Streetwise Professor

February 22, 2014

Слава Україні (Slava Ukraini-Glory to Ukraine)

Filed under: History,Military,Politics,Russia — The Professor @ 10:14 am

Events are unfolding at a furious pace in Ukraine.  I decided not to blog about them last night, because I knew that whatever I wrote would be superseded within minutes, and that was definitely the case.  The same is probably true now, but enough has transpired to justify some comment.

Yesterday saw the negotiation of a deal between the opposition leadership and Yanukovych in which the president made major concessions, including a return to the 2004 constitution (with much more limited presidential powers), the resignation of the interior minister, and the creation of an independent investigation overseen by the EU.  But his concessions were insufficient for the crowds assembled at the Maidan.  The opposition leaders were nothing of the sort: they led only themselves, having lost whatever influence they had over the Maidan the moment they commenced to negotiate.  When they went to the Maidan platform to announce the deal, their ostensible followers reacted with rage.  They were-and are-willing to accept nothing less than Yanukovych’s resignation.

Then the really wild rumors began.  First, it was reported that Yanukovych had fled Kiev.  But where?  Initially, the claim was Harkiv.  Then, a plane allegedly carrying Yanik was tracked flying south.  Sochi?  No: the plane flew on and on, eventually landing in the UAE.  But was Yanukovych on it?

Apparently not.  He was apparently in Harkiv after all, where an assemblage of regime loyalists was meeting.  Then came the second rumor: that Yanukovych had resigned.

That rumor lasted a good 90 minutes, and then Yanukovych appeared on television, saying he had not resigned and would not resign.  He accused the opposition of being Nazis who were mounting a fascist coup like Hitler’s in 1933.

In the meantime, the police left the streets of Kiev.  Berkut units brought to the capital returned to Sevastopol and other cities.  The parliament passed a series of new laws, naming a new acting PM and new ministers, and demanding Yanukovych sign all the laws it had passed and the constitutional change or resign.  A law releasing Tymoshenko and invalidating the law under which she had been jailed also passed.

And as I write, the Rada has voted to remove Yanukovych from office, and Tymoshenko has left the hospital where she had been imprisioned.

The deal struck yesterday was midwifed by the EU, but although it deserves some credit, the laboring mother was the Ukrainian people, not just on Maidan, but throughout the country.  Why did Yanuokovych make so many concessions?  I surmise that he was stunned that the campaign of sniping that killed dozens only seemed to increase the determination of the opposition crowds rather than send the scurrying home.  The seizure of government buildings throughout the country and the switching of sides by police and interior units in various cities made it plain that he had insufficient strength to control the country.  And the firing of the commander of the army suggests that he wanted the military to intervene, but it refused: as I noted from the very beginning, the actions of the army and security forces would be decisive.  Thus stymied, Yanukovych tried to buy time and made concessions, but clung to power hoping that he could reverse matters in time.

Now it appears that he has retreated to his eastern redoubt, and is planning to wage a civil war from it.  Separatist rallies are occurring in the east.

Given his rhetoric-which dovetails perfectly with that coming out of Russia-it is only a matter of time before he calls on the fraternal support of big brother Russia.

How will Putin respond?  I don’t know, but the rhetoric emerging from Russia-including threats to attack the Crimea if “Ukraine breaks apart,” which is exactly what is happening-makes it plain that there is a substantial likelihood of Russian intervention, at least in the east.  Moments ago Russia announced that the opposition had violated the deal which the EU had guaranteed, thereby creating the predicate for an intervention.  (Though, interestingly, the Russian representative did not sign it, leaving in a huff.)  Russia’s UN ambassador Churkin has blamed the “western powers” for destabilizing Ukraine. This further suggests an intervention is in prospect.

Which makes Obama’s reaction all the more shocking.  Obama had a phone call with Putin yesterday.  Afterwards, the White House announced that the conversation had been “constructive and workmanlike.”  The administration made it sound like Putin was in agreement with Obama, and that he has a genuine interest in a peaceful outcome in Ukraine.

He might, but only on his bloody-minded terms.  His actions have been and continue to be anything but constructive.  Indeed, they have been nothing but destructive and threaten to become even more so.

It is astounding that Obama is publicly acting as if Putin is not ultimately and primarily responsible for this entire catastrophe in Ukraine, because that is exactly the reality.   By validating Putin as a constructive force in Ukraine Obama is enabling the Russian president’s impending intervention and will make himself and the United States look utterly foolish when that happens.  Just like in Syria.

