Isaac Laquedem

Mr. Bacardi shares a tip with Isaac

I had occasion this week to meet a Mr. Bacardi, one of the elders of the family whose private company makes the famous rum of the same name.  We were in a small, quiet bar, and I noticed that he was, not surprisingly, drinking Bacardi rum.  ¨¨In college,¨ I said, ¨we drank Bacardi with Coca-Cola, but I later thought that I wasn´t doing justice to this fine spirit.  Mr. Bacardi, how do you recommend drinking Bacardi rum?¨¨ 

Although he didn´t criticize my college choice of rum and Coke, Mr. Bacardi did kindly tell me how he likes to drink Bacardi rum, and instructed the bartender step by step, in front of me, how to do it.  So as a sort of un-Isaac-like public service, I will describe Señor Bacardi´s favored method.

Take a tall, narrow glass and fill it loosely with ice cubes.  (Don´t use crushed ice.)  Half fill the glass with Bacardi, then fill the glass nearly to the top with still or sparkling water, according to taste.  (He prefers still water.)  Gently squeeze a lime quarter into the glass, stir briskly, and sip slowly.

I tried his method for mixing Bacardi rum -- several times, in fact -- and I have to admit that he has a point.  He did add, however, that his son likes Bacardi and Coke.

Another gas tax thought

When people propose tapping gas tax revenues to pay for other worthy causes, one response of AAA Oregon/Idaho and many others is to say that as gas taxes are paid only by users of the roads, the gas tax money should go only toward roads.

Not to make light of AAA´s argument, but Isaac notes that under the same argument, personal income taxes should be spent only for the benefit of people with income.

It´s time to raise the gas tax

Mass transit in Oregon, and in most places, is heavily subsidized.  A system such as TriMet might get about 40% of its operating costs from the farebox.  The rest comes from taxes and subsidies of various sorts.  Whenever it´s suggested to tap gas tax revenues (mostly dedicated to roads and highways) to help pay for mass transit to keep people off of roads, we hear the argument that the roads pay for themselves through the gas tax, without subsidy, and transit should pay for itself.

That argument doesn´t hold up, given the simple fact that Oregon´s roads and highways are deteriorating and the Oregon Department of Transportation (ODOT) doesn´t have enough money to maintain them.  If the gas tax fully supported the highway system then ODOT would have enough money to maintain the roads in first-class condition, and it doesn´t.  For example, Interstate 5, the state´s only north-south freeway, passes over several weight-restricted bridges.  The same is true of the counties; the Sellwood Bridge jn Portland (owned by Multnomah County) is so far gone that buses can´t use it any more.  At least one county (I think it´s Washington County) adopted a plan to turn little-used paved roads back to gravel, to cut down on maintenance costs.  Those aren´t signs of self-funding.

It´s time to increase the gas tax, and it´s time for the Automobile Association of Oregon (now part of AAA Oregon/Idaho), one of the leading historical opponents of gas tax increases, to figure out that many of its members might be willing to pay more for gas if some of the increase went to repair the roads on which they drive their cars.  If the state gas tax can´t support the roads then we´re not paying enough.

Harvard's next president?

The ripples were small outside of academia, but within the ivied walls some earthquakes rumbled this spring, when Lawrence Summers, the president of Harvard and a former secretary of the treasury, resigned under pressure from Harvard's governing board.  He had served five years as president, a shorter term than that of any president of the last 200 years who hadn't died in office, and had become as bedeviled by the faculty as he was beloved by the students.  Derek Bok, who was president from 1971 to 1991, was brought out of retirement to hold the fort for a year while the Harvard Corporation searches for Mr. Summers's successor.

Harvard invited its alumni and friends to suggest names of candidates for the job.  I have an odd theory, constructed at the inspiration of Mrs. Laquedem, that the school will offer the post to Condoleeza Rice, the secretary of state.  She has experience as an academic administrator (she was the provost of Stanford University), wide connections in the government, and a certain diplomatic nature that Mr. Summers lacked, or chose not to use, in his dealings with the tenured faculty.  By the fall of 2007 she will have only 16 months remaining as secretary of state, and will likely be thinking of what to do when President Bush's term expires.  If she isn't on Harvard's list, she should be.

