Machiavelli caution on Social Engineering

Machiavelli cautions the Prince:

          It should be borne in mind that there is nothing more difficult to arrange, more doubtful of success, and more dangerous to carry through than initiating change.  The innovator makes enemies of all those who prospered under the old order, and only lukewarm support is forthcoming from those who would prosper under the new.--Machiavelli, The Prince

 

Translation:  The people with something to lose will fight harder to keep the status quo than the reformers will fight to make and retain a change.

 

A modest corollary is, 

  Without a sustained investment in the accomplishment, the opposition will double down on its effort to recapture lost advantages.

 

President Trump's campaign and actions since election have been to reverse change backed by a very solid base of supporters.  The  President has masterfully conjoined reversing change with nurturing his base. 

 

Examples of change without sustained investment are found in domestic, environmental, and international policies. 

Domestic Change Reversal
Abortion and a woman's right to choose is an excellent example.  Rather than looking for reconciliation and showing the benefits of choice, the "winners" have been smug and brittle.  The brewing resentment manifested first in the Tea Party and now the cult of Trump.

Environmental Regulation
Except for the Los Angeles basin citizens, most Americans do not appreciate the value of environmental regulation in increasing the quality of life and even economic growth.

International Policy

We walked away from Afghanistan in the late 80's, from Iraq in 2011, and more than once from Afghanistan in more recent years.  Without a sustained investment in the accomplishment, the opposition will double down on its effort to recapture lost advantages. 

The Paris accord and Iran nuclear agreement (not a treaty) were not explained to the American people making these initiatives easily reversible by a President more interested in discrediting his predecessor than in good policy.  And the ability to readily link the nuclear agreement to Iran's increased role in promoting instability in the Middle East made reversal of the Obama-era agreement easy pickings. 

Imposing what is "right" without nurturing acceptance is a brittle foundation on which to build a more enlightened society. 

 

Stop Obsessing on Trump!!

Stop Obsessing on Trump

Democrats need to stop obsessing on Trump and focus on their own problems.  The American people have little interest in what the Democrats say about Trump until the Democrats clean their own house first.  The housecleaning starts with replacing Nancy Pelosi.  The Democrats need to sever ties with the politicians who peaked ten years ago.  Next the Dems need to explain issues to the flyover state voters in terms of financial security, pride in  America, and opportunities for their children.  

Re-establish Trust
The roadmap to stop the bleeding and begin to establish trust with those in the middle who want to pivot away from expressing frustration to expressing direction includes:
Apologize to the American people:  acknowledge that the working middle class was ignored the past eight years; recognize that Obama is perceived as aloof, as talking down, as m ore interested in the civil rights of those on the fringe than the economic security of those who had worked to earn the benefits of the American dream.

Pick New Leaders
Sure, Pelosi was picked by a majority of the remaining Democrats in the House.  That is the point: she is the pick of those that remain; she is not the pick of the those who could pose challenging races in districts where democrats could have a chance in the next two election cycles.  The Democrats continue to apply Windex to the rear window of their bus while they ignore the bugs and blizzard hitting the windshield.

Middle Class
The Republicans control 33 state houses: a dual threat.  The Republicans are building the farm team to field future candidates in a well-articulated succession planning strategy.  They are also poised to control the next decade's re-districting proccess which will only further enhance their control of State legislatures and the Congress.  Clearly, the Democrats need new leadership that begins the process of gaining support of the middle class and those who want to be in the middle of the road.
Keep Sanders inside the Tent
finding a way to balance the left wing galvanized by Sanders and the moderates in flyover states is tricky.

Recognize Trump and Koch are Playing the Long Game
Gloating over the Congress inability to change Obamacare was a necessary but very short-lived event.  President Trump has artfully gutted Obamacare by eliminating the individual mandate.  This will inevitably lead to massive increases in insurance rates, mass defections, and a chance for Trump to say "I told you so" and offer a desperate middle class an even worse proposal than was just rejected.  The President is playing the long game; Pelosi is the one distracting her people from reality.

