~ Archive for Uncategorized ~

How many times do we have to pay for the same Internet service? (net neutrality)

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It seems that the Federales have decided not to regulate Internet service providers with regard to “net neutrality” and carrying, e.g., Netflix streams to your house (nytimes). So now these unregulated monopolies will be able to charge us $50-100 per month for service and then charge us again for the same Internet service (by charging Netflix, et al., who will then turn back around and raise our subscription rates). Maybe they should save everyone a lot of trouble and just allow Comcast, Time-Warner, and Verizon to collect a 5% payroll tax on wages in exchange for … giving us whatever Internet speeds and cable channels they think would be appropriate.

Carlos Slim is presumably laughing at us right now…

Related: Thoughts on the Comcast/Time-Warner merger

 

City of Cambridge charges citizens 754 percent interest…

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… and citizens apparently don’t object.

The City of Cambridge received my $111 car excise tax payment, due March 18, about 12 days late, either because I mailed the check late or it was delayed in processing (I’m not quite sure).

Today in the mail I get a “warrant” where a private collection agency hired by the city wants $27.52 as compensation for this late payment. That’s a 754-percent interest rate. I spoke to an official in the tax department at city hall and she said “we’re required by state law to charge that.”

Credit card issuers tried stuff like this and they ended up getting tangled up in regulations that restricted their abilities. Why aren’t their similar efforts to limit how much local governments can charge when they don’t get their $100 on the date expected?

[Separately, clearing up a situation like this is a lot harder with the government than with banks. Bank employees are typically at work mid-day/mid-week. Whereas I only had about a 25 percent success rate in reaching the government employees that I attempted to contact to find out where and how to pay this.]

And you might ask how badly does the city need the $5.44 that they might net after paying the collection agency (assuming that they do in fact get 100% of the debt)? Cambridge gave its outgoing city manager a $5 million retirement package (story). The current manager, Richard Rossi, was earning $330,000 per year back in 2013 (Boston Globe), plus pension commitments whose ultimate cost cannot be established. So the answer is… pretty badly!

College administrators: Why are there so many rich white and Asian people buying our $300,000 product?

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One of the perks of being an expert witness in software patent lawsuits is that I get to eat where law firm partners eat. At O Ya, for example, I enjoyed the $285/person “grand omakase” menu (would have been another $100+ for the wine pairing, I think). At L’Espalier it was only about $200 per person, including wine. At no time did the restaurateurs come out, scan the dining room, and say “I can’t understand why it is mostly rich white and Asian people who eat here.”

Yet give a person a PhD in Higher Education Administration and he or she can be reliably counted on to wonder “Why don’t we have more racial diversity here on our gold-plated campus?” Following the Supreme Court’s decision in Schuette v. BAMN, upholding Michigan’s ban on sorting applicants to public colleges by race, university administrators are scratching their heads once again, unable to figure out why a $300,000 undergraduate degree is appealing primarily to white and Asian Americans.

I’m wondering if it would make sense for a college that was interested in having a more diverse student population simply to cut prices so that a degree cost less than, say, a lightly used Rolls-Royce. There is a lot more racial diversity in a restaurant that charges $20 for a meal than in a restaurant that charges $200. Why wouldn’t we expect to find the same in higher education?

Hugo Chavez: Great politician; poor administrator

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I have finished Rory Carroll’s Comandante: Hugo Chávez’s Venezuela. The book has a flawed structure, jumping back and forth across the 14-year period during which Chavez served as Venezuela’s elected president. There is also some redundancy that a good editor could have eliminated. However, the details, gathered by an Irish journalist who was the Guardian’s correspondent in Venezuela for about six years, make it a worthwhile effort.

Chavez seems to have been perhaps the most able politician of our times. According to Carroll, he managed to (1) rewrite history so that previous leaders seemed terrible by comparison, (2) take credit for anything that was going well, (3) duck responsibility for anything that was going badly, (4) continue to get elected in reasonably fair elections. Here are some samples relating to Chavez’s political skill:

Every government leader uses the media to justify and persuade, project and burnish, but none like Chávez. He was on television almost every day for hours at a time, invariably live, with no script or teleprompter, mulling, musing, deciding, ordering. … On days off you could leave your apartment, take the metro across town, pay utility bills, meet a friend for coffee, buy groceries, pick up laundry, come home, and find him still talking.

