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I’m still reading Coolidge and sometimes the prices back around the turn of the 20th century are striking:

• “In 1890, professors’ salaries [at Amherst College] were $ 2,500, more than twenty times tuition. The step up from laborer to professor was immense, for the average wage earner in 1890 earned $425 a year. ” [i.e., tuition has gone from 1/20th of a professor’s salary to between 1/3 and 1/2]
• “[In 1894] Tuition at Harvard Law that year was $150, and the university catalog estimated additional expenses of up to $471.” [i.e., the tuition has gone from about $4000 in 2014 dollars (calculator used) to $52,350 (source).]
• “Homes in western Massachusetts ranged in price from $2,000 to $5,000, about what a young lawyer could earn in a year if he was lucky.” [Zillow says that the median sale price for a house or condo in Northampton is now $261,000, perhaps four times a young lawyer’s salary out there.]
• “The State House on Beacon Hill was a glorious structure, its cornerstone having been laid by Samuel Adams, the governor, who had arrived to deliver it with fifteen white horses. Its thirty-five-foot dome shone gold, having been freshly gilded in twenty-three-carat paint the autumn before at a price of $4,758.79, a sign that in autumn 1906, Massachusetts was feeling extravagant.” [Compare to present; the state government will spend $1 million to pay off-duty state police cars to park at the closed-for-construction Callahan Tunnel (Boston Herald).]
• Total federal income tax revenues for 1924: $1.84 billion [About $250 billion in today’s dollars, compared to about $3.78 trillion in current spending (Washington Post), i.e., enough to fund 24 days of our current government’s spending.]

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Here are some snippets of what was on friends’ minds at various Christmas and New Year’s gatherings….

A 65-year-old led off his good news summary from 2013 by pointing out that stocks had reached an all-time high. His cohorts were cheered by reflecting on this. I didn’t want to break their hearts by showing them this chart of the S&P 500 in real (inflation-adjusted) dollars. It turns out that the peak was actually in August 2000. We’re getting close to that high point from 13.5 years ago but we aren’t there yet (i.e., a person who is today 65 and put money away for his or her retirement back at age 52 would still be waiting for a positive return on that investment). Measured in barrels of oil, a good proxy for the kinds of things that a comfortable person might want to buy, e.g., gasoline or airline tickets, things are far worse. Oil in August 2000 was about $30 per barrel (source) whereas today it is about $110. So the S&P at 1565 in August 2000 would have purchased 52 barrels of oil. At today’s price of 1830, the S&P buys just 16 barrels of oil. What if you wanted to buy houses in the U.S.? The Case-Shiller index was about 100 in August 2000 and is now 150, so you could buy 15.6 houses back then with an S&P 500 position compared to 12.2 today. But people who have big S&P 500 positions don’t typically buy average houses. What about that condo in Manhattan? This source says the cost was $522 per square foot in 2000 and it is now $1,178. So the S&P 500 has gone from being worth 3 square feet of space in Manhattan to 1.55.

People talked about schools. A father talked about how Cambridge Public Schools (among the world’s most lavishly funded) had by accident managed to create a good Montessori school (Tobin). Children from Caucasian and Asian families, who could not take advantage of the city’s race-based preference system, had only about a 1 in 4 chance of being assigned to this school, according to this father. But recently the central bureaucrats had removed the principal, who had been beloved by both teachers and parents, and substituted a mediocre replacement. The school was now on a downward slide. A homeowner in Brookline talked about how it was unfair that people were crowding into the Brookline schools: “They used to be great. Now they’re just okay. These people are wrecking it for those of us who have been here for 20 years. There should be a 6-12 month waiting period before you can send a kid into our schools.” A passionate supporter of bigger government and higher taxes on “the rich” to pay for it, this owner of a $2 million home in Brookline spoke bitterly about his opposition to “the town considering a property tax override so that they can build a new school.” [Thus proving that most Americans can agree that the fairest tax system is a progressive one where rates are 0% up through whatever their income happened to be in any given year and then 100% above that!]

Despite the trepidation about schools nearly everyone seemed to be happy with how his or her children had turned out. And the kids who were present at these parties were all ones that any parent would be proud to call his/her own. Can our schools really be as bad as the statistics show if the children are turning out so well? [I do realize that this is a biased sample since the parents of these children generally have above-average educations, incomes, etc.]

