Posts tagged ‘Ford’

Bringing Skepticism (and Math) to Electric Vehicle Fuel Numbers

Frequent readers of this blog will know that I am enormously skeptical of most fuel and efficiency numbers for electric vehicles.  Electric vehicles can be quite efficient, and I personally really enjoy the driving feel of an electric car, but most of the numbers published for them, including by the government, are garbage.  I have previously written a series of articles challenging the EPA's MPGe methodology for electric cars.

In just a bit, I am going to challenge some numbers in a recent WSJ article on electric vehicles, but first let me give you an idea of why I don't trust many people on this topic.  Below is a statement from Fueleconomy.gov, which bills itself as the official government source for fuel economy information (this is a public information, not a marketing site).  In reference to electric vehicles, it writes this:

Energy efficient. Electric vehicles convert about 59–62% of the electrical energy from the grid to power at the wheels—conventional gasoline vehicles only convert about 17–21% of the energy stored in gasoline to power at the wheels

The implication, then, is that electric vehicles are 3x more energy efficient than cars with gasoline engines.  I hope engineers and scientists can see immediately why this statement is total crap, but for the rest, here is the problem in short:  Electricity has to be produced, often from a fossil fuel.  That step, of converting the potential energy in the fuel to use-able work, is the least efficient step of the entire fuel to work process.  Even in the most modern of plants it runs less than a 50% conversion efficiency.   So the numbers for the gasoline cars include this inefficient step, but for the electric vehicle it has been shuffled off stage, back to the power plant which is left out of the calculation.

Today I want to investigate this statement, which startled me:

Factor in the $200 a month he reckons he isn't paying for gasoline to fill up his hulking SUV, and Mr. Beisel says "suddenly the [Nissan Leaf] puts $2,000 in my pocket."

Yes, he pays for electricity to charge the Leaf's 24-kilowatt-hour battery—but not much. "In March, I spent $14.94 to charge the car" and a bit less than that in April, he says.

This implies that on a cost-per-mile basis, the EV is over 13x more efficient than gasoline cars.  Is this a fair comparison?  For those who do not want to read a lot of math, I will preview the answer:  the difference in fuel cost per mile is at best 2x, and is driven not by using less fossil fuel (the electric car likely uses a bit more, when you go all the way back to the power plant) but achieves its savings by using lower cost, less-refined fossil fuels  (e.g. natural gas in a large power plant instead of gasoline in a car).

Let's start with his estimate of $14.94.  Assuming that is the purchased power into his vehicle charger, that the charger efficiency is 90%, and the cost per KwH in Atlanta is around $0.11, this implies that 122.24 use-able KwH are going into the car.  Using an estimate of 3.3 miles per KwH for the Leaf, we get 403 miles driven per month or 3.7 cents per mile in electricity costs.  This is very good, and nothing I write should imply that the Leaf is not an efficient vehicle.  But its efficiency advantage is over-hyped.

Now let's take his $200 a month for his Ford Expedition, which has an MPG around 15.  Based on fuel prices in Atlanta of $3.50 a gallon, this implies 57 gallons per month and 857 miles driven.  The cost is 23.3 cents per mile.

Already we see one difference -- the miles driven assumptions are different.  Either he, like a lot of people, don't have a reliable memory for how much he spent on gas, or he has changed his driving habits with the electric car (not unlikely given the shorter range).  Either way, the total dollar costs he quotes are apples and oranges.  The better comparison is 23.3 cents per mile for the Expedition vs. 3.7 cents a mile for the Leaf, a difference of about 6x.  Still substantial, but already less than half the 13x difference implied by the article.

But we can go further, because in a Nissan Leaf, he has a very different car from the Ford Expedition.  It is much smaller, can carry fewer passengers and less cargo, cannot tow anything, and has only 25% of the Expedition's range.   With an electric motor, it offers a very different driving experience.   A better comparison would be to a Toyota Prius, the c version of which gets 50MPG.  It is similar in most of these categories except that it has a much longer range, but we can't fix that comparison, so just keep that difference in mind.

Let's look at the Prius for the same distances we calculated with his Leaf, about 403 miles.   That would require 8.1 gallons in a Prius at $3.50, which would be $28.20 in total or 7 cents a mile.  Note that while the Leaf still is better, the difference has been reduced to just under 2x.  Perhaps more importantly, the annual fuel savings has been reduced from over $2200 vs. the Expedition that drove twice as many miles to $159 a year vs. the Prius driving the same number of miles.  So the tradeoff is $159 a year savings but with much limited range  (forgetting for a moment all the government crony-candy that comes with the electric car).

$159 is likely a real savings but could be swamped by differences in long-term operating costs.  The Prius has a gasoline engine to maintain which the Leaf does not, though Toyota has gotten those things pretty reliable.  On the other hand the Leaf has a far larger battery pack than the Prius, and there are real concerns that this pack (which costs about $15,000 to manufacture) may have to be replaced long before the rest of the car is at end of life.  Replacing a full battery pack after even 10 years would add about $1200 (based on discounted values at 8%) a year to operating costs, swamping the fuel cost advantage.

