New Year's Predictions

It's New Year's Eve and I thought I would make some not so fearless predictions. "Not so fearless" because if I'm wrong, there is really no downside if I am wrong. Last year's predictions weren't that great. Some things I got wrong.

1. Romney would fade as a candidate due to lack of tea party support.
2. The economy would recover then stall. It just never really recovered.
3. The nut roots would froth at the mouth at Obama. They occasionally did so, but not much.
4. A multi-employer union pension plan would go bust. None did, although Kroger took some action due reduce risk to such funds that it contributes to.

The big thing I got right was that the battle to reduce spending would be mostly a draw due to divided government.

On to my fearless 2012 predictions.

1. The world will not end in December, although many will wish it would due to an Obama victory in November.*
   
2. Romney will be the Republican nominee.
3. The economy will recover but stall around election time, but not soon enough to derail Obama's election prospects. The signs of recovery abound. I recall reading over the past two weeks that consumer confidence is up, steel prices are up, on-line holiday sales are up 15% and new unemployment claims are down. Enough good news would allow Obama to eke out a victory, because the Republicans have not made the case that they are not the party of business interests married to government.
4. Looming economic disasters in China and Europe will be put off until the end of the year.
5. Pension reform will pass locally in San Diego.
6. Global warming debate will remain unsettled as higher sunspot activity will continue a warming trend.
   

These are my own predictions, I am sure my fellow SLOBs will be posting their own.

*Of course, I am not rooting for an Obama victory, but it is the way to bet. Also, my history of Presidential predictions is almost perfectly inaccurate, starting with Goldwater in 1964.

Death to Ethanol Subsidies

The Iowa caucuses are only a few days away, and interestingly, the tax subsidy for ethanol production steep import tariffs are about to expire about the same time. I have inveighed against the evils of these subsidies for some time. Seeing their expiration is a cause for rejoicing, and evidence that we can win victories against entrenched special interests. Unfortunately, there is still a federal law on the books that requires the use of ethanol in gasoline. H/T WSJ.

It's also great to see that ethanol hasn't become a burning issue in the Iowa caucuses; perhaps because of the near universal condemnation the whole program is receiving. No matter, time to start taking on other formerly sacred cows of government subsidy. Anyone up for removing the home mortgage subsidy next?

Makes more sense than paying to convert it to ethanol.

Weekend Music Chill - New Year's Edition

We've been watching a lot of football and it's almost New Year's Eve, so what better music to post than Gary Glitter's Rock and Roll Part 2.



And to round our festivities with another stadium favorite, here is Kernkraft 400 with Zombie Nation, supposedly the sports chant stadium remix edition.

Iran Displays its Weakness

Even dictators are politicians, who must win the support of key constituencies to remain in power; how else to explain the hold on power by such madmen as Kim Jong Il. Bret Stephens explained this best in this 2009 WSJ article.

Tyranny is a demanding and quintessentially human art, requiring, among its better practitioners, a discriminating nose for the weaknesses of others and a keen mind for how to exploit them to the fullest. The weaknesses of your own people—the sublimated terror of the masses; the petty ambitions of the cadres; the cravenness of your inner circle—you know only too well.

But a tyrant’s training is no less useful for the manipulation of free men. What keeps an abused and subjugated people in line is the constant fear that things could suddenly get dramatically worse, along with the sporadic hope that things might also get marginally better. So long as most people feel they have much to lose and something to gain, you will have them in your power.

Which brings me to Iran's recent threat to close the Straits of Hormuz to shipping if sanctions were imposed on its crude oil exports. While this may seem a replay of the sort of moves that Kim made famous, I think this is clearly a signal that the Iranian leaders are in a weak position. Kim's threats were aimed at parties who lacked the desire or the means to fully call his bluff, specifically China and South Korea. The Iranian threat directly impacts Obama's re-election prospects and he has the means, in the form of the U.S. Fifth Fleet, to do something about it.

Consider the bearded ones' positions. Despite years of work, they still seem a ways off from achieving their goal of building a nuclear warhead that can be delivered at a distance. Clearly the U.S. and/or Israeli campaign of sabotage and assassination has been successful in slowing their nuclear progress. It seems that the mullahs are in a race against time; they feel the need to fulfill their nuclear ambition to secure their base and to increase their popularity before popular discontent with their failing socialist economy causes the government's collapse. This is why the threat to close the Straits of Hormuz is so telling. It is an almost credible threat, but reveals that they are nervous about the impact of economic sanctions. From the CIA factbook on Iran:

Iran's economy is marked by an inefficient state sector, reliance on the oil sector, which provides the majority of government revenues, and statist policies, which create major distortions throughout the system. Private sector activity is typically limited to small-scale workshops, farming, and services. Price controls, subsidies, and other rigidities weigh down the economy, undermining the potential for private-sector-led growth. Significant informal market activity flourishes. The legislature in late 2009 passed President Mahmud AHMADI-NEJAD's bill to reduce subsidies, particularly on food and energy. The bill would phase out subsidies - which benefit Iran's upper and middle classes the most - over three to five years and replace them with cash payments to Iran's lower classes. However, the start of the program was delayed repeatedly throughout 2010 over fears of public reaction to higher prices.

The dependency on oil revenue to buy domestic peace is clearly their weakness. Another significant weakness, not mentioned in the factbook, is that the Iranians import significant amounts of their gasoline, despite their oil production.

With regards to policy towards, Iran, it seems that the current one is probably the best plan. Use covert means to sabotage the program and delay its progress, and build a consensus on sanctions. We are in no position to threaten full scale war with Iran, nor would we want to do so if sanctions and sabotage can achieve our goals. The ayatollahs are deeply unpopular, starving them of the means to buy domestic support will bring them down.

For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill.

Another Trillion in Debt

The President notified the Congress that he needed some more pocket change to keep the federal government running, to the tune of $1.2 trillion. Under the terms of the misbegotten deal that was struck last August, the President is authorized this last raising of the debt ceiling unless Congress can override a veto that would certainly come if they disapprove.

The deal turned out badly, for many reasons. The Super-Committee failed, and automatic cuts are supposed to kick in, but not until October 2012. Elections are going to intervene before any real change is effected, hence the failure. In hindsight, enabling a super-committee was a bad move tactically and constitutionally. I am sorry I thought it might work to reduce the debt. Deals to continue the payroll tax holiday only make another debt ceiling crisis right before the election more likely.

Speaking of elections, here is the most interesting question. Did the administration miscalculate? Might the debt ceiling actually come into play prior to the November elections, rather than in 2013, as previously predicted? The current limit is $15.194 trillion, which was reached rather quickly, it seems. If the debt ceiling becomes a problem prior to the election, what will the administration do? Here is a hint.

A Treasury Department document shared on Tuesday said that if the limit is reached before the elections, the government could take “extraordinary measures to extend borrowing authority beyond the next elections.” But the department offered no detail.

Because, as Dean often states, Constitutional Republics, are like, hard. I think the political fall out from the Treasury taking such action would be bad for Obama, so he might be forced to grandstand on the issue and take this to the Congress. It would give him an opportunity to run against Congress, instead of the Republican nominee. I hope Boehner is thinking this one through, but I am worried.

