Month: October 2009

Back in April, I wrote a post about how local newspapers provided an important check on politicians handing out taxpayer funds to their cronies. I’ve written more recently about the challenge of American private sector workers ever being able to come up with enough taxes to pay for public employee pensions. There are a few recent Boston Globe stories that illustrate the value of a local newspaper in keeping the taxpayer informed:

• an October 22 story about Boston firefighter pensions (74 percent of retirees become disabled on the job, which entitles them to tax-free pensions; a majority were injured on a day when they happened to be filling in for a supervisor, which entitled them to a pension based on the salary of the person for whom they were filling in that day)
• a library trustee who earned almost $10,000 per hour (in pension benefits) for attending a few board meetings
• two public employees approve each others’ pensions (one got $63,000 per year… EXTRA)

What is upsetting about these stories is that you know the Globe’s small staff can’t possibly be finding more than the tip of the iceberg when it comes to state/local government abuse of the taxpayers.

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An economist pointed out that Bill Clinton was practically a libertarian compared to Barack Obama. Both are popular Democrats, separated by just eight years, so how to explain the difference in philosophy?

My answer was that Clinton had come from Arkansas, a poor state (#48 in household income). There wasn’t that much accumulated wealth in Arkansas to ladle out to cronies. Clinton thus turned to the only remaining possible strategy of trying to grow the pie by making an environment more conducive to business investment.

Obama, by contrast, came to national office from Illinois, a wealthy state (#16). By taxing some of the real estate, factory, and other wealth in Illinois it is possible to hand out significant checks to tens of thousands of supporters. Why attempt the hard work of growing the economy when one can simply tax the Willis (formerly Sears) Tower?

Temperamentally we should expect politicians from wealthy states to behave like Saudi princes, assuming that an inexhaustible supply of wealth is their birthright and spending most of their time figuring out how to distribute it.

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Not quite as important a contribution as the Britney Spears Guide to Semiconductor Physics, but still interesting is this example of Delaunay Triangulation, Hugh Hefner style. Speaking of Hef, the New York Times ran a story on his graceful aging. Should he die of a Viagra overdose at the age of 85 while in bed with Kristina and Karissa (twins; they’ll be 22 by then), there is little doubt that folks will say “He really would have been happier in a comfy chair reading page 39 of Greenspun’s big PDF and learning how to compute the dual of a Voronoi diagram in Common Lisp.”

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I’m deeply confused by a Paul Krugman article in the October 22 New York Times. He argues that the Chinese are ruining the world economy, and our economy, by keeping their currency weak. Chinese exports are too cheap. I can’t figure out why this is bad. Would we be better off if we paid higher prices for Chinese-made car parts, electronics, clothing, etc.? Wouldn’t that leave us with less money to spend on other stuff and therefore worse off?

And what about this finance professor from University of Chicago, John Cochrane, who tears apart one of Krugman’s earlier pieces? Whom are we to believe, the Nobel Laureate Krugman or a glider pilot who lives in a part of the country with no ridge lift (see the bottom of his papers page)? Cochrane seems to be a bit of a contrarian, arguing in the Wall Street Journal that the Lehman failure did not cause the Collapse of 2008.

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Barack Obama visited Boston today to appear at a $6000 per person fundraising event for our Democratic governor, fellow law school graduate Deval Patrick. At first I was excited because I though that perhaps the Nobel Peace Prize winner would take his Aunt Zeituni back with him on Air Force One. Obama indeed praised Governor Patrick for having built additional public housing units here in Massachusetts, but he did not mention that we will be needing them if we are to continue to house illegal immigrants like his aunt. The President also praised Patrick for having increased the number of public school employees in Massachusetts. No praise was apparently due to private sector workers of Massachusetts whose taxes paid for the new teachers’ union members and new housing units. No praise was given to Massachusetts taxpayers who have paid for Aunt Zeituni’s housing for the last six years.

It is unclear why Massachusetts voters love a politician who promises to expand federal spending. According to the Tax Foundation, Massachusetts receives only 82 cents in federal spending for every dollar of taxes paid. The bigger the federal government, the poorer we will become. A politician in New Mexico ($2.20 in spending per dollar paid in taxes) or Maine ($1.41) could be expected to vote for additional federal programs, but why would we want to pay taxes to build pork barrel projects on the other side of the continent?

Deval Patrick received $600,000 from donors who wanted to lunch with Obama. Federal taxpayers probably spent at least $2 million on transportation and security for the President. Commoners suffered lost wages and productivity when they found subway stations closed, streets closed, their scheduled airline flight stopped at Logan, etc. Local flight schools alone suffered at least $10,000 in lost revenue. It would be a lot cheaper if we said that every day for the next 8 years the federal government will write a $1 million check to the person of Barack Obama’s choice and in return the President will agree to stay at his desk and work.

