Saturday, May 21, 2016

Preakness Predictions

The Preakness, the second leg of horse racing's Triple Crown, will go off today shortly after 5pm.  Nyquist will be the odds-on favorite and rightfully so - this horse looks like he has all the makings of a Triple Crown winner.  But the Preakness is the shortest race of the three and a good speed horse might take him down today. Additionally, the track is expected to be muddy, but that has not bothered Nyquist in the past. Even so, there won't be much money to be made if Nyquist does win. And I'm not sure this track, especially if it's muddy, is suited the oddsmakers second choice, Exaggerator, as he loves to come from way back with a great stretch run, something that is tough to do at the Preakness. So, for those of you who did not lose your shirts based on my Kentucky Derby picks, here are a couple of horses that offer a little more bang for your buck.  Stradivari did not run in the Derby, but is a speed horse with couple of impressive wins. And I'd also take a flyer on another horse that did not run in Kentucky, Collected. Either one or both boxed together will bring in a handsome payoff - if they end up in the money, of course.  The betting windows are open!

Natural Weekends

We've had so much of them lately, so today we are featuring clouds:

Friday, May 20, 2016

Does Microsoft Try To Make You Hate The Company

So, Microsoft has done it again - they've managed to tick me off once more.  I had to go out for most of the evening the other night and I stupidly left my computer on and my browser open.  I had left some things I needed to get done open so I could quickly finish them up to have them ready to go out first thing the next morning. So, of course, when I got back home, there was my PC in the middle of being updated to Windows 10.  I didn't ask for Windows 10; I didn't want Windows 10; and I would always so no when I was harassed to upgrade.  But Microsoft's new method to totally annoy you is to send you a message scheduling the upgrades to happen in about 2 hours and go ahead IF YOU DO NOT SPECIFICALLY STOP THEM.  I'm sure I agreed to this type of BS when I accepted the Microsoft license, but really - are they that desperate to push Windows 10. Is it just because they want to move everybody onto Edge so they can finally give up on Internet Explorer.  Who knows. Needless to say, I just went to bed and then had to get up extra early to go through the Windows 10 setup and finally finish the work I needed to get done. But, of course, business is still locked into the Microsoft world and my connection to the office does not work with Edge - it needs IE. And, yes, there are a handful of other apps that also don' work on Windows 10 yet either. I've been a UNIX guy since the 1980s and I should have probably gotten a Mac or Linux-based PC and then partitioned for Windows emulation. But that's a hassle too. I can honestly say that Microsoft really should have just gone away after producing the Office Suite - everything else has just caused me trouble.

Bassick High School - Politics of Perpetual Failure

Thanks again to Lenny Grimaldi over at Only in Bridgeport for highlighting this story of the half century of challenges at Bassick High School in Bridgeport.  Graduation rates have "improved" to 62% as opposed to the state average of 85%; Common Core proficiency levels were 15% in language and 0% in math. As sad as the story is, it is even more disturbing to realize that there are hundreds of schools across the country in similar positions. I'm no education expert and I know the challenges that certain school districts have is enormous. But it seems to me that one of the keys to making progress would be much more stability in the school leadership and much more money for better infrastructure and programs. Admittedly, both are easier said than done. But no organization can be effective with the constant rotation of principals and major shifts in direction that have whipsawed this school in the last few years. And it is clear that the reliance on local property taxes to fund the public school system will inevitably end up being an inequitable system - Bridgeport spends about 33% less per pupil than Greenwich. At some point, the State or Federal government is going to have to put policies in place that somehow makes these funding differences more equitable. It is essentially the equivalent of the illegal red-lining that banks have engaged in in poorer neighborhoods for years, except it is being done to our children by government itself.

Now Is Not The Time To Bern Bridges

I've recently updated an earlier post about the importance of not forgetting history when it comes to Presidential elections. It's a message I hope Sanders' supporters will listen to and hear. You can get the full read here.

