Best Speech Ever -- Bill Clinton and the DNC

I've always had a problem with Bill Clinton, and it only got worse while he let the country wallow in the Lewinksy mess and then turned around a pardoned a bunch of criminals (especially the rich ones) just as he was leaving office.  But today, I think I might just be starting to warm to him.  He has probably done a lot of good with his foundation.  And his DNC speech was masterful.  Just watch it.  Again and again if need be.  It  says just about everything that needed to be said.  The Republicans these days are an easy target, and he showed why, with one killer shot after another.

Again, how DARE they claim to be the party of fiscal responsibility?  Clinton just reminded me that they quadrupled the federal debt in the twelve years before Clinton took office and then doubled it in the eight years after he left.  And yet their entire plan seems to be about giving tax breaks to the rich, and financing that by either (1) closing unspecified loopholes, or (2) cutting aid to people who need it most -- poor children.

The whole Republican fantasy -- no regulation and no taxes -- has never existed anywhere, certainly not in any truly successful modern nation state.  And it's just downright irresponsible to somehow pretend that it is going to be the answer to all our problems -- the problems that were caused by Republican deregulation in the first place.

GOP USA -- Just How Dumb Are They?

I have no idea how I got on GOP USA's mailing list.  Normally I just skip them, but today's headline was "Obama Voters: Just how dumb are they?", and something made me click.  It brought me here,

They have some videos of some very young people making some pretty silly statements.  It's not clear which of them are the so-called "dumb" Obama voters.  Some of them are saying that they don't care that our ambassador was killed.  Some are saying that the video caused it, some are saying it wasn't the video, or that the video set it off.

They also had some interviews by Howard Stern, where the interviewer questioned a series of black people asking them false-premised questions like "Do you think Obama did the right thing by choosing Paul Ryan as a running mate?", or "Do you think they'll ever catch Bin Laden?"  And of course, you'll always be able to find people who simply answer questions like that without saying "what are you talking about?!"  In fact, even people who know better will sometimes assume that a person with credibility -- i.e. a seemingly serious interviewer -- is asking a legitimate question, and they'll proceed with an attempt to answer it.

Very few (if any) of the "dumb" people in the first video identified themselves as Obama supporters.  In fact, some of them were clearly against the U.S.'s (i.e. Obama's) continuation of the course of action that Bush started us on in the Middle East. While several in the second group identified themselves as Obama supporters, that's understandable -- they were clearly black, and clearly in the 47%.

So this is an even worse example of the "correlation"/"causation" fallacy.  In fact, the reasoning here is so flawed I'm not sure it even has a name.  All they've done is taken some people, some of them Obama supporters, and gotten them to say things on camera that seem either stupid, or unpatriotic, or in some cases, possibly both.

They've taken a miniscule, non-random sample (i.e. a sample selected by Howard Stern presumably for the very purpose of demonstrating the "dumbness" of the interviewees) and found that the people were "dumb" based on their failure to challenge the false-premised questions.  And because there is a "correlation" between "dumbness" and Obama-favoring in this sample, that somehow means that all Obama voters are dumb (or at least that's what the title implies).

So, not only are all rich people "job creators" because some of them are, but all Obama voters are "dumb" because some of them are.

What's sad is that THIS is the tactic that the GOP is using to mobilize ITS base to persuade them to go out and vote.  I hope you see where I'm going -- the GOP (or at least GOP USA, whatever that is) knows darn well that its own constituency is dumb, so it uses dumb arguments to persuade them that they are smart.  It might just work . . . . .!

Job Creators -- the Correlation/Causation Fallacy and Paris Hilton

I had an obvious thought just now, and then decided to google it just after writing the title, as opposed to after writing the post.   I see some people on Straightdope have made this point, but I think it bears repeating here and elsewhere.

I didn't say it so many words in my previous posts, but it's worth pointing out that the "rich people as job creators" myth is not just empirically silly, it's also an example of the correlation/causation fallacy.

While it's true that people who create a lot of jobs are typically rich (or on their way to becoming rich), that does NOT mean that any given rich person is likely to be a job creator.

Much of Mitt Romney's platform is based on the fallacy that giving MORE money to rich people will result in more jobs being created.

The only reason that Republicans are in this race at all is because they appeal to rich people, who can spend a lot of money to try to persuade the uneducated and unwashed that they know best how to solve the problem.

But look at it this way.  If you had a billion dollars and wanted it to create jobs, who would you give it to?

(1) Paris Hilton, with no strings attached

or

(2) A government agency given the specific task of using the money to create useful, lasting jobs.

I admit I cringed as I wrote (2) above -- I don't think the government has done a particularly good job at creating jobs.  But I think we (even the uneducated unwashed) can agree that the government would do a better job than Paris Hilton.

UPDATE 10/03/12

Just saw the following headline in Slate:

The Internet Blowhard’s Favorite Phrase

Why do people love to say that correlation does not imply causation?