The winners of next November's elections will face very tough decisions; we are running out of room to maneuver. That makes these elections the most important in our lifetime.

Merry Christmas

Taking the day off from politics and blogging. Merry Christmas from the B-Daddy family. Here is a little Christmas cheer.




Old blue eyes has the best version of this song, but I like Judy Garland's as well, unfortunately, embedding is not available for her video.

Christmas Pancakes

It has been a tradition in our household that I make pancakes on Christmas morning. My sons have always been big fans. When we first started doing this, a simple recipe involving Bisquick sufficed to make them happy. As they grew older, I wanted to keep making improvements, because they were always so giving of their love and appreciation for the effort I put into Christmas breakfast. A wise man told me years ago that having children would change my life for the better. At the time, I didn't see how. I thought of all the things I wasn't going to do and all of the responsibilities I would soon be shouldering. He was wise enough not to try to explain it to me, because I don't think I would have understood.

My boys are in college now, but still live at home, so I still get to make pancakes for them. God richly blesses my life. I don't know how many more Christmases like this we will have. They will soon have careers that may take them far away. So, I want to share my latest Christmas pancake recipe with you, maybe it will inspire someone else's Christmas tradition.

B-Daddy's Beer Pancakes

This recipe makes 12-14 pancakes.

Ingredients:

2 cups less 4 tbsp Organic FlaxPlus Multigrain Pancake Mix
6 tbsp Granulated Sugar
2 packs Instant Oatmeal mix (flavored is fine, I used Maple-Brown Sugar)
1 tsp Baking Powder
4 tbsp Wheat Germ (if you don't have wheat germ, use the whole 2 cups of pancake mix)
2 tbsp Canola Oil
2 tbsp Lemon Juice
3 tbsp Trader's Vic's Macadamia Nut liquer (or your favorite, or use 2 tbsp vanilla extract)
12 oz Shiner Bock beer (or any flavorful malty lager or ale, I don't recommend hoppy ales.)
4 tbsp Butter (for the griddle)

Set up two bowls, wet and dry.
In the dry bowl, stir the Pancake Mix, sugar, oatmeal, baking powder and wheat germ to an even consistency.
In the wet bowl, add, in order, the oil, lemon juice, liqueur and beer.

Now gently pour the contents of the dry bowl into the wet side. There should be considerable foaming from the beer. Very gently, with a fork, stir the ingredients. This will take some time, as you want to break up the clumps of mix that are hiding the dry material inside. At first, the mix will appear too runny. Be patient, the oatmeal takes time to absorb the liquid.

Preheat a griddle on medium low heat, and grease with butter to an even coat. Be careful with the temperature, these pancakes burn easily, even if the bubbles haven't stopped.
Pour a full 1/4 cup per pancake. I usually use a 1/3 cup measuring cup to make sure I can easily get the full 1/4 cup onto the griddle. Flip the pancakes a little earlier than the normal rule of waiting until the bubbles have almost stopped. In about a minute they should be done. Serve with your favorite syrup.



P.S. Those good looking rascals pictured above get their looks from their beautiful Mom.

If You're Flying These Holidays

You should feel very, very safe, if your flight is on a U.S. flagged carrier. There were no fatalities in 2011, and only two in 2010, according to a WSJ article. Today, the chance that an airline flight will have an accident with a fatality is sitting at about one in 11 million. Flying is up to 100 times as safe as car travel by some estimates.

Meanwhile there was much ballyhooed release of new regulations to ensure that pilots and air crews get enough rest. Measure these remarks against the actual safety record shown at right:

Calling the long-awaited regulation a "landmark safety achievement" that resolves pilot-fatigue issues that have been festering since the 1970s, Transportation Secretary Ray LaHood on Wednesday said the changes were based on the latest scientific sleep research.

Perhaps the reference to sleep research is true, but to say that there is a long festering safety issue is demonstrably false. Fortunately, the new regulations aren't quite as onerous as originally thought.

Total projected compliance costs for industry dropped to about $300 million over 10 years, compared with $1.2 billion as originally proposed. FAA officials said they believe the industry won't have to hire new pilots to comply. Even so, the FAA still faced a seemingly big challenge justifying costs versus benefits.

According to the 300-plus page regulation, the value of anticipated benefits ranges from $247 million to more than $700 million over 10 years. Those benefits could include avoiding accidents, reducing aircraft damage and lowering insurance costs

I agree that reduced accidents have great economic value, the first article quoted savings of $600 million per year due to the low accident rate. But the accident rate is already close to zero, so I think we are just going to increase the cost of plane tickets with added regulation. We know from standard economic analysis that for each increase in airline ticket prices some people will choose to drive. That choice will result in more deaths. Why isn't this taken into account in regulatory analysis? It always sounds great when the government announces new regulation to increase safety, but there is a cost to regulation that has unintended consequences. This is why I view the regulatory regime with suspicion.

Weekend Music Chill - Christmas Edition

Merry Christmas, and Happy Hanukkah, which goes from December 20 to 28 this year. Like last weekend, I want to play one modern and one traditional Christmas tune.


Here are The Waitresses with Christmas Wrapping.



Here is a traditional rendering of Good King Wenceslas from York Minster in 1995.

Lying, Cheating . . . whatever

I read a couple of articles today that made my blood boil, not only because of what happened, but because I am certain that there will be absolutely no accountability imposed for lying and cheating. Exhibit 1, involving the DOJ and that miserable hack, of course, involves admitted perjury by a justice lawyer, presumably an "officer of the court." H/T HotAir. From PJMedia.

Stephanie Celandine Gyamfi, reportedly told investigators from the Inspector General’s Office that she perjured herself during an inquiry into Justice Department leaks during the previous administration. Despite the admission, she has not been fired for criminal malfeasance. Indeed, it appears she has not been disciplined in any meaningful way at all.
. . .
According to numerous sources within the Section, Ms. Gyamfi had been asked in two separate interviews whether she was involved in the leaking of confidential and privileged information out of the Voting Section. Each time, she flatly denied any knowledge as to who was responsible for the leaks. In a third interview, she was once again questioned about her role in the leaks. At first, she adamantly denied involvement. Then, however, she was confronted with e-mail documents rebutting her testimony.

And here is the kicker, and what drives me to despair. The lack of accountability.

Amazingly, despite Ms. Gyamfi’s admission of committing perjury not once, but three times, she so far has been neither terminated nor disciplined by the Justice Department. In fact, her boss, Voting Section Chief Chris Herren, continues to assign her to the most politically sensitive of matters, including the Department’s review of Texas’s congressional redistricting plan.

Mere mortal employees of the federal government, such as yours truly, would find ourselves out on our butts, our security clearances revoked and generally unemployable if we were determined to have perjured ourselves. Further, we would not even have to be convicted beyond a reasonable doubt, the mere preponderance of evidence would be necessary to get ourselves fired. But because Ms. Gyamfi's political positions are useful to this administration, jack will be done.

