Wednesday, May 6, 2009

More Random Thoughts

1. Its interesting that in my News-Sentinel articles, the most comments are generated by articles on global warming or on the flat tax. First, the left attacks me regarding expressing skepticism over global warming. I tell them as I tell my students that "I have no dog in this hunt". Even though one usually can pick sides depending on who is advocating what, I reserved judgement on global warming until I studied the issue, read the literature, looked at the models and pored over the empirical results. I concluded that the global warming scare lacked empirical gravitas. When I wrote about this, it was if I had attacked someone's religious beliefs. Now after answering all those hate emails, I am now convinced that not only has global warming become a religion, it actually has engendered a cult following. Do I hear anyone say "the religious left"? The second issue is the flat tax. I wrote that I did not like the "fair" tax because it was on consumption and is usually a hidden tax. I want the people to know exactly how much of their fortune they are paying to the government. I know that what would happen with a "fair" tax, that you would soon hear "it's not fair to tax the milk going to babies", "its not fair to tax the drugs of the elderly" and a myriad of others. Soon special interest groups would be getting rebates and the game of tax avoidance would be on. What is more simpler than no exemptions and no deductions of any type? If you earn income (anything that can be spent), then it is taxed at 20 percent. If you qualify for subsidies, you get them through those programs and not through the tax code. Imagine, a tax code that just collects revenues and is not used to reward or to punish? What a novel idea! Well the hate emails on this issue come from the right who have invested so much time, energy and effort into the "fair" tax. Again, its as though I have attacked someone's religion.
2. I don't understand the government's position in the Chrysler situation.  At issue is the $6.9 billion that the debt holders are not willing to give up in return for the government's offer of $2.5 billion. Well no wonder! It is a raw deal, giving the government and the labor union - which has junior status  - a superior position than senior debt holders. To top it off, the only suitor, Fiat, will not have to pony up a dime. Truly outrageous, especially since the President has chosen to name names and blame the bond holders, trying to smear them. I can image what the union thugs (yes there are a few of them) will do to the companies and company CEOs holding Chrysler debt. Maybe they can get ACORN to picket their offices and homes. However, what I don't really understand is why is the government simply not paying off the bond holders? Come on, $6.9 billion is just chump change to this administration. Haven't they already dumped that into Chrysler already, promising to spend even more after reorganization when they start producing cars that the government will then try to force us all to buy? Mark my words, this government will move to up the taxes on fossil fuels, mandate even higher milage standards and institute a luxury tax on SUVs and nonfarm pickups. I for one will keep my F-350 pickup. No greenie weenie mini car can tow either my redneck bass boat or my toy hauler travel trailer. If I hitched a mini up to either, I would spin and burn out the tires and would be forced to cast for bass on my concrete driveway or camp where I stow my trailer. No thanks Mr. President.
3. The senate just defeated the administration's bill on mortgage cramdowns, 45-51. Its a miracle. While bankruptcy judges can modify mortgage tems on vacation homes, investor properties and multifamily residences, primary mortgage loans cannot be modified. There is evidence that shows that when vacation homes et al were exempted, their loan rates rose. It was therefore likely that mortgage rates on primary mortgages would also rise as lenders would have to compensate for anticipated additional losses given foreclosure rates. Its hard to imagine in a political world where politicians vent against big banks that such a measure failed to pass. Oh and did you notice that Bank of America, Citibank, Wells Fargo and Morgan Stanley were on the administration's side? Since they are wards of the state with billions of TARP funds keeping them afloat, is it any wonder?
4. Speaking of Chrysler, The administration is stating that the bankruptcy will be quick? Huh? I was on the board of subprime lender, New Century Financial. It took well over a year to finalize the bankruptcy. Now the creditors are suing everyone who received money from New Century trying to recover what they can. Why are the creditors of Chrysler going to be different? The only way that this will be quick is if Obama pays off the creditors or keeps threatening to break their knuckles.
5. Like the bad penny, ethanol keeps turning up. The public has rejected biofuels and the industry is sustaining high losses and is in disarray. True to his anti-market bent, the president has decided that he knows best. Despite being totally discredited, Obama is stepping up his efforts to force this turkey on us. Even though, ethanol is more costly that oil to produce, is less efficient, produces more wear on engines, increased the cost of food worldwide and is not environmentally friendly, the administration wants to ramp up how much ethanol we are forced to use, produce more vehicles that can burn higher levels of the stuff and increase the number of stations that sell the higher level blends. Do I hear, the payoff to corn farmers continues to more important than the rest of the world? Further evidence that politics and political correctness trump everything else, is the dictating of florescent light bulbs. These environmentally unfriendly and simply dangerous bulbs would have otherwise be banned. However, they are being mandated? Would someone kindly explain this one to me?
