I heard this quote this morning from a speech that former President Bill Clinton made, and it frightened the heck out of me:
"It is politically imperative for the Democrats to pass a health care bill this year."
If you don't find that chilling, the spin doctors in DC have succeeded in turning you into a zombie.
Let's "unpack" the quote, as my pastor would say. The word "political" should be to most thinking Americans as the word "religious" is to most Christians. I'm not "religious;" I have faith. And I'm not political, nor do I ever want to be.
To be political is to do things for the sake of furthering one's agenda, whether they're the right thing to do or not. I once had several board members who were political, and they wanted me to do something that was good for them personally, but bad for the company. They had phone conversations between board meetings to coordinate their strategy and votes, and then working in concert, they'd hijack board meeting agendas to put forth their own. That is being political.
Of course, an imperative is something that one must do. So something that's politically imperative is something that must be done for political gain, to further one's agenda.
Or in this case, one party's agenda.
Why did Mr. Clinton say "this year?" Simple: mid-terms elections are next year. From that fact, we can divine the political agenda that he believes must be furthered: keep the party's majority in Congress, along with the White House. In other words, maintain one-party control over the United States of America.
Now, to some, that's not a problem at all. They hate Republicans, and would love to have a Karl Rove-ian permanent majority in Washington. But single-party control, no matter the party, has seldom been good for America.
However, regardless the side you're on, the spooky part of Mr. Clinton's quote is the notion that he considers the best path to maintaining single-party control of America the expenditure of trillions of taxpayer dollars - on top of an already record deficit that threatens to kill this country, forget about the health of its citizens - on a bill nobody's read, and that the CBO has announced will increase, not reduce, health care costs.
In other words, the former President believes that Congress should use taxpayer money to further the Democrats' control in Washington. He might as well advocate directly raiding the federal budget and dumping the money into Dems' campaign coffers. I'm just bloody glad he hasn't thought of it. Yet.
That is the mindset we must replace in Washington.
Am I against health care reform? No. The current system is far from perfect. Too many people don't have access. Costs are out of control. Health care costs are the single fastest-rising component of discretionary spending costs, and that hurts us economically. I'm sick of having to shop my company's health care plan out every other year because our new provider, who low-balled us to get our business, raised premiums by double-digit percentages for years two and three.
So start with tort reform. Stop the insane lawsuits that force docs to practice defensive medicine. But the lawyers' lobby owns Washington - heck, our President is himself a lawyer - so tort reform will never happen.
Totally revamp and streamline the process for approving new meds, and allow more competition among big pharma, so my Mom doesn't have to buy her inhaler from Chile.
Regulate the insurance biz at the national level, instead of the states, and even though I'm a free-market guy, bust their control over hospitals and doctors.
And take Medicare and Medicaid away from Congress so they can no longer dip their fingers in the cookie jar.
What don't I like about the proposed plan? Admittedly, I haven't read it. But a friend read the first 500 pages (putting him about 499 pages ahead of Arlen Specter), and listed some highlights. And I was not enamored.
But my biggest problem is that I don't trust Washington to run anything. Let me give you a little example of why.
I'm on a monthly billing plan with the dry cleaner I patronize. It's very convenient: I drop off, I pick up, I'm in and out, and I get a monthly bill which I pay electronically. No pausing to swipe my debit card when I pick up my duds.
Last week, I got a letter telling me that due to some new corporate privacy regulations intended to prevent identity theft (they're affiliated with Procter & Gamble, a big corporation), they're going to have to temporarily suspend monthly billing while they spend a bunch of money to revamp their record-keeping and billing software.
In the interim, I can pay when I pick up - or, I can fill out this handy form, including my credit card number, and they'll automatically charge me when I pick up my cleaning.
Now, they've never had my card number before. Just my name and address, so they could send me the bill. Since I paid using Quicken's billpay service, they would have had my bank account number, but nothing else.
If I fill out this form, they'll have my name, my address, my credit card number, the security code and the expiration date. Everything they need to steal my identity as that cardholder.
And this safeguards my privacy how, exactly?
The next morning, when I dropped off my clothes, I talked to the proprietor about it. She wasn't happy. And when I asked, "This is due to a new government regulation, right?" she responded in the affirmative.
And that, dear friends, is why I don't want to entrust government with my health care. If they cannot efficiently handle my dirty clothes, I'm not letting them anywhere near my spleen.
One final thought: I am sick and tired of hearing how "God wants health care reform." That's no different than Fred Phelps invoking His name to spew forth his bile. Health care is not a God-given human right, or people in the Old Testament would not have gotten sick. There've always been, sad to say, poor people who couldn't afford health care. Seeking access for them is a noble cause, as is seeking access to food for all, and we humans should put our time and money into helping provide for both, through good charitable works.
But neither is a God-given right, like the right to life or liberty (we were created alive and free; we were also created hungry). So let's leave God out of this until He tells us otherwise.
Sunday, August 16, 2009
Saturday, August 15, 2009
It's An Outrage!
A manufactured one, at least.
This post is a response to the fussing and fighting that's going on at all these town hall meetings regarding the Obama health care plan.
And I don't mean to pick on Obama, but he is the President, and this is his plan.
The first meeting I recall seeing footage of was the one in Pennsylvania, featuring former Kansas Governor (thank God!) and now HHS Secretary Kathleen Sebelius and Pennsylvania Senator Arlen Specter, the former Democrat turned RINO turned Democrat. One woman in the audience dressed the Beltway pair down - very eloquently, I thought, and while firmly, respectfully. Her ire seemed to be over the fact that Senator Specter and his ilk appear to be all too happy to spend their taxpayer-funded salaries voting on bills they haven't read, bills that will appropriate billions upon trillions of taxpayer dollars.
Seems like a fair gripe to me. Maybe because it's one I make every day.
After that, though, things turned ugly.
People started shouting. Shouting down the Washingtonians, who, despite their continued lying, cheating, stealing, voting-on-bills-without-reading-them, and general thieving from the tax kitty, still have a right to be heard. Up to a point.
Then, the accusations began. The Dick Armey Brigade is feeding the protests against health care reform. The Obama Administration is feeding the backlash against them.
Know what I think? I think they're both right.
I don't want to start sounding conspiracy theorist, but I think both sides are sending their henchmen to these staged town hall meetings in an effort to portray, in all its ugliness, the great partisan divide that consumes this nation. In so doing, they proliferate it, which serves the two-party agenda that keeps this country divided, and keeps them in power, since no viable third-party alternative can emerge. That keeps the Ted Kennedy's and the Orrin Hatch's in jobs that are probably the only jobs they could get.
The more divided they depict us as being, the more divisive we become. That further delineates the gulf between left and right, further vilifies each side in the minds of the other, and widens the gulf. And win, lose or draw for one party or the other, in a red-state, blue-state world, it increases the odds of holding one's position, gerrymandering aside.
So what's the solution? Throw the entire lot of bums out, I say. Start afresh. Screw party politics. Vote against all your own guys, just to shake things up, or get behind a viable third party. (By "viable," I do not mean Ralph Nader. More like Ron Paul.)
Vote your current bum out. If you think he or she has your best interest at heart, you probably also think that I'm from the government, and I'm here to help you.
And protest to your heart's content. Screw the media lemmings, who repeat what Washington stuffs down their throats. Engage in challenging but respectful discourse, in whatever forum. Exercise your right to be heard; Lord knows Washington isn't interested in what you have to say, but doggonit, say it anyway.
And don't let the suckers sell you down the river. For God's sake, not that. Make them explain why your job has to go away, why you're not getting that scholarship, while your taxes are going up while they get their automatic pay raise.
Then, and only then, can you sleep at night, if you can at all. And if you can, send me your secret. I'd love to know it.
This post is a response to the fussing and fighting that's going on at all these town hall meetings regarding the Obama health care plan.
And I don't mean to pick on Obama, but he is the President, and this is his plan.
The first meeting I recall seeing footage of was the one in Pennsylvania, featuring former Kansas Governor (thank God!) and now HHS Secretary Kathleen Sebelius and Pennsylvania Senator Arlen Specter, the former Democrat turned RINO turned Democrat. One woman in the audience dressed the Beltway pair down - very eloquently, I thought, and while firmly, respectfully. Her ire seemed to be over the fact that Senator Specter and his ilk appear to be all too happy to spend their taxpayer-funded salaries voting on bills they haven't read, bills that will appropriate billions upon trillions of taxpayer dollars.
Seems like a fair gripe to me. Maybe because it's one I make every day.
After that, though, things turned ugly.
People started shouting. Shouting down the Washingtonians, who, despite their continued lying, cheating, stealing, voting-on-bills-without-reading-them, and general thieving from the tax kitty, still have a right to be heard. Up to a point.
Then, the accusations began. The Dick Armey Brigade is feeding the protests against health care reform. The Obama Administration is feeding the backlash against them.
Know what I think? I think they're both right.
