Downside of Living in an Echo Chamber

I am wondering if this performance represents a failure of Obama's staff to perform even the most rudimentary ideological Turing test.  I am sure it has not been discussed on Lefty blogs, but it would take only the briefest perusal of center or Right news sources to guess that this would be the first and most obvious challenging question Obama would get on his Immigration decision.  Is the President's staff simply not used to getting anything but softball questions?  Or are they just incompetent?

Government Supply-Side Health Care Restrictions that Raise Costs

One of the least reported issues related to health care cost inflation is the existence of artificial government restrictions on health care supply, often called "certificates of need".

The COPN [certificate of public need] law is supply-side Obamacare: top-down, command-and-control restrictions on which providers can offer which services. A certificate of public need is, essentially, a government permission slip. Without one, a Virginia doctor can’t put an MRI machine in his clinic. A hospital can’t build a new wing. A hospital company can’t add a satellite campus. And so on.

Getting such permission slips is a long and costly process. The owner of a Northern Virginia radiology practice, for example, spent five years and $175,000 asking permission to buy a new MRI machine. The state said no.

One reason the process takes so long is that competitors often fight such requests. When Bon Secours proposed the St. Francis Medical Center in Chesterfield, rival chain HCA fought it vigorously, arguing there was insufficient demand. The hospital was approved and enjoys a robust business. You’d think state regulators would laugh off competitors’ arguments, but sometimes they’re actually taken seriously. When a Richmond radiology practice wanted to move—not add, but move—a radiation device to its Hanover offices, the state said no in part because Virginia Commonwealth University’s Massey Cancer Center worried the project “could take some of their business.”

This is cronyism and protection of incumbent competitors, pure and simple.  It is often justified by the economically-ignorant as reducing costs because it reduces expenditures on expensive machinery.  But in what industry can you think of does restricting supply ever reduce costs?

In any other industry, the proper response to that would be: So what? If Kroger sets up across the street from Food Lion, we consider that good for consumers: They have more choice. And if they migrate from Food Lion to Kroger, that’s not a bad thing. It means they’re getting more utility for their grocery dollar.

Studies of the COPN system around the country have confirmed what seems intuitively obvious. A joint examination by the Justice Department and the Federal Trade Commission found that COPN regulations hurt competition, fail to contain costs, and “can actually lead to price increases.” Restricting supply raises prices? Imagine that.

Why I Am Against the Death Penalty

Governments can't be trusted to administer life and death.  Simple as that.  Check out these guys.  They had much of their life taken from them -- but not all.

On Income Inequality

Most folks who lament income inequality have the following model in their head:  Wealth comes at a fixed rate from a fountain in the desert, and the rich are the piggy ones who hog all the output of the fountain and won't let anyone else in close to drink.  The more anyone takes from the fountain, the less that is available for everyone else.  And this was probably a pretty good model for considering pre-capitalist societies.  The actual robber barons, before the term was abused to describe successful industrialists of the 19th century, were petty nobles (ie the government of the time) who did absolutely nothing useful except prey on those around them and on those who passed by conducting rudimentary commerce, taking from them by force.  That is not how most people become wealthy today, with the exception of a few beneficiaries of cronyism (e.g. Terry McAuliffe).

These issues are dealt with quite clearly from a surprising source -- this review by an economist of the movie "Elysium".   I don't really get the schtick at the end with the Adam Smith cameo, but the rest is quite good

Postscript:  A while back I was reading the Devil's Candy (terrific book) and thinking about movie-making.  Perhaps it is not surprising that wealthy movie stars think in zero-sum terms.  I suppose much of their success can be thought of as zero-sum.  If I get the part, someone else does not.  If I get an extra point of the gross, that is less for everyone else.  If this movie does well, that probably means less revenue for another movie that came out the same weekend.   Particularly for actors trying to make it or on the rise, movies have a fixed sum of value and they are trying to grab a larger share of that value.

It is interesting that in their own sphere of influence, I never hear about such folks seeking any sort of income redistribution.  Perhaps I have missed it, but I never hear Matt Damon say "hey, take one of my gross points and split it up among all the craft folks on the movie, or share it out with the 20 guys who didn't land my part."

Don't Worry, I am OK

More Thoughts on Immigration -- Why I Think the Tiberius Gracchus Analogy is Particularly Apt

First, congrats to many millions of people who can remain in this country, a status they should have always have had.  We can argue whether anyone who makes his or her way over the border should be able to vote or draw benefits, but there is no doubt in my mind that they should be able to live anywhere they can pay the rent and work anywhere that there is an employer willing to pay them.

I am willing to accept the analysis of folks like Ilya Somin who say that the President's non-enforcement decision on immigration laws is legal.  But I think his concept of "precedent" when he says there are precedents for this sort of thing is way too narrow.  This is an important, dangerous new precedent.

What I think folks are missing who make this argument about precedent is that while many examples exist of the Executive Branch excercising proprietorial discretion, the circumstances are without precedent in both scale and well as in its explicit defiance of legislative intent.  One can argue that Reagan's executive actions vis a vis immigration provide a precedent, for example, but Reagan was essentially following the intent of then-recent Congressional legislation, arguably just fixing flaws with executive orders in the way that legislation was written.  What he did was what Congress wanted.

