Across the Great Divide

The Next Kennedy?

Forget those rumors about Obama being Muslim or tied to the angry black preacher. Now we have proof he's Roman Catholic.

UPDATE: Or a half Queen.

Two Ways to Spend Monday.

In case I haven't been improving your mind sufficiently, you have two choices Monday, April 21st, to get smarter on a couple of my favorite topics.

Energy and the Environment
Economist and Pioneer Press Columnist Ed Lotterman is doing a lecture series at the History Theatre in St. Paul (no, not the Minnesota History Center). This time — 7:30 pm, $15 a ticket — he asks how important it is to be energy independent; limiting greenhouse gas emissions; and the costs of improving air and water quality.

I haven't heard him speak, but his Real World Economics columns do a good job of bringing dismal science  and real life together in a clear, neutral fashion.

Not Again!  The Great Depression, Junk Bonds, Enron/WorldCom, and Now Sub-Prime Mortgages

If you want to scramble, you could start the evening with this public forum at the Carlson School of Management. It runs from 5:30 pm to 7:00 pm, Room 2-260T in the West Bank Campus building, 321 19th Avenue South. The event is free, but bcause seating is very limited, RSVPs to smoidstp@umn.edu are required. 

Some of the questions posed include: How and why did these markets get out of control?  How serious are the consequences? Can our economy right itself? Is new regulation needed?

The longer title reflects a larger cast of characters for the panel, including Gary Stern, president of the Minneapolis Federal Reserve Bank; Karen Edmonds, BestBuy chief ethics officer; Carlson faculty; and others.

Bachmann: Black Magic Woman.

Dump Michele Bachmann took on the thankless task of transcribing Rep. Bachmann's appearance on Jason Lewis's show prior to last weekend's tax protest rally. I could not make my way through the entire thing, but since Mr. and Mrs. Right were so gleefully certain about how tax cuts are the Easter Bunny, I just had to provide a little annotation to a segment that pretty well captures the show.

Michele Bachmann: Well you know and your listeners know that if you increase taxes on people, people will change their behavior. Democrats don’t like to believe that, they believe that people’s behavior is static, but when they increase people in a punitive fashion, people make changes, and we’ll see reduced revenues into the treasury, and there’s recent studies to verify that, that if Democrats go forward and increase taxes, we will in fact reduce revenue.

I thought the whole reason Democrats were in favor of big government, taxes, regulation, criminal rehabilitation, transit and compact fluorescent light bulbs was because we thought people could change their behavior. But my real interest here is Bachmann's faith in these "recent studies."

The Heritage Foundation and other right wing, financial-industry-friendly organizations have been pumping such studies out since George the First declared them voodoo economics.

Voodoo practice rests on three important elements. One, always take credit for mysterious events. Two, throw up ritualistic clouds to defeat empirical observation. And three, keep handy a standard, but unverifiable explanation for when spells fail.

In the 1980s and 1990s, the economy grew at about the same rate. Yet when tax rates were increased under Clinton, tax revenues grew about twice as fast as under the tax-cutting Reagan — 3.5 percent (after adjustment for inflation and the increase in the size of the population), compared to 1.7 percent. Quite the opposite of what Bachmann claims will happen.

Jason Lewis: In fact Sen. Charles Grassley, your colleague over in the Senate, wrote a letter to the CBO not long ago saying, what, what’s the response or what’s been the dynamic behavior coming out of the capital gains tax cut, 28 to 20 percent, of which they now want to at least double in the Democrat propo- oh, the CBO of all people said, yah, you’ve got more revenue than you did at the higher rate.

MB: (laughs) The, the thing is, there are tax cuts that generate revenue. Clearly the tax cuts on capital gains and dividends are revenue raisers.

What the CBO letter actually said was, we got more revenue from lower rates in the short term, but only the timing of the revenue gain might attributed to the capital gains cut. If the Bush tax cuts are made permanent, this level of gain won't even begin to offset the loss of revenue, which the CBO estimated as being about $3.4 trillion through 2018.

When the measurable amount of lost revenue from tax cuts is so large, you have to argue that magical "dynamic behavior" of the economy will supply the money. From here, the discussion gets technical and relies on different models and assumptions about effects of permanent versus temporary tax cuts.  Arguments can be made on both sides.

But you can count on one thing. If the tax cut spell doesn't work, it won't be the voodoo doctor's fault.

More Studies Prove I'm Right.

Nicholas Kristof writes about research into how our biases filter the information we will accept as authoritative.

[Farhad Manjoo, Salon staff writer and author of True Enough: Learning to Live in a Post-Fact Society] cites a more recent study by Stanford University psychologists of students who either favored or opposed capital punishment. The students were shown the same two studies: one suggested that executions have a deterrent effect that reduces subsequent murders, and the other doubted that.

Whatever their stance, the students found the study that supported their position to be well-conducted and persuasive and the other one to be profoundly flawed.

“That led to a funny result,” Mr. Manjoo writes. “People in the study became polarized.”

Other experiments demonstrated how people seek out information that confirms their prejudices and resist information that doesn't fit their beliefs — certainly not news in the blogosphere. Kristof says the blinkering "afflicts both liberals and conservatives, but a raft of studies shows that it is a particular problem with conservatives."

Well, of course! I say, as the conservatives start googling "liberal bias."

It takes conscious work to overcome these perceptual habits and, I will confess as someone who has taken this up as my semi-sacred duty, it is work not consistently undertaken here. One reason, aside from the cognitive stuff, is when the opposition doesn't play that way, you concede a point or enlarge your understanding at the expense of appearing weak or getting run over.

Do not mistake my equanimity and quest for personal enlightenment as Buddhist detachment. I still don't accept people trying to run me off the road — especially if it's someone who can't accept the Truth!

Reason for NWA Departure is Simple, But Not That Simple.

Now that the NWA/Delta merger appears to be real and the leaders of the two companies are talking about their plans, I've been waiting for one of them to tell us how Minnesota's taxes drove the headquarters down to Atlanta. Not a peep from Steenland or Anderson, but that has been the local line here for awhile among a certain set, as exemplified by this pair of comments from Winston Smith:

I hope lawmakers also realize that most of the head office stuff will go to Atlanta. They have a better business climate. For all the lawmakers that want to "stick it to business" or "make the corporations pay" well, they eventually leave, get bought out, or go out of business. Taxes make jobs leave.

[...]

The Minnesota Dem's have been in charge for just over a year and all they can do is tax. It seems like income redistribution is the only thing they are good at or want to do. We have been "The People's Republic of Minnesota" for a long time. Reputation's stick.

Think that doesn't chime thru the national business wires? Some business will leave, some will choose other locations for their next expansion, some will go out of business. Generally speaking, most private sector companies don't want to come here or stay here.

The truth is the airline business sucks, the winners get to pick and choose, and Delta was the winner. Actual mergers of equals are pretty rare, despite all those you read about when the deals are signed.

As former ad exec Lee Lynch says in MinnPost today, the first job of the top dog during a merger is to lie, more or less.

I acquired 12 companies over the past years. In each one, my No. 1 responsibility was to keep the employees calm. You don't want them to leave or be disgruntled with radical change. Wait until things "settle down." Then make changes. I agree that my conduct was a bit disingenuous, but I would contend that every merger I have observed in other businesses has used the same appeal.

He's right, but this drove me nuts in my corporate life, where I worked on employee communications in mergers and divestitures. Having a fiduciary responsibility to turn hard truths into bedtime stories probably had more to do with my leaving Honeywell than any other factor. I suppose it becomes easier once you've got stock options.

Never fear, the anti-tax boys will keep blaming NWA's departure on something even a CEO couldn't say with a straight face.

Las Vegas Without the Tourists.

Oh, goodie.

Since 1913, the United States witnessed only one other year of such unequal wealth distribution — 1928, the year before the stock market crashed, according to Jared Bernstein, a senior fellow at the Economic Policy Institute in Washington. Such inequality is likely to impede an economic recovery, he said.
– "Wall Street Winners Get Billion Dollar Paydays," New York Times

To join the top 25 hedge fund managers in 2007, you had to earn at least $360 million — more than 18 times the money that made the list in 2002. This is one of the few economic indices to show real improvement since Bush the Lesser seized the reins of power.

