Political Calculations
Unexpectedly Intriguing!
29 July 2005

The Canadian-based Fraser Institute has released its 2005 Annual Report of the Economic Freedom of North America (available as a 867KB PDF document). A co-production with the U.S.-based National Center for Policy Analysis (NCPA), the report rates the economic freedom of individual U.S. states and Canadian provinces.

Written by the Fraser Institute's Amela Karabegović and Fred McMahon, along with NCPA's Glenn Mitchell, the report's measure of economic freedom indicates the degree to which an individual citizen of a given state or province is affected by the restrictions placed upon their freedom to freely engage in economic activity by their state and federal governments. These restrictions result in lower values, while higher values indicate a greater degree of economic freedom.

The report breaks the measure of economic freedom across three major areas: Size of Government, Takings and Discriminatory Taxation (or Taxation and Takings), and Labor Market Freedom.

The dynamic table below summarizes the reports ratings for each state or province according to their available economic data for 2002, and includes the contribution of restrictions imposed by each nation's federal government. You may click upon the column headings below to sort the tabulated data from highest-to-lowest value or from lowest-to-highest value. Higher values indicate greater economic freedom.

U.S. vs. Canada
Economic Freedom Index Score
(Including National Government Contribution)
State or Province Overall Index Size of Government Taxation and Takings Labor Market Freedom
CA - Alberta 7.4 8.6 6.9 6.8
CA - British Columbia 5.3 7.2 4.3 4.5
CA - Manitoba 4.9 6.6 3.8 4.3
CA - New Brunswick 4.8 5.7 3.8 5
CA - Newfoundland 4.9 5.7 4.6 4.3
CA - Nova Scotia 4.8 5.6 3.8 5.1
CA - Ontario 5.9 8 4 5.8
CA - Prince Edward Island 4.2 4.7 3.3 4.6
CA - Quebec 4.6 6.8 2.7 4.2
CA - Saskatchewan 5.1 6.5 4.4 4.5
US - Alabama 6.3 5.6 6.3 7
US - Alaska 6.2 5.6 7.3 5.7
US - Arizona 7.1 7.3 6.2 7.7
US - Arkansas 6.3 5.8 5.7 7.3
US - California 6.7 7.6 5.8 6.6
US - Colorado 7.5 8.1 6.6 7.9
US - Connecticut 6.8 7.9 5.4 7.2
US - Delaware 8.4 9 8.3 8
US - Florida 6.8 7 5.5 7.8
US - Georgia 7.4 7.8 6.6 7.9
US - Hawaii 6 6.4 5.8 5.9
US - Idaho 6.6 6.6 6 7.2
US - Illinois 7 7.9 6 7
US - Indiana 7.1 7.5 6.5 7.3
US - Iowa 6.8 6.9 6.3 7.3
US - Kansas 6.7 7.1 5.9 7.2
US - Kentucky 6.5 6.3 6.1 7.1
US - Louisiana 6.4 6.3 5.9 6.9
US - Maine 5.8 6 4.8 6.7
US - Maryland 6.5 6.8 5.7 7
US - Massachusetts 7.1 7.7 6.4 7.3
US - Michigan 6.8 7.4 6.2 6.8
US - Minnesota 7 7.8 5.9 7.3
US - Mississippi 5.6 4.8 5.4 6.6
US - Missouri 6.8 6.8 6.3 7.2
US - Montana 5.5 4.9 5.2 6.4
US - Nebraska 6.9 7.3 6.1 7.4
US - Nevada 7.3 8.3 6.1 7.5
US - New Hampshire 7.3 8 6.2 7.8
US - New Jersey 6.8 8 5.2 7.2
US - New Mexico 5.5 5 4.8 6.7
US - New York 6.2 7 5.1 6.5
US - North Carolina 7.5 7.6 7 8
US - North Dakota 5.9 5 5.8 7
US - Ohio 6.6 7 5.8 7
US - Oklahoma 6.1 5.9 5.5 6.9
US - Oregon 6.5 6.7 6.4 6.5
US - Pennsylvania 6.8 6.8 6.2 7.3
US - Rhode Island 5.9 6.4 4.6 6.8
US - South Carolina 6.7 6.4 6.1 7.4
US - South Dakota 6.8 6.4 6.6 7.6
US - Tennessee 7.1 7.1 6.8 7.5
US - Texas 7.4 7.9 6.4 7.8
US - Utah 7.3 7.6 6.9 7.4
US - Vermont 6.2 6.6 4.9 7
US - Virginia 7.1 6.9 6.7 7.7
US - Washington 6.5 7.3 5.8 6.3
US - West Virginia 5.1 4.2 4.6 6.4
US - Wisconsin 6.7 7.3 5.7 7.2
US - Wyoming 6.7 7.1 5.9 7.2

Why Is Measuring Economic Freedom Important?

The measure of economic freedom is important since it functions as an indicator of the economic growth potential in a country or region. As the report notes, "not only is economic freedom important for the level of prosperity, growth in economic freedom spurs economic growth." When you consider that the barriers and restrictions placed upon the economic freedom of individuals, is it really any wonder that, as the report again notes, "those provinces and states that have low levels of economic freedom continue to leave their citizens poorer than they need or should be."

