Archive for March 2009

Haiti on the Potomac

The Liberty Papers thinks we have become a lawless Banana Republic.  George Will is thinking along the same lines, snarkily observing that Sweden, China, and Mexico have all observed in one way or another that the Feds seem to be acting outside the rule of law.

I have opined in the past that what really extended the Great Depression was not any real underlying economic issue, or even vast increases in government spending per se.  It was that arbitrariness with which the Roosevelt administration dealt with economic matters.  With nutty programs like the Mussolini-inspired National Industrial Recovery Act coming and going, investors and businesses never knew from day to day what the rules of the game would be next year, or even next week.

I fear that this is exactly the climate Obama and Congress are creating today.

  • When Congress reacts to CNN headlines by retroactively confiscating legal compensation that it had protected just weeks before, what will happen to my compensation?
  • When government deficits soar by trillions of dollars, what will taxes look like next year?
  • When the Administration says that Co2 will have to be reduced by 80%, what numbers do I plug into my forecasts for fuel and electricity?
  • When the government decides on a whim to print a trillion dollars more money to pay off government debt, what will inflation look like in the coming months and years?

As of two months ago, my company was still investing.  We were still getting bank credit, particularly for equipment financing, though it took more work than in the past to secure it.  We still saw opportunity in our business, and in fact saw increased opportunity in the recession for low-cost recreation options and outsourcing of public recreation facilities.

But today, I am reluctant to make any new investments.  Investing $5000 now for $8,000 a year from now normally sounds good, but what happens now that the Feds have more than doubled the money supply?  How much will $8,000 really be worth a year from now?  What will my taxes be on the increase?**  What new costs or liabilities  might be retroactively placed on me for making the investment?  What happens if beltway pundits start thinking I am making too much money?

All this commotion of government intervention started when Paulson and other Bush appointees started screaming that the banking system was going to shut down and therefore crash the whole economy.  As my readers know, I believe to this day that this was all sky-is-falling over-reaction and panic-mongering, and most of the credit crunch resulted from uncertainty about the Treasury and its statements, not due to realities on the ground.   However, whatever tightening of credit we might or might not have avoided by government action, it pales in its effect on investment in comparison to the arbitrariness and trillion-dollar-plan-of-the-day that has been the first 60 days of the Obama administration.

** footnote: For those of you who have not lived through high inflation times, taxes and inflation are a deadly combination.  That is because the Federal Government, after creating inflation, then taxes each of us on its effects.  Here is an example:  Invest $5000 now at a fixed 10% a year.  Suddenly, inflation goes up to 8% a year.  In five years, I now have a bit over $8000.  In economic terms I have made a small profit of, since $8000 in five years at 8% inflation is worth $5,445 today.

But the IRS thinks I have made $3000, not just $445, and will tax me on the full $3000.  If they take a third, I only have $7000 at the end, or $4,764 in current dollars, meaning that after taxes, I actually lost money.

Fugitive Slave Law

I often discuss government actions in terms of one's theory of government.   Here is a good example:  What does one's theory of government have to be to justify this:

The American Jobs Creation act of 2004, passed by the Republican-controlled government, amended section 877 of the Internal Revenue Code. Under the new law, any individual who has a net worth of $2 million or an average income-tax liability of $127,000 who renounces his or her citizenship and leaves the country is automatically assumed to have done so for tax avoidance reasons and is subject to some rather unbelievable tax laws.

Any individual who is declared to have expatriated for tax reasons is forced to pay US income taxes on all US based income for 10 years following expatriation, regardless of the country in which the individual resides. Additionally, in the 10 years following expatriation, if a qualifying individual spends 30 days in the United States during any year, he or she is taxed as a US citizen on all income derived from any place in the world. To make matters worse, if an individual happens to die in a year in which he or she spent at least 30 days in the United States, the entire estate is subject to US income tax law.

The only relationship I can think of that justifies this is master to slave.   When slaves run away, the master feels that he has suffered a financial loss that deserves recompense.  I guess it is somewhat comforting to see Republicans consistent on this issue -- they typically  are strong supporters of having to get government permission to enter this country, so I guess it is no suprise they want to assert government rights on individuals when they exit as well.

Maybe Mark Sanford Was On To Something

As has been the case for decades (the gun-to-the-head federal strategy to force 55 mph speed limits and seat belt laws come to mind), the feds are sending money to the states with many strings attached.  Apparently, Arizona is running afoul of one of those provisions:

Arizona's receipt of $1.6 billion in stimulus funding, including more than $300 million already being spent to help keep the state in the black, is at risk because a federal agency says the state is not in compliance with a prohibition against health-care rollbacks.

