Philip Greenspun’s Weblog

My favorite working woman pointed me to “Fair Pay Isn’t Always Equal Pay”, an Op-Ed in the New York Times arguing against a proposed new federal law that would create new ways for women to sue their employers. I thought the article, by Christina Hoff Sommers, was weakly argued. She did not point out that if women could be hired more cheaply than men, any profit-minded employer would have a 100 percent female workforce. President Obama called it “a common-sense bill”, apparently. I wonder if this reflects the fact that he has never held profit-and-loss responsibility in a private business (he did spend one of his 49 years working an entry-level job at a for-profit corporation, but the rest of his working life has been in non-profit or government jobs). I’ve found that folks who never had P&L responsibility anywhere are simply unable to imagine what it would be like to start or operate a business. People who’ve been employees or managers all of their lives tend to focus on employees and managers rather than customers or the financial health of the enterprise.

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Today I was asked two questions about the Tea Party: Am I afraid of it? Do they propose to cut spending or only to cut taxes?

My answer to the fear question was “How much worse could they do than the established parties, which have started (and continue to choose to fight) two expensive wars and strangled the nation’s economy?”

My answer to the second question was “I’m not sure”. A big of Googling brought up http://www.thecontract.org/the-contract-from-america/, which seems to me to be the closest thing that there is to a “tea party platform”. The “contract” implies some serious spending cuts by including both “Demand a Balanced Budget” and “Stop the Tax Hikes”. The federal government now spends approximately $1.5 trillion more than it takes in and the U.S. economy isn’t growing. Therefore, a balanced budget without tax hikes would require eliminating a lot of popular government programs, such as the military, Medicare, Medicaid, and huge cuts to others, such as Social Security. The Tea Partiers have left this inconvenient truth out of their contract, so it is hard to say what the Tea Party is actually advocating.

Taking it down to the household level, imagine a person saying loudly “We are going to cut spending so as to achieve a balanced budget” but won’t say whether the cell phones are to be ditched, the cable TV service terminated, or whether he or she proposes to move to a cheaper apartment.

[The other question government-related question I was asked this evening regarded Social Security. I said that if the current generation of retirees got more back from Social Security than they put in, necessarily some retirees in the future would have to get back less. The only way to avoid that would be a permanent Ponzi scheme in which we grew the U.S. population to be larger than the Earth’s (so that there was always an expanding number of workers to pay off promises to retirees). That said, it has proved difficult for me to substantiate the actual return on investment for current Social Security recipients. This 1996 article says that an average male retiree in 1980 got back 3.7 times more than his contributions would have earned if they’d been invested in bonds; an average female retiree got back 4.4 times due to longer life expectancy. A more nuanced perspective comes from this Cato Institute article, which shows that medium earners got only a couple of percentage points better than in government bonds (though a slight premium adds up over a 40-year career and this article is from the mid-1990s, before the “lost decade” for investors in U.S. securities).]

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On Tuesday I helped a friend pick up his airplane from a maintenance shop in Newburgh, New York (KSWF). The FBO in Newburgh had a stack of local papers, the Times Herald-Record and I picked one up to see how life in New York was 60 miles from the TARP bubble that protects Manhattan. Newburgh’s airport should be a significant source of income for the community. It is home to a fleet of C5 cargo airplane that cost nearly $50,000 per hour to operate; this results in hundreds of jobs for pilots, mechanics, and administrators in the New York Air National Guard. The FBOs at Newburgh are doing well this week because so many foreign governments have flown in enormous Boeing and Airbus planes so that their dignitaries can attend a United Nations conference. There is no room to park these planes at JFK, so they reposition up to Stewart and then tank up with jet fuel.

The cover story was about a property tax hike for 2011 that would raise property tax rates between 41 and 62 percent (most homeowners would see their rate go up by 62 percent). The tax increases are necessary to make up for years of profligate spending by local government. What have they spent the money on? Page three has an article about a school system administrator collecting more than $400,000 per year. Page four had an article about the DARE anti-drug program in schools, which has consumed more than $1 billion per year in tax dollars. According to the article, the DARE program “has been dismissed as being a waste of time and money by 30 studies and countless individuals. … Other studies have even found that DARE graduates had a higher rate of drug use than non-participants.”

