What If There IS No Spending Problem? March 15, 2013March 15, 2013 [HOUSEKEEPING: This site has been moved to a more robust server. I hope there will now be fewer outages. Sorry for the difficulties of the last couple of days. Yesterday’s column, if you missed it, is back up — and a actually bit more polished thanthe version that originally went out.] Updates below on BOREF, SIGA, GLDD, and others, but first . . . A REALLY INTERESTING PERSPECTIVE Kevin Rasmussen: “What if there is no spending problem? I posted your site’s quote of the day on FaceBook the other day: In 1800, 75% of [an American] working man’s expenditures went for food alone. By 1850, that had dropped to 50%. Today it is a little more than 11%. — The Wall Street Journal, September 20, 1996 “Interesting statistic, I thought. My smart friend Jason posted this link [to a piece by blogger and ex-mathematician Doug Muder] as a response. It’s a perspective I hadn’t considered. Interesting!” It is indeed! . . . Government spending goes out of control because healthcare costs go out of control. But just capping what the government spends on Medicare and Medicaid (i.e., the Ryan plan) doesn’t fix anything. If healthcare costs are unsustainable, then what does it matter whether we’re paying those costs through government, through private insurance, or out of our pockets? Personally, it’s all the same to me whether I go broke paying taxes, paying health insurance premiums, or paying my doctor. So a liberal would rather imitate the countries who already get better healthcare for less money than we do and increase the government’s role, ideally with a single-payer system. Summing up: Liberals and conservatives agree that we have a long-term problem, but they argue about what kind of problem: a government spending problem or a healthcare cost problem. Recently I ran into a potentially game-changing question: What if there is no problem? In other words, instead of being trapped in the dismal liberal/conservative argument about which apocalypse we’re headed towards, what if we’re actually not headed towards an apocalypse at all? “That’s crazy!” That was my first reaction too. I mean, look at that graph. But the guy making the claim (William Baumol in the recent book The Cost Disease: Why Computers Get Cheaper and Health Care Doesn’t) has a track record that earns him a hearing. Baumol is an economist who is most famous for identifying Baumol’s Cost Disease in the 1960s. His observation is that although the economy as a whole becomes more productive with the advance of technology, not all sectors progress equally, and some don’t improve their productivity at all. For example, a 21st-century farmer feeds far more people than a 19th-century farmer. Likewise, a worker at a modern shoe factory makes more shoes than a 19th-century cobbler. But it still takes four talented musicians to perform a Beethoven string quartet, and they don’t do it any faster than they did in Beethoven’s day. String quartets have not seen a productivity increase. The economic consensus of the 1960s said that wages were tied to productivity. If that were true, then classical musicians would have seen their incomes crash relative to farmers and shoemakers, who would by now be vastly wealthier than the lowly performers of the New York Philharmonic or the Boston Pops. In fact that didn’t happen, because in the long run the labor market has a supply side as well as a demand side, the result being that every profession has to pay enough to induce talented people to make whatever sacrifices are necessary to enter that profession. But something has to give somewhere, so we see the productivity difference as inflation: The price of a New York Philharmonic ticket is going to rise much faster than the cost of a loaf of bread or a pair of shoes. So Baumol’s observation is that industries with a large component of personal service are not going to increase their productivity as fast as the rest of the economy, and as a result those industries are going to see higher inflation than the economy as a whole. Year-by-year those higher inflation rates might just be a nuisance, but over time exponential growth works its dark magic: If two products each cost $1 today, but one is subject to a 2% inflation rate and the other 10%, in 100 years the low-inflation product costs $7.25 and the high-inflation product costs $13,781. Health care. Health care has a high component of personal service. It does not have high productivity growth. Now this part gets a little tricky, because we all know how much medical technology has improved over the decades. But the improvement is almost entirely on the outcome side rather than the productivity side. Adrian Peterson could tear up his knee and be better than ever the next season, where half a century before Gale Sayers was never the same. But the amount of attention patients need from doctors and nurses has not gone down. Health professionals are doing better for their patients, but they are not processing more of them faster. And most of us wouldn’t want them to. If you heard that one local hospital had one nurse for every five patients and another “more productive” hospital had one nurse for every 50, which would you choose for your surgery? If one doctor sees 30 patients in an hour of clinic time and another doctor only six, which would you pick as your PCP? So back in the 1960s, Baumol looked at this situation and concluded that medical inflation was here to stay. Not because doctors are greedy or health insurance companies are evil or socialized medicine is inefficient, but just from the nature of health care. While other factors undoubtedly matter, the exponential growth would happen anyway. . . . Baumol predicts that over time government spending will rise as a percentage of the economy. But we can afford it. . . . In Baumol’s model, government spending isn’t crowding out everything else. As a society, we aren’t doing without manufactured goods [or food] because health care is soaking up all our money; we’re just using less of our labor to produce the manufactured goods [and food] we want. . . . Read the whole thing? A really interesting piece. BOREF A ninth airline, 10 more slots — here. SIGA Controversial — as reported in a piece I missed Tuesday. The questions seem to be: will SIGA’s contract with the government stand, both as to price and quantity? will the legal ruling requiring it to share revenues with a competitor be tossed out on appeal? will the company find other