The reason I think Tiberius Gracchus is a good analog is that Gracchus too took actions that were technically legal.  Tribunes always technically had the legal power to bypass the Senate, but in hundreds of years had never done so.  Despite their technical legality, his actions were seen at the time as extremely aggressive and plowing new Constitutional ground, ground that would soon become a fertile field for authoritarians to enhance their power.

Somin includes the following, which I think is an example of where defenders of the President's process (as different from the outcomes) are missing reality.  He writes:

I would add that the part of the president’s new policy offering work permits to some of those whose deportation is deferred in no way changes the analysis above. The work permits are merely a formalization of the the president’s exercise of prosecutorial discretion here, which indicates that the administration will not attempt to deport these people merely for being present in the United States and attempting to find jobs here. They do not purport to legalize their status, and the policy of nondeportation can be reversed at any time by the president or his successor.

This is one of those statements that are technically true, but totally obtuse at the same time.   Issuing formal get-out-of-jail-free cards to 5 million people is unprecedented.  Think of it this way:  Imagine a Republican President who is opposed to the minimum wage.  The Executive branch is tasked with enforcing that law, so wold the folks defending the President's methods also argue hat the government can issue permits to 5 million businesses allowing them to  ignore labor law?  Or emissions standards?  Or insider trading laws?

People are just being blinded by what they rightly see as a positive goal (helping millions of people) if they fail to see that the President issuing licenses to not be prosecuted for certain crimes is a huge new precedent.  Proprietorial discretion is supposed to be used to avoid patent unfairness in certain cases (e.g. the situation in Colorado with conflicting state and Federal laws on marijuana).  It is not meant to be a veto power for the President over any law on the books.  But I can tell you one thing -- it is going to be seen by future Presidents as just this.  Presidents and parties change, and for those of you swearing this is a totally legal, normal, fully-precedented action, be aware that the next time 5 million wavers are issued, it may well be for a law you DO want enforced.  Then what?

Update:  Libertarians are making the case that the Constitution never gave Congress the power to restrict immigration.  I could not agree more.  However, I fear that will have zero impact on the precedent that will be inferred from all this.  Because what matters is how the political community as a whole interprets a precedent, and I think that this will be interpreted as "the president may issue mass waivers from any law he does not like."  Now, since I dislike a hell of a lot of the laws on the books, perhaps over time I will like this precedent.  But the way things work is that expansive new executive powers seldom work in favor of liberty in the long run, so I am skeptical.

Droid Turbo Review

I am extremely happy with my Droid Turbo phone on Verizon.  A few notes for those thinking about buying a phone:

Why Android over iPhone

  • I have been an iPhone guy through 2 generations of phones, and still love my iPad.  But I am exhausted with iCloud and Apple proprietary calendar and mail.  I don't use those tools, I use Gmail and other Google tools, and I got exhausted constantly farting with setup issues.  Things I had to use IFTTT to do on the iPhone happen automatically on Android.  And don't even get me started on duplicate photos in the iPhone/iCloud world.  Drives me crazy.
  • If on your desktop you live in the Apple world, buy an iPhone.  If you, like me, use Gmail, Google Calendar, Google drive and other such tools, it makes a heck of a lot of sense to switch to Android.  Google drive is woven into the operating system at many points.  And even better than on the desktop, Android is great at working with and recognizing multiple google accounts without signing in and out.  For example, in the photo viewer, you can view all your photos together from all your accounts.
  • The one downside is I don't use Google hangouts and Google+, and those are woven in as well.  I had to replace the text messaging app with something else (I use Chomp) but that is the great thing about Android - things that are fixed in iOS are customizable in Android (it is also the bad part of Android if you don't want to mess with that -- I would never put my wife on Android, for example).
  • As a downside, all the variation in phones and customizations mean that you are not guaranteed to get Android updates when they come out.  It depends on your carrier and phone manufacturer.
  • The ability to load up all my music for free (even FLAC files which they automatically convert online to high quality MP3) and stream it to my phone is way better than Apple's capability.
  • I think that most of the feature and OS leadership in the last 18 months has really be grabbed by Android.  Except for the fingerprint capability on the iPhone, everything in the iPhone 6 and iOS 8 was just catch up with Android.

The Good about the Turbo

  • Honking big battery.  Yes, it makes it a bit heavier and bulkier, but it is way lighter and less bulky than, say, and iPhone with a mophie battery case.  I never even come close to running out, even when I use it travelling as a GPS in the car for several hours.  You don't realize how much your interaction with your phone is influenced by battery life until you don't have to worry about it.  I can even leave the screen on bright all day
  • Wireless charging.  Awesome.  The mini-USB connector sucks vs. the iPhone connector because it is not reversible so it is much harder to insert.  All that goes away with wireless charging.  Love it.
  • Fast charging.  You can use the fast charger to blast a ton of life back into the phone in just 15 minutes.
  • Near stock Android.  I like this over the glossy custom overlays Samsung and Sony and every other company apply.  I did replace the front end with the Google Now front end, which is nearly identical but it has Google now cards on the leftmost screen, which I have come to enjoy.  Fun travelling in particular when it pops up photo sites or destinations near me.  Its news suggestions are tied into my browser history and are pretty spot on.
  • Near stock Android also pays another benefit - you will get Android updates much faster.  All Motorola phones (given Google's ownership) are early on the list of phones that will get Android Lollipop upgrades.

