Wednesday, November 30, 2011

What Is It That Conservatives Hate About the Constitution? Answer: Freedom of Speech that Results in Criticism of Conservatives.

Political Speech that is Critical of Conservatives Can’t Be Constitutional, Can It?
Remember how every time a Conservative gets all misty eyed and emotional about the country and freedom they bring up the Constitution.  Well part of the Constitution is that government (or anybody else) cannot censor on control speech with respect to a person expressing views on government in a way that does not threaten promote violence or any other illegal behavior.  The Dismal Political Economist thought this was well accepted in the U. S. after more than 200 years of freedom and independence.

Well apparently in Kansas if a high school student criticizes the elected Conservative Republican governor by “tweeting” on her own personal device to about sixty of her friends, the principal of her school can order her to write letters of apology.  Here’s what happened.

Emma Sullivan, a senior at Shawnee Mission East High School in Prairie Village, was in Topeka on Monday as part of Kansas Youth in Government, a program for students interested in politics and government.

During the session, in which Brownback addressed the group, Sullivan posted on her personal Twitter page:

“Just made mean comments at gov brownback and told him he sucked, in person #heblowsalot”

Now admittedly this was not respectful to an elected official, but compared to someone like, say Rush Limbaugh it was pretty mild.  But the Governor’s office immediately sprang into action.

On Tuesday, Sullivan was called to her principal’s office and told that the tweet had been flagged by someone on Brownback’s staff and reported to organizers of the Youth in Government program.

The principal “laid into me about how this was unacceptable and an embarrassment,” Sullivan said. “He said I had created this huge controversy and everyone was up in arms about it … and now he had to do damage control.

Wow, the Governor’s staff has nothing to do all day but sit around and monitor tweets?  And when they find one critical of the Governor they immediately have to take action. 

So what does the school want the student to do?

Sullivan said the principal ordered her to write letters of apology to Brownback, the school’s Youth in Government sponsor, the district’s social studies coordinator and others.
Hopefully Ms. Sullivan will write those letters and say something to the effect “Gov. Brownback, I am sorry that you suck”, because in truth we are all sorry that Gov. Brownback sucks.  As for the school, here is their policy on freedom of expression.

Leigh Anne Neal, spokeswoman for the district, said that district officials were not aware of the incident, but would look into it after the Thanksgiving break.

“In general,” she wrote, “students on school-sponsored field trips, in which they are representing the school, would be expected to conduct themselves in accordance with school district policies, including use of electronic devices. Students may express their personal beliefs, views, and opinions, as long as they do so appropriately and in accordance with school policies.”

That’s right students in Kansas, you have the right to express whatever sentiments you want, as long as in the school’s mind it is “appropriate” and as long as what you say is “in accordance with school policies”.

Imagine if you will if this had been a Conservative student posting about a liberal politician and being attacked in this manner.  Michigan Stadium which seats 110,000 for football would not be big enough to hold the outrage of all those columnists in the Wall Street Journal, Fox News and the Washington Post.  And George Will, that great champion of freedom of speech that in his mind allows unlimited money in campaigns (to support his candidates of course), well we are waiting for his expressions of outrage. 

Waiting, and waiting and waiting.

[Update:  Governor Brownback has apologized, but wrote this rather bizarre comment

I also want to thank the thousands of Kansas educators who remind us daily of our liberties, as well as the values of civility and decorum.

Which is bizarre since it is the Kansas educators at Ms. Sullivan’s school whose actions were in contradiction to “our liberties”.  Maybe the Governor was speaking ironically, although irony is usually not the province of Conservatives.]

Democratic Congressman to Quit Congress In Order to Make More Money

At Least He is Upfront About His Motives

Being a member of Congress is a pretty cushy job.  First of all the pay is great, close to $200,000 a year.  The fringe benefits are fantastic, the best health care government can buy, all expenses covered including travel, great pension plan etc.  In fact once you are established you don’t even need to work close to 40 hours a week, and you can dine out on lobbyist money and fly on corporate jets.

So it is somewhat of a surprise that a sitting member of Congress in a safe seat would quit but members of Congress are not like the rest of us, they have far more greed and consider themselves underpaid even though they make many multiples of the income of their constituents.  They also consider government service to be a way to service and further their own needs.  So we have a member quitting to make even more money, and the surprise is only that the member would be upfront about it.  But that is what Rep. Charlie Gonzalez (D, Tx) is going to do.

Gonzalez, who sued the state over a redistricting plan that carved downtown out of his central San Antonio congressional district, said it was not reapportionment, but the need to provide financial stability for his family that's forcing him to seek a new career.

“I still find the job hugely rewarding, but the demands pull me somewhere else,” said Gonzalez, who will forego an eighth term in office.

Gosh, what can a 50 year old former member of Congress do?  Let’s see, he can’t be a doctor, he can’t be a hedge fund manager, he can’t be an astronaut or a bunch of other things.  Oh wait, he can sell influence and engage in lobbying. 

Now to be fair, Mr. Gonzalez has not indicated that he will do that, but if he expects to make even more money for himself and his family, selling influence and engaging in lobbying is about the only opportunity out there.  After all, didn't his voters send him to Washington so he could learn the ins and outs of influencing legislation, and now that he has that knowledge shouldn't he use it for his own good?