commercial uses for its drug and for other related efforts it may have in development? I surely don’t know, but am holding. GLDD The stock dropped by a third or so in after-hours trading last night on this news of fairly modest accounting problems — but raising the worry there may be something more — coupled with the departure of the COO. This company has been around for more than a century and the fundamental case for owning it remains strong. At $6.20 last night, or $7.30 as I type, this may be a better time to buy than sell. SODA Randy Woolf: “We have one of these frugal alternatives to SodaStream, and like it. A bit more ‘do it yourself’ fuss than SodaStream, but you can make your soda more carbonated this way. The CO2 refill cartridges are MUCH cheaper.” Amy Vail: “I’ve had and loved my Soda Stream for two years now… and discovered recently these are made on an illegal settlement in the occupied West Bank. There are other soda fountain options out there, though. Unfortunately, those brands are not carried around here, so I’m not sure what to do now.” Ah, but if you watch the video from yesterday’s column, I think you will feel much better about the politics of your soda. UTHR John Seiffer: “Any word from your guru on either UTHR or FCSC? I bought both and and am up more in UTHR than I’m down in FCSC. My problem is I never know when to sell. Any thoughts?” Yes: << UTHR continues to show strong earnings and awaits a decision on its oral treprostinil. The FDA initially rejected the application even though one trial succeeded so they refiled the application and the deadline is in a month or so. It has been hard to read the FDA on this situation but it certainly could get an approval. On the other hand, sales for this indication will be limited. The stock looks fully valued at the current price but in this crazy market probably rallies on the approval. >> FCSC << FCSC is an odd company. Most biotech companies prefer to have regular conference calls with investors. This one strangely does not. They were capacity constrained last year but then got an investment from billionaire Randal Kirk. Still little evidence they will be self sustaining on a commercial basis in the near term. Two options: (1) Sell, take the loss, and move on. (2) Hold for the chance that you wake up and one of the gene therapy applications has succeeded or sales eventually pick up. I’m not a fan of strategy 2. I like to know when I’ll be right. This was really meant to be a trade into the FDA approval and then “sell on the news.” Stupidly, we hung on. >> If we were perfect, we’d have all the money in the world. Gotta leave something for everybody else. Have a great weekend. (Especially you, Will Portman, And you, Scott Prouty.)
A Second Joyful Video March 14, 2013March 15, 2013 BOREALIS Signed an eighth airline this week, according to this, adding 135 more planes to what we hope will be its WheelTug backlog. As I’ve said, the question now doesn’t seem to be whether airlines will want this — what airline wouldn’t? — but whether it will come to successful fruition. If it does, the company would presumably be worth a great deal more than the $40 million market capitalization at which it currently trades. But that’s still a big if, so . . . only with money you can truly afford to lose. BALANCED BUDGET: ARE YOU NUTS? The way the government does its accounting, investments are counted as “spending.” By this logic, no family could balance its budget if it bought a house, unless it had enough cash to do so without taking a mortgage; no business could take a loan to finance inventory or build a factory. Every public company in America uses “Generally Accepting Accounting Principles.” But not the US government. So one long-term “solution” to our deficit problem might be to change the way the government does its accounting. But that would mean huge fights over what qualifies as an investment (is education an investment?) and over what length of time those investments should be written off (a lifetime?). It would also mean recognizing some of the long-term obligations the government takes on, which are not currently counted in the budget. In the real world the benchmark should probably be: is the National Debt growing a little slower, over the long run, than the economy as a whole? In high-unemployment years, as now, extra government spending and investment are wholly appropriate. And in boom years, very low deficits — or even surpluses — are appropriate. But over long periods of time (e.g., the 35 years from 1946, when the Debt was 121% of GDP, through 1980, when it had shrunk to 30%), is the Debt gradually shrinking? Think about it: if the debt grew on average by 3% a year while the economy itself grew on average by 4.5% a year (2% the little bit of inflation we tend to get when things are okay and 2.5% real growth), a perfectly realistic objective — then over time the debt would shrink dramatically as a proportion of the economy as a whole. Well, 3% of the current Debt is about half a trillion dollars. That would be a perfectly reasonable deficit to run in a normal year, given the way the government does its accounting. We’d like to see some years when the debt barely grew at all — like the last two Clinton years. We’d like to see years when the economy grew at more than 4.5% (with most of that coming from real growth, not inflation). And I think that we’ll have some years like that. But we’ll also have years like 2013 when unemployment — and the need for increased government investment, and thus big deficits — remain high. People need to understand that, given the way the government does its accounting, a literally “balanced budget” is as dumb — and as bad for America — as telling a young business it can’t invest to grow or a young family it can’t borrow to buy a home. SODASTREAM Yesterday, a joyful video about a whale. Today, a second one — involving humans: Dr. Moshe Dauber: “This company has made the IBD news since December, and as an ‘Israeli’ company I had interest. Not to mention that in December when it was trading around $40 I followed IBD’s rec (sort of) by buying February 45 calls. WOW! And then I looked into how ‘green’ they are . . . and then I saw this video. Now I am really on board. And today I bought SODA. What do you think? I mean ‘with money you could truly afford to lose?’” Wow, indeed! No idea how the stock will do – but what a hopeful, worthy enterprise. I just bought two SodaStreams to show support, and even a little stock, as well.
