Fiscal Inferno Revisited

Time again, I think, to revisit one of my favorit topics: the national debt. And you know what that means: more graphs!

As has probably been evident over the past couple months, something has been increasingly bothering me. It's the rebirth of fiscal conservatism and rise of the deficit hawks in the Republican party after what seems like 8 years of silence on the issue. This is a big issue for me because it is one of the main things that drew me into the Republican party back in the mid-90s. I saw myself then, as I do now, as being aligned conservatively on fiscal issues and liberal on social issues. The idea of limited government, free markets, and a balanced budget has always struck me as the right way to run a government.

This might seem to be at odds with my recent political leanings. After all, I supported Obama (who certainly wants to increase the size of government) as well as the stimulus plan and budget (which will certainly increase the national debt). But it isn't that I stopped believing in my core values: I just stopped believing the Republicans.

So I tried to take a step back and look at the issue objectively. Have I allowed the Bush years to unfairly bias me against Republicans or am I justified in my skepticism? Are Republican administrations really better at handling the debt?

I once again visited the US Treasury and Bureau of Economic Analysis to get my data. I took the annual GDP and national debt numbers over the last 50 years and expressed debt as a percent of GDP. I then calculated the difference year over year. As a technical note, since all debt figures were given in that current year's dollars I had to use that year's current dollars for GDP as well (i.e. I didn't use "Real" GDP or chained-2000 dollars, as most GDP figures use). You can check out the results in the following graph (and I've also attached all my data to the bottom of the post):





So what does this tell us? Well, the 0 line represents no change to debt as a percentage of GDP so as an oversimplification anything below the 0 line is "good" and everything above it is "bad". One thing that is clear is that as a country we did a pretty good job of fiscal restraint from ~1959-1974 and a generally lousy job since then. In the last 50 years we have managed to reduce the debt (as a % of GDP) 25 times while increasing it 25. Unfortunately, 19 of those 25 occurred from 1959-1981, which means we've only managed it 6 times in the last 28 years.

But that's not the question I set about to answer. The question is how do Democratic administrations compare to Republicans in handling the debt? Here's a break-down of the administrations that have managed to reduce the debt:

Republicans
Eisenhower (2)
Nixon (5)
Nixon/Ford (1)
Reagan (1)
GW Bush (1)

Democrats
Kennedy (3)
Carter (2)
Johnson (5)
Clinton (5)

So the score comes out 10 for Republican presidents and 15 for Democrats. That's surprising in and of itself, but it's even moreso when you consider that Republicans have been in the Oval Office one and half times more than Democrats over the last 50 years (30 years to 20).

Obviously, all of this is a gross over-simplification. The President is not a dictator and the behavior of Congress certainly plays more than a minor role in determining this. There's a good argument to be made that Clinton's 5 years are at least partially the work of the Gingrich Republicans in Congress, and that the almost complete lack of reduction during the Reagan years is at least partially attributable to a Democratic congress. The George W years though, where Republicans controlled the Presidency and Congress for 6 years and produced 1 year of debt reduction, are hard to ignore. Especially since they are the most recent.

The numbers bear out that, for whatever reason, Republican administrations simply do not do a better job of handling deficits than Democratic ones, and there's in fact a pretty good argument that they are worse at it.

In the end I guess what I am saying is that even though I believe in fiscal restraint, when given the choice between a party that tells me they are going to spend a lot of money on government and then does it and a party who tells me they won't spend a lot of money and then does anyway, give me the party that is more honest. Republicans have had a great scam going on the last 30 years. They say "government doesn't work" and then they create more government and when it fails they say "See? Told you." Maybe the Democrats don't have any better ideas but at least I can believe them when they say "we're going to create more government and spend more." It does pain me that those two options seem to be my only choices.

Bottom line is that if Republicans ever regain power and actually follow through on their fiscally conservative rhetoric, I'll be happy to jump on board again with them. Until that day, though, consider me an Independent.

Debt and GDP data

When Bad News is Good

So the stock market has largely been going up the last couple of weeks. That is of course good but is not of and by itself all that interesting. What is interesting is why it's been going up. At first blush, most of the headlines talk about stocks rising higher on good economic news. But when you read a little closer, you realize that it's not good news at all; it's bad news that's not as bad as it was expected to be. A sample just from today. Right now the Dow is up 100 points and the headline on Yahoo! Finance reads "Wall Street Pares Losses After Better-Than-Expected Economic Data." So what is this "better-than-expected" data? Pending home sales rebounded in March from a record low in February (in other words, March is the 2nd worst month on record), an index of manufacturing activity contracted in March but by a little less than expected, and construction spending dropped in February for the fifth straight month but at a slower pace than in January. So by and large nothing is getting better; it's just getting worse more slowly.

I'm not at all trying to dismiss the positive gains that the market has made, nor am I trying to say that people shouldn't be feeling a little better about the economy in general. The name of the game during a recession is trying to find a floor, and the slowing of the rate of deterioration is definitely a sign that we could be nearing that floor soon. But just a cursory glance at historical economic data will show you that both recessions and expansions are wrought with false troughs and peaks. I just find it a bit ironic that data which would ordinarily be seen as very bad news in this context is now seen as a reason for optimism. It's kind of like hearing that a school burned down and everyone inside died, and then throwing a party when you find out that one kid actually made it out alive.

In other news, we are exactly 5 days away from the Cubs opener. I am hoping to put together my annual Cubs preview over the weekend. I know that you all can't wait.

20 Minute Sprint Post

OK, I've got 20 minutes before my next meeting and I just want to get something down before it becomes approximately 4 ice ages since I last posted.

I'm too lazy to think of new topics, so I will take the suggestions made in the comments of my previous post.

First, the Economist had a big article discussing different countries' drug policies. Though just about everything has been tried, the result is almost always the same: varying degrees of failure. The most successful seem to be the most liberal policies (where success is defined as the least users of "hard" drugs). The end recommendation of the article was basically one for legalization. I think it will come as no surprise to anyone that knows me that I am in support of that. If not outright legalization, then at least decriminalization where drug use is treated as a health problem rather than a criminal offense. This is not to say that I believe that drug users are victims (they're not) but just that the choice to pollute your own body is a personal decision that shouldn't be legislated. "My body, my choice" may be the rallying cry for pro-choice activists but it could just as easily be one for advocates of decriminalization. Of course, outright legalization would have the added benefits of giving the government something new to tax while at the same time dealing a big blow to the profits of organized crime and cartels. I also think it would be quite a bit better if you allowed ordinary citizens to grow a weed plant in their backyard and harvest it themselves for personal use instead of forcing them to go deal with shady individuals in shady areas (and yes I know they're not really "forcing" them to do that). Beyond anything though, the number one reason to change the drug policies in this country is that they don't work. People aren't being deterred; people continue to be locked-up (and supported by taxpayer money) for non-violent crimes, and the occasional joint-smoker is made to feel like he's a social degenerate while the occasional drinker gets "This Bud's for you!" 20 times an hour every time they turn on a sports broadcast.

Now for the Madoff question that Weir brought up. Obviously the idea of people giving back their profits is ridiculous. They obtained their money by legal means even if Madoff didn't (kind of similar to the Pam Anderson sex tape where the video distributor got to keep his profits because he legally bought the rights from a guy who had stolen it). I also think that getting your money back is just as ridiculous. Enron and Worldcom investors didn't get their money (or even their 401(k)s) back when they were defrauded; this is no different. The tax question, however, is a little more interesting, but in the end I think it's just as bunk. Much like when you're sitting at a blackjack table, you don't really have profits until you take all the chips up to the cashier and cash out. Until then it's all just prospective profit. As an investor you are always entitled to recover what you put in (your basis) tax-free. Anything above and beyond that is rightfully taxed, regardless of how much else you think you still have in your stack.

New Fangled Technology!

Quote of the day
"Sam, you are a pyromaniac in a field of straw men" George Will to Sam Donaldson during a debate on the stimulus on This Week

Today's Fun Fact
The only two days of the year in which there are no professional sports games (MLB, NBA, NHL, or NFL) are the day before and the day after the MLB all-star game. And since the day before the all-star game has the Home-run derby, that really makes only one truly sportsless day.

I continue to be unbelievably swamped at work and I continue to know that no one cares about my excuses.

This week I took two great leaps forward into the 21st century. The first leap was with my cell phone. I no longer am stuck with my wife's used, pink Razr that I have been toting around for the last year. Even though I had purchased a Cubs cover for it in a feeble attempt to hide my shame, all that really did was manage to call attention to the little pieces of bright pink that shone through. I had been hoping to hold out for an iPhone but with our T-Mobile contract that wasn't going to happen for another year, so I went with the G1 (i.e. the Google phone) instead. Haven't had time to try out all the bells and whistles yet but so far I like it. Surfing the net is fast and just as convenient as on the iPhone and I like the one-touch access to Gmail. Another feature that I think is really cool (although I haven't used yet) is that it has a UPC scanner so if you're in a store and see something you like you can scan it and it will instantly do a search for the best price for that product so you can avoid getting hosed on the price and/or making another trip to return it.

