Thursday, May 31, 2012

End Game in Greece and for the Euro

I am normally loathe to link to anything in the Huffington Post, but this article by Simon Johnson brings such clarity to the Greek/Euro situation that I feel compelled to quote the article. (H/T The Grumpy Economist):
. . . the Greek failure mostly demonstrates how wrong a single currency is for Europe. The Greek backlash reflects the enormous pain and difficulty that comes with trying to arrange "internal devaluations" (a euphemism for big wage and spending cuts) in order to restore competitiveness and repay an excessive debt level.

Faced with five years of recession, more than 20 percent unemployment, further cuts to come, and a stream of failed promises from politicians inside and outside the country, a political backlash seems only natural. With IMF leaders, EC officials, and financial journalists floating the idea of a "Greek exit" from the euro, who can now invest in or sign long-term contracts in Greece? Greece's economy can only get worse.
. . .
The ECB has always vehemently denied that it has taken an excessive amount of risk despite its increasingly relaxed lending policies. But between Target2 and direct bond purchases alone, the euro system claims on troubled periphery countries are now approximately 1.1 trillion euros (this is our estimate based on available official data). This amounts to over 200 percent of the (broadly defined) capital of the euro system. No responsible bank would claim these sums are minor risks to its capital or to taxpayers. These claims also amount to 43 percent of German Gross Domestic Product, . . .

For the last three years Europe's politicians have promised to "do whatever it takes" to save the euro. It is now clear that this promise is beyond their capacity to keep -- because it requires steps that are unacceptable to their electorates. No one knows for sure how long they can delay the complete collapse of the euro, perhaps months or even several more years, but we are moving steadily to an ugly end.
Sorry for the extended quotes, that is not normally my style; but it is becoming clearer by the day that this crisis is inevitable. Funny thing about financial crises, once they are seen as inevitable, they arrive sooner than later.

Hopefully Team Romney is studying the situation and is readying a plan. I maintain my long held position (here and here) that McCain could have won the 2008 election if he had proposed a radically different plan than the TARP and stimulus that both Bush and Obama supported. If I know anything about Team Obama, they will triple down on these failed policies if the coming euro crisis hits before the election. They might even be foolish enough to try and pledge U.S. aid to help save the euro. We need to keep an eye on the Fed as well. Romney should be ready with his own plan. If it embraces the free market, he wins in a walk.

Wednesday, May 30, 2012

Mayor Bloomberg is an Idiot

Drudge's headlines took me to an NYT article about Mayor Bloomberg banning soda's over 16 ounces. No ban on juice or lattes. Here are the facts:

16 oz Coca Cola - 187 calories - BANNED!
16 oz cup, Coca Cola with 50% ice - 95 calories - BANNED!
16 oz Orange Juice - 180 calories - Allowed
16 oz Latte (2% milk) - 190 calories - Allowed
Two 8 oz Coca Cola's - 187 calories - Allowed

Explain how this makes sense if the purported reason for this Nanny State intervention is to combat obesity. The lowest calorie drink in the line up is banned.

Tuesday, May 29, 2012

Backdoor Amnesty Through Change in Hardship Regulations?

The Department of Homeland Security intends to streamline the waiver application process for immediate relatives who have been unlawfully present in the United States for quite some time. The reason for this proposed change is that aliens who are present in the country illegally; but would be otherwise eligible for visas as immediate family members of American citizens must leave the country to process their visa application. Leaving triggers a disqualification for returning, because they were here illegally in the first place. The Obama administration is proposing to waive this legal barrier through a "provisional waiver for unlawful presence" in cases of extreme hardship for immediate family.

My issue is that this effectively grants an amnesty process for those who have immigrated illegally but have immediate family members present in the country. Why don't these people apply for their visas in the normal legal manner? Why hasn't the administration cleared the backlog of applications rather than propose a backdoor amnesty? They are certainly spending enough money on stimulus, but rather than solve this problem they seek backdoor amnesty to subvert U.S. immigration law.

Here is the proposed rule making with all legalize from the Federal Register:
On January 9, 2012, U.S. Citizenship and Immigration Services (USCIS) announced its intention to change its current process for filing and adjudication of certain applications for waivers of inadmissibility filed in connection with an immediate relative immigrant visa application. USCIS now proposes to amend its regulations to allow certain immediate relatives of U.S. citizens who are physically present in the United States to request provisional unlawful presence waivers under the Immigration and Nationality Act of 1952, as amended (INA or Act), prior to departing from the United States for consular processing of their immigrant visa applications. Currently, such aliens must depart from the United States and request waivers of inadmissibility during the overseas immigrant visa process, often causing U.S. citizens to be separated for extended periods from their immediate relatives who are otherwise eligible for an immigrant visa and admission for lawful permanent residence. Under the proposal, USCIS would grant a provisional unlawful presence waiver that would become fully effective upon the alien's departure from the United States and the U.S. Department of State (DOS) consular officer's determination at the time of the immigrant visa interview that, in light of the approved provisional unlawful presence waiver and other evidence of record, the alien is otherwise admissible to the United States and eligible to receive an immigrant visa. USCIS does not envision issuing Notices to Appear (NTA) to initiate removal proceedings against aliens whose provisional waiver applications have been approved.
. . .
DATES: Written comments should be submitted on or before June 1, 2012.

ADDRESSES: You may submit comments, identified by DHS Docket No. USCIS-
2012-0003, by one of the following methods:

Federal eRulemaking Portal:
Follow the instructions for submitting comments.

Email: You may submit comments directly to USCIS by email
at Include DHS Docket No. USCIS-2012-0003 in
the subject line of the message.

Mail: Sunday Aigbe, Chief, Regulatory Products Division,
Office of the Executive Secretariat, U.S. Citizenship and Immigration
Services, Department of Homeland Security, 20 Massachusetts Avenue NW.,
Washington, DC 20529-2020. To ensure proper handling, please reference
DHS Docket No. USCIS-2012-0003 on your correspondence. This mailing
address may be used for paper, disk, or CD-ROM submissions.

Hand Delivery/Courier: Sunday Aigbe, Chief, Regulatory
Products Division, Office of the Executive Secretariat, U.S.
Citizenship and Immigration Services, Department of Homeland Security,
20 Massachusetts Avenue NW., Washington, DC 20529-2020. Contact
Telephone Number is (202) 272-8377.
While the DHS asserts that this proposed rule making conforms to the immigration law, that is not clear to me, but I am not expert. I encourage you to comment prior to the deadline.

