Tuesday, February 28, 2012

And One More Thing About Romney's Victory

Hot Air is reporting that exit polling is showing that Romney won among Republican voters 47% to 37% among Republicans. Since the exit polling was within a point or two of the actual results, we can assume that Santorum seriously underperformed among Republicans. Not sure how this can be spun as Romney being a weak Republican candidate.

Romney's Big Night

Whether or not Mitt Romney wins Michigan tonight, this is a good night for him. Romney started the night with a 99 delegates to Santorum's 47, a lead of 52. When the night is over his lead will grow to approximately 143 to 62, a lead of 81. Further, he will have amassed 55% of the delegates available to date. Romney is competing in every state, but no one else is. He will get the nomination because he is better organized. On Super Tuesday, his advantages will become clear, and he will build an even bigger lead. He starts that day with about a 49 delegate lead, as neither Santorum nor Gingrich will be on the ballot in Virginia. It's hard to see why their is so much breathless drama on the TV about all this.

Delegate information from RealClearPolitics.

Yes, I am supporting Mitt Romney. I might have preferred other candidates, but they didn't run. Running for President isn't for the faint of heart. We shouldn't count it against Romeny that he is making a serious run for a second time.

Monday, February 27, 2012

America's Vital National Interests

I am taking a class on strategic planning that includes discussions of America's national interests. I was pleasantly surprised at the constitutional view of the national interest implied in the course's definition. From Graham Allison's document America's National Interest.

. . . we subscribe to the sturdy one-line summary of American vital interests, first
formulated in the late 1940s: to “preserve the United States as a free nation with our
fundamental institutions and values intact.” According to this summary America’s vital interests include (1) survival as a free nation with our fundamental institutions and values; and (2) the international conditions required therefor—in current vernacular, to safeguard and enhance the well-being of Americans in a free and secure nation.
However, this definition of vital national interest got me thinking about the words "free nation" and "fundamental institutions." Both concepts require a little more elucidation to be applied meaningfully to future planning. They are also a little slippery when we grapple with them. For example, what it means to be a "free nation" has undergone revision over time. Today, we might not call a nation free that allowed slavery, and only allowed male land owners to vote. By that standard, today's Saudi Arabia, would be considered more of a free nation than post-revolutionary America. Yet, we consider our nation the enduring continuity of that grew from that original revolution and we consider ourselves exemplars of what it means to be free. The same might be said of the concept of fundamental institutions, which has the misfortune of using part of the euphemism once used to describe slavery, "peculiar institution." Just what institutions are considered fundamental in a republic such as ours? Are only the institutions of government fundamental? I feel confident that de Tocqueville would think otherwise. So how does one determine which institutions are fundamental and what freedom means?

I don't have a full answer to the questions of institutions, but the concept of maintaining our status as a free nation seems clear. The freedoms enshrined in the Constitution of the United States form the basis of deciding whether or not we remain a "free nation." The interpretation of these freedoms does change over time, but they are enduring enough to form a stable basis for making a judgement about what is vital to the national interest. This means that the rights enshrined in the Bill of Rights and the limits placed on the federal government in the constitution must be observed. This also has the benefit of restricting the grandiosity of our planning inside the federal government. Regardless of the threat we might face, we must respond within that framework or we are not truly acting in the national interest. This is a deeply political understanding for those of us in the federal government, enshrined in our oath of office.*

With regards to the concept of our fundamental institutions, those can only be inferred by observation. Unfortunately, it seems that the concept as discussed in "America's National Interest" only applies to the institutions of government. Other institutions such as the integrity of the family unit or the web of volunteer organizations that alleviate so many ills of our society, are worthy of protection under the meaning of fundamental institutions. However, it is not up to the government, federal or otherwise, to prop any of them up in any particular form, merely the government should do no harm. It is my belief that the constitution, as originally intended, limits the power of the federal government to do so; but the meaning of those limits have been so stretched that government is intruding into areas where American's voluntary groups have traditionally held sway. Recognizing the practical as well as constitutional limits of government might be a start.

*Full text of federal employee oath of office:
I, [name], do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God.

The federal Office of Personnel Management helpfully adds this explanation:
As Federal civil servants, we take an oath of office by which we swear to support and defend the Constitution of the United States of America. The Constitution not only establishes our system of government, it actually defines the work role for Federal employees - "to establish Justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty."

Sunday, February 26, 2012

Bombing Iran

Calvin Coolidge is famously said to have described a Sunday sermon as being about "sin." When asked what the preacher had said about it, he said "He was agin it." Similarly, I feel the same way about the topic of bombing Iran, "I'm agin it." The Economist has both a leader and extensive analysis on the subject, and draws the same conclusion. In summary, the attacks are unlikely to be successful in halting Iran's ambitions and will invite retaliation at great cost. Some may wish to believe that an attack would destabilize the regime; but if so, why have dictatorships throughout the ages manufactured external threats to consolidate their grip on power. I have some expertise in this area, my professional opinion is that neither the U.S. nor Israel have the means to indefinitely derail Iran's nuclear ambitions.

However, a nuclear armed Iran; given the current leadership, would be a disaster for the world. It would certainly embolden Iran to continue to meddle in the affairs of its neighbors. Further, one should consider that the Iranians would actually launch nukes at Israel. So doing nothing is also unacceptable as well. The element of time is essential, and the best published Israeli estimate is that the Iranians are two to three years away from possessing four nuclear warheads that could be mounted on ballistic missiles. (As an aside, those who ridiculed Reagan's ideas that we should invest in anti-ballistic missile technology are owed a big fat slap down. While ABM technology can't stop thousands of Russian nukes, the argument used against the project, a mere four nukes is a much simpler, although still complex problem.)

The threat of Israeli bombing has had the salutary effect of convincing the world to take tougher sanctions. Inflation and unemployment are ratcheting up. The Iranian currency has lost half its value. The latest sanction is to shut out Iran from the world's electronic banking system, which is basically the same thing. But we need to keep thinking asymmetrically, that is rather than directly attacking the offending program, attack where Iran is weak. Going after the gasoline imports that Iran needs, despite all its oil, should be the next move. Despite reducing its dependency on gasoline imports, they are still running at 50,000 barrels per month. The regime's weakness accrues to its mismanagement of the economy; it practices a sort of theocratic socialism. Its support comes from outside of the cities, where the socialistic largess is directed.

Finally, the shock of seeing nuclear weapons actually launched 65 years since the only two that were ever released in war will shock the world. We might consider that Iran itself would be profoundly changed if it did so. We have seen Pakistan possess nuclear weapons for some number of years, and it is far less stable, and no nukes have been used. While I don't want to count on the Iranians not using their nukes, we have to remember that their use brings a huge downside to their government as well.

Friday, February 24, 2012

Stuff That's Not News

Dog bites man isn't really news, as the old saw goes, but "Man Bites Dog," will sell newspapers. Modern news organizations seem to have forgotten that. Here's some headlines of late that I choose to mostly ignore because they are in the "dog bites man" category.

