Isaac Laquedem

The leading purpose of the federal economic stimulus contracts is . . . Hanford?

Today's Whimperer carried a chart of  figures, taken from www.recovery.gov (the federal government's website that tracks where the federal economic stimulus money is going), showing where the economic stimulus dollars have gone so far.  About 1.13% of the money dispensed so far has gone to Oregon.  This is $1.8 billion, of which $1.7 billion was grants, $122 million was contracts, and $27 million was loans.  The table also showed how many jobs were created by the money in each category.  In Oregon, each job created by grants cost $187,000; each job created by contracts cost $224,000; each job created by loans cost $3.8 million.  It's reasonable enough that contracting jobs cost more, because contracts typically involve purchasing materials as well as labor. It's reasonable also that the loan jobs cost much more, because the borrower is supposed to pay the money back with interest.

I noted two oddities: as I said, Oregon jobs created by grants cost $187,000 per job; the national average was $230,000 per job, or about 20% more than Oregon's average.  We may have lower labor costs than the average grant recipient (California, a high-cost state, got more than its proportionate share of the loot).  Oddly, the national average for contract jobs is $582,000, more than 2-1/2 times the cost of Oregon's contract jobs.

How can this be?

I think I have the answer, which I gleaned from digging around the government's website.  It lists the top ten contracts, the top ten grants, and the top ten loans.  The largest contract to date -- $1.4 billion -- went to a coompany that's decommissioning two federally-owned nuclear reactors and cleaning up the contamination at the Savannah River nuclear facility, owned by the Department of Energy.  The second-, third-, sixth-, and ninth-largest contracts, totaling $2.35 billion, are also to clean up the government's radioactive messes. (Nos. 2, 6, and 9 are for Hanford.) That's $3.75 billion out of the $18 billion contracted so far, or more than a fifth of the contract dollars.  The labor for these dangerous projects is likely high-cost.

I'm delighted to see the government pick up after itself; however, I can't help thinking that a significant chunk of the funds being classified as stimulus funds are for projects such as these that the federal government would be doing anyway.

What if we provided education the same way that we provide health care?

A casual comment from a schoolteacher friend brought to mind the current debate over national health care.  We have a national health care system already, called Medicare, but it's age-limited, and those much less venerable than Venerable Mom aren't eligible.  Proponents of national health care point to the success of Medicare; opponents complain about the cost and the spectre of creeping socialism.

My friend's comment made me think of an unsophisticated test for a national health care program: lets compare it to the public schools.  We could (well, I can) imagine health care provided as the schools provide it, and then imagine education provided as we now provide health care.  So here goes.

First, let's suppose that we could provide health care in more or less the way that we provide public education.  Everyone would pay taxes to the local health care district in which they reside.  The health care district would also get some state and national funding in exchange for undertaking the obligation to provide free (or very low cost) and appropriate health care for all of its residents who need medical attention.  Each district would build and staff a number of health care clinics almost adequate to serve its population.  People would register with the health clinic in their district.  Some means would be worked out to allow clinics to exchange patients, or to cosponsor surgical hospitals (rather like the old union high school districts) so that not every district would need to provide a full range of care.  The physicians would be somewhat underpaid, but in exchange would have tenure and a first-rate retirement program, won for them by their unions.  All in all, not a bad system.

Now let's pretend that our government could provide education the way that it provides health care.  People employed by large and generous corporations would be able to send their children to schools paid for by tax-deductible education premiums.  People who lost their jobs could continue to send their children to school for another 18 months, but would have to pay the cost themselves, at just the time when they wouldn't be able to afford to do so.  Private school insurance would be available, but inordinately expensive unless purchased in groups.  Parents of slow learners who could not get into a group plan would find themselves slowly priced out of the market, or faced with notices of nonrenewal after Little Johnny fails a spelling test.

Students who want to study math or a foreign language would first need to obtain a referral from their primary care teacher, who could deny the referral if the teacher thought that the student wouldn't benefit from being able to multiply and divide, or being able to speak with the other 94% of the world. 

People with no school insurance whose children, in an emergency, needed to learn the names of the states could take them to the emergency classrooms at the local schools.  The schools would bill them for the education, but take few practical steps to collect, and ultimately pass the costs of providing emergency education onto their premium-paying members. 

Some insurers would cover most of the schools in the area, but others would be selective, and parents who wanted their children to stay in the neighborhood school would have to pay up or change schools if Blue Cross or Aetna dropped their local school from its plan.

I'm a lot more open to the idea of national health care for the under-65 than I was before these two fancies popped into my mind.

Greenhouse gases: the White House turns a public report into a secret, sort of

This week, reports the New York Times, an internal White House document "came to light" that took issue with the conclusion of the Environmental Protection Agency that what the Times calls "climate-altering gases" and the rest of us call "greenhouse gases" are a threat to human health and welfare.  The document was marked "DELIBERATIVE - ATTORNEY CLIENT PRIVILEGE."  The right wing, personified in this instance by Senator John Barrasso of Wyoming, says that this document proves that the EPA's proposed finding is based on politics and not on science -- why else would an internal White House document argue with the EPA's conclusion?  The director of EPA says that the document, which is not dated, is a summary of comments of other agencies mostly prepared under a Bush administration appointee.  Right and left both make much of this secret document, even though they argue to opposite conclusions about what it means.  The story has acquired the unavoidable "Memogate" tag.

