism and Democracy about innovation, about creative destruction. The ability to innovate is key to growth and prosperity - and as Virginia Postrel has argued innovation disperses the benefits to a wider range of societies that accept its benefits.

Stupidity is the third issue. Boettke argues that the counter balance to Smith and Schumpeter is government stupidity. If our government adopts policies which inhibit innovation or trade their effects can be diminished or eliminated. The fence qualifies on several counts here. It would be very expensive. It would not be effective and yet at the same time, the very nature of the fence would diminish our relations with one of our closest neighbors. But Ingram, like Lou Dobbs and Tom Tancredo, are more interested in yammering for ratings than in trying to address broader policy issues. At least Tancredo has realized (somewhat) how foolish his yammering is.

Ingram constantly says that 58% of the American voters want our laws enforced. I am surprised by that number, but not in the way that Ingram suggests. I suspect that asked in one way 58% of our voters want something done - but the hearts and minds of the voters are evidenced in a lot of other ways. I suspect that an even higher percentage of voters, if asked in a non-reflexive manner, would support sound laws which encourage expanded benefits of trade, more innovation and less stupidity.

Sunday, December 23, 2007

Laura Ingram and the Fence

This evening we drove back from the Bay Area and were listening to Laura Ingram (in a repeat of a broadcast I heard earlier in the week). I am not a fan of Ingram's. Among conservative talk show hosts she ranks with Mike Gallagher and slightly above Michael Savage. I object because while she is occasionally funny, a lot of what she talks about is knee jerk.

One of the topics she discussed was the proposal to build a fence across our border with Mexico. In my mind the fence is one of those public works boondoggles that will end up costing much more than even the highest estimates (currently about $7 billion) to erect and then huge amounts to maintain.

The case against our current immigration policy is easy to make. Unfortunately both sides in the debate start with absurd premises. The Ingrams of the world make the same arguments that the nativists of the 19th Century made - that all immigrants are low lifes or criminals. The immigrants rights advocates try to portray them as victims of US trade policy - if we just had fewer multinationals we would have fewer immigrants. Both are silly and unfounded in any data. If, as I am, you are a supporter of increased trade and relative ease of entry, there is still little justification for having a border which is fundamentally unregulated. Bush was right here - one of the key elements of any immigration policy should be a guest worker program and some changes in enforcement - but they need to be coupled. The argument made by organized labor, that the jobs taken by illegal aliens are taking away from domestic workers, is nonsense.

One Congressman makes the case that the costs of the current situation are huge. He estimates that 15% of the California inmate population is illegal. His site estimates that there are 2.2 million illegals in the state. And that adding up all the costs (health care, prisons, K-12, and other benefits) costs California taxpayers more than $3.5 billion annually (that is somehow reduced below the estimate the supporters of Proposition 187 had when it was up for a vote). There are some costs associated with increased numbers of immigrants - but they are not entirely one sided.

The biggest yammering in the state comes from the two counties where migration has been actually in remission. (See the two charts from the Department of Finance Population Unit - the state's demographic experts). Two years ago I came across the Mexican border at Mexicali with a Mexican national in an older car - based on the time we went across it was easy to get across with very little documentation. That is one of the areas of the border where there is already a fence. Ultimately, we need to think about answers to this question which avoid both the nativist notions and the nobility ones (which the immigrant rights advocates propose).

So what are the reasonable answers.(not necessarily in that order) First, it seems to me that we figure out a way to create a guest worker program. We know the cycles of workers quite well - so do the Mexican officials. If given easy in and out - many workers would come to the US for a limited period of time. That would finally prove that a) these workers are not taking jobs away from American workers and b) most do not want to spend their lives here. Second, we try to establish an enforcement mechanism for employers which is more effective than the current one, without creating the police state mechanisms that were present in the initial discussions of Simpson Mazzoli. Third, we increase our direct investment in Mexico which will ultimately reduce the incentive that individuals have to move from Mexico to the US. The integration of trade between our two countries should be encouraged to grow - but bilateral trade should involve activity on both sides of the border.


In 1957, five years after she became Queen, Elizabeth II gave a Christmas Message which was a first, it was televised. I discovered the message this morning. It was a very thoughtful statement both about the Christmas season but also about longer term values. It is worth reading in its entirety. It can be seen on You Tube While there is a lot of great commentary in this message, I have highlighted several passages which I found especially important.

"Happy Christmas.

Twenty-five years ago my grandfather broadcast the first of these Christmas messages. Today is another landmark because television has made it possible for many of you to see me in your homes on Christmas Day. My own family often gather round to watch television as they are this moment, and that is how I imagine you now.

I very much hope that this new medium will make my Christmas message more personal and direct.

It is inevitable that I should seem a rather remote figure to many of you A successor to the Kings and Queens of history; someone whose face may be familiar in newspapers and films but who never really touches your personal lives. But now at least for a few minutes I welcome you to the peace of my own home.

