Deinonychus antirrhopus

Lying in Ponds on Krugman

Lying in Ponds puts to rest all those silly notions that Princeton economist Paul Krugman is not partisan. Even if you remove all references to Republicans completely he still comes in at number 8.

(Thanks to Henry Hanks for sending along the link.)

Ten Thousand Commandments?

That is the name of this report from the Cato Institute that looks at the state of the Federal ruglatory behemoth.

Some things to condsider:

• The Federal Register is at an all time high of 75,606 pages a 9 percent increase since 2001.
• 4,167 new rules were issued by various agencies in 2002. (Its those Republicans for smaller government.)
• Congress passed and the President signed into law 269 bills in 2002.
• There are 4,187 regulations in various stages of implementation in 2002.
• Of those 4,187 135 of them have a significant economic impact, i.e., they have at least a $100 million impact (or a minimum impact of $13.5 billion).

Yes it is clear that the Republican party is the party of smaller government.

The report also notes something significant; that issuing rules and regulations is a more subtle way for the government to fund programs. Instead of raising taxes and paying for these programs itself (thus making some of the costs of the program quite obvious) the government can simply issue regulations that require the private sector or lower levels of government to pay for the these prgorams.

For example, environmental regulations can come with a cost. There are benefits and costs associated with pollution. The benefits are the profits and welfare the goods and services generate. The costs are what we traditionally think of as costs such as labor and capital costs. In addition, there are environmental costs--i.e., the loss of welfare due to a degredation in the environment (smog, dirty water, etc.). Now if the marginal benefits "curve" is inelastic (not that responsive to changes in price) then a regulation that controls pollution via a quote will achieve a goal easier in the sense that it will not require as large a tax. The impact of such a policy will be hard to measure since you wont have the actual tax there to help you calculate the costs.

So this can indeed allow the government to pursue a policy for what appears to be lower costs. And in politics appearances are everything. Look at the gyrations candidates go through over health care and their claims at providing cheaper health care.

Speaking of health care, here are two examples that show quite nicely how regulations hide government mandated costs.

From Dean's Plan:
• Employers offering insurance must pay their share of premiums for two months after employees leave a job.
• Family plans of employers offering insurance must cover dependents up to age 24.
• New Net Business Costs Of Employer Mandates $2.9 billion

  From Gephardt's Plan:
  

• All employers must offer insurance to all employees working 20 hours/week, and must pay at least 60% of the premiums.
  
• New Net Business Costs Of Employer Mandates $36 billion $90 billion in new mandated business expenses, partially offset by 60% tax credit. (Italics in original)
  

Dean's plan would obviously increase the costs per employee for employers. Same for Gephardt's plan. So both of these politicians want to use the governments regulatory authority to spend more money, but instead of raising taxes they figure they'll just order the private sector to do it for them. Nice, they don't have the added costs showing up in the governments costs and they get to take the credit for all the good that may result from these policies.

Needless to say the effect of these policies will be to drive down employment (cateris paribus). This will have additional costs in that people being unemployed will incur a loss in welfare (by welfare I mean well being not the government transfer program). This cost wont be measure at all. Some of the people unemployed by these types of programs might qualify for government unemployment compensation which would show up on the governments balance sheet. Another cost that wouldn't be captured is that some people might not get hired for various jobs. That is, suppose a company wanted to add 10 new workers to a production line, but now after these policies will only add 8 new positions. Do the two fewer positions get counted somewhere? Nope.

Miracuously enough those who support these kinds of policies don't get dinged for their bad effects, probably because these effects are hard to isolate and quantify. However, those who oppose these policies are villified.

This post of mine has another example of regulation basically spending the private sector's money via proclomation. California's Paid Family Medical Leave Act. This act basically puts in place a policy that allows employees to take paid time off (at the disability rate, which I believe is 60% of your pay) for tending to a family member who is sick or needs care. The sentiment is nice, but the simple accounting costs are around $1 billion while the benefits are about a 10th of that. The actual total costs in terms of lost labor, hiring temps, etc. are not known and probably can't be calculated easily, but will in all likelihood be much more than $1 billion. And this comes at a time when California is in a recession. Making labor more expensive via government fiat is probably not a good way to promote job growth.

Cato's estimates of some of these costs put the dollar figure at about $860 billion dollars for 2002 alone. The Federal budget for 2004 is $2.23 trillion, if we make the heroic assumption that the cost of regulations in 2004 are the same as in 2002 the total Federal budget balloons to over $3 trillion dollars. Or think of it this way, the $860 billion in regulatory costs exceeds the GDP of Mexico and Canada!

The Do-Not-Call List

The deadline to sign up is today and I have not signed up, do not plan on signing up, and personally dislike the idea altoghether. I'm a supporter of markets with as little government interference as possible. We have found a way around being bothered during specific times by telemarketers. We turn off the ringer, and turn down the volume on the answer machine. Works like a charm. We do tend to miss calls from friends and family, but if it were an emergency we have our cell phones. So I wont be adding my phone number to the list this time or next year.

Eric Alterman Revises History

Meanwhile, did someone say "Bring 'em on"? (Or was it "Mission accomplished"?)

No, actually it was that Major Combat Operations have ended.

Heat Wave in France and the Death Toll

The recent heat wave in France is claimed to have lead to the deaths of around 3,000 people. The problem is that air conditioning is the household appliance that will dramatically increase load. So when it gets hot and there isn't enough generation capacity to meet demand you have problems. In this case, a problem that lead to the deaths of 3,000 people.

Here in the U.S. there are far fewer deaths attributible to heat waves. Even when places such as California have heat storms you don't hear about 3,000 deaths. One reason is that in the U.S. there is plenty of electricity generation to meet such demands with only a modicum of changes in behavior.

However, that could change with Global Warming. Proponents of Global Warming think that the additional CO₂ being released into the atmosphere is warming up the planet, and enhanced greenhouse effect. The solution is to reduce the amount of CO₂ that is being emitted. To do this would, IMO, require a reduction in air conditioning load. If this happens here in the U.S. it is quite possible that someday we'll be reading about 3,000 elderly in the U.S. dying from the heat. (Say, does this mean the liberals want the elderly to crawl off and die too?¹)

In Europe where they think the Kyoto Protocols are a good thing (the protocols are designed to reduce the amount of CO₂ emissions), they have far less air conditioning. The funny thing is that even those who believe in Global Warming and support the Kyoto Protocols admit it will do nothing to reduce Global Warming.

In 1998, Dr. Thomas Wigley, Senior Scientist at the U.S National Center for Scientific Research, estimated the effect on global climate that would occur if all of the signers of the U.N. Treaty on Global Warming known as the Kyoto Protocol adhered to its provisions with 100 percent compliance. The treaty calls on industrial nations to reduce CO₂ emissions to 7 percent below 1990 levels by 2012. For the United States this would mean about a 35 percent to 40 percent reduction from levels that would otherwise be obtained. Wigley's results have implications for any policy that might be put forth by North Carolina. He found that 100 percent compliance with the UN treaty would result in global temperatures that would be a mere .13^o Fahrenheit lower than they otherwise would be by the year 2050.⁶

As University of Virginia climatologist Patrick Michaels has noted, "This amount would be undetectable with land-based thermometers."⁷ Clearly, if global adherence to the Kyoto protocols would have such an insignificant impact on global climate then nothing North Carolina could do to reduce CO₂ emissions would be anything more than symbolic.

That is with 100% compliance you'd not even notice the effect. How likely is 100% compliance? Damn freaking unlikely if you ask me. One problem is that third world countries are exempt. So it would not be surprising if some of the industries ended up moving to third world countries. Thus, escaping from the constraints of the Kyoto Protocols and reducing its efficacy. (Of course, who knows...maybe that is the goal of those who back the protocols.)

Now some environmenatlly minded folks might say, "what about shifting to renewables that don't pollute." Two things, first they don't "pollute" in the sense that they emit carbon dioxide. You'd need acres and acres of solar panels and windmills to get anywhere near the similar amounts generated by natural gas. Or you'd need a great many geothermal plants. Second, these technologies just aren't that advanced and the amount you'd need would be horrifingly expensive which would put you into the same boat as the French during this last heat wave.
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⁶Thomas Wigley, "The Kyoto Protocol: CO2, CH4, and Climate Implications," Geophysical Research Letter, Vol. 25, 1998, pp. 2285-88.

To read more about Wigley's results click here. Remember this a peer-reviewed article so for Global Warmers it is essentially a fact.

(Thanks to Debunkers for the initial Cato link.)

Conservative Economics

Since I have dumped some dirt on those liberals that have their own brand of economics, I'll vent on conservatives (using the term broadly here, i.e., it doesn't just encompass Republicans) who have their own economics as well. Many conservatives claim to be supply siders when it comes to economics, but they hold this erroneous belief that lower taxes are always good. This is completely at odds with what supply side economics is. The graph at the right there is a stylized Laffer curve. Note that at the tax rate of 50% tax revenue is maximized. The supply sider should argue to set taxes at 50%. If taxes are higher than that, then they should argue for tax cuts, and if lower a tax increase. However, the typical claims from the conservatives/"supply siders" is for lower taxes, and that lower taxes is always better, in an economic sense, than higher taxes.

This is false as can be seen by the chart, at least as far as the supply side argument goes. The supply sider should be interested in finding that tax rate that maximizes tax revenue. Lower taxes might spur economic growth, lower taxes might increase more jobs. But it does not always have to result in more revenue. To argue this way is to violate one of the basic tenets of supply side economics. Yet many conservatives put forward such arguments.

