Author: bill

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You Didn’t Build That — Internet

One of the interesting parts of President Obama’s speech in Roanoke was his explanation that government research created the Internet. Here are his words.

Government research created the Internet so that all the companies could make money off the Internet.

The key development to the Internet was the Defense Department’s Advanced Research Projects Agency Network(ARPANET) in 1969. The primary objective of the project was to allow Defense Department researchers at remote locations access the limited number of large powerful computers. The only users were Defense Department researchers. The reason the government “created” the Internet was to make better weapons. It took almost twenty years before the Internet was opened up for businesses and the public and the Defense Department stopped subsidizing the Internet. Since the Internet was “free” it probably directly led to the demise of two private network competitors, Tymnet and Compuserve. If the government’s plan was for businesses to make money off of the Internet it was a remarkably slow and confused plan with lots of collateral damage in the business community.

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You Didn’t Build That

Way too funny! Read the rest at iowahawk’s blog, You Didn’t Build That.

Readings from the Book of Barack

1 In the beginning Govt created the heavens and the earth. 2 Now the economy was formless and void, darkness was over the surface of the ATMs, and the Spirit of Govt was hovering over the land.

3 And Govt said, “Let there be spending,” and there was spending. 4 Govt saw that the spending was good, and that it separated the light from the darkness. 5 Govt called the spending Investments, and this he did in the first day.

6 Then Govt said, “Let there be roads and bridges across the waters, and let dams divide the waters from the waters.” 7 Thus Govt made the infrastructure and the patronage jobs for eternity under the firmament from the Potomac which was above the firmament; and it was so. 8 And Govt called the firmament Washington. This Govt did on the second day.

9 Then Govt said, “Let the regulations and the guidlines under the heavens be gathered together into one place, and let the Bureaus appear”; and it was so. 10 And Govt called the Bureaus demigovts, and the gathering together of them He called AFSCME. And Govt saw that it was good.

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Could Concealed Carry In the Theater Saved People In Aurora?

It was just a few days before the shooting at the theater in Aurora that we were chuckling at the video at Ocala.com showing a 71 year old man shooting at and chasing some would-be robbers out of an internet cafe. That got me to thinking. What would have happened if the movie theater allowed patrons with concealed carry training to carry their weapon into the theater. My guess is that at least one person would have pulled out their gun and engaged in a gun fight with Mr. Holmes. Like the 71 year old man this act of defiance would probably be effective at diverting the attention of Mr. Holmes and saving the lives of many movie patrons. Mr. Holmes tactical position was very poor. He was in the middle of an open stage. The rules for engagement for concealed carry weapon holders are clear. If he is shooting at you, you can shoot back. Although Mr. Holmes was reported to be wearing a bullet proof vest, if one bullet hit him he would have likely been knocked off his feet. Even if they did not hit him it is very likely that Mr. Holmes would have tried to find cover before continuing the gun fight. This would have made it very difficult or nearly impossible for Mr. Holmes to shoot patrons as they tried to leave the theater. The key to success for this plan is that the concealed carry patrons would not need to kill or wound Mr. Holmes. They just needed to buy some time for the patrons to escape, Mr. Holmes to run out of bullets, and the police to arrive.

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RE: CalPERS Reports Preliminary 2011-12 Fiscal Year Performance

Yesterday CalPERS released a press report yesterday titled, CalPERS Reports Preliminary 2011-12 Fiscal Year Performance of 1 Percent. Since I recently read their financial documents and made a comment about them, I was surprised that they compared the investment return to their 20-year investment return rather than their five or ten year investment return. When you compare the latest investment return to a ten year return of 5.7% there is a greater call for action by the board. Since they are spending the equivalent of 6.4% of their fund on pension benefits each year($15 billion), they are between a rock and a hard place. The time for action was several years ago. Now they are just being stubborn.

 

“It’s important to remember that CalPERS is a long-term investor and one year of performance should not be interpreted as a signal about our ability to achieve our investment goals over the long-term,” said Henry Jones, Chair of CalPERS Investment Committee.