So if you need anything from the Congress and you have plenty of money to spread around, put Mr. Gonzalez in your rolodex.  He’s expecting your call.

Thanks to Taegan Goddard!

The Good Hands People Want to Use Their Good Hands to Grab You By The . . .

Kinda Defeats the Millions Spent on All Those Commercials

If you watch the Allstate Commercials which seem to be everywhere with that nice gentleman (who played the President on a big TV show) telling all of us how wonderful Allstate Insurance is.  Unfortunately what he leaves out is pretty important.  Here is one person’s experience in Charlotte.

Gary Puffpaff was irritated when he got a letter from Allstate Insurance telling him his homeowners' policy wouldn't be renewed because he had his auto insurance with another company.

Not only did Puffpaff question whether the insurer's action was legal - which, it turns out, it is - but he also was upset because Allstate canceled his auto policies a half-dozen years ago after he filed three large claims.

"Every time I see their commercial I laugh about what they say, because I don't believe a word ... about (how) they take care of you and all that," said Puffpaff, 61, a repair technician who lives in Charlotte. "They only want your money."

It seems like in North Carolina a couple of insurance companies are using their market prowess the way most companies use market power.

This year, two of the most popular underwriters of homeowners insurance policies in North Carolina - Allstate and N.C. Farm Bureau - have adopted underwriting guidelines that link homeowners policies with auto policies across the state.

Both companies cite economics as the reason for their stance.

In the case of Allstate, if you don't have an auto insurance policy from us, they're telling customers, your homeowners policy won't be renewed.

Now these are private companies, and they have every right to run their businesses as they see fit.  But one does wonder that if instead of spending tens of millions on commercials Allstate and Farm Bureau might direct that money towards customer service.  They would be astounded how much advertising benefit they would get.

Exhibit 17 Why Newspaper are Failing – The New York Times Has a Story on Mitt Romney’s Hair

Interview with Mr. Romney’s Hair Breaks New Ground in Journalism

No one knows who Leon de Magistris is, and it turns out no one needs to know who he is.  But if you insist, it turns out Mr. Magistris is Mitt Romney’s barber.  And it turns out that for the former impeccable source of new that is called the New York Times, Mr. Magistris is news.

Nobody has a more complicated and intimate relationship with Mr. Romney’s hair than the man who has styled it for more than two decades, a barrel-chested, bald Italian immigrant named Leon de Magistris.

See Mr. Romney’s hair has become a campaign issue.  Really, it has, you can’t make stuff like that up and the NYT is certainly not known for it sense of humor or whimsy.  This is a serious story.  Here is the issue

Mr. Romney’s advisers have been known to fret about the shiny strands, and his rivals have sought to turn them against him. Asked by the late-night-television host Jimmy Fallon on Monday what word she associated with Mr. Romney, a businessman, Olympics executive and governor, Representative Michele Bachmann replied, “Hair.”

enabling Ms. Bachmann with a single sentence to trivialize both her own campaign and that of Mr. Romney’s. 

Of course, like any good journalism, the story reveals previously unknown facts.

Mr. de Magistris, who gave Mr. Romney a $70 trim three weeks ago, agreed to share some of the secrets behind his most famous client’s coiffure in between haircuts the other day.

No, he said, Mr. Romney does not color his hair. Any such artificial enhancement, Mr. de Magistris said, “is not — what do you call it? — in his DNA.”

Despite holding its shape under all but the most extreme conditions, it is gel and mousse-free. “I don’t put any product in there,” he avowed.

So there you have it, Pulitzer material all the way.

Now The Dismal Political Economist will admit he has problems with Mr. Romney.  But he will also concede that Mr. Romney’s hair is indeed Presidential and his hair is fully qualified to assume its rightful place in the White House.  The problem is that is the only part of Mr. Romney so qualified.  The rest of him, well follow the news; it won’t take long to come to that conclusion.  It's not in his, what do you call it, DNA.

Tuesday, November 29, 2011

Dairy Farmers Want Changes in Government Subsidy Programs

Here’s a Better Idea, Why Not Change It So That It No Longer Exists

Dairy farming is a hard and difficult and high risk business.  First of all there are the cows, and large parts of dealing with cows are not very pleasant.  Then there is the milk, whose prices fluctuate wildly.  And also there is the cost of feed, particularly corn whose price can be pushed up because the government feels that subsidizing ethanol production made from distilled corn is good policy and good politics (well they got part of that right.

So the dairy farmers want government help, which they get.  Now they want to change the program.

Now, dairy farmers across the country are pushing to overhaul federal dairy policy in a way they say would save the government money while preventing such a price bust from happening again.

Led by their trade group, the National Milk Producers Federation, dairy farmers want to retire the current price-support program, saying it doesn't keep prices of milk high enough to cover the surging cost of corn they feed their cows. Instead, farmers want federal subsidy checks tied to declines in their profit margin.

Now this seems odd, how can a program which saves the government money help the dairy farmers who receive that money.  Oh, here’s how.

The catch: The idea would likely raise the prices that consumers pay for milk and other dairy products.

To keep the government costs of the new subsidy lower than those of the current program, the U.S. would have to get in the business of managing the nation's milk supply. The proposed overhaul would force dairy farmers to cut production when milk prices fall toward unprofitable levels—a throwback to the way some crop-subsidy programs worked before the 1990s.

