Miscellany: 1/31/12

Quote of the Day 

Nature does not bestow virtue; to be good is an art.
Seneca

Blog Update

January pageviews increased once again month over month and were the strongest since last January (a negligible decrease year-over-year).

ROMNEY WINS FLORIDA!

With about 99% of the precincts reporting, Romney won the Florida primary going away, nearly capturing a clean majority at 46.4%-31.9% over Newt Gingrich. In fact, Romney beat Gingrich and third-place Santorum combined. I want to point out 4 different polls predicted the margin of victory--except the Insider Advantage and PPP polls which reduced the Romney advantage by half. (I previously commented that I distrusted these two pollsters.)

It's very difficult for Gingrich to put a positive spin on this: it's the second straight purple-state primary Romney has won going away. Gingrich will point out that he was outspent, but most voters indicated that they were influenced by two things: debates and electability. In the meanwhile Gingrich's lead in the GOP tracking poll had shrunk to the bare minimum, and I suspect the Florida win put catapult Romney back into the lead. The Nevada caucuses this weekend should also go to Romney (like it did in 2008). My guess is Gingrich's or Santorum's best chance will be Missouri and Ohio next week. The polls I see there from RCP indicate a tight race with Gingrich narrowly in the lead, but these are battleground states like Florida, the Romney campaign has more money and is better organized, and the available polls are sparse, outdated and come from questionable pollsters.

I think what we'll start seeing over the next week or two is more of a bandwagon effect towards Romney. The Romney campaign I think miscalculated in South Carolina, underestimating Gingrich's ability to rebound after bad finishes in Iowa and New Hampshire. But there's no place for Gingrich to hide, as Santorum and Paul continue to fade. It's possible that we'll see nobody drop out at least until Super Tuesday in early March--and possibly not even then. Why? Huckabee in 2008 refused to concede until McCain won an absolute majority of delegates, and many of the early states this year got dinged in terms of delegates. You never can tell in politics; Gabby Giffords' tragedy and Sen. Mark Kirk's (R-IL) recent unlikely stroke reinforce that.

I"m pleased to see Sarah Palin's and Herman Cain's enthusiastic support for Gingrich went nowhere.

Late Note: I have not been watching live network coverage, but there are stories that Gingrich said in his concession speech that he will not run "Republican campaign but a people's campaign". Even the bare hint that Gingrich would go rogue would be political suicide. If there is a legitimate third-party candidate, it's Ron Paul, not  Newt Gingrich. Very bizarre development and it should be interesting to see if he walks that back--or can walk that back. If I'm heading the Romney campaign, I think Romney has just clinched the nomination: I've got that tape going to every local, state, and national GOP executive in the country, it's showing up in my ads, etc.

Anybody But Newt

[NOTE: Most of this commentary was written before tonight's primary win for Romney and late developments.]

With all due respect, I'm done with the strident partisans stubbornly determined, at any cost, to engage in a suicide mission this fall against Obama.  Let me start by saying first of all, from a policy standpoint, I'm closer to Ron Paul than any of the other candidates. More recently, I decided to take an editorial position from the blog to endorse Mitt Romney. This was based on two fundamental, indisputable facts: (1) Mitt Romney is the most electable candidate, over dozens of pairwise polls: he's not a career politician and is an obvious candidate whom can run against Washington; he won a statewide election in the bluest of states, Massachusetts, and he is very competitive against Obama in the battleground states; (2) Mitt Romney is the most qualified person to serve as President (among announced candidates) from either party. Let me be clear: he does understand business and the economy from a first-hand perspective. He has solid executive experience from both the private and public sectors. He has proven ability to reach across the aisle, even with a Democratic-dominated legislature.

Over the past year the so-called "Establishment choice" Romney has seen one train wreck after the other rise and fall as the designated  "non-Romney" candidate: Michele Bachmann, Rick Perry, Herman Cain, and Newt Gingrich.  I get an email inbox full of strident anti-Romney ads, news items, and columns from popular conservative media outlets like Human Events, Newsmax, and Worth Reading. (Can you say 'unsubscribe'?) This is the same man with the same views and credentials that 4 years ago prominent media conservatives like Rush Limbaugh and Mark Levin were essentially backing in an all-out attempt to deny "RINO" John McCain the nomination.  He's not a professional politician: he ran twice before the 2008 GOP nomination race: 1994 as Senate candidate and 2002 as gubernatorial candidate. He was an inexperienced political candidate trying to win statewide election in a very liberal state; did he make mistakes in his campaigns and say things he now wished he could take back? Probably, but he was trying not to let his very liberal opponents define him as a right-wing ideologue in a state that doesn't elect right-wing ideologues. It's almost like the media conservatives would rather not run a Republican at all if he or she doesn't pass their litmus test. By any account, Romney's views are at least as conservative (if not more) now as they were back in 2008.

Some people might think that having maintained the same conservative views for 6 or more years: what's the litmus test?  Unlike Romney, Governor Reagan signed a bill liberalizing abortion in California; Governor Reagan agreed to a tax hike to balance the budget. President Reagan  agreed to tax increases, including social security; he ran huge budget deficits; he signed an immigration law most conservatives today despise. Conservative after conservatives claims to be a Reagan Republican. What did Romney do? He basically stopped an attempt by majority Democrats to implement a variation of HillaryCare by using elements of the same approach Congressional Republicans used in 1993-1994 (including, yes, Gingrich's support). And yet Gingrich is considered the "real" conservative in this race? To reprise a John Kerry-like message, Gingrich was for Freddie Mac before he was against Freddie Mac (but only after he cashed in some $1.6M  in fees through early 2008 while consulting for Freddie Mac's chief lobbyist)? I mean, give me a break.

Let me be blunt here: Newt Gingrich is a jerk, and the American people do not knowingly elect jerks to be their President. The name-calling, the constantly disrespectful tone: using, for instance, the term "Massachusetts liberal" is knowingly false and unnecessary. Romney was facing a nearly 90% Democratic legislature in Massachusetts; he vetoed lots of items, including in the famous RomneyCare legislation--for example, he wanted an exception to the mandate for people whom could post notice of financial responsibility for their medical debts. Newt's own think tank backed RomneyCare, as did the Heritage Foundation, a conservative organization. It's not just that, but Newt has engaged in the pettiest type of sniping talking about a vote Romney cast for a Massachusetts Democrat before he ever became a GOP candidate. Give me a break: how many Republicans rejected Reagan because he remained a Democrat until just a few years before becoming governor? I mean, is this Presidential material? Gingrich lost his temper because a Romney PAC ran ads pointing out he took money from Freddie Mac, he was rebuked by the House while serving as Speaker, etc.: big news for Gingrich: these are legitimate issues. He may not like the negative spin, but let's face it: if Sarah Palin had run, she would be facing issues over Troopergate and her resignation as governor. Romney has never backed away from his health care reform in Massachusetts, and he's acknowledged that it's been an issue.

But to take another example: there was the revelation that Gingrich had allegedly asked his second wife for an open marriage. I mean, it's just as legitimate an issue as it was in discussing the Ensign and Vitter affairs, the resignations of Foley and Chris Lee. I thought it was in Gingrich's interests to handle the relevant question respectfully and honestly. Attacking the messenger is wildly inappropriate; it's not Presidential.

This leads to another assertion made by pro-Gingrich forces: Gingrich was the "best" debater to take on Obama this fall. I definitely don't agree with this; I have a good idea of how to beat Obama (but I don't believe in revealing my hand if I'm playing a game of poker).  I will say that an erratic/undisciplined, predictable performance and a disrespectful tone plays right into Obama's hand. Obama is personally likable, but I guarantee he's going to play the part of the incumbent for all its worth and play prevent defense or rope-a-dope. He doesn't even have to land a punch on the GOP challenger; if he can simply goad the challenger into intemperate behavior, it almost doesn't matter what they're talking about. I will simply hint here that the first step is to put Obama on the defensive by using his own unfulfilled promises and words against him, his failure to back his own bipartisan debt reduction committee findings, his power grabs without Congressional authority (e.g., the Libya operation or the Gulf moratorium issue), and his legislative priorities in a tough economy (e.g., climate change, no movement on business taxes, etc). I would avoid being predictable and I would try to use the element of surprise in challenging him so he can't resort to rehearsed soundbites.