The other leap forward was that I finally got my Kindle yesterday. I had ordered it on Christmas day but everything was backordered for so long that I just got it now. Personally, I think the reason everything was backed up was because they knew that they were releasing the Kindle 2 in late February and they didn't want to keep shipping 1st-generation Kindles and then come out with the upgraded version a month later. I always joked that the new Kindle would come out a week after I got mine, but I truthfully would have been super pissed if that had really happened. Fortunately, they upgraded everyone who had not received their Kindle yet so I can now say that I am one of the 1st people to receive a Kindle 2. Have only played around with it a little since I am (gasp) still reading an actual book, but everything I've tried has worked exactly as advertised. It accesses the Kindle store via a wireless network and you can easily download almost any book you can think of in about a minute. I also signed up for a 2-week free trial of the New York Times and when I woke up this morning it had already downloaded it and it was waiting for me. I also found out that you can e-mail Word documents and PDFs to it so that you can read those as well on it. You basically never really need to carry around a piece of paper ever again (except for my Economist, which isn't available for the Kindle yet). A couple other neat things: you can underline and save passages you like to "My clippings" to share with other people later, you can add notes anywhere, it can hold over 1500 books and even after you delete them off the device Amazon stores them for you and you can add them back at any time, you get instant access to Wikipedia, and you can also just move the cursor to any word you don't understand and it instantly gives you the definition. Lastly, they have this interesting but weird "text-to-speech" function where the device will actually read to you. It's an odd robotic voice that obviously can't get the intonation and emphasis right but it does work. Probably something I'll never use, but it's still neat. OK, here ends the commercial for the Kindle.

Both of these new toys will get good use during our trip out to Phoenix next week! We leave on Friday and are seeing 4 Cubs games (including 2 Cubs vs. Sox). We're also taking a side trip up to Vegas next Wednesday to see the Cubs game there and also see Love, which I have heard amazing things about. It would also be nice if during that trip I could leave Vegas a winner for once but we all know that's not gonna happen.

In any case, I will try to get a blog of some substance together before we leave or, if nothing else, will blog from the laptop poolside just to make everyone jealous.

Hope everyone is having a good week!

Roland With the Punches

Quote of the day:
"It's easy to quit smoking. I've done it hundreds of times." - Mark Twain

Today's Fun Facts:
A bit of alternate universe movie history for you. Tom Selleck was originally cast as Indiana Jones but had to turn it down when the producers of Magnum P.I. wouldn’t let him out of his contract. Eric Stoltz was cast as Marty McFly for 6 weeks before being dubbed “too intense” by producers. The role of Sigourney Weaver’s neighbor in Ghostbusters (Louis Tully) was specifically written for John Candy; when he couldn’t commit it was given to Rick Moranis instead. Both Will Smith and Ewan McGregor turned down the role of Neo in The Matrix. Cary Grant turned down the role of 007 in Dr. No and it went to Sean Connery instead. Connery paid it forward years later by turning down the role of Gandalf, as he reportedly had never read the Tolkien books and didn’t understand the plot.

So Donald Trump's Trump Entertainment filed for bankruptcy today. I really don't care too much about that, but I did find it amusing that the Yahoo! news article about it used this picture of him:



So our dearly departed governor is back in the news in a roundabout way via the new controversey over Roland Burris. Mr. Burris recently decided to enlighten us that former Gov. Blagojevich did in fact hit him up for cash to get the inside track on the Senate seat. Mr. Burris doesn't see it as a big deal that he failed to inform us of this earlier. In fact, apparently it's the impeachment committee's fault for not asking him the correct question: "There were several facts that I was not given the opportunity to make during my testimony." Nevermind the fact that this new statement contradicts an earlier sworn statement and the testimony he made about his contact with the governor's office. I just have to ask the question: has it finally gotten ridiculous enough that we can agree to have a special election rather than let governors appoint replacements? If not, I'd like to know what else needs to happen. One thing's for sure. Even if Burris does survive this, he can kiss his re-election chances goodbye. In fact, I doubt he even makes it out of the Democratic primary.

And once again on the stimulus (set to be signed by Obama today) I have a new rule. Democrats, stop quoting the Moody's Economy study like it's the Bible and Republicans stop quoting noted economist Marty Feldstein's opposition to the stimulus. They both were legitimate points but you have made them and made them again. And then kept making them for another 2 weeks. Now let it go. Find some other sources.

Another Week Another Lonely, Solitary Post

Quote of the day:
"God does not play dice with the universe. He plays an ineffable game of his own devising, which might be compared, from the perspective of any of the other players, to being involved in an obscure and complex version of poker in a pitch-dark room, with blank cards, for infinite stakes, with a Dealer who won't tell you the rules, and who smiles all the time." - Neil Gaiman and Terry Pratchett from the book Good Omens

Today's Fun Fact:
Climate change too boring of an apocalyptic scenario for you? Here's a new thing you can lose sleep over. Right now scientists calculate that there is a roughly 1 in 45,000 chance that the asteroid Apophis will collide with the Earth sometime in 2036. Just as a point of comparison, the odds of you winning the jackpot in the IL state lotto is 1 in 20,358,520. That means that it is 450 times more likely that all life on Earth will be extinguished in 2036 than it is that you will win the lotto. Regardless, I'd still recommend doing all we can to keep Bruce Willis and Ben Affleck alive till 2036, just in case.

So it's been another busy week for me again at work and alas, that has meant another skimpy week for you, my loyal reader(s). As I am sitting down to write this the House has just passed the new compromise version of the stimulus package and the Senate may pass it later today so that Congress can take their planned recess. Funny how fast things can move when people are itching to get to vacation. I also have always found it amusing that we use the term "recess" in government, since the only other place it's used is in grade schools. Something about the image of John McCain, Harry Reid, Nancy Pelosi, and Lindsey Graham all running out of the Capitol at 3:00 to get a big game of kickball together just makes me smile. But I digress . . .

I don't want to go into too much depth on the stimulus bill; I'll just say that I think it's definitely imperfect but it's better than nothing so I'm glad that it's passing. There is one particular aspect about this entire stimulus debate that has really irked me, and it is again the lack of ideologues to find a middle ground. All I have heard from the right the past 2 weeks is overtures urging all of us to bow down and prey at the altar of the almighty tax cut. And from the left you get the opposite, an urging that the stimulus should be no tax cuts and all spending.

Well, what does the empirical data tell us? Rachel Maddow (and other liberals) have been quoting ad nauseam this report from Moody's:

The highlights being that food stamps, unemployment benefits, and infrastructure spending are all vastly superior to tax cuts. This is being used as one of the justifications for why the stimulus plan should be void of all tax cuts. Of course, that's just one study. Here is one from the Congressional Budget Office (CBO) via the Economist:


What strikes me most about this table is the incredible range of each category. Almost all of them can be either a negative or positive multiplier (i.e. really good ideas or really bad ones).

The bottom line for me on this is that no one really knows what is best. I see absolutely 0 evidence to support a stimulus package of all tax cuts and I don't really see a reason to go all the other way either. It seems to me that the prudent option is a mix of both, and that's exactly what the current stimulus bill is (about 60/40 spending and tax cuts). Personally, I'd prefer there be a lot more going to infrastructure, green energy, and education but you know what? I'm not going to demand perfection because I realize that there are millions of other American taxpayers that will be asked to pay for this whose goals aren't exactly in line with mine and I just wish there was more of that spirit in Washington. Even though I politically understand why the Republicans have chosen such a hard line with regard to this bill, it still saddens me. The doomsday cries of "if this legislation passes, it'll be a very bad day for America" (John McCain) are met with the over-optimism of "this bill is the right size and scope necessary to truly help us turn things around" (Rep. Ed Perlmutter). As usual, the truth lies in the middle. And, suprisingly, you know who actually has it right? Bill O'Reilly: "I wish I could predict what will happen, but I can't. And I believe no one can. This economic collapse is simply too complicated and chaotic."

All Talk and No Stimulus Make John an Angry Boy

Just to clarify, the above is a movie reference. For those that have seen it, I'm sure it's obvious.

So, predictably, after having my most consistent posting week ever I follow it up with a very weak one. And certainly not for lack of interesting things to talk about. It's just one of those weeks where I have been completely slammed at work and by the time I get home I just want to do something mindless and not have to form coherent sentences either verbally or in print.

