View 686 Sunday, August 07, 2011

This is my birthday. Thanks to all who sent me subscriptions as a present.

Mission Accomplished

The mission had been completed. The Rangers had taken the objective, and the special forces were called in to complete the mission. That was accomplished and the team was on its way out.

The enemy was experienced in operations against helicopter forces, and had assembled all their troops possessing RPG’s to cover and concealment about 500 yards from where the Chinook was loading up. Their fire discipline was excellent. They lay in wait, mostly undetected.

Twenty two Seals, Three USAF Ground Combat Controllers and a dog handler with his dog, Four Tennessee Army National Guard pilots and crew, and eight Afghan Commandos were loaded aboard, their mission finished. They were on the way home. As the Chinook rose – slowly at first – the RPG’s fired, probably in volley. At least one made a critical hit. The Chinook went down from a height of more than a hundred feet. All aboard were killed.

Of course I am a fiction writer, and the scenario above has been constructed after I spoke with people who know something of the situation. It’s a guess. I am giving away no tactics: the Taliban has employed this tactic since the days of the Russian occupation – indeed we may have taught it to them.

The media news seems to be asking why the Pentagon has not sent grief counselors to console what the media seems to believe is a crippled legion. I have a different view.

I would not care to be a member of the Taliban in that district this month.

The Credit Rating Fandango

The credit rating change (by one rating company, from AAA to AA+) means nothing, but it does give people like former Presidential Chief of Staff Rahm Emanuel an opportunity to blast the Republicans and blackguard the Tea Party for its intransigence on taxes. It’s a new opportunity to make the argument: fairness requires more entitlements. More people ought to be given more benefits. Taxes on the American middle class are already too high. Without higher taxes we are already going into debt with growing deficits. We can’t balance the budget on the backs of the poor – we can’t cut their benefits which is like raising their taxes. Therefore it follows as the night the day that we have to raise taxes on the rich. That includes any corporations making profits, particularly obscene profits. We also have to eliminate the sweetheart tax loopholes, like the deduction for mortgage interest. Mortgage interest is paid by those whose houses haven’t been foreclosed already, meaning that those people paying it must be richer than those who have lost their houses or don’t own one; so by a kind of Morton’s Fork it must be true that they can afford to pay more taxes to support the government.

And of course we can’t balance the budget by cuts. We could cut needless programs like Bunny Inspectors, but that would be such a trivial reduction in the Deficit as not to be worth bothering with.

And if we can’t cut something as silly as Bunny Inspectors, can we cut anything? It is interesting that any proposal to do something as obvious as eliminate silly and clearly needless programs is resisted furiously; probably because once we start cutting, it becomes easier. Once we can eliminate some programs, and actually make real cuts in others (not just cut back on the rate of increase, which is called a Cut in the curious language of finance) the game actually changes.

So the credit rating change will be used as a club to beat the Tea Party; but it ought to be seen as a warning. The United States is not in danger of defaulting on its debts: it retains the ability simply to print enough money to pay them off. The danger is not default, it’s inflation. Coupled with increased unemployment. That’s called stagflation, and we had it good and hard during the Johnson Administration. I wrote several papers on it back when I was running the Pepperdine Research Institute. I don’t seem to have any of those now. I rewrote some of them during the Carter Administration, and Reagan and some of his advisors read them; perhaps they had an effect.

The formula for stagflation is increased deficit financing leading to inflation coupled with stifling regulations that prevent the creation of new jobs. We seem to be on track for stagflation.

Note that Canada was in this situation some years ago, and decided to get out of it by cutting spending. Drastic cuts in spending. The Canadian dollar is now worth more than the American dollar, which is startling for those who grew up before 1990.

As to credit ratings, these are the ratings given by the companies which by law had to approve the Credit Default Swaps that fueled the housing bubble and whose collapse got us into the Depression – oops – Great Recession we’re in now. Their predictive abilities particularly in recognizing bad bets do not inspire a great deal of confidence. Of course the United States will pay its debts. That’s not in question. Just what it pays them with can be another discussion. I don’t think the credit ratings reflect that.

