Month: October 2010

Back in May, I posted an entry about my $83 physical checkup that took six months to schedule and required skilled negotiators at both the doctor’s office and the insurance company to bring the bill down from $510. A paper invoice was mailed to my house and a paper check for $15 mailed back in response.

This morning I called a veterinarian in Seattle to ask if she could see my four month-old Border Collie and investigate his tummy problems. The receptionist offered an appointment not six months later but six hours later. Instead of a multi-page HIPAA form, insurance forms, and demands for my Social Security number, the animal hospital asked for my street address and phone number. Instead of waiting for 20-60 minutes to see the doctor, I was seen at the appointed time. I paid the $67 checkup bill on the spot with a debit card.

[How’s the animal, you may ask? I’m awaiting the results of a test for parasites. His stomach problems don’t seem to be interfering with his demonic energy, as shown in this Motorola Droid 2 videos, captured shortly after the vet visit: with adult Border Collie; with another puppy]

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The Economist has this article on U.S. pension obligations. The chart is interesting. Assuming that the pension funds are able to achieve their most optimistic dreams of an 8 percent annual return on investment, the U.S. states in the chart will run out of money in their pension funds in between 8 and 20 years. Once the funds are exhausted, the pension obligations will consume between 30 and 55 percent of forecast tax revenues.

Separately, an NBER researcher says that we shouldn’t fund public pensions at all, but simply raise taxes when the money is due (PDF paper). Towards the end he simplifies his argument: “Why should taxpayers vote to accumulate assets in a public retirement plans that buys Treasury notes yielding, say, 2% when they are paying 15% interest on their credit cards and 7% on car loans?” If the state needs money in 2020, why should taxpayers borrow money now to pay higher taxes when instead the taxpayers could borrow less and pay higher taxes in 2020? If this guy is right, our public employee pension funds are ridiculously overfunded.

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A few recent articles related to government spending on infrastructure projects.

The first is a New York Times article about Japan’s failure to recover from its early 1990s slowdown. The article does not mention the fact that the U.S. government has been doing exactly what the Japanese government did, i.e., spending money on expensive infrastructure projects and on protecting big established companies (like the Detroit automaker bailout).

As an example of where government stimulus money goes, here’s an article on a $500 million project to build a few miles of light rail in Detroit. It seems odd that anyone would want to build additional transportation infrastructure in a city that is depopulating as rapidly as Detroit. One would naively think that the existing road network would be more than ample for a city whose population is about half of what it was when the roads were laid out (source). See also: this video.

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One of the things that has confused me most about Barack Obama is how he has failed to act on his expressed personal convictions. I would have thought that one of the luxuries of being President of the U.S. is that one would be able to do whatever one wanted, mostly, at least for four years. For example, Obama has said that he is against the wars in Iraq and Afghanistan. He could have ended both with the stroke of a pen and brought he troops home on January 21, 2009. Yet he did not.

In some ways the latest argument over gays in the military is even harder to understand. Obama has said that he is against any restrictions on gays serving in the military. A federal judge handed him exactly what he said that he wanted, i.e., an injunction preventing the military from treating gay soldiers differently from straight soldiers. You would think that he would have checked that one off his list of goals and proceeded to work on other stuff. Instead, we learn from this nytimes article that Obama is mobilizing a swarm of government lawyers to fight the judge’s ruling and preserve the Clinton-era “Don’t Ask, Don’t Tell” policy.

It seems odd that Obama has put so much effort into expanding government power in areas never previously imagined, e.g., to force every American to buy health insurance, but won’t use the powers that everyone agrees that a U.S. President has had for 200+ years, e.g., to bring troops home or to let a judge’s ruling stand unchallenged.

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If you’re a parent of a recent college graduate, still smarting from the $200,000 expense, and the kid has turned out to be unemployable, it may be worth a visit to Glenn Beck’s Wikipedia biography before shelling out for the younger sibling’s college degree. It seems that Glenn Beck graduated high school and never enrolled in college (though as a 32-year-old he signed up for a single class at Yale). Wikipedia shows that he has a “salary” of $32 million per year.