Anyway, I've got about 20 minutes before my next meeting so I'm gonna go with some rapid fire thoughts here.

In terms of our government, I can basically summarize by saying this: right now I'm pissed at everyone. A rundown of my grievances:

Obama - Remember that pledge to not have any lobbyists in his administration? Yeah, well apparently he doesn't . I do understand that there are about 8,000 people in total that are being hired by the administration and not all lobbyists are evil, but much with the case of the campaign finance flip-flop, none of the facts changed between the time when he made a promise and when he went back on it, so why has his position changed?

McCain - I got a lovely e-mail from Sen. McCain on Tuesday urging me to sign an online petition saying that I want Congress to vote no to the stimulus bill. That's it. Just tell them to vote no. Not tell them to work closer with Republicans to craft a better bill, not tell them to support a different bill that they think is better. Nope, no new ideas. Just vote no. That's crap. I know that there are a lot that different economists in different camps disagree on, but the one thing that there is almost unanimous consent on is that even an unbelievably crappy and pork-laden stimulus package is superior to doing nothing right now.

Republicans - Screw you guys and all your faux-concern about budget deficits and wasteful spending. I remember very clearly the days of Newt Gingrich and the "Contract with America" that brought Congress to the Republican party in 94. It was one of the core reasons why I became a Republican in the first place. But suddenly as soon as you controlled both Congress and the White House, fiscal discipline wasn't a concern anymore. Do you all need to be reminded of 2003, when you voted for a reform of Medicare that added $8 trillion of unfunded liability. For those doing the math at home, that's over 8 times the amount of the current proposed stimulus package. Where were the budget hawks then?
Furthermore, in their list of grievances with the stimulus package, about half the items really are things that will create or help retain jobs. Isn't that the point of a stimulus bill? Case in point, here are some things they list:

• $448 million for constructing the Department of Homeland Security headquarters.
• $1.4 billion for rural waste disposal programs.
• $125 million for the Washington sewer system.
• $500 million for state and local fire stations.
• $500 million for flood reduction projects on the Mississippi River.
• $200 million for public computer centers at community colleges.
• $6 billion to turn federal buildings into "green" buildings.
• $412 million for CDC buildings and property.

That's just a few. All of the above are tasks that will need to be performed by people. People who, presumably, will be paid to complete said tasks. When they are paid, they will use this money to purchase goods and services, which will stimulate the economy. Stop me if I'm getting too technical here.

Democrats - Screw you guys for putting a bunch of wasteful crap in this stimulus bill. This was not the time to shove through all your pet projects that you've been denied the last 8 years. I can blame the Republicans for pulling the trigger, but I blame you for loading the gun and handing it to them. Among some of the legitimate grievances that the Republicans have with the bill:

• A $246 million tax break for Hollywood movie producers to buy motion picture film.
• $75 million for "smoking cessation activities.
• $75 million for salaries of employees at the FBI.
• $150 million for honeybee insurance

And not only can you not bring in bipartisan support, you apparently can't even get partisan support! The vote in the Senate was supposed to occur last night, but Harry Reid called it off because he didn't think he had the votes. At least the Republicans knew how to shove a bill down the throats of the opposition when they had the numbers.

In the words of Homer Simpson: "When will people learn? Democracy doesn't work!"

End of a Busy Week

Quote of the day:
“I personally believe that US Americans are unable to do so because some people out there in our nation don't have maps and I believe that our education like such as in South Africa and The Iraq everywhere like such as and I believe that they should our education over here in the US should help the US or should help South Africa and should help The Iraq and the Asian countries so we will be able to build up our future for our children.” – Lauren Upton (Miss Teen South Carolina) when asked why she thought one-fifth of Americans could not locate the United States on a world map.

Today's Fun Fact:
The animal with the fastest resting heartbeat is the hummingbird, at 1400 beats per minute. The slowest is the blue whale, at between 4 and 8. However, the heartbeats of some small animals (such as the hedgehog and ground squirrel) get down to around 5 beats per minute while they are hibernating.

First of all, I'd like to pat myself on the back a little bit for writing a new post every day this week. I have no doubt that Blue Cross is just as thrilled that they have paid me as I did it. Actually, it was a pretty eventful week, so it wasn't altogether that difficult.

So, we now officially have Gov. Quinn. I worked out right after work and then went straight to curling, so I missed both Blagojevich's speech to the legislature and the official announcement that he had been removed. While I still have some reservations over the exact manner in which he was removed, I am very happy he's gone and I hope the state and the country can move on pretty quickly. There is too much to be done on both a state and national level for us to continue to be distracted by this.

So, another day and another piece of grim economic news. A report released today reveals that GDP contracted by 3.8% during the 4th quarter, the largest contraction since 1982. Curiously enough, I can't confirm in any of the news stories if this is real (i.e. inflation-adjusted) GDP or just nominal. I believe that it's nominal, because I don't think that we have the inflation numbers for 2008 yet. While this news is certainly not a shock (analysts had actually been forecasting a 5.1% drop) the seemingly endless roll of daily negative economic news continues and cannot be good for consumer confidence. And in this we have another example of Keynes' "paradox of thrift"; hard times make people spend less and save more at exactly the time when the economy needs them to do the exact opposite. Each piece of bad news just makes people clamp down tighter, which furthers the cycle onward. This is, of course, the flipside to both the dot-com and housing booms, when everyone knew it was a bubble and assets were overvalued but people kept buying and spending anyway.

You can't help but laugh at the irony that on the day we announce the biggest GDP drop in 27 years, Exxon announces that they have broken the US record for annual profit at $45.2 billion. While I am still most definitely a capitalist and defend a company's right to make as much money as they can for their shareholders, I think this is further evidence that oil companies are a lot quicker on the trigger in increasing gas prices when the price of oil per barrel goes up than they are when it goes down. I also think that this is further evidence (as if we needed more) of the need to branch out into alternative energy sources. It is just not good for the country to have such a high concentration of profits in any one industry. Through lobbying and campaign contributions, it simply buys you a far too disproportionate amount of influence in the legislature. And while I don't believe that all oil execs are greedy, soulless, cash whores I also don't believe that none of them are. But I don't think that the key to breaking the energy monopoly is through increased regulation or windfall taxes (though I'm not completely deadset against either). Rather, I think it can only be accomplished when the constituency sends the message that unless their local reps get serious about at least leveling the playing field for alternative energy, they will soon find themselves out of a job.

Finally, and on the lighter side, this story bothered me . As a result of fertility treatment, a woman gave birth to octuplets this week. OK, I'm fine with that. If you wanna get pregnant and can't do it naturally I think it's perfectly fine to utilize all the resources of the modern medical science industry. And sometimes, as a byproduct of that, the results can be too successful. So that's all well and good. Here's the part that bothers me. She already had 6 kids. While I don't think there should be a limit per se on when you are and are not allowed to seek fertility treatment, I think (as in most things) that a healthy dose of common sense is warranted. When you've already got 6 kids and you can't get pregnant again, that's your body's way of telling you to stop. The story also says that amongst her brood are 2-year-old twins. That means that she got pregnant this time when they were only 15-23 months old, so it's not like she tried for years naturally before going to fertility as a last resort.

On a more philosophical level, at what point does it cross into borderline child abuse? How can two people possibly give each child the individual attention that they deserve when there are 14 of them? And this is coming from someone who's dad was one of 10 kids. At least that was spread out over 19 years, so basically 1 every two years. You can definitely see how that can happen if you don't believe in birth control (which, as a good catholic family in the 40s and 50s, they didn't). But this little baby factory has now churned out 14 in 7 years. Talk about unnatural! My question is this: what happens when she goes in for more fertility treatments next year?

Obama Impaled on Olive Branch

Quote of the Day:
“If a woman tells you she's twenty and looks sixteen, she's twelve. If she tells you she's twenty-six and looks twenty-six, she's damn near fourty.” – Chris Rock

Today's Fun Fact:
Despite the images we’ve all seen in our grade school science books, it isn’t possible to draw a map of our solar system to scale. On a sheet of paper, with Earth reduced to about the diameter of a pea, Jupiter would be over a thousand feet away and Pluto would be a mile and a half away (and about the size of a bacterium, so you wouldn’t be able to see it anyway).

So the $819 billion stimulus bill passed the House late yesterday. It passed despite (at last count) exactly 0 Republicans voting for it. While it's not altogether unusual for a vote to line up almost exclusively along party lines, this one was notable for the fact that Obama at least made an effort to achieve bipartisanship on it. How much of an effort you think he made probably depends on your overall opinion of him. In an attempt to garner Republican support, he removed funding for planned parenthood groups and funding to renovate the national Mall (both criticized as wasteful spending by the Republicans) while adding some of the additional tax cuts the Republicans are asking for.