The news chatters about the possible wave of financial collapses starting with the Nikkei just about now (1600 PDT Sunday) and spreading across the Asian market, resulting in a collapse of the NY York stock market Monday (tomorrow) morning; all that in reaction to the downgrading of the US credit rating from AAA to AA+. For most of you whatever is going to happen on that will already have happened by the time you read this.

I don’t do breaking news, and I’m just as confused about that as the rest of the talking heads. I am pretty sure that your interest income will be taxed, and if you are paying off a mortgage and your house hasn’t been foreclosed on, they’ll raise your taxes by closing the “loophole” of mortgage deduction. Our answer to that here at Chaos Manor has been to remove some money from money market accounts and pay off our mortgage entirely. It seemed like the right idea. I don’t see interest income going up or taxes on interest income going down, and the thirst to tax all those who haven’t lost their homes to foreclosure seems insatiable; the Democrats are certain that homeowners will not catch wise. We’ll see. But that was our bet.

Incidentally, in case you are wondering, I continue to point to Bunny Inspectors because until we come up with a mechanism to eliminate something that so obviously needs to be eliminated, I am not sure we will come up with a mechanism to eliminate anything else. Certainly the Super Congress Committee won’t bother with such trivia. It’s not clear that it will cut anything at all. It’s more likely to raise revenues by “eliminating loopholes”.

The credit ratings ARE important because any number of pension and other funds are mandated by law to only invest in AAA –rated bonds.

These funds will have to sell – or the laws will have to change.

Larry

The ratings agencies, which demonstrated their competence by giving great ratings to Credit Default Swaps and the crazy bundled mortgage packages that made it impossible to determine who owned what, and rated high risk loans up there near Treasury Bonds, have power only because Congress gave it to them. What Congress givether Congress may take away – or give to a new ratings agency that magically restores AAA.  Unless of course there is some advantage to a lower US credit rating. It is a Fandango. The United States is not going to default on its debts, and the credit rating agencies can’t really force real cuts in spending. It’s going to take new elections to do that.

Stability and National Security

For anyone interested, one of my old Pepperdine Research papers is available here. It’s in a very muddy pdf format (it appears to be a pre-Xerox copy of the typewritten original) of a paper on Strategic Stability. The report was presented (by me) in a report to the Air Council, and was used at the USAF Academy, in the Air War College, and in some of the strategic policy debates between the Arms Controllers at the State Department and the defense intellectuals of the Pentagon. Eric has been working to clean up the paper so that we can get a clean and readable copy; I’ll make a few comments on the concept now that the Cold War is over (the principles are much the same, and boil down to this: if you want to have peace you have to keep it; a principle that hasn’t changed since Athenian times). The goal is to put it out, readable with some comments, probably for $0.99 on Kindle. I’d make it free, but frankly it will be more widely distributed if it’s on Kindle, and Amazon won’t do that for free. I think this paper is worth the effort to make it available.

View 686 Friday, August 05, 2011

Roberta ‘s sprained knee has recovered enough to let us take a walk around the block – two blocks, actually, since we go down past Ed Begley Jr.’s house – he drove past in his electric car, which is powered from the solar panels on his house – and although the official weather for the area is “hot as blazes” it was actually cool and pleasant in the shade, and not bad in the sun. Nice breeze. Studio City is a village, and it’s a good place to walk.

There is at least one crow fledgling in the flock of five that we saw. I keep hoping there are other flocks of crows here, but I am never sure. Last autumn there was a flock of eleven. Not now.

Studio City is a mostly single family residence area, and while there has been some expansion with large lots subdivided into two huge houses, and other single family houses like ours expanded, the area can support much larger flocks. I can remember when our part of Studio City had two flocks of about 40 crows each. Every couple of days they would gather for what I called a “cawing contest.” One flock would settle into a tree. The other would choose a tree across the street. Then, for about an hour, they would make as much racket as they could. By some complex system of rules some crows would fly from one flock to the other, and as the contest continued, eventually one flock would noticeably outnumber the other. Then the losing group would all fly over to the winning flock’s tree, and they’d all fly off together.

