Saturday, January 30, 2010

Book Pricing on the iPad, some comparisons that do not ring true

According to an interview between Steve Jobs and Walt Mossberg - pricing on iBooks and Kindle will be the same. That makes sense in the market and makes the features of this new e-reader even better. From the videos of reading the motion looks a lot less mechanical, which is a comment against most e-readers including the Kindle which requires forward and backward buttons.

Some of the initial commentary looks like it was written before the device actually came out or simply to defend another device. For example one writer Khabrien makes the claim that "Besides, it is also heard that the light emitting from iPad's screen is too heavy that will strain eyes for a long period of reading." That writer also complains that the larger iPad is "too heavy" because it is 1.5 pounds rather than 10 ounces. The reviews from people that were there suggest a significantly different interpretation. The writer also made a comment about battery life being inadequate in the iPad. I love my Kindle's battery life, but I have never read it for even five hours in a clip. If the touted battery life of an iPad is a reality, I suspect that the life of the thing will be more than adequate for daily life.

Still, as I said in my original post, I think the challenges will not be to the Kindle but to the also rans in the single use device category. ITunes did not eliminate music players, it simply dominated the market. One other comment, from the integration of media that the iPad offers, the place where the Kindle will be handicapped will be in the textbook market. There, although there have been some interesting experiments with Kindles on campus, it looks like the Kindle will have a hard time in competing.

Thursday, January 28, 2010

The State of the Union

In assessing the President's speech last night one needs to think about what he was trying to accomplish but also to reflect on how the American people have perceived his first year in office. I believe he had a very tough task. On the one hand he needed to not abandon the people who elected him. And here I think he made a significant miscalculation. Last night's speech was a clarion call to liberal values. I do not think he convinced many of the independent voters who have been leaving him in droves that he was on their side. A lot of his values were attempts to become what many in the media would call populist values. Here I think polling suggests the the vast majority of Americans are of two minds. They are grumpy at most of their institutions. They do not like what has been happening in in Washington and at the same time they hold resentments at Wall Street. Clearly, from my perspective, the President's speech seemed to fall on the side of being against Wall Street. While he made some motion toward chastising the situation in DC, his unwillingness to even begin to suggest that he might have over-reached on health care suggests that he believes that he thinks the polling on health care reflects misinformation rather than formed beliefs. His danger here is that playing the populist card cannot be effective coming from the role as a patrician (I know what is best for you) and I think that is what his speech sounded like.

The second conclusion about the speech came from his specific proposals. He kept tried to sketch a theme that he had not raised taxes (in fact lowered them), that a freeze with lots of exemptions (in the areas where the problems in growth in government are the most profound, and that he supports expansions of free trade (although a couple of major trade pacts have languished because of lack of support from his administration). I do not think that is where the American people are at this point. The key polling statistic from the Massachusetts election was that almost two thirds of the American people want less government and less taxes over more government and more taxes. I think the President was unconvincing that he believes in that goal.

He is clearly trying to set up a 1948 election scenario where he can run against congress (especially the republicans). When you look at who is running the joint and the popularity of that leadership I do not believe that will be a successful strategy. Last time I checked Harry Reid and Nancy Pelosi were in his party not the GOP and those two are lightening rods for American feelings about the institution of congress. I am not sure that a majority of Americans can name the key members of the GOP leadership in either house.

I liked his ideas about earmarks. That small section was a good step. It will be interesting to see whether he follows through and whether congress adopts the proposal.

Finally, I was surprised about his ignoring Haiti. From my perspective the tragedy of Haiti presented a perfect opportunity to establish some recognition of the non-sword side of our foreign policy and to reassert our critical interests in the region. That was a lost opportunity.

Wednesday, January 27, 2010

The iPad

The announcement on the iPad today confirmed a couple of things and denied a couple others. This is not a netbook. It will be light - a pound and a half and seems to have a very quick processor. It can include up to 64 gigs of flash storage (the same as my Air). It has lots of communications options - 802.11n, bluetooth, and optional 3G. It does not have a camera of any kind. Several Mac aps have been redesigned including the calendar and photos. The device will also include a version of iWork (Numbers, Pages and Keynote) - which is the Mac based productivity software (that could get me to use the device a lot like my laptop because most of what I use my laptop for is mail, web browsing and presentations and writing.

The device is touted to have a 10 hour battery life. That would be wonderful and could stay with you during a normal business day.

The price points on this device sound about right to me. $499 for the basic model and up to $829 for a 64 gig model with 3G. There will be two types of data plans a 250 MB plan for $15 per month and $30 for an unlimited plan.

I put my name in today to be notified when the device is ready for sale in 60-90 days.

One other part caught my eye. I am a big fan of the Kindle. The device has a new software called iBooks. It looks like a quantum improvement over the existing Kindle software. Pricing on this is a bit more expensive that Kindle books but the functionality of the additional features look like a value.

Monday, January 25, 2010

Hayek and Keynes Explained

This RAP is first rate - and differentiates Keynes and Hayek.

