Lately Mitt Romney has been characterizing his approach to new spending as wanting to limit it to things that are really worth borrowing from China to do. I wonder if he realizes that China’s net holdings of U. S. debt has decreased by $260 billion over the last six months. The U. S. trade deficit with China was about $270 billion. That means that China has sold off a full year’s worth of trade imbalance in just the last six months.

We’re not borrowing from China any more. That’s so last decade.

Was what happened to the U. S. economy from 2003 to 2007 a run on the dollar? That’s certainly a different way of looking at things.

I think that this recent post by Robert Reich highlights the dichotomy between his thinking and mine:

There is moral rot in America but it’s not found in the private behavior of ordinary people. It’s located in the public behavior of people who control our economy and are turning our democracy into a financial slush pump. It’s found in Wall Street fraud, exorbitant pay of top executives, financial conflicts of interest, insider trading, and the outright bribery of public officials through unlimited campaign “donations.”

I don’t think there’s a difference. I think that virtue is a habit and that you acquire that habit by what you do. If you routinely lie, when push comes to shove you will lie whether it’s a matter of “private behavior” or “public behavior”. I think that the man who cheats on his wife or the woman who lies on her income tax is likely to cheat and lie in their dealings as a public official or businesswoman, too. If you are greedy, you’ll probably stiff a waiter who’s given you adequate service as quickly as you’ll defraud a customer.

I don’t much care about other people’s sexuality or religious views. I do care about how they treat me and how they treat other people.

Courage, prudence, moderation, justice. They’re all acquired by doing. There is no other way. I think that Robert Reich believes that we can have a just and decent society by passing the right laws, putting the right structures in place, and spending enough money. I believe we can have a just and decent society if we behave justly and decently.

I’ve just published a foreign policy-related post at Outside the Beltway:

Ratcheting Up the Rhetoric…

Has the rhetoric in the war of words between Iran and the U. S. and Israel been ratcheting up lately? It certainly looks that way to me. Evidence of clicking up a notch from Russian news sources.

To be honest I’m skeptical of this story:

Police and retailers are pushing back against a report claiming that theft of Tide laundry detergent is on the rise nationwide and that some cities are devising special task forces to crack down on the alleged phenomenon.

The Daily, an iPad publication, reported Monday that authorities from New York to Oregon are combating a new wave of Tide theft at popular retail stores, like CVS and Walmart. The story quickly spread virally across the Internet, and was even the subject of a segment Tuesday on ABC’s “Good Morning America.”

While police acknowledge that name-brand household items are commonly swiped from store shelves, authorities in at least two states referenced by the publication say they have not seen a specific rise in stolen Tide detergent.

Lt. Matt Swenke of the West St. Paul Police Department in Minnesota described laundry detergent as a “needed commodity” – much like baby formula and toilet paper – that he said is often a target for shoplifters looking to profit by reselling the items to privately-owned retail stores.

He referenced one case of a man suspected of stealing $25,000 worth of Tide detergent from a Walmart in West St. Paul over a 15-month period. He said the man, identified as 53-year-old Patrick Costanzo, was seen on surveillance video stocking up his shopping cart with various items, including Tide, and walking out of the store without paying.

But, Swenke said, “We haven’t noticed anything in terms of this being a rising problem.” He said of the five major retailers in the West St. Paul area, only one store – Walmart – came forward to police about thousands of dollars of missing Tide inventory believed to have been taken by Costanzo.

It’s also being reported that people are bartering Tide for heroin or meth.

I don’t doubt that brand-name household products are being stolen and sold on the black market. The part I doubt is that it’s dramatically on the rise or has reached epidemic proportions. If Tide were in so much demand on the black market, wouldn’t there be forgeries? Wouldn’t there be people going through my trash to get empty Tide bottles?

Wait a minute? You expect Ajax to foam and clean? That’s outrageous!

James Kwak is amazed that people might think that Medicare was an earned benefit:

Imagine Alice works from twenty-five to fifty-five making $30,000 per year, more than double the minimum wage. Then she loses her job and goes on Medicaid—a classic “welfare” program. Then imagine Beatrice, who works from twenty-five to sixty-five making $30,000 per year. (For simplicity, let’s assume each person goes on benefits in 2012, and those $30,000 are constant 2012 dollars.) Then she retires and goes on Medicare—an entitlement she has “earned,” according to Tea Party logic. Assume that each person paid $1,000 in federal income taxes each year. Who’s the freeloader?

