Thursday, September 29, 2011

Where the Obama job plan falls short

Fareed Zakaria critiques the Obama 'job' bill and then suggests his own solution. He begins with this reasoning:

President Obama’s jobs bill is better than doing nothing in the face of a national crisis, but it won’t have much impact on unemployment. Many of the measures are short-term tax breaks and benefits that are unlikely to affect demand for products and services — business’s fundamental problem — and so won’t boost hiring.

Where Obama’s jobs bill falls short - The Washington Post
Thu, 29 Sep 2011 16:16:31 UTC
If it is a jobs bill that will not create jobs, how is it adding $477 billion of debt better than nothing?

If adding jobs is the goal, decrease the price of labor. The government has been increasing liability and taxes on labor, along with risk exposure, for decades. Just the same as it has for land, real estate and externality liability, while drastically slowing down all business development in a warren of regulation and involvement at every level.

Now we have an infrastructure bill. Was not that the way the first stimulus was touted? I guess this time we are led to believe that the administration really, really means it, and its execution will be intelligent, timely and focused on truly decrepit infrastructure. That requires a large leap of faith, since governments have been entrusted with that infrastructure in the first place.

Wednesday, September 28, 2011

Why we need permanent larger government

Mr. Sachs begins in an interesting place regarding truly guargantuan government:

One of the common errors of our recent policy debate has been the belief that various studies of the Congressional Budget Office (CBO) "prove" that the stimulus measures have raised employment and output. Careful readers of the CBO reports know that the CBO has proved nothing of the sort. The CBO reports have assumed that the stimulus works, relying on multipliers found in its mathematical models of the US economy. The CBO hasn't in fact re-examined its model for purposes of estimating the impacts of the stimulus policies.

Jeffrey Sachs: A Real Jobs Program (Updated)
Wed, 28 Sep 2011 06:32:03 UTC

Tuesday, September 27, 2011

Putin and Russia

I view Russia as a mafia run economy. Ralph Peters views it as czarist dictatorship. Maybe the only difference is scale. In any event, he has imprisoned or killed his detractors and successfully quelled any opposition. On the international front, he has also positioned himself to extreme advantage:

It’s worth noting how much Putin has achieved: Like his hero, Peter the Great, he tamed the new nobility (of wealth) and consolidated the power of the state. He returned Russia to great-power status — largely through bluff. He steamrolled a one-sided new START agreement over American negotiators who desperately wanted a deal. His manipulation of Europe has given him virtually every pipeline agreement he wanted while sidelining NATO’s new members in the east and keeping Ukraine weak and disunited. He dismembered Georgia but paid no price for it. He has even achieved a grip over supplies for our troops in Afghanistan second only to the chokehold we granted Pakistan in a fit of strategic ineptitude.

The genius of Vladimir Putin - The Washington Post
Tue, 27 Sep 2011 14:04:23 UTC

Russia is a declining state by any measure other than energy production. Its people are dying or emigrating, its standard of living stymied by a corrupt and briberous economy and state machinery that harckens back to a violence of generations past.

Regardless, in true carpe diem fashion, Putin has soldiered on. The West neither has the moral clarity or the time and capability to respond. As the calamity that is the Eurozone unfolds, we see that encroaching governments, whether they be czars or socialists, all arrive at the same place, economically and morally bankrupt, their purpose long ago lost within the warrens of a bureaucracy determined only to preserve itself.

The Tea Party carricature

Jonah Goldberg resurrects a weak but recurrent theme in his LA Times article; that the silent conservative majority has awakened. He borrows a bear analogy:

In March 2010, liberal columnist Peter Beinart argued that, for decades, Democratic politicians treated America's innate conservatism like a slumbering bear: If you make no sudden moves and talk quietly, you can get a lot done. But if you wake the bear, as Democrats did in the late 1960s and early '70s, the ursine silent majority will punish you.

Goldberg: A bear of a problem for Obama --
Tue, 27 Sep 2011 00:50:20 UTC

One could spend several articles exploring the implications of progressives as man slinking inside the lumbering conservative bear cave, but we will leave that to reader imagination.

Certainly Beinart is not the first writer to notice that voters have been asking for smaller government since Jimmy Carter, and maybe before that.

What is more perplexing is progressive portrayal of the bear as racist, stupid and fearful. Maybe we don't need to leave the bear analogy up to our imagination after all.

Negative progressive labeling of the Tea Party has always been perplexing since it alienates such a significant portion of the population. More mystifying is that the caricature is so far from reality. Some of the most popular Tea Party speakers are black, and some of them are now sitting in Congress. Herman Cain is running for President.

The Progressive narrative often suffers from its disassociation from reality. We suggest this one is particularly harmful and may eventually smear their own brand beyond repair.