Millions Helped by New Overtime Rule; Salary Cutoff Will Adjust Regularly

I thought I'd spend a little more time discussing the Labor Department ruling raising the salary cutoff at which overtime is not required to be paid, another indicator of Obama's latent liberalism coming out as his term ends. The ruling more than doubles the cutoff from $23,660 to $47,476, meaning that millions more workers will be required to be paid overtime. Overtime is exactly that - extra time. And American businesses have been making fortunes over the last 40 years by essentially getting their employees to work for free, often with the implicit, or even explicit, threat of losing their jobs if they don't.  In 1975, 60% of workers were eligible for overtime; prior to this ruling, the current level was 7%.  This arbitrary cutoff is a vestigial legacy of the days when there were more clear-cut differences between managers and manual laborers, between white collar and blue collar, between union and non-union, between middle class and working class. Today, that distinction is much less clear as the middle class has shrunk significantly and the working class is under constant pressure.  The salary cutoff had only been raised once since the mid-1970s, and every year inflation ate away at the true value of that cutoff, leaving more and more workers with no compensation for the extra work they did. And that is the other important part of this new rule. Every 3 years, the salary level will be adjusted to keep up with inflation and adjustments in wages. Workers will no longer have to wait 40 years for the adjustments they deserve. If only we could do that with the minimum wage as well.

Thursday, May 19, 2016

Federer Out Of French Open - Amazing Streak Will End

The great Roger Federer has withdrawn from the upcoming French Open which is scheduled to start on Sunday.  This will end one of the most remarkable streaks in sports history - Federer had competed in 65 Grand Slam tournaments in a row, going all the way back to 1999 when he was an up-and-coming 18 year old.  Federer has some set some amazing records, among them 17 Grand Slam singles titles and 23 consecutive Grand Slam semifinal appearances, and this is another one that will last a long time. Federer has been plagued by back problems this spring and the red clay at Roland Garros is a tough surface for him to win on - he has only won it once back in 2009, completing the career Grand Slam. Any aggravation to his injury here at the French, where his chances to win the title were rather slim, would jeopardize his participation at Wimbledon, where his chances are much greater and which is scheduled to start in early July.  So, at this point for Federer, discretion is the greater part of valor.

In any case, the drama at this year's French Open was going to be whether Novak Djokovic could complete his career Grand Slam or whether the newly resurgent Rafael Nadal would continue his domination of this tournament, having won it 9 times already.  A Djokovic victory would also put him well on the way to winning the calendar Grand Slam as he will be the favorite at Wimbledon and the US Open.  But Roland Garros always has its share of surprises and I expect this year will be no different.

Astronomy Adventure (cont'd) - Back To The Moon

In the last Astronomy Adventure, it became clear that I was having problems with focus. I had been focusing the telescope with my eyes through the lens and then attaching the camera. I suspect I should be focusing with the camera already attached. So it was back to the drawing board. And the easiest place to start this new procedure was with the Moon. Well, the new method produced the best results yet:

I believe the above were taken with the 10mm and 25mm eyepieces respectively.

And here are a couple taken with the 7.5mm eyepiece with 2x Barlow with the first one cropped in GIMP:

The picture above shows the area between Promontory Freznel on the left and Caucasus Mountains on the right with the craters Aristillus and Autolycus in the middle.

This one is not as good but I'm pretty sure it was not just a focus issue. In any case, it is a nice capture of the central peaks in the middle of craters Ptolemaeus and Alphonsus in the upper right.

So, I'm really happy with these results. Accordingly, it is time to go back to the planets to try the new, correct focusing method - we'll see how that goes.

Fed Determined To Raise Rates

It looks like the Fed is pretty determined to raise interest rates at its next meeting in June. Of course, Wall Street had predicted only a 10% chance of this happening as of the beginning of this week, so perhaps the Fed will give them a little more time until July in order to position themselves properly for this move. Apparently, the memory of the disastrous rate hike in December has not scared the Fed off and they are determined to start raising rates again. I'm not so sure the desire to hike rates is so much driven by the fear of inflation (core PCE is still below the Fed target) as it is by the desire to have a few bullets in their gun in the event of the next recession. They are looking for some room to cut rates in the event of an economic downturn rather than resorting to another round of quantitative easing and expanding what some of their members think is an already too bloated balance sheet. Coincidentally, of course, average hourly earnings have began a small but relatively steady climb upwards over the last few months - that has always been a sign to the Fed that it's time to take away the punch bowl.  The Fed better hope that a small rate increase will not end that trend - it has done so too often in the past.

