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  • Archive for the 'Big Government' Category

    Paying Higher Taxes Can be Very Profitable (rerun)

    Posted by David Foster on 11th April 2014 (All posts by )

    (Originally posted in January 2010–now an April perennial)

    Chevy Chase, MD, is an affluent suburb of Washington DC. Median household income is over $200K, and a significant percentage of households have incomes that are much, much higher. Stores located in Chevy Chase include Tiffany & Co, Ralph Lauren, Christian Dior, Versace, Jimmy Choo, Nieman Marcus, Saks Fifth Avenue, and Saks-Jandel.

    PowerLine observed that during the 2008 election season, yards in Chevy Chase were thick with Obama signs–and wonders how these people are now feeling about the prospect of sharp tax increases for people in their income brackets.

    The PowerLine guys are very astute, but I think they’re missing a key point on this one. There are substantial groups of people who stand to benefit financially from the policies of the Obama/Pelosi/Reid triumvirate, and these benefits can greatly outweigh the costs of any additional taxes that these policies require them to pay. Many of the residents of Chevy Chase–a very high percentage of whom get their income directly or indirectly from government activities–fall into this category.

    Consider, for starters, direct employment by the government. Most Americans still probably think of government work as low-paid, but this is much less true than it used to be. According to this, 19% of civil servants now make $100K or more. A significant number of federal employees are now making more than $170,000. And, of course, the more the role of government is expanded, the more such jobs will be created, and the better will be the prospects for further pay increases.

    If one member of a couple is a federal employee making $100K and the other is making $150K, that would be sufficient to allow them to live in Chevy Chase and occasionally partake of the shopping and restaurants. But to make the serious money required to really enjoy the Chevy Chase lifestyle, it’s best to look beyond direct government employment and pursue careers which indirectly but closely benefit from government activity…which are part of the “extended government,” to coin a phrase.

    Read the rest of this entry »

    Posted in Big Government, Taxes | 2 Comments »

    Attack of the Robot Bureaucrats

    Posted by David Foster on 9th March 2014 (All posts by )

    Via Bookworm, here is a truly appalling story from Minnesota. When the fire alarm went off at Como Park High School, a 14-year-old girl was rousted out of the swimming pool, and–dripping wet and wearing only a swimsuit–directed to go stand outside were the temperature was sub-zero and the wind chill made it much worse. Then, she was not allowed to take refuge in one of the many cars in the parking lot because of a school policy forbidding students from sitting in a faculty member’s car. As Bookworm notes:

    Even the lowest intelligence can figure out that the rule’s purpose is to prevent teachers from engaging sexually with children.  The likelihood of a covert sexual contact happening between Kayona and a teacherunder the actual circumstances is ludicrous.  The faculty cars were in full view of the entire school.  There was no chance of illicit sexual congress.

    But the whole nature of bureaucratic rules, of course, is to forbid human judgment based on actual context.

    Fortunately for Kayona, her fellow students hadn’t had human decency ground out of them by rules: “…fellow students, however, demonstrated a grasp of civilized behavior. Students huddled around her and some frigid classmates [sic], giving her a sweatshirt to put around her feet. A teacher coughed up a jacket.” As the children were keeping Kayona alive, the teachers were workingtheir way through the bureaucracy.  After a freezing ten minutes, an administrator finally gave permission for the soaking wet, freezing Kayla to set in a car in full view of everybody.

    As Bookworm notes, this sort of thing is becoming increasingly common. In England in 2009, for example, a man with a broken back lay in 6 inches of water, but paramedics refused to rescue him because they weren’t trained for water rescues. Dozens of similar examples could easily be dredged up.

    The behavior of these bureaucrats is very similar to the behavior of a computer program confronted by a situation for which its designers did not explicitly provide. Sometimes the results will be useless, sometimes they will be humorous, often they will be harmful or outright disastrous.

    Last year in Sweden, there was rampant rioting that included the torching of many cars.  The government of Sweden didn’t do a very good job of protecting its citizens and their property from this outbreak of barbarism. Government agents did, however, fulfill their duty of issuing parking tickets…to burned-out cars. Link with picture.  In my post The Reductio as Absurdum of Bureaucratic Liberalism, I said…

    Read the rest of this entry »

    Posted in Big Government, Education, Germany, History, Human Behavior, Management, Video | 10 Comments »

    Random Links

    Posted by Jonathan on 1st March 2014 (All posts by )

    -Will Israel Be the Next Energy Superpower? – A balanced, thoughtful look at recent developments from Arthur Herman. There is cause for optimism.

    -Wildlife photographer pleads guilty to violating Endangered Species Act – The gist of the story is that some guy was photographing “endangered” birds from less than 500 feet away, which apparently is a violation of the Endangered Species Act, and was turned in to the feds by zealous environmentalists who saw him do this. Of course he copped a plea. If he had taken his chances in court he could have ended up in jail for years. As it is he may still do time and will end up with a felony conviction and probably a big fine to make an example of him. The birds he supposedly harassed aren’t even rare, merely locally rare in Florida, and he didn’t harm any of them. At most he should have been fined a few hundred bucks and warned to stay farther away from the wildlife. But nowadays everything is a federal crime with draconian penalties, and you can’t fart in a wetland without violating some rule. And the enforcement agencies have to justify their budgets. He should have left the birds alone, but his punishment is cruelly excessive. Some of the comments in response to the article are remarkably heartless. Not just the EPA but also the Fish and Wildlife Service and the Park Service deserve substantial defunding.

    -Possibly my best blog post ever.

    Posted in Big Government, Civil Liberties, Energy & Power Generation, Environment, Humor, Israel, Law, Law Enforcement | 10 Comments »

    The “Deep State.”

    Posted by Michael Kennedy on 27th February 2014 (All posts by )

    UPDATED to correct the author of the essay.

