Eisenhower and Me

In about a month, Barack Obama will be inaugurated as the nation's 44th President. Given that the first nine months of my life took place during the administration of Herbert Hoover, my lifetime has now encompassed 14 of this country's 44 presidents, or nearly one-third of all American Presidents. We're talking Hoover, Franklin Roosevelt, Harry Truman, Dwight Eisenhower, John Kennedy, Lyndon Johnson, Richard Nixon, Gerald Ford, James Carter, Ronald Reagan, George H.M. Bush, William Clinton, George W. Bush and now Obama.

In June 1953 I "commenced" by adult and professional life in the quad before Royce Hall on the Westwood campus of the University of California at Los Angeles, receiving a BA in International Relations. That same week I flew to Washington, D.C. to take the oral examination for the US Foreign Service and I turned 21. By this time Dwight David Eisenhower had been President for five months. He was thus the first President of my now a bit more than 55 years of adult life. Of all the Presidents during this period he probably had more impact on my life than any other.

The first impact was felt that same June just after my oral exam. For a period of over 50 years, politics in America was dominated by two public philosophies: the Democratic Party had Franklin Roosevelt's "New Deal" and the Republican Party had Warren Harding's post World War I slogan a "Return to Normalcy". I was caught in the latter as the first measure of the Eisenhower administration was to reduce the size of the federal government. The Eisenhower "reduction in force" or "RIF" meant that the State Department did not hire any new foreign service officers between 1953 and 1955. After my oral exam I was told by the State Department people that I had been certified "eligible for appointment" but that they weren't hiring. I was told to get my military service out of the way and then let them know when I was available.

I came of age during the Korean War and I was, like all young male Americans, registered for the draft. I had actually been taken to Los Angeles in the summer of 1952 for a pre-induction physical which I passed, but was deferred to continue my college education. In June when I returned from Washington, D.C. I "volunteered" for the draft. Being a Foreign Service Officer did not exempt one from the draft, but had I been appointed in the summer of 1953 I wonder if I could have gotten further deferments. Anyway I was inducted in September 1953. My college classmates who did not volunteer were inducted in October. But at induction I was affected a second time by Eisenhower actions: he had brought to a conclusion the Truman administration mess in Korea with a Truce Agreement signed in August 1953. I was thus joining a "peace-time" Army in the process of imploding, that is, reducing numbers sharply and closing bases.

The third thing President Eisenhower did for me was to refuse to commit American forces to support the French in Indo-China. Despite political pressure from the right after the French loss at Dien Bien Phu in 1954, Eisenhower kept away from major commitment and let that country achieve independence in 1955 as two countries, North and South Viet Nam divided by the 17th parallel. So I went neither to Korea nor to Viet Nam but after a 13 months of largely inactive service I was sent to Germany. By this time, after 10 months in the greater New York metropolitan area, I had met and married Nydia Medina of Brooklyn.

We spent the first year of our married life sharing an apartment with a German couple that spoke no English. The location, however, reflected the fourth thing Eisenhower did that affected me. After World War II Germany had been divided into four zones of occupation. Berlin, the capital, had its own four zones. The Brits had northwest Germany, the French the west central portion and the Americans the south, principally Bavaria. The east stayed with the Russians. When Eisenhower became President, as a successful former Army General, he concluded that having all our troops aligned along the border with the Russians made no strategic sense. His policy change was to have American support forces move into the French zone where they could put distance between them and the combat troops in the front lines. I found myself assigned to the 17th Signal Battalion (allegedly I was a field radio repair specialist, but that's another story) located in Pirmasens, Pfalz. We were a few miles north of the French border between Karlsruhe on the Rhein and Saarbrucken. We were housed in a Wehrmacht five story masonry building. We got virtually nothing of the modern buildings built in the American zone.

The fifth and last thing President Eisenhower did that affected me was to reorganize the State Department's personnel structure. I did get an honorable discharge from the US Army, return to San Diego and finally secure my appointment to the Foreign Service as of April 1, 1956. Nydia and I took the train from San Diego to Washington and rented an apartment just past the DC line in Prince George's County, Maryland. Traditionally the Foreign Service had filled all the overseas posts while those who worked in the bureacracy in Washington were part of the general Civil Service. The Administration had hired the former President of Brown University, Henry Wriston, to review the personnel structure and his recommendation that foreign and domestic personnel be integrated into a single Foreign Service was adopted.