Now, to be fair the actual shape of the Laffer curve is not known. So a supply sider could keep arguing for lower tax rates if he believes that the optimal tax rate (in terms of tax revenue) is say 5%. Of course, if taxes start going lower and after a certain point start to drop off, that very same supply sider should argue for a tax increase.

Another factor that can come into play is that there is nothing that says the Laffer curve has to be fixed over time. Today the optimal tax rate from a revenue perspective might be 50%, two years from now it could be 60% or 35%.

Another pet peeve of mine is that many conservative (espeically those with a strong libertarian bent) argue that the market will provide whatever the consumers want. Hence if consumers want smoke free bars and some bars with smoking then that is what you'll observe. There is only one problem with this, there were no regulations in place preventing this prior to current bans on smoking in bars. Yet, as far as I know, we didn't observe smoke free bars. Similarly there is this example:

Disney wants to open a new theme park. They hire market research firm that asks two questions:

1. Do you want Disney to build a theme park on this wooded area.
2. If Disney does build a theme park will you go?

The answer to the first question is overwhelmingly, "No." The answer to the second question is overwhelmingly, "Yes." Now, the community would be better off if no theme park is built, but Disney could still build the park and realize profits.

What is going on in the above story is that people figure that so long as it is there they might as well enjoy it, but if they had their way, there would be no park. In this case, the market results in a sub-optimal outcome.

Markets work great....when they work. Pro-market people tend to have a severe lack of appreciation for when and what can happen when the market fails. I find this lack of appreciation rather annoying at times as the default assumption seems to be that the market does not wrong. I don't know why this is. Perhaps it is because the pro-market people fear that if they admit the market doesn't always work, many people will just conclude it never works.

Liberal Economics

Liberal economics is that economic theory that liberals hold too (not to be confused with liberal economists who tend to believe in neoclassical economic theory). Liberal economics holds really bizzare views.

The first view is that we can tax ourselves into prosperity. You can see it with Cruz Bustamante's proposed tax increases. Bustamante calls this tough love while I just call it idiocy. Here is another example.

Let's look at one index, the federal deficit. It [the economy] didn't turn around until Clinton's 1993 tax increase that most people on your side said would kill the economy.--emphasis added

Another facet of liberal economics is the notion that balancing the (government) budget would help the economy. This is sort of related to the idea above that tax increases are good for the economy. This is why you see so many Democrats clamoring for repealing Bush's tax cuts so that they can reduce the budget deficit. Or worse, some of them want to repeal the tax cuts so that they can spend the money on other new programs. These latter dissemblers (Dick Gephardt being a prime example) talk out of their bottom most orifice when chattering about the deficit. See, if you repeal Bush's tax cuts, and there is a deficit, then repealing the tax cut will decrease the size of the deficit. However, if you spend the money on something new (such as health care) then you are back to having a big fat deficit.

Another aspect of liberal economics is not being in touch with the facts. In the Debunker's thread above, Amy is quite clueless about when the last recession ended. Granted the initial phase of the recovery wasn't robust and it took a long time for NBER to date the recession, but for crying outloud that was well over 10 years ago.

Liberal economics also holds that increasing the minimum wage is a good thing. The problem is that at best the welfare implications of raising the minimum wage are ambiguous. While the wage goes up and undoubtedly increases the welfare for those who have jobs at higher wages; it also increases unemployment, which undoubtedly decreases the welfare of those who get laid off. What is the overall outcome? Can't say without very, very careful analysis.

Some liberal economics believers go so far as to dispute the unemployment implications of raising the minimum wage. Look at the comments in the linked post.

This is always the argument. Of course, there's never any proof offered. Does McDonald's lay off workers if their wages are increased by 25 cents and hour. I doubt it.--DaveB

Do you know why the minimum wage is such an emotional issue? Because people can't afford to live on that money. Being paid 5.15 an hour in NYC is just not enough to get by. Trust me. I tried it.--Josh

Those who complain that a minimum wage squeezes unskilled workers out of the job market have to explain the point of getting a full time job that doesn't pay enough to live on.--rea

You are right, Jay, but the reason there aren't milions of people trying to support themselves and their families on minimum wage jobs is that it can't be done!--rea again

rea's comments are the mot interesting to me. The implication is that the minimum wage should be set at a level where one can support a family. Hello? Minimum wage jobs are low skill jobs, you should not be making the decision to have a family if that is all you can earn. The thinking of rea's is that everybody has to be responsible for the idiotic decisions of the unskilled. Why can't the unskilled be responsible for his own decisions? (A note to rea: Try raising a family when you are unemployed. Seems to me that would be even harder than doing so with a minimum wage job.)

Basically, liberal economics is a view that is diametrically opposed to what is observed. Not all liberals hold to this view of eocnomics, but there seems to be a considerable portion who do, and not all of them are stupid or uneducated. They hold these views because it feels good...it is feel good economics. We'll simply suspend the laws of economics by fiat because we don't like the implications. The problem is that the laws of economics don't give two shits what fuzzy headed liberals think. They will march inexorable on; right on over the objections of well intentioned folks, and some time imposing considerable loses.

Update: Regarding DaveB's idiotic comments about increasing the minimum wage by just $.25 an hour. Yes that might very well mean you have to let several people go. If you are open 19 hours a day (5 A.M. to 12 P.M.) and you have 25 minimum wage employees then that increases costs by over $40,000 a year, or decreases profits by $40,000 a year. You don't need a degree in economics to figure even a McDonald's will respond to that kind of change.

Another Lie from Davis' Speech?

In this post I highlighted some of Gray Davis' lies in his speech at UCLA. Well here is another,

Yes, I could have been tougher in holding down spending when we had big surpluses. But let's be clear. Our increases on my watch went to education and health care, and I make no apology for that.

When I took office, we ranked near the bottom in per-pupil spending, 43rd to be specific. We are now 26, and we're making progress. In fact, just last week, just last Friday, the superintendent of public instruction announced dramatic improvement in student test scores for the fifth year in a row.....

Our schools are getting better, and I pledge you to work every day to improve them further.

The reality is that California public schools are not getting better unless you use Davis' bizzare measure. To Davis, school improvement is measured in how much you spend on education, not on student improvement.

According the the Academic Performance Index (API) data I downloaded (click here) and assuming I am reading it right¹ I looks like API did improve from 2001 to 2002 by a whopping 2% (and that is with rounding up). So, Davis increases spending and this is the result.

No wonder he didn't release the actual improvement numbers and instead went with the totally ridiculous measure of how much we are spending. The latter shows a huge "improvement" the latter does not.

Ooops, this doesn't look good either.

While California schools, including most in the Salinas Valley, improved their performance on the state's major test for the fifth straight year, almost half of the state's schools fell short of meeting new federal goals, state education officials report.

So, we went from 43rd to 26th in terms of spending, but in terms of academics where have we gone? Why didn't Davis the Liar tell us that?

Ten schools get failing marks. That's not good either.

Oh no, more on those schools failing to meet the federal guidelines.
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¹I always get a bit suspicious when I have trouble figuring out exactly what the data values mean. In this case the numbers and their corresponding explanation are so piss poor its rather amazing. Well not when you realize they might actually be trying to hide something.

CA State Supreme Court Tells TURN, "Sorry."

The Utility Reform Network lost it appeal to the State Supreme Court to get SCE's settlement with the CPUC over turned.

Luskin on Krugman and the Blackout

Luskin lets Krugman have it again, and this time with help from Lynne Kiesling.

Krugman's solution, return to the Golden Days of yeteryear when we had vertically integrated monopolies that operated basically as independent islands.

With regulation, we have -- as Krugman himself admits! -- a necessarily subsidized world in which there is "little financial incentive to invest in maintaining and upgrading the system." We have a government-induced reality-distortion field in which electricity consumers can write atta-boy letters to the New York Times praising Krugman's column, whining that "We shouldn't have to make choices about electricity. It should be there for all of us, like air and water."

Read the whole thing.

Kevin Brancato on Diversity in America

Read it. It points out that many who talk about diversity just don't seem to get it. They have this fixed image of what diversity means, and can't accept diverse views on diversity.

For myself, I love diversity in food. I go and eat at a wide array of different ethnic restaurants. I eat Pakistani food, Thai food, Mexican food, sushi, Chinese, and Vietnamese before it became trendy. I love Indian food, and I just recently tried a Hawaiian eating establishment. I love going the Roscoe's Chicken and Waffles, but I only go there occassional since to do so regularly would probably kill me. I can spend untold amounts of time wandering the ailes of my local asian market. Chinatown is an all day trip for my family. I have recently tried cooking filipino dishes. So shut up and let us find diversity however we want to...or not. It is after all a free country.

Henry Hanks points out...

...the reason for the stench at your local video store. No kidding.

Conason Again: Kevin Misses the Point

Kevin Drum at CalPundit takes on the Conason crap and misses the point. Kevin writes,

In Big Lies, Joe Conason says:

If your workplace is safe; if your children go to school rather than being forced into labor; if you are paid a living wage, including overtime; if you enjoy a 40-hour week and you are allowed to join a union to protect your rights -- you can thank liberals. If your food is not poisoned and your water is drinkable -- you can thank liberals.

Megan McArdle mocks Conason's sentiments, Julian Sanchez says, "Golly, thanks liberals! I'd been under the misguided impression that these things were primarily made possible by technological development and economic growth, but it's good to be set straight," and Instapundit links approvingly.

