Category Archives: Policy

Coronavirus economic stimulus may lead to high inflation

This time central banks have responded to the Coronavirus by injecting trillions of dollars into their economies, which could generate Demand-Pull Inflation because “too many dollars will be chasing too few goods.”

Source: Desperate Actions Can Lead to Desperate Consequences, Including a Debt Spiral | Nasdaq

This is my concern too – the problem right now is that goods are not being manufactured and services are not being delivered as much of the economy is shut down by government mandate.

Throwing more money into this encourages people to purchase goods that are now in scarce or limited supply, thereby driving up their prices.

Plus, where is the cash coming from? I have not looked into that. But if we are just printing money (or the electronic equivalent of printing money), we are devaluing the dollar – which is the same thing as inflation.

If this is the case, then you want to own real things as cash will go down in value. A $100 thingie now will sell for $110 after 10% inflation. But $100 of cash now will be worth the equivalent of about $90 after 10% inflation.

Health: Mixed messages on coronavirus covid-19

F5 today, closed their skyscraper in downtown Seattle to disinfect the entire building because one worker had been in contact with someone that later tested positive for COVID-19.

France canceled an outdoor half marathon and closed all indoor activities having more than 5,000 attendees.

Many tech conferences have been canceled, postponed or moved to online presentations. Amazon canceled warehouse tours. Nvidia just canceled a tech conference. The EU has closed its headquarters to visitors.

In King County, Washington, 11 schools are closed because an associate of a staff member or student has become ill (not even diagnosed with COVID-19). The schools are in process of being sanitized. The entire North Shore School District will close on Tuesday to provide staff training on conducting remote education/telelearning …

Nike’s headquarters in Oregon was closed this past weekend for deep sanitization – even though they said they had no reports of any exposure by anyone.

The Washington State Department of Health urges those with unspecified pre-existing medical conditions or over the age of 60 [1] to avoid public gatherings:

“Persons who are older or who have underlying health conditions are at higher risk to develop complications from this virus. Your health and the health of those you care about are important to us and it may be recommended that you stay at home and away from other people during this time. “

In 24 hours, deaths went from 2 to 4, confirmed cases in Washington increased, and there is community transmission in Oregon, now including Eastern Oregon.

Meanwhile, ReedPop Entertainment announces its Emerald City Comic Con, with 100,000 people confined in close quarters in the Washington State Convention Center, with many visitors from other countries, will go on as planned – in Seattle, which is apparently ground zero in the U.S. for the spread of the COVID-19. They assure us that the health of their guests is their highest priority and they are following government guidelines (except those of the Washington State Department of Health but what ever).

So who do we believe?

There is a lack of leadership and clarity as to what steps the public should take. This leads to companies, like Nike, closing for cleaning – without exposure – while ReedPop plans a 100,000 person event in confined quarters at ground zero of the disease spreading in the U.S. and saying it will be safe for all.

Footnotes

[1] We assume the DoH is referring to people over age 50 or 60 but the State lacks clarity in its communications. They say, for example, that people with “underlying health conditions” should avoid contact with other people – but then provides no explanation of “underlying health conditions”.

Finance: Candidates propose housing tax credits

Housing hasn’t traditionally been a hot topic in presidential elections, but with homeownership financially out of reach for many Americans, the candidates vying for the Democratic nomination have been eager to discuss the issue.

Source: Joe Biden wants a first-time homeowner tax credit, Amy Klobuchar would clear public-housing backlog — where the Democratic candidates stand on affordable housing – MarketWatch

A perennial, permanent complaint is that housing costs too much – unlike the good-old-days when housing was far more affordable. Of course.

When we first bought a house, a 30 year mortgage interest rate was 16.8%. Today, the 30 year mortgage interest rate is 3.73%.

We bought a junked home – literally – because that is what we could afford. We had to come up with a 20% down payment and assume loans with a combined interest rate of 11%.