I myself have used judgmental terms in discussing Obama--for example, I think his performance has been mediocre, he has a narcissistic personality, and he's in over his head. But it's not personal--it's about policy and performance, and I think he really blew it as a politician: he was being penny-wise, pound-foolish. He decided to ram partisan legislation down the GOP's throat, which killed any chance of legitimate bipartisanship.

Gingrich has found few, if any of the Congressmen to serve with him to publicly endorse him; the vast majority joined Democrats in 1997 in rebuking  him on ethics charges on a floor vote, unprecedented in American history. Gingrich constantly whines, has varied from conservative orthodoxy on at least as many grounds (and let's not forget--working for a government-sponsored entity is not something any Tea Party conservative would even consider) as Romney (despite not having to run in a blue state like Romney had to), bullies debate moderators and his opponents, and has used Democratic-like class warfare arguments against Romney's candidacy.

Finally, let's look a little bit at Gingrich's support. Sarah Palin has twice unofficially endorsed Gingrich in races in South Carolina and Florida. I'm not making this up: one pop conservative media outlet has actually condemned Fox News for reportedly cutting short a Palin interview on one of the weekend shows (I think she was once again pushing Gingrich's candidacy). Now does anybody else reading this commentary remember what happened to former Governor Pawlenty? Reportedly after he withdrew from the race, he tried to get a gig with Fox News Channel, and Ailes refused, pointing out that Pawlenty had recently endorsed Romney. Now Palin knows all this (or at least Ailes has probably told her in private), and so she can't pick sides officially--so instead she's playing fast and loose with the rules by endorsing in individual races.

[I realize the fact I've endorsed Romney may lead some to question my objectivity here, but I'm a commentator, but a reporter or contributor working for Fox News trying to work around the rules.  I'm far more objective that any commentator I know, even though I have done an endorsement of Romney's candidacy. I have criticized some of Romney's views and performances.]

Parsing Obama's 2012 SOTU Address: Part III

In the last 22 months, businesses have created more than three million jobs. Last year, they created the most jobs since 2005. American manufacturers are hiring again, creating jobs for the first time since the late 1990s. Together, we've agreed to cut the deficit by more than $2 trillion. And we've put in place new rules to hold Wall Street accountable, so a crisis like that never happens again.

Obama's speeches should be called "Weapons of Mass Distortion"....  Where do we start? Obama is knowingly stating things in ways that play on people's mistaken economic assumptions. In Obama terms, this is "putting lipstick on a pig: it's still a pig".

Neo-Keynesian delusional thinking is alive and well in the White House. They want you to think that everyone wins when you play Government Monopoly. Well, the odds are stacked in favor of the House: when you pass GO, you pay the federal bureaucrats $200. The only REAL winners in this rigged game are the toll-collectors (i.e., the IRS).

Now without going back to your history books (no fair peeking!), suppose I told you that by 1944 unemployment had plunged from pre-war nearly 20% to 1.2%;  nearly half of the economy was aimed at WWII, deficits and the cumulative national debt exploded past the size of our economy, and we had 12 million men in the military, nearly a fifth of our labor force.

I mean, FDR threw money and  regulations at the economy during the New Deal, and to his great surprise, the economy remained in a stubborn funk (revisionists will no doubt say he didn't throw ENOUGH money and regulations at the problem...) It was like FDR was lobbing one dodge ball after another at the heads of business owners and couldn't figure out why they didn't have time to grow their businesses and employ more people. His deficit spending was crowding out investment in the private sector, and all the new demands he was throwing at businesses was changing the ground under their feet: who knew what this guy was going to do next? I have used this analogy before: when you start a small campfire (yes, I was once a Boy Scout), you have to coax it to full strength: you don't snuff out the fragile flame under the weight of 2000-page laws! Or, using a different analogy, if you want a 98-pound weakling to scale a mountain for the first time, you don't strap a 45-pound backpack on him.

Yes, I'm referring here to the unconscionable 111th Congress and President Obama. Apparently they didn't take Newt Gingrich's history course on the Great Depression or remember George Santayana's famous quote "Those who cannot remember the past are condemned to repeat it." Take Dodd N. Frankenstein (regular readers will recognize my coined term for so-called "financial reform") and other counterproductive government interventions under the Obama Administration: the private sector was more than willing to find a natural bottom in the real estate cycle (as it always had), but we had an activist government changing the ground under their feet. This was all pushing on a string: the last thing banks were interested in doing was further putting their capital at risk by approving high-risk mortgage applicants under the falling knife of home prices. This was all about filling a long-pending item on the progressive wish list while they briefly held the trifecta of the House, Senate and White House, regardless of the state of the economy. They put ideology ahead of their country.

FDR had found the one sure weapon to get us out of the Depression: draft all the unemployed men in the country and finance a global war, putting it on the national credit card! [Yes, readers, I'm being sarcastic...] So what happens when, all of a sudden, you end up dropping defense expenditures by more than half and let over 10M men come home and out of the service? We are taking all of thus "stimulus" out of the economy. You can all but hear Paul Krugman running around screaming, "The sky is falling!" No doubt some Keynesian economists were suggesting that we "invest" in other hotspots around the globe... [Yes, sarcasm again...] Taylor and Vedder have an interesting post discussing what happened--and "austerity" didn't "cause" massive unemployment.

Obama is wrong to focus on manufacturing for a variety of reasons. The manufacturing sector is not more equal than the service sector;  workers may shift from one sector to the others. First, job losses often inevitably result from improvements in technology and increased productivity. Second, many job losses in the manufacturing sector move towards the service sector.

We've heard this sort of fear before, e.g., when we transitioned from a primarily agrarian economy. Progressives refuse to believe in Adam Smith's "invisible hand". In the 1970's nobody would have ever conceived that that people would be willingly giving up their wired phone services for multi-functional devices you could wear in a shirt pocket, nearsightedness could be permanently cured in a matter of seconds, there would be professions like webmasters, or you could send a message anywhere in the world almost instantaneously, or shop for almost anything or pay a bill in mere seconds, without a trip to the bank or buying a stamp.

(But progressives would have you know that federal bureaucrats running under defined benefit pension systems that the private sector ditched 3 decades ago as unsustainable would have done all of these things and many other even more wonderful things faster, better, and cheaper.... The secret is in the red tape bureaucrats use...)

Money is fungible; if farmers are more productive and food products are high-quality, only cheaper, we'll spend and invest elsewhere in our economy.

As for "financial reform", we have had a ludicrous ideologically-driven, pushing-on-a-string legislation which used the economic tsunami as a transparent excuse. Many, if not most of the problems during the economic tsunami can be traced to problematic public policy (including the GSE's use of an implicit taxpayer-backed guarantee, government subsidies and policies pushing home ownership (particularly for certain high-risk interest groups), incompetent and uncoordinated regulation, etc. There was no attempt to fix existing government policies, to lessen or eliminating the unsustainable subsidies, guarantees, cronyism, government-sanctioned or sponsored entities, uncoordinated, unaccountable regulatory schemes and failures in regulatory performance, etc. Of course, the Democrats weren't about to admit that government was part of the problem, not the solution. Their response was NOT to lower the taxpayer exposure to corruptible guarantees, subsidies, and the like but to expand the self-preserving federal bureaucracy and mandate. As if a government which has accumulated a $15T debt has any moral authority to lecture those in the private sector!

