Bacon's Rebellion

  • Dagong Bangs the Gong on U.S. Debt

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    James A. Bacon

    My latest column from the Washington Times:

    The big three credit-rating agencies that totally missed the meltdown of the subprime mortgage market – Moody’s, Standard & Poor’s and Fitch – still give the United States a AAA credit rating. But there’s a newcomer in the credit-rating game – Dagong Global Credit Rating – which has a very different view of the strength of U.S. finances.

    Beijing-headquartered Dagong, the dominant credit agency in China, is pushing into international markets. This summer, it rated the sovereign debt of 50 nations making up 90 percent of the world’s economy. While Americans still tend to regard U.S. Treasuries as the “safest investment in the world,” Dagong gave our debt a mere AA – lower than that of 11 other countries (including China, which it awarded an AA+). To add insult to injury, the firm declared the U.S. outlook to be “negative.”
    Dagong has set off something of a hissy fit in the credit-rating world. “The Western rating agencies are politicized and highly ideological, and they do not adhere to objective standards,” Chairman Guan Jianzhong told the Financial Times in July. The company also accused U.S. agencies, which share an oligopoly enforced by government fiat, of contributing to the 2007-08 financial crisis by applying the coveted AAA rating to loads of junk subprime mortgage debt.
    The chairman of McGraw-Hill, owner of Standard and Poor’s, accused Dagong of pandering to popular prejudice, insisting that S&P and the other agencies have been unfairly targeted by politicians, pundits and competitors. Also, he countered that Dagong lacks transparency in its policies and procedures.
    We can debate forever whether the U.S. agencies employ more analytical rigor in the rating of their sovereign debt than Dagong, but let’s be clear about one thing: Dagong is not a chump outfit. The company boasts of more than 500 employees, including more than 200 analysts with master’s degrees or doctorates and 50 with postdoctorates. The Chinese finance ministry has directed the company to “participate in the construction of [the] Asian bond market.” Read more.

    Bacon bottom line: Major global investors upon whom the United States depends to continue buying our Treasuries have a far less sanguine idea of our fiscal health than we ourselves do. I’m not saying that Dagong is correct and the U.S. rating agencies are wrong, only that the U.S. agencies do not reflect global opinion. I would be interested to know how Dagong might evaluate Virginia’s AAA debt, if it were allowed to participate in the U.S. debt-rating market. I wonder how they might view a state economy so overwhelmingly dependent upon federal government expenditures.

    Note to pre-Boomers:For those who you who miss the allusion to 1970s-era “The Gong Show” edify yourself by clicking here.

  • Virginia’s Modern Day “Know Nothings”

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    James A. Bacon

    Here’s some important news from the Pew Hispanic Center.
    The center reports that the number of immigrants entering the United States illegally fell by nearly two-thirds between 2005 to 2009. In the first part of the past decade, the number of undocumented people coming into the country was about 850,000 a year. With recession and harsh laws targeting immigrants, it fell to 300,000 a year between 2007 and 2009. The number of undocumented immigrants estimated to be in the country fell by 1 million to about 11 million, the report says.
    Among states, the biggest declines were in Virginia, Florida and Nevada. In Virginia, the number fell by 60,000 from 2008 to 2009, to an estimated 240,000.
    So, one has to ask: If the number of undocumented workers is falling because of the recession, the crash in housing construction and oppressive laws such as the one Prince William County adopted in 2007, why is there suddenly such a big need for a statewide push against immigrants here illegally?
    Corey A. Stewart, the Prince William Board of County Supervisors chairman who backed his county’s legislation and is leading the charge for a statewide law, has said he is “proud” of the statistics.
    But once again, if the number of undocumented foreigners arriving is dropping, why does Virginia suddenly need to be the next Arizona? Stewart says that if you let up on the pressure, they’ll just come back. This plays well at Glenn Beck rallies.
    It’s hard to fathom this hatred of the foreign-born. It smacks of the “Know-Nothing” movement of the 1840s and 1850s, in which Anglo-Saxon Protestants tried to curb immigration of Catholic Germans and Irish. The newcomers, they said, were unwashed, did not hold American values and committed crimes. Plus, they were controlled by the pope in Rome.
    At one point, the Know-Nothings commanded considerable clout and got the upper hand in elections in northern cities, such as Boston and Salem, Mass., that immigrants favored, and they sometimes resorted to violence. Eventually, they ran out of steam.
    You can see the effects of Prince William’s law. I happened to be in Manassas recently and stopped by Mi Barrio, a Salvadoran-Mexican eatery on Prescott Avenue that caters to Latinos. The owner, Luis Gomez, told me that after the law took effect in 2007, he had to shut down for six months. His customers were afraid to come to the county.
    The law, which authorizes county police to stop anyone they suspect of being an illegal immigrant, resulted in the rousting of dark-skinned people in cars, Gomez said. “If they saw three Spanish-looking people in a car, they’d look for a reason to stop them and then check their IDs,” he said. Eventually, the cops let up, and Gomez returned to his normal operating times.
    It is distressing to think that a county or a state would enact laws designed by their very nature to profile by race and color. Even more absurd is the fact that they are being proposed while the supposed need for a statewide law is going away.
    But who knows, maybe the modern-day nativist movement will go the way of the Know-Nothings.
    Peter Galuszka

  • Remembering Semipalatinsk

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    James A. Bacon


    Yesterday, a depressing series of photos lined the second-floor room at the University Club in downtown Washington. They were of the effects of Soviet nuclear weapons testing at Semipalatinsk, a vast and lonely area on the steppes of Kazakhstan.

