How Not To Get Money Out Of Politics

An oft-repeated mantra of the last several decades is that "we need to get money out of politics."  I'm told that that mantra polls well among the public even today.  The proposed solution has been our campaign finance laws, which got started in a big way in the 70s and have been added to since.  Those laws restrict the amount of money that any donor can contribute to a political campaign, and often have also attempted to restrict how much a donor can contribute to a political party or an independent group, and even how much a campaign can spend in the aggregate.  Violate any of the restrictions, and you have committed a criminal act.  

Many, but far from all, of the restrictions have been ruled unconstitutional by the Supreme Court.  In brief summary, the position of the Court has been that independent political expenditures are a form of speech protected under the First Amendment, and therefore cannot be restricted.  However, the Supreme Court has also ruled that contributions directly to a candidate's campaign might be a disguised form of bribery, thereby posing a threat of corruption, and therefore subject to restriction.  There is currently a limit of $2600 for contributions by any one individual to the federal campaign of any one candidate; a married couple can contribute double that, or $5200.  More is a crime.  Many states have their own restrictions, generally of similar form, but subject to the same limitations coming from the Supreme Court case law.

With that background, I will now give the facts of three actual situations that are playing out even today, and your task is to guess which one has been the subject of a criminal investigation:

Scenario A.   Governor Scott Walker of Wisconsin faced a recall election in 2012.  No single donor gave the campaign more than allowed under the contribution limits of the state's campaign finance law.  However, some large independent groups (Americans for Prosperity, Club for Growth, Republican Party of Wisconsin) ran many TV ads during the campaign that, without directly supporting Walker, took Walker's side of certain issues.  Allegations were made that these expenditures were "coordinated" with the Walker campaign, although the independent groups paid for the ads with their own money and none of the money went to Walker or his campaign.  (From the Milwaukee Journal Sentinel of June 19:  Beginning in March 2011, there were "open and express discussions" of the need to coordinate the activities of entities like Americans for Prosperity, Wisconsin Club for Growth, the Republican Party of Wisconsin [and others].)   Some of the money may have come from the much-vilified Koch brothers.   Walker won the recall election.

Scenario B.   After winning election as Mayor of New York City in November 2013, Bill de Blasio pushed forward a signature initiative of universal pre-k education in the public schools.    A not-for-profit called Campaign for One New York was formed by de Blasio and his aides to advance this initiative, and after de Blasio was elected it began running television commercials aimed at building political momentum for the initiative.  A July 15 article from Crain's New York Business describes the next steps.  As of April 8 de Blasio was planning $1 million of television advertising through April in support of the the plan, but had only $100,000 on hand after having spent only about half of the planned amount.  On April 9, the City's teachers union, the American Federation of Teachers, contributed $350,000 to Campaign for One New York, thereby enabling it to complete the advertising blitz.  Then in early May the long-running labor dispute between the City and the teachers union was settled through the efforts of de Blasio, with a contract containing increases over the previous contract calculated at $9 billion, of which some $4 billion consists of retroactive raises that previous mayor Mike Bloomberg had said were unaffordable.  Meanwhile the adoption of public-school pre-k will result in the hiring of several thousand more unionized teachers, and thus several million dollars more per year of taxpayer revenue going to the teachers union.

Scenario C.  Hillary Clinton is considered the presumptive nominee of the Democratic Party for President in 2016.  But she has not yet officially launched a campaign.  Meanwhile, she makes frequent speeches, many on university campuses, and charges reputed "speaking fees" of approximately $250,000 per speech.  According to this Washington Post article, during the last several months she has given at least eight speeches at colleges and universities, for fees totaling some $1.8 million for just those eight.  When criticized by students for spending their tuition money on such high speaking fees for one speech, several of the universities have defended themselves by saying that they did not use tuition money, but rather took money from some kind of speakers fund that had been raised from one or more donors to the university.  For example, the Post article reports that Hillary's speech at Colgate was funded by a senior financial executive named Edward Kerschner; at UConn, her fee was underwritten by New Haven-based developer Edmund Fusco.  In other words, those guys (and others) have managed to send close to 100 times the campaign contribution limit to Hillary; but because they have arranged to characterize the payment as a "speaking fee" and to have a university as an intermediary,  they claim to be outside the campaign finance system and even take a tax deduction for the contribution.

