Dean Heller’s Immoderate Vote

Heller Goo1

Once again, Nevada junior Senator Dean Heller gets stretched out into Immoderate territory in Senate votes this week.  On September 22, 2015 Senator Heller voted in favor of the unscientific and pretty thoroughly politicized “Pain Capable…” forced birth bill (H.R. 36) [roll call 268]

Senator Dianne Feinstein (D-CA) explained the opposition to the bill by noting it is  (1) unconstitutional because it bans abortion procedures before a fetus is medically considered viable and it does not include exceptions for a situation in which a woman’s health in endangered – both elements contradict Roe v. Wade and other precedents.  [RealityCK]

Senator Susan Collins (R-ME) added: “Do we really want to make a criminal out of a physician who is trying to prevent a woman with preeclampsia from suffering damage to her kidneys or liver, or having a stroke or seizures?” said Sen. Susan Collins (R-ME). “Do we want the threat of prison for a doctor who knows that his pregnant patient needs chemotherapy or radiation treatments?” [RealityCK]

For those unfamiliar with lady parts and how they function (which unfortunately seems to include a majority of Republican men in Congress) let’s note that preeclampsia generally occurs after 20 weeks, and one of the first signs is an increase in the woman’s blood pressure.  There is one and only one cure for preeclampsia – the delivery of the fetus. [MayoClinic]  The decisions made by the woman and her physician are going to be really tough at this point. 

The delivery has to happen before damage to the kidneys or liver becomes permanent – or fatal.  What happens to the fetus is problematic.  The usual assumption of viability in the U.S. is 24 weeks of gestational age.  Less than that gestational age and the fetus will likely not be physically mature enough to survive into the neo-natal period and achieve the capacity to be an independent human being. [NCBI]  However, there is another factor which isn’t biological.  The technology must be available to sustain the fetus delivered this early.  For example, even in developed western European countries such as Portugal the age of assumed viability is higher than in the U.S. [NIH]

What makes Senator Heller’s position so radical is his vote to criminalize the efforts of a physician who is confronted with preeclampsia in a pregnant woman after 20 weeks into the pregnancy – when the condition most often appears – and his assumption that all pregnant women and their physicians have access to the kind of neo-natal technology associated with a neo-natal intensive care unit.  And, not just any neo-natal care unit, in cases of extremely pre-mature infants we’re talking about Level III care capacity.

Now scroll through the Nursing Institute of Nevada list of hospitals and their technical and staff capabilities.  Two list Level II nursery care, six list Level III facilities – and they are all located in either the Las Vegas or Reno area.  Treating preeclampsia outside one of Nevada’s two metropolitan areas requires all the emergency training and equipment for the most extreme emergencies.

As if the situation weren’t complicated enough, preeclampsia’s early symptoms – headaches, nausea, plus aches and pains are all things that happen in a normal pregnancy.  However, when the headaches are severe, there’s blurred vision. severe abdominal pain,  and  shortness of breath – it’s time for the emergency room. [MayoClinic]   The condition occurs in about 5%-8% of all pregnancies, and can appear at any time during pregnancy, delivery, and up to six weeks post-partum, although it most frequently happens in the final trimester. [PreecOrg]

It would be very useful if more Republican men knew that a pregnancy involves more than having a wife who reacts to certain smells, and  has trouble with shoe laces, in addition to the general knowledge that it’s a good idea to keep the gas tank filled in the family wagon.

The radical forced-birth crowd in the U.S. Senate seems not to understand that their anti-abortion grandstanding has implications in the real world in which not all pregnancies are trouble free, not all women and infants have immediate access to the very latest technology and medical expertise, and not all complications in pregnancies take place conveniently before some artificially established gestational age.  It’s too bad Senator Heller has joined this herd.

Recommended reading for Republican men: “Frequently Asked Questions,” Preeclampsia Foundation. “Familial Occurrence of Preeclampsia,” National Institutes of Health, NCBI. “Late Pregnancy Complications,” Patient.Info. “Preeclampsia,” Mayo Clinic. “Medline Plus: Preeclampsia,” NLM, NIH. “Preeclampsia,” WebMD.

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Filed under Health Care, Heller, Nevada politics, Politics, Republicans, Women's Issues

No Free Lunch No Free Market

“The market is a human creation. It is based on rules that humans devise. The central question is who shapes those rules and for what purpose,” Reich concludes. “The coming challenge is not to technology or to economics. It is a challenge to democracy. The critical debate for the future is not about he size of government; it is about whom government is for.” [Robert Reich]

Bingo!  Adam Smith, in Wealth of Nations, offered the Invisible Hand – and economists have been grabbing it ever since. IF, they mused, if all buyers and sellers were truly free then markets would achieve equilibrium and all will be well.  Everyone will act in their own self-interest, and the competition induced will benefit all.  There will be an equilibrium price – for anything – when the demand and the supply are equal.  However, there’s always been a flaw in this argument.

