The Twists and Turns of Public Policy

NY Times has a business article saying that commodity index firms are investing more money in commodity futures, perhaps leading to more volatility. Meanwhile, Tom Friedman reports in his op-ed that his daffodils bloomed in January (mine didn't) and voices a call for a Green New Deal. And the Times world news has an article whose lede (first time I've used that term--gosh, I feel all knowledgeable and hip) is:

"Facing public outrage over the soaring price of tortillas, President Felipe Calderón abandoned his free-trade principles on Thursday and forced producers to sign an agreement fixing prices for corn products."

We liberals want to fight global warming, so we encourage ethanol production, particularly when we're seeking the Presidency and it's primary time in Iowa. But on other days we also complain about farm programs, as undeserved rewards to big industrial agribusiness. Those of us focused on foreign lands worry about the impacts of cheap US corn on poor Mexican peasant farmers, observing that if they can't be kept on the farm, they'll end up in the US.

But that's last years politics. Now it seems that demand for ethanol, sparked by high oil prices and government supports, has taken off at the same time the uncounted millions of Chinese have earned enough money to start eating meat, good corn-fed meat, sending corn prices high. (Soybeans are up too, but not as high.) So high corn prices are bad for the Mexican poor, who need protection. (Not sure if high corn prices will drive the urban worker to the U.S, but it won't help the evolution of democracy in Mexico.) Of course, capping the corn price in Mexico hurts those farmers remaining on the land.

Meanwhile, the volatility of corn prices resulting from the market dynamics (demand is relatively inelastic--it takes lots of meat eating Chinese and new ethanol plants to move the price) may be accentuated by boomer money flowing into index funds that seek the next hot commodity (gold and copper have had their runs, now it's time for ag commodities).

What's missed here is the relationship of farm programs and volatility. Farm commodities are much more volatile than other commodities (just watch your California navel oranges go up in price). Over the years, that uncertainty has led to the creation of programs to lessen risk, which continues even now.

Sentence of the Year! (So Far)

"After watching today's procession, it occurred to me that people inside the Beltway (a precondition for service) are far more normal than they get credit for."

From John Dickerson's piece on the Scooter Libby trial in Slate.

Post Stories on Ag Programs--Followup III

Two pieces by Jeff Harrison, a former House Ag staffer, critique the Post stories on agriculture. They are:

• here(the website of the US Rice Federation)
  
• and here a link provided by Jim Wiesemeyer--media savant. I first Jim met back in the payment-in-kind days (1983), not that we've kept up any contact since.
  

In this, as in most things governmental, one needs a grain of salt. (For example, Wiesemeyer spoke to the US Rice Federation and included a slide showing farm real estate values. The data thereon are inconsistent with Harrison's claim that current real estate values are 23 percent below the 1981 peak.)

IRS and Privacy

LA Times has an article on how law enforcement is tapping IRS records. A quote:

"The law that requires agencies to create privacy impact assessments can be waived to protect classified, sensitive or private information, according to the E-Government Act of 2002. Hohn, who composed the privacy assessment, said it left out some information so tax evaders and terrorists wouldn't know how law enforcement is targeting them.

The point, Hohn said, is "not to reveal your strategy."

This quote is contrary to one of my long-held positions: it's okay for the government to accumulate data on me provided I'm notified periodically of what it holds (as the Social Security Administration does with the wage information it has). That gives me the chance to protest and to get incorrect data changed or deleted.

Law enforcement certainly doesn't like the idea--they like to imagine themselves to be hunters/detectives who accumulate information then capture their suspects. Telling suspects, hey, we just opened a dossier on you for possibly contributing money to a terrorist organization in Lebanon (apparently the sort of thing most common in the context of the article) means you can't build a case to take to trial and build your career on. But I'm not sure we want FBI agents to build their careers on that. I think the public might be safer using "deterrence" (the good guys are capable and on the job) rather than post-crime "punishment".

AMT, Turbotax, and Enablers and Iraq's Banking System

Ann Althouse posts on the Alternative Minimum Tax, responding to a suggestion by Kaus that the hassle of doing two calculations is a reason for opposition to it. She and Glenn Reynolds point out that Turbotax software eliminates the problem. So should conservative oppose Turbotax?

It's a good question, but first let me address the AMT. I like the damn thing, liked it back when it was instituted amidst much publicity about fat cats (we had a few back then (i.e., 1969)) and still like it. Problem is, it wasn't indexed when imposed initially. These days it tends to hit the upper middle class in high tax states like Wisconsin. Someone with a $500K house might get hit with a $12.5K tax bill, then be subject to AMT. While I don't have much sympathy for someone in that position, I'd agree they shouldn't get hit by AMT.

Now for the question: is Turbotax a weapon of the evil, tax-sucking vampires known as liberals? Obviously no. It would be like saying that the lack of a banking system in Iraq, which undermines the Iraqi Army, is a weapon of the Iraqi opposition. Bureaucratic systems and software systems are morally and politically neutral, even though they may accidentally help or hurt the good. After all, Turbotax makes our tax system more efficient, permitting lower rates than would otherwise be necessary.

Big Men, Free Throws, and Bureaucrats

It's a law of nature--big men don't make free throws. Think Wilt Chamberlain, Shaquille O'Neal, and many others. But the NY Times has an article on the Mavericks' free throw coach.
He's the only such coach in the league. He coached Shawn Bradley, who achieved a 90% accuracy figure (though it turns out to have been only one year).