Specific legislative actions might include:
Fix Obamacare: Insurance means paying even when you dont use it
Tax Reform: No more Trickle-Down; General Electric hasnt paid corporate taxes in a decade so let's be real
Infrastructure: Find compromise between spending dollars and spending Tax Credits for private initiatives
Regulation: Highlight where deregulation impacts mainstream Americans:  groundwater pollution

Difficult Topics
The abortion topic was dormant for a couple of years but has returned in a way that gives middle American pause on the morality of a woman's right to choose.  The leadership needs to focus on economic issues to attract the middle class.  This means figuring out how to take the wind out of the right to life sails.  Telling lifers they are wrong hasnt worked.  Maybe now is the time for Democrats to talk about individual responsibility; about some type of consequence for the abortion decision; showing respect for their concern for life.  Religious organizations should have every opportunity to use tax deductible money to recruit members; but recruitment cannot extend to imposing their will on civil government.  

Make Healthy People Buy Health Insurance

Auto insurance is one of the worst investments I've ever made:  about $100,000 paid in and less than $5,000 recovered.   As investments go, my health insurance is absolutely the worst use of money I've ever made.  

The best health-related investments have been for exercise, green vegetables, and vacations that involve backpacking.  Ironically, the government requires me to pay taxes on the money that goes for exercise but allows me to deduct the cost of health insurance.  Hmmm.

So how do we get people under age 35, especially those without children, to buy health insurance??  They buy automobile insurance because the car finance company makes them to protect their investment and the State wont let anyone drive without insurance whether they owe money on the car or not.  

So how do you motivate or compel healthy people to pay for health insurance?

Some possibilities just to promote conversation (no endorsement intended) include:

1. Require health insurance as a condition of getting a job--a requirement already exists to show citizenship or a work authorization.
2. Eliminate the requirement that hospitals accept people who lack health insurance.
3. Make proof of health insurance a condition for a driver's license or to register a car.
4. Require health insurance to attend a rave, do on-line betting, use a public basketball court.  
5. Redeploy ICE (border patrol) to sweeps of coffee houses, public places and work places and round up people who can't prove they have health insurance.
6. Require health insurance identification in order to download music from Apple or Spotify.

Alan Greenspan: Political Tool

Alan Greenspan was the world's chief executive officer for economic growth and stability as Chair of the Federal Reserve Board for nearly twenty years from the mid-1980's until the crash of every international market due starting in 2007.  Republicans deified Greenspan crediting him with economic prosperity through sound monetary policy that enabled successfully balancing the federal budget in the Clinton years.

But when asked to explain the housing bubble and the collapse of financial markets for which he was the chief overseer, Greenspan acts as innocent as the little kid surrounded by pieces of the broken cookie jar when asked what happened.

Greenspan says he didn't believe governments should avoid intefering with the choices people make in open markets.  Better to trust financial institutions in their measurement of risk than to insert government regulation.  True enough.

But how does Greenspan explain  the behavior of businesses responsible for evaluating the risk of mortgage-backed securities?  Fitch, et al assigned the same AAA rating to mortgage-backed securities for liar loans as they had previously given to the rating of mortgages for loans that previously required a substantial down payment and conservative ratios for borrower income to debt.  The rating agencies explained they had no historical data on which to assess the risk associated with loans that had no down payment or verification of income.  Therefore the rating agencies explained they had no choice but to give the same AAA rating.  Investment bankers such as Citibank used the AAA rating dubiously assigned by the rating agencies to make huge profits in packaging the questionable loans at the same price as loans previously adhering to more conservating underwriting practices.

Curiously, the Federal Reserve under Greenspan never bothered to challenge the assignment of AAA ratings or examine how an overheated housing market was fueling the overall American economy.

At the same time every American was given the chance to claim any income without proof in order to buy a house, President Bush was assuring the American public that closing factories and sending our manufacturing overseas was creating a chance to re-invent the American worker.  And President Bush could point to a strong economy as proof new jobs were right around the corner for the middle class workers displaced by closing businesses.

In reality, the housing boom was masking the gutting of the American economic engine.  When the housing bubble finally burst there were no jobs to shift to in the new American economy.  The American economy was actually dependent upon housing construction, real estate sales, mortgage brokers, escrow companies and the housing construction after market:  the companies and jobs related to furnishing houses and landscaping the yards.

Greenspan didnt want to do anything to slow down the housing bubble because the artificial economic stimulus served the purposes of the Bush Administration.  Greenspan is turns out was little more than a very bright but disingenuous tool of Republican right.  Bush was able to fuel the economy and in turn his wars in the Middle East with taxes from the housing bubble.  Given the shift of so many businesses overseas combined with tax breaks for the remaining big businesses, the housing bubble became a key source of jobs and tax revenue.

