Thursday, December 31, 2009

RNC Questionnaire Mailed to Me

I received this survey from the RNC recently asking me to fill it out so that they can get more evidence to set strategy and show Republican Congressmembers that Obama's policies aren't popular. Humm, the survey seems very biased to me, the questions are loaded--what kind of proof will this survey provide?

And lo and behold, after the questionnaire ends, there is a contribution form for you to send money. This is the first mailing I've ever received from the RNC or any political party. The cynic in me thinks the survey was just to fire people up over controversial topics and remind them of what is going on in Washington today. When they finish, the contribution form is right there so that they can "do something". What do you think?

Wednesday, December 30, 2009

2009 Year End Real Estate Charts

Here are some useful charts as we end the year.

Los Angeles Real Estate Prices Based on Traffic Flow

As we end 2009, it seems the worst for residential real estate is over. During this year, I picked up three properties in the Oakland area and all of them seem to have gone up looking at recent sales data. With properties generating huge cash flows even with a worsening rental market, I doubt that we'll see a new low being made in Oakland. As for the rest of the nation? Who knows. In LA where I live, I see single family homes continuing to trend lower in price, the homes in various non-Westside areas like Riverside, La Puente, Silverlake and so forth need to return to their pre-bubble prices of around $250,000-$450,000 depending on their proximity to Downtown LA.

In LA, it's all about traffic. Traffic is horrible going west in the mornings and east in the afternoons, north and south are horrible all day long. Downtown is the center of the freeway system where all traffic merges into a few lanes ill suited to today's traffic flow. Downtown is also where a lot of high paying jobs are, generally the easier traffic is to and from Downtown, the more valuable the real estate will be. Those who bought homes 30-60 miles away East of Downtown have 2 hour drives each way at least, to and from work. These are the homes that have more to fall, no one wants to spend 4 hours a day in the car, and with prices getting cheaper elsewhere, hitting the magic price point of $400,000-$600,000, the starter home price in LA, real estate in Riverside will have to return to $200,000 to attract takers. Because north/south traffic is especially bad, homes that are oriented on the 5/101/110/405 interstates that seem closer to Downtown than homes to the east oriented on the 10/60 will be just as cheap. That is moving 5 miles north or south is like moving 10 miles east valuewise. The further east and north/south, the lower property values. Homes located west of Downtown are able to escape the bad traffic flow and so reflect that convenience in their prices. West Los Angeles where I live saw prices drop by only 5.5% in 2009 according to Zillow, and the average home is still at a very high $798,900 (Oct 2009 sales).

My general thoughts are that LA has more to fall. It's a rich city, but having to spend $800,000 just to live in a decent area without facing horrendous traffic to and from work is just too much. Surprisingly, it will be these areas that hold up the best as everyone considers traffic congestion to be one of the major factors when deciding where to purchase. Consider this article as a very general overview of the LA market, I was thinking about more specific predictions and so forth but that's a lot harder and more time consuming than I thought it would be. This was supposed to be just a quick 5 minute blurb, but it's been well over 45 minutes now as I have to check facts and so forth. Maybe the lesson from this post is that real estate is very location specific and generalizations are all but useless. No wonder my real estate instructor drilled into us that location, location, location are the three most important factors in real estate. Now that I have 7 properties in LA and Oakland, I fully understand why.

Monday, December 28, 2009

Uncertainty Principle of Economics

With so many people asking why economics isn't able to predict one crisis or another, I've come up with an answer.

Just as physics has its uncertainty principle that forbids absolute knowledge over a particle's position and velocity (momentum to be more correct), perhaps economics should have its own uncertainty principle that it's impossible to predict both direction of a market and the timeframe with certainty. You can predict timeframe exactly, but then have no idea of which way a market will move. You can predict that a market is overvalued and will move down with increasing accuracy, but then cannot pinpoint the timeframe at all.

Such an uncertainty principle of economics would end the questioning of why the latest bubble or market movement wasn't predicted. It's just not possible, if it were, then we won't have a bubble or movement in the first place (think what would happen if we knew housing would drop AND the exact second when the drop would occur). Remember, you heard it here first, I expect a share of the Nobel Prize should someone follow through with the calculations and a formal proposition.

Google's Internet Monopoly

A recent op-ed raises concerns over Google's near monopoly position, read on for my response.

AS we become increasingly dependent on the Internet, we need to be increasingly concerned about how it is regulated. The Federal Communications Commission has proposed “network neutrality” rules, which would prohibit Internet service providers from discriminating against or charging premiums for certain services or applications on the Web. The commission is correct that ensuring equal access to the infrastructure of the Internet is vital, but it errs in directing its regulations only at service providers like AT&T and Comcast.

Today, search engines like Google, Yahoo and Microsoft’s new Bing have become the Internet’s gatekeepers, and the crucial role they play in directing users to Web sites means they are now as essential a component of its infrastructure as the physical network itself. The F.C.C. needs to look beyond network neutrality and include “search neutrality”: the principle that search engines should have no editorial policies other than that their results be comprehensive, impartial and based solely on relevance.

The need for search neutrality is particularly pressing because so much market power lies in the hands of one company: Google. With 71 percent of the United States search market (and 90 percent in Britain), Google’s dominance of both search and search advertising gives it overwhelming control. Google’s revenues exceeded $21 billion last year, but this pales next to the hundreds of billions of dollars of other companies’ revenues that Google controls indirectly through its search results and sponsored links.

One way that Google exploits this control is by imposing covert “penalties” that can strike legitimate and useful Web sites, removing them entirely from its search results or placing them so far down the rankings that they will in all likelihood never be found. For three years, my company’s vertical search and price-comparison site, Foundem, was effectively “disappeared” from the Internet in this way.

Another way that Google exploits its control is through preferential placement. With the introduction in 2007 of what it calls “universal search,” Google began promoting its own services at or near the top of its search results, bypassing the algorithms it uses to rank the services of others. Google now favors its own price-comparison results for product queries, its own map results for geographic queries, its own news results for topical queries, and its own YouTube results for video queries. And Google’s stated plans for universal search make it clear that this is only the beginning.

Because of its domination of the global search market and ability to penalize competitors while placing its own services at the top of its search results, Google has a virtually unassailable competitive advantage. And Google can deploy this advantage well beyond the confines of search to any service it chooses. Wherever it does so, incumbents are toppled, new entrants are suppressed and innovation is imperiled.

Google’s treatment of Foundem stifled our growth and constrained the development of our innovative search technology. The preferential placement of Google Maps helped it unseat MapQuest from its position as America’s leading online mapping service virtually overnight. The share price of TomTom, a maker of navigation systems, has fallen by some 40 percent in the weeks since the announcement of Google’s free turn-by-turn satellite navigation service. And RightMove, Britain’s leading real-estate portal, lost 10 percent of its market value this month on the mere rumor that Google planned a real-estate search service here.

Without search neutrality rules to constrain Google’s competitive advantage, we may be heading toward a bleakly uniform world of Google Everything — Google Travel, Google Finance, Google Insurance, Google Real Estate, Google Telecoms and, of course, Google Books. (more)

The reason Google has a near monopoly is because it offers relevant searches and useful services. Other search engines that started to place paid sites at the top of their queries quickly lost market share and are now all but dead. Google has always made it clear what is a paid placement and what isn't. There's a line that everyone can see separating the two and it works well. Their algorithm works well, that's the #1 reason they enjoy such a dominant position. Recently Microsoft's Bing has come up with a search that works either just as well, or nearly as well, but it's interesting that they've not been able to come up with a search that clearly works better than Google. Even so, Bing is gaining market share, though mostly at the expense of other search engines.

Google maps is far superior to Mapquest. Google maps will lead you to Google Street View, which is a great way to look around the neighborhood without having to drive there. I can only imagine the amount of money and resources it cost to photograph every single street and address from several different views and make it accessible.

In short, Google has a near monopoly because it's good, it's better than the competition, and because there are low barriers to entry, it has to keep on being good or else some other startup will take over. Only a few years ago, people were concerned that AOL and Yahoo would consolidate their monopoly positions as search/gateways to the internet. These concerns have proven to be ill-founded. If anything, AOL and Yahoo are fighting for their lives, fighting to keep relevant in a fast moving and very competitive online marketplace. I believe Yahoo finance is still the #1 finance site on the internet because it's the best. Google finance is not quite as good even though it has certain features Yahoo doesn't.