Also note that a 2x difference in fuel costs per mile does not imply a 2x difference in fuel efficiency.  Gasoline is very expensive vs. other fuels on a cost per BTU basis, due to taxes that are especially high for gasoline, blending requirements, refining intensity, etc.)  Gasoline, as one person once said to me way back when I worked at a refinery, is the Filet Mignon of the barrel of oil -- if you can find a car that will feed on rump steak instead, you will save a lot of money even if it eats the same amount of meat.    A lot of marginal electric production (and it is the margin we care about for new loads like electric cars) is natural gas, which is perhaps a third (or less) the cost of gasoline per BTU.   My guess is that the key driver of this 2x cost per mile difference is not using less fuel per se, but the ability to use a less expensive, less-refined fuel.

Taking a different approach to the same problem, based on the wells-to-wheels methodology described in my Forbes article (which in turn was taken directly from the DOE), the Nissan Leaf has a real eMPG of about 42 (36.5% of the published 115), less than the Prius's at 50.  This confirms the findings above, that for fossil fuel generated electricity, the Leaf uses a bit more fossil fuels than the Prius but likely uses much less expensive fuels, so is cheaper to drive.  If the marginal electrical fuel is natural gas, the Leaf also likely generates a bit less CO2.

Electric Vehicle Welfare Queen

No, we are not talking today about Elon Musk (though the name fits) but about this electric car buyer profiled in the WSJ:

Bronson Beisel, 46, says he was looking last fall for an alternative to driving his gas-guzzling Ford Expedition sport utility around suburban Atlanta, when he saw a discounted lease offer for an all-electric Nissan Leaf. With $1,000 down, Mr. Beisel says he got a two-year lease for total out-of-pocket payments of $7,009, a deal that reflects a $7,500 federal tax credit.

As a resident of Georgia, Mr. Beisel is also eligible for a $5,000 subsidy from the state government. Now, he says, his out-of-pocket costs for 24 months in the Leaf are just over $2,000. Factor in the $200 a month he reckons he isn't paying for gasoline to fill up his hulking SUV, and Mr. Beisel says "suddenly the car puts $2,000 in my pocket."

Yes, he pays for electricity to charge the Leaf's 24-kilowatt-hour battery—but not much. "In March, I spent $14.94 to charge the car" and a bit less than that in April, he says. He also got an electric car-charging station installed at his house for no upfront cost.

"It's like a two-year test drive, free," he says.

I hope you all enjoy Mr. Beisel's smug pride a driving a car using your money.

In my next post, I am going to dive deeper in the operating cost numbers here.  By the article, Mr. Beisel has cut his monthly fuel costs from $200 to $14.94, a savings of over 90%.  If these numbers are real, why the hell do we have to subsidize these cars?  Well, while it turns out that while the Leaf is a nice efficient vehicle, these numbers are way off.  Stay tuned.

An Author That Actually Loves The Movie of His Book

The movie Blade Runner is a pretty substantial departure from the Phillip Dick book "Do Robots Dream of Electric Sheep" on which it was based.  Even so, and perhaps uniquely in literary history, Dick seems to have absolutely loved the movie.  It kept the right elements of the book - ie, what makes us human -- and shed the silly, trippy stuff.

I don't remember it being a huge box office success.  Probably too dark, even with the last minute change of ending (the happy notion that Rachael had no programmed termination date was added to give audiences a more upbeat ending.)  But the movie certainly had a huge effect on the look and feel of sci-fi.  After the Matrix and the Terminator, we are used to future dystopias, but in the 1970's most popular sci-fi had cities that were as bright and shiny as a new penny.   I remember seeing it the first time, and Blade Runner was arresting, a whole new category of sci-fi noir.  I still love the movie, and it wears pretty well, but nowadays fan argue endlessly of the merits of the original release vs. the directors cut.  The latter purges the Harrison Ford narration and happy ending that were tacked on to make the movie more audience friendly.  I personally like the narration-- it feels consistent with the noir genre -- though the faux happy ending is lame.

New Outrage from the Corporate State

This is just nuts.

Across the United States more than 2,700 companies are collecting state income taxes from hundreds of thousands of workers – and are keeping the money with the states’ approval, says an eye-opening report published on Thursday.

The report from Good Jobs First, a nonprofit taxpayer watchdog organization funded by Ford, Surdna and other major foundations, identifies 16 states that let companies divert some or all of the state income taxes deducted from workers’ paychecks. None of the states requires notifying the workers, whose withholdings are treated as taxes they paid.

General Electric, Goldman Sachs, Procter & Gamble, Chrysler, Ford, General Motors and AMC Theatres enjoy deals to keep state taxes deducted from their workers’ paychecks, the report shows. Foreign companies also enjoy such arrangements, including Electrolux, Nissan, Toyota and a host of Canadian, Japanese and European banks, Good Jobs First says.

