Fast Driving Market Researcher

2013 Budget: An Insurance Company with a Standing Army

2012-02-14T05:25:00.031-08:00

After poring over the 2013 budget, this is the easiest way I can framework to think about what we spend money on. When it comes to government, what we spend money on, of course, is the whole ballgame.

Money in, money out:

• $2.9 trillion revenues (18% of GDP, up from 16% in 2012)
• $3.8 trillion spending (23% of GDP, down from 24% in 2012)

Money out by category (in billions):

o $900 security (DOD, wars, Intel, Homeland, VA, State, nukes)
o $800 Social Security
o $500 Medicare
o $300 Medicaid and Children’s Health Insurance
o $600 mandatory (tax credits, welfare, unemployment, etc.)
o $400 discretionary (all government departments)
o $300 interest ($15 trillion x 2%)

By 2020, Obama’s forecast eventually levels off spending at 22% of GDP and revenues at 20%, putting the deficit (2%) below the average growth rate (3%).

(Click to enlarge)

These %'s are going to have to at least go back to our historical averages, and probably slightly higher since we are now so far in debt and since an aging society will inevitably spend more on its healthcare. Since our long-term spending average is 20% of GDP, this is why Obama is proposing 22%. Since our long-term revenues average is 18%, this is why he is proposing 20%. The Paul Ryan budget brings spending down to 20% of GDP and revenues to 18%. The entire argument is over plus or minus 2%.

The $400 billion in discretionary spending -- a reduction of 10% from 2012 -- is what the president has control over without an act of Congress. This proposal drops that component to the lowest share of GDP in 60 years. The GOP's nonsensical rhetoric aside, Obama is positioning himself to be the most budget-hawkish president since Eisenhower.

Based on the grand bargain discussions last Fall, I believe Obama has made clear he is willing to put entitlements on the table if Republicans put at least a reasonable amount of revenues on the table. The share of GDP that we pay in taxes -- both income and corporate -- is the lowest it has been in American history, and is the lowest in the industrialized world.

The 1.2% of GDP in corporate taxes paid in 2011 is down from 1.8% in 2008. It's also the lowest in our country's history, the lowest of any rich nation in the world, and less than half of the OECD average (3.5%). The budget proposes closing some loopholes and raising some rates to bring the rate to 2%.

To generate additional revenue, the budget proposes raising income taxes on the top bracket back to the Clinton rates. This is essentially an increase of 5%, rising from 35% to 39.6%. Thus, someone who makes $1 million and pays $350k in federal income tax today would pay ~$400k. The administration believes preserving incomes for the lower 98% of the country is more advantageous to fueling economic growth because those people will spend it instead of sticking it in a savings account or brokerage. They also believe since middle class incomes have been stagnant for two decades, while upper class incomes exploded, that it makes sense and is a fair deal.

~~~

Budgets of this nature are as much art as science. This blueprint from Obama is sound and reasonable. It seeks harmony and balance at a time when each is in short supply. It's tentative to preserve growth, while aggressive in its principles. It's loyal to the Obama fundamentals laid out all the way back in the campaign, and authentic to his actions since. Its logic is intricate, yet clear. It's one of the central reasons I support him.

Now switch your vantage. You're a guy running a business and you make $1 million. You will now pay 40% in federal income taxes, another 10% in state and local, and another 20% in assorted taxes on your home, cars, properties, payroll taxes, excise taxes, gas taxes, any investment profit you make, and anything you buy. You look around, consider yourself a producer for our society, and ponder the eternal quandary: is paying $700k in taxes on the $1 million you made not excessive?

It's inarguable that we spend too much money. The question is only whether that inevitably suffocates growth and liberty within a nation founded upon freedom. The government has a solemn duty to spend our money wisely because when they took it they reduced our economic freedom by that exact amount. The problem is that we want to spend like socialists, tax ourselves like libertarians, and run around calling ourselves conservatives. It's intellectually dishonest and completely unsustainable.

Budgets are a statement of values. What you propose spending money on is a direct reflection of your principles. Our budgets -- this one and all in recent memory -- affirm that we value security (25% of all spending), insuring that old people have dignity in retirement (20%), and insuring that the elderly and poor have healthcare (20%). Together, these are two-thirds of all spending. The American government is an insurance company with a standing army.

At some point in the near future, we will have to decide whether we want to invest more in our youth and our nation's hardware, thus planting the seeds for tomorrow's prosperty, or whether we will continue to prioritize being the world's policeman and the health of our oldest and least fortunate. Today's budget says we are not quite ready for the conversation yet.

PP and SGK: Social Media and the Art of Cannibalization

2012-02-05T09:12:00.000-08:00

“Is it possible for a woman’s health organization to stay out of the abortion issue and help all women? I don’t know the answer to that yet. What we were doing before was angering the right-to-life crowd. Then, with our decision in December, we upset the pro-choice crowd. And now we’re going to make the right-to-life crowd mad all over again. How do we stop doing that?” -- Susan G. Komen board member, John D. Raffaelli

How many abortions would you guess there are each year in the US, and what % of Planned Parenthood’s total budget did Susan G. Komen’s donation comprise?

These are two central pillars to understanding the random, polarizing controversy that went viral this week. Here are the relevant estimates (using round numbers for simplicity):

Of Susan G. Komen’s $100 mm in donations, let’s assume $50 mm comes from pro-lifers and $50 mm from pro-choicers. If just one in ten pro-lifers are adamantly pro-life, then $5 mm of donations are potentially at stake by giving (what they would perceive) is at least part of their gift to the biggest abortion provider in the country. An equally-safe assumption is that there is at least another $5 mm from pro-lifers out there who choose to give to non-SGK charities because of SGK’s affiliation with PP. All of which means at least $10 mm is at stake for SGK, and probably much more than that. $10 mm equates to 100,000 breast exams, or 10x the number SGK funds through PP today. The now-reviled SGK decision essentially boils down to them seeking to exponentially increase their mission, a pretty smart thing to do when your focus is breast cancer, not abortion.

SGK reversed the decision presumably because they believe the fallout from not supporting PP would be greater than what they stood to gain. It may be a quick fix and politically satisfying, but it’s junky logic. It assumes that a sizeable amount of money donated to SGK is predicated upon support for PP, upon SGK being pro-choice, or both. Yet, it took me one minute to determine that SGK’s founder is clearly pro-life, so that can't be it. And if donations to SGK were so contingent upon supporting PP, more so than supporting breast cancer, wouldn’t those donors just donate directly to PP? It makes no sense that there is this huge contingent of SGK supporters out there who stand poised to pull their donations if SGK pursues a strategy that expands their core mission and supports their core beliefs.

For PP’s part, they intentionally publicized what was a private decision between two parties, which amounted to 1% of their breast exam funding and 0.1% of their total budget, probably because they feared others in their supporter base might cave to political pressure too. But is it realistic to think the vast majority of donations to PP don’t know that PP provides abortions? Not at all. It’s common sense to assume PP’s donors know they provide abortions and support them anyway. By self-generating this politicized circus, they may have created $3 mm in donations and more than covered the lost SGK money, but they also announced it’s open season on any benefactor who stops giving for a reason they don’t like, or if they even suspect it’s for a reason they don’t like, which was the case here. Congratulations PP, you added 0.3% to your bottom line while putting word on the street you’ll go head hunting at the drop of a dime. A well-fought battle, but see how nicely that works in the fund-raising war.

The broader theme, and the one really beginning to gain speed in America, is the power of social media to organize instantaneous backlash, and force the hand of decision makers by slapping on a digitized death grip. This torrent of soft power from the citizenry is unprecedented in American life. One interpretation of the trend is very positive. It holds that grass-roots expression is the essence of democracy, and that by allowing citizens to organize and opine with vigor, it will inevitably help craft a society more expressive of the people’s consensus. Maybe, and we should hope as much.

But it also has big downside, as perfectly crystallized this week, where nobody wins. SGK was instantly tarnished. 26 senators demanded that SGK reinstate the donation. There were an average of 400,000 tweets per day as it went viral, most of them anti-SGK. Every newspaper ran a front-page story, and the editorials of the usual suspects attacked the decision. SGK had to deal with all of that. In the end, the decision to reverse themselves was undoubtedly a function of that ever-present cloud: career risk. But what we miss as the bullets fly is that 74 senators did not overstep their bounds, and 95%+ of Americans did not voice outrage and attack a charity. Periodic spikes of social media have the potential to create the illusion of consensus where none exists; it has the potential to strong arm good people into making decisions that are not well considered.

Remember, we’re talking about a foundation, and a founder, who have dedicated thirty years to the cure and treatment of breast cancer. This isn’t greedy charlatans cooking up synthetic default swaps to exploit the spread and cash big rips. The founder ought to be able to donate to whoever she chooses, for any reason she chooses, period. And if it supports one of her core beliefs, all the better. Being pro-life isn’t villainous unless we’re prepared to villainize half the country. And just because abortion and breast cancer are both women’s issues doesn’t mean women’s groups can’t take the other side, any more than a pacifist who sees value in a justified war.

The pro-choicers among us have to admit that 1,200,000 abortions is an insidious number. And the pro-lifers ought to think twice about this continuing rampage against Planned Parenthood, when as the biggest provider of contraception in the country, they’re not only the biggest abortion provider, but probably the biggest preventer as well.

Plan Beats No Plan, and Heat Bends to Light

2012-01-23T14:18:00.000-08:00

Time Magazine ran the cover on the right in late Dec, and was then forced to run the left in early Jan. Now they're going to have to run the right again. You know what they say about predicting and the future...might be time we gave it a rest.

Over at Romney HQ, I am confident that the boys sat down this morning, took a deep breath, and decided on a strategy to win Florida. But that's the problem isn't it: a new opponent every week requires a constantly changing strategy, which then smacks of desperation, even though there was nothing you could do to prevent it. It isn't easy finding problems for overachieving, megalomaniacal billionaires with perfect hair, but by golly.

The real problem for Mitt is there is another debate tonight, and another Thursday, and he is getting his lunch eaten by the portly one. This reality-come-election show may be decided in primetime by the most entertaining, pithiest, and confident persona on stage. So I propose tonight our boy Mitt gives the nation a crisp delivery and underlines the reason to pull his lever.

"Right now, Americans despise their own government, which fits the definition of insanity, even if it's well deserved. Nobody believes politicians anymore. We assume they're corrupted by money and power, or blabbing disengenuously out of both sides of their mouth, or both. And as much as he's trying to run away from it, Newt Gingrich is the epitome of a politician. Look at him: he is everything we associate with Washington, and has been for thirty years.

So the question is why would you elect me over him. I'm going to give you three reasons. That was the first one.

The second, and most obvious, is that the country will need a big-time leader who knows exactly what he is doing to navigate the decade that is coming our way. There's a difference between an ideas man and a manager. You may not want to openly admit it, but you want someone who can negotiate compromises with Democrats -- smart, tough, conservative deals.

Newt is not going to bring people to the table. 60% of the country has a negative opinion of him. The last time he was our party's leader, he shut down the government, tried to impeach a president, barely survived one mutiny from his own party, and eventually resigned with the second. Newt is a professional divider, he always has been. Hot rhetoric is fun and it makes for good TV, but it isn't going to work as President when you sit down to negotiate the future of the world with the Chinese. It isn't going to work when global markets force us to cut entitlements for old people. It isn't going to work when we have to figure out how everybody of every color and every background is going to get along in the mixing bowl that is America.

The third reason is that the country wants someone with character. You may not like President Obama, and I disagree with basically everything he says, but he does have character. John Kennedy had character. Dwight Eisenhower had character. I will put my character for 40 years in business, in government, in my church, and as a family man up against anybody's.

It's going to be a hard decade. I will take on big-spending Republicans and big-spending Democrats. I will tell you hard truths. I will negotiate tough as nails. I will give it 100% every day. Right here, right now, I'm the best shot this country has."

Two minutes under the lights, then hammer these themes with a massive warchest, and it's over. Because it makes too much sense not to be, and I have confidence that even Republicans always come to their senses. At some point Romney must force Gingrich to prove he is a good debater, and not just a good showman. This is the wonderful illusion Newt has crafted. But when powerful people convene in small rooms to make big decisions, heat bends to light.

Regardless, it's good to see Gingrich back in the game. He is the more accurate reflection of today's Republican party, and for that reason he ought to win. Organization and money hit him right between the eyes and damn near knocked him out in IA and NH. But Newt's an old-school brawler, and this new brand of conservative populism wears him well. He's sent out the clarion call with his special Newt code to gin up the GOP's animosity towards freeloaders. If they can paint Mitt as a government-loving, tax-dodging, out-of-touch robber baron, an upset is in the cards.

"I like Mitt, but at heart he's basically a polygamous Democrat." It's coming, just give it time. Fortunately, Newt writes his own lines.

A Christmas Miracle: The Arc Bends Towards American Democracy

2011-12-25T12:22:00.000-08:00

Suppose there is a woman who pines to get married and settle down. And suppose over the course of a brisk two years she courts many suitors of various ilk. What would we say about this woman's soul if every few months she decided to marry a different person: seven of them in 24 months?

7 Frontrunners: Sifting Mediocrity for a Soulmate

I think surely we would say she is at least confused about what she wants in a life partner, and probably confused about who she wants to be herself. Above all, I think we would say she is desperate to find someone with the personality, fundamentals and vision for the next thirty years to feel content and safe in giving her hand, and having an exceedingly difficult time doing so.

And so it is, at long last, we’ve watched the Republican nomination process tread a wayward path to Iowa, and hence, to get it on. Here I’ve created a compilation of all the major polls since Feb 2010. Like clockwork, every few months there was a new frontrunner.

Being that time of the year for retrospectives, let's take a moment and recount the greatest hits. These are the issues the debates centered upon:

• Whether to lower taxes from historic lows and how much to cut spending from historic highs

• Whether the scientific consensus is correct and global warming is happening and if so whether to do anything about it

• Whether to give illegal immigrants any path to legalization or whether to begin rounding up 12 million of them to expel

• Whether the individual mandate is a targeted conservative proposition to promote individual responsibility or whether it's liberal treason and unconstitutional

• Whether abortion can be re-litigated into effective banishment and whether the government should consider abortion (covered) healthcare at all

• Whether to get out of Afghanistan and/or Iraq and whether to start another war with another Middle Eastern country on the suspicion of having WMD

• Whether to voucherize and privatize Medicare

Beyond the policies, the real highlights were more colorful:

• We saw retail campaigning partially replaced by candidatorial profiteering to raise their profiles, sell books and angle for TV contracts

• We saw the revelation that owning a hunting ranch called "Niggerhead" is not a disqualifier to be President, nor is giving a stump speech high on prescription drugs, but forgetting that you want to kill the department of Energy (and Education, Commerce and the EPA) is

• We saw that wanting the keys to the nuclear arsenal without first knowing China has nukes and has for forty years isn't disqualifying, nor is a professional résumé of running a failed pizza chain and motivational speaking, but two sexual harassment settlements and a 20-year sex affair is

• We saw that being officially and unprecedentedly sanctioned, fined and then thrown out of Congress by your own party the last time you led isn't a good enough indication of leadership potential, but divorcing two women with cancer and accepting $2 million to lobby for Fannie and Freddie may be

• We learned you can name your newsletter after yourself, publish your commentary including racist observations and/or support for universal healthcare via the individual mandate, then years later claim you knew nothing about it and don't agree with any of it

I recount these not to wallow in absurdity, fun as it may be, but rather as the evidence for why the 7 Frontrunners. Just because the Republican nominating process unfolded as a slow-motion disaster doesn’t mean the Republican electorate –- i.e. a third of our population -– somehow transmogrified into an intellectual disaster. More likely it’s the opposite. I think Republicans fervently, and rightly, believe our government has grown to a crushing new size; they suspiciously, and rightly, see Democrats as a party not willing to fix this by transforming entitlements and alienating their base, but rather espousing more of the same and solution-by-redistribution; they unconvincingly, and rightly again, see the Obama policies being passed and implemented as an expansion of the role of government and not fundamental enough to solve the problems.

So when Republicans are presented with this crop of subpar candidates, the logical thing to do is throw yourself at the next pretty thing walking by, at least until you see his true colors and discover that he doesn't have the solutions anymore than the others did.

Rise of Newt: The Reality of Credibility

Which brings us to Newt, the final frontrunner. For all the psycho-analyses of the GOP electorate and this long strange trip, I think Newt is simply the most plausible candidate.

For the home stretch, it looks like Newt and Mitt are the only serious candidates, though I think we could’ve conceded that months ago and saved the heartache. Let's also concede they are both experienced, accomplished businessmen and politicians. I am now convinced that if 1,000 everyday Republicans, from all nooks and crannies, sat down on their couch with Newt then Mitt for an hour, that 75% would conclude Newt is smarter, more intellectual, more knowledgeable, has a broader historical perspective, is more politically savvy, is a bigger thinker, has more ideas, is more conservative, is more Christian, is more strategically capable of striking grand bargains, is more personable, is more likeable, is more charismatic, is a better marketer, and is more capable of taking it to Obama’s chin in the 2012 election and every step along the way. In the end, these are the things that matter.

Is he a better husband, no. Is he more likely to say something foolish or incendiary, yes. But those pale in comparison, as they should. Anyone who did the closest experiment possible and sat on their couch to watch Romney’s hour-long interview with Charlie Rose last week knows this is true. Up until now, I was a Romney fan: inspired by his résumé, impressed by his persona, and willing to forgive his Obama bashing as the necessary political warfare. But by the end of the hour, things had changed. I looked into his eyes, listened to his spiel, and took measure of the man. There is less than meets the eye. He is the very definition of inauthentic.

Fortunately, our culture has undergone a generational shift at just the right moment. The plate that shifted is the most central tectonic of them all: TV. Over the course of a decade, our population became obsessed with reality shows. This was especially true of shows where we watch performances and render judgment. At the same time, social networking became reality's partner in crime, as a bigger and bigger slice spent more and more time propagating opinions for others to agree, disagree and react among.

Thus, ratings for the GOP debates broke records. Last week’s finale ranked right behind Monday Night Football for the top-rated cable show of the week, along with two hours of analysis:

Once you’re sharing the rarified air with the NFL in America's attention span, you’ve arrived. To wit, the number was unprecedented: 16 primetime debates. I must confess to having watched every single one.

Why this is important is that while I’ve all but given up hope on our electorate’s interest in understanding the big issues, I have the utmost respect in our Blink-like abilities to assess credibility. To be fair, the issues are now so complex, with such long time horizons and interconnected webs, it’s now approaching unreasonable to ask people to invest the time and mindspace necessary to fathom a trillion dollars, to understand the federal budget, to see the risks in a trade war with China, to suppose the outcomes of global warming, to forecast the tradeoffs to renewable energy, and all the rest.

What we can do is spend the time on our couch watching the debates and decide who is most credible, and we have. Thus, the rise of Newt.

Clash of the Titans: Organization and Money vs. Religion and Conservatism

Aside from a well-justified fear that Newt will say or do something to destroy himself, what primarily stands in his way from here on out is organization and money. Just yesterday we learned that Virginia has somehow found a way to exclude the candidate who the plurality of its electorate wants to vote for. The absurdity of that aside (the guy lives in Virginia and he can’t get on the ballot?), we should assume it’s a microcosm of similar organizational mishaps that will recur. This is the result of getting a late start and now lacking a fully-developed campaign infrastructure. It just happens to be magnified when your archrival is a managerial wizard and has been organizing his ground game for six years.

On the money front, through October, in total Romney has raised $33 million to Newt’s $3 million. From this week’s ad blitz in Iowa, we can assume his camp decided enough with the dry powder. Remember that 95% of elections are won by the candidate with the most money over the past two cycles, and 90% of the money goes to TV ads. The initial onslaught is already closing the Gingrich lead.

Romney is executing his strategy to perfection, the question is whether it's enough. The real question is whether it can ever be enough when people just viscerally do not like you.

In addition to being the better candidate, Newt’s advantages will be momentum and math. It always helps to peak late, and by doing so Newt had plenty of time to trade out the “Newt Gingrich for president you’ve got to be joking me” for “He’s a good debater and I think he might even be leading now” plausibility. In order of the primaries, Newt is: tied for 1st with Ron Paul in Iowa, running 2nd behind Romney in New Hampshire, and blowing Romney out two-to-one in South Carolina and Florida. If these hold and Newt gets out front early, the dominos begin to fall. Expect everyone’s support but Hunstman’s to mostly fall Newt’s way:

Another candidate not listed here whose votes Gingrich could swipe are Sarah Palin's. With some well-placed VP alluding to, Newt could get her allegiance and that of her faithful, sizeable following.

Romney’s Mormonism and perceived faux-conservatism will likely lead those meandering sheep right to Newt. Combined with his jumpy manner, all these factors cultivate what has become this underlying sense of fakeness that beget the Romney authenticity gap.

The data squarely backs this up: a quarter of Republicans freely admit they are less likely to support a candidate who is Mormon; a full third of evangelical whites:

Not much is a certainty in the Republican primary, but we know this: if you don’t have the evangelical white vote, you’re in trouble. And you’re really in trouble if you expect to pick up the supporters of Paul, Perry, Bachmann and Santorum as they gradually-then-quickly migrate.

Regardless of how plugged into the candidates the Republican electorate is, if you ask them for the one word they use to describe their politics, they say “Conservative.” It’s almost cult-like this fetish with the idea of being conservative, and I have to admit I’ve never understood it in a society that values forward-thinking progressivity in most every aspect of life other than politics. Nevertheless, it is the way it is, and here’s the judgment on Gingrich and Romney:

All the key demos for the Republican base are 10-30% more likely to see Gingrich as a true conservative. This has the added benefit of being true. The last time Newt was in government he led the Conservative Revolution and took back the House for the first time in 40 years. The last time Mitt was in government he was the governor of Massachusetts. No need to overthink it.

Newt Wins, Democracy Wins

As a Democrat, it’s too easy to have watched this race unfold and cry joy. Perhaps it’s the charitable season, but I see the big patterns being revealed as very positive. A party in disarray, both philosophically from the Bush years and electorally with the rise of the Tea Party, was always going to have a messy selection process. But the fact that they landed on the two superior candidates says the process did its job. Continuing this evolution is potentially a generational upshot for democracy, and would ideally drag the Republican Party back to legitimacy along the way.

I believe if Gingrich wins it will be a win for democracy. He is a closer match to the Republican electorate’s ideals, and he has the stronger political mind. His political philosophy is more important than his personal tribulations, and let's be honest, it’s hard for us avid Clinton supporters to feign indignity at Gingrich’s infidelities. On the other hand, if Romney is able to outmaneuver him in this last leg with organization and negative ads, I think it will be a loss for democracy. It will say that money is still the root of power, and regardless of these broad cultural shifts that our votes are still malleable to a superior ad buy and 30-second psychology.

In the end, the debate between the GOP candidate and Obama will be epic and is likely to set our course for a generation. The pragmatists and realists among us cannot wait to see whether there will be a real clash of ideas with the soul of our country as the prize. For it’s not that Democrats or Obama have shown their blueprint to be superior any more than they’ve shown themselves to be more courageous. It’s that compared to the alternative, they have consistently shown their character, politics and philosophy to be more intelligent, more dignified and more selfless.

But these are not the end all be all. I make room that shrinking government to a size that can be drowned in a bathtub and unleashing the free market may be the only path to salvation from the hole we’ve dug. As painful as it is to say, and as much suffering as it would be to get there, I am at least open to someone making the case. But they’d better make it persuasively, because if not, I’ll buy my first bumper sticker, it will be a big blue O, and we’ll call it a day.

Next up, why we've decided to allow Iowa and New Hampshire to have such a predominant influence on our national elections. Really, why would you do that.

Merry Christmas from my family to yours,
FDMR

OWS: The Four Megathemes in Forty Charts

2011-11-07T10:14:00.000-08:00

“When I was young, I thought that money was the most important thing in life. Now that I am old, I know that it is.” -- Oscar Wilde

Occupy Wall Street is in its second month and appears to be maintaining momentum, if not gathering. It's been said about protests, “First, they ignore you. Second, they ridicule you. Third, they attack you. Then, you win.” We appear to be in the attack phase, yet I don’t think anyone sees victory around the corner, especially considering the stakes of this particular game: money.

Still, the establishment seems to me particularly obtuse about this "99%" movement. They say OWS doesn’t have a clearly defined platform, no goals, and that it’s an "angry mob” as described by Majority Leader Cantor. Herman Cain, leading Republican presidential nominee, said on Meet the Press he doesn’t understand what OWS wants; then reiterated his notorious judgment that “If you don’t have a job and you’re not rich, blame yourself.” Mitt Romney has been heard saying similar things (for now).

Whether you agree with OWS or not, it really takes a special kind of obliviousness to declare they have no point considering how far the country's central pillar -- the middle class -- has been shifted. Nearly 20% of the country is either unemployed, part-time in lieu of full-time, or has given up looking. Yes, unemployment is the symptom, but it's the virus that OWS is protesting. One would also hope these pols might appreciate the upside of harnessing these underlying megathemes, considering how handy 99% would be on election day. Let’s see if we can help clarify it for them.

~~~

Annoying as it may be, our electorate must form its opinions, and our leaders make their decisions, based upon a common set of facts. But, more and more, we’re ignoring facts in lieu of emotion; or the two parties and their followings are operating on two different sets of facts; or we the people are simply not taking the time to understand the facts; or the facts are being intentionally obscured by those with special interests.

Finding the data is not easy, but it is doable. Looking at charts is not fun, but it is necessary. If you are brave and curious, these are forty trends driving our society. Or if you are just curious why the 99'ers hair is on fire, or whether the American tradition of civil disobedience will prompt change this generation, read on.

1. The money is being hoarded

As a starting point, it's good perspective to remember how successful America is: 4% of the world's population has somehow acquired a quarter of its wealth in just over 200 years.

These are the household incomes we currently define as the poverty line:

The 2010 Census shows that 15% of Americans are now in poverty:

• The rate has risen from 12% in 2007 to 14% in 2009 to 15% in 2010.
• 15% are now receiving food stamps.
• 16% have no health insurance.

If you add together the populations of the 25 states with the least population, you get 50 million people. This is the same number of people living in poverty.

Meanwhile, the top 1% of earners receive 19% of the income after taxes (24% pre-tax).

The top 1% has 35% of all the wealth. The top 5% have more than the bottom 95%.

The top 1% has received nearly all of our economy's gains for the last 30 years.

Chief executives' incomes have quadrupled, company profits doubled, but workers' wages remained flat.

This is a US-centric problem, and it has gotten out of control.

The financial sector has gone from 10% of the economy to 40%.

2. Our economic policy is self-defeating

Manufacturing has gone from 30% of all jobs to 7%.

(Note that Reagan began the deregulatory movement in 1980, and China was admitted into the World Trade Organization in 2000.)

We've gone from no trade deficit with China to $300 billion (2% of our GDP).

Clinton created 22 million jobs, Bush created 5 million.

We give other countries $300 billion each year for oil (another 2% of GDP).

The Bush administration, the Fed and Wall Street watched the housing bubble form.

When it burst, home prices fell 37% from peak and household wealth fell 23%.

The government is spending 25% of GDP while only taking in 15% in revenue.

The government has run up a $14 trillion debt ($2 trillion to China).

We have the world's highest corporate tax rate at 35%.

Yet, the average rate paid among Fortune 500's is only 18%; a quarter average 0%.

This makes our effective rate the world's lowest. In 2008, it was 1.8% of GDP. In 2011, it's 1.2%.

Households' federal income taxes are lower than they have ever been.

Total taxation (federal + state + local) is as low as it's ever been.

We tax ourselves far less than than any major competitor.

Yet, half of us think our federal income taxes are too high.

Even though half of us don't actually pay any.

3. Our priorities have gotten out of whack

Only 4% of us are homosexual, yet gay marriage is a perennial wedge issue.

Gun ownership and gun deaths are a US phenomenon, yet the 2nd Amendment is a sacred cow of the right, and a scaredy cat issue for the left.

Smoking kills 430,000 Americans each year, more than the entirety of World War II. Yet, is legal and subsidized by the government $1 billion each year.

There is a clear correlation between population, GDP, CO2 and temperature. Yet, one party refuses to acknowledge it is happening, and public acceptance is in freefall.

The levels are accelerating, yet we're doing nothing about it.

While China is surging ahead in solar (and wind, hydro, and nuclear).

34% of the country is now obese. (2% in China)

We watch twice as much TV as the rest of the world. (5.25 hrs daily)

We've fallen way behind in educational attainment.

Video game sales have tripled in a decade.

Time spent gaming also tripled in a decade, while reading declined.

The cost of college tuition is out of control relative to incomes.

The divorce rate is 33% after 10 years post-marriage, 50% after 20 years.

The number of children born out of wedlock rises unabated.

While our defense spending equals the rest of the world combined.

And we maintain ~10,000 nuclear weapons.

4. Health, government and profiteering do not mix

Private healthcare profits are exploding our overall healthcare costs.

Instead of focusing on why we need so much healthcare, we attack insurance companies -- whose revenue is 2% / profit is 0.2% of all healthcare spending.

Privatizing profits + Unhealthy citizens = 2x healthcare costs versus other countries

In two generations, healthcare will have gone from 5% of GDP to 22%.

Spending twice as much on healthcare means having half as much to invest elsewhere, putting us at a competitive disadvantage.

The amount spent lobbying in DC has doubled in one decade.

The amount to elect a president doubled in one cycle, and is up 7x since Clinton.

Outside money is now pouring into elections following the Citizens United ruling.

While gerrymandering solidifies incumbency and polarizes politicians.

~~~

If you've made it this far, well done. The people who want Occupy Wall Street to have solved these problems with specific demands are asking a lot. And those who say they don't understand why all the fuss are being insincere or unmindful of the changes afoot. What has happened, and what is new, is a widespread recognition of the totality of the problems relative to the smallness of its perpetrators. The days of deindustrialization of society and narrowly-shared prosperity in exchange for financialization and a debt-ridden, growth-obsessed oligarchical stratification are numbered. This happens from time to time in American life, and will be remedied one way or the other.

"I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts." -- Abraham Lincoln

Regulations Everywhere but Not a Drop to Drink

2011-10-20T06:48:00.000-07:00

"He that is good for making excuses is seldom good for anything else." -- Benjamin Franklin

From the Republican debates, it appears that social issues are finally on the back burner and the economy will thankfully take centerstage. So why is the economy stalled and how will the GOP candidate get it going?

What I am hearing in the debates is: "less government spending and less government regulations will free up the private sector to create jobs."

Let's concede that government spending is out of control. Let's also recognize that private sector profit margins have never been higher, yet the jobs haven't materialized.

But let's focus on the regulation part. This has become the GOP and business community's mantra, that Obama and the executive's agencies are "anti-business." In their worldview, the EPA, Clean Air Act, CAFE standards, the SEC, Dodd-Frank, the Volker Rule, the Consumer Protection Bureau, Obamacare, HIPPA, Sarbanes-Oxley and all the rest are crushing America's entrepreneurial spirit.

Surveys do show this perception exists. The National Federation of Independent Business lists government regulation right after poor sales as the biggest impediment to growing their business.

Yet, 18% is a lower rate than the twilight years of Reagan's supposedly anti-regulation administration (when it was in the low 20%'s), and much lower than Bush 1 (when it was in the high 20%'s) and the economy was in recession. Based on the timing of the business cycles, it's hard not to conclude that it's actually recessionary conditions that drives business owners to cry wolf on regulation (and all that phantom growth they would've had) versus the real effects of regulation.

So how would we measure whether government regulations are stifling job creation in reality? Surely one way is whether it's a reason people get laid off. This month's Labor Department report on Mass Layoffs shows that 0.3% of employers cited "Government Regulations/Interventions" as one of the reasons they laid off 50+ people. There were 1,624 such events in Q2'11, and 5 of them cited it.

For the year, the average is 0.2%.

So the next time these candidates are up there whining about the chokehold of regulations and how the economy would be all green shoots without it, let's call spades spades. Yes, you can have too much regulation; you can have dumb regulation; you can have duplicative regulation. But smart regulations are good for fostering safety and cultivating competition, and a smartly-regulated market is one of the reasons our markets functioned so well for so long and created a magnet for capital that enabled 4% of the world's population to consolidate 25% of its wealth. The wild west is a lot more appealing to the smart money when it has a good sheriff.

To have had an epic failure of regulation that brought near economic catastrophe upon us, and then immediately start crying about too much regulation, doesn't pass the smell test. Let's all agree that regulations ought to be as limited as possible and smartly conceived, then direct our focus to the other 99.8% of the problem.

How Not to Fund the Jamboree

2011-09-19T14:49:00.000-07:00

United States Code 42 § 6322c provides that:

Each state energy conservation plan, to be eligible for Federal assistance, shall include: a traffic law or regulation which, to the maximum extent practicable consistent with safety, permits the operator of a motor vehicle to turn such vehicle right at a red stop light after stopping

Unless otherwise posted. That’s the key part.

And so it was, FDMR’s 5-year streak without a traffic citation came to a close. And in doing so, ran smack dab into self-government’s latest incarnation of failing to adequately fund itself, this time at the local level, in all its wee-sized bureaucratic glory.

It had occurred to me that I’d been seeing more squad cars around my territory of late, their little radar guns peeking through the window like a schnauzer through a mail slot. The City of Sandy Springs, founded just five years ago, has discovered the siren song of easy money via the traffic code, as they all eventually do I imagine. They’ve taken the easy way out—setting up shop at the bottom of hills to play the mo-mo game, hiding in strip malls on the lookout for line-crossing criminals out for early morning java fixes.

It began on a balmy Saturday afternoon. We’d loaded the family into the wagon for a trip to one of the City’s sparkling new parks out on the lake. On the way, we passed a new electronic speed sign, crossed through the new four-way stop, over the freshly-paved lane expansion. The corridor was spotless, free of trash and riff raff, as it always is. These things are expensive, and the Springs is on a mission.

This brings us to the moment of truth. I, a citizen, am obeying the speed limit (thanks to the sensor) when I allegedly pass a sign that says No Turn On Red. Here it is on the curb.

As I pull up to the light and stop, the sign is no longer visible.

I look both ways, there are no cars anywhere. I begin to turn right, but just as I roll into the intersection my wife says “You can’t turn right here.” The old FDMR would’ve mown right through that sucker. But the new and improved FDMR, agreeable, fatherly, and picking his battles wisely, reverses back to the light. We wait for the green.

As the cop hugs the side of the wagon, as to not get taken down by whatever evils lurks inside, I craft my spiel, looking back several times to make sure the baby is acting cute.

He nods and writes the ticket anyway. My wife thanks him.

For the next three hours, this bump in life’s road has me (abnormally) incensed. I go back there and retrace the steps so I can see what public safety I endangered, which is the point if I understand it correctly.

Just over this crest there is a hill (where you know who was hiding in the tall grass). So, in theory, a car could zoom up and over and collide with me taking a right.

Seeing this, I’m tempted to abandon my indignity and return to civilian life. Still, not to be outdone, I decide to drive it a couple of times. The Dukes of Hazard notwithstanding, there is no way someone can come over that hill fast enough to run into someone taking a right.

Back at home on the web, I'm figuring out how to pay my debt to society. Because the City of Sandy Springs wants to make it as simple as possible for offenders to give them money, they have a slick new website. Four clicks and there we have the evildoer:

It dawns on me that if I were them I would want the officer to appear for all his citations at the same time. (This is not three-dimensional chess.) So I click on my court date and well well well, lookey what we have here:

It’s as if a large swath of upstanding citizens conspired to flout the same law simultaneously in the same spot.

So I’m back to incensed. As I dig further into the site, I learn that we criminals can only enter a plea on the first court date; we have to come back a second time to present our case. (That’s well played, I must admit.) So now I’m into two days of missing work.

All for a right on red. Of course, you could just pay the fine.

