Archive for August, 2011

Will Patent Reform Create Jobs?

Tuesday, August 30th, 2011

In recent weeks the President has been outlining a number of proposals that he says can be enacted now that will stimulate the economy. Patent reform has been among these proposals, and figures to be a key component of the President’s upcoming jobs plan.

The U.S. Patent and Trademark office has a backlog of 700,000 applications. In 1990 it took approximately 18 months to process an application. Today it takes nearly three years to process an application. Clearly the system needs to be fixed. But will fixing the system really create jobs? Some experts think so. From IBD:

Sen. Patrick Leahy, co-sponsor of a reform bill, says it will create 200,000 jobs. Obama’s patent office head, David Kappos, told lawmakers “millions of jobs are lying in wait” for “a job creation engine (to be) turned loose.”

But no one knows for sure how many new jobs, if any, the reforms passed by the Senate and the House this year will create.

Leahy’s office could not give a source for the 200,000 number. And a White House backgrounder on patent reform only said it is “key to winning the future.”

Business economist Everett Ehrlich, in a 2009 analysis, found the reform could create 100,000 jobs over five years. Economists say the U.S. needs about 100,000 new jobs a month just to keep up with labor force growth.

A New York Times Op-Ed last year said cutting the patent office backlog could yield “at least 675,000 and as many as 2.25 million jobs,” but called this a guess.

“It’s hard to calculate the job effects of this reform,” said Philip Johnson, Johnson & Johnson’s chief intellectual property counsel and a reform backer. “Jobs related to patents are pervasive and there are a lot of ripple effects.”

But not everybody likes the proposed reforms:

But more patents don’t always mean more jobs. In the last three years, the U.S. has granted more than 620,000 patents, almost as many as in the booming 1980s.

“Will it help small businesses that create the most jobs? I think we would question that,” said Molly Brogan of the National Small Business Association.

Currently, the first person or firm to invent something is the rightful patent owner, even if someone else files for protection first. Under the reforms, the first person to file wins the patent.

Advocates say the reforms will remove uncertainties that undermine R&D efforts. The reforms also aim to cut the patent office backlog by protecting patent fees from congressional raids.

Critics say the “first to file” switch risks skewing patent awards toward large companies that tend not to be big job creators. They point to a 2009 study by the National Bureau of Economic Research, which found Canada’s 1989 switch to “first to file” shifted “the ownership structure of patented inventions towards large corporations.”

Kappos says these concerns are unfounded. Of 3 million applications over seven years, he said, “Only one independent inventor’s filing would have received a different outcome under the first-inventor-to-file system.”

The Irony of Reform
While I certainly support the concept of speeding up and streamlining the patent process, I suspect these job projections are exaggerated. Patents are getting processed, and it’s hard to imagine that processing them faster will create millions of jobs that would not have existed otherwise. What I find ironic in this conversation is that many have complained that burdensome and unnecessary government regulations are one of the many things holding back our economy. And in this case, the administration appears to agree that streamlining the regulatory process would be a boon to the economy. It’s too bad they’re not willing to apply this approach across all government rules and regulations.

The Piling On Begins

Friday, August 26th, 2011

I had written several posts last year discussing a lack of leadership from President Obama. In particular I had been critical of his handling of the BP oil spill, but truth be told, I think we’ve seen a lack of leadership on just about every issue facing our country. The President is capable of delivering a great speech. He’s championed a number of causes that send a thrill up the leg of liberals like Chris Matthews. He’s very likable. But that doesn’t make him a leader.

Now we’re starting to see Democrats discuss this as well. The far left has been critical for some time that the President hasn’t been liberal enough, though I’m not exactly sure what they expected. I think like many, including myself, they had misinterpreted what type of liberal the President would be. But that’s a discussion for another day.

Yesterday in the Wall Street Journal, Mortimer Zuckerman published a strong article on the President’s lack of leadership. Zuckerman is chairman and editor in chief of U.S. News & World Report, a publication that is largely considered left of center by those of us who follow media bias. I don’t know enough about Zuckerman to tell you if he’s a moderate or a liberal, but he supported the election of President Obama, and has given thousands to Democrats over the years. His op-ed is worth the read. Here are a few key parts of his article.

