Merry Christmas!


I would like to take this opportunity to wish all a deliriously Merry Christmas and an hilariously happy New Year!

The Chinese were right about being born in interesting times often being a curse. This has been an eventful year with ups and downs for everybody. Next year is bound to be interesting as well.

May you and yours have a magnificent holiday season and a joyous next year!

Spy v Spy


An article in Monday’s Los Angeles Times[1] goes on about Israel being unhappy regarding our spying on them. I’ll take a second to let that sink in.

The host country of Mossad, one of the world’s premier spy agencies, is upset about NSA’s eavesdropping on, among others, their leaders. This is just the latest in a series of foreign “outrage” at NSA’s “spying on allies,” most notably including Germany’s Angela Merkel (who compared the Obama administration to Stassi, the infamous East German secret police), but also populated by such as Italy, France, Britain and Japan. Look, I’m surprised that news organizations that take great pride in being sophisticated beyond their mere consumers haven’t informed us that everybody spies on everybody. Let’s not forget that Israel ran Jonathan Pollard (a Navy intelligence officer) for two years and Ben-ami Kadish (an Army mechanical engineer) for six years through an employee at the their Consulate. Of course the complainants would emphasize that the trouble is us spying on their leaders. Here’s an apparently unknown fact – the purpose of intelligence is to discern the intentions of foreign actors so that the host nation isn’t caught off-guard by events. A State’s intentions are best gleaned from that State’s leaders.

Especially Israel. Jerusalem and Washington have been circling each other for a few years now over reacting to Iranian nuclear research and development – an executive decision. Both are apoplectic about finding out what the other is going to do next. The volume of Israel’s protest is probably directly proportionate to the magnitude of their effort to spy on our leaders (remember that NSA famously encrypted President Obama’s Blackberry before he could use it after the inauguration).

These protestations are aimed, in each case, at the protester’s domestic audience. It’s a public reaction “in defense of their people.” The damage being done is among the various nations’ people, depressing the view of Americans around the world. This is real damage done by Mr Snowden’s public revelations.

There are those who say, “but wait … that we are having this conversation shows that Snowden was right – this is something we needed to know about and have a national discussion about.” No, it’s not. That’s why we need to be careful when electing national leaders – that’s what they’re for … to handle those activities of government that, for whatever reason, aren’t public knowledge. Nations must have secrets from its citizens in order to function in a complex and dangerous world. General Schwarzkopf took great delight in misleading CNN about how we were structuring our land advance into Kuwait because, as he explained, “You need to understand that we blinded Saddam Hussein on the first night of air operations. He gets his strategic intelligence from you people.”

And that’s still the point in regards keeping national secrets. Only more so. With Facebook, Twitter, Instagram, on and on (even these humble pages are accessible by anyone with an internet connection, anywhere in the world), a “public” discussion includes, your fellow citizens and our leaders, but also Hizbollah, Hamas, the Taliban, al Qaeda, Iran, DPRK, PRC, Russia, and our allies (some of whom we may not wish to include completely, if at all). The largest common effect of “public discussions” about serious issues is to politicize those issues, thus ceasing any constructive interchange.

We don’t have a democracy – Greece abandoned democracy for this very reason: having to vote on each and every activity of government left the shopkeepers with no time to keep shop – we have a republic. The officials we send to Washington wear a great burden of responsibility, even if they seem oblivious to it. Their actions weigh heavily on the lives of millions, not just here but across the globe, where, collectively, they are the United States of America. And then there is the matter of revealing the sources and methods by which we gain intelligence. After the New York Times ran a story about how cleaver we were to track bin Laden and other al Qaeda leaders through listening in on their cell phones, al Qaeda heavily curtailed their use of them, and bin Laden began relying only on couriers, successfully hiding from us for a decade. “Public discussions” about sensitive information is a bad idea because “the public” is ignorant of the profundity of certain data, and what else it may reveal about how we do business.

Having said that, do governments classify too much? Almost certainly. It is the nature of bureaucracies to hide the embarrassing along with the dangerous. That’s why we have oversight committees of Congress, who also are treating their jobs as casual political instruments rather than the important check and balance they represent. We keep doing stupid things because we insist on electing shallow people who then nominate and appoint political hacks into positions of high responsibility.

We have inherited a ruling class of self-considered elites who cling more loyally to political ideology than to American interests. Until we insist on a higher level of campaigns by a higher level of candidates, we are living our future.

[1] See Batsheva Sobelman, Israel irked by Snowden revelations of spying on its leaders, in Los Angeles Times, December 23 2013.

the DARPA Model


DoD’s crazy science wing, the Defense Advanced Research Projects Agency – DARPA – is where military problems are explored with unmatched freedom of thinking. Much of the work is done in corroboration with our top universities, letting contracts for specific research projects related to DARPA fields of interest.