~~~

Governments will add $6 billion to the coffers this year in the form of traffic citations. That number is rising due to our recession. The St. Louis Federal Reserve found that a 10% decrease in state revenues corresponds with a 6% increase in ticket revenue the following year. The average ticket haul for municipalities is $250. But the real damage is the insurance premium which on average rises $23/month for 3 years. All for a tidy sum of about one grand per violation. $1000 is roughly the equivalent of the payroll tax cut Congress passed to help families navigate the downturn; which is to say that it’s not peanuts.

I’m not one of these libertarians who thinks stop signs are a constitutional crisis. There’s honest disagreement about how dumb laws should be dumbed down to, and every law and every tax takes away some level of freedom. We're supposed to use good judgment.

Cell phones are a great example. Studies show talking on a cell phone increases the likelihood of an accident by seven times, the same as being drunk at the legal limit. Same with hands-free devices. Texting increases the likelihood 23 times. We also know there were 33,000 traffic fatalities in 2011, among the highest causes of non-medical death and the highest for children 10-24. Banning phones while driving wouldn’t be an abdication to the dumbing down society, it would just be simple recognition of the facts. But that’s tough when 93% of Americans consider ourselves "above average drivers" and the amount of time spent in our cars grows unabated.

So I may disagree with the need for this particular sign, but if the City's real intent were to make the intersection safer, so be it. It’s a judgment call. This cop was empowered with the soft skill discretion to give a warning, so why does he write that ticket? Because the City of Sandy Springs lacks the imagination to create a self-sustaining budget without fleecing its citizens. They make a mockery of justice because they aren't industrious or transparent enough to devise a system of taxation without bending the rules.

So I’m going Pro Se. Who hasn’t wanted to defend themselves in court? The beauty of this is that I have absolutely no case. Regardless, to the greatest extent possible, I intend to thunder away at the officer like Tom Cruise in A Few Good Men. More than anything, I want the judge and the officer to hear a reasonable statement from an upstanding citizen, throw the book at me, and then for us to mutually concede that all three of us are an embarrassment to the legal system and the social compact that binds us.

Creative Destruction: Apple Take Two

2011-09-01T06:08:00.000-07:00

Last week's post was timely as Steve Jobs resigned the very next day. The media world went aflutter with excellent columns and essays about how Jobs changed not only technology, but legacy music and publishing industries as well.

Apple is particularly curious to me because they don't do any market research. Jobs has said, "It's not the consumer's job to know what they want." The theory being that with quickly-evolving spaces like gadgets, by the time products arrive to match what consumers say they want, it's too late because the landscape has already shifted.

Jobs' magic was his vision to know what consumers would want, at what point in time they'd want it. Thereby producing a roadmap for product development, and the real gem -- lead time on competitors. Jobs refused to let consumers' backward-looking feedback impede the evolution of his portfolio. He certainly got it right more than he got it wrong.

That said, Jobs' battle with the publishing industry over iPad subscriptions is a great example of what can make heads shake. For each magazine subscription purchased in the App Store, the publisher has to fork over a third to Apple. A similar battle played out a few years back with the music industry. Talk now is that Apple is training its guns on TV.

Why a third? Who knows; why not half, why not a fifth. It seems like a third is probably about the most publishers could conceivably rationalize, and about the most Jobs could conceivably ask for.

Therein lies the rub. Apple is in the midst of an unprecedented financial windfall. They have $75 billion in cash, which is actually more than the US Treasury has. People are paying $700-900 for iPads. Publishers' apps are improving the iPad experience, which makes iPads more desirable, which makes prices more elastic.
The publishing industry, on the other hand, is in shambles.

Jobs could easily allow iPad users to subscribe to the magazines and allow the full subscription to pass through, thereby helping the industry spring back. It would cost him nothing. In fact, legally, if the customer subscribes through the publishers' website instead of the App Store, Apple isn't owed anything. But since customers don't know that, and the App Store is easier, Apple lops off what probably constitutes the publishers' entire profit margin.

It was all annoying enough that the anti-competitive arm of the Justice Department opened an investigation. All for what, so Apple increases cash reserves by 0.5%?

It's true that Jobs' genius has added more value, more jobs, and donated more money to our society than 99.999% of Americans ever will. He talks about how these legacy industries are a victim of the progression of the digital age, not Apple, and how creative desctruction ultimately creates more jobs than it destroys. I imagine he would also say a CEO's first responsibility is to shareholders, and let the chips fall where they may.

It's the same old story of how to slice pie. Atlas may shrug, but I believe once you reach a certain level of prosperity you owe the society that enabled it a larger debt of gratitude, even when it's not compelled of you. More billionaires are buying into that notion, and we have to assume that these smart cookies have also considered the philosophical and capitalistic implications of their gifts. In additional to his creative genius and generous philanthropy to AIDS, one of Jobs' legacies will be strong-arming content providers into submission at their moments of maximum weakness. History will decide whether he wound up being their salvation or hammering one more nail in the coffin.

Apple, for the Love, Take it Down a Notch

2011-08-20T10:36:00.000-07:00

As one of our clients, HP, quickly dissolved their Touchpad tablet this week, and suggested, as the world's largest PC maker, that they might spin that unit off because it's just not that profitable anymore, tempers flared in my office among Apple Lovers and Apple Haters as to whether Jobs and company had officially stormed Normandy.

People aren't crazy. When your company has irked millions of consumers, wildly successful or not, you've done something questionable.

To my mind, the hate -- that's strong, let's call it bemused annoyance -- is completely self-induced by Apple, and justified. The central reason is that Apple's chosen marketing tone is essentially elitism. Not elitism in the sense that they're saying their products are the best, which is self-evident, but elitism in the sense that the implication is if you use them you are somehow living a more fully-realized life than those who don't.

The Mac guy vs. the PC dork campaign was elitism, even if it was (briefly) clever. 90% of the country uses PCs. Yet apparently, he who uses one is such an un-cool, badly-dressed, bespectacled idiot that he can't possibly function on the same level as a duderino who's wispy-haired, just crunchy enough, just savvy enough, and just cute enough. Jobs and company thinks that makes Apple cool. It's actually not a very cool thing to say. Sinatra didn't run around talking about how cool he was. Neither does George Clooney. Even the Biebs knows better than to pull that crap.

The latest tagline, "If you don't have an iPhone, well, you don't have an iPhone" is like saying if you aren't married to someone hot, you struck out. Or if you don't make six figures, everyone knows you're a failure. Well, that's not true. It's superficial and pompous. Somehow the voice even manages to pile on condescention, which is the true genius. (The kind one might find at their Bar)

The latest iPad 2 ad says "Everything becomes more delightful...even magical." I doubt it. Last year's iPhone tagline was "This Changes Everything. Again." As best I could tell, it added a front-facing camera and copy/paste function.

The world has organized around technology, and Apple has incrementally improved upon the usability and form factors of it, and that's a good thing. Bandwagoning your way to profits through ginned-up exclusivity may be good business, and it certainly keeps the store packed. But they're not curing cancer. Nor are they serving the masses at these inflated price points. Nor do they open their innovations to others in the space, which is the right thing for Apple, but isn't helping propagate these innovations into society at large to eradicate any of the issues Apple has been so good at solving (e.g. security, productivity), which still cost the economy tens of billions of dollars a year and could certainly be put to better use.

The vast majority of Apple's value has been to help people consume entertainment nuggets a little bit faster, a little bit easier, and in slightly higher fidelity than they otherwise would without Apple. People consider that narrow improvement at society's margin, then get bombarded with Apple advertising umpteen times a day telling us how cool they are and we're not, and think maybe they could take it down a notch. To get my love, that would be a good start.

Credit Where Credit Is Due: the Story of Sam

2011-08-10T18:20:00.000-07:00

In town, there’s a gentleman named Sam. In the 50’s up through the 90’s, Sam was absolutely killing it. He built factories, brought Walmart to town, had a fleet of nice automobiles, big security detail, etc. If anybody didn’t like it, they kept it to themselves. He was wildly profitable. He had a mess of kids. In and around town, there was no question who was running things. It was Sam.

In those days, Sam could give a damn what people thought. Frankly, it didn’t matter if you liked him or not; you did business with him or you did something else. Sam was always borrowing huge sums of money to expand his empire. Banks tripped over themselves to extend whatever credit he wanted, on the cheap, because number one he was good for it and number two that’s just what you did. Town practically ran on the currency of Sam. Loaning to him was not considered a risk; and even if it was, it was a risk worth taking.

Fast forward to the 00’s and things had gone horribly awry for Sam. He’d loaned the village idiots money and they couldn’t pay him back, his properties went south, and his businesses belly up. Town, in general, had malaise. Sam was in debt up to his eyeballs. Truth be told, Sam’s older brother George and his three boys had run the business into the ground. George, J-Bo, Mitch and Little Eric tried to make a dollar out of fifteen cents hoping it would trickle down to town and forgot how to balance the checkbook. For a decade, they gave away the store, and now wanted Sam to come back and fix it. Sam opened up a can of whoop ass on them, and set about to do what he could. “What a mess, what a mess, what a mess. Good Lord, what a mess.” If you saw Sam, you heard him say it.

Given the predicament, Sam had no choice but to continue borrowing. But talk of the town had become Sam’s credit. People wouldn’t come out and say Sam won't pay you back, but nobody could tell you when, and nobody could tell you how. Even though Sam's empire was in trouble, given his reputation, everybody was fairly sure he would get it going again. But he did owe a lot. Though his younger brother Timmy swore up and down Sam was good for it.

The only other person in the family anybody would even consider running the company was cousin Smitty, who talked a great game, but who nobody had seen in weeks.

Downgrade: An Unholy Marriage

To complicate matters, Sam had gotten married to an awful thing named Michelle. She wasn’t bad to look at, but was a certified idiot. Her whole family was idiots. Everyone knew this, but still, George’s boys took a shine to her, especially Little Eric; he said she "had moxie." To boot, she was running for mayor, and polling out of her mind to anyone's guess why. She was a force. The marshmallows to Sam’s yams. The beater to his bible.

At long last, the big day arrived for Sam’s trip to the bank. The bills are due tomorrow. Everybody is depending on Sam—his parents, his kids, the security detail, his businesses, town itself, and surrounding towns too. In the lead up, J-Bo, Mitch and Little Eric had gotten the band back together and begun running their mouths, as they are wont to do. They started in on how Sam was a deadbeat, how it ought to be them running the company, how it was Sam who'd run the company in the ground, how he ought to pay employees less or fire them, how they could use the minute clinic instead of healthcare, and how the bank ought not give him the loan until he got his affairs in order.

Most people remembered these three as the ones who started the mess in the first place and paid them no mind. But some were new to town, or weren’t plugged into town, and thought they had a point. Still, when it came down to brass tacks, they needed the money just as much as Sam did.

Now, the credit manager had told Sam and Michelle they were going to have to put money down. These were not the good ole days, and even though the bank was willing to float the note, it was necessary for everybody to give a little. So everybody nods, says yes that’s reasonable, umm hmm, we’ll do that.

Sam and Michelle arrive at the bank and sit down with the manager. Just as negotiations get underway, Michelle goes berserk. She starts screaming that maybe they won’t pay back nothing they owe. Sam, astonished, tells Michelle to shut her trap before she ruins the whole shooting match. No, she says, I ain’t shutting up, and I don’t think they’ll do jack to us. Sam, usually the cool customer, lights into her. She don’t care, she’s playing Texas Rules marriage.

Who does care is the manager. In his day, he's seen arguments among couples he overlooked; has created payment plans out of thin air; has performed jumbo loans against phantom assets; has filled in the blanks on forms with fiction; has loaned to dead people; has made up occupations for those who'd never had one; has conflated the value of everything from Sam’s mansion to the moonshine sheds on the edge of town. But this was different. It had become a spectacle, on full display, for all of town to see.

Michelle proceeds to turn down the manager’s request for a full down payment not once but twice. She and Sam finally agree to put half down. She storms out. Amid the fuss, J-Bo, Mitch and Little Eric had shown up outside to jawbone the deal and, of course, blame it all on Sam.

After what he'd witnessed, the credit manager simply could not find it in himself to give Sam the gold-plated seal of approval he once enjoyed. There were a lot of things to weigh, but the kicker had been Sam’s wife telling him, to his face, she “might not pay his sorry ass back.” She also mentioned come this time next year she might do it again. So he dropped Sam one level to AA+: likely to get paid back, but perhaps some trouble down the road.

~~~

If there are five people working at S&P who can correctly articulate what constitutes the difference between AAA and AA+ credit ratings upon sovereign debt, without reading directly from a thick guide and/or loading every sentence with caveats, I’d be shocked.

People are beginning to forget about the debt ceiling debate because the stock market is melting down. Or they want to blame S&P for what they deem to be an undeserved downgrade; this is the government’s ham-handed response, attributing it to a math error. Or they want to suggest S&P isn’t credible due to their failings during the housing bubble. Ergo, they must be wrong again.

Agreed, taking the ratings agencies seriously is difficult, if for no other reason than they were recently forced to admit they didn’t know what they were doing. The Dodd-Frank law fixed its lasers on the credit agencies post-haste, for among other failings having rated Lehman Brothers AAA the day before it collapsed. When ratings fail, Dodd-Frank contended, the agencies should be required to notify the public of “significant errors” in their methodology. To which Devin Sharma, president of S&P, responded this morning:

“Because credit ratings reflect the subjective opinions of a committee of ratings analysts and incorporate quantitative and qualitative factors, we believe it would be difficult, if not impossible, for the commission to establish a principled definition for what might have constituted a ‘significant error.’”

Translation: we don’t want to be held accountable, at all. Some say S&P and the other ratings houses, Moody’s and Fitch, are in cahoots to put pressure on the federal government, flexing their muscle to show what kind of havoc they can wreak so the government will back off Dodd-Frank. Maybe. But there’s also several simpler answers.

The Politics of Downgrade

All along, S&P clearly said they were going to downgrade anything less than $4 trillion in deficit reduction. That is the same amount that all three serious bi-partisan deficit commissions—Simpson/Bowles, Domenici/Rivlin, and the Gang of Six—concluded was necessary to stave off big problems 10 years from now. When S&P instituted a negative watch on US debt in April, they clearly said it again. They repeated it again in July. Everybody from Fox News to the Huffington Post carried it on the front page:

You’re S&P. You emerge from the financial crisis seriously bruised. You get lumped in with the other two agencies, undifferentiated and disrespected. Your ratings credibility is shot, home and abroad. On the next big thing—deficit reduction—you decide to get serious and reclaim the high ground. You issue a clear ultimatum, with a timeline and a dollar figure. After the $2 trillion deal is signed as the clock strikes midnight, the other two agencies stand pat. You follow through on your promise.

What administration strategist ever concluded they would do otherwise?

The Merits of Downgrade

Politics aside, was it a reasonable conclusion, that is the question. Through a historical lens, for sixty years, America has enjoyed enormous advantages, which now appear to have run their course.

1. In the 40’s and 50’s, manufacturing productivity exploded. Following WW2, the world’s other major powers spent a decade digging out of rubble. Unscathed, America set about becoming the dominant manufacturing force. Millions of soldiers returned to the workforce, went to college on the GI Bill, and a dominant force called the American middle class was born. We were 40% of the world economy. Everything went gangbusters.

2. In the 60’s, women joined the workforce. Half of the population was now free to contribute to our productive capacity, our earning potential, and our consumption potential. Average household income rose dramatically. Everything financial rose with it.

3. Before technology connected global economies, America didn’t have to compete in the same ways with emerging markets for products or labor. Companies were less equipped to locate production centers offshore. Jobs stayed home.

4. In the 80’s, we began having fewer children. As the fertility rate dropped from 2.5 to 2, smaller families meant more productive households through less time lost to maternity and child rearing, less money spent on non-investments like sustenance and day-care, more time to go out and spend, travel, dine, etc.

5. In the 90's, the digital revolution and advent of the internet enhanced productivity like nothing since the Industrial Revolution. We worked faster and more efficiently. An explosion of companies and products followed suit.

6. The credit boom of the 90’s and 00’s put more money in everyone’s pocket.

7. The twin stock market booms of the 90’s and 00’s created a “wealth effect.” Everyone felt richer, so they spent more as incomes and pensions rose.

8. The real estate boom of the 00’s doubled residential and commercial values. For many Americans, home equity became another source of income, credit, or both.

9. From the 80’s until the 00’s, the savings rate declined from 10% to 1%. That meant an extra 9% of income for spending every single year.

10. The two wars of 00’s and 10’s provided enormous stimulus. America is the dominant military-industrial complex in the world. The Pentagon budget doubled to $700 billion. We spent $200 billion a year on war alone.

11. In all, the $14 trillion in debt we accrued from the 80’s through the 10’s went directly into our economy.

None of these are repeatable. There is no new internet on the cusp. Government can't borrow another $14 trillion. Savings and fertility rates can’t go any lower. There are only two genders. China isn’t going to get less competitive, or the world less connected. There isn’t going to be a world war to rekindle manufacturing or bury our competitors in rubble. We can’t re-leverage until we de-leverage.

S&P saw these things, issued a sound ultimatum, and followed through. The alternative is that we are a vibrant economy, with stable capital markets, a well-functioning political system, sensible parties, with a smart path laid down to pay off our debts and reduce unemployment to healthy levels. I don’t know anyone serious who believes any of these things.

~~~

The good thing, and believe it or not there is one, is that the deficit problem is entirely solveable with a modicum of political compromise and a calculator.

All three commissions solved it with $4 trillion plans that mixed increasing taxes and decreasing spending. Tom Coburn solved it with a $9 trillion plan. If we reduced our per person healthcare spending to Switzerland's, the second most expensive, that would save $9 trillion. If Congress did absolutely nothing, the expiration of the Bush tax cuts would raise $4.5 trillion. Ending the wars would save another $1 trillion. Reverting to peacetime Defense spending would save another $1 trillion. Raising the retirement age to 67 would save another $1 trillion. If everybody could refinance their homes to today's 4% 30-year rate, there's another $1 trillion. Eliminating subsidies, loopholes and offshore tax havens would save another $1 trillion.

The Tea Party champions small government, the free market, and jobs. Thus, naturally, they pursue a strategy that results in small potatoes deficit reduction, a continuation of corporate welfare, and a market-rattling downgrade. It's not that they're unlikeable, it's that they don't know what they're doing.

Twenty years from now, if Sam has gotten his groove back, it will be at least in part because The Tea Party shook him out of his funk and focused his energy on renewal. But make no mistake, Sam and Michelle get divorced, Michelle does not become mayor, George's boys do not become business savvy, and town itself will have realized that they are responsible for renewing their own future.

Country to GOP: Right on Substance, Wrong on Politics

2011-07-25T06:56:00.000-07:00

With one week to go until the debt ceiling deadline Aug. 2, still no deal. The latest polls show the majority of Americans see the obvious solution: big spending cuts and small tax increases. Only 20% believe we should reduce the deficit solely with spending cuts.

Even the majority of Republicans want the GOP to compromise.

The country overwhelmingly disapproves of Republicans' handling of the negotiations.

At this point, I believe most Americans understand what the proposed spending cuts would actually entail and who would be most affected -- the elderly, poor and government employees. I'm not so sure they realize the administration is not proposing any tax increases on anyone other than the top 2%. And yet they still agree that some tax increases are necessary.

The administration is proposing three things to drive tax revenues: 1) Stop giving subsidies and tax breaks to corporations; these have accured over 30 years and ultimately are a distortion of the free market 2) Raise income taxes for those making $250k+ from 36% to 39%; the Clinton rates 3) Require billionaires who make most of their income in capital gains and carried interest to state their income in the United States and pay the appropriate tax rate. For the life of me, I cannot understand why these are controversial to the point of national emergency.

What's most sad about this self-inflicted politi-tragedy is that the GOP is basically right, but missing its moment. Spending is absolutely out of control. The federal government is now 25% of the total economy, and revenues are 15%. The historical average is 20% spending, 18% revenues. Partly to blame is the decrease in revenues from the recession and the increase in automatic stabilizers like unemployment insurance, food stamps and Medicare rolls. But still, we've been creeping up for awhile and need a re-set -- the budget has doubled since Bush took office, and is up one third since Obama.

The GOP is also right that raising taxes may have some negative effects. There's no reason to think a tax increase would increase growth in a vacuum, thus it may decrease growth. But most economists say small tax increases of the kind being proposed have small effects on the economy, if any. The notion that a small business owner whose business is expanding will slash payrolls or curtail hiring because his taxes increase 3% is ludicrous. Furthermore, if taxes are at an all-time low, and we don't raise taxes when we fight wars, or when the deficit blows up, and when we have a massive debt to pay down, when would we ever?

The goal is for spending and revenues to meet at 20%. With the past five decades, we now have a big enough sample set to know that slightly higher tax rates from where they are today produces more balance in the budget, more jobs, rising incomes and less inequality. All of these have moved far beyond our historical norms and the levels that we believe are good for America's vitality. How the GOP can dispute that after the most recent 90's boom and 00's bust, while at the same time supporting corporate welfare, blend it togther and call it a "conservative" fiscal framework, is junky logic. How the voters allow it is nut the administration can't crack.

We are a right of center country, I have come to accept that. These polls show, unequivocally, that the preferred policy is right of center. The economics community and bipartisan commissions have concluded that the solution is right of center. The mid-terms produced a right of center momentum. They've all pulled a Democratic president right of center with his deficit reduction preferences.

If only there was a right of center GOP, this could've been their moment. Real conservatives know that, and are beginning to admit it. Politics is the art of the possible, not the philosophy of ideals. There will be no total victory.

The Three Forces and One Big Deal

2011-07-20T13:46:00.000-07:00

At Princeton, there is a guy named Doug Massey who runs The Mexican Migration Project, an endeavor to quantify the ongoing influx of Mexican immigrants into the United States. After tracking the explosion over two decades, Doug came to the following conclusion earlier this month:

“Interest in heading to the United States for the first time among Mexicans has fallen to its lowest level since at least the 1950’s. No one wants to hear it, but the flow has already stopped. For the first time in 60 years, the net traffic from Mexico has gone to zero, and is probably a little bit negative.”

A lot of different factors blended together at once to reverse this phenomenon, including:

• Lower Mexican fertility rates, so fewer young families to move
• More US visas issued, so more legal passage
• An improving Mexican economy, so less economic reason
• A weakening American economy, so fewer jobs available
• Harsher immigration laws, so a less hospitable life
• More deportations, the most of any administration ever
• Stringent employer checks, with harsher fines and more jail time

Put it all in a blender and this is the collapse: (click to enlarge)

If we walked outside and asked 100 people whether net positive or negative Mexicans would enter the US this year, how many would say negative? It’s a stunning turn of events.

However, what’s done is done, and we have 14 million illegal immigrants here already. If we were to deport all the ones of Mexican descent, the buses would extend from San Diego to Juneau, that's assuming they all came out and loaded up voluntarily.

Hispanics, due in part to illegal immigration, but more so to high fertility rates, now comprise 17% of our population. That’s up from 12% in 2000.

The margin of victory in the popular vote in the past six presidential elections was, on average, 5%. With zero sum calculations, you don’t have to pick up the full 5% -- i.e. the loser would only need a 3% swing to become the winner.

Thus, at a time when elections are decided by razor thin margins, we also have a seismic %-shift in demographic composition. The Hispanic population will only become more and more dense as their fertility rate continues to outpace the rest of America's. The cards have been dealt.

This is the first of the three trends I believe will have the biggest impact on American politics in the decade ahead. All happen to be undergoing epic shifts right now:

1. Hispanics
2. TV
3. The Tea Party

The Murdoch Effect: The Plot Thickens

Why would only one third of Republicans believe Obama was born in America? Why would a reality TV host suddenly begin polling at the top of the Republican ticket? Why would the middle class consistently support candidates whose economic policies stagnate the middle class? Why do a majority of Republicans still think Saddam Hussein was involved with 9/11? Why will politicians spend 80% of their campaign money in the 2012 primary on 30-second advertisements? These questions, and many like them, I believe, are attributable to our TV addiction.

On average, Americans watch a little over 5 hours of TV each day.

At the household level, we far exceed the rest of the world's viewership.

A large portion of Republican viewing is allocated to the 27 channels in the Fox empire. About half of Republicans watch Fox News to get their daily newsfeed, more than ABC, NBC, CBS and CNN combined. But the Fox empire is now under assault, as the News Corp scandal has caught like a wildfire in Britain.

The question is whether it’ll jump the pond. The FBI has opened an investigation into whether News Corp hacked phones of 9/11 victims, or conducted other illegal business practices. I don’t think anyone would divine that Rupert Murdoch and Fox are going out of business, but I equally doubt we’d expect Fox’s business practices here to be any less corrosive, should they come to light. The FCC requires media owners be “of good moral character.” While the FCC in theory operates independent of the administration’s ambit, the administration obviously hates Murdoch and Fox, and these two things may inevitably link up.

The arch-conservative properties of Fox News and the Wall Street Journal could well be in for an upheaval in the 24 months ahead. They may have to prove to the American people they aren’t as biased, contrived and gossipy as people of my ilk believe them to be. There could be disruption in how that slice gets their news, and how credible they view these sources to be; they may not want to identify themselves with criminals. Perhaps that’s wishful thinking.

Regardless, if our five hours a day shifts, the zeitgeist shifts with it. Once you subtract sleeping, working, commuting, grooming, and eating, TV comprises about three quarters of our disposible time. Its impact on our brains and culture is as American as apple pie.

The Virtues of the Tea Party, Part 2

My post a year ago laid out how the Tea Party need not be virtuous to bring good things to America. Due to the uniqueness of a third party in politics, as well as the Tea Party's pure orientation towards important issues, they brought sunlight to problems desperately needing it:

• Our national debt
• Insolvent entitlement programs
• Government’s creep into sexuality and social policy
• Our truly insane tax structure
• The military’s adventurism, over-expansionism and nation building

The Tea Party also stood to inculcate some new, advantageous dynamics for Democrats, even if they didn't mean to:

• GOP in-fighting among young, real conservatives versus old, self-serving politicos
• Conservatives' donations fracturing between the establishment and the TP
• Drawing contrast between the crazy and stupid with the reasonable and intelligent
• Highlighting the necessity of compromise and bipartisanship versus obstinacy and purity

These things are happening. It’s important to remember the general public doesn’t care about the Tea Party. When last polled in April, two thirds of Americans said they did not support the Tea Party. Only 5% of us identify as Tea Partiers.

But that doesn’t mean they aren’t having a huge impact, especially in light of what’s happened over the past year. Even if the Tea Party is only 15% of House membership, GOP fragmentation is driving the legislative agenda. What cannot pass without majority gets stuck, and as the laws go, so goes the land. This is just some of what we’ve seen:

• Obama raised $86 mm last quarter, Romney $18 mm; Pawlenty $4 mm
• Pentagon budget reduced by $400 billion over the next decade
• Withdrawal from Iraq
• Withdraw from Afghanistan beginning
• Tax reform officially on the table
• Gays no longer banned from the military
• Gay marriage approved in NY
• Trillions in deficit reduction in return for debt ceiling raise

It is no coincidence these things square, at least loosely, with the influence of the Tea Party.

Yet, crazy will be crazy. That will have an effect, namely on the minds of the middle—that 30% of the country who vow independence, but eventually vote. Usually, the studies tell us, the party and candidate instinctively found to be the most credible, and safest, gets the nod. Tea Party idiocy has been rampant, seeking and sometimes actually accomplishing many policies out-of-sync with public sentiment:

• A transition of Medicare and Medicaid into a private insurance voucher program
• Refusal to end tax breaks for big oil, big ag, and hedge fund managers
• Limiting abortion every which way, including and end to Planned Parenthood subsidies
• Eliminating same-day voting, requiring photo ID's
• Racial profiling via new immigration laws
• Forcing the Obama birth certificate drama to its closure
• Claiming that default on the national debt is no big deal

Each bullet is a veiled attack on a different, sizeable constituency. The elderly, poor, tax payers, women, blacks, Hispanics, and anyone who likes the President. To say the Tea Party is systematically alienating America is an understatement, and their polling reflects that.

Accordingly, the Tea Party leaders have been on a tear. Trump and Glenn Beck both quit. Bachmann surged into second, yet is a gaffe-a-day cringe. Her husband runs an anti-gay counseling center, her family takes farm subsidies, and she’s a former tax attorney. Say what you will about photogenicity, but collecting subsidies and taxes surely isn’t what the Tea Party had in mind. Rick Perry is holding a national convention at the Astrodome to pray for budget solutions. He prayed for rain earlier this summer, to no avail. Palin followed up the Tucson cross-hairs with a cross-country tour to push the new book, new show, and new movie. The name of the movie is Undefeated; this from someone who won one election, lost one, then quit the first one halfway through. This week, Tea Party candidates signed a marriage pledge to honor their spouses. It included limits on Sharia law and references how good things were for children under slavery, what with the two-parent homes and all.

Whatever they are, they are not credible, and they are not safe. Tea Party politics may determine the Republican primary by fragmenting the vote, but no Tea Party candidate is viable in the main. Provided that Michelle Bachmann, Sarah Palin or Rick Perry eventually get in the ring with Obama in a nationally-televised debate, it will set Republican politics back considerably.

The Art of Deal Making, by BO

Where I land is exactly where I landed a year ago: the Tea Party is virtuous for America. I believe Obama has bought lock-stock into the notion that the nation must drastically and rapidly reduce its debt, and I doubt that would've happened without the influence of the Tea Party. The deal they are pushing is the biggest deal possible, $3-4 trillion in deficit reduction over a decade. He has been sharpening this argument for two years, increasingly by stating the only way to do it is by reforming entitlements—rails even the bravest of Democrats dare touch. Just as Willie Horton used to confess to robbing banks because that’s where the money is, reforming Medicaid and Social Security are the keys to our fiscal future.

Thus, with the Tea Party demanding deficit reduction as a precondition for passing the debt ceiling, Obama received a golden gift. Republicans would never actually allow the nation to default; the market would crash, and they would face isolation for a decade. But Obama never called their bluff. If it ever came down to the wire, Obama could unilaterally raise the ceiling by executive power. But he ruled this option out (even though President Clinton advised him to do it). Obama could have included a debt ceiling increase in late 2010 negotiations that extended the Bush tax cuts. But nary a deal was floated.

The fact that he didn't pursue any of these strategies tells me Obama wanted to use the debt ceiling to force budget reform just as much as Republicans did. Without the threat of market apocalypse, Democrats would never allow entitlement reform. By taking marginal rates off the table, Republicans will be forced to accept cleaning up the tax code -- the myriad loopholes, subsidies and tax breaks that have accrued over 30 years. That's the heavy lifting of tax reform; rates can be raised (later) in one fell swoop.

Furthermore, the fact that Obama didn't posture in favor of his own Simpson-Bowles commision, nor for the Gang of Six, led most pundits to criticize him for lack of follow-through. But Obama knows this was the only way to get the deal done. If he’d come out in favor of those plans ahead of the curve, opposition would instantly cohere, and that would be the end of that. By hand-wringing and waiting until the 11th hour for the Gang to submit the plan, in a bi-partisan fashion, Obama is seemingly poised to pull a rabbit out of a hat, again.

Still, as many victories as Obama seals, and as closely as the public moves towards his policy preferences, his approval ratings continue to fall. Therein lies the rub.

Gay Marriage: Public Opinion, the Science and Finding Closure

2011-07-01T14:29:00.000-07:00

“The Bible contains six admonishments to homosexuals and 362 admonishments to heterosexuals. That doesn't mean that God doesn't love heterosexuals. It's just that they need more supervision.” Lynn Lavner

There are issues in life that you can’t seem to resolve your stance upon no matter how many times they arise in life. The only reliable path to closure I’ve found is to take the time to gather the facts, consult your conscience, and make a decision. Then, it becomes a part of who you are. It must be authentic.