From the early days of this, I anticipated that civil war was a very possible outcome in Ukraine.  It looks for all the world that this possibility is about to become a reality, although I have been repeatedly surprised at the path to that outcome.

This is a tragedy.

Слава Україні.  Godspeed to the Ukrainian people.  May we do what we can to give them a chance at independence and freedom.  But I fear that there is a mismatch of will and capability-especially will-and that the ultimate outcome will be a partition of the country, with Yanukovych ruling over a rump state in the east (until Putin tires of him), and with Putin scheming to find the way to achieve his ultimate objective of gaining control, de facto or  de jure, over the entire nation.

This is the end of the beginning, at most.  As bad as things have been, they are almost certain to get worse.  There is a real possibility that Ukraine will emerge free, but I fear that Ukrainians will have to fight for that freedom.

February 20, 2014

Obama Fiddles While Ukraine Burns

Filed under: History,Military,Politics,Russia — The Professor @ 11:52 pm

In his solipsistic way, Obama believes that if he isn’t fighting, there’s no war.  This is most notable in Iraq, and is his plan for Afghanistan.

What Obama fails to recognize is that the enemy has a say.

Today Ukraine is spiraling into bloodshed and anarchy.  The violence on the streets of Kiev gets most of the attention, but the rest of the country-particularly the western portion-is descending into civil war.  Although the immediate author of this tragedy is Yanukovych, he is little more than Putin’s puppet.  The pattern is all too clear.  Putin, primarily through financial blackmail, has compelled the Ukrainian president to unleash his forces against those protesting against his rule–and protesting against Russian dominance.

To Putin, the Cold War isn’t over. Pace Faulkner, to Putin the Soviet past isn’t dead: it isn’t even past. Or to put it differently, he wants to reverse the results of the Cold War, and the resulting humiliation (as he sees it) of Russia.  Restoring Russian suzerainty over Ukraine, as dysfunctional as it is, is the linchpin of that effort.

Putin further perceives that his main adversary in achieving this goal is the United States.

Alas, he’s probably wrong in this, at least to January 2017, because the president of the United States is in denial and advertising his non-adversarial nature:

“Our approach in the United States is not to see these as some Cold War chessboard in which we’re in competition with Russia,” Obama said.

“Our goal is to make sure that the people of Ukraine are able to make decisions for themselves for the future, that the people of Syria are able to make decisions without having bombs going off and killing women and children,” he said.

The disconnect in that statement is jaw-dropping.  It is hard to imagine a president of the United States of America making a more callous and idiotic assertion.  Jesus H. Christ, could it be more obvious? The overriding obstacles to Ukrainians and Syrians being “able to make decisions without having bombs going off and killing women and children” are Putin and Russia.  Full stop.

If Obama’s goal is really to save lives and secure freedom and autonomy for Ukrainians and Syrians, then he has to confront the simple reality that this goal cannot be achieved without confronting Putin.  Ukrainians and Syrians are dying first and foremost because Putin is still fighting the Cold War.  If you want to prevent their cruel deaths, you have to take to the lists.

But, of course, the reason Putin is emboldened to fight these battles is that he has taken the measure of his non-adversarial adversary.  He knows Obama has no stomach for confrontation, but will content himself to fiddle and diddle and spout fine phrases and drone on about red lines or lines without colors while Ukraine and Syria burn.

There is a saying attributed to Trotsky: “You may not be interested in the revolution, but the revolution is interested in you.”  Obama is preciously little interested in the revolutions occurring in Ukraine and Syria (not to mention Venezuela-another Putin ally/project).  But Putin, who is stoking these revolutions, is very interested in confronting the United States.  Obama does not want to go back to the days of the Cold War, but Putin is a revanchist par excellence.

So if Obama wants to advance the ideals he spouts, he has to concede that the United States is in competition with Russia.  Unless he jocks it up, Syrians and Ukrainians (and Venezuelans) will be ground under Putin’s heel.  He cannot vote present.

Obama portrays himself as a progressive, but he is the ultimate reactionary in foreign policy.  His policies in Iraq and Afghanistan are rooted in a reaction against Bush.  His policies regarding Russia are rooted in a reaction against American Cold Warriors, notably Ronald Reagan, the president during Obama’s freezenik college years.  He defines what he is primarily by what he is not.  Such an obsessive focus on avoiding the errors others have supposedly made is usually a perfect recipe for making your own very special errors.

