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 21^st 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?

Healthcare

The West achieved global leadership, in part, because of advances in healthcare during the 19^th 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.

WHO WILL LEAD?

Two wrongs don't make a right. Or, do they?

The Federal Register

Now that Thanksgiving is past and the furor in Ferguson has calmed down a bit, Americans can get back to what we do best:  argue about politics.

When last we heard, the big deal in Washington was the President’s executive actions on immigration policy.  Republicans cried fowl!  Alabama Senator Jeff Sessions said it most concisely.  “The president is endangering our entire constitutional order,” he avers.

Democrats respond by pointing out that Republican presidents have done the same thing. 

It sounds a lot like playground logic…

…. Mom, Barack broke the rules!

….  Yeah, Mom, but so did Ronnie and George.

I know what my Mom (or yours) would say:  “Two wrongs don’t make a right.”

One of the adults in Congress expressed a more balanced view.  Senator Lindsay Graham (R-SC), referring to the House of Representatives controlled by his own party, said on CNN: "Shame on us as Republicans for having a body that cannot generate a solution to an issue" involving national security as well as cultural and economic considerations.

But, were the President’s actions legal?

I would guess that what he has outlined is legal.  The President didn’t wake up the day after Election Day and decide to do this.  I would bet his legal staff burned the midnight oil for months identifying what they thought he could and couldn’t get away with.  Moreover, his apologists are right about Presidents and executive orders.  The website fivethirtyeight.com published a chart of executive orders going back to George Washington.  It’s an interesting graphic showing a peak in the number of executive orders during the FDR administration.

I think there’s actually a larger question: How did it get this way?  How can a President, in effect, create laws through executive action?  Isn’t that the role of Congress?  Isn’t that the Constitutional order (as Senator Sessions put it)?

First, a bit of history.  Two separate events provide the basis for an expansion of executive powers.  In 1935, the Supreme Court decided Humphrey’s executor v. United States in favor of the plaintiff.  The decision rendered a President powerless to fire a duly appointed commissioner (in this case, a commissioner of the FTC).  Unlike cabinet departments, Congress appoints commissioners to administrative bodies that are an extension of their legislative power.  The FCC and the FTC are examples. 

The addition of so many commissions, agencies and cabinet departments during the Roosevelt administration led to the passage of the Administrative Procedures Act of1946.  This law allows government bureaucrats to write procedures that turn the vague laws passed by Congress into rules and regulations.

These legal events – which most people have never heard of – have led to administrative mission creep, extraordinary complexity and lack of accountability in the federal bureaucracy. 

“So what?” you might say.  We all know how unresponsive and incompetent government bureaucracies are.  How does that relate to the current hoo-haw over immigration?

The sheer size of the federal government leads to what economists call “rational ignorance”.  The only people who read the Federal Record to see what new rules are being written are industry lobbyists and special interest groups seeking to influence the outcomes in their favor.  In these cases, they are likely to get their way since if no one else knows, no one will object.

Who knows what rules have been written to enforce immigration laws?  Immigration and Customs Enforcement (ICE) reports through the Department of Homeland Security to the President.  If DHS bureaucrats have written the rules, they can re-write the rules.

Is it any surprise that anti-government Republicans have found a following? 

WHO WILL LEAD?

Frack-tured Fairy Tales

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People of a certain age will remember the Rocky & Bullwinkle Show.  It was a prime time satirical cartoon that was popular decades before The Simpsons and Family Guy.  A regular feature of the show was ‘Fractured Fairy Tales’ which played on malapropisms to get you to chuckle.  They were kind of ‘punny’ in their day.

Now, the governor of New York is promoting his own fairy tale.  This one is over fracking, the controversial practice of bringing vast newly discovered reserves of natural gas to the surface. New York is sitting on the Marcellus Shale, the second largest known reserve of natural gas in the world at 95,000 square miles ranging in depth from 4,000 to 8,000 feet.  If it had been discovered in Texas, every pickup truck in the state would be on autopilot to the nearest wellhead.  Money would have been invested, drilling would have commenced, a new source of energy would be available to the public and guys wearing boots and ten-gallon hats would be lighting cigars with hundred dollar bills.

But, not in New York.  Many a pickup truck can be seen with a ‘No Fracking’ bumper sticker and the environmental lobby holds a lot of sway in Albany.  This is no small matter.  Studies done by economists at Citigroup project that natural gas coupled with improvements in alternative energy sources and efficiency of power plants, factories and autos have the potential of making the US energy independent within a decade. 

Fracking will attract Foreign Direct Investment (FDI), which has been on the decline since the start of the Great Recession.  Energy independence will reduce our net trade deficit by approximately $433 Billion per year. Energy independence will mitigate our national security concerns in the Middle East, reduce our carbon footprint and create domestic jobs.