My position on the banks and AIG is clear:  if you take on undue risk and fail, goodbye. If there is a legitimate market need for your goods and services, the private sector will find a way to address it. The same thing with the auto industry.  Obama's laughable assertion that his corrupt managed bankruptcy "saved" the auto industry is certainly audacious but lacks any serious credibility. Companies with more sustainable cost structures emerge from bankruptcy all the time--the only thing that Obama did was to ensure that the interests of unions, whose unsustainable contracts were the principal contributing factor behind the two automakers' failures, were protected.

In any event, let me quote Kling's reflection on "financial reform", which is spot on:

• No exit strategy from government support for subsidized, lenient mortgage credit. No curbs on Freddie and Fannie, whose market share has skyrocketed in the past year and a half. No increase in down payment requirements for FHA, which is in deep doo-doo.
• No change to the role of credit rating agencies
• Nothing to address the issue of "cognitive capture." The regulators will still get their analysis of the financial sector from the CEO's of the largest banks.
• A pushing-on-a-string consumer financial protection agency.

Finally, the deficit reductions Obama is referring to consist of savings OVER A DECADE, not absolute cuts to current programs. A lot of them come from cuts in (below-cost) reimbursements or playing games with planned budget increases.

Political Humor

"Newt Gingrich has been attacking Mitt Romney for being wealthy and having money in bank accounts in the Cayman Islands. See, that's when you know you're part of the top 1 percent, when your bank's address has the word “island” in it." - Jay Leno

[Newt knows because he met Mitt also filling out a deposit slip during the Cayman Islands cruise he took after his Greek cruise. Mitt thought that Callista's new Tiffany's earrings looked very nice...


When asked by the debate moderator for a response, Romney said, "To the moon, Alice Newt!"]

"Sarah Palin has also been supportive of Gingrich but she hasn't made an official endorsement yet. Her husband endorsed Gingrich but he's a snowmobiler, so nobody cares." - Jimmy Kimmel

[Well, after all, Newt Gingrich has been snowing conservatives for years.... He makes Todd and Sarah feel right at home.]

"Newt Gingrich picked up an endorsement from Herman Cain. It's not unlike getting Carrot Top's endorsement for an Academy Award." - Jimmy Kimmel

[You see, I knew there was a downside to all those late nights between Clinton and Gingrich, talking about those fetching ladies they met on the job, just like Cain...]

Musical Interlude: My Favorite Groups

Queen, "Crazy Little Thing Called Love". Freddie Mercury does retro rock: need I say more? Brilliant...

Miscellany: 1/30/12

Quote of the Day

Seek respect mainly from thyself, for it comes first from within.
Steven H. Coogler

Alexander T. Tabarrok, 
"The Innovation Nation vs. the Warfare-Welfare State":
Thumbs UP!

My Saturday post has attracted some pageviews, which I attribute to a commentary I wrote in a discussion of inventors and innovation. Even though I didn't specifically rant about the effect of government regulation on innovation, it was clear from context:

"I think one of the more interesting points discussed was when DoD went to Kamen to ask about development of an artificial limb; he mentions how he expected a thick specification document, not to mention years of going through FDA approval...A simple Google search reveals references to Kamen's rants about FDA red tape...Most young people at one time or another question authority and/or bureaucracy, and I think that the relevant frame of mind is more likely to come from a libertarian than a communitarian standpoint."

Remember DARPA, the agency that recruited Kamen and a principal founder of what would emerge to be the Internet? (One of the classic papers in the history of human factors (and which I used to cite while in academia)  is a 1960 paper from JCR Licklider: "Man-Computer Symbiosis" which says in section 5.1: "It seems reasonable to envision, for a time 10 or 15 years hence, a "thinking center" that will incorporate the functions of present-day libraries together with anticipated advances in information storage and retrieval and the symbiotic functions suggested earlier in this paper. The picture readily enlarges itself into a network of such centers, connected to one another by wide-band communication lines and to individual users by leased-wire services." DARPA recruited Licklider in 1962 with a mandate to interconnect major DoD centers. I know...you thought I was going to say Al Gore...) DARPA gets $3B from a budget exceeding $3.5T. In fact, as Tabarrok points out, "Even when we lump all federal R&D spending together regardless of quality it amounts to just $150 billion, a mere 4 percent of the budget: National Institutes of Health, which funds medical research, spends $31 billion annually, and the National Science Foundation spends just $7 billion."

Tabarrock's post is worthy, but one item particularly intrigued me as exactly the kind of thinking we don't see from the Obama Administration, which has been more than willing to throw money at boutique energy alternatives, like solar energy, versus proven technologies and solutions:

The U.S. Department of Energy, for example, estimates that small and environmentally friendly hydro-electric projects could generate at least 30,000 MWs of power annually. That’s equivalent to the generating capacity of about 30 nuclear power plants. Moreover, since 97% of U.S. dams are generating zero power today, these projects would not require building any new dams. So what’s the problem? The problem is that building even a small hydro-electric project requires the approval of numerous agencies, including the Federal Energy Regulatory Commission, the U.S. Fish and Wildlife Service, the Army Corps of Engineers, State Environmental Departments and State Historic Preservation Departments. It’s simply too expensive, time-consuming and risky to build these projects when any of these agencies could veto it at any time.

No wonder Newt Gingrich wants to go to the moon... It's the only place left not covered with Obama Administration red tape... You know, now that we've licked that problem of getting computers to network with each other, perhaps Obama could have DARPA figure out protocols to govern turf battles interconnections among government regulators. (I can just see it now: Obama will appoint Al Gore to be father of the Reg-net.)

Get Well Soon, Bella Santorum!

Let me start out by saying I don't support Rick Santorum's bid for the White House (but it goes without saying that I prefer Santorum to Gingrich, and Santorum is an easy choice over Barack Obama). Issues I have with all 3 men in common have to do with their polarizing rhetoric and lack of executive experience. Obviously Obama is currently getting on-the-job experience, and his inexperience shows in his mediocre performance and record.

Before going on to Bella, I briefly wanted to reprise a dated story about media progressive Alan Colmes. (I should note, in fairness, Colmes apologized to Santorum for unconscionable comments relating to Rick's prematurely born late son Gabriel.) [Please note that the embedded videos below are available at the time of the post and may become unavailable in the future.]

In my book collection, I have owned, for years, a copy of Karen Santorum's moving book, Letters to Gabriel, Here is a shorter discussion of Rick and Karen's son Gabriel. Let me quote Karen's words:

For several years I worked as a registered nurse and dealt with many painful situations. I never dreamed one day I would have to face the silent birth of a child of my own.... The 20 week old baby in my womb was diagnosed with a defect that is always fatal without surgery. Through our immense heartache came the most basic of parental emotions: We had to save our child. After many tests it was determined our son was eligible for the operation that could save his life. It was a success, but an infection developed in the amniotic sac, and I was rushed to the hospital with a high fever, having contractions. I begged the doctors to stop my labor, but they said it would be malpractice, for I would surely die since these infections are untreatable.

Gabriel Michael Santorum was born at 12:45 AM on Friday, October 11, 1996. He was a beautiful boy. He did not give a cry or open his tiny eyes. We baptized him, bundled him, and held him ever so close. We sang to him, held his little hands and kissed him. Gabriel lived for two hours. In those two hours something simple but profound happened. Rick and I became parents to a newborn baby and welcomed him into our family. That was all....but it was everything. His life was so brief, yet his impact so great. In two hours we experienced a lifetime of emotions. Love, sorrow, regret, joy----all were packed into that brief span. To have rejected that experience would have been to reject life itself.

According to Michelle Bauman:

On a Fox News segment on Jan. 2, political commentator Alan Colmes criticized Santorum for “some of the crazy things he’s said and done, like taking his two-hour-old baby who died right after childbirth home and played with it for a couple hours, so his other children would know the child was real.”
In a Jan. 5 interview with MSNBC’s Rachel Maddow, Washington Post columnist Eugene Robinson also ridiculed Santorum and his wife for taking their son home “to kind of sleep with it, introduce it to the rest of the family.”
“He’s not a little weird,” said Robinson, “he’s really weird.”
But Robinson and Colmes were “speaking out of a seemingly bottomless well of ignorance,” according to Peter Wehner, a senior fellow at the Ethics and Public Policy Center.
In a Jan. 5 article in Commentary magazine, he pointed out that health experts often suggest spending time with a stillborn child as a means of grieving.

