Archive for August 2011

Green Industrial Policy Fail

This is like the third one in just a few weeks:

Solyndra, a major manufacturer of solar technology in Fremont, has shut its doors, according to employees at the campus.

"I was told by a security guard to get my [stuff] and leave," one employee said. The company employs a little more than 1,000 employees worldwide, according to its website....

Solyndra was touted by the Obama administration as a prime example of how green technology could deliver jobs. The President visited the facility in May of last year and said  "it is just a testament to American ingenuity and dynamism and the fact that we continue to have the best universities in the world, the best technology in the world, and most importantly the best workers in the world. And you guys all represent that. "

The federal government offered $535 million in low cost loan guarantees from the Department of Energy. NBC Bay Area has contacted the White House asking for a statement.

Beyond the whole green jobs boondoggle, trying to compete at low-cost manufacturing of a commodity product in California of all places is simply insane.


My Highest Recommendation

I have pimped the Teaching Company (now called the Great Courses) for years on this blog.  I have done over 20 courses, and am nearly addicted to their offerings.  Nothing bums we out more than to read their catalog and find nothing new I want, except when that happens I order something random I don't think I want and usually love it.  I listen to music a lot less than I used to because I often have a Great Course on my mp3 player instead.

Via Econlog comes a great article about the Great Courses, and make me feel a bit better that I am not alone in my obsession.  Its one of those really interesting stories about an entrepreneur who sticks with his vision, right down to his last dollar.

But it is also a depressing read for someone who may soon be sending his kid to a small liberal arts college.  Some excerpts related to current college education:

the company offers a treasure trove of traditional academic content that undergraduates paying $50,000 a year may find nowhere on their Club Med–like campuses. This past academic year, for example, a Bowdoin College student interested in American history courses could have taken “Black Women in Atlantic New Orleans,” “Women in American History, 1600–1900,” or “Lawn Boy Meets Valley Girl: Gender and the Suburbs,” but if he wanted a course in American political history, the colonial and revolutionary periods, or the Civil War, he would have been out of luck. A Great Courses customer, by contrast, can choose from a cornucopia of American history not yet divvied up into the fiefdoms of race, gender, and sexual orientation, with multiple offerings in the American Revolution, the constitutional period, the Civil War, the Bill of Rights, and the intellectual influences on the country’s founding. There are lessons here for the academy, if it will only pay them heed....

The Great Courses’ uninhibited enthusiasm is so alien to contemporary academic discourse that several professors who have recorded for the firm became defensive when I asked them about their course descriptions, emphatically denying any part in writing the copy—as if celebrating beauty were something to be ashamed of....

So totalitarian is the contemporary university that professors have written to Rollins complaining that his courses are too canonical in content and do not include enough of the requisite “silenced” voices. It is not enough, apparently, that identity politics dominate college humanities departments; they must also rule outside the academy. Of course, outside the academy, theory encounters a little something called the marketplace, where it turns out that courses like “Queering the Alamo,” say, can’t compete with “Great Authors of the Western Literary Tradition.”...

In its emphasis on teaching, the company differs radically from the academic world, where “teaching is routinely stigmatized as a lower-order pursuit, and the ‘real’ academic work is research,” notes Allen Guelzo, an American history professor at Gettysburg College. Though colleges ritually berate themselves for not putting a high enough premium on teaching, they inevitably ignore that skill in awarding tenure or extra pay. As for reaching an audience beyond the hallowed walls of academe, perhaps a regular NPR gig would gain notice in the faculty lounge, but not a Great Courses series. Jeremy McInerney, a University of Pennsylvania history professor, told The Chronicle of Higher Education in 1998 that he wouldn’t have taped “Ancient Greek Civilization” for the company if his tenure vote had been in doubt: “This doesn’t win you any further respect. If anything, there’s a danger of people looking down on it, since many people are suspicious of anything that reeks of popularism.” So much for the academy’s supposed stance against elitism....

Further, it isn’t clear that the Great Courses professors teach the same way back on their home campuses. A professor who teaches the Civil War as the “greatest slave uprising in history” to his undergraduates because that is what is expected of him, says University of Pennsylvania history professor Alan Kors, will know perfectly well how to teach a more intellectually honest course for paying adults.

While I took a fair number of liberal arts courses, being an engineer really sheltered me from this kind of BS.  But my kids interests run more towards liberal arts, and while I am working to enforce the double major approach (you can take whatever major interests you as long as you double it with economics or something useful), I still despair that they really are going to get what they think they will get at college.