So my first assignment was in Washington, DC in the Educational Exchange Service (we administered Fulbright and Smith-Mundt scholarships for foreign students) that had been previously all civil service. The philosophy was that people working in Washington should have first hand experience of working abroad and that those abroad needed periods of "reculturalization". In 1956 many of the department chiefs and administrators were women, having come to Washington during World War II, taking jobs as secretaries, and then remaining in place, rising in rank as the years went by. Civil service employees above clerical status were forced to join the Foreign Service with its obligations to take overseas assignments or seek other employment. During my first tour in Tokyo the consular division was staffed with a number of "Wristonized" officers. The overall career impact was that fairly lengthy assignments in Washington, where one did not get a housing allowance, became common.

While subsequent Presidents affected the country and me to varying degrees, especially during the Johnson and Reagan years, I have to think that President Eisenhower had the most direct impact on my life.

The Frog and the Scorpion

There is a fable about a frog and a scorpion. The scorpion wants to cross a stream but can't swim so it asks a frog for a ride. The frog is reluctant knowing that the scorpion's sting would kill it. The scorpion points out that if it were to sting the frog it would drown. So the frog begins to ferry the scorpion across the stream. The scorpion stings the frog and both die. You could say it was in the nature of the beast.

In the midst of probably our worst economic crisis since the 1930's, we confront the consequences of having bought far more from overseas than we sold. The perennial deficits have been financed, as they are even today, by foreigners, especially governments, in effect exchanging their goods for US Treasury bonds. The US Treasury now pays interest on several trillion dollars of these bonds of which the largest single holder is China with 868 billion dollars worth. Japan is second with 721 billion dollars. As a holder of this extraordinary amount of US obligations, China is in the driver's seat, as it were. Should it cease buying US debt or, worse, choose to hold its reserves in other currencies, e.g. euros, the dollar would undoubtedly suffer a sharp decline in value against other currencies, US imports would be priced above the purchasing power of many if not most Americans and our world standing would be truly eroded.

The saving grace is that while we're the frog and the Chinese the scorpion hopefully they have a a far better perception of self interest. To keep the lid on social ferment and to maintain the near monopoly of power of the Communist Party, China needs an economic growth rate of a minimum of 8% annually. Historically it has achieved even higher rates of growth through massive increases of exports, becoming the world's largest exporter in the process. A world wide recession is already threatening China's ability to manage its domestic economy and for it to throw its financial weight around carelessly could well prove a disaster for all. We are in a form of "mutually assured destruction" that perhaps constrains untoward behavior for all parties.

In the intermediate to longer term the American propensity to consume without much thought to savings and to run large foreign exchange deficits year after year is not sustainable. Economic theory suggests that over time the dollar must decline in relative value to a level conducive to equilibrium in the balance of payments. As this occurs we will undoubtedly experience changes in consumption patterns as well as structural adjustments in the makeup of the national economy. As many are now commenting we may well be entering into a different and changed world.

The saving grace we've enjoyed for some decades has been the role of the US dollar as worldwide medium of exchange and holder of value of last resort. When in panic, foreigners tend to flee to the dollar. But the balance of economic power is shifting. The G-20 meeting held this month in Washington, DC, included in addition to the usual G-8 representatives, the presidents of China, Brazil, Mexico, South Africa and Indonesia as well as prime ministers from South Korea, India and Australia. In my view the locus of economic power has shifted from the Atlantic to the Pacific basin and the economic hegemony of the US will be challenged and most probably diminished in the years to come. Europe is already far less important now relative to the world economy than in the past and Japan is on track to follow. It's a new world out there!

HISTORY IS FICKLE

Historical perspective of people and events changes over time, sometimes becoming more favorable and other times less so. Reputations of many American Presidents have varied widely over the decades.

At present, it would appear that a strong majority of the world's population favors Barack Obama for President of the United States. As stated in a recent Indian newspaper editorial, Obama's election will be viewed as a repudiation of racism in America and will bring to the office a person much less bellicose in foreign policy and much more attuned to the pulse of world opinion than either President George W. Bush or Senator John McCain. What all these well wishers ognore at their peril is that Obama, many democratic politicians and especially the labor unions are opposed to globalization, free trade and the consequences of unbridled capitalism. Democrats have refused to support free trade agreements with Colombia, Panama and South Korea. Candidate Obama has called for renegotiating NAFTA and chastising the Chinese for "currency manipulation". There are calls by Obama and other democrats to somehow reverse outsourcing of jobs and to punish corporations for going off shore. This appeals to many Americans burdened as they are by an economic recession and a great deal of economic uncertainty, not to speak of lost jobs, collapsed housing prices and devalued share holdings. It's not an uncommon call in American history: "America First"! Let's take care of things here before we worry about the rest of the world. Besides its easier to blame foreigners than admit our own errors.

