2005 Q2 GDP up 3.3%

Real GDP increased at an annual rate of 3.3% in the second quarter, revised down from 3.4%.

Today's GDP revision was little noticed due to hurricane coverage, though there has been speculation on how much the broken window fallacy will affect future GDP measurements.

Invasion!

The United States is being invaded ... by itself. In addition to all the National Guard troops being sent to the Gulf Coast, the Navy is also sending some ships to the area.

The Pentagon effort includes the Navy amphibious assault ship USS Bataan, whose helicopters have been flying relief missions from off the Louisiana coast.

The ship, which resembles a small aircraft carrier, can produce large quantities of fresh water and is equipped with 600 hospital beds. (Watch video report on storm-related health risks)

Several other ships, including a rescue and salvage vessel and the USS Iwo Jima, another amphibious assault ship, are on their way from Norfolk, Virginia, the Navy said.

The USNS Comfort, a floating hospital based in Baltimore, Maryland, will depart in coming days. A medical crew from Bethesda Naval Hospital will staff the ship. It has full hospital capabilities, including operating rooms and hundreds of beds.

We sent the USS Abraham Lincoln Carrier Strike Group to Indonesia to assist the tsunami victims. Should we have had a similar force trailing the storm to be there quickly in anticipation of roads and airports being unusable?

Chief's Disease

The Sacramento Bee reports that the man appointed to find workers' compensation fraud in the California Highway Patrol claims that it is the top brass and not individual officers who were abusing the system.

The Bee's investigation last year found that about 80 percent of CHP chiefs file workers' comp claims within two years of retiring. They win injury awards and lifetime medical care, with the injuries laying the groundwork for medical pensions, which shield half of retirement income from taxes.

Several CHP employees have complained anonymously to The Bee in the past year that the system has been used to ease out those who face disciplinary problems or have fallen from favor.

So nobody ever gets fired, they just go on disability. It is pretty much a universal problem that under-performing state employees never get fired. This is a huge expense in the state budget. What we need is for Schwarzenegger to literally be "The Terminator" for employment contracts.

Stem Cell Boondoggle

The Sacramento Bee reports that the advocates of stem cell research who passed Prop 71 are retreating from their claims that the research would pay for itself. The legislators offering the money for the research want to have strings attached in the form of royalties or discounts. But the advocates who promised the benefits of the measure don't want any strings on their money.

Proposition 71 supporters are doing a flip-flop. Biotech firms and university officials are saying that royalties and discounted care would discourage "innovation" and diminish the potential for medical breakthroughs. To drive home this point, they are now throwing cold water on the idea that stem cell research will be very profitable.

If embryonic stem cell research had the potential to pay for itself from royalties and savings then venture capitalists would already have been funding the research. The state should not think it can do better than private venture capitalists at finding profitable research investments. There are also additional legal difficulties in the state using tax-exempt bonds to finance for-profit research.

California faces obstacles in issuing tax-exempt bonds for certain stem cell grants. In a May 23 letter to state Treasurer Phil Angelides, the state's bond counsel warned that patents and royalties resulting from state grants might be construed as taxable "assets," making them ineligible for financing by tax-exempt bonds.

Apparently, Angelides and leaders of the stem-cell institute have known about these challenges for some time, but haven't said anything. To flush out this issue, this page filed an open records request for all memos written by the treasurer's bond counsel on Proposition 71 prior to its passage. Angelides rejected those requests, citing attorney-client privilege.

Other lawsuits have prevented the state from selling the bonds and spending the proceeds. Is it not too late to pull the plug and save the state from spending $3 billion on research that offers little benefit to the state?

More Blackouts

The loss of a transmission line combined with moderately high heat led to rolling blackouts in Southern California.

Temperatures that hovered around 100 in inland areas and reached 94 in Los Angeles had created increased demand of about 1,500 megawatts. A megawatt is enough power to serve about 750 homes.

The demand crisis was exacerbated by the sudden loss of power from a transmission line originating in southern Oregon, officials said.

A transformer in California that converts the power took itself offline automatically at 3:56 p.m. when an oil flow alarm went off, said Carol Tucker, a spokeswoman for the Los Angeles Department of Water and Power, which co-owns the line.

The converter station, in Sylmar about 25 miles north of downtown Los Angeles, is capable of distributing 2,250 megawatts of power. It was operating at half capacity Thursday evening, and an inspection was under way to determine if the transformer could be fixed, Tucker said.

The emergency order from the ISO caused SoCal Edison to reduce demand by 800 megawatts throughout its territory. The ISO asked San Diego to shed 100 megawatts.