For me, gay marriage has always been one of those issues. The issue returned to the fore this week as New York passed the Marriage Equality Act. Gay couples are free to marry as they choose, with a Supreme Court decision likely in the offing. While NY isn’t the first state to do so, New York City is the nation’s cultural and population center, and thus, a symbol.

My father is a Presbyterian minister, and this came on the heels of the Presbyterian Church USA allowing gay men and women to be ordained. Though the amendment serves only to allow, not require, the expectation is the church may fracture along ideological fault lines as the ruling takes practical shape.

It’s time to get to work and take a stand.

4% is the number

In 1950, the nation’s foremost sex researcher, Alfred Kinsey, published the second volume of his life’s work: Sexual Behavior. The books, one on men and one on women, were based upon six thousand interviews exploring every aspect of human sexuality.

One of the more controversial of Kinsey’s data points was the prevalence of homosexuality. The rate usually cited based upon Kinsey’s work was 10%, but Kinsey himself strongly disputed the statistic as too generalized. Instead, he developed a 7-point scale, ranging from exclusively heterosexual to exclusively homosexual, with shades of gray. Kinsey believed strongly that sexual orientation wasn’t binary and is prone to change, so his scale accommodated a range of dalliances.

Today, reaching consensus on the rate hasn't gotten easier. Demographer Gary Gates of UCLA did an exhaustive evaluation of large-scale studies that include sexual orientation and made the following conclusions:

• On average, 4% of adults in the United States identify themselves as lesbian, gay, or bisexual
• 8% report having engaged in a same-sex behavior at any time in their life
• 11% acknowledge at least some same-sex attraction

These, and Kinsey’s findings, pair nicely. The studies Gates formed his conclusion upon had some variance but all were in tight range between 2-5%: (click to enlarge)

According to exit polling from the 2008 Presidential elections, 4% of the electorate self-identified as gay, lesbian, or bisexual. This was the exact same percentage as 2004. In fact, everything I can find suggests it’s been around 4% since Kinsey. And every reliable international study also pins the range between 2-6%.

Any time we as a nation make important decisions it’s helpful to have consensus on scale. Unfortunately, there’s is a yawning gap between the reality of homosexuality and public perception. On average, Americans believe a quarter of the country is gay:

Notice only 4% actually got it right, presumably the 4% who know what they're talking about. What’s intriguing about this (wildly off-base) conception is that it's consistent across age, political party and region. Women’s radars are especially sensitive, guessing 30%, while men guessed 20%. The only group who showed more accuracy were richer and more educated, but still wrong by a multiple of four.

A polarized citizenry, now evenly divided

The other key criteria is how we believe homosexuality comes to be. We have evenly split camps between those who believe homosexuality is a born trait versus those who attribute it to upbringing and environment. Virtually everyone used to believe upbringing/environment, but in the mid-1990’s it evened out and stayed that way:

Everything else having to do with public opinion towards homosexuality has been steadily changing. For the first time ever, a slight majority of Americans support same-sex marriage. A slight majority think homosexuality is morally acceptable. Two-thirds think it should be legal. All of these rates are rising.

Here is where the key criteria correlate: if you're among the half who believe homosexuality is innate, you’re more likely to think it should be legal and that it’s morally acceptable:

If you’re a Democrat you’re more likely to believe homosexuality is innate, and thus, should be legal and is morally acceptable:

At the heart of these changing attitudes is youth. Three fourths of 18-34 year olds support same-sex marriage versus a third of their elders. Support has accelerated strongly over the past year and is consistent across both younger men and women:

Homosexuality was already out of the closet during Generation Y’s formative years so nothing changed for them. As my friend Mike Murphy says, young voters become all voters.

All signs point to nature

Thus, the key question is who is right on origin. Here are the key proclamations from the landmark studies, sharing a similar thesis:

The American Psychological Association, American Psychiatric Association, and National Association of Social Workers stated in 2006:

“Currently, there is no scientific consensus about the factors that cause an individual to become heterosexual, homosexual, or bisexual—including biological, psychological, or social effects of the parents’ sexual orientation. However, the available evidence indicates that the vast majority of lesbian and gay adults were raised by heterosexual parents and the vast majority of children raised by lesbian and gay parents eventually grow up to be heterosexual.”

The Royal College of Psychiatrists stated in 2007:

“Despite almost a century of psychoanalytic and psychological speculation, there is no substantive evidence to support the suggestion that the nature of parenting or early childhood experiences play any role in the formation of a person’s fundamental heterosexual or homosexual orientation. It would appear that sexual orientation is biological in nature, determined by a complex interplay of genetic factors and the early uterine environment. Sexual orientation is therefore not a choice. ”

The American Academy of Pediatrics stated in 2004:

“Sexual orientation probably is not determined by any one factor but by a combination of genetic, hormonal, and environmental influences. In recent decades, biologically based theories have been favored by experts. Although there continues to be controversy and uncertainty as to the genesis of the variety of human sexual orientations, there is no scientific evidence that abnormal parenting, sexual abuse, or other adverse life events influence sexual orientation. Current knowledge suggests that sexual orientation is usually established during early childhood.”

The big neuroscience studies all come to a variation of:

"The fetal brain develops in the male direction through a direct action of testosterone on the developing nerve cells, or in the female direction through the absence of this hormone surge. In this way, our gender identity—the conviction of belonging to the male or female gender—and sexual orientation are programmed into our brain structures when we are still in the womb. There is no indication that social environment after birth has an effect on gender identity or sexual orientation."

Studies of identical twins conclude along similar lines. Where one sibling is homosexual, the likelihood of a homosexual sibling is slightly greater than the general population. But if homosexuality was entirely genetic, the correlation would be ~1:1, and it isn’t near that. On the other hand, if it was upbringing, and we assume parents raise twins very similarly, again we would expect ~1:1. But again, it's nowhere near.

Basically, the studies are concluding there may be some genetic predisposed to being gay, but something more determinant happens to our chemistry along the way, and that something is probably a change in the balance of testosterone in the brain while in the womb. This also implies that homosexuals' bodies, voices, and mannerisms share similarities not because they’re conforming to an archetype but because of chemistry.

What are the reasonable alternatives: If upbringing, why aren’t homosexuals’ children gay at a higher rate? If environment, why has the rate not changed from 4% as culture evolved? Or why would the rate be the same all around the world? All signs point to nature.

Nature itself confirms this. There are hundreds of species that exhibit homosexual behavior. Animals don't have the human benefit of ignoring genetic impulses, so why would they do it if not hard-wired to?

Dispensing with red herrings and finding closure

Contrary to the current debate, I do think the Bible is clear on the matter. Even so, the Bible outlaws lot of things. Working on the Sabbath is a capital offense, are we enforcing that now? If we’re picking and choosing, how are we prioritizing sin? I think it's clear us Christians are interpreting the rules as guidelines.

I also had a favorite red herring: if everyone was homosexual civilization would go extinct, thus if it’s not okay for all it’s immoral for any. But this logic winds up untenable because it’s unrealistic -- if everyone decided to quit their job that would be a big problem, but it’s not immoral for someone to quit their job; if everyone decided to move abroad we’d be in big trouble, but it’s not immoral to emigrate. We know the rate of homosexuality is a solid 4% and global fertility is hanging in there. At some point, morality must meet reality.

If you argue fertility, you must argue it’s morally unacceptable for heterosexual couples to not have kids. Or if for some reason they can’t, it's morally imperative to pursue fertility by any means available. But having children is not a moral imperative, so homosexuals' inability to procreate can’t be the moral baseline.

That settled, the topic of the day is gay marriage. For the umpteen arguments I read, two mega-themes are most relevant:

1. Church and state is separate, so religious tennets cannot limit, dictate or predicate marriage by the state in any way.
2. If marriage is to be sponsored by a secular state, then it must provide some benefit to the state or to society.

A position paper from M.I.T in 2004 lays out the thesis nicely:

“When a state recognizes a marriage, it bestows upon the couple certain benefits which are costly to both the state and other citizens. For example: collecting a deceased spouse's social security, claiming an extra tax exemption for a spouse, and having the right to be covered under a spouse's health insurance policy are all costly benefits associated with marriage. In a sense, a married couple receives a subsidy. Why? Because a marriage between two unrelated heterosexuals is likely to result in a family with children. Propagation of society is a compelling state interest. For this reason, states have, in varying degrees, restricted from marriage couples unlikely to produce children. States regulate marriage in many ways besides denying homosexuals the right to marry. Roughly half of all states prohibit first cousins from marrying, and all prohibit marriage of closer blood relatives, even if the individuals being married are sterile.”

I have learned that when there are many arguments on both sides of an issue, and one side’s strongest argument is fairly weak, it’s the wrong side. The M.I.T. argument ignores the societal benefits of:

1. Family formation and monogamy
2. Same-sex couples adopting orphans at a high rate
3. Homoxexual citizens’ happiness
4. Our societal tradition of equality

The secular argument against is basically money. When the secular argument for is equality, it’s hard not to side with treating everyone equally. Especially considering it applies to such a small proportion of the citizenry, and especially when their happiness has little or no bearing upon the rest of us. And certainly in a country where every major internal battle has been a self-defeating attempt to treat one class of people differently than others.

I used to get hung up on the morality of homosexuality, but now I’ve come to believe that asking a person to love contrary to the way they are born is immoral itself. How can you ask someone else to do that for your own purposes?

To discriminate requires a sound justification, and I never found one. The burden of proof should always lie with the discriminators, and history tells us they never meet it. If you love someone, marry them. And that's my position for life.

"Everybody's journey is individual. If you fall in love with a boy, you fall in love with a boy. The fact that many Americans consider it a disease says more about them than it does about homosexuality." James A. Baldwin

Anne, Age One

2011-06-11T18:26:00.000-07:00

“Making the decision to have a child is momentous. It is to decide forever to have your heart go walking outside your body.” Children’s author Elizabeth Stone

It’s been one year since our daughter Anne was born and I first wrote about our new life. It’s tempting to scribe the sappy and happy trappings of fatherhood, or to recount our indelible this and that’s now locked in my memory forever, but I won’t. This Saturday night, as I sit down to write, the year has concluded with our first weekend alone, just she and I.

We’ve filled three fun-filled days with every activity I can think to do. I’ve gotten her lathered up with SPF 100 each day for an hour at the pool; somehow she still gets tan on that perfect baby skin. We’ve got a raft that I sit her in and we cruise up and down the lanes a hundred times. It all culminates with a bathing suit-to-fresh diaper change on a poolside chair. We do a “Privacy please” routine in British accent that I fear may not translate to the page.

In three days, I’ve introduced myself to more people than in three years. I now know both lifeguards, as well as a nice smattering of moms and dads. Now I know why my wife knows everybody when we’re out and about. Something just comes over you to where you're compelled to press the flesh. Yep, she’s mine, and we’ll see each other here all summer, pleased to meet you.

I find myself concerned with things that I hadn’t contemplated before: is she having enough fun, are we connecting, am I showing her the right way to do this.

Our island is getting slow and we need a thing. We quickly find it: chase. Anne is beginning to walk, I call it The Frankenstein. So I half-hide behind any corner of a room and she immediately has the urge to come get me. We play chase any time the day’s cadence hits a lull. She squeals with delight each time she finds me as if it's the very first time.

The TV is on in the background, and I’m settled into the couch reading while Anne fake reads. She finds her favorite toy, the remote control. She purchases Biutiful from On Demand, an indie arthouse film with Spanish subtitles starring Javier Bardem. Last week, she purchased Black Swan from a friend’s On Demand at a birthday party. At least she has good taste in films, but these $4.99’s are coming out of her allowance, eventually.

Speaking of which, last week, my wife says to me, “Let’s watch a Jeopardy.” Anne picks up the remote, presses the DVR button, selects My Recordings, selects Jeopardy, and presses play. My wife and I look at each other and have one of those moments. The first time your child makes you cry with laughter has to be one of life's very best. What’s funny is I kept trying to decide how I would write it up to make the feat believable by mentioning that each of the selections was in the first position. That's probably unnecessary.

The long weekend began on Thursday, and that afternoon after I left work, our team had a meeting to finalize plans we’ve been making for a new initiative. This particular initiative is one where I think I’m right, they’re wrong, and I’ve been fighting to pull them over to my side. There was no way I could be there and here at the same time, so I skipped it. In the end, most of my ideas were reversed, and the plan was presented back to me as final. My first taste of a family-style tradeoff, and it went down bitter.

In the course of these events, as I’m sitting at the computer, I take my eye off Anne for a split second. Smack! Anne loves to climb our stairs and she’s taken her first tumble. She’s wailing, and I’m on top of her instantly, making sure all the big things are okay, then kissing fingers and toes.

I have the talk with myself. You hear two things your whole life: never take your eye off a baby, and keep things in perspective. I learn these lessons in the blink of an eye, fortunately without any consequences. Every parent must know this dull feeling in their gut.

Once things are settled down, Anne goes right back to the stairs. I feel the pang of a child’s innocence, her eyes wide shut. We go up carefully, the red mark on her back staring me in face.

I want to make amends and change scenery, so we do what we always do: load up the stroller and go for a walk. Storm clouds are beginning to gather, but she and I push on, smiling, daring it to rain on us. Here it comes and we zoom home, safe and sound, together.

After a year, we are still finding our way as a family, but it's a happy family. I've settled comfortably into fatherhood, if for no other reason than I love it so much. In the years leading up, you hear many times that your children will be the most wonderful part of your life, and that’s true. I did not anticipate how much I would love her. There are random moments when I see Anne and she gives her smile that I’m sure makes every father feel this way.

I'm ready for year two. As a friend of mine recently informed me, they get opinions.

The Central Conundrum

2011-06-03T13:48:00.000-07:00

This week, the House voted down the debt ceiling increase, Moody's threatened to downgrade America's credit rating, manufacturing numbers went into freefall, and the GOP marched up to the White House and asked Obama to stop "mischaracterizing" the Ryan plan to begin subsidizing Medicare recipients instead of fully covering them.

Also, NJ Governor Chris Christie proposed dropping the maximum income for a family of three qualifying for Medicaid down from $25,000 to $5,000. The Iowa Republicans promptly asked him to run for president. Finally, Mitt Romney formally announced his candidacy, which the Republican establishment rejected, again.

The common thread of course is healthcare costs. If our manufacturers didn't have to pay for their employees' healthcare, their products would cost less and their competitiveness would improve. If the cost of our healthcare and its toxic inflation weren't out of control, we wouldn't spend half our revenues on it, and we wouldn't need to raise the debt ceiling because we wouldn't be in debt. Moody's wouldn't need to threaten to downgrade us. If Republicans didn't try and cut healthcare benefits every time they won an election, Democrats could do something else with their platform rather than making sure old and poor people get healthcare, something I'm sure they'd love to do. And if Romney hadn't created RomneyCare, he'd be the nominee.

Congress will raise the debt ceiling, we'll have to do it every year. Moody's will do what it always does: send out a feeler, then get it completely wrong. Christie will backtrack, then hop a chopper for the price of what apparently he considers a poor person's annual income. The GOP will find a way not to nominate its most qualified candidate in a generation. And we'll be right back here again for the 2012 election.

These are the key numbers. We spend twice as much per person as the rest of the world on healthcare, partly because we're so unhealthy, but mostly because it costs so much more: (Click to enlarge)

Our costs are rising much faster than anyone else's, up up and away:

We spend a much higher proportion of our GDP, so you can't make the argument that we spend more just because we're rich:

Our government (Public Expenditures in blue) spends as much as a percentage of our economy as all the other countries, but the key is that they have universal healthcare. Even though our spend is the same, a fifth of our citizens have no healthcare. Then we pile on the insurance companies -- look at all that orange.

Yet, our outcomes are mediocre. The World Health Organization ranked us 37th out of 191 countries (a combination of cost and outcomes). France is #1, Italy #2.

~~~

The country has twisted itself into a pretzel trying to figure out the healthcare conundrum, all so that the government doesn’t provide universal coverage for all Americans. Most every other rich country does provide universal coverage, their healthcare systems cost half as much, and their outcomes are superior. In the end, the difference is that their systems aren't built upon incentivizing healthcare providers more to provide more, nor do they have the thick layer of insurance profit built in. The real conundrum is why America doesn't just do what has been proven to work.

Of our own volition, we’re choosing to bankrupt ourselves either because we want insurance companies to make lots of money that we see no benefit from, doctors and hospitals to get paid more that we see no benefit from, poor and old people not to get free healthcare that we are in no way affected by, or we want our employers to pay for healthcare instead of our government, which in turn directly eats up our compensation increases.

That says to me we've basically chosen to doom the economy out of spite. If that is not the dumbest, most ironic thing going on in the world today, I don’t know what is.

The Voice, the Movies and the Future of 3D

2011-05-26T15:00:00.000-07:00

True or false: Voiceovers for all movie previews are the same voice?

Even though movies have always been a favorite hobby of mine, for a very long time, I never noticed. It so happens that a gentleman named Don LaFontaine—a.k.a Thunder Throat, a.k.a. The Voice of God—did 5000 voiceovers during the 90’s and 00’s. There are about 500 movies released a year, which means if we assume that only about half of those are legitimate (~5 big releases per week, ~250 per year), LaFontaine would've done most every movie preview of any significance for the last twenty years. When you consider the range of movies that come out every weekend, that really is impressive. Especially since most people don’t even know it.

Yesterday, I heard that LaFontaine died a couple of years ago. Since I had not noticed any difference in the previews, and I see about a movie per week, that came as (another) surprise. It seems as though the movie moguls made the decision that attaching LaFontaine’s voice to a preview was so important to its perceived credibility, that the hunt had already begun to find his replacement.

Today, the vast majority of preview voiceovers are done by a guy named Hal Douglas, an 84-year-old former radio host turned voiceover artist. Douglas records them in his home studio, oftentimes in his pajamas.

The question is: what is the real differential between a movie with the LaFontaine/Douglas voice versus one without? Presumably, the film would somehow appear less authentic, and thus if it would make $100 million with the voice, it would make significantly less without. My hunch is that it must be more than ~5% or nobody would bother (this is the margin of error in the research world). So what then, $80 million? According to a profile on Douglas, it takes him anywhere between 15 minutes and two hours to perfect a voiceover. He gets paid $2000 per job. There's a yawning gap between $20 million and $2000.

Come to find out, there are 10-20 other LaFontaine-esque voices waiting in the wings, doing the occasional job. Which means the studio heads can threaten Douglas with losing his job to keep his fee “low.” The free market at work.

These days, to me, movies don’t necessarily seem to be getting any better, but trailers definitely are. I’ve seen some awful movies this year just because the trailer was so entertaining. The left part of my brain knew it was going to be awful, but the trailer isolates the right part. We’ve gotten so good at trailers that I swear sometimes I unconsciously motivate to the theater for the previews alone: 20 minutes of Hal Douglas, hitting one homerun after another. I recently flew out of the house in a tizzy to see Battle: Los Angeles, screaming to my wife "It's opening night, the place is going to be packed, I can tell by the preview!" There were five people there and the movie was terrible.

~~~

This past week, my team set up shop in a focus group facility in Beverly Hills listening to professional home theater installers discuss the merits of 3D televisions. These guys are installing $20,000 home theaters to the rich and famous. There is a format war (there always is) between competing 3D technologies -- active vs. passive. We watched scenes from Avatar 3D about two hundred times on various high-end TVs and bandied the future of 3D. Before that, I had never seen 3D. I knew there were lots of movies being released, but for some reason had never had the urge. I don't watch animation, which is probably the culprit.

Regardless, it seems I was the exception. 3D hit the ground running, almost single-handedly elevating the box office for the past two years. In a recession, movies are generally considered recession-proof. But this was no ordinary recession, and this time the number of movie tickets stagnated, as did the number of movies themselves. We're stuck on 1.4 billion tickets sold per year, which means the average American sees almost 5 movies. We’re also stuck on about 500 movies, down from 600+ in 2006 and 2007.

A 3D ticket fetches around $3 more than a 2D. So with the bump, the total box office was able to continue to rise 15% over the past five years, even though 1.4 billion is the same number of tickets sold in 2006. Today’s average ticket price has gone from $6.55 then to $7.90. The price for an adult 3D ticket in New York can run as high as $20, and the nationwide average is $14.

Here’s the key stats:

What seemed like an exorbitant rise in ticket prices over the years has actually just been keeping up with inflation, around 3% per year. Movie tickets are actually less expensive in real terms than in the 1970’s.

The overseas box office take is about the same as the US, which is especially disproportionate when you consider we have only 5% of the world’s people. But times are achangin. Over the past five years, the overseas take has risen at twice the rate of the US—30% versus 15%.

A key component of that, no surprise, is China. They are now second to only the US in box office, and expected to overtake us in a decade or two. (Add it to the list.) But China has some strict rules: only 20 US movies are allowed per year. Those selected depend not only on the movie’s potential, but whether its sensibilities appeal to the government’s taste. After Brad Pitt’s character met the Dalai Lama in 7 Years in Tibet he was banned from ever entering China again. Disney’s Kundun shone a harsh light on China in the late 90’s, and the Disney president had to make a trip to Beijing to make amends and get Shanghai Disneyland on track. Last year’s Green Hornet added an Asian sidekick to Seth Rogen’s superhero allegedly to open the doors East. And there are rumors that the remakers of the upcoming Red Dawn decided against replacing Soviet invaders with Chinese once they ruminated on the implications.

A blockbuster like Avatar will oftentimes make three times in overseas box office versus US -- Avatar made $780 million domestically, and $2 billion overseas. That made it the highest grossing movie of all time, besting Titanic’s $1.85 billion by a wide margin. (James Cameron apparently knows what he’s doing.) Recent blockbuster 3D’s like Alice in Wonderland, Toy Story 3, and Rio all had overseas takes that tripled their domestic take.

3D is exacerbating the overseas explosion. To create a 3D image, the easiest way is to upgrade a digital projector with 3D technology. The US is in the process of replacing its film projectors with digital, but since emerging markets are installing projectors for the first time, they opt directly for 3D digital, a much more seamless and less costly process. Because our big 3D blockbusters have more global appeal than our arthouse indie flicks, and because a higher proportion of their projectors are 3D-ready, and because 3D tickets cost more -- voila -- the overseas 3D market is booming.

There is a hint of trouble in paradise. Last week, Pirates of the Caribbean 4 had the third largest opening weekend ever worldwide. Usually, a 3D blockbuster fetches about 60% of its ticket sales in 3D. But the Pirates rate was only 47%. This weekend (Memorial Day), Kung Fu Panda 2's rate was down to 45%. Some have noted that Disney and DreamWorks seemed to place less emphasis on the 3D aspect in the trailers. Others are wondering whether 3D's allure is beginning to taper off. The expense of filming in 3D, the cost of upgrading the projectors, and the difference in ticket cost likely means that the economics of 3D is a fickle one. Should moviegoers lose the love, watch out sunken costs.

I predict that’s exactly what’s going to happen, if not at the movies, then at least in the home. That goes against today's currents, but having spent a week watching 3D, I feel comfortable saying it may flop. Once the novelty wears off, it’s just not that enjoyable. At 5 movies per year, 3D may or may not retain its novelty in the theater. But once everyone watches a few movies and sporting events at home, I think they’ll rather take off the glasses and relax. At the end of the week, my eyes hurt. And on more than one occasion we had to sit an installer down when he got nauseous. With HD being so awesome, it begs the question: what market gap is 3D filling?

A friend of mine and I had a conversation 5 years ago once HD had really gotten going. Blown away by the picture clarity, we asked, what’s next? The obvious answer was to somehow make you feel like you’re actually there. That’s the promise of 3D, but the delivery isn’t anywhere near there yet, and frankly, it seems like an unrealistic goal. The real innovation would be 3D with no glasses, a technology I learned was called "autostereoscopic." This is still wildly expensive, and at least 10-20 years from becoming a living room reality.

The twin virtues of HD was that it was zero hassle, and the value of the experience was immediately self-evident. It was also versatile to any type of content. With 3D, it's the opposite: it does involve hassle, and it's not immediately obvious that it’s better. In fact, many times I couldn’t believe how bad it was. And that was Avatar; imagine with something that didn’t cost $200 million to produce.

~~~

I see fingerprints of market research. When the technology for HD was created, someone like me surely showed it to consumers and the vast majority of men would've offered to saw their arm off to get one. Today, if we stood in a Best Buy and showed 3D, my guess is only a minority would say they even care.

That should set off sirens in Japan. Unfortunately, for them, it goes back to what else is there left to do? TVs are optimized. They're thin as paper, clear as glass, and cheap as dirt. They're beautiful. They surf the web, stream movies, and use little energy. But back then, the Sony's and LG's of the world would’ve done the research and heard “Make me feel like I'm there!” And the wheels set in motion.

Fortunately, movies aren’t going anywhere. The neighborhood theater holds a dear place in my life, and in America’s. I can count on one hand the number of things I would rather do than get a hot bucket of popcorn, a fizzy Sprite, and settle in as the lights go down. It is something America is still the undisputed champion of. It is one of the last places where we sit, for hours, and just listen.

"A good film is when the price of the dinner, the theatre admission and the babysitter were worth it." Alfred Hitchcock

Last year's Top 10:

Top 10 US of all-time:

The Bin Laden Quandaries

2011-05-05T06:50:00.000-07:00

Here we are in a post-Bin Laden world. In the beginning, it seemed as though the administration was handling the Bin Laden kill deftly, but now they seem to be fumbling it a bit. First they say there was a 40-min firefight, now they say one guy might've gotten off a round or two -- that's a pretty big discrepancy. Of course in the grand scheme of things, it doesn't really matter because any common sense interpretation on rules of engagement says we've got the green light to shoot anyone harboring Bin Laden on sight without waiting to determine whether they'll shoot us first. But the missteps are starting to add up: a firefight that didn't happen, a human shield that wasn't, a secret stealth helicopter that wasn't very stealth and is no longer secret.

From a crisis management standpoint, I've never understood why those in the power position even open the door to debate: we're not releasing the photos, period; we'll provide an accurate account of what happened in one week once everyone has been fully debriefed (and we've got our ducks in a row); our statements may or may not include operational details on who shot who, how many times, nor the design of the mission; we're not going to make public the style nor substance of the information cache retrieved because that defeats every basic principle of intelligence. He's dead and we killed him, that's what you need to know.

Still, Obama is handling the big decisions with finesse. Let's look at some of the moving parts and the quandaries they pose.

While risky, sending in SEAL teams to kill Bin Laden in-person had several effects:

1. It personalized things; we often get marginalized in this war for de-personalizing life and death with pilotless drones and missiles launched from hundreds of miles at sea.

2. It confirmed the death beyond a shadow of a doubt; we're not releasing the pictures to the public, but we'll show it to the opposition party, our allies, Pakistani intelligence, basically anybody who wants to look at it, we'll show it.

3. It reminds people that we don't forget; there's an element of fear and badassishness when SEAL teams descend under cover of darkness in stealth helicopters and double-tap Satan himself in the skull.

4. It reminds the Pakistanis who they are dealing with; we are providing money and cooperation not out kindred spirit but because you are means to an end, and when you play double games, or just exhibit gross incompetence, then sovereignty be damned, we're coming in to TCB.

5. It feels solidly like a win; and we need a win.

Yet, the benefit of a SEAL incursion is a different discussion than whether it was the right decision, or whether it was a courageous decision. If the raid went bad, it was going to go real bad, and Obama would be on the hook. The team could have easily gotten stuck/hurt/killed invading such a garrison town, or Bin Laden could have easily not been there, either of which makes the response from Pakistan a whole different ballgame. But, in the end, there was no other reasonable option -- we had to know if we got him. As former NSA and CIA director Gen. Michael Hayden said, "It was a courageous decision, but it was inevitable." See if you can figure that out.

On whether or not to release the photos, again I think the president made the right call. The administration appears to have concluded that the conspiratorialists and America-haters wouldn’t believe he was dead no matter what. But Bin Laden has been putting out audio recordings every few months for years, so when that completely stops -- photo or no photo -- those who claim he's still alive will have some explaining to do.

While on the other hand, the odds of seeing Bin Laden's murdered and desecrated body might be inflammatory enough to trigger more hatred and more reprisals than would otherwise be. As my friend Chris Matthews said, "How many people would die as a result of releasing the photos? Because if it's one, then it's not worth it." In 2005, when cartoons of Muhammad were published in a Danish newspaper, Islamic riots ensued across the Middle East and killed 100 people. Secs. Clinton and Gates called around to leaders in the region and they concurred with the decision, which made it a lock.

On the photo itself, does it strike anyone as a little too perfect that Bin Laden was shot once, right dead between the eyes? That means he would've heard helicopters and gunshots outside his compound, then the SEALs burst into the room and (according to the official account) he refuses to surrender -- which I'm assuming means he was doing something other than standing still looking at the SEALs -- and somehow still a single, perfect kill shot for the cameras. The more obvious scenario is that Obama ordered Bin Laden not come back alive, thus avoiding the inevitable legal spectacle. And most of us are okay with that.

Regardless, the president said, "We don't trot out trophies," and that kind of moral clarity and simple maturity is why he has the con. There's not a lot of "Bring it on" emanating from Obama, presumably because he sees the futility in that tact. What we do hear is that the body was treated respectfully and according to Islamic tradition, but sent to the bottom of the ocean to avoid its grave becoming a fundamentalist shrine, to forego its inevitable digging up to disprove skeptics, and to obviate the legal battles over jurisdiction on who gets what. This particular skirmish will be over in a couple of weeks, whereas it would've been months if handled otherwise.

On this business of whether or not the Pakistani military knew, let's approach it from Bin Laden's perspective: you are an intelligence/secrecy/terrorism mastermind. If you didn't know that the Pakistani military was friendly to your cause, would you live in the biggest house in town, a half mile away away from a Pakistani military base? Who knows whether the Pakistani government knew, but the Pakistani military surely did.

"If the Pakistani military were Domino's Pizza, they would have delivered to Bin Laden on foot. They could have caught him with a rod and reel. Or perhaps a giant magnet." Jon Stewart, 5/4/11

In the aftermath, the focus has been on whether we're celebrating too much. Though some smoked cigars, jumped into lakes and dressed up like Captain America, it actually feels like about the right mix of justice versus revenge. Some people, especially college kids hearing the news at midnight, are always going to react that way, but I sensed no national party being thrown. The reason is likely that while some may conclude it'll have a degrading operational effect on Al Qaeda and perhaps even shorten the war, most assume the effect will be limited.

To my mind, the Arab Spring's revolutions are doing more to marginalize Al Qaeda's philosophy of violence as the means to an end than any assassination could hope. Unfortunately, every time a group of young Muslims assemble in a town square to ask for self-dignity, freedom of speech and representation, and the Islamic Arab governments' response is to open fire, that makes yet another statement to the world on values. It's amazing that the autocrats haven't by now formulated a more novel/effective/palatable response to these uprisings. They just open fire.

If it's one or two flare-ups, you blame the dictator and brand him insane. Yet we're on about the seventh now, which is a big enough sample to make credible conclusions about Islam and life in the Arab world writ large, their respect for human life, dedication to peace, willingness to cohere to global standards, and the sustainability of non-democratic governments. It doesn't get a whole lot more black and white than whether it's morally acceptable to unleash the military on the citizenry with helicopter gunships. It serves to validate our very worst notions of their faith and its incompatibility with the value systems of the rest of the world.

"I am with you, give firmness to the Believers: I will instill terror into the hearts of the Unbelievers: smite ye above their necks and smite all their finger-tips off them." Holy Koran 8:12

I'm sure the Islamic scholars are well-equipped to put this, and the dozens of other verses like it, into benign context. But it's certainly not turn the other cheek.

Societies must constantly draw distinction between bias and reality, bigotry and stereotype. These preconceptions form not because they're magically dreamt up, but because patterns emerge and continue to reinforce. They may be misapplied, but it doesn't mean they're unfounded -- there's a big difference. There's no cognitive dissonance in accepting that the super-vast majority of Muslims are peaceful, while also allowing that their book and belief system are given to hijacking, and that the ensuing tradeoffs upon human liberty and pursuit of happiness are some that we simply cannot tolerate. Most dark alleys aren't dangerous; but you don't walk down them for a reason.

This isn't a backdoor to intolerance, it's a recognition of cultural incompatibilities and what may be an unsolvable problem. Which is all to say that I'm not sure how many more flare-ups, terrorist attacks, endless wars, blood and treasure we have left in us before the game gets called. When 80% of Pakistanis believe the US is a bigger threat to their survival than India, with whom they've fought three wars; when Pakistan's reaction to Bin Laden hiding for five years 1000 yards away from a military installation is incredulousness that we dare violate their airspace; when the reaction to a cartoon is murder, rioting and burning American flags; when the reaction to their own extremists murdering Americans in the name of their own religion is not outrage: these are the pieces of the puzzle that do not fit.

So when Americans see zero contribution from the Arab world other than war, terrorism and taking our oil money; when they realize it's those dollars actually funding these repressive regimes, all the while watching it slide out the back door to the Osama Bin Laden's of the world; and when we put two and two together and accept it's all so that we can burn the product and kill the planet: that's just not a relationship that's sustainable for very much longer.

“The world today has a strong democratic core shaped by American ingenuity, sacrifice, and spirit. But on the periphery are many unstable and dangerous places, where terrorists seek to impose a medieval dark age. As we learned so brutally and so personally, we do face a new threat. But we also face a renewed choice - between isolation in a perilous world, which I believe is impossible in any event, and engagement to shape a safer world which is the urgent imperative of our time.” John Kerry, Chairman of the Senate Foreign Relations Committee

Pulse of the Nation: April 2011

2011-04-26T08:57:00.000-07:00

The NYT/CBS News poll is out today with some interesting insights into where the country is. More than anything, it spotlights the decoupling between our economy's seemingly steady improvement and a darkening national mood. Usually, the opposite happens.

President Obama's approval/disapproval numbers are stable at ~50/50. But the critical right track/wrong track is getting worse, with 70% now saying the nation is on the wrong track. That is not good, politically, or for the nation's prospects.

These are the other questions that caught my eye (Click to enlarge):

Only about half of the country feels confident that Obama was born in this country; only one third of Republicans. Usually I pawn this off on people not knowing that you have to be a natural-born citizen to be president, but the question clearly states it. Which means half the country thinks an American president went through the 2-year presidential campaign, and nobody noticed he wasn't a citizen. Sometimes the stupidity is breathtaking. It's a shame so many people don't realize they're being manipulated.

Fox News is still by far the dominant news source among Republicans. It has almost twice the viewership of ABC, NBC and CBS combined. (Granted it is a news channel.) I was thinking with the demise of Glenn Beck's show in the offing, and a federal indictment on the way for Chairman Ailes, that ratings might come down to earth. No dice.

One quarter of Americans consider themselves evangelical/born again, which winds up being about one third of those who consider themselves Christian. Overall, we are half Protestant, one fifth Catholic, one fifth Athiest/Agnostic and 1% Jewish or Muslim. It strikes me that we have a lot of anti-Jew/Muslim discussion (and bigotry and suspicion) for groups that comprise 1% of the populace. I guess maybe that's the point.

Two thirds don't support the Tea Party, and only a quarter do. So let's move on. As the proud owner of a new baby girl, I'm having a hard time believing something called a Tea Party is taking up so much of the rest of my time.

Even though Trump is polling at the top of the Republican ticket, 72% of Americans don't think he's a serious candidate. It's tempting to feel good about that, but it also means 28% do, which is scary.

They've been asking this political ideology question for decades and the last two are shown here. In these hundred-some-odd times, never has the portion of the country who consider themselves Liberal been so high (26%). If you look at the three buckets, the Liberal ramp is coming out of the Moderates (32%), while the Conservative trend is holding steady (36%). This is what people are talking about when they say we're becoming more polarized.

About half make less than $50,000 in annual household income, half more. $50,000 has been right around the median income for the past few years, having gone down for the first time in American history over the past decade.

More and more, I believe this is going to be the key tipping point to watch over the next 10 years. Conceptually, income breaks nicely into quartiles: the top 20% includes the filthy rich, the rich and those nearing the cusp of richness; the bottom 20% includes the poor, the dirt poor and all manner of the infirm; the middle 60% spans those doing okay to those doing pretty good to those in the higher end of the upper-middle class.

Everyone can't make it to the top, and everyone won't make it out of the gutter, but it's that 60% that is society's key variable: finding a way for them to strive and thrive has always been, and always will be, the key to a successful democracy. Right now they are struggling and worried about their prospects. If we do not find a way to add good-paying jobs to that three fifths and give them social mobility -- i.e. make it a realistic prospect for them to move themselves from $30-40k to $60-100k -- that will have the core influence on work ethic, optimism, family formation, educational attainment, access to healthcare, geographic mobility, entrepreneurship, marriage rates, fertility rates, homeownership, and on down the line.

We can argue about the nation's economics, taxes and war until we're blue in the face, but a nation without a prospering middle class is a nation becoming more barbell-shaped, withering from within. We are still the idea factory of the world, but we must re-find a way to make and sell things to others. Increasingly, it all revolves around currency valuations; and we'll save this one for another day.

"I can calculate the movement of heavenly bodies but not the madness of men." Sir Isaac Newton

The Trump Card

2011-04-20T09:23:00.001-07:00

Sometimes you type a blog title and you know it's atrocious but you keep it. There's really no reason why, you just stare at it and finally move on. People, I got more important things to do than sit around and name blogs. Speaking of which, let's talk about Donald Trump.

A month ago, I wrote a critique of the Republican field and he wasn't even on the radar. A week ago, he was polling second and I suggested the strategy must be to introduce him as a pawn of misdirection to reinvigorate the Birther movement (not sure why I keep capitalizing it). Today, he's polling at the top of the ticket in the Gallup poll (click to enlarge):

There is probably an incredible introspective on the national psyche being cooked up to explain this by somebody, but while they're polishing, this is what I think is going on:

1. Republicans are irritated that their field is so terrible, so it feels good to lash out / be counterculture by saying they're with Trump at a time when the election is too far away to matter; 56% of Republicans aren't excited about any of their choices for president

2. Mainstream America perceives him as uber-successful, and we love success more than just about anything; 19% of the country thinks their income is in the top 1%

3. He's confident, candid, and speaks truth to power in a time of weakness, political correctness, and obfuscation from politicians who are often corrupt, stupid or evasive; for the past thirty years, confidence always polls the highest among most attractive qualities in a man

4. He somehow takes himself super-seriously, and yet not seriously at all; he somehow is elitist, and yet anti-elitist; he's ugly as all get out, but you can tell he thinks he's pretty; he sounds like a complete idiot, and yet he's very well-spoken; we're enamored by the enigma

5. He's an ultra-nationalist at a time when two-thirds of Americans agree with the statement "America is a nation in decline"; he isn't afraid to call out the Chinese, OPEC, the Russians or whatever busters he thinks are giving us the raw deal

It's a wild mix. Trump once said you can sell snake oil to anybody if the salesman is confident about the recipe. Say what you will, but he's got that down pat. I hope he stays just long enough to pump some much-needed candor (and levity) into the mix, and then fades into oblivion as the Trump is wont to do.

My super-sly dream is that he's actually an insurgent of the left, designed to further delegitimize the GOP (it's possible), then about face a few weeks from now and say, "Well I'll be, he actually was born here." Which would blow the far-right's mind and put the issue to rest. As the Don once said, "As long as you're going to be thinking, think big."

Can't help it, one more:

"All of the women on The Apprentice flirted with me - consciously or unconsciously. That's to be expected." DT

A Strategy is Afoot

2011-04-11T15:43:00.000-07:00

Strategy: a plan, method or series of maneuvers for obtaining a specific goal or result; setting direction or misdirection, through overt or covert means; a blueprint for action

In the wake of the 2008 presidential election, the Republican Party was reeling. Two successive elections had produced seismic shifts in Democratic Congressional majorities, the White House, and Statehouses across the country. The nation was turning a light shade of blue not seen since LBJ’s Great Society, and FDR’s New Deal before that. Obama repeated their feats by passing healthcare and ushered in a new tide of entitlement and safety net spending.

Now, Republicans are seeking to dismantle the efforts of all three. This is nothing new: beginning with Reagan and then with each of the last five big Republican victories in 1980, 1984, 1994, 2006 and now 2012, Republicans have attempted to either repeal, reduce or privatize Medicare or Social Security.

The merits of entitlements have been, and will be, argued until the end of days. There is no mistaking that big entitlements are in many ways the fulfillment of Democrats’ dreams, anathema to the GOP, and take us closer and closer towards European-style social democracies. They have also become the foundation of America’s debt crisis, and represent the redistributive nightmare that the wealthy and corporate classes envision whereby the masses take what’s theirs.

With that in mind, for five minutes, I would like you to imagine that politicians aren’t complete idiots. That’s a big ask, given the last-minute government shutdown we’ve just endured and averted, and the blame-game sniping-spectacle that accompanied it. I also need you to fully buy into the notion that Washington is not only the dominant capital, but the epicenter of power in the world—the primary conduit of money, influence, the fate of nations, and distribution of riches—who gets to keep what or whether it’s taken from them. Also consider that there are entire buildings along the Beltway filled with think tanks whose mission is the party—people with genius IQ’s sitting around all day doing nothing else than thinking about how to win power for their cause.

So the question then is, given that Republicans only control one house of Congress, does it strike anyone as odd that on the heels of two devastating defeats, they are now winning every election in a landslide and every legislative battle handily?

Consider that they’ve accomplished absolutely zero legislatively since 2008, which might typically be associated with a turnabout of one’s political fortunes. The entire debate in Washington is now about debt and deficits. Whether it's last week’s budget, next month’s debt ceiling, or the second half’s coming budget showdown, all we’re talking about is how much to cut, not whether to cut. Republicans are winning and winning big. The only thing Democrats have won recently are the right for Americans to continue getting abortions at abortion providers, and for the EPA to continue regulating greenhouse gases—two rights guaranteed by the Supreme Court—or “nothing” as I like to call it.

Asked another way, what sounds more likely: that Republicans have stumbled backwards into the most stunning, undeserving, instantaneous reversal of political momentum in American history, or, that they deftly developed a beautiful strategy and we are watching them execute it to near perfection?