Arizona could lose the money if the federal determination stands or if state law isn't changed to eliminate a health-care requalification provision that was the basis of the determination, state officials said Monday.

According to Brewer's letter, the agency determined that the Arizona Health Care Cost Containment System's requirement that some enrollees requalify every six months instead of annually violated a stimulus-program prohibition against tightened eligibility standards, methodologies or procedures for a state's Medicaid program.

There is something supremely irritating about Federal bailouts to states that are tied to restrictions that make it more difficult for states to close their budget shortfalls on their own.  It's almost as if Congress wants to institutionalize dependency on the Feds  (where have we seen that before?)

Apparently, in the spirit of the retroactive tax-taking of the AIG deferred compensation payments, the restrictions are retroactive to state actions taken as early as July 1, 2008, meaning that Obama is asking states to roll back legislation that was passed months before he was even elected as a condition of getting the cash.

The actions causing problems for Arizona occurred in September, 2008, and were, according to our governor, the result of legislation passed in June of 2008.

You Knew This Was Coming, Didn't You?

Via the NY Times:

As David Myers scans the rocky slopes of this desert canyon, looking vainly past clumps of brittlebush for bighorn sheep, he imagines an enemy advancing across the crags.

That specter is of an army of mirrors, generators and transmission towers transforming Mojave Desert vistas like this one. While Whitewater Canyon is privately owned and protected, others that Mr. Myers, as head of the Wildlands Conservancy, has fought to preserve are not.

To his chagrin, some of Mr. Myers's fellow environmentalists are helping power companies pinpoint the best sites for solar-power technology. The goal of his former allies is to combat climate change by harnessing the desert's solar-rich terrain, reducing the region's reliance on carbon-emitting fuels.

Mr. Myers is indignant. "How can you say you're going to blade off hundreds of thousands of acres of earth to preserve the Earth?" he said.

Terry Frewin, a local Sierra Club representative, said he had tough questions for state regulators. "Deserts don't need to be sacrificed so that people in L.A. can keep heating their swimming pools," Mr. Frewin said.

Now We're Stylin'

I ordered me some custom Nike's for my 25th Princeton reunion, to go with this fine jacket.  It ain't cheap, but Nike allows for some pretty heavy modding of certain shoes at this customization site.

reunion1

reunion2

Mark Your Calendars -- I Was Wrong Again

A while back on my other blog, Climate Skeptic, I wrote vis a vis my policy not to moderate the comments except for outright spam (which is also my same policy on this blog):

It might have been that 10 years ago or even 5 that visitors would be surprised and shocked by the actions of certain trolls on the site.  But I would expect that anyone, by now, who spends time in blog comment sections knows the drill "” that blog comments can be a free-for-all and some folks just haven't learned how to maturely operate in an anonymous environment....

In fact, I find that the only danger in my wide open policy is the media.  For you see, the only exception to my statement above, the only group on the whole planet that seems not to have gotten the message that comment threads don't necessarily reflect the opinions of the domain operator, is the mainstream media.  I don't know if this is incompetence or willful, but they still write stories predicated on some blog comment being reflective of the blog's host.

Well, I was wrong.  It appears that even in 2009, people who should know better about how blogs work are trying to tar blog proprietors with their commenters actions.  I would put Klein in the "should know better" category, though as a MSM guy as well he may fall into my one exception.  Which would mean I wasn't wrong after all.  It's like that old joke:  I was wrong once ... I once thought I had made a mistake, but it turned out I didn't.

Newspapers and Government

I don't have time right now to editorialize in depth, but I found many of the links in this Reason piece on newspaper bailout proposals to be really creepy.  Nothing could be worse for the First Amendment than making news organizations dependent on government largess.   This bit from the Nation is not only totally misguided, but it demonstrates an utter lack of understanding of history, to the point of demonstrating contempt for hist0rical accuracy:

Only government can implement policies and subsidies to provide an institutional framework for quality journalism. [...]

Fortunately, the rude calculus that says government intervention equals government control is inaccurate and does not reflect our past or present, or what enlightened policies and subsidies could entail.

Our founders never thought that freedom of the press would belong only to those who could afford a press. They would have been horrified at the notion that journalism should be regarded as the private preserve of the Rupert Murdochs and John Malones. The founders would not have entertained, let alone accepted, the current equation that seems to say that if rich people determine there is no good money to be made in the news, then society cannot have news.

