Heard it on the satellite radio on the way home from work last night that the Earth is short one terrorist leader, courtesy of Joint Special Operations Command, SEAL Team Six and some chopper pilots.
Some thoughts:
1. Am I "happy" about this? Not really. Satisfied would be a better description. A very bad person has been neutralized, one who would create disorder and chaos. The man who watched the 9/11 coverage and later claimed to be pleasantly surprised that the towers fell has met justice. About time, too. A box on a long list is checked, but as far as I am concerned, back to work. There's still Ayman Al Zawahiri, the physician-leader of Al Qaeda who is now the likely head. For strictly professional reasons I want that stain on my field of knowledge removed. There's a whole host of people in Yemen, including Anwar Al-Awlaki, that need a 5.56mm craniotomy. The list is long, and will grow until the ideology behind Al Qaeda is discarded by the Muslim community worldwide. This is an important step, but only a step.
2. The chanting and cheering outside the White House last night made me nauseated. First, it looked suspiciously like the same kind of victory lap the Gazans did after 9/11. The intent of creating goodwill or mollifying anger by treating the body of Osama Bin Laden with respect in keeping with Muslim tradition may not counterbalance the looped video of college kids signing our national anthem off-key and high-fiving each other over something they did not even do.
Second, all this celebration reminds me of bad football end zone dances, the kind that make you think the player had heard of the end zone but never dreamed he'd ever get there. We zapped a high-level terrorist, great job but in the scheme of things we put six landers on the moon forty years ago. The more we celebrate the more we raise the worth of Osama Bin Laden. I think it's reasonable for us to thankfully acknowledge a job well done by people whose names might be known 50 years from now, and move along. A memorial for those lost in 9/11 and in the fights against the kind of xenophobic religious extremism he represented might be more appropriate.
If you're in the military or if you're a NYC Firefighter, you get a pass -- these are your brothers and sisters that have died and been wounded and if you want to hoot and holler you have skin in the game. The GW and Georgetown students outside of the White House, eh, not so much. Congrats, the boogeyman of Osama Bin Laden who appeared when you were eight or ten is now gone. Attempt to comport yourself with some dignity. In case you don't remember we are Americans, we do the impossible immediately, the miraculous takes a bit longer. Save your excitement for things that matter. Save the "USA! USA!" chants for Olympic Gold Medals. We are professionals, this is not exceptional, it's what we DO.
3. Yes, Osama Bin Laden needed to die. He was a bad man, who did unspeakable things and planned worse, the hell he would have unleashed on us but for lack of resources is even worse than the things he is responsible for. A partial list includes the 1993 WTC attack, the 1996 Khobar Towers attack, the 1998 Embassy bombings, the 2000 attack on the USS Cole, the 9/11 attacks in 2001, the Spanish train attacks in Madrid in 2002, the Bali bombing in 2002, the London Underground attacks in 2005 and a lot of the insurgent activity in Iraq that left tens of thousands dead. There are also a host of other individual attakcs, the Daniel Pearl beheading, the Nick Berg beheading, little things in the overall scheme but horrific and intended to terrify. He declared war on us once in 1996, again in 1998, and 13 years later he took two to the head and one to the chest, followed by a short trip to the bottom of the Arabian Sea.
Now maybe he didn't pull the trigger or draw the knife, but he was an inspiration for those who did. Osama Bin Laden was an inspirational figure for years in the extremist Arab world, and his continued defiance of the United States made him a Robin Hood-type folk hero among those Muslims predisposed to active jihad. His arguments were persuasive to them and those close to him displayed intense personal loyalty. It's important to note that he had a $50 million price on his head, and nobody turned him in. The people who believed in him never stopped believing in him, maybe just maybe his death will cause a reassessment of positions that Osama, being fish food, cannot argue away. As a symbol of defiance he had to go, because you can't tug on Superman's cape even if Superman might not want to be an American anymore.
4. The death of Bin Laden is not the end of the War on Terror. Being a cellular network, shooting the lead node in the network does not disable the network. The things Al Qaeda likes, much like The Joker in The Dark Knight, are cheap: gasoline, explosives, firearms. Having built the foundation (literally, Al Qaeda is Arabic for "The Base") Islamofascism is not something you can snuff out with even a dozen takedowns of high value targets. It is a philosophy, a worldview, and those are far harder to kill than even one influential figure with what may be governmental cover in a far off land. None of the signers of the Constitution or Declaration of Independence are still alive, but their ideas linger on.
A similar dynamic is present with Osama, the idea of Islamofascism is out and it's like a bell that can't be un-rung. What wins wars is not the death of soldiers or leaders but the defeat of an ideology. The Japanese spent the better part of thirty years spooling themselves up on ideas of racial superiority, subjugating the Chinese and raping Nanking for ten years before attacking Pearl Harbor. They attacked because their ideology said they could. Our ideology contended with theirs in men and material and their ideology was shown to be unsound. The story of Nazism is similar but shorter, only 12 years from national prominence to utter destruction. The ideology of Japanese militarism and Aryan supremacy did not survive a test of arms. The wars did not end because we killed everyone who believed in those philosophies, but because reality and those ideologies diverged so wildly that people abandoned the philosophies, and with the philosophies the justification and motivation for war.
The three basic lies that underpinned Osama Bin Laden's string of BS are:
a) The US appears strong but that strength cannot effectively be brought to bear.
b) The US military cannot stay in a conflict if it takes casualties.
c) Religious piety will provide an advantage over US forces.
All three of these assumptions have some basis in fact, in the view of Osama Bin Laden. The Russians in Afghanistan were far more vicious than the United States has been in Iraq or Afghanistan, and religious piety won the day there. The US stayed in Somalia until the Black Hawk Down incident, after taking casualties the US pulled out. The US did not respond effectively to successive attack cumulating in the 9/11 attack, despite its technological prowess. We have a tremendous nuclear force but have not used it in 60+ years, for example. Trillions of dollars in nuclear deterrence did not provent 19 hijackers with box cutters from killing almost 3000 Americans. Power that cannot be brought to bear.
All of these assumptions have been confronted and found wanting in the past decade. Especially in the crucible of Iraq, many wannabe Islamists from the Arab world at large have found much to their detriment and sudden violent death that US troops will stand and fight, and will do so effectively. Armed confrontations give way rather quickly to much safer IED-type attacks, both in Iraq where the battle was hot from the start, and later in Afghanistan once US power was fully brought to bear there. We took casualties in combat but have stayed, in Afghanistan for almost ten years and in Iraq for over seven. Part of the credit for this needs to go to George W. Bush, whose resolve in the face of the domestic criticism, vituperation and outright hatred that Osama Bin Laden assumed no President could withstand is a credit to the office. We stayed in place and changed the dynamic with the professionalism of our armed forces, and the obstinancy of a President.
Our open society's ability to adapt and innovate has exceeded that of Al Qaeda and associated groups. The technological innovations used to thwart IEDs and find, fix and destroy insurgent groups are truly amazing, and aggressive use of these plus our troops' skill and bravery have made significant strides in Afghanistan this year.
So, the ideology is being defeated but it is not defeated yet. Calls of "Mission Accomplished" and "Now bring the troops home!" are well-intentioned but run the risk of snatching defeat from the jaws of our victory. Al Qaeda has been embarrassed by their inability to dislodge us from Iraq, and now their titular head just got taken out with no fuss and no casualties on our side. This is not the time to pull back or leave breathing room for Al Qaeda's interpretation of the appropriate use of jihad. People will abandon philosophies that make them look stupid. Osama himself thought people would follow a "strong horse" (Al Qadea) rather than a "weak horse" (the United States). Who's weak horse now? I'm thinking it's the guy lying with the coral on the bottom of the Arabian Sea.
This needs time to play out, the Arab Spring is (funny enough) the kind of thing George W. Bush was waiting to see happen by shoving an island of democracy or near-democracy into the heart of the Middle East. It is a moment where the Arab world gets a chance to reassess itself, and it's possible that Islamofascism may be discarded like so many burqas after the defeat of the Taliban in 2001. We need to stay in the game to see how it plays out.
5. Finally, credit to President Barack Obama for his handling of this issue. He campaigned with fierce moral urgency on the wrongness of renditions, Gitmo, enhanced interrogrations, the PATRIOT Act and warrantless wiretapping. While it's possible that he believed absolutely none of what he said at the time in 2008 (he is a politician), once he was fully briefed into the situation a shockingly large number of Bush-era programs that he previously castigated were quietly continued. As quietly as possible, mind you, but continued nonetheless.
Up until now his Presidency has not been a particular success, in fact, it was beginning to feel like Jimmy Carter redux. Malaise, the beginnings of stagflation, high unemployment, high gas prices, national discontent. During the Iranian hostage crisis, Jimmy Carter tried to rescue the American hostages only to have the plan fall apart at an airfield south of Tehran called Desert One. Technical problems and an unfortunate loss of life resulted in a scrubbed mission and a snakebit President.
Barack Obama did not risk his life, but a failed mission to capture or kill Osama Bin Laden with loss of life of American servicemen would have done much to cement the idea of BHO as Jimmy Carter II. Despite the political risk, when he had a clear shot at Osama Bin Laden he took it, and he deserves credit for that. That's the kind of "3AM Phone Call" Hillary Clinton's 2008 campaign ad was about, and this time he answered it. He has been criticized for being risk-averse, but he was not this time and deserves credit for taking a large political risk.
In announcing the death of Osama Bin Laden I found him appropriately reserved and he gave credit to the people who actually did the operation. No victory lap, no smiles, just a job done and justice served. I thought that was very Presidential. Doesn't mean I am a sudden convert to Obamacare, he needs to get serious about addressing the deficit, develop a real energy policy, stop bowing to foreign heads of state and get over himself a bit more, but this time he did well.
Monday, May 02, 2011
Friday, November 19, 2010
What The TSA Didn't Learn In History Class.
At the end of World War I, the French were bled dry. A sizable portion of their military-aged males were six or more feet under as a result of the slaughter of the Western Front. Their solution for the defense of France was the Maginot Line, a series of fortresses with machine-guns, artillery and shelters. Over 5000 fortifications were built across the plains opposite Germany, it interconnected with the Belgian fortifications that also faced Germany, with the anchor of the Belgian defenses at Fort Eben-Emael.
Eben-Emael was a huge excavation roofed with feet of reinforced concrete, bordered by a canal and a deep ditch. Conventional offensive technology of the day was useless against it. Armed and armored, it was practically invulnerable. Then the Germans came.
Using gliders they landed a small number of troops on the grass-covered roof. Using then-new shaped charges they incapacitated the cupolas from which the guns and periscopes projected, rendering the 650 men in the fort blind and unable to shoot back. The small unit was reinforced the next day, and the impregnable Eben-Emael surrendered within a day. With Eben-Emael incapacitated, the Germans ignored the neutrality of Belgium, swept through the Ardennes Forest and around the Maginot Line.
The 3 billion francs put into the static defense of France was utterly wasted and France fell to the Germans within 10 weeks of the fall of the Belgian fort. "Maginot Line" has since become a catchword for defenses destined to be bypassed. It is the classic example of the futility of static defenses against a mobile and inventive enemy. Static defense as a strategic policy has been a laughingstock since, but somehow this lesson of history has not been learned at our own Transportation Security Agency. In fact, they appear to be rather impressed by the Maginot concept, so much that they appear to be building one after another.
The 9/11 hijackers carried box cutters, so no knitting scissors or Swiss Army knives. Line no. 1.
Shoe bomber, so no shoes through the metal detector. Line no. 2.
Plan discovered to use liquid explosives, so no fluids over 3 ounces. Line no. 3.
Nigerian diaper-bomber, so whole-body scans and aggressive, disturbing pat-downs. Line no. 4.
Printer cartridge bombs, so no toner for you. Line no. 5.
Does anyone really believe there will NOT be another attempt, and shortly thereafter TSA's Operation Maginot 6.0 slid into place? Static defense always fails because you cannot put a line, either on a map or in human imagination, beyond which no one will go. Generals are accused of fighting the last war first, the TSA has institutionalized this edict. Were it not for the incompetence of our adversaries we would already be down at least two airliners.
The difference between TSA and Islamic fundamentalists is that incompetence for the fundies is the result of inexperience and will eventually be rectified, while at the TSA it is the result of policy and will not be voluntarily rectified. They will simply inconvenience and/or molest us all so the forms are maintained, and not if but when the next penetration of security comes they cannot be blamed as the protocol was followed. There will be a rectal bomb or at least an attempted bombing at some point, what do the security protocols become at that point? "Okay sir, you're free to go. And by the way, you might want to ask your doctor about your prostate, felt kinda' hard on the right." Free occult blood screens with every flight are part of Obamacare, right?
I don't mind talking with someone about where I am going and why. El Al-type security screenings don't bother me in the least. They might dissuade the constipated-looking religious student behind me who says he is headed to Yemen for "advanced training" though, which is the point. Besides being less invasive, they are more effective as they rely on training and intuition rather than Big Iron like backscatter x-ray machines.
The government has an onus to Do Something, and adding backscatter machines is something that people can walk by and say to themselves, "The government is Doing Something". On one level this is Mission Accomplished for the government, but in my book inflatable and inert machines would work as well for the PR purpose backscatter machines serve. Given that the billions of dollars spent on static machines to create the PR impression of safety is being handily and widely ridiculed by the phrase "Don't Touch My Junk", the PR war is already over and TSA lost. As long as we take intuition out of the loop, as long as people can make it onto a plane having paid cash for a one-way flight with no baggage if they can pass a backscatter exam and a pat-down without being questioned, we are not safer. .
We're just slightly more irradiated, and slightly less free.
Eben-Emael was a huge excavation roofed with feet of reinforced concrete, bordered by a canal and a deep ditch. Conventional offensive technology of the day was useless against it. Armed and armored, it was practically invulnerable. Then the Germans came.
Using gliders they landed a small number of troops on the grass-covered roof. Using then-new shaped charges they incapacitated the cupolas from which the guns and periscopes projected, rendering the 650 men in the fort blind and unable to shoot back. The small unit was reinforced the next day, and the impregnable Eben-Emael surrendered within a day. With Eben-Emael incapacitated, the Germans ignored the neutrality of Belgium, swept through the Ardennes Forest and around the Maginot Line.
The 3 billion francs put into the static defense of France was utterly wasted and France fell to the Germans within 10 weeks of the fall of the Belgian fort. "Maginot Line" has since become a catchword for defenses destined to be bypassed. It is the classic example of the futility of static defenses against a mobile and inventive enemy. Static defense as a strategic policy has been a laughingstock since, but somehow this lesson of history has not been learned at our own Transportation Security Agency. In fact, they appear to be rather impressed by the Maginot concept, so much that they appear to be building one after another.
The 9/11 hijackers carried box cutters, so no knitting scissors or Swiss Army knives. Line no. 1.
Shoe bomber, so no shoes through the metal detector. Line no. 2.
Plan discovered to use liquid explosives, so no fluids over 3 ounces. Line no. 3.
Nigerian diaper-bomber, so whole-body scans and aggressive, disturbing pat-downs. Line no. 4.
Printer cartridge bombs, so no toner for you. Line no. 5.
Does anyone really believe there will NOT be another attempt, and shortly thereafter TSA's Operation Maginot 6.0 slid into place? Static defense always fails because you cannot put a line, either on a map or in human imagination, beyond which no one will go. Generals are accused of fighting the last war first, the TSA has institutionalized this edict. Were it not for the incompetence of our adversaries we would already be down at least two airliners.
The difference between TSA and Islamic fundamentalists is that incompetence for the fundies is the result of inexperience and will eventually be rectified, while at the TSA it is the result of policy and will not be voluntarily rectified. They will simply inconvenience and/or molest us all so the forms are maintained, and not if but when the next penetration of security comes they cannot be blamed as the protocol was followed. There will be a rectal bomb or at least an attempted bombing at some point, what do the security protocols become at that point? "Okay sir, you're free to go. And by the way, you might want to ask your doctor about your prostate, felt kinda' hard on the right." Free occult blood screens with every flight are part of Obamacare, right?
I don't mind talking with someone about where I am going and why. El Al-type security screenings don't bother me in the least. They might dissuade the constipated-looking religious student behind me who says he is headed to Yemen for "advanced training" though, which is the point. Besides being less invasive, they are more effective as they rely on training and intuition rather than Big Iron like backscatter x-ray machines.
The government has an onus to Do Something, and adding backscatter machines is something that people can walk by and say to themselves, "The government is Doing Something". On one level this is Mission Accomplished for the government, but in my book inflatable and inert machines would work as well for the PR purpose backscatter machines serve. Given that the billions of dollars spent on static machines to create the PR impression of safety is being handily and widely ridiculed by the phrase "Don't Touch My Junk", the PR war is already over and TSA lost. As long as we take intuition out of the loop, as long as people can make it onto a plane having paid cash for a one-way flight with no baggage if they can pass a backscatter exam and a pat-down without being questioned, we are not safer. .
We're just slightly more irradiated, and slightly less free.