One of these three scenarios has been the subject of a long-running and expensive criminal investigation.  Can you guess which one?  Of course it is Scenario A, involving Republican Scott Walker.  The theory behind the investigation is that the Walker campaign "coordinated" with the independent groups on the timing and themes of the ads, thereby making the ads a sort of in-kind contribution to the campaign itself, and making the groups subject to registration under Wisconsin campaign law.  The investigation is under the auspices of Democrat Milwaukee County District Attorney John Chisholm.  Two judges, one state and one federal, have weighed in, and both have been severely critical of the investigation.  The federal judge got involved when Club for Growth brought a lawsuit seeking to stop the investigation, and a ruling in that case appears to have shut the investigation down for now.  But the Journal Sentinel provides quotes from the complaint in that case that give an idea of the investigation's scope and tactics:  

[T]he judge who originally presided over the investigation authorized as many as 100 subpoenas "of breathtaking scope" and ordered raids "related to at least 29 organizations." . . .   "School-age children were home in at least two residences and school buses passed their houses during the course of the raids, which lasted over two and a half hours," O'Keefe's complaint said. "The searches were conducted by six armed sheriff's deputies with flak vests, bright lights were aimed at the houses, and multiple vehicles were parked on the lots, police lights ablaze."

I don't know how you may react to the three scenarios, but of the three I find the Walker situation to involve by far the least taste of corruption.  Yet I haven't heard or seen any hint of an investigation as to the situations involving either de Blasio or Clinton.  The biggest part of that could simply be that all the relevant prosecutorial offices in the federal government, New York, and Connecticut are currently headed by Democrats, who are just not going to go after their own.  Meanwhile, Walker is a Republican being pursued by Democrats.

The other piece may be that de Blasio and Clinton are just a little cleverer in how they structure their transactions.  Still, in the face of a $2600 campaign contribution limit, could it really be that giving $250,000 legally to Hillary (and getting a tax deduction for it no less) is as simple as laundering the money through a university and calling it a "speaking fee"?  If so, what possible function is served by these campaign finance laws, other than as a device to torture your adversaries when your side happens to control the prosecutorial offices at a particular moment?  

The Kansas Pile-On

For the forces of government growth, the worst possible thing is a state that breaks ranks from the endless creeping government expansion and actually tries to cut taxes and spending.  In today's United States, that would be Kansas.  So suddenly this state you never read about deep in flyover country is getting a lot of attention in the national press.

In 2010 Kansas elected Republican former Senator Sam Brownback as its governor, following two Democrats (one of whom was Kathleen Sebelius).  With the support of a heavily Republican legislature, Brownback has set about to make big cuts in taxes as a way to jump-start the economy.  The top income tax rate was cut from 6.45% to 4.9% effective in mid-2013.  Further cuts are scheduled over the next several years (down to 3.9% in 2018), and Brownback has even talked about getting rid of the income tax entirely.  Heresy!

The New York Times weighed in on Sunday July 13 with an editorial titled "Kansas' Ruinous Tax Cuts."  The clear goal is to nip this tax cutting thing in the bud before it starts taking hold.  The Times editorial quotes Brownback in 2012 as saying "Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy."  And then it proceeds to cherry-pick some data to try to show that the whole thing isn't working and should be stopped right now:

But the growth didn’t show up. Kansas, in fact, was one of only five states to lose employment over the last six months, while the rest of the country was improving. It has been below the national average in job gains for the three and half years Mr. Brownback has been in office. Average earnings in the state are down since 2012, and so is net growth in the number of registered businesses.

