Spending Our Way to Ruin

Okay, I've had enough. I withheld posting on politics during the election cycle, but now the fools and tools in Congress and our Chief Executive of Hope and Change are about to commit highway robbery of unprecedented proportions. First the House passes a bill that is estimated to cost the American taxpayers $820 Billion. I might point out that only Democrats voted for this, with 11 D's crossing over to vote 'nay'. Now the Senate - at least the Dems and a couple spend-happy Republicans - seems poised to agree to about $800 Billion.

Let's be clear here. This is not "economic stimulus". It is government spending, pure and simple. Obama said so. (Sorry about the Canadian thing, but this was the best version I could find quickly.) What is the difference you ask. Well, stimulus implies that you get some sort of positive ripple effect through the economy or boost in total value (GDP). Supposedly, we will see more jobs, better incomes, and such. This spending will not achieve this goal because it is no different than the typical congressional appropriation. These bills just buy stuff for government - federal, state, and local. There is no real investment of the sort that individuals and businesses make to create added value. Think of it this way. The feds are going to pay a lot of people to build federal offices, install computers, pave roads, etc. So beyond the paychecks of these select, lucky people there will be no value added to the national economy. At the same time, a massive amount of money will be taken out of private hands, which means that when creative and innovative folks come along saying, "Hey, I have a great idea for a better mousetrap", there will be no money for them to do it. So the jobs that would have otherwise been created at the new mousetrap factory, jobs that would last more than the time it takes to install a faucet in a national park outhouse, will never materialize. Here's an even simplier analogy: Could you ever afford to buy the things you really want or repair your car or house, or save for retirement, if you were constantly giving your hard-earned money to your wacky neighbor who only used your cash to add more garden gnomes and floodlights to his yard?

The other important fact is that Congress has to borrow or print all this money, or both. None of those are good options for our nation. First borrowing. We all agree that the root of our economic problems is the reck-loose borrowing and spending of consumers and businesses. Now we are being asked, in a most insulting way, to believe that the way out of our debt is to take on more debt for things we don't really need. Second, printing cash. Inflation. INFLATION. INFLATION! Click here if you don't know why inflation is a bad, bad, bad thing for America.

Speaking of debt... Think you are a fiscally responsible person, with a handle on credit card and consumer debt? Think debt isn't a problem in your life. Oh, aren't you a cute little deluded American. The recently-retired Comptroller of the Currency, the guy who is basically the head bookkeeper for the US, estimates that each American (not just taxpayer, each American) owes $184,000 on the national debt. And that figure keeps rising. Sooner or later, that bill will come due in the form of much higher taxes on everyone.

Back to this spending spree package. What's in it? Good question. The bill from the House is almost 200 pages long and sheds little light on what we taxpayers are actually spending money on. However, here are a few choice porkers:

• $2.825 Billion for broadband internet for rural communities.
• $650 Million for coupons for analog-to-digital television converters
• $140 Million for "climate modeling" (I thought the science was settled on that one?)
• $7.7 Billion for the Federal Buildings Fund
• $150 Million for the Smithsonian
• $50 Million for the National Endowment of the Arts

It just goes on and on, the wasteful, special interest-payback, vote-buying spending. In many cases, such as spending for the Dept. of Education, the appropriation in this emergency "stimulus" bill is twice the normal annual budget amount! The extra shame is that all this pork will inevitably be added to the federal baseline, meaning that it will be used to calculate next year's budgets. So, in a few strokes of the pen, government will have ballooned in size, power, and thirst for our money, all under the disguise of helping the little guy and gal.

All is not lost - yet. The Senate has not voted and the president hasn't signed anything into law. Take this opportunity to call, fax, email and generally pester your elected representatives into stopping this raid on our wallets and liberty. Because that's what this is all about - making everyone a recipient of government welfare. And that's just another way of saying losing your freedom. WE THE PEOPLE deserve much better. We deserve to be respected and listened to by our government. But only if we speak up. Go now and give them your opinion.

Scrabble Scribble

I was setting up to play Scrabble (you remember Scrabble, right?) the other day when something struck me. I noticed that when selecting the initial 7 letters the other players and I picked them from all around the container. This is only interesting when you consider that the letter squares have, supposedly, been well mixed and are randomly distributed across the box. We were trying to randomize our selection of already randomly arranged squares! Of course, if the squares are truly randomly distributed and it should not matter from where in the box you draw the letters. I should be able to pick 7 squares all adjacent to each other and get 7 random letters. Yet my brain tells met that I have to pick from all box to achieve the best selection of letters. There's a psychological term for this type of behavior but I can't recall it at the moment.

Am I the only one who thinks its intriguing how our brains work to influence our behavior?

Milestone or Inflection Point?