~~~

Let’s say you just got crushed two elections in a row. You are losing the demographics of the country, and new Census figures confirm that unless you change direction, you’re finished for a generation. As I watched Paul Ryan’s ubiquitous coverage over the weekend, it occured to me that some serious strategy is afoot. Let's harken back to the dark days of early 2009.

1. Identify a winning cause. The first thing you need is a big, ripe issue. One that aligns well with your platform and has ultra-broad appeal. One that parallels the nation’s situation now, and for the foreseeable future. Preferably one that is of utmost importance. Fiscal responsibility is your party’s mantra, and debt and deficits shall be your cause.

2. Maintain message discipline. In the face of no matter what, for two years straight, stay on message, across every politician, across every forum. Have the entire party repeat it constantly, every day pinning the blame on the figurehead because that's the intensity of message discipline now required to convince a public that is distracted, cynical, fragmented, and detached from politics. If you say it enough times, they will believe it, it’s human nature.

3. Develop a patsy. Fiscal responsibility in times of debt and deficits will require massive cuts. Your platform’s other linchpin is ultra-low taxes, so cuts are the only way to pursue the new cause. This will alienate large swaths of the public, especially the elderly, since they receive a disproportionate amount of the proceeds. So you need to create a shell entity to deflect responsibility, ideally one that seemingly takes these decisions out of your hands; yet votes with you in concert. Enter the Tea Party, a delightful little invention that magically reared its head in early 2009. Anytime cuts are bigger and badder than your core constituency of old people can live with, point to the Tea Party: those crazy people were asking for $60 billion in cuts, while we, the sensible, settled for $40 billion. Remember, you only have one third of the negotiating power versus the Senate and White House, but somehow you control the terms of the debate and get two thirds of your starting position. But how?

4. Box your opponent in. To win the negotiation, the negotiation must end, so you need a deadline. You play along with the continuing resolutions until the President states the obvious—we can’t continue funding the government a month at a time—which you know he’ll do because he’s a pragmatist and the status quo is insane. Since the President vows to veto any more CR’s, that means he has to sign a budget or he’s responsible for shutting down the government. You know that he knows that he’s seen as “overreaching” by the Independents he desperately needs for re-election, and with re-election talk heating up, he can’t be on the hook for a shutdown.

5. Give yourself an out. Offer a 1-week CR as the deadline approaches. If it’s vetoed, your offer was on the table and was spurned.

6. Run misdirection. Out of nowhere, introduce and attack two sacred cows/strawmen of the opposing party. This shifts the focus away from how much you’re cutting, to what must now be saved. Then, when you concede and allow these laws to remain as they were, Democrats think they got a win and can stomach the cuts. In the messy process, you force Democrats to identify the party so strongly with abortion as to be almost morbid.

7. Launch a second-front attack, overwhelm with force. Down the stretch of the negotiations, launch a vision for next year’s budget, an unprecedently aggressive effort to begin the long process of dismantling entitlements and downsizing government. Yet, position it as the fiscal savior: focus on the sweetest-sounding parts—taxes go down, debt goes down, and we save the entitlements. We reduce them, but a half a loaf is a lot better than no loaf. Logical and empathetic, while sweeping the legs right out.

8. Delegitimize your opponent. Right about now, someone that nobody gives a shit about, nobody thinks is credible, that people literally laugh at when they look at, takes center stage at a big party event. In February, Donald Trump strangely/surprisingly gets a slot to speak at the Conservative Political Action convention, a perennially-watched straw polling for soon-to-be presidential nominees. Two months later, the Birther issue has been magically reconceived. It then appears across the full spectrum of seriousness, from the late night paparazzi’s to the Sunday morning punditries, over and over. The Donald quickly rises from a non-entity in politics to the nation’s second highest polling Republican presidential contender in a matter of weeks.

9. Introduce the charismatic leader. In the strategy’s early days, you knew this day would come—the time when you would need a golden boy to lead. You need someone cut straight from the party’s cloth who can appeal to the base—white, male, with the pedigree only family money can instill. Someone who has cross-country appeal, with handsome looks and a flat, Mid-Plains accent. Someone young enough to carry the reins for a long time, but not too young. Someone who is completely conversant in the issue of the day—entitlements, debt and economics. You taste test his style and ideas for a couple of years (i.e. The Roadmap), ingratiating him with the leadership. Next, appoint him to the power position. Then, when the moment is right, introduce him with a high-profile appearance, the State of the Union response say, to legitimize his standing by positioning him opposite the status quo leader. Finally, out of the shadows of Ayn Rand (though he learned long ago to leave that talk behind) and into the newly-crafted, seemingly random, spotlight enters the new Budget Committee Chairman, Paul Ryan, and "The Path to Prosperity.”

~~~

There’s a natural counterargument I'm loath to address: that the reason for the Republicans' renaissance is that debt is the most important issue we face, and they have been courageous enough to tackle it. I agree with the first part—preventing decades of lost prosperity from a debt crisis is more important than improving our healthcare system, more relevant that the wars, and more central to our dominance in the world. It would be nice to think that the Republican party's inherent virtue yearns for fiscal responsibility.

But we need only look into the very recent history of 2000-2008 to disabuse such a notion. If they were inherently concerned about debt, they wouldn’t have doubled it. If they were inherently concerned about deficits, they wouldn’t have transformed a $250 billion surplus into a $1.3 trillion deficit. If they were truly concerned about fiscal rectitude, they wouldn’t have done these things while cutting taxes, adding a prescription drug benefit, and overseeing a financial collapse on a scale the world has never seen. It's just too convenient that Republicans find religion on fiscal matters only once Obama is mired in the hole they dug him. "Deficits don't matter, Reagan proved that," Dick Cheney once famously said. Until they do, or at least until they're someone else's responsibility.

Cognitive dissonance, anyone? We are a center-right nation, and thus given to voting for Republicans. But we are not a stupid-right nation. To now think Republicans are “good with money” after the decade just endured has to be the biggest, most absurd PR triumph in the history of politics.

It's also worth remembering that opposition to the new healthcare law was one of Republicans' core issues in the midterms, usually citing savage cuts, rationing and death panels that ObamaCare would impose upon Medicare. To now turn around and immediately propose savage cuts themselves calls into question any mandate they were supposedly elected to pursue; to say nothing of the stinch of hypocrisy. To boot, three quarters of Americans oppose cutting Medicare and support raising taxes on the wealthy as ways to attack our deficit. Recall that one of the GOP's other key criticisms of healthcare was that it didn't have the support of the people. They're not just moving the goalposts, they're flipping the endzones.

Today, sixty five years after WWII ended, the core threat of Medicare is that the Baby Boomer's began retiring in 2010 and their number is expected to double from 45 million to 80 million over the next twenty years. Yet, the Ryan plan absolves everyone 55-65 from any changes to their benefits because that is their core constituency, that is the group that would go berserk at townhalls during the recess just like they did with healthcare legislation, and they know that people 45-55 aren't thinking about retiring and thus out of sight, out of mind. We live in a country where our investment ratio is 4:1 seniors-to-children, and the GOP's big idea is to exempt the entire generation causing the problem for fear of the political blowback?

Ryan proposes to cut taxes on the wealthy by another 10% from today's (historically) low 35% down to 25%, and over the course of the next forty years to reduce the government's discretionary spending from 12% of the budget to 3%. The idea that we're going to fund, much less invest in, our country for everything that isn't an entitlement, defense or interest on the debt with 3% of the budget is pure fantasy.

Fortunately, Obama sees it clear as a bell:

"There’s nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. And I don’t think there’s anything courageous about asking for sacrifice from those who can least afford it and don’t have any clout on Capitol Hill." President Obama's response to the Ryan budget at George Washington University, 4/14/11

Choosing now to focus on fiscal responsibility by attacking entitlements is about regaining political power, and preserving a wildly-lopsided distribution of wealth that works very well for those who might dream up such a strategy. It just makes too much sense, given the amount of money at stake.

~~~

It's not exactly earth-shattering to think that Republicans are executing a strategy. But this looks like a well-laid, slowly-developing, multi-faceted beauty. One that was centrally-conceived of, and orchestrated by a group of people with access and who really know what they're doing.

People hate politics, and I understand the impulse. Yet, I maintain that it's the NFL of strategy. Nothing big gets done without it, and nothing matches its complexity. No culture is born with any more human potential than any other, yet it's our unique system of government that makes us different. The wheels of government are now beginning to turn to tackle our debt problem, and Obama knows that. He is either letting it happen while executing his own strategy, or he is getting whipped by the GOP, I cannot tell. The administration would say that they had to act to prevent a catastrophe, which they did, and now must not act to prevent a relapse, which could still happen. The problem is that arguing “what might’ve been” has always been a losing strategy. Though they might still be right.

Regardless, make no mistake, there is a war afoot for the hearts and minds and riches of America, whether we see it or not. Republican fortunes have swung too far, in too short a time, to have not been engineered. Kudos to the strategists, it’s very impressive.

Entrepreneurs are simply those who understand that there is little difference between obstacle and opportunity and are able to turn both to their advantage. I'm not interested in preserving the status quo; I want to overthrow it. -- Niccolo Machiavelli

Mid-Term Migration: Follow the Money

2011-03-29T14:06:00.000-07:00

As Republicans went about their historic thumping of the Democrats last November, they made gains across the demographic spectrum. The reversal among the wealthy caught my eye. Those making $200,000 or more voted for Obama by a 6% margin in 2008, and then reversed course and voted for House Republicans in 2010 by a 30% margin. (Click to enlarge)

I think my conservative friends would say that the smart people making the money in this country caught on to Obama/Democrat’s lyin cheatin ways. Yet, if you look at the most educated among us, those with a post-graduate degree still voted Democrat (the doctors, lawyers, professors, philosophers, engineers, divinities, historians, etc.).

To which the natural reply surely is, people must’ve voted with their wallets—taxes. Now we’re talking, because even though Obama lowered taxes for 95% of the country, only 12% of the electorate felt/believed/knew it...

The 5% who didn’t get a tax cut are in the $200k+ camp. Obama talked so tough about letting the Bush tax cuts on the wealthy expire (thus increasing them 3% to 39%) that he scared the bajeezas out of them, even though he wound up caving in the end. And we wonder why politicians are afraid to talk about taxes, ahem, I mean revenue enhancements.

The indisputable fact is that 95% minus 12% equals 83% -- that's the proportion of the country that the Republican messaging machine was able to hoodwink, the Democratic machine was unable to deliver a simple message to, or both.

My money is on the former. Anyone reading, watching or listening to right-wing media and news outlets would have had a very hard time believing that Obama had cut taxes. It's far too easy nowadays to say "they didn't communicate it clearly enough." Healthcare unpopular, too complicated. Tax cuts aren't recognized, didn't explain it right. Ousting Qaddafi or protecting civilians, the mission is unclear. In an age of instant access to the widest array of information in human history, we are apparently unable or unwilling to pick up a newspaper or click a mouse to understand the issues. You don't have to be a news junkie or social studies teacher to figure out what's going on.

~~~

In semi-related matters, I hear Fox News chief Roger Ailes may get a federal indictment. If Justice finds out he instructed Judith Regan to lie to them -- which she says she taped -- it's gonna take the full weight of the GOP to keep him out of the pen. Ailes and David Axelrod had dinner awhile back, where I'm guessing Axelrod told him to knock it off. Apparently, he meant it.

Regan worked for Harper Collins, which is a subsidiary of NewsCorp, which owns Fox News. She was having an affair with Bernard Kerik, who was a close friend of Rudy Guiliani, who was a close friend of Ailes. Kerik was being vetted for Secretary of Homeland Security when the affair was discovered, and Ailes was endorsing Guiliani for the White House, so he pressed Regan to lie, then fired her. Regan sued for $100 million and revealed the tapes. NewCorp/Ailes gave her $10 million and a nice apology. Follow the money.

The Heels: Season Behind, Season Ahead

2011-03-29T08:09:00.001-07:00

I had to go into a bubble for a few days after the Heels lost to Kentucky in the Elite 8. That was a tough loss. I'm not one to blame the zebras, but it would've been nice to have seen a foul called on the final shot. The evidence suggests they got him on the wrist. Hard to shoot without that wrist.

Still, that’s as much fun a season as I can recall, including the championship years. I spent the majority of the last month's games standing up, pacing, holding the baby for support (mutual). It was great fun to watch our guys grow, build confidence, coalesce as a unit and begin to trust each other following Drew’s departure, make comeback after comeback, win the ACC when nobody thought we would, and battle it out with Duke three times.

In the end, it looked like the stars were aligning for us to win it all with Kansas going down, VCU and Butler making it to the Final Four. But we were not the best team in college basketball this year, and it would’ve been an odd way to win it. To be the best you want to beat the best, and we never did.

Back to the game, I thought we played great in the second half, just couldn’t, and wouldn’t, stop their threes. Kentucky shot 55% on 12/22 and we shot 18% on 3/16. We’re going to lose that battle every single time, and I like to see us closer to 10 threes per game than 20. Strategically, I cannot understand why Roy won’t adjust against teams that shoot the three at such a high percentage. UK shot it at 40% for the season. It’s hard to argue with his success, and I appreciate it. Yet, the conclusion that we will probably lose big games if good teams hit their threes is a difficult one to accept.

That said, as much as I complained about our own three-point shooting, the season shooting stats wound up being 33% from 3-pt and 49% from 2-pt. Dead even.

Other thoughts:

• Dex gets a lot of ink for being a great defender, but I disagree. Whoever the best guard is on the other team lit us up all year, and that’s the measure. We need a better shut-down strategy.

• Would’ve liked to have seen Zeller on the All American Honorable Mention with Barnes. He deserved it, especially down the stretch.

• Kendall’s biggest weakness is finishing at the rim and that should be his focus in the off-season. He doesn’t have the jumping ability of a Felton or Lawson, so he’s got to learn a floater, runner or banker in the lane. He has a soft touch, and I think he'll get it.

• Harrison Barnes has the eye of the tiger. I didn’t see it before, but I see it now. In the last five minutes he morphed into a Jordan/Kobe-esque, I will not let this team lose, winner. Those guys have superior minds, and reading one interview with Barnes tells you he's cut out of the same cloth.

I am praying everyone doesn’t go pro. I can’t stand another year of people being baffled by us not playing well when we lose the entire team. If they do stay, we’ve got a shot at winning it all. The tears streaming down their faces in the locker room provides some insight into how much they wanted it. Sometimes I have to remember they’re kids.

I had to write a bio this week and one of the questions was “What You’re Passionate About." Surprise, I chose Tar Heel Basketball. I thought about making up something interesting or unexpected, but it would've been a lie. Cliché perhaps, but it’s more than basketball -- it’s one of my strongest lasting connections to home, childhood, college and family. It gives our friends something to bond around with a regular date to laugh and cheer together. It's social glue that helps some of the people I love stay stuck together. Next year can't come soon enough.

Nuclear: Space, Time and Energy

2011-03-24T15:09:00.000-07:00

The true genius of Einstein’s theory of relativity was that he explained gravity by combining space and time into a single continuum. The three dimensions of space and one dimension of time combined to become space-time. This new insight simplified the solutions to many of the unsolved problems in physics, leading to decades of discovery.

The events unfolding over the past few months make this particular aspect as relevant as ever, as the policy decisions we're making, and the way in which we’re pursuing energy to fuel our preferred mode of living, are increasingly impacting our lives. Space and time continue to exert the key effect on our views.

The central polling question is whether we are in favor or opposed to more nuclear power plants being built. In 1977, there was a massive +48% spread in favor. Then, in 1978 there was a partial meltdown of the Three Mile Island facility in Harrisburg, PA., and by 1979, support had tumbled all the way down to +5%—a 43% downdraft. By 1986, following the full meltdown at Chernobyl, support continued to fall all the way down to a -25% spread. (Click to enlarge)

Then, nuclear went into its renaissance phase, coinciding with the emergence of global warming as a new concern, the wars in the Middle East, the gas spike of 2008, and for the most part, a very safe nuclear power industry cohered. Support peaked all the way back up at a +23% spread in 2008.

The earthquake/tsunami/nuclear trifecta in Japan has plunged support all the way back down to a -7% spread. This 30% downdraft from 2008 was not quite as severe as the 43% downdraft following Three Mile. But this time the fallout wasn’t in our backyard, nor was approval starting from as high a point. It'll be interesting to see whether the intensity of the downdraft follows the intensity of the crisis. If the situation in Japan gets worse, and especially if it drifts across the Pacific, we can bet on approval deteriorating further. And if there is another disaster post-haste, it’ll crater even further—that’s how the human mind works, space and time.

During the renaissance of the 00's, two-thirds of the country said they worried a great deal or fair amount about global warming. That dipped to half over the past two years, as more and more of the country decided climate change was either a hoax or exaggerated. So it’s possible nuclear was already beginning to lose traction before Japan, although there’s other factors like energy security that would’ve tempered that decline. Just because you don't believe in global warming doesn't mean you don't want to get off oil.

What’s fascinating is that even though Republicans are much less likely to be concerned with global warming:

They’re more likely to be in favor of nuclear power plants:

Big picture, what the data is telling us is that we are probably in for a 10-30 year weakening of support for nuclear power, which probably means no more new plants. The best predictor is that not a single plant has been built since Three Mile. So just as ground was breaking on the first plant here in Georgia, here we go again.

Today, France gets 80% of their electricity from nuclear, while we get 20%. The other 70% comes from fossil fuels and 10% from renewables. The long-term plan was to get nuclear up to 40%, and renewables up to 30%, taking fossil fuels down to 30%. We're going to need another plan.

Though nuclear is carbon-free, a new plant costs an incredible $10 billion and a takes a decade to build. Yet, because support for nuclear had grown so broadly, the Obama administration initiated a program of government funding guarantees to build new plants, which was the only way it was going to happen. But if one thinks it’s still going to happen, you didn’t see Nobel Prize-winning Energy Secretary Steven Chu get pinned-down and tongue-twisted in a hearing yesterday by Rep. Joe Barton. They support it alright, umm umm umm, yes, probably.

It would be easier to stomach the Chu inquisition if there was any consistency from the GOP. As Ron Brownstein wrote this week in National Journal, one of the reasons why renewables can't compete on price is because the price of fossil fuels don't represent their actual price. When Joe Barton apologizes and his brethren vote time and again to protect subsidies for oil companies, when loopholes are written into the tax code so that big oil pays ultra-low effective tax rates, when the cost of carbon isn't reflected in a gallon of gas, and when liability for cleanups that cost tens of billions are capped at tens of millions to keep insurance cheap, all those serve to create price advantages. The same is true for subsidizing nuclear with government guarantees; that's the deal with the devil the administration looks to have made. I just get sick of free market this, free market that when it comes to helping poor people, but then it's the policy of the US government to distort energy markets, thereby scuttling the chances of solar, wind or whatever might eventually be the savior to this mess.

Other than diminishing the tools we have to combat carbon emissions, the overarching problem is that all our nuclear plants are now 30-40 years old, and will inevitably have to be replaced/upgraded/closed. If we don’t build any new plants for another 10-30 years because of Japan, then the plants are going to be 70 years old. It’s no black swan prophecy to conclude that something will go terribly wrong. Carefully as we might plan, and as many assurances as we'll be given, a century-old technology created to destroy cities has a high chance of doing just that. I think the nuclear experts actually believe they have a handle on things. But what else would they say?

I’ve made one new, genuinely good friend in ten years, and he just left to defend our interests in the Middle East. Now Libya and Japan dominate the headlines, and oil is spiking to $100+. I considered a hybrid/electric when buying a new car this month, but didn’t pull the trigger. It's hard to feel good when your friend goes halfway around the world to get shot at and you can't even make yourself buy a hybrid. I’m with lots of company:

“About six out of 10 consumers say they would look at a gas-electric hybrid when the time comes to replace their current vehicle, according to a USAToday/Gallup poll. 35% would "strongly consider" a hybrid, and an additional 23% would "consider" it. While the results seem to indicate that hybrids are taking off, it’s at odds with what consumers actually are buying: only 4% of vehicles sold last year were hybrids, the Environmental Protection Agency reports.” 2/14/11 USA Today

One has to assume that if oil-rich countries massacre their people and we intervene, but oil-poor countries do the same and we don’t, there’s a correlation. The notion that our wars are overwhelmingly a function of access to oil isn't a popular opinion, but those who disagree must explain how every major military conflict of the past half century has been on a tiny strip of land halfway around the world that just happens to sit on top of what’s left of the world’s oil reserves.

With that in mind, initial polling was released this week after we launched airstrikes in Libya. There is a slight edge in favor of our efforts to intervene.

That sounds reasonable, until you realize that 47% is the lowest proportion in favor of any major military action in the past generation.

We're either beginning to move off our promote democracy, neocon interventionist approach to foreign policy, or these Middle Eastern adventures are losing luster as a general proposition and we want a new energy policy. Though, if we were capable of conclusions that logical and quickly forming policies around them, there'd be no blogging.

I'm giving us the benefit of the doubt that we wouldn't mind spending less than 1% of our Defense budget to prevent a slaughter. That may be too much credit, given the only policy that receives popular majority support for spending cuts is foreign aid, of which we spend less than 1% of our total budget, making us the biggest giver by amount, but smallest by proportion, of any developed nation.

~~~

We're drifting. We strongly support stopping Saddam from slaughtering Kuwaitis, but not stopping Muammar from slaughtering Libyans. We don't want to invest heavily in renewables, but nuclear is too subject to event-driven panic. We think fossil fuels are a grave threat, then we don't anymore. Science-based issues like climate change and nuclear safety have 30% agreement disparities by completely unrelated factors like whether you're a man versus a woman, a Democrat versus a Republican.

None of which is solving the problem. And if there was one thing Einstein was all about, it was solving problems.

“The discovery of nuclear chain reactions need not bring about the destruction of mankind any more than did the discovery of matches. We only must do everything in our power to safeguard against its abuse. We can't solve problems by using the same kind of thinking we used when we created them." – Albert Einstein

Interview with a Tea Partier

2011-03-12T08:50:00.000-08:00

Whenever I go to this particular coffee shop there is this guy who is always getting ready to leave and he tosses his New York Times onto the table. I grab it because I’m cheap. He’s always drinking his coffee out of a nice porcelain mug, which nobody else in the entire place does, and I always think it seems like something I might like to do.

This morning, the paper’s sitting there, but this time underneath a set of keys and the mug. He’s in the bathroom. I don’t know how long he’s going to be in there, so I buy a paper and sit down. The guy comes out and sits down catty corner. He then says, “I should’ve given you my paper.”

Then, he starts up a conversation, “Greg, nice to meet ya.” And then quickly goes off on a tangent about how liberal the NYT has become, how big of an idiot some of the columnists are, how biased the reporting is, and so on. I figure, hell, it’s only 7:30, but I’ll tune this guy up.

We get into it and he’s a Tea Partier, quintessential. He proceeds through every single conceivable right-wing talking point. Let ‘er rip. I get busy disabusing Greg of any notion that he might have ever been right about anything in the last twenty years. He’s actually listening, and nodding condescendingly, and then returns the favor and tells me why I’m wrong at every turn.

He pontificated, passionately, on these topics:

• Obama is the most incompetent president since Franklin Pierce
• Obama is smart, but was elected just because he’s black
• The NYT has gone from great to awful in the last 20 years
• We both like David Brooks
• If what you say about Brooks liking Obama is true, I’ll write him a letter; today
• The Tea Party is now the driving force in America
• Governors are doing the right thing by busting the unions
• Unions are breaking the back of business and government
• House hearings on Muslim radicalization is a perfectly reasonable thing to do
• This computerized internet is for real
• People in Africa are worthless and produce nothing
• Foreign aid is a complete waste of our money
• Invading Iraq was the right thing to do at the time
• We should take Iran’s weapons out; today
• There is nothing we can do about off-shoring American jobs
• Black kids are dragging down the school system
• Black people, especially the guy at the Verizon store, are incompetent

Since we were back to where we started, I clearly wasn’t making a dent, and was starting to get a little hot, I had to call it. We shook hands, ended the Mexican standoff, and then talked cars and kids. The whole thing lasted 45 minutes.

He was a white male, 55-ish, large, undergrad in Texas, grad school in Georgia, PhD in Virginia, and has two Great Danes. He’s run money, built and sold three small businesses, and loves golf. He was very cordial, if not downright genial. He gets up to leave and says “It was wonderful talking to you” and “Please tell your wife you talked to a right-winger today.”

They’re out there. I’ll see him again.

Republicans in 2012: Waiting on a Comer

2011-03-07T13:24:00.000-08:00

When I was growing up, my dad would take me golfing with he and his buddies on Saturday. We'd all go back to the house afterwards, eat a huge dinner, they'd play cards and I'd watch. Chuck, the most colorful of the bunch, was a miserable card player, and an even worse golfer. He swung as hard as he could at every shot, and faced with an inside straight draw against three of a kind, he wasn't folding on the river. "Waiting on a comer" he used to say.

Here’s the latest GOP presidential polling from CNN:

Huckabee has been perched atop for the past few months. PR-wise, Mike had quite a week. He began by tacking way right with the now patented “Obama is a Kenyan anti-colonialist” line. The radio host teed it up for him:

MALZBERG: Don't you think it's fair to ask Obama how come we don't have a health record, we don't have a college record, we don't have a birth certificate? Why, Mr. Obama, did you spend millions of dollars in courts all over this country to defend against having to present a birth certificate? Why go to court and send lawyers to defend against having to show it? Don't you think we deserve to know more about this man?

And Huck ripped it:

HUCKABEE: I would love to know more. What I know is troubling enough. And one thing that I do know is his having grown up in Kenya, his perspective with a Kenyan father and grandfather, their view of the Mau Mau Revolution in Kenya is very different than ours because he probably grew up hearing that the British were a bunch of imperialists.

