Why Is the Newspaper Business Dying Exactly?

A while back, a columnist writing on Iraq said "You are being lied to." Turns out he was pretty much on target.

On the same theme, the media report incessantly that scientists are confident that they can predict climate conditions 100 years into the future, but they can't even predict those conditions 6 months into the future.

We seem to keep reading about the dreaded outcome of our growing trade deficit too. Hmmmm.

Big Coup for a 2008 Presidential Hopeful

Mitt Romney has scored a big coup in receruiting Greg Mankiw and Glenn Hubbard as his principal economic advisors to his presidential campaign. Of course, Prof. Mankiw's excellent blog (although declining in quality of late, I guess he's busy) is often referenced here and I have touted Dean Hubbard's healthcare policy book here as well. These economists are great additions to any campaign as they will surely add creativity and broad thinking to policy formulation. With that said, I am quite excited about the prospect of Hubbard's ideas on healthcare reform gaining influence on a major candidate for the Oval Office, yet not too excited at the prospect of Mankiw recruiting a potential denizen of the White House into the Pigou Club.

We Need More of This Type Press

The new diesel cars get a mainstream plug today.

Fun With Economic Reporting

Just for fun, check this out...

Here is Bloomberg..."Bernanke Sees Growth Rebounding":
``Economic growth will be modestly below trend in the near term,'' and over the coming year will ``return to a rate that is roughly in line with the growth rate of the economy's underlying productive capacity,'' he told the National Italian American Foundation in New York"

Here is the WSJ..."Bernanke Offers Upbeat Assessment":
"In his first major speech on the economic outlook since his testimony to Congress in July, Mr. Bernanke said growth outside of housing and autos remains "solid," underlying inflation "uncomfortably high" and that the choice before the Fed is whether to raise rates, not whether to cut them. "

Here is the FT..."Markets Uncertain Despite Fed Comments"
"Speaking in New York, Mr Bernanke reassured investors that the outlook for the US economy remained fair, and the slowdown to more moderate growth was proceeding largely as expected."

Here is the UK's Telegraph..."US setbacks see dollar plunge to 15 year low"
"The dollar tumbled to a near a 15-year low against sterling yesterday on fresh signs of economic trouble in the United States. An 8.3pc crash in US industrial orders and an admission by the Federal Reserve chairman that Washington does not know how bad housing really is set off another day of wild gyrations on the currency markets."

and

"Federal Reserve chairman, Ben Bernanke, said the housing slump "would be a drag on economic growth into next year". Mr Bernanke said official figures did not pick up the "sharp increase" in cancellations on house deals and might understate the inventory glut.
"Any significant effect on consumer spending arising from further weakness in housing would have important implications for the economy," he said."

and, the caption under ole' Ben's picture

"The Federal Reserve chairman Ben Bernanke said Washington did not know how bad a state the American housing market was in."

Jeez.

Ignorance Is Expensive & Bad Journalism Runs Up the Tab

The MSM's conspiratorial reflexes when it comes to covering the energy industry and energy markets is an endless source of damage to our society. Check out this "analysis" that states that oil companies manipulate supplies to drive up prices. This "analysis" reveals total and utter ignorance of how the oil industry works. Just check out this sentence as a teaser:

"Shell portrayed its Bakersfield refinery as old and unfit. To make up for older wells, oil companies regularly drill new ones — about 9,800 last year."

What on earth? A refinery and a well are not the same thing, you can't replace or upgrade a refinery with a well, as the writer suggests. This confusion permeates the article.

The truth is that this refinery was built 70 years ago when the wells that supply it were drilled. After 70 years of producing those wells are running dry. California currently is probably the least hospitable place in the world from a regulatory view to drill for oil, contrary to how it was 70 years ago. It is effectively impossible to drill in California, so new local supply wells for this refinery are out of the question. To get crude oil to this facility, they'd have to bring it in by truck or rail, which is way too expensive to do. No crude to refine, no refinery. Pretty simple.

There are numerous other laugh-riot mistakes in the "analysis" but, hey, it's a good story. Oh, and they conveniently left out that the Federal Trade Commission investigated the refinery closing for any anti-trust claim and found no basis. Read it here.

If we continue to be ignorant about energy and pig-headedly stick to crazy conspiracy theories, we deserve what we get, which likely will be high energy prices, perhaps shortages, and increased reliance on foreign sources for our energy. Ask the Ukrainians how that is working out.

No Small Doings in Turkey

Despite the undeniably real threat of death, Pope Benedict takes a Christian message of peace, tolerance, understanding, human communion and reconciliation into hostile territory and makes the appeal for valuing life and each other. As hard as it is for some to believe, despite a history pockmarked with warts, there is a reason that the Catholic Church survives and thrives two thousand years on, and it is on display at this very moment.

Here is another.

