Friday, December 31, 2004

Wedding stuff

I do not understand wedding invitations; two nearly identical items with (to me) miniscule differentiation have a price differential of 200% of the cheaper one's price. Makes no sense. The good news is that my fiancee and I have roughly the same taste as we both make funny faces of disgust or shock at the ugliness of most of the same designs. That will make the entire process easier.

Hello Furrow

I would like to prominently point out that my good friend and commenter Furrowed Brow/G-Man has started his own blog:

Furrow's Place

And this is what he'll be talking about:

POLICY not POLITICS. I enjoy thinking hard about complex policy issues. I am less interested in joining manufactured political controversies. If that's what you want, look elsewhere. My perspective is social scientist. Given a societal goal, I’m interested in figuring out "how to reach it”, or at least “improve." Good policy, in my view should foster improved efficiency, representative democracy, a floor for the least advantaged, and freedom of conscience. If you disagree with these fundamental goals, again, better look elsewhere. But most of the goals I talk about here will be the far more specific, less pompous sounding goals associated with dry policy. It’s not for everyone. I started this blog because I got tired of writing long winded responses to my dad, whose preferred propaganda provider is Rush Limbaugh/Fox News. Perhaps though this blog he will rediscover his ability to think objectively about information. Compelling criticism of what I say is welcome and will be acknowledged. Poor attempts will be ignored or bludgeoned publicly, depending on my mood and energy level. Also, I'm a bit cranky. Once you study policy long enough, you get cranky.

Police Contracts

The Post Gazette is reporting that an arbitration panel has worked out a new city-police employment contract with a couple of significant details that should save the city some significant money over the next couple of years versus the counterfactual of continued operations under the existing contract. The big things are that the cops get a 2.5% raise per year for the next three years, pension benefits are protected and some increased flexibility for senior officers in choosing assignments. The city receives increased healthcare premium contributions (up to $1,000/annually), takes away a weeks worth of vacation and four holidays. To me, as I have not looked at the contract, this seems to be relatively fair given the constrained resources that the city has. Police numbers will be increased as a new rookie class will start training. The rookies will replace the expensive veterans who are or have retired in the past eighteen months.

This plan, if accepted by the city and the ACT 47 coordinators, will allieviate some of the serious overtime needs that the Bureua was projecting recently. This is because some officers will be expected to work an additional nine work days per year (4 holidays + 5 vacation) while the newest rookie will have an additional four work days per year at normal pay. Special events will still drain overtime hours, but compared to the previous contract, there should be less summer demand for overtime in order to cover (fewer) vacations.

Now the interesting things that can occur are if the city/Act 47 coordinators reject this agreement OR if the city/Act 47 accept this agreement and then try to use it as a pattern in their bargaining with the firefighters.

Thursday, December 30, 2004

No Election Workers in Mosul

Via Daily Kos an article by the AP on Yahoo

Three militant groups warned Iraqis against voting in Jan. 30 elections, saying Thursday that people participating in the "dirty farce" risked attack. All 700 employees of the electoral commission in Mosul reportedly resigned after being threatened.

So the third largest city in Iraq is without any capability of implementing anything that is more organized than the elections that were held in my kindergarten class on whether or not we wanted chocalate milk or strawberry milk for Christmas. Combine this with the fundamentally destroyed city of Fallujah and the general insecurity throughout the rest of Al-Anbar and other Sunni Arab dominated provinces, the elections are not going to be able to be run, nationwide. Donald Rumsfeld was right; the US can sponsor elections in only three quarters or four fifths of the country at best. And then we call it legitimate and the media will scratch their heads as the violence and insurgency does not slow down in February and March. But we'll hear it is just more dead-enders, really, and peace and prosperity is right around the corner. I need a beer right now if I am going to think about this any more.


Real Policy Discussion

The following is what I wish we would see about Social Security. Andrew Samwick a conservative economics professor who specializes in Social Security and retirement writes the following:

Second, Max concludes his post with a discussion of whether "pre-funding" this unfunded obligation is good policy. This is an interesting question. As I have noted, my first choice would be not to pre-fund the unfunded obligation but instead to reduce the growth of future benefits (via increases in the retirement ages, not the replacement rate at the age of normal retirement) so that the unfunded part of the obligations is reduced to zero. Reformers to the left of me ideologically--like Diamond and Orszag--have also designed plans that do not entail substantial pre-funding. They do it with tax increases and no reduction in projected aggregate benefits for about five decades. This is a sensible distinction between right and left--smaller versus larger public spheres. I'd like to see it become the template for Congressional debate.

So what we have here is the result of a long series of discussions between acknowledged subject area experts to find common identification of realities and problems. Then we have options thrown out and evaluated, and then we get to the point of asking about what solutions would work to solving the problem. Finally, we get to the point where we are asked to make policy based upon our values and preferences. I disagree with Samwick, in that I would prefer a larger public sphere, but this is the process of decision making that I wish that we would see more often.

However, as long as the Republican Party as embodied by President Bush is purely a political machine and not a party interested in effective governance at the national level, the above discussion is purely mental masturbation. Instead we have a decision process which is "Find a way to implement previously decided policies despite lack of problem or context. Therefore create Crisis that does not exist."

Iraq Trend Data

I am not optimistic about Iraq, I do not believe that the elections will have any signifcant effect, despite the protests of some individuals who are saying that the Shi'ite militias will be effectively used in the ongoing, "managed civil war." Security forces nominally loyal to the Allawi government are routinely outgunned and outfought by insurgent forces, while the US is treading water in the body count as US forces rely on superior body armor and air support to stay effective. The insurgents are operating as competent military units with a reasonable level of weaponary. And it is not just dead-enders, with no popular support.

Instead, the evidence in this AP article suggests that the formerly marginally anti-occupation but also anti-taking up weapons and shooting at the US Iraqi has been heavily migrating to actively taking up arms.

The U.S. military suffered at least 348 deaths in Iraq over the final four months of the year, more than in any other similar period since the invasion in March 2003.

_The number of wounded surpassed 10,000, with more than a quarter injured in the last four months as direct combat, roadside bombs and suicide attacks escalated. When President Bush declared May 1, 2003, that major combat operations were over, the number wounded stood at just 542.

_ The number of attacks on U.S. and allied troops grew from an estimated 1,400 attacks in September to 1,600 in October and 1,950 in November. A year earlier, the attacks numbered 649 in September, 896 in October and 864 in November.

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Defining government down

Bruce over at Flit makes a very interesting and valid point:

President Bush continues to set new standards for public accountability that other PR professionals can only watch and hope to emulate.

Seriously, these things do have trickle-down effects. Any significant decline in public-sector accountability makes life oh so much easier for people like me who do PR for government in our day jobs.

Somedays I wonder if the willingness of the Bush administration to be painfully incompetent on any subject matter that is not the result of directly winning an election or handing out high value goodies to its contributor class (both things that they are good at) is a deliberate strategy to first push back accountability, and then secondly, to create a negative feedback loop. Citizens see the government as fundamentally incompetent, either by design or neglect, citizens see a situation in which they are getting screwed, government intervenes in a situation where success could be achieved if the plan was well executed and present, but the intervention fails, citizens get disgusted and alienated from the government and the concept of risk sharing and collective action agreements with enforcable norms, the feeling of incompetence and thus the reluctance to ask government to do anything increases, placng increased pressure on "returning my money." Is this deliberate, or I have had too much coffee this afternoon?

What he said

Matthew Yglesias on Social Security:

To reiterate my position, Social Security is non-optimal. But it's not in crisis, or in anything remotely deserving the name "crisis." It's good enough and we have other, bigger problems to tackle. We ought to leave well enough alone, worry about national security, the general fund budget imbalance, the Medicare/Medicaid issue, and the health care sector generally.

I agree completely with this analysis and sentiment. A satisficing solution is often good enough, and Social Security meets that criteria.

Wednesday, December 29, 2004

Looking at the British &F-22's

This afternoon I was looking through a lot of my old posts because a friend of mine for his own purposes wanted to see what my archives on force deployment/sustainability contains. Besides deciding that I really should move to TypePad if I ever want to do subject area searches again, I pulled up an old post from June of this year.

There is some informed speculation that the Blair government will be announcing signficant troop and equipment cuts for the British military in the next couple of months in order to effectively pay for operations in Iraq. Four infantry battalions, six escort ships and forty strike fighters are the speculated cuts; this is 10% of the infantry, 20% of the escorts and 10% of the tactical airforce...... I am just mentioning this report because it seems that the British Defence Ministry is a good predictor of what the Pentagon will be saying in the next three to six months.