    I was invited to the event sponsored by Global Green USA and the Embassy of Kazakhstan as throwback to my years covering Central Asia. This may be far afield for usual Bacon Rebellion columns, but it may be worth it.
    The event commemorates two anniversaries. The first, remembering Aug. 29, 1949, was the event code-named “First Lighting.” There, at Semipalatinsk, the Soviets set off their first nuclear bomb. On that windy and cold morning, the sky turned red, the ground trembled and the mushroom cloud appeared.
    Americans were shocked in their arrogance that it would take the backward Russians at least a decade before matching the Trinity test of 1945. A combination of first class espionage and world class science brought the Soviets to the bomb a lot sooner.
    The second anniversary also occurred about the same time of year but about 20 years ago. Nursultan Nazerbayev, the Communist chief of the Republic of Kazakhstan and the president of the newly-independent country after the USSR collapsed, declared Semipalatinsk closed forever to nuclear testing.
    During the years in between, some 456 nuclear blasts were set off, including 86 air bursts and 30 ones on the surface. With their penchant for secrecy, the Soviets built a secret research lab about 45 miles away from ground zero. Called Semipalatinsk 21, it was surrounded by barbed wire and access was strictly controlled.
    The same secrecy prevailed as vast areas were contaminated with radioactive fallout. As the photos at the exhibit at the University Club showed, ordinary Kazakhs were afflicted with blood and heart disease, skin cancers, cleft jaws, birth defects, backward limbs and other ailments. Up to 1.5 million people were either sickened or killed. The land was scared as well. The ground bursts of the 1950s and early 1960s until the 1963 nuclear test ban left gigantic lakes filled with rainwater that are still radioactive.
    The point of the exhibit is non-proliferation and to their credit the Kazakhs showed unusual sanity. When the Soviet Union fell apart without warning, they found themselves the proud owners of more nuclear warheads and delivery systems than the U.S., France and China combined. The threat of illegal sale or theft involving terrorists was obvious. Nazerbayev and his officials worked closely with the U.S. in securing and disposing of the weaponry.
    One operation, set up under an anti-weapon program by Sens. Sam Nunn and Richard Lugar, involved CIA-sponsored covert flights of gigantic C-5A Air Force cargo planes flying out dozens of warheads. They ended up in the U.S. where they were disassembled and their enriched fissionable was removed and sent for reprocessing into fuel for commercial nuclear plants.
    The issue now, Paul F. Walker of Global Green USA and Erlan Idrissov, the Kazakh Ambassador to the U.S. said, is to continue the process by getting the U.S. Senate to pass a new U.S.-Russian nuclear arms treaty that continues the weapons reduction process. Each country would be allowed 1,500 deployed warheads, about a 30 percent cut lower than what was allowed by treaty in 2002.
    What is interesting about the Kazakh approach is that they willingly got rid of their nukes, unlike Pakistan, India, Israel, the U.K., France, China, Russia, the U.S. and perhaps South Africa. North Korea has exploded some kind of device and Iran may be on the verge of one as well.
    The exhibit was the polar opposite of what every Hollywood action movie has shown since the fall of the USSR — cheesy former Soviet republics selling off a few megatons for the price of a few BMWs. But then, Hollywood’s “Borat” version of Kazakhstan was so off the mark, it isn’t even worth bringing up.
    Peter Galuszka

  • Mission Not Accomplished

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    James A. Bacon


    Now that President Barack Obama has declared U.S. combat operations in Iraq over, it might be useful to remember just how much this effort and the one in Afghanistan cost.

    This is particularly important right now since there is so much hullabaloo over federal spending. The immediate critical question is whether there should be more stimulus spending or not to try to invigorate the stumbling recovery.
    Another curious point is that a good part of the $787 billion American Recovery and Reinvestment Act (stimulus) funds haven’t even been spent yet. In Virginia, for instance only about $3.2 billion of the $5.5 billion in stimulus funding for Virginia had been spent as of Aug. 1. The Wall Street Journal has reported that only a fraction of stimulus funding for such efforts as infrastructure, housing, education and homeland security has been spent.
    This once again puts the cart before the horse. If there’s such an outcry among the right wing, including many bloggers and commenters here, how come they don’t point out that a lot of this infamous money hasn’t even been released yet? Would the recovery be faster if it were? If we had a faster recovery, wouldn’t the supposedly dangerous spiral a la “Boomergeddon” be slowed or set right?
    Let’s talk about the wars. According to the National Priorities Project, $1.09 billion has been allocated to the wars in Iraq and Afghanistan, It isn’t clear how much of this sum has actually been spent yet, but the end of combat operations in Iraq suggests some easing of spending is in the future, although some 50,000 U.S. still will remain in Iraq.
    Afghanistan is anyone’s guess. Obama has made that the strategic U.S. priority in fighting global terror, but faces a corrupt Afghan government and centuries of history in which foreigners could never get their way. My personal experience goes back to the 1980s and the Soviet experience there. I was there in January 1989 when, with great fanfare, columns of Soviet tanks and BTRs (personnel carriers) streamed across the Amu Darya River into Uzbekistan after a futile and bloody decade of fighting.
    As for how much all of this will eventually cost is anyone’s guess. Economist Joseph E. Stiglitz has put the price tag at as much as $3 trillion. As he and Linda J. Bilmes wrote in The Washington Post in 2008, “You can’t spend $3 trillion — yes, $3 trillion — on a failed war abroad and not feel the pain at home.”
    He’s right about the pain. As far as failed, well, it seemed that way in 2008. To his credit, President George W, Bush’s escalation in Iraq did seem to settle things enough to set the stage for a U.S. withdrawal of its combat forces. But the, it was Bush who got us in the probably unnecessary war with Iraq with his bogus intelligence reports of Weapons of Mass Destruction.
    That’s a bit off my point. More on my point is the question: When they moan about spending do the newly-hatched deficit hawks consider the war price tag? Or are they content to blame instead the “socialist” Obama they accuse of profligate spending? It could be that Obama is guilty of not spending enough and not getting the money allocated for recovery out there in time.
    Once again, the cart before the horse.
    Peter Galuszka

