Miscellany: 1/22/11

Quote of the Day

The test of courage comes when we are in the minority. The test of tolerance comes when we are in the majority.
Ralph W. Sockman

Obama's Moderate Makeover Political Edition
If He Fools You Twice, Shame on You
I was listening to the pundits on Saturday's Fox News talking about Obama and his upcoming State of the Union address. From leaked details to date, he's retooling his education, health care, green energy, and infrastructure pitch. That's right: at a time we have a $14T debt and climbing, he's talking about spending AGAIN. It's not an expense: it's an asset, an investment. What part of businesses sitting on $2T in cash do Obama and Fed Reserve chief Ben Bernanke NOT understand? Businesses are not investing because the perceived costs exceed benefits. And fiscal and monetary policies are part of the problem: uncompetitive tax rates, convoluted, high-cost, obtrusive tax and regulatory systems (including new mandates, such as health care), trade barriers, obsolete immigration policies, government debt competing with the private sector for investor dollars, etc. And don't get me started on monetary policy: we can't rely on uncertainty in foreign markets (e.g., the euro or the yen) to stabilize the dollar. "Beggar Thy Neighbor" is a prescription for a vicious circle global depression.

What a true leader would be doing is promoting a long-term perspective, both for government and for business. Unfortunately, we are stuck with Barack Obama. Oh, don't me wrong: Obama talks the talk: but his goals (e.g., doubling our exports) are impractical and/or inconsistent with his other policies (e.g., high business and investment taxes, environmental and trade policies, etc.) When I'm talking about "long term", I'm talking about an aging population, with the largest generation starting to retire, leaving a permanently smaller workforce to grapple with the implications of longer-timespan senior citizens' pension and medical needs, with inadequate reserves. I'm talking about a huge debt, the servicing of which will soon crowd out necessary federal operational spending. I'm talking about an economy slanted more to consumption than savings and investment, with governments and households having spent or obligated themselves into unsustainable obligations.
But what a wise leader knows--and Barack Obama does not--is to realize what is not working and to distinguish between what is and what is not feasible. Let us take, for instance, the likely discussions of education and infrastructure. When we talk about education, we really to focus on a few salient points:

1. Massive amounts of money (local, state, and federal) have already poured into our educational system. A number of prescriptive solutions (e.g., teacher/pupil ratios) have not worked (i.e., students from foreign countries with lower ratios outperform us), but we've been saddled with dysfunctional union rules which make it impossible to fire ineffective, union-protected longer-tenured teachers, reject merit-based systems reflecting supply/demand within a discipline (e.g., math and science) and objective criteria, not to mention unsustainable compensation packages (in particular, pensions) and an uncompetitive, agrarian school year. The bottom line, I disagree with the President's likely talking point that we need more federal money in education. If anything, we need to look at reallocating national educational resources on a cost-benefit basis--and certainly not taking the morally hazardous step of encouraging states and municipalities to become dependent on the overextended federal dollar to patch unsustainable business models.
2. We need to rethink what makes sense for federal involvement in education. I think we need to look at states or cities which have weaker economies and tax bases where federal dollars have the greatest impact. For instance, I do not see a need to sink federal dollars in high-funding states like New Jersey, Maryland, and Massachusetts while poorer schools in Mississippi and South Carolina barely cover the basics. But I would like to encourage resource sharing, e.g., virtual classrooms including remote attendance from gifted students in more limited systems (e.g., a high school which lacks the scale to add specialized classes), and have the federal government in establishing independent baselines and data collection.
3. We need more visionary leadership, not someone tied with vested interests to teacher unions. The inconvenient truth is that Catholic and other private schools have routinely outperformed (and, yes, I've heard the typical defensive response that Catholic schools cherry-pick the "best" students). We need someone to note that in the rest of the world, parents are much more closely involved with their children, knowing that in a very competitive economy, the key to a good job is a good education, and limit the amount of unproductive time outside of school and tolerate no excuses. We have an uncompetitive, short school year, and teachers whom all too often expect too little (not too much) of students, grade too liberally, and socially promote undeserving students, passing the buck onto society. I also see more of a pyramid of autonomous instruction resulting in a citizen's independence/self-actualization. In other words, we put more resources into ensuring a rigorous foundation in English, math and science during the early years of education. Again, we need to rethink education in terms of free market principles: we need to reform the protectionist, monopolistic public education system. But the absolute last thing we should do is bail out incompetent local school administrations unwilling to make the tough decisions of cutting bloated budgets or teacher unions selling out the students' best interests to protect their compensation, regardless of classroom performance.

As to infrastructure: the rub is in the details. Making a national commitment to railways, canals, pipelines or highways made far-flung parts in America more accessible and efficient (in the long run) to transport people and supplies. Barack Obama has a particular affinity for projects like high-speed railways. It's not clear to me (I made this clear when I criticized proposed links in southwest-central Florida or Richmond-DC) what the economic boost was. (I do understand why politicians in Tampa Bay and Richmond like it, but it's not clear to me what the business case is: will there be enough premium-priced passenger or cargo fares to recoup the investment (not to mention operational costs), versus, say, conventional rail or highways? Why aren't there private investments beating the politicians to the door to set up private sector solutions to this concept?

I also want to differentiate between infrastructure building and ongoing maintenance. I think there are other issues President Obama needs to address--like raids on the highway fund; also, we should not be using federal mismanagement in the upkeep of existing infrastructure to cost-justify new projects. All that does is reinforce negligence of maintenance. When you are $1.4T in the hole like Obama is, he should be ensuring current operations and maintenance are being done efficiently; homeowners in the middle of an economic downturn don't look at building new houses but go to fix-it superstores and keep their existing properties in good order.
But, going beyond the State of the Union speech rumors, the President has recently chosen Bill Daley (a politically-connected career lawyer and yet another Clinton Administration crony), whom even conservative commentators call a banker; he spent roughly 2 years as CEO of a small politically-connected bank and more recently as a JP Morgan executive lobbyist. Then he's chosen GE CEO Jeff Immelt to succeed ex-Fed Reserve chair Paul Volcker as chair of the Economic Advisory Council. (Among other things, GE is an American producer of wind turbine products, a key Obama green energy priority.)

I'm not convinced that this is anything more than just a cynical symbolic makeover; it's not clear that the Democrats have a cohesive message other than to defend the legacy of the last Congressional term. It's clear that the era of massive deficits is over. I suspect that Obama will resort to paying lip service to the GOP bad cop objectives but then resort to his familiar pattern of straw man arguments, no matter the nature of GOP budget cuts, just like he voted against raising the federal debt ceiling, before he ran for President and the Democratic-controlled Congress added $5T to the national debt, over one third of the national debt in just the last 4 years. He did not get elected to a 4-year term to spend the last two years governing on a GOP agenda. I suspect that he will resort towards a more stealth agenda, e.g., the way that the FCC has attempted to assert unauthorized authority on so-called net neutrality, the EPA has broadly hinted it may assert in lieu of climate change legislation, etc. In turn, I expect the House GOP to challenge any policymaking by administrative fiat.

No Longer Your Grandfather's Safe Munis:
Were Fannie Mae/Freddie Mac Just the First Act?