The internet is the last place government needs to worry about monopoly power and unfair competition. Government should be focusing on Ticketmaster and its monopoly of ticketing, this is an obvious monopoly that tries to inhibit competitors and offers very little yet charges outrageous fees that can be easily 50% of the ticket price. Just try and buy a bleacher ticket to a Dodger's game. $8 for the ticket, but add to that convenience fees of $3 and then mailing fees and service chargers of $2.50 and an additional $5.50 is added on a $8 ticket! How they can be allowed to merge with LiveNation is a mystery to me, where are the anti-trust regulators? Where is the Justice Department on this one? It's so obvious it's a joke.

Regulations can only work if the regulators do their jobs. That's why I'm so skeptical about new regulations and new government agencies that will supposedly cure all of our ills. If only they would start doing their jobs and uphold their current duties, I would be more willing to view regulation as a viable and even superior solution. Please do your jobs government bureaucrats! Perhaps we need a regulation that requires regulators to regulate.

Fixing Corporate America

What we need are interests of owners (shareholders) and managers to be aligned, and a mechanism for owners to enforce discipline on mangers. With alignment, fraud and taking huge risks would not happen, Enron and the housing mortgage bubble would not have happened. All government needs to do is to legally empower owners to have control over what they own.

Why have we not employed this solution yet? Because it benefits neither government nor the managers who donate money to government. There is huge opposition by managers who are able to game the current system, and government has no incentive to make the changes needed so only inferior reforms are proposed.

All the reforms so far being discussed focus on empowering the government to act on behalf of owners to discipline managers. However that solution is far inferior to giving owners direct power to discipline. With government, interests are still not aligned. Government has its own agenda, some of which do not match that of owners. Owners would trade one master for another, and with government, an even more powerful master.

Those who are truly interested in stopping the abuse and ending what John Bogle calls Manager's Capitalism, need only to increase the power and ease by which owners can set manager pay and replace bad managers. Right now managers set their own pay by stacking compensation committees with other managers, and by staggering board nominations and preventing alternative proposals from appearing on the official, company paid, voting documents sent to each and every shareholder. This sets a high bar for shareholders to organize and inform other shareholders of an alternate slate of management. It also makes it difficult to set pay, the very best that can be done is to reject a compensation proposal, but shareholders can never actually make their own proposal without using their own money to mail and inform other shareholders that such a proposal exists.

The current abuse of the corporate structure can be solved, but there has to be enough will to make the right choices, for government officials and politicians to actually want to solve the problem rather than just increasing their own power and importance. That is the high bar to jump, it won't be easy, which is why there are no proposals being seriously discussed that will actually solve what ails corporate America.

Wednesday, December 23, 2009

The Policies of Job Destruction

There's a lot of talk about creating jobs and industries, but with the same breath the pundits proscribe punitive measures that drive jobs and industries away. Government is not good at creating jobs or industries directly. Small businesses are the job creators, industries must find the investment environment attractive.

When expectations of high taxes, and a burdensome environment ensue, jobs will not be created. Look at the punitive tax increases the health care bill imposes, Congress is working overtime to find ways to get money from wherever it can. The regulatory environmental burdens seem to be at an all time high, why would anyone build industrial capacity here in the United States when cap and trade is being talked about and building any sort of factory or manufacturing plant has to go through tons of hurdles? Of course R&D is leaving, why bother to employ researchers when an additional 8-10% will have to be paid thanks to the health care bill? Those who already provide health care know that the bill will only raise health care costs at a time when they need to cut costs? Better just to move to a country without these burdens, this is why a policy of seizing wealth only drives away wealth and destroys the economy. Obama is destroying any prospect of a good recovery with his tax and destroy policies.

Now if taxpayers were getting something valuable in return for all the government spending, then that would cancel out the negatives of higher taxes. But there has been no focus whatsoever on getting value for government spending. All we see is pork and more pork, nothing that makes it easier for employees to get to work faster or for goods to be transported cheaper and quicker. Foreign nations have their negatives too. India's infrastructure is horrible, getting around Mumbai is a nightmare, and China's regulatory environment is even worse for businesses, you never know when the government might turn on you and seize everything you've invested like Russia. That investors are still looking to move to these countries shows how bad it's gotten in the United States, that the advantages the US offers is no longer enough because of all the additional burdens just imposed by Obama. Those who want job growth and capital investment here must make it worthwhile. Businessmen aren't stupid, they must be able to predict future demand and future costs. Everyone can see that the current path the government is taking is unsustainable, and everyone can see that there is no desire to cut future government spending, the budget will have to be balanced by tax increases. Knowing that, it would be foolish to invest in the United States. Not only are the Bush tax cuts going to expire soon, which means a tax increase, but there are serious discussions over a VAT tax and increasing taxes further than the expiration of Bush's cuts will impose. Again, people must think from the prospective of an investor, why should he invest in the United States when there are better opportunities elsewhere? Anger simply makes no difference to the investor, you can be as angry as you want, I'll just take my money where people are happy to see me and my wealth.

Sunday, December 20, 2009

Conservatives and Liberals United Against Health Care Bill Madness

It's incredible that this piece of crap can be passed with everyone against it. Conservatives and liberals both hate it, but somehow it's going through? I don't think it's too late to mount effective opposition, it's time to call the Senators that were on the fence and encourage them to switch over to a no vote. Then the House members, only one Senator has to switch and less than 10 Representatives.

Democrats need to oppose this bill and make sure it never passes. Everyone is in agreement that this is a piece of crap and will fail spectacularly. Once it fails, Democrats will get all the blame, they're the ones who crafted it, who passed it, who control all the levers of government, the backlash will be enormous, the progressive movement will be set back ten years, just as the conservative movement was set back by the horribly incompetent policies of Bush.

You all know what will happen, there is nothing in this bill that will reduce or control costs, when Americans find out that their health care will cost more and be no better, only worse, there will be a lot of anger. We elect Democrats and this is what we get? You can expect another 1994, time for people to DO SOMETHING and voice your displeasure with Senators and Representatives, tell them that you're not in their district but this bill affects everyone in this country and so you are telling them to vote no. If they don't, you'll donate to their opponent come election time and do everything you can to make sure they are defeated. This is the only type of populism that works, the only threat that Congressmen take seriously and the only weapon the people have as powerful as the ones wielded by the large corporations and special interests that have inserted all they've wanted into this bill.

Health Care Final Senate Bill Just More Pork!

So this is what it comes down to, progress for the sake of progress. Passing a bill for the sake of a hollow victory, are you progressives sure you want what you're asking for? Going through the bill, I see nothing but giveaways and grants plus incentives and extra payments to different people and the creation of huge Trust Funds for politicians to dish out money. Oh, and the $200,000 and above tax on the rich isn't indexed to inflation!!! That means it's only a matter of time before we get bracket creep and everyone becomes subject to that tax just like with the AMT. Below are just some of the special programs and extra payments. At some point common sense has to take over and sensible people have to open their eyes and see that this bill is garbage. Blame this on the Republicans? How? This will be the end of your progressive reform, after two pork filled stimulus packages and now this crap, who will ever trust progressives again?

the purpose of carrying out this section, in addition
to the amounts authorized to be appropriated under
subsection (d), there is authorized to be appro-
priated the following:
‘‘(A) For fiscal year 2010,
‘‘(B) For fiscal year 2011,
‘‘(C) For fiscal year 2012, $4,990,553,440.
‘‘(D) For fiscal year 2013,

‘‘(E) For fiscal year 2014,
‘‘(F) For fiscal year 2015,
‘‘(G) For fiscal year 2016, and each subse-
quent fiscal year, the amount appropriated for
O:\KER\KER09924.xml [file 5 of 9] S.L.C.
the preceding fiscal year adjusted by the prod-
uct of—
‘‘(i) one plus the average percentage
increase in costs incurred per patient
served; and
‘‘(ii) one plus the average percentage
increase in the total number of patients

