New Year's Eve

According to the late Bill Vaughn, a columnist for the Kansas City Star: "An optimist stays up until midnight to see the new year in. A pessimist stays up to make sure the old year leaves."

Since I was old enough to stay up until midnight, I usually have. The sole exception is New Year's Eve when I have an uncontrollable urge to fall asleep at 10:00 p.m. Since I find sloppy drunks offensively boring, and the drivers too dangerous for my taste, I shall be in bed early tonight knowing that, even as I write at 5:30 p.m. Eastern Standard Time, it is already next year in most of the world.

Have a very happy and prosperous 2010.

Getting Lucky

In the aftermath of the attempted bombing of Delta Flight 253 on Christmas Day, we are being treated to the unedifying sight of politicians rushing around in ever decreasing circles while chanting 'something must be done'. Meanwhile, bureaucrats are rewriting the security theater script and the average traveller will be expected to endure additional hours of aggravation for no significant increase in safety.

Not even grossly intrusive security systems can prevent every incident. Those who expect the government to guarantee their safety on airplanes are, to put it politely, delusional.

Martin McGuinness (now Deputy First Minister of Northern Ireland and believed to have been Army Council Chief of Staff of the Provisional IRA during the most recent episode of the 'troubles') referred to the 1984 bombing of the Grand Hotel in Brighton, which killed five Conservative Members of Parliament and narrowly missed then Prime Minister Margaret Thatcher, in the following terms:

“Today we were unlucky, but remember we only have to be lucky once – [the security services] will have to be lucky always."

Mr. McGuinness knows what he was talking about.

The real issue is simple: regardless of the efforts of the intelligence and security services, some successful attacks are inevitable. The question, then, is whether we are adult enough to accept what we can not avoid, even while greatly disliking it, or whether we will behave like a bunch of spoiled children whose unrealistic demands for perfect protection can only lead to a 'cure' that may well be worse than the disease.

To sacrifice our freedom in the fruitless pursuit of total safety is a betrayal of every value held by the founders of our nation.

MOMMY... MOMMY...

...GOTTA GO POTTY!

Following the attempted bombing on Christmas Day of a Northwest Airlines flight, the Transportation Security Agency (TSA) has decreed that no one on an international flight to the USA will be permitted to leave his or her seat during the last hour prior to landing.

A variation of this rule was in effect for all flights in and out of Washington Reagan National Airport after it reopened following the 9/11 attacks. The difference, then ,was that the restriction was in effect for only thirty minutes prior to landing and after take off.

Even though thirty minutes does not seem an excessively long time, several flight attendants informed me that, during the time that rule was in effect, it was normal to have to change at least one wet seat cushion on every flight. Working on the principle that forewarned is forearmed, I took to checking seat cushions before sitting down and, indeed, had to request a change more than once.

TSA wins yet another award for futile security theater by introducing a rule that will achieve nothing except to make many passengers uncomfortable and some of them very embarrassed.

See also 'our government at work'.

MOMMY... GOTTA GO POTTY.

Christmas

Today is the day that Christians celebrate the birth of Jesus Christ, their Saviour.

For the non-Christians in the Western world and, sadly, all too many that profess the Christian faith, the season is also an orgy of debt-fueled spending, gluttony, and drunkenness. It would be a pleasure to think that the current economic circumstances would lead us closer to the true spirit of Christmas but I am not optimistic.

In 1928, the iconic American comedian, Will Rogers, proving that there is nothing new under the sun, described the then (and now) consumer frenzy:

"Too many people spend money they haven't earned, to buy things they don't want, to impress people they don't like."

For those of you who understand the real reason for celebration, have a very Merry Christmas.

To the rest: Bah Humbug!

Health Care Reform

This morning, on a party line vote, the Senate passed a bill purporting to reform the health care system in the USA. That is the good news.

The bad news is that Senator Harry Reid (D-Nevada), who can only be described as very small minded and worse than partisan, has created a truly appalling piece of legislation. While the Senate bill might reduce, but not eliminate, the population of the uninsured, it will do little to increase the quality, or contain the costs, of health care in the USA.

Worse, the process of getting, and keeping, every single Democratic Senator on board has allowed blackmailers to demand the insertion of expensive special interest provisions into the bill. 'Larded with Pork', while a tiresome cliche, is a very modest term for this abysmal piece of work.

The bill now goes to a House - Senate conference committee where it must be reconciled with a significantly different - not quite as bad but still not at all good - bill that was passed by the House of Representatives on November 7th. President Obama, apparently heeding President Clinton's failed efforts (sometimes derisively known as 'Hillarycare') to reform the health care system in 1993, has remained above the fray and allowed the Congress to create a pair of ugly and incoherent monsters. Strong Presidential leadership will be essential if anything good is to emerge from the conference committee.

Unfortunately for our nation, the defining characteristics of Mr. Obama's first year in office have been eloquence and a woeful lack of leadership. On the campaign trail, his speeches were reminiscent of President Reagan's ability to communicate and inspire: unfortunately, the record of Mr. Obama's first year in office proves that his leadership skills are minimal compared to those possessed by that giant.

I would be pleased to be proven wrong but am not optimistic. The American health care system is broken but the bills passed by the House and the Senate offer no real solution. It may well be that the least bad outcome is no bill at all.

The Corruption of Language (4)

The Boeing Company's latest passenger airplane took its first flight last week. In an Orwellian twist, the company has chosen to try an attach a name to this machine by calling it the '787 Dreamliner'.

Executive jets - the last bastion of airborne comfort and service - have names. With very few exceptions, large airliners have not had names since the Boeing 707 went into service in 1958. Those with names - Comet, Trident, Caravelle - were not exactly commercial successes and the companies that sold them no longer make long haul commercial airplanes.

Once upon a time, somewhere between the Ford Tri-Motor and the Boeing 737, even coach class air travel was vaguely elegant. There was attentive service, and a modest level of comfort, together with food that was bearable.

Now, to say that air travel is worse than that experienced by cattle being trucked to the slaughterhouse is only a slight exaggeration. Too many people, crammed into minuscule seats, are forced to suffer inadequate leg room, encroachment from the over sized passenger in the next seat, and disgusting food. Having endured the futile security theater performed by poorly trained idiots, passengers then have to survive the attentions of airline staff members who, clearly, would rather be somewhere else.

In addition to the horrors of air travel from the passenger's perspective, this aircraft is two years late (at least) and several billion dollars over budget. If Boeing really wants a name, then 'Nightmare Cattle Carrier' would be more accurate and go a long way towards complying with any truth in labeling legislation that may apply.

Boeing should forget about the moronic name and just stay with 787 as the model number. Since that follows the company's fifty plus year convention, it will refrain from continuing to look stupid as a result of a lame PR effort that only succeeds in corrupting our language.

Copenhagen Conference on Climate Change (3)

The Copenhagen Conference ended yesterday with a so-called "political" agreement - not a draft treaty. The best description of this agreement is that it is little more than a fig leaf and, as I previously suggested would happen, nothing useful was achieved.

The issue is that the developing nations, including fast growing countries such as China, Brazil, and India, want the industrial nations to do all of the heavy lifting. Admittedly the industrial nations have spent the past two hundred years as the major contributors to the problem but that is not the point. Given that China has now passed the USA for the title of CO2 Emitter #1, and India is not far behind, no solution is possible without major reductions on the part of the developing world.

Worse, since CO2 and other greenhouse gases do not respect national borders, even if the industrial nations can cut their emissions to zero - resulting in intense discomfort followed by grinding poverty - the problem is not solved. Unless all countries co-operate - and act - no solution is possible. Indulging in frenzied "blame throwing" is worse than unhelpful.

One possible approach to the fossil fuel and greenhouse gas problem is a substantial carbon tax levied on all fuels used at home (including imported fuel) and an equivalent border tax on imports of goods and services from countries that do not apply such a tax. Needless to say such an approach will be complicated - and loopholes will abound - but now is the time to start designing and implementing such a program.

If we do nothing, then let us eat, drink, and be merry - for tomorrow we die - which suggests that we just don't care about our grandchildren and their children. That approach can only be described as profoundly immoral.

Enough said.

Inflation Anyone?

Yesterday the Senate Banking Committee agreed, by a 17 - 7 vote, to recommend the confirmation of Ben Bernanke for a second term as Chairman of the Federal Reserve Bank. That such a gross error should be made by so many is regrettable, even if not unexpected, because the risk of future inflation is greatly increased if he is confirmed

Dr. Bernanke was an active conspirator with then Federal Reserve Chairman Alan Greenspan (Bubblespan) in the creation of the housing and debt bubbles of 2001 - 2007. Admittedly, since the beginning of the disaster, he has done much to prevent a total meltdown of the economy but his talents are not exactly unique.

