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June 24, 2005

Bad News Before Vacation

There's so much I want to blog about, and so little time to do it. I want to write about emergencies again. I want to write about the recent Social Security reform proposals. I want to write about the Chinese currency peg (Greenspan and Snow were talking with a Senate committee about it on Thursday.) I want to write about the Supreme Court failing to uphold property rights.

But I'm out of time. I'm taking a vacation, and doubt I'll be blogging during it. I'll be out of touch until after Independence Day.

I got some bad news today. Over the past few months I've been writing a lot about my search for a new car. Today I got an e-mail from my salesman. Over four weeks after I placed my order, I've learned there's been a snag:

I contacted GM Dealer Business Center to get an update for the order and have been informed that the vehicle did not get built before the cutoff for the 2005 model production.

GM always disclaims factory orders on a "will try" basis but I was disappointed to have missed out on this order.

At this point our options are to try a locate for an available vehicle in some dealer's inventory or re-order the vehicle as a 2006 model.

We would be subject to the change in the 2006 pricing and as with the 2005 order we would not be assured of what the incentives will be available until the day of delivery.

We may gain some benefit from the current GM price polic[y] if you want to consider some flexibility in the order. We probably do not have the potential to find the exact duplicate of the vehicle we ordered but we might get close..

Please let me know how you would like to have me proceed.

This is going to take a little longer than I thought. :(

June 21, 2005

Lifetime Savings Accounts

One of the items on President Bush's tax agenda deserves more widespread discussion, and prompt action from Congress to enact. Politically, it ought to be a much easier fight than Social Security reform, making his tax cuts permanent, or an overhaul of the whole tax system. I'm talking about Lifetime Savings Accounts.

The idea has been languishing in the sidelines for several years and has undergone a few modifications during that time. This press release from early 2004 has a good description of LSA features:

  • $5,000 annual contribution limit (indexed for inflation).
  • Available to all individuals — no income limits, no age limits.
  • Contributions would be nondeductible (like Roth IRAs).
  • Earnings would accumulate tax-free and all distributions would be excluded from gross income.
  • No minimum required distribution rules would apply at any age throughout owner's life.
  • Contribution limit of $5,000 applies to the individual owner of the account, not the contributor.
  • Contributors could make annual contributions to the accounts of other individuals.
  • Annual aggregate contributions to an individual's accounts could not exceed $5,000.

The key bullet is the fourth one. Read it literally. All distributions are excluded from gross income. There are no penalties of any kind. These accounts can be used for any purpose, not just for retirement savings.

This amounts to a repeal of all savings and investment taxes for the majority of American households. This is something to celebrate, get enacted into law, and celebrate again. (Household median income is around $43,500, so if a household has two people, it could save $10,000 annually in LSAs — over 20% of its total income; much more than is realistic.)

This tax cut removes a disincentive to save. It's important and noteworthy that with LSAs, the government is not playing nanny by telling you how or when to spend your savings. It's up to you. You get to spend it on your own priorities, not someone else's. This is what the "ownership society" should really be about: Individual empowerment through ownership.

The fact that anyone can contribute to anyone else's LSA is a powerful feature. For example, an LSA could be established for a child's college education fund. Many relatives and friends could all contribute to it.

I can already anticipate the backlash: "People might spend their LSAs on stupid things like fancy cars or big televisions!" Yes, they might. And it's their right to do so. It's their money. The solution to financial stupidity is advice and education, not forcibly limited options. (For this reason I would prefer to see Roth IRAs eliminated and LSA contribution limits correspondingly increased.)


Bush's proposal would also rename and improve Roth IRAs. They would now be known as Retirement Savings Accounts (RSAs), would have a $5,000 contribution limit, and would not be phased out for high-income people.

Continuing in the spirit of renaming and consolidation, Employer Retirement Savings Accounts (ERSAs) would replace 401(k) and similar plans. The rules are 401(k)-like, and include the option of Roth-like contributions as I wrote about previously. The contribution limit would be $15,000.

A dedicated saver could use all three — LSA, RSA and ERSA — to save $25,000 annually and never pay any taxes on any of the earnings. (And, all the contribution limits are inflation-indexed.) This is such a huge quantity of money that only people with very high incomes would still be subject to any investment taxes.


On purely economic grounds, I prefer tax cuts for the wealthy over tax cuts for the poor … and I suppose I should write about why, next … but LSAs are still a great idea. Besides, in the long run they might pave the way for a total elimination of all investment taxes. Camel's nose and all that.

I love this plan! I'm excited to be a part of it! Let's do it!

(You may wonder why I didn't mention Bush's other proposal, Individual Development Accounts. I haven't made up my mind yet on these.)