At least Ron Paul’s isolationism (“Ukraine is their business, not ours“) does not presume to strive for lofty goals while eschewing the hard and bitter work required to achieve them.   Obama taunts Ukrainians and Syrians by claiming to have their interests at heart, while doing nothing to advance those interests.  Paul’s isolationism is unleavened by hypocritical idealism.  One cannot say the same of Obama’s policies in Ukraine and Syria, such as they are.

February 19, 2014

Well, at Least He Didn’t Give the Line a Color

Filed under: Military,Politics,Russia — The Professor @ 1:46 pm

Does Obama even listen to what he’s saying?  Today, in Mexico, he spoke on events in Ukraine: “There will be consequences if people step over the line.”

What, just like in Syria?

The main differences between his infamous “red line” remark about Syrian use of chemical weapons and this statement are: (1) Obama didn’t use the word “red”, (2) whereas he specified where was the alleged line was drawn in Syria (use of CW), he doesn’t do so here.  Difference (2) means that no matter how extreme things get in Ukraine, he can always claim that his double secret line (known only to him) wasn’t crossed.  Obama is also going for the double secret (known only to him) consequences.  I might also note Obama’s imprecision on just who “people” might be, giving him even more wiggle room.  Three escape hatches in a ten word statement.  And that’s what this is all about: talking tough while avoiding making any commitment to actually do anything.

Translation for Ukrainians fighting the Yanukovych regime (and Putin): You’re on your own!

Sadly, I think they had figured that out, to their great bitterness, weeks ago.  But they are valiantly battling on, alone except for the support of a few stalwart nations like Poland and the Baltics who know what life is like in the Russian jail of nations.  Speaking of consequences, the result of European and American fecklessness will be a legacy of suspicion and distrust if the opposition indeed thwarts Putin and topples Yanukovych.

February 18, 2014

Strike the Head of the Snake

Filed under: Military,Politics,Russia — The Professor @ 6:55 pm

The US ambassador to Ukraine Pyatt and VP Joe Biden have made it clear that the US holds the Yanukovych regime responsible for the bloodshed that has occurred, and any bloodshed to come.  This is welcome, I guess, but one wonders what the consequences will actually be.  A trip to the comfy chair for Yanukovych and his henchmen, or some tepid financial sanctions?  Or something meaningfully robust?

And even if the Ukrainian regime is dealt with harshly, that won’t hold the truly responsible party accountable.  Yanukovych doesn’t go to the little boys’ room without a hall pass from Putin.  Putin is ultimately responsible for the dead of Maidan.

Punishing at Yanukovych is striking at the tail of the snake.  If you want to kill a  snake, you must strike at its head.  Putin is the head of the python curling around Maidan and Ukraine.

But will Obama have the glands to stand up to Putin?  After all, even the dreamy Jimmy Carter was shocked awake from his reveries by the Soviet invasion of Afghanistan. But despite the Russian complicity in the slaughter in Syria, and its responsibility for the looming violence in Ukraine, the US remains clearly reluctant to bring home any consequences to Putin or Russia.  Indeed, Obama’s public statements about Putin suggest that he is mainly a figure of fun in the White House, ridiculed for his bare-chested bravado.  Yes, that is risible, but behind the bravado is a an amoral, calculating, Machiavellian mind.  Obama seems oblivious to that, even though Putin has run rings around Obama again and again.  Or if he is not oblivious, he is clearly afraid to take on Putin.

I am not advocating the use of force. Instead, I suggest something much more frightening to Putin and his ruling clique.

Back in the Russo-Georgian War, I said that the best US response would be to “cry havoc! and let slip the accountants of war.”  That is, ferret out every dirty Russian dime in western financial institutions.  Track down every shell company in the Caribbean that traces back to Russia, however tortuous the path.

We can even frame it as a boon to Putin.  After all, he has made it plain that he wants to repatriate Russian capital that has fled the country.  We’ll just be helping him out!

But given that many of those dollars of flighty capital were launched by members of the ruling clique, such an endeavor would strike real fear into those that matter most.

Yes, Putin and Lavrov will rant and rave if we investigate Russian money in western financial institutions: their shrieks over the Magnitsky list will seem like gentle purrs by comparison.  But they are good products of the Soviet Union, which taught that the correlation of forces is decisive in any conflict.  Objectively, the correlation of forces decisively favors the US (and the West generally) even given our relatively enervated state.  Economics, demographics, military capacity, alliances, you name it.  What has been lacking is the will to exploit those advantages.  Putin has substituted will for capability.  We have the capability to defeat him, if only we had the will to use it.