This is an AWESOME Idea. I Want to Propose California Do Much More of This

Via Carpe Diem and a whole string of other sites:

"How will California parents react when they find out they will be expected to provide workers' compensation benefits, rest and meal breaks, and paid vacation time for…babysitters? Dinner and a movie night may soon become much more complicated.

California Assembly Bill 889 will require these protections for all “domestic employees,” including nannies, housekeepers and caregivers. The bill has already passed the Assembly and is quickly moving through the Senate with blanket support from the Democrat members that control both houses of the Legislature – and without the support of a single Republican member. Assuming the bill will easily clear its last couple of legislative hurdles, AB 889 will soon be on its way to the Governor's desk.

Under AB 889, household “employers” (aka “parents”) who hire a babysitter on a Friday night will be legally obligated to pay at least minimum wage to any sitter over the age of 18 (unless it is a family member), provide a substitute caregiver every two hours to cover rest and meal breaks, in addition to workers' compensation coverage, overtime pay, and a meticulously calculated timecard/paycheck.

Failure to abide by any of these provisions may result in a legal cause of action against the employer ("parents") including cumulative penalties, attorneys' fees, legal costs and expenses associated with hiring expert witnesses, an unprecedented measure of legal recourse provided no other class of workers – from agricultural laborers to garment manufacturers."

I know this is exactly the kind of thing you would expect me to oppose, but I have decided this is exactly the kind of thing California needs.  I am tired of average citizens passing crazy requirements on business without any concept of the costs and injustices they are proposing, and then scratch their head later wonder why job creation is stagnant.
I want to propose that California do MORE in this same vein.  Here are some suggestions:

  • Every household will have to register for a license to conduct any type of commerce, a license to occupy their house, and a license to hire any employees.  Homeowner will as a minimum have to register to withhold income taxes, pay social security taxes, pay unemployment insurance, pay disability insurance, and pay workers comp insurance.
  • Households should have to file a 1099 for every payment they make to contractors
  • All requirements of Obamacare must be followed for any household labor, including payment of penalties for even part-time labor for which the homeowner does not provide medical insurance
  • No alcohol may be purchased by any individual without first applying for and receiving a state liquor license
  • No cigarettes may be purchased by any individual without first applying for and receiving a state cigarette license
  • No over the counter drugs may be purchased by any individual without first applying for and receiving a state over the counter drug license
  • No eggs may be purchased by any individual without first applying for and receiving a state egg license
  • Any injuries of any type in the household must be reported to OSHA
  • Form EEO-1 must be filed once a year to catalog the race and gender of anyone who did any work in the home
  • Any time one has a dispute in court with another citizen or an employee, they will now be treated the same as businesses in California, which means that the presumption, irregardless of facts, will be strongly in favor of any employee and against the homeowner, and in favor of any other party in any dispute whose net worth is perceived by the jury as less than the homeowner's.
  • At least once a year the home's kitchen must be inspected and certified by both the fire marshal and the health department.  Any deficiencies must be immediately repaired before the kitchen can be used.  All code requirements for commercial kitchens will apply to household kitchens, including requirements for a three-basin washup sink, separate mop sink, and fire extinguishers
  • All homes will be inspected once per year for ADA compliance.  All parts of the home must be wheelchair accessible, even if there are currently no handicapped residents in residence.  Homes more than one-story tall will require an elevator.  All counters must be of the proper height, and all bathrooms must have ADA fixtures.
  • Each home will be required to prominently display all its required licenses as well as state and federal information posters for workers.
  • All homes will be audited at least once every three years to ensure that use taxes have been filed and paid on all out of state Internet purchases
  • Material Safety Data Sheets must be on file for all household cleaning products and other chemicals and available for inspection by the fire marshal
  • All gas tanks (car, lawnmower, portable 5-gallon) will be treated just like commercial gasoline storage tanks, and require monthly leak / loss reporting.  Annually, a complete spill prevention plan must be filed with the state.
  • A stormwater discharge plan must be filed annually with the state
  • Any dropped thermometer or CFL bulb will require homeholder to call out (and pay disposal costs) of a state hazmat team
  • Lifeguards are required at all home pools during daylight hours
  • Households should file property tax returns in the same way that businesses must, listing individually every single piece of personal property they own, from their car to their lawnmower to the pink flamingo in the front yard.
  • Homeowner must track the number of days any guests stay in their house so they can file and pay lodging taxes on a monthly basis
  • Any homeowner who hauls a boat or trailer on US highways must register with the Department of Transportation and receive a DOT number.  They must keep full driver logs and maintenance records available for DOT audit and inspection, and every driver must be drug-tested at least once per year.
  • All food on pantry shelves must meet all state labeling laws
  • At each entrance to the house, a sign warming those entering must be posted warning that certain cancer causing chemicals may be present

Finally, after spending the entire day complying with these rules, the homeowner must read at least 3 posts each day from progressive blogs explaining why anyone who complains about such rules as unreasonable is just a reactionary who doesn't really know how to run his business very well, and they could certainly do better.