The home had been a rental for 8 years and owned by 8 out of state landlords. The property had been vacant for 9 months. The yard was overgrown – about 8 feet thick of plant growth. It was not possible to walk from the front yard to the back yard along the side yards as they were solidly filled with overgrowth. The fence was falling down due to the weight of plants growing over it. To buy this, we assumed the two existing loans on the property, a 1st and a 2nd mortgage. The combined mortgage rate was 11%, and the 2nd loan was a huge interest-only balloon payment loan. That meant within 5 years we had to refinance to pay off the entire 2nd loan. Our eventual refinance bought us an 8% 30 year fixed rate loan. Yeah, 8%.

We spent 3 years working weekends and nights, after our day jobs, repairing and fixing the place and then hired a contractor to add 2 rooms.

As you can see, back in the good-old-days, buying a first home was really easy and interest rates were super low. Right.

Transportation: Tesla deletes car features via software update, after cars are sold, used

Should Tesla be allowed to remove features from a vehicle that’s bought secondhand?

Source: Tesla yanks Autopilot features from used car because ‘they weren’t paid for’ | ZDNet

This is a troubling issue where we rely on software for every feature of consumer products. Software that can be updated to add features can also be downgraded to remove features.

Years ago, Amazon deleted e-book copies of George Orwell’s novel, 1984. Apparently Amazon did not have the distribution rights signed up correctly and customers who had bought the e-book addition discovered Amazon remotely deleted their copy of the book. (Amazon did refund the purchase price). That this was a giant corporation removing, of all things, 1984, was a bit of a shock to many.

Meanwhile, the FAA has proposed a massive, Rube Goldberg-like regulatory scheme for small unmanned aerial systems (SUAS), also known as remote control model aircraft. The FAA envisions a world where all model aircraft regulations are enforced by software, logging their position with government designated Internet databases, once every second during flight – rather than the traditional trust and enforcement mechanisms of all other laws. There are multiple issues with the FAA’s proposal, but one side effect of their attempt to enforce the law via software is they’ve managed to eliminate essentially all indoor flight by model airplanes and quadcopter – because a one-size fits all rule does not work. They’ve also created a monster that would enable automated  drone fleets – and consumer drones – to be enlisted by foreign adversaries in international espionage, permitting – indeed, encouraging – all drones to collect aerial imagery and other data as they fly over our homes and cities.

Transportation: Congress proposing an annual Federal tax on electric vehicles

Source: Congress could make EV drivers pay – POLITICO

My state, Oregon, introduced state fees for fuel efficient vehicles, beginning January 1, 2020. These fees are added to existing annual license fees. Oregon issues vehicle licenses for a 2 year period, not one, so the fee paid when renewing is twice the value shown:

a) For vehicles that have a rating of 0-19 MPG, $18.

(b) For vehicles that have a rating of 20-39 MPG, $23.

(c) For vehicles that have a rating of 40 MPG or greater, $33.

(d) For electric vehicles, $110.

The reason they charge for 2 years is it enables the state to increase the effective rate. On average, people will sell their car with one year of their license remaining. However, when sold, there is no refund. And presumably you buy a new vehicle and pay a new license fee. Same thing if you move out of state – you lose the unused portion of the fee. Now they offer a 4-year pre-paid option – don’t go there!

Oregon has also introduced a “pay per mile” license tax and says that some people may pay less fees under this scheme. When I checked the numbers for my Honda Fit, I would pay more under their pay-per-mile scheme – and I only drive about 7,000 miles per year. Sure, that pay–per-mile fee makes sense – not!

The state increased the regular vehicle license fee by 30% in 2017, and increased the state’s gasoline sales tax, which will increase every other year through 2024. The State also increased the title records fee and added a per-vehicle-sold tax on car dealers, and added a $15 tax on new bicycle purchases.

The proposed Federal tax – amount unknown – would be in addition to State license fees.

