Maggie's Farm

I was informed, as 2011 waned, that my tax credit for commuting would fall from $230 a month to $125.  This bothered me.  Not because I feel I deserve a credit to commute, but because I can't figure out what the government is trying to do.

The fact is, if public transport is a 'good' we should all take advantage of no matter what, then the government should pay for it by taxing everyone and making it available for 'free' - as they do in Portland.  Of course, I oppose this idea entirely.  However, if the theory is that we can get people to do something that is 'good for everybody', then isn't this the way to do it?  Half-measures, like credits, subsidies, and other methods of this ilk only mask what is possibly (though probably not) a problem - that public transportation isn't really viable.  There are ways to determine whether this is true, but not for the average commuter.

What is the premise behind having a tax credit for public commutation?  I like it, I'll use it if it's offered, but I didn't demand it, nor did I write Congress to keep it at $230/month.  The cost, to me, of increased taxation due to the lower credit will be about $270 over the course of the year, so it's not a big deal.  Why not just get rid of it altogether?  If public transport is truly efficient, then it would make much more sense for me to take it, rather than driving into the city myself (or carpooling).

My commute is about $330/month.  The cost of driving (assuming the Federal allowance of .55/mile and $150 a month parking) is about $780/month.  Even if I made a more realistic assumption of about .25/mile, public transport is still an advantage.  But public transport is heavily subsidized.  So I really don't know which is more efficient, and determining this is very hard.

Here is the issue:  Subsidies and tax breaks are supposed to promote the 'public good'.  But how do I know which is more efficient, let alone even better, for me personally?  If it is a 'public good', then its value will be transparent without subsidies and credits.  I'll take whatever credits get offered.  It would be crazy for me not to.  But I'd much rather have a clear means of determining which makes more sense by comparing simple features like cost, time and effort (hey - in the end, I like reading on the train, so if it did cost more I'd probably still take it).

It is precisely this lack of transparency that makes other government initiatives, like Obamacare, a pure misallocation of resources.  Unable to determine where our real efficiencies lie, we opt for what we assume is 'best' or costs us least.  But we cannot know for sure if these things really make sense at all. 

Some old friends were back in the NY area for the holidays.  Rather than stay at a hotel, they watch friends' homes who are also traveling.  Last year, I was jealous of the fact they were staying in a house that George Washington had slept in.  This year, they stayed in the same house.  After a nice dinner at a local pub, they invited us over.

The house as it appeared in 1919:

The house is known as The Timothy Ball House in Maplewood, NJ.  It's not open to tours, because it's a private residence.  The owners do let in groups of local school children to see the portions of the original structure which are intact and visit the room that Washington literally slept in.

The Ball family were Washington's cousins, Mary Ball having been his mother.  Washington would stop by while the troops were wintering in Morristown (which they did over two brutal winters, the second far more difficult than Valley Forge), because a view from the ridge in Maplewood allowed him clear access to watch English troop movements in Elizabeth and Staten Island.

6 years ago, as we prepared to move to a new house, my wife and I decided to 'declutter'.  Since then, we have been in permanent declutter mode, because having too much stuff around is a pain.  Not only that, but as the saying goes "one man's trash is another man's treasure."  Well, not so much trash, but if I'm not using it, it may was well be trash.

In order to get rid of household items, we utilized a variety of services.  The most well known would be Craigslist and Ebay.  After all, you can make a few bucks while in the process of getting rid of useful things you consider junk.  However, my wife also stumbled on Freecycle.

We use it through Yahoo! Groups, but you can join on the web.  It's free, it's easy to use, and you do nothing more than post what you're offering and what town you're in.  The person then picks it up at your door.

When I was on my way to the airport one early morning, my cab driver told me she was recently divorced and havig a rough time.  She had picked up several things from us on Freecycle saying "you people have been a godsend."  Another person sent me an email telling me that the barely used Heelies (kids wheeled sneakers) were the hit of an otherwise difficult Christmas.  For our part, we rarely take, but last spring somebody posted "As many perennials as you can dig," and we wound up spending an hour digging up plants which now fill a previously bland portion of our backyard.

If you haven't tried it, or aren't familiar, Freecycle (Yahoo! link) can help you clean up as 2012 begins, while helping out others at the same time.  It's not for everybody, but I'm a devotee.