The question now being asked is should Obama have even bothered with his overtures? It seems that Republicans think he is somewhat cornered by his promises of bipartisanship. If he fails to make any compromises they can argue that he is shutting them out of the process and reneging on his promise to work with them, and if he fails to go far enough to meet them they can still vote it down (even though they know it will pass) so that they can criticize it when parts of it inevitably don't work. Basically, they want to morph the Obama "I never voted for this war" platform to "I never voted for this stimulus" in the 2010 elections. In essence, they are gambling that the stimulus will either not work, not work quick enough, or just be unpopular. They would say they are not "gambling", since they seem pretty sure it's not going to work.

Personally, I think the Republicans are playing a dangerous game. According to Gallup, Obama currently has an overall 64% approval rating, and 45% amongst Republicans. That's bound to decrease as the recession deepens (as almost all experts think it will). Still, if the public perceives that the Republicans are more interested in blocking the Obama agenda than they are in stimulating the economy it may end up pleasing the 16% that currently disapprove of Obama at the expense of pissing off everyone else.

So should Obama even bother trying to court Republican support if they seem so intent to rebuff it? The only real point of compromise is to give and get concessions from both sides. Why water down the bill you want in the name of appeasing a group that's still going to criticize the legislation anyway? With future legislation (starting with this stimulus bill in the Senate) I think Obama should take the tactic of sitting down with Republican leadership and saying that while he likes the bill the way it is, he is willing to make certain compromises in order to gain bipartisan support. However, if after making those compromises Republicans indicate that they still will not support it he should tell them he is getting rid of all the revisions and going with the bill as originally written. If the legislation is going to be criticized anyway, let it truly be your legislation that you take the heat for. It's true that Republicans can still fillibuster in the Senate, but that would really be a game of political chicken in this climate. Opposing a bill is one thing, but outright blocking a vote is not likely to win them any new supporters.

A Couple New Things I'm Trying

Quote of the day:
“Now that's using the powers of the executive branch to help people who need help, not unlike what Franklin Roosevelt did when he was president, and he helped Great Britain because Congress was not willing to allow the United States to shore up Britain in its fight against the Nazis” – Gov. Blagojevich

Today's Fun Fact:
The modern military salute has its origins in Medieval Times. When a knight rode up to a castle to announce himself to the lord and lady, he would take his right hand and raise his visor to show that it was really him and not an impostor and then drop his arm to let the visor fall down again.

So I decided that I'm going to try to start my blogs off with a quote and a bit of useless trivia. Why? Why not.

Yesterday as I was going through my mail I came upon some literature for an Evanston mayoral candidate. When I read that his name was Barnaby Dinges I swear that the glass of water I was drinking nearly shot out my nose. Though his website specifies that his name is pronounced DIN-jiss (and not ding-gus) it still strikes me as a rather unfortunate name to have in seeking public office.

Lastly, I need a little bit of help. Every year I come up with a goal (or series of goals) for myself. I don't really refer to them as resolutions, but I guess that's what they are. Two years ago it was to get my MBA and run the marathon, and last year it was to get my CPA. This year I'm having difficulty coming up with some. So far the biggest one I have is in some ways very trivial and in some ways one of the most challenging. In an effort to avoid hangovers, I have made it my goal to never drink more than 6 beers in any 24-hour period. I have, however, granted myself two exemptions to this (Super Bowl Sunday and March Madness weekend). Other than that though, I have accomplished a couple rather pedestrian achievements (modding my PSP and beating the original Legend of Zelda in under an hour) and I only have one more (learn to juggle). I have been "working" on a novel for a few years now (i.e. I wrote 10 pages 2 years ago and haven't touched it since) so I was thinking of making it a goal to finish my first draft of it. Anyone else have any ideas on what aspirations I should set for myself?

Geithner In; Blago (soon to be) Out

So, Geithner was confirmed yesterday and is now officially the Treasury Secretary. Obviously as my post yesterday would indicate I am pleased by this, but I'm ready to move on.

Our embattled governor's impeachment trial got underway yesterday while good old Roddy (or, as the Daily Show dubbed him, "Scumdog Million-hairs") decided to forego the proceedings in favor of a whirlwind media tour. This whole situation has brought up something of a moral dilemma for me. On one hand, I absolutely want him out of office. Despite his claims, I do not believe that it is possible for a number of the phrases he was caught on tape using to be within the bounds of the law in any context. It is abundantly clear to me (as well as to most of the general populace) that he is guilty of trying to personally profit from the US Senate appointment. At the same time though, I do kind of agree with him that the impeachment trial is something of a farce. Basically, the legislature has decided to throw in lots of other politically-motivated charges that would never warrant an impeachment by themselves. And Blagojevich will not be given the full opportunity to defend himself due to limitations imposed because of how they might interfere with the criminal case. I said the other day that "a correct decision obtained through incorrect means is still a correct decision" and on those grounds I guess I have to still be in favor of his removal since overall I do think it's the right decision. But it has made me reconsider my position on recall elections. Previously I have been against them because I think the last thing we need is even more perpetual campaigning and a politician that governs by the poll numbers. However, this is exactly the type of situation where a recall election makes sense. I just can't figure out how you can install a recall provision for cases like this without opening the door to mass political manipulation.

And I don't know whether to laugh or cry at all the ridiculous statements being made by Blago over the last week. At last count he had compared his "courage" in making decisions to FDR, his arrest to Pearl Harbor, and likened his "persecution" now to Gandhi and MLK. Mr. Blagojevich, though I don't agree with any of those, you do remind me of this one guy that went around professing his innocence when the whole world knew he was guilty: OJ. Guess you can hope that your criminal trial goes as well as his did (well, as well as his FIRST one at any rate).

Why I Don't Care About Tim Geithner's Tax Problems

Some of you may have noticed me lighting the fuse on the Tim Geithner discussion and then falling silent once we had a few comments. I was all set to respond but then realized that I had quite a bit to say and decided to make it a separate blog post instead.

For the uninitiated, I will attempt to summarize the Geithner situation using just the known facts. Geithner is Obama's nominee for Treasury Secretary. Normally, this post gets minimal coverage but with the financial crisis front and center and the fact that his predecessor (Hank Paulson) became something of an overnight celebrity there is a great deal more scrutiny than there has been in the past. In any case, it has recently come to light that when Mr. Geithner was head of the IMF he failed to pay necessary self-employment taxes to the IRS from 2001-2004. In 2006, he was audited for his 2003 and 2004 returns and ended up paying ~$15,000 in back taxes. It's reasonable to assume that he knew at that time that he had made the same error on his 2001 and 2002 returns as well, but he failed to file an amended return. It was only during the current vetting process that he paid the back taxes on those returns.

This is another of those "scandals" where I just don't see where the issue is. He owed back taxes and he is now current. To me, that's the end of the story. I suspect that it's seen as a bigger deal because as Treasury Secretary he will be the head of the IRS and it's something of an embarassment to still be owing money to the organization he will be overseeing. Fair enough but it still doesn't, and shouldn't, preclude him from the nomination.

There's also been a lot of remarks about him using TurboTax to file his returns, like that's somehow a negative. I'm a CPA and I have used and will continue to use a TurboTax-type program (TaxAct) for my returns as well. Why? Because it's easier, and there's less chance for error. I will also continue to use calculators and spreadsheets even though I am capable of arithmetic and I will continue to use Word and this blog even though I am fully capable of writing things out by hand.

By the way, pay particular attention to the fact that I said "less chance" and not "no chance" for error. Using TaxAct did not stop me from making an error on our 2006 return.

So on the specifics of this case, I don't think there's anything here that warrants a withdrawal or even a holdup of his confirmation. But in a larger sense, this represents something I am growing increasingly tired of in politics, and that's the over-scrutiny and demands for perfection in the private lives of our public officials. Pardon me, but from a privacy standpoint how is someone's minor tax issues anyone else's business? And it's not me calling these issues minor, it's the IRS. They never even so much as assessed Geithner a penalty for any of his errors (and even we got penalized when I messed up our returns). Before anyone jumps on me for partisanship, you may recall that it was on this blog just a few short months ago that I said that all the talk on Palin's family (whether or not the baby was hers, how long she waited to go to the hospital during labor, etc) should have been out of bounds. And in that case we were talking about an elected official. Here we are merely talking about an employee (albeit a very powerful employee). The debate should have nothing to do with whether or not you personally want Geithner in the position, it should have everything to do with whether or not there are grounds to bar him from it. In my opinion, it's not even close. I believe that the proper analogy is saying that someone can't be made Chief of police because you find out that they have a couple unpaid parking tickets.

Happy Inauguration Day!

Have meetings most of the day, so just have a couple real quick comments.

