Friday, December 31, 2010

3 Environmentalist Thoughts

#1 ------Today as I was driving my daughter, her husband and our grand-daughter to the airport we talked about some environmental stuff.  When we picked them up at the airport their car seat had been wrapped in a big plastic bag.  My son in law's comment was they would just get a new wrapper.   (After all as he said, we never let our environmental principles get in the way of our lifestyle.)  Partially as a joke but also as a lesson, I brought the once used bag into their airline.  The first agent was about to throw the thing away but then a second agent picked it up and used it.  Thus, preserving the environment in a tiny way.

#2 ------ The Sacramento Airport authority in the last year or so changed their parking fees.  It once was that if you parked your car  and were there for less than 30 minutes you paid no fee.  The benefit of such a policy was to encourage people not to hover outside the terminals.  That reduced air pollution but it also made the terminals a lot safer.   But then they changed the policy so that now when you drop off people you pay $2 for the first 30 minutes of parking.   Don't get me started on city and county parking lots and their pricing structures.   But it seems to be a silly policy to raise money for the city and the county.

#3 ----- My daughter and I had a discussion about foods - she likes to buy organic produce.  She also talked about her like for Whole Foods.  I am impressed with Whole Foods, even though I remain skeptical about organic foods.   But I speculated that the gross profits for Whole Foods are higher than for other grocery chains (and indeed they are based on margins about a quarter higher than Safeway and almost twelve points better than Kroger).   My daughter thought even with those higher margins she liked shopping there.  I have no problem with John Mackey's marketing strategy  - he discovered a demand that was unfilled and built a series of virtuous circles between growers and buyers to produce something which costs the consumer a little more and earns him a higher margin of profit.   My daughter understood that and was willing to pay for something that did what it said it did.

Tuesday, December 28, 2010

Fantasy Economics by Paul Krugman

In a column in the Bee this morning Paul Krugman titled "Commodity prices are about finite resources, not US Policy"  Krugman argues that commodity prices have risen by a quarter in the last six months.  The chart to the left presents the data on corn.

I picked corn for a couple of reasons.  First, a good deal of the price is influenced by U.S. policy.  Consider what the price of corn would be if we did not offer the massive subsidies we do for corn ethanol.   Then consider what the price of corn would be if we did not have a Cuban sugar embargo.  Both US policies influence the price of corn in the US. (both would have a tendency to artificially inflate the price of corn relative to where it would be without those policies).

The smaller chart to the right shows corn prices for 2010.

What bothers me most about Krugman's conclusions is a second more fundamental point.  The prices of corn or copper or any other commodity is influenced by many factors including governmental policies.   At the same time, as was amply demonstrated by Julian Simon in the 1980s human beings have an infinite capacity to substitute, if given the opportunity.  Thus, if you don't like the price of corn to sweeten your Wheaties, you can use cane sugar for the same purpose.  Unless of course unless U.S. policy restricts the ability of Americans to buy cane sugar.

There is a third and final point about Krugman's rant here.  We've used the last couple of years to get into more debt, by tremendous amounts.  Most normal economists would argue that all those expansions of money will lead to inflation.   But remember Krugman argued that we were too penurious in our bailouts - he wanted us to print even more money.   That expansion of the money supply, which Krugman thought we did not do enough of, has helped to begin a trend of inflation which Krugman seemed to ignore when he was calling for double the dose of stimulus.

So I guess the conclusion is that ethanol subsidies, trade embargoes and monetary expansion are not U.S policy.

Monday, December 27, 2010

Tiebout Confirmed

A few days ago I did a post on the Census data arguing that the Tiebout hypothesis lives.  The New York Post, being a bit more graphic in their design than I, did a story covered in TaxProfBlog which illustrates the point.

People do vote with their feet when it comes to government services and taxes.  That was the central message of "A Pure Theory of Local Expenditure." (Tiebout's hypothesis - see the earlier post to read the article.)

Sunday, December 26, 2010

Freedom Denied

My oldest grandson got a new bike for Christmas.  My son and I picked it out.  When I was his age I got my first bike.  It was a Schwin and painted the same color as our 1955 Buick - green.   The bike gave me an incredible amount of freedom that I had never experienced before.  All of a sudden I could ride to the YMCA - which was a couple of miles away.   When our family moved to Bakersfield a couple of years later, I frequently would go off riding for almost the whole day.  At one point, a friend and I rode out about 20 miles and then turned round and went back.  That offered an accomplishment for me which was kept in my memory.

Our second grandson got his first hot wheels.  When our kids were young they both rode hot wheels all around the neighborhood.  I also built them a wagon - which had a fairly sophisticated steering system and also engraved their names on the side panels.  Some jerk stole the wagon one afternoon we were out.  That probably would not have happened when I was a kid.

Times have changed.  Now before a kid goes out on a bike - they need to get a helmet.  Indeed, we have probably reduced the number of serious injuries on bicycles.  (There were under 800 fatalities on bikes in 2005 which means that per passenger mile fatalities occur about 3-11 times that in cars - which means that even at the higher number bike fatalities are extremely rare.)  Even if you concede the benefits of helmets, it is still a lot less possible for a child to explore with a bike.  This afternoon we took our two grandsons to a park where they could ride around - off the streets.  For the younger one that is logical but when I was that age I might well have been able to ride from my house over to the park with out a worry and without worrying my parents.

So what do you do about those changes?  First, I am (unsurprisingly) resistant to calls for safety on things like bike helmets.  The imposition of state authority may have secondary effects that are greater than the benefits of safer kids.   Second, you end up living with many of those changes because the reality is the apparent safety of earlier times, is simply not present in today's world.   Even with that conclusion, I wonder a bit whether these minor limits on freedom have longer term implications for our future citizens.

Friday, December 24, 2010

The Governor Elect's Decision on the California DC office

California gets 78¢ for each dollar we send in taxes to DC.   According to the latest Tax Foundation computations we are 43rd among the states in receiving federal dough.   When the current governor raised the idea about return, I suggested in a post earlier this year that trying to get to the top of the list was not something most rational people would seek - states near the top are either very small or very poor.

We've got 55 members of congress from the state (including our two senators) plus there are tons of other Californians back there frequently. So Brown's decision to reduce the Washington presence from the current six people to two seems in the right direction.   Bravo.

Thursday, December 23, 2010

The President at 24 months

The President held a press conference on Wednesday where he explored a lot of issues.   Presented below are my thoughts on where this president almost two years into his term.


The Deficit -He made something like this point several times "how do we cut spending that we don’t need while making investments that we do need -- investments in education, research and development, innovation, and the things that are essential to grow our economy over the long run, create jobs, and compete with every other nation in the world."  As Ezra Klein said he did not address how to find financial regulation (which seems a bit of an over-reach) and his healthcare bill (which seems a lot of an over-reach).


"I’m also disappointed we weren’t able to come together around a budget to fund our government over the long term."   Part of that problem comes from the way the existing congress acted on issues like earmarks.   Obama has said he is against but used lots of lubricant to try to woo members into supporting his approaches.


