Thursday, December 28, 2006


Illegals crossing the boarder are down 1/3 for the same period as last year. National Guard troops have been patrolling the boarder with Mexico. There may be more to this than just patrolling. Meat packing plants have also been raided netting a lot of illegal aliens. So it may be a multi prong approach that has reduced the number by a third or maybe they have gotten better and we just are not catching them. In any event, this should have begun decades ago.

Instead of passing new legislation, maybe our Representatives should focus on fixing, enforcing or repealing old legislation’s first.

ISTEP move

The ISTEP test will not be given in the spring instead of the fall. The politicians have now made it virtually impossible to identify how much our children are retaining. Test Scores will be higher and will translate into a higher percent improvement next year. However, this is a one time offset and has little substance if at all.

We have allowed our politicians to pass bad legislation once again. Are we afraid to look at the real problem behind low-test scores? We keep blaming it on low income, both spouses working, higher standards, Federal requirements and more, but are these really the problem?

I have five children and all learn differently and have different traits. The first problem I see is we have let statistics decide the course of action to take. Having worked with both out0of-control processes and in-control process, I understand the limits of statistics. The more consistent your raw material and parts, the more consistent your process will be. The more variability your raw material, the more variability you will have in your process. Our children are all different. At young ages, they are even more diverse than when they are older. Yet I see educators and politicians attempting to change education year after year in an attempt to get higher test scores.

Every change has pros and cons. Take for example full day kindergarten. Initially test scores are higher in grades up though third, but tend to be indistinguishable after grade five. Is it like a marathon where one runs faster for the first mile only to have everyone else catch-up in the second mile? Has anything been gained, no?

For any process to be fully evaluated, one must evaluate it based on a full cycle. In the case of education, the full cycle is thirteen years. I know of no study that has gone 13 years.

What I would like to see is:

  • Less emphases on computers in grades K-8.
  • More emphases on reading and basic math in grades K-5 and less emphases on currency, volume, measurement and other units of measure. Get the basics down first.
  • Open up books that can be read outside of AR lists. 90% of the books I read as a kid are not on the AR list. The AR reading program is good for testing, but terrible in terms of getting kids interested in reading.
  • Get back to writing book reports. If not then present a course on using computers, software and printers so that they are efficient at using them. I have yet to see any student in grade 7 and below able to type and use software without a parent's help and do it faster than hand writing. Learning is all about efficiency.
  • Eliminate computer printed reports and require hand written reports. This will focus the student's attention on format and how to organize their thoughts to minimize erasing. Organizing and thought process are eliminated to a great extent using calculators and computers. It also will practice and improve handwriting.
  • Get back to 55-minute classes. The brain begins to stop processing material after about one hour. This is why most companies when giving presentations take breaks on the hour.
  • Less variety of high school courses. Get back to basics so that students know how to learn. High School is not a substitute or replacement for higher education. It is the foundation for higher education.

Education: Four Day School Week

I have heard some educators propose going to a four day school week. Are they really serious about this? How much information can be retained in a given day? At what point does the brain become saturated with new material that it no longer processes or retains new information?

My guess is that after about six hours, the number of people who can still absorb new information declines rapidly with each additional hour. In addition, to classroom time, there is also homework and preparation for the next day’s class by reading the material in the textbook.

If you want lower test scores, support the four-day school week. If you want higher retention rates, I ask you stay on top of this issue and nip it in the bud the first time some school board member or educator proposes it.

Downtown Stadium

I find it hard to believe that our representatives are still pushing a downtown stadium. Polls show the people do not want it. Private investors do not want to pay for it, but want some type of tax payer assistance. If the private sector does not want to pay for it, then it must not be a wise use of money.

The News Sentinel had a great editorial

Private Accounts: Will there be a new push?

I read in Time Magazine that Andrew Biggs was appointed to Social Security Adminstrator, Deputy by President Bush. He was with the CATO institute the last time we spoke. I think it was in 1998 that he contacted me about a paper I wrote on “Why Economic Growth Was Bad for Social Security.” The paper was picked up by a reasonably good web site and placed on their main page. It got a lot of attention back then.

Andrew contacted me and said he was a social security analyst. We spoke about factors affecting Social Security and the relative importance or weight each had. He had difficulty with the concept that economic growth was bad. He kept bringing up the fact that growth meant higher revenues for Social Security, but had a very difficult time accepting that this same growth rate also affected the growth in future benefits being promised to those under age 60.