Software: Why hiring professional software engineers might have been a good idea #IowaCaucus

Oh my:

It wasn’t so much that the new app that the Iowa Democratic Party had planned to use to report its caucus results didn’t work. It was that people were struggling to even log in or download it in the first place. After all, there had never been any app-specific training for his many precinct chairs.

No training? This points to a lack of common sense and systems analysis at the start of the project. How was this missed?

Further, they likely had not created use cases, which would have caught the next set of failures.

So last Thursday Mr. Bagniewski, the chairman of the Democratic Party in Polk County, Iowa’s most populous, decided to scrap the app entirely, instructing his precinct chairs to simply call in the caucus results as they had always done.

The only problem was, when the time came during Monday’s caucuses, those precinct chairs could not connect with party leaders via phone. Mr. Bagniewski instructed his executive director to take pictures of the results with her smartphone and drive over to the Iowa Democratic Party headquarters to deliver them in person. She was turned away without explanation, he said.

Source: ‘A Systemwide Disaster’: How the Iowa Caucuses Melted Down – DNyuz

I live in the state that featured Cover Oregon[1], a $450 million health exchange that never enrolled a single individual subscriber. It was a complete failure. Healthcare.gov received most of the media attention concerning large government failed software projects but several state projects also failed.

Both health exchange fiascos – and the Iowa Caucus disaster – point to over reliance on software and an assumption that more tech is always better. Tech can make things better, but only when qualified people are involved in all aspects of the project.

Update – my guess was correct says the NY Times:

Shadow was also handicapped by its own lack of coding know-how, according to people familiar with the company. Few of its employees had worked on major tech projects, and many of its engineers were relatively inexperienced.

Only 25% of precinct  chairs were able to successfully install the app. Colossal failure. The system relied, in part, on “security by obscurity”, which never works.

Update: “They” have quite a history with  failed software development. The Associated Press said it could not name a winner of the Iowa Democratic Party Caucuses.

Continue reading Software: Why hiring professional software engineers might have been a good idea #IowaCaucus

Privacy: Spooks figure out ways to trick you into not using encryption

Picsix’s tool creates a fake cell tower that can fool a target’s phone into transmitting data to it. The device cannot read encrypted data, but instead tries a different tactic to get private information: making encrypted apps glitchy or even totally unusable. It’s a subtle but strong way to push a frustrated target away from a private app and toward a non-encrypted service that can easily be intercepted and eavesdropped on. The encryption itself is never broken—it is simply rendered useless.

Source: Cops see an encryption problem. Spyware makers see an opportunity. – MIT Technology Review

Increases in student loan availability lead to increases in tuition and fees

Stated another way, the more money poured in to student loan programs, the higher the tuition charged. Tuition goes up because of student loans rather than the view that student loans go up in response to higher tuition.

Consistent with the model, we find that even when universities price-discriminate, a credit expansion will raise tuition paid byall students and not only by those at the federal loan caps because of pecuniary demand externalities. Such pricing externalities are often conjectured in the context of the effects of expanded subprime borrowing on housing prices leading up to the financial crisis, and our study can be seen as complementary evidence in the student loan market.

From: Lucca, D., Nadauld, T., Shen, K. (2015, 2017). Credit supply and the rise in college tuition: Evidence from the expansion in Federal student aid programs. Staff Report no. 733. Federal Reserve Bank of New York.

As the authors note, this is similar to other areas where a third party supply of money causes prices to rise – such as the effect of cheap mortgages causing home prices to rise.

A similar effect occurs in health care where third party “insurance” benefits are an enabler of higher priced health care services.

Whenever the cost of goods are services are subsidized such that their immediate direct costs are lower than the market clearing price, demand for those goods and services will increase. As demand increases relative to supply, the prices charged increase to a new actual and higher market clearing price.

Student loan programs are a major cause of tuition hikes. Cheap mortgages are a major cause of rising home prices. Health “insurance” is a major cause of higher prices charged in health care.