Well, we are starting to see the reduction in future force levels and structure percolating in the United States too. The F/A -22 stealth air superiority fighter looks like it will be cut from a three wing program to a two wing program as 100+ aircraft in the planned buy may be cut from the program. This is in conjunction with firm speculation that the USN carrier and submarine fleets are at significant risk of 20%+ cuts. Some of these cuts are being made on the "transformation/light weight fighter mafia" agenda. However the majority of the freed-up funding would be going to either reconstitution of the current capital base depleted by Iraq, or to pay for operations.


More on the Mayoral Race

Via my always insightful commenter "O" more things and candidates to track. O states the following are additional candidates:

Frankel, Walko, Flaherty, and Lamb. Ricciardi may run, although he is probably more likely to run again for his council seat. Hertzberg, it seems, is more interested in becoming judge than mayor.

[There's another guy out there who's name escapes me: has run a couple of times and lost every one of them. This guy falls under the "batshit insane" category, and will probably be ignored again.]

O'Connor has the inside track with Flaherty close behind. The rest of the feild is open at this point.

So we are now up to O'Connor, Ferlo, Cox, Peduto, Udin, Frankel, Walko, Flahery, and Lamb as serious contenders. And from Pittsblog, I learned that Peduto has a "draft bill" site set-up. The fun has started and I don't know enough to jump in.

Update I am striking Udin and Frankel from the list due to the comments by Mark Rauterkus that they have announced in the press that they are not running for mayor. I am looking for more info on Riccardi.

I'm Back

Got back in from travelling last night, and it is good to be home.

First, I hit the International Red Cross site to give some (too little) aid for the tsunami victims. I think that the effects (primary and secondary) of this disaester will play out for years. Increased cooperation on a warning system for all of the earthquake prone areas will probably occur. I know the Pacific Rim has a system in place already, but LA would be screwed if a similiar earthquake occurred in the northeast Pacific.

Second, our cat is strange. We drove for about 700 miled last week. She spent 400 in my lap, 100+ looking out the backwindow as cars drove by and then the rest either in the carrier or hiding under the seat. It is a good thing that we now know that she travels well.

Christmas was actually a damm good time this year. Got to see plenty of family and friends but we actually got the mixture right where we saw enough of everyone without getting on each other's (frayed) nerves. And I am also damm proud of my dad (for many reasons) for two specific reasons this winter. First, he has lost some significant weight using Atkins so that when he picked my fiancee and I up from the bus station, he was walking without a grimace. Good job, and secondly, unlike most seemingly successful Atkins users, he does not incessently talk about Atkins.

Now I get to ease back into work, a couple of quasi-voluntary half-days from home and some sorting out around the house, and then a damm good party to look forward to this Friday night.

Wednesday, December 22, 2004


I'm travelling (actually procrastinating from taking out the trash, and then travelling) now to go see my future in-laws and then my family for Christmas. I doubt that I'll have internet access for much of the trip, nor do I really think that I would want it, as I need a couple of days of not paying attention to destress and relax.


Does it matter how the Mosul attack occurred?

Right now there is conflicting evidence on how the attack in Mosul which killed 15 US soldiers, several contractors and Iraqi soldiers occurred. The initial reports were saying that an indirect fire attack took place using either mortars or a 122mm rocket, while later reports are stating that it was a suicide bomber who launched the attack. Now does this matter? I think it does.

If the attack was an indirect fire attack, then the countermeasures are relatively simple; continue to harden the base infrastructure of US forces and conduct aggressive anti-mortar/anti-rocket patrols. These are things that the US is already doing, so more of the same will likely work (to a reasonable degree). Harrassment fire will continue, casualties will be incurred and people will die, but large casualty events are a golden BB scenario.

Now if a suicide bomber was the cause of the attack, it is the starkest confirmation of the infilitration of the US military position in Iraq by insurgents and insurgent sympathizers. If the US is in a full force protection mode, they must be able to successfully screen any potential insurgent sympathizer before they start working on US bases. Given the great success that the US has had in screening Iraqis (hey it's the police force, hey its the Fallujah Brigade, hey its the ING... all infilitrated and all actively passing intel to the other side), comprehensive security will only occur if there no Iraqis near any American bases. This means that either US soldiers will be cooking their own meals, doing their own laundry and typing useless paperwork or third country nationals will be hired out as high priced contractors to do the same scut work. Thus increasing the bill, AND alienating the proportion of Iraqis currently working on US bases AND not insurgent sympathizers as they will be out of a decent paying, although risky job.

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Washington Baseball Stadium

Is a go as a new deal has been renegoatiated which will meet the 50% private construction capital requirement that Cropp inserted into the amended deal. The city is still getting screwed as the only hard concessions they received are a 50% split on construction completion insurance, and limitations of liability if the stadium is not operating by the start of the 2008 season. So it is a slight improvement in terms of the deal that was originally presented, but not a great win given the (bad) situation. Major League Baseball is pledging to look into finding the construction funding streams from private sources, so D.C. is looking at an upsides savings of ~100-200 million dollars versus the previous travesty of a deal.

The interesting thing is something that Scott Lemieux at Lawyers, Guns and Money points out: "At a minimum, I hope that the hysterics from people who said that any further negotiation would kill the deal will instruct us that MLB's once-vaunted leverage is a fraction of what it once was; increasingly, local governments are onto the scam. "

MLB made some small real concessions and some signicant symbolic concessions that could be relatively large if they are actualized. This is a significant departure from the "I'll hold my breath until I turn blue and then I'll relocate if you don't take on all of my capital costs" negoatiating strategy that is (often) successful in convincing second tier cities (including Pittsburgh) that Major League Baseball is the KEY to being a first tier city. Hopefully this knowledge of concession based bargaining will spread and be acted upon.

And the Mayoral Race Begins

With Mayor Murphy's announcement that he will not be running for re-election in the May 2005 Democratic primary, the mayoral race officially began yesterday. Right now I think it looks like it is going to be four or five way free for all for the Democratic nomination who will then roll right over the token sacrificial lamb that the Republicans will put up. I need more information, but from what I can remember the primary challengers with a chance in hell of winning are O'Connor, Ferlo, Cox, Peduto, and Udin. Who else deserves to be in the "chance of hell of winning" group? Who else is thinking of making a run? I am not connected enough to the local scene to be anything more than an interested spectator.

Also what is the over/under on crazy candidates?
Over/under on candidates under the age of 22 or over the age of 85?

Finally my decision tree on whom I will be voting for is getting a little clearer:

1. Not Tom Murphy
2. Has, in my mind, a viable chance of winning the election. (I will engage in strategic voting)
3. Realizes that there is no deux ex machina to save the city
4. Realizes that righting the state of the city will be difficult and unpleasent.
5. Does not pull a "firefighter's union" type deal.
6. Believes in high density urban living
7. Is not bat-shit crazy
8. Agrees with me on some social and political issues
9. Preferably a Democrat

Tuesday, December 21, 2004

Things I've been recently wrong on

Nov. 16th Fallujah Lessons Partially wrong on the Sadrists boycotting the elections, they are just not participating nor opposing the elections.

Oct 30th: Two Days Out and Optimistic... about the election (WHOOPS, I was counting on conventional wisdom and Democratic GOTV efforts to put Kerry over the top in Ohio and Florida while defending New Mexico. )

Oct 27th: October Surprises and Oil Releases I thought and still think that a small committment to release oil from the strategic reserves would be a decent policy idea.

Oct. 7th Expensive Oil I thought oil would not get over $50 a barrel

Sept. 22 Steelers Thoughts "now that Roethslberger is the QB for the next month, most defenses will be able to safely stack the box with the strong safety until they get burned.

Don't get me wrong, I like Roethslberger as a draft pick. I thought he would have been chosen before #11, but I do not think that most quarterbacks are able to be successful starters in their rookie year. Big Ben faces the normal hurdles of transitioning to pro-ball that any rookie faces and then he has the added problem of being a quarterback transitioning systems. He has the physical tools and the mental acuity to be a good quarterback. I just do not believe that he will be successful this year."



I am an incompetent when it comes to actually coding my blog. Look at all of my not so good experiments. Look at my (currently) non-existent sidebar and blogroll. I do not know where it went. I wanted to insert a "Draft Dean for DNC" button use the nifty [img src= ....] that everyone else is using and I just figured out how to use this morning but somehow I have managed to make everything in my sidebar dissappear. I am looking at my template and all of the blog links, and button source code is there but I managed to screw something up. Does anyone know how to help me? If you do please e-mail me at[ fester NINE EIGHT SIX (in numbers) AT] and I'll send you my kludged up code.


