Friday, May 03, 2002

Canadian Sub Update has a story with more details about the subs they picked up at the scratch and dent sale. The Canadian Defense Minister Art Eggleton even made the used car comparision:

In the Commons yesterday, Mr. Eggleton likened the problems to those that might crop up in a car. "If a gadget in the car has a problem or perhaps there are a couple of problems under the hood, what do we do?" he said. "We do not write it off, but instead we get it fixed."

The list of problems include
  • A dent in the Victoria that will cost $400,000 to fix (I assume that is $400,000 Canadian)
  • Bad high-pressure welds in three of the four subs
  • A bad fuel tank in one sub
  • One sub was leaking (I'd image that is bad news in any naval vessel and doubly so in a submarine)
  • Cracked valves in the diesel generator that would cause flooding if they failed
  • Concerns about air quality in all four boats.
Still, the Canadians paid only $750 million for the boats that cost $2 Billion to build. They have at least 20 years of service life in them. As long as the problems are fixed, it will in the end be a good deal.

Wednesday, May 01, 2002

Coke News
They want to tax it in California, but in South Korea they want to replace it with dog meat juice.

Foreigners will be invited to try specially prepared dog meat juice outside the World Cup stadium in a bid to fight "prejudice" against the South Korean delicacy, restaurateurs said Friday.

"We plan to develop canned dog meat tonic juice, which football fans can enjoy in their stadium seats while watching games," said Choi Han-Gwon, a leader of a national association of dog meat restaurants.

"They will enjoy it instead of Coke," he said.

I don't make this stuff up. I just comment on it.

They did know they couldn't go whole hog (or in this case, whole dog):

But [Choi] flatly denied local press reports that the association would offer up dog meat hamburgers and sandwiches during the football event.

"We don't want sensationalism or excessive publicity about dog meat as we fear that there would be a backlash from the government," Choi said.

And I didn't even use any hot dog jokes.

Tuesday, April 30, 2002

Murphy's Blog
My girlfriend Murphy has joined the Blog world with her WonderBlog. Guaranteed to be more metaphysical than anything you'll find here.
Bellesiles And Honda U
Another Instapundit moment today. He reported that Micheal Bellesiles the Emory professor in trouble for making up data to support his anti-gun conclusions obtained his PhD in History from University California at Irvine. As someone who learned his history a few miles up the freeway at Cal State Fullerton I can tell you that UC Irvine's history department was well known nationally as a leading center of Marxist historical thought. Just an interesting data point.

UC Irvine is also known as Honda U because they have a lot of students who are into the boy racer culture and drive around in heavily modified Accords, Civic, and Preludes.
Same Stuart Johnson?
Instapundit printed an email with a link to the web site for Stuart Johnson who is running for Congress. I went to school with a Stuart Johnson starting with elementary school. Wonder if it is the same Stuart Johnson?

My first experience with the entire concept of race came when I mentioned Stuart to some adult (sorry- don't remember who but it was a woman). She looked puzzled for a moment, then said, "Oh, the black kid." Up to that moment I never thought of him as anything other than Stuart Johnson.

I hope that is Stuart running for Congress. He was a good guy and was outgoing and popular. Sounds like the basis for a good politician.

UPDATE: Turns out it is a different Stuart Johnson. Oh well!

Sunday, April 28, 2002

The "New" Economy
Long time readers (all five of you) may remember my earlier posts about Wal-Mart. I'm not crazy about the store, but I respect what they do and how they have done a lot to bring lower prices to people. So I like to read things about them to test my Wal-Mart world view. Somehow this week I stumbled across a USA Today article entitled Wal-Mart, not high tech, defines 'New Economy' by David Callahan. More on Callahan later. I don't normally read USA Today but I thought, what the hey. The article sounded like one of my posts. What I read was an attack on Wal-Mart. And instead of 2 minutes of web reading by me it generated a rather long involved essay.

The article uses the announcement that Wal-Mart is at the top of the Fortune 500 as a starting point. From there, Callahan declares:

While most people think of technology companies as the appropriate symbols of the ''New Economy,'' Wal-Mart and other service sector corporations are the true face of our changing economic system. The real New Economy, unfortunately, is not nearly as appealing as the one of popular imagination.