I don't want to start sounding conspiracy theorist, but I think both sides are sending their henchmen to these staged town hall meetings in an effort to portray, in all its ugliness, the great partisan divide that consumes this nation. In so doing, they proliferate it, which serves the two-party agenda that keeps this country divided, and keeps them in power, since no viable third-party alternative can emerge. That keeps the Ted Kennedy's and the Orrin Hatch's in jobs that are probably the only jobs they could get.
The more divided they depict us as being, the more divisive we become. That further delineates the gulf between left and right, further vilifies each side in the minds of the other, and widens the gulf. And win, lose or draw for one party or the other, in a red-state, blue-state world, it increases the odds of holding one's position, gerrymandering aside.
So what's the solution? Throw the entire lot of bums out, I say. Start afresh. Screw party politics. Vote against all your own guys, just to shake things up, or get behind a viable third party. (By "viable," I do not mean Ralph Nader. More like Ron Paul.)
Vote your current bum out. If you think he or she has your best interest at heart, you probably also think that I'm from the government, and I'm here to help you.
And protest to your heart's content. Screw the media lemmings, who repeat what Washington stuffs down their throats. Engage in challenging but respectful discourse, in whatever forum. Exercise your right to be heard; Lord knows Washington isn't interested in what you have to say, but doggonit, say it anyway.
And don't let the suckers sell you down the river. For God's sake, not that. Make them explain why your job has to go away, why you're not getting that scholarship, while your taxes are going up while they get their automatic pay raise.
Then, and only then, can you sleep at night, if you can at all. And if you can, send me your secret. I'd love to know it.
Thursday, August 13, 2009
A Clunker of a Plan
Okay, so it's been a darn long time since I've posted. My apologies; I've been busy. I'll get around to posting with what one of these days but suffice it to say it has to do with music, missions, and my daughter heading off to college in about a week.
But I really need to vent about this ill-conceived Cash for Clunkers program. Yeesh - talk about a waste of our hard-earned dollars.
Let's take it one spin-laden talking point at a time, shall we? We'll just debunk them as we go.
"It will stimulate the economy by boosting auto sales."
Poppycock. First, "stimuli" like this only serve to temporarily and artificially boost demand. Anyone that was going to buy a car in the next several months hit the bid on this deal, made out better than they would have otherwise, and are laughing all the way to the bank. (Until they get their tax bill.) What happens is that demand gets front-loaded by such an incentive, and people buy sooner rather than later. Then, the stimulus ends, and demand falls off a cliff - lower than where it was pre-stimulus, because future months' buyers have already jumped into the market, having been "stimulated" to do so, and there's no demand left.
Oh, sure – the incentive undoubtedly brought in a few people who otherwise had no intention of trading in their clunker for a new gas miser. But really, in an economy that’s shedding jobs faster than my head is shedding hair, how many Americans are going to trade in a paid-for car to take on a new car payment? Few. As evidence of this, since the program has been tripled to $3 billion, reports show that showroom traffic is waning, and that there's less demand for new cars.
And furthermore, the program's temporary boost to July's auto sales was insufficient to offset a broad decline in retail sales ex-autos, resulting in a decline in overall retail sales for the month. So much for "stimulus."
Then there's the fact that spending at the pump was down in July, thanks to 250,000 people owning less thirsty cars. But if we're buying less gas, we're also buying fewer Snickers, less Mountain Dew, Skoal, air fresheners and all that other crap people buy when they fill the tank.
“It will ‘green up’ America, reducing our dependence on foreign oil.”
You cannot convince me that this government is seriously concerned about greening up America, other than the extent to which pandering to the “green” lobby will green up their own pockets. "We're concerned about the earth legacy we're leaving our children," they cry, even as they pass trillion-dollar, 1,000-page bills they haven't read that will prove more toxic to our children and grandchildren than chlorofluorocarbons. My kid’s at greater risk of having to learn Mandarin Chinese and get run over by a tank for protesting against Chinese rule than she is dying from exposure to pollution or freezing to death thanks to global warming.
As for reducing our dependence on foreign oil, 250,000 more fuel-efficient cars are not going to do that by any significant extent. When is Caterpillar going to start building battery-powered heavy equipment? When are the airlines going to start flying propeller planes again? The impact of this program on our oil consumption is a drop in the bucket.
The program’s requirements allow the maximum $4,500 credit if you buy a vehicle that gets 10 mpg better than your clunker trade-in, which has to get less than 18 mpg to qualify. You can get a $3,500 credit if the new car gets 4 mpg better than your trade-in.
So let’s say you own a 1999 Jeep Grand Cherokee Limited with the big V-8 engine, like I do. That sucker drinks gas at the rate of 15 mpg. So it qualifies. Now, I can get a $3,500 credit for trading it in, if the new car gets 4 mpg better – 19 mpg, just 1 mpg above the fuel-inefficient “clunker” threshold! That’ll green up America! Let’s see, what vehicle could I buy that gets 19 mpg? How about a Honda Pilot, which is every bit as big as the Cherokee, just a bit less thirsty? Yep, another big ol’ SUV on the road. How green.
Now, let’s see what the program’s total gas savings will be. Let’s assume that all 750,000 cars under the expanded $3 billion program sell. That implies an average $4,000 credit, which means half the people traded for a car that gets 10 mpg better than the clunker, and half for a car that gets between 4 and 10 mpg better. For the sake of argument, let’s split the difference and say the people who got the $3,500 credit get 7 mpg better now – half the difference between 4 and 10. And since ten more than 18 is 28, and there aren’t a whole lot of cars that get better than 28 mpg overall, let’s be generous and say the people who got the $4,500 credit get 13 mpg better now, on average. (Granted, some people could be getting as little as 12 mpg now – but how many Hummer drivers are going to trade for a Smart Car?)
So half our participants are getting 7 mpg better than they were before, and half are getting 13 mpg better, for an average of 10 mpg improvement. Assume the average driver puts 15,000 miles a year on his or her car, which is around the book-value assumption. And 750,000 cars participated in the program.
If the average clunker got 15 mpg, and the average new car purchased under the program gets 25 mpg, and the average driver drives 15,000 miles a year, they’ll save 400 gallons of gas. If 750,000 people do this, the total annual savings will be 300 million gallons of gas – woo hoo!
Except – y’know what? That is less than one day’s total US gasoline consumption – one day! At this rate, the government would have to use more than a half-trillion taxpayer dollars to “stimulate” ourselves toward reducing our dependence on foreign oil by half.
“It will replace clunkers with outdated safety equipment with newer, safer cars, reducing traffic fatalities and serious injuries, and lowering insurance costs.”
Okay, I’ll give you that one – up to a point. I’m still safer in my Jeep than I’d be in a Smart Car or a Prius, or probably even a Corolla. And my insurance premiums on a ’99 are a darn sight lower than they’d be on any of those new models, despite their side-curtain air bags.
“People will be spending less on gas, and that means they’ll have more money in their pockets to spend on discretionary items, which will stimulate the economy and help lead to a consumer-led recovery.”
First, how much will I save in gas? Well, taking our aforementioned example of using 400 fewer gallons of gas, at today’s average pump price where I live of $2.59 for regular, I’ll save $1,036. That’s about $7.5 million saved per year under the entire program. Let’s assume every one of those dollars gets spent on discretionary items (which the July retail sales report proved did not happen, as overall sales fell even with the CFC stimulus).
That’s a boost to the consumer’s component of GDP – historically about two-thirds – of about 0.0001%. Awesome. Add in the stimulus from the cars being bought, and you’re at about a 0.2% boost. Better, but still not much. And let’s not forget that those cars would likely have been bought anyway.
And let’s also not forget that not all of that gas savings is going toward discretionary spending. In fact, not a dime of it is. Here’s why.
Let’s say I found one of those dealers who’ll match the CFC program’s incentive with an equal trade-in allowance. So using our average, I’m getting eight grand knocked off my new car. Let’s say the average new car price for the units purchased is $25,000 (that’s not far off the US average, and from what I know of the American consumer’s psyche, they’ll see the incentive as “found money,” and spend more on the new car than they otherwise would have, so it may be conservative).
So my net amount is $17,000. Add sales tax of 7.50%, and we’re at $18,275 – and I’m going to have to finance that. At the best 5-year new car rate in my neck of the woods of 6.50% (and that assumes an excellent credit score, which not all CFC participants have), and my monthly payment is $358.
So my annual gas savings will cover almost three month’s worth of car payments. Not counting the higher insurance premiums on a new car. Guess what’s going to happen to my discretionary spending, now that I have a net $3,200 a year in car payments that I didn’t have before? Add in a boost to insurance premiums of, say $400 a year, and that’s $3,600 a year, or $300 a month, less money in my pocket. So I’m going to hunker down even further, maybe even until the car’s paid off.
One could stretch, and say that since I’ll be making fewer trips to the gas station I’ll be buying fewer Snickers and less Mountain Dew. Three hundred dollars a month buys one heck of a lot of Snickers and Mountain Dew.
So, discretionary spending is going down as a result of this program. But the bright reader will say, “Aha!” (Bright people are always saying stuff like that.) “If those sales were going to happen anyway, then discretionary spending was going down anyway.”