Cold War Part Deux

Fortuitously in this time of increasing global political tension, I have plucked John Lewis Gaddis's The Cold War - A New History off the top of my book backlog. It is a great read not least for the numerous delicious parellels to where we are today. For instance, the Soviets were bewildered (but happy to accept the outcome) at how the powerful and crafty Richard Nixon, who had so outmaneuvered them, could be brought low over a petty burglary (petty burglary being how Russians start the day before they get down to heavier lifting). Islamists and fellow travelers are rightly befuddled yet thrilled that dopey things like Mark Foley and wire-tapping have brought low the one US leader in decades that worked up the will to smack around those who would seek to harm America.

Also in the post-Nixon 1970s, trifling issues distracted the nation from the big picture and even led the Congress to a posture where it actively pursued reigning in the US as opposed to its enemies. Are we not here today with the caterwauling over waterboarding the likes of KSM and the SWIFT monitoring program?

Granted such comparisons are a little simplistic for broad statements (hey, this is not my day job) nonetheless these are lessons that ought to be top of mind as the Middle East gets hotter, which it surely will, and Cold War-esque alignments coalesce in our young century (Russia, China, Iran, Syria and Venezuala making a bid to be the new amalgam to the Warsaw Pact/Communist bloc). We ought to be extra self-aware of the short term bias of our democracy and try to focus our policy discussion on how the world will look 10 years from now rather than 6 months from now. We ought to be prepared to talk to our enemies but remain firmly aware that they are indeed enemies. Above all we must remember that we as Americans will rally around a role in the world grounded in decency and moral principle even if things get messy - fancy games of geopolitical chess, no matter how clean and tidy, that are devoid of nobility of spirit degrades us and ultimately weakens us.

The USD, the Fed and the ECB

Just as in the foreign policy sphere, where "diplomacy" in French actually means "appeasement", in economic policy words do not mean what they appear. The French are calling for "vigilance" on monetary policy, when what they really mean is "intervention" in the sense that they want a policy shift now dammit. The falling dollar is giving the export dependent European economies, and thus their political leaders, fits and had been for sometime. The European Central Bank is helping the process along with its inflation combat tactics of rising interest rates. The ECB has been raising rates in tandem with the US Fed for well over a year now and Jacques Chirac has been screaming over the missed opportunity to allow the US to outpace Europe in raising rates and thus pursue a mercantilist tack. Not much has changed.

I'll forgo a prediction on the USD as I've been wrong more than I've been right on that score, but I will make a prediction for 2007. The current state of the Euro will be a BIG problem for European growth in the year ahead and it will bolster the export side of the US economy and provide a buffer for slowing housing and any waning consumer activity (although I maintain that a retreating consumer is still a theory and not a fact). I am not a proponent of a weak dollar policy, but a weakening dollar is inflationary and just now is perhaps a relatively painless necessity to get the Fed off the fence and hawkish again over inflation. This weighs in favor of those who say the next rate move by the Fed is up, not down.

I'm Not Rolling the Dice On the Latest Educational Fad

I've been picking up the scent of the latest pronouncements by the self-appointed experts on how we should be raising our children for awhile but it appears to gathering steam now. First they scolded us for actually being parents and not bosom-buddies with our kids among other proclamations from on high. Now they want to enlist us in killing off homework. I know there is an appropriate and lengthy response to this that touches on how one develops specific skills as well as the habits of personal discipline, focus, thoroughness, pride in work-product, etc., but the clear winner here is just to call "Bullshit" on the experts. This is one of those debates that is stacked against us normal folks. A bunch of education industry and childhood development big thinkers with Ph.Ds in the softest of soft sciences and years of experience observing children (as opposed to raising them and living with the results) pronounce from on high what is right and good. Who are we to argue with experts, right? Despite the experts' terrible track record in crafting an education/childhood well-being industry that delivers uneducated children, declining standards, and widespread pharmacological dependence, we are supposed to go along because they have done "studies."

What should our answer be? Insist on homework for your children and let others do as they please. Rather than let them force a debate into a winner-take-all policy battle, let them permit their kids to play their videogames or watch TV. My kids will do homework, and hopefully a goodly amount of it. I'll roll the dice as to whether my kids will outcompete and outperform the non-homework doers later on in life.

More Fare for the Unknowledgeable

Greg Mankiw thinks that the appeal of the minimum wage is that it can be used to dupe the unknowledgeable into thinking one is more concerned about poor people than others. Here in NYC, and around the world, rent control is used by politicians in the same way. It is a simplistic (and unfortunately as convincing as it is erroneous) way to say you are on the side of the poor versus the greedy commercial interests; and, people don't equate their dreadful living conditions with rent control. In Amsterdam they seem pretty dreadful, but it is those greed office developers and not the 1901 rent control law, you see.