I find the arguments that such intervention is needed because publishing is too expensive and effectively excludes all but the largest players to be hilarious in the Internet age.  The real problem of newspapers is in fact that it has become so cheap to publish, and competition is rampant.  The problem papers are struggling with is not monopoly, but just the opposite -- that their historic monopoly is gone.   (Take yours truly, for example.  With a $10 a month hosting fee and some of my free time, I have a circulation of almost 5,000 per day).

This appears to me to be yet another veiled attempt by current incumbents to use the government to give them a boost against competition.  Murdoch's empire is utterly assailable -- all you have to do is a better job.   The only thing that makes a business position unassailable is government protection or political advantage aimed at selected players.

Which reminds me of an interesting story.  Ben Franklin  (you know, one of those founders that the Nation refers to as horrified by domination of journalism by moneyed interests) is pretty famous for being among the country's first postmasters.  Before the Revolution, he was postmaster of Philadelphia and later one of the lead postmasters for all the colonies.  We all read in school how he did all kinds of innovative things, because Franklin was a freaking smart guy**.

What you may not know is why he sought out the postmaster job.  Ben Franklin was a printer, and a large source of income for him was running a periodical in Philadelphia  (the names changed over time but among them were the Philadelphia Gazette).  At the time, there were no wire services  (and no wires!)  News came via mail.  Franklin actively sought the postmaster job as a way to get special, privileged access to the mail, which he monitized via his publications.   He had fresher news, and he used the mails to deliver his own publication to customers for free  (a right competitors were not granted)  In a strategy that he did not invent (it was fairly common at the time, and in fact he took the Philadelphia job from his main journalistic competitor who had pursued the same strategy) the surest route to success in the newspaper business was to secure an advantaged position via the government, specifically in a postmaster role.

I am perfectly happy not to go back to this model.

** Postscript:  Franklin seldom gets credit in popular literature for the real areas he contributed to science.  Everyone knows the kite in the thunderstorm story, but I always thought this kind of made him look like a goof, rather than a real scientist.  But Franklin did some real theoretical science, for example by describing what was really going on in a Leyden jar, and substantially advancing how scientists thought about electrical charge and capacitance.

Follow the Money

aigbailout

via Paul Kedrosky (click to enlarge)

I guess the disputed $175 million in deferred compensation payments should be on here as well, though the line would be too infinitesimally thin to draw.   The CDS stuff gets the attention, but the securities guarantees are the largest flow.  Are these guarantees of traded securities, like bonds and equities?  If so, it sure is a happy notion for all of us taxpayers with portfolios that are well under water that we are going to send some of our money to help bail out the losses in the Goldman Sachs portfolio.

The Picks Are In

We had 144 brackets entered (thanks everyone!) and this is the distribution of picks.   Interestingly, the most popular first round upset pick (excluding 9-8 games) was #10 Maryland over #7 California, with 61% calling the upset.  And the majority were right, as Maryland won today over Cal.   Overall the picks show an incredible lack of respect for the Pac-10 and the Big-12, with teams like Cal, Washington, Missouri, Oklahoma, and Kansas getting a lot of votes to fall in early to mid round upsets.  North Carolina garnered the most picks to win it all, followed by Louisville and Pitt.

So You Want to be An Entrepreneur?

We have taken over a demolished campground near Guntersville, AL  (Honeycomb, if anyone is familiar with the area) and are currently in the process of rebuilding it and opening it to the public.  We have not previously done business in Alabama, so here is what we have had to do so far to be legal:

1.  Identified and retained an attorney in the state to act as our registered agent (required for in-state process service)

2.  Registered as a "foreign corporation"  (foreign meaning we are from another state) with the Secretary of State

3.  Registered with the state for a Corporate income tax number

4.  Registered with the state for a business privilege tax number  (Nothing sets me off faster than when I get the pious "doing business in our state is a privilege" spiel from a state.  What an awful theory of government and individual rights that statement represents!)  The privilege tax (which is in some sates, like AZ, a euphemism for sales tax)  seems to be a second income tax in AL, calculated on a slightly different basis. (Update: apparently the first year's taxes must be paid in advance, at the time one starts business in the state).

5.  Registered with the state (yes, with another ID number) to collect sales taxes

6.  Registered with the state to collect lodging taxes  (By the way, spent a couple of hours with the code trying to figure out what these taxes apply to and what they don't, as this varies by state.  Also, the tax rate tables are a complicated mess, and can vary for two locations located a few yards from each other).

7. Registered with the County (yes, with another ID number) to collect county sales tax.  Actually, they outsource this collection to a private company called "Revenue Discovery Systems" which is a nice Orwellian name for a private tax collector.  Is tax farming coming back in vogue?