Right you are. Thus this government program – which cost $3 billion unbudgeted taxpayer dollars and thus gets slapped right on top of the deficit, like all that Snickers and Mountain Dew consumption would get slapped right on top of the average American’s butt – has done zero to stimulate the economy. Zero.
Did it help car manufacturers and dealers? No. The sales were largely going to be made anyway. Did it help the banks? Heck, no – the loan amount they would have otherwise been earning interest on would have been $4,000 more, on average – that’s $4,000 per loan, times 750,000 loans, at an average of probably 7% interest over an average of four years. That’s nearly a half-billion dollars the banks are out.
(In case you haven’t heard, the banks could use all the earnings they can get right now.)
What about local communities and states? Nope, and nope. Less sales tax revenue, as the purchase price was $4,000 lower thanks to the incentive. Times 750,000 cars, the states and municipalities are out a cool $3 billion. And less gas tax revenue also, as people are spending less at the pump. And less sales tax revenue on the Snickers and Mountain Dew.
(They’ve especially been pushing the program hard in California. You know, that big state on the west coast that’s been issuing IOUs instead of tax refund checks because it is flat broke.)
Did it help gas stations? Nope. Will it help that nice young man who sold me a car wash today as I was filling up, and asked for my blog’s URL? I’m afraid not.
And speaking of nice young men, will it help the high school kid who is in the market for a cheap used car to get to and from work? Or the poor immigrant needing the same? No, it won’t – in fact, it will hurt them, and that is one of the unintended consequences of the Clunker program (its most apt name).
Total used car sales in the US last year were 36.5 million units. The average sales price was just under $8,000. We don’t know the standard deviation. But I don’t believe we can assume a bell-shaped curve; there are plenty of used cars for sale priced above $16,000, but none priced below zero. Looking at e-Bay auctions and the like, we don’t see a heck of a lot of cars priced below $3,000. But we do see plenty of used cars priced above $20,000. In other words, our population distribution is likely skewed to the higher side. So let’s just assume that the total number of used cars on the market priced below $3,000 is about 10% of the total – for argument’s sake let’s call it 3.5 million cars.
Why did we pick $3,000 as our threshold? Simple. If my car is worth $3,500, getting that amount for it under the Clunker program isn’t much of an incentive. If it’s worth less, I’m more inclined to hit the bid.
So let’s say 750,000 of those 3.5 million cars in that price bracket are destroyed, as the Clunker program is going to do. That’s a 21% reduction in supply. Guess what happens to the value of cars in that price bracket, now that the supply has dwindled, while the demand hasn’t (if anything it’s gone up, since there are a lot more people unemployed, underemployed, struggling with higher mortgage payments after their ARM reset, etc., in this economy?
That’s right, you remembered that day in Econ 101 – the quantity supplied goes down while the quantity demanded remains the same (or increases), and voila! The price goes up! Now, that $2,500 clunker is worth three grand – and said high school student or struggling immigrant or suddenly-out-of-work-and-fighting-to-survive-as-a-grocery-sacker cannot afford the car.
So, what next? Well, he loses that job, because he can’t get to it. He has less money to spend, and has to go on government assistance – which wasn’t budgeted. Taxes go up, consumption goes down, GDP suffers, joblessness rises.
Did it help the junkyards? You betcha! They’re the ones that will profit mightily from scrapping 750,000 cars that would have remained happily putt-putting down the highways and byways, that still have some good miles left in them, however thirsty those miles might be.
Just one question though: how much energy does it take to destroy 750,000 cars? And are the car-smashing machines powered by gas, electricity, what? Batteries, perhaps? Solar power? Wind? Just the “greenie” in me being curious, is all.
Did it help America? Well, it supposedly will help slow down global warming. So perhaps your great-great-great-great-great-great-great-great-great-grandkids will live one day longer before the next Ice Age freezes ‘em to death. Oh wait – it’s GLOBAL warming, right? And places like China and India are pumping chlorofluorocarbons into the atmosphere at a rate that dwarfs ours, and have neither the incentive nor the conscience to slow it down. So make that an extra half-day your descendants will live before hell freezes over.
But did it help America economically? First, let’s look at the aggregate. The GDP equation includes both personal consumption – what we consumers spend – and government spending, which we fund with our tax dollars. So we didn’t boost GDP – alright, we might have front-loaded some of the fourth quarter’s demand into the third (more on that later), but we didn’t actually boost it. All we did was shift the mix, taking from personal consumption and adding to government spending. It’s a zero-sum game.
And what of future quarters? And next year? That’s when the program begins to detract from GDP, as the government spending won’t be repeated, but it’ll be many months before auto demand returns to normal, with some 750,000 new units on the road. (Even for those who believe that ALL of these sales are purely incentive-driven, and would not have occurred otherwise, and therefore auto demand will return to normal after the program sunsets – 750,000 cars is less than 10% of annual US vehicle sales, and the very limited impact on GDP is as noted above.)
Okay, remember my cryptic “more on that later” when I talked about shifting demand into the third quarter? Here’s what I think one of the dirty little secrets is about this plan. Sorry for sounding conspiracy-theorist, but I tend to imagine some of the discussions that take place in those smoke-filled rooms in Washington, between politicians and their economic advisors and Fed guys and Treasury guys, and I imagine something like this:
Politician: “We have got to end this recession!”
Economist: “Well, it’s really out of our control …”
Politician: “I don’t care, dammit! Mid-term elections are coming up next year!”
Economist: “Well, the definition of the end of a recession is two quarters of positive GDP growth following two or more quarters of negative growth. But the people tend to believe whatever we and CNBC tell them, so if we had just one quarter of positive growth, they might buy into the ‘recovery’ myth, and start spending money again, and maybe sustain growth for a second quarter, and then … who knows?”
Politician: “Excellent! So other than spend an obscene amount of government money, which we’re already doing, how do we make absolutely sure that we get a quarter of positive growth?”
Economist: “Well, we’d have to front-load future demand for something … probably a big-ticket item … probably the biggest-ticket item there is, outside of a home, since we know the housing market is still in the crapper …”
And thus an idea was born.
So whose economy did we stimulate? China’s. The interest on three billion dollars is not insignificant. How do you say “You’re welcome” in Mandarin?
So much for the aggregate. What about you and me?
Well, if we hit the bid on CFC, we saved four grand on a new car. We’re saving a bit on gas. If we keep the car until after it’s paid for – a rarity in America these days, but possibly (and hopefully) the new reality – eventually we could even be money ahead. Assuming we don’t lose our jobs. But our discretionary spending has gone down, and as that filters into the aggregate, our job is even more at risk. But still, if we keep the new car until it’s a clunker, we could come out ahead.
Except on our taxes. You see, we’re already perilously close to seeing the US become so suicidally indebted, our debt is downgraded, as I’ve warned before (I think it’ll happen in 2010). Another three billion doesn’t sound like much on top of 11 trillion – but remember, it was one straw that got credit for breaking the camel’s back. And three billion for every employed person in the US is an extra $22 bucks in US debt, on average.
Not huge, but it would buy a week’s worth of Snickers and Mountain Dew.
But I really need to vent about this ill-conceived Cash for Clunkers program. Yeesh - talk about a waste of our hard-earned dollars.
Let's take it one spin-laden talking point at a time, shall we? We'll just debunk them as we go.
"It will stimulate the economy by boosting auto sales."
Poppycock. First, "stimuli" like this only serve to temporarily and artificially boost demand. Anyone that was going to buy a car in the next several months hit the bid on this deal, made out better than they would have otherwise, and are laughing all the way to the bank. (Until they get their tax bill.) What happens is that demand gets front-loaded by such an incentive, and people buy sooner rather than later. Then, the stimulus ends, and demand falls off a cliff - lower than where it was pre-stimulus, because future months' buyers have already jumped into the market, having been "stimulated" to do so, and there's no demand left.
Oh, sure – the incentive undoubtedly brought in a few people who otherwise had no intention of trading in their clunker for a new gas miser. But really, in an economy that’s shedding jobs faster than my head is shedding hair, how many Americans are going to trade in a paid-for car to take on a new car payment? Few. As evidence of this, since the program has been tripled to $3 billion, reports show that showroom traffic is waning, and that there's less demand for new cars.
And furthermore, the program's temporary boost to July's auto sales was insufficient to offset a broad decline in retail sales ex-autos, resulting in a decline in overall retail sales for the month. So much for "stimulus."
Then there's the fact that spending at the pump was down in July, thanks to 250,000 people owning less thirsty cars. But if we're buying less gas, we're also buying fewer Snickers, less Mountain Dew, Skoal, air fresheners and all that other crap people buy when they fill the tank.
“It will ‘green up’ America, reducing our dependence on foreign oil.”
You cannot convince me that this government is seriously concerned about greening up America, other than the extent to which pandering to the “green” lobby will green up their own pockets. "We're concerned about the earth legacy we're leaving our children," they cry, even as they pass trillion-dollar, 1,000-page bills they haven't read that will prove more toxic to our children and grandchildren than chlorofluorocarbons. My kid’s at greater risk of having to learn Mandarin Chinese and get run over by a tank for protesting against Chinese rule than she is dying from exposure to pollution or freezing to death thanks to global warming.
