Coyote Blog

How the recent "fairness" tax bill became a vehicle for subsidizing connected corporations.

Baucus' Finance Committee passed a bill in August extending 50 expiring deductions and credits for favored industries. At Obama's insistence, the Baucus bill was cut and pasted word for word into the cliff legislation. Set aside for a moment how this contradicts Obama's talk about "fair shares" and the need to diminish the influence of lobbyists, and look at what this raft of tax favors shows us about the Baucus Machine.

Pick any one of the special-interest tax breaks extended by the cliff deal, and you're likely to find a former Baucus aide who lobbied for it on behalf of a large corporation or industry organization.

General Electric may have been the biggest winner from the cliff deal. GE makes more wind turbines than any other U.S. company, and it lobbied hard for extension of the wind production tax credit. But more important for the multinational conglomerate was an arcane-sounding provision that became Section 222 of Baucus' bill and then Section 322 of the cliff bill: "Extension of subpart F exception for active financing income."

In short, this provision allows multinationals to move profits to offshore financial subsidiaries and thus avoid paying U.S. corporate income taxes. This is a windfall for GE: The exception played a central role in GE paying $0 in U.S. corporate income tax in 2011 when it made $5.1 billion in U.S. profits.

Peter Prowitt, formerly Baucus' chief of staff, is now an in-house lobbyist and VP at GE. GE filings show Prowitt on the lobbying teams that won wind-tax credits, electric-vehicle tax credits, and "Extension of Subpart F Deferral for Financial Services."

The examples in the article go on and on.  The best way to get rich in America is not to have a great idea or work hard but to hire an ex-staffer from Senator Baucus's office.

The various cities in the Phoenix metropolitan area have spent a fortune renovating ten spring training fields for 15 major league teams.  I have seen a number like $500 million for the total, but this seems low as Scottsdale spent $100 million for just one complex and Glendale may have spent as much as $200 million for theirs.  Never-the-less, its a lot of taxpayer money.

The primary subsidy, of course, is for major league teams that get lovely facilities that they use for about one month in twelve.

But these subsidies always get sold on their community impact.  But that economic impact turns out to be really narrow.  For in-town visitors, the economic impact is typically a wash, as money spent on going to sports games just substitutes for other local spending.  But these stadiums are held up as great economic engines because they attract out of town visitors:

Cactus League baseball and year-round use of its ballparks and training facilities add an estimated $632 million to Arizona economy, according to a study released Monday by the Cactus League Baseball Association.

The study found that 56 percent of the 1.7 million fans attending games this past spring were out-of-state visitors and the median stay in metro Phoenix was 5.3 nights.

Spring training accounted for $422 million in economic impact in 2012, up 36 percent from the previous study in 2007. Both were done by FMR Associates of Tucson.

One of the flaws of such studies is they never, ever look at what the business displaces.  For example, for local visitors, they never look at local spending sports customers might have made if they had not gone to the game.  All spending on the sports-related businesses are treated as incremental.   For out-of-town visitors, no one ever considers other visitors coming for non-sports reasons who are displaced (March was already, without all the baseball, the busiest hotel month in Phoenix) or considers that some of the visitors might have come to the area anyway.

However, let's for one moment of excessive credulity accept these numbers, and look at the out of town visitors.  56 percent of 1.7 million people times 5.3 nights divided by 2 people per room is 2.52 million room nights, or at $150 each a total of $378 million.   So most of their spring training economic impact is hotel room nights.  This by the way is the same logic that supports various public subsidies of local college bowl games.

Which begs the question, why are we spending upwards of a billion dollars in taxpayer money to subsidize sports teams and hotel chains?  If the vast majority of the economic impact of these stadium investments is for hotels, why don't they pay for them, or split the cost with the teams?

PS- as an aside, it seems that to be successful in the corporate state, one needs ready access to consultants who will put absurdly high numbers on the positive impact of one's government subsidies.  It's like money laundering, but with talking points.  Take your self-serving spin, hand it with a bunch of money to a consultant, and out comes a laundered "study".  In this case, the "study" architects are FMR Associates, which bills itself as specializing "in strategic research for the communications industry."  The communications industry means "PR flacks".   So they specialize in making your talking points sound like they have real research behind them.  Probably a growing business in our corporate state.

From Walter Olson

According to the New York Times, French Socialist president François Hollande demanded and received the dismissal of the editor of Le Figaro, the country’s leading conservative newspaper. If that sounds impossibly high-handed, consider the background, as reported in the Times:

The publisher, Serge Dassault, is a senator from [ousted President Nicolas] Sarkozy’s political party [and thus opposed to Hollande]. But Mr. Dassault also heads a major military contractor, and there was widespread speculation that [Figaro editor Étienne] Mougeotte’s ouster was meant to put the Dassault group in good stead with the new president.

For an American reader, it would be natural to turn the page with a murmur of thanks that such things don’t go on in our country. Don’tbe so sure:

[Since-convicted Illinois Gov. Rod] Blagojevich, Harris and others are also alleged [in the federal indictment] to have withheld state assistance to the Tribune Company in connection with the sale of Wrigley Field. The statement says this was done to induce the firing of Chicago Tribune editorial board members who were critical of Blagojevich.