That it is possible for some of you to see me today is just another example of the speed at which things are changing all around us. Because of these changes I am not surprised that many people feel lost and unable to decide what to hold on to and what to discard. How to take advantage of the new life without losing the best of the old.

But it is not the new inventions which are the difficulty.The trouble is caused by unthinking people who carelessly throw away ageless ideals as if they were old and outworn machinery.

They would have religion thrown aside, morality in personal and public life made meaningless, honestly counted as foolishness and self-interest set up in place of self-restraint.

At this critical moment in our history we will certainly lose the trust and respect of the world if we just abandon those fundamental principles which guided the men and women who built the greatness of this country and Commonwealth.

Today we need a special kind of courage, not the kind needed in battle but a kind which makes us stand up for everything that we know is right, everything that is true and honest. We need the kind of courage that can withstand the subtle corruption of the cynics so that we can show the world that we are not afraid of the future.

It has always been easy to hate and destroy.
To build and to cherish is much more difficult. That is why we can take a pride in the new Commonwealth we are building.

This year Ghana and Malaya joined our brotherhood. Both these countries are now entirely self-governing. Both achieved their new status amicably and peacefully.

This advance is a wonderful tribute to the efforts of men of goodwill who have worked together as friends, and I welcome these two countries with all my heart.

Last October I opened the new Canadian Parliament, and as you know this was the first time that any Sovereign had done so in Ottawa. Once again I was overwhelmed by the loyalty and enthusiasm of my Canadian people.

Also during 1957 my husband and I paid visits to Portugal, France, Denmark and the United States of America. In each case the arrangements and formalities were managed with great skill but no one could have 'managed' the welcome we received from the people.

In each country I was welcomed as Head of the Commonwealth and as your representative. These nations are our friends largely because we have always tried to do our best to be honest and kindly and because we have tried to stand up for what we believe to be right.

In the old days the monarch led his soldiers on the battlefield and his leadership at all times was close and personal.

Today things are very different. I cannot lead you into battle, I do not give you laws or administer justice but I can do something else, I can give you my heart and my devotion to these old islands and to all the peoples of our brotherhood of nations.

I believe in our qualities and in our strength, I believe that together we can set an example to the world which will encourage upright people everywhere.

I would like to read you a few lines from 'Pilgrim's Progress', because I am sure we can say with Mr Valiant for Truth, these words:

"Though with great difficulty I am got hither, yet now I do not repent me of all the trouble I have been at to arrive where I am. My sword I give to him that shall succeed me in my pilgrimage and my courage and skill to him that can get it. My marks and scars I carry with me, to be a witness for me that I have fought his battles who now will be my rewarder."

I hope that 1958 may bring you God's blessing and all the things you long for.

And so I wish you all, young and old, wherever you may be, all the fun and enjoyment, and the peace of a very happy Christmas."

Saturday, December 22, 2007

Politico.Com and Santa posted a compilation of the Christmas messages of several candidates for president. They are worth watching for what they say. But again I am concerned about the message that a presidential candidate needs to make a Christmas message. Wouldn't it be better if they simply shut their yaps for a week or so. Afterall the poor folks in Iowa have to deal with them again soon after Christmas. Aren't we all thankful that the perpetual campaign and the perpetual candidates are always with us.

My high marks go to Guiliani - that is a funny bit. Edwards gets the moronic grinch award and Clinton's ad should get the WONK award. Wow, I am impressed, even at this festive time of year, she is trying to convince us that all she thinks about is policy. The sad fact is that the ad is probably an accurate reflection.

Politico has proven to have some interesting stuff on their site.

The Hucksterbee

In the Reason Politics Blog this morning Mike Huckabee is quoted with two favorite authors. To a seven year old he claimed his favorite was Dr. Seuss, to a more mature audience it was C.S. Lewis. Reason makes the point that this is pandering, which it is.

I think the better point is whether you actually learn anything by asking a presidential candidate who is favorite author is. I tried to think about who my favorite author is and came up with several - for economics I have one (Hayek), for literature another (probably Dickens or Twain), for politics another (probably Jeffrey Birnbaum). But even with that knowledge what could you tell about how I would govern? NOTE - This is not a presidential announcement.

Wednesday, December 19, 2007

Applying Starbucks to the NPD report on Music

The NPD group released research that Apple users are twice as likely to pay for downloaded music as their PC counterparts. Apple Insider quoted Russ Crupnick, who is a VP and entertainment industry analyst ""There's still a cultural divide between Apple consumers and the rest of the computing world, and that's especially apparent when it comes to the way they interact with music. Mac users are not only more active in digital music, they are also more likely to buy CDs, which helps debunk the myth that digital music consumers stop buying music in CD format."

One wonders why the difference. I think the answer is pretty simple. One might call it the Starbucks rule. Starbucks has helped in the coffee business to create a new market which allows individual consumers to design their own coffee - it does not take much to figure out how to get a "venti non-fat, peppermint, hot chocolate, no-whip" or anyone of the thousand other combinations available at Starbucks. And the menu changes enough to allow consumers the opportunity to experiment. But the key concept is ease of use. Once you begin to use Starbucks, you tend to keep coming back - uniform quality and ease of use are the reasons.