Eight Joyful Minutes March 13, 2013 JIM FIXX Kathryn Lance: “Jim was indeed a lovely man. I knew him because my book on jogging (Running for Health and Beauty) came out about a year before his book, he interviewed me for his section on women, and we hit it off. Jim once called me and cheered me up for an hour during the worst flu I have ever had. What is not generally known about Jim, however, is that he ate really badly. Loved all kinds of junk food. For some people this might not be deadly, but for someone with his family background of heart disease, it was too much, even with all the running he did. But I was always glad that if he had to die so young it was on a run, doing what he loved.” SAVING A WHALE This starts a little slow, but really: eight joyful minutes. Tomorrow: a second — entirely unrelated — joyful video. ELIZABETH WARREN SPEAKS SO CLEARLY March 9, 2013 Elizabeth Warren: Attorney General Eric Holder indicated in testimony before the U.S. Senate that some Wall Street banks have gotten so big that they are now above the law. He actually said earlier this week: I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. This is wrong — just plain wrong. We are a country that believes in equal justice under the law — not special deals for the big guys. And that’s not all the special deals that the big banks get. According to recent calculations by Bloomberg, the top ten biggest banks receive an $83 billion subsidy every year in the form of lower borrowing costs — something not available to your community bank or credit union. The markets think that, if things get tough, the government will be there to bail out the big banks again but not the little guys. To put things in perspective — that $83 billion subsidy is about the same amount of money being fought over in the sequestration. So why are we still debating this issue at all? Isn’t it obvious that the “too big to fail” problem still exists and is bad for small banks? Bad for taxpayers? Bad for our economy? Bad for justice? Here’s one theory that worries me: maybe people believe that the banks have in fact become too big to shrink. They have started to say that we can’t cut these banks down to size. I’m not one of them, and neither are colleagues of mine like Sen. Sherrod Brown who have been fighting hard on this issue. We know we can take on the big banks and their army of lobbyists and win because we’ve done it before. When banks are too big to fail, too big to jail, too big for trial, too big to manage, too big to regulate, too big to shrink, and too big to reform… they are just too big. We’re just getting started here. Thank you for being a part of this, Elizabeth
Cheap Drugs March 12, 2013 NOT BANKRUPT! A long time ago, I was involved with some “celebrity software” called MANAGING YOUR MONEY. The original idea was to have Julia Childs (or somebody) for cooking software, Tiger Woods (had he been born at the time) for golf software, and so on. As it happened, the company only got two so-called celebrities: Jim Fixx — a lovely man credited with having helped launch America’s fitness revolution by demonstrating the health benefits of jogging — and me. The two of us were pictured together in four-color ads until, about a month into actual sale of the software, Jim died . . . while jogging. Yes, heart disease apparently ran in his family, but that’s a mixed marketing message at best (“fitness tips from the expert who, had he not practiced them himself, might have died even younger”). Sales of Jim’s software were halted, and days later the publisher asked me to take a physical for the $5 million life insurance policy they had suddenly decided I should have. “Oh, please,” I remember saying at the time. “It won’t make any difference to you if I die. That won’t hurt sales. Dying would be fine. What you don’t want me to do, with my money management software, is go bankrupt.” I was reminded of this today when Craig D. wrote me, triumphantly: “Your beloved Paul Krugman has filed for bankruptcy. I guess the people that peddle fear really don’t know how the markets work.” He included this link, with reporting so detailed and seemingly well sourced that I had a really sick feeling — Paul Krugman IS one of my heroes — until I checked and found that the story had come from a site that describes itself as an “online satirical newspaper” whose “stories are purely fictional.” Even so, it got picked up as real by sites such as The Prudent Investor; and it spread, perhaps abetted by people all too eager to believe it … prompting the Washington Post to set the record straight. But these things, once launched, never die. Professor Krugman’s fictional Chapter 13 filing may now ricochet around the Internet forever, as so many things like this do. Still, you should know that the Nobel laureate seems entirely solvent and (in stark contrast to the satire) quite modest in his lifestyle. I encountered him once on his way home from a fancy charity function he had graciously volunteered his time to headline. Where did I encounter him? On the subway platform, waiting, alone, for his train. HEALTH CARE Even before failing to code