The cracks begin showing when it’s noted that “price” and “value” are not the same thing.  Truly, there is a “market value,” i.e. the price at which an asset would trade in a competitive auction setting, but this isn’t a definition of value.  Value is a qualifier we assign to things that are beneficial, significant, advantageous, or useful. Let’s digress a moment and review why this differentiation between price (even market price) and value is important.

Finance works best when it acts as the conduit for moving capital from places of surplus to places of scarcity.  In the simplest possible terms, finance allows the money in someone’s savings account to be invested in someone else’s business enterprise.   The owner of the savings account benefits from the earnings; the owner of the business enterprise benefits from the extra cash to expand his operations.   Not to put too fine a point to it, but when finance doesn’t move capital from surplus to scarcity then it’s not finance – all too often it’s merely gambling.

Additionally we should note that the the system itself is a gamble.  If I put in a $1000 investment in Widgets International Inc. then I’m betting my shares will either pay dividends, gain in price, or preferably both.  And now to return to “value.”  I’m taking a risk with my money, but I’m also hoping to invest in something of value – perhaps WI Inc. manufactures the best product on offer which helps nurses prevent bed sores from afflicting their patients.  I have $1000 on hand (surplus), Widgets International Inc. needs to expand to meet the demand for its product (scarcity) and finance allows the conduit to work toward mutual benefit.

However, what if I behave as though my $1000 really isn’t surplus? What if I make a side bet that the price of Widget International will go down?  In this instance I am buying a “financial product” which has precious little to do with the product the company is manufacturing, a bit more to do with how the company is managed, and a great deal to do with how a hedge fund can be used to “manage wealth.”   Or, to put it another way – to reduce risk.  Money (capital) slathered about in an effort to reduce risk isn’t part of that conduit for moving capital from surplus to scarcity, and it (as we’ve seen) is fraught with consequences.  The word “behave” is the key term.

If the concepts of price and value are problematic in a discussion of American economics, then our Economic Man as described by Adam Smith is also at issue:

“Economic Man makes logical, rational, self-interested decisions that weigh costs against benefits and maximize value and profit to himself. Economic Man is an intelligent, analytic, selfish creature who has perfect self-regulation in pursuit of his future goals and is unswayed by bodily states and feelings. And Economic Man is a marvelously convenient pawn for building academic theories. But Economic Man has one fatal flaw: he does not exist.” [Harvard]

The “convenient pawn” became the cornerstone of neoclassical economic theory.  The theory elevated the pawn, and the pawn returned the compliment by rationalizing everything from child labor to global out-sourcing.   The Magic Market would “equalize” everything, and all would be well.  In fact, there is no such thing as a free lunch, and there is no such thing as a free market.

In fact, if we skip the jargon (such as a trader saying “I make markets”) what we understand is that traders in the financial sector are sales personnel who have products to sell to prospective buyers.   Last time we looked those sales personnel, the buyers, and the sellers were all human beings – or human beings managing various and sundry enterprises.  Even if  trading is  computerized, someone – some human being – had to program those computers, which still have no innate capacity to count beyond 0 to 1.  There are some benighted souls who believe that if we have just enough “self monitoring,” and more elegant algorithms those messy, inconsistent human beings will no longer screw up the financial markets.  Again, we’d have to ask, “Who is writing those algorithms?” And,  how much “self-monitoring” is good enough?   There are markets, but they are certainly not free of human beings – humans being the brokers, the agents, the buyers, and the sellers.

“Who shapes the rules, and for what purpose?”

We have rules for all manner of human transactions.   When sharing a meal we don’t eat the mashed potatoes with our hands. When getting an invitation with an “RSVP” we don’t wait until after the event to respond.  A soccer match is played with only 11 on each side.  The FAA has rules for take offs and landings to minimize the risk of collisions.   And we have rules for financial markets.   Why? Because a market is simply a transaction between two human agents – buyer and seller – no matter how computerized.

One thing we did learn during the debacle of 2007-2008 was that some investment houses were selling products on which they could calculate a price but they were incapable of determining the product’s value. In some instances the artificiality of the product and its distance from anything tangible, such as a home mortgage, made it impossible to determine what the product was actually worth.  All too much of the Stuff had a “market price” but turned out to have no value in the last analysis.  Thus the demise of Lehman Brothers.

There are some questions at the intersection of economics and politics in 2016:

  • Do we want an unfettered market for financial products? Do we want rules advantageous to the sellers of products in the financial markets? Do we want rules advantageous to the buyers in financial markets? Do we want rules which protect the general public from irresponsible or anti-social behavior on the part of the buyers and sellers?
  • Do we want those who write the rules for the transactions in the financial markets to have the interests of the general public in mind?
  • Do we support agencies which enforce rules designed to restrain the behavior of buyers and sellers in the financial markets?
  • Do we encourage investment or speculation?
  • Should our system of taxation reward work or wealth?