Saturday, September 17, 2011

Green jobs and Solyndra

The theoretical argument for government's terrible track record in research and development, evidenced by the gob smacking Solyndra failure, is attractive and simple. Unfortunately when we look into the details, we never find a practical example of the theory.

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The idea is that private equity is too risk adverse and covets a payback time line too short for foundational, ground-breaking innovation. Therefore it is efficient for government with its vast resources to spend a portion of them on research and development of its own. Since this kind of research is inherently riskier than private investment, its returns will be terrible and fraught with failure. That is why they are doing it!

But as Solyndra demonstrates, where is the ground-breaking technology? The business case demonstrated that it would fail in September of 2011. Its technology had been tried and failed numerous times before. And its cost structure was much higher than competing firms. We may never discover why the Obama administration viewed any of this investment as cutting the edge on anything.

Government R&D, even at its best, often looks more like the Shuttle program, where we take a very expensive program compared to less costly alternatives and run astronomically rising iterations of it with very little innovative variation, learning almost nothing.

In the case of Solyndra, all that we know for sure is that we backed a failed technology espoused by an Obama supporter. Neither fact is a recipe for success or advancement.

Thursday, September 15, 2011

Bones and Progressives

On the TV show Bones, the main character is often referred to as a genius given her standing as the best forensic anthropologist in the nation. Perhaps. I think of her more as an idiot savant. Certainly her social skills, ability to work with others, her ego, lack of empathy and general abilities to reason in any field other than skeletons is on par with a Down's Syndrome child.

Bones' application of anthropology to current culture is challenged and warped by her total inability to frame what she knows with the wider cultural and social implications of man's progress. She is like a computer with no compass, an automaton who views the world and its culture as a large toy to be manipulated. She is marvelously adept at her job, and dangerously, neurotically stupid at the same time.

In a lesser way, that is how I view many academically inclined Progressive contributions to society. They are often artificially academic, based on assumptions with a stilted compass, and purport to manipulate the human experience and progress as though it were toy which can be manipulated to its own benefit.

It is not a coincidence that Bones is a Progressive. Her cultural ineptitude prevents her from seeing that most of her academic science would destroy the very culture in which she lives. Surely that is partly what she wants, as do most Progressives. What makes it dangerous is that in destroying it, in valuing it no higher than the jungle tribes she studies, she would reduce the current society to the economic level of the shaman run tribe she so readily exonerates. Maybe that is what she prefers as well, although there will be no Smithsonian there, her rational thoughts afforded only in the wisps of time between her harried search for survival and the brutish magnanimities of her master.

Wednesday, September 14, 2011

The bankruptcy of economics

I read a comment on the Atlantic today which I consider priceless and speaks for itself:

If you want evidence of the intellectual bankruptcy present in much economic "thinking" look to the excerpt of Professor McElvaine, which echoes comments made by Swedish medal models Krugman and Stiglitz, in which the bursting of a credit bubble, which was the end result of a deliberate decades long effort by Congress, to expand speculation in credit via a very wide variety of direct and indirect subsidies, is described as the result of "anti-regulatory" behavior. Folks, when a fat man who has been gorging for 30 years splits his pants, after he reaches 450 pounds, the fact that he didn't special order his pant seams to be stiched with filament designed to haul in a 25 foot marlin, doesn't make it accurate to say that poor wardrobe decisions are what bared his ass.

Why Obama Was Never Going to Be the Next FDR - Atlantic Mobile
Wed, 14 Sep 2011 21:36:21 UTC

All I can add is that the largest group of economists in the world, housed at the Federal Reserve, aided and abetted them every step of the way. There is just no substitute for common sense, including decades of regressions by over-educated academics bent on interventionism.

I apologize if the writer would prefer a more personal acknowledgement. I know of no way to do so.

Democrats lose NY-9. What does that mean?

Lest Republicans and Sean Hannity become too enamored with the first Republican win in district NY-9 since 1922, let us remember that the election was a referendum on one, and only one, issue. Obama's anti-Israel policies.

Popper. The open society and its enemies

"I see now more clearly than ever before that even our greatest troubles spring from something that is as admirable and sound as it is dangerous—from our impatience to better the lot of our fellows. For these troubles are the by-products of what is perhaps the greatest of all moral and spiritual revolutions of history, a movement which began three centuries ago. It is the longing of uncounted unknown men to free themselves and their minds from the tutelage of authority and prejudice. It is their attempt to build up an open society which rejects the absolute authority of the merely established and the merely traditional while trying to preserve, to develop, and to establish traditions, old or new, that measure up to their standards of freedom, of humaneness, and of rational criticism. It is their unwillingness to sit back and leave the entire responsibility for ruling the world to human or superhuman authority, and their readiness to share the burden of responsibility for avoidable suffering, and to work for its avoidance. This revolution has created powers of appalling destructiveness; but they may yet be conquered."