Koch, Trump and Refining the Formula for Fascism

Calibrating the Formula for Fascism

Trump’s pandering populist rhetoric may test the boundary of what our democracy can tolerate in the way of diverse points of view.  The National Review says of Trump,

“ Trump is a philosophically unmoored political opportunist who would trash the broad conservative consensus within the GOV in favor of a free-floating populism with strong-man overtones.”

The cynical view is Obama has said little and done less over seven years to show respect for people who have a work ethic, believe in God, and value patriotism.  The really cynical view is that he has done this to allow a demagogue to peel off a portion of this group to join the extreme right to achieve the critical mass for a third party candidate.  This third party candidate would vote at the expense of the Republican mainstream.  The Democrats would then have certain victory in the next Presidential election.

The Republican Party is trying to figure out how to keep Trump from using his populist base to  start a third party.  That third party candidancy would make Clinton a shoe-in as our next President. 

Sounds clever.  But at what cost?  Trump may lose interest in serving as the spokesperson for the large mass of people looking for simplistic explanations in a complex world. 

Unlike the George Wallace era, we now have the Koch Brothers able to do real-time and long term behavioral response surveys to help find-tune their messaging.  They have already gone through at least four transitions:

·         Christian (Pretentious) Fundamentalism

·         Soccer Moms

·         Tea Party

·         Trump’s nascent formulation of a Fascist Party.

With each new phase the Koch Brothers have expanded their base.  But perhaps more ominous they have reduced the American people’s alarm at the notion of a fascist state.

So we may be certain that Trump wont be the Republican candidate and that a third-party candidacy is certain to fail.  But that is not cause for celebration.  The Koch Brothers will not see this as a setback.  Trump is simply the next iteration toward calibrating the formula to Fascism. 

21st Century Guide to the New Laws of Economics

Am going to edit the first edition of "21st Century Guide to the New Laws of Economics" should the Supreme Court overturn Health Care Reform Law. New economic theory will be required to explain how to pay for health care that includes pre-existing conditions and universal emergency room services when people can choose not to have coverage. Please share any suggestions on topics to address in the new economics.

Topics might include:
"How the Bush tax cuts provided sustained economic growth"
"Why hedge fund profits deserve capital gains tax treatment?"

“Citizens United gave corporations political free speech, now let’s give them the vote!”

“If a slave was worth 3/5 of a person 200 years ago, why should the middle class be worth any more than that today?"

"How should corporations be weighted in reapportionment?”

“Bailing out AIG to protect wall street gambling is good economics, bailing out underwater mortgage holders is not”

“Why banks should not have to lend money to stimulate the economy in exchange for government bailouts”

“Why bonuses to AIG executives were necessary”

“How Geitner acted differently than Paulson” - er, never mind on that one.

Greenspan replaces Adam Smith as the father of 21st Century Economics. It was Greenspan who guided the late 20th century increases in social security payroll taxes on the lowest income earners and then advocated Bush tax cuts on the wealthest Americans.

Career Planning and Neural Networks

Career planning traditionally meant starting with an entry level skill and then either doing a deeper dive over time in the specialty or climbing the supervisory or management ladder. These both represent a "linear" approach to career growth.
In recent years we've expressed fascination with the recognition that we may have up to seven careers in our employed lifetime. Careers are viewed as distinct phases in our work life that may shift focus back and forth from technical specialist, to manager, to industry-focused, to the information management aspect of the technical specialty or industry, or the ultimate abstraction: the life coach.
Going forward we must change the paradigm from occupation or career to pathways through a neural network.

University of California going private

California taxpayers will soon drop all support for theThe UCLA Anderson School of Business. The Financial times points out that "Thirty years ago, 10 percent of California's general budget was spent on the UC and California state higher education systems and 3 per cent went to prisons. Prison spending has since risen to 11 percent, while higher education's share has slipped to 7.5 percent." this is not the first but certainly a more visible step toward "freeing" the University from public oversight. What right do the legislature and taxpayers have to influence a university they don't pay to support? Ramifications will include: more out of State (and international) students who pay full fees, more research paid by private companies with their own agenda, but also more freedom to find money to keep valued faculty.
Will a UC that has to be self-sufficient keep as many graduate programs in Classics, allow philosphy graduate students to hang around for ten years if they are not paying tuition? For the few dollars the taxpayers continue to pay out of inertia, what will the UC agree to provide??? will the State Constitution get changed to diversify the Board of Regents selection if the taxpayers aren't paying the bills?

