SCSUScholars

Housing bill follies

noreply@blogger.com (King) — Fri, 09 May 2008 18:48:00 +0000

I noticed Hugh has asked that we slow down on the Frank-Dodd housing bill. I got a press release from Rep. Michele Bachmann stating the bill is "deeply flawed".

"The bill even includes a $35 million dollar slush fund for trial lawyers. And according to the Congressional Budget Office, the bill would help refinance the loans of only 500,000 people � less than 1% of homeowners � at the expense of the 51 million homeowners who pay their loans on time, however much they may be hard-pressed to do so.

"The bill is so broad that homeowners covered could deliberately default on their loans to cash-in on the taxpayer bail-out. In others words, a taxpaying single mother working extra hours to pay her mortgage on time could be asked to help pay the loans of someone who intentionally defaulted.

"Lenders and servicers can game the system as well. The bill invites them to cherry-pick only their worst loans to dump onto American taxpayers � including loans people secured through outright fraud.

Hugh's request that we need more time to look at it would be met by the CBO report on the bill that Rep. Bachmann mentions. They estimate the subsidy at $1.7 billion, or $3400 per household refinanced. That on top of the Heritage report on the bill should be enough to convince most that it's a bad idea.

Unfortunately it passed, and thus gives the banks yet another fillip in return for bad decisionmaking. And, as Dean Baker points out, it is just delaying the needed price adjustment in housing.

For those Minnesota congresspeople who voted for the bill (read, all the Ds plus Rep. Ramstad), ask this: Do you think this money should be used to bail out the Parish Homes development? Are you sure it wouldn't be?

Legislative salaries: Yer doin it WRONG!!!

noreply@blogger.com (King) — Fri, 09 May 2008 17:38:00 +0000

I had some private conversations with people on both sides of the ideological spectrum here after the per-diem debate, and at that time I suggested getting the problem solved by some changes in how legislative salaries are set. Current law says you can fix salaries for the upcoming session, but not your current salaries. As a result there was pressure to increase per diems as back-door salary increases.

So what does our senator Tarryl Clark propose? The worst of both worlds:

Lawmakers could vote next week to ask Minnesota voters to take the job of setting their salaries out of their own hands.

However, they will likely keep the power to increase their per diem and other forms of reimbursements where they now sit � with committees of their senior members.

...If approved, HF 3796/SF 3793 would give the job of setting legislative and executive salaries to the state�s Compensation Council, which now only makes recommendations.
The bills originally would have given the council � which consists of 16 citizens appointed by legislators, judges and Gov. Tim Pawlenty � the power to determine legislators� daily reimbursement rates for food and other expenses, known as per diem.
But members of the Senate and House Rules and Administration committees, who now set those rates, amended the bills to retain that power.
�The problem isn�t per diem. The problem is salary,� said Clark, who saw her bill through the Senate committee Thursday. She is the committee�s vice-chairwoman. �I believe if compensation changes, per diem will be modified downward.�

No, no, no. First of all, Clark is saying "hey, give us a salary increase and then we'll see if we can reduce those per diem. Trust us." But you obviously don't think we trust you because you could have voted salary increases yourself before. Your rules committees have proven their distrust of the system by not putting per diem rates in the hands of the Compensation Council, which has the power and the knowledge to do this. Under this bill, the Legislature could still compensate itself through per diems if it didn't like what the Compensation Council came up with. It changes no incentives and abdicates responsibility for choosing one's own salary.

I wish she was running this year. "The problem isn't per diem" is a great line when used by someone who gets $96 a day. I'd love a chance to ask her how she spends hers. You really want me to trust you to reduce that once you get your salary?

And notice, she got it not just for the days the legislature is in session, but for all the committee meeting days she took away from the capitol.

Meanwhile, last Friday oral arguments were heard in the case of Citizens for the Rule of Law's suit that we discussed last February. The AG's office is arguing that only it can bring a case against the legislature and that citizens do not have standing to file the suit. That motion should be ruled upon sometime this summer.

Here's the simple solution: Move both salaries and per diems to the Council, and cap the number of days on which per diems are paid to, say, the number of legislative days plus twenty, or some such. The symbolism of the cap would do wonders.

Not such a great deal

noreply@blogger.com (King) — Fri, 09 May 2008 17:06:00 +0000

By now most of you probably heard of the 23-cent-pizza promotion that Papa John's put up after one of its franchisees in DC printed "Crybaby 23" t-shirts for a Wizards-Cavaliers playoff game after Lebron James (#23 of the Cavs) was accused of whining too much about rough play and not getting foul calls. The lines stretched on for about three hours, leading some to wonder why people wait in line. If the pizza costs $12 normally and you wait three hours standing in line to pay $.23 for it, what's your implied wage? Matt Ryan argues that standing in line is not a cost of the pizza but part of the experience.

...sure, I had to wait in line for 3 hours to get a cheap pizza, but how can I possibly value being able to tell my friends for the indefinite future? I don't believe it's entirely separate from betting longshots at the racetrack-- the story has value, and maybe because it's indeterminate exactly how valuable it is, you end up with individuals massively mis-pricing it.

