Idiotic Signs

I am intrigued by signs. And this one amazes me. In a Starbucks I found a five step instructional piece on how to wash your hands. It seems to me that if you can read the sign you probably have the steps down pretty well. But maybe not.

Don't get me wrong I do not disagree with reminders in food establishments that employees should wash their hands. But this one is just a bit much - don't you think?

It is time to pull the plug on the mortgage interest deduction

As I was driving back from a meeting today I listened to a guy on the radio who said taking a 30 year mortgage in this rate environment makes no sense, especially if you do not itemize.   That accounts for about 70% of all taxpayers.   His argument is simple, a 30 year mortgage begins to pay more principal than interest in the eleventh year - thus for taxpayers who do not itemize the benefit of taking a long mortgage adds costs over the life of the loan and provides zero benefits, except a slightly smaller monthly payment.

The cost of the mortgage interest deduction is one of the most expensive provisions in the tax code.  Estimates come close to $100 billion in subsidy and that applies to some percentage of the remaining 30% of taxpayers that itemize.

When I was writing my dissertation I found that, at least at the time, there seemed to be two facts.   First, the evidence about whether the provision actually increased homeownership in the countries where it was in place, was uneven at best. From my view, the deduction was downright ineffective in encouraging home ownership.  Second, the distribution of benefits was not heavily skewed to upper income taxpayers.   (In essence the elasticity of demand for housing was not perfect - as incomes rise the price of one's housing to not rise in a parallel fashion.) In recent years, a lot of the discussion about this tax provision has been to cap the amount of interest that can be deducted.  Celia Chen, an analyst at Moody's argues that the deduction “hasn’t helped to expand homeownership, but it’s helped to support purchases of larger homes.”  The National Association of Realtors, despite the evidence, argues that the deduction should be preserved.  For example  “Our members believe tinkering with the mortgage interest deduction at the high end will trickle down,” said Lawrence Yun, chief economist of the National Association of Realtors.   They would be even more vociferous if current proposals were to eliminate the deduction entirely.

Since I wrote my dissertation (almost three decades ago) the number of non-itemizers has increased significantly.  Thus, a decreasing percentage of families avail themselves of the deduction.   Eliminating the deduction might also encourage home buyers to take out shorter mortgages.

For both policy provisions and for simplifying the tax code, eliminating the deduction entirely would seem to be timely and appropriate.

What is a Budget?

When Aaron Wildavsky wrote his legendary book The Politics of the Budgetary Process (now classic enough to be a Google Book!) he argued that ultimately budgets are a set of choices we make about society.   As Gerald Sieb pointed out in the WSJ this morning the long term trend on making choices, especially intelligent choices in our federal budget could not be clearer.  

The chart at the right shows spending trends (as % of GDP) that two important categories in the budget represent over time.   Notice that since 1980 spending on mandatory programs, like Social Security, has increased from just under 11% to more than 14% of GDP.   Over the same period, non-defense discretionary spending has decreased from 5.2% to 4% and is projected to decline in the Senate budget to 2.5% in the next ten years.

The second chart is from John Taylor and projects federal outlays based on the house and senate budget proposals.   Note the small print at the right of the chart which highlight that at the end of the projected cycle the Senate expectations of revenue are still well below outlays.

So if we take the path proposed by the Senate, we a) do not balance the budget and b) reduce the amount of discretionary spending in the budget, which is already a very low figure.

Just because the numbers add up does not mean that the policy does.

Field of Dreams

Over the weekend Sacramento officials announced a breakthrough tribute to propose to the NBA to keep the hapless (25-46) Kings.   Here is what the city is offering $258 (58% of the bid) million including the pledge of $212 million from parking revenues and a gift of several parcels of land totaling more than $38 million to the other partners in the deal.   The land is valued at today's prices, the pledge of parking revenues is valued at something approaching future values.

The supporters of this suggest that it will revitalize the downtown. (Stop me if you have heard this one before.)  And while I think any kind of public money for sports franchises is a horrible idea, let's look at the logic of the proposal.

Jeff Michael, an economist at University of the Pacific, is quoted as saying "it's a better deal than last year."  Which means that the city is putting up a smaller percentage of the deal.  Although his comments suggest that the parking revenue estimates may be a bit optimistic.

The key assumption in the proposal is that a) the decline in traffic to downtown is built in part on deteriorating facilities both in downtown and at the King's arena and b) in a Kinsellian wave of optimism, if we build it, they will come.   Neither of those premises is entirely sound.

First, when Downtown Plaza was refurbished a couple of decades ago it brought some immediate growth in sales but that glow soon wore off.   Perhaps a concert and sports venue would bring more people downtown, but perhaps not.    There are two examples that could be used which are close to home.  The Staples Center in Los Angeles seems to have been relatively successful in bringing people back to downtown Los Angeles.   There are two key differences however - first LA is a lot bigger city and second, LA has a basketball team (indeed 2) that has a strong fan base.   If you build it - they will come is true, if you have winning franchise.    But the alternative view, which has a lot more of the characteristics of this deal, is the bonded indebtedness that helped send Stockton into bankruptcy.

One worry from my perspective is the competition for entertainment.   I have not seen the convention center's bookings statistics recently but with the Mondavi Center and the Three Stages in Folsom (both of which are superb venues) I suspect they are not robust.  

Second, and more fundamental are the financing assumptions.   From my view they are flakey, to be kind.   The city's parking structures have almost $5 million in current debt service so according to the City's Treasurer the bonds are structured as interest only (no principal payments) until 2022 when the current debt is retired.    The plan assumes 1.4 million attendees (who will be paying a slightly higher ticket price) which is slightly higher than current attendance.    The Treasurer is quoted as saying "all the profit comes back to the city."   Well, that is not exactly true.  The new franchise owners who are putting up less than half of the commitment will make significant profits if the franchise is successful.