Finishing the JMT!

We FINALLY hiked over Pinchot Pass as the last segment of our ten-year "plan" to hike the John Muir Trail. Expansive granite vistas north and south of the pass. Going down Taboose Pass was not quite as grueling as seven years ago--certainly not because we were in better shape. It was easier to just accept the knee-jarring descent over talus the second time.

Health Care Financing and Reform Challenges

Special interests have more to lose than to gain from any shift in the tectonic plates that support the current approach to health care delivery in the United States. Machiavelli explained that those with something to lose are more highly motivated than those with something to gain from change. Machiavelli predated Adam Smith's economics explanation of the same phenomenon in terms of diminishing returns to scale: the marginal value of a loss is always greater than the marginal value of an equal quantity of gain.
In a perfect world, health care reform would start with eliminating subsidies for growing corn. Corn subsidies enable hydrogenated oils that are full of saturated fats and enable widespread use of corn syrup to sweeten nearly everything we eat or drink.
It wouldn't take much research to figure out that french fries, soda pop, and chips have added twenty pounds to the average American in the past forty years. Other fast foods added another ten to twenty pounds.
Step One: President Obama needs to select a charismatic Surgeon General to get Americans to eat at home, recognize the consequences of fried food, and promote alternatives to french fries and soda pop.
Step Two: President Obama needs to select a charismatic National Fitness Champion to promote healthy eating, exercise, and ways to pursue a more active lifestyle.
Step Three: Michelle Obama needs to get more attention for her efforts to grow vegetables, select raw ingrediants, and spend more time at home in meal preparation as part of a healthy life style.

Create Foundation to Sue for return of Bonuses

The federal government is not going to get ill-gotten bonuses back. The investment bankers who got the bonuses bought Obama just as they have purchased his predecessors. Much of the bonus money was clearly based on phony profit projections. It took two or more people to create the fiction of profit. This is a basis for a conspiracy. We are not likely to win a conspiracy conviction in court as felonies are hard to prove and the federal judges are likely connected to the profiteers. Civil court suits showing the conspiracy have a better chance. Shareholders can bring the suits. The trick is to accumulate enough money to develop the strategy. The strategy needs to set the precedent that can be re-used against bonus profiteers one company at a time. Start with the bonuses for paper profits related to collateralized mortgages. The profits were based on accounting tricks, not actual revenues exceeding expenditures over time. The conspiracy involves the investment bankers, bond counsel, and others creating the fiction that the projected default rate on sub-prime mortages would be no greater than for conventional loans. In every other type of loan they readily agreed that higher interest rates were based on higher risk. But for some reason liar loans and 100 percent loans were not going to have more risk even though they had higher interest rates. The higher interest rates were the source of the projected higher profits over time on which bonuses could be justified today. Yep, take the bonus today for a projected profit that will occur in the future on a higher loan rate for a loan that isn't going to have a higher default than conventional loans. The conspiracy in this wink from the credit rating agency to the bond counsel to the investment banker is obvious. But someone with deep pockets needs to step forward, file suit, and win a court case. The victory will allow return of the profits from the lawyers, the accountants, and the individuals who pocketed the bonus checks.
Had such an effort to challenge preposterous assertions hidden in acccounting fiction occured ten years ago, we might have avoided some of the dot com disasters. The same tricksters were at work then as well: the bond counsel, the investment bankers, and the accounting firms.