Obama's Poll Numbers

Obama is maintaining a slight lead over Romney in RCP's poll of poll averages, but I don't think that's the real story. I have written before about the difference between likely and registered voters and what that portends. Those comments still stand, but now the race is a statistical dead heat among LVs, as RCP calls them. Here is a partial screen capture of the polling as of today.

Since the Republican primaries ended, Obama's percentage has steadily declined. He has never topped 50% in any polling for the last year and a half and is now on a steady decline. Given that second term elections are usually a referendum on the incumbent, these numbers should be considered bad news for Obama. It gives Romney a chance to convince the growing number of undecided voters, who should break against the incumbent under the current economic circumstances. I am repeating what I have learned from years of watching elections and reading commentary; this election could have a different dynamic that we are missing, but its not the way to bet.

Monday, May 28, 2012

Towards an Imperfect Union

The Economist newspaper has come to the conclusion that European monetary union is in trouble; hoist on its own internal contradictions. They see the stark choices for Europe as either full on federalism with an accompanying loss of national sovereignty or dissolution of the euro, with attendant chaos. They then attempt to offer a third way that will not work because it fails to solve the key contradictions. This matters to America because chaos in Europe will deeply affect our economy and some of the lessons have direct applicability to our situation. From the leader:
One road leads to the full break-up of the euro, with all its economic and political repercussions. The other involves an unprecedented transfer of wealth across Europe’s borders and, in return, a corresponding surrender of sovereignty. Separate or superstate: those seem to be the alternatives now.
Why is this so? The currency union presupposes a single market; with one currency and goods and services flowing freely in response to the signals of the free market; just like in the United States. But this has not been achieved in Europe. Labor markets in Europe do not function like those in America. First, labor is not really free to flow across borders in Europe. Language creates barriers, as do habits of peoples used to living in their native land. More importantly, in many countries, and especially Greece, large sections of the economy are under state control. Employees are state workers, further restricting labor flows. Finally, national labor unions in Europe have lobbied national governments for restrictions on labor, in the way of required benefits, minimum wages and rules about firing employees and these rules differ significantly by nation.

Beyond the lack of an integrated labor market, some sovereign governments, by dint of their huge share of the economy, form a barrier to economic integration. The solution was supposed to be that member countries had limits on debt as a share of GDP. The Greeks cheated on this, but it was never realistic to believe that politicians could keep this promise over the objections of disgruntled electorates during a severe recession.

The Economist's proposal doesn't really address the core issues. It admits to a purely technocratic solution. They propose European central regulation of banking, to prevent banks from being pressured by national governments to by sovereign debt and to institute a European wide system of deposit insurance. Second, they argue for a limited effort to mutualise deb of all euro-zone economies above 60% of GDP. I don't really understand this latter plan, but I don't have to, because it won't be implemented. It is a sop to the reckless that the Germans will never accept, IMHO. They argue that this is not a step to full scale federalism. That's not the point anyway.

The move to European regulation of the banks is actually the move to federalism. As the banks are regulated by centrally, but lend locally, the local conditions will become the next target for central European regulators. If union demands make it unprofitable for banks to do any lending in Greece, for example; the logical next step is for central regulators to step in and change those conditions. Banking is so central to capitalism that central control leads inevitably to federalism. To the extent that countries continue on the path to socialism in Europe, their economies will be not be viable.

What would work? The only way that European monetary union would work would be to limit national sovereignty by preventing socialist and Peronist-style intervention in free markets. It is the size of the state sector, and uneven workplace flexibility, including restrictions on wages, that prevents a single market. Unless the EU is willing to guarantee a minimum level of market freedom, including a ban on state participation in the economy, then monetary union won't work.

For the U.S., I foresee a rocky road ahead, because European turmoil will affect our economy directly through the banking system and indirectly through trade. The U.S. already has a federalism with a largely flexible labor market, so most of the issues in the EU lack direct relevance to our situation. The biggest question is what happens if California or Illinois can't run their governments with the revenues they take in. Short of the employees taking serious pay cuts, I don't see any way out of the messes for those states. Greek state workers have already suffered this fate.

To paraphrase Abraham Lincoln, I believe this union cannot endure, permanently half socialist and half free.

Memorial Day

I hope you had a happy Memorial Day. I was attending to personal matters today, so I didn't think to put a post for the occasion, but Dean, W.C. Varones and DooDoo Economics have all done a great job, hopefully you saw their posts.

To those who prefer peace to war in every circumstance, I reply: you are signalling your surrender to the forces of tyranny and injustice in advance of any conflict. Evil is emboldened when it knows there is will be no resistance.

Sunday, May 27, 2012

DeMaio vs Fletcher/Filner or Something Else?

Polling in the San Diego mayor's race has been scant; but Nathan Fletcher's (picture left) decision to leave the Republican party appears to have been shrewd. From the U-T:
A U-T San Diego poll showed DeMaio with 22 percent of the vote, followed by Filner at 18 percent, Fletcher at 17 percent and Dumanis at 8 percent. The survey of 404 registered city voters was taken May 1-2 and has a margin of error of plus or minus 4.9 points.
Conventional wisdom from that article is that Filner, being the lone competitive Democrat in the race is likely to benefit from the line up of two Republicans and one former Republican in the race. My view of Fletcher is that he is closely tied to the Republican downtown establishment, but left the party because DeMaio earned the county GOP endorsement. My fear is that he will knock DeMaio from first place and we will end up with a Filner vs Fletcher match up in November. For this reason, I have donated to the DeMaio campaign early, rather than waiting for November. The barrage of negative advertising against Fletcher may not be working, because it focuses on ancillary issues like missing votes in Sacramento. I don't think the voters in San Diego much care at this point. What would be more effective would be to highlight Fletcher's lukewarm response to protecting taxpayers, bringing up his tepid response to Proposition D, for example.

However, polling from SurveyUSA/KGTV from May 14 had these results:

DeMaio 31%
B Filner 21%
Fletcher 21%
Dumanis 13%
Other 6%
Undecided 8%.

This is a poll of likely voters, which is good, I'm not sure if the U-T article quoted is of registered voters. Proposition B, pension reform, is likely to energize a base of voters friendly to DeMaio. If you analyze the month on month results from the SurveyUSA poll, you might conclude that the negative advertising is having some effect, as Fletcher is down 5% from last month.