The report underscores this position comparing the economic performance of the U.S. states with the best and worst records for economic freedom since 1981:

Most US states have maintained a high degree of economic freedom and only a handful have consistently not done so. West Virginia has the worst record but Hawaii, Maine, Montana, New Mexico, North Dakota, and Rhode Island also have consistently low levels of economic freedom in both the all-government and sub-national indexes. Their average per-capita GDP was nearly US$4,700 below the US average in 2002 and their total growth from 1981 to 2002 is 13 percentage points below the US average of 39% total growth in real terms. This is particularly remarkable because poorer states under normal conditions will grow faster than rich states due to the well-known and empirically verified "convergence" effect....

The states that have consistently strong records in both indexes are Colorado, Georgia, Delaware, North Carolina, New Hampshire, Tennessee, and Texas. Their GDP per capita was US$4,400 above the US average in 2002 and their growth from 1981 to 2002 nearly 20 percentage points higher, a remarkable achievement given that economic theory and evidence shows that richer states should grow more slowly than poorer states due to the convergence effect noted above.

Canada's Core Problem

For Canada, the report notes that Canadian provinces consistently have lower scores than U.S. states, and attributes its performance to the effect of Canada's system of fiscal federalism. Here, the report notes that:

To understand the impact of Canada's fiscal federalism, consider a province that reduces economic freedom by, for example, increasing taxes. This will likely have a negative effect on the provincial economy, as both the following results and international testing show. However, the weaker provincial economy means the province will receive an increase in federal payouts (or a reduction in the fiscal outflow if the province in question is a "have" province). The greater the reduction in economic freedom, the greater the negative impact on the economy and the greater the amount of money the province will receive from the federal government. This inflow of funds will, at least in the short term, partly offset the negative impact on GDP and mute the effect of economic freedom, or its loss, on the economy....

On the other hand, if a province increases economic freedom, for example by reducing taxes, and its economy grows, the result is an increased outflow of government revenues to other jurisdictions and a heavier tax burden, given the progressivity of Canadian taxes, which in turn suppresses increases in economic freedom and economic growth. In other words, fiscal federalism mutes the effect of economic freedom in Canada.

As a result, the report's authors find that Canadian provinces are disadvantaged in pursuing economic opportunity, recognizing that "since Canadian provinces have relatively low levels of economic freedom, Canadians are likely to continue to experience lower standards of living relative to American states." As a result, in this "contest" between the U.S. and Canada, the U.S. wins.


28 July 2005

Danger! You must act now! Call your congressional representatives! Call the environmental activist groups! Demand action! Don't take no for an answer! Fight the invisible killer! Stop the DHMO military-industrial complex! Details below....


Dihydrogen monoxide is colorless, odorless, tasteless, and kills uncounted thousands of people every year. Most of these deaths are caused by accidental inhalation of DHMO, but the dangers of dihydrogen monoxide do not end there. Prolonged exposure to its solid form causes severe tissue damage. Symptoms of DHMO ingestion can include excessive sweating and urination, and possibly a bloated feeling, nausea, vomiting and body electrolyte imbalance. For those who have become dependent, DHMO withdrawal means death.

Dihydrogen monoxide:

  1. is also known as hydric acid, and is the major component of acid rain.
  2. contributes to the "greenhouse effect."
  3. may cause severe burns.
  4. contributes to the erosion of our natural landscape.
  5. accelerates corrosion and rusting of many metals.
  6. may cause electrical failures and decreased effectiveness of automobile brakes.
  7. has been found in excised tumors of terminal cancer patients.


Quantities of dihydrogen monoxide have been found in almost every stream, lake, and reservoir in America today. But the pollution is global, and the contaminant has even been found in Antarctic ice. In the midwest alone DHMO has caused millions of dollars of property damage.

Despite the danger, dihydrogen monoxide is often used:

  1. as an industrial solvent and coolant.
  2. in nuclear power plants.
  3. in the production of styrofoam.
  4. as a fire retardant.
  5. in many forms of cruel animal research.
  6. in the distribution of pesticides. Even after washing, produce remains contaminated by this chemical.
  7. as an additive in "junk-foods" and other food products.

Companies dump waste DHMO into rivers and the ocean, and nothing can be done to stop them because this practice is still legal. The impact on wildlife is extreme, and we cannot afford to ignore it any longer!


The American government has refused to ban the production, distribution, or use of this damaging chemical due to its "importance to the economic health of this nation." In fact, the navy and other military organizations are conducting experiments with DHMO, and designing multi-billion dollar devices to control and utilize it during warfare situations. Hundreds of military research facilities receive tons of it through a highly sophisticated underground distribution network. Many store large quantities for later use.


Act NOW to prevent further contamination. Find out more about this dangerous chemical. What you don't know CAN hurt you and others throughout the world.

The original source of this environmental action alert is available here.

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27 July 2005

Sometimes, when a gambler has had a long losing streak, they will bet an amount equal to the amount they've already lost, hoping that their luck will change and that they will be able to fully regain their losses with just one bet. This kind of betting is often called "doubling down" and it's a very high-risk strategy - one that may restore the gambler's losses, but far more often leads only to ever greater losses.

It's also part of why the AFL-CIO, the largest umbrella of organized labor unions in the U.S., is now fracturing. Back in March 2005, AFL-CIO President John J. Sweeney made a huge bet in setting the strategic direction of the union.