Each year, Beatrice paid $870 in Medicare payroll taxes. In addition, about 16 percent of her income taxes went to Medicare,** for another $160 per year. So over forty years, she contributed about $41,000. At retirement, she will have a life expectancy of about twenty years. Annual Medicare spending per beneficiary is projected by the CBO to be about $15,000 in 2022 (right in the middle of her benefit period), or maybe $12,000 in 2012 dollars, so she can expect to receive total Medicare benefits of about $240,000. That means her net transfer is about $199,000, or $10,000 per year.

About 21 percent of Alice’s federal income taxes go to Medicaid,*** so she contributed $210 per year, or about $6,000. (Let’s assume she paid no state taxes, which makes her look worse.) Total federal Medicaid expenditures were $273 billion in 2010; the federal government pays 57 percent of total Medicaid expenses; and there are about 56 million beneficiaries at any one time; so the average cost per full-year beneficiary is about $8,600. 49 percent of Medicaid spending, however, goes to long-term care, even though only 7 percent of Medicaid beneficiaries received long-term care benefits,**** so the average annual cost per non-long-term care beneficiary is about $4,700.***** So between the ages of 55 and 65, Alice’s total benefits are worth $47,000, for a net transfer of $41,000, or $4,100 per year. Even if we double her average cost because of her age, we still get net benefits of $88,000, or $8,800 per year.

By now, the answer should be obvious. From the perspective of net benefits, they are both freeloaders.

Or, said more simply, for the last forty years Medicare has been marketed to the American people as an earned benefit despite the reality that their contributions don’t by any stretch of the imagination pay what they can expect to receive in benefits. I’m shocked, shocked that they could come to that conclusion.

Extra credit question: if Medicare had never had a specific payroll deduction for it but had always just been paid from general revenues would it have become one of the most popular federal programs?

Let’s talk about light bulbs a little. For the last several years I’ve been surreptitiously replacing our incandescent bulbs with the most cost-effective compact fluorescents I could find, somewhat to my wife’s dismay, I think. Now our nightlights are LEDs and our basement bulbs are mostly CFLs. So far, so good. I haven’t had any problems with any of them.

The first compact fluorescent I ever saw was more than 30 years ago, in the home of the parents of an old friend of mine. We had gone to Philadelphia for a wedding (I had flown out, he had driven) and we all drove back together, stopping overnight in Cleveland to visit his parents.

His dad was an engineer who designed lightbulbs for GE and their entire house was lit with compact fluorescents. The light they produced was beautiful and warm. Their Christmas tree was covered with figural bulbs from the 30s, 40s, and 50s. I think he repaired them himself.

There was one observation of his that I thought I’d share with you. There’s no reason that a lightbulb, particularly a compact fluorescent lightbulb, can’t last for thirty years. It all depends on how they’re made. The issue is production.

One more point. I know that the explanation for the reason that CFLs are nearly all made in China is lower labor costs. I have yet to see that quantified and, frankly, I’m skeptical. I think that environmental and compliance costs are far more likely explanations.

Return with us now to those thrilling days of yesteryear! I think that Phillip Longman and Lina Khan of Washington Monthly have been watching Pan Am too much. Today they have a lengthy jeremiad on the problems faced in markets for air travel other than the major markets, e.g. New York, Los Angeles, Chicago, Atlanta. The Cincinnatis, Memphises, and St. Louises. Their prescription?

Transportation in all its forms is not much different, as most people can see easily when it comes to highways. If we had a “deregulated” private interstate system, we’d have lots of high-quality toll roads running straight and fast between the largest population centers—indeed, probably far more than we need. And from time to time, exuberant entrepreneurs might try to make a profit by constructing a new artery road here or there as well. But the high fixed cost of building roads would mean that most smaller cities either would remain off the network or would have to pay such high tolls that they would never stand a chance of growing. Either way, owners of major highways, seeking to avoid competition, would gradually buy up owners of lesser highways, and then each other, until everyone was paying outrageous tolls and the whole economy suffered.

That was the lesson previous generations learned from railroads; the current generation has to learn it all over again, from our experience with deregulated airlines. Why have we become so passive and reluctant to face up to the hard task of governing ourselves and our markets? We don’t need to recite “The Serenity Prayer.” We need to get out from under the thrall of the false prophets of deregulation, conservative and liberal alike, and make the benefits of true capitalism work for us once again.

Let’s briefly consider why the airline industry is in the state it’s in. Basically, the industry has suffered from the following problems: bad airport management, bad airline management, business model collapse, and fuel prices.