‘‘(a) CREATION OF TRUST FUND.—There is estab-
lished in the Treasury of the United States a trust fund
to be known as the ‘Patient-Centered Outcomes Research
Trust Fund’ (hereafter in this section referred to as the
‘PCORTF’), consisting of such amounts as may be appro-
priated or credited to such Trust Fund as provided in this
section and section 9602(b).
‘‘(1) APPROPRIATION.—There are hereby ap-
propriated to the Trust Fund the following:
‘‘(A) For fiscal year 2010, $10,000,000.
‘‘(B) For fiscal year 2011, $50,000,000.
‘‘(C) For fiscal year 2012, $150,000,000.
‘‘(D) For fiscal year 2013—
O:\MAL\MAL09852.xml [file 6 of 9] S.L.C.
‘‘(i) an amount equivalent to the net
revenues received in the Treasury from the
fees imposed under subchapter B of chap-
ter 34 (relating to fees on health insurance
and self-insured plans) for such fiscal year;
‘‘(ii) $150,000,000.
‘‘(E) For each of fiscal years 2014, 2015,
2016, 2017, 2018, and 2019—
‘‘(i) an amount equivalent to the net
revenues received in the Treasury from the
fees imposed under subchapter B of chap-
ter 34 (relating to fees on health insurance
and self-insured plans) for such fiscal year;
‘‘(ii) $150,000,000.
The amounts appropriated under subpara-
graphs (A), (B), (C), (D)(ii), and (E)(ii) shall
be transferred from the general fund of the
Treasury, from funds not otherwise appro-
‘‘(2) TRUST FUND TRANSFERS.—In addition to
the amounts appropriated under paragraph (1),
there shall be credited to the PCORTF the amounts
O:\MAL\MAL09852.xml [file 6 of 9] S.L.C.
transferred under section 1183 of the Social Secu-
rity Act.

Thursday, December 3, 2009

What's Wrong with California

What's wrong with California? I've collected a few articles that highlight the reasons why California is in such serious trouble. A couple of friends have already moved away, I'm thinking of moving myself. If you don't understand what is going on with California, the articles below will reveal the hellhole I call home.

City Journal says,

When I recently appeared on Glenn Beck’s TV show to discuss California’s dreadful fiscal situation, I mentioned that in Orange County, where I had been a columnist for the Orange County Register, the average pay and benefits package for firefighters was $175,000 per year. After the show, I heard from viewers who couldn’t believe the figure, but it’s true. Firefighters, like all public-safety officials in California, also receive a gold-plated retirement plan: a defined-benefit annual pension that offers 90 percent or more of the worker’s final year’s pay, guaranteed for the rest of his life (and the life of his spouse).

Government employees use various scams to boost their already generous benefits, which include fully paid health care and cost-of-living adjustments. The Sacramento Bee coined the term “chief’s disease,” for example, to refer to the 82 percent (in 2002) of chief’s-level employees at the California Highway Patrol who discovered a disabling injury about one year before retiring. That provides an extra year off work, with pay, and shields 50 percent of their final retirement pay from taxes. Most of these disabilities stem from back pain, knee pain, irritable bowel syndrome, and the like—not from taking bullets from bad guys. The disability numbers soared after CHP disbanded its fraud unit.

From the Sac Bee

Just days before Gov. Arnold Schwarzenegger and legislators finalized a water package, including an $11.1 billion bond issue, state Treasurer Bill Lockyer warned them not to do it.

California is already deeply in debt, Lockyer warned, has huge budget deficits and can't afford another big bond issue.

"The days of blithely heaping more and more debt burden on the general fund are over – at least they should be," Lockyer said.

The earmark-laden bond issue, the package's single most controversial element, raises an interesting question: Just how deeply in debt are our state and local governments?

The answer: No one knows for certain, since debt is scattered through myriad agencies in many forms, but well over a half-trillion dollars is a fair estimate.

Lockyer's warning pertained to the state's "general obligation debt," which currently stands at $59 billion, and there are an additional $50-plus billion in general obligation bonds that have not yet been sold. The biggest chunks of debt, however, are the unfunded obligations for pensions and health care of retired public employees.

The latest annual pension report from the state controller covers 2006, when the unfunded liability was $64 billion. But since then, state and local pension funds have lost at least $150 billion on investments, so a reasonable estimate of today's unfunded liability is $200-plus billion. A state commission, meanwhile, says the state-local liability for retiree health care is about $100 billion.

No one keeps complete data on local government general obligation debt, but it appears to be roughly the same as the state's, perhaps $50 billion, plus several billion dollars in debt incurred by local redevelopment agencies.

There are tens of billions in specialized state debt, such as veteran home loan bonds, "securitization" of tobacco lawsuit proceeds, and budget deficit bonds.

The interest that must be paid on all that state and local debt is probably an additional $100 billion, so we're already talking about well over $500 billion.

Forbes weighs in,

Right now California's economy is moribund, and the prospects for a quick turnaround are not good. Unable to pay its bills, the state is issuing IOUs; its once strong credit rating has collapsed. The state that once boasted the seventh-largest gross domestic product in the world is looking less like a celebrated global innovator and more like a fiscal basket case along the lines of Argentina or Latvia.

It took some amazing incompetence to toss this best-endowed of places down into the dustbin of history. Yet conventional wisdom views the crisis largely as a legacy of Proposition 13, which in effect capped only taxes.

This lets too many malefactors off the hook. I covered the Proposition 13 campaign for the Washington Post and examined its aftermath up close. It passed because California was running huge surpluses at the time, even as soaring property taxes were driving people from their homes.

Admittedly it was a crude instrument, but by limiting those property taxes Proposition 13 managed to save people's houses. To the surprise of many prognosticators, the state government did not go out of business. It has continued to expand faster than either its income or population. Between 2003 and 2007, spending grew 31%, compared with a 5% population increase. Today the overall tax burden as percent of state income, according to the Tax Foundation, has risen to the sixth-highest in the nation.

The media and political pundits refuse to see this gap between the state's budget and its ability to pay as an essential issue. It is. (This is not to say structural reform is not needed. I would support, for example, reforming some of the unintended ill-effects of Proposition 13 that weakened local government and left control of the budget to Sacramento.)

But the fundamental problem remains. California's economy--once wondrously diverse with aerospace, high-tech, agriculture and international trade--has run aground. Burdened by taxes and ever-growing regulation, the state is routinely rated by executives as having among the worst business climates in the nation. No surprise, then, that California's jobs engine has sputtered, and it may be heading toward 15% unemployment.

So if we are to assign blame, let's not start with the poor, old anti-tax activist Howard Jarvis (who helped pass Proposition 13 and passed away over 20 years ago), but with the bigger culprits behind California's fall. Here are five contenders:

continue reading

National Affairs writes,

It would be difficult to overstate the magnitude of California's troubles. In economic terms, the state is simply broke: issuing IOUs as payments for goods and services, begging the federal government to back state debt (a request the Obama administration denied), and watching its credit rating plummet. To address a $42 billion shortfall in February of this year, the legislature enacted a package that included the largest state tax increases in American history, leaving California with the highest sales and personal income-tax rates in the country (though Hawaii would supplant its lead in the latter category in May). When another $26 billion shortfall emerged by summer, lawmakers — chastened by the 2-1 rejection of further tax hikes in a May 19 special election — agreed on another package that featured more than $16 billion in spending reductions, including deep cuts to education, health, and social services.

That's not even the worst of it. For all of the high drama that has accompanied 2009's fiscal travails (a stunning populist backlash against high taxes, widespread public-employee protests over spending cuts), California's lawmakers let the crisis go to waste — failing to use the moment to improve the state's financial outlook. As the San Diego Union-Tribune's John Marelius noted:

[California projects] a deficit of between $7 billion and $8 billion for the next budget cycle. Plus, federal stimulus money, $5 billion of which was used to backfill education cuts this year, may not be available. And about the time the next governor takes office, $16 billion in temporary tax increases that were included in [the] February budget deal will expire.

