Saturday, July 31, 2004

Convention DVD's

Last night I was at a little bar talking politics with my girlfriend and a couple of other friends. We are all Democrats so we were talking the Convention. Unfortunately none of us saw all of the highlight speeches. I am wondering if the DNC or some affiliated group would be willing to make a quickie DVD with lets say the nine other presidential primary candidates, the Clintons, Barrak Obama, Edwards and Kennedy speeches on it? I'll pay decent money for that.

Friday, July 30, 2004

Profits of Instability

A couple of days ago, I wrote a post claiming that the instability in Iraq has allowed Russia to charge between $15 to $30 billion dollars more this year for their oil production than they would have been able to charge in a traditional environment where there is no security or risk premium due to terrorism. Russia is not the only large oil exporter who has been collecting windfall profits. Saudi Arabia produces more oil than Russia and its government's finances are even more heavily dependent on oil exports than the Russian government. The Saudi budget was based on very pessimistic assumptions that oil would be priced at or below $20 per barrel. These projections led to governmental deficits for as far as the eye could see. However, in this new higher priced world, the Saudi government is loosing the spickets on the pumps while also enjoying massive windfall profits that have created surpluses and additional social spending monies for as far as the eye can see. This same story applies for the economies of the entire Persian Gulf, excluding to some degree Bahrain, and most of the rest of the member nations of OPEC. OPEC is composed of countries that are heavily dependent on oil revenue for their hard currency base.

This presents an interesting dilmena for all of the major oil exporters which are not part of NATO or NAFTA; stability in Iraq and in the Middle East in general is a contiunuum of choices, and the extremes on both ends have extremely expensive payoffs. Extreme levels of stability in Iraq will cost the Russians between fifteen and thirty billion dollars a year, and the Saudis even more money ($17-$35 billion is my best guess). Complete instability such as an Al-Queda led or inspired series of coups starting with the Saudi Royal family and moving down the line of Emirate will cost the current stakeholders their lives and fortunes. Somewhere in between are less dire consequences and therefore more desired states of being. This continuum of instability and its resultant payoff matrix leads to some very mixed incentives that we see acted upon every day.

Right now there seems to be a relative truce between the Saudi government and Al-Queda on not attacking the pipeline infrastructure. This is not because Al-Queda does not have the capability to attack the infrastructure or to penetrate security. The last major AQ operation which led to the death of approximately twenty oil field workers could have just been as easily an attack on the pumping stations and pipelines. The Iraqi insurgency has shown how soft these networks are when the bang-men are competent. Yet AQ has not attacked these targets and the attackers are able to escape the Saudi response. This is an interesting truce and it shows that a tolerable level of instability exists, as long as the actual physical infrastructure of wealth creation is not destroyed.

Yet at the same time, the Saudi government know that this truce could expire or break down at any time. They need the backing of the United States to maintain power over a very restive population. This has led to proposals to have a Muslim peacekeeping force enter Iraq. However no Saudi troops are available for this force, and the most support it will get is a nice smile and a friendly wave as it disembarks at Dhahran and Kuwait City. The Saudi government knows that this diplomatic piece of shit gives them some cover with the US government, which is desperately seeking to make the occpation multilateral for both political and practical reasons (some else can get shot.) But they also know that the Saudi National Guard is not large enough or competent enough to do anything worthwhile in Iraq while any committment is certain to bring mass riots into the streets of Riyadh. So fig leafs are offered towards moving up the stability ladder, while no real change will occur.

This same game and same basic set of payoffs are being calculated and played by all of the non-industrialized oil-exporters. Some level of instability is extremely profitable to them, especially an instability that so far has not resulted in the destruction of any actual production or export ability. The importance of this realization is simple; the incentive to cooperate with the United States is low for these countries, and if Iraq and the rest of the Middle East begins to stabilize, there is some direct economic incentive beyond the clear national security incentive that Iran possesses, to help the insurgents in Iraq. Help is not on the way.

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Soma

Via Balta I see this story in which a Bush-Cheney campaign worker was overheard to say that people unhappy with their employment sitation should just get some Prozac.

Brave New World was one of my favorite books as a teenager. I absolutely love the anti-Romantic distopian that Huxley was able to create and the central point was an extension of the Freudian belief that pleasure was merely the release or absence of tension. As an 18 year old, I could understand that, and it was one of the reasons why I limited my illegal drug consumption to beer and whiskey (affordability, and future career consequences were two other major reasons.) My drug of choice was caffeine and lots of it combined with intentional sleep deprivation. But I digress.

When I read this quote, even though the staffer later claimed that she was joking, I immediately thought of Brave New World's drug of choice; soma. It gave one a mellow high where it is impossible to be unhappy while also disassociating oneself from one's surroudning. The non-Island society needed to have people who believed that they were happy in their places and could not willingly agitate for change. That is an extraordinarily pessimistic world, and it can only be brought about by massive apathy. That is a world in which George W. Bush's agenda needs in order to be implemented. Thankfully, wanting to do better is still part of our political discourse, and it has awaken millions of people to agitate for change and improvement. But still, I fear soma and the attitudes which lead to agendas that require indifference to be implemented.

Vermin has returned

Just as a quick note of curiousity to serious junkies like myself; Vermin Supreme who has a candidate for the D.C. non-binding Democratic primary has re-appearred. He was in Boston during the convention as an anarchist protester.

That is all.

Thursday, July 29, 2004

Football et Futbal

Training camps around the NFL are opening this weekend. I am a little worried that the Patriots still have a couple of rookies unsigned, including first rounder Ben Watson, but he is #3 on the depth chart right now behind two solid veterens. I like the Big Cat Williams signing, hopefully this year the Patriots will break the cycle of an offensive lineman acquired in the offseason as a free agent deciding to retire. That would be nice.

Now I am off to see Chelsea v. Roma. FUTBAL!

Jobless Claims Neutral

This week's new claims data shows a neutral story as a seasonally adjusted 345,000 new people claimed unemployment. After the odd first week of July, we have seen new claims hover in the 340,000-350,000 range which is a neutral sentiment.

This job weakness has reflected itself in weak durable good orders and the overall patchy growth that indicates to me that we are definately stuck in neutral right now. Wage and income growth has been fundamentally stagnant as consumption is being finacned on credit. I just don't see where growth comes from unless we see a significant drop in oil prices, a devaluation or even more massive deficits.

Wednesday, July 28, 2004

Scalping and Student Rushes

Tyler Cowen at Marginal Revolution posts an interesting excerpt from an article in which two major league baseball teams are encouraging scalping in order to clear more revenue from the limited supply of good seats to see good baseball being played. Scalping is part of any Intro to Micro class as a grey market response to artificial price barriers to trade as a new market price is met and deadweight loss is minimized as tickets go to those who value them the most.

Now scalping only makes economic sense when the face value tickets are in high demand. It makes very little sense for a scalper to waste his time if he is trying to sell $75 seats to a baseball game that is only half full. The typical consumer can find a better price for the same or better seat with lower transaction costs. Scalping will most likely occur when the team is good or there is some unusual event (see Barry Bonds, see the 1998 homerun race, or see PNC Park on Fireworks night).

What I can not figure out is why teams don't drop their prices when they are drawing like the Pirates. Right now the Pirates are drawing at roughly 60% of capacity, and there are plenty of seats available on most weeknights, even when the weather is cooperating. The marginal cost of a single additional fan is minimal. There is most likely a rather substantial marginal cost between having good service for 20,000 fans in the ballpark and 30,000 fans in the ballpark, but the primary costs being borne by the Pirates are not dependent on attendence. What I can not figure out is why the Pirates do not have a rush policy where for some price over the cheapest seats in the park ($9 bleachers, $10 upper deck) but under the median prices, any fans who show up within an hour of game time can get damm good seats. This should let them fill the stadium more which increases the odds of making more money from concessions and it also creates a long run fan base building exercise as more people will be willing to just randomly pop by to see a game on a boring Tuesday night.

The downsides are that regular season ticket holders will see people getting the same seats that they have but at a significant discount which could create an incentive for people to drop season tickets which denies the team a steady cash flow stream. It also would increase box office expenses. However it should not cut into revenue flow on weekend or special event games because those games are already close to or at capacity with full price tickets.

