Detailed Abstractions

Here we go again…. yet another marketing campaign by the Obama Administration to tout bail out packages that has yet to do anything they’ve previously promised (DA Post here) as a rousing success.   These silly marketing games seem to work well for politicians, but what logic tells us is that you can’t prove a negative.  The Obama Administration can tout bailout monies spent for any reason in to any success they please because proving that it would’ve been better without the money is a nonexistent hypothetical situation for which we can only guess.

& with upcoming elections, for which Democrats currently seem to be in some trouble (polling data here via RealClearPolitics), they will continue this regardless of any true facts which show the opposite.  This week, with some gall, they plan to use the auto show in Detroit (here via Policito):

When the president travels to Michigan on Friday, he’ll tout the revival of General Motors and Chrysler since the auto companies received billions in federal aid and government-assisted bankruptcies….

I say with gall, because they fully intend to tout even more success with blown money when the only major car company to NOT take bail out money is doing better than their rivals (here via Star-Tribune):

DEARBORN, Mich. – Four years ago, Ford mortgaged everything down to the blue oval logo to save itself. Now, even as Americans remain skittish about the economy, it’s reaping big rewards and stealing business from stumbling rivals.

Ford said Friday that it made $2.6 billion from April through June, its fifth straight quarterly profit. The company, which reported record losses in 2008, now predicts it will end 2011 with more cash than debt.

With its two longtime Detroit rivals still finding their way after spending time in bankruptcy last year, Ford, which never took government bailout money, extended its success story…..

Yep, instead of using this time to stand up for the ingenuity, the self reliance, the perseverance of private individuals working without taking tax money, they will use this to tell us all how much better off we are than if they hadn’t.

Oh… and in case you might be one of those people who know about Ford’s success, they have an answer for that as well (here via Detroit News):

Washington — The Senate’s top Democrat argued Ford Motor Co. probably would have collapsed if the government hadn’t bailed out its top two competitors….

So there you have it, even with logical evidence to the contrary, not only did the all knowing government help out two companies that are still barely surviving, but also completely fixed a company for which they contributed nothing directly.

The 9th Circuit strikes again…. via LA Times (here):

SAN FRANCISCO — A sharply divided federal appeals court in California on Monday exposed Wal-Mart Stores Inc. to billions of dollars in legal damages when it ruled a massive class action lawsuit alleging gender discrimination over pay for female workers can go to trial….

Now I don’t claim to be a lawyer and haven’t even played one on tv, but part of the dissent seems obvious to me:

…Judge Sandra Ikuta wrote a blistering dissent, joined by four of her colleagues.

“No court has ever certified a class like this one, until now. And with good reason,” Ikuta wrote. “In this case, six women who have worked in thirteen of Wal-Mart’s 3,400 stores seek to represent every woman who has worked in those stores over the course of the last decade — a class estimated in 2001 to include more than 1.5 million women.”…

Maybe they like being overturned (here from 2007)?

…The 9th Circuit also has a long-running streak as the most overturned, which went unbroken this year. The Supreme Court reviewed 22 cases from the 9th Circuit last term, and it reversed or vacated 19 times….

Via WSJ, The Big Brown Union Bailout

If you can’t beat ‘em, have Congress hobble ‘em. That’s the motto of some in corporate America, and Exhibit A might be United Parcel Service’s campaign to get Washington to impose its labor woes on rival Federal Express. This would be one more union bailout at the expense of business competition and economic efficiency….

This is a continuation of this administration’s policies to pay off unions at the expense of others (DA posts here).

Via Reason.com, GM’s Phony Bailout Payback

Uncle Sam gave GM $49.5 billion last summer in aid to finance its bankruptcy….  So when Whitacre publishes a column with the headline, “The GM Bailout: Paid Back in Full,” most ordinary mortals unfamiliar with bailout minutia would assume that he is alluding to the entire $49.5 billion. That, however, is far from the case….

I say if you want to buy American, buy Ford – no bailout money and still going strong.

