Friday, February 27, 2009

Boosterism of the Worst Sort

NPR had a story this morning with a Bee Sports Columnist who gave us the following wisdom. "Without public money, the new Kings arena won't be built." So what. The hapless Kings are an embarrassment their 12-47 record is not a record but then there is still time for them to lose some more games.

King's boosters have tried a number of times to make the case for public spending to help bailout this private enterprise under all the normal arguments. Sports franchises create local jobs. (Of course the jobs are minimum wage and they only exist for a few days a year.) Sports teams bring prestige to the region. (Gee, is there a loser's category for prestige?) Without a National Sports Franchise our area will be a cow town. (Cows are probably more entertaining than the Kings!)

The Kings are losing money in part because of their outrageous ticket prices and genuinely mediocre talent. Who'd want to spend a couple of hundred bucks to see a lousy team play? The answer is fewer and fewer people from the area. Let's hope the boosters get told again the clear result of every chance we've had for voters to express an opinion - NO PUBLIC MONEY FOR SPORTS FRANCHISES.

The Kindle 2

The Kindle 2 - Amazon's update for their electronic book reader came out today. I ordered mine early and got it yesterday. The new design has a lot of improvements including a thinner profile, better battery life (although the old one was never a problem) and a software update that I think will bring the device even further. In exchange for that the new model does not allow use of SD cards to add memory and has a sealed (iPod like) battery. Neither of those changes should be a problem.

The best innovation on the Kindle 2 is the software update. It has a new feature which allows you to update your position on all your Kindle devices. That may sound like a small feature not applicable to many users but I think it is an important change. The second improvement in software is the ability to highlight and note sections exactly - the former allowed you to not be specific about your notes - now you can. There is also a contextual implementation of the dictionary. That is wonderful and not at all obtrusive.

I bought our first Kindle for my wife who is an avid novel reader. She seemed to enjoy it so I bought a second one for my use. The one problem I had with the device was its cover, which the new version fixes. But she and I, as we did in the print versions of literature, often read the same book. Kindle has always allowed you to shift content among devices. That recreates the metaphor of sharing a hard cover book (RIAA take notice about an appropriate version of fair use). But the new feature works like a book mark. So for example, if I have read a particular book at the office and left my device there, I can now use my wife's device at home and begin at the same spot in the book.

Walt Mossberg argued in his review that the device is pricey. I disagree. Part of the cost is the capitalization of the wireless connection used to download books. This morning my wife and I were preparing for a trip and she said she did not have any books. In just a few minutes, we downloaded her a couple to keep her occupied for our travel. That instant ordering is worth a lot.

A couple of other comments on form. First, I am very sure I would not like to read books on my iPhone or iPod. I like the size of the screen for this purpose. Second, the packaging is Apple like but still a bit more robust than it should be. Third, the new screen is an improvement. I don't like to read in the dark - so don't think that lack of back-lighting is a defect rather it is a recognition about how most people read.

The first generation of this device was a good product. This generation makes it a great product.

Thursday, February 26, 2009

Fiscal Responsibility

The chart presents Federal Outlays and Revenues since 1940. I looked up this chart when I found that the President's budget proposes a deficit of $1.75 trillion. Not to put too fine a touch on the number but the first time the federal government had revenues of $1.75 trillion was a bit more than 10 years ago. By any measure achieving a deficit equal to spending about a decade ago suggests that the federal budget is out of control.

Getting the deficit reduced by 50% by the end of the first term will require either some very large reductions in spending or an almost doubling of tax rates on the top 2% of taxpayers. The first seems unrealistic. The second seems destructive of incentives.

Trying to Understand Our Current Situation

For the last several months I have done a lot of reading on financial meltdowns. I have read pretty widely including Robert Samuelson's The Great Inflation and Its Aftermath which explains the American lead up and response to the inflationary period of the late 1970s. Samuelson argues that our ability to surmount such inflationary problems going forward may be compromised. I also read The Panic of 1907 which is a scholarly work by two professors on a financial panic that led to the development of the Federal Reserve. I began the process with Amity Schlaes The Forgotten Man which is a major reassessment of the policies of FDR that argues that his policies did not take us out of the depression of the 1930s.

