cabinet positions to eliminate

Here are the cabinet positions and what I would do with their departments.

Secretary of State – retain but eliminate all foreign aid.
Secretary of the Treasury – retain but eliminate all IRS agents associated with Obamacare tax enforcement.
Secretary of Defense – retain but close many foreign military bases.
Attorney General – retain but eliminate the Drug Enforcement Administration by shutting down the war on drugs. Pardon all prisoners who are incarcerated for nonviolent drug crimes.
Secretary of the Interior – eliminate and transfer ownership of federal lands to the states with private ownership being the ultimate goal.
Secretary of Agriculture – eliminate.
Secretary of Commerce – eliminate.
Secretary of Labor – eliminate.
Secretary of Health and Human Services – eliminate.
Secretary of Housing and Urban Development – eliminate.
Secretary of Transportation – eliminate.
Secretary of Energy – eliminate.
Secretary of Education – eliminate.
Secretary of Veterans’ Affairs – retain but transition all health care to private hospital systems.
Secretary of Homeland Security – eliminate.
Vice President of the United States – retain.
White House Chief of Staff – retain.
Director of the Office of Management and Budget – retain.
Administrator of the Environmental Protection Agency – eliminate.
Ambassador to the United Nations – eliminate and defund all UN activities aside from the security council.
Chair of the Council of Economic Advisors – eliminate.

A diverse set of strategies can be implemented to eliminate programs on a 1 to 8 year time line. This includes:

  • Transferring ownership of assets and transferring responsibility and funds for programs to the states.
  • Privatization of programs that should be run by the private sector through industry forums, joint ventures, or other forms of collaboration. Food, drug, and product safety fall under this category.
  • Immediate elimination of programs that engage in cronyism, protectionism, and other market distortions. This includes all agricultural and industrial subsidies. This includes housing, mortgages, and loans.
  • Gradual replacement of entitlement programs with state run and private programs.

mobile payments and loyalty

Communications Service Providers, mobile device vendors, and operating system vendors are all formulating their own strategies to capture the payment market. The introduction of Near Field Communications (NFC) technology broadly into mobile devices is the key enabler for users to execute payment transactions by touching devices together. These players all see an opportunity to grab a slice of the huge payments business that credit card companies now dominate. Mobile payments using NFC is potentially very disruptive to the status quo.

From a user perspective, mobile payment seems like a small improvement in convenience. Digital technology may provide improved security and fraud protection over the extremely vulnerable scheme of authenticating a credit card number on a physical card with a matching customer name, security code, expiration date, billing address, PIN, or signature. Improved security and fraud protection would be a compelling motivator for users to adopt this technology.

While users will use mobile payments to replace some of their credit card transactions, it is unlikely that credit cards will disappear any time soon. Mobile devices with NFC are still not common enough. Even the Apple iPhone 5 does not support NFC yet, although it would be extremely surprising if the next major iPhone release did not include NFC support.

Where NFC can provide an even greater convenience is to track loyalty points and rewards. Users carry around a huge stack of loyalty cards in their wallets and on their key chains today. Every vendor has their own loyalty card. It is not uncommon to carry dozens of these. We have cards for grocery stores, pharmacies, coffee shops, retailers of every kind, airlines, hotels, car rentals… the list is endless. What I would like to see is a popular app become the de facto standard in tracking loyalty points universally, so that users can finally shed themselves of all those physical loyalty cards.

A universal loyalty app makes many other side benefits possible. The most important is personalization. A patron of a restaurant can be identified when they check in with their mobile device. They will be credited points at the end of the meal. The customer’s identity can be used to retrieve their food and service preferences, so that without needing to ask the server already knows the customer’s dietary restrictions, allergies, and favorite foods and drinks. The overall experience would be improved for both the server and the customer as communications are streamlined.

A universal loyalty app can also become the means by which coupons and promotional offerings are distributed by vendors and carried by users. This would be far more convenient than carrying around paper coupons. The app can perform important functions like reminding the user to use a valuable coupon before it expires. It benefits users to redeem more savings, and it benefits vendors by promoting more business.

