Philip Greenspun’s Weblog

A friend asked today how to make sense of Barack Obama’s proposed plan to have the federal government spend $3.8 trillion per year (nytimes). The traditional way to look at this is divide it by U.S. GDP of $14 trillion and come up with 27 percent of GDP. Today, though, I wondered if it made more sense to look at it as a percentage of the private economy, which is the primary tax source. Ignoring state and local government spending, the federal government would need to collect 37 percent of private GDP in taxes. But if we add in state and local government spending, total government spending is trending towards 50 percent of GDP. If private GDP is truly the source of U.S. wealth, the government would have to tax nearly 100 percent of it in order to feed itself. As taxes are plainly not 100 percent, this way of looking at the numbers can’t be right.

So we have to circle back and look at government itself as a source of GDP. If the government redistributes money to Social Security recipients, for example, that cash is spent pretty much in the same way as it would have been by the people from whom it was taxed (though obviously they might have preferred to keep it and spend it themselves!). If the government pays interest on debt to U.S. bondholders, does that contribute to GDP? What if the government pays interest to a Chinese bondholder?

I’m wondering if it will get ever more challenging to compute GDP as the government grows. Certainly we had a tough time figuring out the Soviet Union’s GDP and even the Soviet economists couldn’t quite figure it out due to a lack of market prices for many goods.

Circling back to the $3.8 trillion… how do we make sense of that number?

I’ll start: the Haitians have asked for $3 billion to rebuild their wrecked city of 2 million souls. So the U.S. government proposes to spend enough in one year to build new cities, complete with infrastructure, for 2.5 billion people.

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The piece of computer hardware that I would most like to buy right now is a 30″ touch screen computer monitor. I find it difficult to use the mouse while walking on a treadmill desk. Lifting up a hand to press a link on the screen would work well, I think, and I believe that Windows 7 already includes support for a touch screen. I’ve grown accustomed to the Dell 30″ monitor on my desktop. It cost about $1300 back in 2006. Surely an innovative industry would have the same thing now, for about the same price, but with touch sensitivity. A quick look at the Dell site reveals that thanks to four years of innovation by engineers, hard work by Americans to boost the value of our currency, and the manufacturing learning curve… a slightly improved version of my monitor is selling for $1700. It is not touch-sensitive.

How come I can’t buy at least a 24″ touch-sensitive monitor to plug into a standard PC? The technology has been around since the 1960s (Wikipedia) and was widely available in the 1980s.

Separately, Apple has announced its latest contribution to the touch-screen world. I’m more enthusiastic about the iPad than I was about the iPhone (my ideal phone would be a flip-phone with a real keyboard). If they deliver on the 10-hour battery life it could be a nice electronic book reader, though not a perfect substitute for a Kindle, which can be taken on a one-week trip without a charger. An on-screen keyboard should work reasonably well on the iPad’s 9″ screen. The fact that Apple is mass-producing the iPad should make it a good value.

Things that I like about the iPad:

• reasonably large screen size; computers have gotten orders of magnitude more powerful since 1976 when I started programming, but the screens have not grown much
• dedicated volume up/down buttons; I have never liked the traditional iPods because it is possible to get them into a user interface state from which it requires numerous twists and clicks to get back to a state in which it is possible to adjust the volume
• presumably fairly rugged (the iPhones seem to survive a lot of abuse anyway)

How would a family use it? Maybe park it on a bookshelf as a digital photo frame and for charging. Take it out of the stand for use as a book or magazine reader. Use it to adjust a Sonos music system (though for most people, probably the iPad will be the music system, docked into a stand that includes speakers). Hand it to a child who wants to watch a TV program that nobody else wants to watch. Take it into the car for back seat entertainment.

I haven’t quite figured out why the iPad is useful for business. Most people with desk jobs already have a laptop computer with full keyboard. The iPad is a little too big to be carried around by people who actually work for a living (i.e., it can’t replace the handheld computers used by UPS drivers and its screen would become unreadable if used by a mechanic with greasy hands).

When you see a product like this you realize why the car industry is in so much trouble. I am considering becoming a recidivist minivan owner. I priced a Toyota Sienna the other day, the only minivan that comes with AWD for our hellish driveway and which has been supposedly completely redesigned for “2011”. One might have expected the kind of radical re-thinking of the dashboard that Tata did for the Nano (on track to sell 100,000 cars by March), but no. The tachometer is right in front of the driver, hogging real estate. When was the last time a minivan driver wondered whether the engine was turning 1800 rpm or 2500 rpm? The navigation screen is way off to the right and lower, necessitating a much longer diversion of the driver’s eyes from the road.