I don't know how it is we know it's mispriced, though. Any good that I purchase with unknown benefits has some ex post accounting of benefits and costs, but I don't usually call that some mistake in price. For example, I'm forced by my convalescence to listen to a lot more of my purchases on iTunes. (Embarrassingly, in the eight months since I bought my iPod, I have purchased over 150 songs. In this way, I've never grown up.) Some of them are fills for playlists I write, and often I've pulled them out as bad ideas after sinking my $.99 into the song. But this was true when I bought albums, 8-tracks, cassettes and CDs. And some I get a great deal on; I've ended up playing the absolute hell out of Neverending White Lights, which I kind of stumbled on one night and bought two CDs worth after hearing three songs. Are all of these misprices ex ante? I think not.

OB LeBron, who's playing against my C's right now: It's natural in most superstars' careers that they begin to expect some respect from the refs. I obviously didn't get much time to see the Wiz-Cav series, but roughing up the one superstar when the rest of the team looks suspect isn't unusual, and it challenges the league office to see if they'll blatantly cover for the superstar they wish to promote by suspending the other teams' hackers. (They did in this case.) The problem for LeBron against the C's is twofold. First, he is playing against a much better defensive team that uses its own semi-superstar (Pierce) to guard him. Second, he's encouraged to do this by his coach's constant whining about calls, and that coach's insistence on running a 1-4 set for LeBron at the top of the key, basically saying "here, drive by Pierce and then meet Mr. Garnett." LeBron can't expect calls there, and he knows it. It's nice to see there's one coach in the league worse than Doc Rivers. When the Cavs lose this series, Mike Brown should go.

And LeBron isn't even the worst whiner. I think someone vintner needs to market $.21 Timfandel.

Economic hydraulics

noreply@blogger.com (King) — Fri, 09 May 2008 14:51:00 +0000

A very interesting article on the use of a machine by the famous economist Bill Phillips (of Phillips curve fame).

It is 2 metres (7ft) tall, 1.5 metres wide and a metre deep. It runs on water and most of the time it is screened off at the back of a lecture room in Cambridge. But when the nine members of the Bank of England's monetary policy committee announce their latest decision on interest rates today they will owe a debt of gratitude to the computer built in a garage in south Croydon by Bill Phillips - an engineer turned economist from New Zealand - almost 60 years ago.
A sensation when it was unveiled at the London School of Economics in 1949, the Phillips machine used hydraulics to model the workings of the British economy but now looks, at first glance, like the brainchild of a nutty professor. Where the Bank's team of in-house economists are equipped with state-of- the-art digital computers, the profession's first stab at modelling was very much a do-it-yourself affair with a whiff of the Heath Robinson about it.
The prototype was an odd assortment of tanks, pipes, sluices and valves, with water pumped around the machine by a motor cannibalised from the windscreen wiper of a Lancaster bomber. Bits of filed-down Perspex and fishing line were used to channel the coloured dyes that mimicked the flow of income round the economy into consumer spending, taxes, investment and exports. Phillips and Walter Newlyn, who helped piece the machine together at the end of the 1940s, experimented with treacle and methylated spirits before deciding that coloured water was the best way of displaying the way money circulates around the economy.

Irving Fisher also used hydraulics to model an economy because he didn't think the math was there to work out the general equilibrium (Gerard Debreu finally worked this out in the 1950s.) Hydraulics worked for Phillips, however, to demonstrate a coordination problem of policy:

...one early demonstration of the machine displayed the difficulties that can arise when monetary and fiscal policy are not synchronised. Phillips asked one of his students to be chancellor of the exchequer and control taxes and spending; the other to be governor of the Bank and control interest rates. Predictably, the policies were uncoordinated and the upshot was that water overflowed on to the floor.

Now if they could work out that the two people pouring the water are engaged in a game...

(h/t: Tyler Cowen)

Rank ignorance

noreply@blogger.com (King) — Thu, 08 May 2008 14:41:00 +0000

Rankings of things tend to annoy me. I would always prefer to know the actual values involved, but we tend to like lists. But they get you in trouble when people try to change how their measuring things.

Today's example is from our local paper. It takes exception with the Tax Foundation's rankings, largely because the Foundation thinks tax efficiency is a proper goal of public policy. The Foundation adds federal taxes to its ranking of the states, though as the link points out, removing federal taxes changes Minnesota's ranking not at all for 2007. Of course the letter writer forgot to tell you that.

He then switches to a report issued by the Minnesota Taxpayers Association, which includes both data based on taxes per capita and taxes per $1000 personal income. Using the latter measure, and using all state and local taxes, he finds that Minnesota ranks 23rd. Of course, he is now comparing apples and oranges. But he says "That one state has higher-income residents than another has nothing to do with the level of state and local taxes."

But the reason for his letter, that Rep. Steve Gottwalt (R-St. Cloud) has proposed the state corporate income taxes are too high, is belied by his own report use. The state ranks 8th in corporate income taxes per $1000 personal income. The letter writer uses a measure of all taxes to rebut a specific point about one tax, by playing fast and loose with which rankings one uses. Our top marginal corporate tax rate, 9.8%, is sixth-highest in the nation.

He also plays a little fast and loose with his choice of who is a non-partisan by quoting at the end lovingly from something published by the Economic Policy Institute. If you are going to call the Tax Foundation "extreme conservative", then you don't get to use an institute run by folks like Robert Reich and Robert Kuttner as being unbiased.