As another example of the Kansas pile-on, here is Howard Gleckman from July 15 at the Forbes web site.  His conclusion:  "This is fiscal snake oil."  And Mark Peters in the Wall Street Journal on July 15 cites "more than 100 Republican officials" in Kansas as supporting Brownback's opponent for governor in the upcoming election, largely attributing the phenomenon to cold feet over the tax cuts.

A few comments on this.  First, I wouldn't be expecting very dramatic changes to be happening overnight as a result of what really are not-very-dramatic tax cuts.  The process of creating a good investment climate and then attracting the investors takes years, just as the process of destroying a good investment climate and driving business away takes years.  Here in New York, Bill de Blasio is doing everything he can to destroy the good investment climate created by his two predecessors, but you can't really notice any change yet.  It would be nice if clear results could be in within 12 months, but these things just don't work that way.  And then there are specific factors as to particular businesses and industries that can affect the results.  For example, Kansas is big in the private aircraft business, which is struggling.  That business would still be struggling even if they eliminated the income tax entirely.

So instead of cherry-picking some short term data about Kansas, let's take a look at a somewhat bigger picture.   Here is the recent data from the Commerce Department on GDP growth by state for 2013:

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Surprise, it is the usual case of low tax low spend states far outperforming the high tax high spend states.   It's not a perfect correlation, and never is in any given year, but low tax states like Texas (3.7% growth) and Florida (2.2% growth) virtually always outperform the "blue states" (not blue in this chart), like New York (0.7%), New Jersey (1.1%), Connecticut (0.9%) and Illinois (0.9%).  Oh, and there's Kansas at 1.9% -- a lot better than New York.  Try to find that data in the New York Times!

For a little more long term perspective on things, take a look at demographer Joel Kotkin's op-ed from the Wall Street Journal on July 15, "Success and the City."  Kotkin documents the remarkable success of low tax Houston, now the fourth largest city in the country and continuing to outstrip all rivals.

Houston's economic success over the past 20 years—and, more remarkably, since the Great Recession and the weak national recovery—rivals the performance of any large metropolitan region in the U.S. For nearly a decade and a half, the city has added jobs at a furious pace—more than 600,000 since early 2000, and 263,000 since early 2008.  The much more populous greater New York City area has added 103,000 jobs since 2008, and Los Angeles, Chicago, Phoenix, Atlanta and Philadelphia remain well below their 2008 levels in total jobs. Los Angeles and Chicago, like Detroit, have fewer jobs today than they did at the turn of the millennium.

And from today's Wall Street Journal, we have "Weak Economy Dogs Christie On The Road."  With New Jersey having a top income tax rate now almost 9%, why should that surprise anyone?

So Kansas, have a little fortitude.  Success may take a little while, but it will come.

The Impending Demise Of The Insider Trading Jihad

Since Preet Bharara took over as U.S. Attorney for the Southern District of New York in 2009, that office has been almost completely consumed by the jihad against what they falsely call "insider trading."  The label is false because the large majority of the defendants have not been insiders of the companies in question, but rather have been investment professionals of various sorts.  As of about a week ago the SDNY prosecutors claimed a record of 85 straight convictions without a single loss.  Last week they lost their first case, the prosecution of a guy named Rengan Rajaratnam.  That may seem like a small thing -- now it's 85 - 1.  But actually, the latest one is signaling that a good half of the prior 85 were baseless.  The whole jihad could be about to unravel.

Lots of people try to make money in the stock market by coming up with a few tidbits of information about a company before others do, and then trading on that information.  Is that OK?  For many, many investment professionals on and off Wall Street, this is their job.  People who do this have no sense that they are doing anything wrong.  Some (including me) would say that this process is a big part of how the U.S. became a successful country.  But our current government regime thinks that the whole enterprise is somehow wrong. Indeed a fair summary of their view is that anyone who makes money trading on advantageous market information, and by doing that makes more money than other people or more than seems "fair," therefore belongs in jail.  Certainly this is an accurate statement of the view of the current federal criminal prosecutors, led by the SDNY, and of the SEC.    