Read the whole thing.  He has an interesting story about Ted Kennedy passing legislation to force a change in ownership of the Boston paper most consistently critical of him.

Presented without comment (source).

The source is an agency in PA so I don't know if this is a state phenomenon there or if this is US data

For years I have argued that Obama is leading us to a European-style corporate state rather than socialism per se (though the two have many things in common).  It seems like his defenders on the Left have figured that out, and are getting on board.

The other day, Kevin Drum seems to agree with a Washington Monthly article that defends corporatism in the name of attacking it.  In this case, it was an example from the beer industry:

Prior to the 2008 takeover, Anheuser-Busch generally accepted the regulatory regime that had governed the U.S. alcohol industry since the repeal of Prohibition. It didn’t attack the independent wholesalers in control of its supply chain, and generally treated them well. “Tough but fair” is a phrase used by several wholesale-business sources to describe their dealings with the Busch family dynasty. Everyone was making money; there was no need to rock the boat.

All that changed quickly after Anheuser-Busch lost its independence....Today, with only one remaining real competitor, MillerCoors, the pressure it can put on its wholesalers is extraordinary. A wholesaler who loses its account with either company loses one of its two largest customers, and cannot offer his retail clients the name-brand beers that form the backbone of the market. The Big Two in effect have a captive system by which to bring their goods to market.

.... So distributors are caught in an impossible bind: they either do the brewer’s bidding, including selling their businesses to favored “Anchor Wholesalers,” or they lose Anheuser-Busch InBev as a client. And if the wholesalers try to push back? Anheuser-Busch InBev will get rough.

I don't know if this is just tremendous ignorance or some sort of calculated scheming.  The article decries the growing power of beer manufacturers vis a vis liquor distributors, and wants to call this some sort of slide into corporatism.    Actually just the opposite is true -- what we see is Anheuser-Busch taking on some of the largest beneficiaries of government cronysism:  the liquor wholesalers.

The liquor distribution scheme, and resulting government enforced monopolies, created post-Prohibition have been the worst sort of corporate statism, and what is going on here is that the beer manufacturers are finally fed up with it.  Regional liquor wholesalers are generally some of the most politically powerful forces in local and state politics.  These distribution monopolies have all created multi-millionaire owners who deploy money and political clout to prevent any changes in law that might weaken their government-enforced monopoly position.  Wonder why you still can't mail order from Amazon that bottle of California Merlot -- thank the liquor wholesale lobby.  Without all this government protection of distributors, the soft drink business went through identical changes, relatively quietly, decades ago.

This whole liquor distribution scheme we have today is consistent with FDR's corporatist thinking (he was a great admirer of the economic aspects of Mussolini's fascism, and modeled the National Recovery Act after this Italian system).  But it is also thoroughly anti-consumer, and has both raised prices of alcohol to consumers as well as stifled innovation and competition.  We are living in a glorious age of incredible micro-brew choice, but this almost didn't happen.  The biggest hurdle these early pioneers had to clear was cracking this liquor distribution monopoly.

I find it incredible that a Progressive like Drum sees fit to defend such a system and castigate Anheuser-Busch for challenging it.  It is even more amazing to see him positing that anti-trust is all about protecting millionaire corporate players in one part of the supply chain from billionaire corporate players in another part.  I have said for years that anti-trust has been corrupted from protecting consumers to protecting weaker competitors, even when this protection hurts consumers  (remember, Microsoft was convicted of anti-trust violations for giving away free stuff to consumers).  I just am amazed that the Left has come so far that it has now openly adopted this view of anti-trust.

Update:  Here is another example of the Left describing market attacks on a government-protected corporation "Corporatist."  There are always beneficiaries of deregulation (consumers being the most unsung of these).  It is crazy and disingenuous for the Left to call those who win in a newly deregulated market "cronies."

I got a lot of email that Republicans aren't libertarians and to stop complaining that they are not.  OK.  But let's look at their campaign messaging in the context of their own values.

Republicans had a golden opportunity to use the results of a natural experiment over the last four years between red and blue states.  Obama constantly harped on the fact that 3.5 million new jobs had been created on his watch.  Rather than play dueling statistics or end points in this analysis, the Republicans should have taken advantage of existing red/blue data:

Yes.  And the vast majority of these jobs were created in states like Texas which have been successful precisely because they have labor and tax policies which you, Mr. Obama, oppose.  And they have been created in industries like Oil and Gas production that you, Mr. Obama, have done your best to hinder.  All the jobs you claim to have helped to create were actually facilitated by a philosophy of government you oppose, by regulatory policy you would overturn if you could, and in industries you would prefer did not exist.   States like Texas -- with organic growth driven by private capital -- stand in stark contrast to your investments of our taxpayer money in bankrupt companies like Solyndra.   If you had had your way, Mr. Obama, few of these jobs would have been created.  Yes, this country saw some job creation, but it occurred despite your efforts, not because of them.