Some economists figure U.S. consumers would have paid billions of dollars more for dairy products in 2009 had the change been in place.

Hasn’t the time come for the government to get out entirely of the dairy regulation, control, and subsidy business.  This is not 1933.  Yes dairy farmers may suffer, and a way has to be found to support a transition so that existing dairy farmers are not severely harmed or immediately forced out of business, but that should be possible.

It should be possible because Conservatives now control much of the Congress and lower government spending and letting free markets operate as free markets is what they believe in.  So look at the cited article and notice how many Conservative Republicans are supporting an end to the dairy program. 

What, you found none?  Not even one Presidential candidate? Well that’s the problem with Conservatives isn’t it.  There’s never one around when you need one.  Is it because these Republicans tend to represent farm states and rural areas and put their re-election goals ahead of everything else, even their principles?  No that can’t be it. 

Herman Cain Got a Free Master’s Degree Paid for By the Government

But When Asked to Pay Something Back, He Became a Conservative

The Wall Street Journal has an in-depth report on the history of Republican Presidential hopeful Herman Cain.  It is not a particularly interesting report, not because of the reporting, but because Mr. Cain has not lead a particularly interesting life (although recent revelations about his personal activities may contradict that statement). He was well educated, climbed the corporate ladder, was successful as a manager and now has gone into politics.  His life is not remarkable, by his own admission he has been motivated in life almost solely by the desire to make a lot of money, which is fine.  He has neither made major contributions to society nor has he in any way harmed society.  He just is.

But three things do stand out in the article.  The first is this.

He said he drew few political interpretations from his career, except that his success demonstrated to him that racial barriers for African-Americans had largely fallen away. He regarded his achievements simply as proof of what personal focus and hard work could accomplish

The second is that like many self made men, he attributes his success to what he has done and not from any help from the government.  But there is this

After Morehouse, Mr. Cain took a job as a civilian ballistics analyst with the Navy. While working there, the federal government paid for him to pursue a graduate degree at Purdue University, where he earned a master's in computer science.

An event which seems to be totally missing from any discussion Mr. Cain has about his background and the sources of his success.

And the third interesting commentary from the report is this.

Mr. Cain believed a push in Congress to raise the minimum wage imperiled his efforts to rescue the company. "I'm going, 'Wait a minute. I fixed all the stuff inside the company that I can fix, and now I'm going to get hit upside the head by the government?'" he said.

Then came 1994, the year after Democrats passed an income-tax surcharge to reduce the deficit. He says he was stunned when his personal tax bill increased. "It was just a sneak-a-tax,'" he said. "It only affected people of a certain category…That's why I became a conservative."

That’s right, after getting access to the corporate world in part from the government’s civil rights efforts and in part from the experience in a government job and in part from a government provided Master’s degree Mr. Cain became a Conservative.  Why, because the minimum wage, which doesn’t even support a person to live outside poverty or outside near poverty hurt his business profits and because a tax increase that was imposed only on very high income persons affected him.

Everyone, absolutely everyone who is even mildly economically successful in this country owes part of that success to both public and private organizations that have helped each and everyone us become what we are today.  But only Conservatives seem to want to deny to others what they themselves have been given.

That concludes our services, be sure to attend the church’s Lady Auxiliary French bread picnic in the parking lot.

Whose Side Are the Regulators On – The SEC Is Not On Your Side

Making Citibank Admit It is Wrong When It Admits It is Wrong Is Wrong to the SEC

The Securities and Exchange Commission, which governs and regulates the nation’s securities markets finds abuses and misconduct about every day.  Its job is to recover the ill gotten gains from the malefactors and make sure the public knows what is going on when improper and illegal practices take place.

The SEC came under severe criticism when it reached a settlement with Citibank over a Citibank investment scam that was grossly intolerant of ethical and legal behavior, even by Wall Street standards.  Citibank had put together a package of mortgage loans, loans that they knew were so bad that the package was like to lose almost all of its value.  Citibank then sold the loan package to investors without telling them any of this and implemented an investment strategy to make money for Citibank when the package failed.

It is not clear how much money that Citibank made on the deal, but they reached an agreement with the SEC to pay a $285 million fine and the SEC did not require Citibank to admit to any wrong doing despite the overwhelming evidence that they had done something horrific.  A federal judge decided this would not stand.

"The SEC's long-standing policy—hallowed by history, but not by reason—of allowing defendants to enter into consent judgments without admitting or denying the underlying allegations, deprives the court of even the most minimal assurance that the substantial injunctive relief it is being asked to impose has any basis in fact," the judge said.

The judge rightfully condemned this lack of admission of guilt, recognizing that for many players on Wall Street, paying fines for malfeasance is just another cost of business.

In his order, Judge Rakoff said a settlement in which there are no admissions and modest penalties are "frequently viewed, particularly in the business community, as a cost of doing business" rather than "as any indication of where the real truth lies."

"In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers," the judge said. "Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances."

The Dismal Political Economist was hesitant to post this comment and these words though.  It shakes the very foundation his cynicism about investment bankers, Wall Street ethics and the lack of regulation when someone out there in public policy, in this case the Judiciary,  is pursuing truth, justice and the American way.  Why, the next thing that might happen is that Mitt Romney takes a consistent position on an issue.