The great secret about the secret document is that its contents were never much of a secret.  Much of the content comes from a November 28, 2008 letter from Shawne McGibbon of the Small Business Administration to the then-administrator of the EPA, which has been out in public for months.  Some of the comments might be fodder for late-night television, such as the one asserting that EPA's proposed regulations would impose a heavy regulatory burden on the 63,000 small-business dairy farms because of the methane from cows and ammonia from manure.  Others are more provocative, such as SBA's observation that, because carbon dioxide is relatively evenly distributed above the United States, the entire nation would either be in or out of compliance with any standards. 

The main lesson I draw from this is that the way that official Washington brings something to public attention is to say that it's secret.

The road to the White House leads through your dentist's office

Yesterday I fell into conversation with a woman of statistical bent, who told me that a few years ago she had done a research project on the results of American presidential elections, with the goal of determining what characteristics of the candidates were most useful to predict the winner.  The standard political model is that the candidate who is closer to the political center is more likely to win.  The taller candidate also has an advantage, and it's well-known that bald candidates are at a disadvantage.  My companion told me two results of her research that I hadn't heard anywhere, and that suggest that the American voter isn't as interested in the candidates' political views as they think they are.  

Her research and analysis showed, she said, that voters prefer candidates with larger heads, and with larger teeth, especially large regular symmetrical teeth.

Height, hair, head, teeth: it's not so much the candidates' minds, as it is what's on top of, in front of, and beneath their minds that makes us vote for them.

Congressman Brad Miller comments on the other dudes in the banks

One benefit of visiting the nation's capital is the chance to see a Congressman.  My most recent sighting was of Congressman Brad Miller (Raleigh, North Carolina), who has recently been active in proposing ways not just to solve, or at least ameliorate, the mortgage and banking crisis, but also to keep bankers from causing another one.  Today I heard him talk about a proposal he made several years ago to restrict the worst kinds of subprime lending (a proposal that unfortunately didn't pass) and some proposals he's making now to clean up the Augean stables of the financial world.

One of the things I learned from his speech is that a bankruptcy court can rewrite most loan agreements between a bankrupt borrower and the unhappy lender if the value of the security is less than the amount owed on the debt, except for agreements secured by the borrower's principal residence (i.e., home mortgages).  In bankruptcy lingo this is called a cramdown:  let's say the borrower pledged an office building that used to be worth $3,000,000 as security for a loan of $2,500,000, but the building is now worth only $2,000,000.  The bankruptcy court can, to a degree, disregard the security provisions of the mortgage and treat this as a secured loan for $2,000,000 (today's value of the collateral) and an unsecured loan for $500,000.  The lender gets priority to recover the $2,000,000 from the building if it's sold, but has to wait in line with the bootless and unhorsed unsecured creditors to recover anything on the remaining $500,000.  

But there's an exception for a borrower's principal residence.  "Why," he asks, "can a bankrupt borrower cram down a loan on a vacation house, or even on a yacht, but not on the house where they actually live?"  It's a good question.  I don't know the answer.  I did enjoy his description of how financial executives explain the meltdown.  Mr. Miller likened what they are now saying to what he calls the "other dude" defense (he describes himself as a recovered trial lawyer).  The "other dude" defense is when the defendant in a criminal case, let's say a street robbery, says that he was just standing around, minding his own business, when this other dude -- who was about the same height and weight, and looked kind of like him, and even wore the same clothes -- came along and committed the crime, then ran away before the police got there.  Banking executives, he says, are using the "other dude" defense: they were just standing around, minding their own business, making safe and boring loans, when these other dudes came along and created the subprime mortgage meltdown.

Mr. Miller didn't believe in the "other dude" defense when street criminals used it, and I got the sense that he doesn't believe it when bankers use it today. 

His constituents took money out of banks; Congressman Capuano won't put his in

Michael Capuano, a congressman from Massachusetts, let loose a few days ago on the heads of some of the banks that got us into the current financial mess.  The evening news has carried excerpts of his speech.  You should see and hear his full speech: here's the YouTube video.  Kris Broughton at TalkingPointsMemo transcribed his talk here (and thanks to her for the transcription, though no transcription without audio could do his stemwinder justice).

My three favorite parts of Mr. Capuano's speech are these.  In the first excerpt, he talks about how some of his constituents interacted with those banks:

But basically, you come to us today, on your bicycles, after buying Girl Scout cookies, and helping out Mother Teresa, telling us 'we're sorry, we didn't mean it, we won't do it again. Trust us.'

Well, I have some people in my constituency that actually robbed some of your banks, and they say the same thing. 'They're sorry, they didn't mean it, they won't do it again. Just let 'em out.'

Do you understand that this is a little difficult for my constituents to take, that you 'learned your lesson?'  * * *

I for one, between myself and my various campaigns and my own personal business stuff, I get a lot of money to put in banks. I don't have one single penny in any of your banks.