So does that make me an "internet blowhard," or is the fact that I just used the phrase above another example of the correlation/causation fallacy?

The article is by Daniel Engber, and I've gone through it a couple of times and am not sure I get his point.  The short story is that he seems to acknowledge the prevalence and problems with the fallacy, but he calls people who point it out "blowhards" and seems to advocate that we stop using the "catch-phrase" altogether.  Go figure.

He starts off on a confusing note by citing a study which apparently found that depressed college students send more email and IMs and do more file-sharing than do non-depressed college students.  In other words, the study found a correlation.  He doesn't say that the study somehow concluded that these kinds of internet activity caused depression, or that depression caused these kinds of internet activity.  If he had, that would have explained his next sentence, which was that "Not everyone found the news believable."

But so far, the news is just that there was a correlation.  From his report, I don't see any indication that anyone disbelieved the correlation.  One has to click on his links to see what the article reporting the study actually said, and what the commenters were reacting to.  In short, it was this:

"The researchers recommend using these primary findings to further identify correlations between Internet usage and other mental health disorders including anorexia, bulimia, ADHD and schizophrenia. The study’s authors hope to use the findings to apply future software applications that could warn Internet users if they are displaying depression symptoms online."

Commenters were reacting to what they thought was an assumption that an increase in certain web behaviors that are correlated with depression actually justifies warning people that they might be depressed.  Perhaps the commenters were over-reacting a little bit -- as Engber later points out, correlations often are useful indicators.  [as an aside, I generally agree with the commenters that the fallacy is at work here, but I also think the software is silly for other, even more important, reasons]

So he started off on a bad note by not fully explaining his example.  He then goes on with stuff like this:

"So how did a stats-class admonition become so misused and so widespread? What made this simple caveat—a warning not to fall too hard for correlation coefficients—into a coup de grace for second-rate debates?"

He never provides data for his assumption that the admonition has become "so misused."  So far, he's only given us one example, and in that example, the internet blowhards citing the fallacy were simply pointing out the obvious fact that just because a person sends more email, that doesn't mean he's depressed.  Although this doesn't finally answer the question of whether or not the software will be useful, it's perfectly fair to point it out -- I don't think it's a "misuse" of the admonition.  But in any event, the reader of Engber's article can't judge whether or not it's misused, because he hasn't taken the trouble to explain how they were using it.

He then goes on to report on the origins of the phrase, and the fact that it has becoming significantly more widespread in the "computer" age.

I am slowly beginning to think that this article is satire -- he seems to be linking correlation after correlation to causation after causation.  Let's take a closer look:

"Those first, modest peaks of 'correlation is not causation' show up in print in the 1890s—a date that happens to coincide with the discovery of correlation itself.  That's when the British statistician Karl Pearson introduced a powerful idea in math: that a relationship between two variables could be characterized according to its strength and expressed in numbers."

The second sentence more or less refutes the first one here.  It's not that "correlation" was "discovered" in the 1890s, it's just that someone figured out a way to use math to show the strength of a correlation.  But it's probably true that Pearson's work paved the way for studies that pointed to correlations, and made assumptions about causation, which might have caused others to point to the correlation/causation fallacy.  Engber seems to acknowledge this: "As correlations split and multiplied, we needed to remind ourselves of what they meant and what they didn't."

He then provides an interesting if somewhat pointless graph showing that usage of correlation has increased since 1890, whereas "causation" has stayed relatively constant:



Not a surprising graph given that the increase in usage started when the math was worked out.  The increase just shows that the concept caught on, and entered the popular vocabulary in a way that "causation" has not. If you think about it, people today use the word "correlation" a lot more than they use the word "causation."  (As an aside, he invites "someone else [to] explain why correlations have been trending downward since 1976."  I can't answer that definitively here, but I note that there has been an explosion of texts, as well as new words, since 1976.  This is apparently just measuring the percentage of the time that any given word in a book (on average) happens to be "correlation."  If the overall vocabulary is increasing, the percentage usage of any given word will go down.  Likewise, it might be explained by a differential growth of types of literature that are less likely to use the word "correlation" than the types of literature that were sampled for 1976.)

He then points out that "in the present day, . . . Google, Amazon, and the other data juggernauts belch smoggy clouds of information and spit out correlations by the ton" and quotes someone as saying "To them [Amazon, etc.], perhaps, automated number-crunching stands for the highest form of knowledge that civilization has ever produced."  And then Engber speculates:  "In that sense, the admonitory slogan about correlation and causation isn't so much a comment posted on the Internet as a comment posted about the Internet. It's a tiny fist raised in protest against Big Data."

Hard to tell where he wants to go with this; he seems to have become so enthralled by his metaphors that he forgot to link them to his thesis.  I would guess that people who point to the fallacy are typically pointing out a misuse of "correlations," as I am doing above.  I'm not trying to shake my tiny fist at big data.  It's not a movement, it's just an occasional observation, made in reaction to bad logic (or, if misused, in reaction to perceived bad logic).

