Day in the life of a dentist

I find it odd when economic commentators talk of the "informal economy" as a remote, sometimes undesirable, entity.  All you can expect from a healthy business is here: a consumer base, customer service, brand loyalty, operating principles, and yes, money.  Respect, respect.

TINA to US debt?

I picked up the term TINA while living in Anand from friends who were graduates of the Indian Institute of Rural Management where, apparently, its usage was rampant. TINA stands for There Is No Alternative. A typical instance usage would go thus:

Question: Why are we eating at this crappy restaurant again??
Answer: It is 2 AM. TINA.

The ongoing knicker-bunching about the lack of a debt/budget deal between the US Congress and its executive oft brings up the notion of TINA to mind. One asks oneself, so what will the sovereign bond-buyers buy if they balk from buying US bonds (remember, selling bonds is how nations borrow money)?

Those who raise the specter of horrible consequences of a US default choose to ignore the fact that the transaction of a loan is a win-win situation, in most situations. The creditor finds a place to gainfully park his wealth, and that parked wealth floats the debtor's boat. If you were a sovereign bond buyer, what other bond-issuer would you go to, who has the ability to issue you such dependable paper, and in such volume?

As a matter of fact, the long painful discussions within the American leadership only reinforce the fact that the nation is serious about fulfilling its obligations. They are not fighting about whether, they are fighting about how (to pay off the debts). Contrast this with Greece, where thousands descended on the streets and rioted because they didn't want their country to make peace with its creditors. Remember, nobody in America - not the politicians, not the people - is talking about stiffing the country's investors.

This is not to say that a default would not raise interest rates on US bonds. However, that would be a long-overdue manifestation of America's suffering economic strength and its profligacy, not its inability to reach a political consensus. Indeed, if there was an example of good democracy, the current debt fight is it - two groups strongly entrenched in their principles fighting each other in a perfectly civil way. While most in the country may wish for a quick resolution, they will as quickly also add that "their" side's plan is better than the other.  Long live democracy, long live the debt talks.

Bridge of love

Graffiti-ed on the structural member of a road bridge...

(Click to expand)

Ginger dance of individual freedom

This blog has always advocated gay rights, bad-mouthed the concept of state-sanctioned marriages, and defended the freedom to enter a consensual polygamous relationship.  Wendy McElroy (link) talks about the "lurking urges" that prevail with such positions.

Disappointment

Ron Paul has started his video campaign for 2012 with a disaster.  It is titled "Conviction, Not Compromise' and is so trite in its message that put any current runner for the Republican nomination in the ad, and it will still work.



"Millions unemployed"? "No compromise"? "Standing up to Washington"?  These are not the reasons I want to see Ron Paul as the president of the United States.  This is not the Ron Paul.

This is Ron Paul. Having the balls to talk about the blowback arising out of interventionism. In the middle of a Republican debate.



This is Ron Paul. With the sense to say that the state should have no role in deciding marriages. Gay or otherwise.



This is Ron Paul. Talking about how federal intervention in the markets is feeding the housing bubble. In 2001.



Perhaps he is trying to attract the average Republican voter. The problem is that the average Republican ideal is in the woods, having completely replaced the idea of limited government with that of favorable government.

I don't expect Mr. Paul to ever win the Republican nomination, let alone the presidency. But with messages like these I wonder if I will even support him throughout.

The state government shuts down......so?

For the past few days, the Minnesota state government has been shut down because of a dispute between the executive and legislative branches about how to pass the state budget. There is much hand-wringing, and a lot of national attention on the matter.

But when you ask: so what happens when a state government shuts down, the answer is likely to surprise. For instance, a few days into the Minnesota shut-down, NPR ran a story in which they reported (with a straight face) the following "impacts" of a shut-down :

1. State parks (i.e., recreational use) have been shut down
2. New road construction has stopped
3. Some alcohol vendors are having to stop selling since their licenses are not renewed
4. Some state workers have been laid off

Barring the last, where is a real impact on those individuals, state government shut-downs have little impacts (in the short term) on the general population.

The reason for this is the highly fragmented and autonomous way in which America is run. Most public services are provided either by local governments or private companies; both of which depend on user fees, not top-down tax revenues.