As if that weren't apocalyptic enough, California's short-term ­financial difficulties pale in comparison to its long-term obligations. In the most recent fiscal year, the California Public Employees' Retirement System and the California State Teachers' Retirement System, the state's two largest pension plans, lost a combined total of nearly $100 ­billion — about a quarter of their value — in the market downturn. If legislators thought tackling a $60 billion deficit was trying, they are sure to love the challenge of making good on California's fixed pension obligations — which Governor Arnold Schwarzenegger has estimated are $300 billion in the red.

And fiscal troubles are just the tip of the iceberg. California's percentage of adults without at least a high-school education is the second-highest in the nation (and the fact that 72% of those without diplomas are immigrants only fuels the state's growing problem of social stratification). The Commonwealth Fund has ranked the quality of California's health care lowest of the 50 states. The state has the highest rate of criminal recidivism in the country. It has six of the ten worst cities in the country in air pollution. Los Angeles and San Francisco have some of the most congested roads in the nation, which costs the state's employers billions in lost productivity each year. The state is seriously discussing mandatory water rationing, and has in recent years experienced severe disruptions of its electricity supply. Unemployment is over 11%, and a recent survey of corporate CEOs ranked California the worst state in the country in which to do business. It is losing native-born ­citizens faster than any other state.

Finally, the New York Times offers another clue as to why California is imploding,

Still, what California does often takes on outsized significance because the state’s welfare rolls are outsized. In July, while looking for budget cuts, Mr. Schwarzenegger complained that California had 12 percent of the nation’s population but 30 percent of the people on welfare.

As elsewhere, California’s welfare rolls plummeted after the 1996 national overhaul of welfare, from 921,000 families in 1995 to 466,000 families in 2008, but they did not fall as much as in most states. In the recession, rolls have climbed and are projected to reach 557,000 families in 2010, or about 1.3 million individuals.

Parents with special hardships or the youngest babies have always been exempt from work requirements in California, but now two large groups making up one-third or more of all applicants can also opt out: single parents with a child age 1 to 2, or those with two children under 6.

Ms. Zendejas, 20, is the mother of two boys under 6. She has worked part time as a supermarket cashier, but under the old work-to-welfare rules she was supposed to spend an additional 15 hours in vocational training or searching for a more stable job, an effort that she found too hard to juggle, resulting in a financial penalty.

Now she needs to do none of that to get her check, and the penalty of more than $120 a month is ending, too. “It’s a relief,” she said.

The shit is hitting the fan. It won't be long now until the final confrontation between the various leeches who are sucking Californians dry and the taxpayers who have clearly reached their limits. After a record tax increase and already with the nation's highest sales taxes and second highest income taxes, the budget deficit will again be in the tens of billions. Stay tuned.

Monday, November 30, 2009

It's the Details Stupid! Wisdom of a Second Stimulus

It's the details that are important! Government spending can only be good NET DEFICIT if the spending produces long term benefits that will outweigh the costs. In other words, it has to be a good value or else the spending will be a hindrance.

It's like someone at age 18 with a host of choices. Going into debt $80,000 or more can be worthwhile if they are able to get something, like an education, that allows them to more than make up for what they've spent. But if they blow $80,000 on girls and drugs, there'll be a temporary lift, but after the money is spent, their future will be even more bleak being $80,000 in debt.

Obama's problem is that he doesn't seem interested in the details. He let Congress waste the first stimulus instead of crafting his own stimulus plan. That's why there is no support for a second stimulus. The 18 year old has shown himself to be irresponsible by blowing the first installment of his loan. Why bother loaning him more money? There are consequences to waste and ineffective legislation!

Tuesday, November 24, 2009

New Scandal Over Global Warming Data

Uh oh, leaked e-mails from a prominent global warming research group, the Climatic Research Unit of the University of East Anglia in eastern England, reveal that data might have been falsified, cherry-picked, or made up. Other documents and e-mails reveal that the climate model the CRU uses to predict and make their case for future global warming is so riddled with errors and bad code that it is virtually worthless. The CRU's data and model were major contributors in the UN's Intergovernmental Panel on Climate Change's 2007 report. The UN's report is what the United States EPA relies on most heavily to argue that carbon dioxide emissions endanger public health and thus need to be regulated. It all looks like a house of cards that is about to fall. Here is the link to the CBS News article quoted below.

A few days after leaked e-mail messages appeared on the Internet, the U.S. Congress may probe whether prominent scientists who are advocates of global warming theories misrepresented the truth about climate change.

Sen. James Inhofe, an Oklahoma Republican, said on Monday the leaked correspondence suggested researchers "cooked the science to make this thing look as if the science was settled, when all the time of course we knew it was not," according to a transcript of a radio interview posted on his Web site. Aides for Rep. Darrell Issa, a California Republican, are also looking into the disclosure.

The leaked documents (see our previous coverage) come from the Climatic Research Unit of the University of East Anglia in eastern England. In global warming circles, the CRU wields outsize influence: it claims the world's largest temperature data set, and its work and mathematical models were incorporated into the United Nations Intergovernmental Panel on Climate Change's 2007 report. That report, in turn, is what the Environmental Protection Agency acknowledged it "relies on most heavily" when concluding that carbon dioxide emissions endanger public health and should be regulated.

Last week's leaked e-mails range from innocuous to embarrassing and, critics believe, scandalous. They show that some of the field's most prominent scientists were so wedded to theories of man-made global warming that they ridiculed dissenters who asked for copies of their data ("have to respond to more crap criticisms from the idiots"), cheered the deaths of skeptical journalists, and plotted how to keep researchers who reached different conclusions from publishing in peer-reviewed journals.

One e-mail message, apparently from CRU director Phil Jones, references the U.K.'s Freedom of Information Act when asking another researcher to delete correspondence that might be disclosed in response to public records law: "Can you delete any emails you may have had with Keith re AR4? Keith will do likewise." Another, also apparently from Jones: global warming skeptics "have been after the CRU station data for years. If they ever hear there is a Freedom of Information Act now in the UK, I think I'll delete the file rather than send to anyone." (Jones was a contributing author to the chapter of the U.N.'s IPCC report titled "Detection of Climate Change and Attribution of Causes.")

In addition to e-mail messages, the roughly 3,600 leaked documents posted on sites including and include computer code and a description of how an unfortunate programmer named "Harry" -- possibly the CRU's Ian "Harry" Harris -- was tasked with resuscitating and updating a key temperature database that proved to be problematic. Some excerpts from what appear to be his notes, emphasis added:
I am seriously worried that our flagship gridded data product is produced by Delaunay triangulation - apparently linear as well. As far as I can see, this renders the station counts totally meaningless. It also means that we cannot say exactly how the gridded data is arrived at from a statistical perspective - since we're using an off-the-shelf product that isn't documented sufficiently to say that. Why this wasn't coded up in Fortran I don't know - time pressures perhaps? Was too much effort expended on homogenisation, that there wasn't enough time to write a gridding procedure? Of course, it's too late for me to fix it too. Meh.

I am very sorry to report that the rest of the databases seem to be in nearly as poor a state as Australia was. There are hundreds if not thousands of pairs of dummy stations, one with no WMO and one with, usually overlapping and with the same station name and very similar coordinates. I know it could be old and new stations, but why such large overlaps if that's the case? Aarrggghhh! There truly is no end in sight... So, we can have a proper result, but only by including a load of garbage!

One thing that's unsettling is that many of the assigned WMo codes for Canadian stations do not return any hits with a web search. Usually the country's met office, or at least the Weather Underground, show up – but for these stations, nothing at all. Makes me wonder if these are long-discontinued, or were even invented somewhere other than Canada!

Knowing how long it takes to debug this suite - the experiment endeth here. The option (like all the anomdtb options) is totally undocumented so we'll never know what we lost. 22. Right, time to stop pussyfooting around the niceties of Tim's labyrinthine software suites - let's have a go at producing CRU TS 3.0! since failing to do that will be the definitive failure of the entire project.

Ulp! I am seriously close to giving up, again. The history of this is so complex that I can't get far enough into it before by head hurts and I have to stop. Each parameter has a tortuous history of manual and semi-automated interventions that I simply cannot just go back to early versions and run the update prog. I could be throwing away all kinds of corrections - to lat/lons, to WMOs (yes!), and more. So what the hell can I do about all these duplicate stations?...