Windfall Profits and Iraq

What is the economic value of stability in the Middle East? I am asking this question as part of the follow-up to my post on why I believe the rumor of Russian troops being deployed to Al-Anbar Province in order to do the dirty work that the US does not want to do. One of my major arguments is that Russia's finances are not in structually sound shape because the government is too dependent on oil revenue. They are experiencing short term surpluses bouyed by high oil prices. Currently, oil futures are selling at roughly $43/barrel due to the news that Yukos, which produces ~2% of the world's daily oil needs, has been ordered to stop all operations. Included in this price is a security risk premium of $5 to $10 risk premium despite OPEC pumping at full capacity.

So what is security and stability worth to a major oil producer such as Russia? Let's assume that Yukos starts pumping and exporting again under some new ownership structure. In 2003, Russia was producing an average of 8.4 million barrels of crude per day and there are no indications of any production contractions for 2004. Let us assume a couple of scenarios, and be aware of the problems of managing by spreadsheet.

Scenario 1: Stability returns tomorrow to Iraq, full production resumes, and the risk premium instantly disappears as the Saudi government can effectively reassert control because their homegrown insurgency loses hope:
Russia in this case loses between $42,000,000-84,000,000 per day due to the loss of the risk premium. Annual basis this works out to be $15-$30 billion dollars per year in loss oil revenue due to the disappearence of the risk premium.

Scenario 2: Stability slowly returns so that the risk premium linearly declines to half of its present value over the course of a year. It then stabilizes at half the present value for the rest of the projection The first year lost revenue is between $4-$8 billion dollars, and second and subsequent year nominal dollar losses are of $7.5-$15 billion dollars per year.

These two extremely simple scenarios, with very basic modeling assumptions show an incentive for countries which are primarily energy exporters and not energy consumers to be very reluctant to intervene in the Middle East provided that the chaos is managable. Russia is currently profiting by the current level of disorder because that is allowing them to collect windfall profits on their primary export. Intervening to provide stability and remove the risk premium due to chaos in Iraq will have significant direct deployment and operations costs and indirect costs of foregone windfall profits. Small concessions concerning the WTO and Central Asian bases do not even come close to compensating the Russian government for the potential loss of windfall profits.

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Nothing to worry about

Via Morat at Skeptical Notion is this story that states that Florida has a high chance of being a complete electoral mess again this year. The electronic machines in several counties no longer have any records of the 2002 elections because of system failures. Swell, now there is no way for effective recounts to be reliably made. There is absolutely no reason to be paranoid about the health of democracy in this country; none at all. Just ignore the now rescinded felons list that included less than 1/1000th Hispanic names in a state where Hispanics make up at least 13% of the population. Forget the attempt by the governor to keep news organizations from exposing the flaws in this list. Forget the passing of this task along to 67 different counties with 67 different standards. Forget all of this... we need some more apple pie.

Tuesday, July 27, 2004

Important questions

Via Arthur Silber I saw this article which contains the following important revelation:

One of the veteran cartoon stars of "The Simpsons" is coming out of the closet.

The betting on who it might be would seem to favor sniveling yes-man Waylon Smithers, who for years has harbored a secret crush on his boss, the evil nuclear tycoon Mr. Burns. But the show's producers refused to tell the audience at Comic-Con if he's the one.

"We have a show where, to raise money, Springfield legalizes gay marriage," producer Al Jean told a gathering of thousands at the convention. "Homer becomes a minister by going on the Internet and filling out a form. A longtime character comes out of the closet, but I'm not saying who."


Now the question remains who? I have a couple of thoughts as to the likely targets.
  1. Waylan Smithers is the obvious choice as there have been plenty of episodes that have him all but wearing a rainbow flag pin while vacationing in P-town. However, this is too obvious I think.
  2. Ned Flanders is a repressed individual in many ways. He is the societal norm busy body. I feel that the writers have been doing a good job of developing his character in the past three or four seasons, and this is a twist that could make him extremely interesting.
  3. Principal Skinner --- why not, middle aged man still living with his mother. Again, still a little too obvious of a target
  4. What about Moe the bartender --- he has been very secretive about his personal life for a long time, which could be his way of staying in the closet.
  5. Edna Crabapple --- who knows, although we know that she likes guys, but given her string of past beaus, she has poor taste.
What are your thoughts?




Important questions

Via Arthur Silber I saw this article which contains the following important revelation:

One of the veteran cartoon stars of "The Simpsons" is coming out of the closet.

The betting on who it might be would seem to favor sniveling yes-man Waylon Smithers, who for years has harbored a secret crush on his boss, the evil nuclear tycoon Mr. Burns. But the show's producers refused to tell the audience at Comic-Con if he's the one.

"We have a show where, to raise money, Springfield legalizes gay marriage," producer Al Jean told a gathering of thousands at the convention. "Homer becomes a minister by going on the Internet and filling out a form. A longtime character comes out of the closet, but I'm not saying who."


Now the question remains who? I have a couple of thoughts as to the likely targets.
  1. Waylan Smithers is the obvious choice as there have been plenty of episodes that have him all but wearing a rainbow flag pin while vacationing in P-town. However, this is too obvious I think.
  2. Ned Flanders is a repressed individual in many ways. He is the societal norm busy body. I feel that the writers have been doing a good job of developing his character in the past three or four seasons, and this is a twist that could make him extremely interesting.
  3. Principal Skinner --- why not, middle aged man still living with his mother. Again, still a little too obvious of a target
  4. What about Moe the bartender --- he has been very secretive about his personal life for a long time, which could be his way of staying in the closet.
  5. Edna Crabapple --- who knows, although we know that she likes guys, but given her string of past beaus, she has poor taste.
What are your thoughts?

Coffee

I have to agree with Dave Copeland that Pittsburgh needs to develop more of a doughnut culture. I am from New England where Dunkin Donuts have a store on every other block. My hometown of roughly 100,000 people had as of last Christmas, at least nine stand alone Dunkins and another half dozen or so express Dunkin Donut shops plus whatever number of convience store trays. Yeah their donuts are not the best thing in the world, but the coffee is excellent. My girlfriend and I will buy direct from their online store just to get the beans, and then add in some cream and ice and you have a damm fine drink.
The Dunkin's in dahntahn isn't that bad, but it has been a while since it has been renovated and there is still something that is non-New England in the way that they prep their coffee. It is a little more bitter and a little less candy-like than a good cup from Boston. This is a major problem that needs to be solved. A reliable source of strong caffeine dosing is an important pillar of economic development and innovation.

Opportunity Costs for Iraq

The invasion and occupation of Iraq has caused more problems than it has solved according to the UN representative for Iraq. Any justification for this war have long disappeared: no stockpiles of weapons of mass destruction have been found, no operational ties to Al-Quaeda pre-invasion have been proven, human rights improved only by degree and not in kind, random violence is still killing tens of thousands of Iraqis, and the likelihood of a three or four way civil war has increased. This failure is not limited solely to Iraq, it has affected the United States throughout the world. Our security has been decreased because of the failed Iraqi state, the increase incentive for Iran among others, to go nuclear, and the discrediting of the Arab liberal position.

Iran is close to going nuclear. They saw that the United States could not be trusted in a game of brinkmanship. The mullahs of Iran saw Hussein cave on almost every issue (allowing inspectors in, admitting several dual use technologies, dismantling medium range Al-Samoud battlefield missiles) that Bush demanded. Yet, the United States after having all of its public demands met except for Hussien being removed from power, still invaded. The mullahs of Tehren also have seen the different treatment that North Korea has received; they have the bomb and can threaten a major city of a major ally. The conclusion is that nuclear deterrence works against the United States.

The best hope for denying Iran nuclear weapons is no longer military action. The Iranian plants are dispersed and the reactors have operated long enough to allow for at least one enrichment cycle. The best options are now for the United States to support the Iranian liberals and moderates against the conservative mullahs and security apparatus. However, the invasion and occupation of Iraq, has made this task much more difficult.

Needlenose links to a report on two polls that show extreme anti-US sentiment throughout the entire Arab Middle East. Countries which receive large amounts of US aid such as Egypt, Jordan and Moracco have populations that are just as hostile to the current policies of the United States as countries which traditionally use anti-Americanism as a means of diverting popular anger from domestic problems. The problem is not that they "hate our freedoms." It is much simpler and theoretically easier to correct: they hate our policies and do not trust the United States to work towards common interests. (Obligabatory snark required: Except when it comes to denying women reproductive health coverage.)

Arab liberals have been discredited within the wider political world. The United States represents anarchy and suppression which are not ideals upon which to build a political movement upon. The liberals are seeing that the United States will look the other way when their home governments act repressively in the name of stability and anti-terrorism. This repression means that the terrorists are winning the first stage of their campaign for it shows the central governments as corrupt and ham-handed.

