March 30, 2012 archive

Winning At Mega Zillions

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Your Bloguero has been busy. He went to town and secured not only his own financial future, but his membership in the (almost) 1%. Yes, your Bloguero joined the teaming, unwashed masses at the Mega Zillions machine. But there is one pertinent exception relevant to your Bloguero. It’s this. Your Bloguero is going to win the prize. It is a done deal. No equivocation. No doubt. Done. Your Bloguero has already won the prize. You and he have to wait a bit for confirmation, but as your Bloguero is so often told, the check, in this case a huge one, is in the mail. And your Bloguero’s belated career as a philanthropist is about to begin. Nobody knows this yet, except for you. But your Bloguero is fully expecting crushing crowds of people seeking his largesse and advice to assemble early tomorrow at his kitchen door right after they find out he won.

How did your Bloguero accomplish this feat? How did he escape the teaming, faceless masses and enter the uberrich?  Well, you might ask. Very well, your Bloguero will tell you. First, your Bloguero donned his clown nose because winning zillions isn’t serious business. Nope. It’s all clowning around. It’s light, it’s easy, it’s joyful. It took a little work for your Bloguero to ferret out the nose from where it was hiding, but voila! He donned his classic, red clown nose. Ready to win. Listo! Second, your Bloguero donned his lucky, fuzzy Elmer Fudd hat. The hat that could be worn only by Ignatius Riley or Elmer Fudd. Or your soon to be Zillionaire Bloguero. Why? Because winning all of the cash is outrageous in the most delightful way. Millions of suckers people think erroneously that they have won, but there will be only one winner. All of those people realize this on some level. What they don’t realize it that the winner is your Bloguero. Your Bloguero is filled with gratitude to all of those who funded his success, especially all of those who will be eating Value Meals and Ramen noodles for the month of April because of their vain efforts to win money destined only for your Bloguero.

Your Bloguero gave his lottery ticket seller a few dollars and explained he wanted the winning ticket. It was that easy. Your Bloguero wondered, “Why am I wasting money? If I put a single, crumpled dollar bill, one I found under a couch cushion, into this event, I would win Zillions with that crumpled dollar.  My pizza change would transform my life. But this isn’t about saving the unnecessary dollars I spent on the extra tickets. No. That $4 is going to be lost in an impending, vast sea of moolah, an ocean of green so wide that the other side has vanished.”

Your Bloguero loves the impending excitement, the breathless excitement that comes just before it is revealed to almost everyone’s complete surprise that your Bloguero is now ridiculously rich.

Your Bloguero is going to give away 90 percent or more of the winnings. He will tithe himself. The rest, the remaining $55million or so, is as good as gone. Your Bloguero is really looking forward to the giveaway. Your Bloguero wishes we could all win, but there you have it.

———-

cross posted from The Dream Antilles

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On This Day In History March 30

Cross posted from The Stars Hollow Gazette

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

March 30 is the 89th day of the year (90th in leap years) in the Gregorian calendar. There are 276 days remaining until the end of the year.

On this day in 1867, U.S. Secretary of State William H. Seward signs a treaty with Russia for the purchase of Alaska for $7 million. Despite the bargain price of roughly two cents an acre, the Alaskan purchase was ridiculed in Congress and in the press as “Seward’s folly,” “Seward’s icebox,” and President Andrew Johnson’s “polar bear garden.”

Alaska Purchase

Russia was in a difficult financial position and feared losing Russian America without compensation in some future conflict, especially to the British, whom they had fought in the Crimean War (1853-1856). While Alaska attracted little interest at the time, the population of nearby British Columbia started to increase rapidly a few years after hostilities ended, with a large gold rush there prompting the creation of a crown colony on the mainland. The Russians therefore started to believe that in any future conflict with Britain, their hard-to-defend region might become a prime target, and would be easily captured. Therefore the Tsar decided to sell the territory. Perhaps in hopes of starting a bidding war, both the British and the Americans were approached, however the British expressed little interest in buying Alaska. The Russians in 1859 offered to sell the territory to the United States, hoping that its presence in the region would offset the plans of Russia’s greatest regional rival, Great Britain. However, no deal was brokered due to the American Civil War.

Following the Union victory in the Civil War, the Tsar then instructed the Russian minister to the United States, Eduard de Stoeckl, to re-enter into negotiations with Seward in the beginning of March 1867. The negotiations concluded after an all-night session with the signing of the treaty at 4 a.m. on March 30, 1867, with the purchase price set at $7.2 million, or about 2 cents per acre ($4.74/km2).

