Archive for the ‘Government’ Category

The Public Has Spoken – Sort Of

Once you understand public choice theory, watching politics unfold becomes less of a frustration and more a source of amusement.

I just heard President Obama lay out his near term agenda. He was elected by a decent majority and will fight for the issues for which he campaigned. The people have spoken, and the people want a Democratic agenda implemented.

But the House of Representatives was also just elected. It is firmly Republican. The people have spoken, and the people want a Republican agenda implemented.

Same voters. Two conflicting agendas.

Some pundits say that voters want compromise. I don’t understand how you compromise between raising taxes and lowering taxes, for example.

I can only conclude that what voters actually favor is gridlock. This restrains both Democrats and Republicans and preserves the status quo. The last several presidents, when given a compliant Congress, have moved the country in unhappy directions. Gridlock forces politicians to take a “timeout” and allows only actions which are broadly acceptable to voters.

voting day in a small town

voting day in a small town (Photo credit: Muffet)

Don’t expect a lot to happen in a gridlocked political system – the public has spoken and inaction seems to be our preference as a nation.

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A Tangled Solar Web

So, our government just placed a tariff on low cost Chinese solar panels, making them not so low cost. I thought our energy policy was, in part, to encourage the use of alternative energy sources, particularly wind and solar. Government has certainly spent enough money funding alt.energy projects that experienced technology developers found too impractical. Adding tariffs/taxes to raise the cost of solar, making it less cost effective, seems at odds with our policy goals. Right wing partisans might think that there is some deeper sinister plot at work. Perhaps there is, but our government seems to be so big and complex that the right hand destroys what the left hand creates. Ineptitude and inefficiency may be baked into the cake. Would we be farther down the solar path if government had just done nothing?

English: Solar panel installation at an inform...

English: Solar panel installation at an information center adjacent to Ögii Lake (Photo credit: Wikipedia)

Stupid Politicians May Be Smart

Disturbed by political distortions (which some would call lying), some earnest commentators make some wonkish proposals. I haven’t reviewed them, but I can almost guarantee that they are DOA. Yes, yes – politicians do some stupid things and stretch the truth like Silly Putty. You might want to read Why Politicians Lie. But more fundamentally, all you need to know is that politicians lie and do other stupid things because such activities win elections. Are voters really that stupid? Yes and no. Modern behavioral psychology explains a lot: most voters are simply neither terribly engaged nor well informed because that would be an inefficient use of their mental energy – they have other things, like families and jobs, to worry about. Politics and policy only gets whatever mental cycles are left over after higher priority needs are serviced. Thus, for politicians, a winning strategy is to portray a simple message which is sympathetic and easy to digest. It’s hard to see democracy working any other way – and it’s hard to see a better system than democracy.

English: Library of Congress summary: "Ca...

English: Library of Congress summary: “Caricature showing politicians and people representing different professions revolving around head of Richard “Boss” Croker as the Sun.” (Photo credit: Wikipedia)

I write this not to express cynicism. Instead, I find it helpful to remember that whenever a see some politician as stupid and venal, it’s just the way it has to be. Lighten up! This ought not to discourage us from thinking about issues and policy – instead, we should manage our expectations and focus where we can make a difference, not where we can’t.

Health Care in Wonderland

Wow. The surprising Supreme Court decision has caused an avalanche of commentary. The sequence of events and the underlying logic is bizarre. The bottom line is that the mandate (“not a tax”) would be unconstitutional if it were a mandate, but it is constitutional because it really is a tax (not a mandate). You can’t make up stuff this funny!

So, we have the biggest tax increase in history falling almost entirely on the middle class, sponsored by the folks who say there should be no tax increases for the middle class. You can’t make this stuff up!

Despite the Alice in Wonderland nature of the law and politics involved, the reform is chugging on – at least mostly. Big chunks have already been thrown overboard because the administration said they were unworkable. It remains to be seen how much more will collapse under it’s own weight. And, outside government, insurance rates are skyrocketing in anticipation of Reform and employers everywhere are deciding whether they can any longer afford to provide insurance for their employees. The fun has just begun!

Meanwhile, lots of economists have described what needs to be done to fix this mess. Their plot makes sense to me, but a real solution would not sound attractive to the poorly educated voters who decide elections. Democrats won’t touch the good ideas and even the boldest Republicans offer only faint echoes.

So, where are we headed? My guess is that health care will soon get a lot more expensive and a lot more people will do without or without enough. At some point we might hit rock bottom and entertain real reform, but only after the current cast of characters in government are only an unpleasant memory. I hope I’m wrong.

Washington DC: United States Supreme Court

Washington DC: United States Supreme Court (Photo credit: wallyg)

Syria

You might have asked, as others have, why all the standing around? Shouldn’t we do something? Perhaps, but reading this might temper your enthusiasm. Here’s the heart of it:

… we live in a world of diverse cultures, and we know very little about social engineering and how to build nations. When we cannot be sure how to improve the world, prudence becomes an important virtue, and hubristic visions can pose a grave danger. Foreign policy, like medicine, must be guided by the principle, “First, do no harm.”

English: A mosque in Hama, Syria Français : Un...

English: A mosque in Hama, Syria Français : Une mosquée à Hama en Syrie (Photo credit: Wikipedia)

2 Billion $

USPS service delivery truck in a residential a...

USPS service delivery truck in a residential area of San Francisco, California (Photo credit: Wikipedia)

Much is being made of J. P. Morgan’s two billion dollar trading loss. There has been little mention of the fact that this loss occurred inside of a profitable portfolio (or so I’m told).

Every trader takes losses sometimes. The smarter ones examine every loss and try to learn from it. Traders that survive do so by not repeating mistakes. You can bet the folks at Morgan will do so in spades.

As a trader myself, I view this story as barely interesting.

Meanwhile, the US Postal Service is on track to lose 9 billion dollars this year. Why this causes less angst than much small private losses in private markets mystifies me. Morgan may have lost money for stockholders; government support of the USPS loses money for taxpayers.

The government overall loses billions and billions on it’s “investments”. J. P. Morgan is a piker by comparison.

Maybe instead of the government investigating Morgan, we should be investigating the government.

Gouged by the Wind

Fenton Wind Farm near Chandler, Minnesota

Fenton Wind Farm near Chandler, Minnesota (Photo credit: Wikipedia)

It’s not every day that Minnesota makes the editorial page of the Wall Street Journal, but today is such a day.

The editorial questions the wisdom of Minnesota’s renewable energy mandate. The author notes (correctly) that the mandate increases the cost of electricity and that the burden of the cost increase falls mainly on the poor and middle class. They also claim that the environmental benefits are almost zero. Whatever the benefits, they certainly have direct costs to households.

The Journal fails to mention the indirect costs. The high cost of electricity in Minnesota makes it less appealing to businesses, especially those that are heavy users of electricity. This used to mean big manufacturing operations or aluminum smelters, but it increasingly includes outfits with big server farms such as Google, Microsoft, and Amazon. Discouraging both traditional and high tech industries from locating here seems like a dubious economic development strategy.

This strikes me as another attempt to make things better that actually make things worse.

You might think it would be a “no brainer” to reverse course, but I doubt it. There is such a thing as institutional inertia and every bad idea has a core of supporters. For some, environmental concerns trump everything else and they won’t retreat from victories, no matter how small the benefit or how great the cost.

Minnesotans will continue to be gouged by the wind.