Economics for Krugman

Last week, Paul Krugman wrote a column on how economists got things so wrong. He got a few things wrong himself.

First there is the ketchup quote:

Larry Summers, now the top economic adviser in the Obama administration, once mocked finance professors with a parable about "ketchup economists" who "have shown that two-quart bottles of ketchup invariably sell for exactly twice as much as one-quart bottles of ketchup," and conclude from this that the ketchup market is perfectly efficient.

I'm not sure if the original problem here is with Summers or Krugman but Krugman quotes it more than once in his article. There are several problems with this example of market economics.

First, a two-quart bottle of ketchup invariably sells for less than two one-quart bottles. This reflects economies of scale and per-unit costs. As portions become smaller, the cost of packaging, transportation, and shelf space take up a larger proportion of the cost.

Second, supermarkets have been investing heavily in marketing research for decades. What ever price a bottle of ketchup has, it reflects a lot of calculation and experience on the most profitable point. Supermarket prices don't just happen. Krugman thinks that market-based prices arrive at the wrong prince. While they can, and did with the housing bubble, the vast majority of the time they are correct.

Krugman's second problematic example is with a babysitter co-op:

I like to explain the essence of Keynesian economics with a true story that also serves as a parable, a small-scale version of the messes that can afflict entire economies. Consider the travails of the Capitol Hill Baby-Sitting Co-op.

This co-op, whose problems were recounted in a 1977 article in The Journal of Money, Credit and Banking, was an association of about 150 young couples who agreed to help one another by baby-sitting for one another's children when parents wanted a night out. To ensure that every couple did its fair share of baby-sitting, the co-op introduced a form of scrip: coupons made out of heavy pieces of paper, each entitling the bearer to one half-hour of sitting time. Initially, members received 20 coupons on joining and were required to return the same amount on departing the group.

Unfortunately, it turned out that the co-op's members, on average, wanted to hold a reserve of more than 20 coupons, perhaps, in case they should want to go out several times in a row. As a result, relatively few people wanted to spend their scrip and go out, while many wanted to baby-sit so they could add to their hoard. But since baby-sitting opportunities arise only when someone goes out for the night, this meant that baby-sitting jobs were hard to find, which made members of the co-op even more reluctant to go out, making baby-sitting jobs even scarcer. . . .

In short, the co-op fell into a recession.

The analysis that Krugman gives is flawed at every level.

First there is the reason that people hold a reserve of 20 coupons. He says that it is so that they can splurge at a future date. I suspect that it is so that they can quit at any time. The rules of the co-op almost mandate a 20-coupon reserve. You are given 20 coupons when you join and you have to return 20 when you leave. Anyone who allows their reserve to fall below 20 is in debt and will have to earn the difference in order to quit. A different way of looking at this is that you start with a balance of zero but a credit limit of 20 which have to be repaid when you quit.

But that's only part of the problem. The other problem is that this is being presented as a closed system when there are external factors.

Any parent can tell you that it isn't much trouble to watch someone else's child along with your own. It does not double your work, especially if the child that you are sitting is close enough in age to play with your own children (remember that everyone in the co-op has children by definition).

On the other hand, going out represents an additional expense. Dinner and a movie will cost at least $40. So, in order for you to get babysitting work from me, I have to spend an additional sum.

Most people do not send their kids to the sitter every night or even every other night and go out. On the other hand, any parent who is not going out is available to babysit. Since the co-op was established with the expectation that the demand for coupons would balance the demand for sitters, it was doomed from the start.

Also, the prices (coupons) were fixed from the start by the co-op so this example has no place in a discussion of market-based economics. There is no market here. If anything, this is an example of why having prices set by an external authority does not work. Also, if it is hard to find work as a sitter then that makes it harder to repay the 20 coupons when you leave.

This should be obvious to a Nobel-Prize-winning economist but Krugman missed it. He just dismisses it as a recession. He goes on to say:

Freshwater economists are, essentially, neoclassical purists. They believe that all worthwhile economic analysis starts from the premise that people are rational and markets work, a premise violated by the story of the baby-sitting co-op. As they see it, a general lack of sufficient demand isn't possible, because prices always move to match supply with demand. If people want more baby-sitting coupons, the value of those coupons will rise, so that they're worth, say, 40 minutes of baby-sitting rather than half an hour — or, equivalently, the cost of an hours' baby-sitting would fall from 2 coupons to 1.5. And that would solve the problem: the purchasing power of the coupons in circulation would have risen, so that people would feel no need to hoard more, and there would be no recession.

Since the demand for babysitting has an external element, price adjustment will only have a marginal impact. Worse, it would encourage hoarding, at least above the 20-coupon level, since it might take you two evenings of sitting to make up for one night out.

In a normal market, only a subset of the population provides babysitting and they do it for real money instead of hours. The idea of the co-op was to remove the expense of babysitting from the cost of going out. The system that was set up did that admirably. Anyone who needed a sitter would find a large pool of people available. If you stop there then it was a success. It only becomes a failure if you expect an equal number of people to need a sitter and to want to sit. In a population where there was a high demand for sitters and low cost for needed them then this would work. Among a normal population it will always fail.

One final note - any attempt to fix this "recession" is likely to make it worse. There is no way to adjust the co-op rules so that the demand for sitters will match the demand for children to sit. So much for "government" intervention.

"You Lie!"

During last night's speech, when President Obama said that illegal immigrants would not be covered by his proposed health care reform, Rep. Joe Wilson burst out with "You Lie!".

First, this was not appropriate behavior. There was enough of that during the Bush years.

But, what prompted Wilson's outburst? This is where things get tricky. The various health care bills do say that immigrants are not covered but there is no verification. In fact, Republicans have tried to add a verification requirement and the Democrats have rejected it. This means that illegal immigrants probably get coverage even if they are not entitled to it. Obama must know this so he was being disingenuous when he said that they would not be covered.

Obama was disingenuous about other facets of the bills. He continues to claim that early testing will cut costs and save lives. He is only half right there - it will raise costs. He has moderated his promise that the bills will not force individuals or their employers to change coverage but the new taxes and mandates in the bills will certainly force changes.

Regardless, the middle of the President's speech is not the time to argue fine points.

Update - I still think that this outburst was unseemly but it may turn out to be the point where Obama lost the health care debate. The evening news top story was about Wilson instead of Obama. The same thing happened in July when Obama gave a press conference that was mainly about health care but answered one question about a white cop arresting a black professor. Everyone forgot about the rest of the press conference. The same thing seems to be happening - Obama gave a prime-time speech which contained nothing new and was upstaged by two words from the gallery.

Wilson got some action, also. Democrats promised to include some enforcement language in the bills.

What Does Health Care Reform Mean to You?

Forget President Obama's speech. The important details are in the bills working their way through Congress. Forbes analyzes them here. The quick summary is that these bills are awful. Congress realized that they will never pass a bill that adds a trillion dollars to the national debt. They are pledged to come up with a bill that is "deficit neutral".

How can you increase health care coverage without decreasing costs and still call it deficit neutral? By taxing everything in sight.

For example, if you get good health care benefits now (more than $8,000 per individual or $21,000 per family) then your insurer will be taxed a 35% excise tax. Does anyone seriously think that this will not be passed on to the insured or that it will not result in a cap on insurance benefits? So much for promises about not forcing you to change coverage.

There are other new taxes. Drug companies will be taxed $2.3 billion per year divided by their market share. Medical device companies will also be taxed this way. These taxes are designed to be passed on as increased costs so that private enterprise will take the blame instead of Obamacare. At the same time, new incentives will force people to sign up for the public option. It will not be forced on people but it will be the only show in town.

Small businesses will be hit hard. I would not say that the Democrats are planning this but they probably aren't losing any sleep over it, either. Since FDR, Democrats have preferred dealing with a few large companies rather than many small ones. It is easier to control an unionize large businesses.

This health care plan must be scrapped. It takes the worst of the current system and make it even worse. This will be a disaster for the country if it passes.

What Does the Van Jones Resignation Mean?

A funny thing happened over the weekend. Around midnight on Saturday one of President Obama's advisors resigned. Most people never heard of Van Jones until his resignation and most are probably a little confused about why he resigned. The official story is that he used a bad word when describing the Republicans and signed a petition. People on the far left, such as Keith Olbermann-watchers, think that he was the victim of a smear campaign by Glen Beck and others on the right. Olbermann posted on the really-far-left Daily KOS, declaring war on Glen Beck.

What really happened was that Glen Beck and others had spent days digging up embarrassing details about Jones's political beliefs. He is very radical.

The liberal reaction is mixed. Alan Colmes insists that Jones gave up his radical ways nearly ten years ago. He ignores the fact that most of the quotes and positions that have been used against Jones were made after 2000. One clip that Beck ran several times was from early this year.

David Sirota at Huffington is upset because someone from the Progressive movement was forced out. He attributes it to racism and worries about the chilling effect that the resignation will have on progressives who want to go into politics.