As we approach the new year, a common theme of many sites is to review the previous year's events, while casting an eye to the future.  Part of my job is to create business models for various lengths of time, so the idea of 'predicting' the future is something I have a level of comfort with.  However, the art of prediction is art only.  In making any kind of prediction, I've found it is useless to suggest that something will happen with a level of assuredness that exceeds even odds.  In fact, my models typically have a High, Medium and Low outlook, with High having about the same likelihood as Low, and Medium being most likely.  But Medium is couched as a 50/50 possibility.

Another problem with predicting things is that you can go overboard.  Making absolutely outrageous predictions may garner headlines and attract attention, but unless you get extremely lucky, you only wind up looking foolish.  I don't need to make myself look any more foolish than I already am.  Unless I'm going to make a reasonable prediction, I'd prefer to not make any at all.

It's far too difficult to make assumptions about the behaviors of others, the outcomes of their actions, and the potential ripple effects to make a prediction that is completely assured.  That is, unless you rig the system.  I don't have the power to do this, so rather than discuss how I'll rig things to make sure I'm right, I'll just link to some predictions from others, make several of my own, and let Maggie's commenters have some fun thinking about how the new year will unfold.

A former intern at my office is now working with this speaker and directed me to this presentation.  It's a fascinating discussion of choice.  Recently, there was a post on Maggie's about the Runaway Boxcar.  How do we approach choice in a crises?  Stress alters how we make choices, as well as how we view them. So, too, does culture.  At times, the speaker in this video criticizes American views of, and approaches to, choice.  It is unfortunate, because the entire presentation is wonderful.  She points out Americans could benefit by incorporating more collaborative approaches to choice, as opposed to the highly individualistic view we tend to have.  But she fails to mention other cultures lack the insight the American perspective has, and could benefit from more choice, rather than less.  It is also worth noting that the American perspective allows for greater collaborative approaches to choice, whereas other cultures tend to look down on individualistic views.

Choice is difficult.  Choices can, at times, be paralyzing.  But it doesn't mean that more choice is always the answer or that the American narrative on choice is wrong.  It just means the American narrative of choice is different, and that American history shows more choice may not be better, but yields better overall results.

Terrific piece at ZeroHedge today using Christmas Trees and land management as an allegory for the Fed's interventions in the market, and why it's dangerous.

We can increase moral hazard by taking effective steps to 'insure' against its downside.  At some point, however, everything has to revert to the mean.

A quote:

From a forestry point of view, the lessons were learned. In 1995, the Federal Wildland Fire Management Policy stated, "Science has changed the way we think about wildland fire and the way we manage it. Wildland fire, as a critical natural process, must be reintroduced into the ecosystem."

Herein are pearls of great wisdom for central bankers today. Central banks are creating a tinderbox by keeping alive many very bad investments, fertilizing them with everything from artificially low interest rates to preferential liquidity to outright securities purchases. As these institutions and instruments overrun the financial landscape, they hamper the economic ecosystem and perpetuate the environment of low growth and high unemployment in which we currently find ourselves.

When Gutenberg printed his first Bible in 1455, is it possible he ever thought "I believe this technology will be outdated in 650 years"?  Doubtful.  In fact, he probably didn't even care. 

We do care about change, though.  Mainly because it is part of our lives.  Change shapes us and molds us, even as we create the change we seek in our own lives.  For Gutenberg, much of life was relatively the same over the course of time.  By the time Benjamin Franklin was a printer 300 years later, he was still using essentially the same technology Gutenberg had created.  Some revisions had taken place, but it was still a very manual process and the nature of the process would not seem unfamiliar to Gutenberg.

It's been about 100 years since men like Joseph Pulitzer and William Randolph Hearst changed the business of publishing.  How would they have reacted to a blog like Maggie's?  Could they have envisioned the future and recognized opportunity?  It's possible, but more likely they would have feared the shift in message delivery systems and fought the new technology.  Our perceptions about what we do and where we are going is shaped by what we've have done in the past.  As a result, we tend to react poorly to new ideas and products which don't fit neatly into the way we believe life should progress.  25 years ago, we would have considered it odd to think that a TV would hang on a wall or that we could purchase virtually everything we needed as we watched a TV program.