Is mere trading on advantageous market information, including information that originally came from a company insider, actually illegal?  Here is the statute under which the federal criminal prosecutors and SEC go after the non-insiders for this so-called "insider trading."  It is Section 10(b) of the Securities Exchange Act of 1934:

It shall be unlawful for any person . . . [t]o use or employ, in connection with the purchase or sale of any security . . . any manipulative or deceptive device or contrivance . . . .

OK, now that you've read that, can you kindly explain to me exactly what you can and can't do in trading on information that you have come upon that may or may not have come in the first instance from a corporate insider at some company?  In the view of the feds, if you have any reason to suspect that any information about a company that seems valuable to you came from some source inside the company, then any trading by you in the stock of that company is a criminal act.  Can you tease that out of the statute?  I can't.

So how do they come to get a record of 85 straight convictions?  First, almost all of them are guilty pleas, as opposed to convictions after trial before a jury.  I can't find an exact statistic, but my best information is that approximately 6 of the 85 are convictions after a jury trial.  This is an area where a minimally competent defense will cost at least $5 million, and some defenses have cost even $20 million or more.  The feds have essentially infinite resources to pour into the prosecution.    Almost nobody is in a position to defend unless they have an employer to back them, and the prosecutors then put pressure on the employers to pull the plug.  And in the rare case where you have the resources to fight, you then also need unbelievable intestinal fortitude.  Convictions after trial come with incredibly long prison sentences, often 5 or more years; guilty pleas can entail little or no jail time.  While I obviously don't know the facts of every case, I strongly suspect that well over half of the 80 or so guilty pleaders did absolutely nothing wrong.  And if your test of criminality moves from "seems wrong to me" to "clearly violates a criminal statute passed by Congress and signed by the President," then the percentage of innocent will move still higher.

The beginning of the end actually came before the recent acquittal of Rengan Rajaratnam, and goes back at least to April, when the Second Circuit heard the argument in the appeal of Messrs. Newman and Chiasson, non-insiders previously convicted of "insider trading" in the stock of Dell.  The appeal has not yet been decided.  In the Newman/Chiasson case, Dell's designated investor relations spokesperson, Rob Ray, allegedly gave some information he should not have to A, who passed it on to B, who passed it on to C, who passed it on to Newman and Chiasson.  The Second Circuit panel expressed skepticism at the hearing as to how Newman and Chiasson had been convicted without a jury instruction requiring as an element of the crime proof that they knew that Ray had been improperly compensated for disclosing the information.  (Ray, by the way, was never prosecuted, and currently holds a comparable investor relations position at another large public company.  Others in the information chain pleaded guilty.)

In the Rengan Rajaratnam prosecution, the defendant was again a "remote tippee," who allegedly got information about companies passed on by his previously-convicted brother Raj.  Judge Buchwald decided that she would require the prosecutors to prove that Rengan knew that the sources of the information had been improperly compensated; and when the prosecutors came up with nothing, she dismissed the two "fraud" counts against Rengan herself before sending one remaining conspiracy count to the jury.  The jury took just a few hours to dispose of that one as well.

Assume for the moment that the Second Circuit reverses in Newman/Chiasson, as I believe they will.  Another one of the SDNY's handful of trial convictions, Steinberg, also involves the same Dell information chain as Newman and Chiasson (actually Steinberg was yet one more level removed from the source), and Steinberg's trial was before the same judge with the same defective instructions.  It's hard to see how Steinberg's conviction could survive the reversal of Newman/Chiasson.  And suddenly half of Bharara's convictions after trial have gone up in smoke.

And what about those 80 +/- guilty pleas?  According to an analysis by Reuters here, "roughly a third of the insider trader defendants charged by Manhattan U.S. Attorney Preet Bharara since 2009 are alleged so-called 'remote tippees.'"  Of course, remote tippees are just one example of non-insider "insider trading" defendants who are unlikely to have been directly involved in any compensation of insiders.  