Why do state governments do this? Public records show that large companies often pay little or no state income tax in states where they have large operations, as this column has documented. Some companies get discounts on property, sales and other taxes. So how to provide even more subsidies without writing a check? Simple. Let corporations keep the state income taxes deducted from their workers’ paychecks for up to 25 years.

Kentucky, where I have operated for over 10 years, seems to be the originator of this silliness.  I have always wondered why there is not an equal protection issue with such subsidies given to a chosen few companies but not to others.

I wrote years ago about such relocation subsidies being a prisoners dilemma game:

I hope you can see the parallel to subsidizing business relocations (replace prisoner with "governor" and confess with "subsidize").  In a libertarian world where politicians all just say no to subsidizing businesses, then businesses would end up reasonably evenly distributed across the country (due to labor markets, distribution requirements, etc.) and taxpayers would not be paying any subsidies.  However, because politicians fear that their community will lose if they don’t play the subsidy game like everyone else (the equivalent of staying silent while your partner is ratting you out in prison) what we end up with is still having businesses reasonably evenly distributed across the country, but with massive subsidies in place.

To see this clearer, lets take the example of Major League Baseball (MLB).  We all know that cities and states have been massively subsidizing new baseball stadiums for billionaire team owners.  Lets for a minute say this never happened – that somehow, the mayors of the 50 largest cities got together in 1960 and made a no-stadium-subsidy pledge.  First, would MLB still exist?  Sure!  Teams like the Giants have proven that baseball can work financially in a private park, and baseball thrived for years with private parks.  OK, would baseball be in the same cities?  Well, without subsidies, baseball would be in the largest cities, like New York and LA and Chicago, which is exactly where they are now.  The odd city here or there might be different, e.g. Tampa Bay might never have gotten a team, but that would in retrospect have been a good thing.

The net effect in baseball is the same as it is in every other industry:  Relocation subsidies, when everyone is playing the game, do nothing to substantially affect the location of jobs and businesses, but rather just transfer taxpayer money to business owners and workers.

Fisker Karma: Worse Mileage Than A Ford Explorer

The Fisker Karma electric car, developed mainly with your tax money, has rolled out with an EPA MPGe of 52.   But this number is bogus.  The true MPGe is worse than a Ford Explorer.  Learn why in my Forbes.com piece.

Federal Financing Bank?

Bruce Krasting at Zero Hedge has been on the case of the Federal Financing Bank.  I am still unclear if the agency is actually providing the cash or just the guarantee, but it was the one rolling out the Solyndra loan (under DOE auspices, I suppose).

In July, it was still sending cash of some sort to Solyndra - it may be that this was just a drawdown of money under its original loan commitment, or it may be new money.  A couple of things you can see are:

  • A heck of a lot of money was still going out the door to solar programs, likely with no oversight
  • Ford, the supposedly bailout-free company, sure seems to be gobbling up a lot of government guaranteed loans for something.
  • We were lending to Solyndra at 0.89% interest.
All told, a whopping 3/4 of a billion dollars of government guaranteed loans to private companies went out the door in July alone.
Other observations from the report:  The report is hard to read, as it is hard to correlate the new financing activity to changes in the balance sheet.  But there is just a ton of loan activity to rural electric companies.  Wasn't rural electrification an issue in the 1930's?  Isn't it time to let rural electric companies stand on their own two feet and get their own money from the capital markets?
There is also a lot of activity issuing HOPE for Homeowners money - it looks like the government is lending (to banks?) at 0.01% interest.  What is the difference between a 0.01% thirty year loan and a gift?

Milestone, Sort of

Last week in the race around New England colleges I missed a milestone of sorts - Coyote Blog crossed over 5 million visits.  I say "of sorts" because with feed readers, many readers of the blog do not hit the visit counter.  In fact, with over 2,000 feed subscribers who check this feed each day, that equates to about 3/4 million visits a year that don't hit the counter.

Nevertheless, all these numbers, however flawed, are far higher than I ever thought I would reach here (way back on September 29, 2004).  Thanks for the support.

PS-  Here was that first scintillating post 6-1/2 years ago:

This blog will often touch on the insanity that is the current American tort system. I don’t think there is any greater threat to capitalism, due process, or democracy than the growing power of the litigation bar.

Via Overlawyered.com, which should be an essential part of your daily blog browsing, comes this story. Apparently, after being sued by Okaloosa County for making defective police cars, Ford refused to sell the county any more of this type car. The County sued again, this time to force Ford to sell it more cars of the type it is suing Ford for being defective:

One of Morris’ attorneys, Don Barrett, has said the sheriff firmly believes the Police Interceptors are defective but he wants to buy new ones to replace aging cars because seeking other vehicles would be more costly.

lol. Unfortunately, in the service business, it is legally more difficult to exclude customers from the premises. We have several well-known customers who come to our campgrounds (plus Wal-mart and any other private retail establishment) desperately hoping to slip and fall and sue. In a future post, I will tell the story of a Florida campground that is being sued by a visitor for sexual dysfunction after the visitor allegedly stepped on a nail in their facility.