Ditto for iTunes. There are lots of choices and it is easy to understand, especially in the pricing. One of the odd things that the music barons have not yet understood is that there is a logic to the pricing mechanism for iTunes. That is part of its allure. But then with the performance of the RIAA and its supporters it is not surprising that they have not yet thought carefully enough about their business.

Here is a thought experiment. In the current House bill reauthorizing the Higher Education Act, the RIAA has caused an amendment to be introduced which would withdraw federal student aid from colleges who have students who download music illegally. The proposal would single out colleges when other network providers have successfully argued that their responsibility does not extend to what the individual consumer does on the net. But think for a moment if every college gave every student a $25 iTunes card at the start of their educational career. Would that be enough to hook them on honest downloads, just as a Starbucks card gets them to come back to the same coffee provider?

Saturday, December 15, 2007

More on A Christmas Carol

Last December I wrote about one of our family traditions - each year we see at least one version of Dickens' classic tales. On Thursday we took two friends to the Sacramento Theater Company production of the play - this is their 20th anniversary production and it is quite good.

But tonight I saw one of the three most popular versions of the novelette - the one with George C. Scott. Scott's version was done in 1984 for TV. From any reasonable view of the production the thing was done without regard to the actual Dickens story (except in the broadest of terms) and with an eye toward using an actor with the gravitas of Scott. Clive Donner was the director his writer (Pierre Boutron) tried to update the story. But they did a horrible job. Scott is a bit to Pattonesque for his role. But more importantly Boutron tried to eliminate some of the most important lines in the novela. For example, at the end of his time with Ebeneezer the spirit of Christmas present shows two urchins - the one ignorance and the other want. (Dickens point is that ignorance is to be worried about more than want.) But Boutron's language for that point misses it completely. In the original novela Dickens handled this key scene like this "This boy is Ignorance. This girl is Want. Beware them both, and all of their degree, but most of all beware this boy, for on his brow I see that written which is Doom, unless the writing be erased. Deny it!" cried the Spirit, stretching out its hand towards the city. "Slander those who tell it ye. Admit it for your factious purposes, and make it worse. And abide the end." That is powerful language - even in the stilted English of the 1840s - but Boutron makes some other social point.

Scott has some justification for his interpretation. In the original text the first description of Scrooge is thus "But he was a tight-fisted hand at the grind- stone, Scrooge! a squeezing, wrenching, grasping, scraping, clutching, covetous, old sinner! Hard and sharp as flint, from which no steel had ever struck out generous fire; secret, and self-contained, and solitary as an oyster. The cold within him froze his old features, nipped his pointed nose, shriveled his cheek, stiffened his gait; made his eyes red, his thin lips blue and spoke out shrewdly in his grating voice. A frosty rime was on his head, and on his eyebrows, and his wiry chin. He carried his own low temperature always about with him; he iced his office in the dogdays; and didn't thaw it one degree at Christmas.

External heat and cold had little influence on Scrooge. No warmth could warm, no wintry weather chill him. No wind that blew was bitterer than he, no falling snow was more intent upon its purpose, no pelting rain less open to entreaty. Foul weather didn't know where to have him. The heaviest rain, and snow, and hail, and sleet, could boast of the advantage over him in only one respect. They often "came down" handsomely, and Scrooge never did.

Nobody ever stopped him in the street to say, with gladsome looks, "My dear Scrooge, how are you? When will you come to see me?" No beggars implored him to bestow a trifle, no children asked him what it was o'clock, no man or woman ever once in all his life inquired the way to such and such a place, of Scrooge. Even the blind men's dogs appeared to know him; and when they saw him coming on, would tug their owners into doorways and up courts; and then would wag their tails as though they said, "No eye at all is better than an evil eye, dark master!"

But what did Scrooge care? It was the very thing he liked. To edge his way along the crowded paths of life, warning all human sympathy to keep its distance, was what the knowing ones call "nuts" to Scrooge." But in my mind Scott overplays that description.

In my mind a good adaptation of the story was done in 1938 with British actor Reginald Owen. The adaptation was done by Hugo Butler and the director was Edward Marin. Owen is a bit stylized but his transformation is believable. There are some pretty special effects for the time. Owen took the part because Lionel Barrymore (who had done a lot on the radio) had a broken hip. When Owen did this he had been an actor for 33 years.

But my favorite, which I never grow tired of is the 1951 production by Jack Warner. Noel Langley did the adaptation and Alister Sim was Mr. Scrooge. Sim was actually the rector of Edinburgh University at the time the movie was made. When you watch his performance you see a lot of the mannerisms that we associate with Scrooge in other versions that have their origin in his performance. Sim actually beat out Harold McMillan for the rectorship a few years before he did this movie. One of his quotes tells a lot about his appreciation for the cinema. "At first I was not sure if I liked films. The sequences are so disconnected and mechanical I thought I should have difficulty "getting into the skin" of the characters. But I soon found that the care, precision and concentrated energy that attends the photographing of each scene conspires to pitch one into the right frame of mind." Even with that he worked in 61 movies.