Instead of this clear kind of message, we get a bunch of wonky stuff about tax deductions vs. tax rate changes.  Heck, even if you told me I had to run my campaign on the single plank of eliminating tax deductions, I could have done a better job.  I saw this part of the debate that Romney supposedly won.  His explanation was lame.  What about this instead:

This country over the past several decades has increasingly become plagued by cronyism.  Whether it be Wall Street bankers or public employees unions or casket sellers in Louisiana, everyone wants to try to convert influence with the government into taxpayer money for themselves.  We have to end this.  And a good place to start is with the tax code.  Every special deduction and tax credit in the tax code is a giveaway to some special interest.  At best it is a misguided attempt, like the money we wasted in Solyndra, of politicians to try to pick winners and losers, to say that one kind of spending is somehow better than another.  At worst, these deductions are a crony giveaway.  Sure, it's  eliminating these deductions will help reduce the deficit.  But even more importantly, eliminating them would be an opening shot in the war to take cronyism and corporatism out of Washington.

I don't know if its the distance from the Mainland or something about its history, but Hawaii often appears to be among the worst states for regulatory capture by local businesses.  This example was brought to me by a co-worker, who lives in AZ but wants to buy a condo in Hawaii.  They want the condo for their own use, but also hope to rent it out.  This kind of model is more appealing nowadays given the ease (and low cost) with which one can advertise rentals on various Internet sites.

But not so fast, not in Hawaii.  In legislation that reminds be of stuff from the 1990's when businesses tried to fight Internet-driven disintermediation, Hawaii is proposing to force non-Hawaiians to use a local broker to list their rental properties.  Apparently local residents can still list their properties on low-cost Internet sites, but folks on the mainland (also known as "the United States") must use a high-cost locally licensed broker, who typically charge 50% of rental fees as a commission.  These type of commission rates are farcical - they imply that fully half the value of a one-week condominium stay is due to the broker, not the condo itself, its location, etc.  The only way brokers can charge these fees is by maintaining a tight cartel enforced by government licensing laws.

Any reasonable person will look at this law and immediately know it is about crony protection of local real estate brokers.  Of course, that is not what the law says.  It is all about "consumer protection"

The legislature also finds that requiring nonresident owners to employ a licensed professional such as a real estate broker or salesperson or a condominium hotel operator is an important consumer protection measure. Consumers who use real estate companies, real estate brokers, real estate salespersons, or condominium hotel operators for their transient accommodation rental needs can do so with the knowledge that all money generated will flow through a client trust account, the appropriate federal tax form 990s will be generated, and accurate transient accommodations taxes and general excise taxes will be paid. Real estate companies, real estate brokers, real estate salespersons, and condominium hotel operators must comply with specific licensing and bonding requirements, thus offering additional protections for consumers.

So consumer protection is defined as making sure taxes get paid and the government forms get filled out.  Because God knows my entire vacation would be ruined if Federal tax form 990 was not filled out properly.

This is total BS, and Milton Friedman called it years ago when he wrote on licensing:

The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.

This is also a great example of voters agreeing to add costs on everyone but themselves.  If the almost inevitable Constitutional concerns with this law forced in-state and out-of-state condo owners to be treated equally, local owners would immediately push back, hard, against the costs this law would impose.  Only  by structuring this law to apply to those annoying out-of-staters could it ever be passed.

I have been considering taking advantage of low prices in Hawaii to buy a condo, but I may rethink that plan given this pending legislation.

Companies and assets don't go *poof* in a bankruptcy.   In fact, if any of you are even somewhat of a frequent airline flyer, over the last 10 years you likely flew an airline in bankruptcy.  Companies operate all the time, sometimes for years, out of Chapter 11.  In fact, that is what chapter 11 is all about -- helping creditors get more value from a company by keeping it in operation  (only in truly hopeless cases, like Solyndra, is liquidation a higher value outcome for creditors than continued operation).

As such, then, the Obama Administration did not "save" GM and Chrysler, it simply managed their bankruptcy to political ends, shifting the proceeds from those guaranteed them by the rule of law to cronies and political allies.  In the process, they kept these companies on essentially the same path that led them to bankruptcy in the first place, only with a pile of taxpayer money to blow so they could hang around for a while.

To this end, the WSJ has a great editorial on the whole mess

In a true bankruptcy guided by the law rather than by a sympathetic, rule-bending political task force, GM and Chrysler would have more fully faced their competitive challenges, enjoyed more leverage to secure union concessions, and had the chance to divest money-losing operations like GM's moribund Opel unit. True bankruptcy would have lessened the chance that GM and Chrysler will stumble again, a very real possibility in the brutally competitive auto industry.

Certainly President Obama threw enough money at GM and Chrysler to create a short-term turnaround, but if the auto makers find themselves on hard times and return to Washington with hats in hand, his policy will have been no rescue at all.

I will refer the reader back to my editorial way back in 2005 why it was OK to let GM die

Workers get tax money to play cards

Workers at LG Chem, a $300 million lithium-ion battery plant heavily funded by taxpayers, tell Target 8 that they have so little work to do that they spend hours playing cards and board games, reading magazines or watching movies.