Meanwhile over at the SEC, the civil branch of the non-insider insider trading jihad has been crumbling for months.  In a high publicity trial ending in October 2013, Mark Cuban was cleared of alleged insider trading in the stock of Mamma.com.  Subsequent SEC losses have gotten much less publicity.  In February, there was the exoneration of four members of the Steffes family for alleged insider trading in the stock of Florida East Coast.  Nelson Obus was cleared by a jury in May of alleged insider trading in a stock called SunSource after a ten-year battle reported to have cost him $9 million.  In June came the exoneration of Manouchehr Moshayedi for alleged insider trading in the stock of STEC Inc.

Having secured his many guilty pleas, Mr. Bharara has no explicit legal obligation to go back to those wrongly coerced into a plea and offer them exoneration.  On the other hand, this is a man who thinks that the power of the federal prosecutor extends to criminally convicting people in the absence of a clear federal statute and on the basis that their conduct offends his sense of right and wrong.  Is there any chance that he himself will now do the right thing?  Don't count on it.  

Highlights From The 9th International Conference On Climate Change

So I'm just returned back here to Manhattan from the 9th International Conference On Climate Change, put on by the Heartland Institute in Las Vegas over the past three days.  It was a very impressive program, and Heartland deserves great credit for the tremendous organizational effort, let alone raising the money to mount the event.

Two things stand out as remarkable about this conference.  First, there was the high quality and great expertise of the presenters.  To a person, they were serious people making serious points.  And second, there was the fact that not one single scientist from the alarmist camp showed up to defend his or her position before this highly informed skeptical audience.  The second is really the more remarkable.  The event sponsors from Heartland stated repeatedly that they had invited numerous scientists from the alarmist side of the debate, but not one had agreed to show up.

Here's why I find that second fact so remarkable.  Being in the litigation business, I have had the chance to spend a lot of time thinking about how it is that juries of lay people get entrusted to decide disputes over complex matters about which they have little knowledge and no expertise.   But in fact this process of decision by lay people, if very imperfect, works remarkably well.  And here is the view I've come to: A lay person with no knowledge about a complex subject can get a very good idea of who's closer to right by asking himself one simple question -- Which side has the better answers to the other side's best points?   That proposition can then be extended outside the courtroom to arguments generally, including arguments about public policy.  The side that won't or can't answer the other side's best points, or that refuses to show up for debate, is demonstrating that its position has serious problems, even without saying anything.  If the answers were clear and obviously correct, someone would show up and give them.  So when one side refuses to do that, it is conceding that it has lost.

Another organization that I am associated with, the Federalist Society, long ago recognized the importance of being willing to go head to head with the very best that the other side has to offer, at least if you want your own ideas to advance and ultimately prevail in the public sphere.  For those who don't know much about it, the Federalist Society was founded in the 1980s with the idea of getting a hearing in the public sphere for conservative and libertarian legal thought.  From the beginning, the model of the Federalist Society has been to host debates where prominent speakers from the liberal or statist side are always given their full say.  For what I would say are obvious reasons, the Federalist Society, through its model of open and robust debate, has been remarkably successful in its goal of advancing conservative and libertarian legal thought. 

The alarmist climate science community has adopted exactly the opposite strategy.  Indeed that community has not been shy about using every method available to enforce strict orthodoxy and avoid debate.  Here is a small roundup I wrote in March.  Some of the techniques used by the climate community have included getting important media outlets to refuse to publish any work of dissenters, using positions as peer reviewers at prominent science journals to prevent publication of dissenting articles, bringing libel suits against dissenters, threatening criminal prosecution against dissenters, and launching ad hominem attacks against those who don't toe the line.  Well, I guess it's no surprise that anyone hoping to be in with this crowd would not show up at a conference put on by dissenters -- the orthodoxy-enforcers will end your career in a heartbeat.