The irony is that should a President Obama folow through on his various pronouncements, life will not be as good for his overseas well wishers as they naively believe. Asian economies especially, but others as well, have benefited strongly from selling into the American market. A recession of and by itself will reduce American consumption and damage foreign exporters. However, other aspects of protectionism could mean declines in employment at off shore call centers and online services, not to speak of impeded capital flows and lessened business investment.

The Indian editorial mentioned above concluded that India would be better off if McCain wins the election. Assuming Obama wins and that the Obama-Reid-Pelosi combo realize their aspirations, four years downt the road our international trading partners may well look back at the Bush era with longing. There is an old saying: "Be careful of what you wish for, you may get it".

I am confident that as the years pass, history''s evaluation of the G.W. Bush administration will rise, to the undoubted consternation of today's Bush-haters. History, properly viewed, is never short term.

Interesting Times

I’ve long been fond of the reputed Chinese curse: ”May you live in interesting times”. Do the past few weeks qualify as “interesting times”? You betcha, by golly!

Having played the stock market for the past 40 years I am familiar with its vagaries, going both up and down and not always rationally. I must admit that the past couple of weeks have been rather exceptional. I did suffer through the dot.com bust, but made a bundle in the two or three years that followed. Will I be able to repeat? To coin a phrase, only time will tell!

All of this financial carnage plays out in the midst of a presidential campaign that marks, for better or ill, a change in personnel, if not of tone, at the top. Having watched the debates I am struck how no one really seems to come to grips with the various serious issues that confront us. We watch the candidates emote sound bites, criticisms – rarely accurate factually – and expound slogans and platitudes. None has spelled out in great detail the consequences of their proposals. Who pays for the new spending programs, whether for more health care, tax cuts for the “middle class” or buying up bad mortgages? Obama’s “middle class” seems to be anyone whose income is below $250,000 annually, or almost everyone living in America. Taxing the rich and benefiting the “middle class” isn’t going to pay the bills. The top 5% of American income earners already pay over 60% of total income tax and the bottom 42% don’t pay any. That appears to me a system already skewed against the wealthy. How much farther can you go?

The irony in all this is that no president, however gifted, can do anything by just directing that it be done. Government action generally involves legislative action. Any number of good initiatives have run aground in the shoals of a deservedly maligned Congress replete with prima donnas and well entrenched special interests. The current body under the leadership of Reid and Pelosi has not covered itself in glory, nor accomplished much. Proposals to spend garner wide support. Proposals to cut spending engender outrage by any and all of the affected beneficiaries. Does our Navy need more billion dollar destroyers? The Navy doesn’t think so, but Congress will be damned if it lets a single shipyard suffer. There isn’t a government program going that doesn’t put money into somebody’s hands, and few beneficiaries have ever voluntarily given up their benefits.

The candidates were asked at the second debate: “What sacrifices should you ask the American people to make during this time of economic crisis”. Both waffled around the issue with very weak responses. The present economic crisis cannot be blamed just on the greed of “Wall Street”. Everyone was in on the act from Congressmen who pushed populist programs and ever more spending while evading corrective actions until too late to the great American consumer who bought and bought and saved little in the false belief that the “good times’ would never end.

What is very clear although perhaps not recognized by the political classes is that issues drive politics, not the other way around. John McCain was asked what he “didn’t know” and his reply was that he didn’t know what was coming: what crisis and where. His statement is quite true: the future rarely mimics the past. We live in a world of constant change, but we assume that whatever is, will be forever! A bad base for sound policies.

The US may be the single most important player on the economic and political world stage, but it is not alone. Power and influence can be found in several other centers and the US can no longer call the tune without adjusting to others’ agendas. We bought lots of cheap goods from China, benefiting us as consumers, but we paid for these goods by selling US treasury bonds to China. As China’s foreign currency reserves approach a trillion dollars it has the power to destroy the US economy by refusing to buy more bonds and dumping those it has. Such action would also destroy the Chinese economy, so we have a new version of “mutually assured destruction”.

So while our presidential candidates and others of the political class dance over the surface of the present crisis there remain a series of issues that must be addressed in the near term. Briefly, these include:

Foreign relations - we live in a dangerous and turbulent world. The candidates should realize that countries don’t have “friends or enemies” but interests. Multilateral institutions are far from unified and few countries share US interests as completely as we might like. So often defense of the national interest may well require a “go alone” strategy, but this surely requires a careful balancing of our real national interest and our actual capacity to act. Persuasion and diplomacy are useful but interminable delays in reaching decisions should not be tolerated.