& cool science news via e!Science (here):

…In a study published as an Advance Online Publication in the journal Nature Nanotechnology on Sunday, physicists at Ohio University and the University of Hamburg in Germany present the first images of spin in action….

In a story that might have more than it appears, GM announced it will not go through with a deal it announced in early summer to sell their German division Opel.

The story really first appears as the auto company bail-out was in full swing in the US.  GM had pushed a reorganization plan that cut jobs in all countries.  With German Chancellor Angela Merkel getting pressure due to the global economic crisis and facing a re-election, Opel became more important than first assumed (@BusinessWeek):

….On Tuesday, though, German Chancellor Angela Merkel said Opel was not a “system-critical” corporation. “There are system-critical financial institutions,” she told her conservative party’s parliamentary group, according to the Rheinische Post newspaper. “But there are no system-critical industrial firms.” It was Merkel’s indirect way of saying that Opel is less important to Germany than its crisis-stricken banks. Her statements were intended to counter earlier comments made by the head of the left-leaning Social Democratic Party that Opel was indeed “system relevant.” She added, however, that Opel should be given a chance to survive and that like all companies, it has the “right to apply for state aid.”…

It not only became more important, but Chancellor Merkel started treating it as imperative to re-election (@France24.c0m):

Unless you were lucky enough to be traveling or otherwise unavailable on Sunday, you were likely deluged with Mr. Obama’s media storm to sell not only health care, but apparently many other items as well.

First, it should be noted that this WH is above all, extremely insecure.  The President could be seen on 5 Sunday news shows: NBC, ABC, CBS, CNN and Univision.   But he didn’t have time for Fox, the number one rated Sunday news show…

Regardless of the WH being extremely petty and worrying more about perceived injustices than an honest discussion with those who might disagree, what he actually said is far more serious.

When asked if a health care mandate was a tax increase on ABC’s this week, the President responded:

…”I absolutely reject that notion,” the president said….

“What it’s saying is, is that we’re not going to have other people carrying your burdens for you anymore,” said Obama. “Right now everybody in America, just about, has to get auto insurance . Nobody considers that a tax increase.”…

Using flawed logic is nothing new for Presidents, but this one isn’t even close.  Hhe’s analogizing the privilege of driving with the “privilege” of being a citizen.

The difference of course as that by my very birth, I have a “right” to be a citizen, whereas driving has always remained a privilege with constraints.  You see, I can forgo auto insurance, so long as I don’t drive.  There are many ways around without a car in this day and age, but if I “choose” to drive, then constraints can be placed on me.

Health care on the other hand would be required simply because I existed and no other reason.  & If the government says, “You have to buy this” – it is a tax increase as not paying it can land you in very serious legal troubles.

On CBS’s Face the Nation, with an omnipotent sense of when health care, our fearless leader goes further:

…Obama put his support behind the idea of taxing employers that offer high-cost insurance plans.

“I do think that giving a disincentive to insurance companies to offer Cadillac plans that don’t make people healthier is part of the way that we’re going to bring down health care costs for everybody over the long term,” Obama said on NBC’s “Meet the Press.”…

Even ignoring the fact that this goes against his basic premise that more people need more health care, one wonders if there is anything our President doesn’t know.  So far, he’s taken over banks, car companies, told car companies with whom to merge, who to hire, who to fire, what to build… and now we find out he knows how much health care is too much.

But let’s not stop there.  Not only is our community organizer one of the smartest men in America when it comes to economics and health care, he’s also a brilliant strategist with respects to Afghanistan:

…”What I’m not also gonna do, though, is put the resource question before the strategy question,” Obama told NBC’s David Gregory on “Meet the Press.” “Until I’m satisfied that we’ve got the right strategy I’m not gonna be sending some young man or woman over there- beyond what we already have.”…

I’m not sure exactly what happens to man to think he has the answers to every single last question. Maybe it’s just arrogance and ignorance, as Hayek stated:

If most people are not willing to see the difficulty, this is mainly because, consciously or unconsciously, they assume that it will be they who will settle these questions for the others, and because they are convinced of their own capacity to do this.