A universal loyalty app can also become the means by which users may track purchases (keeping a copy of every bill) and their associated warranties and protection plans. An app could easily record purchase dates and vendor information, so that users no longer need to keep paper warranty agreements in a physical filing system.

Having loyalty points, coupons, and purchases tracked by a single app will also enable other innovations, such as dynamically calculated coupon values or promotional pricing to reward users proportional to the value of their past purchases. It also enables vendors with cross-selling opportunities to target users based on recent purchasing decisions. It opens up many avenues for innovation that we cannot even think of today.

Taxmageddon – effects of tax increases

In this article, I am going to attempt a praxeological (science of human action) explanation of the economic effects of the tax increases on high earners. I am doing this as an exercise to apply what I have been learning in my self-directed studies of the Austrian school of economics. I hope, as a baby Austrian, I do not embarrass myself too badly in this amateur attempt.

Obama is demanding that Bush era tax cuts end for high earners. This will raise the top tax rate from 35% to 39.6%. Dividend tax rates will go from 15% to 39.6%; actually to 43.4% to include the Medicare contribution tax added by Obamacare. Capital gains taxes go from 15% to 20% (actually 23.8% including Medicare contribution tax) or from 15% to 18% (actually 21.8%) if held for 5 years or more.

The immediate effect will be massive stock sales during the remainder of 2012 to take advantage of the significantly lower capital gains rate. Expect investors to favor holding their stocks and avoid profit-taking over the next 4 years in anticipation of a future reversal in tax policy.

Low (15%) capital gains tax rates and bad memories from the bursting of the dot com bubble resulted in corporate mergers and acquisitions being conducted in cash instead of stock. With high capital gains tax rates, expect that trend to reverse, as a conversion of stock does not incur any tax immediately. All of these responses mean that tax revenues from capital gains will fall significantly, as investors apply these tax avoidance strategies.

Low (15%) dividend tax rates resulted in corporations distributing profits to shareholders increasingly through dividends. Many corporations that never distributed dividends before began doing so to satisfy investor preferences due to this favorable tax treatment. With a return to high dividend tax rates, expect a return to much lower or zero dividend yields, as corporations respond to investor preferences to favor keeping retained earnings (already taxed at the corporate tax rate of 35% which is among the highest in the world) in the corporations’ coffers to hold those earnings as capital gains, which do not incur any taxes until shares are sold. Those who rely on high yielding stocks for income will shift to bonds or other forms of fixed income. In addition to Fed Quantitative Easing, which lowers interest rates while raising inflation rates, higher dividend tax rates will further hammer those who rely on fixed incomes like retirees. These responses mean that tax revenues from dividends will significantly decrease, returning to the historical trend prior to the 15% era.

Finally, there is the increase in tax rates on ordinary income in the upper bracket(s). Those who earn at these levels include business owners, corporate executives, and professionals like doctors and lawyers. Many of these high earners have some degree of control to adjust their compensation packages. Expect a greater proportion of compensation to be in the form of incentive stock options, so that tax on that income is deferred until the stock is sold. The modest marginal tax rate increase will have little effect. Those who have less control over their compensation will pay more, while those with greater control will pay less. This may end up being a wash or even a net reduction in tax revenues, if small business owners and professions work less and forego expansion due to reduced incentive. Reduction in the growth of businesses will result in a long period of economic stagnation and lack of new employment opportunities for workers.

Taking all of these effects together, it is pretty obvious that tax revenues from higher tax rates will significantly decrease. Investors avoid taxes by deferring stock sales. Investors avoid dividend taxes by influencing corporations to reduce dividends. High earners adjust compensation to defer taxes until they choose to sell stocks. Business owners and professionals forego growing due to reduced incentives. The economy will surely experience a 4 year period of slow or stagnant growth and persistently high unemployment.