Create a Foundation to Sue for return of false bonuses

Executive Bonuses tied to long-term performance

Economist William Baumol warned us what happens when the company managers are not the company owners. For over twenty years we have witnessed corporate management use short-term profits to justify outrageous bonuses. By the time the shareholders realize that the profits were contrived, it is too late and the company's share price, profitability, and competitiveness have diminished. Securities analysts argued that cash flow measured a firm's value. This encouraged managers to minimize research and development of new product. In the short-term, profits and free cash flow were higher but in the longer term the company fell behind the competition in innovation, quality, and competitiveness. This happened to virtually every industrial sector of our economy most notibly seen in the auto industry the past twenty years.
Investment banks allowed traders to take 8 and 9-figure bonuses for "profits" from trades in securitized mortgages. the profits were based on invalid calculation of likely default rates (see my blog entry on this conspiracy). Now that we know the profits do not exist in securitized mortgages, it is too late. Brokers have hundred million dollar windfalls and the taxpayers are looking at trillion dollar bailouts.
Company boards of directors have obediantly followed the recommendations made by the executive management to offer bonuses for short-term results. fiduciary responsibility has no consequence.
Shareholders today are not a well-organized small group of rich investors that have only one degree of separation between themselves and the corporate decision making. Today, shareholders are middle class employees with 401ks managed by mutual funds that are paid regardless of the investment performance. Worse, the individual investor may have an investment advisor who is also compensated on a percentage of the amount invested, not the performacne of the investment. this places at least three levels between the shareholding member of the middle class and the performance of the company: the investment advisor, the mutual fund manager, the public company manager. None are compensated based on long-term performance of the investment.
Going forward, management bonuses should be tied to five-year company performance. bonuses should be paid in stock that in turn has to be held for five years. this ensures that managers own actions have an eye on the longer term and that the manager has a commitment to succession planning: future managers are trained and selected based on their commitment to long term success because their predecessors are still dependent upon future success to realize their full bonus.

Make Baseball invest in its future!!!

Congress granted major league baseball an exemption from anti-trust laws to promote our national past-time. MLB owners and players have squandered their responsibility to the American people through player agents and Bud Selig.
Name one player in the last ten years that has contributed to baseball's enduring legacy who isn't tainted by drugs? Dizzy Dean, Babe Ruth, and Mickey Mantle abused alcohol. But no one ever accused them of using 3.2 to enhance their performance.
The Players' Union and the player agents have resisted drug testing. They were aided by the owners who viewed more homeruns putting more people in the seats and increasing profits.
But short-term profits come at the expense of public support and the integrity of the game. Baseball's integrity is critical to enable comparing statistics of players over time. And major league baseball is nothing if not statistics. What middle-aged male doesn't joke about an inability to remember their own social security number but can recite the scores of all seven games of the 1961 world series.
Players from Mantle's era subsist on pensions of a few thousand dollars a year but are the reason why seniors today take their grandchildren to a ball game. Which players of today's era is going to motivate the seniors of 2040 to take their grandkids to a ball game? Certainly not Barry Bonds, Mark McGuire or Sammy Sosa--all tainted with steroids.
Congress needs to re-establish the guidelines for major league baseball.
The players and owners are not taking steps to sustain the public's interest in the game of baseball. Congress can do so by calling for taking 25 percent of the total revenues and allocating the money to prep sports. Half the amount can be set aside for youth baseball and softball (let's not forget the girls) and the other half spread across sports programs targeted to lower income kids, especially those in inner cities. this half can go for soccer, swimming and anything but football and basketball.
You can already guess the next phase of the proposal: take a similar amount of profits from the NFL and NBA for youth sports and inner city programs.
Player salaries will drop by 25 percent. Good. A $20 million a year player will make $16 million. It is hard to imagine the adverse impact on that player's motivation, team chemistry, or the quality of play viewed by the fan in the stands.
More kids playing sports might have a small impact on the sales of $150 tennis shoes--when kids rediscover that shoes are for playing, not primping, there will be more cache in wearing scruffing sneakers rather than pimped out air jordans.
Owners will make less money on a year to year basis. maybe. but when was the last time that a major league franchise was sold for less than its purchase price, even allowing for inflation?