Postscript:  Every single item on this list is something my company has been required to do.  I am sure I left a bunch out.

You've Blown Your Trust

Ezra Klein via Kevin Drum asks, fairly reasonably, why with very low US borrowing rates does it not make sense to take infrastructure projects we know we have to do in the next 5-7 years and pull them forward.  If we know we have to rebuild bridge X in 2016, lets do it now when there is so much construction capacity sitting around.

In an idealized Platonic technocratic world that many Lefists still insist on believing we actually live in, trustworthy and knowledgeable agents of the state would work up such a list and we could fund it, happy we have made a good financial decision.  But we don't live in that world, as I wrote in the comments

The reason this does not fly has to do with politician's incentives and trust.  In short, Democrats had their chance to do exactly this.  Two years ago, nearly a trillion dollars of such stimulus was approved and sold to the American people as just this sort of infrastructure spending.

But it was no such thing.  Most of the money went to state and local governments as transfer and stabilization payments to keep unionized government workers, who are reliable Democratic voters, employed.  Congress and the Administration knew that the majority of the public would have been leery about spending it this way, so it was sold as "infrastructure" despite the fact that less than 10%, by my count, could reasonably be called this.

Having sold a trillion dollars of pork, waste and political payoffs as "infrastructure," you should not be surprised that the American public is reluctant to believe that an infrastructure project that just pulls future necessary spending forward is really any such thing.  You have in short blown your trust, which is amazing given just how much of a mandate Obama entered office with.  Note that this is not narrowly a criticism of Democrats, they just happen to be in charge.  No one would trust Republicans either.

And by the way, it takes years to really get infrastructure projects up and running - the environmental reviews and red tape that most of the readers for this site have advocated in favor of for years causes these things to take forever.  Not to mention the engineering and procurement.  Even Obama has admitted that he did not understand that shovel-ready was no such thing, even though many of us warned of exactly this problem the first time around

The money is only "free" in a relative sense if we know we have to spend it anyway in future years.  It is not at all free if we have to take it from some productive private use and redeploy it for some politician's whim that gives him or her a nice bullet point on their re-election web site.  Unfortunately, in the real world we live in, rather than in the technocratic paradise Klein imagines, any such bill will be larded with just such flights of fancy from powerful representatives of both parties.

Update:  Talk about history repreating itself, here is what I wrote in January of 2009.

The infrastructure piece, despite being less than 10% of the bill, allows politicians to call this “investment” and “green energy” and “infrastructure” which sell better with sections of the public than “welfare” and “transfer payments.”  The minority infrastructure pieces allow Congress and Obama to call the bill new and forward looking, rather than the imitation of 1970s legislation that it really is.

Gary Johnson's Invisibility is Very Frustrating

I continue to like everything I see of Gary Johnson.  Unfortunately, I seldom see anything.  For reasons not entirely clear to me, Johnson is being left out of the next Republican debate, despite polling better than many of those invited (and that despite a LOT less pub than folks like Rick Santorum).

I understand why the major media ignores him -- their strategy seems to be to focus on the wackiest Republican candidate, whoever that might be at the time.  My only guess on Johnson is that he ticks off social conservatives who have a lot of power in the party.  This is exactly the type of thing that has me not only indifferent to, but hostile to politics, and why you will almost never see horserace-style reporting of political races here.

Anyway, here is more on Johnson and a Reason video so you can actually see the guy.

Krugman Unintended Irony: Anyone Who Does Not Unquestioningly Believe Authorities is Anti-Science


It's a wonder how, when over "97 percent to 98 percent" of scientific authorities accepted the Ptolomeic view of the solar system that we ever got past that.  Though I could certainly understand why in the current economy a die-hard Keynesian might be urging an appeal to authority rather than thinking for oneself.

When, by the way, did the children of the sixties not only lose, but reverse their anti-authoritarian streak?

Postscript:  I have always really hated the nose-counting approach to measuring the accuracy of a scientific hypothesis.  If we want to label something as anti-science, how about using straw polls of scientists as a substitute for fact-based arguments?

Yes indeed, the number of people in the newly made-up profession of "climate science" that are allowed by the UN control the content of the IPCC reports and whose funding is dependent on global warming being scary probably is very high.  The number of people in traditional scientific fields like physics, geology, chemistry, oceanography and meteorology who never-the-less study climate related topics that wholeheartedly are all-in for catastrophic man-made global warming theory would be very different

 Decide for yourself - see my video on global warming.  Am I anti-science?