  • Northrop Grumman: Myths About Privatization

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    James A. Bacon

    If you live in Virginia and need to get a driver’s license or ID card at one of the state’s 74 Department of Motor Vehicles offices today, you are out of luck. Still due a tax refund? Wait a little longer. The Department of Taxation’s computers don’t work. Worried about pollution? Chill out until the Department of Environmental Quality can get its systems up and running.
    What happened? Northrop Grumman has struck again. The firm won a $2.3 billion contract — the largest state pact ever — in 2005 to provide the state with communications and computer services. Another state agency, the Virginia Information Technologies Agency (VITA), is supposed to help Northrop Grumman run the system.
    The tale once again shows just how privatization can get really fouled up and how its benefits can by mythical. Exhibit A is, of course, Northrop Grumman, the huge defense corporation that Virginia officials persuaded to bring its headquarters here this year with a goodie basket worth millions in tax breaks and incentives.
    The state IT system has been a mess. It has had regular outages, forcing a game of musical chairs at VITA top management. The latest mishap occurred Aug. 25 when a couple of small circuit boards fried. Affected were 26 state agencies. All but six were up and running this morning.
    There’s plenty of blame to spread around. Former governor Mark Warner, a Democrat who now represents the state as a senator, was so enamored with the then-fashionable privatization concept back in 2005 that he entered into this outsourcing deal. At the time, state computing was a mishmash of incompatible systems.
    Republican Gov. Robert F. McDonnell inherited the mess, plus about $75,000 in campaign contributions from Northrop Grumman. During the campaign, he made some noises about the issue but piped down. Why? Virginia was in the running to snag Northrop Grumman’s Los Angeles headquarters. It competed against Maryland and the District and won the relocation derby by offering up more than $13 million in state incentives and breaks, plus a like amount from Fairfax County.
    Now we’re stuck with Northrop Grumman. Once again, Virginia’s naive leaders skipped down the yellow brick road of privatization. They support limited government because old Thomas Jefferson did. They are still in love with the era of Margaret Thatcher and Ronald Reagan, who wanted to get government off our backs — through privatization, of course.
    Then-Gov. George Allen pushed the concept further in the 1990s, with the state’s law to sidestep transportation finance shortfalls by farming out state highway responsibilities to private infrastructure firms. Warner, a businessman who made his millions selling cellphone bandwidth, marched in tune.
    And that is why you can’t get a driver’s license in Virginia today or tomorrow or maybe not until Friday.
    Peter Galuszka

  • At the Request of AZA

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    James A. Bacon

    AZA contacted EMR and said that the second half of his comment on the 25,000 jobs lost post by Jim Bacon has been deleted three times since 8:00 this AM. (The time stamp on the Blog is off by an hour.)

    EMR saw the third attempt to post when it was up at about noon. It is gone again. AZA asked that EMR read over his comment and if it made sense, to post it as an original post since Jim had asked a question raised by the first part when the second part was removed.

    EMR is pleased that former students can understand what EMR has been saying and often get ahead of him. AZA’s comment seems like a fair statement and may temper Jim’s tone at the Whoop Ass session later today.

    Here is AZA’s revised complete post that was originally forced to be divided in two because of length and the second half deleted on three occasions:

    ……………

    Mr. Bacon asked:

    “AZA, If it makes economic sense for there medical facilities to be based on the scale of the territory served – Neighborhood, Villages, Communities, Regions, etc. — then you have to explain why that distribution does not exist today.”

    We would refer those who do not yet understand this issue to Professor Risse’s treatise The Shape of the Future (SotF). In Volume I he demonstrates that the organic framework does exist but that human economic, social and physical activities are not yet distributed based on organic reality for reasons that he spells out in the book.

    Some Agency malfunctions result in bad regulations as you suggest. No sane person would disagree.

    However, as eggs, hamburger and salad greens that are intended for humans consumption; as deep well drilling to tap the last of the stored natural capital; and as the demise of Maytag – to say noting of the collapse of the housing finance structure – demonstrate, it is Enterprise malfunction and rigged markets that are at the roots of many of societies worst dysfunctions.

    As Katrina demonstrates often major disasters are a combination of malfunctioning Agency, Enterprise and Institutional activities in a context of human ignorance parading as ‘culture,’ ‘freedom,’ ‘patriotism’ or gods will.

    “The idea of making different types of medical services available at different geographic levels is an elegant one.”

    Yes, and it is also a condition precedent for efficiency and effectiveness in the delivery of all the services upon which humans depend for health, safety and welfare.

    “But economies of scale will continually change with new technology and new delivery models.”

    The illusion that churn, flux and ‘innovation’ will continue or accelerate is just that an optimistic illusion, a Myth. Natural systems do not work that way. They ebb and flow. Humans are running out of resources (including natural capital) to fund the luxury of continual change and ‘innovation.’ Professor Risse addressed this 10 years ago in the ‘Past Shock’ section in Vol II of SotF.

    (End of Part 1)

    The next really big innovation in medicine will be delivering a doctor to the bedside by wire. Not the doctors image or the patients image but the doctor himself. Do not hold your breath for this innovation to occur.

    Even today the vast majority of the medical ‘solutions’ are available to only a very few at the very top of Ziggurat. It these procedures and interventions were subsidized so all citizens could benefit, the medical costs alone would bankrupt society long before Boomergeddon.

    This reality is a key problem with Enterprise provision of medical services. It is EXACTLY like the drivers of the Affordable and Accessible Housing Crisis about which Professor Risse pontificates. Trickle Down does NOT work for any except those at the very top of the Ziggurat.

    Trickle Down drives the Wealth Gap.

    “Who decides what is appropriate at which level on an ongoing basis? Whom do you trust to do that, if not the marketplace?”

    The only answer we have ever heard that COULD actually work and preserve Democracy and market economies is “enlightened Citizens.”

    It is not regulations (Agencies), not markets (Enterprises) and not faith or Myths (Institutions) that alone can achieve what Prof. Risse calls a sustainable trajectory for civilization.

    Citizens are the voters, the owners and the members of Agencies, Enterprises and Institutions.