The Heartland's conference website, linked above, has streaming video of all the presentations.  To highlight just a few of the more important points:

• Patrick Moore, one of the founders of Greenpeace and now apostate, gave a keynote address on the morning of July 8.  Among the illustrations used in his talk were charts showing the lack of correlation of atmospheric CO2 with measured temperatures (1) on geologic time scales (600 million years), where periods of CO2 concentrations many times higher than today have also had ice ages,  (2) during the thermometer era of about 1880 to present, where the first run-up from about 1910 to 1940 preceded the extensive use of fossil fuels, and (3) for the last approximately 18 years, when temperatures have flatlined while CO2 continues to increase.
• On the morning of July 8, a panel on Climate Change and the Hydrosphere addressed the influences of ocean on the climate.  Speakers included William Gray, William Kininmonth and Roy Spencer.  A point that was implicit in all the presentations was finally stated explicitly in the question and answer period:  If world temperatures (as measured by the highly accurate satellites) have remained flat for the last 18 years, and if you believe that CO2 exerts a strong warming influence on temperatures, and if CO2 has increased substantially during that period, then don't you have to concede that there is some natural, non-anthropogenic force that is sufficient to completely offset the warming effect of the CO2? 
• Patrick Michaels of the Cato Institute gave the luncheon keynote address on July 8.  He reviewed the tremendous corrupting influence resulting from the fact that one source, government, provides essentially all funding for climate science research, while at the same time having its own agenda of expanding its own power.  In a situation where all climate models that predicted large warming over the last 18 years have now been falsified by observational data, he called upon climate scientists to reject the hypotheses represented by these models, as a matter of basic scientific ethics.
• In a panel later in the day on July 8, the blogger Tony Heller (nom de blog Steven Goddard) presented some of his data showing adjustments of the observation record from land-based thermometers being adjusted by the government in recent years to lower earlier temperatures and raise more recent ones.

And there was lots more.  I highly recommend to all to view as much of the material from this conference as you have time for.  For anyone on the alarmist side of the debate, I ask you, what are the answers to any of these points?

What's The Right Answer For New Jersey's Public Pensions?

Most of the "blue" states, and a few of the "red" ones, have unsustainable defined benefit pension plans for public employees; but the problem has been well hidden from the voters by the politicians who put these things in place.  By the time the problem gets fully recognized, the hole is really deep.  And don't expect any help from the public employee unions in getting out of the hole -- they will gladly bankrupt their state to fight for the last penny for the pensions.  Hey, that's their job.

The recent stock market run-up has temporarily rescued many of these plans from immediate crisis, so the issue has somewhat receded from the news.  But not in New Jersey, home of some of the worst problems.  There the pension issue has been at the heart of the recent budget battle between Republican Governor Christie and a Democrat-controlled legislature.

While New Jersey's plight may not be the worst among the states (Illinois and California come to mind), its situation is pretty bad.  Here is a roundup of the official asset and funding status of New Jersey's various plans from the website ballotpedia.  It seems that New Jersey governors and legislators have several times adopted the expedient of skipping required pension contributions in order to close what otherwise would be budget deficits.  Recently, only 32% of the 2010 payment was made. This is a very good way to get your pension plan into a death spiral.  The status per most recent official numbers is 64.54% of obligations funded, leaving $47.2 billion of unfunded liabilities.  This against a total state annual budget of $32.5 billion.

If you are interested in inter-state comparisons, ballotpedia cites data from Moody's as ranking New Jersey 4th worst among the states in the ratio of unfunded pension liabilities to annual state revenue (137.2%) and 8th worst in the ratio of unfunded pension liabilities to state GDP (13.0%).  Of course, that's if you believe the official numbers for pension liabilities, using discount rates of about 8%.  A group called State Budget Solutions (SBS) has helpfully done a recalculation of New Jersey's liabilities at a very conservative interest rate of 3.2%, and they come up with unfunded liabilities for New Jersey of $171.7 billion (cited in the ballotpedia article).  That would make the unfunded liabilities a good 5.3 times annual state revenue, and the funded ratio of the plans more like 32%.