Zuckerman discusses the President’s position during the recent debt ceiling debate:

Since the president is the one who represents all of America and all Americans, the buck stops with him rather than with the Congress. It is the president’s job to offer a coherent program for the twin threats of a static economy and an unsustainable explosion of our debts and deficits. But the only core issue on which he took a clear position in the recent debt-ceiling negotiations was that it would have to include new taxes on the wealthy—and he didn’t even hold to that.

He made the politically tested and calculated statement that if you raise taxes on billionaires and millionaires you could solve the problem. This is not so. Even for those who support higher taxes on the wealthy, as I do, we must remember that we have an income tax system in which fully half the “taxpayers” pay no tax at all, and in which the variety of loopholes cries out for a real reform of the tax code. Even if the government instituted a 100% tax on both corporate profits and personal incomes above $250,000 per year, it would yield enough revenue to run the government for only six months. Why? Because under Mr. Obama’s presidency, government spending has swelled to 24% of GDP from 18%.

I have made similar arguments in the past about the need for significant tax reform, not just closing a few loopholes here and there as the President has recommended. Zuckerman continues to discuss the President’s lack of leadership in developing a plan to tackle our country’s problems:

Erskine Bowles, co-chair of the bipartisan Simpson-Bowles commission appointed by the president in 2010 to devise a plan for dealing with the fiscal crisis, put it well: “It is one that is completely predictable and from which there is no escape.” The president said he would stand by his commission, but as of today he’s remained silent on its many proposals, seemingly unable to speak honestly on the subject.

Zuckerman also discusses the disillusionment from the President’s supporters:

The president appears to consider himself immune from error and asserts the fault always lies elsewhere—be it in the opposition in Congress or the Japanese tsunami or in the failure of his audience to fully understand the wisdom and benefits of his proposals. But in politics, the failure of communication is invariably the fault of the communicator.

Many voters who supported him are no longer elated by the historic novelty of his candidacy and presidency. They hoped for a president who would be effective. Remember “Yes We Can”? Now many of his sharpest critics are his former supporters. Witness Bill Broyles, a one-time admirer who recently wrote in Newsweek that “Americans aren’t inspired by well-meaning weakness.” The president who first inspired with great speeches on red and blue America now seems to lack the ability to communicate any sense of resolve for a program, or any realization of the urgency of what might befall us. The teleprompter he almost always uses symbolizes and compounds his emotional distance from his audience.

We lack a coherent and muscular economic strategy, as Mr. Obama and his staff seem almost completely focused on his re-election. He should be spending most of his time on the nitty-gritty of the job instead of on fund raisers, bus tours and visits to diners, which essentially are in service of his political interests. Increasingly his solutions seem to boil down to Vote for Me.

Clearly the president will have to raise his game to win a second term, especially if the Republicans find a real candidate. Will voters be willing to give him another four years? Like many Americans who supported him, I long for a triple-A president to run a triple-A country.

Well written Mr. Zuckerman. You can read his entire op-ed here.

Obama Says Adding $4 Trillion in Debt is “Unpatriotic”

Thursday, August 25th, 2011

This comes under the heading “You Can’t Make This Stuff Up”!

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I have to admit that I often agree with Candidate Obama more than I agree with President Obama. Then Candidate Obama called President Bush “unpatriotic” and “irresponsible” for adding $4 trillion in debt during his eight years in office. I wouldn’t have called Bush unpatriotic, but agree that it was irresponsible. (On a side note, most of that deficit spending happened during Bush’s last two years in office while the Congress was controlled by the Democrats, and we were heading into the recession.)

And in case you’re not paying attention, the budget proposed by the White House earlier this year would have added nearly $10 trillion to the national debt over the next ten years (read this from The Hill).

And from CBS News:

The latest posting by the Treasury Department shows the national debt has now increased $4 trillion on President Obama’s watch.

The debt was $10.626 trillion on the day Mr. Obama took office. The latest calculation from Treasury shows the debt has now hit $14.639 trillion.

It’s the most rapid increase in the debt under any U.S. president.

The national debt increased $4.9 trillion during the eight-year presidency of George W. Bush. The debt now is rising at a pace to surpass that amount during Mr. Obama’s four-year term.

But of course, none of this is President Obama’s fault. He continues to blame Bush. He blames the Republicans. He blames the Tea Party. He blames business. He blames the economy. He blames the banks. He blames the tsunami in Japan. He blames the Arab Spring. He blames the collapsing economies in Europe. Did I miss anyone?

