Archive for the ‘Economics’ Category

How Much Does ‘Too Big to Fail’ Matter?

Monday, April 26th, 2010

One thing that’s throwing me off a bit in the debate over how much effort to put towards breaking up large banks is this notion of focusing on the idea of being “too big to fail.” That is, an institution getting so large that its failure will send intolerable ripples through the rest of the industry/economy, making it imperative that the public not allow such a failure. This is, obviously, the motivating factor behind the bailout of the financial industry and, to a lesser extent, General Motors.  But it seems to me that the concept of resolution authority mostly eliminates that need. The problem with allowing even a relatively small firm like Lehman Brothers to fail is the overall impact it has on the entire industry, essentially creating a panic. Given those sorts of circumstances, some sort of public authority needs to make sure a failure doesn’t happen. But if the FDIC has the authority to seize failed shadow banks and unwind them orderly and slowly, that theoretically takes care of the problems associated with panics and failures. This, of course, is why we don’t have panics related to deposit banks anymore; there’s a process in place for managing these kinds of failures that’s well understood by the industry, and people can anticipate what it means for their firms. Plus, receivership eliminates the problem of failed banks flooding the market with assets, devaluing similar assets on everyone else’s balance sheets. In this sort of structure, no one is too big to fail, because receivership is there as a sort of safety net to slowly manage the collapse of the bank. There are other problems associated with large banks to be sure, so I think the excess attention paid to failures is probably distorting more than it’s clarifying.

McCain the Maverick as a Character Issue

Thursday, April 1st, 2010

Responding to Jill Lawrence’s observation that, despite John McCain’s claims in the 2008 Presidential campaing, it’s Barack Obama who is making decisions that are angering his party’s base, while a primary challenge from the right has McCain abandoning his previous “Mavericky” positions and toeing the GOP line, Chait writes:

Lawrence ticks off numerous examples. Now, to be sure, the difference is mostly in the positions the two men find themselves in: Obama needs to deal with a Senate where conservative Democrats and moderate Republicans hold swing votes, and McCain is fending off a right-wing primary challenge. Still, acknowledging that fact itself undermines McCain’s contention that his breaks with his party, most of them occurring from 2000-2003, were a mark of character. If they were a mark of character, then his current behavior suggests that McCain lacks character. But I think the evidence suggests that reading characterological traits into “maverick” votes is, at best, a wildly overstated exercise.

That’s true enough, if you assume the mavericky votes were honest expressions of McCain’s idiosyncracy. If, instead, you view them as votes primarily cast in opposition to George W. Bush in a fit of pique by the man Bush beat in a nasty GOP primary, then they make a lot of sense as a manifestation of characterological traits; they paint the picture of a man who is unusually petty and prone to pique, a view that makes even more sense when you consider that McCain was already abandoning his independent persona before J.D. Hayworth announced his challenge when it presented a chance to oppose the administration. And considering that McCain was a pretty down-the-line conservative Senator prior to 2001, I maintain this is the best way to understand John McCain’s professional evolution.

In other news, McCain is also claiming that even if Republicans can’t repeal the ACA because they can’t get past a Presiential veto, that’s okay, they’ll just refuse to fund it. The problem is that most of the spending is mandatory spending, not discretionary spending, which means the funding is automatically ppropriated year to year, and changing that would require passing a new law. Which serves as a nice reminder that on top of being a uniquely petty, crotchety old man, McCain also knows nothing about governanve, budgeting, or Congressional procedure, despite having spent nearly 3 decades in Congress.

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The Washington Post’s Greatest Monster

Monday, March 29th, 2010

It’s a tough competition at a paper that includes Charles Krauthammer, Anne Applebaum, and Marc Thiessen in its stable, but Robert Samuelson, an original member of the Pain Caucus, can always be counted on to make a strong case for the title of Greatest Monster at The Washington Post. Here’s a section of his column today, arguing that expanding health insurance to those without access is a “self-indulgence:”

To criticisms, Obama supporters make two arguments. First, the CBO says the plan reduces the deficit by $143 billion over a decade. Second, the legislation contains measures (an expert panel to curb Medicare spending, emphasis on “comparative effectiveness research”) to control health spending. These rejoinders are self-serving and unconvincing.