American public opinion was generally positive, as most editors argued that the U.S. would probably derive great economic benefits from the purchase; friendship of Russia was important; and it would facilitate the acquisition of British Columbia.

Historian Ellis Paxson Oberholtzer summarized the minority opinion of some newspaper editors who opposed the purchase:

   “Already, so it was said, we were burdened with territory we had no population to fill. The Indians within the present boundaries of the republic strained our power to govern aboriginal peoples. Could it be that we would now, with open eyes, seek to add to our difficulties by increasing the number of such peoples under our national care? The purchase price was small; the annual charges for administration, civil and military, would be yet greater, and continuing. The territory included in the proposed cession was not contiguous to the national domain. It lay away at an inconvenient and a dangerous distance. The treaty had been secretly prepared, and signed and foisted upon the country at one o’clock in the morning. It was a dark deed done in the night…. The New York World said that it was a “sucked orange.” It contained nothing of value but furbearing animals, and these had been hunted until they were nearly extinct. Except for the Aleutian Islands and a narrow strip of land extending along the southern coast the country would be not worth taking as a gift…. Unless gold were found in the country much time would elapse before it would be blessed with Hoe printing presses, Methodist chapels and a metropolitan police. It was “a frozen wilderness.

While criticized by some at the time, the financial value of the Alaska Purchase turned out to be many times greater than what the United States had paid for it. The land turned out to be rich in resources (including gold, copper, and oil).

Senate debate

When it became clear that the Senate would not debate the treaty before its adjournment on March 30, Seward persuaded President Andrew Johnson to call the Senate back into special session the next day. Many Republicans scoffed at “Seward’s folly,” although their criticism appears to have been based less on the merits of the purchase than on their hostility to President Johnson and to Seward as Johnson’s political ally. Seward mounted a vigorous campaign, however, and with support from Charles Sumner, chairman of the Senate Foreign Relations Committee, won approval of the treaty on April 9 by a vote of 37-2.

For more than a year, as congressional relations with President Johnson worsened, the House refused to appropriate the necessary funds. But in June 1868, after Johnson’s impeachment trial was over, Stoeckl and Seward revived the campaign for the Alaska purchase. The House finally approved the appropriation in July 1868, by a vote of 113-48.

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ACA: Can You Sever The Head Without Killing The Patient

Cross posted from The Stars Hollow Gazette

Today the Supreme Court heard arguments about the severability of the individual mandate in the Affordable Health Care bill  and the expansion of Medicaid.

The day after the Supreme Court suggested that President Obama’s health care law might be in danger of being held unconstitutional, the justices on Wednesday turned their attention to the practical consequences and political realities of such a ruling.

The justices seemed divided on both questions before them: What should happen to the rest of the law if the court strikes down its core provision? And was the law’s expansion of the Medicaid program constitutional?

The two arguments, over almost three hours, were by turns grave and giddy. They were also relentlessly pragmatic. The justices considered what sort of tasks it makes sense to assign to Congress, what kinds of interaction between federal and state officials are permissible and even the political character of the lawsuits challenging the law. One justice dipped into Senate vote counting.

The court had in other words, on the third and final day of a historic set of arguments, moved from the high theory of constitutional interpretation to the real-world consequences of what various rulings would entail.

The arguments on severability, which hinged totally on whether the mandated stays or goes, boiled down to three points:

1. sever only the mandate, allow the rest of the law to stand and let Congress sort it out;

2. sever the mandate along with insurance regulations like guaranteed issue and community rating, to prevent what the government argues would be an insurance death spiral;

3. or throw out the whole law, which did not include a standard severability clause.

The Justices seemed divided over point #2 and #3 rather than #1. For the most part, the discussions and comments were reflective of the consequences of overturning the entire law or any part of it:

[..] A common reaction, across the bench, was that the Justices themselves did not want the onerous task of going through the remainder of the entire 2,700 pages of the law and deciding what to keep and what to throw out, and most seemed to think that should be left to Congress.  They could not come together, however, on just what task they would send across the street for the lawmakers to perform.  The net effect may well have shored up support for the individual insurance mandate itself.

The dilemma could be captured perfectly in two separate comments by Justice Antonin Scalia – first, that it “can’t be right” that all of the myriad provisions of the law unrelated to the mandate had to fall with it, but, later, that if the Court were to strike out the mandate, “then the statute’s gone.”  [..]