Obama's Liberal Streak Positions Democrats In November

Just like Harry Reid seems liberated by not having to run for re-election, so President Obama seems to be letting his inner liberal out as his term winds down. First, there was the move to protect millions of illegal immigrants from deportation. Then there was the executive action on the environment last summer to reduce greenhouse gas emissions from coal-powered plants. Then his Justice Department stepped up their scrutiny of corporate mergers and acquisitions, blocking a number of them from going forward and probably making others think long and hard about going forward. And more recently, there was the directive to all public schools to allow transgender students to use the bathroom of their gender identity. Finally, yesterday, his Labor Department announced new rules to more then double the salary level at which overtime must be paid. This will increase the paychecks of millions of employees and potentially increase employment as well, as it becomes cheaper to hire a new worker than pay excessive overtime.  Of course, all of these actions drive the Republican base to distraction; but all of them are great issues to run on in the November election. It is finally nice to see Democrats, especially the President, staking out important liberal positions, as opposed the usual tactic of trying to blur the differences with Republicans, going into a general election.

Supreme Court Dysfunction Only Ends When Democrats Win

I doubt Senate Republicans will allow a vote on Merrick Garland before the election - the price they would pay with their base would be too great at this point. And the odds are they will allow a vote in the lame duck session if a Democrat wins and they lose the Senate. But if a Democrat wins and the Republicans manage to hold the Senate, all bets are off.

You really have to wonder why they would bother at that point - whatever losses from their intransigence would already have been incurred. They could simply wait for the Democratic President to either re-nominate Garland or put forward a new candidate. And then they could stonewall that for another few months until the next election cycle begins.  A neutered Supreme Court would just allow the different circuit rulings to stand, creating the bizarre situation of a different application of the same law from one state to the next and more chaos for businesses and citizens. Under their leadership, the legislative branch is clearly broken but they will have paid no price, having just maintained control of the House and Senate; they have left vacancies in the lower courts open for years and paid no price; it is just a small step to take that level of obstruction to the Supreme Court. They can point out that the country would have survived without a ninth justice for nearly a year, so what's a few more months. After all, when the raison d'etre of their legislative platform under a Democratic President is to make sure government does not work and then run against the incompetence of government, a dysfunctional Supreme Court just plays into their strategy. The only way to make the Supreme Court relevant again is to elect a Democratic President and a Democratic Senate.

Wednesday, May 18, 2016

The Right POV - Government Debt is Irresponsible

The Right Point of View is a semi-regular guest post by my favorite Western fiction writer, Edward Massey.  His life is like one of his novels - from the hills of Utah to the renowned McKinsey & Co. to managing the band Blondie to owning a minor league baseball team. He has his own blog about the trials and tribulations of being a writer and you can also pick up copies of his wonderful books at Please check it out when you can. Edward is a good friend and a great guy but his conservative/libertarian politics are more than just my polar opposite - we might not be on the same planet.  But I've always thought it was important for Democrats to at least hear and understand what the other side believes, especially if we are to convert them to our side.  They may be right, but that certainly does not make them correct.

I'm not sure I can keep up with my good friend, Tidal Sounder, but I am happy he has invited me to participate in his blog. It's sort of an insurance policy, an anchor, to keep his blog from floating out to sea with the rest of liberal Connecticut. To wit, I certainly agree with his earlier post that government debt is not like personal debt.  The trouble is his post does not deal with the reasons government debt needs to be monitored, abhorred, and reduced. For the reasons he already stated (which for the sake of brevity I will not enumerate in total), government debt is almost always irresponsible. It is not viewed as a real burden to those who create it because they never expect it to be addressed. Those who address it are the aged, the poor, the disadvantaged, and the fixed-income earner. Ask your average liberal who he/she is worried about - like a litany: the aged, the poor, the disadvantaged, and the fixed-income earner. The reason for controlling government debt is not found in any of the straw men Tidal Sounder so adroitly builds and slays.  The reason is that GDP and tax revenues, like energy and breath, are finite. They can and will run out. They are running out. The accretion of government debt converts GDP growth and inevitable tax increases to interest payments and this expense is achieved at the expense of government services (or private benefit, but let not a liberal be concerned about the destruction of private benefit). That which is the most irresponsible requires the greatest care and discipline from a civilized society. Government debt is necessary, but reigning it in and seeking to eliminate it (which will only have the result of lowering the rate at which it grows) is what requires that a few of us to continue to maintain the right point of view.

When the Levee Breaks...