Senate Bar Is Pretty Low

One last quick one before I go...Don at Cafe Hayek takes on Sen. Byron Dorgan's silly rantings. Hmm...Dorgan, Baucus, Bond. As a northeasterner let me propose a deal for my midwestern countrymen. If you stop sending economic illiterates to Washington to govern us all, we will stop sending crooks.

Happy Thanksgiving

Happy Thanksgiving to all and safe travels.

As Dennis Miller would say, "I am OUTTA HERE."

Boosting the Middle Class

Given the battle for policy aimed at the working class and this little bit if inspiration from Larry Kudlow, here forthwith is a four point plan to drive up the real wages of the working poor and middle class:

1) Eliminate Taxes on Dividend, Capital Gains and Interest Income - not everybody can be a big shot lawyer, CEO or professional athlete, but everybody can buy stocks and bonds.

2) Reduce the Gas Tax & Allow Drilling for Oil and Natural Gas On US Lands and Waters - surging energy supplies means lower gas and heating oil prices; lower prices help the middle class and poor who have to drive farther to work and can't afford the most energy efficient homes.

3) Allow Workers to Opt Out of Social Security - workers, who get walloped by this most regressive of taxes, would immediately get a rise in wages of between 6.25 and 12.5%.

4) Eliminate the Tax Break for Employer-Paid Healthcare & Create a National Market for High-Deductible Health Insurance - workers could opt for their own health insurance, akin to life insurance, and convert their healthcare benefit compensation at work to cash wages.

This Baby Has Alot of Fathers, So It Would Seem

Wow. Here is a fascinating article from Bloomberg that highlights a rift between two major forces behind the Democratic Party, labor unions and the solons of Rubinomics. Apparently the labor unions don't much like Rubinomics, and, amusingly, the article actually manages to make Rubin, Rattner et al. look almost right wing as they disagree with the radical likes of Richard Trumpka and John Sweeney.

What was most interesting about this article to me is that it further shows how every major constituent group is taking credit for the election, whether they either genuinely believe it or are cynically towing that line in order to garner the lion's share of the policy spoils. Labor thinks they tipped the polls and so they want their laundry list taken up by Congress. The Hamilton Project guys don't see it that way; they think the middle class is just looking for some tweaking of global capitalism to benefit them.

The other side of the aisle is doing the same thing. Reagan Republicans and Libertarian-minded folks are saying that they tipped the balance of the election by either staying home or defecting from the Republicans, and thus are demanding a renewed focus on smaller government. Both sides of the immigration debate are claiming that they tipped the election, and are trying to reinvigorate their preferred legislation. Additionally, of course, the media are in on this too. The MSM is claiming the election was about Iraq and that Republicans lost because they were too conservative, and so they are demanding we bug out of Iraq and suggesting that Repuplicans ought to tone it down.

Rather than clearing things up or signalling where we are headed in 2008 and beyond, it looks like this last election made things murkier.

Airbus's Death Spiral Continues

Two weeks ago Airbus lost Fedex. This week, Korean Air, the world's largest cargo carrier, opted to go with the 747-8 instead of the A380. I think it is all over but the crying. The A380 will officially go down as the most expensive government bailout/jobs program in world history. What a shame.

World Economic Forum Pimps for Hillary

The World Economic Forum continues to embarass itself with "studies" that make the most inane assertions. When we last checked in on the Great and Good from Davos, they were touting Algeria as an economic leader.

Now, the geniuses in Davos are saying that places like the Philipines and Sri Lanka are ahead of the US in gender equality. (Ah yes, Sri Lanka, where they practically invented the notion of the female CEO.) So how did they come to such a conclusion? Nancy Pelosi and Condi Rice notwithstanding, apparently there is limited "political empowerment" for the gals here in the USA:

"While the U.S. scores among the top three in education and access to health care, it drops to 66th in ``political empowerment'' rankings with ``no history of female leadership in the executive office,'' the WEF said."

So by electing the corrupt Gloria Macapagal Arroyo or having Marcos abdicate in favor of Cory Acquino, the Philippinos score big in the gender equality sweepstakes. The implication is clear though, just put a female in the Oval Office and we'll rocket back up the rankings. Until such time though, I'll just have to teach my daughters to aspire to move to Manila or Colombo.

How To Destroy Retirement Savings

First Canada. Now Japan is providing us lessons in how to inflict damage on America's wealth and retirement security through tax policy. The writing is on the wall, will the new Democratic majority heed the warning?

Shoppers Defy MSM Message That Their Lot Is Miserable

News reports over the weekend highlighted an early and robust beginning to the holiday shopping season, and it wasn't just for the Playstation 3. To confirm the reports, I sent the ever-ravishing Mrs. Baseball out into the stores and malls to conduct some field research into the state of the retail economy as we go into this all-important time of year. Her assessment: Americans are flush and raring to spend (indeed the former is true). Robust traffic at the malls is coupled with oddly high activity at the big discounters, to wit the local Target was hopping with long lines at the registers as of 9pm on a Sunday night.