Financial systems and markets - bank deregulation originated with President Clinton and by and large has worked. What hasn’t worked is the creation of new financial instruments that were poorly understood and unregulated. Also, a very easy monetary policy on the part of the Federal Reserve led to easy money and lots of borrowing. There was also a lack of understanding of just how closely linked world financial markets are. There are billions of dollars floating around the world and no one government nor multilateral institution has any real handle on how to motivate nor for that matter to control the flows. Attacking the demonstrated flaws in the system should not mean permanent government intervention, government ownership and direction of financial assets nor instituting a harsh regulatory regimen that inhibits the needed flow of capital as it seeks its optimum rate of return.

Government fiscal policy - McCain spoke of the need to reduce spending and even talked about a spending freeze for at least part of the government. He also challenged defense spending. Obama only talks about the need to invest in any number of initiatives while cutting taxes but seems to think this can be paid for by increasing taxes on the “rich”, the oil companies and by closing “loopholes”, a delusion I think. Balancing government expenditures and revenues is unlikely absent a near economic collapse. The country appears to live in an “entitlement” atmosphere. Every problem can be solved by throwing government money at it. No existing program can be cut, whether we’re taking about farm subsidies, subsidies of ethanol or extraordinarily expensive military hardware. Frugality and discipline have disappeared. Neither candidate nor the Congress would appear willing or able to impose either on the nation.

Health care - A prime example of the “entitlement” mentality. We demand the best of medical care for everyone and for everything but don’t really like paying for it. The present system is broken. The biggest problem in the present system and one McCain’s proposal attempts to address is that since 1947 health insurance in the US has largely been company sponsored. No job with a company with benefits means no benefits.

An alternative system where health insurance is based on the individual independently of employment could free consumers to pick and choose from competing plans and, very importantly, would allow portability. Change jobs? No problem, no effect on your health insurance. Companies would be freed of the expense of these often subsidized health programs with the money made available usable for higher wages, lower prices or more investment. The proposed mechanism is to make health insurance expenses tax deductible for individuals and families, up to a limit, while removing the tax deduction feature from company plans. This is a wrenching change from current practice and worrisome to those who favor the “Nanny” state and prefer that Government set the standards and control the program.

Entitlement programs - Here we’re talking Social Security, Medicare, Medicaid and numerous other programs where tax money (or government borrowing ) is transferred for some form of welfare benefit. George Bush offered a program of partial privatization a couple of years ago. It went down in flames as no politician wants to offend the “greedy geezers” whose numbers and votes grow yearly. American youth are largely convinced that there will be no Social Security System in place when they grow old. Spending on these entitlements must be controlled to preserve public funds for other, necessary uses. There are four methods available: raise age eligibility to accord with increased longevity, raise taxes – already a regressive drag on young workers, reduce benefits like cutting back on cost of living increases, or impose a means test that denies benefits to the affluent. Privatization of retirement programs has been successful in other countries, but again the “Nanny “ state stalwarts oppose: people are too stupid to manage their own financial affairs, the governing elite must do it for them. As to the four possible adjustments, I know of no politician, presidential candidate, or not, who has proposed any one of them.

Energy - The country uses a lot of it and it shouldn’t. Aside from environmental impact, it makes excellent economic sense to reduce the relative cost of energy within the economy. Progress has been made: energy usage per unit of GDP has declined since 1973. The real problem as mentioned by both candidates is the $700 billion import bill for petroleum, much of which went to people who don’t have our best interests at heart. Parenthetically, neither candidate mentioned that the number one source of petroleum for the US is Canada and that Mexico ranked third. One technique already in place is to reduce demand and increase the relative value of the dollar. We now have oil at $90 a barrel instead of $140 so the import bill at least in the short run will be much lower even if we do nothing. Logic suggests we need to increase the supply of energy, preferably from domestic sources. Logic doesn’t necessarily lead to effective policy and economic reality proves a barrier. Few alternative sources of energy match the economic efficiency of burning petroleum. Spending millions on ethanol both in subsidies and an artificially high import tariff does far more for corn farmers, corn processors and farm interests than it does to alleviate the energy crisis. When you add in the impact on food prices of higher priced corn and the impact on the environment of more land plowed for corn production, it appears that we need to rethink the whole program and thrust in another direction. Expanded use of natural gas is one area. Offshore drilling is another. Expanded investment in nuclear energy is one more. Investment in wind, solar, tidal and geothermal sources are of interest especially if further research and development can bring unit costs down. Energy conservation is also important, a process that can be promoted by economic incentives like high gasoline taxes as used in Europe or some form of carbon tax. Neither candidate nor few members of Congress are likely to call for any form of tax increase: government mandated standards are the preferred route.