Courtesy  Andrew Burton/Getty Images and ABC

Proud Daddy and Daughter Bella

I don't know if that sweet, beautiful gift from God, Bella (Isabella) Santorum, was named in reference to one of my all-time favorite movies Bella, a powerful pro-adoption choice film. (Don't you just want to hug and kiss that sweetheart? Doesn't her smiling, pretty face just melt your heart?) I can't imagine what it has been like for Rick and Karen to have had to cope with challenges and heartaches involving two of their children, but I don't for a second question their hearts and the fact they are decent, honest, honorable people. There's no doubt that the Santorums (or the Romneys) would bring to the White House a welcome change in leadership, competence, integrity and grace we can really believe in.

Quoting ABC (my edit):

Bella suffers from Trisomy 18, a rare and serious genetic disorder that kills about 90 percent of children before or during birth. Three-year-old Bella was diagnosed with pneumonia in both lungs and had very difficult 36 hours over the weekend; she has “a long way to go,” but has “turned the corner.”

Parsing Obama's 2012 SOTU Address: Part II

In 2008, the house of cards collapsed. We learned that mortgages had been sold to people who couldn't afford or understand them. Banks had made huge bets and bonuses with other people's money. Regulators had looked the other way, or didn't have the authority to stop the bad behavior.

First, notice that Obama is up to his same old same old bag of tricks here: he's making excuses for people whom took out mortgage loans and regulators. And dubious victims at that. We don't need to speculate (as Obama clearly does) on some nonsensical, unsupported conspiracy theory involving banks looking to rip off naive borrowers (with no legally recoverable assets to speak of).

Even liberal Keynesian economist Paul Krugman doesn't buy Obama's "predatory lending" argument, noting that the real estate bubble was broad-based, across the home mortgage and commercial real estate market. Arnold Kling made this observation in April 2010 (my edits):

What about predatory lending? As I understand it, the idea of predatory lending is to saddle the borrower with an expensive mortgage so that you can foreclose on the property and sell it at a profit. How many times did that happen? Have you read of a single instance in the past three years where the bank made a profit on a foreclosure? 

I know that it's axiomatic that poor people are helpless victims. But in the case of these mortgages, that is a really hard sell. The banks did not take from poor people. They gave to poor people. [If the poor homeowner was lucky to sell in a rising market, he] got to reap a nice profit on his house. [Not so lucky, he] lost...close to nothing.

It's not like banks don't understand the risk of holding a nonperforming, low-collateral loan in a falling real estate market. I'm not going to make excuses for banks that failed to exercise due professional care in evaluating applicants. It's not like prospective homeowners don't realize that they are making one of the largest purchase decisions in their lifetime and if you don't have sufficient collateral, sustainable income or a stable credit history, you have to pay an interest premium to the lender for taking on increased risk. Furthermore, mortgage interest rates were below historical norms, and monthly payments for the nontraditional loans were likely to jump at the next planned reset. Everyone also knew that there was, at best, sluggish wage growth.

We don't have to speculate on conspiracy theories here. There was a herd mentality at the time:  prices can only go up from here. Besides, I'll have cashed out long before any real estate correction.  We had heard some of the same kind of nonsense during the late phase of the Nasdaq bubble: "Profits don't matter... We are in a new, different economy where the old rules don't apply..."  I knew that we were in a frothy, speculative market, no doubt enabled by easy money policy from the Fed Reserve, even as early as 2005 when I had read reports of Florida condos still in construction being repeatedly flipped and get-rich-quick-in-real-estate infomercials popping up on late night TV.

Should have we been surprised by a correction? In fact, we know about an 18-year real estate cycle. The economy had pulled out of recession late in GHW Bush's only term in office, fueling the new real estate cycle. By the time I moved to California in late 1999, nearly half-million dollar homes were more the rule than the exception in Silicon Valley. Consider Steve Hanke:

Speaking of economic history, one thing that the purveyors of monetary policy (and all prudent investors) should become well versed in is a piece of business-cycle history that has apparently passed them by – namely the little-known, but essential, 18-year real estate cycle. This cycle goes hand-in-hand with Austrian business cycle theory in which booms and bubbles are created when central banks set short-term interest rates too low, allowing credit to expand artificially.

In fact, the federal government also got swept up in the herd mentality. Democrats and the "compassionate conservative" Bush Administration were thrilled that the percentage of homeowners was at unprecedented high levels (which others as well as myself regarded as unsustainable).The government specifically wanted banks to make loans. One way they could do that was the GSE's purchase of loans from banks. We were not talking about your grandfather's 20-percent down, 30-year, fixed-rate mortgage loan.  Basically we had exhausted the conventional mortgage pool of qualified applicants:

Between 2005-2007, few of the mortgages acquired were conventional,fixed-interest loans with 20% down. By December 2007 [the GSE's were] responsible for 90% of all mortgages. Fannie Mae's loan acquisitions were:

• 62% negative amortization
• 84% interest only
• 58% subprime
• 62% required less than 10% down payment

 Freddie Mac's loans were even more risky, consisting of:

• 72% negative amortization
• 97% interest only
• 67% subprime
• 68% required less than 10% down payment.

I'm not arguing that CRE/GSE policies caused the real estate market crash, but clearly risky loans were enabled by government policy and/or a failure in competent regulatory oversight. Making money available to risky applicants bid up prices, and the magnitude of the GSE exposure using government guarantees to the real estate market exacerbated taxpayer losses.

In the six months before I took office, we lost nearly four million jobs. And we lost another four million before our policies were in full effect.

This is just flat-out intellectually dishonest. Consider the following:

September 2008 – 280,000 jobs lost
October 2008 – 240,000 jobs lost
November 2008 – 333,000 jobs lost
December 2008 – 632,000 jobs lost
January 2009 – 741,000 jobs lost
February 2009 – 681,000 jobs lost
March 2009 – 652,000 jobs lost
April 2009 – 519,000 jobs lost
May 2009 – 303,000 jobs lost
June 2009 – 463,000 jobs lost

NBER claims the recession ended in June 2009.  A May 2009 New York Times report indicated nearly 3 months after the so-called then $787B stimulus, just $45.6B or 5.8% had been spent. In the context of roughly a $14.6T economy? (Well, of course, Obama was responsible for the nation's first trillion-dollar deficit... And second... And third... But after all that spending over 14M unemployed and underemployed from one of the slowest job recoveries in American history. Of course, Obama doesn't want you to think it has anything to do with his reckless, irresponsible threats to raise tax rates on investors, a huge power grab by the federal bureaucracy, globally uncompetitive business income tax rates or playing games with temporary versus permanent tax policy.

Take, for example, the latest economics-challenged proposal from Obama to double Mitt Romney's tax rate to 30 percent. Since most of Romney's income is from CAPITAL GAINS, not WAGES, Obama is really suggesting DOUBLING TAX RATES ON INVESTMENT. Obama KNOWS (or should know) doing this would KILL the economic recovery, but he can grandstand, knowing it's dead on arrival in the House of Representatives. It's the political equivalent of a "free play" (defensive offside in football). And it's ineffective, as even Obama should realize. Capital gain realizations are triggered by sales events. Wealthy individuals don't have to sell relevant assets: they can wait until a more accommodating legislature and President are in power. And as I've constantly mentioned. Wages and short-term capital gains are taxed at the same rate; the special rate reflects long-term investments--and the gains are NOT inflation-adjusted so you're really taxing phantom income--the nominal gain may not even cover your loss in purchasing power, so taxes add to your "real" capital loss.