Things that are fine

  • The camera is fine.  Focuses relatively fast, takes decent pictures, but not as good as you might expect from the specs.  But competitive with other phones.
  • The screen is supposed to be a selling point, with its above HD resolution, but almost never can I tell a difference.  At some point, the eye just cannot see more pixel density.  It has some tradeoffs in that the higher pixel density can lead fonts on some websites to be almost unreadable (no one has really programmed for this high of a pixel density yet).  Also, the higher pixel count requires more power, which reduces some of the advantage of the larger battery
  • The screen is AMOLED, like the Samsung Galaxy phones.  It is a love it or hate it thing.  The colors on AMOLED tend to be oversaturated.   Ironically, I can live with that.  I am SUPREMELY fussy about the colors on my TV's and in particular on my movie projection system, but I don't care so much on the phone.  Certainly it makes the desktop bright and attractive

Things that are a negative for many reviewers but don't bother me

  • "Its ugly".  That is the #1 review comment.  Shrug.   I think it is fine.  Sure, the Moto X with the bamboo back is awesome looking.   But I am deeply into functionality here.  The curved back feels nice in the hand.
  • There is only a single speaker.  I have come to understand that millennials are fine listening to music on crappy tinny speakers.  I would never listen to music on laptop speakers, and especially not on a cell phone speaker.  I only use the cell phone speaker for occasional speakerphone calls.  And it is fine for that.

Things that do bother me

  • I wish it had a memory card slot.   I have 64MB which is likely enough, particularly since I have all my music loaded up online with Google play music and I can just stream it most of the time.  But I would feel better with an expansion slot
  • I wish it was water resistant like the Galaxy S5.  Wireless charging makes this even more doable since you can plug up the USB port.
  • I wish it had iPhone's awesome fingerprint scanner
  • Why do they have to design $800 electronic devices that break when dropped to be so slippery?  The edges are finished in some kind of rubbery stuff that is very grippy.  I wish they had done the back in the same stuff.  That fake nylon webbing stuff on mine is slick, though not wet-bar-of-soap slick like, say, the HTC One M8.

Environmentalists Break the Establishment Clause

Skeptics like myself often see parallels between environmentalism (as practiced by many people) and religion.  Now, they are going one step further to actually establish a state church:

Maryland Gov. Martin O’Malley made national news last year when he fought to pass and signed a tax bill that levied a tax on Marylanders, businesses and churches for the amount of “impervious surface” they have on their property.

Though the O’Malley administration calls it a “fee,” it is commonly called the “rain tax” throughout the state. It is wildly unpopular and the promise to fight to repeal the tax was a large factor in Maryland electing Republican Larry Hogan governor this month.

Now Prince George’s County is offering a way for churches to avoid paying the tax, which is estimated to be an average of $744 per year for them — preach “green” to their parishioners.

So far 30 pastors have agreed to begin “‘green’ ministries to maintain the improvements at their churches, and to preach environmentally focused sermons to educate their congregations” to avoid being hit with the tax, The Washington Post reports.

Thinking of the Gracchi Brothers Today

It is with mixed emotions that I greet this day.  Frequent readers will know that I long for a system of much more open immigration.  I don't think that the US Government should be limiting who can and cannot seek work or live within the US borders (setting rules for citizenship and receipt of benefits are different matters).  So I would like to see many long-time immigrants legalized today (and in fact I likely have friends and acquaintances who will benefit, though it's always been a bit awkward to ask them about immigration status).

However, I would MUCH rather see a rational process implemented than these once a decade amnesties we seem to go in for instead.

I also worry that Obama is taking these actions for all the wrong reasons, seeking to add 5 million Democratic voters rather than trying to help 5 million people who are seeking prosperity.  The reason I suspect this is that he is also seeking higher minimum wages that will likely make it harder for these folks to find work, likely something he has promised to his union allies so they won't freak out.  I have always said that Republicans want immigrants to work but not vote and Democrats want immigrants to vote but not work.

But I am much more worried about the un-Constitutional process that is going to be followed.  Of course, this is not the only Executive power grab over the last two presidencies, but it is a big one and one of the first where the President has admitted he doesn't have the power but is going to do it anyway.

Around 133BC, Tiberius Gracchus was ticked off that the Roman Republic would not consider necessary land reform.  I am going to oversimplify here, but in their conquests the Romans had grabbed a lot of new territory and by law that land was supposed to be parceled in small sections to lots of individual land holders.  Instead, powerful men (many of whom were in the Senate) grabbed the lion's share of this land for themselves in huge estates.   Gracchus rightly saw this as unfair and a violation of law, but it was also a threat to the security of the nation, as independent landowners who bought their own weapons were the backbone of the Roman army.  The shift of agriculture to huge estates staffed with slaves was not only forcing a shift in the makeup of the army (one which would by the way contribute to the rise of despotic generals like Sulla and Caeser), but also was creating social problems by throwing mobs of unlanded poor on the cities, particularly Rome.

Anyway, the short version is that Tiberius Gracchus had good reason to think these reforms were important.  But traditionally they would have to be considered by the Senate first, and he was too impatient to wait that process out, and besides (probably rightly) feared the Senate would find a way to kill them.   He was so passionate about them that he violated the (unwritten) Roman Constitution by ignoring the Senate and setting new precedents for using his position as Tribune to pass the new laws.  It was absolutely the prototype for a well-intentioned bypassing of the Constitution.  I won't go into detail, but Tiberius was killed at the behest of some Senators, but his brother picked up his mantle 10 years later and did some similar things.  Which is why we talk of the Gracchi brothers.