my way out of a paper bag with MANAGING YOUR MONEY (we had some brilliant young programmers to do that; all I had to do was ask questions like, “could it handle return-of-capital distributions?” and they would figure out a way to make it handle return-of-capital distributions), I wrote a book about the insurance industry. Indeed, every aspect of the business — life insurance, auto insurance, credit insurance, homeowner’s insurance, flood insurance, Lloyd’s of London, insurance fraud, and on and on — except one. I just couldn’t get my head around it: health insurance. It was too big and complex and, unlike all the other lines, where I felt I knew exactly what was wrong and how to fix it, I hadn’t a clue. And so it is with special admiration that I have been recommending my pal David Goldhill’s brilliant book, Catastrophic Care: How American Health Care Killed My Father — And How We Can Fix it and my pal Steve Brill’s game-changing 24,000-word cover story in Time — well worth the full read. (Guess who turns out to be the efficient penny-pinching hero. Medicare!) GREAT BOOK And now I have a third recommendation, thanks to John Seiffer, who writes: “If you’re looking for books to understand (and ideas to maybe fix) the US healthcare system you can’t do better than The Healing of America by T.R. Reid. He takes his sore shoulder to all the major industrialized countries (as well as India) and tries out the local health care system in each. He also does research on how the systems work, and the history of how it came to be the way it is. I was surprised at the difference in these systems, all of which have universal health care, better health outcomes than the US and lower costs. Some have more choice than we do, some have shorter wait times, some are all private, some all public, some a mix. What they all have in common is this: 1. They made a choice for universal coverage on moral not economic grounds; 2. They all limit the abilities of insurance companies to profit from people’s sickness. As for his shoulder? He didn’t have the major reconstructive surgery that was recommended in some countries (but not others). The only place that made it feel better was India where he was subjected to a week of a strange diet and regular massage. Go figure.” It begins: If Nikki White had been a resident of any other rich country, she would be alive today. Around the time she graduated from college, Monique A. “Nikki” White contracted systemic lupus erythematosis; that’s a serious disease, but one that modern medicine knows how to manage. If this bright, feisty, dazzling young woman had lived in, say, Japan – the world’s second richest nation – or Germany (third richest), or Britain, France, Italy, Spain, Canada, Sweden, etc., the healthcare systems there would have given her the standard treatment for lupus, and she could have lived a normal lifespan. But Nikki White was a citizen of the world’s richest country, the United States of America. Once she was sick, she couldn’t get health insurance. Like tens of millions of her fellow Americans, she had too much money to qualify for healthcare under welfare, but too little money to pay for the drugs and doctors she needed to stay alive. She spent the last months of her life frantically writing letters and filling out forms, pleading for help. When she died, Nikki White was 32 years old. Maybe the solution isn’t repealing Obamacare and leaning more heavily on a free market for private insurance. CHEAP DRUGS Thanks to ABC News for alerting us to GoodRx. On your phone, this app maps the neighboring pharmacies with competing prices for the prescription you’re aiming to get filled. THE DOCTOR-PATIENT RELATIONSHIP Dr. Richard Feinberg: “I am still reading Steve Brill’s cover story. One thing seems missing to me . . . the doctor-patient relationship. Patient behavior and provider performance drive the majority of healthcare cost. What if just half the people who die from cancer each year actually had an end-of-life conversation with their doctor? It turns out that most of our healthcare dollar is spent during the last year of life. If we can get the laws to allow providers, patient, and family to focus more on quality of life instead of length, huge savings could be realized. And we are discovering that doctors making home visits can be a big saver. Think about all the ER and hospital expenses that can be prevented. Likewise, patient health illiteracy is a major cause of inferior clinical and economic outcomes and most of our efforts to correct the problem have failed miserably. It now seems clear that patients are not going to be engaged and invested unless it is their doctor who is helping. The doctor-patient relationship remains the centerpiece of quality healthcare. Strengthening that core will save big money. Some analyses suggest that implementing many of the current proposals to save money will have the effect of reducing doctor-patient face-to-face time. We need to design our fixes to expand it.” And by the way? In my experience, face time with an unhurried, knowledgeable, caring, experienced nurse can be nearly, or every bit, as good.
