Monday, November 26, 2012

Cyber Monday

The term Cyber Monday is fairly recent. is reputed to have created it in 2004. The idea was that people would be going back to work after Thanksgiving and using their employer's fast internet connection to do their Christmas shopping instead of doing it at home through a slow dial-up line.

The whole idea is pretty out of date. Who uses dial-up anymore? Most people have cable or DSL. Heck, my cell phone has 4G which is fast enough for streaming video and I can use it for an Internet connection if I really need to.

By now the thing has taken on a life of its own with Cyber Monday specials but it's all pretty silly. Christmas is still a month away (ok, 29 days) and nearly everyplace promises delivery in less than a week.

So, don't feel that you have to buy something today just because it is Cyber Monday.

Anyone Remember "Jesusland"?

A polarizing president wins reelection in a close competition. The other side starts talking about succeeding. 2012? Yes, but it also happened in 2004. Many Democrats talked about having the blue states succeed from the union and join Canada. The result would be the United States of Canada and Jesusland.

So, given that, why are so many on the left even reacting to talk of secession?

Friday, November 23, 2012

Obamacare and Unintended Consequences

One of the strongest Libertarian arguments against tight government controls is the law of unintended consequences. This says that things will never work out exactly as anticipated and the more complex the legislation the more unintended consequences it will spawn. Obamacare is complex and far-reaching so the unintended effects will be immense.

One of the first effects it is having is on part-time workers. One of the goals of Obamacare is to see that more people are covered by insurance. Currently, most part-time workers are not covered with part-time being defined as people working no more than 35 hours per week. When they were writing the legislation, some genius figured that if they lowered the limit on part-time hours then more people would be covered.

Keep in mind that it costs a lot more to hire a full-time employee than a part-time one. Places like restaurants and fast-food depend heavily on part-time employees. But now the definition of part-time employee is changing. Obamacare defines it as no more than 30 hours per week.

The employers have two options. One is to provide medical coverage for people. That is the intended consequence but those costs will be passed along to consumers. That will cost sales.

The other option is to cut part-time workers back to 30 hours and hire more workers. That complicates things for the employer but not as much as providing insurance would. But, it has a devastating effect on employees. They lose 1/7 of their income and now they are required by federal law to provide their own insurance.

Even colleges are cutting the hours on part-time teachers in order to cut costs.

So a change that was meant to increase coverage will instead cut people's hours.

Unintended consequences.

Wednesday, November 21, 2012

Benghazi Questions

More than two months after the event there are three unanswered questions about what happened.

  1. Why were the consulate and the ambassador so lightly guarded on that particular date? September 11 is an important symbolic date and the first anniversary of 9/11 since bin Laden was killed. Despite this, orders seems to ave gone out telling the various embassies to treat this date as business as usual.
  2. Why was the response to slow? The battle went on for four hours but it took 19 hours for relief to arrive.
  3. Why did the administration keep talking about a video? Yes, the President used the term "terror" in his Rose Garden speech in a general way. By the weekend the administration was insisting that the event was a protest that got out of hand. The CIA knew that it was a terrorist attack by the next day. Even if they did not want to specifically name al Qaeda, the talking points released made it clear that this was not a demonstration about a video.

The middle question implies incompetence and someone's head should roll. The other two questions imply politics. Remember Joe Biden's quote about why Obama should be reelected, "Bin Laden is dead and GM is alive." The GM part figured in many campaign commercials but the bin Laden part was also important. At various points the Obama campaign insisted that it was a "gutsy call" that Romney would not have made. Biden quoted Romney as saying that he did not see bin Laden's death as that important.

The implication was that the war on terror was won when we killed bin Laden. Romney's actual statement had been that he considered disrupting the organization more important than killing the top man.

The attack at Benghazi proved Romney's point. The organization is still capable of killing Americans. The Obama campaign needed to downplay that message and play up the idea that the war of terror had ended.

It is possible that the administration ordered the embassies to stand down from alert in order for political purposes - that they wanted to push the idea that we don't have to worry about terrorists any longer. If that is what happened then it backfired horribly. Even the protests that actually were inspired by the video were carefully managed to occur on and right after 9/11.