Engber then veers off to say that there are other limits on the utility of statistics as well -- e.g. that the term "statistical significance" is arbitrarily set at 5% (i.e. a result is considered "significant" if the chance that it occurred randomly is less than 5%).  BTW, this reminds me of a good xkcd.com cartoon on the subject:

That's http://xkcd.com/882/ (since people who read this blog might not be as mathematically-inclined as those who read xkcd, the point is if there's a 5% chance of coincidence, and you test something 20 times, chances are that the coincidence will occur in one of your tests).

Back to Engber -- he now wonders why people don't point out this problem with "significance" as often as they point out the problem with correlations:

"'Don't confuse statistical and substantive significance!'" That comment-ready slogan would be just as much a conversation-stopper as correlation does not imply causation, yet people rarely say it. The spurious correlation stands apart from all the other foibles of statistics. It's the only one that's gone mainstream. Why?"

The answer is pretty obvious -- people abuse causation/correlation much more often, and more blatantly, than they "abuse" statistical significance.  

More rumination and the conclusion from Engber:

"I wonder if it has to do with what the foible represents. When we mistake correlation for causation, we find a cause that isn't there. Once upon a time, perhaps, these sorts of errors—false positives—were not so bad at all. If you ate a berry and got sick, you'd have been wise to imbue your data with some meaning. (Better safe than sorry.) Same goes for a red-hot coal: one touch and you've got all the correlations that you need. When the world is strange and scary, when nature bullies and confounds us, it's far worse to miss a link than it is to make one up. A false negative yields the greatest risk.

"Now conditions are reversed. We're the bullies over nature and less afraid of poison berries. When we make a claim about causation, it's not so we can hide out from the world but so we can intervene in it. A false positive means approving drugs that have no effect, or imposing regulations that make no difference, or wasting money in schemes to limit unemployment. As science grows more powerful and government more technocratic, the stakes of correlation—of counterfeit relationships and bogus findings—grow ever larger. The false positive is now more onerous than it's ever been. And all we have to fight it is a catchphrase."

So he has meandered back to the basic point -- that there currently IS a lot of abuse of correlation/causation going on, in all manner of discourse. and that this IS a problem.  If that's the case, why is he so against people trying to point it out?!

His final words -- "And all we have to fight it is a catchphrase" -- are baffling.  If overuse of correlations is a problem, and our only weapon is this catchphrase, why is he preaching unilateral disarmament?!  Why does he "correlate" use of this phrase with "Internet blowharded[ness]"?

It might be our only weapon against all these false correlations, but it's a pretty effective one -- it reminds people, in language that nearly everyone understands, that a correlation -- such as the fact that people who create jobs are typically rich -- says nothing about causation.  The state of being rich does not cause one to create jobs, and giving more money to the rich (by lowering their taxes) will not cause the rich to create more jobs.  What's odd is what I observed when I started this post -- that so few people on the internet had pointed out that the "job creator" myth is yet another example of the causation/correlation fallacy, even though that's so obviously what it is.

If you're one of those internet blowhards that likes to point out causation/correlation fallacies, keep up the good work!

(And for the record, I'm still afraid of poison berries.)

TI-84 ripoff

Every few years I seem to be required to shell out another $100 or more for a lousy calculator for one of my kids.  At this point, I can practically buy a laptop for that price.  Why doesn't Texas Instruments have any competition in "graphing calculators"?!  This cartoon from xkcd.com says it all:

I see from Amazon that Casio and HP both have "graphing calculators" that are currently selling in the $40 range, but they also have higher priced versions.  And you can't send a kid to school with one of those if everyone else has the TI-84.  A commenter on Straightdope suggests getting a TI-82 on eBay for $20 or so; and it looks like you might be able to get a TI-83 on eBay for about $30.

But seriously, it's clearly a case of TI capitalizing on the "lock-in" effect of teacher after teacher requiring the purchase of TI graphing calculators.  Somebody -- some school, some school district -- needs to step in and break the cycle.  Either that, or someone just needs to create a decent "graphing calculator" app, so that the kids can simply use their phones in class.

For all I know, someone has already done that.  I see there are graphing calculator apps for droids and i-stuff.  It's really up to the teachers and the schools now.

Makers and Takers

I have only a little bit to add to Ezra Klein's explanation of how Romney can say that 47% of Americans don't pay taxes.  The two things I'll add below are (1) an explanation of what "payroll tax" means, and (2) the point that this just demonstrates that our economy includes a large number of jobs for which our current tax system (mostly put in place by Republicans) has deemed it imprudent to require Federal Income Taxes.  We can call those people "takers" if we want, but they've taken the jobs in our economy that nobody else wants.

The one thing Klein doesn't do is explain what payroll tax is, and that's unfortunate, because the term is ambiguous and therefore inherently confusing.  Here's what Wikipedia says:

"Payroll tax generally refers to two different kinds of similar taxes. The first kind is a tax that employers are required to withhold from employees' wages, also known as withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG) and often covering advance payment of income tax and social security contributions. The second kind is a tax that is paid from the employer's own funds and that is directly related to employing a worker, which can consist of a fixed charge or be proportionally linked to an employee's pay. The charges paid by the employer usually cover the employer's funding of the social security system."