But folks, liberals really did fight for all these things, and conservatives really did resist them — and a lot of other things as well. Would they have happened anyway eventually? Maybe.--emphasis in the original

This badly misses the point, in my opinion. The implication of the quote from Conason is the following:

I'm a conservative and I want your work place to be dangerous. I'm a conservative and I want your children to work in harsh unsafe conditions and not become educated so they can get jobs that pay decent wages. I'm a conservative and I want your rights trampled. I'm a conservative and I want to poison your water and your food.

That's nonsense. What "conservatives" object to is how these changes are affected. In some cases, government might be the answer, but in others it might not.

For example, the notion of a living wage, there is no such thing in this country. There is the minimum wage, but it is not a "living wage". Do we need one? I don't think so. I think the market should set wages whenever possible.

Do I think children should be forced into labor? No, but at the same time I don't think people should be forced to participate in the government monopoly in education. I would prefer to see more choice for parents in education. But who resists this--thank the liberals.

The probelm with Conason's stupidity is that he is suggesting that conservatives wanted those outcomes. And now liberals are wondering what's the beef? Hello, you are the same people arguing about unfairly being labelled as supporters of Saddam. Well...maybe you are now, given this kind of nonsense. After all, if you don't agree with the liberal approach to solving a problem, then you clearly want the problem to persist. So...if you don't agree with the conservative approach to solving the problem of Saddam Hussein, you must clealry support Saddam Hussein.

Property Taxes in California

Warren Buffet opened his mouth and blew out idiotic hot air recently when talking about California property taxes. Here is my problem with this, Californians are already fairly heavily taxed when you look at all taxes. This article from the Reason Public Policy Institute points out the following,

One way is to compare California to other states. A study released earlier this month by the Public Policy Institute of California found that our state's tax burden, combining federal, state and local taxes, was the fourth highest in the nation. And its burden of state and local taxes and fees was 10th highest.

So Californians are indeed paying considerable amounts in taxes, just not in property taxes. Further, I am totally unpersuaded by the idea that if the property taxes are increased, then other taxes can come down. In fact, I think people who make such suggestions are...well...liars.

How often have we heard politicians say, "Lets raise this tax, and we'll lower that tax for you." And were is the benefit? If they are exactly offsetting then there is no additional revenue and in California's case we still have a deficit. No, these miscreants have no intention of lowering tax rates. Once politicians get their hands on money they spend it. After all it isn't their money and if they don't spend it, some other politician will.

For evidence, just look at the fact that the state increased spending sharply during Davis' first term when it could have increased spending in line with personal income (i.e., increased spending) and saved the surplus for periods when revenues decline due to recessions (like now). Did they do that? No. Have they ever done that? Not that I am aware of. So when they trot out this line of bullshit, that is precisely what it is.

Personally I'd be much happier if Arnold gave Buffet the boot, right back the Nebraska and tell him to stay there if he wants to pay higher property taxes.

Gray Davis: Bald Faced Liar

In a speech the other day at UCLA Davis told an outright lie to his audience,

Let's first talk about energy. I know many of you feel that I was too slow to act during the energy crisis.

I got your message and I accept that criticism. I played the hand I was dealt as best I could. I inherited the energy deregulation scheme which put all of us at the mercy of the big energy producers.

We got no help from the federal government. In fact, when I was fighting Enron and the other energy companies, these same companies were sitting down with Vice President Cheney to draft a national energy strategy.

Actually, when the crisis reached noticable proportions, the year was 2000 and President Clinton was...well President, Al Gore and George Bush were still slugging it out one the campaign trail, and the month was August. The crisis reached international proportions in November and December and Clinton was still President and Bush was the President elect.

While there may have been meetings between Bush, Cheney and various energy company executives there would not and could not have been any policy changes at the federal level unitl February, 2 or so months away.

The help at the federal level that Davis talks about came under Bush's Presidency and whatever the results of the meetings between energy executives and Cheney, they had yet to take effect.

Three years ago, I refused to give in to the pressure to raise rates astronomically. Everyone I talked to said "raise rates, raise rates, raise rates." I would not do it. And I also couldn't let our homes, our businesses, our schools go dark. So I went to work, bought power, built new plants, encouraged conservation for the good people of this state and encouraged the use of clean energy.

And in the end the rates went up an astronomical amount and due to the utter ineptitude by Davis, they will likely stay high to pay for the over priced long term contracts he bought. If he had raised rates there would have been an immediate demand response from large power customers, and later from smaller customers. The problems of shortages would have largely alleviated and the state wouldn't have had to enter into the long term contracts.

My friends, last Friday, 50 million Americans lost electricity for 29 hours. In California, not a single light has gone out in the last two years.

Is this one a lie? Well I guess that depends on what he means by lights going out. In CA there was at least one Stage two emergency where interruptible firms had their service interrupted.

I'm not looking for praise. We made our share of mistakes. And, like you, I wish I had known then all I know now. But my friends, if any of the Republicans in this recall campaign criticized the way we dealt with the energy crisis, you ask them specifically what they would have done to keep the lights on.

How about allow the retail rate to fluctuate as market conditions warrant? Gee, that was easy.

Call me old fashion, and I am. Call me old fashion, but I believe when an election is over, the people have spoken and it's time to get to work and do the public's business.

What an arrogant ass. Sure the people spoke, of course you were saying the budget was going to be $12 billion, but it then blossoms into a $38 billion deficit.

Here's a little history. The California State Controller, Kathleen Connell, warned early on in 2002 that the deficit was looking like it was going to be $8 billion. Davis, through one of his creatures, Steve Maviglio, throws some dirt on her,

"Kathleen Connell has proved herself wrong in projecting just about everything about the state's financial situation," he told the Los Angeles Times. "We expect this pattern to continue." The controller, whose job entails writing checks to cover state expenses, said the budget that Davis proposed this month overestimates the amount of tax money flowing to Sacramento by about $1.4 billion, and underestimates an array of costs, including those for public schools.

In a way, Maviglio was right in that Connell was wrong. She was wildly too optimistic. Davis ended up running up a huge deficit.

Here is Connell's take on the budget Davis just signed. There is this article as well from the Reason Public Policy Institute. It points out that any state government spending that exceeds 6.2% of personal incomes is unsustainable, and that if Davis had frozen spending at that level when he came into office we'd have no deficit.

Now, let me crystal clear here. Pegging spending to 6.2% of personal income does not mean that speding is held constant. As personal income goes up, so does spending. And personal income does indeed tend to go up.

The recall in the state must go forward, and Davis should be kicked out of office for being grossly incompetent and an outright liar.

Not Enough People and Businesses Have Left CA Yet...

...so Cruz Bustamante wants to increase taxes and drive out more!

ELK GROVE – Lt. Gov. Cruz Bustamante invited the public to his middle-class neighborhood yesterday where he outlined a budget plan that would raise taxes by nearly $8 billion on businesses, upper-income households, smokers and drinkers.

Since the state is in a recession, lets make it even worse. Inrease taxes on businesses. Great idea. I mean we already have the $1 billion dollar plus Paid Family/Medical Leave Act, we also have the horrendous workers compensation program, high electricity rates due to the Governor's bungling of the energy crisis, so why not add in higher taxes? Bustamante calls this tough love, but it is actually insanity.

And on top of it Bustamante wants the state to spend even more than it already does,

In exchange, the lone major Democratic candidate in the recall campaign said he would scrap the state car tax on vehicles worth $20,000 or less, boost education spending, provide health insurance for 5 million low-wage workers and roll back recent increases in college fees.

Not a peep about the programs that are actually killing California's businesses. In fact, well increase the number of those feeding at the public trough. It'll be more of the same if Bustamante gets elected.

The California Energy Crisis

Either tomorrow or next Monday the State Supreme Courth should issue a decision in TURN's case about the settlement that the CPUC and Southern California Edison reached back in 2001.

Basically, TURN doens't think SCE should have been allowed to recover the costs it incurred in purchasing power for customers during the energy crisis.

The belief is that the State Supreme Court will not over turn the settlement. The reasoning is fairly simple (and could be wrong) in that if the Supreme Court was going to over turn the settlement why wait this long?

Bin Laden Captured?

That's the rumor that has sparked a turn around in the Dow on Wall Street.

However, a U.S. official who asked not to be identified told Reuters it was "absolutely not true" that bin Laden had been captured.

Apparently this rumor is fairly common though, so take it with a cannister of salt.

"I think the market was improving on a rumor that we caught bin Laden again, which makes it like an even 25 times that we have caught him so far," said Craig Cummings, a partner at Cantor Fitzgerald, noting the rumor has spread through market several times this year.

Joe Conason's Pap

Joe Conason apparently has the following in his new book,

If your workplace is safe; if your children go to school rather than being forced into labor; if you are paid a living wage, including overtime; if you enjoy a 40-hour week and you are allowed to join a union to protect your rights -- you can thank liberals. If your food is not poisoned and your water is drinkable -- you can thank liberals. If your parents are eligible for Medicare and Social Security, so they can grow old in dignity without bankrupting your family -- you can thank liberals. If our rivers are getting cleaner and our air isn't black with pollution; if our wilderness is protected and our countryside is still green -- you can thank liberals. If people of all races can share the same public facilities; if everyone has the right to vote; if couples fall in love and marry regardless of race; if we have finally begun to transcend a segregated society -- you can thank liberals. Progressive innovations like those and so many others were achieved by long, difficult struggles against entrenched power. What defined conservatism, and conservatives, was their opposition to every one of those advances. The country we know and love today was built by those victories for liberalism -- with the support of the American people.

The problem here is that Conason paints with a broad brush and uses the term liberal in several differnt ways. For example on race, a liberal position is that it shouldn't of any concern what two consenting adults want to do. Whether it is an economic transaction or not. The (classical) liberal does not agree with segregation, anti-miscegnation laws, and such. The idea of government intruding into the work place to enforce safety standards is not a liberal policy unless one is talking about modern day liberalism that is statist in nature.