In yet another report on the sad state of America's infrastructure, apparently our dams are in serious need of upgrade and repair. My initial reaction was, of course, that this is the result of Republican intransigence against any spending, even if it is an investment. And it is true that for all their coziness with business, Republicans seem to have a blind spot when it comes to understanding the importance of infrastructure investment. As the article points out, in South Carolina last year over 20 dams failed and the flooding resulted in 17 deaths and over $10 billion in property damage. In 2006, the Koloko dam in Hawaii failed, drowning seven. But the reality is there is not much the federal or even state governments can do to help shore up these failing dams. That is because, incredibly, the majority of dams in the US are privately owned.  When I think about dams in the US, I think of the great government projects like the Tennessee Valley Authority and public/private partnerships like the Hoover Dam.  But the reality is that well over 50% of the dams in the United States are privately owned. I'm not sure quite why this is - perhaps it is a legacy of colonial times when unnavigable streams and rivers on private land were considered just that  - private property. So the dams built on those rivers and streams are also private.  Now you might think that all these privately owned dams are run by hydroelectric utilities or other companies with competence in managing the dams. But, again, incredibly, this is not necessarily true. As an example, the Goshen dam in Virginia is actually owned by the Boy Scouts of America. Now, I know the Boy Scouts are a talented bunch, but I really am not sure I'd be relying on them for managing a dam. And Federal and State monitoring of the condition of many of these smaller, private dams is spotty at best - some states had just one inspector for over 1,000 dams. Oh, and back to the pie chart from FEMA showing the breakdown of dam ownership in the Untied States:

Nearly 12% of dams in the country are of undetermined ownership. Many of these are obsolete or abandoned dams meaning that the owners have given up on them entirely. Just hope you don't live downstream from one of those.

Clinton Ekes Out a Troubling Win in Kentucky

It appears Hillary Clinton has eked out an extremely narrow win in the Kentucky primary.  As I noted yesterday, Kentucky would give some indication of her ability to overcome her lack of popularity in "coal country" and give us an idea of how much more difficult general election wins in the critical states of Ohio and Pennsylvania, which also have large sections of coal country, would be.  Well, a win is a win; and yes, she did get clobbered in those coal producing areas, getting percentages in the 30s and even 20s in some counties.  But what was more surprising was how strongly Sanders did in areas that Hillary expected to dominate. Admittedly, the estimated turnout was only 20%, but even that was up from the 12% in 2012, so it is a small sample size. Kentucky was always going to be a good opportunity for Sanders, with its primarily white and working class population. But the Clinton campaign exerted a decent effort to win this election, so it should be troubling that it was such a tight result.

Fanning Finally Confirmed as Secretary of the Army

Senator Pat Roberts of Kansas finally got whatever verbal assurance he needed from the Pentagon that no Guantanamo detainees would be sent to Fort Leavenworth, Kansas and, with that assurance, the confirmation of Eric Fanning as Secretary of the Army easily passed the Senate in a voice vote.  Fanning is the first openly gay leader of a military service.  What makes Roberts delaying shenanigans so ridiculous is the fact that, as Roberts very well knows and has himself clearly stated, there are already "legal restrictions on funding to move the detainees to Ft. Leavenworth by January 20, 2017". There was already a legal roadblock that prevented the Obama administration from doing the very thing that Roberts needed a verbal assurance for. That verbal assurance is, I would imagine, non-binding but totally unnecessary anyway - and yet Roberts held up this nomination for months. Perhaps the recent publicity surrounding his one-man roadblock finally forced him to cave.

Tuesday, May 17, 2016

Garland Can't Get Hearing; IRS Head Gets Boot

The House Judiciary Committee has decided to go ahead with hearings that will most probably lead to a vote for the impeachment of IRS Commissioner John Koskinen. The dispute originated over the alleged targeting of Republican and conservative groups in the Internal Revenue Service's Exempt Organizations Unit back in 2013. A two year investigation by the Department of Justice ended last year with no charges being filed. Although Mr. Koskinen was not directly related to the alleged targeting, Republicans have accused him of a cover-up because some the emails requested by House investigators turned out to be unrecoverable. It is another break with history for House Republicans - the last agency commissioner to be impeached was all the way back in 1876 when the Secretary of War was removed for corruption.