We are going to need a mayor committed to implementing Proposition B, which holds a commanding 54% to 22% lead in the same poll. I consider the election of Carl DeMaio (lower right) one of the most important races in the country. If San Diego, know historically for its inept handling of employee pensions, earning it the nickname Enron by the Bay, can get its fiscal house in order; then maybe the whole state isn't beyond saving. My fear is that it will take a monumental crisis to create a climate for change given the union's stranglehold on state politics.

Saturday, May 26, 2012

Weekend Music Chill

Happy Memorial Day Weekend. Lots of folks will be hitting the road this weekend, despite $4 gas. I have driven across country more times than I care to remember, so I won't be hitting the road myself. On more than one occasion I would put the tape of this tune into the car stereo when I was closing in on the home stretch of a trip of a few thousand miles. It's Golden Earring with Radar Love.

Golden Earring was a two hit wonder, but I love both their hits. Here is there "bad guy" song, Twighlight Zone (aka When the Bullet Hits the Bone).

Friday, May 25, 2012

Defending the Indefensible - Why Racism Is not a Crime

Jonathon Rauch wrote what I consider the seminal article on intellectual pluralism in 1995. He defends the idea that prejudiced, even hate-filled speech must be protected and that the antidote is better speech and ridicule of the obviously evil. Early in the article he states:
By all indications, Homo sapiens is a tribal species for whom "us versus them" comes naturally and must be continually pushed back. Where there is genuine freedom of expression, there will be racist expression. There will also be people who believe that homosexuals are sick or threaten children or--especially among teenagers--are rightful targets of manly savagery. Homosexuality will always be incomprehensible to most people, and what is incomprehensible is feared. As for anti-Semitism, it appears to be a hardier virus than influenza. If you want pluralism, then you get racism and sexism and homophobia, and communism and fascism and xenophobia and tribalism, and that is just for a start. If you want to believe in intellectual freedom and the progress of knowledge and the advancement of science and all those other good things, then you must swallow hard and accept this: for as thickheaded and wayward an animal as us, the realistic question is how to make the best of prejudice, not how to eradicate it.
Indeed. There is a real connection between the protections Americans are accustomed to and the superior progress we have made in applying technology and creating a wealthy society. But that comes at a price, the price that repugnant thought and speech will be allowed to proceed unchecked in our society.
By letting people make errors--even mischievous, spiteful errors (as, for instance, Galileo's insistence on Copernicanism was taken to be in 1633)--pluralism creates room to challenge orthodoxy, think imaginatively, experiment boldly. Brilliance and bigotry are empowered in the same stroke.
However, we are so concerned about bigotry with regards to race that we are willing to bend the normal rules of justice to achieve the seemingly laudable end of a society without prejudice.
From the purist point of view, a society with even one racist is a racist society, because the idea itself threatens and demeans its targets. They cannot feel wholly safe or wholly welcome as long as racism is present. Pluralism says: There will always be some racists. Marginalize them, ignore them, exploit them, ridicule them, take pains to make their policies illegal, but otherwise leave them alone. Purists say: That's not enough. Society cannot be just until these pervasive and oppressive ideas are searched out and eradicated.
Our society is creating a climate of persecution and victimization that diversity bullies use to impose their own agenda. Racial prejudice is certainly ugly, but the answer is not speech codes and racial quotas, which do harm to our freedoms and threaten our progress in insidious ways. Diversity is in fact a good thing, but by imposing only one kind of diversity, that of race, we exclude real diversity from our colleges and universities. Victor David Hanson hit the bulls eye in discussing L'affaire Warren:
This melodramatic history is the antithesis of the only diversity that counts, intellectual diversity, for it reduces a complex, variegated, universally flawed humanity into cardboard villains and victims. But the point of multiculturalism has never been “diversity.” If true diversity were the aim, then the university would promote the diversity of religion, region, socio-economic background, and most important intellect and philosophy. And that’s what “diversity” of the sort that allowed a blue-eyed, blonde Elizabeth Warren to pass as evidence of Harvard’s “commitment to diversity” is really about: imposing a leftist ideological conformity predicated on America’s historical crimes and sins.
If America's universities are to remain the center of intellectual achievement for which they were once known, this false pretense of diversity has to end. The imposition of speech codes and all the Marxist-Orwellian claptrap regarding acceptable thought must end. The existence of racists, will be met, not with intolerance, but ridicule and well crafted argument. Ultimately, suppression of speech is incompatible with a free society. Suppression does not persuade, it only intimidates and drives behavior underground. Better to have the debate in the open and allow prejudice to sink or swim on its own merits.

Wednesday, May 23, 2012

Greek Default and Leaving the Euro

One of my favorite economists, John H. Cochrane writes in the Grumpy Economist:
Why does everyone equate Greece defaulting on its debt with Greece leaving or being kicked out of the euro? The two steps are completely separate. If Illinois defaults on its bonds, it does not have to leave the dollar zone -- and it would be an obvious disaster for it to do so.
I would agree with him, except that the problem in Greece runs deeper than just a sovereign default. My response from the comments.
But the Greeks seem unwilling to vote for a government that would take the actions needed to stay in the euro zone. If the Greeks default on their euro debt, they will get no new infusion of capital, because they will have broken all trust with their neighbors. Their only way out would be real structural reform. Such reform would include reducing the wages of workers, payments to pensioners and hiving off state businesses. There is no political will to do so. The leftists actually think they can threaten/blackmail the Germans into giving them an endless supply of euros. That's not going to happen. Result, Greece leaves the euro; not because of the debt default, but the refusal to deal with its root causes.
So back to Illinois. What would happen if a state defaulted and did nothing about, continuing deficit spending? Is there a precedent? In the 1840s several states in America defaulted on their debts after investing heavily in canals and railroads. Why can't Jerry Brown learn any history? Arkansas, Florida, Michigan, Mississippi and Louisiana all defaulted on their debts to some extent. But life went on, the states were forced to retrench their spending, and most states passed reform measures that limited debt and gave priority to debt repayment. The difference today, is that states are in debt from high operating expenses. If they were to default, then only a reduction of operating expenses would save them. Even if the federal government were to bail out Illinois or California, such a bailout would be unsustainable without real reform, because the state governments of these two deep blue states have the Greek problem, an overpaid, burdensome state workforce. But a default would force real reform, because these states aren't leaving the dollar zone.

