Wednesday, January 28, 2009

The Stimulus of My Current Anger

Life has been busy lately. MidMark has not been immune to the economic malaise, and we have been busy trying to keep our portfolio working properly.

So while I have read the headlines occasionally, I have not spent much time digging into the details. The topic dominating the headlines recently has been the stimulus package, which passed the House today (apparently without a single Republican vote – so much for Obama’s post-partisanship!).

Not knowing much about it except that it included a lot of money for infrastructure projects like bridges and highways, I assumed that it had been crafted largely by economists who had sat in a room somewhere trying to think of all the ways that we could get our economy rolling again by using the treasury to spend money on stuff. Presumably, there was a method to the madness.

Hearing that the stimulus bill had passed the house, I set out tonight to find out some details of this $900 billion bill. I searched around Google for a summary of the stimulus, but found only either vaporous news articles, light on facts but heavy on politics, or true position papers from the online blogs and opinion journals. I didn’t want someone’s opinion, I just wanted the facts! What’s in this damn bill?

One of the blogs I read had a link to the actual bill itself (I’ll have a link at the end of this post). Having recently spent a good portion of my life perusing voluminous legal documents, I’ve become quite a good speed reader, so the prospect of actually reading the bill rather than someone else’s version of it was appealing. I clicked right in.

First thing I found: 647 pages. Ugh. But I’m a really good speed reader, so, undeterred, I read on. I flashed through the first 50 or so pages which covered policies & procedures, transparency, oversight boards & the like. Pretty boring.

Soon, I got to the good stuff. It’s not a complicated bill. It’s written clearly in very simple language. First, I found an appropriation of $44 million for “Agriculture Buildings and Facilities.” Not much of any explanation, just $44 million for some buildings. Huh? But I continued. Then, there was $2.825 billion for “the cost of broadband loans and guarantees.” Huh? Where’d that number come from? Then, there was $50 million for “Youthbuild activities” and $750 million for “a program of competitive grants for worker training and placement…”

My heart started to sink. I was starting to get it. I started flipping through pages faster. $120 million for “community service for older Americans.” $462 million for “disease control, research and training.” No explanation, no details, just that: $462 million for disease control, research and training.

On page 131 I stopped flipping through pages. Shame on me. Shame, shame, shame on me for not knowing what was going on here. All these past few weeks, I was blithely carrying on, thinking that Obama and his smartest economists were sitting around with charts and graphs, trying to figure out the most effective way to deploy government dollars into our markets in order to grease the wheels of commerce.

Instead, what happened was that he went to Congress and said: “hey, what do you guys want?”

This damn bill is full of $900 billion worth of pet projects that people could not get passed or funded under normal circumstances! Where’d all those odd numbers come from? Certain people had been thinking about those things for years! When Obama said – hey, we don’t have to worry about deficits anymore – everyone just piled their favorite spending into a bill and they hid their true intentions by calling it a stimulus bill!

Read it. Please. Follow this link and read it. This bill is simply horrifying.

Let me be clear – I am not coming down on one side or the other of the current argument about the effectiveness of fiscal stimulus. I am simply pointing out that this particular bill is not a stimulus bill. It is an orgy of spending. It is Santa’s bag of gifts for House and Senate democrats. It is the far left’s greatest, sweetest dream come true.

I’ve been reasonably willing to cut Obama some slack over the last few weeks. He’s seemed smart and pragmatic, and has seemed to solicit opinions from just about everyone before making any decisions. But now, whatever my thoughts on the effectiveness of a true stimulus, one thing is very clear: my short honeymoon with Obama is OVER!

Thursday, January 22, 2009

Too Much

For some years, I have been something of a climate-change skeptic. Let me note here that that being a “skeptic” is a good thing, especially in the case of science, and especially-especially in the case of complicated science.

To be sure, I am not a scientist myself. But I have spent several years studying certain data associated with real climate change (i.e. world temperatures do seem to have climbed approximately 0.7 degrees Celsius over the last 100 years). I have done many indepent regressions testing out various local temperature trends. And I do have many years of computer programming, and (more important) computer modeling experience (this is important insofar as most of the significant conclusions of the climate change crowd can only be reached by relying on the output of complicated computer models which attempt to predict future climate).

I have slowly come to the conclusion that we know far less about our future climate than most climate alarmists would have you believe. Furthermore, I have also come to the conclusion that there is a fair bit of dirty ball being played by the other side to get the data to work out correctly. It seems that every time a skeptic points out a legitimate inconsistency in the climate change theory, after several years, somebody else comes out with some harebrained (but peer reviewed!) paper about why that particular inconsistency was actually consistent with the theory all along (and, obviously, thereby changing the theory along the way). My gut has told me that Michael Mann and his compatriots at RealClimate were, consciously unscrupulous or not, masters at this particular game.