It's amazing that, given the highly competitive environment, no other team has followed suit. Indeed, the article claims that videotaping free throws is highly unusual. (Compare this to a recent article on Phil Mahre, holder of the American record for ski victories, who's making a limited comeback in his 40's. The article observed that now skiers have their runs videotaped and slow-mo analyzed for imperfections in their style, etc.) This seems to be a failure of the competitive free market. Economists, please study.

But the most interesting bit was this:

"Even when the player wants to learn, Boren must conquer another barrier.

He tells them: “When I look at you, I see two things — a brain and a bunch of muscles — and the good news is the brain is really clicking. But the bad news is your muscles have been taking a siesta. They like it the old way and they’re not paying attention to any of this stuff. So when we get down there, they’re going to resist.”

That's a good metaphor for bureaucratic reorganizations and mergers of organization--the brain may say one thing but the muscles do another. It's an especially attractive metaphor because I've found it true. For example, when I drive a usual routine I get locked into a routine so muscles take over. Which is fine, except on those occasions where I need to vary the routine, like deviate from the route to stop at a store.

Census Counts Praiseworthy Children?

According to the NYTimes the Census Bureau has determined that children's quality of life is on the rise. The press release is here.

What blew my mind, at least initially, was the idea that the government would ask how often parents praised children!

Now in my day [tell it, granddad] children weren't praised, at least not to their face. I can remember my parents bragging on me to others (like their siblings), but I don't remember daily praise at any time. I guess, despite evidence to the contrary, we may have advanced.

Federal Crop Insurance and The New Farm Bill

From the Washington Post, with a tip of the hat to George Buddy ,
comes a column by Cato people suggesting reform of the federal crop insurance program. I found this quote ironic:

"lawmakers have made several efforts to "reform" crop insurance. But each wave of legislative changes has moved the program further away from economic rationality and exacerbated its distortion of incentives and inefficiency."

It's ironic because the "reformers" have always operated under the flag of "free market competition". To recap, the New Deal set up the Federal Crop Insurance corporation, issuing government policies for damage to the big field crops. In a parallel universe there were several private companies (some associated with the Farm Bureau, etc.) issuing similar policies. In the 70's we had a standing program that made disaster payments. In 1980, Congress and the Administration decided to phase out the standing program in favor of the private companies, with Federal reinsurance. But each time Congress has said: "no more ad hoc
disaster programs, you have to have crop insurance, they've backed down. The result is a mish-mash of policies and programs that offends every rational bone in this bureaucrat's body. But the reality is the private insurance lobby packs too much clout to expect any big change in the future.

(A diversion--long ago, about a century ago as a matter of fact, the insurance industry (i.e., life, liability, etc.) dodged the bullet of federal regulation because they had too much clout. Insurance agents and adjusters are precisely the sort of people who can make for good political workers.

Roberta Wohlstetter, Separating Wheat from Chaff

Roberta Wohlstetter died. I ran into her work back in 60's. I had done a paper on Pearl Harbor early in my collegiate career which introduced me to the conspiracy theorists and reasonable historians who wrote on it. (Some were the same--like Charles Beard.) The conspiracy theory went that since we had broken the Japanese codes FDR knew when and where they were going to strike and was therefore responsible for the US losses. Further, FDR had maneuvered the Japanese, most notably by embargoing oil, into striking us so he could take the nation into war against Germany. (Some attached a faint odor of anti-Semitism to the final step.) The theory was a carry-over from the American-firsters. People who hated Roosevelt loved the theory, so the right-wing nuts of the day were prominent.)

Wohlstetter wrote a great book, that won the Bancroft Prize, on Pearl Harbor. Her argument basically was, yes, FDR and Washington had lots of information that predicted Pearl Harbor, but in the day-to-day run of affairs, there was also lots of information predicting an attack on Singapore, or Indochina or the Dutch Indies or.... She pointed out the problem of identifying what's significant from amid the mass of detail that a decision-maker receives each day. It's a caution for those who over-simplify.

Ironically she was the wife of Alfred, who was an early mentor to the neo-cons, who have set a new standard for over-simplification.

Farmers, Free Market, and the Future

This Agweb article tied to the American Farm Bureau Federation's annual meeting shows the complexities of farming. Corn farmers in particular are looking to a bright future based on ethanol production expanding. But livestock producers, particularly pork, are facing red ink. Why--because hogs eat corn. The "iron triangle" is at work, as Keith Collins, USDA's chief economist, talks to the meeting and representatives of the universities and other farm organizations are heard from.

Farm groups are concerned with international trade, the Doha round of trade negotiations, immigration, the new farm bill, air quality, and animal protection (against the last two :-) ).

This year has seen a run-up in corn prices. Indeed, I saw one summary that said that corn was the "commodity" with the largest percent increase in 2006. Don't know what price measure was used. Farmers should be used to this--there was a big price increase in 1996, I believe. And then it went to hell again.

Meanwhile, this morning's news has John Deere's stock prices, up 40+% last year, looking good for the future (again based on rosy prices for corn, etc.). But oil prices are falling again, reaching new lows. That means less impetus for ethanol, lower prices for corn, higher profits for pork, and different pressures on politicians doing the new farm bill.

Being a cynic, I think I'll plan to sell John Deere short.