Wednesday, April 21, 2010
What You Probably Don't Know About Goldman Sachs, John Paulson and the Financial Regulation Bill
Like most blog posts, I got to responding to something someone said on Facebook and kind of got carried away. So rather than boring everyone in that thread, I will reserve my boring for people specifically looking to be bored, by me, about something esoteric.
To recap, on April 16, Goldman Sachs was charged with fraud by the SEC (a civil charge, not a criminal one) for selling mortgage-backed securities that the SEC believes Goldman knew would lose value. The SEC charges that Goldman allowed a hedge fund run by John Paulson to choose the components of the CDO, or Collateralized Debt Obligation, called 'Abacus 2007-AC1' that was then sold to European banks and other investors. Paulson's firm bought insurance against those mortgages declining in value. When they did decline in value, his company made a billion (with a 'b') dollars from the insurance contracts they held against the decline in value of Abacus 2007 AC-1.
Just for a vocabulary review:
Mortgage-Backed Security: A stream of income and capital that comes from the repayment of mortgages issued by banks. Also called a MBS or a RMBS (residential MBS). Many mortgages are sold, and by 'buying' a mortgage the new mortgage owner gets the income and capital repayment coming from the original loan. If you bundle up enough of these, they act like a bond -- interest comes in, the capital is repaid over time, people get to pay monthly for their house and investors get their capital and interest repaid. Also, since banks are selling the mortgages they write and getting their capital replenished, they can offer more mortgages. Otherwise, the bank could only make as many loans as they have capital to support. A MBS is a bundle of hundreds or even thousands of mortgages, the bundles are traded.
Subprime Mortgage: A mortgage written to someone who is not considered an ideal credit risk, either because they have issues in the past with paying people back, or they are borrowing more money than their income would otherwise support. Not everyone who gets a subprime mortgage is a deadbeat, some self-employed people may have plenty of income to pay their mortgage but the bank or credit agency does not consider their income to be as reliable as someone with a 9 to 5 job. Unfortunately, a lot of people got subprime loans in the 2000s who should not have gotten any loans at all. Because the risk of default is higher, subprime mortgages generally have higher interest rates. From the investor standpoint, the risk is higher but the income is higher as well.
Credit-default swap: A kind of insurance against the risk of an investment going bad. This originally came from the municipal bond world, because if Peoria defaults on their sewer bonds, nobody really wants to try to claim their sewage plant back. The idea was that like any unlikely but damaging event, you could buy insurance against the risk of default. The CDS industry exploded in the 2000s as the utility of being able to insure against almost anything became popular. Unlike traditional insurance that you purchase to protect your assets, CDS can be purchased for almost anything that you can find someone else to have an agreement with. People with agreements are called 'counterparties'. CDS are not regulated and you don't even have to own the asset you are insuring against a loss. At one point, the dollar value in CDS was over $60 trillion dollars, more than the entire economic output of the world in a given year. Of course, a lot of those CDS were counteracting CDS -- I insure you against your value declining, and then I go and find someone else to insure me against your value declining so I don't have to pay the full amount. If this sounds like off-track betting with billions of dollars, it kind of is. The fact that respectable insurance companies like AIG were big players in this market is unsurprising, since the factor that decides who makes money is an assessment of the risks involved. Unfortunately, the amount of risk in the 2000s was inappropriately priced.
Collateralized Debt Obligation (CDO): A Structured Investment Vehicle (SIV, another acronym) composed of various MBS of varying quality. This is the next order of complexity beyond just bundling up mortgages. CDOs were designed to minimize risk by getting chunks of MBS from various regions of the country and various levels of risk, the idea being that it was silly to think the whole economy would tank at once. Well, silly before 2007-8. If one region or segment of the market tanked, the rest could carry the CDO and still make payments. CDOs were divided into 'tranches', slices of the income from the best, second-best, not-so-best and worst bundles of MBS. The ones in the worst bundle had the highest interest, because they were the riskiest. The ones in the top tranche had the lowest return, but the least risk. Synthetic CDOs, like the Abacus 2007-AC1 deal, were made of tranches bought from other CDOs. If this seems confusing, it's because this is the kind of thing (along with CDS) that Warren Buffet called 'the WMD of the financial markets'. Basically, a CDO tranche owner would not be cashing your checks each month. The money from residential mortgages went into a mixmaster that makes the most complex highway interchange look like a single thread by comparison. Money came in, swirled around, and ended up in CDO accounts each month.
Others have pointed out that the timing of this news release was suspicious. I find the news release interesting for a few reasons.
1. It was a 3-2 decision whether or not to go ahead with the suit. The Republicans voted against, the Democrats voted for, and the sole independent voted to go ahead with the suit. Assuming the SEC are professionals, this is not the highest endorsement of the validity of the claim. Not that it shouldn't be pursued, but the PR damage is done. The SEC alleges, and must prove, these charges. Most likely, there will never be a courtroom resolution regarding this -- there will be a negotiated settlement so the SEC doesn't have to advance what 40% of its commissioners believes is an unwinnable case, and so that GS can take a smaller hit.
2. The release was during trading hours, rather than after, to insure the media would have plenty of time to dwell on the story. Note that the blog post on MoneyWatch is timed 1:59 pm on April 16, 2010. the release was during the trading day. Goldman Sachs lost 14% of its value and the whole Dow Jones Industrial Average shrank 1%. All you have to do is look at the Goldman Sachs price graph for 4/16/2010 to see that the press conference was around 11AM Eastern. I believe the SEC knew they would cause a stink, and did so despite any disruption in the market that might occur. If this was released on Friday at 4pm, after trading, the weekend might have been spent in reflection, with a more muted stock market response on Monday morning. As it is, the SEC made at least a minor panic in order to seem like they're doing something.
3. This just happens to involve John Paulson (no relation to Hank the Former Treasury Secretary), hedge fund manager and poster boy for profiting on credit-default swaps (basically, insurance) on something he didn't even own. Neither he nor his firm are charged, yet putting John Paulson in your press release will put the financial press in a tizzy. It's kind of like mentioning Brad Pitt in a salacious story for TMZ, but then not saying he did any salacious things.
Paulson made a billion dollars on this credit-default swap because his counterparty(ies) believed he was wrong about subprime mortgages. By comparison, his firm made $15 billion in profit in 2007. The Abacus deal was just 7% of the profits he made by betting that all the other smart guys in the room (including Bear Sterns, Lehman Brothers, and the entire credit rating industry) were wrong. Interesting times when being a contrarian is considered not just suspicious, but enough to indict. At least indict a counterparty. So far. Two other contrarians you might have heard of who thought the subprime mortgage market at derivatives were crazy: Warren Buffet and George Soros. Suspicious persons, indeed.
4. In fact, the CDS that Paulson & Co. bought were from Goldman Sachs -- kind of like buying insurance on a house you don't own, then collecting when it burns down. The insurance company gets screwed, yes, but in this case Goldman Sachs is the insurance company. Most likely GS offset its own risk with CDS that paid it if the Abacus 2007-AC1 went south and it had to pay Paulson, but like everything else, it's a bet and the outcome is not known. Very few people were betting against subprime mortgages in 2007. The folks who bought Abacus, mainly European bankers, are not stupid people. This is not an example of stealing money from Mom & Pop. This is big-boy business with a whole lot of money on the line, and if Abacus had gone long and made money, would the SEC be investigating GS for selling what proved to be worthless CDS to Paulson & Co.? I think not. If Paulson & Co. had collapsed taking all of its investors' assets with it as many other hedge funds did there would be no investigation.
5. Retrospectively they can identify something fishy with Abacus 2007 AC-1, but they can't find Bernie Madoff prospectively after he steals between $12 and $20 billion? And after they were sent a 21-page detailed memo that there was something fishy going on? Top of their game, these guys.
6. Then there is the curious timing of this release followed immediately by a broadside of criticism against the GOP for opposing a bill strongly supported by a Senator who received significant personal support from a subprime lender (Countrywide), a bill that contains not only a built-in fund for bailouts with a large advertised number ($50 billion), insuring that the government will continue to serve as a backstop for more risky investments than the market would otherwise bear, but a bill that vests in the Executive the ability to respond with almost unlimited resources to any future bailout/systemic risk situation. It's not that President Obama will have this power that bothers me. It's that any President has the ability to raid the Fed for whatever seems to be needed in the financial sector. Moral hazard out the wazoo. If you don't want business to try to manipulate government, then don't manipulate business from the government. The last thing the "Masters of the Universe", Tom Wolfe's phrase from The Bonfire of the Vanities need is the idea that profits are private and losses are public, because they can get a low-interest bailout from Uncle Sugar. No way. Take away the net, and they probably won't string the tightrope so high.
7. The timing is on the face suspicious because the press conference (unusual for the SEC) on April 16, immediately preceded the White House announcement Monday that he would be speaking at Cooper Union in NYC on Thursday. Look for the Goldman Sachs charges to be featured prominently. Oh, and floor debate on the Financial Regulatory Reform Bill begins just 10 days after the SEC's announcement, on April 26.
Now, the President denies that there was any coordination with the SEC, but even the press figured out that maybe GS wasn't the only ones cooking the books. Here's a quote from that CBS News link:
Wow. Ain't it great when things just happen to go your way? And that article in itself is a veritable masterpiece of innuendo and possibly-designed ignorance. Note how the reporter elides everything I've spent the last couple of thousand words explaining and simply implies theft:
Now, quiz time: did the money from Abacus 2007-AC1 really go to John Paulson? Or did John Paulson find someone willing to bet that the assets in the Abacus 2007-AC1 investment would not decrease in value? And who was John Paulson's counterparty, the folks who paid Paulson & Co. when Abacus 2007-AC1 tanked? (Answer: Goldman Sachs)
The press is so willing to carry water on this one they might as well show up in Washington with buckets in hand. I understand the frustration. But I also understand that things are often far more complex than they seem. I don't see this story as an attempt to make complex things simple for anything other than political reasons.
More background on John Paulson here, from the Wall Street Journal. Excellent article.
NOTE: I do not own any Goldman Sachs shares.
To recap, on April 16, Goldman Sachs was charged with fraud by the SEC (a civil charge, not a criminal one) for selling mortgage-backed securities that the SEC believes Goldman knew would lose value. The SEC charges that Goldman allowed a hedge fund run by John Paulson to choose the components of the CDO, or Collateralized Debt Obligation, called 'Abacus 2007-AC1' that was then sold to European banks and other investors. Paulson's firm bought insurance against those mortgages declining in value. When they did decline in value, his company made a billion (with a 'b') dollars from the insurance contracts they held against the decline in value of Abacus 2007 AC-1.
Just for a vocabulary review:
Mortgage-Backed Security: A stream of income and capital that comes from the repayment of mortgages issued by banks. Also called a MBS or a RMBS (residential MBS). Many mortgages are sold, and by 'buying' a mortgage the new mortgage owner gets the income and capital repayment coming from the original loan. If you bundle up enough of these, they act like a bond -- interest comes in, the capital is repaid over time, people get to pay monthly for their house and investors get their capital and interest repaid. Also, since banks are selling the mortgages they write and getting their capital replenished, they can offer more mortgages. Otherwise, the bank could only make as many loans as they have capital to support. A MBS is a bundle of hundreds or even thousands of mortgages, the bundles are traded.
Subprime Mortgage: A mortgage written to someone who is not considered an ideal credit risk, either because they have issues in the past with paying people back, or they are borrowing more money than their income would otherwise support. Not everyone who gets a subprime mortgage is a deadbeat, some self-employed people may have plenty of income to pay their mortgage but the bank or credit agency does not consider their income to be as reliable as someone with a 9 to 5 job. Unfortunately, a lot of people got subprime loans in the 2000s who should not have gotten any loans at all. Because the risk of default is higher, subprime mortgages generally have higher interest rates. From the investor standpoint, the risk is higher but the income is higher as well.
Credit-default swap: A kind of insurance against the risk of an investment going bad. This originally came from the municipal bond world, because if Peoria defaults on their sewer bonds, nobody really wants to try to claim their sewage plant back. The idea was that like any unlikely but damaging event, you could buy insurance against the risk of default. The CDS industry exploded in the 2000s as the utility of being able to insure against almost anything became popular. Unlike traditional insurance that you purchase to protect your assets, CDS can be purchased for almost anything that you can find someone else to have an agreement with. People with agreements are called 'counterparties'. CDS are not regulated and you don't even have to own the asset you are insuring against a loss. At one point, the dollar value in CDS was over $60 trillion dollars, more than the entire economic output of the world in a given year. Of course, a lot of those CDS were counteracting CDS -- I insure you against your value declining, and then I go and find someone else to insure me against your value declining so I don't have to pay the full amount. If this sounds like off-track betting with billions of dollars, it kind of is. The fact that respectable insurance companies like AIG were big players in this market is unsurprising, since the factor that decides who makes money is an assessment of the risks involved. Unfortunately, the amount of risk in the 2000s was inappropriately priced.
Collateralized Debt Obligation (CDO): A Structured Investment Vehicle (SIV, another acronym) composed of various MBS of varying quality. This is the next order of complexity beyond just bundling up mortgages. CDOs were designed to minimize risk by getting chunks of MBS from various regions of the country and various levels of risk, the idea being that it was silly to think the whole economy would tank at once. Well, silly before 2007-8. If one region or segment of the market tanked, the rest could carry the CDO and still make payments. CDOs were divided into 'tranches', slices of the income from the best, second-best, not-so-best and worst bundles of MBS. The ones in the worst bundle had the highest interest, because they were the riskiest. The ones in the top tranche had the lowest return, but the least risk. Synthetic CDOs, like the Abacus 2007-AC1 deal, were made of tranches bought from other CDOs. If this seems confusing, it's because this is the kind of thing (along with CDS) that Warren Buffet called 'the WMD of the financial markets'. Basically, a CDO tranche owner would not be cashing your checks each month. The money from residential mortgages went into a mixmaster that makes the most complex highway interchange look like a single thread by comparison. Money came in, swirled around, and ended up in CDO accounts each month.
Others have pointed out that the timing of this news release was suspicious. I find the news release interesting for a few reasons.
1. It was a 3-2 decision whether or not to go ahead with the suit. The Republicans voted against, the Democrats voted for, and the sole independent voted to go ahead with the suit. Assuming the SEC are professionals, this is not the highest endorsement of the validity of the claim. Not that it shouldn't be pursued, but the PR damage is done. The SEC alleges, and must prove, these charges. Most likely, there will never be a courtroom resolution regarding this -- there will be a negotiated settlement so the SEC doesn't have to advance what 40% of its commissioners believes is an unwinnable case, and so that GS can take a smaller hit.
2. The release was during trading hours, rather than after, to insure the media would have plenty of time to dwell on the story. Note that the blog post on MoneyWatch is timed 1:59 pm on April 16, 2010. the release was during the trading day. Goldman Sachs lost 14% of its value and the whole Dow Jones Industrial Average shrank 1%. All you have to do is look at the Goldman Sachs price graph for 4/16/2010 to see that the press conference was around 11AM Eastern. I believe the SEC knew they would cause a stink, and did so despite any disruption in the market that might occur. If this was released on Friday at 4pm, after trading, the weekend might have been spent in reflection, with a more muted stock market response on Monday morning. As it is, the SEC made at least a minor panic in order to seem like they're doing something.
3. This just happens to involve John Paulson (no relation to Hank the Former Treasury Secretary), hedge fund manager and poster boy for profiting on credit-default swaps (basically, insurance) on something he didn't even own. Neither he nor his firm are charged, yet putting John Paulson in your press release will put the financial press in a tizzy. It's kind of like mentioning Brad Pitt in a salacious story for TMZ, but then not saying he did any salacious things.
Paulson made a billion dollars on this credit-default swap because his counterparty(ies) believed he was wrong about subprime mortgages. By comparison, his firm made $15 billion in profit in 2007. The Abacus deal was just 7% of the profits he made by betting that all the other smart guys in the room (including Bear Sterns, Lehman Brothers, and the entire credit rating industry) were wrong. Interesting times when being a contrarian is considered not just suspicious, but enough to indict. At least indict a counterparty. So far. Two other contrarians you might have heard of who thought the subprime mortgage market at derivatives were crazy: Warren Buffet and George Soros. Suspicious persons, indeed.
4. In fact, the CDS that Paulson & Co. bought were from Goldman Sachs -- kind of like buying insurance on a house you don't own, then collecting when it burns down. The insurance company gets screwed, yes, but in this case Goldman Sachs is the insurance company. Most likely GS offset its own risk with CDS that paid it if the Abacus 2007-AC1 went south and it had to pay Paulson, but like everything else, it's a bet and the outcome is not known. Very few people were betting against subprime mortgages in 2007. The folks who bought Abacus, mainly European bankers, are not stupid people. This is not an example of stealing money from Mom & Pop. This is big-boy business with a whole lot of money on the line, and if Abacus had gone long and made money, would the SEC be investigating GS for selling what proved to be worthless CDS to Paulson & Co.? I think not. If Paulson & Co. had collapsed taking all of its investors' assets with it as many other hedge funds did there would be no investigation.
