Business

Headlines (5/16/2007)

Crackdown on Indian Outsourcing Firms. H1-B visas are supposed to allow foreign nationals to come to the U.S. to work. So why are a few Indian outsourcing firms ending up with 30% of them?

“Is your PC virus-free? Get it infected here!”. Would you believe anyone would click a Google ad inviting them to have their computer infected with a virus. Believe it.

Toyota cutting hybrid costs, claims every car produced will be hybrid by 2020. As has been speculated many times, Toyota confirms that economy of scale can also apply to alternative vehicles.

Gonzales: Deputy Was Pointman on Firings.

Headlines (5/14/2007)

Starting something new today. The news goes by faster than I can comment. So, to help apathy.net readers keep up, here are the stories I'm reading today:

Microsoft takes on the free world. Fortune magazine digs into Microsoft's plans to seek patent royalties from users of FOSS software like linux.

Iran warns U.S. over strike threat. Following Dick Cheney's remarks that the U.S. will stop Iran from building Nuclear weapons, Iran's president, Ahmadinejad, threatens retaliation for any American strikes and asks whether the U.S. has overstayed its welcome in the region.

Size matters, so does shape under new postal rates. New postal rates begin today in the U.S. The rates, available at the U.S. Post Office bring some confusion to mailing. No longer will first class mail only be rejected for weight, but also size. While normal sized first-class mail is going up a meager 2 cents, large letters go to 80 cents. A large letter is anything that exceeds any one of these dimensions: 11 1/2" long, 6 1/8" high, 1/4" thick.

China Plans Online Gaming Curfew Of Sorts

Fearing that children are spending too much time playing online games, the Chinese government has given software vendors in China three months to place curbs on gaming by underage players.

For games that allow players to accumulate points, the games would be required to stop giving players points after three hours of play in a given day.

This policy assumes, of course, that these kids play only one game online.

This does remind me a bit of the policies built into World of Warcraft that encourage players to take a break from the game. In WOW, players who rest get a 100% to experience accumulation proportionate to the time spent not playing. I suspect that Blizzard Entertainment, makers of World of Warcraft, are more concerned about server load than the health of their players, but the policy does achieve the same goal.

One has to wonder if such 'nanny state' kind of policies where the state substitutes its judgment for the judgment of the parents are a good idea. Libertarians would argue that such regulation is unnecessary and would point at Blizzard's initiative as a sign that the market can handle the problem on its own.

Disappearing Bees Threaten Food Supply (UPDATED)

For a couple hundred years, there have been reports of bee keepers finding hives completely empty of bees: Not just no live bees, but no dead bees either. Recently, the rate of this phenomenon occurring has markedly increased.

The impact of these disappearances, if trends continue, could threaten our food supply as bees play an important role in agriculture. Farmers hire bee keepers to pollinate their crops. A scarcity of bees will drive up the price of pollination.

Many worry that what's shaping up to be a honeybee catastrophe will disrupt the food supply. While staple crops like wheat and corn are pollinated by wind, some 90 cultivated flowering crops – from almonds and apples to cranberries and watermelons – rely heavily on honeybees trucked in for pollinization. Honeybees pollinate every third bite of food ingested by Americans, says a Cornell study. Bees help generate some $14 billion in produce.

The rise in disappearances is so rapid that scientists are having a difficult time pinning down a cause. In the past year, in 24 states, keepers have reported loses between 50 and 90 percent.

Editors In Denial?

A survey conducted by Zogby International found that a whopping 85% of newspaper editors see a bright future ahead for their paper.

That kind of statistic flies in the face of conventional wisdom built up from watching rampant layoffs and loses through-out the industry.

Even more surprising is that 79% welcome the competition from new media in their market.

Perhaps the issue here is local news. Most newspapers I know get their international and national news through syndicates like Reuters and AP. Newspapers, and to a lesser extent local TV news, hold a monopoly on local news. I live in an area with nearly 1 million local residents and I couldn't give you the URL of a single online-only news source for this area.

Maybe editors aren't in denial. Maybe new media can't effectively compete in the local news arena.

On the other hand, like most media, the readers of news papers are the product that newspapers sell to advertisers. Classified ads are an important revenue stream for these papers as well. Can the papers maintain enough circulation to justify their rates? That's the ultimate question.

Toward 100 Miles Per Gallon

Can you make, and sell, a car that goes one hundred miles on a gallon of gas? That's a question we should expect to hear soon from the X-Prize Foundation (the people responsible for the civilian space race.)

They are expected to announce a $25 million prize for creating a car that can go 100 MPG and, here's the kicker, selling a to-be-determined number of units.

One of the most promising recent developments that stands a real chance of competing for this prize is the concept of a Hydraulic Hybrid. We've heard of "hybrid" cars before and many people have fears regarding the safety and expense of batteries, but these hybrids don't use batteries.