Abuse of Power

I am almost sick to my gut today, over the blatantly political attempts that spilled previously classified information about the killing of bin Laden, including the identity of the Seal Team Six Commander. Our President has no shame, blatantly using classified information to lure Hollywood pals to make a film in which he will be portrayed as heroic, no doubt. And Democrats complained that Bush politicized the war. From Judicial Watch, which has obtained a treasure trove of documents regarding the incredible access given Hollywood writer Mark Boal and director Kathryn Bigelow, to top CIA/DOD operatives and facilities.
“These documents, which took nine months and a federal lawsuit to disgorge from the Obama administration, show that politically-connected film makers were giving extraordinary and secret access to bin Laden raid information, including the identity of a Seal Team Six leader,” said Judicial Watch President Tom Fitton. “It is both ironic and hypocritical that the Obama administration stonewalled Judicial Watch’s pursuit of the bin Laden death photos, citing national security concerns, yet seemed willing to share intimate details regarding the raid to help Hollywood filmmakers release a movie ‘perfectly timed to give a home-stretch boost’ to the Obama campaign.”
Maureen Dowd speculated about this last August:

The moviemakers are getting top-level access to the most classified mission in history from an administration that has tried to throw more people in jail for leaking classified information than the Bush administration.

It was clear that the White House had outsourced the job of manning up the president’s image to Hollywood when Boal got welcomed to the upper echelons of the White House and the Pentagon and showed up recently — to the surprise of some military officers — at a C.I.A. ceremony celebrating the hero Seals.

Its one thing to put your life on the line in the service of your country, like these Seals did. But the President cheapens himself and risks their lives by not putting a clamp of secrecy on details of the operation. Finally, he has the gall to blatantly turn to Hollywood to ride the coattails of these brave men to take multiple victory laps. It's disgusting. As Commander-in-Chief, he doesn't respect the members of the military that are in his care. He treats them like subjects whose existence is purposed to his own gain, not as fellow citizens engaged in the defense of the republic.

Tuesday, May 22, 2012

Will an Improving Economy Save Obama?

I have been pessimistic about the lack of economic recovery, but despite the President's best efforts, there are signs that the economy might be showing some signs of life. Consider some of the good news:
  • Record low natural gas prices are propelling manufacturing. The EPA couldn't react fast enough to restrict fracking to kill of this particular goose laying golden eggs and it got too close to the election, so Obama watered down proposed EPA rules. This fact [low natural gas prices] has unleashed the biggest US manufacturing boom in decades. Take for example the US steel industry. Reuters News reported that, "America’s steel industry, for decades a symbol of industrial decline, is betting on natural gas to make it more competitive against foreign producers.
  • U.S. oil production on private land is way up, particularly in North Dakota, far outstripping Obama's shutting down of Gulf oil production and closing off federal lands, later re-opened. From the WSJ: The use of new drilling techniques to tap oil and gas in shale rocks far underground helped add about 158,500 new oil and gas jobs over the past five years, and economists think it has created even more jobs in companies supplying the energy industry and in the broader service industry.
  • Manufacturing in the U.S. is making a comeback. From the Carpe Diem blog: More than 17% of U.S. job growth this year has been in manufacturing, even though that sector represents less than 9% of total payrolls. Further, manufacturing jobs that have gone to China have been returning to the U.S. U.S. manufacturing has become attractive for some companies as Asian wages have surged over recent years and the wage gap between the U.S. and China has narrowed. The drop in the dollar over the past decade has also made U.S.-produced goods more competitive. And higher oil prices have increased the cost of shipping goods across oceans, making domestic manufacturing more appealing.
  • The Gallup survey of Economic Confidence has hit a new high. The Gallup Economic Confidence Index broke through a barrier last week, surpassing -17 for the first time in the four-plus years of Gallup Daily tracking in the United States. The index now stands at -16 for the week ending May 20, up from -18 in each of the prior two weeks in May, and from -21 in late April. However, the index is still negative.

The open question is whether this good news will lift the U.S. economy and if Obama will get any credit. I contend that he should not, because the health care law, his energy policies and refusal to deal with federal spending have all harmed the economy. The American people are pragmatic and tend to give the leader credit when things are going well.

Uncertainty over health care and the regulatory climate are still holding back a full recovery. It's an open question as to whether economic bulls or bears will triumph.

Monday, May 21, 2012

Complaining About the National Debt is well, Racist

The tea party movement still gets tagged with the racist label, which is of course total crap, but its main concern has been the U.S. debt bomb. I have added the U.S. national debt clock to the right to illustrate our main concern. Congratulations, check out how fast your share of the debt is rising under Obama. Meanwhile let's break down the facts. Last fiscal year the federal government reported it had paid $454 Billion on the national debt. The Congressional Budget Office projects that this interest will rise to consume 2.5% of GDP by 2020, up from 1.5% today. But read the fine print, the CBO is using low interest rate projections:
As a result of persistently low interest rates, payments for net interest are expected to remain low despite the burgeoning debt.
Really? Isn't that a nice bedtime story. They are counting on the federal reserve to continue to keep borrowing costs down. The average interest rates the feds pay is around 2%. But the fed's quantitative easing is likely to ignite inflation eventually. As recently as 2000, the treasury paid an average of 6.5%. So instead of a mere $454 billion hole in the budget, under more normal conditions, we might be liable for well over a trillion dollars per year in interest. That would be bigger than the entire defense budget, bigger than social security payments.

The Federal Reserve can't keep interest rates low forever. Eventually, inflation will ignite and force their hand. This debt will become a huge drain on the economy, far greater than the budget projections of the CBO show. Interest rates in the early 80s spiked at the 12% range. It was bitter medicine needed to ring inflation out of the economy, and it worked. Can today's economy survive the almost $3 trillion per year hit that 12% interest rates would cause? That's more than the entire revenue of the federal government in 2011. Who would loan the U.S. money under those conditions? The country survived a hyperinflation scare in the late 70s. We had a much more manageable debt ratio. I don't think we could handle it now.

So, what do you think, bigots? Is this a race tinged discussion or what?

Friday, May 18, 2012

Gay Marriage - NOTA

As in "none of the above." I shy away from the social issues on the theory that the tea party's focus on the ballooning fiscal calamities in all levels of government, federal, state, local and federal reserve is a greater threat to our republic. I making an exception today, because the issue calls for clarity of thought about the role of government.

