Power, Brain Power and Muscle Power

"In 1800, 75% of [an American's] working man's expenditures went for food alone. By 1850, that had dropped to 50%. Today it is a little more than 11%." -- The Wall Street Journal, September 20, 1996

Right now labor costs determine markets. But what if labor cost became minor compared to transportation costs? The ubiquitous sci-fi dystopia? The Road Warrior? Just The Road?
There is an interesting thesis--long and unfulfilled--questioning the supply of cheap oil. Not oil, cheap oil. The success of the West over the last century has hinged on cheap power; oil has been crucial in our industrialization. Now circumstances are changing. Our suppliers--like Mexico--are beginning to use more and more of their own production as they industrialize. American production peaked in 1970. Oil producers do not allow audits of their reserves. New discoveries like the Canadian tar sands, the find off Brazil and the shale deposits in the west and in Pa. will be very expensive to reach and deliver. Oil will not go away but it will get increasingly more expensive. This adds a fascinating component to commercial life: The cost of production and delivery. China, for example, pays its workers almost nothing and uses a lot of cheap coal power so the overhead is low and competes well in foreign markets--unless fuel cost go up. China is big and far away so if the cost of fuel for transportation were to rise across the world, their economic advantage of criminally low labor costs would erode. Industries would be forced to move near their markets; American industries would grow at home. Jobs would increase. Communities would flower. Mel Gibson as food co-op manager?
Not so dystopic.
The world may be flat and information and communication world-wide but the markets may become local.

State of the Union

I broke a rule last night; I watched the State of the Union Address. They are difficult to watch because of the endless stream of good ideas, promises and insights that have been culled from hours of interviews and editorial searches. As with most of politics, these noble observations and plans have no future--and, actually, little past. Most are alien to the speaker and are used mainly as sedation for his angrier opponents.
Insincerity can be polite, can be soothing, can be entertaining but when it is practiced, relentless and involves lives and families it can be rankling, insulting and can seem pathological. Simply, it is too much work to watch.
But watch I did. He shifted ground a bit, emphasizing that fantastic mythological beast of government job creation and seemingly including a new concern for small business. He held on to his campaign programs of escape from the Middle East, universal governmental health care and solutions for Mann-made global warming as if they were on the brink of achievement. The main aspect was particularly weird: He presented himself as an outsider and the Democrats as a minority. He is, of course, the President and the ultimate insider. His party holds overwhelming majorities in the Senate and House--I would guess more than any in my lifetime. (Perhaps Johnson?) His presentation of himself and his party as the struggling, moralistic voice crying out to a self-centered and self-satisfied establishment--so adolescent and 1960's--was unnerving.
Obama is very good, not as good as DeNiro, Hopkins or Reagan would be but very good. But then he is not an amateur; he is a practiced politician and he should be good. I regret he was not inspiring because he could be and we need it.

The Political Universe

Soooo....now the president is going to freeze discretionary--as opposed to military, paramilitary and entitlement-- spending "because we can't spend what we don't have". (Interestingly this makes up about 16% of the budget, about health care's percent of GDP.)
This, after a year of unbelievable health care expansion plans, an astonishing bailout of his friends at Goldman and an energy project estimated to drive the United States into the Stone Age with its expenses. Now he is worried about government spending.
It's hard to know what to make of this because most people live in a world of relative consistency: Friends, family and the grocer down the street generally behave the same way every day and, if they don't, they get professional help. When your conservative banker friend starts wearing sandals and Hawaiian shirts to work, the staff calls his wife, perhaps talks to him and gets an appointment with a guy with a graduate degree. When your hard working brother-in-law shaves his head and gets a tattoo on his face, you go and get your sister and the kids and get them the hell out of the house. But not in politics; politicians have no such need to be consistent. They somehow are allowed to live in a universe that is constantly changing without any analysis or criticism. They perhaps are like bigamists--one day a loud car dealer, the next day a quiet travelling salesman--as they keep all the balls of their universe in the air.
What's next? Barney Frank opposing the existence of Freddy and Fanny?

Medical Fees

It seems that there will be more, not less, debate over the national health care plan. Massachusetts has confused matters and, apparently, the administration. Some financial perspective from the medical angle might be worthwhile.
Over the last years there has been a gradual decline in Medicare medical fees to physicians. One reason is that individual fees are determined by attempting to keep total physician reimbursement stable at 19% of total medical expense despite the increase in patient volume and the expansion of medical therapies. The GEO estimates that fees will decline further, about 35%, from 2005 to 2012 while office overhead will increase 19%. Medicare also pays on average ten percent less than private insurance for the identical service. Medicaid pays less than the cost of billing and I know no physician who bills it. Moreover, Medicare plans a 21% decrease in reimbursement to physicians across the board on March 1, 2010 as well as a $500 billion decrease to overall Medicare funding.
It almost looks like a satire on price controls, how it misunderstands cost and what it does to supply.
The overhead--the percentage of total earnings that go to running a medical office before profit--varies between 47% and 60%; for the sake of argument let's say 50%.
If a medical office suffers a 21% decline in reimbursement, that vastly underestimates the impact in the office itself. The overhead costs are fixed--rent, salaries, insurance. So the decline in reimbursement will be absorbed by the profit side of the ledger. If the overhead is 50%, the profit 50%--a 21% decline would result in a 42% decline in earnings. That, with the erosion of earnings over the last years, would be unthinkable in any other field. It is unlikely many medical offices would survive. That it is being considered at all means the government is intentionally trying to destroy medicine or create a physician shortage. The other option is they don't understand what they are doing.
On the other hand, with Barney Frank's 180 degree turn on Freddy and Fanny, maybe the entire country is being run at random.