Furthermore, continuing Fed QE and trillion dollar annual federal deficits funded >60% by Fed bond buying will stoke higher inflation. This adds insult to injury as real rates of return will be reduced, but capital gains taxes will be paid on fake gains from inflation. Inflated gains are fake because of the loss in purchasing power due to generally higher prices throughout the economy.

Fun times ahead.

what is wrong with TM Forum SID?

What is TM Forum?

The TM Forum is a standards organization for the communications industry. Rather than defining standards for particular network technologies, TM Forum is most interested in how to manage the processes across the entire service provider’s business. Their approach to modeling the communications problem domain divides the space into processes (eTOM), data (SID), applications (TAM), and integration. TM Forum has gained wide acceptance in the industry, and it has become the only game in town at the size and scale of its membership and audience.

What are eTOM and SID?

The business process framework and information framework together serve as an analysis model. They provide a common vocabulary and model for conceptualizing the communications problem space. As with any standards organization, the specifications are an amalgam of contributions from its diverse membership, and the result is formed by consensus.

The business process framework (eTOM) decomposes the business starting at the macro level and explores the parts at more granular levels of activities. Processes are described in terms of the actors, roles, responsibilities, goals, and the types of relevant information involved. There is no presumption of whether activities are performed by humans or automated systems.

The information framework (SID) decomposes the data into the product, service, and resource domains. Each domain is a model of entities and relationships presented as an object model using UML as the notation. The product domain is concerned with customer-facing and commercial interests. The service domain is concerned with abstracting the network resources into capabilities that can be parameterized for commercialization and that are of value to deliver to subscribers. The resource domain is concerned with the networks that enable services to be delivered.

What is wrong with TM Forum SID

As an analysis model, the eTOM and SID do a decent job to help people understand the problem space. However, these standards are problematic, because proponents promote them as being detailed and precise enough to be considered design models that can be translated directly into a software implementation. More accurately the framework is promoted as a starting point, which implies the ability to extend in a robust manner, and it is this position that I challenge. This position is stated in principle and demonstrated in practice through code generation tools. The separation of behavioral and structural modeling seems like a natural approach to organizing concepts, but at the level of detail to design software behavior and data need to come together cohesively as transactions. Object-oriented or service-oriented techniques would normally do this.

By representing SID in UML, it has the appearance of being an object model, but what it omits is behavior in the form of operations and their signatures. This is explained away by delegating the responsibility for interface specifications to the integration framework. That certainly contradicts the position that SID is a design model which translates into implementation.

Missing detailed transactional behavior

The integration framework tries to define software interfaces that directly use the SID entities. The result is a collection of interfaces that only superficially represents the behavior of the system. Because of the methodology of separating process modeling from data modeling, the interfaces are very CRUD-like, and the majority of behavior is assumed to continue residing in process integration (i.e., BPEL). This would work well for service provider specific business processes, but it is the wrong approach for defining transactional behavior that is intrinsic to the domain. These behaviors include life cycle management, capacity management, utilization and availability, compatibility and eligibility, and topology (rules and constraints for designing services and networks).

Because eTOM does not describe the behavior to this level of detail, SID does not define the entities and relationships to a level of detail that supports these essential behaviors. Consequently, neither do the interfaces defined by the integration framework. The problem is that many in the community view the model as robust with rich and unambiguous semantics, when this is far from true. If the very generic-sounding elements of the SID are used to model some of the behaviorally rich capabilities like resource utilization, we quickly discover missing attributes, missing relationships, and missing entities. Even worse, we may even find that the existing elements conflict with how the model needs to be defined to support the behavior. Sometimes a simple attribute needs to become an entity (or a pattern of entities) with a richer set of attributes and relationships. Sometimes relationships on a generalized entity are repeated in a specialized way on a specialized entity, and this is ambiguous for implementation. These issues undermine the robust extensibility of the framework, making the idea that the framework is easily usable as a starting point (extend by adding) very suspect, because extensions require radical destabilizing redesign.