Justice Anthony Kennedy, who is considered the swing vote on the individual mandate, expressed concern “possible unintended consequences in the form of huge costs to insurance companies if the mandate – which would bring millions of healthy young people into the healthcare system and spread out costs – was invalidated alone”:

“We would be exercising the judicial power if one … provision was stricken and the others remained to impose a risk on insurance companies that Congress had never intended,” Kennedy said. “By reason of this court, we would have a new regime that Congress did not provide for, did not consider.”

The four liberal justices expressed deep reservations about tossing out the sweeping law that has hundreds of other provisions, some of them already in effect.

Justice Sonia Sotomayor, one of the four and an Obama appointee to the court, asked whether the court should allow Congress to decide what to do next. “What’s wrong with leaving it in the hands of people who should be fixing this, not us?”

Justice Ruth Bader Ginsburg went further. She said many parts of the law had not been challenged in court. “Why make Congress redo those?”

On the matter of Medicaid expansion a majority of the justices were inclined to support the government’s role in prodding states to expand the state-federal Medicaid healthcare program for the poor, providing coverage for an estimated 17 million Americans:

The court’s more liberal justices all expressed puzzlement about why there should be a problem with the expansion in light of the fact that it is almost entirely to be paid for by the federal government. The states say they are being coerced into participating because a decision not to may cause them to lose not only the new money but also existing funds.

Justice Elena Kagan described a hypothetical program only slightly different from the real one. “It’s just a boatload of federal money for you to take and spend on poor people’s health care,” she said to a lawyer for the states, Paul D. Clement. “It doesn’t sound coercive to me, I have to tell you.” [..]

He (Chief Justice John G. Roberts Jr) said the court’s decision on the Medicaid expansion should be informed by the reality that the states have “since the New Deal” cheerfully accepted federal money.

“It seems to me that they have compromised their status as independent sovereigns because they are so dependent on what the federal government has done,” the chief justice said.

Justice (Antonin) Scalia addressed the political realities of the litigation itself, asking Mr. Clement whether there was “any chance that all 26 states opposing it have Republican governors, and all of the states supporting it have Democratic governors?”

Mr. Clement responded, “There’s a correlation, Justice Scalia.”

In her last article on Wednesday’s sessions, Slate‘s Dahlia Litwick gives her assessment of the last three days:

Amid all the three-day psychodrama, it’s easy to get confused about what’s happened and what hasn’t. Court watchers seem to generally agree that the individual mandate is in real peril and will rise or fall with Chief Justice Roberts and Justice Kennedy. Court watchers also agree that 19th-century tax law-while generally adorable-will not prevent the justices from deciding the case by July. And they also agree that they may have counted five justices who appear willing to take the whole law down, along with the mandate, and the Medicaid expansion as well.

But the longer they talked, the harder it was to say. A lot of today’s discussion started to sound like justices just free-associating about things in the law they didn’t like. That doesn’t reveal all that much about the interplay between the four separate challenges-what happens when they all have to be looked at together-or anything at all about what will happen at conference or in the drafting of opinions. Could the five conservative justices strike down the entire health care law, and take us into what Kagan described this morning as a “revolution”? They could. Will they? I honestly have no idea anymore. As silent retreats go, this one was a lot less enlightening than I’d hoped.

Constitutional law professor Jonathan Turley discussed the hearings with Keith Olbermann on Countdown, calling this case a “game of chicken” that “can be deadly.”

Austerity Is A Black Hole

Cross posted from The Stars Hollow Gazette

It’s very strange that governments knowing that austerity is just deepening the recession in Europe, they continue down the same path.

UK GDP fell faster than previously estimated in fourth quarter, ONS says

• UK GDP fell 0.3% rather than 0.2% in fourth quarter

• Economists had expected no change

• Disposable incomes fall 1.2% – worst since 1977

Britain’s economy was even weaker than expected at the end of last year, underlining the country’s struggle to avoid another recession. [..]

The signs from business surveys and much of the official data so far for this first quarter have been taken as evidence of at least a small new-year bounce-back. But there are widespread doubts over whether that can be sustained. Economists cite many headwinds facing the UK economy, including high oil prices, a government austerity drive and the sovereign debt crisis in the eurozone. [..]

Government spending, exports and household consumption grew, but economists warned that pattern had little chance of holding up.

“The government purse strings are being tightened, growth is deteriorating in key export markets, with the eurozone now likely to be in another recession, and revised retail sales data have signalled a far weaker start to the year than previously thought, raising concerns that households are continuing to retrench amid worries about the economy, jobs and rising prices,” said Chris Williamson, chief economist at Markit.