The reality of the President's first two years has been a dramatic expansion of the deficit with a lot of silly ideas (from cash for clunkers to shovel ready projects to the extensions of unemployment to almost become a sinecure).


Gay Marriage - He lauded the passage of the elimination of "don't ask, don't tell" which is a good thing.   In one statement he raised a point of view which I think defines his presidency as a typical Chicago ward healer - Describing his continuing support of civil unions he left the door open to move further to the left in saying "But I recognize that from their (gays that he works with or knows) perspective it is not enough, and I think is something that we’re going to continue to debate and I personally am going to continue to wrestle with going forward."  There is more than a simple semantic issue here.   From my perspective the issue comes down to property issues and religious issues.  The property issues can be solved by changing the tax code (federal and state law) and inheritance laws (mostly state laws).  But the religious issue is one where, based on this Administration's intrusions into religious life, I am not at all confident that he would accept religious institutions being able to continue their traditions.   This is a fundamental issue about the appropriate reach of the state.


This is a social issue that affects a portion of the population but where that group has conscientiously attempted to modify common understandings of tradition and law.  Does anyone really care if gays live together - of course not.   Do most Americans support the extension of property rights that are common in marriage to gays - of course.   Can American churches perform religious rights which solemnize the committed relationships between to gay people - absolutely.   But should that be extended to require some groups to recognize relationships that are fundamentally in conflict with religious doctrine?  That is where I think the effort is a bit of an over-reach.


Bipartisanship - About the tax cut bill he said "In the last few weeks, we also came together across party lines to pass a package of tax cuts and unemployment insurance that will spur jobs, businesses, and growth."   The entire bill will not spur jobs.   Based on the record of his other stimulus packages the record on job growth is not good.  But those are philosophical differences.   


Earlier in the year, the President feigned bipartisanship and then forced through a dramatic increase in governmental authority on health issues.   I am hopeful that the bill will be reduced in scope both as a result of the constitutional challenge but also by pruning the monstrosity.   In the next congress he will have to be able to demonstrate that he understands something more about bipartisanship than using it when it is handy.


The Dream Act - The President expressed disappointment about the failure of the Dream Act to pass.  I agree with his position on this measure but as I said a couple of days ago, I think the issue could wait. From my perspective, if the GOP is smart they should allow this idea to become law.


Here is an area where he could work on a bipartisan approach.  But I suspect he will use this as a wedge issue rather than in trying to solve the legitimate problems raised by the Dream Act.


An implicit understanding of lame ducks - The President has a very different understanding of lame ducks than I do.  The 20th Amendment moved the convening of congress back to January to reduce the possibility that people who had been voted out of office would have the chance to make serious law.  And in this congress that principle was violated.  The food safety bill is a good example.   I would have preferred to have the Administration fight a bit harder to eliminate the earmarks and other gimmicks in the Continuing Resolution.


Finally, tax issues - The President continues to push the nonsense about millionaires escaping taxes.  If he is smart he will go back to 1986 and review how President Reagan was able to cobble together a bill which lowered rates for everyone and simplified the tax code.  Class bashing may rev up the base but it does little for improving policy and most voters understand that you do not improve the economy by taking more from a target group.


I was asked a few days ago whether I thought Obama would be re-elected.  I responded that depends on a lot of things we cannot see right now.  Does the GOP have a credible candidate? (at this point no)  Does unemployment fall dramatically? (at this point it does not look like that)  On the current course will the deficit problem begin to be solved?  (It does not look like it)   So the simple answer is - who knows?  But that kind of speculation is better when we know more about all three questions as well as whether the GOP leadership in the House is adroit in raising the issues that brought them their majority.

Wednesday, December 22, 2010

The Census numbers

So we are more then 308 million and our growth has been slower than in previous decennial reviews of population.  What is more interesting to me is the fact that most of the growth happened in places where there are low tax and less intrusive regulatory schemes.  Not surprisingly the least vigorous growth happened in places where taxes and regulations abound.  According to Michael Barone - "Seven of the nine states that do not levy an income tax grew faster than the national average. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England.  Altogether, 35 percent of the nation's total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade."

Charles Tiebout wrote a key paper called the "Pure Theory of Local Expenditure" which argued that people vote with their feet by choosing environments (including tax and regulatory regimes) that suit their needs.   California, which in the last couple of decades has grown from a relatively low tax and low regulatory environment to a very high one had some of the most sluggish growth in the country - although not as bad as places in the Rust Belt.   


Gee, Tiebout was right.  All those whiners that decried the extension of lower tax rates at the federal level may need to reconsider their positions.  Even better they might re-think whether all those new regulations are going to make our country more viable or less.  

Saturday, December 18, 2010

Yammering about the Higher Education Bubble

Forbes has an article by Jerry Bowyer, who was a founder of the Allegheny Institute on the supposed higher education bubble.  He parallels (and actually quotes) Carnegie Mellon economist Richard Vedder arguing that the return on a college education is not, at this point, positive.  In essence he creates a novel concept called the price earnings ratio for higher education.  The argument is novel, albeit flawed.  He suggests that the cost of attending an institution of higher education for six years (the average time to degree for many public institutions) never actually gets recouped for most students based on the higher projected income that one could expect from an average college degree.

For years the College Board has published data suggesting that the net return to an individual over a lifetime for a college degree is about a million dollars.  (Or in theory, based on a 40 year job expectancy about $25,000 per year.)  The College Board data is accurate but like Vedder and Bowyer's data is a gross miscalculation.  Vedder argues that many people who go to college end up being "under employed." Some indeed are under-employed.  But the average, even if it is beginning to shrink is still higher.  The bubble believers project incomes will grow in a linear fashion over a person's work life.  That is probably not correct - as people seem to go through phases where their initial incomes are not as high as they once were but their long term incomes may actually accelerate as the new college graduates gain experience.  Census data (as presented above) seems to confirm the College Board conclusions.

But the Bubble advocates have lots of flaws in their assumptions.  First, an average degree (either for the bubble theorists or for the College Board) may not exist.  A graduating nurse can expect a beginning salary that is considerably higher than the average wage in America. But one who graduates in ethnic studies may not receive a higher salary.   But even this data is flawed.  A philosophy major may not receive much with a BA but they are more likely to be successful in law school.   So what you take in college can have a huge influence on what you receive in salary.

Second, salary and lifetime earnings are not the same.  Most employment data suggests that a college graduate spends a lot less time in unemployment lines (although the current recession seems to have somewhat contradicted that data) than the average high school graduate.  

Third, A BA may be a gateway to higher earnings.  While there is some reason to suggest that the earnings differential is not as great as it once was for a BA - the differential for advanced degrees seems to be holding.  As they become more common that differential may lessen.  The reality of the last 20 years has been that the value of a high school diploma has diminished in both nominal and real terms.

Fourth, there may be very good non-economic reasons for pursuing a college degree.  

