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politics

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War versus food. War wins.

We’re spending a billion dollars a day on the Iraq war. Elsewhere in the world, we’re having food riots, because poor people can’t get enough to eat. The U.N.’s World Food Programme estimates the food gap at $500 million. That’s half a day’s worth of the Iraq War to keep millions of people from starving to death.

You can argue all you want about whether it’s our job to feed the world, but as long as we’re racking up a $7 trillion dollar debt spending money on other countries, you’d think we could spare a few hours’ worth of our war budget for humanitarian causes.I feel rather sad that my childhood image of America as a prosperous country that was a world protector and helper doesn’t resonate with our current policies(*).

I guess we all have to stop believing in Santa Claus sometime…

(*) Heck, the chairman of Bear Sterns could fund a significant chunk of that world hunger policy just with the money he took home from the sale of his company at $2 per share. Or John McCain (reported net worth: $100 million). Then there are all our wonderful folk heros who could pick up the tab personally and never even notice: our much-ballyhoo’d Google founders, Larry Ellison, John Kerry, Warren Buffett, Bill Gates, Steve Jobs, or any of our other iconic multi-multi-billionaires.

Taxes, yummy taxes!

It’s almost April 15th, that wonderful time of the year when we pay taxes.

And I say this time of year sucks!! It doesn’t suck because of taxes; they’re inevitable. It sucks because of all the whining people do about taxes.

People complain about taxes all the time. We’re pretty ungrateful, here in America. We have among the lowest tax rates of any first-world country. Other countries get some dramatically visible services (mainly social safety net and healthcare) for their taxes, while a full 60% of our taxes go to military, social security, and medicare/medicaid, which most of us never see directly.

Of course, there’s plenty we do see but don’t connect with our tax dollars: our tax dollars pay for the war in Iraq (*), our schools, the people who clean the graffiti off walls, our sewer system, our water systems, our sidewalks, our policemen, our firemen, the interstate freeways that deliver our food, our oil supply, the court system, etc.

If you don’t like the way your tax dollars are spent, take a few minutes to look over the federal budget. Decide what you’d like cut and write your senators and congresspeople. It won’t make any difference(**), of course, since you aren’t a lobbyist with big dollars behind you, but at least you’ll have the moral high ground of complaining after actually having tried to do something real to affect the issue.

(*) I know, I know, you, personally, were never in favor of the war, but almost half of you voted to keep the wartime administration in 2004. Some of you voted for Bush and have genuinely convinced yourselves you didn’t. Some of you did and hope that by claiming opposition loudly enough, no one will call you to task over it. And some of you gave money to Kerry and assumed writing a check was all the action it would take to change course. Oh, well; welcome to reality. One thing I’m sure of: none of you stopped to analyze the quality of your 2004 decision-making and explicitly change the criteria you used to make your bad decision. It may be 2008, but you’re about to use the same broken decision-making process in November and you’ll wonder why politics doesn’t change.

(**) I think campaign finance is the rot in the system. A billion dollars on Presidential campaigns this year. What else could we have done with that money? As long as campaigns are that expensive, and as long as corporations and special interest can pool dollars to make a big impact, the legislation will benefit them, not us as individuals. So stop your bitching and do something about it or recognize that you’re living in the world of your own creation, take responsibility for your own situation, and spare us your piteous sobbing.

Once again, we penalize people who make smart money decisions

It’s amazing. I always found it odd when applying for a mortgage that banks considered income, but not asset base. If I have a bunch of money and invest in an investment that’s growing in value by 33% per year but not throwing off income, they won’t consider that in deciding to grant a mortgage. But if I put the same money in the same investment that throws off taxable income every year, it reduces my effective return by more than a third (since my combined tax brackets are more than 33%).

Let’s review: Person A invests and is making 33% on their money yearly. Person B invests and is making 20% on their money. Yet banks consider person B, who made the stupider financial decision, to be a credit risk.

Not to be outdone, the State of Massachusetts is doing this now, too, with Romney’s mandatory Health Insurance law. (He claims to be business savvy, but if this is an example of his overwhelming business sense, I’m missing it.)

First, let’s look at the policies: the quoted premiums for a $2,000-deductible policy are $350/month ($4,200 per year). A $3,000 deductible policy is $300/month ($3,600 per year). So here’s the choice: I can pay a guaranteed extra $600 yearly for the $2K deductible, or I can risk that I’ll need more than $2,000 worth of medical help and if my bill makes it as high as $3,000, I might pay out an extra $1,000 under the higher-deductible plan. P.S. I haven’t even visited a doctor in five years.

