The State of the Union

I realize that many of my partisan friends will find this to be a partisan comment - but it is not meant that way.   I listened to the President tonight and to the response given by the GOP and found both statements at best banal.   The list of priorities that the President outlined and that came in the GOP response seemed like what one good friend describes as "legislative kabuki" - not much of the list is likely to be adopted.   And more importantly a lot of the rhetorical points seem more bound in beginning to score points for November 2014 than to improve the chances that we would actually move forward on some key agenda items.

This tradition has a checkered history.   It began because of a constitutional requirement - Article II section 3 requires the President to periodically report to Congress on the state of the union - but beginning with Jefferson - many of our greatest presidents chose to offer only written comments.  Wilson brought the speech process back and almost every president since then has seen it as a chance to make a big speech.   But as John Walker argued it has become a "tedious relic."   John Walker was not the first to make this call - during Bush II several commentators made the same suggestion.

I think what bothers me most is that it has become an opportunity for Washington to demonstrate its arrogance that what happens there actually is critical to the rest of us.  In reality there seems to be a pattern which is too utterly predictable - the President (who ever is in office) claims responsibility for everything that is good (even though the claim is absurd) and then tries to blame everything that is bad against his opponents; he then lays out a laundry list of proposals and makes some rhetorical points that can be picked up later; he then makes one or more attempts to show how connected he is by introducing props who support his underlying points (I think Reagan began this practice) and then he "blesses America" and signs off.

Soon after the opposition gets the chance to make a statement - which is often not actually responsive to what the President has said.   In good years the SOTU gets forgotten quickly.  The President may or may not be successful in advancing an agenda and in rallying the troops in even numbered years.  But the whole things seems horribly self congratulatory.  The President, and for that matter most members of Congress, remain in a bubble.   They have little understanding or appreciation of what it actually takes to make the economy grow.

One issue of theory here is important and it comes from the architecture of the Congress versus the House of Commons.   In Commons the opposing groups are actually arrayed so as to confront each other at least visually on a daily basis.   Our Congress has none of that - and so much of what passes for discussion and debate is stylized drivel.   The point I am making is that I think the SOTU and its response is more of the same.   We all realize that neither statement is likely to be helpful in improving the public understanding of possibilities for changes in policy and that (perhaps more importantly) even with the bones thrown out in tonight's speech - that the partisan divide will be diminished in the least.

What interests me is what might happen if a president in the future were to have a bit more humility and started from the premise that his job was to get things done rather than score points.  He might draft a statement which proposed some ideas for policies and then actually engage with some real people about those ideas.   Most of the political operatives would think that would be immensely risky - but I think the American people who have to vote for these people might actually find it refreshing.   Both sides then might spend some time doing two things - first, they might actually try to engage the American people not in sound bites but in a substantive discussion about policy alternatives and (as importantly) they might actually begin to work on figuring out what they had in common.

Pete Seeger

Pete Seeger died yesterday at 94.   The New York Times did a great article summarizing his very long career.  But I wanted to add this footnote.  I've played bluegrass/old time music on the 5 string banjo since the early 1960s.   Like many of my generation a good part of the reason I started to play was based on several people/groups - the Kingston Trio, Harry Belafonte and most especially Pete Seeger.

Seeger had an instruction book called "How to play a 5 string banjo" which in the original version was quite good.  It had a folkways record that went along with it which had a number of tunes, including "Ode to Joy" that were fun to learn. A few years ago I found a copy of a later version of the book which became a lot more political.   That is too bad because the original was a good way to learn how to play the banjo.   One of the strengths of the manual was its lack of purity.   He taught you a number of styles and the whole point was to learn how to play the instrument not in a particular style.   One of his odd riffs in the book and the record was to suggest that music should come from many sources and should be traded pretty freely.  A lot of his instructional style came from many venues including classical.

Pete Seeger, unlike the other two artists, was never a raging commercial success - although he had more than 100 albums and with the Weavers and the Almanac Singers sold a lot of records.   One of Pete's favorite banjos was a long neck Vega - one of my first banjos was a Vega (although I never liked playing a long neck - which has some extra frets to allow different keys without retuning.   Now one of my favorite instruments  is a Deering Parlor Banjo which has fewer frets.).

Pete Seeger introduced me to a lot of music including a lot of the labor organizing songs which in turn led me to learning a lot about Appalachian music and ultimately to old time string band music.  When my kids were little a lot of their lullabies were coal mining songs - which were often overtly political.   I became more of a frailer than a three finger picker (Scruggs style) as a result of the Appalachian influences.  But  Pete became a jumping off point rather than a constant place to refresh.

My family was pretty musical - my mother had a Master's in Music.  Both parents loved Opera.  I took piano lessons for a short time when I was young.   But I think both my parents thought my attraction to folk music was a bit strange.   I had two aunts in North Carolina who encouraged my interest and even sent me some albums from local groups.

By the time I began to play somewhat professionally (I played in a couple of bands and actually received some fees for it) I had migrated to the work of his brother Mike and the New Lost City Ramblers.   Although a lot of their music certainly included lots of political topics it was less overtly political than Pete's.  Mike died in 2009.   I then went off to a number of other old time musicians including somewhat obscure people like Charlie Poole.

In the 1960s in LA there were two places to hear a lot of folk music - the Ashgrove on Melrose and the UCLA folk festival (ultimately there was also McCabes which had a music shop in Long Beach).  In the 1963 UCLA event I actually played with the Rev. Gary Davis and was photographed for the Saturday Evening Post.   We were jamming between the regularly scheduled concerts and he walked up with his handler (he was blind) and asked if he could play with us.  That was a thrill.  I spent a lot of time at McCabes and the Ashgrove - although I am pretty sure I never heard Pete play at either venue.   McCabes had an odd assortment of musicians including an old Wobblie organizer who taught me a lot of the songs from the IWW song book.

Pete became an icon of the left, including the far left.   As I grew up I became disenchanted with his constant harangues for left of center causes. I also realized that like a lot of the left of the 1940s he never acknowledged that his support for Stalinist causes created a lot of harm in the world.  A lot of the things he espoused for I partially agreed with for example- I thought the Vietnam war was wrong - not because all wars are wrong but because that particular exercise in policy was confused.    I understand that music can often be political but I thought many other musicians were able to separate their politics from their music.

So in the end Pete Seeger was an important influence on me in two ways.  First, he introduced me to some music that has become a deep part of me.   But second, I parted from his politics - a lot of what he talked about between songs - turned me off.