These people and others on the left are missing the larger point - that Jones's beliefs may be typical of the progressive movement but they are at odds with the typical American voter. Jones spent the 1990s as a radical communist and never moderated his position very far. Someone who flirted with Deep Ecology (these are code words for "most humans must die") was a special adviser to the President on green jobs. Colmes and the others don't see anything unusual about this. They occupy an echo chamber where everyone is a radical.

This has happened before. Many of Obama's friends and associates are radicals. When they are found out then they are pushed away from the President's inner circle but the big question remains - what sort of man associates with so many radicals?

The School Speech

On one hand, this should be a no-brainer. The President of the United States plans to give a speech to school children urging them to stay in school and work hard. Who could object?

But there is another angle. A beleaguered president, the day before he addresses the joint houses of Congress in an effort to save the signature issue of his presidency gives a speech to school children. The accompanying lesson plans suggest that teachers have the students write about the problems facing the president and how they can help him. Is there any chance that their response will not be politicized?

The Obama administration did admit that the lesson plans were heavy-handed and released revised ones urging students to work on their own, personal goals instead of the President's.

Considering that teachers are one of the Democrats' strongest supporters, I will be amazed if a lot of teachers don't ignore the revised lesson plan and come home urging their parents to support the president.

And that's why people object.

Update:
I read an advance transcript of the speech. It was long, boring and over the heads of most children.

Health Care and Burning Houses

it is becoming common for left-leaning columnists to dismiss complaints about the public option for health care by comparing it to the fire department. Nicholas Kristof is the most recent to make this comparison. According to this argument, we are happy allowing the government to run the fire department so why not let it run health care? There are four major problems with this apples to oranges logic.

1) You can use this to justify a government takeover of everything. If you trust the government to put out fires, why not trust it to run your supermarkets/banks/TV stations? Reasonable people agree that there has to be some limit to government intrusion into people's lives. Otherwise you end up with Communist Russia which was a failure.

2) Buildings are at fixed locations, people move. Having a single location that will handle fires for a given area makes economic sense. On the other hand, people move all the time and their location has no relation to their insurance carrier. There are other major differences. Fires constitute an emergency. Insurance coverage may involve medical emergencies, but it is paid long after the fact. Geography makes it difficult for rival fire companies to compete but this does not apply to insurance companies.

3) There is no good reason why fire departments are government-run. The historic reason is that steam-powered pumps and horses were expensive. These days, fire departments could easily be outsourced if they weren't heavily unionized. Look at UPS and other delivery services which are slowly killing the US Postal Service.

4) I've been saving the best for last - fire departments are run by local government but the public option will be run by the federal government. There's a big difference in accountability between the two. What do you think the reaction would be if the Obama administration proposed a federal takeover of fire departments? The original question treats all levels of government as a single unit. If you correct for that then the question is: "You don't object to allowing your local government run your fire department so why not let the federal government run health care?" Not half as persuasive when you put it that way, is it?

Numbers Games and Health Care

There are some numbers in the health care reform proposal that should be debated but are not even part of the discussion. The idea of universal coverage is that everyone who is not already insured will be required to purchase insurance. Since employer-provided insurance is cheaper than individual insurance, the government will assist those families that need help. The issue is at what level will we provide help?

First, remember that the actual poor are already covered by Medicaid. The people we are talking about are employed and making good wages. The earnings levels I have seen suggested are $66,000, $88,000 and $110,000 per year for a family of four. To put it into perspective, I checked the census data for 2006 (the most recent available). If your family makes $110,000 per year then you are in the top 20% of wage earners. 80% of the country makes less than that but that 80% will be expected to help you pay your insurance. Think about that for a minute.

Now think about this - what happens if the percentage of families buying their own insurance goes up? What if people decide that they will take the amount that their employer now spends on insurance as pay then uses that plus government assistance to buy their own insurance? Is it possible for everyone to subsidize everyone? Picture a large group of people in a circle. Each one is to take $100 dollars from his pocket and put it in the middle. Then, everyone takes $100 out of the middle. By government reasoning, everyone will be $100 richer.

It's all a numbers game, shifting money from one pocket to another.

The other numbers game is one that has been suggested but dropped. Obama has insisted that he will not sign any bill that is not revenue neutral. That means new taxes on someone. The original suggestion was to tax "gold-plated insurance benefits". The implication is that the government will decide how much health care you need. If you get less then you will be fined. If you get more then you will be taxed (a form of fine).

So who gets the gold-plated benefits? You might assume that they go to the rich. While it is likely that top executives get pretty good insurance, someone who is making $20 million a year isn't really worried about whether his co-pay is $10 or $20. It turns out that the group that would be hit hardest by this new tax is union members. The proposal to tax benefits has been quietly dropped with no word on where the new taxes will come from.

Obama - LIberal or Moderate?

This "analysis" from the AP purports to show that President Obama isn't a far-left liberate. He can't be if he has appointed Bush carry-overs. How should we react to this?

The two top posts mentioned are Fed chief Ben Bernanke and Defense Secretary Robert Gates.

The other appointees mentioned are Sheila Bair, chair of the Federal Deposit Insurance Fund; Ray LaHood, Transportation Secretary; John McHugh, Secretary of the Army and Jon Huntsman, ambassador to China. Francis Collins, director of the National Institutes of Health is also listed even thought he is not a Republican. This shows that the list is being padded.

I'm going to ignore the "other appointees" list outright. They make good windows dressing but none of these is in a position to affect policies that are important to the Obama administration.

These choices do shed a lot of light on the Obama administration and its paradoxes. Obama has aggressively pushed for major changes in some areas while keeping Bush policies and, in some cases, Bush hold-overs in others. In many cases, Obama has kept policies that he campaigned against. His Iraq policy is a continuation of Bush's. He campaigned against rendition and tribunals but has allowed both.

I think that there is a very simple explanation. Obama came to office as an ambitious but inexperienced president. He has several areas where he wants to make his mark. There are others that he campaigned on but doesn't really have strong views. That's where the seeming paradox lies. If Obama cares about something then he puts his own man in charge and puts his own stamp on it. If he doesn't really care about it then he appoints a moderate or even a Bush hold-over and lets it continue with little change.

This approach has its uses. The White House can defend itself against charges that it is radical by pointing to the moderates it has appointed. Here's an example:

The notion that he is moving the government to the left "is laughable, it's utterly laughable," said Thomas E. Mann, a government scholar at the Brookings Institution. Mann said the decision to keep Bernanke and Gates "doesn't buy him a thing with Republicans but was a sign of good judgment in both cases" because Bernanke and Gates were doing good jobs.

There are drawbacks. Many of the issues that Obama doesn't care about loom large in the eyes of his supporters. Cindy Sheehan has already pronounced Obama as bad as Bush about ending the wars. Others are upset about the continuation of rendition and the tribunals.

This will eventually come back to haunt Obama. Single-issue voters have long memories and Obama is seen to be forsaking many of them.

The Worst Reasons

If you are a parent then your child must have desperately wanted something impractical. It didn't matter how you explained things, your child still wanted it. If you asked why your child wanted it you probably got the answer, "I just want it." or "The other kids have it." When my daughter was very young this could lead to a red-faced crying fit.

The Democrats are like this about health care. They've been wanting it so long that they don't remember why, they just want it. You can hear this in the different cases they have made. "All the other countries have it," is high on the list. In fact, that and variations on "fairness" pretty much make up the list. All of the talk about reducing costs or "bending the curve" are disingenuous since the current legislation is guaranteed to drive costs up instead of down.

This is also why the Democrats are so confused at the growing resistance to health care reform. They assumed that the entire country has been stewing over the issue since it failed under the Clintons.

Now the Democrats are adding a new reason - it should be passed as a memorial to Ted Kennedy. This is the worst of the reasons since it asks principled Republicans and Blue Dog Democrats to pass something that will affect the entire country against their better judgment as a memorial. Go ahead and name a building after him but don't reshape a big portion of the nation's economy as a memorial to one man. No one was that important and sentiment should not determine the shape of the US economy.

FDR, Reagan, and Obama

Last year, Obama said that he wanted to be a transformational president like FDR or Ronald Reagan rather than a caretaker president. At the time it looked likely. His campaign bordered on a religious crusade and he was the most ideological candidate in years. His followers were expecting great things from him. His party won Congress with a wide majority.

So, eight months later, how is the transformational part working out? Not so well.

FDR set a standard during his first 100 days but his real changes came about during his follow-up, the so-called Second New Deal. That's when Social Security passed. The first 100 days were all about stabilizing the economy.

Reagan's first actions were similar. He got tax cuts and budget cuts (technically they were cuts in growth) passed even though the Democrats controlled the House. He continued the deregulation that had started under Carter. He also beefed up the military.

In contrast, Obama's successes so far have been pretty meager. He ran on changing America, not on economic recovery but most of his early actions were economic. He signed a patchwork stimulus bill and a pork-laden spending bill. He took over the banks and two domestic auto makers. None of these were part of his platform nor were they particularly popular. The White House modus operandi has been to push bills through Congress fast and sign them quickly before the opposition has a chance to resist. This has worked against him. Credit card reform and the expansion of SCHIP passed before most people were even aware that they were being debated. Obama's approach garnered him little credit and no new political capitol.