5. Retrospectively they can identify something fishy with Abacus 2007 AC-1, but they can't find Bernie Madoff prospectively after he steals between $12 and $20 billion? And after they were sent a 21-page detailed memo that there was something fishy going on? Top of their game, these guys.
6. Then there is the curious timing of this release followed immediately by a broadside of criticism against the GOP for opposing a bill strongly supported by a Senator who received significant personal support from a subprime lender (Countrywide), a bill that contains not only a built-in fund for bailouts with a large advertised number ($50 billion), insuring that the government will continue to serve as a backstop for more risky investments than the market would otherwise bear, but a bill that vests in the Executive the ability to respond with almost unlimited resources to any future bailout/systemic risk situation. It's not that President Obama will have this power that bothers me. It's that any President has the ability to raid the Fed for whatever seems to be needed in the financial sector. Moral hazard out the wazoo. If you don't want business to try to manipulate government, then don't manipulate business from the government. The last thing the "Masters of the Universe", Tom Wolfe's phrase from The Bonfire of the Vanities need is the idea that profits are private and losses are public, because they can get a low-interest bailout from Uncle Sugar. No way. Take away the net, and they probably won't string the tightrope so high.
7. The timing is on the face suspicious because the press conference (unusual for the SEC) on April 16, immediately preceded the White House announcement Monday that he would be speaking at Cooper Union in NYC on Thursday. Look for the Goldman Sachs charges to be featured prominently. Oh, and floor debate on the Financial Regulatory Reform Bill begins just 10 days after the SEC's announcement, on April 26.
Now, the President denies that there was any coordination with the SEC, but even the press figured out that maybe GS wasn't the only ones cooking the books. Here's a quote from that CBS News link:
"Well, I think now that there has been a lot of momentum behind the financial reform bill, and I think that that momentum is only going to increase," Freeland said. "The charges on Friday will give the Democrats who wanted a tougher bill a lot more energy."
Wow. Ain't it great when things just happen to go your way? And that article in itself is a veritable masterpiece of innuendo and possibly-designed ignorance. Note how the reporter elides everything I've spent the last couple of thousand words explaining and simply implies theft:
Goldman took in $15 million in fees for arranging the transaction, while its investors lost over a billion dollars that became profit at Paulson & Co.
Now, quiz time: did the money from Abacus 2007-AC1 really go to John Paulson? Or did John Paulson find someone willing to bet that the assets in the Abacus 2007-AC1 investment would not decrease in value? And who was John Paulson's counterparty, the folks who paid Paulson & Co. when Abacus 2007-AC1 tanked? (Answer: Goldman Sachs)
The press is so willing to carry water on this one they might as well show up in Washington with buckets in hand. I understand the frustration. But I also understand that things are often far more complex than they seem. I don't see this story as an attempt to make complex things simple for anything other than political reasons.
More background on John Paulson here, from the Wall Street Journal. Excellent article.
NOTE: I do not own any Goldman Sachs shares.
Tuesday, April 06, 2010
Obama Changes Nuclear Posture to 'Fetal Position'
Today's New York Times describes the results of President Obama's "Nuclear Posture Review", which has been the product of 150 meetings and is a particularly bad example of the sausage-making process in the Executive Branch.
The United States' Nuclear Posture is the statement of when we will or will not use nuclear weapons. Under President Bush, the posture was essentially that any WMD attack could see a nuclear response. This is a simple and practical policy, because in the field of weapons of mass destruction the United States has divested itself of two of the three main categories of WMDs: chemical and biological. Under the Biological Weapons Convention that has been in force since 1975, the US does not maintain production facilities for or stockpiles of biological weapons. The US is also a signatory to the Chemical Weapons Convention, which went into force in 1997. The US has been steadily destroying its own stockpile of chemical weapons, at considerable expense, and has now destroyed 70% of its chemical weapons, with complete destruction of all chemical weapons scheduled for 2023. If this seems like it's taking a long time, that is because we still have chemical weapon stockpiles from World War I, and that's not the kind of stuff you can throw in a bin and be done with.
So by treaty, the US has already destroyed its biological weapons capabilities, is destroying its chemical weapons capability, and has already pledged to not use either of those weapon classes in warfare. What we're left with is nuclear weapons, and those are so nasty and destructive that they function as a deterrent to the use of biological and chemical weapons. You hit us, we hit you back once, and harder than you can possibly imagine. It's a good policy, and one I agree with. The last President didn't promise to use nuclear weapons, he said that our response may include nuclear weapons.
The three issues involved in deterrence are possessing the means of reprisal, convincing potential foes that you have the will to use the means at your disposal, and keeping any potential adversaries uncertain as to the shape of your response. Deterrence is not the same as a challenge, under the former Nuclear Posture Review we were not daring other countries or groups to challenge us, we were simply announcing the consequences should there be an attack. Deterrence does not seek conflict any more than a concealed carry licensee seeks a gunfight. The consequences of any conflict involving WMD are going to be horrific, and reasonable people can look at the probable butcher's bill and consider other courses of action short of WMD release. Unfortunately, we live in a world where the reasonable people are already deterred, it's the unreasonable ones that are of the greatest concern and here's where the President's characteristic unconstrained worldview begins to fall down.
The President's policy described in the NYT article is not one of unilateral disarmament. We will still have Trident submarines in the water, Minuteman IIIs in the silos and nuclear-capable B-52s able to respond to a strike. The President further refined his policy by stating that the exemption to nuclear response does not extend to countries that are not signatories to the Nuclear Non-Proliferation Treaty (he's looking at you, North Korea and Iran) and that if a biological attack is "serious enough" or biological weapons capabilities become significant enough, a nuclear response may be in order. It appears to me that he is attempting to use the Nuclear Posture Review as yet another lever in what has become a comic opera of trying to get Iran to abandon its pursuit of nuclear weapons, as well as to disincentivize other countries from becoming nuclear powers (he's looking at you, Hugo Chavez). Unfortunately, he and his advisers are overlooking a huge problem.
From an economics standpoint, the barriers to entry to the nuclear weapons club are substantial. A country has to obtain uranium, perform isotope separation to enrich the uranium, create a nuclear reactor, operate the nuclear reactor to produce plutonium, and then separate the plutonium (the optimal nuclear bomb fuel) from the spent and highly-radioactive fuel rods. Then, once sufficient plutonium has been obtained, an implosion system has to be created and tested, and finally the first bomb has to be detonated to prove your technology prior to deployment of a weapon. All of this technology is now 65 years old, but none of it is particularly cheap and most of it has an extra tax in the form of having to be performed clandestinely, with added costs to keep things off the books. If you want to join the thermonuclear club, you need to obtain tritium (a byproduct of nuclear reactors), deuterium (from the sea) and/or lithium-6 deuteride for the second stage of a fission-fusion bomb, along with additional years of testing. So far, none of the "new" nuclear powers (Pakistan, North Korea) have gone to the trouble of making a two or three-stage nuclear weapon. If you're willing to impoverish your country and become a pariah state, at least in the eyes of the United States, all of this is doable but it is neither cheap nor fast.
On the other hand, biological weapons are relatively easily obtainable. The DNA sequence of the H1N1 influenza and 10 strains of the variola virus (smallpox) are available in the scientific literature, with a DNA sequencing machine that is available commercially these can be recreated in a competent laboratory. The US Defense Threat Reduction Agency tested the ability to detect a covert bioweapons facility beginning in 1999, an operation called Project Bachus. For under a million dollars the DTRA was able to create a laboratory that made Bacillus thurigensis, a benign bacterium used to kill mosquitoes in standing water. This doesn't sound like much, but a close cousin of Bacillus thurigensis is Bacillus anthracis, which causes anthrax. If you can make the one, you can make the other. If you have a competent virologist and a supply of chicken embryos (eggs), you have the makings of a nasty virological program even without having to obtain cell culture material. Besides influenza, smallpox and anthrax, there are a host of diseases including tularemia, plague, glanders and a variety of viruses that can and have been weaponized.
Going beyond naturally-occuring pathogens, genetic engineering can create chimeric (mixed) strains of bacteria that can produce diseases the like of which we have never seen. In his 1999 book Biohazard, former Russian bioweapon scientist Ken Alibek describes an experiment performed in the former Soviet Union. A weapons developer inserted the gene for myelin, the protein that sheaths nerve cells, into a strain of Legionella pneumophila, a common and mildly-infectious bacterium that is most often remembered as the cause of "Legionnaire's disease". Legionella is lives in water, and is often found in the condensate within air conditioners. It most commonly causes a mild respiratory illness, and in the rabbits exposed to the engineered strain this occurred as expected. The genetically-engineerd barb in this bacteriological hook began to show several weeks later: by including the myelin protein in the bacterium, the host's immune system was taught that myelin was an invader and should be destroyed. Antibodies to myelin began to destroy myelin throughout the rabbits' bodies, resulting in paralysis and loss of function. In essence, they got a mild respiratory disease that also caused the equivalent of multiple sclerosis. Can you imagine the impact of an extra hundred thousand patients with florid multiple sclerosis? How about a million?
The flaw in the President's plan is that by telling potential enemies that we will respond with nuclear weapons only to a nuclear attack (and even then, only from a non-proliferating state), we are in essence telling them where to spend their efforts. Why build a trillion-dollar infrastructure to make nuclear weapons when a billion will buy you a first-rate biological weapons lab? The proviso that the policy will be reviewed should biological weapons prove to be more "dangerous" than previously thought overlooks the fact that they are already dangerous, and much more so than is currently considered by the President's advisers. This is a pointless policy change that, thinking like an adversary, dictates a cheaper and no less destructive avenue of attack.
A potential enemy doesn't even have to target humans -- the Ug99 strain of wheat rust could affect up to 90% of our wheat production if it makes it to the United States. A couple of bottles of wheat rust spores would take up no more space than a Gatorade, but like most biological weapons with the ability to self-replicate the wheat harvest of the US and Canada could be almost completely destroyed in a few seasons. How many millions would that kill due to famine and starvation?
Rationality works fine with other rational people, but the President has had a singular lack of success in convincing other countries to come along despite his great faith in his own gifts of persuasion. He cannot even convince Brazil to come along on economic sanctions on Iran, much less convince Iran to do much of anything. He has negotiated a nuclear weapons reduction treaty with Russia, which is unsurprising if you are aware of the decrepit state of Russia's nuclear forces. Their current nuclear missile submarines are the 1970s-era Delta-class, and they are reaching the end of their service lives. Their proposed replacement, the Borei-class, are having terrible troubles with their missiles and it's going to cost a fortune to fix those problems and launch new boats. In agreeing to mutual limits on nuclear weapons, the President has solved some very expensive problems for the Russians, with little gain on our side.
The article also mentions that the President's policy "renounces the development of any new nuclear weapons, overruling the initial position of his own defense secretary." The program in question is most likely the Reliable Replacement Warhead, a lower-yield but more-reliable and simpler nuclear warhead to replace our current stockpile. The net effect of bypassing the RRW is that our nuclear forces will continue a decline or require even more expensive refits to remain reliable. When our stockpile was designed "reliability" meant that a warhead would detonate as programmed and for a specified yield after a 6,000 mile flight at Mach 15 or so. Now that we've had them for a while and now that even underground testing is prohibited, reliability has come to mean the knowledge that these exceptionally complex devices will perform as designed after 20 or 30 or even 50 years of riding around in their delivery vehicles. Maintaining that level of reliability for high-speed low-drag mechanisms like the W76 warhead in Trident missiles and the W80 in Tomahawk cruise missiles can be a problem, namely that the things used to originally make those warheads can be difficult to recreate, and therefore even more expensive.
The RRW program was defunded by the Democratic Congress in 2008, and this administration's continued policy consigns our nuclear deterrent to obsolescence. The justification will be for cost reasons, the public will be told that it is just too expensive to maintain our nuclear deterrent, given all the other challenges we face as a nation, and it will sound reasonable. On the other hand, if we lived in a world full of reasonable people we wouldn't really need a nuclear deterrent. This policy is yet another example of ego trumping common sense, the President may be a reasonable man but his election did not make those who wish to strike at our populace any more reasonable. For a leader who claims the mantle of pragmatism, this is a policy that actually makes us more likely to be attacked by signaling that our deterrence is more conditional than it should be, and therefore less assured. By not wanting to appear threatening, the President is actually inviting more attacks, and history is pretty clear that at an unthreatening posture is not a reliable method of defense. We do have a very powerful conventional military, but that is best used for conventional foes. Foes willing to be unconventional should be heartened by our new 'posture'.
The United States' Nuclear Posture is the statement of when we will or will not use nuclear weapons. Under President Bush, the posture was essentially that any WMD attack could see a nuclear response. This is a simple and practical policy, because in the field of weapons of mass destruction the United States has divested itself of two of the three main categories of WMDs: chemical and biological. Under the Biological Weapons Convention that has been in force since 1975, the US does not maintain production facilities for or stockpiles of biological weapons. The US is also a signatory to the Chemical Weapons Convention, which went into force in 1997. The US has been steadily destroying its own stockpile of chemical weapons, at considerable expense, and has now destroyed 70% of its chemical weapons, with complete destruction of all chemical weapons scheduled for 2023. If this seems like it's taking a long time, that is because we still have chemical weapon stockpiles from World War I, and that's not the kind of stuff you can throw in a bin and be done with.
So by treaty, the US has already destroyed its biological weapons capabilities, is destroying its chemical weapons capability, and has already pledged to not use either of those weapon classes in warfare. What we're left with is nuclear weapons, and those are so nasty and destructive that they function as a deterrent to the use of biological and chemical weapons. You hit us, we hit you back once, and harder than you can possibly imagine. It's a good policy, and one I agree with. The last President didn't promise to use nuclear weapons, he said that our response may include nuclear weapons.
The three issues involved in deterrence are possessing the means of reprisal, convincing potential foes that you have the will to use the means at your disposal, and keeping any potential adversaries uncertain as to the shape of your response. Deterrence is not the same as a challenge, under the former Nuclear Posture Review we were not daring other countries or groups to challenge us, we were simply announcing the consequences should there be an attack. Deterrence does not seek conflict any more than a concealed carry licensee seeks a gunfight. The consequences of any conflict involving WMD are going to be horrific, and reasonable people can look at the probable butcher's bill and consider other courses of action short of WMD release. Unfortunately, we live in a world where the reasonable people are already deterred, it's the unreasonable ones that are of the greatest concern and here's where the President's characteristic unconstrained worldview begins to fall down.
The President's policy described in the NYT article is not one of unilateral disarmament. We will still have Trident submarines in the water, Minuteman IIIs in the silos and nuclear-capable B-52s able to respond to a strike. The President further refined his policy by stating that the exemption to nuclear response does not extend to countries that are not signatories to the Nuclear Non-Proliferation Treaty (he's looking at you, North Korea and Iran) and that if a biological attack is "serious enough" or biological weapons capabilities become significant enough, a nuclear response may be in order. It appears to me that he is attempting to use the Nuclear Posture Review as yet another lever in what has become a comic opera of trying to get Iran to abandon its pursuit of nuclear weapons, as well as to disincentivize other countries from becoming nuclear powers (he's looking at you, Hugo Chavez). Unfortunately, he and his advisers are overlooking a huge problem.
From an economics standpoint, the barriers to entry to the nuclear weapons club are substantial. A country has to obtain uranium, perform isotope separation to enrich the uranium, create a nuclear reactor, operate the nuclear reactor to produce plutonium, and then separate the plutonium (the optimal nuclear bomb fuel) from the spent and highly-radioactive fuel rods. Then, once sufficient plutonium has been obtained, an implosion system has to be created and tested, and finally the first bomb has to be detonated to prove your technology prior to deployment of a weapon. All of this technology is now 65 years old, but none of it is particularly cheap and most of it has an extra tax in the form of having to be performed clandestinely, with added costs to keep things off the books. If you want to join the thermonuclear club, you need to obtain tritium (a byproduct of nuclear reactors), deuterium (from the sea) and/or lithium-6 deuteride for the second stage of a fission-fusion bomb, along with additional years of testing. So far, none of the "new" nuclear powers (Pakistan, North Korea) have gone to the trouble of making a two or three-stage nuclear weapon. If you're willing to impoverish your country and become a pariah state, at least in the eyes of the United States, all of this is doable but it is neither cheap nor fast.
On the other hand, biological weapons are relatively easily obtainable. The DNA sequence of the H1N1 influenza and 10 strains of the variola virus (smallpox) are available in the scientific literature, with a DNA sequencing machine that is available commercially these can be recreated in a competent laboratory. The US Defense Threat Reduction Agency tested the ability to detect a covert bioweapons facility beginning in 1999, an operation called Project Bachus. For under a million dollars the DTRA was able to create a laboratory that made Bacillus thurigensis, a benign bacterium used to kill mosquitoes in standing water. This doesn't sound like much, but a close cousin of Bacillus thurigensis is Bacillus anthracis, which causes anthrax. If you can make the one, you can make the other. If you have a competent virologist and a supply of chicken embryos (eggs), you have the makings of a nasty virological program even without having to obtain cell culture material. Besides influenza, smallpox and anthrax, there are a host of diseases including tularemia, plague, glanders and a variety of viruses that can and have been weaponized.