I keep coming back to the depression of the 1930s because a lot of commentators on the left (for example Paul Krugman) argue that we are in a new depression. The Great Depression and the New Deal by Eric Rauchway who is historian at UC Davis. The Depression is a hard subject to cover briefly. That is true for multiple reasons. First, there are a lot of myths on both sides of the political aisle. Some supporters of Keynesian interventions date the beginnings of their "proofs" on the efficacy of those policies to FDR. Critics of Keynesian policies have written, in my opinion, dispositively about the ineffectiveness of those policies.

What Rauchway accomplishes is a concise description of the events leading up to the depression and then a clear explanation of the policies that made up FDR's bag of tricks. I suspect he is a bit more sympathetic toward those policies than I. But for what the book was trying to accomplish - give a short history of the period - it does it superbly.

I should admit that I am not a big fan of the Santayana quote (Those who cannot learn from history are doomed to repeat it.)at least as some tend to use it. That stems from a belief that the conditions of each age have unique aspects. While we can learn about other periods we need to construct policies that fit the conditions of the age. Responding to the critical issues facing us today, will indeed take some understanding of other eras of financial decline. But we will also need to understand the specific conditions that led to our problems at this time. If you are interested in understanding a timeline of the period leading up to the 1930s and through it Rauchway's book is an excellent place to start.

Sunday, February 22, 2009

Sangam Restaurant in Arlington VA

On Sunday I flew to DC for a meeting on Monday. I stayed in a hotel on Glebe Road (because my meeting was in Arlington). Attached to the hotel is a restaurant called Sangam - Indian food.

When I lived in Washington we loved a restaurant called Gaylord which had fine Indian food. We had some friends in the embassy and they swore by it. I especially like a dish which has spinach and lamb called Lamb Saag. Sangam does that very well. They had a wide range of other dishes that I would have liked to have sampled - one of the defects of eating alone is the inability to try more than one dish. I would have loved to try the Samoosas or one of the other dishes and some more of the breads (I tried the Naan and it was fine). They had a mango custard for dessert which was quite tasty. A guest at the next table had the Gulab Juman which is one of my favorites - it looked pretty good but I did not ask him how he liked it.

The service in the place was attentive but not bothersome. The owner seemed to come to every table and ask how things were.

One of the fun things about travel is finding little gems like Sangam - it is worth the trip if you are in the DC area.

Looking forward or paying off prior mistakes

In a piece in the NYT yesterday Tom Friedman argues that the stimulus should concentrate more on encouraging enterprising new ideas than in trying to rescue old ones that are failing. By any standard he has some pretty strong words for the auto industry. At one point he comments "G.M. has become a giant wealth- destruction machine — possibly the biggest in history." That sounds tough but by one estimate it seems accurate. One recent comparison suggested that the value of GM in 1929 (in 2008 dollars) is actually about 25% greater than today. So for holding a stock for 80 years nets a reduction in real terms of 25%. He has similarly harsh comments for Chrysler.

He suggests that rather than spending $20 billion to bail out these companies that the Treasury call the top 20 venture firms and say invest $1 billion each on some new ideas in green technology or in other innovative ideas that look forward rather than backward. While there is a potential risk in the proposal - harkening back to the ideas of industrial policy that were popular when we thought the Japanese economy was one to emulate. It makes a lot more sense than the current auto bailout.

There is a constant tension in public policy debates like this between notions of equity and efficiency. The President's proposals are focused too much on equity - making sure that we reduce the pain of transitions. It is unlikely, even with a new infusion and possibly another - that either of the two ailing big three will ever come back to vibrancy. From my perspective, Friedman's suggestion is a much better idea.

Saturday, February 21, 2009

Republicans and Lunacy

The GOP convention in California is this weekend and for the six members of the legislature who voted for the budget there is a lot of anger. That shows you how poorly the GOP is doing.

There are some long term issues on both the immediate solution and on the longer term issues of how the state raises and expends money. But I believe the six members who voted for the final budget exercised financial responsibility for the state.

The legislative process is a process but it should not be interminable. The GOP members who voted for the budget got some significant changes from the original Big 5 agreement including eliminating a gas tax which only would have sent 14¢ on the dollar to transportation.