    This essay by Mike Lofgren on Bill Moyers’ web site, is interesting. It has the usual leftist slant of Moyers on the topic but also includes many good observations. Lofgren is also a very interesting guy. He spent 28 years as a Republican staffer. From 1995 to 2004, he was budget analyst for national security on the majority staff of the House Budget Committee. From 2005 until his retirement in 2011, Lofgren was the chief analyst for military spending on the Senate Budget Committee. The Democrats took The House in 2006 and the Senate Majority from 2001 to 2003 and then since 2007. If he was on the Budget Committee of the Senate, he must have been a staffer for the Democrat majority, as well.

    he was “appalled at the headlong rush of Republicans to embrace policies that are deeply damaging to this country’s future; and contemptuous of the feckless, craven incompetence of Democrats in their half-hearted attempts to stop them.” He charged that both major American political parties are “rotten captives to corporate loot”, but that while Democrats are merely weak and out of touch, the Republican Party is “becoming more like an apocalyptic cult”. Lofgren and Moyers are both leftists but Lofgren has had an interesting odyssey.

    There is the visible government situated around the Mall in Washington, and then there is another, more shadowy, more indefinable government that is not explained in Civics 101 or observable to tourists at the White House or the Capitol. The former is traditional Washington partisan politics: the tip of the iceberg that a public watching C-SPAN sees daily and which is theoretically controllable via elections. The subsurface part of the iceberg I shall call the Deep State, which operates according to its own compass heading regardless of who is formally in power. [1]

    Read the rest of this entry »

    Posted in Big Government, Civil Society, Conservatism, Current Events, Leftism, National Security, Politics | 11 Comments »

    America 2.0 Looks To Be Worth Around Twenty Five Cents on the Dollar

    Posted by Dan from Madison on 19th February 2014 (All posts by )

    A while back I dissected the debt of Detroit, the classic America 2.0 case. By this, I mean a gigantic government presence, working with manufacturing and unions to push off obligations into the future with no clear plan of really what to do. In the end, of course, it all came crumbling down and yesterday we got a slight glimpse into just how bad it can get.

    To review, here is the diagram I had to make after reading several sources on the subject, to help wrap my head around the calamity that was the city of Detroit’s books:

    This looks crude, and it is, but it really helped me get my brain around the nightmare.

    From everything I have been reading, Kevyn Orr is getting ready to propose that the general obligation and pensions get settled out at .25 on the dollar. That sounds a bit expensive to me, and as Lex Green said to me in an email certainly isn’t “fire sale” prices yet, but that is what the consensus seems to be saying.

    In an odd bit of news, many private foundations have been trying to gather enough money to offset an auction of Detroit’s art collection, estimated by some to be worth up to a billion dollars. If I were Orr, that would have been the first thing I would have done is liquidate that stuff, but I am quite a bit less sensitive than I would need to be to ever consider a career being a politician.

    All of this is subject to the whims of the BK judge, but if I were a retired Detroit fireman, I would certainly begin tightening the belt stat, if that wasn’t done already.

    This may affect municipal investments, but honestly I imagine any fallout from it is already baked into the pie.

    Is Chicago next? We shall soon see.

    From a political standpoint, the Republilcans should make the Democrats own this just like they should own Zerocare ™ and the nightmare in Illinois/Chicago that is coming down the tracks. How easy can it get for a Republican? All they have to say is “look at that” and they should get easily elected in any of a number of districts in 2014.

    (Disclosure – I have many different municipal investment vehicles in my portfolio).

    Cross posted at LITGM.

    Posted in America 3.0, Big Government, Investment Journal | 6 Comments »

    Worthwhile Reading & Viewing

    Posted by David Foster on 14th February 2014 (All posts by )

    A Valentine’s Day story from Sheila O’Malley

    Some thoughts on the color green from Gerard Van der Leun

    Germany’s war against homeschooling, and Obama’s complicity therein

    Early industrial capitalism: myths and realities

    Cashing in on connections in Washington

    The crisis of the administrative state

    Is Common Core encouraging a generic and simplistic approach to literature?

    Why does the question “do you like horror movies?” have predictive power when it comes to how long a relationship will last?

    Liberalism and the credentialist conceit

     

    Posted in Big Government, Business, Economics & Finance, Education, Germany, History, Human Behavior, Political Philosophy, Politics | 2 Comments »

    The Depression may be here.

    Posted by Michael Kennedy on 4th February 2014 (All posts by )

    I have believed for some time that we were entering another Depression. I have previously posted about it.

    The Great Depression did not really get going until the Roosevelt Administration got its anti-business agenda enacted after 1932. The 1929 crash was a single event, much like the 2008 panic. It took major errors in economic policy to make matters worse. Some were made by Hoover, who was a “progressive” but they continued under Roosevelt.

    I posted that statement earlier and it got a rather vigorous rebuttal. I still believe it, however. I think a depression is coming soon. What is more, I am not the only one. Or even only one of two.

    The second article preceded the election of 2012 but is still valid.

    When employment hit an air pocket in December, most analysts brushed off the dreadful jobs number as an anomaly, or a function of the weather. They chose to believe Ben Bernanke rather than their lying eyes. It’s hard to ignore a second signal that the U.S. economy is dead in the water, though: on Monday the Institute for Supply Management reported the steepest drop in manufacturing orders since December 1980:

    fredgraph

    In January, only 51% of manufacturers reported a rise in new orders, vs. 64% in December. Not only did the U.S. economy stop hiring in December, with just 74,000 workers added to payrolls; it stopped ordering new equipment. The drop in orders is something that only has occurred during recessions (denoted by the shaded blue portions of the chart). The Commerce Department earlier reported a sharp drop in December orders for durable goods. In current dollars, durable goods orders are unchanged from a year ago, which is to say they are lower after inflation.

    So, the economy stopped hiring, even at the poor pace the past five years have seen, but business also stopped buying.

