The other day I went to fill the gas tank on my car, like I have done thousands of times before. At the gas station I choose, you activate the pump by swiping your credit card, pushing a button to select the grade of gas, and then picking up the nozzle and inserting it into the gas tank.
In this case, after selecting the grade of gasoline I wanted, I went to put the nozzle in the tank, and it wouldn’t fit. I thought I had just missed the opening with careless placement, so I tried again. The nozzle still wouldn’t go in the tank. After the second attempt I realized that the nozzle was too big to fit into the filler tube on my gas tank.
Once I started actually looking at the nozzle, I realized that I had picked up the wrong one. This gas pump had separate hoses for gasoline and diesel fuels, and I had inadvertently picked up the diesel nozzle.
I thought this was a perfect example of a quality control technique called poka-yoke by the Japanese. Loosely translated, poka-yoke means mistake prevention, or mistake proofing. I usually call it idiot proofing. The idea is to design assemblies so that the parts can only go together one way. If they go together only one way, than the parts cannot be assembled incorrectly.
That is poka-yoke in its purest form. But the doctrine of mistake proofing has been used in many different ways. For example, in building an assembly, you can put quality checks in-line with the assembly process. Let’s say you put a switch on a base plate, then drive two screws to hold the switch in place. The next two stations in the assembly process could be a camera, to detect the presence of the two screws, followed by the installation of a cover plate to protect the switch. If you lock the assembly in place at the camera station, and only unlock it to move to the next step if the camera detects the screws, then you cannot put the cover plate on if the screws are missing.
Usually process controls like the one described above can be overridden by the people working on the line (usually a supervisor), which makes them less effective than going the route of designing an assembly that cannot be misassembled.
The problem with giving supervisors an override is that we assume mistakes are a function of poor training, or bad materials, or not caring about the job, or lack of experience. In my experience with the gas pump, however, the source of the error was none of those things. What happened to me was a momentary lapse of attention. So I was glad that the gas pump was designed so that I couldn’t get diesel fuel into the gasoline tank.
My experience with poka-yoke techniques at the gas station brought home another lesson for me.
No matter how much we idiot-proof our systems, we’re always outnumbered.
Sunday, December 27, 2009
Tuesday, December 15, 2009
Recession vs. Recovery
A variety of salesmen have dropped in on me the last week or so. This being the Christmas season, they are making the rounds, bringing gifts to their customers. The table in our office break room is covered with boxes of chocolates and tins of cookies.
Invariably, as part of the visit, they ask how business is going. When I tell them that things are going pretty good, I get surprised looks. They tell me that at most of their customers, business is way off.
Maybe it’s just that my perspective is different. My company’s overall sales are down about 30% from their peak. So from that perspective, business is terrible. But that’s not my point of comparison. I’m comparing where we are now to where we were one year ago.
At the close of 2008, orders from customers were in free fall. Their requirements were dropping faster than we could reduce capacity. In response we took whole weeks out of our production schedule. We shut down for an entire week at Thanksgiving. We shut down for four weeks in December. We took a week off in February, and two weeks off in March. And every time we shut down, another round of people were laid off. It felt like we were on the edge of a precipice.
Finally, in April our business started to pick up again. Just as important, our production capacity was reduced to the point where it balanced with demand again. Since then, our order book has gotten a little stronger, allowing us to call some of the people back off layoff.
Fast forward to the end of 2009. Thanksgiving was a long weekend, not a week. We’re taking the traditional two week maintenance shutdown at the close of this month. The order book for the first quarter of next year is filling up, not getting emptied out by customer cancellations.
I know the economy is not out of the woods yet, that things could turn down again. I know unemployment is still historically high at 10%, and that there are six applicants for every job. Right now, though, things look relatively secure for me and the survivors at my company. So that’s what I choose to focus on in this season of celebration and counting blessings.
The old joke goes that if your neighbor is unemployed, it’s a recession. If you’re unemployed, it’s a depression. I want to add something to that. If you think you are going to lose your job, it’s still a recession. If you think you’re going to survive and stay in business, it’s a recovery.
Here’s to those who are recovering in 2010. It feels pretty good to still be standing. As Winston Churchill put it (in a different context), “there is nothing so exhilarating as to be shot at without effect.”
Invariably, as part of the visit, they ask how business is going. When I tell them that things are going pretty good, I get surprised looks. They tell me that at most of their customers, business is way off.
Maybe it’s just that my perspective is different. My company’s overall sales are down about 30% from their peak. So from that perspective, business is terrible. But that’s not my point of comparison. I’m comparing where we are now to where we were one year ago.
At the close of 2008, orders from customers were in free fall. Their requirements were dropping faster than we could reduce capacity. In response we took whole weeks out of our production schedule. We shut down for an entire week at Thanksgiving. We shut down for four weeks in December. We took a week off in February, and two weeks off in March. And every time we shut down, another round of people were laid off. It felt like we were on the edge of a precipice.
Finally, in April our business started to pick up again. Just as important, our production capacity was reduced to the point where it balanced with demand again. Since then, our order book has gotten a little stronger, allowing us to call some of the people back off layoff.
Fast forward to the end of 2009. Thanksgiving was a long weekend, not a week. We’re taking the traditional two week maintenance shutdown at the close of this month. The order book for the first quarter of next year is filling up, not getting emptied out by customer cancellations.
I know the economy is not out of the woods yet, that things could turn down again. I know unemployment is still historically high at 10%, and that there are six applicants for every job. Right now, though, things look relatively secure for me and the survivors at my company. So that’s what I choose to focus on in this season of celebration and counting blessings.
The old joke goes that if your neighbor is unemployed, it’s a recession. If you’re unemployed, it’s a depression. I want to add something to that. If you think you are going to lose your job, it’s still a recession. If you think you’re going to survive and stay in business, it’s a recovery.
Here’s to those who are recovering in 2010. It feels pretty good to still be standing. As Winston Churchill put it (in a different context), “there is nothing so exhilarating as to be shot at without effect.”
Thursday, December 10, 2009
The Annual Christmas Diatribe
Plastic Santas have been pulled out of storage, and lights are strung throughout the neighborhood. Tune in to almost any radio station, and you are sure to hear the sounds of Christmas classics wafting over the airwaves. Envelopes of red and green are starting to appear in mailboxes. It’s that time of year again.
It’s time to rail against the rampant commercialism and compulsory gift giving that have hijacked the Christmas holiday.
If you take the practice of exchanging gifts as commonly practiced, and boil it down to the essentials, here’s what you get: You take your hard earned money, and you buy something for someone that they don’t really need. After all, if they had really needed it, they would have bought it for themselves. In exchange, they take their hard earned money and buy you something that you don’t really need.
Once the gift giving is completed and all the packages are opened, what do you have? (Besides two garbage cans filled with torn off wrapping paper and packaging.) You have a bunch of new stuff that you now have to store.
Americans are the most over stuffed people in the history of the planet. Our walk-in closets are filled to overflowing, so we haul our summer clothes up to attic to make room for the winter clothes. We have two car garages that hold only one car, because the rest of the space is stacked high with stuff, most of which never gets used. We have so much stuff that we rent mini-storage units to hold the overflow.
In an ideal world, we would have only the things we used. Our stuff would exist to take care of us. Instead, too often we spend our energy and money taking care of our stuff.
Besides, having too much stuff, most of the Christmas presents I’ve seen in the last few years are all made in China. So aside from a few store clerks, other Americans are not getting any benefit from our spending. We’re impoverishing ourselves to enrich people on the far side of the world. So much for the economic stimulus given by our rampant commercialism. Think about it: are you a net winner from the on-rush of Christmas spending?
I have to stop. Just thinking about this subject makes me foam at the mouth like a rabid squirrel. Right now I have more froth than a Starbucks cappuccino.
I’m not totally anti-Christmas. I love the festivities, the parties, the gatherings of friends and family that come with the season.
But the mandatory gift giving foisted on us by society? To that I say, Bah, humbug!
It’s time to rail against the rampant commercialism and compulsory gift giving that have hijacked the Christmas holiday.
If you take the practice of exchanging gifts as commonly practiced, and boil it down to the essentials, here’s what you get: You take your hard earned money, and you buy something for someone that they don’t really need. After all, if they had really needed it, they would have bought it for themselves. In exchange, they take their hard earned money and buy you something that you don’t really need.
Once the gift giving is completed and all the packages are opened, what do you have? (Besides two garbage cans filled with torn off wrapping paper and packaging.) You have a bunch of new stuff that you now have to store.
Americans are the most over stuffed people in the history of the planet. Our walk-in closets are filled to overflowing, so we haul our summer clothes up to attic to make room for the winter clothes. We have two car garages that hold only one car, because the rest of the space is stacked high with stuff, most of which never gets used. We have so much stuff that we rent mini-storage units to hold the overflow.
In an ideal world, we would have only the things we used. Our stuff would exist to take care of us. Instead, too often we spend our energy and money taking care of our stuff.
Besides, having too much stuff, most of the Christmas presents I’ve seen in the last few years are all made in China. So aside from a few store clerks, other Americans are not getting any benefit from our spending. We’re impoverishing ourselves to enrich people on the far side of the world. So much for the economic stimulus given by our rampant commercialism. Think about it: are you a net winner from the on-rush of Christmas spending?
I have to stop. Just thinking about this subject makes me foam at the mouth like a rabid squirrel. Right now I have more froth than a Starbucks cappuccino.
I’m not totally anti-Christmas. I love the festivities, the parties, the gatherings of friends and family that come with the season.
But the mandatory gift giving foisted on us by society? To that I say, Bah, humbug!
Sunday, December 6, 2009
Scary Movie
Do you think vampire movies are scary? How about werewolves? Or maybe you like to watch Jason chop up teenagers in the Friday the 13th flicks. Well, this will scare the bejeezus out of you.
It's an animation showing the level of unemployment in every county in the US, starting in 2007 and progressing to the current time period. The map is color coded, with darker colors representing higher unemployment. Watching the darkness spread across the map over time is like following the progress of a plague or some other epidemic.
It creeps me out.
It's an animation showing the level of unemployment in every county in the US, starting in 2007 and progressing to the current time period. The map is color coded, with darker colors representing higher unemployment. Watching the darkness spread across the map over time is like following the progress of a plague or some other epidemic.
It creeps me out.
Tuesday, December 1, 2009
Afghanistan Troop Surge
President Obama went on television tonight to announce a major expansion of the US forces engaged in Afghanistan. The US will be sending 30,0000 more troops in the very near future. Troop levels will stay high for up to three years, although the President promised that he will start withdrawing US forces no later than 2011.
Although Obama did not label it as such in his speech, this looks essentially the same as George W. Bush's "surge" into Iraq. This is kind of ironic, because Senator Barack Obama was on record as strongly opposed to expanding the US military presence in Iraq at that time.
By the time the surge in Afghanistan is complete, the number of troops will have doubled from the level they were at at the beginning of the Obama administration. Make no mistake about it, an increase of 30,000 troops is a major military push.
If you're very quiet, and you listen very carefully, far off to the northeast you can hear a tiny popping sound.
That's the Norwegian Nobel Peace Prize committee. The one's who just awarded Barack Obama the Nobel Peace Prize.
Their heads are exploding.
Although Obama did not label it as such in his speech, this looks essentially the same as George W. Bush's "surge" into Iraq. This is kind of ironic, because Senator Barack Obama was on record as strongly opposed to expanding the US military presence in Iraq at that time.
By the time the surge in Afghanistan is complete, the number of troops will have doubled from the level they were at at the beginning of the Obama administration. Make no mistake about it, an increase of 30,000 troops is a major military push.
If you're very quiet, and you listen very carefully, far off to the northeast you can hear a tiny popping sound.
That's the Norwegian Nobel Peace Prize committee. The one's who just awarded Barack Obama the Nobel Peace Prize.
Their heads are exploding.
Tuesday, November 24, 2009
Sunday, November 22, 2009
Breast Cancer Screening
One of the central cost containment ideas in “health care reform” got tested this week, and it failed miserably. I’m talking about using the idea of “best practices” to eliminate waste in the medical system.
The idea behind best practices, also known as evidence based medicine, is to do studies of what works and what doesn’t work in treating various medical conditions. Once the most effective protocol is determined, insurers will only pay for the approved protocol. Other treatments will not be reimbursed. The goal is to prevent overuse of medical testing and procedures that enrich doctors, but do little to improve overall outcomes.
It’s not a bad idea in theory. Too bad it doesn’t work in the real world.
The case in point from this week’s news is the new breast cancer screening guidelines. A group from the United States Preventive Services Task Force (USPSTF) studied the data, and concluded that as a nation, we are doing way too many mammographies. Instead of testing every woman over 40 every year, they are now setting a guideline of every woman over 50, every two years. The few additional live spans increased did not justify the extra biopsies, unnecessary lumpectomies, and related stress and anxiety caused by false positive screenings.
In exchange for doing a difficult job, loaded with hard technical analysis, the USPSTF was promptly thrown under the bus. You may substitute metaphors involving running into buzz saws or being fed to wolves if you prefer.
Katherine Sebelius, the Health and Human Services cabinet secretary, disavowed the findings of the Task Force, even though they were working for her when they did the study.
This does not bode well for the ability of any health care reform plan under consideration to lower costs if enacted into law.
The idea behind best practices, also known as evidence based medicine, is to do studies of what works and what doesn’t work in treating various medical conditions. Once the most effective protocol is determined, insurers will only pay for the approved protocol. Other treatments will not be reimbursed. The goal is to prevent overuse of medical testing and procedures that enrich doctors, but do little to improve overall outcomes.
It’s not a bad idea in theory. Too bad it doesn’t work in the real world.
The case in point from this week’s news is the new breast cancer screening guidelines. A group from the United States Preventive Services Task Force (USPSTF) studied the data, and concluded that as a nation, we are doing way too many mammographies. Instead of testing every woman over 40 every year, they are now setting a guideline of every woman over 50, every two years. The few additional live spans increased did not justify the extra biopsies, unnecessary lumpectomies, and related stress and anxiety caused by false positive screenings.
In exchange for doing a difficult job, loaded with hard technical analysis, the USPSTF was promptly thrown under the bus. You may substitute metaphors involving running into buzz saws or being fed to wolves if you prefer.
Katherine Sebelius, the Health and Human Services cabinet secretary, disavowed the findings of the Task Force, even though they were working for her when they did the study.
This does not bode well for the ability of any health care reform plan under consideration to lower costs if enacted into law.
Monday, November 16, 2009
Getting Ready for Tax Season
I have not had a lot of time for writing the last week or so. A few crises with vendors at my day job, combined with prepping for an exam at the accounting class I’m taking, with tax preparation classes piled into the mix for the last week. The combination of the three has kept me pretty busy.
But the process of getting ready for the start of tax season next January has brought up an issue I want to comment on, so once again I am spurred to set pen to paper (or push electrons onto CRT screen, whatever the computer equivalent is).
Part of the tax prep classes this weekend covered due diligence for tax preparers assisting clients in filing for the earned income credit. The EIC is supposed to supplement the income of wage earners, usually with children. It is a refundable credit, which means that even if you get all of your withholding back, you can still get thousands of dollars in additional money.
Under 2008 tax law, you max out your EIC with two children. If you have more than two children, you receive no additional benefit. If you have zero or one child, you get a smaller benefit. If you have less earned income, you get a smaller check from the government.
So what happens is that people with more earned income and fewer kids claim the children of people who have already maxed out their tax benefit. The amount of fraud and misrepresentation connected to the Earned Income Credit is massive. Every tax preparer in my class had a war story about making claims that just weren’t believable.
But do we turn those people away? No we do not. We accept the client’s statements at face value. We can question the story and document the answers, but we do not require any corroborating evidence. We leave that up to the IRS.
The thing that strikes me about that is that we aren’t being paid by our clients. Sure, the client is getting his or her withholding back. That’s part of their refund. But the lion’s share of the “refund” is provided by credits such as the EIC. The tax preparer is taking his fees out of the government’s money, not the tax filer’s.
That sets up a massive conflict of interest on the part of the tax preparer. If we turn a blind eye to holes in the client’s story in order to get them a bigger refund check, we get a bigger fee for doing the paperwork. The client has huge incentives to cheat, and the tax preparers have incentives to facilitate the cheating.
If I were the IRS, I would step up my auditing of tax preparer’s work by a factor of ten. That would make the tax preparers less willing to accept dodgy answers from a client.
After all, unlike many of the clients, I actually pay income taxes. I don’t want to see my tax dollars going to a fraud.