First, never begin a sentence with “One thing I do know…” if what comes next is patently false. That might've worked in a pre-Google world, but in a mere 0.26 seconds we learn that Obama was raised in Hawaii by his mom, spent three years in Indonesia with her, met his father once, and never stepped foot in Kenya. Today's game of misdirection has to be much subtler, more art than science.

Second, never try and diffuse the situation by saying you “misspoke” and “meant Indonesia” if the sentence's predicate is a well-thought-out rationale for its subject. If you meant Indonesia, it'd be hard for a revolution that happened in Kenya to fit. It confirms liar's intent.

At it was, Huck was just getting warmed up:

HUCKABEE: Most of us grew up going to Boy Scout meetings and our communities were filled with Rotary Clubs, not madrassahs. Again, I am not saying he's not a citizen, I've never said that. I've said the opposite. I've never said he's a Muslim.

Now we’re talking. Obliquely mention a madrassah (terrorism school for kids), inject some apple pie to draw contrast (I’m a Boy Scout and a Rotarian), then button it up with a pre-denial denial (Clearly he’s not a Muslim, I’ve said this repeatedly; but you really wouldn’t know it when the guy grows up in Kenya and dances around with the Mau Mau's and goes to bomb-making school).

Huck closed the week out by -- and you really can't make this stuff up -- insulting Natalie Portman. Those who know me know there’s Helen of Troy and then there’s my Nat. In the wake of her best actress win for Black Swan, Huck was out guns blazing:

From the 2/28 edition of The Michael Medved Show:

MEDVED: Governor, I know you probably are out on book tour right now, you probably didn't have a chance to watch the Academy Awards last night?

HUCKABEE: I'm very happy to say that I missed it because usually it's about the most boring waste of several hours that I've ever experienced.

MEDVED: There was one moment where a very brilliant and admirable actress named Natalie Portman won Best Actress, and she won for a movie which I loathed called Black Swan. But in any event, she got up, she was very visibly pregnant, and it's really it's a problem because she's about seven months pregnant, it's her first pregnancy, and she and the baby's father aren't married, and before two billion people, Natalie Portman says, 'Oh I want to thank my love and he's given me the most wonderful gift.' He didn't give her the most wonderful gift, which would be a wedding ring! And it just seems to me that sending that kind of message is problematic.

HUCKABEE: You know Michael, one of the things that's troubling is that people see a Natalie Portman or some other Hollywood starlet who boasts of, 'Hey look, you know, we're having children, we're not married, but we're having these children, and they're doing just fine.' But there aren't really a lot of single moms out there who are making millions of dollars every year for being in a movie. And I think it gives a distorted image that yes, not everybody hires nannies, and caretakers, and nurses. Most single moms are very poor, uneducated, can't get a job, and if it weren't for government assistance, their kids would be starving to death and never have health care. And that's the story that we're not seeing, and it's unfortunate that we glorify and glamorize the idea of out of children wedlock.

Again with the PR savvy, attacking one of America’s sweethearts, pregnant, having just won an Oscar. (By the way, for not having seen the show, Huck seems to know a lot about it.) Then, insulting fifty million single moms with the “they’re all worthless, welfare queens” ad hominem; a sermon that will show up again because fifty million is a big number in the electoral math. Nevermind that it's not even close to being factually accurate -- the 2009 report on unmarried parents showed that 80% of single mothers are employed and fewer than 10% are recipients of welfare assistance.

The Portman pushback came fast and furious. To which Huck replied, "These people should read my new book and they would know what I said instead of what some left-wing partisans are attempting to put forth," he told UsMagazine (bastion of chastity).

Ahh, Huck has a new book. Things are coming together. No PR is bad PR.

According to the Chairman of the Joint Chiefs in an open session of Congress last year, our debt is the primary threat to our national security. The primary driver of our debt is our healthcare spending, and the primary driver of that is our health. It’s tempting to ask Huck whether he thinks a person’s weight—another very personal decision—is also fair game as it pertains to the destruction of society's fabric. Because if it is, surely he would've agreed to stay home from, say, a Governors Association meeting, to do society a favor and not have everyone see his appearance and getting the wrong idea about what to do with their bodies.

As you can see, Huck lost the weight. And maybe Natalie will wind up conforming to his Southern Baptist paradigm of human worth. Still, as an ordained minister, it's surprising to hear Huck so judgy, i.e. not accepting of others. I'm sure I've heard that phrase somewhere.

Enough with Huck, we both know he’s not running. 2012 will be about proving to America who is capable of managing the nation's operations, not its values. Any good CEO will tell you a company has to get both the economics and the culture right. Some years' elections are about culture and values, some years they're about operations and economics. We’re tired of fighting over values and ready to get the economics right. That’s your cue, Newt.

I used to tell people I liked Newt Gingrich. He was the six-time Representative for our District in Atlanta. His 90’s run as Speaker was really before my time, and I didn’t necessarily understand the venom towards him. It's true he shut down the government in '95, and it's also true that he was fined $300,000 by Congress for ethics violations, the first time ever for a sitting Speaker. But every time I saw an appearance, he was poised and thoughtful. Newt’s a thinker, and his ideas factory American Solutions delivers on just that.

But then he stepped into what I’m now calling the Kenyan quicksand. All this Kenya stuff originated with a Forbes article from Dinesh D'Souza, the Christian apologist and president of King’s College. In a September 27 article in Forbes magazine, Dinesh D'Souza wrote:

"It may seem incredible to suggest the anti-colonial ideology of Barack Obama Sr. is espoused by his son, the President of the United States. That is what I am saying. From a very young age and through his formative years, Obama learned to see America as a force for global domination and destruction. He came to view America's military as an instrument of neo-colonial occupation. He adopted his father's position that capitalism and free markets are code words for economic plunder. Obama grew to perceive the rich as an oppressive class, a kind of neo-colonial power within America.

"In his worldview, profits are a measure of how effectively you have ripped off the rest of society, and America's power in the world is a measure of how selfishly it consumes the globe's resources and how ruthlessly it bullies and dominates the rest of the planet. For Obama, the solutions are simple. He must work to wring the neo-colonialism out of America and the West. And here is where our anti-colonial understanding of Obama really takes off, because it provides a vital key to explaining not only his major policy actions but also the little details that no other theory can adequately account for.”

Articulate and well-argued, but toxic and borderline idiotic. Something tells me if Obama’s worldview was anti-colonial and socialist, the Clintons, Wall Street or Rahm Emanuel might have caught on. The flaws in the logic didn't stop Newt glomming on:

“D'Souza has made a stunning insight into Obama's behavior -- the most profound insight I have read in the last six years about Barack Obama. What if Obama is so outside our comprehension, that only if you understand Kenyan, anti-colonial behavior, can you begin to piece together his actions? That is the most accurate, predictive model for his behavior. This is a person who is fundamentally out of touch with how the world works, who happened to have played a wonderful con, as a result of which he is now president. I think he worked very hard at being a person who is normal, reasonable, moderate, bipartisan, transparent, accommodating -- none of which was true. In the Alinksy tradition, he was being the person he needed to be in order to achieve the position he needed to achieve. He was authentically dishonest.”

Gingrich is referring to Saul Alinsky, the father of community organizing. Like Obama, Alinksy was another University of Chicago man who spent most of his life trying to improve living conditions of poor people. Alinsky believed the middle class, or “the silent majority” as he coined it, was getting screwed in America. His stated motive was “I love this damn country, and we’re going to take it back.” Point being, Alinsky is hailed by people like Obama as the model for rebuilding social mobility for the bottom 80% of the country that are now referred to as the (mathematically-impossible) middle class. But Gingrich sees Alinsky as an avatar for radicalism and bottom-up incitement. It’s snob code for calling Obama a socialist, and goes down easier than attacking him for helping poor people.

The Gingrich's announced they are running today. Each statement of principles at the press conference oddly began with "we" -- meaning he and his wife. He wasn't talking about family matters, he was talking about how "we'd" run the country. His exploratory website has a picture of them both. The whole thing was strange. Here's Newt's romantic bio:

• Married his high school math teacher
• Had an affair and divorced her while she had cancer
• Married the mistress
• Cheated on the mistress with a staffer 23 years his junior
• While having the affair, impeached Clinton for Lewinsky

Newt recently converted to his latest wife's Catholicism and wrote a book on injecting religion back into American government. I think Newt needs to consider injecting some religion back into Newt. Some would say these are personal matters and don't have much to do with politics. I think they have everything to do with character, hypocrisy and a simple understanding of right and wrong, all of which are surely relevant. Ultimately, Gingrich has taught me a valuable life lesson: some people's intelligence can be hypnotic; yet that doesn't preclude them from being crazy.

Moving on, the other major GOP contenders are Romney and Palin. I’m going to practice what I preach and not talk about Palin.

Mitt now spends most of his days answering questions about why in the world he would’ve signed a healthcare law in Massachusetts that includes an individual mandate and is almost identical to Obama’s healthcare law. Here’s how he played it yesterday on the stump in New Hampshire:

"Living in New Hampshire, you’ve heard of our healthcare program next door in Massachusetts. You may have noticed that the President and his people spend more time talking about me and Massachusetts healthcare than Entertainment Tonight spends talking about Charlie Sheen. Our approach was a state plan intended to address problems that were in many ways unique to Massachusetts. What we did was what the Constitution intended for states to do—we were one of the laboratories of democracy. Our experiment wasn’t perfect—some things worked, some didn’t, and some things I’d change. One thing I would never do is to usurp the constitutional power of states with a one-size-fits-all federal takeover. I would repeal Obamacare."

I dare you to figure out what that means. It is razor thin. Yet, I appreciate creativity, and it's not easy to get Obama, Charlie Sheen and Massachusetts into the same sentence.

This is a problem that is not going to go away for Romney, and even though it's just one issue, it is the issue for the far right. His book was released in paperback this month, conspicuously scrubbed of any mention of the individual mandate. Surely someone at the meeting said you can’t say you have no apologies about the central provision of, and most incendiary aspect of, the healthcare law, and then delete it wholesale from the book because it is going to be obvious. There was this thing I like to call "the hardback." No, that conversation had to have happened, and Mitt would've made the final call and likely said something like: we're going to do it, and I'll take a small hit, but removing it from the new edition is a great way to show how my position has evolved. I can't change the Massachusetts law, but there's no way to get elected without disavowing RomneyCare/ObamaCare, and this is our chance.

Romney is a polished politician whose convictions are malleable, and he's the guy to watch in the main event. He is clearly a winner, but to get elected president you either have to have a set of policies that appeal to a broad constituency, or a charismatic enough personality that allows the constituency to trust your policies even though they may not be entirely sure about them. Romney has neither, and thus has spend the last four years contorting himself whichever way the breeze blows, and that makes for a compromised character. Regardless, by the time Huckabee, Palin and Gingrich get done with him he'll be caricatured into a socialist come polygamist with a dog strapped to the roof of his towncar.

~~~

I'm waiting on a comer. There's still time for someone to emerge to lead the GOP field, but the window is closing. And I really don't know who it would be, so I still think it's Romney. It appears the leadership is gradually convincing itself that Obama is unbeatable, so they're not going to waste the best horses. It's possible the stock market crashes again in the 18-month lead up, especially if oil keeps soaring, in which case that'll dramatically level the playing field and provide an opening for a wild card late in the game.

Regardless, we need a GOP enlightenment, renaissance, whatever you want to call it. We’re facing the exact kinds of challenges to national security, individual freedoms and fiscal discipline that are the cornerstones of its platform. But when the leadership is broken, it’s hard to appear credible, and that is what has happened today. Top-shelf conservative thinkers are probably scared to get out in front of a movement that can't stop launching into these crazy tangents. I also keep thinking that reasonable, right-leaning Americans must be about sick of it. It's just not smart, and it's lasted too long.

“If pessimism is not creeping on little cat's feet into Republicans' thinking about their 2012 presidential prospects, that is another reason for pessimism. This is because it indicates they do not understand that sensible Americans, who pay scant attention to presidential politics at this point in the electoral cycle, must nevertheless be detecting vibrations of weirdness emanating from people associated with the party.” George Will, Washington Post op-ed 3/6/11

Debt & Climate: Our Youth Revolt in the Making

2011-02-22T10:25:00.000-08:00

One of key characteristics of the democratic revolutions roiling the Middle East right now is what's called the youth bulge. Many of these countries' 29-and-under population comprises 70%+ of the nation. That is the segment whose dreams are still the biggest for themselves and their young families, who are unwilling to accept repression and poverty for the next fifty years, and who have the energy and networking capacities to organize in droves into its city squares to bring society, and a government, to a screeching halt.

Watching the administration and our foreign policy apparatus wrangle with each unfolding revolt over the past two months suggests there's just not that much to say -- we are for democracy everywhere, and we are against governments shooting their citizens.

The more interesting question is where our own youth will inevitably direct their tour de force in American life. Last week's post was about the growing debt and our political system's inability to deal with it. Last year, I wrote a post on climate change, and a year later we have done basically nothing to deal with the issue. I do not believe that teenagers and young adults will bide their time for very long, Facebook'ing and MTV'ing their way into the new century faced with the prospect of a declining quality of life. The unemployment rate for the country as a whole is 9%, but it's 15% for 20-24 year olds, and 25% for 18-19 year olds.

Nor do I believe a globalized generation will sit idly by while we do nothing on climate change. 18-29 year old's belief and concern with global warming dwarfs their elders'. It's the current generation that would absorb the impact, whatever it may be.

Our youth seem detached, and only about half of eligible 18-29 year olds voted in 2008. My bet is, sooner or later, they stand up and say: "You do not have the right to limit my future."

An updated version of last year's On Climate:

On Climate

The first thing I had to accept about climate change is that there is no right answer. The scale is so big, the atmosphere so complicated, and the time horizon so long, that the science is largely immeasurable and probably unknowable, to man or our machines. If it's real, our generation most likely won't see its major effects. There will never be a consensus among our public about whether it's happening, the severity of the dangers, or what sacrifices are acceptable and smart. Once you accept that, understanding the issue, and the way forward, are much more clear.

Until recently, I assumed most educated people had accepted global warming as a scientific fact. Polls show a huge shift from the mid 90's to the middle of this decade towards public awareness and acceptance. But then around mid-decade, a funny thing began to happen: the polls reversed momentum. Today, 41% of Americans think the threat of global warming has been exaggerated; 66% among Republicans. Only about half think there is "solid evidence" that it's happening at all; less than a third of Republicans. 16% think it is an intentional hoax or conspiracy. Fewer than four in ten think it will have any impact on them in their lifetime. And among a full list of issues including the economy, healthcare, war, etc., global warming ranks dead last for those we're most concerned about. Not long ago, it was at the top of the list, and those polls were all about twenty points higher.

Then, about two months ago I saw an interview with a guy named Bjorn Lomborg. He was being interviewed from the floor of the UN Climate Summit in Copenhagen. Lomborg is a Danish statistician, political scientist and climate skeptic who had written a book called Cool It: The Skeptical Environmentalist's Guide to Global Warming. He was incredibly smart and well-spoken, commanding an arsenal of facts and seemingly genuine. It gave me pause. His premise was that climate change may very well be happening, but the Copenhagen Accord wasn’t going to solve it anymore than the Kyoto Protocol did in 1997. And that we were misdirected in seeking to spend hundreds of billions of dollars with little or no expectation of a return on investment, especially when that money could do a lot of good in the world. In many ways, a billion dollars towards climate change very likely results in a billion dollars not spent on humanitarian aid. So in essence you are indirectly killing people by supporting it. A whole new way of thinking.

Lomborg says we’re acting largely on emotion and inconclusive facts, and that some of this is plain nonsense -- like the imminent demise of the polar bears -- intended to gin up controversy, attention and money. Fareed Zakaria, the host of the show, basically agreed with Lomborg, although emphasized he thought we ought to "buy some insurance."

At the same time, it was often that I picked up the Wall Street Journal editorial page to see a climate skeptic featured prominently. Right leaning or not, it surprised me to see an intellectual property like the Journal mounting such an attack on something I thought was settled. The month went on and I had conversations with three smart friends, ranging from “this is a crock” to “we’re going about this the wrong way,” but all very skeptical. I started riding around town thinking about their arguments; our world is beautiful, it's not the dirty smut some would have us believe. I'd look down from the plane upon the thin layer of the planet we occupy and think to myself, it's ridiculous to believe we could have some catastraphic impact.

This week, the entire Southeast got blanketed in snow, which is a rarity for us in Atlanta. This was at a time when the Northeast is just beginning to dig out of an epic blizzard. As expected, the global warming skeptics came out in droves claiming victory. With all that going on around me, I figured I could no longer afford not to have an understanding of, and stance on, climate change.

~~~

The first thing I did was drive over to Barnes & Noble and read Lomborg’s book. It’s a short, fascinating read that’s being turned into a documentary releasing in September. Each chapter of the book takes a different argument, from polar bears to heat waves to rising tides, and tears it down methodically. Armed with his stats, Lomborg makes cases such as a moderate rise in temperature would actually result in many fewer deaths, and the net effect on arable farming would be hugely positive for agriculture worldwide. After reading about twenty of the arguments, I was rooting for global warming.

At every turn, the skeptics have a rebuttal. They say we are going through a typical cycle, and that the Earth will adapt to new conditions as it has for 4 billion years. They feel it’s hubris (and idiotic) to think that little specks burning some fuel is going to destroy the planet. Their extremes, the denialists, take it a step further and say it’s all a hoax, there’s zero probability of anything of the sort, or some combination.

We are a naturally skeptical public. There was a time from the 1930's until the 1960's when America had great faith in its institutions, a result of our reliance on government to overcome The Great Depression. But then came Vietnam, Watergate, Monica Lewinsky, the Iraq War and now The Great Recession. Suddenly, we're right back to where we were, having lost faith in the credibility of our insitutions and its ability to solve our greatest challenges. Today, less than one quarter of the country trusts the government to "do the right thing most of the time." The approval ratings of Congress are at an all-time low. We, especially the less educated, don't believe anything they tell us.

For better or worse, America also has a tendency to procrastinate on the big decisions. We don’t fight wars until attacked, or until someone is about to take over the world. We don’t raise taxes until a debt bomb explodes. We don't reform the financial system until it implodes. We don’t address healthcare until it threatens to bankrupt the economy. We're very reactionary. Human beings by nature aren't hard-wired to think long-term. We make illogical choices for short-term gain with little regard for the long term. Unfortunately, the most intractable problems are those whose onset is gradual and whose risks are long-term.

The search continued and I landed on Tom Friedman, one of experts from the other camp. In Hot Flat and Crowded, Friedman takes the science and systematically builds the case for climate change in a globalized world whose population will double and eventually triple. He says it is absolutely happening and that it's going to be devastating. Fridman and the believers want to stave off a 5-10 degree change in average temperature, which they fear will begin to happen around 2030 if we continue business as usual. They believe that shift will set off chain reactions in nature that will severely harm human health, the environment and our economies from any combination of:

• Rising sea levels will inundate coastal population centers
• Rapidly-changing habitats will diminish biodiversity
• New pathogens will overwhelm slow-evolving immune systems
• Destabilizing atmospheres will cause severe weather
• Rapidly rising temperatures will cause crop failures
• Glacier melt will disrupt centuries-old water supplies
• Pollution will increase the rate of respiratory illness
• Food scarcity will trigger migration and armed conflict

But Friedman takes it a step further. He approaches the issue in what management gurus call win-wins. To him, climate change is actually the biggest opportunity America will have this century. His thesis is that our biggest problems -- dependence on foreign oil and the wars being perpetuated; an economy cratered due to a loss of manufacturing; and what he believes to be the one-day destruction of our planet -- can all be solved with a revolution in energy technology, or ET. And should America lead such a revolution, it will solidify our standing as the world's economic, military, moral and humanitarian leader for years to come.

These are my conclusions. The key insight is that although there are brilliant people on both sides of the argument, the Friedman argument has all the potential upside for America.

~~~

There is broad consensus among the experts that global warming is happening

Issues that affect the planet are global, therefore the UN is the de facto body. The UN agency for such things is the Intergovernmental Panel on Climate Change, convened in 1988 to begin studying the matter. The IPCC includes most of the world’s foremost experts on the climate and hundreds of other specialists who have been studying the matter for two decades now. They conclude that it is “unequivocal” that warming is happening artificially and that greenhouse gases created by humans are causing it. That view is shared by the National Academy of Sciences, the National Oceanic and Atmospheric Administration, the World Meteorological Organization, the Environmental Protection Agency and NASA.

The big "Climategate" controversy over whether data is manipulated or skeptics' views are being shut out of the debate appears to me to be frivolous. Do scientists present data in such a way to support their view with the most compelling cases? I'm sure they do. When a relatively small number of scientists question the consensus of these prestigious bodies do members call them out for being foolish? Absolutely. I seriously doubt that tweaking data here and there would've fooled NASA. It makes for a good cable news story and is catnip for skeptics, but is there real dissent in the scientific community? No. As an article in the New York Times recently put it:

"The battle is asymmetric. Scientists feel compelled to support their findings with careful observation and replicable analysis, while their critics are free to make sweeping statements condemning their work as fraudulent. Scientists have to do a better job of explaining that there is always more to learn, always uncertainties to be addressed. But they also need to remind people that the occasions where a large scientific consensus is overturned by a few scientific heretics are very, very rare.”

The British House of Commons Science and Technology Committee investigating the controversy concluded:

"We see no evidence to support charges that the University of East Anglia's Climatic Research Unit or its director, Phil Jones, had tampered with data or perverted the peer review process to exaggerate the threat of global warming. As far as we are able to ascertain, nothing in the more than 1,000 stolen e-mails challenged scientific consensus that global warming is happening and that it is induced by human activity."

The vindication was buried on page A11 of the New York Times, whereas the the erupting controversy was the A1 lead last Fall. "They did nothing wrong" doesn't sell as many newspapers and doesn't have the cachet of a global conspiracy.

The British investigation joins a series of investigations by the National Oceanic and Atmospheric Administration, Pennsylvania State University, the InterAcademy Council, and the National Research Council that have all exonerated the incident. And yet the chairman of our Congressional Environmental Committee, Oklahoma's Sen. James Inhofe, said the report was far from a clean bill of health and showed that the scientists “engaged in data manipulation.” Asymmetry in action. Inhofe is well known as a skeptic, whose biggest fundraising contributors happen to be the oil, gas and electric utility industries. It's not that these kinds of obvious connections make skepticism wrong, it's just you'd like the chairman of the most powerful institution on earth pertaining to the matter to be less polluted.

Big picture, skeptics want to view temperatures at a single moment in time, on an absolute basis. But climate has to be viewed relatively, over long periods of time. It's not just whether temperatures rose or fell, it's how much it rose or fell relative to how much it would have without the influence of greenhouse gases. It's too simplistic to say climate change isn't possible because there was a blizzard this week or because temperatures fell in 2009. The fact is that 2000-2009 was the hottest decade on record and the only place the temperature cooled in 2009 was North America. And the 90’s was the hottest decade before that, the 80's before that, and the 70's before that. That’s a trend. Climate change has to be viewed within tens, hundreds and thousands of year cycles. It seems obvious that a macro-warming trend across decades or centuries would have micro-cooling events interspersed.

Those who would deny that global warming is occurring are compelled to either cite a credible expert body who agrees with them, or find an argument more compelling than "these epic blizzards prove everything is normal."

The cause-and-effect of global warming is completely logical

In physics, we know there is such a thing as the greenhouse effect and that it increases temperature. We know that carbon dioxide is a greenhouse gas. We know that we are the first species to ever pump vast quantities of greenhouse gases into the atmosphere. We know from ice core samples that carbon dioxide levels fluxuate over millenia, but today's level far exceeds anything in the past one million years. We know that ice melts as temperature rises. We know from satellite imagery that the polar ice caps are now melting at an alarmingly accelerated pace. We know that the majority of the population lives on the coasts. We also know that inserting artificially high levels of gases into stable systems causes them to become unstable.

One of the most important features in this complicated debate is that it makes common sense. Yet, we also know that what we’re trying to figure out is infinitely complex, and because of that, skeptics are free to seize on the inevitable inaccuracy of predictions to assert that nobody knows for sure what is happening, what dangers will unfold, the likelihood it happens, or when if it does. And they're right. But that still doesn't make the greenhouse effect any less common sense.

The other problem with this line of reasoning is that the original forecasts have consistently wound up underestimating the situation. Emissions levels, temperature increases, glacier melt and other primary measures have been way more than originally expected. Is that really something skeptics want to hang their hats on?

I began asking questions. Do we think the world's smartest climatologists have been bamboozled? Are they choosing to spend their lives solving a problem that's probably false, or they suspect is unlikely? Are they trying to pull off the greatest hoax in history? Do they want to fool the world into panic?

Or, is the greater likelihood that it is happening, it's just not entirely figured out yet, and since it’ll cost a lot of money to address, those who stand to lose attack it?

Thus, I concluded that the complexity of what we are trying to understand makes its certainty unknowable, and that the likelihood of a climate crisis is unlikely, but that it is absolutely possible.

When there is an unknowable level of certainty of catastrophe, the smart thing to do is buy insurance

That’s when I stumbled onto The 1% Doctrine. What is the likelihood that terrorists will detonate a nuclear bomb in America? The complexity of funding, creating, acquiring, securing, operating, transporting, and detonating a nuclear bomb by an unsophisticated, rogue, poor enemy is remote. But that doesn't mean we ignore it. We pursue it vigorously because of the catastrophic threat it poses to our way of life.

“If there's a 1% chance that Pakistani scientists are helping al-Qaeda build or develop a nuclear weapon, we have to treat it as a certainty in terms of our response. It's not about our analysis. It's about our response.” Dick Cheney in Ron Suskind’s bestseller The One Percent Doctrine

The question then becomes how much resources to allocate towards it. We have bigger, more likely threats to deal with such as Russia and China. But is a 1% chance of catastrophe worth at least 1% of the Defense budget? I think most people from every political persuasion would say yes.

And it’s true that addressing climate change will cost lots of money. Several think tanks, Nobel Laureates and independent commissions have estimated how much a cap-and-trade system would cost the US economy and the world. For our part, it is generally estimated at around $100 billion a year in the beginning, eventually phasing out over time once the technologies are developed and implemented. Essentially, you charge for carbon use over a certain cap, and the totality of that extra cost adds up to $100 billion. The incentive to use less carbon triggers market forces to create non-carbon energy sources, and over time those sources will eventually realize economies of scale and cost efficiencies to phase out the costlier carbon-based sources. Because we are built around an energy infrastructure of carbon, it will take a long time for that to happen, but if capitalism and free market economics works then it will happen, and probably a lot quicker than people think.

While $100 billion is a lot of money, it is 0.7% of the US’s $15 trillion annual economy. Meaning, in its most expensive year cap-and-trade fulfills The 1% Doctrine. Therefore, if you accept the basic premise of insuring against disaster, and you believe the climate crisis has at least a 1% chance of happening, then surely cap-and-trade is worth 1% of our money for a decade or so.

The other cost estimate is not the amount of money we would have to pay, but the effect it will have on our growth potential. I think this completely misses the boat on how a clean energy industry could actually multiply our growth potential, but I’ll come back to that later.

The Congressional Budget Office estimates that the current cap-and-trade legislation could reduce our GDP by a net 2 percent over the next 40 yrs, which comes out to about 0.05% per year. That amounts to a tax of about $200 per household by 2020. Several conservative sources such as The Heritage Foundation estimate it to be much higher, more like $2000. It’s probably safe to say it would be somewhere in between, but closer to the unbiased CBO figure. Let’s double the CBO estimate to 0.1% of GDP and $400 per household, per year. The average household makes $50,000 per year. That amounts to about a 1% tax annually. Back at The 1% Doctrine.

There are a lot of things we could do along the way to reduce the amount it would cost with little or no impact on our way of life. McKinsey's Pathways to a Low Carbon Economy concluded that we already have nearly all the means at our disposal to keep carbon emissions in check. They found the US could save $1.2 trillion by 2020, by investing $520 billion in energy efficiency improvements—i.e. a net savings.

The problem is, nobody thinks there is going to actually be any kind of national—much less global—movement to do all of these things without a pending catastrophe as incentive. That’s where cap-and-trade comes in.

Cap-and-trade isn’t perfect, but it’s the best thing anyone’s thought of

"We need a successor to Kyoto, a cap-and-trade system that delivers the necessary environmental impact in an economically responsible manner." -- Arizona Senator John McCain in an op-ed in the Financial Times

“I'm not a scientist, I'm a CEO. But the science is compelling. There’s got to be a price for carbon. In some way, shape or form you have to create certainty in the market. I’ve come to the conclusion that cap-and-trade is the most effective way to create a market. There’s going to be people that argue for a carbon tax but I think cap-and-trade is the more practical approach. Let’s debate all that stuff, but let’s get it done.” -- Jeffrey Immelt, CEO of General Electric in an interview with CNBC

"From an economic point of view, the case for a carbon cap is strong. A well-designed cap will push our economy towards clean, domestic energy in the most flexible way possible, leaving business free to grow and thrive. A cap is the smart, centrist, environmentally rigorous approach to our energy and climate challenges. It's the best way to truly change our future for the better." -- Fred Krupp, President of the Environmental Defense Fund in an op-ed in the Wall Street Journal

I've yet to find any plan with more comprehensive backing from the business community, environmental community, and politicians. The two basic options are a tax on carbon and a cap-and-trade system, and there is almost universal agreement that cap-and-trade is better.

Some of the most prominent corporations in the country, including ConocoPhillips, Deere, Dow Chemical, DuPont, Ford Motor Company, GE, Johnson & Johnson, PepsiCo, Shell, and Xerox agree that cap-and-trade is the best way to regulate emissions while fostering economic growth, and they support it.

The nation's leading environmental groups including the Environmental Defense Fund, National Wildlife Federation, National Resources Defense Council, The Nature Conservancy, Pew Center on Global Climate Change and World Resources Institute also support cap-and-trade.

Even though it's not technically a tax, essentially cap-and-trade is an incredibly complicated incentives system that acts as a tax. But because of Americans aversion to taxes, it’s not called a tax. But it’s definitely a tax in the loose sense of a “We're going to give you an incentive not to do something by making you pay if you do."

Think about the parallel of a gasoline tax. Of the $3 we pay for a gallon of gas, about $1 is tax. With our 300 million people and $15 trillion economy, we use roughly 20 million barrels of oil a day. The European Union has about the same number of people and size of economy, yet we consume 33% more oil because their gas costs twice as much due to a much bigger gas tax. Market forces have created alternate pathways and mentalities in European societies -- e.g. driving less, smaller cars, hybrids, telecommuting, high speed rail, dense population centers, building up not out, renewables -- to use less oil. The only way government is typically effective is to offer an incentive to do, or not to do, something.

Cap-and-trade is a market-based system that we’ve had some success with. The same argument was made with acid rain and sulfur dioxide that cap-and-trade couldn’t work, but it did. Today, there is no threat of acid rain, and we’re all the better for it. That doesn't mean it’s a sure thing it will work this time, but it’s a good indication that it might.

Emerging markets are likelier to follow our lead than not, and many of the risks are already baked in

Will cap-and-trade actually solve the problem? Where this whole thing gets tricky—and where the naysayers have the best ground to stand on—is whether the carbon reductions realized by cap-and-trade would actually prevent a climate crisis.

In order to work, capping emissions from the developed world is a good start because we represent 75% of all emissions. But if the Chinese, Indians and the rest of the developing world fail to match those caps and the sum total still rises above the threshold, then the benefit will be much smaller, and possibly all for naught. The Lomborg argument goes that instead of spending vast sums of money and wreaking havoc on the economy in the process, we should simply spend those vast sums on a new energy source, or on other things.

This is complicated by the speed at which those economies are growing—10% and 8% annually in China and India—as well as the size of their populations—1.3 and 1.2 billion, or about one third of the world. In practical terms, it’s the number of cars and coal-fired power plants to heat homes and light businesses as they become wealthier and pursue a more modern lifestyle.

There are two risks we run in this scenario, and what has some people going nuts. It’s something along the lines of a very reasonable “everybody should have some skin in the game” and a very kindergarten-like “I’m not doing it if he’s not.”

The first risk is that emerging countries make no effort to address the problem in coordination with us, or that they would like to participate but can’t because they’re poor and the developed countries are unable or unwilling to fill the fiscal void. That risk is real, but unlikely. China, India and the rest have just as much at stake as the rest of us with regards to the dangers to the planet -- they have no interest in seeing a catastrophe. They’re even more real for them because, should such a thing happen, they are less in a position to handle them. Furthermore, because of their massive populations, air quality effects are multiplied. The population hubs of China and India are already some of the dirtiest in the world. The incentive structures are basically the same. It’s true that the capabilities to act are different, because they are just now using their finances to bring millions of impoverished citizens into modernity, but it’s not necessarily a zero sum game.

The other factor that encourages buy-in from emerging markets is an appetite to become a part of the global economic system. China and India must maintain solid trade relationships and political standing with the developed world in order to become a full-fledged partner. We see that in their hesitancy to go it alone on security decisions. It’s unlikely that they would just shun the rest of the world’s initiative, thereby making themselves pariahs for economic interests. It would also be entirely in their interest to participate in an energy revolution that created jobs and wealth, and reduced dependence on foreign resources that drain their finances just as they do ours. If there are clean, cheap alternatives coming online, market forces would create incentives for them to participate just as they would us. We see that today, as China begins to lead the world in solar, battery and nuclear technology. The groundwork of coordination, and even leadership, is already being laid, and that is likelier to continue than not.

The second risk commonly cited is that for some industries, especially manufacturing, it will be more expensive to make products under cap-and-trade, so we'll lose jobs and market share to emerging markets. But that's already happened. Manufacturing is now only 10% of our economy, down from 25%. The biggest costs of manufacturing are energy and labor. Regardless of whether our energy costs go up, that isn't going to change their cheap labor, thus, the jobs will continue to offshore. Unless we figure out a way to reduce our energy costs. It's true that cap-and-trade might put more pressure on our manufacturing base, and it's no certainty that we'll ever be able to rebalance their currency so their labor costs aren't 90% cheaper. But those jobs are already gone, and you can’t have your primary argument be something might happen if it's already happened.

The economic benefit of going green is the only thing that will convince people to act

The possibility of a catastrophe at an unknown time in the distant future that sets off an unpredictable chain of events, each with consequences also unknown, is lost on America's strict sense of “I’ll do something about it if it’s obvious and right in front of my face.” If the climate crisis is real, I’m worried that the timeline for action isn’t conducive to such an ethos.

I began wondering if a different message would be more effective. Walking around some emerging markets, the amount of smog is disgusting. In Delhi, at times I literally gasped for fresh air. The horizon is opaque. In Beijing, you cannot see the skyscrapers right across town. I can’t help but think seeing dirty smog and the intuitiveness of getting sick by breathing it wouldn't be a more effective message than a disaster could happen one day. This is the tack they're taking in China:

“There is really no debate about climate change in China. China’s leaders are mostly engineers and scientists, so they don’t waste time questioning scientific data. The push for green in China is a practical discussion on health and wealth. There is no need to emphasize future consequences when people already see, eat and breathe pollution every day.” -- Peggy Liu, chairwoman of the Joint U.S.-China Collaboration on Clean Energy

But I began to question the health notion. The air here is clear and crisp, and the sky is beautiful. This approach would suffer from the same long-term "maybe it will get really bad one day" sketicism. Where I finally netted out is that, as usual, no incentive will be more powerful than a wealth one:

Let’s say you think global warming is ridiculous. There are still ten indisputable economic realities to face. First, this is the worst economic crisis in three generations; throughout history, real estate and banking crises are deep and long. Second, we have a $14 trillion debt and no way to pay it back; our budget forecasts have us adding $1 trillion every year for the next decade, and soon the bond markets will force rates higher and the dollar lower as a result. Third, the world isn’t buying what we’re selling anymore; manufacturing has gone from 25% of our economy to 10% as we've offshored and outsourced our jobs and factories in droves. Fourth, we give $300 billion to other countries each year for oil. Fifth, we continue to fight wars on a tiny sliver of land halfway around the world, which just happens to also be where most of the remaining oil is.

Sixth, there is no Agricultural Revolution, Industrial Revolution, Internet revolution, housing boom or credit boom around the corner that will dig us out of this anytime soon. Seventh, if given the opportunity, every country in the world would prefer to buy clean energy than burn dirty fuels if it was cost effective. Eighth, no society in the world has anything as advanced as the innovation center that is Silicon Valley to create highly-complex solutions. Ninth, our university system and institutions of higher learning and research are the most sophisticated in the world; 18 of the top 20 universities in the world are in America; nobody has anything like The Ivy League or MIT's. Tenth, we have the world’s largest economy by far; 25% of the world's wealth.

Regardless of stance on climate change, the indisputable reality should be that it's entirely within our abilities to invest the time, money and jobs necessary to create a renewable energy source. Then form our economy and infrastructure around it, and ultimately sell it to the rest of the world. If the history of financial and housing crashes is any indication, something epic will be needed to save our economy from a twenty-year downward spiral. We'll probably wind up doing it if for no other reason than we have to.