Iraq will have significant legacy costs for the United States. We will be paying the consequences of this mis-calculation for at least a generation. Iran will be going nuclear as soon as they have the capability to do so. Liberalization has taken a breather because the liberal democrats are discredited as being too closely aligned with the west/US. The US military is learning lessons, but they are being politically manipulated and stretched extremely thin. Reconstituting our forces will take less time than reconstituting our image and moral authority.


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Monday, July 26, 2004

Russians in Iraq

Over at the Agonist there is an article in the Asia Times which is postulating that there is a secret deal in place for the Russians to deply at least two divisions of infantry to Al-Anbar province. The deal, under this story, will be announced a week before the election in order to blow Kerry out of the water.

I have seen this rumor float a couple of times, and it makes absolutely no sense to me. Right now the Russians do not have a couple of spare divisions that can walk and chew gum at the same time. The trained divisions that are available are already fighting Muslim insurgents, but much closer to home in Chechnya and the other Caucuss regions. Additionally, the Russian government's finances are still not in good shape. The high oil prices have led to short term suprluses and a general strengthening of the ruble, but there are high debt costs and legacy transition costs to deal with. Deploying a short corps is not cheap. The United States would most likely have to pick up the tab, and if Congress is not notified of this deal in time to appropriate the needed funds, it really does not help out that much on the ground.

Finally, although Putin would most likely like Bush to be re-elected because Bush likes Pooty-Poot and does not care for the actual democratization of Russia, versus the different posture that the Clinton administration and most likely a future Kerry administration had on pushing for actual reforms, he is still scared of the military dominance of the United States. Putin has begun to steer a course of actually balancing the United States; the Chinese and Russian governments are dividing up their respective spheres of influence in Central Asia and are actively cooperating on weapons development because they know that they are at least two generations of weaponry and systems intregration behind the United States. If a leader fears another country's power, why would he want to bail that potential opponent out of a self-inflicted quagmire?

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Expectations versus Long and Variable Lags

Last night I was working as a volunteer for Victory 2004, part of the 527 funded GOTV effort in Pennsylvania. The work was simply phonebanking independent and third party registered voters so that we could assign them the appropriate support number from #1 (solid Kerry) to #5 (solid Bush). The stack of numbers that I was calling seemed to have more #1's than 5's and fewer Kerry leaners than Bush leaners. The Bush leaners were relatively vague and non-committal and took some significant pushing on my part for them to make up their mind. That is the good news for that also seemed to be the experience of the other callers last night.

After we were done and we were having some pizza, we talked and joked around for a while. One of the major areas of discussion was the economy and how we are not perceiving it to be turning around on the employment front despite what President Bush is saying. However, some people were saying that as soon as Kerry was inaugurated, we will be looking at golden years of prosperity. I know hope is important, but reality has a strong value to it to.

Presidents and their policies can change the economy. They can change the incentives, change the price levels of items, change the risk premia and when all else fails, they can jawbone the American consumer to spend. However all of these effects require a lag. President Bush was not able to start affecting the economy until after his first tax cut was passed, therefore the first several months of his administration occurred under the structural environment created and modified by the Clinton administration. Kerry's first several months will be operating under the Bush environment. And that environment has a significant chance of producing a recession in the second half of next year. And due to the Bush policy of goosing federal deficits to unsustainable levels in order to pay for upper income, low marginal propensity to spend individuals and also encouraged low interest rates, the Kerry policy quiver to deal with another recession is rather empty. Kerry will not have any effect on the economy for several months if not a year or two.

Now if the hardcore Kerry partisans and volunteers (I have the feeling that these two groups are fairly well intermingled) have expectations on social and international policy, then having an expectation of a quick change come early spring next year, is much more realistic. I just want the people with economic concerns to have a more realistic appreciation of what the President can actually do and when the effects can start coursing their way through the economy.

Sunday, July 25, 2004

Quick thoughts

The Pittsburgh Daily Kos beer session went well yesterday, although it was only myself and the two Joes. I had a great time and the Park House is a good little tavern. The conversation was great as we ranged from the Pirates doing surprising well to research methodologies, pet peeves about the remaining Deaniacs ( he lost, let's build from there instead of being bitter) to a discussion about upcoming movies. This needs to be done again sometime in the near future.

Bicyling ten miles to and from the bar in order to get two beers; not the smartest thing I have done, although it probably was healthy.

This Post-Gazette article confirms some of my fears about the revenue projections from slot machines. I, without the chance to intensely stufy the issue, just don't think there is a 3 billion dollar gambling market in Pennsylvania. The state is taking some precautions against a potential revenue shortfall, but they are still treating the gambling revenue as "found money" before it has actually arrived.

Ricky Williams has to be one of the biggest busts of all time because he truly can be and has been a dominating player with some massive personal issues that he needs to resolve. And plenty opportunities have been spent by two teams to get ahold of him, and he flashes enough to justify hope, and then he falls back into his own problems. Now he is retired.

Training camps open this week... finally!

Friday, July 23, 2004

I've got nothing

I have nothing interesting to say right now. The past couple of days have been happily busy for me (except for folding socks). I have an interview this morning and one more next week, and I should be hearing about a temp job soon. So I don't think I'll be writing anything serious today or tomorrow.

Wednesday, July 21, 2004

Pittsburgh finances

Jonathan, I will not try to shoot you or the Allegheny Institute for the city does spend a lot of money and its tax burden is fairly high. However, I have a major methodological issue with the most recent study: the Allegheny Institute is comparing Pittsburgh with three very dissimiliar cities, therefore the amount of learning that can go on is fairly minimal. My problem with the four chosen comparisons is that none have had to significantly deal with the massive relocation and transition costs of deindustrialization where you now have 2x as much infrastructure per capita than when the infrastructure was built.

Now if you look at the May 2004 Allegheny Institute benchmarking report against Northern Rust Belt cities, then we can learn a little bit more of what is immediately achievable.

First from the May report we see that Pittsburgh has a significant but not an overwhelmingly large debt load compared to the worst cities. The July report recommends that Pittsburgh seek to reduce its debt service costs from 23% of the budget to 12% of the budget. Off the back of my envelope, that would cut the debt load per-capita by $143 which would put Pittsburgh in the area of St. Louis in terms of debt service. Now this is a good idea, however, there is no way for the city to do this because almost none of its current long term debt is callable due to previous refinancings. So 23% of the budget is off the table. It can not be cut in significant way.

Now onto police protection: Pittsburgh, using the May report as my data source, gets real good value for its money. 1% more crime per 10,000 than Philadelphia for 61% of the costs and against the average, 33% less crime for onyl 75% of the cost. So there is a good argument that Pittsburgh receives great value for its police dollar. There is a trade-off (most likely non-linear) between police spending and crime control, so Pittsburgh may be willing to tolerate more crime to save a couple of bucks but the police department seems to show good results.

I agree with the Allegheny Institute that fire expenditures in the city are way out of line of service needs. The study performed by Amy Jo Wendholt(disclosure, she was a classmate of mine, and also the file is a large PDF) is a damm good starting point of a discussion and decision system for sizing the fire department to our current needs. Those cuts can only come at the next collective bargaining round. There is very little to no money to be saved from the firefighters for this fiscal year. Between debt service and fire which can not be touched this fiscal year, 45% of the budget is off limits. We seem to get good service from the current level of police spending, and I am hesitant to recommend deep cuts in the capital maitenence of the city's parks and roads as that is a long term destructrive course. Next year we should get some significant breathing room for additional spending cuts from fire beyond the general personal cuts and city wide employee compensation reductions that are already in place.




NOTE: First posted as a comment over at The Conversation

Iraqi Option Space wrt Ramadi

A couple of days ago, I posted a list of the apparent “no go” areas in Iraq. I had listed Ramadi as a potential no-go area because the US Marines are still maintaining a combat outpost in the central part of the city, but they have fundamentally admitted that they only firmly control some of the access points to the city and not the city itself. Well via Needlenose it looks like the Marines are fundamentally abandoning the city. The US will declare victory and pacification complete as it seems that both sides are willing to live and let live as the US will engage in search and evade patrols while the resistance is primarily composed of local folks who are deeply against having a foreign army in their hometown.

Now this move may or may not save more US lives than the counterfactual of the US trying to assert control in Ramadi. I think it will because Ramadi is a larger city with a higher level of professionalism in the ranks of the defenders than Fallujah and that was a city that was able to hold against a brigade size US attack. However, Ramadi is yet another safe zone and sanctuary that highly motivated insurgents who wish to defend more than just their home town can use to rest, re-equip and plan future operations against the US. It is also yet another potential headlock against the major Jordan-Baghdad supply line.