Afghans riots and kill people over Koran burning/Mohammed insult.
Greeks riot over government cuts.
Raising taxes results in unexpected revenue shortfall. (BTW this could be on zillionaires or cigarettes.)
Islamists pass sharia laws.
Obama continues or increases some Bush era policy.
Lady Gaga does [fill in the blank with anything outrageous].
High flying Patriot team loses in the Super Bowl. (OK, that last one was just schadenfreude.)

Feel free to provide your own in the comments.

Weekend Music Chill

I have given up alcohol for Lent, so the best I can do to satisfy that yen is play a little George Thorogood.

While we're on this theme, here are the Blues Brothers with "Hey Bartender."

Thursday, February 23, 2012

City Emails On Snapdragon Name Change

I have blogged my outrage a couple of times over local crony capitalism of Jerry Sanders giving away city naming rights to Qualcomm by allowing the temporary name change to Snapdragon. The U-T posted a treasure trove of emails that paint an unflattering picture. I have excerpted two of them here. Here is the city's CFO wondering why the city isn't getting a cut of the value of the advertising, hooray for Mary Lewis.

Here is Jay Goldstone, the Mayor's Chief Operating Officer, deciding that he has a license to practice law and that this whole signage thing is really all about how fast he can please his corporate buddies at Qualcomm.

Mr. Chris Larson is a senior planner for the city, also presumably, not a lawyer.

Two things are very awry here. First, the city appeared to violate the law both on signage and the terms of the Qualcomm naming deal. Second, the city lost out on a money making opportunity that might have helped the taxpayers. But the deeper malaise that infects city hall defies logic; why did the city staff trip all over themselves to help out a local corporation? I am not anti-business, I am just against business advancing their interests at the expense of the taxpayers. This is a long term trend in San Diego that needs to end.

Wednesday, February 22, 2012

Bad Day to Miss the News

I missed the news yesterday and missed some good news stories, which are infrequent enough. (Work and class pressures were too much.)

Pension Reform Measure Stays on on the Ballot, Survives Two Lawsuits

In the first lawsuit, the California Public Employment Relations Board tried to take the almost unprecedented step of preventing a citizen initiative on pension reform to reach the ballot on the thin legal argument that it was actually a city government sponsored initiative, which violates good faith bargaining principles.
In his ruling, Judge William Dato said case law is clear that the court should block a measure only when it is clear beyond a doubt that it is invalid. He said he found no compelling reason to keep the initiative from the ballot when its legality can be still be challenged later.
Exactly. Further, even if city officials were involved in the initiative process, which is what the PERB alleges, they are citizens, too, and have the right to launch an initiative process.

The second lawsuit
. . . filed by mayoral candidate and attorney Hud Collins, claims the measure is a major revision to the City Charter, and can't be put on the June ballot by way of petition signatures.

But Judge Steven Denton ruled that the initiative won't affect the "structure" of city government, so it's a valid amendment to the charter.

So much for pre-election legal challenges. This initiative will clearly pass in June. I think the unions know it, hence the legal wrangling. Get ready for post-election lawsuits to prevent the law from taking effect. If any city employee is reading this blog, could you please explain how this hurts you; I understand how the union bosses get hurt, but how does the union member get hurt.

Comprehensive Smackdown of Warmist Scaremongering

The WSJ published a second smackdown of the theory that man made CO2 is causing catastrophic global warming. Of course increased CO2 has some impact, the questions about how much and whether this is even a problem are not clear. Further, the supposed climate experts have no clue as to whether the vast economic tradeoffs necessary to shift from a carbon based energy economy are worth it. They rail against supposed non-experts who question their findings, and yet launch themselves into economic discussions in which they are clearly uneducated and untrained. The pseudo-scientific cult of warmism has all the hallmarks of religion. A few choice quotes from the scientists who have gone public with debunking the theory that we are all doomed.
When predictions fail, we say the theory is "falsified" and we should look for the reasons for the failure.
. . .
From the graph it appears that the projections exaggerate, substantially, the response of the earth's temperature to CO2 which increased by about 11% from 1989 through 2011. Furthermore, when one examines the historical temperature record throughout the 20th century and into the 21st, the data strongly suggest a much lower CO2 effect than almost all models calculate.
. . .
Given this dubious track record of prediction, it is entirely reasonable to ask for a second opinion.
. . .
The Trenberth letter tells us that decarbonization of the world's economy would "drive decades of economic growth." This is not a scientific statement nor is there evidence it is true. A premature global-scale transition from hydrocarbon fuels would require massive government intervention to support the deployment of more expensive energy technology. If there were economic advantages to investing in technology that depends on taxpayer support, companies like Beacon Power, Evergreen Solar, Solar Millenium, SpectraWatt, Solyndra, Ener1 and the Renewable Energy Development Corporation would be prospering instead of filing for bankruptcy in only the past few months.
Thanks for that.

As I continue to point out, if the warmists were serious they would have called for a carbon tax with an income tax offset as the economically most efficient means of delivering CO2 reduction. That they do not is proof of their statist aims.

Santorum's Odds on In-Trade Drop

Ok, I admit this is today's news, but Santorum has too much big government baggage and emphasis on social issues when the nation has to face down the debt-star. I would hope that social conservatives see that government that is limited in all areas is to their advantage. Notice how every expansion of government eventually intrudes on religious beliefs, usually in a negative way, e.g. Obamacare vs the Catholic Church. Santorum can make a big show of defending Catholicism against Obamacare, but he has some history in causing the problem in the first place.

Monday, February 20, 2012

DeMaio Event

Temple of Mut has done a great job of keeping up with state and local issues on her blog. Case in point is today's post regarding Democrats for DeMaio, in which she gets out to meet Carl DeMaio in person at the local Albertson's. DeMaio's reasoned and reasonable approach to union pushback on the pension reform plan is highlighted. Good for Carl for his willingness to engage the public, including his opponents.

To be clear, I have endorsed Carl DeMaio for Mayor, but I have seen nothing to dissuade me from that position. Thanks to Temple of Mut for some intrepid citizen reporting. (Disclaimer: The Southern California Tax Revolt Coalition does not endorse candidates for office, this is a personal endorsement.)

Concerns Over China

While others have been worried about China's supposed strengths, I am actually worried about its weaknesses and potential impact on world politics. I have already discussed that their industrial pollution and lack of affordable housing are unsustainable. The housing issue arises from two policies that work to prevent a healthy real estate market. First, Chinese workers are forced to save with state sponsored banks at low interest rates. Lacking healthy returns, they cannot effectively save to purchase real estate. Second, the banks, while flush with cash, have been directed to loan to "strategic" businesses. Until lately, that has not included businesses building apartments or homes.

A new trend is appearing that also bodes ill. China's economic expansion to date has been largely dependent upon export driven growth, but limits on its ability to export might drive its foreign policy in a more belligerent direction, since the benefits of free trade that accompany peaceful accommodation are lowered. We are now seeing wage inflation in China continuing unabated. Over at Carpe Diem, Professor Perry has posited that the rise in Chinese wages has contributed to significant reshoring of American manufacturing capacity. This has the same net effect as trade restrictions on Chinese exports. I believe that China's military bellicosity has been held in check because their economic dependence on exports gave them an interest in preventing overt actions that would disrupt world trade. As a result, they have confined their military efforts to a build up of capability and to cyber attacks and espionage because these would not harm exports.