Why, then, should we trust him not lead us into another financial disaster?

Dr. Bernanke is a student of the Great Depression. There is good reason to suspect that he has learned - all too well - the lessons of 1937 when over-enthusiastic monetary and fiscal tightening pushed the economy back to its knees. In 1937, the National Debt was hardly something that worried financiers and politicians. Nor were the risks of throwing money around particularly high as shown by our nation's ability to finance the costs of World War II. Now, our nation's indebtedness has financial and strategic consequences that should provide many sleepless nights for our leaders. In this situation, more is not better!

The risk is that Dr. Bernanke will keep throwing money at our economy without taking into account the fact that 10% unemployment, while undesirable, is far better than the inflation inflicted on Germany under the Weimar Republic or Zimbabwe under Dictator Mugabe. Million percent inflation (it could happen) leads inevitably to Depression-era unemployment rates.

On the other hand, for an overwhelmingly indebted nation, such as the USA, which can borrow in its own currency, inflation is a marvellous way of making debt disappear. In times when Kings and Emperors ruled, they understood this well and frequently debased the currency. Taken too far, however, the destruction of middle class wealth - the poor have no wealth to destroy and the rich can protect themselves - risks tyranny or violent revolution.

Dr. Bernanke was a significant contributor to our current economic problems. While he has partially, but only partially, redeemed himself in the past eighteen months, the risks of re-appointing him are unacceptable.

The full Senate should decline to confirm him saying: "Thank you for your service, Dr. Bernanke. Enjoy your retirement."

Pushing Granny Under a Bus

In 2001, the [George W.] Bush administration, and the Republicans who then controlled the Congress, purported to repeal the Estate Tax. The provisions of the 2001 Tax Bill progressively reduced rates and increased exemptions through 2009. Then the tax was repealed in its entirety beginning in 2010.

In an exercise of spectacular intellectual dishonesty, however, and to "make the numbers come out right" according to the Congressional Budget Office's "scoring process", the tax reappears in 2011 at the 2001 rate - 55% with a $1 million exemption.

Assuming, then, that Granny is even modestly wealthy, the incentives for pushing her under a bus next year are higher than we might care to think about. If there is no convenient bus, then a close encounter with a pillow may well serve.

[Full disclosure: both of my parents are dead and I am not named as a beneficiary in any one's will].

It is not right to tempt the Ungodly but that is what the Congress has done. Wealthy parents and grandparents, particularly those who are ill and frail, may want to keep a wary eye on their descendants.

Copenhagen Conference on Climate Change (2)

On Monday, the developing countries walked out of the Copenhagen Conference for a few hours over a leaked draft of a treaty that would remove their exemption from the Kyoto Treaty's CO2 reductions. This suggests that getting to an agreement will be hard, possibly impossible, but even if an agreement is reached, the chances of it actually resulting in something useful would seem to be vanishingly close to zero.

There are good arguments, not least the fact that the supply of fossil fuels is ultimately finite, for converting the world economy to sustainable sources of energy. On the other hand, there are technological, logistical, and cost issues - not least being how to store electricity at a reasonable price - that make it impossible to do so overnight or even in the near future. That doesn't mean that we should do nothing but increased funding for basic and applied research is urgently needed.

The inevitable conclusion is that it is going to get a quite a bit hotter and rising sea levels will be an uncomfortable consequence. This will last for a few hundred years until the conversion to sustainable energy development is complete.

Developing the expertize and infrastructure to adapt to the likely new circumstances is the critical priority. Chasing pie-in-the-sky technologies such as CCS (carbon capture and storage) which, even if they can be made to work safely and effectively, will be grotesquely expensive, is not a recipe for prosperity.

Expect a bull market for hydraulic and civil engineers from the Netherlands which is, after all, a country that has thrived for centuries even though one third of its land area is below sea level.

End of the Year Punditry

As we come to the end of the year, the commentariat is occupying itself with reviews of the year that is almost past and forecasts for the year to come. It is notable that the reviews of the past year almost never admit (the Economist Newspaper http://www.economist.com/ is a rare exception) to the errors that the pundit made in his or her previous forecast.

Everyone who is tempted to prognosticate - perhaps bloviate is a better word - about the year to come, should keep in mind economist John Kenneth Galbraith's most perceptive remark:

"The only function of economic forecasting is to make astrology look respectable."

This also applies to those who attempt to forecast trends in technology, politics, culture and almost any other subject that can be imagined.

Enough said.

Copenhagen Conference on Climate Change (1)

Today's thought is the concept of 'Cap and Trade' - a mechanism which attempts to limit the production of greenhouse gases.

That is, the total amount of greenhouse gases emitted will be limited by law and companies will be issued entitlements to emit a certain amount. That is the 'Cap'. The 'Trade' allows companies to sell unused, or buy additional, permits.

Think of it as a command and control (i.e. socialism) combined with a legalized black market.

In the long run, neither command and control nor the black market is good for either prosperity or freedom.

The best approach to greenhouse gas reduction is to use the tax code to provide the price signals which the market, an inherently short term process, fails to send when there is a long term problem. Then rebate 100% of the proceeds via the payroll tax. Since the market will then be sending a signal that hiring new employees has become cheaper, it is likely that more people will be hired.

Perhaps this is all too obvious. Certainly it will be opposed by the rent seekers who will benefit from the bureaucracy, the loopholes in the laws, and the unintended consequences caused by the inherent economic flaws of the likely cap and trade process.

If some is good...

Practising alcoholics are firm believers that, if some is good, more must be better. Sometimes, for a change of pace, they will say that, if a thing is worth doing, it's worth overdoing. Only rarely do they realise that this approach to life doesn't really work. A few of them actually stop drinking and get sober.

The average American with decent medical insurance behaves just like an alcoholic and, while some of the care that they get is worthwhile, there is much that is harmful when it is not just a waste of hard earned money.

Try taking a lesson from Nancy Reagan and, the next time that a doctor wants to perform some expensive and painful procedures, just say 'No'. If that is too radical a course of action, then ask this question: "what are the consequences if I say no?"

If everyone acted with appropriate scepticism to the treatments peddled by the medical industry, we might all be a little healthier and a lot richer.

Evasions, Omissions, Lies and Misinformation

The Republican Party once again demonstrates its intellectual bankruptcy with its proposed 10 point manifesto. The only description for this collection of evasions, omissions, lies, and misinformation is that it is yet another gigantic step towards the lunatic right.

The lunacy is that that, unless a candidate agrees with at least eight of the points, the result will be withdrawal of support by the Republican National Committee.

Years in the wilderness anyone?

Here is the manifesto with some comments:

1) We support smaller government, smaller national debt, lower deficits and lower taxes by opposing bills like Obama’s “stimulus” bill;

Smaller government is good but reducing taxes and running up deficits is not the way to go. Starving the beast does not work. What is needed is to reduce spending. The stimulus bill is not the problem so long as it is a one-off item and the Congress sets about restoring fiscal discipline as soon as the recovery is assured.

Uncontrollable spending on entitlements - Social Security. Medicare, Medicaid etc. - will eat the budget, first, and then the economy. The courage to tackle those seems to be entirely lacking.

(2) We support market-based health care reform and oppose Obama-style government run health care;

There are times when markets fail. Markets don't work well without clear price signals and the price signals in the medical sector are particularly obscure.

Another problem is asymmetry of information. Markets also fail when consumer and provider do not have equal knowledge. Every used car salesman, prior to the Internet, understood that and it still works fairly well in that business. Tort reform would help to reduce the cost of malpractice insurance and, more significantly, the cost of defensive medicine.

(3) We support market-based energy reforms by opposing cap and trade legislation;

Admittedly 'Cap and Trade' is command and control with a leavening of market discipline but it may be necessary. What is the Republican alternative?

While it is possible to argue, with a fairly straight face, that global warming is not actually happening, there is no denying that the supply of fossil fuels is ultimately finite even if it is sufficient for a century or more. On the other hand, the capital costs and time involved in switching energy sources are so daunting that we need to start now unless we simply have no sense of responsibility towards our grand children and their children.

A carbon tax in addition to cap and trade would add a stronger price signal. Rebating the proceeds through the payroll tax process would make it cheaper to hire new employees but there is no sign of that.

(4) We support workers’ right to secret ballot by opposing card check;

Finally something sensible and democratic. Intimidation by companies is a real problem but 'Card Check' would only counter it by substituting intimidation by union organizer.