    Read the rest of this entry »

    Posted in Big Government, Britain, Business, Health Care, Obama, Politics, Taxes, Tea Party, Urban Issues | 33 Comments »

    Greed for Power

    Posted by David Foster on 28th January 2014 (All posts by )

    Kevin Williamson, writing at NRO, notes that political self-interest is no less selfish than economic self-interest. About Barack Obama, he has this to say:

    What could it possibly mean to be lectured on selfishness by a man whose entire career has been dedicated to no cause other than the cause of himself? “Selfishness” has been conflated with materialism and greed, but the literal meaning of the word is excessive devotion to one’s self and one’s interests. To be unselfish is to be ready to give up that which one holds most dear; for some men, that is money, but what is money to a president of the United States, who knows that in retirement he can support himself in ducal style with one day’s work a month at Bill Clinton rates, in princely style with two days’ work, and in imperial style with three? Money is an abstraction to a retired president. But the thing that he really cares about — power — Barack Obama guards in a fashion more miserly than that of any mythical dragon watching his horde. (sic–I think he means “hoard”)

    And political power, of course,  is always and everywhere convertible into economic wealth. The conversion may be in the form of in-kind benefits…the dachas and special stores made available to the old Soviet elite, the extremely expensive government aircraft made available to Obama’s vacationing family (and even to his dog) as well as to himself…or it may involve the at-least-implicit conversion of influence into money. (Al Gore’s financial net worth in now somewhere around the $200 million level, the Clintons are at roughly the same level. Today’s WSJ mentioned that former Clinton counsel Lanny Davis has been hired by a Chinese company to defend them against charges of violating California law. Lanny Davis may be a good lawyer, but is anyone really so naive as to think that his selection for this job has nothing to do with influence?) And in the celebrity-obsessed culture of 2014 America, the public recognition that comes with political office and power increases still further the ability to turn power into economic wealth. Get the power, the wealth will come…although, of course, for many obsessive power-seekers, the psychic rewards of power itself are the primary motivators.

    Obama once remarked “I do think at a certain point you’ve made enough money.”  Has he ever considered the possibility that maybe at a certain point he’s accumulated enough power? I doubt it. To a considerable extent, I think, the Democratic harping on inequalities of wealth and income acts as a smokescreen to avoid discussion of the high and increasing inequalities of power.

    Read the rest of this entry »

    Posted in Big Government, Human Behavior, Obama, Political Philosophy, Politics, USA | 15 Comments »

    San Francisco and a Sneaky Win for the Red

    Posted by Carl from Chicago on 25th January 2014 (All posts by )

    In San Francisco recently there has been a minor hubub about the buses that ferry technology workers from San Francisco (where they live) to Silicon Valley (where they work). “Activists” have been blocking the city bus lanes where the technology companies pick up workers, and the city of San Francisco recently voted to charge the buses $1 for each time they stop in the bus lanes to pick up passengers, per this article. However, the “real” challenge isn’t with the buses, but the impact of Google, Facebook and other technology companies in the valley that are contributing to a rapid gentrification of the entire city

    But while logistical details of the pilot program were the reason for having the hearing, they also had nothing to do with it. For many residents, the high-ceilinged room at City Hall was a forum for airing much bigger grievances about inequality, for articulating angst against an industry attracting bands of well-paid workers to town while long-term residents are losing their homes. “These companies are filthy rich,” said a resident born in San Francisco. “We need to squeeze them for everything they’re worth.” Some speakers wanted the buses to be banned and for companies to take the money spent on shuttles and funnel it into the city’s transportation budget — advice the committee approving the proposal didn’t find too compelling.

    A similar difference in approach played out at the protest that morning. While some activists made careful arguments about the tornado of wealth, growth and housing shortages that has thrown the city into an affordability crisis, others held a giant sign with a much less nuanced message: “F*** off Google.”

    This thread crystalizes two key threads that I’ve noticed in my visits to California for work and for pleasure (Dan and I have been there a couple of times to run the Presidio 10) and I often travel to the valley to visit various companies as part of my job. The first item is that San Francisco has been completely remade, from top to bottom, and there are almost no “bad” neighborhoods left in the entire city. I’ve walked through most of the city or taken the streetcars, or driven, and since the 2008 bust the entire city has been part of an enormous revitalization as wealthy tech workers and related professionals have bought up property in the city. There still are a bunch of drunks in the Tenderloin, aggressive panhandlers everywhere, and some projects and worse neighborhoods in the corners of the city, but by and large it has been completely upgraded.

    The second thread is that the workers in Silicon Valley are so completely opposite of these “activists” that it is difficult to know how to begin the comparison. At all of the companies I’ve visited the professionals are engaged in their work and have a very “capitalistic” view of being the best and beating the competition. While California is a completely “blue” state on the map, these technology professionals couldn’t be more “red” on the issues of free markets, access to capital, and the nature of the world-wide competition that they face (I don’t know about social issues because we’d never discuss that sort of thing). These firms leverage overseas workers without a second thought, and ruthlessly prune inefficient parts of their organization to focus on their core differentiators.

    While the world was focused elsewhere San Francisco transformed into a post-industrial city full of aggressive technology workers and professionals. Due to some remaining elements of rent control there are still some of the characteristic “activists” milling around but the relentless and unstoppable force of high property values will find solutions and will eventually demolish and buy out their remaining haunts until it is just the ruthless face of the post industrial economy that can afford to live in the city.

    The “activists” will end up packing their belongings and heading over to Oakland or somewhere else where the rents are affordable and they can pick up their protests there. Unfortunately for them San Francisco’s compact size, beauty, and absence of large scale government subsidized housing will drive them completely out of the city. The college students will likely pick up some of the protests but since they don’t really vote or build a substantial power base up the wealthy firms will soon control local government and then policy and reality will align.

    If you really want to look at long term opportunities I’d recommend property in Oakland. Oakland has a great location, it just needs to be terraformed via gentrification and rising property taxes until every activist and poor person is driven out, just like it is occurring today in San Francisco. Maybe this is a 20-30 year vision, but it will happen.

    Cross posted at LITGM

    Posted in Big Government, Economics & Finance, Tech, Transportation | 24 Comments »

    Why The Post Office Is Doomed

    Posted by Carl from Chicago on 20th January 2014 (All posts by )

    The United States Postal Service (USPS) is in bad financial shape. The service is currently losing money and is unable to pay some required payments to the government for employee retirement benefits. While the USPS has retained its first class mail monopoly, it sends only a small percentage the ecommerce packages that are the backbone of the physical internet economy.

