Month: November 2009

Almost a year ago, I wondered if extending unemployment benefits made sense. This month Congress was at it again, taxing the working to pay the non-working and borrowing from America’s children to pay the currently middle-aged (H.R. 3548). I had dinner Friday night with a very capable 40-something woman. She stayed home with her three children until 2006, then found an entry-level job at an architecture firm. Due to her intelligence and energy, she was quickly given additional responsibilities. However, she found herself laid off in the fall 2008 economic collapse. What has she been doing for the past 12 months? “I go to a Web site every week and answer five yes/no questions by clicking the mouse,” she answered. “They don’t ask me if I’ve actually looked for a job, just if I’ve been available for full-time work. Then they send me a check.”

How do her unemployment checks compare to her former earnings? “I had downtown parking fees deducted from my payroll checks, plus a bunch of other stuff. The difference in take-home pay is only about $100 per month. Because I get health insurance through my husband’s employer, I have no financial incentive to look for a job.”

Related: My July 2008 review of The Forgotten Man, a history of the Great Depression that shows that “virtually every action by Hoover, Roosevelt (FDR), and Congress hindered the U.S. economy”.

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An 82-year-old friend recently woke up with a slight fever. Living right next to some of America’s best hospitals, he decided not to take any chances with his health and went down to Massachusetts General Hospital (“the massive genital” as my MD friends call it). As an American citizen on Medicare’s fee-for-service system, he was a prime candidate for a battery of expensive tests. They decided to start with a CT scan, enhanced with a dye. The test did not reveal any pathology, but it did provoke a near-fatal allergic reaction that resulted in him being hospitalized. He was fortunate to escape the fate of the 1 in 75,000 patients who receive this test and die (source). Having gone over to Mass General with a slight flu, my friend emerged after 12 days hovering on the edge between life and death. The taxpayer was stuck with a bill of at least $20,000 for an illness that was entirely caused by the test.

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Most of the news from Washington should be scary to investors. The federal government is expanding at about the same pace that it did during World War II and running huge deficits. Nobody has a credible story for how the debts being accumulated now are going to be repaid. Ridiculous promises are being made to public employee unions, pensioners, Social Security recipients, Medicare patients and providers, and, through health care reform, everyone else in the U.S. Yet the stock market is climbing. How is this possible? Let’s consider one result of the government promising things that it has no way to pay for: some percentage of people won’t believe the promise.

Looking at the numbers for Medicare and Social Security, for example, a citizen might believe that the age of eligibility for both programs will be increased and benefits reduced. He or she would act on that belief by saving more money now against the day when Congress reneges on all of the current promises. Where can he put those savings and get some protection against inflation, the collapse of the dollar against foreign currencies, as well as the promise of a bit of a return? The stock market. The more recklessly the U.S. government behaves, the more comforting will be an ownership stake in a multinational company such as Intel or GE.

This is a reformulation of the standard observation that people in countries with untrustworthy economies and/or governments tend to save more.

[Of course, I recognize that perceived recklessness by the U.S. government may have some negative consequences for the market as well, but this posting is to point out one positive factor. A reckless U.S. government would provide an even bigger boost to foreign stocks and bonds, which I believe have also been doing quite well lately.]

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An airline pilot friend sent me a song: “Tweetin’ on a Jet Plane”.

This may not be an accurate summary of the recent airline flight that failed to respond to ATC and overshot Minneapolis. Northwest Airlines does not offer in-flight Internet access on their Airbus A320s (source). Thus if the pilots were indeed working on their laptops it would have to have been using a desktop application such as Microsoft Office. Various politicians are calling for banning electronic devices in the cockpit, on the theory that every safety problem can be fixed with an additional regulation. I have personally observed airline captains using smartphones while parked on a taxiway waiting out air traffic control/weather delays. They did this to check weather, contact Dispatch, and do other flight-related tasks. A ban on the use of such devices would have simply inconvenienced passengers further and would not have improved safety (we were stopped with the parking brake set, an all too common situation at JFK). Once in the air, cell phones tend not to work, especially T-Mobile (I have tried it from helicopters and light airplanes, while someone else was on the controls).