Whatever the reason he believes so strongly in his ability to decide what’s best for our own good, history shows us without question where this inevitably leads.  Hayek again:

To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.

Let’s hope we begin to understand the value of humility before we do too much damage.

Well, we’ve moved from Cash for Clunkers onto Cash for Appliances and politicians everywhere have patted themselves on the back for what a fine job the original program did.

According to most news reports, sales were up a tremendous amount due to this program.  ABC News reports Auto Sales Up in August Thanks to Cash for Clunkers, Bloomberg reports U.S. Consumer Spending Climbs on ‘Cash for Clunkers, and CNN reports 4th UPDATE: Auto Industry Posts Best US Sales Of Year.

If one just reads the headlines and do the normal drive-bys on the news, this is yet another government program which is a rousing success.

This assumes of course you only look on the surface.  Looking further, there were many consequences of this program that probably wasn’t helpful.  Listing the potential and real negatives is a worthwhile endeavor if we truly wish to analyze the situation.  Since I can’t sum up the problems with this program any better than Cato has, Chris Edwards posted on their blog:

* A few billion dollars worth of wealth was destroyed. About 750,000 cars, many of which could have provided consumer value for many years, were thrown in the trash. Suppose each clunker was worth $3,000 at a guess, that would mean that the government destroyed $2.25 billion of value.

* Low-income families, who tend to buy used cars, were harmed because the clunkers program will push up used car prices.

* Taxpayers were ripped off $3 billion. The government took my money to give to people who will buy new cars that are much nicer than mine!

* The federal bureaucracy has added 1,100 people to handle all the clunker administration. Again, taxpayers are the losers….

* The auto industry received a short-term “sugar high” at the expense of lower future sales when the program is over. The program apparently boosted sales by about 750,000 cars this year, but that probably means that sales over the next few years will be about 750,000 lower. The program probably further damaged the longer-term prospects of auto dealers and automakers by diverting their attention from market fundamentals in the scramble for federal cash.

This isn’t to say they’re weren’t positives.  This only mean that using a vision which includes more than the past couple of months to analyze the situation will objectively result in either seeing this as a smaller success than currently marketed, or more likely, seeing this as an actual failure.

This is a continuous issue with basic human thinking.  All humans due to brain wiring and evolution have certain built in biases that cause us to make ineffective decisions.  By better understanding those biases, we can seek to minimize them.  Without minimization though, this thinking results in quick based resolutions that are overreaching and often end with a result much different from intended.

A few easy recent examples come to mind.  Sarbanes-Oxely, the Patriot Act, and McCain-Feingold.

Using SOX, lots of new regulations were added to company finance reports due to Enron, MCI, and other companies.  However the regulations can’t possibly prevent what took place nor can they do any better than what happened.  In Enron’s case, corrupt management ruined a business and they went to jail.  SOX will not prevent another Enron and I think the incentives against doing it again already exist when CEOs, CFOs, and others lose their business and their freedoms.

The true result of SOX?  A new industry of people and millions and millions spent by companies to ensure compliance, which is passed on to consumers that will not prevent future fraud (Bernie Madoff?).

Another example – even small decisions made too fast can turn out to be completely wrong.  Here in St. Louis, MO, they renamed a part of I70 after Mark McGwire due to his home run record.  It was a travesty to begin with as the road used to be named after Mark Twain, but after the steroid scandal included Mr. McGwire the idiocy and quickness of the decision was easy to see.

Additionally, the economy; lots of us still wish for the 90s when jobs were extremely plentiful, pay was high, and the economy was moving forward with lots of momentum.  Long term view?  It turned out to be a ponzi scheme that was mostly paper profits which resulted in a bubble that, as with all bubbles, burst.   Indeed, there was no new business cycle or new business rules that changed the economy in such a way as to guarantee no more downturns.  Several very large companies declared bankruptcy, CEOs went to jail, and millions of individuals lost a lot of their retirement money as their 401Ks nosedived.

In some ways though, making quick decisions makes complete sense.  In our very quick world, we are forced to make decisions quickly and lots of times, make those decisions based upon partial information.  In business, product innovation, management decisions, battlefield tactics, and in many other places this is necessary and having the skill to do this well is a requirement in most aspects of today’s professional life.