My friends are mostly getting to the stage of life where they talk about health care for their aging parents. Despite the fact that Medicare was paying all of the bills and no expense or procedure was being spared, they were appalled at what they plainly perceived as disorganization, incompetence, and mismanagement at Boston’s top hospitals, e.g., Mass General. As these friends are mostly not doctors it is tough to know whether the problem is simply one of perception due to the large number of providers involved and the lack of clear communication to the patient and family.

A gathering of pilots and aircraft owners from Hanscom Field was notable for the enthusiasm that everyone displayed for helping young people (some of whom were present) progress towards personal and professional aviation goals. For example, all of the aircraft owners were offering the younger career-building pilots the opportunity to fly their airplanes. It is something that one doesn’t see as much in engineering and I’m not sure why.

[Another notable fact from the pilot dinner was that every man at one table who had been a father in Massachusetts had been sued for child support and, as part of the child support lawsuit, the plaintiff had ratted him out to the state’s Department of Children and Families as a child molester. We learned that this is no longer the default level of pressure applied, however, from a soft-spoken even-tempered guy that we’ve known for years. He was currently going through hearings as a criminal defendant: “The prosecutors around Worcester got a grant from the federal government to prosecute violence against women,” he noted [maybe this program?], “which means that they now go after every man who is accused because they get paid for it. So now all of the child support plaintiffs in Worcester are going to the police saying that they have been beaten up.” The mother of his 11-month-old son alleged that he had grabbed her wrist. “She has no evidence other than her own statement. She doesn’t have any witness to say that I ever yelled at her, threatened her, or touched her. She has no marks on her skin. But anyway my lawyers say that I will still have to go through at least four court appearances as an accused criminal. My plaintiff offered to drop the charges if I would pay her what she is demanding, but it works out to more than 100 percent of my after-tax income.”]

This is the time of year when I have the most contact with MIT Media Lab faculty. The lab seems to have settled into a moderately comfortable middle age (the lab, not the people!), with lots of fairly young faculty who are excited about the work that they are doing. I would say that the success proves the wisdom of Nicholas Negroponte, the founder, who invested heavily in a fancy building that seemed ridiculous at the time. Why did people still searching for a problem to solve deserve a better building than the drawers full of Nobel-prize winners in the Physics and Biology departments? At first glance it might seem that it would be more important to gather the best researchers doing the most important stuff. But it turns out that people are unreliable. Their ideas might not pan out. Their ideas might pan out so well that they get hired away by other institutions. What can be relied upon, however, is the persistence of a massive and deluxe building near the heart of the MIT campus. If you have a nice building at a good university you can always hire creative people to fill it.

Hardly anyone was worried about economic security. Each couple [couples with kids hardly ever seem to invite anyone who isn’t part of a couple] had at least one person with a reasonably well-paid job and usually both adults in a household were doing well in a career. The folks who seemed to have the toughest time finding a rewarding new job when necessary were older (50+) software engineers with no management experience. Their technical skills were excellent but despite the shortage of capable programmers, employers were more interested in hiring managers that age, not individual programmers.

Some people talked about books that they were writing but I don’t remember anyone talking about a book that he or she was reading. People who had been passionate 25-year-old consumers and then discussers of books, movies, theater, concerts, etc. are either no longer reading or no longer bothering to talk about what they read. (Right now I am reading a biography of Calvin Coolidge so maybe it is a good thing that people my age apparently don’t talk about what they are reading!)

It was in shopping for bagels to serve to my own guests that I met my personal hero for 2014. The trim man of about 40 behind the counter at the Harvard Square Dunkin’ Donuts filled a bag with 18 bagels then asked “Is there anything else that you want?” I began mentally going through the list of all of the donuts on display, starting with “Boston Kreme”. This led to a conversation on the subject of temptation versus willpower and he mentioned that he had once weighed 300 lbs. If he can lose 150 lbs. and keep it off while standing right next to 20 baskets of donuts, shouldn’t it be possible for me to keep a single New Year’s resolution?

A belated Merry Christmas and Happy New Year to all of my readers!

 

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The Washington Post says that the programmers who built healthcare.gov are being fired (story). They are being replaced by Accenture, at $90 million per year for maintenance.

This does raise some questions…

• if the site works, how is it possible to spend $90 million each year on maintenance?
• if the site doesn’t work, absent spectacular incompetence by the old team, how will it be possible for a team of new programmers that has never looked at the source code to make progress at a more rapid rate, at least in the short run?
• how much is actually going to be spent if you could the salaries of federal government workers in addition to these contractors? And, rather than building this site, would it have been cheaper to fly all of the Americans who have successfully signed up to non-Medicaid plans via healthcare.gov over to France every time one of those folks needed a real medical intervention? (paying market/private rates in France for the services consumed)
• should we buy Accenture stock as a way of getting some of our tax dollars back? This chart shows that building Web sites for hundreds of millions of dollars is actually pretty profitable.

