Some time back, I offered the opinion that we could fix the Somali piracy problem by a quick military initiative. It's got much worse and nobody seems to be doing anything about it. It's particularly ironic that the muslim Somalis have now captured a Saudi oil tanker and a ship taking grain to Iran.
The problems, in addition to restrictive international law, seem to include the fact that the pirates hold a large number of ships and crews at this moment and military action would probably result in a great deal of death and destruction. The shipowners are probably less worried about the rule of law in general than their specific need to get their crews, ships, and cargos back intact.
There's the follow-on problem that since Somalia lacks what we would call a vibrant economy, or any functioning government, piracy is going to remain the career of choice for so many violent young men that suppressing once isn't going to do it. And a violent military intervention is likely to just make them more violent.
We had a solution, which was the Islamic Courts that ruled Somalia until we forced them out with the help of Ethiopia. Unfortunately, our substitute government can't govern. It's probably time that we stopped worrying about people who don't respect Jews and Christians particularly and concentrated more on who can maintain law and order.
Tuesday, November 18, 2008
Sunday, November 16, 2008
Getting ready for Wednesday in Oregon
The governor and the legislature obviously know that something bad is going to come out of Wednesday morning's update on the state's tax revenue forecast. They are already starting to ask agencies for suggestions for 5% reductions in their budgets for the current biennium. Since there are only a few months left, this is an impossible target. For the schools, with contracts in place for their expenses, it's not likely they can do anything at all.
So when the new estimate comes in, showing at least a billion dollars shortfall for the next biennium and enough damage for this one to wipe out the rainy day fund, there isn't much they will be able to do except spend it. They were already planning to spend the EFB (Ending Fund Balance) down to almost nothing, which means that the so-called rainy day fund was just the EFB. With the two combined reduced to almost zero, they will be legally obliged to super-balance the next biennium and restore some semblance of an EFB. So figure that the actual shortfall for 09-11 is already down a billion before it starts, and will be down two billion at least when the forecast comes in. When the forecast becomes realistic, which by policy in Oregon is always very and generally too late, it will be down three billion or more.
This is before considering the effect on costs of PERS. Maybe this time, we can collectively agree that making promises that oblige future generations is unethical, and that whatever money the current generation chooses to provide its public employees for their pensions should be given to them via 401(k) or whatever, at their own future risk entirely.
So when the new estimate comes in, showing at least a billion dollars shortfall for the next biennium and enough damage for this one to wipe out the rainy day fund, there isn't much they will be able to do except spend it. They were already planning to spend the EFB (Ending Fund Balance) down to almost nothing, which means that the so-called rainy day fund was just the EFB. With the two combined reduced to almost zero, they will be legally obliged to super-balance the next biennium and restore some semblance of an EFB. So figure that the actual shortfall for 09-11 is already down a billion before it starts, and will be down two billion at least when the forecast comes in. When the forecast becomes realistic, which by policy in Oregon is always very and generally too late, it will be down three billion or more.
This is before considering the effect on costs of PERS. Maybe this time, we can collectively agree that making promises that oblige future generations is unethical, and that whatever money the current generation chooses to provide its public employees for their pensions should be given to them via 401(k) or whatever, at their own future risk entirely.
Saturday, November 15, 2008
Another stimulus
W.C. Fields said, "If at first you don't succeed, try, try again. Then give up. No point being a damned fool about it." So on the basis, maybe we should give another shot of federal stimulus to the taxpayers a second chance.
But that's when it seems at least to make sense to begin with, which the theory behind the federal stimulus doesn't. John Maynard Keynes said many years ago that the most effective way for a government to stimulate was to spend. That guaranteed economic activity. If the same amount is simply passed back to the taxpayers, if they are frightened, many of them will just pocket it.
Keynesianism was born from the Great Depression and held sway in economics until around 1979. There is some talk that is has been embraced again in 2008, because governments are using tax money to try to avoid another depression. But they are doing it in a way that Keynes would have argued strongly against.
In fact, we've really already given the money-back-to-taxpayers strategy its best chance, with the Reagan and Bush tax cuts, which have eviscerated federal revenues over the past three decades. Part of Keyesianism is to put money away during good times, which is anathema to both right and left, it seems.
My guess is that there will be a further stimulus package and it won't stimulate much. What will happen when the dust settles and we're a couple trillion farther in debt, I have no idea.
But that's when it seems at least to make sense to begin with, which the theory behind the federal stimulus doesn't. John Maynard Keynes said many years ago that the most effective way for a government to stimulate was to spend. That guaranteed economic activity. If the same amount is simply passed back to the taxpayers, if they are frightened, many of them will just pocket it.