Exhibit 2 is even more painful, because it expressly violates the will of the voters in California. Olga Pierce and Jeff Larson have a devastating article in ProPublica titled, How Democrats Fooled California’s Redistricting Commission. The whole article is almost too much for me to take. It is such an obvious first step on the road to dictatorship that I have difficulty absorbing the article's entire contents.

In previous years, the party had used its perennial control of California’s state Legislature to draw district maps that protected Democratic incumbents. But in 2010, California voters put redistricting in the hands of a citizens’ commission where decisions would be guided by public testimony and open debate.
. . .
n the weeks that followed, party leaders came up with a plan. Working with the Democratic Congressional Campaign Committee — a national arm of the party that provides money and support to Democratic candidates — members were told to begin “strategizing about potential future district lines," according to another email.
. . .
When they appeared before the commission, those groups identified themselves as ordinary Californians and did not disclose their ties to the party. One woman who purported to represent the Asian community of the San Gabriel Valley was actually a lobbyist who grew up in rural Idaho, and lives in Sacramento.
. . .
The losers in this once-a-decade reshaping of the electoral map, experts say, were the state’s voters. The intent of the citizens’ commission was to directly link a lawmaker’s political fate to the will of his or her constituents. But as ProPublica’s review makes clear, Democratic incumbents are once again insulated from the will of the electorate.

We used to have a consensus in this country that crimes against the public trust were serious and important enough to warrant punishment, regardless of the politics of the perpetrator. If we accept that any amount of lying and chicanery is acceptable in the name of political gain, then we have surely lost our way.

Payroll Tax Fiasco

Pillars of the economy meet with members of Congress.

Today's WSJ editorial excoriates House Republicans for their mishandling the payroll tax debate. While there is plenty of tactical political blame to be shared by Boehner and McConnell, the real crime is that we are debating this at all. The tax holiday on payroll taxes that temporarily cut the rate from 6.2% to 4.2%, is never going to be made permanent. Everyone knows it, so any impact on hiring is already discounted. The current tax holiday has done nothing for unemployment, which remains stubbornly high. Worse it is blowing a hole in the social security accounting, bringing the day of bankruptcy closer, much faster.

A better approach comes from John B. Taylor, on the opposite page from the editorial, who argues that stable tax policy would help recovery much more than any gimmickry. I would say that stable regulatory policy should be added to the mix, as well. He points out that the Congressional Budget Office has called for higher tax rates as one option to repair social security's balance sheets. The current loss of revenue from reduced rates only makes that option more attractive in the long run, so it is a self defeating policy, as employers know that they are likely to be saddled with higher taxes later and just have to lay people off. As a manager, I am always trying to balance hiring against future budget expectations, sometimes leaving positions vacant as a hedge. I can't imagine business owners think differently.

Taylor has a slightly different argument about why the temporary holiday is bad.

But the policies are worse than doing nothing at all. Rather than stimulate the economy, they hold the economy back by creating policy unpredictability and by distracting Washington from crucial long-term reforms that are key to restoring economic growth and creating jobs.

He also attacks the complexity of the tax code, and notes that there are 84 temporary provisions expiring this year. I think the Congress likes the temporary nature of the provisions, because they can collect rents from special interests every few years as inducement to extend them. This is in line with my recent theme of crony capitalism. How can the following temporary measure be of any value to the economy? "Three year depreciation for race horses two years old or younger." Really, when the race horse owners, those pillars of the American economy, need this policy extended, I am sure they are going to be very generous giving to their senator's re-election campaign.

Congress - Putting the Crony into Capitalism

Walter Russell Mead, getting to be one of my favorite writers, takes down Congress and Wall Street on their extremely cozy relationship. This whole article is worth a read, because it proves the old saw that the real crime is what's legal. A brief summary.

• Hedge fund investors and other key Wall Street insiders get tipped off by Congress and staffers on legislative direction. From the WSJ: When Senate Democrats finally brokered a compromise over the proposed health-care law, a group of hedge funds were let in on the deal, learning details hours before a public announcement on Dec. 8, 2009.
• As Mead notes. Fabulous profits are there to be made, perfectly legally; legislators do Wall Street a favor by giving the hedgies an early head’s up, the hedgies reciprocate by making large campaign contributions. Everybody wins except for the pathetic losers not part of the magic inner ring, and nobody breaks any laws.
• Congresscritters in turn, personally benefit from being brought in on deals that you or I can only dream about. Nancy Pelosi and her husband were parties to a dozen or so IPOs, many of which were effectively off limits to all but the biggest institutional investors and their favored clients. One of those was a 2008 investment of between $1 million and $5 million in Visa. . .
  
• OWS got it wrong, the problem isn't Wall Street, but the coziness between Wall Street and Washington, which the Tea Party better understands. The paternalistic and benevolent government envisioned by the architects of the blue social model has morphed into a corrupt insider state that can no longer regulate or protect. The answer can’t be to give more power to people like Chris Dodd; that is what the Tea Party understands and the OWS folks too often miss.

Considering all of the advantages that Congress has, we find studies that show that members of the House of Representatives stock market returns beat the market by 6.8%. To quote Dean:

These guys write the legislation, they make the rules... and they're completely immune from taking advantage of gaming the situation in any manner they feel... and they still can't make out any better than 6 and 12 percent above the market average?

U.S. Congress: where corruption meets complete incompetence.

No Blogging Tonight

Enjoying some family time.

Obamacare - What Actually Changed?

. . . Other than a morass of new regulation? As the slow moving train wreck called the Patient Protection and Affordable Care Act rolls down its tracks of doom, it seems that many of the worst elements of health insurance have survived. All that has been added are layers of bureaucracy, as if even more regulation was going to help an industry choking on it. Here is the latest instance of plus ça change, plus c'est la même chose. From the Wonkblog at WaPo.

Under the health reform law, every insurance plan will be required to cover a set of “essential health benefits.” The Affordable Care Act defines 10 broad categories that must be included, such as “professional services of physicians and other health professionals” and “hospitalizations.” What fits within those categories is up to the Obama administration. Any plan that wants to sell on the new insurance marketplace will have to cover the benefits.
. . .
But what Health and Human Services created today wasn’t really an essential health benefits package at all. Instead, the department announced that every state will have the option to determine essential health benefits themselves, by using standards that already exist in their states. “The state is always in control of what the essential health benefit plan is in that particular state,” Steve Larsen, director of the Center for Consumer Information and Insurance Oversight, told reporters this afternoon.

How is that really different than today, where insurance is regulated by the states? The Secretary of HHS can now sue each state if he/she doesn't like their interpretation of the law, setting up politically motivated punishments of states by the federal executive branch, consolidating federal power. While the Obama administration would never abuse its power to sue a state trying to conform to federal law, what if those wascawy Wepubwicans ever win the White House? Something for you Democrats to think about.

Fruther, if the Supreme Court fails to strike down the individual mandate, the case is more important from a precedent setting perspective than from a practical one. The fines set for the individual mandate are not set high enough to get compliance. Further, there are weak enforcement mechanisms. From Randy E. Barnett in the New York University Journal of Law & Liberty.