So technically, if my income tax is being withheld, then I'm paying payroll tax.  But it's also possible to pay payroll tax without having income tax withheld.  In that case, money is withheld from my paycheck to help finance the costs of employing me in the first place, and this can include Social Security and Medicare, but not necessarily income tax.  It's that latter class of people that make up the 28% in the chart above.

So it's apparently perfectly accurate to say these people (more accurately, households) don't pay income tax.  They don't.  And it shouldn't surprise us that they have jobs -- obviously, we don't have an unemployment rate of 47%.  All that means is that they are the working poor, or at least the working "pretty poor."  They make enough money to take them out of "unemployed" statistics, but not enough for the government to think they need to be taxed.  Interestingly, (according to Klein) the growth of this segment of the population seems to be attributable to Republican tax cuts under Reagan and Bush 2 -- in the course of cutting taxes for the rich, they also cut taxes for the working poor.

When I say working poor, I note that this segment -- or at least some of it --  does make over $20K per year (a separate slice of the pie is the 6.9% who make less than that).  [It's hard to say for sure how the pie chart handles overlap between these two slices -- i.e. there are presumably people who make less than 20K per year AND pay payroll taxes -- do they count for the 28.3 percent, or the 6.9%?  Or are they double counted?].

So where does that leave us?  In a way, Romney is right.  There are 47% of people who don't pay Federal Income Tax, who presumably benefit from government programs funded by other people's income taxes.  Yes, they pay other kinds of taxes -- state taxes (including the very regressive sales tax), as well as Federal Medicare and Social Security taxes -- but that's not relevant to the Republicans' basic point, about them benefiting from programs that they didn't contribute to (or in the case of the elderly, aren't currently contributing to).  So technically one could call these people "takers" not "makers."

But the reason for that is that they are doing the jobs that nobody else wants to do -- the thankless, low-paying jobs.  Apparently, that's somewhere on the order of 28.3% of all jobs in our economy.  For whatever reason, our tax system says that people in that kind of job don't need to pay Federal Income Tax.  Does Romney plan on changing that?  If so, how?!  Is he going to start taxing these people?  If he does that, then why would these people -- who presumably can barely make ends meet as it is -- even take these jobs?

And if we need to provide these people with subsidized health care so that they can stay in these jobs, isn't that something we should do?  [Of course, as I've said elsewhere, ObamaCare might not have been the right way to do it, but that's a different story].

So Romney may well be right that he's not going to be able to reach 47% of the voters, since apparently he recognizes that his platform is going to hurt them.  If I were in one of those classes, I'd be very scared of what the Republicans might do.  But I'm not (thankfully), and I'm still very scared.  Sorry Mitt.

Here's another chart, also from Citizens for Tax Justice (via the WashingtonPost):

Bread Flour Pricing

I doubt it costs any more to make "bread flour" (or "better for bread" flour) than it costs to make regular flour.  But supermarkets will try to gouge you here (I'm assuming it's the supermarkets, not the wholesalers, because if it were the wholesalers, the supermarkets would all go to the cheaper brands).  In the DC area, Shoppers Food Warehouse stocks only the "King Arthur" brand bread flour, and sells it for a whopping $4.79 for a 5 pound bag.  Giant stocks "Gold Medal" bread flour, and sells it for only $3.29.  So if you think you can trust Shoppers to always give you the best prices, think again.

As usual, after I wrote this I checked to see how well known this phenomenon was.  It turns out King Arthur costs more everywhere -- in some places twice as much as Gold Medal -- and is considered by some to be a better brand of flour than the others.  But the one guy who tested King Arthur side by side with Gold Medal (Northwest Sourdough) liked them both a lot, but actually liked Gold Medal a little bit better.

So (consistent with my practice of not usually editing myself after I find new facts, but rather simply "correcting" myself later in the post), Shoppers is not being quite as nefarious as I thought -- they have limited shelf-space for bread flour and they choose a brand that bread connoisseurs may well prefer.  But it doesn't hurt them that the profit margin on that sort of "gourmet" item will be greater than for your standard Gold Medal bag of bread flour.

Getting Cheap Air Fares

Always a challenge.  Here are some good tips, courtesy of foxbusiness.com:

Set up daily or weekly price alerts.

Don't buy more than 3 months in advance.  Start checking prices at that time.

Prices stay the same until about 28 days before departure.

Prices are lowest 18-28 days before departure (=magic window).

Domestic fares are lowest 21 days before departure (about 8% lower than average fares available six months before departure) (seems like a strange comparison)

Fares increase 5% (on average) two weeks before departure, 30%  the week before departure.