Even if you can get over the notion that it is the City's responsibility to help support a sports franchise, this deal comes down to whether by building a new edifice downtown the city will attract enough collateral business to repay its investment.   If the assumptions are all correct, then it might be an OK deal.   But the contrary evidence against these kinds of proposals is pretty strong.    From my perspective every city should just say no to the extortion demanded by the professional sports franchises.

Political Correctness and Endorsements

This afternoon I was driving back from a meeting in the Bay Area and heard an NPR type interviewing a "branding" expert who joked about whether the tie-in that Marriott corporation has established with the new movie about Jackie Robinson would increase the number of African-Americans using the Marriott Rewards program.

According to the NYT and Apoorva Gandhi, vice president for multicultural markets and alliances with Marriott, the tie in "matches our culture, theme and values." The NYT story babbled on about how this program would increase Marriott's ties with minorities. The sage Mr. Ghandi said "We want to reach multicultural travelers in a unique way that will cut through the clutter and resonate in a way that reaches them personally.”

The sage on NPR guffawed about the unlikelihood that this tie in would rope in more African Americans.   There was an earlier version of a bio-pic where Jackie Robinson played himself.  As I remember the movie it was not much to write home about.  The chatter on this movie has been pretty good.  Oddly the earlier version said nothing about Gil Hodges

I have a special feeling for Robinson, even though he went to UCLA.   He was a class act.   And so this recognition in a bio-pic will be good for all fans of baseball.   And that is the point.  Summer months, I suspect, a lot of families go on road trips.   Part of that experience is to go to a baseball game.  From my perspective the appeal of this movie is not based on race (although that is a critical part of the story).   I share the critic's questions about whether a tie-in will bring one group of consumers into a hotel rewards program.  But I suspect the chances would be greater for enlarging the "rewards program members of summer" were they to do a more direct tie in with baseball.   

Robinson got his chance in good part because he was very good at baseball but also because an unlikely guy like Branch Rickey decided it was time to make a change in baseball.   Robinson was a ground breaker, but as I mentioned yesterday, I would never describe him as a person from a "marginalized group."   On April 12, when the movie is released, I will be one of the first to see it not because of the Marriott endorsement.  I can only hope that the movie shows something about the real life of Robinson and not some politically correct impression.   Robinson and Rickey's story is good enough by itself without all the PC that seems to infect a lot of our heroes today. BTW, I already am a member of Marriott Rewards.

Do stories matter?

My wife and I went to a program on Thursday called Advancing Women's Leadership at the University of the Pacific. I am not normally a fan of these types of events.   They often devolve into repetition of cliches for a couple of hours.   But this program had some substance.  The Keynoter was Condeleezza Rice and I wanted to go just for the opportunity to hear her speak. As I thought about it, I do not believe she has ever found a job because of her gender.

The first speaker of the day was the founder of Latina Magazine, Christy Haubegger. She was witty and insightful. One of those insights was "It is hard to be what you can't imagine." She evolved from doing a business plan in Stanford Law School to finding angels to help fund the venture. She said her initial hit rate was about 3 in 200. But she said she went back to those who turned her down - with the idea that the negative response could yield results.  Even if a small percentage of the people offered reasons why she had been rejected, she would begin to understand how to improve her pitch.  She made a strong point, which was seconded by Rice, that mentors come in all shapes and sizes.   As ground breakers, both pointed out that had they waited for mentors that looked like them - they would have had to wait for a long time.

Rice's speech offered a couple of interesting observations including that authoritarianism is not stable.    She illustrated the point with a story about Nicholae Cheausescu, the former leader of Romania.  At one point when an old woman in the crowd called the dictator a liar, the crowd quickly turned against him.   She also had some great points about the relationships between rights and responsibilities in our system.  Finally, she also said that Americans are a strange mix because they are the most individualistic and yet also the most philanthropic.

I was struck with one a contrast between two parts of the event.  In a panel between the first speaker and Rice, the moderator, a Pacific professor, made a couple of comments about the problems with being from a "marginalized group."   Rice's remarks argued that the only people who can be marginalized are those who accept the status. She argued that when people are confronted with racism or sexism they can figure out how to get around it, or to deflect it or in some instances to confront it.   But walking around with a chip on your shoulder (she described it as running around with "your hair on fire") is not productive because a) it does not solve the underlying problem and b) ultimately puts one in a marginal position.

Rice was a superb and interesting speaker.  I also enjoyed Ms. Haubeggar.   The problem with the idea of "marginalized groups" is that what is begun as a temporary condition to address perceived wrongs can evolve into a permanent status.   Over time those perceptions will destroy one of the strengths that Rice talked about - namely that we are an individualist people (valuing individual achievement).

A Clone by Any other Name will not smell as Sweet

The Yankee Group is a research outfit that tries to project where things are going in the tech world.   They seem to be unimpressed with the launch of the new Samsung IV phone/phablet.    In a release yesterday, covered in Appleinsider, they suggest that the new phone will actually lose ground to the iPhone.  They think the new phone will not gain ground in the US market.

As I suggested in an earlier post, the rollout of the as yet unreleased (with no date yet posted) phone was evocative of an Apple event - although many observers said it was one click off.   I think that may be true of the Galaxy IV too.   There is one other risk for Samsung at this point, with an announcement and no release date, they may depress sales of the Galaxy III.   Timing on announcements of new products can influence the sales channels for the earlier models.

On Sunday, my son bought his son (10) a new cellular phone.   After, I commented to my grandson, that I had not had a cellular phone when I was 10, it seemed like a natural thing to do.    This is perhaps the best way to get in touch with kids as they are walking home from school.   My son chose a lower end phone - but not surprisingly AT&T offers a phone with unlimited texting for the pre-teen set.