A case for employment based drug testing

Is unintentionally made by William Safire of the New York Times as he must have lit up one hell of a doobie on Sunday evening as he wrote a column that has a vast international conspiracy against the United States, Colin Powell winning bureuacratic battles in the United States, functioning Iraq-Al-Qaueda collaborative operational relationships, and a Democratic President elect appointing Wolfowitz to head the Defense Department and Rumsfeld to State after a victorious 2004 campaign.... That must be some fine hydrophonically grown material to come up with this scenario.



In a touching story about a 4 times wounded Marine from the 1 MEF force there is some interesting info at the very end:

Mitchell says he doesn't personally know anyone else who has had four injuries in such a short period of time but he says about one quarter of the marines in his battalion in Fallujah have at least one Purple Heart.

Assuming that the slightly injured/seriously injured casuality ratio as shown at is accurate and applicable to urban fighting, and assuming that about one quarter is 25%, and that the battalion was at full strength, the Fallujah fighting has put 13% of the battalion's entire strength in the hospital for at least three days. Given that the infantry units probably bore the brunt of the casualities AND that the infantry companies make up about a small majority of the headcount in an unaugmented Marine infantry battalion, some of the combat companies in this battalion probably have/had 25%-35% of their personal in the hospital for at least three days.

Social Security and Productivity

There is a good deal of arguments and evidence (huge PDF) to suggest that the long run productivity growth rate that the Social Security actuaries are using to computer an intermediate cost projection that results in both 75 year and inifite horizon deficits are too low by a significant number. Furthermore, these productivity critics are arguing that a more likely long run productivity improvement rate should be at a level which is sufficient in and of itself to move the long run OASI trust fund balances to be positive.

Now, via TAPPED, I see a new critic of the actuaries has issued a forecast (large PDF) that is at significant odds over the next six years compared to what the actuaries are forecasting. The primary area of difference between these two forecasts is in productivity growth.

Now who released this forecast that is so at odds with the Social Security Administration's forecast of short term growth? Why none other than than the White House Council of Economic Advisors!

So we have one Bush administration projection that is allowing Bush to advance an ideological agenda to gut Social Security by making it a risky proposition with high fees and large rewards for campaign contributors. And then we have another projection that will give Bush cover to cut more taxes for his contributor class while still being able to say with a straight face that the deficit will be cut in half (as % of GDP) by 2009 due to superior economic growth... I would love for someone to repeatedly ask Bush and every damm senior administration official in charge of economic affairs which forecast is actually correct.

Now the answer I expect to see from someone, with a certain amount of tongue stapled to a cheek is the following: "No forecast is precise, there are too many unknown unknowns, and asking questions about the future leads to uncertainity and moral unclarity about the present, and tax cuts are always good." I also expect to see some snark on the lines of

"Why trust a Bush forecast...
My tax cuts in 2001, oops, 2002, oops, 2003 will create above trend job growth....
We only need 30,000 troops in Iraq by September 2003....
We'll be greeted with rose petals as we are liberators....
30,000 sarin shells just north, east, south and west of Tikrit and Baghdad..."


Pittsburgh BlogFest

Ripping the following off from Inner Bitch

We've all pretty much recovered from the first BlogFest, and we've got a bunch of new blogs on the books at, so it seems like a good time to do it again (now with added Wojo!).

Come meet your fellow bloggers at Finnegan's Wake on Wednesday, January 19. This is a purely social event; it will be utterly without agenda, structure, or redeeming value.
WHAT: Pittsburgh Blogfest 2
WHEN: Wednesday, January 19, 5:30 - 9:30 pm and later
WHERE: Finnegan's Wake (near PNC Park, 20 General Robinson St., North Shore, 412-325-2601), in the Pub Room
WHO: You
AND: Creating Text(iles), Grabass, My Brilliant Mistakes, Inner Bitch, many more

If you're planning to join us, please email blogfest (at)

Targetting oil infrastructure

Global Guerillas, a site that you should be checking up on weekly, IMO, has an interesting and frightening analysis of the vulnerability of the Russian energy infrastructure and what he sees as the evolution of the Chechen guerilla movement away from a traditional locality based movement to an economic actor. GG lists nine seperate successful attacks against Russian energy distribution infrastructure that appear to be similiar in gross methodology as the methods used against the Iraqi oil infrastructure. The Iraqi pace and effectiveness at shutting down the oil distribution infrastructure is much higher than the current Chechan efforts, but as Global Guerilla notes:

The infrastructure's long distances, numerous choke points, lack of redundancies, and corrupt security combine to make it extremely vulnerable.

That same sentence can be applied in toto to most of OPEC's oil infrastructure, and the majority (-the corruption) part can be applied to almost all global oil infrastructure. This fear is why I have strong doubts (backed by almost no real evidence, that is why I am a blogger) that oil will get cheap (<33.00/barrel) any time soon.


No need to comment

The ACLU has gotten their hands on a massive data dump that shows that torture was an authorized procedure, evidently by the President damm early on... And despite the probable buyer's remorse that the American public is having on electing G.W. this is what we approved of, or at least 51% of the country decided was not a big enough deal to vote against a guy who approved of this.


The Patriots lost as Tom Brady had a horrendous game (4 INTs). So it is 99% likely that the Pats will have to come to Pittsburgh to play for the AFCC. That should drive the city nuts.

And the damm pipes in my building are singing so that is why I am up at 3:30 in the morning.

Monday, December 20, 2004


Via Daily War News I came across this Financial Times article that examines some of the Saudi government's fears about the insurgency in Iraq. Basically the Saudis are worried that the several hundred Saudi jihadis currently in Iraq may come back to the Kingdom and with the increased skill that they gained in Iraq AND increased stature within the anti-government/anti-US communities pose a far greater threat to the house of Saud than the manageable threat that currently exists. This is a real worry.

However the thing that caught me is the following couple of sentences:

Suspected militants with military experience gained in Iraq have been detected in several Middle Eastern countries, and some have been found as far afield as western Europe, according to intelligence officials.

"They are coming back with security experience, ranging from skills in how to lose people who are trailing them, as well as having the qualities of guerrilla fighters. They also know how to do surveillance," a senior European intelligence officer said.

Shit, that sounds a lot like the Afghan Arabs, who make/made up one of the two major power groups that are/were personally loyal to Bin Laden (the other is Egyptian jihadists, although there is significant overlap between these two sets). We all know the stories of how Bin Laden fought the Soviets along with thousands of other radicals in Afganistan, and then afterwards translated their increased expertise into an international terrorist organization with good skills and capabilities. The good news was that the Afghan Arabs are getting older (the war ended 15 years ago) and the most ambitious in terms of their anti-Western/US activities have faced significant attrition, both pre and post 9/11.

However the Iraq war and insurgency looks like it may be replenishing the ranks of combat hardened jihadis (although most fighters in Iraq are Iraqs who are not Wahhabists, there are enough foreign jihadis to matter) who believe that they are reliving one of the foundational myths of Al-Quaeda; namely dedicated guerilla resistance sustained by a radical faith can humble and bankrupt a superpower despite massive losses among the faithful.

Iraq is most likely creating a similiar future blowback cadre.


Damm good racket

I recently got a parking ticket on fairly questionable grounds, the back third of the company minivan was overlapping some very faded yellow streaks on a weather worn sidewalk ledge. The signage was confusing as well. But I have decided not to challenge the ticket because it is just not worth my effort, so I paid this morning via the phone payment system. And I have to say it is a damm good scam for the city. In addition to the 267% in fees above the original fine, there is a $3.00 convience fee to use the phone in system. I am amazed at the audacity of this fee for the phone in system if it was constructed properly should be saving the city Traffic Court several dollars at least per ticket in transaction costs if it is used on any frequency. Hell, the phone system should save Traffic Court significant sums of money versus a postal system of collection.

All I have to say, it is a damm good racket, that all said and done, fees and charges are 300% of the fine amount... damm fine racket.

Sunday, December 19, 2004

Medicare as the Problem

Brad Plumer is an advocate of dealing with one of the two major short term General Fund deficit problems before we even start thinking about Social Security. That problem is Medicare and in this case, there is almost no dispute that the revenue imbalance and thus deficit is real and it is coming up in the reasonably medium term (10-12 years). QandO is linking to a piece which quotes the Comptroller General of the United States as stating the following:

"Of the $43 trillion the United States now faces in unfunded obligations, $28 trillion are due under Medicare, while just $3.8 trillion stem from Social Security".

"Solving" the problems of Social Security by issuing more debt is most likely not a credible way of proving our fiscal responsiblity if there is nothing done about the known and much closer to occuring problems of Medicare. The current debate on Social Security looting privatization holds the risk that Tyler Cowen points out:

If we can borrow all that new money "scot-free," will we truly reduce future expenditures on social security benefits? Or will those funds simply be diverted, either explicitly or implicitly, to finance the Medicare shortfall? Which way would you, as a bondholder, bet?