But the process of getting ready for the start of tax season next January has brought up an issue I want to comment on, so once again I am spurred to set pen to paper (or push electrons onto CRT screen, whatever the computer equivalent is).
Part of the tax prep classes this weekend covered due diligence for tax preparers assisting clients in filing for the earned income credit. The EIC is supposed to supplement the income of wage earners, usually with children. It is a refundable credit, which means that even if you get all of your withholding back, you can still get thousands of dollars in additional money.
Under 2008 tax law, you max out your EIC with two children. If you have more than two children, you receive no additional benefit. If you have zero or one child, you get a smaller benefit. If you have less earned income, you get a smaller check from the government.
So what happens is that people with more earned income and fewer kids claim the children of people who have already maxed out their tax benefit. The amount of fraud and misrepresentation connected to the Earned Income Credit is massive. Every tax preparer in my class had a war story about making claims that just weren’t believable.
But do we turn those people away? No we do not. We accept the client’s statements at face value. We can question the story and document the answers, but we do not require any corroborating evidence. We leave that up to the IRS.
The thing that strikes me about that is that we aren’t being paid by our clients. Sure, the client is getting his or her withholding back. That’s part of their refund. But the lion’s share of the “refund” is provided by credits such as the EIC. The tax preparer is taking his fees out of the government’s money, not the tax filer’s.
That sets up a massive conflict of interest on the part of the tax preparer. If we turn a blind eye to holes in the client’s story in order to get them a bigger refund check, we get a bigger fee for doing the paperwork. The client has huge incentives to cheat, and the tax preparers have incentives to facilitate the cheating.
If I were the IRS, I would step up my auditing of tax preparer’s work by a factor of ten. That would make the tax preparers less willing to accept dodgy answers from a client.
After all, unlike many of the clients, I actually pay income taxes. I don’t want to see my tax dollars going to a fraud.
Tuesday, November 10, 2009
... Before a Fall
The US House of Representatives voted on a version of health care “reform” over the weekend. Actually, it would probably be more accurate to call the legislation health insurance overhaul. However, since various forms of health insurance pay for the overwhelming majority of medical care in this country, it is clear that if the legislation also gets out of the Senate, a gigantic restructuring of the health care sector of the economy is envisioned.
Health care is one of the largest sectors of the economy. Currently, about one out of every seven dollars spent in America is spent of health care. The House just passed a vision of how to reengineer 17% of the economy.
The final vote tally: 220 for to 215 against.
Now, call me crazy (you wouldn’t be the first one), but I think the scale of the legislation is wildly out of proportion to the margin in favor. As a conservative, my natural inclination is to make small, evolutionary changes to society’s existing structures, instead of big sweeping alterations. But even liberals who think they are smart enough to restructure one seventh of the economy in one fell swoop should at least wait until they had some kind of consensus, shouldn’t they?
220 for to 215 against doesn’t exactly shout out “consensus,” does it?
If the House wanted to change the speed limit on the Interstates, 220 to 215 is an acceptable margin of victory. Add a few square miles of Federal land to a national park? Hey, 220 to 215 means the will of the people is clear.
But to radically restructure the health insurance industry and create a massive new entitlement? It is an act of the highest degree of hubris to assume that because you have 50.6% of the votes, you should pass legislation of this scale, just because you can.
The ancient Greeks had a saying: Who the Gods would humble, they first make proud.
Health care is one of the largest sectors of the economy. Currently, about one out of every seven dollars spent in America is spent of health care. The House just passed a vision of how to reengineer 17% of the economy.
The final vote tally: 220 for to 215 against.
Now, call me crazy (you wouldn’t be the first one), but I think the scale of the legislation is wildly out of proportion to the margin in favor. As a conservative, my natural inclination is to make small, evolutionary changes to society’s existing structures, instead of big sweeping alterations. But even liberals who think they are smart enough to restructure one seventh of the economy in one fell swoop should at least wait until they had some kind of consensus, shouldn’t they?
220 for to 215 against doesn’t exactly shout out “consensus,” does it?
If the House wanted to change the speed limit on the Interstates, 220 to 215 is an acceptable margin of victory. Add a few square miles of Federal land to a national park? Hey, 220 to 215 means the will of the people is clear.
But to radically restructure the health insurance industry and create a massive new entitlement? It is an act of the highest degree of hubris to assume that because you have 50.6% of the votes, you should pass legislation of this scale, just because you can.
The ancient Greeks had a saying: Who the Gods would humble, they first make proud.
Thursday, November 5, 2009
Pet Peeve #4368: Toner Warning
I use an HP LaserJet printer. It is a terrific printer, fast and almost flawless. I’ve had it for years, and have been very pleased with the performance I’ve gotten out of it.
Except for one little thing.
When the toner cartridge gets down to about 10% full, you get a warning message flashed on your screen, telling you it is time to replace the toner cartridge. All well and good, except that you really don’t need to replace the toner cartridge. At least, just not yet.
You can run for a while before you actually run out of toner. You know when you’re really low on toner because your printing starts to get blank streaks going down the page. Even then, you can pop the toner cartridge out, shake it to redistribute the remaining toner, and start pumping out documents again.
The last 10% of the toner is still enough to print hundreds of pages. If you are like me, and print about ten to twenty pages a day, that 10% can last weeks, or even months. In the meantime, though, the warning message flashes on your screen every time you hit the Print button.
Every freaking time!
This irks me. I’m irked.
I’m just saying …
Except for one little thing.
When the toner cartridge gets down to about 10% full, you get a warning message flashed on your screen, telling you it is time to replace the toner cartridge. All well and good, except that you really don’t need to replace the toner cartridge. At least, just not yet.
You can run for a while before you actually run out of toner. You know when you’re really low on toner because your printing starts to get blank streaks going down the page. Even then, you can pop the toner cartridge out, shake it to redistribute the remaining toner, and start pumping out documents again.
The last 10% of the toner is still enough to print hundreds of pages. If you are like me, and print about ten to twenty pages a day, that 10% can last weeks, or even months. In the meantime, though, the warning message flashes on your screen every time you hit the Print button.
Every freaking time!
This irks me. I’m irked.
I’m just saying …
Thursday, October 29, 2009
Here's a Clunker of a Program
Remember the Cash for Clunkers program? This was the part of the stimulus package that offered a $4500 government check for car buyers who traded in an old car for a newer, more fuel efficient model. A wildly popular program, Cash for Clunkers handed out $4 billion in tax payer money between late July and early August.
In addition to the “green” benefits of getting more fuel efficient cars on the road, the program was primarily intended to boost sales in the auto industry. And it worked, right? Car sales surged in August. So the program was a success.
Well, not so fast. You see, everyone who traded in an old vehicle for a new car got the cash rebate. But most of those people would have bought a new vehicle even without the government check that call along with it. The measure of how successful the program was should be the number of people who bought a new car that would not have made the purchase without the Cash for Clunkers program.
The automotive site Edmunds.com did the analysis to figure out how many people bought a car specifically because of the rebates. Their estimate of the number of additional buyers was only 125,000 out of the 690,000 total cars sold during the program. That means that the government subsidy per additional car sold was (drum roll, please) … $24,000.
For the folks who bought the cars, the government rebate was a great deal. In terms of stimulating the economy, not such a great deal. That would be bad enough if it was the end of the story. But as the telemarketeers say, “wait, there’s more!”
Car sales surged in August, good news for the economy. But then car sales collapsed in September, bad news for the economy. August sales were about one and a quarter million vehicles, and September was about 40% less, at seven hundred and fifty thousand. It doesn’t take a rocket scientist to realize that most, is not all, of the surge in business during August was comprised of buyers who would otherwise have waited until September to buy a new car.
To me, it sure looks like the government borrowed $4 billion from the Chinese and handed it out to car buyers for a net increase in new car sales of zero. Zip. Nil. Big goose egg.
But hey, that’s okay. I won’t mind eventually seeing my taxes go up to pay for this. After all, I’m getting my share. You see, I bought a new air conditioning unit last August when the old one on my house died. I would have ponied up the money for one anyway. Remember, it was August. Hotter than the hinges of hell. I wasn’t going one week without AC. Only, now, I qualify for a $1500 tax credit for buying an Energy Star rated appliance, courtesy of the Obama stimulus package. Woo-hoo! Spend that money!
I can’t wait to see what those brainiacs in Washington come up with for an encore.
In addition to the “green” benefits of getting more fuel efficient cars on the road, the program was primarily intended to boost sales in the auto industry. And it worked, right? Car sales surged in August. So the program was a success.
Well, not so fast. You see, everyone who traded in an old vehicle for a new car got the cash rebate. But most of those people would have bought a new vehicle even without the government check that call along with it. The measure of how successful the program was should be the number of people who bought a new car that would not have made the purchase without the Cash for Clunkers program.
The automotive site Edmunds.com did the analysis to figure out how many people bought a car specifically because of the rebates. Their estimate of the number of additional buyers was only 125,000 out of the 690,000 total cars sold during the program. That means that the government subsidy per additional car sold was (drum roll, please) … $24,000.
For the folks who bought the cars, the government rebate was a great deal. In terms of stimulating the economy, not such a great deal. That would be bad enough if it was the end of the story. But as the telemarketeers say, “wait, there’s more!”
Car sales surged in August, good news for the economy. But then car sales collapsed in September, bad news for the economy. August sales were about one and a quarter million vehicles, and September was about 40% less, at seven hundred and fifty thousand. It doesn’t take a rocket scientist to realize that most, is not all, of the surge in business during August was comprised of buyers who would otherwise have waited until September to buy a new car.
To me, it sure looks like the government borrowed $4 billion from the Chinese and handed it out to car buyers for a net increase in new car sales of zero. Zip. Nil. Big goose egg.
But hey, that’s okay. I won’t mind eventually seeing my taxes go up to pay for this. After all, I’m getting my share. You see, I bought a new air conditioning unit last August when the old one on my house died. I would have ponied up the money for one anyway. Remember, it was August. Hotter than the hinges of hell. I wasn’t going one week without AC. Only, now, I qualify for a $1500 tax credit for buying an Energy Star rated appliance, courtesy of the Obama stimulus package. Woo-hoo! Spend that money!
I can’t wait to see what those brainiacs in Washington come up with for an encore.
Monday, October 26, 2009
In the health care “reform” debate, the favorite villain of the “reform” forces has been the health insurance industry. The argument runs something like this: health insurance continues to increase in price because the insurance companies are for profit entities. In their quest to maximize profits, the insurance companies continually raise premiums, then deny coverage on the slightest pretext. If only we could find a way to trim their outrageous profits, then we could afford to extend coverage to more people.
Here’s a quotation from House Speaker Nancy Pelosi:
“I’m very pleased that (Democratic leaders) will be talking, too, about the immoral profits being made by the insurance industry and how those profits have increased in the Bush years.”
Immoral profits. Those rapacious bastards!
There is only one problem with this argument. Well, okay, there’s lots more than one problem with that argument, but here is a big one: it turns out that the health insurance industry isn’t all that profitable. According to a report by the Associated Press, the profit margin of the insurance industry hovers around 6%. In 2008, that level of profitability dropped down to 2.2%.
So, if ALL of the medical care in this country was paid for by insurance companies, AND ALL of those companies were for-profit, AND ALL of those companies were replaced by a non-profit government entity that operated with perfect efficiency, we might be able to reduce health care costs by an average of 6% a year.
Health care’s share of the national economy is currently about 17%. If we drop that by 6% of the total, you go all the way down to … 16%. Hardly an earth shattering change.
Insurance companies are big faceless organizations. It is easy to find stories of people who have been denied coverage because of pre-existing conditions in the face of massive medical expenditures. These two conditions make the health insurance industry a good whipping boy in the current debate. After all, everyone likes to root for the underdog.
But the people who are advocating rearranging one sixth of the economy, and creating a humongous new entitlement should be honest about why they want to do that. It doesn’t seem to be about saving money.
Here’s a quotation from House Speaker Nancy Pelosi:
“I’m very pleased that (Democratic leaders) will be talking, too, about the immoral profits being made by the insurance industry and how those profits have increased in the Bush years.”
Immoral profits. Those rapacious bastards!
There is only one problem with this argument. Well, okay, there’s lots more than one problem with that argument, but here is a big one: it turns out that the health insurance industry isn’t all that profitable. According to a report by the Associated Press, the profit margin of the insurance industry hovers around 6%. In 2008, that level of profitability dropped down to 2.2%.
So, if ALL of the medical care in this country was paid for by insurance companies, AND ALL of those companies were for-profit, AND ALL of those companies were replaced by a non-profit government entity that operated with perfect efficiency, we might be able to reduce health care costs by an average of 6% a year.
Health care’s share of the national economy is currently about 17%. If we drop that by 6% of the total, you go all the way down to … 16%. Hardly an earth shattering change.
Insurance companies are big faceless organizations. It is easy to find stories of people who have been denied coverage because of pre-existing conditions in the face of massive medical expenditures. These two conditions make the health insurance industry a good whipping boy in the current debate. After all, everyone likes to root for the underdog.
But the people who are advocating rearranging one sixth of the economy, and creating a humongous new entitlement should be honest about why they want to do that. It doesn’t seem to be about saving money.
Tuesday, October 20, 2009
Medical Marijuana?
The Justice Department announced a major change in drug enforcement policy yesterday. In states that have legalized medical marijuana, the Federal government will no longer go after sellers that appear to be in compliance with state laws. Dispensaries in California that have their paperwork in order will not have to worry about breaking Federal laws against the sale of controlled substances.
I’m conflicted about this decision. The libertarian in me is all in favor of expanding the rights of individuals to do as they please without government interference. The strict constitutional constructionist in me applauds the victory for state’s rights inherent in the decision. The social conservative in me is … troubled.
I think the thing that bothers me is the mendacity inherent in the system. If medical marijuana was really about resolving nausea in cancer patients undergoing chemotherapy, or helping glaucoma patients who don’t respond well to other drugs, I don’t think anybody would be bothered one way or the other. That was the protective cover used to sell the idea.
The reality is somewhat different.
In reality, medical marijuana is about legalizing a narcotic so that people who want to get stoned can do so without risking being arrested. In California, anyone who wants to can get a prescription from a doctor to acquire as much cannabis as they can consume. If you don’t know a doctor who will write a prescription for “anxiety” or “insomnia,” just visit a marijuana dispensary and they will be happy to recommend one to you. According to a profile in The New Yorker magazine, there are over two hundred thousand medical marijuana prescriptions written in California alone.
I’m uncomfortable with training the citizenry to lie about their health in order to indulge their vices. Of course, one of the truisms of a democracy is that when enough of the citizens want to participate in a vice, they will find a way to legalize it.
In my state, they passed a law setting up a state lottery a few years ago. The pretext was that the lottery was going to raise funds to “enrich” education in the state. Hogwash! Folks just wanted to gamble.
So if people want to spend a good chunk of their lives intoxicated, I guess we should let them, whether the drug of choice is pot or booze. But let’s not kid ourselves that the stoners are being treated with medicine.
I’m conflicted about this decision. The libertarian in me is all in favor of expanding the rights of individuals to do as they please without government interference. The strict constitutional constructionist in me applauds the victory for state’s rights inherent in the decision. The social conservative in me is … troubled.
I think the thing that bothers me is the mendacity inherent in the system. If medical marijuana was really about resolving nausea in cancer patients undergoing chemotherapy, or helping glaucoma patients who don’t respond well to other drugs, I don’t think anybody would be bothered one way or the other. That was the protective cover used to sell the idea.
The reality is somewhat different.
In reality, medical marijuana is about legalizing a narcotic so that people who want to get stoned can do so without risking being arrested. In California, anyone who wants to can get a prescription from a doctor to acquire as much cannabis as they can consume. If you don’t know a doctor who will write a prescription for “anxiety” or “insomnia,” just visit a marijuana dispensary and they will be happy to recommend one to you. According to a profile in The New Yorker magazine, there are over two hundred thousand medical marijuana prescriptions written in California alone.
I’m uncomfortable with training the citizenry to lie about their health in order to indulge their vices. Of course, one of the truisms of a democracy is that when enough of the citizens want to participate in a vice, they will find a way to legalize it.
In my state, they passed a law setting up a state lottery a few years ago. The pretext was that the lottery was going to raise funds to “enrich” education in the state. Hogwash! Folks just wanted to gamble.
So if people want to spend a good chunk of their lives intoxicated, I guess we should let them, whether the drug of choice is pot or booze. But let’s not kid ourselves that the stoners are being treated with medicine.