Callahan's contention is that the New Economy had served the technologic few well, but was giving the shaft to the average person. He calls it the Wal-Mart economy. He lists three flaws in the system:

Low-skilled jobs: In the Wal-Mart economy, the most valued productivity gains include those that automate service transactions, allowing them to be more easily completed by low-skilled, lower-paid workers. These workers are easier to find, easier to use in part-time positions without benefits and less likely to unionize. Wal-Mart's legions of low-paid, non-unionized workers (some 60% of whom don't have company-provided health insurance) are part of the fastest-growing labor-market sector: 73.9% of new jobs created between 1989 and 1999 were in such low-wage service industries. In 2000, tech jobs comprised only 5% of all U.S. jobs. Retail and services accounted for far more.

First this ignores the fact that automation creates high paying jobs in other sectors. Callahan has a very Ludite view of technology. It seems it can only force everyone into crappy jobs. Unclear who is selling, making, and maintaining all that technology.

Second, Wal-Mart jobs are retail jobs. Retail has never been a high paying economic sector. This is nothing new. But the very precise sounding stats (73.9% of new jobs created between 1989 and 1999 were in such low-wage service industries) don't hold up to some digging. The Depart of Labor's December 2000 report Job Growth in the 1990s: a Retrospect (WARNING- big PDF file) does show that the biggest category of job growth by far in the 1990's is the service sector. However, it is by no means clear that all service sector jobs are low paying ones. First it should be noted that the DOL calls retail jobs such as Wal-Mart's Retail Trade, a distinct category not included in Services. Retail trade created 3,313,000 jobs from 1989 to 1999. Services created 12,120,00 jobs. The and while some areas of the Services category are not high paying (example- Amusement and recreation services) some are high paying (examples- Auto repair, Legal services). It is highly simplistic to say "Lots of service jobs and all of them pay poorly."

Fewer options: Wal-Mart is famous for offering wide customer choices. But it is also famous for driving surrounding smaller competitors out of business. When they disappear, consumers' choices are decided by Wal-Mart, sometimes in disturbing ways. For example, if Wal-Mart is your only pharmacy option, and you need emergency contraception, forget it. Wal-Mart's conservative management decreed that its pharmacies would not carry the morning-after pill. In an economy of ubiquitous chains and franchises, consumer choices actually narrow, and shoppers are increasingly served by less-knowledgeable, less-well-trained employees who are less likely to know them.

One of the reasons we won the Cold War is that our economy does not ensure every business a place in the market. If you are inefficient or fail to serve the needs of your customers you will lose. Why should consumers be forced to pay more for products to keep exisiting merchants in business? Remember, Wal-Mart does not send jack booted strike teams to beat up their opponents. They convince shoppers to spend money at Wal-Mart.

Second, in most cases Wal-Mart provides a far greater range of goods than small merchants. So there many be fewer stores after Wal-Mart arrives in town but more product choices. And the prices will be lower- a critical factor for low income households. Callahan wants to have things both ways. As we will see, he is a big defender of the poor. At the same time he is opposed to the very type of business that will offer them low cost options.

Finally if Wal-Mart drives opponents out of business and then fails to provide for the needs of its customers someone will jump into the market to offer those goods and services. This is not a static model where the game ends once Wal-Mart arrives. New, nimble players will arrive to pick at Wal-Mart much as Wal-Mart picked at K-Mart.

Note the use of the term "conservative management". Callahan uses the word conservative to label those he disagrees with. This is a constant throughout his writtings. More on that later. For now, I would want to know how many pharmacies do offer morning after pills. Small town American ones? Wal-Marts chain store competitors? I have a feeling that it will be hard to get that product in many small towns and that this is more an excuse to label Wal-Mart as "conservative" than a critical issue impacting millions of consumers.

Environmental woes: The real New Economy generates endless sprawl and mind-boggling waste. Again, Wal-Mart typifies the problem. Its stores can cover 100,000 square feet. With parking areas, new Wal-Marts can encompass more than 25 acres.