As the leaked messages, and especially the HARRY_READ_ME.txt file, found their way around technical circles, two things happened: first, programmers unaffiliated with East Anglia started taking a close look at the quality of the CRU's code, and second, they began to feel sympathetic for anyone who had to spend three years (including working weekends) trying to make sense of code that appeared to be undocumented and buggy, while representing the core of CRU's climate model.

One programmer highlighted the error of relying on computer code that, if it generates an error message, continues as if nothing untoward ever occurred. Another debugged the code by pointing out why the output of a calculation that should always generate a positive number was incorrectly generating a negative one. A third concluded: "I feel for this guy. He's obviously spent years trying to get data from undocumented and completely messy sources."

Programmer-written comments inserted into CRU's Fortran code have drawn fire as well. The file says: "Apply a VERY ARTIFICAL correction for decline!!" and "APPLY ARTIFICIAL CORRECTION." Another,, says: "Low pass filtering at century and longer time scales never gets rid of the trend - so eventually I start to scale down the 120-yr low pass time series to mimic the effect of removing/adding longer time scales!"

More on cherry picking from this site.

And more evidence of fraud/cherry picking here.

Thursday, November 19, 2009

Fake Job Creation Numbers

More on the wastefulness of the $787 first stimulus. And we're told we need another? No thank you.

At least funny bones are being stimulated by the Obama Administration's $787 billion economic stimulus bill.

To wit, how many Americans does it take to make nine pairs of work boots? According to the White House's site, an $890 shoe order for the Army Corps of Engineers, courtesy of the stimulus package, created nine new jobs at Moore's Shoes & Services in Campbellsville, Kentucky.

The job-for-a-boot plan may not be American productivity at its best. But such stories go a ways toward explaining how the Administration has come up with 640,329 jobs "created/saved" by the American Recovery Act as of October 30.

Jonathan Karl of ABC News deserves credit among Beltway reporters for committing journalism and actually fact-checking White House claims. Head Start in Augusta, Georgia claimed 317 jobs were created by a $790,000 grant. In reality, as Mr. Karl reported this week, the money went toward a one-off pay hike for 317 employees.

Other media outlets and government watchdog groups have also found numerous errors in the stimulus filings. Jobs have been overstated or counted multiple times. One Alabama housing authority claimed that a $540,071 grant would create 7,280 jobs. The Birmingham News reports that only 14 were created. In some cases, Recovery Act funds went to nonexistent Congressional districts, such as the 26th in Louisiana or the 12th in Virginia. Up to $6.4 billion went to imaginary places in America, according to the Franklin Center for Government and Public Integrity.

Asked by the New Orleans Times-Picayune why so many recipients would misstate their districts, Ed Pound, the director of communications for the Obama Administration's, said, "Who knows, man, who really knows."

Monday, November 9, 2009

Internet Piracy: A Response to Pirates' Justifications

I can't believe either the irrational crap coming out of these people trying to defend pirating. Do any of you understand economics? Logic? You see, there are certain things called goods. People want goods, the very act of trying to get a good means you want it, and that means it has some value.

So we're supposed to believe you will take time to download stuff you do not enjoy and you do not want? That's ridiculous and no intelligent person will even bother making that defense. Do you go around taking grass from parks and front yards? Do you take sand from the beach? No, you won't bother to voluntarily spend time to collect stuff that is worthless to you, the very fact that you do spend time downloading music, movies, or software means that they have value, and means you are getting something for nothing. In the real world, that's usually only possible with theft.

If it's worth nothing to you, then it won't hurt you if it is taken away and you don't ever spend time on it. If there were a pile of sand in your room, would you care if I took it away? No, maybe you'd even pay me to take it away. If these games and stuff are truly worthless, that you aren't getting any benefit, then it shouldn't matter if I prevent you from accessing these things beyond the free demos and trailers given to you buy the owners. You can prevent me from accessing toxic waste, that's worthless to me and I don't care that I can't have toxic waste or play round in it. You can also come and take away what I put in the trash bin anytime you want and I don't care. I'd actually thank you for taking it away, again, it is worthless to me. But it's funny to hear you people complain so loudly about having your "worthless" music and software taken away from you. Why you'd think it was WORTH SOMETHING to you the way you argue and try to make LAME excuses that are so easily dismissed that the very intelligence of those making them has to be questioned. THIS is the best you can come up with? We all know you pirates are getting something valuable and not paying. That's wrong, and that's destructive for the economy and for society. We cannot have a class of people (artists, bookwriters, software developers, etc.) who are not allowed to make money for their labor. That would be slavery and no one allows that anymore. If they should be allowed to make money from providing you a VALUEABLE good or service, then it's up to them to decide the price. Yes, too high a price and you won't buy. Too bad for them huh? The seller absolutely has a right to set a price or to reject a price for the goods/services he is selling. I could go on and on destroying every argument you pirates make, but I think the point has been made. Enough of your BS, you can't justify pirating and so the decent people of society WILL stop you.

Pirating can't be stopped, really? What if a mandatory 5 year jail term in federal prison PER item pirated with NO chance of parole or early release? Are you still sure? How about mandatory software that comes with every computer and every OS that tracks and reports to a government agency what you are doing on your computer so encryption can't hide your piracy? Add that to the mandatory jail term in federal prison, do you still want to tell me piracy can't be stopped? Piracy can be stopped with very draconian and invasive procedures, it's best for society if some other means could be found to make pirates stop without resorting to those measures. The first step is to stop enabling pirates. Take away their BS arguments and make it clear that they have no justification whatsoever for what they are doing. Just like the thief can't claim poverty or that someone else stole from him, as justification to steal. We have to establish in EVERYONE's minds that pirating is wrong. Some people won't do an act that they consider wrong even if they can do it and get away with it. That's a start, but it needs to happen or the draconian stuff will be the only solution left.

Wednesday, November 4, 2009

Using Social Forces to Raise Taxes

The focus of my post was to point out that we should consider using all the fields of social science to deal with broad based social issues such as greed and morality.

To continue as an example, tax rates could be raised much easier if social praise and reinforcement were given to those who paid the most taxes. Costless praise and other forms of recognition such as a "national taxpayers day" where high tax payers received kudos for their generosity and a brief statement by politicians acknowledging that the nation's operations rests on their shoulders (true or not) would lessen the opposition to higher taxes. Social rewards are a type of currency that can be used in exchange for monetary currency. That's why in previous large scale wars like WWII, every nation involved used praise and shame to raise enormous amounts of money and quell discontentment over the low level of consumer goods provided to society. Almost everyone bought War Bonds even though they knew the low interest and unfavorable terms were likely to produce an economic loss for the buyer. Yet the social rewards outweighed the economic gain. There is a case where "greed" and "self-interest" in economic terms were overcome by costless (economic) social forces at work. The same forces can be heralded again to produce positive outcomes.

Wall Street Greed, Economics, and Society

Economics is only one of the fields of social science. It seems greed and self-interest in our society, are being examined solely within the realm of economics, completely ignoring that there are many other social forces at work.

Social norms and mores are incredibly powerful and greatly influence behavior within societies at all times. Group dynamics and acceptable norms can override economic self-interest.

There is almost no mention of moral relativism and the degradation of using social pressure to enforce norms. As John Bogle noted in his books, "Enough", and "Fight for the Soul of Capitalism", it used to be that managers had a sense of duty towards the owners. Likewise, people didn't take advantage of government programs unless they had to, many felt ashamed to take charity and would do their best to avoid the welfare label. It seems the shame of managers enriching themselves and dependence upon public charity has eroded to the point where social pressure no longer exists. Could they be related? Could the new social message of, you are entitled to get these benefits if you are qualified to, if you can legally, regardless if you need it or deserve it? What I see today is a focus on legality, not morality. If it's legal, it's right, there's no shame in doing something that is legal but morally despicable because morality is no longer agreed upon. That could be good or bad, but the weakness and lack of a cohesive moral code means that social forces are weaker too, and that could explain much of the breakdown in ethics we are seeing today.