The voters will have the final say on this package when they get to consider the spending limit in May along with the lottery changes and the new taxes.

Thursday, February 19, 2009

Econtalk note on John Nash

David Henderson at Econtalk quotes John Nash - the Nobel winner who was also recognized in the movie A Beautiful Mind.

Nash commented - "Then gradually I began to intellectually reject some of the delusionally influenced lines of thinking which had been characteristic of my orientation. This began, most recognizably, with the rejection of politically-oriented thinking as essentially a hopeless waste of intellectual effort."

As someone who has spent a good part of the last 40 years on political activity and "politically oriented thinking" it sounds about right to me!

NPR and Budget Nonsense

Sometimes you wonder about NPR. Well actually, not that often. During this week they did some coverage of the budget discussions in Sacramento. California attained an exceptional status on many fronts in the last few years. For example, as a function of the political leadership's punting on addressing some long term budget problems, a few weeks ago California surpassed Louisiana as the worst credit in the country. The state also has the second highest foreclosure rate, the third highest budget deficit (as a percent of state spending) and the fourth highest unemployment rate (behind such powerhouses as Michigan).

NPR's coverage brought together some alleged experts who opined that the reason for the deficit and the continuing problem was a requirement which we share with only a couple of other states (which demands that two thirds of the legislature vote to approve a budget and tax increases) and the (in the opinion of these experts) actions run wild of voters who adopt propositions.

Nowhere in the story was there even a tiny recognition that during the administration of this governor that state revenues have grown rapidly - but state expenditures have grown even faster. Nowhere in the story was any recognition that based on population and CPI changes that our growth in spending should have been about half of what it actually has been. Nowhere in the story was there any recognition that prison costs (partially as a result of voter passed initiatives) have doubled in the last few years while inmate population has grown by only 5.5%. Finally, nowhere in the story was there any recognition that the structure of our revenues is based on a series of supposedly progressive principles which actually makes revenues much more volatile. Because of the structure of our tax system, (which has been adopted by the legislature - much of it with a 2/3 vote) when options and capital gains are good - we rake in the dough; when they are poor, revenues drop even faster than your 401K has in the last three months.

There was a lot of drama this week. Some of it was warranted. Changing the system in California will take time but the state's leaders had dilly dallied so long that they brought us to the abyss. The budget adopted by the Legislature on Thursday morning is not perfect. It raises sales taxes to make us one of the highest rates in the country. It adds a surcharge to the income tax (already close to the highest rate in the country). It may cut some things which we should not reduce. But it gives the state some breathing room.

With luck and a little diligence the state can come back from the abyss. After careful consideration we might adopt some additional restrictions on spending growth. Or we might change the fraction on how taxes and budgets are adopted. Or we might restructure the way we collect revenues to make them less elastic. One would hope that during the next sixteen months (the plan is supposed to work until June 2010) the state's leadership, including its political leadership, will take a deep breath, do some careful analysis (unlike the substance in the NPR story) and present some realistic alternatives to improve the state's situation.

Saturday, February 14, 2009

Ignore the Critics

Remember when movies were fun? No redeeming social commentary. No challenging plot. But just an enjoyable way to spend 90 minutes? We saw the Pink Panther 2 this afternoon and that is exactly what the movie is.

I wanted to see what the movie critics said about it when I got home. Betsy Sharkey of the LA Times commented - "The truth is that Pink Panther 2 is really not a movie at all but a series of short comedy sketches strung together rather haphazardly trying to masquerade as a movie. It's as if Martin made a wish list of all the people he could have fun playing with." Claudia Pulg says "Rather than reinvigorating the Panther comedy franchise from the '60s and '70s, Martin's version dumbs it down and wrings the zany fun out of it. It's as if the former stand-up comedian is going through the motions of humor, with these and also those Cheaper by the Dozen movies, assuming that youthful target audiences won't know the difference." Dave White at gave the movie a D-. I don't know what these three saw, but it was not the movie I enjoyed this afternoon.