Environment - Overcoming environmental damage from whatever source and attempting to restore what has been lost is laudable, extremely difficult and closely tied to the whole argument on global warming. Sarah Pallin admitted that global warming was taking place and that we needed to adapt to that reality, but that its cause was not clearly known even though human actions undoubtedly played a role. She was right: Joe Biden’s statement that global warming is solely the result of human action was flat out wrong. Al Gore’s proposal that we can overcome the problem in ten years is delusional.

Climate conditions are very tricky. Eleven hundred years ago the world was so warm that the Norsemen thought Greenland suitable for raising barley and herding sheep. Five hundred years ago it was so cold that the grain crops in Europe failed to ripen and thousands starved. Sun spot variance, changes in the earth’s orbit, volcanic activity, burning fossil fuels that generate carbon dioxide? Or all of the above. No one truly knows and those who spell out just how many degrees the earth will warm in the next twenty years should lend their talent to our local weathermen who fail to forecast the weather accurately three days in advance. There are a lot of variables, but what is certain is that the combustion of fossil fuels is the cornerstone of the modern economy world wide and you can’t change this condition without horrendous restructuring of the physical economy and quite likely severe negative economic consequences. For example, Norway imposed very strict regulations to reduce carbon dioxide emissions including very high gasoline taxes. Per capita emission of carbon dioxide has been reduced, but the total tonnage produced by the country has increased. Why? More people, more cars and more oil wells.

Before leaving the environmental issue, an even more important element is the use – and misuse – of water. We have problems but the developing world, e.g. China and India , have far more severe ones. Shortages of potable water, pollution of what exists and increasing needs for industry and agriculture exacerbate the problem. Someone needs to address the US problem of the southwestern desert and population growth, the appropriate use of relative dry plains areas east of the Rockies and the contamination of our waterways. Straightening out rivers and putting dams everywhere have also been unhelpful in avoiding environmental damage. Do we really need cities in the desert or others below sea level and in flood plains?

Issues that need to be addressed or they will control our lives in ways not to our liking!

Real Estate

Falling house prices and the bursting of the real estate bubble have been at the forefront of the news for many months now. Southern Calvert County (Maryland) was one of the farther out areas of “affordable” housing that was badly affected as were similarly located suburbs elsewhere in Maryland and Virginia. Into this mess we chose to venture.

While in Arizona in April we saw a senior living community that offered a model home we thought ideal, 1,800 square feet all on one level. We put down a deposit on a lot at a price made feasible through a substantial discount offered by the developer. Score one for the buyer’s side.

Back at the ranch, that is, at our second home located less than a mile from the Chesapeake Bay, market prospects were grim. We had concluded that at our advanced age and the general dispersion of the family, it didn’t make sense for us to continue to keep up two rather large, three story residences. Our unique, custom built contemporary could, we think, have sold for close to $400,000 in mid-2006. In mid-2008 there were over three hundred houses listed for sale in our ZIP code, none of which seemed to be selling. Our real estate agent was hard pressed to identify “comparable” properties since among the 4,000 houses in the Chesapeake Ranch Estates there was none like ours. To get a feel for the going price we engaged an appraiser. Bad move! The woman came out, didn’t particularly like our appreciate our house, identified three “reasonable substitutes” – one split level and two Cape Cods - for our house that had sold recently within a couple of miles of us, and came up with an appraisal of $282,900. We were shocked, of course, $400 down a rat hole, as it were. Score one against the seller’s side.

With trepidation we put the house into multiple listing on August 12, with an asking price of $329,900. (We ignored the appraisal and used our own sense of market value.) That weekend a husband and wife with one daughter came by with the feminine members “falling in love” with the place. Within a week we had received an offer, quite low, responded and had our counter-offer essentially accepted. The effective selling price after seller give-backs was $315,000.