As for reducing our dependence on foreign oil, 250,000 more fuel-efficient cars are not going to do that by any significant extent. When is Caterpillar going to start building battery-powered heavy equipment? When are the airlines going to start flying propeller planes again? The impact of this program on our oil consumption is a drop in the bucket.
The program’s requirements allow the maximum $4,500 credit if you buy a vehicle that gets 10 mpg better than your clunker trade-in, which has to get less than 18 mpg to qualify. You can get a $3,500 credit if the new car gets 4 mpg better than your trade-in.
So let’s say you own a 1999 Jeep Grand Cherokee Limited with the big V-8 engine, like I do. That sucker drinks gas at the rate of 15 mpg. So it qualifies. Now, I can get a $3,500 credit for trading it in, if the new car gets 4 mpg better – 19 mpg, just 1 mpg above the fuel-inefficient “clunker” threshold! That’ll green up America! Let’s see, what vehicle could I buy that gets 19 mpg? How about a Honda Pilot, which is every bit as big as the Cherokee, just a bit less thirsty? Yep, another big ol’ SUV on the road. How green.
Now, let’s see what the program’s total gas savings will be. Let’s assume that all 750,000 cars under the expanded $3 billion program sell. That implies an average $4,000 credit, which means half the people traded for a car that gets 10 mpg better than the clunker, and half for a car that gets between 4 and 10 mpg better. For the sake of argument, let’s split the difference and say the people who got the $3,500 credit get 7 mpg better now – half the difference between 4 and 10. And since ten more than 18 is 28, and there aren’t a whole lot of cars that get better than 28 mpg overall, let’s be generous and say the people who got the $4,500 credit get 13 mpg better now, on average. (Granted, some people could be getting as little as 12 mpg now – but how many Hummer drivers are going to trade for a Smart Car?)
So half our participants are getting 7 mpg better than they were before, and half are getting 13 mpg better, for an average of 10 mpg improvement. Assume the average driver puts 15,000 miles a year on his or her car, which is around the book-value assumption. And 750,000 cars participated in the program.
If the average clunker got 15 mpg, and the average new car purchased under the program gets 25 mpg, and the average driver drives 15,000 miles a year, they’ll save 400 gallons of gas. If 750,000 people do this, the total annual savings will be 300 million gallons of gas – woo hoo!
Except – y’know what? That is less than one day’s total US gasoline consumption – one day! At this rate, the government would have to use more than a half-trillion taxpayer dollars to “stimulate” ourselves toward reducing our dependence on foreign oil by half.
“It will replace clunkers with outdated safety equipment with newer, safer cars, reducing traffic fatalities and serious injuries, and lowering insurance costs.”
Okay, I’ll give you that one – up to a point. I’m still safer in my Jeep than I’d be in a Smart Car or a Prius, or probably even a Corolla. And my insurance premiums on a ’99 are a darn sight lower than they’d be on any of those new models, despite their side-curtain air bags.
“People will be spending less on gas, and that means they’ll have more money in their pockets to spend on discretionary items, which will stimulate the economy and help lead to a consumer-led recovery.”
First, how much will I save in gas? Well, taking our aforementioned example of using 400 fewer gallons of gas, at today’s average pump price where I live of $2.59 for regular, I’ll save $1,036. That’s about $7.5 million saved per year under the entire program. Let’s assume every one of those dollars gets spent on discretionary items (which the July retail sales report proved did not happen, as overall sales fell even with the CFC stimulus).
That’s a boost to the consumer’s component of GDP – historically about two-thirds – of about 0.0001%. Awesome. Add in the stimulus from the cars being bought, and you’re at about a 0.2% boost. Better, but still not much. And let’s not forget that those cars would likely have been bought anyway.
And let’s also not forget that not all of that gas savings is going toward discretionary spending. In fact, not a dime of it is. Here’s why.
Let’s say I found one of those dealers who’ll match the CFC program’s incentive with an equal trade-in allowance. So using our average, I’m getting eight grand knocked off my new car. Let’s say the average new car price for the units purchased is $25,000 (that’s not far off the US average, and from what I know of the American consumer’s psyche, they’ll see the incentive as “found money,” and spend more on the new car than they otherwise would have, so it may be conservative).
So my net amount is $17,000. Add sales tax of 7.50%, and we’re at $18,275 – and I’m going to have to finance that. At the best 5-year new car rate in my neck of the woods of 6.50% (and that assumes an excellent credit score, which not all CFC participants have), and my monthly payment is $358.
So my annual gas savings will cover almost three month’s worth of car payments. Not counting the higher insurance premiums on a new car. Guess what’s going to happen to my discretionary spending, now that I have a net $3,200 a year in car payments that I didn’t have before? Add in a boost to insurance premiums of, say $400 a year, and that’s $3,600 a year, or $300 a month, less money in my pocket. So I’m going to hunker down even further, maybe even until the car’s paid off.
One could stretch, and say that since I’ll be making fewer trips to the gas station I’ll be buying fewer Snickers and less Mountain Dew. Three hundred dollars a month buys one heck of a lot of Snickers and Mountain Dew.
So, discretionary spending is going down as a result of this program. But the bright reader will say, “Aha!” (Bright people are always saying stuff like that.) “If those sales were going to happen anyway, then discretionary spending was going down anyway.”
Right you are. Thus this government program – which cost $3 billion unbudgeted taxpayer dollars and thus gets slapped right on top of the deficit, like all that Snickers and Mountain Dew consumption would get slapped right on top of the average American’s butt – has done zero to stimulate the economy. Zero.
Did it help car manufacturers and dealers? No. The sales were largely going to be made anyway. Did it help the banks? Heck, no – the loan amount they would have otherwise been earning interest on would have been $4,000 more, on average – that’s $4,000 per loan, times 750,000 loans, at an average of probably 7% interest over an average of four years. That’s nearly a half-billion dollars the banks are out.
(In case you haven’t heard, the banks could use all the earnings they can get right now.)
What about local communities and states? Nope, and nope. Less sales tax revenue, as the purchase price was $4,000 lower thanks to the incentive. Times 750,000 cars, the states and municipalities are out a cool $3 billion. And less gas tax revenue also, as people are spending less at the pump. And less sales tax revenue on the Snickers and Mountain Dew.
(They’ve especially been pushing the program hard in California. You know, that big state on the west coast that’s been issuing IOUs instead of tax refund checks because it is flat broke.)
Did it help gas stations? Nope. Will it help that nice young man who sold me a car wash today as I was filling up, and asked for my blog’s URL? I’m afraid not.
And speaking of nice young men, will it help the high school kid who is in the market for a cheap used car to get to and from work? Or the poor immigrant needing the same? No, it won’t – in fact, it will hurt them, and that is one of the unintended consequences of the Clunker program (its most apt name).
Total used car sales in the US last year were 36.5 million units. The average sales price was just under $8,000. We don’t know the standard deviation. But I don’t believe we can assume a bell-shaped curve; there are plenty of used cars for sale priced above $16,000, but none priced below zero. Looking at e-Bay auctions and the like, we don’t see a heck of a lot of cars priced below $3,000. But we do see plenty of used cars priced above $20,000. In other words, our population distribution is likely skewed to the higher side. So let’s just assume that the total number of used cars on the market priced below $3,000 is about 10% of the total – for argument’s sake let’s call it 3.5 million cars.
Why did we pick $3,000 as our threshold? Simple. If my car is worth $3,500, getting that amount for it under the Clunker program isn’t much of an incentive. If it’s worth less, I’m more inclined to hit the bid.
So let’s say 750,000 of those 3.5 million cars in that price bracket are destroyed, as the Clunker program is going to do. That’s a 21% reduction in supply. Guess what happens to the value of cars in that price bracket, now that the supply has dwindled, while the demand hasn’t (if anything it’s gone up, since there are a lot more people unemployed, underemployed, struggling with higher mortgage payments after their ARM reset, etc., in this economy?
That’s right, you remembered that day in Econ 101 – the quantity supplied goes down while the quantity demanded remains the same (or increases), and voila! The price goes up! Now, that $2,500 clunker is worth three grand – and said high school student or struggling immigrant or suddenly-out-of-work-and-fighting-to-survive-as-a-grocery-sacker cannot afford the car.
So, what next? Well, he loses that job, because he can’t get to it. He has less money to spend, and has to go on government assistance – which wasn’t budgeted. Taxes go up, consumption goes down, GDP suffers, joblessness rises.
Did it help the junkyards? You betcha! They’re the ones that will profit mightily from scrapping 750,000 cars that would have remained happily putt-putting down the highways and byways, that still have some good miles left in them, however thirsty those miles might be.
Just one question though: how much energy does it take to destroy 750,000 cars? And are the car-smashing machines powered by gas, electricity, what? Batteries, perhaps? Solar power? Wind? Just the “greenie” in me being curious, is all.