So if old-age entitlement reform is an area of actual policy interest in this administration than the program that needs examination is Medicare.

Vox Baby, someone you should be reading on a regular basis , has some ideas on Medicare reform that may play into Social Security's problems also. He states that we should apply a very basic problem solving strategy and find where the breakeven point on age is for Medicare so that if everyone above Age X is in Medicare under no other policy change while everyone under Age X is excluded from Medicare, the system comes into long term balance, then we should as a serious policy option think about transitioning to age X as the starting point. This is a good idea that defines some of the parameters and trade-offs.

There are plenty of ways of doing this conversion, I bet the change would be a slow and gradual change, much like how the Normal Retirement Age was changed by 1 month per year for 24 years to raise full benefits age to 67. Now this gradual policy would neccessitate an older Age X than just saying "Starting next month, Medicare will only cover people at Age X and for everyone between 62.5 and X, Screw You." But this decision will then be a matter of policy wonkery, which has little productive value right now.

Now if it was implemented, it would most likely create a gap between when people are eligible for Medicare and when they are eligibile for Social Security. Health insurance is one of the larger relatively fixed costs of old age. Our system has health insurance for the middle class provided through the employer. If the age of Medicare eligibility is pushed back, then it is extremely likely that workforce participation rates among the new gappers. They will want to work longer to ensure a smoother transition between their employer provided healthcare and Medicare instead of going naked for several years. This would lead to increased Social Security taxes (no lump of labor fallacy here) on the increased wages, and a shorter time period of collection of Social Security Benefits (although at a higher rate if Age X is greater than adjusted Normal Retirement Age). Additionally from the expenditure side of the equation, more time not spent collecting Social Security means more deaths so the worker:beneficiary ratio will see a marginally positive increase. (Note: I am not excusing Vox Baby or anyone else wanting to throw sick people to their death beds; I'm just stating that old people will die off as they age.)

I need to think more about this issue, but it is interesting to look at the cross program implications and interactions.

Potential Debt Requirements for 2004-2005

Brad Setser does some serious number crunching and speculating on US income and debt demands for 2004 and potential debt demand for 2005. It is not pretty:

it is -- sadly -- not entirely implausible that the US might need to "export" $1 trillion in debt next year.....if equity investors are taking (net) $200 billion out of the US next year, I doubt the US will be able to sell the one trillion in debt necessary to finance both that equity outflow and a $800 billion current account deficit. Interest rates would have to rise a bit more than is forecast to attract that kind of funding, slowing the US economy, slowing consumption growth, slowing import demand and reducing the trade and current account deficits.

But no matter how you cut it, the US will need to place an enormous amount of debt abroad next year.

He has two major concerns; first, there is absolutely no spending discipline anywhere in the United States; the American consumer does not want to save any money and the US federal government is damm determined to run massive deficits as they try to outsource Social Security through the privatization looting plan. The only source of governmental savings is currently in the Social Security Trust Fund which reduces global open market supply of US treasuries by $150+ billion dollars. The 2% diversion plan would increase the US demand (all else equal) by another $80-100 billion dollars) per year for the next decade or more.

Bush thinks this is a wonderful idea. And his Treasury Secretary thinks that the bond markets will reward the US debt with a lower interest rate than it would otherwise grant due to Bush's "responsibility." All of this faux policy debate is happening in a world where the proponents for radical change claim they are firm believers in both the market and the assumption of homo-economicacus rationalis despite the fact that if this assumption is valid, there will be no "free lunch for additional returns.

The second concern that Setser has is that the US knows it is in a death bet against the current value of the dollar. Sooner or later the United States either needs to become politically and economically responsible again by imposing a voluntary austerity package, or the world's financial markets will impose austerity and responsibilty by cutting off cheap funding for the deficit. Everyone knows this will happen (eventually) so right now people who can buy some protection against this death bet, are doing so. Protection in this scenario is for US citizens to buy more foreign assets so if the dollar declines, those foreign assets will increase in value in dollar terms than if the US citizens were holding dollar denominated assets. Foreign capital has pretty much made the same decision to start to stay away from US debt and maybe start getting out of US debt. This decision by US individuals to park some of their assets in Canadian dollars, Euros, Yen, British Pounds or Swiss Francs requires that foreigners are willing to reloan the net value of these assets back to the United States.

I do not have the technical expertise to judge whether or not a trillion dollars of external financing will be needed for next year, but the case for financing of this size sure as hell looks plausible for me.

Looking Ahead

Brad DeLong is linking to a piece by Dean Baker that looks into the granting of stock options to high level executives at publiclly traded comanpies. Surprise, surprise, these stock option grants tend to be granted to executives right before good news is announced which causes the stock price to increase and thus the profits of the executives to increase. I am not ranting against insider self-dealing and self-enrichment of the top executives versus the hollowing out of the rest of the workforce, although that is happening. Instead this is some evidence that insiders have a damm good idea of what is happening within their company at the very least, and most likely their sector.

This is a preface to the following chart from Barrons (via The Big Picture showing insider selling is outpacing insider buying at a rate of 6 to 1.

So assuming that insiders are aware of near term future reports of their company's profitability and good news profile AND assuming that the insiders want to make as much money as legally possible, selling assets at this rate would suggest that insiders believe that right now is about the best time as any to move out to cash or other assets versus holding their company's stock. To me that suggests that we may be facing a recession or significantly slower growth in the relatively near future.

Bah Humbug

I just finished Christmas shopping, (1 exception, but due to international shipping times, it won't matter that I wait for the post-Christmas sales) and I am glad that I am done. I hate this part of Christmas because I am both horrendous at figuring out what I would like to get, and then figuring out what someone else wants. I am pretty damm good when I have a very clearly defined shopping problem, but the incomplete problems drive me to paralysis. But I am done now! YEAH!!!!

Now going back to reasonably clearly defined problems, the ring that I got for our engagement was one of those problems. My fiancee and I had shopped together for several months trying to define parameters (cuts, # of stones, type of bands, price range, color of band etc.) and finally got to a set of things that she liked and I understood. From that point an easy decision process. And she loves it. Today while we were standing in line, she got a totally random compliment for the ring from a random woman who was behind us waiting for the check-out line to move forward. So I can do this shopping thing on understand parameters and do it well, it is just these messy problems, the ones that I love on the intellectual level that I hate when it is a practical concern.

Friday, December 17, 2004

Port Authority, half sigh of relief

The Port Authority of Allegheny County has elected to embark upon a phased reduction of services and fare increases over the next seven months. The first round will see fares for a single zone ride go up a quarter and several routes cut as well as plenty of late night routes dramatically reduced. The second round which starts July 1, 2005 will see a fifty cent increase in single zone one way fares and a chain saw taken to most late night and weekend routes.

However, this is a victory compared to the doomsday scenario that was being put out over the summer and going into the fall. Back then all night and weekend service of all types, and ACCESS service would be cut in order to save costs. I don't like these cuts as they will dramatically increase the cost (fiscal, time and aggravation wise) of living in the city and encourages yet again, those that can afford to get out to get out, but this is not a disaester scale move. Now lets see if there can be a long term funding solution worked out.

Marines shifting 2cd Lts. from aviation to ground?

A little birdie who works down at Pensacola Naval Air Station and whom I trust has recently stated that the Marines are making up a smaller than typical contigent of newbie pilots and NFOs who are going through primary flight training for tactical aviation. The bird suspects that the extra Marine 2cd Lietenants who are not coming into the aviation program are getting shifted to the infantry and combat engineers.

P of true: 40%

Thursday, December 16, 2004

Other than That Mrs. Lincoln, how was the show

Eric Bowser at the new to me blog by that name (thanks Pittsburgh has this to say about Tike Redman:

Redman would be viewed as the likely successor as the leadoff hitter but the team has concerns about his early season struggles, poor OBP, strikezone knowledge, and route running to the ball in center.

Quick Good News

New claims for unemployment fell to a very respectable 317,000 last week. These weekly numbers are volatile, but this is good news.

Secondly, the FCC is NOT regulating satellite radio. I am not a big fan of shock jocks, but this is a good protection of limited commercial free speech. I am happy here.

Update Housing starts collapsed by double digit margins for November; however new permits only suffered a small decline.

Wednesday, December 15, 2004

Sports Stadiums, Subsidies and the Public Good

I do not like outright public subsidies for sports stadiums. I like the New England Patriots' Gillette Field model where the only public cash was to widen Route 1, provide an off ramp, and to otherwise let the Kraft family take all the risks and all the profits instead of the traditional all the profits only part of the equation. But I am also a believer in sunk costs; once a decision has been made and implemented, the next relevant question is "What next." So Pittsburgh has some great natural experiments on whether or not the stadiums are economic engines.