No politician seems to be willing to consider the idea that the two pilots simply fell asleep, something that has happened numerous times before to airline crews, and then made up a story that they thought would sound better. In a jet one usually has to respond to a radio call at least every 5 or 10 minutes, if only to switch from one controller to another (each controller handles a specific block of airspace and at 500 miles per hour one tends to go through those blocks pretty quickly). It would be very strange for an awake pilot, even one distracted by a computer, not to notice the lack of radio exchange.

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President Obama expressed confusion as to why Dr. Nidal Malik Hasan shot and killed a group of American soldiers. Perhaps that is because he was reading the same New York Times article that I was. An imam is quoted as saying that Dr. Hasan “wanted a woman who prayed five times a day and wears a hijab, and maybe the women he met were not complying with those things”. The same article quotes Nader Hasan, a cousin, saying that unhappiness about a potential deployment to Iraq or Afghanistan motivated Dr. Hasan’s violence. This struck me as odd. If Dr. Hasan wanted to meet pious Muslim women, wouldn’t an all-expenses paid trip to a country containing millions of such women be something for him to look forward to? Surely it is easier to find a hijab-wearing woman in Afghanistan than in Texas.

[August 2024 update: That last sentence probably isn’t true anymore…]

What’s it like over there for a medical doctor? One of my friends, a man in his 60s who went to Iraq with his reserve unit, sent me his war diary from 2005. Here are some excerpts (I’ve changed the names):