Redundant Nanny Statism at its worst?

The penetration of Smartphones and Tablets into our everyday lives has been very quick.   Yesterday the Federal Trade Commission announced a "settlement" with Apple regarding unauthorized purchases from their APP store that were supposedly done by children.  That will cost the rest of us about $32 million.

Cartoon from the Onion

“This settlement is a victory for consumers harmed by Apple’s unfair billing and a signal to the business community,” said FTC Chairwoman( and chief nanny in charge) Edith Ramirez. “You cannot charge consumers for charges they did not authorize.”   The FTC pounced after a class action suit was settled a couple of months ago.  I disagreed with the settlement at the time.

So what happened here.   A bunch of kids got ahold of their parent's iPhones or iPads and
ordered a bunch of stuff, including in APP purchases that amounted to a lot of dough.

So what is wrong with this?  From my perspective a lot.   When you buy a mobile device one of the reasons you do it is to be connected.  Take some comparable examples.   If a child in a household found a friend in a far away place and began making phone calls to the friend - who should be responsible for the purchases?  The parents.  Parents or other adults should teach the kids to exercise self restraint.

The same principle should apply here - even though Apple already forces consumers to enter a password to purchase APPs or other stuff.   If parents are worried that their little darlings will be buying "smurf points" then they can take a couple of parental actions.  They can password protect their device and keep the password away from the kid.   When they give the kid the device they can turn off cellular and wifi.   They could keep an eye on their bills.  Or even more amazing they could tell their children to take some personal responsibility and understand that actions are not without consequences.

Is everybody as tired of Sebastian Thrun as I am?

For those of you who have not heard of Thrun, he is a Stanford professor who helped to develop the idea of MOOCs (Massive Open Online Courses).  By any measure I should be attracted to Thrun's thinking - his interests in technology issues is well developed in a number of areas including driverless cars. By his own description he loves to work on big problems.  Fast Company gushed about him and his course in Artificial Intelligence that he taught with a colleague from Google -

Some 160,000 people sign up: young men dodging mortar attacks in Afghanistan, single mothers struggling to support their children in the United States, students in more than 190 countries. The youngest kid in the class is 10; the oldest is 70. Most struggle with the material, but a good number thrive. When the Professor ranks the scores from the final exam, he sees something shocking: None of the top 400 students goes to Stanford. They all took the class on the Internet. The experiment starts to look like something more.

I do not know how many times I have heard the 160,000 number bandied about.  But the number is meaningless unless you know the results of those signups (for a free course) - Udacity's normal completion rate is 3% (according to an All Things Digital interview with Thrun last July).    They did a minor experiment at San Jose State where the pass rate for three courses was between 20% and 44%.

Thrun claimed to be a leading edge educator based on his AI course - "It was this catalytic moment," Thrun says. "I was educating more AI students than there were AI students in all the rest of the world combined."   Yeah, right, even if you believe the numbers that he released about the course - where only one in eight students completed the course - that looks like a profound overstatement. 

At the end of 2013 Forbes did a long form interview where Thrun's ego showed through.  What bothers me most is how well he seems to get covered on a set of issues where he has very little actual experience or expertise.   Ultimately, there is a lot of opportunity for higher education to revise how it does stuff - including working on alternative ways to finance its operations and how to deliver content - what is a student or a course or even a degree are good questions.   But for even an idea guy like Thrun who has lived off the subsidies of Stanford to offer his AI course, it seems odd that so many outside of higher education have given this experiment so much credibility and seemingly ignored other more substantive thinkers on what needs to be done to change higher education.

A slight redefinition for Economics

When I walk our dog Indy, I often listen to books on tape or podcasts.  Econtalk is a favorite of mine - last year the host interviewed Ronald Coase.   Coase is one of those seminal figures in Economics and the interview was wonderful.   The current book I am listening to is Basic Economics by Thomas Sowell.

Sowell begins the book with a common flaw.   He argues that Economics is the study of scarcity.  That is not an uncommon opinion.  Check out 100 textbooks and I will bet you will find all of them starting in the same manner.

But here is where I think the starting point is wrong.   Many commodities in society are approaching the status of limitlessness.   And yet even if we were to achieve that for all the necessities of life we would still need to think about economics.   Stefan Linder, a Swedish economist, in a book that is sadly out of print, argued that as commodities become more ubiquitous we still have to make choices - time becomes the issue to solve not products.

So for me, rather than beginning with the idea of scarcity and going through a series of supply and demand curves we should begin the discussion of the subject about choices.  This offers a lot of improvements in results.   First, we begin to understand that life is about making the right choices among alternatives, many of which are easy to obtain.   Second, as we think about those choices we might be less inclined to substitute feelings for judgment.   Many of our political choices are based on feelings - "everyone should get healthcare" (without any explicit understanding about what healthcare is or what it will cost) or we have a "right" to this or that.    A third benefit, and perhaps the most important, is that one does not naturally devolve many decisions to a governmental solution.   Many in society ask us to believe that by producing something on the government side of the ledger that we inherently defeat the problem of scarcity.   But as the deficits in public pensions and entitlement programs suggest - that is pure nonsense.

As James Buchanan pointed out many years ago - if you begin with the benefits of trade (people establish relationships for mutual benefit) rather than the concept of scarcity - you ultimately have a sounder basis to discuss economics.  The same could be said for starting with the idea of choices and their consequences.

Joe Biden Public Policy Wonk

Sometimes you do not need to say much - for example -

#1 - Nearly 32 million riders prove what I’ve known my whole career – passenger rail is one of the best bargains available to the American people. We need to continue investing in our nation’s infrastructure, including passenger rail service, to keep our economy moving.  - Joe Biden is Vice President of the United States of America.

#2 -  A graph produced by the Vice President to prove his point.  (Ridership is UP)

#3 - A graph from the Chair of Amtrak's Board to the Congress for more subsidy.

#4 - 

	RIDERSHIP	2013 APPROPRIATION	WISHED FOR APPROPRIATION
	31,600,000	1,378,000,000	2,650,000,000
SUBSIDY PER RIDER		$43.61	$83.86

So Biden argues that something which requires an almost $44 per ride subsidy is one of the "best bargains to the American people" - if that is true I would hate to see some of the lesser bargains.