The point of a war memorial is that it´s supposed to be inconvenient

Since Mr. Allen´s Rose Garden opened 10 years ago, the Memorial Coliseum has been a stepchild among the sports venues of Portland.  Several ideas for the building have been proposed in the last few years, ranging from tearing the Coliseum down and replacing it with, well, something else (maybe Steve Ballmer will fund it?), to turning it into an athletic center.  This post on BlueOregon, written by Ted Hinds, suggests moving Memorial Coliseum to the University of Oregon.

Although for reasons given in the comments it´s impracticable to move more than the shell,  Mr. Hinds hits on one important point about the Coliseum, which is that it´s a memorial to Oregon soldiers who died in war.  That´s why it´s called ¨Memorial Coliseum,¨and whatever obsolescence may now afflict the ¨Coliseum¨ part of its name, the ¨Memorial¨¨ part still bears meaning, particularly the memorial wall that´s between the coliseum itself and the space where the underground exhibition halls used to be.

I don´t object to tearing the coliseum down, or replacing it with something else, but on one condition, which is that the memorial wall and the fountain in front of it must be kept intact.  Perhaps that inconveniences redevelopment, but the sad fact is that war is inconvenient.  War is messy.  War kills people.  It seems to me that the least we could do to show respect for those who gave their lives in our country´s wars, and whom we´ve chosen to memorialize in an important way, is to keep the memorial itself intact regardless of the inconvenience it might cause us in laying out real estate developments.  A convenient memorial is a forgotten memorial.

I might suggest leaving room around the current memorial wall to mark the names of Oregonians who died in the Vietnam War, the Gulf War, and the Iraq War, except that it´s unfortunately hard to tell how much room to leave.

The Fine Institution's $7 billion offers a lesson to Oregon

The Fine Institution that I sometimes refer to here has accumulated a gigantic endowment, the result of several centuries of thrift.  I recently asked its president to name the biggest decisions that his successor would face.  He said that his successor would have to decide how best to use the $7 billion to make a difference in the world.

I should note that the $7 billion isn't the endowment.  The endowment is much larger.  The $7 billion is merely the portion of the increase over the last 3 or 4 years that exceeded the budgeted increase in the endowment: that is, it's not even all of the appreciation; it's just the unexpected portion of the appreciation.

This brought to mind my post of a few days ago about Oregon's income tax kicker, the legislature's danegeld to the voters.  We haven't mastered, or even begun to study, the art of what to do with unexpected wealth.  When we have more than we expected, we give it back; when we have less than expected, we cut public services.  This "heads I win, tails you lose" model of financial planning gives us jails we can't open, schools with no music and art, and roads in disrepair. 

Although Oregon isn't attempting to be a Fine Institution (I think it should), we could at least emulate the Fine Institution and others in that class by putting our surpluses into an endowment, away from the fingers of future legislators, where the income will produce some permanent value.  Even with such an endowment, we might never find such a large sum of unexpected money, but without some sort of state savings plan, we certainly won't find one.

The humble tuna defeats the TSA

Since I last flew coach on my usual airline, it's replaced the former airline fare (a French punster might call it haute cuisine) with a choice of four boxed meals, each available for half a sawbuck.  The one I bought included a plastic knife, because for security reasons the airlines now supply with their meals dull plastic knives instead of dull metal knives.  The dull plastic knife was for me to use to spread the tuna over the crackers.  The tuna came in a pull-top can, and the top, when pulled from the can, had the expected piscine aroma.  It also had a sharp metal edge.  Though not as sharp as that of a boxcutter it was a good deal sharper than a metal airline knife, and might provide some food for thought for the federal mavens of air safety.

A graduation thought

This is the season of college graduations, or "commencements" (leave it to higher education to name an ending with a word meaning "beginning"), and this week a law student, speaking at the graduation of his class, reminded his classmates to be humble:

"You may take great pride in the degrees that you receive today," he said.  "Don't.  All those degrees would have been given to someone today anyway -- even the magnas."

The next GM for the Portland Trail Blazers?

I could certainly be way off on this one, as I don't know the source well enough to judge his reliability, and I don't follow the business of basketball to know whether this is even plausible, but an unguarded comment suggests that the Trail Blazers might be talking with Pat Riley about joining their organization, most likely as the general manager.