Conason also implies that conservativism today is somehow associated with opposition to these policies (and to be fair, Conason is using the past tense here so it isn't clear if he views many "conservatives" as still holding to this opposition, although this view is present on the left),

What defined conservatism, and conservatives, was their opposition to every one of those advances. The country we know and love today was built by those victories for liberalism -- with the support of the American people.

I am typically considered a conservative by many liberals today. However, I am vehemently opposed to racial segregation. As for the rest I am not opposed to any of it at all (I mean come on, who the Hell is in favor of an unsafe work place? "Boss, my cubicle is too safe, I think we need to make it more dangerous."), I just happen to disagree with modern liberals as to how to achieve these goals.

For example, on environmental issues I happen to think that whenever possible the extension of property rights will go a great deal towards solving the problems. Granted this is not always easy or even feasible such as how do you assign property rights to something like the air, or the insects that go from my property to somebody elses.

In other words it isn't that people who are considered "conservative" today oppose these things (No really, we want food and water to be poisoned!), they just favor a different approach to solving the problems. The approach I favor (the classical liberal) is one that allows people to make their own decisions by and large. The modern liberal approach is to have the government make those decisions.

(Thanks to Megan McArdle for the quote).

P.S. I'd like to take a second to also point out that if things keep going the way they are, Social Security and Medicare will be quite sufficient by themselves to bankrupt families. The systems are heading for financial insolvency. Granted it is a ways down the road, but that is where we are heading. I think it is disingenuous of Conason not to point this out.

Sloppy Reporting at the Washington Post...

...or a stealth edit by the White House. In this article Dana Milbank and Bradley Graham claim that Bush is revising "history" with regards to combat operations in Iraq.

In his May 1 speech on the USS Abraham Lincoln, Bush declared: "Major combat operations in Iraq have ended. In the battle of Iraq, the United States and our allies have prevailed. And now our coalition is engaged in securing and reconstructing that country." The headline on the White House site above Bush's May 1 speech is "President Bush Announces Combat Operations in Iraq Have Ended."

Since then, a search of Bush speeches on the White House Web site indicates, the president had not spoken of the guerrilla fighting in Iraq as combat until this interview; he had earlier spoken of the "cessation of combat" in Iraq.

First, I looked at the White House site, and that speach specfically and the headline does not read what Milbank and Graham claim:

President Bush Announces Major Combat Operations in Iraq Have Ended --emphasis added

Whooops. Something isn't right here, either Milbank and Graham blew it (and given the recent poor track record of major news papers I would not be surprised to learn they did drop the ball here), or the White House altered the speech after that fact.

Ah-ha! Here it is, PROOF! Proof, I say, that the Bush Administration edited their website. If you look at box insert on the right hand side you'll see a link that says, "President Anounces Combat Operations Have Ended." These tricky Administration minions have changed it everywhere else, but not there. Ha! Caught red handed.[/end Atrios mode]

Lynne Kiesling on the Power Outage

Here is Lynne's Tech Central Station article on the power outage. I haven't read it yet, but given Lynne's excellent information and knowledge of electricity issues, I recommend it anyways. Once I have read it, I'll post some comments here in an update.

Update: Okay, I've read it and don't have much to add. I like the final part. I think it can be done rather quickly with regards to large power customers. Large power customers typically have real time meters and know how much they are consuming at 15 minute intervals. Thus, they could figure out how much their power is costing them in 15 minute blocks. Further, many of these customers have what is called a flat load shape. A flat load is where the consumption is consistent over time. Your typical residential customer has a load shape like a hill, it starts out small, then moves towards a peak around mid-afternoon/evening and then declines. A large plant that operates three shifts about the same size is going have a load curve that is pretty flat. This makes it easy to forecast costs and savings from various measures to reduce electricity consumption.

Of course, the knee jerk reaction is like what is seen over at Atrios' site. Deregulation is bad, deregulation wont work, and all for the wrong reasons. The transmission system is not deregulated. Customers don't see that actual generations costs at the time they are consuming. The result: over consumption due to faulty price signals.

So what is the solution put forward by this crowd? More regulation, more lines, more generation (but only the good kind) and inevitably rising electricity prices. This latter effect of course is then blamed on greedy corporations.

So, who should you believe? Atrios (and the posters at his site) who we know nothing about, and who has demonstrated a very shallow understanding of the issues, or Lynne Kiesling, who's credentials we can see, who has shown again and again to have a very deep and detailed understanding of the issue?

Even More on Energy and Deregulation/Regulation

I should have mentioned yesterday that a good place to also read about this stuff is Lynne Kiesling's site. Lynne specializes in energy economics and is an excellent source for information.

Her coverage of the power outage starts here and then you can scroll up. (If later links that I provide don't work start there and just scroll up...Lynne is still on blogspot, but I have it on authority that she is planning on moving sometime in the future.)

The next post isn't very long, but has a very cogent observation.

I would frame what Glenn said about "restructuring not going too well" in this way: it has stalled in a very akward place, with a lot of things, including transmission, still under substantial federal and state-level regulation.

This is important in that with deregulation sort of in limbo at the moment many utilities are reluctant to make invetments in their systems not knowing is going to happen to them. Think of it this way, would you want to buy a house which you plan on living in only to find out six months later you have to share it with some other families? You might decide that holding off on buying the house is the best course of action.

What is going on that could affect the investment decisions for the transmission systems? RTO's, Regional Transmission Organizations. The goal of an RTO is to remove various impediments to deregulation. One such impediment is where companies use their transmission system strategically to limit a competitors access to a market. One of the RTO's functions will be to remove this impediment. At the same time, there has to be an assurance that the owners of these transmission systems are still going to be getting a "fair" return on their investment. Here is some reading from the FERC.

In reading that, it becomes quite obvious that the transmission system is not going to be totally out from under the FERC anytime soon. The running of the transmission system in a given RTO will be up to the RTO, but the FERC will have oversight of the RTO. For instance in the post directly beneath this one, Atrios agrees with Kuttner over the idea that nobody will do any sort of planning for transmission needs, however, the above white paper from FERC puts the lie to this statement. Specifically we have,

As required in Order No. 2000, the Final Rule will require the RTO or ISO to produce technical assessments of the regional grid and support the state siting authorities or multi-state entities by performing necessary studies.

So much for Atrios and Kuttner. By the way, I absolutely do not recommend either as a source of information on this issue. Both know just enough to be convincing, yet highly misleading.

Lynne's next post has some really good links. I especially recommend this one from the Department of Energy.

Unfortunately, investments in the transmission grid have diminished significantly in recent years. Investment barriers include lack of regional integrated planning, difficulty in siting, and uncertainty regarding investment risks and returns. Recently the Federal Energy Regulatory Commission (FERC) called for the development of five Regional Transmission Organizations (RTO's). These RTO's, once completed, will formalize the regional planning process and efficiently manage the growth of the transmission system.

In other words, NIMBYism, environmentalism, and the low rate of return have made investment in the transmission lines less desirable.

The current transmission system was designed to meet the needs of the old utility system of vertically integrated utilities that generated, transmitted and distributed power. The current transmission system was not built with the types of loads that are seen on the system these days. The RTO's which are being created by FERC and overseen by FERC are to help solve some of the above problems.

This post has a nice round up of news links on the power outage. Not all of them are related to the economics of energy and electricity, but give an idea of how things like this can impact many facets of our lives.

This piece at the Reason Public Policy Institute does away with that old canard that "electricity is different because it cannot be stored." Neither can good food service be stored...should we regulate that with a vertically integrated monopoly. Similarly with say a music concert. In fact, the latter is definitely monopolistic in that only that band can provide such performances. Maybe we need FMCRC, the Federal Music Concert Regulatory Commission to make sure that these bastards don't get too rich of of us.

As for the articles notion of restoring direct access, I don't have a problem with it so long as the generation component of the electricity rates are deregulated, i.e., allowed to fluctuate depending on demand.

While small businesses and residential customers don't have very good means of monitoring their usage and its cost at the time (typically residential customers wont know what the costs are until the month following), large power customers do. In fact, it is not uncommon for a large power user to actually have people whose only job is to watch over electricity consumption. Many large power customers do have real time meters. So with sufficient software and effort they can figure out how much their consumption is costing them at the time and recommend the necessary actions to lower costs.

Lynne also points to Reason's blackout resource center. It is also chock full of good information. Lynne also has an excellent set of links on her blog to energy issues in general. So check it out!

Atrios Falls for the Deregulation Argument Hook, Line and Sinker

Unsurprisingly Atrios buys into the "its all deregulations fault" baloney.

There it is, in a nut shell. Energy companies have no more incentive to build transmission lines than trucking companies have an incentive to build highways. So, when the government inevitably steps in to solve this little problem the worry is that the power companies themselves won't have to pony up a single cent, letting the free ride off the infrastructure.

Sloppy language too. There is, IMO, a difference between an energy company (a company that generates and sells electricity) and a utility (a regulated monopoly that distributes and transmits electricity--and with some generation). Anyhow, the question is why don't utilities want to build additional transmission systems?

As noted here the three reasons are going to be NIMBYism, environmentalism, and the costs. Further, it isn't going to be due to the utilities, but to local groups who don't want transmission lines near their homes, environmental groups, and consumer advocacy groups.

What Atrios forgets is that the utilities can't just say, "Oh we need more transmission, lets go build some." The utilities must first ask if they can build additional transmission lines, then they go through hearings over the issue.