Fully functioning Smart Phones have the disadvantage of a pricing scheme which is probably out of reach for many consumers.   An iPhone would have been very expensive for the use that my grandson was going to put it to.  So neither the Galaxy nor the iPhone are likely candidates for that market.

While we were waiting to complete the transaction I noticed one of the sales associates was checking her phone - which was a Galaxy III.   I asked her about the phone and its size and she said she liked it a lot.  I picked one up and still found it to be very bulky.

When iPods were first becoming must have devices Microsoft developed an MP3 player which tried to mirror the Apple product.   It was called the Zune.   It was pretty well designed but lacked the entire environment that Apple had created for their product.   It sold poorly although surprisingly it is still an also ran in the competition for MP3 players.

A lot of a smart phone purchase involves a series of choices - size, operating system, options, APPs and even color go into making a decision on which phone to choose.  But from my perspective, and seemingly from the Yankee Group's more sophisticated market view, the attempt by Samsung to copy Apple, will fall flat.

Proceed with Caution

The US Department of Education ruled yesterday that colleges and universities participating in Title IV can award aid for assessment of prior learning.   While the Department said it would proceed with care, the potential for abuse here is significant.   The ruling was directed at Southern New Hampshire University, which is a place that has advertised heavily on TV.

Here is the notion, a "student" could apply for federal aid by signing up with a university and then taking a series of assessments to demonstrate competencies.   The Department sees this as getting away from "seat time" as the only arbiter of time to degree.   But consider the following example.   Let's say I am a 25 year old male who decides to go back.   For some reason, when this guy graduated from high school he never enrolled in college.   But he had a pretty good high school experience and has held a series of jobs over time and has developed a lot of competencies in what would normally be considered lower division college work.  So for example, he learned something about statistics and writing.   From my reading of the opinion letter, the student would get full eligibility for student aid but would only take classes for half of the normal time to degree.   In essence, even though the student is nominally enrolled for 50% of a degree, he would get aid for 100%.

Obviously, this has the potential to have colleges and universities do some innovative thinking about how to award credit and perhaps to even encourage more students to complete a degree.   But I look back at the "ability to benefit" provision of the 1972 Education Amendments, which created the first notion of wider eligibility for students in need and remember that while the provision offered many students a chance for an education, it also allowed significant abuse with some of the proprietary operators going into welfare lines signing people up with the promise of "free money."   Over a long career in the public policy of higher education, this small move could have huge negative consequences.

Hearing Coolidge and one of his 1924 opponents

The more that I have thought about the NYT review of Amity Shlaes new book on our thirtieth president, the more I am annoyed.   The reviewer diddled around with the substance of the book and then came up with the conclusion that Coolidge was "an extraordinarily blinkered and foolish and complacent leader."    While I was surfing the net the other day I came across this newsreel footage of Coolidge which in about four minutes summarizes the case that Coolidge made for his re-election.  The book talks about the three candidates using the new medium of film to give short campaign speeches.  This seems to be one of them.

Clearly, the "it takes a village" groupies would disagree with Coolidge's thoughts.  But as you review what Coolidge had to say, there are some very contemporary themes.  The thirtieth president would not be a media darling today.   I suspect his two opponents would also not fit into the the celebrity model of politicians.   Here is Robert LaFollette's speech in 1924 (who was the Progressive candidate that year) -

(Unfortunately, Youtube does not contain any footage from the Democrat candidate that year, John W. Davis.)
Coolidge, had some interesting challenges in his election campaign.  He needed to uphold the positive part of the Harding legacy (although as one of my professors as an undergraduate once said, the best thing that Harding did for the country was to die).  At the same time he had made a strong commitment to a tax policy which dramatically lowered rates (even after a partial defeat before the election on his and Mellon's tax proposal), he wanted to reduce the size of government in total terms - both as a result of the peacetime dividend of the end of WWI but also in absolute terms.   He lived in an environment when politicians he worked with could not be counted on to not pursue their own ambitions. (Gee, that is new also.)  But in the end he was successful in a number of key areas.

There are many issues during the time that seem out of place.  The headlong rush to reduce the size of the military worldwide (adopted in the Kellogg pact) seems naive and it was signed on Coolidge's watch - although there was considerable support for the effort across the political spectrum.   The opposition to anti-lynching laws (Coolidge supported the enactment of anti-lynching laws) also seems a bad part of our history.

At the same time the notion that government has proper limits has never been more clear.   To call Coolidge "blinker, foolish and complacent" is just another demonstration of the "blinkered, foolish and complacent" state of contemporary journalism.

Does Data Matter?

In recent years there has been an increasing call for banning something called "distracted driving" - which seems to devolve always back to cell phone usage in the car.

I must admit that I am bothered when I see a drivers with  cellphones in their hands.   Indeed, when the talk about producing a ban to all but hands free usage began in California, I told the two vice presidents that worked for me that I would buy them a unit for their car so they could talk hands free.

But the Atlantic Cities magazine had an article yesterday which reproduced a chart originally created in a Center for Disease Control and Prevention report which used World Health Organization data to suggest that the US is awash in distracted drivers.   I put all those links in because from my point of view the writer in this unknown magazine jumps to a conclusion that is not warranted.

Here is a second chart from the CDC report.  This reports data on a phone for text and email messages while driving.   Notice that the US numbers are about the same for frequent tester/emailers as other countries.  We are at the high end for occasional texters/emailers as two other countries.  It is pretty clear to me that talking on a phone, hands free, is no more distracting  than perhaps switching a radio station, asking kids in the back seat to quiet down or even rolling down the window.

But the distracted driving paranoids want to ban all cellphone usage.   Indeed, if you listen to some of them they argue that safe driving requires one to not have passengers nor a radio.