For instance, I explored what services a Minneapolis (a city in Minnesota) resident uses on a day-to-day basis and if any of these are at the mercy of the state of government:

1. Police protection: Forces are raised and managed by the city
2. Schools: Run by locally administered school districts
3. Roads: Most managed by city and county
4. Electricity: Excel Power, a private utility company
5. Gas: Centerpoint Energy, a private utility company

Some of these functions do get funding from state and federal governments, but local agencies run a lot of their operations on fees and/or assessments.  If there is an example of the benefits of decentralized governance, it is this.

Ditto with the federal government.  When a shut-down was feared earlier this year, the top-quoted example of an "impact" of a shut-down that many fear-mongering commentators came up with was that tourists would have to be turned away from federally-administered national parks.  Really?

The curse of leverage

As argued before, this blogger thinks tax deductions on mortgage interests that American homeowners enjoy are a mistake.  At the level of public policy, this subsidy is as reprehensible as any other subsidy; at the level of individuals, it exacerbates the moral hazard of buying stuff with someone else's money.

The good news is, the said blogger is finding new friends in high places.  Recently, a Federal Reserve President, N. Kocherlakota, went on record that tax incentives to mortgage interests should be trimmed. 

Read about it here.

Kocherlakota notes that:

"...leverage made the financial sector more sensitive to downward movements in the price of land."

Indeed so. What is true for the financial sector, so is it for housing. Compare the highly-leveraged American housing market with the barely-leveraged Chinese one. In 2009, there were fears that the Chinese market would crash too in the wake of the American one, but nothing of that sort happened. Leverage made all the different. Or the lack of it.

Why to win friends and influence people

Iran and the United States on the same side? Nitin Pai thinks so.

"...Washington has allowed a dogmatic petulance over Iran take over strategic sense."

Indeed.

But unfortunately Pai buttresses his rebuttal of one dogma with yet another. Namely, why China and India's geopolitical interests cannot converge is something I have never understood...

What two-party stranglehold?

Commentator Bruce Maiman asks in the Sacramento Bee: "Is it time to break the stranglehold of Republicans and Democrats in American politics?" Maiman argues against the two-party system of America, claiming that it is radicalizing the democracy.

I myself often bemoaning the lack of a viable "third" option (or fourth, or fifth,...) in the American electorate so the argument should strike a chord with me.

But it doesn't. Because, for all their visibility, the two main political parties in the United States do not dominate the political process as much as one would think.

For starters, unlike notable parliamentary democracies where the "majority party" gets invited to form a government, America's system of separation of powers ensures that the chief executive officer will be elected even if no political parties exist. Indeed, it is theoretically possible for an independent/third-party candidate to be elected as president even as the legislature stays under the domination of the two major parties.

Secondly, the system of primaries for nominating party candidates in state and national elections opens another major pathway for non-conformist candidates to win nomination. This also speaks a lot for local independence, a major break from some other electoral systems where party headquarters patronizingly nominate candidates. A recent manifestation of the success of this system was when numerous Tea Party candidates dislodged well-entrenched Republican candidates to win nominations and elections. Indeed, my candidate for the 2012 Republican nomination - Ron Paul - is far from your stereotypical Republican, but he is still a legitimate runner for the party nomination.

Lastly, observe how legislators in US states and federal governments vote. While contentious issues are sometimes sharply split along party lines, voting on many other issues is not. Because candidates do get elected without the patronage of the centralized party bureaucracy, the system of "party whip" is much weaker here.

So, while Mr. Maiman's outrage at the "stranglehold" of the two main parties is rightly placed, there is nothing that needs to be done. A few minor tweaks like discontinuing public sponsorship of party primaries and banishing the use of partisan titles in state and national legislatures (e.g. "Democratic leader" or "minority leader") would be nice. But besides that, the apparent domination of political dialogue by the two parties is as fickle as Justin Bieber being wildly popular. Nobody can do anything about it, but there's no harm coming out of it either.

I'll scratch your back...

Candid words from former Defense Secretary Robert Gates, in justification of the Libyan war:

"These allies, particularly the British and the French, and the Italians for that matter, have really been a big help to us in Afghanistan. They consider Libya a vital interest for them. Our alliance with them is a vital interest for us. So as they have helped us in Afghanistan, it seems to me that we are in a position of helping them with respect to Libya."

Hmm. Anyone familiar with the term "imperialist war"?

Stuff that makes the internet precious

Miscellaneous political note: I had a lot of fun replacing "honey badger" with "John McCain" in the above video. Try it.