The Hobby Lobby Case

This week the Supreme Court accepted two cases which could become a fundamental base for a new understanding of the role of government.    The President's Senior Advisor argued in an article on HuffPost that  A Woman's Health Care Decisions Should Be in Her Own Hands, Not Her Boss's.  That is something I agree with totally.   But then Valerie Jarrett perverts her own argument by assuming that if the government mandates something it should also be able to impose its values on individual employers.  There I disagree.  The two cases accepted were  Sebelius v. Hobby Lobby Stores, Inc. (13-354); and Conestoga Wood Specialties Corp. v. Sebelius (13-356).   The left has argued that this is a "radical" change in the way law is interpreted by adding individual rights to corporate ones.  Jarrett seems to think that the ACA should have imposed a common set of standard on employers not individuals (although there is indeed an individual mandate) and seems to ignore that the individual mandate, if interpreted in her broad reading, coercive.

Jarrett writes "Ensuring the full freedom of women as health care consumers to access essential preventative health services is a vital component of the Affordable Care Act (ACA). And nowhere are health decisions more personal or essential to keep in their hands, than those regarding reproductive health. The ACA was designed to ensure that health care decisions are made between a woman and her doctor, and not by her boss, or Washington politicians."   Unfortunately the ACA goes several steps further.

Could government conceivably require health insurers to add certain coverages for health policies?  Of course.  That is especially true if the government is providing the service.  But should government be able to force employers, who have formed in a corporate structure primarily in response to  our tax laws, to offer coverage which violates their religious beliefs?  I think not.

I am not an attorney.   But I believe that the four justices who voted to overturn the ACA in the courts are most likely to be joined by the Chief Justice, who wrote the convoluted opinion which formed the basis for upholding the ACA.  It is also pretty clear that the four justices who concurred with Roberts' decision are unlikely to change.  So we will be stuck with another 5-4 decision.

Ultimately, there are plenty of alternatives to the mandate and to the one size fits all philosophy of Jarrett.   I wonder whether Jarrett has ever tried to think about what Hayek called the "fatal conceit" - ultimately centralized solutions like Obamacare will fail because they ignore the rich diversity of the human experience.

This story has another twist.  What I have not seen is a set of suits challenging the President's arbitrary and capricious implementation of the law he challenged.   I am not sure where there is any authority for a Chief Executive to selectively over-rule provisions of an enacted law so blatantly.   His delay of the employer mandate and now other provisions without direct congressional authorization is a testament to the complexity of implementing this Leviathan - yet no where in the statute does he have the authority to delay those provisions that are hard to implement - especially when the delays are timed in such a manner as to sweep the problems under the rug until after the 2014 elections.

Whats wrong with Supercats for Health Insurance?

Before the ACA consumers had the opportunity to buy the equivalent of a "super cat" policy to cover only the extraordinary costs of health care.   Insurance is an agreement between the company and the insured.  There are two key concepts about insurance - frequency and severity.   Some insured events happen often, others not so much.   Some insured events are expensive and others are not.  A third idea one needs to understand about insurance is the concept of retention (Retention = deductible) which is really the amount of risk you are willing to bear.   In many cases people are willing to bear small and frequent risks from their own resources and hoping to have an insurance pool cover those larger costs that occur infrequently.

Think a bit about your car.   You can reduce the cost of insuring your car by increasing the level of risk you are willing to accept -for example if you raise your collision deductible you can lower your out of pocket costs that you pay to an insurance company.  But when accidents occur you have to pay out more on each incidence.  Thus, there are two implicit bets being made by people who raise their deductibles.  First, they believe that over the long term the net savings in premium by accepting a higher deductible will be greater than the costs incurred by auto accidents.   At the same time the make an assumption that they can bear the costs of the large expense when it comes.  

In health insurance, younger customers who do not have a lot of health problems can save a lot of money by buying a high deductible policy.   The attachment point for these can be a lot or a little - but the assumption is that day to day costs of health are borne out of pocket.   So doctor visits are not covered but major operations probably would be.

One size does not fit all in health insurance.   It has some characteristics that are similar to life insurance - as you age benefits are more likely to be paid out.   But as with life insurance some older individuals might choose to forgo full coverage of insurance.  One of the dynamics of the ACA is that it allows (and indeed even potentially encourages) individuals to postpone making a decision on health care costs because no person can be denied coverage.  Depending on one's income and situation in life it might be most economical to not sign up for Obamacare until you are faced with a catastrophic event.

Yesterday the President described the high deductible policies as "junk" - that is utter nonsense - although some of these policies are certainly less useful than others many are designed to meet consumer needs.  An implicit assumption in the President's logic is that all people who buy high deductible policies are unintelligent consumers.   In reality people who buy these policies are like the rest of the population - heterogeneous.    Some are young and don't use the system much.   Some are not wealthy and they are likely to be served by the expansions in Medicaid.  But many have made a wise decision of postponing spending on health care to accomplish other things.   They have more money in their pockets that they can use for other purposes.

There is plenty of evidence that the expansion of insurance and governmental interventions has increased cost structures in health care.  Many doctors have begun to reject both Medicare and Medicaid patients.  I have found that in some medical offices if you came in before the ACA and offered to pay cash (and thus allow a medical office to not go through the forms process) they would offer you a discount over their normal fees.

A wiser course when the ACA was being considered would have been to allow some of these "super cat" policies - that might have been acceptable even if those consumers were required to sign a disclosure (as one does in lending transactions) acknowledging the types of risks being assumed by the purchaser.   But the majority that passed the bill would have none of it.  And the Secretary charged with implementing it went about her work in the most doctrinaire manner possible.

A new definition of accountability

I must say that after I read reports of the HHS Secretary's testimony yesterday I had to go back to the dictionary. She said "Hold me accountable for the debacle. I'm responsible," - So what does the dictionary say - "the fact or condition of being accountable; responsibility."

So did the Secretary say  assure those people who counted on the promises that she and the President made would be fulfilled? (If you like your current policy you can keep it)  Uh, no.

So did the Secretary suggest that she had an answer to fix the problem of many current policy holders experiencing huge increases in premium?  Uh, no.

So did she say they would fix the process by which a massive new complex consumer website was allowed to go live without adequate testing?  Uh, no.

So I am confused.   What does taking responsibility mean?  When Harry Truman was President he said "The buck Stops here."  For the Secretary, the words are clear but the substantive actions are not.  In the Nanny World view of the Secretary being accountable means making decisions for others that you do not feel they are competent to make on their own.