Suppose the CBO estimate is correct. So? The $143 billion saving is about 1 percent of the projected $12.7 trillion deficit from 2009 to 2020. If the administration has $1 trillion or so of spending cuts and tax increases over a decade, all these monies should first cover existing deficits — not finance new spending. Obama’s behavior resembles a highly indebted family’s taking an expensive round-the-world trip because it claims to have found ways to pay for it. It’s self-indulgent and reckless.

As  brief aside, there was a point not that long ago when Samuelson couched his morally outrageous positions in much more clever arguments. But whether time is catching up with him or his position has gotten so cozy he can’t avoid the temptation to phone it in, these days Samuelson’s columns don’t even stand up to an initial skimming. In the next paragraph, for example, Samuelson argues that the CBO’s report is “misleading,” and bases this claim on a New York Times Op-Ed by Douglas Holtz-Eakin that Krugman absolutely shredded on the Times’ own website, and by invoking the “doc fix” that was going to pass regardless of the fate of healthcare reform. It’s the work of a complete hack, and not even original hack work at that.

But even leaving that aside, Samuelson’s argument, such as it is, falls apart under the weight of Samuelson’s own analogy. Samuelson would have you believe that expanding access to health insurance is akin to a family that finds some extra money in its budget opts to take a lavish vacation rather than pay down existing debt. I have a better idea, how about we compare it to a family who, rather than pay off some of their credit card debt, takes the newfound funds and…buys health insurance! Of course, that wouldn’t work for Samuelson’s point, because while people can generally agree that vacations should be sacrificed in the name of controlling your personal debt, they’d look at you like you had 3 eyes if you even remotely suggested that paying more than the minimum credit card payment should take precedence over getting your family health insurance.

It’s entirely possible that it didn’t occur to Samuelson that it would be better to compare expanding health insurance coverage to buying insurance rather than taking an extravagant vacation, but I doubt it. The omission is so egregious, and the example Samuelson chose so over the top (I mean really, how many people go on a globe-trotting vacation anyway?), that I can’t really imagine that Samuelson wasn’t deliberately trying to obscure how basic a necessity health insurance is in the modern world. Because, while a hostility to the social saftey net and social welfare spending is the animating factor of Samuelson’s existence, he’s aware enough of the larger political debate to know that most people would be appalled by his beliefs. And so, he’s left coming up with wild analogies to make giving people access to a basic necessity seem like a frivolous expenditure. Thankfully, he’s just not smart enough, nor his writing strong enough, to carry that sort of argument these days.

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The Point of No Return

Thursday, February 18th, 2010

I guess you could classify this as a lack of civility:

Senate Majority Leader Harry Reid (D-Nev.) lacks the votes to begin debating his targeted jobs bill, according to sources monitoring the legislation.

Reid needs 60 votes to open debate on the $15 billion jobs bill. The vote is scheduled for Monday, when lawmakers return from the Presidents Day recess.

“I understand Reid does not have the votes for cloture on Monday on his jobs bill,” one source said.
 
A Reid spokesman said the vote is in the hands of Republicans. Democrats have 59 senators in their conference.

What this underscores is the simple fact that whether you attribute the rise of the filibuster to a breakdown in comity amongst Senators or a rational response to systemic incentives, we’re to the point where there just isn’t any way to reasonably expect a return to the old social norms of the Senate. The minority has gotten to the point where they’re potentially willing to prevent the majority from even considering bills the majority party would like to pass, and they’re also in a position to benefit from that obstruction electorally. There may have been a time when the prevailing norm of Senate cuture was to eschew the potential rewards of blocking everything on the majority’s agenda, but those days are clearly gone. The minority recognizes that they have both the incentive and the means to keep the minority from doing anything, and they’ve decided they’re willing to excercise that ability. It’s just incredibly naive to imagine that things can go back to the way they were so long as the filibuster rule exists.

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There’s More To Life Than Messaging

Thursday, February 4th, 2010

by Brien Jackson

I confess, I’m pretty stupified by this:

At a time of increasing debate over the optimal relationship between government and business in the U.S., new Gallup polling shows that 57% of Americans are worried that there will be too much government regulation of business, while 37% worry that there will not be enough. Half of Americans believe the government should become less involved in regulating and controlling business, with 24% saying the government should become more involved and 23% saying things are about right.