We have seen several shocks in the financial markets over the past decade: the Nasdaq meltdown, Enron and other corporate scandals (taking along employee "all-or-nothing" nest eggs), the real estate market collapse and related economic tsunami, etc. Now prospective retirees are facing potentially a different, disturbing issue; probably anyone who invests for retirement knows the typical lifetime investment formula: you start off as a young adult investing primarily in common stocks, say, growth-oriented (vs. stable, slow-growing businesses with steady dividend payments, like utilities), which traditionally have shown the greatest return (but with more volatile prices). Generally, as middle-aged people approach retirement, we see a transition from growth stocks towards blue chip dividend stocks and local and/or state bonds. Public sector bond interest often has certain tax-related benefits. In particular, local and state bonds are generally considered safer investments because they have to run balanced budgets and are implicitly backed by the US government. The reason I bring that up is because if "implicit backing" sounds familiar, it's because the mortgage government-sponsored duopoly (Freddie Mac and Fannie Mae) had the same, and we taxpayers are still stuck covering losses from loans made in a real estate bubble.

We are seeing some disturbing signs in the municipal bond market as cities, struggling under the weight of recession-based lower tax revenue and unsustainable pension funding, are, in some prominent cases, failing, or at least seeing their pristine credit rating downgraded by credit bureaus. In fact, less than two weeks ago, Chicago's bond rating was downgraded. A downgraded credit rating results in higher interest rates (to accommodate investor risk), which further constrains the city's finances. (In Chicago's case, the downgrade complicates the picture for O'Hare's planned expansion; O'Hare is a major cash cow for the city.)

The below chart reflects in part the exodus of money moving out of municipal bonds to other forms of investments; in part, CBS' 60 Minutes last month featured a prominent financials guru, Meredith Whitney, whom predicted the municipal market will be far more volatile than anyone is predicting. In the meanwhile, we have been seeing investors liquidating positions and/or buyers staying away from the market. In part, municipal bond ETF's (see chart below), a popular sector-index mechanism, are showing the results of net sells, which reflect partial liquidation of underlying bonds. Some market observers scoff at Whitney's warnings, claiming that the rotation out of municipal bonds reflects other factors (e.g., chasing the hot returns of the rallying stock market or perhaps into ultra-safe Treasuries, anticipating T-bill price appreciations as Bernanke and the Fed engage in quantitative easing); they claim the bond dumping is undeserved and represents a historic buying opportunity.

I will simply point out that most of the net 1M employment pickups under the Bush Administration were in the public sector--specifically state and local employees. The Obama stimulus simply postponed the day of reckoning for states and cities to get their finances in order. Any faithful reader knows I've been beating the public pension issue for weeks, if not months, and warning against bailouts to fiscally irresponsible states, like California, Illinois and New York. I'm not writing a financial blog, and I will not advise you on how to invest your money. (Personally, I do not have investments in dedicated bond issues.) My real concern is what the President and the Congress will do to bail out states and cities: call it TARP v. 2.

Chart courtesy of Google Finance
SUB:iShrs S&P ShtTrm Ntnl AMTFr MncplBnf ETF

Past year's Price Chart

Musical Interlude: One-Hit Wonders/Instrumentals

M, "Pop Musik"

Miscellany: 1/21/11

Quote of the Day

I was angry with my friend; I told my wrath, my wrath did end. I was angry with my foe; I told it not, my wrath did grow.
William Blake

Obama's "Dead Cat Bounce" in the Ratings

It is no secret to any faithful reader to the blog that I politically do not support President Obama, and I will not support his reelection. But I don't let my personal feelings influence my judgment: I have been quite clear that I know President Obama will defeat Sarah Palin if she is the GOP nominee although her political principles are closer to mine.

Look at what's happened to Obama since the devastating mid-terms: the stock market has been doing well and several economic signals are improving (GDP growth upgrade, declining first-time unemployment filings, higher consumer confidence, improving manufacturing sector, etc.), Obama finally engaged in compromise on the Bush tax cut extensions (when all tax cuts were due to expire less than a month away and the Senate Republicans blocked a class warfare bill) and picked up some symbolic wins on things like 'don't ask, don't tell' (in an overwhelmingly Democratic lame duck session). He also gave a well-received speech in the aftermath of the Tuscon Massacre; in fact, Americans tend to rally behind their leaders during crisis periods. RCP shows an average approval rating of 49.8% and a 5.6% net approval rating.

Does this mean that Obama has bottomed out, well on his way back up to testing resistance at former highs? In a word, no. Most investors are aware of the concept of a "dead cat bounce": in short, a stock may decline to some point and "bounce back" as buyers think all the bad news is behind the stock and is way too cheap. But in reality the fundamental news behind the decline hasn't changed, and is setting up for a further decline past "support levels".

The investment technical analysis analogy doesn't quite hold for politics, of course (although one could argue that Republicans in Connecticut (Senate, 2006), NY-23 (special election, 2009), and Colorado (Governor, 2010) became not a factor in the closing weeks of the campaign). I fully expect 70% or more Democrats will support Obama and probably about 40% or more of independents and moderates, although that could change (remember, Richard Nixon resigned less than 2 years after a blowout reelection landslide against McGovern). Any kind of economic downturn, aggravating an already sky-high unemployment rate, a 9/11-style attack, rampant inflation, what if states and cities start defaulting on their debt, etc. could happen.

The bottom line is, even if no nightmare scenario plays out over the next 21 months, it's unlikely that Obama will be able to make up the 7M jobs still lost over the recession or get the official unemployment rate back down around 8%. (For one thing, millions have dropped out of the labor market, and they'll came back in if the economy improves--meaning we could see the number of new hires and number of unemployed go up simulataneously; don't forget--the economy has to expand by a million jobs or so just to handle new entrants into the labor force (e.g., high school or college graduates). As for the national debt: I don't think people understand the significance of the Pelosi Congresses adding $5T to the national debt. When our total revenues in a good year peak at just over $2T, we got 6 years of spending in 4 years--and federal spending is never going to be zero. We need billions in business taxes, millions of jobs and deep spending cuts just to get back to a $400B or so deficit. This is before we reserve a dime for the health care agenda.

Are voters going to forget that an $862B stimulus plan wasn't a success by its own objectives (e.g., contain unemployment below 8%)? Or a healthcare bill putting their own popular coverages at risk? Or the debacle of the BP oil spill?

It's likely the Democrats are going to try to scapegoat the Republican House for any problems over the coming term. But if the Republicans actually shrink the deficit, introduce new ways to deal with the health care sector without breaking the bank, etc., they will gain credibility with independents and moderates. And they'll be able to say in 2012 the only reason they weren't able to do better is because the Senate and Presidency were controlled by Democrats.

The fact is, Obama won 53% of the vote in 2008. I think the 46% of McCain voters haven't changed their minds about Obama. I believe that the 53% approvals or so in the national news polls following the Tuscon Massacre may well be Obama's peak. I think it would take some incredible event (e.g., finding and killing Osama bin Laden) for Obama to go up from here. I think you'll see Obama slowly drifting back to 47-48% over the next few weeks.

Keep your eye in China; dry shipping statistics show the commodity imports into China slowing down. A China stock market correction could hit natural resource-rich economies (e.g., Australia, Canada, and South America) and trigger a global recession, exacerbating European economic difficulties. With Donald Trump and Rush Limbaugh joining Chuck Schumer on the China-bashing front, any kind of trade war will result in a lose-lose situation for the global economy.

Frivolous Abusive Lawsuits: Thumbs DOWN!

I intended to provide a recap of the US Chamber of Commerce's 2010 countdown of the worst cases of lawsuit abuse earlier, but there were intervening news stories. I've experienced my own form of legal system abuse which I will not describe here, but let's just say I've experienced the Alice in Wonderland situation of having to hire a lawyer, when I was the victim of a situation (there's a similar story summarized below in a different, far more tragic context). I firmly believe, with a passion, we need to have people or organizations whom abuse the legal system not only pay all related legal costs but be legally sanctioned.