The Absurd Dynamics of Obamacare

Ezra Klein of the Washington Post's Wonk blog has been furiously trying to find a pony in the load of errors that is Obamacare at this point.   He did a post yesterday which argued that the ACA's policy was actually pretty good - despite the news of the computer screw ups.   He presented a diagram and called it the Obama Trilemma - which argues that the ACA is trying to balance three different issues in health insurance.

When you think about the diagram at the right it which comes from his article, it looks simple - but the simplicity makes all three legs inaccurate.  That is true in part because it oversimplifies the problems associated with trying to advance health care coverage.

Take each of the three legs of the triangle.   Affordability is a concept that is, in this instance, in the eyes of the beholder.   What is the right percentage of income that a person should bear to be covered?   That answer is different for the poor and the rest of us.  Accessibility is a bit clearer - although in this case because of the mandate - accessibility is not voluntary.   Is a comprehensive policy one which meets the current needs of a policy holder or one which covers all eventualities?   If you decide to define it as the latter, then the costs for many consumers will be significantly in excess of what they would pay under a less regulated market.

There are actually four markets that the ACA is trying to cover - the group policy (where individuals are covered for health costs by a policy issued by an employer), the individual (where individuals buy coverage on their own), Medicare and Medicaid.   Medicare is relatively straight forward - individuals are covered for a basic policy and have the option to purchase at additional expense a broader set of coverages.  Although it is financially unsound, we at least understand how it works.   The case that was made to expand Medicaid was that it was not accessible to a broad enough range of individuals (that depends a lot on how flexible the individual and group markets are) and on your definition of equity - in this case the Congress chose to define the standard quite liberally (400% of the poverty rate calculated by the Federal Government).

The real problem comes on accessibility for the individual and group markets.   If comprehensiveness is too broad then insurance companies are likely to reduce their spread of risk or raise their prices to cover those new costs.   Remember that the President repeatedly told us that "If you like your current policy, nothing will change."   That turns out not to have been true.  Comprehensiveness for the supporters of the ACA is defined by someone else - In 1993 Hillary Clinton commented "We just think people will be too focused on saving money and they won't get the care for their children and themselves that they need"   So much for consumer choice.   Here is the situation for one such policy holder who had her choices reduced by the ACA -

I'm one of those 7 to 12 "millions" who has had an individual "policy"- in Texas, no less- for 10+ years. Premiums with my current Ins.Co.- BCBS- are going up 25% for an individual "Silver level" policy. What am I gaining/losing ? Mental health coverage (thankfully, don't need); better Rx coverage (I think- but maybe not); no lifetime policy maximum ( mine was $1MM); maternity care (Umm, at 60, don't need it); had 80% major med/ co-insurance-BUT- no maximum out of pocket. With a Silver plan, I'm down to 70% "co-insurance" but a "cap" on out of pocket at $6250. Is it a "good deal" for me, assuming no catastrophic health crisis ? No. But neither was/has been my private, individual policy of 10+ years- Over $7,000 a year before co-pays & deductibles for "benefits" that have averaged out to less than $500 a year. 
I "get" shared sacrifice; I get getting the under served/poor into a system that treats before a crisis (and out of the ER- which as a Taxpayer, I am paying for directly- via my property taxes here in Dallas); I get convincing the young invincibles that nothing is free forever. 

Evidence is coming in fast and furious that a lot of people covered in the individual market are being dropped or are facing huge increases in costs.   The numbers at this point are in the millions.  Sara Kliff - who writes on healthcare for the WP, commented that between half and three quarters of the buyers in the individual market are going to be dropped.  She says that is because the plans do not meet the standards of the ACA.   In reality the numbers look to be a lot larger, in part because some of the group market is also being affected and many group policy holders are facing significant cost increases.  One administration person called the 5% (probably a low number) insignificant.

There is one other twist in the program which has long term implications.   There was an implicit tradeoff in the ACA  - we could afford to expand the coverage in the Medicaid part of the system IF we got people who were currently uncovered to buy coverage.   Evidence from the successful sites like Oregon is that the vast majority of "purchasers" are signing up for Medicaid.   That makes the economics of the program even less favorable.

The ACA, at least in California Covered, which I investigated for a friend, has lots of choices - from bronze, to silver, to gold plans - offered by a number of providers.  That seeming choice is not realized when you add in all of the mandated services.   Costs even for a minimum policy may not be reasonable except for a person who is getting a government subsidy.

If we can ever get to trying to fix this mess (after the incompetent computer code is adjusted) we might begin to think about a system which offers a shopping basket rather than a package for consumers.

A thoroughly misleading statistic

Earlier this week the Census Bureau released numbers which I found to be significantly misleading.   The headline stated that 49% of Americans get government benefits.  82.5 million Americans receive Medicaid benefits (that is about one in four).  Almost 50 million receive Social Security payments.  An equal number received food stamps.  46 million get Medicare.  20 million receive SSI.  13 million receive subsidized housing.  5 million receive unemployment benefits.  3 million get Veterans benefits.  And about 360,000 receive Railroad Retirement.  (The chart at the right is from the WSJ)

Here is my problem with the number.   I have color coded two types of programs - those which require a contribution (where the government serves as a bank) and those which do not.  In many cases the programs that are contributory are a horrible deal.  For example, over my career my employers and I contributed almost $350,000 to Social Security and almost $100,000 to Medicare taxes.   If you simply net present valued those contributions my current Social Security benefit would be at least double what I am receiving.  And more importantly I would have a net asset to pass on to my heirs.   Medical insurance would be a lot more expensive but would still provide better benefits if the program were a true contributory scheme.

Some of those programs in black are set up like a risk pool.  So, for example, every wage earner pays a percentage of wage to unemployment insurance.  During my career I never had to use the insurance, but had I been unemployed I could have cushioned the problems of not having a wage while I looked for another job.   But some things that are called insurance are not.  FICA (or Social Security) is called insurance but it is not.   The structure of Social Security where one generation pays for another (thus if the number of contributors begins to be smaller than the number of recipients) is unsound financially but in no way is it insurance.   Many of the problems of these "benefit" programs could be solved by making part of the payments we all make into a savings program and part into a welfare payment for those who have been less fortunate.   That is what places like Chile have done and it immediately put their program on a sound footing.

By confusing the notion of benefits you begin to confuse the basic role(s) of government.  There are now 15 million more people receiving food stamps than there were at the start of the recession and the number continues to grow.  At the same time I am concerned that the rollout of the ACA will increase the recipients of non-contributory benefits.   Clearly, as a society we need to provide for those who cannot provide for themselves.   But we should not make two errors that I believe the stories about the Census numbers do.   First, we should not aggregate the data between programs run by government that are (at least in theory) supported by contributions and those where support for individuals receive benefits without direct contributions.  Second, if we really want to focus on those with legitimate needs then we need to think about ways to assure that those programs which are contributory all the maximum flexibility to the contributors to get the best yield on their contributions.  