The methodology (Highlighted below in an excerpt from the report) in the report is worth reading, from my perspective it calls into question whether the results between European and American habits are even accurate -

HealthStyles and EuroPNStyles are online surveys designed by Porter Novelli (Washington, DC), a worldwide social marketing and public relations firm, and conducted among persons aged ≥18 years to examine health-related attitudes and behaviors. The HealthStyles data analyzed in this study were collected in the 2011 fall HealthStyles survey, conducted in the United States during September 30–October 5, 2011. The fall HealthStyles survey was sent to a random sample of panelists who had completed the 2011 spring HealthStyles survey. The spring HealthStyles survey was drawn from a panel containing 50,000 persons randomly selected through probability-based sampling to be representative of the noninstitutionalized U.S. civilian population; 14,598 panelists were selected to participate in the spring HealthStyles survey, and 8,110 panelists completed the survey (response rate: 56%). The fall HealthStyles survey was sent to 5,315 of the persons who had completed the spring HealthStyles survey; 3,696 (70%) completed the fall HealthStyles survey. Respondents who completed the survey received reward points (worth approximately $10) and were eligible to win a prize through a monthly sweepstakes (prizes generally were worth less than $500). HealthStyles survey data were weighted to match U.S. Current Population Survey proportions for the following nine characteristics: sex, age, annual household income, race/ethnicity, household size, education, U.S. Census region, metro status (i.e., residence in a metropolitan statistical area [MSA] versus a non-MSA), and prior Internet access.

The EuroPNStyles survey was conducted in July 2011 in Belgium, France, Germany, the Netherlands, Portugal, Spain, and the UK. The sample was randomly drawn from Synovate's Global Opinion Panel, recruited via Synovate partnerships with select websites, portals, and Internet service providers in Belgium, France, Germany, the Netherlands, Spain, and the UK. In Portugal, the sample was randomly drawn from the Global Market Insite's Panel. Panelists were selected to match each country's census proportions for age and sex, and quotas were set to reach 1,700 adults in all countries except for Spain and Portugal, where quotas were set to 850 adults. The survey's response rate in 2011 was 34%, with 10,338 persons completing the survey. Respondents received reward points for completing the survey, and the final data were weighted by age and sex to match each country's census proportions.

I wonder how much this "research" actually cost the CDC to produce.  But even if this is a task for the CDC, the report is useless without some additional thinking about the conclusions.  For example, is there data that "distracted driving" incidents are lower in California (where hands free restrictions are enforced) than they are in states where there is no such ban?

What is a Cellphone?

Samsung unveiled its newest version of the Galaxy cellphone at an event in New York City at Radio City Music Hall last night.  They clearly wanted to emulate the kind of glitz for an Apple rollout.   While they made their device thinner and three grams lighter, it has a larger screen.  They also added some features like smart gesture which if you are watching a movie on the phone, for instance, and your eyes move away, the movie will pause.   They also made one of the cameras similar to a very good point and shoot model with 13 megapixels.   The new phone has an IR sensor so it could also double as a TV remote.

PC Magazine did a comparison chart of features which is pretty helpful.  Fundamentally, most of the technology changes are things that are likely to be in the next version of the iPhone.   I am not sure I care about whether a phone has an Amoled or Retina display (both are clear) or whether the internal chip is one kind or another (I simply want the phone to do what I use a phone for most - calling people and doing light web surfing and email.)   When I want to do serious web surfing or email or for that matter even watching movies, I move to either my laptop or tablet.    As I think I commented when Apple added the reader to the phone - that is not a feature I am likely to use anytime soon.   It is also likely that when the next Apple phone comes out, it will have all the technical features that the Galaxy has or some variation.

One knock on the iPhone when the 5 came out was the lack of an NFC chip (which the Samsung has) - those chips allow certain transactions to take place using the phone.   I have found Apple's smart wallet to do all that an NFC chip would do without the risk of hacking that some users of NFC devices have complained about.

Forbes did a review that focused on some new features that allow the phone to be a health monitor.  The reviewer basically said interesting but so what.   I tend to agree.   It also concluded that "in a year’s time we’ll be looking at standardized smartphones differentiated by the culture of the manufacturer and the services they provide, as much as we care about the slab and how it performs."

Samsung commented,according to the WSJ, that they were driven by four factors -"The phone had to be fun, encourage closer relationships, offer convenience and help improve health and wellness." The WSJ quick look at the new phone argued that several of the features were not ready for prime time. Perhaps that is why this introduction did not offer a firm release date.

The PC review offered one knock on the new phone - that even though the pixel density of the display was denser than the iPhone it could be a bit fuzzy.   But I suspect that for those phone users who game or watch videos a lot that small difference will mean nothing.

The real question here is personal preference.  When the S2 and S3 came out Samsung made a determined pitch to get iPhone users to switch.  I went to a Samsung display in the mall and found the phone to be a bit clumsy - that will be even more true in this new model.   We'll see what Apple comes out with when they announce their new model.   But for now the real beneficiary is the consumer.

What is the Job of a Biographer?

I have just finished reading a new biography on Calvin Coolidge.   It is excellent.   The book, in one sense is a precursor to Amity Shlaes re-evaluation of the great depression. (The Forgotten Man)   As I began to read the book, I consulted two reviews  - one from the New York Times and the other from the New Yorker.   The NYT reviewer concludes that Coolidge was "an extraordinarily blinkered and foolish and complacent leader."  The New Yorker described Shlaes scholarship as an attempt at "revisionism."

What struck me even more after I read the book was the thought that both reviewers began their work with a conclusion already written.  From my perspective the job of a biographer is divided into two parts.   First, the writer must do enough research to understand what the person did during their life.   Not everything in one's life is significant but any good biographer needs to understand the breadth of things that happened during the subject's life to get a better idea of why the person took the path he did.

