Whither the Blue Dogs?

During the 2006 mid-term elections, Democrats picked up a lot of seats in very conservative areas by promising to offer a fiscal sanity check to a Republican-led government that had went nuts on spending.  Many of them were rhetorical deficit hawks, and the Blue Dog Caucus grew to be one of the largest and potentially strongest on the Hill.  Now that they get their first test of the Democrat-led era, a $900,000,000,000 pork-filled welfare and infrastructure "stimulus" bill, lets look at it and see how they did.  Of the 43 members of the Blue Dog Caucus, only six voted against the record spending bill.  That's a 13% pass rate.  These are your real blue dogs: Allen Boyd, Jim Cooper, Brad Ellsworth, Collin Peterson, Heath Shuler, and Gene Taylor.  Call them or email them and thank them for standing up for the taxpayer.  The other 37 are old-fashioned yellow dogs that didn't mean a word of their rhetoric.  They were just Bush obstructionists who wanted to win in the South, West, and Rural East and Midwest.

Make-work Projects in Beaumont

Yesterday I predicted that much of the so-called stimulus package would be make-work projects that don't really improve infrastructure. Today, the local radio station reported that Beaumont Mayor Becky Ames has been in Washington lobbying for her projects. Here's the list:

Amtrack train stop - $750,000
Block grant reinvestment zone housing - $5 Million
Landfill hydrogen project - $5 Million
Public Safety Headquarters - $272,000
Bus stop rehabilitaion - $1 Million

The current Amtrack station in Beaumont is a slab, because it gets no passengers. It's near my office, and I see the train stop there when it does in the afternoon. They could triple their ridership and still not get passengers on every stop. But it has nothing to do with new riders. The
mayor's justification was, "We want to move it to a nicer area so when the train stops in Beaumont, the passengers get a better view." She has called this her highest priority for stimulus money.

I have no clue whether housing block grants are needed, but it seems that every city asks for them every time Federal money is offered.

The landfill hydrogen project is a cool project. They reform the methane as it comes off the landfill and sell the hydrogen to local refineries. This project is already funded and will go forward without Federal funds. They're just asking for Federal dollars because they might be available.

I don't know anything about the Public Safety Headquarters. From the amount of the funds request, I think they're going to build a house for the Police Chief.

Bus stop rehabilitation is the only project of the bunch that is a good idea and not currently being progressed. Most Beaumont bus stops are just benches, and I often see people waiting for the bus out in the pouring rain. I'm really skeptical about the amount of economic stimulus it will
provide.

Buicks to the Moon

The current congressional proposal for stimulus will borrow (or print, because God knows who would buy a Treasury bond at 0.05% interest, or whatever it is today) $825 Billion and throw some of it into the economy in various ways.  Some of it will go to State and local governments, which means that we can kiss that money goodbye.  Some of the other provisions: a small cut in Social Security Withholding that should help the poor, but puts one more chip in our fragile Social Security situation.  About $358 Billion of it will go into so-called "shovel-ready" infrastructure projects, which someone somewhere in Washington thinks will be built in the next two years.  Let me first say that within reason, infrastructure is the business of government.  No country has ever successfully transferred the building of roads, bridges, water supplies, etc., to the private sector.  It is cheaper to build infrastructure projects in bad economic times than in good.  That being said, let's put this $358 Billion number in perspective:

 

In 2008 Dollars,

 

The entire Space Program through the Apollo Era cost $288 Billion over 18 years.

The entire Interstate Highway System Project cost $425 Billion over 35 years.

The entire New Deal cost $500 Billion over 18 years.

 

There is no way that this stimulus package will actually get spent on real, needed projects in two years.  And the stimulus effect of infrastructure projects is greatly overrated.  One only has to look at the US during the 1930s or Japan during the 1990s to see that.  So I expect a whole lot of the money to be spent on time machines and bridges to the moon, which will neither have a stimulative effect nor provide meaningful improvement to our country's infrastructure.  On a local scale, this is the equivalent of Houston looking at Reliant Stadium, calling it a success, and building 5 more.