Sacrificing to Support James Cameron's Lifestyle

Everyone, you need to give up you CO2 emissions so that James Camperon can maintain his lifestyle:

But e.g. James Cameron apparently assumes that people won't be able to notice that he is using

3 houses in Malibu (24,000 sq ft in total - 10 times the average U.S. home), a 100-acre ranch in Santa Barbara, a JetRanger helicopter, three Harleys, a Corvette, a Ducati, a Ford GT, a collection of dirt bikes, a yacht, a Humvee firetruck, a fleet of submarines...

Nevertheless, he demands that people live with less - the same people who made him rich by watching his movies....

There simply doesn't exist any justification of the need to lower the world population that would make the life of James Cameron sustainable. It's just amazing to think about the societal atmosphere that makes it natural for him to defend these inhuman concepts.

Update:

Life in the Corporate State

A European-style corporate state is typically ruled by a troika of large favored corporations, industrial and public employee unions, and long-time political insiders.  Most definitely excluded from power are consumers, entrepreneurs, small businesses, younger workers without seniority, and taxpayers.

I have argued that Obama is not a socialist, but is building a European-style corporate state.  Here is a great indicator, from my Princeton classmate Henry Payne:

For the first time in more than two years, SUV sales account for more than half of the U.S. auto market. ...

The trend comes even as Washington issued a new edict that vehicles average an absurd 62 mpg by 2025. The current absurd standard -- 35 mpg by 2015 -- has forced manufacturers to invest billions in new small-car development.

Today, manufacturers are in defiance of their own customers -- their marketing departments churning out small-car ads touting their new green products. This puts automakers in a tough spot: Continue to make cars for the government, or listen to their customers.

For now, manufacturers are sticking with the government, telling the Detroit News that "with a slew of new cars coming out, such as the Chevrolet Cruze, the Ford Fiesta and a new Ford Focus early next year, car sales are likely to outpace truck sales in the coming months."

If you want a deeper look at how legislation is made in the corporate state, read this fascinating (but very long) New Yorker report on the efforts to pass a climate bill this past year.  The author writes it in the spirit of lamenting lost opportunities, but I read it as a great inside view of the sausage factor.  Do we really want to give these guys more power?

In the same spirit, I commented thus on Kevin Drum's post discussing the growth of campaign spending this year, and lamenting that it is going to the nasty old Coke team instead of the Pepsi team:

There is a really simple solution to this -- reduce the coercive power of government to break individuals or corporations or to hand them windfalls, and all this spending goes away.

The spending has not gone up because the rules changed, because the Supreme Court rules did not substantially affect this kind of campaign spending (there is a ton of sloppiness in the media on this point).

The spending has gone up because Obama & the Democratic Congress has put more of the US economy in play in their attempts to form a European-style corporate state. When Obama and Pelosi engage in populist public speeches vilifying whole sectors of the economy, groups are going to try to defend themselves from the onslaught, either by throwing the current office holders out or buying the favor of those they can't unseat.

More Great Moments in Regulation

Today's episode -- the shut down of the new debt market

Ford Motor Co.'s financing arm pulled plans to issue new debt, the first casualty of a bond market thrown into turmoil by the financial overhaul signed into law Wednesday.

Market participants said the auto maker pulled a recent deal, backed by packages of auto loans, because it was unable to use credit ratings in its offering documents, a legal requirement for such sales. The company declined to comment.

The nation's dominant ratings firms have in recent days refused to allow their ratings to be used in bond registration statements. The firms, including Moody's Investors Service, Standard & Poor's and Fitch Ratings, fear they will be exposed to new liability created by the Dodd-Frank law.

The law says that the ratings firms can be held legally liable for the quality of their ratings. In response, the firms yanked their consent to use the ratings, hoping for a reprieve from the Securities and Exchange Commission or Congress. The trouble is that asset-backed bonds are required by law to include ratings in official documents.

The result has been a shutdown of the market for asset-backed securities, a $1.4 trillion market that only recently clawed its way back to health after being nearly shuttered by the financial crisis.

Fannie & Freddie Officially Declared Bottomless Pits. GMAC Not Far Behind

While private banks are paying back their TARP money, Fannie and Freddie have been given a new blank check:

It's a favorite government trick to announce bad news on a Friday afternoon, so it appears in Saturday's paper, the least likely edition to be read. By Sunday and Monday, it's old news. The Obama Treasury just went one better, announcing on Christmas Eve that they were uncapping the amount they believe will have to be invested in Fannie and Freddie. The Bush Treasury first estimated the government-sponsored enterprises' (GSEs) losses at $100 billion each. The Obama administration, which has been using the GSEs to stabilize the housing market by reducing their underwriting standards, upped the ante to $200 billion each. Now the administration has thrown in the towel completely, and dropped a large lump of coal in each taxpayer's stocking"”it won't even try to estimate the total losses of Fannie and Freddie.

For extra special bonus style points, Fannie and Freddie executives will apparently receive multi-million dollar pay packages that the pay czar will be denying to many private banks.