Who's values, who's morality? That's a refrain often repeated, and it might be good overall to question certain social mores and all societies change their codes of conduct over time. We could be in one of the times of great change. Nevertheless, that also weakens the ability for society to restrict behavior. If it can't be said that some behavior is "wrong", then the only question that remains is, "is it legal?". This is increasingly the question I see being asked today. Right and wrong are simply not factors considered when making decisions. We should not use economics alone to analyze broad social behaviors, all of the fields of social science should be employed in such an analysis.

Linking Government, Tax Rates, and Economic Growth

Tax policy does have an effect on the overall economy. However it's hard to measure because of the lack of a "control" group. How much would have economic growth grown had taxes been lower? Perhaps we would have had a 4% growth rate instead of 3%, it's difficult to determine what if.

That's why the studies referenced below are important.

Unlike other studies, they try and control for other factors leaving tax rates as the variable, this is how any good study of a variable should proceed. These are the only types of studies I know of that try and control for other variables. It's nearly worthless to compare tax rates across different eras to come to a conclusion because of the different conditions that exist. The best we can do is compare countries with similar conditions and with differing tax rates to get an answer. Yet there are so many variables that even those studies cannot completely eliminate outside factors. Still, the studies confirm basic economic theory, that taxes are distortionary and are a negative factor to economic growth. Now people should also see that taxes translate into government spending and that can have positive benefits. It is possible for those positive benefits to outweigh the negatives of a tax, an easy example is the construction of a bridge or road to reduce transportation costs which stimulates economic growth. So it seems that higher taxes can be positive ONLY if the taxes are spent in a way that produces more benefits than the cost of the tax. You can disagree with my analysis of the data, but you should visit the website anyway because there are good and constructive analysis from both sides. Given today's government with its high inefficient manner of allocating resources and spending, it seems highly unlikely to me that the proceeds from a higher tax would be spent wisely.

Friday, October 30, 2009

Are Profits Responsible for the High Costs of Health Care?

I remember reading a study showing that even if all profits were stripped out of health care, the United States would still spend more on health care than the OCED average. Actually, we don't need a study to see this, using OCED figures, we would have to cut spending per person by more than 2/3rds to get to the OCED average.

July 1, 2009

Organisation for Economic Co-operation and Development (OECD) Health Data

Total health care spending per person, 2007 *

United States ( 7290)
OCED average ( 2964)

Australia ( 3137)
Austria ( 3763)
Belgium ( 3595)
Canada ( 3895)
Czech Republic ( 1626)
Denmark ( 3512)
Finland ( 2840)
France ( 3601)
Germany ( 3588)
Greece ( 2727)
Hungary ( 1388)
Iceland ( 3319)
Ireland ( 3424)
Italy ( 2686)
Japan ( 2581)
Korea ( 1688)
Luxembourg ( 4162)
Mexico ( 823)
Netherlands ( 3837)
New Zealand ( 2510)
Norway ( 4763)
Poland ( 1035)
Portugal ( 2150)
Slovak Republic ( 1555)
Spain ( 2671)
Sweden ( 3323)
Switzerland ( 4417)
Turkey ( 615)
United Kingdom ( 2992)

I find it hard to believe that profits make up 2/3rds of the cost of health care. This flies in the face of all the financial statements filed by health care providers. Profits are not the main component of health care costs.

It's also untrue that "The American system relies more on individual consumer decisions and market forces than any other health care system in place" as stated by Devin. The individual consumer makes very few decisions, the decisions are made by the insurance company or HMO, AND doctors.

In our health system, the doctors are the ones who decide the appropriate treatment and course of action. Insurers can only deny coverage if the treatment is not deemed medically necessary for health (like cosmetic) or if there are pre-existing conditions. Insurers don't have a choice if the procedure is recommended by a doctor and it's to treat a medical condition.

Doctors do not consider costs as they are not the ones paying, in fact, they usually receive payments from whatever treatment they order. There is no method currently that tries to distribute health care based on value, that is getting the most bang for the buck.

A treatment that is only 90% as effective as the most effective treatment but only costs 50% as much will not be used. The patient and doctor will demand the most effective means of treatment, regardless of cost. To lower costs, we will have to insert value somehow as one of the components to calculate the appropriate treatment. But patients and doctors are opposed to this as that would mean the odds for survival would be reduced, if only marginally.

In other countries, the government decides on the value component. More effective, yet much more costly procedures are denied or not covered by the government health insurance. There was a ruckus a year or two ago about Britain's NIH denying an Alzheimer drug that was shown to delay the onset of Alzheimers by an average of 6 months. The government decided that it wasn't worth the cost of the drug and denied the treatment. Only after massive protests did the government reconsider. Most decisions aren't challenged though, so many treatments Americans get aren't available to patients in other countries, unless they pay 100% out of pocket that is. Some countries prevent even that, forcing patients to go out of country.

I believe it's the lack of a cost/benefit component to treatment decisions that is responsible for most of the high health care costs. People receive the best treatment the doctor is aware of regardless of cost. We see this with the use of drugs under patent instead of generics even if the patented drug is only 5%-10% more effective yet triple or more the cost. Yet should insurance companies, the only goalkeeper to costs, tries to deny that drug in favor of the generic, patients get upset and accuse the insurance company of greed and killing patients for profit.

Americans have to be willing to accept rationing, which is what cost/benefit analysis does. There is no way around it. They must accept a lower chance of survival, even if only slightly, so that the most cost effective treatment can be mandated. Until Americans, including the people on this board who hysterically deny the need for rationing, accept this, costs will remain high.

Health Care Bill Giveaways

Wow, just got through reading the summaries and skimming over the bill. I don't see how this bill will not cost us a LOT more to provide health care. It drastically expands the subsidies to "low-income" people and also expands Medicaid to cover more people. It also removes lifetime caps from all policies! Just some of the benefits that are being added from the government webpage:

* It will end increases in premiums or denials of care based on pre-existing conditions, race, or gender, and strictly limit age rating.
* The proposal will also eliminate co-pays for preventive care, and cap out-of-pocket expensesto protects every American from bankruptcy.

Improving quality of care for every American. The legislation will ensure that Americans of all ages, from young children to retirees have access to greater quality of care by focusing on prevention, wellness, and strengthening programs that work.

* Guarantees that every child in America will have health care coverage that includes dental, hearing and vision benefits.
* Provides better preventive and wellness care. Every health care plan offered through the exchange and by employers after a grace period will cover preventive care at no cost to the patient.
* Increases the health care workforce to ensure that more doctors and nurses are available to provide quality care as more Americans get coverage.
* Strengthens Medicare and Medicaid and closes the Medicare Part D ‘donut hole’ so that seniors and low-income Americans receive better quality of care and see lower prescription drug costs and out-of-pocket expenses.

Even more found elsewhere:

INCREASE DEPENDENT AGE FOR POLICIES THROUGH AGE 26: Allows those through age 26 not otherwise
covered to remain on their parents’ policies at their parents’ discretion.

COBRA EXTENSION: Allows individuals to keep their COBRA coverage until the Exchange is up and running.
[NOTE: This is separate from the Recovery Act provisions that provide premium assistance for selected groups.]

ENSURING RECONSTRUCTIVE SURGERY FOR CHILDREN: Requires plans to pay for reconstructive surgery for
children with deformities.

Even more:

CREATES REINSURANCE FOR EARLY RETIREES: Creates a new temporary reinsurance program to help offset
the cost of coverage for companies that provide early retiree health benefits for those ages 55-64.

IMMEDIATE HELP FOR THE UNINSURED (INTERIM HIGH-RISK POOL): Creates a $5 billion fund, modeled after
the President’s plan, to finance an immediate, temporary insurance program for those who are uninsurable
because of pre-existing conditions.

NEW LONG-TERM CARE PROGRAM (CLASS ACT): Creates a new, voluntary, public long-term care insurance
program to help purchase services and supports for people who have functional limitations. Benefits are a
daily or weekly cash benefit to help people with functional limitations purchase the services and supports
needed to maintain personal and financial independence. CLASS would supplement, not supplant, traditional
payers of long-term care (e.g. Medicaid and/or private long term care insurance).

INCREASES FUNDING FOR COMMUNITY HEALTH CENTERS: Provides increased funding for community health
centers that will allow them to double the number of patients served over the next five years.

funding for preventive services at the community and local level to address public health problems such as
obesity, tobacco use, and diabetes.

sustaining the current efforts to increase the size of the National Health Service Corps. Primary care and nurse
training programs are also immediately expanded to increase the size of the primary care and nursing
workforce. Ensures that public health challenges are adequately addressed.