Heizenberg and Politics

Uncertainty is a principle in all realms of study except politics. The wondrous (and I suspect reassuring) confidence that political theory inspires likely keeps the psychiatric wards unburdened in these difficult times. These people are so sure. They are so convinced. And their opponents, equally sure, are so stupid or so base or both. Centralized government theories are particularly interesting because the have the ability to be proactively wrong on a large scale; small government theories are at least less damaging through inaction. But a doctrinaire is never discouraged; both sides excuse the failures of their plans in history because they weren't done right or--my favorite--forcefully enough. The certitude required to start your revolution with the phrase "first we kill all the..." is both awe-inspiring and bewildering. Imagine such a mind encountering the camel for the first time--or entangled quantum particles.
The obvious problem is the dreaded "unintended consequences" where the local lake management council brings in frogs to kill the beetles, then snakes to kill the frogs, then alligators and then on up the predator chain to nuclear weapons. So in response to demands for mandated alcohol fuel, food shortages are created. And what are the real consequences of banning DDT? (There is a very funny question raised by a writer who asks "Why 'please don't feed the animals'"? The answer is because almost any human interference has negative qualities. Kindness Kills!)
But there is a "weakest link" problem as well. Becky Ackers has reported on the homeland security self-tests. (The airport security budget has gone from 700 million to 6 billion dollars.) Recently the administration informed airport security agents of their plans to challenge their screening techniques by sending incognito agents through airport security checkpoints with obvious weapons and threatening materials. 90% of the fake terrorists got through the checkpoints. The administration then gave the homeland security the photographs of the fake terrorists to look for. If the security agents had the pictures of the fake terrorists, 75% got through.
The next question would be: How high up on the administrative/legislative/judicial chain is the weakest link? If Obama truly believes that he and Scott Brown were elected by the same mindset, the weakest link is pretty high.

Revolution

A blog I read spent some time cursing the structure of the Senate's population blind system of two votes per state as part of an analysis of Brown's recent win in Massachusetts. It seems that Brown, as with Obama, has stimulated analysis of "revolution." Destruction, revamping the world in your own image or overturning the status quo does not, of course, qualify as revolution. Revolution, as "radical", implies an attack on the roots of the society with the implication of reseeding the society with new material and, therefore, new roots. The reseeding is the hard part and must reflect the revolution's genetic material: The new society must have the infrastructure to grow into its new ideals. The French Revolution's ideals were not well formed but they certainly had animosity towards an identifiable group and did the destruction part of revolution very well. I think Obama--and the blogger mentioned above--have identified the aims of their revolution but are unclear on the means and completely blank on the infrastructure they need to create. The ideals must primarily create the structure, not destroy it.
In 1945, the Japanese surrendered and Vietnam guerrillas rushed into the void in a matter of days. They chased the Japanese and Vichy French out and occupied Hanoi under a National Liberation Committee. Its president, Ho Chi Minh, spoke to a huge crowd at the city's Ba Dinh Square and read the Vietnam Declaration of Independence. He began "All men are created equal. They are endowed by their creator with certain inalienable rights....do you hear me distinctly, my fellow countrymen?"
That old Ho, he sure knew how to start a revolution.

Scott Brown

Scott Brown wins in Massachusetts: Does it mean anything? Has something significant come out of the state of Lexington and Concord or will he just play Ken to Palin's evil Barbie in the press? Clearly the democrats are alarmed; Jim Webb is taking moral lessons from it. But the government cares little for the opinions of the public, whether through ideological certainty or simple arrogant disdain, so why would the election make a difference? It does imply more voter integrity than I expected; that itself may be important. But the train may have left here. The damage to the economy, the impact on the producers in the society, the disillusion that will likely follow, the decline in reward--then in living standards, the obvious government incompetence and its inexplicable tangle with financial interests, the suspicion that Obama may be more interested in ideological fulfillment than the nation's well being---all will contribute to an economic and psychological unwinding that will not end well. The distance that has grown between the government and the governed is now greater than the separation between church and state. The uplifting lesson the Brown election may give is that the victims seem to care.

Palin-tology

Why Palin? Because Angelina won't run.
All of the anxious prophesies of analysts, economists and Tocqueville are coming true: democracies destroy themselves with selfishness, stupidity and demagoguery. But mostly selfishness as citizens and special interests use the democratic system to protect or better themselves. This is personified in the finance /banking industry where the direction and aims of a few in power no longer parallel the aims of the country but are actually counter to them. And Obama is the worst because he knows the truth. He was elected with the hope he would bring fundamental change to the system and, rather than trying to reconstruct the economy for its long term betterment, he chose instead to fill political obligations, reward backers and allow the decline of the economy to continue apace because, in his heart (I think), he believes it deserves it. At a time in history where he could have been a significant leader, even a revolutionary one, he brought in the same economic leadership from the same system that needed reformed. Then he began--or, better, deferred to the Congress to begin--a reconstruction of the health care system to what end I have no ideas nor have I heard anyone explain. One thing about it is certain: It will be hugely expensive, expensive to an economy that even now borrows to pay its bills.
On this collapsing stage where pompous politicians posture and their entertainment handmaidens review, Palin is seen as unworthy, unqualified, uneducated and offensively ambitious as if the incompetent actors over the last years are not. The truth of Palin is that she - like Angelina (my choice for Ambassador to the U.N.), Serena Williams (my choice for Secretary of Defense) and Danika Patrick (who sounds too dumb to do anything but should be able to be Secretary of Transportation)-is an accomplished woman in her chosen sphere, has a certain amount of animal magnetism and couldn't possibly be worse.