Martin's characterization of Inspector Clouseau does not try to mimic Sellers' one. Instead he appropriates a bit more sophistication with an appreciation for gadgets. This Clouseau is funny because he is so clueless. This movie will not make you think. But it will make you laugh. There is a sequence when Clouseau goes into a restaurant and attempts to choose a bottle of wine as all the bottles begin to fall out of the rack. It is skillful (with a bit of computer aiding) and funny. Martin's character also adds a love interest that is played well. Ignore the critics and be prepared to enjoy yourself.

Friday, February 13, 2009


I recently decided to get my own URL (that is the address that you use on the internet to have your distinct territory). It sounds a lot more techie than it actually is. You choose a name, pay a fee and then you can set up your own world.

I asked a couple of friends who know a lot more about the Internet than I about hosting services and finally decided to use a service called Bluehost. I used a new software package called iWeb '09 - which is the latest version of Apple's program with pre-designed websites.

My site is now up and running. A couple of caveats. First, I needed help of a friend who knew something about UNIX directories and posting to the web. He is a computer consultant who I have used before named Lee Hinde. He knows his stuff but he is also a patient guide. Second, Bluehost was exceptional. After you do the initial setup they have a bunch of helpful video tutorials on setting up your website and also some predesigned website templates. (I liked the ones in iWeb better.) Bluehost also has a very helpful help desk.

I am still trying to think out what my site will be used for - but it is up and running and that is exciting. If I can do it, and you have a friend or guide like Lee Hinde and a hosting service like Bluehost - you can too!

Thursday, February 12, 2009

Lincoln's Bicentennial Year

Today marks the 200th Anniversary of Lincoln's birth. It is likely that we will see a lot of Lincolnian retrospectives during this year. Lincoln has always been a complex figure for me. On the one hand I learned the story of his role in emancipation and the Civil War. On the other, there is considerable record in his tenure of expansions of governmental power, which may or may not have been necessary.

But in the last year, I have found two resources that I thought were exceptionally valuable. The first is a book, Team of Rivals, by historian Doris Kearns Goodwin about the interaction of Lincoln's cabinet. It is a stunning testament to his political acumen.

The second is a series of lectures, that are available as podcasts from the National Constitution Center in Philadelphia. The Center is a great resource. Their podcasts of lectures are often interesting. In the last few months they have presented a series of programs on the legacy of 1808. When the Constitution was originally written it had the infamous 3/5 clause but it also had a provision which began to ban importation of slaves in 1808. But the provision required an implementation process. The lectures have been an interesting set of perspectives on the discussions surrounding that congressional process as well as things that developed as a result of that action including reconstruction. The Center has brought together some interesting scholars to discuss the issues.

Our current president has a lot of characteristics in common with Lincoln, including a lack of executive or even direct political experience, so understanding more about Lincoln could well give us clues about our current incumbent.

Wednesday, February 11, 2009

The Legion of Christ, Now

On the February 4, the Mexican Catholic order, the Legion of Christ, announced, in a statement of contrition that their founder had violated his vows and had fathered a daughter. Their spokesman, in the statement said "One of the mysteries that we all see in life is that God does good works with less than perfect human instruments."

This morning I spent an hour on the phone with a priest, who has become a good friend. He is going through a very rough time. I never met Fr. Maciel the founder of the order. But he was evidently a very charismatic individual. The order developed a focus of on evangelizing leaders. I have worked around members of this order for almost 20 years. I have been impressed by a group of priests and individuals who have demonstrated a commitment to focus on the charism of the order. There are things about this order that are off putting to me. I am not good around hierarchies and like a lot of elements in the Catholic church, the Legionnaires seem to have that as an operating principle. I've had a number of discussions with priests in the order about the appropriate role of obedience. (One of the four vows that Legionaires make). But I have never been confused about the clear relationship that the order has established to help leaders think about ethical practices in leadership.

In January of 2006, after an article in the WSJ about the Legion which I thought was a bit inaccurate, I commented "Like most human organizations there are complex stories to tell about this order. But when I look at the contributions that individual priests and lay people make to their societies, I am impressed with the breadth and depth of their commitment to firm values and great implementation. I am not sure why the WSJ could not also get that message." After the disclosure on the fourth and the phone call today I went back to that post. I believe it is still accurate.