~~~

I probably discovered and included a small fraction of the debate. We could argue about global warming for the next fifty years; we might. Some people will be convinced, some won’t. We could devise models to predict what the planet will be like and the dangers posed; some will be right, some wrong. There will never be a consensus. Yet, that seems like what we are waiting for.

History either provides reassurance or reason to doubt, depending on your take. Colonel Edwin L. Drake drilled the first oil well in Titusville, Pa. in 1859. John D. Rockefeller formed the Standard Oil Company in 1870. Henry Ford introduced the Motel T in 1908. It’s now 2011, one hundred and fifty two years later, and we’re still using oil to power everything that moves. Do we really think that one hundred and fifty years from now the same will be true?

History either provides reassurance or reason to doubt: Colonel Edwin L. Drake drilled the first oil well in Titusville, Pa. in 1859; John D. Rockefeller formed the Standard Oil Company in 1870; Henry Ford introduced the Motel T in 1908. It’s now 2011, one hundred and fifty two years later, and we’re still using oil to power everything that moves. Do we really think that one hundred and fifty years from now the same will be true?

America's history of addressing our biggest challenges victoriously suggests we will again. But the paralysis of today's political system, the change in momentum of acceptance of the science, a lack of any imminent catalyst, and the daunting hole just blown in our financial situation could mean the inconvenient truth is that we don't have the tools to succeed this time around.

I still believe that if America’s power is fully unleashed, a positive outcome is likely. It is the clearest opportunity for greatness we as a people have in this generation. As with everything else, it’s only a matter of leadership. And if America saves the world in the process, it won’t be the first time.

The 2012 Budget: Ask and Ye Shall Receive

2011-02-14T14:43:00.000-08:00

The Obama Administration’s new budget was released yesterday, just a few days after a new Pew poll that asked Americans about their dollars and sense. Both are telling about the current state of the union and the citizen mind.

This year’s budget is $3.7 trillion, bringing the federal government's share of the total $14 trillion economy to about 25%. We're projected to take in $2.0 trillion in tax receipts, which means the projected deficit is $1.7 trillion. That we spend almost twice as much as we take in is submitted without comment.

For all the tortured souls that will emerge from cocoons this week to promote the budget as a tough-minded approach to cost-cutting, it’s noteworthy that both the budget and deficit actually went up—this year's figures are slightly bigger than last year’s $3.6 trillion and $1.6 trillion, respectively.

This morning's editorials from the New York Times and Wall Street Journal were similarly critical. When that kind of lightning strikes, you know something's up.

"This will go down as canny politics in Washington, as the President lies in wait to ambush Republicans when they propose their real spending cuts. Then he hopes he can cut them to ribbons on his way to re-election. That may be the White House game plan, but we wonder if the politics will play out that way. The American people also want a President to lead, and this budget is so transparently cynical it may help Republicans make their case that if they don't lead, no one will." WSJ

"What Mr. Obama’s budget is most definitely not is a blueprint for dealing with the real long-term problems that feed the budget deficit: rising health care costs, an aging population and a refusal by lawmakers to face the inescapable need to raise taxes at some point. Rather, it defers those critical issues, in hopes, we assume, that both the economy and the political environment will improve in the future." NYT

This is the steady rise in total government spending across the last century, combining federal, state and local governments. As a proportion of our economy, the government keeps getting bigger and bigger.

This is how the administration’s new budget breaks down. Note that entitlements, Defense, and interest on the debt comprise about three fourths of the budget.

Although we have deep structural problems in our economy due to the offshoring of our manufacturing base to Asia where labor costs are 90% lower, the entitlements are the core issue. Why the budget and deficit continue to rise, and why it will continue to do so, is simple: thanks to the baby boom sixty years ago, our demographics now dictate that we have more old people as a proportion of the population than we used to. Since old people need more healthcare and can’t work, their Medicare and Social Security payments continue to rise proportionally. The ratio of workers-to-seniors continues to fall, especially once we throw in a once-in-a-lifetime recession, so there's less people creating the money to pay for the seniors. The lost tax revenues from the recession only piled on to a problem already with a head of steam. Add that to the straight up rise in healthcare costs over the past ten years, and that's the lion's share.

The national dialogue has methodically shifted over the past year to now pressing politicians on why they focus on the tiny blue sliver and not the big ones. It’s good that that's happening, and the Deficit Commission late in the year crystallized why we either deal with the big slivers, or there’s really no arithmetically realistic way out of the jam. But the budget incorporated exceedingly few of the commission's big ideas.

"This budget goes nowhere near where they will have to go to resolve our fiscal nightmare." Erskine Bowles, Co-Chairman of President Obama's Deficit Commission

But it’s the Pew poll that tells us why we’re in the jam, and why we can't get out. Yes, politicians are beholden to corporate influences, global quid pro quo, special interest groups, and so on. But when the people convene a majority and loudly say they want something, action follows pretty quickly. Telling examples from this year are the success of Don’t Ask Don’t Tell (support for gay rights hit a tipping point) and failure of climate change legislation (support for which is beginning to go the other way). If you can get 60%+ support on an issue, it's a done deal; that's democracy.

The fact that the government is now swollen to unsustainable levels has reached the point of common knowledge. So Pew asked Americans what we're willing to increase and decrease spending on. Focus on the percentages willing to decrease each in 2011.

None of them even scare 60%. Next, Pew asked which state services should decrease or which taxes should increase. All are rejected at right around the magic 60%.

Finally, Pew asks whether Obama could be doing more to help the economy. 56% say yes he could.

If you don't want to pay more taxes, yet aren't willing to decrease spending on anything, and still want your President to do more, that means you want him to spend more money. Thems is the options.

In a vacuum, it makes sense to me that there is an optimal level of taxation in order to trigger a vibrant economy. We agree that government is necessary to do the things collectively that can’t be done individually, and that government must be funded with taxation. Whatever that level is must be one that will not stifle innovation or the allocation of capital, one that will enhance and maximize the quality of life for its citizens, yet invest adequately on their behalf for the future, and above all else, one that pays for the services it provides in a balanced budget, sound money fashion that is responsible towards the next generation of Americans. We simply don't have the right to screw the country up for them by limiting their potential growth and saddling them with debt.

Since ours has been the most successful economy in the history of the world, amassing 25% of the world’s wealth with 5% of its population in a little over 200 years, I think it’s safe to say that whatever we’ve been doing over the past century is probably about right. We may have to tweak it now that we’re in a jam to pay down our debts, but we know where we ought to end up.

Our total taxation as a percentage of the economy is as low as its been in 50 years:

Income taxes especially are historically low:

Versus just about every other developed nation in the world, we’re extremely tax-light, which has clearly served us well:

The point is, when people talk about how high our tax burden is, that’s wrong -- we're taxing less. When government talks about the tough choices they’re making, that's wrong -- they’re making the easiest of the tough choices. And when people talk about how worried they are about our finances, that's wrong -- they don’t want to pay more taxes and don’t want to cut benefits. We either don’t have a grasp of the math, are not being serious, are being selfish, or are being intentionally misled.

For the GOP, the logic snag comes from their insistence on keeping the Bush tax cuts, all the while carping that the new budget doesn't cut enough. Putting aside the fact that the tax cuts are a major reason we're in the deficit/debt jam in the first place, their ideological premise is that removing money from the economy in the form of higher taxes would weaken it at a perilous moment. By the same logic, cutting the size of government should also weaken it. They have arguments why not, but if government is 25% of the economy, and you instantly rip out a big chunk, it would hurt.

Obama held his second press conference in two days and is saying all the right things about beginning to solve the problem, but this first pass is tepid if anything. He's in a tough spot -- if he slashes government programs the left will howl; if he slashes entitlement benefits he can't get re-elected; but if he doesn't slash enough, the GOP will crow and then steal the mantle of fiscal responsibility.

Regardless, today's budget projections forecast $1+ trillion deficits for many years to come, all of which gets added to the national debt that now stands at $14 trillion. Next month we’ll have a big fight in Congress about raising the debt ceiling above $14 trillion, which we know will be pure theater because the deficits dictate that it’ll have to be raised again, and again, and again; with every annual trillion dollar deficit will come an increase.

In their book, This Time is Different, Rogoff and Reinhart tell us that once debt reaches 100%-to-GDP, economic growth slows by about 1%. The chart shows we're almost there. That happened only one other time in our history due to the cost of WW2, then we immediately paid it down. Somehow we've done it again, but without the war.

In 2011, we’ll grow around 3%, which is about our long-term average. The Rogoff/Reinhart finding means that we will probably begin to fall to 2% in the years to come. That 1% direction -- the difference between falling to 2% versus rising to 4% -- is the whole ballgame.

I have to assume it'll take another crisis to snap us into action. A lot of smart people say we've still got 10 years before it becomes a catastrophe. Others are worried that the relatively brief crisis of 2008-2009 dulled our senses to what a real one actually looks like. It's going to be very interesting to see how a world responds to its only superpower on the brink.

"America will always do the right thing. But only after exhausting all other options." Winston Churchill

In Defense of Food: The Gospel

2011-01-31T15:55:00.000-08:00

I re-read Michael Pollan’s In Defense of Food over Christmas. Among his works, I consider Defense to be the masterpiece. These are some of his big insights, with a few of my own. Once you step back and think about what food has become, a new world emerges. But until you do, nothing seems amiss.

Simplification of the Soil: The Holy Trinities

It helps to figure out how things came to be. Around 1950, two discoveries converged: first, we realized that crops need only nitrogen, phosphorus and potassium (NPK) to grow, and second, we devised how to harvest nitrogen from fossil fuels and synthesize it with the other two elements into fertilizer. We no longer had to wait on organic decomposition of carbon life forms to fertilize soil for next season’s crops. Plants could grow to fruition with shallow roots in NPK-infused soil, bigger and faster.

Unfortunately, not having deep roots or organic building blocks simplified plants' composition—they were bigger and just as filling, but didn’t have nearly the same concentration of nutrients. NPK's harshness also killed off much of the biological activity in the soil, thus simplifying crops further. According to the Department of Agriculture, we have to eat three times as many of some vegetables today to get the same nutrition as one in 1950.

The search for yield continued. Soon we discovered that corn, soy and wheat are nature’s most efficient machines for turning sunlight and NPK into edible energy. The government began subsidizing the trinity so they would live long and prosper. Subsidizies triggered price incentives to foodmakers, and the result is today two thirds of the calories we consume comes from these three crops alone. Because we were producing so much of them, we fed them to livestock instead of grazing, thus closing the food chain loop of a super-simple diet. Today, we have 4% of the world population, yet produce 40% of global corn output. Pollan’s other book, Omnivore’s Dilemma, details this with a trip to a fast food restaurant where everything, even the bag, is based on the crop trinity.

The key insight is that, in a world of rich ecosystems of foods and elements, we now have to actively seek them out. If our bodies need more than the trinities to run smoothly, it now takes effort to acquire them.

The Religion of Nutritionism: Food Reduced to the Sum of Parts

This is where Pollan hits his stride and provides the concept of Nutritionism. A hundred years ago, the only nutrients we’d discovered were proteins, fats and carbohydrates—what we know today as the macronutrients—so that’s how we explained nutrition and health. But then sailors with ample access to macronutrients kept getting sick, and we discovered vitamins. As the decades rolled on, we moved beyond macros and vitamins and discovered amino acids, hailed as the key nutritional discovery. More recently, we discovered macros’ partners in crime, micronutrients—omega-3’s, anti-oxidants and hundreds of other varieties. Every generation has its nutritional crown jewels.

Today, we spend more resources researching nutrition and purveying what we think we know than any society. There is a sense that we now have an exact understanding of the science behind food, with our clear evidence and convincing models. The question is, if at each stage of nutritional history there was a new class of nutrients we didn’t know existed, why all the surety now?

Our approach breaks things down into parts. Food is biology and chemistry, thus subject to the scientific method, revolving around independent variables where the presence of something is used to determine its properties. Since we also tend to see things in terms of black and white, we've classified nutrients as good or bad, residing along an arbitrary spectrum of value.

The path to Nutritionism also has a historical component. During World War II as meat and dairy products were rationed, we began noticing the rate of heart-related illness went down drastically, then skyrocketed afterwards. The same didn’t happen in other countries, and researchers concluded it was the saturated fat and cholesterol in meat and dairy that were to blame. In 1977, the Senate Committee on Nutrition issued guidelines specifically advising Americans to cut down on red meat and dairy.

As expected, the two industries went nuts. The Committee then changed its recommendation to: “eat meat and dairy with less saturated fat.” Notice the difference—one says to eat less of a food, the other says to stay away from a nutrient. The chairman of the Committee, Nixon's 1972 presidential opponent Sen. George McGovern, was ousted in his next election, with the opposition funded heavily by the industries he’d offended. To this day, there hasn't been an incumbent senator beaten as badly as the drubbing that McGovern took. Thus, from that day forward no government policy ever specified not to eat a specific food, it's always bad nutrients.

The bad nutrients shift over time. First it was protein. Then carbs. Then fat in the 90’s. Then carbs again with Atkins and South Beach in the 00’s. We’re due for another shift, and with it will come a new raft of diet books, each glorifying some nutrients and vilifying others. The question is, if we actually knew what we were talking about, would the nutrient in favor keep changing with each generation?

As Pollan defines it, Nutritionism is the belief that all we need to understand food and its relationship with the body is its chemical constituents: that the sum is equal to the parts. Let’s challenge it and see if it holds water:

~Do we know what’s in an apple? In other words, can we identify and quantify its parts and systems? Until recently, I would’ve said yes of course. It’s so many parts sugar, fiber, Vitamin-C and so on. If so, surely we can bottle those things in a caplet with the nutritional benefits of an apple. But consider the desert island hypothetical: for a full year, you’re stuck with an apple tree or you’re stuck with apple caplets. In which scenario would you be healthier? The real apples of course.

~The logic takes another turn by asking why we can't make an apple if we know everything in it and how it works. A synthetically-processed apple that feels, looks, smells, tastes and ages like an apple has somehow eluded us.

But why the contradiction? The answer is that we don’t nearly understand the complexity of food's parts and systems, nor its relationship to the complex systems among which it interacts. Nutritionism takes the nutrient out of food, food out of the diet, the diet out of the body, the body out of the lifestyle, and the lifestyle out of the environment. The combined complexity of these systems is more than we can explain. Pollan’s book is basically an acceptance of that, and the embrace of a life without trying to.

Gradually and muffled, it’s emerged that the low-fat craze was probably wrong. The Harvard School of Health says, “It is now increasingly recognized that the low-fat campaign has been based on little scientific evidence and may have caused unintended health consequences.”

Further evidence is found in our long search for a cure for cancer. One commonly-held belief is that free radicals attack DNA, triggering the process of cancer. We know for a fact those who eat lots of plants are less likely to get cancer. Since plants are full of anti-oxidants like beta carotene, and the cancer process is largely one of oxidation, it makes sense that the anti-oxidants are the savior. So by isolating anti-oxidants we create beta carotene supplements and fortified foods. But those who ingest the supplements and/or fortified food aren’t any less likely to get cancer. Which means there’s something about the interaction of the anti-oxidants and everything else inside the plants it inhabits that provides the anti-cancer benefit. Food is more than the sum of parts, and we don’t know why.

Pollan says Nutritionism is similar to a religion because we can’t see nutrients so we need scientists to explain it, and we take these priests’ word on faith. Understanding food by nutrient parts is the cornerstone of food science, and without it we’d have to admit we don’t know what we’re talking about.

Let’s suppose for a moment we do. All our nutrient knowledge must ultimately be intended to help us be healthier—surely that’s the point. So at our moment of peak knowledge, it’s curious that we’re the most unhealthy of any society, and we’re the least healthy we've ever been. Two thirds of us are overweight, one third outright obese, including a fifth of children. We have the highest rates of diet-related chronic illness of any advanced country. Four of our top ten killers are directly linked to diet—heart disease, diabetes, stroke and several forms of cancer. It all begs the question, if we really understood food, wouldn’t we be healthier?

The Industrialization of Food: At War with a Mid-Size Country

Pollan does a nice few chapters on how fake our food has become, which follows the trinity to the factory floor. It’s mostly a different take on Fast Food Nation, so I’m going to skip it here, but the gist is that nothing is as it seems. If you’ve ever wondered how canned soup can last five years, how burgers are freeze-dried then magically taste like burgers again, how guacamole powder becomes guacamole, what’s actually in a Cheeto and how they make it taste cheesy and flourescent orange without any actual cheese, and so on, it’s good reading. Basically, he makes a strong case that nothing packaged into squares and set atop grocery store shelves in the middle of the store is actually food as our grandmothers used to recognize it. It’s an edible food-like substance, but it’s not actually food. We might technically be able to eat things like cookies, pepperoni, soda and bacon-infused Southwest ranch dressing, but it isn’t actually food in the traditional, what’s been food for a billion years, sense of the word. If you can’t envision it growing or breathing, or being extracted from something growing or breathing, it's something else.

What I’m more interested in is how our society has been duped into acting in a manner that defies our self interest—what’s best for our bodies.

In order to get us to do what they want us to, the food industry has pitted the two titans of instinct—self-gratification vs. self-preservation—and employs the arts of conditioning and misdirection. The annual spend of the automotive industry on advertising is $8 billion. The annual spend of the food industrial complex is $32 billion. In a world of 200 countries, Uzbekistan is #81 with a GDP of $32 billion. All my skepticism and cynicism of advertising aside, what I’m willing to accept is that they wouldn’t be spending the GDP of a mid-size country if didn’t work and work well. There’s plenty of neuroscience and choice behavior research to show why we eat more M&Ms out of a big bowl, why some colors and smells appeal to us more, etc. The point is, with $32 billion being spent just on advertising each year, and another $100 billion on the research and development of food, the industry has some firepower.

Where things get really difficult for those of us trying to combat these forces is when the foods we think are wholesome and natural are actually anything but. What are the most natural foods you can think of? Surely, bread has to be on the short list. The next time you’re in the grocery store look at the ingredients of a loaf of bread. It has as many processed chemicals as a pack of cookies. Industry has gotten extremely good at fooling us. When something says it's "natural" or "healthy" on the package, we can be pretty certain it's not.

One of the ancillary benefits of a nutrient-by-nutrient approach to food science for the industry is that all they have to do in order to increase the health quotient of their product is add some good nutrients. To introduce a new product, just add some omega-3’s. To make it more delicious, add more salt, sugar or fat and reduce the serving size on the informational label. To certify that it's healthy, fund a study. All we see is a whole grain cereal fortified with omega-3’s and an American Heart Association seal of approval.

The common link is artificiality. Any food that exists naturally has evolved over millions of years on the Earth. In response to the unveiling of a new food pyramid, one of the scientists Pollan interviewed said that food pyramids are a waste of time. "All we need is a pyramid with whole foods on the top and processed foods on the bottom. If a whole food hadn't evolved to have an abundance of nutrients that would keep animals healthy, it wouldn't have survived natural selection."

There is a point in a plant’s life when it is most ready for its seeds to germinate. Because the plant itself cannot spread its seeds, through evolution the plant has developed traits so that animals will do the work. First, the fruit becomes sweet when ripe, knowing that animals want sugar. Second, the ripeness emits an odor, so it can be swept downwind. Third, it changes color, so the animal will see it from a distance. It took the plant millions of years to develop these traits. And we think we can emulate that level of complexity in an afternoon with a few guys and a chemistry set.

The diet industry is another $40 billion annually. Books, weight loss programs, magazines, DVDs, meal replacements, etc. All with a vested interest in people continuing to be fat, thus needing the dream to be skinny. Yet, according to The New England Journal of Medicine, the vast majority of people who participate in weight-loss programs “are typically back to baseline in three to five years.” But each one needs a hook. No fat, low fat. Bad carbs, good carbs. Fast food, slow food. South Beach, Sonoma. Atkins, Jenny Craig. Slim Fast, Dexatrim. The Zone, The Secret. Pomegranates, Akai. Omega-3’s, Probiotics. Dr. Oz, Dr. Weil. It's taken on a carnival, kitchen sink quality. We’re breathlessly trying to figure out how to do something that human beings had been doing successfully for millions of years. There’s no new physics of food to find; we won't create something out of nothing.

Before the food industrial complex really got going, we spent 20% of income on food, which is in-line with what the rest of the world spends today. But now we spend 10%, as ingredients got cheaper and higher quality, local and perishable foods got more expensive. Over the same course, we went from spending 10% of GDP on healthcare to 20%. Notice the inverse correlation. The irony for America is that eating better would probably pay for itself.

The Western Diet: An Unnatural State

My favorite Pollan anecdote is the anthropological study in Australia among the ten aborigines who had moved close to a nearby city and began consuming their diet of civilization. The aborigines eat lots of processed and fertilized foods found in the Western Diet, drink a bunch of soda and beer, and all ten developed diabetes. So the anthropologist got them to move back to the bush, resume their traditional diet, live off the land, and let her come with. Eight weeks later, all ten had resumed normal sugar levels and lost 20 pounds. It’s reversible.

A close second are the Swiss mountaineers. This anthropologist is a dentist trying to understand how we could have the most advanced dental practices the world has ever known, and yet the number of cavities and root canals keep soaring. He stumbles upon this tribe in the Alps who have never seen a tube of toothpaste, and whose teeth are covered in green slime, and yet underneath their teeth are perfect. Healthy is the body’s natural state—we have to try to be unhealthy.

These anecdotes also suggest that our bodies simply haven’t changed at the same speed our food has, and thus we’re not biologically equipped to process what we’re eating. Our digestive systems haven’t evolved to express a gene to process Snickers so that it helps our body. Our teeth haven’t produced enamel 2.0 so that being covered in processed sugar isn’t threatening.

It follows that the healthiest cultures eat traditional diets. Most of their food is grown and prepared as it has been for generations. The French, Japanese, and Greeks are examples of extremely healthy cultures as measured by weight and disease, yet all eat diets high in saturated fat. The constant is they eat less processed food and less meat. Yet, imagine you're one of them. Don’t we think these other cultures think their food is delicious? If they are taking just as much pleasure in food, yet not suffering the same health effects, what really is the upside to the Western diet?

Their diets also beg the question: if some people eat lots of fatty food and get fat, and other people eat it but don’t, are we sure it’s fat that makes people fat? Now we're back where we started: Nutritionism.

~~~

In the beginning of the movie The Matrix, we come to learn that Neo is becoming increasingly aware that he exists within an opaquely-complex, yet beautifully-structured system being managed by powerful forces for their own benefit. The world, and the pieces on the chessboard as he sees them, isn't real.

Food is like that. It is in the interest of the food complex that we eat cheap, unhealthy food, as much of it as possible. It surrounds us. It’s on every street corner and throughout our grocery stores. It's in our schools and in our workplaces. We have a corral-around-the-food social structure, and a let’s-have-a-nice-dinner-out romantic paradigm. It's how mothers show love. It's how we reward ourselves and how we console ourselves. Its ad dollars are the creamy filler of our central hobby, TV watching.

The good news is, this is becoming more and more obvious. Farmers markets are becoming popular. There are real options for whole foods, though not yet broadly affordable. There is an organic movement underway. Politicians are beginning to pay heed, and the healthcare debate has increased the stakes. Michelle Obama has made it one of her central priorities. Mayor Bloomberg has done the same. Op-ed pages feature nutrition pieces more frequently. Wal-Mart recently announced plans to reformulate its entire line of store brand products over five years to be healthier, and to drop the prices of its fruits and vegetables to make them more affordable. Other food bellwethers like Kraft have announced company-wide plans to reduce the amount of sodium in their processed foods.

This morning, for the first time since the ill-fated '77 committee's report on red meat and dairy, the new Dietary Guidelines was released and took a giant leap forward. Released every five years by the Departments of Agriculture and Health and Human Services, this year, for the first time since Nutritionism was born, advised to eat less of specific foods—soda, pizza, desserts and a raft of other processed foods. “For them to have said ‘eat less’ is really new. Who would have thought?” said Margo Wooten, director of nutrition policy at the Center for Science. “But if companies don’t change their practices and reformulate their products, people don’t have a chance of following the guidelines.” I’m not going to hold my breath. Nor do I really agree that we can’t take more responsibility of our own destinies.

In closing, Pollan’s advice is three-fold: Eat real food. Mostly plants. Not too much. I am adding: Get some exercise, most every day. It really is that simple. But simple shouldn’t be confused with easy. I was about to post this and opened a box of Triscuits. A human being cannot get any closer to railing against the packaged foods industry than I was in that moment, and yet I was elbow-deep in it. It has become nearly impossible to manage the psychology and economy of eating real food, and every step of the way, we should know who and what we are up against, and what their motives are. Like always, it’s money.

Headline Unemployment: Not So Fast

2011-01-09T06:47:00.000-08:00

The jobs report came out yesterday and the unemployment rate dropped from 9.8% to 9.4%. That is the lowest level in 20 months and the biggest one-month decrease in 12 years. As can be seen in the chart, in a short historical context it's less impressive. But the number went down, and precipitously, so that seems like a very good thing.

In his weekly internet address, President Obama said, “Overall, the decline in the unemployment rate is positive news. The trend is clear: we’ve seen 12 straight months of private-sector job growth, the first time that’s been true since 2006.”

Here’s the mechanics of calculating unemployment. Each year, our population grows by ~1%. This has been fairly consistent, although declining over the past decade. The new Census data shows that our population grew 9.7% from 2000-2010 so that we now have 308 million people.

Our growth rate is higher than most countries, especially Europe and Japan, whose populations are actually expected to decline substantially over the next decade. The US trails only India among major economies for expected population growth on a proportional basis.

In order to replace the previous generation, the average woman has to produce 2 children. The rate in the US is 2.06. India’s fertility rate is 2.81. Some of the African nations are in the 5-8 range.

Birth rates, population growth and unemployment are closely linked by the labor participation rate, which is the proportion of the population that either have a job or want a job. The US labor participation rate is about two thirds. 1% population growth means we add about 3 million people a year, thus the proportion of those who either have a job or want a job is around 2 million.

Unemployment is then the proportion of the labor force who want a job but can’t find one. Which means in order to keep the unemployment rate steady, we have to create around 150k jobs each month (2 million ÷ 12 months).

Thus, when the jobs report comes out and only 100,000 jobs are created, yet the unemployment rate has the biggest drop in over a decade, that causes some head scratching. And when the President then touts the number, presumably backed by the smartest economists in the world telling him it’s a good thing, the scratching intensifies.

A little digging and we have the answer, or at least one possibility of the answer. Remember, the unemployment rate is a proportion of the labor force—those who are working or want to work. Let’s use round numbers:

If there are 100 people in the labor force and 10 want to work but can’t find a job, the rate is 10%. If three of the 10 give up, the rate actually improves to 7% because those three come out of both the numerator and denominator (7 ÷ 97 = 7%).

Take a look at the labor participation rate. The latest report shows 260,000 people dropping out of the labor force since November, and the rate falling to a 25-year low.

If the participation rate reverts from today’s 64% back to the mean—around 66% was typical during the “good” economy of 2004-2008—that extra 2% adds 4 million to the numerator and denominator, which would increase the unemployment rate to 11.7%.

We lost 8.5 million jobs in the recession. Which means we would have to create 300k a month for five years to accommodate new entrants and reabsorb the unemployed. We haven't created more than 200k in a non-Census month since the recession ended. This month's unemployment rate going down is indicative of one thing: people giving up. If you need money, have a family and your pride, why would you give up? Because you've been looking for a very long time in futility. The average length of being unemployed is now around 8 months. At some point, it's human nature, and even rational, to give up.

~~~

Until we see 300k+ job prints for months and months, the rest is just noise. Obama is a politician, one whose future depends on economic improvement. Even still, I expect more candor. It's one thing to try and instill hope and confidence or even position his policies as making a difference. But if you ask him whether we should be treated like adults and issues tackled head on, that response is at odds with yesterday's fluff.

I was on a call the other day where a client told me they preferred not to ask employees about moving call centers back from overseas because it's just never going to happen. Companies are accelerating offshoring, outsourcing and replacing human beings with machines because in an environment with stagnant revenue that's the clearest way to increase productivity and thus maintain rising profits. We know it's working because earnings continue to rise, as does the stock market.

Something huge has to change structurally if we are to ever see normal 4-5% unemployment in America again. There is more to the story than the headline.

Wall Street Journal: Conspicuously Obtuse

2011-01-08T09:57:00.001-08:00

A couple days after Christmas, we were lying in bed and I noticed a story on the morning crawl: Banks Open the Lending Spigot. Later that same morning, my visiting father mentioned that he'd heard where banks were starting to lend again. Both were clearly inspired by the Wall Street Journal's "Banks Open Loan Spigot for Businesses" by Ruth Simon, easily identifiable because the word "spigot" kept being repeated elsewhere. Upon going directly to the source, this is the accompanying graphic with that morning's cover story:

Open spigot, indeed. A few paragraphs down, Ruth does us the courtesy of mentioning the 0.2% increase from the third quarter to the fourth that was the inspiration for the gaudy headline, and then diligently plays down any significance the trend might have, noting: "Lending typically rises toward the end of the year as companies increase inventories, so the recent increase might not be sustained."

