Posts tagged ‘transparency’

Missing the Forest for the Trees

I can understand the man bites dog appeal of a story about the press turning on Obama.  But seriously, their biggest problem with this President's transparency is that he does not allow enough pictures of himself?

It Turns Out That Democrats Were Responsible for the Watergate Coverup

The Washington Post has a very good article on failures of Obamacare exchange implementation.  The Left is finding the article to be convincing evidence that the failures were all ... wait for it .. the Republican's fault.

Every single failure, save one, in the article (we'll come back to that one in a minute) was due to the Administration's fear of Republican criticism.  So results were hidden, bad decisions were made, and key steps were delayed until after the last election.  All because the Obama Administration appears to incredibly thin-skinned about criticism.

But blaming these decisions on Republicans and other Obamacare opponents is absurd.  One could easily say that the bad decisions made by the Nixon administration to cover up Watergate and other campaign shenanigans were driven by a fear of political reprisals by Democrats, but no one would be crazy enough to blame the Democrats for them.  It reminds me of the folks who wanted to blame failures in the Vietnam war on the anti-war movement.  But that is exactly what is going on here, and the amazing thing is just how many people seem willing to enable and support this incredible evasion.

The one other example that Republicans are supposedly to blame is latched onto by Kevin Drum, among others, quite eagerly.  Apparently, the PPACA legislation, which was written entirely by Democrats and passed without a single Republican vote, failed to actually provide financing for an enormous new organization to build and run the exchanges.  And, amazingly enough, Republicans refused to fix the Democrat's problem with the Democrat-written legislation in a law they hated and wanted repealed.  So the Obama Administration had to build the exchanges within the existing CMS organization, which botched the implementation.  And for THAT, apparently Republicans are to blame for it all.

Of course, beyond the just bizarre "buck stops anywhere but here" mentality, there are other problems with this logic.  First, it is hard to believe that a brand new greenfield organization run entirely by Obama's policy folks and completely without any systems experience would have done better than an organization that at least has some health care systems experience.  Further, would the schedule really have been aided by having to start an entirely new organization from scratch?  Finally, it is clear from the article that a large part of the reason for moving the work to CMS was not just money but a desire to avoid transparency, to bury and hide the work.  Even had the financing mistake** not been made, one gets the sense that Obama might have buried the effort inside CMS anyway.

In fact, this is the overriding theme from the entire article.  Every decision made for the Obamacare implementation seemed to be driven by political expediency first, avoiding transparency and accountability second, and actual results last.  It is well worth reading yourself to see what conclusions you draw.


** I am not entirely convinced it was a mistake.  Remember, the Democrats were scrambling to make the PPACA seem budget neutral.  They might easily have left out key bits of financing they know they needed, thinking they could hide the appropriation later.   A plan that died when Scott Brown was unexpectedly elected.


Total Fecklessness

If a city government cannot bring itself to end something so obviously abusive as pension spiking, what hope is there of any real reforms on tougher matters?  Government employees are increasingly running government in their own favor.

After nearly three hours of contentious debate, Phoenix city leaders were so divided over how to tackle pension “spiking” on Tuesday that they ended up doing nothing at all.

They walked into the City Council chambers prepared to make changes, but after splintering into three ideological factions, voted 5-4 against a plan to combat spiking, generally seen as the artificial inflation of a city employee’s income to boost his or her retirement benefit.

Several high-profile cases have come to light, pushing the effort to eliminate pension boosting to the forefront of the council’s agenda.

Former Phoenix City Manager David Cavazos, who retired last week to lead another city, was able to apply unused sick pay and other perks to spike his pension to an estimated $235,863, the second-largest retirement benefit in city history.

Earlier this month, a subcommittee of council members proposed modest reforms that they said would reduce pension spiking and provide transparency. They said the plan treated existing employees fairly and avoided potential litigation.

But the proposal fell apart Tuesday night, when a group of liberal-leaning council members joined the body’s fiscal conservatives in voting against it, though their rationales were vastly different.

After the motion to approve the proposal failed, the meeting ended. The result, greeted by cheers from employee unions in the crowd

This is a Scandal??

How is this a scandal?

While fans can also purchase pink [NFL Branded] clothing and accessories to support the cause, a shockingly small amount of the fans' money is actually going towards cancer research.

According to data obtained from the NFL by Darren Rovell of ESPN, the NFL "takes a 25% royalty from the wholesale price (1/2 retail), donates 90% of royalty to American Cancer Society."

In other words, for every $100 in pink merchandise sold, $12.50 goes to the NFL. Of that, $11.25 goes to the American Cancer Society (ACS) and the NFL keeps the rest. The remaining money is then divided up by the company that makes the merchandise (37.5%) and the company that sells the merchandise (50.0%), which is often the NFL and the individual teams.

How is this "shockingly small"?  A donation of 11.25% of the retail price, and 22.5% of the wholesale price,  of a piece of clothing is a pretty hefty.  What do they expect?  All the author is doing is demonstrating his (her?)  ignorance of retail and clothing net profit margins.  In particular, how can you try to make the NFL the bad guy for donating 90% of the money they actually get?  It's their program, they can't donate the clothing manufacturer's money.