The revelations about Fr. Maciel have been troubling to some of my friends. But I would argue that regardless of the human frailties of their founder, that the Legionnaire's gifts to leaders are immense and that they should not lose sight of that.

Tuesday, February 10, 2009

One too many early mornings

This morning I got to the airport for an early flight to Burbank. I wondered as I was driving why my right shoe was less comfortable than my left. When I was about to get on the plane I discovered why I felt the difference. Luckily, no one called me on it.

The photo illustrates what I had not seen when I was putting on my shoes at 0 dark thirty.

Monday, February 09, 2009

The New Secretary of Education

Last week I had the chance to hear from the new Secretary of Education, Arne Duncan, who was formerly a basketball buddy of the President and also the Chicago Superintendent of Schools. I should state that I have never been much of a fan of secretaries of education. The last one talked a lot without much knowledge. She was a disruptive force.

But I liked the new guy. He seems intelligent. He seems ready to listen to alternative points of view and to learn about the nuances of areas where he may not be knowledgeable. In short, what a good public official should be. It was a welcome change.


Yesterday morning I was speaking with one of our (retired) priests at the coffee hour after our 8 AM service. He is a good guy who is mostly thoughtful and conservative in his philosophy. We discussed the current economic situation. He commented that we could no longer afford to be a small percentage of the world's population and a major percentage of its consumption. I think part of his comments came from his Christian beliefs.

The inevitable conclusion of his statement is to redistribute some of that consumption, or a lot of it, to those who have less. And indeed, a good deal of charity is ultimately a voluntary redistribution. Many would take that "maldistribution" and see it as a demand to redistribute involuntarily. Indeed, a good deal of the left's criticism of our situation both at the national and international levels would demand such policies. But there is, in my mind, a more compelling solution than forced redistribution which is suggested by the Parable of the Talents. Part of our role should be to increase the size of the available resources for all people - to enlarge the size of the pie not to simply recut it.

The Lack of Vision in Veteran Reporters

In the LA Times today George Skelton, the veteran LA Times political reporter presents three "solutions" for solving the budget mess in Sacramento. He would a) reduce the percentage for adopting budgets and taxes from the current 2/3 to 55%. The taxes requirement would be limited to only those funds which were not above growth in inflation and population. Finally, he would cut off pay and per diem for the Governor and members of the legislature if they did not pass a budget on time.

The 55% rule would reduce the necessary fraction for adopting budget or taxes from the current 54 votes in the Assembly and 27 votes in the Senate to 44 and 22. Ultimately, in today's gerrymandered legislature that would mean the equivalent of a majority vote. The cutoff of compensation has a certain ring to it, but likely what elected officials would do is figure out how to live off their campaign accounts when they were a bit late.

When the 2/3 requirement was adopted, it was done so with a policy intent in mind. It was clear that even with the worst kind of redistricting follies the vote would require some votes from the minority party. That is a pretty clear policy rationale. It may or may not achieve its objective and may or may not create secondary consequences. But what is the rationale for a 55% standard?

Based on our experience with Proposition 4, which limited increases in spending to changes in population and inflation (why those factors is appropriate is also a good question - do family budgets automatically increase with changes in size and compensation?), legislators are infinitely ingenious in evading the standards when they want to. The shenanigans in last year's budget gives a good idea about how non-limiting a proposal like this would be.

What Skelton and other reformers might better spend their time at is coming up with a set of proposals which would inhibit the natural tendency of legislators to be less careful with tax revenues than they are with their own money. But that is a lot harder task.

Sunday, February 08, 2009

MyPhone versus Mobile Me

Microsoft has announced a new cloud service for your phone (assuming it is a MSFT based phone) which will allow you to back up all of your phone stuff on to the cloud. As the Beta has been released it offers about 200 MB of space to back up all your phone information which can be accessed either from your phone or on any PC. That is not a bad concept but a bit more limited than Mobile Me - the Apple service with broader coverage.

Mobile Me allows back up of address contacts and photos but also bookmarks and email and then synchs them ingeniously to all of your devices that use those services. So for example, if you have a laptop, a smart phone and a desktop machine - all of those things can be backed up and will be in constant synch - plus you can access them from the web.