DARPA’s success with these contractual arrangements has led to an innovative method of developing research at a level of abstraction that precedes those project-specific arrangements. Both DARPA and the X-Prize Foundation have used crowd-sourcing for getting research focused on a task, rather than a product. It works. In 2004, DARPA held the first Grand Challenge, paying $1 million for an autonomous ground vehicle that could negotiate a course run on real roads, strewn with obstacles and hazards that could easily, and without incident, be negotiated by a human driver. Nine years later, Google is operating driverless cars on the streets of Mountain View [CA].

There is no question that the Grand Challenge sped up the development of autonomous vehicles by years rather than waiting for them to spontaneously appear from some guy’s garage. The concept recognizes the private sector’s vast advantage over government in problem solving – the spiral-cut ham is a product of the fact that a ham is a pain in the ass to carve at a table full of mashed potatoes, casseroles, hot rolls, and drinks in front of every plate. The challenge threw entry open to anyone who could meet the qualifications for entry – a vehicle or software that demonstrated a reasonable chance of succeeding given a little more development time. It exploits the cloud for tinkerers showing promise, and then focuses their efforts on a specific task with measurable results. The challenges have thus far outperformed their more formal competitors in the defense industry working from contracts, and have cost government less than industry and university contracts.

Thus far, DARPA has designed four challenges – the Grand Challenge (discussed above), the Network Challenge (exploring the roles the internet and social networking play in the real-time communications, wide-area collaborations, and practical actions required to solve broad-scope, time-critical problems), the Shredder Challenge (solve a problem faced by warfighters who find torn-up or shredded documents in war zones. Is it possible to reconstitute shredded documents?), and the Robotics Challenge (develop a robot that can work side-by-side with first responders and warfighters) – plus a follow-on to the Grand Challenge – the Urban Challenge (complete a complex 60-mile urban course with live traffic in less than six hours, using the same standards required to pass the California DMV road test). The X-Prize Foundation operates three contests, their most famous, the Ansari X-Prize, has created the civilian space program. They are also challenging entrepreneurial enterprises with the Google Lunar X-Prize (a private company must land safely on the surface of the Moon, travel 500 meters above, below, or on the Lunar surface, and send back two “Mooncasts” to Earth), and the Qualcomm Tricorder X-Prize (a portable, wireless device in the palm of your hand that monitors and diagnoses your health conditions).

I think government should put more projects out to the crowd, DARPA/X-Prize style. “Here’s a few million dollars for anyone who can (fill in the blank).” Not only does this method exploit America’s legendary innovative reservoirs, but the prize money is always leveraged – the picture at the top shows Carnegie Mellon’s 2012 Grand Challenge entry, which not only bristles with sensors, but also with NASCAR-esque sponsors’ ads. Participants are readily supported by corporations that will benefit from a scalable winning technology. Much of the R&D expense, in other words, is not paid by government, but by the participants and their sponsors. These endeavors have resulted in far better solutions, far cheaper, than when government hand-picks an institution to solve the problem on a cost-plus basis.

To me, this is a natural. It gets better results for less money, it gets some of that pent-up corporate money back into circulation, it provides incentive for non-entry-level skilled jobs, and it does so in a popular manner government programs could only dream about.

In the end, it probably makes too much sense to have a prayer of being adopted by professional politicians. By rewarding only success, it rules out putting the project in a Congressman’s district (or with a pet company, etc), for example. Much of the subsidization is done directly by private businesses, robbing government officials of buying support. It helps the economy, employment and education (these highly publicized contests are getting kids excited about science like nothing since the space program) in ways for which politicians cannot claim credit.

Too bad. There are areas that could use crowd-sourcing to explore. For example, developing a dynamic in-put/out-put model of the economy for CBO to use in scoring bills for their real-world initial and out-year costs. Currently, the bill is presented to CBO along with economic assumptions to use in their static economic models – which invariably under-estimate costs and over-estimate benefits. Don’t let the politicians tell how the economy will work – if they knew, we would never have recessions – feed real data into the model and let the conditions created by the bill interact with it. I’m sure there are many other ways in which this cost-effective and innovative way to encourage targeted research could be used.

the “Death of Liberalism”


Many pundits are lamenting/celebrating the quasi-mortal self-inflicted wound of ObamaCare to the Liberal Cause. I’m not one of them.

Remember that as recently as last September, many of these same pundits were celebrating/lamenting the quasi-mortal self-inflicted wound of the “government shutdown” to Republicans. Having said that, serious damage has been inflicted in both cases. Currently, the faltering of the Obama administration is casting doubt on the whole “Hope and Change” mantra that is the de facto anthem of liberalism – “You will thank us later for forcing our Utopia upon you.”