If that is true then Obama needed to keep things quiet until after the election. The idea that a president would leave state department personnel vulnerable for political purposes is enough to cost a president his reelection. Even if that was not true, the events that actually happened threatened to change the message from "Bin Laden is dead and GM is alive" to "Bin Laden is dead but al Qaeda is alive".

That is why these questions are important. We need to know if our government is playing politics with lives and lying to cover it up.

Monday, November 19, 2012

Hostess and the Unions

Hostess, maker of Twinklies and Wonder Bread, went out of business last week after union members refused to come back to work from a strike. This has lead to a national polarization. On one hand the ACL-CIO put out this statement:

What's happening with Hostess Brands is a microcosm of what's wrong with America, as Bain-style Wall Street vultures make themselves rich by making America poor. Crony capitalism and consistently poor management drove Hostess into the ground, but its workers are paying the price. These workers, who consistently make great products Americans love and have offered multiple concessions, want their company to succeed. They have bravely taken a stand against the corporate race-to-the-bottom. And now they and their communities are suffering the tragedy of a needless layoff. This is wrong. It has to stop. It's wrecking America.

Some information has been circulating that supports the union position and blames everything on incompetent management. This is incomplete.

Hostess has been in decline for a decade or more. Sales have been declining as the nation becomes more interested in a healthy diet. Their signature product, the Twinkie, is the poster child for junk food.

At the same time that their sales have gone down, their expenses have gone up. Hostess uses sugar instead of corn syrup and the price of sugar is kept artificially high bu government policy (at the same time, corn syrup is federally subsidized which is why so many food makers have switched). Prior to going out of business, Hostess had filed Chapter 11 bankruptcy twice.

Facing declining sales and rising costs, the only way that Hostess could stay in business was to cut expenses. Personnel is usually one of the highest costs in running a business so they asked the bankruptcy courts to approve a cut in pay. This was granted which lead to the strike.

I have seen short lists of issues circulating Facebook. They point out the multiple reorganizations and raises in management pay. All of these points are irrelevant. Hostess could not stay in business if its plants were closed due to a strike nor could it stay in business for very long if it didn't get wage concessions.

Two unions were involved. One, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) is affiliated with the AFL-CIO. The other union is the Teamsters Union. The Teamsters met with the Hostess management and agreed that wage cuts were the only way to stay in business. The BCTGM told its members that there were better options but did not specify any.

Obviously the management was not bluffing and the Teamsters blames the BCTGM for the loss of 18,500 jobs.

I don't know if they still teach about Pyrrhic Victories in school but this seems like a classic example. In Classical times, King Pyrrhus won two battles against invading Romans but he lost proportionally more of his army than the Romans did leaving Pyrrhus in a weaker position after his victories.

The AFL-CIO is celebrating this because it sends a message to management that worker concessions are off the table. They would prefer to see a plant closed than see its workers paid less.

It is certainly possible that Hostess was not a viable company in the long-term. Two reorganizations in less than a decade indicates that their problems went deeper than poor management. It is also possible that the BCTGM's claim is true that Hostess was planning on selling its parts. In that case, lower production costs would make it more likely that the plants would stay open under new owners. Regardless, the plants are closed now and the workers are unemployed.

Friday, November 16, 2012

Over the Cliff

The "Fiscal Cliff" is approaching. President Obama has made it clear that he will not accept a deal that does not raise the marginal rate on the highest earners. The Republicans have similarly made it clear that they are willing to eliminate tax adjustments and loopholes so that revenue is higher but they will not accept higher rates and actually would prefer the rates flattened.

Prior to the election I characterized it as a choice between competence and ideology. That is how this fight is breaking down. There is evidence to indicate that the Republican proposal would help the economy and the President's would hurt it. That does not matter to the President. He is fixated on having the rich pay a nominally higher percentage, even if they would pay as much or more under the Republican proposal.

The worst thing is that there are people on both sides rooting for the government to fall over the Fiscal Cliff.

The Fiscal Cliff was created a year and a half ago as part of the debt limit negotiations. Rather than continue to give the President unlimited spending power, the Republicans insisted that an immediate raise in the debt limit must be tied to long-term deficit reductions. With the deadline approaching fast, there was no time to hash out a complicated plan so they promised to do it later and they established the Fiscal Cliff as an incentive to force the issue. The idea is that if no cuts could be decided on then everything would be cut with a disproportionate amount of the cuts coming from defense. This will throw tens of thousands of government workers and contractors out of work. In addition to that, all of the tax cuts will expire. This combination could easily force a new recession.