Modern Mexico

I started working in Mexico about 20 years ago. In one of my first visits the driver for the person I was with facilitated our visit to the Shrine of Guadalupe by paying a traffic officer a small "mordita" to allow us to park our van in the middle of the street for an hour or so - because there was no available parking in the area and we wanted to see the shrine. I was reminded of that today because I was with another friend who was trying to get us to a restaurant in Tlalplan - called Enriques - very good place. Traffic was horrible. Our driver, who is also a police officer, jumped out of the car directed the traffic so that we could move around the jam and then jumped back into the car after we had passed the jam. But the country is also very different.

I am visiting a university in Mexico City that serves middle class kids but is founded on the principles of the Christian Brothers. It has a problem - its' students are not wealthy so they do not attract those from the most wealthy families. But it also is feeling the heat from what we would call in the US the proprietaries - they offer degrees without much rigor - but their prices are the same or lower than the university I am visiting.

I met this morning with the deans and then spent an hour with the admissions staff. We talked about how they could segment the market to define their potential students more effectively. I am impressed with the deans and with the admissions staff. They have thought about their challenges but they are ready and able to take on this competition.

So what I continue to find here is a country increasingly able and willing to compete on the highest international standards.

Sunday, January 24, 2010

Nonsense Numbers

The Obama administration has tried to justify it's economic programs by suggesting that it has "created or saved" a number of jobs. The problem is that there is no way to understand how any administration can save a job - just how do you assess that? What is a job saved? On Sunday three different Obamaspokepersons had three different answers. All of them were wrong. But then why should you be surprised?

If you are going to count the "saved" jobs then should not you also count the lost ones (based on the hectoring that the Administration has offered in the last several months about how to regulate this or that activity?

Friday, January 22, 2010

Franklin Delano Obama

One of the revelations in Amity Shlaes excellent book, the Forgotten Man, was that the great depression was really two problems not one. FDR came into office and proposed a wide range of solutions to the problem none of which seemed to have been even marginally successful in reducing the core problems facing the country. Then the Supreme Court had a chance to invalidate a good part of the New Deal and growth began to happen. Then FDR began making a series of either calculated or not threats to the business community and that apparent recovery began to falter. That is a bit of an oversimplification of the 1930s but it is disturbingly close to the first year of Obama, except remarkably compacted.

Obama seems to have over-reached in his first year. A different politician, with a bit more experience, might have not taken on health care as job one - looking at the destruction that it had caused presidents in the past. He might have worked hard on his interpretation of how to create jobs (which his supporters would argue he did in that bloated porkbarrel they called the Stimulus Package - with thousands of earmarks). But in the wake of the defeat of his choice to succeed Senator Kennedy, he chose this week to harangue about the evils of the financial markets. The markets responded appropriately. While he yammered about the evil banks, his proposals did nothing to reign in the hazards created by Fannie and Freddie.

The difference between this president and FDR is that if he continues in this vein it is unlikely that he will see a second term. Indeed, if something he does not respond and unemployment remains at the elevated levels of today, he is likely to lose control of one or both houses of congress. History does not repeat but you sure can learn from it. Here is a link on the loss in the Dow this week.

Thursday, January 21, 2010

Nobody does it better...

There are a lot of us who are breathless for the details on the Apple Tablet - expected to be announced six days from now and available to consumers in the next few months. A group called Retrevo did a survey of some people and came out with the definitive statement that consumers would not be ready to purchase one of the devices if they cost more than $700.

The graphic (from Apple Insider) shows the results of the survey. No 3G, no E-books and short battery life and the thing is a dud- at least according to the survey. From my perspective the tablet needs reasonably long battery life and is likely to have e-books in the same style that the existing iPhone and iTouch does. I am indifferent as to network and hope it has 3G. Also, as a potential consumer, I will look at buying one of these devices if it fits my need. If it has versions of iWork and strong connectivity and will weigh even less than my air - it could well replace my travel laptop. And for that I would be willing to pay a good deal more than $700.

But we'll all have to wait and see what pops out on the 27th.

Tuesday, January 19, 2010

CNET and Rumors

CNET is a site that does a lot of chatter about technology. The attached picture is from them. In a story they look at the possible names for the new device that Apple is expected to announce on the 27th. They suggested that at least some people have said it would be the iSlate or iTablet. But CNET claims that the new device will be called the iPad.

I am less concerned about the name and more about what this new thing will do and will it really do all of the things that supposedly informed leakers say it will. Assuming the technical specs are close to what has been rumored, I will have ordered one as soon as I return from Mexico on the 27th.

The Effects of Events on Washington

There are two possible results from the Massachusetts senate race. On the one hand the Administration and the majority party could look at the results and say, we have heard the message and it might be a good idea, as Reagan did in the 1986 tax reform battles, to go back to figuring out how to get a bipartisan plan for improving our health system.

The alternative would be for the leadership to say "the voters have spoken, let's ignore them." They could propose all sorts of political games (some of which have been proposed already) - they could delay the final certification of the election - even though Brown's margin seems to be pretty large; they could rush a bill through by trying to jam a bill through the congress immediately (even though a large percentage of the voters think the plan is going in the wrong direction).

In the last six months, several administration spokespeople have argued that they inherited the mess and their inability to get things done on a number of fronts is based on the size of the problem. That can work for a while but not for a year.