Dickens is one of my favorite authors. His ability to draw characters out is phenomenal. When you read the original text of Dickens you also begin to understand some of the images that are common to all versions - for example the picture above shows the Spirit of Christmas Present -which is the one that is commonly associated with the story in almost all versions.

Let's regulate "Citizen Journalism" (and other absurdities)

An Associate Professor at the University of Georgia's Journalism School,David Hazinski, yabbers in a recent column that we should "regulate citizen journalists." He writes " CNN's last YouTube Republican debate included a question from a retired general who is on Hillary Clinton's lesbian, gay, bisexual and transgender steering committee. False Internet rumors about Sen. Barack Obama attending a radical Muslim school became so widespread that CNN and other news agencies did stories debunking the rumors. There are literally hundreds of Internet hoaxes and false reports passed off as true stories, tracked by sites such as" What horrors!!!!! Had the professor bothered to take that list of indiscretions and match them against the failings of the "professional community" he would have an imbalanced list.

Hazinski makes three suggestions. "• Major news organizations must create standards to substantiate citizen-contributed information and video, and ensure its accuracy and authenticity. (Perhaps as a novel suggestion journalism schools should also think about asking their students to work on accuracy and authenticity for their actual students). • They should clarify and reinforce their own standards and work through trade organizations to enforce national standards so they have real meaning. (Yeah, right - that one would require the "professionals" to have some standards.) • Journalism schools such as mine at the University of Georgia should create mini-courses to certify citizen journalists in proper ethics and procedures, much as volunteer teachers, paramedics and sheriff's auxiliaries are trained and certified. (Most of that training takes place outside of the university, for some obvious reasons.)

What particularly caught my attention about this article was not the absurd suggestions but more the notion that "professional" journalists live up to a consistent standard. The range of outrages that we have lived with for fabricated stories and false reporting from the professionals seems to be ignored. Hazinski's notion that if we just professionalize something it will meet standards cannot be demonstrated in his profession. But second, his suggestions ignore the very real impact of the ubiquity of information. At one point there was a "paper of record" in the US. At one point there were only three television networks and they established a somewhat common standard of information. But those days are gone and will not return. No yammering about establishing professional standards will bring them back - licensure is not the answer. Reminding information consumers that caveat emptor is a good caution for any source be it professional or citizen is a much better standard. We get the benefit of citizen journalists of all types but with that benefit there is also a cost. It is too bad that professor Hazinski does not understand that.

Thursday, December 13, 2007

Taxes Real and Imagined

Greg Mankiw at Harvard did some computations on tax burden by income quintile based on data from the Congressional Budget Office. He computed all Federal taxes as a percentage of Household Income. The first number (as a percentgae of Household Income) is for 2005. The number in parens is computed as the average for the period between 1979 and 2005.

All households: 20.5 (21.6)

Top 1 percent: 31.2 (31.7)
Top 5 percent: 28.9 (29.0)
Top 10 percent: 27.4 (27.6)

Lowest quintile: 4.3 (7.2)
Second quintile: 9.9 (13.2)
Middle quintile: 14.2 (17.1)
Fourth quintile: 17.4 (20.1)
Highest quintile: 25.5 (26.1)

Notice two things about the data. All income groups are paying a smaller percentage of their household income in federal taxes than they did over the period (1979-2005) but more importantly the lowest income groups have had their total tax burden reduced by more than 40% while the highest income tax payers (top 1%) have seen a decline of 1.5%. That compares to a 5% decline for all households. Were there a substantive discussion about taxes every candidate for President would applaud both the reduction in rates and the increasing progressivity. But the chances of that happening are very small.

Over the last decade in many countries around the world (except the US) the tax systems have been simplified immensely.

Evangelistas de Mac

In a CNET post titled "Why do Apple customers care so much?" Tom Krazit explores why Apple users seem to be so committed to their computers.

I think it is pretty simple, Tom. There are two explanations. First, one could argue "They started it!" - Windows owners have made some pretty outrageous claims over the years including ones that Apple was just a "toy" that would get any reasonable person's dander up. But second, Mac owners knew full well that things like graphics and photos and document creation and even file nomenclature were superior on a Mac. The beauty of the Mac was its simplicity.

Krazit wondered why he was assaulted after writing an article about some initial problems with the new Mac OS. Some Mac owners take the support of their product to absurd levels. I was an early Leopard adopter and what I found was some things I like a lot (the better integration of wireless and printers is but one feature) and some things I do not (I found that a good many of the things I took for granted on the new have to be re-entered). But the fact is that as Mac has gone from the original OS X to all of the members of the cat family that their software had two characteristics. First, it was less subject to intrusion and second it was pretty damn stable. I keep looking at my Windows based colleagues and hearing about the "blue screen." At the same time Microsoft kept promising this new Longhorn (Bull vs. feline?) and then delaying it and in the end what became Vista was something that most of my Windows using friends thought was not that great.