Chávez and his scholars were even bolder in rearranging the twentieth century. Traditionally, Venezuelans were taught that the uprising against Marcos Pérez Jiménez in 1958 ended the reign of dictators (so rushed was his flight to exile he left $2 million in a suitcase on the runway) and ushered in multiparty democracy. Chávez needed to reverse this sequence of virtue; otherwise how could he be the nation’s savior? Thus he half rehabilitated a U.S.-backed brute who murdered and jailed thousands, repeatedly praising his public works, his discipline, his patriotism. “I think General Pérez Jiménez was the best president Venezuela had in a long time,” he declared. “He was much better than Rómulo Betancourt [an elected president], much better than all of those others. They hated him because he was a soldier.” The democracy that followed the dictator was cast as the true villain: an electoral charade to dupe the people while oligarchs looted the country. Chávez’s family history was reordered to fit the new official truth. His father had been a proud member of COPEI, one of the “putrid” ruling parties, and despite his modest teacher’s salary all six of his children went on to college education and decent careers. The state provided subsidized housing (Chávez lived in one with his grandmother) and free, rickety education and health care, making Venezuela South America’s richest country until populism and corruption rotted the system in the 1980s. All this became heresy. The comandante, the nation was told a thousand times, was born in extreme poverty, a mud hut, and grew up in a venal, vicious system. “It punished the poor. Spat on the poor.” Thus his 1992 coup against Carlos Andrés Pérez was not a military conspiracy but the cry of an oppressed people. School textbooks were amended so the coup became “a rebellion that changed the destiny of the republic.”

The Liberator’s sacred work would be completed with socialist and communal values replacing capitalist individualism. The comandante called it the Great National Moral and Illuminating Journey. “Education, morals, and enlightenment in all spheres, everywhere, at all times.” He had spoken of this upon taking power, and by 2007 he had formalized it into an official campaign, inaugurating moral and enlightenment training brigades and creating a presidential council to guide schools and universities toward the new consciousness. The campaign did improve lives and elevate learning through literacy programs, which reached rheumy-eyed grandmothers in the slums, and expanded education, which let poor students stay in school and move on to free tuition at Bolivarian universities. The comandante, a talented didact, urged followers to read history, philosophy, and poetry, brandishing his latest favorite tome as an example. … Housewives and taxi drivers found themselves debating colonial history, social consciousness, and the global economy in communal councils and evening classes. Teenagers who normally would have dropped out enrolled in colleges to study architecture, engineering, and literature. A new state-run film studio, Villa del Cine, contributed by producing social documentaries and costume dramas about Venezuelan history. State television talk shows discussed gender equality, the rights of indigenous people, and the role of trade unions. All this unfolded, noted the comandante’s supporters, while the West hiked education fees and wallowed in shallow materialism.

What mattered, as the [2012] election neared, was having the means to confect a boom. Chávez ordered big pay raises for state workers—he was most generous with the army—and a blitz of new payments to pensioners, mothers, children, and students. For the first time the money supply exceeded $100 billion. To tamp down inflation, which was the hemisphere’s highest, the government fixed the prices of fifteen thousand goods, everything from coffee to toothpaste, based upon “scientific analysis” of what constituted fair prices. Soldiers and civilians in red T-shirts patrolled warehouses and stores to ensure that businesses complied, even if it drove them into bankruptcy. At the same time, ports worked overtime offloading containers from around the world to keep shelves stocked. It was like shaking a bottle of champagne and holding down the cork. Inflation and devaluation waited down the line, but in the short term the strategy worked. People had money in their pockets. And many, for the first time in their lives, had hopes of a decent roof over their heads. Venezuelans expected their government to supply cheap housing, but the comandante had built less than his predecessors. Three million people—almost a tenth of the population—lacked adequate accommodation. Thus was hatched the Great Housing Mission, a scheme to build two million houses within five years. “I will not rest in the quest to solve this drama inherited from the curse of capitalism,” said the comandante. It was impossible to build so many houses so fast, not least because nationalized cement and steel factories were sputtering and private contractors feared building anything that could be expropriated. So the government paid firms from Belarus, Russia, China, and Iran inflated prices to throw up apartment blocks all over the country. They also painted slums—those visible from the motorways—bright red, yellow, and blue, Venezuela’s national colors. By mid-2012, the comandante claimed to have reached 96 percent of the housing target for that period. Every few days he or a minister appeared on television to hand keys to a jubilant citizen. The 96 percent number was fanciful, but many homes had indeed been built, or at least redecorated, and it was enough to give hope to those on the waiting list. The list was the key. The government bombarded the population with text messages urging it to register for a home. Millions flocked to mobile registration centers where they received receipts with a name, the date, a registration number, and a stamp. A well-off person cannot understand what it means to possess such a slip of paper, cannot appreciate the solemnity with which a poor person memorizes it, makes copies, and guards it as something precious, a potential passport to comfort and dignity. A vote for Chávez would keep it valid. The list did not just give hope—it gave the government a formidable database come election day.