It's bad enough that the Democrats are materially misleading Americans on the nature of income by suggesting that middle-class Americans are paying twice Romney's tax rate. That is knowingly false. The top tax bracket on wages is applied INCREMENTALLY, and middle-class investors are taxed at the same rate as Romney.

But let's go back to Obama's disingenuous use of job loss statistics, and this is a point I made in a recent post:: the indisputable fact is that job losses accelerated AFTER OBAMA AND DEMOCRATIC-CONTROLLED CONGRESS WERE ELECTED in November 2008. One has to be in a state of denial to think businesses cut jobs because of a lame duck President's policies. The Democrats controlled the Congress during and after the lame duck session. The only weapon Bush had was the veto, and the Democrats knew they could just wait until Obama was inaugurated to pass anything they wanted without having to worry about a Presidential veto.So even though Bush had almost 3 months left in his term, for all practical purposes, he was powerless. Businessmen were not thinking in terms: let's take on new hires; we'll just fire them as soon as Obama is in office.  As I mentioned earlier: past performance is not indicative of future results.

Obama can try to scapegoat Bush all he wants--he's 3 years into his Presidency and he's still Bush-bashing, but the indisputable fact is that the Democrats took control of Congress nearly a year before the start of the Great Recession in December 2007 and 20 months before the tsunami and TARP. Didn't the Democrats pass a stimulus bill that Bush signed in his last year? Yes. So Obama is intentionally misleading people here wanting to pass off as many job losses he can to Bush. Everybody knew that Obama was going to sign a huge stimulus bill before he even took his oath. He signed it less than a month in office. This is the same Congress that took over a year to pass ObamaCare.

Musical Interlude: My Favorite Groups

Queen, "Another One Bites the Dust"

Miscellany: 1/29/12

Quote of the Day  

Patience has its limits. Take it too far, and it's cowardice.
George Jackson

Parsing Obama's 2012 SOTU Address: Part I

Think about the America within our reach: A country that leads the world in educating its people. An America that attracts a new generation of high-tech manufacturing and high-paying jobs. A future where we're in control of our own energy, and our security and prosperity aren't so tied to unstable parts of the world. An economy built to last, where hard work pays off, and responsibility is rewarded.

This passage just strikes me as odd in several respects. Let's start with the unusual soundbite at the end "responsibility is rewarded". What exactly does that mean? Responsibility is "the act of carrying out prescribed roles and duties without supervision in home, school, community and society. Responsibility is a force that binds you to your obligations."  If I assume the role of a husband and/or father (NB: I've never been married and don't have children), I am responsible for providing financial and emotional support for my wife and kids. I don't expect to be rewarded for doing the right thing by my family. It would be nice if my efforts were noticed and appreciated, but my duties are not contingent on whether family members love or even respect me. Now, certainly government can remedy the situation (e.g., garnish wages) if you are financially able but don't meet the obligations to your family, but it's not the role of government to confer its blessings on the heads of households.

I think what Obama is really saying here is insidious: he is subtly and unconscionably subordinating liberty of the individual or business to the authority of the state, e.g., "we are going to reward businesses which are entitled [the right size, industry, ownership, etc.] or do right by [fill in the blank with a relevant progressive ideological goal: are environmentally conscious, accommodate union demands, achieve lending targets for small businesses or minority home ownership, etc.]"  What are the rewards? Things like exemptions from economic growth-choking regulations, tax breaks. In other words, industrial policy/crony capitalism as usual. Picking winners and losers in the economy. Obama is implicitly defining "responsibility" as accommodation to progressive ideological objectives and is also implying that he wants to punish "irresponsible" individual or business behavior. Is there no end to this counterproductive, megalomaniac delusion? All these not-that-subtle anti-business threats do absolutely nothing positive for the economy, including jobs.

Now let's review the earlier part of the passage: he's talking about "America that leads the way in educating its people".  First, our universities are world-class. He's referring to K-12 and generally public education, traditionally managed at the local and state level. This is clearly a situation where public policy is part of the problem, not the solution. We find that administrators often have at best limited ability to manage resources, hamstrung by union contracts; we have legally enforced public monopolies with little or no effective competition, where parents who choose a private/parochial school for their children are not given the right to use their own tax money for a school of their choice and have to pay twice.

Barack Obama is completely clueless here; for all the money thrown at public education over the past 50 years, we have seen little, if anything to show for it on any desired criterion (test scores, graduation rates, etc.) In other societies, doing well in school and passing board exams can mean the difference between a comfortable middle-class lifestyle and a lifetime of financial struggle.  If we are going to continue to subsidize education, we need to acknowledge (1) the status quo is not working, (2) the amount of resources government can contribute is limited and needs to be more efficiently allocated, preferably by encouraging real (not token) K-12 competition, and (3) our children are too important to delegate responsibility of their education to dysfunctional government and legislators, bought and paid for by crony union interests.

"An America that attracts a new generation of high-tech manufacturing and high-paying jobs."  This really, really annoys me. First, America, with a single-digit percentage of the world's population accounts for nearly a quarter of the global GDP, and we continue to lead in manufacturing, particularly high value-added manufacturing. MJ Perry in his Carpe Diem blog (see blog top-right recommended blogs) routinely features news clips with a positive spin on our manufacturing sector. Some manufacturers that relied on high-cost low-skilled labor, no longer globally competitive, have shut down, but consumers with more money in their pockets spend and invest in other parts of the economy. It's called the law of comparative advantage. Unfortunately, the Democrats can't put the genie back into the bottle: businesses are not charities; they have to be profitable in the long run.

But Obama is ignoring the unbelievable damage that that his high-tax/high-regulation rhetoric, globally uncompetitive business tax structures, and industrial policies are having on American economic growth. He has got to stop cherry-picking which industrial sectors win and lose, and doubling down on regulations, a hidden tax on consumers, with an anemic economy is extraordinarily counterproductive. It took forever to get three free trade treaties negotiated by Bush passed (only during the last year), never mind any new initiatives.

" A future where we're in control of our own energy". One of the problems here is that Obama is continuing to throw money at alternative energy which is only profitable as a result of massive, unaffordable, unsustainable subsidies. On the other hand, while Obama tried to take credit for the North Dakota oil boom helping to displace some foreign imports, which has zero to do with his policies which have been generally negative towards oil and gas exploration; he has done nothing to end countless environmentalist lawsuits against development of shale properties in the West-Central-North US. There were his notorious moratoriums against Gulf exploration and development after the BP oil spill, and he has released only something like 5% in relevant acreage of offshore areas for exploration, including almost no new exploration off the shores of blue or purple states (e.g., West Coast and the Northeast).  


And don't get me started on the Keystone XL pipeline project which is a transparent concession to his crony environmentalist allies. The point is that Obama's political grandstanding does undermine a stronger dollar, and we are going to face a severe economic crunch if and when other countries don't need to accumulate dollars to pay for oil, which props up demand for the dollar. Probably the single best thing Obama could do to facilitate energy independence for ourselves and our allies is to get out of the way of domestic oil and gas exploration. Alternative energy will play more of a role--but that will reflect the supply and demand for energy, and we're still years away from that.

The defining issue of our time is how to keep that promise [ if you worked hard, you could do well enough to raise a family, own a home, send your kids to college, and put a little away for retirement] alive....We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by. Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules. What's at stake are not Democratic values or Republican values, but American values. 

I absolutely reject the implicit assertion of FDR's Second Bill of Rights, expounded in his 1944 SOTU address:

• The right to a useful and remunerative job in the industries or shops or farms or mines of the nation;
• The right to earn enough to provide adequate food and clothing and recreation;
• The right of every farmer to raise and sell his products at a return which will give him and his family a decent living;
• The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad;
• The right of every family to a decent home;
• The right to adequate medical care and the opportunity to achieve and enjoy good health;
• The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment;
• The right to a good education.