The 2010 polls results are listed here (and I encourage readers to visit the source websites), but I'll summarize a few of those which particularly caught my eye:

• According to law enforcement in the Kalispell, Montana area, a girl, despondent and suicidal after an argument with her boyfriend (she explicitly hinted in text messages of an impending car accident), veered over the lane divider on an overpass at 85 mph and crashed into an oncoming vehicle, killing a 4-month pregnant, 35-year-old mother and her 13-year-old son. The girl, who survived the accident with permanent injuries, is suing the widower/father (and other parties) for loss of income and pain and suffering.
• A motorcycle driver in northern Idaho was stopped and subsequently charged with DWI given a blood alcohol of .16. He claimed that the real motivation for his arrest was an unconstitutional intolerance for his Native American religious beliefs: after stopping him, they deliberately opened and searched the contents of the medicine bag, which had been specially blessed by a medicine woman in 1995. The troopers, in opening and examining the medicine bag, had dissipated its mystical powers, making it worthless, and he is thus seeking $25,000 in compensatory damages.
• A mid-20's Los Angeles woman with a Blackberry cellphone was using the walk option to Google Maps for 2-mile distance directions between locations in upscale Park City, UT on a winter's night. The walking path included a 4-lane highway without usable sidewalks in either direction; thus, she walked inside one of the highway lanes when a driver, not seeing her in time, hit her. She is suing Google for alleged negligence, carelessness, and recklessness in not sufficiently alerting her that walking in a highway lane at night (never mind without the same types of precautions bicycle riders use, e.g., lights, reflective clothing, helmets, etc.) is dangerous. (After all, the Blackberry version of Google Maps does not include the general warning computer browser versions have, noting that pedestrian pathways or sidewalks may not available.... Surely if Google had squeezed that standard general warning in plain view on the Blackberry, the lady would have reconsidered her options...) [I have used various map services over the years (e.g., Mapquest, Yahoo, and Google), and all of them have occasional usability problems: wrong direction turn, misstated distances, etc.]
  
  

Political Humor

A few originals:

• Sasha Obama, the President's younger daughter, is learning Mandarin in school and decided to practice her new language skills on Chinese President Jintao. Her school has issued a denial that it is selling US Treasury bonds in a fundraiser.
• The celebration of President Obama's second anniversary (cotton) figured in the recent exchange of gifts between Presidents Obama and Jintao. Obama gave the Chinese President several bales of our best cotton, and Jintao presented Obama with cotton bedding, rugs, bath towels, curtains, and tablecloths. And a special discount on custom-made suits and monogrammed bathrobes.

Musical Interlude: One-Hit Wonders/Instrumentals

Herb Alpert, "Rise"

Miscellany: 1/20/11

Quote of the Day

Pray that you will never have to bear all that you are able to endure.
Jewish saying

Common Cause's Assault Against the First Amendment: Thumbs DOWN!

This is not unlike Gore's attempt to steal the 2000 President election by trying to mine enough votes from legally disputed ballots in Democratic-controlled Florida counties to reverse Bush's machine-verified victory recount. (Clearly ballots not machine-scored in Democratic-controlled are more equal than the same in Republican-controlled counties...) The Gore strategy was two-pronged: (1) reverse Bush's victory outright by manipulating crony county vote counts; and/or (2) run out the clock on Florida's certification of electors (since Bush needed Florida's votes to win the vote of the electoral college). The US Supreme Court ruled 7-2 against the first point, rightly recognizing equal protection was violated in using arbitrary vote counting procedures and, more narrowly, ruled 5-4 that Florida could certify the election using existing vote counts in order to participate in the the electoral college by Constitution-prescribed dates. (Liberals claim Bush "stole" the election and they would "prove" that Gore won the election once ballots were made available via the Freedom of Information Act; this would incidentally taint the Supreme Court's second decision and cause great scandal in the government. Journalists did subsequently obtain and scored the disputed ballots--in Bush's favor.)

The reason I raise the issue is that the liberal organization Common Cause, still upset over the Citizens United v FEC decision, which ended the unconstitutional prohibition (and double standard) against for-profit, non-media business free speech, wants to argue the decision was improper and should be vacated, claiming that Justices Scalia and Thomas should have recused themselves from the majority opinion because of travel expenses paid by the Federalist Society to speak at a retreat hosted by the private company Koch Industries' CEO. (The libertarian billionaire Koch brothers are reported to be a sponsor of the Tea Party.) A further allegation has been made that Justice Thomas' wife's leadership position for a conservative cause organization also constituted a similar conflict of interest.

By any objective analysis, Attorney General Eric Holder should ignore this unconscionable, thinly-veiled attempt to intimidate Supreme Court justices and manipulate their decisions. First, the difference in the Citizens United decision was the two Bush nominees (Roberts and Alito); the remaining three in the majority (Scalia, Thomas, and Kennedy) had already telegraphed their principled position in 2003, years before the Citizens United decision. Second, the travel expenses in question were not paid by the Koch brothers but the Federalist Society and were duly reported by the justices in a timely manner. Moreover, the Federalist Society is funded by membership dues and grants, and it has sponsored appearances by jurists or lawyers whom do not agree with its more conservative orientation (e.g., Justice Stephen Breyer).

Have the progressive voices called out President Obama, who publicly criticized the Supreme Court in last year's State of the Union address, despite the fact he broke a campaign promise, unlike John McCain, to limit himself during the general campaign to equal public funding (simply giving a self-serving excuse that HIS donations were "more equal")? The Weekly Standard also argues that the advocacy organizations conveniently pick and choose their targets; for example, groups appealing a federal judge's decision throwing out the 2008 California Proposition 8 ratification (restoring the traditional definition of marriage) argued that Appeals Judge Reinhardt should recuse himself due to his wife's ACLU local branch adversarial involvement in the case.

My First 2011 Candidate for Jackass of the Year

Rep. Steve Cohen (D-TN) compared the GOP's principled opposition to the 2010 Democratic Party Health Care Law to the propaganda of key Nazi's, using the term "blood libel". We can see how Obama's recent post-Tuscon Massacre address has resonated with his own partisan base (so much for his "leadership" on the issue: how many times have I said about Obama: it's not what he says, but what he does?)

I discussed the objectionable use of the term 'blood libel' in an earlier post where I condemned Sarah Palin's widely reported use of the same term. Let me quote the definition from religioustolerance.org:

A false belief which has endured since the 1st century BCE. It states that members of a religious group kidnap, abuse, ritually murder and sometimes eat the body of a member of another religion. Groups creating this groundless fable include ancient Greek and Roman Pagans, Christians, Nazis, and Muslims. Innocent religious groups victimized by the fable include Jews, Christians, Wiccans, Druids and other Neopagans, and Roma (Gypsies).

[I mentioned the classic examples of Roman pagans' false claim that the Christian sacrament of Holy Communion (Matthew 26:26) is an exercise of cannibalism and the anti-Semitic lie that a key ingredient of matzos is Gentile blood.]



Political Humor

Obama and Hu had a private dinner the night before. When Obama tried to pick up the check, Hu said, “Your money is no good here.” Obama laughed, and Hu said, “No, really, your money is no good.” - Jay Leno

[The bill was for $900B. When Obama tried to pay with his Federal Reserve credit card, he was told that he was over his $14.3T credit limit: he would have to put up Fort Knox as collateral...]