This may be the prime point to figure out whether the administration does indeed have any audacity or merely arrogance. The definition of audacity includes boldness, courage and daring but it also includes negative connotations like insolence and impudence. It will be interesting to see whether this Administration can actually walk the walk.

Tea Leaves and Tea

On Sunday the Washington Post wrote about a recently conducted poll that concentrated on Obama's fall in the polls. And indeed that is one of the stories that the poll seems to produce. The poll itself is presented on this link. If you look at the questions the President has slid in the polls - although generally people like him as a person and seem to think he is a trustworthy guy. Feelings about Congress are considerably more negative than those about the President. The poll found that almost two thirds of voters think the country is going in the wrong direction. The current 37% is certainly significantly higher than it was in some periods in the Bush administration but it is also down by about a quarter from this administration's high point. All those things are well known from other polls.

For me however the most interesting question was this one - Generally speaking, would you say you favor (smaller government with fewer services), or (larger government with more services)? (The Chart reads right to left - from 1992 - present and RED is the smaller government, fewer services response. The numbers on the horizontal axis are support for smaller government.)

The WP did not cover this poll, which seems to indicate that the Administration's quest for more government and more taxes is not supported by 58% of the voters. That may be because of the Post's own editorial policy or some other odd reason. Support for less government and fewer taxes has never in the time of the poll dipped below 50%. You wonder how any politician who listened to this consistent and pretty strong trend might fare in the political realm. We elect politicians to make choices and it seems from this poll that we are grumpy when they don't do that job.

Monday, January 18, 2010

Sense and Nonsense

Why are faculty so liberal? There is a common perception that faculty are left of center of the electorate. A sociology faculty member at University of British Columbia (Neil Gross) and a doctoral candidate in sociology at Harvard (Ethan Fosse) think they have come up with an answer. The "researchers" first examined "a range of characteristics that apply disproportionately to professors but are not unique to professors" and then compared those characteristics with political sensibilities. But of course then they quantify their results.

43% of the political gap between professors and the rest of us can be attributed to four characteristics - high levels of educational attainment; a disparity between their levels of education and income; to be not theologically a conservative protestant (they describe this as either being Jewish, non-religious, or a member of a faith that is not theologically conservative - but I think my definition is a bit clearer; and they have a high tolerance for controversial ideas.

How does one explain all that mumbo-jumbo? Professors in the academy are of one stripe and work hard to assure they are cloned. Thus, the tolerance for controversial ideas is really an intolerance for any ideas outside the current coda. They feel resentment l based on the perception that they should be paid more for spending all that time getting an education

"The theory we advance ... holds that the liberalism of professors is a function not primarily of class relations, but rather of the systematic sorting of young adults who are already liberally or conservatively inclined into and out of the academic professions," again there seems to be self typing and self selection.

The researchers comment "the professoriate, along with a number of other knowledge work fields, has been 'politically typed' as appropriate and welcoming of people with broadly liberal sensibilities, and as inappropriate for conservatives," they write. "This reputation leads many more liberal than conservative students to aspire for the advanced educational credentials that make entry into knowledge work fields possible, and to put in the work necessary to translate those aspirations into reality."

In my world that is not liberal, but dogmatic.

Sunday, January 17, 2010

Developments in Massachusetts

I'm not very good at predicting elections, especially in a place like Massachusetts. But the indicators from RCP suggest that even if Coakley is able to win, democrats across the country will reassess their "mandate", or will they? Among the early indicators in this race Brown leads among the independent voters (in polling) by 21% (58-37). He leads among those who have already voted by 16% (58-42). The New York Times describes the current situation as follows "Democratic enrollment has fallen from 48 percent of the electorate in 1984 to 37 percent last year. And thanks largely to votes from independent voters in the suburbs, Massachusetts was led by Republican governors for 16 straight years, until Gov. Deval Patrick, a Democrat, broke the streak with his 2006 landslide election. Now Mr. Patrick is dealing with slipping approval ratings as he seeks re-election." Even more of interest is the current Intrade ranking which has Brown up by a comfortable margin - Intrade is the political futures market.

From my perspective, the more interesting question about this special election is not who will win but whether it will cause the leaders in congress to think a bit more carefully about the rush to pass the health bill. The strong story in the last eight weeks has been that a) a huge number of voters do not like the process that brought us to where we are and b) a slightly smaller number, but still a majority, think the bill is seriously flawed. Some congressional leaders and even the President have commented that they believe that opposition comes from ignorance. If the process has been as transparent as congressional leaders and the President claim it has been, how can that be?

Friday, January 15, 2010

Families and Health Care

Like many American families mine is divided on the efficacy of the President's health care proposal. But in the last few months we have had a great dialogue about the issues involved. We have some experts in the issues in this public policy question. I have a brother who is a physician (cardiologist) and another who is a banker. I have a nephew who sells pharmaceuticals and another who is doing an MBA/MPH at Michigan. I have a daughter who has become something of a public policy wonk. She has become engaged in the debates of the day in a meaningful way.

For the past month or so there have been a series of exchanges among the group. In spite of differences among them, there are some common conclusions.