Combining contributory and welfare benefits together distorts reality and makes a bad deal for both the contributor and the recipient. If you carry the logic of this statistic to its conclusion then every time I drive on a road, which I pay for with income and gas taxes I am getting a benefit from government.   Government then becomes the creator of all benefits.   That certainly is not a way to advance a free society.

Reflections on Gridlock

I've been struck in this current (or continuing) political fight how unable the political class seems to be able to look for a solution on both the budget and the debt ceiling.   There are many causes but no one seems to be working toward a solution.   But the discussions in the media have been less than helpful.

Here are some thoughts - 
#1 - Each side seems intent on talking to itself - Here is how a left of center friend described the stalemate in a Facebook post - "This is a fight they have lost nearly 50 times in Congress, in a national election, and in the Supreme Court. Democrats have compromised by offering a measure that included $72 billion in annualized across-the-board spending cuts to keep the government open. The Senate passed this legislation multiple times before the government closed. " This friend is normally a very reasoned person but the post strikes me as ignoring some major issues.    Let me parse the statements a bit.  This is a fight they have lost nearly 50 times in Congress, in a national election, and in the Supreme Court.  I am not sure where the number 50 comes from but my friend ignores the fact that the ACA (if that indeed is the base of the problem) was adopted by an extraordinary set of procedures without a single vote from the GOP; the immediate election after the bill was adopted saw massive losses for the democrats mostly attributed to the one bill; the Supreme Court's decision on the constitutionality of the measure was actually a 4:4:1 decision. It is one which is not likely to be in the replay roll of SCOTUS.   All of this suggests that the ACA could use some adjustments to build a broader political base.  Democrats have compromised by offering a measure that included $72 billion in annualized across-the-board spending cuts to keep the government open.   That assumes that the supposed $72 billion actually solved the deficit - but it (which even with the reductions from the top) continues to be among the largest in our history.  More needs to be done on both the level of government spending and reducing the debt.   The Senate passed this legislation multiple times before the government closed.   So far the leader of the Senate has been the most strident in opposing any substantive discussion about changes in the ACA.  When you listen to the pundits of the right - they echo tired phrases - as tired as the ones of my friend on the left.

#2 - The Political Class seems to think this is a silly game not serious business - Wonkblog actually created a Daily Default Dashboard (See illustration above) which is based on a series of questionable financial indicators.   Even that seems to indicate that the level of projected tension in Washington is not high at this point.   They figure they can screw around for a couple of more days and then get credited with the save.   Joel Kotkin points out in a recent column "This has been a golden era for the nation's capital, perhaps the one place that never really felt the recession. Of the nation's 10 richest counties, seven are in the Washington area. In 1969, notes liberal journalist Dylan Matthews, wages in the D.C. region were 12 percent higher than the national average; today, they are 36 percent higher. Matthews ascribes this differential not so much to government per se, but on the huge increase in lobbying, which has nearly doubled over the past decade."  Kotkin argues that all this has lead to a divide in the country that is not just left/right but between the Washington elites and the rest of us.   The GOP may be leading the way but everyone's reputation is taking a hit - at some point we will rise up and say enough shenanigans.

#3 - So what about the debt ceiling and the CR? - Yesterday the President said he will begin to negotiate when the House passes a clean CR and debt limit increase.   He seemed also to say that it is unusual to negotiate on something like the debt limit - (one of his favorite lines - the debt limit increase is merely confirming what Congress has already authorized).   But those premises are false on a number of points.   First, since 1962 the debt limit has been raised 74 times (according to the Center for American Progress - hardly a conservative mouthpiece).   Our debt held by the public amounts to about two thirds of our national product which is the highest it has been in almost sixty years.   In prior periods things like Gramm-Rudman-Hollings and PayGo have been included in debt limit adjustment agreements.  Debt limit votes have proven a good time to elicit spending reductions and controls.  Doing what the President proposes would expose about half the country to more unbridled spending.

Interest on the debt is about 6% of the total federal expenditures.   So the claim that if the debt ceiling is not increased we will default are nonsense.  Organizations like Moody's have pointed out the absurdity of the claim - in a CNBC interview the CEO of Moody's said  “It is extremely unlikely that the Treasury is not going to continue to pay on those securities, hopefully it is unlikely that we go past October 17 and fail to raise the debt ceiling, but even if that does happen, then we think that the U.S. Treasury is still going to pay on those Treasury securities,” he added.   The best estimate of the effects of the lack of a CR (continuing resolution - which is a short term fix necessary because the Congress cannot actually pass a real budget) has on governmental programs is about 17% (thus 83% of the government is still operating).  The President has a lot of discretion in deciding which things stay open. So if we default it will be done by the President much in the same way that the Administration has chosen which things to call non-essential.  So far the President has chosen a standard policy of making the pain visible.   But as we saw at the WWII memorial - many people are beginning to understand the politics of closures.

#4 - So what is the fight actually about? -.   Note that in the last five years, partially as a result of the recession but not entirely, the percentage of the economy dedicated to federal spending is significantly above what it was prior to this president.   Revenues have begun to trend back to their normal levels (at under 20% of GDP) but the deficit is still large because the expenditure side of the budget is still considerably larger than it has been at any time in our history.  Note the projected "drop" brings the budget back to 4-6% over where it has been and that is in a time when war expenditures are going down.  As mentioned above, that is also true for that our total national debt (both what is represented in internal transfers and what is owned by the public) is the highest it has ever been.

Ultimately, I believe the American people want something less from government.  They've shown a reluctance to raise taxes to the levels necessary to fund all the things the Administration wants to do.  They've also shown a great deal of well deserved grumpiness about the implementation of the ACA.    One other issue - unlike prior fights on this issue - while the right is taking a beating - so is the President.   An NBC/WSJ poll in September found that a small majority of Americans disapprove of Obama's handling of the economy (52%).   By a 2:1 margin Americans do not want to raise the debt ceiling.   At the time the respondents supported the GOP notions on working on the deficit by a 12 point margin.  Another major poll about the same time said by a 20% margin that they disapproved of the President's handling of the economy.   And more importantly 40% thought the economy would be worse off a year from now.  52% of the respondents believe that the economy is in bad (bad, very bad or terrible) shape.