So: guaranteed pay $600/year or take a risk of maybe paying $1,000/year? To me, the choice is obvious. Take the maybe $1,000, since I certainly won’t need $3k of medical coverage every year, and the extra $600 in premiums will be a guaranteed yearly payout.

But the wonderful MBA-inspired law mandates the $2,000 policy. So I’m stuck paying for this silly policy that’s a bad financial decision.

If you believe people should simply be required to buy their own insurance, Gosh darn it, let them buy the insurance that makes sense.

If you believe that we should have a national insurance program, Gosh darn it, do that.

But isn’t it absurd to say, “Gee, people aren’t buying insurance because they can’t afford it, so let’s just mandate it. And while we’re at it, let’s mandate a financially crappy requirement for the people who actually have some financial literacy.”

Romney, hats off to you. You made a third of a billion dollars writing checks to buy other people’s companies while they did the work to make them profitable (yes, yes, picking up a pen is hard work when you don’t have someone to sign for you, but we sympathize). Oh, right, you also laid people off to get those companies to profitability.

Of course, it made good practice for your time as Governor. You ran on a business development platform, and we lost 126,000 jobs during your tenure as Governor–more than any other state in the union. Perhaps you thought that eliminating residents of Massachusetts would bring economic health, the way layoffs let you quickly flip a company at a profit in Private Equity? Oh, right, then let’s throw in the health care plan that forces me to siphon off my money to private insurers by buying an inferior policy.

Hats off to you. I hope you run again in 2012. You’ll make a fine President. You can be the second in our new tradition of Presidential Harvard MBAs who have so keenly demonstrated their skill and acumen at making themselves rich, while gutting the organizations they run.

What if you had $1 billion to spend on a Presidential campaign?

I was reading reports that Michael Bloomberg was rumored to announce his candidacy for President. A friend mentioned that he had reportedly said he would spend up to $1 billion to get elected (no sources were cited).

I was thinking: what would you do if you were going to spend $1 bn on a Presidential campaign?

Rather than spend it on vapid attack ads, I might spend it revitalizing a community, or doing something to make a concrete difference in the lives of many people, and then saying, “That’s the kind of thing I want to see happen as President.”

Would it work? I don’t know. But I’d rather see the money directly creating good than going to yet another round of media buys so we can all be inundated with the meaningless drivel that is campaign advertising.

Cooking the numbers, nationally, to present a tasty inflation report

I was just reading an article in the Boston Globe about the trade deficit hitting a 4-month low when I stumbled across these two paragraphs:

In a second report, inflation at the wholesale level jumped sharply in July, rising by 0.6 percent, far above the 0.1 percent increase analysts had been expecting. The bigger-than-expected jump reflected sharply higher energy prices.

The Labor Department said that core wholesale inflation, which excludes volatile food and energy costs, rose by a much more moderate 0.1 percent, even better 0.2 percent gain analysts had expected.

I don’t recall whether I blogged about this before (and I’m way too lazy to search my archives), but this is a really cool tidbit: Inflation numbers are cooked to make the government look good.

It turns out that inflation has really been going up a bunch over the last 20-30 years. Real income, that is, how much stuff we can buy if we spend every dollar we take home, has fallen for most of us. We can buy less today than we could 30 years ago. (This reflects the statistic that most of the economic growth since the 70s has gone to the top 10% or even the top 1% of the earners.)

As you can imagine, this makes the government look bad, no matter who’s in office. It made Reagan look bad. It made Bush 1.0 look bad. It made Clinton look bad. And it made Bush 2.0 look bad.

But Bush Administration 2.0 has been nothing if not brilliant at redefining reality. So in 2000, the Federal Reserve Board redefined inflation. Now we have “inflation” and “core inflation.” Core inflation is just like inflation, except they don’t include increases in energy and food prices. Those prices, you see, are too volatile, and might paint a misleading picture.

Hah! Those are also the most important components of measuring inflation, because neither is a optional purchase. If energy prices rise 20%, we pretty much have to pay that cost. It gets factored into our gas prices directly, and it gets factored into everything else we buy in the form of transportation costs, manufacturing costs, etc. When energy costs rise fundamentally, eventually, the cost of everything rises, and we can buy less stuff with the same amount of money. In other words, inflation.