And besides, the NFL should be congratulated for being open about the numbers -- there is often zero transparency in such charitable promotional programs.  How much of the money in the last charity gala you attended do you think actually made it to the charity rather than just help fund the self-aggrandizement of their socialite sponsors?

Trading $1 in Debt for 85 cents of Economic Activity

UPDATE:  Mea culpa.  One point in the original post was dead wrong.  It is possible, contrary to what I wrote below, to get something like a 0.7%  difference in annual growth rates with the assumptions he has in the chart below (Drum still exaggerated when he called it 1%).  I don't know if the model is valid (I have little faith in any macro models) but I was wrong on this claim.  Using the 0.7% and working more carefully by quarter we get a cumulative GDP addition a bit lower than the cumulative debt addition.  There is still obviously a reasonable question even at a multiplier near 1 whether $1 of economic activity today is worth $1 of debt repayment plus interest in the future.  

I am not a believer, obviously, in cyclical tweaking of the economy by the Feds.  To my thinking, the last recession was caused by a massive government-driven mis-allocation of capital so further heavy-handed government allocation of capital seems like a poor solution.  But what really drives me crazy is that most folks on the Left will seductively argue that now is not the time to reduce debt levels, implying sometime in the future when the economy is better will be the appropriate time.  But when, in any expansion, have you heard anyone on the Left say, "hey, its time to reduce spending and cut debt because we need the fiscal flexibility next time the economy goes wrong."

I will leave the stuff in error below in the post because I don't think it is right to disappear mistakes.  For transparency, my spreadsheet reconstruction both confirming the 0.7% and with the updated numbers below is here:   reconstruction.xls.


Kevin Drum is flogging the austerity horse again

I see that Macroecomic Advisors has produced a comprehensive estimate of the total effect of bad fiscal policies. Their conclusion: austerity policies since the start of 2011 have cut GDP growth by about 1 percentage point per year.

Something seemed odd to me -- when I opened up the linked study, it said the "lost" government discretionary spending is about 2% of GDP.  Is Drum really arguing that we should be spending 2% of GDP to increase GDP by 1%?

Of course, the math does not work quite this way given compounding and such, but it did cause me to check things out.  The first thing I learned is that Drum partook of some creative rounding.  The study actually said reductions in discretionary spending as a percent of GDP reduced GDP growth rates since the beginning of 2011 by 0.7% a year, not 1% (the study does mention a 1% number but this includes other effects as well).

But it is weirder than that, because here is the chart in the study that is supposed to support the 0.7% number:

click to enlarge

Note that in the quarterly data, only 2 quarters appear to show a 0.7% difference and all the others are less.  I understand that compounding can do weird things, but how can the string of numbers represented by the green bars net to 0.7%?  What it looks like they did is just read off the last bar, which would be appropriate if they were doing some sort of cumulative model, but that is not how the chart is built.  If we interpolate actual values and are relatively careful about getting the compounding right, the difference is actually about 0.45%.  So now we are down to less than half the number Drum quoted see update above (I sent an email to the study author for clarification but have not heard back.  Update:  he was nice enough to send me a quick email).

So let's accept this 0.45% 0.7% number for a moment.  If GDP started somewhere around 16 trillion in 2010, if we apply a 0.45% the quarterly growth numbers from his chart, we get an incremental economic activity from 2011 through 2013:Q2 of about $333 billion.

So now look at the spending side.  The source says that discretionary spending fell by about 2% of GDP over this period.  From the graph above, it seems to bite pretty early, but we will assume it fell 1/12 of this 2% figure each quarter, so that by the end of 2013 or beginning of 2014 we get a fall in spending by 2% of GDP.  Cumulatively, this would be a reduction in spending over the 2.5 years vs. some "non-austere" benchmark of $388 billion.

Thus, in exchange for running up $677 billion $388 billion in additional debt, we would have had $445 billion $333 billion in incremental economic activity.  A couple of reactions:

  1. Having the government borrow money and spend it definitely increases near-term GDP.  No one disputes that.  It is not even in question.  Those of us who favor reigning in government spending acknowledge this.  The question is, at what cost in terms of future obligations.  In fact, this very study Drum is quoting says

    Economists agree that failure to shrink prospective deficits and debt will bestow significant economic consequences and risks on future generations. Federal deficits drive up interest rates, “crowding out” private investment. If government borrowing supports consumption (e.g., through Social Security and major health programs) rather than public investment, the nation’s overall capital stock declines, undermining our standard of living. The process is slow but the eventual impact is large.2 In addition, accumulating debt raises the risk of a fiscal crisis. No one can say when this might occur but, unlike crowding out, a debt crisis could develop unexpectedly once debt reached high levels.

