Bailout Verdict

James Steele and Donald Barlett have an article analyzing where the money for the government bailout of the banks went. The answer is "nobody knows" because of a delinquent lack of oversight.

This quote from a democracy now interview pretty such sums it up:

"The outcome would have been exactly the same had there been no bailout and bankruptcy court had been allowed to take its course."

Lies, Damn Lies, and Public Education

Standford University just published a study which claims that charter schools are not doing as well as traditional public schools. What most people who repeat the claims of this report do not understand is that it is not a measure of actual performance of the respective schools. It only measures how much students of comparable backgrounds improved test scores over previous years.

The differences in improvement which are measured are tiny: between 1 and 3 percent of a standard deviation. And they admit it: "This small difference — less than 1 percent of a standard deviation — is significant statistically, but is meaningless from a practical standpoint. Differences of the magnitude described here could arise simply from the measurement error."

To get some better looking results, they break out the measurements into lower, middle, and high school levels, and find that charter school students in high schools improve 2-5% of a standard deviation less.

"we did look at performance at elementary, middle, high school and multi-level schools and found that actually elementary and middle schools were actually outperforming their traditional public school peers.
The way—the measure that we used is growth on their—each state’s test. And because testing is generally from third to eighth grade, so we can’t even really look at the schools who just have kindergarten through third grade, because we haven’t gotten a growth score on those yet."
(Kenneth Surratt, assistant director of the Center for Research on Education Outcomes at Stanford University and one of the lead authors of their report, in an interview on Democracy Now)

Wait, did he just say testing is only generally available through eight grade, and they are still able to assert they have good measurements for high schools somehow? This deserves a closer look. On page 7 of the technical appendix there is a table showing the measurements for math and reading broken down by grade level. 8 of 12 of the grades improved in math, and 7 of 12 of the grades improved in reading. If I take a simple average of their numbers, for all grades, for grades 3-8 (when the test scores are most available), or even for high school only, I get positive results! What isn't included in their table is the sample sizes for each grade, so a simple average is not exactly accurate, but I find it incredulous that their sample sizes in the negative scoring grades would be so much larger as to throw the actual results that far off the average.

I can get a negative result if I throw out the 1st and 12th grade scores, which show charter schools doing very much better compared to other grade. I'm not sure what happened with the 1st graders, but 12th grade is when students are taking college entrance exams and all, so while testing may be optional at the other high school grade levels, we should have a much larger sample size from 12th grade because they are taking SATs and ACTs. Yet the only way I can get results similar to those alleged by this report is to assume a very tiny sample size of 12th graders. The words "deeply flawed" come to my mind here.

Personally, I don't think charter schools are going to solve any big problems. They are still public schools, after all. But it is really depressing to see the education unions going to such lengths to try to stifle the one prospect we have for some healthy competition in public education. Charter schools give us an alternative to throwing more money at traditional public schools when they are failing. Not that its really better, but at least the administrators can see the students (and the per-student funding) leaving their school.

Stop Rewarding Failure

There has been a lot of talk in the news lately about the outrage over the bonuses (165Megabucks) AIG is giving its employees. But the most surprising thing is that all the talk, from congress, from AIG, and from the media, is about how they cannot avoid giving the bonuses because of contractual obligations. What a load of disingenuity that is!

Many, many employers are currently forcing their workers to take paycuts during this downturn. My own employer is compensating us with unpaid leave, which is very nice of them, but we didn't have any options about the temporary paycut. AIG could do the same thing. But they say these are "retention bonuses," not performance bonuses. They also say these people are only working to shut down the company, which contradicts the "retention" bit.

These bonus are a giant fraud, and congress is complicit by putting up with such lame excuses. The media is also complicit by spending so much time reporting on the lame excuses, instead of pointing out how lame they are.

Even worse than the excuses, however, is the proposed solutions. Congress is proposing to withhold the bonus amounts from the next payment to AIG, or to tax the company to recover the amount. All the solutions have one theme in common: the people get to keep their bonuses, and the company pays the penalty for them. This means that no one is being punished. Fining a company does not hurt those to make the poor decisions, because they just deduct the amount from the balance sheet and spread the harm over all the shareholders, while their own salary and bonuses remain unchanged.