Sweeney was then confronted with growing dissatisfaction among the senior leadership ranks of the AFL-CIO's component unions, who argued that under his leadership, the organization's focus on political issues, rather than focusing upon organizing new members into the union fold, was failing to revitalize the organization. In response, Sweeney took the tack of reinforcing the strategy he already in place - in effect, doubling down his previous bets:

In March, responding to proposals from the insurgents, the AFL-CIO Executive Council approved a plan to cut national unions’ payments to the AFL-CIO by 17 percent, provide another $15 million for organizing and double political expenditures to $45 million a year.

Source: Public Employee Press, July/August 2005: "AFL-CIO: Is It Splitsville?"

That Sweeney's bets to date have been losing ones is indisputable. In 1995, when Sweeney was elected to be President of the AFL-CIO, union members made up 14.9% of the U.S. workforce. Today, labor's percentage of the U.S. workforce is roughly 12.5%, declining steadily over Sweeney's tenure. This fits in with the larger trend toward the decline of union membership in the U.S., which peaked in 1954 with 34.7% of the workforce, and has declined continuously since.

The AFL-CIO also has little to show for its political contributions as well. Even though the union built a substantial warchest to fund it's political activities during the course of the 2004 election, the money failed to swing the U.S. national elections in any meaningful way. As a result, the union finds its ability to affect legislation under consideration essentially unchanged or decreased, particularly since the vast bulk of their contributions went toward the Democratic Party, which failed to achieve national majorities in the elections.

In short, Sweeney's strategy of emphasizing political issues has failed to either arrest or even to significantly slow organized labor's decline - a view shared by the component unions who are now severing their organizational ties with the AFL-CIO. This split will impact the AFL-CIO's bottom line, as the unions divorcing themselves from the body represent nearly 25% of the total union membership in the U.S.

And yet, in the face of rejection by these dissident unions, Sweeney has moved to double down his bets yet again. One wonders how long organized labor will be able to afford his leadership.


26 July 2005

One of the items frequently cited, then forgotten, in the debate over Social Security reform is the ratio of the number of individuals receiving the program's retirement benefits to the number of workers who are taxed to provide them. Currently, as noted by economist Arnold Kling, this ratio is 4.5 workers for each retiree, with the ratio declining to just 2.5 workers for every retiree in 2030, and stabilizing around this level thereafter.

More than anything else, this increased burden upon younger workers to support the retirement benefits of earlier generations is driven by the demographics of the baby-boom generation. Aside from their large numbers in proportion to earlier and later generations, the baby-boom generation can also expect to live longer, which will also contribute to the increased burden upon workers of later generations. This demographic effect is a primary driver in reducing the amount of retirement benefits that Social Security will be able to deliver in the future.

But, what if we were to fix the ratio of workers to retirees at a constant level, and then change the age when workers may retire and receive full benefits to keep pace with the worker/retiree ratio? Robert D. Arnott and Anne Casscells looked at this question in their article from the March/April 2003 issue of the Financial Analysts Journal "Demographics and Capital Market Returns" (available online as a 684 PDF document). The following chart from the article illustrates how the retirement age would have been affected had this system been in place beginning in 1950, and projects ahead to 2050:

Retirement Age with Look-Ahead, 1950-2050

What's interesting to note from the article is that the authors' forecast increase in the age of retirement to 73 around the year 2030 is not driven so much by the available savings and benefits available to support the retirees, as it is their demand for goods and services. Below a certain worker/retiree ratio, those who might have otherwise retired at today's scheduled retirement age of 65 (which is already in the process of being raised to 67), Arnott and Casscells predict these individuals will be forced to work longer in order to have the goods and services they consume available in sufficient supply to support their demand!

Overall, the demographics of the baby-boom generation make for a neat topic of discussion for how Social Security will need to be reformed to be sustainable for the long term. With the current system, those expecting to receive benefits after 2041 will have their benefits slashed by 26% according to the Social Security Administration's projections. The sooner the sustainability of Social Security for the long haul is addressed definitively by today's leaders, the better off the nation will be.

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25 July 2005

Are you wealthy? How do you know? JLP at All Things Financial has posted a formula from The Millionaire Next Door that can help you answer the question:

Multiply your age by your income from all sources. Then divide that number by 10 to arrive at what your net worth should be.

Here at Political Calculations, we take formulas and turn them into tools - and the wealth threshold calculation above is the kind of math we find irresistable. Enter your data in the table below, and click "Calculate" to find what your net worth needs to be to be considered "wealthy!"

Your Information
Input Data Values
Your Age
Annual Household Income ($USD)

Wealth Threshold
Calculated Results Values
Net Worth

Now, all you need to do is to compare your actual net worth with the calculated net worth value. If it's greater than the calculated value, you may consider yourself to be wealthy. Good luck!

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24 July 2005

Welcome to the Carnival of the Capitalists for the week beginning July 25, 2005! Below you'll find the contributions of dozens of bloggers on subjects encompassing business, economics, personal finance, accounting, finance, marketing, taxes, legal issues and technology, to name just a few.

But that's not all! This week's Carnival of the Capitalists marks Political Calculations' first time for hosting the CotC, so it's the perfect opportunity to showcase some of the features that make this blog unique among all others, beginning with the format of the Carnival of the Capitalists itself.

This week's edition of the Carnival of the Capitalists is presented using dynamic tables. You may click upon any of the column headings below to sort this week's contributions according to blog name, post title, category and description. If you're using a modern web browser, the table will automatically rearrange itself according to the heading you selected! Clicking the column heading again will rearrange the table in reverse order.

If you're looking for the editor's choice of the best posts of the week, click the Description column heading. Posts chosen as this week's best of the Carnival of the Capitalists have been marked with an A+!