Obama tried the same approach with health care reform, breaking several promises about transparency, but found that it was too big to push through quickly. Currently it is languishing with major portions still being debated.

This doesn't sound like a transformative president to me. What happened?

The first problem is that Obama has no message. Hope and Change are nice vague terms for winning an election but they don't give much of a mandate. Obama did make specific promises - over 500, more than twice the typical candidate's platform. This further watered down his mandate. Were people voting for him because he promised health care reform or because he promised to get the troops out or Iraq?

FDR had a strong message - "Competition is keeping prices too low. We need to reduce the number of businesses so that the remaining ones can charge higher prices. At the same time we will strengthen the unions so that they can demand higher wages."

Reagan had his own strong message, "Competition is good. It keeps prices down. We need more businesses and less burden from government and unions so that the demand for workers raises wages."

Both men expressed their visions in no uncertain terms. If they had problems getting their legislation through Congress, they appealed to the American people to pressure Congress.

Obama probably agrees with FDR but he has only hinted at it. In fact, whatever his personal beliefs are, he only hints at them. When he does make unguarded comments they reflect badly on him. Obama will never pass legislation while expressing his beliefs about bitter people clinging to guns and religion.

Both FDR and Reagan inspired generations of followers. In fact, they defined the current debate about the proper role of government (FDR=more, Reagan=less). During the campaign, Obama was so coy about his beliefs that most Libertarians voted for him thinking that he would be a pragmatic centrist.

In order to be a transformative president, you have to have a clearly defined philosophy. Without that, you are a caretaker administration.

Now, there's nothing wrong with being a caretaker. Most presidents are. That's why only four of them were carved on Mount Rushmore. The country can't handle new transformations every 4-8 years. It's hard enough to be a successful caretaker president. In the last 50 years, only three presidents have managed to serve a full two terms. The others are usually counted as failed presidencies. Even Kennedy who probably would have been reelected couldn't translate his popularity into political results.

So where does that leave Obama? He has two choices. He can define exactly what his vision is and try to win the country over to it, then use that, as Reagan did, to push his favored legislation through Congress. This will be tough. Defining visions are what campaigns are all about and Obama has three years before his next campaign starts in earnest. In the meantime, trying to sell a message without a campaign is nearly impossible. The White House has already tried to mobilize its campaign to sell health care. They failed. There is the additional problem that the country might not like what Obama is selling. The Democrats are have moved to the left but polls show that most of the country is still conservative. Admitting that he is a radical might hurt more than it helps.

The other option is to take the Clinton approach. Move to the center. Steal ideas from the right. The left will hate him for it (as they did Clinton) but it is a proven way to salvage a presidency.

Defaming the Dissidents

Ever since protesters started showing up at town hall meetings, the left has been belittling them. First they were paid "Brooks Brothers" protesters. Then they were a threat to free exchange of ideas.

More recently the left has focused on two things. One is that several protesters carry signs calling President Obama a Nazi. This has caused an uproar from the left. "How dare you compare the President to someone so evil?"

The other thing has been that a few protesters had guns. One was carrying a gun illegally. Others were carrying legally. The left's take on this is that it is meant as intimidation. MSNBC showed one protester with an AR-15 across his back and talked about racist white militia members. The protester in question was black but they had only shown close-ups of his back so that this was not obvious.

One way to react to this is to dismiss it as simple hypocrisy. The left never had any problems with paid protesters. MoveOn seriously considered running an ad during the Superbowl that showed President Push morphing into Hitler. No one on the left complained that this was over-the-top. Democrats don't believe in guns but last November, members of the New Black Panthers stood outside a polling place carrying clubs and shouting racial epithets. Again, no reaction from the left.

So is this just a matter of the left objecting to its own tactics when they are the subject? I don't think so.

I think that this is a concerted, if ineffectual, effort to discredit the protesters. This is a page from Saul Alinsky. It is easier to attack an individual than his ideas. If the left can make the protesters seem like a bunch of nuts then they don't have to defend their health care proposals. They are the ones trying to shut down the debate...

Protester: According to the CBO, your health care proposal will bend the curve up instead of down.

Democrat: You're ugly.

New York Times Columnist: These protestors are ugly so we shouldn't listen to them.

Centerpiece or Sliver?

President Obama insists that the public option was only a "sliver" of health care reform. The reaction from the left makes you wonder. New York Times columnist, Bob Herbert, seems to think that without a public option, the reform will only make things worse.

Giving consumers the choice of an efficient, nonprofit, government-run insurance plan would have moved us toward real cost control, but that option has gone a-glimmering. The public deserves better. The drug companies, the insurance industry and the rest of the corporate high-rollers have their tentacles all over this so-called reform effort, squeezing it for all it's worth.

Meanwhile, the public — struggling with the worst economic downturn since the 1930s — is looking on with great anxiety and confusion. If the drug companies and the insurance industry are smiling, it can only mean that the public interest is being left behind.

I could quote others but their complaint is always the same - we have to have a public plan or we will not have real health care reform. What is there about a public plan that is so appealing?

The obvious starting point is that the left hates to see anyone make a profit and hates it worse if they are making a profit from human misery. Obama describes it this way:

{...} a system that often works better for the health-insurance companies than it does for them.

But if that was all there was to it then why create a government-owned and controlled competitor? The government just passed sweeping reforms on what banks can and cannot do with credit cards. Why not do the same thing with health coverage? After all, health care reform is being rebranded as insurance reform. Is there more to this?

The right has been afraid that the public plan was a backdoor way of passing single payer. From the reaction on the left, they thought so, too.

Obama and the Public Plan

Yesterday's top story was that the White House was backing off of the requirement that insurance reform include a public plan. My reaction was that if this was true, it meant that Obama would get his package. By today the message it more mixed. It may be off the table. It may still be on the table. It may even be on the table but hidden to be revealed at the last second.

If the public option is not dropped and Obama's health care plan passes then this will be the biggest reason for the failure. Pundits will talk about death boards and town hall meetings but the public option is the real reason that health care is in trouble.

To conservatives and insurance companies, the public option is a back-door way of implementing single-payer. Conservatives don't want the government running such a large portion of the economy and the insurance companies are sure that they will be forced out of business. There is good reason for these fears. European countries that offer the public/private mix have the majority of the population enrolled in the public plan. The private plans sometimes exist only for the wealthy and government workers.

If you think that the public plan will be comparable to private coverage then explain why the Democrats have consistently rejected amendments that would force them and their staffs to switch to the public plan?

Here's another factoid - when it passed, Social Security only covered around half of the population. Once government programs start, they tend to expand.

Obama's justification for the public plan is that private, for-profit insurance companies can't be trusted. They need competition from the government to "keep them honest". Other, high-ranking Democrats have admitted that the public plan is a back-door to single-payer, just as the other side fears. They tend to say this quietly. I have seen them quoted but I couldn't find and of the quotes when researching this post.

So, by including a public plan, the Democrats have energised conservatives who are willing to work against the reform package. They have also mobilized the insurance companies who are providing the financing. In the meantime the drug makers are funding the pro-reform movement in exchange for not being subject to price controls.

If Obama dropped the public option for real then much of the opposition would vanish. He could make a deal with the insurance companies. They stand to gain millions of new customers from the universal coverage requirement. If they switched sides then the conservatives would find themselves heavily out-spent and missing one of their central arguments against reform.

It shows how heavily Obama was influenced by Saul Alinsky and other socialists in his youth that he is willing to give up easy passage because of an innate distrust of for-profit companies.

There is one possibility why the White House is being so coy about the public plan. Howard Dean suggested that both Houses of Congress pass a measure without a public plan then insert it during the budget reconciliation process. This would only require 51 votes instead of 60 to pass the Senate and wouldn't give health care opponents enough time to re-mobilize. That would be a betrayal of Obama's promises of open government but he turned his back on that one with the first bill he signed.

Clunkers and Winners

Last weekend I was camping in Indianan. Someone else at the event had his brakes go bad on the drive there from Wisconsin. He had his van checked. The master cylinder and the brake lines needed replaced. The van was a Chevy Astro and GM hasn't made replacement parts for it in years so he would have to find parts from a junked Astro. He decided that this was going to cost way more than the van was worth. Instead he planned to donate the van to a local charity, drive home in a rental car and buy a new car there.

After talking with his family they decided on a different plan. His father-in-law would drive down with a truck and haul the van back home. Then the would trade the van in for Cash-For-Clunker money.

There are several winners and losers here. The big winner was the owner of the van. He was going to get a government check for several times the worth of a van that would have ended up scrapped, anyway.

The losers are the charity that would have gotten the van. They wouldn't have gotten much for it but now they will get nothing. Multiply this by thousands to see the true effect on charities.

I'm not sure about the rental industry. They rented a truck for a round trip instead of a car for a one-way trip. One-way rentals are expensive for the renter and inconvenient for the rental agency. I'll call this one a wash.

Astro owners in general are slight losers. That's one fewer Astro to be broken down for spare parts. Instead it will be crushed. One van doesn't make much difference but multiply that by thousands and you are setting up for a spare parts shortage for years to come.