I never understood the rules, but the other day while hiking up the hill with Paul Schindler, former editor of BYTE online, I told him about it, and he wondered if there were any permanent transfers of members from one flock to the other, thus promoting genetic diversity. I didn’t know, and since there aren’t enough crows to have cawing contests now, I can’t watch to see if the early transfers from one flock to the other mostly involved fledglings. It’s an interesting hypothesis. Crows flock, but they basically raise their young in single families in summer. When the young begin to fly the elders conduct them around teaching them the crow business for a few days, then the kids are pretty well on their own. In the old days that meant joining a flock, and it may be that the cawing contests were meant to attract this years’ fledglings to one or the other flock.

West Nile Virus has thinned the Studio City crows from two flocks of 40 or so to perhaps 20 total (that’s a guess, and probably optimistic: I hope there are that many). There was another outbreak of this formerly unknown disease amounting to I think three cases in Los Angeles and Ventura counties. The toll on bird population was much higher. I suppose there are some people, particularly those with big trees suitable for use in a cawing contest, who found the large flocks irritating, but I miss them. I wish we could come up with some way to immunize our crows, but I don’t suppose that will happen.

On Bunny Inspectors and why I don’t implement comments:

I recently had mail from a reader who took me to task for my frequent mentions of Federal Bunny Inspectors.

For those who don’t know, these are Federal Inspectors employed by the Department of Agriculture to enforce laws requiring you to have a Federal – not local, not state, but Federal – permit to sell rabbits as pets. Actually it gets worse: they also go about investigating stage magicians including local amateur stage acts to see if there is a rabbit involved in the act. Interestingly, if you kill the rabbit in the act, or sell them for meat, or even feed them to snakes, no Federal license is required. Only if you use them in the stage act, in which case you must have a license and proper transportation equipment, and yes, highly paid Federal civil servants actually roam the land looking for magic acts that may or may not employ rabbits. And you get to pay interest on money we borrow from China to pay these civil servants including their medical care and retirement benefits.

My correspondent told me that this was a tiny amount of money. His subject was “orders of magnitude” and he in essence accused me of innumeracy. I pointed out that this was intended as symbolic of a greater problem, and his remark was

I do understand the concept of symbolism. I understand it as an inferior substitute for reasoning.

At this point I must have taken leave of my senses, because I answered that by saying that my point was that a country that can’t cut this kind of spending can’t cut anything else. And of course that got me

Not necessarily. Larger programs are more heavily defended, but also more heavily attacked.

For instance, the F-35 jet engine

Which ought to be sufficient explanation for why I don’t open this place up for general comments. I would spend my life in conversations like this, in which the object is to score points. That can be fun, but it’s not a terribly productive way to spend time, and I never seem to have enough time nowadays. It’s bad enough when I’m tempted to answer mail.

And alas, it remains true: if we can’t manage to eliminate Bunny Inspectors, we aren’t likely to eliminate programs like Head Start, which are popular and which everyone, everyone I know anyway, wishes mightily would work. I don’t know anyone who doesn’t wish Head Start would work. Indeed, if Head Start did what we all hope it would do, it would save us a lot of money. The trouble is that Head Start doesn’t work. There are literally hundreds of studies, all conducted by people who very much want Head Start to work, and none of them are able to find any objective means of demonstrating any effect of Head Start lasting more than a year or so. Ten years after Head Start its alumni have grades, dropout rates, crime rates, and anything else you would like to measure that are indistinguishable from those who did not experience Head Start. Charles Murray, who fervently wishes Head Start would work, has been in program assessment work much of his life; he’s one of those who searched avidly for any data showing success. There isn’t any.