EMPLOYER WELLNESS PROGRAMS: Establishes a grant program for employers to promote healthy behaviors
among their employees.

And even more!!!!

BEGINS TO FILL IN THE MEDICARE PART D DRUG DONUT HOLE: Provides for a 50% discount on brand-name
drugs in the Part D donut hole, and immediately shrinks the size of the donut hole by $500 in 2010. The donut
hole continues to be narrowed over the coming years until it is fully eliminated by 2019.

Medicaid coverage to HIV-positive individuals and provides enhanced federal matching payments for the costs
of care.

services in Medicaid up to Medicare levels with 100% federal funding (phased in over several years).

PROVIDES FOR 12-MONTH CONTINUOUS ELIGIBILITY IN CHIP: Provides continuity of care for children by
requiring that states provide 12-month continuous eligibility for children in the CHIP program

PROGRAM: Eases burdens on enrollment so more low-income beneficiaries can get the financial help they
need to make health care affordable.

NEW PROTECTIONS IN MEDICARE ADVANTAGE: Limits cost-sharing for services in Medicare Advantage plans
to no more than cost-sharing in traditional Medicare, and provides for bonus payments to high-quality plans.

ESSENTIAL BENEFITS: In preparation for reform, the Health Benefits Advisory Committee reports their
recommended essential benefits package to the Secretary of HHS for adoption.

Additional federal funds to states with high unemployment. Assists States in maintaining access to
Medicaid services during the recession by extending the current Recovery Act increase in federal Medicaid
payments to states with high unemployment rates.

IMPROVES LOW-INCOME PROTECTIONS IN MEDICARE: Increases the assets test limits in the Part D drug
program and Medicare Savings Programs to ensure that more low-income beneficiaries get the financial help
they need to make their health care affordable.

Lifts the current 36-month limitation on Medicare coverage of immunosuppressive drugs for kidney transplant
patients who would otherwise lose this coverage on or after 2012.

I didn't bother to go on because this post is already getting too long. How much will this all cost? The site says zero for the first 10 years, actually a positive $100 to the deficit in the first 10 years, but I'm waiting to see the total cost, I bet most of the costs are delayed in order to game the 10 year projection the CBO issues, the numbers breakdown is not yet available. Wow, a whole bunch of giveaways and expanded services, I just don't see where the cost savings would come from and how we're going to pay for the real costs once the plan is implemented and real numbers come in instead of these projections. More posts later

Thursday, October 29, 2009

Observations on Bubbles

Bubbles are only obvious after the fact. I thought there was a housing bubble, but I also thought we had a bond bubble too when 30-year Treasury bonds were near 5%. It could be that the bond bubble is still ongoing and will pop soon, or next year, or not at all. Gold is another case. I don't think there is a bubble in gold, the heightened attention paid to it reflects the unease people feel towards the ballooning balance sheets of central banks and the unsupportable budget deficits of certain nations. Yet there are others who think gold is pretty much worthless outside its value for industrial purposes. Is gold in a bubble right now? Too hard to say. Should gold drop to $450 then it becomes obvious and we can look back at the gold bubble and blast the idiots who couldn't see something so obvious. Stock market P/E has been higher than average and in bubble mode since the early 90's, yet even after this meltdown we're way higher.

What I think we need to focus on are the types of events or bubbles that can bring down the financial system. This has to do with leverage and allowable risks to our banks. The dot com bubble hurt, but wasn't as damaging as this crisis because banks didn't stand a chance of going under, they were not exposed enough to the bubble to cause a financial system meltdown. However banks are tied to real estate in a much great fashion, here is where a bubble can do great harm.

In the future, we have to make sure leveraged firms don't have their eggs in one basket and that not all firms that are leveraged are exposed to the same risks. Should all banks start lending out cheap money for margin accounts tied to gold, then the price of gold would have a great impact and could cause a crisis like this one. It's the banks and the leverage that is the problem. If we can eliminate the risk of many banks going under at the same time, then we've solved the problem, crises will no longer be as severe as this one.

Large banks should have higher capital requirements, and lower leverage allowances. Smaller banks will have looser requirements, but the regulator needs to see if they are all betting on the same thing and if that poses a danger to the entire system should the bet turn out badly.

Almost forgot, bubbles are almost always the result of easy credit. Bubbles can't form without credit, in every case I can think of, credit was the hidden accomplice, perhaps even the mastermind that causes bubbles. No credit, not enough "fuel" for a bubble to develop. I think we're seeing a lot more bubbles recently because the FED just will not allow credit to contract, they keep on trying to reinflate the bubble, even now there are calls for more loans and credit to be made available. I think the FED's monetary policy is severely flawed, the default rate in normal times is too low and they refuse to tighten until its too late due to pressure to allow good economic times to continue (the economy is always referred to as bad, no matter what, even when we had below 5% unemployment in order to create pressure for more rate cuts). The FED has to break the cycle or we'll have another bubble shortly, the aftermath of reflating the housing bubble.

Saturday, October 24, 2009

Creating Government Jobs Through Stimulus

The problem with government job creation is that most are hired on a permanent basis. Union rules either prevent layoffs or make it extremely costly due to buyout provisions and similar measures. Since government jobs are not downwardly elastic, over-hiring beyond the optimal level required to provide services would represent a persistent burden long after the stimulative effects are no longer needed. That would hamper recovery and stifle economic growth.

Why? Because these jobs have to be paid for and so eventually higher taxes will have to be levied to pay for the extra government employees. Most state governments must run a balanced budget and can't run long term deficits, and the federal government which can, must eventually pay back the debt with interest. Even assuming some debt never has to be paid back, the federal government still has a market imposed debt ceiling beyond which it becomes increasingly more difficult and costly to finance.

It's the stickiness of government jobs that has to be taken into consideration. An increase in taxes has a negative effect on the economy, and because the outlook for the budget looks so bad already with total debt increasing faster than GDP (thus an increasing debt/GDP ratio) for the foreseeable future, there simply isn't any room for more.

As with any spending, the issue of value is important. Excess government jobs provide very little value, some of the worst bang for the buck available. Mish, I think, has a very credible analysis on the issue of "wasteful" stimulus, though the quote below is from HB.

"In reality, the entire inflationary mini-boomlet-within-the-depression was simply an illusion. 'GDP growth' that is bought with monetary pumping and feckless fiscal spending only misdirects and ultimately consumes even more scarce capital.

Fiscal stimulus may temporarily give the impression of a recovery, but it is not a genuine recovery. It makes things worse. The moment the pumping is abandoned, the true state of affairs is simply unmasked. That is what happened in 37/38 - a slight tightening of monetary policy revealed the fact that the mini-boomlet was as unsound as its predecessor boom in the years prior to the '29 crash."

In theory, these recessions and depressions happen because of mis-allocated resources. Mis-allocating more resources will only prolong the recession, not make it better. We need to allocate resources to productive uses, in other words, hiring people to dig holes and fill them up again just to create jobs isn't going to get us out of recession. As soon as the spending stops and the workers are laid off, we end up back where we started, but on even worse terms because of the added debt required to pay for those workers in the first place. Value seems to be the most important aspect missing from the discussion.

Thursday, October 15, 2009

Why are conservatives seemingly anti-government?

It's not that the government is always the bad guy. It's that the government is run by people, just like corporations are, and people can be good or bad. What matters is the checks and balances to make sure power isn't abused and that people are working towards the right goal in an efficient manner.

Businesses are checked by the necessity of making a profit, and a profit in economic terms means they are providing a good or service society wants and generating gains for society in aggregate. Should they abuse or scam customers beyond the good they provide to those customers, they simply will not get enough business and they'll go bankrupt. Plus there are government agencies and laws to watch over the conduct of corporations. Yes definitely government is needed as a check to businesses beyond "market forces".