These are so-called positive rights: in essence, obligations that the government must do or guarantee for you. The issue isn't so much the worthiness of these ideals, but the use of the term "rights" and thus the implicit mandate of the government to guarantee them. Government simply doesn't have the resources or the know-how to underwrite these guarantees or effectively micromanage the economy, but even if it did, there would be moral hazard: why should I work hard or save to buy a house or for retirement or a rainy day if, no matter what I do or say, the government is going to guarantee I'm going to be fed, have a decent roof over my head, be treated for even preventable illness, etc?

Obama provides a false choice: either we accept a world where this unsustainable government does everything for you or we settle for a free economy where some might do very well. Obama sees the economy as a zero-sum game, not a win-win game. There's a saying in the financial services industry: past performance is not a guarantee of future results. Ask Ted Turner whom at one time was worth nearly $10B and is reportedly down to about $2B or former employees of Enron whose retirement savings in the company's stock were wiped out.

The problem is that government intervention adversely effects economic growth; we need to encourage economic growth, a rising tide that lifts all boats. There are a number of misleading income inequality statistics behind Obama's rhetoric: we need to remember a key reason that "the rich got richer" has to do with the fact that government policy had been burdensome with respect to pre-1980 tax rates. High tax rates discourage the incentive to earn more and/or to invest; if and when the government tax or regulatory burden on individuals and business decreases, it restores an incentive for individuals and businesses to earn more and/or deploy more assets. It may very well be the case that the economically successful will benefit considerably from these policies, but they are also taking on economic risk--say, new competitor products or services undermine their business model.

"Fair shot"? "Fair share"? "Same set of rules"?  Oh, but who exactly decides what is "fair" or the "same set of rules"? That is the rub; Obama wants you to believe that he and other progressive Democrat elitists stand in judgment of just what is "fair" or the "same set of rules"... Tell me, what was the "same set of rules" when Obama rammed through managed auto company bankruptcies which stiff-armed bondholders and rewarded lower-standing union interests? What was "fair" about other oil and gas vendors in the Gulf of Mexico which were forced to shut down because of the BP oil spill, regardless of their own safety procedures and regulatory compliance? What was "fair" about union groups and/or other companies in (say) former Speaker Pelosi's district offered waivers from certain aspects of ObamaCare? What's "fair" about Obama and his cronies growing the national debt by 50% in less than one term of office and leaving future generations to pay an unconscionable burden in addition to their own while he refused at all turns to make any substantive cuts to live within the government's means? What's "fair" about using money from Medicare, needed to shore up a program which will be insolvent in roughly a decade, to help pay for another entitlement program? What is "fair" about payroll tax holidays which further undermine the long-term financial stability of the social security system?

 The fact of the matter is that Obama and his Democrat cronies have been picking winners and losers in the economy:  alternative energy companies, teacher and/or public safety unions,  auto companies, etc. Whatever convoluted special-interest rules exist in this house of cards we call our tax system, Obama and company have added their own special-interest groups. Obama's attempt to stake out a claim on "fairness" is arbitrary and laughable.

I agree that American values are at stake--but the danger is from an overreaching elitist federal bureaucracy, dedicated to self-preservation at the expense of an increasingly threatened free market. What we need to do is to foster liberty, self-reliance, hard work, thrift, perseverance, and other virtues, NOT an undue dependence on a paternalistic bureaucracy which undermines our very self-actualization.

Let's remember how we got here. Long before the recession, jobs and manufacturing began leaving our shores. Technology made businesses more efficient, but also made some jobs obsolete. Folks at the top saw their incomes rise like never before, but most hardworking Americans struggled with costs that were growing, paychecks that weren't, and personal debt that kept piling up.

Actually, Obama is rewriting history. For example, we had a number of shocks to the economy during the last decade--9/11, the financial scandals, and 3 asset bubbles (fueled by easy money policies by the Fed). It's not true that the same people did as well over the past decade: the stock market was flat over the decade. Some businesses did well (e.g., Google and Apple) but most struggled--as well as the shareholders. It is true that the 2001 and 2003 tax cuts did encourage growth in the tax base: what Obama deliberately ignores to report in his heavily edited version of reality is that federal revenues grew to an all-time time under the Bush tax cuts, and the income tax burden was the most progressive in history; people at the very top have been contributing twice their share of national income while the bottom half of earners, if anything, were net beneficiaries.

What Obama also conveniently ignores and/or tries to explain away the failure of government regulators, the role that public policy played in artificially raising home ownership beyond the historical average, the inability of the Congress to live within its means, and the failure of the government to shore up unsustainable entitlements as Baby Boomer retirements continue to escalate.

I will likely continue my analysis of the SOTU in a future post. I dislike Obama's rhetoric because it's fundamentally dishonest and misleading, and I feel it underestimates the intelligence of the American people.  I mean, does he seriously expect people to believe he and his fellow partisans are the arbiters of "fairness" or "special interests" are exclusively the backers of the opposition, not his own side? This smacks of the same kind of elitism that led him to wonder during the 2008 campaign what was it about those Midwesterners to vote against their own self-interest, to cling to their guns and Bibles? He just couldn't understand why, after 3 dozen speeches, he had failed to get the American people to see the wisdom of ObamaCare--it surely wasn't the legislation itself: it was far more reasonable to believe that he just hadn't found the right words to say in casting his spell over the American people...

No, Obama can't co-opt the truth by mere assertion, and analyzing Obama's speeches is like trying to pull teeth.

Political Potpourri

Busy weekend as we head down the stretch to Tuesday's primary in Florida, with polls now showing Romney beginning to pull away from Gingrich.  What's peculiar is Herman Cain's decision to endorse Gingrich. Cain (as well as Santorum) had backed Romney in 2008. Sarah Palin is trying to repeat her South Carolina endorsement  of Gingrich against the "Establishment". In the meanwhile, everyone is talking about money making the difference in Florida as Romney forces outspend Gingrich's.

There has been a lot of discussion about a couple of points regarding Gingrich's ethics charges and the nature of his resignation, which have been cited in the Romney PAC ads. Byron York, in particular, has been cited in arguing that the IRS "exonerated" Gingrich. Gingrich had taught a college course which sponsors had promised was tax-exempt but others alleged served a political purpose, putting the tax-exempt status in jeopardy. The IRS later investigated the course and did not find it partisan in nature. However, Gingrich had submitted letters from lawyers during the investigation which the committee felt was incomplete, inaccurate or unreliable. (Anyone believing that a combative Gingrich in 1997 meekly agreed to a $300K fine and a lopsided  bipartisan vote against him over a trumped-up charge is in a state of denial.) There was a suggestion in the Romney ads that Gingrich resigned in disgrace after the ethics charges. In reality, there was a failed attempt to bring Gingrich down after the vote, but Gingrich, who was in trouble with fellow Republicans for other reasons as well, was principally undone by a loss of seats (but still retaining control) following the 1998 mid-term elections. I think the ad was probably a bit of a stretch, but Gingrich was on thin ice for multiple reasons heading into the 1998 elections. Whether it was his erratic behavior, rumors of an affair, and/or the unprecedented ethics rebuke to a sitting Speaker, Gingrich should not be surprised that his resignation as Speaker and from the House is an issue; the Romney campaign did not invent the issue, and even if Romney didn't make it an issue, Obama certainly would have.

I don't know if other pundits have noticed this, but Gingrich's lead over Romney in the Gallup daily tracking poll has shrunk to 2 points, 28-26, down 6 points from Friday (Romney +2, Gingrich -4). I think Romney learned a valuable lesson in South Carolina; after Gingrich had finished #4 and #5 and leading early the week of the primary,  Romney was playing prevent defense. I think the campaign isn't likely to let that happen again.

Musical Interlude: My Favorite Groups

Queen (with David Bowie), "Under Pressure". Bring together two of the greatest rock vocalists of all times and a brilliant anthem-like pop arrangement, melody and harmony, and you have one of the best tracks ever recorded in the rock era, hands down one of my favorites from the 1980's.