Going beyond naturally-occuring pathogens, genetic engineering can create chimeric (mixed) strains of bacteria that can produce diseases the like of which we have never seen. In his 1999 book Biohazard, former Russian bioweapon scientist Ken Alibek describes an experiment performed in the former Soviet Union. A weapons developer inserted the gene for myelin, the protein that sheaths nerve cells, into a strain of Legionella pneumophila, a common and mildly-infectious bacterium that is most often remembered as the cause of "Legionnaire's disease". Legionella is lives in water, and is often found in the condensate within air conditioners. It most commonly causes a mild respiratory illness, and in the rabbits exposed to the engineered strain this occurred as expected. The genetically-engineerd barb in this bacteriological hook began to show several weeks later: by including the myelin protein in the bacterium, the host's immune system was taught that myelin was an invader and should be destroyed. Antibodies to myelin began to destroy myelin throughout the rabbits' bodies, resulting in paralysis and loss of function. In essence, they got a mild respiratory disease that also caused the equivalent of multiple sclerosis. Can you imagine the impact of an extra hundred thousand patients with florid multiple sclerosis? How about a million?
The flaw in the President's plan is that by telling potential enemies that we will respond with nuclear weapons only to a nuclear attack (and even then, only from a non-proliferating state), we are in essence telling them where to spend their efforts. Why build a trillion-dollar infrastructure to make nuclear weapons when a billion will buy you a first-rate biological weapons lab? The proviso that the policy will be reviewed should biological weapons prove to be more "dangerous" than previously thought overlooks the fact that they are already dangerous, and much more so than is currently considered by the President's advisers. This is a pointless policy change that, thinking like an adversary, dictates a cheaper and no less destructive avenue of attack.
A potential enemy doesn't even have to target humans -- the Ug99 strain of wheat rust could affect up to 90% of our wheat production if it makes it to the United States. A couple of bottles of wheat rust spores would take up no more space than a Gatorade, but like most biological weapons with the ability to self-replicate the wheat harvest of the US and Canada could be almost completely destroyed in a few seasons. How many millions would that kill due to famine and starvation?
Rationality works fine with other rational people, but the President has had a singular lack of success in convincing other countries to come along despite his great faith in his own gifts of persuasion. He cannot even convince Brazil to come along on economic sanctions on Iran, much less convince Iran to do much of anything. He has negotiated a nuclear weapons reduction treaty with Russia, which is unsurprising if you are aware of the decrepit state of Russia's nuclear forces. Their current nuclear missile submarines are the 1970s-era Delta-class, and they are reaching the end of their service lives. Their proposed replacement, the Borei-class, are having terrible troubles with their missiles and it's going to cost a fortune to fix those problems and launch new boats. In agreeing to mutual limits on nuclear weapons, the President has solved some very expensive problems for the Russians, with little gain on our side.
The article also mentions that the President's policy "renounces the development of any new nuclear weapons, overruling the initial position of his own defense secretary." The program in question is most likely the Reliable Replacement Warhead, a lower-yield but more-reliable and simpler nuclear warhead to replace our current stockpile. The net effect of bypassing the RRW is that our nuclear forces will continue a decline or require even more expensive refits to remain reliable. When our stockpile was designed "reliability" meant that a warhead would detonate as programmed and for a specified yield after a 6,000 mile flight at Mach 15 or so. Now that we've had them for a while and now that even underground testing is prohibited, reliability has come to mean the knowledge that these exceptionally complex devices will perform as designed after 20 or 30 or even 50 years of riding around in their delivery vehicles. Maintaining that level of reliability for high-speed low-drag mechanisms like the W76 warhead in Trident missiles and the W80 in Tomahawk cruise missiles can be a problem, namely that the things used to originally make those warheads can be difficult to recreate, and therefore even more expensive.
The RRW program was defunded by the Democratic Congress in 2008, and this administration's continued policy consigns our nuclear deterrent to obsolescence. The justification will be for cost reasons, the public will be told that it is just too expensive to maintain our nuclear deterrent, given all the other challenges we face as a nation, and it will sound reasonable. On the other hand, if we lived in a world full of reasonable people we wouldn't really need a nuclear deterrent. This policy is yet another example of ego trumping common sense, the President may be a reasonable man but his election did not make those who wish to strike at our populace any more reasonable. For a leader who claims the mantle of pragmatism, this is a policy that actually makes us more likely to be attacked by signaling that our deterrence is more conditional than it should be, and therefore less assured. By not wanting to appear threatening, the President is actually inviting more attacks, and history is pretty clear that at an unthreatening posture is not a reliable method of defense. We do have a very powerful conventional military, but that is best used for conventional foes. Foes willing to be unconventional should be heartened by our new 'posture'.
Wednesday, November 04, 2009
What the November 2009 Elections Mean
Had a bunch of elections around the country, and your interpretation of them seems to vary greatly depending on which party you favor. The GOP points to Bob McConnell's overwhelming victory in Virginia as evidence that Virginia is no longer 'purple', and to Chris Christie's upset win over Jon Corzine to take the governorship of New Jersey as a clear shot across the bow of what the Democrats viewed after November 2008 as a permanent change in electoral politics.
Democrats, like Nancy Pelosi and David Axelrod, believe that the more significant race was in the 23rd Congressional District of New York, where Democratic candidate Bill Owens edged out Conservative Party (yes, they have that in New York, which sounds like a reason to invoke the Endangered Species Act) candidate Doug Hoffman. This sort of ignores the fact that there actually was a GOP candidate, Dede Scozzafava, a state assemblyperson who dropped out of the race after being pummelled in the polls, despite RNC backing and who repaid her supporters in the Republican Party (including Newt Gingrich) by endorsing the Democrat rather than Hoffman. There is an meme floating around that the NY-23 seat hadn't been held by a Democrat since before the Civil War, but apparently people who believe that meme have no access to Wikipedia, the last Democrat to hold that seat was elected in 1991, and the seat has changed hands between the parties eight times in the last century.
In terms of the number of voters, overwhelmingly the votes went GOP on the whole, particularly in Virginia where McConnell stomped Creigh Deeds by a 20% vote margin. Considering that McConnell won the State Attorney General race against Deeds by a fraction of a percent in 2008, the players didn't change but the score most certainly did. Chris Christie was outspent 3:1 by Jon Corzine, a former Goldman Sachs partner and very wealthy man who spent heavily in New Jersey media, which means buying lots of air time in NYC and Philadelphia.
The lessons I take away from these results are as follows:
1. It's Still The Economy, Stupid.
Times are tough. When times are tough, voters tend to punish the party in power. The vote totals in favor of the GOP are similar to those in the 1993 by-elections, which implies that 2010 could end up much like the highly-disruptive 1994 election that swept the GOP into power. This is not an endorsement of the GOP, simply an observation that if the DNC believes that running against George W. Bush will work in 2010, I believe they will be rather rudely surprised, assuming the economy does not improve dramatically. Nobody is buying the 3.5% GDP bump. Unemployment and possible future unemployment is what motivated the voters this time around.
Continuing to trumpet a temporary bump in GDP in the face of continued job losses is a net loser for the White House. Compounding this with "jobs created or saved" numbers that not even the network newscasts will report with a straight face is telling the American people that "All is Well" when they clearly know all is NOT well. A scene from Animal House shows how I believe the White House's economic numbers are being received (note: the White House is played by Kevin Bacon):
2. With Enough GOP Help, The Democrats Can Win Seats In Purple Districts.
You would think that this would have been evident from the 2008 election, but it does not hurt to repeat it. John McCain was nominated from a dispirited field of GOP candidates, flirted with selecting a Democrat for a VP and refused to fight his opponent. Bob McConnell and Chris Christie ran disciplined races against Democratic opponents who had numerous campaign visits from the President -- and won.
Dede Scozzafava was the choice of GOP party people in NY-23, not the product of a contested primary. Her policy positions were far to the left of any mainstream Republican to the point where she was endorsed by ACORN, the SEIU and Markos Mouslitas of the Daily Kos. She made Arlen Specter look like Tom DeLay in terms of conservatism.
Even after getting millions of dollars and campaign volunteers from the National Republican Congressional Committee, she turned around and planted the knife squarely in the back of the party by endorsing not Doug Hoffman, who would have caucused with the GOP, but Bill Owens, whose policy positions were only a little to the right of hers. She quit the Saturday before the race because she was destined to finish a distant third no matter what, but given the small margin between Owens and Hoffman it's likely that her Dead Hand endorsement of Owens lost the district for the party she claimed to support. With enough help from incompetent Republicans, Democrats can eke out a victory.
3. Third Parties Feel Good, But Don't Win.
You know that guy, the one who drives a Peugeot just to be different? The person listens to African pop not because he likes it, but because it's different and allows everyone to know they're different when it leaks out their earbuds? Yeah, those people are probably third party voters, and while they're interesting and funky and unique, they're not going to win elections. It's about being pure to themselves and standing out more than getting anything done. Libertarian party, Green party, Peace party -- they're not unAmerican in the sense of treasonous, they are unAmerican in the sense that they're satisfied with being a stumbling block and not actually winning.
Doug Hoffman did not get Republican party support, but he did pick up endorsements from Fred Thompson, Sarah Palin, Tim Pawlenty and Mike Huckabee, as well as Glenn Beck. Doug seemed like a really nice guy in the interviews I saw, but somewhat unpolished and not ready for prime time. He did spectacularly well for a third party candidate, but -- and it's an important but -- he still lost. The way he came to be nominated over Scozzafava is part of the story here, and since Owens stands for re-election in 2010 I would love to see Doug lead a combined GOP-Conservative Party ticket in that election after he beats all comers in a primary.
The take-home lesson here is not that we need a Tea Party of staunch fiscal conservatives to spend themselves on futile, uncoordinated and underfunded attempts to win office. I sympathize with these people, I think their hearts are in the right place, but their small-government Constitution-quoting butts belong in the Republican Party. Those folks were sidelined within the GOP sometime around 2000, which was a cardinal mistake on the part of the GOP. Folks like Senator Tom Coburn need to go to the Tea Party folks, and the Tea Party people need to get into the Big Tent. Scozzafavas we don't need, you have to draw the line somewhere and she's farther outside the GOP perimeter than even Susan Collins and Olympia Snowe tend to wander.
The GOP needs the passion of the Tea Party people, and emphasis on small government and fiscal responsibility is the shortest path to rehabilitating the GOP brand.
4. Democrats In Red States And Districts Should Be Hearing Footsteps.
The Dems in Virginia didn't get beat, they got annihilated. Bill Owens in New York is not the newest progressive in Congress, he's the newest Blue Dog, and considering that he almost got beat by an almost-competent Doug Hoffman, I don't see him attending strategy sessions with the far-left Dems from deep blue districts any time soon. There are 83 representatives and 20 senators from states that went for McCain in 2008, and all of these people have good reason to point to the blood on the walls in the Democratic HQs in Virginia and tell their leadership that they are NOT voting for any tax and spend packages, like healthcare. Nancy Pelosi may have picked up another 'blue' seat in the House, but IMO the election results cost her many times that on specific issues from people in her own party.
The counter to the revolt of the Democrats in the House who are looking at serious reelection challenges is for the Democratic Congressional Campaign Committee to say, "Yes, you're right. It looks like a bad district in which to be a Democrat that you have there. If you vote with us, we might give you enough support for you to win in 2010, but if you don't -- good luck." Any party only needs 218 to hold a majority in the House, and Blue Dogs who stand a good chance of being replaced by Republicans in any event may find their votes and themselves not only not needed, but not wanted. It's a dangerous counter for the DCCC to play, but it's entirely possible they will invoke the 'death penalty' to get their signature legislative packages across. After all, they believe that PelosiCare, Cap & Trade and Card Check are what we need, even if we're not smart enough to see it for ourselves.
5. Barack Obama Looks Good In His New Suits, But They Don't Have Tails.
The spin on The One's involvment in NJ and VA is "He wasn't on the ticket, this has nothing to do with him." One Democratic representative said, "He hasn't even been in Virginia," which would have been true at the time if she had added, "in the last four days." Obama campaigned heavily for Corzine, Corzine completely outspent Christie, and Christie still won. McConnell, well, he demolished Creigh Deeds. He was expected to win by 15, but he won by 20. Ouch.
The 2010 elections will hinge on the President's ability to effectively campaign for Democrats. His appearances, his charisma, his connection to young and minority voters were deciding factors in 2008, and the Democratic majorities in the House and Senate are great examples of what having a powerful draw at the top of the ticket can do for a national party, only -- he's not on the ticket in 2010, either. It's debatable whether two state governor elections have anything to say about national politics, but if they have anything to say it's nothing that the Democrats whose names appear below the President/Vice-President block want to hear. Given that Barack Obama will be the lead singer in the DNC's national efforts in 2010, he needs to be able to do better. Any thought that the DNC had created a new grand coalition was cracked by Virginia going so solidly Republican and shattered by reliably-blue New Jersey repudiating Jon Corzine.
The "sea change" that President Obama was supposed to have led lasted all of a year -- a year in which the deficit tripled, more people lost jobs than in the year before and the Stimulus, well, didn't. The President's job is secure through 2012, but the Congress is definitely in play. The President's best hope is that the economy comes back, Iran signs a deal and China keeps its appetite for our debt for another 12 months, because if things continue as they have the voters will usher the Democrats to the door.
That's what I get out of this. Your thoughts?
Democrats, like Nancy Pelosi and David Axelrod, believe that the more significant race was in the 23rd Congressional District of New York, where Democratic candidate Bill Owens edged out Conservative Party (yes, they have that in New York, which sounds like a reason to invoke the Endangered Species Act) candidate Doug Hoffman. This sort of ignores the fact that there actually was a GOP candidate, Dede Scozzafava, a state assemblyperson who dropped out of the race after being pummelled in the polls, despite RNC backing and who repaid her supporters in the Republican Party (including Newt Gingrich) by endorsing the Democrat rather than Hoffman. There is an meme floating around that the NY-23 seat hadn't been held by a Democrat since before the Civil War, but apparently people who believe that meme have no access to Wikipedia, the last Democrat to hold that seat was elected in 1991, and the seat has changed hands between the parties eight times in the last century.
In terms of the number of voters, overwhelmingly the votes went GOP on the whole, particularly in Virginia where McConnell stomped Creigh Deeds by a 20% vote margin. Considering that McConnell won the State Attorney General race against Deeds by a fraction of a percent in 2008, the players didn't change but the score most certainly did. Chris Christie was outspent 3:1 by Jon Corzine, a former Goldman Sachs partner and very wealthy man who spent heavily in New Jersey media, which means buying lots of air time in NYC and Philadelphia.
The lessons I take away from these results are as follows:
1. It's Still The Economy, Stupid.
Times are tough. When times are tough, voters tend to punish the party in power. The vote totals in favor of the GOP are similar to those in the 1993 by-elections, which implies that 2010 could end up much like the highly-disruptive 1994 election that swept the GOP into power. This is not an endorsement of the GOP, simply an observation that if the DNC believes that running against George W. Bush will work in 2010, I believe they will be rather rudely surprised, assuming the economy does not improve dramatically. Nobody is buying the 3.5% GDP bump. Unemployment and possible future unemployment is what motivated the voters this time around.
Continuing to trumpet a temporary bump in GDP in the face of continued job losses is a net loser for the White House. Compounding this with "jobs created or saved" numbers that not even the network newscasts will report with a straight face is telling the American people that "All is Well" when they clearly know all is NOT well. A scene from Animal House shows how I believe the White House's economic numbers are being received (note: the White House is played by Kevin Bacon):
2. With Enough GOP Help, The Democrats Can Win Seats In Purple Districts.
You would think that this would have been evident from the 2008 election, but it does not hurt to repeat it. John McCain was nominated from a dispirited field of GOP candidates, flirted with selecting a Democrat for a VP and refused to fight his opponent. Bob McConnell and Chris Christie ran disciplined races against Democratic opponents who had numerous campaign visits from the President -- and won.
Dede Scozzafava was the choice of GOP party people in NY-23, not the product of a contested primary. Her policy positions were far to the left of any mainstream Republican to the point where she was endorsed by ACORN, the SEIU and Markos Mouslitas of the Daily Kos. She made Arlen Specter look like Tom DeLay in terms of conservatism.
Even after getting millions of dollars and campaign volunteers from the National Republican Congressional Committee, she turned around and planted the knife squarely in the back of the party by endorsing not Doug Hoffman, who would have caucused with the GOP, but Bill Owens, whose policy positions were only a little to the right of hers. She quit the Saturday before the race because she was destined to finish a distant third no matter what, but given the small margin between Owens and Hoffman it's likely that her Dead Hand endorsement of Owens lost the district for the party she claimed to support. With enough help from incompetent Republicans, Democrats can eke out a victory.