The Post Gazette has an excellent article by Milan Simonich which examines the claim that the stadiums are significant new economic activity generators instead of redistribution of normally occuring regional activity. He makes clear the basic consensus among non-shilling academics that stadiums are not a net plus for any economic region larger than the parking lot and stadium grounds. He also counters with the typical anctedoctal stories of increased business by some merchants AND the common "Pittsburgh Pride" is valuable clarion calls. However he goes beyond this typical story and actually shows that the Steelers do attract a slightly higher than typical out of town contigent. But the numbers mentioned of out of area seasoon ticket holders is miniscule and unless they are heroic spenders, no where near a large enough contigent to generate sufficient revenue to account for the SEA, Tourism Board and hotel owners associations' claims of increased revenue.

Pittsburgh is a natural experiment (as is Cleveland and ~20 other cities) that show publicly financed stadiums and professional sports teams most likely do not add much to the economic mix of any large city. Washington D.C. looks like it is learning that lesson as city council is paring back the amoung of public subsidy for the new Nationals ballpark. Major League Baseball is throwing a temper tantrum, and there is a decent chance that it will move the team to a permanent location in Northern Virginia, but who cares, as the city of D.C. has enough other problems that it could use the ~$30-33 million dollar income stream that it would have dedicated to debt service for something more constructive such as infrastructure repair, education, or hell even not taxing to that amount.

Iraqi list replacement

Swopa at Needlenose is linking to a Knight Ridder piece that states three Shi'ite politicians were assainated on Monday, the first day of the election season. I have a question that I would like to find out more info on:

What are the rules for replacements when candidates are either killed or flee the country or are wounded too severely? Are the lists allowed to nominate a replacement? If so, does the replacement take the replacee's slot, or is the replacement moved to the bottom of the list so that there is effectively no chance of election? If the second case is the correct scenario, do we need to worry about targeted intra-list assaination campaigns due slot placement disputes?

Which if funnier?

I saw the two following lines at two very distinct places and both made me laugh pretty damm hard (yes, I am a geek) but I am not sure which is funnier:

From Dave Copeland commenting about Allegheny County (PA) Sherriff Pete DeFazio:

If you search for "foolish nitwit" in Google, your first result is the home page of Allegheny County Sheriff DeFazio.

Or from Atrios (wordsmith unknown) on Kerik:

Bernard Kerik is one scandal away from winning the Presidential Medal of Freedom.

Other than that, it has been a long, but good day at the office as I have just achieved myself into a whole boatload of new work to do over the next month.

Walt Harris: Should I stay or Should I go?

I don't follow a lot of college football as I (usually) have better things to do on a Saturday afternoon and if I am to watch pro football on Sundays without getting the "Why do you waste your time on a game" look too often, I better not push my luck. But I am interested in the transition planning that is going on at Pitt. Walt Harris was the Panther's head coach, offensive coordinator and quarterbacks coach but he has now accepted a job at Stanford as the head coach. The Panthers play in a BCS bowl on Jan 1, 2005. The question is the following: Should Walt Harris coach one more game for the Panthers, and then leave for Stanford, or should the Panthers find an interim internal coach and let Harris leave as soon as he can get on the 28X.

The primary argument that I see for letting him go now is the divided attention span argument; he needs to set up his Stanford staff, work on recruiting etc. as he is also preparing the game plan for the bowl game. I just don't see this as a too valid argument because the game plan for Utah will have had well over three weeks to be developed. I am assuming that Harris and the Pitt coaching staff in general are competent professionals and if the NFL coaches can prepare intricate game plans against a high quality opponent in the play-offs with two weeks (if given a bye) if they don't know exactly who their opponent will be for half that time, a competent college staff should be able to create a good game plan in 3 weeks when they have that much time to self-scout and opposition scout. The practices right now are primarily more about keeping lose and in shape than implementing the game plan. It is not a stressful time of the year for the coaching staff if they are not actively recruiting. The cost of keeping Harris at Pitt is relatively low as he should be able to accomplish his game day activities without any problems, while also constructing the back end of his Stanford staff.

2005-2006 OIF Rotation Announced

Direct from the DOD Press Release

For Operation Iraqi Freedom, the rotation is consistent with the current force structure in Iraq of 17 brigades and three division headquarters. The troop list announced today includes:

48th Infantry Brigade (Separate), Georgia Army National Guard

172d Stryker Brigade Combat Team, Ft. Wainwright, Alaska

1st Brigade, 10th Mountain Division, Ft. Drum, N.Y.

101st Airborne Division, Air Assault (division headquarters and 4 brigades), Ft. Campbell, Ky.

1st Brigade, 1st Infantry Division, Ft. Riley, Kan.

4th Infantry Division (division headquarters and 4 brigades), Ft. Hood, Texas

The first units deploying to Iraq are scheduled to arrive in mid-2005, and successive units will deploy at various times through mid-2006.

The minor thing to note is that the 4th Infantry and the 101st Air Aiborne are operating under a newer and different table of organization that has more brigades, but fewer battalions per brigade. So 17 brigades in OIF 4 is a little bit different than 17 brigades in OIF 3.


Tuesday, December 14, 2004

Barnes Foundation Well Done

The Barnes Foundation has received permission from a low level judge to break the will of its founder and move its world class impressionist and post-impressionism art collection from a village on the outskirts of Philadelphia into the city itself in order to ensure its fiscal survival. I don't have much interest in this case except to say "Well done" to a couple of my classmates who worked on this project a couple of years ago and who laid the groundwork for a significant part of the transition plan.

Now this is getting funny

I have been beside myself with laughter as the Bernard Kerik nomination is turning into a diseaster of hilarious proportions:

Steve Gilliard is acting as the aggregator of all things Kerik and this is absurd. He had a secret first wife who has never shown up on any background checks that must have been conducted on Kerik if he was to have positions of any sensitiviy. As Atrios notes, the timing of his first marriage's divorce and his second marriage suggests bigamy for at least six months.

Now josh Marshall is trying to see if the official excuse for Kerik to step down -- an untaxed nanny -- actually exists or if she is invented out of whole cloth as a vaguely non-controversial way of ending the entire press cycle. There are at least three different stories and significant timeline departures as to when the nanny left Kerik's employ and the country....

This is funny, but sad for this guy is whom George W. Bush thought was the best guy to run a major cabinet agency that is tasked to protect us....

Trade Deficit Huge

The October trade deficit skyrocketed to $55.5 BILLION dollars. This level is significantly higher than the consensus figure. Imports grew faster than relatively anemic exports. High oil prices also came into play, so we should expect to see some easing of this point of pressure in the November, and especially December trade figures as oil prices have climbed down from their record nominal highs.

The good news is that industrial capacity utilization is back up to the May 2001 level of 77.6% which is better than the high 75-low 76% range that it had been hanging out in for most of 2003, early 2004. However, this is still not enough utilization to prompt significant investment in new plants and heavy capital equipment. We need to see consistent readings on the sunny side of 80% for that to happen. The end of the accelerated depreciation schedules at the end of the month may also put a cramp on industrial capacity utilization growth as this tax break pulled investment forward in time.


Monday, December 13, 2004

Airlifting supplies

The Washington Post is reporting that the Air Force is delivering "much larger quantities of materiel to bases around" Iraq in order to avoid truck convoys due to the high risk that these convoys have. The US Air Force has the largest collection of strategic and tactical airlifters, and they can move significant quantities of supplies; however the USAF does not have enough airlift capacity to conduct current operations much less the surge in operations that a significant airlift operation would dictate. The USAF has not had enough airlift since this issue has been raised in 1941.

Air lift will reduce casualities (most likely) but it also indicates that CENTCOM does not believe that the roads in Iraq are secured or safe enough to operate on with units that are not front line combat units. Airlift is extraordinarily expensive (just look at what FedEx air costs v. Fedex ground costs to move a package, and multiply by at least 2) in both marginal terms and long term recapitalization. We are losing Iraq if the logistics network is transferring over to airlifting supplies from Germany or Quatar directly to fire and patrol bases.


Futzing around with OASI numbers

Okay, so this morning I was trying to speculate a little bit on a scenario where the stock market would produce sufficient returns to save Social Security without general economic growth which produced the higher level of "saving OASI" returns also just saving Social Security. I do not have a complete model in front of me, but I can play with a couple of parameters such as income distribution, share of wage income as share of national income, and profit levels. I will be assuming that the tax rates stay constant.