In the near term, the results were some partial successes with land reform.  However, in the long-term, their actions really got the ball rolling on what is called the Roman Revolution.  A hundred years later, the Republic would be gone, replaced with a dictatorship.  Step by step, the precedents often set initially with only the best intentions, were snatched up and used by demagogues to cement their own power.  In later years, what gave emperors their authority was a package of powers granted to them.  One of the most important was "tribunition" power.  In essence, the tribunition power included many of the powers first exercised aggresively by the Gracchi brothers.  More than just starting the ball rolling on the Revolution, they pioneered the use of powers that were to be the core of future emperors' authority.

I Just Want to Barf

I have become pretty immune to letting BS government pleas for more power get to me, but this almost made me barf.

The No. 2 official at the Justice Department delivered a blunt message last month to Apple Inc. executives: New encryption technology that renders locked iPhones impervious to law enforcement would lead to tragedy. A child would die, he said, because police wouldn’t be able to scour a suspect’s phone, according to people who attended the meeting.

Children will die, do you hear?  CHILDREN WILL DIE!!!!

It is far more likely, based on recent history, that police will want to access your phone out of a prurient desire to see your naughty pictures than it will be to save some dying child ala in Dirty Harry.  Jeez you can make the same argument that if police could just randomly charge into any house they wanted for any reason, at some point they would probably save someone.

Thoughts on the Japanese Economy

I would characterize long-term Japanese economic policy this way:

  • Technocratically planned economy where the government chose winners and losers and directed capital to industries favored for development (e.g. MITI with steel, autos, electronics).
  • Strong government favoritism for exports and exporters over the domestic economy -- export industries are heavily protected at the cost of raising costs for internal consumers and limiting competition in domestic markets.
  • Enormous, near Herculean commitment to deficit spending as stimulus.  With deficits consistently running in the 8% of GP range and total government debt a stratospheric levels, Japan is the poster child for Krugman's anti-austerity

To these three I would add something that is seldom mentioned, that Japan has a near Scandinavian GINI index, with income inequality well under that of the US.  Oh yes, and they were an enthusiastic adopter of CO2 limits.

And the result of all this has been... 25 years of stagnation.

I remember when every one of these three planks was enthusiastically lauded by the US elite.  I was at Harvard Business School in the late 1980's and much of the discussion was about the US needing to adopt MITI-like government industrial planning and management.  If pressed at the time, people might kind of sort of acknowledge that life wasn't so good for Japanese consumers, but we were in a Michael Porter big picture competitiveness-of-nations phase, and no one seemed to care that their definition of national success did not turn out so well for the people actually living there.

To me, Japan is a giant case study in Austrian economics.  It's like they set out to run a quarter-century test: "let's see if mispricing of credit and forced misallocation of capital is really the cause of recessions."  So it is amazing that no one seems to want to acknowledge the results of this experiment.  Paul Krugman appears weekly in the New York Times to frequently advocate for exactly this same economic plan.

Well, My Company Is Officially Required to Buy a Product That Does Not Exist For Us

As of next year, my company is required to offer health care plans to our full-time employees or else pay a penalty.    Unfortunately, after an extensive market search, no one will sell me such a policy -- not even the government health care exchange for small businesses.

Let's take a step back.  Business owners have had the rules pounded into us over the last few years, but many of you may not be familiar with the details.  The detail rules are here, as "simplified" as much as possible by the NFIB, but don't read them unless you have to or your head will explode.  The simple way to think of it is that there are two penalties out there:

  • The "A" penalty is for companies that do not offer any sort of health plan, no matter how crappy, to their full-time employees.  The A penalty in this case is $2,000 per full-time employee, with the first 30** free (so with 60 FT employees and no health plan, the penalty is (60-30) x $2,000 = $60,000 a year.
  • The "B" penalty is for companies that avoid the "A" penalty.  If a health plan is offered, but is not affordable (ie the employee monthly share of premiums is higher than a government-set floor) then the company gets penalized $3,000 for every full-time employee who both goes into an exchange and gets a plan with a government-subsidized premium.   There is a cap on the "B" penalty that it can be no higher than if the "A" penalty was applied to the whole company.

We have always pretty much assumed we were going to get the B penalty.  For minimum wage workers, the floor contribution is something like $9o a month, so the company share over a year for a typical employee of ours would be way over $3000.  Also, since over half of our full-time employees are on Medicare and another portion of them are on some sort of retirement plan from a corporation, we don't expect that many to go into the exchange anyway.  So we plan to just pay the penalty.

But we had expected to avoid the A penalty by offering some sort of policy to our employees.  When experts present this stuff, they act like only the dumbest of the dumb companies would ever be saddled with the A penalty.  After all, the company does not even have to pay anything for the policy, they just have to offer something.

But it turns out that all the things that protect us from the B penalty make us almost un-insurable.  First and foremost, insurers have a minimum participation rate they demand.  They are not going to go through all the overhead costs of setting you up on their plan if no one is going to sign up.  In the Government Small Business Health Care Exchange (SHOP), that minimum participation rate is around 70%.  No WAY we can meet that, since over half or our employees are on Medicare and would thus not sign up for anything.  The fact that the average age of our workforce is in the 60's, maybe even the 70's, just makes things worse.  Obamacare gives insurers only limited ability to price for higher risk, so they lose money on older people.  That means they are going to avoid like the plague signing up any group like ours that is all older people.