So what did the Cameron government do? If you guessed double down on austerity, you’re right. Jonathan Portes analogy with Shakespeare’s Macbeth is quite apt:

I described this as the “Macbeth argument”, from the following quote:

   “I am in blood stepped in so far that should I wade no more, Returning were as tedious as go o’er.”   [Act III, scene iv.]

In other words, since Macbeth has already killed Duncan and Banquo, it is better to carry on (and order the deaths of Macduff and his family) than to stop. So, although misguided policy has led to unnecessary economic damage, that damage is (returning to economist speak) a sunk cost; and the pain ahead is less then the pain that we would suffer if we changed course, as a consequence of the possible negative financial market reaction.

The Treasury also appears to subscribe to a variant of this argument.  When the original fiscal consolidation plan was welcomed by the rating agencies, that was a vote of confidence:  

   “Standard & Poor’s, the ratings agency, revised its outlook on Britain from negative to stable..The Chancellor said: “”That is .. a vote of confidence in the Coalition Government’s economic policies..”  Telegraph, 26 October 2010

But when the same rating agencies realised the damage the plan was doing to growth, that made it even more necessary:

   “Fitch revised the outlook on the UK’s rating to negative from stable….”A week from the Budget this is a reminder of why it is essential Britain sticks to its plans to deal with its debts,” a Treasury spokesman said…”  Telegraph, 14 March 2012

Spain has already fallen into another recession, sucked in by the black hole of austerity:

Spain’s economy is suffering its second recession since 2009, the Bank of Spain said, a development that obstructs the government’s efforts to reorder public finances as it prepares the budget for this year.

“The most recent information for the start of 2012 confirms the prolongation of the contraction in output,” the Madrid-based central bank said in its monthly bulletin today.

Spain’s gross domestic product declined 0.3 percent in the fourth quarter of last year, less than two years after emerging from the last recession. Prime Minister Mariano Rajoy will present his 2012 budget on March 30, amid growing pressure from investors and European peers to rein in the deficit, which was 8.5 percent of GDP last year.

The spending plan, his first since coming to power in December, won’t increase tax on consumption nor cut civil servants’ salaries, Rajoy said today in Seoul. The previous administration slashed wages of public workers by an average 5 percent in 2010.

Rajoy, who leads the pro-business People’s Party, hasn’t said where he will cut spending, even as he pledged today to present a budget that is “very austere.”

And just as with Britain and Greece, the same causes are exacerbating the Spanish problem, from Delusional Economics at naked capitalism:

Back in November last year I posted on my confusion over the jubilation shown by the citizens of Spain as they elected Mariano Rajoy as their new political leader. Mr Rajoy’s strategy during the election campaign was to say very little about what he was actually intending to do to address his country’s financial problems, preferring to simply let the incumbent party fall on its own sword so that he could take the reins. It became obvious soon after the election that, despite his party’s best efforts to dodge questions, the intention was simply to continue with even more austerity.

Since that post I have continually warned that although Spain is obviously a different country to Greece in regards to how its problems have manifested, it still faces significant macroeconomic challenges that were not being correctly reflected in the bond market. [..]

And in the United States, conservative state governments continue with their austerity agenda that continues to be a drag on the economy:

Republicans seized control of both branches of the legislature in 11 states after the 2010 elections. It’s in these very states that public sector layoffs are disproportionately concentrated, leading to one of the biggest rounds of job losses for the public workforce since record keeping began. Governors and state legislators promised to focus on creating jobs and balancing budgets during campaign season-even newly elected Pennsylvania Governor Tom Corbett still claims that creating jobs is one of his “top priorities.” Instead, these newly Republican states are targeting public workers, causing a significant drop in employment in the public sector that has threatened the entire economy. [..]

Economists argue over how significantly public sector layoffs in a weak economy hurt the recovery, but many agree that it has a substantial impact. Paul Krugman has estimated that if the government workforce had grown at a Reagan-era rate instead of decreasing rapidly, unemployment would now be closer to 7 percent, instead of the 8.5 percent it’s been hovering around for the past five months.

Growth in  public employment would have three positive effects on the economy:

1. It would increase spending in the private sector, thus improving the GDP;

2. It would increase tax revenues to not just the federal government with increased collection of payroll tax, but also increase the tax revenues of both state and local governments.

3. Increased spending by would have a positive effect on employment in the private sector with a need for workers to meet the demand for goods and services.

Don’t try to tell this to economic conservatives because there is more blood to be spilled. No matter how much they wash, the stain of recession remains in the hands of conservative governments in Europe and the US.

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