Tennessee Senator Corker Re-Writes History of Mortgage Companies in the Washington Post

Maybe That’s the Post’s Function in Life, to Give Republican Senators a Reputable Forum to Misrepresent

Because the facts and history of the once government owned, once private, and now once again government owned mortgage companies like Fannie Mae and Freddie Mac does not support Republican and Conservative dogma, those Republicans and Conservatives who write about them have to re-invent that history to conform to their cherished incorrect beliefs.  So as a public service here is the briefest possible history of government involvement in the mortgage insurance business.

  1. Starting in the 1930’s the Federal government sponsored a number of agencies who mission was to guarantee home mortgages to facilitate and stimulate the residential construction and home ownership sector.

  1. These organizations were phenomenally successful, and home construction and home ownership boomed in the post WW II era.

  1. Two of these agencies, Fannie Mae and Freddie Mac were privatized, with implicit government guarantees of their debt.

  1. The agencies that remained government owned, FHA and Ginnie Mae continued to be sound, properly run businesses.

  1. Non-existent or lax regulation of Fannie Mae and Freddie Mac, particularly during the Bush administration lead to their using their government guarantee of funding to buy and guarantee bad mortgages, so much so that the Bush administration had to take them back into government ownership.

  1. The Obama administration has reformed their practices and they are now making money from their loans of recent years.  They are still working through the bad loans made under the Bush administration.

There you have it, privatization and lax regulation lead to a disaster, costing taxpayers hundreds of billions.  But Republicans cannot let this truth be known, it contradicts what they want people to know.  So Tennessee Republican Senator Bob Corker uses the Washington Post to present the fantasy side of the argument.

But we have come to a point where continued inaction impedes the ability of the private market to take over a function the government has completely mismanaged. We must move beyond Fannie and Freddie, immediately.

Uh, no Mr. Corker.  Fannie and Freddie were completely mismanaged under private ownership. Under public ownership they, along with other agencies have done what they are supposed to do.  Mr.  Corker then goes on to talk about managing interest rate risk and says this

This leaves the lender with the tricky job of managing an asset-liability mismatch. But the private sector has proved capable of the task. In fact, the development of the risk management infrastructure to deal with this challenge remains a great accomplishment of modern finance.

Really, that’s what he says.  Which must explain why the banking system and Wall Street has done so well for the past five years.  But then Mr. Corker moves on to credit risk

Having “crowded out” private investors by charging an insurance premium that was too cheap, the GSEs are saddled with $5 trillion worth of bad credit. This is a tragedy of our own making. During the boom years, the GSEs’ affordable housing goals were coupled with a Congress and an administration that saw only the bright side of rapidly increasing homeownership rates. That meant that as housing prices began to spike, it was impossible to make credit slightly more expensive. Without countercyclical market mechanisms able to operate naturally, as housing prices went higher, the GSEs simply raced each other to lower guarantee fees, out of fear that they might lose business from mortgage originators such as Countrywide and Washington Mutual. The result, we now know, was a government-induced bubble followed by a painful collapse.

Wow, can anyone successfully count the number of false statements in that quote.  See one reason for the collapse is that these private companies made credit way to expensive; after luring unqualified home buyers into the system with low “teaser” rates these buyers were unable to make payments when rates reset to much higher levels.  Oh yes, Countrywide and Washington Mutual, how did those private companies do?  Wa Mutual failed, and Countrywide was bought by Bank of America and it is now doing its best to sink that bank entirely.

So thanks Washington Post, for giving a Republican the forum to write total mis-information and fabrication about the home mortgage debacle.  But don’t expect thanks from Republicans and Conservatives, because every now and then you also allow someone to write correctly about things, and that sort of thing is what Conservatives hate. And even if you devoted your editorial pages entirely to promoting right wing Conservative myths, you still would not be successful.  The Wall Street Journal editorial section will always do that better, they are pros and you are just a pretty good amateur.

Monday, November 28, 2011

Now That Thanksgiving is Over the Attacks on Medicare Begin Again

This Time Democrats are Joining in the Fun

If you are elderly and retired you face two economic threats.  The first is loss of income, since you are unable to return to the labor force.  The second is impoverishment from catastrophic medical costs.  The first of these threats has been ameliorated by Social Security and tax incentive driven savings plans.  The second, of course has been eliminated via Medicare.

Medicare was enacted in the 1960’s and enhanced in later decades.  A key feature of Medicare is cost sharing.  The costs of providing health care for those 65 and over are borne by the recipients themselves (premiums, co-pays, and deductibles), employers and employees (payroll taxes) and general tax revenues.  This seems fair and reasonable, but not to everyone.

As the cost of providing medical care to the elderly rises, those who want to reduce taxes on the wealthy are developing programs to reform or replace Medicare with systems that will shift more of the costs to the individual recipients, and less cost sharing by government.  The mechanism for doing this, proposed by Republicans, is having private insurance provide the Medicare services, with government providing a subsidy to senior to pay the premium.  Now some Democrats are coming on board.

The idea faces opposition from many Democrats, who say it would shift costs to beneficiaries and eliminate the guarantee of affordable health insurance for older Americans. But some Democrats say that — if carefully designed, with enough protections for beneficiaries — it might work. . . . Alice M. Rivlin, who was budget director for President Bill Clinton, had urged the deficit panel to establish an insurance exchange for Medicare beneficiaries.