Keynesianism was born from the Great Depression and held sway in economics until around 1979. There is some talk that is has been embraced again in 2008, because governments are using tax money to try to avoid another depression. But they are doing it in a way that Keynes would have argued strongly against.
In fact, we've really already given the money-back-to-taxpayers strategy its best chance, with the Reagan and Bush tax cuts, which have eviscerated federal revenues over the past three decades. Part of Keyesianism is to put money away during good times, which is anathema to both right and left, it seems.
My guess is that there will be a further stimulus package and it won't stimulate much. What will happen when the dust settles and we're a couple trillion farther in debt, I have no idea.
Oil and Military Spending
The New York Times has just reported that Russia has backed off on its threat to expand its missile system provocatively close to the Baltic countries. The original threat was seen as a quick challenge to Obama, although he wasn't yet in office so he couldn't have responded. The withdrawal may be seen as an attempt to be conciliatory to him.
I see it as more likely a realization that it doesn't make political and economic sense. According to the CIA, Russia is still losing population. Its health care system is in tatters and men survive, on average, only to the age of 59.
Twenty-odd years ago, the USSR failed largely, according to myth, because they responded to the buildup of the U.S. military with spending on their own systems which they could not afford. I've always thought it interesting to think that, by ignoring the U.S. challenge and focusing instead on building what communist theory says they should have been building, they would have won the Cold War. That's the logic, but I don't quite believe it.
However, the Russians may be discovering that they have large civilian needs to meet and, what they could afford at $147/barrel of oil, they can't at $58. I expect Iran to ratchet down their pursuit of nuclear weaponry. I don't think this has anything to do with trying to act in harmony with Obama. It's the realization that international posturing won't matter if the mobs at home run you out of office.
I see it as more likely a realization that it doesn't make political and economic sense. According to the CIA, Russia is still losing population. Its health care system is in tatters and men survive, on average, only to the age of 59.
Twenty-odd years ago, the USSR failed largely, according to myth, because they responded to the buildup of the U.S. military with spending on their own systems which they could not afford. I've always thought it interesting to think that, by ignoring the U.S. challenge and focusing instead on building what communist theory says they should have been building, they would have won the Cold War. That's the logic, but I don't quite believe it.
However, the Russians may be discovering that they have large civilian needs to meet and, what they could afford at $147/barrel of oil, they can't at $58. I expect Iran to ratchet down their pursuit of nuclear weaponry. I don't think this has anything to do with trying to act in harmony with Obama. It's the realization that international posturing won't matter if the mobs at home run you out of office.
Friday, November 14, 2008
Who exactly are we bailing out in Detroit?
Understandably, the plan to bail out the Big Three has some formidable problems. First is that the $25 billion is probably three times the market value of the businesses. GM and Ford are worth about six billion and Chrysler can't be that hot itself.
When the CEO of GM said he just needed money to fill a gap, he said it was until 2010 when his UAW cost savings would kick in. Why 2010? We're not being asked to bail out GM, we're bailing out the UAW. Remember how they had this deal where if the economy slowed down, laid off workers got paid just like they were working?
The country is full of workers who have been displaced by the economy and who got no golden parachutes. Why tax money to make this happen for auto workers? I suggest we let them go bust, so they can start over. A new board, new management, and a new union contract. They can do all that without my money.
When the CEO of GM said he just needed money to fill a gap, he said it was until 2010 when his UAW cost savings would kick in. Why 2010? We're not being asked to bail out GM, we're bailing out the UAW. Remember how they had this deal where if the economy slowed down, laid off workers got paid just like they were working?
The country is full of workers who have been displaced by the economy and who got no golden parachutes. Why tax money to make this happen for auto workers? I suggest we let them go bust, so they can start over. A new board, new management, and a new union contract. They can do all that without my money.
Wednesday, November 12, 2008
Testing my Iraq Theory of Dividing the Oil Spoils
My theory that the relative calm in Iraq was the result of politicians realizing that there was too much money available at stake to waste time quarreling, is about to be tested. The price of oil is dropping so far so fast that the cash available to keep the typical Iraqi comfortable isn't going to be there.
There are some 25 million Iraqis, although a census now would be distorted by the number of refugees in other countries, and the daily oil production could be about 2.5 million bpd without much trouble. At $150, less $30 cost, that's $12 daily for every Iraqi. Most of that, of course, is siphoned off by corruption and mismanagement, but it's still enough that it could trickle down to the man on the desert fast enough to bring them all to the brink of the middle class, by Iraqi standards.
