The First Rule of Merging with Chrysler Is Don’t

GM is putting their merger plans with Chrysler on hold. Looks like someone finally spoke to Daimler-Benz.

Changes in Congress – Very Small Changes

“Throw the bums out” is a popular political sentiment. But how often does it actually happen? To find out, I crunched some numbers from Roll Call‘s post-election casualty list.

The results were not encouraging.

There will be 64 new members of Congress next year, along with 12 new Senators. That’s a total turnover rate of 14.7% in the House and 12% in the Senate.

That means average tenure is a hair under 14 years (7 terms) in the House, and about 16.67 years (2.78 terms) in the Senate.

But that’s total turnover. Some members left to run for other offices, like Biden and Obama. More than half of all turnover was caused by either retirement (31) or death (8).

A bum can only be thrown out if he actively seeks re-election. That happened 20 times in the House — thrice in primaries and 17 times in general elections. Three Senators were defeated this year. Removing open seats from the equation, which have no incumbent running, we see that the bums hardly ever get thrown out.

In short: if you’re an incumbent Congressman running for re-election, your chance of success is 94.9% (370 out of 390). If you’re in the Senate, your chance of winning another term is 90.0% (27/30).

Talk about job security. Heck, Sen. Ted Stevens was convicted on 7 felony counts and still won (UPDATE: He lost after a recount. Well done, Alaska!). Rep. William Jefferson just won his second election after being caught storing $90,000 of bribe money in his freezer.

People do seem to want change. But for some reason, they rarely vote that way.

Obama Predictions

The voters have spoken, and Barack Obama will be the next president. Watching the partisan reactions on both sides has been both amusing and disheartening. It seems as though most people see Obama as either the new messiah, or else the anti-christ.

Not a lot of middle ground out there.

Here at Inertia Wins, we proudly take that middle ground. We believe in skepticism without cynicism; in disagreement without contempt; in conviction without Certainty; and in politics without romance.

From that perspective, here are some predictions for how the Obama presidency will turn out:

Obama will be a two-term president, though he will be significantly less popular by the time his presidency comes to a close. Stars that burn so bright tend to fade quickly. It will not help Obama that many of the problems with politics-as-usual that he speaks out against are systemic. Even the leader of the free world is powerless against the political process.

One-party rule will not be good for Democrats. As happened with Republicans during the Bush era, unified government will lead to sclerosis, hubris, and an increase in corruption. Obama will not help; he will not risk angering his party by vetoing bad legislation. Democrats will lose their Congressional majority, probably in 2012. Voters seem to prefer divided government, which is why we’ve had it about two thirds of the time over the last century.

We will not see a full-fledged nationalization of health care. The government currently spends about 54% of all health care dollars; I expect that figure to rise, but not above about 67%.

Obama will withdraw most soldiers from Iraq sometime in 2011. Some small peacekeeping forces will remain there more or less permanently, as happened with Korea.

Obama will ramp up our presence in Afghanistan, and it will not go well. This will contribute to his declining popularity. The U.S. military can fight and win almost any battle, but even they cannot build a nation. That kind of change can only come from within. Like Clinton and both Bushes, Obama will not learn that lesson.

Taxes and spending will both go up, but not by catastrophic levels. Overall public sector growth will be slightly less than under Bush. That means Obama’s final budget will probably be the nation’s first to to exceed $5 trillion. When divided government returns, Obama will find his veto pen and strike down bad GOP legislation, no matter how similar it is to Democratic legislation. Government growth in Obama’s second term will be sharply lower than under his first term.

Agree? Disagree? Predictions of your own? Comments and emails are always welcome.

America to Lurch Left?

The Weekly Standard‘s Fred Barnes has a scare story in today’s Wall Street Journal. He warns of a lurch to the left if Barack Obama wins today’s election. Barnes, a partisan Republican, wrote a book about President Bush in 2006 titled Rebel-in-Chief. He is also a McCain supporter.

Suppose Obama wins, and this lurch to the left happens. Why is Barnes opposed to it? A leftward turn would simply be a continuation of large swaths of Bush administration policy — which Barnes endorses.

True, most people think of President Bush as a conservative, not a liberal. And yes, President Bush is socially conservative and hawkish on foreign policy.

His liberal credentials are still impressive.

For example: President Bush has enacted the largest new entitlement program in forty years; made the tax code more progressive; skyrocketed federal spending on education; overseen 51,000 new regulations to rein in unfettered free markets; transferred billions of dollars from taxpayers to alternative energy researchers; the list goes on.

In short, the federal government, both in spending and in doing, has grown faster under Bush than even Lyndon Johnson could muster. McCain’s limited government credentials are on roughly equal footing.

Barnes and Obama do see things differently on foreign policy and on some social issues. But when it comes to core principles, there is little difference. Barnes, Bush, McCain, and Obama all favor a large, active federal government. Barnes’ distaste for Obama — and support for McCain — is more likely motivated by partisanship than actual philosophical disagreement.