If export driven growth dries up, causing a recession, I believe the incentives regarding threatening a Taiwan invasion will change. Chinese annexation of Taiwan, against the wishes of those people would be a disaster for the world order. One of the bedrock principles of American foreign policy has been that borders of nation-states may not be changed by force. It is in our interest to keep this concept sacrosanct, in order to prevent a tipping point of global land grabbing that we lack the military might to stop on more than one front at a time. If Taiwan resisted by force of arms, with U.S. aid, it would be bloody and highly disruptive to the world economy.

I don't think the trend line is so drastic that China's exports will dry up overnight, but it is a long term strategic trend that requires watching.

Saturday, February 18, 2012

More Evidence the Greeks Will Default

As Dean is fond of saying constitutional republics, are like, hard. In the case of Greece, no matter what the government does, the people aren't going to accept the necessary measures to pay back their debt, and for good reason, they probably can't. However, in a parliamentary system, such a question should have been put to the people in the form of new elections before the negotiations continue. But the current "unity" government has plunged ahead with voting on austerity measures that seem uncertain to actually solve the debt problem, and definitely won't if too many more buildings are burnt and all the tourists leave. A vote would have the salutary effect of denying legitimacy to the protesters, because they would either have to live with the measures or take responsibility for the consequences of default. Either way, they might receive a dose of reality.

But this all might be mooted because even the Germans don't think the Greeks are going to pay much back, which has been my opinion all along.
The German finance ministry is actively pushing for Greece to declare itself bankrupt and to agree a "haircut" on the bulk of its debts held by banks, a move that would be classed as a default by financial markets.
. . .
Wolfgang Schäuble, the German finance minister, does not believe that any government would be able to implement them.

His pessimism has been tipped into despair with a secret European Commission, Central and IMF report that even if Greece made good on its promises, it would not be enough to reach the target of bringing total debt to 120 per cent of GDP by 2020.

"He just thinks the Greeks cannot do what needs to be done. And even if by some miracle they did what has been promised, he - and a growing group - are convinced it will not pull Greece out the hole,"
The only remaining question is what happens after a de facto default? I think that the Greek economy is going to go through a long depression. The only way they will be able to receive new lending to finance a recovery, will be to pledge physical assets, like their islands and the Parthenon perhaps. Even then, lenders would be reluctant to accept the collateral without constitutional protections to prevent nationalization.

Pretty nice collateral?

But let's also be clear about the game being played by the rest of the EU. An anonymous commenter previously posted that it is not really that big a deal if the Greeks default, the worry is the example set and the impact to banks. Much of the worry has been about the spread of bank failure if Greek default causes Italian and Spanish bond yields to rise. Once again, too big to fail leads to irrational economic policy. No one wants to learn this lesson, not the U.S. and not the Europeans. Heck even the Chinese prop up their banks with enforced savings and below market interest rates for the working stiff. So instead of too big to fail, why don't we require ever increasing capital reserve requirements as banks become larger? That would make it harder for big banks to leverage access to cheap capital from the Fed to make easy money, but that should be their problem.

Paul Ryan Smackdown of Geithner

Paul Ryan asks Timmy the Tax Cheat about the long term trajectory of the Obama budget. Timmy's response, "We don't have a definitive solution... We just don't like yours." Now there's some leadership.

A graphic from Geithner's own budget report:

A full discussion is available at the American Enterprise Institute blog.

Friday, February 17, 2012

Being Like Europe?

The lines of difference between social-democratic Europe and the capitalist America were never as strong as our caricatures made them seem. But watching the direction that Germany is driving Europe, I wonder how soon conservatives will be wishing we were more like Europe. I was a bit surprised to read of an Italian politician saying this about the Euro, in the context of a country's inability to devalue to gain competitiveness.
The common currency prevents politicians from fantasizing that they can devalue—and inflate—their way to prosperity. Instead, as Italy's new prime minister, Mario Monti, put it, growth "will have to come from structural reforms or supply-side measures."
Structural reforms that took place in Germany after the unification with the East have put on a path to long term health and low unemployment. Despite suffering an economic downturn in 2008, like the rest of the world, Germany's unemployment rate stands today at 5.5%. From Der Spiegel:
One of the triggers was the reform that combined unemployment assistance and welfare payments into a new entity known as Unemployment Benefits II. "The incentives to work have increased, especially for the qualified unemployed," says Dennis Snower, president of the Kiel Institute for the World Economy (IFO).
As described in ThinkProgress:

Specifically, the government took a fresh look at people who had not worked in years to determine who could and couldn’t work. The able and healthy were matched with potential employers. If they took a low-paying job, which was often the case, they would still receive a small portion of their benefits for a time. If they refused to work, their benefits were reduced anyway.

“The incentives to take up work were strengthened,” says Felix Hüfner of the Organization for Economic Co-operation and Development, “and also the sanctions were strengthened.” Sure enough, the reforms have nudged more people back into the labor force — and work tends to beget more work, as people develop skills and have more money to spend.

Also, as part of Germany's "Agenda 2010" program, passed in 2003, strict protection for workers long serving in jobs was also removed.

I am not saying that Germany is now less protective in terms of preventing workers from being fired than the U.S., but the reforms show that increased labor market flexibility and limiting unemployment compensation pays off. That 5.5% unemployment rate is looking good to me.

Picture is of the city of Dortmund, North Rhine-Westphalia.

Weekend Music Chill

Been listening to instrumental surf music of late. Here are two favorites.

Here are The Torquays with Bumble Bee Twist.

And Los Straitjackets with The Lonely Apache

I posted another favorite last May, The Eliminators Surf Band from the OC performing El Barracho.

Thursday, February 16, 2012

October Surprise?

Well not a surprise, maybe, but certainly this could impact the election. According to Senator Rob Portman (R-OH), pictured, the current debt ceiling may be breached right before the election.
According to Table 6-2 in the President’s Budget’s “Analytical Perspectives” volume, the President estimates the total debt subject to the statutory limit – growing by $132 billion per month – will reach $16.334 trillion at the end of FY 2012 (September 30, 2012). This is just $60 billion below the current debt limit. Thus, without a change in the debt trajectory, the debt ceiling will be eclipsed by October 15, 2012 unless the Department of Treasury again uses emergency protocols to shift that date past Election Day 2012.
You can bet big bucks that Timmy the Tax Cheat will be pulling out ALL the stops to make sure that the debt crisis rolls past election day.

Portman makes another good point.
. . .his [Obama's] new budget increases spending and projects that Washington will be hitting the debt ceiling again in mid-October – burning through a $2.1 trillion debt limit increase in just over 14 months. This is an unfortunate but clear signal to the American people that Washington is spending too much, borrowing too much, and putting our nation’s fiscal stability at risk.
. . . President Obama’s budget increases the debt by $11 trillion over ten years, falling woefully short of addressing this pending fiscal crisis. Chock-full of gimmicks and stimulus spending, this is a political document . . .
Well said.

By the way, I told you so.

