Legalized Pot

A perfect storm is brewing. California is in dire straits fiscally and is on the precipice of default. Pot would raise major revenues, and if California legalizes pot the rest of the country will eventually.

More Stupid Administrative Efficiency Arguments

"The administrative costs of the main Social Security program are 0.6 percent of expenditures. The disability insurance program clocks in a bit higher: 2.3 percent. It's all pretty lean."

I am not a senior and thus my only exposure to social security is the FICA tax pulled from my paycheck. But typically you hear that the Social Security Administration does a good job at what they do, cutting checks to people. However, in obliquely making this point Mr. Klein unwittingly points to a flaw in the measurement of administrative efficiency. The Social Security Administration cuts checks for both Social Security (Old Age Insurance) and Disability Insurance. Thus they have the same fixed costs. Then what accounts for the difference in the administrative efficiency? There are more people claiming social security than disability insurance. It's quite simple. Imagine that the typical cost of writing checks to a claimant works out to an annualized expense of $500 per claimant. The $500 is your administrative cost. Now you divide the administrative costs by the benefit check cut. The marginal cost of adding a zero to the that benefit check is essentially zero. So if the benefit were $1 million annually the percentage dedicated towards administrative costs would be 0.0005%. If the annual benefit were $1,000 the administrative costs constitute 5%. Efficiency in this manner is effectively being equated to the generosity of the benefits disbursed. This is measurement error.

The Health Care Bill

The health care bill that the House has put forward is a disappointment. In the immediate future it will expand coverage but will do nothing to contain costs. The employer based system is kept intact and to some degree reinforced (by maintaining the employer tax exclusion and not allowing those with employer sponsored health care to purchase a different plan through a national exchange). The one aspect that I find promising is that the MedPac appears to be getting beefed up. But the health care bill is built on the status quo as opposed to an attempt to move towards a more rational and efficient system.

More Government Motors Brilliance

Lawmakers are now trying to reinstate dealers that were closed as part of the Chrysler and GM bankruptcy proceedings.

Wal Mart Health Care

It would be interesting if Wal Mart were to extend health care to all of its employees. It could basically drop a minute clinic in the store alongside the pharmacy and basically function as a self contained HMO.

Employer Mandate=Assanine

Johnathon Cohn breathlessly reports that Wal Mart has broken with its business brethren by endorsing the inclusion of an Employer Mandate. I understand why Cohn finds this to be good news, it portends easier passage of Health Care reform. I, however, think an Employer Mandate is idiotic. It just further cements the status quo. We need to move away from an employer based system. The downfalls associated with an employer based health care system are many but here goes a list:

1. Reduces labor market flexibility by inducing job lock and creating greater impediments to starting a business

2. Assuming the tax exclusion remains in place, which is sort of the whole point if you were to have an employer mandate, the employer mandate is regressive as the tax exclusion primarily benefits higher income folks.

3. Making the same assumption as in point two, the tax exclusion incentivizes medical expenditures without regard to outcome thus exacerbating medical cost growth...

4. Which will cause stagnant wages or declining for the majority of workers as we saw in this last decade.

5. Employer incentives aren't very well aligned with those of the employee, this is devastating with regards to the management of chronic diseases.

Hooray for Employer Based Health Care!

That Wal Mart has endorsed the employer mandate is a bit surprising but not shocking. Google "bootleggers and baptists" to see why their endorsement shouldn't be so shocking.

I have found the whole health care debate to be underwhelming. There has been much handwringing about the inclusion of a public plan and potential cost savings to be reaped from said public plan's purported administrative cost savings (one time savings at that). So much of the debate has really centered around how to expand on the status quo instead of transitioning to a sustainable system.

Hear Rick Kogan, the voice of Chicago

• Rick Kogan reads the closing lines of Nelson Algren's book 'America Eats'
• Rick Kogan narrates Chicago's hilarious Schadenfreud episodes 59 and 60
• Rick Kogan on Chicago Public Radio's Eight Forty Eight, "1955 Chicago" (Feb. 2, 2005)
• Rick Kogan interviews Danny Goldring on WGN Radio
• Rick Kogan interviewed on Outside the Loop Radio, episodes 3 & 4
• Rick Kogan interviewed by Steve Cochrane about broadcaster Paul Harvey
• Rick Kogan interviewed by Studs Terkel, parts 1 & 2

The Climate Bill Sucks

The Climate bill is a massive corporate give-away. This is corporate welfare in an unprecedented scope. This is why carbon taxes are superior and should have been the vehicle for climate change legislation from the outset.

