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Why Run Ships on Oil? April 29, 2009

Posted by federalist in Energy, Open Questions, Transportation.
3 comments

Vote for Dave asks an excellent question: Massive container ships burn low-grade “bunker” fuel for power. Wouldn’t it be more cost effective to run them on nuclear power, as our navy has done without incident for decades on submarines and large warships?  Shouldn’t global warmists be thrilled at such low-hanging fruit in the fight against carbon dioxide emissions?

[Addendum: Four nuclear-powered cargo ships were built, but the technology is simply not cost-competitive with fossil fuels.  The United States Navy has abandoned nuclear power for all vessels but submarines and aircraft carriers, where nuclear power confers unique tactical benefits.]

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Federalism Update April 27, 2009

Posted by federalist in Federalism, Taxation.
5 comments

The first assertions of state sovereignty occurred early in the history of the United States: Jefferson authored the Kentucky Resolutions and Madison wrote the Virginia Resolution. One generation later was the notable South Carolina “nullification crisis.”  In February I noted the resurgence of state sovereignty movements.  Christian Science Monitor had a good update last month.  This week Randy Barnett proposes a Constitutional “Federalism Amendment” to reign in the federal government, though I much prefer his simpler fix, which is to repeal the 16th amendment:

What sort of language would restore a healthy balance between federal and state power while protecting the liberties of the people?

One simple proposal would be to repeal the 16th Amendment enacted in 1913 that authorized a federal income tax. This single change would strike at the heart of unlimited federal power and end the costly and intrusive tax code. Congress could then replace the income tax with a “uniform” national sales or “excise” tax (as stated in Article I, section 8) that would be paid by everyone residing in the country as they consumed, and would automatically render savings and capital appreciation free of tax.

The Problem With Wind Power April 25, 2009

Posted by federalist in Energy.
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Ross McCracken via William Tucker:

As wind provides neither baseload nor peaking plant it has no impact on reserve capacity. . . [I]t increases redundancy in peaking plants and reduces the profits of baseload generation; potentially good for consumers but bad for investment in non-intermittent sources of power, and presenting the risk of a decline in reserve capacity. . . . [P]eaking plants would be used much less and baseload plant would see sustained period of potential below cost prices – a particular nightmare for the nuclear industry.

The Vicious Cycle of Regulation April 22, 2009

Posted by federalist in Government Regulation, Markets.
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Fraud can occur in both regulated and unregulated markets, due to failures of both regulators and participants.  Chidem Kurdas analyzes the failure of Manhattan Capital and argues that regulatory responses can produce a vicious cycle.

The conventional response of boosting government watchdogs magnifies the impact of their mistakes while reducing both the watchdogs’ and the public’s incentive to learn.  It creates a vicious spiral of more regulation, regulatory failure, and even more regulation.

In contrast, non-regulatory responses to a market failure are patently virtuous in comparison.  As Carl Close summarizes:

[T]here’s often a big difference in the consequences of their respective mistakes, Kurdas argues. When investors fail, everyone tends to learn from their mistakes; but when regulators fail, new regulations are proposed, and investors are not given stronger incentives to learn.

QOTD: The Public Pension Shakedown April 20, 2009

Posted by federalist in Pensions.
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The pension fund scandal exposes the myth of the superior virtue of the public and nonprofit worlds. Greed is universal. And the opportunity for corruption is enormous when political discretion is tied to vast sums of public money.

That’s today’s WSJ editorial page.  I’ve railed against the inherent hazards of public pensions frequently.  Another highlight from the WSJ’s piece:

It has also become routine for politicians to inject their pension funds into partisan debates that have nothing to do with the sound management of retiree money.

The Trench and the Ivory Tower April 16, 2009

Posted by federalist in Education, Social Politics.
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During the height of protests against the Vietnam War most Ivy League universities decided to formalize their anti-government views by rejecting the Reserve Officer Training Corps (ROTC).  Prior to that point ROTC had been an integral part of the academy, commissioning thousands of American military officers.  But for the last forty years the liberal leaders of private colleges have, under variuos pretenses, enforced this official schism with American military institutions.  Since the mid-1990s the most commonly cited objection has been government policies against openly homosexual behavior by soldiers.  Retired Army Colonel Timothy Whalen points out the striking inconsistency in the academy’s continued opposition to the military:

The so-called “Don’t Ask, Don’t Tell” policy is in fact public law, passed by a bipartisan vote of the U.S. Congress, signed into law by President Bill Clinton, and then sustained by a decision of the Supreme Court. When and if the government changes the policy, I am confident that the military will faithfully carry out the new policy, just as it has during over 230 years of unfailing allegiance to the civil government.

Perhaps the administration and faculty, including some law school deans and professors of institutions that oppose ROTC on campus, are unaware that the military is under civilian control. Perhaps they know that and so, acting with integrity in support of their principles, also oppose recruiting for clerkships to the Supreme Court that upheld the law, fellowships to Congress and the White House, and so on. The first is unbelievable and I have never heard of any instances of the second. This leaves me to suspect that this issue is a stalking horse for an antimilitary position that does not have the courage to speak its name.

For more information: AdvocatesForROTC.org has been tracking this issue for years.

I Can No Longer Do My Own Taxes April 15, 2009

Posted by federalist in Taxation.
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I have a Yale degree in Computer Science and Math, magna cum laude, and I worked for the government for several years.  I have always tried to do my own taxes because:

  1. I enjoy tax optimization, and I need to fully understand the tax system in order to minimize taxes.
  2. I believe I am as capable as an average accountant at reading and understanding the tax regulations.
  3. I want to know when the government has made strict tax compliance impossible even for someone with an above-average technical education.