Wednesday, February 15, 2012

Payroll Tax Fiasco - Again

Not content to aid Obama' s re-election, Republicans are jeopardizing their chances of retaining the House of Representatives by showing no principle in the fight over the payroll tax temporary reduction. It seemed like a weak sequel to their December foolishness. Since it was clear that they were always going to cave on a deal to continue to blow a hole in Social Security's finances, what principles were they standing for that got in the way of a deal.

Not that the Democrats acted much better, but they seem to have won the media battle. Democrats were talking up a surtax on those earning over $1 million as a way to offset the lost revenue.

Of course, none of this is sensible policy. But neither party operates by any fixed set of principles, so how can we expect any sensible outcome.

Tuesday, February 14, 2012

A Real Tax Fairness Plan

Obama's proposals to tax the rich more are red herrings; they may appeal to the class warfare instincts of his base, but have little to do with raising the revenue necessary to fund the federal government. Our tax policy is a mess, there are huge loopholes, gifts to special interests with marginal rates left too high to make up the shortfalls. His proposals do nothing to alleviate these problems. The result is that corporate and personal tax lawyers can offer their clients positive return on investment by gaming the system to avoid taxes, all in a legal manner. The complexity of the tax system matters, because inefficiencies in tax collection and complexities in compliance are a drag on the economy People want the rich to pay their "fair share," but the left seems intent on making a show of punishing the rich for their success. That is not the same as actually punishing the rich, which might dry up donations, as their is no taste for closing off exemptions.

Given the income tax structure and the desire for fairness, a flat tax with no deductions and credits seems the fairest system. But what forms of income should be taxed? My initial instincts would be to only tax ordinary income, and leave investment alone. But that results in some truly unfair situations. Billionaires whose income derives from their investments would not be taxed at all; which situation would be politically unpalatable, even if you thought it was appropriate. The problem with taxing the rich is that they can shift their income among three sources, corporate profits, dividends, and capital gains; effectively arbitraging income sources to reduce their tax rate. However, taxing all of these sources of income at the same rate has the effect of double taxation on ordinary investors who lack the ability of the super-rich to reallocate sources of income.

Consider two examples. Joe Sixpack puts away a little money that he invests in Microsoft to get a better rate of return than the bank. Microsoft's profits are taxed, and then they can pay a dividend. In turn, Joe pays taxes on the dividends as income, resulting in a double taxation rate. If there was a flat tax of 20% on all income, the effective tax rate for Joe's investment income is 40%. From a policy perspective we need Joe to save, so the double taxation is a disincentive. But what about Jane Billionaire? She may own her own company, so she can retain the profits in the firm, not pay a dividend, too avoid a double taxation; its her company. If we made dividends tax free, then she could declare big dividends and reap the tax free income. Her wealth gives her options that Joe lacks. We want to tax Jane fairly, but don't want her to have an effective rate less than Joe's.

I haven't even argued about the need to eliminate all the loopholes in the system. The loopholes are the scraps that attract the vermin of lawyers and lobbyists to keep invading the House (and Senate). Given that a single flat tax without loopholes is preferable; we need to solve the Joe vs. Jane issue. My proposal would be to eliminate all capital gains and dividend taxation for individuals earning less than $500,000 and couples earning less than $1,000,000 per year. This would have the added advantage of encouraging savings, which the country desperately needs to counteract the effects of the recession. It is standard economic theory that a country's GDP growth can't outstrip its savings rate. Setting these limits would also prevent the wealthy from using tax policy arbitrage to avoid taxes, making this the fairest system imaginable.

We would also want a reasonably high standard deduction to prevent the working poor from experiencing the highest marginal tax rates. Coming off tax free welfare and into a paying job shouldn't result in a reduced standard of living due to income taxes. (This is the theory behind the earned income credit.) We could probably set a flat tax rate at about around 16%-18% and still bring in enough income to fund the federal government at its historic percentage of GDP. Further, even the if the wealthy were getting double taxation on dividends or gains, it would only be at the 32%-36% range, hardly a historically unprecedented level.

If the President really cared about the tax fairness he would propose something like this, and the "rich" would definitely pay their fair share; certainly a higher rate than the rest of us. But I don't think they would mind, because they could fire their tax lawyers and stop worrying so much about taxes.

(I ran the numbers on my own situation using a $20,000 standard deduction plus $5,000 for each dependent and continued destructibility of my 401(k) at the 17% flat rate. I found that my taxes would increase by about 15% over what I am paying now. It would be worth it to get my savings into tax free status and to not worry so much about taxes.)

Sunday, February 12, 2012

Peak Workers, Not Peak Oil is the Real Problem of the Future

Demography is the most precise of the social sciences. It deals in high statistical accuracy and predicted trends play out over decades. To some extent the problems of debt and future liabilities for the United States are wholly predictable from demographic trends. Unfortunately, these problems are global, not limited to the United States. The percentage of the population that is able or willing to participate in the labor force is going to undergo huge shifts over the next two decades, with predictable consequences. (To get ahead of myself, this is why I believe we need to solve the illegal immigration problem quickly, so that we can establish the conditions to allow massive legal migration, while we still have that option.)

Doug Saunders, a reporter for Canada's Globe and Mail, highlights some interesting issues. He calls the problem, peak people, but I think the term peak workers is more accurate.
About 11 per cent of the world’s people are over 60 at the moment. In the next 25 years that will double, to almost a fifth, and one in six of those people will be over 80, according to a forthcoming book, Global Aging in the 21st Century, by sociologists Susan McDaniel of the University of Lethbridge and Zachary Zimmer of the University of California.
. . .
The cheapest labour will vanish. We’re already seeing this: Because China is aging very fast, its dwindling working-age population is turning down the lowest-paid jobs and pushing up the minimum wage sharply, as well as the once-minimal costs of social services: Stuff from China will stop being cheap, because the Chinese aren’t young.
. . .
Peak people will also be an age when countries will be competing for immigrants rather than trying to limit them. Immigration has spared Canada from the worst of aging, but immigrants adopt host-country family sizes very quickly, so they’re a temporary fix. And if their home countries are competing to keep them, then we'll have a harder time finding young people who want to come.

Saunders doesn't address the public pensions issue much in the article, but that will be a key area of dispute. As we have seen in Greece, people don't much like having their wages or entitlements cut. But Social Security has always been run on an implicit assumption that there would be sufficient workers replacing the one's leaving and receiving benefits. What if that is no longer true? Look at this population pyramid:

We can see the bulge in the 45-54 year old age category which will spell trouble since there are fewer workers behind that group. But look here is the Chinese problem.

Source of graphs is NationMaster.com, which aggregates publicly available facts in an easy to use fashion.

We can see that their pension problem is farther in the future, but is much more significant. Further, as their population bulge enters its peak earnings years, it will drive up average wages.

The United States has had a higher fertility rate than other first world nations. I am not sure that will continue to hold up. We have always been a nation of immigrants, attracting the best and brightest from all over the world. We need to be thinking about this problem now, and attracting young skilled immigrants before the competition heats up. All that is really required is for government to get out of the way, by ending unnecessary limits on H-1B visas, and letting those with such visas have a path to citizenship.

Saturday, February 11, 2012

Muddling Through?