Uh, Oh, I May Be a Terrorist Suspect

This is a bit old, but Radley Balko linked this story about a many busted for taking pictures of a refinery

Police Chief Jim McDonnell has confirmed that detaining photographers for taking pictures “with no apparent esthetic value” is within Long Beach Police Department  policy.

McDonnell spoke for a follow-up story on a June 30 incidentin which Sander Roscoe Wolff, a Long Beach resident and regular contributor to Long Beach Post, was detained by Officer Asif Kahn for taking pictures of North Long Beach refinery.

“If an officer sees someone taking pictures of something like a refinery,” says McDonnell, “it is incumbent upon the officer to make contact with the individual.” McDonnell went on to say that whether said contact becomes detainment depends on the circumstances the officer encounters.

McDonnell says that while there is no police training specific to determining whether a photographer’s subject has “apparent esthetic value,” officers make such judgments “based on their overall training and experience” and will generally approach photographers not engaging in “regular tourist behavior.”

This policy apparently falls under the rubric of compiling Suspicious Activity Reports (SAR) as outlined in the Los Angeles Police Department’s Special Order No. 11, a March 2008 statement of the LAPD’s “policy …  to make every effort to accurately and appropriately gather, record and analyze information, of a criminal or non-criminal nature, that could indicate activity or intentions related to either foreign or domestic terrorism.”

Among the non-criminal behaviors “which shall be reported on a SAR” are the usage of binoculars and cameras (presumably when observing a building, although this is not specified), asking about an establishment’s hours of operation, taking pictures or video footage “with no apparent esthetic value,” and taking notes.

First, I think refineries are enormously interesting photography subjects (disclaimer:  I used to work in the Exxon Baytown refinery) and I think they can be downright beautiful at night.

Second, I take pictures of industrial subjects all the time as potential guides for my model railroading.  Incredibly-boring-for-most-people example here.

One-Program Proof Technocratic Government Does Not Work

Ethanol continues to be one of the dumbest, most costly programs ever engaged in by the Federal government

"Today, about 40 percent of all U.S. corn -- that's 15 percent of global corn production or 5 percent of all global grain -- is diverted into the corn ethanol scam in order to produce the energy equivalent of about 0.6 percent of global oil needs.
Corn prices, now close to $7 per bushel, have more than doubled over the past two years (see chart above). And recent harsh weather, including floods in the Midwest and drought in the South, will likely mean a subpar U.S. corn harvest. That, in turn, will mean yet higher prices for corn, which will translate into higher prices for meat, milk, eggs, cheese and other commodities.
Environmental damage:  check
Fails to meets its goals (of reducing fossil fuel use): check
Raises food prices:  check
Raises gas prices: check
Highly regressive costs that hurt the poor most:  check
Benefits accrue to very a small group of the politically connected:  check

Winding Down Debt

via Kevin Drum, personal debt in the US:

One of the problems with the stimulus, in my mind, is that it was aimed at interrupting this process.

Financial vs. Operating Investors

Kevin Drum argues that Conservatives have vastly over-estimated the effects of capital gains tax changes on investment.

I can't agree with parts of the article that seem to argue that all taxes have limited effects on behavior (this is easily disproved, just look at what the tax code does for preferences of issuing debt vs. equity, or even look at the mortgage market).  But I have always suspected that the political focus on the capital gains tax represents another piece of evidence that financial players (Wall Street, banks) dominate much of economic regulation.

All things being equal, a low capital gains tax is fine.  If I sell some stock, its nice to pay a lower tax on the profits, particularly since at some level those profits have already been taxed once at the corporate level.  Financial players who buy and sell securities live and die by the capital gains tax, and I suppose for businesses there is some advantage in that it perhaps reduces the cost of debt and equity.

But as a business person with my own company, that capital gains tax is largely irrelevant to my investment decisions.   That is because all my investments are made to generate cash flow, and thus the regular tax rate is the ordinary income tax rate.  Perhaps one time in my life, if ever, the capital gains tax will be hugely relevant when I sell my business, but that is at some time in the future so nebulous that it does not affect my behavior.   Other than the double taxation argument, I have never understood why those who take their investment gains in asset value appreciation rather than in income should get different tax treatments.

Time Value of Money?

Michael Lewis, a pretty savvy financial guy who has written a lot about financial markets, says this:

 There is no such thing as a riskless asset. The reason an asset pays a return is that it carries risk.

Actually, even a perfectly risk-free financial asset (which I agree does not exist) theoretically pays a return, a payment for the use of your money for some period of time, which compensates you for the opportunities to use that money in other ways which you forgo when you buy that asset.