The second part I was taken with is toward the end, when he gives the bank presidents some personnel advice:

I don't want my money put into CDO's and credit default swaps and making humongous bonuses - me personally. Until that changes, none of us really believe - I don't believe - anything will change.

Until you change the people who brought you into SIV's - who was the brilliant person who came and said 'let's do credit default swaps?'

Find him.  Fire him.  Tell me you fired him.

Get out of CDO's. Start loaning the money that we gave you. Get it on the street. And don't say 'oh well, we're not using that money for bonuses.' Come on! Money's all of a sudden not fungible in your entities. It's fungible everywhere else, but not in your entity.

Get our money out on the street. And if you don't want to give it back, don't come here and tell me that you can't.

And the third part I especially liked was in the middle of his speech, between the two parts I quoted, when Mr. Capuano acknowledged that he wasn't asking a question:

I don't really have a question, but I was told I can use the five minutes, 'cause the questions I have, you've answered them, and you're going to continue to answer them.

President Obama makes a Laquedem Plan more generous

Back on November 19, I proposed that if the government were to assist the automakers, it should put strict conditions on how much any recipient of the public largesse could pay its executives until it paid the government back.  A figure of $400,000 a year seemed reasonable to me; it's what we pay the nation's president.  My logic was that a company receiving a multi-billion dollar bailout should be willing to follow the federal pay scale.

I doubt that President Obama got the idea from this blog (although I mentioned it to Mr. Emanuel when I had the good fortune to sit next to him on an airplane in December), but I'm pleased that he is proposing to limit executive compensation to $500,000/year at firms that accept "extraordinary assistance" from the government. 

Last week I praised Cascade Bancorp, a Bend bank holding company, for announcing that it would not pay bonuses for 2008 or raise executive salaries for 2009.  Today's Wall Street Journal reports on another community banker who understands the message that the government and the public are sending.  His name is Chevis C. Swetman and he is the president of The People's Bank in Biloxi, Mississippi, a community bank with about $900 million in assets (about half the size of Bank of the Cascades and West Coast Bank) which hasn't signed up for the government bailout.  Mr. Swetman, the Journal says, is angered by reports of the perks and lavish trips at some large banks that took the TARP money, and says simply about those bankers, "These people ain't got a clue."

One small step for an American, one giant leap for Americankind

Celebrate one of the unemployed

If I may say so without disrespect to the memory of Martin Luther King, Jr., the thought that today is Richard Cheney's last full day as vice president justifies today being a national holiday, all by itself.

Harry Reid gives Kate Brown an unexpected power over the United States Senate

President-elect Obama has resigned his senate seat.  Rod Blagojevich, the governor of Illinois, has the power to appoint his replacement as senator.  Governor Blagojevich has been caught on tape saying things that a reasonable juror might interpret as the governor wanting some consideration in exchange for the appointment, and he's been indicted for it.  The taped conversations include the governor discussing six possible candidates, and who might give him what in exchange for the appointment.  He's become a political persona non grata in Illinois, but he's still the governor.

In a brilliant political move, Governor Blagojevich appointed Roland Burris to the senate.  Mr. Burris is a former Illinois attorney general and has a long track record of public service.  He's also whom Barack Obama endorsed for the Illinois governor's race in 2002.  He wasn't one of the six potential senators/contributors whom Governor Blagojevich was discussing on tape.

The governor appointed Mr. Burris only after Senator Harry Reid said that the senate wouldn't seat anyone appointed by Governor Blagojevich because of the bribery indictment -- Senator Reid believes that the indictment means that anyone appointed by Governor Blagojevich is tainted.  The Illinois secretary of state has refused to countersign Mr. Burris's certificate of appointment, and the Senate leadership says that an obscure senate rule, Senate Rule 2, requires that the certificate of appointment be signed by the governor and the secretary of state.  (The rule doesn't quite say that, actually.)

Here's why Governor Blagojevich's move was politically brilliant.  First, he appears to have been the first person to notice that Barack Obama was the only black senator, and with his move to the White House, the senate won't have any black members.  Mr. Burris is African-American; in fact, he was the first African-American to be elected to statewide office in Illinois.  The governor has put the senate Democratic leadership in the embarrassing position of standing against having any blacks in the senate.  (The Republicans are sitting back and enjoying the spectacle.)

Second, he's making the Senate create an awkward precedent by giving an unexpected power to the Illinois secretary of state, and by extension to the secretaries of state of the other 49 states.  Imagine that the Senate is equally divided between the two parties, and one senator dies.  For illustration, let's say the deceased senator is a Democrat.  The Democratic governor of the senator's home state appoints a Democrat to fill the vacancy.  However, the Republican secretary of state refuses to sign the certificate of appointment for a few weeks so that the Republicans can enjoy a brief majority in the Senate and pass some legislation.  The Senate leadership's argument against seating Mr. Burris gives to the secretaries of state the power, in these interesting situations, to affect which party runs the Senate.  It's an unexpected power that makes Kate Brown's new position, and that of her 49 counterparts across the country, more than ceremonial.