• [at a training and embarkation base in the U.S.] Now it is back on the bus for a trip to medical screening, finance paperwork, a meeting with Joe Smith (medical liaison employee) whose job it is to take care of the doctors. … it comes as no surprise that he is of little or no value. Add to that the fact that he doesn’t know this and he has all of the makings of a first rate government employee. One would think that with 131 groups before us, Joe would have the program down pat, have detailed handouts and guidance for everything from what to wear to where to play golf, but he doesn’t.
• [Next day] we are off to the dental clinic. My unit failed to send my dental records so I must repeat the bite wing and Panorex films even though I have a copy of my current physical showing the dental visit. The procedures require much waiting time for very little clinical time.
• [afternoon] we head for the CIF. This is the clothing issue point. The stations are numbered. Go from 1 to 19 and you get most of the things that you need and lots of things that you don’t need. I ask why I need snow boots and a shovel in the desert. Answer: because it is required. I now have three green duffel bags filled with stuff. There are uniforms, boots, body armor vest, flight suits, gas mask and best of all, a 9mm Beretta pistol. Since not everyone goes to Iraq, (some to Afghanistan, Kuwait, etc) it makes sense to issue thousands of dollars of unusable or unneeded equipment to everyone. They were all out of the body armor plates that go in the vest.
• [next day] What could be more fun than a 2 hour classroom lecture on how to shoot a pistol followed by a 45-minute bus ride to the range? The sun is bright and the air temp is 93 degrees. The first group of 15 soldiers goes to the line, performs their tasks (shooting computer controlled silhouette targets), and steps away for the second group. I join the second group since it is clear that it is only getting hotter and we must wear the armor until we finish qualifying. I ask for a civilian instructor to help me since I have little experience at the range. He does a great job for me; does everything but pull the trigger and I am an expert marksman. I even shoot, by accident, the distant target of the 2nd LT next to me.
• [next day] Starts at 7 AM for Death by PowerPoint presentation, a series of legal, cultural and ecumenical lectures designed to put the most alert person to sleep.
• [next day] Another beautiful day and this time it is a 4-hour course on map reading. With plotter and protractor we perform the basic functions that we teach our student pilots to do in about 20 minutes.
• [weekend] I sort out my three duffel bags of military equipment. It appears that two of them can stay behind in a rental locker that Dr Jones has hired for 4 months. I’ll pay my share so that I don’t have to schlep all of this to the desert.
• [next day] About 50 of us will take the 4-hour course on improvised explosive devices. We learn that a lot of the Iraqi bombs are made from US artillery shells. The plastic explosives are all from France. I ask the sergeant how it is possible that we are being attacked with our own friendly ordinance. I’ll let you know when I get an answer. The films are very interesting. The terrorists video most of their attacks to use as advertising. They also compensate their members based on the damage they wreak.
• [next day] Convoy class. The PowerPoint lectures are given by reservists on one year of active duty. They have never been to Iraq. Most of the slides are from the internet; few are from the Army. The take home message is that 50 percent of the deaths occur to truck passengers, either alone or in convoy.
• [about a week is spent playing golf, riding horses, and otherwise killing time waiting for a plane to the Gulf] Time is being wasted at the usual military rate.
• [after getting off the plane] We are in Kuwait. Considered by many to be a battle zone, at least for tax purposes, we are shuttled from here to there in buses protected by trucks with 50 caliber machine guns. Our first stop is RFI. This is a clothing issue point where we receive a mandatory allotment of “must have” gear for the war. I get knee pads, elbow pads, a new Kevlar helmet. Was there something wrong with the one that I got 2 weeks ago? I also get socks, tee shirts, Oakley sunglasses (you know the desert UV) and some other valuable stuff. This brings the price to $1,200. I sign for the goods. Amex is not needed because the Feds trust me not to lose the equipment. The clock keeps ticking, none of us sleeps. In fact, there is no place to sleep. We see a video tape from the Commanding General reiterating the rules of war. It includes commentary on drinking, drugs, sex and shooting the enemy. I don’t forget that we never shoot people; only “threats” or enemies.
• [on the ride from Kuwait to Iraq] The C-17 aircraft is a story by itself. What a beautiful $200 million machine. Great glass cockpit, FMS and highly capable autopilot. Holds 240,000 lbs of fuel and grosses at 560K. The amazing part is that it can get in and out of 3,000 feet. Every landing is power-on and the underside of the flaps is titanium allowing them to act as thrust diverters for landing. This is a great family aircraft because you can put your boat, SUV and a couple of hundred close friends and head to [a tiny airport in Maine] if the fuel burn doesn’t scare you.
• We get to [Iraq destination] in an hour and then hold near the airport for one hour while a mortar attack occurs. Watching the fireball explosions from 15,000 feet is enough to unnerve any clear headed person. Cleared to land we taxi in. I thank the crew profusely for their kindness to me and we make our way by bus to the passenger terminal. We finally get checked in as soldiers in Iraq. We do a little paperwork, dine at the Burger King at the PX and I get a room at the DVQ. Distinguished Visitor Quarters are for O-6 and above. A trailer with 2 bedrooms separated by a bathroom. I couldn’t be happier. I sleep on my down pillow until 8:30 AM.
• [next day] After lunch and a quick PX visit to buy soap we walk to the Air Force Hospital. It is a true combat support hospital. Air conditioned tents, all surgical specialties, trauma and ICU doctors. The Blackhawk lands on the pad. A bloody Iraqi is being bagged, then wheeled immediately to the ER. One of his legs is missing. The staff and their morale couldn’t be better.
• [afternoon] Bill [comrade from Guard unit] makes it back from his meeting. It is a warm reunion. He and his family are doing well. We have dinner and catch up on events past. One of the members of the unit has recently committed suicide. There was little warning. Apparently his wife was also in the Guard and was outside of his door when it occurred. Live ammunition, even in the hands of people unencumbered by mind altering substances, is always a risky procedure. This has not been the first suicide and certainly won’t be the last. Bill told me about the two Chinook helicopters that were totaled. One was destroyed in a whiteout sandstorm leading to a hard landing; no one was injured. The other was fuel management by pilot error. They switched tanks and flamed out both engines at 500 feet and 140 knots. The landing was very hard. The aircraft was crunched and there were three serious pilot injuries.
• [flight to field hospital] One of the boys drives me back to the flight line at 9 PM for the 10 PM departure in a Chinook that leaves at 10:40 PM. We fly at 500 feet AGL [above ground level]. The lights are out and I spend some time in the cockpit. I sit behind the left hand forward 50 cal machine gunner. They wear night vision goggles and would probably shoot anything that moves. There is a right hand forward gunner and another at the tail. Since I don’t consider the guns to be deterrents to ground fire, I can’t wait to get to [the destination]. About 40 minutes does the trick. We land, luggage is removed and we are greeted by the outgoing doctors. They are already at the airport for their flight that will leave in 2 hours.
• [next day] [Doctor soon to be rotating out] takes us on a giant walking tour of the Camp. We see everything including the mess hall, PX (new and quite nice), the gym, the administration building, the laundry, etc. I get 45 rounds of 9mm ammunition which I don’t need for two reasons. One, my magazines are lost in the other duffel bag [lost by charter carrier from U.S. to Kuwait]. Two, one bullet is sufficient if you need to use this gun. At any rate, I comply with the rules and put the stuff in my bureau drawer. At 6:30 PM I see two patients at sick call. The first is a 23 year old with severe low back pain, probably a slight disc herniation although there are no neurological sequellae. He is very nice and appreciative. I treat him conservatively with non steroidals and bed rest. The second is a 30 year old woman who arrives with her sergeant complaining of a right breast lump for three days. I do a thorough history and exam and find rib tenderness below the left and right breasts. On further questioning, she has just done a maximum amount of pushups for her PT test. There are no lumps. The sergeant insists that I order a mammogram. I explain that there is no need. She is adamant. I suggest that when she takes the patient home that she do the breast exam and bring her back if she finds a lump. If I needed a mammogram, I would have to fly the patient to Germany. I give her some non steroidals and wave adios.
• [next day] I awake to a beautiful sunrise. The air is clear and the crescent moon has disappeared. 7 AM is the perfect time to shower. I shave in the