They say it's been going on for months.

"There would be up to 40 of us that would just sit in there during the day," said former LG Chem employee Nicole Merryman, who said she quit in May.

"We were given assignments to go outside and clean; if we weren't cleaning outside, we were cleaning inside. If there was nothing for us to do, we would study in the cafeteria, or we would sit and play cards, sit and read magazines," said Merryman. "It's really sad that all these people are sitting there and doing nothing, and it's basically on taxpayer money."

Two current employees told Target 8 that the game-playing continues because, as much as they want to work, they still have nothing to do.

"There's a whole bunch of people, a whole bunch," filling their time with card games and board games," one of those current employees said.

Via the WSJ, the Solyndra scam continues

Having sold off its manufacturing plant, fired nearly 1,000 workers and proven the non-viability of its business model, Solyndra's only real assets are what the IRS calls "tax attributes." These are between $875 million and $975 million in net operating losses that can reduce future taxable income, which the IRS values as high as $350 million. Before it went toes up, Solyndra also accumulated $12 million in solar tax credits that can reduce tax liabilities dollar for dollar.

Tax-loss carry-forwards are routine but worthless if a company can't turn profits to pay taxes on. So Solyndra's owners are asking the court to liquidate the rest of the business and contribute a net $6.7 million to pay off creditors for pennies on the dollar. A holding corporation will then emerge from Chapter 11 that won't make products or employ workers, but it will get the Solyndra tax offsets.

The dummy company is owned by Argonaut Ventures I LLC, Solyndra's largest shareholder and the primary investment arm of the George Kaiser Family Foundation. Mr. Kaiser is a Tulsa oil billionaire who bundled campaign checks for Mr. Obama in 2008.

Wow, who could have predicted this?   Well, lots of folks, including me just over a year ago.   I actually underestimated the value, assuming the losses would be worth about $150 million in avoided taxes, not the $350 million the IRS now pegs them at.  If I can figure out this game, the Obama Administration had to know what was going on.

If the Administration allows this to happen (and remember that in the GM boondoggle,  Obama waived the traditional rules that have bankrupt companies losing their tax loss carryforwards, giving GM a multi-billion dollar tax subsidy almost no one counts in the bailout costs), this will make Kaiser's last cash investment in Solyndra one of the great crony deals of all time.

If you remember, Kaiser (via Argonaut) invested $75 million as Solyndra was going down the tubes.  No rational person could have thought that amount would have saved the company, and it didn't.  What it bought, we now know, is three things:

• Kaiser got the US Government to give up their lead creditor position to Kaiser, basically putting the US Government behind the Obama donor to get repaid and reducing the taxpayers' influence in the bankruptcy
• It gave Kaiser a few precious months to loot the company.  Between that $75 million investment and the bankruptcy, Solyndra sold off most of its liquid assets at a discount to .... Argonaut, the group controlled by Kaiser
• It looks like Kaiser will get nearly a billion dollars in tax losses that can be used to reduce its future taxes by $350 million.

JP Morgan finds itself under the government microscope for having heartlessly... cooperated with the government four years ago

The U.S. Department of Justice and New York Attorney General Eric Schneiderman teamed up last week to sue J.P. Morgan in a headline-grabbing case alleging the fraudulent sale of mortgage-backed securities.

One notable detail: J.P. Morgan didn't sell the securities. The seller was Bear Stearns—yes, the same Bear Stearns that the government persuaded Morgan to buy in 2008. And, yes, the same government that is now participating in the lawsuit against Morgan to answer for stuff Bear did before the government got Morgan to buy it....

As for the federal government's role, it's helpful to recall some recent history: In the mid-2000s, Bear Stearns became—outside of Fannie Mae and Freddie Mac—perhaps the most reckless financial firm in the housing market. Bear was the smallest of the major Wall Street investment banks. But instead of allowing market punishment for Bear and its creditors when it was headed to bankruptcy, the feds decided the country could not survive a Bear failure. So they orchestrated a sale to J.P. Morgan and provided $29 billion in taxpayer financing to make it happen.

The principal author of the Bear deal was Timothy Geithner, who was then the president of the Federal Reserve Bank of New York and is now the Secretary of the Treasury. Until this week, we didn't think the Bear intervention could look any worse.

Somewhere there was a legal department fail here - I can't ever, ever imagine buying a company with Bear's reputation that was sinking into bankruptcy without doing either via an asset sale or letting the mess wash through Chapter 7 so there could be an old bank / new bank split.  But Bank of America made exactly the same mistake at roughly the same time with Countrywide, so it must have appeared at the time that the government largess here (or the government pressure) was too much to ignore.

I work in a small, four-story suburban office building.  I have seen our fire drills and can look out at our parking lot, and I would be surprised if there are 200 people in the building.    A few months ago some division of Chrysler moved in and took a bunch of the space.   A lot still remains empty (which is why I am here -- cheap!)