Wednesday, October 14, 2009
Hurricane Recovery
I haven’t posted in about a week because I was out of town. I took a long weekend and traveled down to New Orleans with some friends. This was our second trip. The first was in June of 2007.
Two years post-Katrina, the effects of the hurricane were still visible everywhere. On this trip, it was obvious that the recovery operations have come a long way. We did not have a car on this trip, so we could not get too far away from the tourist areas, so I cannot speak to the state of the recovery in the 9th ward and other outlying areas of the city.
Still, the amount of cleanup in the French Quarter, Warehouse District, and Central Business District was impressive. Two years ago, there were high rise office towers in the CBD with boarded up windows. The high water mark was still visible on many of the commercial buildings in the area around the Superdome that flooded. From my casual inspection, all of that damage has now been repaired.
Although the French Quarter experienced no flooding, hurricane winds had seriously damaged some buildings, especially along the riverfront. I looked for those same buildings, but it looks like they had been successfully rehabbed in the last two years.
We did see one lot on Exchange Place where a building had been taken down to the foundation, and a steel frame structure erected. Steel girders would support the second and third floor balconies. I suspect that once the building was finished, a façade would be installed on the exterior to fit the building in with prevailing historical architecture that surrounded it. But this looked more like the process of upgrading historic buildings than repairing storm damage.
The St. Charles and Canal Street streetcars were both running, a welcome change from 2007. We rode the St. Charles streetcar out past the Garden District to the end of the line. Once you got past Tulane University, there were more signs of disrepair. Gas lines were being reworked, and the sidewalks exhibited serious buckling. But we only saw one abandoned house with the spray painted markings the emergency crews had used. Two years ago those houses were everywhere, even in the high rent Garden District itself.
The biggest changes were to the businesses themselves. On our first visit, it was obvious that tourism businesses were suffering from the lack of workers. Every restaurant and retail store had help wanted signs out. Day and hours of operation were curtailed, due to the lack of staff. Levels of service were not what they should be, because the available staff were stretched too thin. In one coffee shop, the owner bussed the table before we sat down, took our order, then went back to the kitchen to cook it.
None of that was in evidence on this trip. All of the tourist businesses seemed to be operating at full capacity. I saw a few help wanted signs for retail counter help, but that was all.
From what I have read, rents in New Orleans have gone up significantly post-Katrina. However, the higher rents have not deterred people from moving back, rolling up their sleeves, and going to work.
New Orleans is a much smaller city than it was in summer of 2005, and it may always be a much smaller city than it was. But from one tourist’s perspective, the heavy lifting of recovery from Katrina appears to have been accomplished. It looks like the balance point between living costs and employment opportunities has been reached. Any future growth will have to be organic, driven by the dynamism of the local economy, instead of an influx of Federal money.
One more thing. I can personally attest that the oyster beds have recovered.
Two years post-Katrina, the effects of the hurricane were still visible everywhere. On this trip, it was obvious that the recovery operations have come a long way. We did not have a car on this trip, so we could not get too far away from the tourist areas, so I cannot speak to the state of the recovery in the 9th ward and other outlying areas of the city.
Still, the amount of cleanup in the French Quarter, Warehouse District, and Central Business District was impressive. Two years ago, there were high rise office towers in the CBD with boarded up windows. The high water mark was still visible on many of the commercial buildings in the area around the Superdome that flooded. From my casual inspection, all of that damage has now been repaired.
Although the French Quarter experienced no flooding, hurricane winds had seriously damaged some buildings, especially along the riverfront. I looked for those same buildings, but it looks like they had been successfully rehabbed in the last two years.
We did see one lot on Exchange Place where a building had been taken down to the foundation, and a steel frame structure erected. Steel girders would support the second and third floor balconies. I suspect that once the building was finished, a façade would be installed on the exterior to fit the building in with prevailing historical architecture that surrounded it. But this looked more like the process of upgrading historic buildings than repairing storm damage.
The St. Charles and Canal Street streetcars were both running, a welcome change from 2007. We rode the St. Charles streetcar out past the Garden District to the end of the line. Once you got past Tulane University, there were more signs of disrepair. Gas lines were being reworked, and the sidewalks exhibited serious buckling. But we only saw one abandoned house with the spray painted markings the emergency crews had used. Two years ago those houses were everywhere, even in the high rent Garden District itself.
The biggest changes were to the businesses themselves. On our first visit, it was obvious that tourism businesses were suffering from the lack of workers. Every restaurant and retail store had help wanted signs out. Day and hours of operation were curtailed, due to the lack of staff. Levels of service were not what they should be, because the available staff were stretched too thin. In one coffee shop, the owner bussed the table before we sat down, took our order, then went back to the kitchen to cook it.
None of that was in evidence on this trip. All of the tourist businesses seemed to be operating at full capacity. I saw a few help wanted signs for retail counter help, but that was all.
From what I have read, rents in New Orleans have gone up significantly post-Katrina. However, the higher rents have not deterred people from moving back, rolling up their sleeves, and going to work.
New Orleans is a much smaller city than it was in summer of 2005, and it may always be a much smaller city than it was. But from one tourist’s perspective, the heavy lifting of recovery from Katrina appears to have been accomplished. It looks like the balance point between living costs and employment opportunities has been reached. Any future growth will have to be organic, driven by the dynamism of the local economy, instead of an influx of Federal money.
One more thing. I can personally attest that the oyster beds have recovered.
Wednesday, October 7, 2009
Gee, this sounds like a great deal!
United Airlines has announced a new program this week. Premium Baggage allows the traveler to pay a single annual charge for the right to avoid individual flight baggage fees for a year. The fee for Premium Baggage is $249 per year, and you get to check two bags every time you take a United flight. The current fees are $20 for the first bag checked, and $30 for the second.
This plan works like a frequent flyer program, except that the incentives are reversed. With frequent flyer miles, the airline rewards your loyalty by giving you something. That reward could be upgrades to first class, or it could be free flights. Frequent flyer miles are the carrot the airline uses to affect the traveler’s behavior.
The Premium Baggage program is less about carrots, and more about sticks. Purchase the service, United is saying, and we’ll stop whacking you with extra charges every time you check in for a flight.
Basically, Premium Baggage is the frequent flyer program’s evil twin.
This plan works like a frequent flyer program, except that the incentives are reversed. With frequent flyer miles, the airline rewards your loyalty by giving you something. That reward could be upgrades to first class, or it could be free flights. Frequent flyer miles are the carrot the airline uses to affect the traveler’s behavior.
The Premium Baggage program is less about carrots, and more about sticks. Purchase the service, United is saying, and we’ll stop whacking you with extra charges every time you check in for a flight.
Basically, Premium Baggage is the frequent flyer program’s evil twin.
Tuesday, October 6, 2009
Cap and Trade: It ain't easy, being green.
Last week Exelon, a giant utility company, announced that it was ending its membership in the US Chamber of Commerce, citing opposition to the Chamber’s positions on climate change and the EPA’s recent moves to regulate carbon dioxide emissions as an immediate threat to human health and safety. Other high profile companies that have recently left the Chamber are Pacific Gas & Electric, PNR Resources (another utility), and Apple Computer. Nike has resigned from the Board of Directors of the Chamber, but is retaining their membership.
It looks like the progressive companies, the leaders of the future, have embraced the need for a carbon free future, and are willing to do whatever it takes to accomplish that future.
The funny thing though, is that none of those companies is going to suffer very much from supporting climate change legislation.
Exelon, for example, like Pacific G & E and PNR Resources, owns lots of nuclear power plants. So under carbon cap and trade legislation currently under consideration, these companies would be awarded what are called carbon offsets. Utilities that have a lot of coal fired power plants (big carbon emitters), would have to purchase those offsets to compensate for the amount of carbon they emit.
Basically, Exelon stands to make a lot of money from cap and trade legislation. If I could pick up an entirely new revenue source, without having to do any work for the extra money, I’d be in favor of that too. Exelon doesn’t even have to worry about upsetting their customers. The utilities that are buying offsets from Exelon have to deal with that headache, when they raise their customer’s rates to pay for the offsets.
Now let’s look at the other two examples, Nike and Apple. What I notice is that neither of these companies has significant manufacturing operations in the US. Both are essentially design and marketing operations that outsource all of the actual work of building their products to Asian contractors.
So you can put all the restrictions you want on carbon emissions associated with manufacturing. It won’t hurt those guys’ feelings in the least. After all, they’ve got no skin in the game.
Now, maybe we really do need to make huge reductions in the amount of carbon we emit as a society. And maybe the best way to do that is to place restrictions on large point sources like power plants, instead of forcing individuals to change their behavior. Maybe.
My point is that it is easy to be in favor of something when somebody else is going to have to pay for it. Easy, but not particularly virtuous or laudable.
It looks like the progressive companies, the leaders of the future, have embraced the need for a carbon free future, and are willing to do whatever it takes to accomplish that future.
The funny thing though, is that none of those companies is going to suffer very much from supporting climate change legislation.
Exelon, for example, like Pacific G & E and PNR Resources, owns lots of nuclear power plants. So under carbon cap and trade legislation currently under consideration, these companies would be awarded what are called carbon offsets. Utilities that have a lot of coal fired power plants (big carbon emitters), would have to purchase those offsets to compensate for the amount of carbon they emit.
Basically, Exelon stands to make a lot of money from cap and trade legislation. If I could pick up an entirely new revenue source, without having to do any work for the extra money, I’d be in favor of that too. Exelon doesn’t even have to worry about upsetting their customers. The utilities that are buying offsets from Exelon have to deal with that headache, when they raise their customer’s rates to pay for the offsets.
Now let’s look at the other two examples, Nike and Apple. What I notice is that neither of these companies has significant manufacturing operations in the US. Both are essentially design and marketing operations that outsource all of the actual work of building their products to Asian contractors.
So you can put all the restrictions you want on carbon emissions associated with manufacturing. It won’t hurt those guys’ feelings in the least. After all, they’ve got no skin in the game.
Now, maybe we really do need to make huge reductions in the amount of carbon we emit as a society. And maybe the best way to do that is to place restrictions on large point sources like power plants, instead of forcing individuals to change their behavior. Maybe.
My point is that it is easy to be in favor of something when somebody else is going to have to pay for it. Easy, but not particularly virtuous or laudable.
Tuesday, September 29, 2009
Okay, this is creepy. This is a video of an elementary school class being taught songs of praise to President Obama:
It's a little hard to understand, so here is a transcription of the lyrics to the first song:
Barack Hussein Obama
He said that all must lend a hand [?]
To make this country strong again
Mmm, mmm, mm!
Barack Hussein Obama
He said we must be clear today
Equal work means equal pay
Mmm, mmm, mm!
Barack Hussein Obama
He said that we must take a stand
To make sure everyone gets a chance
Mmm, mmm, mm!
Barack Hussein Obama
He said Red, Yellow, Black or White
All are equal in his sight
Mmm, mmm, mm!
Now the sentiments expressed are completely innocuous. Equality and equal opportunity are laudable values, and I don't think anyone could find fault with them. What's nuts about this is that it looks like the teachers are indoctrinating a group of small children to worship an elected politician.
The right wing in this country has personalized the policy debate to a shameful degree. When I see pictures of the President photoshopped to look like the Joker in the movie "The Dark Knight," I'm appalled. Not only is it disrespectful and uncalled for, it does nothing to advance the policy debate.
But on the left wing side, there appears to have arisen a cult of personality around Barack Obama that is as polarizing in its own way. Teaching little children to sing paeans to the Dear Leader is something you would expect to see in a totalitarian dictatorship. Since these teachers thought it up on their own, it's a bit spooky.
There are beaucoup nut jobs on the right side of the debate in this country, granted. But there is a full complement of wingnuts on the left as well.
It's a little hard to understand, so here is a transcription of the lyrics to the first song:
Barack Hussein Obama
He said that all must lend a hand [?]
To make this country strong again
Mmm, mmm, mm!
Barack Hussein Obama
He said we must be clear today
Equal work means equal pay
Mmm, mmm, mm!
Barack Hussein Obama
He said that we must take a stand
To make sure everyone gets a chance
Mmm, mmm, mm!
Barack Hussein Obama
He said Red, Yellow, Black or White
All are equal in his sight
Mmm, mmm, mm!
Now the sentiments expressed are completely innocuous. Equality and equal opportunity are laudable values, and I don't think anyone could find fault with them. What's nuts about this is that it looks like the teachers are indoctrinating a group of small children to worship an elected politician.
The right wing in this country has personalized the policy debate to a shameful degree. When I see pictures of the President photoshopped to look like the Joker in the movie "The Dark Knight," I'm appalled. Not only is it disrespectful and uncalled for, it does nothing to advance the policy debate.
But on the left wing side, there appears to have arisen a cult of personality around Barack Obama that is as polarizing in its own way. Teaching little children to sing paeans to the Dear Leader is something you would expect to see in a totalitarian dictatorship. Since these teachers thought it up on their own, it's a bit spooky.
There are beaucoup nut jobs on the right side of the debate in this country, granted. But there is a full complement of wingnuts on the left as well.
Thursday, September 24, 2009
Off Topic Post
I watched the new Courtney Cox comedy, Cougar Town, last night. The set up is a 40 something woman reentering the dating scene after divorce. It is sharp, well written comedy. I’ll make a point of watching it again.
It’s odd what your subconscious will throw out. I woke up this morning with the following thoughts crystallizing in my brain.
In my younger years, before I met my wife, I would periodically go out on dates to expensive restaurants. On these excursions, I would invariable pay, and I would invariably not get lucky.
It occurs to me that this was the singles equivalent of hanging a pork chop around the neck of the ugly baby so that the dog will play with the kid. “You’re going to pay for dinner? And I can order anything I want? Okay, I’ll go out with you.”
Eventually, I did meet my wife, the one woman in North America who looks at me and thinks “wow, this is it.” She is a rare creature, as the taste for short, scrawny, balding geek is not universally shared in our culture.
Anyway, if I could take back all the lobster dinners I bought without romantic success, I’d be two house payments ahead, and whole ocean ecosystems would have been saved.
It’s odd what your subconscious will throw out. I woke up this morning with the following thoughts crystallizing in my brain.
In my younger years, before I met my wife, I would periodically go out on dates to expensive restaurants. On these excursions, I would invariable pay, and I would invariably not get lucky.
It occurs to me that this was the singles equivalent of hanging a pork chop around the neck of the ugly baby so that the dog will play with the kid. “You’re going to pay for dinner? And I can order anything I want? Okay, I’ll go out with you.”
Eventually, I did meet my wife, the one woman in North America who looks at me and thinks “wow, this is it.” She is a rare creature, as the taste for short, scrawny, balding geek is not universally shared in our culture.
Anyway, if I could take back all the lobster dinners I bought without romantic success, I’d be two house payments ahead, and whole ocean ecosystems would have been saved.
Tuesday, September 22, 2009
Silver Linings
Economically, we're not out of the wood yet. For the business I work at, sales continue to be greatly reduced from the same period a year ago. We saw some signs of recovery in the second quarter, but as we close out the third quarter, our order backlog has dropped back down.
September has been particularly slow. For our core business segment, the volume of product we are shipping this month is no more than what we shipped in August. However, due to the vagaries of our accounting system, we have five weeks of production this month, versus four weeks last month. For each week this month, we only have 80% of the activity compared to each week in August.
The bottom line to this it that there isn’t enough work for all the employees to have a full schedule. There is always the temptation in this situation to keep people busy by running extra inventory. Inevitably, however, you end up running the wrong mix of product, leaving you short of raw material to run what your customers will actually want. Also, by building inventory on the theory of “build it and they will come,” you make the correction that much worse when you finally recognize that increased sales are not just around the corner.
So I’m biting the bullet. I’m scheduling two fewer production days next week. At least this will give us a chance to do our end of quarter inventory on straight time. Normally we have the inventory crew come in at midnight after the last production shift at the end of a month, and they get time and a half.
The excess production only built up during the second half of this month. For the first couple of weeks in September, not only did we have a short week because of Labor Day, but we also had a lot of people out sick, which, in a perverse way, cut into our capacity. I needed all the healthy people who showed up for work. It was only after the wave of illness based and everyone came back to work that we began overproducing.
You know, not everyone can see the silver lining in a flu pandemic. And they call me a pessimist.
September has been particularly slow. For our core business segment, the volume of product we are shipping this month is no more than what we shipped in August. However, due to the vagaries of our accounting system, we have five weeks of production this month, versus four weeks last month. For each week this month, we only have 80% of the activity compared to each week in August.