Right now the OASI tax rate is 10.60% of eligible payroll (employer and employee contribution combined.) Total tax derived income for the OASI in 2003 was 456.1 billion dollars. Therefore taxable payroll was 4.302 trillion dollars in 2003. National wage income was 45.4% of GDP in the second quarter of 2004. Table 1.12 of the National Income and Products Account Table states that 2003 national income derived from wages and salary was equal to 5.1 trillion dollars, therefore OASI taxable income is roughly 84% of all wage/salary income for 2003. This is a figure beneath the 90% target that was orginally set by the Greenspan commission for wage/salary income subject to OASI taxation. The 2003 GDP was 11.004 trillion dollars. OASI taxable wages/salary is roughly 39% of GDP in 2003.

If wages stay constant as a share of national income, but the skewing becomes more extreme so that more income is shielded above the cap, then we have a problem. I just did a very basic set of straight line assumptions, along with 3% real GDP growth over the next twenty years. If we are to assume that the % of salary/wages that are subject to tax goes down in a straight line to 80% by 2023 and EVERYTHING ELSE STAYS CONSTANT, then Social Security OASI is in the hole by 333 billion 2004 constant dollars compared to a projection where the share of taxable wages/total wages is constant.

On the opposite end, if corporate profits increase as a share of national income, it creates a higher level of dividend streams which may allow for higher rates of return for people who own stocks before the change in corporate income. I am far less confident of my ability to number crunch here, but if P/E stays constant at 20:1 but the share of net profits increases by 25% to 10.15% of national income, then we should see a fair price and capital gains increase of 25% as a windfall profit. This change in profits could be directly compensated for by the continuation of the trend towards a smaller share of national income going into wages/salaries. If this was to occur, it would create higher returns while decreasing anticipated tax revenue into the OASI trust fund.

Now I do not know what the scenarios really are talking about. I am just trying to come up with a plausible scenario in which the stock market will save Social Security while the general economic growth that accompanies the savior Stock Market would also not solve the problem. I do not have the modeling software or even the knowledge to use it correctly to flesh this entire point out and find where the inflection points and boundary conditions are over any time horizon past a couple of years. I can do that on Excel. But I strongly suspect that a scenario where the overall level of profits is increasing as a share of national income combined with a continued bifurtifcation of individual wages into very high wage/high skilled individuals who can shelter a significant portion of their income above the cap, and then declining and more compressed wages for medium and lower skilled workers may lead to a scenario where Baker's challenge could be honestly met.

2 Thumbs up for Cafe Sam

I just got back from a wonderful lunch at Cafe Sam on Baum Boulevard. Today was the kick-off lunch for a new program that we are kicking off at work, so we had to get all the principals together, brief them in, feed them and then get some feedback. Cafe Sam was an ideal location as it is centrally located for the vast majority of the individuals as it is right on the Oakland/Shadyside/Bloomfield border and access is quick enough from Downtown via Bigelow Boulevard.

The food was excellent. I had a tilipia fillet that was in what could best be described as a Bananas Foster like sauce. The meet was sweet, succulent and extraordinarily flaky. It melted in my mouth. Others at my table had a sharp Chicken Marsala where the wine had just enough bitterness to add an accent to the properly plump chicken breasts, and the final tablemate had portabella linguini. The mushrooms were carmelized and sweet while the linguini had the perfect al-dente feel.

Service was excellent, present, quick but not overbearing. I had never dined here before, but I was curious as I drive past the place at least three times a week. I anxiously look forward to going back there again.

An Unlikely OASI Scenario

Dean Baker guest posting at Max Speaks raises a question that he has been raising for at least three years when I heard him make the same point at a conference concerning stock market returns:

in which I ask proponents of privatization to write down the set of dividend yields and capital gains that will give them the 6.5-7.0 percent real stock returns that they conventionally assume. Such returns were possible in the past because the price to earnings (PE) ratios have historically been much lower and profit growth was much faster.

The price to earnings ratio averaged about 14.5 to 1 over the last seventy years, compared to more than 20 to 1 today. This is important, because if 60 percent of profits are paid out as dividends (or used for share buybacks), this gets you a dividend yield of over 4.0 percent with a PE ratio of 14.5 to one. It gets you just 3.0 percent with a PE ratio of 20 to 1, and of course less when the PE ratio is higher.

The rate of profit growth is important, because if we assume that the price to earnings ratio stays constant over time (the alternatives are that it always increases or decreases) then stock prices will rise at the rate of real profit growth. Historically, real profits have grown more than 3.0 percent annually. The trustees project that real profits will grow at 1.4 percent annually (measured against the consumer price index).

I have argued that the higher than normal PE and the slower than normal projected profit growth imply that returns will be much lower in the future than in the past,

I agree with this basic argument that privatization proponents who are trying to deal with infinite time horizons is "not a public policy priority. It is not without significance, but on the scale of proper concerns, it should not rank high." But that is the discussion that we are having now instead of a discussion about the massive General Fund deficits over the course of the next decade. [GF chart from Brad DeLong]

So I am trying to be skeptical of Dean Baker's test and I have a potential scenario in which the economic situations that would improve Social Security through investment in the stock market would not lead to an aggregate savings of Social Security through general economic growth. I need to run the numbers on this sucker, and I don't have a model in front of me to do so I'll do some digging tonight to get the expenditure analysis from the Trustees' report.

Let us assume that the share of national income decreases in the comparatively short term (5-25 years), let us assume that the skewing of income distribution becomes even more pronounced towards the high end, let us assume that that the share of national income that goes towards profits increases. Let us assume that capital income continues to enjoy increased tax advantages. I don't know what the parameters would be for this to effect meaningful changes but the first step would decrease the base of taxable payroll, while the second would shift more of the potentially taxable payroll above the cap and therefore decrease the revenue coming in. Increased corporate profits as a share of national income would probably increase the payout of dividends (assume 60% dividend, 40% retained capital) and this would increase the rate of return on equities over the long run.

Sunday, December 12, 2004

Good to know

Via The Left Coaster a rush transcript of today's Meet the Press where Gen. McCaffery(ret) states the following:

GEN. McCAFFREY: Well, I'll tell you thank God for the National Guard and reserves. It's astonishing the job they've done. You know, they came as they were. You never see a story of people deserting or refusing to come to the colors. I mean, the individual ready reservists, we've had some problems, but basically these kids are over there to fight. They're doing a terrific job.

The next rotation - OIF5 - breaks the bank.

MR. RUSSERT: What does that mean: OIF5?

GEN. McCAFFREY: Excuse me. Operational Iraqi Freedom - the fifth rotation - will use up our National Guard and reserve.

We have called up a couple of hundred thousand of these troops. By law, you can't keep them on active duty more than 24 months. At that point, the inadequate size of the active Army - and not just combat battalions, the logistic structure to make it work - at that point, we're going over a cliff. A year out from now we're in trouble.

MR. RUSSERT: You won't have the Guard or reservists to fill the gap.

GEN. McCAFFREY: I don't see how we're going to continue it.

I'm 4-f (too many things floating around in three of the four leg joints will do that for me) but I have actually had to consider the fact that I am 4-f as a probabilistic part of planning for my life in the next four to five years. There is nothing left in the strategic tank for the United States due to the decision to engage in a war of choice, and the draft is the most probable source of new warm bodies that can be tapped if the elections scheduled for Jan. 30 are not the panacea snake oil that they are being sold as.


Yep, its secure

A headline from today's Boston Globe

U.S. warplanes strike Fallujah; 2 U.S. troops killed

So yep, Fallujah is all secured, the only worry is the rabid dogs, and peace will be breaking out any minute now.

Good Point

Josh Marhshall makes the following good point about the Bush tendency to appoint personal loyalists to high positions:

Let's broaden this out a bit, shall we?

Perhaps we were too hasty in criticizing the president for only giving cabinet nominations to people who have already served as his butler, or footman or personal tutor. Because when he goes outside his personal circle the process seems almost comically inept, hasty and reckless

So if we are to get unqualified, ineffective and incompetent leadership from the White House that seems intent on destroying the credibility and finances of this country, might as well let Bush get people whose problems and incompetence he already knows. Save everyone some time.

Friday, December 10, 2004

Good Lord that is a lot of Money

Reuters is reporting that the Bush Administration is starting to shape the supplemental appropriations bill that will be needed to pay for continued operations in Iraq and Afganistan that that the numbers being bandied about are in the $75-100 Billion dollar range. This is a lot of money and a damm good indicator that the pace of operations is not anticipated to slow, nor that they anticipate being able to substantially draw down US forces over the next fiscal year because the operational side of this request is larger than the operational request for last year which supported roughly 17 brigades per month for the year.

And guess what, it still won't be enough to buy a peace in Iraq, as the forces nominally loyal to the Baghdad central government are still functionally irrelevant and useless. As this Washington Post article quotes a US soldier in Mosul:

"They are our biggest liability," referring to the Iraqi National Guardsmen. Another soldier grumbled, "These guys are awful."

and this is not just the view of a couple of grunts.