These actions and the tactical pointlessness of the continued casualities that the United States is continuing to take has created significant wedges in the US military against Bush. The front line troops are frustrated at the strategic leadership which has placed them in an impossible situation. The tactical abilities of the front line soldiers are being massively hamstrung by the strategic contradictions, limitations and failures. Withdrawing from Al-Anbar and praying that chaos does not ensue is not a good option, but it may be the least bad.

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Abusing the Reserves

The Pentagon is considering extending the active duty tours of the 39th Infantry Brigade of the Arkansas National Guard. This extension would extend the active duty time of the serving soldiers past the twenty four months of active duty which the Pentagon had set as the upper bound immediately after September 11th. Right now this move would only affect a battalion or roughly 500 soldiers who served a six month tour in the Sinai Desert as part of the border peacekeeping force for Egypt and Isreal, and now they are serving a full year in Baghdad. Add in mobilization, training and transportation time and they are right at 24 months.

This action, if it occurs, along with the calling up of selected members of the IRR and sending training units into Iraq in order to buy some additional deployable brigade months shows that the Reserve Component system is not working despite what some may argue. The temporary need for certain specialities and extra trained boots on the ground would have been valid for homeland security missions and Afganistan. However Iraq looks like it will be a major strain on resources for the next several years. The Reserves were meant to either be a quick stop gap and surge capacity protection or cadre for future active duty units. It is performing now as just another part of the active duty component. And that will do wonders to the already poor retention.

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Tuesday, July 20, 2004

Good Grassroots technique

While surfing over at a conservative blog by Gerbera I saw this grassroots technique that a Republican candidate is either using for the general election.

This January McHenry sat down with his consultant, former Iowa Republican chairman Dee Stewart, and committed to DVD a nearly identical series of messages. 200 of them, in fact, over the course of three sittings and seven hours: One each for his 20 volunteers and the ten counties they would start visiting. Working six-and-a-half days per week for the past seven months, the McHenry campaign has already knocked on some 40,000 doors, DVD player in tow, playing these short messages to potential supporters.

In them McHenry introduces himself, then says: "My good friend [Name] is visiting with you today to tell you about my conservative experience, and to discuss with you my plans to bring more good paying jobs to [County] County," before asking for their vote and support and thanking them for their time. By July 20, the McHenry campaign expects they'll have brought these messages to 55,000 doorsteps, in this district with some 50,000 active voters in 38,000 households. Everyone will meet him at least once. Those on the fence will meet him again.


This is a simple technique that Democrats and liberals should adapt because seeing a face and hearing a candidate's voice is much more powerful on the Q-factor than just listening to yet another volunteer. I remember the Dean campaign during June, July and August of 2003 having some great success at Meet-ups with the "Hi to Howard" videos that they played. That was able to move people who were slightly interested in Dean to becoming hardcore volunteers and "1's." This technique will be best for candidates like Ginny Schrader who plan on running ground operation heavy campaigns because they don't have the cash to win an air war in expensive media markets.

Housing Starts

Housing starts fell by 8% for the month of June according to preliminary reports. Housing has been one of the primary drivers of the economy in the past three years as record low interest rates allowed for individuals to significantly increase the top-line amount of house that they could buy without increasing their monthly payment. Right now this is a single data point, although May's increase was exceptionally weak. If we see a couple more months of data that show declines or low growth, then I would conclude that the economy is tipping back into either a Japanese style non-growth recovery or an actual recession.

The good news of the past couple of months is getting thinner. Inflation which finally was making a comeback as demand was starting to outstrip capacity looks like it may be weakening again. The traditional response to low inflation and low employment growth is to lower interest rates. However we are still at near generational low interest rates, and due to technical reasons, the Federal Reserve may only have another 40-50 basis points that it could actually cut. The Federal Reserve is out of ammo. It is almost forced to raise interest rates at a measured pace because of concerns over the fundamental weakness of the US dollar and the low US savings rate.

A higher interest environment, even an environment in which interest rates are neutral compared to the historic past, will be an extremely painful environment for most Americans. This is because we as a people have maintained unnaturally high levels of consumer debt during the recession and job drought which has followed.

High levels of personal debt and current consumption patterns can be maintained for the long run if personal income growth is the same or higher than the rate of debt increases, or if interest rates do not increase even as inflation eats away the core value of the principal. Right now we are seeing interest rate increases, and low inflation, so therefore the debt loads that most Americans are not sustainable unless they cut into their current consumption to pay debt service charges. This recovery has not provided any wage growth. Therefore the debt levels can not be easily sustained, and major debt financed purchases such as houses and cars will be curtailed by some of the marginal buyers who previously were willing to engage in high risk debt transactions.

The tightening credit environment will be a painful environment to operate under as there still is insufficient capacity utilization to drive large amounts of new business investment and the federal government is fundamentally tapped out of new and larger deficits that it can run. The stimulas that was applied late last year has come through the American economy like prune juice through a constipated toddler, and now we get to clean up the stinky mess.

Monday, July 19, 2004

Pittsburgh Blogging Get Together + Personal notes

Over at Chance The Gardner's D-Kos Diary he proposes a Friday night get together for a couple of beers and then the Pirates game for D-Kos/liberal Pittsburgh based bloggers. I am up for that, and I'll be e-mail everyone that I can think of tomorrow morning. Please e-mail me or him if you are interested in coming so appropriate planning can occur.

Second point, I would like to say thank you to the nice people down at the Pittsburgh State Office building's PennDOT license center. I received polite, fast, reasonable service as I finally (about two years too late) switched my license from Massachusetts to Pennsylvania. I was in and out in under 20 minutes, and that included five minutes talking to a guy who lived in my previous home town. (Small world.)

On the job front, I am starting to receive a little second order good news. The people that I have been sending resumes and networking with so far have nothing for me, nor any good direct prospects. However they are passing my resume along with a couple of glowing recommendations to other people who do have things available. Hopefully something will shake free sooner or later. Else, I'll just be stuck temping.

Sunday, July 18, 2004

Good Column

I was reading the Post Gazette this morning as I should be applying for jobs, and I saw one of the smartest columns concerning the economic incidence of taxation which is both correct and easily understandable today. Unfortunately it was not in either the business section or the editorial page, but on the sports page.

Bob Smizik astutely points out that a slot license for the Penguins with which they propose to use to build an arena without using public funds is an intellectually bankrupt argument. He points out that the state would experience the opportunity costs of paying for the bonds that would be dedicated revenue bonds for the arena from the concurrent loss in general fund revenue. The slot machine revenue is just a pass-through of general revenue funding for the arena. Smizik makes a second good point in that the health of the Penguins does not directly impact the health of the city and region but the health of the city and region directly impacts the health of the Penguins. Therefore, solving the problems of the region will provide significantly higher returns for everyone involved, including the Penguins than building a new arena.

My personal take on the Penguins is this: I like hockey, I like going down to the Mellon Arena to see a game from the cheap seats, however massively subsidizing stadiums in which the profit opportunities go to private individuals while the public bears the risk is a damm stupid piece of public policy. I support the New England Patriots model of stadium construction; public finance was only used for infrastructure improvement, the actual stadium and its support facilities were paid entirely by private money. That same model should be the objective of any new stadium construction that occurs in Western Pennsylvania.

Saturday, July 17, 2004

No Go Zones

This post by Steve Gilliard has prompted me to ask where the no-go zones are for US forces. I am defining these areas that the US can not or will not enter in anything less than battalion force, and can only control an area as far as they have a clear line of sight for the direct fire weapons. And once they withdraw after taking casualities, the Iraqi resistance is able to quickly reassert control.

Fallujah is the best known no-go zone. The Marines control some of the access points into and out of the city, but US forces have not controlled the city since March. The Fallujah Brigade is fundamentally the polite face of the local resistance. Population is roughly 300,000 people in the city itself.

Sadr City, the massive Shi'ite slum in Baghdad has recently allowed US forces to enter the area in an attempt to chase down some of the carbombers. However, this area can take away permission and back that word up within a couple of hours. This area has been a no-go zone for most of the past year. US forces operate without taking large scale casualities at the sufference of the religious leaders. Population 2+ million.

Samarra has no US forces in the city at the request of the city council. Insurgents effectively control the city. The 1st Infantry Division may be contemplating launcing an assault into the city to re-establish control, but right now it is a no-go zone. Population ~300,000.