100,000 Technology Professionals will return to India

A friend predicted that 100,000 Indians will be forced to leave the United States due to jobs lost in information technology in the next 18 months. Foreign nationals with a H1B work permit must have continuous employment to remain in the United States. After six years, the foreign national can obtain a "green card" that permits staying in the US whether employed or not. With the economic downturn, employers are not renewing contracts with high tech body shops and even terminating employees. Without a job, many foreign nationals will have to return to their home country under terms of their work visa, even if they have money in the bank or relatives willing to help.
the increase in wealth and an expanding economy may allow many of these returning skilled workers to readily get jobs back in India.
When the US and world economy improve, these Indians will have the contacts and business knowledge to take advantage of the newly emerging and backlog of information technology work required by American companies. But the jobs may remain in India.
Yourdan wrote in 1990 about the Decline of the American Programmer. He predicted the gradual movement of technology jobs to India with its labor force of trained computer scientists and fluency in English. The trend has accelerated as American companies were forced to reduce labor costs. But many computing jobs stayed in America because of the importance of having staff who understood the unique processes and behaviors of the individual company.
When the economy rebounds, these same American companies will still have requirements for computer specialists who know the idiosyncrasies of the local processes and products. However, the specialist in local needs may have returned to India two years earlier. So rather than recruit for a technical specialist for $100,000 a year salary locally, companies will reach across the Pacific to former employees who can readily assemble a team of developers who will work for $30,000 a year. Shortcomings in the past of overseas developers lacking local insight will be undone by the return of 100,000 technical specialists to India.
Not all the repatriated professionals will have keen insights into the American company internal processes. But it only takes a few thousand with insight to serve as a local presence to provide the essential explanations and guidance to compatriots working at one-third the pay.

Reforming Personal Responsibility for Health Care

The fastest and biggest improvement to health care comes by taking individual responsibility for our own well-being. President Obama or his surrogates need to call for all citizens to take a walk around the block, around the fast food chain and not into it, and set a goal to do ten sit-ups by Independence Day.
the president doesn't need a fight with the fast-food industry. But he can speak to the merits of celery and carrots as an occasional alternative to chips and fries.
A family walk in the evening doesn't have to threaten McDonalds, Frito-Lay or CocaCola.

The irony of course is we could pay for health care reform with the subsidies currently going to the corn industry. The reduced consumption of high fructose corn syrup and hydrogenated vegetable oil would aid the average american in losing ten pounds of fat in the next 12 months.

Saving Africa

The International Monetary Fund, World Bank, and the vast bureaucracy of the United Nations have cost the United States hundreds of billions of dollars. A New Yorker article points out, "Poor countries have been receiving at least some foreign aid for thirty or forty years—a total of more than a trillion dollars, in one estimate".
Yet Africa still has dictators, insurmountable poverty, war upon war, and no hope of improvement.
The situation is so bad the even the Bush administration was able to make improvements in the fight against malaria. If Bush can make a difference, imagine what a concerted effort could achieve.
Shared investments such as the IMF, UN, and World Bank have NOT worked.
So let's have each nation pick a cause or a nation and say to the rest of the world, "we are going to work with this specific country and improve the roads, schools, universities, water supply, job skills, agricultural coops, and civil service system."
Each first world nation will have a quota of African nations to support. This is not the re-invention of colonialism. This is the application of accountability through visibility to achieve results. The existing agencies that pool money from industrial nations will be REPLACED with the one-on-one approach. There will be plenty of opportunities for corruption and inefficiency. If Sweden is matched with Zambia, we will no doubt see more volvos and saabs in the capital and a claim from Stockholm that millions have been invested to improve transportation in xxx. But this is not about the number of dollars spent.

How does accountability improve with individual nation assignments?
The people of the sponsoring nation, once they know their country is responsible on the world stage for another country, will ask more questions of their government.
The people will want to do better than the countries with whom they compare their own.
A practice that Denmark makes work in Zambia will lead to questions within Sweden about why continue failed practices in Ghana.



Accountability and visibility mean that we will establish a baseline measurement of the number of schools, number of students, literacy rate, gross national product, number of middle class families. the number of volvos Zambian army colonels drive on independence day parades doesn't matter. The world will receive an annual report on the increase in high school graduates, new exports, Zambian students in Swedish universities.

Country matches must recognize potential biases that some first world nations may have. The New Yorker article points out, "Sweden and other Scandinavian countries supported Julius Nyerere’s socialist regime in Tanzania, which almost destroyed the agricultural sector by dragooning scattered bushmen into collective farms."

More to come and your thoughts invited to explore the approach.

Purpose and Use

Econochasm combines three forces: iconoclastic, economics, chaos, and the abyss into which our values/principles/personal integrity sink as a result of the Bush administration and the pathetic defense of the Democratic party in the first nine years of the 21st century. Get used to the idea there are more forces at work than stated.
We will make observations, predictions, rail against the ineffective response of our leaders and offer suggestions to move our country, individually and collectively, forward.