If we can’t eliminate Bunny Inspectors we aren’t going to eliminate Head Start. If we can’t get rid of Department of Education SWAT Teams, we won’t be able to get rid of much of the imbecility of “No Child Left Behind” AKA “No Child Gets Ahead.”

John Derbyshire, a sometimes correspondent whom I admire considerably, rails that the US Education System is already working about as well as it can.

Pretty much everything any politician says about education makes me want to go up to whoever said it, grab him by the suit-jacket lapels, and shake him forcefully up and down while screaming in his face: “DON’T YOU GET IT? YOU’RE AN INTELLIGENT GUY—WHY CAN’T YOU SEE WHAT’S RIGHT IN FRONT OF YOUR NOSE?”

Case in point: Three years ago New York City hired the Rand Corporation to raise public-school students’ test scores by paying cash bonuses to teachers whose classes performed well. More than $56 million in bonuses was handed out.

Results? There weren’t any. “Researchers called the experiment a bust,” reports the New York Post. You could have knocked Mayor Michael Bloomberg down with a feather. “I would have thought it would have had a bigger effect,” he gasped. That was the point where the lapel-grab impulse seized me.

Read more: http://takimag.com/article/
what_shall_we_do_with_the_kids/
print#ixzz1UBeJpU00 

He has other instances.

And he’s both wrong and right. Given the criteria we are using for whether or not education works, he’s pretty well right, and certainly right in that throwing more money into this imbecilic system of education isn’t going to bring about noticeable improvements.

But our criteria are based on Lake Wobegon, when in reality, half our children are below average. Bill Gates may finally have figured this out: for many years he said that every American child deserved a world class university prep education in K-12. I haven’t heard him saying that recently. Perhaps he understands that condemning the below average children to a world class university prep education condemns them to years of pure hell.

But that’s another essay, and I’m running low on time.

My point is that if we can’t make obvious cuts in useless actions of government, we aren’t ready to tackle really tough problems. We have to have a mechanism for trimming out the ridiculous so that our supposedly intelligent legislators can actually look at the hideously expensive and well intentioned programs that are not working.

View 686 Thursday, August 04, 2011

· Lessons for the Mamelukes

· Those cuts in education

Lessons for the Mamelukes

It was on the network news last night and major front pages today: Hosni Mubarak, formerly Pharaoh, formerly Commander in Chief of the Egyptian Armed Forces, successor to Sadat, on a gurney in a cage, on trial for his life. His two sons shared the cage with him.

When Tunisia exploded and the Tunisian Army dithered, then chose to protect the demonstrators from the security forces, the Egyptian military, the Mamelukes who were the power behind Mubarak, saw an opportunity in the beginnings of unrest and demonstrations in Cairo.

Mubarak had hoped to maneuver his sons into leadership positions, turning his rule from despoty to dynasty. The Mamelukes didn’t want that. Mubarak’s sons reminded those who knew the history of Imperial Rome (which after all ruled Egypt for a very long time) of the sons of Septimius Severus. One of them, Caracalla, sacked Alexandria in retaliation for an insult. The Mamelukes didn’t want to relinquish command of Egypt – they still haven’t, although they are supposed to be arranging an election that will mean the end of their rule – but they did not want a Mubarak dynasty. The demonstrations looked to be a good way to end that. Mubarak would resign and go into exile. The Army would continue to rule.

Mubarak resigned but he didn’t go into exile. That turned out to be a mistake: the demonstrators demanded more, and the Cairo demonstrations went from a demand for regime change to a demand for revenge, as revolutions almost always do.

The Mamelukes had not wanted to see Mubarak’s head on a stick. He was, after all, their leader. They do not want to see that now, but they are not sure what they ought to do.

There are lessons here. One is the usual lesson the West seems determined to teach to strong men and dictators from Pinochet to Qaddafi to Bashar al-Assad: never let go. If you must go down, go down fighting, for you will not survive the transition – and after the first round of revenge will come the others, more show trials. And if you fight, as Khaddafi and Bashar are doing, you may yet win out. If you do not, you will at best spend your life in a Dutch prison. They may not poison you as the Brits are said to have poisoned Napoleon, but it will not be pleasant. Better to do as Martin Luther advised the Princes to do with the Anabaptists: burn, slay, kill.