It is an odd mistake for him to make, but perhaps it is a nomenclature issue, with financial guys thinking of returns in terms of spreads, say against the risk-free rate.  Certainly if you define it that way, returns on financial assets would be all due to risk.

Wow, I Can't Believe the Post Office Has Not Thought of This

From a Michael Lewis article on the European financial mess

To get around pay restraints in the calendar year the Greek government simply paid employees a 13th and even 14th monthly salary—months that didn’t exist.

Absolutely Sensible Thought That Seems To Violate Most People's Intuition

Commenting on the Gibson guitar raid

I'm confused by the ban on Brazilian rosewood. According to the Wikipedia article, [Brazilian rosewood]

is found only in Brazil, from the eastern forests of Bahia to Rio de Janeiro. It is threatened by habitat loss, since most of its habitat has been converted to farmland. Due to its endangered status, it was CITES-listed on Nov. 6 1992 in Appendix I (the most protected), and illegal to trade.

It grows in a specific area but is threatened because most of this habitat has been converted to farmland? And the solution is to ban trade in the wood, making it of no economic value? How is this supposed to preserve the habitat? Wouldn't that be an excellent reason to go ahead and convert the rest of the habitat to farmland, growing something that would be of economic value? I just don't get the logic there. Wouldn't it make more sense to have a world market in Brazilian rosewood, a natural product both beautiful and prized for its resonant qualities in musical instruments? Wouldn't that make it very desirable to create plantations devoted to growing rosewood so you could sell it into that international market? Wouldn't that result in a lot more rosewood? Surely a valuable product like rosewood would be a higher value use of the land than as mere farmland?

Here is the same idea from a different venue.  Might be more polar bears left if people wanted one for breakfast

An Emerging Front in Attacking Free Speech

I have seen several stories of late where folks are attempting to use Federal and state anti-stalking statutes to create prior restraints on speech.   Not only is this wrong, but it is more likely than not to be enforced in a non-neutral way vis a vis content -- ie frequent criticism of a climate skeptic is justified defense of science, frequent criticism of Al Gore is stalking.

Letting Bureaucrats Define New Crimes

Yet more crap to keep up with as an employer

Today the NLRB released its final rule mandating all private sector employers subject to the National Labor Relations Act to post notices informing employees of their rights under the Act. The final rule is scheduled to be published in the Federal Register on August 30, 2011. Posting of the Employee Rights Notice becomes effective November 14, 2011. Failure to post will be an unfair labor practice....

Failure to post the Notice will constitute an unfair labor practice which may be filed with the NLRB by any person. Further, the failure to post the Notice will be deemed evidence of anti-union animus or motivation where employers are alleged to have interfered, restrained, or coerced or otherwise discriminated against employees to encourage or discourage union membership or activity.

We already spend a thousand bucks a year or so with printing companies that keep us supplied with updated signs for all of our locations.  At some point we are going to have to buy billboards to fit all the stuff we are required to post -- minimum wage notices, NLRB notices, civil rights policies, occupancy permits, sales tax licenses, liquor licenses, egg licenses, cigarette licences, fire inspections, health inspections. Soon I am sure we will have a couple of square feet of Obamacare notices.

Did CLOUD Just Rain on the Global Warming Parade?

Today in Forbes, I have an article bringing the layman up to speed on Henrik Svensmark and this theory of cosmic ray cloud seeding.  Since his theory helped explain some 20th century warming via natural effects rather than anthropogenic ones, he and fellow researchers have face an uphill climb even getting funding to test his hypothesis.  But today, CERN in Geneva has released study results confirming most of Svensmark's hypothesis, though crucially, it is impossible to infer from this work how much of 20th century temperature changes can be traced to the effect (this is the same problem global warming alarmists face -- CO2 greenhouse warming can be demonstrated in a lab, but its hard to figure out its actual effect in a complex climate system).

From the article:

Much of the debate revolves around the  role of the sun, and though holding opposing positions, both skeptics and alarmists have had good points in the debate.  Skeptics have argued that it is absurd to downplay the role of the sun, as it is the energy source driving the entire climate system.  Michael Mann notwithstanding, there is good evidence that unusually cold periods have been recorded in times of reduced solar activity, and that the warming of the second half of the 20th century has coincided with a series of unusually strong solar cycles.

Global warming advocates have responded, in turn, that while the sun has indeed been more active in the last half of the century, the actual percentage change in solar irradiance is tiny, and hardly seems large enough to explain measured increases in temperatures and ocean heat content.