Peggy Noonan reports that people are turning off from politics this election year in a unusual trend. To many tea partyers, this election seems historic, because the President and prior Congress so fundamentally overstepped the constitutional boundaries of government with health care and in other areas. Failure to quickly reverse this trend might doom us to a long period of stagnation. However, it seems that people have no faith in politics or in our elites, so they are tuning out Obama and the Republican candidates. And probably political blogs like this one.

With the economy seemingly limping towards improvement and with the two parties seemingly out of ideas, I believe that most people think that we are such a great country that we will muddle through. But it still feels miserable. One reason why might be the shape of the recovery. Economist John B. Taylor of Stanford offers these two pictures of economic recovery, the first is the current recovery, the second from the early 80s.

In the 80s, real GDP restored to the long term trend, today's recovery looks like it will just parallel the long term trend. The gap means permanent lost jobs, in my interpretation. Taylor makes the same point as I did on the percentage of the population in the workforce not recovering.

The great issue of our day is whether we are going to reign in government rationally or will we allow it grow to the point of destroying itself, in Greek fashion. It's as if we are resigned to the latter outcome, because there is no national leader who can make the compelling case for real change. The tea party movement knows the day of reckoning could come swiftly, but we haven't developed the bench strength to put forward a national ticket.

Bret Stephens on why the Republicans deserve to lose and probably will, even though the voters are sick of Obama.

Thus the core difference between Mr. Romney and Mr. Obama: For the governor, the convictions are the veneer. For the president, the pragmatism is. Voters always see through this. They usually prefer the man who stands for something.

What about Rick Santorum and Ron Paul? They are owed some respect, especially for the contrast between their willingness to take a stand for principle against the front-runners' willingness to say anything. But Messrs. Santorum and Paul are two tedious men, deep in conversation with some country that's not quite America, appealing to a devoted base but not beyond it.

Finally, there are the men not in the field: Mitch Daniels, Paul Ryan, Chris Christie, Jeb Bush, Haley Barbour. This was the GOP A-Team, the guys who should have showed up to the first debate but didn't because running for president is hard and the spouses were reluctant. Nothing commends them for it. If this election is as important as they all say it is, they had a duty to step up. Abraham Lincoln did not shy from the contest of 1860 because of Mary Todd.
The prescription? Change the tone of the national conversation, when the next shoe drops, count on the public to remember that we have a path ahead, a return to limited government.

Friday, February 10, 2012

Greek Update - Greeks Riot

That's it. What did we expect after new austerity measures were agreed to? Who the heck goes to work in Greece anyway? Clearly they aren't going to pay anything back to their creditors. The Europeans should just give the Greeks the boot and let the banks take their losses as an example to the others. (H/T The Grumpy Economist.)

Update on Contraception Controversy

Widespread news coverage of the Obama administration has ignited widespread controversy. Just perform search for "contraception coverage catholic" and see what's cooking in the news. I have blogged twice on this issue already, because it goes to the heart of questions about freedom under the PPACA. But John Cochrane, a U of Chicago economics professor (thank you Milton Friedman), points out in yesterday's WSJ that the issue is symptomatic of deeper problems with Obamacare. A few examples:

  1. Insurance that covers known and expected expenses end up causing those services to be delivered at higher cost because of administrative expense and lack of price competition. This is true of contraception.
  2. Even though the goal of the bill was to reduce the cost of health care, mandating coverage of routine services drives up the cost.
  3. The purported goal of providing access to contraception is a smoke screen. Birth control isn't outlawed in the U.S. Poor women who can't afford it, aren't in employer sponsored health plans.
  4. It's unfair. The elderly, gay and infertile pay higher premiums. "Let's mandate that every time a government official says that the government is going to "help" some category of voter, he or she has to say who they are going to hurt in the same sentence. Because it has to be someone."
  5. If we want to subsidize contraception, then subsidize, but let the Congress vote on it, so the cost is explicit.
  6. The PPACA is horribly named and should just be tossed because it just doubles down on all the distortions and cross-subsidies already present in health care.

Nicely put, Professor Cochrane (pictured above).

Weekend Music Chill

Here is one of my favorite covers edition comparisons, because I love both versions of this great music. First the original, Iggy Pop with The Passenger,

One of my favorite 80s bands, Siouxsie and the Banshees covering:

This is a repeat from my other blog, so if you are disappointed to see it again, let me know.

Thursday, February 9, 2012

Update on Iran

I blogged earlier about increasing Iranian bellicosity and its implication for more war in the Middle East. I thought that part of the reason for the increasingly belligerent stance was internal to Iranian politics. The NYT is reporting that President Ahmadinejad will be compelled to testify on "irregularities" regarding his economic leadership. Clearly an indicator that the populace is restless and that theocratic socialism isn't delivering the goods. What else?
In addition to economic issues, hard-line clerics devoted to Ayatollah Khamenei have long harbored suspicions that Mr. Ahmadinejad leads a “deviant current” that would challenge their primacy in all aspects of society.
Like Mahdism?

Mehdi Khalaji opines in the WSJ that we bypass dealing with both mullahs and the crazy Ahmadinejad and influence the real source of power in Iran, the Revolutionary Guards (IRGC).
Iran is a den of political intrigue, with sophisticated and nuanced maneuvering among factions, albeit within an increasingly narrow element of the elite. In such a system, the leader's position is much more vulnerable than in a state of iron-fisted, one-man rule.
. . .
What has really stoked the Revolutionary Guard's anger at Khamenei is that they see him as responsible for the tougher Western sanctions that have hurt their economic interests. The Revolutionary Guard has been a major player in the Iranian economy for more than two decades. Today, even most private businesses cannot function without some "special arrangement" with the Revolutionary Guard. [ed. note: And I thought we had a military-industrial problem!]
. . .
A wiser course would be to prepare now to open channels of communication with Revolutionary Guard leaders, who are surely busy planning ways to address the mounting pressure of international sanctions.
I couldn't agree more. Every maneuver we make that delays Iran getting a nuke, moves us closer to the day when a popular uprising topples the regime.

More on the Democrat War Against Religion - UPDATE

Female Democratic Senators Shaheen, Boxer and Murray signed an op-ed in yesterday's WSJ that gives the rationale for forcing Catholic hospitals to provide contraception coverage to their employees against their consciences of their leaders and members. After babbling for most of the article about the benefits of covering contraception, which is wholly beside the point we get to the key paragraph.

Catholic hospitals and charities are woven into the fabric of our broader society. They serve the public, receive government funds, and get special tax benefits. We have a long history of asking these institutions to play by the same rules as all our other public institutions.

There you have it in black and white from Democrat politicians, the underlying fascist mentality of their war on religion. If you want to participate in the "fabric of our broader society" you have to check your principles and knuckle under to the state's version of morality. Any effort by a group to ameliorate the difficulties of the less fortunate is subject to the imposition of government standards of religion. The authors have the gall to call this outcome freedom of religion in the article.

I have seen nothing more revealing of the lack of understanding of what freedom of conscious or indeed freedom of any type means to progressives than that quote. Read it carefully if you value your freedom.


I removed some inflammatory language from the post. You can read Calivancouver's comment to see why.