Health policy: “The U.S. can slash health-care costs 75% with 2 fundamental changes”

This makes a lot of sense, thus it will never happen, unfortunately:

Fund the HSA deductible, as Indiana and Whole Foods do, and put real prices on everything.

Source: The U.S. can slash health-care costs 75% with 2 fundamental changes — and without ‘Medicare for All’ – MarketWatch

The Affordable Care Act, according to co-architect Jonathan Gruber, was about coverage. As he put it, in his own words “we paid lip service” to cost controls. In fact, in the unsubsidized individual market, insurance premiums rose by 100 to 200% (that’s two to three times higher prices). This market is probably about 18 million people, plus another 6 million or so who remain uninsured due to the high prices and are not normally counted.

How expensive is the ACA market? For those in their 50s and up, premiums may cost thousands of dollars per month, with $2,000 or more being common. That’s $24,000 per year for a high deductible “insurance” plan – often meaning $30,000 or more out of pocket before receiving benefits. Surprisingly, the subsidy cut off level for 2020 is about $68,000 per year. If you earn this much or more, you are not eligible for any subsidy assistance. You’ll pay $30,000 out of pocket on your $68,000 pre-tax income – and you still need to pay taxes, housing, food and transportation costs.

Actual price quote, HealthCare.gov, 64 year old married couple living in Laramie, WY – this is the cheapest Silver plan.

How did this absurdity happen? Jonathan Gruber made numerous errors in crafting the ACA. One of which is that the subsidy cut off level is determined as a factor of the regional poverty income level. It has nothing to do with actual insurance prices. Gruber never envisioned insurance premiums rising so high, so rapidly. Thus we have absurd cut off levels having no relationship to actual prices of insurance!

Part of the reason prices rose so rapidly is because 35 state run high risk insurance pools were shut down and all of their high cost/high risk patients were moved into the ACA individual market. Prior to 2017, some of these high costs were shared with most insured people in the country. But beginning in 2017, these risk sharing measures were ended and the individual market had to share these costs exclusively, turning the individual market into a de facto high risk/high cost insurance pool.

For those that are subsidized, the Federal taxpayer picks up the extra charge. In fact, through various quirks, many subsidized consumers pay less than they did in 2014, and some even pay ZERO premiums – receiving insurance for free.

Meanwhile, those in the unsubsidized market have seen a doubling or tripling of their costs to the point they have been forced to drop out of the market. Much political ventings drones on about the Individual Mandate but that is irrelevant. The ACA itself exempts people from the mandate if the least cost Bronze plan exceeds about 8% of your household income. This turns out to be true for most families in their 40s and up and most married couples in their 50s and up.

The primary point of the ACA was to provide insurance access to the non-group market. Contrary to poplar misconception, the HIPAA of 1996 provided pre-existing condition exclusion protections to all those with employer sponsored insurance. Medicare, Medicaid and VA coverage already provided protection. Nearly everyone had pre-existing condition protections – except for the small non-group or individual market (actually about 24 states enacted their own forms of protection). The ACA provided those protections but at the expense of pricing millions out of access – which is a big miss for an Act whose title begins with “Affordable”. (Technically it was Patient Protection and Affordable Care Act but still…)

Business: San Francisco to require tech entrepreneurs to receive a permit from the city before launching their tech products

Guess San Francisco doesn’t want to be a center of tech innovation:

But the office will do more than just help eager tech firms obtain approvals and permits. It will also have the power to weigh the potential impact of a proposed technology on city infrastructure and public safety — as well as privacy and security — before giving a green light to a pilot project or product launch.”

Source: New San Francisco Office Could Curb ‘Reckless’ Rollouts of Emerging Tech | KQED News

The city will review and issue a permit – or advise the company how it may need to alter its product – before its product can be trialed or launched in San Francisco.

Faceless bureaucrats with no skin in the game will sit in the driver’s seat. What could possibly go wrong?