But Krazit also gives a short history of the role of Guy Kawasaki and his work on cult of the Macintosh. And that story needs to be told. When Amelio and Spindler were CEOs of Apple (after Jobs was pushed out for the Pepsi guy and he failed) Apple became a plodding middle aged company. Their product line was a joke and their market share was shrinking. They had one good innovation (Newton) which was brought out before it was ready and then marketed poorly. Kawasaki got a small group of Apple fans together at that time and created something called the Mac Evangelistas. He started with fewer that 100 (I was part of that group) and in a short time built the group to more than 44,000. This was an original implementation of viral marketing - each morning one of Guy's people would create an email with every article on Apple (almost like an RSS feed now) with the URL or email of the correspondent. When someone wrote something nasty about Apple (which at the time could well have been justified) they would get a ton of emails. The group lasted for about two years and was remarkably successful. Walt Mossberg commented at one point that he would no longer write critical stuff about Apple because if he did he would get a bazillion emails. When Apple began to resurge - the Evangelistas were disbanded and Guy went on to form an Angel fund and to write a couple of pretty good books on venturing.

One of the key things which Steve Jobs has done in a number of areas is to simplify. My wife last night expressed frustration at being able to control our TV/DVD/Cable remote. It has a bunch of buttons which will allow you to scratch your back while looking for a program but most people don't actually want to be able to do that. The iPod was a classic implementation of that principle - even the Shuffle seemed to break through that boundary. There are things I do not like about some Mac products - Safari is not always as web compliant as it should be. But for the most part the reason I am a loyal Mac customer is not because of the cult but because of the simplicity. I can do a whole bunch of things which I have never seen Windows users be able to do. Indeed there is more software for Windows (although not necessarily for Vista) but I am not sure I really need the ability to analyze the mating cycle of a fly using some absurd statistical package. (and indeed if I wanted to do that I could use Boot Camp or Parallel).

Krazit's point is that it is time for the Mac-v-PC debate to move on. I am not sure I agree unless both sides lay down their arms. In the rare instances that I am forced to us PCs I cringe at some of the "features" that I need to work with. I am one of those people who has not even used Boot Camp or Parallel (which allows Intel based Mac users to run Windows in a native environment) for my laptop. Windows tried to make itself inevitable. It did not work. When Microsoft's supporters begin to think more clearly about a range of options (which is where I think the technology is actually going) then the Evangelistas will do the same. I agree with Krazit that the real point should be that all of us consumers should demand things that work for us.

Tuesday, December 11, 2007

More on Housing

Arnold Kling makes a good point in TCS daily today about the housing problem. He argues that we need to get back to more realistic multiples of income to determine housing affordability. He criticizes the idea of Option ARMs (where the first rate in the loan is set artificially low to reset at some determined point - or periodically- in the future AND where the buyer has a very low down payment). The combination of that "innovation" creates two problems. First, it assumes a continuous increase in value of the home, which would allow the borrower to catch up to the size of the financing. But second, it also allows a borrower to get into the loan with very little commitment to the loan or the house. Kling talks about his house purchase where he put down 20% of the purchase price. That may be a bit old fashioned but 0% may also be a bit out of the bounds of reasonableness. He also talks about multiples of income as a determinant of eligibility. In recent years some mortgage people have suggested that home buyers could get into a house with projected payments north of 40% of their income. That is absurd.

Kling, who is a pretty good economist, suggests that to take the froth out of the market by getting the people that got suckered into the frothy market a $10,000 tax credit to move on. (I am not sure why he chose $10,000 or a tax credit.) He says the credit should be paid for by confiscating the "Rolexes and Lexuses" of mortgage brokers who got their buyers into this mess. His suggestion for the tax credit and its financing are presumably tongue in cheek - but the notion of getting the valuation of housing back into more normal guidelines is much more reasonable.

In the New Yorker, James Suroweicki (the author of The Wisdom of Crowds), makes another good point. He suggests "Unfortunately, it’s(the Administration's plan using a freeze) also an example of the limits of such intervention. Although the plan will provide real relief for at least some homeowners, it’s more like a Band-Aid than like the major surgery that some of the hype makes out. That’s because at this point interest-rate resets are just a small part of the mortgage-market problem. Postponing rate resets doesn’t change the fact that too many people spent far too much borrowed money on houses with prices that were far too high, and that they are now stuck in homes that they can’t really afford and can’t sell."

Sunday, December 09, 2007

If Al Gore wrote about Economics

In Today's Sacramento Bee an article titled "Dark Days Certainly Ahead for the Economy" (the Post headline was even more ominous - It's Not 1929, but It's the Biggest Mess Since )Steven Pearlstein concludes with the ominous "This may not be 1929. But its a good bet that it's way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001."

Pearlstein is the business columnist for the Washington Post. And in the article he goes through a rough cut on how CDOs (Collateralized Debt Obligations) are somehow the newest evil plot from Wall Street. These relatively new financial instruments bundled things like mortgages together to sell in the financial markets thus increasing liquidity in the markets.