So, as a result, I am required by law, under harsh financial penalties, to purchase a product that is not available to me.  Had President Obama required that I buy 2 pounds of rocks from Mars, the result would not have been any more unfair.

By the way, I have for a couple of years now been discussing my efforts to convert all our full-time employees to part-time.  I have gotten a lot of grief for that in the comments.  But do you see why now?  The Administration is levying a penalty on me that I cannot avoid.  That penalty is calculated as a multiple of the number of full-time workers I employ.  The only way I can reduce the penalty is to reduce the number of full-time employees.

It is a sorry state of affairs to have to see my greatest business achievement of the last year was to get my number of full-time employees in a workforce of over 350 people down to just 42.  This year, we will work to get it under 30.  If we can do that, we will avoid all penalties entirely without having to mess with the health insurance marketplace.

 

** As a transition measure, the first 80 are free in 2015, which means my company will avoid penalties in 2015 no matter what but not in 2016 unless we can get our full-time employee count down further.

 

Postscript:  One of the oddball and confusing parts of the law is that the word "full-time" has multiple meanings.  This year, companies with more than 100 full time equivalents (FTE) are subject to the mandate.    Because of this, at cocktail parties, I have people walk up to me all the time saying the law does/doesn't apply to me based on a factoid they heard about minimum workforce sizes.  I have 350 total employees of whom 42 are full time.  Some say that puts me over 100 (the 350) and some say that puts me under the 100 (the 42).  It turns out that neither are relevant in determining if I am under or over 100, it is a third calculation that matters.  We do have more than 100 FTE, but we have less than 80 full-time employees that triggers the penalties in 2015.  Go figure.

I Wonder...

I wonder if American tattoos with Asian characters look like this to the Asians.

An Example of Broken Discourse

Apparently there is a daily pill called Truvada that can help reduce (but apparently not prevent) the transmission of HIV through unprotected sex.   Many public health agencies are promoting its use.

Apparently there is also at least one skeptic, a man named Michael Weinstein, who fears the pill may not be as effective as advertised, but more importantly is concerned that the pill's existence will reduce the use of condoms among at-risk men.

As I read the article (and I know zero about it on my own)  the ranking in terms of effectiveness is:  condoms+Truvada > condoms > Truvada > nothing.

The amazing thing to me is how broken the dialog about these issues appears to be.  Truvada supporters claim that there is a consensus on Truvada and that Weinstein is alone in his criticism, and that he is as bad as a "climate-change denialist" (eek!)

Weinstein claims that many others believe as he does but have been silenced by intimidation by the Truvada supporters.  Further, he argues that public officials who support Truvada are all paid off by the drug makers in one way or another.

Jeez, this all sounds so familiar to this veteran of the climate wars that it is just amazing.  And the real tragedy of this broken discourse is that both sides have a totally valid argument.  I have no doubt that Truvada provides incremental protection (even Weinstein's clinic proscribes it).  On the other hand, it is fairly "settled science" in the safety world that an easier-to-use protection method can actually reduce total safety by undercutting a parallel protection mechanism -- the drop in seat belt use after air bags were added to cars is a classic example.    Weinstein argues that Truvada use will reduce use of condoms, and thus undermine safety.  Truvada supporters argue that condom use is so low already, even after 30 years of education efforts, that the drug is better.  Essentially, Weinstein sees the baseline as men who use condoms and worry about them getting worse.  The other side sees the baseline as men who don't use condoms and argues the drug makes things better.

It is a shame to see two groups of people who likely are motivated by good intentions devolve into name-calling and ad hominem attacks.   Just read the quotes in the article - no one in the debate seems to acknowledge that the other side includes people of good will who simply disagree.

Orwellian Government Language Update

In all the states we operate in, sales tax registrations are open-ended.  This means that once you register for a sales tax license, you keep it without having to do any sort of renewal.  However, there are penalties for not reporting every month on an active license, so there are pretty strong incentives to report a closed license as soon as one is not using it.  In effect, your monthly report is your renewal.

For some reason, Arizona has decided that it needs to put businesses through an annual renewal process for sales** tax licenses.  I have no idea why.  Even California does not make folks jump through this hoop.  Anyway, I chuckled at the name they assigned to this change: "TPT Simplification Program."  Because everyone knows that adding an extra paperwork step each year is a simplification.  I guess it simplifies the process of keeping their employment numbers up at the Department of Revenue.

 

** AZ actually call its sales tax a "transaction privilege tax."  Since I do not consider voluntary business transactions between two individuals to be a "privilege" that can only be granted by the state, I refuse to use the term.

An Unexpected Roadblock to Some of Our HR Automation

We are trying to use some of the available tools out there to better automate our application and onboarding process for employees.  Though we are not a huge employer (about 350 part-time people) we hire and fire them all every year, so there is a lot of burden for our size on the HR system.

We are running into a frustrating issue.  Most of our employees are older and often have limited computer skills, but we are getting past that.  But we tend to hire couples, and it turns out in the over-50 set that couples often share the same email address.  I can't even imagine having the same email address as my wife and having to filter through all of her business, but there it is.  Unfortunately, in the world of web accounts, must vendors use the email address as the one reliable unique identifier for a person and thus use it for the user name or expect it to be unique.