Charlie Quimby pointed out something similar in the Mn2020/Mn Free Market Institute spat over Matt Entenza's 32nd ranking. It's not a fruitful debate (and I say this as a fellow of the latter, with some trepidation.) The question is whether taxes effect people's willingness to truck, barter and exchange in Minnesota, and choosing between Minnesota and other states. Rankings and arguments over what's in the numerator or denominator of this or that ratio won't help solve that debate.

A brief note on Iraq loans

noreply@blogger.com (King) — Thu, 08 May 2008 14:18:00 +0000

I am puzzled by the whole idea that we should expect Iraq to pay for reconstruction through loans rather than grants, as Rep. Tim Walz suggested yesterday, and which has been floated by senators including our Norm Coleman. The parallel story I would tell is to think about my own desire to educate my child versus the state's interest in an educated workforce. Both of us have the same interest; using a state subsidy to finance my child's education shifts the price I pay for education, but if the state does not want to buy as much as I would myself, it's just giving me money. The child gets the same education either way, it's only a question of who pays. The question is a question of marginal analysis.

Who has a greater stake in Iraqi reconstruction at the margin? If you believe the GWOT is aided by the establishment of a functioning democracy in Iraq, it seems reasonable to argue that Iraq would choose less reconstruction and transformation than would be best for U.S. interests, and so it makes more sense for the U.S. to pay. Besides, the Walz formulation of Iraqi oil money helping us finance war in Afghanistan sounds a little too mercenary. That would be made only worse if you do not believe our anti-terrorism strategy is advanced by stabilizing Iraq.

Why a property tax?

noreply@blogger.com (King) — Wed, 07 May 2008 22:21:00 +0000

I appreciated LL's coverage of the floor debate of HF3149, which passed with an 80-52 vote, including five DFL legislators opposed. The bill, the darling of Tax Committee chair Ann Lenczewski, completely upends the basis of a property tax, in a state where we rank about in the middle of property tax collections.

There is debate whether the Revenue Department's testimony, mentioned by the Taxpayers League, that 69% of taxpayers would see a net tax increase under this formula (because they would lose the ability to deduct state property taxes from their state income tax, which for some will cost more than the property tax relief advertised). I do not find anything on Revenue's website with the 69% number, and if someone wants to point me to that analysis I would eagerly read it. It doesn't sound implausible, however. The state income tax has always been set to tax relatively lightly the "perfect MN family", with a mortgage, kids in school or day care, etc. Single renters making more than $35,000, I've always thought, don't get treated so well. As I mentioned when I filled out #1's taxes last month, if you don't have itemized deductions in Minnesota, you tend to pay in at fairly low income levels.

There's also the removal of the circuit breaker on local property tax increases. Part of the property tax refund that HF 3149 repeals is to shield homeowners from sudden increases in property taxes from, say, new levies passed by local government. But you still had to pay some (I make it as 64% of a property tax increase stays with you, the state refunding the remainder. The House Research analysis makes no mention of the income tax recapture.) That 64% is enough to keep some people from voting for your new local project, which makes local governments unhappy. Now, however, if you end up with taxes greater than 2% of your income because of a levy, every last dollar is relieved from your property tax: It is paid by the state out of its income and sales tax revenues. It is an attempt to tear down the barrier to greater government spending -- the Truth in Taxation statement that tells you "vote for this, and your taxes go up." The DFL, along with the LGA booty it distributes under this bill, takes a brake off of local spending.

But the truly most bizarre portion of this thing is the premise Lenczewski is using for the bill, that your property tax depends on your income. Why do we tax property, anyway? Property provides us with a stream of income, much of which is not realized. My recuperation from surgery this week has helped remind me I live in a nice house, in a great neighborhood. Many of the services I receive are non-monetary, and many of them are the result of the city of St. Cloud's public expenditures, such as the paths behind our houses that travel up from Whitney Park through the old airfield that pre-dates the development I live in. The city provides flowers that I am walking by along that path. It provides these services to everyone living in this area, true public goods. Since I am receiving that benefit as the result of the property I own, should I pay for it by a tax on property or a tax on income? We tax property precisely because the flow of its benefits are non-monetary. And the removal of the circuit-breaker says we can increase benefits to all property owners -- who will enjoy those in equal share -- but that we will tax only those who have non-property income, labor income, in excess of what the Minnesota DFL decides is "enough".

Well, not quite THAT bad

noreply@blogger.com (King) — Wed, 07 May 2008 14:50:00 +0000

Paul Mirengoff says Obama is the favorite now, and by more than a little:

I consider Obama the favorite. One can usually predict the outcome of the general election, and come pretty close on the margin, by considering just a few variables: how the economy is doing, whether we're at war and how popular the war is, which party holds the White House and how long it has held it, and how popular the president is.

This year, these "fundamentals" point to a Democratic victory of at least 10 percentage points.

I actually know a thing or two about such models, having written a dissertation on political business cycles and a couple of papers regarding electoral behavior. A model many of us use as a reference is Ray Fair's Predicting Presidential Elections. It's written by an economist so it favors some of the same variables Paul is using, including measures for war. Fair assumes the war variable currently registers as a zero, so hang on there for a minute while we check everything else and then see whether or not the belief that America is in a war matters for the calculation.