A study shows that nearly half of our country’s undergraduates show almost no gains in learning after their first two years in college. And the other half are nerds. - Jimmy Kimmel

[On a separate note, President Obama hasn't learned a thing from his first 2 years in office.]

Some originals:

• House Speaker John Boehner has really cut the White House entertainment budget. Chinese President Hu Jintao was delighted to find a Chinese-made toy came with his Happy Meal. (He didn't get one when he visited the San Francisco area...) Obama read the message that was inside his fortune cookie: "You will run for President in the middle of the biggest recession in 6 decades against a 72-year-old career politician from a party whose outgoing President has the lowest approval rating in decades, whom chooses an inexperienced, second-year governor from a small state as his running mate, has far less campaign money, admits that he needs to be educated on the economy, and unilaterally suspends his campaign."
• Senate Majority Leader Harry Reid said he would not go the White House dinner because the Chinese President is a “dictator.” On a separate note, Reid vowed the recently passed House bill repealing last year's health care law will never get a floor vote.
  
• For crying out loud, Speaker Boehner also chose not to attend the White House dinner...

Musical Interlude: One-Hit Wonders/Instrumentals

Club Nouveau, "Lean on Me"

Miscellany: 1/19/11

Quote of the Day

Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent.
Calvin Coolidge

A Brief Comment About Readership

I don't write for the approval of others, but as someone with two pure math degrees and whom has performed statistical analyses for various projects in academia, I have always been fascinated by the readership numbers since Blogger made them available last July and counting. But my readership has collapsed since New Year's--probably half the rate of last month, slightly below my November peak. Readership had built steadily from July. But January will probably be my worst month by far, and yesterday's count was the lowest I can recall for a weekday. I don't know if it's a cyclical thing, if something has changed in terms of how Google is promoting the blog or computing readership statistics, if readers are adversely responding to provocative opinions or some other reason. From my standpoint, the quality of the posts has remained consistent.

I put a lot of work into my posts, and I've published a daily post in this format for several consecutive months, while working some gigs with long hours. This is probably unsustainable, especially if I take on certain travel or commute-intensive professional gigs. (In fact, I haven't published my nutritional blog for over a year.) It isn't so much the readership numbers; but some of my segments sometimes run longer than syndicated columns, and I will not publish for the sake of publishing. There are other writing projects I want to pursue (besides free blogs). I have no immediate plans to change my format or publishing schedule (if that happens, it will likely amount to little more than an occasional day or two between posts): to be honest, I don't see a conservative blog on the Internet with my style, humor, or perspective.

Bipartisan House Vote to Repeal ObamaCare 245-189: Thumbs WAY UP!

The unanimous House Republicans vote in favor of "Repealing the Job-Killing Health Care Act", plus 3 Democrats, got more votes than last year's 219-212 for the corrupt Democratic Party Healthcare Bill.

I want to make a few points. First, many media commentators are raising the same conventional talking point that the repeal is dead on arrival given a 53-member Senate Democrat majority--in any event, there are enough progressive Democrats in either house to sustain a Presidential veto. I believe I posted that prediction even before the mid-terms. But let me point out that McConnell seems confident a vote will occur, and McConnell is not one to make idle threats. I do know that the House Republicans will have a lot to say about any legislation that gets to the President (including budgets and funding for ObamaCare), the large Senate minority has the ability to block almost any legislation Reid wants to pass and to offer amendments, it's very clear that the only reason Reid would block a vote would be because he doesn't have the votes to defeat the bill, and the Senate Democrats are not doing themselves a favor by refusing a vote on repealing a bill that 4 out of 5 Americans polled agree must be changed.

Second, how long are the Congressional Democrats and President Obama going to play the boy who cried wolf? We had to pass the 2009 $787B stimulus bill or else; we couldn't allow the automakers to go bankrupt or else; we had to pass the health care bill or else. The Heritage Foundation wrote an excellent refutation today on the scaremongering charge that the health care of 1 of every 2 Americans would face issues due to preexisting conditions. In fact, this seems anomalous given the fact over 80% of Americans are covered by health insurance right now.

As the Foundation points out, over 90% of those in private health plans are in group policies where they may have health coverage from day 1 or are allowed coverage from day 1 if they could provide proof of insurance over the past year or so. In some cases, there is a waiting period for coverage for preexisting conditions if you have been uncovered or come from certain (e.g., individual) plans. In fact, I once had a minor outpatient procedure which had to be postponed because a transition between doctors, and it was done less than two months in my new position with a different health insurance plan. I never had a problem once I was able to document payment history to my former provider over the prior year. In another case I applied for an individual coverage plan and was denied, not because of my medical history, but because of my self-reported weight for my height. The insurer which refused my coverage provided me information on the state high risk pool program. The high risk plan offered lower premiums for those whom could show preexisting coverage (like me) and others had to pay a significantly higher premium for the first 6 months or so for coverage. (The latter plan was something like $200-300 more a month.)

What Heritage Foundation points out is that there were already certain protections for health insurance which existed before last year's bill passage; they argue it's more reasonable, say, to reform the individual policy market similar to the group policy market than to risk the law of unintended consequences by reinventing the whole health care sector (and/or to firm up state/region high risk pools). "If it ain't broke, don't fix it." The fact is, most people are satisfied with their own health insurance coverage.

The Talking Points on China: Some Comments

We hear a lot of alarmist rhetoric on China: they hold some $900B of our debt; they are manipulating their currency at America's expense; they are rapidly building up their military forces; etc. But we need to put some balance into the discussion. First of all, the national debt is $14T, and China owns almost 6.5% of the debt. About a third of the national debt is held in the social security trust fund, and most of debt is held by domestic organizations and individuals. Whereas the best way to approach this problem is to get our own fiscal house in order, we need to also remember that China maintains a trade surplus primarily with the United States. This means if Americans suddenly lose their interest in Chinese goods, it could be a devastating effect on the Chinese economy where operating margins are thin; factories may collapse and send thousands or millions out of work. Some believe that China's own real estate market has been in its own huge bubble, and there are some shaky banks. The currency peg makes imported goods more expensive, and inflation (particularly food inflation) is growing, adversely affecting Chinese disposable income. But America has a number of advantages, too: it is the de facto world currency and instability increases the desire to hold dollars.

I am reluctant to intrude on the rights of American consumers to buy what they want--produced domestically or elsewhere. But at the same time, our issue has more to do with debt (government, individual and/or corporate) and spending far too much. We also are vulnerable by dependence on imported resources (e.g., oil and rare earths).What we need is to give Americans a reason to invest domestically--e.g., by cutting regulations, getting our government fiscal house in order (competing against industry for investment capital), lowering business tax rates and reforming tax policies favoring debt in place of saving and investment.

The Costs of Regulation: Some Comments


Gattuso, Katz and Keen note that, contrary to Democratic political hype and urban legend, the alleged "deregulation era" under George W. Bush actually added over $70B in regulatory burden (as determined by regulatory impact studies); in fiscal year 2009 (including 4 months under Bush), an above-average $13B were added, but in fiscal year 2010 (ending last September) Obama and the Democrats added an American record of $28B regulatory burden, the highest numbers since data are available (1981). The total annual cost of compliance with federal regulators is estimated at $1.75T annually--more than TWICE the amount of total individual income taxes collected. Again, this is money that is not being invested in business growth opportunities and jobs, but is collected for the benefit of federal bureaucrats.