I note this is the least developed argument. OK- Wal-Marts are big. But if they replaced all those smaller businesses mentioned in Fewer Options section isn't that probably less total sprawl? What mind-boggling waste is Callahan thinking of? Wal-Mart is known for ruthlessly working to reduce supply chain costs. It is more efficient to send one truck load to one store rather than have that same truck visit ten smaller stores. Or send 10 smaller trucks to clog up the roads.

Perhaps Mr. Callahan has some evidence of Wal-Mart's creation of environment problems. Either USA Today edited it out, or he was too busy to include it. This looks more like waving the bloody shirt of "won't someone think of the environment" than a serious argument. Based on the quality of data produced here and elsewhere in his writtings I'm not holding my breath waiting for it.

So who exactly is David Callahan? USA Today identifies him as "...research director at Demos, a New York public-policy research and advocacy group." His biography on the Demos web site (nice looking site by the way) says:

David Callahan: As Director of Research, David helps to develop and manage Demos' projects and communications activities. He has written extensively on both foreign and domestic policy. He is author of four books and was co-editor, with Stephen Heintz, of Quality of Life 2000: The New Politics of Work, Family, and Community. David's articles have appeared in newspapers and magazines around the country, including The New York Times and The Washington Post, and he has appeared as a political commentator on CNN, MSNBC, Fox Television News, and numerous radio shows. Before helping to found Demos in 1999, David was a Fellow at the Century Foundation. He also served as Managing Editor of The American Prospect magazine. He is a graduate of Hampshire College and holds a Ph.D. in politics from Princeton University.

Demos itself has a mission statement:

Demos is committed to a long-term effort to reframe and redesign policy and politics to meet the complex challenges of the 21st century. We seek to bring everyone into the life of American democracy and to achieve a broadly shared prosperity characterized by greater opportunity and less disparity.

Democracy reform is currently focused on state elections reform. I didn't have time to jump into that issue, but if you want to read their opinions they have an extensive listing of reports available on the Demos site.

I was more interested in their opinions on economic opportunity as this clearly fits into the discussion on Wal-Mart. Both Callahan and Demos clearly have political agendas. But USA Today simply calls them a New York public-policy research and advocacy group. So what is Callahan's position on things economic? Let's start with a February 5, 2001 New York Times editorial entitled Here's to Bad Times. In it, Callahan starts by saying:

Consumer confidence is plummeting and companies are cutting back, but I, for one, am not mourning. The 90's boom left me both financially battered and psychically troubled, and I don't think I'm alone. As the economy has slowed, I'll confess that my main reaction has been relief.

Here at the start of the downtown he is happy that thousands of people are about to be unemployed. Why is he happy?

In the past five years, while the New York economy surged, the rent on my apartment in Manhattan nearly doubled. I've hung on, but barely. New York has become less and less affordable for middle-class people like me who don't happen to work on Wall Street or in corporate law firms.

I'm not sure how he expected the law of supply and demand to function when more and more companies wanted space in New York. Perhaps when he founded his non-profit he should have set up shop somewhere other than in the middle of a hugely expensive city? He also decries the money centered culture of big business. Because of Dot Com millionaires he thinks it a good idea for the companies to fail and the jobs to go with them. The entire article is appalling. He is celebrating the failure of businesses and the loss of employment that goes along with it because he found the hot economy to be personally inconvenient to his lifestyle. Remember that in the Wal-Mart article he complains that there are too many low paying jobs. When there were more high paying jobs, he was happy they were going away.

On the Enron front he tries to tie Enron to Bush in another article that first appear in the New York Times:

The links between the Bush administration and Enron also highlight the need for campaign finance reform to reduce the access of big corporate donors to our highest government officials. If a prolonged scandal reveals more links between the Bush administration and Enron, the public may be more convinced than ever that Washington politicians are doing the bidding of corporate campaign contributors at the expense of average Americans.

Callahan's political bias shows clearly in June 18, 2001 American Prospect article about Oregon titled Clash in the States. Here he constantly refers to "conservatives" and "conservative Republicans". The thrust of the article is that the "right wing conservatives" have bought their way into power. The underlying assumption being they couldn't have possibly achieved success on their merits.