You read it here first folks.

What Foot Will They Put Forward?

I am generally loathe to mark time according to the beginnings and endings of US presidential terms as the forces of history naturally ebb and flow across such artificical boundaries. Nonetheless sometimes such oversimplification can be clarifying. In that spirit, one could arguably sum up the presidency of William Jefferson Clinton thusly: He came fresh out of the gates with gays in the military and HillaryCare, his wife's vision of socialized medicine, and promptly lost his party's majority in the House of Representatives. Thereafter he passed centrist, even rightist (again to oversimplify, this time with crude political labels), policies such as welfare reform and NAFTA before settling into a long period of benign ineffectiveness as he dealt with the fallout of scandals stemming from past real estate deals and current oral sex.

Of course the history has yet to unfold, but the new Democratic majority seems to be making noises about what they will lead with out of the starting gates. The short list includes the military draft, HillaryCare and global warming. I'm not saying that we've seen this movie before, just that the trailer would indicate a probability greater than zero of huing to recent historical events and a level of predictability in the outcome.

Just Like the Stones et al., Scribblers Try Not to Fade Away

I don't read much fiction (actual history is much more interesting than the neuroses of 99.9% of working scribblers) but Bloomberg reports on Thomas Pynchon's latest novel and this comment struck me:

"Pynchon's novels have conquered the world. He's prosperous. He has a family -- the odes to family life in ``Against the Day'' do more than hint at happiness. Good for him. He's earned it. But contentment is no emotion to fuel a book this big."

As is often the case, the reactionary edge tends to come off a bit with age and awareness of one's good fortune, yet some purveyors of rage persist even though they've lost their mojo. The reality is that it pays too damn well to inveigh against the putative demonic plutocracy than to do things like illuminate the slow and imperceptible progress of our times. Perpetuating the "robber baron myth" has always been quite lucrative, but it is indeed that, a myth. The linguistic formulation of "robber baron" is so laughably inaccurate as to be Orwellian. Classic "robber barons" like Carnegie and Rockefeller were, of course, the opposite of barons, they were both born and raised in obvious poverty, and they did not rob anything, but created something from almost nothing. Both Carneige and Rockefeller gained enormous wealth by creating large industries that didn't exist prior. But I've digressed...

The main inspiration of this post was to comment on the delightful detail of Pynchon's newest corporate evil-doer. The robber baron character in "Against the Day" is Scarsdale Vibe. I wonder if Nick Kristof was his inspiration!

Paulson To Say Major Rethink In Order

Treasury Secretary Paulson today will give a speech calling for, as a pink, foreign newspaper describes it, a "root and branch" rethinking of the US's approach to capital markets regulation. More after the speech.

Previous Paulson coverage here.

UPDATE: Here is Bloomberg's take and here is the text of the speech.

Revolutionary Zeal Ain't What It Used To Be

Wait a second...this is a Socialist? Isn't that Hermes?



















More of what the Socialists are wearing this season here.

Chuck "Materazzi" Schumer

OK, it may not be up there with Materazzi and Zidane, but c'mon, aren't you just dying to know what Chuck Schumer said to John Kerry in the hallway?

Pro-Growth, Pro-Liberty Vote on Healthcare As They Exit?

Health Savings Accounts are a good start to healthcare reform, but not nearly all that should be done. Nonetheless in the current political environment we shouldn't scoff at any gains we get in terms of a more free-market approach to healthcare. I have said before that states will lead the way in terms of policy innovation, and such is the case. In a weird, Twilight Zonish development, Michael Barone reports that the one gang of Republicans that drove themselves to the lowest depths of public approval is set to pass an expansion of HSAs. Why is that these guys couldn't pass this pro-growth, pro-market, pro-liberty, pro-individual, anti-statist legislation before they destroyed their standing with voters?

Sarbanes-Oxley Reform Coming

SEC Chairman Christopher Cox, interviewed by Bloomberg, says that changes implementation standards for section 404 of Sarbanes-Oxley will be coming in early December and be "significant." Bloomberg has the video in its Audio/Video section on its homepage. It looks like the section 404 stuff will have a materiality test, which should go a loooong way to fixing things. We'll see, but this is progress. Finally.

Milton Friedman Takes His Place In the Firmament of Heaven

One of our greatest minds and citizens has passed away. Milton Friedman is dead at age 94. Lest you think this is a sad day, it is not. Death is inevitable, we can only feel blessed that we had Milton Friedman walking among us for a robust 94 years. The best way to mourn/honor him is to go back and reread (or read for the first time if you haven't) Free to Choose and/or Capitalism and Freedom.

Rest in Peace Good Sir.

...and, if there is just one thing that you want to take away and hold on to from Friedman's thinking, it is this...the four ways to spend money.