But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.

In other news, the Feds are also propping up another quasi-governmental agency with more cash

GMAC, the ailing financing arm of General Motors, is set to receive around $3.5 billion in government aid, ABC News has learned. The funds would be the third infusion of federal support for the troubled lender.

The latest government aid would bring the total federal assistance for GMAC to $16 billion when combined with the $12.5 billion that the lender has already received dating back to December 2008. Due to its prior cash infusions, the government already owns 35 percent of GMAC.

GMAC continues to lose money because every time it gets more taxpayer money, it starts offering zero percent financing deals.

Immediately after GMAC became eligible for TARP money, GM reduced to zero the interest rate"¦ on certain models. This, of course, penalizes GM competitors, including Toyota, Honda and other "transplants" whose cars are made in America by Americans for Americans, and Ford, which does not have the freedom of maneuver conferred by TARP money because Ford is not taking any"¦

GMAC has begun making loans to borrowers with credit scores as low as 621, a significant relaxation of the 700 minimum score the company adopted just three months ago as it struggled to survive. America's median credit score is 723"¦

This perhaps might explain why GM, unlike other banks with low stress-test scores, was unable to get any private capital.   Because lenders know GMAC will just hand the money over to car buyers with little prospect for getting any value back in return.  Incentives for GMAC to take losses to sell cars, always an issue under GM's private management, will only increase as the Administration looks to create some evidence - any evidence - that their GM investment isn't a total dog.  Witness $3 billion in cash for clunkers funds that went to buy $1 billion of used vehicles.

Postscript: Related news, the 10 most ridiculous uses of stimulus funds. Seems like there would be a lot of competition for this award.

66,667% Contingency Fee

Via Overlawyered:

The settlement discussed in this space July 17 "” in which lawyers nabbed more than $25 million in fees and expenses, while fewer than 100 consumers redeemed Ford coupons worth $37,500 "” was covered by the Associated Press last week, which stirred outrage in many quarters [Krauss/PoL, Greenfield, Cal Biz Lit]. As Cal Civil Justice notes, the settlement was purportedly on behalf of owners who suffered no rollover or other mishap. Instead, it sought damages for losses in the vehicle's resale value due to adverse publicity, a nicely circular theory, since the adverse publicity was in good measure propelled by various allies of the plaintiff's bar.

Sorry Chevy

We own about 100 trucks as part of the business, many of them Chevy's.  We are going out right now to replace several, and I just can't bring myself to do business with Government Motors.  So its Ford trucks for now.

Those Stable, Happy 1950's

From an article about the Edsel:

total new car sales in the United States declined 31% from the 1957 to 1958 model years

Gosh, and we managed to get out of that without spending a trillion dollars.  Wow.

Postscript: Sometimes it is hard for fiction to top reality.  In vacation, the movie-makers tried to create the ugliest station wagon they could imagine.

truckster

They didn't even come close to topping reality

edsel

Add GM, Ford, and Chrysler to this List

Via TJIC, who had a much better title, "poor credit risks remain poor credit risks, even after you give them a free pony"

Recent data suggests that many borrowers who received help with mortgage modifications earlier this year tended to re-default on their payments, a top U.S. banking regulator said on Monday.

"The results, I confess, were somewhat surprising, and not in a good way," said John Dugan, head of the U.S. Office of the Comptroller of the Currency, in prepared remarks for a U.S. housing forum.

"Put simply, it shows that over half of mortgage modifications seemed not to be working after six months," he said.

You can absolutely, without a doubt, add the Big 3 to the list of folks who will be facing default once again just months after getting their first dollop of federal money.

$485 Billion in Value Destroyed, and Counting

David Yermack has an awesome essay in the WSJ this weekend, encouraging Congress to just say no to spending $25-$50 billion bailing out Ford and GM.  Why?  Well, beyond the obvious moral hazard, these companies are value destruction machines of epic proportions.

Over the past decade, the capital destruction by GM has been breathtaking, on a greater scale than documented by Mr. Jensen for the 1980s. GM has invested $310 billion in its business between 1998 and 2007. The total depreciation of GM's physical plant during this period was $128 billion, meaning that a net $182 billion of society's capital has been pumped into GM over the past decade -- a waste of about $1.5 billion per month of national savings. The story at Ford has not been as adverse but is still disheartening, as Ford has invested $155 billion and consumed $8 billion net of depreciation since 1998.

As a society, we have very little to show for this $465 billion. At the end of 1998, GM's market capitalization was $46 billion and Ford's was $71 billion. Today both firms have negligible value, with share prices in the low single digits. Both are facing imminent bankruptcy and delisting from the major stock exchanges. Along with management, the companies' unions and even their regulators in Washington may have their own culpability, a topic that merits its own separate discussion. Yet one can only imagine how the $465 billion could have been used better -- for instance, GM and Ford could have closed their own facilities and acquired all of the shares of Honda, Toyota, Nissan and Volkswagen.