June 16, 2005

Breathtaking Bias

Wow. This BusinessWeek Online article, "I Want My Safety Net" is the most concentratedly biased thing I have ever read from a nominally-"Business"-oriented publication. I'm not very familiar with BusinessWeek, though, so it's possible they already had a reputation for this sort of thing. If not… well, they do now.

Let's see what we've got:

George Silli … had a brush with President Bush's Ownership Society, and it was an experience he'll not soon forget. … He saw the value of his mutual funds drop by 60% and is convinced that opening Social Security to individual investing would produce similar results on a massive scale.

I wish it were different, but the Ownership Society is only meekly about actual private ownership. Bush's proposed Social Security reform, for example, falls far short of true ownership. But leaving aside the accuracy of the comparison, I've also had a brush with the Ownership Society, and it's been working out much more profitably for me (e.g. most recently, +7.6% in 50 days.) Did they even look for someone who's turned a profit in the stock market?

A political independent, Silli has learned enough about the market to be pessimistic about a small fry's chances. He not only wants to leave Social Security alone but also thinks politicians should expand entitlements by mandating near-universal health insurance as a shield against soaring medical bills.

A political independent who distrusts markets and favors socialized medicine? Hmm, I wonder if they looked for a political independent who favors markets and distrusts socialized medicine?

Safety Netters include plenty of card-carrying Republicans and independent swing voters, and the group may represent a broader swath of America than the White House imagines.

The piece wouldn't be complete without the White-House-out-of-touch angle, delicately pitched with the word "may", disguising suggestion as opinion.

A … suvery … found 67% of Americans think it's a good idea to guarantee health care for all U.S. citizens, as Canada and Britain do, with just 27% dissenting. Support for a government-directed universal insurance system is strong, despite GOP warnings about socialized medicine.

Oh sure, I also think it's "a good idea" to guarantee health care for all U.S. citizens. I'm also in favor of kittens, babies, and world peace. But the trouble with desires is that they don't specify an implementation. If guaranteeing health care means socialization, I'm resolutely opposed. If guaranteeing health care means abolishing licensing and trashing regulations, I'll be first in line.

Gotta love the last sentence. It reeks of groupthink.

The mention of Canada is rich. The Canadian health care system does not provide universal health care, at least according to the Canadian Supreme Court, which recently struck down a Quebec ban on private health insurance, saying "… delays in the public health-care system are widespread, and that, in some serious cases, patients die as a result of waiting lists for public health care".

Will a free-market approach to health care guarantee unlimited health care? Of course not. But it would do a lot better than a socialist system.

Big swings in family income … have increased markedly over the past two decades … houses … are increasingly in hock … Personal bankruptcies increased fivefold …

"Big swings" ≠ "big declines". Some people have done very well. Is it impolite for me to point out that the authors are only drawing attention to the negative side of this?

As income volatility has grown, government — prodded by free-market Republicans out to reverse the New Deal — has been offloading ever more responsibility onto individuals.

Republicans do not want to reverse the New Deal. I want to reverse the New Deal. Don't give that compliment to the Republicans; they certainly haven't earned it.

Corporations vying to compete globally have steadily shifted costs and responsibility for pensions and health care to their employees …

Am I the only person who views defined-contribution plans as less risky than defined-benefit plans? I don't want to worry about the government doing something stupid and putting my employer out of business, or worry about my employer doing something stupid all by itself. The PBGC — which shouldn't exist in the first place — doesn't pick up the whole tab. And it's certainly not free.

Conservatives see disentitlement as a recognition of new economic realities — and the death rattle of the Nanny State. But skeptics, among them prominent New Democratic thinkers, counter that America's safety net can be both modern and market-based without piling still more financial burdens onto the stooped shoulders of Joe and Jane Average.

Golly gee! Prominent New Democratic Thinkers! Yessiree, I want some of those prominent thinker types taking care of me, because I can't do it all by myself. I'm glad they're taking care of me and my siblings Joe and Jane Average, because we're too unsophisticated to think about this stuff.

I know what "market-based" means, but I don't know what "modern" means — yet I'm oddly certain it means precisely "not market-based". I wonder why that is? Do you suppose I'm right?

… New Democrats advocate policies … Conservatives dismiss such proposals …

A stunning reversal from the real world, where the Democrats are totally AWOL with their own proposals to fix Social Security. Oh, that's right — there's no crisis so there's nothing to fix. I forgot. (Unless you're my age and you're staring directly at a 30% benefit cut under current law!)

… despite such gambits, the President has little to show …

He's losing! He's losing! People will believe this if we keep saying it!!