Person of the Year

I guess Time magazine is deliberating about who should be its Person of the Year. I'm sure Time's editors will bandy about some of the familiar putative do-gooders and supposed influencers for the sake of debate, but the choice seems pretty obvious to me. If you give FORTY BILLION DOLLLARS (an amount equal to the GDP of Oman) to charity and don't get Person of the Year, something is screwed up, don'tcha think?

New Jersey and You...Perfect Together???

New Jersey, the boyhood home state of Donny Baseball, continues its quest to become the most unlivable state in the country. It is drawing up plans to turn the major, free interstate routes to toll roads. The crushing taxes, horribly corrupt government, unnecessarily high cost of living, and the overregulated economy just seem to get worse and worse. On the plus side, the Garden State is home to the sixth ranked college football team in the nation!

Yergin's Peak

Bloomberg reports on a new report out by Cambridge Energy Research Associates, the firm run by respected energy expert and Pulitzer Prize-winning author Daniel Yergin. Basically, CERA says that peak oil is 30 years in the future (for those who believe in Hubbert Peak). The report also claims that production declines will be slow and gradual and bolsters what we already know to be true in the energy business, that advancing technology and evolving political situations mean we can find and extract ever increasing amounts of energy.

Yergin is disliked by the Peak Oil crowd and they are always out to discredit him. The Bloomberg article cites a guy at ASPO who takes a putative swipe at Yergin by claiming that Yergin's research is a scheme to make money and that he won't reveal his data. Well, YEAH! Yergin runs a business and presumably he is endeavoring to have it be profitable. How does one run a profitable research business? By producing research that is insightful and accurate to an extent that clients are willing to pay for it. And Yergin does. So why would Yergin give his data and analytical methodolgy away for free when he can make a very nice living by selling it?

More thoughts on Peak Oil here and here.

When All Else Fails, Whine To The Government

Two very interesting business tussles make the pages WSJ today - the NFL Network versus the major cable carriers and the NYSE versus major Internet companies. The NFL and the cable guys are locked in what the WSJ rightly calls a game of chicken, the NFL wants to raise prices and get on the cable networks while the cable networks want the programming but at lower prices. And so they battle, negotiate, and each hopes that market forces will favor their position. Same thing is going on with the fees that the NYSE charges Internet companies for stock price data. Although in this case, the Internet companies are not fighting it out in the marketplace, they are whining to the government. This is exactly what they are doing in a showdown with large ISPs like Verizon and Cablevision. I keep hearing how Silicon Valley companies are full of such exceptionally smart people. If they are so smart then how come they have to go crying to the government when things don't go their way and/or they get outflanked strategically? Maybe they are smart in the sense that they know that enlisting the government is the best way to play the game with a losing hand. In this sense, they are like the airlines or the big three automakers. In light of all this, seems to me that the vaunted Silicon Valley reputation for intelligence and business savvy is a bit overblown.

Post-Election, Rubinomics Has Its Sleeves Rolled Up

Donny Baseball on February 9, 2006:

"The true goal of Rubinomics is to always raise taxes to the level of expenditures, not to make distinctions and judgements on the merits of the expenditures."

Bob Rubin on November 9, 2006:

"You cannot solve the nation's fiscal problems without increased revenues."

"I think if you were to increase taxes right now you would have probably about zero negative effect on the economy,"

(HT: Larry Kudlow)

UPDATE: The WSJ takes a hack at Rubin as well.

Three Cheers For Nancy Pelosi and the 'Special Interests'

Check this out. Pelosi got more campaign dough from Kleiner Perkins than from the AFL-CIO and, naturally, they want her to push for Sarbanes-Oxley reform so that it remains easy and cheap for them to unload their portfolio companies on the public markets. I guess, sometimes even the most principled "progressive" has to bend to the will of capitalist reality.

This follows Chuck Schumer signing on for reform of Sarbox.

They'll Let Anybody In This Club

Greg Mankiw will be thrilled...Dominique de Villepin has joined the Pigou Club!! And in other news...

As I've said, let's stay well behind the Europeans on this one lest they are driving themselves over a cliff.

UPDATE: A pink foreign newspaper has more on how France, in the name of climate change, is walling its economy in from the world. Regardless of the intentions, this is protectionism and it will have the same impact to France's economy as if the intentions were otherwise.

Pay Dirt!

Incoming House Financial Services Committee Chairman Barney Frank says that hedge fund regulation is not a priority. Looks like this was money well-spent.

Airbus: Value Play or Value Trap?

The Emiratis are trying to figure out if Airbus is a value play or a value trap (or in other investment parlance, "cheap for a reason"). Long term the airlines cannot abide having only one healthy airplane supplier. Still, can a flawed structure be reformed at least enough to squeeze some returns out of Airbus? Also, do they really want to invest alongside the Russians? Experience councils caution on that score.

UPDATE: Some pink, foreign newspaper has a BIG roundup and commentary today on the troubles at Airbus (subscription req'd).