Christie put through what was labeled as a big pension reform in 2011, described here in a Wall Street Journal article by Josh Dawsey and Heather Haddon on July 1.  Under that reform supposedly the state was going to contribute around $2.25 billion per year to gradually catch up.   Well, according to SBS here, Christie's just-signed budget includes only $691 million for the pensions.  According to Christie, revenue came in below projections, and there just isn't enough money for the pension catch up funding.

Needless to say, the public employee unions are up in arms.  They promptly filed a suit and sought an injunction, but a state judge has already given preliminary approval to Christie to do what he is doing.  The solution offered by the unions and by prominent Democrats in the state legislature has been to raise the tax rate on high earners yet again.  The legislature passed that, but Christie vetoed it.

But the question is, what is the right answer here for New Jersey?  The Democrat/union proposal of higher taxes may work for one year, but New Jersey is highly likely to be in a pension death spiral situation already.  Unless the stock market performs miracles, the supposedly required pension contributions will keep increasing year after year, probably faster than the economy can hope to keep up.  In this kind of situation, can you increase the taxes on the same people year after year and expect them to stick around?

I submit that if you should find yourself in a Ponzi scheme, the best thing that can happen is to have it crash as quickly as possible.  And the biggest mistake you can make is to keep feeding it as you dig deeper and deeper into a hole from which you can never get out.  This would imply that it is actually a sensible strategy to quit making the pension contributions, thereby accelerating the crash.  The crash will come when there is still a large productive economy in New Jersey, and as the crash approaches, the public employees will be forced to the negotiating table to accept retirement contributions at a sustainable level.  Defined contribution plans anyone?  

What Is The Greatest Scientific Fraud Of All Time? -- Part II

Just under a year ago, on July 19, 2013, I asked the question, What Is The Greatest Scientific Fraud Of All Time?   After going through a number of candidates (e.g., the Tasaday, Piltdown Man) I concluded:

[G]oing through these lists also makes clear that none of these frauds comes close to the big one going on right now, which is the world temperature data tampering fraud.

The world temperature data tampering fraud is the fraud whereby the official U.S. government guardians of temperature data, namely NOAA/NCDC and NASA/GISS, systematically adjust older temperatures down and newer temperatures up in order to introduce spurious warming trends into the data and thereby support the narrative that "global warming" is occurring.

Some people who are following and reporting on this story are still avoiding the use of the word "fraud."  I am not.  

When I wrote the July 2013 post, this story was still struggling for attention.  A very energetic guy who blogs at Real Science under the name Steven Goddard (actual name: Tony Heller) was writing post after post comparing recent temperature data on government websites to previous versions, and noting example after example of downward adjustments of the past and upward adjustments of the more recent data.  However, some had criticized his work for occasional inaccuracies or errors.  Joseph D'Aleo of the icecap.us website had also entered the fray with several examples of unexplained adjustments.  But otherwise the story has been largely quiet in the intervening year.

That all ended a couple of weeks ago.  Over a period of a few days, several wide circulation sites, and even a television news show, featured some of Goddard's work.  It had lead position on Drudge for a day.  Steve Doocy of Fox and Friends had a segment based on Goddard's work where he stated "NASA scientists fudged the numbers to make 1998 the hottest year to overstate the extent of global warming."  Other sources picking up the story included the Telegraph, Breitbart, and realclearpolitics.

Next, politifact decided to weigh in.  They went to the usual suspects of the "mainstream" climate community, including the director of NASA/GISS, Gavin Schmidt.  These usual suspects engaged in the usual obfuscatory handwaving, attributing various of the adjustments to seemingly legitimate things like station moves and changes in the time of day at which thermometers are read.  Politifact fell for it, rating Doocy's Fox News piece "pants on fire."