A company that gets itself a union almost certainly deserves it. Most employees don't want to pay union dues but they do have to be treated decently or they will go looking for someone to help them. Legislation to restrain some of the worst company anti-union behavior would be a good (and democratic) idea but "card check" is not it.

(5) We support legal immigration and assimilation into American society by opposing amnesty for illegal immigrants;

Get real. What are you going to do with the 12 million or so illegal immigrants that are already in the country?

Just fix the broken system which, admittedly, will not be easy.

(6) We support victory in Iraq and Afghanistan by supporting military-recommended troop surges:

The wars in Afghanistan and Iraq are political problems with a military component. This is not World War II which was a primarily military problem requiring the defeat of, and unconditional surrender by, the Axis powers.

French Prime Minister Georges Clemenceau said it well: "war is too important to be left to the Generals."

Not only should the Republican party remember this, it should also take heed of the concept of civilian control of the military. We have enough retired Generals in senior policy positions as it is and giving the uniforms carte blanche is hardly a good, or democratic, road to walk down.

(7) We support containment of Iran and North Korea, particularly effective action to eliminate their nuclear weapons threat;

What are you suggesting? Bombing - or invasion?

Fairly draconian sanctions on North Korea haven't worked and there is no real evidence that more intense sanctions would deter Iran. That leaves military action.

If so, what resources do we have available? Since we don't have the resources to start two more wars, then this is only bluffing. We may not like the Iranian or North Korean governments but they are shrewd - not stupid - and our bluff is likely to be called.

(8) We support retention of the Defense of Marriage Act;

That is one way to go but it would be nice to get some clear thinking on marriage.

One part of marriage is a religious sacrament. That, however, brings into play the 1st Amendment ('Congress shall make no law respecting an establishment of religion...') so the government should probably remove itself from the definition of that form of marriage.

The other part involves privileges and benefits that the State grants to what might be regarded as 'Family Company, Inc.' All of these 'Family Company' marriages are State sanctioned but many are not blessed by any religion. The 14th Amendment (that's the one that abolished slavery) requires equal treatment under the law. Why then are all 'family company' type arrangements - regardless of the sex of the primary partners - not treated equally?

In addition to the simple provisions of the 14th Amendment, discrimination on the grounds of gender is specifically prohibited by many laws. Why then is it permitted here?

We did eventually, after a very long gap between the ratification of the Constitution in 1878, and the ratification of the 19th Amendment in 1919, allow women (not clearly an inferior group that would justify such treatment) to vote.

(9) We support protecting the lives of vulnerable persons by opposing health care rationing and denial of health care and government funding of abortion; and

The Soviet Union had ration coupons: so do we. It is just that ours are green, have pictures of George Washington on them, and we are allowed as many as we can earn. There is no reason for rationing if you are spending your own money.

When, however, patients or their families demand that others pay unlimited sums of money for their treatments - many of which are of dubious worth with respect to well being or increased lifespan - there would seem to be some moral issues that need to be addressed.

Note also, that much health care is delivered via an equivalent to the so called public option: Medicare, Medicaid, Veterans Administration Health Benefits, SCHIP (State Children's Health Insurance Program) etc.

Perhaps rationing is the only way. Is it morally reasonable that I demand that others spend hundreds of thousands of dollars to extend my life for a few days?

(10) We support the right to keep and bear arms by opposing government restrictions on gun ownership.

How are you going to keeps guns out of the hands of crazies and ideologically motivated terrorists? Or do you suggest that we go back to the Wild West and make the whole country a free fire zone?

What do you suggest about the perverse inner city culture that makes being 'dissed' or just perceiving that one has been 'dissed' a justification for opening fire? What about all of the felons who are currently locked up but most of whom will eventually be released.

What do the victims of Maj. Nidal Hassan (Ft. Hood), Seung-Hui Cho (Virginia tech), John Allen Muhammad (Washington sniper) and many, many, others think about this idea?

So here is the scorecard as analyzed by a long time Republican who, for many years, was more or less in the middle of the party but is now hanging on by his fingernails:

Sensible 1; Partly sensible 1; Irrelevant 2; Really stupid 6

Our country deserves better. President Barack Obama may be too far left and too much of an intellectual to be a great - or even good - leader. That leaves the Republican party an opportunity which it is in the process of squandering.

The Corruption of Language (3)

One of the more offensive terms that I have heard recently is 'Turkey Day' when referring to Thanksgiving.

Surely there is much more to this holiday than than merely stuffing ourselves with even greater than usual quantities of food. If, on this quintessentially American holiday, we do not take a moment to reflect on our blessings - and regardless of our situation, there are always some - then we are missing the point.

Let's just call the holiday by its proper name and give thanks - even when tiresome Uncle Jim has had too much to drink and, as usual, mortally insults Great Aunt Ethel.

Have a very happy Thanksgiving.

The Corruption of Language (2)

As we get closer to the Copenhagen meeting that is supposed to (but will not) agree on a replacement for the soon to expire Kyoto Protocol, the common term used to describe the problem appears to be 'climate change'.

So what does that mean?

If the problem is global warming, say so. If, on the other hand, the problem is an imminent ice age, then say that.

George Orwell warned us about the deliberate misuse of language by authoritarian governments as a tool to enhance their powers. He also noted our own ability to mislead ourselves:

"[Our language] becomes ugly and inaccurate because our thoughts are foolish, but the slovenliness of our language makes it easier for us to have foolish thoughts."

"... but if thought corrupts language, language can also corrupt thought."

At the risk of being thought pedantic, it is time to insist on precision in language. Without precision, sloppy thinking leads to self deception, foolish policies and, likely sooner rather than later, tyranny.

Would that there were more people like the late John Lennon who, when asked how he wrote such good songs, said:

"Say what you mean, make it rhyme, give it a back beat."

Say what you mean is the critically important issue. If it sounds harsh, or offends the thin of skin, then so be it.

Former Governor Palin

If former Alaska Governor Sarah Palin, who resigned her position with eighteen months remaining in her term, plans a Presidential run in 2012, she (and the Republican Party) should keep in mind something said by renowned [American] football coach Vince Lombardi:

"Winners never quit and quitters never win."

Enough said.

The Corruption of Language

The Concise Oxford Dictionary (New Edition) defines rogue as a 'dishonest or unprincipled person' and Rogues' Gallery as 'a collection of photographs of known criminals'. The same dictionary also states that rogue is also used in a jocular manner referring to a 'mischievous child or waggish or arch person'.

So, the term 'rogue' refers to really unpleasant people or to childish pranksters.

The title of former Alaska Governor Sarah Palin's book is 'Going Rogue'.

Since the word 'rogue' in no way means contrarian, leader, or brave in the face of ruthless opposition, she appears to be, like so many other political hacks, corrupting the language in a way that George Orwell would recognize all too well.

More charitably perhaps, she and her editors are simply too lazy to have bothered to open a dictionary.

Either way, her rapid departure from the political scene would make the world a slightly better place.

Productivity and the Business of Colleges and Universities

Before the modern era, increases in individual (and national) wealth were generally the result of conquest (or colonization which was much the same thing) with its resulting theft and pillage. Only occasionally - usually at millennial intervals or greater - did some form of productivity increase result in a major increase in wealth. Examples include the invention of agriculture, the wheel, and the domestication of animals capable of providing transportation and augmenting or replacing human muscle power in the performance of useful work.

Expectations, however, have changed since the beginning of the industrial age. Now, we believe that our standard of living should increase every year. That means that our incomes must increase faster than the cost of the goods and services that we consume. When it does not, we are disappointed and disgruntled.

War is now so destructive that little or no net gain can be expected. Theft is a career option for only a few - and not often profitable given the actual and opportunity costs of spending time in a prison cell. That leaves productivity improvements as the only way forward to increased national and individual wealth.

Not all sectors of the economy are equal when it comes to improvements in productivity. In general, manufacturing productivity (in terms of reductions in cost and improvements in quality) has improved at a more than respectable rate. Productivity in many service industries has barely changed.

College education is one of those service industries where productivity, measured in output per labor hour of input, is no better than it was fifty years ago. In fact, given the deterioration in the college's raw material - because so many freshmen are ill prepared - as well as the outright waste when students flunk out or drop out and fail to complete their courses of study, together with the time spent, usually by social "scientists" researching (and students learning about) matters of supreme triviality, it can reasonably be argued that educational productivity has actually declined since the end of World War II when, with the GI Bill, the era of mass college education began.

College professors, and all of the other support staff employed by Universities and Colleges, however, expect that their money incomes will increase every year by more than does the cost of the goods and services that they purchase.