The rate of muggings, kidnappings, and murders exploded, spreading fear like shrapnel. The state lost the ability to keep citizens safe, to protect them from each other. It was baffling. The maximum leader who liked to micromanage everything lost control of society’s most fundamental requirement, security, wringing his hands while criminals shot, stabbed, and strangled with impunity. It was not supposed to be like this. Poverty was falling and new social missions were bringing services to neglected barrios to ameliorate, as the government put it, decades of “savage capitalism.” Chávez’s opponents were also stumped. They called him a dictator, but real dictators—Trujillo, Pérez Jiménez, Fidel, Kim Jong Il—kept streets safe for ordinary people. The great journey shuddered to a halt because towns and cities were quarantined by fear. … The mayhem undermined official rhetoric about moral renewal and the poor being repositories of virtue and authentic national spirit. The government tried blaming the violence on U.S.-backed Colombian mercenaries out to destabilize the revolution, then on capitalism’s legacy of individualism. It deployed the national guard to bolster police, but the violence swirled around the bewildered soldiers, just as it did the police, and they returned to barracks. … Normally, all this would devastate a president’s support, especially if he was left-wing and could be painted as “soft on crime.” Chávez, to his credit, did not lunge for the death penalty and violent crackdowns, perennially popular but ineffective remedies in Latin America and the Caribbean. And still he managed to escape political damage. It was astonishing. His ratings held up while voters were held up, tied up, cut up, broken into, held down, gunned down, and buried. Chávez achieved this feat by doing something against his nature: he shut up. On crime, which polls said concerned voters more than any other issue, his lips were sealed. Caracas could endure a particularly grisly weekend, more than sixty dead, convoys of funeral corteges, and he had nothing to say. Thugs could abduct ranchers in Táchira, shoot police in Zulia, and rape in Amazonas without presidential comment. Grieving mothers with banners and whistles could block motorways in Valencia demanding justice for slain children, and from Miraflores silence. The comandante simply refused to own the problem. In muteness he sought and found refuge.

If Chávez had been a true dictator, the final act would have been predictable: a slide further into denial until the fantasy realm unraveled and enraged subjects booted the bewildered, pathetic figure into oblivion. His enemies scripted the imagined epilogue with various endings—Chávez boarding a plane to exile in Cuba, Chávez in handcuffs, Chávez forlorn and forgotten at the family ranch in Barinas. Each version involved disgrace and comeuppance. But here his enemies themselves succumbed to fantasy. However much they shouted “Tyrant!” and willed Chávez to act accordingly, he remained a stubborn, indefatigable hybrid: an elected autocrat. His rule stopped well short of dictatorship. Repression was mostly light and selective, involving threats, fines, and jail terms. Opponents organized freely and, with the help of a shrill (albeit shrinking) private media, fought elections. That Chávez hijacked state institutions and resources did not change the fact that people could vote against him.

According to Carroll, Chavez promised the same things as leaders in other countries:

  • To a country that already had a free public health care system for the poor he promised additional health care services/schemes
  • To government workers and people whose skills were not in demand he promised that they would be enriched through taxes on the most successful private sector workers (and that the new higher taxes would not discourage those private sector workers from continuing to work as hard as they formerly had)
  • To most voters he promised that they could enjoy a better standard of living without either working more diligently or learning new skills (i.e., the government would either raise wages or reduce prices).
  • That he would protect citizens from foreign invasion/influence via an expensive military.
  • That he would reduce income inequality.

Assisted by a big rise in oil prices, Chavez delivered on some of these promises. For example, he brought in 20,000+ doctors from Cuba and expanded health care delivery. But his efforts were stymied due primarily to two factors: (1) demographics, (2) incompetent administration.

Venezuela’s wealth is derived primarily from natural resources, such as oil and farmland. Carroll points out “When Hugo Chávez was born in 1954, Venezuela’s population was five million. By 1999 it was an estimated twenty-one million, with 80 percent crammed into crowded towns and hillside slums.” (And by 2012 it had risen to 30 million.) In other words, a fixed amount of natural wealth divided by 30 million did not go as far as when divided by 5 million.