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A reader pointed me to a September 30, 2009 Forbes magazine article, “Cambridge runs amok”. In this article, we learn the following:

• the city manager earns $300,000 per year (plus benefits and pension obligations that may cost another nearly $300,000 per year)
• the Cambridge, MA’s director of affordable housing gets paid more than the governor of Massachusetts
• the city has accumulated $1.2 billion in liabilities, most of it from unfunded pension liabilities, which would grow far larger if doctors are clever enough to extend peoples’ lives

The liabilities, divided by the 22,000 parcels of taxable land in Cambridge, work out to roughly $55,000 per property owner. A different way to put this into perspective, considering the valuable commercial office towers in Kendall Square, is to look at the total value of property in Cambridge. According to a September 21 letter from that $300,000 per year city manager, the total tax base is about $24.3B, making the liabilities about 5 percent of property owners’ assets. So it is still safe to buy that $1 million condo in Harvard Square, but remember that you’ll eventually have to pay $50,000 of that in taxes, in addition to whatever it costs to operate the city government on a current basis.

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Now that Google’s Android operating system is appearing on a bunch of new smart phones, it seems like a good time to report on my year with Android on an HTC/T-Mobile G1 phone.

How has it worked as a phone? Call quality and reliability are as good as can be expected on the T-Mobile network. In other words, it works great if you stand on one foot in space L17 in the parking lot of the Swedish Physicians office across the street from T-Mobile’s Bellevue, Washington headquarters. The phone has survived a few drops onto concrete and asphalt surfaces. About 5 percent of the time that the phone rings when in my pocket, I manage to hit the “hang up” button while pulling it out; I wish that it were a flip-phone design. Dialing via voice recognition works remarkably well considering that my phone is hunting through a list of several hundred contacts.

The slide-out keyboard is nice, but the “carpal tunnel hump” on the right side should be patented by hand surgeons. Will the next dictator of the world please require mobile phone QWERTY keyboards to be freely accessible from both sides?