1) There is a general agreement about what the issues that should be under discussion are.
2) There are a variety of viewpoints. But those viewpoints have been treated with respect.
3) There is a recognition that the insurance companies need to figure out how to cover people, even those with pre-existing conditions.
4) There is some agreement that elimination of the state regulation of health insurance is probably a good idea.
5) While there is disagreement about the cost impact of defensive medicine (I tend to believe the higher numbers others in my family believe the effects are much less important) there is a recognition that the Congress has done nothing to solve this problem.
6) There is a clear understanding that there are tradeoffs in the discussions and that ultimately an expansion of coverage is likely to redistribute utilization in the system - which is likely to lead to rationing in some areas.
7) There is almost universal recognition that the process that the Congress has not been useful or effective in discovering reasonable alternatives.

From my perspective the last is the most important. This group of educated people has had a more substantive discussion about a major national entity that we hire to conduct those kinds of discussions in our behalf.

Over Christmas the banker, who has never been much involved in politics, commented that he thought a good way to proceed on Congress was to change the terms of service to be more like jury duty - members would be chosen on a random basis and would serve for a limited period of time. The recognition of this group that our current institutions are not serving us well should give pause to every elected official.

Thursday, January 14, 2010

Bluetooth Tourrets Syndrome

When I land in an airport I normally sit down for a few minutes and catch up on email. Increasingly I find a guy like the one in the picture - who speak on a bluetooth device. For the last fifteen minutes this yahoo screamed into his earpiece telling the entire waiting area about his father's pastrami sandwiches, how most of his family cannot afford things like gas and electricity and a host of other fascinating topics. What is most wonderful about these guys is that they are either a) very hard of hearing or b) so egotistical that they think the rest of us are actually interested in their prattle. I guess this type never learned about discretion or more to the point, manners.

Wednesday, January 13, 2010

Three Reflections on the Economy

John Taylor did a post this morning which he demonstrates that a) monetary policy was too accommodative for too long and b) a good portion (78%) of economists who think about this issue believe that policy helped to create the housing bubble. Thomas Hoenig's chart (which is reproduced her) should give all of us pause.

A second indicator of the folly of current national policy was in an Associated Press analysis of stimulus spending in construction. Their analysis suggests that the effect of all that dough was bupkis.

A third worry is that our statistics are a bit out of whack on unemployment. Depending on the model used to count employment and unemployment statistics our unemployment rate might be as much as 10% higher than posted figures. This is more than a technician's argument because it fundamentally affects a host of issues including the perceptions that Americans take about their situation.

Tie them together and we get ineffective policy, based on questionable numbers that helps to cause a serious inflationary cycle in the future. How audacious is that?

Tuesday, January 12, 2010

The Quality of Our Political Leaders (and those who want to be)

The Massachusetts senate race to succeed Kennedy has heated up in its last week. The polls seem to say that Marthy Coakley, who has served as the AG in Massachusetts is in a close race. She and Scott Brown had what the Boston papers called a heated debate last night. The Boston papers are all commenting on her enforcement efforts against local garden clubs. But then comes her latest ad. Coakley, or her supporters, can't even seem to spell the name of the state she seeks to represent correctly. Her ad says "Paid for by the Massachusettes Democratic Party." Gee I wonder if she wins, if she will become the educashun senator.

Monday, January 11, 2010

The Real Star

Beginning in 1984 Hollywood produced a couple of pictures about a kid who was not exactly fitting in to his environment. It was called the Karate Kid. I always thought that Ralph Macchio was the glue that held the movie together. Macchio was a kid who grew by learning karate. But we recently watched the Next Karate Kid which was one of Hillary Swank's movies. What you see very quickly is that the real star of these series was Pat Morita, who played the karate instructor, Mr. Miagi.

Over the holidays, we saw a preview for a new version of the genre - this time set in China with Jackie Chan. It will be interesting to see whether this new generation can carry off what Morita and his supporting cast was able to do so well two decades ago.

Statistics and Philosophy in Health Care

About a week ago I got an Email which claimed the Investor's Business Daily had made a series of claims about the comparative advantages of health care systems. Included in the claims were ones about the relative survival statistics for various diseases. As an example the Email said, IBD had claimed that the percentage of men and women who survived a cancer five years after diagnosis: U.S. 65%, England 46%, Canada 42%. When you Google IBD for those numbers they do not come up.

A lot of the statistics being thrown around in the health care debate are silly or mis-represented. That is true for both proponents and opponents of the measures under consideration in Congress. So I did some searching on my own. The British National Health Care Office says that women with breast cancer in the UK have slightly higher than an 80% five year survival rate. According to the American Cancer Society the five year rate on breast cancer in the US is 91% for whites and 78% for blacks - thus it is pretty easy to conclude that our rate is slightly (but not dramatically) higher than the Brits. Admittedly those numbers are not representative of the entire population of cancer patients but as several statisticians caution - the way individual countries count these things can produce differences in results that are not consequential.