The Mamelukes already regret their actions. What they will do now is not clear. Certainly there will be factions among the top leadership who see that they are next. And they are watching progress in Syria as Bashar Assad surrounds Hama.

But What of Justice?

Of course the question rises, should not tyrants be brought to trial? Where is justice?

There is no answer to that. England, during the Wars of the Roses, found it expedient solemnly to declare that it could never be treason to swear allegiance or pay taxes to a crowned King, no matter which color rose that King wore. Sun Tzu teaches that one ought to build golden bridges for ones enemies. The question is simple: what is the cost of justice? How many lives will be lost if the option of settling these affairs with silver bullets is irrevocably thrown out. Let Justice be done though the heavens fall is an appealing cry. I remember shouting it at an undergraduate rally myself some sixty years ago.

Meanwhile the battles in Libya continue. The artillery rolls out and people are being slaughtered like sheep in Syria. For some, the heavens are falling. Will they see justice?

Those cuts in education.

The cries are becoming shrill: the budget deal is cutting spending on education! We must do something.

Alas, the Deficit Deal cuts nothing. Even if every projected “cut” in the Deficit Deal were implemented – and in fact none will be before 2013 – the result is not a cut. It is a reduction in projected increases in spending. I hate to keep repeating that, but apparently it is difficult to understand: the “cuts” in the Deficit Deal are cuts only to projected spending. Even if implemented, there will be more spending on education in future than there was this year. There are no cuts, although the demonstrating college students are demonstrating the quality of the education they are getting, since they don’t realize this.

The downside to pumping more money into education is that when more money enters a market the prices go up. When I was a lad, state colleges were nearly free. You had to find a way to live while going to school, but tuition at state schools was never the deciding factor. Roberta worked her way through college. I had the GI Bill to help me, so for me it was mostly a matter of board jobs: work an hour at Reich’s Café in Iowa City and you got a meal off the menu. Those jobs are outlawed by the Federal government now: they don’t meet minimum wage requirements.

Since we have been pumping money into the university systems the tuition has risen accordingly. Costs of education soar. University staffs and facilities multiply and become more expensive. My suspicion is that genuine cuts in education spending would benefit the institutions as they are forced to shed non-essential expenditures. I’m prepared to present arguments for that position, but that isn’t my point here: there are no cuts in education expenditures. We’re going to spend more money on education next year than we did last year. We will spend more in 2013 than we will in 2012; just not as much more as the baseline projections forecast. And that, in the Washington Accounting, is a cut.

So the demonstrating students can go back to studying sociology or whatever is it they are slaving away at, and thus help make the US more competitive in the international intellectual market. I am sure there is a dire need for more sociology students.

And the Dow will continue to fall when the financial people realize that the Deficit is now larger than the annual GDP of the United States, and rising.

The Wall Street Journal has an editorial today on the effect of the Deficit Deal. Apparently even the WSJ did not quite understand the effects of the Deficit Deal. They are now horrified. It’s worth your attention if you want to understand why things are going to get worse. Note that the Dow is just figuring this all out.

Jihad!

Re the Republicans:

“We have negotiated with terrorists. This small group of terrorists have made it impossible to spend any more money.” Mike Doyle, Member of Congress (D, Pennsylvania)

“Tea Party Republicans have waged jihad on the American people.” Joe Nocera, columnist, New York Times

This is known as civility.

We can hope that the House will hold fast on its rejection of the card check nonsense built into the appropriation for the FAA. This isn’t about money. Well, in a sense it is: it’s about compulsory union membership and thus donations to Democrats. Presumably the Republicans in the House know enough to stand their ground. Although you never know with the Country Club. The Tea Party Republicans understand perfectly.