The End of an Era

I said it before, and it bears saying again: Michael Jackson was the King of Pop. His passing marks the end of an era, but his music will persist in the lives of the living.

Wackjob

So I was looking on drudge and I saw a curious headline: Congresswoman Refuses To Complete 2010 Census.... Immediately I thought there could only be two people in congress that crazy and stupid to do something like this: Michelle Bachman and Maxine Waters. Then I saw another headline immediately below it: Fears ACORN collecting data.... Then I knew it must be Michelle Bachman. And sure enough, I was right. What a wackjob. She is a joke.

The Day the TV Died

For me that day is today. I will admit that I'm one of those millions not fully prepared for the switch to digital television. I have a digital-to-analog converter box, but it doesn't work with my antenna.

Now that my TV has died, I no longer have a refuge from reality. It's just me face-to-face with reality. Which isn't a new experience, as I didn't have a television for about the first six months after my move to Chicago.

I'd like to think that this is a moment when more people will wonder what it would be like not simply to live without TV, but to live in a society without television. To quote Don DeLillo from White Noise, "Television is the death throes of human consciousness."

Sotamayor

Many of the right have made fools of themselves trying to diminish the accomplisments of Judge, soon to be Justice, Sotamayor.  Folks like Fred Barnes, William Bennett, Michael Goldfarb, and countless others have alleged that here success is entirely contingent on preferential treatment.  However, her resume renders this line of attack absurd on its face.  She graduated head of her class in Princeton, was law review at Yale Law School and has served on both circuit and appellate courts. This is the normal trajectory for a Supreme Court justice, namely, an abnormal or exceptional career, the mark of the elite.  It has long been the claim of those of us on the right that a judge should be voted up or down on their qualifications.  Provided there is no ethical snafu or apparent cronyism (a la Harriet Miers), Sotomayor is evidently qualified and should be confirmed by wide margins.  

Watching Life from the Periphery: Russell Brand's Booky Wook

Lately I've been quite fascinated with British comedian Russell Brand. I first became aware of him from an appearance on a late-night show, and since then he's been on my radar screen. I recently saw his performance in Forgetting Sarah Marshall and just finished reading his Booky Wook, a "memoir of sex, drugs, and stand-up."

He's not a very cuddly or tender man. His memoir is mostly a story about his nearly career-destroying descent into heroine and sex addiction, followed by his successful rehabilitation as a stand-up comedian and actor. Along the way he wises up to his detachment from his own life and the "amoral dream of commodified sex." Though he doesn't talk much about death, Brand is clearly driven by the sense of the fleeting and fragile span of life that we're given on earth, and yearns to connect with others who feel the same. More than once he recollects with happiness those rare moments when he found "one of those rare women who recognized that life is finite and saw orgasms as a wonderful distraction."

In his life, aside from his insatiable fancy "to have sex with adult human females," one thing remains the same: his relentless ambition to become famous. From the start he knew that comedy would be his ticket - his "cursed talent." It was the only way he could relate to others and cope with his sense of always being an outsider, watching life from the periphery, and only really living it on the stage. It also makes him tolerable and charming.

I like him because he has a poet's appreciation and ear for language—"you are in for a giddy, wild ride through language," he says of his book—combined with a preference for the grandiloquent and even grotesque phrase or gesture or act over the customary, conventional, and cliched. Like all comedians who get their material by watching life from the periphery, Brand also makes some prescient observations about humans. Like their tendency to change their mind about what they want to do that evening: "People do this a lot. They don't seem to realize that the future is just like now, but in a little while, so they say they're going to do things in anticipation of some kind of seismic shift in their worldview that never actually materializes. But everything's not going to be made of leather, the world won't stink of sherbet. Tomorrow is not some mythical kingdom where you'll grow butterfly wings and be able to talk to the animals—you'll basically feel pretty much the same way you do at the moment."