The World Health Organization numbers (if you look at them at all closely) - which rate us 37th, are mostly bunk. They do not norm for the wide variations in population (we are a lot more heterogeneous than many countries higher than us on the list - for example ahead of the US are places like San Marino and Andorra and Monaco or even Japan where the populations are more homogeneous). Among the variables in the WHO numbers are "fairness in financial contribution" - that is certainly not an objective number. The WHO numbers also rate health expenditure per capita inversely - so we are ranked at the bottom because we spend more than anyone else. WHO publishes the rankings with a political motive. The Commonwealth Fund study ranks us as 14th - but again when you look at the data - it is suspect. The CATO Institute did a great short analysis of the WHO numbers

What a lot of this comes down to is philosophy not statistics. There is plenty of evidence that government mandates tend to distort care - Canadians use the American health system for procedures that their system cannot handle (or chooses not to handle). From the reading that I have done there are also some variances among countries based on lifestyle. My suspicion is that we are pretty good at treating some cancers because of the incidence in the population or the level of funded research.

My concern about the Reid/Pelosi proposals is not based on morbidity rates or WHO rankings but broader concerns about the increased demand that the program will produce without any apparent or real concern about increasing the supply of providers. I am also bothered that it is hard to find a government mandated program which operates with high efficiency that does not significantly distort market choices. I am also concerned that while everyone admits that malpractice costs are a major factor in distorting health care costs that neither bill does anything even close to the current California caps on damages.

Political Yabbering

Watch CBS News Videos Online

Last night 60 Minutes did a story on the 2008 campaign in which McCain's former campaign manager described Palin as "a rushed -- and wholly unprepared -- pick to be a heartbeat away from presidency as the running mate for Republican 2008 GOP presidential candidate John McCain." If politicians had any sense they would conclude from this interview that while Palin turned out to be a bad pick, the picker (namely Schmidt) was an even worse one.

Schmidt is obviously trying to re-establish his reputation as a campaign expert - but his interview shows him for what he was a
"rushed, and wholly unprepared." Any candidate who hires this guy going forward is not likely to be successful. The concern that I have about this is not the nonsense that Schmidt or Palin try to lay down, but the role that campaign consultants have in defining campaigns.

Sunday, January 10, 2010

Apple TV

On Friday night I hooked up Apple TV to our new HD screen downstairs. Apple TV allows you to stream video, music and photos from one machine to your TV in a simple way. I have almost 200 digitized movies and about 10,000 songs in iTunes. Add to that I have 20,000 photos. All of those are instantaneously available on my main screen in our family room.

What I like about this product is its simplicity. It was simple to set up and simple to use. Obviously, if you have non-HD movies they do not magically convert to HD format but they still look very good on an HD screen.

What I don't like about the product is the hard disk size. The current model is 160 GIGs for $229 - I have an earlier version so my hard disk is tiny. With streaming I suspect I will not be using the hard disk much - my main computer at home has 2 Terabytes of storage - but I suspect like most products like this uses that I have not thought of will come to mind very soon.

Senator McCaskill on Health Care

The greatest deliberative body in the world(or at least the body that once had that appelation) has as one of its members Claire McKaskill from Missouri. McKaskill attempts to argue on this radio snippet on several sides of the bill - she is for a conference committee that is open but everyone knows what is in the bill so that is unnecessary (are you following me?). It is clear that regardless of what people in her state think about the bill (the most recent polling I could find showed that almost three quarters of the voters would like to slow the process down a bit) the Senator wants to get this into law as quickly as possible. Nationally only 42% of the voters want the current bill (as they can understand it) but McKaskill seems to want to cling to the issue regardless.

McKaskill attempts to make the argument that (as the President has tried to do also) a lot of the opposition has been stirred up because of mis-information. Yet when you listen to her trying to defend her position she seems to stumble in trying to explain her position - her logic seems to be try anything that will stick. No wonder that she has the support of 29% of Missourians in current polling. Missouri is the "show me" state - my guess is that when McKaskill comes up for re-election she will find out that in her case "show me" is followed by "the exit."

Saturday, January 09, 2010

Federal Funding and You - Largesse is not

In the Governor's state of the state address he claimed that California gets a raw deal in terms of the money we send to Washington versus what we get back. Our junior senator (who evidently thinks she is in a tougher race than most analysts do) quickly put out a "study" which claimed that indeed in the last couple of years, mostly because of Boxer's efforts, we now get tons of money.

Here are some thoughts on both the Governor's and Senator Boxer's claims:

First, no matter how much money we send to Washington there is always an efficiency loss that has been estimated from tiny to gigantic. FIgure it like this - when you send money to any government some bureaucrat has to process the dough. That is not free. Don't try to get to precise here because a lot of the precision comes from ideology. But the point is clear - money sent to Washington does not come back to us whole. There are some things like defense, which we cannot efficiently provide through the market. But most things are better in quality and delivery if they are delivered as a result of consumer choice. The efficiency loss is exacerbated by earmarks. We decide to fund a library in Jamestown because a congressman from South Carolina thinks he can get it added to a bill - not necessarily because that is where the next marginal dollar should be sent.

Second, federal expenditures in the states come from only a couple of sources - they come from payments to individuals - those include things like social security, salaries to employees, other kinds of direct payments(for example student aid) ; program money (for all the things that the feds want to encourage); federal installations (military bases or even federal buildings); and direct purchases. The chart gives you the Concord Coalition's division - which is about as good as any. There is not magic here. Because of the efficiency loss we are not really benefitting as a result of more dough. On the payment side of the ledger, if you are a small or poor state, you are not likely to have very large payments to the federal government.

