Monday, October 27, 2008

Hats off to Brother Carter!

Those of us who met on the old INTEL-Dump and have continued our cyber friendship will appreciate this IHT article. Whatever your politics, we owe a "hats off" to Phil Carter, as whatever level of camaraderie we share, Phil made it possible, and I thank him for introducing me to all of you, as well as many of the "old timers" with whom we no longer have contact.

INTEL-DUMP came into existence because Phil cares. The participants joined in the fray because we cared. Phil used a level of intellectual discourse that generally made the discussion stimulating.

Best to Phil, and best to all of you.


Monday, October 20, 2008

Does this leave you a little ill at ease?

I found this "Challenge Coin" today on the internet. Versions for each branch of service are available.

Are there not limits on what one can use the official seals of government agencies for? Can one use the service seals to promote obviously sectarian religious beliefs?

Is the mission of the US military "to stand against the devil's schemes"? If so, which schemes? To many who read Ephesians as part of their faith, unjust war is a scheme of the devil.

Is that a Crusader? If so, not only Muslims would be offended. Orthodox Christians still remember the sack of Constantinople.

For me, this is much more than a little bit unsettling. It's offensive.


Saturday, October 18, 2008

What does the story of Joe the Plumber tell us?

Last night, while waiting at the port for the bride to return on the ferry from Athens, I grabbed a cappuccino and watched the news at the cafe on Greek TV. A full 5 minutes were devoted to the unfolding story of "Joe the Plumber". The newscaster's comments were certainly unflattering toward Joe, John McCain and US politics in general. My fellow coffee drinkers watched and when the unexpected turn of events were given, laughed heartily at how McCain had failed to get the real story on Joe, his occupation and less than honest representations to Obama.

There is, however, at least to me, a very telling lesson to be learned here. John McCain is running for the highest office in the land. Amongst his many claims for being highly qualified is his military service. If there is anything I learned in the military, it was that you "never come to class without having done your homework". Apparently, John forgot, or never learned this lesson.

But more significant to me, a lover of numbers and the challenge of making sense of them, Joe's comments didn't hunt from the very beginning. First, Obama's $250,000+ income population represents about 2% of the households in the US. Was this guy saying he was going to buy a plumbing firm that would set him above 98% of the households in the country? Quite a stretch. Then I thought about what level of business a plumbing firm would have to do to turn a quarter million in profit. At a 20% profit margin, he'd have to have annual sales of $1.25 million. That's a hell of a lot of plumbing at a very high profit %.

When McCain jumped upon Joe as an example of "middle class workers", that really blew me away. Again, Joe's question pertained to tax rates on the highest 2% of households. I doubt there are many "workers" in that category, and by definition, no middle class households. But, it looked like a great "GOTCHA" moment. Rather than simply say that Obama simply wanted to "spread the wealth", McCain decided to make Joe an icon of how Obama would repress the working class.

The Story of Joe the Plumber, as presented to the world by John McCain, is a fraud. First, the tax proposal being bashed does not apply to the working class. Second, Joe will never make $250,000 by buying his boss's two man plumbing operation. Third, at present, Joe cannot buy the company and operate under current licensing laws in his area.

Anyone who has taken a freshman level course in business should have seen the holes in Joe's original comments. Anyone versed in public policy should have recognized that $250,000 annual income is not representative of the middle class. Anyone who served in the military should have thought about doing some homework before thrusting this incident onto the world stage as a campaign transforming event. John McCain claims expertise in all three of these areas. As cute as it was, it just didn't hunt.

That the campaign, along with it's candidate, chose this path raises some very serious questions about both. But, in this age of sound bites, cute and gotchas, those serious questions will never be as fully addressed as, let's say, where Bill Clinton stuck a cigar.

So, what the story of Joe the Plumber tells us, is that no matter how bad our government and our elected officials perform, we deserve it. We keep electing people like this.



Sunday, October 05, 2008

So, what is this thing called infrastructure?

A recent news item quoted snippets from the two candidates about the economy:

"I will rebuild the middle class and create millions of new jobs by investing in infrastructure and renewable energy," vowed Obama.

McCain pledged to "open markets around the globe for our products, cut taxes and expand domestic production of energy ... I will create jobs and get the economy on the right track."

I find Obama's use of the term infrastructure interesting, not because our infrastructure is not in need of investment, but because it is probably one of the more neglected and misunderstood elements of America.

On the other hand, McCain touts "market expansion" as the cure all. Expanding markets create jobs. You know, like the vast expansion of the mortgage market.

First, one should keep in mind that many significant elements of our infrastructure are not serious long term "GDP multipliers". Rebuilding sorely neglected bridges creates jobs for the construction project's duration. The bridge may be enduring, but the jobs are not. Thus, the cash infusion is finite, and any workers trained and employed in these projects will be looking for new employment at the project's completion. Yet, we need to bite the bullet and tend to this task. To me, the sound approach would be a long term infrastructure building and maintenance program that would establish, at the least, a stable labor pool, and an "industry" with a long term life expectancy. The difficulty is doing this in a tax averse, profit seeking society. We must have "growing markets", and if we are talking about tax funded infrastructure, the end result is higher taxes to "grow the market opportunities", especially if profit making firms have a vested interest in the "market". But many elements of infrastructure are societal needs, not simple capitalist markets.