    Citizens and their Households are also the sole members of the New Fourth Estate.

    As Professor Risse demonstrates in THE ESTATES MATRIX that it takes all FOUR legs of the MATRIX to manage a modern technologically based society.

    As demonstrated by eggs, hamburger, etc. noted above ‘markets’ can only be a rational distributor of the resources necessary to support health safety and welfare of society IF citizens are well informed and all Four Estates work in harmony.

    Enterprise controlled markets will always work to optimize short term profits not the happiness, safety or long term sustainability of citizens, Households or civilization.

    The only possible ‘solution’ is for citizens to understand the need for and them support implementation of :

    Fundamental Transformation of governance structure (Agency Transformation – including rational regulation with controls, programs, policies and education exercised at the level of impact.)

    Fundamental Transformation of economic structure (Enterprise Transformation – a market economy is essential but they must be enlightened markets and Enterprise scale is as important as Agency scale.)

    Fundamental Transformation of human settlement pattern (This is essential so that citizens and their Households and their Organizations (Agencies, Enterprises, and Institutions) – can manage society.)

    In this context blaming the current president for killing 25,000 jobs as Mr. Bacon’s earlier post does is not just wrong, it feeds the Anger of Ignorance.

    Larry G’s cautionary note about the Google searches is ABSOLUTELY RIGHT. That is why tossing rocks at empty pigeon holes (or tossing cans of Glen Beck Red Meat Whoop Ass) is akin to yelling FIRE in a crowded theater.

    That is also why civilization as we know it may be doomed.

    Pandering governance practitioners, including those selling ‘traditional values’ as well as Enterprises (including MainStream Media) and Institutions (especially the political Clans) have been lying to citizens to stoke Mass OverConsumption.

    For their part, citizens are not taking responsibility for the collective impact of their actions.

    The longer the meaningless rock tossing goes on, the less chance of citizens making better choices at Google and everywhere else.

    AZA

  • The “Cooch” Gets His Ass Whupped

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    James A. Bacon

    Jim Bacon, our favorite bloviator, seems to be a little too enamored with Kenneth Cuccinelli, our hard-charging attorney general who battles his highly-politicized court fights and opinions.
    As the Grand Baconator Deluxe writes:
    “It will be take-no-prisoners time in Northern Virginia this Tuesday evening at the Virginia Conservative PAC fundraiser. Ken Cuccinelli will be the headline speaker. I don’t know what the Attorney General plans to talk about, but I suspect the words “kicking butt” and “taking names” will apply.”
    Well, Jimbo, Ole Cooch just got his ass whupped in Charlottesville.
    Today, Albemarle County Judge Paul M. Peatross Jr. threw out that five civil investigative demands issued by Cuccinelli against the University of Virginia in his probe of possible fraud by global warming specialty Michael Mann.
    Peatross ruled that the attorney general had not shown that the CIDs were relevant and had not sufficiently “stated the nature of the conduct” that is allegedly fraudulent.
    Mann, who left U.Va., 2005 and now teaches at Penn State University, believes that human activity has contributed to global warming. Cuccinelli, a staunch conservative who doubts global warming, believes that Mann fudged research while at U.Va. He is demanding data and emails from 40 scientists around the world.
    The case has gained international attention and outcries from such groups as the American Association of University Professors and the Union of Concerned Scientists which says that at least one of Cuccinelli’s CIDs seeks information that has nothing to do with Mann.
    The Charlottesville judge also ruled that Cuccinelli has the power to issue CIDs against the university and could come back with revised ones.
    Since taking office in January, Cuccinelli has issued a series of controversial opinions and filed politically-tainted lawsuits. He has said that gays have no right to protection at public universities, that the Environmental Protection Agency cannot regulate carbon dioxide, and that Christmas decorations can be erected on public property if equal space is given to other religions. On Aug. 2, a federal judge in Richmond allowed his lawsuit against a new federal health care plan to proceed.
    Does that make it 1-1? What’s the expense to taxpayers for all this nonsense? Groveton? Any ideas?
    Peter Galuszka

  • AN ENLIGHTENING CONFRONTATION WITH REALITY

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    James A. Bacon

    Readers of Bacon’s Rebellion will recall the name Richard Thornton. A few years ago, Richard provided eye opening insights into the nefarious activities of Pre-Revolutionary governors of the Virginia Colony. Back in the days of the First Bacon’s Rebellion.

    Richard is a National Examiner in architecture and design. He often focuses on the historic roots of North American settlement patterns. He has been asked to do a series on the reasons behind the impact that Katrina had on New Orleans.

    His series can be found at

    http://www.examiner.com/architecture-and-design-in-national/richard-thornton

    If you thought you knew about New Orleans, you may be surprised to find out what you did not know. He is up to the fourth installment and has not gotten to the War of 1812.

    Sure a lot better than tossing rocks at empty pigeon holes.

    EMR

  • A Massive Confrontation with Reality

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    James A. Bacon

    It will be take-no-prisoners time in Northern Virginia this Tuesday evening at the Virginia Conservative PAC fundraiser. Ken Cuccinelli will be the headline speaker. I don’t know what the Attorney General plans to talk about, but I suspect the words “kicking butt” and “taking names” will apply.

    Yours truly will provide the warm-up act. I will explain how, unless we can bludgeon the electorate into a major attitude adjustment, the U.S. is heading for a major confrontation with reality — Boomergeddon — within the next 15 to 20 years.

    For details about the event, to be held at the Waterford in Springfield, click here.

  • Obamacare: 25,000 Lost Jobs and Counting

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    James A. Bacon

    Bacon’s latest column in the Washington Times:

    An Associated Press story sparked a small furor recently when it reported that the Obama administration’s ban on deep-water drilling would cost an estimated 23,000 jobs. With unemployment stuck near 10 percent, consternation over the avoidable job destruction was understandable.