Moreover, unlike Sonzinisky, the penalty does not even purport to be a tax. It is called a “penalty.” Although the penalty was inserted into the Internal Revenue Code, Congress then expressly severed the penalty from the normal enforcement mechanisms of the tax code. The failure to pay the penalty “shall not be subject to any criminal prosecution or penalty with respect to such failure.” Nor shall the IRS “file notice of lien with respect to any property of a taxpayer by reason of any failure to pay the penalty imposed by this section,” or impose a “levy on any such property with re- spect to such failure.” All of these restrictions undermine the claim that, because the penalty is inserted into the Internal Revenue Code, that it is a garden variety tax.

What did this atrocity really get us? More bureaucracy and regulation, less choice, maddeningly more complex regulatory landscape, more subsidies, more debt and a dubious precedent that will effectively grant Congress unlimited power over every person if upheld. Glad we had time to read the bill.

Agreeing With Krugman on China - Truly Scary

Paul Krugman is the economist/columnist that I love to hate. He is probably brilliant in some way that I cannot understand, because I almost never see it in his work at the New York Times. He is a Nobel Prize winner, but I often wondered if his award was not politically motivated, in much the same way that Obama's clearly was. I was surprised to find his analysis of China's economic situation quite penetrating. I had argued against Glenn Beck and others that China was not the formidable foe they thought. My unlikely ally in this regard is Krugman. Some key points.

Still, even the official data are troubling — and recent news is sufficiently dramatic to ring alarm bells.

The most striking thing about the Chinese economy over the past decade was the way household consumption, although rising, lagged behind overall growth.

. . .China increasingly relied on trade surpluses to keep manufacturing afloat. But the bigger story from China’s point of view is investment spending, which has soared to almost half of G.D.P.

. . .it [the motivation for this investment] depended on an ever-inflating real estate bubble. Real estate investment has roughly doubled as a share of G.D.P. since 2000, accounting directly for more than half of the overall rise in investment.

Do we actually know that [Chinese] real estate was a bubble? It exhibited all the signs: not just rising prices, but also the kind of speculative fever all too familiar from our own experiences just a few years back — think coastal Florida.

. . . it’s impossible not to be worried: China’s story just sounds too much like the crack-ups we’ve already seen elsewhere.

Krugman also takes to task those who think that China's "strong, smart leaders" who don't have to bother with democratic niceties will somehow handle the situation. He points out that endemic bribery at the local level limits the central government's ability to govern. I would add that even dictatorships are subject to political pressures, which ultimately cannot be ignored.

We have a good news, bad news situation. Despite all of the troubles of the Unites States, there is no other nation close to being able to challenge our leadership, not the Europeans, not China and not Russia. However, if China also starts to suffer serious economic hardship, then a global depression seems possible.

Managed Competition with Subsidies is not a Free Market in Health Care

Paul Krugman summarizes the leftist argument for socialized medicine in today's New York Times. He also cites a longer article by Ezra Klein purporting to prove that competition doesn't lower the cost of health care. Krugman's summary.

Patients by and large don’t have the information to evaluate medical treatments; in any case, they mainly buy insurance rather than medical care directly; and insurers profit not by providing the most cost-effective care, but by trying to insure people who won’t need care.

And it’s not as if market competition hasn’t been given a try; in this country it has been tried over and over, by politicians who won’t take no for an answer.

Ezra Klein cites any number of examples such as Medicare Advantage and Medicare Part D to show that the competition within those programs has not lowered costs.

These are misleading arguments that need rebuttal.

• In a free society, why is it a goal to spend less on health care? If we have rising levels of discretionary income, why wouldn't we choose to spend more on improving our quality of life?
  
• We conflate total costs with unit costs. An aging population is going to consume more health care, there is nothing to be done about the demographic curve. However, competition can reduce unit costs.
• Even if people have to make decisions about medical providers under emergency conditions, they do not make decisions about insurance plans that way. True competition between plans is stifled by Obamacare and so many other regulations.
• Even under emergency conditions, people make informed decisions about health care treatment. They can often decide which emergency room to visit and have information about who is best when they do so. During my last few emergency room visits, I arrived by private vehicle, in full possession of my faculties, as did over 90% of the other patients I saw there.
• If we had people paying significant out of pocket expenses, and they had better choices in health care providers, then an Angie's List for doctor's would spring up. Krugman thinks the average person as both ignorant and stupid, unable to learn for themselves. When the chips are on the line, I find people to be just the opposite, researching treatments and providers extensively.
• Competition has been slowly squeezed out of the market place ever since the introduction of Medicare and the insurance industry following all of Medicare's practices. It is a lie to say that any free market solution has been tried in the last three decades. Klein makes the classic leftist argument that when a quasi-competitive managed system that also involves government subsidies and regulation doesn't deliver cost savings, this is proof of the failure of free markets. It is not.

Until we decouple insurance from work and free up the insurance industry to provide plans with high deductibles and relatively high catastrophic caps, we are not going to get unit cost containment. Until the baby boomers leave the stage, we are going to see increases in health care costs, period.

Keystone Pipeline and Latest "jobs" Bill

The Democrat controlled Senate passed a two month extension of the payroll tax cut and an unemployment benefits extension. Although touted as a jobs bill, this will do little to help the economy. The payroll tax cut has so far done nothing, and will continue to do nothing except bring the day of reckoning on social security much sooner. That this doesn't produce cognitive dissonance at the AARP is beyond me and shows how deeply they are embedded with the Democratic party.






However, the Republicans managed to get a provision into the bill forcing the administration's hand on the Keystone XL pipeline. I was wondering how the left might spin this, and was surprised at the pretty realistic coverage by Joan McCarter at DailyKos:

Of course this doesn't mean that construction on the pipeline itself will be expedited, it's just intended to make Obama look bad at the beginning of an election year. When it's denied, as the State Department has already said would happen if forced to have to decide in just 60 days, Republicans can screech about his killing jobs. If he overrules the State Department, a possible but unlikely outcome, then Republicans can watch his base explode. Their favorite pastime.

Of course Joan doesn't remember the first Bush years, and all of the Reagan administration, where this was the favorite pastime of Democrats. It's a healthy part of the political system, because it forces choices on the parties and makes them say what they stand for. This is why being in power is hard, you can't equally please all parts of your coalition. In this case Obama will be forced to choose between his base of enviro-greenies and labor. I think that he will still try to finesse the deal, but it will be a test of how badly he wants to be re-elected. My guess is that because he does desire re-election, he will stiff the greens, because they have nowhere to go, and ensure labor support, because they have cash and boots on the ground.

Mark Meckler Arrest in New York

Mark Meckler, head of the Tea Party Patriots, was arrested at New York City's La Guardia airport, after declaring that he was carrying an unloaded firearm, following TSA regulations for so reporting. He was arrested for his troubles. SarahB at Lipstick Underground has the details. Bottom line, federal law protects his transport, as he has a permit for concealed carry. New York City merely wants to harass travelers because of their animus against the Second Amendment. They will lose this court case, but all people will remember are the headlines that some tea party dude brought a firearm to the airport.

Podcast below that gives a full explanation.

KOGO Podcast

Weekend Music Chill

We may not be blogging next weekend, and its time to get into the spirit of the season, so here is some Christmas music, of two very different styles.




