Category: Regulation

Deferred Maintenance is America’s Exceptionalism

The Daily Escape:

West Cornwall Covered Bridge, West Cornwall, CT – photo by Juergen Roth Photography. The 172’ bridge spans the Housatonic River.

America runs on deferred maintenance. We won’t do a thing today that can be put off for another day, another year, or several years. The ongoing disaster of the collapsed condo at Champlain Towers South in Florida is a perfect metaphor for America. A quick look at some details is instructive.

The NYT had a story about the conflicts among residents and the Champlain Towers South condo board. A report indicated that major repairs were needed to maintain the structural integrity of the building. But the repairs weren’t popular with the residents: (brackets by Wrongo)

“Steve Rosenthal, 72, a restaurant advertising executive, went to the gym in the building nearly every day. Afterward, he would stop at the pool, where he could see a crack on a third-floor balcony that he described as ‘atrocious.’ But he called the $135,000 assessment [to fix the problems] on his condo, a corner unit with double balconies, a ‘second mortgage’.

‘It’s an upscale building, but it’s not the Ritz or the Four Seasons….The people that live [here]…aren’t Rockefellers or Rothschilds. We’re upper middle class, I guess, and a lot of us are retired’….When a neighbor knocked on his door, 705, with a petition against the assessment, Mr. Rosenthal signed it. The first payment was due on July 1.”

BTW, Rosenthal survived the condo collapse. He was rescued from the intact part of the collapsed building, and he’s staying in a Residence Inn a few blocks away. Worse, Rosenthal has filed a lawsuit against the condo board for negligence and against the property for shoddy construction!

America is filled with assholes like Rosenthal. They’ve taken over – they dominate our politics (I’m talking to you Mitch). They dole out promotions to other assholes. They punish anyone who tries to do the right thing. They tell us how to vote, and who to love. (Hat tip: Jessica Wildfire)

Their attitude that “This seems bad, but if I have to pay to fix it, count me out” is the position of many, many Americans, regardless of what kind of deferred maintenance is being considered. Fixing our roads? Sorry, no gas tax increases. Better school buildings? Property taxes are too damn high. Better Internet? Why? Better health insurance? Socialism!

DC politics is infested with a “we can’t afford this” knee-jerk reaction whenever the subject of dealing with America’s deferred maintenance is on the table. And of course, that’s the thinking that deferred the maintenance in the first place.

It’s particularly bad when the subject is how to deal with climate change. What incentives are there to alter behavior to prevent change that will have most of its effects after 2050? The answer is none, except for an intangible feeling that you’ve done the right thing for posterity.

Current stakeholders (regardless of whether they have a stake in a property, a city, or the entire country), willingly defer maintenance to the next generation of stakeholders, when it will be much, much more expensive. Eventually, the problem can’t be remedied. Like In the Florida condo, that’s when things start collapsing, and people start dying.

Perhaps someone should have said to the condo residents: “You can probably play Russian roulette without dying, but do you really like your odds?”

There was a 1981 ad by Fram Oil Filters  that had the tag line: “pay me now or, pay me later.” Imagine, accountability and wisdom brought to you by Madison Avenue! When we move from car maintenance to the country, the answer is you’ll pay WAY more later. We’ve been blowing off serious repair and replacement of our infrastructure for decades.

We’ve blown off making sure that all Americans have safe bridges and roads.

We’ve blown off making sure that all Americans have basic health insurance.

We’ve blown off immigration reform.

We’ve blown off gun sanity.

We’re blowing off moving from fossil fuels to renewables.

Do you see the parallel in how we respond to these issues? First, there’s a warning, then there’s evidence, followed by denial, delay, and ultimately, disaster. There’s no problem, if there is a problem, it’s too expensive to fix. Maybe we can fix it in a few years, eventually followed by incalculable cost and misery.

We’re the only rich country that kicks the can down the road on anything that’s politically difficult. You know that’s true if you’ve been to an airport in China or Europe. If you’ve taken public transit in Europe or Hong Kong. If you’ve seen the ports in Rotterdam or in Asia.

Time to kill all the assholes.

Facebooklinkedinrss

Monday Wake Up Call – May 24, 2021

The Daily Escape:

Sun, clouds and Saguaros, North Scottsdale AZ – photo by rayredstonemedia61

After three decades of digital technology development, it’s evident that cybersecurity isn’t being adequately ensured by Mr. Market’s “invisible hand.” In remarks at the White House last Thursday, Biden said:

“…private entities are in charge of their own cybersecurity…and we know what they need. They need greater private-sector investment in cybersecurity.”