After the fundraiser, Obama stopped by MIT with his lawyer friends Deval Patrick and John Kerry. The transcript of the talk reveals that this speech about renewable energy credits two dozen politicians. John Kerry is “an all-star” who is “[working on legislation to] make renewable energy the profitable kind of energy in America” . Abe Lincoln “designated a system of land grant colleges”. FDR “signed the GI Bill”. Senators are praised for working with the all-star Kerry. Representative Ed Markey “deserves a big round of applause” for passing legislation relating to energy.

Was anyone left out of the talk? No scientists or engineers were mentioned, except for a couple of guys who served on Obama’s council of advisors. According to the troika of lawyers on the dais, all scientific and engineering innovation is apparently due to the efforts of politicians like themselves.

Does it make sense to credit technical achievements to lawyer-politicians? Consider that, since the Enlightenment, scientists and engineers have worked successfully in monarchies in England and France, in feudal systems in more fragmented European countries, on expeditions with Napoleon, under Communist rule in Russia and China, for Adolf Hitler in Nazi Germany, and here in the U.S. under whatever we’re calling our present system of government. Isaac Newton was a member of the Royal Society, but I don’t remember King Charles II taking credit for the Principia.

Who are my heroes of renewable energy? Let’s limit this to starting in the year 1900 so that we don’t have to reflect on our own inadequacies compared to Newton, Maxwell, Gauss, et al.

We’ll consider electricity first. Let’s thank Oleg Vladimirovich Losev, inventor of the LED. To keep some of the Obama spirit in my speech, I’ll also thank Marx and Lenin for creating the Soviet Union that enabled Mr. Losev to do his important work under a political system that inspired our own planned economy today. M. Stanley Whittingham and John B. Goodenough, inventors of the lithium-ion battery; if we had better batteries, all of the rest of our energy problems would be simple to solve. Karl Alexander Muller and Johannes Georg Bednorz for their work on high temperature superconductors that enable low-loss electric power lines. Julius Edgar Lilienfeld, inventor of the transistor, and then all of the silicon nerds who enabled us to run millions of transistors at the cost of just a few watts.

How about power generation? Robert M. Potter, Eugene S. Robinson, and Morton C. Smith, developers of the Hot Dry Rock idea (1974 patent), which may yet save us from barbecuing the planet.

Things with a lot of parts? Kiichiro Toyoda, founder of Toyota Motor Corporation, and his colleagues for figuring out how to make machines that don’t break; it saves a lot of energy if you can use an automobile for 20 years instead of 7. For more modern heros, Wang Chuan-Fu, the founder of Shezhen-based startup battery company BYD, and Warren Buffett, who recently added $230 million in financing for BYD’s line of electric cars (story).

Can innovation and energy independence be achieved by expanding government, celebrating politicians who spend taxpayer money, and spending $52 billion per year on homeland security (partly by running 4,400 Secret Service agents around the U.S. to partisan fundraisers)? I sure hope so.

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A friend of mine wants to set up a wiki for perhaps 200 people who fly a particular kind of airplane. He’s looking for a recommendation for a hosting service and software. Here are the specs…

Required:

• easy to edit. WYSIWYG not required, but simple tags like Mediawiki or Confluence.
• publicly editable, no login required
• revision history, easy to undo page changes
• expect < 200 pages of content max.
• download of attachments, like PDF, PPT required.
• discussion / comments per page.
• searchable, easy to bookmark, generated table of contents

Nice to have:

• highly desirable to take a copy of the entire wiki offline on a smartphon (iPhone, BlackBerry), PDF ok.
• Injecting simple HTML.
• email notifications of page changes.
• separate domain name
• exportable to a neutral format, like XML
• cost under $20/month

General discussion list, blogs, forums not required nor desired.

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What makes this a non-obvious question is that the wiki systems that let anyone edit are too public, e.g., Wikipedia. The wiki systems that are private are too private and require people to register before they can tweak.

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The federal government announced its latest plan to cut back on some of the looting of America by Wall Street (New York Times story). Background: Bank executives paid themselves billions in bonuses up to and beyond the point at which they wiped out their shareholders, then started paying themselves bonuses out of the hundreds of billions of tax dollars shoveled in by the U.S. government. Uncle Scrooge is now saying that a bank executive, even with the support of his or her golfing buddies on the Board, can’t take home $100 million per year in cash anymore… the executive has to take $100 million in restricted stock instead. Sounds like an improvement, except to the shareholders whose interest in the public company will be diluted.

To restore investor confidence in American public companies, how about a rule that says the company can’t issue new stock for employees or promise anything to an employee for future delivery out of future revenues?