 

I don't want to reject the Obama/Pelosi/Reid plan without offering one of my own.  Cut the infrastructure grants to zero.  Instead, offer very low interest loans (1% is probably possible) to any state, city, county, school board, or other local government who can pass a bond on the infrastructure need that they think they have.  I'll bet gold to dollars that this would cut the short-term Federal expenditures by 75% or greater, cut the long-term cost to almost zero, and eliminate almost all of the make-work programs that don't improve infrastructure in any meaningful way.

Happy Inauguration Day!

I congratulate President Barack Obama on his inauguration as the 44th President of the united States of America.  I campaigned against him, and I disagree greatly with many of his ideas about government, but I wish him all the best.  I hold out hope that he does a great job governing, but I have my doubts.  I do have great hopes about one thing, though.  For our 16 years of Baby Boomer Presidents, we have lacked real manliness and dignity in the White House.  George W. Bush was closer to a gentleman than Bill Clinton, but his manliness trended more to machismo than the reserved masculinity that becomes a President.  George H.W. Bush had it, as did Ronald Reagan.  Barack Obama carries that air about him, and I have hopes that it holds true throughout his term.  The lack of manliness has been reflected in our culture.  (It may be a reflection of our culture, but I have to believe vice versa so that I can believe that it will get better.)  With some luck, maybe, just maybe, American men will follow the lead of a gentleman President and "man-up" themselves.

Obama's Economic Recovery Plan ± 80%

President-elect Obama used his weekly radio YouTube address to make bold claims about his stimulus package, the amount of growth that it will create (3.7%), and the amount of jobs that it will create (3,675,000). He based it all on this report that his incoming administration created. Everyone should read the plan. Why? It will show you the absolute lack of depth and judgment that Obama's advisers have so far. It reads more like a Freshman Economics term paper than something written by high-paid economic experts. There are nuggets in there that show that brilliantly. Here's one:

The final step is to take the effect on GDP and translate it into job creation. Not all of the increasedoutput reflects increased employment: some comes from increases in hours of work among employed workers and some comes from higher productivity. We therefore use the relatively conservative rule of thumb that a 1 percent increase in GDP corresponds to an increase in employment of approximately 1 million jobs, or about three-quarters of a percent. This has been the rough correspondence over history and matches the FRB/US model reasonably well.

In other words, Obama's team has no clue how closely GDP growth relates to job growth, so they made up a number. So I just decided to do run a check on their numbers: 1% GDP growth is $138 Billion per year. 1 million average workers in the US would make just over $25 Billion. Obama's numbers have no basis in fact. Denninger found the most egregious example of this, here are his thoughts:

Obama: You Need To Fire Everyoneinvolved in producing your American Recovery and Reinvestment Plan.
Why? In "Appendix 1"

We considered multipliers for the case where the federal funds rate remains constant, rather than the usual case where the Federal Reserve raises the funds rate in response to fiscal expansion, on the grounds that the funds rate is likely to be at or near its lower bound of zero for the foreseeable future.

Please tell me this is a joke. Obama really believes that The Fed can hold interest rates at zero for four years and they can spend without bound, while the bond market will blithely look on at $1-2 trillion deficits annually and the economy will begin to recover?
You're kidding, right?

To give the Obama team some credit, at least they admit how much they understand. From the Conclusion:

As emphasized at many points in the analysis, there is substantial uncertainty around all of our estimates.

Hold onto your shorts, folks. We're in for a rough ride.

Cow Fart Tax

The EPA wants to apply Title V regulations from the Clean Air Act to agriculture. According to the Florida Farm Bureau, who ran the numbers, the Environmental Protection Agency want to make all ranchers with more than 50 head of cattle, dairy farmers with more than 25 cows, and rice farmer with more than 35 acres (plus others) file a Title V emissions report for the methane their livestock or crops release. That's right, ranchers will have to report their cow farts to the government, and pay a tax based on them.

Most of the published outrage has been about taxes, which are significant, but as anyone who has worked in refineries or chemical plants will tell you, the taxes are a small part of the Title V problem. Title V permitting is a long and tedious process that requires submitting a permit proposal to the government, who then sends it back to the company with their suggestions, and the process repeats itself until they can come to an agreement. One facility where I worked had 5 people who worked full time on Title V permitting for several years. This process would bankrupt all but the large corporate ranchers and farmers. If it passes, it will put all of the remaining independent for-profit farmers and ranchers out of business. Only corporate agriculture and really small-scale agriculture by hobbyists will remain.