The cost of a university education, as with all goods and services, increases at a rate that is expressed by the formula:

Rate of Increase in Education Cost = Rate of General Inflation - Increase in Productivity.

When productivity increases are suffiiently high, prices drop. That is why the laptop computer (four year old Lenovo ThinkPad running Windows XP with MS Office) on which this blog is being written cost about $1,000 in 2005. Its equivalent in 1982 (Osborne 1 running CPM with two 182K floppy disk drives using WordStar and SuperCalc) cost $2,000 which, after adjusting for inflation, is about $4,000 at 2005 prices. Far more capable machines are now being advertised for $500 or so.

So, given negative productivity, it can be no surprise that college costs are increasing at a significantly higher rate than inflation.

Colleges and Universities, then, if they are not to be priced out of business, must recognize that radical changes to their business model are needed. There are currently three streams of college education and only two of them, accounting for a minority of the students who are not undergoing remedial classes, require full time attendance at the place of learning:

• The hard sciences - although not necessarily computer science - require extensive laboratory facilities as well as access to great minds.
• The humanities also require a community of scholars.

Most of the rest of what passes for college level education is either remedial basics (Math, English language and writing), the white collar equivalent of a trade or technical school or a self indulgent wallowing in trivia.

With respect to this third last group, most of the teaching, and a great many of the examinations can be delivered remotely with no loss of quality but with the potential for great improvements in productivity and reductions in cost.

The 'what' and the 'how' are important but ultimately trivial.

The 'why' is critical. The community of scholars involved in history, philosophy, the arts, and the hard sciences (Physics, Chemistry, Geology, Astronomy, Biology and Neuroscience among others) will get us closer (with apologies to the late Douglas Adams - author of The Hitchhiker's Guide to the Galaxy) to an answer to life, the universe, and everything that may be more comprehensive and understandable than 42.

In summary, if the cost of attending Colleges and Universities is not to become so great that the customers (students) can no longer afford to buy buy the service, they will need to separate their business.

The first, and most important, business is discovery. While the benefits of discovery are real, they are often diffuse and sometimes realized far in the future. As a result, that part of the business will have to be funded by endowments, charities, and governments.

The second business is the creation of a population with the skills needed to prosper - or at least survive - in the modern economic and technological environment. Whether that should funded by business, the students, or government (on behalf of society in general) and in what proportion remains an open question. All of those groups gain benefits from an educated population.

Whatever Colleges and Universities chose to do, and nothing is not a viable option, they would be well advised to be aware of this still valid criticism made by Adam Smith over two hundred years ago:

The discipline of colleges and universities is in general contrived, not for the benefit of the students, but for the interest, or more properly speaking, for the ease of masters.

That is definitely a recipe for low productivity!

A Biography of Warren Buffet

Judging by his annual letter to shareholders, Warren Buffet must be one of the most interesting men in business today. Certainly he seem to have much the same business skills and insights, although more honest, and is as much of a character as J.P. Morgan, Jay Gould, Commodore Vanderbilt and other Robber Barons of the 19th century.

[In the interests of full disclosure, I own a modest position in Berkshire Hathaway B Shares.]

Alice Schroeder's biography of Warren Buffet (The Snowball) is overly long, hard work to read, and gives the impression that Mr. Buffet is merely an obsessive compulsive with a consistent investment philosophy - value investing - learned from Benjamin Graham, dubious social skills, and a peculiar personal life.

On the other hand, his realization that he probably did not understand philanthropy, and his decision to turn over the bulk of his fortune to the Bill and Melinda Gates Foundation says sometime very profound about the man. Would that Ms. Schroeder had explored - and explained - the part of his character that led to this magnificent and unselfish decision.

The real failure of the book is that it tells, in excruciating detail, the "what" and sometimes the "how", but rarely discusses the "why" or the philosophy of Mr. Buffet's life and work.

Good writing can tell a story without overuse of words and paper but the modern trend in biographies seems to be that quantity trumps quality. One test of good writing is to tell a story in as few words as possible - although not in fewer. In this case, there is no excuse for eight hundred and thirty eight pages (plus notes and index) of what can easily be described as a repetitive and boring data dump. Had Ms. Schroeder limited herself to three hundred and fifty pages, she might have been forced to write a biography that was both instructive and entertaining or she would have given up and spared enough trees to make a respectable forest.

Perhaps, the best advice ever to writers came from Voltaire:

"The best way to be boring is to leave nothing out"

Enough said.

American Democracy (3)

Eighteen year old citizens have the right to vote in the USA. Since that is so, they are presumed to be adults - even if they are not actually grown up.

On the other hand, no State permits them to drink alcohol and, quite soon, no bank will be able to give them a credit card without a co-signer who must be both over twenty one and a person who will accept full liability. The implication of these laws, then, is that persons between the ages of eighteen and not quite twenty one are irresponsible children.

Many of them are indeed still irresponsible children but, if so, why do irresponsible children have the right to vote - with potentially significant consequences for other peoples' lives - but not to run their own lives even if they run those lives into the ground?

Perhaps the age of majority, and the right to vote, should be twenty one again.

American Democracy (2)

The founders of the United States were extremely suspicion of the passions of the common man and so created a representative republic but not - repeat not - a democracy.

Our government spends a great deal of time attempting to promote democracy in other people's countries while ignoring the fact that the USA, more than two hundred and thirty years after the adoption of the Declaration of Independence, is still not actually a democracy.

When the constitution was ratified in 1788, slaves and women were not entitled to vote. For male citizens, there was also a property qualification. Even then, the right to vote counted for less than we are now accustomed to. Although Congressmen were directly elected, Senators were appointed by Governors or State Legislators. Even in 1796, the first Presidential Election after the retirement of George Washington, the Members of the Electoral College (an abomination that exists to this day) were appointed in nine, and directly elected in only seven, of the sixteen States.

The Electoral College still exists and is arguably less democratic now than in 1796. The real scandal, however, is the disenfranchisement of six hundred thousand citizens who live in the District of Columbia. While the District does have votes, as if it were a State, in the Electoral College, it has only a non-voting Delegate in the House of Representatives and no representation whatsoever in the Senate.

Even though it is not a democracy, the USA claims to be one and should do the right thing by permitting the citizens of the District of Columbia to exercise the rights on which our country was founded. Since it may well take a Constitutional Amendment to right the wrong, the principled course of action would be to start the process now.

This should be a matter of fundamental right - not a matter of political advantage. Unfortunately, our representatives, as usual, can be found wallowing in the slough of self-interest. The Democratic Party supports voting rights for the District because its population consists overwhelmingly of Democrats: the Republican Party opposes those rights for exactly that same reason.

Were American politicians to follow Mark Twain's advice, the world might be a slightly better place:

Always do right; this will gratify some people and astonish the rest.

Regrettably, the chance of this happening is vanishingly close to zero.

Circular Firing Squads

The Democratic Party is known for its skill in assembling circular firing squads.

In the special election to fill the Congressional (NY - 23rd District) seat, left open by the appointment of Rep. John McHugh to serve as Secretary of the Army, conservatives proved that they are every bit the equal of their Democratic Party counterparts when they nominated an extreme right winger to run on the third party Conservative Party ticket.

The official Republican Party candidate - a moderate who, absent a split vote, was almost certain to win - was driven out of the race and the Democratic challenger took the prize without much difficulty. The result is that one of the few Republican seats in the north east - and one that had been in Republican hands for more than a century - has been unnecessarily lost to the Democrats.

Regrettably, the Republican party seems to have taken yet another step towards being an organization of Southern right wingers obsessed with social issues such as gay marriage, abortion and Christian prayers in public settings while simultaneously refusing to raise taxes to pay for the government spending programs that they demand. Those of us who describe ourselves as Liberals of the 19th century variety (otherwise almost identical to Goldwater conservatives who believe in a strong defense, fiscal conservatism and social tolerance) can only shake our heads and wonder where in the current party structure we fit.

Stay tuned for another episode of the right wing circular firing squad in the 2010 Florida Republican Senatorial primary. There, Governor Charlie Crist is facing strong opposition from a very young right winger, with no executive experience, named Marco Rubio who seems to be as obsessed with Fidel Castro and Cuba as anything else. This Twitter post, four days ago, sums up his attitude to a still significant number of Republicans:

"If you live in NY CD 23 vote 4 Hoffman. Send message to those who want GOP to "moderate" that we do not need 2 Democratic Parties."