    High deficits and debt also undermine the efficacy of macroeconomic policies and reduce policymakers’ flexibility to respond to unexpected events. For example, in a recession, it would be harder to provide fiscal stimulus if deficits and debt already were high. Furthermore, fiscal stimulus might be less effective then. Additional deficit spending could be seen as pushing the nation closer to crisis, thereby forcing up interest rates and undercutting the effects of the stimulus. With fiscal policy hamstrung, the burden of counter-cyclical policy is thrust on the Federal Open Market Committee (FOMC) but, particularly in a low interest-rate environment, the FOMC may be unable (or unwilling) to provide additional monetary

  2. I guess we have pretty much given up on the >1 multiplier, huh?  Beggaring our children for incremental economic growth today is a risky enough strategy, but particularly so with the implied .66 .85 multiplier here.

This is not the first time Drum has taken, uh, creative data approaches to cry "austerity" during a mad spending spree. 

Climate Humor from the New York Times

Though this is hilarious, I am pretty sure Thomas Lovejoy is serious when he writes

But the complete candor and transparency of the [IPCC] panel’s findings should be recognized and applauded. This is science sticking with the facts. It does not mean that global warming is not a problem; indeed it is a really big problem.

This is a howler.  Two quick examples.  First, every past IPCC report summary has had estimates for climate sensitivity, ie the amount of temperature increase they expect for a doubling of CO2 levels.  Coming into this IPCC report, emerging evidence from recent studies has been that the climate sensitivity is much lower than previous estimates.  So what did the "transparent" IPCC do?  They, for the first time, just left out the estimate rather than be forced to publish one that was lower than the last report.

The second example relates to the fact that temperatures have been flat over the last 15-17 years and as a result, every single climate model has overestimated temperatures.  By a lot. In a draft version, the IPCC created this chart (the red dots were added by Steve McIntyre after the chart was made as the new data came in).

figure-1-4-models-vs-observations-annotated (1)


This chart was consistent with a number of peer-reviewed studies that assessed the performance of climate models.  Well, this chart was a little too much "candor" for the transparent IPCC, so they replaced it with this chart in the final draft:



What a mess!  They have made the area we want to look at between 1990 and the present really tiny, and then they have somehow shifted the forecast envelopes down on several of the past reports so that suddenly current measurements are within the bands.   They also hide the bottom of the fourth assessment band (orange FAR) so you can't see that observations are out of the envelope of the last report.  No one so far can figure out how they got the numbers in this chart, and it does not match any peer-reviewed work.  Steve McIntyre is trying to figure it out.

OK, so now that we are on the subject of climate models, here is the second hilarious thing Lovejoy said:

Does the leveling-off of temperatures mean that the climate models used to track them are seriously flawed? Not really. It is important to remember that models are used so that we can understand where the Earth system is headed.

Does this make any sense at all?  Try it in a different context:  The Fed said the fact that their economic models failed to predict what actually happened over the last 15 years is irrelevant because the models are only used to see where the economy is headed.

The consistent theme of this report is declining certainty and declining chances of catastrophe, two facts that the IPCC works as hard as possible to obfuscate but which still come out pretty clearly as one reads the report.

Health Care and Prices

Kevin Drum is lauding the transparency an Oregon health insurance exchange which was initiated some apparently welcome price competition into a market for now standardized products.  My response was this:

I applaud any effort by this Administration and others to improve the transparency of pricing in the medical field.  I would have more confidence, though, if all of you folks were not pushing for 100% pre-paid medical plans that will essentially eliminate price-shopping by individuals, and in so doing effectively eliminate the enormous utility of prices.  Prices will soon be meaningful for one thing -- insurance -- in the health care field and absolutely meaningless for everything else in the field.

By the way, at the same time you are improving competition on price, you are eliminating by fiat all competition on features (e.g. what is covered, what deductible I want, etc).  This "success" is like the government mandating one single cell phone design, and then crowing how much easier shopping is for consumers because there is now only one choice.  A simple world for consumers is not necessarily a better world.  I am sure Medieval peasants had a very simple shopping experience as well.

US Doctor Salaries

Kevin Drum thinks he has found the smoking health care gun - US doctors are paid more than everyone else.  That is why we have too-expensive medical care!  A few quick thoughts

  • I am the last one to argue that doctors salaries are set anywhere like at a market clearing price.  Our certification system, crazy third-party payer systems, lack of price transparency, and absurd arguments over the "doc fix" and Medicare reimbursement rates all convince me that doctor salaries must be "wrong"
  • The charts he shows have absolutely no correction for productivity, at least as I read the methodology.  Per the text, they don't even have correction for hours worked.  A McKinsey report several years ago found that US doctors made more, but also saw a lot more patients in a day.  GP care cost more than expected vs. other country's experience, but is due mostly to number of visits, not cost per visit.
  • There is no correction for doctor expenses.  Malpractice insurance, anyone?  We have the most costly malpractice insurance in the world because we have the most broken system.  Doctors pay that out of their salary
  • US GP salaries in Drum's linked report are actually falling, unlike all the other countries studied.  Seem to have fallen 6% in 10 years (page 18), whereas France, for example, has increased more than 10%.