Wrongo’s last assignment was as CEO for a division of a F500 defense contractor. We were targeted by Chinese and other hackers thousands of times per day. By 2005, the parent company was investing tens of millions annually on cybersecurity. Most non-defense firms have come to investing in cybersecurity slowly and without large funding.

We again became painfully aware of the issue when hackers shut down the Colonial pipeline on Mother’s Day, bringing back gas shortages and long conga lines of cars trying to fill up. We subsequently heard that Colonial paid the hackers $4.4 million in Bitcoin to regain control of their networks.

From the New Yorker:

“…we are a country that has seen nearly a thousand reported ransomware attacks on our critical infrastructure since 2013. This includes transportation services, wastewater facilities, communications systems, and hospitals. The average recovery cost of a ransomware attack for businesses is around two million dollars.”

Even though private companies are most vulnerable to counterattacks, they continue to set their own cybersecurity standards largely based on operational and economic priorities, even if their negligence exposes the public to risks. So why won’t companies fix their mess?

Most in the private sector think that cybersecurity regulations will cost too much, which they do not want to pay, or may be incapable of paying. Many in the private sector also consider requirements for better cybersecurity to be yet another form of government regulation.

Mostly, it’s about money and secondarily, about a shortage of IT skills. Some argue that the incentive structure is backwards. Companies often think the costs of adding robust cybersecurity to be higher than their likely losses from a cyber theft. In a way, they are self-insuring, but that ignores the harm to their customers that occurs when personal information is stolen, or when you can’t buy gasoline.

CEOs are concerned primarily with the short-term profits and stock prices of their corporations. Companies have regularly absorbed losses incurred by security breaches, rather than reveal weaknesses in their internal cybersecurity systems, all in the name of protecting management reputations.

In 2015, Obama’s DHS designated dams, defense, agriculture, health care, and twelve other sectors of the economy as “critical infrastructure,” meaning that they:

“…are so vital to the US that their incapacity or destruction would have a debilitating impact on our physical or economic security or public health or safety.”

But while the DHS issued cybersecurity guidelines to those sectors, most companies operating critical infrastructure (like Colonial) are privately owned, and they ignored them. That includes 80% of the energy sector, including pipelines, power generation, and the electricity grid. DHS said in 2015 that those industries needed to develop a common vision and framework to deal with cyber threats.

But corporate America never developed that vision and framework.

In 2019, a European cybersecurity researcher using open-source tools available to anyone, identified and mapped the location of twenty-six thousand industrial-control systems across the US whose internet configurations left them exposed and vulnerable to attack. But you know, they would be prohibitively expensive to fix.

On May 12th, Biden issued an executive order that directed federal agencies and their contractors to abide by a host of stringent new cybersecurity regulations and reporting requirements. The order also required IT service providers and companies that operate industrial-control systems, to inform the government about cybersecurity breaches that could affect American networks.

Biden’s order is a significant workaround for the lack of government control of cybersecurity in the private sector. Many of the cloud services and software packages used by government agencies are also used in the private sector. So, Biden is creating the likelihood that those standards and requirements will be more broadly adopted. That would be similar to auto-emissions standards: When California raised its standards, 12 other states decided to adopt those requirements, and five automakers agreed to design all their new cars to meet them.

Something similar could occur with cybersecurity. Like with Covid, we’re again learning that there’s a very good reason for a robust central government that has the will to write and enforce 21st Century regulations.

Time to wake up America! Corporations aren’t your friends. From sending jobs abroad, to out-of-control share buybacks, to failing to invest in cybersecurity, they need much closer scrutiny. To help you wake up, let’s dust off Depeche Mode with their 1989 hit “Personal Jesus”:

Facebooklinkedinrss

Sunday Cartoon Blogging – September 22, 2019

Wrongo never talks sports, but most of America has heard about the New England Patriots dropping Antonio Brown after 10 days on the job. If you don’t know about the fuss, here is a good summary. Brown apparently has yuuge issues with women, but three professional football teams so far, have offered him chances to demonstrate several times that he’s a really, really good player.

This week, Brown sent threatening and menacing texts to a second woman, and that made working for the Patriots untenable. Most think he will get hired fairly soon by another team.