Finally, there are the issues of the appropriate price for higher education and the appropriate distribution of costs.  Paying for college requires a perspective on time (what proportion of funding for higher education should come from savings, current income or leveraging future income through loans) and and also on who should bear the cost.  If the individual is the main beneficiary then they might bear a larger share of the total cost than if the major beneficiary of an educated population is society.  Traditionally, public institutions have been financed by direct contributions from government offered regardless of financial need.  While there can be an argument for continuation of at least a part of that largesse - the low rates of decades ago seem increasingly untenable.   At the same time, when prices were low savings and current income were assumed to be enough to cover education costs.  As prices have risen more and more students are borrowing against expected future earnings.   That makes the purchase of higher education a lot more like buying a house or retirement (a long term capital expenditure) and that may involve some differing assumptions about the current pricing structure.

The Lame Duck Congress

Traditionally a lame duck session (defined by the US Senate as  a session where the Senate "reconvenes in an even-numbered year following the November general elections to consider various items of business") does dribs and drabs that were left over from the preceding two years.   This one is special for two reasons.  First, the configuration of the new congress will be considerably different.  Second, the former majority in the House and the remaining much smaller majority in the Senate was to get their imprint on a number of issues before they are forced out.   Here are a five thoughts on this one.


#1 -  The defeat of the Omnibus Spending Bill was wonderful!  There was so much pork in this measure that it was embarrassing.  Democrats loaded the thing up with earmarks (although some republicans did too) to the point that the dems put in about twice the value of earmarks as the GOP.  Some argue that earmarks are a) only a small part of the budget and b) necessary.   They need to be stopped.  The ability of members to aid their own districts and their buddies just adds to the imperial congress.


#2 - The tax bill, while expensive, was generally good.  As I argued in an earlier post, there are some things in the tax bill that I disagree with and it costs a lot of money but I think it was the right thing to do as an interim measure.  Let's hope both the GOP and the dems work hard to come up with revision of the code which broadens the base but lowers rates (similar to TRA in 1986).


#3 - Don't Ask Don't Tell can wait - The policy was an ill-conceived idea when it was first introduced and passed into law.  I do not have a military background but it seems to me that a person's sexuality should not be an issue in whether they become a soldier.  Overt activity with other soldiers should be limited simply for good management reasons.


#4 - So can the Dream Act and Start - The Dream Act vote was a political ploy.  In my mind illegal aliens who serve in the military or are brought here by their parents and attend high school should have a shot at college.   But that is an issue that needs to be explored.  The Start Treaty could certainly wait until the new congress.     I am not convinced by the opponents who say this is unilateral disarmament but I think the thing should be vetted a bit more.


#5 - The Ernest and Julio Rule - Gallo Wines used to have a slogan - we will sell no wine before its time.   One of my legislative rules is the Gallo rule - legislators will do nothing until they have to.  The record of this congress partially denies that rule.  A good part of the congress, which some have called very productive, was simply the exercise of raw political power.  Part of the reason the American people rose up in such numbers was they perceived that congress had over-reached.   But the rest of the congress was mired in partisan wrangling of huge proportions.  That should not argue that they should rush through a bunch of stuff at the end of the session.

Monday, December 13, 2010

Wolves in Sheep's Clothing

For more than a decade I have been a "decline to state" in terms of party registration.  Today, in New York, a new movement will be announced called No Labels which even includes its' own theme song sung by the R&B singer Akron.   Two Californians will be on the platform, our soon to be former Lieutenant Governor Abel Maldanado and the current Mayor of Los Angeles Antonio Villagarosa.

The ditty that Akron offers says in part "I wish they did not have no labels. There would be more change with no labels."  That is just flat out nonsense.  In the early part of the 20th Century California was designed so that a lot of the major positions in the state were with "no labels" - Mayors, County Supervisors even the Superintendent of Public Instruction all run without an apparent label.  But in reality, all of those people have a label.  Villagarosa, when he was Speaker of the Assembly, was a constant supporter of the public employee unions.  A good part of the deficit we face in the state comes from being entirely too generous to those unions.

Ultimately, politics is a game of ideas.  Who should get taxed?  Who should society choose to help?  How much should we limit the exuberance of the market?   There are fundamental differences in philosophy among all the competing ideas in politics.

What we have too much of in today's political system is not too many labels but too little willingness to consider the seriousness of alternative philosophies - we've lost an ability to listen.  So I won't be a supporter of the No Labels movement but I would join one that reminded politicians of their one mouth and two ears.

Sunday, December 12, 2010

More on the Tax Deal

Professor Paul Caron posted a wonderful compilation on the discussion about the tax bill including a meltdown by Keith Olberman of MSNBC.   The battle lines on this compromise are well established.  Ultimately while there are elements that I disagree with, I think this is a pretty good initial step.


There are certainly things to love in the proposal.  From my perspective, the continuation of the Bush tax cuts in their entirety (except for the Estate Tax which is set at a reasonable level with lower rates) is a positive development. There are also things to dislike - namely the increase in the deficit (which may actually be a bit lower than projected if indeed the reductions encourage some additional economic growth) and the extension of unemployment benefits.   The payroll tax holiday is a classic Keynesian stimulus - which I think will have little effect on growth.

I was also pleased to see that the President at least gave nodding support for the Bowles-Simpson approach which would simplify the code by lowering rates and broadening the base.  In the end the discussion we have had for the last couple of weeks on tax policy which looks a lot like Animal Farm (stylized arguments - four legs good, two legs bad) has not produced much sensible about long term tax policy.  But if this forces the political class to revisit this in two years and if it forces a more broad based discussion about how to raise revenues (not increase but how we should collect taxes), then the momentariness of the rate continuations and the increase in the deficit could be seen as a positive development.

Selling Berkshire

In 1987 I bought Berkshire Hathaway at $3785 per share.  This week I sold the position at $120K per share.   That amounts to a bit more than a 30 bagger.  But in the last couple of years I've gotten the distinct impression that the investment potential has declined significantly.

The story of BRK.A begins with the legendary business professor Benjamin Graham who spent his career inspiring students at Columbia.  In the 1920s Graham led a movement to improve the quality of accounting information released by corporations.  His basic insight (in Security Analysis) was that when you buy a stock you are buying a set of assets.  But later on he had a group of students, including Warren Buffett and the founder of the Sequoia Fund, who figured out how to beat the market by applying some basic principles to investing.

Had you bought into Berkshire when Buffett took over the company you would be very wealthy today.  But in the last five years the stock has been a lousy proxy for the S&P.  The CEO has been caught up in becoming a public figure rather than an investor.  So while I admire the past performance of the stock, it's inspiration has been caught up in the hype of being a media figure.

What annoys me the most about Buffett's recent performances has been the hypocrisy.   Buffett has been one of the major proponents of keeping estate taxes high.  Yet, a good deal of his success over his career has been based on finding family owned business and buying them in a way that delays or denies the impact of estate taxes.  Ultimately, sound tax policy should not allow those kinds of manipulations.   We should, as the President's tax deal does, set rates for inheritance in the low range and at a high enough cap so that most taxpayers should not get caught.  One could make a case for the complete elimination of estate taxes but if there is to be a tax it should be lower than it could be next year and at a fairly high exclusion.