My guess is that the results would change drastically if the generic “business” was replaced with “banks,” but anyway, there you go. Americans are skeptical of “government regulations.” Digby, in keeping with a general trend among some netroots bloggers to imagine that everything is about messaging, and a specific trend of her’s to argue that progressive politicians don’t make an explicit case for progressive beliefs, calls this “an epic failue of liberal politics.” But is it, or is it a success of conservative messaging?

At least since the late 1970’s, American conservative messaging has been based on two basic tactics; blatantly lying about things, and crafting talking points that drastically over-simplify issues to easy-to-remember, but highy inaccurate, dogma. In the case of regulations, the conservative line is pretty simple; regulations are bad, always in all places. What is the progressive line supposed to be in contrast? More regulations are always awesome? That’s ridiculous. As both Atrios and Yglesias point out, there really are bad regulations on business out there, mostly at the state and municipal level. Further, most local governments impose land use regulations that are bad for progressive goals, by limiting the amount of density that can grow in an area, leading to inefficient energy use, poor conditions for mass transit to grow, and adverse environmental consequences. These are all places where we really do need to deregulate, or at least re-regulate in a more intelligent way.

The problem progressive messaging has is pretty simple; progressives are still largely attached to reality, and still mostly trying to act like adults. They’re more comfortable handling nuance than conservatives, as opposed to constructing a religious like dogma to fit an entire worldview into. That makes it incredibly difficult to use rhetoric to change the way people respond to polls like this, unless Digby wants progressives to go all in with their own lies and over-simplified talking points, hoping they win out. Which I suppose they could do, but where does that leave us? With both sides living in their own personal reality, with their own religious-like views, talking in dogmatic, over-simplified absolutisms?

Taibbi

Monday, December 14th, 2009

by Brien Jackson

Matt Taibbi’s latest polemic in Rolling Stone has been the topic of the weekend, and since I’ve weighed in on it in comment sections elsewhere, I might as well add it to my own neglected blog. Kevin Drum, Digby, Matt Yglesias, Tim Fernholz, Ezra Klein, and Brad Delong have, in my opinion, the best responses, and you should read all of them. I’m not at all a fan of this article, and more generally I’m not a fan of Taibbi’s, but I suspect that’s as much because I’m not a fan of polemics in general more than anything else. I do, however, think this article does a good job exposing the genre’s weaknesses.

First of all, yes, there are factual errors, and no, they’re not really that important. Confusing various James Rubins and so on is embarrassing, but it’s not a mortal sin. I will give Taibbi that. The bigger problems come in the somewhat vague interpretation of “facts” and the interpretation thereof. For example, did Michael Froman have a large role in the transition process? Yes. Does that mean he “hired” Tim Geithner as Secretary of the Treasury? Of course not. Presidents-elect don’t outsource selections for top tier cabinet positions. It’s ridiculous. But it’s not technically wrong since it’s not technically a fact, it’s just a transparently absurd interpretation of events. And of course there’s the rather central notion that the corruption is represented by various officials’ connections to Robert Rubin, which is likewise completely ridiculous. Robert Rubin spent 2 years as the chairman of the National Economic Council under President Clinton and another 4 years as Treasury Secretary, meaning that you could pretty much connect anyone who worked on economic policy during the Clinton administration to Rubin. Does anyone expect that the Obama administration wouldn’t or shouldn’t have people who worked in the last Democratic administration in it? That facing a tough economic situation the administration should only be staffed with people who have never been around the job before? That seems, well, ridiculous doesn’t it?