#5 - How will it all come out? - see The Paul Masson Theory of Legislating - I've taught a course on legislative practice over the last couple of decades in which I lay out about a half dozen rules that I came to understand in the four decades that I worked in Washington and Sacramento.  The Paul Masson Rule is simple - legislators will make no decision until they have to (riffing off the old commercial - we will sell no wine before its time).   My suspicion is that they will begin to talk in the next couple of days and come to a resolution within a day or two of the supposed deadline when the debt ceiling will begin to pinch - that might be as late as the 20th but certainly before Halloween.

A so what chart from the WP.

The WP published the following graph this morning which compares the power consumption in six African countries with the consumption of an energy efficient refrigerator in the US.

The point the Post was trying to make was look how greedy (or fill in other negatives) Americans are.   But my response is so what.   Americans do a lot of things that the rest of the world does not, including working aggressively on making the things they use even more efficient.   The Post's logic is that Americans are piggy.  But why not try to bring standards of consumption in those six nations up to something closer to what the US can afford?  

Consider another chart.   This time compare what a fridge cost to operate and how much it consumed in electricity over time.

Over the last 40 years the average refrigerator in the US has reduced the number of kilowatts consumed by three quarters.  All the while the cost of consuming those KWs has also been reduced.  We've got products that do a better job for cheaper.   Taken from another view, we have actually reduced the disparity between consumption in those six countries because in the 1970s undoubtedly there was most likely less electricity consumed in the African countries and more in the US refrigerators.    Numbers and charts always benefit from looking at a wider range of numbers.

Running for office and from responsibility

On Monday afternoon, after a horrific spectacle at the Washington Navy Yard, the President took the opportunity to tout his economic record before a bunch of hand picked lapdogs on the South Court of the White House. His remarks were designed to "celebrate" the five year anniversary of the financial meltdown - that "anniversary" could have been held at any time. But this president has no sense of proportion. I have taken eight comments out of the President banal yammerings and added some commentary. What Obama seems to fail to get is that compromise takes two sides working together.  The genius of the American political system is the design - it take a broad consensus to move things forward.   In the world of this President he believes that he preempts anything.  All that within a spectacle over the last several weeks - where his indecision on an international issue has worked to make the situation considerably worse.   But again, this President, does not care.  Commentary described the speech thusly - "After the spectacle of indecision and retreat that was his Syria policy in the last month, and a year in which he proved again that he hasn’t the leadership skills to broker a deal with anyone but his sycophants, all Obama has left for us is anger at his political foes and a reflexive need to blame them for all of the country’s woes and his own failures." That is harsh but accurate.

The President's remarks came just a day before the 228th anniversary of the last day of the Constitutional convention. One of the blogs I read posted remarks from President Coolidge on the importance of the Constitution

"It is axiomatic that our country can not stand still. It would seem to be perfectly plain from recent events that it is determined to go forward. But it wants no pretenses, it wants no vagaries. It is determined to advance in an orderly, sound and common-sense way. It does not propose to abandon the theory of the Declaration that the people have inalienable rights which no majority and no power of government can destroy. It does not propose to abandon the practice of the Constitution that provides for the protection of these rights. It believes that within these limitations, which are imposed not by the fiat of man but by the law of the Creator, self-government is just and wise. It is convinced that it will be impossible for the people to provide their own government unless they continue to own their own property. These are the very foundations of America" -
The President began by a hearty back pat -

"By the time I took the oath of office, the economy was shrinking by an annual rate of more than 8 percent. Our businesses were shedding 800,000 jobs each month. It was a perfect storm that would rob millions of Americans of jobs and homes and savings that they had worked a lifetime to build. And it also laid bare the long erosion of a middle class that, for more than a decade, has had to work harder and harder just to keep up."

From my perspective the President fails to consider what the causes of these horrible situations. A good many of them are attributable to governmental policies and as importantly, many of them remain unimproved.   As Coolidge suggested a good part of the role of government is to understand when its actions can be ineffective.
He went on to give the now obligatory "stories" of real people.
And so those are the stories that guided everything we've done.
President Reagan was one of the first to use this technique and at the time many people said it was a way to show the president actually lived in the real world.   But stories like the ones the president used are not a substitute for sound judgment on policy.

Then he offered himself some more back pats....
And what all this means is we've cleared away the rubble from the financial crisis and we've begun to lay a new foundation for economic growth and prosperity. 
If this is recovery I would hate to see what a slowdown is to him.  This recovery still has substantial unemployment and mediocre economic growth.   Many economists would argue that part of the reason for that performance is the policies he adopted, some of which were continuations of the previous administration.

He then goes on to make his pitch -
We need to grow faster.  We need more good-paying jobs.  We need more broad-based prosperity.  We need more ladders of opportunity for people who are currently poor but want to get into the middle class.
Indeed we do.  But he then indicates (as he did during the last campaign) that government is the engine of growth.
The budget Congress passes will determine whether we can hire more workers to upgrade our transportation and communications networks, or fund the kinds of research and development that have always kept America on the cutting edge.  So what happens here in Washington makes a difference.  What happens up on Capitol Hill is going to help determine not only the pace of our growth, but also the quality of jobs, the quality of opportunity for this generation and future generations. 
The logic he uses here is utter nonsense.   By reducing the influence of government in our economy - growth is likely to recover.  But his sole definition of a sound recovery is one where government is allowed to grow significantly.

Then he goes into his deflective mode (what some have called the Bart Simpson theory of political responsibility) -
Up until now, Republicans have argued that these cuts are necessary in the name of fiscal responsibility.  But our deficits are now falling at the fastest rate since the end of World War II.  I want to repeat that.  Our deficits are going down faster than any time since before I was born.  (Applause.)  By the end of this year, we will have cut our deficits by more than half since I took office.

Now, keep in mind, initially, the whole argument was we’re going to do this because we want to reduce our debt.  That doesn’t seem to be the focus now.  Now the focus is on Obamacare. So let’s put this in perspective.  The Affordable Care Act has been the law for three and a half years now.  It passed both houses of Congress.  The Supreme Court ruled it constitutional.  It was an issue in last year’s election and the candidate who called for repeal lost.  (Applause.)  Republicans in the House have tried to repeal or sabotage it about 40 times.  They’ve failed every time.