Lots of things drive men, but few are as powerful as the animal instincts which create the attraction between a man and a woman.  Many times I've uttered the phrase "Yeah, she's hot" with other buddies of mine.  But I've never stopped to consider the differentiation between 'hot' and 'pretty'.  Hot is an attraction, a magnet and promotes a desire which is usually more salacious than meaningful.  Pretty is also an attraction, but requires thought and consideration.  Pretty has lasting qualities.  Hot can be fleeting.

I thought this article, forwarded to me by a female friend, was a terrific summation of the difference.  I differ from the author in that I'm all for 'hotness' at the right time and place, and in limited doses.  Hotness shouldn't be the only selling point.  One of the problems of hotness is that it can be too easily revealed to be a charade. 

One benefit of pretty is that it can be made to appear hot (as the Olivia Newton-John example points out).  It can be stepped back, if necessary.  Sometimes, however, hotness is just a veil and we are going to be disappointed with what's really there.  The Legends of Micronesia often utilize themes of this sort, people, ghosts and gods who improve their appearance to entice people and promote a disastrous end.

I visit Cafe Hayek regularly, though missed the past few days.  I was shocked to see today that the Comments section had been closed.  I had commented on a few topics there over the years, but generally avoided it because it frequently becomes a quagmire.  In fact, I noticed this recently when I'd posed a question, only to find myself under attack for asking any questions that didn't agree 100% with the authors.

Strange thing is, the question I'd posed was a request for clarity by posing an example, not a statement of opposing viewpoint.  Suddenly, however, I became a "two-bit moron" and an "uninformed boob".  I'll cop to being both, though I think using these terms on people you're exchanging views with, in a somewhat public forum, is rude.

It's unfortunate the professors found the need to shut down their comments.  Commenting on articles is a fine balance, not unlike sending emails.  You can't properly convey emotion, and as a result sometimes meanings are misunderstood.  Typically I try to employ the same courtesies I utilize in real life.  I refrain from name-calling and will restate a point, if necessary, to add clarity.  On comments (unlike email), you can't always pick up the phone and say "no, that's not what I meant".

I'm happy that I've never seen a comment thread on Maggie's become a name-calling mess.  There have been plenty of disagreements, and that's healthy.  But when you stop respecting others, you stop respecting the process.

ZeroHedge posted an article that lists 50 crazy facts about the US Economy.  It is pretty impressive how this economy has been 'recovering' for so long, and yet these facts exist.  Did I say impressive?  My bad.

One of the 50:

A staggering 48.5% of all Americans live in a household that receives some form of government benefits. Back in 1983, that number was below 30 percent

In this morning's news stories, BD linked to a discussion of what may happen should Tim Tebow and the Broncos win the Super Bowl.  Outlandish talk, not just because of the religious/political overtones injected by the article, but also because the Broncos are a long way from the Super Bowl.

Most importantly, however, was the fact - and this is a fact many people following this story choose to ignore - that Tebow is winning not because of his religion or beliefs, but because of his hard work.

His fervent religious beliefs are intriguing and that's what makes him a great news story.  He's different from many other well-known athletes in this respect.  It's unfortunate that it's not his work ethic that makes him interesting.  This may be due to the fact that so many great athletes work extremely hard.  So I guess it's a surprise that he can have religion and work hard, too, that makes him different?  Not according to his teammates.

And yet inside the Broncos’ complex, conversations about Tebow go on for half an hour without a mention of God or religion or their most famous player’s spirituality. The talk is instead about a man who is driven, who arrives early in the morning and leaves long after most of his teammates have departed. In college Tebow was famous for declarations of hard work but that seemed more about lifting weights and running sprints. Now that he is in the NFL, his diligence is in improving his throwing and studying opponents. The phrase most often attributed to him is not about God but rather, “Tell me how I can get better.”

I'm opposed to any new income taxes.  It matters little if they are assessed on my income or a much wealthier person's income.  The average person is overburdened.

I feel the same way about corporate taxes, too.  The oddity, in both personal income and corporate taxes, is how little people actually pay and how few of us pay.  There are a myriad of reasons for this.  Loopholes, primarily, but also the manner in which taxes are assessed.  After all, capital gains and investment income are not taxed in the same fashion as earned income, for many good reasons.  It is money at risk, and money at work.  It must be treated differently.