More damning, I think, is the way Taibbi chooses to characterize the people he casts as the good guys, for lack of a better term. The stalwarts of the campaign who have supposedly been vanquished now that Obama no longer needs them to fool the lefties, namely Austan Goolsbee and Karen Kornbluh. Here’s how he introduced them:

In order to grasp the full horror of what took place, however, one needs to go back a few weeks before the actual bailout — to November 5th, 2008, the day after Obama’s election.That was the day the jubilant Obama campaign announced its transition team. Though many of the names were familiar — former Bill Clinton chief of staff John Podesta, long-time Obama confidante Valerie Jarrett — the list was most notable for who was not on it, especially on the economic side. Austan Goolsbee, a University of Chicago economist who had served as one of Obama’s chief advisers during the campaign, didn’t make the cut. Neither did Karen Kornbluh, who had served as Obama’s policy director and was instrumental in crafting the Democratic Party’s platform. Both had emphasized populist themes during the campaign: Kornbluh was known for pushing Democrats to focus on the plight of the poor and middle class, while Goolsbee was an aggressive critic of Wall Street, declaring that AIG executives should receive “a Nobel Prize — for evil.”

Well that’s great and all, but it isn’t anywhere near the full story. Goolsbee has never been a populist hero before Taibbi’s article painted him that way, at least that I’m aware of, and prior to this he was best known as being the guy who assured the Canadian government that candidate Obama’s anti-NAFTA rhetoric in Ohio shouldn’t be taken seriously. His description of Kornbluh isn’t inaccurate in its own right, but as Ezra points out, Taibbi conveniently neglects to mention that Kornbluh served in the Treasury Department under Clinton as deputy chief of staff to…Robert Rubin! Indeed as Ezra points out, it’s easy to imagine that had Kornbluh gotten a more prominent role in the administration, she’d be on Taibbi’s list of nefarious Rubinites. Unfair conjecture you say? Well, look at the treatment Taibbi gives Jason Furman:

Just below Summers is Jason Furman, who worked for Rubin in the Clinton White House and was one of the first directors of Rubin’s Hamilton Project. The appointment of Furman — a persistent advocate of free-trade agreements like NAFTA and the author of droolingly pro-globalization reports with titles like “Walmart: A Progressive Success Story” — provided one of the first clues that Obama had only been posturing when he promised crowds of struggling Midwesterners during the campaign that he would renegotiate NAFTA, which facilitated the flight of blue-collar jobs to other countries. “NAFTA’s shortcomings were evident when signed, and we must now amend the agreement to fix them,” Obama declared. A few months after hiring Furman to help shape its economic policy, however, the White House quietly quashed any talk of renegotiating the trade deal.

Now we could quibble with this all day if we really wanted to, but I’ll skip all that for the purpose of noting that whether you like Furman or not, he was a top economic adviser to the Obama campaign in 2008. So the larger takeaway here is that whether or not you agree with Taibbi on how bad the financial industry is, what he’s unquestionably doing is grossly misstating the nature of the Obama campaign. Which is what makes Drum’s defense of the article rather bizarre:

But look: this is all just nitpicky bullshit.  Taibbi’s piece is basically about how the finance industry owns Congress and the Obama administration, and that’s basically true.  In fact, I have a piece coming out in a week or so in the print magazine that makes pretty much the same point.  My approach is different, and my language is all PG-rated, but my conclusions are pretty much the same.  The finance industry, through both standard lobbying and what Simon Johnson calls “intellectual capture,” has, over the decades since Reagan was elected, convinced nearly everyone that what’s good for Wall Street is good for America, and that what’s bad for Wall Street would be catastrophic for America.  Everything else follows from that.

Well look, that’s all great, but that isn’t really the point of  Taibbi’s article. Hell, that would be a pretty boring polemic. After all, who needs Matt Taibbi to tell them that the banks own Washington, especially Congress? We all know that! What people need Matt Taibbi to do is spin entertaining stories of personal malfeasance. And Taibbi delivers in spades, but he isn’t writing about “intellectual capture,” his narrative is that Obama “sold out.” That’s a very specific charge that’s very different than simply claiming the Obama administration has too much affinity for the banking industry. It’s also entirely untrue, as evidenced by the fact that Taibbi had to a) reinvent Austan Goolsbee as a raging populist, b) ignore Karen Kornbluh’s rather direct ties to the dreaded Robert Rubin and, c) ignore Jason Furman’s role in the Obama campaign.