The truth is, no matter who wins, people who favor limited government will probably lose.

Stock Market Selloff?

Following the economy, especially lately, can be confusing. Reporters are not helping matters.

A CNN.com article, for example, blames yesterday’s stock market plunge on a selloff.

But there was no selloff; every seller requires a buyer.

Just as more people were selling, so were more people buying. Describing yesterday’s market as a selloff only tells half the story.

The same article says that today’s 600-point gain happened when “investors scooped up a variety of shares.” But those buyers cannot buy unless somebody sells to them. Again, the article only tells half the story. And here is one case where two halves do not a whole make.

So what really happened yesterday and today? High trading volume. That may not sound very exciting. But at least it’s accurate.

Flaws and all, the article can still teach us an important lesson, if only we let it: sometimes financial reporters don’t know what they’re talking about.

Don’t believe everything you read, in other words.

Something to keep in mind while trying to make sense of these troubled times.

U.S.-Colombia Free Trade Agreement Stirs in Its Sleep

The stalled U.S.-Colombia free trade agreement has become a campaign issue in Florida’s 25th District, which is home to a substantial Colombian-American population. Rep. Mario Diaz-Balart is using his support of the agreement as a club with which to beat his challenger.

That challenger, Joe Garcia, doth protest. He says he is “for fair trade and getting it done in a way that protects American jobs and American commerce.” That’s another way of saying that he thinks consumers are paying too little for goods and services.

Trade cannot be fair unless it is free. For more on how the U.S.-Colombia free trade agreement promotes both fairness and freedom, see this study that Fran Smith and I co-authored in July.

Why I’m Not Voting This Year

I used to vote. But I stopped after the 2002 election. I catch a lot of flak for it, too. Friends, family, and co-workers have all taken me to task over the years.

But I have my reasons. Two of them, in fact. The first is simple: I don’t care for either candidate.

The second reason is much more important. Unfortunately, it also rubs a lot of people the wrong way: my vote will not change the outcome of the election. This is true even though I live in a swing state. For all intents and purposes, my vote doesn’t count.

Let’s use Virginia, where I live, as an example. There are currently 5,021,993 registered voters here. Let’s bias the assumptions to make my vote as decisive as possible. Suppose 40% turnout, which is lower than expected. Also suppose that Obama and McCain are polling exactly 50-50 on election day. The election could easily go either way. It’s a coin toss. Would my vote affect the outcome?

There’s a chance it would. And I just calculated it using a formula developed by political scientists Geoffrey Brennan and Loren Lomasky (hat tip to Bryan Caplan‘s Public Finance class). How big is that chance?

(drumroll, please…)

It’s so small, my graphing calculator can’t even display it properly. It gives me a syntax error. That means we’re talking a number smaller than 10 to the -100 power. Basically zero, in other words. Even under the most favorable circumstances.

You can see why I don’t think it matters if I vote.

Unfortunately, more than one person I’ve talked to has assumed that because I don’t vote, then I must think that anyone who does is a fool. That simply isn’t true. A lot of people value participating in democracy highly enough to outweigh the low impact of voting. That is a value judgment, and not to be looked down upon; different people have different values.

All I ask is that you voters out there return the favor and respect the decisions of those of us who don’t vote. We have our reasons, too.

In which Blogging Resumes

Not that the blogosphere has noticed, but this blog has fallen silent these last few months. Grad school has a way of occupying time that could be spent blogging. But I’ll chime in as my studies permit.

More Trade Means More Peace

If goods do not cross borders, then soldiers will.

It’s an old saying. Maybe even a cliche. But there is some truth to it. What wonderful news, then, that India and Pakistan have re-opened a trade route through the Kashmir region.

Soldiers have been crossing that border for 60 years. Replacing those soldiers with spices, apples, and other, ahem, non-fatal goods will have two positive effects. First, those goods will become cheaper and more abundant in India and Pakistan.

Second, the new trade route will help to strengthen the blossoming but still fragile peace; killing the customer is bad for business. Indians and Pakistani in and around Kashmir are developing a financial incentive to get along.

Expanding international trade is not just good economics. It is good foreign policy. Congress and our next president, whoever he is, would do well to heed that lesson.

Pesimistic Bias

Last quarter’s economic growth was revised upward to 3.3%. This is fifty percent faster than the hundred-year moving average of 2.2%. What wonderful news.

Or is it? “[T]he outlook for the remainder of the year remained grim,” warns the second sentence of a New York Times article.

Bad reporting is one reason why polling data shows that the public systematically thinks the economy is in worse shape than it actually is. But is it right to blame the Times for simply giving the people what they already want — a cloud to go with their silver lining?

Pessimistic bias is wired into the human brain, it seems. Which makes this writer pessimistic about the state of economic reporting.