This is throwing us for a loop.  It is less of a problem in the application system because most of our couples just want to submit a single joint application anyway.  But for onboarding, they  each need their own W-4, I-9, etc.  So they need separate user accounts.

The question then comes down to this for us:  I can require them to get a second email address, but that is likely going to flummox some folks and require my manual intervention to help them.  Do I thus cause more tech support issues for myself than I save from the automation itself?

No point here, just venting on a problem I have not figured out how to fix.  And no fair saying stuff like "gmail is free and easy to sign up for, just make them get another gmail account."  I have managers who do a fabulous job for me that it took me days to teach how to log into and use Gmail.  A better and fairer comment would be "you have 20,000 applicants, make the application process require separate emails and even make it a little technically challenging so you limit your hiring pool to people who are better suited to using modern computer tools."  And yes, that may in fact be our solution.

Government Accounting: The Report That Says Green Loan Program is Profitable is A Total Joke

The government claims to be making huge profits on its greentech loan program, despite losses at companies like Solyndra.

The U.S. government expects to earn $5 billion to $6 billion from the renewable-energy loan program that funded flops including Solyndra LLC, supporting President Barack Obama’s decision to back low-carbon technologies.

The Department of Energy has disbursed about half of $32.4 billion allocated to spur innovation, and the expected return will be detailed in a report due to be released as soon as tomorrow, according to an official who helped put together the data.

The results contradict the widely held view that the U.S. has wasted taxpayer money funding failures including Solyndra, which closed its doors in 2011 after receiving $528 million in government backing. That adds to Obama’s credibility as he seeks to make climate change a bigger priority after announcing a historic emissions deal with China.

Even Kevin Drum calls partial BS on this:

And yet....I'd still remain a bit cautious about the overall success of the program. Out of its $32 billion in approved loans, half represent loan guarantees to nuclear power plant developers and Ford Motor. These are not exactly risky, innovative startups. They're huge companies that could very easily have raised money without government help, and which represented virtually zero danger of default. If DOE is including returns from those loans in its forecast, color me unimpressed.

The genuinely risky half of the loan program is called Section 1705, and it includes everything that most of us think of as real renewable energy projects (wind, solar, biofuel, etc.). DOE hasn't broken that out separately.

I call further BS.  It turns out this program is actually losing money, not making money.

  1. This "study" is a classic case of assuming your conclusion. The reason the risky parts of the portfolio would lose money is if they don't pay off over the next 20 years or so they have to run. But all the study says is "The $5 billion to $6 billion figure was calculated based on the average rates and expected returns of funds dispersed so far, paid back over 20 to 25 years." In other words, if the loans turn out not to be risky, they won't be risky. LOL.
  2. I bet they are not accounting for things like Ivanpah, there the holders of the government loan are looking to pay off the government loan with .. a government subsidy. So if you squint, the loan to Ivanpah looks profitable, but no rational person would come to that conclusion about the program as a whole.
  3. Ivanpah is just a subset of a larger problem. Companies like Tesla get government subsidies (and their customers get subsidies as well) from dozens of sources. Is it really a win for taxpayers if they pay back their government loan with government money?
  4. They count the 37 basis points above treasury rates that they charge as "profit". This is crazy. I run a fairly large business. No business is getting Tbills +37 BP loans. Heck, since Tbills are at about 0%, this means they are loaning money to private concerns at less than 1%. This is a crazy large subsidy.  I could make money in over a 2-5 year period in just about anything if I could borrow at effectively 0%.
  5. Worst of all, they are not using present value.  Let's say their average spread from the Bloomberg article is 100 BP over treasuries.  That means that ignoring loan losses on a $32 billion portfolio they are making a spread of $320 million a year.  Over 20-25 years that is $6-7 billion.  Less some large loan losses that is $5-6 billion.  But notice I never discounted.  This is just adding up nominal interest spreads over 25 years.  This is insane.  Absolutely no private investor on the planet would think like this.  If you discounted the interest spread payments at any reasonable risk-adjusted rate**, then the net present value may already be less than losses in Solyndra and others and thus already in the hole, even without considering future losses.  This report is an embarrassing political exercise, not a serious economic analysis.

All of this leaves out the inherent cronyism of the whole exercise.

 

** I would argue that in many of these loans, and despite interest rates charged in the 0-2% range, the government was taking an equity risk.  Worse than equity risks -- these are essentially venture capital investments risks with T-bill returns (note the one private comment on the returns in the Bloomberg article is from a venture capital investor in greentech).   The taxpayers are bearing all the risk but getting none of the returns.  Any discount rate for these risks under 15-20% is far too low.

Regulatory Compliance

Illustrating Pollution Stories with Steam Plumes

Readers will know of my pet peeve on this issue.  It turns out this has come up as a viewer complaint at the BBC several times and they actually have a policy on it, though like many media organizations they don't consistently follow their own guide.

You can see many examples simply by searching google images for "air pollution".  The people riding bikes with masks are in actual pollution.  The rest of the photos on the first page are mainly steam plumes.  Note how the photographers like to catch the steam at dusk or backlit so they look dark and sortof smokey.

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I Understand the Concern, But....