Did it help America? Well, it supposedly will help slow down global warming. So perhaps your great-great-great-great-great-great-great-great-great-grandkids will live one day longer before the next Ice Age freezes ‘em to death. Oh wait – it’s GLOBAL warming, right? And places like China and India are pumping chlorofluorocarbons into the atmosphere at a rate that dwarfs ours, and have neither the incentive nor the conscience to slow it down. So make that an extra half-day your descendants will live before hell freezes over.
But did it help America economically? First, let’s look at the aggregate. The GDP equation includes both personal consumption – what we consumers spend – and government spending, which we fund with our tax dollars. So we didn’t boost GDP – alright, we might have front-loaded some of the fourth quarter’s demand into the third (more on that later), but we didn’t actually boost it. All we did was shift the mix, taking from personal consumption and adding to government spending. It’s a zero-sum game.
And what of future quarters? And next year? That’s when the program begins to detract from GDP, as the government spending won’t be repeated, but it’ll be many months before auto demand returns to normal, with some 750,000 new units on the road. (Even for those who believe that ALL of these sales are purely incentive-driven, and would not have occurred otherwise, and therefore auto demand will return to normal after the program sunsets – 750,000 cars is less than 10% of annual US vehicle sales, and the very limited impact on GDP is as noted above.)
Okay, remember my cryptic “more on that later” when I talked about shifting demand into the third quarter? Here’s what I think one of the dirty little secrets is about this plan. Sorry for sounding conspiracy-theorist, but I tend to imagine some of the discussions that take place in those smoke-filled rooms in Washington, between politicians and their economic advisors and Fed guys and Treasury guys, and I imagine something like this:
Politician: “We have got to end this recession!”
Economist: “Well, it’s really out of our control …”
Politician: “I don’t care, dammit! Mid-term elections are coming up next year!”
Economist: “Well, the definition of the end of a recession is two quarters of positive GDP growth following two or more quarters of negative growth. But the people tend to believe whatever we and CNBC tell them, so if we had just one quarter of positive growth, they might buy into the ‘recovery’ myth, and start spending money again, and maybe sustain growth for a second quarter, and then … who knows?”
Politician: “Excellent! So other than spend an obscene amount of government money, which we’re already doing, how do we make absolutely sure that we get a quarter of positive growth?”
Economist: “Well, we’d have to front-load future demand for something … probably a big-ticket item … probably the biggest-ticket item there is, outside of a home, since we know the housing market is still in the crapper …”
And thus an idea was born.
So whose economy did we stimulate? China’s. The interest on three billion dollars is not insignificant. How do you say “You’re welcome” in Mandarin?
So much for the aggregate. What about you and me?
Well, if we hit the bid on CFC, we saved four grand on a new car. We’re saving a bit on gas. If we keep the car until after it’s paid for – a rarity in America these days, but possibly (and hopefully) the new reality – eventually we could even be money ahead. Assuming we don’t lose our jobs. But our discretionary spending has gone down, and as that filters into the aggregate, our job is even more at risk. But still, if we keep the new car until it’s a clunker, we could come out ahead.
Except on our taxes. You see, we’re already perilously close to seeing the US become so suicidally indebted, our debt is downgraded, as I’ve warned before (I think it’ll happen in 2010). Another three billion doesn’t sound like much on top of 11 trillion – but remember, it was one straw that got credit for breaking the camel’s back. And three billion for every employed person in the US is an extra $22 bucks in US debt, on average.
Not huge, but it would buy a week’s worth of Snickers and Mountain Dew.
Saturday, July 11, 2009
Just A Quick Rant From Paradise
I'm sitting in my condo in Maui, from whose lanai I can see the ocean. From our pool, I can see the islands of Lanai, Molokai and Oahu in the far distance. The beach could be better - some seaweed and rocks - but I'm not complaining, as within a mile's drive (or walk) are some phenomenal, clean, sandy beaches. Life is good.
So I have little about which to complain. But I will say that this morning, I caught a snippet on the news about President Obama being in Ghana, with his children. They showed a clip of him saying how important it was for his children to be there, what a great educational experience that was for them.
Great. Having paid for a romantic Valentine's Day weekend with the missus in Sweet Home Chicago, then a Broadway Show in New York that he purportedly promised her while on the campaign trail - apparently the first campaign promise he's kept - now we, the humble taxpayer (which disqualifies us from his cabinet, by the way) get to pay for a family trip to Ghana so the kiddoes can get in touch with their African heritage.
The news bit I was watching then attempted to cut to a speech he reportedly gave before the Ghanan version of our Congress. But instead, we were treated to a repeat of the clip of him saying what an important trip it was for his daughters.
Which begs the question: did he even speak before the Ghanan lawmakers? Or was he absent from their proceedings, as he usually was during his all-too-brief tenure as a US Senator?
I do hope his daughters learned a great deal from their experience. The plight of many in Africa is deplorable. And I hope they learn enough to ask Daddy some questions. Such as, "Daddy, are you going to do something about the holocaust in Darfur?" Or, "Daddy, do you plan to continue providing aid to sub-Saharan Africa to fight AIDS, like your mean old predecessor, George Bush? Or is that one of 'the failed policies of the last eight years' that you mention every other sentence?"
Or, "Daddy, can we go see great-Grandma this trip? Or do we simply not have enough time, like your last visit here?"
So I have little about which to complain. But I will say that this morning, I caught a snippet on the news about President Obama being in Ghana, with his children. They showed a clip of him saying how important it was for his children to be there, what a great educational experience that was for them.
Great. Having paid for a romantic Valentine's Day weekend with the missus in Sweet Home Chicago, then a Broadway Show in New York that he purportedly promised her while on the campaign trail - apparently the first campaign promise he's kept - now we, the humble taxpayer (which disqualifies us from his cabinet, by the way) get to pay for a family trip to Ghana so the kiddoes can get in touch with their African heritage.
The news bit I was watching then attempted to cut to a speech he reportedly gave before the Ghanan version of our Congress. But instead, we were treated to a repeat of the clip of him saying what an important trip it was for his daughters.
Which begs the question: did he even speak before the Ghanan lawmakers? Or was he absent from their proceedings, as he usually was during his all-too-brief tenure as a US Senator?
I do hope his daughters learned a great deal from their experience. The plight of many in Africa is deplorable. And I hope they learn enough to ask Daddy some questions. Such as, "Daddy, are you going to do something about the holocaust in Darfur?" Or, "Daddy, do you plan to continue providing aid to sub-Saharan Africa to fight AIDS, like your mean old predecessor, George Bush? Or is that one of 'the failed policies of the last eight years' that you mention every other sentence?"
Or, "Daddy, can we go see great-Grandma this trip? Or do we simply not have enough time, like your last visit here?"
Wednesday, July 8, 2009
My Obama
As I sit in the Salt Lake City airport, still groggy from the crack-of-dawn flight here from Kansas City following the three and a half hours' sleep I got, and awaiting the six-plus hour flight to Maui, here's a little gem I penned a while back. I do some songwriting (one of my pieces may wind up on a CD soon), and occasionally I'll re-work the words to a familiar tune, usually for the sake of satire. This is an example.
My Obama
(To the tune of “My Sharona”)
Ooh, you love to tax and spend, tax and spend,
When you gonna give us a break, Obama?
All this madness has to end, it has to end,
How much do you think we can take, Obama?
Treasury is broke, that’s no joke, Geithner’s printing fast,
China and Japan plan a ban, so it cannot last
My my my I yi – woo!
M-m-m-my Obama!
M-m-m-my Obama!
You want health care for us all, for us all,
Where’s the money coming for that, Obama?
Government will overpay, every day,
Will you tax us for being fat, Obama?
All the Docs will quit, pack their kit, practice somewhere else,
Then if we get sick, up a creek – universal health?
My my my I yi – woo!
M-m-m-my Obama!
M-m-m-my Obama!
Now you wanna run GM, run GM,
Do you even know what it takes, Obama?
What else will you wanna seize? We’re on our knees!
Please, you gotta put on the brakes, Obama!
You can’t socialize; it’s not wise – take a look at France
Even they now say: “USA, time to change your stance”
My my my I yi – woo!
M-m-m-my Obama!
M-m-m-my Obama!
Didn’t pay my income tax, that’s a fact –
Can I get a spot on your team, Obama?
Simple little oversight, it’s alright,
Wasn’t some nefarious scheme, Obama!
Cabinet gets a pass, don’t harass, get upset or curse;
See the bank execs – what the heck? What they did was worse!
My my my I yi – woo!
M-m-m-my Obama!
M-m-m-my Obama!
My Obama
(To the tune of “My Sharona”)
Ooh, you love to tax and spend, tax and spend,
When you gonna give us a break, Obama?
All this madness has to end, it has to end,
How much do you think we can take, Obama?
Treasury is broke, that’s no joke, Geithner’s printing fast,
China and Japan plan a ban, so it cannot last
My my my I yi – woo!
M-m-m-my Obama!
M-m-m-my Obama!
You want health care for us all, for us all,
Where’s the money coming for that, Obama?