Republicans to Receive Bailout from Congress

Congressional Democrats announced today that they had agreed to a bailout plan for Republicans after last week's devastating election results.  While exact details are unavailable, sources tell us that the Republicans will be given 4 seats in the Senate and 15 in the House.  Nancy Pelosi said in a statement today: "We've established pretty clearly over the last several months that failed strategies and management should not necessarily have to result in losses in market share, particularly for well-connected Washington insiders."

Asked for comment, Democratic strategist James Carville was giddy.  "This is brilliant.  It really doesn't give up anything of substance to the Republicans.  But it will sap the energy from the Republican Party for making any substantial changes, and make it more likely they will continue the failed strategies that led to this most recent loss.  After their recent failures, the Republicans were on the verge of being forced to reinvent their whole organization.  This bailout should reduce the likelihood of that substantially."

When asked if bailouts of AIG, General Motors, Ford, Chrysler, Freddie Mac, Fannie Mae, and Bear Stearns wouldn't similarly reduce the urgency to change failed approaches, Carville answered "no comment."

Short Rant on the New Typepad Editor

I am getting used to the new Typepad editor, but two issues still really cause me to question the sanity of the developers, particularly since this roll out has been going on since June:

  • I cannot believe that a blogging engine -- not a generic text editor or HTML editor, but a purpose built blogging engine -- would eliminate the blockquote functionality from the editor.  Have these guys ever, you know, actually read a blog or two?  We bloggers live off block quotes.
  • How long has the computing spelling checking been around?  A couple of decades?  About 10 minutes into that 20 year span, developers learned from users that in addition to a "skip" button, they probably needed a "skip all" button.  Because if you write a 5000 word post on the banking crisis and use the "Bernanke" in that post 100 times, it is going to be real boring hitting "skip" 100 times in the spell check rather than "skip all" or even better "add to dictionary."  But, the rocket scientists at Typepad did indeed only put in a "skip" option, a bit like Ford building a car in which the windows won't roll down.

So Wrong, I Almost Wish It Would Pass

Sometimes a proposed law is so wrong and so destructive, but so typical of a certain philosophical bent, that I almost wish it would pass, if for no reason than to have an Atlas Shrugged-type object example of disastrous results.  Such is the case for a California ballot initiative that has qualified for the signature-gathering stage.  The initiative, in part:  (full text linked here)

  • Imposes one-time tax of at least 55% on property
    exceeding $20 million of a California resident or held in California by
    nonresident.  [note that this is an asset tax, not an income tax]
  • Imposes one-time tax (between 36.5% - 54.3%) on income exceeding $10 million when resident dies or leaves California.
  • Imposes
    additional 17.5% tax on total incomes of taxpayers with income
    exceeding $150,000 if single, $250,000 if married; 35% if incomes
    exceed $350,000 if single, $500,000 if married.
  • The proceeds of this money will be used to:
    • To
      purchase 30% to 51% of the outstanding shares of stock in ExxonMobil,
      Chevron, General Motors, Ford, Goldman Sachs, JP Morgan Chase, and
      Citigroup, in order to ensure California has an uninterrupted source of
      energy and financial capital.
    • To drain and restore the Hetch Hetchy Valley to it's condition at the beginning of the 20th century.
    • Use
      any Surplus funds to combat Global Warming, make infrastructure repairs
      and improvements, and to research alternative energy sources.

Beyond the unbelievably Marxist confiscation going on here, it begs the question of just what supply of energy and financial capital that California is not getting today that this will somehow ensure.  The implication seems to be that ExxonMobil, GM, and Citigroup are too fair-minded, selling their wares too even-handedly, and that California would prefer their attention tilted towards California.

Of course this initiative is profoundly immoral, so I can't do anything but deride it, but it would make for a spectacular object lesson (though one would have thought the Soviet Union's experience to be sufficient to this task, but apparently not).  I am sure GM's troubles would be greatly helped by replacing its board of directors with the California State Legislature  (the only American organization running a bigger deficit than GM) and replacing Citigroup's credit analysists with California social services beauracrats.  I would kind of like to see this in the same way I would love to see what happens if I threw a crate of flourescent tubes off a 10th-floor roof  -- I would never actualy do it, because it would be unsafe and destructive, but I can still dream about how compelling the disaster would be.

Postscript: One could probably label this the Arizona and Nevada economic stimulation act and probably not be far off the mark.

The Income-Shift Is Reversed

Typically, wealthy individuals and investors will work hard to delay declaration of income and to push taxes off as far into the future as possible.  The present value of taxes paid a year from now are less than paying the taxes today.

But over the last several weeks, I have had casual conversations with entrepreneurs and individuals from the moderately to very wealthy, and almost to a one they have said they are trying to pull income into 2007 and 2008 in anticipation of potentially large increases in capital gains tax rates and the rates at the top of the bracket.