Miscellany: 1/28/12

Quote of the Day 

Never give in... 
never, never, never, never, 
in nothing great or small, 
large or petty,
never give in 
except to convictions of honor and good sense. 
Never yield to force... 
never yield to the apparently overwhelming might of the enemy.


Winston Churchill

Too Funny: An Author Pleads For Crowdsourcing

You could understand this point of view from a different context: bootleg recordings of recording artists' live performances. Most popular artists sooner or later release one or more authorized "live" compilations (particularly after Peter Frampton's unbelievable success with his mid-70's album). But I could easily see cases of impromptu guest performances or failed official recordings when, years later, say, Bruce Springsteen says, "Just before we went on tour in 1979, we went to this little club near Philadelphia. We were in the zone that night, but we don't have a suitable quality recording of the event." One could easily see where Springsteen fans might check to see if any fan at the club that night recorded the event.

In fact, free products or services have been a way of building a larger audience for future transactions. But science fiction author Walter Jon Williams decided to use piracy for his own benefit in a delightful tongue-in-cheek post called "Crowdsource, please":

I’m striving to get my out-of-print books and stories online so that (a) you can enjoy them, and (b) I can make a few bucks...I discovered that my work had been pirated, and was available for free...I figured I’d let the pirates do the work, and steal from them... [But] the scans were truly dreadful and full of errors [and] apparently a few of my books were so obscure that they flew under the radar of even the pirates!..So I’m willing to trade.  Should any of you volunteer to provide scans of [any of 3 out-of-print books], that lucky individual will get a signed, personalized copy of the WJW book of his or her choice [and be acknowledged in a future edition of the missing volume].

PC World has an interesting post up arguing Why History Needs Software Piracy. No, this piece is not encouraging illegal mass distribution of copyrighted work. It's best understood in context. For example, I've got some unusable licensed music tracks from a former digital music distributor; in other cases, I've exhausted my digital rights simply as an artifact of having to reformat the hard drive on a notebook PC and restore from backup without making a single copy to media or another device. There are other classic pop songs which aren't available through iTunes or Amazon. Books or journals go out of print (I published 3 book chapters in the 1990's).

To be honest, I've never made a penny from anything I've published, whether it's a dozen articles or another 6 national conference proceedings and book chapters (and, of course, these blogs). I've occasionally thought about making available my academic and professional articles and book chapters, but there are also publisher contractual rights to consider.

My mom once asked me why I'm writing this blog--it's not like I'm making any money off it. I think initially I wanted to use it to flesh out some ideas for future political volumes; that's still a possibility, but to be honest with pageviews reaching in the dozens versus thousands, if I was to become a commercial success, my sales wouldn't get much of a boost off of the blog. Second, I thought perhaps my prolific, high quality commentaries with a fairly distinctive perspective might attract the interest of a publishing group. For the most part, the blog is more of an exercise in discipline: I found when I was teaching, I always came to class with prepared lecture notes in detail. In a similar fashion, I find in presenting my political perspective, I often have to research various topics to an exhaustive degree, sometimes with a dozen or more links.

It also provides a paper trail of my evolving political views which I find interesting. When I started off the blog, I was more tolerant of nation building, federal government leadership in education, and a more active Fed Reserve role.

Greatest Innovators?

Lemelson-MIT have an annual invention index. Among other things, they poll teens and young adults as to their ranking of inventors or innovators. This year's ranking was headed by Thomas Edison (52%), Steve Jobs (24%), Alexander Bell (10%), Marie Curie (5%), and Mark Zuckerberg (3%).

Let's just say I have a different take. Jobs and Zuckerberg would not even be listed among my honorable mentions; I see them more as marketers than inventors; certainly their products or services have been innovative and popular but more evolutionary than revolutionary.

I first would like to acknowledge the context which I believe contributes to American leadership in innovation: from a political standpoint, we have English philosopher John Locke, whom provided the intellectual context for our Declaration of Independence, and James Madison the Father of our Constitution, the Bill of Rights and our government's balance of powers; from a philosophical standpoint, the American pragmatist school (championed by Peirce, James, and Dewey); from a management perspective, scientific management founder Frederick Taylor, IBM CEO Thomas J. Watson, and quality guru W. Edwards Deming.

I would argue that technology has had a number of important leaders, starting with the Wright brothers and air/space travel/warfare; Watson and Crick (DNA) and the human genome project; and Intel's microprocessor and Microsoft's cross-vendor personal computing operating system in the world of high tech.

It's almost a crime to single out any one person or movement. There are hundreds, if not thousands of innovators whom should be recognized. But I'm at a loss to explain how Dean Kamen, probably the best known American inventor today, didn't place high on the list. I have embedded a couple of videos below. I think one of the more interesting points discussed was when DoD went to Kamen to ask about development of an artificial limb; he mentions how he expected a thick specification document, not to mention years of going through FDA approval. The context seems to suggest that DoD was more interested in giving Kamen room he needed to achieve his goal versus trying to micromanage the process.  I would have liked to have heard more about these issues; a simple Google search reveals references to Kamen's rants about FDA red tape.

My personal experience is that creativity requires both hard work and an ability to question one's own assumptions. Peer pressure or groupthink (including pervasive progressive ideology in most universities) is not conducive to creative approaches. I found in trying to do something new I often had to battle resistance to change, skeptical colleagues, etc. Most young people at one time or another question authority and/or bureaucracy, and I think that the relevant frame of mind is more likely to come from a libertarian than a communitarian standpoint. Still, Kamen is clearly moved, especially in the second video, talking about how wounded warriors have gained a degree of independence from his efforts.

Let me just say for the record: I am a deficit hawk, but I will not balance the budget on the back of people whom sacrificed their health and limbs in the service of their country.





Musical Interlude: My Favorite Groups

Queen, "Bicycle Race"/"Fat-Bottomed Girls"

Miscellany: 1/27/12

Quote of the Day 

Compromise: 
The art of dividing a cake in such a way that everybody believes he got the biggest piece.
Sherry Rothfield

Must Be Nice... 
We Need Federal Pension Reform

I am not a regular C-SPAN viewer, but the other day I was checking on my expanded cable listings, which I accidentally stumbled the very beginning of this session on the third C-SPAN channel. I later found a C-SPAN webpage with the video, but it was not possible to link the video. Today I discovered video embed functionality through a C-SPAN archive website.  In addition, you can find a relevant House hearing webpage here (with links to participant hearing documents).  I have respect for the work of AEI's Andrew Biggs, whom has considerable scope of knowledge involving retirement programs (including social security: for an interesting take on his views on that entitlement, see this The Atlantic interview). Biggs' statement for the committee is available here.

I touched briefly on the federal pension system when reviewing the sorry state of the USPS. Biggs' statement cited above provides a nice historical summary. Before 1984, there was a single all-inclusive (no social security) defined benefit (pension) system (CSRS). Since 1984, there has been a hybrid system, consisting of social security, a defined benefit system (FERS) and a (401K/403B-like) defined contribution system (TPS). Long story short, on a more apples-to-apples approach, Biggs finds no comparable private sector concept to FERS (which requires less than 1% employee contribution) and the government match in TPS is significantly more generous (e.g., 5% versus 3% of salary, Table 1). Biggs compares federal and private sector retirement in Table 2; basically, social security plus TPS accounts for roughly a third of the employee's salary both in government and private sector systems; FERS accounts for another third--without a comparable private sector match. Biggs essentially argues that we need to phase out FERS for new federal employees, that we can do it without undermining comparable compensation with the private sector.