In the bipartisan spirit, I'm going to say something nice about our soon to be former President Bush. In case you are ever hard pressed to name one good thing that the man ever did, I think this qualifies. By executive order, he is designating nearly 200,000 square miles of the Pacific Ocean as conservation areas. This will make him the person that has protected more of the oceans than anyone else in the world. Now, overall I think that policies of sustainability are preferable to pure conservation (in much the way that I believe that drinking responsibly is preferable to prohibition), but given all the challenges and (often) years of time it takes to get such policies in place (especially since so much of it involves international waters) I think that this was a good idea.

As for our incoming President, I was reading the latest Economist this morning on the way in, and I think that this summed things up pretty well:

"The next four, or eight, years may be a disappointment, a triumphant renewal, or something in between. Mr Obama is inexperienced, and right now the world looks especially forbidding. But he is a respectful and thoughtful man, and that is a good start.

Random Thought That Occurred to Me

So don't ask me why I thought about this, but it intrigued me. I just ordered a 1 terabyte external hard drive and while thinking about how awesomely huge that is it got me to another thought. Assume the following: an 80-year life span, the average length of a song is 3.5 minutes, and the average size of an MP3 is 1 MB per minute. If you bought a total of 12 terabytes of hard drive space (which you could do for ~$1200) and filled it with MP3s, you would officially have more music than you could ever listen to in your lifetime. Even if you started playing songs the moment you were born and continued 24/365, you would still not get through them all by the time you were 80. Of course, that begs the next question, which is how long would it take to download 12 TBs of music on the average T1 line? Well, guess that's a question for another day . . .

Changing topics completely, this story disturbed me . A man (Jonathan Reed) in Texas has had his 30-year-old rape/murder conviction overturned. The reason? The Texas Supreme court ruled that "prosecutors improperly excluded black prospective jurors from Reed's trial". The kicker is that Reed is white. The case was apparently built upon a manual "written by a prosecutor in 1969 and used for years later, that advised Dallas prosecutors to exclude minorities from juries" because "they almost always empathize with the accused". OK, that definitely seems pretty obscene, but is this really an effective way to right that wrong? Shouldn't the fact that, you know, there was overwhelming evidence that this guy is guilty carry a little more weight (the roommate of the murdered girl was also attacked but lived and ID'd Reed, and two other residents ID'd him as being in the apartment complex before the attack) than judicial procedure? It seems to me that it's your basic right to a trial judged by a jury of your peers and it certainly seems like he still got that. Thus, if we were talking about a black defendant where all black jurors were disallowed that would be different. Furthermore, since this manual was written in 1969 and Reed's trial was in 1979, doesn't that mean that all decisions rendered within those 10 years now need to be vacated and retried? And, if so, doesn't that mean that the families of any men put to death (Reed was on death row) as a result of decisions rendered during that time can now sue the state? I guess that at the end of the day, my point is that I believe that a correct response achieved through incorrect methods is still a correct response. I think that while lower courts need to be strict interpreters of the law, when cases reach the levels of the state and federal supreme court, I believe that society is better served if the justices are guided by the overall principle of "was justice served in this case?" But, as with the Burris appointment, this is probably another example of where the "right" thing to do comes into conflict with the "legal" thing to do. It's a bit disheartening that those two principles should conflict so often.

Happy New Year!

Before I get into anything else, help settle a debate between me and Mike. How much does the new Pepsi logo look like the Obama logo? Judge for yourself:

Pepsi

Obama

Personally, I don't think they are that close. It's true that both are red, white, and blue and both are circular, but it's certainly not strange for a politician to use the U.S. colors in a campaign (in fact, it's more rare for them not to), nor is it unusual for a logo to be in a circle. You know what I think the new Pepsi logo looks like? The old Pepsi logo.

I think they wasted a couple hundred million on an ad designer who basically decided that the white swoosh should turn up instead of down on the right side. Yep, that's some value for your money.

Next topic. In reading this week's Economist, I came across an article on Turkmenistan. Now, I know that people in most of the rest of the world do not have as simplistic names as we do, but I came across one that is just obscenely long. The current president of Turkmenistan is Gurbanguly Berdymukhammedov. Good luck fitting that on a bumper sticker. If they charge by the letter, the campaign could go bankrupt just from printing yard signs. Let me take a stab at phoenetically pronouncing this one. I'm gonna go with Ger-bahn-goo-ly Bir-dy-mook-ham-ma-dawv. Anybody got any better ideas?

I've been following the Israel-Hamas conflict with interest. I don't have a whole lot of thoughts on it, other than that it is obviously a bad thing for stability in the Middle East. That is not at all to say that Israel isn't justified in doing what they are doing (I think they certainly are) but it definitely sets the peace process back quite a bit. During times of relative calm, it's easier for 3rd parties to try to act as a peace broker between opposing forces. But once the conflict turns hot, it pretty much forces everyone in the region (as well as all the major countries of the world) to line up behind one side or the other, and that makes it hard for anyone to be seen as a neutral party capable of mediating. Years of baby steps forward are completely erased overnight. It is times like these when I am most pessimistic about the long-term. I said shortly after 9/11 that realistically I saw only 3 eventual outcomes from the Middle East situation: 1) we wipe them out; 2) they wipe us out; 3) we wipe each other out. Sadly, 7 years later not much has happened to change my mind about that. But, as with climate change, nothing would make me happier than to be completely wrong.

Finally, the unresolved Senate seats make for some interesting January pre-inauguration news. The Roland Burris appointment has unfolded very interestingly. Last week, it was pretty much seen as a given that Burris wouldn't be seated when Congress convened yesterday. Even Burris seemed somewhat resigned to it, telling the Sun-Times that "if he is turned away at the ceremony, he won't make a scene." Then over the weekend, things suddenly took a turn as more and more people came to the conclusion that "gee, I guess Blago is still the governor, and unless we have proof that Burris obtained the nomination through illegal means, we don't really have any legal grounds to not seat him." But, as usual, the Democrats couldn't be pro-active about it. They still chose to not seat him yesterday but now it looks like they will today (or at least sometime soon). Even though it's easy to resolve, flip-flops like this drive me crazy. If there are no new facts to consider, why are you coming up with a different conclusion today than the one you had yesterday?

The other Senate situation still needing to be resolved is the one in Minnesota. On election night, incumbent Norm Coleman led challenger Al Franken by 215 votes, triggering a mandatory recount. Now, after the recount process has been completed, Franken now leads by 225 votes and Coleman has filed a lawsuit challenging the results. I think this is an extraordinarily bad idea for Coleman. Now let me be clear about this. I am not an Al Franken fan. In my opinion, he's the sort of extreme leftist in the Michael Moore type mold that give moderate liberals a bad name. Nevertheless, in the absence of extraordinary circumstances, dragging the election results through the court system does far more harm than potential good. There will always be ballots that can be contested (i.e. where someone marks down both candidates and then crosses one out) and there will always be controversy where some absentee ballots are discounted and then allowed or vice versa. But there is just no way to legitimately win an election in a court room. I thought it was a bad idea when Gore did it in 2000 and I think it's a bad idea now. I don't often say this, but I think maybe that LA has it right. If no candidate gets over 50% of the votes on election night, there should be a run-off a few weeks later. Either that or there should just be an automatic run-off if the result is within 1%.

End of the Year Update

Not a whole heck of a lot to report but wanted to get one more post in before we roll the calendar over.

Spent Christmas in Houston and looks like we missed out on some truly nasty weather up here in Chicago. I have no doubt that we'll have plenty of more chances to experience horrible weather over the next 2-3 months. Our nice and relaxing time in Houston was brought to a grinding halt when we were informed on Saturday that a pipe had burst in our building and the garage was being flooded. Fortunately (for us, not the developer) it was the rear half of the building that was affected and our car was parked at Midway, so from a damage perspective we were fine. It did mean, however, that we had the distinct pleasure of returning home to no running water. After some headaches dealing with our not-at-all efficient developer we finally got water restored last night ~7:00. Good times.

Weather was decent in Houston. Got up into the 70s most days but rained a lot. I was excited to have a chance to get outside and run again for the first time in over 6 weeks. I was real good and ran the first 5 days I was there but then took Christmas day off and somehow never made it back out again. Nothing too much else exciting to report from the trip. Worked at the pizza place a bit, finished a couple books, and saw a couple movies: The Curious Case of Benjamin Button and Bedtime Stories. Benjamin Button I would classify as a good movie that I just didn't like very much. Everything about it is well done (acting, writing, directing) but it just can't escape the fact that the story is inherently depressing and in the end that makes it not a lot of fun to watch. Bedtime Stories was about what you'd expect it to be (i.e. pretty stupid but moderately entertaining); only saw it because we took our nieces and nephews to see it and when you can get 4 kids (from ages 4 to 13) to all agree on the same movie that is the movie you are seeing.