Food cost isn’t quite so pervasive, but it’s even less optional than energy. You can go without turning on your A/C for a week. You may not like it, but you can do it. You can’t skip eating. So when food costs go up, they hit you immediately.

By creating this separate definition of inflation, the Government can now point to low inflation numbers and be surprised at how well we’re holding down inflation. Gee, isn’t that grand. It’s even lower than expected.

But for those of us who aren’t mired in self-delusion, inflation is how much more we have to spend on our lives overall, to maintain our standard of living. Perhaps that’s why Americans are now living with negative savings; real inflation has increased to the point where we can’t afford our lifestyles. Happily, however, if you just follow the Government’s lead and focus on “core inflation,” you’ll realize that maybe you’re hungrier, further in debt, and in financial trouble, but at least “core inflation” is low. Sleep well, while you can still afford that mortgage payment.

Politics. Corruption. The destruction of democracy.

I don’t like to get too political too often, since my Blog is mainly about business.

But sometimes, the depth of our current incompetence is just too great to ignore. We’ve repealed Habeas Corpus, our Congress just approved Bush warrentless spying on Americans, and it turns out almost 200,000 weapons in Iraq are “missing” (can you say: probably in the hands of insurgents?). Oh, yes, and the weapons we were to deliver the Iraqis to help keep order? About 2/3 of those haven’t actually found their way to the Iraqi peacekeeping forces.

What would we be doing differently if we were actively trying to destroy world stability, bring down the American Democracy, and bankrupt America?

Oh, crap. Now I have to move my purple bracelet again.

Long-term Thinking: The Depopulation Problem

How much of our prosperity is driven by innovation, hard work, productivity, yada, yada, yada, and how much is simple demographics?

The Long Now is an organization that encourages long-term thinking. The have free seminars about long-term perspectives. I just finished listening to The Depopulation Problem. The author talks through many economic and social issues, all related to fertility rates and the aging population.

The speaker makes some fairly eye-opening observations. For example, demographically, religious fundamentalists tend to have larger families. Does that mean the population of 2050 will be more fundamentalist than we are now? He extrapolates to some pretty outrageous scenarios, but the basic issue is worth a listen. As fertility rates drop and lifespans lengthen, there are more and more old people for every productive young person. So at the end of the day (or the lifetime), the working population has to work longer and harder just to support the old people, leaving a lower standard of living for the middle classes.

Give a listen. It’s an important issue and, by definition, it will become an issue during our lifetimes.

U.S. Auto Manufacturers outraged at 12-year target to reach below-average performance

I’m not quite sure what to say. The Senate has voted to raise mileage standards to 35 mpg by the year 2020. U.S. auto folks claim it will never happen, as AutoBlog reports.

Is it just me, or are these folks crazy? Gas gas gone up 100% in the last 10 years, and 30% in the last 2 years. By 2020, whether or not you believe in Peak Oil, the price will likely go up considerably, if only because China and India are drastically increasing their demand for oil. And they think that offering sub-35-mpg cars when gas is $5-$6/gallon will keep them in business? Get real. This is long-term planning of the worst kind: long-term planning to go bankrupt.

And by the way, the EPA reports that Toyotas, even the non-hybrids, already get around 35mpg. That means the U.S. auto manufacturers think that 12 years isn’t enough time to become competitive with mileage available today from imports. Gee, talk about American “can-do” ingenuity. And we’re paying these auto CEOs how much money?

If this represents Detroit’s true attitude, let’s just liquidate the companies now and distribute their remaining assets to startups committed to helping us find a long-term transportation solution.

Propoganda, by any other name, is still as manipulative

As I write this, CNN is announcing that the U.S. Military is now posting “unfiltered” videos on YouTube, to show what it’s really like on the ground in Iraq.

In the five minutes I watched the segment, every one of the videos showed uniformed servicemen playing with kids, shooting hoops, and giving presents to grateful families. Wow! Iraq looks like my 19th birthday party, only with cool combat fatigues and neat machinery.

Noticeably missing are the body bags, the servicemen whose limbs have been blown off by roadside bombs, and the blood and bodies of Iraqi civilians killed in the daily suicide bomb attack. And oddly, other than campaign ads for Republicans in 2004, no coffins of the young men and women who have died in Iraq.

Let’s hear it for unfiltered videos.

Coming soon: “unfiltered” financial data on Enron, Worldcom, and many other of your other favorite companies.