Fair has a calculator you can use to test your own prediction. I plugged in 0.9% for GDP growth forecast for the first three quarters of this year, based on last week's announcement of a 0.6% first quarter growth rate, assuming zero for Q2 and 2.1% for Q3 (these are approximately the WSJ Economist survey data from April; it's possible some of the Q3 growth gets pulled into Q2 because the stimulus checks seemed to come out earlier than we thought, but for this calculation that's a wash.) Inflation over the second Bush administration has averaged 2.8% per year. I'm leaving it there as the baseline; we'll play with that in a bit. The last thing you need is a measure of "good news", or the number of quarters real per capita GDP growth was over 3.2% on an annual basis. I see three such quarters (2005q3, 2006q1 and 2007q3). Using those values, I get 48.61% as the Republican share of the two-party vote total. If you'll guess Barr, Nader and the other fringe candidates draw 1% of the total vote, that gives McCain 48.1% of the vote and Obama 50.9%, a difference of only 2.8%, not 10%.

Inflation doesn't matter too much to this, given that the equation calls for all 15 quarters to be factored in and 13 quarters are in the books. If I add an additional 1% to q2 and q3, it cuts McCain's vote share only by about 0.1%. Inflation this summer may make us feel crabby towards government, but I'm not inclined to believe voters will visit the sins of the Fed on McCain.

Could the war matter, and if so how much? Douglas Hibbs has long been the father of the "bread and peace model", and he reports a comfortable 6-8% Democrat margin. But his model only ascribes a loss of .75% to the cumulative fatalities in Iraq; the rest is his estimation of smaller impact of the Bush expansion than Fair's. Fair tested his model using shift variables for WW1, WW2, and Korea (not Vietnam, a story for some other time). I'm inclined to use that 3/4% adjustment from Hibbs.

I think thus that the margin is much less pessimistic than Paul has painted it. McCain probably starts, ceteris paribus, in a four-point hole, but not a ten. There's work to do, but given the unpredictability of the campaign so far, I wouldn't start heading for the exits just yet.

One in four home sales in Mpls market in Q1 "lender-mediated"

noreply@blogger.com (King) — Tue, 06 May 2008 21:41:00 +0000

The Minneapolis Board of Realtors put out today a report on the number of sales they estimate have been either foreclosures or "short sales". It is partially an attempt to get people to understand that the market for traditional sales -- where the owner is selling the house and the bank is a passive party -- has not fallen in prices nearly as fast as suggested in the aggregated data.

Not surprisingly, lender-mediated homes have seen a substantial increase in total market share over the last 24 months. The percent of total new residential listings in the Twin Cities 13-county region that are flagged as foreclosures or short sales using our methodology has shown steady growth, rising from 2.9 percent in Q1 2006 to 7.1 percent in Q1 2007 and 21.7 percent in Q1 2008.

...The actual number of traditional seller new listings has fallen by 27.4 percent over the last two years, with only 19,675 in Q1 of this year compared to 27,116 in Q1 of 2006. So clearly, homeowners are holding steady in their current residences with greater frequency and home builders are producing far less new inventory.

The market share picture is similar for home sales, with foreclosures and short sales comprising a larger portion of overall sales than they have before. In Q1 2008, 27.6 percent of total residential closed sales were mediated by a financial institution, up substantially from the first quarter of the two years prior. And the number of traditional closed sales fell from 8,896 in Q1 2006 to 4,790 in Q1 2008, while the number of bank mediated sales increased from 324 to 1,828 for the same time period comparison.

So people putting homes on the market has fallen, but the number of homes put up by traditional sellers and which sold fell by much, much more. 1828 houses either through foreclosure or through short sales has a very depressing effect on homeowners "holding steady" in their homes. They may be holding, but they're not steady.

More of the short-sale and foreclosed homes are lower-price homes, so if the rate of those homes being put into the market accelerates, the report is right to point out, that makes the value of houses look like it's falling faster than it is. But there may be many more homes out there with people not able to sell, not able to make their payments, and not able to get out of the game. Even if traditional sale prices have only fallen 3.5% over the last two years, that still means a lot of homes with mortgages repricing this year are about to be in big trouble.

Call it a wash

noreply@blogger.com (King) — Tue, 06 May 2008 16:51:00 +0000

That's my verdict on the windfall profits tax versus gas tax holiday discussions you hear from the news today. I base this on the analysis at the Tax Foundation last week reminding us that taxes get shifted.

We distribute a $9 billion windfall profits tax (assumed to be borne by domestic owners of oil companies) and a $9 billion gas tax holiday. We show the results of the gas tax holiday under two scenarios: (1) the assumption made by Hillary Clinton and John McCain that the reduction in the tax will be fully passed forward to consumers and (2) the assumption of most economists that a temporary gas tax holiday would merely increase the profits of the oil industry due to the inability of domestic supply to respond to increased demand in the short run.

So it would just be a method of how the tax gets paid. Now at least one candidate wants to stop the shift,

It should be pointed out that Clinton attempts to reconcile these two assumptions with a provision that would force the Federal Trade Commission to mandate that the tax cut be reflected in the price at the pump. This is the worst provision of them all: essentially, she wants to control the economic incidence of a tax via legal mandate. Such a policy is economically equivalent to price controls.