"The security is going to have to come from the Iraqi National Guard because the police force is absolutely incapable," said Lt. Col. Erik Kurilla, 38, of Minneapolis, commander of the 1st Battalion, 24th Infantry Regiment of the 25th Division's 1st Brigade, which is responsible for west Mosul.

Security, as whatever may actually pass for that word, is only provided effectively by either the US military, the sectarian and party militias, or the insurgent forces. The vast majority of the forces nominally loyal to the Allawi government are ineffective, and this is not just shown in Mosul, but it is a common echo of complaints from across the country. This means that if the United States wants to continue to stay in Iraq, it will continue to shoulder the entire burden of providing any security in regions where it is the dominant power.

And yeah, as a sidenote, the Bush promise to cut in half the deficit as a % of GDP by 2009 is inoperable as that promise assumed constraint in spending, no new debt from Social Security and get this: Absolutely no money to be spent in Afganistan or Iraq past FY 05.


Thursday, December 09, 2004

Nuclear Proliferation Confidence Building Idea

The following is a random idea that popped into my head, so please tell me why this is stupid and counterproductive in comments:

Iran is working towards nuclear weapons and North Korea has nuclear weapons. There are rumors out there that Pakistan is helping Saudi Arabia in a nuclear research program. Nuclear proliferation is a real phenonoman and a serious future security threat to the United States. The threat that is frequently cited is that the regime of a new, less trustworthy and inimically hostile nuclear weapon state will either willingly sell/give a nuclear weapon to a terrorist group which then uses it against the United States or other Western nations OR the nation state loses track of a nuclear weapon (which is a worry about Russia, and #1 was/is a worry about Pakistan). Very legitimate threat scenario.

I am a big believer in deterrance, although the counter-argument in the above scenario is that the leaders of the nuclear armed state are not completely rational OR believe that they can give the weapons away in a traceless manner and thus will not be deterred. So, how about this policy for definately North Korea, and in the future for any other emerging nuclear weapons state: Allow the US or the IAEA or another trusted third party to take samples of the isotope mixture of the HEU processing facilities and the plutonium production facilities. Each facility (as far as I know) will produce a unique fingerprint of trace elements that are still detectable after a nuclear blast. These fingerprints will be distributed to every nation on earth so that a nuclear incident can be traced back to the builder of the weapon very quickly.

At the same time, the United States and any other nuclear power that believes in deterrance make known that it will consider the supplier of a nuclear weapon just as responsible as the actual placer of the weapon and therefore the supplier will bear the same consequences as the actual attacker. Therefore the uncertainity argument about trackability is removed from the equation, and thus the incentive for quasi rational offensive proliferation to non-state actors is greatly reduced. This is a cheap policy of confidence building that the US primary defense (deterrence) will still be perceived to be effective.

Where this party is heading

Today seems like the start of the circular firing squad as the Dean speech yesterday brought out all the U-shaped guns that we all know and love. I liked the Dean speech, to me that it where the party needs to stand and go, but the circular firing squad will commence right about now. But I think that this firing squad will be relatively small and ineffective because quite a few people of way more influence and power than me (just an insignificant but opionated blogger) agree with the following sentiments as expressed by Josh Marshall:

Finally, I should confess that ideally I would like to see the Democratic party unify behind a thorough and coherent TPM agenda, with TPM views on national security, social policy, fiscal policy and all the rest of it. Those who wouldn’t go along with the proper TPM doctrine I’d probably expel, I guess.

In the absence of that TPM party, though, I’m happy to consider myself one more fallen and perhaps disagreeable member of the Democratic party, filled with people I disagree with but with whom I think I share some core political values and beliefs. And I’ll work to point them in what I think is the right direction.

As Nick Confessore notes the battle lines as thus:

most consequential split in the Democratic Party going forward is not liberals versus centrists. The key split is not really ideological at all, when you get down into it. Here's how I see the fight shaping up. On the one side are the rump Democratic establishment of consultants, pollsters, and senior members of Congress, people who span the ideological continuum but who share in common an inability to adapt to the Republican ascendancy and recognize it for what it is. Many of them would like Democrats to win more often, but they are not ready to give up the Beltway fiefdoms and influence they still possess in order to achieve it. On the other side are party reformers of left and right, who tend towards ideological ecumenism but are determined to change the way the Democratic Party is organized and funded.

This party had a methodology that worked well enough in 1992, failed in 1994, partially failed in 1996, had some success due to oppositional overreach in 1998, and is looking at three straight electoral failures in a row against an opponent who does not care about the future health of the United States beyond that of electoral considerations. Something is wrong as I noted yesterday, and the old methods are not working. It is not a matter of policy per se, but of principles and confidence. The Democratic Party needs to be proud of our principles and be confident of our vision for the future. And if to be that means eliminating or reorganizing internal fiefdoms for medium size fish in puddle sized ponds, then we need to do that; nicely if possible, but completed at all costs.

Numeric language Pet Peeve

My job requires me to do a significant amount of driving during the afternoon drivetime. I need some noise in the car to make the time pass quickly and today's music just doesn't do it for me, so I listen to sports talk radio. One of my pet peeves is when they refer to say the Jets have a "+15 turnover ratio"

I just want to tear my hair out and scream: "THAT IS A MARGIN as it is the difference between two numbers (Defensive take-aways - offensive give-aways) and NOT A RATIO which is a quotient of two numbers (Passed completed/passes thrown)."

I know it is not the radio hosts' fault for this terminology, as this is the common expression used throughout football. I remember Coach A (my H.S's football coach...I never played the game) use that term on at least a weekly basis during the in-season lifting program that I took part in as he ranted between sets on what the football team needed to do to win. I know professional coaches use this phrase all the time. It just drives me nuts that Ratio is used instead of the otherwise more accurate and common MARGIN.

Oh Sadr

Iraq'd is reporting that the grand unified Shi'ite list does not contain Moqutada Sadr or his chief lieutanants and aides on it at all. ABC News is reporting that this is because "the movement of firebrand anti-U.S. cleric Muqtada al-Sadr had been left off the list because it has not registered with Iraq's electoral commission." Although several Sadrist supporters are somewhere on the list. So it looks like there is a possibility that the Sadrists are getting screwed and sidelined... which if this is true means that roughly the 30% of the population that has both the guns AND the willingness to use them against the US are being sidelined in such a way that they will be screwed by any result of the election... sure lets provide some more incentives for revolt.

New Claims Dec.8

New claims for unemployment insurance rose by 8,000 this week to 357,000 new claims. This is a pretty weak number if we are to believe that the economy will be adding jobs due to decreased productivity growth from its recent pace and continued production growth. But it is one week worth of data. I am guessing (with no evidence) that the poor retail performance is contributing to this number.

Also as a side note, the 349,000 number from last week was unrevised. This is not important really, just the first time in a while that I remember seeing this number stay the same after the first round of revisions. Just an oddity.

Recruiting Problems

Balta caught the following column from Soldiers for the Truth that discusses first quarter recruitment success.

Hack, here’s a snapshot of how little of our 1st Quarter mission has been achieved,” says an Army recruiter. .....
“These are totals for the 41 USAREC (Recruiting Command) Battalions, so these stats represent the USAREC mission accomplishment:

Regular Army Volume (all RA contracts):
Mission: 25,322
Achieved: 12,703 (50.17 percent)

Army Reserve Volume:
Mission: 7,373
Achieved: 3,206 (43.48 percent).”

The Army National Guard is faring no better. A Guard retention NCO says: “The word is out on the streets of Washington, D.C. ‘Do not join the Guard.’ I see these words echoing right across the U.S.A.”

Let us assume that this information is reasonably accurate, timely, and complete. Just to be sure that this information is complete before I began a policy option analysis, I am going to assume that these numberes represent only the first two months of the first quarter data (October and November.) Therefore, I am going to do a straight line approximation of what their December results may look like and thus the Regular Army would be at 75% of quota and the Army Reserve would be at 65% of quota. There are some big assumptions here, but they are defensible.

The Army is in trouble for manpower. We know this already because the training units (11th ACR, 1/509th PIR) are in Iraq conducting combat operations. Sending the finishing school instructors gives the military one great brigade at the cost of 10 to 20 (slighlty to moderately) weaker brigades over the course of the deployment and the minimum needed reconstitution time. We already knew that there is a recruitment problem because the Army has been willing to drop standards and accept more people without high school diplomas and lower scores of the AFSVAB tests. We know that there is a manpower problem because the military has been willing to eat its future manpower stream by bringing forward to basic the Delayed Entry Program recruits due to the "needs of the service." What are the ways out of this problem.