We can focus down on a single issue illustrative of the general regulatory environment – this past July a Senate Committee was taking testimony on a proposed rule that investment advisers place the client’s interest first when deciding upon investments in retirement accounts. One member of the panel offered that the rule would “cost” the investors some $80 billion because financial firms would simply raise fees to make up the profit differential if they couldn’t put their own interests before the interests of their retirement account clients. [Litan pdf]  However, what didn’t go unchallenged was that the study cited by the panel member was financed by the Capital Group, a corporation which definitely stands to benefit if the proposed rule from the Department of Labor is not implemented. [BostonGlobe]

The question highlights the element of freedom:  Is the investment adviser free to purchase elements in a portfolio which enhance the profitability of his firm, or must the adviser give first priority to those investments which will best serve the clients’ interests?  Is the client free to assume his agent (investment adviser) is acting in his or her best interests?  Is the client free to know how investment portfolio decisions are made?  It isn’t a question of whether or not the “market” is “free,” it’s a question of who is free to do what.

Consider for a moment a situation in which a large employer has selected a financial advisor to manage its retirement program.  There are three human agencies at play: the employer, the employees, and the financial advisors.  And, because there are human beings involved we should assume that these relationships are contractual. If the financial advisors are placing their own interests above those of the retirees, then must the employer seek to break the contract? Under what conditions and at what expense?  Are the employees free to take their contribution elsewhere? But, what of the employer’s contributions?   In the rarefied theoretical academic version of a Free Market this would never happen – all the pawn would march neatly across the board. However, this isn’t a theoretical academic version – this is real life – and if the financial advisor is “free” to act in his or her firm’s interest, what happens to the contributions of the employer and the employee? If they act in their self interest then they must cut ties with the advisors.  If the adviser is “free” to act in his or her self interest the employer and the employees lose value in their retirement investments; if the employer and employees are “free” to act in their own self interest the adviser loses the account.   We are left asking: Who is going to write the rules of our economic game? Or to put it in economic-political terms:

“The most important political competition over the next decades will not be between the right and left, or between Republicans and Democrats. It will be between a majority of Americans who have been losing ground, and an economic elite that refuses to recognize or respond to its growing distress.”  [Reich]

References/Recommended Reading:  John Lanchester, “Money Talks: Learning the Language of Finance,” New Yorker, 8/4/2014.  Craig Lambert, “The Marketplace of Perceptions.” Harvard Magazine, March-April 2006.  Michael Blanding, “The Business of Behavioral Economics,” Forbes, August 2014.  Adam Ozimek, “The Future  Irrelevancy of Behavioral Economics,” Forbes, September 2015.  Dan Ariely, “The End of Rational Economics,” Harvard Business Review, July-August 2009.  Paul Krugman, “How did economists get it so wrong?” New York Times Magazine, September 2009.  Noah Smith, “Finance has caught on to behavioral economics, Bloomberg View, June 2015.  Robert Litan, Senate Subcommittee on Employment and Workplace Safety, Senate HELP, July 21, 2015. (pdf) Annie Linsky, “Warren…Brookings Institution,” Boston Globe, September 29, 2015.  Robert Reich, “How the pro-corporate elite has rigged the system against the rest of us,” Alternet, September 29, 2015.

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Filed under Economy, financial regulation

Words from the Week and the No True Scotsman Fallacy

GOP Dinosaur Distress Flag Understatement of the Week: On the resignation of John Boehner (R-OH): “Boehner has faced constant pressure from conservatives who believed he was too willing to compromise with President Barack Obama and too likely to rely on Democratic votes to pass crucial legislation. The approaching confrontation over government spending had raised the prospect of another possible challenge to his speakership by conservatives, something Boehner has beaten back several times before.” [LVRJ]

Word salad from times past:  Representative Mark Amodei (R-NV2) on his vote for Rep. Boehner for the speakership: “

“So we ‘fire Boehner’ and start a month-long or longer election for his successor at a time when we should be dismantling the Affordable Care Act, taking care of our veterans, reducing the deficit, navigating foreign affairs and solving Nevada’s federal issues? That’s a great plan, if you want to continue the dig on Congress as a place where nothing gets done. 

“I am perfectly fine with differing views. Not everyone is going to agree all the time. But it is a bit discouraging to get lit up on an issue where in some cases a person has taken a thought or two from one source and treated it like the complete and final word.”

Present Palaver: Representative Amodei’s right on one score – the Congress has a 14% approval rating. [Gallup]  And, he may be correct on another.  When Amodei spoke to the previous “fire Boehner” attempt and predicted a squabble for the Speakership, the comments might have been predictive, this round could see yet another scramble between supporters of Rep. McCarthy (R-CA), Rep. Hensarling (R-TX), Rep. Roskam (R-IL) and perhaps others. [TheHill]  And then there’s the comment from Rep. Peter King (R-NY) – “this is a victory for the crazies.” [TheHill]

Possibly very true words:  The extension of Representative King’s remark — “You can’t appease these people.” [TheHill]

More words:  There are two ways to see compromise, and Winston Churchill expressed both.  On one hand he said, “An appeaser is one who feeds a crocodile – hoping it will eat him last;” while on another occasion he said, “The English have never drawn a line without blurring it.” [FQ] There are situations in which either or both might be true.  However, the current manifestation of the American GOP seems to have glommed on to the former without consideration of when the latter might be more appropriate.

