Tuesday, November 30, 2010

Thoughts on WikiLeaks

I have a few scattered thoughts, in no particular order. Unlike several other topics, I don't really have a clear-cut right/wrong opinion on the organization or what they are trying to do, so anecdotal observations will have to suffice.

Observation, the first: if the US is really so concerned about the information being leaked, why don't they use their new-found (or maybe just newly abused) power to take down the entire domain? I mean, if piracy of music is justification for taking down internet sites, than espionage and exposure of classified material would be grounds for nuking WikiLeaks' ISP from orbit, much less obliterating their DNS entries, right? I mean, if you're gonna be wielding the gigantic censorship stick anyway, and clubbing anyone who your donors are upset with, you might as well just fix the problem you spend so much time complaining about too...

Observation, the second: An acquaintance from school, Patri Freidman, re-tweeted a brilliant observation: as the government keeps telling us, if you have nothing to hide, than you have nothing to worry about. I realize this is not necessarily directly applicable to foreign relations (at least as people perceive them), but the sentiment is spot on: it's utter BS when the government uses it as an excuse to violate people's privacy, and it's immensely gratifying to see the government squirm when the situation is reversed. Particularly in light of the recent expansions of the TSA, both in aggressive violation of the 4th Amendment and in desired scope of control, it seems utterly fitting that the government be subject to metaphorically identical examination.

Observation, the third: the founder of WikiLeaks has a very valid point, that the government hides an immense amount of information behind secrecy laws, and not always because the information is actually secret for legitimate national security reasons. There is no other check/balance for this potential for abuse, and as such WikiLeaks (and to a less direct extent, the internet in general) provide a valuable public service. Until or unless we have some other sort of effective check against abuse, WikiLeaks serves a valuable public service (at least as much as, say for example, NPR).

Observation, the forth: WikiLeaks appears to be practicing responsible disclosure, as far as I can tell (within the bounds of what they are choosing to release). They asked the State Department to provide information on sensitive areas or security concerns, and they redacted information which could compromise people. Sure, there still exists the possibility of people getting seriously hurt as a result, and there will be lots of embarrassment, but there's also a chance people could have more open discussions about real threats in the world (such as Iran) as a result of the disclosures, so on balance it might not be negative. In a perfect world it might also lead to more action to stop the real threats too, instead of just debating them in secret, and maybe more privacy for the people as the government gets a taste of what they do to people every day. In the real world, the government has a long and virtually unblemished history of concealing corruption and abuse of freedom behind secrecy, and to the extent that people can peel away the coverings and expose the disgusting mess to the light of day, the better off we the people will probably be.

Those are my random observations, at least for now.

Tuesday, November 23, 2010

Easier Fix for Unemployment

The Fed has been pretty busy recently, debating inflation targets, QE2, monetary/fiscal policy, etc. I have suggested before that the easiest way, by far, for the Fed to achieve its inflation target is to just back out the hedonic regression, basket adjustment, and other one-sided transparent manipulations by the BLS to artificially lower the CPI. If you just use the "real" numbers (ie: before/without the intentional distortions), you could have inflation at over 4% immediately (since that's where the real value is), and you wouldn't have to worry about trying to raise it by printing money. Of course, that is all sorta academic, since the economists at the Fed are not total morons, and I assume they know the real numbers, and are just using the fake numbers to justify their de-facto fiscal policy of printing money.

However, it does raise an interesting point: if the public is stupid enough to be deceived by the rather blatant BLS distortions to the CPI, wouldn't the same thing work for unemployment? I mean, there certainly is a fair amount of distortion already (for example, consider the "discouraged" workers category, who are defined out of the unemployment statistics; again, see http://shadowstats.com for the real numbers), but really, I think the public is stupid enough that you could do more. For example, consider hedonic regression, the theory that people always buy lower quality, cheaper stuff as time goes on (and thus the CPI can be arbitrarily lowered). With some slight modification, I propose that this manipulation could easily be applied to unemployment as well.