On a different topic, a friend and I depressed ourselves in a bar last night laying out the case that the next decade may in many ways be a repeat of the 1970s.  Already, we see both parties reverting to the economic prescriptions they promoted in the 1970s.  Further, this week may herald the beginning of an inflationary monetary and fiscal policy combined with government enforced structural limits on growth (e.g. Co2 abatement policy, trade protectionism, price controls, high marginal tax rates and capital gains tax rates, lending restrictions, etc.)  We are seriously discussing nationalizing a major industry (health care) for the first time since the 1970's (when nationalizing oil was seriously considered).  Currently we have a Republican President who is less market-oriented than his Democratic predecessor, and at least as clueless on economic issues as were Nixon and Ford.  All that's left to do is elect a new Jimmy Carter in 2008...

Isn't This A Measurement Problem?

I often see the stat that US manufacturing employment has shrunk substantially over the last 50 or so years, usually accompanied by much wailing from the left (yes, the same people who criticized manufacturing work as dehumanizing 40 years ago).

The WaPo, via Hit and Run, says that US manufacturing output is at an all time high, and that the only way to reconcile these two is with technology and productivity.  Which is certainly part of the story, and its refreshing to see someone telling this story and not trying to cast the manufacturing numbers as a reason to slam the borders closed against imports.

But isn't there also a measurement problem here?  Eighty years ago, if a Ford Motor factory needed the windows cleaned, a Ford employee did it.  If it needed the parking lot striped, Ford workers did it.  When it needed the bathrooms cleaned at night, Ford janitors did it.  Today, the same Ford factory needs its windows and bathrooms cleaned, but an outside service contractor likely does the work.  In the economic statistics, haven't these workers migrated from "manufacturing" to "service" without anything real on the ground changing?

Should Juries Be Able to Ban Products?

I have written on this before on the context of Vioxx, but is it really rational public policy to have juries be allowed to effectively ban products, products that both legislatures and regulatory bodies have explicitly or implicitly deemed as legal?  Ted Frank takes this on at Overlawyered in a nice follow-up post on a $31 million jury verdict against Ford:

SUVs are designed to have high clearance to traverse rugged terrain.
This raises the center of gravity and affects the handling: it's a
known tradeoff of the laws of physics. There are a wide variety of
tests of varying degrees of scientific merit one can use to suggest a
vehicle is "too prone" to roll over, and plaintiffs have the benefit of
cherry-picking which tests to apply to which vehicles. You'll find lots
of lawyers complaining that the Bronco II allegedly responded poorly in
"J-turn tests", where the steering wheel is turned 330 degrees in one
third of a second and held there for another 4.67 seconds. Ford
designed the Explorer to pass the J-turn test to take away this claim,
and the trial lawyers started using different methodologies to claim
that the Explorer was too prone to roll over.

Empirically, however, the Bronco doesn't roll over more than several
other SUVs on the market, which is why NHTSA, in both the Bush I and
Clinton administrations, refused to recall the Bronco when the
plaintiffs' bar asked it to. When I say Ford was held liable for
producing an SUV, I'm not spinning: it was because it was held liable
for producing an SUV.

Moreover, a vehicle should be viewed in totality: an auto that is
more likely to roll over may be safer in other particulars that more
than compensate for that increased propensity. So I question the
premise. One can't change the rollover propensity without creating a
different vehicle entirely. The vehicle should be viewed holistically,
and holistically, the Bronco is a safe car when used as designed.

Perhaps we as a society would be better off taking the nanny-state
step of banning SUVs, forbidding people from wildnerness driving
because too many drivers don't know how to drive SUVs in highway
conditions, but that's a decision that not only would end the American
auto industry, but should be made other than by a 12-person jury of
laypeople. This vehicle rolled over because the driver drove off the
road.

I had similar thoughts about the Vioxx cases:

Anyway, the point of this post is that this verdict represents a very dangerous assault on individual choice.  Recognize that there are many, many activities in life where individuals are presented with the following choice:

If I choose to do X, my life will be improved in some way but I may statiscally increase my chance of an early death.

You
may react at first to say that "I would never risk death to improve my
life", but likely you make this choice every day.  For example, if you
drive a car, you are certainly increasing your chance of early death
via a auto accident, but you accept this risk because driving allows
you to get so much more done in your life (vs. walking).  If you ride a
bike, swim, snow ski, roller blade, etc. you are making this choice.
Heck, everyone on the California coast is playing Russian Roulette with
an earthquake in exchange for a great climate, beautiful scenery, and
plentiful jobs.

The vast majority of drugs and medical therapies carry this same
value proposition:  A drug will likely improve or extend your life in
some way but carries a statistical chance of inducing a side effect
that is worse than the original problem, up to and including death.
The problem is that we have structured a liability system in this
country such that the few people who evince the side effects can claim
more money in damages than the drug was worth to all the people it
helped.  For example, if a drug helps 999 people, but kills the
thousandth, and that thousandth person's family is awarded $253 million
in damages (as in this case), the drug is never going to be put on the
market again.  Even if the next 1000 people sign a paper saying we are
willing to take the one-in-a-thousand risk to relieve the pain that is
ruining our lives, they still are not going to get the drug because the
drug companies know that some Oprah-loving jury will buy the argument
that they did not understand the risk they were taking and award the
next death another quarter of a billion dollars....