    The real failure of the postal service, however, is encapsulated in the photo above. In our River North neighborhood, where the population density is high (local residents in high rise condominiums plus innumerable tourists) and the value of real estate is high, too, there is one institution that you can count on to not shovel their sidewalk or take care of their property. The US Postal Service.

    The employees of the USPS are unionized and likely no one has the job of shoveling the sidewalk, or it isn’t in their job description. Thus it isn’t shoveled, and you need to trudge through it which becomes treacherous as the snow melts and re-freezes. Since many of the people who actually might want to use the postal service in this area are elderly, the dangerous sidewalks are even harder to defend.

    They also used to have two mailboxes in the “drive up” section where you can pull your car up to the curb in front of the River North post office. Recently when I attempted to mail Christmas cards (we don’t like to leave them with the mailman in our condominium building because we’ve heard horror stories) at the post office, I couldn’t stuff them into the mailbox, because they reduced capacity down to a single mailbox. There were a few other potential customers milling around fuming as well, since the outdoor mailbox had apparently been jammed beyond capacity for some time.
    Read the rest of this entry »

    Posted in Big Government, Business, Chicagoania, Economics & Finance | 25 Comments »

    More Obamacare News

    Posted by Michael Kennedy on 18th January 2014 (All posts by )

    The CMS has a new contractor for Obamacare, not just the web site. The previous contractor, CGI Federal, has been replaced rather suddenly.

    “Accenture, one of the world’s largest consulting firms, has extensive experience with computer systems on the state level and built California’s large new health-insurance exchange. But it has not done substantial work on any Health and Human Services Department program.
    “The administration’s decision to end the contract with CGI reflects lingering unease over the performance of HealthCare.gov even as officials have touted recent improvements and the rising numbers of Americans who have used the marketplace to sign up for health coverage that took effect Jan. 1.”

    CGI Federal is the company connected with Michelle Obama through her classmate, a fellow Princeton alumna.

    Read the rest of this entry »

    Posted in Big Government, Economics & Finance, Health Care, Management, Medicine, Politics | 18 Comments »

    Is the Preferance Cascade Beginning?

    Posted by Sgt. Mom on 9th January 2014 (All posts by )

    All during late November and December of last year, I began seeing internet discussions of the looming disaster that is Obamacare – and yes, I will hang that name on the so-called Affordable Care Act, also known as the un-Affordable Care Act. The man behind the desk in the Oval Office pursued this as his singular achievement; his legislative allies rammed it through over protest, and his media allies have viciously abused those who advised caution. So it is only fitting and fair that his name get attached to it at every opportunity, especially if it brings down his whole political machine in a spectacular fashion, rather like a slow-motion Hindenberg collapsing.

    Read the rest of this entry »

    Posted in Big Government, Deep Thoughts, Health Care | 47 Comments »

    ZIRP Embodied

    Posted by Carl from Chicago on 15th December 2013 (All posts by )

    ZIRP or “Zero Interest Rate Policy” has been in effect in the USA since late 2008. From that point forward, the effective interest received on money from CD’s, banks, and non-risk bearing debt is very low, especially when taxation is taken into consideration.

    Recently I was standing at an ATM when I saw this receipt casually left on the ground. It showed over $300,000 left in a low or non interest bearing account. To me, this embodies how ZIRP has turned the world on its head.

    When I was growing up, inflation was high and interest rates were high, too. I distinctly remember my grandfather having an argument with someone else when he said that interest rates would never go below 10% again (they were nearly 20% at the time). If you had any money, you had to put it to work to get the benefit of “compounding interest” which is basically interest earned on interest, which would make your assets grow quickly. In parallel, of course, inflation was making everything cost more, so you were probably treading water, but that is a different issue entirely.

    In the age of ZIRP, there is no point instructing anyone about the advantages of compounding interest, because the effects are too small to be believed. In the portfolios I run for my nieces and nephews, they receive ZERO CENTS most months on the cash held in their account, and the cumulative year end totals are too small to receive an interest 1099 from the IRS. The SEC fee, which amounts to a few pennies per trade, actually is a larger cost, so I am just likely to ignore both elements.
    Read the rest of this entry »

    Posted in Big Government, Business, Economics & Finance | 16 Comments »

    Obamacare, the Scrooging

    Posted by TM Lutas on 14th December 2013 (All posts by )

    People signing up for Obamacare are being robbed by the government. This time it’s not metaphorically, like when your perfectly satisfactory insurance plan is made illegal and all the compliant plans are more expensive and have worse terms but literally. People are having their accounts debited improperly during the Christmas season. And because it is being done by the government, there is little recourse to sue due to sovereign immunity and, of course, those most injured haven’t the money to hire representation anyway. I think Pope Francis calls it ‘despoliation of the poor’.

    Double debits, wrong day debits, wrong amount debits, these are all standard hazards with any sort of Electronic Funds Transfer (ETF) system. There’s nothing particularly new about these issues. It’s all part of the back end errors that those dastardly Republicans have been hyperventilating about and Democrats have been pooh poohing for weeks now.

    You never know when Tuttle will turn into Buttle in one of these systems. But what’s in a name?

    Merry Christmas

    Cross posted: Flit-TM

    Posted in Big Government, Health Care, Obama, Video | 20 Comments »

    “Occupy Pennsylvania Avenue”

    Posted by Jonathan on 9th December 2013 (All posts by )

    New from Kevin Villani: Occupy Pennsylvania Avenue: How Politicians Caused the Financial Crisis and Why their Reforms Failed, and the Kindle version: Occupy Pennsylvania Avenue

    (Kevin has shared on this blog a couple of prior works on the same subject. You can find those essays, and reader comments in response, here.)