A few fringe Republicans want to see the cuts go through. They see this as the only way to actually slow government growth.

On the other hand, several senior Democrats see the Fiscal Cliff as a way of gaining political advantage. If it happens they figure that the Republicans will be so desperate that they will accept any deal the Democrats offer. They also see it as a loophole in the Republicans' pledge not to raise taxes. They figure that once the rates rise automatically, the Republicans will only have to vote on reducing taxes for most people instead of raising them on a specific group.

There is a good chance that the Democrats will win this. In the debt negotiations, the last sticking point was when the debt limit would come up again. The President insisted that the debt limit be raised high enough to last past the election and was willing to collapse the  world's economy rather than give on this issue. I expect to see him play the same trump card again and for the Republicans to take the responsible course and give in.

But, there is a second Fiscal Cliff coming up. The debt limit will need to be raised again soon.

Wednesday, November 14, 2012


The mem going around the left these days is that the Democrats should have won Congress but didn't because the nasty Republicans cheated by gerrymandering the system. While it may be true that more people voted for Democrats for Congress than voted for Republicans, this does not prove anything. There are some more important factors at work. The most important one is that Democrats tend to live clustered together while Republicans spread out more. This has its own ramifications.

Ohio was the swing state this year. Given how closely balanced the Ohio electorate is you would expect it to have equal numbers of Democrats and republicans but if you look at a map showing concentrations of voters you find that President Obama's support came from a swath across the northern part of the state plus the areas around Columbus and Cincinnati. The rest of the state went for Romney.

If you draw simple Congressional districts then you only end up with three or four Democrats. The only way to get more is to chop up the cities and add them to more rural districts. But the more you do this the stranger the districts look. No matter how you chop it up, it is going to look like gerrymandering to a neutral observer. There is just no way around this.

This also ties into minority rights. Minorities tend to vote Democrat and the thinking for decades has been to create minority districts in order to assure the election of minorities to Congress. Any change to this system would be treated as a threat to minority representation.

Another factor caused by Democrats clustering together is that votes count more in some states than in others. To keep Congress from having over a thousand members, the smaller states get more representatives per citizen than the large states get. Most of the small states vote Republican and the large states vote Democrat.

There are some other factors at play. 30 states have Republican governors. Since you can't gerrymander a state, this implies that Congress should be 60% Republican. The fact that it isn't shows the importance of incumbency and wave elections. Many of those governors were elected in the wave election of 2010. The House of Representatives also changed hands that year. The new districts were drawn after an election where the Republicans won big.

Incumbency should never be ignored as a factor. We had three wave elections where multiple districts changed hands, two in which Democrats made gains and one in which Republicans reversed this trend. And these took place before the most recent redistricting. Part of this is because both parties fight hard for safe districts but part is also because in an ordinary election, people tend to vote for the person already in office. The system is set up to favor the incumbent from either party. While we did have a series of wave elections, this is unusual. The House has only changed hands three times in the last 50 years and two of them were in the last six.

A case can be made for making more districts competitive. Currently the most radical members of Congress, especially from the left, come from safe seats. Having more competitive districts would tend to favor more moderate candidates but the current complaints about gerrymandering have nothing to do with that. They are the coming from people who are offended by the very idea that the election was a status quo election.

Tuesday, November 13, 2012

A Status Quo Election

So what meaning should the Republicans take from last week's election loss? Not much, mainly because nothing really changed.

The elections in 2006-2010 were change elections. The White House, the House of Representatives, and/or the Senate changed parties.

In 2012, nothing changed. The Democrats picked up two seats in the Senate but the balance of power is still about the same.

In a lot of ways, 2012 resembles 2004. In both elections the vote was more a referendum on the incumbent as anything. The party out of power hated the incumbent with a passion and rallied behind a slightly wooden New Englander. They expected to win based and were surprised that the incumbent won by a narrow but solid majority. The results of the election started the incumbent's party talking about holding a permanent majority and the need for the challenger's party to change if it wanted to stay competitive.