CalPERS 1 percent return is below the fund’s discount rate of 7.5 percent, a long-term hurdle lowered recently in response to a steady decline in inflation and as part of CalPERS routine evaluation of economic assumptions. CalPERS 20-year investment return is 7.7 percent.

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A Parody of Obama’s Remarks on Business

I could not help myself but wonder whether President Obama felt as strongly about the contributions government makes to business failures as it does to business successes. Since there are more businesss failures than business successes in this country, President Obama could have made a stronger correlation implies causation argument that education and infrastructure leads to business failures. Here is my version of his speech. You can see the original here.

If you are a failure, somebody along the line gave you some help. There was a great teacher somewhere in your life but that teacher did not help you. Somebody helped to create this unbelievable American system that we have that allowed a few to thrive and others like you to fail. Somebody invested in roads and bridges but that did not help you. If you’ve got a failed business ”” you didn’t build that. Somebody else made that happen.

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reason.tv – Videos > Randy Barnett: Losing Obamacare While Preserving the Constitution

Yesterday my wife and I sat down to watch this video clip on reason.tv, Randy Barnett: Losing Obamacare While Preserving the Constitution. Since Randy was one of the leaders in the constitutional challenge to Obamacare, I read several of his legal criticisms and was curious what he had to say about the decision. He is by definition one of the original sources of the legal challenge to Obamacare. In the interview Randy talks at length about the libertarian view of the Constitution. I learned that my political leanings can be described as more of a constitutional libertarian than a traditional conservative. I remain skeptical about the big government decision making process. I do not have a problem with government occasionally making a bad decision but it seems too easy for big government decision makers to make really big, bad decisions. This remains a fuzzy definition since it is so difficult to define what a conservative, liberal, and a libertarian view is anymore. Here is one of the highlights of the interview.

Barnett argues that the chief justice “substituted a less dangerous tax power for a far more dangerous Commerce Clause power." Had the Supreme Court accepted the government’s theory of the Commerce Clause, Barnett explains, Congress would have had the power "to do anything it wants with respect to the economy."

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California’s Bad Bet Makes JPMorgan’s Look Minor – Bloomberg

I was casually catching up on some blogs and found this gem at Bloomberg. This led me to the article, SB400 pension boost: uncanny forecast unheeded, on calpensions.com. Wow! For a long time I have been wondering how we got into this mess with defined benefit pension plans and there is probably no better example of the problem than the largest pension fund in the United States, Calpers. From the SB400 article we can see in retrospect the legislators were overly optimistic about investment returns versus expenses. The legislators were expecting an annual average of 8.25 percent and they got a 3.1 percent return according to according to a Wilshire consultants report in March 2010. In the latest Calpers Fact at a Glance the latest ten year total return is listed at 5.7%. According to Calpers the assets went from $172.2 billion in 2000 to $237.5 billion in 2011. Although this looks good at first glance, the compounded rate is only 2.97%. It is pretty obvious that if you are spending like you are getting a 8.25% return and you are getting somewhere between 3.1% and 5.7% returns you are going to be in trouble. Then I tried to compare Calpers to the savings in my 401K. If my calculations are correct the average wealth saved per participant(237.5 billion/1.6 million participants) in Calpers is $148,000.  This doesn’t look too good but it is about the same number reported about Calpers in the pension plans article in Wikipedia. If we look at only the current retirees(536,234) this number goes up to $448,000. This is an ugly number for those people expecting something close to 50% of their salary over a 20 year retirement . Regardless of how you want to slice and dice these numbers to come up with the more precise actuarial values, there is too little money in the fund for the retirees’ benefits. Something has to give. The interesting part of examining the problems facing Calpers is that it reminds me of another bubble, residential real estate. Both bubbles received bipartisan support for overly optimistic outlooks about the future. In one case it is residential real estate appreciation and the other it is stock market performance. The irony is that the warning symptoms in both bubbles were apparent early on. That is where it takes the contributions from a lot of very smart people to turn a bad decision into a really big, bad decision. Finally the solution to these bubbles require very difficult political choices. So even though it is relatively easy to identify the cause of the bubbles, finding legislators willing to try and fix the consequences from bad decision making in the past is particularly difficult. It appears we have a decision making system in which bad decisions are too easy to make considering that it takes decades to undo their consequences. I can’t wait to see how the health care decisions turn out!