This one is for Nanny.

Republican Sioux City Iowa Debate

I watched most of the last Iowa debate tonight and was impressed with the Republican candidates. Practice, if it doesn't make perfect, gets you pretty far down the road to it. Some observations.

• I saw some passion from Romney. This was his best performance. I loved his defense of his time at Bain Capital. He cut some jobs, but he also created jobs. Then he makes a very sly move and compares it to when "Obama ran General Motors." Killer move, because he isn't criticizing the take over, but it is so unpopular, that reminding voters of it is toxic to Obama.
• Rick Perry had one of the more memorable lines, comparing himself to Tim Tebow, as an underdog candidate. Also very sly, given the current controversy and the make up of Republican voters in Iowa. I think that if Perry can get a ground game going in Iowa and South Carolina, he may still have a chance.
  
• Gingrich had a great performance, except in explaining the nature of his services to Freddie Mac. As popular as it was, I wasn't happy about the whole judges testifying before Congress part. Another example of a seemingly brilliant, "out of the box idea," that didn't get the vetting needed.
  
• Bachmann looked bad, because, even if she damaged Gingrich, she looks a bit unethical in making baseless charges about Gingrich's work at Freddie Mac. I found her attack distasteful, as she suggested it was somehow unethical, with zero evidence to back up her claim.
• The discussion on Iran did no one any favors. Ron Paul sounded weird and defensive, and couldn't make the sale, but the rest of the gang sounded trigger happy. My belief is that the clandestine war that we are already conducting is the best approach. But if they get a nuke, its not the game changer everyone thinks. A nuke is eventually going to be used in the region; better it come from the devil we know, to give BMD a chance, than from a surprise source that we aren't prepared for. Now what to say in public about it? That's the tough question.
  
• Romney also responded to the flip-flop question with facts and sincerity. When you look at the fact that he governed Massachusetts as a Republican with huge Democrat majorities, you are looking at a guy who made some compromises to get things done. He touted his veto record as governor, but didn't mention how many were overridden.
  
• Santorum did a good job too, I just have a hard time being objective. It's a personal gut reaction thing for me, I just don't like him.
• Jon Huntsman was at the debate and sounded intelligent as well.
  

I saw a tweet that Gary Johnson is going to run as a Libertarian. This is bad news, if true. After the debate Ron Paul made it pretty clear that he isn't running as a third party candidate, even though he didn't rise to Sean Hannity's challenge to offer an absolute pledge. I get the feeling that Ron Paul finds Obama so distasteful that he wouldn't want to facilitate his re-election. But Gary Johnson might pull in enough tea party types angry over their choices to hurt the Republican nominee's chances. Hard to say if the desire to see Obama off would overcome the loathing of the current field as more of the same establishment Republican types.

All told, when I think through Obama's baggage, the bad economy, everything Holder does, Solyndra, Fast and Furious and ongoing bailouts, I believe he can be beaten. But he is the President, sitting on a mountain of cash, so we should remember that he will be looking to whack his opponent, figuratively, of course.

Christopher Hitchens - Requiescat in pace

Just a few quick notes on the passing of Christopher Hitchens, who died today. I always found him maddeningly effective in his prose style. I often disagreed with him, especially about religion, for which he blamed much of the world's troubles. But I also respected him for taking on former allies in attacking the left's blind spot towards militant jihad. He seemed to veer wildly between leftist positions and a deep regard for liberty, but the man could write. We will miss his sharp wit.

In the Unlikely Event of a Water Landing

I work in IT management, and preparing for contingencies and product launch failures and delays is a prudent part of my daily routine. We always joke about the process, because unlike airlines, where water landings are very rare, apparently, disasters are more routine in IT. Which brings me to the euro. Here is a little tidbit that is an indicator of the euro's long term health.

At least one—the Central Bank of Ireland—is evaluating whether it needs to secure additional access to printing presses in case it has to churn out new bank notes to support a reborn national currency, according to people familiar with the matter.

So, in the unlikely event of a water landing. Just a friendly warning. I cashed out an international fund six weeks ago and put the funds in U.S. corporate bonds. The more I study the problem the more I am convinced that the euro can't survive. More than one prominent economist points to the huge productivity growth disparity between Germany and the rest of the euro zone, which is not compensated for by wage disparity, as the reason the euro can't survive. Alan Blinder has a very readable explanation here.

Incompetent Polling on Brown's Tax Hikes - UPDATE

Lest you get depressed over the stupidity in the headline in today' U-T that a big majority approves of Jerry Brown's proposed tax hikes, let me return you to reality, and a much better outlook. Here is the main quote.

Nearly two-thirds of Californians favor Brown’s tax hike, but fewer than half of them think he’s doing a good job as governor, according to a survey released Monday by the nonprofit Public Policy Institute of California.

First, remember that this a poll of "adults," allegedly, not likely voters, not even registered voters. Such a poll is bound to vastly over estimate the support for new taxes. Likely voters are going to be more conservative than "adults."

Second look at the actual wording of the question:

Governor Brown has proposed a plan to help close the state’s budget deficit over the next five years. The plan, which would be put before voters in November, would raise $7 billion annually through a temporary four-year half- cent sales tax increase and a temporary five- year income tax increase on those earning more than $250,000. Do you favor or oppose this proposal?

They might as well have said Do you support the heroic Governor's surefire plan to cure our deficit woes? What kind of polling is this?

Third, in my experience, polls always over estimate the support for tax increases. Remember how Proposition D, the half cent sales tax increase was supposed to be a squeaker? The U-T published a poll near election time that showed a 40% to 40% tie with a large number of undecideds. Final result? The tax increased was crushed 63-37, not even getting the 40% it polled at.

Fourth, PPIC, who performed the polling, is generally left of center. Of course they will get a result that supports tax increases.

Finally, these tax increases energize an angry public to vote no because they are sick to death of lack of accountability from government. This vote will re-energize the tea party movement in California.

UPDATE

I cross posted this article at sdrostra.com. In the comments, Tony Krvaric makes some excellent comments, here is an excerpt.

1) The question is framed in terms of deficit reduction, even though real world experience shows that there’s no correlation between raising taxes and reducing the deficit (or else California certainly would have no deficit by now.)

2) The poll tries to state as fact that Jerry Brown’s plan will, for certain, produce $7 billion in new tax revenue, even though again, real world experience shows that tax increases rarely, if ever, produce the revenue its predicted they will.

3) Is it really necessary for a pollster to underline that four year and five year tax increases are “temporary?” Doesn’t their descriptive as four year and five year tax increases already make that clear?

4) Look at the timing of this poll. It was released the same day that the Department of Finance director announced the budget trigger cuts.

His entire comments are worth a read.

SHOCK? Overcounting Home Sales

The Drudge headline says SHOCK: Realtors: We've Overcounted Home Sales for Five Years... I guess someone is shocked that the very people who stand to benefit from painting a rosy picture on housing have been providing inflated numbers? Count me shocked as well, like Captain Renault.




Supposedly the revised numbers won't affect home prices, but how do those guys know? They're in shock. This blog has consistently said that home prices still have a ways to fall. We still haven't changed our mind.