The loss of transmittion clearly exceeded the increased demand from the heat. Perhaps it is time to pay more attention to the advice by Vernon Smith on deregulating transmission in OpinionJournal.

Mortgaging Education

The California Teachers Association is mortgaging their headquarters so that they can spend $54 million on the special election. They will pay for it by increasing union dues by $60 million. These dues are paid by teachers, and ultimately by California taxpayers. But they say that the people of California are too poor to spend $50 million on a special election while their union members are so rich that they can easily afford to pay $60 million for political activism. This is Robin Hood in reverse. Paycheck protection must pass.

Another candidate in the last election was able to get a $6 million mortgage on a house even though he did not report paying one penny of property taxes on his tax return.

The Kelo Strip

In a small strip of land near the Atlantic coast, Local Liberty reports that the city of New London wants to charge back rent to the Kelo litigants.

The U.S. Supreme Court recently found that the city's original seizure of private property was constitutional under the principal of eminent domain, and now New London is claiming that the affected homeowners were living on city land for the duration of the lawsuit and owe back rent. It's a new definition of chutzpah: Confiscate land and charge back rent for the years the owners fought confiscation.

In some cases, their debt could amount to hundreds of thousands of dollars. Moreover, the homeowners are being offered buyouts based on the market rate as it was in 2000.

However, I think the outrage is not what what is happening now but what happened in 2000. The injustice is that the City seized the land in 2000. The law, however wrongly determined, is that the City paid for the land in 2000 and has owned it since then and can charge the occupants for rent. The last appeal must go to the court of public opinion. The City may want to settle to avoid bad PR. But the litigants claim that rents were not part of the 2000 agreement.

A lawyer for the residents, Scott Bullock, responded to the letter on July 8, 2004, asserting that the NLDC had agreed to forgo rents as part of a pretrial agreement in which the residents in turn agreed to a hastened trial schedule. Bullock called the NLDC's effort at obtaining back rent "a new low."

"It seems like it is simply a desperate attempt by a nearly broke organization to try to come up with more funds to perpetuate its own existence," Bullock wrote. He vowed to respond to any lawsuit with another.

I had originally noted when the ruling came out that the taking was for government self preservation not for public benefit. However, I doubt that the City had planned on profiting from collecting rents during a long court fight. They had planned to hand the land to developers and start collecting taxes from them as soon as possible.

Also, the City is now doing for housing exactly what Social Security reform opponents insist on doing for retirement. When the City seized the property in 2000 they bore the full risk of owning "blighted" property. House prices are risky while fixed rents are risk free. The government is taking their property and giving them a "guaranteed risk free housing benefit" just as reform opponents insist that the government take 1/6 of your income so it can give you a "guaranteed risk free retirement benefit".

Meanwhile, in a larger strip of land on the Mediterranean, the government is seizing land, with compensation, in order to transfer the land to another government. The hold-outs there could lose a third of their compensation. I don't know if disengagement will make things better or worse, but there has been little progress under the status quo peace process. Whatever happens there, the sooner it begin the sooner it will be finished. We need to watch and learn what happens when extremists are in charge of their own land.

And on our large strip of land on the Pacific, Local Liberty reports that a Democrat State Senator has proposed a two-year ban on Kelo style eminent domain seizures.

Reproposition

Daniel Weintraub just reported that Prop. 77 has been returned to the ballot. The state Supreme Court restored the measure and will review it again after the election. This is not unexpected since the court restored Prop. 80 to the ballot despite obvious constitutional problems in that proposition.

Update: (6:20 PM)
The Sacramento Bee has the story on the return of Proposition 77 to the California Special Election ballot.

The state Supreme Court moved Friday to put Gov. Arnold Schwarzenegger's redistricting measure back on California's special-election ballot, saying discrepancies between different versions of the measure were not "likely to have misled the persons who signed the intiative petition."

"We conclude," the court added, "that it would not be appropriate to deny the electorate the opportunity to vote on Proposition 77..."

In their half-page order, the justices said they would determine after the election whether the initiative was flawed.

Illegal Immigrant Homeowners

There has been a large increase in banks providing home loans to illegal immigrants. This is definitely a positive symptom. It is a good sign that foreigners who rise into poverty by crossing our borders can further rise out of poverty by earning enough money to buy a home. Our economy must be quite healthy for illegal immigrants to be able to afford to buy homes despite large increases in home prices, especially in heavily immigrant markets. Illegal immigrants who both can and want to participate in the American dream by purchasing a home are certainly the top candidates for participation in some sort of guest worker program. However, there is no real need to provide any government assistance to illegal immigrant home buyers like what is provided for legal American home buyers.