The bottom line to this it that there isn’t enough work for all the employees to have a full schedule. There is always the temptation in this situation to keep people busy by running extra inventory. Inevitably, however, you end up running the wrong mix of product, leaving you short of raw material to run what your customers will actually want. Also, by building inventory on the theory of “build it and they will come,” you make the correction that much worse when you finally recognize that increased sales are not just around the corner.
So I’m biting the bullet. I’m scheduling two fewer production days next week. At least this will give us a chance to do our end of quarter inventory on straight time. Normally we have the inventory crew come in at midnight after the last production shift at the end of a month, and they get time and a half.
The excess production only built up during the second half of this month. For the first couple of weeks in September, not only did we have a short week because of Labor Day, but we also had a lot of people out sick, which, in a perverse way, cut into our capacity. I needed all the healthy people who showed up for work. It was only after the wave of illness based and everyone came back to work that we began overproducing.
You know, not everyone can see the silver lining in a flu pandemic. And they call me a pessimist.
Friday, September 18, 2009
The World's Single Most Destructive Thought
I ran into this post on a blog called I Luv SA. When I read the opening sentence, I realized that the blogger had perfectly encapsulated a specific worldview. "I am poor because you are rich."
This is a worldview that is gaining increasing currency in American politics and policy today. Whenever I read about concerns over increasing income inequality, and how the top 10% is grabbing all the economic gains, this destructive thought is underlying those concerns.
In college I took a seminar in Comparative Economics, taught by Franco Modigliano, who went on to win the Nobel Prize in Economics. If I had known he was going to win the Nobel Prize, I probably wouldn't have cut class as often as I did.
Anyway, in one of the class sessions I did attend, he spent most of the time demolishing Marx's economic theories. He showed how, over the last century, various economists had pointed out how wrong Marx's theories were.
Most of the arguments against Marx were fairly technical, and to tell you the truth, I don't remember a one of them. But the class did make an immpact on me. After spending most of the class knocking down Marxism, Professor Modigliano then provided the insight that has stuck with me over the last thirty years: "The important thing about Marxism is not that it is correct. The important thing is that every generation has to prove it false all over again."
"I am poor because you are rich." It is a wonderfully seductive idea. It absolves me of all responsibility, justifies any actions I take against you.
It just happens to be completely wrong.
This is a worldview that is gaining increasing currency in American politics and policy today. Whenever I read about concerns over increasing income inequality, and how the top 10% is grabbing all the economic gains, this destructive thought is underlying those concerns.
In college I took a seminar in Comparative Economics, taught by Franco Modigliano, who went on to win the Nobel Prize in Economics. If I had known he was going to win the Nobel Prize, I probably wouldn't have cut class as often as I did.
Anyway, in one of the class sessions I did attend, he spent most of the time demolishing Marx's economic theories. He showed how, over the last century, various economists had pointed out how wrong Marx's theories were.
Most of the arguments against Marx were fairly technical, and to tell you the truth, I don't remember a one of them. But the class did make an immpact on me. After spending most of the class knocking down Marxism, Professor Modigliano then provided the insight that has stuck with me over the last thirty years: "The important thing about Marxism is not that it is correct. The important thing is that every generation has to prove it false all over again."
"I am poor because you are rich." It is a wonderfully seductive idea. It absolves me of all responsibility, justifies any actions I take against you.
It just happens to be completely wrong.
Thursday, September 17, 2009
Job Seeking
I had an interesting conversation the other day. I was sitting at my desk, upgrading a spreadsheet to automatically notify us when it was time to order more components for one of our product lines, when the phone rang. On the other end was a salesman for a metals service center. He was just doing what salesmen do, cold calling to try and find potential new accounts.
We talked for a minute or two, and quickly established that my company doesn’t use the alloys he carries. He started to apologize for taking my time. I told him it was okay. After all, I’ve sat on the other side of the desk, trying to drum up new business. No reason not to be polite. If you never talk to salesmen, you’ll never find any new opportunities.
On a whim, I asked him how his business was doing. Business was slow, but he was surviving. Since most salesmen are at least partially paid on commission, he had to have been working harder, for less money, than a year ago. My bonus won’t be as good as it was last year, so I’m in the same boat. I told him that qualified us both for the category of under employed. Working, but not making as much as we used to. Of course, that beats the crap out of unemployment.
Then I mentioned that I didn’t understand how some people could fall out of the unemployment statistics because they had “stopped looking for work.” I don’t know about you, but about every six hours I get hungry. If you have no source of income, and you’re not looking for work, how do you keep buying groceries?
The salesman told me a story. He had two close friends, and all three of them had been laid off within a short period of time. One had found a new job within a month. He had looked for a couple of months before landing his current position. Then there was his other friend.
His other friend had been laid off from his previous job last October. It’s closing in on a year without work. The last time the salesman had visited his friend, the guy had said he had given up looking for a job. Between unemployment compensation and side work as a mechanic, the friend was just getting by. When reminded that the extended unemployment benefits were about to run out, the friend replied “I don’t think that the government is going to let me starve.”
Well, this is ostensibly a democracy. So can I register a vote on that?
Seriously, this makes me think that a lot of the people who have “stopped looking,” have stopped because they are still getting benefits. When their benefits run out, they will rediscover a sense of urgency about generating more cash flow. This may not take the form of another job. Some of those people will work a lot harder at their side business. Or they may lower their expectations and take on multiple part time gigs.
If you lower your expectations while you are still on unemployment, you risk losing your benefit. If the jobs available pay only a little more than unemployment compensation, why take the job? But once the benefit checks stop coming in, your perspective will change.
After all, you gotta eat.
We talked for a minute or two, and quickly established that my company doesn’t use the alloys he carries. He started to apologize for taking my time. I told him it was okay. After all, I’ve sat on the other side of the desk, trying to drum up new business. No reason not to be polite. If you never talk to salesmen, you’ll never find any new opportunities.
On a whim, I asked him how his business was doing. Business was slow, but he was surviving. Since most salesmen are at least partially paid on commission, he had to have been working harder, for less money, than a year ago. My bonus won’t be as good as it was last year, so I’m in the same boat. I told him that qualified us both for the category of under employed. Working, but not making as much as we used to. Of course, that beats the crap out of unemployment.
Then I mentioned that I didn’t understand how some people could fall out of the unemployment statistics because they had “stopped looking for work.” I don’t know about you, but about every six hours I get hungry. If you have no source of income, and you’re not looking for work, how do you keep buying groceries?
The salesman told me a story. He had two close friends, and all three of them had been laid off within a short period of time. One had found a new job within a month. He had looked for a couple of months before landing his current position. Then there was his other friend.
His other friend had been laid off from his previous job last October. It’s closing in on a year without work. The last time the salesman had visited his friend, the guy had said he had given up looking for a job. Between unemployment compensation and side work as a mechanic, the friend was just getting by. When reminded that the extended unemployment benefits were about to run out, the friend replied “I don’t think that the government is going to let me starve.”
Well, this is ostensibly a democracy. So can I register a vote on that?
Seriously, this makes me think that a lot of the people who have “stopped looking,” have stopped because they are still getting benefits. When their benefits run out, they will rediscover a sense of urgency about generating more cash flow. This may not take the form of another job. Some of those people will work a lot harder at their side business. Or they may lower their expectations and take on multiple part time gigs.
If you lower your expectations while you are still on unemployment, you risk losing your benefit. If the jobs available pay only a little more than unemployment compensation, why take the job? But once the benefit checks stop coming in, your perspective will change.
After all, you gotta eat.
Tuesday, September 15, 2009
French Health Care, Part Deux
In my last post I talked a little bit about how the French pay for their health care system, the one everybody in the US media thinks is so fabulous. The French pay a 22% payroll tax rate, compared to 7.5% for American workers. This is, of course, more than matched by the employer. Also, it turns out that a lot of French households also carry private supplemental health insurance. This must be sort of like the Medigap coverage that many seniors in this country have, that supplements what Medicare pays medical providers. So that’s where the money comes from, the revenue side of the equation.
But we also have to look at the expense side of the equation. After all, the French pay about 11% of their GNP for health care, compared to over 17% of GNP in the US. Now call me crazy, but I have a hard time believing that the French are more efficient than Americans at anything. A French surgeon doesn’t do a bypass operation twice as fast as an American, and I doubt that French surgical teams have only half as many nurses and techs as American teams.
Although the man hours per procedure may be the same in both countries, it turns out that there is a huge difference in the cost of those man hours. On average, doctors in France make only about one third what doctors in the US earn. This is primarily because the French Social Security fund is the primary buyer of medical care, and they use their near monopoly power to keep reimbursements low.
Another place where the French use the monopoly power of their system is in pharmaceutical purchasing. Basically, the French government tells the drug companies what price they will get for their products. Since the alternative is to lose the French market, the drug companies take the deal.
As a matter of fact, most of the western world does the same thing. That leaves the US as the only unregulated pharmaceutical market. The result is that the US market ends up funding most of the research into new drugs.
So the French system does use the power of the public insurance provider (what we would call the public option) to keep costs lower than in the US. But here’s the rub: Their costs keep going up, just like ours. The French have raised their Social Security tax six times in the last 20 years to pay for their “free” health care.
Insurance companies are not popular in our culture. Neither are pharmaceutical companies. So maybe there is the political will to destroy their business model in the name of lowering costs. I’m not so sure that, as a people, we think it is okay to cut the pay of our doctors in half. Without those kind of savings, providing free care to everyone is just going to raise prices on everyone, healthy and sick alike.
But we also have to look at the expense side of the equation. After all, the French pay about 11% of their GNP for health care, compared to over 17% of GNP in the US. Now call me crazy, but I have a hard time believing that the French are more efficient than Americans at anything. A French surgeon doesn’t do a bypass operation twice as fast as an American, and I doubt that French surgical teams have only half as many nurses and techs as American teams.
Although the man hours per procedure may be the same in both countries, it turns out that there is a huge difference in the cost of those man hours. On average, doctors in France make only about one third what doctors in the US earn. This is primarily because the French Social Security fund is the primary buyer of medical care, and they use their near monopoly power to keep reimbursements low.
Another place where the French use the monopoly power of their system is in pharmaceutical purchasing. Basically, the French government tells the drug companies what price they will get for their products. Since the alternative is to lose the French market, the drug companies take the deal.
As a matter of fact, most of the western world does the same thing. That leaves the US as the only unregulated pharmaceutical market. The result is that the US market ends up funding most of the research into new drugs.
So the French system does use the power of the public insurance provider (what we would call the public option) to keep costs lower than in the US. But here’s the rub: Their costs keep going up, just like ours. The French have raised their Social Security tax six times in the last 20 years to pay for their “free” health care.
Insurance companies are not popular in our culture. Neither are pharmaceutical companies. So maybe there is the political will to destroy their business model in the name of lowering costs. I’m not so sure that, as a people, we think it is okay to cut the pay of our doctors in half. Without those kind of savings, providing free care to everyone is just going to raise prices on everyone, healthy and sick alike.
Thursday, September 10, 2009
"Who is this guy FICA, and why does he get so much of my money?": French Edition
The President gave his big speech on health care reform last night. It’s hard for me to believe that a single oration, no matter how inspiring, is enough to move the needle on getting this kind of major legislation passed thorough Congress in the face of entrenched opposition. “Gorsh, that Obama feller sure talks real purty. He convinced me to restructure one seventh of the American economy. I mean, he’s just so durn charismatic!”
But the occasion did spur me to start thinking about health insurance in this country again. Actually, it got me thinking about health insurance in France. After all, the French system is the model most commonly cited in the media as the ideal from the patient’s perspective. Everybody’s covered, the copays are small, and you can never be denied coverage.
Best of all, from all published reports, there is exactly zero interaction with the government run insurance company. You just call the doctor or drop in at the hospital. All the messy financial details are handled off stage. “Monsieur, let us focus on making you well.” What’s not to like?
The question that pops up is a simple one: How do they pay for this great system? More specifically, who pays for the system, and how much do they pay? After all, the money has got to come from somewhere, right?
So I did a little digging, which is a shocking easy thing to do, what with this newfangled Internet and all. It turns out that the French health insurance system is part of the French Social Security system. So in addition to paying retirees, the system also pays for everybody’s medical bills. The interesting thing is that Social Security in France is funded via the same mechanism as in the US: payroll taxes.
In the US, the tax rate for Social Security and Medicare combined is 15%, with half that paid by the employer and half by the employee. The effective payroll tax rate for employees in America is 7.5%.
So what is the equivalent rate in France?
The equivalent rate turns out to be about 22%. That’s right, 22%. So let us say that you earn $10 an hour. In America, your take home is $9.25/hour. In France, say hello to $7.80/hour.
It kind of puts a different spin on the situation, don’t cha think?
I wonder why that number is being reported on more often in this debate. After all, the money for health care has to come from somewhere. There ain’t no such thing as a free lunch.
But the occasion did spur me to start thinking about health insurance in this country again. Actually, it got me thinking about health insurance in France. After all, the French system is the model most commonly cited in the media as the ideal from the patient’s perspective. Everybody’s covered, the copays are small, and you can never be denied coverage.
Best of all, from all published reports, there is exactly zero interaction with the government run insurance company. You just call the doctor or drop in at the hospital. All the messy financial details are handled off stage. “Monsieur, let us focus on making you well.” What’s not to like?
The question that pops up is a simple one: How do they pay for this great system? More specifically, who pays for the system, and how much do they pay? After all, the money has got to come from somewhere, right?
So I did a little digging, which is a shocking easy thing to do, what with this newfangled Internet and all. It turns out that the French health insurance system is part of the French Social Security system. So in addition to paying retirees, the system also pays for everybody’s medical bills. The interesting thing is that Social Security in France is funded via the same mechanism as in the US: payroll taxes.
In the US, the tax rate for Social Security and Medicare combined is 15%, with half that paid by the employer and half by the employee. The effective payroll tax rate for employees in America is 7.5%.
So what is the equivalent rate in France?
The equivalent rate turns out to be about 22%. That’s right, 22%. So let us say that you earn $10 an hour. In America, your take home is $9.25/hour. In France, say hello to $7.80/hour.
It kind of puts a different spin on the situation, don’t cha think?
I wonder why that number is being reported on more often in this debate. After all, the money for health care has to come from somewhere. There ain’t no such thing as a free lunch.
Monday, September 7, 2009
Interlude
Well, I haven’t blogged in over a week. This has a lot to do with the Office Manager at work going out on maternity leave last month. The added responsibilities have kept me pretty busy. It’s not that I’ve picked up so much extra workload, because we divvied up her work among four people. It’s that she is so damn competent at her job, whereas I am not. Oh, I’m competent enough at my work, just not hers. So it takes me twice as long to do a task as it would normally take her.
It gotten to the point where I’m ready to go to her house and knock on the door. Then, when her husband answers, I’ll punch him. “You did this to her, and don’t think I don’t know it! Miracle of life, my ass! Tell her that play time’s over, and she needs to get her butt back into the office.”
Kidding, just kidding.
It gotten to the point where I’m ready to go to her house and knock on the door. Then, when her husband answers, I’ll punch him. “You did this to her, and don’t think I don’t know it! Miracle of life, my ass! Tell her that play time’s over, and she needs to get her butt back into the office.”
Kidding, just kidding.
Wednesday, August 26, 2009
What was old is new again.
Remember Digger?
A couple of years ago the pharmaceutical giant Novartis launched a marketing campaign for their drug Lamisil. Lamisil was the tradename for an oral antifungal medication. The primary use of the drug was to treat toenail fungus.
As a prescription medicine, the idea of the marketing was to convince consumers to ask their doctor for a scrip for Lamisil. The biggest hurdle in doing that was to get people aware of the existence of toenail fungus. I don’t know about you, but I don’t spend a great deal of time critically examining my toenails for signs of health.
So the advertising brainiacs in charge of the campaign decided on a tried and true solution: they created an animated personification of the disease to explain what was so terrible about having toenail fungus. Enter Digger. A commercial from the original ad campaign is shown below.
As the animated avatar for a fungal infection, Digger walks the fine line between being cute and annoying at the same time. Sort of like the in-law with the store of great jokes, who stays three days too long on a visit. Or the bedraggled looking street cat that lets you pet it and purrs, then turns and claws the crap out of your hand and wrist.
Lamisil lost patent protection in 2007, at which time generic competition came onto the prescription market. That was about the time the TV commercials stopped running. With generic competition and the accompanying loss of market share, heavy advertising probably reduced the profitability of the Lamisil brand.