… family balance sheets have improved. Americans' household wealth has floated upward of late, propelled by recovering stock valuations and soaring real estate values. Moreover, real wages for the civilian workforce have grown 8% in the past decade after a long stretch when they fell. And the family poverty rate, tallied at 10% in 2003, has improved from the 13.9% numbers recorded four decades earlier.

Oh, here we go. This is the good news. I wonder why it's buried in the middle of the article, instead of earlier to provide balance against the talk of houses in hock and rising bankruptcies?

While federal spending on the safety net for the poor has grown briskly, it hasn't kept pace with society's needs. Medicare is straining to cover seniors' bills, and some states are downsizing Medicaid programs. In 1996, strict time limits were put on welfare dependency, a step that slashed the rolls by half. Meantime, huge holes have been ripped in the private safety net as the cost shift to workers has accelerated.

It's well known (at least among economists) that when you subsidize something, you get more of it. If you provide a safety net, people will use it. If you make it stronger, people will use it more. When you're giving away something essentially for free, you shouldn't be surprised to discover that demand is essentially infinite.

And the "cost shift to workers" is, of course, something I'm totally in favor of. The authors should realize that it's misleading to call it a cost shift, though. The cost of an employee to an employer includes both benefits and wages. The benefits were never free — they were at the expense of wages. And as benefits decrease, wages will rise. I prefer wages because I can spend them on my priorities, rather than the priorities of whatever meddler-in-other-peoples'-lives decided the benefits should be.

Among the groups whose faith in the market dipped most are three key Bush constituencies: baby boomers, college grads, and suburbanites.

Doom! Gloom! Aieeee!

To George W. Bush, a Texan who revels in the myth of the wildcatter, running risks in pursuit of the big gusher is a quintessential part of the American character. But as the scion of an aristocratic Eastern dynasty, the budding young tycoon always had a network of family friends and relations to call on. Those golden connections bailed George W. out of his early forays into the oil business.

If you can believe it, this particular example of the ritualistic bringing-up of Bush's silver spoon history fills the literary role of a segue. By its presence, I assume that the authors thought a politically charged segue was better than a bland one, or none at all.

… at the core of Safety Net Nation are white men. You read that right. These are the same white-male swing voters who have been trending strongly Republican in recent Presidential contests. They tend to be socially conservative and patriotic. They have average incomes and are slightly less educated than the citizenry as a whole.

I'm getting tired of being offended at the suggestion that people who voted for Bush are stupid. The hints are too frequent. I'm sick of elitism hiding behind the mask of "just providing information". How "slightly" less educated are they? So slightly that it's not worth mentioning, perhaps? How untactful.

Bush über-strategist Karl Rove, who commands the White House's Social Security war room, sees personal accounts as vital to shifting the allegiance of younger voters to the GOP. But there's a glitch in Rove's machine: Polls show that, rather than flocking to Bush over Social Security, the under-40s are growing skeptical of his approach.

Oh goodie, I was waiting for the mention of Karl Rove. Is anyone else getting bored by the predictability? And I simply don't believe their poll comment.

Then there are disillusioned techies who once wanted government to get out of the way and let them get rich by age 30 but who now favor a federal role in shielding them from the excesses of capitalism.

Heh. :) What "excesses"? I want the government to stop shielding me from capitalism!


Groan. Okay, I'm getting tired so I'm not going to finish fisking this. I think I've made my point already.

June 14, 2005

Worst Phishing Scam Ever

I just had an interesting telephone call. Two calls, actually. (I hung up on them and they immediately called back!) They pretended to be calling from a mortgage company, collecting information to have someone call me back later to make a refinancing offer. They called me "Markley", apparently unaware that I had a first name.

There were two things that made this special.

The first was that when I told the lady I didn't believe her company could give me a better rate than 5%, she kept asking for my information anyway and said "you're breaking my heart" several times. I couldn't help but think of Eric Cartman's sales line "you're breakin' my balls". Hint: Legitimate salespeople will go away peacefully when they realize they won't be able to make a competitive offer. This lady thought she'd have no problem giving me a better than 5% rate on a fixed mortgage. I know better.

The second, and more amusing, aspect of this phishing expedition is that after I hung up and she called back and I asked to be put on their Do Not Call list, a man came on the line and started insulting me and swearing at me after saying that he would not put me on the Do Not Call list. The best part was that he used Indian insults, e.g. calling me a "choot" (which you can look up if you want to).

I asked him "is this a real business?" and he responded "no, it's a dance club." I let a dramatic pause elapse and said, "I don't hear any music." From the background noises I could hear, it did in fact sound like a call center. Judging from the time of the call and the thick accents, the call probably did originate from a call center in India. Is this how bored or unhappy employees are passing the time nowadays?

The telephone call ended when he told me to hang up and I said "no, you hang up." Eventually he did.