[Note that Google was funded with about $25 million that lasted five years, albeit supplemented by some ad revenue (source). Thus if the healthcare.gov project goes perfectly in 2014 it will be consuming cash at 18 times the rate that the world’s most rapidly growing company did.]

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There has been a lot of news coverage about various politicians and political appointees conspiring against the public by closing lanes on the George Washington Bridge. None of the articles have addressed the question of whether it makes sense for this bridge to be government-owned. A private company surely would not voluntarily cut its own revenue by closing lanes unnecessarily. When was the last time that you went to a McDonald’s restaurant and had to sacrifice your health by ordering a salad because they weren’t selling Bacon Habanero Ranch Quarter Pounders due to a personal grudge among politicians?

There are probably a lot of governments worldwide that could operate a bridge competently and efficiently, but New York and New Jersey do not seem likely candidates. The Tax Foundation says that New York and New Jersey are the two least efficient states in the United States, in terms of the percentage of state income that they spend to fund state and local government. The Port Authority is one of the world’s most wasteful entities (see this July 2010 posting about them spending $15,500 per flight hour to accomplish a $400 per hour helicopter mission) and now we’ve learned that Port Authority properties are playthings for capricious rulers.

Why should an already-built bridge continue to be owned by this entity? There are no unusual capital or permitting requirements associated with its continued maintenance. If you are a fan of expanding the government’s role in our economy, the proceeds from selling the bridge could be used to build additional infrastructure to be managed by the Port Authority. If you’re a fan of arithmetic, you could note that New York and New Jersey are both insolvent if pension obligations are lined up against pension funds invested in financial instruments that exist in the market (i.e., not fictitious ones that return 8 percent per year). The money from selling the bridge could be used to reduce the pension funding gap.

Private companies own and operate some of the world’s busiest airports, e.g., Heathrow Airport. Maintaining a single bridge has to be simpler than managing Heathrow.

Given the scarcity of bridges across the Hudson in the New York City area it would probably make sense to require that whoever buys the G.W. bridge can’t charge more in tolls than the current price, adjusted for inflation (the current price is already close to the highest in the world so this restriction should not prevent a sale).

Why not put the bridge out for bid and see what it is worth?

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I served lunch to a four-year-old girl today.

• Child: “What’s on the plate?”
• Grown-Up: “Cod.”
• Child: “What’s that?”
• Grown-Up: “A big fish that lives on the bottom of the ocean. Though unfortunately this one had to die so that we could have our lunch.”
• Child: “How do they catch them?”
• Grown-Up: “Sometimes with lines and hooks but commercial fishermen usually drag nets behind a boat.”
• Child: “I want to see it.”
• Grown-Up [pulling phone out of pocket]: “Here’s a video on YouTube showing a boat near Iceland catching cod.”

When I was growing up it wasn’t practical to watch a video of commercial harvesting of the animal that was simultaneously being consumed. Will this Brave New World of knowledge turn more of the next generation into vegetarians?

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Folks:

The movie Divorce Corp. comes out on Friday, so it seems like a good time to update the material that I gathered previously on the subject (e.g., this posting on Denmark’s laws and customs).

I’m looking for people to interview and asking my readers to help.

I know a woman in one of the “winner-take-all” states of the Northeast where it is typical for a female plaintiff in a no-fault divorce lawsuit to get the house, the children, and the cash (the trifecta that this academic study says is ideal for motivating plaintiffs). In this case, the mom pulled the plug on her brief marriage when her daughter was three years old, spiriting away the child and presenting the father with the fait accompli that he was now a sperm donor who owed her about $10,000 per year. In the sixteen years since this happened I have listened to the mother complain about the father’s inadequancy. Aside from paying her $10,000 tax-free dollars per year, in the plaintiff-mother’s mind the defendant-father was supposed to be a “secondary parent” to this child, taking care of her one day per week and doing some driving to get her back and forth to her mom’s house. To the mother’s dismay he was doing a crummy job as a secondary parent. He would fail to pick her up or drop her off on time or sometimes refuse to drive at all. I had confidently marked him down in my ledger of truly inferior human beings, but recently the mom added “But he is such a great father to the three kids from his new marriage. I don’t understand why he doesn’t take an interest in my daughter.”