Since we got back I also went out and saw The Wrestler, which I thought was excellent. Ironic that it was just about as depressing as Benjamin Button but somehow I liked it a lot more. Maybe it's because it was an hour shorter or maybe it's just because I am quite familiar with what happens to has-been (or never were) wrestlers and thus I knew more what to expect. Mickey Rourke does indeed turn in an Oscar-worthy performance and you can't help but think that he put a lot of himself into the role. Evan Rachel Wood is also very good in a small role. I've only seen her in this and Across the Universe but I've been impressed by her and wouldn't be surprised to see her really take off in the next couple years.

The Bears? Blah . . . Only silver lining is that tickets to the game were going for so much money that I avoided having the displeasure of witnessing the season-ending loss in person. I am however, excited about Illini basketball and the Big Ten conference season opening today, as well as the Blackhawks Winter Classic and all the bowl games on New Year's Day.

Well, I think that does it for me for 2008. I'm working on a couple of more weighty posts that hopefully will be enjoyable and stimulate some good discussion. Hope everyone had a Merry Christmas, has a Happy New Year, and I will see you in '09!

Double Feature

OK, one more thought on Bernie Madoff and then I'll let it go (for now). Is it just me or does he look like he could be Harry Shearer's brother?

Bernie Madoff

Harry Shearer

In other news, I got out last night and saw a double-feature of two really good films: Frost/Nixon and Slumdog Millionaire.

For the benefit of those unfamiliar with these films, Frost/Nixon is a fictionalized recount of the interview of Richard Nixon by David Frost 3 years after Nixon resigned from office and the circumstances leading up to it. It is famous because it was in these interviews that Nixon finally admitted to being part of a coverup and that he let the American people down. Here the story is largely told from Frost's perspective, and I think that is the correct choice. Frost was viewed as basically the Jerry Springer of his day (or, at best, the David Letterman). Someone who could be entertaining but was not given serious credibility for having the journalistic chops to pin down someone like Nixon and force him to answer the tough questions. In fact, that's pretty much the reason he was granted the interview. He offered Nixon $600,000 (much from his own personal accounts) and was seen as someone who would toss softballs all night and allow Nixon to start to repair his image. Frost, on the other hand, sees this as an opportunity to prove that he has what it takes to be taken seriously and (he hopes) will springboard his career back to success in America. This type of approach makes us realize that there is a lot on the line for Frost here too. Had the film focused on Nixon's point of view, why would we care about some hack journalist asking him questions? Whatever your opinion on Nixon, you have to admit that he's a fascinating, enduring figure whose legend just seems to grow with time. One of the great ironies of the film is that many of the characters talk about how one of the worst outcomes of the interview would be if Nixon was somehow able to exonerate himself. The interviews did not do that, and I wouldn't argue that the film does either, but it's certainly succesful at turning Nixon into a sympathetic (if never really likable) figure. In the end, it doesn't argue that people should forgive Richard Nixon for his crimes, but that they should understand that he definitely did not "get away with them." One of the lines in the film (which, incidentally, Nixon never actually said) is "no one can know what it's like to resign the Presidency of the United States." And that's the key. I can't think of another person in history that has fallen so far, and had to live with that fact for 20 more years. To have been the most powerful man in the world and then been reduced to the point where you will never just be "former President Richard Nixon"; always "disgraced former President Richard Nixon."

A quick word on Frank Langella's performance. He doesn't really look like Nixon, and he only passably sounds like him. Nevertheless, he IS him. From his mannerisms, to his walk, to his style of speech, to the way he fills up a room and just exudes power, he really is the embodiment of the man. If you have never understood why Nixon was so hard to pin down during interviews and investigations, I can guarantee that you will understand after you see this film.

Don't want to sleight Slumdog Millionaire, which I also thought was very good, but I don't have a whole lot to say about it. It's really a conventional rags-to-riches/love story set in a very unconventional setting (Mumbai, India) and told in a fairly unique way. It's about a "slumdog" (i.e. poor boy from the ghettos) that is one question away from becoming a millionaire on the Indian version of "Who Wants to Be a Millionaire". He is suspected of cheating because how could someone from such a background know all these answers? The remainder of the story is told in a series of flashbacks as he takes us through his life and we learn how he acquired his knowledge. Ultimately, it's a skillfully made if rather conventional story. Definitely worth seeing though, if only to see some great shots of a foreign country that haven't really been seen before by US audiences. Be warned that much of the movie is subtitled.

May(doff)day

First of all, it is Monday afternoon and as of right now we still have good old Blago as our governor so, sadly, it looks like I was wrong about that one. I'm still hoping for a quick resolution, but am preparing myself for this thing to drag out for weeks and possibly months.

I also awoke today to see that some dude named Bernie Madoff is perhaps the greatest magician of our time: he apparently made $50 billion disappear overnight. Before we get to the specifics, there is something that irks me. The four articles about this that I saw today had the following headlines: "Stocks Edge Lower as Madoff Victim List Grows", "Alleged Madoff Fraud Victims Include Big Banks, Super Rich", "List of Madoff's Victims Keep Growing, Likely to Extend Beyond Clients", and "How to Get Money Back from Bernie Madoff." So, basically, a lot of information about who has been affected and to what extent, but next to nothing about what actually happened. I think it's yet another example of our ADD media. Apparently they broke the story of what Madoff did on Saturday and so if you missed it - too bad; they're moving on. In that respect, maybe Blagoyevich is on to something here. He's gambling that we don't care enough to continually keep following this story and will eventually just forget about it. And he might be right. But I digress. . .

Fortunately, I got a good summary from the Economist:

"Details are still emerging, but Mr. Madoff has himself described it as a giant Ponzi scheme. For years, it seems, the returns paid to investors came, in part at least, not from real investment gains but from inflows from new clients. It might still have been going on, were it not for the global financial crisis. Redemption requests for $7 billion, by investors looking to pull back from turbulent stockmarkets, forced Mr. Madoff to admit that his coffers were empty - bearing out Warren Buffett's adage that only when the tide goes out is it clear who was swimming naked."

Some other details that I found interesting:

"The affair has - like the subprime-mortgage debacle - exposed a stunning lack of due dilligence. Droves of investors who should have known better tossed in billions, preferring to keep their fingers crossed rather than ask awkward questions of a firm whose investment strategy was vague and opaque. Even within his own group, Mr. Madoff's money-management business was a black box; no one but he had full access to the accounts. As a broker-dealer, it was able to clear its own trades, a privilege that should give pause for thought. Worse, questions had been hanging over the operation since the mid-1990s. Some institutional investors have long steered clear of Mr. Madoff, unable to understand how he spun his gold, or uneasy that his books were audited by a tiny, three-person accounting firm."

I bolded the parts I found most interesting. Being able to clear your own trades is just a complete lack of a fundamental control. You can get away with that if your operation is heavily audited, but I think it's pretty obvious that a $50 billion portfolio is way too big for a 3-person accounting firm to handle. Even so, if they had performed their job adequately they would have uncovered this scheme long ago. One of the most basic steps in auditing investments is to pick a sample of securities and observe that they are physically present onsite or in a safety deposit box offsite. I'm sure that this accounting firm will soon be out of business if they are not already. I am quite curious if they have professional liability insurance (as most audit firms do) and if so how much they had and who is on the hook for that.

Two months ago, Christy and I went to see a play called The Voysey Inheritance. Here's a quick summary of the plot:

"Misappropriation of client funds...fraudulent speculation on the Stock Market...deceit...lies ...and an intricate cover up. When young Edward Voysey discovers that the family's wealth has been built on three generations of deceit and theft he must choose between confessing all and ruining the clients that have unwittingly trusted the firm, or continuing the deceit in the hope of righting the wrongs that the firm's clients have unwittingly been subjected to. So the scene is set for an intriguing examination of ethics - and their absence - in the world of high finance."

Hmm, sounds a bit familiar no? The best part is that this play was written in 1905. Technology has grown by leaps and bounds since then, but it seems that financial swindels are often still barely above the sophistication level of 3 Card Monty.

It's also a vivid reminder of the fact that the "con" in "con man" is short for confidence. A good con man doesn't take your money; you give it to him because he's somehow managed to convince you that he's got your best interests in mind, or at least that you both share a common interest. And no matter what the final dollar amount ends up being here, the real damage will be consumers enduring yet another blow to their confidence in the finance industry. As they say about roaches in your house, "by the time you see one, it means you've got 1000." People are likely to start pulling more and more money out of their accounts out of fear and that's going to 1) cause the markets to fall further and 2) expose more criminals who are currently perpetrating similar schemes. The combination is likely to have a postive feedback loop effect, and that can be a very dangerous thing. Whatever the underlying reasons for a financial crisis, nothing gets better until trust is restored. People have to trust that they will still have a job next week before they will make major purchases. Banks have to trust a company's or consumer's income statements before they will lend them money. Right now nobody trusts anybody, and this is actually where greed is the enemy of capitalism. In the capitalist model, a nation of greedy pigs with an unquenchable need for consumption is good for society as a whole, but a nation of greedy misers who horde all they have is not.