There are so many things in these two paragraphs it is almost hard to know where to begin.   Deficits are going down not because of economic growth - which is one way to accomplish that - but because of the sequester and because the Congress has wisely (or politically - and I do not think it makes any difference) understood that spending more does not grow the economy.   The ACA is one of those rare instances in policy where no member of the opposition joined in supporting it.   It is beginning to unravel - or why would the President delay its implementation until after the 2014 elections; why would the AFL (one of the President's most loyal allies) ask that the law be significantly revised.   While the House has voted 40 times to repeal Obamacare (I am not sure that the number is correct but for the moment consider that it is true) the Senate has not passed a budget for a number of years.   They have simply bottled up any serious discussion of any issue.   At this point the President's prized enactment is supported by about 4 Americans in 10.

He then gets to the meat of his argument - 

Meanwhile, the law has already helped millions of Americans -- young people who were able to stay on their parents’ plan up until the age of 26; seniors who are getting additional discounts on their prescription drugs; ordinary families and small businesses that are getting rebates from insurance companies because now insurance companies have to actually spend money on people's care instead of on administrative costs and CEO bonuses.

A lot of the horror stories that were predicted about how this was going to shoot rates way up and there were going to be death panels and all that stuff -- none of that stuff has happened.  And in two weeks, the Affordable Care Act is going to help millions more people.  And there's no serious evidence that the law -- which has helped to keep down the rise in health care costs to their lowest level in 50 years -- is holding back economic growth. 

The claims of the effects of a law, which has not been implemented and which the President himself has arbitrarily moved to not enforce, are not clear.   There may well be some short term effects that may seem to be positive.  At the same time numerous employers are opting to reduce the number of hours for their employees to assure that they are not required to pay for the significant unfunded mandates in the new law. Most commentators suggest that the long term costs of this administrative monstrosity will not be positive for the health care system nor for the economy.

From my perspective there are two takeaways from this speech.   This president, more than any in history, considers his powers to be over the other two branches - he has shown no willingness or even ability to sit down with his opponents on a substantive basis and begin to work the nation out of political gridlock.   Second, with his imperial sense, he does not seem to recognize that on a day when a national tragedy happened within about 20 of blocks of his office that the time for political rhetoric should be delayed.

What is appropriate public behavior?

Yesterday the CEO of Starbucks penned an open letter to the American people which requested, in the spirit of an old Johnny Cash song - to "leave your guns at home."

Schultz says that Starbucks will not ban people, in open carry states, from bringing their weapons to coffee.  He is asking customers in these states to respect the company's wishes.

When I first heard about this I thought "another politically correct CEO" and that may be the case.   But in his public comments Schultz has repeatedly said Starbucks is not a policy organization.  Schultz and some of the news coverage of the story has suggested that gun advocates have used Starbucks to promote their point of view.   And indeed, some gun advocates have had their pictures taken in a store.

I can understand how some people would feel uncomfortable in the presence of a gun toting coffee drinker.

I live in a state where at least a majority of legislators have no appreciation of gun rights - so I have missed scenes like the one at the right.   I am not sure why it is necessary to bring a weapon like the one in the picture into any store. Were I to live in a right to carry state, it is not likely that I would bring a weapon like the one in the picture into any store. (If indeed I owned one.)

I love to fish but would probably not wear my waders into a Starbucks nor would I carry my rod or my net there.   It just does not seem appropriate.

I think Schultz's judgment about whether the store could be successful in establishing an outright ban (which as a private business they should have the right to do) is correct.   But the letter is equally ineffective.  It won't make gun owners happy and because he did not propose an outright ban - it will not make anti-Second Amendment advocates pleased either.  Should Starbucks make a strong statement or establish a strong policy prohibiting  guns in states where there are open carry laws, I would be less likely to patronize their stores. 

As I read the letter, though, I remain concerned that while it is well written, it presents a tremendous opportunity to be misinterpreted.   It just looks to me like he did not think out his options very carefully.

Schultz's Letter is reprinted in full below - 

Tuesday, September 17, 2013

Posted by Howard Schultz, Starbucks chairman, president and chief executive officer

Dear Fellow Americans,

Few topics in America generate a more polarized and emotional debate than guns. In recent months, Starbucks stores and our partners (employees) who work in our stores have been thrust unwillingly into the middle of this debate. That’s why I am writing today with a respectful request that customers no longer bring firearms into our stores or outdoor seating areas.

From the beginning, our vision at Starbucks has been to create a “third place” between home and work where people can come together to enjoy the peace and pleasure of coffee and community. Our values have always centered on building community rather than dividing people, and our stores exist to give every customer a safe and comfortable respite from the concerns of daily life.

We appreciate that there is a highly sensitive balance of rights and responsibilities surrounding America’s gun laws, and we recognize the deep passion for and against the “open carry” laws adopted by many states. (In the United States, “open carry” is the term used for openly carrying a firearm in public.) For years we have listened carefully to input from our customers, partners, community leaders and voices on both sides of this complicated, highly charged issue.

Our company’s longstanding approach to “open carry” has been to follow local laws: we permit it in states where allowed and we prohibit it in states where these laws don’t exist. We have chosen this approach because we believe our store partners should not be put in the uncomfortable position of requiring customers to disarm or leave our stores. We believe that gun policy should be addressed by government and law enforcement—not by Starbucks and our store partners.

Recently, however, we’ve seen the “open carry” debate become increasingly uncivil and, in some cases, even threatening. Pro-gun activists have used our stores as a political stage for media events misleadingly called “Starbucks Appreciation Days” that disingenuously portray Starbucks as a champion of “open carry.” To be clear: we do not want these events in our stores. Some anti-gun activists have also played a role in ratcheting up the rhetoric and friction, including soliciting and confronting our customers and partners.

For these reasons, today we are respectfully requesting that customers no longer bring firearms into our stores or outdoor seating areas—even in states where “open carry” is permitted—unless they are authorized law enforcement personnel.

I would like to clarify two points. First, this is a request and not an outright ban. Why? Because we want to give responsible gun owners the chance to respect our request—and also because enforcing a ban would potentially require our partners to confront armed customers, and that is not a role I am comfortable asking Starbucks partners to take on. Second, we know we cannot satisfy everyone. For those who oppose “open carry,” we believe the legislative and policy-making process is the proper arena for this debate, not our stores. For those who champion “open carry,” please respect that Starbucks stores are places where everyone should feel relaxed and comfortable. The presence of a weapon in our stores is unsettling and upsetting for many of our customers.