I do believe this was more sinister than prank. Several weeks ago I believe I was contacted by a much calmer person in the same group. He couldn't understand that I wasn't willing to give him my Social Security number over the telephone and wouldn't take "no" for an answer. I had to hang up on him, too, but there was no call-back and no stream of insults. Both times, the people were very interested in my information.

I wanted to use Call Trace (*57) to report these choads scammers, but after a quick search online I was unable to determine how much it would cost me. (It's not free, to discourage frivolous use.) I wrote an e-mail to Verizon customer support encouraging them to publish the fee on their website. I will not, on principle, use a feature if I'm unable to determine its cost.

June 13, 2005

Ethics: Emergencies and Obligations - Part 7 - Force in Emergencies

I'm finally returning to the series on emergency ethics I started in January. It's been several months since the last time I wrote about this; if you'd like to review, here are the previous installments:

Ordinarily, I condemn the initiation of physical force. This condemnation is rooted in Ayn Rand's argument that reason is man's fundamental tool for living and that force is imposed in order to circumvent the victim's exercise of reason. If I engage my mind toward an act of production, and you steal my product, you disrupt my ability to survive by the use of reason. This is fundamentally anti-human. And since human life is the standard of value, this use of force (i.e., to steal) is evil.

The standard caveat: Not all force is evil. Self-defense is fine. Recovering stolen property is fine. It's the initiation of force that's problematic.

The unusual nature of emergencies (see especially Part 2) creates exceptions to the non-initiation-of-force principle. This occurs because the ordinary conditions of existence that lead to the NIFP are dissimilar to the conditions of emergency situations.

Let's imagine I have a misanthropic neighbor, the sort of person who yells "get off my land!" while waving a shotgun menacingly when kids run through his yard. He's told me in very clear terms that he wants me to leave him and his property alone at all times. Now let's say one day he has a heart attack and collapses in his front yard. He falls suddenly, making no indication that help is requested.

Do I trespass, against his explicit instructions, in order to attempt to save his life? (Maybe I know CPR or have a defibrillator.) Is this an unacceptable initiation of force? Clearly not. It would be perverse to adhere to the NIFP — which bars violence against my neighbor in order to protect his life — in a context where adherence to the NIFP would virtually guarantee his death.

Life is primary. Nonaggression is derivative, it emerges from context. It is useful and remarkable that the NIFP applies so well to almost all situations — it makes everyday ethics a manageable business — but it's important to realize that it doesn't apply to all situations.

"Okay," you're thinking, "I see your point about life-or-death situations. But what about emergencies that aren't so dire?" Let's modify the misanthropic neighbor example. Let's say there's a small fire starting in his house while no one is there. (He accidentally left the stove on and Fluffy jumped up on the counter… poor Fluffy…) Let's also say that I'm a professional firefighter, I hear the cat scream, and notice the situation.

The fire is still very small. I'm an expert and have the right equipment — I can easily save his house by breaking into it. (I'm purposely ignoring the angle that the fire is an objective threat to my own safety and property; assume my house is far enough away that it's not a risk.) Would saving his house be aggression and forbidden as breaking-and-entering, or is this acceptable?

It's acceptable. In ordinary situations, aggression against property is forbidden because it takes value away from its rightful owner — value that plays a role in maintaining and enhancing the owner's life. In the context of this emergency situation, my action preserves the value of my neighbor's property to my neighbor. Yes, I am initiating force and damaging property by breaking into his house — but the damage would have been far worse if I had done nothing. This initiation of force should not be condemned.

Here's the interesting question: In this situation, should I be entitled to bill my neighbor for my firefighting services, and have the law on my side if he declines to pay? That will be the subject of my next installment.

June 10, 2005

Love a Nerd

I can't let the nerds make better lovers story pass without comment.

"A nerd is an excellent provider and a guy who puts you first," says E. Jean Carroll, Elle magazine's love and sex advice columnist. "He'll turn out to be a great father and a great husband."

And, she insists that a woman who is willing to stick it out with a nerd and get past his quirks will be handsomely rewarded. "Don't give up on him too fast," she said. "If you stick with him, he's going to turn out to be really great."

When it comes to the between-the-sheets aspect of the relationship, Carroll agreed that a girl couldn't do much better than a less-than-perfect male specimen. "We've all been to bed with the guy who is worried about what he looks like, checking the mirror before he gets in bed," she said. "The nerd, gloriously, stunningly, perfectly, is into the woman. That right there is very stirring, sexually."

Do you like what you're reading? Your humble pirate nerd author is currently unattached and accepting applications. Even if you already have a nerd, consider an upgrade! (Does your nerd "know a lot about computers"? Well, this one puts debug features into microprocessors. A higher plane of nerdhood.)