Impoverishment through population growth doesn’t make for very interesting journalism, however, so the book is crammed full of colorful stories about Chavez’s inability to manage all of the stuff that he took over.

As the drought worsened in the spring of 2010, Chávez faced three options: reduce the subsidy that gave Venezuelans extremely cheap electricity to compel his citizens, per capita the continent’s biggest energy guzzlers, to reduce consumption; ration electricity through scheduled blackouts in Caracas and other cities; or pull the plug on Ciudad Guayana. The first two would hurt his popularity; the third would devastate the industrial heartland. Chávez didn’t hesitate. Functionaries from the palace flew to Ciudad Guayana to yank cables from half its machines. Shutting down smelters and furnaces takes time and care to protect complex equipment, but such was functionaries’ haste that entire plants were ruined. … The even better news, he said, was that the firm had not fired a single worker. All six thousand staff were still on the payroll. Instead of creating jobs and decent public services for the scavengers of Cambalache, in other words, Venezuela’s oil boom was keeping decaying industries on life support. “Thanks to the support of the Bolivarian process and its social commitment, we have been able to protect the workers from hardship,” said Gamluch. “This shows the revolution’s compassion and solidarity.” A tour of the plant was dispiriting: ghostly factories that echoed if you shouted, assembly lines with cobwebs, a yard of dusty buses missing wheels and windows.

Chávez used a land law and a billion dollars to seize and distribute a million hectares of privately owned land to thousands of new cooperatives. Their members whooped in delight and rode around on subsidized tractors. But there were no financial controls, and many co-ops disappeared with the money. Others flailed for want of experience, training, and infrastructure. They lacked spare parts, warehouses, fridges, trucks, roads, buyers. Ninety percent collapsed. The comandante spent another billion and decreed tighter monitoring and training. Officials went too far and choked replacement co-ops with bureaucracy. (My friends at La Vecindad, I was happy to discover, proved an exception. The co-op did not thrive but at least survived.) The comandante ordered more equipment and credits and seized another million hectares to try again. This frightened private farmers, who feared expropriations, so they stopped investing and sold off their equipment and herds. Co-ops could not fill the gap, because regulated prices for food starved them of profits. Scarcity spread, and store shelves went bare. Rather than raise prices, which would have hurt his popularity, the comandante imported ever greater quantities of food. When co-ops protested, saying they could not compete, ministers played dumb. What imports? So much was imported the ports were overwhelmed and 300,000 tonnes rotted in containers. Prices jumped again, so the army arrested butchers suspected of selling over the regulated price. Squads of ruling party officials raided stores suspected of “hoarding.” Rather than risk arrest, supermarket managers kept stocks bare. The comandante insisted the country had achieved “food sovereignty.”

The consequences of poor administration in Venezuela are much more severe than in the U.S., for example. If the U.S. government can’t get healthcare.gov to work it can simply print another $1 billion for fixes (where “print” = issue Treasury bonds and have the Federal Reserve Bank buy them). The Venezuelan government does not have a printing press for hard currency. The U.S. has a deeper pool of skilled workers, which means that the chance of appointing someone truly incompetent is smaller and also each skilled worker has fewer unskilled workers to support. The greater level of wealth in the U.S. can support a larger array of failed government schemes. The fragmented political system in the U.S. is an obstruction to the implementation of dramatic new laws, thus favoring stability.

Carroll explores what motivated Venezuelans to participate in this system. In some cases it was the opportunity for personal enrichment through corruption. In others it was banal careerism.

Amid the collective hush, the feigned dumbness of those who saw the corruption but held their tongue, a lone voice shouted. “All we have done is substitute elites,” it raged. “We didn’t transform the state, because it was a gold mine. And he who finds the mine doesn’t share.” Luis Tascón, the National Assembly member who had given his name to the notorious blacklist, now emerged as the revolution’s conscience. “We have been transformed by the state. It is a devouring monster . . . Our top people were born in the barrio, got out, and didn’t go back. And the barrio continues being the same.”