I suspect that today is the last day I will ever pay less than $4 for a gallon of gasoline. I saved the receipt from the first time I paid more than $3 a gallon - it was just after Hurricane Katrina hit when there was wide concern that gasoline deliveries would be interrupted. Here is my prediction: the internal combustion engine is doomed. It's tombstone has already been carved and is just waiting for the DoD to be added by an alternative. My bet is electric or hybrid electric originating from nuclear plants. Corn ethanol is a complete folly. Actually, any agriculturally-based fuel input, be it switch grass or sugar or otherwise, is a bad idea as it will invariably compete for farm land with food products. The world wants to eat more than it wants to drive and the backlash will only continue if we don't wise up to basic realities.

However, for the time being, the oil companies are providing a safe harbor for investors weary of the fall-out from the housing/financial market crunch. Oh, yes, some decry the profits of ExxonMobil, et al. But their arguments mostly neglect the facts that Big Oil is losing money on refining operations, their overall margins are a mere 8%, and the largest shareholders of the energy companies are mutual funds and pension plans. So, retirees, teachers, policemen, and all sorts of individuals with retirement accounts are personally gaining from the profits. Probably no comfort to you, but remember that when politicians and other "activists" yap about "windfall profits" and new taxes, it will really mean less money in the pockets of senior citizens and public-sector employees.

Back to alternative fuels... the company that can provide a fuel with the energy equivalent of a gallon of gas at $1 per unit is going to make a lot of money. A lot. I call that opportunity.

Pity Party?

Have you heard about this credit crisis thing? Yeah, been kinda popular in the press lately. Lots of stories of problems, write-downs, foreclosures, layoffs, fraud, defaults, and failures in the real estate and financial markets. Given that, which groups of workers do you think have been crying themselves to sleep every night?

So, imagine my grin when a friend forwarded me this flyer for a business networking event in Philadelphia.

Unless the drink special is Jonestown Kool-Aid, I don't think this will be a particulary "Happy" hour for those young professionals. My advice to them, save your money and spend your time looking for a refrigerator box. You'll need it after the bank you once did business with repossesses your BMW and your shiny new condo. But don't feel too bad, when the bank takes the condo back, it will only be worth 1/3 as much as your mortgage, so the bank is really doing you a favor. And the labor market is not all bad... I hear that demand for crop pickers is sky high. Cheers!

Match Maker, Match Maker...

2008. The year of the online match-maker wars. History will recall the tens of thousands of teary-eyed singles cut down in the cross fire. Indeed, the web rivals were a match made in HELL!

Ok, I've already discussed fat overweight people on television. So now it's on to those annoying commercials for Chemistry.com or whatever it's called. You know the ones, with the poor souls thoroughly flummoxed by the rejection of their application by E-Harmony. But I'm digressing from what I really want to say.

I would really like to conduct a research study of the success of these various match-makers. I'm curious what effect, if any, their matching/comparison algorithms have on the outcomes of paired couples. Specifically, I wonder if people convince themselves that the man or woman they get matched with are "really great" only because some computer program tells them so. Admittedly, this would be a daunting task, separating out the effects of all the variables, but surely some freakonomist out there could crunch the data. There are probably some ethical issues, too, but come on... these people are rejects anyway. The computer said so.

Worth a Read

Being a Yankee means appreciating creative (and usually astoundingly simple) solutions to problems, be they unique or ubiquitous. Thus, I'm pirating borrowing a format from the intelligent authors of Marginal Revolution.com and presenting my own "Markets in Everything" post.

The Economist reports from Africa on the proliferation of personal banking services:

They have taken branches to the unbanked, either in prefabricated form, or in vans that make regular visits to under-served areas. Other countries are doing the same. In remote areas where delivering cash is hard, mini-machines have been installed in corner shops where customers print out a slip confirming they are in the black and present it to the shopkeeper, who provides the cash. Some rural branches and ATMs rely on solar energy and satellite phone connections.

How cool is that?! Wait, it gets even more amazing.

Standard Bank supplies an isolated branch on an island in Uganda's Lake Victoria by having planes drop bags of cash from the air.

Who says money doesn't fall from the sky - I'd love to know how much security that requires. Anyway, this is the type of innovation (and risk taking) that powers economic growth and freedom. Sadly, it is not all whiz-bang progress.

According to the World Bank, in 40 out of 48 countries in the region, it still takes over a year—and a long list of procedures—to enforce a contract.

A year! 12 months! 365 days! I don't have any data, but I'm guessing most contract disputes in the US and other industrialized countries are resolved in a matter of weeks or months. Actually, I'd bet that most are resolved before they ever get to adjudication. This is important because contract disputes, and enforcement of contracts, can be a tremendous dead weight loss for the parties involved and for the economy and society as a whole. See this post (fourth paragraph, but read the whole thing) for a brief glimpse of what I think about the state of litigation in America .

Bottom line, conditions are improving in Africa because of creative people and a little bit of risk taking. Although compared to the alternative of continued poverty, maybe the risk isn't that big.


Don't you love the irony of me blogging about innovation in a format that I effectively stole from another blogger. Ah, the glory of the Internet!