The formal selling price was $324,000, which is the value of the 100% VA-guaranteed mortgage. By our covering $9,000 of the buyer’s closing cost, we effectively allowed the buyer to amortize this portion of his closing costs, saving cash, and paying out this amount over the life of the mortgage. All of this hinged upon an appraisal coming close to the asking price. This appraiser came out with a figure of $324,000. Our real estate agent thinks this is because she met with him and put forth a number of “comparables” favorable to our cause. There is also the suspicion that appraisers still have an institutional bias to justify the proposed level of mortgage. That this appraisal was $41,100 more than the earlier one was gratifying. Real estate appraisal, like the practice of medicine, is an art, not a science. Incidentally, most of the houses in the area with “For Sale” signs remain in that condition. Someone once said that it is better to be lucky than good!

Then began the fun! We had in the course of about 5 weeks to empty out our house, dumping some of our goods, carrying others to the house in Potomac and yet another collection to put in storage pending a move to Arizona. Some even were transported to Pennsylvania. We dumped, among other things, 3 old analog TV’s that in today’s digital world were without value. For an old man with bad knees I spent a lot to time carrying boxes up and down stairs and loading our pickup truck. We brought to Potomac five truck loads of things, much of which remains to be stored properly in the new surroundings.

Our life style has changed. For 17 years we drove nearly every weekend the 160 mile round trip to the beach house and back. It was a lovely home and there is much that we will miss: breakfast on the deck surrounded by trees; walks to the Bay; expansive rooms bathed in sunlight, a full moon bathing the bedroom in light through the skylight above; and, a car port that we’ve never had elsewhere in Maryland. But now the house has new owners, much younger than we, who will hopefully provide care, attention and derive enjoyment in the years to come.

CNG REVISITED

The campaign to convert the American motorist to compressed natural gas from gasoline continues apace with more full page ads touting the cost advantage of natural gas. T. Boone Pickens, the apparent power behind this campaign, has been in the energy field for a long time. As an independent oil man he founded Mesa Petroleum and led the firm for many years until the industry hit a bad stretch and Pickens was ousted.

Pickens recently published a new autobiography, reviewed by a columnist in the Wall Street Journal who apparently is no great admirer. Among the allegations was that Pickens is behind a group formed to develop compressed natural gas delivery stations which, according to the reviewer, fuels Pickens' interest in CNG as an automobile fuel. The reviewer went on to attack Pickens' positions on wind power and the economic advantages of CNG. He asserted that wind power won't be very useful because the wind farms are in the western desert and the major electrical markets are in the eastern US, requiring the construction of new and expensive transmission lines. As to CNG, he wrote that a car built to use this fuel would carry a surcharge of $6,000 and that to convert a vehicle to CNG would cost $12,000. And, finally, there are few places where you can buy the CNG you would need.

At first blush this appears damning, but the more I think about it the more I'm convinced the reviewer is writing from biases and not from facts. Technically I don't think converting an internal combustion engine from gasoline to compressed gas is that difficult. Admittedly compressed gas requires a steel cylinder in place of the sheet iron gas tank and, often in cars that I've ridden that use CNG, the tank does take up much of the trunk. But starting from scratch to build a gas powered car shouldn't need nearly as much modification as building a hybrid, and I don't recall Toyota's Prius requiring a $6,000 premium, although there was a premium. Considering that my Ford Fusion has a trunk with 20 cubic feet of capacity, I would think that a compressed gas tank could be built into the car, replacing the gasoline tank, without too much impingement of the trunk space. As to getting the cylinders to fire, if a motor can be made to use biodiesel it shouldn't be too hard to modify it for natural gas. As to a $12,000 price for conversion, I think that figure is just off the wall. Besides which if you buy a car designed for CNG the question of conversion is moot. True there are few places that sell compressed gas, but should the market grow, Pickens and others will invest to supply it.

The basic facts that natural gas costs substantially less than gasoline and that the US has substantial domestic supplies of natural gas remain.

There has been substantial comment on the disconnect between areas suitable for wind generation of power, like the western desert, and the principal market for electric power which remains the eastern urban centers. Transmission lines at present are inadequate and building new ones not only costs a lot of money but runs into stiff opposition from environmentalists. We all want "green" power but don't want to see a transmission line within 50 miles. The latest developments I have read about finesse the problem by proposing to put the wind mills off the coast of the Eastern US. Unlike the Pacific, the Atlantic ocean remains realatively shallow for some distance from shore so that wind towers even as far as 50 miles from the coast are technically feasible. Wind farms off the coast of New Jersey or Delaware would certainly bridge the gap between power generation and consumption.

Regardless of technical difficulties the time has come, politically speaking, to throw lots of money at alternative energy options. Let's just hope for the sake of the tax payer that there is some direct connection between money spent and results generated.