3. Third Parties Feel Good, But Don't Win.
You know that guy, the one who drives a Peugeot just to be different? The person listens to African pop not because he likes it, but because it's different and allows everyone to know they're different when it leaks out their earbuds? Yeah, those people are probably third party voters, and while they're interesting and funky and unique, they're not going to win elections. It's about being pure to themselves and standing out more than getting anything done. Libertarian party, Green party, Peace party -- they're not unAmerican in the sense of treasonous, they are unAmerican in the sense that they're satisfied with being a stumbling block and not actually winning.
Doug Hoffman did not get Republican party support, but he did pick up endorsements from Fred Thompson, Sarah Palin, Tim Pawlenty and Mike Huckabee, as well as Glenn Beck. Doug seemed like a really nice guy in the interviews I saw, but somewhat unpolished and not ready for prime time. He did spectacularly well for a third party candidate, but -- and it's an important but -- he still lost. The way he came to be nominated over Scozzafava is part of the story here, and since Owens stands for re-election in 2010 I would love to see Doug lead a combined GOP-Conservative Party ticket in that election after he beats all comers in a primary.
The take-home lesson here is not that we need a Tea Party of staunch fiscal conservatives to spend themselves on futile, uncoordinated and underfunded attempts to win office. I sympathize with these people, I think their hearts are in the right place, but their small-government Constitution-quoting butts belong in the Republican Party. Those folks were sidelined within the GOP sometime around 2000, which was a cardinal mistake on the part of the GOP. Folks like Senator Tom Coburn need to go to the Tea Party folks, and the Tea Party people need to get into the Big Tent. Scozzafavas we don't need, you have to draw the line somewhere and she's farther outside the GOP perimeter than even Susan Collins and Olympia Snowe tend to wander.
The GOP needs the passion of the Tea Party people, and emphasis on small government and fiscal responsibility is the shortest path to rehabilitating the GOP brand.
4. Democrats In Red States And Districts Should Be Hearing Footsteps.
The Dems in Virginia didn't get beat, they got annihilated. Bill Owens in New York is not the newest progressive in Congress, he's the newest Blue Dog, and considering that he almost got beat by an almost-competent Doug Hoffman, I don't see him attending strategy sessions with the far-left Dems from deep blue districts any time soon. There are 83 representatives and 20 senators from states that went for McCain in 2008, and all of these people have good reason to point to the blood on the walls in the Democratic HQs in Virginia and tell their leadership that they are NOT voting for any tax and spend packages, like healthcare. Nancy Pelosi may have picked up another 'blue' seat in the House, but IMO the election results cost her many times that on specific issues from people in her own party.
The counter to the revolt of the Democrats in the House who are looking at serious reelection challenges is for the Democratic Congressional Campaign Committee to say, "Yes, you're right. It looks like a bad district in which to be a Democrat that you have there. If you vote with us, we might give you enough support for you to win in 2010, but if you don't -- good luck." Any party only needs 218 to hold a majority in the House, and Blue Dogs who stand a good chance of being replaced by Republicans in any event may find their votes and themselves not only not needed, but not wanted. It's a dangerous counter for the DCCC to play, but it's entirely possible they will invoke the 'death penalty' to get their signature legislative packages across. After all, they believe that PelosiCare, Cap & Trade and Card Check are what we need, even if we're not smart enough to see it for ourselves.
5. Barack Obama Looks Good In His New Suits, But They Don't Have Tails.
The spin on The One's involvment in NJ and VA is "He wasn't on the ticket, this has nothing to do with him." One Democratic representative said, "He hasn't even been in Virginia," which would have been true at the time if she had added, "in the last four days." Obama campaigned heavily for Corzine, Corzine completely outspent Christie, and Christie still won. McConnell, well, he demolished Creigh Deeds. He was expected to win by 15, but he won by 20. Ouch.
The 2010 elections will hinge on the President's ability to effectively campaign for Democrats. His appearances, his charisma, his connection to young and minority voters were deciding factors in 2008, and the Democratic majorities in the House and Senate are great examples of what having a powerful draw at the top of the ticket can do for a national party, only -- he's not on the ticket in 2010, either. It's debatable whether two state governor elections have anything to say about national politics, but if they have anything to say it's nothing that the Democrats whose names appear below the President/Vice-President block want to hear. Given that Barack Obama will be the lead singer in the DNC's national efforts in 2010, he needs to be able to do better. Any thought that the DNC had created a new grand coalition was cracked by Virginia going so solidly Republican and shattered by reliably-blue New Jersey repudiating Jon Corzine.
The "sea change" that President Obama was supposed to have led lasted all of a year -- a year in which the deficit tripled, more people lost jobs than in the year before and the Stimulus, well, didn't. The President's job is secure through 2012, but the Congress is definitely in play. The President's best hope is that the economy comes back, Iran signs a deal and China keeps its appetite for our debt for another 12 months, because if things continue as they have the voters will usher the Democrats to the door.
That's what I get out of this. Your thoughts?
Saturday, October 10, 2009
Facebook Nobel Prize/Obama Jokes
In the future, everyone will win the Nobel Peace Prize for 15 minutes.
In other news, the 2012 Olympic Committee announced today that President Barack Obama has been awarded the Gold Medal in the Decathlon, more than two years before the event was scheduled to begin. Commitee members were convinced of his fitness for the award based on shirtless pictures of the President published in People magazine.
President Barack Obama will receive an Emmy for his numerous appearances on television in 2008 and 2009. Particularly cited was his standout performance in the ABC production "Death of a Fly".
The President of the United States has been named as a 2009 Tony Award winner for his stellar attendance at a Broadway show in May 2009.
The producers of the Academy Awards program have announced President Barack Obama as the winner of the Irving G. Thalberg Memorial Award for lifetime achievement. In addition, the award will be renamed the "Barack H. Obama Award" and presented annually to President Barack Obama.
In recognition of the pitch he threw at the 2009 All-Star Game, President Barack Obama has been named today as MVP of the 2009 World Series.
The Heisman Trophy Trust announced today that the iconic bronze statue will be recast, with a shirtless Barack Obama replacing the anachronistic college football figure from the 1930s. In a mild departure from tradition, the President will be portrayed clutching a basketball, though a similar arm-forward pose will be used. Also, the 2009 award and all future Heisman Trophy awards will be presented th Barack Obama
The Association of Community Organizers for Reform Now (ACORN) has named President Barack Obama as their "Customer of the Year" for 2009. The White House had no comment. Senator Al Franken (D-MN) was disappointed in his second-place showing, but congratulated the President in a press release.
The National Organization for Women followed the lead of the Nobel Peace Prize committee and named President Barack Obama as NOW's "Woman of the Year" for 2009. When questioned about the President's lack of female gender, the spokesperson said, "He said he WANTS to be female someday, and we think that's good enough for us."
Seen elsewhere on the Internet: Barack Obama has been named Motor Trend's Car of the Year.
The First Lady announced that for the first time in her adult life she is proud of Norway.
"Hey honey, Barack Obama won the Nobel Peace Prize." "For what?" "Exactly."
Seen elsewhere on the Internet: The voting was close, but it was the Beer Summit that put Obama over the top.
Happiest guy in the world right now? The guy that had Barack Obama on his Fantasy Nobel Prize team.
I wonder if he sued to get all the other candidates off the ballot this time?
In a little-noted announcement, William Ayers received an 'Assist' award in the Nobel Prize for Literature category.
Chuck Norris could win the Nobel Peace Prize by default, simply by killing everyone else on the planet. Lucky for us, Chuck Norris does not want the Nobel Peace Prize.
In other news, the 2012 Olympic Committee announced today that President Barack Obama has been awarded the Gold Medal in the Decathlon, more than two years before the event was scheduled to begin. Commitee members were convinced of his fitness for the award based on shirtless pictures of the President published in People magazine.
President Barack Obama will receive an Emmy for his numerous appearances on television in 2008 and 2009. Particularly cited was his standout performance in the ABC production "Death of a Fly".
The President of the United States has been named as a 2009 Tony Award winner for his stellar attendance at a Broadway show in May 2009.
The producers of the Academy Awards program have announced President Barack Obama as the winner of the Irving G. Thalberg Memorial Award for lifetime achievement. In addition, the award will be renamed the "Barack H. Obama Award" and presented annually to President Barack Obama.
In recognition of the pitch he threw at the 2009 All-Star Game, President Barack Obama has been named today as MVP of the 2009 World Series.
The Heisman Trophy Trust announced today that the iconic bronze statue will be recast, with a shirtless Barack Obama replacing the anachronistic college football figure from the 1930s. In a mild departure from tradition, the President will be portrayed clutching a basketball, though a similar arm-forward pose will be used. Also, the 2009 award and all future Heisman Trophy awards will be presented th Barack Obama
The Association of Community Organizers for Reform Now (ACORN) has named President Barack Obama as their "Customer of the Year" for 2009. The White House had no comment. Senator Al Franken (D-MN) was disappointed in his second-place showing, but congratulated the President in a press release.
The National Organization for Women followed the lead of the Nobel Peace Prize committee and named President Barack Obama as NOW's "Woman of the Year" for 2009. When questioned about the President's lack of female gender, the spokesperson said, "He said he WANTS to be female someday, and we think that's good enough for us."
Seen elsewhere on the Internet: Barack Obama has been named Motor Trend's Car of the Year.
The First Lady announced that for the first time in her adult life she is proud of Norway.
"Hey honey, Barack Obama won the Nobel Peace Prize." "For what?" "Exactly."
Seen elsewhere on the Internet: The voting was close, but it was the Beer Summit that put Obama over the top.
Happiest guy in the world right now? The guy that had Barack Obama on his Fantasy Nobel Prize team.
I wonder if he sued to get all the other candidates off the ballot this time?
In a little-noted announcement, William Ayers received an 'Assist' award in the Nobel Prize for Literature category.
Chuck Norris could win the Nobel Peace Prize by default, simply by killing everyone else on the planet. Lucky for us, Chuck Norris does not want the Nobel Peace Prize.
Friday, September 11, 2009
Eight Years Ago
I remember 9/11/01 very well.
I was underemployed at the time, and actually liking it pretty well. The main hospital our radiology group covered had been bought out by its cross-town rival, and not wishing to be an employee for the other radiology group, another radiologist and I were covering our secondary hospital on a per-diem basis. Tuesday was my day off, so I played some Counter-Strike until the late evening the night before, slipped into bed and slept the sleep of the innocent.
About 8:05 am I woke up with the sounds of early morning domesticity wafting in from the kitchen. I walked over to the computer, fired up Drudge Report and was confronted with the headline 'PLANE HITS WTC'. Just a few months earlier someone had run a Cessna into a building in Florida, and a couple of years earlier John F. Kennedy Junior had crashed into the Atlantic. I figured another light plane had struck the WTC, bad for the pilot, passengers and anyone in the office it hit, but not horrific, right?
I switched on "Fox & Friends" to see both towers ablaze, like Godzilla had come to town. Within a few seconds they replayed the video of the second plane hitting the WTC at high speed. The first might have been a badly off-course jetliner with control problems that happened to hit the tallest thing in Manhattan. The second was clearly no accident, with the high-speed bank into the corner of the building. Seeing something so bizarre, so unexpected, I half-anticipated more plane strikes in Manhattan in short order. Within half an hour, word came that the Pentagon had been hit, and I knew that something big was going on. My first thought was, "Someone has been reading Tom Clancy." The climactic scene in "Debt of Honor" is a JAL 747 slamming into the Capitol Building, and this was pretty much the same thing.
After seeing the towers collapse, one after the other, I was sure that I had just witnessed the most significant event of my generation. I also knew that someone, somewhere in the world was laughing and pleased about this, and that the person who planned this was absolutely messing with the wrong people.
Later I found out that someone I had met had been a passenger on Flight 77, the jet that crashed into the Pentagon. Paul Ambrose had been an officer in the American Medical Student Association, a competitor organization to my own AMA Resident Physician Section. I had a couple of chances to meet him at AMA events, he was really an exceptional guy. He did his residency at Dartmouth, was appointed the resident representative on the ACGME (the most important body for resident and fellowship programs), and went on to get a Master's in Public Health at Harvard. At the time of his death, he was a Senior Clinical Advisor to the Surgeon General. Paul was headed for a bright career in public health, and I'm sure he would have had plenty to say about our current health care debate. The Association for Prevention and Treatment Research has an annual conference and scholarship program named for Paul Ambrose. It says something about someone that, even at the tender age of 32, his life's mission and passion were so evident that he's still remembered and honored today.
The first time I met him, he was introducing a presentation from Doctors Without Borders. In retrospect, it's ironic that participation in an overseas mission with DWB seems dangerous and exciting, while getting on a plane from DC to California seems pedestrian. You worry the most about the confinement in your seat, about comfort, not the clean-shaven men in first class who are going to make a political point with your life and that of everyone in your plane, and anyone they can get on the ground.
People critical of our response after 9/11 often begin their criticism by asserting that "You think American lives are more valuable than the lives of people from other countries", and to be honest I don't. Americans of all walks of life are my countrymen and I feel a closer kinship to them than I do to others, I'll be honest. The big reason that another 9/11 needs to not happen is that Americans demand a response from their government, and the American government has the tools to get a response. Often, the tools are blunt and/or explosive, and come whistling down out of the sky to leave a mess on the ground. Avoiding another 9/11 is important because ultimately, it saves lives all around the world. It's hard to imagine a world without 9/11. We would not have put boots on the ground in Afghanistan on a dare. We might have eventually gotten around to getting rid of Saddam Hussein. The events of 9/11/2001 did change the variables in terms of what was 'acceptable risk', if you believe Ron Susskind's book The One Percent Doctrine, anything with a 1% risk of occurring had to be eliminated as a possibility. When you get down to that level of risk reduction, the US military gets very busy.
I'm thankful that my kids have no direct memory of 9/11. I'm glad I didn't have to try to explain it to them so they could understand. The idea that the world contains people so angry and nihilistic that using passenger jets as cruise missiles seems like a good idea is something I'd rather my kids not dwell on. On 9/11, I remember Paul and other people like Barbara Olson, an author whose books I have read, and Rick Rescorla, a British-born US Army officer and genuine hero of the Vietnam war who died at the World Trade Center. I remember the passengers on Flight 93, who showed what is defined by 'the Militia': not goofballs in camouflage crawling around Michigan, but average Americans who, finding themselves in the most dangerous circumstances imaginable, self-organized and probably saved thousands of lives at the cost of their own. The American response to 9/11 started on Flight 93, within minutes of their notification that the WTC had been hit by hijacked planes (through nominally illegal cell phone calls, I might add). Those people didn't wait for someone to tell them what to do. That's Americans in a crisis -- a brief moment of "Oh $%#*", then back to work on solving the problem.
That's what I want my kids to remember about 9/11.
I was underemployed at the time, and actually liking it pretty well. The main hospital our radiology group covered had been bought out by its cross-town rival, and not wishing to be an employee for the other radiology group, another radiologist and I were covering our secondary hospital on a per-diem basis. Tuesday was my day off, so I played some Counter-Strike until the late evening the night before, slipped into bed and slept the sleep of the innocent.
About 8:05 am I woke up with the sounds of early morning domesticity wafting in from the kitchen. I walked over to the computer, fired up Drudge Report and was confronted with the headline 'PLANE HITS WTC'. Just a few months earlier someone had run a Cessna into a building in Florida, and a couple of years earlier John F. Kennedy Junior had crashed into the Atlantic. I figured another light plane had struck the WTC, bad for the pilot, passengers and anyone in the office it hit, but not horrific, right?
I switched on "Fox & Friends" to see both towers ablaze, like Godzilla had come to town. Within a few seconds they replayed the video of the second plane hitting the WTC at high speed. The first might have been a badly off-course jetliner with control problems that happened to hit the tallest thing in Manhattan. The second was clearly no accident, with the high-speed bank into the corner of the building. Seeing something so bizarre, so unexpected, I half-anticipated more plane strikes in Manhattan in short order. Within half an hour, word came that the Pentagon had been hit, and I knew that something big was going on. My first thought was, "Someone has been reading Tom Clancy." The climactic scene in "Debt of Honor" is a JAL 747 slamming into the Capitol Building, and this was pretty much the same thing.
After seeing the towers collapse, one after the other, I was sure that I had just witnessed the most significant event of my generation. I also knew that someone, somewhere in the world was laughing and pleased about this, and that the person who planned this was absolutely messing with the wrong people.
Later I found out that someone I had met had been a passenger on Flight 77, the jet that crashed into the Pentagon. Paul Ambrose had been an officer in the American Medical Student Association, a competitor organization to my own AMA Resident Physician Section. I had a couple of chances to meet him at AMA events, he was really an exceptional guy. He did his residency at Dartmouth, was appointed the resident representative on the ACGME (the most important body for resident and fellowship programs), and went on to get a Master's in Public Health at Harvard. At the time of his death, he was a Senior Clinical Advisor to the Surgeon General. Paul was headed for a bright career in public health, and I'm sure he would have had plenty to say about our current health care debate. The Association for Prevention and Treatment Research has an annual conference and scholarship program named for Paul Ambrose. It says something about someone that, even at the tender age of 32, his life's mission and passion were so evident that he's still remembered and honored today.