The new MSFT service is free at this time and Mobile Me has a fee attached. In the time I have been using Mobile Me they have held the price constant but have increased (doubled) the capacity. So at my price range I have 40 gigs of storage available anywhere, any time. The MSFT solution seems to think of technology in silos. The Mobile Me thinks of technology as a set of tools which should be usable in any venue.

What happens to Debt?

The Chart (from Barrons) shows the changing nature of debt service in the country as a percentage of household income. There are two obvious questions, with the dump in wealth that the last quarter took from Americans, what is likely to happen on repayment?

Second, when you compound this with the debt service required of the federal government we seem to be in historic tendencies.

The charts suggest two possibilities. First, typical Keynesian solutions, if they ever worked, may be less effective in this kind of environment. Second, combining household and government debt as a percentage of GDP may suggest some longer term problems with inflation.

There is a third possibility also, consumers may have reached or exceeded their capacity for debt. If that is true that may say a lot about consumption patterns on housing and consumer goods going forward.

Friday, February 06, 2009

Steve Ballmer, Economist

The wizard of Microsoft (whose performance as CEO has included such stunning successes as the former operating system Vista and the non-selling music player the Zune) offered commentary on the state of the economy. Ballmer compared the economy of 2008-9 to the downturns in 1839, 1873 and 1929. ""This is a once-in-a-lifetime economic crisis," said Ballmer, " (whose stock price based on total return has offered investors -46.6% for one year, -36.4% for three years and -26.9% for five years. That compares to -33.4% for one year, +19.4% for three years and +699% for five years for Apple.) It is interesting that not one member of his audience wondered with a record like that whether he could offer any insight on economic matters.

"In my view, what we now have will be a fundamental economic reset," he said. "The economy is going to have to re-establish itself at a level of spending that reflects the real value of underlying assets before we can all start growing again at a healthy rate." (Gee, thanks Steve. You done so well as understanding what consumers want and how to price your products, your advice will certainly be helpful to the democrats in the House, who actually solicited your comments.) One wonders whether the up to $20 million bonus structure that was announced for Ballmer in September continues to apply.

"PC sales (are) discretionary in most home budgets, the second, the third PC," (That has certainly been true about computers with the Microsoft operating system as well as phones with Mobile MSFT - consumers seem to increasingly be making the choices to move away from that platform.)

Ballmer distinguished between the effects of public debt and private debt. He described this as "a once-in-a-lifetime opportunity to think about our priorities again and make the investments that put us on the right foot." (from the press story on CNET it is not clear whether Ballmer was talking about his company or the country.)

Thursday, February 05, 2009

Margaret Thatcher Speaks

A quote sent to me by my brother -

Margaret Thatcher - "The problem with Socialism is that eventually you run out of other people's money."

and then two more quotes from Lady Thatcher that I have always liked.

#1 - Europe was created by history. America was created by philosophy.
#2 - To me, consensus seems to be the process of abandoning all beliefs, principles, values and policies. So it is something in which no one believes and to which no one objects.

How Does the Budget Poll?

Capitol Weekly issued their first poll about a number of subjects. 51% of Californians would support a part time legislature. I suspect than number might be going up over the next few weeks. A surprising 60.6% (wonder why it is so low) think California is "on the wrong track." 49% of the voters favor a "top-two" primary - where the top two vote getters go on to the general regardless of party affiliation. That is a modification of the old open primary model but has been suggested as a way around partisan bickering. Interestingly, 60% of the Latinos polled agree with the notion while 51% of the Blacks oppose the idea.

Capitol Weekly was a source for jobs information in the Capitol but was recently redesigned to include some commentary on state issues. It's online edition is pretty good. Their polling is expected to be quarterly.

An addition to distinctions for California

This morning Abel Maldonado raised questions about Controller John Chaing's purchase of more than $2 million in furniture to reconfigure his office as he moved. The purchases were made during this fiscal year and Chaing says he cut the cost in half. And this is a trivial amount. But Maldonado does have a point. It is not like our budget crisis came upon us in the last few months!