I am a firm believer in the indirect attack, aimed at the enemy’s center of gravity.  Unleashing forensic accountants on Russian money held abroad-and there is a lot of it-would achieve exactly that.  Would that Obama would do so.  Alas, I think that history will record that Obama made Jimmy Carter look like Rambo on ‘roids.

The Blood Being Shed in Kiev is on Putin’s Hands

Filed under: Military,Politics,Russia — The Professor @ 1:27 pm

My prediction that the situation in Ukraine was easing turned out to be horribly optimistic, and terribly wrong.  Within hours of posting, violence-the most extreme of the past months-erupted on the streets of Kiev.

The pretext for a brutal assault by regime forces was a march by oppositionists to the parliament building.  The marchers were demanding that the Rada return the country to the 2004 constitution, which substantially limited presidential powers. They were set upon by militia.  Then the government forces advanced on Grushevsky Street in Kiev, penetrating the protestors’ position through an opening that the opposition had agreed to make in exchange for amnesty of those previously  arrested.  Now the government forces have moved on the Maidan, and are announcing that all women and children should leave before the regime troops execute an “anti-terrorist operation.”  The militia have already burned down the protestors’ tents.  The scenes in the live feed are apocalyptic.

I have seen reports of up to nine dead, including seven protestors.  One body was allegedly found headless. This nearly doubles the previous death toll, and the night is not over.

The timing of the repression is telling.  It occurred the day after Putin released the next $2 billion in aid.  He presumably did so only if his conditions were met.  And Yanukovych would not have taken such action without the approval of his patron.  The circumstantial evidence therefore strongly suggests that Putin either ordered the action, or gave Yanukovych permission to carry it out.

Even if the crackdown is not a direct quid pro quo demanded by Putin in exchange for the money, the blood is on Putin’s hands, and on Russia’s hands.  The conflict on the streets results directly from his coercion of Yanukovych into walking away from the association agreement with the EU, and his demand that Ukraine associate with Russia alone.  No such demand, no protests, no blood on the streets.

That is, Putin’s actions in November were necessary and sufficient conditions for what is transpiring today.  If yesterday’s release of money was tied to Yanukovych’s agreement to end the protests by whatever means necessary, that only compounds the crime and determined the timing.

Thus, the blood is on Putin’s hands.

Now we have to watch to see what the coalition of the feckless-the EU and the US-does.  A Rubicon has been crossed.  What will Germany and the US do in particular to respond?

And respond not just against Ukrainian officials and the Ukrainian government, but at the ultimate source of the repression: Russia and Putin.

February 17, 2014

Poor Ukraine: So Close to Putin, So Far From God

Filed under: Economics,History,Politics,Russia — The Professor @ 9:47 pm

The situation in Ukraine has reached something of a denouement. The opposition leadership and the regime have reached an agreement whereby the government will amnesty arrested protestors, and the protestors will end the occupation of government buildings and permit traffic to move on Hrushevskyy Street, although they will not dismantle the barricades altogether.

This deal has been met with some dismay (and in cases, anger and bitterness) on Maidan, and with good reason.  The protestors have given up their main leverage, and although they have threatened to re-occupy the buildings and Hrushevskyy Street if Yanukovych’s regime backslides, this is likely an empty threat.  The regime was surprised once, but is unlikely to be surprised twice, and will be ready to respond aggressively to any attempt to take the buildings again.

Conversely, the government can easily re-arrest those that it has amnestied-and many more to boot.  There is thus a pronounced asymmetry between the concessions made by the government, and those made by the opposition.

In brief, although Yanukovych has not triumphed, the threat to him has abated considerably and the correlation of forces has shifted palpably in his direction.

Perhaps reflecting this, Putin has relented and will proceed with the purchase of the next tranche of $2 billion in Ukrainian Eurobonds.

Truth be told, the real threat to the Yanukovych regime is economic.  The Ukrainian currency, the Hryvnia, is the best readily available indicator.  It has plunged from 8.2 to the dollar at the beginning of Maidan, to 8.8/8.9 to the dollar at present.  Although it rallied to 8.4 a week ago, when the outlines of a deal were in prospect, and when Ukraine imposed capital controls, it weakened almost immediately thereafter.  The current depressed level augers poorly for Ukraine’s future prospects.