Further, the article that Atrios links to to support his argument doesn't support his argument. It merely makes a statement and then fails utterly to support it.

Third, under deregulation the local utilities no longer have an economic incentive to invest in keeping up transmission lines. Antiquated power lines are operating too close to their capacity. The more power that is shipped long distances in the new deregulated markets, the more power those lines must carry.

Why is there no more incentive? Could it be that the fixed (and rather low) rate of return that the regulators allow them to get is not worth the trouble of going through all the NIMBYism, environmentalism, and the various hearings?

Further, Kuttner flubs it on his analysis of market power and price setting.

But deregulation hasn't worked, for three basic reasons. First, there is a fairly fixed demand for electricity and generating capacity is tight, so companies that produce it enjoy a good deal of power to manipulate prices. The Enron scandal, which soaked Californians for tens of billions of dollars, was only the most extreme example. California authorities calculated that a generating company needed to control just 3 percent of the state's supply to set a monopoly price.

Sorry, but California was a really different scenario. The retail rates were frozen ensuring that demand is fixed (inelastic--i.e., it is not responsive to price changes...because there is not price change) while the wholesale market was deregulated. This meant that the generators could earn very high profits by driving the price up.

It is similar with gasoline and the oil crises a few decades ago. Price controls keep the prices low so retail customers were set to consume at the low price. But, because the price of oil was so high and the retailers could not raise prices so they weren't going to be able to meet the low price demand. The result a shortage.

If the retail rate had not been frozen in CA, the price wouldn't have gone as high and there wouldn't have been hardly any blackouts or interruptions of service.

The reason a generator needed only a small percentage of the total generating capacity was because of these factors. These factors by the way were determined by the government.

Second, the idea of creating large national markets to buy and sell electricity makes more sense as economic theory than as physics, because it consumes power to transmit power. "It's only efficient to transmit electricity for a few hundred miles at most," says Dr. Richard Rosen, a physicist at the Tellus Institute, a nonprofit research group.

Nobody that I know of has talked about a "large national market" for electricity. There has been talk about competition in various regions. The way Kuttner puts it makes it sound as if people in the industry are not aware of line losses. Of course they are. Just as there isn't a "national market for delivered pizza" (look Marge, pizza in New York is only $5, lets order some and have it delivered here [in Colorado!]).

In addition, in the old days of regulation, a utility like Con Ed would be required to regularly submit a resource plan to a state's public service commission.

And utilities still are required to do so. Now they just do it for distribution and transmission. The very thing Kuttner says they wont do.

The two organizations would forecast demand and decide how much money should be invested in power plants and transmission lines. Rates would be adjusted to cover costs. Under deregulation, however, nobody plays that crucial planning role.

Under deregulation this is, to some extent true for generation, but it is not true that no forecasting is done for the distribution and transmission systems. Rate design for the distribution and transmission systems do have energy components (i.e., part of the revenues are designed to be recovered through kWh and kW charges). In fact, I can tell you that the utilities in California still engage in such forecasting.

In short, Kuttner and Atrios are both wrong.

Electricity and Deregulation, Part II

I thought I'd post on the idea of upgrading the transmission systems here in the U.S. Its not going to happen despite what Bush, other Republicans, or Democrats say. Here's why:

• It'll cost too much.
• NIMBYism
• Environmentalism

Those three things will ensure that we wont see much of anything done to the existing transmission systems.

That costs will go up if upgrades are made is pretty much a given. Suppose you have a transmission system that needs to be upgraded. Suppose the costs are an additional $100 million/year and that the system has 75,000 GWh worth of usage overa given year. This would increase the transmission rates by $0.0013/kWh. It doesn't look like all that much, but remember a househould could easily use 400 or 500 kWh a month. And yes, people do sit up and take notice of changes like that.

The NIMBYism and environmentalism will be the bigger problems though. No environmentalist is going to be happy with additional transmission towers being built, lines being hung, and the operation and maintenance activites that go along with it. Such expansions of the system will be fought tooth and nail by the environmentalist.

Similarly people are not going to be keen on having a 250 KV line running near their house along with the towers to hold them. Any planned expansion of the transmission system will likely be fought tooth and nail by local residents.

Combine those from all three of these groups and you'll have a pretty tough time getting new transmission systems planend let alone built and working.

My prediction is that nothing will be done to the transmission systems in terms of adding additional capacity/redundancy. The only changes will be procedural--i.e., changes on what to do if a similar situation arises again. Other than that, nothing will be done.

Electricity and Deregulation

With the recen massive power outage in the Northeast and the Eastern part of Canada there has been lots of talk about deregulation and electricity. Most of it wrong.

Here is one such example.

SANTA MONICA, Calif., Aug. 14 /U.S. Newswire/ -- Most of the states impacted by Thursday's massive blackout are states that have enacted electricity deregulation schemes in recent years, according to the California-based Foundation for Taxpayer and Consumer Rights (FTCR). While the reasons for the blackout remain unclear, FTCR believes that the lack of government oversight of public utilities contributed to the extended reach of the power outages. Historically, electric utilities had been fully regulated and subject to stringent supply standards and price controls.

There is only one problem here. The transmission and distribution systems have not been deregulated. The transmission system is regulated by the FERC and the distribution system would be regulated by the state's public utilities commission. Further, when there is deregulation of the generation business it isn't like most other markets.

For example in California, the California ISO (Idependent System Operator) is in charge of maintaining the grid. It is their job to ensure that there is enough power and that there are no problems that could result in a blackout.

"We do not know why the power failed in New York, but we know that over the last few years most of the affected states have been deregulating their power systems," said FTCR's senior consumer advocate Douglas Heller. "Regulated and publicly-owned power systems are better suited to ensure energy reliability, while deregulated systems are more susceptible to dangerous supply shortages like the one that blacked out much of the Northeast. Electricity is too vital to the public safety and economy to leave in the hands of unregulated power firms."

We don't know why the power went out, but we'll speculate and blame it on undersupply. However, if the problem was at the transmission level then it is not the deregulated portion of the industry.

There are three components to the electrical grid, simply speaking.

• Generation
• Transmission
• Distribution

Obviously generation is the production of electricity. Transmission are the high voltage wires that carry the electricity over large distances. Once the electricity gets to where the final users are, it is distributed to them via the distribution system. This part of the system includes the lines you see outside most houses, shops, and business. It also includes transformers and substations.

Now deregulation has typically been only in the generation business. To some extent there is no reason for the generation to be part of the regulated monopoly. Theoretically, when electricity prices get high enough private investors would pony up the money for new power plants.

Of course, it isn't this simple in real life. For both transmission and generation you have constraints from both environmental concerns and from NIMBYism (Not In My Back Yard).

NIMBYism would make it more difficult and expensive to build generation plants. Similarly with environmental concerns. These two factors imply that the for certain price increases there wouldn't be any willingness to build new power plants. Thus, you'd run more of a risk of having too little generation.

The same thing applies to transmission lines. Also, the solution for generation:

Build the power plants where nobody wants to live.

Would necessitate additional transmission capacity. Thus, building a generation plant out where nobody wants to live wont necessarily solve the problem.

"If regulators cannot control prices or supplies, the public faces the dangerous proposition of paying too much for power, not getting enough power or both," said Heller.

Controlling the prices is not the solution either. On days where the demand is high the price should be higher. The reason for this is that as the demand increases, generation that is not as cost effective has to be used. In some cases, very expensive generation. For example, combustion turbines (basically jet engines bolted to the floor) are quite expensive. However, these are called peaker plants in that they generate power during peaks when power reserves are getting low.

But, in a regulated environment the prices do not change to reflect these increasing costs. Basically waht this means is that people are getting a distorted price signal. Something that costs $10 is stilled priced at $1. Clearly people are going to be purchasing "too much".

So the idea of regulated energy prices, i.e., energy prices that are fixed, could very well result in demand higher than if the price were allowed to fluctuate.

You don't need this kind of price variability for the distribution and transmission system, or at least not as much. The systems are fixed and are designed for loads that are usually quite high. So where you should see the variation in prices is in generation component.

Now this doesn't mean that there aren't pitfalls that come with deregulation. One thing to keep in mind is that the grid was built with the notion of least cost in mind. If it was cheaper to build a generating plant that is what was built. If it was cheaper to build tranmission lines to bring in power from someplace else...that is what you did. Now the problem is that the grid does not have a lot of redundancy. This lack of redundancy can be bad both for competition in the deregulated market and for the reliability of the grid.

For example, in California the system is transmission capacity constrained. Hence generators back during the energy crisis in the state could use transmission congestion (it was especially bad on that path 15 the main north-south transmission lines) to gain strategic advantage and push prices up. It also resulted in reserves in parts of the state becoming very low and the triggering of Stage 1 and Stage 2 emergencies.

Now all that being said, deregulated markets such as Pennsylvania, Maryland and New Jersey (PMJ) are working fine. Further, my reading of the blackout last week was that Pennsylvania was hit because the problem in other regions. This probably would have happened even if Pennsylvania was not part of PMJ (i.e., still regulated).

So, to reiterate, the transmission and distribution portions of the electricity system have not been deregulated. Further, keeping the generation part of the electricity portion of the market regulated could actually result in demand that is too high and result in the system being more unstable/closer to the system experiencing problems.

Arianna: The Pig at the Trough

Well, well, well, isn't this fascinating. Its particularly ironic given that Arianna has written a book titled Pigs at the Trough. In her book Arianna excoriates fat cat corporate executives for sucking at the public tit and not paying for it. Now we find out that Arianna her self is sucking at that tit and not paying for it.