And you wonder why we don't trust her with health care! But aside that, it's the legal incidence that is changing, not the economic burden, between the Obama and Clinton/McCain plans. (I know I just gave my GOP friends a heart attack joining those names. Tell me, aside the above, what are the differences between their plans?)

One curious point from the earlier link on windfall profits:

Amy Myers Jaffe, a fellow in energy studies at the James A. Baker III Institute for Public Policy just finished a two-year study looking at oil companies and how they spend their money.
The study found that for the five big international oil companies - ExxonMobil (XOM, Fortune 500), Royal Dutch Shell (RDSA), BP (BP), Chevron (CVX, Fortune 500) and ConocoPhillips (COP, Fortune 500) - spending on share buybacks went from under $10 billion a year in 2003 to nearly $60 billion a year in 2006.
Spending on developing their existing oil fields, however, went from about $35 to $50 billion, while spending on finding new oil fields went from about $6 billion to $10 billion.
"These companies are spending a very small amount of their operating cash flow on exploration," she said. "They are spending the majority of their funds buying back stock."

And that might or might not be a bad thing. If it was to indicate the stock was undervalued, buybacks are good as a signal of economic value. Or, it could be that free cash flow is high and that, in order to prevent managers from spending unwisely, the stockholders have money returned through buybacks. But it is also the case that buybacks might indicate slopping up the exercise of options by insiders (short story: CFO Mr. Big exercises 10mil in options on stock at a strike price of $10; to keep earnings from being diluted, the company buys back 10mil in stock -- perhaps but not necessarily from Mr. Big -- at the current market price of $25.) The buyback is in essence part of Mr. Big's compensation.

If you think that Mr. Big makes too much, you may prefer the windfall profits tax to discourage this practice. But the burden of the tax is borne by all shareholders, not just him.

Rice as nice

noreply@blogger.com (King) — Tue, 06 May 2008 16:20:00 +0000

The morning paper brought a story that local food vendors and restaurants -- and we have many Asian markets here for a community St. Cloud's size, one reason I love the place -- haven't experienced the widely reported shortages of rice that have pushed Sam's and Costco to set purchase limits to prevent middlemen making runs on their rice supplies.

�I believe I have enough stock," said Kim Nguyen, manager at Viet-Tien Market in St. Cloud.
When Nguyen first heard about rising prices of rice and rationing at warehouses, she was concerned that the market would not have enough stocks on the shelves.
�Then I thought it was a short-term shortage," Nguyen said, referring to a state of consumer panic surrounding the warehouse rations.
Viet-Tien Market has not rationed any of its sales on rice.
Cub Foods is not rationing rice either, spokeswoman Lee Ann Jorgenson said. Neither is Coborn's.
�We have seen prices go up, but we don't see any need to ration our stock right now," Coborn's spokesman Steve Gottwalt said.
Restaurants, such as China Restaurant and Hong Kong Restaurant in St. Cloud, also are in the clear for now.
Nguyen said some specialty rices, such as jasmine, are still easy to get. However, she is limited by her supplier to 10, 10-pound bags of basmati rice per order.

Prices go up to help ration supplies, but that's not the only thing at play here. Rice is rice, pretty much a staple and where prices aren't going to be the competitive margin on which suppliers operate. Ms. Nguyen has alternatives to where she can buy her rice. If she cannot be sure that her supplier will be with rice each week, she may seek alternative suppliers. The suppliers of course bring rice and lots of other products on which their profit margins may be higher. So a rationing in their case might help assure Ms. Nguyen that the rice will be there, and keep her loyal to her current supplier.

The Costco/Sam restrictions are another matter. Those larger chains are seeking price information, and in a noisy market they would like several transactions to confirm a change in market conditions. One speculator running out a store on a very large purchase not only inconveniences that store's other customers but also might provide bad price information to the larger distributors.

Mom of the Year - Soldiers' Angels

noreply@blogger.com (Janet) — Tue, 06 May 2008 02:45:00 +0000

Many of our readers know I ship packages to American soldiers in Iraq. I've been doing this since 2003. The group I originally linked through was Soldiers' Angels. This year, the founder of Soldiers' Angels, Patti Patton-Bader, is one of the finalists for America's favorite mom.

If you click on this link, you can go there and vote for Patti - I'd sure like it if you would. She is the mom with the medium-length dark hair, on the left side, under military mom.

Her organization, Soldiers' Angels, now operates internationally to provide letters, care packages, and comfort items to our deployed men and women as well as support for their families here at home. In addition, Soldiers' Angels provides assistance to the wounded, continuing support for veterans, remembrances and comfort for families of the fallen and immediate response to the unique difficulties that some may require.

You can just vote or you can sign up to adopt a soldier.

Regardless, this is support for our finest and bravest. We are extremely fortunate to have such an organization supporting members of our outstanding military.

