Sunday, September 25, 2011

Oh No. Another Twelve Years of Putin

Four years of non-suspense ended Saturday. Vladimir Putin will return as president of Russia in March. This decision does not bode well for Russia, the West, or for those who wish to do business in Russia. In fact, nothing much will change. Only the election of a new president could change the status quo, and this is not going to happen.

Putin’s maneuvering within the constitution has restored the Soviet practice of lifetime tenure of the top leader. He became president at age 48. When he retires at age 72 (if he does not choose to serve longer), Putin’s quarter century tenure will match that of Joseph Stalin.

Let’s go back to the events of Saturday’s  United Russia convention: First,  Prime Minister Vladimir Putin rose to nominate protégé and current President Dmitry Medvedev to head the party list in the December parliamentary elections. As party head, he will  replace Putin as  Prime Minister. Newly lame-duck Medvedev, purportedly near tears,  then proposed Putin as the party’s presidential candidate for the March 2012 elections.  United Russia delegates approved both proposals unanimously and with enthusiasm. (All that was missing was the “stormy and sustained applause” of the Stalin era).

United Russia controls almost three quarters of the votes in the  Duma. Of the three other parties, only the Communists act as a feeble opposition. The other two are pro-Kremlin “pocket parties” that serve as democratic window dressing.

Russia’s new 2012 leadership has already been selected. Russia and the West are stuck with it, like it or not.

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Berlin Journal September 26, 2011

What do Germans think of U.S. politics?

So far, there appears unanimity that Obama’s “good plans and intentions” are being held hostage by the evil Republicans. The Tea Party is universally hated as a bunch of suicidal kooks.  On state television, Tea Partiers are shown as clowns, racists, and idiots. These opinions appear to be shared across age groups and comes from relatively well educated people.  There is disappointment in Obama but only insofar as he has not been able to put his plans through.

German network television

German network television (prime time at least) is directed at a gray audience. I guess young people either nightclub or surf the web. I have yet to see a prime-time romantic comedy in which the man and woman are under fifty. In most case they are sixty and above.

The Pirate Party

Berlin just had its elections. The Pirate Party, whose agenda has something to do with personal privacy rights, received enough votes to enter the Berlin city government. Apparently, the German Green Party started the same way and now it is a part of mainstream German politics. And the Germans look askance at our Tea Party?

The Berlin Marathon

The Germans are usually a quiet people, but if you give them a chance to celebrate, they won’t shut up. They began their loud music and vuvuzelas at about 8 AM on Sunday and didn’t stop until four in the afternoon.

Sunday, September 18, 2011

Can We Really Call Climate Science A Science?

Soviet Politburo September 8, 1927
“Trotsky: Let us present our platform to the party congress. What are you afraid of?
Stalin: Comrade Trotsky demands equality between the Central Committee and his opposition group. In whose name do you speak so insolently?
Trotsky ally: Why are you trying to hide our platform? What does this say about your courage?
Stalin: We are not prepared to turn the party into a discussion club.”
George Orwell, Animal Farm, Chapter 7
“They had come to a time when no one dared speak his mind, when fierce, growling dogs roamed everywhere, and when you had to watch your comrades torn to pieces after confessing to shocking crimes.”
E-mails from  Phil Jones (East Anglia University)
July 8, 2004
“I can’t see either of these papers being in the next IPCC report. Kevin and I will keep them out somehow — even if we have to redefine what the peer-review literature is!”
March 11, 2003
“I will be emailing the journal to tell them I’m having nothing more to do with it until they rid themselves of this troublesome editor.”
There is no disagreement that the earth’s temperature has always changed over time. There are periods of warming and cooling. It appears we are in a period of warming. The debate between “warmists” and “skeptics” is about whether human Co2 emissions are the cause of warming, whether the relatively small effects of these emissions will compound into larger changes, and, if so, whether, the benefits of remediation outweigh the costs. By “warmists,” I mean  Global Warming Alarmists who believe that warming is caused by humans and will have disastrous consequences for humankind if unchecked by remediation, no matter how costly.
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Saturday, September 17, 2011

The Most Charitable Interpretation of Solyndra: Obama Is Clueless

Any rookie business student knows what it means when a company’s outside  auditor  raises “substantial doubt about its ability to continue as a going concern.”  A negative “going concern” verdict means that the auditing firm has concluded, after examining the company’s assets, liabilities, and net income that it is unlikely the company will survive.