Dad believed banks were really ramping it up, why wouldn't he? There was a time when I would've believed it too. I figured I'd sit down at my usual Saturday morning Starbucks and give the Journal another shot since it'd been awhile. What followed was a two and a half hour reading of the daily farce that has become Rupert Murdoch's propaganda machine.

~~~

One of the cover stories was a puff piece on the thousands of birds that died spontaneously in Arkansas. The Journal's conclusion is that this is nothing rare, going on to cite numerous mass die offs over the years. Fine, but the reason cited -- New Year's fireworks startling the birds and causing them to fly into things -- wasn't supported by any evidence nor does the piece then press back on the fact that there's fireworks every year all across the country and this doesn't happen. No analytical rigor, no challenging the obvious holes in the story. Odd. It was, in fact, a preview of the coming attractions covering the more newsy of the previous day's events.

The second page characterizes Obama's big appointment, Gene Sperling, his new economic chief, as "a workaholic who tends towards the disheveled." Then proceeds to lampoon him for three paragraphs for among other things a fountain pen once breaking on his shirt and being named most eligible bachelor by W Magazine. I'm sure Gene will appreciate it as his coming out party; the gravitas, not to mention relevance, was unmistakable.

On to healthcare, a WSJ mainstay. Instead of reporting that Republicans' attempt to repeal healthcare is a waste of time since Obama will veto it anyway, or the intellectual non-sequitor of Republicans wanting to strip out the individual mandate (i.e. the revenue generator) while keeping the preexisting conditions rule, banning rescission and spending caps (i.e. the costs), they choose to focus on Democrats voting en masse against the repeal. It's almost as if they don't like Democrats.

About midway through we cover the Defense Secretary's attempt to kill a Marine amphibious assault vehicle for cost reasons, but without ever mentioning the cost. Here, it's as if they are in favor of funding military spending no matter what.

Carl "By the Numbers" Bialik reports that the 1 in 4 stat being bandied about for the proportion of mortgages that are underwater is bad math. As proof, he says first of all it's not all homes, just the ones with mortgages; so really it's only 1 in 6 since a third of homes don't have mortgages. Apparently Carl thinks those other home values somehow escape supply and demand and retain their value, though he doesn't mention how. Then he points out the problems are only concentrated in a few states. I like to point out myself that those are the states where people "live" and thus are a "proportion of homeowners" as the stat implies. Details. He also doesn't like the uncertainty in the estimates. Carl doesn't seem to understand the possibility of overvaluing, just the likelihood of undervaluing. He also doesn't like including those who are "close" to achieving equity in the stat, he prefers what I like to call the horse shoes and hand grenades approach. To conclude, Carl says most people don't really even know their actual equity; a.k.a. the head-in-the-sand approach to home valuation, one that disappears when a house goes on the market I suspect. There's a nice chart in the margin. It shows that the ratio is, in fact, 1 in 4. But Carl's exactly right, some people who have zero equity in their home are very close to zero.

Next up is a searing critique of the hit Mayor Bloomberg's reputation has taken in recent weeks. The key blunder cited was taking too long to dig the city out of the snowstorm. No mention of this being the sixth worst blizzard in the recorded history of New York City, or the fact that it took a week when twenty million New Yorkers expected a couple thousand workers to dig them out same day. The second catastrophic idiocy cratering Bloomberg's now fuzzy future was appointing a new schools chancellors with no schools experience. No mention of him doing the exact same thing last time, or that chancellor largely being lauded as the best in the city's history. The key stat cited is 75% of New Yorkers thinking Bloomberg will ultimately be remembered as "average, above average or one of the best mayors ever." A true failure if there ever was. Bloomberg's finished, again.

Jeremy Page, WSJ Defense Correspondent, suspects that China's leaked images of its new stealth fighter jet may be no leak at all, with a wink and a nod single quotes around 'Leak' in the headline. Says the fact that bloggers know about the plane, and that some appear to have actually been onsite taking pictures at the runway test, means something fishy is afoot. I know for a fact that most bloggers can't even get to their own blog in China, so the fact that they were standing at the fence taking pictures and then posting them an hour later makes me think Jeremy may be onto something. He also thinks China may be sending a message to the world about its military prowess, and maybe the Chinese people to boot. Once again with the penetrating analysis. The story concludes with a subtle dig at Secretary Gates' decision to cut our own stealth fighter because of cost overruns with the rationale being that China wouldn't have one until 2020. But Jeremy thinks it could actually be as soon as 2018. Again, its almost as if they dislike these military cuts.

Upon finally making it to the Opinion page, the very first column decries "ObamaCare" and "raising taxes while slashing Medicare" and thus claims it is "pushing the US toward a European-style welfare state, making more people dependent on government instead of themselves, and undermining the incentives to work." It goes on to rebuke the Congressional Budget Office's assertion that repealing the law will increase the deficit by $250 billion over the next decade, and create more people without healthcare. Let's ignore for a second whether it's more likely that the WSJ or CBO is non-partisan and has a better handle on the math, it's tempting to think having not read this page since around the time healthcare passed that they might have been copying and pasting this every day since.

I kid you not, I turn the page and the next opinion piece is titled "ObamaCare's Reality Deficit." At some point you'd think the editor would get a hankering for something, I don't know, new. Both articles are right in that the new law is a disaster, wrongly conceived, and will not play out as expected. But their rationale -- that it's stupid to think that adding more people will cost less -- avoids even the most simple understanding of the players and motives. Of course covering more people costs more money. The point is that the concessions won from insurance companies to eliminate dastardly and immoral things they do to sick people would have never happened without promising those same companies 30 million more customers and ensuring the survival of private, mostly employer-sponsored healthcare. That's what you said you wanted because the other option is a single-payer, government-run healthcare system, which regardless of how many times you label this that does not make it so. People are going to get sick and require healthcare, it's just a matter of how they are treated and with what efficiency and compassion. Here, it's almost as if they don't care about that last part.

At this point, I've moved through surprise, suspicion and boredom to slide seamlessly into disbelief. One of my personal projects is making the irresponsibility of using smartphones while driving a more acceptable notion. The Journal's Holman W. Jenkins Jr. uses his Saturday morning space to attack Transportation Secretary Ray LaHood for prioritizing distracted driving and now attempting to forge compromise with the auto industry to try and curb it. "A smartphone is no more villainous than eating a bagel" the little Jenkins bemoans, citing studies that show fatality crashes declining even though there's been a quadrupling of vehicles on the road. He also cites the ineffectiveness of cell phone bans in states where they've been enacted. He says safety is served with hands-free voice integration and let's leave it at that and stop being such a nanny state. No mention of hands-free being no more effective versus holding a phone in study after study. No mention of texting causing 23x more accidents than normal driving and 4x as many as drunk driving. No mention of the effect of enhanced car safety and airbags on the rate of fatalities. No discussion of the complexity of enforcing hands-free and no-text laws or the cultural shift necessary to curb it. In fact, there's not really a lot of commonsense at all as the newest Jenkins proceeds for three full column inches to lament "the hubbub over texting and phoning in cars." I would be shocked if he has a teenage girl.

As the paper draws to a close I go hunting for Sports, as the BCS championship is Monday. On the very back page, there is one solitary half-page dedicated to sports. John Paul Newport's Golf Journal has some suggestions on what to work on in the off-season. That's it, that's the end of the paper.

~~~

This morning's reading of the WSJ adds some inches of support to my growing belief that we are fast becoming a nation of sheep, who just believe la-di-da whatever we're told so that Ruth, Carl and the baby Jenkins' of the world can fill their columns. We need a full and vigorous debate in this country if we're going to realize our potential, one that is supported by premier news dissemination on both sides of the aisle. Today, we came up short.

America's Pulse: Confused, but Stable

2010-12-16T07:07:00.000-08:00

This morning’s Wall Street Journal poll really helps to get a feel for where the country is. Interpretting polling results is tricky, but incredibly important. It's now been a month since the election. The results have begun to settle in and somewhere, right now, there are serious men sitting in the West Wing looking at these numbers basing their strategy, and thus our future, at least in part on the results.

Here's what I think the poll told us (click to enlarge the questions and results):

Americans are extremely worried about the future. This number is not getting better.

We feel like what we've just experienced may be the beginning of a decline.

The things that have had the greatest recent impact on our lives as a nation have all been negative.

We’re split down the middle on whether we approve of Obama. But his numbers are firm year-over-year. The people who like him now, like him for good.

Yet, the majority do not approve of his policies, even though we like him personally.

Nor are we confident in his abilities to get us where we want to go.

Nor are we confident that he's going to be successful in what he's endeavouring to do.

We don’t blame him for the economic mess we're in.

But we want to see him focus more on the economy.

There are more Democrats/leaning Democrats (42%) than Republicans/leaning Republicans (33%) amongst us.

We feel that voting in Republicans in the mid-terms was largely a positive thing to do. But we always say this.

We don’t really care about the Tea Party movement.

We're frustrated with all three parties, as evidenced by the positive/negative dispersions.

We approve of the tax compromise just struck.

We’d like to see more compromise so that more can get done. But Republicans are much less willing to see their elected officials do it.

Some realize the President made concessions to Republicans he shouldn’t have had to make on taxes for the top 2% to get the compromise done.

Many of us are ready to go ahead and tackle the deficit now, even though it could slow down the recovery.

Because we don’t think the economy is going to get better anytime soon, so why not get started.

We're roughly split down the middle on supporting the changes we'll ultimately be asked to make, which will mean higher taxes and less services.

But we would much prefer to do it by shrinking government than raising taxes.

Fox has gathered the right in one place, while the left and middle spread out for information.

Fortunately, we haven't yet lost our minds.

We still know the right decisions on the truly important things, like nuclear holocaust.

~~~

The data paints a sobering picture of an America on its heels. It also paints one of a country that is sane, which is not the one usually portrayed in the mainstream media as having gone completely nuts.

The mid-terms was a quintissential vote of no-confidence in the direction of the country, and we did all we could, which was throw people out and try something else. We elected Republicans, even though many fewer of us consider ourselves Republicans, even though we have an extremely low opinion of Republicans, and even though Republicans just ran the country into the ground for a decade. That is a confused, frightened people.

Right now the central problem is that we lack a national narrative. We have always had a strong understanding of our place in the world and who we are. In the late 1700’s and early 1800’s, we fought for our independence and became the land of the free. We were establishing ourselves as a country. In the mid-to-late 1800’s, we pioneered the West, established our cities and laid the framework to connect the coasts. We were explorers and the Agricultural Revolution enhanced everyone’s lives. In the early 1900’s, the Industrial Revolution promulgated our productivity and ingenuity as the cities grew skyscrapers and we became networked, mobile with cars and connected with phones. The roaring 20’s began to establish wealth in America. We were settling in and becoming a center of gravity. Then came the great wars and we banded together to fight for freedom in the world. We were the defenders of democracy and the last bastion of liberties. The next three decades saw our economy truly explode while the rest of the world was digging out of the rubble, and we became an economic superpower unlike the world has ever seen.

But now, I fear we don’t know who we are. 9/11, the wars, and the Great Recession have cut deeply into the heart of American exceptionalism. The rise of China and other emerging powers is causing us to question what the next twenty years will look like and whether our status will be the same as many of us have only known. Fox is winning hearts and minds because many of us value entertainment more than facts, and somehow they've convinced people that the economic problem was solveable, or that the President hasn't tried hard enough. This, combined with the false expectation that Obama would create bipartisanship in Washington, has sapped confidence in him. We're voting for Republicans because in prototypical American fashion we don't accept that the solution is a long game, and we’re not ready to make the sacrifices to our wallets that the times will ultimately call for.

The conventional wisdom is that anytime someone tells you that the problem is a communications problem, that person has run out of ideas. Here, I think the conventional wisdom is wrong. The central question we have to answer is who we want to be and how we're going to get there. That is a narrative the administration has not yet woven. If they do, the people will sacrifice for their country, and we'll believe in our President.

Peters vs. Mercator: The Projectionary Battle Royale

2010-12-14T07:43:00.000-08:00

Greenland is about the same size as Africa, right? I'm also under the impression that Europe and South America are roughly the same size.

And I'm pretty sure the countries in the Northern hemisphere are roughly equal to those in the Southern.

As it goes with so many self-evident truths, this turns out not to be. Africa is 14 times larger than Greenland. South America is twice as large as Europe. The countries in the Southern hemisphere have twice as much land mass as the Northern. Say hello to the Peters Projection Map.

When ships were first setting sail and Europe was the center of the map-making universe some five hundred years ago, the cartographers took it upon themselves to make some necessary tradeoffs. They had a decision to make projecting a round world onto a flat map: create parallel and perpendicular lines of latitude and longitude so captains could steer straight or keep all the land masses proportional to their actual size. They chose the former, as anyone would, and put Europe in the middle, as we suspected they might. When you're trying to take over the world, you don't mind splitting hairs. The result was the Mercator Projection Map we still know today.

All of this was well and fine until the mid-1800's when some aspiring if not trouble-making cartographers by the name of Edwards, Gall and Peters decided to see what the world might look like if precise sailing took a momentary back seat to accurate sizing. Somehow, they'd gotten it into their heads that the size of something is often linked to its importance in our collective consciousness, and that was an inequity they sought to remedy. I'll leave the ends justifies the imperialistic means and any ensuing social inequality for the anthropologists to sort out, but in the meantime I'm trying to figure out how I made it this long without knowing Africa was so dang big.

And now I hear there's rabble-rousing in what must be a divine comedy of annual cartographic conventions that our top-bottom biases should go the way of our big-smalls. Since the Earth really is just a big globe floating, rotating and spinning out there in the ether, the world could just as easily be projected this way:

I say let's not upset the apple cart. But considering the whole slavery episode, and since there's really not that many sailors amongst us, we ought to at least consider giving Africa the middle positioning.

These and many other interesting facts one stumbles upon while watching West Wing re-runs up all night with bronchitis. In what must be the coincident to end all coincidents, the very next morning my boss walks into my office, strolls up to the map hanging on the wall, and says, "Have you ever heard of the Peters Map?"

Japan, America and The Big Thesis: Update

2010-12-12T08:51:00.000-08:00

Last September, I outlined the prospect that America might emulate the Japanese economy's plight of the 1990's. Early in the decade, Japan experienced a massive stock market and real estate bubble that burst badly, sending the economy and stock market tumbling, thus beginning twenty years of torturous rise and fall.

Japan's stock market had a huge rebound from its lows, corrected 24%, then proceeded all the way back up to the highs over the course of the following year. I think it’s entirely possible that our 16% correction this summer was the parallel, and now our new top is the parallel to their June ’94 top. Japan's double top was 2% higher than 9 months earlier. On Friday, we closed 2% higher than the April highs 8 months ago.

This is the investment advisor’s bullish sentiment. The level of bullishness from every corner of the investing world right now is off the charts, as can be seen by the most recent bull ratings. This was a good predictor of the S&P's Nov ’07 and April '10 tops. I suspect it’s even more bullish with the market's new highs at the end of this week.

Central to the Fed's worries is deflation. Falling prices creates a vicious cycle and that is what Ben Bernanke says keeps him up nights. So far, the key measure of pricing in America, the core Consumer Price Index (CPI) is mirroring Japan's on both sides of the housing bubbles perfectly.

~~~

What does it all mean and will the parallel hold? We shall soon see. I have to admit that even though I was looking at this parallel all along that I completely overlooked the October '93 / July '10 pattern similarity, and thus the ensuing strength in our markets in the second half of this year. In hindsight, it appears crystal clear.

With the tax cuts likely to be pushed through this week, which amounts to ~$900 billion stimulus for the next two years, as well as every Tom, Dick and Harry economic guru raising growth forecasts for 2011, it sure has a "this time is different" feel to it. The four most expensive words in the English language.

The Republican Agenda for December: Lame

2010-12-02T16:52:00.000-08:00

I took a break from politics after the Republican landslide in the mid-terms to recharge the batteries. I figured post-Thanksgiving I'd pick up a newspaper and see what was going on during the lame duck. From what I can tell, these are the Republicans' initiatives with their newly-crowned power:

o Block repeal of Don't Ask Don't Tell
o Block the Dream Act giving Hispanic kids a path to citizenship
o Reject the findings of the Deficit Commission
o Block unemployment benefits
o Extend the Bush tax cuts for the top 2%
o Repeal Healthcare
o Block the nuclear arms treaty with Russia
o Strip the Federal Reserve of its independence
o Dissent from the Financial Crisis Inquiry Commission

Each of the issues has it nuances, but still, at the end of the day you can usually judge character/motive/value by the trends in one's priorities/tactics/accomplishments. Here, the trend is clear -- obstruction. This agenda shows no enlightenment, no lessons learned, no ambition to smack a homerun out of the ballpark, no propensity for analytical rigor; rather, it is quintessential partisan small ball.

4% of the country is gay and 15% is Hispanic. In one month the GOP will manage to alienate a fifth of the electorate. Nobody is going to mistake them for strategic thinkers.

The four Republicans on the financial crisis inquiry voted to exclude these terms from the final report: deregulation, interconnectedness, shadow banking, and Wall Street.

CBO estimates that repealing the new healthcare law will tack on another $150 billion over the course of the decade. But it'll never actually happen because Obama would veto it, so they're either going to explode the deficit or waste everyone's time.

Still, extending the Bush tax cuts for the top 2% looks to be the biggest issue. In practice, it looks something like this: If you make $500,000 a year, the Obama plan would extend the Bush tax rates up to your first $250,000. Your incremental $250,000 would be taxed at the Clinton tax rates, or 3% more than today. Which works out to $7500 a year, or around $600 a month. If you are making a half a million dollars a year, this has zero impact on your economic well-being. And you're exceedingly likely to save that money instead of spend it, so it doesn't add much lift to the economy. In fact, most economists say tax cuts for the top is the least effective tactic to boost economic activity.

Yet, we have to borrow the $100 billion that it costs every year, probably from the Chinese, and all that gets added to the debt with interest. In the wake of an election that was supposed to be all about fiscal responsibility, the central push is a policy that adds a trillion dollars to the debt over 10 years.

This is, of course, crazy. Yet Obama will ultimately concede this fight as his signature olive branch following the mid-term shellacking because they see no other plausible strategy. He could choose to stand firm, everyone's taxes would rise, Washington would be consumed by partisan bickering, confusion about the tax rates would affect confidence, he'd get painted as a tax-raising liberal, and the result would amount to a $1 trillion anti-stimulus, of which the administration would have zero chance of getting anymore of in the wake of the fight. The economy will either drag along or dip back into recession, in which case the GOP will say see, we told you so, Obama killed the recovery. Lose lose.

I don't understand why the administration doesn't just call the GOP's bluff. There is no way Republicans let taxes rise on the vast majority of the electorate on January 1 when the President can go to the press podium every single afternoon between now and then and say "I'm ready to lower taxes for 98% of the country, just as soon as the GOP stops their filibuster." He even has polling cover -- 70% of the country is against extending the cuts for the top 2%. But he won't do it because it's too confrontational.

The Machiavellian strategy would be to have the president come out for a compromise with tax cuts for everyone, but have the outgoing Democrats blow up the deal and all the cuts expire. I have watched Obama's outgoing budget director Peter Orzag sit on the Charlie Rose show and say that unless taxes go up -- soon, substantially, and for everyone -- we are going to be in a world of hurt like we've never seen before. Obama knows this. It's conceivable he's angling for the jugular.

Unfortunately, I don't think they have that much courage; at least not yet. The likeliest scenario is a compromise, and this will ultimately be a perceptual blemish for the president -- the left flank will holler as the GOP puffs their chests, and the public will see Obama as weak for caving. And they should because he did. Thus, Americans may rightly see the GOP as having stood their ground, won the fight and protected the tax cuts, and that will surely resonate with some and serve as a valuable campaign tool in 2012.

But in the end, cutting taxes will only have a negligible effect on the economy; we just played this game for the past decade and it blew up in our face. Yet, it will add exponentially to the debt. We'll be right back here in another two years having the same fight about a slow-moving economy, unsustainable debt, and neither party will have the courage to do what actually needs to be done.

~~~

I believe the GOP won the mid-terms not because Americans were in love with any of their ideas or candidates, but rather because we are going to keep throwing the bums out until a new breed of politician solves the issues that are central to our lives. For the past decade we've basically punted on those issues. And at this rate, the revolving door will keep on spinning in 2012.

My father-in-law took me to the Smithsonian Museum of American History over the break. I stopped to skim an original copy of the Declaration of Independence.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are life, liberty and the pursuit of happiness. That to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed. That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.

When, in the course of human events, we got off on this track I do not know, but I honestly don't think the founders would believe it. If someone were to explain the situation to Thomas Jefferson -- that the country is now $14 trillion in debt, much of it to our archenemies, rejecting the ideas being proposed to address it, obstructing the efforts to figure out what happened, actually increasing the debt with tax cuts for the wealthiest, and holding the verification of loose nukes hostage as a negotiating tactic -- he would roll right over in his grave I guarantee it.

TSA and the Security Theater: Drop the Curtain

2010-11-29T10:51:00.000-08:00

Every morning for the past week we awoke to find the hubbub of anxiety over airtravel. In the wake of the printer bombs, it seems the TSA wasn’t satisfied with the current protocols of screening contraband. So they’ve deployed high-tech X-ray machines, as well as new patdown procedures that can only be described as groping. And it was, repeatedly. The news segments’ favorite visual was of course the little old lady being fondled, followed by an iPhone “don’t touch my junk” digital short. Really colorful stuff.

We got our chance to experience the hysteria on Thanksgiving morning, traveling with the baby for the first time. We steeled ourselves for the worst—anything short of a cavity search would be considered a success. But it wasn’t to be, as we glided through the usual routine, taking things off and unpacking our bags. I held the baby and walked through the machine. The TSA agent asks me how old she is and I think oh here we go. I say almost 7 months and he says, “She’s cute.” Honestly, I would have no idea anything had changed unless I hadn’t been prepped for the apocalypse.

The ride home was more exciting. We’re flying out of Washington Reagan, which on the top 10 list of high-value terrorist ports of travel must be winner or runner-up. At this point, I’ve been lulled into complacency by our previous nonevent and multiple turkey stuffings. We mobilize and breeze through again. Now we’re on the plane. I’m filing away mental notes for my friends with the thesis “don’t fly with a baby no matter what anybody tells you.” Then, something catches my eye. He’s mid-20’s, Arab, and acting very strange as he boards. Fidgety. He’s holding his backpack weirdly close. The whole thing is fishy. He sits down in the row across from us, and immediately takes an interest in the baby. Too much of an interest for my taste. Kind of a “I’m going to miss the wonder of life” kind of interest. Keeps checking his phone for something, which really rouses me. Eyes closed, head back. Is he praying? We take off and he wants to get up and go to the lavatory. The flight attendant says no you should wait. He pauses for a second, lets her move along, then gets up and goes.

At this point, my heart drops. Five seconds earlier, I’m thinking this is exactly the kind of thing that makes for a good book. Five seconds later, I’m thinking, dear Lord, this is actually going down. I look at my wife and she looks at me, knowing what I’m thinking. I look at the baby and know something has to be done. This is the main event. So while he’s in the bathroom I get up and approach the flight attendant. “Is the marshal on board?” I ask, knowing the Reagan flights have one. “I can’t answer that,” she says. I explain the situation, hushed because we’re right beside the lavatory. She says, “Okay.” So I turn back around and go to my seat, watching to see what unfolds. She does nothing; sits there for a couple of minutes, tending the drink cart.

Well that’s not going to cut it, I think. So I wait for the guy to return to his seat and get up and go to the lavatory myself. If you’ve never searched an airplane bathroom for a bomb, you really should. There’s about twenty different compartments perfect for hiding such a thing. I go through them one-by-one. I finally stumble on one with a thermos sized canister and a red “this thing is ready to detonate” light. But its proximity to the sink tells me odds are it’s the hot water. After about five minutes of searching, I’m satisfied that he either threw it into the trash, which I can’t get my arm down there, or he flushed it down the toilet, in which case I doubt it’s going to go off. I head back to my seat, thinking that if he did stash it, then he surely watched me walk in right behind him. If that’s the case, he won’t be able to stop himself from making eye-contact with me on the way back, and I’m going to know that look when I see it. He gives me a blank stare, one that doesn’t really register anything. So I decide to return my best “if this thing happens, it’s going to be you and me” look. No reaction. He’s cold-blooded.

I sit back down. He goes into his backpack immediately. It’s on. Out comes a mini-pack of raisins, one for him and one he offers the baby. He’s mentally handicapped. I want to jump out the window.

Security theater: drama, comedy or tragedy?

Part of me has always wanted to save the day somehow. I think that’s a pretty natural emotion in a man’s range. As a kid sitting in the pew of my father's church daydreaming, I used to imagine myself wrestling some crazed lunatic to the ground who comes down the aisle with a vendetta. That said, at 32 years old, I’m pretty sure I wouldn’t have amped myself up into thinking this special guy was an international terrorist without some helpful conditioning from the government and media. It’s not to suggest that bombs on planes aren’t a real threat, they are. Following 9/11, we’ve had multiple close calls. Terrorists are absolutely targeting the airplanes, that’s indisputable.

So the question then becomes what to do about it, what impact that will have on the economic, psychological and security well-being of the nation, and then choosing the path with the best collective result. What I’ve decided in my research is counterculture and seemingly extreme: that eliminating all airtravel security is the most logical approach.

Ten years after 9/11, what percentage of the time would you guess screening procedures fail to detect explosive devices? The results I found from the various tests, including a de-publicized report from the investigative arm of Congress, the General Accounting Office (GAO), and several TSA tests, is a 50-75% failure rate. Half to three quarters of the time, a bomb will go through screening undetected.

I think we could stop right there and call it a wrap. Since 9/11 and airport security was nationalized, we’ve spent $40 billion to beef up security with training, equipment and all the bells and whistles. That is on top of the $10 billion annual budget to staff and operationalize TSA. And what has all that bought us? A fifty fifty chance.

“Government investigators were able to bring materials needed to construct bombs through airport security at 21 different U.S. airports. Sources who spoke to NBC on condition of anonymity, because the Government Accountability Office investigation is classified, said that not once did Transportation Security Administration screeners catch the bomb components in carry-on luggage, even when the investigators deliberately went through secondary screening. "I'm appalled," New Jersey Gov. Tom Kean, chairman of the 9/11 commission, said on the results. "I'm dismayed and, yes, to a degree, it does surprise me, because I thought the Department of Homeland Security was making some progress on this, and evidently they're not.” March 7, 2006 (NBC News)

At some point, it becomes arithmetically impossible to do worse. Which really isn't surprising, since putting government in charge of a highly complex apparatus isn't the typical pathway to excellence. Yet, in their defense, TSA is being asked to do something that is basically impossible: assess every conceivable article or combination of elements that may be used in a harmful way by peering through solid materials, and do it in such a way that doesn't offend anyone, allocates only seconds to each person, employs low wage workers, two million times a day, 700 million times a year, to thwart a terrorist strike that may or may not happen once. That's a tall order.

In addition to the nuts and bolts, we spent an additional $160 million to fund a new TSA program teaching agents to look for micro-expressions on passengers’ faces that foreshadow danger. This is just one of the new “advanced countermeasures” gravy lavished upon the heap. Yet, these aren’t elite counterterrorism agents, they’re normal Joe's. Half of the time I walk through they're either playing grab ass with each other or look like they just woke up. They're going to detect micro-expressions? There's another $35 million being spent because of the psychological stress agents endure from being berated all day. We have to provide counseling just so they can function.

The most notable failure culminated in last year's Christmas Day bomber. The guy's father had actually gone to the US embassy in Nigeria and told them he thought his son was going to do something. Even with a $100 million No Fly List, he was allowed to fly to Detroit. He passes freely through security with a bomb sewn into his underwear, then sets it on fire. His fellow passengers saw what was happening and jumped on him. This is a trend: for each of the close calls we've had, we have luck mostly to thank.

Ultimately, the real benefit of the whole charade is for the psychological reassurance of the passengers, which means it’s theater. Here’s a good example: If you try and go through security with liquids they are thrown in the trash bin. The liquid is thrown away because it might be a bomb, but you're allowed to proceed and the TSA agent spends the rest of the day sitting there with it two feet away.

“A short history of airport security: We screen for guns and bombs, so the terrorists use box cutters. We confiscate box cutters and corkscrews, so they put explosives in their sneakers. We screen footwear, so they try to use liquids. We confiscate liquids, so they put PETN bombs in their underwear. We roll out full-body scanners, even though they wouldn't have caught the Underwear Bomber, so they put a bomb in a printer cartridge. We ban printer cartridges over 16 ounces -- the level of magical thinking here is amazing -- and they're going to do something else. This is a stupid game, and we should stop playing it. It's not even a fair game. It's not that the terrorist picks an attack and we pick a defense, and we see who wins. It's that we pick a defense, and then the terrorists look at our defense and pick an attack designed to get around it. Our security measures only work if we happen to guess the plot correctly. If we get it wrong, we've wasted our money. This isn't security; it's security theater.” -- Bruce Schneier, Beyond Fear: Thinking Sensibly About Security in an Uncertain World

The point is simply that it doesn’t work. And even if it did, the economics don’t. If we’ve allocated this many resources to create a system that can’t detect half the bombs or stop a guy from boarding whose dad told us he’s a terrorist, it’s probably not ever going to work. That offends our "every problem is solvable" American sensibility. But some problems aren't fixable without accepting unacceptable tradeoffs.

However, let’s say it did work. Fast forward twenty years. America has devised the most impenetrable system of airport security in the history of mankind. It has taken a trillion dollars and roughly that many hours of manpower. What is the result? Terrorists would go to movie theaters instead of airports. So is a 50% toss-up worth the money, time, frustration, etc.? Yes, probably. But it's a false choice; it assumes that the result can't be accomplished via other means.

We as a nation have to accept this and recognize that we have other fish to fry. No dreamt-up color code system, fancy gadgetry, or advanced patting is going to change that reality.

Sans security: a pilot test

But why is it that no one will accept that? I began asking friends what percentage of the population they think would opt for no-screening airports -- i.e. print your board pass and walk directly to the gate in 5 minutes. The results ranged from 5% to 50%. I think that's about right, which means the majority of us probably wouldn’t go for it. Once all screening was eliminated, my friends seemed to think bombings would become a weekly occurance, or that a coordinated attack blowing up lots of planes at once would be inevitable. Maybe it would. But I always go back to the movie theater example. If it's going to happen, there's nothing to stop it.

I can’t help but think that the reason that we are overly fearful is because of the medium -- airplanes. When I watched that guy get up to detonate his would-be bomb, I had a feeling of helplessness. We were stuck there at the whim of a madman. Just like there's a fear of flying because if something does happen, chances are that's all she wrote. In a plane, we’re dependent on the pilot’s flying skills to get us there safely, and nowhere else is primal helplessness so acute. In our cars, we’re more in charge of our own destiny. When there’s a natural disaster coming, we can head for the hills or go to the basement. There’s a semblance of control. Rationally, we know that we’re ten times more likely to die by lightning or by shark attack than in a plane crash. We know it’s completely emotional, but it doesn’t make it any less powerful. But being irrational doesn’t mean we should settle for bad choices that wind up dumbing down the country.

Keeping an eye on the big picture

What is Al Qaeda’s goal when they attack us? It does seem likely that their goal is in-part to kill Americans. But by killing 3000 people on 9/11 they wiped out a grand total of 0.00001% of our population. That’s just not the plausible endgame if their ambition is our destruction. Rather, Bin Laden has stated that the easiest path from A to B is our economic demise. On top of the $300 billion for air security, we have to add the $1 trillion for the Iraq War, another $1 trillion for the Afghanistan War, and a big chunk of the annual intelligence and defense budgets. A lot of that if not most is in response to 9/11. Over the weekend Al Qaeda's magazine—they actually have such a thing—bragged that their investment in printer bombs, a.k.a. "Operation Hemorrhage", will have a big payoff.

"Two Nokia mobiles, $150 each, two HP printers, $300 each, plus shipping, transportation and other miscellaneous expenses add up to a total bill of $4,200. That is all Operation Hemorrhage cost us. The aim is to bleed the enemy to death." -- Inspire Magazine, 11/22/10

“They’re laughing at us,” Eliot Spitzer said on his show last night. I don't know if they're necessarily laughing since they're sleeping in caves and dodging drone missiles, but they have to be thinking this particular tactic is working pretty nicely.

The secondary goal is to suppress the way we live. That is really the implicit goal of terrorism: to enter into our stream of consciousness and to slowly make our society less free and make us feel less safe. It’s those freedoms and safety that are diametrically at odds with radical, fundamentalist Islam. Herein lies the slippery slope of the police state. If it’s okay to do an X-ray of someone, then it must be okay to wand them. If it’s okay to wand them, then it must be okay to pat them down. If that’s okay, it must be okay to pat their privates. If it’s okay to do it at the airport then surely it's okay to do some things before they arrive. So why not be allowed to electronically monitor their calls? And if that’s okay, then surely it’s okay to follow them, or go into their homes to look for evidence of plotting.

So where do we draw the line? At "reasonable" we're told. Is patting down grandmothers reasonable? Sure, they say, because if we don't, Al Qaeda will recruit grandmothers. Is selectively profiling Arabs reasonable? No, they say, because then they'll recruit Caucasians. Is it reasonable to allow 3 ounces of liquids but not 4? How about allowing flip flops to stay on but not tennis shoes? How about sweatshirts but not jackets? How about banning pocket knives but then giving first class passengers knives to cut their steak? Stop me if any of this sounds remotely "reasonable."

The nasty little secret is that living with some level of terrorist threat is a sustainable risk, and one we must tolerate in order to continue being the freest country in the world. Some level of risk actually is acceptable. We accept risk far greater than airtravel every day by getting onto the freeway in exchange for the liberty of doing so. We don't have to peer too hard into the future to see cameras on every street corner and a level of government entanglement in private lives that becomes stifling. This is not the stuff of conspiracy or George Orwell novels. Britain has already deployed the cameras and facial recognition software. "What's the harm if you aren't doing anything wrong?" is the common refrain. And that sounds good and seemingly makes a lot of sense in a digital age. But it occurs to me that the state was never meant to surveil the populace, in whatever age.

The naysayers, and indeed the President and Homeland Security Department’s response to the all the TSA carping, say that our attitudes will be very different once a plane blows up. But that’s a political straw man, and not a particularly good one. If a bomb goes off at the movie theater, will we say we should’ve been screening moviegoers all along? Not likely.

Instead, we have to ingrain ourselves with just enough suspiciousness to be prudent, but stop short of the kind of paranoia that I exhibited. Because at the end of the day, if it’s going to happen, it’s going to happen. I'm all for the kinds of intelligence and investigative preventative measures to snuff out syndicates of terrorism at home and abroad. But in a nation of 300 million people, if some nutcase wants to blow himself up, he’s going to do it, no matter what. And if The Jackal wants to come through customs, he's coming through.

~~~

It’s a mistake to dismiss our freedoms as anything other than the bedrock of our unparalleled success as a nation. The only logical approach is to use the trillion dollars more wisely, do the proper intelligence ahead of time, reinforce the cockpit, encourage citizens to be vigilant, and go on with our lives. The incompetence of airport security, and the fact that it's probably not doable in the first place, makes the argument moot. To me, this is one of those areas that seems like it requires a level-headed compromise, but by doing so, we allow the creep to set in. There do exist areas of life where it’s all or nothing, and I think this is one of them.