Battery hybrids have electric motors that run off batteries that are charged by braking, a supplemental internal combustion (IC) engine (i.e., gas engine), and sometimes an overnight charge (i.e, a "pluggable" hybrid.)

Hydraulic Hybrids have a hydraulic motor (basically a system of pumps that use pressurized fluid for power). An IC engine powers the pumps to maintain vehicle speed, but most of the power used in acceleration comes for stored hydraulic energy captured during breaking.

Bush Moves To Circumvent Regulatory Process

Last week, president Bush signed an Executive Order instructing all federal agencies to pass all their regulations and "guidance documents" through an appointee of the administration for approval.

This move coincides with the president re-nomination of Susan E Dudley to the Office of Information and Regulatory Affairs at the Office of Management and Budget. Ms Dudley has argued in the past that government intervention is not necessary "in the absence of a specific market failure."

The Executive Order provides instruction to agencies along the same lines as Ms Dudley's ideology. Essentially, what she is arguing for is no regulations unless the private sector has failed to address the issue.

This Executive Order runs contrary to the legislative process as Congress often enacts legislation calling for regulation which leaves the specific requirements and implementation up to the bureaucrats that run the agency. It seems likely that Congress will be forced to write more specific details into legislation when regulation is desired. In some ways, that will make the legislation harder to pass as people become concerned about the slow pace at which rules written into law could be adjusted to address market issues.

Minimum Wage Increase Blocked In Senate

In an effort to demonstrate lack of support for the House bill in its current state, Senate majority leader, Harry Reid, called for a vote to end debate on the bill. The vote failed 54-43; 60 votes was required to end debate. Such "cloture" votes are required in the Senate.

The issue is one of tax break incentives desired by president Bush to offset the harm Republicans feel a minimum wage increase will cause to small businesses. Senate Republicans used their ability to block cloture to stop the bill's consideration.

The stickiest issue here, as I understand it, is that any tax related measure must, constitutionally, begin in the house. It is not sufficient for the Senate to pass an altered version and bring the two bills together in conference. Note that the story linked below says otherwise.

House Votes To End Oil Subsidies, Tax Breaks

Yesterday, the House of Representatives, under Speaker Nancy Pelosi, completed its 100 Hours agenda with the passage of a bill to end tax breaks and subsidies given to the oil industry.

The bill reclaims $14 billion in lost revenue over the next 5 years, if it is ultimately signed into law. The bill passed on a vote of 264 to 163 with, again, many Republicans voting with the Democrats. That vote, however, is short of a veto-proof majority. The Bush Administration has voiced displeasure with the measure but has not threatened to veto it.

Part of the bill will require the administration to renegotiate leases for drilling rights in the Gulf of Mexico. When Congress authorized the leases during the 90s, they directed that royalties be paid if the price of oil went over $34 a barrel. The Clinton Administration failed to put such a requirement into the leases. When the price of oil crossed that threshold during the Bush Administration, they decided they were powerless to fix the problem. This bill effectively voids the leases.

The open question is whether the oil-friendly administration will veto the bill, ignore it with a signing statement, or actually follow it.

House Passes Minimum Wage Hike With Veto-Proof Majority

Just hours before president Bush's address to the nation on Iraq, the House of Representatives delivered on another of Nancy Pelosi's 100 Hours initiatives. The bill easily passed on veto-proof 315-116 vote that included 82 republicans voting along with the democratic majority.

The minimum wage, under this bill, would go from $5.15 to $7.25 over the next two years. If the bill becomes law, the minimum wage hike will go as follows:

110th Congress First Hundred Hours Summary

When the 110th Congress begins its session today, incoming speaker, Nancy Pelosi, has an agenda for the first 100 hours of the session. Over the next two weeks, a broad range of issues of importance to the majority of Americans will be acted upon. Below is a summary, with links to more in-depth analysis from earlier apathy.net articles.

  • Draining The Swamp - a catch phrase for an agenda to improve congressional ethics. Highlights include: a ban on privately funded travel, loss of floor access to past members who are now lobbyists, 24 hours waiting period on all bills and 3 days for bills containing earmarks or limited tax benefits.
  • Minimum Wage Increase - Congress will seek to raise the minimum wage to $7.25. Analysis shows that this should increase the GDP and help save social security.
  • The 9/11 Commission - Pelosi claims that Congress will implement "all the recommendations" of the 9/11 commission. The truth here is that most things have been implemented except the calls for more direct oversight by Congress. It's no surprise Pelosi wants to implement that.
  • Medicaid Prescription Drug Program - as it stands now, the federal government is prohibited from negotiating with drug companies to get lower prices for drugs available through this program. Congress will seek to lift that restriction. Whether or not such negotiations will secure lower prices than the current system is a matter of much debate.
  • Student Loan Rates - Congress will seek to cut student loan rates in half (from 6.8% to 3.4% for Stafford loans.) The impact of such a change can be far reaching as college education can be a factor in unemployment, entitlement use and likelihood to vote.
  • Big Oil - Congress will seek to reverse one of the biggest blunders of the Clinton Administration by compelling Oil companies to pay mandated royalties on off-shore drilling revenue. The law allowing the drilling required the government to secure royalty agreements for the leases, but Clinton Administration ineptly left that requirement out of the leases. The blunder, if not fixed, will cost tax payers over 10 billion in revenue over the next 5 years.
  • Social Security - The administration's bluster about the insolvency of the Social Security trust fund is a boondoggle to justify their desire to see the money put into the stock market to jack the value of wealthy portfolios. Congress is promising to head off any efforts toward privatization on part of the administration.