The first time I met him, he was introducing a presentation from Doctors Without Borders. In retrospect, it's ironic that participation in an overseas mission with DWB seems dangerous and exciting, while getting on a plane from DC to California seems pedestrian. You worry the most about the confinement in your seat, about comfort, not the clean-shaven men in first class who are going to make a political point with your life and that of everyone in your plane, and anyone they can get on the ground.
People critical of our response after 9/11 often begin their criticism by asserting that "You think American lives are more valuable than the lives of people from other countries", and to be honest I don't. Americans of all walks of life are my countrymen and I feel a closer kinship to them than I do to others, I'll be honest. The big reason that another 9/11 needs to not happen is that Americans demand a response from their government, and the American government has the tools to get a response. Often, the tools are blunt and/or explosive, and come whistling down out of the sky to leave a mess on the ground. Avoiding another 9/11 is important because ultimately, it saves lives all around the world. It's hard to imagine a world without 9/11. We would not have put boots on the ground in Afghanistan on a dare. We might have eventually gotten around to getting rid of Saddam Hussein. The events of 9/11/2001 did change the variables in terms of what was 'acceptable risk', if you believe Ron Susskind's book The One Percent Doctrine, anything with a 1% risk of occurring had to be eliminated as a possibility. When you get down to that level of risk reduction, the US military gets very busy.
I'm thankful that my kids have no direct memory of 9/11. I'm glad I didn't have to try to explain it to them so they could understand. The idea that the world contains people so angry and nihilistic that using passenger jets as cruise missiles seems like a good idea is something I'd rather my kids not dwell on. On 9/11, I remember Paul and other people like Barbara Olson, an author whose books I have read, and Rick Rescorla, a British-born US Army officer and genuine hero of the Vietnam war who died at the World Trade Center. I remember the passengers on Flight 93, who showed what is defined by 'the Militia': not goofballs in camouflage crawling around Michigan, but average Americans who, finding themselves in the most dangerous circumstances imaginable, self-organized and probably saved thousands of lives at the cost of their own. The American response to 9/11 started on Flight 93, within minutes of their notification that the WTC had been hit by hijacked planes (through nominally illegal cell phone calls, I might add). Those people didn't wait for someone to tell them what to do. That's Americans in a crisis -- a brief moment of "Oh $%#*", then back to work on solving the problem.
That's what I want my kids to remember about 9/11.
Wednesday, August 12, 2009
My Position On The Healthcare Debate
A friend asked me what I thought about it. I didn't have a single link to give him, so I typed this up. Lazy slug that I am, I decided to re-use it, because it's blog-length and it covers quite a bit of ground.
My biases:
1. Single-payer is bad. Lived in Canada. Been there, done that. Great place if you aren't sick.
2. The government doesn't run things efficiently, as a rule, though there are a few exceptions.
3. The current system could use a major tune-up.
4. Freedom of choice and markets are better than government mandates.
What is difficult to discuss is the final bill, there are three House bills, and at least two Senate bills at last count. The deciding factor for me is the "public option" for healthcare financing. It is also the point of greatest contention between the Blue Dog caucus and the Progressive caucus in the Democratic party. The Blue Dogs have indicated that they won't vote for a bill with it, the Progressives won't vote for a bill without it, so basically there is a standoff. The fiscal conservatives' goal and the social progressives' goal during the August recess is to show one side or the other that they're wrong, and hopefully get one side or the other to change. The pattern of town hall meeting attendance is heavily on the (D) side, because really, this is an intraparty disagreement on the blue side of the House and Senate.
I've read parts of HB 3200, and the "death panel" stuff just isn't in there. What it sounds like to me is the authors encouraging doctors to get all their patients to discuss end-of-life issues, like, "If your heart stops, we can try to restart it with electrical shocks, drugs, both or neither. Which would you prefer?" Or, "If you have difficulty breathing and your heart stops, do you want to be put on a ventilator?" I think the goal is to get people to think about those kinds of things, in part because some people will say, "Just let me die" and then those folks are allowed to expire without spending six weeks in the ICU, on a vent and on dialysis and with 24/7 nursing care, running up a bill until they finally die -- like they probably would have six weeks earlier, without the cost. It's not unreasonable to point out that this sounds like they're trying to lower costs by letting people die sooner...because that's precisely what they're doing, IN ADDITION to making end-of-life choices easier on families because Grandpa has already decided that if his heart stops he doesn't want CPR or to be intubated or whatever.
The Healthcare Exchange sounds needlessly complex, as does all the bureaucratic apparatus that HB3200 calls for. It recreates on a national level all of the state insurance regulatory apparatus that already exists. Why does an employer HAVE to go through a federally-approved exchange? Why do private companies have to rejigger all their products to get everything on the same forms the government wants? It's just busywork, to do all the same things that people are already doing, and all of this could be done easier and cheaper by simply making a model base-level policy and saying "Everybody has to offer this. You can add more if you want." Then have one website where patients can go and compare prices, etc. If Orbitz can do this for airline flights, then it can be done for health insurance. I bet Google would give the government a server or three for free.
After seeing the careful and prudent management of Fannie Mae and Freddie Mac, I am not enthusiastic as to the likelihood of success of "Fannie Med", or whatever they end up calling the public option. The President has promised "If you have insurance you like, you get to keep it"...though this does not apply if your company figures it's easier to pay the 8% fine and leave you out on your own, or if the public option is cheaper and they decide to go for that. It will be hard to fathom how politically salable a public option will be unless it's priced below private market options, so in fact it seems likely that many people will end up losing the insurance they have and getting new insurance. The argument is that the government is not forcing them to change, but that's kind of specious to me.
The other things that are telling to me are the state-level public options that have been tried in the past:
TennCare (TN)
Keiki Child Care (HI)
Commonwealth Care (MA) and Dirigeo Choice (ME}
ALL of these universal coverage plans ended up costing taxpayers lots of money, even though they weren't supposed to do so. TennCare worked for a while but eventually was a nightmare for TN docs. The Hawaii plan only covered children, but what they found was that even parents with private health insurance were dropping coverage on their kids and taking the 'public option' at reduced cost. Commonwealth Care and Dirigeo are covered in the Union-Leader link. There is another example of people gaming the system in Massachusetts, spelled out in tooth-grinding detail in this article.
One can argue for the necessity or 'right' to health care (and I would dispute that it's a 'right', Constitutionally or otherwise, for me to have prior claim on the services of another and have the power of the state at my disposal to take it from them), but the dollars have to come from somewhere and the math doesn't lie. These types of plans invariably cost more than projected, and deliver fewer services. We're already bumping up against our new national debt ceiling of $12.5 trillion or so. What gets cut to pay for healthcare? How much bigger does the federal government need to be? How many more weeks will you be working to pay for this new program, and all the minions in office buildings in DC to run it?
The reason that the 'public option' will run into fiscal problems is that it's counting on cost savings from treating chronic conditions earlier and keeping down acute care costs over time. The problem is that, according to the CBO (who reviewed the literature), this doesn't work.
Democrats in support of the plan insist it will work, despite real-world evidence that it does not. If wishes were horses, etc. The other problem is that our current health system serves 290 million people. Adding the extra 45 million is increasing the number of patients by 15%, on a system that in some areas and in some places, is already having trouble serving the number of patient-customers it already has. The number of physicians and physician offices doesn't magically increase by 15% just because the bill has passed. Here in Longview, it's a six-month or more wait to get a well-woman visit with an OB/Gyn. You can just go ahead and extend that to six-and-a-half months, proportionately speaking.
If the 'public option' got $4-500 billion in seed money, and was a live-or-die option with no recourse to the federal government when it, like every plan before it, went broke, I would approve of the experiment. Shoot, we've poured almost that much money into AIG, GM and Chrysler with little to nothing to show for it. But the real goal of a public option for many of the advocates is not to go broke, it's to have the private insurers go broke trying to compete with it. For many people, single-payer is their goal. And if the day comes that the single-payer program replaces all other health coverage in the United States, then there will be cost decisions made that will end in something like (but not called) a "death panel". It won't be overt action, they won't administratively sentence your Dad to lethal injection for being too old. But there can be issues like failing to provide enough NICU beds, or not providing enough therapy centers for cancer patients.
These things DO result in deaths, it's one of the reasons the US leads the world in cancer survival rates for both men and women. All single-payer systems will get into cost overrun problems, or at least, every one that has been tried has done so far to this point in the Untied States. When that happens -- not when HB3200 passes, not when single-payer is introduced to "fix" the problems HB3200 created, but when money gets tight -- then the government will make decisions about rationing care. They have to, they're the only game in town under a single-payer system. People will object that healthcare services are currently rationed based on price. This is true, a discussion of this statement is here.
Finally (and if you've read this far, I admire both your patience and your endurance), there really are options to HB3200 and everything being considered now that are cheaper and will actually help the people who need helping. The bizarre thing about US health insurance is that it's tied to employment, an artifact of WW II and wage & price controls of the time. Insurance is tax-deductible for employers, but not employees, to the tune of $264 billion in what would otherwise be income tax collected on the equivalent in wages that is spent on health insurance. The smart thing to do IMO is to make that an individual tax deduction, refundable as a credit to low-income people on a sliding scale. If you want poor people to have insurance, then make sure they get the money the same way they get EITC checks when they file their taxes. For everyone else, your employer can pay you full wages (instead of wage=(full wage minus insurance)), and you can buy your health insurance the same way you buy your life insurance.
Make it so that people can buy insurance through groups if they want to, like association health plans (NRA, Texas Aggie Alumni Association, BBB, NASB, whatever), and buy across state lines to find better deals. If the government is going to do anything, specify a method of comparison of benefits and costs that all insurance plans have to meet, publish it on the Internet and put printed copies in every post office and library for people who don't have internet access.
The 85% of people who have health insurance will still have their health insurance, and you'll get the people in the 15% uninsured who need and want health insurance. The government can use its existing infrastructure (IRS) to get the money to people, at no additional cost other than a modification of the 1040 form. The government doesn't have to collect any more information than it has right now, on anyone. The government doesn't need to create a whole new fiscal risk to the budget, either.
My biases:
1. Single-payer is bad. Lived in Canada. Been there, done that. Great place if you aren't sick.
2. The government doesn't run things efficiently, as a rule, though there are a few exceptions.
3. The current system could use a major tune-up.
4. Freedom of choice and markets are better than government mandates.
What is difficult to discuss is the final bill, there are three House bills, and at least two Senate bills at last count. The deciding factor for me is the "public option" for healthcare financing. It is also the point of greatest contention between the Blue Dog caucus and the Progressive caucus in the Democratic party. The Blue Dogs have indicated that they won't vote for a bill with it, the Progressives won't vote for a bill without it, so basically there is a standoff. The fiscal conservatives' goal and the social progressives' goal during the August recess is to show one side or the other that they're wrong, and hopefully get one side or the other to change. The pattern of town hall meeting attendance is heavily on the (D) side, because really, this is an intraparty disagreement on the blue side of the House and Senate.
I've read parts of HB 3200, and the "death panel" stuff just isn't in there. What it sounds like to me is the authors encouraging doctors to get all their patients to discuss end-of-life issues, like, "If your heart stops, we can try to restart it with electrical shocks, drugs, both or neither. Which would you prefer?" Or, "If you have difficulty breathing and your heart stops, do you want to be put on a ventilator?" I think the goal is to get people to think about those kinds of things, in part because some people will say, "Just let me die" and then those folks are allowed to expire without spending six weeks in the ICU, on a vent and on dialysis and with 24/7 nursing care, running up a bill until they finally die -- like they probably would have six weeks earlier, without the cost. It's not unreasonable to point out that this sounds like they're trying to lower costs by letting people die sooner...because that's precisely what they're doing, IN ADDITION to making end-of-life choices easier on families because Grandpa has already decided that if his heart stops he doesn't want CPR or to be intubated or whatever.
The Healthcare Exchange sounds needlessly complex, as does all the bureaucratic apparatus that HB3200 calls for. It recreates on a national level all of the state insurance regulatory apparatus that already exists. Why does an employer HAVE to go through a federally-approved exchange? Why do private companies have to rejigger all their products to get everything on the same forms the government wants? It's just busywork, to do all the same things that people are already doing, and all of this could be done easier and cheaper by simply making a model base-level policy and saying "Everybody has to offer this. You can add more if you want." Then have one website where patients can go and compare prices, etc. If Orbitz can do this for airline flights, then it can be done for health insurance. I bet Google would give the government a server or three for free.
After seeing the careful and prudent management of Fannie Mae and Freddie Mac, I am not enthusiastic as to the likelihood of success of "Fannie Med", or whatever they end up calling the public option. The President has promised "If you have insurance you like, you get to keep it"...though this does not apply if your company figures it's easier to pay the 8% fine and leave you out on your own, or if the public option is cheaper and they decide to go for that. It will be hard to fathom how politically salable a public option will be unless it's priced below private market options, so in fact it seems likely that many people will end up losing the insurance they have and getting new insurance. The argument is that the government is not forcing them to change, but that's kind of specious to me.
The other things that are telling to me are the state-level public options that have been tried in the past:
TennCare (TN)
Keiki Child Care (HI)
Commonwealth Care (MA) and Dirigeo Choice (ME}
ALL of these universal coverage plans ended up costing taxpayers lots of money, even though they weren't supposed to do so. TennCare worked for a while but eventually was a nightmare for TN docs. The Hawaii plan only covered children, but what they found was that even parents with private health insurance were dropping coverage on their kids and taking the 'public option' at reduced cost. Commonwealth Care and Dirigeo are covered in the Union-Leader link. There is another example of people gaming the system in Massachusetts, spelled out in tooth-grinding detail in this article.
One can argue for the necessity or 'right' to health care (and I would dispute that it's a 'right', Constitutionally or otherwise, for me to have prior claim on the services of another and have the power of the state at my disposal to take it from them), but the dollars have to come from somewhere and the math doesn't lie. These types of plans invariably cost more than projected, and deliver fewer services. We're already bumping up against our new national debt ceiling of $12.5 trillion or so. What gets cut to pay for healthcare? How much bigger does the federal government need to be? How many more weeks will you be working to pay for this new program, and all the minions in office buildings in DC to run it?
The reason that the 'public option' will run into fiscal problems is that it's counting on cost savings from treating chronic conditions earlier and keeping down acute care costs over time. The problem is that, according to the CBO (who reviewed the literature), this doesn't work.
Democrats in support of the plan insist it will work, despite real-world evidence that it does not. If wishes were horses, etc. The other problem is that our current health system serves 290 million people. Adding the extra 45 million is increasing the number of patients by 15%, on a system that in some areas and in some places, is already having trouble serving the number of patient-customers it already has. The number of physicians and physician offices doesn't magically increase by 15% just because the bill has passed. Here in Longview, it's a six-month or more wait to get a well-woman visit with an OB/Gyn. You can just go ahead and extend that to six-and-a-half months, proportionately speaking.
If the 'public option' got $4-500 billion in seed money, and was a live-or-die option with no recourse to the federal government when it, like every plan before it, went broke, I would approve of the experiment. Shoot, we've poured almost that much money into AIG, GM and Chrysler with little to nothing to show for it. But the real goal of a public option for many of the advocates is not to go broke, it's to have the private insurers go broke trying to compete with it. For many people, single-payer is their goal. And if the day comes that the single-payer program replaces all other health coverage in the United States, then there will be cost decisions made that will end in something like (but not called) a "death panel". It won't be overt action, they won't administratively sentence your Dad to lethal injection for being too old. But there can be issues like failing to provide enough NICU beds, or not providing enough therapy centers for cancer patients.
These things DO result in deaths, it's one of the reasons the US leads the world in cancer survival rates for both men and women. All single-payer systems will get into cost overrun problems, or at least, every one that has been tried has done so far to this point in the Untied States. When that happens -- not when HB3200 passes, not when single-payer is introduced to "fix" the problems HB3200 created, but when money gets tight -- then the government will make decisions about rationing care. They have to, they're the only game in town under a single-payer system. People will object that healthcare services are currently rationed based on price. This is true, a discussion of this statement is here.
Finally (and if you've read this far, I admire both your patience and your endurance), there really are options to HB3200 and everything being considered now that are cheaper and will actually help the people who need helping. The bizarre thing about US health insurance is that it's tied to employment, an artifact of WW II and wage & price controls of the time. Insurance is tax-deductible for employers, but not employees, to the tune of $264 billion in what would otherwise be income tax collected on the equivalent in wages that is spent on health insurance. The smart thing to do IMO is to make that an individual tax deduction, refundable as a credit to low-income people on a sliding scale. If you want poor people to have insurance, then make sure they get the money the same way they get EITC checks when they file their taxes. For everyone else, your employer can pay you full wages (instead of wage=(full wage minus insurance)), and you can buy your health insurance the same way you buy your life insurance.