The germ of an idea began to form in my head… the daughter has been a perfectly nice child at all times. Maybe the difference in this guy’s behavior was not a function of the daughter’s personality but of the mother’s attitude and the fact that he is paying the mother to be the parent. The guy had voluntarily signed up to cooperate with the mother in marriage, but his role was terminated involuntarily by the wife’s divorce lawsuit. The guy had voluntarily signed up to cooperate with the second wife in marriage and child-rearing and has continued voluntarily and effectively in that role. Let’s take it as a given that he is a terrible secondary parent/check-writer, but perhaps that is because nobody ever asked him if he wanted the job.

The theory behind child support is that, when the custodial parent does not have a job, it saves children from poverty. In the case of this child, however, both parents are remarried and both have comfortable household incomes and lifestyles. The $10,000 per year money flow did not have any effect on the child’s standard of living but I am now wondering if it deprived her of an involved father.

Suppose that the mother had said “I don’t need any money from you but I would like your cooperation in rearing this child so would you please let me know what you can do for her and how much time you can invest in her”? Would that have changed this guy’s attitude and behavior so that he ended up treating the child from his first marriage more like he treated the children from his second marriage? From the guy’s perspective, did paying someone to do the chores of parenting (e.g., driving) make him resentful if he ever had to do anything less than fun with this daughter?

I don’t have any way of contacting this guy to get his side of the story so I am appealing to readers. Do you know people in a similar situation that I could interview (I will keep the interviewees anonymous)? Here are the requirements:

• was sued for divorce after a short marriage and with a young child
• divorce plaintiff sought “sole” or “primary” custody of the child
• lived in a state where 50/50 parenting was unobtainable (at least at the time) from the courts as a practical matter (so the defendant never had an opportunity to serve in an equal parental role)
• has paid child support for 10+ years
• is paying the child support to a person who would have a comfortable lifestyle regardless (let’s say at least 2X the state’s average family income)

In most jurisdictions it is possible for a parent who obtains custody to collect child support, no matter how rich the plaintiff. A plaintiff/victorious investment banker earning $5 million per year who obtained two-thirds custody could collect additional tax-free money every month from the defendant/defeated parent. Why would legislators and judges set things up this way? It would make perfect sense if it turns out to be true that ordering Parent A to write a check every month to Parent B won’t have any effect on how Parent A feels about investing time and energy in the child. So the interview questions are to explore whether or not this is true, e.g.,

• Honestly, has the fact that you are sending checks every month to someone who doesn’t need them compromised your performance as a parent?
• Does the fact that you have to pay for your child’s expenses while at the other parent’s house as well as provide a dedicated room in your own house or apartment bother you? (this economic review in Massachusetts pointed out that the payor who has a child one third time ends up paying the same expenses twice, once in the child support recipient’s home and once in his or her own)
• Does paying the other parent every month make you more likely to skip out on the unpleasant and/or boring parts of being a parent?
• Does paying the other parent every month lead to you treating the child of your first marriage differently than any subsequent children?
• Does paying the other parent every month make it harder to cooperate with that parent?

Identities will be kept in strict confidence.

 

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Today’s New York Times carries an article about high-speed rail in California. It seems that if everything goes according to plan and there are no difficulties or delays, the state will spend $68 billion to build a 520-mile railroad to be completed by 2029 ($131 million per slowly built mile).

How do the innovative geniuses of California compare in performance to the plodding dullards of China? http://en.wikipedia.org/wiki/High-speed_rail_in_China says that the Chinese will spend $300 billion to complete 16,000 miles of track by 2020 ($19 million per quickly built mile).

[You might ask whether or not performance is comparable. Wikipedia says that the Chinese trains can go 160-220 mph. Wikipedia says that the California system will have speeds of “over 200 miles per hour” (and also that the system might cost closer to $91 billion.]

Update: Another way to look at this is what it would cost to fly people back and forth between these destinations efficiently. Absent government regulations to protect local carriers and unions, Americans would be flown around by an efficient airline such as Ryanair. This costs about 7 cents per seat mile (source). So the cost of taking one passenger on a 520-mile trip would be about $35. Suppose that the $91 billion estimate is more realistic and that, instead of being used to construct this railroad, it were invested in infrastructure projects in growing economies and yielded a 4 percent real annual return. That’s about $3.64 billion per year in cash, enough to fund 104 million one-way trips every year (i.e., 2.7 trips per year per current California resident). So instead of paying $91 billion for this railroad and then also paying for tickets to ride on it, Californians could use the money to pay for virtually unlimited free north/south air transportation (http://www.transtats.bts.gov/ shows that Americans and foreign visitors only got on airliners about 643 million times in 2013).