The Chrysler folks put a sign downstairs a few days ago saying that they would be hosting a luncheon for the building.  Great, I thought, a free hot dog and some fruit salad.  Imagine my shock when I saw this when I arrived today:

Chrysler sent three full semi-trailers, one of cars and two of convention-type booths and displays, plus a whole crew of people to set this up, all for a lunch in our building with less than 200 people.  I thought maybe that we were just getting a preview of a larger public event, but I am looking out my window now and they are tearing down again.  Crazy.

One thing that even many libertarians get wrong:  Wasting money is not unique to government entities.  Private and public entities can become senescent, and grow bureaucracies that lose focus on what they are supposed to be doing.  The difference between the private and the pubic sphere, though, is that for private companies, markets eventually enforce discipline (either forcing change or killing off the bloated entity).   There is no similar mechanism for state agencies short of perhaps absolute bankruptcy, and Greece is proving even that is not enough to force change.

Of course, when the government gives large private entities with political pull special protections and bailouts, then no such accountability is enforced.  The same people are operating the company with the same false assumptions and unlearned lessons.

I found this article in the Arizona Republic, our local rag, almost criminal.  As far as it goes, I think the facts are correct.  What is amazing is what it leaves out.  First, the article:

Glendale administrators propose cutting nearly a quarter of the city's employees, or 249 positions, if voters approve a ballot measure in November to repeal a sales-tax hike.

Repeal of the 0.7 percentage-point tax hike that took effect last month would mean the loss of $11 million this year and $25 million annually through 2017, according to city estimates.

The City Council had approved the temporary increase to shore up its deficit-ridden general fund after laying off 49 employees and cutting $10 million from departments at the start of this fiscal year....

Proposed cuts include shuttering two of the three city libraries, one of its two aquatic centers, the TV station and all city festivals, including Glendale Glitters.

The article continues with the usual panic about cuts in police and firefighters and libraries and parks,  etc. etc.  What the article does not mention except in passing in paragraph 12 is the reason for the tax increase and the budget problems in the first place.  Over heated opposition in the community, the City Council, which has enjoyed pretending to be big shot Donald Trumps over the last few years with taxpayer money, handed a private individual $25 million a year to keep the ice hockey team in town, an ice hockey team that has the lowest attendance in the league despite doing fairly well the last few years.  This is on top of years of other subsidies and the taxpayer-funded $300 million stadium.   The numbers line up exactly -- a new $25 million a year subsidy and a new $25 million a year tax, and the paper cannot even connect these dots, even when they were directly connected in real time (ie the tax was specifically justified to pay for the subsidy).

What the article entirely fails to mention is that, given no voice in these corporatist extravagances in Glendale (the tiny town of 250,000 has also subsidized an NFL franchise and a couple of MLB teams), the only way the citizens of this town have any way to exercise accountability is to vote down the tax that enables this corporate handout.  They were not allowed to vote on the deal itself.  This is not a bunch of wacky red-staters voting to decimate the parks departments, as the city and the paper would like you to believe, but a citizenship that is tired of the idiotic corporate cronyism in the Glendale city council and are looking for some way, any way, to enforce some accountability.

This is the media and the state in bed together promoting the larger state.  Glendale's problems are entirely self-imposed, spending huge amounts of tax money on subsidizing sports teams and real estate ventures.  When these all failed like so many Solyndras, they are trying to make this out to be a tax shortfall, when in fact it is spending idiocy.

The media always seems to participate as a cheerleader in this statism, but local papers have a special interest in promoting this sort of sports corporatism.  Just about the only thing that sells dead-tree newspapers any more is the sports section.  I would love to see what would happen to circulation rates if they cut the sports section.  So any state actions that add professional sports franchises or keeps them in town contribute directly to the newspapers' survival.

I thought this was an interesting example of creative destruction.  Five years ago, Time and Newsweek were running cover stories about the "Blackberry" culture and how ubiquitous the device was in modern business.  Now, people are making fun of it for being outdated tech.  If only we could get the average voter to truly appreciate creative destruction.  We might have fewer bailouts and more economic growth.

By the way, Canada says it won't bail out Blackberry, which is good, but is interesting given that it did bail out the Canadian automotive sector just a few years ago.  In terms of total market value I would guess the Canadian automotive sector is way smaller than Blackberry at its peak.  Only a cynic would suggest the difference is that the auto sector is unionized and therefore politically organized to generate campaign donations and grass roots get-out-the-vote efforts, while RIM is not.  That would imply that bailouts were due to political pull rather than sound and consistent economic reasoning, which I am sure can't possibly be true.

PS- there are still good and valid reasons for enterprises, like the Administration and government agencies, to use the Blackberry over smartphones.  Just because they are out of favor with 16-year-old girls does not mean they don't have utility. Oddly, though, given this particular niche and comparative advantage, RIM seems to be obsoleting its installed base of enterprise servers.   I am not an expert, but I think a lot of enterprises would stick with Blackberry for quite a while just out of inertia and lack of desire to change.  But now that Blackberry is forcing them to rethink their whole enterprise platform anyway, it seems to allow other competitors solutions into play.  Or am I missing something?