Callahan is also quoted in an article reviewing a Demos report on free trade written by one of his colleagues. The main thrust of the report is that trade agreements take power away from states. Callahan says:

"We've had this powerful force of globalization which everybody has been talking about, mostly in terms of how it is changing our economic life," said Callahan. "But I think what a lot of people haven't realized is that globalization and international trade agreements are challenging long-standing ways in which we govern ourselves at the state level. We have all these states that are struggling to deal with new international regulations which affect how much power they have," he said.

This seem to conflict what he writes in his 1997 book Unwinnable Wars: American Power and Ethnic Conflict. It calls for the UN to be the main player in controlling intra-state ethnic violence:

Thesis: the recent trend for intra-state ethnic violence will continue - if decrease. All states have an interest in ending - ideally, preventing - such wars. The UN must be empowered to play a more effective role, and have a greater capacity for using standing forces, in managing internal conflicts. Regional bodies, UN financing, arms-trade control, cooperation with NGOs, and aid to failed states, must all be strengthened. Diplomacy and intelligence (mainly analysis) must be updated - and cooperate with the UN.

In other words in 1997 he is calling for more global action. In August 16, 2001 he opposes international agreements because he fears they undermine US sovereignty. That puts him in the same camp with the extreme right wing groups he disagrees with. You know, the Black Helicopter UN is going to put us all into camps folks that run around in Montana.

The connection to Wal-Mart is simple. Callahan wants the states and localities empowered so they can block the activities of companies such as Wal-Mart. He is afraid that some treaty will strip away grass-roots movements.

The article on the Demos trade report also quotes other experts who say it is bunk:

Daniel Griswold, associate director of the Center for Trade Policy Studies at the libertarian Cato Institute, disagreed completely with the study's theory that global trade agreements undermine the power of the state governments. "There is nothing in our global trade agreements that prevents state and local governments from performing essential functions," he said. "States building business ties with foreign investors is a healthy form of economic investment."

Griswold believes that free trade and foreign direct capital investment creates more job possibilities for American citizens, and the only time states will encounter difficulties is when they subsidize foreign companies.

James L. Gattuso, vice president of policy at the conservative-leaning Competitive Enterprise Institute, agrees that globalization may limit the powers of the state government in many ways, but says the Demos study exaggerates the amount of influence.

"Rather than worrying about restrictions on a state's ability to tax, subsidize, and regulate, we should see that as a good thing," Gattuso said. "In the old, pre-globalized, world, many states had a near-monopoly over their citizens. Now governments find themselves in a competitive situation. Rather than weaken federalism, that may simply make it more effective," said Gattuso.

And note that the article (from UPI) identifies both the opponents as either "libertarian" or "conservative-leaning" but calls Demos "a leftward-leaning think tank in New York City". Credit to UPI on that one! I strongly agree with Griswald and Gattuso on this one.

I think it is fair to say that David Callahan is no friend to business or to the success of individuals. Demos promotes the standard class warfare approach to economics. The Demos site says:

Despite an explosion of new wealth in American society since the 1980s, our society has serious inequities in wealth, income, and economic opportunity. According to data released in 1999 by the Congressional Budget Office, between 1977 and 1999 U.S. households in the top fifth income bracket experienced after-tax income gains of 43 percent; the top one percent gained 115 percent. During this same period, income for the bottom fifth of American households declined by 9 percent.

Before we discuss the data, we should keep in mind that movement within these blocks is constant. In other words, the bottom 1/5th of American households is highly unlikely to be exactly the same people in 1999 as in 1977. As the Census folks say:

From one year to the next, the great majority of Americans experience significant fluctuations in their economic well-being, as measured by their incomes relative to their poverty thresholds. About three-fourths of the population see their economic well-being go either up or down by at least 5 percent from one year to the next.

Just remember that when you hear that the rich get richer. Not so- some rich get richer. Some get poorer. Some poor become middle class. Some middle class slid into poverty. The economy is a fluid system.

Now on to the numbers. Just to show you can prove whatever you want if you use the right numbers, I'm tossing the June 2000 Census Bureau study on Income Inequality into the fray. (PDF here). It concludes:

Data collected since 1993 indicate that the trend of increasing income inequality, which characterized the 1980s, has slowed or disappeared. The share of aggregate money income received by households in the top quintile has not experienced a significant increase since 1993.