Wednesday, February 8, 2012

Some Newer Greek Debt Deal is Hailed

Another day, another haircut for holders of Greek debt, this time for the European Central Bank.

The European Central Bank has made key concessions over its holdings of Greek government bonds, which will contribute to a reduction of the country's debt burden and smooth the path toward a new bailout for the country, said people briefed on Greece's debt-restructuring negotiations.

The decision by one of the Greek government's biggest creditors will narrow a gap in Greece's finances, helping pave the way for a debt-restructuring agreement . . .
The Greeks are saved, hooray. Wait haven't we heard this before? To continue:
But it is still unclear whether Greek politicians, facing public outrage, will accept the tough austerity policies pushed by European authorities and the IMF as the conditions to secure a deal.
If I was a Greek politician, I would just keep failing to get the votes needed for a deal, because every time I did, I would just get more concessions out of the EU.

Define Irony

The WSJ is reporting that a boom in natural gas and oil is creating U.S. jobs. According to Russell Gold's article a total of 158,500 direct new jobs were created over the last five year. More jobs have been created in secondary industries like Fleetwood Homes, in Idaho, for shipment to North Dakota oil fields.

Who would have thought that this administration would be presiding over an oil and gas boom? Well they wouldn't be if the those resources had been found on federal land. But Obama will reap the benefit anyway.

About those Dakota homes, here's some video.

A few quotes from the WSJ:

The staccato of nail guns echoes across a cavernous building here as workers piece together manufactured houses with easy-to-clean linoleum floors and rugged interiors for muddy oil-field workers.
. . .
The economic benefits of rising energy production are spreading far beyond the traditional oil patch, to Ohio and Pennsylvania, Nebraska and New York, North Carolina and Idaho. Truck drivers from pretty much anywhere can find work related to the surging energy business. Private-equity firms completed $24.8 billion of energy deals of all types last year, up from $8.5 billion in 2010, according to data tracker Preqin. Manufacturing plants are returning to the U.S. to take advantage of cheap natural gas, spurring major investments in petrochemical and steel production in the Gulf Coast and Midwest.
. . .
During his State of the Union speech, President Barack Obama said, "The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper."

Tuesday, February 7, 2012

The Big Truth - Investors Create Jobs

A friend on facebook recommended an article and video featuring Nick Hanauer, a highly successful investor, THE BIG LIE: “Rich People Create Jobs. Hanauer assert that it is not the rich who create jobs, but the "ecosystem," which requires thriving middle class willing to spend money so that investors can get rich. He also says that Amazon.com destroyed more jobs than it created. He is an idiot. Here's why.

The real issue isn't jobs, per se, but new jobs. A few minutes worth of thought or reading a standard economics text would reveal that new jobs can only come from investment. Even a primitive economy that consumed all that it produced would have no wealth available to invest. Imagine a simple agrarian economy with farmers and a blacksmith. The blacksmith makes plows for the farmers, which he sells for food. If he wants to make more plows he has to expand his business by using some of the food to pay those same farmers to build a bigger shed. Perhaps he has an idea for a better plow. He has to spend some of his labor on trying out designs that might not work out. He can only do so if he has enough surplus food that he can temporarily forgo making plows. That means he is investing in new technology. Eventually, if the plow helps the farmers be more productive he can charge a higher price, hire a helper, and the farmers can reap more crops. The local economy grows, but only if consumption is temporarily reduced to fund investment.

In a monetary economy, the investment climate matters. The marginal tax rate change will have an effect on marginal behavior. Nick doesn't understand, he thinks only in terms of a single average investor for which there is a single high rate that will cause him to stop investing. This is a common fallacy in economic argument.

Further, he underestimates the effect of foreign investment and its sensitivity to tax rates. The United States has benefited from foreign investment throughout its entire history. Our freedom and rule of law made this land the place to invest. Raising taxes on profits reduces the foreign investment that is so helpful to us now.

Finally, there is no basis for some of Hanauer's assertion. He said that the share of national income goes to the rich is increasing. This was certainly true up until 2007. However, what would you do about it? I would have a tax system that causes the richest to pay slightly more than their share of income in taxes and everyone else to pay slightly less. It might look like this:

Wait, that is a picture of our current tax system, courtesy of the non-partisan CBO.

Hanauer also rails against middle class suffering due to the spiraling costs of health care and education, coincidentally the two areas of heaviest government involvement. Health care is heavily regulated and subsidized and higher education is heavily subsidized, resulting in a bubble.

As to whether Amazon.com destroyed or created jobs, I can't say for sure, but I am certain that Hanauer isn't taking into account the jobs created by Amazon because:
  • They provide a new platform for "storefronts" on Amazon.
  • They create greater demand for product manufacturers that sell through Amazon.
  • They leave greater disposable income that can be used to buy other stuff in the hands of consumers.

Monday, February 6, 2012

Odds and Ends

Obama's re-election odds are up to 57.6% on Intrade, my guess is that it is being driven by negative ads among by GOP Presidential hopefuls, and the supposedly rosy jobs picture.

I am taking a class on national security strategy that has helped me look at some world problems in a different light. When one considers the next century and America's role, there are reasons for great optimism and great pessimism. The optimism stems from our nation being freer than China and Europe, more open to new technology and change; and our key competitors fundamental strategic weaknesses with regards to their demographics and growth engines. (How long can China use export to grow at a faster rate than the consumers of its products?) Pessimism comes from our unwillingness to deal with our burgeoning debt and runaway government liabilities due to demagoguery on those issues.

I have new female political heroine: Rep. Ann Marie Buerkle (R-N.Y.) grilling AG Holder (aka that miserable hack) last Thursday:

“How many more Border Patrol agents would have had to die as part of Operation Fast and Furious for you to take responsibility?” she asked, referring to Border Patrol agent Brian Terry, whose death has been linked to weapons lost by the controversial program.

Apparently, Temple of Mut, "likes" her too.

The Greek tragedy of a slow motion default on their debt continues; yawn, who cares? I think we have all gotten used to the idea that they aren't paying much of it back, and so do the markets, which despite the headlines, are hardly moving. Relevant joke: How many economists does it take to change a light bulb? None, the market has already discounted the change.

Work and class are pushing blogging to the back burner, I hope to post with relevant but shorter articles.

Sunday, February 5, 2012

More War in the Middle East?

Iran is giving signals that it is preparing for war with Israel. Look at this screen capture from the Persian language Fars News Agency's front page:

Note the tattered Israeli flag, I am unable to get a translation of the web site, so I don't know what is being said. WND is reporting that a conservative website (this link is to a Google translation of the site*) that has ties to the reigning Ayatollah is publishing clerical (that is legal in Muslim parlance) justification for attacking Israel and killing all Jews. It is my recollection that tyrannies launch propaganda campaigns in preparation for war. Israel is taking precautions world wide to protect their embassies, another relevant fact.

Check the difference between the English language version of Iran's official news site and the Farsi version above:

Here the approach is more subtle, the Iranian Defense Minister touts the launch of a satellite; but we know that satellite launching technology is indistinguishable from ballistic missile technology. In the fifth article, Brigadier General Mohammad Pakpour, head of the Iranian Revolutionary Guard Corps (IRGC) warns that the IRGC will deliver a crushing blow to Israel if they attack, but maintains that Iran will not attack first.