And thus the debate stood, until a Danish scientist named Henrik Svensmark suggested something outrageous -- that cosmic rays might seed cloud formation.  The implications, if true, had potentially enormous implications for the debate about natural causes of warming.

When the sun is very active, it can be thought of as pushing away cosmic rays from the Earth, reducing their incidence.  When the sun is less active, we see more cosmic rays.  This is fairly well understood.  But if Svensmark was correct, it would mean that periods of high solar output should coincide with reduced cloud formation (due to reduced cosmic race incidence), which in turn would have a warming effect on the Earth, since less sunlight would be reflected back into space before hitting the Earth.

Here was a theory, then, that would increase the theoretical impact on climate of an active sun, and better explain why solar irradiance changes might be underestimating the effect of solar output changes on climate and temperatures.

I go on to discuss the recent CERN CLOUD study and what it has apparently found.

College Bleg, Wesleyan (CT) Edition

My son is being recruited, at a minimum, at Bowdoin, Vassar, Wesleyan, Haverford, Kenyon and possibly Amherst and Pomona to play baseball.  We have a pretty good handle on all these schools except Wesleyan in Connecticut, which we have visited but we are having a hard time getting a read on.

In the 2011 Insider's Guide to the Colleges, Wesleyan is described as an extreme example of a college dedicated to politically correct intolerance.  The book says that the classes tend to be mainly focused on teaching kids to be radical activists rather than any traditional subject matter.  Social life is portrayed as revolving around marijuana and hallucinogens.   It is by far the most negative review we have read (well, I suppose this would not be negative to some).

We are trying to get a read on the accuracy of this.    Any of you know this school or attend it?   Is there truth to this, or does the writer have an ax to grind?   He is not naive to what he will find politically at New England liberal arts colleges. The question is not whether there is a lot of leftish political correctness - that is a baseline in all such schools.  The question is whether this school is unusually extreme.  The book makes it sound like it is Kos Kidz Academy.    Comment or send me an email.

Update:  Hmm, based on the comments, I explained myself poorly.  Nic will likely never play pro ball.  If that were his goal, we would definitely be looking to ASU or Texas.  He has decided he wants to go to a small liberal arts college.  Baseball has two synergies - one, he would like to play in college.  Two, being recruited for sports helps in the admissions process at selective schools.

There is money set aside to pay for college, from a source such that it needs to be used for college, so arguments about price-value issues with college are not immediately relevant.

WTF? This is What They Mean by Oil and Gas Subsidies?

When the Left has talked about oil and gas subsidies, I have generally nodded my head and agreed that any such things should be eliminated, just as they should be eliminated for all industries.   They have in the past thrown out huge numbers for such subsidies that seemed high, but I have not really questioned them.  But then I see this chart at Kevin Drum's site

Seriously, nearly half the "subsidy" number is the ability of a company to use LIFO accounting on inventory for their taxes?  Since the proposition is to eliminate these only for oil and gas, what is the logic that somehow LIFO accounting is wrong in Oil and Gas but OK in every other industry?   In fact, at least the first two largest items are both accounting rules that apply to all manufacturing industry.  So, rather than advocating for the elimination of special status for oil and gas, as I thought the argument was, they are in fact arguing that oil and gas going forward be treated in a unique and special way by the tax code, separate from every other manufacturing industry.

In fact, many of these are merely changes to the amortization and depreciation rate for up-front investments.  Typically, politicians of both parties have advocated for the current rules to encourage investment.  Now I suppose we are fine-tuning the rules, so that we encourage investment in the tax code in everything but oil and gas.  I will say this does seem to be consistent with Obama Administration jobs policy, which has been to try to stimulate businesses that are going nowhere and hold back the one business (oil and gas drilling) that is actually trying to grow.  I am fine with stopping the use of the tax code to try to channel private investment in politician-preferred directions.  But changing the decision rule from "using the tax code to encourage all manufacturing investment" to "using the tax code to encourage investment only in the industries we are personally sympathetic to" is just making the interventionism worse.

This is really weak.  Not to mention flawed.  Unless I am missing something, a change from LIFO to FIFO or some other inventory valuation rules will create a one-time change in income (and thus taxes) when the change is made.  LIFO only creates sustained reductions in taxable income, and thus taxes, if your raw materials prices are consistently rising (it actually increases taxes vs. FIFO if input prices are falling).  Given that oil and gas prices are volatile, its hard to see how this does much except extract a one-time tax payment from oil companies at the changeover.

By the way, I am pretty sure I would be all for ending government spending on "ultra-deepwater and unconventional natural gas and other petroleum research," though ironically this is exactly the kind of basic research the Left loves the government to perform.