Information about next week's Carnival of the Capitalists may be found below this week's contributions. Ladies and gentlemen, boys and girls of all ages, I give you:

Carnival of the Capitalists for July 25, 2005
(Click the column headings to sort table data.)
Contributor Post Category Description/Comment
Multiple Mentality The Currency of Video Games economics
MM contributor Yoshi has been playing video games and comments upon the unreality of the universal currency that seems to prevail across the gamer's electronic domain.
Bad Example WHEN DOES THE WAR STOP? general
Harvey wonders just what it will take to end the war on terror, ultimately noting that market capitalism may provide the solution.
Porkopolis Wanting Our Cake and Eating It Too economics
Starting with a New York Times article, Porkopolis explores why prescription drug prices are so high, and finds that profit motive, as opposed to price controls, offers a better solution to making them affordable.
Wordlab I Am Chairman Of Chrysler Corporation Always marketing
Wordlab's Abnu wonders if having former Chrysler CEO Lee Iacocca out pitching DaimlerChrysler's new EMPLOYEE PRICING PLUS offers in television commercials makes sense.
Free Money Finance Don't Believe Financial "Experts" personal finance
FMF finds that so-called financial "experts" are often wrong in their advice, and links to a "gotcha" article at the Motley Fool.
Steve Pavlina's Personal Development Blog Saving Time With Your Microwave managing
Can you take efficiency too far in seeking to save those precious seconds while microwaving your meals? Steve Pavlina offers his thoughts.
Lump on a Blog The Poetry of Capitalism economics
Lumpy has been reading Ayn Rand's Atlas Shrugged, and has found insight into the nature of money through quotational therapy.
JSLogan Coaching Is a Higher Value Service than Mentoring managing
Is there a difference between coaching and mentoring? Jim Logan offers a distinction and finds coaches to be superior to mentors.
Random Thoughts from a CTO The Sweet Spot managing
Taking a principle from Good to Great, Skip Angel offers some ideas that can help managers learn how to find the high productivity "sweet spot" of each person they manage.
Searchlight Crusade The Negative Amortization Loan personal finance
Dan Melson looks at negative amortization loans and advises that "if anyone offers you one of these loans, drag them into the sunlight, drive a wooden stake through their heart, and RUN AWAY!"
View from a Height How Not to Diversify investing
Investors have long assumed that U.S. stocks can be broken down into separate size and value-growth asset classes, but evidence from their performance shows that they can't. Joshua Sharf says its still a good idea to diversify, but not along these lines.
Gautam Ghosh on Management Crossing the Chasm managing
A+: Gautam Ghosh provides good advice in how to adapt from managing just one's own performance to managing the performance of others after being promoted into management.
Entrepreneurial Mind Technology and Small Business business
A+: Jeff Cornwall argues that the systematic approach to opportunity recognition is the most important "technology" available to entrepreneurs, and that knowing what opportunities to pursue and which to let go is the most powerful tool we can offer to any entrepreneur.
Political Calculations Effective Marketing marketing
My mailbox provided a good example of the right way to market a local Realtor's services - if only all my junk mail was as good!
Blog Business World Money Saving Office Furniture and Equipment business
Wayne Hurlburt finds that acquiring used office furniture can pay dividends by keeping overhead expenses low.
voluntaryXchange Libtertarian Daydream Coming True? taxes
What if you could pay taxes to the state of your choice, instead of the state in which you reside? David Tufte comments on a proposed law now being debated in the Senate that would permit neighbors in Hawaii to be citizens of different states.
Lip-sticking Jane Talks Strategy business
Strategy is such a vital part of any business plan, yet Yvonne Divita notes that far too many of us overlook the need to bring in outside help to develop a successful business strategy.
Internet Stock Blog Don't Short Junk - Implications of News Corp's Purchase of Intermix investing
David Jackson examines the implications of News Corp's purchase of Intermix Media, despite the fact that Intermix just settled a suit with Elliot Spitzer and still has businesses of questionable value.
Mover Mike What is Blogs: Small Business business
Having been rejected from being listed in the Blogs: Small Business directory, Mover Mike makes the case for including his business, then challenges the Blogs: Small Business administrators to demonstrate how his business would be better if it were included.
Landfair Furniture The Other Side of Obesity-- A Follow-Up business
It’s been said that there are markets in everything – including providing items we take for granted to the obese. Bev Landfair also showcases Big Fat Blog, a site devoted to fat acceptance.
NetworthIQ Introducing NetworthIQ personal finance
Making it's world debut, Ryan Williams introduces NetworthIQ is the web’s first social personal finance tool, where you can track, share (optionally) and compare your net worth.
interim thoughts… India Stock Markets on a Roll investing
Neelakantan provides the lowdown on Indian stock markets, which closed at their highest levels ever after a three month long bull run.
All Things Financial How to Determine If You're Wealthy personal finance
How do you know if you're wealthy? JLP provides a rule-of-thumb formula to help you find out (soon to be now available as a tool here at Political Calculations!)
Crossroads Dispatches Signature Voices, and Perhaps What I Learned About Branding While Strolling Galleries marketing
China is entering the art market voraciously, as Evelyn Rodriguez' peek at branding confirms on the heels of a recent trip to one of the largest art markets and artist colonies in the U.S.
Worker Bees Blog Is Feminine Leadership a Myth? managing
As one of the organizers of BlogHer, Elisa Camahort has been thinking a lot about whether men and women lead, manage, communicate, etc. differently, and finds she differs from the opinions of one of her co-organizers.
Photon Courier The Smart-Talk Trap managing
David Foster looks at how organizations tend to encourage a verbal style that is negative, overly complex and ultimately destructive.
Skeptical Optimist Deficits for Dummies economics
A+: In the debate over deficits and debt, Steve Conover finds that economic growth is getting short shrift and provides a primer for those interested in why growth is so important to the debate.
WILLisms.com Trivia Tidbit of the Day: Part 116 -- Tax Revenues taxes
A+: A lower tax rate just produced the largest increase in tax revenue in U.S. history? Will Franklin charts the data.
Catallarchy The Competition Fallacy economics
David Masten of Catallarchy makes the argument that competition is a property not just of free market societies, but rather of all societies, with political structure determining how it manifests itself.
Canadian Capitalist Privatize the LCBO taxes
Canadian Capitalist Arbee believes that the government of Ontario should not be operating a wholesale and retail alcohol business when it has better things to do that are in the public interest.
ROFASix The "Gray Men" in Europe general
NOTR recent travels reveal that Europe isn't the vibrant place it used to be, which he finds to be the result of the continent's encroaching socialism.
Ripples: post-corporate adventures Post-corporate Income - How high do you set the bar? general
A+: David St. Lawrence offers his thoughts on life after leaving the corporate mothership, when you're offered the chance to re-examine your priorties.
FunnyBusiness Tattoo Lady general
Many corporations have policies that forbid tattoos and other "body modification," but Elana Centor wonders how realistic this policy is when 35% of 16-35 year olds have tattoos.
The Big Picture Why Are Movie Theatre Revenues Declining? business
Barry Ritholtz finds five factors that are hurting the movie-industry's revenue from the big screen, and touches off a very robust discussion in the post's comments.
Small Business Trends Illegal Immigrants Are a Lucrative Customer Opportunity business
Recent news reports say that businesses are now targeting illegal immigrants as a lucrative market opportunity. When Anita Campbell posed the question, "Should businesses sell to illegal immigrants?" it got a lot of varied and interesting opinions.
EGO Blogging and Advertising marketing
Martin Lindeskog comments on the benefits and potential hazards of having ads on your blog, including a look at future ad platforms, blog portals and payment transactions.
BusinessPundit When Customer Rewards Programs Don't Pay marketing
Rob looks at research that shows customer reward programs don't always pay, and presents a discussion in the comments section on how good employees can eliminate the need for the reward programs.
MobHappy PR Solutions marketing
Russell Buckley follows up his previous week's entry with some specific guidance for bloggers on getting what they want from the PR industry.
Gongol.com Industrial Production economics
Brian Gongol reveals the decline in industrial production in the United States isn't a new phenomenon. A brief look at the data proves the shift to a service economy has been consistently underway since the 1930s.
Econbrowser How many people should be working in America? economics
A+:Quite a few commentators have suggested that the labor force participation rate is a much better indicator of the health of the U.S. labor market than is the unemployment rate. Economist James Hamilton feels that quite a few commentators have this wrong.
Ashish's Niti Bleeding hearts and unintended consequences general
Is there anything else that can be done to screw the people in the third-world countries? Ashish Hanwadikar wonders if it's possible?