Third, the positive versus negative balance is conditioned on a lot of things which are not necessarily positive for a state. For example, if a state has a lot of very low income people (so lots of payments to individuals), lots of federal buildings and employees and a relatively small population your ratio of tax dollars received to those paid is very high. Mississippi gets about $2 for every one it sends. The District of Columbia gets more than $5 per dollar sent.

Members of Congress including Senator Boxer try to get us to believe that they somehow can rain largesse down on their constituents and that the money comes for free. That is utter nonsense. But there is a final important conclusion to this debate - where the Governor's criticisms seem to be very much on point. Federal money has an efficiency loss but it also comes with strings. For years California has had to pay excess costs based on federal policy. The feds mandate things like reimbursement rates for all of their health payments - and in many cases those mandates ultimately cost each of us more in dollars and more in liberty than they offer in monetary support. But the balance sheet that Boxer offered in her defense of being a rain maker is just bunk.

The next time Senator Boxer claims that she has successfully raised the payments to California from 78¢ to $1.45 per dollar sent to Washington - a) don't believe her numbers, but b) also ask her whether she believes in free lunches.

Friday, January 08, 2010

Variety in E-Book Readers

I am a huge fan of the Amazon Kindle. Since I bought the first model, I have preferred reading books on it rather than in hard copy. It is light and functional. The range of reading choices is superb. Over the last year I have read more than a dozen books on economic panics as well as a range of other books of interest. For the most part if it is available in print there is a way to get it on the Kindle.

CNET in covering the consumer electronics show in Las Vegas ran a story this morning that raises a question about whether the range of new ebook readers on the market will represent the beginning of the end of the trend for these devices. Clearly from the picture there are a lot of manufacturers who are trying to get a foothold in this niche. The most prominent competitor to the Kindle seems to be the Barnes and Noble device called the Nook or the newest version of the Sony E-Reader.Wired also did a story and some short reviews on the eight or nine top e-readers.

When the Nook came out most of the reviews on it found it wanting. Some of the features, like being able to loan books to other readers, proved to be clumsy. Reviews on the Sony device have been a bit more positive. Sony is adding a wireless feature (using AT&T not Sprint) which bring the Sony and Amazon products closer. Sony has also added a music player for its device.

But the real question remains, how large a market is there for a single purpose device? True, the Kindle can read all sorts of products including periodicals. But will the new rumored Apple Tablet close out the two or three leading products in the e-reader category? From my view the market will divide into three parts if the Apple device is released. The first will be devices under $300 which will be mostly pure e-readers. The minimum to play at this level will require a clear screen, long battery life and wireless connectivity.

At the higher end would be a niche for the Apple Tablet or similar devices. My guess is that the price point here will be double or triple the price for the Kindle type device. But to play in this arena the device needs several additional features. The press reports on the Apple Table suggest that it will have color, some type of more robust connectivity (3G) and a much better video component. Clearly, a couple of begun to build a device that runs on a variation of the Windows Mobile platform. For my money I would stay away from that platform.

The third group of products will be the also rans. I think most of the devices pictured in the CNET story will be in that group. The next six months will help to define this new market in media devices. Some have suggested the Apple Tablet will be a Kindle killer. For my money, I will still own both.

Thursday, January 07, 2010

More on the State of the State

The responses on the Governor's State of the State address have begun to roll in and many are predictable. Dan Walters, cynic in chief at the Sacramento Bee, suggested that his proposals will fly when pigs do. George Skelton thought he hit the right tone. From my perspective - Skelton is more right than Walters. (That is often true.)

There were three kinds of issues raised by the Governor. The first might be called aspirational. He argued rather forcefully that the Feds owe us some dough for their mandates. This is not a new argument from the state, Pete Wilson made a similar argument when he was governor. But it is still true. For $1 that Californians send to Washington we get 78¢ back. I have a brother in Idaho who immediately sent me a note and asked that we not try to get Idahoans to fix our "tax and spend mess." I replied that based on their population (1.4 million) and their federal receipts ($9.9 billion) that they owed us each about $1500 to balance the books. The chart shows the to and from of our federal dollars - clearly we get a lousy deal.

In the same vein his proposal on asking to have more money spent on higher education than prisons is a good idea. It may not be a good idea to do this as a constitutional amendment but in these times - violating basic principles of organization might be a good idea. We are still not sure whether this proposal includes all of higher education, including student aid or whether it merely includes the CSU and UC funding - if it is limited it is a bad idea.

His comments about the health care bill, I think reflect the thinking of a majority of Americans. They are disgusted by the Louisiana purchase, Cornhusker deal and the raft of other bribes in the two bills. They are also annoyed about the apparent rush to decision which the majority seems to want to advance in secret negotiations.

The second set of issues were bully pulpit issues. The Governor's strong defense of the work of the Tax Commission is a good example. He urged the legislature to think about an income tax that relies on 144,000 Californians for half its revenue. The Tax Commission may not have been perfect but it needs to be a starting place. The business community's immediate rejection of even consideration of alternatives to the present system shows how bereft they are of current leadership

His comments about the state's pension system were also important. California, over the last couple of decades has significantly increased both current and pension compensation for its employees, way beyond what the private sector offers for comparable work and way beyond what we can afford. Even Willie Brown argued that in one of his most recent columns. But because of the control the public employee unions exercise over members in the democratic caucus, this one will be hard to get done.

