A Citizen's Guide to Indiana

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Tippecanoe Rising

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Looks like the Tippecanoe River, near the Oakdale Dam and Delphi, is flooding again. It did so twice in 2008 and figures to do so again here in 2009. So far, it’s not as bad as it was last year, thankfully:

Water from the Tippecanoe River was flowing through the Oakdale Dam, which is just north of the homes that were being evacuated, at a rate greater than the flood flow rate of 13,000 cubic feet per second. Monday night, the flow was 14,350 cubic feet per second.

By comparison, in February 2008, the highest rate flowing through the Oakdale Dam was nearly 26,000 cubic feet per second.

Short term, it’s hard to know what to do for people who live in areas that are suddenly subjected to repeated flooding. (I say “suddenly,” but I guess I don’t know — seems like this frequency of flooding has to be relatively new, otherwise initial construction in these places seems unlikely.) Long term, people have to get out of these areas.

Health Care Debate Getting Started

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Ricardo Alonso-Zaldivar, writing for the Associated Press, has an article on the debate over the appropriate role of government in the health care insurance field. Leading Republicans apparently do not think government should be in the business of competing with health care insurers.

“I’m concerned that if the government steps in, it will eventually push out the private health care plans millions of Americans enjoy today,” Rep. Roy Blunt, R-Mo., said in the Republican weekly radio address.

I wouldn’t go so far as to suggest that the average American “enjoys” his or her health care insurance – even assuming they have some.

I don’t pretend to know what the best health care system would look like. But I’m pretty well convinced that the options I’ve heard from Republicans in the past — usually either nothing or tweaking the market based system — won’t work. The current system is horribly inefficient. We spend close to the most money per capita on health care and don’t get much bang for our buck. Too many people get no health care when their ailments are manageable only to get treated when their symptoms are much more severe at the emergency room which is probably one of the most expensive places to get care. These people get charged a sort of sticker price for the services which is an order of magnitude greater than the prices charged to insurers or Medicare/Medicaid patients. These people pay what they can but the unpaid bills get passed along to the paying customers one way or another. The bureaucracy involved is staggering — the government organizations involved in health care typically require less paperwork than the for-profit insurers, for whom money actually paid for providing health care is thought of as “medical loss.”

So, doing nothing is a pretty bad option. Similarly, the market is not a great tool for pricing and allocating health care resources. Health care services aren’t commodities where pricing comparisons are easy to make. Even if they were, information on health care pricing is closely guarded by health care providers. And, finally, a guy in the middle of cardiac arrest isn’t exactly in a “strong” bargaining position.

The government advantage for insurance is that it can pool a huge amount of risk. Insurance works by taking individually unpredictable risk and making it predictable by pooling the risk in a way that can be calculated statistically. The larger the pool, the more accurate the prediction. People pay premiums into the pool according to their pro rata share of the risk. All insurance involves those who don’t suffer loss subsidizing those who do suffer loss.

It should be interesting to see how those who oppose (additional) government intervention in the health care insurance industry address these issues. There is also this: “Many Americans may not realize the government already picks up nearly half the nation’s $2.4 trillion health care bill, through programs including Medicare and Medicaid.”

More on Kepler

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DarkSyde over at Daily Kos has a nice entry on the Kepler project that provides a nice bit of background on Johannes Kepler and an overview of just what the new NASA mission is supposed to accomplish.

Kepler did the math that showed the planets revolved around the sun, much to the chagrin of many religious leaders of the day who thought the Bible, rather than observation, should govern belief of how the universe functioned.

As for the current NASA mission:

Kepler is basically a horrendously accurate photometer married to a powerful wide view telescope that will trail the earth in deep space, undeterred by earth’s shadow, designed to detect minute changes in stellar brightness as planets cross in front of a parent star. The accuracy of Kepler’s photometer is so sensitive that it could detect a moth fluttering in front of a searchlight from hundreds of miles away. Only a tiny fraction of exosolar systems are likely to align in such a way that one or more planets conveniently eclipses its sun from our local perspective, but Kepler can look at one-hundred thousand stars at once!