1) Demand side reduction; declare victory in Iraq after the elections no matter what the results, and then go home after leaving Iraq as a failed state with a raging insurgency. This would immediately reduce the number of soldiers who need to be replaced by new recruits due to combat injuries. It would also make the military a better bet for young people looking for a chance to get of wherever they are from.
This strategy would explain some of Mr. M's questions for increased deployment of troops for "election" security operations as more troops are almost always needed to cover a withdrawal than for an occupation. See the planning for the Bosnia force in 1995. However I doubt that this is actually an option on the table.

2) Improve recruitment: Do the regular things, increase bonuses, increase the number of recruiters, increase the marketing budget etc. It will work to some degree, but if the news in Iraq does not get better and the economy continues to sputter along, it will be still be harder to recruit on economic grounds this year than the same time last year.

3) Screw the National Guard: Say Oh Well, we don't have enough soldiers, so the entire military is stoplossed until the end of the emergency, and we are mobilizing the Guard as both unit replacements and individual replacements.

3b)Continue to borrow from the future; continue to borrow against delayed enlistment personal, continue to reduce the number of soldiers in extended training, cut down on training time, reduce the number of officers going to the Army War College and other mid-career post-grad schools, pull soldiers from their educational assignments, continue stop-loss, continue to pull in IRR etc.

4) Draft.

Unfortunately, my prediction from November 2003, seems to be coming true that the US will be soon facing the consequences of the following dilemna:

1) The United States wants to maintain something vaguely resembling a strategic reserve

2) The United States wants to have a combat effective and experienced army in 2005/2006 time frame.

3) The United States wants to have a functional reserve system in 2005/2006.

We're given up the strategic reserve (82cd Airborne redeploying back to Iraq for the election) and #2 and #3 are under attack from a multitude of directions and this recruiting news is just another piece of bad information.

I updated this post with #3b as a policy option at 8:45 AM


Wednesday, December 08, 2004

Better Treatment on November Employment Report

I am dipping into this well a lot tonight, but Vox Baby has a great treatment of last weeks' initial November job report that is way better than what I have written about it. Let me start at the end, and then pull out a couple of high points:

To summarize, the top line number is payroll jobs, which came in positive but weaker than expected. Combined with a reduction in the workweek and small downward revisions to previous months, this is not a strong report. It shouldn't put any upward pressure on interest rates, via the pace of the Fed's tightening or the market's reaction.

The top line number is the change in nonfarm employment measured from the establishment (or payroll) survey in November. That came in at +112,000......These revisions were -20,000 in September and -30,000 in October, so the total increase in nonfarm payroll employment in November compared to what was reported last month for October is 112,000 - 54,000 = +58,000.....the workweek for private production or nonsupervisory workers fell from 33.8 to 33.7......this is equivalent to a reduction in labor input equal to 10.56/33.8 = 0.312 million or about 312,000 workers.....Finishing up the establishment survey, average hourly earnings for production or nonsupervisory workers increased by $0.01, to $15.83. This figure does not adjust for inflation, which would swing it to a decline.

Now jumping over to General Glut, who is riffing off of the new Challenger lay-off report and the five month slide in consumer confidence has this to extraordinarily optimistic piece to say:

The upshot? We may actually be nearing the US employment peak this cycle -- still some 1% below the previous peak in early 2001.

And this will be occuring as the respectable economists are saying outloud and in public that there is most likely a housing bubble in the coastal metropolis that will be popping within the next year or two which will depress contruction employment and the wonderful wealth effect that has fueled spending and depleted American savings over the past two years. And this, as Vox Baby hints at, and Wampum graphs is in an environment where there real wages have fundamentally stagnated for at least the past six months after declining for a year straight. There are no fundamental fiscal reserves to cope with a hard time in the American economy.

Well the good news is that a recession should significantly help out with the current account deficit....

I'm sad

Actually I am laughing, but I am sad in a general sense that I get the following T-shirt (via Vox Baby
"It occurs to me that there are only 10 types of people in the world: those who understand binary and those who don't."

Kendrell Bell and Patriots Linebackers in '05

This Pats Fans messageboard post does a good job of outlining the Patriots' linebacker situation for the next year. Basically the Patriots are old and relatively thin in the middle with Ted Johnson and Tedi Bruschi as the starters. Both are at or soon to be reaching the end of their prime productive years if they follow the typical linebacker lifespan. Bruschi came into the league as a tweener DE/OLB and has slowly migrated towards the middle. The depth is traditionally provided by Roman Phifer who is the oldest active linebacker in the league and still a damm good coverage backer. Dan Klecko is emulating Bruschi as he is a DT/ILB conversion project, but he is out for the year due to a knee injury. On the outside, the Patriots are significantly deeper with McGuinest, Colvin and Vrabel in a three way rotation of excellent pass rushers and strong run forcers while depth is provided by the young and energetic Tully Banta Cain and secondary depth by Don Davis who is primarily a special teamer and currently a back-up strong safety.

So the Patriots are in good shape on the outside, but a little lacking on the inside, especially if Roman Phifer retires this off-season. There are couple of ways to address the depth issue at inside linebacker. First, is to keep Phifer on the team. Secondly, the Patriots can hope Klecko can be a legit #3 ILB and also find a mid-price veteran free agent, thirdly one of the outside linebackers can move to the inside and let Banta Cain move to the #3 OLB position. Mike Vrabel is the most likely candidate for this switch as he has the size and speed to be extremely effective. Fourth, the Patriots can draft an inside linebacker relatively high, but I do not think that Bellicheck will want a rookie making the playcalls for the defense. Or fifth and most interestingly to me, the Patriots could see if they can make a play for Kendrell Bell from Pittsburgh.

Kendrell Bell is a free agent at the end of this season, and will be looking for a large contract. Bell is an excellent inside linebacker when he is healthy. However he is not healthy that often. The Steelers use him as a blitzer, a run stuffer and occasionally as a down lineman/passrusher on definitive nickel and dime situations. He is a damm good player. However, he has been consistently hurt in two of the past three seasons. Larry Foote has shown that he is an adequate and competent inside linebacker for the Steelers this season, and the other ILB position is more than ably covered by James Farrior.

With the Steelers needing to free up significant 2005 cap room to pay for Roethslberger's achieved incentives and the high probability that Plaxico Burress will receive a large contract with a decent first year cap hit, there is a decent (p>.50) chance that Bell will not receive an offer from the Steelers that he likes. The Patriots, assuming that they can free up some cap space currently being used by Ty Law and Troy Brown, should have sufficient money to make a run the free agents that they desire. They could make Bell an interesting incentive filled offer that, if accepted, would immediately strengthen the middle of the field as it would allow Ted Johnson to come out on passing downs. Even if the offer was for only a year or two so that Bell, who is young, could do a Kurt Warner and audition for a high paying gig elsewhere, the Patriots would be better off than counting on either a rookie or a conversion project.

Reality of Social Security

Kevin Drum has the best, non-financialese argument against the plan to loot privatize parts of Social Security. Basically any scenario which should produce average returns of 7% or more, which is the base assumption of the stock market advocates, will produce an environment in which there is no need to "save" Socail Security as the economy will be doing well enough to produce sufficient revenue to cover the Baby Boom and their echo generations. As he notes, the bar is not high to completely cover the Baby Boom:
In other words, if GDP growth averages, say, 2.2% over the next 75 years, Social Security is in fine shape and we don't have to do anything. We only need to "fix" it with private accounts if GDP growth is less than that.

Now as Dean Baker has consistently argued in thick financialese, there are very few heroic assumptions about profits and dividend yields which can yield 7% or even 6% average annual returns without seeing Social Security saved by the economy with no other action involved. There are no good policy reasons for destroying Social Security's best features in order to save it.

There are some good technical reasons for potentially wanting to put some money into the stock market. As Brad DeLong notes, there is an equity risk premium that is most likely a market inefficiency that is slowly working its way out through the increased P/E ratios that Dean Baker is harping upon. It may make sense for the Federal Government to free ride on a generation long windfall profit by using Social Security funds as an investment pool. However it makes sense for central (READ CHEAP!) administration and sharing of the systemic timing risk.

The other valid and more conservative argument for partial or complete Social Security privatization is that the courts are a far more responsible enforcer of government promises than Congress and this Congress has not shown a willingness to protect and enforce its end of the bargain with the collective pool of OASDI Trust Fund money. Therefore if people want to see some portion of their Social Security money, the odds are better if that money is in their name with their ownership rights than as a vague and legally changable promise upheld only by the political system.

However that is not what the Bush Administration or the American Enterprise Institute or the Cato Institute will be trying to sell. Don't you love mendacity in the morning!

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