As I've mentioned before, our annual budget deficit could possible erased if the IRS was able to collect all the money it is due.  But the constant underfunding of the IRS has made it difficult for the agency to do its job, which, in the world of the House Republicans, means that its budget gets slashed again because they are not doing their job.

Yes, we all know the IRS makes an easy and inviting target. And maybe I'm underestimating the intelligence of the American voter and their knowledge of the different roles of the House and Senate Judiciary Committees. But I think it would once again make voters question Republicans' priorities when a Judiciary Committee is spending time impeaching an IRS commissioner over an issue where no criminal conduct has been found while the nomination of Merrick Garland to the Supreme Court is unable to even get a hearing. But maybe Republicans know better - their last attempt at impeachment worked out so well for them, didn't it.

Massive Meteor Fireball Lit The Northeast Sky Last Night

I guessed I missed the massive meteor fireball that streaked across the sky in the Northeast in the early hours of Tuesday morning. You can see a video from a police car dashcam in Portand, Maine here. The fireball was seen from as far north as Ontario to as far south as Pennsylvania and in all the New England states. And the sonic boom as it exploded was also heard over a wide area.  I was out trying to get some pictures of Mars but it started clouding over around 12:15am, so I packed it in and missed this spectacular meteor show. If you saw the meteor or, even better, have video of the incredible event, please contact the American Meteor Society.

Bellweather Vote For Hillary in Kentucky

It is Primary Day for Democrats in Kentucky and Oregon and, although Oregon has more delegates at stake, Kentucky will be more of a bellweather for the Clinton campaign. That may seem counterintuitive as Kentucky is a deep red state while Oregon leans blue.  But if Hillary can not overcome her lack of popularity in the coal portion of the state, it does not bode well for the general election in the coal country areas of Ohio and Pennsylvania, two hugely important states.  Hillary has the support of the Democratic establishment in the state and her strength in urban areas and with minority votes should be able to pull her through. In addition, Bill Clinton, who remains quite popular in the state, has been campaigning hard for Hillary. The latest poll was taken way back in March so we have no meaningful read of the electorate at present. And Sanders' demolition of Hillary in West Virginia shows just how important the coal country vote can be.  We'll know later tonight whether Hillary survives this test.

The Domino Theory and Brexit

For those of you old enough to remember, the Domino Theory was one of the reasons that we ended up in the quagmire of Vietnam.  The theory basically was that if Vietnam fell, then all the surrounding countries in Southeast Asia would also soon fall to the Communists, like dominoes. And I guess what I am proposing when it comes to the British voting to exit the European Union, Brexit as it is called, is that it will be the first domino to fall.  The referendum is up for a vote on June 23, a little over a month away, and the current polling is pretty much all over the place - Reuters shows "stay" up by 15 points while others show the vote neck and neck. The debate has split the Conservative party wide open, with former London Mayor Boris Johnson, a future PM hopeful, leading the "leave" faction and current PM David Cameron heading the "stay" camp. But for the purposes of this post, let's assume the "leave" vote prevails and the UK ends up leaving the EU. 

In 2014, Scotland held a referendum on independence from the United Kingdom which lost by a 10 point margin, 55%-45%.  The referendum was really a launch pad for the Scottish National Party (SNP) which, in less than a decade, has managed to displace Labor as the dominant force in Scottish politics. In an ironic twist, one of the arguments made against Scottish independence was that the country would lose its membership in the EU.  Scottish support for the EU is higher than the rest of the UK and the SNP has said that it would put forward a second referendum on independence if the UK voted to leave. Scotland has long felt they were the forgotten stepchild when it comes to policies made in London and now the country no longer has a strong voice in either the Labor or Conservative parties that make up the majority of Parliament.  In addition, Scotland's economy has come under pressure as the price of oil has fallen through the floor.  Any vote for independence today would be quite close and the traditional powers of Labor and Conservatives that both opposed Scottish devolution would have less influence.

Northern Ireland also presents some potential problems if the UK leaves the EU.  Again, the country is much more pro-Europe than the rest of England and the EU is Northern Ireland's largest trading partner, much of it with Ireland.  In theory, a border would have to be maintained between Ireland and Northern Ireland, restricting the flow of trade and people between those two countries. The creation of  that border would be seen as essentially a British decision and could lead to increased calls for reunification with Ireland in order to stay in the EU, adding another layer of resentment to the country's long internal struggle.