I Am Firmly On the Bandwagon, Until I Am Off

Maybe you just have to be from Jersey to see the subtle ironic beauty in this headline. Who knows. Regardless, it's ON! Go Knights!

Spilling Pharmaceutical Seed Corn

Greg Mankiw nails it. Price controls on drugs today spills the metaphorical seed corn for the future. As for me, I expect that I will get sick later rather than sooner, so I advocate letting the science whiz kids of the world make huge money by developing the cures now for the dread diseases that me and mine will get decades hence. Thus we must dispense with the noxious platitudes that we have a "right" to healthcare. "Healthcare" is another person's expertise, their creativity, their scientific insight, their hard work, their tools and sometimes just their bedside manner. Regardless of what it is, I am not entitled to any of these by rights. Each of these was acquired through somebody else's resources and initiative, and I am not entitled to it. I must get whoever can provide "healthcare" to offer it to me via a mutually beneficial and voluntary exchange.

More here and here and here.

You Must Go To Iraq, Mr. President

You must go to Iraq and tell the troops that this election was a repudiation of Bridges to Nowhere, a repudiation of fiscal profligacy, a repudiation of bigger and opaque government, and timid politicians. Not a repudiation of them. Go tell them. Go tell them that every dead terrorist makes us safer, that rolling up terror training camps makes us safer, that keeping Iran and Syria nervous due to our proximity makes us safer. Go tell them, Mr. President.

Thinking Ahead to 2008

OK, time to begin building the policy platform for 2008. Republicans need to really convince small government types, Libertarians and Reagan Republicans alike, that they will walk the small government walk. How? In addition to keeping the flame for reform - Social Security reform, tax reform, tort reform, free-market healthcare reform, drilling for domestic energy - forgo namby-pamby goals. Think big, make splash. Here are a few starting points:

• The Department of Education's budget is $89 billion. Cut it in half. Yes, half. Abandon all federal mandates and aid to states. Retain only those programs that benefit the lowest income Americans, say bottom 5%. The Department of Education has no bearing on the quality of education in this country.
• The Department of Health and Human Service's budget is $700 billion most of which is Medicare and Medicaid. Those are separate issues. For now, cut in half the approximately $70 billion of HHS's budget that is discretionary. Meals on Wheels? Nice in theory, but leave it to states and private citizens.
• The Department of Housing and Urban Development's budget is $31 billion. Kill the entire department. Yes, kill it. HUD is a patchwork of subsidies and grants that make housing more expensive and urban areas more dependent on the federal government. Devolve the responsibility to states.
• The Department of Energy's budget is $23 billion. Kill it. Biggest waste of money there is. Alternative fuels? Leave it to venture capital and the private sector. We'll have more, better, and cleaner energy as a result.
• The Department of Commerce's budget is $9. Small potatoes, but cut it in half anyway. Plenty of subsidies and protection that can and should go poof.
• The Department of Defense's budget is $400+ billion. Defense is important and cannot be done by the private sector. But there is ALOT of fat. Freeze the budget for 5 years, force the department to prioritize necessary projects over fat.
• The Department of the Interior's budget is $10 billion. Small spuds but kill it anyway. Let states steward their natural resources. Nobody cares for the land like the locals.

Much of this will shift fiscal burdens to states. Fine. Cut federal taxes so that citizens have more money to pay state tax increases and let the 50 states compete to provide efficient government. Bloated, inefficient state governments will lose residents, economic and political power. Efficient ones will win.

This advice is easy applicable to Democrats as well. Americans want honest government first and foremost and less government ultimately. If you want to keep this majority, you will need to show at least some propensity to admit the ineffectiveness and unnecessariness of certain government activities. Two to four years of "we are going to take things away from you for the common good" will land you back in the wilderness.

Post Mortem

It's late and I want to go to bed, but let me dash off a little note to Republican Bozos...

Dear Republican Bozos,
Don't delude yourself that this slaughter was about George Bush and Iraq. This was about YOU and your arrogance and stupidity. John McCain who I do not like but I must concede has it exactly right, you came to Washington to reform the government and you became the government. You did not steward the taxpayers money. You cared more about incumbency than about principle. The blame for tonight rests with Ted "Secret Hold on Coburn-Obama" Stevens, Don "Bridge to Nowhere" Young, and Jerry "Appropriations A-GoGo" Lewis, and whoever said "I'm gonna earmark the shit out of it". It's your bloody fault . Sit in your cocoons all you want and mutter to yourselves about George Bush and Iraq, but this is why you got slaughtered.
Best,
Faintly Libertarian, Capitalist Voter Who Would Have Been in the Bag if You Weren't Such Bozos

UPDATE: Not that the Mirror is known for incisive political analysis and not that its readers are really in the market for true understanding of US political dynamics, but on the off chance that it might register at the Mirror or with Mirror readers...this is all wrong. See above and see here.