So, we must avoid the pitfalls of never ending public works projects. Taxes must support necessary infrastructure. Infrastructure vital to the nation's well being. Otherwise, we become like the former Soviet Union, where vast fortunes were spent building unnecessary facilities solely to create jobs - year after year after year. Exquisite amphitheaters for band performances to entertain passing boats along the Volga River waterway, for example. When we cruised up the Volga in 1992, we saw numerous amphitheaters, facing the river, kept neat and clean, but never used. As our Russian friend said, "Build it. Engage a staff to keep it clean. Lots of jobs. Lots of Jobs. But nothing meaningful produced - not even music." Adding to the horrific burden that caused the government to collapse of its own weight.

And all infrastructure is not simply brick and mortar. Consider air transportation. Since the start of airline deregulation, the US has really had no serious air transportation policy. Safety regulations, operating regulations, airport building programs and the air traffic control system, yes. Those four areas are pretty much what represents the infrastructure of the US air transport system, and these are what are addressed in allocating the current resources and planning for the future air transportation needs of the country. Notice I didn't mention airlines. During the blood bath of "Fare Wars" in the early 1990's, Bob Crandall, then CEO of American Airlines, said that airlines were no longer anything other that the purveyors of a commodity - "cheap seats between point A and Point B". Anyone with enough borrowed money could enter "the market" with a couple of aircraft and offer cheap seats, whether or not these seats were necessary, and whether or not the business plan could ever realistically offer a profit. These low price airlines drove the rest of the industry to match their prices, as any cash flow is better than no cash flow.

Now, one might say the the flying public benefited, because they were able to save considerable money in airfares, and many more people got the opportunity to fly. On the other hand, look closely at what this "commodity" approach to airlines has created over the last 18 or so years. Employment in the industry is highly unstable. Real wage levels in the industry have fallen. Route structures are unpredictable. Every major airline (I'm including Southwest) in existence in 1990, except two, has either gone out of business or declared bankruptcy to stay in business. Billions in retirement plans as well as employee and investor saving have evaporated. All but one major airline now ships its "major maintenance" tasks to foreign sites, where quality oversight is questionable. But even if the quality is OK, highly skilled jobs are lost in the US, diminishing the domestic size of this talented labor pool in the long run. And, as we now see, all airlines are having to significantly reduce total capacity to survive, driving fares up and eliminating cities from the route network. And this contraction has hit the domestic market harder than international routes, resulting in fewer US jobs. In short, allowing "market forces" to make airlines commodity suppliers rather than an integral part of the air transportation infrastructure has had enormous long term societal cost.

If you want to jump up and shout, "What about Southwest?", I would respond that Southwest is a "niche" airline that has wisely identified and dominates its niche. It is not part of the US airline "system" in any respect other than using airports and air traffic control. You cannot book travel through Southwest outside its own system. Part of the savings in using Southwest is its use of outlying or secondary airports. If you want to travel from Amarillo, TX (as well as dozens of other cities that Southwest serves) to London, for example, you will have to change airports (at your time and expense) to connect to the transatlantic flight, carrying your baggage with you in the taxi, train or bus. And, if your SW flight is late or canceled, the airline to which you are connecting has no legal obligation to accommodate this problem. Unlike "regular" airlines, a Southwest ticket carries no cash value outside Southwest. I am not saying Southwest isn't great. I am just saying that upon close inspection, it is operating in a system of its own and provides a service separate and different from what we see as the "air transportation system". It does, however do its job well and at benefit to the flying public. But if all airlines were to adopt Southwest's model, there would be no "system" and travel would be truly chaotic.

Placing the airlines into the "infrastructure" of the air transportation system of the US would indeed stabilize the industry, and that could be done to a great measure by establishing a national air transportation policy. Here in Europe, the discounters are restricted to point to point niche markets by requiring them to generally use a secondary airport at one end of each route. Niche markets are recognized and encouraged. What Southwest does to lower costs, European regulators do to preserve infrastructure. And everybody benefits.

But the air transport system is not the only element of infrastructure that has fallen prey to free market forces. Anyone remember ENRON, or the financial "system"?

"Infrastructure" has such a noble ring. And, in the main, US infrastructure in many areas is deteriorating, often to make way for "free market" profits, as well as to gain political capital by lowering taxes. But in the end, failing to recognize, build and maintain essential infrastructure delivers a down stream bill which often far exceeds the tax savings and short term profits initially enjoyed.

Hopefully, Mr Obama knows a bit more about infrastructure than our national track record demonstrates. Should he be the successful candidate, and if he understands even the basics of national infrastructure, we may very well benefit.


Friday, October 03, 2008

Thought provoking piece by John Eisenhower

Today's IHT has this piece by John S.D. Eisenhower, Ike's son.

I offer it without comment, other than it's revelations and opinion are thought provoking.

What do you think?