Now maybe this doesn’t bother you, but it should. For one thing, if it’s wrong for Glenn Beck, Rush Limbaugh, Sean Hannity etc. to feed their audience bullshit and conspiracy theories to validate their emotion based beliefs about politics and policy, then it should be wrong when someone “on the left” does it too. More importantly, painting an inaccurate picture of Obama the candidate’s views on economics and finance doesn’t really help anyone who’s actually interested in the problems with intellectual capture or Washington’s closeness to Wall Street. If anything, examining how much candidate Obama was in line with mainstream Washington/Wall Street during the campaign and why no one cared about it at the time would be a much more helpful piece of journalism. But it wouldn’t have been very entertaining, definitely wouldn’t have been as controversial as this piece has been (links baby links!), and wouldn’t have stoked the victim role a large segment of the netroots needs to survive. So that’s not the piece Taibbi delivers. Which is really a shame because the problem of Wall Street capture of Congress is a problem that really could use a good tongue lashing from a writer as talented as Taibbi.

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Hey…Jobs!

Monday, November 23rd, 2009

Brien Jackson

I’m not really sure this is news, in the sense that I thought it was fairly well known that heavy rain regularly overwhelms our sewage processing facilities and leads to lots of untreated sweage overflowing into water sources, at least amongst the sort of people who would pay any attention to that sort of thing, but it does serve to remind us of something fairly useful; there’s a lot of things this country needs to get to doing! Our infrastructure is crumbling, of course, but even if it weren’t, it’s simply not on par with other advanced countries anymore. In fact, it’s very conceivable that within a generation it will b a real stretch to call the United States a first-world nation.

But, on the other hand, we also have a lot of newly out of work people who would really like to have a job. And interest rates are pretty much as low as they can be. So we have a large pool of potential laborers perfectly willing to go to work dealing with these issues, and cheap money to finance the projects. If you’re a glass-half-full type, this is a perfect confluence of problems; the poor economy makes it possible to get to work fixing our decrepit infrastructure, and fixing our nfrastructure can pump new life into the economy. It’s the opposite of a catch-22!

But, of course, doing this would require, you know, spending. More to the point, we’d need government spending. And every Washington Post columnist and other assorted variations of idiots knows that government spending is bad! Not just bad!, but BAD!!1111!!111! So that’s pretty much impossible, because conservatives and Blue Dogs won’t be having any of that evil government spending on things like making sure our sewage treatment facilities don’t spill everyone’s waste into water sources. Besides, if sewage treatment was that important, the free market would take care of it for us. That it hasn’t is just proof that people actually like drinking shit water. Right?

More broadly, there’s actually a lot of places where this dynamic holds. I’m sure you’ve seen the lines of people waiting for H1N1 vaccines. Well, if you’re like me, your first response to that is to wonder if putting that money people together in one small place is really the best way to address a public health issue. Especially when the people are mostly made up of the demographics most susceptible to getting sick in te first place. It also seems that the long waiting time imposes another burden on getting vaccinated that might lead to more people deciding not to get the vaccine. What could fix that? How about a system of public health clinics that would be charged with handling these sorts of routine healthcare matters? It would make the delivery of basic healthcare more convenient for consumers, and would create thousands of jobs or nurses and primary care doctors. But, you know, SocialiZeD MediCinZ!!!qq!!111!1122111! So screw you and your “employment” commie!! We got military jets we’ll never use to buy!

Much Love For The Steel City: The G-20 And The Rust Belt Renaissance

Sunday, September 27th, 2009

By Tommy Brown

As the apparatchiks of the globalized economy departed my fair hometown this past Saturday, I am happy to report that Pittsburgh came out looking very well in pretty much all aspects. Our image as Steeltown USA (“hell with the lid off”) and/or a dying Rust Belt town crippled by the loss of the industry that defined us for generations has been put to bed, hopefully for good.

The most powerful men on the planet and their international entourages pleasantly surprised to find a formerly depressed city that had shed its industrial roots and reinvented itself for the information/service economy of the new century.  Maybe even a model for the dozens of other Rust Belt cities between the Mon Valley and Chicago dying a slow and painful economic death.

But don’t take my word for it. Here’s some articles from the national and international media:

From Forbes:

. . . President Barack Obama sees in Pittsburgh a way forward for the American city in the 21st century. White House Press Secretary Robert Gibbs said, “It’s an area that has seen its share of economic woes in the past but because of foresight and investment is now renewed–giving birth to … industries that are creating the jobs of the future. And I think [Obama] believes it would be a good place to highlight some of that.”