After all, if you’re spending big bucks on TV ads to make people aware of the existence of the disease your drug treats, and then people end up buying the generic because of lower copays, all your ads are doing is driving sales for your competitor. So you drop the ads, lower your price, and you can still make more money on lower sales volume. Television advertising is expensive. It costs vastly more to market a drug than it does to manufacture and distribute it.
Fast forward to today. Novartis has launched a topical version of Lamisil as an over the counter medication. The most common reason folks pop into Walgreens to pick up antifungals is to treat athlete’s foot. Now, profit margins on over the counter meds can be pretty good, but you have to support the brand with marketing.
So Digger has been resurrected, this time as athlete’s foot fungus. You can see the new ad here.
So not only are pharmaceuticals resurrected in new formulations, but now the drug mascots are being reused as well. Maybe there really is nothing new under the sun.
A couple of years ago the pharmaceutical giant Novartis launched a marketing campaign for their drug Lamisil. Lamisil was the tradename for an oral antifungal medication. The primary use of the drug was to treat toenail fungus.
As a prescription medicine, the idea of the marketing was to convince consumers to ask their doctor for a scrip for Lamisil. The biggest hurdle in doing that was to get people aware of the existence of toenail fungus. I don’t know about you, but I don’t spend a great deal of time critically examining my toenails for signs of health.
So the advertising brainiacs in charge of the campaign decided on a tried and true solution: they created an animated personification of the disease to explain what was so terrible about having toenail fungus. Enter Digger. A commercial from the original ad campaign is shown below.
As the animated avatar for a fungal infection, Digger walks the fine line between being cute and annoying at the same time. Sort of like the in-law with the store of great jokes, who stays three days too long on a visit. Or the bedraggled looking street cat that lets you pet it and purrs, then turns and claws the crap out of your hand and wrist.
Lamisil lost patent protection in 2007, at which time generic competition came onto the prescription market. That was about the time the TV commercials stopped running. With generic competition and the accompanying loss of market share, heavy advertising probably reduced the profitability of the Lamisil brand.
After all, if you’re spending big bucks on TV ads to make people aware of the existence of the disease your drug treats, and then people end up buying the generic because of lower copays, all your ads are doing is driving sales for your competitor. So you drop the ads, lower your price, and you can still make more money on lower sales volume. Television advertising is expensive. It costs vastly more to market a drug than it does to manufacture and distribute it.
Fast forward to today. Novartis has launched a topical version of Lamisil as an over the counter medication. The most common reason folks pop into Walgreens to pick up antifungals is to treat athlete’s foot. Now, profit margins on over the counter meds can be pretty good, but you have to support the brand with marketing.
So Digger has been resurrected, this time as athlete’s foot fungus. You can see the new ad here.
So not only are pharmaceuticals resurrected in new formulations, but now the drug mascots are being reused as well. Maybe there really is nothing new under the sun.
Friday, August 21, 2009
Will wonders never cease?
I didn't think it was possible.
I found a thoughtful, well-written article on the CBS website. It points out the Obamacare healthcare reform proposals are being sold on the basis that "reform" is necessary to reduce health care spending, but that the current proposals will, in fact, increase health care spending and make access to healthcare scarcer, not more availible.
The idea that it was thoughtful and well-written doesn't surprise me. Across the political spectrum, there are many excellent writers. For example, Paul Krugman irritates the hell out of me, but he writes well. Robert Reich has been known to cause me to actually froth at the mouth. Real foam, no kidding. But it is because he scores his points so well that he irks me so badly.
And it is not that the article pointed out flaws in the administration's healthcare proposals. I completely agreed with the points that were made. I am, after all, only slightly to the right...of Attila the Hun.
No, it was that the article appeared on the CBS website. I would have thought that as a bastion of the Eastern establishment, a pillar of the mainstream media, CBS would, if anything, be cheerleading for the administration's proposals.
What's next? Will Rachel Maddow start opposing sending more troops to Afghanistan?
I found a thoughtful, well-written article on the CBS website. It points out the Obamacare healthcare reform proposals are being sold on the basis that "reform" is necessary to reduce health care spending, but that the current proposals will, in fact, increase health care spending and make access to healthcare scarcer, not more availible.
The idea that it was thoughtful and well-written doesn't surprise me. Across the political spectrum, there are many excellent writers. For example, Paul Krugman irritates the hell out of me, but he writes well. Robert Reich has been known to cause me to actually froth at the mouth. Real foam, no kidding. But it is because he scores his points so well that he irks me so badly.
And it is not that the article pointed out flaws in the administration's healthcare proposals. I completely agreed with the points that were made. I am, after all, only slightly to the right...of Attila the Hun.
No, it was that the article appeared on the CBS website. I would have thought that as a bastion of the Eastern establishment, a pillar of the mainstream media, CBS would, if anything, be cheerleading for the administration's proposals.
What's next? Will Rachel Maddow start opposing sending more troops to Afghanistan?
Tuesday, August 18, 2009
A new milestone in American eating!
Who says the spirit of innovation is dead? Who claims that nothing is invented here anymore, that America's best days are behind us? I cry No! The spirit that inspired our forefathers breathes within us yet.
The Wisconsin state fair is in full swing up in West Allis, WI (part of the Greater Allis metroplex). On the midway, inbetween the Ferris wheel and the prize steers, along with the funnel cakes and corn dogs, a new champion has emerged. Chocolate covered bacon. You heard me aright, citizens. American ingenuity has found a way to marry pork products and milk chocolate. Not stopping there, this new food item is actually served on a stick, for the culinary convenience of the consumer.
Bacon on a stick would be invention enough for some, more timid nations. Combining meat and milk chocolate would be too radical in lesser peoples. But in this great land of ours, the sky's the limit when it comes to increasing the caloric density of foodstuffs, whilst simultaneously making it easier to eat one handed.
Is this a great country, or what?
It makes you wonder what new comestible is still merely a gleam in some bold entrepreneur's eye. Caramel coated spam, anyone?
The Wisconsin state fair is in full swing up in West Allis, WI (part of the Greater Allis metroplex). On the midway, inbetween the Ferris wheel and the prize steers, along with the funnel cakes and corn dogs, a new champion has emerged. Chocolate covered bacon. You heard me aright, citizens. American ingenuity has found a way to marry pork products and milk chocolate. Not stopping there, this new food item is actually served on a stick, for the culinary convenience of the consumer.
Bacon on a stick would be invention enough for some, more timid nations. Combining meat and milk chocolate would be too radical in lesser peoples. But in this great land of ours, the sky's the limit when it comes to increasing the caloric density of foodstuffs, whilst simultaneously making it easier to eat one handed.
Is this a great country, or what?
It makes you wonder what new comestible is still merely a gleam in some bold entrepreneur's eye. Caramel coated spam, anyone?
Monday, August 17, 2009
Ancient China
I just finished reading a translation of Annals of the Grand Historian by Sima Qian. Annals covers the history of the Qin dynasty, the revolt against the Qin, founding of the Han dynasty that followed, and includes much of the early years of the Han dynasty. Written about 100 BC, it covers the period from about 350 BC to the author's immediate past.
In my translation, the last chapter is titled The Money Makers. The chapter is a short account of some of the ways of earning money in ancient China. More generally, it lays out Sima Qian's understanding of the motivations that drove what was, to him, the contemporary economy.
Some of the historian's remarks jumped off the page at me, and I thought I'd share them:
"... when it comes to those impoverished men with aged parents and wives and children too weak or young to help them out... who must depend upon the gifts and contributions of the community for their food and clothing and are unable to provide for themselves--if men such as these, reduced to such straits, still fail to feel any shame or embarrassment, then they hardly deserve to be called human." You have to wonder what Sima Qian would make of the modern idea of entitlements. No need to feel shame over not being able to feed your kids. You're entitled to food stamps.
Or this:
"Therefore, when men have no wealth at all, they live by their brawn; when they have a little, they struggle to get ahead by their brains; and when they already have plenty of money, they look for an opportunity for a good investment. This is in general the way things work."
Or this:
"As for the ordinary lot of tax-paying commoners, if they are confronted by someone whose wealth is ten times their own, they will behave with humility; if by someone whose wealth is 100 times their own, they will cringe with fear; if by someone whose wealth is 1,000 times their own, they will undertake to work for him; and if by someone whose wealth is 10,000 times their own they will become his servants. This is the principle of things."
With very little modification, these statements would accurately describe economic life in today's capitalist societies. What is amazing about this is that Sima Qian was writing around 100 BC, over 2000 years ago.
The more things change, the more they stay the same. And people wonder why I'm a conservative.
In my translation, the last chapter is titled The Money Makers. The chapter is a short account of some of the ways of earning money in ancient China. More generally, it lays out Sima Qian's understanding of the motivations that drove what was, to him, the contemporary economy.
Some of the historian's remarks jumped off the page at me, and I thought I'd share them:
"... when it comes to those impoverished men with aged parents and wives and children too weak or young to help them out... who must depend upon the gifts and contributions of the community for their food and clothing and are unable to provide for themselves--if men such as these, reduced to such straits, still fail to feel any shame or embarrassment, then they hardly deserve to be called human." You have to wonder what Sima Qian would make of the modern idea of entitlements. No need to feel shame over not being able to feed your kids. You're entitled to food stamps.
Or this:
"Therefore, when men have no wealth at all, they live by their brawn; when they have a little, they struggle to get ahead by their brains; and when they already have plenty of money, they look for an opportunity for a good investment. This is in general the way things work."
Or this:
"As for the ordinary lot of tax-paying commoners, if they are confronted by someone whose wealth is ten times their own, they will behave with humility; if by someone whose wealth is 100 times their own, they will cringe with fear; if by someone whose wealth is 1,000 times their own, they will undertake to work for him; and if by someone whose wealth is 10,000 times their own they will become his servants. This is the principle of things."
With very little modification, these statements would accurately describe economic life in today's capitalist societies. What is amazing about this is that Sima Qian was writing around 100 BC, over 2000 years ago.
The more things change, the more they stay the same. And people wonder why I'm a conservative.
Wednesday, August 5, 2009
A Bad Place to Get Lost
A leading story in the news today has been the release of two American journalists by North Korea. The two women were working on stories in a border region between China and North Korea when they were scooped up and arrested for spying by the North Koreans. There is some question as to which side of the border they were actually on when they were grabbed.
After five months of captivity, during which North Korea threatened to send them to a hard labor camp for their "crimes," there was a recent break in the negotiations for their release. Bill Clinton flew to Pyongyang, sat through a photo op with Kim Jong Il, and whisked the women back to the States.
Meanwhile, three Americans who strayed across the Iranian border while hiking in Iraq have been detained by the Iranians since last Friday.
When the authorities in the United States find citizens of other countries wandering across our borders without authorization, we call them illegal immigrants and boot them out. We actually send them home on our dime. When Iran and North Korea find people crossing their border, they snatch them up and toss them in a dungeon.
Maybe there is something to this "Axis of Evil" thing, after all.
After five months of captivity, during which North Korea threatened to send them to a hard labor camp for their "crimes," there was a recent break in the negotiations for their release. Bill Clinton flew to Pyongyang, sat through a photo op with Kim Jong Il, and whisked the women back to the States.
Meanwhile, three Americans who strayed across the Iranian border while hiking in Iraq have been detained by the Iranians since last Friday.
When the authorities in the United States find citizens of other countries wandering across our borders without authorization, we call them illegal immigrants and boot them out. We actually send them home on our dime. When Iran and North Korea find people crossing their border, they snatch them up and toss them in a dungeon.
Maybe there is something to this "Axis of Evil" thing, after all.
Friday, July 31, 2009
Summer Jobs V
Heckyl, our summer intern, has, like Elvis, left the building. Although the original scope of the program called for working ten weeks over the summer, the bureaucrats administering the program ran out of money early. They cut the program off after seven weeks.
Heckyl made such a difference to our operations that it was three days before I noticed that he was gone. Put your hand into a pail of water, than pull your hand out. Does the water miss you?
His lack of impact was not his fault. Completely untrained and inexperienced workers cannot contribute a lot in any organization, and if they’re not going to be around for a long time, there is no point in giving them much training. I would have liked to provide Heckyl with more technical training while he was with us, but I didn’t push the issue with my staff. It would be fair to say that I had higher hopes, but not higher expectations.
What makes this interesting is that last week our HR manager went to a meeting where the speaker was with the Tennessee Career Center, the agency that administered the make work summer jobs program. Part of his talk was about the Summer Works program. (The title of the program was “Summer Works.” Who knew?)
Regarding the Summer Works program, the salient points of the briefing were:
1. Tennessee as a whole got $65 million.
2. Our slice of Tennessee (area #11), got $4.2 million.
3. Approximately 1000 youth in our area participated in the program.
4. Total impact in goods and services was over $6.5 million, according to a study by the University of Memphis.
A thousand people got jobs! The economic impact was a dollar and a half for every dollar spent! This must have been money well spent, right?
Hogwash.
If you look at these numbers with a more jaundiced eye, a different picture emerges. Let’s start with the 1000 people who got jobs. If you’re trying to make your numbers look good, you include everyone who you sent out to a job site. At our company, we tried out five people through the Summer Works program. One never showed up for the first day of work. One was late on the first day, then lied about the time he was told to show up, so we fired him before he began. Two started work and lasted less than two weeks. The last was Heckyl.
One data point does not make a trend, but if other companies’ experience is anywhere close to ours, the number of people who actually worked for the whole summer was only a fraction of what is reported.
But let’s assume that the 1000 jobs actually represents the number of full time equivalents for the length of the program, i.e. even with all the churning, 32,000 hours a week were actually clocked in for the duration of the program (program participants were limited to 32 hours a week). At $6.75/hour, and with a ten week duration, wages paid out would be $2.16 million. $4.2 million was allocated, but less than half of that actually went to the participants. Half the money was chewed up by overhead.
Finally, let’s look at the alleged $6.5 million dollar impact. I would love to see the methodology used to arrive at that number. I suspect they simply took the amount spent, and used a multiplier to arrive at the total amount of economic activity generated. The idea behind economic multipliers is that when you pay someone, they go out and spend their money, in this case the $4.2 million. It doesn’t stop there, however. The people you spend your money with then go out and spend their paychecks with other vendors who then pay their employees, and so on. Based a $6.5 million impact produced by $4.2 million in spending, the multiplier effect is about 1.5 for this program.
In terms of being effective or productive in a job, producing 1.5 times your wages is incredibly low. In manufacturing, the value of goods and services produced is normally a minimum of six times wages. The multiplier effect for this program is about the same as for consumption spending in general.
In other words, the estimated impact of the Summer Works program was no higher than it would be if they simply handed out the money to the applicants, without actually requiring them to show up at a job.
Frankly, based on my experience with the program, I tend to agree with the estimate.
Heckyl made such a difference to our operations that it was three days before I noticed that he was gone. Put your hand into a pail of water, than pull your hand out. Does the water miss you?
His lack of impact was not his fault. Completely untrained and inexperienced workers cannot contribute a lot in any organization, and if they’re not going to be around for a long time, there is no point in giving them much training. I would have liked to provide Heckyl with more technical training while he was with us, but I didn’t push the issue with my staff. It would be fair to say that I had higher hopes, but not higher expectations.
What makes this interesting is that last week our HR manager went to a meeting where the speaker was with the Tennessee Career Center, the agency that administered the make work summer jobs program. Part of his talk was about the Summer Works program. (The title of the program was “Summer Works.” Who knew?)
Regarding the Summer Works program, the salient points of the briefing were:
1. Tennessee as a whole got $65 million.
2. Our slice of Tennessee (area #11), got $4.2 million.
3. Approximately 1000 youth in our area participated in the program.
4. Total impact in goods and services was over $6.5 million, according to a study by the University of Memphis.
A thousand people got jobs! The economic impact was a dollar and a half for every dollar spent! This must have been money well spent, right?
Hogwash.
If you look at these numbers with a more jaundiced eye, a different picture emerges. Let’s start with the 1000 people who got jobs. If you’re trying to make your numbers look good, you include everyone who you sent out to a job site. At our company, we tried out five people through the Summer Works program. One never showed up for the first day of work. One was late on the first day, then lied about the time he was told to show up, so we fired him before he began. Two started work and lasted less than two weeks. The last was Heckyl.
One data point does not make a trend, but if other companies’ experience is anywhere close to ours, the number of people who actually worked for the whole summer was only a fraction of what is reported.