The attitude of the right wing activists brings to mind the description of the British Labor Party's [extreme left wing] 1983 Election Manifesto (platform) as the 'longest political suicide note in history'. The policies that the Labor Party espoused made a major contribution to Margaret Thatcher's Conservative Party landslide. The Labor Party did not regain national office until 1997.

Is that the experience that Republicans want? Can such ideological inflexibility be good for our country? Is the Republican Party to become the 'Exclusionary Right Wing Party' instead of the 'Broad Tent Center Right Party' that is still needed for electoral success in America?

Profits at Ford Motor Company

Today the Ford Motor Company announced that it had actually made a reasonably decent profit ($997 million) in the third quarter of 2009. Unfortunately for the company that doesn't do much to offset the cumulative looses of over $28 billion in the three and a half years since the beginning of 2006.

Then there is the debt - some $24 billion - that will have to be paid back someday. Since there are only three ways to repay debt - issue more debt, sell shares, or use after tax profits - Ford will need to make significantly higher profits, for many years, before the long suffering shareholders see much, if anything, in the way of dividends.

Over the weekend, coincidentally, the membership of the United Auto Workers union rejected proposed mid-contract concessions that would have brought Ford's wage and benefit costs more in line with those negotiated by the state owned basket cases (Chrysler and General Motors). More importantly, the rejected changes also provided for more flexible work rules - the key to productivity improvements and cost reduction.

So, F0rd still has a problem going forward and management will have a major fight on its hands - at least if the company is to be returned to long term financial health - when the UAW contract is up for renewal in 2011.

Fifty years of skilled bargaining by the UAW, combined with management's pusillanimous weakness, created unaffordably high labor costs allied with abysmally poor productivity. If Ford CEO Alan Mulally is serious about the company's future, he will have to be ready to take a lengthy strike over pay, benefits and, most importantly, work rules.

Here is some advice for Chairman Bill Ford and for Mr. Mullally:

It's not what you pay your workers for working that creates an unaffordable cost structure, it's what you pay them for not working and because you allow them to work really inefficiently.

For those who are thinking about buying Ford stock on the good news: caveat emptor. Be very sure that what appears to be the light at the end of the tunnel is not the headlight of an oncoming locomotive.

The Customers' Yachts

It is said that, one day, a banker was extolling the virtues of his new yacht to the financier J.P. Morgan. Morgan listened patiently for a while and then asked the question that, some one hundred years later and after yet another in an apparently never ending series of financial crashes and debacles, is still applicable:

"But where are the customers' yachts?"

Enough said.

Riding Motorcycles

Today was a beautiful fall day - sunny, gentle breezes and a temperature around 65F. The inevitable result was that there were many motorcycles on the road between Washington DC and Annapolis, Maryland.

Notwithstanding the association with the 'Hell's Angels' gangs, the style of riding practiced by those riding Harley-Davidson bikes is generally sedate. By contrast, the actions of those riding Kawasakis, Suzukis and similar machines can reasonably be described as 'scattering suicide notes along the highway'.

While the number of fatalities resulting from automobile accidents is falling, the death toll as a result of motorcycle accidents is increasing. It is not all that difficult to work out the reason why!

Health Care (2)

The skies are darkened by streams of criss-crossing lobbyists (and campaign contributions from interested parties) as various bills, purporting to reform the American health care system, work their way through the United States Congress.

Unfortunately, while there is some hope of reducing - although not eliminating - the disgracefully large number of uninsured, there is little or nothing being done to reduce the costs of the current system. There is little dispute that these costs are both out of control and projected to consume most of our economy before too many years have passed.

Addressing the issue now is likely to result in much less pain in the long term. Our politicians, however, have shown conclusively that they do not have have the stomach to make hard decisions. Jean Claude Juncker, former Prime Minister of Luxembourg, summarized the situation perfectly:

"We all know what to do. We just don’t know how to be re-elected once we’ve done it."

There are, I believe, three different major problems: none of which are being addressed by any of the proposed bills:

First, patients, encouraged by direct to consumer advertising and their own "research" on the Internet, demand treatments that are often inappropriate, ineffective or both. Overworked doctors, like mothers dealing with whiny and demanding small children and teenagers, get tired of saying "no" - specially as they are not paid for the time it takes to explain their diagnoses and treatment plans. So they schedule the procedure or provide the demanded prescription.

This is a cultural issue and will take time for attitudes to change. It will be hard but the cultural shift with respect to smoking - cool in the 1960s to, generally, an exhibition of stupidity now - provides hope.

Second, most doctors and hospitals, no matter how ethical and honorable, are paid on a fee for service basis. That is, they get paid for "doing things to people".

That is how they keep their offices open, their nurses and assistants paid, and have enough money for a decent living (after paying back the loans taken out to attend medical school) for themselves. In conjunction with the patient demand issue described above, the doctor's incentives are aligned in favor of doing more rather than less.

There is a simple question that all patients should pose to their doctors: "what are the likely consequences if I say no?"

Third, the tort bar is still running amok and the Law of Unintended Consequences is in full flower. Naturally, doctors respond to the threat of being sued by practicing [expensive] defensive medicine since the chance of a lawsuit, from a disgruntled patient bent on vengeance, is much reduced. That is all the more so when a poor outcome follows action rather than no action - even when no action is likely to be the better way.

That last statement almost certainly deserves to be explained further. It's not the multi-multi-million dollar jury awards that are the problem, or even the main driver of costs, so caps on non-economic damages will provide only limited value. The real issue is that when a doctor is sued for malpractice, the insurance company takes over the defense.

All too often the insurance company comes to the decision that it will cost $150,000 to defend the doctor but the case can be settled for $50,000 even though a defense is likely to prevail. So the insurance company settles, the doctor's reputation is modestly besmirched, the attorney takes his one third (or more) of the proceeds without having had to do much work, and the not-really-harmed patient gets a modest, but still undeserved, payment.

That gives lawyers the incentive to file as many suits as possible in a never ending search for easy settlements. Short term savings for the insurance company (quarterly earnings anyone?) result in greatly increased long term costs.

Lawyers will not be discouraged until they start finding out that the sympathy card - as opposed to a finding of true fault - does not work. In the event that the insurance companies were to develop some courage and backbone, a few major victories in court would reduce the number of attormeys willing to file suit where the merits are few - if not entirely lacking - but payments are still highly likly to be made.

The Angles and the Saxons suffered the depredations of Viking raiders between the ninth and eleventh centuries. They paid Danegeld - i.e. blackmail - to try to persuade the Vikings to refrain from looting and pillaging. It didn't work and the Viking problem was only solved when the English kingdoms became willing to fight back. That sounds like a dark ages version of the current medical tort racket.

Plus ca change, plus c'est la meme chose!

American Socialism (5)

The primary characteristic of socialism is that the government controls an ever increasing share of the economy. That applies to both spending and to control of the means of production and distribution.

If we are not yet a socialist nation, we are well on the way.

While socialism is bad enough, our government - admittedly encouraged by an electorate that seems to believe that there is such a thing as a free lunch - is operating in the worst possible way. We have excessive spending matched by low taxes and high borrowing.

Were we to continue the present level of spending, and pay for it through taxation, then there is a chance that citizens might rise up and say "enough". For those, however, who labor under the delusion that the so-called rich can pay, there is not enough money to cover the current deficit - even if the governement were to tax all income over $250,000 at 100%.

Perhaps President Obama, and the Congressional leadership, of both parties, should take note of these two thoughts:

"The problem with socialism is that eventually you run out of other people's money." Margaret Thatcher

"Nobody, no individual or country, can indefinitely spend more than he or she earns." Raul Castro

Those that are conservatives may find Lady Thatcher's thoughts more acceptable, while liberals and so-called progressives can get the same message from Raul Castro. Either way, it is time to return to our roots as a nation of producers and savers rather seekers of entitlements who borrow recklessly to support out of control spending.

Dreaming of the 2010 mid-term elections

Republicans who are dreaming of recapturing the House - and possibly the Senate - in next year's elections should consider this very carefully:

"Just say no" is not a political program. Nor is relying on disillusionment with the current Congress a guarantee of anything.

When Republicans captured the House of Representatives in 1994, after 42 years in the minority, it was because then Representative - later Speaker of the House - Newt Gringrich created a positive political program which he named 'The Contract with America'.

The genius of President Reagan and Speaker Gringrich was that they both had well thought out programs based on sound conservative intellectual foundations. President Reagan also understood that it was possible to compromise on legislation without sacrificing his principles.

Those who claim to be President Reagan's political heirs need to do much better than to pervert Mrs. Reagan's most famous comment. She was speaking to teenagers and college students who were under great peer pressure to indulge in illegal drugs. We, on the other hand, need an alternative to the current government.