Such a ruling warns potential investors to stay clear of the company.

Apparently, one of the few who did not understand this accounting message was President Barack Obama. Instead of staying clear, he made a televised visit to  Solyndra in Freemont, California in May of 2010. There he stated before the assembled employees, press, and TV crews that: "It is here that companies like Solyndra are leading the way toward a brighter, more prosperous future."

Solyndra declared bankruptcy and laid off  its workers on August 31.   

This was a strange upbeat message for a President to deliver about a company that received a negative “going concern” verdict from PriceWaterhouseCoopers two months earlier.  The PriceWaterhouseCoopers auditor found cumulated losses of $558 million and negative cash flows. (By the way, these cumulated losses are suspiciously close to the federal loan guarantee).

The negative audit, by the way, was no secret. It was reported by Reuters and on GreenTech websites on April 2, 2010. It would seem that some one in the Department of Energy or on Obama’s staff would have seen these accounts. If not, that is a scandal in itself.

The audit report would not have been the only sign of trouble, but it alone was enough. The numerous visits of Solyndra executives to the White House must have been about getting more bailout money. There must have been a large number of red flags we will never know about.

Obama’s visit to Solyndra was not a casual drop-by. It constituted an integral part of the selling of his top-priority green technology program. Solyndra was the first company to get a stimulus green-technology loan guarantee. Obama’s staff carefully choreographed the event and made sure it got extensive press coverage. 

How are we to explain how a U.S. President can  publicly back a company whose own auditors correctly conclude it will not survive?  None of the possible explanations inspire confidence.

One possibility is that Obama’s time horizon is so short that he was prepared to risk long-term embarrassment and scandal for short-term political gain. He could even have thought that his personal presence would cause investors to throw their money down the Solyndra pit. Who knows on this.

A second interpretation is that Obama believes his naïve view of the world –we need solar power, hence a Solyndra must be viable – trumps everything else including the fact that Solyndra was spending huge amounts of money and earning no revenues. In this case, a religious belief in green technology outweighed hard economic facts.  

A third possibility is that he is clueless when it comes to business matters. Obama could argue that no one on his staff told him – that he was kept in the dark. If we accept this argument, then we must conclude that Obama has a totally incompetent staff and administration. Obama should be reminded of  Harry Truman’s “the buck stops here.”

Of the three possibilities, the clueless argument is the most charitable.

The Solyndra affair casts doubt on the competence of the President. It also reveals the dark underbelly of state industrial policy. World experience shows that governments make poor investment bankers. The mistakes of Japan’s once-acclaimed industrial policy contributed to its three decades malaise. Mahathir’s decision to build jumbo jets in Malaysia at least was stopped before it bankrupted the country. China’s government banks throw money at political projects. Solyndra joins this  band. Let’s hope a lesson was learned.

Thursday, September 8, 2011

Obama’s Jobs Speech: “And It’s All Paid For”

I had to watch President Obama’s jobs speech. I was scheduled to comment after the speech on a BBC radio program. Quite often, I skip his speeches. I already know what he plans to say. Tonight was no exception, but I had to watch.

The BBC producer warned me politely that a left-of-center commentator would join the discussion. It turned out to be Larry Kotlikoff of Boston University.

Anyway, here is my summary:

The President proposed  a half-price ($450 billion) second stimulus. He did not put a price tag on it, as I recall, but the press did. The proposed stimulus consists of spending increases for all kinds of goods things like roads and teachers and of short-term tax cuts in payroll taxes and hiring incentives. He did not mention that such short term fixes have been proven to have little or no effect – an inconvenient fact that only academic economists talk about, I guess.

The speech was delivered forcefully and with passion. It might raise his polls. But inquiring minds will want to know why a smaller second stimulus will accomplish what a larger first stimulus did not.

The President’s speech contained, pardon my French, a lie. He insisted that the second stimulus “is all paid for.” This statement will go down in history along with his: “If you like your current health insurance, you can keep it.” 

The President explained that we will spend more money now, but future spending cuts will more than compensate. Why think of  $1.5 trillion in spending cuts? Why not $2 trillion? He did not bother to say that this is the oldest “bait and switch” trick in politics.  What he is really asserting is that some future President and future Congress will be sure to make the spending cuts to “pay for” his spending right now.

I made these points during the BBC interview. I did not have any spirited exchanges with Professor Kotlikoff because he agreed that more spending now would likely create more uncertainty and depress the economy even more. So much for the right-of-center left-of-center debate BBC hoped for.