Sent to Me from Virginia

HT to my sister



Before You Buy Those Cheap Computer Speakers....

I have invested some decent (but not stupid) money on my home stereo, but I have realized I listen to my crappy computer speakers about 3 times more.

So here is the first step in my upgrade, a pair of powered studio monitor speakers.  At under $200 a pair, they are not that much more expensive than higher-end computer speakers.   These are built for near-field listening and sound much better than most computer speakers.  The one I chose are a tad large, but I have loved them so far, even without a subwoofer.  These particular units are cheaper at Amazon by $10 but Sweetwater has better selection and help choosing studio monitors.  Just make sure you have the cable situation sorted out -- most studio monitors take a special 3-prong balanced XLR input common in high end and pro audio but not in most consumer audio.  But you can easily find a number of converter cables.

If I keep listening at my computer, the next improvement step is an inexpensive DAC (which can correct a lot of mess in computer digital audio).

Justice, Rich and Poor

Ken at Popehat has some good thoughts, prompted by the dropping of the rape case against Dominique Strauss-Kahn.

The critical narrative holds that this case shows that the rich and the powerful are above the law. I’m not so sure. I don’t believe the DA took this route because he was afraid to prosecute a rich and powerful man, or as a favor to rich and powerful forces behind the curtain. But there’s no doubt that money and power get you a vastly better chance of this result. They get it because rich and powerful people can field a team of lawyers and investigators to find problems with the case. Those problems are often there — but usually the defendants don’t have the money to hire teams of people to find them. The rich and the powerful draw media attention, which leads to people coming forward with information that might not otherwise come out. Sometimes this hurts the defense, but just as often it yields critical impeachment evidence about prosecution witnesses. Perversely, this case shows how wealth and power and lead prosecutors to discover flaws in their own case. Most rape cases wouldn’t get anywhere near the police and prosecutorial scrutiny that this one did. But the police and the DA knew they were under the spotlight, and knew that Strauss-Kahn could field a serious team, and devoted vast resources to the case — resources that revealed issues that might never have been discovered in a rape case against the poor and the obscure.

Why decry the quality of justice that the rich and powerful get, when we could decry the level of justice that the poor get? The justice that the rich and powerful get illustrates how the system can meticulously test the adequacy of evidence against an accused. Why not try to raise every defendant closer to that level, rather than suggest that we ought to tear down the adequate justice available to the few? Believe me, the government lovesthat narrative — loves it when people view a vigorous and thorough defense as some sort of scam to be scorned. Resentment of the justice that Strauss-Kahn can afford is the government’s weapon, which it wields to get you to accept steadily less and less justice in every other case.

I am sure there are situations where the rich get a special break, but anyone who wants to argue that they systematically get off easier has to explain Martha Stewart, who went to jail not for insider trading by lying to the police, a charge no street hustler would ever be brought to court on.  And how about Barry Bonds, on whom the full force of and resources of the US Government is focused for a crime I can find going on in about any Gold's Gym in the country.

The imbalance of wealth and power are on the prosecution side, and politicians trying to get elected propose laws constantly to increase this imbalance.  The rich have the resources to stand up to this onslaught, the poor often do not.

Could Anyone Hope For A Better Epitaph?

Major Justification for GM Bailout Falls Apart

As GM was failing, I argued for the normal laws of bankruptcy to be allowed to work.  After all, valuable brands and manufacturing facilities were not just going to go *poof* -- someone would purchase them and employ them, and hopefully those someone's would to a better job than the previous owners and managers.

A big part of the "logic" for bailout and Presidential intervention in the auto companies was that auto purchases would halt if consumers were unsure whether their warranties would be honored and service would be available.

From an AP story, November 13, 2008

Advocates for the nation's automakers are warning that the collapse of the Big Three - or even just General Motors - could set off a catastrophic chain reaction in the economy, eliminating up to 3 million jobs and depriving governments of more than $150 billion in tax revenue.

Industry supporters are offering such grim predictions as Congress weighs whether to bail out the nation's largest automakers, which are struggling to survive the steepest economic slide in decades....

Automakers say bankruptcy protection is not an option because people would be reluctant to make long-term car and truck purchases from companies that might not last the life of their vehicles.

Well, it turns out that this was partially bogus.  The written warranties are still honored, but GM argues it left liability for any defects or design problems in the old shell company

General Motors Co (GM.N) is seeking to dismiss a lawsuit over a suspension problem on more than 400,000 Chevrolet Impalas from the 2007 and 2008 model years, saying it should not be responsible for repairs because the flaw predated its bankruptcy.