Consider, hypothetically, that you suppose that as jobs become more scarce, more women decide to stay home and raise families. BAM, exclude all women from the unemployment numbers. Maybe as jobs become scarce, people retire earlier. BAM, there go all the people over 60 (or 55, or 50, or whatever number you want to pick really). Maybe young adults decide to get more education: there goes everyone under... 25? 30? The possibilities are virtually endless. Moreover, you can tweak the numbers to achieve whatever unemployment figure you want, just like hedonic regression. It's beautiful, efficient, easy, and there's roughly 30 years of evidence to support the idea that the general population will go along with it.

Really, I don't know why people haven't come up with this already.

Wednesday, November 10, 2010

TSA Airport Security: Could We Just Strip?

There's been a bit of controversy lately over the new TSA security devices and procedures being put in place to make commercial air travel more obtrusive and dangerous for people. Specifically, I'm referring to the new full body "naked" scanners, and the associated "enhanced" pat-down procedures for people who refuse the scans, designed primarily to be so obtrusive and embarrassing that people will consider the scanner to be the lesser of two undesirable circumstances. The new system are more obtrusive for obvious reasons, but also more dangerous: after all, exposing frequent travelers to repeated bursts of radiation (which may be significantly higher than advertised, according to some rumors/investigations) can have bad long-term effect on the human body. Of course, if everyone requested the new "make it as cumbersome and humiliating as possible" pat-downs, that would also grind security lines to a halt, so there's no real good alternative.

As a side note, it's also very important to remember amidst all the new scanners and procedures that none of this makes air travel any safer. Real security is about thwarting people who are trying to do bad things; by refusing to focus on trying to find bad people, and instead focusing on treating everyone equally, TSA does nothing to enhance the safety of air travel. In addition, security penetration tests have shown that human error makes it still possible to get "bad" things by security, and any determined and trained military adversary would have little trouble thwarting any security measures TSA could employ. In essence, everything is for show, and to a lesser extent for enhancing government control and intrusiveness.

That said, if we're going to have all these ridiculous "security" measures for air travel, allow me to suggest an additional option for the seasoned traveler who is not particularly self-conscious about nudity. Since people already need to remove their shoes and all jewelery, as well as belts and items from pockets, it would not be too hard to strip entirely naked while in the security line. You could send your cloths through the scanner with your other carry-ons, breeze through the metal detector (probably optional too at that point), and get dressed on the other side. As long as there was enough room before and after the security checkpoint for the people dressing and undressing, it wouldn't even slow the process down. This process would eliminate all radiation, any excuse for fondling or sexual assault, and you could always choose one of the alternatives if you were uncomfortable. As an added bonus, if it became common, this would probably do a lot to loosen people's attitudes toward nudity in general (you may or may not consider this a bonus, and you may need to add extra seating and/or CCTV around security for other people at the airport, to handle the crowds wanting to watch, at least for the first few years).

Anyway, what do you all think? If we're going to have all this intrusive, dangerous, useless security, we should at least allow this as an option, in my opinion...

Monday, November 8, 2010

Medical Insurance Reform Idea

I've blogged about the US medical insurance problem before, but as most pundits could attest to, it's much easier to point out flaws in a system than to propose solutions (and, as an aside, only mildly harder to use the flaws and public frustration with the system to advance an unrelated agenda which does nothing to address them and might even make them worse, as the Obama administration has so aptly and repeatedly demonstrated). Part of the reason you don't see people like me proposing 2000+ page legislative "fix all" monstrosities to "reform" broken systems is that reasonable people realize that you don't reform/fix problems with massive legislative fecal-dumps: at best they fix some problems at the expense of more spending and red-tape; at worst they make most problems worse and add more spending and red-tape. The path to actual good reform is to address the actual real problems, one at a time, in a manner which most people can agree makes the situation better on the whole. To that end, I have a small idea which I would love to see in a future legislative reform package (hopefully limited to just this idea).