Software design is a complex set of trade-offs to balance many opposing forces, including performance, scalability, availability, and maintainability alongside the functional requirements. SID cannot possibly be a design model, because none of these forces are considered. I strongly believe it would be an error to accept SID as a design model for direct implementation in software. I believe that any reasonable software implementation will have a data model that looks radically different than SID, but elements of the software interface will have a conceptual linkage to SID as its intellectual ancestry. If we think of SID in this capacity, we have some hope for a viable implementation.

a champion is a winner – are you one?

You’re not a champion of the free market if you oppose low priced goods from China and off-shoring to low cost labor. You’re just another protectionist, who favors the interests of a few domestic corporations over the interests of millions of consumers. It is a failure to understand the economics of comparative advantage.

You’re not a champion of smaller government if you want higher military spending on foreign interventions and ‘humanitarian’ missions. You’re just another big government crony in the pocket of the defense industry to promote the military industrial complex. National security in reality puts our focus on the defense of our actual national interests.

You’re not a champion of liberty if you support drug prohibition and the war on drugs. You’re just another nanny statist, who does not believe in individual rights. It is also a failure to understand the economics that create black markets, promote lawlessness, escalate violence, and increases drug potency that endanger users.

You’re not a champion of the US Constitution if you believe the Supremacy Clause gives federal powers over States beyond those powers expressly enumerated. You’re just another supporter of a living Constitution that comports with whatever powers politicians want and in whatever directions populist opinions lobby for. You talk about federal programs in education, energy, housing, and “job creation”, conceding the most important limiting principle—that the Constitution does not authorize the federal government to interfere in these ways, no matter what the present day politicians, constitutional “experts”, and the US Supreme Court (itself a branch of the federal government) has to say about it.

You’re not a champion of transparency if you support unchecked government discretion to classify information for secrecy and “national security”. You’re just another political class elitist who does not believe in accountability.

You’re not a champion against Ponzi schemes if you want to save the Social Security program as we know it. You’re just another delusional politician who thinks that kicking the can down the road to win votes today does not matter, because the inevitable crisis will not occur until someone else’s watch.

You lost, because you were not a champion.

dark matter – skepticism

I remain skeptical of both dark matter and dark energy. I don’t believe that either are valid concepts. They are hypothesized as explanations for observations that defy the current theories of how ordinary matter and energy ought to behave. I don’t have an argument to disprove either concept, but I do believe the burden of proof is on those who assert the existence of dark matter and dark energy. In this article, I would like to present an alternative theory to explain the anomalous behavior that proponents of dark matter use to support their hypothesis.

We must begin with an introduction to the topic of dark matter. One of the reasons that dark matter is hypothesized is to explain the unexpected rotational speeds of galaxies. In spiral galaxies like our own, the stars orbiting closer to the central super-massive black hole should appear to orbit very quickly, while the stars orbiting farther away should move much more slowly. The stars should behave as the planets do in our solar system. But they don’t. The galaxy rotates more like a wheel.

A wheel rotates the way it does because it is solid. The molecules that make up the solid are far apart, and the spaces between them are enormous. It is the electrostatic forces forming the bonds between molecules that are so strong that the molecules maintain a rigid structure.

Perhaps the stars within a galaxy travel together like a solid. Could the mutual gravitation between neighboring stars be strong enough to hold them together in a somewhat rigid configuration? That seems more plausible than to view the stars as orbiting the central super-massive black hole.

The Milky Way has a mass of ~1,250 billion solar masses. Its super-massive black hole, Sagittarius A*, has a mass of 4.1 million solar masses. Compare these proportions to the Solar System, where the Sun at 2 * 10^30 kg is more than 1000 times larger than the planets at less than 2 x 10^27 kg combined. The Sun’s dominant mass explains why the planets orbit the Sun. Sgr A* is puny relative to the stars in the galaxy. Perhaps this is why the mutual gravitation of neighboring stars would hold them in a nearly rigid configuration, and these influences would dominate over the gravitational force of the central super-massive black hole.

I don’t have the math skills to test that hypothesis. But it’s fun to wonder about such things in the hopes that someone with skills might think of the same idea and publish a legitimate version of the theory.