I don't know if the automobile industry will come out ahead or break even. They were going to sell a new car, regardless. They might sell a more expensive one because of this. Or they might not.

The biggest loser is the US taxpayer. We subsidized a transaction that would have heppened anyway. We paid several times what the van is worth to no real effect since it would likely be scrapped anyway.

Death Panels, Nazi symbols, and the Health debate

August is traditionally the month for crazy news stories. Normally Congress is out of session and the president is on vacation and there is little actual news to report on so reporters fill the air with stories about shark attacks and anything else they can find.

This year the politicians may not be in Washington but they are not on break. They are trying to drum up support for Health Care Reform. At the same time, opponents are trying to stop them. This is leading to all sorts of irrelevancies. For example:

Death panels. Sarah Palin talked about the establishment of death panels that would rule on who got to live. While her language is colorful, she was probably referring to something like Britain's NICE standards. These attempt to rate cost against quality of life in deciding what treatments will be allowed. When a woman at a town hall asked President Obama about a pacemaker for her then-100 year old mother, she was referring to this sort of cost benefit. Obama's answer wasn't comforting. I assume that Governor Palin was under this sort of pressure when she was pregnant with her son Trig to have an abortion.

While we might see something like this eventually established, it is not part of the current bills.

Nazi Symbols. Nancy Pelosi claimed to have seen protesters carrying Nazi symbols outside a town hall meeting. CNN checked. There was a sign with a swastika that had a circle and a line through it. In other words, it was a "no Nazi" sign. There was also a sign with Obama sporting a Hitler mustache. Pelosi gave the impression that the protesters were neo-Nazis when that's what they were calling her side.

Organized protests. The left has been insisting that the protests are organized and packed with people from outside the district. This is an attempt to discredit the protesters. To date, all that anyone can find is that anti-reformers have sent out email alerts and urged protesters to attend these meetings. This is exactly the tactic used by the supporters. This doesn't matter. The important thing for the Democrats is to get out a message. They know that few people will bother to look for the truth.

ReBranding. Most people are already insured so they rightly wonder what is in it for them? The two points that Obama is insistent on are universal coverage and the government option. Neither of these will help people who are already insured and they know it. Obama finally figured this out and launched a new message - that the whole thing is nothing more than an insurance bill of rights. If that was true then it would have already passed and been signed. This is only a small part of the reform bills. Similarly, Obama tried telling people that he is actually thrifty and will not sign a bill unless it is deficit neutral. While the White House is still trying to convince people that the bill will be paid for through increasing efficiencies in the system, this is an exaggeration (and I'm being kind). There will be a tax increase as part of it and it will hit most of the population.

Health Care Crisis. Obama insists that we are in a crisis. He tosses around the figure of 46 million without insurance. What he doesn't mention is that this includes 10 million illegal aliens. When asked, the Democrats insist that they will not be insuring illegals. So why include them in the count of the uninsured? To make the number scarier. In truth, a large percentage of the uninsured are gambling that they will not need coverage. They prefer to keep their money rather than spend it in insurance premiums. If asked, they would probably prefer to be left alone but they have to be included, also. The bigger the number the more the perceived urgency.

In his first few months in office, Obama took over the financial sector and the big three car makers. Now he is trying to take over energy and health care. People are rightly asking what he will be taking over next year? The speed that Obama is using to take over portions of the economy is scaring people. It doesn't help that the Demcrats made a big thing out of being Progressives and that the fascists rose out of the early-20th century Progressive movement. In pushing a bill that isn't even written yet, Obama is scaring otherwise reasonable people. I've said before that he should be spending his time on the economy. Health Care Reform is something for a country that feels financially strong, not one reeling under mounting debt and unemployment.

President Bush Saves the World

According to Paul Krugman, the country, and by extension the world, has been saved from a repeat of the Great Depression by big-spending government. He dances around the subject quite a bit and gives credit to Obama's stimulus but that isn't really credible. The stimulus has barely started spending any money and reports show that it is not being targeted very well.

So what did save the economy? It must have been Bush and the TARP. That's what kept the banks in business and TARP money was used to bail out GM and Chrysler. Obama's actions have been more follow-up than leadership on these issues.

Of course, Krugman would rather chew off his right leg than credit Bush with doing anything right so he is left with applauding Obama for a yet-to-be-spent stimulus package.

Since Obama has spent most of his time in the White House complaining about the "mess" that Bush left him, it would be nice to hear something nice about the Bush administration. Not that this will ever happen.

Stifling Debate

An official starts to address a gathering of people to explain his position. Suddenly a protester stands up and starts making a disturbance. Is this a danger to democratic society? Something that must be suppressed? Or is it an example of constitutionally protected free speech?

Not so strangely, it depends on who is being interrupted. Currently the Obama administration is upset because tea party protesters are disrupting town hall meetings on health care. Several points should be considered:

First, this sort of behavior is nothing new. The left has been doing it constantly for decades. Speakers such as David Horowitz can expect that any time he gives a talk on campus, the front row will be filled with hecklers who have no intention of letting him speak.

The left had a blind spot about this. Talking Points Memo recently debated if they ever did this. Some people felt that they had done it during the Bush proposal for Social Security reform. Others felt that it hadn't happened since the 1960s. No one seemed to realize that it happens regularly.

The second point is that the White House is attempting to stifle the debate on their own terms. The whole purpose of the town hall meetings was to put out a controlled message. The President's town hall meetings are stacked with ringers from his campaign. They are trying to keep opponents from being heard. They even set up a special email address for people to forward anything that looks "fishy" to. It is unclear if this will be used to formulate responses or to threaten people who are disseminating the wrong message. Regardless, with the Democrats controlling the White House and Congress and a sympathetic press controlling CBS, ABC, NBC, CNN, and MSNBC, it is not surprising that people are copying tactics from the left to get their message out.

The third point is that the administration is spreading a lot of misinformation. The protesters are justified in calling them liars when they are not telling the truth. When the President of the United States tells lies on prime time, then what are average citizens to do? (The same thing that they did when no WMDs surfaced in Iraq.)

Finally, the left is insisting that the disruptions are being caused by paid agitators but has so far failed to find any. The closest that they have come is an overlap in volunteers.

For the record, here are a few statements that are being put out:

If you are satisfied with your doctor or health plan then no one will make you change it. Truth - Assuming that your current plan meets the new standards, it is up to your employer whether you will keep it or switch to a different plan or the public one.

Health Care Reform will cut health care costs. Truth - the current proposals are more likely to push future costs up than down.

You will not be forced to pay for abortion. Truth - a news story yesterday said that the public plan probably would include abortion.

This will not lead to single-payer. Truth - Based on other countries such as France, it will probably lead to a de facto single-payer covering 80%-90% of the population.

The Automotive Model

President Obama says that we need health care reform in order to "bend the curve down." By this he means that we need to do something to keep health care costs from rising faster than inflation. The trouble is that none of the proposals being debated really address this. That's why we have all of the talk about rationing. As costs go up, the amount of services available to individuals will have to be reduced.

Will Obamacare solve this? No. France and Germany are close to the various public/private models being debated for Obamacare. They also come in after the US in the amount spent per capita on health care and they face the same problem with rising costs that we face. They also get less for their money. The survival rates for the most cancers range from slightly better in the US to much better for prostate cancer.

There is some talk about cutting Medicare but simply allocating less money means more rationing. This leads to human-interest stories about people being denied care and a return to previous funding.

Obama insists that the problem of rising costs is caused by greedy doctors who order too many of the wrong type of test (and not enough of the preventative tests that Obama insists will lower long-term costs). In his rush to find villains, Obama overlooks the fact that greedy insurance companies are not going to pay for unneeded tests. Obama's distrust of free markets makes him look for him to see rising costs as an indicator of insufficient government control. There are other factors, many of them byproducts of government policy.

One factor is the cost of malpractice insurance and the cost of "defensive medicine" - tests done in case of future lawsuits. Obama announced early on that malpractice reform would not be part of health reform. This kept the trial lawyers happy and they are one of the Democrats' biggest sources of money. It also eliminated a major tool in controlling costs.

A big problem with insurance is how it is handled. Most people do not buy insurance. Their employer buys it on their behalf. This came about mainly due to the progressive tax rates prior to the Reagan administration. The tax rates were not indexed to inflation so it was very easy for a cost of living increase to push someone into a higher tax rate and result in less actual take-home pay. At the time, most benefits were deductible so applying a cost of living increase to a benefit was a way of beating inflation. This gives individuals an incentive to run up their insurance costs. I know people who believe that a benefit is wasted if it isn't used so they try to get as much out of their insurance as they can.

With most people covered through their employer, insurance companies didn't have any incentive to sell to individuals. There is more profit in group sales than individual sales. This makes it harder for individuals to get insurance. This is also where a big part of the 47 million uninsured figure comes from. Anyone who is unemployed for any length of time is included in this figure.

One solution that I have seen being talked about in conservative circles is to treat health insurance like automobile insurance. You are responsible for buying your own instead of it being bought on your behalf by your employer. You would choose the options and amount of coverage that you need and can afford. Many regular things either would not be covered or would have a deductible. You don't expect your insurance to pay for oil changes, brake jobs, or new tires. Why should insurance pay for check-ups?