~ Karl Popper, Preface to The Open Society and its Enemies

In summary, The Open Society and its Enemies is a monumental defence of human freedom and dignity, and a demolition of many pervasive ideas that render our traditions of rationality and tolerance dangerously fragile under the pressure of social and political crises. Chief among these is the utopian impulse to recreate society in the image of someone's dreams.

Greece default and the Eurozone

Consider this scenario. What would it matter to the American dollar if Los Angeles (Greece and LA both have about 10m people) went bankrupt? Why then, is the EU so involved in protecting bankers' loans with taxpayer dollars? After all, there is no inherent reason why Greece default should significantly impair the Euro over the long run.

Sunday, September 11, 2011

Al Gore and global warming and invasion of privacy

Al Gore wants you to donate your Facebook account in the battle against global warming.

Would you trust someone else with your Facebook account, giving them enough access to post status updates on your behalf? What if that person was Al Gore and it was all for a good cause

Yes, the latest frontier in online activism has been breached by Gore and the kids over at the Climate Reality Project, who want you to donate your Facebook and/or Twitter account so they can force your friends to be as active as you are in fighting the Green fight.

Al Gore wants to borrow your Facebook and Twitter accounts • The Register
Sun, 11 Sep 2011 12:40:26 UTC

Most coverage of this proposal centers on the spamming. But if Al Gore's minions gain access to your Facebook account, spamming your friends is the least of the problem.

They also gain access to all your personal information, where they can add it to hundreds of progressive databases for later spamming, and potential hacking if they lose control of your data.

Lastly, Al Gore could conceivably make money on this deal by selling your personal information to marketers and other activists!

If your privacy is precious to you, why is this in any way a good idea?

Saturday, September 10, 2011

The sounds and smells of the economy

Steven King writes one of the best articles of the week:

I accepted Martin Wolf’s invitation to “listen to what bond markets are telling us” (Financial Times, September 7). Unfortunately, I was unable to detect the call to “borrow and spend, please” so audible to Mr Wolf. I took a deep breath and immediately realised what was going on. I might not have been able to hear anything. But I could certainly smell something. I could smell fear.

Bond yields are low not because investors want governments to borrow more. Bond yields are low for the same reason that the gold price is high, the Japanese yen is strong, the Swiss National Bank struggles to control its currency and equities have tumbled. Investors are trying to find pockets of safety in a world where the financial system appears to be slowly crumbling. This is an olfactory, not an auditory, problem.

Financial Times | I can't hear the markets but I can smell fear

The financial system is collapsing under a babbling tower of debt aided by loose monetary policy and ill-considered central banking interest rates. A great deal of folks are going to have to take debt hair cuts.

When will all the write-downs finally occur? Later rather than sooner as long as central bankers and governments keep preventing it. Which is bad. In the meantime, economies will remain stagnant, and people will attempt to find safe haven for their money.

Friday, September 9, 2011

Obama's job plan

The key to Obama's job plan are cuts to social security taxes. If you needed any more evidence that SS is a Ponzi scheme, you just got it; if there was any ROI on social security, Obama would not dare touch people's retirement money.

Meanwhile, 'experts' have modeled the stimulus of his proposal:

Cutting taxes is a time-honored strategy for stimulating growth. The formula is simple: Workers will spend more money when their paychecks grow, and companies will respond to that increased demand by hiring more workers, creating a cycle that increases the pace of growth.

Preliminary analyses of the White House plan estimate that the tax cuts could create more than 50,000 jobs a month, a significant boost considering that employment climbed by 35,000 jobs, on average, in each of the last three months.

Obama’s Job Plan Hinges on Cut to Social Security Tax -
Fri, 9 Sep 2011 22:37:09 UTC

Being a huge skeptic of macroeconomics, I challenge anyone to prove the bolded statement. Practically, the immeasurability of many national based government programs is one in a long list of arguments for government intrusion, if it is going to take place, to occur at local levels. Local programs have a chance of being measured, along with marrying cost and benefit.

Too many marketing and advertising campaigns in private industry do not have effective measurement mechanisms. But it is highly ironic that in politics this deficiency is a feature, not a bug. For politicians long ago have somehow divorced benefit and cost of their programs, and now they are free of measurement as well.

For no expert can say what the result of Obama's proposals will be, what they are as they occur, or look back after they are finished, and tally any kind of score.

How taxes are regressive

While we're talking about regressive taxes, including social security, Milton Friedman talks about a number of programs that should be changed.