But who checks government power? Conservatives believe that government is the greater danger because it has more power and fewer checks. Government also isn't subject to being checked by market forces, government agencies don't have to offer good service or generate surplus to society. I think the tea parties and the huge march on Washington we saw was concern over the powers government is reserving for itself and the lack of enough checks to that power. Government can make laws and send people to jail, it can tax and take wealth away, it can affect people's lives a lot more than corporations can. No corporation can take away more wealth than I'm willing to give away, I can always end service, but I can't opt out of taxes or end the services government provides without moving out of country and renouncing my citizenship and utterly giving up my live as I know it.

The Biggest Difference Between Liberals and Conservatives

I think the biggest difference between conservatives and liberals are that liberals always assume their intentions will work and without any other negative consequences. They ignore or don't pay attention to the details of implementation and execution, but rather focus on the overall intent and focus.

This consumer protection agency is a good example. Liberals want someone to protect ordinary people from the abuses of corporations and others who might want to take advantage. I don't think anyone is against that goal, but HOW EXACTLY is this consumer protection agency going to function, what are its powers, and how are they going to implement their goals? Who will run it and who will have oversight?

I find that liberals don't concern themselves with those details, furthermore they trust and assume that the agency will be infallible and run as it was intended to. Conservatives are much more skeptical, focus on the unintended consequences, and point out that any agency is staffed by people and people are fallible. Depending on the system and the checks and balances, people can be darn right incompetent or a number of things so it can't be assumed this agency will do what it was intended to do.

Saturday, September 19, 2009

Is Obama a Natural Born Citizen?

After further research, as currently interpreted, Barack Obama is a natural born citizen of the United States. The Supreme Court refused to take up the issue meaning that they let the current interpretation stand. Had they found error in the current interpretation, the Supreme Court would have taken the case.

Both sides have arguments that support their case for what is a "natural born" citizen, but under current convention, a natural born citizen is a person born in the United States or a territory thereof. Regardless there are more ways to show that Obama is a natural born citizen.

The United States has always had two principles that determine if a person is born a citizen of the United States.
… the United States recognizes the U.S. citizenship of individuals according to two fundamental principles: jus soli (right of birthplace) and jus sanguinis (right of blood). From the office of Citizenship and Immigration Services
he term jus sanguinis describes a person born of parents who are citizens and jus soli describes a person born in the country. Persons who are born only under the principle of jus sanguinis are called a “consanguineously born citizens,” and their claim of citizenship is based on inheritance. . On the other hand persons who claims their citizenship based solely on the principle of jus soli are called “native born citizens” and these persons’ claims are based on the geographical location of their birth. Both principles are equal in making one a born citizen. Being a born citizen extends to them one particular immunity not given to naturalized citizens, in that born citizens are immune from involuntarily renouncing their citizenship. A naturalized citizen can have his citizenship revoked for several reasons, but under current law, born citizens must walk into a US Embassy abroad and in front of the Consul renounce their citizenship.
I take the above quotes from The Birthers website which disagrees with me to make a point. First, Obama is defined as a native born citizen by the Birthers, meaning that he cannot have his US citizenship revoked, or lose it by involuntary means, he MUST renounce his citizenship in front of an Consul in an US embassy to lose his citizenship, he can't lose it by any other means.

Secondly, Barack Obama does qualify under the definition of natural born the Birthers uses. Barack's mother was an US citizen, that gives Barack US citizenship by jus sanguinis (blood). All it takes is one parent to be an US citizen to automatically give you US citizenship regardless of where you are born. Marriage does matter as well as residency periods, however it seems that Obama's mother did qualify.
Section 309 of the INA [8 USC § 1409] grants US citizenship at birth to an "illegitimate" child if his/her American mother had previously spent at least one continuous full year in the US.
So if Obama was born on US soil in Hawaii, then he would have a claim to citizenship on both principles of jus soli (right of birthplace) and jus sanguinis (right of blood). That would clearly make him a natural born citizen by even the standards of the Birthers and all dissenters. Furthermore, whatever he or his parents did in scamming/getting an Indonesian passport or whatever, Barrack cannot lose his US citizenship without renouncing it in front of a consul inside an US embassy. Doesn't matter how much he lies about his citizenship to gain college funding, he has to renounce it formally.

I hope I've shown logically that Obama does qualify as long as he was born on US soil, and there's no proof that he wasn't. If that's your only hope, I would abandon that hope immediately. The FBI is supposed to vet any candidate for presidency, maybe it's too much for me to assume, but I assume they checked the long form birth certificate and would have said something if the certificate shows anything other than US soil for Obama's birthplace. We can be almost certain that Obama was born on US soil. Why? Because people have seen it and the form WILL BE released sooner or later. I don't think the people would be this sanguine if they knew that in 20 years or so, the country would find out that they deceived the nation and violated the Constitution. So why doesn't Obama release the long form? Because this makes opponents look stupid and why take away the rope if your enemies are hanging themselves? He's going to give you guys all the rope you want.


Health care is a very difficult issue because Americans expect that everything will be used to treat their illness without regard for costs. It makes sense, everyone values their own life a great deal and want all possible treatments and methods to be used to help cure their illness or extend their life. But that costs a lot of money.

Take this example. A person has cancer that is at a stage where 80% of people die within a year. Further treatment will cost $50,000 a month, is it worth it to continue treatment? In the US, there is no one who can say no. The insurance company might try, but laws prohibit denial of coverage because "it's not worth it". And of course the person who has cancer is going to say of course it's worth it, any amount of money is worth trying to save my life.

In Europe, the government decides, which would also happen here if Obamacare passes. Someone has to decide if spending X money is worth an X percent chance of extending a person's life. Otherwise, we get huge costs because we try to do everything possible to extend a person's life regardless of the cost. That's why health care is so expensive in this country, that and the fact that we do have the best care in the world. Recent studies have finally provided evidence for what I've suspected all along.

Life expectancy in the United States fares poorly in international comparisons, primarily because of high mortality rates above age 50. Its low ranking is often blamed on a poor performance by the health care system rather than on behavioral or social factors. This paper presents evidence on the relative performance of the US health care system using death avoidance as the sole criterion. We find that, by standards of OECD countries, the US does well in terms of screening for cancer, survival rates from cancer, survival rates after heart attacks and strokes, and medication of individuals with high levels of blood pressure or cholesterol. We consider in greater depth mortality from prostate cancer and breast cancer, diseases for which effective methods of identification and treatment have been developed and where behavioral factors do not play a dominant role. We show that the US has had significantly faster declines in mortality from these two diseases than comparison countries. We conclude that the low longevity ranking of the United States is not likely to be a result of a poorly functioning health care system.
Insurance can't get around the fact that SOMEONE HAS TO PAY! Just because you have insurance and only pay $10000 for $100,000 of health care services doesn't mean the $90,000 disappears! Someone else will have to cover that shortfall. So insurance cannot possibly work if everyone is receiving $100,000 of services for premiums and copays that add up to $10,000. It means that those who don't get sick and have insurance will see premiums that seem very high to them. Again, someone has to make up the difference, someone has to pay. This is what makes health care so difficult to "fix".

And of course there are government regulations and such that prevent health insurers from offering coverage across States, which could reduce risk for the insurers and rates for everyone else. The larger the pool, the easier it is to predict outcomes. Also why do Americans require that doctors treat them or be the primary person to see them? Most illnesses and sicknesses are common ones that we know about and know how to treat. A nurse can be just as effective, let's say stitching up a cut or treating an infection. Doctors could then be reserved for only the most difficult cases, this is what they do in the UK. You don't get to see a doctor unless the nurse doesn't know what is wrong with you and can't fix you up. That saves money, but would Americans be satisfied with that kind of health care? Maybe, read on below.

WSJ -- Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors' groups and hospitals.

Walgreen Co.'s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.

Walgreen, the second-largest pharmacy chain by stores, plans to start a pilot program for managing diabetes in coming months. CVS's MinuteClinic is piloting a rapid test for conjunctivitis, or pinkeye, at its Atlanta clinics and working with the Cleveland Clinic to provide care to asthma patients.

MP: So how are the MDs responding to the increased competition from retail clinics? First of all, they don't like the competition:

Such moves (expansion of services at retail clinics) are raising the ire of physicians' groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.

But second of all, they are responding to the competition from retail clinics by acting more competitively themselves:

The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.