The wound to liberalism is deeper than the wound to Republicans, and I think I know why. The budget matters over which the Mexican Standoff between congressional Republicans and the White House was fought are, to the average citizen, arcane and inside-the-Beltway. It fires up the base, but doesn’t resonate in the non-base much beyond the next news cycle. Outrage at politicians is free. ObamaCare affects everyone, and between the deception of marketing it, bungling the rollout, and the sticker shock of “finding out what’s in it,” it’s been unpleasant. And it is costing real people real money. That will last beyond the next news cycle.

There is also the widely felt disappointment in liberalism-applied. The promises were great, the execution, not so much. IRS running amok, DoJ not prosecuting anything, DoS dysfunctional to the point of costing lives, a president and cabinet chiefs who never seem to know what’s going on – and that’s all before the rollout of ObamaCare. It’s appearing to a growing number of people that these guys just don’t know what they’re doing. Most damaging of all, most respondents now consider the president to be dishonest and untrustworthy. That’s a deep hole from which to extricate oneself, and his personality doesn’t seem the contritious type.

Liberalism is far from dead, but it’s still incoherent with fever.

An Interesting and Important Case


A new hazard has appeared on the radar screens of Team ObamaCare. The first, and most profoundly dangerous, hazard was overcome in Florida v United States when SCOTUS ruled that the individual mandate was constitutional. None of the ancillary cases floating around posed a serious threat.

This new one, however, could be very dangerous.

In 2011, Jon Adler[1], a law professor, sent an eMail to his friend Michael Cannon[2], saying that he [Adler] thought he had spotted an error in ObamaCare that could unravel a significant portion of the law[3]. It seems an important aspect of the implementation of the Affordable Care Act is being executed in defiance of the law’s instructions. The law says one thing and the government is doing another.

The exchanges are defined in §1311 and §1321 of the law, and their rights and duties delineated. In short, Affordable Care Act-compliant insurance policies would be offered through software “exchanges” that would act as a router between consumer and insurer, filtered for qualifications and assistance. One would go online and submit their data, and the exchange would produce a range of policies for which they qualify. The consumer would click on the policy desired, and the exchange would reveal how to directly contact the insurer offering that plan. These exchanges were to be operated in each State by that State (§1311). If a State declined to set up and operate an exchange, the federal government would establish and operate an exchange in that State (§1321). At issue are the federal subsidies for individuals buying insurance in their state’s healthcare exchanges. The plain-text language of the law stipulates that those subsidies should be allotted for plans purchased “through an Exchange established by the State under Section 1311[4].

The law is being implemented such that all fifty states are offering subsidies, not just the 14 states that chose to set up a 1311-exchange. Adler contends that this is illegal behavior, and that 1311-subsidies to 1321-exchanges should be struck down. This is problematic because it would take a significant number of consumers out of the game (those who could no longer afford any policy), costing the insurer a significant revenue stream, causing post-March premium adjustments. Premiums of those carrying ObamaCare policies would spike. This would be just the latest in a seemingly unending string of unpleasant surprises – increasing public displeasure with the Affordable Care Act (and thus the Democrats who voted for it or currently support it).

It would take players out of the game because a, say, $300-a-month policy, costs the insurer ~$240-a-month, actuarially, to operate, eighty percent of revenues being conscripted to payouts on policies. Profits and overhead – to include salaries and wages – to be gleaned from the remaining twenty percent of revenues[5]. This means that insurers are operating on a razor-thin margin, particularly at the outset. ObamaCare insurers will be cash-flow businesses for a decade or so from program enactment (March 31 2014). A significant reduction in consumers (and therefore revenues) will necessitate a re-calculation of fiscally responsible premium levels to adjust to this new reality. This could cause a further winnowing of financially-stretched consumers from ObamaCare (opting for the fines, or finding some other method of managing their healthcare), sparking another round of re-calculation and premium adjustments. Rinse and repeat. This feedback loop – what the industry calls a Death Spiral – leads inexorably to zero consumers for infinitely high-priced insurance[6].

Adler and Cannon wrote an op-ed to this affect in 2011[7]. Now there are four cases challenging the subsidies in federally-run exchanges. One of them, Halbig v Sebelius, was argued in DC District Court in November of 2011 by premier litigator Michael Carvin. The government issued a barrage of motions to dismiss, ranging from standing to fuzziness of complaint. Judge Paul L Friedman brushed the motions aside, each with cause, and noted that the trial should proceed to the merits phase. He noted that the issue is of “some urgency to both sides,” and said that “I want to do it quickly.” All briefs and motions were to be filed by November and oral arguments were heard on December 3. Judge Friedman said he would enter final judgment by February 15, ideally before IRS began handing out subsidies on January 1.