In the Shlaes biography of Coolidge, she does some meticulous research.   We begin to understand Coolidge by understanding his family; the influence that his choice of college (Amherst) had on his life; his role in the Boston Police strike; his relationship with his wife Grace; and the various facets of a long political career.   Shlaes skilfully weaves a narrative together that dives into each of these issues and more.  At the end of the book, you know a lot more about the thirtieth president well beyond the anecdotes and quips of wags like Dorothy Parker and Alice Roosevelt.

Roosevelt once commented that Coolidge looked like he was "weaned on a pickle."  Roosevelt was in her declining years when I lived in Washington.   But the WP would trot her out every few years as a historic and entertaining figure.   The more I read these pieces the more I thought of her as a spoiled child that never quite grew up.  Coolidge could be caricatured but that does not mean he did not have substance.  

One of the best parts of the book is Shlaes extended discussions about Coolidge's role in the 1919 strike of the police in Boston.    A good part of Coolidge's national stature came from his firm role in the strike.  What Shlaes does well is to put all of this in context beginning with some national events like the general strike in the city of Seattle and concern that ran through the country about the Bolshevik revolution.   Labor was trying to extend its record of progress during the teens in the last century.   And at least some of the legislation that Coolidge signed while governor - advanced those goals.  But he drew the line at the ability of police to strike.    Wilson equivocated on the coal and steel strikes but Coolidge chose to react strongly against the strikers.  Yet as Shlaes points out, even after the strikers were fired, he attempted to treat them humanely - they just were not going to get their former positions back.

The second task of a biographer is to relate the person in history to our times.   Why should we know more about the subject of the biography?   But what can we apply to current times from that person's life?   There are odd things in every person's life.  For example, Coolidge once supported a bill in the Massachusetts legislature which would limit the ability of autos which went more than 20 miles an hour to operate.    That is quaint in today's terms but even the story of that bill gives you an idea of Coolidge the politician.  He worked hard for his constituents.   Coolidge's relationship with Teddy Roosevelt waxed and waned over his career and Shlaes does a superb job of presenting the evolution of his thoughts.

But what Shlaes' work does most importantly is give a coherent explanation of Coolidge's fundamental beliefs, animated in both personal and political life, of the danger of hubris and the limitations on the effectiveness of governmental action to solve all our woes.   Both reviewers seem to have started out with the Wilsonian notion that government action is for itself positive.    I understand that a lot of people in this country have lost that essential teaching that was so prominent in the nation's founding but that does not mean that should not be something that our political leaders could relearn.

Shlaes accomplishes both tasks in an extraordinarily readable book.   There are things about Coolidge that tie him to his times - not just the proposal on autos but his support for tariffs and other things which are not relevant to our times.   At the same time Shlaes presents a compelling case that the President who she terms the "great refrainer" has a lot to teach this generation.

Pope Francis

I am not Catholic but followed the retirement of Pope Benedict and the selection of the new pope with interest.   From all that you can read about him, he seems to be the right choice for our times.

I worked with Jesuits over most of my career.  As a group they have an interesting mix of intellect and humility.  One of my closest colleagues in the independent colleges was the President of Santa Clara University, Fr. Paul Locatelli.    He moved the University successfully from a good place to a great one.   He raised a lot of money.   He improved both the physical and intellectual focus of the place.   A few years before his retirement from the University, he created a year long project at Santa Clara to think about globalization.   The project was going to begin with a speech/forum by Thomas Friedman (who had just published the Lexus and the Olive Tree) and then proceed through a series of events which explored the range of issues relating to our increasingly interconnected world.   As I was leaving he gave me a list of the speakers and readings that students were going to encounter over the year.  I worried that the balance was not where it should be and wrote him a long note about alternative speakers and sources.  He ended up adding a lot of the stuff - so in the end the Santa Clara community could dig into all aspects of the issues.   What is important here is not that Fr. Locatelli accepted some of my suggestions but that he would conceive of a major role of the university to get the community to engage outside their narrow academic disciplines.

I am intrigued by several aspects of the new pontiff's background.   Among the saints, St. Francis is one of the most intriguing and inspiring to me.  His story and his ministry are compelling.   When we were in Italy we went to Assisi.   You get a good idea about both the life of St. Francis and his relationship to the more organized church.  The new pope's lifestyle presents a lot of the aspects of St. Francis' life.   I suspect that many of the trappings of the papal office will be shed.   That is probably appropriate.   At the same time, it is interesting to see the first Jesuit pope; the first pope named Francis; the first pope in almost 1400 years who is non-European.

The Ryan Budget

Representative Paul Ryan released his budget proposal yesterday and it provoked entirely predictable responses.  The liberals, including the two talking heads on Wonkblog, immediately tried to dismiss the proposal.  The two Wonks on the video dismiss that the deficit is a significant problem - don't worry about the dramatic growth of deficits over the last several years.       At the same time, the so called Bipartisan Policy Center (yeah right) did two charts which (in their view) reduce the over all debt by greater levels than other groups in Washington.    More than the proposal by former Senate Pete Domenici and former LBJ economist Alice Rivlin.  

Ultimately, the questions raised by the Ryan proposal come to a second chart,which graphs what the proposal reduces over time.   A key assumption of the proposal is a significant change in Medicaid and some less dramatic reductions in Medicare.  (Although the underlying logic of the proposal is to introduce some market based reforms to Medicare.)   The second major assumption of Ryan's proposal is that the tax system is broken and needs to be significantly fixed by simplification.   The Wonkblog commentators seem to think that is impossible.   They also seem to ignore the positive effects that simplification would have on economic growth.   