In all of his public statements the Sage of Omaha has never acknowledged that part of his wealth has been based on a public policy which hurts people with fewer resources than he has.

Friday, December 10, 2010

The President and Tax Reform

I found the President's remarks on Tax Reform generally positive yesterday.  He commented that he was beginning to think about proposing to simplify the tax code next year in a dual strategy to improve the code and to raise revenue.   That is the approach followed by President Reagan in the 1986 tax act and it was a sound one then.  It would be a sound one now too.

But there are some caution lights on this approach.  The first, could be heard in both the NYT coverage and an NPR piece on it.   There is only one way to simplify the tax code - that is by cutting the thatch out of the code.  The Deficit Reduction Commission proposed to eliminate virtually all of the deductions in the code (save the Charitable Deduction and a Mortgage Interest Deduction for a Principal Residence) which is a good place to start.   But some in the equity crowd have argued a different approach, namely capping in some way the application of deductions for high income taxpayers.   That approach does nothing to reduce the burden of the tax code, indeed, it increases the complexity of the code.  Look at the machinations around the "marriage penalty" to understand the truth of the statement.

Broadening the base is never easy.  But the 1986 process proved it could be successful both politically and economically.  If the President wants to recoup at least some of his clout on economic issues he will need to avoid the people in his administration who see the tax code as an opportunity to foment class warfare.

Tuesday, December 07, 2010

Busman's Holiday

On Sunday and Monday I was in Austin for a set of meetings.  As I often do when I am in a state capitol I got a chance to tour the Texas Capitol.  The legislative process is a reflection of many things including the buildings we construct to carry out the process.  The Texas Capitol is among the most beautiful I have been in.  It is constructed of red granite but what impressed me more was the use of light in the interior sections of the building.  

The Texas house is huge compared to California and the Senate is smaller.  Texas has a shorter session than we do and it meets every other year.  But if you get to Austin, in addition to checking out the music and the food, schedule some time to tour the Capitol, it will be worth your time.

The Tax Deal

From all of the caterwauling on the left you would have assumed that the President has been pronounced a heretic.   I am not entirely a fan of this compromise.  There are some very good things in the proposal - from my perspective the creation of an estate tax solution which avoids both the confiscatory notions of the left and the fantasies of complete exemption on the right is close to being perfect.  They move to a $5 million limit on estates ($10 million for couples) based on a 35% rate.   While I can certainly make a case for ending the estate tax entirely -this seems like a reasonable place to have policy land.  

I also believe that the acceptance of the rates in the 2001 Tax Act for all taxpayers is an interim solution. Not perfect but about right.   In the long term we need to simplify the entire income tax system and lower rates.  That means broadening the base.  We got some good ideas from the Bowles Simpson proposal but if this gets us off the bash the rich rhetoric and toward a saner discussion of tax reform, then it is a good idea.

I am troubled by the temporary tax holiday on FICA, dropping by 2% the rates for one year.  It is a pretty good stimulus for wage earners but the condition of the Social Security "trust fund" is perilous.  And this simply adds to that problem.

But I am very troubled by the thirteen month extension of unemployment benefits.   I am not sure what an appropriate length for unemployment benefits should be.  But it should not be close to two years.  The tradeoff here is simple.  Make the benefits too generous and you dampen the incentives for seeking employment.  Make them too small and people in real transitions will be faced with calamity.  I do not think they hit the right balance here.

What gives me hope on this is two things.  First, if we can assume that Paul Krugman is wrong (and that is not a hard thing to assume) that there are "no deficit hawks in Congress" and that the new majority will take their role seriously when they convene the next congress, this interim deal is fine.  Second, if the deal causes the far left that has had far too much say in our national policies to go into frenzy, so much the better.  Their class bating rhetoric has worked for too long and finally their bluff was called.  I say let them whimper.

Sunday, December 05, 2010

Achieving a balanced budget

This is a follow up to the last post.  We now know that the Deficit Commission was unable to achieve 14 votes to get the Senate to consider its proposals.  On Facebook recently, I have engaged in a lot of banter about whether the Bush era tax cuts should be extended.  That is not the point.  A balanced budget is possible at many levels.  But based on the last election and also some enduring principles, most Americans have rejected in rather strong terms the huge increase in governmental activity - both in the Obama administration but also in more generalized polling.

For the past 30 years we've been able to raise about 18-20% of the GDP to fund the things we have wanted to do in the governmental sector at the federal level.   But a lot of the Washington elites think that percentage should be larger.  It is clear that many in the current administration think we should raise the amount of dough we spend through the feds to something approaching 30%.  

But an alternative way to look, which seems to coincide with the voters, is to decrease the role of government.  Not in the way that most bureaucrats would do it by huge and pro rata cuts in all spending but by making more reasoned choices about what we think we should do using tax dollars.   There are tiny examples - I think, for example, that public radio should not be burdened with governmental support.  Eliminating the CPB and NPR would make no dent in the budget but it would say something about our priorities.   I'd also work to eliminate a lot of the funding for the Smithsonian - a fine institution but prone to bouts of political correctness.  If we want a national museum then let those who want it to be there help fund it - partially with admission fees and partially through fund raising.   While we are at it - why should the Transportation Security Administration have government employees?  If airport security is important why not set the standards and then let the airlines and air travelers figure out how to meet the standards.   All of those potential cuts come from a philosophical approach which starts with a premise that government is not very good at doing things.   I am sure if we started with that debate (what should government do?) we could achieve a balanced budget because then the discussion would be about the appropriate balance not whether millionaires should pay more taxes or the unemployed should be covered with benefits for more than two years.

First Questions on the Deficit Commission and other issues

In the last few weeks we have watched democrats scramble to adjust their position on reauthorizing the Bush tax cuts.  Finally in the last couple of days at least two prominent democrats indicated an interest in raising their ante on tax cuts to exclude people who make less than a million bucks.  This is classic positional bargaining and I hope the GOP leadership says no.  There is a first question that any discussion about the deficit should begin with and it is not what percentage of the taxpayers should pay at the highest rate.  The most important question to answer on this fight is "What percentage of the GDP should be be dedicating to federal activities?"

In the last two years, tax revenues, as a percentage of GDP have dropped from their traditional levels of about 18-20% to below 15%.   At the same time because of all the bailouts our expenditures have risen to close to 25%.  The Deficit Commission has a start which needs to be followed up with vigor - regardless of tax rates.  But the political class, or at least large portions of it, do not seem to understand that truth.

Tuesday, November 30, 2010

One more twist on the Pay Freeze

There is one other idea that should be added to the mix on the President's proposal.  According to the WSJ since 1997 the number of civilian employees of the federal government has increased by 17%. (or about 300,000 new highly paid employees).   The folly of the limited proposal looks even sillier with that data in tow.


We should not heap comment on the President alone.  Six GOP members of the US Senate just voted against ending earmarks - two were lame ducks (Voinovich and Bennett) - one (Murkowski was just "re-elected" - I will bet Alaskans are proud of that vote) and the rest ( Cochran, Collins,  Inhofe , Lugar, and Shelby (Ala.) were just lame.


