Unexpected consequences of Obamacare and immigration amnesties

I'm not sure why this hasn't generated more outrage yet: the Washington Times has spotted that President Obama's plan to legalize employment for illegal immigrants might screw over American workers even more than initially suspected:

President Obama's temporary amnesty, which lasts three years, declares up to 5 million illegal immigrants to be lawfully in the country and eligible for work permits, but it still deems them ineligible for public benefits such as buying insurance on Obamacare's health exchanges.

Seems sensible enough, although the amnesty beneficiaries might well be eligible for the Earned Income Tax Credit if they have kids. But there's a consequence for the lack of health exchange rights:

Under the Affordable Care Act, that means businesses who hire them won't have to pay a penalty for not providing them health coverage [my emphasis] — making them $3,000 more attractive than a similar native-born worker, whom the business by law would have to cover.

Oopsie. Since the immigrants will tend to participate in the lower-paid end of the employment spectrum, that means the $3000 delta will be a huge fraction of the wage. That's quite the competitive advantage. Sure, it means in practice that they won't have ACA-compliant health care - and in fact I'd expect many employers to pay their amnestied workers a higher headline wage to compensate for this lack of employer-supported healthcare. Nevertheless, once it's legal to employ these workers openly, the wage differential makes them look very attractive.

This won't affect unionized jobs where wages can't easily be varied, but in the private sector the medium-sized businesses who have more than 50 employees will start sucking up all the amnestied labor they can and will stop hiring the locals. Small businesses which have pushed workers into part-time slots to avoid the ACA can now replace two part-time workers with a full-time amnestied worker.

This is what happens when you create a baroque, complicated legal framework for employment and health insurance. When you subsequently make changes, you will find that they have unexpected effects.

Anatomy of a timeshare sale

Dear readers, the things I do on your behalf. Herewith my notes from participating in a recent timeshare sales session which was the condition of a fairly well discounted holiday which my partner and I recently enjoyed.

The vacation property itself was very pretty - manicured lawns, artfully trimmed flowering bushes and a background of blue skies and the sound of crashing waves. The sales office itself was tucked away in a corner of the imposing main clubhouse, presumably because once you’re an owner you don’t like to be reminded of how and where they got you. It was a reasonably high traffic operation, several other couples there waiting or coming through - note that there were no singles, only couples. I'd guess they’re maximising their chances of finding a weak spot and then leveraging it to pressure the other party. Divide and conquer FTW!

The waiting room had the usual free beverages to enjoy for the few minutes we were waiting. Coffee was from a press-top urn and was awful. Normally I'm OK with urn coffee in a pinch, but my goodness this stuff was dreadful; I had to fall back to Lipton tea. This was scheduled to be a 2 hour session so my tolerance for coffee absence would be tested to its limit.

I'll call our sales rep "Nick", who was audibly a New Yorker. He led us down to his office and the presentation started after a few minutes of soft soap "how was your vacation so far? what have you enjoyed?" which was fairly obviously an intelligence-gathering exercise.

Nick started the sell emphasising that this was not a high pressure sales session. He then described the "price integrity" of his company, that they never discounted or negotiated on price (yeah, sure, you betcha snookums) and referenced back to how much we'd enjoyed the holiday so far to stimulate the guilt gland. He then noted the extra financial incentives if we bought right now, today, with a yes/no decision at the end of the session. What was that about "no high pressure sales", Nick? He outlined our aim today which was to decide whether our future vacations would be better with or without TIMESHARECO ownership, which was studiously neutral so far. At the end of the session we would be meeting with the company inventory manager for details on prices, incentives etc.

About 10-15 minutes in and Nick took a break to "get some water". Presumably this was to check with his boss on his boss's read on the situation so far. I didn't think to check for a video or audio monitor in the office; nothing was obvious, and I'm guessing that there wasn't any eavesdropping going on. Certainly nothing subsequently made me suspect that.

Nick started the next session reviewing our past holidays and latched on to our holiday last year as similar to the kind of thing he was selling. He asked us to name our "dream" 3-5 money-no-object vacations which we did. He picked out quality as a factor in our holidays and started talking numbers on room prices, picking a $200/night base price.

We learned after casual conversation from me that he had retired from a job as a retirement plan sales manager, but had come back into the timeshare sales game after a couple of years. In light of the later discussions, this made a lot of sense. He likened the scheme he was selling as a "401(k)" (money purchase pension scheme) for holidays - invest money and get a steady yield of vacations.

During the meeting he took very short but effective notes on a single sheet of paper, only a few words per concept; around now he read back to us a summary of what he'd noted, and pretty much nailed everything. I was very impressed at his technical skill. I also approved of the strategic placing of his office with a genuinely lovely garden and waterfall view - he sat with his back to it, so it clearly wasn't intended for his benefit. I bet the room views aren't like that (except for the show rooms.)