Currently, when you have medical insurance, there are two contracts in place. One is between the insurer and the provider, which stipulates the terms under which they will be paid for procedures on/for people with the insurance, how claims are resolved, what rates will be paid, what procedures will be covered, etc. The second if between the insurer and the patient, covering how much will be paid, what steps must be followed, what doctors can be seen under what conditions, etc. This is problematic in practice, because medical providers often have "trouble" resolving billing with insurance companies, and pass that burden to the patient, often at great expense of time and hassle. In actuality, these problems can happen on both sides, and they can sometimes be semi-intentional: the medical provider has no particular incentive to submit claims correctly (since the patient is ultimately liable for the costs), and the insurer has no incentive to pay claims unless everything is in order to their satisfaction. Often, the patient is stuck in the middle, resolving any problems which may arise in the process.

I would propose that there be a federal law, which establishes that if an insurance company has a contractual relationship with a medical provider, and the provider admits a patient for treatment under an insurance plan provided by that company, that the patient be only legally liable for the payments as dictated by the policy. This is no functional change from the current situation, except that in the case of claim submission problems, the patient would explicitly not be liable: it would be up to the provider to resolve the problem with the insurance company they have contracted with. The law could also allow for insurance plans where the patient paid the co-payments and deductibles directly to the insurance company upon receiving treatment, and thereby avoid all legal liability to the medical provider.

The benefits would be obvious. The providers would be incentivized to streamline the claim submission process and avoid errors. The insurance companies would be incentivized to pay legitimate claims promptly, to keep providers happy and avoid legal action from businesses with the knowledge and experience to pursue such if necessary. Patients would no longer be caught in the middle, being used as leverage to the detriment of the health care experience. Everybody wins.

Now would be where I would typically insert my snarky comment about it being too good of an idea to ever be actually adopted, but I'll leave that out this time. Seriously, though, for my actual readers: am I missing anything, or would this be a good change?

On Printing Money

Note: This subject is interesting to me, so please bear with any rambling.

Over the last couple of years, the government (through various agencies and programs) has been doing something very interesting. First, though, I'll explain some background which will probably be familiar.

When a government runs a deficit, they typically finance it through borrowing, either from foreign or domestic participants, with the promise to repay the borrowing with interest over long periods of time. This, of course, is the source of the declared portion of the national debt, about half of which is owed to foreign entities (mainly countries such as China), and about half owed to domestic entities (in the form of government bond funds and such). This doesn't count the unrealized obligations such as Social Security and Medicare, but these are somewhat more flexible, as they are promises which can be changed, unlike bonds which are promises which carry the "full faith and credit" of the US (and are thus harder, but not impossible, to modify).

Normally, these debts would be paid by future tax revenue of the government (hence the idea of "pushing" the payment obligations onto future generations, which is what the debt does). However, there is a second mechanism by which the government can reduce its effective debt, provided it controls its own currency, and the debt is denominated in its own currency: it can create more currency. Smaller and less stable countries have been doing this literally for centuries, basically since fiat currency was invested, with various degrees of success (they all collapse eventually, but some stay around longer than others).

For many years, the government has been spending more than they take in, but this has really ramped up under the Obama regime: the government has been increasing the national debt by approximately 10% annually for the last two years. However, during this time the Fed has created approximately the same amount of new currency, under various programs (QE1, QE2, banking support, etc.). The debt is still increasing since the US is still borrowing, but the Fed is buying the bonds with new "money" (US currency is actually Federal Reserve notes), so effectively no additional lending from foreign or domestic sources is needed to sustain the borrowing. In essence, the Fed is printing money to cover whatever additional borrowing/debt the government is creating, and there is no effective limit to their ability to do so.

At first glace, the typical economist theory would say that this is going to be massively inflationary, with the amount of currency increasing by 10% annually; however, this is not proving to be the case. Part of this is due to the official inflation statistics: they have been corrupted and manipulated over the years to the point that they can/do understate actual inflation by a virtually arbitrary amount, so the government can keep official inflation as low as desired. Part is also due to fractional reserve lending and the economy: the fact that since borrowing is still low due to weak demand means that the total effective currency is not increasing nearly as quickly as actual currency. However, even without those two factors, it would be difficult to say that the American people would realize the problem or really object to the root effects, outside of some vague notion that this massive borrowing/printing is somehow "bad": the typical people just don't have the knowledge to correlate it with the eventual effects.