Government will overpay, every day,
Will you tax us for being fat, Obama?
All the Docs will quit, pack their kit, practice somewhere else,
Then if we get sick, up a creek – universal health?
My my my I yi – woo!
M-m-m-my Obama!
M-m-m-my Obama!
Now you wanna run GM, run GM,
Do you even know what it takes, Obama?
What else will you wanna seize? We’re on our knees!
Please, you gotta put on the brakes, Obama!
You can’t socialize; it’s not wise – take a look at France
Even they now say: “USA, time to change your stance”
My my my I yi – woo!
M-m-m-my Obama!
M-m-m-my Obama!
Didn’t pay my income tax, that’s a fact –
Can I get a spot on your team, Obama?
Simple little oversight, it’s alright,
Wasn’t some nefarious scheme, Obama!
Cabinet gets a pass, don’t harass, get upset or curse;
See the bank execs – what the heck? What they did was worse!
My my my I yi – woo!
M-m-m-my Obama!
M-m-m-my Obama!
Tuesday, July 7, 2009
Random Pre-Vacation Musings
Tomorrow morning I board a plane at the unspeakable hour of 6 am - bearing the colors of the unspeakable airline, Delta - to fly to Maui for a well-deserved (if I do say so myself) vacation with my two favorite people in the world. Before I go, some random thoughts on three topics.
First, a follow-up to my proposed reforms posted yesterday. Here are some more, some proposed by my good buddies at d2football.com, some fleshed out from what I already came up with, and some that I forgot about, or came up with later.
1. I'd also do away with the party conventions. I'd like to do away with the parties, period, and have the election process simply be "Citizen A running for president, not Member X of the RNC," as one of my d2 pals put it. Not sure how to pull that off though.
2. I'd also do away with caucuses, in favor of primaries. And no dual-selection processes like we have in some places in Texas.
3. I'd scrap the electoral college. Not that a popular vote doesn't have its flaws, but the electoral college today simply leads to candidates playing a numbers game, and focusing on "key states" and "swing states" while ignoring others, either because they're a foregone conclusion to go to one party or the other, or because they don't carry enough electoral votes to matter. EVERY vote MUST matter!
4. To clarify, POTUS could take AFOne on a leisure trip, but would have to pay the costs for it and the security detail out of pocket. If s/he can't afford it - too bad. There are plenty of opportunities to visit New York on official government business, and the prez could take in a Broadway show then. Besides, DC has decent entertainment. If a national crisis breaks out on a self-funded leisure trip, of course the taxpayer funds would come into play to pay for the altered travel plans.
5. I might reconsider the deductibility of charitable contributions. If I did, I'd remove the caps. If somebody wants to give 100% of their substantial income to charity, they should be able to do so, and have a tax incentive for doing it.
6. From the same d2 guy, I'd strip all official positions from the political parties, including Speaker and committee chairs. Let the congresspersons run for chairmanships, and be voted on by their peers. There'd be a new voting process with each election cycle.
7. From the same guy (maybe I should make him Chief of Staff), I'd reinstate the peacetime draft, with certain exemptions - disability, or employment in certain fields. Pay would be based in part on length of service commitment.
8. I would provide tax incentives for saving and investment. I'd up the IRA/401k limits, and remove the caps. We have to get back to being a nation of savers and investors, not borrowers and consumers.
************
I hate even giving this blog space, but I'm sickened by the whole Michael Jackson thing. He was a marketing genius who surrounded himself with very good producers; he wrote catchy pop tunes with little substance or meaning; he was a prodigious child talent, but an average singer as an adult; and he could only have been popular as an entertainer in our current/recent culture.
And he was a pedophile.
Yet they're selling tickets to celebrate his life. What does that say about us?
When we heard on the news that there'd be all-day coverage of this media circus today, my wife lamented that it wasn't tomorrow instead: we'll be on airplanes all day.
Some news talking head commented that it was "highly unusual" to find the surgical drug Propofol in a private citizen's home. My first thought was that the words "highly unusual" fit Michael Jackson like ... well, like a glove.
A very excellent book I'm reading called "The Reason for God" made a very appropriate point that applies to Jackson's life. I believe the author, Tim Keller, might have been quoting C.S. Lewis. To paraphrase, he noted that there's a God-shaped hole in all of us. And when someone finally reaches the zenith of one's chosen field - the pinnacle of what one is really good at - and finds they're still the same broken schmuck they were when they were nobody, with all the attendant warts, hurts and demons, it has to be devastating. At that point, what else is there? What else can they do to be somebody different, the somebody they thought fame, fortune, success, whatever, would make them? When they realize that they're not that butterfly, but still the same old worm, what then?
It can only end badly, and we've seen it too many times.
When you've got one puzzle piece left, you fill it with the only piece that will fit. Try filling it with a perfectly round piece, or a square piece, and there's still a hole. Get the message?
************
As a cycling fan, I find this year's Tour de France intriguing. It is fitting proof that experience can often trump youthful vigor. To wit: the sporting press are making a mountain out of the molehill that Lance Armstrong, at age 37, managed to be in the lead group that split from the peloton yesterday, just when the group hit the stiff Mediterranean winds near the French coast, while his compatriot, young Alberto Contador, reportedly and presumably the leader of their Astana team, got caught in the back group.
I say it was no rivalry-bred conspiracy, but a simple matter of the experience of a seven-time Tour winner, who's forgotten more about racing tactics than most in the peloton will ever know, versus the lack of savvy of a young stud who's won three major tours, but with the guidance of cycling's greatest tactician, Johann Bruyneel.
Look back at past Tours. In those nervous, early stages, Armstrong always rode near the front. Always. That's what leaders do. You avoid the surprises, the unexpected breakaways, the field splits, and the crashes. That Conti was leisurely making his way from the back of the pack to the middle at that point just shows that he has a lot to learn.
Former Armstrong lieutenant George Hincapie, now a rival, was in the front group. Conspiracy? Nope. Big George is himself a veteran of 14 Tours. He knows the game. Two Astana teammates were with Armstrong. Team rift? Doubtful. If I were on Armstrong's team, I'd be on his wheel as long as I could hold it. You don't win 7 Tours by being lucky. The only reason I wouldn't be on his wheel would be if I were an arrogant young buck who thought his climbing prowess and his post-Armstrong successes made the leadership of the team his birthright. And that may prove Contador's downfall.
What if Armstrong and his two teammates had stayed back with their "leader," Contador?
Well, first, it was no accident that Astana had positioned itself as the leading team headed into today's team time trial. I have to believe it was part of Astana's strategy. Knowing the TTT was coming on the fourth stage, and that the leading team is last to hit the course, you'd want to be that team, so that you'd know all the other teams' split times at each of the three checkpoints. That strategy was also likely led by Armstrong and Bruyneel.
After stage one, in which Astana smashed the opening time trial, placing four riders in the top ten, and stage two, Astana held the team lead by 31 seconds over yellow jersey Fabian Cancellara's Saxo Bank team. The split between the lead group - containing Armstrong, the two other Astana riders, and race leader Cancellara - and the main group on Wednesday was 41 seconds. There were no other Saxo riders in the lead group.
Had Astana had zero riders in the lead group, they'd have possibly lost the team lead. As it was, Armstrong's two teammates in the lead group put the hammer down, putting distance between the two groups to maximize the TEAM's advantage. (That also fueled the conspiracy theories.)
Of course, with the benefit of being able to start the TTT last, Astana destroyed the field today. Looking at the average times from the lead five riders - those whose times count in the TTT for the team time - from Saxo and Astana from Stage 1's 15.5 km time trial, and extrapolating the distance to today's 39.9 km, produced a 44 second gap between Astana and Saxo Bank.
Astana beat Saxo by 40 seconds, enough to put Armstrong in second by a scant 0.22 second - a margin so small that the race officials had to go back to to Stage 1's results and, combined with today's, calculate the times to the hundredth of a second.
That margin almost put Armstrong in yellow for the 84th time in his career. But more importantly, it set up Astana for a cinch victory in this year's Tour. Cancellara can't climb, so he's not a GC contender. The other contenders? They have too much time to make up to overcome the Astana lead. Carlos Sastre, who won last year only because Contador and Astana were excluded from the race (don't get me started on that travesty), is 2:44 behind Armstrong, 2:25 behind third-placed Contador, 2:21 behind fourth-placed Andreas Kloden, and 2:13 behind fifth-placed Levi Leipheimer. Between those four Astana riders, they have 12 Tour podium appearances. Tough to make up that much time on that set of riders.
Two-time bridesmaid Cadel Evans is 2:59 down on Armstrong, and 2009 Giro winner Denis Menchov is nearly another minute back.
Heading into the steep stuff on Friday, Astana also has a couple of other mountain goats in seventh and 11th place. Only Team Garmin's Christian Vandevelde and Columbia's Hincapie have a decent GC shot at this point. Things are setting up nicely for a 1-2-3 finish for Astana, an unprecedented feat that would put a nice feather in Bruyneel's cap, regardless who's in what position.