Wednesday, February 04, 2009

Distinctions for the Golden State

California has achieved some distinctions in the last week. We got rated the worst state bonds in the country by the ratings agencies. That means higher borrowing costs for all the things we borrow money. In a NCSL study we came out fourth, as the state with the highest percentage of deficit. While Nevada is at 37.6%, Arizona at 28.2% and New York at 24.3%, we are at a measily 22.3%.

Then there were the events in California. The Counties have begun to wise up that if the state is going to pay them with rubber checks, they should return the favor. A labor and environmental coalition has yammered about challenging just the GOP members of the legislature for "selling votes" because they are asking for changes in laws during the budget process.

We are now four days late from the Armageddon of warrants. It is a wonder that no one has proposed just to recall the entire lot of elected officials.

The Virtue of Candor

In late 1973 I was working for Bill Simon, who was then head of the Federal Energy Office. We had issued a long and complicated set of regulations on the distribution of middle distillate fuels. We had transposed a percentage that was key. I was asked by the press, at the end of a very hectic day - What happened? I simply said "We screwed up."

The WP put the story on page 10 but every other paper in the country put it on page 1 above the fold with lots of direct quotes. I went in to see my boss early the next morning - half expecting to be fired. Bill, who was always in earlier than me, looked up and said "Great, it makes us look candid; but next time if you don't want to be quoted use the Anglo-Saxon alternative." I thought that was sage advice. (The WPs story about the President says he "erred" a bit less colorful reference.)

The President's admission about his vetting process was refreshing. It was also important that he suggested there should not be two sets of rules - one for most taxpayers and one for Washington insiders. Having three key nominees get ensnared in tax issues suggests they could improve the way they check out nominees. The WP in a story this morning from a couple of tax experts (an NYU Professor and Paul Caron - the editor of TaxProfBlog) say the issues covered were not "(according to Caron) rocket science."

That should be granted. The Daschle issue evidences something about the insularity of Washington insiders. But it should also be noticed that a tax code that intrusive is in real need of revision.

Tuesday, February 03, 2009

The More Things Change - the More They Change

Tom Daschle withdrew his nomination for Secretary of HHS this afternoon. I am surprised. Gerald Seib the Ace reporter for the WSJ said this morning that he thought that might happen. He said this is a new era and the appearance of impropriety here comes not from the not paying taxes but from the separation that the acceptance of the limo and driver seemed to create. I am quite frankly surprised by the outcome. In earlier eras that might not have been a disqualifying circumstance.

In recent years the separation of our elected officials from their constituents has proceeded almost unabated. This may be the beginnings of a reintroduction of Washington to the rest of the US. It might be a refreshing trend. Regardless, I stand by the explanation of this problem and hope that someone will notice the need to simplify our tax system. The disconnect between tax payers and Washington (which generally wanted to excuse Daschle's lapse) can be seen in the attached chart which is a summary from the IRS taxpayer attitude survey.

Taxvox (Howard Gleckman) presents a paper by Joel Slemrod that estimates tax compliance costs in the US at $125 million or about 13¢ per dollar collected. He also estimates that compliance is a non-issue for about 40 million taxpayers and the compliance is not necessarily related to income (more compliance with more income). Finally, he says that the costs of compliance are concentrated in record-keeping and that programs like TaxCut do not help with that function. A code which has all those characteristics is bound to fail - regardless of how honorable the taxpayers are.

Monday, February 02, 2009

Three explanations for Obama's Tax Evaders

There has been a lot of discussion about the errors of the Secretary of the Treasury and Secretary of Health and Human Services' tax evasion. From what I have read there are three possible explanations. First, these two people were scofflaws and should not be allowed to hold their office. From my perspective, that is the least satisfying. Second, these are honest mistakes, albeit larger than most people would consider trivial. The third, in my mind seems the most likely, the tax code is so convoluted that these kinds of errors are possible and even likely.

Each of the explanations lead to different conclusions. The first two would suggest that the Senate should not have confirmed the one and should not confirm the other. But the third would require a bit more thought. How about redoing the tax system so that it is a bit less like a creation of the modern pharacies? Unfortunately, our tax writers are not likely to get this one!