An SBA analysis (see chart below) shows that small businesses are particularly affected by regulatory costs, being roughly 36% higher. (Especially notable: environmental regulations for small manufacturers.) So the next time President Obama, with a straight face, tells small businesses that he is on their side, he just might try streamlining their regulatory burden. And don't just stop there: that $1.75T is really a hidden type of job-killing taxation that mostly benefits career federal bureaucrats. Business costs (whether tax or regulatory) are fungible; we need more than token gestures on R&D credits or depreciation write-offs. Also, might I suggest to Speaker Boehner that not only should he consider the constitutional basis of new legislation but also its relevant tax and regulatory burdens?

Courtesy of the Small Business Administration

Political Humor

There was a really awkward moment when the Chinese president met President Obama’s daughters and asked them, “So what factories do you kids work at?” - Jay Leno

[The Obama Family Unemployment Compensation Act makes it more profitable for the daughters not to work than to operate their own lemonade stand in front of the White House. Of course, the Obama's waive preexisting employment history for allowances and guarantee that the girls can continue to draw allowances through the age of 26.]

Some originals:

• Outgoing Pennsylvania Governor Ed Rendell called 60 Minutes correspondent Lesly Stahl a simpleton, an idiot, when she pointed out the evils and social costs associated with gambling, a favorite target of governors and legislators for raising tax revenues. Rendell was pointing out addicted gamblers will go somewhere else to get their gambling fix, like Las Vegas. True enough. In November, a lot of Nevada residents went and pulled the slot lever, and the voting machine came up straight Harry Reid terms. However, instead of paying off for voters, the machine asked the voter to donate to the 'Re-elect Harry Reid 2016' campaign via the coin slots.
• Visiting Chinese President Hu Jintao was very impressed with the White House; he noted that the jail China uses to confine its Nobel Peace Prize winner looks different than its American counterpart.
• President Barack Obama, known for his thoughtful gifts to foreign leaders, decided to give President Jintao a 25-DVD collection of President Barack Obama: The Best of 2009-2010. (It comes with a special discount coupon for the next collection.) Unfortunately, although the DVD's were manufactured in China, they don't play on the country's own DVD players. So President Jintao is going to have to set aside one of the DVD players otherwise exported to the United States...

Musical Interlude: One-Hit Wonders/Instrumentals

(From Dr. Zhivago): "Lara's Theme"



Ray Conniff/Singers, hit version with vocals

Miscellany: 1/18/11

Quote of the Day

All profoundly original work looks ugly at first.
Clement Greenberg

Political Potpourri

We've barely started  the 112th Congress when politics is in the air. In particular, the Senate is ripe for a GOP turnover as just over two-thirds of the Senate seats up are Democratic, and the GOP only need to hold serve and win 1 in four Democratic seats to retake the Senate. In a Democratic wave election in 2006, there were a number of  close Democratic wins--Webb (Virginia), Tester (Montana), and McCaskill (Missouri). Ben Nelson (Nebraska) is clearly vulnerable especially after the healthcare bill, and Bill Nelson (Florida) faced a a weak candidate in Katherine Harris, the controversial Florida Secretary of State during the Bush-Gore recount. Martinez fill-in George LeMieux is widely considered to be interested in running for term of his own; Jeb Bush would win the race in a walk, but in fact he passed up last year's campaign. There are other candidates (Congressmen and state legislators) thought to be interested in running. Former Senators George Allen (R-VA) and Jim Talent (R-MO) may decide to follow Dan Coates (R-IN) in attempting to resume their Senate careers.

Senator Sherrod Brown (D-OH) and Senator Bob Casey (D-PA), both with very liberal voting records in purple states that strongly leaned Republican in the midterm election, can expect stiff challenges. The Ohio name that is getting the most attention right now is the new state treasurer, Josh Mandel, whom won 80 of 88 counties. I personally think former Pennsylvania Governor and first DHS Secretary Tom Ridge would be a formidable challenger to Casey, and, of course, Rick Santorum, who lost to Casey, would be an instant favorite, but he's clearly eying an dark horse Presidential candidacy.

Senator Conrad, clearly vulnerable in red state North Dakota, announced he won't stand for reelection, and Senator Lieberman, an Independent/Democrat, badly behind in polls, is also expected to announce his retirement shortly. The Democratic nominee has to be favored to succeed Lieberman in blue state Connecticut, but Linda McMahon, a political novice whom lost by 11% to a popular 3-term attorney general, Richard Blumenthal, whom beat each of his prior GOP challengers by over 30%, is a likely candidate, and there is a former Republican governor and former US Congressmen whom may also run for the nomination.

Needless to say, Republicans have to hold serve; there is no doubt that Scott Brown (R-MA) will have to work at his getting his first full term, but so far Massachusetts voters are giving him (and his independent Republican voting record) good approval ratings. Kay Bailey Hutchison (R-TX) announced, as expected, she would not run for reelection (in fact, she said as much during her unsuccessful campaign to replace Governor Rick Perry last year). No doubt there will be a Democratic challenger (it's hard to believe because Texas has been consistently a red state since 1993, but John Tower in 1961 was the first Republican senator since Reconstruction, and Hutchison won conservative Democratic Senator Bentsen's former seat in 1993). The Republicans have a deep bench, including the current Lieutenant Governor, David Dewhurst.

Is the Pope University Catholic?

Are we really surprised that the progressive Obama Administration is trying to meddle in the internal affairs of Catholic universities, which, on the grounds of religious freedom, are usually exempt from the reach of most federal laws? Last week the NLRB, ignoring the fact that the Archdiocese of New York classifies Manhattan College as Catholic, ruled that the college is not really Catholic but de facto secular and hence must follow labor relations regulations allowing, for example, the unionization of university professors. (Now if any professor could have used union protection, I was the classic case study (there are things I'll never discuss on this blog), but as a matter of principle, I would have refused to join a union, even at the expense of my own career. I would never be a part of an organization which impeded effective university administration and stood by ineffective/incompetent professors.)

Manhattan College must have fallen short of some of the 10 factors described by Kevin Theriot and others suggesting a legal defense against federal and state government intrusion, particularly laws on certain issues where the Catholic Church has taken a contrasting moral position (e.g., contraceptive and/or abortion coverage in health care, extending benefits to homosexual partners, etc.)

Postal Carriers: #11 Fastest-Growing Compensation Over Past Decade?

With the obsolete USPS regularly running chronic deficits, escalating prices, and (surprise) shrinking volumes, it of course follows that Bloomberg Businessweek found postal carriers among the top dozen occupations in terms of average compensation increase over the past decade.  (No doubt Pony Express riders and telegraph and telephone operators can't be that far behind...) The USPS should have been privatized decades earlier, of course...

Health Care and Battle of the Polls on Repeal

With the AP poll showing a modest drop of  opposition (particularly among Republicans) and the Quinnipaic showing a plurality (48-43%) in favor of repeal, tomorrow's expected vote is relevant.

I personally don't like the approach the Republicans are taking, although I favor repeal. I think it has more to do with forcing Senate Democrats and/or President Obama into defending a deeply unpopular law. The popular talking point is with 23 Democratic Senate seats up for grabs, the Republicans can lure 4 Democrats to cross the aisle if it gets to the floor. I don't know how the GOP gets the floor vote past a defiant Majority Leader Reid. In any event, I have to be a realist and say it's unlikely; you can make a case that could happen with new Senator Manchin (D-WV), but Blumenthal and Coons are pledged to support the bill, and I don't see any of the Democrats admitting their original votes were wrong. If they did, it would still be a reelection issue (I can just saw the attack ads now: Ben Nelson flip-flopped on healthcare.)