Pelosi: Buy Pharma, Buy Big Oil, Boo-Yah!!

My main reaction to these ostensibly shocking statistics is "so what?" But for shits and giggles, let's check her math...

Pelosi Assertion #1: In 100 hours, the top five oil companies will take in $4.3 billion in profits.

Let's see. ExxonMobil made $36.13 billion in net income last year. That's roughly $99 million per day or $412.4 million in 100 hours. Exxon is the largest oil company, so the top 5 oil companies can't be larger than 5 Exxons. 5 Exxons would make $2.06 billion in 100 hours, not $4.3 billion. Only off by 50%.

Pelosi Assertion #2: In 100 hours, the top 10 pharmaceutical companies will gain $2.6 billion in profits.

OK. Pfizer made $8.09 billion in 2005 or $22.2 million per day, thus $92.3 million in a hundred hours. 10 Pfizers would make $923 million and since the top 10 pharmaceutical companies can't be larger than 10 Pfizers, she's not even close.

Granted these are 2005 numbers. 2006 numbers could be better naturally. Given the magnitude of the disparity, if these are the run rates that Pelosi is assuming I can only conclude that Pelosi is forecasting stunning earnings growth and blowout corporate profits well beyond "street expectations." She's as bullish a forecaster as I've seen! Buy stocks! Go Nancy!

Another Arrow In Airbus

Emirates and Singapore Airlines are critical to the A380 as they are the premier passenger airlines for big planes, but it is easy to overlook the important cargo segment. So, it is a crushing blow to the A380 that Fedex has cancelled its A380 orders and will buy the triple 7. This is devastating news. Fedex has competitors and if they want to compete they will need planes too, and if the A380 isn't ready, they too will have to buy what is available. More such news is in the offing, I believe. Airbus reminds me of the classic depiction of St. Sebastian, sure he is still alive, but the outlook isn't all that sunny.

Lest readers think that I gloat over European failure and US success, as that is the prevailing undertone of the Boeing/Airbus rivalry, I do not. I do not relish the misery of Airbus's shareholders, workers or customers. I want to see excellence and success in commerce regardless of its geographic origin. And I want to see the continuing fruits of human ingenuity manifested in the progress of commercial aviation. What I do relish though is the defeat of the statist industrial model at the hands of dynamic capitalism. I relish the victory of Adam Smith, F.A. Hayek, and Schumpeter (all Europeans mind you) over Marx, Keynes, and EuroStatism.

Man Is It Lonely Out Here

Mrs. Baseball and select other associates have known that I have been predicting a Democratic House and a Republican Senate for sometime (at least a year) but I haven't gone on record as saying such so I can't prove my political analytical savvy to the world. But I did predict lots of bitterness and puckering over a year ago. Safe to say that one was on the mark.

The MSM seems to be continually pounding the theme that voters are upset over the situation in Iraq. I guess. I mean the MSM are generally quite in tune with the people and deadly accurate perceptive, right? Just for the record then, I am one of the negligibly small percentage of Americans, by MSM logic, that aren't upset over the situation in Iraq. I am upset that I don't have a way to opt out of the Social Security Ponzi scheme. I am upset that I can't buy health insurance that is identical in cost and purpose to the life insurance that I buy. I am upset that my tax dollars are going to provide miracles of science to the wealthiest generation of human beings that the world has ever seen and bridges for small communities in Alaska. I am upset that I can't plan my family's investments past 2010 because I don't know what tax policy will look like. I am upset that we aren't drilling like mad for oil in Alaska and the OCS so that we don't have to buy oil from Hugo Chavez and the Saudis. I am mad that the government feels it is its duty to intervene in myriad aspects of my life that it has no business in and that it does so in a ham-handed, bone-headed and worthless manner.

Reading the mainstream news I feel like the only guy in America who feels this way.

America On Pins and Needles Over Looming Contest

One more day until we can start the 48 hour countdown to what the entire country has been abuzz over...that's right...Rutgers vs. Louisville on Thursday evening! Get all your pregame hype here and your bargain tickets here.

It's Just a Matter of Probabilities

So this NYTimes story - the one about how Saddam Hussein was a year away from building a nuke - has resurrected the whole war justification debate (as opposed to the war status debate, which apparently the coming election is about).