In the end the only way to provide proof to him of this was to run ten computer simulations using his values and send them to him. We kept all things the same except changed wage growth, which is also a factor in economic growth. I sent him the printouts and never heard from him again.

My perception was that he and the rest at CATO were and had banked their reputation on a proposal to reform social security based on economic growth. This later turned out to be private accounts. Private accounts as proposed by President Bush will not work.

In general private accounts allow a worker to divert some percentage of their Social Security taxes to a private account. In exchange, the individual's Social Security benefit would be reduced by the value of the equivalent annuity of the diverted tax dollars plus interest at the Treasury rate. This is referred to as the "Offset" condition.

The Social Security benefit formula would also change. Currently previous year’s wages are indexed by the change in the US Average Wage Growth, but now would be indexed by inflation. In addition the number of work years averaged would increase from 35 to 40. This would reduce current promised benefits by up to 30%.

All private accounts do is repackage the problem. It reduces the problem by legislating nearly a 40% benefit cut on those who retire in the future. They all fall far short of yielding the promised Social Security benefit under current law. 44% of your benefit comes from an 8.6% Social Security tax while 56% of your benefit comes from your diverted 2%. Theoretically diverting four percentage points could reduce your social security benefit to zero. One must pay particular attention to the terms "payable benefits" and "promised benefits." Payable benefits are generally equal to 60% to 70% of promised benefits.

It is important to note what reference base is being used when evaluating private accounts. The only way payable benefits can equal promised benefits is for the combined assets of the trust fund and private accounts to total $16 Trillion by years end. The moral is "You cannot get something from nothing."

I think we will see another push for private accounts. The first thing that must be done prior to any debate on Social Security Reform is to educate the public about Social Security. There are so many myths and misconceptions about Social Security that any dialogue is worthless.

Social Security Information

Wednesday, December 06, 2006

Writ of Mandamus

The IRS contends that if they have violated a U.S. Statute, that the U.S. Tax Court does not have statutory authority to require the IRS change IRS regulations to comport with the U.S. Statute. This just blows my mind. The IRS contends that only the U.S. District Court has jurisdiction. However, the U.S. Tax Court is responsible for all disputes arrising under Title 26. I would think that if a dispute is over the interpretation of a statute, that the U.S. Tax Court would have jurisdiction.

Social Security Administration Publication SSA-05-100023 states applying for a social security number is voluntary. In fac their web site says applying for a social security number if voluntary. I have several letters from the Social Security Administration over the past decades stating the same.

The entire dissagreement is over the interpreation of a statute. The IRS removed 25 words, added four additional words and left out the title of the section all together. In addition it does not even mention another section of the same statute. It is like it does not exist.

26 USC 6109(c)
Requirement of information For purposes of this section, the Secretary is authorized to require such information as may be necessary to assign an identifying number to any person

26 USC 6109(d)
Use of a social security number The social security account number issued to an individual for purposes of section 205(c)(2)(A) of the Social Security Act shall, except as shall otherwise be specified under regulations of the Secretary, be used as the identifying number for such individual for purposes of this title.

The IRS interpretation: Red are new words. Strike through are deleted words.

(d)Use of a social security number.

The social security account number issued to an individual for purposes of section 205(c)(2)(A) of the Social Security Act shall, except as shall otherwise be specified under applicable regulations of the Secretary, be used as is the identifying number of the for such individual for purposes of this title.

In construing a statute, courts generally seek the plain and literal meaning of its language. See United States v. Locke, 471 U.S. 84, 93, 95-96 (1985); United States v. American Trucking Associations, Inc., 310 U.S. 534, 543 (1940). For that purpose, courts generally assume that Congress uses common words in their popular meaning. See Commissioner v. Groetzinger, 480 U.S. 23, 28 (1987), affg. 771 F.2d 269 (7th Cir. 1985).

In deciding whether the regulation comports with the statute’s plain language, we look to the ordinary usage or settled meanings of the words used in the statute by Congress. See Lynch v. Alworth-Stephens Co., 267 U.S. 364, 370 (1925). There is a strong presumption that Congress expresses its intention through the language it chooses. See INS v. Cardoza- Fonseca, 480 U.S. 421, 432 n.12 (1987).