The Republicans have become more conservative, and thereby less likely to appreciate Churchill’s second comment on compromise.  The Poole-Rosenthal study emphasized this point:

“The short version would be since the late 1970s starting with the 1976 election in the House the Republican caucus has steadily moved to the right ever since. It’s been a little more uneven in the Senate. The Senate caucuses have also moved to the right. Republicans are now furtherest (sic) to the right that they’ve been in 100 years.”  [NPR]

Perhaps Rep. King’s ‘crazies’ have adopted the line attributed to the script writers of the 1949 oater “She Wore A Yellow Ribbon,” in which John Wayne’s character said, “Never apologize and never explain – it’s a sign of weakness.” [AskMeta]  There are some interesting pieces covering this general topic.  See, for example, Paul Rosenberg’s “They’ll always move further right: Why every defeat only makes Republicans more extreme,” in Salon, June 24, 2015.  Or, Ryan Dennison’s post in Addicting Info, “As Democrats move left, Republicans have moved dangerously to the extreme right,” June 28, 2015.  Or, Bill Schneider’s article, “How far right can Republicans go?” written for Reuters, May 21, 2014.

The current flap involving the Republican Congressional leadership illustrates another pattern that may be afflicting the GOP as it moves inexorably to the extreme right – the “reinterpretation of evidence in order to prevent the refutation of one’s position.” AKA The No True Scotsman Fallacy. []

The fallacy is a form of circular argument which substantiates an existing belief by dismissing any counter-examples to it. Such as the classic form:

(1) “Angus puts sugar on his porridge,” (2) No (true) Scotsman puts sugar on his porridge; therefore (3) Angus is not a (true) Scotsman.” Therefore, Angus is not a counter-example to the claim that no true Scotsman puts sugar on his porridge.”

By changing the characters, we could create another example. (1) Economist A demonstrates that lowering taxes doesn’t create more tax revenue. (2) No true Economist would argue that lowering taxes doesn’t increase revenue; (3) therefore Economist A is not a true economist; and therefore Economist A is not providing counter-examples to the claim that no true economist would claim otherwise.

Or we could say: (1) There are instances in which the circumstances of a pregnancy call for abortion to be provided as a medical procedure; (2) No true conservative would ever countenance an abortion; (3) Therefore no one advocating abortions under these circumstances is a true conservative; therefore there is no counter-example to the claim that there are circumstances in which abortion is an appropriate medical procedure.

Playing the pseudo-patriot card is easy in the creation of a foreign policy example of the No True Scotsman Fallacy.  (1) Diplomat B drafts a treaty with a nation not recognized as an ally. (2) No true American would ever agree to a treaty with ____; therefore (3) Diplomat B is not a true American; and therefore, the fact of the treaty doesn’t provide a counter-example to the proposition that no true American would agree to a treaty with ____”

The problem, of course, with the application of the No True Scotsman Fallacy is that the definition of “TRUE” becomes inextricably entangled with the policy proposals under consideration, and the further the illogical thinking extends the more narrow the definition of “TRUE.”   Thus, the No True Scotsman Fallacy hinges on a definition of  a “true” American or a “true Christian” which serves the advocate’s personal set of ideological beliefs – and only the advocate’s personal set of ideological beliefs.

Hence, no TRUE Republican could compromise with the Democratic side of the aisle in Congress.  Speaker Boehner compromised with the Democrats. Ergo Speaker Boehner is not a “true” Republican.   And then the Republican Party becomes too extreme for Republicans?

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Filed under Boehner, conservatism, Nevada Congressional Representatives, Nevada politics, Politics, Republicans

Pain Capable Panderers Get The Wedgies

Heller Goo 2

No matter how much he may try to stretch himself into a “moderate” shape Nevada Senator Dean Heller is aligned squarely with the radical right when it comes to women’s health.   The U.S. Senate can’t seem to address major items like climate change, infrastructure, and the voting rights act, but the Republican controlled body can certainly spend time on women’s bodies.  Witness: H.R. 36, and the vote thereon. [rc268]

H.R. 36 is the product of the House conservatives’ brain-flatulence and emphatic embrace of pseudo-scientific items like a “pain capable” fetus, in which abortions would be banned after twenty weeks.  What’s the science?

“Published research generally supports an experience of pain being possible only later in gestation than 20 weeks. A synthesis of available evidence was published in the Journal of the American Medical Association in 2005 by experts from the University of California, San Francisco, and elsewhere, and their report concluded: “Evidence regarding the capacity for fetal pain is limited but indicates that fetal perception of pain is unlikely before the third trimester.” The third trimester begins at 27 to 28 weeks from conception.” [FactCheck]

There are a couple of things to notice in the summary above. First, “evidence regarding the capacity for fetal pain is limited,” or, restated, there is limited evidence (read: little) that the fetus is able to perceive pain. Secondly, if we accept the “limited’ evidence, then the perception is unlikely until 27-28 weeks after conception. However, nothing scientific stopped Senator Dean Heller from voting to bring H.R. 36 up for a vote.  The motion to break cloture failed.