There are other parallels. In 2004 we were involved in two wars so the Democrats ran a war veteran on the theory that someone who had been in combat was better qualified to command the troops. During the campaign his strong point, his military service, was discredited.

In 2012 we were stuck in a financial slump so the Republicans ran a businessman on the theory that someone who had guided businesses would be better qualified to run the economy. During the campaign his strong point, his time at Bain, was discredited.

Another similarity, in 2004 and in 2012 the incumbent had the better get-out-the-vote organization.

There are some differences. Romney is much more moderate than Kerry and in 2004 the Republicans controlled both houses of Congress. Bush managed to increase his lead in the popular vote. In 2012 the Democrats do not control the House and Obama's lead was smaller in 2012 than in 2008. Also, the Republicans hold a record number of governorships including several states that Obama carried.

So, what lesson should we learn?

The biggest one is how fast things change. After Katrina and mismanagement in Iraq, the Republicans lost both Houses of Congress followed by the White House. Considering the number of scandals that have come out in the last week, the chaos in Libya and Egypt, and the weakening economy, Obama's popularity may vanish as fast as Bush's did.

There are a couple of things that the Republicans need to do to help their chances. One is to quash the extreme anti-abortion candidates. They pull down the entire party. The other is to come up with a more positive stance on immigration control.

They also need to start calling the Democrats on how far to the left they moved. How can the Democrats claim to be the moderates when they are running on a platform of free birth control? Similarly, the Republicans need to start insisting that the Democrats give a strategy for entitlement reform that goes beyond kicking the can down the road.

Monday, November 12, 2012

Timing is Everything

If the financial crash had happened six months later, Obama would have gotten more of the blame. Instead he was able to blame Bush.

If Hurricane Sandy had hit a week later then Obama's approval ratings would probably still have been below 50% on election day.

Who knows what would have happened if the head of the CIA had resigned a week earlier? Or what will come of his testimony this week (assuming that he still gives it)?

Obama spent weeks running on a "Save Big Bird" platform. What would have happened to this and the Million Muppet March if it had come out the the man who controls Elmo has been accused of having relationship with a 16-year-old boy?

Thursday, November 08, 2012

What happened and what to do about it

A week and a half ago things looked good for Romney. He was ahead in several polls including the consolidated ones like Real Clear Politics and was gaining. A week ago things started looking bad. Romney was dropping and Obama was gaining. Even then, Obama was below 50% in the swing states. If the undecideds followed the historic pattern and broke for the challenger then Romney would still win.

It didn't happen that way. The undecideds broke for Obama. It had been assumed that Democrats would be less enthusiastic than Republicans and turn out in fewer numbers. That didn't happen either. Obama managed to close the enthusiasm gap.

One big factor was Hurricane Sandy. Presidents almost always get a popularity boost immediately after a disaster. Obama's approval rating had been below 50% for some time but it climbed above 50% right after the hurricane hit, matching his percentage of the vote.

So that is why he won a close election. The bigger question is why the election was that close in the first place and what Republicans can do about it in the future.

The economy should have been a deciding factor. Obama mismanaged the recovery but there was a recovery. Voters tend to judge incumbents on how the economy is doing at the end of his term compared with the beginning. There is no question that the economy has improved. It should have been much better but voters don't seem to judge against that.

The Republicans' social agenda hurt them. Two different Senatorial candidates got caught making stupid statements about abortion and rape. Santorum, one of the last challengers for President is on the record as being against birth control. Heck, Santorum is so extreme that I would have voted for Obama over him.

It is hard to reconcile a platform of limited government with intrusive right-to-life positions. The Republicans need to learn the lesson that the Democrats learned on gun control. After Clinton waged a multi-year assault on guns, it was assumed that Gore would be even worse. There are a lot of gun owners who vote for gun rights first. Clinton's gun control probably cost Gore the election. Since then the candidates have been silent on gun control. Obama even disavowed his earlier position on outlawing guns.

Republicans need to take a similar approach. Extreme pro-life Republicans pull down the entire party. A huge majority of the country feels that abortion in the case of rape and incest should always be allowed so any candidate who suggests otherwise is wildly out of step. It gets worse when god gets dragged into it.