A regulation may not contradict the unambiguous language of a statute. See Citizen’s Natl. Bank v. United States, 417 F.2d 675 (5th Cir. 1969); Hefti v. Commissioner, 97 T.C. 180, 189 (1991), affd. 983 F.2d 868 (8th Cir. 1993).

Where the statute’s language is plain, the language is where the interpretive task should end, and the sole function of the courts is to enforce such language according to its terms. United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989); United States v. Merriam, 263 U.S. 179, 187-188 (1923)(stating that tax statutes are not to be extended by implication beyond the clear import of the language used).

Does 26 U.S.C. 6109(c) require those eligible for a social Security Number to have one?

Does the plain language interpretation mean that if you have a SSN, that is your identifying number. However, the secretary has the option of making an exception to using the SSN and regulate something else. The IRS interprest "except as otherise specified under regulations" that it can expand the use of the SSN to all who are eligible.

Friday, December 01, 2006

Buy puts on ethanol plants

Senator Lugar, Congressman Souder and Govenor Danials all need a course in physics, math and economics when it comes to energy. All of them support ethanol, yet I doubt they have the slightest idea what is actually involved.

Corn prices have risen dramatically this year. As of today, they were $3.90 a bushel. Does not sound like much, but considering you get 1.5 to 2.0 gallons of ethanol from a bushel, it means a great deal. At 1.5 gallons per bushel the raw material cost excluding energy is $2.60 a gallon; at 2 gallons per bushel the cost drops to $1.95. This excludes the nearly 100,000 Btu’s per gallon needed to grow, transport and distill the ethanol.

On top of this ethanol has 73,000 Btu’s v. unleaded gas’s 123,000 Btu energy content. In simple terms, gas milage drops dramatically. Have you noticed how other farm crop prices are rising as more acerage is converted to corn? We are being hosed. We subsidize each gallon of ethanol at the tune of 52 cents! We then pay more for meat, vegetables as down stream users pay more for corn or supply v demand causes prices to increase.

Car companies would be foolish to convert to E-85 as would building more ethanol plants. What happens when the price of corn reaches $5 a bushel? Who is going to be willing to pay $3.50 for E-85 when gas is under $3? As I understand it, famers have sold long term options to buy their corn. The farmer who has done this is not getting $3.90, but closer to $2.25. When all these options expire, be prepared for a huge price increase in E-85.

The markets should be allowed to dictate price, not government. We need to eliminate all tax subsidies in the production of Ethanol and let it survive or die based on its merits, not the wims of politicians. Eliminate the tax subsidy and restore the economic balance. Maybe the only way to make money in Ethanol is to buy ethanol puts?

Full Day Kindergarten

From the search I have been doing, there is no conclusive evidence that full day kindergarten is better. By this, I mean when you look at five years down the road, there is no difference in test scores. If you want to make first grade test scores higher, FDK will help in this area. However, long term, it does nothing that statistically stands out.

There is a time to learn and a time to play. Creativity is generally developed between the ages of two and six. It takes time to develop creativity or what some say is "imagination." This is the driving force behind our economy. The US is the leader in creativity, new ideas, concepts that improve our standard of learning.

Keep in mind that the human brain is the same revision that it was 10,000 years ago. We learn process and remember the same way. There may be some little tricks that have been developed, but pretty much memory is dependent on the amount of information being processed and the number of associations attributed with that memory. The more associations, the more that will be remembered.

What is the purpose of Kindergarten? Is it to develop social skills, if so, then full day is not needed? If it is to teach math and reading, then let us eliminate the senior year of high school since all we are doing is pushing forward learning.

Also, keep in mind that not all children are ready for kindergarten. Sending those to school who are daydreamers and forcing them to do what they are unprepared for may cause them to hate school for a long time thereafter.

Looking at the distribution of potential students who are age 5 will show a wide variation in skills. Do you honestly think that a "process" can be developed to accomodate 90% of these students at age 5? Just look at grade 2 and how many different types of students there are and the number of programs to help them. All we are doing is moving forward information that many are not ready for. Why not wait a bit until they are ready to learn?

All children developing differently. Some can read early, but have no creativity. Some are very artistic, but can not add. Some can neither read or do math, but understand how things work. My experience shows that by about third or fourth grade for the most part, students tend to merge so to speak in capabilities. What I am attempting to say is we all reach the end point differently taking different routes, but we get there. Forcing everyone along the same route is not a good idea.

NBC-33 Debate poll results from 2002