I keep thinking back to the early Reagan years. He too inherited a mess from his predecessor. In November of 1982, unemployment stood at 10.8%. By the time the election rolled around just two years later, unemployment had dropped to 7.2%. Why? Because Reagan had a pro-business plan to grow the economy. And grow the economy he did.

Obama Cuts Red Tape

Wednesday, August 24th, 2011

I’ve been planning to write a post about government regulations for some time. And this isn’t it. But here are a few tidbits to chew on until we have time to talk about this in-depth. Earlier this year, President Obama in an op-ed in the Wall Street Journal made a pledge to help businesses by eliminating red tape.

We’re also getting rid of absurd and unnecessary paperwork requirements that waste time and money. We’re looking at the system as a whole to make sure we avoid excessive, inconsistent and redundant regulation. And finally, today I am directing federal agencies to do more to account for—and reduce—the burdens regulations may place on small businesses. Small firms drive growth and create most new jobs in this country. We need to make sure nothing stands in their way.

You can read his op-ed from January in the Wall Street Journal here.

Another more recent quote from President Obama:

What I have done — and this is unprecedented … is I’ve said to each agency … “look at regulations that are already on the books and if they don’t make sense, let’s get rid of them.”

This week the administration has announced its plan to update government rules and regulations. You can read this post on the White House’s website from Cass Sunstein, the Administrator of the Office of Information and Regulatory Affairs. According to Sunstein, “Over the next five years, the monetized savings from just a fraction of the reforms announced today are likely to exceed $10 billion.”

Now a few facts to put this into perspective. From Investors.com in an unrelated article from June:

Government regulations come with costs. Compliance is a heavy burden. During a news conference in which Hartzler spoke of “horror stories” caused by rules, she referred to a Small Business Administration estimate that says government regulations cost the economy more than $1.75 trillion a year, about 12% to 14% of GDP and half of what Washington is now spending — $3.456 trillion — in a year.

The Competitive Enterprise Institute, which has been keeping up with federal regulation for years through its yearly “Ten Thousand Commandments” reports, believes the cost is closer to $1.8 trillion because agencies spend an estimated “$55.4 billion (on budget) to administer and police the regulatory enterprise.”

Let’s see, we make changes to save businesses $10 billion over the next five years, compared to the $8.75 trillion that will be spent on compliance. And that does not include the thousands of new rules and regulations that are still being written from ObamaCare and the Dodd-Frank banking reforms.

And on a side note, PolitiFact gave the President a “Pants on Fire” for his claim that his approach to cutting red tape was “unprecedented”.

Chiefs: Getting Strong One Position at a Time

Saturday, August 20th, 2011

Kansas City ChiefsOne of the things I’ve really come to appreciate about the Scott Pioli approach is how the Chiefs identify their needs, and find the right players to fill them. The Chiefs had plenty of holes on their roster a couple years ago, and you can’t plug them all in one off-season.

Quarterbacks
Loss: Brodie Croyle
Gain: Ricky Stanzi
Summary: The Chiefs have little experience among their backup quarterbacks. Considering that Croyle had experience but had never gotten a victory, it’s hard to imagine that the Chiefs are any worse off without him. Time will tell what happens here. Many in the media believe that the Chiefs need an experienced number two, but not much out there to sign. There’s certainly some risk entering the season with Tyler Palko and Stanzi as your options behind Matt Cassel.
Result: Unknown

Kansas City Chief Le'Ron McClainRunning Backs
Loss: Tim Castille
Gain: Le’Ron McClain, Shane Bannon
Summary: Despite having the number one rushing attack in the NFL last year, the Chiefs were not very good in short yardage or goal line situations. McClain should help both as a blocker and as a threat to run and catch the ball. The Chiefs have managed to improve the best backfield in the NFL.
Result: Big Improvement

Wide Receivers
Loss: Chris Chambers
Gain: Jonathan Baldwin, Steve Breaston, Keary Colbert, Jerheme Urban (back from IR)
Summary: The Chiefs have more talent at wide receiver than they’ll be able to keep. When was the last time you could say that? My warning is that rookie wide receivers seldom make an impact. Don’t be surprised if Baldwin comes off the bench early in the season. Other than Dwayne Bowe, expect to see the rest of the receivers rotate through different packages.
Result: Big Improvement

Tight Ends
Summary: No movement among tight ends is fine with me. If Tony Moeaki improves on his rookie performance, the Chiefs might have a star in the making. He put up better numbers last year than Tony Gonzalez did in his rookie campaign.