    But that’s hardly the only example of how Mr. Obama’s policies are devastating the economy. A little-noticed provision of the Affordable Care Act will wipe out an estimated 25,000 jobs that physician-owned hospitals were expecting to create within the next year or so. To keep the big hospitals on the sidelines of the health care debate, the authors of Obamacare cut a deal that effectively blocks physicians from building or expanding their own specialty hospitals – spiking 39 projects that were on the drawing board before the law was enacted.

    The job-killing provisions of Obamacare are particularly ironic given that physician-owned facilities tend to be economically efficient and deliver superior medical outcomes. Stated goals of Obamacare are to tame in-hospital infections, reduce medical complications and cut readmission rates – metrics in which many physician-owned hospitals excel. But health care “reform” hamstrings the tightly focused physician-owned surgery centers while protecting generalist community hospitals with more political clout.

    The larger hospitals have long nursed a grudge against the nation’s 265 doctor-owned hospitals. Accusing physicians of “skimming the cream” of the most profitable patients and referring patients to their own facilities, a supposed conflict of interest, the big-hospital lobby has pushed for years to restrict the ability of doctor-owned hospitals to compete. The restrictive proposals made little progress during the George W. Bush years, but tumultuous debate over health care reform put them back into play.

    Obamacare architect Sen. Max Baucus, Montana Democrat, proposed to pay for Obamacare’s massive expansion of entitlements in part by imposing a 20 percent cut in Medicare fees for hospital services over the decade. Understandably, the American Hospital Association and the Federation of American Hospitals protested the arbitrary nature of the cost savings. So, the Baucus caucus threw the big hospitals a bone – the crackdown on physician-owned hospitals – in exchange for putting a muzzle on their opposition. Neutralizing the hospital lobby was crucial for the law’s passage. Read more.

    Bacon’s Rebellion angle: Fortunately for Virginia, none of the canceled physician-owned hospital projects are located here in the Old Dominion. That’s because there are so very few POHs here. Why is that? Because Virginia has the Certificate of Public Need (COPN) process by which the general hospitals can block the creation and/or expansion of POHs.

    Virginia hospitals justify the anti-competitive COPN on the grounds that physician-owned hospitals “skim the cream,” mostly treating patients with better-paying private insurance and forcing general hospitals to treat money-losing Medicaid patients and those with no insurance at all.

    That argument bears revisiting. The Physician Hospitals of America contend that POHs have comparable Medicare/Medicaid patient mixes to many general hospitals and that they do provide some uncompensated care as well. Obama’s insurance reforms should bring about a large reduction in uncompensated care. If the uninsured population drops by 2/3 or so, as is predicted, the number of patients without any means to pay for their medical care is greatly diminished. In that case, general hospitals need no special protections from competing doctors’ hospitals.

    It will be interesting to see if Gov. Bob McDonnell’s health care council takes up this issue — or just buries it.

  • A Review of “Boomergeddon”

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    James A. Bacon

    “Boomergeddon” is a useful, breezy primer on the problems confronting the U.S. as its Baby Boomer population ages and face what the author believes to be a rising firestorm of government debt and entitlement programs that the nation can no longer afford.
    The author, Jim Bacon, is a journalist with a libertarian point of view who has little use for government, swears by balanced budgets and has a bit of a Calvinist streak regarding personal responsibility. His book seems not at all intended to be the final verdict on the enormously negative scenarios that Bacon sees, but rather as an introduction to some difficult issues that people born right after World War II through the early 1960s will likely face as they become elderly.
    In this role, the book is a benefit. Bacon is an excellent writer and breezes through coming demographic shifts and complex economic problems such as an overload of sovereign debt, an unworkable managed care health system, far too much government spending, and so on. In this sense, Bacon is performing a real service for the student of introductory current events since he lays out a number of issues in an easy-to-comprehend manner.
    The book falls short for the same reasons. It appears to be hastily written with an eye to looming November elections (Republicans have suddenly discovered deficit spending after eight years of George W. Bush). Rather than going out and interviewing real people, Bacon instead relies too much on cut and paste articles mostly from conservative or libertarian outfits such as the Cato Institute.
    More sophisticated readers will find some of his points obvious. It should come as no surprise that many people in the Washington area voted for Obama which is a pattern similar to other large, diverse metropolitan areas. It’s not exactly news that the District of Columbia area is chock-a-block with lobbyists. The average newspaper reader is well aware that subprime spending and overuse of credit cards contributed to the worst financial crisis since the Great Depression. In this, he underplays the role of huge and lightly-regulated financial service companies in pushing credit instruments on a reluctant public .
    Bacon gives interesting background on managed care, but this may be his weakest chapter. He’s absolutely right in noting that our current system has no price transparency — an important point to a free market advocate like Bacon. And, he pushes quality control as Obama’s solutions do, but he makes a big mistake by believing that medical outcomes of human beings are really widgets or jet engines that can be measured by such in-vogue quality management trends as Six Sigma used in the manufacturing sector. It might have helped if Bacon had spent a week or even a day in a hospital to see how things really work. Very few people can afford medical concierge services that he sees as a promising free market trend.
    And, while noting that Obamacare is designed to give millions of mostly poor and uninsured Americans access to health insurance, he somehow acts as if lower income people don’t deserve health care. This same strain of class elitism is evident in his discussion of credit cards when he makes such statements as “Master Cards for the masses.” Credit card use expanded beyond the wealthy for other reasons than that the great unwashed wanted to live like kings. Financial institutions have forced people to drop cash or checks because they are more expensive to process.
    A few other points. Bacon hop-scotches the world looking at rising troubles points, sort of like the “Sit Rep” section that Soldier of Fortune magazine used to publish. Some of this is interesting, but it is doubtful how useful it is to his “Boomergeddon” point. The squabbles. for instance, of tiny Nagorno-Karabakh are of minor relevance to the foreign policy of the U.S. and the Boomers it serves, although Armenians and Azeris might be interested.
    The core of the book are the near doomsday scenarios that Bacon presents. He envisions 13 (curious number) steps on the road to Boomergeddon. These start in 2011 with slower than expected growth, continued government spending, a currency crisis in 2017, a recession the following year, a credit downgrade in 2022, failed bond auctions in 2027 and then, (ka-boom), Boomergeddon.
    Very few professional economists I know are able to predict what’s happening two quarters from now, let alone in 2020. Bacon is a journalist, not a trained economist. Curiously for someone so anti-government, he may be paying too much attention to what governments do. Indeed, large, state-less private corporations have been on the scene for at least two decades How they and their financiers rock and roll with the times will likely have much more of an impact. Governments will likely have much less of a say on economics two decades from now than they do today.
    Still, Bacon has done an admirable job of putting together some very big thoughts for the average reader. If his intention is to spark debates, he’s done us all a good service.
    Peter Galuszka
    (submitted to Amazon.com)