The only services that are rising in price are government programs. Because they are Ponzi schemes, which are also generally regressive in the name of 'equality.'

What is worse, they are bankrupting us.

Friedman, Social security and Ponzi schemes

Mr. Friedman will not answer the simple question: Is Social Security a Ponzi scheme?

The answer is that of course it is.

If I stop paying into my life insurance plan, I am still eligible for the rewards accrued. Because insurance companies invest my money to create an ROI.

If people stopped paying into SS, it would immediately be bankrupt. Because it is a Ponzi scheme. There is no investment; the payers support the retired. And if you should die before you receive all the money you paid in, your children do not receive it. The government keeps it.

Imagine the economic security of the poor if their 12-16% payments into SS for the last 20 years gave them even an insurance industry return. Imagine the nest eggs the poor could have left their children. Given general life spans, imagine how many black men are supporting old white women in their dotage.

I can not understand any supposed intellectual that will not agree that SS is economic crap. 'Crap' is a financial term BTW.

Put another way, the rich use return on investment and compounding to grow richer. Because SS is a Ponzi scheme, the poor are structurally prohibited from participating.

Lastly and most importantly, Mr. Friedman well understands all of this. He will just not admit it. Why? Because fixing SS would entail investing the money with people like Mr. Santelli. And he would hate to do that. More philosophically, it would turn every citizen into an investor, with a stake in the economy. Now why would any Progressive want that? And perhaps most immediately, it would require the state to stop stealing SS and admit they have been wrong all along.

UPDATE: SS as Ponzi scheme is now one of the most debated topics on the Internet. Here is the definition according to the SEC:

A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

"Ponzi" Schemes
Tue, 13 Sep 2011 15:18:37 UTC
That is exactly what SS does.

One of the most often cited defenses of SS is that it is not meant to be a deception. The obvious rejoinder is that Social Security Insurance is neither insurance or secure. It makes no investments; in fact the 'fund' has been raided to pay for other government 'programs.' And the argument seems to be that if folks are gullible enough to participate despite its fraudulent claims, it must be legal. Seriously? Is that the argument you want to go with?

Wednesday, September 7, 2011

Has Obama failed by his own standards?

The conservative Jay Cost believes Obama has failed by his own standards, which he paraphrases as follows:

Obama’s purpose was to “excavate” the lost nobility of American politics, emphasizing the public good over special interests. In Obama’s estimation, it is the dominance of such interests – be it partisan absolutists, lobbying groups, or whatever – that has driven us apart, and eroded the public faith in our institutions. Obama would change all that, and restore confidence in the government.

Morning Jay: Obama has Failed by His Own Standards | The Weekly Standard
Wed, 7 Sep 2011 13:17:42 UTC

Cost goes on to explain that Gallop polls show the electorate now disfavors the federal government more than ever, making him a failure. I suggest Cost's reasoning is off.

That may be an accurate summary of Obama's election platform. But I contend Obama has accomplished almost everything he set out to do. Cost actually lists them. He has permanently grown government and regulation by double digit percentages. He has introduced invasive regulation and a style of autocratic Presidential oversight not seen since Roosevelt. There is no factual or historical evidence that Congress will roll any of it back.

Progressives adore Obama partly because of his 'ability' to doublespeak. Is Cost a victim of such? That he may be a one term President because of what he has done does not bother Obama in the slightest. He already got what he wanted.

And no government since WWII spending ended has ever shrunk the federal government. Even then the Keynesians cried that the sky would fall.

The Fed considers more stimulus

The Fed has already promised to keep interest rates low until 2013, transfering money from fixed income earners and savers (read Grandma's retirement cash flow) to bank Balance Sheets.

Now they are considering additional alternatives, including QEIII. You know, the policy where they devalue the currency.

At their meeting on Sept. 20 and 21, the central bank’s policy makers will consider next possible steps to help the economy, which could include rejiggering the Fed’s portfolio of bonds; pushing down a 0.25% interest rate it pays banks; restarting a bond-buying program, known as quantitative easing; or doing nothing at all.

Fed Spectrum: Where FOMC Members Stand on Stimulus - Real Time Economics - WSJ
Wed, 7 Sep 2011 13:34:34 UTC

Woopsie. They got it wrong:

At their meeting on Sept. 20 and 21, the central bank’s policy makers will consider next possible steps to help the economy bankers and large corporations, which could include rejiggering the Fed’s portfolio of bonds; pushing down a 0.25% interest rate it pays banks; restarting a bond-buying program, known as quantitative easing transfering money from savers to banks, or devaluing the currency to shore up banker Balance Sheets riddled with ill considered loans; or doing nothing at all.

There. I fixed it.