Kansas City Chief Jon AsamoahOffensive Line
Loss: Brian Waters
Gain: Rodney Hudson, Jared Gaither
Summary: Despite having the best rushing attack in the NFL, I’m glad that the Chiefs continue to improve the line. I think Jamaal Charles made them look good, not the other way around. They’ve moved second year guard Jon Asamoah into the starting lineup at right guard. They’ll flip Ryan Lilja to the left side, which is where he played for the Colts, to replace Waters. Waters was one of my favorite Chiefs, but he hasn’t played at a Pro Bowl level in years. Casey Wiegmann is back at center, but he’s only holding the position until Hudson is ready. And Gaither is an interesting pickup. If he’s healthy, he should eventually start at one of the offensive tackle positions. I’m not convinced he’s healthy. Or one of the right 53.
Result: Probably Improved

Defensive Line
Loss: Shawn Smith, Ron Edwards
Gain: Kelly Gregg, Jerrell Powe, Allen Bailey
Summary: Very happy that the Chiefs re-signed Wallace Gilberry. He was high on my list of off-season priorities. I suspect that we’ll quickly realize that Gregg is a significant upgrade over Edwards in the middle of the line. Smith played fairly well last year, and offered nice flexibility with his ability to play anywhere along the line. The key this year will be for us to continue to see improvement from Tyson Jackson and Glenn Dorsey. Bailey and Powe will likely get playing time.
Result: Improved

Kansas City Chief Justin HoustonLinebackers
Loss: Mike Vrabel
Gain: Justin Houston, Brandon Silar, Cameron Sheffield (back fromIR)
Summary: Vrabel provided leadership, but it appeared that Andy Studebaker was already outplaying him on the field. And it appears that both Houston and Sheffield will add some punch to the pass rush.
Result: Improved

Cornerbacks
Loss: None
Gain: Jalil Brown
Summary: Brown will likely compete with Javier Arenas in the nickel, but could be a long-term replacement if the Chiefs are unable to sign either Brandon Carr or Brandon Flowers to an extension.
Result: Unknown

Safeties
Loss: None
Gain: Sabby Piscitelli
Summary: Piscitelli was brought in to create competition. Not even sure he’ll make the team. The Chiefs are set at safety with Eric Berry and Kendrick Lewis. With each of them entering the second years in the league, we should see continued improvement from both of them.
Result: Improved with Age

Specialties
Summary: The Chiefs appear set with kicker Ryan Succop and punter Dustin Colquit. The Chiefs would like to get more production from their returners Dexter McCluster and Arenas.

So when does a great team become a great team? Somewhere they have to transition from good to great. Is there any reason this couldn’t be the year for the Chiefs?

Food Stamps = Stimulus?

Thursday, August 18th, 2011

The administration’s love for Keynesian Economics continues. This is a quote from the Secretary of Agriculture Tom Vilsack:

Well, obviously, it’s putting people to work. Which is why we’re going to have some interesting things in the course of the forum this morning. Later this morning, we’re going have a press conference with Secretary Mavis and Secretary Chu to announce something that’s never happened in this country — something that we think is exciting in terms of job growth. I should point out, when you talk about the SNAP program or the foot stamp program, you have to recognize that it’s also an economic stimulus. Every dollar of SNAP benefits generates $1.84 in the economy in terms of economic activity. If people are able to buy a little more in the grocery store, someone has to stock it, package it, shelve it, process it, ship it. All of those are jobs. It’s the most direct stimulus you can get in the economy during these tough times.

Now if only we could provide food stamps to more people, our economy would be in excellent health!

Spending Big Means Nothing in the NFL

Sunday, August 14th, 2011

I’ve long made the case, even before the hiring of general manager Scott Pioli, that you build a team through the draft, not free agency. In a related story from Sam Mellinger in the KC Star this morning, it appears that there’s no correlation between money spent and winning games in the NFL. I’m not surprised.

Sam starts out by explaining:

The amount of cash that teams commit to players has no impact on their success.

Not some impact. Not a little impact. Zero impact.

That’s according to documents obtained by The Star through league sources, numbers that show that today’s NFL can be conquered equally by big spenders and small. Analysis by third-party sources confirms that there is no connection in the amount of money teams spend and the amount of on-field success they have.