But let’s assume that the 1000 jobs actually represents the number of full time equivalents for the length of the program, i.e. even with all the churning, 32,000 hours a week were actually clocked in for the duration of the program (program participants were limited to 32 hours a week). At $6.75/hour, and with a ten week duration, wages paid out would be $2.16 million. $4.2 million was allocated, but less than half of that actually went to the participants. Half the money was chewed up by overhead.
Finally, let’s look at the alleged $6.5 million dollar impact. I would love to see the methodology used to arrive at that number. I suspect they simply took the amount spent, and used a multiplier to arrive at the total amount of economic activity generated. The idea behind economic multipliers is that when you pay someone, they go out and spend their money, in this case the $4.2 million. It doesn’t stop there, however. The people you spend your money with then go out and spend their paychecks with other vendors who then pay their employees, and so on. Based a $6.5 million impact produced by $4.2 million in spending, the multiplier effect is about 1.5 for this program.
In terms of being effective or productive in a job, producing 1.5 times your wages is incredibly low. In manufacturing, the value of goods and services produced is normally a minimum of six times wages. The multiplier effect for this program is about the same as for consumption spending in general.
In other words, the estimated impact of the Summer Works program was no higher than it would be if they simply handed out the money to the applicants, without actually requiring them to show up at a job.
Frankly, based on my experience with the program, I tend to agree with the estimate.
Monday, July 27, 2009
Vaporware
In the computer industry, there is a term called vaporware. The idea behind vaporware is that sometimes a company will announce a new product and begin taking orders. The marketing for the new product will include the specifications, along with claims for what the product will do. The only problem is that the company hasn’t actually built the hardware or written the software yet. The new product they are taking orders for does not exist yet.
Of course, companies indulge in the practice of selling vaporware for all kinds of reasons. Maybe they want to line up customers and guarantee the market before committing resources to building a new product. Maybe they want to announce their intentions to competitors to preempt the competition from going head to head in a market segment.
The beautiful part of vaporware is that you can lock up support for your product before you have to do the hard work of building something that actually does what you say it will.
For me, the Obama administration’s proposals for health care reform contain a large element of vaporware. Specifically, the cost containment mechanism seems pretty fuzzy, from what I have seen so far. Other than vague promises from hospital and pharmaceutical industry spokesmen that prices will drop, nothing I’ve read has indicated how the total amount of resources devoted to health care in this country will decline if more people have unfettered access to the medical system.
I think that is way the Obamacare bill has stalled in committee. People are figuring out that “reform” of the health care system mostly means transferring an enormous amount of power to the government, and for most of us, there will be no discernable benefit.
Without a mechanism for controlling costs, extending coverage to the uninsured through a government subsidized plan doesn’t reform the system at all. You’ve merely created a constituency for a new government entitlement. Eventually, taxes on all of us are going to have to go up to pay for the beneficiaries of that entitlement program.
With vaporware, sometimes the product never does get developed, or when it does, it doesn’t meet the original specs. With Obamacare, we’re in for the same thing.
Of course, companies indulge in the practice of selling vaporware for all kinds of reasons. Maybe they want to line up customers and guarantee the market before committing resources to building a new product. Maybe they want to announce their intentions to competitors to preempt the competition from going head to head in a market segment.
The beautiful part of vaporware is that you can lock up support for your product before you have to do the hard work of building something that actually does what you say it will.
For me, the Obama administration’s proposals for health care reform contain a large element of vaporware. Specifically, the cost containment mechanism seems pretty fuzzy, from what I have seen so far. Other than vague promises from hospital and pharmaceutical industry spokesmen that prices will drop, nothing I’ve read has indicated how the total amount of resources devoted to health care in this country will decline if more people have unfettered access to the medical system.
I think that is way the Obamacare bill has stalled in committee. People are figuring out that “reform” of the health care system mostly means transferring an enormous amount of power to the government, and for most of us, there will be no discernable benefit.
Without a mechanism for controlling costs, extending coverage to the uninsured through a government subsidized plan doesn’t reform the system at all. You’ve merely created a constituency for a new government entitlement. Eventually, taxes on all of us are going to have to go up to pay for the beneficiaries of that entitlement program.
With vaporware, sometimes the product never does get developed, or when it does, it doesn’t meet the original specs. With Obamacare, we’re in for the same thing.
Friday, July 24, 2009
Henry Louis Gates
“Sir, do you know how fast you were going?”
What I want to say:
“Well, duh! Of course I know how fast I was going, you moron. My speedometer works just fine. Haven’t met your quota for the month yet? Is that why you pulled me over?”
What I actually say:
(With my hands in plain view, clamped on the steering wheel.) I’m not really sure, but I guess it was in excess of posted limits. I imagine you’re going to want to see my license and registration.”
“Excuse me sir, but did you know that it is illegal to own or shoot off fireworks in this county?”
What I want to say:
“Buddy, I see by your uniform that you are a city policeman. Guess what? You’re half a mile into the county at this address. You have no jurisdiction to come onto my property and tell me what to do. Besides, everybody else in this neighborhood is going to shoot off fireworks tonight. Why are you singling me out?”
What I actually say:
(Casting an eye at the thick bank of smoke slowly drifting towards the street.) “I’m sorry, officer. We won’t set off anymore fireworks. As soon as these sparklers I’m holding burn out, we’ll move the party indoors.”
I offer these examples up as a way of establishing that I have some expertise in interacting with law enforcement without getting arrested. So I feel qualified to offer some advice to Henry Louis Gates. Gates is the Harvard professor who was arrested after breaking into his own house earlier this week.
It is important to remember that Gates was not arrested for the break in. He was arrested for shouting at the top of his lungs at the cop.
Rule #1: Never forget that the policeman is the guy with the gun, the stick, and the handcuffs. The last thing I like to do after a long international flight is spend three or four hours waiting to be arraigned and then bailed out at the police station. Even with the charges dropped, it could not have been a pleasant experience. In the words of the John Cougar Mellancamp song: “I fight authority, authority always wins.”
Rule #2: Try and see the situation from the police perspective. In responding to a burglary call, the policeman cannot assume that just because someone says they live in the house, they really do live in the house, particularly when the front door is still standing open when they arrive. If there really is a burglary in progress, the bad guys will lie. And if there are two burglars, as the initial report stated, this could turn into a life threatening situation very quickly. So when the cop asks you if there is anyone else in the house, responding “that’s none of your business” is going to raise the suspicion level considerably.
From all accounts, it sounds to me like Professor Gates did nothing to defuse a potentially dangerous situation, and did everything to escalate the confrontation.
Of course, what do I know? In all of my interactions with the police, I’ve known from the get go that I was in the wrong. Then again, I’ve never been arrested either.
What I want to say:
“Well, duh! Of course I know how fast I was going, you moron. My speedometer works just fine. Haven’t met your quota for the month yet? Is that why you pulled me over?”
What I actually say:
(With my hands in plain view, clamped on the steering wheel.) I’m not really sure, but I guess it was in excess of posted limits. I imagine you’re going to want to see my license and registration.”
“Excuse me sir, but did you know that it is illegal to own or shoot off fireworks in this county?”
What I want to say:
“Buddy, I see by your uniform that you are a city policeman. Guess what? You’re half a mile into the county at this address. You have no jurisdiction to come onto my property and tell me what to do. Besides, everybody else in this neighborhood is going to shoot off fireworks tonight. Why are you singling me out?”
What I actually say:
(Casting an eye at the thick bank of smoke slowly drifting towards the street.) “I’m sorry, officer. We won’t set off anymore fireworks. As soon as these sparklers I’m holding burn out, we’ll move the party indoors.”
I offer these examples up as a way of establishing that I have some expertise in interacting with law enforcement without getting arrested. So I feel qualified to offer some advice to Henry Louis Gates. Gates is the Harvard professor who was arrested after breaking into his own house earlier this week.
It is important to remember that Gates was not arrested for the break in. He was arrested for shouting at the top of his lungs at the cop.
Rule #1: Never forget that the policeman is the guy with the gun, the stick, and the handcuffs. The last thing I like to do after a long international flight is spend three or four hours waiting to be arraigned and then bailed out at the police station. Even with the charges dropped, it could not have been a pleasant experience. In the words of the John Cougar Mellancamp song: “I fight authority, authority always wins.”
Rule #2: Try and see the situation from the police perspective. In responding to a burglary call, the policeman cannot assume that just because someone says they live in the house, they really do live in the house, particularly when the front door is still standing open when they arrive. If there really is a burglary in progress, the bad guys will lie. And if there are two burglars, as the initial report stated, this could turn into a life threatening situation very quickly. So when the cop asks you if there is anyone else in the house, responding “that’s none of your business” is going to raise the suspicion level considerably.
From all accounts, it sounds to me like Professor Gates did nothing to defuse a potentially dangerous situation, and did everything to escalate the confrontation.
Of course, what do I know? In all of my interactions with the police, I’ve known from the get go that I was in the wrong. Then again, I’ve never been arrested either.
Tuesday, July 21, 2009
Medical Care
The Obama administration is putting on a full court press to get their health care legislation passed before Congress goes into recess in August. Since the bill is about twelve hundred pages long, quick passage would mean that most of the Representatives and Senators voting on the bill would not have actually read it.
I understand the sense of urgency on the part of the administration. The longer the period of reflection and debate, the more time opponents of the President’s health care restructuring plan have to uncover flaws and mobilize opposition. Obama and his advisors want to enact their plan while they still have some momentum left from the election.
Political expediency does not make a rush to judgement a good idea, however. Since health care is currently about 16% of the American economy, such haste is a little scary to me.
The underlying assumption behind all the talk of universal coverage is the belief that all of the inhabitants of the United States have a right to unlimited medical care. You are entitled, solely by your residence in this country, to as much or as little health care as you feel you need. Hip replacement? Go wild. Dialysis three times a week? Knock yourself out.
I always thought I had a right to free speech and free assembly, that I could live where I wanted and how I wanted, without a lot of interference from the government. Apparently I missed the part where I was entitled to free medical care.
I wonder what other free stuff I’m owed as my birthright?
I understand the sense of urgency on the part of the administration. The longer the period of reflection and debate, the more time opponents of the President’s health care restructuring plan have to uncover flaws and mobilize opposition. Obama and his advisors want to enact their plan while they still have some momentum left from the election.
Political expediency does not make a rush to judgement a good idea, however. Since health care is currently about 16% of the American economy, such haste is a little scary to me.
The underlying assumption behind all the talk of universal coverage is the belief that all of the inhabitants of the United States have a right to unlimited medical care. You are entitled, solely by your residence in this country, to as much or as little health care as you feel you need. Hip replacement? Go wild. Dialysis three times a week? Knock yourself out.
I always thought I had a right to free speech and free assembly, that I could live where I wanted and how I wanted, without a lot of interference from the government. Apparently I missed the part where I was entitled to free medical care.
I wonder what other free stuff I’m owed as my birthright?
Wednesday, July 15, 2009
Summer Jobs IV
Our story thus far: My company took on two summer hires as part of a make work program, funded by the stimulus package. The original two, Frick and Frack, both quit within two weeks. Frack merely stopped showing up, and Frick quit after telling us that “we wanted too much work” out of him. We then brought in Heckyl and Jeckyl. Jeckyl was a no show on day one. Heckyl has stuck it out for three weeks so far.
When we called the agency administering the grant to ask for a Jeckyl (Mark II), we were told that they could not send anyone else out. The number of people working had already committed the money in the original grant. Given our results, I can only conclude that other employers were having an easier time holding on to their summer hires than we were. At some point I may seek some of the other employers out to find out what kind of results they were getting, and how their treatment of their summer hires differed from mine.
Meanwhile, Heckyl continues to clock in, somewhat to the surprise of the management team. He has only missed two days in three weeks, and he has called in both times. However, this week we did have the episode of the Morning Nap.
We ship our product in gaylords, big cardboard boxes about the size of a refrigerator box. This week we got some in that needed to be wiped down before we loaded product into them. So we tilted them over on their side, and Heckyl was assigned to wipe them out with a paper towels. Simple enough, right?
About twenty minutes later the regular employee who Heckyl is working with went looking for him. He couldn’t find Heckyl at first, until he spotted a foot emerging from the open end of the gaylord. Our guy went around to the open side, looked in and found Heckyl taking a nap at 10:30 in the morning. Our regular employee did what anybody would do in this circumstance: he pulled out a cell phone and snapped a picture of his napping coworker. Then he went and told his coworkers to check it out.
After about fifteen minutes, somebody went and found the Production Supervisor, Big T, and showed him. Big T did what anybody would do in this circumstance. He pulled out his cell phone and snapped a picture of Sleeping Beauty. Then Big T stepped back, had a forktruck fired up, and started shouting for someone to get the gaylords out of the area, while pounding his fist on the side of the cardboard box. Unsurprisingly, Heckyl emerged from the box, claiming that he was still working on this one.
Afterwards, Big T and I discussed what to do about it. Ordinarily, we would just escort Heckyl to the timeclock, watch him punch out, and wave bye-bye as he drove off into the sunset. Since he’s not on our payroll, however, we decided to let him off with a simple warning. I guess we’re no more careful with the taxpayer’s money than anybody else.
The funny thing about the whole situation is this: Heckyl has missed work twice, and been caught sleeping on the job in the middle of the morning. And of the five workforce program guys we’ve tried, he’s the star! No wonder these guys need the government to help them find a job.
When we called the agency administering the grant to ask for a Jeckyl (Mark II), we were told that they could not send anyone else out. The number of people working had already committed the money in the original grant. Given our results, I can only conclude that other employers were having an easier time holding on to their summer hires than we were. At some point I may seek some of the other employers out to find out what kind of results they were getting, and how their treatment of their summer hires differed from mine.
Meanwhile, Heckyl continues to clock in, somewhat to the surprise of the management team. He has only missed two days in three weeks, and he has called in both times. However, this week we did have the episode of the Morning Nap.
We ship our product in gaylords, big cardboard boxes about the size of a refrigerator box. This week we got some in that needed to be wiped down before we loaded product into them. So we tilted them over on their side, and Heckyl was assigned to wipe them out with a paper towels. Simple enough, right?
About twenty minutes later the regular employee who Heckyl is working with went looking for him. He couldn’t find Heckyl at first, until he spotted a foot emerging from the open end of the gaylord. Our guy went around to the open side, looked in and found Heckyl taking a nap at 10:30 in the morning. Our regular employee did what anybody would do in this circumstance: he pulled out a cell phone and snapped a picture of his napping coworker. Then he went and told his coworkers to check it out.
After about fifteen minutes, somebody went and found the Production Supervisor, Big T, and showed him. Big T did what anybody would do in this circumstance. He pulled out his cell phone and snapped a picture of Sleeping Beauty. Then Big T stepped back, had a forktruck fired up, and started shouting for someone to get the gaylords out of the area, while pounding his fist on the side of the cardboard box. Unsurprisingly, Heckyl emerged from the box, claiming that he was still working on this one.
Afterwards, Big T and I discussed what to do about it. Ordinarily, we would just escort Heckyl to the timeclock, watch him punch out, and wave bye-bye as he drove off into the sunset. Since he’s not on our payroll, however, we decided to let him off with a simple warning. I guess we’re no more careful with the taxpayer’s money than anybody else.
The funny thing about the whole situation is this: Heckyl has missed work twice, and been caught sleeping on the job in the middle of the morning. And of the five workforce program guys we’ve tried, he’s the star! No wonder these guys need the government to help them find a job.
Friday, July 10, 2009
What's in a name?
A deal was recently announced the Russian national oil and gas company, Gazprom, and NNCP, the Nigerian state oil company. The two entities are forming a joint venture to build a $2.5 billion pipeline in Africa.
The joint venture had to have a name, of course, so the executives in charge decided to form a name by smooshing together syllables from the names of the two parent companies. In a decision that will go down in the annals of bad branding history, the new company will be named Nigaz.
Nigaz in Africa. Oh. My. God!
Now, I know neither party in the deal is a native English speaker, but there are branding consultants who will check things like what your name sounds like in various languages, and clue you in about potential missteps before you issue the press release and get business cards printed. I guess the Russians didn’t talk to those guys.
Nigaz. That’s why I spend so much time reading the news. Reality is so much more entertaining than fiction.
You can’t make this stuff up.
The joint venture had to have a name, of course, so the executives in charge decided to form a name by smooshing together syllables from the names of the two parent companies. In a decision that will go down in the annals of bad branding history, the new company will be named Nigaz.