Most of the hearing I watched was very predictable: we hear populist grandstanding about the Congress' own pension plan, the Democrats bring up their cherry-picked studies preposterously suggesting that federal employees are underpaid by roughly a quarter (Biggs suggests that these are not peer-reviewed, an academic standard which, among other things, carefully reviews methodology). The problem is that the civil service system is pretty much a round peg/square hole system that has no essential connection to the dynamic labor supply/demand picture in the private sector, just like the absurd Medicare/Medicaid below-cost reimbursement schedule which bears little comparison to the real prices in the private sector. Some also note that the public sector fills comparable slots with less experienced, skilled personnel. (I'm not going to name names here, but I've worked with civil servants on a number of contracts, and if I take a first cut of about a dozen civil servants, there are only two that I would consider staffing for comparable positions in the private sector. Most I met were in over their head.)

I can already predict how this plays out. The Democrats will offer to expand the employee contribution to FERS in an effort to stave off more radical reforms, which are desperately needed. We are already running under an unsustainable budget deficit. The average civil servant retires in his or her late 50's and may be eligible for a FERS annuity supplement; given my constant criticism of state/local pension funding, Biggs argues that FERS funding is much worse. We need to act sooner than later to reform this system--before we are forced to do so in a manner similar to Greece.



Political Potpourri

It's been a mixed week for Romney: the Gallup tracking poll showed Romney drifting down to his early January share (which is not good when you consider 3 opponents have left the race), but Gingrich seems to have stalled in the low 30's. Two recent national polls have Gingrich with roughly an 8-point lead. On a more positive note, there's some evidence that Romney has found his footing on the offense in the debates against Gingrich; a number of prominent conservatives have started questioning Gingrich's conservatism; Gingrich continues to lose badly to Obama in paired runoffs; and after an initial Gingrich surge in Florida after his SC win, it looks like Romney has regained an 8 or 9 point lead.

So far Obama is benefiting from the Romney-Gingrich struggle. Romney has to bear some responsibility because he didn't seem to anticipate Gingrich's populist attacks against his wealth and involvement with Bain Capital, and the demand for his income tax records. Gingrich, of course, wasn't really interested in Romney's finances: exit polls show he was really making a class-based argument. I expect Romney is in the process of turning around his campaign.

Musical Interlude: My Favorite Groups

Queen, "We Will Rock You"/"We Are The Champions"

Miscellany: 1/26/12

Quote of the Day



Only solitary men know the full joys of friendship. 
Others have their family; 
but to a solitary and an exile, 
his friends are everything.

Willa Cather


The "New" Buffett Rule:
I Decree ALL OTHER Millionaires Should
Pay MORE Taxes Than I Do Now

This is not to be confused with the Obama Buffet Rule, which is "all we can tax" of a one-percenter's assets.  The first thing that comes is Buffett secretary Debra Bosanek's salary estimate ranging from $200K to $500K by Paul Roderick Gregory, based on the information provided about Bosanek and Buffett's tax rates. (If accurate, there are going to be a lot of college kids trying to find out what coursework it takes to become Warren Buffett's secretary...)

First of all, note that when Buffett talks about his secretary paying more taxes than him, he doesn't mean it in the common sense understanding, which is aggregate tax paid, not relative tax paid. For instance, if he paid 15% on $1M, his tax is $150K. If the secretary paid 30% on $100K, the tax is $30K--Buffett is paying 5 times more tax. Does Buffett have to pay 5 times the amount for the same loaf of bread as the secretary? Does he get 5 times the number of votes or 5 times the national defense service of his secretary? Of course not. One of my signature sayings in this blog is: if there's one thing Obama knows, it's symbolism: Obama likes arugula, owns a mansion in an upscale Chicago neighborhood and knows $200K secretaries... No doubt during the debates this fall, he'll ask Romney if he has Grey Poupon... Warren Buffett earns a mere $100K at Berkshire Hathaway--the same salary he has drawn for decades. So the bulk of his income comes from investment income, not wages (the basis of social security).

Second, Buffett is comparing apples to oranges. Investment tax rates are lower for a number of good reasons. For example, in many cases, you are taxing nominal gains, not real (inflation-adjusted) gains. (Hinkle points out a Fed Reserve study indicating the effective tax rate of 233% on Dow Jones investments from 1972 to 1992; in other words, once you factor inflation (i.e., failed monetary policy) into the picture, the government was taxing principal, never mind any nominal gains.)  You have already taxed the same stream of income once before, e.g., the corporate level (up to 35%). (The whole issue of subchapter S corporations is trying to deal with the federal government's double-dipping from the same stream of income--even more when you factor in compounding and other considerations.)

Now the Dems are focusing on Romney's self-reported 15% tax rate over the past 2 years on roughly $20M a year in income. There are a few things wrong with this analysis: first, Romney earned very little wages over that period (i.e., he was doing a lot of work setting up his bid for the Presidency)--most of his income was related to investments. Second, the President doesn't mention salient facts, such as the average income tax burden is more like 9.3% vs. Romney's 15%.

Obama and his fellow myopic progressives seeking to demagogue the issue of millionaire taxes fail to explain why, for instance, investment tax policy affects economic growth. The economically successful can cash out at any time and live out the rest of their lives, say, on safe bond interest alone. Knowing the high failure rate among new businesses and/or other risks (competitor, industry or general economic) and inflation risk, why invest? Tax policy doesn't treat losses the same as gains. When you have gains, the government wants ALL your tax then and there (net of any carryover), but you can only deduct up to a net loss of $3000 in any one year. Investing, to put it in words Obama can understand, is the free market's way of "spreading the wealth around"; if and when business succeeds and grows, it's not just the investor that profits, but workers and the government as well (employee and business tax receipts, etc.) A low, consistent investment tax policy encourages private sector investment, and the government earns more revenue in the long run. Obama's ideologically driven investment tax policies, scapegoating the economically successful, is shameless counterproductive demagoguery. Even if the proposal is likely dead on arrival in Congress, it raises uncertainty over current or future projects and expansion decisions.



Santorum, Dennis Miller and 
the Political Significance of Bestiality

I subscribe to the (comedian) Dennis Miller Show podcasts and in fact embedded an audio clip of a call-in viewer in yesterday's post. (Miller, a lapsed Catholic, is generally conservative but not a social conservative, e.g., he's pro-abortion choice and gay marriage.) For some reason, Dennis Miller has been particularly obsessed by social conservative Senator Santorum's use of the term 'bestiality' in the same conversation with gay marriage.

Santorum is trying to argue that there is reason for one-man/one-woman relationship as the foundation for family over the centuries; the point is, and this is what Miller isn't focusing on, that the law of unintended consequences accompanies radical social engineering. Keep in mind homosexuality, polygamy, bestiality, adult-child relationships, etc. are not new concepts. The constraints on entities and relationships within the ideal of marriage and family are not arbitrary but reflect functional, evolutionary considerations in society's stability and self-preservation. Some individual characteristics are arbitrary in nature (e.g., race, ethnicity, religion, height, weight, or (adult) age).  However, gender is not an arbitrary consideration to procreation, which is tied to the future of society.

Miller seems to think that Santorum is attempting to equate nontraditional relationships; no, I think that Santorum was simply fleshing out examples of relationships not fitting the ideal and making a slippery slope reductio ad absurdum argument.

Personally, I think society should continue to embrace the traditional definition of marriage but I am reluctant for the state to intervene in the cases of nontraditional relationships (e.g., gay and polygamy) where there is competent consent.


Political Humor

"A new website just came out that’s designed to calculate how long it takes Mitt Romney to earn your salary. So from now on, whenever Mitt Romney is running late, he can call there and say, 'I'll be there in five teachers.'" - Conan O'Brien

[In other news, a new website just came out which estimates how long it takes for Barack Obama to spend your annual salary. The federal government spends about $6.85M per minute; you know what that means: even a one-percenter can't afford a 10-second ad.]


"House Minority Leader Nancy Pelosi says she has dirt on Newt Gingrich, but so far she's keeping her lips sealed — because that's how the last surgeon left them." - Conan O'Brien

[Well, that's because the mud has dried since their last election together...]


Musical Interlude: My Favorite Groups

Queen, "Somebody to Love"