Nevada’s other Senator, Harry Reid, offered the following summation of GOP efforts:

“It is said that you cannot make the same mistake twice. The second time you make it, it’s a choice. On every issue imaginable Republicans are choosing to  employ the same failed strategy. Over and over again, they drag Congress and the American people through votes that are publicity stunts designed to boost their conservative records.

Today we stand in the midst of yet another Republican show-vote designed to honor the political wish list of extremists. Once again, Republicans have decided to place women’s health at the center of their ideological campaign. We’ve seen this tactic before.  It doesn’t work. Americans are tired of Republican attacks on women’s health.”

And yes, the bill is going nowhere, and the vote was a waste of time.  However, it does appear indicative of a Republican strategy in this Constant Campaign season.

Enter The Wedgies

For the sake of argument, let’s define a wedge issue as a social or cultural topic introduced into a campaign which seeks to attract and galvanize persuadable voters who might otherwise focus on economic or other major issues.  There’s nothing particularly new about this technique.  We could start almost anywhere, but 1968 seems as good a place as any, as an election into which two divisive issues were raised: “Public Order,” and “busing.”  The former sought to brand Democrats as the party of chaos (Chicago civil unrest) and the party supporting “forced integration” for which “busing” was the stand-in.  The busing (race) issue morphed into “States Rights”  and “welfare queens” (race) during the 1980 campaign, which was, in turn,  revised into the “Affirmative Action” (race)  issue in 1996. The “gay marriage wedge issue” was used to good effect in the 2004 election season.

Clinging to the Wedgies

While wedge issues are extremely helpful during primary elections, their utility may diminish during general elections depending on the level of voter turnout.  The danger of the wedge strategy is that it may be viewed as what is on offer from a party which has very little else to publicize to a national audience.  The second danger inherent in the wedge strategy is that the issue itself may become marginalized and less effective in national elections.

It’s a useful exercise during any campaign season to take a step away from the publicity attached to single issues or single candidates and see what the polling says about national priorities.  For example, the July 28, 2015 polling done by Quinnipiac University shows registered voters placing the highest priority on the economy and jobs (37%), health care (13%), terrorism (12%), and foreign policy (9%).  Immigration (9%), Climate Change (6%), federal deficit (6%), taxes (3%) rounded out the polling.  Those social and cultural issues garner about 2% to 3% in other polling. [TPP]

Note that of the contemporary wedge issues only immigration is seen as a major national priority (9%) and the polls don’t indicate the perspective of the voters in terms of either passing comprehensive immigration policy reform, or on the other hand, a policy of mass deportation. Gay marriage and abortion barely register with a majority of American voters.

Using gay marriage as a wedge issue appears to be one of those issues whose time has come and gone. Gay marriage might have been a potent wedge issue in 1996 when only 27% of the population thought those marriages should be valid, however its luster faded by 2015 when approximately 60% of the American public agreed that gay marriages should be legal. [Gallup] The fact that only the most radical of the Republican Party’s presidential candidates sought to exploit the issue of the Kentucky county clerk leads to the conclusion that this issue has also been marginalized.

The next available wedge issue for social  conservatives is abortion, and it appears to be moving center stage for its close up in the 2015 primary season.  The priority given to the abortion issue by the GOP has been explained thusly:

“The answer lies in the Republican Party’s shift to the right. A decade ago, between 30 and 40 percent of Republicans identified as pro-choice. This May, (2012) that number was a scant 22 percent. It’s hard to know whether that’s the result of Republicans changing their minds about abortion, or pro-choice respondents ceasing to identify as Republicans. But the result is the same: The party is increasingly uniform in its opposition to abortion.” [AmProsp]

This might help to explain why H.R. 36 (and other similar legislation) is perceived as a cohesive issue for Republicans and why Senator Heller and others have attached themselves to it.  Trends in voter affiliation may support the thesis that some are ceasing to identify as Republicans since polling was done in  2003.  As of 2014 32% responded as Democrats, 39% as Independents, and 23% as Republicans; a loss of 7% in self-identification with the GOP since 2003. [PRC]  If the trend continues, we might reasonably conclude that the fixation in the GOP with what appears to be a wedge issue of limited utility could have serious consequences for that party in upcoming national elections.

Given the Republican Party’s march to the right, the willingness of its national leadership to adopt a wedge issue like abortion, and the continual emphasis placed on the topic by ultra-conservatives, probably means we will see more publicity about Planned Parenthood, more non-scientific legislation, and more lock step votes such as that of Senator Heller in the U.S. Senate.   And it’s still over 400 days until the next national election.