We need immigration reform so that we can be more selective about who is allowed to immigrate to America. Home buyers are usually high among those who we want to select.

Exit Strategy

Independent Sources notes that the Democrats' exit strategy from the 2004 election has failed. Despite all the reasons why liberals would be welcome in Canada, a Reuters reports that "in the six months up to the U.S. election there were 16,266 applications from people seeking to live in Canada, a figure that fell to 14,666 for the half year after the vote." But he does not mention the downside reported in the story.

"I can only assume the Americans who checked out the Web site subsequently checked out our winter temperatures and further took note that the National Hockey League was being locked out and had second thoughts,"

So it was the NHL labor union and the failure of global warming that foiled the Democrats' exit strategy.

Camp Crawford

After praising the French for all the vacation time that they have no choice but to take, the MSM is now attacking Bush for the vacation time that the President chooses to take. Bush has hosted several foreign dignitaries in his Crawford ranch, which is both a workplace, the "Texas White House", and a vacation spot. But the Huffington Post reveals that the Press Corps's opposition is not about vacation time but about location, location, location!

Prisoners of Camp Crawford complain of small cells, poor meals, constant surveillance, and disrespectful--even disdainful--treatment from Presidential staff.

"Thirty-three days in this hell-hole feels like thirty-three years," said a bitter long-time White House correspondent. "You're away from your family. We're all billeted into these crappy Waco motels--you know, the kind they hose down with antiseptic every day and you've got one lousy blanket which is made of recycled Coke bottles or something. There are huge fights for the cells with fast Internet connections but not many have them. The networks always get those. We didn't mind the facilities in Santa Barbara or Martha's Vineyard. Even Kennebunkport was more endurable than this."

A Fox News camera man agreed. "Basically you sit around in baking heat, bored out of your mind. How many times can you visit the 'Texas Sports Hall of Fame' or beat Nora O'Donnell at Scrabble? Nothing happens, except maybe when one of the staff summons you to watch the President pulling brush. After a few minutes, they pile you back into the buses, and that's it. It's torture."

All inmates interviewed agreed that the food they were served was inferior to that of other camps, such as Guantanamo. "How can I put this?" said a Los Angeles-based correspondent. "The meals would be paradise if you were six-years-old. Like, what is it going to be tonight: chicken nuggets or pizza again? It's like living that movie, 'Supersize Me.' A big deal is to go to the Marriott Courtyard's breakfast buffet. At least you can get a piece of fruit, even if it's not ripe."

The inmates agreed, however, it was far better to be in Waco than have to do duty in the press pool in the town of Crawford itself. Even Crawford's own website describes the facilities this way: "The town currently boasts only one restaurant, a converted gas station called The Coffee Station. There's no supermarket or hotel but there are five churches. Tourists will find that this 'dry' town has no sale of alcoholic beverages."

The Press Corps would probably be much happier if Bush took a vacation to Aruba. A vacation there would do wonders for Bush's ratings.

War on Terror

President Bush is sticking to using the label "war on terror". It seems it was only the defense department that wanted to use "global struggle against violent extremism".

Many pundits have been saying "Our enemy is not really 'terror' but ..., this is really a war on ... (zzzzz)". They are right, but "war on terror" is shorter and this label has stuck, having been used in many speeches. If there was a better short label then that is what we would have used it in first place.

After all, what was so bad about the numeral 'II' that 60 million people had to die in a war over it?

Retirement Insurance

The New York Times notes that the insurance industry is lobbying congress for a piece of the Social Security action. If they want it, we should let them have it. The private insurance industry already competitively provides retirement accounts, annuities, life and disability insurance, everything that Social Security provides. Instead of private accounts, people should be allowed to put part of their Social Security contributions into private insurance and annuities that meets government constraints.

What should be the role for Social Security? What government insurance uniquely provides is risk blindness. Only the government can be blind to risk without going out of business, either by mandating contributions or by passing losses to taxpayers. The blind Social Security insurance annuity currently does the former, but should be doing the latter. It is better for Social Security to be a small money-losing program than a large solvent program. Social Security's solvency is meaningless since we have a unified federal budget. Instead of raising contributions or reducing benefits to keep the blind Social Security retirement annuity solvent, we should let people opt out while leaving Social Security as a backup. Social Security benefits could be more flat, based more on hours worked than contributions, so that most would opt out while adequate benefits would still be available for low earners.

The insurance industry is also trying to prevent the elimination of the estate tax, which many wealthy Americans now pay with the proceeds of life insurance policies. As a compromise for sending them annuity business we should reduce their planning business by eliminating the estate tax. The AARP could also compete for retirement annuity business, so they would probably not be opposed.