And here is the tragedy.  An economic collapse, which would be accompanied by a further collapse in the currency, would be the most likely cause of Yanukovych’s political demise.  But then the opposition would inherit a horrible situation which would require it to take measures that would inevitably lead to it becoming hated and despised.  It is also not an environment conducive to the completion of the constructive economic and political reforms the country so desperately needs.  Think of Russia ’91-’92, or ’98-’99.   The reformers ended up totally discredited and hated, paving the way for the emergence of Putinism.

The end result is unlikely to be a Ukraine that resembles Poland, on a path to converging with the EU. A more likely outcome is a perpetual Sovokistan, and one that is a satrapy of Russia to boot.

An incipient collapse would put Putin in a hard place.  He would be forced to double down and increase economic assistance-likely throwing bad money after worse-or to stand aside and watch the whole thing collapse.

Cynic that he is, perhaps he would stand aside, on the calculation that he could take advantage of the collapse, and swoop in and pick up the pieces of a shattered country.  And a prostrate Ukraine would hardly be attractive to the EU.

It pains me, but I just can’t see a clear path forward for the unlucky country.  Belarus-light on the upside.  Perpetual basket case as the middle  scenario.  Economic collapse and revolutionary chaos as the worst case

The Sovok legacy is too powerful: the country’s institutions are weak and fundamentally corrupt.  Europe is feckless and disinterested, long on soaring rhetoric, short on  Euros and will.  Obama doesn’t give a rat’s rump about foreign policy generally, except for his Iranian legacy project: if he won’t bestir himself over the daily slaughter of hundreds in Syria, he’s not going to lift a finger to keep Ukraine from sullenly settling into a Russian orbit.  In contrast, Putin is far more motivated, driven by his dream of undoing the results of the Cold War.  He views Ukrainian independence from Russia as a historical monstrosity.  He would no doubt prefer to eliminate Ukrainian sovereignty de jure, but would no doubt settle to eliminate it de facto–for now.

Ukraine is too close to Putin-and subjugation of Ukraine is a goal too close to Putin’s heart.  Ukraine is far from the EU, farther still from the US, and farther still from the help of God.

I wish this weren’t so.  I pray I am wrong.  But as much as I admire the idealists on Maidan, and pull for their victory, I can’t see it happening.  The mutilating historical legacy of the USSR is too powerful,  a malign Russia is too close, and succor is very, very far away.

The Wages of Fecklessness: Obama and Kerry Get a Raise

Filed under: History,Military,Politics,Russia — The Professor @ 11:39 am

American foreign policy continues its triumphant march from humiliation to humiliation.  To the shock and amazement of the world (not really) the Syria “peace” talks in Geneva have failed.  Utterly.  So utterly that the Assad regime put the Opposition’s delegation to the talks on a terrorist list.

This left Obama’s foreign policy Sancho Panza, John Kerry, spluttering in impotent rage against Assad:

“It is very clear that Bashar al-Assad is continuing to try to win this (on) the battlefield rather than to (go) to the negotiating table (with) good faith,” said Kerry, speaking in the Indonesian capital during a trip to Asia and the Middle East.

That was clear before the talks began.  Reuters claims that it appears that Kerry is “trying to tighten diplomatic pressure on Assad.”  I’m sure the Chinless Ophthalmologist is quaking in his Guccis.

He is also spluttering against the Russians:

U.S. Secretary of State John Kerry accused Russia on Monday of enabling the Syrian regime’s stepped-up military campaign by providing President Bashar al-Assad with more arms, undercutting efforts to find a diplomatic solution to the conflict.

The sharp criticism from Mr. Kerry reflected growing U.S. frustration with Moscow’s continued support of the Syrian president. Mr. Kerry said Iran and Lebanese Hezbollah have likewise increased their support for the Syrian regime, allowing him to expand his military campaign.

“Russia needs to be a part of the solution and not be contributing so many more weapons and so much more aid that they’re in fact enabling Assad to double down, which is creating an enormous problem,” Mr. Kerry told reporters at a joint news conference in Jakarta with his Indonesian counterpart. His comments came on the final stop of a five-day Asia tour.

Mr. Kerry said it was important for the international community to consider in the coming days “exactly what steps can now be taken in the face of this intransigence.”