The issue of gay marriage is framed as a yes or no proposition. But I question why. The answer is that we have ceded to government the role of defining this social relationship. It was not always so. Marriage was once the sole province of the individuals involved or the church. The French Revolution and the German chancellor Bismarck are cited as key influences in the transition of marriage to government regulation; hardly worthy lineage, in my opinion. We would not have this issue if the state was not involved; my none of the above solution. What I resent about the gay marriage movement is the attempt to use the force of government to impose on me a definition of marriage with which I disagree. If the definition is not up to the government, we are free to come to consensus as a society with freedom to disagree. This is the foundation of intellectual pluralism, about which I might blog some other day.

This begs some serious questions about what would society look like without government sanctioned marriage.
  • What about income taxes, how will we determine who is in a household? Whoever self declares to be part of the household. Why not? Why don't we abolish income taxes?
  • What about divorce? If there is not marriage, what happens when people split up? Ultimately, marriage is a civil contract. We will have to establish a body of contract law for various forms of civil unions. Perhaps, some protections for children need to be established. Certainly the concept of guardianship might still require state sanction, but that is separate from marriage. I think the bigger problem is that we will have common law situations, with no contract at all. But isn't "palimony" an old issue for the courts?
  • What about incest, like brothers and sisters marrying? Isn't there compelling state interest to prevent such relationships? My answer is that it is not compelling enough. Government doesn't need to solve every problem. Is this a big rampant problem? Not to my knowledge.
  • What about polygamy? My answer is that individuals should be allowed to make this choice for themselves. I don't think it is a successful social model, so it isn't going to catch on.

This doesn't solve every societal problem with regards to marriage, none are. Better to leave these questions to be resolved by citizens and our chosen institutions outside of government control.

For the record, I believe that gay people (defined as those with a sexual attraction to the same gender) are not inherently evil, nor even sinful. I believe the correct interpretation of the Bible is that gays should live celibate lives. But I strongly desire a government that does not interfere in these personal matters, because a government with the power to investigate our personal lives is one that can invade our privacy for all sorts of ill ends.

Weekend Music Chill

This song is one of my favorite's from the 70s; I like Warren Zevon's wit on display in this rendition of Lawyers, Guns and Money.

And because I like covers, here is Hank Williams Jr. covering:

Thursday, May 17, 2012

Zero Interest Rates are Wrecking the Economy

David Einhorn, President of Greenlight Capital, has published a brilliant article exposing why the Fed's policies are counter-productive to economic recovery, because they don't produce the effects intended. (H/T WC Varones) Although, he doesn't explicitly say so in the article, I believe he is also making a good case for the gold standard, because only a gold standard would prevent the Federal Reserve from playing these kinds of games with the economy. It's difficult to do justice to an article of that length, but I wanted to give my readers a sense of the magnitude of the folly of Chairman Bernanke.

The fed is keeping interest rates low and is signalling that they will keep rates low for a long time. Both facts are impacting markets. Einhorn likens this to a steady of diet of Jelly Donuts, on the analogy that a single jelly donut might give you a boost of energy in the afternoon, but a steady diet of them just makes you sick. What are the impacts of artificially low interest rates?
  • Low interest rates make it harder for retirement eligible to actually retire, they are getting little return for their money.
  • Interest rates are a measure of the time value of money. By setting it at zero, there is no urgency about investment decisions.
  • Because those who live on fixed savings, have less to spend, they spend less, harming the economic recovery.
  • Investment isn't increasing at zero rates, because once rates fall below the rate of inflation, the only consideration is whether the principle can be paid back. If inflation is at 2.5%, then reducing interest rates from 2.5% to 1.5% or even zero percent will have no effect on investment, so there is no offset to the fact that savers have less to spend.
  • Zero rates allow otherwise worthless loans to appear to be performing, as the borrower can make nominal payments. But it delays the necessary economic unwinding necessary for real economic recovery.

And what about signalling that interest rates will stay low for a long time?

  • Bonds, even though they are paying a paltry 2%, have no downside risk, because investors know that there is no danger of rising rates.
  • This does the stock market no good, because only the rich are investing. Note the thin volumes on the market, making it more volatile. Further, the policy allows the rich to leverage assets with access to cheap capital at the expense of the middle class, increasing income inequality. (I don't believe that income inequality per se, is bad; but when it derives from government favoritism in the banking system or policy, it rends the social fabric due to its fundamental unfairness.)
  • Inflation is taking hold in commodity markets, especially oil and gold. Inflation seldom shows up evenly in the economy. Gold and oil prices seem to reflect belief that the fed is pumping ever greater numbers of dollars into the economy. But higher oil prices retard economic recovery.

Einhorn ends the article with a plea for a modest increase in interest rates. I disagree. We can't expect politically appointed and connected Federal Reserve board members to pursue such a policy. It would send a shock to the Treasury in the form of massive increases in the burden of servicing the debt. Better to remove the power of the fed to artificially set interest rates by returning to a gold standard. People may argue that we had boom and bust cycles under the gold standard. My question, "Is this economy any better?"

Tuesday, May 15, 2012

Quote of the Week

Herman Cain on the gold standard:
Gold is kryptonite to big-spending politicians. It is to the moochers and looters in government what sunlight and garlic are to vampires.

Light blogging lately due to end of semester madness on the home front and some minor illness (one day bug).

Saturday, May 12, 2012

San Diego tea party Ballot Proposition Recommendations

My fellow SLOB, W.C. Varones, has posted tea party recommendations for this June's ballot. Since there is no official tea party position, and everyone can claim a leadership role in the tea party, I am following suit. I am a resident of the city of San Diego, so I am not covering propositions in El Cajon, Oceanside or other areas. On to the props - I am using my own shortened and more accurate versions of the titles. Don't like my characterizations? Tough, get your own blog; free speech rocks.

Statewide Propositions

Proposition 28 - The Faux Term Limits Initiative - NO

This measure reduces the total time a legislator can serve in office (Assembly or Senate) to 12 years, down from 14 years. More term limits, hooray? Wrong. Right now, members of the Assembly are limited to 6 years in office; if they want to stay in Sacramento they have to run for the State Senate. Under this proposal, an Assemblyman will go from being limited to three terms to being limited to six terms, because the new language doesn't specify which house the term limits apply to, unlike now. Under the current system State Senators are limited to two four year terms, if Prop 28 passes they will go to three. This will actually increase the time that legislators remain ensconced in uncompetitive districts. Vote NO.