8.  Registered with the County to collect county lodging tax.   (sigh, we are going to have to file multiple reports each month to report all of our transaction taxes - some states actually have unified reporting and payment).

9.  No city taxes, it turns out, because we are just outside of any incorporated areas.  Thank goodness for small favors

10.  Registered for state unemployment taxes  (yes, with another ID number).  This was one of those circularities that really drive you crazy.  I can't pay people until ADP has the state set up for us in the payroll system, but they need an unemployment number that the state refuses to provide until we have issued at least $1500 in state payroll checks.  Arrrgghhh.  Fortunately (?) ADP will go ahead and start issuing the checks without a number, but there is a $50 per month fee for doing so.

11.  Registered for state income tax withholding (yes, with another ID number).  Again, need this to pay people legally

12.  Don't know yet if there is County withholding.  There are county income taxes in some places.

Expect in these forms to fill out the exact same data over, and over, and over again.  The state will maintain corporate records in about 6-8 parallel data bases and corporations are responsible for keeping every one of these data bases correct.

What I have not done yet, but know from experience I will have to do

1.  Obtain county occupancy permits or licenses

2.  Obtain county and/or state health inspections

3.  Obtain Coast Guard inspections of the docks

4.  Register with the state and/or county to pay personal property taxes

5.  Get miscellaneous bizarre licenses that are absolutely unpredictable and impossible to discover until we are in violation, like the egg merchant license in KY and CO.

I thought for about 3 microseconds about selling beer and wine in our store, but I am sick and tired of the intrusive, picky, petty, and time-consuming liquor licensing processes in most states, and the income we make from alcohol sales simply doesn't measure up to the hassle.

Postscript: I try to remember that we should actually be thankful for this mess.  Though it represents almost 20 hours of my personal time to set up, and hours of time each month  filling out forms and reports, not to mention thousands of dollars a year to ADP to help manage, this mess is still orders of magnitude better than what an entrepeneur would face in France or Germany.

The Amount Almost Doesn't Matter, Because it HAS to Go Higher

Apparently there is some debate about the true cost of Obama's proposed cap-and-trade system - is it $646 billion?  it is $2 trillion.  My sense is that it doesn't matter, because these costs are to the total cost of a full Co2 abatement program what shooting the first monkey into space was to the moon-landing program.

Just to get this out of the way, it is absurd to argue this is anything but a tax on individuals.  It HAS to result in a price increase to individuals, for things like electricity, or it is not working.  Price increases are a core feature of the program, not a bug.  The whole point is to reduce fossil fuel use, and in the near term, with infrastructure fairly fixed, this can only be achieved via reduced electricity consumption.  And, unless you are a fan of rolling brown-outs, this in turn will only be achieved by raising the price.   Long-term this reduction might come from shifts in the mix of electricity producing facilities (ie from coal to gas or nukes) but this takes time, and never-the-less the wholesale replacement of perfectly serviceable electrical generation infrastructure will certainly have a cost as well.

Further, now matter what the initial cost is, the costs will almost certainly have to increase by orders of magnitude over the next decades, if the programs is to have its desired benefits of substantially reducing CO2 production  (currently targeted by the administration as an 80-85% reduction).  How much of a price increase is it going to take for you to reduce your home's electrical use by 80%?  We have examples of parts of the country where electricity rates have doubled in a short period of time, and electrical consumption changed by far less than 80%  (the EPA apparently uses near-term price elasticities around 16%, meaning that a doubling of prices might result in a 16% reduction in demand).

It is probably easier to think about gasoline use (though this initial system will not apply to most transportation uses).  Last year, gas prices doubled.  Did your driving go down by 80%?  Probably not, since a doubling of gas prices reduced driving and demand by about 5-10%.  How high would the price of gas have to go to get you to really cut back your driving by 80%?  Europeans have $8-$9 a gallon gas, and much more onerous regulations on fuel economy in cars, and their per capita consumption has not fallen 80%  over the last decades  (Germany's per capita gas consumption, for example, has dropped about 20% since 1990).  How high will our gas prices have to go?

According to climate alarmists, Co2 levels in the atmosphere have already passed a point of no return leading us to a tipping point and rapidly accelerating temperatures.  As a result, again according to alarmists, incremental reduction steps that slightly slow the rate of increase of Co2 are useless -- only enormous reductions in Co2 output that result in declining world Co2 levels will suffice to save us from doom.