"International fares don’t fluctuate as much; 34 days before departure, fares are about 4% lower than the average at six months before departure."  Still, somehow I got a flight to Europe on a Turkish airlines flight that for a few hours (or maybe days) was about half the price of other airlines -- and this was about 3-4 months before departure.  So "fluctuate" might not be the right verb for a sentence talking about average.

Consider booking hotel when booking airfare.  Apparently those package deals really are good deals, and can include meals.

Airlines announce sales on Tuesdays -- look mid-day Tues to Wed. morning for best sales.

They also announce last-minute weekend deals on Tuesdays.

Wednesday is the cheapest departure date, then Tuesday, then Saturday.

For weekend trip, cheapest is to leave Saturday and return Monday.

Early morning flights are often cheaper and more reliable (fewer delays/cancellations); overnight flights, late afternoon, and dinner flights can also be good deals.

Smaller airports can be cheaper.

One stop flights can be cheaper than non-stops.

One way tickets (from different airlines, each way) can be a bargain.  See Hacker Fares.

If prices go down after you book, you might be able to get a credit.  If within 24 hours of purchase, you'll get it all back.  If later than that you might get a credit, but you might be charged a fee.

Read more: http://www.foxbusiness.com/personal-finance/2012/08/30/how-to-get-cheapest-price-on-airfare/#ixzz25h3Z49ld

Hooray for Junk DNA

Today's Washington Post reports various studies showing the junk DNA is even more important than we thought.  To recap, at one point we thought it was junk -- not needed for anything; gradually we came to realize that some of it played some role in regulation of genes, and now we realize that it plays a really big role in regulation of genes.

So it's only "junk" in the sense that it's not the genes themselves; it doesn't code for proteins.  If you want to code a protein in a dish, all you need is the gene, not the junk (i.e. you work with cDNA, not gDNA).  But if you truly want to understand an individual person's genetic makeup, you NEED the junk DNA.

Romney's Bain Rescue

It is becoming increasingly clear that there is no such thing as a "good" (i.e. capable) businessman when it comes to running large financial companies.  Somehow, the very nature of that enterprise -- making money from (other people's) money -- creates incentives for risk-taking, and the risk-takers who win are always rewarded in terms of (a) winning, and (b) higher compensation.  In other words, the lucky rise to the top at disproportionate rates -- possibly at the expense of moderation or even understanding -- and eventually the luck always runs out.

How could anybody, no matter how capable, run a business like that?

Which is why there are no superstar financial CEOs.

Jamie Dimon was until he wasn't.

Sandy Weill was until he wasn't.

Robert Rubin was until he wasn't.

And several other bumblers were until they weren't as well.

So when Romney claims to have been a capable CEO of such a business, you have to take that with a grain of salt.  In the "The Federal Bailout That Saved Mitt Romney" in the Sept. 13 2012 of Rolling Stone, Tim Dickinson uses government documents to attempt to disprove Romney's own mythology about himself.

As will become clear as you read the rest of this post, as I read Dickinson's article more closely, I think Dickinson overstates the case against Romney, and is also missing key facts that would help readers judge whether what Romney did was defensible.

The bottom line, as I understand it, is that Bill Bain spun off "Bain Capital" (a private equity firm) from "Bain and Company" (a consulting firm) in 1984, and put Romney in charge of Bain Capital.  Mr. Bain and his cronies then looted Bain and Company for money to plow into Bain Capital, leaving Bain and Company $200 million in debt.

As an aside, this has always baffled me -- how is it that consulting firms (and law firms for that matter) wind up having so much debt?  Presumably they make their money by providing consulting services; what need is there for borrowing money?  When the press reports on debts like these, are they failing to mention some underlying physical assets or real estate?  Here's a quote from the article:

"To free up money to invest in the new business, founder Bill Bain and his partners cashed out much of their stock in the consulting firm – leaving it saddled with about $200 million in debt. (Romney, though not a founder, reportedly profited from the deal.) "People will tell you that Bill raped the place clean, was greedy, didn't know when to stop," a former Bain consultant later conceded. "Did they take too much out of the firm? You bet.""

So that's interesting.  Can I start a company, give myself all its stock, and then borrow $200 million dollars to get the company going, and then "cash out" my stock -- i.e. sell my stock back to the company for $200 million" and walk away?  Nice work if you can get it -- although there were doubtless a few more steps in Bain's process, this seems to be exactly what the founders did.  But of course the article doesn't specify exactly how much of the $200 million they took out (see below, it was at least $25 million).

End of aside.

Things went from bad to worse at Bain and Company when in the late 1980s a Bain consultant was implicated in a London financial scandal, and the recession hit.  Romney was then put in charge of Bain and Company -- which, as above, was suffering from a damaged reputation, founder looting, and a recession --  and he now claims to have rescued it.

The article explains how he did it.

The choice for Bain & Co. and its creditors was whether to let Bain go bankrupt (in which case the creditors would get to divide Bain's looted assets), or whether something could be done to enable Bain to keep going, so that it could eventually honor its debts to the creditors (or at least pay the creditors more than they would have gotten out of a bankruptcy).