I think politically the Republican House leadership should really want to start off with some bipartisan wins. But if you are going to take a strategic stance to really put the Democrats on the defensive, you try a different approach. I mentioned in a prior post a couple of obvious poison pills: repeal the mandate and allow states to freeze their current Medicare obligations. There are other approaches as well: for example, one could propose that the total federal healthcare outlays can never exceed a certain percentage (say, 10%) of the GDP, all deferred benefit programs (like the entitlement programs) maintain the same reserve requirements expected in government regulation of the private sector, that any new health care benefits be implemented on a pay-go basis, etc. These are consistent with other federal budget processes (e.g., fixed-bid projects). For example, by maintaining a cost ceiling, managers have an implicit incentive to eliminate inefficient processes.

I'm getting frustrated that no Republican seems to be calling out the ludicrous concept the federal government can run health care efficiently (especially the administrative fee criterion).  The reason that administrative costs are so high is because of differential treatment (e.g., large companies can self-insure and do not have to comply with state-specific benefit mandates; small companies can't). Small companies can't band together, e.g., across states, to gain scalability and thus attract lower pricing from various insurers. It would also be helpful to allow a certain basket of basic health insurance benefits to be guaranteed and marketed across states.

Dems are particularly trying to sell their 2000-page monstrosity on goodies like guaranteed coverage and allowing dependents on household policies until the age of 26. There's no such thing as a free lunch. The Democrats are implying that the health costs associated with keeping kids on your policy don't affect the household policy costs--which is utter nonsense. The Republicans eventually get to the point of talking about high risk pools; they need to invert their presentation, because during the entire year of debate over health care, I rarely heard any discussion whatsoever over high risk pools--their current issues (e.g., inadequate funding), how to finance the subsidized rates, etc.

There are a number of tweaks that could be done to address things like preexisting conditions: for example, insurance plans could get subsidies from the federal government for taking high-cost patients, and/or people who elect not to carry insurance and experience expensive health problems could be assigned penalties or premium surcharges.

What the Republicans need to do is to show that the Democrats, by expanding Medicaid, closing doughnut holes, "free" annual checkups, etc., are doing is exascerbating costs; if people think health care is "free", they will overconsume resources--see doctors unnecessarily, questionable medications, etc. The idea is to let insurance be insurance. There should be deductibles: most people can and should  pay routine expenses. As I've mentioned in the past, when you pay for auto insurance, you are not covering normal operational expenses--gasoline, wiper replacements, oil changes, battery replacements, etc. It's  insane that health insurers or the government should be covering consumables like contraceptives, Viagra, and similar items; most people need to think through the costs associated with bringing a baby into the world and evaluate the intrinsic costs and benefits of contraceptives.

But in terms of Democrats' trying to put lipstick on their healthcare pig, I have a couple of things to point out. First, the health care law is deeply unpopular and has been for over a year counting; only 1 out of 5 or so voters favor the health care law as is. Second, voters have mutually inconsistent positions; for example, they like some of the benefits they understand, involving preexisting conditions and allowing dependents to stay on household family policies until their mid-20's, but they also don't like the individual mandates. People understand that preexisting conditions mean high costs. Only the government can print money to pay for things it doesn't have the money to cover; insurers are not suicidal--accepting policyholders whom cost the company money from day one is a step to bankruptcy. That's why you have the mandate--in essence, forcing healthy people to pay more than their fair share to subsidize other people.

I think we need a fairer way to spread all of these costs, e.g., through a small national sales tax. This would be a conceptually cleaner way for the entire population to spread the costs of catastrophic health conditions. In fact, a similar approach (taxing health care premiums) is how many high risk plans are subsidized.



Political Humor

"Arnold Schwarzenegger says that being governor of California cost him at least $200 million in lost movie roles. Movie-goers everywhere say it was worth it." - Conan O'Brien

[I'm not sure if  Arnold is going to command top dollar for his next role after production costs for "The Governator" left California voters in a $17.2B hole.]

"The Republican National Committee elected Reince Priebus as their new chairman. “Reince Priebus” is also the name of a car driven by Jay Leno." - David Letterman

[Well, they THOUGHT they were voting for syndicated morning TV host Regis Philbin, whom announced his retirement for later this year.]

Musical Interlude: One-Hit Wonders/Instrumentals

Gary Numan, "Cars"

Miscellany: 1/17/11

Quote of the Day

Slight not what is near though aiming at what is far.
Euripides

Remembering Martin Luther King Jr.

I think sometimes we have to separate any man from his legend. I have sometimes mentioned that Martin Luther King Jr, like his father, was a Republican; the Republicans during Reconstruction enacted civil rights legislation which vanquished southern white Democrats deeply resented. White Democrats gradually reassert their power through the polls (including intimidation of new black voters by various groups). GOP-controlled state governments, largely propped up by remaining federal troops, gave way after the controversial 1876 Presidential election when GOP candidate Rutherford Hayes, who won 47% of the popular vote, narrowly beat Samuel Tilden by a single electoral vote, awarded disputed electoral votes for 3 states (Florida, Louisiana, and South Carolina) in a compromise ending Reconstruction in the south. White Democrats consolidated their control with arbitrary voter qualifications (e.g., poll taxes, property ownership or literacy tests) de facto disqualifying most black citizens and enacted "separate but (un)equal" Jim Crow laws, paying lip service to new Constitutional guarantees but in effect perpetuating an underclass.

The principle of "separate but equal" was upheld in a nearly unanimous Supreme Court ruling, Plessy v Ferguson. The State of Louisiana required (in the Separate Car Act) railroads operating inside the state to implement and enforce racially segregated cars. Homer Plessy, a mulatto with one black grandparent, purposefully attempted to board the whites-only car and was arrested. Judge Ferguson rejected Plessy's lawsuit against the State of Louisiana, and the Supreme Court rejected Plessy's Fourteenth Amendment challenge, ruling segregation doesn't imply inferior treatment.

Southern states used the Plessy ruling to rollback remaining vestiges of Republican civil rights legislation. Funding of facilities, in particular public schools, was hardly equal (consider, for instance, segregated schools in lower tax revenue neighborhoods). This eventually resulted in the unanimous Brown v Board of Education at Topeka, which ruled public school segregation laws violated the Fourteenth Amendment and provided a beachhead for new civil rights initiative in which Dr. Martin Luther King Jr. operated.

I share Dr. Martin Luther King's dream for every American, regardless of his genetic makeup, being free, not just in words, but in reality, and his prescription for nonviolent change. However, I must respectfully disagree with his politics, which, if anything, are even more strident than Barack Obama's views and polemically dismissive of conservative views. Take, for example, his March 31, 1968 sermon, "Remaining Awake Through a Great Revolution."

For example, Dr. King suggests that the only thing the federal government gave slaves was their release, that liberty meant nothing if they didn't have the resources to exercise their liberty (sort of like being released along an isolated highway, not a place to stay, food to eat, a phone to call someone, etc.) [This is the concept of positive liberty/rights; I had a number of related posts during the 2008 campaign when an old Obama radio interview made the news cycle, where he expressed wistful skepticism that the court system could be used to work around conservative legislators and directly demand necessary economic security expenditures.] He then alleges that white immigrants were given access to free land in the West, farm subsidies, farmer colleges, etc., and basically suggests that the country's policies have been hypocritical and racially motivated:

Now there is another myth that still gets around: it is a kind of over reliance on the bootstrap philosophy. There are those who still feel that if the Negro is to rise out of poverty, if the Negro is to rise out of the slum conditions, if he is to rise out of discrimination and segregation, he must do it all by himself. And so they say the Negro must lift himself by his own bootstraps... they never stop to realize the debt that they owe a people who were kept in slavery two hundred and forty-four years... But [the freed black person] was not given [anything] to make that freedom meaningful...And these are so often the very people who tell Negroes that they must lift themselves by their own bootstraps. It’s all right to tell a man to lift himself by his own bootstraps, but it is a cruel jest to say to a bootless man that he ought to lift himself by his own bootstraps.