The President and his allies in Congress have programs - even if they have many flaws. To win back the Congress, Republicans must develop their own programs or, better yet, tells us which ones they will abolish and how they will balance the budget in the not so distant future.

The alternative is to continue to "just say no" while watching erstwhile supporters walking away from a party that doesn't seem to stand for anything beyond just being in office.

Health Care (1)

After an automobile accident, the insurance company will, with help from the police and sometimes courts, make a decision as to fault.

If you are not at fault, your car may be destroyed but your rates will not increase. If, however, you are at fault, then your rates will rise - often very significantly - or your policy may be cancelled. Rates will also increase if you are the recipient of too many citations for speeding or more serious moving violations.

The reason is simple, logical and fair: if you cause accidents or get caught driving like a maniac, it is highly likely that you will cost the insurance company much more money than does the average driver. So it is only reasonable that your rates should rise.

Health insurance companies, however, care not at all about fault and, under pressure from politicians and interest groups, not much about lifestyle choices. They charge modest additional premiums to smokers but barely consider other lifestyle choices - unsafe sex, lack of exercise, alcohol and drug abuse, excessive consumption of sugar, fats, red meat etc. etc. - that are known to cause massive increases in the risk of contracting diseases that are seriously expensive to treat.

If on the other hand, a person was a passenger, wearing a seat belt, in the innocent car, who suffered extensive injuries - including two amputations - he or she will always have a preexisting condition. As an individual purchaser, if coverage is not declined, that person will be charged outrageous premiums. In contrast with the automobile insurance model, fault is assumed where none exists. Individual underwriting is not unreasonable, but it should take fault into account.

So why do medical insurance companies wonder why they are so disliked?

Reform is urgently needed and it is supported by the electorate. The medical establishment, however, with the insurance companies to the fore, appears to be lining up to oppose it.

Follow the money is a good rule of thumb when evaluating the public statements of any interest group likely to be affected by legislation. Since it is the medical establishment - mostly the insurance and major pharmaceutical companies - that is scattering cash in the general direction of the Congress, there is a serious risk that reform, even if it happens, will be so watered down that it will amount to little.

American Socialism (4)

A government that confines itself to the purchase of public goods and services, such as defense, policing, roads, education, the gathering of statistics and a bit of modest - and very careful - regulation of economic activities, along with support for basic research and exploration, will not consume very much of the national wealth. That is the sort of minimum level of government which, were we thinking about the good of our nation rather than seeking maximum personal advantage from government programs, we should all desire and support.

Unfortunately, regardless of the label attached to the party in power, we have an ever growing socialist government and we have had one since Franklin D. Roosevelt became President more than seventy five years ago.

A major characteristic of a socialist government - second only to the ownership of the means of production and distribution - is the confiscation of wealth from one or more groups that are currently out of favor in order to reward other groups that are temporarily in favor or are able to wield significant political power.

The most egregious current examples are:

• an $8,000 refundable tax credit payable to first time home buyers
• a $1,500 tax credit to those who decide to upgrade the windows in their home
• an additional trade in allowance of $4,500 to persuade owners of semi-ancient low gas mileage vehicles to buy new cars that have better fuel economy.

The potential benefit to a person that falls into all three of these favored groups is $14,000 which is about as much as the gross (before deductions) annual earnings of a full-time employee being paid the minimum wage. Mercifully the so-called "cash for clunkers" program has ended at a cost of only (only?) $3 billion. The other two are scheduled to end before the year is out but interest groups are gearing up to get them extended.

It is possible to make a reasonable argument that there are benefits to society resulting from government run welfare programs such a Social Security, Medicare, Medicaid, and Unemployment Insurance since they are designed to alleviate the effects of poverty and other extreme financial hardships. Even though we might well be better off without them, the economic disruption that would most likely result is a strong argument against abolition. That reforms are needed, and should be undertaken with great urgency, goes without saying.

On the other hand, it is almost impossible to justify - at least while keeping a straight face - large cash subsidies to persons who are financially able to purchase a house, a new car, or to undertake major renovations to their homes. Nor does it make sense that housing costs should be subsidized in the form of tax relief on interest payments because buyers chose to take out a mortgage on the property. (More on that another time)

Some of us who pay our taxes, and do not have our snouts buried in the public trough, are becoming weary of this never ending pocket picking. Unfortunately, we are still too few to influence the crooks and charlatans who occupy the Congress and the State Legislatures.

Frederic Bastiat, a French Economist who lived from1801 to 1850, described our current government almost perfectly: "Government is the great fiction, through which everybody endeavors to live at the expense of everybody else."

Those who receive largesse from the government, and are under the erroneous impression that they are the recipients of "free money", should be very aware of this remark made by Thomas Jefferson: "A government big enough to give you everything you want, is strong enough to take everything you have."

Socialism generates its support from the mistaken belief that there is actually such a thing as a free lunch. It consists of a superficially appealing set of ideas that, however, can never survive in the long term. Unfortunately, its collapse is always very painful even though the subsequent long term benefits are many.

Some one hundred years ago, George Bernard Shaw accurately described the current political dynamic: "A government which robs Peter to pay Paul can always depend on the support of Paul." Given that there are many more 'Pauls' than 'Peters', and given that our form of socialism is not quite as fragile as the version practiced in the Soviet Empire, we are likely to spend at least another decade - or more - before the collapse of the current paradigm.

Although circumstances will be painful, we will then, if we have the courage, have an opportunity to rebuild an America of self reliant, hard working and unselfish people that would be recognizable to those who came so far, in such hard and dangerous circumstances, to found our nation.

Nobel Peace Prize

It is hard to comprehend how the Norwegian Nobel Peace Prize Committee could give this usually, although not always, significant award to President Barack Obama.

Looking through the list of winners from 1901 - 2009 http://nobelprizes.com/nobel/peace/peace.html there are giants and there are those whose achievements were minor. There are none who had achieved so little at the time of their nominations and who deserved the prize less than Obama.

The nomination period closed on February 1, 2009 - at which time President Obama had been in office for a mere twelve days. He had said some good words in his campaign but by then, as could reasonably be expected, had achieved little or nothing. Compared to such worthy recipients as Nelson Mandela, Mother Theresa, John Hume and David Trimble, Lech Walesa, Desmond Tutu, Anwar Sadat and Menachim Begim, or Andrei Sakharov, his accomplishments are not trivial - they are non-existent.

I can only come to the conclusion that the committee members are really not too bright, were desperate for a candidate, or had consumed a week's worth of recreational substances in a single day. Perhaps all three apply!

At least President Obama has not yet started a war even though he has not managed to end or win either of the two wars that he inherited from President Bush (Iraq and Afghanistan). It is not impossible, however, that he may order attacks against Iran nor can a war to defend South Korea against an attack by North Korea be ruled out. There would be much irony - although not exactly enjoyable - were our Nobel Peace Prize winning President to find himself in such a situation.

Awarding the prize to President Obama is arguably as bad a decision as the Committee's failure to award it to Alexander Solzhenitsyn.

Enough said.

American Socialism (3)

One of Karl Marx's more significant prescriptions was the common - i.e. State - ownership of the means of production and distribution.

In the communist world, state ownership of almost every business was the norm. Even in the socialist economies of Western Europe, many companies - sometimes all companies - in major industries were state owned: the seemingly never ending list includes steel, railroads, oil companies, airlines, electricity generation, mining, telephone service and even automobile companies.

The common elements - whether in a socialist or a communist country - were inefficiency, incompetence and vast taxpayer subsidies. The only significant difference between two models was that, in socialist countries, the beneficiaries were the workers who received far higher than justified compensation in exchange for little work.

In communist countries, by contrast, there were no beneficiaries: "they pretend to pay us and we pretend to work", was a frequent comment. Quality, features, reliability and availability were grossly lacking even if the price was acceptable.

In America, we have our own nationalized industries. Amtrak -formally known as the National Passenger Rail Corporation - is arguably the most egregious, but costs only (only?) a few billion dollars a year to provide, except perhaps in the Washington - Boston corridor, wholly inadequate service.

Far more significant is the US Postal Service whose operations, inefficient as they are, are made worse by political meddling. It's business model - a single price to anywhere for each class of mail - makes no sense since its prices are largely unrelated to cost or to the competition's charges. Any suggestions that business improvements might be made - such as reducing mail delivery to five days - are greeted with cries of "but what about our jobs". Worse, the Congress has legislated that the price of a first class stamp may not rise by more than the rate of inflation.