The Laquedem Kicker in the Pants for Higher Education Plan

One of the Fine Institutions that's educated a number of the Laquedems is inviting my class back for a milestone reunion.  The Fine Institution's official hymn includes this quatrain:

Integrinti sint curatores,
Eruditi professores,
Largiantur donatores
Benepartas copias.

A translation that conveys the meaning, if not quite word-for-word, is:

May [the Institution's] caretakers be honest,
May its professors be erudite,
May its supporters be many
And give copiously when asked.

The Fine Institution seems willing to excuse the Laquedems from auditing the trustees and enlightening the professors, but hopes that we can help it meet the third portion of this tripartite prayer.  Although its development office's estimate of the Laquedem fortune is optimistic (I should present it to my banker) it does correctly believe that I stand ready to help out, albeit in some amount perhaps closer to parvo than to copias.

These thoughts passed through my mind as I read about Governor Kulongoski's proposal to have the state of Oregon hang on to the "kicker" instead of refunding it to taxpayers.  A little background: several years ago as part of the plan to starve the legislature into submission an anti-tax group proposed, and the voters adopted, a constitutional amendment that says that if the state takes in more income tax money than it budgeted, it must return the excess to the taxpayers in the following year.  This refund of the tax surplus is called the "kicker," perhaps because it's sort of a kickback to taxpayers.  The kicker check usually arrives with a letter from an elected official which makes it appear that the kicker check is the gift of a munificent government, rather like the handouts that Gaius Julius Caesar used to give to the masses, instead of the truth, which is that it's an unpleasant duty imposed on the state by its voters.

Even though the kicker law represents bad public policy at its finest, it's widely viewed as political suicide to suggest reducing the refund checks of the taxpayers.  The soundest reason for returning the excess money to the taxpayers is that Oregon's legislature is too dysfunctional to spend surplus money wisely.  The main reason advanced for the refund, I think, is different: it's that the taxpayers are counting on receiving the kicker money and it somehow represents extra taxes that the taxpayers have paid.

Nonsense.  I expect to pay the state an income tax of about nine percent on my income, and that's about what I do pay.  The rates don't change very much.  It's not as if the state told me at the beginning of the year, "We estimate that your share of the cost to run the state is $X thousand" and at the end of the year says, "Good news!   We didn't need to spend all your money, so here's a refund of the extra you paid."  Rather, the state gives me the kicker refund because the citizens and businesses of Oregon collectively had a better year than the state expected they would, and paid more taxes in total than the state had predicted.

If the kicker is bad policy (as I believe) and shouldn't be refunded to the taxpayers, and if the legislature can't be trusted to spend it well, what should be done with it?  I like the Governor's idea of creating a rainy-day fund, except that I believe that if we had such a fund, the legislature would quickly find rainfall on the driest of days, and spend it.  I also believe that we're letting our public universities run down and become third-rate, which will keep down the growth of the tech industry in Oregon.

Hence my idea on what to do with the kicker, which I'm calling the Laquedem Kicker in the Pants for Higher Education Plan.  The surplus will be set aside in an endowment in which the principal is untouchable, to be managed by the Oregon Investment Council and to be separate from the state's general fund (i.e., not reachable to pay for any deficit in PERS).  The actual income of the endowment in each year will be given to the state colleges in the following year in direct proportion to the number of undergraduates who graduate from the college within four years of entering.  The allocation board doesn't get to say (for example) that this year Oregon State University is more deserving than Oregon Institute of Technology, or that Eastern Oregon University is more deserving than Southern Oregon University (which I still think of as SOSC) -- it's strictly allocated by the number of graduating seniors.  Why support schools that can't produce graduates?

Under my plan the kicker fund can't be diverted to pay for highways, or salmon habitat, or trams (compare the lottery fund, which was to go only to economic development and which the Legislature's tapped for a variety of pet causes).  The principal is saved forever and the income goes to Oregon's public colleges.  How much income?  It's possible that the fund would build to $1 billion in a few years of surplus, which should produce about 4% ($40 million) of cash flow if invested prudently.  The public colleges have about 85,000 undergraduates.  Each school would get an average of almost $500 per undergraduate per year; not a fortune to be sure, but still a meaningful sum for a public college. 

We aren't going to make our state colleges world-class, or even national-class, institutions overnight.  But we ought to at least make the effort to get them back into the competition by the time that today's students are ready to send their own children to college.