Since electronics have gotten ridiculously cheap, did Toyota throw them all in as standard? Let’s consider what we’re talking about here: a Bluetooth speakerphone ($50?), a GPS ($100), and a back seat DVD player ($150). In fact, none of these are standard. You can buy these $300 of electronics in a bundle for $6000 (which will really sting a few years down the road when DVDs have gone extinct in favor of digital files and Blu-Ray). Does the car offer a “keep my dog cool” mode that runs the existing fans when parked? No. Does the car offer a “call me if I’ve left a baby in the car” mode that uses the existing microphones, alarm, and temperature sensors to detect that someone is in a parked car while the temperature is climbing? No. [This article explains that the nanny state required parents to move kids to the back seat to save them from the big bad airbag (a previous mandate from the government). Due to consumers not exhibiting the perfect memories that government bureaucrats depended on, now “vehicle-related heat deaths far outnumber fatalities caused by airbag injuries” (car ride tends to put baby to sleep; parent forgets that out-of-sight baby is in the car).]

My neighbor sold an older Chrysler minivan in perfect condition for $2000. Someone who bought his minivan could buy a Motorola Droid phone ($2000 over three years, including service), a car dock ($30), and enjoy a far superior GPS experience from Google Maps (which includes free traffic information; with the Toyota system you have to pay for a subscription). Then he could add two Apple iPads for the kids to use in the back ($1000). He wouldn’t need the bluetooth speakerphone because the Droid already is a speakerphone. So… for the price of just the basic electronics options in the Toyota, a consumer could have a minivan, free phone service, and $1000 left over.

Is it any wonder that car sales in the U.S. are stagnant?

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If you thought a stuck gas pedal in a Toyota was bad, check out this story about a pilot’s first taxi in a homebuilt airplane.

In another driver versus pilot comparison, check this story on a Cessna 152 landing on the New Jersey Turnpike. My favorite part is the quote from the NJTP spokesman: “The plane landed, he taxied it over to the shoulder. We can’t even get motorists to do that when they break down.”

[Separately, I’m wondering whether the Toyota accidents would have been avoided if the driver had switched the transmission into neutral (airplanes don’t generally have a transmission so this is not an option for the pilot (some airplanes have a gearbox, but it can’t be disengaged)).]

Update: I found an interesting Car and Driver test of stopping distances when the brakes are fighting the engine.]

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Folks:

I’ve drafted a book review of It Takes a Pillage and would appreciated comments/corrections.

Thanks.

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Most of my knowledge about child care comes from watching Hollywood films. The darling child gets sleepy at the end of the day. The adult reads the child a bedtime story and the kid gradually gets sleepier and sleepier, dozing off halfway through.

The other night I was visiting a friend. She was in bed with her 2-year-old daughter at around 8:30 pm, reading her a story, just like in the movies. Then the hospital called and mom, a medical doctor, had to drive in. “Do you mind taking over?” she asked. “No problem,” I replied, thinking about the warm glow around bedtime from all of those movies. I grabbed a copy of Peter Rabbit, took off my shoes, and got on the bed. The girl lost interest after two pages, stood up, and put out her arms to be hoisted down off the bed. I pulled her closer to me and started reading again. She wriggled away and went to the foot of the bed. I told her that it was sleepy time and she needed to stay in bed. She was insistent. There was crying. I asked if she needed to go pee-pee, but could not get an intelligible answer. Based on my experience with dogs, I figured I would put her on the floor and see if she walked to the bathroom. She walked to her toys in the living room. I tried to play with her, but she wasn’t responding. I started typing on the computer. Eventually she came over and fell asleep, face-down, on my feet.

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This would be a good general knowledge job interview question. Give folks these facts: Canon introduced the EF mount in 1987 with the first EOS bodies; there are 6.7 billion people on the planet; Canon is the market leader in camera systems with interchangeable lenses, but Nikon is a close second; every user of a complex camera has at least one lens (and typically bodies are sold in a kit with one (crummy) lens); the cost of a body and one lens has ranged from $300 in the primitive old film days, but thanks to advances in modern technology, prices start at around $500 these days. Even from a person with no photography experience, I think it is reasonable to expect an answer that is within one order of magnitude to the question “How many lenses has Canon produced for the EOS cameras?”

For the answer… check out this Canon press release.

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I met a money guy today at a party here in D.C. As part of the trend of the financial center in the U.S. shifting towards Washington, D.C., his private equity fund is based here. He concentrates on Latin America. Where did he think the best opportunities for investment were? “Colombia, Brazil, Peru, Mexico, and Chile,” was the response. “Avoid Venezuela, Ecuador, and Bolivia due to political risk.” What about the political risk in his favorite countries? “A lot of Latin American governments are in better shape and more fiscally responsible than the U.S. government.”