I am a lot less comfortable than the Wonkblogers seem to be about the growth in debt in the country - both the speed with which it has grown and the percentage of GDP that our debt represents should be almost terrifying to anyone with some understanding of history.  David Walker, the former Comptroller General of the US (the Chief Accountant for the government) described the problem as a "fiscal cancer" , which in my view is not far off from reality.   If our elected officials (I caught myself from using the term "leaders") can begin to talk seriously, a legitimate reform of the tax system and of the entitlement system may indeed be possible.  It certainly will not be the vision that Ryan offered yesterday.  And it certainly will not be the vision that the President has offered (or actually will offer in the next couple of days).  But it will also most likely be a better vision than the one that all but those in the cocoon of Washington seem to understand without some serious work on debt and deficit.

Government's Role in "Noing Thyself"

I am reading Amity Shlaes excellent new biography of President Coolidge (and will write a full review when I have finished it) but three disparate decisions caught my eye yesterday that would have been of interest to the thirtieth president.    All are evolving stories and so their outcome is unclear, but each would seem to be a validation of Coolidge's propensity to just say no.

The first was Judge Milton Tingling's decision to overturn the New York City Nanny State regulations on sodas.  Mayor Bloomberg claimed that the limit on sodas sold in fast food joints under the silly notion that it would somehow help to control obesity.  The judge saw through that nonsense and declared a regulation that banned only certain kinds of drinks in a limited set of establishments, "arbitrary and capricious."   The NPR story on the decision concludes that lawmakers in Mississippi are hot to trot to pass a ban on bans (prohibiting local entities from enacting Bloomberg type regulatory schemes).  Like many other people who grew up before the extra large drinks were available, I have been surprised at the size of sodas available today.   But the simple answer to not consuming too much soda is to simply not buy it.

The second story is a developing one in Mexico.   Major parts of the Mexican economy have been collared by monopolies, especially in the communications fields.   Monday, Mexico's new President declared that competition in telephones and television might unleash some very positive competition.   I will confess that when I have been to Mexico over the last two decades that I am confused and annoyed at the way Mexican phone service works.   In the last few trips things have started to be simplified but the much of the current system is outdated.   The new Federal Communications Institute may be a step in the right direction.   One friend from Mexico wrote me this morning and quipped "No mas vacas sagradas?(No more sacred cows?)"  If Peña Nieto succeeds it will be a big step.

The third story is about the North Central Association of Schools and Colleges' new accrediting standards.   North Central adopted a new standard in their accrediting guidelines which states that “The institution’s educational responsibilities take primacy over other purposes, such as generating financial returns for investors, contributing to a related or parent organization or supporting external interests.”   Inside Higher Education commented that the new rule(s) were aimed at the for profit institutions and indeed a first implementation resulted in proposed probation for the University of Phoenix.   Part of the growth of proprietary institutions over the last several decades comes from a vague notion in federal law called "ability to benefit" - which was aimed at assuring a wide range of students opportunity to education after high school.   

Each of these issues relates to thinking about the proper role of government in our lives, from Shlaes biography which Coolidge was thoughtful practitioner.   In the first, if we want to control obesity is there a better way to do it than creating "arbitrary and capricious" regulations?   In the second, mercantilist grants of power from government do not serve the consumer nor the society - and Peña Nieto's new Institute has the possibility of doing something right for Mexico's continued robust economic growth.   In the third, a non-governmental entity, despite a wide opportunity created by government policy, is re-establishing a notion that should be paramount that education has some public goods aspects that we should not ignore.  (But public goods are not created exclusively by government.)

The fickle finger of polls

According to the National Review Blog Ashley Judd has fallen out of favor with Kentucky democrats to oppose Minority Leader Mitch McConnell.    In December, she was the darling of the pollsters.  USA Today announced with some fanfare that she was the number one pick.   Judd has an MPA from Harvard.  (For many that might be a disqualifying credential to work in the Senate.)   The Democratic Senatorial Committee is said to be applying the brakes to the Judd campaign thinking they might have a chance to unseat the Minority Leader with a more conventional candidate.   She was a member of the Tennessee delegation to the Democratic Convention in 2012 and that might pose some problems for her as a candidate in Kentucky but she has legitimate Kentucky roots.  The Rove PAC has already run an add to that effect.   Judd can be seen at UK basketball games and she does have some ties to the state.

A few days ago Huffpost said Judd denied the story of a candidacy which would be announced around the time of the Kentucky Derby “I am not sure who is saying this stuff, but it is not I! I’d prefer as a fan of your journalism that you stay accurate and credible. We told everyone who called us yesterday these stories are fabrications.”

Perhaps it is her stridency at one point she said she was not going to have children because "It's unconscionable to breed, with the number of children who are starving to death in impoverished countries."   As Salon pointed out of the 24 Senate incumbents that have been defeated since 2000 none of the races offer much hope to such a outspoken liberal activist.   Kentucky is a red state, and while McConnell is not exactly beloved he does have a track record without the baggage that many of the defeated senators had going into their elections.   Having lived through a celebrity governorship in California and watched Al Franken stumble his way through the Senate, I am also not sure she would add anything that the Senate needs except another middle aged publicity seeker.

With friends like these....

A Rare Instance when the
"Rev" has mouth shut

The "Rev" Jesse Jackson offered a prayer at the funeral of Hugo Chavez yesterday and then on CNN commented (I guess in response to the notion that Chavez was a tyrant and helped to ruin his country's economy, prop up Cuba and generally be a bad neighbor) “Well you know, democracies mature … our first 15 presidents owned people, they owned slaves,”

Mr. Jackson should learn some American history. (Of course, that is not a serious suggestion.) John Adams and John Quincy Adams did not own slaves.  Many of the other first fifteen either emancipated their slaves at death or proposed ways to eliminate slavery over time.   JQA actually, late in life, successfully argued a case before the Supreme Court coming from a rebellion on a ship called Amistad (which was in the slave trade in the 1830s).  The Spanish Crown and others were arguing that the people on board were slaves.   JQA won the case in the Supreme Court freeing all the people that had been on board.