The Government is Collecting Geolocation Data from Your Cellphone

Just a warning. Reliable sources indicate that the information the U.S. Government is collecting mobile phone geolocation data under a secret interpretation of Section 215 of the Patriot Act. From Reason's blog:

. . . [Senators] Wyden and Udall, both members of the Senate Intelligence Committee, have been warning that the Obama administration relies on a "secret interpretation" of the PATRIOT Act to justify surveillance that the general public does not realize is happening. The interpretation involves Section 215 of the law, which authorizes the FBI to demands business records or any other "tangible things" it deems useful "for an authorized investigation. . .

Of course that miserable hack at DOJ is part of the fun. Wyden and Udall condemn Justice's denial of a secret interpretation as "extremely misleading."

Why do some think that this has to do with geolocation? From the Cato Institute' Julian Sanchez:

Department of Justice has developed a novel legal theory, known as the “hybrid theory,” according to which law enforcement may do some types of geolocation tracking of suspects’ cellular phones without obtaining a full-blown probable cause warrant. The “hybrid theory” involves fusing two very different types of surveillance authority. “Pen registers” allow the monitoring, in real time, of the communications “metadata” from phones or other communications devices (phone numbers dialed, IP addresses connected to). For cellular phones, that “metadata” would often make it possible to pinpoint at least approximately—and, increasingly, with a good deal of precision, especially in urban areas—the location of the user. Federal law, however, prohibits carriers from disclosing location information “solely” pursuant to a pen register order. Another type of authority, known as a 2703(d) order, is a bit like Patriot’s business records authority (though only for telecommunications providers), and is used to compel the production of historical (as opposed to real-time/prospective) records, without any exclusion on location information. The Justice Department’s novel theory—which I discussed at a recent Cato event with Sen. Wyden on geolocation tracking—is that by bundling these two authorities in a new kind of combination order, they can do real-time geolocation tracking without the need to obtain a full Fourth Amendment warrant based on probable cause.

Further, there is reason to believe that the information isn't being used in any particular investigation. From the Campaign for Liberty, more from Wyden and Udall:

Section 215 authorities are not interpreted in the same way that grand jury subpoena authorities are, and we are concerned that when Justice Department officials suggest that the two authorities are ‘analogous’ they provide the public with a false understanding of how surveillance law is interpreted in practice.

Why the discussion of grand jury rules? The U.S. Attorney's manual provides that:

It is improper to utilize the grand jury solely as an investigative aid in the search for a fugitive in whose testimony the grand jury has no interest.

Wyden and Udall conclude that:

...locating subjects for the benefit of law enforcement (rather than as a means of securing their testimony before the grand jury) is one of the few things so expressly and specifically excluded.

From this we might conclude that the government is making use of geolocation data for other than ongoing criminal investigations. I could be wrong, but I have to trust my instincts on this one.

I would like to thank this man, Julian Sanchez, for working diligently to work on the behalf of all citizens in the arena of electronic freedom.

Occupying the Ports? #Occupy's War on the Working Class - UPDATE 2

The Occupy movement intends to shutdown ports on the West Coast tomorrow, Monday, December 12. OccupySD plans are listed here. There stated aim is to draw attention to "unfair and unjust business practices of multinational corporations." That there is a nexus between multinationals and the ports is left to the imagination of the reader. They also claim that their purpose includes:

- our picket lines are picket lines organized by working class people, in solidarity with fellow workers

One problem with that assertion is that the unions aren't too happy. From the SF Chronicle.

"Support is one thing," Robert McEllrath, president of the International Longshoreman and Warehouse Union, wrote to his members last week. "Outside groups attempting to co-opt our struggle in order to advance a broader agenda is quite another and one that is destructive to our democratic process."

Not the 1 percent

The Alameda County Building and Construction Trades Council's secretary-treasurer, Andreas Cluver, said many of his union's workers were recently hired at port building projects after long stretches on unemployment. Given that, a port shutdown aimed at punishing the 1 percent "makes no sense," he said.

He said no union at the port supports the shutdown.

"We're extremely supportive of the message of Occupy Oakland, and we did come out to support the Nov. 2 general strike, but we're not behind this one," Cluver said. "When working people aren't involved in the decision on whether to shut down their jobs at the port, that's problematic. And we weren't consulted. Losing a day of wages is hard."

Also, given that this protest is planned for a Monday, is this really a protest of working people? Or maybe its a protest against working people for their effrontery in working for big corporations in order to put food on the table for their families. It seems that the #OWS and its affiliate's protests are actually a war against those who work, regardless of their "percent" by the leisured class of those who subsist off the generosity of our society.

UPDATES

SarahB at Lipstick Underground is providing updates this morning.

UPDATE 2

Dean at BeersWithDemo checks out the action with some man in the street pictures. Here is a taste:

A Quick Note on Newt Gingrich's Palestinian People Comment

Newt Gingrich's comments below brought him controversy and attacks from the Palestinians themselves as well as other Republican candidates.




That his remarks are accurate doesn't appear relevant to those criticizing him. A succinct history of the term, Palestinian, makes that clear. However, I think that a people are who they decide to be, for reasons good and otherwise. One might believe that the Arabic peoples who are descendants of settlers of the territory that is now Israel could have made other choices about their national identity. They did not and that is now a fact that must be dealt with. There was no American people until after the revolutionary war. The main allegiance of people was to their state and not the United States as a whole initially. This is evidenced by the fact that prior to the Civil War, sentences might be constructed that begin "The United States are. . ." whereas after the war, the usage changed to "The United States is. . ." I believe wholeheartedly in the invented people know as Americans.

Gingrich's comments show that he can't resist showing off; trying to impress his interviewer with just how smart he is on a subject clearly of interest to that audience. Rather than thinking clearly how he might use the opportunity to further the interests of the United States, especially in the event that he becomes President, Gingrich veers into immaturity with a true but irrelevant comment sure to ignite controversy.

In my view, Obama suffers from the same malaise of short-sighted and egotistical behavior, but just isn't near as smart as Gingrich. We don't need an immature conservative President. Regardless, I am hoping for Newt to clean up his act, and show that he can act Presidential. I'm not supporting him, but if he is the nominee, I want him to be in a position to beat Obama.

Weekend Music Chill

Saw Limitless last weekend, and really enjoyed some new music. Here are The Black Keys performing Howlin' For You.



And Ash Grunwald performing Walking.

Newt Gingrich Called Me

I got a call from Newt Gingrich tonight, not the man himself, of course, but a recorded message from him. I have noticed that the tactics that campaigns use in direct mail and fund raising telephone calls differ from what they use on television and in press releases. For that reason, I often report on calls like this to shed light on the process.

Newt's call started with a live human being who let me know that although Newt was leading in the polls, the Iowa caucuses and New Hampshire primaries would be starting in January, so there was not time to waste in getting campaign cash into the candidates' coffers. (I am using Newt and not Gingrich, because his paid callers were not using his last name either.) He then put on a recording of Newt's which had the following main points.