Many people are already doing this. They buy cheap catastrophic-coverage and pay other expenses out of pocket. This is one way of bending the curve down. If a doctor says that your headache is probably just that but that you could have a CAT scan to be sure, you are much more likely to agree if the test is covered by insurance.

This is the opposite from Obamacare. The President says that he wants more poeple being tested and that he does not want any co-pay for these tests. This represents two different points of view of medical tests. One side wants to leave the choice to the individual. The other side does nto trust the individual to make the correct choice and wants to test everyone.

Complicating this is the fact that most people are healthy so most tests are not needed. Worse, some tests produce a high number of false positives. This can lead to unneeded treatment. The PSA test for prostate cancer is an example of one that has a high number of false positives. It also detects any cancer, no matter how small. Since prostate cancer is slow-growing, a man can have it for decades without needing treatment. A review of PSA tests found that positives were often followed up with unneeded agressive treatment.

All of this should be part of the national discussion. Instead the debate is centered exclusively on insuring the most number of people and regulating minimum coverage.

Why 3 cents?

One proposal to help pay for medical reform is a $0.03/can tax on soft drinks. Why three cents?

It's a bribe for the soft drink companies. Vending machines don't take pennies. Amounts have to be divisible by increments of five cents. If a three cent tax is imposed, they will raise prices a nickel and pocket the difference. All complaints will be directed at the government.

The White House and Congress are already fighting the insurance companies. They don't need new enemies.

Obama, Gates and Crowley - a few thoughts

It is obvious that Gates' defenders either have not read the police report or are ignoring it in the hopes that their readers have not read it. The most common phrase that they use is that "Gates was arrested in his own home." After that, they speculate that Gates should have simply walked away.

According to the police report, Gates admitted Crowley into his home to show the sergeant some id. He was also agitated. Gates's own account indicated that he was sure that Crowley was a rogue, racist cop immediately. According to the police report, Crowley was convinced that Gates belonged in the house. Gates was still yelling at Crowley, demanding his name and badge but not staying listening when Crowley gave it to him, twice. Crowley gave up and left the house. If Gates had left it there and complained through official channels then there would have been no story. Instead, Gates followed Crowley through two rooms and onto the front porch where he continued to call Crowley names, this time in front of others.

In some neighborhoods this could have started a riot but I doubt that Cambridge is one of them. Crowley could have left Gates to rant to his audience. Instead he warned Gates twice that he was becoming disorderly. Keep in mind that, at this point he was not in his own home. He was on the front porch. There are lots of things that you can do inside your house that you can't do on the front porch. Crowley decided that shouting racial diatribes was one of those things and arrested Gates.

So, by my count, Gates had at least three opportunities to calm things down and Crowley had one.

Why is this incident still news? Because it is polarizing. It is easy to side with one of these men and overlook his part, giving complete blame to the other. That's what President Obama did last week when he said that the police acted stupidly. Obviously, Gates also acted stupidly but Obama still seems blind to that.

A few days ago Glenn Beck used the incident to call Obama a racist. While I don't agree with him that Obama hates white people or white values, there is a double standard here.

First for anyone who is upset by Beck's statement, I'd like to know what their reaction was when people called George W. Bush a racist and accused him of allowing, or even ordering, New Orleans flooded? This was a much stronger accusation than Beck's but I don't remember anyone being fired or even disciplined for saying such things. So, if it was ok to call Bush a racists then why not Obama? Obviously it is because Obama has darker skin and many people believe that racism is ok as long as the racist is black.

Another double standard is Obama's set of friends. He counted the Reverend Wright as a close friend and advisor until videos of Wright peddling racial hate came to light.

Professor Gates is another example. His entire career is based on racial grievances. He is a believer in conspiracies against blacks as a race.

What does it say about Obama that he counts these men as friends? If the races had been reversed then association with either man would have doomed a white politician's career.

Obama can imply that the typical white person is a racist but Joe Biden's presidential run crashed and burned when he described Obama as "articulate", possibly implying that there were black men who are not articulate.

Whites are beginning to resent the one-sidedness of it all. Not long ago Crowley would have been dismissed as the rogue, racist that Gates described him as but things are different this time. The police force stood up for him and whites are saying that Crowley may have over-reacted but he would probably have done the same thing to anyone shouting at him regardless of race.

Ironically our "post-racial" president contributed to the national debate. If he had simply said that both sides had acted stupidly then neither side could have complained. Instead he sided with his friend. Years from now historians may look back at this as the event that unravelled the Obama presidency. (Actually, health care reform was already in trouble which is why he was giving a prime-time news conference in the first place but historians will still say that the Gates incident was the biggest factor).

Birthers

If you are a Birther (you think that President Obama was not born in Hawaii) then please shut up. There is nothing to this and you are embarrassing the rest of us. For the last eight and a half years conservatives could sneer at liberals afflicted with Bush Derangement Syndrome as they talked endlessly about conspiracies within the Bush administration. Now we have our own affliction - Obama Derangement Syndrome.

Think about the whole controversy for a few minutes...

Why would Obama's parents have bothered arranging for fake birth announcements and fake birth registration? His mother was a US citizen so it doesn't matter where he was born (remember that McCain was born to American parents in Panama).

Barack, Sr had a very good reason to keep his mother from going to Kenya - his first wife who he abandoned without a divorce (he did this to Obama's mother a few years later).

If there was anything to this then Hillary's investigators would have found it two years ago. They were responsible for other damaging leaks about the Obama campaign.

The whole conspiracy theory seems to be based on the pre-knowledge that Obama would someday run for president. While it indicates a touching faith in Obama's parents aspirations for their son it's a lot of trouble to go through for a 300 million to one shot that their son would someday run for president.

The conspiracy theory is silly enough that liberals are using it to discredit all conservatives. All they have to do is bring on a Birther or two and represent them as more mainstream than they are.

One thing that I will say about the conservative reaction to the Birther movement - a number of conservatives have stepped forward to denounce it. I can't remember any liberals questioning the 9/11 Truth movement. Howard Dean, when he was still the front-runner in 2004 seemed open to the idea that Bush was involved in the 9/11 attacks. Other high-ranking Democrats included this in the long list of things that they wanted to hold hearings on. Republicans joined Democrats in unanimous support for a bill honoring Alaska's 50th anniversary as a state and as the birthplace of Barack Obama.

Obama's Errors

It's been a rough July for President Obama. His original schedule called for both Cap and Trade and Health Reform to pass Congress before the August recess with Obama signing both bills by September 15. As recently as a month ago this looked possible. Now Cap and Trade is stalled and the new goal for health care is to get it out of committee before the recess. Even that looks doubtful.

What happened?

I've said before that the Progressives think that they are the smartest people who ever lived. Look at the audaciousness of Obama's schedule. He planned on reshaping a huge portion of the economy while saving the banks and the car makers and stimulating us out of a recession. And he was going to do it all in six months.

The problem with thinking that you are one of the smartest people who ever lived is that you think that you are infallible. No one can convince you that you are about to make a mistake and you don't recognize your mistakes after you made them. This has happened to Obama and it is starting to catch up with him.

His first and possibly biggest mistake was the stimulus. In fact, it was a whole bundle of mistakes.

The first mistake was letting Congress write the bill with little to no guidance from the White House. This allowed it to become the mother of all pork with very little actual stimulus involved. In order to be effective it needed to get as much money out the door as quickly as possible. Instead, most of the spending will be after 2009. People are noticing how little stimulus has actually been spent.

The second mistake was making the bill too big. Obama and Congress were cheered on by people like Paul Krugman who insisted that even $800 billion was too small. The bill should have been limited to money that could actually be spent in 2009. By bulking up the bill they made people afraid of additional debt. $800 billion rounds up to a trillion dollars too easily, especially when you include interest on the debt. Between that and the TARP, the country is still in shock over how fast such large sums could be spent.

The third mistake was abandoning bipartisanship. Obama made a pitch at the house Republicans. They told him why they could not support the stimulus. His response was to remind them that he won the election so he could do whatever he wanted and that they should stop listening to Rush Limbaugh. So much for bipartisanship.

You could see this one coming. During the campaign Obama promised to end partisanship but he has also made it clear that he does not like the compromises that bipartisanship usually involves. He seemed to expect the Republicans to see the error of their ways and convert to Progressivism. The stimulus ended any attempts at bipartisanship. Washington is more divided than ever. Without being willing to compromise, it is unlikely that Obama will pick up any Republican votes for Health Care or Cap and Trade.

The fourth mistake was underestimating the problems in the economy. The White House expected the economy to recover on its own by now which would allow them to claim that the stimulus was effective. That would have left the Republicans scrambling to explain that the two events were not connected. Instead the White House is stuck trying to explain why unemployment continues to rise. Obama promised that the stimulus would keep unemployment down to 8% and that people laid off from construction-related companies such as Caterpillar would be called back immediately. Instead unemployment is heading for 10% and Caterpillar has laid off even more people. It is hard to defend the stimulus and argue for even further-reaching legislation at the same time.