Dick Durbin reflected the Washington political class - "I believe I have an important responsibility to the state of Illinois and the people I represent to direct federal dollars into projects critically important for our state and our future. "  What a crock.



The President's Pay Freeze - a small step

The President's proposal for freezing pay for federal workers for the next two years, which would save about $6 billion over the term of the freeze, is welcome.   Average federal pay has been growing in recent years and now is north of $82,000 per year.  That of course does not include the dough that employees get in benefits.   That salary level compares to the median household income in the country in 2009 of about $50,000.  So you can get an idea about how generous we are with those employees.

A lot of recent studies have pointed out that federal pay is considerably higher than the private sector.  And friends of public employees have argued that those reports are flawed because they do not control for the level of education required.  After all the federal government employs a lot of scientists, and engineers and lawyers.  The Federal Times, in a recent article said 45% of federal employees have a college degree. That is about half again as many in the private sector.  That may be another point (do we really need all those highly educated people running our lives? Is the work of government so technical that it requires that level of education? Or more appropriately should it be?).   But that argument is for another day.

On this one look at the impact of the President's proposal on the deficit.  Can't see it?  That is the point.  In addition to the freeze on pay he should be seriously thinking about reducing the number of employees.  When Washington begins to feel this recession, we will know they have begun to understand it a bit better.

Sunday, November 28, 2010

Faith - Markets and Government

For the past couple of days we have been visiting our daughter and her husband and my mother in law and my wife's sister.   Friday night at dinner we had a discussion about the book The Big Short: Inside the Doomsday Machine by Michael Lewis.    From all that I have read and heard, the crisis in the housing market has many fathers.  About a year ago we had dinner with the retired CEO of Bank of America who argued that the mortgage crisis came about because of a series of governmental mis-steps including expansion of the tax free treatment of gains for houses, the expansion of leverage of Fannie and Freddie and the widening of the Community Reinvestment Act.   Obviously there is the rest of the story which involves the development of the synthetic instruments, CDOs and the like, by investment houses.  On that side there are a lot of causes besides making the mortgage market more fluid and less tied to an individual banking institution.  Lewis' book tells the investment side of the story pretty well.  But surprisingly he does not mention the role of members of congress (especially Christopher Dodd and Barney Frank) who frustrated the role of regulators who recognized some of the excesses of the Government Sponsored Entities.   The role of the ratings agencies and the bankers who really did not understand their own instruments are high on Lewis' list but there were also the natural tendency of many in the business world to act in their narrow self interest.

But from the perspective of my sister in law at was an assumption that the blame fell all on the private sector and those "greedy" bankers and insurance types.  In reality it was both.   The problem comes from the interaction of the government and private sector.  This chart from the WSJ shows that as we have gone through TARP and all the other supposed efforts to ameliorate the mortgage problem, the length of the average delay in payment for homes in foreclosure has increased rather dramatically.

I understand that I am perpetually skeptical of the efficacy of governmental action to help in many (or even most areas) - but I am always struck to encounter someone who seems to believe the opposite.  Public Choice Economics teaches us that people do not throw off their self interest when they take roles in government.  To assume self interest in the private sector is assumed - but my surprise is that many do not seem to see that does not change when you move things to the government.

Sunday, November 21, 2010

Intimacy, 2010 (another thing I do not get)

After seeing Handel's Orlando with the Sacramento Opera this afternoon we went to a place that we like for dinner near our house.  I noticed the couple in the picture behind us.  The photo is not retouched much and was taken with my phone.  But notice one thing about it.  Both people in the picture are using their Smartphones.  That made me wonder.  Were they not connecting?  Were they looking up reviews of the restaurant on Yelp or some other social networking site?  Were they passing on dirty notes which they did not want the rest of the patrons to hear?

I thought part of the fun of going out to dinner was the opportunity to talk without the bother of distractions like phone calls.


Thursday, November 18, 2010

Breathless News

My wife is a big fan of Dancing with the Stars.  I'm not.   I was home on Monday and thought the woman who was voted off did a lousy job in one of her two dances.  But I really do not care.

But all of a sudden the NY Daily News has a story that Bristol called her dancing partner some names.  And then there is the rumor that somehow Bristol or her mom manipulated the Tea Party to get them to vote for her.

So is this an important story?  Even with the twists - probably designed to get everyone to look in for the final event - it is just so much hype.  I understand that many in the liberal side of the aisle are absolutely paranoid about Bristol's mom.  Get over it.  The chances of her ever being president about tiny - if not non-existent.  Sarah's gift is to annoy the left - just like Ariana Huffington is to annoy the right.  Both are relatively attractive and have a gift of the gab.  But would the American people choose either to run their government?  Not a chance.

The second set of breathless reporting is about the new TSA procedure to scan our bodies. (Horrors!!!!!!!)  A couple of nut cases have protested this new "intrusive" scanning procedure.

I am one who a) flies a lot and b) thinks one of the biggest mistakes of the W. Administration was agreeing to move all those security personnel into federal jobs. But even with that why does anybody care.    I'm reasonably convinced that the full body scan is not necessary to figure out who the terrorists are.  But once you agree to having the government do this job you also implicitly agree to having bureaucrats make decisions which may or may not include anything relating to how to achieve the results we all want (safe air travel).

For me the bottom line is not whether Bristol makes it through the finals of Dancing with the Stars or whether the TSA has an outrageous new procedure to annoy air travelers.  When you think about what we should do about the deficit or how we should organize our health care system or how this country should respond to Islamic fanatics - these stories deserve to be put into the dustbin of history even before they are written.

The Role of the Independents

I was in Washington for a couple of days of meetings and yesterday heard from Stuart Rothenberg of the Rothenberg Political Report.  Rothernberg has a deserved reputation as one of the prime election analysts.  But he made a point yesterday which I disagree with.

A key factor in this election (and indeed in the elections in 2006 and 2008) was the votes of the independents.  In 2006 and 2008 the independent voters trended heavily toward the democrats. In this election they trended heavily toward the GOP.  Rothenberg characterized the independents as "mood" voters - not much involved in the political life of the country and prone to swing based on their mood.  

There is some interesting scholarly writing on the subject.  For example there was The Myth of the Independent Voter which argued that independents are really closet liberals or conservatives, which was published about a decade ago.   From my perspective the idea that independents are motivated primarily by mood is a gross oversimplification.   In recent years in California the number of voters who are decline to state has increased to just over 20% of the electorate.   That number is rising quickly.  It is not because of those voters are increasingly moody.  Indeed, independent voters are not caught up in the day to day gossip and intrigues of political life.  But that does not mean they are inattentive.

From my perspective the trend is a reflection that an increasing fraction of voters are dissatisfied with the choices they are offered by the traditional parties.   The US is still a center right country.   Those independent voters have a mix of beliefs that are reflected in the last three elections.  The GOP's constant harping about matters which many voters thought should be outside of politics caused many of them to bolt in 2006 and 2008.  The perception that Congress was rentable through things like earmarks did not diminish that shift.  But then comes 2010, many Americans perceived that the current administration and leadership in the congress had vastly over-reached.   Government was perceived, rightly in my opinion, as getting into too many things.   The process of adopting the health care bill and the financial regulation bill was perceived as arbitrary and intrusive.