I am proud of our country and our heritage of civil discourse and debate. It is in this spirit that we make today’s request. Whatever your view, I encourage you to be responsible and respectful of each other as citizens and neighbors.

Sincerely,

Howard Schultz

The Problem with Income Statistics

There's been some recent data on which both the left and the right seem to be concentrating.   It seems that this economic recovery has not been as robust as anyone thought it would be.   In some stats wages have actually declined.   The numbers have been very harsh on workers without a high school diploma but even not very friendly to college graduates.   In January, for example, total income (according to the Feds who keep those numbers) income declined month to month by 3.6%.  Real wages for many income groups have declined.

Some part of the left (like former Enron advisor Paul Krugman for example or Robert Reich) believe that incomes have declined because there is not enough government.   They continue to subscribe to the "public squalor" argument first advanced by John Kenneth Galbraith (if we only had more government we would be better off).   Some of the right (for example, John Taylor and Paul Ryan) sees the slow income growth as a function of too much government.   If we could just reduce the government's hand in the economy and reduce the level of debt, incomes and economic growth would be kick started.

The chart at the left is one from Catherine Mulbrandon's wonderful resource on income statistics.  It shows job growth by sector by income between 2000 and 2011.  So, for example,  during the period the number of government jobs in the economy grew and their average income was a bit over $60,000.  Health care and social assistance grew significantly but their median income was a bit lower.

Mulbrandon's chart, which was published widely this week in places like Wonkblog got me to think about the issue.   And while I generally subscribe to the arguments from people like Taylor and Ryan - there is a bit more going on.     As Mitra Toosi (of the Bureau of Labor Statistics) has suggested the workforce is composed of three groups (at least as it applies to this question) entrants (those starting to work), stayers (those continuing) and leavers (those retiring or leaving the workforce for some other reason).    The mix of those could have a profound effect on aggregate income statistics.   The chart above is from a paper by Toosi which projects workforce participation to 2050 by age.   Note that even then there will be some remnants of the boomers still in the workforce.  But the dynamics of the three groups may influence the aggregates.

Let's try an example to illustrate this.   I retired from my CEO position at the end of 2011.    My successor was hired with an income that was about a third lower than the final level of compensation I received.  Over time her compensation will grow to match or exceed what I achieved (assuming she does well - and I make that assumption).  At the same time, while I retired comfortably, my income has declined from when I was working full time.   If we had a two person economy, aggregate income would have declined.   But neither of us is worse off.

All this is not to denigrate the arguments for reducing deficits and for putting the economy on a sounder path to economic growth.   But it is to say that when you hear some politician or pundit making a point about income statistics, take the words with a lot of caution.

50 Years after "I have a dream"

Over the weekend there was a lot of coverage of the 50th anniversary of the March on Washington(which is tomorrow) where Dr. Martin Luther King gave his "I have a dream speech."  I listened to some of the clips from the speeches and read a lot on the coverage of that much smaller event.

I had four impressions.

#1 - When you re-read the "I have a dream" speech you get a sense that Dr. King was particularly blessed that day.  His rhetoric was soaring.   The main premises were well thought out, but at least according to contemporaries, King extemporized throughout the speech which added substance to an already well done speech.

William Safire at one point did an analysis of the speech and argued that several of the key phrases and some of the cadence can be traced back to earlier speeches by other political figures in our history.  Bill was not making a criticism rather he was making the point that some of the best speeches build off others.  If Bill's analysis was correct, it does not take away from the impact that King produced.

#2 - The rhetoric over the weekend was not soaring but pedestrian.   I am not sure why Al Sharpton is presented as one of the leaders of the African American community.  But he showed himself again as a clumsy buffoon.    An initial premise of Dr. King's speech was that a good deal of the responsibility for civil rights came from self help.  That trend came from earlier leaders in the African American community like Booker T. Washington, Frederic Douglas and even A. Phillip Randolph (who spoke in 1963).   Sharpton tried to make the same point in at least two instances.   In one (trying to make the point that disrespect for personal dignity is not a way to develop) he defamed two of the icons of the civil rights struggle (Rosa Parks and Fannie Lou Hamer).   He also made the point that "We need to give  them (young men in the African American community) dreams again, not to worry about sagging pants, but sagging morality"   He never seemed to get the point that many of the things he has supported contribute to that sagging morality.

#3 Eric Holder described the broadening of the concept of civil rights - "Our focus has broadened to include the cause of women, of Latinos, of Asian Americans, of lesbians, of gays, of people with disabilities. And of countless others across this great country who still yearn for equality" - which just about sums up the errors of political correctness.   Most of the people at the rally over the weekend believe that civil rights are created by dividing rather than unifying.   As Al Gore once remarked they believe that "e pluribus unum" means "out of one many" which is exactly the opposite of the meaning of one of the key phrases in our national lexicon.

#4 - Finally, as I reflected on both the 1963 march and the one over the weekend I wondered whether the key issues that Dr. King was trying to addressed have been morphed with 50 years of policies which create more dependence rather than independence.   Sharpton used a particularly powerful analogy that Dr. King used about collecting on the debt of equal protection under the law and turned the phrase to sound like his main goal was to get a lottery payoff.

Clearly, in spite of the rhetoric over the weekend, the country has made significant progress in assuring equal protection under the law.   And just as clearly, the mountaintop which King used as his final metaphor has not been achieved.  But at least some of the restraint from achieving the goals has been created by public policies which inhibit ultimate progress and low bar rhetoric of this generation of "leaders."

Another Example of "just because you can, doesn't mean you should"

This is a short post.   The chart at the left shows the associated taxes and fees attached to a projected car rental in Seattle.   I say projected because on a recent trip I finally decided that I would not use this rental company (fees for other companies are comparable) because of the almost 40% rate of tax on the rental.

Most all of these except the sales tax (at a whopping 9.5%) are adopted because the state and local governments think they can get away with it.   Seattle got talked into building a new sports stadium and car renters are asked to help pay for it.   The cost of the concession granted the rental company is amortized out over all the renters.   The rental car company even asks to have renters pay for the license plates.   Oh, and we also get to pay for funding regional transit.

The point here is that at some point travelers are going to be less likely to rent cars or stay in hotels or even visit places if the hidden taxes that residents of the city think they are shuffling off on visitors become even more onerous.   From my perspective a 40% tax is a bit too dear.   So on this trip I cancelled the reservation and used a shuttle.  The cost of the shuttle (which undoubtedly also had some of these taxes) was even less than the total tax bill on the projected car rental.  Too bad Seattle.