So we started playing disc golf again...

A bit off topic...

My brother and Eric found a course up here that we really like. It's got a good mix of wooded and open holes (the underbrush in a few places is a bit thick, however). If any of you come to visit us while it's warm out make sure you bring your discs...

Why you should know what you're talking about when you complain

The credit card industry is long overdue for an overhaul. The one being pushed by the Senate and the House certainly has some flaws but the complaints (largely coming from the right) completely miss the boat. If I hear another talking head complain about how this will increase borrowing costs, I'm going to kick someone. Yes! It will increase borrowing costs. It should! Right now, every person that gets a low rate credit card or that proudly pays off their credit card every month is actually a loss for the credit card companies. They are subsidized by the people who have their rate hiked. Credit Card companies have long had a predatory marketing plan.

1) Cast a wide net for cards
2) Set triggers that even reasonable people will occasionally hit
3) Increase fees and rates tremendously as a result

Credit card companies are the only companies (that I'm aware of) that can arbitrarily change the terms and conditions of a loan at their whim (technically, you can opt out of the change and they freeze your credit card... But you have to recognize that a change has occurred).

The changes are going to bring some long overdue sanity to the industry. College students with no job shouldn't be getting credit cards. People who stop paying shouldn't have their debt balloon by over 50% in three months.

Let's work on the parts of the bill that are less then well thought out instead of trotting out these straw man arguments of "cost more".

What do I believe

I've written before about my moderate tendencies. My wife accuses me (on a fairly regular basis) of not being truly moderate but just being unwilling to make a decision. So I figured it would be a good exercise to spell out what I believe.

I'm a moderate but I'm fairly fiscally conservative and fairly socially liberal. I'm a strong states rights advocate in that I believe the federal government should be limited. But I also believe that we've done a bad job as a nation of stating what we DO believe the federal government should either be in charge of or have an influence on. Because of this lack of clarity, the federal government has, several times, expanded into areas that I'd prefer they did not because, like any organism, it wants to grow.

The federal government should have several responsibilities. Many of these have roots in economic theory (which I'm obviously keenly aware of). At a national level, we should look to be protecting ourselves from external threats and large internal threats. We should be safeguarding common goods (broadcast frequencies, off shore natural resources, environment, park land, etc). We should aggressively pursue unnatural monopolies and regulate natural monopolies and we should be clear about identifying which is which. The government should serve as a facilitator and rule setter for markets. This means arbitrating contract disputes (through the court) as well as establishing rules regarding financial disclosure and regulation of financial entities that partake of deposit insurance (which I believe is valid).

What should the federal government not be involved in? Regulating speech (including speech on public airwaves), Education, Religion (in fact, no government should get involved there). Defining marriage and (this is going to be a weird one) defining who can and cannot work in a state. I believe that the role of immigration (in the sense of who becomes a citizen) is obviously a national issue but the role of determining who is permitted to work in an area is clearly a state issue and should be left to the state. I don't think congress should be making laws that attach conditions based on compliance to thinks that they had no chance of passing a law on and which are completely unrelated (we won't give you money for schools unless you have a seat belt law). Federal government should not be in charge of our retirements or our health care. Medicare and Social Security are two of the worst laws ever written. If the states want to do that kind of thing then that's fine but there's no reason for that to happen at the federal level (and honestly, how is the enactment of social security even constitutional? What's the interstate commerce implication involved?)

I do find myself sitting on the fence of things like abortion. On the one hand, I just don't believe that life begins at conception... On the other hand, practices like partial birth abortion are so abhorrent to me as to make my mind shut off and not want to think about it.

I think that Washington DC and Puerto Rico should be pushed into statehood. I understand the demographics involved and the fact that that likely results in 4 more Democratic senators. Unfortunately, I don't believe that what's right should take a back seat to political calculus.

I believe that money is not speech. But I believe that individual citizens should be allowed to do whatever they want with their money. The regulation / restriction of speech comes when people pool their money into an organization. I believe that organizations have no inherent free speech right.

I believe that the President should resign from his party the moment he takes the oath of office. The leader of the Executive Branch as leader of a political party is not a recipe for success. I believe that Congress should control its power of the purse aggressively and ruthlessly. I believe that a long term balance budget should be the goal. Short term deficits are alright but they MUST be balanced by surpluses later. I believe that people are going to have to get used to the idea of government running a surplus because we have to decide as a nation that we're going to fix what people before us broke. It's not our fault but that doesn't abdicate our moral responsibility. I don't want my daughter to have to live with that level of debt.

I believe that our laws should be crafted to encourage and nurture growth. Tax advantages (not tax breaks) should be permitted for small businesses. Bankruptcy laws need to be robust and debtor friendly. We should encourage success and make failure not lifelong. We need to acknowledge that sometimes good ideas fail through chance or bad timing. That doesn't make the idea bad or the inventor stupid. It's not always the result of laziness or incompetence. We want to encourage risk taking when it's a GOOD risk. That includes the long shots (If I bet you my $100 vs. your $1 that I can roll a 1 on a single die, you'd be a fool not to take the bet. If you lost, it doesn't mean you were wrong to make the decision).