My personal belief is that a flat income tax, with no (or very few) loopholes is transparent, easy to employ, and would reduce the need for a large bureaucracy chasing the average citizen.  It would generate more, or at least equivalent, revenue but not cost the government as much. All told, it's a money saver.  This is a preference that I'm unlikely to ever see, as many people don't fully understand the benefits of a flat tax, in particular its very 'fairness' (a vague term, but defensible in the manner I'm using it).

A flat tax alone probably isn't enough, though.  To truly have an impact and get people focused on longer time frames, I've always felt a Tobin Tax would be useful.  Capital gains taxes would be eliminated and replaced with a Tobin Tax on currency trades and a Transaction Tax on investments.  There are many reasons to not like this, given the nature of Wall Street behavior today.  However, as part of a broad tax overhaul, it would probably yield tremendous results.  Bruce Krasting disagrees, as does the House of Lords.  It's possible this is because the current concept would be to implement a Tobin Tax in addition to the existing tax structure, rather than as part of an overhaul.  As part of a complete restructuring of the tax code, these taxes would focus investors on longer buy and hold periods, reduce High Frequency Trading, stabilize currency exchanges, and generate considerable revenue for the government.  The problem, of course, is the level at which the tax is set.  .03% is perhaps too high.  Then again, OWS would complain it's too low.

It would be intriguing to see someone elected who is willing to alter the tax code so it more naturally meshes with the way business is done today.

Today, Yahoo! asked if I am I better off than my parents? Do I have more opportunity and a better life overall? These are questions that politicians will be asking the next few months.  They are questions pundits continually ask. But posing these questions doesn't really inform us.

Depending on how I define 'better off', I could reply yes or no to both questions.  If all I did was pay attention to the broad statistics and ignore my personal situation, then no.  I should join OWS and complain incessantly.

Am I earning more in real terms than my father at a similar age? No. I do have much more saved for retirement, but at my age my father was finishing putting two boys through college, and looking to pay for three more children. He had a larger home and a nicer car, and he went on some very nice vacations (sometimes with us, usually without). The problem is, no matter how well off he was, his life is not mine. I can't compare how well I'm doing to him, because we entered very different professions and made very different choices. Do I feel better off? Yes. Do I live very well? Yes. So whether I am better off or not is a vague question.  It is not dependent purely on statistics.  Answering the two original questions will beg other questions rather than providing a concrete response.

After all, we tend to have very short memories about our situations and how we've progressed.

Several neighbors kindly stopped by last weekend and dropped off the NY Times Sunday Magazine.  The cover had a picture of ME!  How exciting.  Not quite as exciting was the article about how, in my current state, I may well be doomed.  The article offered several solutions on how my breed may be saved.

I've owned a bulldog for 17 of the last 18 years, and currently own my second.  I grew up with collies, german shepherds, and golden retrievers.  Never did I expect to fall for a breed such as this.  In fact, the original purchase was a Christmas gift for my new wife who loved the breed.  We lived in an apartment, and they are excellent apartment dogs.

Neither of my dogs have had major health problems.  More importantly, regarding the article, I've never met a breeder who would disagree with some of the commentary the article provided about the breed.  All of them are upfront and honest about the difficulties bulldogs present.  I purchased my current dog from Cody Sickle, who is quoted in the article.  He is well known for producing healthy dogs.  My vet is a former breeder, and his partners have all adopted the bulldog as their 'specialty'.

The key point of the article, however, is that the standard needs to be changed.  Here, unfortunately, breeders and the AKC have not taken the necessary steps.  Undoubtedly, the breed needs some refinement and some steps should be taken.  But can you really question the majesty of such an animal as this?

"When taxes are too high, people go hungry. When the government is too intrusive, people lose their spirit. Act for the people's benefit. Trust them; leave them alone."

Lao Tzu

This past weekend, my elder son asked me to drive him to the outlets so he could get some Ralph Lauren shirts at a reduced cost.  Frankly, I don't know where he got this penchant for name brand clothing, but it's his money, not mine.  What is my money is the gas it takes to drive an hour to the outlets and the time I gave up to make the 2 hour (round trip) drive.  I thought it would be a good lesson for him on 2 levels.  First, I could teach him about opportunity costs by showing him why the trip was frivolous.  Second, he'd get some driving practice so he could get his license in 2 weeks.

