The Law Of Unintended Consequences

What both legislators and the public overlook with alarming frequency is that when a law is enacted, there may be consequences that the supporters of the law never dreamed of. Sometimes, this consequence diverges 180 degrees from the original intent of the supporters of the law. Such is the case with the generous tax credit for mixing alternative fuels with fossil fuels. The object here was to increase the usage of ethanol and gasoline blends, which reduces the amount of gasoline consumed while not coincidentally providing a boon for corn growers. But in one case the enactment of the tax credit has caused the opposite effect in the paper industry. Part of the paper production process is the creation of a waste product called black liquor. For 80 years the paper industry has used black liquor as a fuel source to run their mills. Black liquor is as much of an alternative fuel as ethanol. So by ADDING fossil fuel to black liquor, rather than using pure black liquor, paper mills are entitled to this tax credit to the tune of tens of billions of dollars, while increasing the consumption of fossil fuels at the same time.

Clearly, when the tax credit was enacted, the intent was for alternative fuels to be added to fossil fuels to garner the credit. It wasn't meant to provide a reward for fossil fuels to be added to existing alternative fuels. But that's exactly what happened. Now there's no doubt that the black liquor tax credit will eventually be repealed. Because of the snail's pace at which Congress enacts tax (or for that matter, any) legislation, this credit is still available even though this unintended consequence has been well known for quite a while.

Unintended consequences also occur when supporters of a proposal fail to take into account potential behavioral responses to the new law. For example, the Obama administration proposed last year that US corporations with foreign income earned abroad that is not immediately subject to US tax should not be able to deduct the associated expenses relating to that income, until the income is recognized in the United States. On the surface that sounds like both a fair proposal and a revenue generator in these times of scarce government revenue--a real win-win situation for the government. Except that US multinationals pointed out that in such a situation, the rational thing for them to do would be to move those expenses offshore, since there would be no current tax benefit in any country for such expenditures under the proposal. And given that the expenses in question would in many cases be comprised of services performed by employees, the result of the proposal would be to incentivize U.S. multinationals to move American jobs overseas. Fortunately the Obama proposal never got very far in the legislative process, and recognizing this original unintended consequence, the Obama administration has now dropped that proposal

The lesson here is that before strongly advocating the passage of any new law, supporters need to look carefully and understand what all the consequences are, not just the ones you want to occur.

Hello Dalai--It's So Nice To Have You Back In Town

I heard on the news that the Dalai Lama is in Washington DC for an unofficial visit with President Obama. This reminded me of the Dalai Lama's previous visit to our nation's capital. Listening to the news on KFWB at that time I heard the announcer proclaim that the Dalai Lama was in Washington D.C. to "receive the Congressional Medal of Honor." What? Perhaps the leading symbol for peace and nonviolence in this world being honored for wartime battlefield heroics? Immediately I was overcome with images of the Dalai Lama, hand grenades strapped to his waist, battling with the invaders from the Han nation. Then the announcer clarified that it was the Congressional Gold Medal, not the Congressional Medal of Honor that was being awarded. Oh well. Somehow the Congressional Medal of Honor sounds better.

Little Fuzhou--How Did They Know?

Whenever I go into a Chinese restaurant or business establishment in the Chinese community, they start talking to me in Chinese, not knowing that I don't know the lingo. Consequently, when I went into a couple of places in the Little Fuzhou section of Manhattan Chinatown and I was greeted in English, I was shocked. How did they know? Did I look Japanese or Korean? After thinking about this for quite a while (off and on for four weeks), I finally figured it out.

The answer requires a couple of digressions. The entirety of Manhattan Chinatown east of Bowery has been referred at times as "Little Fuzhou." This is to distinguish it from the original Chinatown core from Bowery and west which is Cantonese/Toishanese in origin going back to the 19th century. As Manhattan Chinatown has expanded past its original core into formerly non-Chinese areas of the Lower East Side, this expansion has been fueled by immigrants from Fuzhou as opposed to the historic immigration from the area formerly known as Canton. Keep in mind that this Fujianese immigration largely represents lower end working class migrants, who by the way are mostly not of legal status. Indeed, many of them are merely passing through New York on their way to new jobs at Chinese businesses all over the east, midwest and south, wherever there's a bus connection from under the Manhattan Bridge. When you are in this part of Manhattan Chinatown, non-Chinese faces are almost non-existent and English is seldom heard. Tourists--or even other New Yorkers seldom find their way here. There is at least one banquet size Chinese restaurant that doesn't have an English menu. This makes the greetings I heard in English all the more surprising.

The second digression is that until 2003 I had not experienced the cold winter weather the people who live east of California are used to. Since 2003, making annual winter visits to Manhattan has taught me things about cold weather, like the fact that men actually wear gloves and scarves, and that sweater hats are a daily necessity. Over these past seven years I have built up a cold weather wardrobe of purchases made in New York. One favorite purchase was made the year that winter never showed up in New York, and Macy's was stuck with a large inventory of unsold wool overcoats which they began liquidating halfway through winter. I was able to score one of those $300 items for less than half price, and I wear it religiously on each winter trip to the East Coast.

So what does any of this have to do with my initial puzzlement? Well, I figure it's that black wool overcoat that gave me away. Fujianese restaurant workers don't walk around Manhattan Chinatown wearing long wool overcoats. North Face is more the style there. Nobody walks around Little Fuzhou in a long wool overcoat except for this silly interloper.