The Los Angeles Times reported Thursday political commentator Arianna Huffington has paid no personal state income tax and less than $800 in personal federal taxes over the last two years.

It sure does make it hard to take this bimbo seriously when she writes:

Or maybe you don't even bother with a house. Maybe you live on a yacht like Sakura, the 192-foot, five-deck, $10 million floating mansion owned by Oracle CEO Larry Ellison. Or the aptly named Aquasition, which you took off the hands of former WorldCom CEO Bernie Ebbers after the company he led hid more than $7 billion in losses and scuttled its stock. Or maybe these are just too small-time for you. If that's the case, try out Kozlowski's $25 million, 130-foot historic sloop Endeavour, which costs the Tyco tycoon $700,000 a year to maintain.

What a dunce. Didn't she think that maybe she'd look like a hypocrite by pulling such a stunt?

NewsMax has even more.

In announcing her candidacy last week, Huffington complained that California's whopping $38 billion budget deficit had been caused in part by "corporate fat cats [who] get away with not paying their fair share of taxes."

Once again we can see that Arianna is a elitist hypocrite who has two standards, one for her and her cronies, and another for everybody else.

Huffington's tax returns show that her income in the last two years was offset by losses she reported for Christabella Inc., the corporation she established to manage her writing and lecturing business.

In an interview Wednesday, Huffington told the Times that there was no inconsistency between her complaints about undertaxed corporation executives and her own meager tax payments. Instead she insisted that her tax deductions had been "very conservative" and didn't rely on "loopholes."

Why she postively sounds like one of those corporate fat cats!

Then there is this:

"I'm not the rich candidate that popular perception might have presumed just because I was married to a wealthy man," Huffington told the Times, referring to her ex-husband, Michael Huffington, a former Republican congressman who is a multimillionaire. "I'm a working woman."

Oh stop it, you're killing me Arianna with the irony. Yes, Arianna is just like other working women out there, not enough time to things like cook dinner, or bath the kids and then spend some time relaxing.

Hey...wonder if that $771 was for social security on a nanny? Now that would really take the cake!

From the LA Times:

The Times reported Thursday that Huffington paid so little in taxes because her income was more than offset by large losses she reported from her private corporation, Christabella Inc., which manages her writing and lecturing business.

"Do you have a problem with hypocrisy?" one television reporter shouted.

Responding to the questions, Huffington said: "I have absolutely no problem with my taxes. I'm sure you know there's a difference between loopholes and tax deductions. They're a part of our system, they're perfectly legal and perfectly normal."

See, here is my problem. I'm pretty sure that many of the "corporate fat cats who avoid paying their fair share" are also using aspects of the tax code that are part of the system. In other words, they are doing exactly what Arianna has done. Yet they are scum and she is virtuous.

Guess that $771 wasn't for a nanny though:

Huffington said Thursday that she also paid $98,000 in property taxes during the same period, as well as more than $50,000 in payroll taxes as an employer.

Still, I wonder how many "working women" come home to a $7 million dollar Brentwood home?

What a hypocrite.

Krugman Doesn't Do His Homework

A nice detailed article (if that doesn't work look for Prof. Krugman: "Critics, do your homework.") on how Krugman blew it when discussing the situation in Iraq for American soldiers.

Disconnect-from-Reality TV

I don't watch Reality TV shows. I didn't watch Joe Millionaire, I couldn't care less who was the Mole, and I don't know what the deal is with tribal councils and extinguished torches. I'm proud of my ignorance in this area, and actually a little smug about it.

However, I have to admit, I'm hooked on Bravo's show Boy Meets Boy. It's like watching a train wreck in slow motion.

The show is basically a variation of The Bachelor, but in this case it's 15 men trying to win the heart of another man. The requisite Reality TV twist is that, unbeknownst to the star (or his best friend gal-pal who advises him), some of the contestants are straight men pretending to be gay. If a straight guy "wins", he gets $25,000.

When I first heard of the show, I was appalled. I thought that it was just another attempt to have a little entertainment at gay men's expense.

Evidently I'm not the only one, as this MSNBC article reveals:

But the show may even prove divisive among gays—especially when they learn that the leading man himself is still smarting from the experience. “I felt betrayed,” says James, a California human-resources executive, perhaps the first reality star ever to speak a bad word about his own series. James was finally let in on the big secret when he’d narrowed his suitors down to three—we won’t give away their orientation—and he was livid. “They told me they put the twist in there because they wanted straight people to watch,” he says. “I said to them, ‘Well, you’ve played gay people as entertainment for straight people. Of course they’re going to watch’.”

So far in the first three episodes, James has eliminated 9 men, 5 of whom were straight, and based on the previews for next week, at least 1 of the remaining "mates" is also straight. This both irritates and reassures me.

I'm irritated that a minimum of 40% of the contestants were fakes. The producers seem to have stacked the deck against James (I wouldn't be surprised if the final breakdown is 8/7 or even 9/6). I guess that was intentional, since if he'd eliminated all the straight guys in the first two rounds there wouldn't be any "tension".

On the other hand, I'm reassured by the fact that he has eliminated a good number of straight men, however inadvertently, as incompatible. He dropped one of the guys in episode 3 because he felt he was hiding something (duh).

So my final conclusion is, I'm hooked, and will watch the remaining episodes. I'm sure that's exactly what Bravo wants.

PS -- My opinion of the remaining guys:

Wes, Robb -- gay
Brian -- probably gay
Darrin -- straight
Sean, Franklin -- inscrutable

He'll wind up with Wes.

PPS -- I have an idea for Bravo: do a version of The Bachelorette, with the twist that some of the male suitors are gay. In my experience, gay men (especially those who have spent some time in the closet) are much better liars than straight men.

West Nile Virus: Epidemic?

Well Henry Miller thinks so, and so does InstaPundit. The problem is that when you are measuring things you set new records, further setting new records is easier when you have just started taking measurments.

Over at NumbersWatch there is a nice FAQ on this phenomenon.

Think of this simple example. Suppose we have a stationary proces that is described by the uniform distribution on the interval [0,1]. Now you take 30 observations (say over 30 days) and the extreme value is 0.97. So what are the chances that you will break that record on any given day? Since we have the uniform distribution it is 0.03. What is the probability you wont break it on any given day? 0.97. Now the probability you wont break it for n days is 0.97ⁿ. So after 20 days the chances we haven't broken this record is 5.43794E-21 which is a really small number.

Now the interesting part of that FAQ is here:

Returning to our allegorical astronomer, he now finds that it is increasingly difficult to establish new records over a reasonable time scale. This poses a number of problems. He now has an established department with mouths to feed. He therefore needs to keep the pot boiling with regular press releases in order to justify more research grants. There are now two basic methods open to him. The first is the Olympics method, which is based on improving the accuracy of recording so that smaller and smaller increments of record are established, in his case by improving the optics on his telescope. The second is the Climatologist's method, which involves extending the range of techniques of measurement, so that he can cherry pick the ones that best suit his purpose. He therefore expands to radio, infra-red, x-ray and ultra-violet telescopes, including satellite mounted versions. As a result he continues to hit the headlines and corner a substantial share of the limited funds available for scientific research. Thus, as with all good fairy stories, they lived happy ever after.

Is Henry Miller basically shilling for more money? I don't know maybe, maybe not. Still, keep in mind that simply because there is a new record it isn't something to get your panties in a knot about. Yes, even if it means more deaths. After all, we accept human death all the time. If we did not the speed limit would be 2 MPH, bicycles would be illegal, and you wouldn't have bathtubs.

Greatest American?

Robert Prather has conducted a poll on who are the greatest Americans and here is the list.

Light Blogging Today

Sorry, got lots of work to do.

Robert Musil on Krugman

Robert really hammers Krugman in this post (if that doesn't work try this link, and scroll down to "Lies, Damn Lies and Represenative Statistics In The Grand Dutchy of Krugmania").

One thing that caught my attention that I am surprised Krugman flubbed: the median vs. average thing. When reporting incomes, housing prices, etc. it is typical to use the median value (the middle observation(s)). The reason is that the average can be skewed by large numbers. Suppose you are sitting in a bar and the incomes are (in thousands) $25, 35, 45, and 55. The average is $40/year. Now in walks (using Robert's example) Warren Buffet and his income is say, $50 million. Now the average is over $12 million/year. Is that reflective of what most people earn as income in that bar? Hell no. Now the median is $45,000/year which, in most people's opinion, is a more accurate picture of what the typical person will earn in a year in there.

From Democratic Underground: Privatized Hell

I found this when looking for examples of the Left's hostility towards property rights. In a way I find the essay rather sad in that there are some elements of truth in the essay, but that the author does not understand the topic well enough to articulate a cogent argument.

For instance his treatment of the notion of fire departments/protection. Fire departments are not public goods. Fire departments were created as a result of the negative externalities associated with fires. The author notes the problem here

In colonial Philadelphia, firefighters were employed by private insurance companies which, of course, had financial incentives to minimize damage to their clients' properties. Plaques with the insurance company's insignia were placed on buildings, so that the fire fighters would know whether or not it was their business to put out the fires on the premises. (These plaques are often found today in antique shops). If the wrong plaque was on the building, well, that was just tough luck. Of course, with their attention confined to a single building, fire fighters were ill-disposed to prevent a spreading of the fire to adjacent non-client structures.

Here is the problem. Each person can take various measures to protect against fires. Some will do a better job than others. Now, if I am lazy about reducing fire hazards and you share a building with me, I am imposing costs on you that are not immediately going to affect me. These costs are external to the market (hence the name externality). Further, if I hire a fire department, I might not be as diligent about reducing fire hazards on my property; after all the fire department will come and put the fire out.