Given that the Iranians are probably about a year away from assembling up to four nukes, I am not sure what their game plan is. Perhaps they are trying to provoke an Israeli attack in order to build domestic support. If so, then perhaps the Israelis would be better served by not attacking the nuclear capability; but that is asking a lot of a country being threatened with nuclear attack. I think that we should never forget that the United States isn't the only country whose foreign policy is driven by domestic politics.

*Google translate provides the following translation of from an article on the Iranian website alef.ir. I am excerpting here for posterity. I cannot vouch for its accuracy of translation, however based on context I think there are many object-subject reversals, so this article is mostly discussing attacking Israel, even though portions indicate Israel is attacking.

Jurisprudential reasons for Israel's destruction
Guestbook: Alireza Forghani, 15 Persian date Bahman 90
Published: Saturday, 15 Persian date Bahman 1390 13:16

Necessary destruction of Israel from the perspective of Imam Khomeini (RA):
"Today the first qibla of Muslims to Israel, this cancerous tumor has been the Middle East. It satanic Israeli media division with the bombers. On every Muslim is required to equip themselves against Israel. My nearly twenty years of international Zionism Hey, I have and it's safe for all the world's revolutions and the liberation of Iran's recent past, I do not know. I have already noted, the usurper state of Israel, which is aiming for is the great danger and fear of Islam and Muslim countries is If the Muslims to make their deadlines, lost opportunities and avoid them if possible and necessary because the risk is that Islam is based on the Islamic states in particular and generally on other Muslims that corruption in any way possible to resolve the matter in. . all our problems of Israel. Israel of America. "
. . . Jurisprudential reasons for the Israeli military attack on Iran
. . .
Start with who you fight with God while they fight you, but the wicked [and primers] not because God does not love transgressors (Baqara 190) and where to find them and make them where you Bkshydshan Randhand drive, and the temptation to idolatry is worse than murder, and do not fight with them at the Sacred Mosque, unless they are there with your campaign, and because the campaign Bkshydshan the reward of such unbelievers (Baqara 191)
Jihad in the words of "JHD" means hardship and toil, or of "JHD" is meant to afford and tolerate in terms of effort and inconvenience in the way of God. Jihad in all aspects of economic, political, cultural and military, but can be explained solely using Jihad, Jihad's military Immediacy mind. Military jihad and the defense is divided into two basic types.
. . .

1 - Blood of Muslims to repel Israeli assault
As noted above, the purpose of repelling invasion defensive jihad against the enemies of Islam and Muslims and jihad is the primary goal of those who received the invitation to Islam and is considered the sufficiency imperatives, defensive jihad is obligatory objective.

In particular the Imam Khomeini (RA) described in the 2826 Manual states:
"If the enemy should invade the blood of Muslims and its borders, it is obligatory upon the Muslim masses every means possible to defend the lives and property of the give-away. And it does not need the permission of the judge."

. . .
With regard to Israel's aggression fake state of Palestine as part of the blood and includes the first Qibla of Muslims, to defend the sacred part of the blood of Muslims and Islamic Flsytn every means possible is obligatory in which case the judge would not even need to leave.

2 - to deal with the Israeli invasions of Palestinian blood
Regardless of the Israeli aggression against Palestine and the Muslims as the land is clear and the heads of this regime have never been denied that this fake regime soda dominate other Islamic lands bordering on the head and in this way to develop an every day in the provision of Chinese dominance of different ways.

. . .

Hence and considering the issues concerning primary and expansionist jihad against the Zionist regime and the regime definitively fake blood for Islam and Islamic Jihad to attack Israel on the defensive on the whole Muslim world is the objective obligatory.

3 - fear of Israeli domination over the Islamic countries
Imam Khomeini (RA) the Muslims were invited to consciousness, and of foreign domination over the Muslims have been warned. His 2828 issue states:

"If the Islamic countries of the map is drawn the strangers who might fear that dominate the Islamic countries to find it, it is obligatory upon Muslims with every means possible, plan to take them, and prevent They influence their development. "
The first jihad attack "Blood" non-Muslims is the lack of blood and land of Israel and the occupied land of Palestine to take over. Israel in the Palestinian territory of the Muslim people as a cancer that plans are drawn into an Islamic country and fear that it will dominate the Islamic countries to find that it is obligatory upon Muslims with every means possible, the map throw them together, and to prevent the development of Israel's influence.

. . .
Iran can destroy Israel in less than 9 minutes
Sjyl the missiles from ballistic missiles is a departure from the atmosphere and the path to such a height into the atmosphere back with about 10 to 12 Mach (approximately 3400 to 4080 meters per second) by the flooding, which destroy it. For all existing air defense systems is impossible. It represents the country's progress in missile technology to achieve such an important achievement. The solid ink technology used in rocket propulsion in addition to desirable features, high storage life is also looking for these missiles.
. . .
In the name of Allah
Iran must attack Israel by 2014

The necessity of Israel annihilation in Imam Khomeini's view
"Today, the first Qibla of the Muslims has been occupied by Israel, a cancerous tumor for the Middle East. Today, Israel is causing division using all evil means. Every Muslim is obliged to equip themselves against Israel. For about 20 years, I have been warning about the danger of international Zionist, and right now its danger for all the liberation revolutions in the world and the recent Islamic revolution of Iran is not less than the past. I have already warned that the Israeli usurping government, with the aims which it is seeking for, is a great danger for Islam and all Muslim nations, and it is likely that if Muslims leave Israel alone, the opportunity could be lost and it may not be possible to stop them; and since the potential danger is facing the foundations of Islam, it is necessary for the Islamic governments in particular and other Muslims in general to remove this corrupting material by any means. All our troubles are due to Israel! And Israel results from America too.

Nice that the United States doesn't escape notice from these loonies.

Saturday, February 4, 2012

Obama's National Security Strategy

We have often joked, especially Dean, about the extent to which O=W, especially in terms of national security policy. But Walter Russell Mead argues in this video that there is an underlying, uniquely American reason, for this. American policy is driven by the democratic forces of our republic. This means that it is incoherent and lurches in various directions in the short term as we elect new Presidents and Congress' level of interference rises and falls. Unlike an historical figure like Bismarck whose intellect almost single-handedly unified Germany, our strategy is an amalgam of the forces of the republic. Our strategy is less like a ship of state navigated by a single Captain, but more like a gang fight on the poop deck for control of the helm.

But somehow this works over the long term. This is because the direction of the U.S. strategy is actually effective and reflective of the actual interests of the citizens. Over time, the strategy is reflective of our values, is effective in establishing a stable world order, and is consonant with our economic interests, which are promoted by free trade and peace.

As a result, the latest military strategy released by the administration looks much like that of the Bush administration. There is consensus that we must defeat Al Qaeda, promote peace in the Middle East, stop the spread of weapons of mass destruction, prevent Iran from getting nukes, promoting a stable world order. The specific means to conduct this strategy of necessity include working with allies to allow us a smaller, more affordable military. Ron Paul struggles when he talks foreign policy because his ideas, even if correct, do not accord with the current consensus. In my view, that consensus has solidified after the 9-11 attacks and the subsequent wars in Afghanistan and Iraq.