God save the American Farmer!

Predicting a $2,000,000,000,000 Deficit

You heard it here first: the United States Government's Federal Deficit for fiscal year 2009 (ending 9/30) will be much closer to $2 Trillion than $1 Trillion. As bad as Bush's budgets were, Obama's first year will be worse than any three of Bush's. He has already warned us of a greater than 1 trillion dollar deficit, which will Tom Coburn predicts will be $1.6 Trillion. Add to that $290 Billion for the first 9 months of Obama's stimulus bill, $100 Billion or so for Iraq and Afghanistan, and a conservative $100 Billion to bail out various industries that will come to Washington with their hands out (I expect GM and Chrysler to be back, builders, and God knows who else). That brings my estimate to a staggering $2.1 Trillion dollars. As Senator Coburn has said, “The greatest moral issue of our time isn’t abortion, it’s robbing our next generation of opportunity. You’re going to save a child from being aborted so they can be born into a debtor’s prison?” As I wrote Monday, the "Keynesian multiplier" is now 0.2. We are saddling our children with $2 Trillion more debt to grow (or more likely, slow the collapse of) the economy by $0.4 Trillion. That is immoral.

Two related side notes:
CNN will air I.O.U.S.A. this weekend. This is the most important documentary in years, and it's well done.

Proving that he is truly insane, Harry Reid is repeating his try to pass a Coburn Omnibus bill. Senator Coburn has a really simple litmus test for bills that he'll obstruct. If a bill spends money on a duplicated program, he will hold obstruct it by any means necessary. Reid is trying to combine a bunch of bills that have been held up by Dr. Coburn to pass. Call your Senators and ask them to stand with the honorable Dr. No and against Dirty Harry.

New blog I have been following and some interesting data

I was recently turned on to Karl Denninger's blog, and his remarkably accurate predictions. He's been at least as accurate as the great Peter Schiff, and with more detail. This post and it's follow-up should be required reading for anyone who cares about this country.

But this is the one that really caught my eye: from October.

In short, it wouldn't have done anything because the economy only grows at a rate of about 20 cents for every dollar of debt taken on. That is, it takes five dollars of debt to generate one new dollar of GDP.

If you have been wondering how the bailouts needed to be in Trillions, this is why. The fundamental theory behind Keynesian economics is that a dollar spent by government multiplies itself in economic growth. It is a true theory, except that the multiplier is below 1 (throughout history, it's around 0.7). For the US, now it is 0.2. That's right, for $1 of Keynesian growth, we have to saddle our children with $5 in debt. It is immoral, and Paulson, Bernanke, and any legislator who voted for the bailouts should be imprisoned for it.

On Equality and the NBA

When talking with a friend and fellow basketball fan last week, I made the observation that despite my Rockets having a so-so season so far, I haven't had as much fun watching basketball in over a decade. The Lakers, Celtics, Trail Blazers, and Cavaliers are all really good, several other teams (my Rockets, and especially the Hornets included) are pretty good, and there is a great game on almost every day. My friend disagreed, saying that with more concentration of talent on a few good teams, that equality is suffering. After much thought, I decided that I didn't care much at all about equality. I care about equal opportunity. If I were a fan of a miserably bad team like New York or Washington, I would be hopeful as long as my team had the same chance to improve as any other. But equality doesn't make basketball a more enjoyable spectator sport. Exceptionalism makes basketball a more enjoyable spectator sport. LeBron James, Kevin Garnett, Kobe Bryant, and Chris Paul make basketball more enjoyable. Some of the world's greatest athletes performing at an elite level in the world's most beautiful game make basketball more enjoyable.

The same thing can be said about societies. No society progresses because it becomes more equal. Societies should have equal rights because it is: (a) the morally correct thing, and (b) the way to ultimate progress so long as opportunities are available for the exceptional. Progressivism has always been less concerned with Progress as equality. And even so, it never realizes equality. It makes those below the favored class more equal, but the gap between the favored class and the rest of the society grows.

In The Conscience of a Conservative, Barry Goldwater makes the assertion that individualism is sacred, and that "the conscience of a Conservative is pricked by anyone who would debase the dignity of the individual human being". In basketball, as in society, exceptionalism, which can only be found by individuality does much more good for society than equality ever could.