“You think it can’t go on like this but it does every week some new mad instructions and if you say anything you’re branded a troublemaker and sent to tour the jails on the border and trust me you don’t want to tour the jails on the border so you keep your mouth shut and just get on with it but when you hear the stories about what’s happening dear God it makes your skin crawl and to think you’re part of it is just intolerable, intolerable but at my age I’m not going to get another job am I so I just sit there at my desk with a silent scream all day processing reports and photographs that make me want to throw up my lunch I’m telling you it’s bad bad bad.” The mid-ranking official in the penal service whom we shall call Sarah paused for breath and took a sip of papaya juice. She always spoke in torrents after leaving her office as if the words had dammed up all day and demanded sluicing. It was a tic common to many mid-ranking officials, men and women in their forties and fifties who had never particularly liked the comandante and were now squeezed between Chavista superiors and young graduates from the Bolivarian universities. They loathed being part of the system but stayed for the salaries and perks. By her second papaya juice Sarah would slow down. “The office is ridiculous, far too many people, all these kids with diplomas, and half can’t write or spell; they just sit there all day waiting for something to happen and wondering when they’ll get their free holiday to Cuba.”

Americans ultimately were Chavez’s biggest fans:

Amid the comandante’s supporting chorus, one voice stood out. … Her name was Eva Golinger. Chávez christened her “la novia de Venezuela,” Venezuela’s sweetheart. She was intriguing not just as a westerner in the palace but as someone who applauded Chávez’s early stories, the ones about inclusion and social justice in the first years of his presidency, and who continued clapping even as his stories turned dark and bizarre. She became, in her own words, an “insider outsider.” She was petite, in her mid-thirties, with brown hair past her shoulders, and wore a wary smile. Her apartment was small, bright, well-ordered, and warmed by two cats imported from Brooklyn. … She was born on a U.S. Air Force base and imbibed progressive causes from a young age. Her father was a psychiatrist who had served as an officer in Vietnam, and her mother brought her on women’s rights marches. She attended Sarah Lawrence College and in the early 1990s moved to Mérida to explore family roots. Venezuela was in ferment. Chávez was in jail, an enigma, and Mérida’s students regularly marched against government austerity.  … She obtained a law degree specializing in human rights. “Music and justice, my two passions.”  … In early 2004, as Chávez geared up for the recall referendum, Golinger found evidence the United States was funding anti-Chávez groups. She packed the documents into a bulging suitcase and flew to Venezuela to inform the comandante. At first palace aides rebuffed her, thinking she was mad or a spy, but Golinger prevailed and was ushered onto Chávez’s plane on his way to a Hello, President broadcast. “They served us breakfast, but we were so busy talking I don’t think we touched anything except the coffee. There was an instant connection. The first time you meet him is pretty overwhelming. There is a magnetism, a powerful presence. Yet also a gentleness and vulnerability.” The comandante invited her onto the show to share the revelations, making her a star of the revolution. Golinger moved to Caracas and began writing books about U.S. perfidy against the comandante. “The president can be naive,” she noted. “He is surrounded by people who want to abuse his power. He has been betrayed again and again. His enemies have created myths and smears. That is where I come in. I hunt down the lies and set the record straight.” He was under attack, she continued, because the United States wanted the oil and to silence an ideological challenger. Thus it fomented a media campaign to demonize him. “This is a new type of war, and I’m proud to be a soldier on the right side.”

Two years later Golinger was editor of the international edition of Correo del Orinoco, a state newspaper and de facto international mouthpiece. Her crowning moment was addressing Chávez, ministers, governors, generals, and ambassadors at a special event under the National Assembly’s golden dome. “Here is the light that has opened the path to a better world,” she told them, wearing a red dress and neck ribbon. “Here is the nucleus of the battle for global social justice . . . The future of humanity is here; that is what I profoundly believe.” Then she cut to the chase. Her latest research, she said, showed that the opposition media—she singled out Globovisión and fourteen radio stations—were in cahoots with the U.S. empire. The audience gasped in indignation. Golinger continued. It was part of a Pentagon plot to smear the comandante in a possible prelude to invasion. Chávez nodded gravely. Generals scribbled down the traitors’ names. Golinger urged the assembly to pass a law blocking foreign funding of NGOs and political parties. “Fatherland, socialism, or death!” she cried. “Long live Venezuela! Long live Comandante Presidente Chávez!” A standing ovation filled the hall. At Chávez’s urging, the assembly rushed through what was dubbed the Golinger law. It was a pretext to bankrupt human rights watchdogs, prison welfare groups, and other thorns in the government’s side. Most were shoestring operations that monitored issues like oil pollution, police shootings, jail conditions, education indicators. They relied on grants from foreign institutions, such as Germany’s Konrad Adenauer Stiftung foundation, to buy computers and pay rent. The law dried up their funding and devastated civil society. Golinger, speaking a few months after it passed, called it a triumph. “Finally! I’m delighted. This should have been done a long time ago. The infiltration is continuous, and this gives us a tool to stop it.” “The changes under way are incredible,” she said. “Venezuela is truly a beacon for the world.” She was not blind to problems, she said. “The administrative incompetence can be maddening. And the corruption is enormous, I see it.” So why not, from her editor’s perch, investigate and denounce it? Her eyes widened. “No, no, I can’t do that. Powerful people are involved. It would be dangerous. I look away and focus on all the positive things happening.”