I think folks are rightly concerned that "disparate impact" logic run amok is leading to a lot of questionable practices, like this one in Minnesota:

The good: Minneapolis Public Schools want to decrease total suspensions for non-violent infractions of school rules.

The bad: The district has pledged to do this by implementing a special review system for cases where a black or Latino student is disciplined. Only minority students will enjoy this special privilege.

That seems purposefully unconstitutional—and is likely illegal, according to certain legal minds.

The new policy is the result of negotiations between MPS and the Department of Education's Office for Civil Rights. Minority students are disciplined at much higher rates than white students, and for two years the federal government has investigated whether that statistic was the result of institutional racism.

I understand the concern here, and I don't think it is unreasonable to demand that a public institution make this review process applicable to all suspensions, not just to those of black and Hispanic kids.

But good God, if I found out, say, that Hispanics were getting laid off at ten times the rate as Anglo workers in my company, I would definitely do something different in the process.  I would not immediately assume it was due to discrimination but I would sure as hell insert myself into the process to make sure things were fair.  I could easily see myself at least temporarily demanding in such a case that all terminations of people of color be reviewed with me first.  Hell, I wouldn't have waited for two years to do it either.   Even if the terminations turned out to be righteous, I would  hopefully learn something along the way about why the disparity exists and what I could do about it in the future.

By the way, in today's legal environment, any private employer who says they don't put extra scrutiny on terminations of folks in protected classes, or don't increase the warnings and documentation required internally before firing someone in a protected class, is probably a liar.

Painting Your Intellectual Opponents as Psychologically Defective

Perhaps some of you have seen studies knocking about from time to time that attempt to correlate one or another political position with various psychological or mental deficiencies.  Probably the most common is "________ (fill in the blank, I have seen this study for both Conservatives and Liberals) have lower IQ or are less educated or more gullible or whatever than their intellectual opponents.  Most folks in the mainstream, fortunately, treat this as the unserious biased ad hominem attack that it is -- it should hardly be a surprise that the folks who look the best in all these studies miraculously match the political views of those doing the study.

However, for those of you who don't follow the climate debate, you may not know that there is a cottage industry among the alarmist / warmist community that cranks out studies that say that skeptics are mentally defective in some way.  I kid you not.  I won't get into it, because those not in the climate debate won't care much and those in the debate have seen this stuff debated to death.  But I thought those of you out of the loop might like to see an example.

A guy named Stephan Lewandowsky has released a series of really egregiously-structured studies around the general theme of climate skeptics being susceptible to conspiracy theories, or conspiracy "ideation" as he puts it.  He has "proved" this in the past by offering a mix of people on the Left and Right a list of conspiracy theories mainly held by people on the Right (e.g. Obama birth certificate) while leaving out almost any of the common conspiracy theories held by the Left.  Then he asks these people which theories they believe, and Surprise!  People on the Right, who overlap a lot with skeptics, believe Rightish conspiracy theories more than do people on the Left. So thus climate skeptics are what they are because they are people who are more susceptible than average to conspiracy ideation.  Yes, this study is as stupid as it sounds -- actually it is more stupid because he did it via Internet poll advertised mainly on alarmist blogs with no controls for people submitting false flag answers.  And like most climate studies, he got some basic statistical calculations wrong.

Anyway, his new study is out and it is just as awesome in its dedication to fail as his prior work

One known element of conspiratorial thinking is its ‘self-sealing’ quality (Keeley 1999, Bale 2007, Sunstein and Vermeule 2009), whereby evidence against a conspiratorial belief is re-interpreted as evidencefor that belief. In the case of ‘climategate’, this self-sealing nature ofconspiratorial belief became evident after the scientists in question wereexonerated by nine investigations in two countries (including various parliamentary and government committees in the U.S. and U.K.; see table1), when those exonerations were re-branded as a ‘whitewash.’ This ‘whitewash’ response can be illustrated by U.S. Representative Sensenbrennerʼs published response to the EPAʼs endangerment finding.

This so grossly oversimplifies the issues involved as to be breathtaking.  Only the most tightly sealed of echo chambers could possible pass this work on to publication.

For Other Aging Prog Rock Fans

This new album by Steve Rothery is fabulous.  Big thanks to reader and music journalist Stephen Humphries.  I generally purchase about 80% of his monthly playlist.

Regulatory Deception

Kevin Drum quotes Politico about a coming series of Administration environmental diktats:

...The administration was committed to its upcoming deadlines many months ago, in some cases under court order, after postponing a number of the actions until after the 2012 or 2014 elections. Now that Obama is almost out of time, they’re coming all at once.

The whole "under court order" and "our of time" thing is an scam.  The Administration colludes with environmental groups to sue them demanding some regulation the Administration wants but knows it can't get through the regular legislative or regulator process.  The Administration immediately rolls over in the suit and settles, agreeing to implement the regulation it wanted in the first place.  Then it can claim the settlement of the court suit "requires" them to proceed with these regulations.  I can't tell if I should be embarrassed for the reporter writing this that they are so ignorant of how these suits work or angry that the reporting is essentially colluding in this deceptive practice.

I often wonder if Democrats really believe they will hold the White House forever.  I suppose they must, because they seem utterly unconcerned, even gleeful in fact, about new authoritarian Presidential powers they would freak out over if a Republican exercised.