    Posted in Big Government, Book Notes, Economics & Finance, Public Finance, Urban Issues | Comments Off

    The Minimum Wage Debate and Tax Incentives

    Posted by Carl from Chicago on 30th November 2013 (All posts by )

    Originally when I started over at Chicago Boyz I used to write regularly about tax policy. I haven’t written as much lately on that topic because the news has been completely dispiriting… at every turn it seems that the Federal, State and Local governments have taken positions to make the system more complex, confusing, and dysfunctional.

    The goal of a tax policy should be to:
    1. Achieve the revenue goals that they set out to meet
    2. Do so in a way that has causes the least amount of distortions to the economy

    Recently the idea of “fixing” our tax policies and incentives, for me at least, is aligned with recent discussions on the idea of raising the minimum wage. The minimum wage is $7.25 / hour, although this varies with state and local laws as summarized here. A suburb in Seattle, near the Seattle-Tacoma airport (Sea-Tac), recently passed an ordinance to raise the minimum wage to $15 / hour. This ordinance is a bit more clever than most, since the airport is unlikely to close or take significant actions due to the immense capital costs and constraints associated with doing so, and has a strong public element (politicians can just try to pass the costs on to air travelers).

    These same discussions come up in Chicago, as fast food workers also have had some (small) demonstrations to try to raise the minimum wage to $15 / hour. While their campaign has sputtered out, it will likely re-surface and be championed by our governor.

    The obvious difficulty with raising the minimum wage is that employers are not sitting ducks. There are many low wage workers in River North, for instance, working in bars, restaurants, cleaning services, and in various security related occupations (virtually every building has a set of doormen). If you doubled the minimum wage, for instance, all of these businesses and institutions would immediately embark on a host of labor saving initiatives and automation efforts. I am not an expert in these sorts of automation experts but can imagine people being replaced by computers, call centers handling service, and moving to self-service for customers in other instances. It is highly unlikely that they would just attempt to pass on the price increases and keep the same level of staffing; that would be economic suicide, especially with their competitors scrambling to reduce their labor expenses. Efforts that could not be automated would rise in price, which would likewise discourage consumption, until an equilibrium was reached.
    Read the rest of this entry »

    Posted in Big Government, Taxes | 9 Comments »

    How A Simple Train System Lays Bare Our Impending Decline

    Posted by Carl from Chicago on 23rd November 2013 (All posts by )



    Recently I was riding on the Metra, the commuter rail system that connects the suburbs to downtown Chicago.  I picked up “On the Bi-Level”, the flyer that Metra management makes available to riders and was browsing through it when I came upon this innocuous sounding statement:

    I certainly will not argue that Metra is without challenges.  Perhaps the biggest challenge, and one that will impact many of our plans, is our needs for more capital money to invest in our system.  We estimate Metra will need about $9.7 billion over the next decade to achieve a state of good repair on the system, and we expect to receive about a fourth of that amount from traditional federal and state sources.  Riders need to understand that fares help us cover our operating costs but have never been a significant source for capital expenses – we must rely on Washington and Springfield for that funding.

    Within the utility community there is a concept called “generation equity”.  This implies that you need to spread the burden of replacement and renovation across the life cycle of users, rather than hitting them all on the first riders, such as in the case of a train line.  On the other hand, you cannot just ignore ongoing capital costs and let the system run into ruin by paying the minimal upkeep costs every year.


    In this article, Metra lays bare the facts that:

    • Fare costs (riders) only “help” them cover their operating costs
    • Funding from other sources (and debt) helps them cover the rest of their operating costs
    • Then they rely on largess from the state or Federal governments for about a fourth of their capital costs
    • And who knows where they are going to get the rest of the funds for capital replacement


    In fact, it would be impossible for Metra to re-build the train lines that they have today in the current regulatory and legal environment.  Permits, lawyers, litigation, politically favored contractors, and a welter of archaic tools and practices would make the costs impossibly high and the deadlines incredibly long.  By “capital” costs, they are generally talking about replacing bridges, stations and sections of existing track rather than “true” expansion, although they do occasionally add some incremental lines or stations.


    It is important to understand that things have gotten more EXPENSIVE but they haven’t gotten BETTER.  The infrastructure that we take for granted might as well have been built by the ancient Egyptians given how herculean the task would be to replace them.  Americans will never see another major dam built in the USA and likely few to no additional incremental nuclear or coal plants in the next 25 years.  Even major transmission lines are going to be few and far between, which will only be built because it is absolutely necessary to get electricity to new population centers.  This is all due to the layers of process and regulations and lawyers that we have overlaid atop the simplest tasks, and you can see the contrast when you go to China and see cities being built overnight. 


    At some point we are either going to need to radically re-structure how we build and pay for things or go to a completely private system where you pay for what you receive in terms of capacity, reliability and performance.  States and cities that make it impossibly expensive to build and expand will inevitably suffer relative to other locations that are freer in terms of rules and regulations, unless (as is likely) the entire US is burdened with Federal regulations that make it impossible to escape this yoke.


    Cross posted at LITGM

    Posted in Big Government, Chicagoania, Economics & Finance | 9 Comments »

    “Three things to keep in mind about Obamacare”

    Posted by Jonathan on 22nd November 2013 (All posts by )

    A great post by J. E. Dyer:

    1. The problem with Obamacare is that it fundamentally changes the relationship of government to the people. The change is wholly malign. There is no way to operate the Obamacare system and also force the government to respect the people’s rights. Obamacare will, at every step, increase the risk at which government holds our rights.
     
    We’re already seeing that with the roll-out, which has promptly violated the president’s best-known and most categorical promises – an indication of his complete lack of respect for us – as well as the people’s rights to decide what to do with their own property (in this case, their earnings), and to execute private contracts according to their own preferences.
     
    What matters about Obamacare is that it has forced so many people to do so many things involuntarily. It will continue to do so. Obamacare is about government force, about limiting people’s options, and about constraining the people to do or not do certain things. That’s what government is about, which is why it’s what Obamacare is about. Government is incapable of being about anything else.
     