If you date me, all of your wildest dreams will come true.

You know you want to write me. You should just listen to your heart. That's what I do.

Wise Words From Greenspan

Alan Greenspan, testifying before congress, 06/09/2005 11:58am ET:

What does create the wealth of nations? What is it about the United States which gives us a special status? I think the way I would put it is, first, it's not our real resources as such … but it's fundamentally our Constitution. Because the Constitution is structured in a manner which protects property rights better than anywhere else in the world. And one of the reasons why businesses have flocked here, why they have invested here, is that they know that in the event of adjudication they get a fair trial, and that our Constitution protects them.

June 06, 2005

Investing: Roth 401k or Traditional 401k?

Have you heard the news? Starting in 2006, a Roth-like option for 401(k) plans will be introduced. They'll probably be known as either a "Roth 401(k)" or a "Roth ERSA". They're created by 26USC§402A and so might logically be called "402A" plans, just as 26USC§401(k) created the "401(k)". (Note that it's §402A, not §402(a), which is something different.)

I haven't thoroughly immersed myself in the details. If you want to, go ahead — you'll find them in the laws cited above, and in IRS REG-152354-04. (Have I mentioned lately that I love the Internet?) The basic idea is simple. With a 401(k), contributions are tax-deductible but when you retire, your distributions will be taxed as ordinary income. With a 402A, contributions aren't tax-deductible but when you retire, your distributions will be tax-free. For both, income within the account is not taxed.

The question of whether the 401(k) or 402A is superior is fundamentally the same question of whether a Traditional IRA or a Roth IRA is superior. The answer, of course, is "it depends". It depends on taxes, because the fundamental difference between the options is when they're taxed — when you put money in, or when you take money out.

The 401(k)/402A contribution limit for 2006 will be $15,000. For a typical person with a combined income tax rate of 34% (25% Federal + 9% Oregon state), a maxed-out 402A contribution will cost $22,727.27 out of their pocket — 34% taxes on $22,727.27 are $7,727.27, leaving $15,000 for the account. Given the same starting funds of $22,727.27, a maxed-out 401(k) contribution will be $15,000, with the remaining $7,727.27 taxed at 34%, leaving $5,100 for regular non-tax-advantaged investment.

As if you couldn't sense it coming, yes, it's time to play with a spreadsheet! It's also time for the obligatory disclaimer: I am not a financial advisor or planner or consultant or <insert adjective here>… but I do play one on the internet. :)

The spreadsheet is configured for a 20-year investment period over which to compare the 401(k) and 402A options. There's also a section for saving exclusively in a non-tax-advantaged account. For simplicity, the spreadsheet assumes the rate of return from investments is fixed, and that taxes on non-tax-advantaged investments are also fixed. The 401(k)/402A contribution limit is allowed to vary over time for expected inflation, and income tax rates may also be varied over time.

The default values in the spreadsheet have unchanging income taxes. Look at the results. After 20 years, and assuming that by then you're old enough to be eligible to take distributions, the Roth-like 402A wins. (I'll address the Required Minimum Distribution in a minute — patience!) It's important to see that the entire advantage is due to the taxes on the non-tax-advantaged accounts. If you ignore those taxes (set cell B5 to 0), all three options have equal returns!

A brief side note: You can minimize taxes on the non-tax-advantaged account by adopting a very-long-run buy-and-hold strategy. Prefer capital gains to dividends, because they can compound without being taxed. This mimics the benefits of the tax-advantaged accounts. (The spreadsheet doesn't model this.) Of course, it's tough to maintain a balanced portfolio with this approach. It's not practical to never sell anything. Being a totally passive investor just for the tax benefit is not a good idea. And it still wouldn't enable the non-advantaged account to match the 402A. Avoiding the taxation on the compounding doesn't avoid the eventual taxation on the gain. The 402A avoids taxation on both.

Set cell B5 back to 15%, and we'll continue.

Before you decide to put all your money in a 402A, we need to talk about the Required Minimum Distribution. Eventually the government requires you to withdraw funds from a 401(k) — they won't let you avoid taxes forever. There's a table that explains how much you'll be required to distribute from your 401(k).

One of the potential benefits of a 401(k) is that you might be in a lower income tax bracket when you retire, especially if you have no significant income other than Social Security and your 401(k) distribution. By taking distributions as slowly as possible, you can try to stay in low tax brackets. The spreadsheet doesn't model this at all — it liquidates the 401(k) all at once. And even here it gets it wrong, because you certainly wouldn't qualify for the 25% federal tax bracket if you did that! The spreadsheet understates the taxes for a liquidation. But you wouldn't liquidate anyway — you'd take the minimum distribution allowed.