“Those who would give up essential liberty to purchase a little temporary safety deserve neither.” -- Benjamin Franklin

Halloween 2010: Still Spooked

2010-10-30T09:16:00.000-07:00

A few thoughts on the current economic environment. Several months ago, I wrote a couple of posts portending what I thought might be a serious economic event in the second half of the year. Since then, we've certainly seen a slowdown, but the stock market has risen back to its April highs as the world has been rapt awaiting whether or not Ben Bernanke and his Fed would unveil the second round of money printing and save the economy. The big announcement comes next week, as does the mid-term elections. I suspect many tricks and few treats.

Yesterday, it was announced that the economy grew at a 2% pace in the third quarter. For all the countless data points tracked and parsed by the economic cognoscenti, ultimately, my own baseline is that stocks follow GDP. It's that simple. If an economy is rising 2% or more, stocks rise with it. If growth falls below 2%, or there is a recession, the market goes down. 2% is something of a gravity threshold -- if you don't reach escape velocity of 2%, you generally begin to fall down.

So I set out to find good leading indicators of growth. I landed on two venerable institutions, the CMI and ECRI, both with its own proprietary models for tracking the economy. For its part, the ECRI has never had a -10 reading without an ensuing recession. I don’t care what ECRI themselves are now saying, that is a mathematical fact. It hit -10 over the summer.

CMI (red) was created in 2005 and has a very tight correlation with GDP (green), as can be seen in this chart (click to enlarge):

Before the crisis, CMI appears to rise coincidentally with GDP. But then after the big collapse it begins to lead GDP by a quarter or so. Stocks (blue) appear to also be coincident with GDP before the collapse, but then appear to lag by a quarter or so following the collapse. This jibes very closely with the Japanese experience.

The light red GDP quarters are my add, beginning with yesterday's 2% reading. If the CMI-GDP pattern had held, Q3 would’ve fallen somewhere between flat to -2%. Now that it’s come in at 2%, the stock rally over the last couple of months looks warranted. The entire financial world attributed the rally to expectations of the big Bernanke announcement. Respectfully, the chart disagrees.

There’s definitely an argument that CMI is young, unproven, this time really is different, and now its model is broken. Conversely, the ECRI has stood the test of time, but could also be subject to the this time is different argument. In the meantime, here's its perfect record. The gray shading indicates recessions, and as can be seen, a -10 reading has always meant a recession is imminent.

In the details of yesterday's GDP release were the key split -- of the 2%, 1.4% came from inventory rebuilding and only 0.6% came from final sales. What I think really is different this time is the unprecedented amount of stimulus that got poured into the market over the past year ($2 trillion in QE1, $1 trillion Obama Stimulus, ZIRP, HAMP, Cash 4 Clunkers, Homebuyer Tax Credit, and so forth) and the unprecedented level of inventory rebuilding that happened following the collapse of '08. I think these have combined to delay the inevitable. If people really felt the economy improving, they would hire more people and buy more stuff. That's how it's always worked.

Finally, some triskaidekaphobia for why I think we’re still in for a big fright:

1. Taxes are going up in 2011, two months left to book profits
2. Double tops are a classic technical
3. Trading volume has been extremely low, a common bear rally tell
4. Only 20% of individual investors are bearish, a classic contrarian tell
5. Consumer and small business confidence are still in the gutter
6. Funds have flowed out of mutual funds for six straight months
7. Commercial brokers have record net short positions
8. Bonds and gold are both predicting a disaster
9. Commodity prices are rising fast, especially metals and crops; yet everything else is barely rising above break even (i.e. an exact mirror of Japan's path to deflation)
10. Corporate profit margins are at record highs (i.e. nowhere to go but down)
11. Home prices are beginning to dip; supply is at record highs, demand is at record lows, and the foreclosure mess is just getting started
12. Trailing 10-year PE ratios are back above 20, a historically unsustainable level
13. New orders are falling in ISM manufacturing survey, far below inventory levels

Boo, indeed. Of these, #4 is my favorite. We are currently stuck in the worst recession in a century, unemployment is 10%, home values are down 30% off the peak, nobody seems to have a solution, and everyone hates the government and has no faith that they're going to solve the problem. Yet the stock market has soared and only 20% of investors think it's going to go down from here. That's why the rest of the world thinks Americans are optimists. But not everybody's buying it.

"With all due respect, U.S. policy is clueless. The problem is not a shortage of liquidity. It's not that the Americans haven't pumped enough liquidity into the market.... The U.S. has lived on borrowed money for too long." -- German Finance Minister Wolfgang Schäuble

Regardless, in the coming weeks and months we'll have the answer. I hope I'm wrong. However, I am still firmly of the belief that if it were true that a bunch of old guys in nice suits could push buttons and make the economy do what we want it to and erase decades of overindulgence, every country would have opulence and iPhones, everyone's economy would grow at a brisk pace, and nobody's stock market would ever go down. We should all be so lucky.

In the meantime, tomorrow is my 32nd and today is Anne's half birthday. Life is good, family is happy and healthy, and I'm one of the fortunate to have a great job. Happy Halloween.

Mid-terms 2010: All Hands on Deck

2010-10-20T10:56:00.000-07:00

Here is the predicament. On Tuesday, Republicans stand likely to sweep the mid-term elections. I had hoped that our country would come to its senses, but alas, it has not.

It is very likely that Republicans will pick up the necessary votes to take the House. If that happens, very little will get done legislatively because they will obstruct everything the President wants to do, and the President disagrees with just about everything they want to do. Unfortunately, the world is not going to wait on our politicians to work things out. Wars will march on, jobs will continue to ship overseas, greenhouse gases will continue to amass, our students will continue to fall further behind our competitors, the economy will continue to flag, and this debt that now has a Vulcan death grip on our prospects for growth will continue to squeeze at both ends.

In fact, based on the slate of candidates the Republicans are marching out for the presidential elections in 2012, I think it's exceedingly likely that Obama will be re-elected, and thus it'll be until 2016 or 2020 until there's the possibility for unified government action. It's going to be all filibusters all the time.

We're two weeks out, and here's the mechanics. Gallup just released its latest weekly generic ballot that shows Republicans with a 5-point lead among registered voters.

Among likely voters, they run two scenarios: high turnout and low turnout. Here, the picture is much more grim. Republicans are 11-17 points ahead based on the turnout. The lower the turnout, the bigger the Republican advantage.

Republicans do better in a lower turnout election because the less enthusiastic you are, the less likely you are to vote. Democrats are much less enthusiastic this election.

In 2008, when Democrats crushed Republicans in both the Presidential and Congressional elections they had a 20-point enthusiasm gap.

This becomes more obvious when looking at the profile of Likely Voters. Even though there are more registered Democrats than Republicans...

...there are 18% more Republican/Lean Republican than Democrat/Lean Democrat among Likely Voters in the 2010 election.

When we look at mid-term elections over time, if your base is energized like the Republicans are today, you're going to win and win big. In 2006, when the Democrats swept the Republicans they had a 7-point advantage. A lot of pundits are drawing parallels to 1994 and the Gingrich Republican Revolution and there Republicans had a 7-point advantage.

That's what happened with a 7-point advantage. This time, we're talking about 17 points if the turnout is low. This is going to be a massacre.

~~~

For the past two years, there has been a constancy to the GOP's politicking of an obstructionist and idealess platform that is irresponsible in my view. Nobody can make a serious argument that Republicans have shown a track record of success in the last twenty years. The recently unveiled Pledge to America manifesto also dispells the idea that Republicans show any commitment to shared sacrifice, willingness to work together, or coherent vision to solve the nation's most critical problems. The rest is just noise.

There are specific groups of Democrats sitting on the sidelines disaffected with Obama, the party and the economy: college students, minorities, and females. These groups, along with the highly educated, won the '06 and '08 elections for Democrats, and if they would just vote Democrats would do fine. If they think sitting this one out is going to make things better, they're about to get run over by reality. Frankly, I don't think anyone really cares if they're enthusiastic or not. But dormancy is not the solution. Independents will not be swayed in the waning moments but Democrats can still be motivated, even if by shame.

The Democratic Campaign Committee needs to take its remaining $100 million and instead of running the thousands of local attack ads for congressmen that nobody knows, nobody cares about and everyone is now completely tired of, run an ad that mobilizes Democrats en masse.

"Of course, the fact that we're even sitting here two years after Bush talking about a GOP comeback is a profound testament to two things: One, the American voter's unmatched ability to forget what happened to him 10 seconds ago, and two, the Republican Party's incredible recuperative skill and bureaucratic ingenuity. This is a party that in 2008 was not just beaten but obliterated, with nearly every one of its recognizable leaders reduced to historical-footnote status and pinned with blame for some ghastly political catastrophe. There were literally no healthy bodies left on the bench, but the Republicans managed to get back in the game anyway by plucking an assortment of nativist freaks, village idiots and Internet Hitlers out of thin air and training them into a giant ball of incoherent resentment just in time for the 2010 midterms. They returned to prominence by outdoing Barack Obama at his own game: turning out masses of energized and disciplined supporters on the streets and overwhelming the ballot box with sheer enthusiasm." -- Matt Taibbi, Tea & Crackers (Rolling Stone, October 2010)

Hit & Run: The Drive-by Media and the Story of Ricardo

2010-10-17T11:36:00.000-07:00

Ricardo León Sánchez de Reinaldo was born in Havana and moved to the United States with his parents at the tender age of 2. In his early years, he watched his father work odd jobs driving a truck, washing dishes, working in a factory—the stereotype one might have of a Cuban immigrant seeking a better life for his family beyond Castro’s oppressive regime. Ricardo made his way through the Miami public schools, showing promise as an athlete and grabbing a football scholarship to Minnesota State. But it turned out the football life wasn’t for him, so in 1979 he transferred to the University of Minnesota, this time having secured a Journalism scholarship, his true calling.

After graduating, Ricardo became Rick, and he set out the way most aspiring journalists do, first making his bones at local television affiliates in Minnesota, Miami and then Houston. He was good at his craft, winning an Emmy in 1983 for his series When I Left Cuba. By many measures, Rick was ticking off boxes of the American dream and well on his way. In 2001, he got his big break being picked up by MSNBC, a fast-growing liberal cable news outlet.

Sanchez was now cutting his teeth with some of the best in the business. Eventually, Rick would trade in his 30 Rock credentials, make some moves, and eventually wind up in Atlanta at the world leader in news, CNN. There, he covered the events of 9/11, the war in Afghanistan, and the network’s Peabody Award-winning coverage of Hurricane Katrina. The CNN brass saw real potential in Rick and quickly promoted him to anchor his own two-hour slot in the afternoon, whose goal was to merge social networking into a citizen-driven, interactive program, something the aging and ratings-declining CNN felt it desperately needed to connect with today’s youth and the 25-45 demo. Sanchez was almost there, almost to the top of the pyramid, the holy grail of news anchoring—a primetime show.

In the spring of 2010, CNN’s current 8pm show anchored by Campbell Brown began sucking wind, along with scads of other attempts to be fresh. Brown herself practically asked to be taken off the air. More broadly, CNN had fallen far behind Fox News in the ratings war, and had recently given up the #2 position to MSNBC.

Things swung into crisis mode and change was happening fast. In the interim, Rick got his shot. His show, Rick’s List, was moved up from the afternoon to the prized 8pm slot. Although it seemed like he’d made it, by no means had the brass given the show the full go-ahead, and in fact, though things were mum at first, word began to spread a search had begun for a more long-term solution.

Eventually, word came down that the powers that be had settled on the former Governor of New York, Eliot Spitzer, to team his liberalness with the conservative and cute Kathleen Parker for a textbook buddy show. Rick was out. In the meantime, unfortunately for Rick’s prospects, the ratings for his show were abysmal. CNN recorded its worst weekly ratings in the history of the franchise, and Rick’s List scored one tenth the viewers of his Fox counterpart, Bill O’Reilly, with only half as many primetime viewers as the comparable month last year.

It is with this preamble and life story that Rick Sanchez found himself, having just taped his last show earlier that day, on Pete Dominick’s radio show last week. Pete is a friend of Jon Stewart, who was his former boss at the Daily Show, something Sanchez was keenly aware of. Stewart had recently taken fond of skewering Sanchez and his eccentric approach to newscasting, mocking Sanchez personally some twenty something times on the air. Sanchez, who along with most everyone else Stewart makes a fool of, had clearly let it get under his skin. This is a little lengthy, but I think it’s important that people actually know what went down and exactly what Rick said:

First, when discussing the state of the media, the news business and its lack of balance and objectivity, Sanchez went after Fox’s Bill O’Reilly, MSNBC’s Rachel Maddow and Keith Olberman for their ultra-partisanship. Then he trained his sights on CNN, recalling a specific time when he’d been stereotyped as the Hispanic anchor and probably still licking his wounds from his final taping. His broader point was that it wasn’t just the conservative movement who was playing the game, but also “elite, Northeast establishment liberals that deep down, when they look at a guy like me, see a guy automatically who belongs in the second tier, and not the top tier.” Then Stewart came up:

“I think to some extent Jon Stewart and Stephen Colbert are the same way. I think Stewart’s a bigot.” Dominick pushed back on the term, to which Sanchez replied: “That’s what happens when you watch yourself on his show every day, and all they ever do is call you stupid. Anybody who’s different than he is, anybody who’s not from his frame of reference, anybody who doesn’t look and sound exactly like the people that he sounds like and grew up with. His worldview is very much a white, liberal, establishment point of view. Here’s what they do, this is the game they play: I just picked on Fox News because they just had a bald-faced lie about something. Damnit, that means I gotta find something on CNN. Oh, I know, wait, let me find that Rick Sanchez, that little Puerto Rican guy. I’ll make fun of him. Do we have anything? Yeah, last week, he mispronounced the word indutably or whatever. Find me that and we’ll do a whole 4-minute segment on how he mispronounced the word arithmetic.” Dominick eventually pushed back on the term bigot again and Sanchez backed off. “All right, I’ll take the word bigot back; I’ll say prejudice — uninformed.” But when Pete defended Jon Stewart as “just a comedian,” Sanchez rejected it, “That’s a cop-out.”

If it had ended there, it probably would have been a two-day story. But it didn’t. Dominick pointed out that Stewart was Jewish and that he’d probably faced discrimination himself. To which Sanchez replied sarcastically: “Yeah, very powerless people. He’s such a minority. Who are you kidding? I’m telling you that everybody who runs CNN is a lot like Stewart, and a lot of people who run all the other networks are a lot like Stewart, and to imply that somehow they — the people in this country who are Jewish — are an oppressed minority? Yeah, right.”

Finally, Dominick pushed back one more time on the Jewish American population not being discriminated against, and Sanchez replied: “I grew up not speaking English, dealing with real prejudice every day as a kid. I’ve been told that I can’t do certain things in life simply because I was a Hispanic. My friends who are black, I’ve seen that with them, and I’ve seen that with a lot of minorities. Although I understand the plight of Jews, and all their experiences, and the things that have happened historically for them, I can’t say that my Jewish friends who I grew up with in South Florida ever were prejudiced against simply because they were Jewish. There may have been jokes around them or about other things, but it’s kind of a different thing.”

~~~

Quick, how many primetime TV anchors can you name that aren’t white? I couldn’t name one either, and there’s a reason. The three nightly network television news anchors are Brian Williams, Diane Sawyer and Katie Couric. MSNBC runs Dylan Ratigan, Chris Matthews, Ed Schultz, Keith Olbermann, Rachel Maddow and Lawrence O’Donnell. Fox News runs Neil Cavuto, Bret Baier, Shepard Smith, Bill O’Reilly, Sean Hannity, Glenn Beck, Greta Van Susteren, and Megyn Kelly. The Sunday morning news shows anchors are David Gregory, Christiane Amanpour, Bob Schiefer and Chris Wallace. The late night shows are Jay Leno, David Letterman, Jimmy Kimmel, Craig Ferguson, and Jimmy Fallon. CNN runs Wolf Blitzer, John King, Anderson Cooper, Larry King, and now Spitzer and Parker.

White as the driven snow, every single one of them. There are probably a few exceptions, but those are the big slots. Here and there, and whenever there is an ensemble cast on the morning shows or on the weekend roundtable, things tend to be a tad more diverse. Geraldo Rivera and George Lopez come to mind as outliers, but inconsequential. Yet, at last count, about 35% of the country is minority. Hispanics are the biggest at 15%, followed by Blacks at 13% and Asians at 4%.

I think where Sanchez was going is that there is a pretty big disconnect here and he’s right. I can even understand him calling Stewart a bigot. A bigot is defined by Webster as “a person who is utterly intolerant of any differing creed, belief, or opinion.” Stewart makes fun of people for a living whom he perceives to be outside of what he considers correct, cool, logical or something that conforms to his unique sensibilities. And we also have to remember that Stewart was consistently singling out Sanchez and humiliating him not once or twice, but 20+ times. Of course Sanchez is going to hate the guy, who wouldn’t, he’s a human being.

But where Sanchez got off track is implying that Jews run CNN and the media writ large, a common conspiracy theory. Unfortunately for Rick, the head of CNN nor the chief of Time Warner is Jewish. In fact, not one of the major news operations is currently headed by a Jewish executive. The New York Times founding family is Jewish, but neither its editor nor that of the Wall Street Journal, Washington Post or USA Today is Jewish.

Hollywood on the other hand is more Jewish than the general population, which is only 1-2% Jewish. There are a substantial number of directors, producers and bigwigs that are Jewish. And there are definitely a lot of Jewish in power at the networks. Robert Iger runs ABC and he’s Jewish, Leslie Moonves and Sumner Redstone run CBS and they’re both Jewish, and the outgoing Jeff Zucker ran NBC and he’s Jewish. And the former chief of Time Warner, which owns CNN, Gerald Levin was Jewish. The chiefs of the big movie studios are also heavily Jewish, with Iger at Disney, Peter Chernin at 20th Century Fox, Barry Meyer at Warner Brothers, the Weinstein brothers at Miramax, and David Geffen, Jeff Katzenberg and Steven Spielberg at Dreamworks. The point that often gets missed, and which I won’t go into detail describing because David Brooks has already done it for us, is that Jewish people are wildly successful relative to their size, the media is no exception, and since that’s 100% of the big three networks and most of the big movie studios, it’s not complete insanity to note the disproportionality.

“Jews are a famously accomplished group. They make up 0.2 percent of the world population, but 54 percent of the world chess champions, 27 percent of the Nobel Physics Laureates and 31 percent of the Medicine Laureates. Jews make up 2 percent of the U.S. population, but 21 percent of the Ivy League student bodies, 26 percent of the Kennedy Center Honorees, 37 percent of the Academy Award-winning directors, 38 percent of those on a recent Business Week list of leading philanthropists, 51 percent of the Pulitzer Prize winners for nonfiction.” The Tel Aviv Cluster, January 1, 2010 (NYT)

Thus, with minorities like unicorns in the primetime news world, and a decent amount of Jewish representation in running the media, Sanchez having just gotten his big chance for something he worked his whole life for, and probably thought he deserved, swiped out from under him by a white guy who is Jewish, and whose name had barely gotten out of the headlines for going to high-priced hookers, was probably feeling pretty angry and said some things he shouldn’t have. CNN had just replaced its chief Jon Klein who was a big fan of Sanchez’s. Klein had overseen CNN’s downfall and what many felt was a trivialization of the news to try and match Fox and MSNBC’s more theatrical, non-stop yapping approach. That fit the Sanchez skill set nicely, but it didn’t particularly suit the unbiased, rock solid approach to news CNN was supposed to fulfill. The new chief was on the warpath cleaning house and Sanchez the rascal was definitely in his sights. So Sanchez giving him an excuse to fire him is a much different scenario than Sanchez messing up out of the wild blue yonder, especially had his show been successful, which it obviously wasn’t. Context is king.

~~~

My intent isn’t to come to Jon Stewart’s defense. Stewart occupies that beautiful space between newsiness and comedy that allows him to toggle back and forth between serious and funny depending on which is most convenient for him at the moment. He gets to call everyone like Sanchez out for saying ridiculous things, all the while saying ridiculous things himself that aren’t held to account because, hey, it’s all comedy; except for when it isn’t, how nice. There’s zero accountability and we’d be wise to watch how much credence he’s lent.

Nor is it to vilify the firing of Sanchez. Although Sanchez's ranting against minority suppression is coming from a patently different perspective than the typical "Jews control the media" that trips the alarms, and even though he may've raised some worthy points, Rick's a smart guy and thus surely aware of that particular accusation's place in the pantheon of inflammatory things to say. Directing the comment towards CNN was not only tone-deaf and crude but also disloyal. You can't have people that do things that stupid as the nightly face of the network.

To wit, in 1990 Rick Sanchez left a Dolphins game in Miami, drunk, and hit a pedestrian, then fled the scene only to return a few hours later. His blood alcohol was twice the legal limit, his victim was paralyzed, and he died five years later in an assisted living facility. Sanchez pleaded no contest and somehow weaseled his way out of the jam. Rick deserves no charity from anyone, having done the unforgivable.

Rather, the real question is, amidst all the coverage of the Sanchez saga, how many columns and segments raised the question of disproportionate racial bias among the ranks of our media that Sanchez so inartfully spoke to, or that rethought Stewart’s lofty stature in the social contract? Zero. That’s the discussion that should’ve taken place were race not taboo in our country. It didn’t happen because it would likely escalate into a discussion that the media brass don’t want to seriously have, because it would require a national conversation more substantive than the headline “Sanchez Fired for Calling Jon Stewart a Bigot," and because it might draw the ire and fire of the media's new darling. Cowardice is what triggered the damage control machine as it often does, and the machine’s first button is pink slip. It was easiest for CNN to sweep Sanchez under the rug, for the rest of us to assume his intentions anti-Semitic, label him a bigot together, and everybody move on.

I don’t think that is the way American life should work, yet that’s precisely how we do it. So long, Ricardo.

Pretty

2010-10-02T11:36:00.000-07:00

I’ve spent the better part of the past two months fixated on pretty. Or, more accurately, trying to figure out what others think is pretty. We’ve been doing package testing all over the country for a major grocery client that’s consolidating all its store brand products around a single design motif. It’s trickier than you might think.

When we shop, and especially when we shop for packaged goods that we can’t see inside, we make a determination about the quality of the product based largely on small scintillas of its packaging. If it looks cheap, we often jump to the conclusion that it is cheap. It became clear to me quite quickly that moms don’t want cheap-looking packages sitting on their pantry shelves even if it saves a buck, and even if the product inside is solid gold. And they surely aren’t going to show it in front of their husband’s boss during the prep-and-chat portion of a dinner party. Kids, it seems, are even worse, completely rejecting the “fake” Lucky Charms spot-on-sight. Packaging signifies authenticity, which in turn tells us a lot of what we need to know.

To get everybody in the focus groups in the mood, I shared a little anecdote. If you ask someone who is going to buy a new laptop what exactly is going to determine their decision, they’ll usually rattle off a litany of their specification preferences—how big of a hard drive they want for all their music, how fast the processor ought to be, their favorite screen size, etc. But once I take them shopping, it would knock you out how often we walk out with the one she thought was cute, or the one he thought was a cool color, or the one with a brand logo stamped on that they trusted for whatever reason. In other words, it’s largely packaging, and the emotional connection we form with packaging.

We showed a bunch of different designs and finally landed on one that respondents felt looked a little more upscale—“a generic that doesn’t even look like a generic” as one lady in suburban Chicago put it. In a down economy, they wanted to save some money but didn’t want to feel cheap in the process. “If I look in my buggy and see a bunch of cheap looking products, that's going to remind me that we’re in a really tough spot and I have to shop at the dollar store. And that makes me sad.” The winning design is going to help absolve that sadness from lives.

Of course, this is ridiculous. Essentially, the goal of the research is to figure out how to fool people into believing that the product is something that it’s not, at least that’s the glass half empty assessment. The glass half full says we’re not fooling them into anything because the product is what it is, it’s just prettier in one package versus another, and what’s the harm in that. I imagine people have this internal battle with themselves all the time in the grocery store because I know I do. Store brand napkins, yes, because who cares. Cheese, produce, and milk, sure why not. But Lucky Charms versus Magic Stars…wait a second.

And so off to the races my mind goes, across two months and around the country, paying more attention to pretty. It’s Autumn now, my favorite time of the year because it brings halcyon afternoons of cool sunshine and color. I see The American with George Clooney and it’s a decent movie I tell others, but what really makes it nice is the cinematography of the bucolic Italian countryside. I wander around the gym, myself and everyone else trying to look fit. I pick up a People magazine while getting my haircut, trying to figure out what these people have done to be famous other than look so great. I turn my lease in and take over my wife’s car, not particularly thrilled since I think it looks like a girl’s car. My Tar Heels storm the field wearing navy blue, which just happens to be the color of Duke, and I have a visceral reaction.

Once you start noticing it, you see it everywhere, and it becomes overwhelming. The baby has reached a point of maximum cuteness at 5 months, and I think I love her even more because of it, absurd as that may be. People stop me in the store, seemingly unable to control themselves. They didn’t do that three months ago when she looked like a little raisin. We have a meeting with a new branding team to discuss an overhaul of our company’s marketing elements—our logo, website, colors and tagline. Yes, this is who we are in part, but more than that it’s what we look like to the world in the five seconds they might take to see it. Surely people aren’t making a decision where to spend millions of dollars based on look and feel I say. But I know it’s true.

Around now every year, I go back up to Chapel Hill and interview students for a couple of positions with the company. We begin with 200 résumés, interview the best 20, and then hire 2. This weekend I’m going through the résumés. If you’ve ever gone through 200 résumés you know it’s not easy. Do I read every word? That would take a week. Do I read most words? Probably not. What really influences the outcome are snapshots—an inexplicable mix of how things look. It’s tempting to say it’s arbitrary, presumptive and capricious. Which I might if I didn’t know it worked so well. Each résumé has about 1 minute to make an impression. 200 résumés, 4 hours—the future of the company, based heavily on the appearance of various fonts on a sheet of paper. Whether someone can take a lot of variables and present them in a coherent, visually-appealing way somehow tells you a lot about a person’s entire worth. I wish it wasn’t so. And it continues in person. I can tell you in the first five seconds of an interviewee walking in the room whether we'll hire them.

The month rolls on. I wake up beside my wife and know I married her at least in part because I thought she was beautiful. I walk through our house and think to myself how much I love it. Why? Because it looks so nice, and I clearly remember us walking through the front door, turning to each other instantly and knowing this was going to be our first home. We decide to give the new Law & Order Los Angeles a try, but something doesn’t look right. The characters don’t appear authentic, and the courtroom lacks the New York version’s gritty panache. The star looks the same as he did in the movie Scream years ago, and I can’t take him seriously because of it. The other guy has a thick, cheesy mustache and it just looks wrong for LA. Does everything look wrong or does it just look different? Who’s to say, it just looks off, and so we’re done with it.

It’s tempting to say life is too superficial now. And easy to wax nostalgic for the days when substance mattered much more than style, when a person’s character trumped all. But it’s hard to say if such a time really ever existed, or whether our visual cues have simply evolved into new ones. Never judge a book by its cover we’re told, and never stereotype. I think that’s casting a rather simplistic framework upon what is a highly complex system, one borne out every day in most every aspect of our lives where we’re forced to use instant heuristics to take on a million visual variables and sort out our judgment into an actionable conception.

Malcolm Gladwell’s Blink: The Power to Think Without Thinking explored the psychology and behavioral economics of the unconscious, and how the mind instantly processes variables and partial pieces of information to judge what is important in the blink of an eye, or “thin slicing” as Gladwell puts it. He explores how each person’s instant judgments are influenced by their innate likes and dislikes, and how every single one of our experiences informs those likes and dislikes, and thus the virtual cycle of it all. The example I recall most clearly is of the tennis legend Vic Braden, whereby Braden can predict with something like 90%+ accuracy when a server is going to double fault while the toss is in the air. He doesn’t know how he knows, it’s just something about the look.

Some interesting research is providing more insight into how looks influence our daily lives. The journal Science has taken survey ratings of people’s attractiveness and cross-referenced it with various aspects of their lives to show that good-looking people tend to be paid more, get better performance evaluations, are admitted to college more often, score higher by voters and receive more favorable judgments at trial. I suppose this doesn’t surprise anyone, but it’s painful to see it there in black and white.

Science goes on to show that pretty women are actually discriminated against when applying for jobs considered masculine and for which appearance was not seen as important to the job, such as titles like manager of research and development, director of finance, mechanical engineer and construction supervisor.

Another study by Newsweek among hiring managers and employees concluded that looks matter in every aspect of the workplace and mattered more for women. Among nine attributes, looks came in third behind only experience and confidence for what is most important. Two thirds said they believe some managers would hesitate before hiring a qualified job candidate who was significantly overweight, even though two thirds of us are overweight (the irony). Two thirds also said they believe companies should be allowed to hire people based on looks, especially when a job requires an employee to be the face of a company at retail stores or in sales. However, two thirds also said they believe most Americans would favor a law making it illegal to discriminate based on looks. So there’s a contradiction in what we do, what we think we should be able to do, and what we think others ought to be able to do.

My favorite study was another from Science, in which children played a game simulating Odysseus’ voyage from Troy to Ithaca, then were shown two pictures and asked which man they would rather be their captain on the perilous trip home. The pictures were actually candidates for French parliamentary elections. The children chose the men who won the elections at a high rate. What were they actually choosing? It seems that we have an uncanny ability to eye competence, and that the skill develops at a very young age.

These same results have been mirrored among adults for U.S. Senate and Gubernatorial elections, as well as elections in Australia, Finland, France, Ireland, Mexico, New Zealand and the United Kingdom. When asked who will win an election between two pictures, we get it right most of the time. (It occurs to me this could save a lot of money and heartache.) New research out of MIT shows that candidate appearances are not just an oblique factor, but in fact are the strongest criteria among voters who possess little political knowledge and spend a lot of time in front of their television screens. Which is most of us. Furthermore, the predictive power of facial judgments is largely independent of candidate familiarity, gender, race, incumbency, age, and even their attractiveness. We just know who looks like they’ll do the best job. Thus, how somebody looks undoubtedly largely decides whether we’ll vote for them, who in turn map the course of history. I guess we wouldn’t do it unless it worked.

Why do people tend to marry spouses who are about the same attractiveness? You don’t see many ugly guys with fetching supermodels on their hip. Why are most people attracted to people of the same race? Anthropologists would have us believe pretty is a combination of facial symmetry and body proportionality -- a V-shape with broad shoulders for guys and a certain hip-to-waist-to-chest ratio for the gals -- and that these things are remarkably similar across cultures. Of course, there’s a lot of other sociological factors at play, but I think we'd all like to think it’s something more than nose-to-eye ratios or the level of melanin in our skin shaping who we choose to spend the rest of our lives with. If personality is so much more important than looks, I think we'd see more geeks with beauties than we do.

At its most basic level, how something looks is really just each of these properties creating a slightly different spectrum of light, whose wavelengths are then translated into slightly differently images by our retinas. Talk about arbitrary.

When I first started pondering this post I wanted to blow up the irrelevance of appearances in bourgeois American life, and figure out a way for looks not to matter so much in mine. It occurred to me that once a society reaches a point where the superficial determines so much of its consequence, surely that must be a society’s weary final frontier because by then all the substantive work has been done. I wanted to begin laying the groundwork for how to teach that lesson to my daughter, and to begin charting a course for substance to ripple through style in our lives.

But it’s not that easy. What I learned was that how something looks influences just about every aspect of our lives, and anathema though it may be, appearances are usually more than surface-deep. There is a very thin line between how something looks and what it is, and the line is not always so clear. Oftentimes, appearance is the most telling characteristic. And the panoply of these micro-expressions and visual nuances, and our brain’s uncanny wherewithal to process it all, is one of life’s neatest tricks. Life isn’t black and white, and it isn’t even gray. It’s colorful, and it's beautiful and ugly. And we know it well.

Charts That Made Me Go Hmmm...

2010-09-08T07:46:00.000-07:00

The purpose of charts is of course to illuminate a trend or make a point more clearly or quickly that it could be made through words alone. I ran across these two charts recently, one clearly illustrating what I've understood to be true but didn't understand why, and the other causing me to scratch my head because what I'd always accepted as fact was no way no how true.

This first chart puts wealth on the horizontal axis, religiousness on the vertical, and population is indicated by the size of the sphere. (click to enlarge)

If we're looking for why America is so different than the rest of the world, this is one of the best illustrations of how it came to be. We're all alone in the upper right quadrant -- religious and rich. Whereas all the Muslim countries (and India) are up in the upper left hand corner -- extremely religious and extremely poor. And there's Japan, France, England, Germany and the other Western European countries in the bottom right quadrant -- non-religious but rich.

The world power omitted is China. (China isn't big on "information sharing.") However, we can hypothesize. We know from various sources that China's GDP per capita is about $3000, compared with about $50,000 for Americans. And it's very likely that China's religiosity is similar to Hong Kong's (not religious). That puts the world's largest sphere squarely in the bottom left hand quadrant. So the world's four main powers are in four separate corners. If what you believe and what you have defines you, it probably defines how well you get along with others too.

~~~

This next chart shows how our nation's debt has risen and fallen with each president's administration.

Debt is the topic of the day because we're now nearing our all-time high debt-to-GDP ratio (120%), last triggered by the cost of a world war, but falling quickly once it was over. Yet, now we're nearing those debt levels again with no world war to blame and no economic recovery in sight to heal it. The Republicans have accused Democrats of causing it and appear poised to deliver a big anti-incumbent win for the Republicans in the mid-terms in November. But the reason it made me scratch my head was this: if Republicans have the "fiscally responsible" mantle and Democrats have the "crazy spenders" label, then why has the federal debt fallen under all four of the last four Democratic presidents and risen under all four of the last four Republicans?

Because it's not true, that's why. Apparently some misperceptions can last 50 years.