Next Week's Carnival

Next week's Carnival of the Capitalists will be hosted by Michael Cage of the Local Small Business Marketing & Advertising Blog. Bloggers who would like to contribute to next week's CotC may use the CotC Submission Form to submit their entries (preferred), or may alternatively submit them to cotcmail -at- gmail -dot- com.

About Political Calculations

Now, as the host of this week's CotC, I get one main reward - the opportunity to shamelessly plug Political Calculations(TM)! Here, it's not enough to simply comment upon current events. Oh no. We build simple, easy-to-use calculators to do math related those current events too! (Yes, it's almost as if we're proud of it!) The tools built and found here range the gamut from topics such as election results, investing, personal finance, Social Security, economics and taxes, along with more ordinary posts covering life, stuff and just about everything else.... Just click on the links for typical examples or scroll through the menu for a tour of some of Political Calculations' most popular posts!


My special thanks to Jay Solo of Accidental Verbosity for the opportunity to host the Carnival of the Capitalists for this week, and to all the bloggers who made contributions! Bloggers looking for information on how to implement the sorting table function in their own blogs may find very useful informtion on this function and many others at The Daily Kryogenix.

The latest edition of the Carnival of Personal Finance is now available! If you're a fan of the Carnival of the Capitalists, you might find a lot to like about this new Carnival!

Update (July 25, 2005): Extraordinarily heavy traffic may impact some of the functionality of the site - if you encounter difficulty with the tools on the site, please check back later.


22 July 2005

Regular readers know that Political Calculations has long observed the shortcomings of the collective leadership of Washington state (in general) and King County (in particular). And that's for a reason. What makes these particular governments more interesting than, oh say, that of the City of Chicago, are their leaders unique combination of support for radical left-wing ideology *and* corrupt Democratic party machine politics. While Chicago has had more than its fair share of corrupt politics in its history, its leaders have always stood by core American values and sensibilities. In Washington state however, things are different, as there is little structural impediment from checks and balances within nearly every level of government to restrain its leaders' worst impulses, and little outside government as well.