I think Dr. King is oversimplifying history in a provocative way and is distorting what conservatives are saying. A number of immigrants have come to this country with nominal assets, Asian immigrants have also faced racial discrimination, and many first-generation immigrants had limited command of English, a definite disadvantage in this country. In fact, many conservatives oppose in principle the public policy examples King is raising (e.g., government farm subsidies or land grants). And many freedmen, since the early days of the republic, had made their own professional niche in society without government handouts, something Dr. King conveniently ignored. We agree that slavery was a moral injustice of the highest order, intrinsically incompatible with the individual's unalienable rights of life, liberty, and the pursuit of happiness--but we can't erase the past and what happened to one's ancestors. We have to start with today's possibilities and make our own future. In fact, we regard victimization as a more subtle form of government enslavement that strips away the individual's power and encourages dependence on others, unworthy of one's own God-given gifts.

I will not comment on several other other King positions in detail here, but just to list a few: he saw spending on the Vietnam War as a zero-sum game with domestic poverty programs; he saw America as arrogant and exploitive of third-world countries, entirely consistent with Rev. Jeremiah Wright's "God damn America" rhetoric and President Obama's international apology tours. He uses the same rhetoric about America isolating itself internationally as a consequence of its Vietnam policies as the Democrats repeatedly used against George W. Bush for his Iraq policies during his second term in office.

Other allegations have been made about Dr. King, including questions of plagiarizing part of his doctoral dissertation, scandalous sexual relationships, and the like. Whether or not that's true, I don't know, but any human being makes mistakes. What I think defines Dr. King is his leadership during difficult years of our country's history. Could he have even envisioned a day where the same party that once institutionalized discrimination against blacks in former Confederate states would nominate and see elected the first black man as President? There may never have been a President Obama without the leadership of Martin Luther King, and a nation is grateful.




Dedicated to Congresswoman Gabrielle Giffords and Astronaut Mark Kelly

Gabrielle's husband Mark told doctors that Gabrielle had smiled at him and to others that she has even rubbed his neck. I am astounded by the improbable, rapid, remarkable recovery to date; God is great! I am also particularly struck by Mark's incredible decency and overtures to assailant Jared Loughner's sorrowful parents. I would hate to put words in Mark's mouth, but the first thing I thought when I heard the good news was of one of my favorite songs from the 1980's:




Looking at the World Through Christina Taylor Green's Eyes

The same news story cited above also mentioned the corneas of youngest fatality of the Tuscon Massacre, 9-year-old Christina Taylor Green, with the agreement of her parents, had been successfully transplanted to two children. I hope no parent would ever have to face that decision, but the gift of Christina has not only inspired a nation but brought sight to two children. God bless the Green family for their generous gift and the memory of beautiful Christina.

Public Humor

"Due to the recession there are now 15,000 less lawyers. Nobody ever talks about the good things that happen because of the recession." –Jay Leno

[The only thing better than 15,000 fewer lawyers would be 15,000 fewer elected officeholders to do mischief with the people's liberties... After all, what do lawyers do when they can't find a job or teach? That's right--they run for public office...]

"The [Congressional Republicans] also hoping to cut back on government regulation on Wall Street. I think we can all agree that Wall Street does a good job policing itself." –Jimmy Kimmel

[...I think we can all agree that the government does a good job regulating its own spending. Let's hope that the Republicans can cut back on spending.]

Musical Interlude: One-Hit Wonders/Instrumentals

Deep Blue Something, "Breakfast at Tiffany's"

Miscellany: 1/16/11

Quote of the Day

But be ye doers of the word, and not hearers only deluding your own selves
James 1:22

Governor Pat Quinn (D-IL): Recall? Thumbs UP!

In last Tuesday's post, I briefly discussed Illinois' new tax hike bill designed to close a large state deficit. They currently have a $13B deficit. Now the Tax Foundation has a chart that shows Illinois has lost nearly $32B in net outgoing taxpayers to other states from 1993 to 2008. Of course, about $11.4B of that is in retirement states  Florida and Arizona; but two prominent neighboring states (Wisconsin and Indiana) each account for over $2B, and only Iowa of the other three states (i.e., Missouri and Kentucky) has net incoming into the state (just over $76M). This is with the EXISTING tax burden (a flat 3% income tax for individuals, 4.8% corporate). Anyone who thinks Wisconsin and Indiana aren't licking their chops over the state tax hikes (Indiana, in particular, has a 3.4% flat income tax rate and Illinois difference with Wisconsin's has significantly narrowed) is in a state of denial.

Literally the only "good" news about this is that Quinn originally wanted larger hikes than he got: 75%  increases in the rates: instead, he settled for 66% individual and 30% corporate respectively. Clearly, a 30% increase in corporate taxes will not help Quinn retain or attract businesses (and relevant jobs) to the state. Quinn expects roughly half of the deficit to be resolved by the tax hikes and the rest by limiting state spending increases to 2% per annum. Faithful readers know the drill: you increase the price/cost of something, you get less of it. Of course, it's more difficult to measure the opportunity costs of tax increases, e.g., the number of people and businesses which would have migrated into the state maintaining stable tax rates. A key reason for the tax hike is to enable the state to borrow just over $12B, two-thirds of which is needed to cover overdue bills and the remainder to cover missed contributions to the state pension fund. (If there is one topic I have repeatedly addressed over the past several weeks, it's the fact that local and state pension funds are unsustainable, but none of the progressive state leaders are willing to play bad cop to their union supporters.)

The proposed business tax burden  (in conjunction with the federal corporate tax and the personal property replacement tax)  would be one of the highest in the country (in fact, globally). Readers should note that Quinn promised to veto any bill raising the tax rates over 100 basis points (i.e., from a 3% income tax rate to 4%) Quinn needed an 85% vote in the Chicago area to barely squeeze out a victory over an obscure, weak Republican challenger; his fiscal "conservatism" is not credible, having vetoed only 1 spending bill and promising the employee unions no layoffs or closures, putting his special interests for the unions over the general. So there is already an attempt to recall newly-reelected Quinn. There's a waiting period for the post-Blago recall measure, and it requires consent of a number of state Democrats in each house (10 in the House, 5 in the Senate, the same for Republicans (which shouldn't be a problem)).

I am somewhat skeptical that Mike "Mish" Shedlock will attract enough Democrats (recall the evidence in favor of Clinton's impeachment was overwhelming: in fact, he was sanctioned by the judge in the Paula Jones case and his law license was suspended, but the Senate Dems quietly voted to acquit). But powerful Democrats, like 6-term outgoing Chicago Mayor Richard Daley, have been tough critics about going to the people for large tax increases without putting the taxpayer's interests first, i.e., serious budget cuts.