Jackson also seems to ignore the 1808 clause in the Constitution which banned the importation of slaves after 1808.   Most scholars argue that based on the divisions at the time in the country that the clause was a grand bargain which led to a diminishment of the institution of slavery.  In 2008, at the 200th anniversary of the clause, there were a number of scholarly papers which credited the compromise with a) allowing the union to form and b) beginning to end slavery in the country.   It certainly could have happened faster, but that a ban on importation of slaves was considered, adopted and maintained is a testament to our constitutional system.

Another intellectual and spiritual leader, Iranian President Mahmoud Ahmadinejad, commented that Chavez will "return on resurrection day" with Jesus Christ and will "establish peace, justice, and kindness" on earth.   Wow, almost as good as the Rev's comments.

Dead Tyrants Day

Hugo Chavez, the President of Venezuela, died today after a long battle with cancer.  Surprisingly March 5 is the anniversary of the death of Joseph Stalin, who died 60 years ago.  Like his predecessor ( in death) Chavez was a tyrant who helped to wreck his country's economy.  He also did His best to destroy civil liberties in the country.  The Bolivar (currency) was recently devalued and there a massive food shortages in the country.

Chavez started in the military.  He thought of himself as a natural successor to Simon Bolivar but his model of rise to power and governance was a lot more like Stalin.   At the end of his life Stalin obsessed about plots to poison him - as recently as a week ago Chavez's VP expelled two US diplomats and claimed that the US was trying to poison the President.  That was he same VP who claimed that Chavez had held a four hour cabinet meeting a couple of weeks before.

Stalin, you may remember, once said "It is enough that the people know there was an election.  The people who cast the votes decide nothing.  The people who count the votes decide everything."  Chavez tried at least two attempts a coups before he was elected.  But once elected he used the Stalin principle with vigor.  But as his reign continued he expanded his powers, fomented a couple of petty tyrants in other South American countries and generally tried to repress those who opposed him.

Venezuela was once a thriving country, but like his most admired regime (besides his own of course there was Cuba) he made quick work of turning the country into a basket case economically.  I heard a lot about Chavez in Mexico when he tried in the 2006 election to change the outcome.  Fortunately for Mexico, Chavez and his candidate failed.

Stalin had one other aphorism that might be appropriate.  Stalin said "Death is the solution to all problems.  No man - no problem."   Unfortunately, even with Chavez's passing the problems facing Venezuela will be hard to eliminate quickly.

NPR in Conflict

This afternoon I was listening to NPR on its weekend news program.  The program reported on the ill effects that artificial light has on health.   A researcher at the University of Connecticut has argued that artificial light does all sorts of horrible things to circadian rhythms.   He went a bit further than the AMA is willing to go at this point but none-the-less there are at least some correlations that might be moving toward causation.   The story pointed out that the city of lights (Paris)(France) has instituted some new rules to reduce the number of lights at night.

Imagine my surprise when I find out that one of the leading loci of health paranoia (perhaps after New York) is sponsoring something called Bay Lights.  Bay Lights is privately funded and is called an "installation" and would, for the next two years, illuminate the Bay Bridge with Twinkle lights along the span.   Isn't that adding artificial light?  What about all those poor neighbors living in Treasure Island and all those expensive condos in the city and in Oakland?  Can those poor codgers live with all that light?

There is clearly not a direct link between the amount of light and the amount of security.   But dark corners tend to encourage the less legitimate of our communities a chance to operate (think cockroaches).   But the researcher brings up some interesting ideas about the relationship of artificial light to health.   I, for one, tend to sleep better in a darker room.   And yet when I sleep in a pitch black room, I do not sleep well at all.

There are three strange things about the stories together.  First, who should we believe?  Is it the research with his preliminary notion that it is harder to sleep in light or is it the notion of civic virtue and installations?   Second, did SF that city known for its wretched excesses of public troughs actually fund something from the private sector?   Third, will we all be healthier if our cities are darker?

Regrets and threats and substance

White House Staffer Gene Sperling

Washington was all a twitter about claims and counter-claims between a White House official (eventually confirmed as Gene Sperling) and Bob Woodward.

Here is the email exchange as published by Politico - (Emphasis added)

From Gene Sperling to Bob Woodward on Feb. 22, 2013

Bob:

I apologize for raising my voice in our conversation today. My bad. I do understand your problems with a couple of our statements in the fall — but feel on the other hand that you focus on a few specific trees that gives a very wrong perception of the forest. But perhaps we will just not see eye to eye here.

But I do truly believe you should rethink your comment about saying saying that Potus asking for revenues is moving the goal post. I know you may not believe this, but as a friend, I think you will regret staking out that claim. The idea that the sequester was to force both sides to go back to try at a big or grand barain with a mix of entitlements and revenues (even if there were serious disagreements on composition) was part of the DNA of the thing from the start. It was an accepted part of the understanding — from the start. Really. It was assumed by the Rs on the Supercommittee that came right after: it was assumed in the November-December 2012 negotiations. There may have been big disagreements over rates and ratios — but that it was supposed to be replaced by entitlements and revenues of some form is not controversial. (Indeed, the discretionary savings amount from the Boehner-Obama negotiations were locked in in BCA: the sequester was just designed to force all back to table on entitlements and revenues.)

I agree there are more than one side to our first disagreement, but again think this latter issue is diffferent. Not out to argue and argue on this latter point. Just my sincere advice. Your call obviously.

My apologies again for raising my voice on the call with you. Feel bad about that and truly apologize.