Things Aren’t THAT Bad For The Best-Off March 11, 2013 I run into a lot of wealthy folks — some of my most successful Harvard Business School classmates, for example — who are really displeased with the President. Why? Is it because the stock market is at record highs? Because corporate profits are at record highs? Because no one has gone to jail? The Dow closed Friday at an all-time record high — 14,397 — more than double the 6547 low it reached a few weeks after his Inauguration. Ask yourself: Would it have been 20,000 if only President Bush had been given four more years to realize his vision? 30,000 if Senator McCain had been handed the reins? 40,000 if, in 2008, Governor Romney had won? Would corporate profits have been even higher than they are today? Is it the tax rates that have wealthy Republicans upset? That may be part of it. Here was Jeb Bush on yesterday’s FACE THE NATION: “We have incredibly high taxes for high-income Americans.” In fact, of course, we’ve had incredibly low taxes for high-income Americans. (Not least in Jeb’s home state, Florida, where the rate on your first billion dollars each year — whether earned or inherited — is zero. As it is on all further billions, as well.) Yes, the federal rate is going back to the Clinton-era 39.6% on that portion of your “earned” income that exceeds $450,000 (or $400,000 filing singly). But c’mon: do people really remember the Clinton years as oppressive to high-income Americans? If 39.6% is “incredibly high,” what was Nixon’s 70% top rate? What was Eisenhower’s 90% top rate? Meanwhile, where Ronald Reagan left office with a 28% top rate on dividends and long-term capital gains, we now have an “incredibly high” 23.8% rate (when you include the 3.8% Medicare surcharge) on that portion of your income that exceeds $450,000. If we’re serious about reducing our deficit, why wouldn’t we want to return rates on the best-off back closer to their historic levels? (If you say “because they’re the job creators,” I’m gonna to beg you, yet again, to watch this quick Nick Hanauer clip.) I doubt it’s the high unemployment rate that has some wealthy Republicans upset but, for the record, unemployment is lower than it was when the President took office — with 6.35 million net new private sector jobs created since we hit Bush bottom. (I call it that because, it seems to me, you can’t fairly blame Obama for the hemorrhaging under way before his measures had been passed and given a little time to take hold. Turning around economies is like turning around aircraft carriers.) And it would have been significantly lower still if the Republicans had not blocked the American Jobs Act the President called for. No . . . what mainly accounts for the animus, I think, was our failure to say what went without saying — and actually was said, but should have been said more often and more loudly anyway: that we love rich people! Many rich people contribute a great deal to society! No one meant to be critical of those “fat cats” who were not greedy or negligent in the run-up to the melt down, as so many were not. No one meant to be critical of those not opposed to sensible regulatory reform, or to paying a bit more in taxes. Those successful people deserve the same praise successful Americans have always enjoyed. (A lot of them, realizing this, helped reelect the President.) Which brings me to today’s topic, which was actually health care, but we’ve run out of time. The Jeb Bush comment just made me crazy and I got off the track. Please come back tomorrow.
A Republican’s View On Inequality March 8, 2013March 8, 2013 WE’RE SETTING RECORDS! Well this is exciting: Global temperatures are warmer than at any time in at least 4,000 years, scientists reported Thursday, and over the coming decades are likely to surpass levels not seen on the planet since before the last ice age. . . . Even if the temperature increase from human activity that is projected for later this century comes out on the low end of estimates, scientists said, the planet will be at least as warm as it was during the warmest periods of the modern geological era, known as the Holocene, and probably warmer than that. . . . Dr. Mann pointed out that the early Holocene temperature increase was almost certainly slow, giving plants and creatures time to adjust. But he said the modern spike would probably threaten the survival of many species, in addition to putting severe stresses on human civilization. To the extent there is anything to be concerned about here, I think the solution must lie in (a) simply denying it and (b) cutting tax rates on the very rich. AND SPEAKING OF THE VERY RICH . . . . . . continuing yesterday’s discussion (did you find 12 minutes to watch those two clips?), there’s this from Sheila Baer’s recent op-ed: The yawning gap between rich and poor has been growing since the 1970s and reached a 90-year peak in 2007, just before the financial crisis. The Great Recession narrowed the gap a bit, but now, once again, the richest Americans are vacuuming up what wealth is out there, a trend that Mr. Saez expects to continue. I am a capitalist and a lifelong Republican. I believe that, in a meritocracy, some level of income inequality is both inevitable and desirable, as encouragement to those who contribute most to our economic prosperity. But I fear that government actions, not merit, have fueled these extremes in income distribution through taxpayer bailouts, central-bank-engineered financial asset bubbles and unjustified tax breaks that favor the rich. This is not a situation