I wound up getting to fulfill my goals, he got his shirts, and we both learned a valuable lesson.

No good deed goes unpunished.  In other words, Murphy was right.  You can almost count on unintended consequences.

Gotta love those headline writers.  "Jobless Rate Falls" will be standard fare for the next week as the MSM continues its cheerleading to promote Obama's campaign.  I'm not opposed to cheerleading if it makes sense.  But we've heard all this before!  It's a broken record.

More workers and lower unemployment are always good. But lying about their meaning is a huge problem.  We don't have a hiring trend, let alone a trend meaningful enough to call for an economic recovery!

While part of the decline in the unemployment rate from 9.0 percent in October was due to people leaving the labor force, the household survey from which the jobless rate is derived also showed solid gains in employment.

In other words, about 3/4 of the drop in unemployment is from people leaving the workforce, while the long term trend since January 2011 is flat (at best). In addition, the size of the job gains are still minimal, don't represent a meaningful trend, and come as we gear up for - what? - holiday season. This is a snoozer from the MSM, but if it begins to show strength into 2012 (if we see 200,000+ jobs created in December, Jan, Feb), I'll happily eat crow. But we've seen growth of 122,000 jobs before during the recession. In fact, we've seen months of more than 200,000 several times.  At what point does this story get old?

Somebody thinks the West is finished financially.  What does that mean, though?

Personally, I've been a supporter of switching back to a gold standard, even if only temporarily, in order to impose budgetary discipline and promote economic growth.

Regardless, it was only a matter of time before Emerging Economies started to catch up.  In the long run, this will benefit the United States, because at some point their workers will want to live like us, demand wages like us, and spend like us.  Outsourcing will shift back to high productivity areas like the US.

In the meantime, the question becomes a relatively simple one.  Would you rather see the US grow at 2% a year and the rest of the world at 1% or less, or see the US grow at 3% a year and the rest of the world grow at 5% or more?  The first is the situation we've been in, recently.  The second is more likely over the long haul, because as other small nations grow, they will demand more from the US. 

So I reject the concept that we're "finished financially" and suggest we're at a turning point, and the direction we go is dependent on whether we make intelligent economic decisions, or continue to engage crony capitalism financed by fiat currency.

Where we go is dependent on how we choose to manage our current state.  Artificially, as we are now, or by focusing on our strengths, such as creativity, marketing, and education.  We are entrepreneurs at heart.  The rest of the world benefits from the vision and effort the US exhibits.

I'm not a big fan of religious exhibitions in public venues.  I'm not opposed to them, I'm not critical of seeing a prayer circle after a game, or a player thanking God for divine intervention.  That's what the player wants to believe?  Fine.  My issue is really one that relates to this - if God is helping the winning team, then what's He doing for the losing team?  Are they just not strong enough believers?  Did they not say the right prayers or did they not make the correct sacrifices?  It's not really a strong argument to say "God allowed/helped me to win" because it presumes God didn't allow or help those on the losing side.

God gives each of us abilities, and how we use them is what determines how well we do at sports, work, home life, etc.  Beyond that, God doesn't intervene much, in my view.  If I start using drugs and begin to play poorly on the field, did "God allow/help me to use drugs"?  I don't think so.

It's a sword that cuts both ways, and in the end it's a personal decision relating to how you choose to use your God-given talents that determines whether you're a winner or loser.  When you're playing for the championship against another believer, then it comes down to your mental toughness.  Another God-given talent, one which can be developed and improved (just as any God-given talent can).

Where is OWS hoping things wind up?  Given some of the recent pictures in the blogosphere, one calling for a "Cultural Revolution", it's likely that these nitwits have a hankering for the recent past and all the wonderfulness others in Russia and China experienced.  In a sense, a very bizarre sense, we could call them 'conservative', because they want to return to the way things were - even if those things were in another severely degraded country.  Lord knows they are not progressive.

I was watching a boring football game and began to glance around other channels, and noticed "Dr. Zhivago".  I'm a fan of David Lean, and in particular this film.  Beautifully shot, well crafted, magnificent characters and storytelling. 

As I watched, I couldn't help but think "this is what OWS dreams about - the chance to expropriate the property of others so they can misuse and destroy property."