Until now, aware of my own limitations, I have been reluctant to post about this topic. But upon seeing yesterday’s headlines, I knew something was up, and I lost patience. This is just too much.

PS: Pielke’s last statement is the greatest unanswered question in the climate change world.

Friday, January 9, 2009

Whose Fault is All This?

As reports roll in about unemployment reaching levels last seen in the Great Depression (this is not yet true on a percentage basis, but that does not stop the press from reporting such things), and as scandals such as the Madoff affair unfold, our collective national psyche is searching for villains to blame.

There are quite a few to choose from: Stan O’Neal of Merrill Lynch, Franklin Raines of Fannie Mae, Madoff himself. Others would like to paint the entirety of Wall Street itself (as distinct from “Main Street”) as the villain. Still others have found even more specific grievances to air: Deborah Spar, President of Barnard College, has recently pointed out in a Washington Post Op Ed that most of the guilty parties identified so far are men, and wonders whether there isn’t some innate difference between the sexes which accounts for the more testosterone-enhanced among us being more prone to the types of excess which led to the current financial collapse.

While there may be something to Ms. Spar’s thesis, I can’t help but wonder whether all of these thousands or hundreds of thousands of people (some of whom I know, by the way) can all be truly evil (or even just stupid).

I suspect not.

Taking the argument one step further, why do we suppose that, while the great things that make our economy dynamic and lead to ever greater standards of living are somehow widespread and universal, the opposite, those which cause financial distress and cause decreasing standards of living, are somehow always the result of individual turpitude?

As most of us know, Adam Smith described the former as the “invisible hand.” This is the principle that hundreds, thousands, perhaps even millions of individuals, each pursuing their own particular utility, will collectively result in the betterment of mankind.

But is it not possible that the invisible hand is also responsible for economic turmoil? I think it was Benjamin Graham who, when asked what was going to happen in the stock market, said it was going to go up and it was going to go down. Is it not possible that there is some equivalent with regard to the economy in general? Is it not possible that the invisible hand moves economies down as much as it moves them up (although inexorably, over longer periods of time, mostly up)? Is it not also possible, therefore, that these downward economic dislocations are simply the result of hundreds, thousands, perhaps even millions of people, each pursuing their own particular utility?

I suspect so.

The implication of this theory is that some people are going to be frustrated very soon. One class of people will be frustrated because their search for villains will prove more elusive than hoped. They will look deeply into the actions of the purported villains only to find, surprisingly, that each of these people acted somewhat in accordance with accepted strategies and procedures, and further, that they probably behaved rationally given the information available to them.

Another class of people, for whom I have the deepest empathy, will be crucified, notwithstanding that they acted rationally and in accordance with generally accepted strategies and procedures. Stan O’Neal particularly comes to mind. He’s probably a decent fellow, and when things were going well, boy, they were going really well. But now that they’re not going so well, nobody really remembers the circumstances under which he made his decisions. The assumption is that he was complicit in some great theft from the masses, rather than just a CEO trying to make the most money for his corporation, and generally unaware of the financial disaster looming ahead. Frankly, nobody saw this coming. I listen to Chief Economists all the time, and not one of them gave us a whisper of what was to come.

And now it’s all Stan O’Neal’s fault?

There are people who will go to jail because of this unquenchable thirst of ours for fault-finding. The Bernie Madoffs of the world certainly deserve to go to jail, and for a long time. But I will guarantee you that more than just a few Stan O’Neals will go to jail, too, just to satisfy a weird craving humans all have to blame someone when something goes wrong. And that’s a shame.

Friday, January 2, 2009

The Irrational Demonification of the SUV

There is a lot of bad math and bad logic on the topic of energy being cast about these days.

The example of sloppy thinking which irks me the most is the simple use of miles per gallon as the final arbiter on energy efficiency, and thus, in the minds of many, moral cleanliness.

In my estimation, an SUV which gets 15 miles per gallon but regularly carries five people and all their gear is about five times as efficient as a Porsche 911 which gets 15 miles to the gallon and regularly carries one person and maybe a cellphone. When people rail about wasted energy, why do they talk about SUV's instead of sports cars?

As I drove my family home from a short vacation in Washington, DC, today, all five of us in the car, stuff packed to the rafters, I realized that the more appropriate measure for energy efficiency should be person-miles-per-gallon.

Under that standard, we were cruising along at about 80 PMPGs. In order to commute alone as effectively, our neighborly Prius driver would have to pitch his prized hybrid in favor of a motorcycle. I try to take it one step further by riding a bicycle to and from work as much as I can.

Full Disclosure: until very recently, I also regularly drove a Porsche. Please realize, I am not moralizing here, only pointing out faulty logic.