Speaking of that, what will the effects be? Well, contrary to the "gut" thoughts, these actions are probably "good" for the economy, at least in the short term, and considered in isolation from the political manipulation and market disruption which results from such. In essence, inflation is just wealth redistribution from the people who have currency; in the US, that's "rich" people (defined here as anyone trying to save money) and entities which have lent us money, both foreign and domestic. It's essentially a way to tax everyone with money, and spend that money as the government sees fit. As such, in a country where the national debt per person often exceeds the average person's net wealth (especially in a down economy), this can be beneficial to a lot of people, and especially those of the receiving end of the wealth redistribution.

This begs the question: if the effect isn't as bad as the theory would hold, and many people would be in favor of it, should the Fed just buy any excess debt as a regular policy? I would contend that perhaps they have been doing so as a "dry run" to testing such a policy, intentional or not, and have a reasonable gauge of public opinion and reaction to such moves. Wealth redistribution, while exceptionally un-American, might be ethically preferable to generational theft, which appears to be the alternative in an era of uncontrolled government spending. Of course, the "correct" answer would be to fix the root problem, but the voting populace has proven incapable of even not electing socialists, much less encouraging spending reform, so I find that exceedingly unlikely.

Of course, the wealth redistribution through money printing only works for a while, after which the currency and economy collapses entirely, but it might work for longer than traditional theory would dictate. As the saying goes, "in the end we're all dead", and a little more turmoil for future generations (in the form of the fall of the country) might be preferable to trying to fix the systemic spending and obligations problems now. At least that appears to be the approach of the current government in the US, and unless you think the voting populace is going to get a lot smarter really soon, I'd suggest people plan accordingly.

Wednesday, November 3, 2010

California Bucks the National Trend

The voters of California have successfully defied the national trend toward smaller government and less taxation, voting almost universally in the other direction. If we assume the voters understood what they were voting for (as assumption which is far from certain, but I'll go with it), the majority of voters in California stand against the Tea Party principles, and want more taxation, more big government, more destruction of businesses, and more of the status quo. One could argue, certainly, that the powerful union lobbies purchased the election results in California, but at the end of the day, the voters have spoken, and California will live with the consequences.

To recap, here's what the voters decided:
- "Moonbeam" Jerry Brown, friend of unions and mortal enemy of taxpayers, for governor
- Barbara "rubber stamp" Boxer for Senate
- "New taxes with simple majority" Prop 25 passed

It remains to be seen exactly what form the new taxes and regulations will be in, but with a looming $20+ Billion deficit and a clear mandate to go "all in" with the tax and spend approach to governance, you can be assured that some form of tax hike is coming for California. It's mildly surprising that the state which already has the highest taxation rate and one of the worst business climates in the country would be voting for more taxation and regulation, especially with unemployment around 12.5% and combined underemployment hovering around 25% in the state, but California has a long-standing tradition of forging its own political path. As a silver-lining, bond rates for tax-exempt California municipal bonds should go up (Greece's bonds are paying over 10% currently), so at least it's not all bad for people living here, at least until the state can't borrow any more.

Speaking of which, if I were someone concerned about the future of the US, I'd start thinking now about how to handle the eventual default point, when California can't borrow any more and goes to the federal government for a bailout. If the rest of the country doesn't want to get stuck with the bill for California's largess, get a plan in place now, before the crisis hits. The conservative part of me says to let the state go down in flames, relying on the taxation authority to suck everyone there dry until there's nobody left, and then have a procedure in place to rewrite the state Constitution and redistribute the state resources after it collapses. A more reasonable approach might be to create a program whereby the state can get a loan from the federal government if it agrees to harsh austerity measures designed to both get the state finances in order, and be punitive to the people who voted the state into its fiscal mess. Whatever the approach, though, the federal government needs to have a plan, because California's economic collapse is not a matter of 'if', but a matter of 'when'.