Inaugural aspirations, his and mine

At last, the pageantry of the inauguration has begun to fade, and although the media's chanted refrains ("historic!," in case anyone alive, anywhere, had yet to be informed of the history-making going on) continue to echo across the morning talk show spectrum, we are finally beginning to see what sorts of policies will actually come from the Obama Presidency. Thus far, it has been a decidedly mixed bag. While I have been pleased to see the President backing off of "cut-and-run" campaign promises vis-a-vis Iraq, I can't begin to describe how ironic and condescending it is for Democrats to demand tax increases for the rich, and then to nominate and confirm a rich, tax-evader to oversee the IRS. Ah, yes - not those rich.

I am realistically inclined to believe that the next 4 years will not be kind to the small-government, free-traders amongst us, but I think there are a few possible outcomes we might reasonably hope for:

• Honor the legacy of Dr. King, and complete the civil rights revolution, by ending race based preferences in education and hiring: "A man whose father less than 60 years ago might not have been served at a local restaurant can now stand before you to take a sacred oath," the President declared, and proud we should rightly be. Yet, with the election of our nation's first minority President (or, as I have argued, with his very nomination), the politics of race and the grievance-based culture of victimization have been necessarily marginalized. What can be more farcical than claiming that our system still requires separate rules for certain groups of people, when that very system is led by a member of one of those groups. Mr. Obama should declare that if his election has any meaning beyond the political, as so many millions believe it does, than he, and our nation, can no longer tolerate a government that is not blind to race. While probably a long shot,Obama has indicated that he has warmed to the idea, particularly when discussing race-based versus means-based preferences.



• Enact meaningful economic reforms without doing more damage: In his inaugural address, President Obama promised "...not only to create new jobs, but to lay a new foundation for growth," signaling early and sizable action to counter-act the current recession. Yet, thus far, congressional democrats have continued to propose outdated Keynesian experiments that will do little to address the current crisis, and much more to address their wallets, and their special interest constituents. Rather than pump tax-payer billions into congress's pet projects (Condoms? Really?), President Obama should propose a comprehensive plan based on marginal tax cuts and pro-business incentives. As the Wall Street Journal argues, any stimulus to individuals and businesses need to be in the form of incentives to produce and spend, rather than temporary, lump sum payments. Only by changing the marginal incentive structure will government effect consumer and supplier decision-making on a semi-permanent basis. Infrastructure spending is an important priority, but hardly an effective way to stimulate the economy, and federal subsidies to bail-out state budget deficits and fund state-level infrastructure are a bad idea, aside from doing diddly for the economy (University of Chicago Nobel Laureate Gary Becker makes a strong argument here that it could even hurt the private sector). Again, there is growing clamor for a tax-oriented stimulus, and President Obama has met with congressional Republicans to discuss the topic.
  
  Moreover, and perhaps more important to the long-term vitality of the economy, we must not return to an era of over-regulation, nor should we demonize the products and tools that were abused in the lead-up to this crisis, rather than those who abused them. The ability to spread and exchange risk, represented in such now-demonized products as sub-prime mortgages and credit default swaps (CDS), is vital to a thriving economy and continued capital investment. Onerous regulation and government intervention, while pacifying to reactionary populist sentiment, will only hurt those it intends to help.



• Secure victory and a successful transition out of Iraq: There can be little doubt that America is tired of Iraq, and has been for some time. But with the gains of the last 12-18 months becoming more evident with every passing day of media silence, it would be folly on a grand scale for the President to rush to withdraw our troops, and leave our fledgling democratic ally underdeveloped and ripe for relapse. Just as one-time stimulus payments have little long-term effect because consumers know they are temporary (see 2008, stimulus check of), so too security gains can be squandered if Iraq's enemies know they must simply wait for a hasty American withdrawal to strike. For our endeavor in Iraq to be a lasting success (and make no mistake, it can very well be), we must ensure a functioning Iraqi military and security force that is not only capable of maintaining relative peace, but is also actively doing the job that coalition troops are now, that of rooting out remaining al-qaeda militants and securing the country's porous borders. Luckily, President Obama has begun to back pedal on his aggressive withdrawal timeline, and has been in active discussion with the Joint Chiefs and leaders on the ground. A victory in Iraq is more feasible now than any time since the invasion, and a pragmatic approach could ensure a successful draw down on Obama's watch.

Of course, only time will tell if President Obama will actually turn out to be the pragmatic centrist he claims to be, or if he will cave to left-wing special interests and the lures of a complicit congress. Let's hope for the former, as its the best we can get.