Gay marriage is another issue that the Republicans would be better off silent about. Again, it does not go with the limited government approach. Obama stirred up a lot of excitement by announcing that he no longer objected to gay marriage although he would not do anything to advance it. Republicans should take a hands-off approach to it.

Finally, they may need to throw Grover Norquist under the bus. I know all of the arguments against raising taxes. They are all intellectual. "Make the rich pay a little bit more" and "Make the rich pay their fair share" are emotional appeals. If Republicans are in control then taxes will not be raised. But, in order to take control, they may need to make some populist compromises. Reagan could run on a platform of tax cuts for all because a larger portion of the population was paying income tax then and, because of runaway inflation, the amount going for taxes kept increasing due to high inflation. Those factors are not present today so that platform will no longer work.

One thing that the Republicans have going for them - in the last 50 years, Obama was the only person elected president who had not been Vice President or a governor and that was a special case (Palin was the only governor on the ticket). The Republicans now have a record 30 governors. That gives them a deep pool of talent to draw from. The Democrats are short on superstars for 2016. If the Republicans can tame their social conservative side then they have a good shot at retaking the White House.

Tuesday, November 06, 2012

Psychohistory and the Polls

Isaac Asimov's famous Foundation Series was based on the idea of Psychohistory. This allowed mathematicians to predict human behavior using specialized mathematics. With this, the inventor, Hari Seldon, was able to predict and influence the founding of a new galactic empire. The basic principle of psychohistory is that people in large enough groups will react in predictable ways.

The theory is seductive and many pollsters began by reading this series.

One problem is identifying and quantifying all of the possible inputs. Right now there is no way to do this. The best we can do is to try to take a snapshot of opinions and make guesses about that. For example, Romney surged in the polls following each debate, even the second one in which the moderator took on the role of fact-checker. Does that mean that Romney won the debates or that winning and losing didn't matter, just looking presidential was enough? Did Obama close with Romney because of his campaign or because of his initial response to Hurricane Sandy? Did he fade at the last minute because of continuing stories about Sandy? The pollsters cannot tell us.

In the last few days multiple companies have done national polls and hundreds of companies have done state polls. As of election day the race is too close to call. All of the polls are within the margin of error. The race is going to be decided by things like voter turnout. In 2004 a record number of people voted. Democrats showed up in record numbers but were overwhelmed by record numbers of Republicans. In 2008, Democrats showed up in record numbers while Republicans stayed home or switched parties. In 2010, fewer people voted and of those who did, Republicans turned out in record numbers while the Democrats stayed home.

Pollsters try to estimate the likelihood of individuals showing up but it is difficult. Most people don't even want to talk to a pollster. So, they guess what the turnout will be and apply this to their actual sampling to get an idea of what the actual turnout will be. The result is that the polls are close to each other but none are identical. In the swing states, the percentage of undecided voters is high enough to tip the election for either candidate. These are states where neither candidate has 50% and is only ahead by two points or fewer.

Enter the poll aggregators. They reach a conclusion based on combining multiple polls. Real Clear Politics does this.

Then there is Nate Silver. He claims to be able to take unreliable data and coax reliability out of it by weighting the various polls according to secret formulas. He does not explain these except to say that he treats state polls as more accurate than national polls. He uses this to predict the winner. In this case, he says that President Obama has a 92% probability of winning.

So how does he control for such things as undecided voters and voter turnout? He doesn't. It doesn't help his case that he seems to give more weight to older, smaller, pro-Obama polls than to more recent pro-Romney polls.

The financial meltdown happened because of a reliance on models predicting human behavior. They showed that the default rate on sub-prime mortgages was low enough that they could be treated as a AAA investment. The problem was that they assumed a constant default rate. This was influenced by rising house values which allowed most people with financial problems to sell their house rather than default. When the housing market crashed, people could no longer sell their homes and started to default. The people who had written the financial models knew that this was possible but no one wanted to hear about it. There was too much money to be made by ignoring the risks.

Nate Silver's models have the same sort of flaw. They assume that the underlying polls are correct but, as I pointed out above, the race is within their margin of error. This is a much tougher election to predict than 2008 when Silver correctly called 49 out of 50 states.

At this point Obama will win or he will not. Further predictions will not change things. But I would hesitate before investing money in Silver's models.