Knock $100 off that, and the post-cost figure is closer to $20, or $2/day. Now there isn't enough. The country can continue to do OK, but only if the 60% Shiite population agrees to stay economically marginalized. If the Kurds want the 40% that's in Kurdistan, the Shiites may want the balance that's in the south, leaving almost nothing for the Sunnis, who will then be forced to fight. That's been my theory.
The other possibility is that they are all just getting too tired of it all to go on fighting. We're coming up to six years. With luck, they have been pushed to the point that they just can't see why they benefit from more civil war. I hope so. One thing I share with the average Iraqi is the intense wish for the U.S. of A. to simply get the hell out of Iraq.
There are some 25 million Iraqis, although a census now would be distorted by the number of refugees in other countries, and the daily oil production could be about 2.5 million bpd without much trouble. At $150, less $30 cost, that's $12 daily for every Iraqi. Most of that, of course, is siphoned off by corruption and mismanagement, but it's still enough that it could trickle down to the man on the desert fast enough to bring them all to the brink of the middle class, by Iraqi standards.
Knock $100 off that, and the post-cost figure is closer to $20, or $2/day. Now there isn't enough. The country can continue to do OK, but only if the 60% Shiite population agrees to stay economically marginalized. If the Kurds want the 40% that's in Kurdistan, the Shiites may want the balance that's in the south, leaving almost nothing for the Sunnis, who will then be forced to fight. That's been my theory.
The other possibility is that they are all just getting too tired of it all to go on fighting. We're coming up to six years. With luck, they have been pushed to the point that they just can't see why they benefit from more civil war. I hope so. One thing I share with the average Iraqi is the intense wish for the U.S. of A. to simply get the hell out of Iraq.
Sunday, November 02, 2008
Time to Become a Republican Again
On Wednesday, I'm going to change my voter registration from independent to Republican. There's a measure on the ballot here in Oregon that would make it possible for me to vote in primaries, thus reducing the need to pick a party in order to have a say in who appears on the November ballots, but I'm going to switch anyway.
Frankly, I think the Republican Party is too important to be handed over to Sarah Palin and her ilk. After McCain loses, I expect those responsible to gain rather than lose influence, unless there's a counterattack. I'm sure that many of those who presently lead the Republican Party will be uncomfortable finding me within their fold. But it's mutual so that makes it fair.
I'm going to pick an issue to rally people around and it's going to be the "war on drugs." I just read an interesting comment about how it's going in Britain and it seems much the same as here. America's cost is pushing $200 billion a year, when you consider all the impacts. After nearly four decades, it has failed. Let's give it up.
Simply consider this alternative. All dangerous drugs are legal but regulated, taxed enough to pay for treatment, viewed as public health issues, and made the subject of unfavourable publicity. You become a drug criminal in the same way you become a booze criminal. It's illegal to sell to minors. It's illegal to hijack trucks filled with drugs, but then it's illegal to hijack trucks filled with Tootsie Rolls. If you treat drugs as health problems, there is very little to be unduly concerned about.
Which is different from being completely unconcerned. We tell people to fasten their seat belts, exercise, and cut down on fat. Employers pay uniform medical insurance whether or not we do these things. If we simply discourage drug use and treat addiction as a health issue, almost all the problems go away.
Frankly, I think the Republican Party is too important to be handed over to Sarah Palin and her ilk. After McCain loses, I expect those responsible to gain rather than lose influence, unless there's a counterattack. I'm sure that many of those who presently lead the Republican Party will be uncomfortable finding me within their fold. But it's mutual so that makes it fair.
I'm going to pick an issue to rally people around and it's going to be the "war on drugs." I just read an interesting comment about how it's going in Britain and it seems much the same as here. America's cost is pushing $200 billion a year, when you consider all the impacts. After nearly four decades, it has failed. Let's give it up.
Simply consider this alternative. All dangerous drugs are legal but regulated, taxed enough to pay for treatment, viewed as public health issues, and made the subject of unfavourable publicity. You become a drug criminal in the same way you become a booze criminal. It's illegal to sell to minors. It's illegal to hijack trucks filled with drugs, but then it's illegal to hijack trucks filled with Tootsie Rolls. If you treat drugs as health problems, there is very little to be unduly concerned about.
Which is different from being completely unconcerned. We tell people to fasten their seat belts, exercise, and cut down on fat. Employers pay uniform medical insurance whether or not we do these things. If we simply discourage drug use and treat addiction as a health issue, almost all the problems go away.
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