Health update

noreply@blogger.com (King) — Mon, 05 May 2008 16:04:00 +0000

Thanks to the commenters and emailers. I've been home since Saturday afternoon, and feeling good enough today to wonder if Tylenol will do the job. Given last Wednesday night where I thought I was Bobby in that episode where he goes into prison and goes crazy to catch some bad guys, this is progress. Staples come out Thursday, it appears, and otherwise everything's normal. Even ate a little palak paneer last night -- my spice buds are badly out of shape, but the digestion handled the spinach and soft cheese well. Weather's good and I'm going for a short walk now. See you tomorrow.

Bridges respond to incentives

noreply@blogger.com (King) — Mon, 05 May 2008 15:36:00 +0000

Ed Morrissey is right in pointing out that the private sector works in how the I-35W bridge might now be open in September rather than in December.

Perhaps at some point, people will learn to harness the power of the private sector more completely for future public efforts as well. If we started to apply this lesson to non-emergencies as well as emergencies, perhaps we would have fewer of the latter. When we incentivize success, we succeed. When we incentivize bureaucracy, we get red tape, delays, and frustration.

I hope the planners of the DeSoto bridge reconstruction are paying attention. They might want to invite Flatiron to bid on the project. (If they could also reopen the old Flatiron Tavern, it'd do this St. Cloudian's heart good after I get done recovering.)

What the STrib article made very interesting to me was how they structured the incentives in the I35 contract to get faster delivery from Flatiron:

Flatiron-Manson was awarded the project under a MnDOT formula taking into account construction costs, time to completion and factors such as aesthetics and public-relations efforts. At the time of the award in September, critics assailed the agency for choosing the most expensive contract and the longest construction time

Now, if the bridge is finished in 337 days instead of the 437 in Flatiron's proposal, the construction period will be shorter than any that were proposed -- but will widen the cost gap.

One of the four bidders, Maple Grove-based C.S. McCrossan, offered to build a steel bridge in 367 days at a cost of $177 million. The second-shortest time was proposed by the team of Ames/Lunda, also based in the Midwest, which proposed 392 days for $178 million. The fourth bidder, Walsh/American bridge, proposed the same time frame as Flatiron, 437 days, but a lower cost, $219 million.
...State officials said last fall that the bridge closure is costing Minnesotans $400,000 a day in travel-related expenses alone. The $200,000 daily incentive was arrived at by dividing that number in half.
Gutknecht says the estimate of $400,000 a day, which was based on drive times and fuel costs, is a minimum. "When we figured it out,'' he said, "fuel was quite a bit cheaper."

So the value to Minnesotans of having the bridge done sooner is higher now than before; those additional benefits will accrue to drivers. In some sense, the incentive's value is greater when the date of completion is further into the distance. Once you cross the 368th day, there's no incentive for the low local bidder McCrossan to move any faster, unless penalties were imposed. I don't know the terms on the other contracts in re: incentives, so let's assume they all had the $200k/day incentives. It changes how I think about the contracts.

And here, we can't even have an empty holster

noreply@blogger.com (King) — Mon, 05 May 2008 15:29:00 +0000

In California, a professor is denied a contract because her Quaker beliefs did not permit her to sign a contract that contained a loyalty oath requiring her to defend the U.S. and state constitutions against all enemies, foreign and domestic. James Joyner thinks this is stupid:

I swore to protect the Constitution from its enemies three times � upon matriculating as a cadet, upon enlisting in the Army Reserve, and upon commissioning � and actually deployed to a combat zone pursuant to that oath. Several times in the ensuing years, I also signed contracts to teach at various colleges and universities. None of them asked to to sign any oaths and I�d have laughed at them if they had.

I've never seen such an oath either.

ISD 742 learns the Washington Monument strategy

noreply@blogger.com (King) — Mon, 05 May 2008 14:52:00 +0000

You could have seen this from a mile away. The local school board, in the midst of hiring a new superintendent, has released a document that describes "a glimpse of what may happen if St. Cloud school district voters defeat a property tax increase Nov. 4."

The cuts could include school closings, mass layoffs, reductions in activities and special education, and spending reserve dollars. More ideas are funneling in as Superintendent Bruce Watkins shares the proposals throughout the district.
The ideas represent more than $6 million in cuts. When the list is put before school board members in late May, it will be whittled to $4.3 million.
"They look terrible. When we look at them, there isn't a single thing on the list that is a reasonable alternative that would not affect the education of children," board Chairwoman Deb Lalley said.

A graphic (here in .pdf from the Times) leads with closing schools. Of course that's what they want you to see; "give me my levy or we'll shoot this school." In public finance, it's known as the Washington Monument strategy.

Within the article are the seeds of the fight.

Voters in 2007 rejected a request to renew a tax passed in 2003 that provided $4.8 million a year. That caused a budget shortfall for 2008-09 that the district plans to fill with $1.5 million in reductions and $3.3 million in reserves.

...In 2007, the district was more cautious about mentioning possible reductions until later in the campaign. The philosophy has shifted to determining potential reductions about a year before they would be made.

So they said no, but the school district's reply is "you didn't really mean that, did you?" When you think about what the 2003 tax levy was for...

One possibility eliminates the 30 teacher positions that were added with money from the property tax increase in 2003. Each teacher costs the district about $45,000. One proposal suggests laying off 30 to save $1.4 million.