So if you are careful, don't hire a fire department, and my house catches fire you could very well suffer as well. Definitely a market imperfection. One solution is to have the fire department be a public service that taxes pay for.

Another alternative is to just leave everything to the courts to sort out. Of course, this solution is reactive in the sense that both you and I have already suffered losses and now are trying to assign degrees of reponsibility/blame.

Is having the fire department the best solution? Problably not. But the fire department is not a public good (or service) in a strict sense in that if they are putting a fire out at my house, they cannot be several blocks away putting out another fire.

A public good is a good where your consumption of the good (or service) does not reduce or hamper my consumption. Hence national defense is a public good.

Both public goods and externalities are examples of when the market fails. The question then becomes, given these failures is the government solution the best feasible solution. Notice the word feasible in there; it is in there for a reason. The best solution is in all likelihood impossible to attain.

But many libertarians/proponents of the the market know this. So when Mr. Partridge writes

These conservatives contend that virtually all economic and social institutions are better managed when privatized and unregulated. According to this libertarian theory, the greed (i.e., profit motive) of investing private individuals is, in virtually all cases, mystically transformed into the optimum public good. The exceptions are the police, the military, the courts and the legislatures which, they concede, are properly confined to the public sector [Note 2].

He is being dishonest, in my opinion. It is not necessarily the case that the government solution is going to be better than simply living with the market imperfection(s). The market is pretty much by definition imprefect, but usually we just live with it vs. turning to massive widespread government intrusion. Its basically the problem of trying to kill a fly with a hammer. You can do it, but you'll probably cause more damage than just putting up with the fly.

Mr Partridge also does not understand the notion of Rawlsian justice with his little example:

Two communities are situated on opposite banks of a great river: on the right bank is "Randville," and on the left bank is "Rawlsburg." Randville is populated entirely by libertarians - rugged individualists all, who shun collective activity and who assume full responsibility for their personal safety, welfare and property. Rawlsburg is comprised of individuals who are properly covetous of their personal rights, yet fully aware of the desirability of promoting public goods and of acting collectively in the face of common emergencies.

The notion of Rawlsian justice is that you maximize the minimum payoff (the maximin solution). So in the above example you would first focus all your energy on the person most at risk of the flood and work from there to the next most threatened person. If the person who is most threatened eats up all the town's flood-protection-resources then oh well.

Also, simply because you believe in libertarian principles does not mean you abhor all forms of collective action. Corporations are collectives after all. They are a group of people who are working to a single purpose. If it is in your best interest to get together and cooperate then it is entirely possible that people will do it. There is the danger of the free rider problem, but that problem depends on the number of people involved.

Further, libertarians do realize that the market/individuals cannot surmount all problems. This is why libertarians and market propoenents argue in favor of the government to provide for national defense, the legal system, and so forth.

In this example, why can't the local government realize they are in a flood zone and take the necessary proactive measures to solve the problem? Libertarians and market proponents are not everywhere and anywhere anarcho-capitalists. Conflating them is another error on the part of Mr Partridge.

Mr. Partridge also is in error with regards to Garrett Hardin's tragedy of the commons.

The free rider problem exemplifies a larger conundrum, well-known to political philosophers back to Aristotle (and presumably beyond): the tragedy of the commons - famously reiterated by Garrett Hardin. Here is how the tragedy plays out: in numerous cases, an aggregate of individuals who rationally seek advantage for themselves, bring ruin upon all. Hardin's example was of an overstocked pasture, the productivity of which is destroyed as each private farmer attempts to increase his personal wealth by adding livestock to the pasture.

The pasture is not a public good, but treating it as one is the problem. This leads to externalities (again). My addition of another grazing animal reduces not only my own profits, but those of everybody else as well. Since the costs of an additional grazing animal are dispersed and I alone reap the benefits there is a strong incentive to over-graze the pasture.

We don't need the government to solve this problem, the market can do so quite well. If I own part of the pasture, then I will not want to over-graze my part of it because now I bear all the costs and reap all the benefits so the situation with the common grazing pasture do not arise.

Mr. Partridge is misleading here as well:

To the contrary, the libertarian doctrine behind the radical right-wing declares that government is the enemy - that the free market and the self-interested use of private property will, via Adam Smith's"invisible hand, invariably result in the best result for society at large. Good for each, good for all; bad for each, bad for all. --emphasis in the original

This is an over simplification of the problem. Given a set of stringent assumptions, the market will arrive at a solution where you cannot make anyone better off without making someone else worse off. Now the key part are the stringent assumptions. If they don't hold, then neither does the result. When the assumptions don't hold then the market is imperfect and the question is when and where should the government intervene.

Mr. Partrigde continues with his error:

The absurdity of uncompromising privatism and market absolutism is on full display when applied to environmental policy. The libertarian Robert J. Smith writes:

"The problems of environmental degradation, pollution, overexploitation of natural resources, and depletion of wildlife all derive from their being treated as common property resources. Whenever we find an approach to the extension of private property rights in these areas, we find superior results." (R. Smith, 42-3, my emphasis)

It thus follows that I own, not only my property, but also the atmosphere above it and the ground below it. Can I then prohibit fly-overs by aircraft? Can I sue if the inflow to the aquifer beneath me is contaminated? Who, then? Are the "owners" of the insects that pollinate my orchards entitled to charge me for the service? The mind boggles. And it gets even worse (as I elaborate in Section III of my "With Liberty for Some" ).

I find this amusing. After basically accepting the veracity of Hardin's tragedy of the common's story, Mr. Partridge now seems to be rejecting it. Further, he is deliberately misleading about owning insects, air, and so forth. It is quite clear in the passage he quotes that it is in those cases and those cases only where we can extend property rights that we observe superior solutions. Is it possible to extend property rights to everything, I doubt it. So Mr. Partridge is arguing against a strawman here.

Mr. Partridge builds another strawman here:

Furthermore, the privatizers' celebration of "competitive enterprise" is essentially hypocritical. Capitalists hate competition, as they relentless strive to build monopolies and crush their competitors. All that stands in their way are anti-trust laws and the courts - which is to say, government.

Yes, of course businessmen want to have a monopoly. To me this is precisely why you don't want the government to be overly involved in the economy. Government actions have created monopolies and monopolistic situtations more than the market has. One example where there was a non-competitive market was the California energy market and that market was created by...wait for it...government. And yes, who had a big say in the creation of that market...wait for it...businesses.

This government - our government - is what the Bush and his supporters wish to drown in a bathtub. They desire this, firm in the conviction that a disconnected aggregate of self-serving private individuals, in absolute control of their private property, will serve us better.

Right, which is why Bush has increased government spending in virtually all areas of discretionary spending (link). Mr. Partridge is wrong on so many levels here it is pathetic.

Update I: In comments Robin writes:

Quite a mixture of ignorance and dishonesty you waded through there. Frankly, if a person can't coherently explain the "tragedy of the commons" and public goods - and explain the difference between the two - then they are too ignorant to be allowed out of the house without an escort.

A bit harsh, but rather accurate. Mr. Partridge should know the difference.

Speaking of Property Rights....

Over at Catallarchy.net, there is a post on endangered species and property rights. The author notes that if property rights can be assigned to snow leopards then it might very well solve the problem for this endangered species.

The logic goes like this. If snow leopards have a market value, then they will be treated like any other (renewable) resource. Think of cows. Are cows endangered? How about dogs, cats, chickens or pigs? All of these animals have one thing in common, they are treated quite literally as property. These animals thrive and are at extremely low risk of extinction because they are valuabe.

Many environmentalists have problems with this. The idea of owning something like a snow leopard is almost alien to them. They talk about the rights of the leopard, the intrinsic value of the leopard as a leopard and not as a piece of property that somebody else can buy and sell.

This is all fine and good, but when you get to the point where the rubber meets the pavement all those things really don't matter at all.

Property Rights: The Key to Economic Development

That is the gist of this Cato Institute Policy Analysis. I know it sounds ridiculous that somebody is so serious in putting forward such a claim. Most of people would say, "Well that's obvious."

Well, here is one person who disagrees. Yep, Steve Kangas yet again.

Property is anything whose use is controlled, usually by threat of force. This may include land, objects, ideas, even people (slaves). Groups are more efficient and effective at defending property than lone individuals. Such groups use military force to protect property from external threats, and police force to protect property from internal threats. These groups (as represented by government) are the ultimate owners, since they exercise the force that protects property. As ultimate owners, governments create a subordinate property system for their citizens to use. Many governments have liberalized citizen's rights to use property to a high degree, but the ultimate owners still place limits on its use, in the form of zoning laws, property taxes, etc. Awarding citizens 100 percent ownership and control of their property would recreate the anarchic system of nations on a smaller scale, with land and business owners acting as the rulers of their own pocket principalities. Like all sovereign tribes, principalities or nations, this would result in instability and frequent war. Democratic government is the only other system allows everyone to possess the nation's property.

Basically Steve Kangas is arguing that the government is the owner of all property and that while you think you own your house (car, computer, whatever) it is actually the government that does since they control the military and police which protect property.

The problem is that, at least initially, the government could not take land from somebody without compenstating them.

Amendment IV

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Amendment V

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
--Source

So yes, private property and property rights do depend on the state for enforcement and so forth, but it is clear that private property is not owned by the state.

This kind of thinking is logically fallacious:

"The extent of property and property rights depend on the legal system to promote and protect property and property rights. Therefore, since the government controls the legal system it also controls the property and is ultimately the property owner."

While the first part is true, the second part does not have to be true. Our legal system is such an example.