The trip from Bedford (KBED) to Newburgh (KSWF) was conducted in a Piper Warrior of uncertain vintage, worth perhaps $30,000. Against a light headwind, it took 1.6 hours from engine start to engine shut-down. The return was conducted in a $3 million twin-engine jet. With a bit of a tailwind, it took 1.1 hours to reverse the journey.

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The kitchen laptop computer had an unfortunate encounter with a full mug of tea. As it cost $499 about 1.5 years ago, it can probably be regarded as a write-off. Rather than providing retraining and a 709 ride for household members, I was thinking it might be nice to redesign the installation to expose only a monitor and keyboard, with a brick underneath a desktop. One of the uses of this laptop was Skype video chat. So I went shopping for monitors at hp.com and dell.com and found that none of the nicer monitors, e.g., 27″, include webcams. I would think that nearly everyone who has a home PC would want to the option of using it for videoconferencing. I would think that nearly everyone who buys a nicer monitor would want to avoid clipping an afterthought webcam onto the top of the monitor. So how come it is nearly impossible to buy a monitor with built-in webcam, microphone, and maybe even speakers? A competitive market is not supposed to result in 20 different vendors all selling identical products, is it?

In the laptop world, it is almost impossible to buy a machine without a webcam. Similarly in the all-in-one PC world, both Macintosh and Windows; they all have webcams to support videoconferencing.

My one theory: the standard monitor interface is the DVI cable, which cannot support both the pixels coming up and the USB traffic going back. I don’t think this problem is insurmountable (and I’m not even sure that I’m right about what the extra pins in DVI can do), however, as it is possible to buy a bundled DVI and USB cable. Also, a lot of monitors, including the four-year-old Dell 30″ monitor I’m using right now, have USB ports.

[Update: After drying out for 8 hours, the Toshiba laptop booted up Windows Vista, ripped a CD from its optical drive, pulled Web pages from the Internet with Google Chrome, etc. The keyboard is kind of mushy, but I’m hoping it will revive. If not, I guess I can raise the laptop up on a phone book (more ergonomic anyway) and attach a USB keyboard. I’m somewhat amazed that a $499 computer can handle a full mug of near-boiling tea; hardware engineers are a lot smarter than software engineers!]

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Since I’ve written about some pension funding issues in previous postings (example), let me point readers to a couple of news articles. From today’s Wall Street Journal, “Pension Gaps Loom Larger”, about how public and private pension funds are assuming 8 percent return on investment over the coming decades. And today’s New York Times has “The Illusion of Pension Savings”, about Enron-style accounting gimmicks that enable states to look slightly less bankrupt.

In some ways the WSJ article is more interesting. Here in Boston an 18-year-old hired by the MBTA can retire at age 41 and is entitled to an inflation-adjusted pension from age 41 until death at perhaps age 100. So the pension fund managers need to be looking out for about 80 years. The assumptions that they’ve made are that the U.S. needs to grow about as well for the next 80 years as it did during the years 1920-2000 (and the 2000-2010 period needs to be chopped out!) or the fund and therefore the company or state goes bankrupt. Not only does the U.S. need to continue to be doing great, but returns to investors need to continue to be high. The flood of savings from newly wealth Chinese, Brazilians, and Indians, for example, cannot result in competition that reduces the return to capital below what it was in, say, the 1950s. When you think about it, the risk that these guys are comfortable with is rather breathtaking. Without a letter from God promising that the next 80 years will look like the 1920-2000 period, why do we allow corporate managers and politicians bet the future of their organizations?

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When health care costs, payroll taxes, and wrongful termination lawsuit risk rise while education levels fall, economists say that businesses will tend to substitute capital for labor…

(captured with a Motorola Droid 2 mobile phone that I’m testing out)

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Today’s nytimes carries a story about American politicians in the upcoming election distancing themselves from their party (link). We’ve got a system where an individual politician can get reelected to a lucrative comfortable enjoyable job even when his constituents aren’t happy with what the government is doing. This is simply not possible in most of the world’s democracies, where a party is held accountable through the parliamentary system. The U.S. system results in much more stability, in that incumbents are almost invulnerable (especially after Gerrymandering the districts so that they can choose their own voters). We can be sure that mostly we’ll see the same faces in power next year. But as I’ve noted recently in some responses to reader comments, it seems that the U.S. system is less able to adapt when things aren’t going well.