Now an honest argument cannot be used here, since a program to shift health care costs to Seniors is not all that winning a position.  So the argument has to be made that this is cost savings, that Medicare, like all government programs is wasteful and that the private sector can do health care insurance for the elderly at a much lower costs. 

The argument is an old one.  Competition in the private sector will reduce the cost of health care for seniors, c'mon man!  This is delusional wishful thinking.  Private insurance in the non-elderly market has premiums rising much faster than the cost of Medicare.  And adding the profit contribution and higher administrative costs from a multiple of private plans will push up costs, not lower them. 

One argument is that Medicare Advantage plans, private plans that administer Medicare health care lower costs.

 one-fourth of the 48 million Medicare beneficiaries are in private Medicare Advantage plans, offered by companies like UnitedHealth and Humana, which cover a wide range of doctors’ services and hospital care.

The new health care law is cutting payments to Medicare Advantage plans. Republican lawmakers predicted that the cuts would lead insurers to increase premiums, reduce benefits or pull out of the program. But so far the dire predictions have not been borne out.

On average, the Obama administration said recently, Medicare Advantage premiums will be 4 percent lower in 2012 than in 2011, and insurers expect their Medicare enrollment to increase by 10 percent.

Uh, yes the premium costs may be declining but the co-pays of Medicare Advantage plans are rising, as they have been all along.  So no, Medicare Advantage plans are not the huge cost savings they purport to be.

Now it may be that private insurance will evolve into a system that will cut costs.  This could happen if the trend towards insurance companies buying health care providers and getting into the business of providing health care and the trend of health care providers to provide insurance continues.  This will take a push by the government, and require intelligence in health care economics.  Neither activity is likely.

So as the Greediest generation continues its press for more and more tax cuts, everyone should know that some of that money will come from shifting health care costs to the elderly.  But that’s okay, if you cannot afford to have health care, don’t get sick.

Merck Sues Merck for Merck Taking Merck’s Facebook Page

A Dispute That Can Only Happen Now

It turns out that there are two Merck Pharmaceutical companies.  One is based in the United States and the other is based in Germany, and even though they share the same name they are independent of each other and compete in drug markets.  So it is only inevitable that the two companies would clash in court, but the issue is certainly a surprising one.

German drug maker Merck KGaA has asked a New York City court to force Facebook Inc. to explain how the German company lost its page on the social-networking site to U.S.-based rival Merck & Co.

Exactly how one loses a Facebook page is not clear, but what is clear is that this is serious stuff.  Facebook has become so important in a company’s ability to position itself in the market that the loss, or misplacement or the alien abduction of a Facebook page is something worth going to court about.

German Merck's filing on Monday said its Facebook page has been "misappropriated," adding that it wasn't clear how that happened nor who was at fault. The German company's case was brought against Facebook because the Palo Alto, Calif., company didn't provide clear information about what happened, the filing stated.

Okay, now we know that the term for losing your Facebook page to a name-alike competitor is that it was “misappropriated”.  Also it is not sure which laws were broken here, a survey of the Republican candidates for President found that only three of the eight thought that Facebook pages were specifically protected by the Constitution (Article IV, Section 3(a) according to one Presidential aspirant).

And how exactly did it turn out that there are two Merck companies?  Well that was part of the Treaty of Versailles that set the terms for ending World War I.  What, you think The Dismal Political Economist is joking?

The two Mercks became separate companies under the Treaty of Versailles, each owning rights to the Merck trademark in different geographic areas, as part of Germany's reparations after World War I.

Yes, one can imagine the great men of that time sitting in a Parisian palace and discussing how to make two Mercks.  And one wonders was it Clemenceau or Wilson who forgot to settle the Facebook issue.  Keynes was there and he should have taken care of this.

Defense Department Buying Junked Aircraft from Britain for Spare Parts

Government Savings or Another Sign of American Decline

Like many Americans The Dismal Political Economist is doing fine economically but he is also not near as at ease with his financial situation as he used to be.  For that reason he tends to fix things rather than replace them, and he is always on the lookout for scrapped items that he can salvage spare parts from.

It turns out the U. S. Government is in the same situation.  Recently Britain decided to retire a class of Harrier jets, and in a stunning coup (or sign of financial desperation) the U. S. is buying a bunch of them.

The government has agreed a $180 million deal to sell 72 retired Harrier aircraft to the U.S. Marine Corps for use as spare parts, a minister said on Thursday.

It seems the U. S. has use for these

72 Harrier aircraft frames and associated parts which will be used as a major source of spares for the U.S. Marine Corps Harrier AV-8B fleet of aircraft," defence equipment minister Peter Luff told parliament.

And it’s a nice deal for everyone.  But it does raise the question whether or not this is a smart deal for the Defense Department, or an indication that the U. S. is moving another step towards becoming a scavenger nation.  Of course, it could be both.

BLS October Data Shows High Tax States and Low Tax States Gaining Jobs

That Can’t Be Right, That Contradicts Conservative Dogma (Ok, Not News, Everything Contradicts Conservative Dogma)

A basic tenet of modern Conservatism is that taxes are job killers.  High taxes make businesses move to low tax jurisdictions and prevent job creation in businesses that stay in high tax jurisdictions.  So the October state employment report ought to show that high tax states lost jobs and low tax states created jobs.  Except it doesn’t.