Nigaz in Africa. Oh. My. God!
Now, I know neither party in the deal is a native English speaker, but there are branding consultants who will check things like what your name sounds like in various languages, and clue you in about potential missteps before you issue the press release and get business cards printed. I guess the Russians didn’t talk to those guys.
Nigaz. That’s why I spend so much time reading the news. Reality is so much more entertaining than fiction.
You can’t make this stuff up.
Tuesday, July 7, 2009
Getting your stories straight
USA Today ran two finance stories today with sharply contradictory messages. On the front page, the headline above the fold reads BANKS GET STINGY ON CREDIT. The story reported is that for the first four months of this year the number of new credit cards issued declined 38% compared with the same four months in 2008. Also, credit limits are slightly lower on the new cards that are issued. The average credit limit of $4594 is 3% lower than last year.
The tone of this story is that the new restraint on the part of credit card issuers is a bad thing. Spending pumps up the economy. Easy access to credit leads to spending. Therefore limiting access to credit delays the economic recovery.
In the Money section of the same paper, there is a related story with a completely different slant. Here the headline is US DEBT SHRINKING AT GLACIAL PACE. Total household debt peaked at $13.9 trillion in the third quarter of 2008, almost doubling since 2007. It has declined to $13.8 trillion during the first quarter of 2009, about a 1% drop.
This story points out that the US has just begun to deleverage. In the mid-80’s, household debt was 65% of disposable income. At the peak in 2007, household debt was 133% of disposable income. The perspective underlying this story is that until a lot more debt is either paid off or written off, consumers will not have the available income to resume spending in a way that will lift the economy.
So which is it? Is more debt good for the economy, or bad for the economy? From my perspective, it is an obvious answer. The economy came crashing down because of excessive debt. People paid way too much for houses they couldn’t afford. Then, to furnish those houses, they maxed out their credit cards. This was followed by tapping home equity lines of credit to pay off credit cards, which were then run up to the limit again.
It was like the financial equivalent of a giant game of musical chairs. Eventually the music stopped. Only in this game, all of the chairs had been pulled away. The good news is that the savings rate has increased from a negative number to 6.9%. This is a sign that people have stopped digging themselves into ever deeper holes of debt. But backfilling those holes will take time. The last thing we need to do is go back onto a credit fueled spending spree. That only starts the digging process all over again.
What was most surprising to me about these two stories is how they could have such different slants on the situation, coming out on the same day in the same paper. Don’t the editors read what the reporters are writing?
The tone of this story is that the new restraint on the part of credit card issuers is a bad thing. Spending pumps up the economy. Easy access to credit leads to spending. Therefore limiting access to credit delays the economic recovery.
In the Money section of the same paper, there is a related story with a completely different slant. Here the headline is US DEBT SHRINKING AT GLACIAL PACE. Total household debt peaked at $13.9 trillion in the third quarter of 2008, almost doubling since 2007. It has declined to $13.8 trillion during the first quarter of 2009, about a 1% drop.
This story points out that the US has just begun to deleverage. In the mid-80’s, household debt was 65% of disposable income. At the peak in 2007, household debt was 133% of disposable income. The perspective underlying this story is that until a lot more debt is either paid off or written off, consumers will not have the available income to resume spending in a way that will lift the economy.
So which is it? Is more debt good for the economy, or bad for the economy? From my perspective, it is an obvious answer. The economy came crashing down because of excessive debt. People paid way too much for houses they couldn’t afford. Then, to furnish those houses, they maxed out their credit cards. This was followed by tapping home equity lines of credit to pay off credit cards, which were then run up to the limit again.
It was like the financial equivalent of a giant game of musical chairs. Eventually the music stopped. Only in this game, all of the chairs had been pulled away. The good news is that the savings rate has increased from a negative number to 6.9%. This is a sign that people have stopped digging themselves into ever deeper holes of debt. But backfilling those holes will take time. The last thing we need to do is go back onto a credit fueled spending spree. That only starts the digging process all over again.
What was most surprising to me about these two stories is how they could have such different slants on the situation, coming out on the same day in the same paper. Don’t the editors read what the reporters are writing?
Sunday, July 5, 2009
It's the Money, Stupid!
Sarah Palin announced her resignation from the governorship of Alaska just before the start of the holiday weekend. She will be leaving office 18 months early. From her prepared statement at the press conference where she made the announcement, it was not immediately apparent what her rationale was. The FBI has already issued a statement saying that Governor Palin was not the subject of any investigations, so a scandal concerning illegalities is a pretty remote prospect.
I can only come up with two possibilities.
First, she is leaving office in order to launch a full time bid for the Presidency. Alaska is too small a state, and too far away from the lower 48 to build a power base for a national office. To campaign effectively at teh national level, she will need to work full time, and relocate her base of operations.
If this is her reasoning, it is a dumb idea. Palin did so badly as a Vice-presidential candidate that her chances of winning the nomination were minimal to start with. You don't enhance your credentials for a higher office by quitting the lower office you currently hold.
Second, she has decided to hit the speaker circuit full time. Sarah Palin is a darling of the right, particularly the social conservatives who comprise so much of the base for the Republican party. Unencumbered by the demands and limits of holding office, she will be free to accept several engagements a week, exhorting the faithful at $30 thousand a pop.
To my mind, mercenary that I am, this seems a more plausible plan. After all, being a governor probably pays a couple hundred grand a year. She can make ten times that amount by using her celebrity. And once you've seen the bright lights of the big city, moving back to Fairbanks has got to be a big letdown.
Cashing in your chips while you've got the chance: it's the American Way, isn't it? Besides, she has all those mouths to feed!
I can only come up with two possibilities.
First, she is leaving office in order to launch a full time bid for the Presidency. Alaska is too small a state, and too far away from the lower 48 to build a power base for a national office. To campaign effectively at teh national level, she will need to work full time, and relocate her base of operations.
If this is her reasoning, it is a dumb idea. Palin did so badly as a Vice-presidential candidate that her chances of winning the nomination were minimal to start with. You don't enhance your credentials for a higher office by quitting the lower office you currently hold.
Second, she has decided to hit the speaker circuit full time. Sarah Palin is a darling of the right, particularly the social conservatives who comprise so much of the base for the Republican party. Unencumbered by the demands and limits of holding office, she will be free to accept several engagements a week, exhorting the faithful at $30 thousand a pop.
To my mind, mercenary that I am, this seems a more plausible plan. After all, being a governor probably pays a couple hundred grand a year. She can make ten times that amount by using her celebrity. And once you've seen the bright lights of the big city, moving back to Fairbanks has got to be a big letdown.
Cashing in your chips while you've got the chance: it's the American Way, isn't it? Besides, she has all those mouths to feed!
Monday, June 29, 2009
Summer Jobs III
We now have completed three weeks of the Federal make work summer jobs program that was part of the stimulus package. Frick and Frack, the original two hires, have both flown the coop. Frack stopped showing up last Monday. Frick waited until last Wednesday to let us know that he was quitting the program.
So we went back to the well, and requested two more summer hires. After all, the grant money has to be spent. Let’s call the two new guys Heckyl and Jeckyl.
Heckyl came in last Wednesday and worked one day. He then had some kind of family emergency, and called in to let us know that he was going to skip Thursday. For regular hires, missing your second day of work is not a prescription for long employment, but Heckyl is only a part time summer hire, so what the heck.
Jeckyl stopped in last Thursday for a quick orientation, and was told to report to work Monday morning.
Fast forward to Monday morning. Wonder of wonders, Heckyl actually came back to go to work. Alas, Jeckyl was a no show. He probably developed a vision problem over the weekend: he just couldn’t see coming in to work.
This program is supposed to be reserved for the economically disadvantaged, job seekers between the age of 18 to 24. It’s easy to see why these jacklegs are in the economically disadvantaged category. When you only work a few days before quitting a job, it’s hard to get ahead in life. Even with the Federal government guaranteeing their paycheck, these clowns can’t hold a job long enough to get any usable experience.
This whole experience so far illustrates one of my general rules for predicting behavior:
Everyone wants a paycheck. Most people want a job. Some people want to work for a living.
So, we’ve put in a request for a new Jeckyl. We’ll call him Jeckyl II. I’ve a sneaking suspicion that we’ll be on to Tweedledee and Tweedledum before the summer is over.
So we went back to the well, and requested two more summer hires. After all, the grant money has to be spent. Let’s call the two new guys Heckyl and Jeckyl.
Heckyl came in last Wednesday and worked one day. He then had some kind of family emergency, and called in to let us know that he was going to skip Thursday. For regular hires, missing your second day of work is not a prescription for long employment, but Heckyl is only a part time summer hire, so what the heck.
Jeckyl stopped in last Thursday for a quick orientation, and was told to report to work Monday morning.
Fast forward to Monday morning. Wonder of wonders, Heckyl actually came back to go to work. Alas, Jeckyl was a no show. He probably developed a vision problem over the weekend: he just couldn’t see coming in to work.
This program is supposed to be reserved for the economically disadvantaged, job seekers between the age of 18 to 24. It’s easy to see why these jacklegs are in the economically disadvantaged category. When you only work a few days before quitting a job, it’s hard to get ahead in life. Even with the Federal government guaranteeing their paycheck, these clowns can’t hold a job long enough to get any usable experience.
This whole experience so far illustrates one of my general rules for predicting behavior:
Everyone wants a paycheck. Most people want a job. Some people want to work for a living.
So, we’ve put in a request for a new Jeckyl. We’ll call him Jeckyl II. I’ve a sneaking suspicion that we’ll be on to Tweedledee and Tweedledum before the summer is over.
Monday, June 22, 2009
Summer Jobs II
Frick and Frack, the two summer temps hired through the stimulus package make-work jobs program, have finished their second week of employment.
We can already see differences between the two. We started out knowing that due to the lack of training and experience, they would be about half worthless. For Frick, however, the dial has slid over to about 95% worthless. In two weeks he has left early or come in late four times. If he was a regular hire, that alone would be enough to get him shown the door. But he also has a propensity to leave a job half done. When all you are asked to do is sweep out a warehouse, to do the job poorly doesn’t speak well to your energy or enthusiasm.
One of the supervisors in the plant suggested that by the end of week three, we would have to fire Frick. “But he’s free labor,” I protested. “You get what you pay for,” came the response.
Frack, on the other hand, seems to work hard at whatever task he is assigned. Unfortunately, he didn’t show up for work this morning. Nor did he call in. The combination of the two usually indicates that someone has voted with their feet, and has resigned their position. This is actually superior to the more common approach of quitting work, but continuing to show up and draw a paycheck.
Anyway, we called the agency administering the make-work summer jobs grant, and asked them to call Frack and verify whether he was coming back or not. If he has quit, they promised to find a replacement, because “we have to spend the money.”
If they are starting to worry about using all of the money from the grant, and it is only week three, do you think we’re the only workplace having trouble keeping these guys on the job? It makes you wonder what the hiring criteria were for this program.
Sometimes you get what you pay for. Sometimes you pay for something, and you get nothing in return.
We can already see differences between the two. We started out knowing that due to the lack of training and experience, they would be about half worthless. For Frick, however, the dial has slid over to about 95% worthless. In two weeks he has left early or come in late four times. If he was a regular hire, that alone would be enough to get him shown the door. But he also has a propensity to leave a job half done. When all you are asked to do is sweep out a warehouse, to do the job poorly doesn’t speak well to your energy or enthusiasm.
One of the supervisors in the plant suggested that by the end of week three, we would have to fire Frick. “But he’s free labor,” I protested. “You get what you pay for,” came the response.
Frack, on the other hand, seems to work hard at whatever task he is assigned. Unfortunately, he didn’t show up for work this morning. Nor did he call in. The combination of the two usually indicates that someone has voted with their feet, and has resigned their position. This is actually superior to the more common approach of quitting work, but continuing to show up and draw a paycheck.
Anyway, we called the agency administering the make-work summer jobs grant, and asked them to call Frack and verify whether he was coming back or not. If he has quit, they promised to find a replacement, because “we have to spend the money.”
If they are starting to worry about using all of the money from the grant, and it is only week three, do you think we’re the only workplace having trouble keeping these guys on the job? It makes you wonder what the hiring criteria were for this program.
Sometimes you get what you pay for. Sometimes you pay for something, and you get nothing in return.
Friday, June 19, 2009
Iran's "Election"
Iran held what was ostensibly an election for President last week. The two main candidates were Mahmoud Ahmadinejad, the incumbent, and Mir Hossein Mousavi, a more moderate politician. Mr. Ahmadinejad was declared the victor.
The thing is, Ahmadinejad was declared the victor before the vote count was finished. And the announced vote tallies show him winning by a landslide, drubbing Mr. Mousavi by a margin of two to one. This despite polling that shows Ahmadinejad being increasingly unpopular, and support for Mousavi growing in the run up to the election.
So it looks like the election was stolen. Violent street protests have ensued, with the security services not being shy about bludgeoning and even killing the protestors.
Now, from an American perspective, I’m not sure it really matters who the President of Iran is. In Iran’s theocracy, real power resides with the Revolutionary council, a group of twelve Islamic mullahs. The Council has to approve the candidates before they can even appear on the ballot. So in that sense, both Ahmadinejad and Mousavi are products of the system, tools of the ruling clerics.
Here’s what scares me about the situation. Iran is enriching uranium so that they can build atomic bombs. This is perceived by most Westerners as adverse to our interests and destabilizing to the Middle East. The US and our allies are trying to deter Iran from pursuing this policy of pursuing nuclear ambitions.
The problem is that all of our tools diplomacy, both hard and soft, assume that the Iran state has a government that acts as a rational player. They don’t have to be reasonable, but they have to be sane. Sane men will not knowingly pursue policies that damage their own interests, and will pursue policies that enhance their interests. All of the carrots and sticks in the international system are based on that principle.
If the government of Iran is not rational, that is very frightening. Give insane men plutonium, and anything could happen. It is very difficult to deter insane men.
This brings me back to their Presidential campaign. The Iranians staged a major election, with months of campaigning. Then on election day, the whole process was revealed to be a sham. The election wasn’t just stolen. It was blatently, obviously stolen. It was stolen in a way that enraged the opposition, and sparked violence in the streets.
Now, that’s just crazy.
The thing is, Ahmadinejad was declared the victor before the vote count was finished. And the announced vote tallies show him winning by a landslide, drubbing Mr. Mousavi by a margin of two to one. This despite polling that shows Ahmadinejad being increasingly unpopular, and support for Mousavi growing in the run up to the election.
So it looks like the election was stolen. Violent street protests have ensued, with the security services not being shy about bludgeoning and even killing the protestors.
Now, from an American perspective, I’m not sure it really matters who the President of Iran is. In Iran’s theocracy, real power resides with the Revolutionary council, a group of twelve Islamic mullahs. The Council has to approve the candidates before they can even appear on the ballot. So in that sense, both Ahmadinejad and Mousavi are products of the system, tools of the ruling clerics.
Here’s what scares me about the situation. Iran is enriching uranium so that they can build atomic bombs. This is perceived by most Westerners as adverse to our interests and destabilizing to the Middle East. The US and our allies are trying to deter Iran from pursuing this policy of pursuing nuclear ambitions.
The problem is that all of our tools diplomacy, both hard and soft, assume that the Iran state has a government that acts as a rational player. They don’t have to be reasonable, but they have to be sane. Sane men will not knowingly pursue policies that damage their own interests, and will pursue policies that enhance their interests. All of the carrots and sticks in the international system are based on that principle.
If the government of Iran is not rational, that is very frightening. Give insane men plutonium, and anything could happen. It is very difficult to deter insane men.
This brings me back to their Presidential campaign. The Iranians staged a major election, with months of campaigning. Then on election day, the whole process was revealed to be a sham. The election wasn’t just stolen. It was blatently, obviously stolen. It was stolen in a way that enraged the opposition, and sparked violence in the streets.
Now, that’s just crazy.
Tuesday, June 16, 2009
Health Care Assumptions
The Obama administration is getting ready to unveil their plan to massively restructure the delivery of health care in this country. One of the core rationales for this plan is to extend "access" to health care services. This argument overstates the case. I would argue that there is no problem with accessing health care in this country.
If you have a medical problem, you can go to any emergency room in the country. They must, by law, treat you without reference to your ability to pay. When you go to the emergency room, a doctor will (eventually) see you about your problem. If you are bleeding on the linoleum, you will move to the head of the line, guaranteed.