As a connoisseur of sex, he knows what's sexy: "She was sexy, in a lap-dancer sort of way, which many might think, incidentally, is the best way to be sexy; other ways include: sexy like a teacher, sexy like a police-woman, a mate's sister, a biblical character, Cher, Eva Braun, a Brontë sister, a babysitter, Madonna, or The Madonna."

Brand is a cocky, confident, cheeky man. I can't wait for his next book(y wook).

Cap and Trade= Carbon Tax + Corporate Welfare part 1 million and five

I have previously stated my preference for a carbon tax over a cap and trade regimen. What I see as the weakness of a Cap and Trade program proponents see as its strength: its opaque nature. It is true that a cap and trade, were the emissions permits to be auctioned off, would simulate a carbon tax. All well and good. But the reason most cap and trade advocates prefer a cap and trade is not because it simulates a carbon tax, but that it does so and reformers can avoid saying the word tax. But as its opacity is a double edged sword, it is also much more susceptible to rent seeking as is evidenced in the form of the proposed Waxmen-Markey bill whereby 85% of the emissions permits would be allocated as opposed to auctioned off. I can imagine how rigorous the allocation methodology will be: 1. Do you pollute extensively? Check; 2. Are you headquartered in or provide service extensively in a key congressional district? Check; 3. Have you donated to my (insert namer or party) campaign? Check; 4. Here is a free emissions permit which you can now use to defray the costs of your pollution by either keeping or selling at a premium to a less politically connected power company.

Some Wit from Russell Brand

"Life is not a theme park and if it is the theme is death."
—Russell Brand, My Booky Wook, p. 150.

The Jay Leno Show

It's not a talk show, it's a vehicle for advertisers: "Mr. Farella said he also liked NBC’s promise that Mr. Leno’s show would be 'advertiser-friendly,' offering sponsors opportunities like commercials delivered by Mr. Leno and the inclusion of brands in skits."

Chrysler

Chrysler will be a millstone around the Obama administration's neck.  It doesn't appear to do all that much about the cost structure of Chrysler, it will make any company that has a sizable union presence a credit risk in the eyes of investors, and there is a pretty good chance that Chrysler will fail again, just as it has twice already in the last two decades (I am considering the Mercedes merger/acquisition as a bailout).  Pairing Chrysler with Fiat will give Chrysler access to small cars and nominally a luxury marque in the form of Alfa Romeo.  However, both Fiat and Alfa Romeo, are renowned for reliability issues.  Just as Chrysler is.  I do think the Fiat 500 might be a real hit but outside of that Chrysler doesn't get much.  

The principle purpose behind this reorganization seems to be to preserve UAW pensions and health benefits.  But I think this will be viewed as a pyrrhic victory for the UAW and the union movement writ large.  I don't think the UAW is out of the woods yet.  What if Chrysler continues to make crappy cars that people don't want to buy?  I don't see how a tie-up with Fiat changes that trajectory.  If so, four or five years, I doubt Obama will be able to pull off the same hijinx and will probably just have to let them enter into a normal bankruptcy process which could very well result in liquidation whereby those UAW pensions are dropped onto the Pension Benefit Guaranty Corporation.  This is what should have happpened this time around.  There is in fact some value to be found in each individual brand (especially Dodge and Jeep).  It's not as if Chrysler were to go into liquidation that every job would be lost and those brands would be gone forever.  Nissan was just recently looking at having Dodge manufacture trucks for them to be rebadged.  If Chrysler went into liquidation wouldn't Hyundai, Nissan or potentially a Chinese manufacturer be interested in buying one of those brands, whether to supplement their offering in the case of a Hyundai or to get a foothold in the American market in the case of a Chinese manufacturer.