To the last point, I have a hypothesis.  When you first overlay a government health care / price control regime, you get an initial savings.  Doctors are forced to work for less and they still, out of habit and momentum, abide by past productivity standards.  But over time, productivity, like any government-captured function falls.  And over time, doctors, like other civil service groups, become better at organizing and lobbying and begin to get increasing pay packages.  After all, if teachers and fire-fighters can scare Californians into absurd pay and benefit packages, what do you think doctors will be able to do once they learn the game?

A Great Question For Every Expansion of Executive Power

Glenn Greenwald has shown an admirable willingness to call out "his guy" to frequently criticize Obama's claim to be able to order Americans killed at his say-so, "without a whiff of due process, transparency or oversight".  In a recent article, he is flabbergasted that Congresswoman Debbie Wasserman Schulz, who is also head of the DNC, does not seem to have heard of the policy.

I am less surprised than he at the ignorance and mendacity of politicians.  But I did like the question Wasserman Schulz was asked:  did she trust Romney (ie her political bête noire) with such power.  This is a question that everyone should always ask at proposed expansions of government, and particularly Executive, power.  Choose the politician you least trust and/or disagree with the most.  Are you comfortable giving this power to that person?

So many of the Left (Greenwald being one of the few exceptions) have ignored this story, I think because they trust Obama.  Fine, but are you really going to trust the next guy in power?  Because now that you have established that this power is A-OK with a Democrat-Progressive child of the sixties, it is highly unlikely the next Republican in office is going to eschew it.  Wouldn't folks have been a bit more careful about giving this a pass had George Bush claimed the power.  (There is a sort of domestic policy parallel in this, in Republicans rolling over for Medicare part D when Bush was in office when they never would have done so for Clinton).

More Glendale Follies

I almost hate beating on the silly folks who run the City of Glendale even further, but they keep screwing up.

One of the reasons I think that city officials like those in Glendale like to dabble in real estate and sports stadiums is what I call the "bigshot effect."  They don't have any capital of their own, and they don't have the skills such that anyone else would (voluntarily) trust them to invest other people's money, but with a poll of tax money they get to play Donald Trump and act like they are big wheels.  The Glendale city council did this for years, and when their incompetence inevitably led to things starting to fall apart, they have simply thrown more money at it to try to protect their personal prestige.

But unfortunately, incompetence generally is an infinite reservoir, and apparently the City has screwed up again.  Years ago, when the City promised the rich people who owned the AZ Cardinals a new half billion dollar stadium, they put a contract to that effect on paper.  Granted, this was a sorry giveaway, spending hundreds of millions of dollars for a stadium that would be used by the Cardinals for 30 hours a year, by the Fiesta Bowl for 3 hours a year, and by the NFL for a Superbowl for 3 hours every 6-7 years.  But, never-the-less, the City made a contractual agreement.

And then, in its rush to be real estate bigshots, the city turned about 3700 parking spaces promised contractually to the Cardinals over to a developer to create an outlet mall (of the sort that has been quietly going bankrupt all over the country over the last few years).  Incredibly, the city did this without any plan for how to replace the parking it owed the Cardinals.  To this day, it has no plan.

Apparently, there were also some shenanigans with $25 million that had been escrowed to build a parking garage.

The demand letter also blames the parking problem on the city's dealings with Steve Ellman, Westgate's former developer and a one-time co-owner of the Phoenix Coyotes. The letter states that Ellman's relationship with the city has been "characterized by a lack of transparency."

The letter raises questions about a January 2011 arrangement in which the city and Ellman equally split a $25million escrow fund that had been earmarked to build a parking garage in Westgate, the team said.

Ellman put that money in escrow in 2008 after failing to keep a promise to the city to provide a set amount of permanent parking in Westgate.

By early 2011, half of that money went back to Ellman's lenders as part of a deal to try to keep the Coyotes in Glendale, while the city received the other $12.5 million in the account.

What a mess.  This is what happens when politicians try to be bigshots with our money.



IRS Harassing the Tea Party?

Sure seems like it.   Here is the list of questions the Ohio Tea Party has asked as part of their application, which should be routine, for 501(c)4 status.  The Virginia Tea Party had similar requests, including apparently a demand for donor lists and confidential materials which the IRS says will be made public.  The latter seems part and parcel of recent initiative on the Left (seen also in the whole Heartland fiasco) to out confidential donors of Conservative and libertarian organizations while demanding no similar transparency of organizations on the Left.

By the way, I am President of a 501(c)4 organization  (basically a trade group) and I can say with some authority that we never have received any sort of parallel set of questions from the IRS vis a vis our status, so this is either a very new requirement or one especially crafted to apply only to the Tea Party.  I can say from all too much experience that having a Federal agency sit on a request for 9 months and then suddenly demand incredible amounts of work in just a few days from the private party is absolutely typical.

Understanding the Data One References

I am certain that I have made this mistake myself, but Kevin Drum is careless about using data just because it 1) is labeled in a way he thinks he understands and 2) it supports his pre-conceived notions.