However, even though quick decisions on partial information are required in today’s world, we must still be cognizant of potential long term ramifications if we truly intend to leave a world for our children and grandchildren that is better than we found it.

Otherwise, we can continue to only contemplate things in small slices of time and we will certainly continue down the road of bad decisions.

Of course that’s just my two synapses rubbing together… I could be wrong.

For those interested in what some “journalists” are claiming to be “fishy” emails as such, here comes Slate to the rescue.

In an article titled Obama Wants to Kill Your Grandma, author Mike Madden does his best to stump for health care reform by building, then burning several men mad of straw.

The five myths he sees?

Myth 1: Democrats want to kill your grandmother

Myth 2: The government — i.e., you — will have to pay for abortions.

Myth 3: Obama will ban all private health insurance.

Myth 4: The government can’t possibly run a healthcare program.

Myth 5: Unlike private insurance, government bureaucrats will ration care

I consider myself pretty well informed and have yet to hear any of this crap, but lets assume it is being talked about.  Are they truly myths?

Skipping the first one completely as no one who understands rational thought honestly believes that politicians would endanger themselves by pushing for legislation they knew would kill their constituents.  Even with my very low thoughts about most politicians and their ability to critically think, politicians are rational.  & rational politicians can’t get re-elected if they purposefully wish to kill their citizens.

So, if someone reads an email that states, “Democrats want your grandma to die” and believes it, I think the fault lies with them and not the idiotic author.

On Myth #2 (abortions will be paid for): Since most Democratically controlled state government gives money to Planned Parenthood and one of Obama’s first act as President was to remove the executive order President Bush signed disallowing international funds to be used for abortion, this doesn’t seem all that “mythy”…

Please note:  I’m not making any judgment on abortion here, but it seems reasonable to expect prior behavior to continue.

On Myth #3 (the plan will ban private insurance):  I haven’t honestly heard it expressed in this way.  Most people who are against the plan for this reason, haven’t said the plan expressly forbids private health insurance, only that the government would be competing on an even playing field.  First, they wouldn’t pay taxes.  Second, they would have tax payer dollars to finance any potential loses.

Both of these things makes it nigh impossible for a private industry to compete with a public one.  Therefore, it’s predictable that this is the end result of the legislation and not a myth at all.

On Myth #4 (government can’t run health care):  The author uses Medicare & VA health care as reasons it’s possible.  It’s obvious that he is either completely unaware of Medicare’s cost overruns adding an unfunded liability to future generations of 30 trillion more than expected, but he apparently also missed the part when every politician in the country was screaming about how bad VA care is.

It’s also obvious, he’s never been to a VA hospital for care.  Either way, this is an opinion and in no way a myth.

Finally, the last one, Myth #5 (unlike private insurance, the government will ration care):  This myth is well worded for people unwilling to honestly debate health care.  For those willing to look at health care rationally though, the statement includes a false assumption, thereby invalidating it completely.

From mu understanding, no opponents have claimed that private insurance isn’t a rationing system.

Far from it, most of the opponents against government run health care seem to be the only ones willing to tell the truth.

The truth – health care will always be rationed.  Since there will always be an infinite want for health care, but for obvious reasons finite resources, rationing has to exist whether it’s private rationing or public rationing.

So the idea that this is a “myth” is simply another straw man playing with matches.

For those willing to go further, the real question is whether the market is more efficient at doing this job and therefore likely to be able to actually cover more people than the inefficiencies of the government itself.

The author may certainly disagree that the market provides a better solution, but it is not a myth.

It seems that for America, debates on major policy decisions are inversely proportional with rational thought.  For instance, on just two large questions – “Should we use pre-emptive strikes?” or “Should we completely remake health care” the main pieces of the debate has been obfuscation, logical fallacies, and messenger assassination. Which would make complete sense if we were a third world country where facts are hidden.

Since we’re not, it’s odd that for all the well meaning people who honestly believe that this is one of the largest questions of our time, the debate is nothing but a bunch of rhetorical gymnastics.