Over the year, 23 states experienced statistically significant changes in
employment, 22 of which were increases. The largest increase occurred in California (+239,100), followed by Texas (+231,600) and Florida (+93,900). The only state with an over-the-year statistically significant decrease in employment was Georgia (-33,300). (See table D.)

Yes, there are our good Conservative friends Texas and Florida, but wait there is also the high tax state of California.  What’s that doing there?  And if you look at the data there is Illinois, which raised taxes substantially to deal with a large budget deficit.  Illinois increased employment by 60,000.  And even New York, with its massive taxes and huge layoffs in the financial industry increased employment by 61,000.  Massachusetts, high taxes there didn’t prevent a 50,000 increase in jobs.

Georgia has been under Republican control for years.  The result, it was the only state with a significant decrease in jobs.  Maybe Georgia needs to return to the days of Democratic rule.

The lesson here is fairly clear.  Individual tax levels do not seem to be correlated with growth in employment in the various states.  Texas does have low taxes and high population growth and high job growth.  California and Illinois and New York have high taxes and high job growth.  That clear conclusion, state tax levels do not matter much in the job creation process, which is what people other than ideologues would expect.  Jobs are created when there is the demand for the goods and services those jobs produce.  No one ever hired an employee to produce something that could not be sold just because taxes were low. 

 Lesson learned Conservatives?  No, didn’t think so.

Sunday, November 27, 2011

David Frum Wonders Why Former Pennsylvania Senator Rick Santorum Was Not “Taken Care Of” After He Lost Bid for Re-election

The Rest of Us Wonder Why He Would Have Been Taken Care Of

David Frum is a former Wall Street Journal editorial writer and George W. Bush  White House staff member.  He is famed for the Frum Forum which is pretty good and for his sane and rational Conservatism, the kind that is at odds with the phony Conservatism of most Republicans today. 

Thus it is puzzling that Mr. Frum takes up up valuable space in his forum to raise the question why the Republicans did not take care of Sen. Rick Santorum of Pennsylvania when he was defeated for re-election.

Yet when Santorum fell casualty to the wave election of 2006, there was no ambassadorship for him. Nobody conveyed to a DC law firm that it would be appreciated at the White House if an “of counsel” position could be found for him. I don’t want to exaggerate, Santorum made a decent living after his defeat. But in the couple of conversations with him a year or so after his defeat, he projected the air of a man who felt friendless and abandoned.

The “ambassadorship” question is easy to answer, no country he would be sent to wanted a man whose vicious hatred and bigotry towards the gay and lesbian community was so great that it defined who he was.  But the bigger question is why a principled Conservative like Mr. Frum would even think that it was the obligation of the Bush Administration to “take care” of Mr. Santorum.  Oh wait, having government take care of politicians is a Conservative thing, as noted here in an earlier post.

There are currently about 14 million unemployed in the country.  After all 14 million have jobs then it would timely and appropriate to take care of Mr. Santorum.  But don’t worry anyone, as a former member of Congress Mr. Santorum has benefits that the rest of the population can only fantasize about (and financial support from Fox News whenever he wants it).  That’s what happens when you can vote for your own salary and other types of compensation.

Saving Europe May Mean Reforming Labor Markets – But It’s Not Likely to Happen

Italy’s Labor Rules Work Against Labor

The pessimism that continue to envelop Europe is now taking on Germany and France.  France is pursuing an austerity program to try and protect its bond ratings, and Germany just found out that the bond vigilantes are targeting all of Europe, not just the weak economies.  A German bond offering has failed.

The problem is that if countries like Italy have difficulties, countries like Germany which are export driven will also falter, because export driven countries depend upon the health of their customers.  China is another country that may learn this lesson the hard way, that if the U. S. and Europe, their major customers have a problem, China has a problem.

Italy is one of the weak countries of Europe that now has a new government.  The new government is charged with getting Italy’s debt under control and with implementing policy that will create growth.  This will be impossible without reforming Italy’s labor market practices.

Italy, like much of Europe has labor market policies which although ostensibly designed to protect labor, actually works in opposition to labor.

Italian work contracts are negotiated nationally. Union leaders and employer federations set pay scales, benefits packages, and employment conditions for entire classes of workers—metal mechanics, textile laborers, construction workers, journalists, even maids and nannies. Workers—especially public employees—are guaranteed the same wage wherever they live. Never mind that living in Milan is 10 percent more expensive than Naples, according to Italy’s National Institute for Statistics. Negotiating labor contracts at the national level also removes nearly all incentives to compromise. 

These contracts just about make it impossible for Italian firms to fire anyone or to manage the labor, so here is the result

The World Economic Forum ranks Italy 123rd out of 142 countries in the efficiency of its labor market. Employers are robbed of their ability to innovate, from experimenting with hours of operations to introducing new forms of wage structures. Meanwhile, national strikes roll around like federal holidays—one every month or so and almost always on a Monday or Friday to guarantee participants a three-day weekend. On average, Italian workers spend almost six times as many hours on strike as their German counterparts, according to the European Industrial Relations Observatory. In the past decade productivity has remained flat, even as its neighbors to the north have continued to work more efficiently.

And employment is Italy become fractured, with those in good jobs given tremendous job security, and employers afraid to hire anyone for fear they can never ever reduce the labor force if economic conditions require it.