What this means is that Obama's cap-and-trade scheme as currently configured is both expensive AND useless, as it will, by almost any estimation, make only a trivial dent in Co2 growth  (similar to the Kyoto treaty, where even supporters admit that full compliance would have made an immeasurably small difference in global temperatures).   A real plan that would actually hit the goals he has set for us would be so expensive as to make even $2 trillion seem cheap.  This is just a toe in the water, to set up the infrastructure -- the real cost increases come later.  Using a fairly crude analogy, Obama is merely grabbing the waistband of our underwear now -- he won't start to pull and twist until later.

Wrapped in the Flag of "Systemic Risk"

A couple of questions about AIG:

1.  Is there any real legal difference between the contractual commitment by AIG to pay bonuses to employees and their contractual commitment to pay off mortgage bond guarantees to companies like Goldman Sachs? **

2.  In a bankruptcy, how senior would contractual promises of deferred compensation to employees be?  Everyone comes after the government, of course, but would such claims be more or less senior to, say, commitments to pay counter-parties?

** before claiming one commitment was outrageous and unjustified, one needs to be clear which commitment he is referring to, since both commitments in retrospect seem crazy to me.  It is just that one party (ie Goldman Sachs), which has the added advantage of being represented by many of its former employees in the Treasury department, has convinced Congress and the Administration that not paying them carries systemic risk to the economy.

That seems to be the new key to government largess:  Carrying systemic risk.  It used to be one wanted to be poor or female or black to merit special consideration in the government spending sweepstakes.  But nowadays, in our post-racial society, the key is to be the one who can wrap himself in the flag of "systemic risk."  Here is .

Kelo Update

Cato has a good 6-minute video on the Kelo imminent domain case.  As an update, the Kelo house has been bulldozed, along with the rest of the neighborhood, but no construction has or is expected to take place in the area any time soon.

PS- the Maxine Waters pious defense of property rights is simply hilarious

24 Hours To Get Your Brackets In

Brackets are due circa noon Eastern time on Thursday.  Right now we have 107 brackets!  This should be a blast this year.

To join, go to http://www.pickhoops.com/CoyoteBlog and sign up, then enter your bracket.  This year, you may enter two different brackets if you wish.  The detailed rules are here.

Online bracket entry closes Thursday, March 19th at 12:20pm EDT.  Be sure to get your brackets in early.  Anyone can play "” the more the better.  Each participant will be allows to submit up to two brackets.

LOL, Best Line I Have Read This Week

Referring the Senator Grassley's statement that AIG executives who are receiving bonuses should "resign or go commit suicide," David Harsanyi responds:

C'mon. If suicide were a proper penalty for piddling away taxpayer dollars, the National Mall would look just like Jonestown after refreshments.

Dangerous Until Proven Safe

I have been negligent in covering some of the nuttiness that is resulting from the CPSIA, the law last year passed in response to the Chinese toy recalls that allows greatly increased regulatory authority (requiring extensive testing of every lot, aircraft-manufacturing-like supply chain documentation, etc) over the entire toy distribution chain for certain perceived health threats like lead and pthalates.  Worse, the law provides enormous openings for third party groups to sue for ridiculous amounts of money over unproven health risks.  It is not clear to me a group suing under this law even needs to prove injury, but just some mythical small percentage chance of potential injury.

What all the targets of this law have in common are absurd overreactions to trivial risks of ingesting microscopic quantities of certain substances like lead.  Recently, a whole bunch of mini-bikes were taken off the market because 12-year-olds might suddenly start gnawing on the engine parts and ingest some lead.  For reasons that are not really clear to me, this country finds it impossible to rationally assess risks -- we have schools shut down with hazmat teams called out to clean up the mercury when someone drops a thermometer in the lab, while day after day the school probably serves fish in the cafeteria with higher mercury content than any kid would get from being near a broken thermometer.

Overlawyered has been all over this story, for example here.  The most recent episode came the other day when an EPA spokesman suggested that all libraries needed to pull books from the shelves printed before 1985 because there might be a billionth of a gram of lead in the ink:

It's been a day of dramatic developments on the CPSIA-and-libraries front. An Associated Press article out yesterday quoted Scott Wolfson, a spokesman for the Consumer Product Safety Commission (CPSC) as officially urging the nation's libraries to remove from their shelves children's books printed before 1986 until more is known about their possible dangers from lead in their inks, dyes and pigments:

Until the testing is done, the nation's more than 116,000 public and school libraries "should take steps to ensure that the children aren't accessing those books," Wolfson said. "Steps can be taken to put them in an area on hold until the Consumer Product Safety Commission can give further guidance."