One last thing - when ever anyone is discussing any particular legislation and its potential future effects one must keep in mind that no one can prove or disprove any future hypothetical wrong.  The best thing we can honestly do when evaluating future predictions is to understand that most of them will be wrong for lots of reasons.

One important principles that should be kept in mind when passing 1200 page legislation aimed at completely overhauling 1/7th of the economy are unintended consequences.

This principle was demonstrated very well recently with a small program known as Cash for Clunkers.  Passed to remove older cars from the road to increase gas mileage of the current fleet, it actually produced several unintended consequences… some good, some bad.

Good:  It was a quick stimulus to the automobile industry

Bad:  It appears that most people traded in a 3rd truck for a new SUV.  It appears that the gas mileage differences are negligible.

Bad:  By taking $1000 cars, which poorer folks or younger kids, could use to get to work and/or school and giving them a value of $3000-$4500, we’ve hurt the poors chances to become mobile.

& many more, some of them we don’t even know or have yet to fully realize.  The reason is obvious, 536 people (Senate, Congress, & the President), no matter how smart, have enough brain power to effectively move the market in any direction they wish for the betterment of any particular group.  I wish we had people this smart, but even Einstein would be unable to effectively predict policy outcomes due to the myriad of people who will use those policies in their independent rational way.

As with all propaganda, calling things lies that you can’t disprove and burning randomly built straw men all make for very nice rhetorical tricks, but rational people should know better.

Before Mr. Putin and others in the Russian government decided against freedom for all and started moving back towards an authoritarian regime, they talked a lot about pushing Glasnost.

This Russian word has been in their language for quite some time, but more recently, Mikhail Gorbachev changed the meaning.  In the 1980′s, he used the word in policies, speeches, and everywhere he could to push new changes in the Communist government.

The word was used to describe the new government system as being more transparent and more open.  Worldwide people knew the word and used it as a synonym for openness.  Mr. Gorbachev used the word to hopefully shape policies that would’ve reduced corruption and increased citizen engagement.

Fast forward to the 2008 US Presidential election and things looked much the same.  After going through a war time President, where secrecy is always valued more highly than during peace time, most Presidential candidates argued that transparency was missing in Washington.

Voters readily agreed with these statements and should’ve.  Using basic human conditioning, logic, & game theory, we know that transparency does indeed reduce corruption and increase engagement.  Anonymous actions and transactions are some of the ways the corrupt around us succeed.  Looking at Enron, socialistic governments, even your neighbors, will help prove this concept.

Even President Barak Obama pushed this openness and transparency.  He even pushed so hard during the campaign, that it became a cornerstone of how his administration would be better than others.  In the first 100 days, we even saw glimmers of hope that this would happen:

President Obama embraces openness on day one

Vowing transparency, Obama OKs ethics guidelines

MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES

FDA transparency committee set up under Obama openness pledge

& many, many more

Naturally, like all things, the devil is in the details.  Since Mr. Obama’s changes in the very beginning to certain rules and such, we have very much witnessed an administration that is just as willing to hide details from the public as were previous administrations.  The main difference lies, not in whether any given administration is open, but only in what facts they wish to conceal.

As proof of this assertion, look no further than the Clunker for Cash programs.  The program, designed to remove old cars off the road, has looked extremely successful.  In just 11 days, more than 250,000 older cars were removed from the US and replaced with more fuel efficient and cleaner cars.

This also helped spark demand in the auto industry which was a welcome side benefit during the recession.  From all accounts, the program was successful and is potentially something we should continue to fund going forward.

Why then the refusal to share information (here) about this prized program?

The Obama administration is refusing to release government records on its “cash-for-clunkers” rebate program that would substantiate — or undercut — White House claims of the program’s success, even as the president presses the Senate for a quick vote for $2 billion to boost car sales.

It seems odd that an administration which has proactively bound their belief system to the ideas of transparency and openness would prevent the distribution, of what seems like innocuous, information.