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I took a taxi today from National Airport to Northwest Washington, D.C. The District has replaced the zone system that prevailed for decades with conventional taxi meters. Fares are about $1.50 per mile, compared to $2.00 per mile in New York City and $2.80 in Boston.

My driver owned his taxi, a brand-new Toyota Prius. There are few government-imposed limits on entry into the taxi market in D.C. A driver takes a class, passes a test, pays a few hundred dollars per year, and welcomes his customers. Taxis are  plentiful and the prices are pretty low, which is no doubt appreciated by the politicians and their staff members who use them.

In New York City, by contrast, the artificial scarcity of medallions generated by the government has driven up the price to $766,000 (source). Taxis can be tough to find, especially outside of Manhattan, and the customer needs to pay enough to provide the owner with a return on a $766,001 investment (a lot of New York cabs seem to be worth about $1 for the vehicle, so add that to the cost of the right to work (the medallion)). The drivers see very little of this money, as competition keeps their wages minimal (more).

The situation is similar in Boston, with medallion prices a significant fraction of a million dollars.

Students of politics might not be surprised that in a city where many taxi customers are politically powerful, things are set up so that taxi rates and availability are as favorable as possible for the consumer.

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When Americans elected someone who identifies himself as “black” as president, folks said that this might usher in a new era of open minds and tolerance. I’m wondering if, ironically, Obama will end up presiding over the greatest increase in employment discrimination that the country has ever seen.

I’ve started six companies and had the good fortune to operate most of them during the prosperous period 1985-2006. I hired whites and blacks. I hired women and men. I hired 18-year-olds and 55-year-olds. I hired Muslims, Hindus, Jews, and Christians. In addition to Americans, I hired people from Pakistan, India, China, Germany, England, Canada, Australia, Japan, Croatia, South America, and various parts of the former Soviet Union. Was I trying to make a statement about diversity? No. I was trying to stay in business. We had growing demand from customers and, thanks to the strong economy, there weren’t many qualified applicants for the jobs that I offered. I felt lucky whenever I could find someone whom I was enthusiastic about hiring.

This article (dated from some time in 2009 according to the text) says that, due to the 25 million Americans who are unemployed or underemployed, there are typically 200 applicants for every job opening in the U.S. If we assume that 15 of those 200 are pretty well qualified, that leaves an ample opportunity for personal prejudice to operate. If an employer does not like workers of a particular race, he need not hire any and won’t face any financial consequence. More realistically, if any employer is prejudiced against older workers, who are rendered less attractive by government mandates to provide them with ruinously expensive health insurance, he or she can hire a workforce of twentysomethings.

In Obama’s speech he noted that “My administration has a Civil Rights Division that is once again prosecuting … employment discrimination”.  I think this makes sense. In a healthy classical free market economy, there would be almost no involuntary unemployment and a firm practicing discrimination would risk being overtaken by competitors. In a moribund planned economy, however, there is ample opportunity for cost-free employment discrimination and only a larger government can discourage it (though the Framers might ask why this isn’t a job for the 50 states; see The Dirty Dozen).

As government tends not to be perfectly efficient, my prediction is that Obama has a good chance of presiding over a massive expansion of employment discrimination in America. I expect this to fall hardest on older workers.

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I’m wondering if Barack Obama’s State of the Union speech will discourage private investment. Obama promised a range of economic planning initiatives, including support for favored exporters, additional support for the residential housing market, and subsidies for renewable energy. It is uncertain as to whether Congress will approve new spending or regulations, but in the mean time consider the perspective of a Jane Businesswoman. Suppose that Jane invested in washing machines last summer, having gotten a good deal from a manufacturer. But then the Federal Government launched Cash for Clunkers, which induced all of Jane’s customers to max out their credit borrowing to buy new cars and take advantage of the Clunker windfall. As none of Jane’s customers could afford to buy a car and a washing machine during the same season, she took a beating on the investment.

How can Jane feel comfortable investing in something other than the industries that are now going to get special favors from Congress? No problem, you might think. She can invest in renewable energy. But so are all of the other people chasing the new government handouts. Then what happens if Congress does not follow through? The investment in renewable energy becomes a loss as well.

Could it be that any promise of government economic planning will reduce private investment until the subsidies are either implemented or definitively rejected? If so, perhaps the government should do its economic planning in secret and then announce new initiatives when they are enacted, the way that electronics and software companies do with their new products (early announcements tend to depress sales of the existing product).

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