King County Executive Ron Sims Nowhere does this difference stand out more clearly than in the workings of the government of King County, where a culture of fear has fully taken reign under County Executive Ron Sims (picture on the right), where recent examples may be found at Sound Politics. We could go on and rant about the latest outrages, but Political Calculations is always more interested in solving problems. In this case, the question that we find compelling is "how would responsible leaders go about fixing the self-inflicted problems of King County?" And perhaps more the the point: "How would a responsible leader repair the culture of fear that has taken root in King County's government?"

To begin answering that question, it's best to first recognize the features that characterize the environment in which a culture of fear may develop in an organization. The world of business provides such an example in the recent scandal at USA Today, where reporter Jack Kelley was able to "fabricate and plagiarize stories for more than a decade."

More than anything else, the cultural environment of the newsroom at USA Today allowed the misconduct to occur, according to a panel of independent editors. Tim Porter outlines the environmental culture of fear that allowed the scandal to grow:

  • Lax editing: Lack of standards, or unwillingness to enforce them.
  • Newsroom leadership: Focused on process not product; looking inward, not outward.
  • Staff communications: Competition instead of collaboration; department silos worthy of the FBI and CIA.
  • Star system: Work only with the "easy" people; an inability, or unwillingness, to develop staff.
  • Climate of fear: Destructive, defensive culture bent on perfection not performance or risk.
  • Anonymous sources: Playing by their rules, not ours.

While specific to USA Today and the business of journalism, it would not be hard, at all, to find equivalents to these environmental features of a culture of fear in today's King County government.

So, now knowing what defines a culture of fear in an organization, how would a responsible leader fix the problem? Kathleen Ryan and Daniel Oestreich have researched how to rebuild trust in organizations whose functioning has been impaired by fear, publishing their work in Driving Fear Out of the Workplace. They find that the road back to an culture of high trust is built on the following foundations:

  • Acknowledging the presence of fear.
  • Paying attention to interpersonal conduct.
  • Valuing criticism and rewarding the messenger.
  • Reducing ambiguity in rules and relationships.
  • Discussing the previously undiscussable.
  • Collaborating on decisions.
  • Challenging "Worst Case" thinking.

Of course, all it will take to begin repairing the damage wrought by King County's culture of fear is new, more responsible leadership. That will be hard, as the old leadership does not yet realize that its time has passed, and it will fight being forced to step aside. Worse, the old leadership's base of support, which includes the local media, does not recognize its obsolescence either. And so, the hard work that it will take to heal the wounds of fear must await the hard work to put new leaders in place. For the people of King County, the sooner, the better.

21 July 2005

Did you ever wonder what your boss is really saying about you in your employee evaluation? Political Calculations(TM) provides the following guide to understanding your employee evaluation by deciphering your boss' code....

A keen analyst: Thoroughly confused.

Accepts new job assignments willingly: Never finishes a job.

Active socially: Drinks heavily.

Alert to company developments: An office gossip.

Approaches difficult problems with logic: Finds someone else to do the job.

Average: Not too bright.

Bridge builder: Likes to compromise.

Charismatic: No interest in any opinion but his own.

Competent: Is still able to get work done if supervisor helps.

Conscientious and careful: Scared.

Consults with co-workers often: Indecisive, confused, and clueless.

Consults with supervisor often: Very annoying.

Delegates responsibility effectively: Passes the buck well.

Demonstrates qualities of leadership: Has a loud voice.

Displays excellent intuitive judgement: Knows when to disappear.

Displays great dexterity and agility: Dodges and evades superiors well.

Enjoys job: Needs more to do.

Excels in sustaining concentration but avoids confrontations: Ignores everyone.

Excels in the effective application of skills: Makes a good cup of coffee.

Exceptionally well qualified: Has committed no major blunders to date.

Expresses self well: Can string two sentences together.

Gets along extremely well with superiors and subordinates alike: A coward.

Happy: Paid too much.

Hard worker: Usually does it the hard way.

Identifies major management problems: Complains a lot.

Indifferent to instruction: Knows more than superiors.

Internationally known: Likes to go to conferences and trade shows in Las Vegas.

Is well informed: Knows all office gossip and where all the skeletons are kept.

Inspires the cooperation of others: Gets everyone else to do the work.

Is unusually loyal: Wanted by no-one else.

Judgement is usually sound: Lucky.

Keen sense of humor: Knows lots of dirty jokes.

Keeps informed on business issues: Subscribes to Playboy and National Enquirer.

Listens well: Has no ideas of his own.

Maintains a high degree of participation: Comes to work on time.

Maintains professional attitude: A snob.

Meticulous in attention to detail: A nitpicker.

Mover and shaker: Favors steamroller tactics without regard for other opinions.

Not a desk person: Did not go to college.

Of great value to the organization: Turns in work on time.

Use all available resources: Takes office supplies home for personal use.

Quick thinking: Offers plausible excuses for errors.

Requires work-value attitudinal readjustment: Lazy and hard-headed.

Should go far: Please.

Slightly below average: Stupid.

Spends extra hours on the job: Miserable home life.

Stern disciplinarian: A real jerk.

Straightforward: Blunt and insensitive.

Strong adherence to principles: Stubborn.

Tactful in dealing with superiors: Knows when to keep mouth shut.

Takes advantage of every opportunity to progress: Buys drinks for superiors.

Takes pride in work: Conceited.

Unlimited potential: Will stick with us until retirement.

Uses resources well: Delegates everything.

Uses time effectively: Clock watcher.

Very creative: Finds 22 reasons to do anything except original work.