Afiuni’s case [a judge imprisoned for freeing an fallen official from jail because, after three years, he had not been tried] marked a point where even the comandante’s most exalted intellectual champion would not follow. For a decade Noam Chomsky, the feted scourge of capitalism, had lauded the revolution as a beacon and counterweight to U.S. imperialism. The passion was reciprocated. Chávez had turned one of Chomsky’s books, Hegemony or Survival: America’s Quest for Global Dominance, into a bestseller after brandishing it during a UN speech in 2006. Three years later he hosted the professor with pomp and bear hugs in Caracas. The man voted the world’s top public intellectual by Prospect magazine said Venezuela was taking steps toward a better world. The comandante mischievously suggested Washington could repair diplomatic ties by making him ambassador to Caracas. But by 2010, Chomsky, from his home near the Massachusetts Institute of Technology, where he taught linguistics, had become uneasy. As a self-described libertarian socialist, he was suspicious of state authority, and the comandante was amassing ever more of it.

Some other academics in the United States, Europe, and Latin America who had previously defended the comandante were feeling the same way. They confided misgivings in private but not in public, fearing accusations of betrayal from one side, naïveté from the other. So they remained silent. Chomsky had winced when Chávez centralized more powers and used enabling laws, but it was the Afiuni case that tipped him over the edge. Human rights activists at Harvard’s Carr Center relayed details of her plight. Alarmed by her cancer, authorities in February 2011 softened her confinement to house arrest but proceeded with the case. Chomsky wrote a private letter to Chávez requesting clemency. … The professor praised Venezuela for standing up to U.S. bullying and championing regional integration and voiced continued hope that revolution was a step toward a better world. He was not going to explicitly denounce his ardent friend.

Ultimately one reason that Chavez failed to achieve his goals (other than being reelected) is that the skilled middle class could not be forced to support an ever-larger government and ever-larger number of dependents:

By 2011 doctors, dentists, engineers, accountants, architects, scientists, and artists were also leaving. For the first time in its history Venezuela, which since Columbus had received immigrant waves, exported people. Caracas became a city of farewells. More than 700,000 fled. They packed consulates for visas, signed up for language courses, and struck out for Europe, North America, Colombia, Brazil, Australia, Dubai.

A few days after the election, the comandante announced the creation of a half ministry—was this now thirty-two or thirty-four ministries?—dedicated to fighting inefficiency and bureaucracy. Officials sighed and exchanged conspiratorial winks. We turn the wheel and cannot stop it. Todo bochinche, agarra lo que puedas. It’s all a mess, grab what you can. The opposition weighed its own calculations. Stay united around Capriles, fracture into rival tribes, turn more populist? Middle-class Venezuelans debated whether to emigrate. The poor were not going anywhere and made the best of whatever the revolution had to offer. Venezuelans were supposed to be the jokers of South America, a spontaneous, gregarious culture, but both sides lost their sense of humor in sullen polarization. If this was democracy, and in many ways it was, Venezuela posed an uncomfortable question: When is democracy not enough?

Take-away: If you are good at telling voters what they want to hear, you can win elections. If you are good at winning elections it doesn’t matter how good a job you do once elected.

More: read the book

Boston Marathon 2014

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I took a special (to me) four-year-old to see her first Boston Marathon in Coolidge Corner, Brookline today. The security around the race was very impressive. An EPA ASPECT Cessna Caravan with a tricked-out exhaust system was operated all week from Hanscom Field to look for chemical and radioactive contamination. Coast Guard and U.S. Army Blackhawks flew back and forth overhead in formations of up to five helicopters (at about $25,000 per flight hour per helicopter, according to TIME Magazine). A friend asked “Did you feel safer?” My response: “Given that the Tsarnaev brothers were armed with two pressure cookers and one pistol, the security for this marathon has the same rational basis as a person who is attacked with a kitchen knife and expects the next attack to come from a nuclear-powered submarine.”