Using Android means using Google Web applications. As of late 2008, syncing with Microsoft Outlook did not work well even as a one-time transfer, much less as a day-to-day operation. If you’re wedded to Outlook, stick with a Blackberry or Windows Mobile phone. I was already a user of Gmail and Google Docs, so moving to Android meant mostly adopting the Google contact manager. Contacts is the weakest part of Gmail and especially a year ago, could best be considered a work in progress. Importing contacts from Outlook, Google’s software would drop much of the information on the floor. Microsoft’s programmers envisioned a world in which some phone numbers are associated only with a company. The Smartest Programmers in the World (TM) wrote software in which such a contact was imported as just a phone number with no association to any text string, person’s name, or company name. Repeating the import command resulted in a complete set of duplicate contacts. Via this blog posting, I am hereby offering to purchase a Windows 7 machine for the Gmail group and a copy of Microsoft Outlook so that they can see what the average user might need. One wishes that someone at Google had spent a few hours watching a Microsoft Outlook user and writing down those features that were most critical.

Speaking of Outlook, the To-do Lists and Notes features are missing from the Google world and/or buried so deep as to be useless.

What works well? The native Gmail client is excellent and Google Calendar is mirrored painlessly. Google search and Web browsing work well and are fast on the 3G network.

I have just begun to experiment with Google Voice, which offers some very nice features, especially the ability to use one phone number for home, work, and cell (could save huge $$ for someone who travels internationally; calls will forward seamlessly to an Android phone with a local SIM card; voicemail messages will be transcribed and attached as an audio clip to email rather than retrieved at $3 per minute). An Android user can download an application that sends the central Google Voice phone number as the caller ID so that call recipients don’t get confused about who is calling. This important feature is unavailable to iPhone users who labor in shackles on Steve Jobs’s plantation.

For a completely Googlified Lifestyle (TM), the most glaring omission is Google Docs. I don’t necessarily want to edit Google Documents from the phone, but I store many snippets of critical information in various Google Docs. It would be nice to have an application that took a search string and made it easy to scroll through fragments of documents and spreadsheets that contain that string, pulling out the complete document for review only as a last resort.

As far as style goes, most of the people I’ve met using iPhones were overweight middle-aged men. Most of the G1 users that I’ve met were attractive slender women between the ages of 20 and 40.

The year-old G1 is somewhat underpowered for the latest Android release. One of the drawbacks of a phone running a normal multi-tasking operating system is that a background process may be consuming 100 percent of the CPU, memory, and network. It is common for an application to freeze, not because the code is buggy but because the phone is devoting its resources to a background process.

What’s missing? A dock so that I can use my Android as a home computer, as described in “Mobile Phone as Home Computer”. An Android device offers voice and text communications, Web browser, music, photos, and video. If I learn to use the Android interface, why should I have to learn anything else? Just give me a big screen, normal keyboard, and fast processor.

More challenging would be to rethink the user interface to a task/user orientation. A traveler with a mobile phone ought to be able to say “show me nearby hotels with vacancies, their room rates, and a button that I can press to reserve a room”. This would have been possible in the 1990s, even before phones had built-in GPS receivers. The carrier knows approximately where the customer is. Expedia knows where the vacant hotel rooms are and the rates. The hotel industry pays commissions to anyone in the booking chain. You’d think that you would be able to do that on any phone with more than 5 lines of screen space.

Current smart phones, especially the iPhone but including the Android, put themselves first instead of the user first. The phone is proud of its abilities to display movie showtimes, so the user looking for an evening of entertainment is expected to hunt among the applications and select the “MovieTime” app. A user-oriented interface would try to capture some information about the user. Is the phone user at home, work, or traveling? Is the phone user working, trying to connect with friends and family, or looking for some kind of diversion?

Suppose that the phone has figured out that the owner is on his way home from work and is trying to figure out what he wants to do for the evening. Instead of giving the owner a choice of 100 applications from which to choose, the phone would gather the most relevant information about entertainment options, nearby friends and family who are also planning to go out, nearby restaurants, etc. and present that information in a compact format. Despite all of the virtues of a SmartPhone, the lack of a full-size keyboard and mouse makes it slower to interact with than a PC. The phone should anticipate more of what the owner is likely to want to see and bubble it up to higher level pages.