Again, this was all known, and totally predictable, when Kerry was high-fiving The Tarantula in Geneva at the announcement of the talks oh-so-many deaths ago.

Speaking of The Tarantula, Lavrov had an answer for Kerry.  Short version: f*ck off.  Longer version:

In Moscow, Russian Foreign Minister Sergei Lavrov hit back, citing “evidence that certain sponsors of the opposition are starting to create a new structure” bringing in Assad foes who have left the main opposition National Coalition.

“In other words, a course is being set to move away from the negotiations track and once again place bets on a military scenario,” Lavrov said at a joint news conference after talks with his Eritrean counterpart.

He also faulted the United States for failing to ensure the presence of a broadly representative opposition delegation at the Geneva talks, saying that Russia had done its part in getting Assad’s government to the table.

“Russia is always being urged to make more of an effort to resolve the Syrian conflict,” Lavrov said. “When we hear that Russia must take some steps, it’s necessary to remember one simple truth: We have done everything we promised.”

Given the failure in Geneva, Obama says he is “considering” new policy options, but according to the Reuters piece, provided no details.

Sure.  Take your time.  It’s not like people are dying or anything.

In point of fact, Don Quixote is too focused on Iranian windmills to pay much attention to Syria.  Indeed, the most reasonable inference is that he believes that doing anything that would undermine Assad would also undermine his Iran initiative, given that Assad is essentially a wholly-owned subsidiary of the Iranian Pasdaran.

But there is some good news for Kerry.  The Chinese are planning to build a replica of the Titanic, and to reenact the disaster.  So after retiring from public life (I won’t say service) he can apply for the furniture rearranging position.

Syria is just one example of Putin beating on Obama like a big bass drum.  There are many others.  Obama’s retiring ambassador to Russia, Michael McFaul, watched Putin’s drum solo for five years (and who took a few personal beatings of his own), but nonetheless thinks that Obama should strive for another Reset. Because, of course, repeating the same thing that has failed miserably is a sign of genius, not insanity.

Maybe for his next appointment should be as ambassador to Sweden, because he evidently has Stockholm Syndrome.

And here’s the sobering news people: Putin is on his good behavior now.  Wait until the cleanup after the closing ceremony at Sochi begins.  More on that later.



February 15, 2014

The Rent Seeker, Posing as Visionary

Filed under: Economics,Energy,Politics,Regulation — The Professor @ 9:36 pm

I haven’t written much at all about Elon Musk and Tesla since the middle of last year.  I have no reason to change my opinion that the prices of Tesla and Solar City stock were manipulated in April-May, but by the same token don’t believe that their subsequent increases are primarily the result of manipulation.  Those stock prices are partying like a 1999-era dot com company.  I think the party will end soon, but I don’t know when and I could be wrong.

But my main issue with Musk was not about the stock price.  It was about the fact that all of his companies were heavily dependent on government subsidies and support.  This support socialized the potential losses, and allowed Musk (and other major investors, notably Goldman) to capture the upside.  My point was if his products and business models were so great, he could succeed on his own, by attracting private capital.

One company that I mentioned in passing was SpaceX, his  space launch venture.  Inevitably, this company is dependent on government contracts, given that a very large fraction of space launches carry government payloads.  This is something different from Solar City and Tesla, where the government is providing subsidies but not receiving any product or service in return.  But still, it means that Musk depends crucially on cultivating government support.  Government contracting-especially big ticket contracting-is hardly a pristine activity.  A firm does not succeed or fail at it primarily on the basis of the superiority of its product, but instead on the basis of its ability to influence politicians and bureaucrats.  And a lack of scruple is often a feature not a bug in that regard.

SpaceX was  looking for a commercial launch site, and  seeking state subsidies in order to build it.  The company has been playing states off against one another, looking for tax benefits. My current home state, Texas, has been one of his targets.

Cynically, Musk focused on one of the poorest parts of the state-Brownsville-and dangled the prospect of a mere 600 jobs, in exchange for  $20 million dollars or so in tax benefits.  Some of which will come from the taxpayers of that very poor community.  And sadly, the state legislature has succumbed.

I’ve been to downtown Brownsville.  I testified at a trial there in 2008.  (The reason that what was the biggest bankruptcy case in US history was being heard in Brownsville is a story in itself.)  The law office for the local counsel in the case was at the edge of downtown, and during breaks I wandered around.  It was an educational experience.  I had just flown in from Milan (another story), and to be honest, I felt more foreign in downtown Brownsville than I did in Italy: and I certainly got far more puzzling and suspicious looks in Brownsville than around Lake Como.  Let’s just say it ain’t the Bay area.  And that Elon Musk wouldn’t be caught dead there.  Well, maybe if he did go there . . .