It's hard to see the silver lining in all this, but I still believe it's there. There are still a whole lot of well run firms with profitbale, enduring business models and they will end up coming through this fine. I am also hopeful that the exposure of all these systemic problems will let us make some badly needed reforms in a way that is just not possible during the good times. Sometimes you just need to demolish the house and start over again instead of patching up every leak. Of course, that doesn't make it any more pleasant for the owners of the house (i.e. us), particularly when we are still inside the house as it's being demolished around us!

Blag-OY-VEH-evich (sorry, all the good puns are already taken)

So the masses (ok, 2 people) have been clamoring (ok, wondering) if I was going to do a post about our esteemed public servant Mr. Blagoje(bleep). Initially, I didn't have a whole lot to say about it. Most of the time when a public official gets caught (as in the cases of Sen. Craig and Sen. Stevens) there's at least some form of semi-plausible story where they might, just maybe, be innocent. That's when it's a good time to get together and try and separate the known facts from the speculation and figure out where the "truth" lies. That certainly does not appear to be the case here. As Nixon can tell you (or could of until 1994) it's real hard to weasel out of your own voice on tape. Speaking of Nixon, Hot Roddy might have a chance to surpass him in the category of "highest concentration of expletives in a career and life ruining recording." Something he can hang his hat on as he (hopefully) rots in his cell next to his predecessor.

For those who may not have read a ton about it, let's take a look at the "highlights":

"I’m going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain. You hear what I’m saying. And if I don’t get what I want and I’m not satisfied with it, then I’ll just take the Senate seat myself."

[The Senate seat is] "a (bleeping) valuable thing, you just don’t give it away for nothing."

"I’ve got this thing and it’s (bleeping) golden, and, uh, uh, I’m just not giving it up for (bleeping) nothing. I’m not gonna do it. And, and I can always use it. I can parachute me there."

On Obama's preferred candidate: "they’re not willing to give me anything except appreciation. (bleep) them."

There's also a lot of good stuff with him trying to shake down the CFO of a children's hospital for a $50k contribution and him threatening to hold up the Cubs sale if the Trib board didn't fire some editors that were critical of him.

So, anyway, all that's out there and I think it's pretty cut and dry. And while I am disgusted and saddened by it I am also not naive and I can't be completely stunned by the revelation that we have a very crooked politician on our hands.

But what I am absolutely astonished by is the news that he apparently has no plans of resigning. I am assuming that he will be planning to use the R Kelly "that's not me on the tape" defense. That will prove to be exceedingly more difficult for him though, as he's up against a court-approved wiretap by federal agents and not a grainy video on the web.

Perhaps I shouldn't be that astonished, though. As I mentioned in the comments to my last post, we're talking about a guy trying to auction off probably the highest-profile appointment in the country right now, knowing that he's already under investigation for his Rezko affiliation, in a job where his predecessor left in disgrace and is currently rotting in jail. In that context, this latest act of arrogance or stupidity (I'm still not sure which it is) represents the model of consistency.

Actually, more than anything else I think it's delusion. This is obviously a guy who basically must feel like he's Bear Stearns (i.e. too big to fail). The level of self-denial that allows this man to actually believe that he has a chance of conducting "business as usual" for the remainder of his term is such that I honestly believe he may now have a good case to plead innocence by reason of insanity when he's eventually put on trial.

Ultimately, though, it won't really matter. There is an ever-increasing crowd of people lining up at the guillotine to have a whack. It's a race between the IL attorney general, Lisa Madigan, getting to the IL supreme court to declare him unfit for office, and the state legislature getting down to impeach him. I'm sure that somewhere on the internet there has been a betting line established.

My guess is that by end of day tomorrow he will "do the right thing" and resign. It's just taking some more time for those around him to pierce the fog of invincibility he thinks he has. One way or the other, I think we'll be welcoming in Gov. Quinn by early next week. Once Blago goes to jail that will make 4 of our last 8 governors who have followed that route. Here's hoping that Gov. Quinn can take us back under the 50% line!

Surprise loser in all of this: George Ryan. If he ever had a chance of having the rest of his sentence commuted, it is gone now.

Surprise winner in all of this: Elliot Spitzer. Congratulations Elliot! You are now just the 2nd most disgraced governor of 2008!

So, uh, yeah . . .

Wow, 3 weeks since my last update. I knew it had been a while but I didn't realize that I'd slacked quite this bad. It certainly hasn't been due to me being busy - I had all of last week off. More along the lines of I haven't had a whole lot to say.

I talked about doing a long post on the auto bailout, but after having a couple hour-long conversations with various people about it I got a little burned out on the topic and don't really want to go too much in depth on it. The long-short of it is that on principle I am against it. The auto industry is not merely going through a liquidity crisis like a lot of other businesses are. They have been struggling and burning through cash at an almost unimaginable rate for the better part of 2 decades now. They simply were able to get away with it as long as credit was so easy. However, as I have oft repeated, I am a pragmatist and I recognize the extremely detrimental effect (both economically and psychologically) that letting the Big 3 go under would have on the labor market and the country as a whole right now, so I won't be that upset if some form of bailout ends up being authorised. The main problem is that I don't want this to open the floodgates for all struggling industries to parade through Washington with their hands out. For that reason, I will only be really upset if money is given without any form of punitive stipulation, such as the removal of the current management. One of the arguments I've heard from the auto company reps is "why was it a good idea to bail out Wall Street but now it's a bad idea to bail out the auto industry?" That's just a terrible argument. If you are asking for money, you have to make the case why it's a good idea to give it to you, and not basically say "well you made this mistake once, so how about you just keep on making it?" Regardless of what happens, the Big 3 are going to need to do some major restructuring if they want to survive. They are simply carrying way too much debt to ever be profitable with their business model. Even with the dramatic reduction of benefits set to take effect in 2010, they will need to find a way to turn some of their creditors into equity holders or all they will be doing is delaying the inevitable. As they say, when you jump off the top of the 80th floor for 79 stories you can feel like you're flying.

And, as a final point, having all of the CEOs flying up to Capitol Hill on private jets was just idiocy. I know that it's a relatively minor thing, but it just shows complete lack of foresight on their part. It's like a guy going out to beg while he's wearing an Armani suit. And really I blame their respective PR departments. Each company has teams of people that are dedicated only to upholding the company's image. How can it be that not one of them stood up and said "Um, think about how this is going to look."? If truly no one did, that doesn't speak very highly of the level of talent in the organization. And if someone did and was shot down, that doesn't speak very highly of the decision making process. But then again what do you expect from a company who said in the mid-90s that hybrid cars would never be economically viable?

Finally finished Warren Buffett's book, and I still can't recommend it enough for anyone with even a passing interest in business. As my next "educational read" I've started to read Contours of the World Economy, which is a series of essays that analyzes the economies of the major empires and civilizations from the Romans on. So far it's pretty good, although quite dry. But I've read that it's used as a textbook in some college macro-economics classes, so I guess that's to be expected.

Hope that everyone had a good Thanksgiving! I'll try not to make it another 3 weeks before my next update.

Republican Schizophrenia

"Senator Obama and I have had and argued our differences, and he has prevailed. No doubt many of those differences remain. These are difficult times for our country. And I pledge to him tonight to do all in my power to help him lead us through the many challenges we face. I urge all Americans who supported me to join me in not just congratulating him, but offering our next president our good will and earnest effort to find ways to come together to find the necessary compromises to bridge our differences and help restore our prosperity, defend our security in a dangerous world, and leave our children and grandchildren a stronger, better country than we inherited. Whatever our differences, we are fellow Americans. And please believe me when I say no association has ever meant more to me than that."

- John McCain, from his concession speech last Tuesday

"There are three seats in the House and two in the Senate that still hang in the balance. Winning these races and strengthening our Republican numbers in both chambers of Congress is critical to blocking Barack Obama’s left-wing agenda . . .The Obama-Biden Democrats and their liberal special interest allies are trying to steal these election victories from Republicans. . .Harry Reid and Nancy Pelosi are hoping to add more seats to the Democrats’ Senate and House majorities so they can steamroll our opposition to their extreme, ultraliberal schemes. . . Every Republican vote we can add now will help our Party stop the Obama Democrats’ leftist policies in the U.S. Congress. "

- Mike Duncan (RNC Chairman), from an email I got from him yesterday soliciting me for donations to the RNC.