Finally, the departure of the UK from the EU will essentially break the taboo associated with an exit. It will not be long before you hear Eurosceptics in Greece, France, Spain and elsewhere point to the UK as an example of what could be done. In Finland, Parliament is scheduled to debate leaving the Euro this year and similar debates are in the offing in Denmark and Austria. And there is no telling what would happen when a far right party gets control of government in one of the eastern bloc member states. But you have to feel, eventually, one country will vote to leave and then the floodgates would really be open.

None of these events would happen instantly - it would be a long, difficult process in uncharted waters for any of these countries.  As opposed to the EU, leaving or, for that matter, joining the Euro is an especially complex, arduous, and disruptive task with no certainty of the result. But the door would certainly be open if they chose to take it. Now, I happen to believe that the "stay" camp will eke out a victory and all this speculation will be for naught.  Cameron has managed to lead a charmed political life, squeaking through when he has too.  But, either way, the Brexit question will be a win/win for the Conservative point of view in England. If they leave, the more nativist Conservatives will take over; and if they stay, the UK economy will contract again and Cameron's Chancellor of the Exchequer George Osborne can use that excuse to continue his push for increased privatization and his attack on the social safety net in Britain.  But, if the UK leaves and the dominoes fall, David Cameron may well be remembered as the man responsible for the dissolution of the UK and the break-up the European Union.

Monday, May 16, 2016

Good News for Animals, For a Change

With the dismal and depressing daily reports of our deteriorating ecological climate (see here, here, and here), it is nice to see that some past conservation efforts have actually born some fruit. Ospreys, foxes, coyotes, and bears have all returned to Connecticut in strength. It might actually give you just a small sliver of hope for the future...

More Uber Backlash

It's nice to see that some other pundit has similar views to my own when it comes to Uber. It is really time for the company to, as Kevin Drum says, "start acting like a grownup". Their seeming sense that they are entitled to not be regulated in any meaningful way just won't play any longer.

Morning Joe Misogyny

I've always thought Joe Scarborough treats Mika Brzezinksy horribly on Morning Joe and that is one of the primary reasons I don't watch the show - their interaction actually makes me physically uncomfortable. It always seems that Joe is talking over her and treating her in a condescending manner, and even his attempt to help Mika resolve her demands for more equal pay came across as self interest.  So, it was not a great surprise to see the Morning Joe panel go all Reince Preibus on us and declare that, since everyone expects Trump to treat women horribly, it's all OK.

Trump Not Worth A Lot After All

The excuse that Donald Trump uses for not releasing his taxes - that he is currently being audited - is, of course, patently bogus;  nothing about an audit prevents you from releasing the returns. So the question remains as to what Trump's real reason is.  Mitt Romney believes this refusal is "disqualifying" and surmises that there is a "bombshell" in the tax documents.  And Mitt might actually have some inside information on this, having potentially vetted Trump as a Vice Presidential candidate in the 2012 election.  Others have speculated that the returns will show, as Romney's did as well, just how low an effective tax rate Trump was paying. But, knowing Trump, he would just portray paying a small percentage of his income in taxes as showing what a smart and effective businessman he was. Now comes the latest report from Crain's showing that Trump qualified for a tax break in New York that was eligible only for people making under $500,000 per year.  Now you and I would be perfectly happy with that kind of income, it is pretty paltry sum for someone who professes to be worth $10 billion, although Forbes estimates his value to be less than half that.  On the other hand, as of the end of February 2016, Trump had loaned his campaign about $25 million dollars but it is unclear whether that was a cash loan or backed by some form of collateral that Trump owns. And today, the Wall Street Journal reports that Trump does not have the over $500 million that it takes to run a modern Presidential campaign.  In fact, a financial disclosure form that Trump was required to file showed that he could have as little as $100 million in liquid assets. Of course, perhaps Trump can run a less expensive campaign than most others considering the inordinate amount of free media exposure he manages to generate, estimated at nearly $2 billion during the primary campaign.

It seems pretty clear that Trump is not really a developer anymore - he is just a front man for other development money and a spokesman for the Trump brand. And my guess is that his tax returns would show that he is not nearly as wealthy as he constantly professes.  Making this known publicly will not only damage his enormous ego, but probably will hurt the Trump brand as it would show just how minor a "player" he really is.  But we'll probably never know the truth until his taxes are released.