Visionary: Cannot handle paperwork or any project that lasts less than a week.

Well organized: Does too much busywork.

Will go far: Relative of management.

Willing to take calculated risks: Doesn't mind spending someone else's money.

Zealous attitude: Opinionated.

Treacherous sluggard who makes up for it with a quick tongue and a quicker blade: Much like Captain Feathersword....

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20 July 2005

Broken Tracks The Heritage Foundation recently ran a series of horror stories detailing the poor performance of the U.S.' highly subsidized passenger rail service Amtrak. While the horror stories provide ample anecdotal evidence of the railroad's monumentally poor service, the question remains - can passenger rail work in the U.S.?

The answer: Not without a massive infusion of new subsidies, in addition to continuing the present level of taxpayer-provided money. At present, nearly 40% of Amtrak's operating expenses are covered by the largess of the U.S. taxpayer. Even with this level of support, Amtrak can expect to lose more than $700 million this year, as none of Amtrak's routes are profitable. (In 2004, the operating losses for all Amtrak routes added up to more than $695 million, with an average loss per passenger of $245.)

New subsidies would be required to address Amtrak's deferred maintenance costs, which presently total more than $10 billion dollars (Reference: Wall Street Journal, subscription required.) Beyond the deferred maintenance expenses however, substantial increases in taxpayer subsidies would be required to address Amtrak's capital infrastructure.

How Else Is Amtrak Not Working?

When you consider the price tag for keeping Amtrak afloat, it's hard to support continuing its government subsidy. It becomes even harder when you realize how few people would actually be affected by discontinuing Amtrak's most unprofitable rail routes and redirecting its resources toward achieving sustainable profitability where it could potentially make money. Chris Suellentrop of Slate provides numbers for comparison:

Amtrak carries about 64,000 passengers a day. That compares to 1.8 million passengers daily for domestic airlines and 984,000 passengers daily for intercity buses. That's right, more than 15 times as many Americans use intercity buses than use Amtrak. And those are just the mass-transit options for intercity travel. More people drive between cities than take a plane.

The subsidy from the federal government has another negative effect upon the passenger rail service. It insulates Amtrak from market-driven realities. For example, Amtrak's management structure is highly bloated. Chris Suellentrop notes that the railroad has 80 vice presidents, although it plans to reduce that number to 25. In addition, Amtrak's labor costs (wages, salaries and benefits) are far in excess of the vast majority of other transportation industry workers receive while facing real world competitive pressures.

Should U.S. Taxpayers Keep Supporting Amtrak?

There comes a time that when a system breaks down, it must be changed or else it will fail entirely. The time for change for Amtrak will come on September 30, when the President's proposed budget for 2006 would discontinue Amtrak's taxpayer subsidy. Far from being a death knell for the railroad, the President's proposed budget marks a wake-up call for Amtrak's management, workers and passengers, who must brace themselves for the changes that will need to be made to make passenger rail service viable in the long term. For the U.S. Congress and the President, no subsidy should be granted to Amtrak without an enforceable guarantee that the railroad will finally undertake the radical restructuring that it has avoided for so long.


19 July 2005

It's a trend that's been incubating for some time, but the move by large international companies to create new products using non-home country based research and development (R&D) professionals is now becoming more visible. The July 25, 2005 issue of Fortune has an interesting article on how these companies are looking to develop new products and services by utilizing the non-home-country-based intellectual capital at their disposal. The article focuses on five companies: U.S.-based General Electric (GE) and Motorola and Intel, Swiss pharmaceutical giant Novartis, and Dutch conglomerate Philips, examining how each are using foreign-based talent to increase the R&D productivity of their corporations.

Here's a quick rundown of the examples of the kind of work that each company profiled in the article are doing by using their overseas divisions to develop new products and services:

How Global Companies Use Foreign R&D
Company Where and What They're Doing
General Electric
  • Operates R&D centers in Bangalore, Bangladesh, Shanghai, China and Munich, Germany.
  • Developing wind energy generating technology.
  • 28% of the companies 7,000 R&D employees work in more than 20 countries.
  • Developing the Centrino family of wireless technology.
  • Shanghai, China.
  • Provides funding and technology transfer to the Shanghai Institute of Materia Medica to investigate traditional Asian remedies for potential development into new medicines.
  • Worldwide
  • Tapping customers for new product ideas and conducting both home and field research into how products may be improved.

Forrester Research estimates that only five percent of the Fortune Global 500 companies have taken their innovation development global at present, and predicts that the number of companies doing so will only increase. Forrester Research CEO George Colony explains why in the Fortune article:

"There’s simply not enough qualified talent at home for global companies to keep pace."

The reasons for this lack of available home-grown talent will be explored on another day....


18 July 2005

This week's CotC is being hosted by Andrew Roth of the Club for Growth, which is not just a Political Action Committee, but a blog too (actually, two blogs if you count their Social Security Choice effort!) So, without further delay, here are the best posts of the week!

  • Is there any such thing as a temporary tax? Shamalama of Common Folk Using Common Sense finds that Pennsylvania's "temporary" tax on alcohol to help pay for recovery efforts following the 1936 Johnstown flood is still being collected nearly 70 years later!
  • Warren Meyer asks "Why Aren't We Seeing Long Gas Lines?" in the best economics post of the week!
  • What do you think of Jim Cramer? If you've heard his radio show, or seen him on television, you know he's not shy about telling all of us what he thinks about the stocks he's *really* excited about. But, what's his track record? Free Money Finance has the scoop!
  • The best business post of the week is delivered by Mover Mike, entitled "Deflation Discounting! In one post, Mover Mike picks up on a post by Furniture Today's Retail Ideas blogger Loreen Epp on how today's economic environment of inflation combined with deflation and market competition is affecting how furniture is priced, and comments on how it should be priced. Great business environment insight!