The poorest people in Brownsville will not benefit the slightest from the SpaceX venture.  But he and his lobbyist successfully importuned the state and county to take taxpayer money and give it to SpaceX by invoking their poverty.  It was utterly cynical for a billionaire to extract tens of millions from Texas taxpayers in the name of the poor Mexican Americans of Brownsville.

I know this is the way the game is played.  And that’s the problem: the game is cynical and wrong.  It is mere rent seeking.  Musk is particularly appalling because he is a rent seeker posing as a technological visionary.  His businesses all depend on extracting rents from the government, which he pockets.

But he has a cult of personality that portrays him as some towering visionary genius.

Maybe he is.  If he is, he should be able to make it all on his own, like some 19th century titan (Rockefellar, Carnegie), without collecting hundreds of millions from taxpayers.

I say let him try.  And I am dismayed that the Texas legislature didn’t.

February 8, 2014

Benedict Arnold, Yield to Edward Snowden the Dubious Distinction of Most Perfidious American

Filed under: Military,Politics,Russia,Snowden — The Professor @ 8:03 pm

The headline and lede of this article focus on the fact that Snowden used a rather ordinary webcrawling tool to scrape and steal hundreds of thousands of NSA documents.  Yes, that’s important, primarily because it reveals serious breakdowns in security at NSA.  Most notably, the lack of compartmentalization at NSA is rather shocking.

But that is not the most important thing. By far.  Two other things put it in the dust.

The first is that Snowden set the parameters of the webcrawler to look for specific categories of documents:

Mr. Snowden appears to have set the parameters for the searches, including which subjects to look for and how deeply to follow links to documents and other data on the N.S.A.’s internal networks. Intelligence officials told a House hearing last week that he accessed roughly 1.7 million files.

If Snowden had really been interested in the privacy of Americans, he would have limited his search parameters to documents that contained such information.  But through the myriad non-privacy related stories derived from Snowden documents, and the statements of US officials, we know that the vast bulk of the materials he stole had nothing to do with this.  Instead, they were related to intelligence operations against potential adversaries, and to US military operations and movements.

That is, he chose to take this information.  Information that has nothing to do with civil liberties, but which when revealed is deeply damaging to US security.  And which if obtained by Russia or China in particular-both stops on the Snowden World Tour, remember-would wreak havoc on US intelligence and military operations.

Second, the article shows that the Booz Allen Hamilton facility in Hawaii where Snowden worked was the most vulnerable to an inside attack of all NSA facilities:

Agency officials insist that if Mr. Snowden had been working from N.S.A. headquarters at Fort Meade, Md., which was equipped with monitors designed to detect when a huge volume of data was being accessed and downloaded, he almost certainly would have been caught. But because he worked at an agency outpost that had not yet been upgraded with modern security measures, his copying of what the agency’s newly appointed No. 2 officer, Rick Ledgett, recently called “the keys to the kingdom” raised few alarms.

Given that Snowden left one NSA contractor (Dell) and went to another with greater access, and the one that was the least secure, the only reasonable inference is that he chose BAH with malice aforethought.  Combine that with the fact that Snowden’s searches were deliberately far more expansive than would have been necessary to achieve his ostensible purpose of alerting Americans to purported threats to their privacy, the only reasonable conclusion is that Snowden’s real purpose was to inflict grave damage on the security of this country.  His country.  My country.

One possibility consistent with that is that he did so at the behest of, or connivance with, a foreign power, most notably Russia.  Definitive or even compelling evidence to that effect is not yet in the public domain.

But that doesn’t really matter.  Whether Snowden acted at the behest of Russia or some other foreign entity, or was simply acting on his own twisted and narcissistic impulses, the consequences for American security are incalculable.

Snowden’s “whistleblower” persona is a cover.  A cover for a directed attack on the US.  Whether he did it all on his own, or with the support, assistance, and encouragement of Russia or China is a a secondary issue.  They (and other adversaries of the US) are the main beneficiaries of his perfidy, and the citizens of the US-yes, the people whom Snowden claims to have been trying to help-are the biggest casualties.