Let’s look at some problems that could have been eliminated by this rule:

• General Motors, which appeared to be healthy and profitable in the 1960s and 70s, was actually bankrupting itself with pension and retiree health care liabilities that were not disclosed to shareholders (more)
• The New York Stock Exchange, a tax-exempt not-for-profit company, quietly promised to give $140 million to Richard Grasso upon his retirement (Wikipedia)
• Jack Welch and his golfing buddies at General Electric helped themselves to a 30 percent ownership stake in the company by issuing themselves stock options (he brags about this in his autobiography; see my review)

With a “no printing new stock and no unfunded future promises” rule, executives could not loot from a company more than 100 percent of current profits and cash. Once the looters had retired, the shareholders would have a chance to live and fight another day with a new set of managers.

What about pensions? Under this rule, a company could contribute current cash to a worker’s 401k account. Managers would not be able to subject shareholders to catastrophic risk from an increase in human lifespan, a fall in interest rates, an increase in health care costs, etc.

What about compensation that was tied in some way to the long-term health of the company? The company could use profits to buy its own stock back and put it into an escrow account for employees, with the stock to be released from escrow after a period of years. The company could similarly put aside cash in escrow that would flow out to the employee in the event that the company was profitable over a period of years. If the company prospered, the employee (or former employee) could buy the house in the Hamptons. If the management’s bets failed to pay off and the company floundered, the cash would come back out of escrow and be available to rebuild value for shareholders.

As noted in my economic recovery plan, under the guise of protecting shareholders, the government essentially created the problem of corporate looting by preventing shareholders in public companies from nominating Board members (thus freeing the incumbent managers to nominate their best friends). This latest attempt by the Feds to save shareholders seems likely only to defer their ruin.

What’s wrong with the idea that a public company should not be able to spend more than 100 percent of its current revenue on compensating current employees?

[Update: An October 22 New York Times piece by Joe Nocera noting “the most straightforward way to shrink the oversize pay of Wall Street executives — and, more generally, curb the excesses of executive pay — would be to make directors more accountable to the company’s shareholders.”]

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Harvard Law School graduates Deval Patrick and Barack Obama will be holding a fundraising lunch on Friday here in Boston (details). Taxpayers nationwide will be paying Nobel Laureate Obama’s salary and travel expenses for an entourage of 500 while he spends a Friday doing something other than work. To prevent disgruntled taxpayers from throwing offal at the dignitaries, the FAA is imposing a 30 nautical mile flight restriction around the city from 11 am until 4 pm. Our flight school will be effectively shut down on what would otherwise be a profitable fall day.

Is it safe to say that we now have enough lawyers to kill any economy?

[Related: ABC News story about a flight school owner in Oakland, California sends the Democratic Party a bill for lost revenue during Nobel Laureate Obama’s fundraising visit there.]

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As noted in an earlier posting, at a total cost to society of about $150 in administration plus $2 in test materials it was established that I don’t have strep throat. After a week of feeling relieved not to be suffering from strep, but yet coughing and enervated, I went in to see the doctor and he said “Yes, I’m sure that you don’t have strep. All you have is swine flu. Try to get some rest, drink a lot of fluids, and expect the suffering to continue for 10-14 days total.”

The good thing about swine flu is that it gives one a good excuse to sit at the computer and type. In hopes that it will be useful to a team of energetic young programmers, I’ve drafted a complete idea for what should be a viable business: a Web service that conveniently allows someone to read and respond to postings from multiple online communities. Comments would be welcome.

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The New York Times today carries a story about a couple of local Republican functionaries in rural South Carolina who got in trouble for offering a theory about how wealthy Jews got rich. They were genuinely shocked to find that anyone objected to their sharing a bit of folk wisdom. It reminded me of a story told by a flight attendant friend who grew up in southern Appalachia. She was talking to a fellow flight attendant about renting a new apartment in northern Kentucky. “The landlord wanted $650 per month, but I Jewed him down to $500.” Her friend said, “You do realize that I’m Jewish, don’t you?” Our southern gal said “Of course. Why are you asking?” Her friend had to explain to her that the expression, “to Jew down”, which she had been blithely using for 30 years, was considered offensive by actual Jews.

[For those who are truly passionate on the subject of Jewish wealth, there is a new book coming out, Start-up Nation: The Story of Israel’s Economic Miracle. Apparently Israel is home to a large number of companies listed on the Nasdaq (list). I’m not sure why this is surprising. Israel is one of the world’s most densely populated countries and has very little water. That rules out agriculture. Israel is not on an important trade route and most nearby countries declared war on Israel in 1948 and remain in a declared state of war. That rules out trade. Israel remains poor compared to Western Europe and the U.S., which rules out banking. Israel has no natural resources, which rules out mining and heavy manufacturing. The only reasonable option for an ambitious Israeli therefore would be something in infotech or biotech.

For those who are upset by Jewish wealth, I guess they can take comfort in the U.S. government’s strenuous efforts toward making us all equally poor.]

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