The lawsuit, filed on June 29 by Donna Trusky of Blakely, Pennsylvania, contended that her Impala suffered from faulty rear spindle rods, causing her rear tires to wear out after just 6,000 miles. [ID:nN1E7650CT]

Seeking class-action status and alleging breach of warranty, the lawsuit demands that GM fix the rods, saying that it had done so on Impala police vehicles.

But in a recent filing with the U.S. District Court in Detroit, GM noted that the cars were made by its predecessor General Motors Corp, now called Motors Liquidation Co or "Old GM," before its 2009 bankruptcy and federal bailout.

The current company, called "New GM," said it did not assume responsibility under the reorganization to fix the Impala problem, but only to make repairs "subject to conditions and limitations" in express written warranties. In essence, the automaker said, Trusky sued the wrong entity.

"New GM's warranty obligations for vehicles sold by Old GM are limited to the express terms and conditions in the Old GM written warranties on a going-forward basis," wrote Benjamin Jeffers, a lawyer for GM. "New GM did not assume responsibility for Old GM's design choices, conduct, or alleged breaches of liability under the warranty."

Of course, this happens all the time in bankruptcy  (and it is my experience, but I am not a legal expert) that GM may or may not succeed in this argument.  It is not always possible to leave liabilities behind in an old corporate shell, or else companies would reorganize every year.

But the point is that the special treatment of GM was supposed to be to protect consumers, and that turns out to be BS.  The warranties were likely always going to be protected in any bankruptcy, as such consumer benefits nearly always are in chapter 11 (the fact that you still hold any frequent flyer miles is proof of this, as nearly every airline in the country has been through chapter 11 in the last couple of decades and none of them disavowed their frequent flyer miles, despite the fact that holders are the most unsecured of unsecured creditors).


Social Security Disability Payments on the Rise

From Robert Powel at Yahoo Finance

On the contrary, Landis noted that disability claims are up, as are SSI public assistance claims. And to some, including John Laitner, the director of the University of Michigan Retirement Research Center, that spells trouble.

The Old Age Survivors Insurance (OASI) fund, from which retirement benefits are paid, continues to grow modestly, Laitner said. The OASI fund is expected to grow from $2.4 trillion in 2010 to an estimated $2.5 trillion in 2011. (See page 3 of Facts & Figures.) But the Disability Insurance (DI) trust fund is shrinking, and has reached a very low level. The DI fund is expected to fall from $180 billion in 2010 to an estimated $154 billion in 2011.

What's more, disability awards have grown faster since 1970 than those for retirees, Laitner said. The annual number of awards to disabled retired workers rose from 1.3 million in 1970 to 2.6 million in 2010, while for disabled workers it increased from 350,000 in 1970 to 1 million in 2010. And if that wasn't bad enough, the average age of retired beneficiaries has risen slightly since 1960, but the average age of disabled beneficiaries has fallen.

According to Facts & Figures: "The average age of disabled-worker beneficiaries in current-payment status has declined substantially since 1960, when DI benefits first became available to persons younger than age 50. In that year, the average age of a disabled worker was 57.2 years. The rapid drop in average age in the following years reflects a growing number of awards to workers under 50. By 1995, the average age had fallen to a low of 49.8, and by 2010, it had risen to 52.8. By contrast, the average age of retired workers has changed little over time, rising from 72.4 in 1960 to 73.7 in 2010." (See page 17.)

Said Laitner: "In my opinion, long-run concerns about the financial solvency of both OASI and DI are warranted, but between the two, DI seems to raise the most immediate alarm."

I only have anecdotal evidence, and that can be dangerous, but I cannot tell you how many fully able-bodied people come to our company and say "I have a lifetime full disability payment but I am fully able to do any work.  I can't show any income because I would lose my disability... can you pay me under the table somehow? [of course we cannot]."  My strong suspicion from observing the disability process from the outside is that there is a ton of fraud.

I have met people whose lifetime dream and goal is to get a disability designation.  I once had a worker who was applying for a full disability.  Asked by someone in the process about my assessment of her ability, I submitted some material about her job requirements and the types of things she seemed able to do.  She actually hired a lawyer who threatened to sue me if I in any way interfered with the process of her getting her disability designation.  It may not seem like a fortune to you or I, but I have met a number of folks who treat a lifetime disability designation as equivalent to hitting the lottery.

Of course, reform here will be nearly impossible.  You only have to look at some of the public employees groups that have lucrative disability programs where union-vetted doctors routinely handout disability designations to nearly every retiree.  Any attempt at reform will merely be met with heart-rending stories in the media about folks with true disabilities needing help, ignoring the fact that any effort to cut down on fraud is actually to help these folks by insuring the financial solvency of the fund that pays them.

This Guy Has Some Skills