Ramadi may soon tip into a no go zone as the Marine battalion that is trying to hold the city is reduced to a single combat outpost in the central city and then a series of surrounding access control points. This battalion has taken 20% casualities in the past four months. Traditionally 20% casualities are enough to pull a unit off line to rest and reconstitute. Unfortunately, there are no spare units in the strategic reserve for this to occur. Additionally, the commander of the 1st Marine Division has taken to giving this battalion a motivational speech which consists of 'They Shall Not Pass.' which is not the sign of good things happening. Population 500,000.

So there are 2.6 million Iraqi Arabs who live in areas that are definately under insurgent control. Another half million are living in a city that could soon go under effective insurgent control. Out of the roughly 20 million person Arab population, between 12-15% of this population are living in areas that are not even under nominal control of either the interim government or the US military. Traditional guerilla warfare lessons suggest that an insurgency can last as long as it can maintain 10% of the population's active support. You connect the dots.....

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Friday, July 16, 2004

Reducing political information costs

Bruce Bartlett at Townhall has a good column up. (He is, IMO, the only worthwhile read there) In it he proposes a probable Kerry economic policy team if he was to win the election, and from my view as a big fan of the Clinton administration's economic policies, I like the line-up that he proposes. This exercise that he conducted was done in order to persuade the Kerry campaign team to release a shadow cabinet or at least a partial shadow cabinet so as to increase the information certainity for undecided voters.

I think that this is a good point that Bartlett is making, although it can be abused. George W. Bush in the 2000 campaign made sure that everyone knew that if he was to President, Colin Powell would be his Secrectary of State. This was a signalling device that Bush intended to follow a 'humble' but strong foreign policy and that the Powell Doctrine would be the predominant test for military interventions. Well, four years later, we see that the lower level advisors that no one but the alt.politics Usenet nerds were aware of have been the prime shapers of foreign policy. But abuse can and should be punished at the next election, and I think that this will happen.

An effective shadow cabinet announcement will do more than eliminate some of the uncertainity that swing voters face. It will, as Daniel Drezner argues, dramatically reduce the transition time costs, assuming Kerry wins, because several of the leading Cabinet Secrectaries would already be thoroughly vetted. There are two downsides from the point of view of the Kerry campaign; first an increased probability of a gaffe, and secondly and more importantly, vetting a shadow cabinet will consume important time and energy that may be better used in getting Kerry elected.

However this proposal should be seriously considered and implemented because it looks like undecided voters are just waiting for the right time to heavily break towards Kerry. More positive information and a postive agenda will only accelerate this occurrence. If the break happens quickly, that will allow Kerry-Edwards to focus on the redder swing states because the bluer swing states such as Pennsylvania will become solid blues. This should create positive coattails for second tier Democratic candidates (such as Joe Hoeffl) and begin the process of repudiating the Bush legacy.

I like this idea a lot because it is one of the few that has great policy implications as a well informed electorate is a key to democracy, and right now great political pay-offs for my party. A rare bi-fecta.

UPDATE Matthew Yglesias agrees in principle with the proposal and he shares the opportunity cost concern that I have. He also astutely raises the point that confirmation may become harder for shadow cabinet members because they most likely would be expected to be Kerry campaign surrogates and attack the GOP. Interesting, I need to think about this more, but I still like the basic idea.

Coalition of the Shrinking, Pt. 2

Yahoo via Agence France Press is reporting that Thailand will be withdrawing their entire contigent of humanitarian soldiers from Iraq no later than September 20, 2004.  This move is being motivated by two major concerns.  First, the deployment of the 451 soldiers created very strong political opposition in Thailand and there are elections coming up this winter.  The government probably wants to reduce the salience of the Iraq issue and the Thai-US alliance in the minds of the voters and see if they can play up the economy.  Secondly, and this is related to the political opposition, is that the Thai troops are relatively ineffective at doing anything other than being a name on the list that the Bush administration trots out in their attempt to prove that they are effective multilateralists at heart.  This ineffectiveness is due to the Thai soldiers being confined to their base due to security concerns since April.  The security situation will not be getting any better, and Thai public opinion will not tolerate any additional casualities, therefore the troops are functionally useless.
 
Finally, this is random speculation because I do not know anywhere near enough about Thailand to be intelligent in my thoughts about this country, but it could be an attempt by the Thai government to throw a small bone to the Thai Muslim minority in the deep south.  Currently there is an ongoing insurgency/crime wave between the Buddhists and Muslims in the southern most province(s) of Thailand that border Malayasia.  I am speculating here, but the removal of Thai troops from Iraq may remove one of the grievances that the Thai Muslims have.  Does any one know more here?





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Gambling Revenue Growth

I see in today's  USA Today that gambling revenue for already established casinoes is growing at a much slower rate (1.9%) than it had during the early years of the recent surge in gambling interest and constuction (1999's growth: ~21%)  I had not seen this information when I wrote my post concerning the implausibility of Pennsylvania receiving one billion dollars a year in new tax revenue generated by the freshly legalized slot machines.  However this new information makes the underlying assumptions behind that sum even shakier.  Gambling is becoming a more mature industry, at least in this incarnation, and therefore what growth will occur will primarily be localized growth attributed to a slight combination of lower transaction (transportation/hotel) costs and then just cannibalization of the market.  I doubt that Pennsylvania will decimate the Atlantic City market for gambling as that area has a strong brand while Pennsylvania still is a "no fun" state with only slots and not table games.
 
There is a broader lesson here that should be blatantly obvious; anything that everyone else is doing does not allow for massive profits.  The types of things that produce massive profits are fundamentally unique products that no one else at this time is making.  However the problem from the point of view of a firm or a region is that humans are damm good imitators so there are very few long term profit centers unless there are either restrictions upon imitation, or consistent and long term innovation, or some non-economic reason that creates uniqueness.  In gambling, Las Vegas has that non-economic cause of uniqueness that fuels their casinoes; it has a 50 year brand of being a place where indiscretion and imagination is covered. 
 
 

Quick thoughts

I still need to finish my second cup of coffee so I have yet to start thinking for the day.  So here are some quick thoughts this morning:
 
  • I am seeing a lot of really useful changes on the blogger interface for the first time today.  I wonder if I can load images.  Otherwise this new interface looks almost as functional as the really nice Typepad system I have used over at the Swing State Project.
  • Something that my girlfriend had been telling me for months I accept completely as true now; there is nothing more relaxing than a happily purring cat on your lap.
  • I want Friday cat blogging to resume somewhere (note to self: if I can do images here, I could do that)
  • Is Speed II holding auditions for stunt bus drivers?  Today was the third day in a row that my bus made record time to Downtown (11 minutes).  Yeah it helps that I am leaving at 5:42AM but damm that bus never slowed down.
  • The first buses of the morning have the most pleasant drivers I have ever met.  My theory is that they get an easy run in as there is no traffic AND all the passengers are either like me,trying to hold onto their coffee, or passed out as it is 5:42 in the morning.  Therefore the drivers receive no gruff from the regulars and there are no transients commuting at this time.
  • I don't function well on less than four hours of sleep.
  • Paul Celluci (R-MA) is resigning as ambassador to Canada in order to potentially run as John Kerry's replacement.  Assuming that the Mass Democratic sponsored Senate replacement bill passes, the only chance he has of being a Senator is to be appointed by Romney.  Celluci would get crushed in either the 2005 special election or the 2006 general by half a dozen Congressional Democrats.
  • I really like this interface.
  • The Patriots signed two quarterbacks yesterday; Jim Miller, previously of the Bears, and Kurt Kittner, a guy they have been pursuing for  a couple of years now.  I wonder what this means.  The most likely meaning is that Bellicheck wants to save Brady's arm for the regular season and to inject some competition for the #3 QB spot.  I have not heard anything about the development of Kliff Kingsbury, good or bad.
  • When does training camp start?
  • It is amazing what happens to one's hit counts when two things occur: sending trackback pings and writing in-depth, thought out pieces.
  • All right, done with my coffee, time to start thinking.

Thursday, July 15, 2004

What to do with the grown-ups?

There has been a long been a loud call among the mainstream liberal left for the responsible adults of the Republican Party to step forward and assert their own power against this current administartion because it is neither conservative, nor effective at achieving whatever ends they are pursuing. Rational self interest should dictate that the responsible adults of the party not collude with the crazy element of the party because that will result in their probable loss of power. Yet, on most issues the Republican Party including the Senate acts on the guidance of their rightwing and not the center.