Now we come on to the numbers. He was trying to sell on the basis of 7 days stay, $200/night, over 20 years - that if we did this with his company then it would be cheaper than renting a hotel room each year. He presented a table showing cost of hotel rooms in brackets - but quoting in non-constant dollars. The chart spanned 40 years - so starting from the mid-1970 when 11% annual inflation was the average - but actually only 7% over past 10 years (I did the math). Later, checking the US inflation calculator it's clear that 1974-1984 is by far the steepest inflation decade of the past 40 year - 110% compared to 42% (1984-1994), 27% (1994-2004) or 25% (2004-2014).

I innocently asked him "but aren't wages inflating too, so shouldn't this be expressed in constant dollars or at least expressed in terms of purchasing power? And aren't hotel prices determined by supply/demand - what you can persuade people to pay, not what your costs are, so heavily influenced by wages?" at which point he pretended confusion. I also asked why he was looking at a 40 year basis when we were talking about a future span of 20 years, which met with a similar response.

Now it makes sense why he used to sell retirement plans... he's essentially selling a financial plan. He's saying that if we give TIMESHARECO about 20 grand then they can invest it in property and meet the cost of our stays over the next 20 years while presumably turning a small profit including his commission. And yet, they can't persuade the major financial establishments to make the same investments and profit directly. I wonder why?

Now the "here's all the places you can stay!" list. About 70 locations in 10 countries - not a massive amount, but they have "affiliates" in 100 countries with over 5000 resorts you can stay at. Minimum of 3 nights per stay, no max, which seems reasonable. With your purchase of the plan you get X points per year to spend on properties, and can transfer points between years. It costs $100 to carry forward non-spent points, but $0 to borrow them from future years - cheaper to take a loan than save up. What's wrong with this picture? It means that they want the additional money they get from you actually staying, of which more later.

We toured through photo sets of properties in countries we might visit, though only TIMESHARECO properties not affiliates - which was a nice sleight of hand. Apparently TIMESHARECO "reviews" the quality of the affiliates to ensure they're up to scratch. I'm sure you're as reassured as I was. It's a first-come first-served model for all properties. Nick claimed that there was a low probability of all affiliate properties being full in an area even in busy time e.g. spring break but didn't address TIMESHARECO numbers directly. So they almost certainly have a problem with availability during this times. Affiliates charges $200 per booking which is a nice little earner and pushes you towards fewer, longer holidays in affiliates.

He gave us a brochure for the affiliate program: RCI. According to their SSL cert information they are Wyndham Worldwide Corporation based in Parsippany, New Jersey. Their stock is up about 15% y/y so clearly the timeshare business is doing well out of the boom.

Nick took another break, this time more extended than the previous one, presumably to allow replanning of his sales approach. I couldn't help but notice that he didn't offer us a refill of our beverages.

He mentioned in passing that there was also a maintenance fee which covers insurance for the property, in response to an earlier question I had about "what if the property we buy rights to burns down?" We fenced for a few minutes, then 70 mins after the start of the discussion he gave up, said that we didn't have to tour the property if we didn't want to - we didn't - and handed over the bonus gifts that we were due to receive at the end of the property. He did try a last gasp attempt with vacation offer similar to what we had already enjoyed, with another timeshare presentation linked in. I'm sure that if we'd taken this up then we'd have been lined up with their Top Gun negotiator. But we said no thanks, and left.

Overall a fascinating view into the world of timeshare sales. I didn't feel in any danger of buying at any point, but I give Nick his due that he tried very hard and used most of the tricks in the book without resorting to what I'd regard as "high pressure" sales. Perhaps the fact that I was taking notes alarmed him a little; he emphasised at the start that he'd give us all the items discussed in writing, but of course with us leaving before closing this didn't happen (if it would have happened). Credit to him that he recognised when he was beaten and didn't waste our time or his beyond that point. It also turned out to be remarkably easy to elicit information about him and divert him off course for a few minutes. Presumably this was because he thought that he was making a social connection and common ground.

The offer itself of course was completely overpriced - I checked out the secondary market in TIMESHARECO properties and they were a) heavily discounted, around 60% of face value and b) not selling, though of course these are related and just give you a ballpark idea of the market clearing price. The annual maintenance cost was around $1300 - i.e. the same as 6 nights of hotel stays at $200/night. If you buy in the primary market, you are a total mug or you have lots of money, the holiday model fits you and you don't mind paying a healthy excess for the convenience.