The Chiefs have spent time defending their approach to free agency. They have come under fire from both the media and fans for not being more aggressive in pursuing the high profile free agents and spending more money. We’ve watched teams like the Oakland Raiders, Dallas Cowboys and Washington Redskins commit huge amounts of money to the “best” free agents on the market, yet have little to show for it.

The Chiefs had one of the lowest payrolls in the league a couple years ago as they started their youth movement. But now as their best players become due for new contracts, the Chiefs are spending more money retaining players like Tamba Hali, Jamaal Charles and Derrick Johnson. They are now in the middle of the pack in regards to money spent, with deals looming for Dwayne Bowe and Brandon Flowers.

Sam goes on to explain:

Since 2001, the highest-spending team in each season won an average of 8.3 games. The Packers and Colts won the Super Bowl in years they spent the most money, but six other seasons the biggest spender didn’t even make the playoffs. The Giants won their Super Bowl while being ranked 30th in spending.

Over the same period, the top quarter of spenders each year won an average of 8.4 games. It’s consistent too: No year averaged more than 9.4 wins (in 2009) or fewer than 7.1 (2005).

The last 10 Super Bowl winners have ranked, on average, 15th in spending. The Super Bowl loser ranked 16th.

A connection between spending and winning just does not exist.

Keep in mind these numbers reflect actual cash spent, not the funny-money manipulation of salary-cap numbers.

Through deeper analysis and conversations with personnel men throughout the league, logical reasons for the disconnect between big spending and big winning begin to surface.

First, as Washington and Dallas and a few others have proved, free agency is an extremely inefficient talent pool.

Second, big-spending teams are often desperate teams with a coach or GM clinging to his job. Free agency is often used to cover holes or chase bad investments, so steady and improving teams are better at resisting those temptations.

And third, under the old collective-bargaining agreement, top draft picks commanded huge contracts from bad teams.

The article is worth reading, and a vindication for the Chiefs from some of their critics.

Chiefs and Free Agency 2011

Wednesday, August 10th, 2011

Kansas City ChiefsI’m excited to be writing about football and the Chiefs. It was a long and boring off-season as the owners and the players haggled over billions of dollars. With a new long-term deal in place, we shouldn’t have to go through this again any time soon.

Just a few quick notes. We’ll take a more in-depth look at the roster in a few days.

Like it or not, the Chiefs have a plan, and they’ve stuck to it. Last year the Chiefs signed a group of veterans that included guard Ryan Lilja, center Casey Wiegmann, running back Thomas Jones, wide receiver Jerheme Urban (who spent the season on the injured reserve) and defensive lineman Shaun Smith. The fans and the media were underwhelmed. But the Chiefs improved by six games over the season before, and won the AFC West.

This year the media had higher expectations. Misunderstanding the labor agreement, many in the media thought that the Chiefs would be forced to be more aggressive in free agency in order to reach a league minimum for team salary — though if they’d been paying better attention, they’d have realized that the new minimum doesn’t kick in for a couple years.

And apparently they haven’t been paying attention to the Pioli plan in the first place.

Ravens Kelly GreggThis year the Chiefs have signed defensive tackle Kelly Gregg, fullback Le’Ron McClain and wide receiver Steve Breaston. But more importantly, in the last year, the Chiefs have re-signed and extended long-term contracts for linebackers Tamba Hali, Derrick Johnson and Andy Studebaker, and running back Jamaal Charles. My expectation is that before this season is over, the Chiefs will have new deals with wide receiver Dwayne Bowe and cornerback Brandon Flowers.

I love the plan.

The New England Patriots and the Philadelphia Eagles have made the most news with their acquisitions this year. But Super Bowls are not won by big splashes in free agency. They’re won by drafting well, developing your players from within, and plugging a few holes with the right veterans. Look at the recent success of teams like the Packers, the Steelers, the Colts and other Super Bowl winners. You would have included the Patriots in this group while they were winning championships, but they’ve crossed over to the darkside of free agency and appear to be trying to buy one final Super Bowl before Tom Brady and Bill Belichick retire. These winning organizations don’t often sign the “big name” free agents. They draft and develop their core players.

The Chiefs have the right plan, and are executing it well. They have plugged holes in their roster through the draft and free agency. And with continued player development, the Chiefs will be better again this year.