Update:  Apparently RIM is saying the previous paragraph is incorrect, that the new servers will support all the old devices ... except for email, calendar, and contacts.  Unfortunately, this seems to encompass the entire Blackberry functionality.  I have had one or two of the devices, and you are a nut if you are trying to surf the web on one as your main usage.

This is from an article in Distro, free publication that Engadget pushes to my iPad.  The only version I can find to link to is this pig of a pdf.  The article is on 38 Studios, the Curt Shilling video game company that the taxpayers of Rhode Island lost over $50 million funding.  This is a justification for a similar tech funding program in Nevada:

“The Catalyst Fund and the NCIC Fund are two of the best things that have happened in Nevada in the time that I’ve been here,” he said. “The biggest challenge facing Nevada is that we have very little in the way of risk capital. Our funding capacity is only a fraction of what our actual funding needs are.”

Meanwhile, most of the limited venture money available in the area tends to be in the hands of investors who lack familiarity with the tech sector, said Colin Loretz, co-founder and CEO of Web-based  startup Cloudsnap. Loretz — whose company recently received support from startup accelerator TechStars — ended up going out of state to secure funding from investors in San Antonio and San Francisco.

“What we’ve always found was that there were few funding options in Reno, and most of them didn’t understand what we were doing,” Loretz said. “They were very, very knowledgeable in more traditional areas such as manufacturing, mining and clean energy, but not cloud services.”

This is simply bizarre.  Why does every single geographical box we might draw on the map need to be self-sufficient in tech venture capital?  What is the big deal about going out-of-state for investment.  It can't be hard to do, since the person speaking actually did exactly that himself.

According to Google Maps, Sand Hill Road, the epicenter of tech venture capital, is just 4 hours and 24 minutes from downtown Reno by car.  That makes the venture capitalists in Menlo Park closer to Reno than to LA.  What is the big freaking deal that makes it so important for Nevada to have in-state tech venture capital, even at the cost of blowing a lot of taxpayer money to get there?

By the way, I thought this was a funny adjunct to that justification:

Meanwhile, Nevada officials said they have learned from the problems experienced by other states and built the necessary protections into their programs. Management of the NCIC fund, for example, will be overseen by a private equity firm, said Nevada State Treasurer Kate Marshall.

We need a state private equity fund because we have no private equity expertise in Nevada.  The state fund will be run well because we will put the (supposedly nonexistent) state private equity experts in charge of it.  Not to worry.  No chance at all that this state money will just be used to back and bail out the private equity managers' investments.

The article is light on details about how the whole Rhode Island debacle went down.  I would really like to find a step by step history that shows how debacles like this occur.

I got a call today from the National Conference of Mayors.  They wanted to send somebody by to talk to me about just how committed these great folks were to small business success.

The call began poorly, as their representative tried to use a tactic I mostly only get from penny-stock boiler rooms - pretending that she and I had talked some time in the past and that I had committed to meeting with her.  I suppose this tactic might have worked with a frazzled exec, but it is one sure fire way to immediately get me pissed off in a phone call.  After telling her that she and I had no such call and that I did not appreciate the cheap telemarketing tactic, I said that I had absolutely no desire to help the mayors put some fake pro-business patina on their activities that are generally hostile to commerce and free markets.   I told them that I did not want a subsidy, handout, any special access, training programs, etc., I just wanted to be left alone.  I was not going to participate in some program where I get my picture taken shaking some politicians right hand while he is whacking me with a stick with his left.  The representative, to her credit before she hung up, admitted she gets this reaction a lot.

One only has to look at their "plan" (pdf)  to see what their vision entails for "helping" small business.  Here is a summary of the planks:

1. More Federal spending on local infrastructure
2. More Federal unemployment spending and lower Federal payroll taxes
3. Create new Federal subsidy and loan programs and job training programs for businesses in favored, sexy-sounding industries (e.g. "manufacturing" or "high-tech").  I presume someone starting a restaurant or hair salon or without any political clout need not apply.  To their credit they also advocate free trade agreements and visa reform, though they then lose that credit by also advocating failed ideas like "trade adjustment assistance" and "metropolitan export plans"
4. More Federal spending in urban areas (police, job training, affordable housing, community development).

As will not be surprising, absolutely nothing in the Mayor's plans dealt with actual issues under their control, such as business, occupational, and occupancy licencing reform.   Also not surprisingly, the mayors call for hundreds of billions of dollars in new Federal spending narrowly aimed at urban areas without once explaining why these can't or shouldn't be funded locally.  If Los Angeles wants more money for its police, or trains, or schools, and if that spending has real demonstrable value to the city, then why can't they sell the new taxes and spending to their own citizens?  Why do they need the money from the Feds (ie from the rest of us)?

But you can just see the corporate state a work.  A few companies will cynically climb on board, knowing this is all BS, but also knowing that they will get a nice subsidy or sweetheart project in exchange for letting the majors check their "pro-business" box  (pro-business used here as distinct from pro-market).