Lipstick on a postal pig

I can't help but share this lunacy with you. The (American) Center For Economic and Policy Research thinks that the problem with the US Postal Service isn't the lackadaisical, contemptuous, inefficient distribution of mail which it perpetrates. It's just not properly utilized. Instead, we should allow it to run banking services at the same efficiency with which it delivers mail:

[...] the Postal Service could improve its finances by expanding rather than contracting. Specifically, it can return to providing basic banking services, as it did in the past and many other postal systems still do. This course has been suggested by the Postal Service's Inspector General.
This route takes advantage of the fact that the Postal Service has buildings in nearly every neighborhood in the country. These offices can be used to provide basic services to a large unbanked population that often can't afford fees associated with low balance accounts. As a result they often end up paying exorbitant fees to check cashing services, pay day lenders and other non-bank providers of financial services.

Of course, the reason that banks have run a mile from providing banking services to clients with low income or dubious immigration status, running away from a steady (albeit low) income stream, is due to... government regulatory pressure. Who'd have thought that the government would have caused these problems?

Now the CEPR is proposing that a government agency can step in and fix the very real problems in banking access that other government agencies have created. I don't know whether to laugh or cry.

Incidentally, my personal experience with sending mail through the USPS - a monthly mail to a residential address within the same state, dropped in a regular post box - is that the failure rate is about 1 in 13. This is corroborated by the experience of The Advice Goddess (Los Angeles resident Amy Alkon, if you're not reading her blog or buying her books then you really should):

How sucko is @USPS? Called to complain re lazy postal wkrs not picking up from blue boxes; USPSer says "I'd never put mail in one of those"

— Amy Alkon (@amyalkon) November 5, 2014

There is no way that the USPS could comply with the existing banking regulations in the USA without having the same order of overhead as the major US banks. I suspect their savings in property costs are insignificant; even if they could train existing post office counter staff to be bank tellers as well without any major salary inflation, all the backend systems and personnel required would kill their cost advantage. Check out the USPS compensation and benefits: "regular salary increases" means you're paid by length of service, not productivity, they get federal health benefits which are a step or three above Obamacare coverage, and they get a defined benefit retirement plan. Believe me, if you're staff at a major bank, you would sell your mother on the streets to get these benefits.

All the CEPR is doing in this article is lobbying for an increase in (unionized) federal government employees. The government, and therefore the taxpayer, is going to pick up the tab, but that's Just Fine with them. The only way I can see this working is if the USPS is exempted from most of the existing banking regulations - and if that's the problem, why not just repeal them for everyone else as well?

A caricature of Civil Service placement and rhetoric

The new director of GCHQ was announced earlier this year as Robert Hannigan, CMG (Cross of St Michael and St George, aka "Call Me God") replacing the incumbent Sir Iain Lobban, KCMG (Knight's Cross of St Michael and St George, aka "Kindly Call Me God"). Whereas Sir Iain was a 30 year veteran of GCHQ, working his way up from a language specialist post, Hannigan was an Oxford classicist - ironically at Wadham, one of the few socialist bastions of the university - and worked his way around various government communications and political director posts before landing a security/intelligence billet at the Cabinet office. Hannigan is almost a cliché of the professional civil servant.

Hannigan decided to write in the FT about why Facebook, Twitter and Google increasing user security was a Bad Thing:

The extremists of Isis use messaging and social media services such as Twitter, Facebook and WhatsApp, and a language their peers understand. The videos they post of themselves attacking towns, firing weapons or detonating explosives have a self-conscious online gaming quality. [...] There is no need for today’s would-be jihadis to seek out restricted websites with secret passwords: they can follow other young people posting their adventures in Syria as they would anywhere else.

Right - but the UK or US governments can already submit requests to gain access to specific information stored by Facebook, Google, Twitter et al. What Hannigan leaves out is: why is this not sufficient? The answer, of course, is that it's hard to know where to look. Far easier to cast a dragnet through Internet traffic, identify likely sources of extremism, and use intelligence based on their details to ask for specific data from Facebook, Google, Twitter et al. But for the UK in the first half of 2014, the UK issued over 2000 individual requests for data, covering an average of 1.3 people per request. How many terrorism-related arrests (never mind convictions) correspond to this - single digits? That's a pretty broad net for a very small number of actual offenders.

Hannigan subsequently received a bitchslap in Comment is Free from Libdem Julian Huppert:

Take the invention of the radio or the telephone. These transformed the nature of communication, allowing people to speak with one another across long distances far more quickly than could have ever been imagined. However, they also meant that those wishing to do us harm, whether petty criminals or terrorists, could communicate with each other much more quickly too. But you wouldn’t blame radio or phone manufacturers for allowing criminals to speak to each other any more than you would old Royal Mail responsible for a letter being posted from one criminal to another.