The instrument should be able to detect the transit of smaller, more earthlike worlds along with their larger siblings, and hopefully produce a fair estimate on their size and mass. Future space and earth-based observatories will build on Kepler’s results to obtain spectra, and maybe one day the first ever direct images, revealing the atmospheric and surface composition of some of these new planets.

Kepler Launch

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NASA launched the Kepler space craft in search of earth-like planets. I can hardly wait to burn styrofoam on a pristine new planet.

NASA has launched a spacecraft with a mission to help determine something that has been the theme for many Hollywood movies over the years: whether Earth-like planets might exist elsewhere in space.

The 15-foot tall, 2,320-pound Kepler satellite lifted off yesterday at 10:50 p.m. Eastern time atop a Delta II rocket from the Cape Canaveral Air Force Station in Florida for a three-and- a-half-year mission to find other planets that may support life, according to a NASA statement distributed by PR Newswire.

Kepler carries a photometer, a device made up of 42 highly sensitive digital light sensors that will monitor a patch of 100,000 stars to detect planets that may orbit them. Its findings will be essential in determining the course of future missions looking for extraterrestrial life, said David Koch, Kepler’s deputy principal investigator.

Legal Aid 101 “Child Support” – 3/11/09

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Tippecanoe County Legal Aid will be hosting one of its “Legal Aid 101” series at the Tippecanoe County Public Library (map) on March 11, 2009 at 6:30 p.m. A panel of attorneys will provide a short presentation and answer questions about child support. Apparently there will be free pizza and drinks as well.

The library is located at 627 South Street, Lafayette Indiana. The phone number for Tippecanoe County Legal Aid is (765) 742-1068.

Watchmen Opens Today

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The movie adaptation of The Watchmen opens today. I loved the book so I’m excited to see the movie — even if it could ultimately disappoint. I remember reading it my freshman year in college – spring of 1990. I possibly had not studied adequately for a world history test. Or, in any case, The Watchmen was on my mind as I was writing an essay answer on a world history question. The question had something to do with the unlikely rise of Europe circa 1500, particularly when one looked at how comparatively strong the Islamic states to the east and south were.

In any event, I can’t remember how I weaved it in, but there is a scene in the Watchmen concerning the character Ozymandias referencing Shelley’s poem of the same name with a crumbling statue in the desert bearing the inscription, “Look on my works, ye mighty, and despair.” So, I threw in a reference to the poem and got a paragraph or two riffing on it. I got an “A” on the test, as I recall. Just one more reason for me to like the graphic novel.

It’s Not Pork if it’s for Us

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I spent nine hours in a mediation yesterday for a case having to do with a pig business relationship gone sour, so I am still thinking porcine thoughts. Presumably that is why Maureen Groppe’s article in the Louisville Courier Press caught my eye. It is entitled “Indiana earmarks nearly $71 million.”

First of all, I tend to think that earmarks are the grease that makes the machine roll. Whether you like them or not should depend on whether you like the machine — the grease is just an incidental part of the process that gets your hands messy if you’re not watching.

Increased transparency of the budget process is going to lead to increased criticism of the process because now you can see more of who requested what. Apparently Pete Visclosky, by virtue of his seniority in the majority and position on a committee writing the spending bill, got the lion’s share of Indiana’s pork. (Now I’m having visions of a lion prowling a confined feeding lot). Reps. Pence and Burton avoided the earmark process and left their districts dry (highlighting a dilemma — do you play the game as it is, or do you wish for something different?)

Senator Lugar apparently came up big for my area — $2.9 million for hybrid buses in Lafayette, $188,00 for Purdue University’s Midwest Center for Bioenergy Grasses, and $188,000 to Purdue for biomass energy research. Thank you Senator Lugar. See how this works? Federal money for local projects that seem sensible gives a voter positive feelings toward the politician that secured the money.

Gannett News Service has a breakdown.