Those in the top tier cling to their jobs knowing that if they quit they’re unlikely to find another. Unlike in the U.S., where constant churn means jobs are continuously being opened and filled, in Italy the labor market has seized up. Workers can’t move where they’re most productive. Potential entrepreneurs don’t dare drop out of their regular jobs to launch startups, for fear they would not land another good position should they fail. And woe to those who clash with their boss; the flip side of protection from being fired is that it’s very hard to change employers.

 So Italy has a big underground economy

Anywhere from 15 percent to 27 percent of economic activity is underground, according to the Organization for Economic Cooperation and Development and the International Monetary Fund. In this world, receipts are unheard of, taxes unpaid, and union rules don’t apply.

And so the current status of the labor market is this

 The result is a three-tiered labor force, a setup Italians dub “apartheid.” Of 27 million workers, 15 million—most 40-plus—enjoy stable jobs with guaranteed privileges. An additional 8 million, mostly younger, form a growing army of freelancers and employees on continuously rolled-over short-term contracts. They receive none of the benefits that would in theory be granted under the generous labor laws. The remainder, 4 million or so, toil in the unprotected underground economy, according to Italy’s National Institute for Statistics.

So Italy has a labor force that protects the older workers at the expense of younger workers.  And unless Italy reforms this market, economic growth that is desperately needed to return fiscal stability to the country will not happen.  And if the goal is to reduce the level of debt as a percentage of GDP, guess what happens when GDP is declining and debt is rising.

The new government of Italy is composed of technocrats as opposed to politicians.  This means they know what to do.  It also means that they probably will not be able to do it, and until they and other new governments in Europe can show they will be able to do it, expect to bond vigilante attacks to continue.  And that is not good for anyone.

Dr. Vicky Triponey, A Heroine at Penn State

Wall Street Journal Report Confirms What Everyone Knew; Big Time Collegiate Student-Athletes Are Treated Differently Than Student-Students

The guilt or innocence of the individuals charged both with crimes and with inappropriate, unethical and reprehensible behavior in the Penn State scandal cannot be judged at this time.  As strongly as one wants to condemn everyone associated with the horrible accusations, we just cannot do so until the justice system has run its course.

This does not mean we cannot comment on persons who were relevant to the situation but are not charged or suspected of behaving improperly.  In a superb piece of investigative reporting, the Wall Street Journal has an in-depth story on Dr. Vicky Triponey, a person who until now has been totally unknown.

Students at Penn State are subject to a code of conduct administered by the office of judicial affairs—an arm of the student-affairs department. The office can open investigations of any incident on or off campus. It can order a range of punishments, including, if it sees fit, expulsion.

When Dr. Triponey arrived from the University of Connecticut in 2003 to become vice president of student affairs, she was charged with overseeing the department that enforced the code.

So how does this have anything to do with Penn State athletics.  Well Ms. Triponey assumed that all students were to be treated equally and the same (coming from a non-college football factory school Ms. Triponey’s na├»ve position can be forgiven). This lead to confrontation with legendary coach Joe Paterno, whom she thought  had a different viewpoint.

Dr. Triponey also wrote that Mr. Paterno believed that the school's code of conduct should not apply to any incidents that take place off campus—that those should be handled by police—and they shouldn't be allowed to affect anyone's status as a student.

"Coach Paterno would rather we NOT inform the public when a football player is found responsible for committing a serious violation of the law and/or our student code," she wrote, "despite any moral or legal obligation to do so."

Dr. Triponey ended her note by asking Mr. Curley and Mr. Spanier if these were accurate impressions of Mr. Paterno's views—and whether they shared them.

Mr. Curley and Mr. Spanier are or course two administrative officials at Penn State charged with crimes in connection with the allegations.  But their response to Ms. Triponey, years before any of the current issues became known is telling

Mr. Curley's response, also reviewed by the Journal, was sent three days later and was copied to Mr. Spanier. "I think your summary is accurate," it said.

So we know have at least one possible answer to the question of why Mr. Paterno and the Penn State athletic coaches did not do anything upon given information about the conduct of Mr. Sandusky, the person charged with the hideous crimes in this case.  They didn’t feel they had to "despite any moral or legal obligation to do so." 

The sorry end to this saga is that Ms. Triponey left Penn State, and she was replaced by a much more compliant person

After Dr. Triponey's departure, the university hired Bob Secor, a former vice provost at the school, to head a committee to examine the judicial-review process. Mr. Secor says that Mr. Paterno told him that he didn't think other people should be able to decide whether a football player should be able to play or not. "And we agreed with that," he says.

On Oct. 1, 2007, Mr. Spanier accepted the committee's recommended changes. Under the new rules, the judicial-review process would have only a limited ability to end a student's participation in activities—including football.

And from that time forward it became official what everyone knew was unofficial, that the football program at Penn State was supreme over any and all other aspects of the University.  While nothing can dwarf the individual tragedy if the charges are proven,  at an institutional and societal level, that may be the biggest tragedy of all.

Saturday, November 26, 2011

When Are Conservatives Going to Quit Whining About Public Employee Union Contracts

Do They Just Not Understand That Management Has to Sign Off on Any Contract?

One of the many things Conservatives are united about is that public employee unions have imposed huge unmanageable costs on state and local governments, and that is the reason why those governments have financial problems.  Even worse, from their point of view, it is the reason why those same government cannot enact big tax cuts for the wealthy.