In other words during the time when David Callahan was getting his rent increased in New York the rich were not involved in an increasingly powerful wave of profit. The CBO numbers Demos quotes include the period when income inequality was increasing, the period the Census Bureau identifies as the mid 1970's up to the early 1990's. Most the growth in inequality comes not in the 1990's but in the prior decades. Callahan and Demos are pointing their fingers at the wrong people and a problem that does not exist.

You can see this in the CBO data (found in summary form here) as well as seeing that Demos is playing a bit loose with the data (perhaps why they don't provide a link to the hard numbers, just to opinion polls). Demos says:

Top 5th- Gain 43%
Top 1%- Gain 115%
Bottom 5th- Lost 9%

The CBO chart shows (all number post tax income):

Top 5th- Gain 33.3% (note that top 10%, not top 5th, gained 44.4%. Demos labels this incorrectly.)
Top 1%- Gain 93.4% (again, different than Demos and I don't see where than get their 115% figure. Thin air?)
Bottom 5th- Lost 8.9%

All of these reflect 1977-1999 numbers. Watch what happens when we exclude 1977-1988 and only look at the time period 1989 through 1999:

Top 5th- Gain 7.0%
Top 1%- Gain 3.3%
Bottom 5th- lost 2.4%

What happened to that huge inequality? It doesn't exist in the 1990's. Is it sad to see the bottom 20% not doing well? Of course it is. But saying that the rich are getting richer using puffed up numbers is not the best way to approach the problem.

We started with a USA Today article complaining about Wal-Mart's success. We end with the inconsistent positions taken by the article's author. He wants to punish success because those that innovate and do well will make more money than others. As I said at the start, I'm not a big Wal-Mart fan, but I also don't think they are the center of evil in the world. Lots of folks think they are (check out the Google search for Wal-Mart evil). It is a topic I'm sure I'll visit again, but with real facts- not distortions.
Yahoo says folks are getting mega bucks back in refund form this year:

Last year's big tax cut combined with the economic downturn to give Americans more tax refunds than ever. The refunds were larger than ever too.

The Internal Revenue Service announced Thursday that the 77 million refunds processed through April 19 set a record, as did the average of $1,937. All told, almost $150 billion in refunds have been paid out.

Then on Friday I heard the radio news weasel say that because tax revenues were down the government deficit was heading up. Gee, people got laid off. Their incomes went down. Your manditory withholding is based on working all year at a salary. Suddenly you've seriously overpaid especially if you drop into a lower bracket. This is not rocket science.

On top of that didn't we all get a tax break this year? If people didn't adjust withhold that would tend to bump up the refunds as well.

Of course the spin the talk radio was putting on this was that perhaps we need to raise taxes.

Why do I see Elmo behind all this?
Used Car, Err Sub Salesmen
That is what the Canadian Navy should have been thinking about. They purchased four Upholder class diesel electric subs from Great Britian. Turns out that one of them, the Victoria, has a dent in it.

The Canadian navy has discovered that HMCS Victoria, one of four used submarines acquired from the British government, has a dent in its hull.

A CBC-TV report Tuesday described the damage as potentially deadly, but a navy spokesman said that was an "exaggeration."

Other Canadian papers went with the screamer headlines like New submarine a lemon, navy finds. However it appears this is minor wear and tear- it is a used submarine after all.

This isn't the first problem the Canadians have had though. The first sub they got also had trouble (Victoria is the 2nd of 4 subs purchased):

In March, HMCS Windsor had to return to dock within hours of beginning a sea trial.

A crewman had mistakenly flooded the engine room, and sailors had to bail out more than 2,000 litres of water.

Contrast that description with this one from the "screamer" paper:

In March, another of subs, HMCS Windsor, was turned back to port just hours after it set out on its first training mission from Halifax.

The vessel's crew discovered a malfunction with one of the hydraulic systems and then had to bail water as the submarine started to flood.

Very different stories. Crewman screws up- not the sub's fault. Or sub is flawed, crew finds out- sub's fault. Both can't be true. Someone is spinning.....