[Update 2018: One wag’s comment on the new cost estimate of $77 billion and new delivery date of 2033 was “People used to rob trains. Now trains are used to rob the people.”]

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Folks:

Today I was deposed as an expert witness in a software patent case. An attorney charging $500 per hour was supposed to be asking me tough questions while three more attorneys and a court reporter looked on. Due to the lack of slack in the American airline system, the recent snowy/icy weather had caused all of the attorneys to spend 6-7 hours waiting in various airports day after day and only three out of four made it to Boston. The attorney asking the questions was marooned in a hotel in Denver, Colorado while the rest of us sat in a meeting room at the Charles Hotel in Cambridge, Massachusetts.

The solution was a pair of iPads and Apple’s Facetime software. It would have worked out great from a hotel in Singapore to a hotel in Hong Kong or from Seoul to Tokyo. But high-speed Internet seems to be one thing that nearly all American hotels aren’t capable of doing (see my July 2004 posting from a $300/night hotel in Los Angeles, this November 2005 report comparing California and Mexico, this August 2006 posting from an expensive casino). So the connection kept going in and out, resulting in a waste of more than $2000 in combined fees (the deposition took about an hour longer than it would have).

Why is this something that Americans cannot master? Given the value of business travelers’ time, you’d think that this would be something that business hotels would be great at doing. They spend a fortune making it faster for frequent business travelers to check in and out. Why not make it possible for those folks, who can’t wait an extra three minutes to check in, to get some work done?

[Separately, the fanciest hotel in Cambridge was hopping at lunch time today with a banquet for hundreds of people. Who were they? City of Cambridge employees celebrating the recent election of City Council members (work one evening/week for nine months/year and get paid $75,000 (September 2013 posting))) using City resident tax dollars.]

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A friend here in Massachusetts was singing the praises of New York’s Mayor de Blasio for adding taxes on high-earners in order to reduce income inequality. It sounds reasonable on its face, but then I remembered my helicopter student, age 39 and about to retire from NYPD on a 100% pension. He was up in Boston attending Harvard’s Kennedy School of Government, courtesy of New York City taxpayers and, once done he was planning to retire to his native Philippines and have New Yorkers wire him money every month.

Since government workers are paid, on average, more than private sector workers, mightn’t extra taxes that actually increase income inequality? State and local governments overwhelmingly spend money on salaries, health care, and pension benefits for government employees. (See http://seethroughny.net/payrolls/city-of-ny and http://seethroughny.net/index.php?cID=189 for some public-employee salary and pension data.)

Suppose that the tax rates are left unchanged. The high-income New York City resident now has the money to go out for some additional restaurant meals. for example. Many restaurant workers earn less than average and probably nearly all earn less than city employees.

What do readers think? Will inequality of income go up or down in New York City with this new tax?

[Personally I think that the new tax might not result in much additional cash being collected. A certain number of New Yorkers who currently spend 140 days per year in (potentially tax-free) places other than New York City might decide to start spending 183 days in those places (see this article on what people are doing already). A handful of businesses will move to places with lower tax rates. So more money will be collected from those who stay for at least 183 days but there will be fewer people from whom to collect tax. This could be a positive for helicopter charter operators as more people try to get out to the Hamptons before midnight (which would tend to reduce income inequality, since helicopter pilots make a lot less than school teachers or police officers!).]

[There is no question that New York’s government needs the money. The Tax Foundation says that New York needs to collect 12.77 percent of state residents’ income in order to function (probably higher in the city). This compares to 7.9 percent in Texas, 8.1 percent in New Hampshire, and 10.4 percent in Massachusetts.]

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Back in 2010 I wrote about Glenn Beck’s salary in comparison with his educational spending (never enrolled in college).

This evening it was pointed out to me that Glenn Beck, high school graduate, is the author of a New York Times bestseller on American history: Miracles and Massacres: True and Untold Stories of the Making of America. The book gets 4.5 stars from Amazon reviewers, narrowly beating out Pauline Maier’s American Scripture: Making the Declaration of Independence (Vintage) (Maier is a professor at MIT with a PhD in history) and crushing Drew Gilpin Faust’s The Creation of Confederate Nationalism (Faust, possessed of an Ivy League PhD, is now president of Harvard University!).

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