Publius at the third estate has a potential answer for why one of the GOP's adults has never been able to assert effective mainstream ideological control over the party; "the Reagan majority would never have been possible without those voters. Without the social conservatism, what is to attract working class voters to neoliberalism? "

Now Matt Stoller at BOPNews is looking at how the neo-cons are the ultimate embodiment of the secular effects of this long association with the most fundamentalist and socially conservative parts of the Right; everything is based upon faith and without faith there is only evil and opposition. The grown-ups in the Republican party are a minority not because being irresponsible is fun (it is, just ask me about that time at Senor Frog some day) but because rationally they know that if the social conservatives are disappointed by the lack of faith among the moderates and the rational seekers, there is no chance of power. The Democrats have effectively cornered the market on social liberals with fiscal conservtive leanings and this is a closed market for the Republican Party. However this coalition is just half the population and it is used to dealing with self-correcting institutions where errors can be attributed to honest mistakes and corrected instead. The grown-ups of the Republican Party are fundamentally being chased out by their coalition partners, the grown-ups just don't want to admit it yet.

Now what does this mean for political strategy? Should the Democrats, assuming we win in November, seek to reach out to the few remaining grownup Republicans in the Senate, induce some of the New England GOP Senators to switch, and form effetive collaborations with the likes of McCain, Hegel, Lugar and occassionally Graham and Shelby on some issues? Or should the Democrats seek to play extreme hardball in order to marginalize and isolate the Republican Party? I don't know yet, although I think that an effective strategy of containing and then rolling back the Texas wing of the Republican Party will need some Yugoslavias for the strategy to be effective.

Economy is back in neutral

This week's unemployment claims data shows that a seasonally adjusted new claim total of 349,000. This is an increase of 40,000 new claims from the adjusted total from the first week of July. The previous week total was most likely a technical fluke as a new seasonal adjustment model was put into place AND a built in assumption that most factories will close for a week of maitenance in the first week of July. However more factories than expected stayed open. If we remove this strange week of data from the 4 week moving average, the average initial claims is back to 350,000. This is a level that is consistent with just enough job growth to keep up with the population, or roughly 120-140,000 jobs a month. As Brad DeLong points out, this is an employment growth level that is significantly beneath the projections of the Bush administration's latest estimates.

So employment looks to be at best a neutral economic contributor. What else is out there for areas of growth? Well the good news is that productivity is still increasing at a fundamental rate of growth that is consistent with the 90s productivity boom. This should translate into some combination of higher real wages or higher profits. Right now real wages are stagnant to slightly declining and raises look to barely keep up with inflation. Corporate profits are at record levels as a percentage of the economy, but with pricing power starting to weaken again as import prices declined last month and US agricultural export prices also fell. There is not a lot of space for more profits to be squeezed through either price increases or through increased productivity.

Now the bad news. The Fed is raising interest rates. It is doing so gradually but the market has already priced its expectations into intermediate and long term rates. This should finally puncture the crazy localized real estate bubbles on the coasts which will have a largely negative wealth effect and thus decrease aggregate consumer spending.

Consumer spending is already slowing down as wages and other real income is not changing but debt payments and gasoline payments are increasing. Business inventory growth is beneath expectations as industrial production and capacity utilization declined in June. The decline occurred in both durable and non-durable goods. Therefore I expect manufacturing to stop adding employment and probably start shedding jobs again.

The economy is sliding back into neutral after the massive dose of fiscal stimulas which was applied at this time last year has finally started to slide its way out of the economy. Consumer spending finally looks like it is taking a break, while business investment still does not look like it can take up the slack. There is no immediate stimulas on the horizon, although there is a possibility of a renewed decrease in the value of the dollar if these economic reports continue to indicate relative weakness in the US economy compared to a finally growing Japan and a torrid China and India.

Disgusting

Via Gryn's Daily Kos diary is this report that Seymour Hersh has seen videos of children being sodomized at Abu Ghraib prison in order to have their parents break down and inform on the insurgents. If this is true, and I have little reason to doubt Hersh given that he seems to be the best informed and sourced journalist in the country, I am disgusted beyond words for this is worse than what I imagined when he dropped hints that the publicly available evidence of torture, torture-lite and humiliation was only the tip of the iceberg.

America has lost its moral standing in the world, and we have betrayed our ideals in an ill-conceived war that was not prompted by any clear or present danger to our well being or security but instead has bogged our military down for the majority of this decade, increased the likelihood of terrorist action by our previous enemies as they have had time to reorganize and recuperate, increased the likelihood of terrorist action by new enemies who otherwise would have been fairly indifferent to mildly anti-US but now are virulently anti-US, and decreased the likelihood of future international cooperation because the rest of the world does not trust us as they see a fundamental hypocrisy when the United States preaches human rights and the rule of law but has allowed, no, encouraged Abu Ghraib and the oubliette of Guantanmo Bay.

The United States has lost its moral authority to be a bright shining light upon the hill for the rest of the world. I want this country to believe in its ideals again instead of short term expediency fueled by a combination of fear, ignorance, and misplaced and thus exploited trust in a man who has never demonstrated the ability to analyze a problem past his own self-interest. Abu Ghraib is the result of a systemic failure of leadership and a lack of moral courage. We must fix ourselves and admit as a country that we can do better than this miserable failure; that we are better than this.

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Wednesday, July 14, 2004

Pennslylvania poll results

A new Quinnipiac University poll conducted between July 6-11, 2004 with 1,577 Pennsylvania registered voters and an MOE of +/- 2.5 points shows that in a three way race John Kerry and John Edwards has opened up a 5 point lead over Bush/Cheney. More importantly in a two way race once Nader is discounted as he is having massive ballot access problems in Pennyslvania, Kerry has opened up seven point lead, 49-42 versus Bush.

The poll is reporting that Kerry is gaining strength in Southwestern Pennsylvania and is solidifying his support among union members. My personal guess is that a combination of the unions institutionally feeling betrayed by Bush on his flip-flop of steel tariffs, greater union discipline, and an unwillingness to vote on cultural versus economic issues is starting to have an effect on solidifying this part of the Democratic winning coalition. We are also dealing with the start of an Edwards bounce as we enter the second phase of the campaign where the electorate has decided that Bush probably does not deserve a second term, but the alternative needs to be examined. Well, the Kerry-Edwards ticket is looking mighty attractive so this is some good news.

Finally, I would want to wait to see if the Q-poll result is replicated with a couple of other outside the MOE leads for Kerry before the convention, but this could offer a good explanation as to why Pennsylvania is not flooded with television advertisments. Pennsylvania could be a swing state with a strong Kerry lean that needs some defense, but is not a prime flip target. Interesting!

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I don't get it

I know this post is late to the party, but I do not understand what the uproar is about the new Bush affiliate based internet fundraising model. Yes, there is potential for foreign donations, but the incentive to return those donations are high, especially for a campaign that is trying to run on 'character' and coded appeals to xenophobia against those cheese eating surrender monkeys. But beyond that, why is this a big deal.

This is just another form of fundraising that has gone on for years. It is not novel, it is not innovative, and hell, it probably will not be that effective when compared to the Democratic means of Internet fundraising. As Carla at Preemptive Karma notes, this program will take the grassroots out of the internet giving for the GOP.

The Democratic internet fundraising has occurred either through self-direction to candidate websites where the donors freely go to the site, through blast e-mails, or through links posted for free by bloggers who voluntarily and with no expectation of compensation want to show their support for the ticket. This means that the cost of attracting a donation from the Internet is dirt cheap, and even when you throw in infrastructure and compliance costs, an Internet dollar is cheaper for a candidate to use than a 'rubber chicken' $2,000/plate dollar in both financial and candidate's time terms. Internet donations for the Dean campaign cost the campaign roughly 5-7% of the donation to attract, process and comply with fed. regs. Traditional donations will often cost a campaign 20-40% of the donation to attract, process and comply with. fed. regs.

The new GOP program has a 30% commission paid to the webmaster of the sites that sends the GOP donors. So already the cost of an Internet dollar is in the rubber chicken range. Now this would not be a bad thing if the average Internet donation was like the average rubber chicken donation. If the cost of a donation was purely a function of its size and increased linearly, then size would not matter. However there are certain fixed costs that are assessed for every donation at the same rate. These costs are the same for a 10.01 D-Kos 8 donation and for a 2,000 Ken Lay donation. This means that below a certain size of donation, it really is not cost effective for a campaign to accept donations below a certain dollar figure.