Romney apparently started off well:  according to the article, "He persuaded the founders to return $25 million of the cash they had raided from Bain & Company and forgive $75 million in debt, in return for protection from most future liabilities."

Another aside:  The reference to debt-forgiveness by the founders is somewhat puzzling, and I don't think it has an antecedent basis in the article.  Perhaps it means that the founders hadn't really taken out a full $200 million -- this suggests that they took out at least $25 million, and also managed to set things up so that the company still owed them money as creditors.  This also suggests that the $200 million initially reported in the article included $75 million lent by the founders.

End other aside.

This suggests that Romney might well have "repaired" whatever damage Bain had inflicted on itself through the looting.

Unfortunately, the article is woefully short on numbers from here on in, just referring to "massive debt" but noting that the company was "flush with cash" because of the money put in by the founders.  The article tells us that Romney consolidated its remaining debts with four banks, one of which was owned by the FDIC and was owed $30.6 million (this is where Romney's claim that he saved taxpayers $30 million comes from).

As mentioned, the article says that the company was "flush with cash" as a result of Bain's having given up some of the looted money, and then says:

"Under normal circumstances, such ample reserves would have made liquidating Bain an attractive option: Creditors could simply divvy up the stockpiled cash and be done with the troubled firm."

But there's no clear support for this.  All the reader can see is that the company might have gotten $25 million in "cash" from Bain etc.  But as far as I can tell, it was still at least $100 million in debt.  So creditors divvying it up in bankruptcy would get only 25 cents on the dollar.  WE NEED MORE NUMBERS!

There article goes on to explain the negotiation:

"But Bain had inserted a poison pill in its loan agreement with the banks: Instead of being required to use its cash to pay back the firm's creditors, the money could be pocketed by Bain executives in the form of fat bonuses – starting with VPs making $200,000 and up. "The company can deplete its cash balances by making officer-bonus payments," the FDIC lamented, "and still be in compliance with the loan documents."

"What's more, the bonus loophole gave Romney a perverse form of leverage: If the banks and the FDIC didn't give in to his demands and forgive much of Bain's debts, Romney would raid the firm's coffers, pushing it into the very bankruptcy that the loan agreement had been intended to avert. The losers in this game would not only be Bain's creditors – including the federal government – but the firm's nearly 1,000 employees worldwide.  {PF Note: now, just a few words after saying the company should have been liquidated, Dickinson is worried about the Bain employees who would lose their jobs in a liquidation]


"In March 1992, according to the FDIC documents, Romney approached the banks and played the bonus card. Allow Bain to pay off its debt at a deep discount, he demanded – just 35 cents on the dollar. Otherwise, the "majority" of the firm's "excess cash" would "be available for the bonus pool to its officers at a vice president level and above.""

We just don't have the numbers to really assess this.  But if the "cash" on hand was $25 million, I guess the fact that he could pay out "the majority" of it in bankruptcy suggests that he could have paid more than $12.5 million in bonuses, rather than let the creditors have it.

I have to admit if I were in his position, I would have played the same card.  If I was a shareholder in Bain, I would hope that whoever was in charge of that negotiation would have played that card.  It's a negotiation, after all.  But we still don't know how exactly the 35 cents on the dollar compared with a bankruptcy return.  As above, it appears that even without paying the bonuses, a bankruptcy might have resulted in only 25 cents on the dollar.  So 35 cents might have been reasonably generous (and would have allowed the 1000 Bain employees to keep their jobs).

And it's also pretty interesting that the four remaining banks -- the creditors at issue here -- were willing to permit Bain to put that "poison pill" into their agreements.  You would think that if they had had any negotiating sense, they wouldn't have done that.  It's really the carelessness of those banks (plus the FDIC) that's to blame for Romney's negotiating tactic.

"The next month, when the banks balked at the deal, Romney decided to prove he wasn't bluffing. "As the bank group did not accept the proposal from Bain," the records show, "Bain's senior management has decided to go forth with the distribution of bonuses." (Bain's lawyers redacted the amount of the executive payouts, and the Romney campaign refused to comment on whether Romney himself received a bonus.)

"Romney's decision to place executive compensation over fiscal responsibility immediately put Bain on the ropes. By that July, FDIC analysts reported, Bain had so little money left that "the company will actually run out of cash and default on the existing debt structure" as early as 1995. If that happened, Bain employees and American consumers would take the hit – an alternative that analysts considered "catastrophic."

"But Romney didn't dole out all of Bain's cash as bonuses right away. According to a record from May 1992, he set aside some of the money to put one last squeeze on the firm's creditors. Romney now demanded that the banks and the government agree to a deal that was even less favorable than the last – to retire Bain's debts "at a price up to but not exceeding 30 cents on the dollar.""

So this is all part of the negotiation -- yes, Romney put Bain on the ropes [although query whether Bain wasn't already on the ropes], but only because the banks refused to accept his initial offer of 35 cents on the dollar.