CDOs have introduced a lot of very positive things into the financial markets. However, there are a couple of problems with them. First, in relation to the bundling of mortgages - the real problem facing us here, like the problem we faced with the S&L crisis, was the liberalization of lending standards. Lenders, to compete for business, introduced two sets of "innovations" into the mortgage market in recent years. The first was a very low teaser rate which reset after an initial period. The second was a 100% (or in some cases a 105%) loan. In both cases the sting comes not from the way the mortgages are marketed but because the two new innovations allowed a number of buyers to get into a house without any real "skin" in the game.

I am not sure what the junk bond crisis of 1987 was. Indeed, during the 1970s and 1980s the financial markets increased the range of things they would finance and in the late 1980s there were a series of highly leveraged debt instruments which cratered. But before that we got the benefits of a lot of new ventures that were financed and which would not have been without the "junk" bonds. In the S&L "crisis" we changed a couple of rules for Savings and Loans - by raising the guarantee level and by diversifying the portfolio which these financial institutions could invest in. The result was a lot of junk in the market. Same thing here.

Pearlstein, like Gore, seems to throw around a couple of technical terms, paint a scary picture and then hope to hell that all of us shudder. Well, don't. Financial markets correct. Loan standards for mortgages are tightening. And for a while they are likely to be very tight. But then the markets will adjust. We still have highly leveraged debt instruments (Junk Bonds), we still have home lending institutions (most all of the federally chartered S&Ls are gone - and that is a good thing but there are lots of other places to get home loans), and we still have a vibrant tech sector(although we got rid of a lot of the wild talkers in the 1990s). The answer is that we will get through this problem. Hopefully, we will get away from the giddy exuberance of the last few years and some of the fools who were lured into idiotic mortgages and some of the fools in the financial markets who created these idiotic instruments will get burned.

But let's get some numbers clear. The most terrible estimates of the depth of this problem reach about 3% of GDP - certainly higher than the tech bubble (which was about 1%) but rivaling the S&L crisis and considerably lower than other financial crises that have faced the US or other nations (the Japanese bank crisis was about 7% of GDP). There are some things to worry about here including the perceptual problem since most of the assets here are leveraged. The perceptual problem could be significant - if people like Pearlstein continue to cry wolf - people might actually believe that the numbers are worse than they actually are. That could be a larger problem than the real one.

But because we should be cautious and alert does not suggest that we should be shuddering - we should not leap into solutions and that is the worry of Pearlstein's column. I am not a big fan of the President's freeze (although it seems so small that it will not affect many borrowers). And I would be even less excited about some other government solution - let the markets sort it out not some merchant of the apocalypse.

Why Most Critics Need a Day Job

This afternoon we went to see Mr. Bean's Holiday. The critics seemed to hate this.

For example - before we went we read all of the following " Atkinson has never succeeded in making me laugh. Because of this, when I see that he's in a movie, I assume that I won't laugh. And then I don't. So what I'm saying is that if you think Mr. Bean is the funniest character ever created in Western Civilization, then by all means, ignore this review. "( Or "If you've seen 10 minutes of Rowan Atkinson's Mr. Bean routine, you've seen it all. Any larger dose can lead to irritation, dry mouth and depression." (Arizona Daily Star) Or "If you've never been particularly fond of Atkinson's brand of slapstick, you certainly won't be converted by this trifle." (NY Daily News) Or from 1/2 of Ebert and Roeper "I hate Mr. Bean, I hated this movie. He’s an annoying, creepy, leering, sweaty, unfunny character, and ten seconds would be too much and this movie’s like 90 minutes." (Richard Roeper) Or "Too often in Mr. Bean's Holiday, you get the feeling Rowan Atkinson and his collaborators confused the notion of 'building a gag slowly' with 'forgetting to build one at all'.(Chicago Tribune)

But then Box Office magazine said "One of the year’s most enjoyable surprises." That is certainly the way we found it. I've never been a big fan of Bean - a lot of his humor does not work for me. But this movie, which is his adventures in getting from his home to Cannes after winning a lottery, was a real treat. Bean really does not speak in this movie. But he gets his point across. The supporting cast is wonderful and well linked. Some of the bits, including his lip-synching an aria from Madame Butterfly, are priceless. There are several times in the movie where I was on the edge because of the outrageous behavior of Bean - but he seems to pull through.

If you get the chance - ignore the critics - you will not be sorry.


Over the last week or so I've had a good discussion with a reader named Poi - who disagrees with my comments on the Campus Commitment. In the end, I think we finally disagree about whether the document is a good approach for campuses. I think the commitment is at least partially a statement of political correctness - Poi believes that it is a creative way to encourage campuses to take small steps forward in wise energy use. But it is always valuable to be able to look at the world from a number of perspectives.