Armstrong is smart like a fox - ask Jan Ullrich. And Contador can either learn from him, or congratulate him on the podium in Paris.
First, a follow-up to my proposed reforms posted yesterday. Here are some more, some proposed by my good buddies at d2football.com, some fleshed out from what I already came up with, and some that I forgot about, or came up with later.
1. I'd also do away with the party conventions. I'd like to do away with the parties, period, and have the election process simply be "Citizen A running for president, not Member X of the RNC," as one of my d2 pals put it. Not sure how to pull that off though.
2. I'd also do away with caucuses, in favor of primaries. And no dual-selection processes like we have in some places in Texas.
3. I'd scrap the electoral college. Not that a popular vote doesn't have its flaws, but the electoral college today simply leads to candidates playing a numbers game, and focusing on "key states" and "swing states" while ignoring others, either because they're a foregone conclusion to go to one party or the other, or because they don't carry enough electoral votes to matter. EVERY vote MUST matter!
4. To clarify, POTUS could take AFOne on a leisure trip, but would have to pay the costs for it and the security detail out of pocket. If s/he can't afford it - too bad. There are plenty of opportunities to visit New York on official government business, and the prez could take in a Broadway show then. Besides, DC has decent entertainment. If a national crisis breaks out on a self-funded leisure trip, of course the taxpayer funds would come into play to pay for the altered travel plans.
5. I might reconsider the deductibility of charitable contributions. If I did, I'd remove the caps. If somebody wants to give 100% of their substantial income to charity, they should be able to do so, and have a tax incentive for doing it.
6. From the same d2 guy, I'd strip all official positions from the political parties, including Speaker and committee chairs. Let the congresspersons run for chairmanships, and be voted on by their peers. There'd be a new voting process with each election cycle.
7. From the same guy (maybe I should make him Chief of Staff), I'd reinstate the peacetime draft, with certain exemptions - disability, or employment in certain fields. Pay would be based in part on length of service commitment.
8. I would provide tax incentives for saving and investment. I'd up the IRA/401k limits, and remove the caps. We have to get back to being a nation of savers and investors, not borrowers and consumers.
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I hate even giving this blog space, but I'm sickened by the whole Michael Jackson thing. He was a marketing genius who surrounded himself with very good producers; he wrote catchy pop tunes with little substance or meaning; he was a prodigious child talent, but an average singer as an adult; and he could only have been popular as an entertainer in our current/recent culture.
And he was a pedophile.
Yet they're selling tickets to celebrate his life. What does that say about us?
When we heard on the news that there'd be all-day coverage of this media circus today, my wife lamented that it wasn't tomorrow instead: we'll be on airplanes all day.
Some news talking head commented that it was "highly unusual" to find the surgical drug Propofol in a private citizen's home. My first thought was that the words "highly unusual" fit Michael Jackson like ... well, like a glove.
A very excellent book I'm reading called "The Reason for God" made a very appropriate point that applies to Jackson's life. I believe the author, Tim Keller, might have been quoting C.S. Lewis. To paraphrase, he noted that there's a God-shaped hole in all of us. And when someone finally reaches the zenith of one's chosen field - the pinnacle of what one is really good at - and finds they're still the same broken schmuck they were when they were nobody, with all the attendant warts, hurts and demons, it has to be devastating. At that point, what else is there? What else can they do to be somebody different, the somebody they thought fame, fortune, success, whatever, would make them? When they realize that they're not that butterfly, but still the same old worm, what then?
It can only end badly, and we've seen it too many times.
When you've got one puzzle piece left, you fill it with the only piece that will fit. Try filling it with a perfectly round piece, or a square piece, and there's still a hole. Get the message?
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As a cycling fan, I find this year's Tour de France intriguing. It is fitting proof that experience can often trump youthful vigor. To wit: the sporting press are making a mountain out of the molehill that Lance Armstrong, at age 37, managed to be in the lead group that split from the peloton yesterday, just when the group hit the stiff Mediterranean winds near the French coast, while his compatriot, young Alberto Contador, reportedly and presumably the leader of their Astana team, got caught in the back group.
I say it was no rivalry-bred conspiracy, but a simple matter of the experience of a seven-time Tour winner, who's forgotten more about racing tactics than most in the peloton will ever know, versus the lack of savvy of a young stud who's won three major tours, but with the guidance of cycling's greatest tactician, Johann Bruyneel.
Look back at past Tours. In those nervous, early stages, Armstrong always rode near the front. Always. That's what leaders do. You avoid the surprises, the unexpected breakaways, the field splits, and the crashes. That Conti was leisurely making his way from the back of the pack to the middle at that point just shows that he has a lot to learn.
Former Armstrong lieutenant George Hincapie, now a rival, was in the front group. Conspiracy? Nope. Big George is himself a veteran of 14 Tours. He knows the game. Two Astana teammates were with Armstrong. Team rift? Doubtful. If I were on Armstrong's team, I'd be on his wheel as long as I could hold it. You don't win 7 Tours by being lucky. The only reason I wouldn't be on his wheel would be if I were an arrogant young buck who thought his climbing prowess and his post-Armstrong successes made the leadership of the team his birthright. And that may prove Contador's downfall.
What if Armstrong and his two teammates had stayed back with their "leader," Contador?
Well, first, it was no accident that Astana had positioned itself as the leading team headed into today's team time trial. I have to believe it was part of Astana's strategy. Knowing the TTT was coming on the fourth stage, and that the leading team is last to hit the course, you'd want to be that team, so that you'd know all the other teams' split times at each of the three checkpoints. That strategy was also likely led by Armstrong and Bruyneel.
After stage one, in which Astana smashed the opening time trial, placing four riders in the top ten, and stage two, Astana held the team lead by 31 seconds over yellow jersey Fabian Cancellara's Saxo Bank team. The split between the lead group - containing Armstrong, the two other Astana riders, and race leader Cancellara - and the main group on Wednesday was 41 seconds. There were no other Saxo riders in the lead group.
Had Astana had zero riders in the lead group, they'd have possibly lost the team lead. As it was, Armstrong's two teammates in the lead group put the hammer down, putting distance between the two groups to maximize the TEAM's advantage. (That also fueled the conspiracy theories.)
Of course, with the benefit of being able to start the TTT last, Astana destroyed the field today. Looking at the average times from the lead five riders - those whose times count in the TTT for the team time - from Saxo and Astana from Stage 1's 15.5 km time trial, and extrapolating the distance to today's 39.9 km, produced a 44 second gap between Astana and Saxo Bank.
Astana beat Saxo by 40 seconds, enough to put Armstrong in second by a scant 0.22 second - a margin so small that the race officials had to go back to to Stage 1's results and, combined with today's, calculate the times to the hundredth of a second.
That margin almost put Armstrong in yellow for the 84th time in his career. But more importantly, it set up Astana for a cinch victory in this year's Tour. Cancellara can't climb, so he's not a GC contender. The other contenders? They have too much time to make up to overcome the Astana lead. Carlos Sastre, who won last year only because Contador and Astana were excluded from the race (don't get me started on that travesty), is 2:44 behind Armstrong, 2:25 behind third-placed Contador, 2:21 behind fourth-placed Andreas Kloden, and 2:13 behind fifth-placed Levi Leipheimer. Between those four Astana riders, they have 12 Tour podium appearances. Tough to make up that much time on that set of riders.
Two-time bridesmaid Cadel Evans is 2:59 down on Armstrong, and 2009 Giro winner Denis Menchov is nearly another minute back.
Heading into the steep stuff on Friday, Astana also has a couple of other mountain goats in seventh and 11th place. Only Team Garmin's Christian Vandevelde and Columbia's Hincapie have a decent GC shot at this point. Things are setting up nicely for a 1-2-3 finish for Astana, an unprecedented feat that would put a nice feather in Bruyneel's cap, regardless who's in what position.
Armstrong is smart like a fox - ask Jan Ullrich. And Contador can either learn from him, or congratulate him on the podium in Paris.
Monday, July 6, 2009
I'm Ba-aack!
I decided to return to the blogosphere after all, and the topic for today is reforms.
Having grown completely and entirely sick, tired and disgusted of all politicians and of politics in general, I spent part of my hiatus from this blog thinking about what I'd do differently "if I were king," to rip off the Wizard of Oz.
If I were prez, this would be my agenda, in no particular order (recognizing that in the current environment in DC I could never accomplish it, and that some of these things would be beyond my purview as POTUS - either states' issues or congressional ones):
1. Complete campaign reform. This includes limiting campaigning for president to a nine-month period running prior to the election - none of this running for two years crap. Debates would be set in advance, limited to three for the primaries and three for the general election, and would follow the same format for each. Every candidate would have an opportunity to answer each question - no more limiting questions to some candidates, as happened to Huckabee and Paul in one of the last GOP debates. The moderator could not come from the mainstream media - I'm not sure whom I'd pick, maybe draw from a lottery, or maybe have all questions submitted from the people, electronically via a website, e-mail or phone. A switch would be placed on each candidate's mic, and when they hit their time limit for a question the mic would shut off. Likewise, if their answer were off-topic, or if they tried to veer off-topic after giving an answer, the mic could be shut off and we'd move to the next question. Three infractions, and they're out of the debate, and all subsequent ones. If they can't play by the rules in a debate, they're unlikely to in office.