The President put himself in a bad position. He heralded his jobs speech for weeks, but he had nothing new to say. He repackaged old ideas the best he could. It is my guess that the voting public will see things as they are.

The Jobs Speech Obama Should Give, But Won't

My Fellow Americans:
Despite valiant efforts by my administration and the Federal Reserve, the economy is faltering and jobs are not being created. We must respond with decisive measures.

I had intended to come to you tonight with proposals to do more of the same – a second stimulus, an infrastructure bank, extending unemployment insurance, and some loosening of the regulatory burden. But I have concluded that such measures will do little to solve our problems of low growth and unemployment. Moreover, it would be difficult, if not impossible, to convince Congress to support new spending programs in this time of budget deficits. Now is the time for bold bipartisan measures. Half measures will not do.

The past three years have taught us that we cannot create growth and jobs through government. Only the private sector can do so. Private enterprise needs the confidence to invest and hire, and lenders need the confidence to lend. Neither will do so as long as they fear our government is against them or that government will rewrite the rules of the game on them. There is also the false impression that I and my administration are against business.

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Saturday, September 3, 2011

Psst: The Tea Party Is Mainstream Despite Everything You Hear

Democrat politicians paint the Tea Party as an extreme fringe of American politics. Vice President Joe Biden famously described Tea Party Republicans as “terrorists.” According to Democrat Sen. Jay Rockefeller, the Tea Party are “extremists” who have “hijacked” the Republican Party.  Other Democrats are less restrained, telling us: The Tea Party is like the Nazis or KKK, is a serious threat to our national security, and Tea Party members should “go straight to hell.”  Some even whisper the Tea Party “wants to lynch blacks.”
Establishment figures condescendingly describe the Tea Party as “an amorphous collection of individuals” which includes “affluent suburban libertarians, rural fundamentalists, ambitious pundits, unreconstructed racists, and fiscally conservative housewives.” They shudder to consider: What would happen to our foreign policy if those hicks got in charge!
The Democrats’ media allies either ignore huge Tea Party rallies or feature clown-like demonstrators dressed as Uncle Sam or revolutionary figures. They single out Sarah Palin and Michele Bachmann as representatives of the sinister free-market ideology of the Christian right.
National Public Radio and other “balanced” news organizations decry the plague on both parties. The beleaguered president must contend with his far-left, and noble moderate Republicans must bear their Tea Party cross. They ask plaintively: With extremists on both sides, how we can have civilized discourse and compromise?
Democratic politicians and their media allies can scarcely restrain their glee when national polls find the Tea Party’s popularity slipping. Given the onslaught from all sides, I personally find it remarkable that the Tea Party commands the large support it does.
The dominant narrative of the Tea Party as an extremist fringe group isolated from the American mainstream is distant from the truth. American public opinion polls, in fact, show that those who have “read, heard or seen anything about the Tea Party” are more supportive and majorities credit the Tea Party with energizing the political process and making government more responsive to the people.
If the Tea Party is a kook fringe, then its agenda should be far out of line with American public opinion. I surveyed a large number of Tea Party sites to distill what I consider to be its “core” platform. I then studied public opinion polls to determine whether the American people agree with the Tea Party’s core principles.

Thursday, September 1, 2011

Obama’s New Top Economist Opposes His Jobs Program

The mainstream press has heaped praise on President Obama’s pick to head his Council of Economic Advisers. Alan Krueger is indeed a prestigious economist, noted for his empirical work and lack of ideological bent.

The mainstream press particularly emphasizes his controversial work on minimum wages which concludes that in the case studied the minimum wage did not depress employment. Insofar as this finding defies much conventional wisdom, this particular study set off a string of research that served the economics profession well.

Only the Wall Street Journal has noted that Krueger, in two research papers for the prestigious National Bureau of Economic Research, found that more generous unemployment benefits raise unemployment.  In his 2008 study, Krueger concluded that job search is inversely related to the generosity of unemployment benefits. In other words, unemployed workers who get generous unemployment insurance spend less time looking for a job.

This finding, by the way, is consistent with a great deal of research that shows that the unemployed find jobs near the end of coverage by unemployment insurance.

The extension of unemployment insurance beyond the current almost two years will be a major plank in Obama’s job program. His new top economic advisor should tell him to drop that provision if he really wants to lower the unemployment rate.