George Soros — when he wasn't busy licking pay envelopes for lefty bloggers — still somehow found time to pull down $2.9 billion, 10 percent of what the top 50 hedge fund managers combined earned last year. Their investors, largely wealthy individuals and large pension and endowment funds, pulled in returns ranging from 32 percent to 590 percent, the Times says.

Some funds also flame out or implode, too, like distant stars whose light we mortals will never see extinguished. If we're very lucky. Been feeling lucky lately?

Recent big hedge fund winners bet against the mortgage and credit markets. It's nice to know some people are doing all right as result of the housing meltdown, falling dollar and rising commodity prices.

Coincidentally, yesterday I first read about Chuck Feeney, who founded the airport duty free shop industry with DFS and became one of the world's richest men. In 1984, though, he secretly gave away nearly all of his personal wealth to a foundation he established, The Atlantic Philanthropies.

The transfer was estimated at between $500 million and $1 billion, and it formed only the beginning of the foundation's wealth. Feeney's investments continued to generate tremendous sums of money — $155 million in 1988 from DFS alone. As his attention turned to philanthropy and his personal net worth dropped below $5 million, Feeney kept racking up business successes, so much so that today his foundation struggles to ensure its investments don't hit "extraordinary pay dirt" and ruin its effort to donate over $1 million per day in order to close its doors in the next decade.

Feeney's business generated tremendous wealth for himself and his partners, although some could not stomach the risk. At one time, all his professional staff abandoned him except for an accountant who couldn't afford airfare back to Europe. That man's 2-percent stake later put him in the Forbes 400.

The highest entrepreneurial virtue, clearly evident in Feeney, is a mysterious sort of second sight. It's related to ambition in that it dreams big, and is akin to what is typically called "intelligence," but not the kind of number-crunching that many who sneer at businessmen imagine to be their secret. Rather, it's a kind of intuition that senses opportunities where others do not, that recognizes a sea change coming from only the slightest shifts of current.

Feeney continued to think big as a giver. He invested aggressively in Ireland's entire higher education system, for example, in the belief that it would improve the nation's well-being, and the Irish economy was indeed transformed. He was extremely circumspect for such a high-impact donor, and even more unusual for his global vision and desire to make his difference now, with the money from his pocket, rather than doling out his leavings through slow-motion,  legacy-perpetuating largess.

Speculation and risk taking have always fueled the great fortunes, and some good has inevitably trickled in their wake. Wealth in the last two robber baron ages came at least in part from building steel mills and railroads, drilling oil wells and developing cities. In contrast, Feeney's money came from services — helping tourists legally avoid taxes on luxury purchases. These latest fortunes reach an even higher level of speculative abstraction, to which actual people and tangible products are invisible and seem almost irrelevant to the enterprise.

Except that the suckers have to keep losing to build any Las Vegas.

Where is This Place?

Besides my sister's house, I've only been in two other places in our neighborhood just south of Grand Junction near the east entrance to the Colorado National Monument. Both have stuffed mountain lions.

So far, I know half of us are unusual. I just need a bigger sample to figure out which half.

I got the question about some photos, where is this place? Where is easy. It's what I still need to work out.

Down, Uh, Boy?!

This demo video of a pack animal robot called Big Dog is either extremely cool or disquieting. Would a head make it better or worse?

Since it's still being developed for the Defense Department, I expect we have a grace period before Hummer owners can buy the consumer version.

Earth to Blog.

Went for a hike with an long-lost friend, across several canyons overlooking the Grand Valley. Blogging takes a back seat at times like this.

Time to Get Out a Little More.

Seriously though - every single person I’ve heard talk about the rally sang Davis-White’s praises.  She’s a great speaker, an engaging person, and a solid candidate to go after Keith Ellison.

Needless to say, you’ll be hearing a lot more about both her and Fourth District GOP-endorsed candidate Ed Matthews.

Til next year!

– Shot in the Dark

Seriously. The election, however, is this year.