    The public debate right now treats the Obamacare fiasco as if the central proposition is that taking over one-sixth of the economy is a technological challenge. The reality that matters is that government taking over the network of human decisions involved in “health care” is a moral outrage. Doing that is applying the model of regulatory force to a vast complex of human questions that have no universal, “right” answers. We might as well let the government tell us what to eat, what to wear, where to live, and what God to believe in – and if Obamacare stands, our government will eventually do just that.
     
    [...]
     
    Quite frankly, I think the advice to Republicans to simply stand silent and “let Obamacare implode” is foolish. There is no hope of Obamacare imploding. It’s not a malformed bomb, governed by physical principles. It’s a man-made political arrangement. Its defenders will keep moving the goalposts and changing the rules to keep it on the field. It will get all the overtime it needs. The only way to defeat Obamacare is to actually counter it with a plan and a principled argument.

    Read the whole thing.

    Posted in Big Government, Health Care, Medicine, Obama | 2 Comments »

    Building the airplane during takeoff.

    Posted by Michael Kennedy on 19th November 2013 (All posts by )

    Henry-Chao

    UPDATE: The Wall Street Journal on how to fix the Obamacare crisis.

    What can be done is Congress creating a new option in the form of a national health insurance charter under which insurers could design new low-cost policies free of mandated benefits imposed by ObamaCare and the 50 states that many of those losing their individual policies today surely would find attractive.

    What’s the first thing the new nationally chartered insurers would do? Rush out cheap, high-deductible policies, allaying some of the resentment that the ObamaCare mandate provokes among the young, healthy and footloose affluent.

    These folks could buy the minimalist coverage that (for various reasons) makes sense for them. They wouldn’t be forced to buy excessive coverage they don’t need to subsidize the old and sick.

    Who knows ? Maybe Jenkins reads this blog. It’s so obvious that the solution should be apparent even to Democrats.

    We are now learning that a large share of the Obamacare structure is still unbuilt. This is not the website but the guts of the system.

    The revelation came out of questioning of Mr. Chao by Rep. Cory Gardner (R., Colo.). Gardner was trying to figure out how much of the IT infrastructure around the federal insurance exchange had been completed. “Well, how much do we have to build today, still? What do we need to build? 50 percent? 40 percent? 30 percent?” Chao replied, “I think it’s just an approximation—we’re probably sitting between 60 and 70 percent because we still have to build…”

    Gardner replied, incredulously, “Wait, 60 or 70 percent that needs to be built, still?” Chao did not contradict Gardner, adding, “because we still have to build the payment systems to make payments to insurers in January.”

    This is the guy who is the chief IT guy for CMS.

    If the ability to pay the insurance companies is not yet written, how can anybody sign up ?

    Gardner, a fourth time: “But the entire system is 60 to 70 percent away from being complete.” Chao: “There’s the back office systems, the accounting systems, the payment systems…they still need to be done.”

    Gardner asked a fifth time: “Of those 60 to 70 percent of systems that are still being built, how are they going to be tested?”

    The answer was the same way the rest was tested.

    Read the rest of this entry »

    Posted in Big Government, Health Care, Medicine, Obama, Politics, Systems Analysis | 8 Comments »

    Where do we go now ?

    Posted by Michael Kennedy on 13th November 2013 (All posts by )

    I don’t want to wear out my welcome with posts but this is a topic that has interested me for many years. When I retired from practice, I spent a year at Dartmouth trying to learn how we can improve health care delivery and reduce cost without reducing quality.

    The Obamacare web site now has lost its happy photo of the Obamacare girl. The fact that she is a non-citizen seems appropriate. The web site is supposed to be fixed by November 30. Will that happen ? Well, maybe not.

    On Friday, the man tasked with the digital fixes said the site “remains a long way from where it needs to be” as more and more problems emerge.

    “As we put new fixes in, volume is increasing, exposing new storage capacity and software application issues,” Jeff Zients told reporters on a conference call.

    And at Tuesday’s White House Press Briefing, Press Secretary Jay Carney again said there was “more work to be done” on repairing HealthCare.gov.

    Carney, along with Zients and other administration officials, have repeatedly said the November 30 deadline is to get the health care website working for a “vast majority” of Americans looking to enroll in the Obamacare exchanges.

    So, what happens December 2, the Monday after the “glitches” are fixed ? First, they won’t be fixed. The contractor that designed the program, not just the web site, has a terrible record.

    Read the rest of this entry »

    Posted in Advertising, Big Government, Civil Society, Economics & Finance, Health Care, Leftism, Medicine, Obama, Politics | 11 Comments »

    Why health care is in trouble.

    Posted by Michael Kennedy on 8th November 2013 (All posts by )

    Our health care system has been built up over the years in a jury-rigged, ramshackle fashion. Before World War II, there was very little health insurance and what there was often was the product of labor union contracts. The early years were concerned with accident insurance and workers compensation laws.

    The American life insurance system was established in the mid-1700s. The earliest forms of health insurance, how­ever, did not emerge until 1850, when the Franklin Health Assurance Com­pany of Massachusetts began providing accident insurance, to cover injuries re­lated to railroad and steamboat travel. From this, sickness insurance covering all kinds of illnesses and injuries soon evolved, but the first modern health insurance plans were not formed until 1930.

    The Baylor program for school teachers was the first in 1929.

    Medical insurance took stride in 1929 when Dr. Justin Ford Kimball, an administrator at Baylor University Hospital in Dallas, Texas, realized that many schoolteachers were not paying their medical bills. In response to this problem, he developed the Baylor Plan – teachers were to pay 50 cents per month in exchange for the guarantee that they could receive medical services for up to 21 days of any one year.

    In those days, the concern was lost wages more than hospital care.

    In 1939, the American Hospital Association (AHA) first used the name Blue Cross to des­ignate health care plans that met their standards. These plans merged to form Blue Cross under the AHA in 1960. Considered nonprofit organizations, the Blue Cross plans were exempted from paying taxes, enabling them to maintain low premiums. Pre-paid plans covering physician and surgeon services, includ­ing the California Physicians’ Service in 1939, also emerged around this time. These physician-sponsored plans com­bined into Blue Shield in 1946 and Blue Cross and Blue Shield merged into one company in 1971.