By the way, have you noticed the odd irony here?  Robert Ernst (the
gentleman who died in the Vioxx case) is assumed, both by the FDA and
the litigation system, to be unable to make informed decisions about
risk and his own health.  But a jury of 12 random people who never
experienced his pain can make such decisions for him?  And us?

Alex Tabarrok at Marginal Revolution said it even more succinctly:

How did we arrive at a system in which 12 random Texans are assigned
responsibility for evaluating the scientific merits of statistical evidence of
this type, weighing the costs and benefits, and potentially
sending
a productive blue-chip American company into bankruptcy protection?

Han and Chewie: The Early Years

If George Lucas needs any more money, here is my movie idea for him:  Make a movie about Han Solo and Chewbacca in their early years.  How did a Wookie prince become a smuggler?  How did he meet Han?  How did Han win the Millennium Falcon from Lando?  In my imagination, the movie would be more in the spirit of Raiders of the Lost Ark rather than the most recent star wars movie, putting the emphasis on adventure and action over special effects, Republic politics, and endless light-saber fights.  The only real challenge would be casting the young Han Solo part -- who would be willing to try to replace Harrison Ford?

Does anyone doubt that this would make a fortune, particularly if you teamed Lucas with someone to do the writing?  The series would easily lend itself to a serial format, with multiple episodes, though in that format it might make a better TV show than movie.

Han_chewie

PS-  I got started thinking about this because I saw Star Wars III again this weekend.  As an update to my review:  it did not wear very well.  The back third from the (attempted) arrest of Palpatine forward was still engaging, but the front half actually had me squirming in my seat. The dialog still sucks, the initial mission sequence still makes no sense, and the battle with General Grievous is still just one more gratuitous light saber battle and chase scene.

Creating Two Classes of Citizens

Over the past couple of days, the comment period and the resulting debate about FEC rule-making for blogs and campaign finance reform really has me simmering.  As a review, McCain-Feingold for the second* time in modern US history created a dual class of citizenship when it comes to First Amendment speech rights:  The "media" (however defined) was given full speech rights without limitations during an election, while all other citizens had their first amendment rights limited. 

These past few weeks, we have been debating whether this media exemption from speech restrictions should be extended to bloggers.  At first, I was in favorThen I was torn.  Now, I am pissed.  The more I think of it, it is insane that we are creating a 2-tiered system of first amendment rights at all, and I really don't care any more who is in which tier.  Given the wording of the Constitution, how do I decide who gets speech and who doesn't - it sounds like everyone is supposed to:

Congress shall make no law respecting an establishment of religion, or
prohibiting the free exercise thereof; or abridging the freedom of
speech, or of the press; or the right of the people peaceably to
assemble, and to petition the government for a redress of grievances.

I have come to the conclusion that arguing over who gets the media exemption is like arguing about whether a Native American in 1960's Alabama should use the white or the colored-only bathroom:  It is an obscene discussion and is missing the whole point, that the facilities shouldn't be segregated in the first place.

I have read my handy pocket Constitution (courtesy of the Cato Institute) through a number of times, and I have yet to find any mention of special constitutional privileges or rights for employees of major media firms.  Unfortunately, we seem to act like its in there somewhere, as I wrote here as well, though in a different context.

*  Footnote:  This is not the first time we have created two classes of citizen when it comes to speech.  Over the last 30-40 years, we have differentiated "political" speech from "commercial" speech.  Until McCain-Feingold, political speech was pretty zealously protected by the courts, while we have gotten to the point that the government can pass nearly any law it wants restricting commercial speech.  Here is a simplistic example.  Unless I am over some spending limit, I can buy an ad in the NY Times and print in 70 point type "Bush Sucks" and no court would bat an eye.  If I am a pissed off Ford customer, I can print an ad in the Times saying "Ford Sucks" and probably be fine as well.  However, if I am a Honda dealer, and place an ad in the NY Times saying "Ford Sucks", I will likely get fined and slapped with an injunction.

When the Constitution says that "Congress shall make no law ... abridging the freedom of speech" it sure seems like there aren't any qualifying words like "political" or "commercial"

More Nutty Tort Decisions

Frequent readers of this site will know that I am a strong opponent of how the current tort system works.  However, I am not a big supporter of damage caps.  Damage caps may limit the harm of a broken tort system, but they don't fix the root problem - the jackpot justice that seeks wealth transfers from wealthy parties irrespective of who was really at fault.  For example, note this case, where teens who were not wearing their seat belts were killed by a driver breaking the speed limit and with a blood alcohol level over twice the legal limit.  The jury decided the accident was 90% the fault of... Ford, for designing a car with the same glass used by everyone else in the auto industry.  But the unfairness of the decision is only the beginning of the outright nuttiness and fraud by the plaintiff in this case.  Make sure to go to this article - you have to scroll to the article on Ford appealing frontier justice, but the extra finger work is justified.