If my hypothesis is correct, the GOP will need to stay away from earmarks and work to correct the excesses of both of the major landmarks of the last two years.  If they do, there will not be a wide swing back in 2012.  If they don't and the democrats show they have recognized the overstepping they did in these last two years, we could have a swing back. It isn't that the independents are "moody" it is that they will not be drawn into the petty machinations of politics unless they feel they need to be.

Monday, November 15, 2010

What is Wrong With Cable News

CNBC has a poll this morning that contains a set of false choices.  It asks listeners to choose between Social Security, Medicare and Defense as places to reduce the federal budget.  As the recently published Debt Commission Report suggests real choices will come from all those and more.  A Forbes columnist suggests we should eliminate funding for the Transportation Security Administration and send the function back to the private sector.   Others have suggested that we eliminate funding for the Corporation for Public Broadcasting.  The point is we should be considering all of those and more.

Some would argue that Social Security cannot be reduced.  How about, as the Commission Report said, reducing the inflation formula for adjusting benefits?  How about considering increasing the eligibility age over time?   Medicare?  How about moving a lot of Medicare from an entitlement to something closer to vouchers?   In Defense, can't it be assumed that we could make some better choices?

The point is the MSM and politicians constantly argue that cutting the budget is hard.  It was easy to get us into this mess - but just because it was easy on the way up, why should it be any harder on the way down the spending curve.

Two applications of the First Amendment

Two stories caught my eye  in relation to the First Amendment.  The first was about Amazon's pulling The Pedophile's Guide to Love and Pleasure by Phillip Greaves.   The book seems to have been uniformly condemned but some sources have commented that by pulling the book that Amazon somehow violated the author's First Amendment rights.  Nonsense.   Amazon is a private company.  The First Amendment protects the right of Mr. Greaves to publish all sorts of offensive stuff so long as he does not directly violate laws.  So for example, he could publish a book like this, even though the content is offensive, but he could be prevented from publishing the same book with photos of pedophiles in action.   But Amazon, as a business is under no obligation to carry any product.   I assume that there are millions of books that Amazon does not sell - based on their marketing decisions.   The First Amendment has nothing to say about Amazon's decision on what to sell.


In May of 2010 students in one California district were banned from wearing a flag shirt to their school.  This month one kid (Cody Allecia) who rode his bike to school in the Central Valley was told by the Superintendent to pack the flag away.   The Superintendent of Denair USD said that the flag would somehow be disruptive.  Shame on the Superintendent - who does not seem to have read the First Amendment (he seems to have gotten his undergraduate degree in Poultry from CSUSLO).   To his credit (or whatever) the Superintendent later allowed the student to fly his flag and said he will address the issue at the School Board's November 18  meeting.   In this case the ultimate right of a student to engage in political speech (protected by the First Amendment) was immediately limited but then seemingly restored.

Cable News and Nullum Prandium non es Gratuitum

CNBC has a poll this morning that contains a set of false choices.  It asks listeners to choose between Social Security, Medicare and Defense as places to reduce the federal budget.  As the recently published Debt Commission Report suggests real choices will come from all those and more.  A Forbes columnist suggests we should eliminate funding for the Transportation Security Administration and send the function back to the private sector.   Others have suggested that we eliminate funding for the Corporation for Public Broadcasting.  The point is we should be considering all of those and more.

Some would argue that Social Security cannot be reduced.  How about, as the Commission Report said, reducing the inflation formula for adjusting benefits?  How about considering increasing the eligibility age over time?   Medicare?  How about moving a lot of Medicare from an entitlement to something closer to vouchers?   In Defense, can't it be assumed that we could make some better choices?

The point is the MSM and politicians constantly argue that cutting the budget is hard.  It was easy to get us into this mess - but just because it was easy on the way up, why should it be any harder on the way down the spending curve?  Tim Pawlenty, who is evidently running to President, has an article in the Manchester Union Leader which argues that we should simply close the open bar in Washington.   Sounds like an awfully good idea.

Saturday, November 13, 2010

An Interesting Excursion - The Redistricting Commission

This morning the Bee did a story on the finalists for the Redistricting Commission.  What intrigued me about the list of finalists is their backgrounds.   You can read their biographies here but in order to understand who remains on the list you need to go here.   I know a couple of the people who applied.  I also read several of the applications and bios on the site of the remaining 36.  From my perspective, the process will be in pretty good hands - certainly better than it would have been had we allowed the legislature to do this again.

Friday, November 12, 2010

Marv Esch

The third job I had in politics, was with a Michigan congressman named Marvin Esch.  I only worked with him for a year.  But it was an important year for me professionally.   Marv was a consummate optimist with a good sense of humor who did not take himself seriously although he did take his job seriously.  I came to him after the US Senator I was working for  (Winston Prouty) died in office.   In 1970 Prouty was in a very tough re-election campaign which he survived.   Esch was in a similar race in 1972.  He was running against a well financed candidate named Marv Stempien.   We worked hard in that campaign and won it.   Esch came to congress after serving in the Michigan legislature and before that was a professor of speech.

The campaign that year was as tough as the 1970 one had been.  And like the Prouty-Hoff campaign, our opponent had the resources to make it very competitive.  We needed to respond quickly.  At one point he encountered a hit piece put out by our opponent and got it to us in DC within a few hours.  Our AA and I spent most of that evening crafting out a response that mocked the hit piece.  We printed it on the equivalent of a sophisticated mimeo machine and got it back to the district before morning. (No faxes or emails then.)  We only printed a few hundred of the counter-attacks but they were successful enough to make all the ones that Stempien had printed useless.  When I was in the district a few days later and watching a Stempien rally - he tried to hand out the hit piece and one person said - "no not this one, I want the funny one.

Esch was not afraid to take unpopular positions.  He was a strong advocate for the voluntary army.   But he also understood political realities.  For a good part of 1972, the issue of forced busing was coursing through Michigan politics.  Marv understood the destructive nature of the plans that had been adopted in many parts of the country and thus represented his district well.  We argued a lot about whether he should sign a discharge petition to get the issue considered on the floor of the House.  When he finally made his decision he called me in and said "OK, now write my statement supporting the discharge petition."  It was a position that I disagreed with but one that made political sense.

Perhaps the most memorable thing about the year (besides our compelling victory that November) was a visit to Siena Heights College, in Lenawee County.  Siena Heights was a small Catholic College in Adrian, Michigan.  Like many institutions of its size it was struggling.  It also had its first lay president (Siena was founded by the Dominicans).   We visited there in the Spring of 1972 for perhaps two hours.

Marv's district was unique in that it had more college students in it than any other in the country - with the University of Michigan, Michigan State, Livonia Community College and then two independent colleges in Lenawee County.   1972 was the year the Congress did the first reauthorization of the Higher Education Act of 1965.  Marv was the number two member of the Education and Labor Committee and thus would play a leading role in mapping strategy for the GOP members of the Committee.  