From something called the Washington Free Beacon, via Real Science

Just days after the Export-Import Bank approved a multi-million dollar federal loan guarantee to benefit a mostly foreign-based wind-energy outfit, the company pink-slipped more than 200 American workers.

The Export-Import Bank, a federal agency that promotes and finances sales of U.S. exports to foreign buyers, approved a $32 million loan guarantee on Aug. 2 for a Brazilian firm to purchase wind turbines from LM Wind Power. According to itswebsite, LM Wind Power is headquartered in Denmark.

“Ex-Im Bank’s financing, which guarantees a Bank of America loan, will support approximately 250 permanent American jobs at the company’s Little Rock, Ark., and Grand Forks, N.D., manufacturing facilities,” the bank said in a release.

The company maintains a manufacturing presence in Arkansas and North Dakota—but the company laid off 234 of the Arkansas plant’s roughly 300 workers just two days after its loan was approved.

“We have this week told our workforce that we are re-sizing our workforce and business to fit our plans for 2013,” Adam Ruple, human resources director for LM Wind Power, told the City Wire of Arkansas.

A spokesman for LM Wind Power referred the Free Beacon to the company’s website.

When LM Wind Power came to Little Rock, Arkansas, in 2007, it said it would employ 1,000 people by 2012. But the global economic crunch led to diminishing demand. Three months before its loan guarantee was finalized, LM Wind Power announced its profits had fallen 41 percent last year.

It really takes some amazing stones to grab a $32 million subsidized government loan on the promise to add 250 jobs just days before a planned  234-person layoff.

In my younger, more naive days, I would have drawn the following lesson from this story:  "Never create a business plan predicated on subsidy checks from the government.  They may stop at any time."  I still think this is mostly true, as FirstSolar is finding out.  But my sense is that a range of folks from GE to Kleiner Perkins still get their checks.  So one may cynically rewrite the rule: "Never create a business plan predicated on subsidy checks from the government unless you are confident you have the political connections to guarantee and expedite the payments."

It seems like local solar company perfect power tried to feed at the government trough without actually having sufficient clout in the corporate state.  Bad idea

About 100 Arizona homeowners who paid $4,500 up front for solar-power systems fear they may never get their rooftop panels after being left waiting for months by the installation company.

Angry homeowners are demanding their systems or refunds. The company, Perfect Power Solar, is blaming the delays on federal government red tape.

Perfect Power owner Lynn Paige said the company has cash-flow problems because energy grants that were supposed to provide substantial funding of the solar systems aren't being approved quickly enough. She pledged to deliver the systems or refund all customers by the end of the year.

Treasury officials would not comment on the situation. Government e-mails sent to Paige suggest Perfect Power's grant applications were incomplete. In them, officials point to problems with submissions and warn of potential denials.

Industry experts and owners of other solar companies in Arizona said that the grant program is fraught with risks for solar companies and that some built business models based on future payments from the government without the financial reserves to cope with delays. They describe the situation as a high-tech gamble that some companies lost.

Residential solar-power systems cost $15,000 to $40,000. The Section 1603 grant program, part of the American Recovery and Reinvestment Act, offered developers cash to offset 30 percent of the costs. Although the program was not available to homeowners, some companies tapped the grants to sell residential solar systems as leases. A company would install and own the system, then lease it to a homeowner.

Program rules required developers to complete installations before they could apply for reimbursement. But funding was not guaranteed, and even after systems were built, the government delayed approval of some applications and denied others.

If this was one of Kliener Perkins' companies, for example, Ray Lane would just call the White House and get his money released. If your solvency depends on continued flow of taxpayer cash, you better have the clout to keep the money flowing or you are likely to get hosed.  Bureaucracies tend to have default answers of "wait" and "no".  Those are the answers average people without pull are going to get.  The "yes" goes to those who cut through the red tape from the top.  These yeses, like the ones to Solyndra, only make it more likely everyone else get the "no" answer, as the agencies need to show they are being particularly diligent to offset the impression of sloppiness they get from the Solyndra-type cases.

Retroactively, the company's leadership has figured this out, that to survived at the government trough, they have to go political

Paige has asked customers not to file complaints or talk to the media about problems the company is facing.

"It has been very unhelpful ... that a few customers have chosen to write very negative letters to the BBB," she wrote in a May e-mail to customers.

Instead of filing complaints, Paige said, customers should write to Arizona U.S. Sens. John McCain and Jon Kyl to request their help in freeing up the government grant money and to pressure the Treasury Department....

That month, the BBB revoked Perfect Power's accreditation and gave the company an F rating. The company had 16 complaints filed against it the past year. The registrar shows four open complaints against Perfect Power; a fifth complaint was listed as settled or withdrawn.

Forget about the customers.  Let's just focus our attention on our two Senators.

Here is an amazing bit of data on where the US corn crop goes:

The Department of Agriculture says the corn crop in the US will be down 13% due to the drought.  But corn available for food uses is down 40% due to the ethanol mandate.  You do the math.  Wait, I don't trust your math.  I will do it for you:

PS-  It's kind of amazing the supposed worst drought ever has dropped corn yields by just 13%.  Hurray for modern agriculture.   This year we will still produce about the same amount of corn we did in 2006.