[In case anyone is motivated to ask, I am not a Glenn Beck fan. I have only seen parts of his show a few times while in various aviation facilities, all of which seem to have Fox News playing in the pilot lounges. This blog entry was prompted by a friend claiming that Glenn Beck was a Yale graduate, which struck me as unlikely based on what I’d seen of his show. Regardless of his achievements as a TV personality, I am very impressed by his return on investment in education!]

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A couple of recent items from the New York Times:

• Gregory Mankiw calculates the total tax rate on $1,000 in 1099 income put aside for a child’s future; with federal income tax, Medicare tax, state income tax, corporate tax, dividend tax, and estate tax, the government collects about 90 percent
• New York state facilities for naughty teenagers cost $220,000 per kid per year ($600/day, or enough to send the kid (along with a friend or two) to the Four Seasons resort of his choice), except when the cost is infinite because the state continues to pay 80 employees at a facility that no longer houses any kids at all.

Mankiw adds some evidence to my theory that competent politicians will extract the maximum amount of taxes that a given economy can produce. When people say, for example, that a particular tax in the U.S. could be higher, my response is that their suggestion is offensive to professional politicians. If there were more blood that could be squeezed from Americans overall, it would already have been collected. Sadly we have let our politicians down to some extent by not building an economy sized appropriately for Medicare, public employee pensions, Social Security, government worker salaries, our various foreign wars, etc. Our politicians’ confidence in us was misplaced. But that doesn’t mean that more could be collected overall from the American people that they are actually stuck with.

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The town sent me a property tax bill today. The value of the house is down about 7 percent, reflecting the continued collapse of the U.S. private economy (Massachusetts does not benefit that much from the general expansion of the federal government, from TARP, or from the Detroit automaker bailouts). Even the Millionaires for Obama (the neighbors) aren’t prospering in the Obamaconomy. How about the tax owed? It is up about 7 percent, reflecting the pay raises of local schoolteachers, policemen, and firefighters as well as the continued rise in the costs of health care for public employees as well as the rising cost of pensions and health care for retired public employees.

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New Jersey’s Governor Christie has been assailed lately for canceling a proposed railroad tunnel because the cost estimates have grown to between 11 and 14 billion dollars (source). None of the newspaper articles that I’ve seen on this story, however, have compared the cost of this tunnel to others around the world. Here are the data that I wish the journalists had pulled from Wikipedia:

• Lotschberg Base Tunnel, world’s longest land tunnel, dug under a mountain at the peak of the world economic boom and completed in 2007; 21.5 miles long, about $4.5 billion (might be 1998 dollars, though); cost per mile: $209 million
• Gotthard Base Tunnel, when completed in 2017 will become the world’s longest railway tunnel; at least 35.4 miles plus additional tunnels, shafts and passages totaling 94.3 miles, about $10.2 billion; cost per mile: $288 million
• Channel Tunnel or “Chunnel”, connecting France and England, world’s longest undersea tunnel; 31.4 miles, opened 1994, cost $7.4 billion (might be 1985 dollars and the cost overruns did lead to bankruptcy); cost per mile: $235 million
• Wushaoling Tunnel, traveling through four regional fault zones; 13 miles long, opened 2006, cost $845 million; cost per mile: $65 million
• New Jersey-New York Mass Transit/ARC Tunnel, scheduled for completion in 2018; 3.5 miles long, cost $11-14 billion; cost per mile: $3.7 billion (I used $13 billion for this calculation)

Are folks in New Jersey rich enough to pay 15 times as much per mile of tunnel as the Swiss? Or 57 times as much per mile as the Chinese pay? New Jersey has high income now (2nd in nation), but Forbes suggests that New Jerseyans will not be especially wealthy in 2018 if present trends continue. New Jersey has some existing fiscal problems that led to its being the first U.S. state charged with fraud by the federal Securities and Exchange Commission (SEC site).

To me the most interesting part of this story is why newspapers couldn’t be bothered to calculate the cost per mile of this project. A Google News search for ‘new jersey tunnel “cost per mile”‘ yielded no results (“new jersey tunnel” yielded 689 results). The New York Times article mentions the number of jobs that the government forecasts would be “created” (the accounting doesn’t make sense to me because they did not subtract the number of jobs that would be lost due to taxpayers having $13 billion less to invest and spend) and a bunch of other estimates. In a situation where the main debate is about whether or not something is too costly you’d expect a newspaper to include some facts about what similar projects have cost worldwide.