From a recent comment: Sweden, for example, was able to scale back its welfare state in the 1990s after a period of economic decline (taxes as a percentage of GDP have declined in Sweden (source)). The United Kingdom, right now, is dramatically cutting spending in ways that would be unthinkable in the U.S. (they’re going to cut government spending by roughly 8 percent of GDP; in the U.S. that would be $1.1 trillion in spending cuts, equivalent to eliminating the military ($660 billion) and Medicare ($530 billion)). The UK Prime Minister has taken to flying on commercial airlines rather than chartering massive private jets (source). See this Bloomberg article for what they’re up to.

One could argue that the U.S. system can’t be that bad, since we’re still here after 223 years (1787 to 2010). The government was successful in responding to the crises of the Civil War and Pearl Harbor. It looks to me, however, as though the U.S. government is best at responding to crises that are challenges to the power of the government and to which a reasonable solution is growth in government size and power. When the crisis is “Americans aren’t doing well”, the response often includes growing government but does not ameliorate the problem.

Let’s consider slavery. It was observed even in 1787 that black slaves were not enjoying a good life. Yet it was not until the 1950s that black Americans enjoyed full civil rights, e.g., with Brown versus Board of Education. Lyndon Johnson’s War on Poverty was launched 46 years ago in response to a poverty rate of 19 percent; after literally trillions of dollars in spending and millions of government workers hired (the U.S. had 845,000 social workers in 2006 (source)), the poverty rate is expected to be 15 percent in 2010 (Washington Post). The [First?] Great Depression of the 1930s was prolonged by government action, according to The Forgotten Man. Richard Nixon launched the War on Drugs 39 years ago and we’ve spent more than $1 trillion on law enforcement and incarceration yet the availability of drugs is similar to what it was in 1971.

Thus it looks like our political system can be effective when government power is threatened and the government needs to grow in order to maintain its power. But our political system does not seem to have a strong record of success where the solution requires shrinking the government or where the problem is that individual Americans aren’t enjoying the quality of life that they might.

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Flying with a student yesterday, we had a 13-year-old passenger in the back of the helicopter. I thought “wouldn’t it be fun to take this kid right over his house” so asked him where he lived. “Needham,” he replied. Inside or outside of 128? [Our state highway 128 coincides in this area with Interstate 95, a ring highway around Boston] “I’m not sure. Inside, I think,” he said. Perhaps he didn’t understand the concept of a ring highway, so I asked whether 128 was to the west or east of his house. He didn’t know (which means he can work for T-Mobile in Framingham). Most of Needham is outside of 128, so despite his statement that his house was inside, I directed the student to fly towards the Needham town center. After 15 minutes of orbiting, our passenger finally located his house, about 5 miles west (outside) of 128.

The kid goes to a private school inside of 128. Thus every day he fails to notice that he must cross a six-lane superhighway in order to get to school. Every day he fails to notice the massive green signs with “I-95” painted on them and exotic destinations such as Providence, Rhode Island. Every day he fails to notice the “paid for by the American Recovery and Reinvestment Act” signs. His father called me later to thank me for taking his son up in the helicopter. My response was “It made me wonder whether anyone from this generation will be able to find his ass with both hands once we are dead and gone.”

Growing up in Bethesda, Maryland, back in the 1960s and early 1970s, I don’t remember any of us kids having trouble understanding the difference between going into the city (further inside the Beltway) and traveling onto or outside of I-495. I wonder if one difference is that we traveled in an unairconditioned Chevy station wagon with the windows open and no entertainment options other than punching siblings. If alone with a parent, we occupied the front seat supplemented by a booster seat. Today’s children, by contrast, travel in armored SUVs and sit in the back with the windows rolled up and the air conditioner on. Instead of looking out the windows at the “now crossing I-95” signs, they can look inside at a movie playing on an LCD screen or at a text message from a friend.