Multiculturalism: A Danger

As our nation endures yet another spell of emotional turmoil regarding immigration the role of immigrants and others who are “different” from what we think of as mainstream is also in question. The two issues are closely linked and the one involving “different” calls into play the concept of “multiculturalism”, a consideration of which follows

We are not born with either a culture or language, but the capacity to develop both. Each human infant enters life with a set of basic needs. These include nutrition, affection, health, a place in some sort of social structure, a sense of identify and place, and an accepted set of “rules of the game”, that is, how is one expected to behave to be accepted in the group. None of these needs is culture specific, but generic to the human condition.

The embryo is indifferent as to which language group or culture it is born into.
After birth, however, the process of acculturation begins and the individual acquires an identity, a language system and knowledge of a specific set of “rules of the game”. Having gone through this process, most individuals develop a vested interest in defending the acquired status and its related sense of identity. A major outward manifestation of acculturation is language, basically a system of applying labels to defined elements of experience, of things, of forces and concepts. Each language tends to apply the labels differently and transference with precision from one set of views of the universe to another is difficult.

Immigration challenges the acculturation process because in the changed environment the new generation starts to play by a different set of rules and a different language, a process many parents find threatening of their own sense of identity and orderly behavior. The shift from the previous culture to the new can be messy and engender resistance.

A great advantage for modern political states in seeking their place in the world is the capacity to blend disparate cultural groups into a reasonably congenial whole. America has been remarkably successful in this process: the melting pot works, but at various times in history there have been doubts. Nineteenth century German and Irish immigration raised serious concerns as did the influx in later decades of immigrants from Italy and Eastern Europe. Despite these concerns the Republic survived! It should be admitted, however, that the process in this century was aided by low immigration levels from 1922 until after World War II owing to restrictive immigration laws and the pernicious effects of the Great Depression.

Now confronting substantial inflows of immigrants these concerns are again rampant. Focus has been on Hispanic immigrants but the flow is far more widespread, including African, South Asian, Middle Eastern, Chinese and Vietnamese. The press reports twelve million people living in America without proper documentation. But of a population of 300 million, this is only 4 percent. Not an insurmountable number. But, as in earlier times, fear has arisen that the country’s ability to assimilate is inadequate to cope with the sheer number of newly arriving immigrants.

Despite its current concerns, America has been far more adept at assimilation than European or Asian societies. The rule of thumb seems to be that three generations converts a foreign immigrant into a typical American. In today’s world, however, there are many political entities that are not truly “nation states”. It would appear imperative for a modern, technically and economically advanced state or those that aspire to this status, to have the benefit of a reasonably unified civil society filling its politically defined boundaries. Failure to achieve this is acutely apparent in countries like Iraq and Afghanistan, not to speak of the former Kingdom of the South Slavs. Another relevant example is whether the thousands of Kurds, Azeris, Arabs and Baluchis who find themselves in Iran feel at one with Iranian culture and the Farsi language.

Returning to the United States, recognition of differences in cultural backgrounds enriches our society. One would not want to see differing traditional foods, holiday celebrations and taste in music and literature disappear. Nor do we want to see freedom of religion weakened. But to do well within our society, all American residents need to master English, accept the norms of civil behavior and play pretty much by the same, established set of rules. A multiculturalism resulting in autonomous enclaves of people marching to the beat of a different drummer is not helpful, either to the country or to the members of the enclave.

A prime example is Santa Ana, county seat of Orange County, California, in which Hispanics (mostly Mexican) now are 79% of the city’s population. Daily life can and is carried out for most residents within the “Chicano” culture and entirely in the Spanish language. There is a catch, however, in that lack of English language capacity imposes an economic ceiling, confining those without English to low skilled and low paying jobs. To break out of this trap and to enter into the broader America of higher skilled and professional employment one needs to communicate in the national language, English. Santa Ana has begun a program to teach English to help its interested Spanish speaking residents surpass this economic barrier.

There are two issues at play, then. One is whether the current rate of immigration, both legal and illegal, is beyond what the country can reasonably assimilate and the other is a tendency by some to reject acculturation into the whole in favor of preserving separate cultural entities, whether of behavior, language or acceptance of U.S. “rules of the game”.

The danger that I see for the first issue is not how we assimilate the twelve million already here, I think we can handle that in time, especially since many of these people have been here for some years and have already begun the process, but what do we do with the next twelve million? At some point the inflow has to be controlled!