What if the Tsarnaevs had some cousins who had wanted to attack this marathon in the same way that the 2013 event was spoiled? The authorities absolutely forbade backpacks, potentially filled with explosives, from being carried near the finish line. But there was no such prohibition on bags and backpacks elsewhere on the route. Greta and I watched from Coolidge Corner, amidst hundreds of other spectators and passed by clumps of as many as 50 runners. At our feet? A large backpack.

[Note: I believe that the backpack belonged to a young woman who was hoping to cross the route to get to her job at Trader Joe's. But she had been waiting there for 30 minutes and there was nobody to stop her from walking away and leaving the backpack.]

Favorite T-shirt: “Keep Calm and Marath On” (each word on its own line)

Interior noise measurements from a 2000 Pilatus PC-12

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These measurements were made in Pilatus PC-12 s/n 353, a Series 9 airplane with 10,700 hours. Note that these show that the plane is at least 2 dB quieter than an almost-new PC-12 NG (previous posting).

Measurements were made with a 10-year-old Radio Shack digital sound level meter, model 33-2055, set to “slow” and “A-weighting”. Measurements were made with the meter’s microphone near the ear level of a person seated in the PC-12. All speeds are indicated airspeed (i.e., true airspeed and ground speed would be higher).

 

Phase Pilot Row 1 Row 2 Row 3
idle 79 75 73 70
taxi 74 72 70
takeoff 82 82
climb 84 82
6500′; 180 knots 88 82 80 79
7000′; 215 knots 88 87-88 85 84
10,000′; 208 knots 88 87 85 84
13,000′; 203 knots 87 86 85 83-84
15,000′; 204 knots 88 87 85 83
FL280; 170 knots 86 83 82 81
FL280; 128 knots 85 78 77 75-78

Alternative Minimum Tax, deducting state/local taxes, exemptions for children

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As in previous years I was unable to understand my accountant’s explanation of why I was paying Alternative Minimum Tax (AMT). If other people are as confused as I am that means that Americans generally have no idea what their income tax bracket might be, i.e., they won’t know until the end of the year how much of a pay raise they would be able to spend.

With a little digging, e.g., this CNBC article, it seems that “The taxpayers now most likely to be liable for AMT payment are people with big families who live in high-tax states.” It seems that with regular taxes the government provides tax benefits for having children and tax deductions of amounts paid in state and local taxes. Then with AMT those benefits are taken away.

I’m wondering why any of this makes sense. Can it truly be efficient to have a country where most of the people who pay significant amounts of tax don’t have any idea what their tax rate is? And if the government needs more money, why are children and state/local taxes deductible?

Let’s consider local taxes. Suppose that you live in a low-tax/low-service town. The town won’t take ownership of streets within developments. You and your neighbors will have to get together to pay for snow plowing of the common street. That won’t be deductible. If the town taxes you, however, and pays the same snow plowing contractor the same amount of money, now the expense is deductible. People who pay more in state/local taxes get more government services, presumably, than people who live in low-tax areas. If people are getting services for their money from their state and local government why do they also need to get money back from the federal government (i.e., from the rest of us)?

How about children? In the old days the federal government didn’t do much for kids so maybe it made sense to provide extra money through the tax system. But now the federal government is involved in funding local schools, in subsidizing student loans, and in providing free or subsidized health insurance for children (the Department of Education was created only in 1979 and now has a budget of more than $70 billion per year; the CHIP program was created in 1997). Is the additional tax subsidy justified? Also, there are people who are earning substantial profits from children who nonetheless may claim these kids as “dependents”. For example, see this posting that refers to Cameron Kennedy’s lawsuit against Peter Orszag where she is trying to get $300,000 per year in tax-free child support to supplement her $350,000 per year salary. If Kennedy can keep the kids with her for 51 percent of the nights of the year, the IRS will give her a reduced tax rate on her $350,000 per year McKinsey consultant income. If we assume that she spends $100,000 per year on the two kids in private school tuition, gold-plated iPhone cases, etc., that means the average American taxpayer will subsidize Kennedy for having a $200,000 per year tax-free revenue source in her house. That’s roughly equivalent to the after-tax yield on $15 million of IBM stock. So we’ve set up a system where, for the sake of fairness, we would have to allow childless Americans to claim a $10-15 million stock portfolio as a “dependent”.