Proposition 29 - Cigarette Tax Dollars for Special Interests - NO

From the LOWV website:
This measure increases--effective October 2012--the existing state excise tax on cigarettes by $1 per pack. The total state excise tax, therefore, would be $1.87 per pack.
So the tax is set to increase by 115%. We also know that increasing tobacco taxes never generates the revenue projected. Where would the money go? Well to fund the California Cancer Research Life Sciences Innovation Trust Fund silly. Who could be against that? Well, it turns out that this will be a slush fund, where research dollars are directed by unelected officials, appointed by politicians who can pay back their supporters. From, the members of the committee to funnel research money to close pals of the medical and political establishment are:
  • 3 University of California chancellors (Berkeley, San Francisco and Santa Cruz)
  • 3 "selected from among Cancer Center Directors of National Cancer Institute designated cancer centers located within the State of California" (appointed by the Governor of California)
  • 1 "affiliated with a California Academic Medical Center who is a practicing physician with expertise in the prevention, treatment or research of cardiovascular disease" (appointed by the Governor of California)
  • 2 "selected from among California representatives of California or national disease advocacy groups whose focus is tobacco-related illness, at least one of whom shall be a person who has been treated for a tobacco related illness." (appointed by Director of California Department of Public Health)
  • A Committee to establish a peer review process for selection of grants modeled on the process used by the National Institutes of Health.
Tobacco tax dollars couldn't be in better hands, given all the politicians involved. Is the state of California going to get into the cancer research funding business, given all our other problems? Further, this is an example of ballot box budgeting. I will stipulate that the Democrat controlled legislature has not done their job for decades; but we are getting to the point where angels themselves couldn't straighten out our state budget, given the complexities of initiatives directing spending. Vote NO.

San Diego Ballot Measures

Proposition A - Project Labor Agreements Can Not be Mandatory - Yes

This explanation from the LOWV site is simple.
The ballot measure states that except as required by State or federal contracting or procurement obligation, or as a condition of the receipt of State or federal funds, the City shall not require a contractor on a construction project to participate in a Project Labor Agreement (PLA) as a contract condition.
It prevents the city from imposing a PLA condition in order to win a contract. Why this is controversial is beyond me. The bidding contractors for city work should be able to bid based on their knowledge of their own costs, without having to worry that the city will side with unions and impose additional costs on projects. Richard Rider has signed on to the ballot argument for the proposition, always a big endorsement in my view. Vote YES.

Proposition B - San Diego Employee Pension Reform - Yes

There has been a huge discussion of the details of this proposition, so I only want to make a few simple points of my own. First, even the proposition's opponents concede it will save the city and therefore the taxpayers, money. Their claim is that the savings don't come from the change to a defined contribution system. So what? This is a package deal that saves money.

Second, is a philosophical matter. Who should be responsible for the management of pensions, the employee or employer. I think our experience over the last two decades has answered the question. The employees must be in charge of their own retirement planning, because neither unions, nor businesses, nor government can be counted upon to keep their best interests first and foremost. This is how we got into this mess, unions cut deals with politicians that couldn't be kept and we ended up with a disaster. Defined benefits require pay as you go accounting, which makes the costs of pensions more transparent.

Finally, there is the question of risk. Defined benefit pensions puts the risk for future benefits on the taxpayers. If the market tanks, or politicians are corrupt or some catastrophe strikes, it puts the taxpayers at risk. I don't want the risk, I have enough of my own. Why should taxpayers, who are mostly relying on 401(k)s for their own retirement, and shouldering their own retirement risk, also should the retirement risk of employees? They shouldn't.

Vote YES.

Friday, May 11, 2012

Weekend Music Chill

This weekend's music is a request from long time commenter and reader Road Dawg. I really like Celtic and Irish music, and Blackmore's Night provides a nice update on that sound. First, Trapped in a Crystal Ball.

Second, one of my favorite Christmas carols, Emmanuel.

BTW, I don't normally entertain requests, not that there have been any, but 'Dawg is family.

Obama is Trailing in the Polls - MSM Ignores

This is not making headlines, natch, but Obama is consistently behind in polls of likely voters. However, news reporting to date mixes the results from both polls of registered voters and likely voters, obscuring the true situation. However, polls of registered voters are notoriously inaccurate. We experienced this locally in 2010 when the U-T called Proposition D too close to call, but I was confident it would be defeated based on the distinction between registered or likely voters.

Here is what Rasmussen is showing. Note the trend line.

On RealClearPolitics, they keep an average "poll of polls." But it is skewed by the RV (registered voter) results. Here is today's posting.

If you look at the RCP web site, every poll of likely voters for the last month has Romney ahead of or tied with Obama. It is very, very early in the campaign and much can happen. But I have heard a lot of discouragement from people I know who think that Obama will lie and cheat his way to victory. Certainly his party will try, but I think there is room for optimism, not just for a victory, but a significant one. This is an important turning point for America to reverse course on nationalized health care and stop the madness of huge deficits.

Thursday, May 10, 2012

Walker Leads in Wisconsin Poll

I feel confident that Scott Walker will win his recall rematch with Milwaukee mayor Tom Barrett. Rasmussen is reporting that Walker currently holds a 5% lead 50-45 over Democrat Barrett. But not so confident that I won't donate again to his campaign. The reason that he will win is that the benefits of his reforms are starting to be felt in the local budgets throughout the state. Although the following quote is a quibble over the exact amount of the savings, consider this article from the Sheboygan Press:
The budget-repair law passed last spring and required most public workers to contribute 5.8 percent toward their state pensions and 12.6 percent toward health care premiums and stripped them of nearly all union rights — a move that triggered the current recall effort against Walker.
. . .
Sheboygan County reported saving about $1.6 million in its 2012 budget as a result of benefit concessions required under Walker's bill, compared to the $2.1 million that Endsley and the Walker administration both claimed.
Walker is claiming $1 billion in savings throughout the state, but even if that is exaggerated, there is no denying that he has changed the dynamic of local budgets. As teacher layoffs are avoided and local budgets get some breathing room, the public is going to reward Walker with the continuation of his term.

At the LA Times, Democrat and educator, Jonathon Zimmerman argues against the recall on process grounds.

As a liberal, I'm troubled by the prospect of voters unseating an elected official over taxes. Or abortion. Or gun control. If you can recall leaders for any political reason, sooner or later your own ox will be gored.