Good Lord, I'm agreeing with a Libdem MP writing in CiF. I need to have a lie down.

Hannigan is so dangerous in his new role because he's never really had to be accountable to voters (since he's not a politician), nor influenced by the experience and caution of the senior technical staff in GCHQ (since he never worked there). He can view GCHQ as a factory for producing intelligence to be consumed by the civil service, not as a dangerous-but-necessary-in-limited-circumstances intrusion into the private lives of UK citizens. After all, he knows that no-one is going to tap his phone or read his email.

Personally, I'd like to see a set of 10 MPs, selected by public lottery (much like the National Lottery draw, to enforce fairness) read in on GCHQ and similar agency information requests. They'd get to see a monthly summary of the requests made and information produced, and would be obliged to give an annual public report (restricted to generalities, and maybe conducted 6 months in arrears of the requests to give time for data to firm up) on their perception of the width of the requests vs information retrieved. That's about 40 Facebook personal data trawls per MP, which is a reasonably broad view of data without excessive work. Incidentally, I'd also be interested in a breakdown of the immigration status of the people under surveillance.

Mazzucato and her State-behind-the-iPhone claims

This caught my eye in the Twitter feed of Mariana "everything comes from the State" Mazzucato:

.State behind Apple figure (pic) in my #EUDigitalMinds piece is from p.109 of http://t.co/apmUdCZwdS @NeelieKroesEU pic.twitter.com/Mb8iGOPswn

— Mariana Mazzucato (@MazzucatoM) November 4, 2014

The box claiming that "microprocessor" came from DARPA didn't sound right to me, so I did some digging.

Sure enough, DARPA appears to have had squat all to do with the development of the first microprocessors:

Three projects delivered a microprocessor at about the same time: Garrett AiResearch's Central Air Data Computer (CADC), Texas Instruments (TI) TMS 1000 (1971 September), and Intel's 4004 (1971 November).

I don't know about the CADC, but Tim Jackson's excellent book "Inside Intel" is very clear that the 4004 was a joint Intel-Busicom innovation, DARPA wasn't anywhere to be seen, TI's TMS 1000 was similarly an internal evolutionary development targeted at a range of industry products.

Looking at a preview of Mazzucato's book via Amazon, it seems that her claims about state money being behind the microprocessor are because the US government funded the SEMATECH semiconductor technology consortium with $100 million per year. Note that SEMATECH was founded in 1986 by which point we already had the early 68000 microprocessors, and the first ARM designs (from the UK!) appeared in 1985. Both of these were recognisable predecessors of the various CPUs that have appeared in the iPhone - indeed up to the late iPhone 4 models they used an ARM design.

I'm now curious about the other boxes in that diagram. The NAVSTAR/GPS and HTML/HTTP claims seem right to me, but I wonder about DARPA's association with "DRAM cache" - I'd expect that to come from Intel and friends - and "Signal compression" (Army Research Office) is so mind-meltingly vague a topic that you could claim nearly anyone is associated with it - the Motion Picture Experts Group who oversee the MPEG standards have hundreds of commercial and academic members. If Mazzucato's premise is that "without state support these developments would never have happened" then it's laughably refutable.

At this point I'm very tempted to order Mazzucato's book The Entrepreneurial State for the sole purpose of finding out just how misleading it is on this subject that happen to know about, and thus a measure of how reliable it is for the other parts I know less about.

Update: it seems that associating the DoE (US Department of Energy) with the lithium-ion battery is also something of a stretch. The first commercial lithium-ion battery was released by Sony and Asahi Kasei in Japan. The academic work leading up to it started with an Exxon-funded researcher in the early 70s . The only DofE link I can find is on their Vehicle Technologies Office: Batteries page and states:

This research builds upon decades of work that the Department of Energy has conducted in batteries and energy storage. Research supported by the Vehicle Technologies Office led to today's modern nickel metal hydride batteries, which nearly all first generation hybrid electric vehicles used. Similarly, the Office's research also helped develop the lithium-ion battery technology used in the Chevrolet Volt, the first commercially available plug-in hybrid electric vehicle.

That's a pretty loose connection. I suspect, since they specifically quote the Volt, that the DofE provided money to Chevrolet for research into the development of batteries for their cars, but the connection between the Volt and the iPhone battery is... tenuous.

For fuck's sake, Mariana. You could have had a reasonably good point by illustrating the parts of the iPhone that were fairly definitively state-funded in origin, but you had to go the whole hog and make wild, spurious and refutable claims just to bolster the argument, relying on most reviewers not challenging you because of your political viewpoint and on most readers not knowing better. That's pretty despicable.