I do not mean to diminish the environmental concerns.  Anyone who has seen the documentary Gasland knows that fracking, if done improperly can ruin the water supply.  But, it’s being done safely in places like Texas and North Dakota.

To stir the pot a bit, President Obama has nominated Ernest Moniz to head the Energy Department.  Moniz comes from the MIT Energy initiative, financed by the industry.  He has expressed support for nuclear power and has declared the risks of fracking to be “manageable”.  Perhaps the President really intends to follow through on the policies he outlined in his State of the Union speech:  “this country needs an all-out, all-of-the-above strategy that develops every available source of American energy.”

That isn’t to say that there won’t be incidents.  These activities are prone to human error, as Three Mile Island, the Exxon Valdez and the BP Gulf oil spill have shown us.  But, the opportunity is too great to ignore.  The question isn’t should we or should we not frack.  The question is how can we do it as safely as possible. 

Moreover, we must be view fracking and natural gas in the proper context.  It is not the final answer.  It is a bridge solution.  In the near term, it will reduce greenhouse gases and reduce imports of foreign oil.  However, it’s equally important that we support the research and development initiatives of government agencies like the Advance Research Projects Administration – Energy (ARPA-E) that will provide long term solutions that will enable us to be energy independent while emitting fewer greenhouse gases.  None of the alternative energy options are economically or technologically viable today.  But, they will be some day.  Just not some day soon.

For New York, there’s a broader issue.  Governor Andrew Cuomo has declared his state “Open for Business” and is backing it up with an impressive public relations campaign.  But, such declarations must be backed up by facts.  Businesses are driven by dollars not slogans.  And, New York continues to lose jobs and people to other states. 

In a recent TV ad, the governor makes a big deal about his new policies not increasing taxes.  But, if he wants his slogan to be true, he needs to come to grips with the lack of competitiveness from which New York suffers compared to other states.  Businesses set up shop in low tax, low cost states.  New York is at the opposite end of the spectrum.

The governor must address the structural problems that cause New York to be lagging the nation in job growth and unemployment.  Otherwise the ‘Open for Business’ campaign is just another Fractured Fairy Tale.

WHO WILL LEAD?

The U.S. Constitution Was Designed to be Amended

It’s time to get military weapons out of the hands of civilians.  Yes, I know that the assault weapons ban passed during the Clinton administration was rendered unconstitutional by the Supreme Court.  But, the Constitution was designed to be amended.  And, if we need to amend it to get a ban on weapons manufactured with a military purpose, then amend it we must.

I am a great respecter of the U.S. Constitution.  It is a brilliant document, a reflection of the Age of Enlightenment and the courage of the men who wrote it.  Among its most brilliant elements is Article V, which outlines the procedure for amendments.  The Founders knew that society would evolve. 

The Second Amendment was written at a time when we had just concluded a revolution against the King of England.   There was a legitimate fear of the tyranny of a central government.  Would a new United States government confiscate private property to serve its own ends?  No one could be sure.

The Founders wrote the Second Amendment to the Constitution as part of the Bill of Rights with that in mind.  The United States had yet to take the form of a single country and it only made sense to grant the citizens the right to bear arms against a potentially repressive government.

Is such a fear rational in the 21^st Century?  And if it is, what group of citizens could defend itself against the U.S. Army?  Not those guys in camo holed up in the woods of Michigan or Idaho. 

Now, I have heard the argument – haven’t we all – that the school principal in Newtown, CT might have defended herself rather than sacrificed her life to protect the children.  And, perhaps that’s so.  But, do we really want to live in a society where our teachers need to arm themselves?  Where will that lead us?  Should our teachers be required to carry and use guns?  What of those who won’t or can’t?  Should they lose their jobs because they don’t carry weapons in the classroom?

It’s a ludicrous argument.

I grew up in New York where today anyone carrying an unlicensed gun risks going to jail.  There is good reason to fear gun violence in the city that never sleeps as it is in many of our big cities. 

But, I also lived in Colorado where gun ownership is routine.  I worked with a guy who told me he used to go home after school to get his .22 caliber rifle, tie it to the handlebars of his bike and go hunting rabbits.  No one thought anything of it.  I know that ranchers and farmers consider a rifle an essential tool, and often use it to defend their livestock from a hungry coyote or to put down an injured animal.  I met another guy who used a .45 caliber pistol to kill a grizzly bear while camping in the wilderness.

But, none of them owned an AK-47.

Could Adam Lanza have killed first-graders with a pistol or single shot rifle?  Yes, he could have.  But, not so many and not so quickly.

Do we still fear that our government might confiscate our property, as did the Founders?  Isn’t it time to get past that argument?

Clinton’s assault weapons ban, passed in 1994, gave impetus to the NRA to target Congressional Democrats who had voted for it in the mid-term elections.  Their campaign contributed to that year’s change of control from Democrat to Republican for the first time in 40 years.  Democrats have not pressed for gun control legislation since. 