Even if the economy was improbing noticably, employment always trails the general economy. Unemployment continues to be high for months into a recovery. The most optimistic projections from January showed high unemployment throughout 2009. Obama will have to wait to take credit for creating jobs. In the meantime he takes the heat for not solving our problems. This happened to every other president in the last 20 years so the Obama administration should have been prepared.

The fifth mistake was the speed that the Obama administration pushes everything through. The stimulus was voted on before anyone could read it. The Cap and Trade legislation was passed in the House before the final copy had even been assembled. This is the sort of thing that Michael Moore makes fun of legislators over. The idea is to move so quickly that a bill's opponents don't have a chance to mount a defense. In practice it is indefensible. The actual process of writing the law has been subcontracted out to the unelected staffs of committee members. Personally I think that legislators should abstain on any vote where there has not been sufficient time to read the legislation. As new things pop up from the stimulus it taints future legislation that is being rushed through the same way.

That's five major mistakes on a piece of legislation that passed in Obama's first 28 days. He continues to make many of the same mistakes.

Probably his biggest mistake was losing his focus on the economy. This is part of his rush to implement everything in six months. The impression is that he has lost interest in the one issue that is most pressing to most people. Health Care has moved down on the list and global warming is barely on the list. Obama has tried to redirect his focus by insisting that the new economy will be built on green energy and health care but that doesn't get much traction. It is too easy for his critics to point out that both require massive government subsidies on top of an unsustainable national debt.

If Obama hadn't been in such a hurry he could have made centered everything he did on the economy and postponed items that didn't fit that model. Then, when the economy finally did recover, he would have new political capitol to spend on his remaining priorities. As it is, he may not have enough political capitol to carry him over.

Paul Light, an expert on the presidency and a professor at New York University, said the president's problems with Capitol Hill reflect "a miscalculation by the Obama administration on how political capital gets spent in Washington."

Light said that capital, even for a president who enjoys immense personal popular support like Obama, is spent a bit at a time on each initiative or piece of legislation.

"I think the Obama administration has been spending political capital at roughly the same rate the federal government spends money," Light said. "Eventually, it runs out."

Gates and the Press Conference

Accounts of the arrest of Henry Louis Gates, Jr. differ but it is clear that from the beginning Gates resented having to answer to a policeman. His own account indicates that he was certain from the beginning that the police sergeant was racially motivated. On his part, Sgt. Crowley says that he had to investigate a report of two men breaking into a house and that Gates refused to answer basic questions such as if there was a second person in the house.

It is pretty much a given in this country that anyone who starts yelling at a cop who is performing routine duties is going to be hauled off in handcuffs but that charges will be dropped later. This happens everywhere regardless of the color of the person doing the shouting.

Regardless, even though this event had been reported nationally, it is not something that the President should concern himself with. It is a local matter and the president is trying to push through what is likely to be the most important legislation of his presidency.

So why did Obama answer a question about the Gates case? You don't get to be president without knowing how to duck a question. He stared by admitting that he didn't know all of the facts of the case, then offered an opinion anyway. Worse, the opinion injected race into the press conference. When the first black president (not counting Clinton) starts talking about race it's news, especially when the rest of the press conference was boring.

So yesterday's headline nationwide was that the President called a cop stupid. The White House tried to soften it but that just put the story back in the news cycle. Progressives quickly started complaining that the Gates story was somehow being used to distract from the "real" story - Obama on health.

What happened? How did the story get away from the White House?

Obama is learning that simply holding a press conference is not enough. You have to have new or memorable content. Most politicians try to control this by using sound bites - memorable phrases that the press is likely to pick up. Obama eschews sound bites. His theory is that people should listen to his entire speech, not just small bits. Accordingly his speeches and press conferences tend to be bland.

In addition, he didn't have anything new to offer on health care. No progress had been made in Congress. He didn't say anything memorable about health care except a possible Matrix reference (red pill/blue pill). With no sound bites and nothing new, editors lead with the one new thing he did say - a condemnation of police officers made without the facts.

This may have doomed health care. It certainly cost it all momentum. Ironically, it might be to Obama's advantage that the Senate will not vote on health care until this Fall. With the Gates distraction still going strong, the White House is not in a position to mobilize public opinion in time for an August vote. With an extra month to regroup, Obama might have a chance.

This is not a sure thing. Originally the Senate delay was seen as bad news for Obama. The mid-year economic report will be out by then and the country might not be willing to commit to new spending after seeing what a hole we are already in. Opponents of the bill will have a chance to read it and ferret out all possible objections. Worse, the public might be sick of health care by September and just want the issue to go away.

Betting on the Weather

Recently, John Hinderaker of Powerline commented that it has been cold in Minneapolis recently. Nate Silver of FiveThirtyEight insisted that, overall, it has been an average Summer and challenged bloggers to a bet. Silver's take on the temperature:

Indeed, it's been pretty cool in Minneapolis for the past couple of days; the temperature hasn't hit 70 since midday Thursday. But has it been an unusually cool summer? No, not really. Since summer began on June 21st, high temperatures there have been above average 15 times and below average 13 times. The average high temperature there since summer began this year has been 82.4 degrees. The average historic high temperature over the same period is ... 82.4 degrees. It's been a completely typical summer in Minneapolis, although with one rather hot period in late June and one rather cool one now. (Note: actual high temperatures can be found here and historical averages can be found here.)

The terms of his bet:

You are eligible for this challenge if:

1. You live in the United States and provide me with your home address and telephone number (I will provide you with mine) and,
2. You are a regular (at least once weekly) contributor to a political, economics or science blog with an Alexa traffic global ranking of 50,000 or lower.

The reason for the latter requirement is because I want to be able to shame/humiliate you if you back out of the challenge or refuse to pay, as I'd assume you'd do the same with me.

The rules of the challenge are as follows:

1. For each day that the high temperature in your hometown is at least 1 degree Fahrenheit above average, as listed by Weather Underground, you owe me $25. For each day that it is at least 1 degree Fahrenheit below average, I owe you $25.
2. The challenge proceeds in monthly intervals, with the first month being August. At the end of each month, we'll tally up the winning and losing days and the loser writes the winner a check for the balance.
3. The challenge automatically rolls over to the next month until/unless: (i) one party informs the other by the 20th of the previous month that he would like to discontinue the challenge (that is, if you want to discontinue the challenge for September, you'd have to tell me this by August 20th), or (ii) the losing party has failed to pay the winning party in a timely fashion, in which case the challenge may be canceled at the sole discretion of the winning party.

Someone tried to take Silver up on the bet. See here. His major change to Silver's terms were that the temperature be based on Minneapolis since that's where the whole thing started. Silver declined saying:

But can you use somewhere other than your hometown? No, that would be a problem. I'm fully aware that this is a somewhat "bad" bet for me for the next 30-60 days in about 10% of the country - an area which happens to include Minneapolis. After that, basically the whole
country is expected to have average-to-above-average temperatures through the middle of 2011.

If someone from MSP or Chicago or Milwaukee happened to want to take the bet -- that's fine, I'm a man of my word (although I'd hope that person would not be a total weenie and would continue the bet for longer than 30 days). But if I allow people to cherry-pick their location, I'm just printing money for them, and it sort of defeats the purpose, which is to illustrate that *on average* the country is getting (slightly) warmer.

So what should we make of this? First, Silver should have stood by his original statement and accepted Minneapolis. He seems to have backed off from his original assertion that things are normal in MSP after checking the data more closely. More important is Silver's use of days above and below average temperature as a measure. Ryan Underdown mentions this is passing and points out that average temperatures have been down. I'd like to expand on this subject.

The problem is that average temperatures do not conform to what we think of as averages. When someone says "average", we think "typical". This works well when the data is distributed evenly but poorly when the data is grouped.

Take average height. If I refer to average height for men then I am describing a typical man. The same for women. The problem is that the average height for men is several inches higher than the average height for women. If I refer to the average height for humans I would be using a number that does not describe the typical person.

To illustrate with a very small sample set - I am 6'1". My wife and daughter are 5'3". Our average height is 5'6", even though none of us is that height. What's more, the sample set is skewed towards the lower end. If I were to bet that the next person to walk into the house would be below the average I would win 2/3s of the time. (If my daughter still lived at home.)

To apply this to Summer weather - temperatures are not evenly distributed. There are sunny days and rainy days. A typical sunny day in July in Ohio (where I have personal experience) will have a high in the upper 80s or the low 90s. A typical rainy day will have a high in the 70s. There are more sunny days than rainy days in July but there are enough rainy days to drag down the average a bit. The average high for Ohio in July is 85 but, as I said earlier, the typical high on a sunny day is slightly higher.

This means that in an average year the number of days above average is going to be higher than the number of days below average. That means that Silver has an advantage in his bet which has nothing to do with global warming. It is just a side effect of the statistical set he chose to use.

If Silver wanted an honest bet then he would bet on the average temperature for the month. That includes enough sunny and rainy days to bring the monthly average in line with the historical averages.

You can see this in the various links I have already given. By figuring the number of days above or below average, Minneapolis is having a normal Summer but when you look at the average temperatures it is cooler than normal.