Note that this saves more money than closing both of the junior highs, according to the graphic. This is what school districts should be saying: We can either close a school and keep student-teacher ratios at current levels, or we can keep the schools open and lay off some teachers and let ratios rise. We've discussed that point here before, and the evidence that ratios matter for learning is tenuous. So if people want to have neighborhood schools, and they've voted against the levy last time, why not accept the word of the voters and make the layoffs?

Because teachers make lousy Washington Monuments.

Best paragraph I read this morning

noreply@blogger.com (King) — Sun, 04 May 2008 16:21:00 +0000

Gas is $3.50 a gallon and politicians are ready to lock up oil company executives. Milk is $3.50 a gallon and the same politicians can't shovel our money to the farm lobby fast enough. What statesmen.

Pat Shortridge on Friday. Meanwhile, Bill Polley dissects the gas tax holiday proposal. McCain is right on the farm bill, but the tax holiday is not well thought out.

Latest on King

noreply@blogger.com (Janet) — Sat, 03 May 2008 02:13:00 +0000

We just returned from a visit to King in the hospital in St. Cloud, about 80 miles north of here.

He was sitting up, reading his email, enjoying a number of visitors. He says it's difficult to walk much - it really tires him but he does it. He's eating solid food and is very alert. I cannot emphasize how much everyone's thoughts, prayers, notes, comments (and flowers) meant to him - blew him away - he's very grateful.

King hopes to get home tomorrow; if not then, Sunday. It will be a while before he gets back to 100% but he'll make it. His gall bladder was really bad - no microscopic surgery, the full incision had to be made. Hence, a longer recovery but at least they got it before the infection got any worse. This was serious, folks.

Again thank you all.

Supporting one blogger

noreply@blogger.com (King) — Fri, 02 May 2008 18:11:00 +0000

Surgery does weird things to you; you become emotional at unexpected moments; bursts of energy are wills o the wisp; many visitors come that you cannot really respond to as you want to. So anyway, to second Janet below, yes, thanks for everything, from readers I did not know I had until this week. I own my intestines again. I'm still at the hospital and will now go take a walk, which is how I get better. A few steps at a time. But I expect to go home over the weekend. Extra sutures and drains were removed about two hours ago, I'm a bit sore from that but this will pass in a few hours, I'm confident. Next week being finals week, I have some room to coast for a bit.

An orderly just asked if I wanted water with ice. In any normal circumstance I would have said thanks but that I'd get it myself. Try to be very polite, but self-reliant. One lesson I learned this week is how to accept kindness with gratitude, without feelings of obligation or shame. Not sure I knew this before. I haven't given up individualism by any stretch, but our humanity needs an opportunity to express its care for other individuals, and to know that to give people that opportunity to do it, person-to-person, is part of what makes us feel our own.

I apologize to not linking back to posts from Michael, Gary, Leo, Ed, Andy and others. I cannot get through the BlogNetNews reader for Minnesota, not enough energy. But I deeply appreciate every one. I have never felt so supported.

Update on King - Thursday, May 1

noreply@blogger.com (Janet) — Thu, 01 May 2008 22:14:00 +0000

My husband and I were heading to St. Cloud to visit King today. We were about 30 minutes into the trip when I got a call from King's wife, Barb. She told us that today was not a good day and asked if we could make the trip Friday or Saturday. We agreed.

I did talk with King - as he said, he was experiencing some discomfort and needs some rest. However, he also wanted to express his gratitude for all the notes, thoughts, prayers and concern. It has been over-whelming.

Again, thank you all!

King Is Out of Surgery

noreply@blogger.com (Janet) — Wed, 30 Apr 2008 12:20:00 +0000

Gary Gross was the first to post the following e-mail from King's wife, Barbara:

King had his gall bladder removed but needed the major incision for which his hospitalization will be prolonged until Thursday or Friday.

Apparently, it was very infected.

Barring complications, he will recuperate on the 4th floor of the hospital.

I�ll continue to keep you posted; meantime, what a blessing the Blogosphere has been. I can�t thank you enough,

Barbara

We are all extremely thankful and relieved at this good news, and wish King and his family the best.

Update April 30.

King is recovering satisfactorily. Thanks to all of you who sent wishes of a successful operation and healthy recovery. All your comments were copied and sent to his wife, Barb. If you care to post any more comments, those two will be forwarded.

Again, thank you all for your thoughts and prayers.

UPDATE (11am): Many thanks to all of you. I just took the most tiring, most exciting 10-minute, 150 foot walk ever taken by this human being and found I had a wire for my laptop here. I am shocked beyond words at the outpouring of friendship shown me the last few days by you all on the comments, in other posts and people who've come by the hospital so far. I'm a little too weak to do lots of blogging, so this is all for today most likely. I'll tell you the rest of the story sometime. But when I tell people that virtual friends can be just as vital as those in real time, your comments, thoughts and prayers will be Exhibit A for the prosecution. God blesses me with your friendship. --kb

Update Thursday, May 1

King continues to do well. Most pain is gone. He's taking short walks. He gets solid food this morning. Toast never tasted so good! Again, thanks to all.

From an Aussie Soldier

noreply@blogger.com (Janet) — Tue, 29 Apr 2008 13:00:00 +0000

I am biased in favor of American soldiers. We have the best trained, most professional, caring soldiers in the world.