Summary: If your life revolves around Microsoft Outlook, a Windows Mobile phone will be a better choice or possibly a Blackberry. If your life revolves around Google Web applications, the Android OS is probably the best phone on the market. In the abstract, how does Android compare to the iPhone? Text-oriented users will appreciate the fact that several Android models have full QWERTY keyboards. Voice-oriented users will appreciate the fact that all Android models to date have superior call reliability and sound quality to the iPhone. Both iPhone and Android suffer from the “let’s lump all applications into a big array and let the owner click down into one after another to accomplish a task.” A Macintosh computer owner who uses a lot of desktop applications will probably prefer the iPhone; a Web-oriented computer user or Google Voice enthusiast will probably prefer Android.

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I recently finished reading No Ordinary Time: Franklin and Eleanor Roosevelt: The Home Front in World War II, which won the Pulitzer Prize for Doris Kearns Goodwin. The book starts when FDR has already been in office for 8 years, tinkering unsuccessfully with the economy in hopes of getting it to grow beyond its size in 1929. American economic worries disappear when Europe and Asia go to war and all of the world’s accumulated wealth begins to pour into the U.S. to buy food, clothing, machines, etc. The book follows FDR as he attacked the following challenges:

• integrating black Americans into factories and the military
• hysteria over the risk that Japanese-Americans would aid Japan
• strikes for higher wages as the labor market grew tight
• an ally, Churchill, who did not want to launch a cross-Channel invasion
• a wife who was uninterested in sex (though she produced six children, five of whom survived)

Black Americans had suffered horribly during the Depression. Their rate of unemployment was lower than that of whites in 1930 (older posting), but government intervention in the labor market worked to blacks’ disadvantage. Companies were prevented by law from cutting wages, which meant that workers on average were paid more than the market wage. Therefore companies wanted to keep only their most educated and most skilled workers, who tended to be white. Employers were forced to recognize unions, which tended to be run by and for white workers. The jobs boom created by World War II meant that blacks were needed in factories, however. This caused a lot of friction as white-run unions would strike rather than work shoulder-to-shoulder with blacks. Roosevelt prided himself on being a friend to Labor, but he was also commander-in-chief of the U.S. military. The parents of soldiers were infuriated any time that a union struck because the resulting lack of ammunition and arms might get one of their boys killed due. FDR used the U.S. Army on multiple occasions to seize factories and force unions back to work. The Philadelphia transit union that is currently on strike walked off the job in August 1944 “to protest the upgrading of eight Negro employees to motormen” and distributed handbills with a message from Franklin to Eleanor: “You kiss the Negroes and I’ll kiss the Jews and we’ll stay in the White House as long as we choose.” FDR moved 5,000 soldiers into Philadelphia and threatened the striking workers with the military draft. Faced with the possibility of fighting overseas, they returned to work.

In addition to striking over the injustice of having to work alongside blacks, unions of white workers took advantage of the tight labor market and war production urgency by striking for higher wages. Roosevelt, betraying his Depression-era policies, responded to public outrage by sending in the army. FDR comes across as a consummate politician attuned to the breezes of public opinion, leaving his wife to be the one with the strong and fixed convictions.

Black soldiers in the military grew increasingly angry over unequal treatment on- and off-base. The best thing that could happen to a black soldier was to be shipped over to England where there was no institutionalized segregation. The next best thing was the death of a general, admiral, or cabinet secretary. By 1944 enough of the old guys had died and been replaced by younger bureaucrats that the military became more or less integrated.

When hysteria grew over the risk of Japanese-Americans aiding the enemy, Roosevelt took the easy way out, caving in to pressure to move these U.S. citizens from the West Coast to concentration camps in the blistering interior deserts. Eleanor argued tirelessly against this policy, but was ignored. Goodwin covers the economic motivation behind many calls for the internment, notably a desire to take over rich Japanese-owned farmland.

The book is not a military history, but Goodwin covers the frictions among Churchill, Roosevelt, and Stalin over the practicability of a cross-Channel invasion. As far as Churchill was concerned, the time would not be ripe until the Allies could essentially walk unopposed through France and Belgium. Stalin wanted a second front opened immediately. Roosevelt had to navigate between the two and eventually force Churchill into the 1944 invasion, 5/6th of whose troops were American.