Within the day, however, commission chief of staff Joe Martyak said that Wolfson had "misspoke", and that the commission has neither concluded that the books might be dangerous nor recommended that libraries take any action. An early version of the AP story is here, with the Wolfson quote, and a later version here, for purposes of comparison.

It's not as if Wolfson was making things up here. As readers will recall, one of the two CPSC commissioners, Thomas Moore, called weeks ago for some undefinedly large share of old books to be "sequestered" from children for the time being. However, the full commission has left the issue up in the air rather than endorsing Moore's view.

I Still Have This Dream

This is dead-on, at least for me.

students

It is odd that I have this dream about college, even at the age of 47, about every other month, but I have never had a similar dream about work, even now that my entire life savings depends on the success of my business.  I wonder why that is?

Positive News About the Economy

A bit over a week ago, I forecast that we had passed the economic bottom and would soon be back on the way up.  The IBD lists a number of reasons why I may be correct:  (ht:  Carpe Diem)

"¢ A broad rally in stocks, confirmed last Thursday, continuing into this week and led by the beaten-down financials.

"¢ A surprising 22% surge in February housing starts to a seasonally adjusted annual rate of 583,000 units.

"¢ A back-to-back jump in retail sales ex autos, in both January and February.

"¢ A return to profitability at several major banks, including Citigroup, Bank of America and JPMorgan.

"¢ A doubling in the obscure but important Baltic Dry Index, a key indicator of global trade flows.

"¢ An upwardly sloping yield curve, which Fed research suggests all but ensures a rebound by year-end.

"¢ A Housing Affordability Index that has hit an all-time high.

"¢ A two-month improvement in wholesale used-car prices, measured by the Manheim Index.

"¢ A rise in Monster's Employment Index in February, suggesting a turn in the job market may be around the corner.

"¢ A 4 1/2-year high in the dollar against other major currencies, on a trade-weighted basis.

"¢ A sharp increase in the money supply, as measured by M2 and M1. Weekly M2 growth has averaged 10.1% year-over-year since the start of 2009, while M1 has grown at a 14.6% rate.

"¢ A two-month rally in the Index of Leading Indicators.

"¢ A growing body of evidence that the "liquidity crunch" is dead. Data show nearly $14 trillion in liquidity on the sidelines of the markets, ready to boost consumer spending, credit growth or further stock market gains.

Of course, this makes the entire argument for the trillion dollar plus stimulus bill moot.  If my company had started spending itself into debt to fight some sort of emergency, and then found the emergency did not exist, you can bet we would be spending every hour of the day to stop as much of that emergency spending as possible.  Not so in Washington.  Despite now forecasting an improving economy, and basing his budget on this being a milder-than-normal recession, Obama has not even suggested any roll-back in the massive spending and debt-creation program.  Which just goes to prove that the "stimulus" bill had nothing to do with stimulus in the first place, but was a leftish spending plan sold based on panic, in exactly the same way the Bush administration sold the Patriot Act.

In fact, much of Obama's remaining legislative agenda (including nationalization of parts of the health care system and a Co2 cap-and-trade system) include what are effectively large tax increases that cannot realistically be passed in the depths of a recession.  So expect a lot of talking up of the economy to prepare the way for these tax increases, not to mention the tax increases that will be necesary, but have not yet been proposed, to pay for the servicing of the huge debt and new spending we just took on.

One final prediction:  As the economy improves enough for the average person to see the improvement, expect the Obama administration to be spinning like mad.  Their first objective will be to take credit for the recovery.  This is absurd, as it appears that the recovery will start long before the first dollar of spending occurs.  The media may, however, let him get away with this.  If it does not, his second story will be that the confidence exuded by the passing of the stimulus bill created the recovery.  This is also absurd on its face, given the crash in equity prices after the stimulus bill was passed and the extreme general skepticism about the stimulus in poll numbers.

Postscript: By the way, I would argue the whole story of this stimulus bill is a microcosm of the climate debate.  Extreme panic was generated based on a fear that their might be some possibility of a catastrophe (ie a second Great Depression) and that on the precautionary principle, we spent a trillion dollars just in case.  Remember that in January, Obama said there will be - not might be - another 5 million job losses, a number we will come nowhere near.

As it turned out, there was never a realistic chance of a catastrophe, but the costs will remain, and all the while the panic over the issue was used as cover to pass a whole range of freedom-reducing initiatives.   Naomi Klein was half right in the shock doctrine -- there are folks who use emergencies to successfully push for radical change, but it is almost always the forces of more government control who win out, not the supporters of laissez faire.