But I think the broader fallout for the Obama administration will not just be the needless waste of taxpayer money but will be the affect this has on unions.  The UAW has largely been identified as the culprit of Chrysler and GM, however, a lot of the blame has been misplaced.  While the UAW did cause a cost structure that made for some unsuitable compromises (such as the precluding the manufacture of a competitive small car) management deserves the bulk of the blame.   The cars that GM and Chrysler have made of the years have been crap.  Some of this is the result of cost cutting but it has also been to a large degree a function of design, concept and quality.  Most of those three things are ultimately the responsibility of management and Chrysler and GM management have failed on all three accounts.  However, by stiffing the senior creditors to reward the UAW with GM and Chrysler equity stakes and the preservation of their benefits, this would seem to create a substantial risk in the eyes of investors where it concerns union companies.  Why would you want to lend to a company with a union when there is a decent chance if things go south that the government will subvert your claims to those of their preferred special interest: the unions.  Now not only will a union company' exhibit a cost structure disadvantage but also a disadvantage from the perspective of borrowing costs.  

The Bidens and Ponzi Schemes

One of my favorite finance bloggers is John Hempton, an Australian.  He has been machine gun posting about a firm Paradigm Global, which happens to be owned/run by Joe Biden's brother and son.  He makes a fairly compelling case that the Biden's brother and son are at least entangled in a ponzi scheme, and possibly running one.

Anyway, here are his posts on Paradigm Global:

http://brontecapital.blogspot.com/2009/04/just-how-sloppy-is-paradigm-global.html

http://brontecapital.blogspot.com/2009/04/statement-by-paradigm-and-some.html

http://brontecapital.blogspot.com/2009/04/economics-of-paradigm-global-alleged.html

http://brontecapital.blogspot.com/2009/04/another-post-i-did-not-make.html

http://brontecapital.blogspot.com/2009/04/first-post-i-did-not-make-on-ponta.html

http://brontecapital.blogspot.com/2009/04/fraudulent-hedge-fund-associated-with.html

The difference between a Pandemic and an Epidemic

I don't have the source for this; probably something I wrote down from the NYT or NYRB:

Pandemic, an adjective from the Greek pandemos, "of all the people," becomes a noun to mean "the outbreak of a disease spreading over a large geographic area," now construed as "worldwide." Epidemic, disease visited on a large segment of a population, is now considered regional rather than global.

On Miss California/Perez Hilton

You've all seen the video of Miss California at the Miss America competition expressing her belief that marriage should be between "a man and a woman," much to the visible chagrin of the gay judge, Perez Hilton. Many people have written in defense of Miss California, saying that she should not be "persecuted" for her views about gay marriage, views which many people in California and elsewhere also share. Fair enough. However, it seems that most people who are ready to offer their comments on the exchange between Miss California and Perez Hilton haven't paid attention to the question she was actually asked and to the answer she actually gave. Here is my transcript of the exchange:

Perez Hilton: Vermont recently became the fourth state to legalize same-sex marriage [crowd cheers]. Do you think every state should follow suit? Why or why not?

Miss California: Why I think it’s great that Americans are able to choose one or the other. Um, we live in a land that you can choose -- same-sex marriage or opposite marriage. And, you know what, in my country, in my family, I think that - I believe that - a marriage should be between a man and a woman. No offense to anybody out there [crowd cheers]. But that’s how I was raised and that’s how I think it should be between a man and a woman. Thank you.

First of all, and not to put too fine a point on it, Miss California was not asked whether she supports gay marriage or not. She was asked whether other states should legalize same-sex marriage. There are many ways she could have answered that question without making her own views public. She didn't want to offend anybody, and she could have done so, if she said, for example, that that question is a political question and should be left to each state to decide. Period.

Second, her answer suggests that she has no strong view about the issue. First she says that it is a "great" thing that gays can marry each other in America. Then she offers her now famous opinion that she believes that marriage should be between a man and a woman. Those two statements aren't necessarily contradictory. She may not support same-sex marriage, but she doesn't wish to condemn Vermont and the other three states for legalizing it either. In any case, she seemed to fail to fully register the fact that she was being asked a political question and that she should have responded accordingly. She only realized this after she had put forth her opinion, but by then it was too late. Many people "out there" were already offended and that offense wasn't remedied by the words "no offense to anybody." Her answer would have been better received if she didn't refer to her audience as people "out there" and to the source of her beliefs as "my country...my family."

A little bit of sympathy for persons like Perez (who was after all a judge in the competition) would have gone a long way. And that's why she lost.