Our national fascination with holiday shopping is once again at 'all in' mode.  Black Friday has passed, Cyber Monday is upon us.  Cyber Monday was originally a fictional concept, with online retailers suggesting for years that the Monday after Black Friday was the heaviest online shopping day of the year.  It wasn't.  When it was first suggested, it was twelfth largest holiday shopping day.  However, Cyber Monday is now a cultural meme and last year became the largest online shopping day for Amazon simply because that's how it was marketed.

Regardless of which day is largest online, Black Friday remains the shopping holiday that resonates.  Every year, we hear it used as a bellwether on the health of our animal spirits toward spending.  This year, we've heard that it's indicative of great things to come!  Then again, it was used that way last year, too.  2011 has proven to be substantially larger than 2010, in terms of Black Friday spending (6.6% growth versus 0.3% growth year over year).  Ultimately, Black Friday of 2010 indicated nothing of importance economically, because most of the holiday spending increases were from high income folk.  The large initial growth on Black Friday this year may not say much more than people are looking for bargains, and retailers are seeking to burn off inventory.

Or it could say much more.  One thing it definitely says is we love our debt and getting rid of it will prove difficult.

The 'mood' in the US, if we are to believe the MSM, is that nasty Republicans have undermined the political process with their adherence to outdated dogma.  Nevermind that Democrats adhere to outlandish (and outdated) dogma, the discussion will revolve around how to demonize one side or the other.  The MSM claim "compromise" is what's important.  They also hint the Republicans cause all the problems.

There is a history of compromise in Congress, but there is also a history of sticking to your guns.  How you view things usually depends on what you want to believe.  Personally, I think sometimes compromise is good, but at other times sticking to your beliefs is better.  In the case of the deficit, I'm more dogmatic.  There have to be more spending cuts before we can even discuss, let alone implement, more taxes.  If we do implement more taxes, I believe having the 'rich' pay more isn't a bad idea, but a better idea is to combine that with a broader income tax base that includes the 49% who don't pay anything.

The nature of the spending cuts are as fair as we could hope for, given the current political environment.  Particularly if you believe, as I do, that the Supercommittee idea is an unconstitutional solution.  I believe this because cuts are 'automatic' whether the committee agrees to a deal or there is no agreement at all.  If they make a deal, Congress agrees to support it.  If they fail, the current outcome, nobody votes for anything except to possibly stop the cuts.  There is limited representation, there is limited discussion.  The cuts just happen.  Clearly there is an undemocratic theme here, but at least everything gets cut.  Nothing is spared.  It may be unconstitutional, but we're being unconstitutional together to achieve a goal.  I can't believe that's good, but some think it is.

Today, the first of two GDP revisions was issued.  It was revised down from 2.5% to 2.0%.  Revisions are a natural part of our economic reporting structure.  We can't get all the data in a timely fashion, so certain guesses are made regarding the data that is missing when initial results go out.  'Guesses' should be incorrect.  'Estimates' would be the correct term. 

It's not unusual for data to be revised downward, and it's not unusual for revisions to get little fanfare.  What is unusual is the consistent nature of the downward revisions we have seen over the last few years and how little attention this receives.

I'm sure the bureaucrats view their 'guesses' as 'estimates'.  But I wouldn't be surprised if they have been told to paint a pretty picture, within reason.  Few of the downward revisions have been outlandish.  Given the nature of the economy the past few years, however, wouldn't it make sense to have a slightly more negative outlook on the initial print?

No, because the initial print is what gets all the press and it's what everyone will pay attention to.  Politics isn't supposed to alter the economic reporting, but in this administration it has taken a decidedly political turn.

Supporters of Obama's foreign policy are sure to be scratching their heads now.  Anyone who feels Obama has done a better job than his predecessor, particularly with regard to the Mid East and Islam in general due to the OBL mission, have new questions to ask themselves.  Such as, "What the heck was Leon Panetta paying attention to?"

General David Petraeus took over just 2 months ago, and faces his first crisis as a massive network of operatives have, no doubt, been executed or face execution.  All the goodwill Obama may have had for catching and killing Bin Laden should now be tossed right out the window.  Early reports on what occurred may prove incorrect, but it appears the operatives and their handlers "got lazy" regarding their communications.  In that business, laziness carries a high price.