My personal belief is that some of the tactical ideas of Ron Paul, like closing overseas bases to get a more affordable military, could be grafted onto the consensus on military and foreign policy, because affordability is an important consideration of our strategy.

Friday, February 3, 2012

Today's Jobs Numbers - Fewer People are Working

The President said that the economic recovery is speeding up, based on the reported jump in jobs created and a dropping unemployment rate. “The recovery is speeding up,” he said, and to keep it going, he argued, Congress must pass a package that would extend the payroll tax cut and continue unemployment benefits. As if those are really the causes of economic growth.

However, looking at the detailed BLS data and tax data reveals a less flattering picture. First and foremost, the labor participation rate dropped again, from 64.0% to 63.7%. I stopped trusting the official unemployment figures some time ago, but I have started to think the statistic is irrelevant. No matter how you slice it, there are fewer people working to produce goods and services to support the entire economy. Here is a ten year snapshot.

Some of the trend may come from retiring boomers, but I submit that they wouldn't be leaving the work force so quickly we had recovered more quickly from the recession. The youngest boomer is only 66, so retiring boomers can't really explain this graph.

My other reason for unease despite the cheery news is that I don't trust the seasonal adjustment, which appears to account for all of the good news. If you read the BLS press release closely, look at how they use the term. From the TrimTabs Money Blog:
The BLS each month reports two data series, but only one jobs number is reported by the media. Actual jobs outstanding, not seasonally adjusted, are down 2.9 million over the past two months. It is only after seasonal adjustments – made at the sole discretion of the Bureau of Labor Statistics economists that 2.9 million less jobs gets translated into 446,000 new seasonally adjusted jobs for January and December.
Looking at Table B-1 of today's release reveals that total employment, without adjustment, declined from 132,952,000 to 130,263,000. If seasonal adjustment is overstated because of the mild winter then the touted job creation could be very misleading.

Corporate profits are in good shape, so we might actually get a recovery going soon. But to think today's statistics are really good news is a mistake. By the way corporate tax receipts are way down, despite profits being up, because of a tax break for investment. Corporations were given the opportunity to accelerate depreciation on capital investments. Just one more loophole that forces us to keep the base rate high, but we still end up with insufficient revenue. Closing question, did corporations spend big on labor saving equipment that in turn kept unemployment high due to this loophole?

Weekend Music Chill

I'm not a big fan of the most recent music you might hear on the radio, but this band seems pretty decent. This song got stuck in my head. They sound a tiny bit like ELO at the start, but then move into their own unique sound.

Here is MGMT with "It's Working."

And I am just going out on a limb with this Lali Puna performing Faking the Books.

Thursday, February 2, 2012

Snapdragon Illegal Naming Update

In a previous post, I discussed the apparently illegal, crony capitalist tactics of Mayor Sanders' office in allowing Qualcomm Stadium to be renamed to Snapdragon without council approval. This was done despite a city attorney memo advising against it and the fact that the city could have used the revenue that Qualcomm might have delivered to get the advertising value out of the name change. As I wrote:
The temporary name change of Jack Murphy Qualcomm Stadium to Snapdragon, despite a memo from City Attorney Jan Goldsmith that the name change was not authorized unless approved by the City Council just disgusts me. The city loses money every year on the stadium, undermining public support for everything else that Mayor Sanders has proposed, including a new City Hall. Why would the mayor engage in such an egregious display of crony capitalism, in effect donating millions of dollars of free advertising revenue to Qualcomm?
Now emails released to the U-T Watchdog under a public records request have shown that the city's CFO had questions.
San Diego’s chief financial officer questioned whether the city was being appropriately paid for a temporary name change of Qualcomm Stadium to endorse the company’s Snapdragon processor on the same day Mayor Jerry Sanders held a news conference touting the promotion.
Of course, no one responded to the question. Worse it turns out that Qualcomm paid the city a paltry $1000 to "cover expenses" but what might be viewed as a tacit admission that their actions might have legal ramifications.

We have further questioning from city officials about the legalities of this deal, but Mayor Sanders is more concerned about keeping buddy-buddy with local corporate giant Qualcomm.

Wednesday, February 1, 2012

Trump Turds

Donald Trump may be known as a real estate tycoon, deal maker and for his eponymous towers, but Michele Malkin reminds us of the crony capitalist sources of his wealth, namely that Trump is a serial eminent domain abuser.

While casting himself as America’s new constitutional savior, Trump has shown reckless disregard for fundamental private property rights. In the 1990s, he waged a notorious war on elderly homeowner Vera Coking, who owned a little home in Atlantic City that stood in the way of Trump’s manifest land development. The real estate mogul was determined to expand his Trump Plaza and build a limo parking lot — Coking’s private property be damned. The nonprofit Institute for Justice, which successfully saved Coking’s home, explained the confiscatory scheme:

“Unlike most developers, Donald Trump doesn’t have to negotiate with a private owner when he wants to buy a piece of property, because a governmental agency — the Casino Reinvestment Development Authority or CRDA — will get it for him at a fraction of the market value,. . .
. . .
Trump has attempted to use the same tactics in Connecticut and has championed the reviled Kelo vs. City of New London Supreme Court ruling upholding expansive use of eminent domain. He told Fox News anchor Neil Cavuto that he agreed with the ruling “100 percent” and defended the chilling power of government to kick people out of their homes and businesses based on arbitrary determinations:

Nice to see Trump talking up Gingrich; if that doesn't kill tea party support for Newt, I don't know what will.

House Passes Federal Wage Freeze

Darrell Issa's tweet alerted me to the passage of a federal wage freeze today, HR 3835. As a federal employee, I am not exactly happy to have my pay frozen as real world inflation continues. But given, the tough economic times that Americans are still facing, I understand that even the federal work force isn't immune to economic forces. Republicans cleverly tied the federal work force pay freeze to a freeze on the pay of members of Congress. From Politico:
“So, it will be perceived as if you are voting against the bill, you are voting to raise your own salary,” House Minority Whip Steny Hoyer (D-Md.) told reporters earlier this week. “A very good 30-second ad. Isn’t that clever?”
Why, yes it is. I love it when Democrats whine when they get outmaneuvered, but crow when they do it themselves. However, there are some decent reasons to continue the freeze, even though it doesn't save that much money. Issa's office included this information in a press release.

On Monday, the nonpartisan Congressional Budget Office issued a study, which found that total compensation for federal employees was 16% greater than for comparable private sector employees.

The CBO study also found that:

• Benefits were 48% more costly for federal employees than private sector employees.

• Highly-skilled employees (with a professional degree or PhD) were the only employees compensated less than their private sector counterparts.

• Taking benefits out of the equation, federal employees made 2% more than private sector workers at large companies and 9% more than private sector workers overall.

Unfortunately, the PhD issue is a real problem for our military research labs looking to attract top talent. We need some smart folks to perform basic research and to have the skills to ensure that defense contractors are subject to honest test and evaluation criteria.