The Most Stunning Ironic Political Development In My Lifetime

Scott Brown's election has to be the most stunning and ironic political development that I've ever seen. Jesse Ventura becoming governor of Minnesota was stunning. Sonny Bono becoming a serious politician was stunning. Sarah Palin for VP was stunning. But none carry the irony of this election. Congress is consumed in passing a health care bill, the dream of the late senator Ted Kennedy. All the talk since passage of the Senate bill on Christmas Eve was whether the Democratic controlled Congress could reach an agreement (somehow it probably would because failure was not an option given the Obama administration's prioritization). Nowhere on the radar was the possibility that the Senate Democrats might lose their fillbuster proof 60 member majority. Ten days ago I never heard of Scott Brown. Now he has taken the former Ted Kennedy Massachusetts seat in the U.S. Senate. This leaves three alternatives for health care reform. The House can approve the Senate bill intact (with its Cadillac health care excise tax intended to hit at wealthy individuals but which more greatly affects union members) exactly as is, avoiding further Senate votes. They can try to pass a new bill in two weeks or less before Brown is certified. Or they can start all over again. The first two alternatives sound too much like dirty pool and I'd be surprised if they went down that road. So is that the end of health care reform for now?

Manhattan Chinese Food

Since I'm spending most of the week in New York City I thought I'd write on the state of Chinese food in Manhattan and how it compares to the stuff back home in L. A. I've eaten at over 200 restaurants in New York Chinatown (which I estimate covers perhaps two-thirds of all the restaurants there), choosing the best ones first. I've also eaten at all the Chinese restaurants in Los Angeles Chinatown and 95 percent of the Chinese restaurants in the San Gabriel Valley.

I can categorically say that by comparison, New York Chinese food is grossly inferior to that of Los Angeles, or for that matter, San Francisco. I don't make this statement as a matter of regional pride, but rather because it is the logical conclusion based on demographics. Historically NYC Chinatown had been Cantonese in origin, but the last two decades have seen a wave of immigration from Fujian province. These recent immigrants are the poorest of the poor. NYC Chinatown serves the Fujian community, the historic Cantonese community, and the tourist community. As such the Chinese food there is mired in the 20th Century, certainly not being bad, but not reflecting the latest evolutions in Chinese in cuisine, both as to other regional cuisines as well as improvements in Cantonese/Hong Kong style cuisine, and not particularly geared towards an affluent customer base. Indeed, the best Chinese restaurant in Manhattan is Chinatown Brasserie, which is not even in Chinatown, and most of whose clientele is not Chinese (because it is so ridiculously expensive).

Meanwhile, Los Angeles has likewise seen an influx of immigration from Asia, much more broadly based than that seen in New York, both in terms of geographic origins as well as socioeconomic background. Nobody loves their food more than the Chinese, and well heeled immigrants from Hong Kong, Taiwan and Mainland China expect the most appetizing food that money can buy. As a result, the Los Angeles area is a gold mine for lovers of Chinese food, with more diverse (in terms of regional cuisines and breadth of selection) better (and, interestingly, cheaper) Chinese food than anywhere else in the United States, though the Bay Area is a close runner up. It is particularly the much smaller community of Hong Kong Chinese in New York that probably explains the lack of evolution of Chinese food in Manhattan compared to Los Angeles, San Francisco, Vancouver and Toronto.

There is California quality Chinese food in Flushing, and indeed there are regional varieties in Flushing, such as Xian, Wenzhou, Henan and Guizhou that you won't find in California. However, Flushing does not measure up to the San Gabriel Valley.

Happy New Year

In honor of New Year's, here's a seldom seen view of the Times Square Waterford Crystal Ball.

It's Football Bowl Season

College bowl season is here and purists who would rather see a playoff system decry the ever increasing number of "meaningless" bowl games. But does anybody stop and ask why we have 34 bowl games now, with two more being added next year? Perusing the bowl schedule we see that of all the pre-January 1 bowl games, only two are not televised by ESPN or ESPN2, and indeed only one game is slated for ESPN 2. What that means is that almost all of the early bowl games have an exclusive time slot on ESPN. Obviously this means that the ratings for each game will be maximized. Indeed, ESPN has become the gorilla in the room when it comes to the bowl system. While a lot of college football fans make fun of all of the minor bowl games, the fact is that these bowl games have ratings that far exceed any comparable programming that ESPN could put up in the time slot. The New Mexico Bowl, as minor as the bowls get, draws something like 3 million viewers. That's almost double the highest rating one can expect for a showcase regular season basketball game.

The power of ESPN can be demonstrated by UCLA's appearance in the Eagle Bank Bowl in Washington DC. Traditionally PAC 10 teams do not play in bowl games east of the Mississippi River, except for BCS appearance, because none of the PAC 10 teams travel well enough to warrant an invitation. Even relatively high profile non-BCS bowls such as the Gator Bowl or the former Peach Bowl (whatever it's called now) would never consider inviting a west coast team.

Everything else being equal, one would expect UCLA to be playing in the Humanitarian Bowl in Boise against Idaho. So how did UCLA end up in a regional east coast bowl game instead? Two reasons, both ESPN related. First of all putting UCLA in the Eagle Bank Bowl would give the game TV ratings far higher than any other opponent, as it would capture the lucrative Los Angeles TV market. Secondly, if UCLA played in the Humanitarian Bowl, it would mean that one of ESPN's other bowls would be stuck with two also ran teams out of the mid-American conference. While it is true that most any game with a bowl label will draw a significant TV audience, that is because people like watching bowl games to see matchups that they otherwise wouldn't see during the regular season. A game between two second tier teams from the same mid-major conference probably wouldn't draw a viewership beyond the players' families.

Note that this "made for TV" bowl schedule now extends to college basketball, with all of these preseason tournaments with top teams from all over the country that are played in empty arenas. These tournaments are supported entirely by TV dollars, with live gate not even being necessary.