Having said the above, here are some quotes from an Aussie soldier regarding his experience with American soldiers in Iraq. You can go here for the full letter. I am comfortable that it's legit - the original source was Michael Ledeen at Pajamas Media a known specialist on the Middle East and Islamic jihadism. This says it all.

Gentlemen I am an Australian and my son is an Australian - as far as we are concerned there is not place on God's earth better than Australia, and there are no people better than Australians. My son and I just ended a long 'phone conversation and here are some of his comments, believe me this is what he said.

'Before I came over here I thought we (the Australian Army) were pretty .... hot..... was I ever wrong!....The Yanks (I hope you don't mind me using that word) are so professional from the top to the bottom that it is almost embarrassing to be in their company, and to call yourself a soldier....don't get me wrong, we are good at what we do but the Yanks are so much better.....they are complete at what they do, how they do it and their attitude is awesome....they don't complain they just get on with the job and they do it right.

Let's face it they don't have to be here, they could stay in America and beat the s*** out of anyone who threatened them, but they are here because they believe they should be here, and the Iraqis would be screwed if they weren't here.

The reason why I am sharing this with you is because I realize that you (as a nation) must get pretty ***** with all the criticism you receive by the so-called 'know it alls' who are sitting at home - safe. The reality is that they are safe, just as I am, because of America. If the world went arse up tomorrow ..... I know that the Americans would be there putting themselves on the line for others. That to me is the sign of greatness.

UPDATE: This is so typical. I posted this tribute to American soldiers, which praises their professionalism, their competence, their attitudes, and their willingness to sacrifice for others. The first response is a comment with not one positive word about our soldiers, instead changing the subject to bash President Bush and the American government. Such behavior is why so many claims to "support our troops" give the impression of hypocritical and cynical propaganda.

King is in the Hospital

noreply@blogger.com (Janet) — Mon, 28 Apr 2008 22:39:00 +0000

To our readers: King is in the hospital at this time and won't be blogging for a while. We'd talked Saturday morning - he'd landed in the hospital then with some stomach problems. He's on a restricted diet so stomach issues cannot be ignored. He was feeling better and they could find no source of the problem. He came to the Twin Cities to do his afternoon radio show, drove back to St. Cloud only to return to the hospital on Saturday night.

Tests run today indicate his problem is his gall bladder. He'll wait for surgery because he is now running a fever and having heart palpitations. His St. Cloud blogging buddy, Gary Gross, has information here.

As of now, surgery is scheduled for Tuesday morning. King has received pain meds. I will keep readers posted. In the meantime, any thoughts and prayers for King and his family are welcome. Any comments you post will be forwarded to King's family. Thank you.

Update, Tuesday, 4/29

As of now, King rested comfortably. Surgery is this morning. After hearing results, I'll post. To those who left messages for King and his family, thank you! They are really appreciated!

April 26 - Snow

noreply@blogger.com (Janet) — Sat, 26 Apr 2008 12:16:00 +0000

This past Wednesday was beautiful - temperature in the low 70's, clear sky and, "Finally," we thought, "spring is here!" After all we had a rather prolonged winter.

Budding trees, the beginnings of flowers, shorts, t-shirts, etc. - all signs of spring were visible. We then experienced two days of rain (great for the farmers) and this morning, SNOW. It's April 26. Included are photos from the back of our house - you can see the green of lilies, iris, and other flowers through the dusting of snow.

Rediscovering partisan cycles

noreply@blogger.com (King) — Fri, 25 Apr 2008 20:38:00 +0000

Many people are talking about Larry Bartels new book, Unequal Democracy. Paul Krugman talks about the differences in inequality between GOP and Democrat administrations, but he can't figure out why that happens. Dani Rodrik seems to accept Bartels' explanation of why voters still vote for Republicans when they keep giving us recessions and income inequality, which is that voters are myopic. (Russ Roberts calls the data into question -- well worth considering, but not my point.)

Alex Tabarrok makes the key point: We've known this result for some time.

In a nutshell, the theory of partisan business cycles says that Democrats care more about reducing unemployment, Republicans care more about reducing inflation. Wage growth is set according to expected inflation in advance of an election. Since which party will win the election is unknown wages growth is set according to a mean of the Democrat (high) and Republican (low) expected inflation rates. If Democrats are elected they inflate and real wages fall creating a boom. If Republicans are elected they reduce inflation and real wages rise creating a bust.

A certain economist wrote his dissertation on political business cycles in the 1980s and considered partisan cycles. I didn't have at that time the nice chart that Alberto Alesina and Howard Rosenthal (Am Pol Sci Rev, 1989) drew that Alex has updated, but I had noted what they note in their introduction. Democratic and Republican candidates have "polarized policy preferencs" in that Democrats have a higher tolerance for inflation and a lower tolerance for unemployment than do Republicans." (pp. 374-75) There are also economic frictions caused by the presence of wage contracts, that must be set during the period where we don't know whether the Republican or Democrat will win. Because these contracts can be rewritten after the election, most of the shock that occurs when one side or the other wins an election happens in the first half of the new administration; ergo, partisan cycles are the result of settling electoral choices. Unlike earlier political business cycle models, you can generate these results while still having completely rational voters. What they lack is only knowledge of how everyone else in the economy will vote.