The beauty of the Democratic internet money machine is that it has reduced the marketing and event preperation cost to almost zero, or more realistically it has shifted the costs of communicating with small donor activists to a massive number of volunteers who are engaged primarily in a hobby. The Kerry, Dean and Clark campaigns still had to pay credit card transaction, bandwidth, server and pizza for the intern costs, but these are cheap compared to traditional methods of small donor marketing. This allows for a $10 donation to actually be a net gain for the campaign. Previously $10 might be a financial wash, although a campaign would take the money because a small donor is almost an assured voter and potential volunteer. Now it is profitable for the campaign to target the $10 or $100 donors, and that is what has propelled the Kerry fundraising surge.

This GOP model won't make it revolutionarily more profitable for the GOP to target small donors. They already have a good direct mail system in place, and this system may marginally reduce transaction costs, but the political sphere is not being widened in any appreciable way. This iniative is an isomorph of the logic behind Pets.Com; everyone else is on the Internet and it is cool, so therefore anything can be sold or transacted there, therefore I can put up a dumb business model and ignore what virtually free transaction costs do to the traditional mindset. I'll be a traditional command and control back-end with a dazzling front-end. Hell, why should I care that my opponent is being stupid, it is to my advantage.

Electoral Division of Labor

One of my political pet peeves is the continued insistence by some individuals who I have conversed with in person and online that the primary Democratic/liberal electoral strategy should be based on mobilizing the untold millions of presumed to be progressive voters who do not currently consistently vote in order to win a sweeping mandate. Now I would love for a massive landslide election brought about by 75-80% participation rates but this misplaced strategic focus peeves me because it is a strategy of weakness and illusion. The Democratic Party has had a generation-long image of being weak, so let's not add any more ammo to that image that the party needs to break.

The engage the unengaged voter strategy is the strategy of a long shot because a strong candidate will run on the known knowns to use Rumsfeld's divisions of knowledge. A strong candidate will be able to assess what groups he can count on with minimal amount of stoking, what groups need to be listened to and might require policy or rhetorical accomodation, which groups of people will require significant resources to persuade for majority support, which groups of people need to be courted in order to lose not that badly to, and what groups of people won't vote for him no matter what accomodations and outreach efforts are made. A strong candidate can assess this matrix of options and make a good probalistic judgement of where his resources need to be devoted in order to win election. A strong candidate is dealing with known knowns and known unknowns; the level of analysis and uncertainity is fairly low, which allows for an effective campaign.

A weak candidate and campaign should perform the same analysis and they will come to the conclusion that for some reason that using the traditional means of analysis and campaigning that there is a 95% chance of them getting no more than 45% of the vote. In some cases, this may be sufficient to win, but in most cases traditional means of campaigning will produce a loss for a weak candidate. Most candidates are running because they want to win, therefore alternative and riskier strategies are needed for weaker candidates. All out negative assaults and innuendo smear campaigns are one method, and another is to seek to expand the pool of potential voters. Unfortunately, the pool of non-voters who are persuaded to vote in any given election tends to be pretty small, so this strategy has few pay-offs.

Now, I do not disagree with the need to bring new voters into the process. New voters are the lifeblood of a successful majority if those previously apathetic non-voters become dedicated voters, even if they are swingers. However bringing in new voters should not be a primary expenditure of energy for strong campaigns and candidates. The short term incentive to win overpowers the long term incentive of party building. Weaker campaigns will attempt to bring new voters into the fold and some will be successful, others will fail because of organizational, demographic and message challenges and failures.

The proper place for the primary gruntwork that is needed to bring new voters into the political arena is in my mind, the state and national parties as well as the external political support apparatus. These organizations have a different incentive mixture than candidates and they most likely will have more resources that are not needed for immediate pay-off therefore they can take a longer view of an opportunity. One of the best examples is the Dean for America/Democracy for America seeding of candidates who will not get traditional monetary suppprt, for as Chris Andersen at Intereting Times points out, these candidates won't win this cycle, but they can help other stronger but still marginally winnable Democrats win by diverting disproportionate amount of time and money from supposedly safe GOP seats back into the district instead of flowing out to help GOP candidates in competitive districts. This is a long term view as it will rebuild the Democratic minor league system which for during the past decade has resembled the Red Sox farm system.

This is the proper division of labor. Candidates and campaigns must work off the pre-exisiting conditions at the start of the electoral cycle with the objective of winning during that cycle. Yes, there will and should be a few exceptions as 'seasoning' runs and kamikazes against unbeatable incumbents, but the goal for 98% of candidates should be to win this cycle. The party committees and outside organizations should of course support the candidates and campaigns of this cycle but their main focus should be to two cycles into the future. They need to change the underlying fundamentals in order to move the marginal winners into surefire winners, to move the marginal losers to marginal winners, and to change the long-shots into competitive candidates. These organizations can and should use top tier strong candidates as part of this process, but they should never allow themselves to monopolize or dominate the candidates' time.

The only general exception to this division of labor that I think we should support is when the Democrats are running an absolutely unbeatable candidate (Ted Kennedy for example), that candidate should be able to divert significant energy from their primary task (win elections) to secondary tasks which include recruiting previously apathatic voters to the party.

Tuesday, July 13, 2004

Changes to the Coalition

Following up on a question that Eric at Wampum Blog posted, I am trying to assemble the list of countries that have significantly changed their contributions of the "Coalition of the Willing, bribed, or logrolling" since March 1, 2004 and going out to September 1, 2004.

OUT
Spain has withdrawn two battalions of infantry and logistic support for the Plus Ultra brigade. ~2,500 soldiers.

Hondorus has withdrawn an infantry company and support elements ~300 men.

Dominican Republic has withdrawn their soldiers from Iraq, roughly 200.

Norway has withdrawn an engineering company, its only contribution to Iraq.

The Philippines are in the process of pulling out fifty engineers.

IN
South Korea has committed to sending two battalions of infantry and other support units, numbering a total of 3,000 soldiers to Kurdistan.

Tonga sent 45 Marines to operate with the USMC in Al Anbar Province.

Georgia is sending a pair of additional infantry companies (+350 soldiers) to upgrade their mission to battalion size.

WHO KNOWS
Thailand is vacilitating between pulling out their 450 soldiers and keeping them in.

Japan has promised to send troops this summer but they have been promising that for the past six months and keep on running into "difficulties.

UPDATE Thailand will withdraw their entire force by September 20, 2004. More speculation and analysis a couple of posts up thread.

Poland has announced that they are cutting their committment in half from a weak brigade group to a large battalion. This change will occur around the New Year.

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Casino Location thoughts

Jonathan Potts is linking to an interesting article in the Philadelphia Inquirer which states that Philly city government will not have any zoning or planning powers for any casino built within that city. Philadelphia is not alone, for this article states " None of Pennsylvania's 14 planned slots parlors and casinos will be subject to municipal zoning controls. At best, local input will be advisory."
So where would I, an unemployed in my field of low level economic development, want to put the slots into the city of Pittsburgh. Right now there are five legitimate proposals for slot locations in the city. Station Square, North Side, Hays, Mellon Arena and Downtown/Strip District. These are the sites with partnerships already formed and at least vague business plans and building designs drawn up and available to the public. Some of the sites are in more advanced stages of planning such as the Hays development, while others such as Station Square are dusting off plans from the early 90s when it looked like riverboat gambling was coming to the area. But no matter what stage of development the partnerships are at, the first bandit arm will not be pulled for at least another eighteen months.

Now what should our preferred location decision criteria be? I would venture that the city, county and state will want to spend as little as possible on politically motivated infrastructure development. This means the preferred site should have good pre-existing access to sewer, water and highway infrastructure. Additionally, I would want to minimize the negative social costs by a combination of use segregation or thorough use integration so that there is a strong network of social capital. Next, I would want the surrounding commercial infrastructure to be capable of providing support for the casino. This means adequate hotel rooms, restaurants, basic services etc.

The North Side casino site would be in the parking lots between Heinz Field and PNC Park. It has good access to highways with a dedicated off-ramp into Heinz Field. If the planned series of URA and Parking Authority parking garages are erected, and the casino was to minimize their crowds on football home games, the parking situation in this area should be sufficient to handle any reasonable crowd. Hotels are available in Downtown and along the I-279/Parkway West/Airport corridor with clear transportation links. A light rail link is being built to the stadiums. The site is fairly isolated from pre-exhibiting neighborhoods; so social externalities may be contained. Restaurant and other commercial retail space is current insufficient as the Federal Street strip of businesses are based primarily on the game day surge business model while a casino will see a steadier flow of people. However there is sufficient land available for new construction if need be. The biggest roadblock is that the North Side will have received the last three mega-projects that may or may not have perceived positive regional benefits but definitely strong local negative impacts. The North Side has an excellent political network.