He tries to use the above chart to make the point that Medicare is superior to private insurers because it is more "accurate."  Accuracy in claims seems like a good thing, but I started to wonder how it was defined in this study.

So I spent like 30 whole seconds clicking through to the study.  It turns out the data is based on surveys of doctors.  This chart is explained this way:

Description:  On what percentage of claim lines does the payer's allowed amount equal the physician practice's expected allowed amount?

So really, this chart is not a measure of insurance company accuracy, it is really a measure of doctor accuracy in estimating insurance company claims payment behavior, or perhaps of insurance company claims transparency.  Because Medicare pays fixed, published, below-market rates, and because they are so large, it is not at all surprising doctors are better at predicting what Medicare will pay on a claim.

In other words, doctors disagree with Aetna on claims more frequently than they disagree with Medicare?  Is this bad or good.  I have no idea.

But one could go further and say that another way of heading this chart, rather than "accuracy," would be "willingness of insurer to roll over and pay whatever the doctor asks for."

In the past, Drum and others on the Left have also bragged that Medicare's overhead is lower than private insurers.  These are all related issues.  Private insurers put more scrutiny on claims, which costs more in overhead and causes claims to get paid slower, but presumably results in lower claims payments and less fraud.

Medicare's approach may be net better (ie overhead savings could be larger than claims and fraud savings) or it could be worse, but this chart in isolation tells us nothing.

PS - this is not the first time I have found Drum running health care numbers that do not mean what he thinks they mean.

Constitution-Free Detainment

I've warned before that this military detainment issue was a dangerous one, first in Gitmo, and now with Bradley Manning.   I understand the administration and the Army are pissed at the guy for embarrassing them and potentially giving away secrets to hostile parties, but the guy has not been tried or convicted of anything.  Hell, even if he had been convicted of something, I can't believe he would be sentenced to the punishments he is enduring in what is essentially pre-trial detention.   We are all pissed at Jared Loughner but we haven't treated him this way in detention.

The military is NOT doing anything to improve their case that they should be allowed to handle indefinite detentions, such as at Gitmo, through their procedures rather than civil ones.

The Left seems upset and surprised that Obama would allow such a thing, given his rhetoric on the campaign trail.  I was never surprised -- I wrote on inauguration day that candidates who want more transparency in politics and reductions in Presidential arbitrary authority generally change their tune once in office.  As I wrote then, "It seems that creeping executive power is a lot more worrisome when someone else is in power."  And if that wasn't enough, the Administration's about face on closing Gitmo was another reminder.

Free Market Health Care: The Road Not Taken

My column is up at Forbes, and is the fourth in a series on Obamacare.  An excerpt:

Its amazing to me how many ways supporters of government health care can find to rationalize the bad incentives of third-party payers systems.  Take, for example, the prevelance today of numerous, costly tests that appear to be unnecessary.  Obamacare supporters would say that this is the profit motive of doctors trying to get extra income, and therefore a free market failure.   I would point the finger at other causes (e.g. defensive medicine), but the motivation does not matter.   Let’s suppose the volume of tests is truly due to doctors looking for extra revenue, like an expensive restaurant that always is pushing their desserts.  In a free economy, most of us just say no to the expensive dessert.  But the medical field is like a big prix fixe menu — the dessert is already paid for, so sure, we will got ahead and take it whether we are hungry or not.

It should be no surprise that while US consumer prices have risen 53% since 1992, health care prices have risen at nearly double that rate, by 98%.  Recognize that this is not inevitable.  This inflation is not something unique to medical care — it is something unique to how we pay for medical care.

Contrast this inflation rate for health care with price increases in cosmetic surgery, which unlike other care is typically paid out of pocket and is not covered by third party payer systems.  Over the same period, prices for cosmetic surgery rose just 21%, half the general rate of inflation and just over one fifth the overall health care rate of inflation.

This is why I call free market health care the road not traveled.  There are many ways we could have helped the poor secure basic health coverage (e.g. through vouchers) without destroying the entire industry with third-party payer systems.  Part of the problem in the public discourse is that few people alive today can even remember a free market in health care, so its impossible for some even to imagine.

Update: Coincidently, Mark Perry has a post that addresses just the issue I do in my article, that is the positive effects of high-deductible health insurance and out of pocket health expenditures on pricing transparency and reduced costs.  The high deductible health plans at GM seem to be having a positive effect on the health care market.  A shame they will probably be illegal under Obamacare.  Of course, since GM is owned by the government, it can get any special rules that it wants, unlike the rest of us.  But that his how things work in the corporate state.

Transparency for Thee, But Not for Me

The government is the first organization, given its unique powers to use force against citizens, that should be subject to surveillance and transparency.  Unfortunately, since it is the government itself that sets the rules, it is usually the last.  Following in the tradition of a Congress that exempts itself form most of its workplace regulation, comes the new financial bill which apparently exempts the SEC from most public scrutiny

Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.

The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities." Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.

That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would "increase transparency in financial dealings."

Apparently the children of the sixties, who once pushed for the Freedom of Information Act as a check to those in power, now are rolling it back once they are in power themselves.

