Federal Regulation D

Today there was a message on my answering machine from my bank with an "urgent" message.  I was worried that it might be fraudulent charges so I immediately called.  I was informed that I was getting close to violating Regulation D of the Federal Reserve board.  That sounded pretty serious to me.

Then the bank representative told me what Regulation D was: it limits the number of online transfers you can make between your accounts to 6 times a month.  I had already made 5 transfers and the month is only half over (I would explain why but it is no more your business than it is the Federal governments business).

I can't imagine what could possibly be wrong with making more than 6 online transfers.  Nor can I imaging why the Federal Reserve board thinks it's any of their business.  It's my money and my relationship with my bank.

It seems I've heard talk of the need for more financial regulation out of Washington DC.  No Thanks!

Dieting and Cutting the Deficit

Pres. Obama announced that he plans on cutting the deficit in half. [1]  Sounds like a step in the right direction, but consider this:

You had the perfect physique in High School, but every year you've put on a few pounds and the last two years you gained 20 pounds each year.  You now weigh an extra 200 lbs and your doctor and loved ones are pleading for you to lose weight.  You promise to cut your weight gain in half!  Notice the subtle insertion of the word "gain".  What this really means is that you will still gain 10 lbs next year.  Not exactly losing weight.

The deficit is like your annual weight gain and debt is like the total weight you need to lose.  For example, the Federal deficit for fiscal year 2009 was $1.4 trillion (million million) [2] while the debt is ten times that (about $14 trillion) [3. The Debt Clock].  Cutting the deficit in half still means the debt is growing.

I wonder how fat we'll get before we go on a real diet.

All or Nothing

This week, President Obama announced a plan to freeze the wages of ALL Federal employees for two years,  saving billions of dollars.  My first reaction was "Good for him!  Saving billions is a step in the right direction."  After thinking about it, I realized the fallacy of this move.

While I believe that there are many Federal workers that deserve a wage freeze, not "All" do.

Similar "All or Nothing" thinking:

• ALL people traveling on airplanes are suspected terrorists and are subjected to extreme measures (taking off clothing items, not allowing the carry of any liquids, subject to invasive electronic and physical searching) 
• ALL deep-water drilling must stop for 6-months (Obama's offshore drilling moratorium after the BP Oil Spill), hurting many viable and safe drill sites and impacting the jobs and related economy. 
• The $787 Billion Stimulus included ALL spending ideas (Why not pick the most valuable spending ideas and then authorize spending as needed?).
• The Healthcare Reform Act included ALL 2000+ pages of reform (why not just pick the best couple of ideas and see how they work?)

This problem isn't Democrat nor is it Republican.  It's a "leave it to me, I know best" mentality.  When the All or Nothing decisions are made they typically result in unintended bad consequences.  The resulting criticism draws the excuse that "it would be too hard to sort out the good from the bad" or "we'll fix it later"[1].  

Extreme examples of "All or Nothing" thinking

• During the French Revolution, the idea that ALL Aristocrats were bad and should be executed.
• In early U.S. history, the idea that ALL blacks were inferior and NONE should be allowed basic civil rights.
• Nazi Germany's idea that ALL Jews are bad for Germany 
• During World War II, the idea in the U.S that ALL Japanese immigrants were bad and should be put in concentration camps. 

What would be a better approach to cutting the cost of Federal wages?  Here's my idea:

1. Evaluate the relative "value" of all Federal Departments and Agencies (listed here)
2. Determine a percentage that each Department/Agency needs to cut.
3. Give the head of each Dept./Agency the task of making the cuts.
4. The head of each Dept./Agency then performs steps 1-3 for his subordinates.
5. Repeat steps 1-4 until you reach the bottom of the decision makers.
6. Repeat steps 1-5 evary 1 to 12 months until you've balanced the budget.

Smog Days

The U.S. Constitution gives the Federal Government the power to promote the general welfare. I decided to point out an area where our Government actually has done this.

I think it would be interesting to poll Americans to see how many have heard of or experienced a "Smog Day". I'm guessing the demographics would be limited. I've asked a few younger friends and my kids and they gave me blank stares.

I grew up in Los Angeles County a few miles from the beach where I attended grade school in the 1970s. I remember several days each year that were "Smog Days". We weren't allowed to play outside and instead had recess and lunch in our classes and were told to put our heads on our desks. On these days, too much activity would make your eyes and lungs burn.

Fast forward 20 years.

My children attended grade school in East Los Angeles County (where the air quality is typically worse than the coast) in the 1990's until we moved to San Diego County in 2000. They never had a "smog day" that I know of.

What changed?

In 1979, the South Coast Air Basin (of which Los Angeles is a part) experienced 228 days above the state one-hour ozone standard; in 2007, the number of days in violation was down to 96. The change is even more dramatic when looking at individual communities. From 1979 to 2007, Pasadena dropped from 191 days over the limit to 13, Reseda from 138 to 22, Anaheim from 61 to 2, Pomona from 167 to 19, and West Los Angeles from 76 to 2. This story is replicated across the region. It is also broadly true for the other pollutants that comprise smog.[1]

Here's an interesting chart. It doesn't go back to the 1970s, but you can see the trend. (I'm glad I don't live in Houston ;-)


Why did it change?

A series of "Clean Air Acts"[2] in 1963, 1967, 1970, 1977 and 1990 were enacted by the Federal Government to limit air pollution (The EPA was created in 1971). The result is a much better quality of life for millions of people.

How did it change?

Technological solutions: catalytic converters, unleaded gasoline, smog checks, etc.

Note: The Government didn't spend money to fix the problem. They set standards and intelligent, inventive people found solutions.

The Constitution still works - part 2

The drafters of the U.S. Constitution were very familiar with the corruption of power. Extensive debates were held with one of the main concerns involving giving too much power to the Federal government. Too much power is fine in the hands of good men, but is terrible in the hands of evil men. Unfortunately, you can't always guarantee good men come to power. To be safe, the Constitution restricts this power.

One way to restrict this power was to use checks and balances. A consequence of this is that many times it ties the hands of those in power and slows down the process of change. Sometimes this is bad. Usually it is good.

The Obama administration found out the negative consequences of our founding father's design when they tried to bring the White House into the information age.
(See "Staff Finds White House in the Technological Dark Ages")

The "most technologically savvy presidential campaign in history" enjoyed the same advantages of modern information technology that many companies, homes, libraries, teenagers, etc. in the U.S. enjoy. Yet, when seated in public office, "Obama officials ran smack into the constraints of the federal bureaucracy".

So the question I have is: if there are so many constraints on our Federal Government, why do they think they are the best ones to solve our problems?

I heard recently that if we eliminated the income tax for all Americans, it would be about the same as all of our bailouts (about $1 trillion). Imagine how that could stimulate the economy! But, instead of leaving the $1 trillion in the hands of working people, let's give it to people that have "a jumble of disconnected phone lines, old computer software, and security regulations forbidding outside e-mail accounts".