The Station Square site is really two different proposals. The first would locate the casino at the old Philthy McNasty's restaurant/club on Carson and Smithfield. This location is fairly cramped but it is extraordinary close to downtown, although the hotels and restaurants are further away than the North Side location. The other location at Station Square is the more likely, and it would be in the parking lots/empty land at the west end of the complex. Both locations have reasonable direct highway access, although not as good as the North Side. The closest exit is on the Ft. Pitt Bridge, but I-376 is nearby. Station Square is a pre-existing light rail station. The complex already has a strong restaurant base as well as plenty of existing parking. New parking spaces would need to be constructed in garages. If the parking lot site were selected, the casino would be relatively far from any residential areas. It would abut industrial space. The Philthy McNasty's location also has geographic separation from residential areas.

The Mellon Arena site is mainly being proposed as a way to keep the Penguins in Pittsburgh. The current Mellon Arena site (I am including the former church and other surrounding parking lands) has good highway access from the Crosstown Boulevard although the 6th/7th Avenue and Bigelow Blvd. interchange needs some massive de-twisting if there is to be a significant increase in traffic volume. However access is very limited from any other location as Center Avenue and 5th Avenue are relatively narrow and pass through significant residential neighborhoods. Parking in the area is almost entirely surface lots at this time and there is little spare workweek capacity as it currently serves as an overflow lot for Downtown. However, due to the high number of abandoned buildings and URA owned surface lots near 5th Avenue, expansion land is readily and (fairly) cheaply available. The Mellon Arena site abuts directly against the Crawford Square housing development. This is an area of new homes that are retailing at above county median prices, so there is some wealth and power to organize effective opposition. Finally, while there is a hotel across the street, the remainder of the Downtown hotels are not within walking distance, nor are the restaurants. There is little support infrastructure for any type of crowd.

The Hays site is interesting. Right now it is a slag heap/abandoned coal mine with some serious environmental problems. The main developer has had a variety of proposals in over the past couple of years which include strip mining the remaining coal as a means of site preparation for a horse track, slot parlor, and now mixed used retail/commercial/residential development along with a gaming feature. The location has no direct or even easy indirect access to an Interstate. There is no way of building a connector cheaply. Local residents are complaining already about the increased traffic due to the projected coal mine, so I expect local opposition to be intense. Right now, I do not know what the exact plans are for hotel development, but there is little hotel capacity in the immediate Pittsburgh neighborhoods, and as far as I know, no hotels exist in Baldwin. New construction of some sort will be needed to provide gamblers with on-site or walking distance accommodations. The only commercial infrastructure will be that which will be built with the development.

The Downtown/Strip District (on the Point side of the 16th St. Bridge) location is currently a ghost proposal, as far I know. The Downtown region has good highway access from all directions and it is the hub of the regional public transportation network with buses and light rail dropping 40,000 people off per day in Downtown. Hotel accommodations exist in relatively high numbers for the region, and a casino would make the business plans of the proposed convention center hotel(s) much more realistic and feasible. The restaurant scene downtown is pretty decent. There is a good deal of specialization for the lunchtime surge, but there is a pre-existing wide array of options. The biggest problem is that land is expensive, parking is very limited and comparatively expensive for the region, and there is no identified site as of yet. The Strip District offers a little more room and parking spaces, but it is further away from the services and hotels in Downtown.

Now the real question is what type of spinoffs effect are people expecting. If they want to minimize social externalities by isolation, then local government officials need to expect very little in multiplier effects. As David Schwartz of the UNLV Gaming Studies Research Center states in his blog "self-contained casino resorts--what you find on the Las Vegas Strip, on Indian reservations, and in Atlantic City--have not proved themselves to improve any kind of "urban" fabric." If the city and county government are expecting large positive economic spin-offs then the casinos need to be integrated into the pre-existing neighborhoods. I do not know what the expectations are but if the city is looking for a self-contained project with the ugly externalities hidden from view, then either the Station Square project in the parking lots, or the Hays coal mine redevelopment plan makes the most sense. If the city is looking for positive local micro-cluster spinoffs, then Downtown is an intriguing possiblity.

Monday, July 12, 2004

Elections

Newsweek last week published a report that stated DHS is seeking a law to empower the director of the Federal Elections Assistance Commission to postpone and reschedule federal elections in the face of a terrorist attack. This proposal has received a significant amount of play in the lefty and liberal and moderate and conservative blogosphere and it is getting a significant negative reaction.

Billmon as always thinks through this problem with a penetrating analysis that tries to get beyond paranoia and suspicion of the Bush administration. His scenario would be that Kerry/Edwards had a slight lead on the Wednesday before the election and then a "spectacular attack" such an LNG tanker exploding, a dirty bomb on the National Mall or some such occurs on Thursday. In a rally around the flag effect mixed with shock, Bush receives a thirty point boost by Friday. Do you still want the election to be held on Tuesday or do you as a liberal want to wait for another couple of weeks for rationality to be restored?

I would still want the elections to be held that Tuesday. This country is greater than a single election and I do not want to set the precedent that a President or his appointees can decide to postpone elections until a more convenient time. I do not believe that this idea would pass the Clinton test that former Rep. Barr (R-GA) would use to remind his colleagues on the dangers of expanding the power of the federal government. He said that his Republican colleagues need to remember there will be a time when these powers are in the hands of Hillary Clinton as the AG or as President. I do not see why Hillary is the evil avatar for the right, but he has a point, precedence and a long shadow of the future is needed. I know that this power does not pass this liberal's Bush test. I do not trust Bush as far as I can throw him.

This distrust is a long one that starts with the fact that the Bush administration is staffed with officials who have long familiarity and comfort with plans and proposals concerning extra-constitutional measures of governmental continuity. Both Dick Cheney and Donald Rumsfeld were in positions of being able to assume power without being confirmed by the Senate de minimus or actually being elected to the executive succession chain.

Secondly, I am suspicious of any executive's claim for limited but near absolute emergency powers with minimal checks and balances. My suspicions are based on two grounds. First, these temporary powers have a way of becoming more and more permanent as both the executive likes the powers now available and as some parts of the population are unable to effectively retake the powers that they had ceded. Secondly, temporary powers have the surprising ability, even in this country, of becoming the new baseline for further discussion. The PATRIOT Act is a good example of the second concern.

Thirdly, postponing elections breaks a fundamental political contract. Our democracy goes forward, no matter what the circumstances are. We were able to hold relatively free and relatively fair elections during an ongoing Civil War. Elections were held in both World Wars, and Mayor Guilliani was forced to leave his office on time just months after September 11th. This country is resilient and one of the reasons is that we agree that elections and their results are sacred.

The current Republican Party is less willing to play by the tacit agreements that hold political society together. Societal and political norms as explained by James Joyner in a different context, allow the system to function effectively. They were willing to violate these norms by mid-decade redistricting in both Colorado and Texas. The Supreme Court in Bush v. Gore declared that the decision rendered in that case had no value as future precedent. I do not want the Republican Party, as I distrust them more than the Democrats, to have an even looser interpretation of political norms than they currently do.

However with all of this written, there probably is a need for some agreed upon procedure that would allow for a fifteen day delay in elections if there is a serious terrorist attack. Billmon asked what would a fair and non-partisan decision mechanism look like and how could it be trusted to be fair and non-partisan by all sides. My first instinct is to go the Constitutional amendment route because it is a slower route than a law and more likely to spark serious debate. My procedure would be that it would take a unanimous agreement of the President, the Senate Majority and Minority Leaders, the Speaker of the House and the Minority leader and all nine or surviving Supreme Court justices. Also if the Secret Service is protecting an official nominee of a party that is eligible for the full allotment of general election federal funding, his agreement would also become necessary. The delay would be applicable only once and can not be renewed.

This proposal would set the bar extremely high as there are at least fourteen veto players with different agendas and motivations. The bar to action is extremely high. The most extreme emergencies would produce rapid reaction as all could agree that a nuclear blast to Chicago is an extreme national emergency. However that is the type of reaction which will not occur in the Washington D.C. sniper case or the anthrax mailer because those events, however horrifying, do not qualify as clear and present national dangers. Finally, this proposal would not be in effect for 2004, so elections full speed ahead, no matter what, while it would be in effect for 2008 where everyone understands the fundamental ground rules ahead of time.

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