Most major airports are owned and operated by cities, counties, or regional authorities. Chicago owns O’Hare. St. Louis owns Lambert-St. Louis. The city of Los Angeles owns Los Angeles International Airport. The number and timing of landing and takeoff slots is determined by the FAA and, essentially, assigned by lottery. Airlines treat these slots as assets and buy, sell, and trade them among themselves.

The governments that own and operate the airports are incentivized always to increase the number of runways and the size of terminal facilities without consideration of the number of slots available. That’s where their fees come from and it’s the part that’s under their control. Chicago has been expanding O’Hare over the objections of its carriers for decades. Some time ago Chicago attempted to add a third airport, again over the objections of air carriers. That ultimately failed.

If this sounds like a “tragedy of the commons” situation to you, you won’t be far off. More to the point does this sound like inadequate regulation?

The airlines, too, have their management problems. One of my early posts was on this very subject. Rather than going into more detail, I’ll just ask a question. Who created the airlines’ employee pension problem discussed in the article?

Moving on to my third point, I think it’s clear that the business model that has dominated the major air carriers for decades has run into serious problems. Mention problems with the hub system in the post linked above. It renders the carriers who’ve adopted it unresponsive to change (as does our entire allocation system). Southwest Airlines is dismissed in the article as a low-cost carrier without considering how Southwest is able to keep its ticket prices low while maintaining higher levels of employee satisfaction than the major carriers.

Basically, Southwest is arbitraging the overcapacity in major markets and the cost differentials between facilities within those markets. Buying slots is cheaper at Midway than at O’Hare.

Consider the graph at the top of this post. Other than the seasonal nature of the airline business the thing that I think that graph makes clear it’s that the airline industry is not a growth business. The number of revenue passenger miles has been pretty flat since 2005. It’s not just the recession. Things have changed. See also this interesting post from Mark Perry. This presentation from the Regional Airline Association is interesting, too, if not completely on point. Does it refute the authors’ underlying claim?

However, there’s another way in which the business model of the major carriers is failing. This isn’t the 1960s. Big companies just aren’t what they used to be and nowadays businesses have alternatives other than physically sending their worker bees around the country and around the world.

When the number of slots has peaked, your revenue passenger miles have plateaued, and you can’t wring any more costs out of operations than you already have done, it leaves the airline industry at the mercy of oil prices which is basically where they are now.

Note the recurring theme: how will more regulation improve any of the problems the airlines are having? What it will do is provide a smokescreen for increasing prices which I gather is what the authors want.

What will the future look like? If it will be of a handful of megalopolises, the airlines are doing exactly the right thing and we shouldn’t get in their way. If it will be of a great flattening and the disappearance of cities with increased telecommuting and teleconferencing, there is no future for the airline industry.

Detroit, Memphis, St. Louis, and Pittsburgh’s problems were not created by the airline industry and re-regulating the industry won’t solve those problems. Regulation is not good at dealing with change. Move over for the 21st century. If you don’t like change, you won’t like it at all. What were great cities in 1950 won’t be rebuilt with more regulation, however benign and effective. Embrace the future—that future means change.

Last night at 7:29pm five-time Iditarod competitor Dallas Seavey passed under the burled arch, becoming the winner of the 2012 Iditarod:

As early as the halfway mark of the Iditarod Trail Sled Dog Race, 25-year-old Dallas Seavey revealed the plan that would crown him the youngest champion in race history. The blueprint: Throttle his team’s speed early, resist the temptation to surge ahead, spring the trap.

Or, as Seavey likes to say, he was creating a monster.

“We built the winning team during the race,” Seavey said, crediting the win on the mid-race restraint he showed even as others leaped ahead. “As soon as (other) teams really started coming together, they took off and started racing and tore it all apart.”

Seavey’s dad and grandfather didn’t get to see their son and grandson, respectively, cross the finish line. They were behind him on the trail, finishing their own Iditarod races. Seavey is a third generation Iditarod competitor.

Other than his youth (at 25 Dallas Seavey is the youngest ever winner) there are any number of other interest aspects to his victory. Seavey doesn’t have his own kennel—unlike most of the top competitors his team was drawn from a number of established kennels with proven records.

Since Susan Butcher’s victories more than 20 years ago, the primary focus of the race has been the dogs, breeding dogs with better capabilities, better sled racing dogs. Today’s mushers are in much better condition than those of a generation ago. Several are triathletes. Dallas Seavey ran a good portion of the thousand mile race. Increasingly, I think we can expect the Iditarod not only to be about breeding and training better dogs but about training better mushers.