The problem is not that people want access to health care, and they can't get it. We already have universal access to health care. The problem is that people want unlimited access to medical care. The question is not whether everyone should have health care in this country. The question is whether everyone should have access to as much medical treatment as they want.
If we answer that question as a yes, then it leads inevitably to another question. how do we pay for it?
If you have a medical problem, you can go to any emergency room in the country. They must, by law, treat you without reference to your ability to pay. When you go to the emergency room, a doctor will (eventually) see you about your problem. If you are bleeding on the linoleum, you will move to the head of the line, guaranteed.
The problem is not that people want access to health care, and they can't get it. We already have universal access to health care. The problem is that people want unlimited access to medical care. The question is not whether everyone should have health care in this country. The question is whether everyone should have access to as much medical treatment as they want.
If we answer that question as a yes, then it leads inevitably to another question. how do we pay for it?
Friday, June 12, 2009
Summer Jobs
We picked up a couple of summer interns at my company this week. They came to us through a government program that is part of the Obama stimulus package. Basically, the government pays their wages and picks up their benefits (worker’s comp, FICA taxes), put they actually work for us.
Free labor. What’s not to like, right?
Actually, it is kind of a tricky prospect, trying to get useful output out of these guys. Business was slower earlier in the year when we signed on for this program, and we were working reduced hours. I had a concern that our regular workforce would perceive the summer workers as competing with them for work.
Fortunately, business has picked up from the low point last winter. But these guys (let’s call them Frick and Frack) know nothing about working in an industrial facility. Zip, zilch, nada. So to get any more output out of them than pushing a broom, they will have to be trained. I can’t even let them mop the floor after they’ve swept it without proper training. Oily mop water from an industrial facility has to be properly disposed of.
It is the classic investment problem. I have to invest resources into training Frick and Frack in order to turn them into usable resources in their own right (or, as I like to call them, interchangeable worker units). To train them I have to take my regular folks off their jobs to do the OJT. Too much training, and I can’t get my money back out of them by increased productivity, especially since they’re only here for the summer. Also, I have to keep regular work going while they are being trained.
Still, I want them to get more out of their summer job than just pushing a broom. So I’m looking for that balance point where we teach them enough for them to say they have learned something, but at the same time keep the training short enough to get some payback off the investment in training.
In a larger sense, I want Frick and Frack to come out of this experience with more skills than they went in because they aren’t really free labor. After all, the government is picking up the check. Spending money just to create make-work jobs is a terrible use of the government’s limited resources. Spending the same money to help develop the next generation workforce makes a lot more sense to me.
After all, it’s my tax dollars at work.
Free labor. What’s not to like, right?
Actually, it is kind of a tricky prospect, trying to get useful output out of these guys. Business was slower earlier in the year when we signed on for this program, and we were working reduced hours. I had a concern that our regular workforce would perceive the summer workers as competing with them for work.
Fortunately, business has picked up from the low point last winter. But these guys (let’s call them Frick and Frack) know nothing about working in an industrial facility. Zip, zilch, nada. So to get any more output out of them than pushing a broom, they will have to be trained. I can’t even let them mop the floor after they’ve swept it without proper training. Oily mop water from an industrial facility has to be properly disposed of.
It is the classic investment problem. I have to invest resources into training Frick and Frack in order to turn them into usable resources in their own right (or, as I like to call them, interchangeable worker units). To train them I have to take my regular folks off their jobs to do the OJT. Too much training, and I can’t get my money back out of them by increased productivity, especially since they’re only here for the summer. Also, I have to keep regular work going while they are being trained.
Still, I want them to get more out of their summer job than just pushing a broom. So I’m looking for that balance point where we teach them enough for them to say they have learned something, but at the same time keep the training short enough to get some payback off the investment in training.
In a larger sense, I want Frick and Frack to come out of this experience with more skills than they went in because they aren’t really free labor. After all, the government is picking up the check. Spending money just to create make-work jobs is a terrible use of the government’s limited resources. Spending the same money to help develop the next generation workforce makes a lot more sense to me.
After all, it’s my tax dollars at work.
Tuesday, June 9, 2009
Off Topic Post: Great Moments in "D'uh"
Breaking News! Adam Lambert, the runner up in this year's American Idol competition, has come out as a gay man. He made the announcement as part of an interview in this month's Rolling Stone magazine.
Really? Seriously? This is supposed to be news?
I mean, I watched all of about three minutes of American Idol this season, and I could have told you that Adam Lambert was gay.
All of you aspiring journalists out there, repeat after me: "Dog bites man, that's not news. Man bites dog, that's news."
Really? Seriously? This is supposed to be news?
I mean, I watched all of about three minutes of American Idol this season, and I could have told you that Adam Lambert was gay.
All of you aspiring journalists out there, repeat after me: "Dog bites man, that's not news. Man bites dog, that's news."
Monday, June 8, 2009
False Modesty
Last week’s big business story was the bankruptcy filing by General Motors. The Federal government will be taking the lion’s share of the reconstituted entity once it emerges from bankruptcy court. In exchange for the billions that the Feds have already loaned GM, plus providing the debtor-in-possession financing, the government will have 60% of the equity. The UAW will have about 20%, and the secured bondholders will have the balance.
Just as in the case of Chrysler, the secured bondholders are getting the short end of the stick. Under normal bankruptcy law, the secured creditors usually get the majority of the equity in the company that emerges. In the case of these two car companies, the unsecured health insurance and pension claims of the union have been moved up in seniority, compared to the bondholders. Of course, this wouldn’t have anything to do with the fact that the UAW has supported Democratic candidates almost exclusively, with resources of both money and manpower. No, no, there’s no payola at work here.
What I found interesting about the deal was the government’s protests that they did not want to own a part of General Motors, let alone the majority stake. Over and over, spokesmen for the administration kept claiming that they did not want to be responsible for managing operations at a car company.
That reticence confuses me a little bit. After all, these are the same guys who are proposing to take control of the entire US health care sector in the interest of providing universal coverage. One out of every six dollars in this country is spent on health care, but the administration is not being shy about planning a massive restructuring. That restructuring will include a government owned health insurance fund that will compete directly with private health insurance companies.
Or how about energy, another major industrial area of the economy? The Obama administration is putting the finishing touches on their plan to completely restructure how electricity is generated and distributed in this country. Those plans include bankrupting the entire coal mining industry, and making obsolete any coal-fired power plants.
These guys aren’t shy about directly injecting government control over huge swaths of what is now private industry. The outlier is the automotive industry. For some reason, they don’t want to be in charge of that.
Just everything else.
Just as in the case of Chrysler, the secured bondholders are getting the short end of the stick. Under normal bankruptcy law, the secured creditors usually get the majority of the equity in the company that emerges. In the case of these two car companies, the unsecured health insurance and pension claims of the union have been moved up in seniority, compared to the bondholders. Of course, this wouldn’t have anything to do with the fact that the UAW has supported Democratic candidates almost exclusively, with resources of both money and manpower. No, no, there’s no payola at work here.
What I found interesting about the deal was the government’s protests that they did not want to own a part of General Motors, let alone the majority stake. Over and over, spokesmen for the administration kept claiming that they did not want to be responsible for managing operations at a car company.
That reticence confuses me a little bit. After all, these are the same guys who are proposing to take control of the entire US health care sector in the interest of providing universal coverage. One out of every six dollars in this country is spent on health care, but the administration is not being shy about planning a massive restructuring. That restructuring will include a government owned health insurance fund that will compete directly with private health insurance companies.
Or how about energy, another major industrial area of the economy? The Obama administration is putting the finishing touches on their plan to completely restructure how electricity is generated and distributed in this country. Those plans include bankrupting the entire coal mining industry, and making obsolete any coal-fired power plants.
These guys aren’t shy about directly injecting government control over huge swaths of what is now private industry. The outlier is the automotive industry. For some reason, they don’t want to be in charge of that.
Just everything else.
Monday, June 1, 2009
"You can't handle the truth!"
I can’t figure out the appeal of California. As a former Floridian who has visited the Golden State several times, I thought the oranges tasted funny, the sunshine was the wrong color, and Disneyland was at best a prototype for the real theme park at Disney World.
On the down side, California suffers from earthquakes, mudslides, raging forest fires, occasional civil insurrection, and ridiculously expensive real estate. And the traffic is hellacious.
Now the state appears to be in complete meltdown. After the voters soundly rejected a mixed bag of referendums that raised taxes, redirected earmarked funds, and sold off assets, the state is announcing big cuts to try and balance the budget shortfall that approaches $24 billion. California may become the first state to declare bankruptcy.
In the middle of all this, the state’s finance director, Mike Genest, made the following extraordinary statement during a conference call with reporters last Friday:
“Government doesn’t provide services to rich people. It doesn’t even really provide services to the middle class.” He added: “You have to cut where the money is.”
Now, I’m sure Mr. Genest’s intention was to explain why the proposed budget cuts were hitting low income residents so hard. No doubt he was trying to answer a question along the lines of “Why do all of the cuts seem to target poor people?” or “Is this political payback because poor people tend to vote Democratic, and the governor is Republican?” Something like that.
As a middle class taxpayer, I interpret Mr. Genest’s statement a little differently:
“If you’re in the upper or middle class, you are not going to get your money’s worth from the state government. Never have, never will. Yeah, we’ve been screwing you out of your taxes right along. You got a problem with that?”
Kudos to Mr. Genest for his refreshing honesty, but if I was a California taxpayer I’d be a little bent right now.
On the down side, California suffers from earthquakes, mudslides, raging forest fires, occasional civil insurrection, and ridiculously expensive real estate. And the traffic is hellacious.
Now the state appears to be in complete meltdown. After the voters soundly rejected a mixed bag of referendums that raised taxes, redirected earmarked funds, and sold off assets, the state is announcing big cuts to try and balance the budget shortfall that approaches $24 billion. California may become the first state to declare bankruptcy.
In the middle of all this, the state’s finance director, Mike Genest, made the following extraordinary statement during a conference call with reporters last Friday:
“Government doesn’t provide services to rich people. It doesn’t even really provide services to the middle class.” He added: “You have to cut where the money is.”
Now, I’m sure Mr. Genest’s intention was to explain why the proposed budget cuts were hitting low income residents so hard. No doubt he was trying to answer a question along the lines of “Why do all of the cuts seem to target poor people?” or “Is this political payback because poor people tend to vote Democratic, and the governor is Republican?” Something like that.
As a middle class taxpayer, I interpret Mr. Genest’s statement a little differently:
“If you’re in the upper or middle class, you are not going to get your money’s worth from the state government. Never have, never will. Yeah, we’ve been screwing you out of your taxes right along. You got a problem with that?”
Kudos to Mr. Genest for his refreshing honesty, but if I was a California taxpayer I’d be a little bent right now.
Tuesday, May 26, 2009
Sonia Sotomayer
Sonia Sotomayer has been nominated to fill the position on the US Supreme Court left by the pending retirement of David Souter.
A graduate of Princeton and Yale Law School, Judge Sotomayer has been on the Federal Bench since 1992.
This one looks like a slam dunk. Her presence on the Court does not significantly alter the liberal-conservative dynamic, as Justice Souter usually voted with the liberal bloc. To vote against Sotomayer would be to vote against a woman and a Hispanic. Besides, even if all of the Republicans in the Senate voted against her, they don’t have the votes to stop her nomination. The Repubs know it, the Dems know it, so there will be plenty o’ grandstanding, which will change the end result not one iota.
Since this was a done deal, I wasn’t going to exert a lot of energy on it. Then I read that Judge Sotomayer said this: “I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion [as a judge] than a white male who hasn’t lived that life.”
Now, when I first read that, I thought “No way. That has got to be an Internet hoax in the making.”
Well, it turns out that she really did say that, as part of a speech she gave in 2001. Apparently the snippet is taken out of context. The full text of the speech can be found here.
Even if you accept her point that being a woman Hispanic makes her a better judge in areas of sexual and racial discrimination, and I’m not sure I do (after all, there’s a reason why the statue of justice is wearing a blindfold), it raises a question for me.
If being a woman and a Hispanic makes you a better judge in some types of cases, where does it make you a worse judge?
Now that’s a question I like to see asked.
A graduate of Princeton and Yale Law School, Judge Sotomayer has been on the Federal Bench since 1992.
This one looks like a slam dunk. Her presence on the Court does not significantly alter the liberal-conservative dynamic, as Justice Souter usually voted with the liberal bloc. To vote against Sotomayer would be to vote against a woman and a Hispanic. Besides, even if all of the Republicans in the Senate voted against her, they don’t have the votes to stop her nomination. The Repubs know it, the Dems know it, so there will be plenty o’ grandstanding, which will change the end result not one iota.
Since this was a done deal, I wasn’t going to exert a lot of energy on it. Then I read that Judge Sotomayer said this: “I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion [as a judge] than a white male who hasn’t lived that life.”
Now, when I first read that, I thought “No way. That has got to be an Internet hoax in the making.”
Well, it turns out that she really did say that, as part of a speech she gave in 2001. Apparently the snippet is taken out of context. The full text of the speech can be found here.
Even if you accept her point that being a woman Hispanic makes her a better judge in areas of sexual and racial discrimination, and I’m not sure I do (after all, there’s a reason why the statue of justice is wearing a blindfold), it raises a question for me.
If being a woman and a Hispanic makes you a better judge in some types of cases, where does it make you a worse judge?
Now that’s a question I like to see asked.
Thursday, May 21, 2009
Car Wars, Part III
In my previous posts regarding the Obama administration’s new automotive fuel economy standards, I have intimated why I do not think mandating a huge increase in mileage is a workable idea. In this post I want to counter one of the arguments that has been raised in favor of the idea.
I’m talking about the “national standard” argument. Basically, this argument goes that it is better that we now have a new federal standard, as opposed to a “patchwork” of different fuel efficiency standards in various areas of the country. With a single standard, manufacturers can focus all of their engineering efforts on meeting the Federal goals, rather than trying to develop different cars for different states.
This argument is crap. It’s hogwash. No, it’s hogwash on steroids.
A little history is in order. A few years back, California announced that in the interest of controlling pollution from automobiles, the state was going to come out with a mileage standard for cars sold in California. This mileage standard was considerably in excess of Federal standards at the time.
The car companies sued to halt this action, arguing that mileage standards were the business of the Federal government. The Bush administration agreed with them. What the car companies really objected to was that the new California mileage rules would force them to develop cars that few people wanted to buy, and abandon vehicles that people did want to buy. Since the California market is so large, you can’t afford not participate in it. A classic Catch 22: they don’t want to meet the California standard, but they can’t afford to give up the California market.
But the car companies could have chosen to embrace the California standards. And the mix of cars developed for the strictest mileage standards in the country would meet the requirements of every other region as well.
Fast forward to the present day. The Obama administration has preempted the California attempt to impose higher fuel economy. How did they do it? By adopting the California standard!
Now, call me crazy, but I don’t think there is much preemption in capitulation.
The Obama administration has basically turned over control of the fortunes of a large, strategically important industry to the pollution control bureaucrats of a single state.
It may be a new Federal standard, but these actions are a betrayal of the Federal system.
I’m talking about the “national standard” argument. Basically, this argument goes that it is better that we now have a new federal standard, as opposed to a “patchwork” of different fuel efficiency standards in various areas of the country. With a single standard, manufacturers can focus all of their engineering efforts on meeting the Federal goals, rather than trying to develop different cars for different states.
This argument is crap. It’s hogwash. No, it’s hogwash on steroids.
A little history is in order. A few years back, California announced that in the interest of controlling pollution from automobiles, the state was going to come out with a mileage standard for cars sold in California. This mileage standard was considerably in excess of Federal standards at the time.
The car companies sued to halt this action, arguing that mileage standards were the business of the Federal government. The Bush administration agreed with them. What the car companies really objected to was that the new California mileage rules would force them to develop cars that few people wanted to buy, and abandon vehicles that people did want to buy. Since the California market is so large, you can’t afford not participate in it. A classic Catch 22: they don’t want to meet the California standard, but they can’t afford to give up the California market.
But the car companies could have chosen to embrace the California standards. And the mix of cars developed for the strictest mileage standards in the country would meet the requirements of every other region as well.
Fast forward to the present day. The Obama administration has preempted the California attempt to impose higher fuel economy. How did they do it? By adopting the California standard!
Now, call me crazy, but I don’t think there is much preemption in capitulation.
The Obama administration has basically turned over control of the fortunes of a large, strategically important industry to the pollution control bureaucrats of a single state.
It may be a new Federal standard, but these actions are a betrayal of the Federal system.
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