Gene

From Woodward to Sperling on Feb. 23, 2013

Bob Woodward

Gene: You do not ever have to apologize to me. You get wound up because you are making your points and you believe them. This is all part of a serious discussion. I for one welcome a little heat; there should more given the importance. I also welcome your personal advice. I am listening. I know you lived all this. My partial advantage is that I talked extensively with all involved. I am traveling and will try to reach you after 3 pm today. Best, Bob

Most people concentrated on the first highlight.  From my perspective I would have concentrated on the second.   Sperling assumes as does the President that the "Fiscal Cliff" and "Super-committee/Sequestration" discussions were discrete.  That is the only way one could conclude that the huge tax increase which was adopted as part of the "Fiscal Cliff" discussions would not be part of the larger negotiations on the budget.   Only in Washington could this be possible.   Is Sperling really that dumb or does he just think we are?

Some not so random thoughts on the sequestration

One of the amazing things about the discussion about sequestration is the entire lack of perspective for the debate.   For the past week or so we have been subjected to both dire warnings and economic nonsense.   The chart at the right compares three numbers.   The middle column is the total sequestration for the current year. (As I mentioned in an earlier post - which amounts to 2.6% of the federal budget.)    The Fiscal Cliff settlement raised taxes to the tune of several times the amount of spending reduced in the sequestration.  

But the Washington critics ignore a more important number.   Were sequestration to take full effect, 40% of it would be with borrowed money.  Presumably, if we did not spend it we would not borrow it. Thus simultaneously reducing the deficit, and reducing the trend line on our national debt.   Both of those are positive for economic growth.   IF you have to borrow it to spend it, you depress future prospects for growth.

A number of Washington savants (from my perspective idiot savants) have argued that this very tiny cut would torpedo the meager economic recovery.   But think for a moment how even the full amount (not discounting it for the reduction in borrowing) relates to the GDP.   The relationship is $82 billion for this year in a $15.7 trillion economy.    The group that believes this tiny change in government spending (further reduced because of the foregone borrowing) would derail the economy.   I guess they also believe "you did not build it" or that Solyndra was good use of tax resources.  But then we already knew that.

Gaffes and Substance are sometimes related

NOTE - When this was originally posted it had a video of Congresswoman Waters making a fool of herself.  Unfortunately the original video was pulled - I did find it on RCP -

Here is the transcript (Waters can barely pronounce sequestration - but even with that she does read a script pretty well - even if she does not understand the numbers) -
Yesterday we did have Mr. Bernanke in our committee and he came to tell us what he’s doing with quantitative easing and that is trying to stimulate the economy with the bond purchases that he’s been doing because he’s trying to keep the interest rates low and jobs – and he said that if sequestration takes place, that’s going to be a great setback. We don’t need to be having something like sequestration that’s going to cause these jobs losses, over 170 million jobs that could be lost – and so he made it very clear he’s not opposed to cuts but cuts must be done over a long period of time and in a very planned way rather than this blunt cutting that will be done by sequestration. As you know in this committee we have all of HUD and HUD is responsible for so many programs that determine the quality of life for women and families. CBDG, a form of grant programs will be cut by $153 million dollars, these are grants that help with cities and children and low-income programs. We also will cut the Home Program by $52 million if sequestration takes place, Native American Housing grants by $34 million, House and Choice grants $113 million, Public Housing – mostly single women in Public Housing – another $304 million, and homelessness, everybody claims to be concerned with homelessness and the growing number of women and children who are out their homeless but look they will take a $99 million dollar hit and on and on and on. We are here today, one more time, talking about women and children and families and how we can protect our women, children, and families and have a decent quality of life – sequestration will set us back, all of the gains that we have made will be lost with sequestration. 

Every politician makes gaffes.   Yesterday Maxine Waters (D-CA) commented that if sequestration were to take place 170 million jobs would be lost.   At some point later she corrected herself and figured out that the "projected" number is 750,000.  About half of the total population is in the workforce so it is possible that the original number was so off as to include not only all the US workforce but a portion of the population that is not normally considered in the workforce.  From my perspective it is not that the Congresswoman made a dumb mistake.

Obviously, the loss of jobs depends on Keynesian assumptions that government spending improves growth and growth employment.   If we learned anything from the first four years of this president (and even the last two of the last) that piece of wisdom is nonsense.

John Taylor presented an alternative view on his blog which suggests that as we move the percentage of GDP spent by the government down, growth is likely to increase.

What bothers me about this tape is the tone and the substance of her remarks.  I suspect Ms. Waters has only a light involvement with economics.   But her statement says, we heard from Chairman Bernanke and he said that if the sequester is allowed to go into effect the economic "recovery" will be slowed.   For my money, there are a couple of responses.   First, what economic recovery?  Growth after this recession has been puny.   We have thrown tons of imaginary cash (40% of the budget is debt financed) at solving the problem and except for the delusional thinking in Washington, this is the worst recovery in several decades.   Normally, with a steep decline, you get a bigger response out of the trough - and that has not happened.

Second, is the exaggeration.   The President met with congressional leaders yesterday for seven minutes - yet he has made half a dozen campaign stops around the country.   If the peril were real it would seem he would be working hard to solve the problem.   The Senate GOP tried to give the president more discretion in making reductions but under instructions from the White House, the Senate democrats rejected that offer.   The Senate democrats also tried to pass a "deficit reduction" measure (which was defeated.   The measure (this could only be done in DC) would have actually increased the deficit for the first three years.

Third is the failure to understand the impact of a 2% cut.   Every employee, especially those making under the wage cap for Social Security, faced a 2% cut in wages this year with the reinstatement of FICA to its normal rates.   That policy, which was abetted by the GOP, was wrong and we should not have lowered the rate.   Regardless, that 2% cut came in and workers are still going to their jobs.

Unfortunately, not a lot of Americans are listening to this debate.   They should be.   Not just for the entertainment value of gaffes but for the underlying assumptions used by both sides to press their case.