In June the Michigan legislature, which was controlled by democrats, voted to move Lenawee county out of the second district.  It was heavily Republican and by removing the voters there, the district would be a lot less favorable to Esch.  But because of the visit and the energy we saw at Siena, all through the conference committee discussions, Marv would turn to me an say "What do you think this proposal would do to Siena College?"   That taught me an important lesson - that impressions in politics are critical.  At the same time, Marv was enough of an idealist to think about the broader questions of public policy should not be decided merely on constituent needs.

One other story bears repeating.  I heard Marv tell a story many times when I worked for him which I thought was funny.  He would be asked to speak to prospective candidates about the role of a politician. He would say there are only three things a politician needs to know.  The eager candidates would write down "Only three things to know" - some would even underline the opening.  He would then say "First, you've got to be for everything that is good."  Most of the crowd would write down "for everything that's good."   He would then say second "You have to be against everything that's bad."  By now a smaller group of the candidates were taking notes.  Then he would deliver the zinger where he would say "The third one is the toughest, you have to understand the difference between #1 and #2."

I got lured away from Marv's office after the 1972 campaign in part because someone offered me a lot more money.  I soon learned that had not been a good campaign move.   Marv went on to challenge Don Riegle in the 1976 Senate race and lost.  Riegle had been a moderate Republican who switched parties.  In almost any other year, Marv would have made a race of it.  Marv went on to work for US Steel and then did some other gigs.  He retired to Michigan.

Marv died in June of this year and for some reason, I did not see notice of it until now.  Over my career I have had the opportunity to work with a lot of smart people - Marv tied intellect with principle.   That combination is all too rare.

80 Times Around the World

On Wednesday evening, somewhere in the middle of the country, I passed 2,000,000 miles on United.  For those of you without a calculator, that means I have flown the equivalent of 80 times around the world.

Indeed, I have been to a lot of places in the world - some that not many get to, like Palau.  But a lot of it was schlepping between Sacramento and Washington, D.C.   I've also done a lot of flying to Mexico in the last 20 years working with universities there.

The 2 million miles does not include non-United miles - so all those with Pan Am and Southwest and Mexicana and Aeromexico and a raft of other airlines many of which are no longer in business would add a lot more miles to the mix.

The question is what do I have do show for it?  As I thought about it there are three things.  #1 - A bunch of interesting experiences - getting an audience with John Paul II (albeit in a large group); eating dinner in Kyoto at one of the finest restaurants I have ever experienced; fishing in Wyoming; visiting most of the 50 states (sorry Dakotas and Alaska); seeing the energy of the Bermudan people before and after Hurricane Emily - to name a few.  #2 - When you reach a million miles with United you become the second level of flight status for life.  When you reach two million they add membership in the Red Carpet room for life.  If one gets to three million miles you get 1K status for life (which I have had for the last twenty years).  But as Up in the Air suggested earlier in the year - recognition by travel companies is not all it is staked out to be.  #3 - All that travel widened my vision and forced me to begin to work on Spanish (although most of my Mexican friends would argue there is still a long way to go). #4 - A very disciplined travel style.  I know how to pack for almost any trip and to reduce the bulk of what I take.  That does not carryover to the detritus in my office and home.  But at least there is a start.

Wednesday, November 10, 2010

Candidates and Irritants

Pajamas Media published a post yesterday which commented that Sarah Palin would be better off continuing to take the role of social commentator than political candidate.  I argued that was correct and that in the end she would choose the dough and the fame over the candidacy.   A lefty friend of mine commented - "She is an irritant to the left, and if they had any self respect or intellectual integrity, she'd be an embarrassment to the right. But the bottom line is that she's a megalomaniac on a mission from God. She'll hear the whispers from the sycophants saying, "Run, run, run. It's God's plan." Her ego won't be able to resist."


So it seems Palin is doing her job quite well.   Think of Palin as the right wing version of Ariana Huffington - someone who jabbers a lot and irritates the other side but is unlikely to ever be a serious political candidate.

Tuesday, November 09, 2010

Another thing I do not understand

In the last few years I have averaged about 90 nights a year in hotel rooms.  In many today you get a little nudge that says "if you are environmentally conscious hang up your towels and we won't wash them - that will save a gazillion gallons of water."  Here is the rub, many of these same hotels now offer beds with tons of pillows - not one or two but four to six.  Presumably when a guest leaves a room those extra pillow cases are washed.  So even if I buy the idea of saving water - just how do all those new extra pillows fit into the saving water thing?

As I think I have said before, I do not participate in those programs because the interests are not aligned.  If they said, hang up your towels and we'll knock $5 off you bill - then I might consider doing it.  But exactly why is it in my interest to lower their costs?  They keep raising their room rates.  So how about some balance.

When will candidates get it?

This morning's Bee had an article about campaign consultant Mike Murphy who mismanaged the recent campaign for Meg Whitman.   He took a lead in the Spring and moved it into a rout in November, all with $140 million.  He claimed the state was "too blue" to win a campaign.  What nonsense.  He got paid $90,000 per month.  So when should Whitman claim a refund.  He certainly did not add any value to the campaign.  He never really defined why Whitman was running.  He blew the most explosive issue in the campaign by simply trying to hide it until the Brown campaign brought up the immigration problems of Whitman's former and well paid domestic.

Remember that this is the same incompetent who talked John McCain into accepting Sarah Palin as his candidate for VP.

Murphy has a wealth of excuses but in the future let's hope that people he tries to help will look a bit more closely into his record before retaining him.  He is a one person wrecking crew.

Sunday, November 07, 2010

The right to choose

This afternoon two friends came over to bring back some stuff we had lent them for a party.  We got to talking about the election and discussing the campaigns for Governor and Senator in California.  The wife said she believed in a "woman's right to choose" and that women should have control of their bodies on the issue of abortion.

I asked her how she had voted on Proposition 19 (the Marijuana initiative) she said she had voted no.  I commented that I thought that was in conflict with her basic principle on abortion issues.   If the state should not intervene in deciding about whether to abort a fetus, then why would it be logical to prevent someone from smoking dope?  She responded that it was different.  I asked how?  She said there is a great possibility that pot smokers can injure others (one wonders whether the same argument about the fetus makes any sense).   I responded that existing law allows additional penalties for people who drive with impairments (including dope and alcohol).   So I wondered why she would reject a candidate who did not allow a woman to control her body but would reject a proposal to allow pot smokers to decide what they put in their body.

Note - I believe that existing law on abortion diminishes the ability of fathers to be involved in the decisions about children and thus makes them less responsible - but believe that the state should not be involved in medical decisions (like abortion) either in intervening between a woman and her fetus or in funding the provision of abortion.  At the same time I voted against Proposition 19 (in part because I thought it was poorly drafted) - so her illogic also applies to my voting pattern.  But I wanted to point out that most Californians do not believe in an absolute right to choose on most activities in society.