• Now that he is the front runner, Gingrich has been subject to a smear campaign from left leaning media. This is to be expected, because he is the candidate they fear most.
• Three things distinguish him from other Republican candidates, all of whom would make a better President than Barack Obama.
  
• Gingrich is the best debater, and therefore will crush Obama in Presidential debates in October. This crushing will lead inevitably to Obama's defeat.
  
• He has proven leadership experience. He cited his ability to get welfare reform done as a bipartisan deal with a Democratic administration.
• He claimed that the breadth of his solutions was more compete than any of his opponents. [This is not necessarily a good thing IMHO, and shows his penchant for always pointing out that he is the smartest kid in the class. Since I was actually the smartest kid in the class, I don't enjoy the competition.]
• He chided fellow Republicans for their attack ads against him, and pointed out that Obama will have a billion dollars of campaign cash and free media from the likes of MSNBC to attack Republicans next fall. He said we needn't give them any help.

After the call, a woman came reminding me that true conservatives always knew that Newt's superior credentials and ideas would cause him to rise to the top of Presidential polls. She wasn't actually that eloquent, seemingly barely able to read her script. She proceeded to ask me for a $100 donation. At least it wasn't a three dollar raffle ticket to have dinner. I had heard enough by that point, and told her I was supporting Ron Paul, just to see if I could get a reaction. She just plowed on with her script, so I hung up.

As these things go, I believe Gingrich wasn't really flying anything under the radar, good for him. I am pretty unenthusiastic about my choices; but I actually think that Gingrich could beat Obama, if and its a big if, he didn't self destruct in the interim. Unfortunately, the risk averse bet would be to go with Romney, but hedging one's bets don't produce big pots.

San Diego's Poor Students Fall Behind

Recent testing of San Diego fourth and eighth graders showed that the poor kids are doing even less well in San Diego's schools than when similar tests conducted in 2003. From the U-T.

Among San Diego’s fourth-graders eligible for free lunch, those tested last year earned a math score that was 38 points lower than those who do not receive that income-based subsidy. That’s a deeper chasm than the 27-point difference reported in 2003.

Budget cuts are blamed by some in the article for the drop in scores, but the gap is consistent with other research.

In his 2008 book, the Outliers, Malcolm Gladwell posits that the reason for lower test scores achieved by lower income students was due to lack of summer activities that promote further development of reading skills. From the book, he addresses research performed by Johns Hopkins University sociologist Karl Alexander. He reviewed changes in reading test scores that occurred over summer vacation, dividing scores by income groups, top, middle and bottom.


(Source: Gladwell, Malcolm (2008-10-29). Outliers: The Story of Success (p. 257). Hachette Book Group. Kindle Edition.) We see that the those in the high income group achieve a 52 point cumulative increase in test scores over their summer vacations, compared to poor children, who make no progress.

In Outliers, Gladwell looks at KIPP (Knowledge is Power Program) where students spend considerably more time in school than the national average. The program has lifted almost everyone one of its poor students into college eligibility. From The Economist:

In particular, charter schools in the Knowledge is Power Programme (KIPP) start the school day at 7.30am and end at 5pm, hold classes on some Saturdays and teach for a couple of weeks in the summer. All in all, KIPP students get about 60% more class time than their peers and routinely score better in tests.

The lengthy school days, and the work over the summer allow these poorer children to perform as well as students in wealthy districts. One of the criticisms of the KIPP program is the self-selection of children whose parents are motivated to be involved. However, I see it differently. They have a program that demands high commitment from parents, and being free from the shackles of the public education system, they can do so. It is just one of many innovations available when schools are freed from tight legal restrictions.

A public school cannot compel the compliance of parents to be involved in their child's education in the manner that a charter such as KIPP can. When government takes over the duty of educating all children, we lose the flexibility to allow education to innovate to 21st century demands. Further, the schools no longer view parents as clients they must please in order to maintain their business of educating children. For this reason, I believe we should end the system of public education and provide subsidies to allow parents to pay for the education of their children.

Will that fix the system? Probably not, because parental involvement and longer hours are also needed and full privatization won't fix that. However, as schools who implement reforms that draw the parents into greater involvement and longer hours, including summer studies for students, their free market success will spawn imitators.

San Diego Navy Lights and USS Benfold Tour

I took a break from politics this evening and took family and friends to the Naval Base in San Diego for the Holiday Lights and a tour of the USS Benfold (DDG-65). It was great that the Navy opened up the base to the public and let them tour some of our ships. I was struck by the professionalism and high spirits of all the officers and sailors involved. There was quite the line to get on base, and the line of cars moved slowly, but it was worth it. Here are a few photos and explanations from the tour.



This is the fantail of the Benfold, where the ship can land a Navy helicopter. Our tour guide mentioned that they occasionally hold barbeques on the "steel beach" (the fantail) during long deployments. You can also see pier security in the background. The Navy did a great job of balancing security with making people feel welcome. I noticed that a lot of sailors on duty made a point of saying Merry Christmas to us.



Here's our tour group on the forecastle (pronounced foc'sle) with the 5 inch gun mount featured prominently. We were told that the spent rounds from firing the gun put dents in the non-skid on the deck. Our tour guide was the ensign in camouflage in the foreground. She was very patient with the questions from our group and had great answers. The hexagonal features below the bridge wings are part of the ship's ballistic missile defense system. On the deck behind the gun is the vertical launch system for various missiles, including the famous Tomahawk.


Here's another photo of the five inch gun with San Diego Harbor in the background.



This is a view across the dock, towards the USS Bonhomme Richard (LHD-6), I believe. During the tour, one of the ships was playing the made for TV Rudolph the Red-Nosed Reindeer on the fantail, which was a great touch.

On our way off the ship, we were treated to Christmas cookies. They were as delicious as any I have ever tasted. Better than Army cookies by a long shot. Beat Army!

Odds and Ends

Newt is the next not-Romney, but his experience and the seeming belief that all his dirty laundry has already aired might mean he has staying power. Not an endorsement, just an observation. Two things I like about the new Newt, and we'll see how long it lasts, are his frequent comments that any of the GOP candidates would make a better President than Obama and his intelligence over the illegal immigration question. I was starting to resign myself to Romney, not liking Newt's checkered past, but who knows, Americans are forgiving if somebody looks repentant enough and the sin was long ago enough.

Speaking of which I am waiting for any conservative to rebut my comments from an earlier post:

Do conservatives really want a government powerful enough to round up 11 million people for deportation? Do we really want the federal government getting practice at interning that many people?

Or rebut my contention that Gonzales vs Raich was wrongly decided and helps the constitutional case for Obamacare.

Even Vladimir Putin can't stuff enough ballot boxes to totally control an election. Gives me hope for beating Obama in 2012.

The slow motion collapse of the euro continues. The situation is pretty simple, despite claims of complexity to the contrary. The standard way out for governments that have spent and promised too much is to debase their currency through inflation. Since all of the offending countries are in the euro, only two solutions remain. Italy, Portugal and Greece and others leave the euro, or the European Central Bank prints euros, which screws the Germans, and to a lesser extent the French. Count on the Germans to elect a government that leaves the euro if they start to suffer inflation. Either way, the euro is toast, no matter what European politicians say. Count on fools at the fed and in the administration to think they can help with a bailout through the IMF. (Treasury spokesman denies this, so we know it must be true.) To coin a phrase, "There's not enough swag in China to bail out all the fools."