 Winking smile

I will leave you with what David Crane wrote in the Bloomberg article, California’s Bad Bet Makes JPMorgan’s Look Minor.

The pension deal was a stunning example of nondisclosure. The legislators didn’t inform the taxpayers that:

1. The state was on the hook for deficiencies if actual investment returns fall short of assumed investment returns.

2. The assumed investment returns implicitly forecast that the Dow Jones Industrial Average would reach about 25,000 by 2009 (it barely made it over 10,500 that year) and 28,000,000 by 2099.

3. Potential costs to the state were uncapped.

4. Members of the Calpers board had received campaign contributions from beneficiaries of the legislation.

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Comments on the Current Consumer Credit Report

Both James Pethokoukis and Cullen Roche made misleading comments about the growth in consumer credit after the G.19 report was released. Here is a quote from A weak recovery with a weak foundation built on credit card debt that highlights the problem.

A big leap in credit card debt in May. It surged by $8.0 billion, the biggest one month gain since November 2007.

Here is an updated graph from the Fed that shows both revolving and non-revolving credit from 2000 to the present. In the graph we can see that revolving credit(i.e. credit cards) is still depressed and growing slowly compared to non-revolving credit(i.e. auto loans). It is still down from its peak in 2008 while the non-revolving credit has already passed its 2008 peak. Using a one month change to describe a trend is misleading. Since last month’s G.19 report showed a decline in revolving credit and this month it shows a gain, I think it is a little early to make predictions on credit card debt growth.

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How to Replace Obamacare

I believe that repealing the Affordable Care Act(ACA) is the appropriate policy because the improvements from ACA come primarily through cost shifting rather than actual health care reform.  As an example the Individual Mandate attempts to force the high cost, uninsurable patients onto the smallest health insurance segment, the individual health insurance market. A Milliman report prepared for Ohio estimates that the insurance rates in the individual health insurance market will go up 55% to 85%. It is not likely that the individual health insurance market will survive and then we will have a much larger uninsured problem.

The Medicaid expansion is even more amazing. While the fiscally responsible states complain about their problems with coming up with their modestly increased matching funds, the federal government has magically raised the money without any raising taxes. With the Medicaid expansion we have confirmation that the mythological free lunch exists. Since most of the ACA policies make it more difficult reform health care(e.g. community rating, essential benefits, health subsidies), we might as well start over and try to make some actual health care reforms without the cost sharing baggage.

For a different perspective how to replace Obamacare we have this article from the National Affairs article, How to Replace Obamacare. Here is their argument against the repeal-only approach.

But repeal will not be enough, for a simple reason: Although Obamacare would worsen many of the problems with our system of health-care financing, that system clearly does call out for serious reform. Despite the widespread public antipathy toward the new health-care law, simply reverting to the pre-Obamacare status quo would be viewed by many Americans, perhaps even most, as unacceptable. After all, a repeal-only approach would leave many of the most grievous flaws in our system of financing health care unaddressed. Chief among them would be steadily rising health-care costs, driven by the same misguided government policies that so evidently demand reform.

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Camping out at McDonalds

plain-golden-arches-logoOn Friday a storm came through and knocked out the power for about 3 million people including me. The temperature in my house last night was 92 degrees when I tried to go to bed. I slept with a towel so I could wipe up the sweat. It was miserable.

Now it is Sunday and McDonalds has three things that I do not have, air conditioning, Wi-Fi, and hot coffee. The Duke power outage map for my area looks like somebody shot it with a shotgun so it looks like it might be awhile. I guess it is time to work on those outdoor projects. Oh well!