I believe that children should have as good a chance for success as possible. And I believe that this chance for success should be as relatively even. A child who inherits $10 million dollars is GUARANTEED an income of $500,000 for life. Sure, they can screw that up and squander it or not plan well and have it decreased by inflation. But the fact is, they were $500,000 per year better off then a kid born in poverty. That's why things like the estate tax don't bother me. We shouldn't take it all, but I believe that it's a valid source of revenue to tax those who have been successful a little more than those who weren't. Leveling the playing field has become code for "arbitrary, capricious government". But it doesn't need to me. We should have definite rules and (more importantly) a statement of principals. Every law that congress passes to limit something like estate issues, creates a thousand little cracks for smart people to take advantage of. Our principals should guide us in how to interpret those. If our purpose is to limit the ability to give "gifts" because you can't differentiate a "gift" that should be tax free from a "payment for services rendered" that should be taxed then that colors our principal one way. If, on the other hand, we want to limit "gifts" because we don't want people giving their children too much of a leg up then that colors our efforts another.

While we're talking about taxes, I believe that our tax code has gotten ridiculously and completely out of hand. I don't believe in a flat tax (although "flatter" has some merit) and I'd like to see some things have some tax advantages (R&D, startups, etc) but by and large, these should be tax "deferrals" not reduced taxes. As for all the other stuff? I don't see why the interest I pay on my house should be tax deductable. Nor should my regular health care. Certain one time events should be (health care costs above and beyond my insurance). Other governmental costs should NOT be however. Charitable contribution is fine. The personal tax code for MOST people is not really the problem though. The bigger problem happens at the corporate level where the tax code is affecting the shape of the company and the pay rates of the employees (we had a bubble in part because executives were compensated with short term stock awards rather than salaries). If government is affecting corporate structure then there's something wrong.

I'm sure there's stuff I left off, but that's just how I feel.

Why doesn't the headline read, "Citi to be owned 34% by the government"??

This article is a tad bit worrisome. Apparently, Citigroup's plan for success is to just convert preferred shares (a fancy loan) into common stock (ownership) in an attempt to make the metrics work. Yes, this does save some cash because dividends are not obligated. But, what I'm more curious about, is how the government plans on A) Acting in its fiduciary capacity and B) unwinding its position. As a 34% owner of Citigroup, you'd expect anyone, the government included, to be active. However, the government has a pretty severe conflict of interest. What's to stop congress from passing laws that require the Citigroup government board members to vote in certain ways or push for certain things. More importantly, what's to stop those board members from doing things without the full force of law behind them. I guess, technically, the government doesn't own them, the US Treasury does. But that's an entity that's not exactly independent.

Hopefully, the press will push for more clear guidelines on the ownership responsibilities and plans for these entities. I wouldn't hold my breath though.

Two Good Ideas... One Mine... One Borrowed

Submitted for your approval

Idea #1) Expand VISAs to create jobs. I've talked before about the "myth" that foreign workers steal jobs. This idea is a way to avoid that myth and accomplish a very targeted goal. How, might you ask, does letting MORE people into the country help create jobs? An excellent question. Well, if you create a new class of VISAs called "Startup" VISAs and give them to people who intend to start a new business, then, by defintiion, you will be creating jobs. Many of these will be tech startups because those tend to be less capital intensive. This has the added benefit of not actually increasing competition tremendously as most tech startups do something NEW (think Twitter and MySpace). Obviously, not every startup will succeed, but if even a few of them do, the gain for the US is big while the loss is practically zero. I think this is a win, win.

Idea #2) There's an equality issue that people struggle with as part of class warfare. We are generally okay with rich people eating more expensive food and driving more expensive cars. Where it gets fuzzy, is when we start talking about health care and eductation. Is it fair that a rich family can afford the best health care? Is it fair that a rich family can painlessly send their children to the best schools and then the best colleges? This issue isn't black and white to me but I see the moral quandary. The solution that democrats have largely advocated is greater state interest (not necessarily control but certainly influence and/or regulation and subsidization). The solution that the right pushes is free markets (think school vouchers and increased inter state competition for insurance). Let's combine those two. Let's establish a separate pool of money that goes equally to every child in the US. This money goes to buy health insurance and pay for school. This creates a de facto voucher system for all educations. Schools and insurance companies can trade in these special dollars for real dollars (on a 1:1) basis to get funds to pay expenses. Schools and insurance companies set their own prices. Parents are still free to pay for medical expenses out of pocket (and tutoring, etc.) but these are considered supplemental. This doesn't fully eliminate the fairness issues but it establishes a baseline of what is the minimum. It's also targeted toward children without providing incentives to parents to skim money from said children.

The first idea is from paulgraham.com

The second idea is mine...