The best public policies are made from the direct interaction of people who disagree, respectfully. The best results are not, as is said often in the legislative process, to be a result that "no one likes so it must be good" but from conscientious discussion where the end goal is to figure out where an appropriate result should come. It is too bad that the public policy process spends too much time on the stylized debates that one colleague in the legislative process called "legislative kabuki" and too little on trying to find solutions which meet the needs of the interests involved.

Friday, December 07, 2007

Paygo and Harry Reid

The towering leader of the US Senate showed again why his colleagues elected him Majority Leader. The Senate has been wrestling with trying to fix the Alternative Minimum Tax which is a creation of 1960s tax policy and forces an increasing number of taxpayers to ignore legitimate deductions and pay a higher level of tax. The AMT was created in that era when the Assistant Secretary for Tax touted a report that thousands of "rich" taxpayers were not paying their fair share. The provision has held on even though there are tons of studies that suggest that no one ever consistently escapes the tax man (Benjamin Franklin was right about the only certainty being death and taxes!). But as many outdated policies based on bad statistics have a tendency to do the AMT is taking an increasing bite out of taxpayers who are far from wealthy.

When the Democrats took over in 2006 they promised fiscal responsibility and so reinforced some rules that are called "paygo" (if you want to reduce revenues you have to find offsetting revenues). But the AMT is a big magilla for the dems. There are an increasing number of taxpayers who are getting snared. Yesterday, the Senate adopted a solution for the AMT which ignores paygo. Reid, commented on his failure to follow the rules his majority adopted by saying "We want everyone to know we have tried every alternative possible," - uh, OK Harry,so much for leadership.

Don't get me wrong. Paygo is a good idea only if the where gets and the where gones are comparable. AND the AMT is silly tax policy. And, the House is likely to reduce the giddiness that the Senate introduced into the process (their last "good" idea was to pay for a partial reduction in the AMT by taxing "rich" wall street bankers - especially hedge fund managers).

One more comment on the Campus Commitment

Poi responded to my post - so I will continue the dialogue. I guess my greatest concern about the commitment is its orientation. I am skeptical about the scope and direction of the science that makes a series of apocalyptic projections based on models. Please note I was trained as an economist so my scientific knowledge is limited - but I worry about the intensity of the debate. Malthusian projections are always outsmarted by ingenuity. While I believe there are good reasons to be careful with resources, regardless of the underlying science, I believe the way that the issue of global warming has been brought to us has taken on aspects which I think are simply antithetical to the way a university should function. One of the two places I heard from on Monday who had rejected Cortese's (and yes I object to Cortese's messianic approach) is one of the nation's premier places for discussion of ideas (it also has a reputation as being left of center on the spectrum).

Bjorn Lomborg's latest book (Cool It) makes two important points. First, he believes that the projections on global warming are subject to a lot of questions. The trendlines are simply wrong. But second, and more importantly, even if the conclusions on the data are correct, there are a much better set of efficacious responses to the problems.

From my reading of the commitment all of the steps taken on page 2 of the document start with the premise that there is only one response to the issues of global warming. For example, "Within one year of signing this document, begin purchasing at least 15% of our institution's electricity consumption from renewable sources." Or "Establish a policy committee that supports climate and sustainability shareholder proposals at companies where our institution's endowment is invested." Why 15%? Does the commitment mean that EVERY shareholder proposal that is labeled that way should be supported? In the case of this issue, where I believe some scientists have gone well beyond the actual science - a one best way approach is inappropriate.

Finally, to the two offers that the Commitment makes for campuses (the loan fund from the Clinton fund and the information interchange). The Clinton fund is but one of many alternative financing mechanisms available to most campuses. If the value of the savings are as large as I think they are for energy rich proposals (retrofits for example) there is plenty of low interest money available. On the second, colleges and universities have spent a good part of the last decade being bashed on 'college costs' and there are a number of groups across the country (including the one that I was at on Monday) who are working very hard at thinking about how to use their resources better - that was the very point of the discussion on Monday in relation to one initiative.

I am still a skeptic about the Climate Commitment based on both a concern for the underlying science and because of the one size fits all approach (at least one set of responses to a complex set of issues) but appreciate the interchange with Poi.

Thursday, December 06, 2007

Governor Romney's Speech

The speech today was panned by a lot of the media, but for my taste it was about right. Mr. Romney did not answer the whisper campaign about the Mormons. He should not have. What he did discuss was the role of religion in American life. He showed the clear ties between liberty and freedom and religion. That should have been to point. There are plenty of candidates on both sides of the aisle who have no commitment to religious practice. Romney explained in rich detail why religious practice in one's personal life can be beneficial to one's political life. (not in the sense of the Moral Majority) but as a guidepost for decisions and directions.

I expect this will not quell the critics but thoughtful people should begin to look at the Governor not because or in spite of his religious beliefs they should focus more importantly on his political philosophy. This campaign is developing into the most vacuous in recent history. The CNN debates and all the other silly parts have not helped voters understand differences among the philosophies of key candidates. That is a bad sign for American voters and for our national political system. I admired Romney's attempt to bring a better focus into the campaign.