The thought that Antonio Brown will have another NFL job, and Colin Kaepernick still won’t, shows that in 2019, it is better to threaten women, than to threaten the NFL’s rich white establishment.

On to cartoons. Trump may or may not have promised something to someone:

Ok, this is alarming, but on the bright side, Obama killed Osama bin Laden before Trump could fall in love and invite him to the White House. You can see his tweet now:

“I had a great meeting with Osama, he really loves his Family! Great great letter he wrote me, and wants us to be friends! He told me that some of the things people have said about him in the past are very unfair, and I agree!”

Democrats can’t decide what to do. This week, Nadler was beaten badly by Lewandowski, and Schiff couldn’t get the information regarding the whistleblower’s charges that are required by law from the Trump administration:

Whistleblowers are an endangered species in America:

Trump hates California, it’s got too many homeless, fuel-efficient cars and brown people:

On the bright side, rolling back EPA regulations will create more sick people:

The administration’s priorities bear no relation to reality:

Biden is still in charge, but not everything on the menu is appetizing:

Facebooklinkedinrss

Taxes Aren’t Theft

The Daily Escape:

Humpback Whale, Tonga – Photo by Rita Kluge

Joseph Stieglitz has an op-ed in the NYT about saving capitalism from itself. He wants to re-brand capitalism as “progressive capitalism”: (emphasis by Wrongo)

“There is an alternative: progressive capitalism. Progressive capitalism is not an oxymoron; we can indeed channel the power of the market to serve society….The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society. We need regulations that ensure strong competition without abusive exploitation, realigning the relationship between corporations and the workers they employ and the customers they are supposed to serve. We must be as resolute in combating market power as the corporate sector is in increasing it.”

America has been debating the role of capitalism in our society since our beginnings. In 1790, John Adams published the Discourses on Davila in which he said that entrenched economic inequality would create a political oligarchy in America similar to what had already occurred in Europe.

The problem isn’t inequality. We’ve survived a permanent underclass, but until recently, it has been a statistical minority. But, we won’t survive today’s continuing erosion of the middle class. Stieglitz says:

“We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.”

He calls for:

“…a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.”

Call it progressive capitalism, capitalism plus, democratic capitalism, or whatever you want. At the core of any reform of capitalism is less corporate control over the levers of power, and a redistribution of wealth. Along with the growth in economic inequality and political impotence, so grows the myth propagated by the ultra-rich that higher taxes are a public theft of their hard earned fortunes, and are a threat to their personal freedoms.

Let’s spend a minute on the difference between positive and negative rights.

In the simplest terms, negative rights (most of the Constitution’s Bill of Rights) protect us from the government. They tell us what the government can’t do. The Constitution was designed as primarily a negative rights document, to maximize our individual liberty, and to protect us from the government interfering in our lives. They are most helpful to people whose rights are already protected.

Positive rights are different. They include things like the right to an education, and in some countries, the right to healthcare. Most of us define freedom as: freedom from hunger, freedom from ignorance, freedom from exploitation, freedom from poverty, freedom from hopelessness and despair. Very few positive rights are enumerated in the Constitution, with the exception of the right to have the government protect private property.

Today, if there’s one enduring myth that drives US politics, it is the myth that the rich have earned their reward, through nothing but their own hard work and savvy. The rich want no income redistribution, which they call “socialism”, just as the fat cats said in this cartoon from 1912:

The Republicans in the 1930s called FDR a socialist. Now, as we are thinking about a New Deal 2.0, today’s Republicans want to again brand all Democrats as socialists.

Corporations and the 1% ignore how much they are helped by a system designed by them, and for them. They are contemptuous of government and public authority, which they say act as agents of the poor, attempting to extort the rich.

They forget that our government facilitates and protects their wealth. If not for the many Federal agencies that write regulations favorable to industry, the Federal Reserve, protectors of the banking industry along with others, there would be a lot less wealth for corporations and the 1% to aggregate.

Therefore, they should pay the most.

And remember, rural electrification was a federal project under FDR. The dams on the Columbia River made irrigation possible, opening up western lands to agriculture. The Tennessee Valley Authority (TVA) was the Green New Deal of its time, and was the basis for development of a modern Southeastern US. The railroads that opened up the West relied on government property provided to private companies (redistribution?) to develop.

Let’s decide to reform capitalism. First, by making it responsive to the positive rights that average Americans are longing for. Second, paying for that with much high taxes on corporations. If the loopholes created by savvy corporate tax lawyers remain on the books, let’s create a stiff Alternative Minimum Tax (AMT) for corporations.