Since we have no proof, I don’t wish to use conjecture or speculation about to why the admin is refusing to deliver the information they claim makes their case for refunding the program, but the possible reasons are almost endless.  Some include:

They could knowingly be hiding damaging information.  IE- the data doesn’t support their current contention.

They might not be able to really get the full set of information they are claiming they have… IE – they spoke earlier than they should’ve about the program using incoming information instead of complete information.

They might have all the information they will likely get, but it might not contain specific data to help resell the program.  IE – we know it was used 250K times on these types of cars, but do we know whether this actually increased demand, got people to trade-in cars they wouldn’t have otherwise… etc, etc

But whatever the reason for the refusal, you would think in an “open” administration, at the very least, should communicate the reason the data has been delayed (and not denied from an open administration) and when the data should be available to the public.

Of course when the current makeup of our politicians includes several hundred incumbents who have voted on both the Patriot Act & more recently, health care reform, without ever having enough time to read it…. and with current celebrity obsessed population being more enamored by style than actual substance…I don’t see any trends that positive change in true transparency is on the way for the US.

As we all know, Congress, the Senate, and the President of the United States is pushing hard for health care reform, which they promise us will lead to lower costs and will be completely revenue neutral.

To take their claims into context, these are the exact same individuals who brought us a really good program, Cash for Clunkers, only to bankrupt it in 1/11th the promised time.

The program, which was intended to remove older, less fuel efficient cars off the road, started on July 24th, 2009, with a total of $1 Billion dollars in assets (here):

…Approved last month, the program known officially as the Car Allowance Rebate System offers rebates of $3,500 to owners who relinquish cars rated at less than 18 miles per gallon to purchase ones getting at least 22 m.p.g. If the new vehicle gets at least 10 m.p.g. more than the trade-in, the rebate is $4,500. For SUVs, minivans and pickups, a 2 m.p.g. improvement is required, while a 5 m.p.g. gain nets the full rebate…

…The program is expected to run four months, or until the $1 billion is depleted. The National Highway Traffic Safety Administration has until July 24 to issue the final regulations, putting most transactions on hold until Friday…

It was supposed to last 4 months, but is now almost out of money (here):

WASHINGTON — Transportation Secretary Ray LaHood said Sunday that unless the Senate approves $2 billion in additional funding, the Obama administration could be forced to halt as early as Tuesday the “cash for clunkers” program that has become one of the most visible and fast-acting of the government’s economic-stimulus programs.

& the analysis itself wasn’t a simple mistake or a black swan.  We didn’t run into any unknown situations or start out with bad numbers.  The reason the initial analysis was wrong was negligence:

…U.S. auto sales have been running at an annual pace below 10 million a year since January, a steep drop from the 16 million annual sales levels normal earlier in the decade. That sales collapse has led to tens of thousands of layoffs at auto companies and the manufacturing and service firms that support them…

Using just those numbers alone, we expect 3.2 million cars to be bought in the next 4 months, but Congress allocated money for just  8% of expected sales, without apparently contemplating the obvious increase in demand.

Of course this is a minor example when comparing the relatively small number of $1 billion dollars (or $11 billion) against a $3 trillion dollar budget, but it’s clearly instructive.

Time and time again, the government had lead us down a path with promises of this and that kind snake oil, this and that kind of freedom.  Yet almost every single time, they have proven their inability to fully understand the consequences of legislation.

The amount of willful ignorance it mush take to be consistently wrong, but still think you’re helping now or will be helpful in the future is simply astounding.

But shooting fish in a barrel will only get us so far.  In our system of government, the end result is that the voters are truly responsible.  Politicians run on incentives like us all & as long as voters don’t hold them accountable for their mistakes, they have no obvious reason to change course.

If we as voters show, by our very actions, that we are ok with a system that rewards incumbency without contemplating actual results, rewards style over substance, rewards politically correct talk as opposed to direct debates, we are contributing to a system which will allow these actions to continue.

But since there doesn’t seem to be any grassroots effort aimed at actually changing the system itself instead of ensuring “our team” wins, we might as well ask the question:

How much did they say health care would cost?