Reality Check - Why Government Debt Is Not Like Personal Debt

Monday's Reality Check - a weekly presentation of facts and figures to help us all discuss important issues with some degree of understanding. Because, despite living in this post-modern, post-truth world, the fact remains that facts still remain.

In our last post, we looked at who actually owns all the US debt and showed that the myth that "China owns all our debt" is exactly that - a myth.  Today, we will look at how government debt differs from our regular household debt and why it's important to understand those differences. One of the most annoying and false analogies that people make is saying that the "federal government needs to manage its finances in the same way a family manages its budget".  Usually when you hear this, it is followed by the need to make radical cuts to spending in order to bring the debt under control. Even President Obama, someone who really should know better, said this back in 2010 - "families across the country are tightening their belts and making tough decisions. The federal government should do the same". But equating these two types of budgets is totally misleading. So how is government debt that much different from our own personal household debt - let us count the ways:
  • US Government has the virtually the entire rest of the world available as potential lenders in the form of buyers of US Treasury securities.  As we saw in the prior Reality Check, current holders of US debt span the globe and US Treasury securities grease the wheels of global capitalism.  For most of us, there are just maybe a few hundred sources of lending that we could tap into.
  • All things being equal, an increase in GDP will result in an increase in revenue for the Government.  The average annual US GDP growth rate over the last 10 years is around 2% - and that period includes one of the greatest downturns in the US economy since the Great Depression. Now, in the past, many of us could pretty much guarantee that are income would rise relatively predictably over the years.  But that presumption pretty much disappeared about 30 years ago and has never returned.  The point being that lenders can pretty much count on the growth of potential revenue for Government - but that does not necessarily apply to you and me as individuals.
  • I'm sorry to tell you this, but you and I are going to die.  There is a reason why I wasn't able to get a 30 year mortgage when I bought my new house - my earning power was going to substantially decrease when I retired and I'd probably be dead long before the loan was paid in full. Stable governments, on the other hand, are eternal, at least in economic terms.  Borrowers are only too happy to roll over US debt since they know with a degree of certainty that they will be repaid.
  • Governments have the power to tax and raise revenue virtually at will. There is nothing that keeps the US Government from raising tax rates to the point where they could generate enough revenue to eliminate the deficit and even start paying down the debt. Yes, the economy might contract a bit and the voters might be mighty angry, but the deficit would be eliminated.  You and I don't really have anything like that kind of option - we just can't go into the boss and say next year you're going to pay me X amount more because I need to pay off my credit card debt; that's just not going to happen.
  • There is no foreclosure or repossession option for Government debt - it can only be restructured.  As opposed to most of us who have to put up some kind of security for the loans we take (mortgage, auto, etc.), Government debt has no "asset" associated with it that can be seized in the case of non-payment.
  • Finally, and by far the most important reason that Government debt is different is that the Government can essentially print money - money that it can use to pay off creditors. Perhaps in another post I can get into the mechanics of the interaction between the US Treasury and the Federal Reserve but, suffice it to say, the US Government can create money at will.  Yes, this will eventually cause inflation to rise but, as we saw in this Reality Check post, inflation is one of the strategies for reducing the deficit. Yes, creditors might be annoyed to see the value of their debt depreciate and interest rates would generally be higher, but creating more money is a always an option for paying our debts. Other than some extremely good counterfeiters, none of us as individuals have that capability.
The importance of this final point cannot be understated.  And it is also key in understanding why some countries have recovered more quickly than others since the Great Recession in 2008. Additionally, the notion that dollars can essentially be created out of thin air is a challenge to the very idea of the value of money, which is why we constantly have people calling for the return of the gold standard. But both those discussions will have to wait for another day.

Families spend more than they make all the time - they just borrow using a credit card. And, yes, when we've maxed out our credit cards, usually our only option is to cut back on spending so that we can bring our budget into balance and start paying off those cards.  But the government has many more options to increase the revenue or even print the money they need to accomplish that same balance. So the next time someone tells you how the government needs to get its financial house in order just like a family budget, you can point out how that analogy really does not apply.  There are a number of critical differences - that's just a fact.

Sunday, May 15, 2016

Natural Weekends

And here is one of the Cardinals that has been chasing the Blue Jays around the last few days: