Marginal Utility

by Tom Bozzo

It's been a very quiet Halloween, despite our best efforts to guide the little demons (*) and zombies (**) to our candy supply...



Perhaps the kids know that if the Senate Democrats don't manage to return Alito to the Stone Age whence he came, once again America's Finest News Source will go from being a "mere" purveyor of meta-truths to being a straight news source.


(*) E.g., the vampire cowboy (actual costume).

(**) E.g., the cheerleader from Zombie U. (ditto).

by Tom Bozzo

I have to agree 110% with Phantom Scribbler: it was too damn dark too damn early for the start of Standard Time yesterday. Since it was dreary here to start with, it felt like darkness had fallen by 4:30. With various critical clocks not yet reset, I was very confused.

One thing I noticed this morning, as it was getting bright and cheery around 6:30, is that the early onset of darkness will make biking to work an increased challenge. I expect to be arriving much earlier than usual most such Standard Time days. Either that, or I'll need to find a bi-xenon headlight for my bike. So some avoided fuel burn in my car on some of these bikeable fall days may be a small fuel savings benefit from the extension of Daylight Savings Time.

by Tom Bozzo

George W. Bush reportedly will announce his new Supreme Court pick tomorrow, after hour of tireless deliberation with Harriet Miers over at Camp David. With Miers probably feeling blue, and Official "Turd Blossom" A not yet having officially beaten the rap, what sort of quality of choice do you suppose we'll get for the panicked save-the-bacon ASAP pick?

• A crazy court packing scheme? (See right.)
  
• A true legal scholar. If such a candidate existed, why didn't they nominate him/her? I don't necessarily agree that CJOTUS Roberts is one, but he played one well enough that you'd think the administration's crackerjack strategerists might have detected a path of least resistance.
  
• The most transparently wingnutty wignut in the box of nuts? (At least Luttig already has a blog.) Of course, going nuclear is a more viable strategy when there's fissile material in the stockpile.
  
• The next least qualified stealth candidate after Miers? Almost too scary to contemplate.

If nothing else, it should ensure we'll have a plenty scaaaarry Halloween!

Update: It's the wingnuttiest wingnut, hooray! I really was hoping for Parker Posey.

by Tom Bozzo

St. Paul Mayor Randy Kelly's campaign office turned out to be next door to the model railroad museum. During the '04 campaign, Kelly took a page from his predecessor's playbook (or possibly consumed the same psychedelic substances in the St. Paul city hall water) and eagerly shilled for George W. Bush. The latest polling in the race (reported by Kos) suggests that an influx of Republican money on his behalf won't save Kelly from being ignominiously turfed by his constituents.

Q: Is not being a Big Loser a prerequisite for the turncoat phase of one's political career?

10 days before the election, a lonely place.


The tough life of a yard sign.


Representative St. Paul street scene: Challenger Chris Coleman is clearly winning the battle of the yards. See ya, Randy!

by Tom Bozzo

John has had an unbelievably long birthday season, as he insisted on getting a share of the festivities for his mother (beginning of October) and sister (mid-October), and had his playgroup friends over for a party a week ago. One day short of the real thing, we had the Twin Cities affair with the cousins, aunts, uncles, and Grandma.

First stop: The Twin Cities Model Railroad Museum in St. Paul.

For a while, I wasn't sure we'd make it past the Thomas stuff near the entrance.


Then, this Thomas, Annie, and Clarabel set lured John away.


The median age of the kids there was approximately 3, and the staff were kind (not to mention alert) enough to run Thomas even though it was Saturday.


An aerial view of the Minneapolis riverfronts from the end of the Age of Steam, and the awesomely awesome 1/48 scale reproduction.

(Click for larger versions.)

Someone must have set the points wrong — this doesn't look much like Sodor...


This is neat (*), Dad. Think we could have one of these at home?


Then we were off to cousin Allison's house for pizza and cake.

The reveal: John says, "Let me at it!"


Make a wish...


Granted.


(*) Neat, but not "cool," we were notified. "Cool," for now, is apparently reserved for John's Lego starfleet.

by Tom Bozzo

While the advance estimate of GDP growth for the third quarter came in this morning at a more than respectable 3.8% (subject to significant revision), AP-Ipsos poll results reported yesterday suggest that a large fraction of the public nevertheless thinks that the economy stinks.

The Greenspan tenure is viewed by a majority (56%) as "mostly a time of prosperity" against 29% opting for "time of decline." But current conditions are regarded as "only fair" or "poor" by 75% of respondents; only 3% call current conditions "excellent." George W. Bush gets credit, such as it is, for current conditions from 55%, vs. 29% assigning credit or blame to Greenspan. The wag in me wants to know what fraction of respondents actually knew who Alan Greenspan was and what his job entails.

High fuel prices surely don't help, though since this poll was conducted 10/24-26, it could have been worse vis-à-vis the the storm-related gasoline price spikes Few of the upcoming season's whopping heating bills have yet been presented, either.

The still-high levels dovetail with a couple bigger issues that could easily drive the negative public perceptions, though; these have notably been hammered over at Barry Ritholtz's The Big Picture blog. There have been lots of signs of strains on individual finances even for the wealthy (who I'd normally say have generally done as well as anyone over the last few years), and inflation is considerably worse than the "core" inflation indexes most closely tracked by policymakers (and even the broader official inflation measures) indicate (*). The last is particularly significant because wage growth after measured inflation has been poor.

I'd add that the distribution of income matters for whether macroeconomic statistics such as GDP growth can be taken as indicators of general well-being. It's not uncommon in economics to evaluate the policies positively if their results theoretically allow the gainers to compensate the losers, whether or not they actually do (this is usually called the Kaldor-Hicks criterion). If the gains accrue narrowly enough, and systematically fail to "trickle down," then it shouldn't be so much of a surprise that the theoretical beneficiaries aren't so grateful.


(*) Some commenters, including Ritholtz, criticize the implementation of "hedonic" adjustments for product quality in the inflation measures, which I think is off-base for some technical reasons I touched on here. However, there are other methodological issues behind the price indexes that are problematic, for instance the methods used to impute inflation for owned housing.

by Tom Bozzo

The time of the post notwithstanding, I've spent most of the day driving to the place with the Lego store, Punch Neapolitan Pizza, and Grandma's House, and so the only thing I heard was Fitgerald's press conference on NPR; I am for the moment unsullied by other blogiversal reactions to Fitzmas.

I won't lie and say that I wouldn't have been happier with a Rove indictment under the Fitzmas tree. (I'd have needed a case of champagne and a subsequent trip to detox had Cheney been implicated, too.) My crackpot theory of Rove is that the day-to-day quality of his strategery is not in line with his reputation as the generation's most fearsome political operator, and it helps Bush much less than one might think to have him stay in his job.

Fitzgerald did a fine job avoiding the remotest appearance of bias one way or another, and conveying the gravity of the charges leveled in the indictment. On NPR, Joe DiGenova readily agreed that the charges against Libby were no trivialities.

One of the more interesting questions for how this will play out is whether the Washington press corps gets a spine transplant. Clearly, Fitzgerald's questioners were very interested in the question of why Libby might allegedly be perjuring himself and obstructing justice. Naturally, it takes much less advanced mathematics to provide a probable answer for the blog (i.e., Biggus Dickus suggesting offhandedly that they will Cheney Wilson), or for investigative reporting, than to prove a criminal case in court. The charges highlight that Scott McClellan had repeatedly lied to the press about the involvement of Libby and Rove in the affair, among other things, and that may transgress boundaries of submission for most of them. Maybe not Judith Miller, but most of them.

by Tom Bozzo

While Wal-Mart has taken flak over its efforts to reduce its benefit costs by discouraging the unhealthy from working for the mega-retailer, it's far from the only employer engaging in health-related discrimination. People going ape over the Madison smoking ban might take note of a Wall Street Journal item today, noting that in states where it's permitted by law, including its home state, the Union Pacific Railroad does not hire smokers (an older related item is here). Union Pacific's headquarters are located in the People's Republic of Nebraska. Similarly, Alaska Airlines reportedly has declined to hire smokers since the 1980s. All in the name of business, libertarian friends!

Meanwhile, I noticed that a downside of my new parking spot at work, which is much closer to the building entrance than the old one, is that my car smells like smoke at the end of the day, a "gift" from a young woman who works at an insurance office whose entrance is adjacent to my space and, from what I can tell, must smoke a lot. Grrr. Don't expect me to sign any petitions against a future comprehensive smoking ban.

by Tom Bozzo

That's the shorter version of David Broder's frankly wankerish column on a Democratic Leadership Council panel trying to forge a "bipartisan" course to a less-unbalanced federal budget through "some short-term tax increases in return for long-term savings on entitlement programs and improvements in the administration of government."

The DLC'ers were reportedly getting advice from ex-McCain Social Security adviser Maya MacGuineas, who

...urged the Democrats to begin examining ideas she and others have put forward that would not simply reduce future benefits or postpone the age at which retirees could claim them but would instead adapt the whole social insurance concept of the 1930s to the realities of a new millennium.

Her concepts include mandated programs of individual savings for the predictable expenses of child-rearing, education and retirement; social insurance for the costs of catastrophic but unforeseeable medical bills; and some guarantee of safety-net income for people who, through no fault of their own, lose jobs or retirement benefits because of broad economic changes.

In short, enact the Ownership Society Lite. I've always been amused to see how the alternative to tax-funded social programs is saving... enforced by the coercive power of the government.

Democrats of the New and Old persuasions alike should recognize that the "realities of the new millennium" are that corporations can't — or, more accurately, won't — offer economic security through the "free" market. Additionally, as this week's remarkably shrill Time cover story notes, contracts between corporations and workers are less sacred than other contracts in important ways that affect both retirement and general economic security. As a result, the "social insurance concept" behind entitlements like Social Security is as relevant as ever. The idea that social insurance programs are outdated relics of the 1930s is patently false. Workers need them, and that's no small reason why they're popular.

Meanwhile, the idea that there is a bipartisan consensus to form around any tax increases, however necessary they may be to realign federal revenues and spending, is also fantasy. Reality is that "moderate" Republican budget hawks and far-right spend-and-don't tax Republicans alike have been more than happy to preside over the fiscal debacle. Moreover, the Republican leadership specifically twisted arms within their caucus to pass the biggest unfunded entitlement in recent memory. Funding Social Security in its present form is almost trivial in comparison.

One of the lessons I'd hope Democrats would absorb from recent elections is that no amount of necessity or bipartisanship will insulate them from the stock Republican attack that they're a bunch of weak-kneed traitors and tax-lovers (not necessarily in that order, depending on the intensity of the electoral imperative that Iraq be cut loose next fall). The implications are that there is little political gain to triangulation for its own sake, and that it doesn't hurt Democrats to remember that progressive policies are popular.

They can start with easy steps: Don't take advice from Republican consultants.

by Tom Bozzo

One of the president's long-running rationalizations of the carnage in Iraq — which is less notable for the recent milestone so much as the absence of any reason to expect that we won't be talking about the next one this time next year, if not sooner — is the 'flypaper' notion that combat in Iraq diverts terrorist resources that could have been deployed on U.S. soil, heard as recently as this past Tuesday from Bush himself.

I've thought this to be very unlikely to be valid logic given the shoestring nature of many terrorist operations, but as part of the occasional Marginal Utility series on counterfactualism, I will note that even if it were true, it suffers from the increasingly glaring additional flaw that we are already owed at least one avoided 9/11-level attack, specifically due to the Iraq war, merely to "break even" on the spilled blood of coalition troops.

Perhaps by way of addressing this concern, the administration had recently released a list of disrupted terrorist plots (link via Dartblog):

1. The West Coast Airliner Plot: In mid-2002 the U.S. disrupted a plot to attack targets on the West Coast of the United States using hijacked airplanes. The plotters included at least one major operational planner involved in planning the events of 9/11.
2. The East Coast Airliner Plot: In mid-2003 the U.S. and a partner disrupted a plot to attack targets on the East Coast of the United States using hijacked commercial airplanes.
3. The Jose Padilla Plot: In May 2002 the U.S. disrupted a plot that involved blowing up apartment buildings in the United States. One of the plotters, Jose Padilla, also discussed the possibility of using a "dirty bomb" in the U.S.
4. The 2004 UK Urban Targets Plot: In mid-2004 the U.S. and partners disrupted a plot that involved urban targets in the United Kingdom. These plots involved using explosives against a variety of sites.
5. The 2003 Karachi Plot: In the Spring of 2003 the U.S. and a partner disrupted a plot to attack Westerners at several targets in Karachi, Pakistan.
6. The Heathrow Airport Plot: In 2003 the U.S. and several partners disrupted a plot to attack Heathrow Airport using hijacked commercial airliners. The planning for this attack was undertaken by a major 9/11 operational figure.
7. The 2004 UK Plot: In the Spring of 2004 the U.S. and partners, using a combination of law enforcement and intelligence resources, disrupted a plot to conduct large-scale bombings in the UK.
8. The 2002 Arabian Gulf Shipping Plot: In late 2002 and 2003 the U.S. and a partner nation disrupted a plot by al-Qa'ida operatives to attack ships in the Arabian Gulf.
9. The 2002 Straits of Hormuz Plot: In 2002 the U.S. and partners disrupted a plot to attack ships transiting the Straits of Hormuz.
10. The 2003 Tourist Site Plot: In 2003 the U.S. and a partner nation disrupted a plot to attack a tourist site outside the United States.

There's little reason to think that our activities in Iraq had anything substantive to do with these plot disruptions. That the list quickly proceeds to plots to conduct attacks outside the U.S. does not strengthen the argument, as we've clearly lost others. I also find the list notable for the absence of evidence of any plotters, including Padilla, brought to justice in the conventional sense. As Bush noted in the Tuesday speech:

In four years since September the 11th, the evil that reached our shores has reappeared on other days, in other places -- in Mombasa and Casablanca and Riyadh and Jakarta and Istanbul and Madrid and Beslan (*) and Taba, Netanya, Baghdad, and elsewhere. In the past few months, we've seen a new terror offensive with attacks in London, Sharm el-Sheikh, and a deadly bombing in Bali once again.

In short, as many plots were successfully carried out outside the U.S. as the administration is willing to take credit for disrupting. Sadly, it seems likely that the U.S. will only be charmed for so long. Security-oriented Bushists should consider just how much struggle they're getting out of the administration.

--------------------------

(*) A particularly strange line of illogic that has emanated from Bush recently is to connect attacks by Chechen terrorists in Russia with Russian non-support for the Iraq war, as an inevitability-of-attack meme, as if there wasn't a significant causal factor via Russian military operations in Chechnya.

by Tom Bozzo

At a minimum, not terrible news. Midwest Airlines is one of those businesses I don't patronize very often, but which I nevertheless like the idea of having around. (*) Unlike any of the major airlines, Midwest is usually very pleasant to fly despite some retrenchment in service quality. (**) It has, however, been to the brink of bankruptcy as its business model made it dependent on the high-fare business travelers who went away between the recession and 9/11, and Northwest probably was hoping to push them over the edge by establishing a mini-hub operation at Midwest's Milwaukee base. This pretty clearly targeted high-yield destinations such as LaGuardia and Washington National Airport.

While Midwest's financial condition is still dire, Northwest's trip to bankruptcy court has led it to curtail its Milwaukee operations by 14 flights, or 11% of capacity, axing four nonstop destinations including Midwest's secondary hub in Kansas City. That's not a shock, as the Northwest nonstop from Milwaukee to National was the emptiest flight I'd taken in the post-9/11 era. NWA has, sensibly, reduced gauge from ~100-seat DC-9s to 44-48 seat CRJs since.

I think it takes something less than 20/20 hindsight to suggest that the money NWA threw at our friends to the east would have been better spent hedging its fuel costs.

I leave it as a matter for discussion whether the $15 billion to be spent reconfiguring O'Hare Airport would be better applied, e.g., to a TGV line connecting Chicago and New York.


(*) Another such establishment, the Madison Asian fusion restaurant Firefly, apparently has a new chef who may be turning the place around. Muramoto makes it somewhat superfluous, though.

(**) The exceptions have tended to involve delays due to flight crew on-duty time restrictions.

by Tom Bozzo

Hope springs eternal.

by Tom Bozzo

Day 3 alone with John was quiet enough. We weren't hurrying each other in the morning, as we had nowhere in particular to go. Eventually, we strolled up to the playground in Wingra Park, did a couple of underdogs, ran around the merry-go-round until I got dizzy (John kept going), then headed back home via Pasqual's.

The program to displace the Thomas and Friends product catalog from John's reading repertoire was amazingly successful, to the extent that I arguably could have read all twenty-six volumes of the Rev. Awdry's Thomas stories straight through without complaint from John.

During naptime, I strove to be a Really Useful Husband by making sure that I hadn't made any glaring errors or omissions in my domestic efforts over the course of the weekend. One problem loomed: We were sitting on three-quarters of a day's supply of diapers for Julia, tops. We also got a call letting us know that some industrial-strength diaper rash ointment that Suzanne had special ordered had arrived. So we were going to head out for some errands in the brief window between the end of nap (~5 P.M.) and the expected return (~6:30 P.M.).

The place to get diapers in the largest quantities (short of the warehouse stores, the only one of which in Madison is co-located with the Wal-Mart, if you get my meaning) is Toys 'R' Us, which is obviously a dangerous place to take a 3-year-old. Fortunately, John was so fixated on a desire for a lollipop that we passed a display of Thomas and Friends Duplos ("Daddy, that's cool"), not to mention the rest of the retail Thomasverse, with scarcely a peep pip peep or poop poop poop of protest that we took the Express to the baby stuff. Unfortunately, there were no lollipops at the checkouts, though a brief negotiation led to the purchase of the titular M&Ms as a substitute.

Honest, the bag of M&Ms looked small, but the dent that John put in it between TRU and the Walgreen's where the diaper rash stuff was waiting, despite a constant feed of candies, made it clear that dinner was not going to proceed as usual. So we were downstairs playing with Legos when Suzanne and Julia returned home. Then we traded children.

There was some delayed hell to pay. John woke up this morning decidedly on the wrong side of the crib, and reportedly was whiny and demanding straight through my return from work, at which point I was treated to a not-enough-birthday-presents-to-open tantrum that led me to scoop up Julia and let it burn out without an audience. My reward was a much more compliant boy content to eat his dinner, brush his teeth, have three Thomas stories read to him, and fall asleep promptly at 7:30.

Glad to have you back, sweet pea!

by Tom Bozzo

Even though the stack of reading material on my nightstand, which is actually now a stack of reading material mostly in the closet so that it won't (a) get in the way of the cleaning people, and/or (b) cause the nightstand, which (given the diminutive size of our bedroom) is a tiny drawer unit attached to the wall, to fall down, hasn't gotten any smaller in recent weeks, I have succumbed to the temptation to get even more books.

Unfortunately, after having half-jokingly suggested that some of my social science blog pals and I start a book club, taking on 2005 Nobel (yeah, yeah) laureate Thomas Schelling's Choice and Consequence (alternatively, The Strategy of Conflict or Micromotives and Macrobehavior, the latter of which Isaac of Armchair Capitalists has been reading) as the first read, Schelling was not part of the order.

So if anyone wants to take on Charlie Stross's Accelerando (an free e-text version is available here) or Chris Mooney's The Republican War On Science, that's what's actually going to be added to my pile. Or, for an oldie but goodie of non-mathematical economics which I can get from my personal library, how about Mancur Olson's The Logic of Collective Action (which I've been meaning to re-read)?

by Tom Bozzo

1. "They Tried To Teach My Baby Science."

2. In The Capital Times, Doug Moe reports Editor Scott Dikkers's contribution to the recent flap over The Onion's use of the presidential seal in its radio address feature:

Dikkers, the editor, wrote the White House lawyer too, also getting his name wrong.

"Dear Mr. Dixon,

"I greatly appreciate your comments regarding my Weekly Radio Address parody. But I'm surprised the president deems it wise to spend taxpayer money for his lawyer to write letters to The Onion.

"If you have a lot of extra money lying around that you don't know what to do with, here are some better ideas for spending it:

"1. How about a tax break for satirists?

"2. With indictments in 'Plamegate' forthcoming, perhaps a nice going-away present for Karl Rove, Scooter Libby, Vice President Cheney, or whoever the president may be firing. I recommend a subscription to The Onion.

"3. It has recently become obvious that there is need for some sort of federal organization to administer the management of emergencies - a hypothetical 'Federal Emergency Management Administration,' if you will. You could spend the money on that.

"4. Harriet Miers could really use a scholarship to some kind of rudimentary judge school.

"In the event there's any extra money left over after all these projects, then perhaps the president could justify paying lawyers to protect him from comedians."

It's not a lifelong feud yet, but it's a start.

P.S., is Blogger forcing word verification on any of my other Blogger-using pals? This is supposed to represent an automated splog-reducing feature; it doesn't seem to be very effective.

by Tom Bozzo

In the Washington Post: "Rosa was a true giant of the civil rights movement," said U.S. Rep. John Conyers Jr. (D-Mich.), in whose office Parks worked for more than 20 years. "There are very few people who can say their actions and conduct changed the face of the nation, and Rosa Parks is one of those individuals."

by Tom Bozzo

Go see Jonah Gelbach's post at CardCarryingMember on the third anniversary of Paul Wellstone's death.

by Tom Bozzo

A story on ethanol developments in Wisconsin by Jason Stein in yesterday's Wisconsin State Journal is headlined with a slight condensation of this quote from former Republican state senator and current corn lobbyist Bob Welch: "We can become the Saudi Arabia of ethanol."

As my good blogging buddy Drek said in comments earlier, "Oh hell. That loud bang you heard was my head exploding." Welch, most recently known for finishing third in the 2004 Republican U.S. Senate primary to eventual Feingold thrashee Tim Michels and Not The Right Russ Darrow, may be in the running for the stupidest utterance of the year by a Wisconsin politician, and considering that the paleolithic caucus in the state legislature still has the self-styled Taxpayer's Bill of Rights to consider among other bad ideas, it's not an award lacking competition.

Wisconsin, Stein might have noted, is not even the Saudi Arabia of corn — per USDA statistics, Iowa takes that honor, while Illinois is Russia and Nebraska ('Cornhuskers' notwithstanding) is something like Iran and Mexico combined. Wisconsin's place in the corn hierarchy makes us something more like Venezuela.

Welch characterized as a "conservative, free-market[er]" despite his efforts on behalf of legislation that would mandate 10% percent gasohol for the state (on top of the federal subsidies), goes on to ask, "What's the downside to bringing those jobs home?"

I can turn over the mike to Wisconsin Manufacturers and Commerce, which doesn't like that increased emissions of nitrogen oxides from the ethanol would force businesses to reduce their emissions to meet air-quality standards, which aligns its position with the Sierra Club's enough to lead to zombies walking the streets of Madison. Not exactly principled opposition, maybe, but that's WMC for you.

There's also the nagging detail that ethanol really doesn't save energy, and isn't an economical proposition at market prices. Stein characterizes this in terms of a battle between new analysis from the Argonne National Lab (optimistic) and older research from Cornell (pessimistic), but as I'd noted back in September, the pessimistic studies differ from the optimistic ones most significantly by (correctly) including additional sources of energy consumption in the corn-ethanol cycle.

There is a pro-ethanol argument that it substitutes relatively abundant fuels that aren't convenient for use in motor vehicles for oil. Unfortunately, one of those fuels is natural gas, whose supply situation is such that it's losing its position as a cheap fuel; the other is coal, which has its own environmental issues.

This is not to say that research into biofuels is wasted. On the contrary, it's better to find economical processes rather than to throw subsidies down the rathole for the benefit of agribusiness conglomerates like Archer Daniels Midland The Family Corn Farmer.

by Tom Bozzo

The headline to Joseph Nocera's column yesterday in the NYT business section, "Punishing Success at Harvard" (here, though the business columnists including the estimable Gretchen Morgenson and Floyd Norris are also behind the "Times Select" pay/print subscriber wall), had me wondering how that wacky Larry Summers could be driving the place into the ground this week. Turns out the crimes are possibly insufficient fealty to the university's departed star money manager — who left to open a hedge fund — and trying to restrain the astronomical compensation of the Harvard Management Company's top earners.

The top six earners at Harvard Management (and, by extension, Harvard) collectively made $107.5 million in the 2003 fiscal year, and $78.4 million in 2004, the latter enough to pay the 2005-06 tuition, room and board of 1,881 Harvard undergraduates (or 28.7% of the undergraduate enrollment). The top individuals made $35.1 million in 2003, and $25.4 million in 2004. Astonishingly, there's a group of alumni publicly complaining that such sums are excessive. Even Ben Stein expresses misgivings in today's column. According to Nocera, the Summers "punishment" would cap the payouts at around $20-$25 million.

Shocking, I know. I just don't know how I would handle that sort of punishment. But in the business, it's considered a threat to Harvard's ability to hire first-rate money managers. Nocera writes:

Just about everybody in hedge fund land takes exactly the opposite view and thinks that the criticism is the height of foolishness. They point out, for starters, that Mr. Meyer saves the university money. After all, outside hedge fund managers who turn in investment performances like that of Mr. Mittleman and Mr. Samuels make far more than $35 million.

Likewise, Stephanie Strom had reported in the Times last November:

Harvard says that it would cost more to farm out all its assets to external managers and that it is inappropriate to compare compensation paid to its top money managers with compensation in the nonprofit sector at large. It contends their compensation should be compared with that paid to private hedge fund managers.

As Stein notes, hedge fund managers can make far more than the investment bank partner money offered by the elite universities' big endowments, let alone mere institutional money manager pay. The analogy with hedge fund managers at least is not as malapropos as the analogy between university presidents and corporate CEOs, though that's not for want of trying by some of them and their requisite supine boards.

The real conundrum here is how the comparison group of hedge fund managers avoids seeing a good chunk of the incentive fee-based compensation competed away. There's been lots of entry of both managers, as an array of finance stars (and otherwise) seek to cash in, and capital as an increasingly broad array of institutions and individuals seek to hop on the bandwagon. There is, according to this UMass report for Lehman Brothers (PDF), (older) research suggesting that there is little evidence that extraordinary returns derive from extraordinary individual manager skill, given a fund's investment style. (That is, the driver of differences in returns between "good" and "bad" performers owes to the consistently poor performance of the screw-ups.) Nor is there an obvious shortage of finance whizzes who might take excellent if not obscene pay to demonstrate their eligibility for free agency. You'd have to consider the 'fooled by randomness' possibility if the departed star managers are systematically relying on gut instincts versus reproducible quantitative analyses — and it's tough to rule it out even if they aren't.

So what gives? I'm inclined to view hedge fund managers as being in a position akin to real estate agents: Their compensation is driven by convention as competitive forces. The rich individuals and institutions seem to view themselves as price takers (ludicrously, in the case of Harvard, where the alternative of paying full incentive fees to outside managers is threatened even as it negotiates fee-reducing deals with its former managers gone free agent) rather than sophisticated actors who can negotiate with the managers. It also could be that they just don't miss the money.

by Tom Bozzo

• Get dressed. John seems to have inherited my preferences for staing in PJ's for an arbitrarily long time on gray/cold/damp weekend days.
• Go to Borders to use discount coupon that expires today. Original Thomas the Frickin' Tank Engine stories are the target: Better to read the actual stories, their sexist and classist foibles and all, than the frickin' Thomas catalog, which has been naptime and bedtime reading for the last couple days (testing our willingness to read anything when John wants stuff read to him).
• Find open space to give boy running room. Hilldale may fit the bill. (We need cereal, too.)
• Hope rain subsides, engage in father/son bonding activities such as looking at cars.
• Tortellini and leftover birthday party cupcakes for lunch, dinner TBD.

Note to Tonya: My Blue's Clues avoidance efforts were foiled this morning by John saying, "Daddy, will you snuggle with me and watch Blue's Clues? That's a great idea!" Can I dash my son's impressions of what constitutes a great idea before he even turns 3? No, I can't.

Chocolate, Elmo, and trucks. Who can ask for anything more?


4:07 P.M. Update: The Complete Thomas the Tank Engine Collection, compiling 26 of the Rev. W. Audry's stories, is a hit even though we've read two stories so far and Thomas has not yet made an appearance. It was also a snip, under $20 including tax thanks to the aforementioned coupon. The catalog can be made to disappear. Parking at the wrong end of Hilldale let me sneak a little exercise into the grocery shopping trip, though there were potent fumes (fuel? turpentine?) in the vicinity of some construction in the south end of the mall. I also had to grit my teeth while passing the site of the tossed-out Chocolate Shoppe, eventually to be replaced by Ben & Jerry's. Prep work for dinner (sautéed chicken breasts w/ herbs, couscous, chilled steamed broccoli w/ lemon juice and olive oil, cupcakes for dessert) and two loads of laundry are done. A solid nap is continuing.

by Tom Bozzo

Former Sen. Connie Mack, Republican of Florida, is chairman of the Bushist tax reform commission. He is the subject of the 'Questions' feature in today's New York Times Magazine, with Deborah Solomon administering the third degree.

Things are going badly for you when you are so full of sh*t your eyeballs are brown, and the MSM calls you on it. Repeatedly. Good work, Ms. Solomon! My favorite exchange:

Ms. Solomon. Indeed, he is still calling for tax cuts. He would like to eliminate the estate tax permanently.

Mr. Mack. I think there is a likelihood that Congress will deal with that issue before this term comes to an end. I would vote to eliminate, as we refer to it, the death tax. I think it's an unfair tax. [Standard talking point --Ed.]

Q. Really? I think it's a perfect tax. The idea behind it was to allow people to postpone paying taxes until they die, at which point they presumably no longer care. Why do you call it unfair?

A. Well, let's say, if you are in the farming business and you have the desire to pass this farm on to your children. The problem is that when your parents die, you have to come up with cash to pay the estate tax. One thing you don't have is cash. You've got plenty of land. So I just don't believe it's a fair tax.

Q. That strikes me as a red herring. The issue is not really small farms, but zillion-dollar estates made up of stocks and bonds. [Completely correct --Ed.]

A. I don't know what the percentage breakdown is. I still go back to the same notion that these individuals who have accumulated these resources have paid taxes on them many times in their life, and then to say, when you die, now you pay more taxes on it? There is a limit.

Q. Well, the U.S. government has to get money from somewhere. As a two-term former Republican senator from Florida, where do you suggest we get money from?

A. What money?

Q. The money to run this country.

A. [Oh, that --Ed.] We'll borrow it.

The myth of Republican fiscal rectitude should be so dead it was never born.

by Tom Bozzo

Here is the thrillingness of my father-son time so far (spouse and daughter arrived safely in Dallas). Hold on to your hats!

• Target run for diapers, laundry stuff, more disposable sippy cups (Julia now uses them too), bigger onesies for Julia, etc. John hadn't been there in a Long Time to avoid the perils of wrangling infant and toddler in the acres of big-box parking; took our Halloween candy shopping like a champ. Even before the latest pharmacy shenanigans in Missouri, I had seen Target as Wal-Mart with plausible deniability for upper income diaper and laundry soap shoppers: Ugh. My natural urge to get out of there as fast as possible helps us avoid meltdown opportunities.
  
• Brunch at Marigold Kitchen, for which I maintain love equal and opposite to my feelings about Target, even though the menu could change a little more often and it's always darn near slammed when I'm there. Today, homecoming more than offset the gray and chilly weather, and the line was out to the vestibule. I know we're in very regular regular territory when one of the women who usually works the registers asks where the rest of my family is. John has his usual (pancake, sausage, fruit), I opt for the omelette with chorizo and roasted corn relish (after duck confit hash w/ poached eggs last week). Happily, we finish at the same time: No meltdown!
• Off to Olbrich Gardens to blow off some toddler steam. The warm-year-round conservatory is a reliable all-weather stop, but John initially wants to go no further than the gift shop, where they sell these zoo animal miniatures of which he's amassed quite the menagerie. I decline to get him an animal, suggesting that it's a special thing to do with Mommy. "OK." We head to the conservatory, where he's drawn to a large pitcher plant near a stairway. I explain that the pitchers lure and trap bugs, which the plant then eats. "No way!" "It's true." "No Way!!!!" Up the stairs. Three cents deposited in wishing waterfall. Hello said to large fish in pool at end of the water feature. Out of the conservatory: Second request for animal, denied without prejudice. We head out into the gardens. Having reached late October without a frost (which reminds me that I need to harvest the remaining basil soon!), there's still stuff in bloom. We run back and forth between the rose tower and the fountain jets in front of the tower many times. John gets wet enough from sticking his hand in the jets that parental intervention is required. Back and forth many more times. John offers to trade willingness to walk back to the car for a zoo animal. I counter with looking at a zoo animal, which is enough to get John moving. Insistent demands for an animal on the way back; "Not if you ask like that, big guy." The demand is eventually rephrased as a complete sentence beginning with "please." We settle on one hippo ($2) and one tiny car ($1). Could've been worse, though Mrs. Tweezers could fill me in on saying "no."
• Return trip home. Kickoff for the stupid Wisconsin game is an hour away, and I am not looking forward to running the gauntlet of pre-game partiers on Regent St. We pass a train on John Nolen Drive near the Monona Terrace, which a subsequent traffic light ensures we don't beat to North Shore Dr. A crazy dude in a Mercedes jinks under the descending gate, and I head towards the Beltline. John wants to see the train again, so we do a P-turn (Madison traffic engineering pretty much forbids U-turns anywhere you'd want to make one; there was also a cop there, too) and get a second look at the train — two Union Pacific locomotives pulling 25 or 30 hopper cars loaded with what looks like gravel. John is disappointed that there is no caboose. Now being pointed back towards downtown, I try a fairly direct route (Vilas, instead of Regent) which is probably no quicker, given the trade off of parking for drinking activity. One of the Marigold Kitchen chef-owners is standing in what I assume to be his driveway holding out a shingle offering easy-out parking. I resist the temptation to lower the window and ask about supervision of the last hour of brunch.
• Home: John clearly has pooped, and is clearly pooped, but still has some desire to fiddle with his Frickin' Thomas Engines. Also, I am to start work on the next Lego spaceship. Yes, Ming the Merciless! We head to the basement trainyard/shipyard for a few minutes. We head upstairs when he complains that the cat, sleeping in his actual cat bed and not a laundry basket, is bothering him. With a diaper change and a Thomas catalogue read in lieu of a pre-nap story, the morning is over at 2:06.

Time to get him up... meanwhile, here's the boy after yesterday's birthday party with the playgroup friends.

by Tom Bozzo

I haven't spent an entire day alone with John in his nearly three years... until now. Suzanne is out of town for the weekend to visit a friend who once lived a half-block from our current location but currently is braving the fire ants and killer bees down in Texas.

It's looking like a cool, drizzly and dreary start to the weekend here, so we're looking at Blue's Frickin' Clues, Thomas the Frickin' Tank Engine, and/or a big Lego party to kick things off.

Woo-hoo!

by Tom Bozzo

Artist	Song	Album
The Stone Roses	Something Burning (iTMS link)	The Complete Stone Roses
The Pastels	Something Going On	Creation Purple Compilation
The Mighty Lemon Drops	Something Happens (iTMS link, alt. version)	Happy Head
The Buzzcocks	Something's Gone Wrong Again	Singles Going Steady
The Jesus & Mary Chain	Something's Wrong (iTMS link)	Psychocandy
My Bloody Valentine	Sometimes (iTMS link)	Lost In Translation (soundtrack)
Robyn Hitchcock	Sometimes I Wish I Was A Pretty Girl	I Often Dream Of Trains
The Sneetches	Sometimes That's All We Have	Sometimes That's All We Have
The Railway Children	Somewhere South	Recurrence
Wire	Song 1	154

See Scrivenings for the Alphabetical Ten rules. I cheated by nonrandomly selecting #1.

The iTunes Music Store Esoterica Index of this Ten — 100% less the fraction of songs available on the iTMS — 65% (only partial credit is awarded for the downbeat live take of the Lemon Drops song). Only the Railway Children are totally absent from the iTMS library.

by Tom Bozzo

Looks like high prices and rising interest rates are denting the local real estate market. Some statistics reported in today's Cap Times:

• September house and condominium sales down 10% year over year — 563 units vs. 626 in September '04;
• 3,636 Dane County listings on the South Central Wisconsin MLS at the end of September, up 59% over September '04;
  
• 686 listings over $400,000 (note to visitors in high-priced markets, that's still a lot for around these parts), 50 sales — nearly 14 months' inventory at the present sales pace;
• Mean and median prices are still up modestly over last year, around 6%.

The overall inventory level is not what would normally be considered excessive, though it's now high enough to constitute a potential shock for sellers expecting to list today and sell tomorrow — unless they're selling exceptionally nice and not exceptionally high-priced houses. The high-end sluggishness is much more pronounced, though, confirming what I'd noticed in the near west side listings (even very nice houses not moving much at the prevailing prices) and suggests that maybe the supply of suckers isn't infinite after all.

It's a little scary to imagine the situation if the local economy were bad.

by Tom Bozzo

Good.

Lee Sensenbrenner describes the kickoff meeting in the Cap Times:

On the corner of North and Johnson streets on the city's east side, television news crews were wearing frowns and packing their gear back into their trucks Wednesday night. They had been turned away from the first meeting of a group that's trying to oust Mayor Dave Cieslewicz in a recall election for his role in supporting Madison's smoking ban.

Maybe the recall organizers forgot that there's no such thing as bad publicity?

As a busy bar hummed above them, the group milled around an uncrowded smoke-free basement room, waiting to see if their numbers would grow beyond the dozen or so who had shown up.

Two volunteer consultants from the Citizens for Responsible Government Network - which was founded during the successful efforts to throw several Milwaukee County officials from office - were going to brief them on what they were getting into.

Over 35,000 signatures would be needed to hold a special election. They would have 30 days to collect them. The petitions they would carry had two charges against the mayor, both related to the smoking ban: "Failure to protect civil liberties" and "destroying jobs."

I wonder how many of these people voted for Bush. Locking people up indefinitely without charge: acceptable. Abrograting the pseudo-right to smoke in public: hanging offense!

Upstairs, just after the dinner hour, seats at the bar were nearly full.

Doesn't look good for that 'destroying jobs' charge now, does it?

"Business has been all right," [Travis Julius, owner of the Sandlot bar and grill] said. "We're lucky to have a lot of really faithful neighbors."

He said he thought that there should have been some room for compromise in the smoking ban, and still hopes that Madison could allow some exceptions to the law, like allowing smoking during certain hours.

But regarding the recall campaign against the mayor, he said that "it's tough to make a specific comment on that."

"I don't know that we'll get support in this community to do it," he said. Julius said he would rather have fewer mandates from city hall, but didn't put the blame entirely on the mayor.

Et tu, Julius?

As the meeting in the basement was winding down, Ben Masel, a supporter of Libertarian causes who is running against Sen. Herb Kohl, left and gave the effort little chance of succeeding.

Getting signatures in potentially lousy late fall weather at a bunch of bars would make it all the more difficult, he said.

"You get the same people at each bar," Masel said. "You get a good start and then nothing. And you've got to catch them before the third drink is over, or else it's hopeless."

Is there a Hugh Jass here? Hey everybody, do I have a Hugh Jass?

[Chris] Kliesmet [of CRG] said that they will try to help any group in the state recall public officials as long as a few conditions are met. First, the attempt has to be legal and follow his organization's philosophy of fiscal conservatism and anti-corruption.

"If you want to recall someone for supporting stem cell research," he said, "that's not us." He said the smoking ban met the criteria because it hurt businesses.

Not exactly demonstrated. If the policy ends up increasing business overall, at some cost to a specific group of taverns, does it "hurt businesses?"

There is a "no carpet bagging rule," Kliesmet said, and having Heather Mees, a manager for a bar in the town of Burke, organize the effort locally satisfied that.

I'm curious as to Mees's beef. The principle of it? Are they're not seeing enough smoking refugees outside the city?

The CRG Network board also has to approve the effort and, lastly, Kliesmet said, "there's the 'Are You Serious?' rule."

"If it's a bad idea," Kliesmet said later, "people won't sign the petitions."

Quite. Just say no thank you.

by Tom Bozzo

A couple weeks ago, Mark Thoma had picked up a Bloomberg article by Kevin Hassett of the American Enterprise Institute speculating that the Bush tax reform commission might recommend the ominously-named X Tax as a sea change in the tax system. At the time, I was in a wonky mood and had started, but never fully developed, an X Tax post; subsequent news seemed to have rendered Hassett's prediction about as operative as Dow 36,000 (Hassett's bubble-era work of fiction co-authored with Tech Central Station meister James K. Glassman) — apparently John Breaux has indicated that total exemption of investment income is a non-starter from the center-right on leftward — but TaxProf Blog quotes Bill Gale of Brookings suggesting that the commission may yet propose relatively far-out changes among its alternatives.

Some of the taxprof bloggers got pretty excited at the prospect of the X Tax being recommended as an option for the real tax code, e.g. Victor Fleischer at The Conglomerate (also the source for the TaxProf Blog link). Fleischer suggests that progressives might want to support the X Tax, and at a minimum shouldn't autonomically reject it. In that spirit, I'll recover a portion of my X Tax musings from the Island of Lost Posts.

Hassett called the X Tax "a brilliant redesign of the famous flat tax that delivers most of the economic benefit of the tax, while allowing policy makers to maintain the progressivity currently in the code." It was devised by the late David Bradford. Fleischer notes correctly that the X Tax really isn't a flat tax at all on the individual side, contending that it's a "progressive consumption tax." From my reading of some of Bradford's papers, I don't agree. Unless I'm missing something, the X Tax isn't really a consumption tax either.

The quick version of Bradford is that the X Tax would tax transactions in the "real economy," so businesses would pay a flat tax on their net final sales of goods and services, less compensation costs, while individuals would pay tax at graduated rates on wages and salaries. Financial transactions are outside the tax base, and Bradford noted that taxing financial institutions is potentially problematic. The top rate for the compensation tax would equal the business tax rate.

So the X Tax is really a progressive payroll tax on the individual side, and I'm not convinced that progressivity sweetens the deal when individual investment income is totally excluded from (individual) tax.

The usual progressive consumption tax formulation, in which investment income is at least subject to tax when it's consumed, at least discourages heirs and heiresses from extremes of profligacy, which Robert Frank has suggested may have broader benefits if you happen to think rampant consumerism needs to be restrained.

Still, there are ways to formulate the basic tax fairness question in which progressive consumption taxes don't seem likely to fare well for liberals. For instance, if the consumption tax fairness question is posed as, "is it fair to tax someone who must spend X the same as someone who chooses to spend X but could spend Y which is (possibly a lot) more than X," would you say yes? Or, to put it slightly differently, does ability to pay count? The answer pretty clearly is a matter of normative outlook, but an affirmative doesn't seem to be a slam dunk for political progressives. For the X Tax, you have to go further and offer an affirmative to the question of whether it's fairer to tax someone who spends X out of wage or salary income higher than someone who spends X out of investment income.

Fleischer notes:

Liberals must recognize that our current system fails to tax a lot of investment income, so don't defend the status quo for the sake of defending the status quo. More importantly, the X-tax would eliminate some important economic distortions that don't help poor people very much, like the home mortgage interest deduction.

Fleischer's first point is fair, though it doesn't follow that the failure of the current tax system to get all investment income into the tax base implies that the optimal tax rate is zero. Just what the optimal rate might be resides at the not at all clean boundary between positive and normative economics. That is, it's a fundamentally normative judgment that the social welfare function should assign very small social benefit (utility), on the margin, to the last dollars of income of the very rich. It is also possible to deny that there is even such a thing as a "social welfare function," however much I and most mainstream economists might be inclined to believe in one.

On the positive-economics end of things, I don't find the suggestion that relatively low tax rates on the income would discourage much investment. A zero rate on investment income implies more labor supply distortion for a given revenue yield, as Bradford himself noted. (I'm just old enough to remember when some conservative economists cared about labor supply distortions.) It's also a stretch to suggest that increasing the after-tax price of owner-occupied housing is a good way for progressives to help the poor. Irrational stigmatization courtesy of Frank Luntz types aside, taxing the wealth transfers of the very rich deceased would seem to be a lot more effective under a reasonable social welfare function.

Overall, the X Tax doesn't sound very appealing from a politically progressive perspective since, on the face of it, it doesn't even try to meet ordinary consumption taxes' minimal fairness standard of taxing actual consumption in its entirety. It really looks like a tax that heirs and heiresses will love a lot more than everyone else, and I will not cop to the fairness of taxing the idle rich less than everyone else.

by Tom Bozzo

From former Mac cloner Power Computing:


...also reproduced at The Unofficial Apple Weblog, where Laurie Duncan plays a nanotechnological fiddle in response to serial Apple basher John C. Dvorak's complaints that the media suffers from a misplaced pro-Apple bias.

by Tom Bozzo

Please take any blood pressure or rage control medications you may require before reading the following. Thank you.

AP: FEMA Official Says Boss Ignored Warnings:

Later, on Aug. 31, Bahamonde frantically e-mailed Brown to tell him that thousands are evacuees were gathering in the streets with no food or water and that "estimates are many will die within hours."

"Sir, I know that you know the situation is past critical," Bahamonde wrote.

Less than three hours later, however, Brown's press secretary wrote colleagues to complain that the FEMA director needed more time to eat dinner at a Baton Rouge restaurant that evening. "He needs much more that (sic) 20 or 30 minutes," wrote Brown aide Sharon Worthy.

"We now have traffic to encounter to go to and from a location of his choise (sic), followed by wait service from the restaurant staff, eating, etc. Thank you."

About the only mitigating factor is that it wouldn't necessarily have been an improvement for Brown to have been on the job, eating take out.

Yeeeearrgh!

by Tom Bozzo

Someone from the DCCC was searching around for a photo. You might want to send them one.

by Tom Bozzo

No, I am not kidding.

According to reports on the mishmash of fantasy and reality that's expected to emanate from the tax reform commission, permanent elimination of the dreaded AMT will be one of the recommendations. It's also one of the few that Congress might be tempted to enact, as it's in the position of having to pass temporary AMT relief provisions (which, full disclosure, thanks to a new larger mortgage and the arrival of a second child, kept me from paying a small AMT liability in 2004, and will likely do so again in 2005).

There's not a totally invalid concern that the AMT will rapidly reach down from the upper-upper middle class to the lower-upper middle class, partly because it does not have the regular income tax system's inflation adjustments for tax brackets and exemptions, and more significantly because it helped the original Bush income tax shift show a smaller effect on the government's finances. It's also almost a parody of tax complexity that you have to fill out a worksheet to find out if you need to fill out the form that will tell you if you owe AMT.

But there is ample bullshit, too, like this characterization of the AMT from the New York Times:

The alternative minimum tax, a steep levy faced by an increasing number of middle-income taxpayers, would be abolished.

The "middle-income" characterization is one problem: Based on 2003 tax statistics (Excel file; the latest data available from IRS), you have to have an AGI in approximately the top 30% to have even a theoretical risk of AMT liability. People with actual middle incomes don't make that much money, though 70th percentile income earners are not rich.

The "steep levy" characterization also is highly questionable. The AMT tax rate is 26%, for pete's sake, which prior to the Bush tax shifts was a lower rate than all but the first regular income tax bracket; for a joint-filing couple, the AMT rate is zero on the first $58,000 in income ($49,000 without the temporary fixes); and the AMT permits mortgage interest and charitable contribution deductions. My AMT liability would be lower than that under the regular income tax; even without the stopgap fixes, I could not look at any of you in the eyes and call the result burdensome.

So strip away provisions pertaining to some exotic forms of income, and the AMT is a flat tax with a big zero bracket and a couple popular deductions. So the proposal to eliminate AMT, as opposed to simplify it, fix some details (adjust the zero bracket for inflation, e.g.), and make AMT the regular tax system boils down to No Pony for the Flat Taxers (link via Economist's View).

Additionally, since there's no reason why the AMT rates couldn't be more progressive, failing to do the same with a graduated rate structure is arguably No Pony for the Tax Simplifiers either.

by Tom Bozzo

A selection of today's visits from search engines...

john gard

He's like Tom DeLay minus the gravitas.

state and local tax deduction Bush eliminate

That reportedly is part of the Bush tax reform commission's plan. Republican stocks of political capital are such that its chance of passage prior to the 2006 Congressional elections is as close to zero as makes no odds.

fsbomadison discussion

If you are shopping the near west or near east, you or your agent must follow fsbomadison.com, which obtains listings for a lot of houses whose desirability-price combination makes the owners want to cut out at least one real estate middleperson.

ask the economist a question

What's the question, and which economist?

maryland victory song

This was a hit, as long as they weren't after the tune.

alan greenspan AND evaluation

Maybe, as Brad DeLong says, he's the monetary policy technocrat par excellence, though he'd have more of a lock on that title had he, like Paul Volcker, actually been the guy who wrestled stagflation and eventually won. Unfortunately, he will also go down as having enabled the worst deterioration of the federal government's finances in history.

dell XPS vs. apple powerbook

If you want to carry one further than the distance from your dining room to your family room, it's PowerBook all the way, baby. The new Apple 15"er is portable, relatively cheap, and has a new higher resolution screen.

darth miers

Heh indeedy. Though if her notes to George W. Bush from her Texas days are any indication, her Sith name should be Darth Obsequius (*).

bmw 2006 audio ipod hiss

None on my '02 using the iPod connection kit; I haven't tried the E90's stereo miniplug connector.

best blog in the world, becker, posner

Believe it or not, this one came from the uchicago.edu domain. They got this post: I don't think so. Everyone should know that Fafblog is the best blog, and moreover is about "god and the universe and those horrible screaming monkeys and that time I made a pizza out of an old tire and a can of whip cream."

estate tax arguments already taxed

An estate tax myth is that it is a form of double-taxation. This may be so, but taxable estates tend to consist primarily of unrealized capital gains, which are hitherto untaxed.

restaurant muramoto

It's our favorite mid-priced restaurant in Madison right now. I could eat the duck roll every day.

pseudonymous blogging

I don't, on rare occasions wish I did, and don't hold it against anyone who does.

overture center possible gift of madison philanthropist jerry frautschi 21 million

It would be nice.


(*) Update: "Darth Sequious" would be a slightly less obvious, if a little more prequel-y, Sith name for Miers.

by Tom Bozzo

From the Daily Page account of last night's Madison city council session on the Overture refinancing deals, a couple things caught my attention:

• Andrew Taylor, the director of the MBA program at the UW Business School for arts administration, spoke as a privae citizen to the proposal. He said that "the financial exposure to the city has been underplayed," stating that it "is almost a guarantee" that there will be an additional $1 million in annual costs for Overture operations and maintenance than the $1.6 million per annum figure that is currently projected.

Erm, if it will cost more than projected to maintain Overture, won't that also increase the break-even rate of return for the trust fund?

And this:

• Up next was an investment advisor and associate who asked alders to open a pamphlet that he provided to each of them prior to the meeting. Specifically, he directed them to look at a chart tacking the growth of the stock market since the Great Depression. He said that recent stasis in investments were simply poor years, and said he offered this piece to give confidence to those concerned about the risks of refinancing.

So much for "historical performance, particularly short-term performance, is no guarantee of future returns." It's worth noting that the lackluster post-bubble performance of the market is not, in fact, simply poor years. Based on the returns of Vanguard's Total Stock Market index fund, it's actually been a combination of bad years (2000, 2001), a terrible year (2002), a great year (2003), a good year (2004), and a poor-to-date year (2005), for a five year average annual return of -0.63% through the end of September.

In any event, the recall effort is even more clearly misdirected than it's been to date. I would happily recall any alder who was reassured by the investment advisor's reported presenation.

by Tom Bozzo

The refinancing plan for the Overture Center ended up passing the city council by an ostensibly veto-proof 15-5 margin after all. The meeting was live-blogged at the Isthmus Daily Page site by Kristian Knutsen, if you want fuller details. The Cap Times is reporting that the mayor may nevertheless veto the measure, and that Ald. Austin King (who voted for the refinancing plan) has indicated he wouldn't vote to override a veto, so the question is whether a couple other alders would behave likewise.

Now, I couldn't tell you whether the Overture trust will clear its rate-of-return hurdle even if I knew the details of its investments. As was seen in the Social Security privatization battle, predicting forward-looking returns is unavoidably contentious, and even if you could reliably predict expected returns, the realized returns' deviations from expectations matter — as Mayor Cieslewicz and the council's fiscal hawks emphasized. (And, echoing a point I made yesterday, he had stressed results from the city's fiscal efficiency auditor that the city bears especially large risks from poor near-term returns.)

What's basically incontrovertible is that the trust is undercapitalized. I'm inclined to agree with David White of AFSCME, who according to the Cap Times:

Reject[ed] claims that it would be easier to raise money for the facility if it were not part of the city as nothing more than "a talking point," White also said he did not trust markets in the next few years to deliver returns consistently above 8 percent.

Assuming the plan goes forward, the ball is in the foundation's court to put some action behind the assertion that the existing structure can do more for Overture than city ownership, raise some money, and thereby reduce the taxpayer's risk the old fashioned way.

by Tom Bozzo

Continuing yesterday's lunchtime thoughts, let me add that I'm not an unqualified fan of the Overture Center.

Oh, sure, the new concert hall is a vast improvement over the old Oscar Mayer Theater, and the various other resident performing arts groups from the old Civic Center should benefit from similar leaps in the smaller performance spaces, and the new home for the Madison Museum of Contemporary Art might make even make MMoCA feel more like an art museum.

Still, I tend to view the project as a missed opportunity for the city. The old Civic Center could feel like a hole in the otherwise bustling State St., and Overture in some ways makes the hole bigger.

Quite simply, if I were the Archduke of Madison, the concert hall would have been located elsewhere — probably in the 300 block of East Washington Avenue, where a surface parking lot presently anchors the southwest end of the East Wash corridor's post-industrial blight. This crackpot view was reinforced by taking in fire truck parade from a vantage point across State from the old Capitol Theater/Civic Center entrance. From the historic Capitol facade to the glassed-in wedge "icon" where the Radical Rye used to be (the Radical Rye of Light?), Cesar Pelli has given us a rather sterile and over-tall stretch of wall for the not overly broad State St (visible behind the Fitchburg ladder truck here; compare the rosy-looking drawing on this Overture Foundation page). Plus, in my fantasy world, Dotty's, the Radical Rye, and whatever was in the old Deb and Lola's (sniff) space would never have been displaced.

What of the broader development issues? I had been somewhat boggled back in the death throes of the Fairchild St. Dotty's that, having been graced with a State Street that could survive the best efforts of the urban pedestrian mall fad to kill it, the city would knock down perfectly good businesses in the name of the arts — or at least the somewhat misguided notion that what the street really needed was more Symphony patrons.

Since then, I think the Cieslewicz administration deserves considerable credit for having promoted increased density in the central neighborhoods (including the northwest end of ours) without waging much if any unnecessary assault on what's already in place. The simple fact — a propos of Brad DeLong's link last weekend to a summer piece by Nathan Newman at TPMCafé criticizing progressives for failing to take affordable housing issues seriously enough, with some of us even clinging to beloved lower-density traditional neighborhoods at the cost of

...condemn[ing] others to homelessness and the rest to increasingly long commutes... more people will be driven out into the suburbs to create more strip malls, SUVs, environmental degradation, and Republicans.