Recommended/Reference: N. Coca, “Wedge Issues: A 2008 Historical Preview,” NithinCoca, January 2008.  D.S. Hillygus, T.G. Shields, “The Persuadable Voter: Wedge Issues in Presidential Campaigns, Princeton University Press, 2009.  K. Walsh, “Wedge Issues Take Center Stage in 2016 Race,” USNWR, April 2015.  Sen. Harry Reid, “Republican Attacks on Women…” Press Release, September 2015.  D. Townshend, “Abortion: The New Wedge Issue,” American Prospect, August 2012.  Pew Research Center, “Trends in Party Affiliation,” April 2015.  The Polling Report, “Problems and Priorities,” July 2015.

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Filed under abortion, Heller, Nevada politics, Politics, Reid

VW Bugs

VW “With three Volkswagen and two Audi dealerships in Las Vegas told to stop the sale order of its four-cylinder diesel vehicles, Volkswagen AG said Tuesday that a scandal over falsified U.S. vehicle emission tests could affect 11 million cars worldwide as investigations of its diesel models multiply.” [LVRJ]

There are some interesting layers to this story.  Let’s call layer one the “regulations” layer.  We do want to set standards for the emission of nitrous oxide, which accounts for about 5% of greenhouse gas created by human activity. And, the stuff tends to stick around:

“Nitrous oxide molecules stay in the atmosphere for an average of 114 years before being removed by a sink or destroyed through chemical reactions. The impact of 1 pound of N2O on warming the atmosphere is almost 300 times that of 1 pound of carbon dioxide.” [EPA]

Therefore, it sounds like a good idea to set some standards for light duty vehicle emissions. [ pdf]  Volkswagen, desirous of selling its products – in this case four cylinder diesel powered cars – was subject to those vehicle emission standards, just like other diesel vehicles manufactured by Ford, Mercedes Benz, and BMW. [AutoTrader]  So, why would the corporation cheat? One important reason is that the company could not manufacture a car with the three legs of the stool: Performance, Fuel Economy, and Low Pollution – and maintain its profits. [Vox]

As everyone knows by now, the corporation decided to install defeat software which fudged the numbers when the cars were being tested for emissions. In short, they could get the performance levels they wanted, at profitability levels they wanted, and this done by sacrificing the pollution part of the equation.  This explains the wide difference between the results of the road tests and the lab tests.

“The Environmental Protection Agency alleges the automaker had designed software to let its diesel cars detect when they were being tested for emissions. The software, known as a “defeat device,” was installed in some 482,000 cars, spanning model years 2009 through 2015, regulators say.” [LVRJ]

Again, as everyone knows by now, this was patently illegal.  Patently illegal behavior by a company with sales revenues of $202.46 billion in 2014; gross income of $33.88 billion; and, a net income of $10.85 billion. [MktWtch] Prior to this debacle, VW’s ROE (return on equity) was at 11.84%, Ford reported 14.33%, and BMW’s ROE was 15.61% [YCharts]

Investors like watching the ROE because:

“Return on equity (ROE) measures the rate of return on the money invested by common stock owners and retained by the company thanks to previous profitable years. It demonstrates a company’s ability to generate profits from shareholders’ equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate growth. Return on equity is useful for comparing the profitability of companies within a sector or industry.” [YCharts]

VW’s earnings for 2015 were estimated as about $234 billion. Ford, by contrast, was expected to see about $150 billion for 2015.  On June 24, 2015 VW was selling at $218.40/share; things started to go south quickly after VW hit $162.40/share on September 18, 2015, and the stock is reported at $111.50 September 23, 2015.   We are now sliding into the second layer of the story.  It’s not just that VW stock took a dive after the cheating was reported – nor that the cheating caused investors to sell – it may very well be that the very thing the corporate management feared, which caused the cheating, was the proximate reason for the Big Slide.

The Management Layer.   VW’s annual report to investors opens with a general description of board operations, “We also receive a detailed monthly report from the Board of Management on the current business position and the forecast for the current year. Any variance in performance as against the plans and targets previously drawn were explained by the Board of Management in detail, either orally or in writing. We analyzed the reasons for the variances together with the Board of Management so as to enable countermeasures to be derived.” [VW pdf]

What we appear to have at this point is Management Speak for Shareholder Value management.  It’s probably safe to assume that the discussions of “current business position” included the old standbys sales, revenues, expenses, liabilities, and analyst expectations.  We can base this conjecture on the reference to the “forecast for the current year.”  Remove the gilding on “variance,” and “targets,” and we’re most likely talking about share prices predicated on earnings expectations. 

So, in order to keep the earnings expectations nice and high, and thereby secure higher share prices – the management decided to roll the dice and hope that no one caught on to the Defeat Device.  More simply stated: Shot. Into. Own. Feet.

If there were a better reason to chuck the Share Holder Theory of Management – or at least to modify it such that it doesn’t drive the decision making process into the nearest convenient ditch – this just might be the appropriate occasion.