6. I have few heroes: Milton Friedman, Tom Sowell, John Lewis, and Jack Kemp. Of that group I guess you would think that John Lewis now democrat representative from my home district in Georgia is out of place. Well read David Halberstam's remarkable book "The Children" - one of my top ten favorite books of all time - and John Lewis will be your hero as well. However, this is about Jack Kemp who died on September 2. I remember feeling that he was elected to congress from Buffalo one year after retiring from the NFL only because football had made him a folk hero in upper New York state. Imagine my surprise when he turned out to be my idea what Republicans should be, free market and all inclusive. Jack Kemp loved free markets. He also love all Americans, especially the dispossessed, and would take his ideas into the inner city and argue with the liberals why capitalism is the best vehicle for social change and economic advancement. He strongly favored tax cuts, enterprise zones, and incentives that fostered innovation and rewarded productive economic behavior. I recall the Center for Neighborhood Enterprise's Bob Woodson, one of Kemp's close friends, saying that in this country we have a program rewarding all sorts of destructive behavior but precious few that rewards those poor people who struggle to send their kids to good schools, keep them out of jail, preach abstainism, keep them off drugs and hold them to high standards. Jack Kemp was one of the few Republicans who understood this and tried to do something about it. Although the Republicans are on the right side of the voucher issue which despite of their views pre-election, Obama and his education secretary Duncan favored, precious few Republican politicians are like Jack Kemp. He would take his message directly to the people in the neighborhoods. Jack Kemp would have been in the DC schools the day the congress killed the DC vouchers rather than just bemoaning it in the safe and secure halls of congress. That most blacks have strong conservative values has been well documented. I always marvel that a people so religious would prefer to be in a party that openly mocks and derides the religious to one that openly embraces faith. Yet it is so perhaps in part that few Republican leaders choose to take their message to the inner cities. This, too is a tragedy and remains an opportunity lost.
7. Walter Williams has written on grade inflation ( I told my students this semester that I was not going to participate in the new grade scale at UT that further dumbs-down our academic standards. It awards minuses so that an A- counts for 3.7 quality points, a B- is 2.7 and a C- is 1.7. As a result, UT is saying that an A student really is only a B+ student, a B student is now really a C student and a C student is in reality a D student. I then told them that I was astounded that students would not accept mediocrity in most things but the most important one - education. None would want an energetic but mediocre surgeon, pay money to hear a hard working but untalented band, yet wanted mediocrity in the classroom to be rewarded with As. Well not in my class. Although I will admit that my standards have slipped. I have now been at UT long enough to be teaching second generations. What I hear is "Mamma says, where are the outside readings, the extra books, the bi-weekly written reports that she had to suffer through?" Well, dear reader, if I had those same requirements, I would be ridden out of the university on a rail. Imagine, even given my present standards, one MBA class protested my course all the way up to the university ombudsman, complaining that my course requirements "exceeded the norm expected in the MBA program". I responded saying that the students should then be protesting all their other classes. As a result, I will never again teach MBAs. Its not worth the grief.


Luis said...

To your last point, as you already know, I am a MBA student at UT and I personally feel cheated that some of the students before me did not care enough about learning advanced material at a high level of education for a short period of time (a single 15 week period). I feel that if I should invest so much time, money, and forgo 18 months worth of salary, I want to learn and take away from the experience everything I can. Employers don't care about your grades as much as they care about what value you can provide to the business through what you learned. It is sad that in this MBA class I will not have the opportunity to learn from you in a formal classroom capacity.

By the way, spot on with the Chrysler debacle and Milton Friedman as a hero.

David said...

Dr. Black,

Surely you over-generalized when you refer to my message to you as "hate" email. Though I have no doubt that you did received some hate email.

On the other hand, I note that you cautiously hedged your generalization about global warming referring to the "scare" component, saying that the research you studied lacked "empirical gravitas." My question to you - as before -is "What research results are you reading that you have come to this conclusion?"

I, too, have reviewed summaries of the research and have concluded that the contrarians you refer to (The Petition Project and Dr. Roy Spencer) don't measure up to the body of evidence summarized by the Intergovernmental Panel on Climate Change.

David Holden