    The modern insurance plans were very recent in origin. I was there for much of it. The commercial insurers fought the status of Blue Cross, which was not required to have reserves. Blue Cross asserted that it promised hospital care, not payment, so reserves were not necessary.

    The 1940s and 1950s also saw the proliferation of employee benefit plans, and the included health insurance pack­ages became more and more compre­hensive as strong unions negotiated for additional benefits. During the Second World War, companies competing for labor had limited ability to use wages to attract employees due to wartime wage controls, so they began to compete through health insurance packages. The companies’ healthcare expenses were exempted from income tax, and the resulting trend is largely responsible for the workplace’s present role as the main supplier of health insurance.

    The war produced much of this as wage limitations were in force but fringe benefits, like health insurance, were permitted. A lot of this history is contained in Paul Starr’s book The Social Transformation of American Medicine.

    From the first, commercial insurers focused on employer plans while Blue Cross and Blue Shield (which was founded by the California Medical Association to pay doctor bills) were individual plans.

    In 1954, Social Security coverage included disability benefits for the first time, and in 1965, Medicare and Medicaid pro­grams were introduced, in part because of the Democratic majority in Congress. In the 1970s and 1980s, more expen­sive medical technology and flaws in the health care system led to higher costs for health insurance companies. Responding to higher costs, employee benefit plans changed into managed care plans, and Health Maintenance Organizations (HMOs) emerged. Man­aged care plans are unique in that they involve a particular network of health­care providers that have been verified for healthcare quality and that have agreements with the insurer about price and related issues. HMOs were originally primarily nonprofit, but they were quickly replaced by commercial interests, and managed care only suc­ceeded in temporarily slowing the growth of healthcare costs.

    Two major changes came in the 1970s. In 1978, the federal government established what were called Professional Standards Review Organizations or PSRO. All doctors had to receive training in how to do these reviews and it was immediately apparent that cost was the only consideration, not quality of care.

    I decided to educate myself and took a course from an organization called “The American Board of Quality Assurance and Utilization Review Physicians. I took the exam and passed, then attended the annual meeting. This was about 1986. People I met at that meeting informed me that the exams were graded by throwing them up in the air. Any that landed balancing on one edge were flunked. Nonetheless, the experience was valuable because I could see what was coming.

    I was president of the Orange County Medical Association that year and had served for eight years on the Commission on Legislation of the CMA, now called The Council on Legislation. This gave me an opportunity to meet many legislators, many state level and some federal. The impression they made on me was that few knew anything about medicine and most were not very intelligent.

    Read the rest of this entry »

    Posted in Big Government, Book Notes, Current Events, France, Germany, Health Care, Medicine, Politics | 19 Comments »

    A rolling catastrophe

    Posted by Michael Kennedy on 4th November 2013 (All posts by )

    Obamacare debuted on October 1. It is now November 4 and the mess is worse. I have been posting about it, here, and here, and here, and even here.

    The political left is trying very hard as can be seen here.

    keep-your-plan-flowchart

    It’s kind of complicated so I will summarize. You are screwed !

    There are accusations that insurance companies are using this to drop high risk subscribers. Maybe that is true but it is the consequence of ignorant people designing Obamacare. Did these guys ever set up a new business ? As Casey Stengel once said to the Mets , “”Can’t anybody here play this game?”

    I guess not.

    The New York Times has done what it can.

    We are also told that “in all the furor, people forget how terrible many of the soon-to-be-abandoned policies were. Some had deductibles as high as $10,000 or $25,000 and required large co-pays after that, and some didn’t cover hospital care.” Never mind that we have seen cancellations of insurance policies with deductibles much lower, and customers forced to purchase replacement policies with higher deductibles, and with premium increases of 100%, if not higher.

    Then there is this argument.

    Why can’t people opt out of mental health coverage if there is not a reasonable chance that they will need that coverage? Why can’t they get mental health coverage when it is needed? After all, pre-existing conditions can no longer be denied, so in the event that mental health coverage is needed down the line, it can be obtained and the insurance companies cannot deny people who already have pre-existing mental health conditions. The Times assures us that over-coverage–and the high premiums that come with it–is “one price of moving toward universal coverage with comprehensive benefits.” They don’t explain why having unnecessary coverage is a step towards social justice, but as we saw from the beginning of this intelligence-insulting, repulsively dishonest op-ed, the New York Times is less about explaining, and more about covering up a disastrous rollout with disastrous policy consequences for the country.

    Peggy Noonan, who has frustrated me with her obtuseness at times, gets it now.

    Politically where are we right now, at this moment?

    We have a huge piece of U.S. economic and social change that debuted a month ago as a program. The program dealt with something personal, even intimate: your health, the care of your body, the medicines you choose to take or procedures you get. It was hugely controversial from day one. It took all the political oxygen from the room. It failed to garner even one vote from the opposition when it was passed. It gave rise to a significant opposition movement, the town hall uprisings, which later produced the tea party. It caused unrest. In fact, it seemed not to answer a problem but cause it. I called ObamaCare, at the time of its passage, a catastrophic victory—one won at too great cost, with too much political bloodshed, and at the end what would you get? Barren terrain. A thing not worth fighting for.

    So the program debuts and it’s a resounding, famous, fantastical flop. The first weeks of the news coverage are about how the websites don’t work, can you believe we paid for this, do you believe they had more than three years and produced this public joke of a program, this embarrassment?

    She assumed that it wasn’t worth it if it worked !

    The problem now is not the delivery system of the program, it’s the program itself. Not the computer screen but what’s inside the program. This is something you can’t get the IT guy in to fix.

    They said if you liked your insurance you could keep your insurance—but that’s not true. It was never true! They said if you liked your doctor you could keep your doctor—but that’s not true. It was never true! They said they would cover everyone who needed it, and instead people who had coverage are losing it—millions of them! They said they would make insurance less expensive—but it’s more expensive! Premium shock, deductible shock. They said don’t worry, your health information will be secure, but instead the whole setup looks like a hacker’s holiday. Bad guys are apparently already going for your private information.