Make it so that people can buy insurance through groups if they want to, like association health plans (NRA, Texas Aggie Alumni Association, BBB, NASB, whatever), and buy across state lines to find better deals. If the government is going to do anything, specify a method of comparison of benefits and costs that all insurance plans have to meet, publish it on the Internet and put printed copies in every post office and library for people who don't have internet access.
The 85% of people who have health insurance will still have their health insurance, and you'll get the people in the 15% uninsured who need and want health insurance. The government can use its existing infrastructure (IRS) to get the money to people, at no additional cost other than a modification of the 1040 form. The government doesn't have to collect any more information than it has right now, on anyone. The government doesn't need to create a whole new fiscal risk to the budget, either.
Friday, May 08, 2009
Why Treasury Auctions Should Matter To You
Yesterday, the US Treasury had to offer more interest than they were expecting to sell their 30-year bonds.
Now, I'm not a financial whiz, and I'll be happy to hear from anyone who is in the bond-trading business about the significance of this event. But a similar thing happened to Great Britain earlier this year, for the first time since 2002 they didn't sell the entire stock of government bonds that they intended.
Why this is important is that in the last few months of 2008 and early 2009 the spending that the Obama Administration intended to accomplish seemed reasonable if only for the fact that people around the world seemingly couldn't get enough of the Treasury bill. T-bills are offered at a given interest rate, and then they can be traded afterward. If the price of a $1,000 T-bill offering 10% interest goes up, then the yield (interest relative to the price of the bond) decreases, and vice-versa. If you pay $500 for a $1000 bond that pays 10%, then your effective yield is 20%, because you're getting $100 in interest for a cost of $500. Government bond prices generally don't swing this much, but you can get some corporate bonds (GM for instance) at well less than face value now, with an astronomical yield, in part because the people who bought GM bonds originally don't believe they'll get either their money back or even their interest.
If you paid $1200 for a $1000 bond with a rate of 10%, you're actually seeing negative yield, it costs you more to own the bond than you're receiving in interest. For a while in 2008, the credit and investment markets were in such a tizzy that the T-bill was showing a negative yield -- people didn't mind losing a little money if they knew they would get the bulk of their money back. The private equity market was in disarray, and the government equity market was the place to be.
If you're a statist looking to expand the power of government, this latest credit crisis is a self-licking ice cream cone. Private equity is discredited, so people have a great appetite for government debt they feel they can trust. With people lining up to buy your debt, your government spending can increase because they are giving you cash in return for promises, cash you can turn around and spend on what you see as places for the government to "invest". What's more, people are so frantic for government debt that the bidding process keeps the interest rates low, so the cost of incurring debt isn't nearly as great as if you tried to borrow huge amounts of money under normal circumstances. It's a perfect storm blowing in your favor.
But all parties come to an end, and funny enough for the statists, it's good economic news that is now the problem. The latest jobs report that came out this (Friday) morning showed that only 539,000 people lost their jobs last month, rather than the 600,000+ in the preceeding few months, and there are private-sector folks who track this kind of thing so that the lower first-time unemployment number was known. Now, I don't presume to speak to the minds of Treasury auction participants, but reporters seem to feel that the expectation of slight economic improvement led the bidders for 30-year T-bills to ask for more interest (bid less money) for the T-bills on offer yesterday. This is plausible. When the economy is improving, the T-bill is no longer the only lifeboat, and negative yields may lose less than the market in 2008, but if the market is better in 2009 then money managers will need to get better than negative yields themselves.
Other plausible reasons for the Treasury unexpectedly having to offer higher interest yields include the Chinese not buying as much as they used to, meaning more were available and demand was down. As well, investment banks looking at the huge amount of money that has been promised by the government and lent by the Federal Reserve may be asking themselves when the inflation is going to hit, and wanting a higher yield to compensate for the increased risk of inflation.
In any event, this is a sign that the days of the private market being happy to lend to the Federal Government at record-low rates of return and fund masssive government expenditures may be drawing to a close. The auction didn't fail the way the British auction did, the Treasury was still able to raise the requisite amount of money albeit at a slightly higher cost down the road to the taxpayer. But the increased cost of borrowing and the failure of the British bond sale earlier this year does beg the question, "What happens if the government finds it harder and harder to borrow money?" There is not an infinite appetite domestically and abroad for US public debt, so there is an upper bound to the amount of borrowing that can occur.
Being a sovreign nation with a fiat currency, the United States has as many dollars at is says that it has, and the Federal Reserve System is allowed to expand or contract the monetary supply (the total number of dollars) as financial demands require. If the government cannot sell its debt, it can simply ask the Federal Reserve to "print" more money.
As an aside, I wish the presses were running full-tilt cranking out sheets of $100 bills to fund this government expansion, but I doubt the money could be physically printed fast enough to fullfill the requirements of just the amount of money passed out to banks, car manufacturers and expanded government programs since this past October. A trillion dollars is ten BILLION $100 bills. At a gram per bill, that's ten million kilograms of currency, about 22 million pounds of nothing but $100 bills.
This dump truck, the Caterpillar 797B, can carry 380 tons and is used in mining operations.
It would take just under 29 of them to hold a trillion dollars worth of $100 bills. It would take roughly 100 of these trucks, filled with their maximum load of 380 tons of $100 bills, to haul away the federal budget this year -- but hey, only half of that is debt, right?
That trillion dollars can be created in a computer system by the declaration of the Federal Reserve. It most recently happened on March 18, 2009. The Federal Reserve bought $1 trillion in T-bills and mortgage-backed securities with this money, though no 380-ton dumptrucks were reported in the streets of Washington, DC. The computer at the Fed got another 1 followed by 12 zeroes, and shortly thereafter the accounts listing "T-bills held by Federal Reserve" jumped up, and so did the account balance of the Treasury.
If you're getting a mental image of a snake eating its own tail for the nutrient value, then you're pretty much right on as to what is happening. This is of course legal, I'm not decrying it as something evil or nefarious, but everything has consequences. And it's the consequences that are my chief concern when the Treasury has problems selling their T-bills, because the Federal Reserve can always buy them with currency they create not based on items of intrinsic value, like gold or food, or based even on paper currency, but by the declaration of the Federal Reserve. Thus, there are more dollars in the system, and as the amount of goods and services produced in the United States didn't change, by definition the value of goods and services per dollar will decrease. This is called inflation.
When the US Government can no longer exchange its debt obligations to fund government operations, it must turn to making more currency. It's possible the Federal Reserve will tell President Obama that the till is closed, that the risk of inflation is too high. They will do this in part by making it more expensive for everyone to borrow money, by raising interest rates. This not only affects the federal government, it also affects everyone whose ARM resets and leads to higher mortgage costs. It affects anyone buying a car, which is something the auto industry really doesn't need. It affects anyone trying to borrow money to build or expand a business, increasing the costs of economic growth and employing others.
At this point, we must hope that President Obama and the Congress are "moderates" they tell us they are, and will moderate their spending appetites, which to this point exceed that of any Congress or Presidency in US history. I hope Ben Bernanke has the stones to tell the President that they just can't borrow what they want to borrow from the Fed, and that if more T-bill auctions end up more expensive than originally planned that Tim Geithner will pull the President aside and tell him that there is no more appetite for our debt and some serious priority-shuffling is required.
Maybe this will come in the form of significantly increased taxes, but people resist paying taxes (all people, not just wealthy people) and will move to minimize their tax burden. It's more likely that some of the more ambitious parts of the Obama agenda, like health care reform, will have to be seriously scaled back or abandoned altogether, if this happens before things like health care reform and cap-and-trade energy taxes are locked into place.
But it is also likely that what will be described as "a little" inflation is declared to be worth the goal of a "more equitable society". Of course, the inflation won't be or stay "little", and the equality of outcome will never appear, thus the need for continued government pursuit of the will o' wisp, with the inevitable "little more" inflation every year.
And meanwhile, your savings will be ground away, the cost of everyday goods will continue to increase, and we will learn the joys of inflation that has so bedeviled Zimbabwe and Argentina and other nations whose leadership was wrong-headed and felt their ends justified their citizens' increasingly-humble means.
So keep an eye out for news of more T-bill sales going unexpectedly south. I expected this, just not so soon. This current event is minor, and may not happen again for months, but when a T-bill auction doesn't sell out, that will be time to see how much gold you have on hand, because your next set of groceries may be costing considerably more than the last.
Now, I'm not a financial whiz, and I'll be happy to hear from anyone who is in the bond-trading business about the significance of this event. But a similar thing happened to Great Britain earlier this year, for the first time since 2002 they didn't sell the entire stock of government bonds that they intended.
Why this is important is that in the last few months of 2008 and early 2009 the spending that the Obama Administration intended to accomplish seemed reasonable if only for the fact that people around the world seemingly couldn't get enough of the Treasury bill. T-bills are offered at a given interest rate, and then they can be traded afterward. If the price of a $1,000 T-bill offering 10% interest goes up, then the yield (interest relative to the price of the bond) decreases, and vice-versa. If you pay $500 for a $1000 bond that pays 10%, then your effective yield is 20%, because you're getting $100 in interest for a cost of $500. Government bond prices generally don't swing this much, but you can get some corporate bonds (GM for instance) at well less than face value now, with an astronomical yield, in part because the people who bought GM bonds originally don't believe they'll get either their money back or even their interest.
If you paid $1200 for a $1000 bond with a rate of 10%, you're actually seeing negative yield, it costs you more to own the bond than you're receiving in interest. For a while in 2008, the credit and investment markets were in such a tizzy that the T-bill was showing a negative yield -- people didn't mind losing a little money if they knew they would get the bulk of their money back. The private equity market was in disarray, and the government equity market was the place to be.
If you're a statist looking to expand the power of government, this latest credit crisis is a self-licking ice cream cone. Private equity is discredited, so people have a great appetite for government debt they feel they can trust. With people lining up to buy your debt, your government spending can increase because they are giving you cash in return for promises, cash you can turn around and spend on what you see as places for the government to "invest". What's more, people are so frantic for government debt that the bidding process keeps the interest rates low, so the cost of incurring debt isn't nearly as great as if you tried to borrow huge amounts of money under normal circumstances. It's a perfect storm blowing in your favor.
But all parties come to an end, and funny enough for the statists, it's good economic news that is now the problem. The latest jobs report that came out this (Friday) morning showed that only 539,000 people lost their jobs last month, rather than the 600,000+ in the preceeding few months, and there are private-sector folks who track this kind of thing so that the lower first-time unemployment number was known. Now, I don't presume to speak to the minds of Treasury auction participants, but reporters seem to feel that the expectation of slight economic improvement led the bidders for 30-year T-bills to ask for more interest (bid less money) for the T-bills on offer yesterday. This is plausible. When the economy is improving, the T-bill is no longer the only lifeboat, and negative yields may lose less than the market in 2008, but if the market is better in 2009 then money managers will need to get better than negative yields themselves.
Other plausible reasons for the Treasury unexpectedly having to offer higher interest yields include the Chinese not buying as much as they used to, meaning more were available and demand was down. As well, investment banks looking at the huge amount of money that has been promised by the government and lent by the Federal Reserve may be asking themselves when the inflation is going to hit, and wanting a higher yield to compensate for the increased risk of inflation.
In any event, this is a sign that the days of the private market being happy to lend to the Federal Government at record-low rates of return and fund masssive government expenditures may be drawing to a close. The auction didn't fail the way the British auction did, the Treasury was still able to raise the requisite amount of money albeit at a slightly higher cost down the road to the taxpayer. But the increased cost of borrowing and the failure of the British bond sale earlier this year does beg the question, "What happens if the government finds it harder and harder to borrow money?" There is not an infinite appetite domestically and abroad for US public debt, so there is an upper bound to the amount of borrowing that can occur.
Being a sovreign nation with a fiat currency, the United States has as many dollars at is says that it has, and the Federal Reserve System is allowed to expand or contract the monetary supply (the total number of dollars) as financial demands require. If the government cannot sell its debt, it can simply ask the Federal Reserve to "print" more money.
As an aside, I wish the presses were running full-tilt cranking out sheets of $100 bills to fund this government expansion, but I doubt the money could be physically printed fast enough to fullfill the requirements of just the amount of money passed out to banks, car manufacturers and expanded government programs since this past October. A trillion dollars is ten BILLION $100 bills. At a gram per bill, that's ten million kilograms of currency, about 22 million pounds of nothing but $100 bills.
This dump truck, the Caterpillar 797B, can carry 380 tons and is used in mining operations.
It would take just under 29 of them to hold a trillion dollars worth of $100 bills. It would take roughly 100 of these trucks, filled with their maximum load of 380 tons of $100 bills, to haul away the federal budget this year -- but hey, only half of that is debt, right?
That trillion dollars can be created in a computer system by the declaration of the Federal Reserve. It most recently happened on March 18, 2009. The Federal Reserve bought $1 trillion in T-bills and mortgage-backed securities with this money, though no 380-ton dumptrucks were reported in the streets of Washington, DC. The computer at the Fed got another 1 followed by 12 zeroes, and shortly thereafter the accounts listing "T-bills held by Federal Reserve" jumped up, and so did the account balance of the Treasury.
If you're getting a mental image of a snake eating its own tail for the nutrient value, then you're pretty much right on as to what is happening. This is of course legal, I'm not decrying it as something evil or nefarious, but everything has consequences. And it's the consequences that are my chief concern when the Treasury has problems selling their T-bills, because the Federal Reserve can always buy them with currency they create not based on items of intrinsic value, like gold or food, or based even on paper currency, but by the declaration of the Federal Reserve. Thus, there are more dollars in the system, and as the amount of goods and services produced in the United States didn't change, by definition the value of goods and services per dollar will decrease. This is called inflation.
When the US Government can no longer exchange its debt obligations to fund government operations, it must turn to making more currency. It's possible the Federal Reserve will tell President Obama that the till is closed, that the risk of inflation is too high. They will do this in part by making it more expensive for everyone to borrow money, by raising interest rates. This not only affects the federal government, it also affects everyone whose ARM resets and leads to higher mortgage costs. It affects anyone buying a car, which is something the auto industry really doesn't need. It affects anyone trying to borrow money to build or expand a business, increasing the costs of economic growth and employing others.
At this point, we must hope that President Obama and the Congress are "moderates" they tell us they are, and will moderate their spending appetites, which to this point exceed that of any Congress or Presidency in US history. I hope Ben Bernanke has the stones to tell the President that they just can't borrow what they want to borrow from the Fed, and that if more T-bill auctions end up more expensive than originally planned that Tim Geithner will pull the President aside and tell him that there is no more appetite for our debt and some serious priority-shuffling is required.
Maybe this will come in the form of significantly increased taxes, but people resist paying taxes (all people, not just wealthy people) and will move to minimize their tax burden. It's more likely that some of the more ambitious parts of the Obama agenda, like health care reform, will have to be seriously scaled back or abandoned altogether, if this happens before things like health care reform and cap-and-trade energy taxes are locked into place.
But it is also likely that what will be described as "a little" inflation is declared to be worth the goal of a "more equitable society". Of course, the inflation won't be or stay "little", and the equality of outcome will never appear, thus the need for continued government pursuit of the will o' wisp, with the inevitable "little more" inflation every year.
And meanwhile, your savings will be ground away, the cost of everyday goods will continue to increase, and we will learn the joys of inflation that has so bedeviled Zimbabwe and Argentina and other nations whose leadership was wrong-headed and felt their ends justified their citizens' increasingly-humble means.
So keep an eye out for news of more T-bill sales going unexpectedly south. I expected this, just not so soon. This current event is minor, and may not happen again for months, but when a T-bill auction doesn't sell out, that will be time to see how much gold you have on hand, because your next set of groceries may be costing considerably more than the last.
Wednesday, May 06, 2009
How I Spent My First Billion
I was born wealthy. I had nothing to do with this bequest of good fortune, and I'm not feeling guilty about it as some would have me do. Much of the wealth I had I can only appreciate looking back over my life. I can say that it truly is the experiences that stand out more so than the material things, but I had those, too.
I had houses in Michigan, Ohio, North Carolina, Missouri, Arkansas, Pennsylvania, Iowa and several in Texas. I even spent some time living abroad, it's one of the things you can do when you have the means. I (like many wealthy people) had two families, but they get along exceptionally well. Spending liberally on both of them keeps things on an even keel. In my family, my parents know about spending -- they've each spent over TWO billion.
Rather than being idle with my wealth, I spent quite a bit of the first billion on education. Several schools in several places, sampling what I could learn. I even got a doctorate, and a career to keep me busy. Doing nothing with the wealth you've been given is just wrong, isn't it?
And I spent, boy did I spend. Looking back, it's hard to imagine that I spent on average around eighty-six thousand a day. I even spent my wealth when I was sleeping, but the sleep was worth it. It's funny, when I was younger the wealth seemed more valuable somehow, but now having spent so much I have the memories to show for that billion. In the process of burning through my first billion I found a wonderful, thoughtful, capable lady who really wanted to help me spend it well, and we have three really funny, intelligent children, all of whom have their own fortunes to spend or (so we hope).