Bill Gates at the U of Chicago

I managed to snag tickets to Bill Gates' talk at the Graduate School of Business yesterday through a nifty online lottery for students. Annoying seating corral-gals aside (what's with that - people in business school can't seat themselves?), the talk itself was pretty interesting. He spoke for about 30 minutes, primarily on the topics of rapid technological growth and how it will impact education, health care and the human machine interface, although he did touch on what what he termed at Davos "Creative Capitalism." A video of the talk can be had here (WMV, 76 MB)

Some of the highlights:

• He opened the talk by replaying his hilarious farewell video that originally aired at CES - celebrity appearances include Jay-Z, Steve Balmer, Bono, Clooney, Obama, and more. Even funnier in person.


• A brief discussion of the evolution of software and hardware industries - he posits an interesting theory that the spread of personal computers, cell phones, etc. works in a positive feedback loop with the growth of software companies - thoughts on this later


• The Future of Interaction - Natural User Interface. This was the part I found the most interesting. He discussed how the shift taking place already with the iPhone and Microsoft Surface will eventually transform how we interact with machines. The next iterations will involve touch, speech and visual recognition, and natural writing implements. Cool.


• Technology and Healthcare - another cool point, where he demonstrated Microsoft's HD View, being used in conjunction with Harvard to create ground-breaking brain imaging. He stressed the idea that technology should be accesible, so that it enables innovation in a variety of fields, rather than hinders it. He also stressed the applicability of Machine learning and AI to solving puzzles like the AIDS virus.


• During the question period, he also addressed a variety of applications of both technology and "Creative Capitalism," particularly in terms of improving inner-city education via charter schools and accountability testing, eradicating malaria and other diseases, and enabling biological research.

My Thoughts:
I think Gates is on to something when he talks about the ability of non-government, privately funded agencies to address certain market failures - particularly the collaboration of the Gates Foundation with GlaxoSmithKline to share the substantial financial risk involved in developing a malaria vaccine. I'm more skeptical, however, when he tries to replicate these successes, and this approach in general, in situations where the markets appear more efficient - for example, his ongoing project to raise African coffee farmer's wages. Improving productivity and efficiency is a good target, as they have done with a separate Indian farming program, but simply seeking to inflate wages a la Fair Trade Coffee isn't.

The Campus Workers Question

With the time for renewing campus labor contracts upon us, the usual sympathetic suspects have sprung into action across campus, most notably Students Organizing United with Labor (SOUL). More interesting, and certainly more relevant to the discussion from a factual standpoint, is the smaller contingent of students questioning the rather boisterous claims of the Union/SOUL coalition. By way of background, the union rejected an initial offer in the 2-3% gradual increase range, and then again narrowly voted to reject an offer of 3.5% over the next three years.

In a recent set of dueling editorials blazened across the soiled pages of the Chicago Maroon, the attitude of both sides makes itself subtly, but openly, apparent. Senior Andrew Lees wrote to question the validity of the "4%" demand coming from student groups, and he raises a number of strong points:

The CPI grew at an average annual rate of 2.53 percent in the 12 months ending in October 2007. Inflation measured by the Core CPI—so named because it excludes energy and food, the two most volatile components of the price level—was at 2.37 percent, well below the Union’s 4-percent mark. Both of these numbers, you will note, are below the University’s three percent offer...When questioning SOUL members about the accuracy of the four percent, they insist that the cost of living in Chicago is rising faster than in the rest of the nation. This is also untrue: Headline CPI for the Chicago-Gary-Kenosha area grew at a 2.54-percent average annual rate, and Core CPI for the area estimated the inflation rate at just 1.95 percent.
(Emphasis is mine)

He further lambasted the present campaign for the arbitrary nature of the 4% figure, since it does not correlate to either the empirical data, or the anecdotal assertions also being used to bolster the demand. A week later, a member of the workers union wrote to argue that "Inflation data does not reflect reality." An interesting premise, to say the least, but he makes several claims that demand further exploration, due to their potentially misleading implications:

[The CPI value of 2.53] hides the fact that inflation has been trending upward over the last year—the average over the last 6 months has been 3.51 percent

One has to wonder, then, what the union found unsatisfactory about the 3.5% increase that they voted to reject?

The author also mentions rising property taxes and rent values, both of which are valid concerns - yet the CPI breakdown clearly shows that rent and housing costs are factored into both the national and the regional calculations. Most confusing is his claim that:

[T]he inflation rate for gasoline, now at 26.1 percent, affects us greatly. [This] figures are not reflected in Lees’s figure of 2.53 percent, but they are reflected in our lives.

Hmm, call me crazy, but as I undestand it that is exactly what seperates CPI from Core CPI - the CPI value of 2.53% is higher precisely because it does include the price of fuel, which tends to have a much higher inflation value and raise the entire metric. The author closes with an ad hominem exhortation to consult with the workers about how much of a cost of living pay raise they deserve - a valid request, so long as the workers are consulting with the facts.