Monday, November 05, 2012

Sandy's Aftermath

A week ago Hurricane Sandy hit the New York City area causing massive destruction. Many people immediately announced that Global Warming was responsible and called for immediate action. Is this justified? Not really.

Although it was described as a "superstorm" and a "Frankenstorm", Sandy was only a category one hurricane. It joined with two other storm systems and ended up having a record size. This happens. The "Perfect Storm" is another example. It does not prove anything about climate in general.

Experts have warned for years that New York City was totally unprepared for a direct hit by a hurricane. Nothing was done. This was just as true fifty years ago as now and made the destruction much worse. So far I have not heard anyone talking about hurricane preparedness, just Global Warming. Hurricanes have always happened and they need to be planned for. Just imagine what a stronger hurricane would have done. Or will do since this is inevitable.

Two things make this seem worse - one is that it hit such a populous region. The other is that it hit in the networks' back yard. They don't have to send remote units to view the destruction. They can do this by car (if they can get gas).

President Obama's approval rating on Rasmussen ticked up for a few days last week. He had been behind by four points but for a few days he was tied with Governor Romney. That was probably a response to Obama looking presidential in response to the storm. As reports of lasting power outages and Staten Island being forgotten filter out, Obama has dropped again.

Mayor Bloomburg probably did his own political career lasting damage. Instead of planning for storms and floods, he was worrying about transfats and baby formula. He turned down Nation Guard assistance on the grounds that only NYPD should be armed. His insistence on not cancelling the marathon and his last-minute cancellation made him a top story nation-wide. I doubt that his endorsement of Obama will help the President's reelection campaign.

Friday, November 02, 2012

The Election and the Future

The election of Barack Obama in 2008 marked the culmination of a push by the left wing of the Democratic Party to move the party to the left. Milestones in this push included the candidacy of Howard Dean, the rise of the "Netroots" on-line community, the closing of the moderate Democrat Leadership Council, the ejection from the party of office-holders such as Joe Lieberman, and the re-branding of the left as "progressive" instead of "liberal".

That last one is important. While they like to recall the Progressives from the early 20th century, the term went out of fashion after the 1948 election when it was used as a front for communists.

If Obama wins a second term then things will continue as they have for the last two years. His slogan is "Forward." (or more recently "Forward!") but his real goal is "Entrenchment!".

Obama believes that the fiscal cliff gives him the upper hand in negotiations with Congress. He is willing to let all of the various tax cuts expire and all of the budget cuts go into effect. He believes that this will make the Republicans so desperate to make a deal that they will have to accept any terms that he dictates. These will start with tax increases on the rich. He may add in other portions of his agenda that failed during his first term.

It is unclear if this tactic will succeed. The important thing is that he is willing to hold the economic health of the nation hostage (a term he used two years ago to describe the Republicans).

Regardless of his relations with the Republicans, Obama has shown that he is willing to ignore Congress and legislate through executive order. This may permanently damage the balance between the three branches of government.

Obama has promised the Russians that he will have more flexibility during his second term in negotiating arms reductions.

He is a follower of Paul Krugman who believes that the solution to a slow economy and a budget deficit is more spending and a higher deficit. This reasoning says that if the government pumps enough money into the economy then it will eventually pick up so much that the deficit can be eliminated. The fact that this has only been accomplished in conjunction with a war that destroyed Europe's industrial capacity escapes them.

Obama has a European view of the relationship between government and its people. In this view, rights come from the government and group rights can take priority over individual rights. Religion is harmful and should be limited to private observances. The economy must be carefully managed by the government and steps must be taken to equalize results. Rich people represents a failure of government.

The fact that most of Europe is in deep financial trouble is irrelevant and can be blamed on misguided attempts at austerity. This feeds back into the Krugman view that government can never spent too much.

If Obama is defeated then none of this will happen. What is more, it will be generations before the Democrats go so far to the left again. That is what happened after McGovern was trounced in 1972. For that matter, gun control has been off the table for Democrats since the 2000 election. The widespread thinking is that Gore lost because of gun control legislation passed under Clinton (with Gore providing the tie-breaking vote in the Senate). That cost him Tennessee which would have given him the election.

If Obama loses then the Democrats will back away from a radical agenda and moderate their position. If they win they will double-down on it.