I'm also worried that the Wisconsin recall, which has drawn nationwide attention and money, will trigger a vicious cycle of partisan retribution. Your guy didn't win in November? No problem. Start a recall drive now.

Most of all, though, I fear that the recall threat will make our elected officials even more timid and poll-tested than they already are.
I supported the recall of Gray Davis in 2002, so I don't have any right to complain about this recall on moral grounds. I do complain that unions are able to extract money from taxpayer funded paychecks nationwide, to fund this recall effort.


This graphic illustrates why Scott Walker's victory is so important. It breaks this cycle:

Wednesday, May 9, 2012

Obama Changes the Subject - UPDATE

Obama's poll driven announcement on gay marriage today was a distraction from his real failures to do anything meaningful to improve the economy. His combination of cronyism and neglect of the economy are nicely summarized in this ad from Americans for Prosperity:


My son pointed me to this picture.

This is an example of an internet meme involving the slowest Pokémon, Slowpoke; pictured with Obama's face, in this case. Courtesy of the Pokémeme website.

Tuesday, May 8, 2012

Slow Motion Greek Tragedy

The slow and painful exit of Greece from the euro continued. I would actually applaud the move, because there was never any way they could remain in the currency union, except for the manner of his exit. Syriza (a left wing party that had a surprisingly strong second place finish) has failed to form a coalition of left wing parties. This probably means a new round of elections in June. Syriza's leader, Alexis Tsipras, has called for abrogation of austerity measures that were pledged as part of the bailout package from the Germans and ECB. This will effectively lead to the Greek exit from the euro, although he denies it. Tsipras has called for nationalizing the banks, restoring pay and pensions that were cut and all the usual leftist clap trap. If they leave the euro and inflate the currency, they can have their cake and eat it too, because they will in effect cut wages and pensions. From the Irish Times:

“The bailout parties no longer have a majority in parliament to vote for measures that plunder the country. There will be no €11 billion of additional austerity measures; 150,000 jobs will not be cut,” he said, adding he was only prepared to work with New Democracy and Pasok in government if their leaders sent a letter to Brussels reneging on their written support for the bailout programme.

Syriza came a surprise second in Sunday’s election, garnering 16.8 per cent of the vote and landing 52 seats in the 300-member parliament. New Democracy took an 18.5 per cent share but 108 seats, thanks to a 50-seat bonus awarded to the first party. In third place was Pasok, on 13.2 per cent, which took 41 seats.

Under the Greek system, the party with the most votes gets a bonus of 50 seats in parliament. This has probably denied the left wing parties a chance to form a coalition, because the more right wing party New Democracy, was the leading vote getter.

I doubt that the Greeks could ever comply with the "austerity" measures. It's not well understood that the Greeks have increased their taxes massively as part of the bid to reduce deficits. Nothing has really helped them out of their difficulties.

H/T National Review's Veronique DeRugy, from Matt Mitchell:
Lots and lots of papers* have now studied this question and the evidence is rather clear: the types of austerity that are most-likely to a) cut the debt and b) not kill the economy are those that are heavily weighted toward spending reductions and not tax increases. I am aware of not one study that found the opposite.
DeRugy points out that the asterisk refers to 21 peer reviewed papers. So it matters that the left is seeking to reverse the spending cuts but not the tax increases in Greece. In my view, the Greeks would be best off leaving the euro zone, reforming their tax code, through massive simplification, getting the government out of important industries, and imposing the spending cuts by inflating the currency. Their current situation is hopeless and even more socialism will just be the death knell for their society. It will be interesting to see how this plays out, because the right of center party remains committed to the euro and the left remains committed to fantasy football.

Good News from Indiana

Readers of this blog probably already know that Richard Mourdock defeated Richard Lugar in today's Indiana Republican Senate primary. He is number four on my list of people to support to make a difference this election cycle.

One thing to remember is that this strategy of electing more conservative Republicans in conservative states can backfire if we have misjudged the appetite of the state. In the 2010 election cycle, Christine O'Donnell turned out to be a bad candidate, but I also believe that the Delaware was too liberal of a state for someone with her positions to win. Left Coast Rebel pointed out a theory originating from famed political analyst Nate Silver, that Republicans should look to elect more conservative politicians in more conservative states. In "redder" states, these Republicans should "pull their weight," by being more conservative. Silver put together the following graphic by way of explanation.

While Lugar shows up as particularly less conservative than Indiana politics might allow for, we need to support Mourdock in the general election to ensure to move the party in the right direction.

Monday, May 7, 2012

Diversity Bullies

CDR Salamander has a post each Thursday on the latest antics of the diversity bullies, mostly as it relates to their beachhead in the Naval service. His latest post is of the antics of Elizabeth Warren, candidate for Senate, who seems to have claimed 1/32nd Native American blood to advance her career at Harvard. Maybe she didn't, but she hasn't offered any evidence that her claim is true. I mostly avoid issues of race on this blog; they divert from my main points. But, the diversity bullies are part of a culture that hates liberty and achievement based on merit. Occasionally, they must be slapped down, and this case offers the chance. Why those who are the seeming beneficiaries race-based affirmative action would support those policies is a mystery to me. From the WSJ:
Ms. Warren has insisted that she was hired based on merit alone, and the controversy highlights one of the seldom-discussed side-effects of affirmative action policies, which is that they taint the achievements of intended beneficiaries. Liberal supporters of affirmative action like to pretend that there is no shame in being hired to meet a racial or ethnic quota and not for your job skills alone, or in being admitted to a college with SAT scores well below those of your white and Asian peers. But the reality is that nobody who has any pride wants to be that "diversity" hire in the office or that token minority on campus, especially if it allows others to dismiss your success as having resulted from a tilted playing field.
Lest you think that the U.S. military is immune from these shenanigans consider this, from the good Commander:
We have a Flag Officer who tells rooms full of officers that they need to claim any Diversity label they can in order to improve their careers - like he did.
Or this:
A new DoN Diversity Office will be established, with the Assistant Secretary of the Navy (Manpower and Reserve Affairs) serving as the DoN's diversity officer. The Diversity Office will leverage, coordinate and formalize ongoing efforts within the Navy and Marine Corps and will include the heads of the Navy Office of Diversity and Inclusion, Marine Corps Office of Equal Opportunity and Diversity Management and the DoN Office of Civilian Diversity as team members.
Your tax dollars at work, ensuring balkanization of the U.S. military. If you need to get your blood pressure up for a heavy work out, read CDR Salamander's Thursday posts.