And now this:

"The FDIC considered finding a buyer to take over its loans to Bain, but analysts concluded that "Bain has no value as a going concern." And the government wasn't likely to get much out of Bain if it allowed the firm to go bankrupt: The loan agreement engineered by Romney had left the FDIC "virtually unsecured" on the $30.6 million it was owed by Bain. "Once bonuses are paid," the analysts warned, "all members of the bank group believe this company will dissolve during 1993.""

I can't help but resent the line "the loan agreement engineered by Romney."  There were two parties to that agreement, and this was at exactly the time that the FDIC had the very most leverage.  And yet its lawyers apparently allowed the poison pill provisions, and otherwise left the taxpayers "virtually unsecured" on their $30.6 million.  The article gives a hint as to how this might have happened -- the head of the FDIC was Bill Seidman, an old crony of Romney's father's, and Romney had  given a  former FDIC bank examiner a senior executive at Bain position a month before closing on the loan agreement (but there's no indication of when the guy worked at FDIC -- also I'm not sure why this would motivate the people left behind at the FDIC to negotiate a bad agreement).

Towards the end of the article, we get some numbers that might have been helpful sooner:

"In the end, the government surrendered. At the time, The Boston Globe cited bankers dismissing the bailout as "relatively routine" – but the federal documents reveal it was anything but. The FDIC agreed to accept nearly $5 million in cash to retire $15 million in Bain's debt – an immediate government bailout of $10 million. All told, the FDIC estimated it would recoup just $14 million of the $30 million that Romney's firm owed the government.

"It was a raw deal – but Romney's threat to loot his own firm had left the government with no other choice. If the FDIC had pushed Bain into bankruptcy, the records reveal, the agency would have recouped just $3.56 million from the firm."

Again, the "other choice" would have been to negotiate a better agreement.  And also, this would seem to confirm my suspicion above that even apart from the poison pill, and even when the company was "flush with cash" bankruptcy would not have been the best option.  The result was that the government (apparently) got 14 million back on 30.6 million, which is over 45 cents on the dollar, which is more than Romney ever offered.

And now for the last two paragraphs:

"But while taxpayers did not finance the bailout, the debt forgiven by the government was booked as a loss to the FDIC – and then recouped through higher insurance premiums from banks. And banks, of course, are notorious for finding ways to pass their costs along to customers, usually in the form of higher fees. Thanks to the nature of the market, in other words, the bailout negotiated by Romney ultimately wound up being paid by the American people."

Yes, banks are notorious for increasing fees (and if you've been reading this blog, you'll know I've been victimized by some of them), but that's very different from a taxpayer-funded bailout.  The fees fall disproportionately on members of the public who are too clueless to notice or avoid them -- modern capitalism at work.

"Even as consumers took a loss, however, a small group of investors wound up getting a good deal in the bailout. Bain Capital – the very firm that had triggered the crisis in the first place – walked away with $4 million. That was the fee it charged Bain & Company for loaning the consulting firm the services of its chief executive – one Willard Mitt Romney."

We also don't have enough facts to assess this.  Obviously Romney provided significant value to Bain and Company by saving it from liquidation.  But was there really $4 million in cash in Bain and Company available for this?  Did the FDIC have to approve it?

Now let's take a quick look at how the Romney campaign characterizes the Bain & Co. rescue:

"In 1990, Mitt Romney's former firm, Bain & Company, was in a dire situation. It was on the brink of collapse. The leaders of Bain & Co. asked Romney to come back to the firm to lead it out of the precipitous fall it was experiencing. His return to the company provided an instantaneous morale boost for the employees that recognized Romney's leadership capabilities and his strong record of turning around companies. He reined in spending, made executives more financially accountable, and put the focus back on customer service.

"Bain & Co.'s turnaround was an incredible success: In just a year, a company on the brink had returned to profitability. Mitt Romney not only saved thousands of jobs, but also set the firm on a course to be one of the largest and most successful management consulting firms in the world. Today, Boston-based Bain & Co. has more than 5,000 employees - including 3,500 consultants - and is ranked #1 on multiple "best places to work" lists."

Ok, that's a bit vague and it doesn't mention the negotiating tactic (and the payout of executive bonuses).  But it doesn't seem to be untrue . . . . .

In Defense of "Plagiarism"

I'm not really defending "plagiarism."  One of the few things I remember about my high school English class was when, in discussing The Scarlet Letter," my teacher explained that "revenge" was one of the worst of all possible sins, right up there with plagiarism.

While some plagiarism is obvious and obviously reprehensible -- i.e. taking someone's work and passing it off as one's own -- much of what passes for plagiarism is in a much grayer area.

For starters, plagiarism is not a legal term.  Inevitably, people concerned about plagiarism can really only cite copyright law, which is something quite different.  Here's the entire front page from "plagiarism.org":

What is Plagiarism?