Economists advocate for Federal funding of economists.  Because if there is anything economics has taught us, its that the Feds do such a good job at allocating resources.

Via the Unbroken Window  (arguing against personal interest, I suppose, since the author is a professor of economics)

In the past I have been critical of First Solar, like I have most solar companies, for having business models that were almost entirely dependent on huge government subsidies, particularly in Europe.  When these go away, the businesses start to crash.

I have not had time to dig into their financials to look for shenanigans, and to parse out how much is still dependent in some way on either direct subsidies of solar projects or incentives that cause utilities to buy solar electricity at above market rates, but First Solar reversed their large losses to a profit in the last quarter.  I am not sure if this is BS or not, but I like this attitude if true:

The company's cost per watt is the lowest in the industry, but it increased slightly during the quarter, to 72 cents per watt, because of the under utilization of its factories. If the factories had run more, the cost would have gone down, officials said.

Hughes said First Solar is making headway on its plan to target regions of the world with ample sunshine and a need for electricity, where solar power can compete without subsidies that make it cost-effective when compared with traditional energy sources.

Those places include Australia, India, the Middle East and other regions, he said.

That would be terrific.  I would love to see a solar boom driven by real economics and not taxpayer largess.

That is the subject of my post this week at the Privatization Blog

The whole topic of licensing as anti-consumer efforts to restrict competition is a long-running one here.   Since I am sort-of-kind-of not-blogging right now, I won't excerpt or comment on it a lot, but this is a very interesting piecelooking at internal documents of the American Dietetic Association discussing their efforts to pass laws in various states that essentially ban anyone but their members from giving diet and nutrition advice.  It is one such law in North Carolina which required that Steve Cooksey take down all his blog posts about his dieting experiences (since he is not licensed by the state, it is illegal for him to speak on the topic).

The funniest part for me in the ADA materials is that they constantly seem to be put out that their efforts to  ban competition from anyone outside of their organization are described by critics as creating a monopoly.  Who, us? Monopoly?  We are just trying to help customers.  Missing in all this, of course, is any evidence of a grass roots effort by nutrition customers.  I will remind everyone of this great Milton Friedman quote:

The justification offered is always the same: to protect the consumer. However, the reason is demonstrated by observing who lobbies at the state legislature for the imposition or strengthening of licensure. The lobbyists are invariably representatives of the occupation in question rather than of the customers. True enough, plumbers presumably know better than anyone else what their customers need to be protected against. However, it is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.

I am encouraged to see this from the Left.  Kevin Drum writes, in response to a proposal for California state licensing of dog groomers:

What's unfortunate, I guess, is that this would all be unobjectionable if it were a voluntary certification program. If you want to pay more to take Fido to a certified groomer, go right ahead. If you want to save money, then don't. But critics are almost certainly right that a voluntary license would become a required license in pretty short order. After all, Vargas's proposal may be for a voluntary license right now, but that's only because he's failed to get support for a required license in the past.

What's more, if the program were voluntary I'm not sure why you'd need the state involved in the first place. If there's really a demand for this kind of certification, it seems likely that a trade association of some kind would set something up. And if there isn't, then why bother?

Right on!  I wish Drum would carry this same thinking further into other economic spheres (why are consumers powerful enough to handle dog grooming choices suddenly infantile when it comes to health care decisions) but I am encouraged none-the-less.  There is room, I think, for a left-right coalition against corporate cronyism (of which licensing is among the worst forms, helping to protect incumbent businesses against upstart competitors).  Unfortunately, such cronyism is so deeply ingrained in both Romney and Obama that it is certainly not going to happen in this election.

John Stossel has a great link-filled round up of failed and failing solar and green energy programs funded by the Obama Administration with our money.  Check out the extensive list.

Here, for laughs, is Ray Lane of Kleiner Perkins rhapsodizing about Obama as the greatest government venture capitalist ever, and using for his prime example ... Solyndra!

I suppose at one point Kleiner Perkins used to take private risks with private money, but it seems to have found out it can make higher returns leveraging its investments with taxpayer money, and then using political influence to mandate business for the companies in which it invests. Thus the hiring of Al Gore, among other moves, to the KP board. Lane, by the way, is Chairman of serial government trough-feeder Fisker automotive, which make admittedly very cool-looking cars that require a lot of taxpayer subsidies.

Certainly Mr. Lane knows something about marketing, including that age-old tactic the "bait and switch."  The taxpayer subsidies of Fisker were made on the theory that electric cars were somehow greener than gasoline cars because they use less energy.  But looking at the fuel at the power plant it takes to make the electricity that goes into a Fisker Karma, the car gets worse gas mileage than an SUV  (only an EPA equivalent MPG standard that breaks the second law of thermodynamics hides this fact).  Congratulations Mr. Lane, green subsidies for sub-SUV gas mileage.  All those checks KP partners wrote to Obama in the last election certainly got a good return.