I made a lot of good, genuine friends. It's hard for some people to know whether it's their wealth that brings friends to them, or they themselves, but either way I met and befriended hundreds of people while I was spending my fortune. I have friends from nearly everywhere I lived, much like families, when you spend on people they tend to remember it, and appreciate it. People say you can't buy friends, but those people just don't spend the right way.
The end of my first billion I didn't even recognize, to be honest. I was working my first real Big Boy job, living in a great little town, father of two and planning to have Lasik in a couple of months. Best I can figure on August 9th, 1999, at about 5:30 in the morning I spent the last of my first billion.
I turned 31.7 years old. And in my sleep, I started spending my second billion.
*****
The billion I had wasn't in dollars. I had spent a billion seconds of my life to achieve all those things. My two families were my brother, sister, mother and father, and then my own family with my wife. I lived in all those places mostly because I was a kid moving around with my parents. I "bought" friends the way we all do -- with our time, our greatest investment in others.
I found out that I had spent a billion seconds already when I recently read Everyday Survival by Laurence Gonzalez, an excellent meditation on life, people and energy disposition. It was about that time that we were talking about these huge budget deficits, when the phrase "billions" was casually discarded in favor of "trillions", and it struck me how little we understand and relate to large numbers like that. A billion seconds is three-quarters of my life to this point, almost. We consider people who've had three billion seconds of life to be quite old. When people start talking about a $787 billion stimulus bill, that's a little over $86,000 a day for roughly 200 lifetimes.
And when they talk about a trillion -- that's a whole order of magnitude (well, three orders of magnitude) more. A trillion seconds ago was 30,000 years ago. These numbers are staggeringly large, and it sort of makes my mouth go dry a bit to consider that those numbers are debt, money that is intended to be repaid. Statistically speaking, I've worked for 15 years, and spent four months per year working just to pay the taxes I've owed. Doing the math, that's:
60 months
240 weeks
1200 workdays
9600 working hours
34,560,000 seconds
In my next billion seconds I'll probably be working the whole time. Assuming no increase in income tax rates, that's going to mean the income taxes I'm paying will consume 6.9% of my life. That doesn't even count the repayment of debt, the debt this year alone is nearly half of the budget, meaning that if we all spent 13.8% of our lives doing nothing but working to pay taxes we'd break even...this year. This assumes no inflation and no increase in interest on existing or future debt, both of which are exceptionally unlikely.
This is why the debt bothers me: because my kids will be spending a little over a tenth of their adult lives working to pay income taxes just to keep pace with the debt, not to even begin eliminating it. Once you add in the anticipated shortfalls from Social Security and Medicare, they're trillons of more dollars in the hole.
They're kids, and I'm not going to explain this to them until they ask me. Right now, they have a wealth of time they need to spend developing themselves, their skills and abilities. Right now, I'm the adult with the wider view of the world and what's going on, and it's my responsibility to change this. It's the responsibility of all of us who have the skills to do basic math to let our representatives know how much we dislike this level of spending.
It's not just your dollars they're taking. It's your real wealth that's being spent.
I had houses in Michigan, Ohio, North Carolina, Missouri, Arkansas, Pennsylvania, Iowa and several in Texas. I even spent some time living abroad, it's one of the things you can do when you have the means. I (like many wealthy people) had two families, but they get along exceptionally well. Spending liberally on both of them keeps things on an even keel. In my family, my parents know about spending -- they've each spent over TWO billion.
Rather than being idle with my wealth, I spent quite a bit of the first billion on education. Several schools in several places, sampling what I could learn. I even got a doctorate, and a career to keep me busy. Doing nothing with the wealth you've been given is just wrong, isn't it?
And I spent, boy did I spend. Looking back, it's hard to imagine that I spent on average around eighty-six thousand a day. I even spent my wealth when I was sleeping, but the sleep was worth it. It's funny, when I was younger the wealth seemed more valuable somehow, but now having spent so much I have the memories to show for that billion. In the process of burning through my first billion I found a wonderful, thoughtful, capable lady who really wanted to help me spend it well, and we have three really funny, intelligent children, all of whom have their own fortunes to spend or (so we hope).
I made a lot of good, genuine friends. It's hard for some people to know whether it's their wealth that brings friends to them, or they themselves, but either way I met and befriended hundreds of people while I was spending my fortune. I have friends from nearly everywhere I lived, much like families, when you spend on people they tend to remember it, and appreciate it. People say you can't buy friends, but those people just don't spend the right way.
The end of my first billion I didn't even recognize, to be honest. I was working my first real Big Boy job, living in a great little town, father of two and planning to have Lasik in a couple of months. Best I can figure on August 9th, 1999, at about 5:30 in the morning I spent the last of my first billion.
I turned 31.7 years old. And in my sleep, I started spending my second billion.
*****
The billion I had wasn't in dollars. I had spent a billion seconds of my life to achieve all those things. My two families were my brother, sister, mother and father, and then my own family with my wife. I lived in all those places mostly because I was a kid moving around with my parents. I "bought" friends the way we all do -- with our time, our greatest investment in others.
I found out that I had spent a billion seconds already when I recently read Everyday Survival by Laurence Gonzalez, an excellent meditation on life, people and energy disposition. It was about that time that we were talking about these huge budget deficits, when the phrase "billions" was casually discarded in favor of "trillions", and it struck me how little we understand and relate to large numbers like that. A billion seconds is three-quarters of my life to this point, almost. We consider people who've had three billion seconds of life to be quite old. When people start talking about a $787 billion stimulus bill, that's a little over $86,000 a day for roughly 200 lifetimes.
And when they talk about a trillion -- that's a whole order of magnitude (well, three orders of magnitude) more. A trillion seconds ago was 30,000 years ago. These numbers are staggeringly large, and it sort of makes my mouth go dry a bit to consider that those numbers are debt, money that is intended to be repaid. Statistically speaking, I've worked for 15 years, and spent four months per year working just to pay the taxes I've owed. Doing the math, that's:
60 months
240 weeks
1200 workdays
9600 working hours
34,560,000 seconds
In my next billion seconds I'll probably be working the whole time. Assuming no increase in income tax rates, that's going to mean the income taxes I'm paying will consume 6.9% of my life. That doesn't even count the repayment of debt, the debt this year alone is nearly half of the budget, meaning that if we all spent 13.8% of our lives doing nothing but working to pay taxes we'd break even...this year. This assumes no inflation and no increase in interest on existing or future debt, both of which are exceptionally unlikely.
This is why the debt bothers me: because my kids will be spending a little over a tenth of their adult lives working to pay income taxes just to keep pace with the debt, not to even begin eliminating it. Once you add in the anticipated shortfalls from Social Security and Medicare, they're trillons of more dollars in the hole.
They're kids, and I'm not going to explain this to them until they ask me. Right now, they have a wealth of time they need to spend developing themselves, their skills and abilities. Right now, I'm the adult with the wider view of the world and what's going on, and it's my responsibility to change this. It's the responsibility of all of us who have the skills to do basic math to let our representatives know how much we dislike this level of spending.
It's not just your dollars they're taking. It's your real wealth that's being spent.
Wednesday, March 04, 2009
Sippican Cottage: My Father Asks For Nothing
Sippican Cottage: My Father Asks For Nothing
Papa (Marci's grandfather Billy Wise) died in February 2003, I can gauge how long ago by how big my youngest daughter is. She was a tiny spark of happiness toddling around a gloomy living room back then. She didn't get a chance to know him, and it's her loss.
He was a supply Sergeant in the Army Air Force, based in England from 1942 on. His unit got there to set up everything so the B-17s based out of England could start the difficult process of sorting out what worked and what didn't in the aerial bombing of Hitler's Europe. He flew on a few missions, he called them "milk runs" across the channel to France, when they needed anyone who could hold a M2 .50 caliber machinegun in the side gunner position, but he would tell you he wasn't a combat soldier. He was a proud veteran of the Eighth Air Force, though. He had a story or three about going across to Normandy a few days after D-Day to set up Marsten matting to build an improvised airstrip. He wasn't a fan of war.
He came home to a wife who loved him for nearly sixty years (and still does today), a series of sales jobs at which he found middle-class success, and had two children: a daughter and a son, who is the father of my wife and the grandfather of my children.
I knew Papa for what seems like a very short time, it was only 12 years and some change. I intended to take him to an airshow and buy him and I a ride in a B-17, but by the time I had the resources I didn't have the time, and he passed away suddenly. It would have been a great thing, but I dithered, and I missed it. I miss him more.
He died the way he would have wanted to, I think: in the middle of a joke at a doughnut shop where he and his Greatest Generation compatriots met daily to solve the problems of the world. He probably would have wanted to make it to the punchline, but hey, leave your audience wanting more, right? He was a gem of a man.
His burial was at the National Cemetary in Grand Prairie. If you've never been to a military funeral you can't understand the bond that soldiers feel for one another. The attendants at his funeral showed the utmost respect for a fallen soldier, and his survivors. He fought, like so many others who proceeded him into that cemetery, because it was the right thing to do. My wife, my children, maybe even I were witness for him that day, because he made our lives as we know them possible. It was the least we could do.
This is a great piece about a son who got to take his father to see a B-24 like the one that was so formative in his young years. I'm glad for him that he did.
It's also a reminder to me to stop doing the urgent things, and start doing the important things.
Papa (Marci's grandfather Billy Wise) died in February 2003, I can gauge how long ago by how big my youngest daughter is. She was a tiny spark of happiness toddling around a gloomy living room back then. She didn't get a chance to know him, and it's her loss.
He was a supply Sergeant in the Army Air Force, based in England from 1942 on. His unit got there to set up everything so the B-17s based out of England could start the difficult process of sorting out what worked and what didn't in the aerial bombing of Hitler's Europe. He flew on a few missions, he called them "milk runs" across the channel to France, when they needed anyone who could hold a M2 .50 caliber machinegun in the side gunner position, but he would tell you he wasn't a combat soldier. He was a proud veteran of the Eighth Air Force, though. He had a story or three about going across to Normandy a few days after D-Day to set up Marsten matting to build an improvised airstrip. He wasn't a fan of war.
He came home to a wife who loved him for nearly sixty years (and still does today), a series of sales jobs at which he found middle-class success, and had two children: a daughter and a son, who is the father of my wife and the grandfather of my children.
I knew Papa for what seems like a very short time, it was only 12 years and some change. I intended to take him to an airshow and buy him and I a ride in a B-17, but by the time I had the resources I didn't have the time, and he passed away suddenly. It would have been a great thing, but I dithered, and I missed it. I miss him more.
He died the way he would have wanted to, I think: in the middle of a joke at a doughnut shop where he and his Greatest Generation compatriots met daily to solve the problems of the world. He probably would have wanted to make it to the punchline, but hey, leave your audience wanting more, right? He was a gem of a man.
His burial was at the National Cemetary in Grand Prairie. If you've never been to a military funeral you can't understand the bond that soldiers feel for one another. The attendants at his funeral showed the utmost respect for a fallen soldier, and his survivors. He fought, like so many others who proceeded him into that cemetery, because it was the right thing to do. My wife, my children, maybe even I were witness for him that day, because he made our lives as we know them possible. It was the least we could do.
This is a great piece about a son who got to take his father to see a B-24 like the one that was so formative in his young years. I'm glad for him that he did.
It's also a reminder to me to stop doing the urgent things, and start doing the important things.
Tuesday, March 03, 2009
The Governance Registry
This is an idea I have been kicking around for a while. It would make (at the least) an interesting experiment, and not a particularly expensive one.
The proposed Obama budget for 2010 I find to be an abomination, it's only redeeming value is that it makes the steaming loaf of the $410 billion Omnibus budget bill for spending for the rest of 2009 look responsible by comparison. I fundamentally disagree with spending that much money on things that I do not share the President's concern for, and what's more, I pay a HUGE pile of taxes and stand to pay much more when the tax cuts of the Bush years run out.
I remember the misguided "Nuclear Peace" movement of the 1980s, and the phrase, "Wouldn't it be nice if schools were fully funded and the Air Force had to have a bake sale to buy a bomber?" Undoubtedly this doggerel was born in some left-wing think tank, or maybe air-freighted straight over from the USSR itself, but it got me to thinking: would the school or the Air Force win in a budget contest? And for me, there was no doubt, I'd be buying a share in the bomber.
With wedding and baby showers the US has developed quite an infrastructure dedicated to making lists and letting others fulfill the wishes of the honorees, it seems to be a reasonable step to adopt the same thing for the US Government. My "Government Registry" works like this:
1. The Congress adopts a budget for the year, which is divided as much as possible into the smallest dollar-value increment for each program and then fed into an online database. The Congress has 'registered' for the things it would like in a given year, down to the nuts, bolts, tires and policy costs.
2. Congress can set whatever taxation levels it chooses to, brackets, flat taxes, whatever.
3. Taxpayers get a report from the government when their taxes are filed, listing their payroll taxes, their income taxes paid, and their taxpayer ID.
4. Taxpayers then log into a secure website, enter their taxpayer ID and "go shopping", dedicating their tax dollars to specific programs the Congress has asked for in the next fiscal year.
You have to pay your FICA taxes toward Social Security and Medicare, which are programs that you front-end pay to directly benefit you, so when it comes to "shopping" for the government people who don't pay income taxes don't get to play in terms of determining which national priorities get funded.
For the lazy, there can be choices like "Evenly Distribute" and "All Social Welfare" and "All Defense" to allocate their dollars quickly and by formula. For everyone else, they get to know for sure what their tax dollars paid for in the next fiscal year.
I would buy a JDAM kit, medical insurance for a military family or two, childhood immunizations, practice ammo for the military and maybe buy some number of yards of interstate highway repair, and some hours of Air Traffic Controller hours (might need those guys if I fly). I would know what my money went to, and that makes paying my taxes a little more palatable.
The thing about wedding registries is that you occasionally get more in one category than you wanted, and have to return things. It would be interesting to see HUD trying to hawk 120mm tank rounds to fulfill their Congressional mandate, but probably the easier way to handle it is to make a public "gift" of some portion of overages from different government departments to the ones who missed out. The implications for the importance of the different departments of government in the eyes of taxpayers could not be clearer than the DoD announcing that it was funding 70% of the Department of Agriculture's budget for the year.
The budget would look very, very different, I think, if the people who paid the taxes chose where the money would go.
The proposed Obama budget for 2010 I find to be an abomination, it's only redeeming value is that it makes the steaming loaf of the $410 billion Omnibus budget bill for spending for the rest of 2009 look responsible by comparison. I fundamentally disagree with spending that much money on things that I do not share the President's concern for, and what's more, I pay a HUGE pile of taxes and stand to pay much more when the tax cuts of the Bush years run out.
I remember the misguided "Nuclear Peace" movement of the 1980s, and the phrase, "Wouldn't it be nice if schools were fully funded and the Air Force had to have a bake sale to buy a bomber?" Undoubtedly this doggerel was born in some left-wing think tank, or maybe air-freighted straight over from the USSR itself, but it got me to thinking: would the school or the Air Force win in a budget contest? And for me, there was no doubt, I'd be buying a share in the bomber.
With wedding and baby showers the US has developed quite an infrastructure dedicated to making lists and letting others fulfill the wishes of the honorees, it seems to be a reasonable step to adopt the same thing for the US Government. My "Government Registry" works like this:
1. The Congress adopts a budget for the year, which is divided as much as possible into the smallest dollar-value increment for each program and then fed into an online database. The Congress has 'registered' for the things it would like in a given year, down to the nuts, bolts, tires and policy costs.
2. Congress can set whatever taxation levels it chooses to, brackets, flat taxes, whatever.
3. Taxpayers get a report from the government when their taxes are filed, listing their payroll taxes, their income taxes paid, and their taxpayer ID.
4. Taxpayers then log into a secure website, enter their taxpayer ID and "go shopping", dedicating their tax dollars to specific programs the Congress has asked for in the next fiscal year.
You have to pay your FICA taxes toward Social Security and Medicare, which are programs that you front-end pay to directly benefit you, so when it comes to "shopping" for the government people who don't pay income taxes don't get to play in terms of determining which national priorities get funded.
For the lazy, there can be choices like "Evenly Distribute" and "All Social Welfare" and "All Defense" to allocate their dollars quickly and by formula. For everyone else, they get to know for sure what their tax dollars paid for in the next fiscal year.
I would buy a JDAM kit, medical insurance for a military family or two, childhood immunizations, practice ammo for the military and maybe buy some number of yards of interstate highway repair, and some hours of Air Traffic Controller hours (might need those guys if I fly). I would know what my money went to, and that makes paying my taxes a little more palatable.
The thing about wedding registries is that you occasionally get more in one category than you wanted, and have to return things. It would be interesting to see HUD trying to hawk 120mm tank rounds to fulfill their Congressional mandate, but probably the easier way to handle it is to make a public "gift" of some portion of overages from different government departments to the ones who missed out. The implications for the importance of the different departments of government in the eyes of taxpayers could not be clearer than the DoD announcing that it was funding 70% of the Department of Agriculture's budget for the year.
The budget would look very, very different, I think, if the people who paid the taxes chose where the money would go.
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