  • ADVICE FOR THE DONKEY CLAN AND FOR BEN’S FED

    Posted on

    by

    James A. Bacon

    On 25 August the WaPo head line read: “As midterms loom, Democrats (the Donkey Clan) work to shore up faltering recovery.”

    By ‘recovery’ it is assumed that the headline writer was suggesting that the Donkey Clan is hoping that ‘something’ will get ‘the economy’ back to Business-As-Usual in time to make citizens feel good by 2 November.

    Forget that, in will never happen. Jobless stagnation is the very best one can hope in the immediate future. In spite of Richard Florida’s optimistic story title noted below, Fundamental Transformation takes time.

    On 26 August the WaPo headline read: “Fed policy foggy as the economic picture clouds”

    It would be nice if the Fed raised the interest rates. Low interest rates help some big financial Enterprises at the top of the Ziggurat but punishes those who saved over the past two decades.

    But in the larger context:

    How about a Fed policy and Donkey Clan platform planks based on HONESTY and on REALITY?

    Jim Bacon sees Boomergeddon looming in the distance. There is a problem much closer at hand.

    Car SALEs and home SALESs have pulled the economy out of the last seven recessions.

    Not this time. Too many Wrong Size Houses in the Wrong Locations (which, by definition, are accessible by Autonomobiles) are the ROOT cause of The Great Recession AND the economic hurt that will follow, what ever it is called.

    It is NOT just risky home loans to poor credit risks…

    It is NOT just wild gambling on futures and derivatives driven by the unfounded assumption that house values will always go up…

    It is NOT just that home owners used the speculative value as debit card to fund private debt…

    It is NOT just that Agencies have increased public debt and tossed good money after bad to prop up shaky loans on dwellings in dysfunctional locations…

    It is NOT just that Agencies, Enterprises and Institutions acted as if home ownership was an unquestioned good thing…

    It is NOT just that those Wrong Size Houses in the Wrong Locations are only accessible by Autonomobile…

    It is NOT just that Autonomobiles that most citizens can afford require cheap materials and cheap energy to build and run best on gasoline…

    It is All those things and many more.

    But mainly it is continuing economic policy that depends on unsustainable patterns of consumer consumption – Mass OverConsumption.

    And it is about the location and pattern of human activities at, above and below the surface of the planet.

    As noted in The Shape of the Future, LOCATION matters and national, state and municipal policy, programs, regulations and education programs have been guided by the Geographically Illiterate for 65 years.

    It is time to pay the piper.

    Sales of exiting homes are at a 15 year low. Sales of new houses are at a 40 year low.

    CNN says: “Say goodbye to the McMansion.” That SHOULD surprise no one since Chris Nelson projected in 2006 that if the then current trends continued there would be 22-million Wrong Size Houses in the Wrong Locations by 2030. It is the demographics stupid (and the location and the economy.)

    The housing news is BAD for home owners and land owners. However, declining house prices is NOT a bad thing in the long run. It will make shelter ‘affordable’ and that is GOOD but Only if the homes are ALSO ACCESSIBLE. See SYNERGY’s work over the past 15 years on the Affordable and Accessible Housing Crisis.

    Home ownership itself is not ALWAYS a good thing for reasons Richard Florida spells out in The Great Reset. There is a short version of Florida’s perspective in “The Roadmap to a High-Speed Recovery” in the 12 Aug 10 The New Republic.

    According to some like James Altucher home ownership is BAD thing. His 19 Aug 10 column in DailyFinance lists seven reasons. Many will not agree but Altucher provides food for thought. It is very clear home ownership is NOT for everyone.

    But the BIG economic issue going forward is not just housing and Autonomobiles – it is human settlement patterns and what has been driving dysfunctional shelter locations. The question is:

    IN THE NEW REALITY, WHAT WILL HAPPEN TO PROPERTY VALUES?
    Well, it depends on LOCATION. Home values and property values have changed trajectory more significantly in the last three years than at any time since data has been available. In general, the farther from the Centroid of New Urban Region Cores and the farther from the Zentra of all Urban agglomerations, the more house values and property values have fallen and will fall. The reasons and research on this topic follow, but to put the issue in historical perspective:

    For over 100 years Countryside land values have been irrationally inflated by speculation about the amount of land that can be sustainably and productively devoted to Urban land uses. As larger and larger percentages of the population shifted to Urban sources for their livelihood the unfounded assumption was that more and more land would be needed for Urban activities. See Chapter 1 Box 2 of The Shape of the Future for the reasons why between 1800 and 2000 the population increased by 50 times but the amount of land needed for daily human activity as a percentage of the total area of the US DECEASED by a factor of 10.

    Much of the unfounded speculative increase in ‘value’ was based on the assumption that any land one could access with an Autonomobile would be a potential location of Urban land uses. The speculation accelerated in the 1920s when there was extensive growth in Autonomobile ownership. The speculation exploded in 1956 with the funding of the Interstate and Defense Highway System. See “Interstate Crime” Column # 50 28 Feb 2005 accessible from the RESOURCE page at www.emrisse.com

    Now there is a new resource that allows anyone to check out location of places citizens can live if they want to lower transportation costs and have a smaller (and cheaper) carbon footprint http://abogo.cnt.org

    But wait, these are the SAME places Florida says the Creative Class WANTS to live. AND, it turns out it is the ONLY place those at the bottom of the Ziggurat can afford to live.