That is the credo of a nationalized industry: price controlled for political reasons and worker-centric. It's major operational objective is to provide well paying jobs, regardless of cost, rather than offering top class products or services that the market will devour at a price that will generate both profits and above average pay and benefits.

When communism collapsed, the group now known as the Oligarchs set about stealing the formerly state owned assets. There was some benefit but not nearly as much as in largely socialist nations of Western Europe which had already set about privatizing their nationalized industries.

In several of those countries, the Postal Service makes an interesting case study. Germany privatized Deutsche Post. The British, on the other hand, kept government ownership, while steadily reducing the scope of the Post Office's legal monopoly, but contracted out small postal facilities to local convenience stores and converted the larger facilities into the government's High Street facility where services to citizens are delivered.

Both of these postal service models seem to work - certainly better than the one that we have. Just don't try to hold your breath until any significant improvements are made here. One of our great national myths, that we are a totally capitalist economy, will surely prevail.

Of course the Postal Service is something of an extreme case. On the other hand, when and how, are the most recently nationalized (wholly or partly) wards of the state to be returned to the private sector?

The Hall of Shame includes:

• Banks (CitiGroup, Bank of America and too many more to list)
• Investment Banks (Morgan Stanley, Goldman Sachs)
• Automobile manufacturers (Chrysler, General Motors)
• Insurance companies (AIG)
• Guarantors of private debt (Fannie Mae, Freddie Mac, Sallie Mae)

Privately owned businesses, although capable of abuses that require regulation, have generally served us well. No nationalized industry can make such a claim.

We are ill served by state ownership of the 'means of production and distribution'. The sooner the government is no longer a business owner, able to dictate policies and prices, the better our economy and our society will be.

American Democracy (1)

2009 is not generally an election year but Governors of Virginia and New Jersey will be elected next month.

There is a joke circulating on the Internet:

Politicians should be limited to two terms: one in office, the second in jail.

Like many of the best jokes, it has a large element of truth but this one tells us nothing really new. Comedian Will Rogers famously said: "[America] has the best Congress money can buy."

Mark Twain, in the 19th century, spoke more directly: "It could probably be shown by facts and figures that there is no distinctly American criminal class except Congress."

Since I live in Virginia, I will have the opportunity to vote for a new Governor next month. Given that the world would likely be a better place were, with a very few exceptions, "forever" politicians to became extinct, the following principles are worth considering:

• Rule 1 - vote against the incumbent
• Rule 2 - if no incumbent, vote against the lawyer
• Rule 3 - if no incumbent, and both candidates are lawyers, vote against the candidate of the party of the retiring office holder
• Rule 4 - if no lawyers are running.... (come to think of it that will never happen, so there is no need for a rule!)

It is a sad commentary on the state of our politics that there are so few politicians worth voting for.

American Socialism (2)

Every country has its own national myths and one of ours is that we are a capitalist democracy (more on democracy another time) with no taint of the evil socialism practised by effete Europeans who spend more time in pubs, bars, and cafes than at work.

As usual this cherished national myth is full of holes. First there are the really pure socialist programs that involve a direct transfer of cash from one group (frequently the rich - but not always) to another temporarily favored group.

Some of the most egregious are:

• Social Security
• Medicare
• Medicaid
• Farm subsidies - including provision of irrigation water and grazing rights on Federal (i.e. OUR) land at prices far below what the free market would pay.
• Rural Electrification Administration (now issuing highly subsidized loans so that people who live in rural areas can have cable TV)
• The Universal Service Fund which levies a very substantial tax on our land line telephone bills so that people who live in rural areas can have highly subsidized telephone service. Perhaps someone should talk to cell phone providers in India or Africa to see how this is done affordably without taxes and subsidies.
• AMTRAK
• Public Transit which in days of old, used to make money but now, thanks to cheap gasoline combined with union driven work rules and pay scales, is a never ending drain on the taxpayer's purse.
• Taxpayer subsidized flood insurance for those stupid enough to build in a flood plain or rich enough to have a house on the beach. Usually this involves a level of risk that no commercial insurance company would take for less than $5,000 but the Federal Government (i.e. us) will take for $400. To add insult to injury, when houses are flooded, taxpayers' funds are frequently given to those who refused to buy into this highly subsidized program.
• The deduction of mortgage interest expense (an interesting reverse Robin Hood maneuver which robs from the poor to give to the rich)

I am sure that, given time, I could come up with many more but there are many other forms of socialism rampant in our society:

• Think of the fortunate few who are recipients of really cheap electricity generated by the Tennessee Valley Authority and the Bonneville Power Authority. The electricity is so cheap because the government provided the capital without charging proper interest or imposing any requirement to show a commercial profit.
• The refusal of our elected representatives - egged on by the airlines - to introduce congestion pricing at our busiest airports.
• The howls of jealous rage when some [amazingly sensible] politician suggests a congestion charge to use really crowded streets (New York's Mayor Bloomberg proposed it but was shouted down even though supposedly super-socialist London did it - where it worked).
• The insulting term ' Lexus Lanes' when another sensible politician suggests variable pricing HOT (High Occupancy Toll) roads. (Let the market decide who wants to get to work fast and whether they are willing to pay the price. Others can take public transit if they do not want to sit in traffic jams.)

The essence of capitalism - i.e. not socialism - is business failure. But now we have banks that are too big to fail (CitiGroup, Bank of America, and on and on) as well as companies that must also be bailed out (General Motors, Chrysler) or given loans when no commercial banker or venture capitalist would look at them.

Then there are

• Rent controls
• Zoning
• Licensing of barbers and beauticians (It doesn't take 600 hours of class work to learn to cut and style hair)
• New York City's iniquitous controls restricting the number of taxi medallions
• The exemption of churches and other houses of worship from property taxes
• Anti-scalping laws that prohibit a person from selling tickets to concerts, sporting, and similar events for more than list price. (Sounds like allocation by 'standing in line' which is definitely socialist)
• Subsidized housing: in addition to the above mentioned tax deductions for mortgage interest, government backed guarantees to banks that mortgages will be repaid (Fannie Mae, Freddie Mac, FHA, USDA) thereby reducing the interest cost far below the proper market price.

And finally, at least for today, the incompetence of government provided K - 12 education. It is possible to make a good argument that the taxpayer should pay for kindergarten, elementary and secondary education. Having the taxpayer write the checks is a form of insurance against the excessive costs generated by having a large family, it spreads the cost burden over time, and it removes some very strong, but undesirable and dysfunctional, market incentives for parents to send their children to work at the earliest possible age rather than sending them to school.

No one, however, can make a good argument - at least not with a straight face - that government, particularly in the form of School Boards which have been captured by Teachers Unions, should be the near monopoly provider.

There are times when markets fail - sometimes times when it is not possible for them to succeed. That is when regulation or socialist solutions are appropriate (more on that another time too) but the market option is usually best and certainly, until proven ineffective or dysfunctional, should be the first choice when we try to determine how we organize our society for maximum freedom.

So, if those who accuse President Obama of trying to turn America into a socialist paradise - or hell hole, take your pick - are willing to be rigorous about surrendering the benefits that they have received from Socialist America, I will be more than willing to listen to their arguments. Until then, I would be grateful if they kept in mind that thought is almost always of greater value than shouting

American Socialism (1)

One of the results of the debate over reform of our dysfunctional health care system (more on that another time) is that there are many people shouting about President Obama's evil plans to turn America into a socialist society.

America already is a socialist society.

For those who would challenge that statement consider the number of government programs that simply involve transfers of cash from one group to another (farm subsidies for one) or services (such as K - 12 education) where government employees have an almost total monopoly.

A large number of the most vocal people are over the age of 65. If their actions were consistent with their expressed views, there should be long lines of older people queuing up to return their Social Security checks and to resign from the Medicare program.

I don't see that happening anytime soon and can only conclude that, as usual, hypocrisy rules.

Back Again

After a little more than eight months of silence, I find that that, regardless of whether anyone is actually reading what I write, there is much that I would like to say. To put what I think - or think that I think - in writing helps me clarify my ideas while weeding out prejudices and other half baked rubbish that floats around in my head.

As I wrote in the last entry here, writing is both hard and time consuming so I am unlikely, therefore, to post more than a couple of times a week. I will make an exception for the occasional quotation that is too good to resist.

Watch this space.

End of the line...

After blogging for almost a year, and having written nearly two hundred short essays, I have come to the conclusion that I am spending too much time to provide too little value to too few readers.

One of the important lessons that I have learned is one that professional writers (I am not one) know: the process is hard and time consuming. There is good reason why thoughtful commentators write only a few columns each week. Researching and understanding topics, as well as choosing the proper words so that the thoughts come out right on paper, takes a lot of time.