However, the President expressed the feelings of many when he said on Monday, “a lot of gun owners would agree that AK-47s belong in the hands of soldiers, not in the hands of criminals –– that they belong on the battlefield of war, not on the streets of our cities….  that we should do everything possible to prevent criminals and fugitives from purchasing weapons; … that a mentally unbalanced individual should not be able to get his hands on a gun so easily. These steps shouldn’t be controversial. They should be common sense.”

Any measure must be able to withstand the scrutiny of the Supreme Court, bound to interpret the Constitution and apply it to Congress’ legislation.   But, Article V…  well, Article V grants the power to amend the Constitution to the Congress and the state legislatures.  The President has no role in the process.

Great change comes about when large majorities demand it.  Will a large majority of Americans demand the change we need? 

Do we have the will to do it? 

WHO WILL LEAD?

This Is Your Brain… This Is Your Brain in the White House

I am beginning to be glad I am such a dummy.  Have you noticed how the smart guys really screw things up?  All those smart guys in Washington got us into a war in Iraq.  Oops, no weapons of mass destruction.  All those smart guys on Wall Street bought into the mortgage mess.  Oops, the mortgages weren’t worth the paper they were printed on.  All those smart guys in the Silicon Valley convinced themselves that IPO’s of pre-revenue startups were a great investment.  Oops, the tech bubble bursts.

Ever since the Age of Reason, we have convinced ourselves that we are rational human beings.  The central concept is that reason should overrule emotion.   So, we rationalize everything, convincing ourselves that our rational mind is in charge.  Our leaders – government and corporate -- are no more or less immune to this phenomenon than are we.   To make matters worse, we are now converting our best reasoning into software, moving to a society ruled by algorithms. Wall Street runs their trading operations by computer.   Computers write news reports for Forbes magazine.  And, Wal-Mart’s computers automatically generate orders to their suppliers when their stock runs low.

Now, the math geniuses behind this trend are preparing us for robots that will clean our houses (think Roomba on steroids) and cars that will drive themselves. 

We can’t trust the tech industry with our credit card numbers.  Now, we are going to have them drive our kids to school?

All of this is going on within the context of recent studies of brain science that suggest we are not simply moved by math.  We are motivated by emotion and our success is a function of the human cocktail that blends both sides of the brain. 

Karl Albrecht, Ph.D

I had been thinking about this when someone sent me a link to Psychology Today’s website.  The blog post (Brain Snacks), written by Karl Albrecht, Ph.D. delineated recent presidents along the lines of the type of thinker they are.  It divided them into two spheres – left brain is Blue and right brain is Red.  And, it further identified the high concept thinkers (Sky) and the pragmatists (Earth).  So, there are four possible combinations. 

Dr. Albrecht is careful to disclaim any notion that he is certain of his analysis.  After all, he hasn’t examined the “patients”.  That said, he believes he has had enough opportunity to observe the style of recent presidents to reach some tentative conclusions.  Ronald Reagan was both a Red Earth and a Red Sky.  Bill Clinton, a Red Sky.  Big thinkers with a vision, he says. 

Not so, the current contenders to be our nation’s chief executive.  Obama, according to Albrecht, is a Blue Earth thinker while Romney is likely a Red Earth.  “If you’re hoping for a Reaganesque ‘new America’ narrative, for example, don’t hold your breath,”  says the good doctor.  “Whoever wins, it’ll be all about tools and tool belts.”

He goes a step further and claims that even the programs that the two candidates propose will not matter a whole lot.  “Very few of them will survive the first collision with the Congress and the lobbyists,” he says.  “Ultimately, what matters is the individual leader’s ability to deploy his or her particular kind of intelligence, and his or her cognitive orientation, in a way that can mobilize people and resources to get the big things done.”

George Friedman

I have reported on the writings of Stratfor founder George Friedman in the past (Hey, We Had a Deal... Didn't We?).  He has observed that we have had a crisis that gave rise to a strategic president who made big changes to the way we are governed about every 50 years.  Most recently, it was Ronald Reagan.  Friedman does not suggest any reasons that it’s 50 years.  He just makes the observation.

I had been hoping that the current crisis might give rise to a strategic presidency – one which would make big sweeping changes to our entitlement programs, our fiscal circumstance and our social policies -- someone who might shorten the 50 year cycle.  But, if Dr. Albrecht is correct, we’ll have to wait a little longer.  Pragmatists like Obama and Romney are not guided by ideology.  They focus on what can get done. 

What they can get done is important.  However, how they LEAD is more so.  Reagan was able to convince Democrats to vote against their own interests.  Clinton forged a path contrary to his party’s ideology on trade and fiscal matters.  Bush imprinted our nation with a new security paradigm following 9/11. 

So, what happens next?  Can either of the current candidates LEAD us to a more sustainable economic future?  Or, should we just find an algorithm to do the job?