You can really feel the goodwill and bipartisanship, can't you?

First of all, let me just say that the reason I get emails from the RNC is because I gave $25 to John McCain during the primaries. And it turned out to be some of the best $25 I ever spent, just for the information and insight into the campaign that it provided. It was quite humorous over the last 6 months to get back to back emails; one from the Obama campaign and one from the McCain campaign, with subjects like "Help us defeat Obama and the Democrats" next to "Help us defeat John McCain and the Repiblicans."

In any case, back to the quotes. I certainly don't expect the GOP to suddenly start agreeing with everything the Democrats say. I just think that it shouldn't be too much to ask to, you know, wait until there actually is legislation out there to oppose. Otherwise you're basically just defining your party as "we're against whatever the Democrats are for". In addition to being really petty, that doesn't sound like a very good way to govern or reconnect with the American public. And I like the use of the word "schemes" in describing Reid and Pelosi. Makes them sound like some silent picture-era villains sitting in Congress twirling their handlebar moustaches. And finally, I really like how they say that Democrats are "trying to steal these elections." Yes, their cunning plan to get more votes than their opponent is diabolical indeed.

I understand that politics is a contact sport, but there's a lot of other paths to take here. Why not just play up the checks and balances angle, as in "our government functions best when voices from both sides of the aisle are heard. We need these elections to keep our voices from being drowned out."? Or, considering the beating they endured last Tuesday, the GOP could approach it from the angle of "you have spoken, and we have heard you. With your help we will renew this party and this country." Overall, this is just another illustration of the fact that the Republicans simply don't know how to appeal to centrists and independents anymore. They can't get it through their thick skulls that there are a lot of people (as of today a majority, in fact) that don't automatically equate the Democrats with a force that needs to be stopped at all costs. As with the Sarah Palin pick, this kind of communication does very well at energizing your base but that base by itself is simply not sufficient to win federal elections anymore (north of the Mason-Dixon line anyway). Until they realize that, there will continue to be dark days ahead for the GOP.

Idiots on Both Sides of the Aisle

So, if we have truly entered a new age of bipartisanship in American politics let me get in the spirit by complaining equally about a member of each party.

First up, and hopefully the last time I ever feel compelled to talk about her, is the easiest Republican target since Dan Quayle, Sarah Palin. With the election over it now appears that as harsh as the media and pundits were on her it turns out she deserved all that and then some. The stories starting to surface about her now are truly cringe-worthy considering how close she came to being one heartbeat away from the presidency. And the best part about it is that these stories have been broken by Fox news . Among the most damning (hopefully; though who knows what other stories will emerge) are reports that "she was unaware that Africa was not a country but a whole continent" and that she was "unable to name the countries that belong to the North American Free Trade Agreement: the US, Mexico, and Canada." I could go on a long diatribe about this being a reflection of McCain's bad judgment and so on and so forth, but you know what? More than anything I just want to be done with her. Ms. Palin, I wish you all the best in your future endeavors, but please slink back to Wasilla now and become irrelevant to my life once again.

This story though, bothers me a bit more. Harry Reid is apparently leaning towards removing Joe Lieberman as Chairman of the Senate Homeland Security and Governmental Affairs Committee. In a statement, Reid said "While I understand that Sen. Lieberman has voted with Democrats a majority of the time, his comments and actions have raised serious concerns among many in our caucus." However he wishes to phrase it, the bottom line is that this is punishment for Lieberman supporting John McCain. Look, I am not a big Lieberman fan. I thought he was a poor choice for VP in 2000 and I often found myself getting very angry at him throughout this campaign. But this is 100% the wrong thing to do. Democrats won on Tuesday based largely on a campaign of ushering in a new era of bipartisanship. That means extending an olive branch across the aisle to people who may have done you wrong in the past and whom you may not even like very much for the betterment of the country. Well, Joe Lieberman isn't even across the aisle. If Congressional Democrats can't even make peace with someone who has been one of their own for the vast majority of his career, I have absolutely no faith in their ability to heal the rift with Republicans. It also sends the message that breaking with the party to stand up for what you believe is right for the country will not be tolerated. I can't think of a single worse message to send right now.

On the far, far lighter side of things I am on my way to the Cheech and Chong show at the Rosemont Theatre tomorrow night. I honestly haven't watched a single Cheech and Chong film or listened to a recording of them in about 10 years, so it will be interesting to see how the humor has held up. In any case, Cheech Marin has aged a lot better than Tommy Chong has, so I had a feeling this would be my only chance to see them and I'm looking forward to it.

Have a good weekend everyone!

Musings on the Rally

Well, probably the best and easiest way to describe the rally is to say that if you saw it on TV it was exactly what it looked like it was: a lot of people that were all very happy and just excited to be a part of the moment.

The picture above was taken by Joe right when Obama came out to speak. Obviously we were not very close, but that wasn't really the point. We spent the early part of the evening at Joe's friend's Ed's place (that's a lot of possesives in a row!) with my brother and his girlfriend Kari (who also went to the rally with us). He lives about 5 blocks from the rally location and we thought it would be a good place to eat dinner, watch the early returns, and relax before we got amped up to be amidst the throngs of people. As a result, we didn't leave for the rally till about 8:45. Since people had started lining up to get in first thing in the morning, it didn't seem to make much sense to get there 2 hours early just to end up about 200 feet closer and still not be able to see anything. While there were lines to get in, it wasn't nearly as bad as I was expecting. There were 2 separate security checkpoints, but it was only the first one that had a decent size line. That was where they were making sure that only people with tickets were getting past so once you got through that it really opened up. At the second one they scanned your ticket and checked your ID to make sure it was legit. Strangely enough, there were actually no metal detectors. I am thinking that they used them for the early crowd but then once it got jammed up they figured it wasn't as big of a security risk since everyone else would be pretty far back. That's just speculation on my part, though.

We got inside the actual rally at about 9:15 and just stood around and conversed with fellow supporters for about half an hour. At that point, since they'd already called Ohio and Pennsylvania for Obama it was just a question of when, not if, the victory would be official. They had CNN on the jumbotron and the sound system was more than adequate to keep everyone informed. Finally, at 9:58 they called Virginia for Obama and there was a huge cheer that went up from the crowd. Less than 2 minutes later, just as the California polls closed they made it official: Sen. Barack Obama was now President-elect Obama. For about 5 minutes you couldn't hear CNN anymore or, indeed, anything else other than 200,000 people screaming and yelling. When some semblance of calm was restored, the next thing I remember hearing was that McCain was about to speak and officially concede. I give John McCain all the credit in the world, because he gave one of the best concession speeches I've ever heard. While there were a smattering of boos, by and large most people cheered and applauded him (with the notable exception of when he talked about Palin). We weren't there to dance on the grave of our opponent, we were there to celebrate our victory.

After that the fervor died down for a little while, but you could feel the anticipation and the energy never left the crowd. Finally, after about another 30-45 minutes of waiting the moment arrived. As you would expect, the place erupted when he walked out but it actually died down fairly quickly. As excited as everyone still was, they were more interested in hearing him talk than they were in cheering at the moment. There was the feeling that this was going to be a speech that would still be played 30, 50, maybe 100 years from now. And he didn't disappoint. For any that missed it, I would encourage you to go to youtube or any of 1000 other places on the web to view or read a transcript of it. It was a synthesis of everything he has been saying for the past 2 years. I made a point to look around while he was talking, to try to freeze the image in my mind forever. The thing that struck me the most as I listened was being aware of how silent it was. There were 200,000 people all standing in the center of one the largest, busiest cities in the world and the only sound that could be heard was the voice of one man, speaking for millions and saying everything that we wanted to say. By the end, I don't think there was anyone there whose eyes didn't at least well up. Truly as unforgettable a moment as there can be.

Reflecting on it later, I was most impressed with how he was able to weave in the sense of celebration and rejoicing with a continuing call for action. As I said in my last post, this isn't really the end at all; it's just the beginning. And rather than summarize and expound upon what he said, in the end I really can't say it any better than he did himself:

The road ahead will be long. Our climb will be steep. We may not get there in one year or even one term, but America - I have never been more hopeful than I am tonight that we will get there. I promise you - we as a people will get there.

There will be setbacks and false starts. There are many who wont agree with every decision or policy I make as President, and we know that government can't solve every problem. But I will always be honest with you about the challenges we face. I will listen to you, especially when we disagree. And above all, I will ask you to join in the work of remaking this nation the only way its been done in America for two-hundred and twenty-one years - block by block, brick by brick, calloused hand by calloused hand.

What began twenty-one months ago in the depths of winter must not end on this autumn night. This victory alone is not the change we seek - it is only the chance for us to make that change. And that cannot happen if we go back to the way things were. It cannot happen without you.