that any freethinking Republican should accept. # And now a bit of accumulated reader feedback (thank you, accumulated readers) . . . CANNED FOOD In response to the 12-year-old Campbell’s tomato basil soup I recently enjoyed (well, I guess older the 12, as that was the expiration, not the birth, date), Ken Doran offers this link: “Food technologists define shelf life not by how long it takes for food to become inedible, but how long it takes for a trained sensory panel to detect a ‘just noticeable difference’ between newly manufactured and stored cans. There’s no consideration of whether the difference might be pleasant in its own way or even an improvement—it’s a defect by definition.” See my point? CAR MATH Jim Batterson: “Your link to UBER last week was broken.” Ah. I was arguing that it’s nuts to own a car in New York City. We have subways. We have buses. We have cabs. And now we (and many other cities) have Uber. I’ve written about this before, but Uber is sensational — and you and I each get ten bucks if you use this link to sign up. Krikor Daglian: “I just re-read your Investment Guide for the fifth or sixth time . . . borrowed from the New York Public Library, which is a great way to save money on books and DVDs. You can now download some books directly to your Kindle through nypl.org, or have a physical copy delivered directly to your local branch free of charge. Anyway, I’ve been inspired again to find all the areas I could be saving some money, and have been making sure my Roth IRA has a nice balance of low-cost funds. Which brings me to your latest column. I’m one of those rare Manhattanites with a car. I hold on to it because my mom is 75 and lives alone in NJ, so I like to be able to get over to her quickly and easily at any time. It’s also very convenient sometimes (trip to Ikea, getting out of town, or even just going somewhere in Queens or Brooklyn that is ill served by the subway). I want to assure you that it can be done inexpensively. I do street parking only (it has never been parked in an NYC garage – not one day). It’s an old car (’93 Camry) that I got for free as a hand-me-down (thanks again Mom), so I only do liability insurance, and since it’s rarely driven, I only tally up about 3,500 miles a year; my insurance costs are about $500 a year through USAA. I also do a lot of my own repairs — I’ve fixed a power window mechanism, replaced a side mirror and a door handle, and replaced the battery last week. Unfortunately, more difficult repairs, inspection and registration fees, and gas, not to mention EZ-Pass, do cost a bit. If it weren’t for Mom, I might consider ditching the car. But still, I wanted to let you know that it is possible to have a car in the city without spending a fortune on it!” I did this, too, for a while, decades ago, until I realized that everything in my life had come to revolve around “alternate side of the street parking.” But someone must agree with you or it wouldn’t be so hard to find a parking space in the first place. # More of your excellent feedback next week. Have a great weekend, shortened-by-an-hour though it will be. Spring is in the air!
12 Minutes March 7, 2013March 6, 2013 Yesterday I addressed John Boehner’s opposition to taxes. (“How much more money do we want to steal from the American people to fund more government? I’m for: NO more.”) Especially taxes on the very best off. As goes without saying but must always be said anyway, no one likes taxes — or a dentist’s drilling. But — as is not said often enough — most people recognize taxes are the price we pay for civilization — and that avoiding needed dental work is really stupid. (Likewise, needed infrastructure investment.) And so I ask for 12 minutes of your time on the off chance you have not already seen both of these videos — or just 6 if you’ve seen one but not the other: WEALTH INEQUALITY: 6 minutes This one has just gone viral, so you’ve probably seen it. More than 3 million people have. THE REAL JOB CREATORS: 6 minutes This one, by serial entrepreneur billionaire Nick Hanauer, I have linked to over and over. Note the connection. The first one shows how we’ve decimated the middle class, sucking so much wealth into the tippy top (and then largely shielding it from taxation). The second shows how it is the middle class — not the mega-rich — who are the job creators. I sent this second one to my one truly right-wing mega-pal. I won’t say who it is, but he was the principal backer of one of the right-wing Republican primary candidates. He is a very nice guy, fun to be with, deeply religious, passionate about trying to alleviate suffering . . . and clueless — I think — about how the people he supports and the policies he espouses and the right-wing line he buys (for example, that climate change is a hoax) actually stand to make the suffering much worse. He is a smart guy and an honest guy, and he sends me emails every few weeks like, “I’m not avoiding you; I’m still trying to get my head around that video.” He knows he owes me a response. And I think on some level he realizes Hanauer’s logic is drum-tight. But his heart tells him it can’t be right. Because if it were, well, that would mean he and his fellow uber-rich Republicans are wrong about a lot of things. For one: it would make their insistence on low taxes for themselves selfish rather than far-sighted. And, like anyone, he’d rather think of himself as far-sighted. He is a good guy. The game’s not over. Who knows? He may come around. Anyway, I’m cutting into your 12 minutes. Watch both. Send them to others.