Covert action against Iran's nuclear program suggests CIA or Israeli involvement. I should hope so. Do we really want a war? People who rail against covert action always act like its evil. But is a nuclear-armed Iran preferable, especially given the crazy Mahdists that run the place? As an aside, it seems obvious that the Stuxnet virus was an example of state-sponsored cyber-warfare against Iran. But we better get our game up, the mere fact that Stuxnet showed it was possible to infect stand alone industrial control systems means that others will try.

Overall, I am pretty up beat. I think that the eventual Republican nominee can beat Obama. He or she doesn't have to be perfect, just tested in the fire of the campaign.

Obamacare, Medical Marijuana and the tea party

No this isn't an article about whether Obamacare should cover medical pot. If you thought so, I recommend reading up on this blog's agenda and purpose. Today's U-T reports that a group known as Citizens for Patient Rights plans to introduce a ballot measure that would regulate medical marijuana in the city. The plan would include zoning, and a tax structure to pay for regulation. It all sounds very un-libertarian, so why shouldn't the tea party movement be opposing this effort?

Thinking further into the unique circumstances that led to the need for this regulation, we find that it impacts Obamacare. Some background: currently, federal law prohibits dispensing marijuana for medical or any other purposes. U.S. attorney for San Diego, Laura Duffy has promised a vigorous prosecution campaign not only against the dispensaries, but against advertising outlets that take their business. Further, the city attorney is prosecuting the dispensaries for zoning violations. So, despite state law that permits the sale of medical marijuana, the dispensaries are at great legal and financial risk. The proposed initiative is part of a campaign to normalize the local law enforcement environment for the dispensaries. In fact, almost all businesses face forms of local regulation, so this effort supports a local outcome that would be similar to regulations facing liquor stores.

I support this effort at normalization, because it sets up legal challenge to the federal law under which the feds believe they can outlaw pot sales in California. The relevant Supreme Court decision is Gonzales v Raich, in which the Supreme Court held that the federal government had the right to prevent all marijuana cultivation and use, regardless of circumstance. This broad view of the interstate commerce clause, essentially gutted the 10th amendment. Some key quotes from the decision.

Given the enforcement difficulties that attend distinguishing between marijuana cultivated locally and marijuana grown elsewhere, 21 U.S.C. § 801(5), and concerns about diversion into illicit channels,33 we have no difficulty concluding that Congress had a rational basis for believing that failure to regulate the intrastate manufacture and possession of marijuana would leave a gaping hole in the CSA. Thus, as in Wickard, when it enacted comprehensive legislation to regulate the interstate market in a fungible commodity, Congress was acting well within its authority to “make all Laws which shall be necessary and proper” to “regulate Commerce … among the several States.” U.S. Const., Art. I, §8. That the regulation ensnares some purely intrastate activity is of no moment. As we have done many times before, we refuse to excise individual components of that larger scheme.

. . .limiting the activity to marijuana possession and cultivation “in accordance with state law” cannot serve to place respondents’ activities beyond congressional reach. The Supremacy Clause unambiguously provides that if there is any conflict between federal and state law, federal law shall prevail. It is beyond peradventure that federal power over commerce is “ ‘superior to that of the States to provide for the welfare or necessities of their inhabitants,’ ”

The tie to Obamacare proceeds from this broad interpretation of the interstate commerce clause. It is an interpretation that we should profoundly desire to become unpopular. Overturning Gonzales v Raich in a future Supreme Court would further tea party goals of increasing individual liberty and limiting the power of the federal government. Volokh (always a great source for liberty leaning constitutional analysis) discusses a proposed bill put forward by Ron Paul and Barney Frank to repeal the federal law banning marijuana. The key insight regarding limiting federal power follows.

On the other hand, it is unfortunate that this essentially federalist bill hasn’t attracted any support from conservatives, especially the Tea party faction. After all, the bill does not require nationwide legalization, but merely leaves it up to each state to decide for itself. One of the main themes of the Tea Party is their insistence that the federal government has exceeded its constitutional bounds. The War on Drugs is a particularly extreme example of such federal overreach. Indeed, the federal ban on marijuana is responsible for Gonzales v. Raich, the Supreme Court’s broadest and most questionable interpretation of federal power so far (which I criticized in this article). Raich held that Congress’ power to regulate interstate commerce was broad enough to justify a ban on the possession of medical marijuana that had never been sold in any market or ever crossed state lines.

Every lower court decision upholding the constitutionality of the Obamacare individual mandate has relied heavily on Raich. In my view, the mandate goes even further than Raich did. But there’s no doubt that Raich makes life more difficult for mandate opponents. A political movement that is serious about constraining federal power cannot, consistent with its principles, support the present sweeping federal War on Drugs.

Normalizing marijuana regulation in the city provides a real life rebuke to the idea that we must depend on the federal government to regulate every aspect of national economic and criminal policy. It builds a coalition against the pervasive view of federal power contained in Gonzales. For that reason, the tea party movement should be supporting this initiative.

Unemployment Falls to 8.6%, Employment Falls to 64.0%

This morning's headlines, before Herman Cain* dropped out of the Presidential race, was that unemployment had declined to 8.6%. I was immediately skeptical about the numbers, because a shift that big is not normal, in my experience. Sure enough, digging into the numbers we find this factoid.

The decline in the participation rate to 64.0% from 64.2%, was driven by a drop of 315,000 in the labor force which contributed to the 594k decline in unemployment.

Clearly, the news is not as good as news as the headlines would lead us to believe. New job creation was pegged at 120,000, but it is only about the number of new entrants in the labor force. It's good that there are new private sector jobs, but I have read various sources that peg the required number of jobs needing to be created per month between 200,000 and 250,000. In my opinion, the continued fall in labor participation rate is the key story here. This means we have a shrinking percentage of people working to support the overall economic output that we all rely upon. I will admit that a portion of the fall is not due to anything the administration could have done, because there are demographic trends, i.e. aging baby-boomers, contributing to a fall in labor force participation. The very long term trends can be viewed below from Calculated Risk.


Calculated Risk also points out that "U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, declined to 15.6% - this remains very high. U-6 was in the 8% range in 2007."

The other bad news is that the number of long term unemployed stayed stuck. From the government's BLS.

The number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 5.7 million and accounted for 43.0 percent of the unemployed.

This is a big problem for the long term, as these folks start to see themselves, and employers see them as unemployable. We have some serious problems with entitlements starting to be a huge drain on the federal budget. One way to alleviate part of the problem is for people to work longer into retirement. But the large number of long term unemployed and the declining labor force participation rate makes that outcome less likely.




*A quick note on Herman Cain. Without taking a position on whether he is guilty of anything he is accused of, I can safely say that he has displayed very poor judgement, by his own admission. Giving another woman money over the course of many years, without telling your wife, and not being prepared to discuss the issue during a Presidential campaign is too much to accept in a candidate.