(which is, of course, bad) — is that hardly any cities have such want of property that's ripe for redevelopment that it's necessary to put bulldozers to not-blighted properties. It's not obviously true even of New York, Chicago, or San Francisco, let alone mid-sized cities without especially binding space constraints such as Madison (the lakes notwithstanding).

Later: Development ahead of transit: Sneaky?

by Tom Bozzo

The Cap Times reports that a Madison offshoot of CRG will commence its effort to collect the needed signatures for its petition to recall Mayor Dave Cieslewicz on Friday, though the Mendota Beacon reported that the paperwork to form the recall committee had been filed on October 10.

Since the organizer of the drive seeks to enlist the aid of bar owners in obtaining valid signatures, in the event the effort gets what may appear to be a sufficient number of takers, I suggest the authorities carefully review the sheets for names like I. P. Freeley, Amanda Hugginkiss, and Bea O'Problem. Also, there is an Evergreen Road in Middleton but no Evergreen Terrace in Madison.

Marginal Utility recommends that its Madison readers politely decline to sign the recall petition under any name.

by Tom Bozzo

Here's something of a request post, as Paul Houseman exhorted me in the comments to turn my attention towards Madison and say something about the Overture Center for the Arts, the city's nearly complete $205 million performing and visual arts palace funded primarily by local philanthropst W. Jerome Frautschi. Mr. Frautschi's megafortune was derived in large part from his stake in his wife's almost unfathomably successful business.

The city council is set to vote tonight on a complicated plan to refinance the center's construction debt (backed by a city guarantee) such that the center's endowment will be able to pay off the construction debt and still provide for the facility's long-term update. The Cap Times reports that the council narrowly favors the plan by downtown Ald. Mike Verveer's tally, though not by enough to sustain a possible mayoral veto.

What's not to like? Apart from some longer-term issues regarding the city's possible obligations that apparently remain fuzzy, the taxpayer's obligation to the center under the plan depends on the endowment's ability to obtain an 8% return on its investments. The mayoral alternative, which would involve liquidating the endowment to pay off the facility, which would then be transferred to city ownership, would put city taxpayers on the hook for Overture's upkeep, though to an extent that looks more predictable on its face. On the other hand, the board of the nonprofit Arts District contends that maintaining ownership of Overture would make subsequent fundraising easier.

My first thought is that the Arts District doesn't know the meaning of the saying, "once bitten, twice shy." The original Overture gift was structured — at the tail end of the stock market bubble — to fund construction and maintenance of the facility, and certainly also reduce the required Frautschi gift (not that there's anything wrong with that), under the assumption that the endowment would earn 9% average annual returns. In 1999, that must have seemed like the height of investment conservatism, but we all know how that turned out. (The endowment has recovered in the last couple years, but not nearly to the originally planned extent.) So now a percentage point has been shaved off as a concession to post-bubble sobriety.

Should the city take the bet? I'm leaning toward siding with Mayor Dave on this one. Both the volatility of returns, and the profile of realized returns, matter, arguably more to the city as the guarantor and maker-up of certain shortfalls in the returns than to the Arts District. The timing of the gambit is particularly nerve-wracking, as practically every asset class in which the endowment could be invested appears to be richly priced, so it's hardly inconceivable that the first couple years' returns could badly underperform the longer-term expectations to the city taxpayer's detriment. The Arts District should bring more capital to the table and try again.

Later: The Mistake on State? Density and Development in the Progressive City.

Update 10/19/05: The results.

by Tom Bozzo

There can be such thing as too free (as in beer). Google's free Blogspot blog hosting service has long been a haven for spam blogs (or 'splogs'), and in fact it is so easy to set up a blog that automated spam blog creation has reached crisis levels, as Joe Malchow notes at Dartblog. For Blogspot bloggers like me and many of my blog pals, a cost arises from a Gresham's Law of the Blogiverse, to the extent blog indexes tune us out to cope with the splog assault.

While the zero cash price was a big part of the reason I located on Blogspot, I've had mixed feelings about it. In particular, I find the dependency of my blogging avocation on Google's mysterious business model a little unsettling. I assume they are in it for the free content creation, which can be turned into an adequate revenue stream by convincing enough bloggers to turn their hobby into an income source through ad placements. But really, who knows? In any event, I'd almost certainly stick around if a modest fee were imposed for the service — it shouldn't take much to kill off the market for splog creation.

The alternative is to implement a Turing test, like the type-the-characters verification step that is intended to keep spam out of the comments by separating people from machines. The problem there is that the tests are not necessarily robust to people with lots of cheap computing capacity to throw at them; also, as Scott notes at Semiquark, the spam market in its infinite wisdom has other solutions it can deploy when only a human will do.

by Tom Bozzo

A commenter to the post on the Madison indoor smoking ban and the would-be recall of Mayor Dave Cieslewicz claimed that the research into the health risks of secondhand smoke is too inconclusive, and the estimated risks too small besides, to warrant the remedy of the ban. I'm not a public health researcher, but thanks to the miracle of the internets, I nevertheless was pointed to one of the seminal papers on the topic, this 1993 JAMA article that estimated a 50% increase in lung cancer risk for food-service workers at establishments permitting smoking. Need I add that the author of the article, Mike Siegel, has a blog, too?

The synthesis of subsequent research I gather from Siegel's blogging is that the health risks are sufficient to justify the remedy of banning indoor smoking in all public places, whereas outdoor smoking bans (which have been pursued elsewhere) can't be justified by health concerns.

I suppose it is possible to argue that, notwithstanding the substantial increase in risk, the risk level remains low. The catch is that there doesn't seem to be any reason to believe that workers are compensated for accepting the risk — and, further, such clear but not present dangers aren't things people are obviously good at weighing rationally.

by Tom Bozzo

It's campaign finance reporting time, and the finances of the 8th CD candidates are the biggest local news.

My good buddy John Gard has raised the most money, $465,498. He's also spent the most by far, $141,410, versus $98,279 for the four Democrats combined. Reading blogs must be expensive, else Gard is a crackerjack student of DeLay-style fiscal conservatism [sic]. The three main Democratic contenders (Wall, Nusbaum, and Kagen) are not in bad shape at all, assuming they can avoid killing each other in the primary season.

Gard also leads the field in corporate and PAC contributions, with $127,435 versus $4,250 for the Democrats. Free to a good home, here are some of Gard's bigger corporate and PAC supporters in the most recent reporting cycle:

• American Beverage Licensees PAC, $2,500;
  
• Bowling Proprietors Association of America PAC, $1,000 (there really is an association for everything!)
• The G-P Employees Fund of Georgia-Pacific Corporation, $5,000;
• National Beer Wholesalers Assocation PAC, $5,000 (what is it about Gard and alcohol?);
• Police Officer PAC, $5,000 (funny, I thought concealed carry was just an unfunded mandate for businesses to put up signage banning guns from their premises);
• Prosperity PAC, $5,000 (an Alexandria, VA-based PAC mostly funded by a variety of corporate and association donors);
• R. J. Reynolds PAC, $2,000;
• SBC Communications Inc. Employee Federal PAC, $4,000;
• TDS Telecommunications Corp. PAC, $2,000 (my friendly neighborhood CLEC/ISP, d'ohh);
• Wellpoint Inc. WellPAC, $2,500.

Gard doesn't yet hold a corporate shakedown candle to F. James Sensenbrenner, though.

Really, it's a lot of fun to follow the flow of funds in the campaign finance reports, if you find profoundly depressing evidence of how corporations buy and sell politicians "a lot of fun." For instance, the SBC Employee PAC got $5,000 from the America's Majority Trust. (The SBC PAC spreads its money around very broadly, though its bias is solidly rightward.) America's Majority Trust has its own long list of association and corporate donors; while officially non-partisan, you can see which majority they trust here.