[Yes, I know that this post officially makes me an ancient curmudgeon.]

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Super Sad True Love Story is an interesting book that I’ve just started. The author has extrapolated from current trends to create a near-future that has the following characteristics:

• The dollar has been devalued about 50:1 against the yuan, which has become the world’s reserve currency, along with “northern euros” (there might be a southern euro, but nobody wants it)
• The U.S. is no longer a desirable place for emigrants, except for a handful of Albanians. U.S. consulates worldwide have posters saying “the boat is full, amigo”.
• Women shop for a brand of clothing called “JuicyPussy”
• The general decline of economic activity in the U.S. has led to a lot of mergers, resulting in UnitedContinentalDeltamerican (which operates “peeling 737s” against “sleek new dolphin-nosed China Southern Airlines planes”) and LandO’LakesGMFord.
• there are tanks and armored personnel carriers at airports and in cities throughout the U.S. with National Guardsmen performing various security checks; most of the active duty soldiers are bogged down in a disastrous war against Venezuela
• Immigrants with poor credit ratings are deported; those who stay in the U.S. find that they have done worse than relatives who remained back in the home country
• People get their news on mobile phones from a service called “CrisisNet”
• Potemkin Villages are set up when the Chinese central bankers come to visit to see if the U.S. will ever be able to repay any of its debts to China

The political system of the U.S. has changed into a single-party state, with everyone asked to join the Bipartisan Party. A powerful new agency, the American Restoration Authority, administers a lot of new government powers and fills the country with signs that end with slogans such as “Together We’ll Surprise the World!”

[I’ve finished the book now. The last two-thirds aren’t as thought-provoking as the first third, but it is a well-written novel. Is the author’s vision of New York City strange? Not as strange as the reality, e.g., this woman complaining about a guy who crushed her Dodge Charger by falling on it from 400′ and surviving.]

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I spent the day in Washington, D.C. We started out with a trip to the Natural History museum, finding a parking space right in front of the building and going in (admission free, but security check required) to chase after a 2.5-year-old girl who loves elephants, butterflies, and almost everything in between. She pointed at a Clownfish in the aquarium and said “Nemo!”. The Washington Mall now offers free WiFi in addition to free museums.

Next stop was East Capitol Hill, a neighborhood I would have been afraid to visit in the 1970s. We walked a Samoyed bitch from her home on 10th Street Southeast to Lincoln Park. Most of the row houses have been renovated and many sported beautiful gardens. The Park at lunch time was patronized by nannies strolling babies, white people walking Labs and Goldens, and black guys walking unneutered Pit Bulls. In a city that supposedly has bountiful jobs for everyone, I was distressed to see a woman reading How to Be the Employee Your Company Can’t Live Without.

Next stop was Eastern Market and the surrounding shops, then a trip down into the Metro for a ride to National Airport. Some of the Metro stations have been almost blanketed with advertising banners from vendors trying to sell things to the Federal Government. Today it was Dell selling some sort of security system. Everything at the airport that was run by the government was shiny and modern. The Cesar Pelli terminal, opened in 1997, glittered with glass and steel. The TSA had new signs proudly proclaiming their use of millimeter wave technology and the TSA machines indeed gleamed with shiny newness and sophistication.

Stepping out of the government- and tax-funded world into the private sector was rather a let-down. The 15-year-old regional jet that I boarded for the flight to Boston was one step from either the glue factory or flying the lords of poverty around Africa. After the one-hour fight, I boarded the MBTA for what turned out to be a one-hour trip to Harvard Square (it is about 7 miles away by road). During the many pauses, I read Super Sad True Love Story, which promises to be a near-great novel, while the young couple next to me were riveted to a videogame on their touchscreen smartphone (Samsung/Sprint). The marketing for smartphones stresses all kinds of business uses for these devices, but I wonder if the main use won’t end up being brain-wasting games (just as TV was originally thought to be a place where Harvard and Yale lectures would be distributed to America’s living rooms).

By the time I stepped out of the MBTA Red Line train, I had heard approximately 50 recorded announcements over public-address systems in the various airports and mass transit systems. These reminded me to be alert for suspicious behavior by fellow passengers and to report unattended baggage.

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