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.

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.

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.

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?

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.

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.

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?

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!

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.

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.

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.

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?

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.

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."

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.

"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.

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.

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.

Car Wars, Part II

I have a clarification on my previous post regarding the new Federal automotive fuel efficiency standards. The 35 mpg requirement is for passenger cars and light trucks combined. The requirement for passenger cars is that the corporate average hits 42 miles per gallon.

I was curious as to how many cars currently on the market meet that standard. So I visited the official EPA fuel efficiency website (www.fueleconomy.gov). They have a searchable database where you can look for cars that meet differing levels of fuel efficiency. Do a search at meet or exceed 40 mpg, and you come up with two, count ‘em two, models. If you want a car that meets the 2016 standard today, you can get a Toyota Prius or a Honda Civic Hybrid.

It kind of reminds me of Henry Ford’s old dictate regarding the Model T. “You can have it in any color you want, as long as it’s black.”

Typically, cars are developed in what’s called a platform. The platform includes the chassis, the suspension, the powertrain; basically, all of the guts and structure between the seats and the body panels. Usually, more than one model of car is built off of the platform. For example, the Honda CR-V is built off the Civic platform. The Ford Fusion and the Mercury Milan also share a platform.

Developing a new platform takes between three and five years. Not only does the platform have to be engineered, but a lot of the subassemblies will also be new designs. Then the tools to build the new parts have to be designed and built. Once the new parts are made, then the assembly processes to make the subassemblies have to be designed and built. I have seen times where getting just one part for a new automotive subassembly took over 18 months between the first quotation to delivery of production parts.

Because of the enormous cost of developing a new platform, particularly once you get to the stage of building production tools, car companies usually bring only one platform to market in any one year.

To arrive at the mandated targets will require new platform development for almost every platform over the next 8 years. If you listen carefully, you can hear faint screams of agony coming from all directions. Those are the screams of product planners and design engineers from all over the world being told about the new North American standards they will have to meet, and the timetable for meeting them.

Car Wars

I have been hearing on the news today about the new deal to raise automotive fuel efficiency standards. The average passenger car mileage will increase from the current 27.5 miles per gallon to 35.5 miles per gallon in 2016. From the news coverage I’ve seen so far, it is not clear if that 35.5 mpg figure also applies to light trucks. Last year Congress passed a law requiring light trucks to hit fuel efficiency standards of 27.5 mpg by 2020, but that is now superceded by this new EPA rule.

For car makers, fuel efficiency is governed by a concept known by the acronym CAFÉ: Corporate Average Fuel Efficiency. The concept is pretty simple. The average fuel efficiency of all of the cars a manufacturer sells has to hit the government’s target. If you sell one Ford Fusion (26.5 mpg) and one Ford Fusion Hybrid (38.5 mpg), your CAFÉ rating is 32.5 mpg.

If you are Ford Motor, and you want to sell a muscle car like a Mustang (22 mpg) you have to sell another car that gets 49 miles to the gallon to hit the new standard. The latest version of the Toyota Prius only gets 44 mpg, so even that would have to increase by 11% to average out with a Mustang.

The new fuel efficiency standards represent a 30% increase over a seven year time period. To hit these targets, what all of the car companies are going to have to do is predictable. Cars are going to get (much) smaller, lighter, and less powerful. They are also going to become much more expensive.

A lot more cars are going to be hybrids. Since every hybrid has dual drive systems, one gas and one electric, there are a lot more components per car than a standard powertrain. More components, more cost.

For cars with more powerful engines, the prices will also go up. Why? Well, how else can the car companies convince you to buy a car that would lose a collision with a dog, when what you really want is a big honkin’ pickup truck? After all, the evidence of the marketplace is clear. Given a choice, Americans like to drive SUV’s and pickup trucks. In 2007, the top three best selling vehicles in North America were all full size trucks.

In the news coverage so far, everyone has been all smiley and happy, singing kumbaya over how great this is. So far, nobody has bothered to ask any automotive design engineers what they think about this. Those poor bastards are probably sitting in bars, trying to drink themselves into a catatonic stupor.

Tomorrow morning, they are going to have to wake up with a hangover, go in to work, and start trying to figure out how to retool 80% of the industry capacity to build small cars on lines configured to make big trucks and SUV’s. They have to do this during a major recession, with forecasted sales volume at 60% or less of what is was just a couple of years ago. And, oh yeah, the head of California’s pollution control board announced plans today to start work on the next major ratcheting up of fuel efficiency standards.

Work in the auto industry? I’d rather take on a career juggling chain saws. Flaming chain saws.