The Most Open Administration Ever, Hope And Change, Yada Yada...

Ted Bridis of the AP reports

For at least a year, the Homeland Security Department detoured hundreds of requests for federal records to senior political advisers for highly unusual scrutiny, probing for information about the requesters and delaying disclosures deemed too politically sensitive, according to nearly 1,000 pages of internal e-mails obtained by The Associated Press....

Internally, Homeland Security was adamant that Napolitano's political advisers were merely reviewing materials before they were distributed, not making the call on whether they should come out. "To be clear, this is a review not an approval," Callahan wrote.

Yet many e-mails directed Homeland Security employees never to release information under FOIA without approval by political appointees.

"It is imperative that these requests are not released prior to the front office reviewing both the letter and the records," Papoi wrote in an e-mail to the agency's officers responsible for administering the law.

Another e-mail described a request from USA Today that was "tagged by the front office and requires approval."

Under the law, people can request copies of U.S. government records without specifying why they want them and are not obligated to provide personal information about themselves other than their name and an address where the records should be sent.

Yet several times, at least, junior political staffers asked superiors about the motives or affiliations of the requesters.

The directive laid out an expansive view of the sort of documents that required political vetting.

Anything that related to an Obama policy priority was pegged for this review. So was anything that touched on a "controversial or sensitive subject" that could attract media attention or that dealt with meetings involving prominent business and elected leaders.

Anything requested by lawmakers, journalists, activist groups or watchdog organizations had to go to the political appointees. This included all of AP's information requests, even a routine one for records that had already been sought by other news organizations.

Making Entrepreneurship Harder

The Free Market Project wonders why the government wants to make it harder for entrepreneurs to attract investment capital.

This is the same government that has no problem with the poorest people in our society, or anyone else, playing the lottery every week, or heading to an Indian casino or Las Vegas.  For certain, they don't have an income limit on who can contribute to a political campaign, despite the fact that there is generally no pay-off for that unless you're able to contribute thousands or bundle tens or hundreds of thousands in campaign donations....

My question is this: With the transparency possible using the Internet, why aren't average citizens able to spend small amounts of money (like, lottery ticket money) on seed-money investments?  With proper transparency and protections in place, why aren't entrepreneurs allowed to put their idea online so that the average Joe (or anyone) can look at what they're doing and invest in it if they like the idea?

Climate Updates

Believe it or not, I am not going to update on the CRU emails.  The insights into the science process are illuminating, and confirm much that we have suspected, but faults in transparency do not automatically win the game -- they lead to [hopefully] future transparency which then allows for better criticism and/or replication of the work.

My frustration today is a recent article in Scientific American [with the lofty academic title "Seven Answers to Climate Contrarian Nonsense"] which purports to shoot down the seven key skeptics arguments.  Many others have shown how the author does not do a very good job of shooting down these seven, but that is not my main frustration.  The problem is that, like many of the global warming myth buster articles like this, the author completely fails to address the best, core arguments of skeptics, preferring to snipe around at easier prey at the margins.

In this post, I discuss his article and suggest 7 better propositions alarmists should, but never do, address.

You can see discussion of all of these in my recent lecture, on video here.

Don't have 90 minutes?  Richard Lindzen of MIT has a great summary in the WSJ that mirrors a lot of what I delve into in my video.

Here are my seven alternative skeptics' claims I would like to see addressed:

Claim A: Nearly every scientist, skeptic and alarmist alike, agree that the first order warming from CO2 is small.  Catastrophic forecasts that demand immediate government action are based on a second theory that the climate temperature system is dominated by positive feedback.  There is little understanding of these feedbacks, at least in their net effect, and no basis for assuming feedbacks in a long-term stable system are strongly net positive.   As a note, the claim is that the net feedbacks are not positive, so demonstration of single one-off positive feedbacks, like ice albedo, are not sufficient to disprove this claim.  In particular, the role of the water cycle and cloud formation are very much in dispute.

Claim B: At no point have climate scientists ever reconciled the claims of the dendroclimatologists like Michael Mann that world temperatures were incredibly stable for thousands of years before man burned fossil fuels with the claim that the climate system is driven by very high net positive feedbacks.   There is nothing in the feedback assumptions that applies uniquely to CO2 forcing, so these feedbacks, if they exist today, should have existed in the past and almost certainly have made temperatures highly variable, if not unstable.

Claim C: On its face, the climate model assumptions (including high positive feedbacks) of substantial warming from small changes in CO2 are inconsistent with relatively modest past warming.  Scientists use what is essentially an arbitrary plug variable to handle this, assuming anthropogenic aerosols have historically masked what would be higher past warming levels.  The arbitrariness of the plug is obvious given that most models include a cooling effect of aerosols in direct proportion to their warming effect from CO2, two phenomenon that should not be linked in nature, but are linked if modelers are trying to force their climate models to balance.  Further, since aerosols are short lived and only cover about 10% of the globe's surface in any volume, nearly heroic levels of cooling effects must be assumed, since it takes 10C of cooling from the 10% area of effect to get 1C cooling in the global averages.