[The data from other tunnels is a little bit confusing since there are varying numbers of tracks and holes through the Earth. The Chunnel, for example, is really two single-track tunnels plus an additional “service tunnel”. The Lotschberg Base Tunnel is currently a mix of double- and single-track capacity. The Gotthard Base Tunnel is two tunnels with one track each (no “service tunnel”).]

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Those of us who’ve been participating in Internet discussions for decades (me since 1976), starting in the identified days of ARPAnet and now in the potentially anonymous or pseudonymous mud-slinging days of Internet, associate the technology with a certain amount of incivility (see http://en.wikipedia.org/wiki/Flaming_(Internet) for example).

My friend Kyle took me out dinner this evening at No. 9 Park, an extremely civilized venue. She works in the health care industry where it is conventional to have 100-person conference calls. She said “I’ve learned that you never ask a question of the group. The answer always comes from an angry crazy person.”

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I went to see The Social Network this evening.

The movie starts out with Mark Zuckerberg, the Facebook founder, in a bar with his girlfriend from Boston University, Erica Albright. This struck an off note for me because the typical Harvard undergrad needs a passport to leave Cambridge. The idea that an introverted computer programmer at Harvard would have a girlfriend at BU, other than perhaps someone he had known from high school (the dialog makes it clear that they did not meet in high school), is almost absurdly unlikely.

The next scene in the movie has Zuckerberg bringing down the entire Harvard University network by building facemash.com, a site that let users rate undergrads’ appearance. The site got 22,000 page views within four hours (or perhaps it was 22,000 photo views), each page view consisting of some text and a couple of photos, and this supposedly brought down Harvard’s 2003 network, capable of transferring physics data sets and streaming video. (For comparison, in 1999 America Online’s Web servers were responding to 28,000 file requests… every second.)

[It was possible in the olden days to slow a network down with user activity. I personally slowed down a corporate network by developing a popular multi-player SpaceWar game that required peer-to-peer synchronization, but that was in 1983 and the network was a single coax cable running old-school Ethernet (10Base5!) among about 100 Symbolics Lisp Machines. The game was banned by company executives.]

The portrayal of Harvard students and Facebook programmers as persistently drunk seemed hard to reconcile with the dreary realities of keeping a bunch of MySQL servers running and indeed the movie’s initial focus on technology shifts to a focus on interpersonal dynamics. We don’t learn much about what it felt like to build the company or add features to the service.

Former students often ask me what I think of Facebook. Many of them are just a little older than Zuckerberg and they say “Philip: you built all of those features in the 1990s. You taught a whole course on how to build online communities. How does it feel to see this guy make billions of dollars without having to do anything innovative?” My response is that I didn’t envision every element of Facebook. I imagined only three levels of publication: private (email), public (Web site), and community (on a Web site accessible only to other registered users of a site such as photo.net). I never had the idea of limiting information based on a network (though on photo.net we did have a “friends” feature starting in 2000 where contributions to the overall community by particular users marked as interesting would be highlighted to the person who’d selected those “friends” and that information would be displayed in reverse chronological order).

Zuckerberg seems to have done everything that the early Internet nerds suggested doing, e.g., starting with a relational database management system, watching user behavior carefully and refining the site’s feature set, providing mechanisms for users to connect and discuss. It was our generation’s job to show his generation how to do stuff, so we did our job and he did his.

My favorite part of the movie experience was a character who says that his girlfriend is “jealous, crazy, and frightening”. I nudged my companion and said “Wow, she’s just like you!” Seconds later the girlfriend says “How come your Facebook page says that you’re single?” My companion had in fact uttered these very words back in 2007 and in much the same tone of suspicion and indignation. I explained that I had set it up back several years ago after being invited by some students and didn’t use Facebook except to acknowledge friend requests. If it made her unhappy I would change the status to “married” and did so. This led to a flurry of congratulatory emails from surprised friends. To each one I had to respond that I had only changed the relationship status in order to quell criticism and there had not been any wedding. That’s when I realized that Facebook was more than simply a diversion for college undergraduates.

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