There would also be significant campaign finance reform, including the elimination of all PACs, and a cap on funds raised - any funds donated above the cap would go to pay down the national debt.
2. Congressional term limits, two terms for senators and six for representatives. Twelve years is long enough to serve in any job. Also, congressional bennies would expire after a time period equal to the time the congressperson served. So if the lawmaker serves the full 12 years, they'd get 12 years of post-service bennies before they expired and they had to get a real job. If a rep serves one term then loses, they'd get two years of bennies. The bennies would be those they'd get during active service; the pension would be equivalent to 80% of their annual pay the last year they served, with no COLAs during the payout period.
3. Congress could no longer approve their own pay raises. They - and the president - would get an annual COLA equal to headline CPI for that year, period. And in any year there was a budget deficit, they'd get nada. If the deficit exceeded 5% of GDP, they would each take a pay cut that year equal to the deficit as a percent of GDP (this year they'd get whacked by about 13%), with the money going to pay down the deficit. And they'd get no chance to recoup that pay cut, just the annual COLAs.
4. I'd pursue real, meaningful tort reform. There would be caps on awards, including medical malpractice suits, maybe dependent on the nature of the injury. I'd want to consult more on that with my HHS Secretary, a very smart doc I know. I'd also streamline the FDA drug approval process - it shouldn't take any longer to get a drug approved here than in other developed countries. And I'd break the insurance companies' stranglehold on medicine - again, I'd defer to my HHS Secretary on the details.
5. Neither the president nor congress would have more than six weeks' paid vacation per year, and there would be no junkets. Camp David would only be used if the president had to be whisked out of DC for security reasons, or to entertain foreign dignitaries - never for a leisurely getaway. It would be a working retreat. AFOne could not be used for weekend trips on leisure, at least on the taxpayers' dime - if the president wanted a weekend getaway, he'd still use AFOne and have the appropriate security detail, but it would come out of his own pocket (or hers). In fact, the president and each elected congressperson would have an annual travel budget that could not be exceeded except if there's a national emergency that required travel, and any expenditures over budget would come out of pocket.
6. It would be law that former lobbyists could not be given cabinet appointments, and no elected official could serve as a lobbyist after their term for a period of time equal to the term served in office.
7. The Fed would function solely as a central bank and lender of last resort, and its balance sheet would be limited in size. It could not regulate. And it would be completely independent, by a constitutional amendment if necessary.
8. There would be a line-item veto. Also, no spending bill could be voted on until the people had a chance to review it for three weeks, and no lawmaker could vote on a spending bill without signing an affidavit, subject to legal action, attesting to his/her having read and understood it.
9. The IRS, Dept. of Education, and probably the DEA and ATF would be eliminated. A flat tax would be imposed in place of the current structure, with no itemized deductions.
10. Unemployment benefits could not be extended by Congress. Thirteen weeks, period.
11. Any state that wanted federal funding for education would have to make financial literacy a part of the core public school curriculum, beginning at the elementary school level and continuing through high school.
12. Usury limits would be put in place. Payday lending would be illegal. Any financial institution that offered car loans in excess of five years and/or mortgages other than fixed-rate loans with at least 10% down, documented income, and maximum debt-to-income ratios would have to hold all such loans in portfolio.
13. Derivatives markets would be regulated, and the old CFTC rules relating to hedging would be brought back. Wall Street firms could not qualify as real commodity hedgers, only qualified end users.
14. I'd kill the cap and trade idea.
15. Illegal immigrants would be just that: illegal. If they wanted to apply for citizenship, they could, following the same rules as anyone else, after the appropriate punishment for being in the US illegally. If someone was in the US illegally and had a child, that child could not be a US citizen without going through the application process. No free education, welfare, etc.
16. The US would pull out of the UN, and the UN would be kicked off US soil.
I'm sure I could think of more, but that's a decent start for my first term.
Having grown completely and entirely sick, tired and disgusted of all politicians and of politics in general, I spent part of my hiatus from this blog thinking about what I'd do differently "if I were king," to rip off the Wizard of Oz.
If I were prez, this would be my agenda, in no particular order (recognizing that in the current environment in DC I could never accomplish it, and that some of these things would be beyond my purview as POTUS - either states' issues or congressional ones):
1. Complete campaign reform. This includes limiting campaigning for president to a nine-month period running prior to the election - none of this running for two years crap. Debates would be set in advance, limited to three for the primaries and three for the general election, and would follow the same format for each. Every candidate would have an opportunity to answer each question - no more limiting questions to some candidates, as happened to Huckabee and Paul in one of the last GOP debates. The moderator could not come from the mainstream media - I'm not sure whom I'd pick, maybe draw from a lottery, or maybe have all questions submitted from the people, electronically via a website, e-mail or phone. A switch would be placed on each candidate's mic, and when they hit their time limit for a question the mic would shut off. Likewise, if their answer were off-topic, or if they tried to veer off-topic after giving an answer, the mic could be shut off and we'd move to the next question. Three infractions, and they're out of the debate, and all subsequent ones. If they can't play by the rules in a debate, they're unlikely to in office.
There would also be significant campaign finance reform, including the elimination of all PACs, and a cap on funds raised - any funds donated above the cap would go to pay down the national debt.
2. Congressional term limits, two terms for senators and six for representatives. Twelve years is long enough to serve in any job. Also, congressional bennies would expire after a time period equal to the time the congressperson served. So if the lawmaker serves the full 12 years, they'd get 12 years of post-service bennies before they expired and they had to get a real job. If a rep serves one term then loses, they'd get two years of bennies. The bennies would be those they'd get during active service; the pension would be equivalent to 80% of their annual pay the last year they served, with no COLAs during the payout period.
3. Congress could no longer approve their own pay raises. They - and the president - would get an annual COLA equal to headline CPI for that year, period. And in any year there was a budget deficit, they'd get nada. If the deficit exceeded 5% of GDP, they would each take a pay cut that year equal to the deficit as a percent of GDP (this year they'd get whacked by about 13%), with the money going to pay down the deficit. And they'd get no chance to recoup that pay cut, just the annual COLAs.
4. I'd pursue real, meaningful tort reform. There would be caps on awards, including medical malpractice suits, maybe dependent on the nature of the injury. I'd want to consult more on that with my HHS Secretary, a very smart doc I know. I'd also streamline the FDA drug approval process - it shouldn't take any longer to get a drug approved here than in other developed countries. And I'd break the insurance companies' stranglehold on medicine - again, I'd defer to my HHS Secretary on the details.
5. Neither the president nor congress would have more than six weeks' paid vacation per year, and there would be no junkets. Camp David would only be used if the president had to be whisked out of DC for security reasons, or to entertain foreign dignitaries - never for a leisurely getaway. It would be a working retreat. AFOne could not be used for weekend trips on leisure, at least on the taxpayers' dime - if the president wanted a weekend getaway, he'd still use AFOne and have the appropriate security detail, but it would come out of his own pocket (or hers). In fact, the president and each elected congressperson would have an annual travel budget that could not be exceeded except if there's a national emergency that required travel, and any expenditures over budget would come out of pocket.
6. It would be law that former lobbyists could not be given cabinet appointments, and no elected official could serve as a lobbyist after their term for a period of time equal to the term served in office.
7. The Fed would function solely as a central bank and lender of last resort, and its balance sheet would be limited in size. It could not regulate. And it would be completely independent, by a constitutional amendment if necessary.
8. There would be a line-item veto. Also, no spending bill could be voted on until the people had a chance to review it for three weeks, and no lawmaker could vote on a spending bill without signing an affidavit, subject to legal action, attesting to his/her having read and understood it.
9. The IRS, Dept. of Education, and probably the DEA and ATF would be eliminated. A flat tax would be imposed in place of the current structure, with no itemized deductions.
10. Unemployment benefits could not be extended by Congress. Thirteen weeks, period.
11. Any state that wanted federal funding for education would have to make financial literacy a part of the core public school curriculum, beginning at the elementary school level and continuing through high school.
12. Usury limits would be put in place. Payday lending would be illegal. Any financial institution that offered car loans in excess of five years and/or mortgages other than fixed-rate loans with at least 10% down, documented income, and maximum debt-to-income ratios would have to hold all such loans in portfolio.
13. Derivatives markets would be regulated, and the old CFTC rules relating to hedging would be brought back. Wall Street firms could not qualify as real commodity hedgers, only qualified end users.
14. I'd kill the cap and trade idea.
15. Illegal immigrants would be just that: illegal. If they wanted to apply for citizenship, they could, following the same rules as anyone else, after the appropriate punishment for being in the US illegally. If someone was in the US illegally and had a child, that child could not be a US citizen without going through the application process. No free education, welfare, etc.
16. The US would pull out of the UN, and the UN would be kicked off US soil.
I'm sure I could think of more, but that's a decent start for my first term.
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