Sunday, December 28, 2014

Perhaps I am reading too much... my 2014 brain dump

I have an app on my iPhone, iPad and computer called Pocket.  It allows you to save articles you would like to read later and have them show up on any of your devices.  As it turns out, the good folks at Pocket keep track of how much you read.  Last week, they sent me an email telling me that I have read over 929,000 words this year, the equivalent of 20 books.  Of course, that doesn’t include the other dozen books, newspapers or magazines that I read which might add another half mil or so.  Conservatively, let’s put the total at a million.

So, what have I learned from all this?  First, there are two kinds of birdbrains running our government in Washington:  Republicans and Democrats.  If you buy into the dogma of either party, you’re not getting any truth.  Second, the media can’t be counted on to help you figure things out.  They don’t report the truth.  They report what people say.  There’s a difference.

Maybe you already know that.  You didn’t need to read a million words to figure it out.  If that’s the case, you can stop reading right here and go play another game of Candy Crush or Game of War.

For the rest of you…

The economy

Presidents take too much credit for a good economy and get too much blame for bad ones.

The Bush tax cuts were intended to create economic growth; however, GDP growth during the Bush years equaled the growth in our national debt.  Net zero!

That said, the Bush tax cuts didn’t cause the financial crisis, the causes of which can be traced to the 60’s.  Presidents and Congresses of both parties as well as multiple Fed Chairmen precipitated the crisis.

The recent spurt in GDP growth has not been caused by the Obama stimulus or any other policies of his administration.  Virtually all the jobs created since 2009 were created by the energy boom as can easily be seen by reviewing this graph using data from the St. Louis Fed:

Absent the energy boom, the US economy would look much like Europe’s.  All of which adds perspective to the recent ban on fracking by the governor of my home state of New York, a state that has been losing jobs and population to the Sunbelt due to the blue state folly of overregulation, high taxes and debt.

Climate Change

The debate over global warming is fueled more by passion than science.  Reportedly 97% of climatologists have concluded that climate change will cause vast expanses of the civilized world will be covered by water within 100 years.  My reading of the definitive report by the UN sponsored International Panel on Climate Change (IPCC) lends some doubt on those projections as the IPCC uses the adjective “likely” or “very likely” when describing their projections.  Science is never certain.  My correspondence with scientists suggest that nothing as complex as the climate can be predicted with any degree of certainty 100 years in the future.

That said, the result of burning fossil fuels is toxic.  Efforts to convert to renewable energy are beginning to bear fruit and are cost effective. Government investments (like venture capital investments) have resulted in some high profile business failures.  However, subsidies for renewable energy have had the desired result.  And, the EPA state-by-state plan for conversion to renewables by 2030 is well considered and appears to be economically viable.  The first phase of this plan involves a substantial conversion of coal-fueled power plants to natural gas by 2020.  (See fracking above.)

To get from here to there, we need to understand that we will continue to burn fossil fuels for decades.  Converting to lower emission energy sources (such as coal to natural gas) will diminish the damage during the transition.  There is a web of hundreds of pipelines transporting oil and natural gas around the US and Canada.  If we fail to support the addition of new pipelines, not only are we adding an economic burden but also we are forcing producers to transport the stuff less safely by rail.

Institutions from Yale to MIT have analyzed the risks of fracking.  Most of the press reports linking fracking to damage to the water supply and earthquakes are erroneous.  But, the press is in the thrall of an unyielding environmental lobby.  So, the public believes that fracking is more dangerous than it really is.

Income inequality

French economist Thomas Piketty made a splash this year with an extensively researched book, Capital in the 21st Century, which concluded that income inequality was the result of returns on capital exceeding return on labor.  So, the rich get richer and the poor get poorer.  This conclusion should surprise no one.  Why would anyone invest capital if they would not get a superior return?

Yet, the book fed the confirmation bias of liberals who think that government should redistribute income and that income inequality is a serious problem in the US.  A parallel study done at Cornell took a different view.  Piketty’s analysis failed to take into account the impact of government benefits.  When considering that impact, the bottom quintile of earners in the US experienced a 33% increase in income from 1979 to present rather than the 31% decrease reported by Piketty.

We could continue to increase those benefits and increase the minimum wage and we would still not make a dent in the real problem.  At the core of our social problems are inner city communities and families that are broken and dysfunctional.  The real fix – if there is one – is improved education.  In my hometown of Rochester, only 5% of high school graduates are ready for college or careers – last in the country.  School choice is the only answer.  I would ask why our high school options shouldn’t look like our college options.  Some public, some private…  some affordable, some not.  Ultimately parents play a large role in selecting a college for their children based upon income and other factors.  Why not the same for grammar school and high school?


The West achieved global leadership, in part, because of advances in healthcare during the 19th Century.  Maintaining a healthy, working middle class is essential to our security and financial sustainability.  The Affordable Care Act does little to address an underlying cost structure that, combined with demographics, will continue to increase the share of GDP absorbed by healthcare.  In a recent article by Pascal Emmanuel Gobry titled “What Americans Won’t Learn About Healthcare”, the author suggests that Singapore’s system might serve as the best straw man for real reform in the US.

Looking forward

There is always a lot of hand-wringing and sniping during periods of economic malaise.  Perhaps we’ll catch a break from that starting next year.

I expect that we will see the beginning of wage increases that will affect the middle class positively and the hand-wringing will abate.  The demand for labor will be driven by the return of manufacturing to our shores.  The Boston Consulting Group (BCG) predicts that the US will become the least expensive place among industrialized nations to produce manufactured goods within a few years due to lower energy costs, more flexible labor laws and the world’s most efficient transportation system.  BCG projects that China’s costs will be 95% of the US – insufficient to motivate companies to locate new factories there. 

The hitch is that new factories will not employ low skilled labor in large numbers.  The modern factory is highly automated and those who work there will need to have the math skills to operate sophisticated machinery. 

Politics in DC

I tend to read more about policy than politics.  So, I am not confident about my insights into our electoral prospects.

The recent national election has pundits leaving Democrats for dead.  But, this has happened many times before.  In a brief blog post, Walter Russell Mead of the American Interest provides several examples of broad electoral victories that were reversed by a fickle public within 2 to 4 years and provides an interesting perspective on why we keep swinging from left to right and back again.

For my part, I see one very troubling element that undermines our national charter.

The Religious Right has been a key element of the Republican voting bloc since Ronald Reagan first shook hands with Ralph Reed.  In my view, their views are contrary to the libertarian philosophy otherwise espoused by the party.  Freedom is freedom.  A small minority of Americans shouldn’t be able to impose their moral values on the majority.  It is noteworthy that religious conservatives have not achieved their goals despite electing conservative presidents in 5 of the last 9 elections.

The country is becoming more urban and more liberal.  The US map shown to us by the media after each election with Republican counties colored in red and Democrats in blue presents a very red picture.  But, electoral votes aren’t allocated by acreage. Over 80% of voters now live in urban or suburban communities and those communities – including the big cities in conservative states like Georgia and Texas – overwhelming vote Democrat.

Social attitudes are becoming more liberal.  A majority supports both reproductive choice and same sex marriage.  If the Republican Party can’t find a way to nominate candidates who don’t pander to this element of the party, they will have a very difficult time winning the White House.

That’s it… it’s time to reformat the hard drive and start reading new stuff in 2015.


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