    Put another way, it is the ONLY place that society can afford to support Urban citizens no matter where they are in the economic Ziggurat.

    At SYNERGY we have been harping for over 25 years on the need to use Vacant and Underutilized land inside The Clear Edge and we have the position papers to prove it, so does Jim Bacon. Just so no one forgets, Mr. Bacon and EMR have also said – and continue to say: So long as they pay their fair share of location-variable costs citizens should be able to live where ever they want. A main driver of settlement pattern dysfunction are the hidden and neglected subsidies and externalities.

    In addition, municipal regulations and many other forces have prevented the rational evolution of human settlement patterns. The what, how, why and WHERE is spelled out in The Shape of the Future. The misguided regulations and other forces have raised the cost of the built environment – shelter, employment, services and infrastructure – to the determent of citizens at all scales. In Clusters, Neighborhoods, Villages, Communities, SubRegions and Regions citizens are not well served by the existing land use CoMixture, the lack of diversity and unsustainability.

    The simplistic “Abogo” tool linked above is still in Beta form but working out the bugs will just make it stronger.

    What it shows is: If you are in a Household that derives its primary support from Urban
    activities:

    Live and work INSIDE The Clear Edge.

    In fact the closer to the Centroid, the better. That is true for all scales of Urban places from the Cores of New Urban Regions to the Zentra of small Urban agglomerations in the Countryside that are the components of Balanced But Disaggregated Communities.

    Housing and other components of the built environment to necessary to support Resilient, Sustainable Regions will continue to be sound investments. In fact inside R=5 the residential values dipped and rebounded over the past three years. “Regional” averages mask what has happened in the past three years in the higher radius bands. When the value of Urban ‘improvements’ goes down, the hot air will leave the speculative Countryside bubble that has been expanding for over 100 years.

    This will help those who want to acquire land for contemporary farming close to the market but it will wipe out property tax as THE source of income for municipal jurisdictions. That is not a bad thing in the long term since revenue to support Agencies at all scales of governance should come from user fees and from taxes on consumption, not taxes on property. That is another story for another time.

    SYNERGY has recently applied Regional Metrics and newly available data to document the current trajectory of house values. “Current” means through yesterday. The results are just what you would expect after reading Bill Lucy’s new book Foreclosing the Dream or any of the material produced to date by PROPERTY DYNAMICS, a program of 1000 Friends of Virginia’s Future.

    Suffice it to say, that the invisible hand is FAR ahead of the current crop of Agency ‘planners’ (including those at the FED) and the political spinners in both dominant Clans. Strangely enough, the current market trajectory is NOT ahead of the best Regional thinking in the period 1960 to 1973. Inexplicably, the OPEC Oil Embargo resulted in the leadership of Agencies, Enterprises and Institutions to shift human settlement patterns in EXACTLY the wrong direction. You guessed it, that is yet another story for another time.

    SYNERGY is working on a list of strategies that Community and SubRegional Agencies, Enterprises and Institutions can implement to achieve a sustainable trajectory for themselves and their constituents (the voters), owners (including stockholders) and members. There is a lot that ‘special’ places like Greater Warrenton-Fauquier can do but time is running out and it will soon be too late to change existing policy, regulations, programs, projects and education.

    Now for that Donkey Clan and Ben’s Fed advice:

    Stop pretending something – ANYTHING – will bring back the good old days.

    Humans have burned through millions of years of stored natural capital, not just petroleum but concentrated minerals, marine resources, top soil, fossil water, a protective atmosphere.

    There must be a shift from Mass OverConsumption to REAL conservatism – aka, conservation.

    The focus must be on rational conservation objectives such as energy conservation, land conservation, air and water conservation, agricultural land conservation, species diversity and not exacerbating climate change.

    The Wealth Gap must be closed. Does anyone need to be reminded that the major component of the wealth of the vast majority fo citizens WAS the ‘equity’ in their home? Larry G’s comment on Jim Bacon’s post is right on by the way.

    The idea that making the rich richer will result in more trickle-down is DEAD. Things have been getting worse and worse for the majority for nearly four decades. It is time be honest.

    There are strategies to address systemic problems which the majority to can come to embrace in intelligently presented: stop mineral dissipation, stop top soil loss, stop ground water depletion, recycle, reuse and share. Live on energy income, not on capital.

    The party is over. Citizens deserve an opportunity to succeed, not a free ride and entertainment while they wait for the gravy train. There are adults in the US that will appreciate honesty.

    If the Donkey Clan abandons those at the bottom of the Ziggurat they will not just run the federal, state and municipal agencies into bankruptcy, they will lose their base.

    Elephant Clan has abandoned those in the middle of the Ziggurat. It is now faced with the defection by the Anger of Ignorance crowd.

    By continuing Business-As-Usual, the Donkey Clan will lose the bottom of the Ziggurat to populist demagogues as has happened in Latin America and there will be no one in either Clan for those in the middle to support. A five Clan future?

    The Donkey Clan must lay out the course toward a sustainable trajectory and be honest, be real. Or become a minor fifth Clan.

    There are less than 10 weeks to sell a new message. Some Clanspersons may lose the next election but the whole Clan will lose its soul AND its constituency on the current path.

    The times ahead will be difficult but there will be some entertainment too:

    Let us see how fast the ‘property rights’ advocates who own speculatively inflated land stop complaining about how “government” is preventing them from “doing what they want with their property” and start whining for “government” to provide price supports for their speculative interests in land?

    The Consumptionists have had the bull horn for 30 years. It is time for a new and sweeter tune from more refined instruments.