Update: A similar list here from Forbes.

Transit as the Anti-Stimulus

The (flawed) theory of government stimulus plans is that in certain economic under-capacity situations, government spending can have a multiplier effect.

The Anti-planner shows that, as far as government spending on mass-transit is concerned, $9,150 of taxpayer subsides per rider generate about $6,100 in average savings per rider.  Every dollar of public transit spending destroys about 30 cents of value, which I guess makes it the anti-stimulus.

Update:  Yeah, I know, transit supposedly eliminates all those externalities.  But most rail transit plans typically reduce congestion by fractions of a percent, even by their builder's estimates, while energy savings is wildly over-estimated.

The Earmarked Bankruptcy

The normal process for bureaucratic allocation of, say, highway funds, does not always work that well.  Seriously, you don't have to convince this libertarian of that.  But it is at least intended to try to balance priorities and allocate the funds marginally rationally.   Which points out the problem with earmarks -- they are overrides by Congress of the normal allocation and prioritization process for political ends.  By definition, the projects in earmarks would not have normally been funded by the usual operation of the prioritization process.

Which brings me, oddly enough, to AIG  (and to GM).  When companies can no longer meet all of their obligations, they generally file for chapter 11 bankruptcy. This is an extremely well-worn process, both in the courts and the business community, that attempts to save as much value as possible and to allocate that value, based on law and a set of rules everyone understands in advance, to the various stakeholders.   The folks who are involved in this process are pretty hard-headed folks, less out for revenge and retribution as for maintaining value and capturing as much as possible for whatever group one might represent.

Now Congress and the Administration are getting themselves involved in the bankruptcy process, by trying to avert actual chapter 11 filings by AIG and GM.  By doing so, they are effectively overriding the bankruptcy process.  Just as with earmarking, they claim this override is for some good of the country.  But, just as with earmarking, you can assume it is to benefit some politically-favored group.  At GM, the feds are saying that we don't want employees or the equity holders to take a haircut, as they would in Chapter 11, so we will transfer the loss to taxpayers, and perhaps bondholders (could there be any politically less favored group than taxpayers?).  Same at AIG.   Is it any surprise that the number one beneficiary of the Pauslon bailout of AIG was Goldman Sachs?  The Left thought they smelled a rat when the administrations contracted with ex-Cheney-run Haliburton in Iraq, but no one is going to bat an eye when the Treasury department, populated with ex-Wall Street types, is bailing out all its employees' old firms?

On the subject de jour, the AIG executive bonuses, many of these were just as guaranteed, contractually, as were payments on AIG policies and bond guarantees.  I don't know how such obligations are treated in chapter 11 (are they treated as more or less senior than other obligations?) but I do know the decision to keep them or ditch them would be made against a goal of maintaining long-term value, and not public witch-hunting.

This is the real problem, even beyond the taxpayer cost, of this new form of Congressional or Administration-led pseudo-bankruptcy:  Winners and losers are determined by political power and perceptions of short-term political gain, rather than against a goal of maintaining value and following well understood and predictable rule.  This process throws all the old predictable rules and traditions out the window.  Investors and folks with contracts used to know just how senior their obligations were in a corporate failure.  Now, they have no idea, as their position in the bankruptcy may in the future depend more on how much they donated in the last presidential election, or how good their PR agent is.

Fourth Annual NCAA Tournament Bracket Challenge

Note: This post sticky through 3/19.  Look below for newest posts.

Back by popular demand is the annual Coyote Blog NCAA Bracket Challenge.  Yes, I know that many of you are bracketed out, but for those of you who are self-employed and don't have an office pool to join or who just can't get enough of turning in brackets, this pool is offered as my public service.

Last year we had well over 100 entries, and we expect more this year. Everyone is welcome, so send the link to friends as well.  There is no charge to join in and I have chosen a service with the absolutely least intrusive log-in (name, email, password only) and no spam.  The only thing I ask is that, since my kids are participating, try to keep the team names and board chat fairly clean.

To join, go to http://www.pickhoops.com/CoyoteBlog and sign up, then enter your bracket.  This year, you may enter two different brackets if you wish.

Scoring is as follows:

Round 1 correct picks:  1 points
Round 2:  2
Round 3:  4
Round 4:  6
Round 5:  8
Round 6:  10

Special March Madness scoring bonus: If you correctly pick the underdog in any round (ie, the team with the higher number seed) to win, then you receive bonus points for that correct pick equal to the difference in the two team's seeds.  So don't be afraid to go for the long-shots!   The detailed rules are here.