The only real solution to the crises we face is simple: STOP REWARDING FAILURE. If the banks were allowed to fail because of the bad types of loans they made, those loans would stop and bankers would remember the lesson. The bailouts just reward the decision makers for their bad decisions, and teaches them they can continue making bad decisions and count on the government to bail them out next time too. The automakers are talking up how poorly their companies are doing so that they can get bailout money too. And the lesson all big business owners are learning is that failure pays big dividends from the government.

But that's nothing new. The public education system has been practicing that policy for decades already.

Bailout/Stimulus mania

Just in case anyone has not noticed this pattern, I wanted to spell it out clearly.

Congress passes the bailout on Oct 3, 2008. Between Oct 3 and Oct 9, the DOW drops 20% and stays down.

The senate OKs the stimulus on Feb 9, 2009, making it clear that it will pass shortly, which it does on Feb 14. Between Feb 9 and now, the DOW has dropped 21%.

Lesson: government meddling in the economy is the worst thing that can possibly happen.

The next worst drop in the DOW is Nov 18-20, 2008, when congress was discussing bailing out the automakers. The DOW dropped 10%, but congress decided against the bailout and the DOW quickly recovered.

What would happen if we let the insolvent banks fail without government interference?

On Mar 7, 2008, Bear Stearns stock lost 80% of its value, the failed company, and was acquired by JPMorgan. The DOW was down 4% between Feb 29 and Mar 10, and quickly recovered.

Lehman Brothers filed for bankruptcy on Sept 15, 2008. The DOW dropped 7% from Sept 12 to Sept 17, but regained that 7% two days later. I cannot call it an actual recovery, because the bailout was only 2 weeks after that.

Lesson: Business failures, even big ones, are minor blips in the economy.

So the word "mania" in the title is meant in the sense of "dementia", not "craze".

Socializing 401k plans

Democracy Now had a story about a proposed plan to have the government take over the 401k pension plans all over the country and run it as "a mandated, a universal supplement to Social Security" where the individual wouldn't exposed to the risks of the stock market and would get a guaranteed return.

The socialists were ecstatic about the idea, of course, and it is hard to imagine legislators passing up another cash cow the size of social security.

Fortunately, its mere proposal is an admission of the utter failure of Social Security, since a guaranteed retirement pension is exactly what Social Security is supposed to be doing for us. So if we admit that Social Security is failing to do what it was designed to do, why should we expect yet another government sponsored pension plan to fare any better?

No, We Can't

If Americans really wanted change, we would have been choosing between Ron Paul and Dennis Kucinich.

We are the Jackels

I love Democracy Now because it's so depressing. They outdid themselves yesterday. The end of this interview just made my blood run cold.

JOHN PERKINS: I think there’s an amazing revolution going on in Latin America. In the last—in this decade, nine countries, representing more than 80 percent of the population, have democratically and peacefully voted in presidents who say, “We don’t want any more war. We don’t want any more terrorism. We don’t want any more exploitation by foreign corporations.” They’re saying, “We don’t want foreign aid. We simply want to have the right to use our resources to help our people.”

And these are countries, Amy, every one of them, that during most of my lifetime were run by brutal dictators who were US puppets. And now, all that’s changed in the last—less than ten years. And I think there’s tremendous hope there. I think this gives hope for all of us here in the United States, for people in Africa, in the Middle East, that diverse groups can come together and do what’s right democratically and peacefully.

AMY GOODMAN: Do you think Chavez of Venezuela, Evo Morales of Bolivia, Correa of Ecuador have reason to fear, well, who you call the jackals?

JOHN PERKINS: Absolutely. They do have reason to fear, and I know they’re taking protection. I have spoken with Correa. He’s exchanged letters with me. I was with Evo Morales on New Year’s Eve a year ago. Chavez has talked openly about this. I was just in Nicaragua. Daniel Ortega feels this way. They’re taking steps, and probably most importantly is that they’re banding together. There’s so many of them now, it would be hard for the United States to send in enough jackals, you know, without raising a lot of world concern. However, you reported on this program—I think it was yesterday—that the Fourth Fleet has been taken out of mothballs. The US naval fleet that goes into the Caribbean and South America that’s been in mothballs since 1950 is being called out.

John Perkins used to be one of those jackels he is talking about, but the thing which really gets me is the contrast between hope for real freedom, and the United States being the biggest obstacle to that freedom.