Just like the AMT that Wrongo has had to pay for lo, these many years.

Facebooklinkedinrss

Capitalism’s Bad Smell

The Daily Escape:

New Macallan Distillery – 2018 photo via ArchDaily. There are 952 different bottles to taste on site. Bring a designated driver.  

Capitalism in America has gotten bad enough to attract the attention of The Economist:

“Two things stand out about business in America today. One is how successful American firms are: they account for 57 of the world’s 100 most valuable listed firms. The other is the bad smell hanging over a number of powerful companies.”

No one says that The Economist has a liberal worldview. They are the news journal of globalism and neoliberalism. But, even they think that the time has come to revisit how we treat our largest companies.

They go through a litany of all-too-familiar corporate abuses.

  • Boeing selling 737 MAX planes with dangerous software that you had to pay extra to get.
  • Criminal charges have been filed against Goldman Sachs in Malaysia for its role in arranging $6.5 billion of debt for a fraudulently run state fund.
  • A jury in California has just found that Monsanto failed to warn a customer that its weed killer could cause cancer.
  • Wells Fargo admitted creating 3.5 million in unauthorized bank accounts.
  • Facebook’s data practices are under scrutiny in several countries.
  • Purdue Pharma is the subject of a lawsuit by New York’s attorney general, along with McKesson and Johnson & Johnson.

The Economist points out that America has been no stranger to corporate scandals. In the 19th century meat packers sold rotten meat. In the 1960s, Detroit made cars that were in the words of Ralph Nader, “unsafe at any speed”. In the 1990s, tobacco companies and asbestos manufacturers had to settle class action suits that cost them more than $150 billion.

In the early 2000s, WorldCom, Enron and Tyco committed accounting fraud. And nobody forgets the mortgage fraud by our large banks and insurance firms that caused the Great Recession in 2008.

Back to the Economist: (brackets by Wrongo)

“Today’s crises…have common elements. The firms tend to be established, with dominant market positions. Outrage infuses social media and Congress. And yet the financial cost [to these bad actors] has been limited.”

They say that of ten big American listed firms involved in scandalous episodes, their median share price only lagged the stock market by 11% after the event. And just two of the CEOs at scandal-ridden firms were fired. Worse, for the ten firms, the total pool of senior executive pay has risen over the four most recent years to almost $600 million.

Doesn’t corporate America just see these things as the cost of doing business?

We need to remember that this just doesn’t happen here. Volkswagen cheated on emissions tests, as did Audi and Nissan. Sweden’s Swedbank is facing a criminal investigation for money-laundering.

American capitalism needs reform. The Economist says that in the past, three forces constrained corporate conduct: regulation, litigation and competition. Since the 2008 financial crisis, each of these three forces have been weakened by both our elected officials, and by US regulators. This provides an incentive for firms to take an extended walk on the wild side.

First, America’s regulatory system features both capture and incompetence. The FDA has allowed opioids to be sold in huge numbers, clearly beyond what was medically necessary. The FAA delegated its inspection process to Boeing. The FTC can’t police Facebook. The Fed, the FDIC, and the Comptroller of the Currency, our bank regulators, fail to indict bank executives. They impose fines that are small, relative to value of the gains made by rules breaking.

Second, litigation is no longer a deterrent. The Economist says that:

“Criminal cases leading to jail terms for top executives are as rare as socialists at Goldman Sachs.”

The same is true for civil actions. Arbitration clauses cause both customers and employees to forfeit the right to pursue class actions. Firms are more likely to extend cases by appealing, which can take years.

Finally, we all expect the market will punish bad behavior by corporations, because customers have options. But we know that America’s corporations have gotten larger, primarily by acquisition. That makes it harder for angry customers to move to competitors. There’s just one alternative to Boeing; Airbus, but it doesn’t have spare capacity. Users aren’t leaving Facebook. If you need OxyContin, you have just one source. Try changing your cable provider.

Econ 101 shows that the trajectory of monopoly begins with economies of scale, and ends with economies of exploitation. And remember that six corporations own 90% of the media. We won’t hear much about wrongdoing at Amazon from the WaPo.

Voters need to push for more enforcement of regulations, which can only be done by the federal government.

We have to insist that the protection of citizens is more important than protecting corporations and the 1%.

Facebooklinkedinrss