Note that it is not that Volkswagen wasn’t a profitable company.  It had a perfectly acceptable RoE (11.84%) with earnings expected to be in the $230B range for 2015.  Nor did the 4 cylinder diesel engine cars constitute a major portion of its sales.  While the total number of cars involved isn’t clear yet, VW has shut down sales of the 2015 and 2016 “clean diesel” models, noting that 23% (7,400) of new cars sold in August were diesel. [NYT]  Volkswagen Group manufactured some 10.2 million vehicles in 2014. [Stat]  The North American production for 2015 was estimated at 0.64 million. [Stat]

It almost defies common sense to perceive how cheating on the emissions testing for a group of products which were not a major part of the American market was really supposed to enhance the bottom line.  Unless, we revert to the “every penny counts” mindset in maintaining a certain targeted profit level.  Let’s take an educated guess that it was more important for VW management to maintain profit (and thus share value) than it was for them to develop and produce cars with legal levels of emissions, acceptable standards for performance, and reasonable fuel efficiency.  They were more interested in making money than in making cars? More interested in short term profits and rolling those dice against long term losses?

It wasn’t that long ago that Volkswagen wanted to be the global leader in unit sales, but as a CNBC commentator put it: “Volkswagen is learning that getting ahead at all costs eventually catches up with you. So much for being the leader on a global basis on auto sales.”

The international layer.  Diesel powered cars are much more popular in Europe than in the U.S.  Thus, economists are trying to sort out what the impact will be on the Eurozone economy [Express]  The company is now facing litigation in Italy over fuel economy related issues. [Telegraph]  And, there are reports that the EU is looking at stricter rules to close the gap between laboratory and road test results. [EuObs]  Ironically, a company that didn’t want to play by the rules may find itself facing a more rigid regulatory regime in the very part of the planet where it had 25% of the market.  As of yesterday, there were calls for greater scrutiny of all automobile manufactures in Europe. [MrktWtch

Perhaps even more ironically, a company that wanted to increase its value managed to cause a 30 billion Euro drop in market cap in two days. [MrktWtch]  The CEO has resigned, the Chancellor of Germany is calling for a prompt investigation, [Telegraph] and the UK is entering the lists for a probe of what went so ridiculously wrong. [Guardian]

What went wrong?  What’s been going wrong for a while now – the story sounds entirely too familiar?  Financial institutions which sold and then bet on the value of financial products on which they could not place a value (Lehman Brothers et al.) in the U.S. in 2007-2008? Subprime CDOs?   Bankers colluded to fiddle with the LIBOR rate?  Does it sound like the same motivation as seen in the Worldcom and Enron?  It’s founded in the same swamp land all the other egregious examples have inhabited – greed.

Perhaps it’s too easy to forget that money isn’t the root of all evil; it’s the LOVE of money, or  that “For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.” [1T 6:10]  There will be sorrows aplenty – in the regulation layer, the management layer, and on the international scene.  There is a relatively fine line between seeking economic growth and downright avarice, and when it’s crossed the results can be catastrophic.  The question becomes: How many more times do we have to see this play before we get the point?

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Sound and Fury Signifying Something: Nevada Republicans vote against funding Planned Parenthood

Planned Parenthood Stand

It doesn’t take much imagination to guess how Nevada’s Republican Representatives in Congress voted on H.R. 3134, the bill to defund Planned Parenthood.  Yes, they all voted in favor of the resolution. [LTN]  This would primarily impact three centers in the Las Vegas metropolitan area (2), and one in Reno.  Let’s be clear about what the Nevada Republicans wanted to “de-fund.”  Those public funds come from two programs. Medicaid, a health care program for lower-income Americans, and Title X, a federal family planning program which also serves lower-income individuals  constitute most of the funding appropriated, with Medicaid getting the largest portion.   What is almost beyond understanding is why the resolution was necessary – other than as a vehicle for political grandstanding:

“The 1977 Hyde Amendment dictated that federal Medicaid funds could only be used to fund abortions in cases of rape, incest or to protect the life of the mother. However, some states have expanded cases in which they will provide funds. Currently, 17 states allow funds to be used for “medically necessary” abortions. In those cases that these states count as medically necessary but that are not permitted by the federal guidelines, states cover the cost alone.” [KNPR]

Thus, in essence, what the Republican contingent from Nevada is saying is that they do not wish to adhere to the Hyde Amendment, and instead wish to deny Medicaid funding for abortions resulting from rape, incest, or to protect the life of the mother.  If this isn’t a radical position it would be hard to imagine what might be.

We could go a step further and say that what the Nevada Republicans are saying is that a wealthy woman who would obviously not qualify for Medicaid is perfectly free to have any medical procedure she can afford – BUT lower-income women who depend on the services of clinics such as those established by Planned Parenthood have NO options in cases of rape, incest, or the need to protect the very life of the mother.  Again, if this isn’t elitist, it’s hard to imagine what would be.

Another element which makes this entire issue devolve into the inane is that there are, in fact, sliding scale payment and free clinics in Nevada which offer some family planning and medical services.  In the Reno area there are about ten such clinics, but only one which provides “abortion referrals.” That would be the Planned Parenthood clinic.  Of the 29 free or reduced cost clinics in the Clark County area only two advertise either abortion services or abortion referrals. Planned Parenthood. One advertises post abortion services, and other referrals.   However, if one is a radical advocate for forced birth, then defunding the only abortion procedure providers would be a desirable thing?