HIs third type of issues were the reality ones. A budget is about choices and priorities. And with the dismal state of the economy - The University of the Pacific Economic Forecasting Project said yesterday that the state's 12% unemployment is likely to consider for at least a year more - a lot of what we have come to expect from the state will not be there.

It remains to be seen how the legislature will handle the three kinds of issues - but the Governor has set the plate quite well.

Wednesday, January 06, 2010

Part of the State of the State

In January of 2009, I made a presentation to the Board of Trustees of a University that I represent. Included in that presentation was the slide at the right. I was trying to make a visual point that the priorities of the state were out of whack.

Here is what the Governor said today about the relationship between higher education and our prison system. “But I am drawing this line. Because our future economic well-being is so dependent upon education, I will protect education funding in this budget. And we can no longer afford to cut higher education either. The priorities have become out of whack over the years. Thirty years ago 10 percent of the general fund went to higher education and 3 percent went to prisons. Today almost 11 percent goes to prisons and only 7 1/2 percent goes to higher education. Spending 45 percent more on prisons than universities is no way to proceed into the future. What does it say about a state that focuses more on prison uniforms than caps and gowns? It simply is not healthy. I will submit to you a constitutional amendment so that never again do we spend a greater percentage of our money on prisons than on higher education. “

It is not clear the the Governor includes student aid in his proposal, obviously, I hope he does. But I was interested to see him pick up this long term trend - which every Californian should be concerned about.

Brian Lamb's Letter

Kudos to Brian Lamb and CSpan - his network continues to offer great public service that places like NPR and Fox and CNN and MSNBC should aspire to.

The President in his own words

"I would not underestimate the degree to which shame is a healthy emotion and that you can shame congress into doing the right thing (perhaps the Administration too) if people know what's going on." Let's see if the President actually believes what he says or whether he continues to dodge around his clearly stated campaign promise.

The President's mouthpiece commented that the American people know what is in the health care bills so they don't need to be involved in this part of the process. Has any member of congress actually read the entire bill?

Tuesday, January 05, 2010

Rent Seeking 101

This morning the Internal Revenue Service announced that they would henceforth require people who prepare other people's tax forms to be "qualified" and proposed a new set of regulations to accomplish that. The new regulations will require preparers to pay a fee (surprise) and to take some continuing education. Evidently, the IRS believes that these new requirements will improve the quality of tax advice that each of us gets from preparers. A better solution to the problem of tax complexity would be to simplify the income tax. But that is simply too logical.

The IRS Commissioner this morning said, "In most states you need a license to cut someone's hair," but today "most tax-return preparers don't have to meet any standards when they sit down and prepare a federal tax return for an American taxpayer." Gee Commissioner, in most states we've reduced the regulatory burden on people who cut hair. Many states have abolished their boards of cosmetology based on the simple notion that people can make judgments about who gives good hair cuts.

H&R Block, the nation's largest provider of tax preparation services sought this new regulatory scheme for years. This morning on MSNBC, the head of H&R Block said he saluted the IRS for proposing this new idea - and that all they sought was a "level playing field." Excuse me but this one does not pass the scratch and sniff test. The IRS deputy commissioner for Operations is the former head of H&R Block. Doesn't that make you wonder a bit? Like many of the other things that this Administration has attempted, there is little legal authority for the IRS to make these new rules.

What bothers me the most about this nonsense is whether the Service will require its own people to be licensed. (Don't take bets here.) When the Government Accountability Office did a study of the accuracy of advice from the IRS and found that a large percentage of their advice was wrong. Former congressman J.J. Pickle of Texas once quipped, "Calling the IRS for tax advice is a real crapshoot." Regulations are not likely to improve that situation.

Monday, January 04, 2010

Bernanke's Speech to the AEA

In a speech to the American Economic Association, the Fed Chair said the following - "All efforts should be made to strengthen our regulatory system to prevent a recurrence of the crisis and to cushion the effects if another crisis occurs." The speech also had the following ""The lesson I take from this experience is not that financial regulation and supervision are ineffective for controlling emerging risks, but that their execution must be better and smarter." If the Chairman actually believes that, I am not sure he should be re-confirmed for a second term.

The two charts took about two minutes to find. Anyone who has watched the financial crisis with even mild interest knows that beginning in the early 1990s the leveraging of the two government sponsored enterprises (Fannie Mae and Freddie Mac) increased dramatically. Those leverage ratios increased in part because Members of Congress demanded that those two entities do more to increase lending to "non-traditional" borrowers. The result of this and other policies, including the relative liquidity in the monetary system, produced some rather expected results. Loan to value standards went out the window. The numbers of mortgages with little or no documentation increased by huge numbers. In essence all this policy netted up demand for housing by a tremendous amount. At the same time, the average borrower also leveraged up. All those trend lines helped to create the bubble that is presented so well in the chart out of the Chairman's speech.