Rep. Pete Visclosky, D-Merrillville: $29.3 million
Sen. Richard Lugar, R-Ind.: $3.3 million
Rep. Brad Ellsworth, D-Evansville: $3.2 million
Rep. Baron Hill, D-Seymour: $3 million
Rep. Joe Donnelly, D-Granger: $2.3 million
Sen. Evan Bayh, D-Ind.: $1.19 million
Rep. Andre Carson, D-Indianapolis: $1.15 million
Rep. Steve Buyer, R-Monticello: $810,000
Rep. Mark Souder, R-Fort Wayne: $717,500
Rep. Dan Burton, R-Indianapolis: $0
Rep. Mike Pence, R-Columbus: $0

RIP Uncle Al

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“Uncle Al” Lewis passed away this weekend. I don’t, honestly, remember much about the show, but I remember liking it and I remember doing “the twist” in front of the TV when they had the kids dancing. I grew up in Richmond, on the Indiana/Ohio border, so I got “Uncle Al” out of Cincinnati and “Cowboy Bob” out of Indianapolis.

According to Wikipedia “The [Uncle Al Show] ran an estimated 15,000 episodes, with an estimated 440,000 children having appeared on the show throughout it’s run.” Not a bad life’s work. Rest in peace, Uncle Al.

AIG: Ground Zero of the Economic Melt Down

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Joe Nocera does a good job of explaining how AIG is ground zero of the economic melt down. Essentially, it was a linchpin in the process of concentrating and magnifying the risk from questionable mortgage practices.

Step one – a potential homeowner maybe with or without a reasonable expectation of paying a mortgage based on varying levels of information buys a mortgage. The broker and lender take their commission and sell it on up the line; taking the money & running.

Step two – the mortgages get aggregated and sold as a security.

Step three – AIG steps in and sells credit default swaps for these securities. Basically, this is a form of magic dust sprinkled over the mortgage-backed securities to make them look safer than they are. AIG has a AAA rating. It sells these credit default swaps as a form of insurance for the mortgage-backed securities, converting these securities from their natural level of risk to a AAA rated security, ostensibly risk free or close to it.

Why would Wall Street and the banks go for this? Because it shifted the risk of default from themselves to A.I.G., and the AAA rating made the securities much easier to market. What was in it for A.I.G.? Lucrative fees, naturally. But it also saw the fees as risk-free money; surely it would never have to actually pay up. Like everyone else on Wall Street, A.I.G. operated on the belief that the underlying assets — housing — could only go up in price.

That foolhardy belief, in turn, led A.I.G. to commit several other stupid mistakes. When a company insures against, say, floods or earthquakes, it has to put money in reserve in case a flood happens. That’s why, as a rule, insurance companies are usually overcapitalized, with low debt ratios. But because credit-default swaps were not regulated, and were not even categorized as a traditional insurance product, A.I.G. didn’t have to put anything aside for losses. And it didn’t. Its leverage was more akin to an investment bank than an insurance company. So when housing prices started falling, and losses started piling up, it had no way to pay them off. Not understanding the real risk, the company grievously mispriced it.

In addition, AIG took extra money for inserting “collateral triggers” into its derivative contracts, meaning that if its rating declined (and by extension the rating of the mortgage securities it was insuring), it had to put up collateral. The credit default swaps let purchasing banks make their own balance sheets look less risky than they really were. Because they weren’t properly accounting for actual risk, these banks were allowed to advance loans without adequate capital.

So, if we let AIG go belly up, then all of that risk transferred to AIG through the magic of credit default swaps suddenly reappears on the bank’s balance sheets, triggering capital requirements for the banks, resulting in a huge crater where our banking system used to be.

Here’s what is most infuriating: Here we are now, fully aware of how these scams worked. Yet for all practical purposes, the government has to keep them going. Indeed, that may be the single most important reason it can’t let A.I.G. fail. If the company defaulted, hundreds of billions of dollars’ worth of credit-default swaps would “blow up,” and all those European banks whose toxic assets are supposedly insured by A.I.G. would suddenly be sitting on immense losses. Their already shaky capital structures would be destroyed. A.I.G. helped create the illusion of regulatory capital with its swaps, and now the government has to actually back up those contracts with taxpayer money to keep the banks from collapsing. It would be funny if it weren’t so awful.