Presidential Articles

On Wednesday morning I did note to my son in law which said "your President" lost big last night.  He responded and said "you mean our president."   I responded syntactically.   The president is an office that all of us should respect, he is the constitutionally selected leader of the country.   But there is another side of the presidency which was repudiated on Tuesday.  The policies of the current president (including his massive health care bill) were significantly rejected in Tuesday's election.   So while I continue to respect the President and the Presidency, I am glad that the American people woke up to the problems created by the Obama Administration proposed by a person I did not vote for.

More election thoughts

An IBD (Investor's Business Daily poll taken November 1-4 said that 53% of Americans would prefer to solve the budget problems at the federal level by cutting things rather than increasing taxes.  They also do not seem to believe that more economic "stimulus" will help move the economy forward.

Those thoughts were revealed on Tuesday when the GOP captured at least 60 seats in the house and move 680 seats in state legislatures (the previous record there was 472). So why hasn't the massive infusion of dough moved economic activity more.   After all if you buy the Keynesian interpretation of the responses in the Great Depression all those alphabet agencies that FDR created actually moved the economy forward.

There is currently considerable research that suggests that the standard interpretation of our movement out of depression in the 1930s is simply wrong.   If you track unemployment we did not begin to move out of high double digit unemployment until World War II.  And, indeed, many of the measures enacted by Roosevelt may well have reduced certainty and thus slowed economic recovery. For example the most readable interpretation of that view comes in Amity Shales The Forgotten Man: A New History of the Great Depression.   But there is plenty of other research that brings the interpretation into question.  Robert Higgs (Crisis and Leviathan: Critical Episodes in the Growth of American Government (A Pacific Research Institute for Public Policy Book) has a couple of books on the issue.

But even if you buy the standard FDR as savior interpretation, one wonders why all that dough we have spent this time has not had a noticeable effect.   Again there are a couple of interpretations.  On the left, (Paul Krugman for example) some have argued that we did not spend enough.  From my point of view, that is just looney tunes.  

The alternative view could be that the situation is different.  For the last 40 years or so we have floated around 33-35% of GDP as a portion of federal tax revenues/spending.  That compares to about 13% at the start of the depression. After the Depression and WWII there Federal share of our GDP was about a quarter.  From Nixon through Bush that percentage rose to the low to mid thirties. The first year of the Obama administration that number jumped to well over 42%.   One response could be that the effect of a reduction of the private sector for a temporary period when the economy is less than a fifth might have a more significant effect than when it is close to two fifths.   American voters may realize the diminishing effects of infusions of borrowed money better than the political class.

Wednesday, November 03, 2010

Five Thoughts on the Election

#1 - Ding Dong the Witch is Dead - The reign of one of the most imperious Speakers of the House is over. None too soon.  Remember she was the one who said to her members they could find out what was in the health care bill after it was past.    I, for one, am glad she is gone.

#2 - The GOP won an impressive set of elections in the House, in State Houses and in Governorships - at this point there are 11 races that have not been called in the House and in five the GOP is leading - that would mean a net gain of 65 seats. That is the largest win for the GOP ever. Most of the map in the middle two years ago was blue. Evidently a vote for the health care monstrosity that the Imperial Speaker thought was not meant to be read - was not a popular one.   Even the GOP member who voted for one version of it - lost.  Some long term democrat members (those that had not retired already) lost. To put that in perspective look at Jim Oberstar, Ike Skelton and Russ Feingold - between them they had more than 80 years of seniority.  The impressive nature of the win is also conditioned on the retirements like Bart Stupak and David Obey who opted not to go for re-election.  One of the most obnoxious members of the House (Alan Grayson) got picked off.   The new senate may have a hard time if Reid wants to try to run it the way he did.  But you also need to look at the 2012 class where there are several democratic members who come from now redder states.  Reid may be the majority leader but he could well be toothless.

#3 - In spite of the spin of the establishment the Tea Party did pretty well - They had some notable losses (I was disappointed that Angle did not knock off Harry Reid - admittedly they were both weak candidates) but they also seemed to have won some important races.  Remember that six months ago the MSM was parroting some democrats and calling the Tea Party an "astroturf" grassroots movement.

#4 - California is absurdly different - They seem to have knocked out one incumbent democrat from Congress.  But they elected (for a third term which his father could not get) Jerry Brown.   He may not be as bad as he was three decades ago.  Whitman's campaign was horrible.  She had a strong case to make and blew it.   Californians elected a far left Attorney General.  They re-elected arguably the least able member of the US Senate.  They supported extending the role of the redistricting commission to our congressional delegation.  They turned down dope.  They rejected a parks fee and raised the vote requirements for fees to be adopted.  At the same time they reduced the threshold for approving a state budget.   But if the rest of the country was going RED - California stayed BLUE.

#5 - The mandate can be volatile and if the new members do not get it..... - One thing the election showed was that the voters are not in favor of a new expansionist government.  But I think they also will not be supporters of prancing and dancing that the GOP seemed to engage in before they were ousted.

Another thing I do not understand

Last night I went to the airport in Mexico City with a friend who was going to meet the Cardinal who was coming from Monterey.  His flight was delayed.  The flight was originally scheduled to land at 7 PM.  But by 7:58 the flight board had the following message regarding Aeromexico 931 from Monterey - A Tiempo (on time).  All of the other flights on the screen had landed but there it was 58 minutes late - and still expected to be on time.

The photo is from my phone and I took it in a hurry - but you get the idea.

Sunday, October 31, 2010

A Genuinely Unsatisfying Experience

This election, in part because I will be in Mexico on election day, I became a permanent absentee voter.  So last week my wife and I filled out our ballots and mailed them in.  Compared to the experience of going into the local polling place the experience was a bust.  I wanted to vote because there are several clear choices in this election both on candidates and on propositions.   While many of the views I hold are likely to not be held by a majority of the electorate, this is a chance for me to express my opinion.

I've participated in a couple of wave elections in my lifetime.  This one seems like it will also be a wave - although if the polls are right, California will not track the national polls.   We seem likely to re-elect Jerry Brown as governor after a 28 year hiatus (but one in which he continued to live off the public trough) and to re-elect the least competent member of the US Senate.

But the whole experience of expressing my opinion in the privacy of my home seemed less than thrilling.  It left me cold.   I wonder how others feel about this new way of voting - where at least in California will soon be the majority way to vote.  There are some odd consequences of this new procedure.  For my wife and I there was no chance to influence our vote after the middle of last week - sorry to all you national celebrities who phoned me to personally ask me to vote for X.   All those stupid - my opponent is a known (fill in the blank) - commercials have had no effect on me.  For those who voted earlier - even the new cooked polls (which seem to be almost predominant this year) cannot scare away my vote.   But as I said, the whole experience left me cold.  I wonder if they will continue to reduce the number of poll watchers for election day - we should not need as many as in the past.

If this new trend says we are all too busy to exercise our civic responsibility at one time - then too bad for us.  It also led me to think about whether an enterprising candidate will start to stage early voter election night parties.  Perhaps two weeks before the election, you could invite all your early voters to come and celebrate with you.   As I the whole experience of voting absentee left me cold.