    EMR

  • The Whiplash Shift in Investor Sentiment

    Posted on

    by

    James A. Bacon

    Wow, the negative shift in investor sentiment has come faster and harder than I ever imagined. When I started writing “Boomergeddon” about a year ago, the U.S. economy was growing briskly and the stock market was rising. I certainly wasn’t alone as a pessimist, but I didn’t have much company. Indeed, I sometimes wondered if I was testing peoples’ credulity by suggesting that the U.S. might default on its debt within 15 to 20 years.

    Now I’m getting trampled by the stampede for the exits. Fear of inflation has turned into fear of deflation. Hopes for a strong recovery have morphed into worry about a double-dip recession. Sentiment gets worse by the day. Now there’s this: Gluskin Sheff economist David Rosenberg says the U.S. economy has entered a 1930s-style depression. Reports CNBC:

    The 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent, sending the stock market to a 50 percent rally in early 1930 as investors thought the worst had passed.

    “False premise,” Rosenberg said. “And guess what? We may well be reliving history here. If you’re keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%.”

    According to CNBC, major analysts from Goldman Sachs, JPMorgan and others have slashed 2010 GDP projections to the 1.5- to 2-percent range. Meanwhile, Morgan Stanley now says that global investors face defaults on government bonds, given the burden of aging populations and difficulty of generating more tax revenues. Reports Bloomberg:

    “Governments will impose a loss on some of their stakeholders,” Arnaud Mares, an executive director at Morgan Stanley in London, wrote in a research report today. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” The sovereign-debt crisis is global “and it is not over.” …

    “Outright sovereign default in large advanced economies remains an extremely unlikely outcome, in our view,” the report said. “But current yields and break-even inflation rates provide very little protection against the credible threat of financial oppression in any form it might take.” …

    “The conflict that opposes bondholders to other government stakeholders is more intense than ever, and their interests are no longer sufficiently well-aligned with those of influential political constituencies,” such as elderly voters and their claims on pensions and health insurance, Mares wrote.

    The sentiment is getting so negative, I’m tempted to become a contrarian. Sure, fellas, the situation is bad, but it isn’t that bad. We’ve still got 15 years before Uncle Sam goes broke. Give it a rest, already! (Original post on the Boomergeddon blog.)

    In all seriousness, Virginians need to pay heed. Time is running out to get our fiscal house in order and wean ourselves from the federal teat. The job of governance will not get any easier in the years ahead. It will only get harder.

  • The “Cooch’s” Curious Circle

    Posted on

    by

    James A. Bacon

    Want to see how Virginia’s hard right conservatives operate? Follow the circle.
    Del. Robert G. Marshall, a Prince William County Republican and a staunch social conservative, sets his social media a Twitter and before you know it, he has asked his dogmatic kinsman, Atty. Gen. Kenneth Cuccinelli, for a legal opinion on an issue that could come off a check-the-box list from Liberty or Regent University.
    Arizona’s racist anti-illegal immigration law gets slammed by a federal judge. Marshall tweets “the Cooch” who comes out with an opinion that in the Old Dominion, law enforcement can stop and question anybody they think might be undocumented. No matter that being undocumented is not a criminal violation of federal law which has jurisdiction here. It is a civil matter.
    Finally want to stick it to Roe V. Wade? Marshall asks the “Cooch” for a legal opinion on whether outpatient abortion clinics should have the same standards as full-service hospitals that handle just about everything from the common cold to coronary bypasses. If fully implemented, Cuccinelli’s ruling could shut down 17 out of 21 abortion clinics. He’s been trying to do that for all those years he was a legislator.
    Want to clear the state for Nativity scenes at fire stations even though it is still August? That’s foremost on Marshall’s mind so he asks the “Cooch” who says that Christmas displays are just fine on public property as long as other faiths have access, too.
    Reactions are mixed. The ACLU advises all to ignore Cuccinelli’s immigrant opinion but they are OK with the Christmas thing.
    One wonders, what is next? Mandatory church services on Sundays?
    Peter Galuszka

  • Boomergeddon Update

    Posted on

    by

    James A. Bacon

    In case you are one of those who pre-ordered a copy of Boomergeddon, here’s a status update. A small volume of books was delivered to Amazon.com late last week but they were insufficient to cover the number of preorders, so in the blink of an eye, the book status went from “preorder” to “out of stock.” As a consequence, many people are still waiting for their copy.

    We have made another shipment of books to Amazon.com, but the number ordered by the computer is ludicrously small, so it still may be “out of stock” when the books arrive in Amazon.com’s warehouse and are distributed to buyers. Just be patient. This trial by ordeal is common to unknown authors and small publishers. You will get your book.

    To keep you amused, I link to a brief profile that Rick Sincere wrote about Boomergeddon and yours truly in the Charlottesville Libertarian Examiner. (Note to self: Make sure you comb your hair before a journalist snaps your photo. Otherwise, your wife may not allow you out in public ever again.)

    And here’s a link to an interview by Scott Lee on the Freedom & Prosperity Radio Network. (Note to self: Learn to banish the word “uh” from your radio-interview vocabulary.)

    And, of course, there is always the Boomergeddon blog, where I post more regularly than I do on Bacon’s Rebellion. Since setting up the blog on Boomergeddon.us, I managed to purchase the .com domain from a cyber squatter. So, we are officially Boomergeddon.com now!

Now Available

Book cover of 'Dust Mites: A Second American Revolution' by James A. Bacon, featuring astronauts planting a flag with a blue and white emblem on a lunar landscape, with Earth visible in the background.
For sale on Amazon.com

The year: 2075. The American colonies on the Moon are getting restless under Washington’s tyrannical rule….

This second edition of “Dust Mites” has a snazzy new cover, includes helpful lunar maps, and is 5,000 words tighter than the original. The sequel, “Trogs,” is scheduled for publication this summer.

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Bacon’s Rebellion is Virginia’s leading politically non-aligned portal for news, opinions and analysis about state, regional and local public policy. Read more about us here.

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