Eleanor Roosevelt traveled as far as England and Australia to check up on conditions for troops and workers, serving as FDR’s eyes and ears. She had a personal staff of one, paid for from her personal funds (compare to present day First Lady), rejected Secret Service protection, and asked a lot of tough questions. Despite her generally soft humanitarian inclinations, she had no compunction about dropping the atomic bomb on Japan. She felt “a little sad” about the necessity of using a second bomb.

Speaking of that personal staff of one… Prior to contracting polio, FDR had an affair with his wife’s social secretary, the beautiful young Lucy Mercer, who was to remain a lifelong friend and was with him when he died in1945 in Warm Springs, Georgia. He invited Crown Princess Martha, exiled from her native Norway by the German occupation, to live in the White House with her children, and spent a lot of evenings with the vivacious and charming Martha. The Press did not cover this angle of FDR’s life, nor did they publish photographs of FDR that showed his crippled legs or the President being assisted. The relationship between President and Vice-President was quite different in 1944 and 45. Roosevelt had barely met Harry Truman before the election and barely spoke to him after the election.

Any serious book about this era should be sobering to current Americans. Hoover and FDR demonstrated that brilliant politicians and aggressive government were not able to generate economic growth; Hitler, Hirohito, and Tojo handed us a recovery by making it virtually impossible to do business anywhere other than in the U.S. As we enter our 9th year of the war in Afghanistan, the example of victory in World War II (4 years for us; 6 years for most others) seems increasingly irrelevant. If FDR were president today there would scarcely be an Afghan left alive and, instead of being celebrated as a hero, he would be prosecuted as a war criminal.

On the other hand, the book offers some hope. This week we are digesting the results of an election in which most races were narrowly decided; it seems impossible to get more than 60 percent of Americans to agree on any candidate or issue. Philadelphians who earn an average of about $36,000 per year aren’t able to get to work because their public transit system union, whose members earn an average of $52,000 per year (plus pensions and health insurance that may effectively double that), are striking for higher wages. How can we overcome our difficulties as a nation if we can’t unite as we did during World War II? According to Goodwin, the U.S. was never united during World War II. Despite heated struggles among various groups, we managed to prevail over Germany and Japan, very tough opponents indeed.

More: Read No Ordinary Time: Franklin and Eleanor Roosevelt: The Home Front in World War II

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A money manager friend showed me an interesting research report by Frederick J. Sheehan titled “Dark Vision: The Coming Collapse of the Municipal Bond Market. This is a product of weedenco.com and available only to subscribers, but I will summarize it here.

Sheehan starts off by noting that a lack of panic by the ratings and government agencies does not indicate health for a financial market. He cites the fact that the Fed did not anticipate how bad the subprime collapse was likely to be and obviously the Moody’s and Standard and Poor’s ratings were ridiculous.

Sheehan notes that “spending is rising and revenue is collapsing” for all levels of government. Pension fund losses will require governments to double their contributions to pension plans (see my blog posting on public employee pensions). Spending is rising, e.g., in New York City from an average of $65,401 in compensation per public employee in 2000 to $106,743 in 2009. The number of full-time employees in NYC grew as well, despite falling school enrollment. The number of state and local government workers grew from 4 million in 1955 to 20 million in 2008 (5x growth, against less than 2X growth in U.S. population). Those workers receive an average of 43 percent more pay and benefits than a private sector worker.

Municipalities dealt with the separation between taxes and expenses by borrowing. In the mid-1990s, states and cities were retiring as much debt as they were incurring. During the 2000s, though, they borrowed about $150 billion per year in aggregate, peaking at $215 billion in 2007 by which time $2.7 trillion in debt was outstanding, more than two years’ worth of tax receipts.

Barring some sort of miraculous boom in the economy and pension fund investment returns, state and local governments are headed for insolvency and default. This means that valuing a municipal bond becomes a matter for a legal expert rather than an accountant. Even for the legal expert, it is apparently tough to predict what will happen. Let’s start with the Wikipedia article on Chapter 9 bankruptcy: “Previous to the creation of Chapter 9 bankruptcy the only remedy when a municipality was unable to pay its creditors was for the creditors to pursue an action of mandamus, and compel the municipality to raise taxes. During the Great Depression this approach proved impossible so in 1934 the Bankruptcy Act was amended to extend to municipalities.”