Only The Server Died March 6, 2013March 6, 2013 Sorry for the technical difficulties: a server problem in Utah shut us down much of the last 24 hours. If you caught yesterday’s post, you may have figured it was the omelet that silenced me. Far from it. I am jazzed. Tons of things I want to share with you. Yesterday I also posted a Borealis development. I forgot to include this nice write-up (“WheelTug about to revolutionize airport taxiing”) — scroll down to the middle of Page 2 to see it — or to alert you to the not-yet-linkable February-March issue of Ramp Equipment News, which does, as well. (“It may be mentioned that savings on fuel alone from the use of WheelTug are little short of mind-boggling. It is estimated that a WheelTug-equipped B737 aircraft could save nearly 100,000 gallons of fuel er year. But there’s more . . .”) So yes, it will take more than three-year-old egg whites to keep me from sticking around to see how this all turns out. Finally, I had a chance to tweak yesterday’s main item slightly, so — always wanting my best foot forward, which was difficult for a right-footed high school soccer left halfback — I re-offer it today: JOHN BOEHNER’S VIEW House Speaker John Boehner: “How much more money do we want to steal from the American people to fund more government? I’m for: NO more.” To him, tax revenue is “stolen” from the people. Worst of all, it’s stolen from those who are best off — most recently, in the increased rate he abhors on that portion of your income that exceeds $450,000. Yes, for the average American, that portion is zero. But it’s still a theft we should all resist tooth and nail as he does, because folks earning more than $450,000 are the job creators! The rest of us would not even be earning minimum wage (which John Boehner would lower or abolish if he could) if it were not for those folks. How many times do we have to say it? Those folks are the job creators! Except that they’re definitively not. Watch the indispensable Nick Hanauer clip I keep plugging and send it to all your friends. And note that in the Fifties and Sixties and Seventies loads of jobs were created (the top federal tax bracket was in the 70% and 90% range) . . . . . . and that after Clinton raised Reagan’s too-low rate, to get our budget back in balance, 23 million net new jobs were created over 8 years. But that when Bush then slashed the top rate, essentially no net new jobs were created. (And here’s a an interesting related tidbit [thanks, Pete]: “Contrary To GOP Rhetoric, Low-Tax States Have Worse Economic Growth.”) The idea that taxes are “stolen” from us is as wrong-headed as the notion that we are already suffering under unprecedented levels of taxation. No one likes taxes, but these days they are relatively low — especially for the mega-wealthy. Equally wrong-headed: the notion that only private goods and services have value. That things we purchase collectively, through our taxes, like — roads, schools and cops; DARPA, food inspection, and health care for seniors — are bad, or at least inherently less worthy than things we purchase individually, like cars, Coke, and curtains; booze, snacks, and porn. Please oh please oh PLEASE bring back the moderates who once dominated — or could at least be found here and there — in the Republican party. Last point: As technology and robotics grow ever more capable, there will be ever fewer truly essential jobs. The kind worth paying handsomely to fill. In theory, this could be great: short work weeks, plenty of vacation, loads of time to enjoy the non-essentials . . . but only if we can find a way to “spread the wealth.” If it all goes to the relative handful of folks who own the technology and the robots . . . and to the elite class who know how to control and repair them . . . with the rest of us all earning minimum wage (or less, once the Republicans repeal it) . . . or unemployed and homeless and begging in the street . . . what kind of world will we have? Is that truly what we want? Or should we find ways — things like the minimum wage and the progressive income tax — to share the prosperity? Taxes, sensibly constructed and spent — on things like infrastructure and our kids’ future — are not theft. They are in the words of Justice Oliver Wendell Holmes, Jr., “the price we pay for civilization.” Louisiana Governor Bobby Jindal, a Republican, calls his “the stupid party.” Because taxes are the price we pay for civilization, and his party is dead set against them — even against what are historically-modest tax rates on billionaires — maybe he should also call it “the brutish party.”
John Boehner: Taxes = Theft March 5, 2013March 27, 2017 FOOD For legal reasons I’m not going to tell you I made an eight-egg omelet last night from a carton of pasteurized organic egg whites I found in the back of my refrigerator . . . dated April 11, 2010 . . . or that the “tastes freshest within 5 days of opening” legend almost threw me until I realized it had not been opened . . . or that it smelled fine and, minutes later, became a fluffy salt-and-pepper egg-white omelet highlighted with dabs of I Can’t Believe It’s Not Butter. Because if I did tell you this and you tried it and it killed you and you rose from the grave to sue me — well, you never know what a jury will do. So I didn’t make such an omelet last night. Who would do such a thing? But one of the speakers at TED last week said 40% of all our fresh food is simply wasted – thrown out – because we buy too much, stash it in the back of refrigerators that have grown too deep even to know what’s in them (or in “crispers” which generally do not keep things crisp) and then toss it out because it’s spoiled. Or years past expiration. Another of the TED speakers was my new pal Ron Finley. He lives in South Central, one of those diabetes-plagued inner city areas where healthy food isn’t even available for purchase. So he decided to grow some, starting with a median strip outside his home. The City came by to tell him to stop. He said, “Really? You’re going to come after me for this? Bring it on.” He now has 20 such urban gardens around South Central, with neighborhood kids engaged in tending them. (“If a kid grows tomatoes, he’ll eat tomatoes.”) His story — told here at a previous TED (the current talk has not yet been posted) — is delicious. Feel free to steal his idea. BOREF WheelTug signed another airline, according to this — too small to be of real note, but every little bit helps, I guess. The real issue is not signing airlines — I can’t see how any airline could not want WheelTug if it becomes operational — but rather whether it will become operational. Will they and their impressive team of partners actually get it approved and produced? I think they very possibly will, but I am known for my annoying optimism. The one thing I did seize on in the press release: the company is now estimating annual savings per plane of “more than $700,000,” up from “more than $500,000.” If that were to prove true, perhaps they will be able to wring even more than the $50,000 per year profit per plane I’ve been blue-skying as I try to imagine what its parent, Borealis, could be worth. Let’s see: 10,000 planes times $100,000 a year . . . THEFT House Speaker John Boehner: “How much more money do we want to steal from the American people to fund more government? I’m for: NO more.” To him, tax revenue is “stolen” from the people. Worst of all, it’s stolen from those who are best off — most recently, in the increased rate he abhors on that portion of your income that exceeds $450,000. Yes, for the average American, that portion is zero. But it’s still a theft we should all resist tooth and nail as he does, because folks earning more than $450,000 are the job creators! The rest of us would not even be earning minimum wage (which John Boehner would lower or abolish if he could) if it were not for those folks. How many times do we have to say it? Those folks are the job creators! Except that they’re definitively not. Watch the indispensable Nick Hanauer clip I keep plugging and send it to all your friends. And note that in the Fifties and Sixties and Seventies loads of jobs were created (the top federal tax bracket was in the 70% and 90% range) . . . . . . and that after Clinton raised Reagan’s too-low rate, to get our budget back in balance, 23 million net new jobs were created over 8 years. But that when Bush then slashed the top rate, essentially no net new jobs were created. (And here’s a an interesting related tidbit [thanks, Pete]: “Contrary To GOP Rhetoric, Low-Tax States Have Worse Economic Growth.”) The idea that taxes are “stolen” from us is as wrong-headed as the notion that we are already suffering under unprecedented levels of taxation. No one likes taxes, but these days they are relatively low — especially for the mega-wealthy. Equally wrong-headed: the notion that only private goods and services have value. That things we purchase collectively, through our taxes, like — roads, schools and cops; DARPA, food inspection, and health care for seniors — are bad, or at least inherently less worthy than things we purchase individually, like cars, Coke, and curtains; booze, snacks, and porn. Please oh please oh PLEASE bring back the moderates who once dominated — or could at least be found here and there — in the Republican party. Last point: As technology and robotics grow ever more capable, there will be ever fewer truly essential jobs. The kind worth paying handsomely to fill. In theory, this could be great: short work weeks, plenty of vacation, loads of time to enjoy the non-essentials . . . but only if we can find a way to “spread the wealth.” If it all goes to the relative handful of folks who own the technology and the robots . . . and to the elite class who know how to control and repair them . . . with the rest of us all earning minimum wage (or less, once the Republicans repeal it) . . . or unemployed and homeless and begging in the street . . . what kind of world will we have? Is that truly what we want? Or should we find ways — things like the minimum wage and the progressive income tax — to share the prosperity? Taxes, sensibly constructed and spent — on things like infrastructure and our kids’ future — are not theft. They are in the words of Justice Oliver Wendell Holmes, Jr., “the price we pay for civilization.” Louisiana Governor Bobby Jindal, a Republican, calls his “the stupid party.” Because taxes are the price we pay for civilization, and his party is dead set against them — even against what are historically-modest tax rates on billionaires — maybe he should also call it “the brutish party.”
Toppy March 4, 2013 The Pope is gone, the Queen is ill, Hugo Chavez is dead. (Unofficially, but quite dead nonetheless, I’m told, for some days now.) China is in a real estate bubble whose bursting could cause global upset. (Did you see last night’s 60 Minutes?). And here in the U.S., the Tea Party Republicans seem hell-bent on cuts that would out-Hoover Hoover, driving us back into recession, increasing the deficit, and blocking investments that would modernize our infrastructure and enhance our prosperity. Meanwhile, the stock market is at record levels. From Chris Brown’s latest monthly letter: I continue to see, both anecdotally and statistically, extreme optimism for the stock market. One wildcard which didn’t occur to me until early February is that the last time there was a capital gains tax hike was 1987. Investors sold much more stock than usual in late 1986 (as evidenced by capital gains tax receipts), and as soon as 1987 began, the market gapped higher and rallied sharply for several months, with fewer natural sellers. There was extreme optimism in February of 1987, and the market just rallied higher anyway. That could be the case again in 2013. Of course, the 1987 rally, massive as it was, was lost entirely in the course of the October crash. If the market reaches a point of extreme optimism, and then rallies further, that entire subsequent rally is often suddenly given back. In 1999, the average Joe became fluent enough with the bull thesis to explain to you why economic growth and demographic changes implied a revaluation higher for equities. In 2007, he could explain the “Goldilocks” economy and that “subprime is contained.” A lot of people whose job does not involve the stock market have expressed views to me lately that with bond prices high and interest rates low, stocks are really “the only place to put your money.” It’s sound enough reasoning, but it’s getting very popular and quite stale. I wouldn’t bet the farm on it. That is not to say that we have given up on finding good stocks; we are always looking for advantageous trades and new longer-term positions, but we are going to continue to be cautious in the current environment. Today is a better day to find a few morsels of spilled grain under the refrigerator than to go for the chocolate chip resting on the mouse trap. Chocolate chip cookies! Tomorrow, a few words on food.