As to the cultural enclaves I think as a nation we need to revisit and probably eliminate bi-lingual education, ballots in foreign languages and other elements catering to those outside the mainstream. The major drive behind much of this is the large Hispanic element among recent immigrants, but where is the justice in catering to Spanish speakers and ignoring speakers of Hindi, Tamil, Tagalog, Vietnamese, Hmong, Arabic, Portuguese, Cantonese, Mandarin, Korean and a variety of African languages? The solution is not a tower of Babel, but a push to join the mainstream. It’s interesting to note that bi-lingual education is largely limited to Hispanics, but children of Japanese and Chinese background, and other groups as well, send their children outside of regular school hours to special Chinese or Japanese language schools, without taxpayer funding. It doesn’t seem a fair system.

The US market will supply the demand for foreign language media or ethnic foods and it will cater to consumer cultural differences as long as there is money to be made. That’s what free markets do. But I see no national interest served by using public funds to entrench cultural disparity. Both the needs of our individual residents and the country are best served by programs than enhance assimilation through improved education, health and English language ability. Since we can’t or shouldn’t choose individual groups over others, the best government approach is one of neutrality. Provide the social and education services needed by all without catering to the perceived special needs of individual groups.

Economics 101

There are some basic economic principles taught in elementary economics, among them the concept that at an equilibrium price supply and demand will be equal. In this simple model if supply contracts while demand remains the same, the price will rise until there is a new equilibrium. In real life it doesn't always work that way as changes in either supply or demand don't result in equivalent price changes. The economic principle is of price elasticity. If consumers continue to buy the same amount of a commodity at a higher price, the price is said to be inelastic. A case in point is gasoline: a price increase this year in the range of 35% appears to have reduced demand by around 3.5%, a reduction but clearly an example of price inelasticity.

Politicians seem not ever to have taken Economics 101. The Maryland legislature earlier this year faced a substantial budget deficit. So one of the measures taken to address the issue was to raise the tax on a pack of cigarettes to $2.00. Now they discover that cigarette sales in the State have fallen 25% compared to last year and that their assumption of physical sales volume remaining the same despite the sharp increase in price was, to put it mildly, flawed. If one assumed that the sales decline meant a reduction in smoking you could at least assign a health benefit to the measure. What is more likely, however, is that smokers are buying their cigarettes out of state: the neighboring Commonwealth of Virginia imposes only a 30 cent tax per pack. So now the Maryland politicians are calling for policing the border to make sure that no one has bought more than 3 packs out of state. In New York City where very high cigarette taxes were also imposed, it is estimated that 75% of the cigarettes consumed come from outside the city. High cigarette taxes in some jurisdictions within a common market, e.g. the United States, in which other members impose much lower taxes is a blatant invitation to smuggling and political jawboning won't stop the illicit flow of goods.

A similar disregard of the economic laws produced the "gray market" many of us have taken advantage of. Manufacturers, especially of pharmaceuticals and goods for personal consumption devised a strategy of differential pricing. One, high, price for the US market and other, usually lower prices, for foreign markets, like Europe. But the entrepreneurial spirit lives and selected merchants discovered the price differential for many items was large enough to allow purchase in Europe followed by shipment to and resale in the US at prices undercutting the manufacturer's list prices but still profitable. The manufacturers screamed and demanded the US government deny imports from "unauthorized" dealers. Now with online purchasing prevalent it's extremely hard to maintain differential pricing.

People in general are not "economic men" making their decisions based on carefully calculated economic principles, but governments, corporations and people discover eventually that you can ignore economics but only to a degree and for a limited time before the consequences catch up. Today there is an electric power shortage in China: electric prices are kept below economic rates by the government to keep costs low for consumers, but coal prices go up and electric power companies even in China are reluctant to buy more coal just to lose money selling electricity. Future economic growth is threatened. What's a government to do? Let electricity prices rise? Subsidize the power companies? How does misallocation of resources encourage investment in power generation?

And so it goes - populism versus the insights of all those dead economists.

CNG

Now that I've proposed that the country switch fuel for cars and trucks from gasoline to natural gas, I see others furthering this concept. The Washington Post on August 5 carried a full page ad for Compressed Natural Gas (CNG) sponsored by two trade associations. The pitch is the same: CNG costs only half as much as gasoline in gallon equivalents and that the US has large supplies of domestically produced gas. Neither presidential candidate has mentioned this issue and neither has produced any really useful ideas on energy. Pelois-Reid are still battling against lifting the ban on off-shore drilling despited majority public support for the measure. I suspect Congress favors it as well so to avoid the issue the leadership just avoids any legislation in the field.