100 Hours: Big Oil

One of the hottest issues contained on incoming speaker Nancy Pelosi's 100 Hours platform is the Oil Industry.

The American people are getting squeezed at the gas pump while the oil industry makes headlines for record profits.

During the lame-duck congress, House democrats fired a warning shot across the bow of the oil industry with a narrowly defeated bill that would have closed a legal loophole that is keeping the oil industry from paying a projected $10 billion over the next decade. That bill went down 205-207 in the republican controlled congress.

The same legislation is expected to be introduced as part of the first 100 hours of the 110th Congress later this week where it is expected to pass easily.

The problem actually dates back to the Clinton Administration which negotiated about a thousand leases for oil exploration in the Gulf of Mexico. Oil companies, under the legislation that allows the drilling, are supposed to be paying royalties on revenue from those fields if oil goes over $34 a barrel (which it has been for like four years). The problem is that the Clinton Administration failed to include any such clause in the leases. The proposed legislation seeks to force the renegotiation of those leases to see the clauses put in place. It is estimated that the industry has already avoided paying billions of dollars in royalties due to the legal loophole.

100 Hours: Medicaid Prescription Drug Program

As we wait for the opening of the 110th Congress on January 4th, here is another of Nancy Pelosi's "100 Hours" Proposals: Allow Medicaid to negotiate lower prices with drug companies.

It sounds almost ridiculous, doesn't it. The fact that Medicaid isn't permitted to negotiate prices as part of the plan borders on criminal waste. That said, let's take a closer look.

Shortly after the legislation that created the drug program passed, Senator Frist, the then Majority Leader, asked the Congressional Budget Office to examine what the price effects would be if the section that prohibits the governments direct involvement in the negotiations were removed. The C.B.O. estimated that the effects would be "negligible":

We estimate that striking that provision would have a negligible effect on federal spending because CBO estimates that substantial savings will be obtained by the private plans and that the Secretary would not be able to negotiate prices that further reduce federal spending to a significant degree. Because they will be at substantial financial risk, private plans will have strong incentives to negotiate price discounts, both to control their own costs in providing the drug benefit and to attract enrollees with low premiums and cost-sharing requirements.

100 Hours: Minimum Wage Increase

Another part of Nancy Pelosi's promised first 100 hours of the 110th Congress is a promise to pass an increase in the minimum wage.

As I've previously mentioned on this site, I think this is overdue and perhaps should be indexed so as to avoid this fight in the future; but, in any case, the proposed legislation is likely to call for an increase to $7.25/hour.

I do not wish to rehash arguments put forth in my previous article on the topic (link below), except to point out that without an increase by 2008, anyone working full time at minimum wage will be below the poverty line.

As part of this series on the first 100 hours, I want to touch on another aspect of raising the minimum wage: GDP, Taxes and Social Security.

In states where the state minimum wage is higher than the current $5.15 federal minimum, the GDP per working-age capita is $73,369 compared to $62,671 for states at the minimum. In states with a minimum of $7.00 or higher, the GDP per working-age capita rises to $78,950.

A Peak At The First 100 Hours Of The 110th Congress

Incoming Speaker, Nancy Pelosi, has a legislative agenda for the first 100 hours of democratic rule in the next congress. Many of the proposals sounds straight forward and I will look at each in depth over the coming weeks leading to the start of the 110th Congress. In no particular order, here's her agenda:

  • "We will start by cleaning up Congress, breaking the link between lobbyists and legislation and commit to pay-as-you-go, no new deficit spending.
  • "We will make our nation safer and we will begin by implementing the recommendations of the independent, bipartisan 9/11 Commission.
  • "We will make our economy fairer, and we will begin by raising the minimum wage. We will not pass a pay raise for Congress until there is an increase in the minimum wage.
  • "We will make health care more affordable for all Americans, and we will begin by fixing the Medicare prescription drug program, putting seniors first by negotiating lower drug prices. We will also promote stem cell research to offer real hope to the millions of American families who suffer from devastating diseases.
  • "We will broaden college opportunity, and we will begin by cutting interest rates for student loans in half.
  • "We will energize America by achieving energy independence, and we will begin by rolling back the multi-billion dollar subsidies for Big Oil.
  • "[and,] We will guarantee a dignified retirement, and we will begin by fighting any attempt to privatize Social Security."

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