Some more on the Campus Commitment

Poi responded that "I'm also not sure why you think the initiative is "clearly political" as it seems to be focused exclusively on voluntary action." The writer also suggested that many campuses took a deliberative approach to making their (the writer used there) decision. Fine. My point was pretty clear and different. I believe that there are many reasons why a campus should reduce its use of energy and improve its environmental practices - with or without the joint project sponsored by Cortese. As the representative from one campus said - his campus had not signed on because the statement did not seem to be in conformity with the mission of the college. The other CFO who spoke suggested that his campus has some pretty well developed campus policies that were a) developed on that campus and which b) do not fit exactly with the Campus Commitment. Obviously any campus that wants to join in the parade should to that.

I did not ascribe that every campus took the decision on a knee jerk basis - but it is clearly easier on campuses today to simply support the commitment without thinking more carefully about the broader set of issues. In the original post I clearly was supportive of one of the dissenting campus' initiatives and of the suggestions of the investment banker. What I was objecting to was the Cortese effort, which I believe to be flawed.

Emeritus Biology Professor at UCSB, Daniel Botkin, said on a recent podcast of Econtalk that a good deal of the discussion of many science issues including global warming has taken on the characteristics of a "civil religion" - I believe that to be true. In some key issues one position is taken as gospel all others are taken in heresy. Bodkin's point is a good one - he is a distinguished scientist. In a recent article for the WSJ he argued "The popular imagination has been captured by beliefs that have little scientific basis. " Until that trend is reversed many campuses across the country are likely to sign on to things like the Cortese pledge without taking the care that they should to think about the broader issues facing campuses and the greater society. That broader point should not be lost.

Tuesday, December 04, 2007

Pointing out the flaws in one's argument

Yesterday I was with a group of financial officers for independent colleges from Washington, Oregon and California who meet periodically to discuss common problems and issues. They spent a couple of hours discussing a series of initiatives related to energy use. They heard first from the director of a group called Second Nature, which has a long time commitment to a wide range of environmental causes. I've heard Cortese before and he tends to be a bit of an ideologue. His (long) speech was followed by two more interesting ones. The first by an investment banker who is committed to reducing carbon usage among his clients. He spent about 20 minutes explaining a half dozen ways that campuses could begin to think about how to reduce their energy usage. All of what he said was very practical. I thought some of the suggestions were silly but many made a good deal of sense.

There is a good deal of moral imperative here which I think is both inappropriate and destructive. Cass Sunnstein, from the University of Chicago Law School, pointed out in a recent Econtalk podcast that there were good reasons why the US moved quickly to stop one set of emissions (during the Reagan Administration) and yet on a bipartisan basis refused to ratify Kyoto. The economics, both the current and long term benefit to cost ratios were positive for the changes we made on aerosols but not on the protocols made in Kyoto. In one sense the political statements offered by Cortese in his campus crusade can be contrasted with the more measured and focused issues raised by the investment banker.

The final set of presentations was from four of the CFOs of these campuses who responded to an initiative of one of Cortese's groups called the American College & University Presidents Climate Commitment. The site for this initiative says that colleges should join into the group's efforts because "Standing on the sidelines poses a great risk to the reputation of Higher Education. In fact, Higher Education faces a great risk if it fails to lead the effort to restabilize the climate to a point where we have a chance of accommodating 9 billion people and meeting their basic needs." Two of the four had signed on to the initiative and they discussed how the campus had decided to sign on. The other two did not. I was especially interested in the responses for the campuses who did not. In these kind of efforts, on most campuses, it is a very easy thing to sign the pledge. But these two, both campuses known for their liberal students, chose not to. CFO #1 raised two concerns. First, he used Guidestar (which is a service by which you can find the most recent IRS filing of any charity in the country) which showed that among Cortese's two charities the total raised an expended was less than $250,000. The CFO said why should colleges commit their resources to an entity like this which is so significantly underfinanced. He made a second and more important point. His college has made a substantial commitment to wise environmental choices. Indeed, they have even produced an informative brochure about all their efforts. He asked a very good question, why should his campus substitute the priorities of Cortese's group for those that the campus itself developed. That is a good question.

The second CFO said his college was still going through the decision process of trying to figure out whether they would sign on to the effort. But he gave the strong impression, that after the process was completed that it was unlikely they would. He then said something which every college in the country should use as a guideline for these kinds of campaigns. He said his college will not participate in a political campaign (and Cortese's effort is clearly a political campaign) unless it is in full conformity with the college mission. His college has a well established tradition of discussion and debate on campus. But a fundamental principle which many campuses have forgotten, is that campuses should be places of debate and discussion not advocacy. His campus has not forgotten.

There are plenty of good reasons why campuses should be careful about their energy use - regardless of one's position on global warming - but that should not require them to band together to commit to someone else's crafted agenda. Those two CFOs offered a good guide for every campus in the country. Even for those 400+ campuses who knee-jerked onto Cortese's latest campaign.