The crux of plaintiffs’ argument is that Congress unambiguously defined State and Federal exchanges and then unambiguously designated State exchanges as being eligible for federal subsidies. This is important because a principle of judicial interpretation of legislation is to look at the language used in the plain-text version of the legislation written and passed by Congress, and signed into law. And there it is: “subsidies should be allotted for plans purchased through an Exchange established by the State under Section 1311.” [8] It is considered a priori that Congress means what it says. Here the search is for legislative intent.

The crux of government’s argument is that the federal government is acting “in the shoes” of State exchanges, and thus should be treated as such. This is important because another principle of judicial interpretation holds that an insular ruling should resonate with the law as a whole. The purpose of the Affordable Care Act is to bring full-service healthcare coverage to the uninsured, so it would be logical to subsidize the resource-challenged consumer, wherever they are found. Here the search is for internal consistency.

A side issue involves why IRS is poised to emit subsidies on January 1. It seems that President Obama issued a request to IRS that it interpret the disparate clauses as unintentionally specifying that only State exchanges are eligible, and to issue subsidies to all who financially qualify. Plaintiffs argue that this effectively changes the language of the law, and that no one but Congress is constitutionally allowed to do that.

Whoever loses in the DC District Court will undoubtedly appeal to the US DC District Court of Appeals, and that loser to the US Supreme Court. A narrow ruling on Halbig v Sebelius (that only States exchanges are eligible to authorize subsidies) will all but unravel the Patient Protection and Affordable Care Act, and a broad ruling (that subsidies be considered only on financial criteria) will further buttress its legal pedigree.

[1] Professor, law; director, Center for Business Law and Regulation, Case Western Reserve University.

[2] Director, health policy studies, Cato Institute.

[3] Pema Levy, The Case That Could Topple ObamaCare, in Newsweek, December 17 2013, 1505EST.

[4] Ibid.

[5] Insurers will generate “off-book” revenues by short-term investing operating surpluses in low-risk, dependable return instruments. This will increase absolute profits without polluting ObamaCare accounting of the 80-20 rule, making it possible for insurers to participate in the first place.

[6] There are those who say that this was the Democrats’ idea – allow ObamaCare to collapse so as to necessitate the “Single-Payer” option – nationalized healthcare.

[7] Jonathan H Adler and Michael F Cannon, Another ObamaCare Glitch, in Wall Street Journal, November 16 2011.

[8] See, for example, Michael F Cannon, An Update on Halbig, and Other Lawsuits That Could Make the Decrepit Look Like a Hiccup, in Forbes, November 2013.

Mexican Cobalt


We know that al Qaeda and Hizbollah have training camps in the Tri-Border Region of South America – an essentially lawless region of jungle where the borders of Paraguay, Argentina and Brazil meet – and conduct fund-raising in the surrounding area. The Arabs (al Qaeda) and Persians (Hizbollah) are the trainers, the recruits are indigenous Hispanics for use in the Americas. We also know that at least the Zetas Mexican drug cartel has sent some of its operators down to the region for training, meaning that there is interaction between international terrorists and Mexican cartels. It would be foolhardy to assume that none of these newly trained agents have infiltrated the United States through our porous southern border.

This becomes an interesting backdrop when considering Wednesday’s recovery of “most” of the cobalt-60 (Co60) stolen with a truck on Monday near Mexico City. Cobalt is the most likely candidate for use in dirty bombs, as it is primarily used in industry and medicine, and therefore not protected by DoD constraints. It is, in other words, easier to steal. It is a gamma-ray emitter (the most dangerous type of natural radiation), Co60 has a half-life of 5.27 years, making it an ideal candidate for terror weapons. Dirty bombs use slow, cool explosives, so as to spread, rather than cook, the payload. Their use is to spread terror rather than damage.

Having said all that, it is probable that the thieves were after the truck, not knowing what it was carrying. What bothers me is that not all of the Co60 was recovered. What I don’t know at this point is how much is missing (that isn’t being released yet), but it wouldn’t take much to panic a city.

It’s more than likely just another truck heist, but I thought it worth a heads-up.


UPDATE: Six individuals, ages 16 to 38, were admitted to a hospital in Pachuca (about 56 miles from Mexico City) for symptoms of radiation poisoning.  The police staked out the hospital and took the men into custody upon their release.  This does appear to be just a truck theft, although no further mention has been made of the totality of the recovery of Co60.  Still waiting to hear on that front.