Coyote's first rule of government authority:  Never support any government power you would not want your ideological enemy wielding.

Net Neutrality is Not Neutrality, It is Actually the Opposite. It's Corporate Welfare for Netflix and Google

Net Neutrality is one of those Orwellian words that mean exactly the opposite of what they sound like.  There is a battle that goes on in the marketplace in virtually every communication medium between content creators and content deliverers.  We can certainly see this in cable TV, as media companies and the cable companies that deliver their product occasionally have battles that break out in public.   But one could argue similar things go on even in, say, shipping, where magazine publishers push for special postal rates and Amazon negotiates special bulk UPS rates.

In fact, this fight for rents across a vertical supply chain exists in virtually every industry.  Consumers will pay so much for a finished product.  Any vertical supply chain is constantly battling over how much each step in the chain gets of the final consumer price.

What "net neutrality" actually means is that certain people, including apparently the President, want to tip the balance in this negotiation towards the content creators (no surprise given Hollywood's support for Democrats).  Netflix, for example, takes a huge amount of bandwidth that costs ISP's a lot of money to provide.  But Netflix doesn't want the ISP's to be be able to charge for this extra bandwidth Netflix uses - Netflix wants to get all the benefit of taking up the lion's share of ISP bandwidth investments without having to pay for it.  Net Neutrality is corporate welfare for content creators.

Check this out: Two companies (Netflix and Google) use half the total downstream US bandwidth.  They use orders and orders of magnitude more bandwidth than any other content creators, but don't want to pay for it (source)

sandvine-2h-2013

Why should you care?  Well, the tilting of this balance has real implications for innovation.  It creates incentives for content creators to devise new bandwidth-heavy services.  On the other hand, it pretty much wipes out any incentive for ISP's (cable companies, phone companies, etc) to invest in bandwidth infrastructure (cell phone companies, to my understand, are typically exempted from net neutrality proposals).  Why bother investing in more bandwidth infrastrcture if the government is so obviously intent on tilting the rewards of such investments towards content creators?  Expect to see continued lamentations from folks (ironically mostly on the Left, who support net neutrality) that the US trails in providing high-speed Internet infrastructure.

Don't believe me?  Well, AT&T and Verizon have halted their fiber rollout.  Google has not, but Google is really increasingly on the content creation side.  And that is one strategy for dealing with this problem of the government tilting the power balance in a vertical supply chain:  vertical integration.

Postscript:  There are folks out there who always feel better as a consumer if their services are heavily regulated by the Government.  Well, the Internet is currently largely unregulated, but the cable TV industry is heavily regulated.  Which one are you more satisfied with?

Update:  OK, after a lot of comments and emails, I am willing to admit I am conflating multiple issues, some of which fit the strict definition of net neutrality (e.g.  ISP A can't block Planned Parenthood sites because its CEO is anti-abortion) with other potential ISP-content provider conflicts.  I am working on some updates as I study more, but I will say in response that

  1. President Obama is essentially doing the same thing, trying to ram through a regulatory power grab (shifting ISPs to Title II oversight) that actually has vanishly little to do with the strict definition of net neutrality.   Net neutrality supporters should be forewarned that the number of content and privacy restrictions that will pour forth from regulators will dwarf the essentially non-existent cases of net neutrality violation we have seen so far in the unregulated market.
  2. I am still pretty sure the net effect of these regulations, whether they really affect net neutrality or not, will be to disarm ISP's in favor of content providers in the typical supply chain vertical wars that occur in a free market.  At the end of the day, an ISP's last resort in negotiating with a content provider is to shut them out for a time, just as the content provider can do the same in reverse to the ISP's customers.  Banning an ISP from doing so is like banning a union from striking. And for those who keep telling me that this sort of behavior is different and won't be illegal under net neutrality, then please explain to me how in practice one defines a ban based on a supply chain rent-division arguments and a ban based on nefarious non neutrality.

Poverty and the Minimum Wage

Mark Perry had this chart on the demographics of income distribution.  From it, I want to draw a couple of conclusions about minimum wage and poverty

Click to Enlarge

Note the household income per earner for the lowest quintile.  It equates to something over $14 an hour, well above minimum wage almost everywhere in the US and nearly as high as the $15 national minimum wage proposed as an anti-poverty program.

The problem with most poor households is not wage rate, it is getting full time work.  The household income per earner is nearly as high as the average income of the second quintile.  The problem is that most poor households do not have full-time earners.   The key stat is that only 16% worked full-time and only 30% had any sort of job at all.

This is what always amazes me about the minimum wage discussions.  An increased minimum wage doesn't address the root problem of poverty at all, and in fact will tend to make it worse by pricing the 85% of the poor who need a job or need more hours out of the job market.  If they can't find a job at $8, it is the purest insanity to think they will have a better chance with their limited skills of finding a job at $15.**

 

**Postscript:  I suppose there is one set of facts that would lead to a minimum wage increasing employment in this lowest quintile:  If people who don't work in this quintile are not seeking work because they are happy to live on government benefits and other sources of charity.  This would imply that the reason they are not working full-time is not because no work is available but because they choose indolence.  If this were the case, then a rising minimum wage would provide enough incentive, I suppose, for some to get off the couch and go to work.  I am reluctant to buy into this explanation, but I am SURE that those on the Left who promote the idea of rising minimum wages increasing employment would not accept these assumptions.