Bracket entry appears to be open.  Online bracket entry closes Thursday, March 19th at 12:20pm EDT.  Be sure to get your brackets in early.  Anyone can play "” the more the better.  Each participant will be allows to submit up to two brackets.

Why, Yes They Do

A reader wrote me and asked why, given my dislike for Sheriff Joe Arpaio, I had not blogged on the request by a number of members of the US Congress to investigate Arpaio, particularly regarding his crime sweeps of neighborhoods that seem to result in the arrest of mainly those of Mexican ethnicity.  Heck, he has pulled more Hispanics out of some tony suburbs than I thought could even exist in the area, much less have probable cause for arrest.

I guess I haven't blogged on it because I am busy, and besides I am not sure a political stunt by some Congressmen will really amount to much of an investigation.

But I do have a reaction to the blog post that the reader sent me.  The blog is called MaxRedline and comments thus on the investigation:

This is interesting; it's unclear exactly where in the Founding documents of our nation that illegal aliens are granted civil rights.

This is a mistake I think many conservatives make.  Because, in fact, immigrants, no matter what licenses and permissions they have or don't have from the US government, have the same rights as everyone else.  Because rights don't flow from the government, they flow from the fact of being human.  Government is not the source of rights, it is their protector.  I can bring the founding fathers into the matter as well:

Like the founders of this country, I believe that our individual rights exist by the very fact of our existence as thinking human beings, and that these rights are not the gift of kings or congressmen.  Rights do not flow to us from government, but in fact governments are formed by men as an artificial construct to help us protect those rights, and well-constructed governments, like ours, are carefully limited in their powers to avoid stifling the rights we have inherently as human beings.

Do you see where this is going?  The individual rights we hold dear are our rights as human beings, NOT as citizens.  They flow from our very existence, not from our government. As human beings, we have the right to assemble with whomever we want and to speak our minds.  We have the right to live free of force or physical coercion from other men.  We have the right to make mutually beneficial arrangements with other men, arrangements that might involve exchanging goods, purchasing shelter, or paying another man an agreed upon rate for his work.  We have these rights and more in nature, and have therefore chosen to form governments not to be the source of these rights (for they already existed in advance of governments) but to provide protection of these rights against other men who might try to violate these rights through force or fraud....

These rights of speech and assembly and commerce and property shouldn't, therefore, be contingent on "citizenship".

For the same reasons, we owe the same due process to the civilian we snatched off the streets of Kabul and dumped into Guantanamo as to the housewife from Peoria.   The exception to this is things like voting and running for office, but these are just process issues associated with the artificial construct called government.  And welfare and the New Deal screws a lot of this up, but that is discussed at my post linked above.

Interestingly, most Conservatives would say that they agree with this proposition, that rights flow from our humanity and not from the government.  They would also generally oppose government licensing of all sorts of activities.  But here we have a case where conservatives are arguing that not only some limited commerce rights, but the full package of civil rights, are lost without a certain piece of paper from the government.

Many more immigration posts here.

Note To Companies Who Do Business With Me

It has become an increasingly common practice for companies that are making calls, say from a customer service center or the accounts receivables department, to use a computer auto-dialer.  If the customer picks up, they give the customer a recorded message to hold for a real person with an important message.  Sometimes the holds can last a while.  The idea is that the company is not paying people to waste time waiting for people to pick up, or worse, not to pick up.

I despise this practice.  The implicit assumption is that the time of the folks in their call center is more valuable than mine, such that it is better that I hold rather than their employees waste one second of time.  Well, all you companies who do this (Do you hear me Frito-Lay?  Coca-Cola?) are never going to get me, because I hang up the microsecond I get a recorded message.  I would do this even if I was sure it was a real business call, because I find the implicit assumptions insulting, but I am even faster to hang up now that telemarketers have latched onto this practice.

Exactly What One Might Expect from a Yalie

from the AZ Republic:

A Yale University student is suing US Airways for $1 million because of the loss of a video game system he claims was taken from his luggage.

Ohio resident Jesse Maiman, 21, claims his Xbox 360 console was taken from his bag during a December flight from New Haven, Conn. to Cincinnati.

He is suing for $1,700 for the video game system and for the maximum damages allowable by law, or $1 million.

You can read the article all day and you will not find any extenuating circumstances to justify this arbitrarily absurd number.   Even $1,700 for the game system itself is absurd.  One hour of legal time on this would be worth more than the machine.

More Cool Charts

Immigration Explorer at the NY Times.  Dynamic map of US immigration and sources of immigration over the last 120 years.