Claim D: The key issue is the effect of CO2 vs. other effects in the complex climate system.  We know CO2 causes some warming in a lab, but how much on the real earth?  The main evidence climate scientists have is that their climate models are unable to replicate the warming from 1975-1998 without the use of man-made CO2 -- in other words, they claim their models are unable to replicate the warming with natural factors alone.  But these models are not anywhere near good enough to be relied on for this conclusion, particularly since they admittedly leave out any number of natural factors, such as ocean cycles and longer term cycles like the one that drove the little ice age, and admit to not understanding many others, such as cloud formation.

Claim E: There are multiple alternate explanations for the 1975-1998 warming other than manmade CO2.  All likely contributed (along with CO2) but it there is no evidence to give most of the blame to Co2.  Other factors include ocean cycles (this corresponded to a PDO warm phase), the sun (this corresponded to the most intense period of the sun in the last 100 years), mankind's land use changes (driving both urban heating effects as well as rural changes with alterations in land use), and a continuing recovery from the Little Ice Age, perhaps the coldest period in the last 5000 years.

Claim F: Climate scientists claim that the .4-.5C warming from 1975-1998 cannot have been caused natural variations.  This has never been reconciled with the fact that the 0.6C warming from 1910 to 1940 was almost certainly due mostly to natural forces.  Also, the claim that natural forcings could not have caused a 0.2C per decade warming in the 80's and 90's cannot be reconciled with the the current claimed natural "masking" of anthropogenic warming  that must be on the order of 0.2C per decade.

Claim G: Climate scientists are embarrassing themselves in the use of the word "climate change."  First, the only mechanism ever expressed for CO2 to change climate is via warming.  If there is no warming, then CO2 can't be causing climate change by any mechanism anyone has ever suggested.   So saying that "climate change is accelerating" (just Google it) when warming has stopped is disingenuous, and a false marketing effort to try to keep the alarm ringing.  Second, the attempts by scientists who should know better to identify weather events at the tails of the normal distribution and claim that these are evidence of a shift in the mean of the distribution is ridiculous.  There are no long term US trends in droughts or wet weather, nor in global cyclonic activity, nor in US tornadoes.  But every drought, hurricane, flood, or tornado is cited as evidence of accelerating climate change (see my ppt slide deck for the data).  This is absurd.

Classic Government

This is just so typical.  In response to demands for transparency, the Norwegian government starts publishing ... tons of private data about its citizens.  I wonder how much detail they put online about how the government spends the tax money?   Via maggies farm.


Funny quote from Radley Balko, discussing the lack of any real information at the new White House web site:

Good to know they're at least working hard to make flattering photographs of the president "more accessible" to the public. Who says Obama has dropped the ball on transparency?

The Feds May Have to Come Clean

From Marginal Revolution:

The FASAB has asked
that the United States government start including future Medicare and
Social Security liabilities in current budget deficit figures:

the Federal Accounting Standards Advisory Board released a proposal in
which the government would have to account for the cost of future
Social Security payments year by year as people build up entitlements.

Seen in advance of its release by the Financial Times, the switch in
accounting practices would be an international accounting anomaly, as
most other governments treat social insurance as a political commitment
to pay future benefits rather than a financial liability, the newspaper

The FASAB is made up of six independent members who support the
proposal and three opposing members from the U.S. Treasury, the White
House Office of Management and Budget and the Government Accountability

I support this change despite the fact it may result in what I consider bad outcomes (e.g. big tax increases) as the magnitude of future liabilities become clear.  Tyler Cowen also argues it may make these programs harder to scale back, since it shifts the future payments from a political promise to a financial commitment.  But just like free speech, one has to be consistent in one's support for transparency.

If this all seems arcane to you, let me give you some perspective.  Today, Jeff Skilling was given over 30 years in jail for various accounting-related frauds, supposedly hiding losses and liabilities from shareholders's view.  But what Skilling was convicted of doing were minor, subtle accounting tricks involving penny-ante sums of money compared to the egregious games Congress plays with accounting for the federal government's future liabilities.  Skilling was accused, for example, of booking future liabilities in certain joint ventures where they were hard to find; the feds, in contrast, do not book future liabilities at all.

Like Finding Out Kennedy Was Killed By Lee Harvey Oswold

Holy foregone conclusions, Batman.  It turns out the secret hold on the earmark transparency bill was finally traced to two senators:  Ted Stevens and Robert Byrd.  Knock me over with a feather.

Double Secret Probation

Why even bother to filibuster when you can put legislation on secret hold.  While this story is highly ironic, I suppose the Senator involved has to at least be credited with consistency in his/her opposition to transparency for putting a "secret hold" on a bill to increase the public's visibility of the earmark process:

Yet most Senators clearly have no desire to shine a light on their
spending practices, and at least one -- perhaps more -- has placed a
"secret" hold on the legislation. Normally the architects of these
holds are exposed within a few legislative days, but with Congress on
recess the masked spender has so far evaded capture and public scrutiny.