Consider a person who has had the misfortune to be born with an unlovable personality and physical appearance. This person is single, childless, and lonely. In addition, this person will be living in a lonely West Texas town or an isolated hamlet in New Hampshire (i.e., low tax jurisdictions) with very spartan public services.  This unfortunate soul will pay federal taxes to support the Department of Education, the Department of HHS, and other agencies that provide free services to more fortunate Americans who enjoy the company of their children on a daily basis. Mr. Lonely Heart will also have to pay additional federal taxes to make up for the money that families with children did not pay because they were deducting state and local taxes in high-tax, high-service locations.

As a parent in a high-tax state I personally am one of the beneficiaries of these subsidies, but I can’t understand why a single childless person in a small West Texas town is paying for our family’s use of the new nearly $100 million Cambridge Public Library. If we ran out of money for whatever reason, the government would step in and give us free housing, free health care, food stamps, and, always, a free education for our kids plus subsidized student loans for college and/or subsidized tuition at state-run colleges. If we haven’t run out of money then why do the existing government subsidies to our kids need to be supplemented with tax subsidies? (In Cambridge, regardless of family income, a child will be able to enjoy the library system, the $27,000 per pupil school system (does not include capital costs so probably $35,000 to $40,000 per year in actual spending), and a 50 percent subsidy of the costs of attending the University of Massachusetts.)

What would it look like if we eliminated the AMT, deductions for state/local taxes, and exemptions for children?

Employment Litigation in Maryland

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After-dinner conversation this evening with some friends from graduate school …

A friend’s wife was owed about $40,000 by her former employer. She and her husband approached a litigator who estimated that the matter could be handled for $2,500 in fees. On that basis, they agreed to sign up for litigation. The case ended 15 months later with a four-day jury trial in which she was awarded $40,000 in damages. Her legal fees to that point? About $200,000 (i.e., 80X the estimate). Fortunately, the contract under which she was suing required a person found in breach to pay the other side’s fees. The jury agreed with this interpretation and awarded her the legal fees in addition to the actual damages. All’s well that end’s well? “The judge set aside the jury’s fee award, so all I got was the $40,000. I could have appealed but I was exhausted by the process so we gave up.”

How did she feel about the experience? “I learned that the system only works for the lawyers.”

Passover Tax Day thoughts

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Why is this Passover different from most others? The first day coincides with Tax Day for Americans. Jews remember the bitter hardship and forced labor of slavery in Egypt. Scholars, however, can find no evidence of modern era-style slavery (or of Jews residing in or escaping from in Egypt). As for the pyramids there are records of payments to laborers, typically farmers who had nothing else to do at certain times of year. A “slave” in ancient Egypt may simply have been a person subject to a 20% tax that free Egyptians did not pay.

[To the children at last night's Seder I pointed out that "the plagues visited upon the Egyptians were so bad that their civilization lasted only about 2000 more years."]

Hugo Chavez’s legacy

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I’m reading Comandante: Hugo Chávez’s Venezuela. The book contains an interesting perspective on this leader, from an executive at the Venezuelan national oil company:

Sansó defended Chávez’s energy policy, saying the comandante had helped revive OPEC, sending prices rising even before the Iraq war, and had had the vision to recognize Venezuela’s oil was not just around Lake Maracaibo, in the west, but also in the center of the country along the Orinoco in a smiling arc known as the Faja. The same wilderness that had swallowed gold-seeking conquistadores contained enormous deposits of extra-heavy crude. The black ooze had long been written off as tar, a costly-to-extract type of liquid coal, and the old PDVSA gave foreign oil companies a virtual free hand to develop it. Chávez insisted it was oil, and eventually even the U.S. Geological Survey agreed. The zone contained an estimated 220 billion barrels—making Venezuela’s total reserves vaster than Saudi Arabia’s. Chávez partly nationalized the Faja in 2007, taking majority shares in the operations, an audacious decision that infuriated the foreign oil companies working there. “For that alone Chávez was worth it,” said Sansó. “He was crazy enough to do it. Any reasonable guy wouldn’t have had the guts. He would have said it’s not possible. A century from now Chávez will be remembered and thanked for this, no matter what else happens.”

The book could use some editing. It jumps back and forth in time. There is some redundancy. But it is highly relevant right now when politicians and newspapers worldwide are trying to get people excited about “income inequality” (e.g., see this New York Times op-ed from yesterday). Chávez did not just talk about income inequality but took action.

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