Many people think of plagiarism as copying another's work, or borrowing someone else's original ideas. But terms like "copying" and "borrowing" can disguise the seriousness of the offense:

According to the Merriam-Webster Online Dictionary, to "plagiarize" means

• to steal and pass off (the ideas or words of another) as one's own
• to use (another's production) without crediting the source
• to commit literary theft
• to present as new and original an idea or product derived from an existing source.

In other words, plagiarism is an act of fraud. It involves both stealing someone else's work and lying about it afterward.

But can words and ideas really be stolen?

According to U.S. law, the answer is yes. The expression of original ideas is considered intellectual property, and is protected by copyright laws, just like original inventions. Almost all forms of expression fall under copyright protection as long as they are recorded in some way (such as a book or a computer file).

All of the following are considered plagiarism:

• turning in someone else's work as your own
• copying words or ideas from someone else without giving credit
• failing to put a quotation in quotation marks
• giving incorrect information about the source of a quotation
• changing words but copying the sentence structure of a source without giving credit
• copying so many words or ideas from a source that it makes up the majority of your work, whether you give credit or not (see our section on "fair use" rules)

Most cases of plagiarism can be avoided, however, by citing sources. Simply acknowledging that certain material has been borrowed, and providing your audience with the information necessary to find that source, is usually enough to prevent plagiarism. See our section on citation for more information on how to cite sources properly.

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Note how when they get to giving examples, they simply say "All of the following are considered plagiarism."  It's not untrue -- there are probably some people who consider everything on that list plagiarism -- but there are doubtless others (including me) who don't "consider" all of these things plagiarism.

Some of them could be simple mistakes -- e.g. I didn't put the copied text above in quotation marks.  Was that plagiarism?

Did John F, Kennedy commit "plagiarism" when he put his name on Profiles in Courage (assuming the allegations that Ted Sorensen ghost-wrote it for him are correct)?  [just looked that up on Wikipedia and saw the following, which I hadn't heard before -- the joke around the Senate was that they wished Jack had a little less profile and a little more courage.].  Put another way, is it really "plagiarism" when the true writer is a willing (and well-paid) participant in the process?

I seriously doubt that either Mitt Romney or Barack Obama wrote their campaign books all by themselves -- does that disqualify both of them from being President?

Likewise, "giving incorrect information about the source of a quotation" could be a simple mistake, not plagiarism.  In fact, putting the thing in quotes ought to be a pretty good defense AGAINST plagiarism, because in that case you're making it clear that they are NOT your words (that's not to say that misattributing a quote is never misconduct; just saying it's not always plagiarism).

And then there's "changing words but copying the sentence structure of a source without giving credit."  This goes beyond the traditional definition of plagiarism, which is to take someone else's ideas or expression and pass them off as one's own.  If the sentence embodies an "idea", then yes, an attribution might be appropriate.  But if the sentence is merely reporting a fact -- especially a fact that is widely known -- then why should it be "plagiarism" to rewrite the "fact" using new words, but the same "sentence structure"?  If the author used subject-verb-object, am I precluded from doing the same?

I am not really defending Jonah Lehrer here -- the evidence that he engaged in journalistic misconduct seems overwhelming.  But that doesn't mean it's all plagiarism.  For example, Charles Seife, in yesterday's Slate, goes through a bunch of examples from Lehrer's work, and declares many of them to be "plagiarism."  Here's one that troubles me:

Lehrer:

The rebounding experiment went like this: 10 basketball players, 10 coaches and 10 sportswriters, plus a group of complete basketball novices, watched video clips of a player attempting a free throw. (You can watch the videos here.) Not surprisingly, the professional athletes were far better at predicting whether or not the shot would go in. While they got it right more than two-thirds of the time, the non-playing experts (i.e., the coaches and writers) only got it right about 40 percent of the time.

Newsweek:

In the experiment, 10 basketball players, 10 coaches and 10 sportswriters (considered non-playing experts), and novices all watched a video clip of someone attempting a free throw. The players were better at predicting whether the shot would go in: they got it right in two-thirds of the shots they saw, compared to 40 percent right for novices and 44 percent for coaches and writers. 

The "gotcha" here is that it was really 5 of each, so that tells us that Lehrer was working from the erroneous Newsweek piece.  But does that make it plagiarism?  Seife seems to think it does:

"With plagiarism, an author tries to convince his audience that he has become conversant in a subject through journalistic research, processed that research, and distilled it by turning it into words on paper."

If I am posting a blog about something that occurred in the real world (and which I happened to read about first in Newsweek), do I really have to give Newsweek credit?  In this one, Lehrer has changed both the sentence structure and the vocabulary, added new expression, and also added a helpful link to the videos themselves.  Is it plagiarism just because we now know that his source was this particular Newsweek article?'  I personally don't assume that every journalist that reports the result of some study has necessarily read the original study or spoken to the person who conducted the study, but that's what Seife seems to think the use of such a study always implies.

If the journalistic profession wants to label that plagiarism, I don't really have standing to complain.  But what about high school students?  I'll get to that later.