But by this time the story was getting so much play that lots of people were starting to pay attention.  A guy named Paul Homewood of the website notalotofpeopleknowthat was intrigued enough to pick one station at random in Texas and do a deep dive into the data. His resulting post on June 26 is titled "Massive Temperature Adjustments at Luling, Texas."  His conclusion:

[T]he adjustments have added an astonishing 1.35C to the annual temperature for 2013.  Note also that I have included the same figures for 1934, which show that the adjustment has reduced temperatures that year by 0.91C.  So, the net effect of the adjustments between 1934 and 2013 has been to add 2.26C of warming.

Then Joe D'Aleo weighed in with some data from Maine.  In 2013 he had downloaded NCDC annual temperature data for Maine.  Then NOAA earlier this year announced a transition to a new so-called CLIMDIV version of its USHCN data for Maine, so D'Aleo downloaded that for comparison to the version he had downloaded last year.  How did the two compare?  While the old data showed no warming in a record going all the way back to 1895, suddenly there was a large warming trend.  And where did it come from?

The new CLIMDIV data was supposed to resolve issues with recent station moves, transition to airport, to new MMTS technology and UHI and siting issues with improvements late in the record, we were very surprised to see the biggest changes to the early data set.  1913 went from the warmest year in the record to the middle of the pack with a cooling of close to 5F!.

So kindly, Dr. Schmidt, can you explain exactly how a change to the time of day at which temperatures are read has now made 1913 5F cooler in Maine than it was previously?

On June 28 the highly respected Judith Curry of Georgia Tech weighed in with a post titled Skeptical of skeptics: is Steve Goddard right?  I have previously noted that Curry, once a member of the climate science in crowd, has become increasingly unaccepting of the unscientific antics of the climate science community.   Her conclusion after reviewing Goddard, Homewood and others:  

I infer from this that there seems to be a real problem with the USHCN data set, or at least with some of the stations. . . .  As far as I can tell, NOAA has not responded to Goddard’s allegations. Now, with Homewood’s explanation/clarification, NOAA really needs to respond.

On June 29, there was a lengthy post by Anthony Watts of wattsupwiththat, titled NOAA's temperature control knob for the past, the present, and maybe the future - July 1936 now hottest month again.  Anthony did some looking at yet more data, and every place you look the story comes up the same.  For example, Anthony asked a guy named Bruce at Sunshine Hours to gather data on Kansas and plot it on some maps, which then appear in Anthony's post.  Example of the results:

Bruce also plotted some other maps of Kansas, for July 1936, and for July 2012. Note how in July 1936 the Tmax temperature are almost all adjusted cooler, and in 2012, most all Tmax temperatures are adjusted warmer.

Go to Anthony's post for the maps with station by station data.  Anthony then asks:  Whatever happened to just using actual measured data?  There is no justification for this. 

But at the end of his post, Anthony continues to give these people the benefit of the doubt:

I don’t believe this is case where somebody purposely has their hand on a control knob for temperature data, I think all of this is nothing more than artifacts of a convoluted methodology and typical bureaucratic blundering. As I’ve always said, never attribute malice to what can be explained by simple incompetence.

Sorry, but I'm not buying it.  Here are my problems:  (1) Adjustments to the raw data are everywhere, and literally all of them make the past cooler and the present warmer.  (2) There are literally tens of billions of dollars at stake in having a record of increasing temperatures.  Every scientist working in the "climate science" area is dependent on continuation of government science funding in this area totaling as much as $10 billion per year.  Then there are additional massive subsidies for things like green energy.  (3) They won't release all the underlying calculations and computer code behind the adjustments.  My conclusion: There is nothing innocent about this.  This is the IRS deleted emails scandal multiplied by a factor of 100.

Politifact put a series of questions about this to NCDC and Watts has also posted their response here.  The heart:  "our algorithm is working as designed."  No backup, no code, no detailed justification of each change.  And good luck trying to get that.

Repeat:  The Greatest Scientific Fraud Of All Time.