For those who believe that abortions should be “safe, legal, and rare” the notion that de-funding will be some kind of blessing is illogical, irrational, and perhaps even deadly.

Nevada’s Republican Representatives, no matter the political spin they may attempt to apply, have aligned themselves with the Forced Birth radicals, and in doing so have decided that low-income women should be forced to carry pregnancies to term even if they are (1) the result of rape; (2) incest; (3) or are perilous to the life of the mother.

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Distracted to Distraction?

carnival barker What are there? Some 412 days until the next general election, and the broadcast media is behaving like that is going to happen any moment? Perhaps we might call the campaign thus far, as presented by the beltway media and associated punditry, “The Click Bait Campaign?”  There are as many explanations for why the campaign appearances and speeches by Democratic candidates (Clinton, Sanders, etc.) aren’t getting the press coverage garnered by the Republican Clown Car as there are Punditatti to express them.  But while the press-gangs muse about whether Secretary Clinton is seen as “reliable,” or if Senator Sanders is perceived as “electable,” of if candidate Fiorina is “crisp and effective”… or if candidate Trump is “serious”… we’re missing some issues that deserve far more attention than the National ADHD click bait coverage is giving us.  Here’s what I’m waiting to hear more about.

The national economy.  The candidate who can convince me that he or she understands the shape of the American economy is probably the one who will get my vote.  Surely someone can clarify and amplify the changes in the U.S. economy in the past forty years:

“Previously, income grew more or less in step with household wealth. From 1962 to 1966, a period of low inflation and robust economic growth, real private sector wages rose 27.5 percent while real net worth increased 23.6 percent, according to Bloomberg News calculations based on government data. In the five-year period ending in 1996, real net worth gained 15.6 percent while private wages grew 11.3 percent. More recently, the gap between household net worth and wage growth has widened. From 2001 to 2005, the value of household assets minus liabilities rose 16.6 percent after inflation. Private sector wages rose just 2.7 percent.” [Bloomberg 2006]

Thus we  have an hour-glass economy, [Salmon, Reuters] one in which the wealth is concentrated at the upper end of the scale, and more occupations continue fall into the low-income levels. [Salon]  Senator Sanders has made continuous reference to the Income Inequality Gap, [Sanders] and Secretary Clinton has made this topic part of her repertoire on the campaign trail. [WSJ]

By February 2015 someone on the Republican side of the aisle noticed the Income Inequality gap (hour glass economy) [NYT] and Senator Marco Rubio attempted to slot into the issue by suggesting expanding the Child Tax Credit and cutting the tax brackets from seven to two (15% and 35%) unfortunately there’s no suggestion as to how to pay for this. Nor does he specify how to pay for expanding tax credits to childless adults; put simply, his arithmetic doesn’t work.  [NYT]  And, then there’s the rather tired Republican “promise” to create “flex funds” – another way of expressing the block grant anti-poverty programs proposal which lends itself nicely to eventual (and predictable) cuts to the grants by Congress.  In short, there’s nothing much new here: Credit Card Conservatism, and cuts to anti-poverty programs.  Meanwhile, we have the Limping Middle Class.

Perhaps we need a What To Watch For List?

  • Which candidates are speaking of a taxation system which rewards work and not just wealth?
  • Which candidates are addressing the decline in middle class income jobs in this country?
  • Which candidates are advocating equal pay for equal work? And/or an increase in funding for child care?
  • Which candidates are proposing an increase in the federal minimum wage?
  • Which candidates are suggesting we need to address the restoration of the manufacturing sector in this country?
  • Which candidates are supportive of workers’ rights to organize and form unions to bring more balance with multi-national corporations?
  • Which candidates are advocating funding for the improvement and maintenance of our national infrastructure?

It may be difficult to listen for these points since the media seems intent on speculating about the “electoral” effect of what candidates are proposing instead of explaining or clarifying the implications of their policy positions.  Meanwhile the media focuses on “Abortion!” or the “Planned Parenthood” hoax videos – the “Email,” the “Islamists!” the Whatever Will Get The Clicks of the Day.  A little over 412 days from now Americans will vote, and we’ll probably cast ballots based on the issue that is and remains the top American concern: It’s the Economy Stupid. Or, It’s the Stupid Economy.

Recommended: Robert Reich, “The Limping Middle Class,” New York Times, 9/03/11.  Danny Vinik, “Marco Rubio…”, New Republic, 1/14/15. Brendan Nyham, “Why Republicans are suddenly talking about economic inequality,” New York Times, 2/13/15.  Andrew Leonard, “The Hour Glass Economy,” Salon, 9/13/15.  Future of Jobs, “In an Hourglass Economy,” transcript,, 8/2011. Bernard Starr, “Corporations Plan for a Post Middle Class America,” Business, Huffington Post, 4/6/12.  Mollie Reilly, “Thomas Piketty calls out Republican hypocrisy on income inequality,” Huffington Post, 3/11/15.

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