Sunday Talk Soup and the Coming Economic Iceberg

I listed to last Sunday's podcast of Meet the Press, including Majority Leader Harry Reid, and just about everything he had to say on the policy front was 100% wrong. If I run out of new things to talk about, I'll go back and refute each delusion in detail. But, because I am discussing energy below, one of his Alice in Wonderland moments came when he talked about oil shooting up to over $140/barrel in 2008 and then used that to promote, no, not developing more of our oil resources, but using the same old same old stimulus "good-money-chasing-bad" mindset of  throwing heavy government grants to green energy companies. I mean, this is after he and Nancy Pelosi  added $5T to the current $14 national debt over the past 4 years, now approaching the size of our economy. And that's BEFORE what I call the kaleidoscope  accounting of the new health care law.

Of course, the big news from that interview was that Reid predicted that the Tea Party will melt away when the economy improves. Wrong, and I'm not saying this as wishful thinking. The Democrats don't see to realize that the good ship Titanic they've built in progressive splendor is heading straight for an iceberg, and it doesn't matter how much Obama or the new Republican President try to steer away from it, it's going to hit. It will probably mean the end of the Democratic Party as we know it, as people realize far too late that all these things--over-consuming for decades, heavy consumer debt, heavy government debt, unsustainable entitlement programs, poor business investment, etc.--are going to result in a national nightmare. If you think we have an unemployment problem now, just imagine what will happen with a huge oil shock or if suddenly the world stops buying American debt. What a lot of people don't understand is with a declining American currency as we've had (only a troubled euro and yen are deferring our day of reckoning), our import-dependent economy is already in the process of sowing the seeds for raging inflation--JOB-KILLING INFLATION.  We need to at least triple the job growth numbers we are seeing to make dents in unemployment--but this administration and its progressive Congressional allies have been doing the exact opposite of what they should be doing: pursuing anti-business growth policies: too much regulation, globally uncompetitive tax rates, slumping population growth (not enough legal immigration), and excess consumption, among other things. We need to deal with excess consumption and debt, we have got to get entitlements under control, and we have to cut down our national debt and deal with our trade balance in a serious manner.

In order to do that, we essentially have to undo everything clueless Barack Obama and his crony progressive legislators have done. It's not a question of partisanship; it's a matter of our survival, our standard of living. We are going to hit the iceberg--and it's going to be probably 5 times worse than people expect.

Let me give you a couple of obvious predictions: states and cities are already starting to deleverage (cut debt); many businesses are deleveraging. HINT: when businesses see good prospects, they take on risk,  debt and new employees. We are going to see some cities, possibly states approaching bankruptcy. If you think the federal government is immune from the pain of states and municipalities are going through, think again. There is already a lot of talk about replacing the dollar as the de facto world currency. We are facing rapidly developing third-world nations as global competitors where many people own better cellphones than the one I use, where other countries are graduating 3 times the number of engineers and a fraction of the lawyers we have. (Lawsuit abuse is a major competitive disadvantage for our economy as businesses have to set aside resources to fight or settle frivolous lawsuits, resources that can't be spent on expanding trade.)

Is there any greater indictment of the idiotic backers of Sharron Angle than the fact Harry Reid celebrated her win in the primary? Are we about to see the same thing next year? Democrats would LOVE NOTHING BETTER than Republicans nominating Sarah Palin, a guaranteed loser to Barack Obama. If there's anything worse than 4 years of Barack Obama, it's 8 years of Barack Obama. Obama's lead will firm up with the economy; the question is whether he gets hit with his own economic tsunami before or after his reelection. I worry about the prospect it will be after. Sarah Palin needs to put her country ahead of her personal ambition. We cannot afford the reelection of Barack Obama. It's not a matter of politics--it's a matter of our way of life.

Charts of the Day

Source: energyandcapital.com

The first chart shows how oil is a major vulnerability of our economy. We have basically stabilized our consumption of oil at about 20 million barrels a day. Now there are some ways we can mitigate our need for oil, which is to turn to (cleaner) natural gas, domestic supplies of which have become far cheaper due to technological innovation. We can easily convert buses and trucks to run on a form of natural gas, for example. But we are probably years away before compatible (e.g., algae-based) fuels can be produced in volume. We can promote telecommuting technologies or so people don't need to commute daily from the suburbs.

But even if we succeed at electric car production (at a cost and volume and assuming we have sufficient component materials (say, for example, rare earth)), for many people living in the suburbs or small towns, selling houses with a limited buyers in the market may not be an option; to some extent, satellite commuter rails may help, but the volume may not justify the investment.

The bottom line is, we have a quarter million registered cars and trucks, and the most feasible way of running them is through conventional oil. I don't want to hear environmentalist ideals here: companies may not be able to hire the people they need, and people may not be able to find jobs if commute costs go through the roof. We face a big problem: a lot of developing nations (China, India, Brazil, and others) have rapidly growing middle classes. For example, Indian car companies are aiming at producing cars selling for $3000 each. China already imports almost 5 million barrels a day, second only to the US, and it was a net exporter just a few years ago. The point is, the US has more competition for output a shrinking number of exporters with maturing, declining production. EVEN IF WE STABILIZE our net imports, with any decent global economic growth and a world sloshing in US dollars, prices are on their way up--and the highs of 2008 may come back sooner than expected.

In the meanwhile, domestic oil production is stagnant. We have not been a net exporter for years. This will not improve until we provide more domestic incentives to make local production (of oil and other goods and services) viable. But that brings me to a second, related point. Consider the corn chart below. Food inflation is soaring; in some areas of China, half of disposable income is being spent on food. Why? Because we have counterproductive policies to produce ethanol from corn; even Al Gore is beginning to second-guess ethanol (although he's probably more worried about fertilizer runoffs into environmentally-sensitive waterways). There are other technologies (not currently feasible in commercial quantities) for producing ethanol.  In the meanwhile, there is no pipeline infrastructure for transporting ethanol, and the production of ethanol requires considerable consumption of fuel. In the meanwhile, if you check ethanol producers, a lot of them are struggling: excess capacity, blend limits (up to 15% for conventional engines), higher price of corn, limited number of flex-fuel cars, etc.

Other alternative energy stories are not doing well; Evergreen Solar, for instance, finds its cost structure of panel manufacturing in the US globally uncompetitive and is shipping those operations to China (what was that, President Obama, about alternative energy being a jobs grower in the US?) There have been challenges in the wind power business with Pickens' abandoning his famous 2008 initiative, and even CSU finding out it couldn't afford to continue its own wind power initiative. Does this "disprove" the viability of an alternative energy industry? Of course not. But when you have economically feasible, job creating technologies and natural resources of oil, gas, and coal--and an unsustainable national debt, President Obama and Congressional Democrats are playing Russian roulette with our economy at stake.

Courtesy of dailywealth.com

Political Humor

"Chinese President Hu Jintao will be at the White House next week. The good news is, he has no plans to foreclose. We can stay another month." –Jay Leno

[And every time "Hail to the Chief" is played, China gets a royalty check. Jintao is also considering having Obama put up AIG, Fannie Mae, Freddie Mac, and GM as collateral against any future loans, plus options on offshore oil and gas exploration, shale development in the West, and ANWR...]

"Police are looking for a man in Phoenix who robbed a bank and told the teller he wanted the money in twenties, forties and sixties. Authorities believe he could be one of President Obama's economic advisers." –Jay Leno

[Not quite, Jay. The man demanded all the Obama money in the bank. He really wanted it in $80 bills, but somebody had told him that an $80 bill is worth less than a $20 bill...]

Musical Interlude: One-Hit Wonders/Instrumentals

Blue Swede, "Hooked on a Feeling"