Saturday, May 5, 2012

Ron Paul in San Diego - UPDATE

W.C. Varones and Left Coast Rebel attended the Ron Paul event held yesterday at UCSD. W.C. has a great post on the event. Left Coast Rebel is promising one. From W.C. Varones' blog:

He hit on all the topics you'd expect - the war on drugs, the debt and deficit, central planning, the TSA, big government destroying the economy, the Dirty Fed, global imperialism, etc. And of course the solution to all of this: restore the Constitution,

Here is some video from the event.

The U-T managed to get out a decent report of the event as well. Focusing on the local angle where a UCSD student was left in a DEA holding cell for five days without food or water.
"We know about the case of Daniel, one of the students here, of being arrested and thrown in a prison and forgotten — for five days — ending up in an intensive-care unit," Paul said to loud boos. "And then it's done in the name of being a compassionate conservative. That's not compassion at all."

Even though I am supporting Romney for President, I am much more in tune with the proposed policies of Ron Paul. He is a great American who has been fighting for liberty for quite a long time.


As promised, Left Coast Rebel also has a report on Dr. Paul's visit.

  • Ron Paul is a rock star. He's pushing 80 and he's clearly a rock star.
  • Paul's speech was strictly off-the-cuff. He didn't read from a teleprompter nor did he even have notes that he worked from (that I could see). Instead, he started with an idea or topic and his speech flowed from there. His speaking style is a bit rough (jumping to different topics quickly, etc. but it's fascinating to see how authentic his oratory chops are -- very inspirational).
  • When was the last time ANY Republican motivated young people so? And that's the essence of who Ron Paul his. He animates and motivates the youth in a positive way, a positive message that echoes America's Founders; ideas that are timeless yet shockingly forgotten today. I got the feeling that many of the young people in attendance didn't know what to expect and, for the first time, heard the message of LIBERTY.
Read the whole post with many more pictures like this at Left Coast Rebel.

Friday, May 4, 2012

Labor Participation Rate Hits Historic Low

Not since 1981 has the national labor participation rate been this low. Tyler Durden at ZeroHedge put up this graph:

Despite a few upticks, there has been a steady plummeting of the labor participation rate, to a 30 year low of 64.3%. The Obama administration has done nothing to reverse this trend. This is the key indicator of economic health, because this indicates the number of people working in the economy. No matter how the Administration spins it, they are failing to provide jobs for Americans. The number of people not working is at an all time record high as well. I don't think the economy will turn around until Obama is no longer the President. His administration presents too much of a risk of uncertainty to business. Have overseas profits? Don't repatriate with high marginal tax rates. Want to hire more workers? Will you get a nasty surprise that your health plan doesn't qualify or maybe there is a minimum wage hike around the corner. In a politically incorrect industry, like oil or gas exploration? Are you up for regulatory crucifixion?

The list goes on, but the uncertainty of future hostility and regulatory change are the main reasons we claim that the administration is engaging in a #WarOnJobs.


Even DailyKos is publishing this graph and bemoaning the jobs picture. Will wonders never cease?

Weekend Music Chill

It's been a long emotional week in my personal life. Sometimes I like to get on the karaoke to relieve the stress. Unfortunately, I have limited range. Here are two of the very few songs I am competent to sing.

and just to have one cover:

I previously posted two others I can handle.

Thursday, May 3, 2012

Anti-Boycott Boycott?

Michelle Malkin, the most prolific tweeter whom I follow, has been a leading proponent of boycotting businesses who succumb to lefty boycott threats and abandon support for conservative causes like ALEC or Rush Limbaugh. Bradley Smith, in today's WSJ, argues that we are all the worse for the secondary boycott, because it frays civil society.
All these examples are what are called "secondary boycotts"—attempts to influence the actions of the target by exerting pressure on a third party. Secondary boycotts should not be confused with primary boycotts. A decision not to patronize a business that discriminates on the basis of race is an example of a primary boycott. Primary boycotts—used to great effect during the Civil Rights Movement—have a long and often laudatory history.

But secondary boycotts have long been recognized as harmful to civil society. They rend the social fabric by making it difficult for people to simply live their lives.
. . .
People have a right not to do business with companies or individuals. But blacklists—never a healthy part of political debate—endanger the very commerce that enriches us all.
I admit that I participated by pulling the renewal of my Carbonite subscription. Smith's reasoning has me wondering if direct retaliation is the best way to fight back. Consider the climate. Businesses are often cautious, having the broadest possible base to sell your wares is just good business. If boycotts become routine, then potential advertisers might conclude its best to avoid all politically charged broadcasting. The nation is the poorer for having fewer points of view on display, left or right. Secondary boycotts in retaliation by conservatives only increases the wariness of advertisers, because they get in a lose-lose situation.

What's the other option? I think a buycott and similar action improves the climate. A buycott would be buying extra from the business that is being targeted by the left. This would help them weather the temporary storm of lost sales. And the storm is almost always temporary. Look at Rush Limbaugh, he doesn't appear to be suffering, and isn't allowing some of his fickle advertisers back on his show. Buycotting maintains civil society, because it encourages businesses to have fewer worries about the potential boycott. When Whole Foods CEO John Mackey proposed free market alternatives to Obmacare in 2009, there were sporadic attempts to boycott Whole Foods that went nowhere. Tea party types organized a buycott and we had great fun. Given our generally more cheerful nature than the left, buycotts are more appropriate to conservatives and libertarians.

B-Daddy in 2009 at the Whole Foods Buycott, having fun buying good food.

Wednesday, May 2, 2012

Sometimes it's the Little Things

With long term unemployment at high and unabated levels, with Obamacare an unaffordable assault on both our well being and our liberty, of course Obama doesn't deserve to be re-elected. But sometimes its just the little things. . .

GM still owes the Treasury $27 billion. That sounds like a big thing, but when you're running up debt at the pace of $1.5 trillion per year, give or take, it seems small.

Barack Obama appears to have been untruthful about his New York "girlfriend" in Dreams of My Father.

Forward, the new slogan of the Obama campaign is a long time slogan of European Marxists. The slogan was released just in time for May Day and Occupy protests. Coincidence? I think not.

Obama at one time railed against the use of the war on terrorism for political gain and "spiking the football." What the heck is he doing now?