A person who is 70 (the first year distributions are required) must distribute 1/27.4th of their 401(k). From a balance of $773,839.96, this is $28,242.33. This is just under today's 25% federal income tax bracket. Assuming you'd have Social Security income also, you wouldn't be able to benefit from being in a lower tax bracket at retirement. (The table is configured so that the distributions are approximately equal each year.) Additionally, the spreadsheet only models 20 years of contributions. If you were an über-investor and contributed the maximum for 50 working years, you'd have $9.4 million and the minimum distribution alone would be over $340,000, putting you in today's maximum (35%) federal income tax bracket. In general, the more you invest in the 401(k), the more likely you won't be in a lower tax bracket when you start taking distributions.

While a 401(k) requires distributions, a 402A doesn't. For the long-lived, this is an advantage for the 402A because more earnings from compounding during old age will be sheltered from taxation. (The spreadsheet doesn't model this.)

Another factor to consider is your expectation of income tax rates in the future. It's difficult to predict decades into the future, of course, but personally I'm very comfortable estimating that income taxes will be higher in the future than they are today. Today's enormous budget deficits, and the future's spending for Social Security and especially Medicare, make me very pessimistic about future tax rates. Enter a 2% rate of tax increases into cell C3 and see what changes. The income tax rate after 20 years rises to 50%. The 401(k), if distributed all at once, is worse even than the non-tax-advantaged account! This occurs because all of the 401(k) money was taxed at 50%, but much of the non-tax-advantaged account was taxed in earlier years at lower rates. (Again, the spreadsheet isn't modeling 401(k) required minimum distributions, so this is a hasty comparison.)

At this point, you're probably ready to give up on your 401(k) and switch to a 402A as quickly as possible. Not so fast. The 401(k) has a saving grace: Different states have different income tax structures. You can move. Oregon has a high income tax but no sales tax. Washington has no income tax but a high sales tax. What if I move to Washington when I retire? Set cell C3 back to 0% and then set cell C29 to 25%. This goes back to unchanging tax rates and models a move from Oregon to Washington, decreasing my taxes 9%. Now the 401(k) has the edge over the 402A! This should also be intuitive — lower taxes in retirement favor the 401(k), lower taxes while contributing favor the 402A.

What am I personally planning to do? My hunches lean toward a 1% rate of increase in income taxes (cell C3) and a 10% tax differential between Oregon and Washington when I retire. With C29=C27-10%, the 401(k) is better by a slim margin. When I expand the spreadsheet for the correct number of years before I take distributions, the difference is less than 1%. It would probably be better to avoid the expense of moving to Washington. Plus, I'd feel safer in a 402A where I wouldn't need to worry about future tax rates. Further, using the 402A obviates the need to maintain a non-tax-advantaged account as with the 401(k), where my money would be vulnerable to increases in investment-related taxes.

Having made some numerical projections, I feel pretty good about the 402A. Now I'll have to check with my employer to see if they're planning to offer them at all. :)


Upon reflection it seems like the spreadsheet is under-done. I talked about several things that it doesn't model. But I'd rather not go through the effort to add them. Besides, if you want an analysis that gets all the details right, you ought to go to a professional anyway.

One last thought — if the United States switches to a national consumption tax, this whole analysis has to be defenestrated.

June 04, 2005

"Privatization" Failure

I found this on the Mises blog:

This CNN article explains a failed "privatization" attempt. I put that word in quotation marks because, as the article reveals, it seems that the government still interfered. I don't know any more details, but I bet this is comparable to the failure of "deregulation" in California electricity.

Brian Moore's comment (he also blogs) exposes the lie in CNN's headline ("Pennsylvania school privatization effort collapses"):

From the article:

Edison also found itself in a perpetual three-way power struggle with the board and the central administration. The contract did not allow Edison to hire or fire teachers. The company also did not control the district's finances and had limited ability to shift resources to places that needed them. It was not involved in generating the faulty information that hid the system's [$35 million] budget deficit.

So, this "private" school didn't have control over human resources, budget, budget allocation or accounting? That's a new definition of "private" to me.

Indeed. The news article also mentions that Edison Schools is leaving "partly" because it hasn't been paid $4 million it's owed.

It's important for people to know that this was not privatization, despite how the media presents it.

Sometimes I'm a Little Slow

I can't stop chuckling. This is so ridiculous I have to write about it. I just spent about ten minutes trying to wrap my head around a very short e-mail.

At first I thought it was spam because I couldn't figure it out. But it referenced something on my blog, and I wasn't ready to believe spammers are that sophisticated yet. But if it's not spam… it should make sense!