There are other things that I should be doing. Some have the potential to make the world a slightly better place: working on behalf of sailors with disabilities, consulting to small businesses, helping to manage the financial affairs of the condominium association where I live are among them.

Although hard work, writing here has been fun. On the other hand, it has been something of a self indulgent waste of time that can be better spent elsewhere. I will, therefore, bid my readers adieu and fade into the background. Those who want my advice and opinions know where to find me.

Economic stimulus package

Americans, like a pack of over-excited Golden Retrievers, are drooling over the prospects of getting their hands on some of the cash to be thrown around in President-elect Obama's economic stimulus package.

We should, however, consider this, written by Alexander Tyler in 1787 - the year that the Thirteen Colonies adopted the new Federal Constitution:

"A Democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largesse out of the public treasury."

Nearly fifty years later, Alexis de Toqueville came to a similar conclusion:

"The American Republic will endure, until politicians realize they can bribe the people with their own money."

The history of every democracy involves the seizure, by the government, of an ever increasing share of income. Worse, every year the proportion of transfer payments - compared to the purchase 0f public goods - increases.

Politicians, notwithstanding the fact that there is no such thing as a free lunch, have come to see the public treasury as a never ending source of wealth that can be distributed to all and sundry (well, to favored groups anyway) without incurring any cost. The politically incorrect term is that they are [more or less legally] buying votes. At the same time, voters have come to expect that they will be handed wealth from the public treasury without considering the fact that the wealth was theirs in the first place.

Except, someone will have to pay the bill - even if it is the next three generations.

We got into this economic mess because citizens and government, deluding themselves into believing that there is such a things as a free lunch, indulged in a frenzy of consumption financed by borrowing. Can it really be the case that more of the same will get us out again? Or would we be better served by accepting the realities and buckling down to work our way out of the hole that we have dug for ourselves? Arguably, deferring the inevitable will only make the pain greater.

Americans are not whiners and do not expect to have things handed to them. At least that was the way it used to be. If that has changed, then the predictions of Professor Tyler and M. de Toqueville are all too likely to come true sooner than we would like.

U.S. Postal Service

There was a time when I used around 150 - 200 first class stamps a year. Now, with online bill paying, and Internet submission of invoices to my clients, I write three or four checks each month and a book of stamps lasts all year, maybe longer.

The price of postage, however, increases almost every year and, inevitably, the result is a collection of unused - but now inadequate - stamps sitting in a desk drawer. That means a trip to the post office to buy a sheet of one or two cent stamps. Needless to say the number bought rarely matches the number of semi-obsolete stamps sitting in the desk drawer.

It is rare for a government organization to do the right and sensible thing but the United States Postal Service has got it right. USPS has issued a 'Forever' stamp that is good for first class mail from the time of purchase until the end of time.

This is a simple, although not necessarily obvious, idea that has benefits for everyone. Customers can avoid an unneeded trip to the post office, the Postal Service no longer needs to print so many low denomination stamps, and the incidence of mail returned for insufficient postage is reduced.

Everyone wins which, when dealing with government, is unusual. Let us hope that more civil servants will have the courage to abandon procedure and conventional wisdom in favor of service to citizens.

St. Augustine redux?

Yesterday, President-elect Obama visited Capitol Hill to pitch ideas for his proposed economic stimulus bill which will involve tax credits and much, much, spending.

Since, when it comes to spending, Congress's behavior resembles nothing so much as that of an out of control heroin addict, most of this is likely to become a never ending burden on the taxpayer. Many programs are created but few are ever ended.

While Senator Kent Conrad (D-ND), Chairman of the Senate Budget Committee, did say that a commitment to reducing future deficits is critical, urgency is hard to find. Perhaps all Senators and Representatives should be forced to carry signs displaying a slightly modified version of St. Augustine's most notorious prayer:

" God, [at least when it comes to government spending,] give me chastity and continence, but not yet."

Enough said.

Budget Deficits

The Federal Government will run a very substantial fiscal deficit this year. Absent a complete market meltdown, the deficit can be financed even though the price may be high. That deals with the short term but, in the long term, spending will have to be cut unless taxes rise to unproductive and unsustainable levels.

States, cities, counties and other municipalities are also facing ugly mismatches between spending and revenue. Most of them are prohibited from deficit spending although there are some exceptions - mainly for capital projects and draws from so-called rainy day funds. Since there is a practical limit to the amount that taxes can be raised, spending must be cut.

Almost without exception, however, political cowardice reigns when spending cuts are on the agenda. Instead of making hard decisions about effectiveness and value, Governors and Mayors decree across the board spending cuts. Good programs are cut by as much as those that are useless and irrelevant.

We elect politicians to manage the affairs of government and to spend our money both effectively and in moderation. We also elect them to make hard choices: we must demand that they do so. Nor should we accept Ponzi schemes that involve out of control spending with the bill passed to the next generation.

Brave politicians will receive their due from thoughtful citizens. Even if their political careers end, they will know that they did the right thing. Better yet they will set an example set for national politicians to follow.

Theft

Theodore Roosevelt clearly understood human nature and the impact that education, wealth and power can have when he said:

A man who has never gone to school may steal from a freight car; but if he has a university education, he may steal the whole railroad.

Bernie Madoff is only the latest in the financial world to have stolen - or at least tried to steal - the whole railroad. There will be more and, since the regulators will be a step behind, we should always keep in mind the old cliche: if it seems to be too good to be true, it probably is.

Unenforceable Laws

As we contemplate the opening of the 111th Congress next week, let us hope that some of its members will remember, or at least have their staffs draw their attention to, these wise words uttered by Albert Einstein:

"Nothing is more destructive of respect for the government and the law of the land than passing laws which cannot be enforced."

Since opinion polls, and the desire for re-election at almost any cost, now drive political behavior, the consequence is an almost obsessive need for politicians to be seen to be doing something. The result, all too often, is a panderfest of unenforceable law.

War in Afghanistan

As the American involvement in Iraq begins to wind down, many more troops will be heading to Afghanistan.

Unfortunately, few policy makers seem to be considering that, even though the Afghans start each war badly, they have a two hundred year record of four wins and no losses. The losers during this time period are:

• Britain: 1st Afghan War 1838 - 1842


• Britain: 2nd Afghan War 1878 - 1921


• Britain: 3rd Afghan War 1919 - 1921


• Soviet Union: Afghan War 1979 - 1989

Now the Great Game is on again: America 2001 - present.

In 656 AD, a few years after the death of the Prophet Mohammad, Arab armies invaded Afghanistan in the name of Islam. It took over two hundred years until Afghanistan was fully conquered, in approximately 870 AD, and the population converted to Sunni Islam. From that time on there have been many invaders - Genghis Khan, the Moghuls and the Persians to name a few - but none have managed to disturb the Islamic and tribal nature of the country for long.

Afghanistan is occupied - sort of - by NATO and American armies who are attempting something that has never been achieved in the history of the country. That is the creation of a strong central government which will be able to control the country and, most important to the West but not perhaps to Afghans, deny sanctuary to Islamic terrorists.

There is little likelihood of any victory in Afghanistan in the near or medium term since the West's objectives (the rule of law and the dissolution of terrorist bases and sanctuaries in the bad lands of the Afghan - Pakistani border) are no closer now than in 2001 when America invaded and overthrew the then Taliban dominated government. The idea that Afghanistan can be governed by a strong central government has simply not been accepted by the tribes who value autonomy over country and those who know that the forces of Islam are again at war against the Crusaders.

Be prepared for the loss of many more of our lives and much treasure, for little gain, in one of the world's great hell holes.

Cheap and nasty

In the 1950s and 1960s 'Made in Japan' was a synonym for cheap, nasty and low quality goods. Now it is the standard of quality and value. Today, cheap and nasty is identified by 'Made in China'. That would be more or less bearable except for the fact that all too many of these poor quality products are also dangerous.

The response of most Americans, encouraged by the media, is to blame our government for not inspecting everything and protecting us from harm. The reality is that we need to stop whining and begin looking out for ourselves. Relying on government, which is generally expensive, inefficient, and incompetent, simply doesn't work very well. Self reliance is an American characteristic of which we need to see more.

This quote, from Maya Angelou's latest book - Letter to My Daughter - provides valuable advice:

"Never whine. Whining lets a brute know that a victim is in the neighborhood."

So, whining and complaining are out: action is in. I simply intend to do my absolute best to avoid anything that says 'Made in China'. I will change my mind when Chinese manufacturers achieve the quality and reliability standards of their counterparts in Japan and Korea.