None of this proves anything about global warming or long-term climate trends. The weather for a single city measured a month at a time is meaningless when compared to global trends. Silver should know this which makes the point of his entire wager dishonest. The fact that his use of daily average temperatures gives him a statistic advantage makes things worse.

Obamacare

Health care reform means different things to different people. Most people worry about a major illness such as cancer wiping out their savings. Others worry about rising medical and insurance costs. President Obama has listed this as a major concern since unrestrained costs will ruin Medicare and Medicaid in the foreseeable future. In addition to this, many people are fairly happy with their current coverage and don't want it to change in the name of reform. Obama has promised that no one will be forced to change their coverage.

So how does the proposed Obamacare stack up against expectations? Poorly.

The issue of illness wiping out savings is not addressed at all.

Rising costs are addressed indirectly through the public option. This will be an insurance plan offered directly by the government, "to keep the insurance companies honest". It will work like Medicare in which a government bureaucrat decides how much the government is will to pay for procedures and the provider is obligated to accept this as payment in full, regardless of actual costs. This will potentially keep costs down by underpaying for services.

What about Obama's promise that people will not be forced to change their coverage? There are three likely cases where this is untrue. The first is someone who is young and healthy and has only signed up for catastrophic coverage. These people will be fined and assigned to an approved insurance plan by the IRS. The other two cases involve the public option. Many employers will switch coverage to the public option. Germany allows this choice and 90% of Germans are covered by the public option. It will be cheaper because the government doesn't have to pay actual costs. The third case is people with really good coverage. Obamacare is going to be expensive and Congress is looking at taxing benefits over a certain amount as a revenue source.

So Obamacare does not cover the two topics that most people want fixed when they talk about health care reform. What does it do? It has two goals. One is to slowly switch the country over to the public option. The other is to increase the number of people who have insurance. It will make it illegal to be uninsured. The ideal is to cover everyone but newest estimates say that it will not.

Because this "reform" does nothing about rising costs, the bill for Obamacare is impressive - somewhere between $600 billion and $1.5 trillion over the next decade. There is talk about trying to pay for it through higher taxes. Right now this is limited to the "rich" but they don't have enough money to pay for all of Obama's wish list. Regular people are going to end up footing part of the bill.

One interesting provision - seniors will be required to have a counseling session about death with dignity every five years. This could easily turn into a push for euthanasia.

Another interesting point - there was an amendment that would force Senators and their staffers to take the public option rather than the coverage that they now enjoy. This was voted down by the Democrats. The public option may be good enough for most of the country but not for the Senators.


Note:
At this point there is no Obamacare. There are multiple bills going through Congress which President Obama endorsed. Given the schedule that the White House is pushing - passage by early August, it is likely that the final bill will be voted on before anyone in Congress has a chance to read it. That's how this administration likes to work - give an arbitrary deadline to vote on a massive bill before anyone can possibly understand the contents and implications, to say nothing of objecting to specifics.

Since Obamacare does not exist yet, I am referring to the bills that the President is supporting as if they were in the final version.

Moon Landing + 40

Forty years ago last Christmas, humans circled the moon for the first time. Forty years ago today they actually landed and walked around on the moon. We went back four more times then stopped. What happened?

Public interest waned quite a bit between the first and second moon landing. Part of it was inevitable. Being the second to do something is never as grand as being first. Worse, the entire world watched the first moon landing but on the second one the camera was briefly pointed at the sun and the lens burned out. Listening to a moon walk wasn't as exciting as watching one.

The drop in public interest was so great that none of the networks bothered to carry Apollo 13's live broadcast. Interest picked up when a fuel cell exploded and it was questionable if they would make it back to earth.

By Apollo 14, moon landings seemed commonplace. The astronaut's schedule called for them to go a lot further, out of range of the camera. Apollo 15 had a motorized vehicle and took the camera with them but it was too late to reignite interest.

There was another factor in our loss of interest - the Soviets had given up.

Starting with America's first manned shots, we called it the Space Race. Space exploration was a showy way of demonstrating technological might. If a country could orbit a man over your country, it could also drop a bomb on you. By this point other nations were joining the nuclear weapons club but the US and the USSR were the only two countries that could put a man in orbit. And the USSR was way ahead.

President Kennedy, acting on advice from his science advisers, changed the rules of the game. We couldn't catch up in earth-orbital flight so we would set a new, harder goal - going to the moon.

A lot of parallels were made between Columbus and Neil Armstrong. There was the assumption that setting foot on the moon was just the start. Everyone assumed that by now we would have at least one city on the moon and be well along on traveling to Mars. If would have happened, too, if the Soviets had shown any interest in doing it first. Instead they gave up.

By 1968 it was obvious to the USSR that we had an insurmountable lead. They always had better launch craft than we did but we pulled ahead in computers and other technical requirements. In early 1969 they tried a last-ditch effort to reach the moon first. If blew up on the launching pad and they never tried again. When Neil Armstrong landed, they announced that they were de-emphasizing manned space probes in favor of robotic craft. That doomed the moon program. No one wants to run a race by themselves. The space program was expensive and the economy was doing poorly. NASA changed priorities. They would build a space station and a space truck to supply it. Even this was cut back. The space station was cut and the space truck became the shuttle.

The Space Race was the bright spot of the cold war. It would never have happened without the competition between the world's two superpowers. There is talk of returning to the moon and continuing on to Mars but there is no urgency to it. Everyone knows that if the US doesn't do it then no one will so it can wait until we have the will on our own or a competitor.

It's one thing to

Climate variability

RealClimate has a guest column on climate variability. This is an important concession for them since they have spent years and considerable effort trying to prove that CO2 is the only driver for climate change. Al Gore, who cites them as a major source of his information is on record as saying that the only reason that Venus is hotter than the Earth is because of CO2. This shows how badly the cooling of the last few years has hurt their case.

On its surface, the column continues to defend global warming theory. It starts out with this statement:

A climate that is highly sensitive to radiative forcing (i.e., responds very strongly to increasing greenhouse gas forcing) by definition will be unable to quickly dissipate global mean temperature anomalies arising from either purely natural dynamical processes or stochastic radiative forcing, and hence will have significant internal variability. The opposite also holds. It's painfully easy to paint oneself logically into a corner by arguing that either (i) vigorous natural variability caused 20th century climate change, but the climate is insensitive to radiative forcing by greenhouse gases; or (ii) the climate is very sensitive to greenhouse gases, but we still are able to attribute details of inter-decadal wiggles in the global mean temperature to a specific forcing cause. Of course, both could be wrong if the climate is not behaving as a linear forced (stochastic + GHG) system.

That last disclaimer is interesting but the thrust of this paragraph argues that variable climate proves warming theory because it shows that the climate can be changed. As I said, it represents a major policy shift for RealClimate to allow anyone to suggest that the climate can change without human forcing. I will get to the implications of this later.

The rest of the paper deals with the period from 1998 to the present which they refer to as an episode. Their point is that something natural happened to the climate in 1998 skewing the averages. Because of this, only data prior to 1998 should be used in charting global warming.

We hypothesize that the established pre-1998 trend is the true forced warming signal, and that the climate system effectively overshot this signal in response to the 1997/98 El Niño. This overshoot is in the process of radiatively dissipating, and the climate will return to its earlier defined, greenhouse gas-forced warming signal. If this hypothesis is correct, the era of consistent record-breaking global mean temperatures will not resume until roughly 2020.

While this sounds quite reasonable there are two problems with it. The obvious one is that you can't just throw out data that doesn't fit your model and claim that the remaining data is correct. There is a prediction that we will see a return of the warming signal around 2020. This is valid scientific method but we have to wait another decade in order to validate it.

The other problem is the assumption that, with the exception of the 1998 event, world temperatures would have been naturally stable without human-induced warming. Now that it has been admitted that the climate can change without human intervention, it has to be admitted that other, natural, long-term trends can happen. RealClimate tried to keep this line of inquiry closed. That's why allowing any admission of it is such a policy change for them.

Malaise and Carter

Thirty years ago Jimmy Carter's presidency was failing. Gas prices were rising. Natural gas prices were also rising and gas line pressure had been noticeably down the  previous record-cold Winter. Word had gotten out that the Secret Service had saved the President from an attack rabbit. When the White House declined to provide footage, CBS showed a clip from Monty Python and the Holy Grail, instead. People were talking about how much the presidency had aged Carter.

Realizing that things were bad, Carter's aids called him in from a planned vacation to give a major speech. They quickly abandoned the original speech and spent the next ten days writing a new one. This one would address the mood of the country and energy policy. A press release described the country's mood as a "malaise". The word stuck and it became known as the "Malaise Speech".

Carter loyalists are quick to defend the speech was well received and his popularity rose after the address. Carter speechwriter Gordon Stewart says:

To this day, I don't entirely know why the speech came to be derided for a word that was in the air, but never once appeared in the text. Still, the "malaise" label stuck: maybe because President Carter's cabinet shake-up a few days later wasted the political energy that had been focused on our energy problems; maybe because the administration's opponents attached it to the speech relentlessly; maybe because it was just too hard to compete with Ronald Reagan and his banner of limitless American consumption.