    This is the worst that could be imagined.
    Read the rest of this entry »

    Posted in Big Government, Bioethics, Civil Society, Current Events, Health Care, Leftism, Medicine, Politics | 20 Comments »

    “I Am Not a Crook”

    Posted by David Foster on 2nd November 2013 (All posts by )

    …said Richard Nixon, famously. Comes now Joe Biden, with “I am not a geek.” Specifically, in responding to questions about the problems with the Obamacare website and its supporting systems, Biden said:

    “Neither (the president) or I are technology geeks and we assumed that it was up and ready to run.”

    I don’t think the main problems with this implementation have to do with a lack of geekitude–most likely, there are many quite competent software developers working on this project–but rather with a lack of effective management. (And if there is a shortage of competent developers on the project, well, that’s a management issue, too, isn’t it.)

    Real managers, real executives, don’t assume that important things will be ready when they’re supposed to be ready, and they aren’t satisfied with superficial answers to superficial  questions, either. These effective leaders are people who have developed effective questioning skills so they can find out what is really going on. They establish open, non-fear-based organizational cultures so that people with concerns feel able to bring them forward. As I noted in my post about Benghazi (excusing failure by pleading incompetence), it is the responsiblity of an executive to establish an information and decision-flow architecture…including clear assignment of responsibilities…to ensure that the right things are seen and acted upon by the right people at the right time. Failure to do this..and to maintain and tune the system over time…will predictably result in catastrophes.

    Later in the interview with Biden, the Vice President also said he didn’t know the specifics of why the website isn’t working, but that he was told the platform “is fine, but they have to change an awful lot of the inputs.”

    “Look, all I know is they talk about 50,000 lines of this and this, I don’t know the technical reasons,” Biden said.

    ”So I don’t know, I wish I could tell you, that’s why I became a lawyer,”

    A pretty flippant response to a serious situation. Slow Joe might not be able to understand the technical reasons for the failure, but he should be able–if he were competent at his job–to investigate and understand the management reasons for the failure.

    Some of the questions that come to mind about this debacle are: How were the contractors selected? Why was it decided to have the government (CMS) act as prime contractor, rather than choosing an external company for that role? What do the contracts with the outside contractors actually specify, in terms of deliverables? What remedies are provided in the contracts for failures in delivery? If these remedies are inadequate, why did the government not require that they be more stringent? What coordination vehicles were there between the government group writing and interpreting the Obamacare regulations and the separate group that was attempting to act as prime contractor? Was there a single individual in charge? What project scheduling and tracking methods were employed throughout this effort?

    These are not issues that are specific to software technology–the above questions are ones that any good executive, whether his background is in construction or in theater or in wholesale distribution, would understand that he should ask.

    A United States President is not elected as a philosopher king; he is elected to run the executive departments of government and to faithfully execute the laws passed by Congress. The members of the present administration have repeatedly demonstrated their utter incompetence to perform these tasks.

    An administration that seeks endless expansion of government’s role–but is at the same time completely incompetent at carrying out basic executive tasks–will drive expanding circles of chaos throughout ever-broader reaches of American society and the American economy.

     

    Posted in Big Government, Health Care, Management, Tech | 23 Comments »

    A Critical Insight.

    Posted by Michael Kennedy on 1st November 2013 (All posts by )

    Today, Belmont club has a post, with a link to another blog post, that I think explain a lot of the Obamacare fiasco.

    Fernandez begins with a discussion of Obama’s technique with favored columnists.

    get him in an off-the-record setting with a small group of opinion columnists — the David Brooks and E.J. Dionne types — and he’ll talk for hours. …

    “It’s not an accident who he invites: He reads the people that he thinks matter, and he really likes engaging those people,” said one reporter with knowledge of the meetings. “He reads people carefully — he has a columnist mentality — and he wants to win columnists over,” said another. …

    These people are, like him, unsophisticated in technology. They are lawyers or journalists and the numbers of math and science courses represented in the room are few.

    The other blog post is titled “Government is magic.”

    Our technocracy is detached from competence. It’s not the technocracy of engineers, but of “thinkers” who read Malcolm Gladwell and Thomas Friedman and watch TED talks and savor the flavor of competence, without ever imbibing its substance.

    These are the people who love Freakonomics, who enjoy all sorts of mental puzzles, who like to see an idea turned on its head, but who couldn’t fix a toaster.

    This strikes me as a huge insight into why this administration doesn’t understand the trouble it is in.

    Read the rest of this entry »

    Posted in Big Government, Chicagoania, Education, Health Care, Human Behavior, Management, Politics, The Press | 14 Comments »

    HHS Secretary Sebelius is Baghdad Bob in Drag…

    Posted by Trent Telenko on 30th October 2013 (All posts by )

    …and the Obama Administration is having a worse than “Hurricane Katrina” class credibility meltdown unseen in the West since Israeli Prime Minister Ehud Olmert’s political collapse in July 2008.

    Health and Human Services Secretary Kathleen Sebelius made the outrageously untrue statement in Congressional hearings today about the Affordable Care Act (Obamacare) that: ‘The website has never crashed.’

    As this Instapundit link makes clear that the split screen between her testimony and objective reality is well into the Muhammad Saeed al-Sahhaf AKA “Baghdad Bob” territory in terms of “Who are you going to believe, me? Or your lying eyes?”

    The bottom line of Pres. Obama’s spokesman for his signature achievement as President getting laughed at as a Democratic Party version of “Baghdad Bob” is a “Pres. George W. Bush after Hurricane Katrina” moment.

    The Obama Administration’s credibility on domestic policy is now as crippled as his foreign policy was after his Syrian Nerve Gas “Red Line” misadventure. It is all downhill from here.

    The final fate of Israeli Prime Minister Ehud Olmert now awaits Pres. Obama.

    Posted in America 3.0, Big Government, Current Events, Health Care | 10 Comments »