Kangas is not alone in this belief. Here is another example. It is not uncommon to find hostility on the left towards property and property rights.

Bush on Spending

One of the areas that I find less than appealling about Bush is his spending. Bush spends quite a bit for a Republican, so much so that I think it is fair to call him a Big Government Republican. Under Bush spending for education, energy, transportation, international affairs, and health have all increased. The only decrease has been in agriculture. The increases in 2002 were substantial, as this table shows:

Int'l Affairs	33.4%
Education	21.5%
Energy	1,119.2%
Health	12.3%
Transportation	11.8%
VA Benefits	11.4%
Regional Dev.	7.4%
Science/Space	3.3%

Source

Yes, that's right, energy increased over 1,000%, of course it was went from $22 million dollars (inflation adjusted) to $267 million dollars.

This is one reason why there is a deficit. The deficit has three sources:

1. The recession and sluggish recovery
2. Tax cuts
3. Increased spending.

Of course, raising taxes right now as Al Hunt seems to be advocating would be dumb. Taxes are contractionary. This is not advanced economics here, but some pretty basic stuff. If you have $100 and the government comes along and takes $10 in taxes you now have $90 to spend. This means that you are going to spend less. Of course, the government can spend that money, but what added benefit is there to the government spending money you were going to spend? Not much, otherwise if there was, this economy should be booming right along. Afterall, Bush is spending, spending, and spending.

What guys like Al Hunt don't seem to realize (or they do, but are being dishonest) is that raising taxes when the economy is expanding makes more sense than when the economy is contracting. This is what Clinton did. It was like putting a speed bump in front of the economy, i.e. slowed it down a bit, but it kept right on expanding.

Raising taxes now, would be dumb. Yet you don't hear this from the Democrats or Bush's critics. Yes, there is a deficit. And yes, a deficit today means more taxes down the road, but raising taxes when the economy is still weak is just not sound policy.

I think the Democrats would have a good message if they pointed out that creating a situation where there are deficits for many years is a problem, and that raising taxes in the future when the economy is stronger to reduce and/or eliminate the deficit is reasonable.

Of course, we also have to remember that politicians tend not to do such reasonable things. When there is more tax revenue, the temptation will be to spend it; not reduce the size of the deficit/debt.

Update I: Some more on this from the Cato Institute here, here, and here. That last one is pretty funny:

The Mother of All Big Spenders: Bush spends like Carter and panders like Clinton.

The Bush administration's newly released budget projections reveal an anticipated budget deficit of $455 billion for the current fiscal year, up another $151 billion since February. Supporters and critics of the administration are tripping over themselves to blame the deficit on tax cuts, the war, and a slow economy. But the fact is we have mounting deficits because George W. Bush is the most gratuitous big spender to occupy the White House since Jimmy Carter. One could say that he has become the "Mother of All Big Spenders."

Ouch, that's going to leave a mark.

Here is a Good Davis Foot Soldier

Apparently Arnold was supposed to have a plan already to go prior to announcing his candidacy. Well at least according to Ellis Hanican. And of course, he has to start with the mud as well (hey, he probably copied verbatim from the fax from Davis' office)

Clearly, Arnold has some explaining to do - about Arnold. About his complex and hidden business dealings. About his dating habits, reported to be unusually carnivorous for a married father of four.

As we speak, political reporters across America are seeking guidance from dusty copies of old Spy magazines. His father's days in the Nazi Party.

It's all out there, and it won't stay hidden for long.

Yes, I'm sure, with guys like you it wont.

None of the others Mr. Henican mentions apparently have to meet this level of expectation, just Arnold. As if the election were next Monday and you only had a few days to make up your mind. Dumbass, we still have weeks to listen to what each candidate will propose. I don't know what Arnold's plans will be, but I'm going to venture out on a limb and predict Davis' plans:

Nothing.

Yep, that's right Davis will not articulate any plan at all. You see, that would require foresight and leadership, something Davis is so utterly lacking it is a miracle he can make to the bathroom without messing his pants.

Becoming an Economist

If you are thinking of becoming an economist (i.e., gong to graduate school) look here. That site has lots of useful information, especially the advice to undergraduates thinking of going on to grad school in economics. Yes, take lots of math. You can't take enough. You should be taking one, maybe two math courses each semester/quarter till you graduate. You will need not just calculus, but real analysis, statistics, probability, and also some more advanced courses that deal with matrix algebra and even things like linear and non-linear programming.

Also check out the economic pick up lines. Its worth a couple of chuckles.

I love you, ceteris paribus.

Sheesh.

Term Limits: Why They Are Bad

Term limits on politicians is still a very popular issue here in California. Attempts to end term limits have resulted in failure. However, despite this popularity, I think term limits are a bad idea.

The problem is that term limits, IMO, tend to actually reduce the control voters have over their elected officials.

For example, suppose you are an elected official and you can serve for two terms. Now, what ensures that you will act in accordance with the wishes of your constituents in your last term? Certainly not a threat by voters that they wont vote in for a third term, because you cannot serve a third term. So what is there? Maybe, and that is a big maybe, the hope of running for an even higher office. However, that is rather weak in that there are many, many Assemblymen and Senators and there can only be one governor. You could try to run for the U.S. Congress or Senate, but there you'll likely be facing an incumbent which is a very tough nut to crack. Is there another mechanism there to keep state elected officials actions consistent with what their constituents want? If there is one I don't see it.

Now, lets take a look at this article by Patrick Basham at the Cato Institute. In it there are a number of claims:

1. The legislature works faster.
2. Passes budgets on time.
3. Fiscal conservatism.

My first question is what the Hell is Mr. Basham smoking and/or drinking? Let me know, because it sounds like powerful stuff!

First, the legislature has not worked faster in regards to the last budget. The state went for the longest period without a budget. Is that a result solely of term limits? I dunno, but the fact that many legislators are going to be out of office at end of 2004, what incentive is there for them to act in a timely fashion?

As for fiscal conservatism, that has got to be the biggest joke I've heard in a long time. Spending in this state has gone up, up, and up. In fact, IIRC the budget 2002/2003 is actually larger than the previous years despite the fact there was a budget deficit and warnings that this years budget deficit would be even larger!

In a Policy Analysis article Mr. Basham comes up with the following list

1. Term limits remain popular with state electorates long after their introduction.
2. Term limits stimulate electoral competition in state legislative elections.
3. Term limits enable nontraditional candidates to run for seats in state legislatures.
4. Female, Hispanic-American, and Asian-American candidates find it easier to enter term-limited legislatures than non-term-limited bodies. The record is more mixed for African Americans.
5. Term limits weaken seniority systems in state legislatures.
6. Term limits tend to weaken the leadership of a state legislature.
7. Term limits have not strengthened interest groups, state bureaucracies, or legislative staffs as predicted by critics of term limits.
8. Some evidence suggests that term limits foster public policies compatible with limited government.

I think the notion that term limits reduce the leadership of the legislature is part of what got us into this mess. Leadership during a crisis is precisely what is needed. We needed it during the energy crisis and we needed it with the budget crisis. We don't have it and look at the mess.

As for the notion of weakening special interest groups, that is a laugh. Since legislators coming in are inexperienced they rely on others to provide them with information, one such group are special interest groups.

Sometimes I think the Cato Institute has become fixated that competition is anywhere and everywhere a good thing. This is overly simplistic, false, and in some cases can lead to disaster.

Arnold Coming Under Fire

Not all that surprising as this means the Davis is in all likelihood not a lame duck anymore, but a dead one. Art Torres is complaining about the lack of on the job training. Okay, this maybe true, but Davis supposedly had lots of on the job training and look where that has gotten the state.

Part of Arnold's response was:

"Leadership means that you set goals for yourself … go after those goals and acomplish them," he said. "That’s what it is about. And you need to be a uniter, not a divider. … you have to bring the parties together."

Which is true, especially in California. California is still a liberal state. Most registered voters are Democrats. So any governor is going to need the have some support from Democrats.

Now Arnold, while a Republican is not all that conservative. He is pro-choice, pro-gun control, and pro-gay rights. So on social issues he is to the left of many Republicans.

In terms of economic policy Arnold is fairly moderate. Most of the budget debate has focused on either spending cuts or tax increases. Arnold has offered a third way, making the state more business friendly and thus increasing the tax base. Assuming this works, you'll get an increase in tax revenue without increasing tax rates.

The problem with this is that it takes time. It wont solve the budget problem today, tomorrow, or in 6 months. Further, I am not sure how successful Arnold (or anybody can be) with such a goal. The Democrats in this state, are without a doubt extremely anti-business. After the passage of the Paid Family/Medical Leave Act, there can be no doubt. These politicians do not view business as good, but something that should be controlled, regulated, and told what to do. Typically this view raises costs, and when that happens businesses tend to respond in two ways.

1. Shut down (i.e., go out of business and layoff your workers)
2. Leave the state.

So Arnold is not going to get that much support from the Democrats in the state legislature. The only thing Arnold can hope for, is that the recall will signal to the Democrats in the legislature to get their heads out from between their butt-cheeks and plot a new course.

Will this happen? I don't know. To be quite honest, my thinking is that nothing will happen, there will be gridlock in Sacramento. Enraged over the recall Democrats will dig in and stymie everything Arnold proposes. On the budget/finance front the Republicans will kill all Democratic proposals. And when the next election comes around, the voters will have a chance to really clean house. That is assuming they have a mind too.

However, another thing to factor in is term limits. California legislators face term limits. This reduces the control voters have over elected officials. So, even if Arnold is elected by a very large number of voters, the impact on the legislators will be minimal, IMO.