Porkbusters, a grassroots outfit that fights government waste, found
this untransparent move to stymie government transparency a bit rich,
and last week launched a campaign to unveil the blocker's identity. It
has asked its members to call on their Senators to disavow the hold,
and the responses are trickling in. The group, which is tracking the
results on its Web site (, still has the pictures
of 91 Senators under its "Suspect" list. The nine Senators who have
denied placing the hold are now listed as "In the Clear"; they are
Senator Coburn, Barack Obama, Mary Landrieu, David Vitter, John McCain,
Ron Wyden, Richard Shelby, Jim Inhofe and Jeff Sessions.

If Congress insists on spending like there's no tomorrow, at least
the Members could let the voters see what they're spending it on by
passing Senator Coburn's reform. Will the real secret Senator please
stand up?

Sarbanes-Oxley and Enron

Personally, I think you are insane to be a CEO or a board member of a public company under Sarbanes-Oxley.  There is no way I am going to sign a document on threat of prison that no one of the thousands of employees who work for me did anything to screw up the books.  Heck, I run a private company owned only by me where there is no incentive other than to report the numbers like they are, I sit next to my bookkeeper who is the only other one who touches the books, and I still find errors from time to time in past periods.

But what got me going on this post was a TV interview I tuned in the middle of last week.  I can't find a version online or even the name of the people interviewed, but the gist of the discussion was how Sarbanes-Oxley was going to prevent Enron-type situations that bankrupt investors.

I wonder how many people believe this?  Because Enron was going down, with or without the accounting shenanigans.  Its trading-based business model followed a life-cycle that should be familiar to anyone who has been in trading -- that is, they had unbelievable margins early on, but as others figured out what they were doing and duplicated it, the margins narrowed.  As trading margins narrow, the only way to maintain profits is to increase volume, leveraging up your capital into larger and larger trades at narrower and narrower spreads.  This volume strategy requires a very low cost of capital, which means low borrowing costs and a high stock price.  By hiding debt and losses in off-book subsidiaries, the Enron managers may have delayed the ultimate reckoning (by keeping equity prices high and its bond yields low), but the accounting games were not the cause of the failure.  In the same way, the march of long distance rates towards zero ultimately brought down Worldcom, not accounting.  In the latter case, if you borrow lots of money to buy long-distance companies, as Worldcom did,  assuming say 20 cent per minute long distance rates and then the rate goes to 5 cents, you are probably in trouble.

I am all for curbing the imperial CEO and giving shareholders and boards more power to police accounting and establish transparency.  I am not sure SarbOx does any of this.  My gut feel is that five years from now we will view SarbOx as more of an enabler for state attorney general self-promotion (as each races to try to prosecute some high-profile CEO for arcane accounting errors) and tort bar shenanigans.

I am honsetly curious, do any of you, as equity holders, feel better about your equities today with SarbOx than without it, especially given the added expense every company has had to take on?  It would be interesting to test the market's perceived value of SarbOx by allowing shareholders to vote to opt in or out of SarbOx.  Not only would their voting be interesting, but, if they opt out, it would be interesting to see if the stock price goes down (meaning SarbOx has perceived value) or up (meaning SarbOx is mostly perceived as extra regulatory expense).

The Sanctity of Grand Jury Testimony

I know this will come as a shock to many people, but grand jury testimony is supposed to be secret and stay that way.  I mention this, because lately, "sealed" and secret court records seem to inevitably end up in the media.  The most prominent example is yesterday's leak of Balco grand jury testimony, though the Clinton-related grand juries seemed to be sieves as well.

There are real reasons for secrecy in grand jury proceedings.  The most obvious is that grand juries have often been used to build cases against organized crime figures, and those testifying may be risking their life to do so.  More recently, with the enormous power of the press to convict people even before they go to trial, sealed testimony can help protect reputations as well as the presumption of innocence.

Now, I am not a lawyer, and I would love to hear what Volokh has to say.  I suspect there are those who would argue, as they did in the (admittedly different) case of the release of Jack Ryan's divorce records, that transparency in the legal system is more important than individual privacy.  This may or may not be true legally, but I think it would hurt the grand jury process, and anyway, I don't think this is what happened here - the Balco testimony looks to have been leaked illegally.  By the way, I am tired of the notion that journalistic privilege stemming from the first amendment trumps legal compliance with any other laws.  I know the press loves having this, sortof like the double-O license to kill, but I don't buy it.


Hey, maybe I can be a lawyer.  Here is Eugene Volokh talking about journalistic privilege today!


I forgot to mention that there is an exception to secrecy - the witness may publicly discuss their own testimony.  Again, however, I do not think this is the case here.  I don't think Giambi released these details about his own testimony, and the format of the article - with both sides of the Q&A, is pretty clearly from the transcript of the hearings.  Besides, if Giambi were going to voluntarily go public with this admission, he is much more likely to get paid $10 million to tell it to Barbara Walters than he is to anonymously leak it to the SF Chronicle.