Regulations in this case helped to build the bubble. And lack of significant response by regulators to the nonsense of politicians who were trying to build constituencies by giving housing away was deafening. Regulatory structures can always be improved but arguing that the future bubbles will be prevented by more technocrats is silly.


One of the key elements of the liberal response to terrorism has been that they would not allow "profiling" - choosing particular groups for special scrutiny.

The Obama Administration yesterday said that persons traveling to the US with the following passports (Cuba, Iran, Sudan and Syria,Afghanistan, Algeria, Lebanon, Libya, Iraq, Nigeria, Pakistan, Saudi Arabia, Somalia and Yemen) will face special procedures before they board a plane to the US. I salute the Administration for this step. My only question is why this very logical step took the federal government so long to do.

Oh, by the way, wait for someone in the media to help redefine what "profiling" means.

Saturday, January 02, 2010

For our safety or their convenience?

For the last two decades I have been a very frequent flyer. But since 9/11 that has become harder and harder. For almost all of that time I have been at the highest level on two airlines. (the one which George Clooney's character brags about - except not American). But as I have watched the development of the TSA and the internal safety rules on individual airlines - many simply do not make sense.

For example - We are told that somehow our electronic gear like iPods and electronic book readers interfere with the navigation systems of airliners and therefore we need to keep them in the OFF position for the first and last 10 minutes of a flight. The data that I have read suggests that those kinds of systems do not interfere with any system but the passenger's attention. How about a rule which states no earphones for the last 10 minutes? And why have I noticed that flight attendants are increasingly calling the no toy use rule earlier and earlier in the flight path? What is the difference in attention between a Kindle and a paperback?

We have also been subjected to new types of restrictions on flying. All liquids below a certain quantity have been banned. Those have to come in a one quart plastic bag. Then we get new suggestions after the hot pants bomber on Christmas - that we will have to stay in our seats for an hour before landing on international flights. But the infinite wisdom in the Transportation Safety Administration would not dare to think about profiling potential terrorists. Quick can you think of how many 80 year old grannies have ever contributed to a bombing plot? That was east but there are hundreds of other types of flyers who are unlikely to be involved in plotting to bring down an airline. This is not rocket science, it involves intelligence. But as we saw in the Keystone Cops like performance of the TSA and the intelligence agencies, evidently those tasked with reducing our risks in flying are lacking in the basic skills of intelligence.

Admittedly our prior president was the one who agreed to make all of the security screeners public employees. But really now, are all these new rules necessary or even helpful? True, we've only had a couple of near misses on incidents (hot pants and shoes) but have the agencies tasked with thinking about these questions thought about any alternatives that would concentrate more resources on people who are likely to act inappropriately?

Has the government even considered any alternatives that would improve the situation for the most frequent travelers? In the early 1990s the Customs Service created a program which allowed the most frequent international travelers to submit some bio-metric data in exchange for express service in coming back into the country. Unfortunately, the Fast Pass program was dropped because the government computers and scanners were only about 30% accurate - and when they failed the system went down? Couldn't they get some competent computer professionals to implement a system that was as reliable as an ATM?

From my perspective there has been one group (besides the terrorists) that has benefited from all the new rules and requirements - those are the businesses behind the screeners. In most airports now there are tons of new businesses including food courts, massage, shoe repair, jewelry stores and gadget shops that have been established to allow you to pass the time after getting through screening. I had not thought about it before but perhaps this is just a big part of the stimulus package - which will get one sector of the economy working again.

An interesting list from Amazon

Amazon published its 100 top reader chosen books for 2009. In the top 20 are two Glenn Beck books and Mark Levin's Liberty and Tyranny (at 2 with the Beck books at 3 and 16) but also there are Going Rogue and Culture of Corruption (Michelle Malkin's book on Obama). Thus a quarter of the top rated books are by or about conservatives. The only book close to a liberal one is Senator Kennedy's Autobiography. In the top 30 add the Dick Morris book called Catastrophe. For the rest of the top 30 there are a couple of novels and several health books. If you look at the numbers in the Amazon top 100 sellers only Palin's book is there. So the reader best books list must be telling us something.

Here are some possible explanations:

#1 - Conservatives are better conspirators. (The Hillary Clinton Theory) All these kinds of lists are merely an opportunity for conservatives to exercise their tech savvy - this is a variation of the rant first offered by Hillary that there is a vast right wing conspiracy somehow that frustrates liberal ambitions.
#2 - Liberals control the media so they do not need to write down their ideas. (The Rush Limbaugh Theory) This could actually have been said by many other conservative talk show hosts. It seems like the Yang of the first one's Yin.
#3 - When you are out of power you have time to write. (The Memoir Theory) No additional explanation seems necessary here. Politicians and those who would be public commentators want to figure out how to keep themselves before the public.
#4 - Today's readers are tomorrow's voters. (The 2010 Theory) - Among the ones listed this is the most convincing. The only book in the top 20 that I have read is the Levin book which is part screed and part history. But my suspicion is that the reader list is in part a reflection of the general mood of the country at about one year into the Obama presidency. If the GOP candidate to replace Senator Kennedy comes anywhere close on January 19 - this one will certainly be the most credible.