At least Benedict Arnold (another malignant narcissist) contributed mightily to the American cause before his betrayal of his country: ironically, the US may never have achieved independence without Arnold.  Moreover, Arnold’s perfidy was uncovered before he could do serious damage. Snowden never contributed anything positive to this country or its people, and he is still at large, wreaking more havoc by the day.

Where is Inspector Javert when you need him?

To Hell With Economists Who Willfully Disregard Basic Economics to Engage in Partisan Flackery

Filed under: Economics,Politics,Regulation — The Professor @ 1:56 pm

To return to the CBO Obamacare report.  It is really amazing that the admin spin (but I repeat myself) is that this is no big deal because hey, the job losses are a supply side effect, not a demand side effect.  Amazing, and embarrassing to my profession, because some who have made this claim are economists who should-and I am sure do-know better.

The effect that the CBO points out is related to the fact that the phase-out of subsidies as income increases under Obamacare is effectively a tax on labor income. There is a very basic tenet in economics called Tax Incidence Analysis, which says that the effect of a tax out output (or in this case, input usage) doesn’t depend on whether the tax is imposed on the buyer or the seller.  Impose it on the buyer (in this instance, employers), the demand curve shifts down: In Obamacare Spinworld, that’s BAD!.  Impose it on the seller (in this instance, workers), the supply curve shifts up, crucially by the same amount as the demand curve would shift down if the tax is imposed on the buyer.  End result: both routes lead to the same destination in terms of the amount of employment and the take-home pay of workers.

The tax-and remember, the subsidy phase out is equivalent to a tax-drives a wedge between the price that buyers (employers) pay and sellers (workers) receive.  It is this wedge that distorts decisions.  It is the size of the wedge that determines the size of the distortion, and the size of the wedge is the same whether a given tax is imposed on the buyer, the seller, or split between them in any arbitrary way.

Again, this is the most basic economics.  So how come some economists are saying the CBO report is nothing to worry about because the effect it identifies is due to a shift in the supply curve, rather than the demand curve?

Put differently, the workers who are (according to Admin Spin) going to enjoy freedom from the drudgery of labor as a result of the subsidy phase-out would be the very same workers who would be out of work if an equivalent tax had been imposed on employers.  But I guess those people in the latter scenario (again: the very same people) wouldn’t be enjoying freedom from the drudgery of labor, or something, so that would be bad.  (This brings to mind the scorn  that Keynesian economists heaped on New Classical and RBC economists who suggested that unemployment is voluntary.  What’s good for the goose . . . )  I guess you’re free to enjoy leisure when you decide it isn’t worth working, but you are not free to enjoy leisure if someone decides not to hire you.

Like I say.  Truly embarrassing to the profession that any economist would do anything but call bullshit on the spin.  Instead we see economists picking up their shovels and adding more manure to the pile.

I am not alone in this opinion.  Indeed, I should defer to Casey Mulligan, because he has been the one who has been assiduously documenting the perverse supply side effects of myriad Obama policies.  His painstaking work nudged the CBO to revising its earlier conclusions about employment declines, though he still thinks they underestimate the effect.  And he is also embarrassed and disgusted by the performance of many of our peers:

Mr. Mulligan reserves particular scorn for the economists making this “eliminated from the drudgery of labor market” argument, which he views as a form of trahison des clercs. “I don’t know what their intentions are,” he says, choosing his words carefully, “but it looks like they’re trying to leverage the lack of economic education in their audience by making these sorts of points.”

A job, Mr. Mulligan explains, “is a transaction between buyers and sellers. When a transaction doesn’t happen, it doesn’t happen. We know that it doesn’t matter on which side of the market you put the disincentives, the results are the same. . . . In this case you’re putting an implicit tax on work for households, and employers aren’t willing to compensate the households enough so they’ll still work.” Jobs can be destroyed by sellers (workers) as much as buyers (businesses).

When Mulligan says “we know it doesn’t matter on which side of the market you put the disincentives, the results are the same” he is summarizing the implications of tax incidence analysis.  When he says “when a transaction doesn’t happen, it doesn’t happen” he means that the wedge between what employers pay and what workers receive causes some people not to be employed, and it doesn’t matter whether this is because an employer finds them too expensive to hire, or they find their take home too little to justify giving up leisure (or, enjoying “freedom” if you will).

Basic economics tells you that the Administration spin is wrong.  Is it to much to ask that economists not only not spin along, but actually criticize it?

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