The latest to join in whining is somebody from the Mitt Romney Massachusetts administration,

Mr. Costrell, a professor of education reform and economics at the University of Arkansas, served as chief economist for the Commonwealth of Massachusetts from 2003-2006 and education adviser to Gov. Mitt Romney from 2005-2006.

whose major qualification would seem to be that his political position is in sync with the editors of the Wall Street Journal.

And here is some of his whine.

In the heated debates over government collective bargaining, a simple fact is often lost: Benefits for teachers and municipal workers are often more expensive than they are for state employees, let alone for workers in private business. The disparity between runaway local costs and more restrained state benefits is the key rationale—often misunderstood—for the efforts of Wisconsin, Massachusetts, Ohio and other states to limit local collective bargaining over benefits.

In local bargaining, the employer is outgunned by unions with state and national affiliates behind them, and numerous provisions in state law tilt the table in the unions' favor.

Maybe This Is What Government Needs to Stand Up to
Public Employee Unions Who Don't Even Have
the Right to Strike

Wow, public employee unions who in most cases do not even have the right to strike are more powerful than government, who has very deep pockets and can withstand a strike far better than a private company.  Who would have thought that state and local government officials are so pitiful, so impotent, so lacking in basic management skills that they cannot engage in successful collective bargaining.  But they must be according to Mr. Costrell.

Here is the core of Mr. Costrell’s argument

In Cleveland, for example, the collectively bargained contribution by teachers is $75 per month for family health coverage, a fraction of a state employee's $205 monthly contribution. Ohio state employees face an out-of-pocket maximum of $3,000 per family for in-network coverage, including a deductible of $400 and a co-insurance rate of 20%. For Cleveland teachers, the out-of-pocket maximum is zero—there's no deductible and no co-insurance. These provisions are written into Cleveland's union contract. They will be very difficult to remove.

Very difficult to remove?  No, Mr. Costrell it is very easy to remove those provisions.  When the contract expires and a new one is being negotiated management just says we are changing that and reaches agreement on what management wants.  It’s called collective bargaining Mr. Costrell, and with government at the table it is far more powerful than any union. If you and your fellow Conservatives are not up to it, the thing to do is not destroy collective bargaining, but for you and your ilk to cede political offices to those who are.

We would all appreciate it.

Bond Vigilantes Are Attacking in Europe

They Are Real, They Are Just Not Here

Conservatives and other who have warned against having the U. S. engage in massive economic stimulus to get the stalled U. S. economy growing fast enough to reduce unemployment rates have pointed to what is now called “Bond Vigilantes” as the basis for their opposition to the large deficits that policy would create.  Their argument is that massive deficits would cause lenders who buy U.S. bonds to demand higher interest rates, and that the interest rate rises would harm the economy, thus defeating any gains expected from normal Keynesian growth policy.

The problem with this argument, as appealing as it may sound is that it just has not come true, at least not in the United States.  Contrary to expectation, interest rates in the  U. S. have fallen, not risen in large part because the U. S. economy has looked stronger than any European one, and because despite a reduction in its credit rating, government debt in the U. S. still looks like the safest investment out there.

The Bond Vigilantes Attack Europe

This is not the case in Europe.  The bond vigilantes have struck with force.  They have pushed up the yields on Italian and Spanish debt so high that the liquidity of these countries, that is the ability to borrow money to refinance debt coming due and to finance current budget deficits is in doubt.  Either or both of these nations may require massive bailouts.  And no, Europe does not currently have the resources to bailout both Spain and Italy.

Germany, the strongest European economy and the country so far that has escaped an attack by the bond vigilantes has just suffered it first attack.

Germany, which was seeking to raise as much as 6 billion euros, or $8.1 billion, in an auction of 10-year bonds, met demand for only 3.9 billion euros worth, leaving the state with twice as many leftovers as normal, the Bundesbank reported. The bonds, considered the safest government securities in the euro zone, were priced at an average yield of 1.98 percent, slightly above the prevailing market price.

Charles Diebel, head of market strategy at Lloyds Banking in London, described the auction flop as “a pretty significant buyers’ strike.”

No, there is no major concern about the German economy, at least not yet.  The concern is that Europe will not step up and do the right things.  European policy makers, led by Germany are making two huge mistakes.  The first is that they are demanding severe fiscal austerity in nations like Italy and Spain so that these countries can reduce their budget deficits.  They seem to have forgotten basic economics, that this policy will also reduce growth, reduce GDP and make the countries less rather than more able to meet their debt obligations.

The second problem is that Europe, again lead by Germany is refusing the let the European Central Bank be the lender of last resort.  To stem the panic in European bond markets the ECB has to say that it will support Italian, Spanish and other sovereign debts at a given level.  This is today the only policy that will stabilize bond markets and give Italy and Spain the time needed to reform their economies.  Germany does not want to do this because it feels such a policy will (1) reduce the pressure on those countries to reform and (2) lead to high inflation. 

The Germans may be right, but it doesn’t matter.  The current policy is doomed to failure; the alternative policy of empowering the ECP may well fail, but unlike the current policy it at least has a possibility of success.

All of those who have read the history of the 20th Century in Europe and want a weak, divided and economically devastated Europe raise your hands. 

 I don’t see any.