Without bankruptcy protection, a city that couldn’t pay bondholders would be forced to raise taxes until it could. This happened to West Palm Beach, Florida in the Depression and property tax rates rose to 42.5 percent of assessed value. Potentially bondholders might demand that the city hand over real estate to satisfy its debts. With bankruptcy protection, it is unclear what happens. Vallejo, California went bankrupt 18 months ago and their obligations have not yet been resolved (story). If courts allow municipalities to walk away from debt they’ll have every incentive to declare bankruptcy and start afresh. There are no shareholders in a municipality to wipe out and therefore the only negative consequence of a bankruptcy filing would possibly be having to pay higher interest rates for future borrowing. If on the other hand, governments are not allowed to walk away from many of their obligations, they will simply run out of cash. Are bondholders senior to pension obligations or not? It may be up to the individual judge. This is “uncharted territory for investors” as my money manager put it (he does not buy U.S. muni bonds).

Municipal bonds are still perceived as almost risk-free by most investors and consequently offer a low yield, according to Sheehan. He points out that if the municipalities don’t default, the investor gets only a slightly better return than in Treasuries. Why take the risk if you’re not getting paid for it?

This ends my summary of Sheehan’s report. My own opinion is that the main lesson of subprime is that an investor cannot rely on the ratings agencies or the government to protect his or her interests. The never-employed guy in Cleveland with the house in a crummy neighborhood and no down payment? The risk that he would never make a payment should have been apparent to any investor who dug underneath the asset-backed security. Similarly, an investor in muni bonds can look at the municipality. Does the state have a shrinking population, high public employee salaries, and a big pension obligation overhang from when the population was larger? They probably will eventually default. And if an insurance company was dumb enough to insure the bonds, they’ll probably be bankrupt too.

http://www.taxfoundation.org/research/show/268.html gives a table of per-capita debt in each state and also the ratio of that debt to GDP. Massachusetts comes in at #1, with more than $10,000 of debt for each citizen and 20 percent of GDP. Each Texan owes about $1,000, by contrast, or 2 percent of GDP. The difference in yield between a Massachusetts bond and a Texas bond is probably not large enough to compensate for the increased risk of Massachusetts defaulting. This LA Times article contrasts California’s spending versus Texas’s.

[Separately, this table should be looked at whenever you’re reading about an economist who says that the U.S. should borrow and spend more on “stimulus”. They’ll tell you that we can afford to borrow another 20 percent of GDP, citing the current federal debt-to-GDP ratio. What they don’t tell you is that your state and local government may already have borrowed an additional 20 percent of GDP!]

The most serious weakness in the article is that Sheehan does not identify the mostly likely candidates to default. Surely Greenwich, Connecticut, whose residents were recently showered with billions of dollars in federally-funded bonus payments, is not going to have trouble repaying obligations incurred when investment bank salaries were much lower. But what about the Rust Belt? There must be cities whose factories have closed, residents have moved on, yet whose bond obligations remain. If so, let’s have the names! If not, how bad can the “crisis” really be?

More: A discussion of Sheehan’s report is available at the Daily Kos.

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… which is why Congress proposes to leave 18 million people still uninsured in the year 2019 (source). I’m getting more and more confused by our politicians. A lot of them have offered beautiful speeches about how it is both a tragedy and a violation of basic human rights for a person to live in the U.S. without health insurance. At present, millions of Americans are not customers of health insurance companies. After the proposed $1 trillion health care reform has had six years to work, we’ll be left with… millions of Americans who have no insurance. If this is indeed a moral issue, how can it be moral to leave millions in the same supposedly inhuman situation that they’re in right now?

I have not put my own name forward for a Nobel Peace Prize, but my own health care proposal would cover every human being living in the U.S., as well as visitors, all at a dramatically lower cost than what we’re currently spending (and certainly we wouldn’t need an extra $1 trillion thrown in). How is it that those who would leave 18 million without health insurance are able to claim the moral high ground?

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