What irked me throughout the whole debate regarding Iraqi WMDs was the terrible black/white framework in which the debate was conducted. Did/does Saddam have WMDs, yes or no? This was not the right question. The right question was "what is the probability that Saddam has WMDs?" Certainly it wasn't 100%, but it sure as hell wasn't 0%. Similarly with the probability that Saddam had ties to Islamic terrorist groups like al-Qaeda. Maybe it wasn't 100%, but definitely not 0%. Of course the next question for purposes of policy was what level of probability for these issues are the American people willing to live with? 5%? 20%? 50%? Of course, estimates of costs and benefits will vary and the value ascribed to each this can be a highly subjective matter, but at least this would have been at better way to view the debate and to analyze where we are today. If I told you that the probability that Saddam had both ties to terrorists and WMD was 25%, you may or may not have supported the war. You also may or may not be upset about the current state of the war. At some level of probability the current situation in Iraq has to be considered preferrable to having Saddam, situated as the Times says he was situated, in power. No Saddam, US boots on the ground, albeit with Sunnis and Shiites killing each other vs. a Saddam a year away from having a nuke? Where's the tipping point? I would say that what the NY Times has reported has raised the probability that Saddam was a real threat, making the decision to oust him more justified and the current situation more tolerable. It is mind-boggling to me that they didn't see it that way.

Boffo Employment Numbers

The jobs data for October are out and the report shows 92,000 additional payroll jobs. A survey of economits had expected 123,000 (as if economists are good at predicting anything). Normally it would be this shortfall that gets highighted in the media to put a pessimistic spin on the numbers. Shockingly, every media outlet I have spied this AM takes the straightforward angle - that unemployment hits a five year low. Revisions to August and September numbers added 139,000 jobs to what was previously thought. This is on top of the, oh, 800,000 jobs that they missed counting all year. And let's not forget that as the unemployment rate has plunged well below 5% to 4.4%, there just ain't many great people left to hire, so faced with hiring bozos or not at all, some employers will not hire, which will slow the rate of hiring naturally, so a slowing in payroll hiring is to be expected.

(Yes, the word of the week is "boffo".)

Boeing vs. Airbus, Part VII

I have fallen down on the job as of late in covering the greatest business rivalry of all time, but Varifrank is on top of it. As he points out Emirates and Singapore are the keys. They are the marquee customers for big planes. Emirates cancelling reveals the depth of the doodoo that Airbus is in.

Whew! The Apocalypse Has Been Postponed

Rutgers-Louisville tickets are going for $425 on eBay! Alas, do not be afraid, the world is not spinning off its axis - faced with the choice between a crook and an empty suit for Senate, Jerseyans appear to favor the crook.

You Can Have Your Duck Fat and Eat it Too

"...reservatrol at high doses..." huh? Got it covered.

Canada Shows Us How to Kill Our Stock Market

Numerous pundits have raised the specter of Rep. Charles Rangel becoming the Chairman of the House Ways and Means Committee in a Democrat controlled Congress. Rangel has gone on record saying that there isn't a single tax cut enacted during the Bush administration that he wouldn't seek to reverse. Investors are specifically worried that the 2003 dividend and capital gains tax rate cuts would be allowed to expire under a Rangel controlled Ways and Means. They should be, and just to make it all that much more real and frightening, the Canadian government today gave us a taste of what it would be like for our stock market, where our nest-eggs, our pensions, and many people's hopes and dreams are invested. Canada is raising taxes on a tax-favored security known as an "income trust" and the value of these securities predictably tanked. This is what will happen to the value of stocks here in the US if dividend and capital gains taxes are allowed to go up in 2010. In fact, this will take place well before 2010, when the market anticipates that the tax cuts will be allowed to expire. Happy investing.

Wonders Never Cease

I am agog. One of the the most unreconstructed liberal members of the Great Sausage Factory's Upper Chamber, my very own Senator, Chuck Schumer write this today in the WSJ:

"First, what lessons can we learn from other nations' regulatory systems? Currently, there are more than 10 federal, state and industry regulatory bodies in the U.S. The British have only one such body. Industry experts estimate that the gross financial regulatory costs to U.S. companies are 15 times higher than in Britain. Beyond cost savings, the British enjoy another advantage: While our regulatory bodies are often competing to be the toughest cop on the street, the British regulatory body seems to be more collaborative and solutions-oriented.

With the benefit of hindsight, the Sarbanes-Oxley Act of 2002, which imposed a new regulatory framework on all public companies doing business in the U.S., also needs to be re-examined. Since its passage, auditing expenses for companies doing business in the U.S. have grown far beyond anything Congress had anticipated. Of course, we must not in any way diminish our ability to detect corporate fraud and protect investors. But there appears to be a worrisome trend of corporate leaders focusing inordinate time on compliance minutiae rather than innovative strategies for growth, for fear of facing personal financial penalties from overzealous regulators.

Second, what lessons can we learn from other nations' legal environments? The total value of securities class-action lawsuits in the U.S. has skyrocketed in recent years, to $9.6 billion in 2005 from $150 million in 1997. The U.K. and other nations have laws that far more effectively discourage frivolous suits. It may be time to revisit the best way to reduce frivolous lawsuits without eliminating meritorious ones."

It gives you a sense of what a disastrous misfire Sarbanes-Oxley was that Chuck Schumer would even put his name to this let alone do so before his colleague Paul Sarbanes has even left the building.

Read the whole thing.