The real reason is probably that there was never any way the Jimmy Carter we all know would avoid saying: "There is simply no way to avoid sacrifice." Where the speeches of Reagan and Barack Obama evoke the beauty of dreams, President Carter insisted on the realities of responsibility and the need for radical change. Mr. Carter's sense of our own accountability, his warnings about the debilitating effects of self-centered divisiveness were the speech's true heresies.

He is too kind to his former boss. Carter promised several actions. None of these ever took place. Instead, as Stewart alludes, Carter asked his entire cabinet for their resignations and accepted them from the most prominent members. This reinforced the impression that he was out of his league.

If Carter had followed up on his proposals he would be remembered differently. Instead he is lumped together with Gerald Ford as a president who could not work with Congress. Around 14 months later Iran invaded the US embassy and took diplomatic staff members hostage, making Carter look weaker than ever.

Part of the reason that Reagan left such an impression is that he was such a contrast with his predecessors. Both men came to Washington promising to change things. Only Reagan actually did. Carter was voted out of office by people who thought of him as a nice man who was not competent to be president. The more Reagan accomplished the worse Carter looked.

Carter apologists want his speech to be remembered as a high point of his administration. In fact, it was simply a lofty set of promises that he never followed up on. That makes it representative of the Carter presidency.

Sotomayor

I probably will not agree with most of Sonia Sotomayor's decisions on the Supreme Court but she should be confirmed. She is well qualified and one of the perks of being president is being able to appoint someone who matches your views. Senate Republicans are welcome to grill her but they should not make a cause out of it. That's how the process is supposed to work.

That said, the Democrats including President Obama have violated this principle for decades. The NOW and the related abortion lobby are principally to blame. They have made abortion a litmus test and assume that anyone nominated by a Republican will fail it. This is a perversion of the process. Republicans have had to resort to "stealth nominees" - people whose judicial history is too short to draw conclusions from.

The Roe v Wade decision was possibly the worst since the days of slavery. It invented a constitutional right where none is clearly written. The gyrations every since have been devoted to protecting or overthrowing that single decision.

The Supreme Court is too important to be hostage to a single issue.

A Strange Circle

The headline says Obama's visit to fort a "Full-Circle Experience". The full circle is an American black returning to the location where his ancestors were forcibly removed from their homeland.

Except this has different implications for Obama. His mother was white and her family owned slaves at one point (there was speculation a year ago that one of Obama's ancestors may have owned one of Oprah's). His father was African. His family never left Africa except Barack senior for a few years to attend college and father an American child. Any connection between Barack senior and slavery would have involved Obama's family benefiting from selling the compatriots.

Obama made a different circle on the same trip. Rather than appologize for slavery and colonization, he told Africans to get their act together. He passed over his father's native Kenya in favor of Ghana because of Ghana's dedication to free, open elections and the corruption in most other African countries. These comments were personal for him. His father had been a member of Jenya's government and was pushed out due to corruption.

Obama's speech to Africa was a welcome change from Bush and Clinton who both felt the need to appologize for not solving all of Africa's problems for them.

The Awesomeness of Obamacare

Bob Cesca has a post on Huffington in which he talks about how great the public option will be. Some quotes:

The fact remains that the only downside to the public option is that it's just too awesome. We don't deserve anything that good. Simply put: it's Medicare, but for anyone who wants it. And this is somehow a nightmare scenario -- one that we must never be allowed to experience even though it would cost much less than our current system, it would cover everyone who wants it, and it would be accountable to the American people.

{...}

The "it's too awesome for your own good" argument was the one we heard from both Republicans and centrist Blue Dog Democrats for several months recently. But now it's back to the good old fashioned socialized-healthcare-is-awful frame, most notably trotted out by Republican minority leader and Deep Space Nine shapeshifter Mitch McConnell, who has been peppering his floor speeches with the tear-jerking story of the one person from Canada who doesn't like her free and universal healthcare.

Imagine that. Free. And this one person hates it so bad, you don't even know!

Too bad there's nothing free and universal in God's non-socialist America. Like roads, police protection, fire departments, public schools, and public parks where we can protest against public programs like funding for parks.

But Mitch McConnell says that in Canada people have to wait for a knee replacement. See now, if I'm getting a free knee replacement surgery without fear of being dropped by my health insurance carrier or having to run up credit card debt in order to cover the co-pay, the co-insurance and the deductible, I want my damn knee replacement yesterday.

Waiting eight weeks (the average wait time) for a free Canadian knee replacement surgery is eight weeks too long. In America, I can have my knee surgery over lunch, yes? Of course I have to pay more for such a convenience. And I'm participating in an enterprise that could easily screw me out of the coverage entirely. But I can have my surgery whenever I want it. (Actually, it's about a 21 day wait.)

 

There are so many problems with Cesca's post I'm not sure where to begin.

Let's start with "free". He tosses that term around a lot but he doesn't seem to realize that none of his examples are free. Someone pays for the roads and parks and police. Specifically, it is the taxpayers who pay for them. So go back and reread his screed but replace "free" with "taxpayer funded" or "paid for by other people".

Now that that is settled, I'll start from the top. Yes, the public option is like Medicare - except it isn't. Medicare is subsidized medicine and it is quickly running out of money. Last year it paid out more than it took in. The public option is being sold as revenue neutral. That means that it is supposed to support itself through premiums, just like a private insurance company. In reality, it will have to be subsidized for the poor and it will probably be subsidized for everyone enrolled. Congress is already looking at new taxes to pay for this. And they are looking at people who make a lot less than $250,000 a year.

Higher taxes is one way to cover the expenses. Rationing medical treatment is another. Cesca dismisses this, saying that the average waiting time in Canada is only eight weeks. If you follow his link you will find that he got that figure from an article published in 1994 which was based on data from 1992. Here is an article from this year. It's statistics are much less awesome.

Knee replacement surgery is a common surgical procedure that allows for an effective reduction of pain and adequate restoration of function for the vast majority of patients suffering from advanced knee osteoarthritis or other forms of arthritis. [1] In the last decades, the growing needs of the population have made this procedure, along with hip replacement, the second most popular orthopaedic surgery. [2] In Canada, in 2006, the rate of knee replacements reached 106.9/100 000 persons, in sharp progression from the past decade. [3] This sharp rise in demand has translated into growing waiting lists. Governments have tried to tackle this problem, and with the allocation of new funding and the development of new policies, more patients are being operated. [4] But wait times remain a problem; recent Canadian data show that, depending on the province, the median pre-surgery wait time range from 112 to 291 days and still today an important proportion of patients are not operated within six months, the maximum acceptable waiting time benchmark established in Canada.

Then there is the awesome British health care. Liberals (or progessives) don't talk about the Brits much anymore. It is too easy to find stories like this one which says that hospital overcrowding makes patients likely to contract "superbugs". Canada has an easier solution for overcrowding - they've been sending their overflow to the US for a decade.

Cesca doesn't really care about any facts or figures. He is sure that single-payer health care is the best solution and he has no interest in looking any further. This is troubling because of the prominence that the Huffington Post has been given. It now feeds stories into MSN broadcasts and sends journalists to presidential press conferences. His bio says He's been a featured blogger/columnist for the Huffington Post since August, 2005. His posts appear on the front page above-the-fold every Wednesday (sometimes Thursday). That makes him pretty prominent for being so wrong.

Stimulus Woes

Unemployment is at a 26 year high. This wasn't supposed to happen. After all, Congress passed a massive stimulus bill during Obama's first few weeks in office. So what happened?

A bigger question is how a package that spends most of its money after 2009 could possibly have affected the economy now?

Vice-President Biden may have let something slip when he said that they had underestimated how bad the economy was. The cynical take on his statement is that they expected the economy to turn around this Summer on its own. They would then take credit for it and continue spending the bulk of the $800 billion.

With the economy still doing poorly, people are taking a second (or first) look at the stimulus. Last night NBC led with a New York Times story about stimulus-related road construction. It seems that most of the spending is in rural counties but most of the unemployment is in urban counties.

According to an analysis by The New York Times of 5,274 transportation projects approved so far — the most complete look yet at how states plan to spend their stimulus money — the 100 largest metropolitan areas are getting less than half the money from the biggest pot of transportation stimulus money. In many cases, they have lost a tug of war with state lawmakers that urban advocates say could hurt the nation's economic engines.

It should also be pointed out that "shovel-ready" construction projects only get $26 billion out of $800 billion.

Economists such as Paul Krugman say that this proves their prediction that $800 billion wasn't enough money and that a second, larger stimulus bill is needed. The White House is denying that they plan a second stimulus "at this point".

But the White House press secretary, speaking to reporters aboard Air Force One, suggested that could change if the country continues to lose jobs.

The idea of passing a second huge spending bill before most of the money from the first one is due to be spent is troubling. The first one will cost $1 trillion by the time interest is paid. We may have already overspent. Some economists are predicting a double-dip recession with debt-induced inflation triggering a new recession late next year. Adding in a new stimulus could ruin the economy for years to come.