I see you're still full of shit :) I'm loving that ladybug on the island and Lewis & Clark being overbudget and late. I'm way too easily amused for a princess.

The good news is that I have car insurance so I can travel once again. Bad news is I can't afford the gas. If I just had a boat that would float, I'd be good to go.

Such is life. Waiting for true love to show up when you least expect it.

Puzzled? I was.

My only clue was that the author's name seemed vaguely familiar. So I checked my old e-mail and, sure enough, this is a bona fide real person who I've corresponded with before (in January). Not a spammer. So the e-mail definitely should make sense.

So who would open an e-mail by telling me I'm full of shit? Poopie, of course! And she, by virtue of her pseudonym, can get away with it. So then I start laughing. But it gets even better!

The Lewis & Clark reference I understand; I had just written it. But I drew a blank on the ladybug reference. I checked google and discovered that I've never written the word "ladybug" on my blog (until now). So I re-read my own index page to see if I had made any oblique reference to anything ladybug-like.

I was ready to give up when I scrolled all the way to the bottom. And then I suddenly noticed my own site graphics. At the bottom, and on my banner, I have graphics of a tiny island. And a round red thing that could be (I suppose!) mistaken for a ladybug. At this point I laughed for about a minute and decided I absolutely had to blog about all this.

Poopie, that's not a ladybug. That's a wild pizza. You see, it's pizza shaped and has toppings… and the spear is how you know it's wild. (Domesticated pizzas don't have spears.) You should read the story (and then read the analysis so it all makes sense). The story was written a year before I started blogging, and is responsible for my piratey theme.


The bit about "a boat that would float" weirded me out because it sounded like something an old girlfriend of mine would have said. (Six years ago — sigh.) But no one could have known about that. It must have been a coincidence.

Anyway, Poopie — HI! Good to hear from you again. Pardon my rambling. :) Have fun on the piano this weekend. I think I'll be spending my time much the same way.

June 03, 2005

Love at Intel

This is not a fiery office romance story. (But the title got you thinking, didn't it?) I'll write one of those eventually, probably around the time electric blankets become popular in hell. And not Dante's version, mind you. If you'd like to read that sort of thing sooner, set me up with someone. :)

Rather, this is about NASA astronaut Dr. Stanley Love's visit to Intel. Why did he come to Intel? I'm still not sure. There were approximately three Intel employees in attendance at this event. Lots of schoolchildren were bussed in, though. (…hmmm, it's strange for me to use the word "bussed" in the transportation sense.)

I knew in advance that this was an event for kids, not for engineers. I went anyway because (1) I had a question to ask, and (2) I've had fun reporting on interesting events recently.

Dr. Love was introduced by my Congressman, David Wu, who I voted against. My manager also attended (and brought his son!), and said the obligatory "woo-woo" (Wu-Wu) when I pointed to the Congressman. I don't think Wu held the attention of the students. He talked briefly about a committee he's on and used words like "obstruse" and "nascent" and "balkanized" — the kids didn't care.

After Wu's introduction, Dr. Love segued to a short video about space exploration. After the video he talked very briefly about exploration before going to Q&A. There was no speech! He basically said that we haven't been to the moon for 30 years, and that we're planning to go back as a stepping-stone to Mars. He mentioned that his current role is to consult on new spacecraft, and that's what I hoped he'd talk about, but right when I was getting interested we went to Q&A. I felt somewhat cheated, but this arrangement did maximize time for the Q&A, and maybe the interaction was the raison d'être for the event.

I was the only adult who asked a question. (But I look young!) See if you can spot which one was mine. The following are my hastily typed and paraphrased notes; I only got a handful of direct quotes. I was very happy to be able to use a laptop during this; there's no way I could have written things down quickly enough. Kids ask short questions, so there were lots of them. Dr. Love's responses were longer than the impression you'd get just from the below; I essentialized them.