Next week, Political Calculations(TM) will be hosting the Carnival of the Capitalists! For those who would like to submit posts for the next Carnival, please use the CotC's official submission form (at Gongol.com).

17 July 2005

Going through my mail the other day, I came across a newsletter-style advertisement from a Realtor who prospects my neighborhood for potential clients. I have to admit that I'm impressed by the display of marketing savvy - the Realtor in question is truly doing some very effective marketing for his business. The newsletter is designed to grab the attention and good will of its recipients, and does it well. Here's a short list of what the Realtor is doing right:

  • Uses humorous anecdotes from his own experiences to build a favorable impression in the cover letter.
  • Lists all recent sale prices of homes sold for the Realtor's targeted market neighborhoods. The information is organized by neighborhood, address, house features (number of bedrooms, bathrooms, garages, square footage) and is listed by price from highest to lowest.
  • Provides photos and information for all houses currently listed by the Realtor.
  • Emphasizes the values that define the relationship the Realtor seeks to achieve with clients. For example, "Our clients always come first," "Our integrity is our trademark," "We take the time to educate our clients and make sure all their questions are answered," et cetera.
  • Features a contest where the winner who's house is featured in a photo inset wins a gift certificate to a restaurant when they contact the Realtor.
  • Provides contact numbers, web site addresses and mini-ads outlining the services available through the Realtor on each page.
  • Notes the upcoming birthdays and anniversaries of current and former clients.
  • Provides classified ad space for local home improvement, decorating, and maintenance (cleaning, repair, etc.) businesses.

Basically, everything about the Realtor's brochure is designed to build a positive connection with potential clients before even meeting them. While I don't know if he's the top selling agent for my neck of the woods, it wouldn't surpise me if he's near the top. If he isn't there, I believe he soon will be - anybody good enough at putting an effective marketing package together for themselves can certainly do so for selling a house, and will sell a lot of them.


15 July 2005

What does it take to start a business? To be an entrepreneur? To succeed at being your own boss? The following text was excerpted from a presentation put together by Wil Shipley, and is available in its entirety as a 172KB PDF document. (HT: Zimran of winterspeak.com)

Part Trois: Starting Your Own Business

What are you, crazy?

Well, if you're getting set to start your own business, forgoing any "regular" job you have or might otherwise have, you might be! Wil Shipley asks the questions that define the risks willing to be undertaken by an entrepreneur (at least, in his vision):

Starting your own company

  • Do you hate being told what to do?
  • Do you like to lead?
  • Do you like eating rice and beans?
  • Do you mind living in a box, down by the river?
  • You might be an entrepreneur!

But, isn't setting up a business hard? Wil provides insights from his experience:

“Forming a Company is Easy!”

- Me, again

Step 1: Create an LLC

“Limited Liability Company”

  • Very simple taxes for LLCs
  • Incorporating keeps you from being sued and losing everything
  • You will get sued
  • Incorporating keeps your books clean
  • You will get audited by the state
  • File forms on-line, save a ton of money
  • You can form an LLC for about $150

Step 2: Open a business bank account

Do not use your personal account

  • Some banks focus on businesses
  • You really want to use one of these banks
  • Ask to speak to a business banker
  • You’re going to start a relationship with this person
  • This person might end up being your best asset
  • Good business bankers say:
    • “Your account is overdrawn; should I just cover it?”
    • “Want some money?”
    • “Need credit cards?”
    • “Want those fees reversed?”

Step 3: Find accountants

  • Accounts don’t keep your books
    • You’re still going to have to track sales and expenditures yourself, every day
    • Use QuickBooks
      • Every penny you earn or spend has to be categorized
      • The beauty is you get to write off some expenses when tax-time comes
        • Omni wrote off giant TVs, pool tables, and pinball machines
  • Accountants do:
    • Give you advice on husbanding your money
    • File your taxes
    • Tell you what tax agencies you need to pay, and how to pay them

Taxes Suck

  • State of Washington
    • WA B&O - Business and Occupation
  • City of Seattle
    • Seattle Business License
    • Seattle Occupation
  • King County
    • Monorail
    • King County Occupation
  • If you have employees
    • Federal
      • FUTA - Federal Unemployment
      • FICA - Federal Income Tax
      • Medicare
      • Medicaid
    • State
      • SUIWA - State Unemployment
      • WA L&I - Labor and Industries (disability)

Step 4: Retain some lawyers

Again: you will be sued

  • Talk to friends and associates, get a recommendation
  • Don’t have them form the company for you; that’s a waste of $1000
  • Don’t pay them a lot up-front
    • If they want a $5,000 “retainer,” then walk
  • Find someone young and hungry
    • Less than $100 / hour scares me
    • More than $300 / hour scares me, as well
  • I like finding young people at big firms
    • Big firms are famous
    • When you send nastigrams, they stick

That concludes what Wil feels is most important in establishing a new business. Although the bulk of the presentation revolves around Wil's programming business, the whole presentation is well worth reading, offering great insights on employee compensation, why you need lawyers and how to get a job working for "The Man," among others!


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