Granted, the tax code has not experienced any quantum leaps in convolution in the last few years.  It certainly does increase in complexity each year, but what pushed me over the edge were new complications in my own financial circumstances that took me deeper into the uncharted and poorly illuminated niches of existing tax regulations.

I spent days poring over my taxes this year.  As is my custom I began with TurboTax to flesh out the bulk of my returns, and then began digging into specific forms and publications to understand and verify what was going on.  I was alarmed early on to discover that TurboTax had failed to optimally incorporate information pertaining to a home office deduction — and then to discover that it had made the same error last year!  I saved a few thousand dollars right there.  But after many more hours of trying to place gains and losses associated with alternative investments I concluded that it is simply impossible to confirm the correct way to assess those taxes.  So this year I will begin to pay an accountant to review my returns.  And I present myself as evidence that the United States government imposes tax laws upon its citizens with which reasonably competent men cannot with certainty comply.

Incidentally, I don’t believe that accountants have any special powers of discernment when it comes to tax law compliance.  I have often reviewed the professionally-prepared tax returns of family and friends in order to offer them better financial advice.  And I have frequently noticed that in gray areas of uncertainty professional accountants typically take liberties and shortcuts for the benefit of their clients that do not strictly square with the letter of the law.  I have concluded that the law as written is so impenetrable (see “Lazy Law“) that extra-legal customs have evolved, generally respected by both accountants and the IRS, to prevent the  business of filing and processing taxes from grinding to a halt.  An outsider like me is not privy to these customs and so the government forces me to choose to either:

  1. Pay an accountant to lead me through the unwritten law.
  2. Do my taxes conservatively and probably pay the government more than I rightly owe.
  3. Do my taxes liberally and risk violating the unwritten laws and consequently being forced to pay additional fines for my daring.

How Special Is Your Child? April 14, 2009

Posted by federalist in Uncategorized.
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My wife wondered, “What is the probability of a couple having two children that are genetically identical (excepting twins)?”  Initially I figured this would normally just be 223 * 223.  The unique genome of a normal human consists of 46 chromosomes (22 homologous pairs, and two sex chromosomes), half of which come from each parent.  During normal meiosis each gamete (i.e., sperm or egg) receives one of each 23 parent chromosome pairs at random, and during conception two gametes are combined to form the zygote.  Hence the odds of two separate zygotes getting the same chromosome copies is 1:246 = 1:70 trillion. (This excludes the relatively rare cases of mutation and abnormal meiosis, each of which can further increase the universe of unique and viable genotypes that a single couple can produce.)

But molecular biology is never that easy. It turns out that the probability of having genetically identical children (unless they are formed as identical twins due to the splitting of a zygote within a few days after conception) is infinitesimal: The process of meiosis not only involves the random allocation of chromosome pairs to each gamete, but also exposes each chromosome to a phenomenon known as crossover which allows specific genes from one chromosome to switch places with its pair.  Hence, a child could end up with unique autosomal chromosomes that do not match any of his parents’.  (The probability of crossover depends on characteristics of the genome itself, and is statistically described using map units.)

Normally every one of a child’s genes will match one of his parent’s.  But the variations introduced by normal meiosis make it all but impossible for two separately-conceived children of the same parents to be genetically identical.

The Proper Role of Government in the Free Market April 10, 2009

Posted by federalist in Finance, Government Regulation, Markets.
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Socialists have grabbed onto the (largely government-caused) financial market crisis of the last year as evidence that capitalism and free markets are inherently defective.  I believe this has been adequately debunked: government meddling in home finance and labor markets was not only a primary cause of recent crises, but subsequent “bailout” measures have only exacerbated problems that the free markets were equipped to most efficiently resolve.

Early in the crisis I addressed the limited but justifiable role government might play in the markets.  Amar Bhide has a good essay continuing this theme.  In particular he notes the government regulatory institutions that were already in place to deal with market crises:

Our government plays an important ameliorative role. Unemployment benefits stop major dislocations from creating the widespread hunger and homelessness experienced in the Great Depression. They also prevent the anxiety of more than 90% of the workforce that remains employed from turning into a panic.

Bankruptcy laws and courts facilitate the orderly unwinding of obligations that individuals and businesses can no longer meet or easily resolve through bilateral negotiations (as is often the case when a troubled business faces many creditors with different kinds of claims). A bankruptcy code that quickly salvages the greatest possible value from failure is crucial for our economic dynamism.

The Federal Deposit Insurance Corporation (FDIC) immediately assumes the liabilities of failed banks and then gradually disposes of their assets — a process that has ended the bank runs that used to trigger depressions until the 1930s. But beyond amelioration and providing the judicial (or in the case of the FDIC, quasi-judicial) procedures for reorganization, there is little more that the government can do to accelerate the unwinding and renewal necessary to put the economy back on an even keel.

How about a cap on public pensions? April 2, 2009

Posted by federalist in Pensions.
6 comments

The more we learn about public pensions, the more we shake our heads in disbelief.  Adding insult to injury, taxpayers whose own individual retirement savings have been savaged in the markets are being forced to pony up more money to replace mismanaged funds for public pensioners, whose lifetime retirement benefits are guaranteed by the government.  A recent Boston Globe editorial echoes the outrage.

Public pension systems have been so grossly abused that I propose a retroactive cap: No individual should be allowed to collect more than $100k per year in combined government-backed retirement benefits (i.e., the total value of cash pension payments, subsidies, and healthcare).

Or, following the current custom of righting all wrongs through the tax code, how about a 90% federal tax on all government-source pension benefits that exceed $100k per year?