Have you been to the moon?
No, I was seven years old at the time.
Where have you been in orbit?
I haven't flown yet. I expect to either go to Hubble or to the ISS someday.
What engines will we use to get to Mars?
We're still trying to answer that. Solid chemical fuels aren't suitable. Liquid chemical fuels (H2+O2) are the default. Also looking at nuclear-electric and nuclear-thermal propulsion.
Do the different layers of the atmosphere have different gases?
The atmosphere is well-mixed below about 86km (the turbopause). Above that it's less mixed and you see more hydrogen and helium.
Will you go to Mars?
Probably not, I'll be too old. The moon is a possibility.
How long does it take to get to the moon?
Depends on how fast you're going. [Too bad there was no one doing sound effects to give him a rimshot - ed.] The Apollo way (coasting there from low earth orbit) takes 2-3 days.
What's the optimum age for spaceflight?
Sally Ride was in her early 20s, John Glenn was 87. (I think these were both wrong, unless I misheard him: Ride was 32 and Glenn was 77.) Most astronauts are in their 40s. For a mission to Mars it would be better to be an old man due to the expected level of radiation. It won't catch up with you so much if you won't live long anyway.
How fast does a rocket go?
Going up isn't the hard part of reaching orbit. What's important is having enough tangential speed to remain in orbit. It's about 17,500mph for orbit, another 10k to reach the moon, or 15k for Mars. Our spacecraft in the outer solar system are much faster.
Did they go by Saturn?
Yes. Both Voyagers, one Pioneer, and Cassini.
Will there be foreign involvement in the next space vehicle?
They've been invited, but we'll build it on our own if necessary.
I want to go to Mars. Should I become a pilot?
"It can't hurt." Historically, the early astronauts were test pilots. It's part of the culture to look for people with aviation backgrounds. Don't do something just to bcome an astronaut — do it because you think it's interesting. Only twenty out of thousands of applicants become astronauts. [I applaud Dr. Love's injection of caution here.]
I'd like to hear your thoughts on private spaceflight efforts.
"More power to 'em." One day we (NASA) will be less relevant. The private groups are "doing great work" and they have the freedom to do things we don't. We have to follow more rules. They have the benefit of small groups with less oversight. "One day they will surpass what the government does."
(I missed this question. It was something about education.)
I didn't know what I wanted to be when I grew up. Majored in physics. Got a doctorate in astronomy. My training is in planetary science (i.e. not cosmology).
What are you doing right now?
"Talking to you guys." :) There's a 60-day study underway about how to go back to the moon. Once the architecture is in place, I'll help with vehicle design as the crew advocate. (Example: He'll make sure the ship has a window.)
When did you join NASA?
In 1998, after 7 years of applying.
Have we grown food in space?
Yes, but only in small quantities.
Is Spirit still on Mars?
There are two rovers. Yes they're still there. One has become stuck.
Why can't we use the Apollo spacecraft to go back to the Moon?
There are only two left, and they're in museums.
Can't we build new ones?
We'd have to redesign them — "I understand the plans cannot be found." Plus, we'd want to use modern materials.
What technological achievement would most help us getting to Mars?
Propulsion to get us there in less than a year. The second research area is crew health for a long (3-year) mission.
When will we go back to the moon?
The first section of the new vehicle should be orbiting in 5-7 years. Moon would be 5 years after that.
What other types of propulsion have you heard of?
Solar sails, magnetic sails, some incredible things. Default answer for politicians like Wu is that we'd use chemical rockets because they're a known entity. Nuclear has technological and political hurdles. Solar sail will be tested in a couple weeks by a private company. (More info)
Are we concerned about waste in space?
Things in low earth orbit eventually come back in. Most spacecraft have no nuclear material. Lunar landers had some, and it's still there on the moon.
Are we concerned about leaving waste on the moon?
It's not a concern because the moon is biologically dead. [It's a "radiation-blasted wasteland" - ed.] What we are worried about is the possibility of contaminating Mars with life from Earth.
Could we dispose of nuclear waste in space?
IMHO if you have nuclear waste, space is a good place for it. But the expense of getting it there is too high. And rockets sometimes fail. The best plans I've heard are places far from people, in bedrock, in dry environments, with lots of warnings that will be understood even ten thousand years from now. An interesting idea is dropping nuclear waste in steel torpedoes over seafloor subduction zones. It would punch in hundreds of meters into the seafloor. But seawater is good at corroding metal.

That was the end of the Q&A. Wu concluded with some political remarks. He said that the political problem with space travel is getting consensus on paying for it. He said, "You all are the converted. You need to go out and convert others." He made a tie-in with the Lewis and Clark expedition, which was over-budget and late. "I'm not here to defend late federal projects or overspending…" instead to say that exploring the unknown has risks and takes courage.

I beg to differ with my Congressman. To recognize the value in space exploration, and to be an evangelist for government spending, are two very different things. I don't think the government has any business whatsoever in space exploration outside its military applications. If I were in charge, I'd immediately terminate government funding for a return to the moon or a mission to Mars.

I do not believe it is acceptable to steal from people (by taxation) in order to satisfy my intellectual curiosity. NASA has created wonderful scientific and engineering results, but its method of funding is immoral. Let people choose individually whether or not to support space exploration. Some would contribute eagerly. Others have different priorities, and they should be respected.


Why did this event occur at Intel? No reason was ever offered. I find it hard to believe we have the only large auditorium in the area. I more cynically expect that it was a political decision of Wu's, who is happy to be seen as a buddy of both technology and education. I don't know what Intel got out of hosting this.

Tiny Island