Pittsburgh boasts world-class culture and president-approved industries crucial to the growth of the nation (education, health care, technology, energy), but it will never be New York. Pittsburgh is also a conglomeration of neighborhoods, where mom-and-pop stores are still a staple and people greet their neighbors in the supermarket, but it’s no small town. In the city’s historic South Side, mega-chains like Urban Outfitters coexist with tiny consignment boutiques that have persisted for over a decade, and a Cheesecake Factory is just a stone’s throw from a row of old biker bars.

Pittsburgh is, in other words, a big city with a small-city mindset. Or maybe it’s a small city with big-city ideas. Either way, it is negotiating–sometimes precariously, sometimes with aplomb–a balance between these two spheres. As city councilman Bill Peduto says, “It is figuring out how to become global while staying local.” Which is perhaps the greatest challenge in this age of rapid globalization and economic turmoil.

From WaPo’s “Pittsburgh Shows How the Rust Belt Can Be Polished Up”:

Pittsburgh has shaken off its smoky image, transformed by an industrial collapse that drove out half of the city’s population in the early 1980s. As the Group of 20 gathers Thursday, members are more likely to ask what Pittsburgh can teach them than why they had to come here.The city’s unemployment rate is well below the national average. Wages and housing prices are stable or up. Nearby Cleveland has experienced rampant foreclosures, but here they are relatively uncommon.

The city’s main industries — health care and education — are thriving. The University of Pittsburgh Medical Center, an $8 billion health-care company, employs 50,000 people in western Pennsylvania. Pittsburgh’s health services business has almost tripled in size since 1979, creating more than 100,000 jobs.

It is quite a turnaround for a city that lost 120,000 jobs between 1981 and 1984, after its steel industry collapsed. Thousands of young residents fled the city to find work, and unemployment reached 17 percent among those who remained. Much as with Detroit today, many wondered whether Pittsburgh could continue to exist.

“But here we are, still a major center and doing well,” said Christopher Briem, an urban studies expert at the University of Pittsburgh. “The lesson is that there’s life after your defining industry dies.”

From the BBC, with the can’t-resist-the-stupid-pun headline “Pittsburgh Steeled to be Host City”:

Another [thought by the White House] was ensuring that the Pittsburgh story told a positive story about Obama’s America.

Later in the article. . .

And the symbolism?

Well, the population of Pittsburgh seems remarkably on-message. Local politicians, business leaders and folks in cafes and bars will all tell you the same story.

Pittsburgh – the grimy old steel town that was a powerhouse of American heavy industry and made its money under choking clouds of smoke from its mills and mines – is no more.

Locals have been making their feelings clear about declining industries

In its place is a clean, green example of regeneration. A city where pleasure cruisers carry tourists between the wooded banks of its three rivers and where people make a living in services such as health and education or in hi-tech business.

No-one puts it better than Frank Coonelly, president of the city’s baseball team the Pittsburgh Pirates: “It’s a remarkable transformation, not just of the economy but of the city itself from an industrial steel town to a city that now really is driven by hi-tech and service sectors.

“People who think of Pittsburgh as a smoky steel town, when they come in here this week they’ll see quite a different thing.”

It feels like the perfect message for the Obama administration to send out from a city which is about become the backdrop for 1,000 TV reporters from around the world.

And a piece from Voice of America on our new wave of immigration in a city that has always been defined by an ethnic makeup of Irish, Italian, “hunky” (those of Eastern European descent) and black:

European immigrants flocked to western Pennsylvania at the dawn of the industrial age to work in the steel mills and factories of Pittsburgh, which was the world-famous “Steel City” well into the 20th century. Over the past 50 years, however, heavy industry has been leaving Pittsburgh, along with tens of thousands of jobs. But over time Pittsburgh essentially “reinvented” itself, and the city is now best known for high-technology enterprises, medical specialties, banks and universities. That transformation has prompted a new wave of immigrants, this time including many from south Asia. Families originally from India now are one of Pittsburgh’s largest ethnic communities, and they are thriving.

Your Humble Author has to admit a certain amount of hometown pride in seeing a city that when I was a child and teenager was written off as another Gary, Indiana or Baltimore in the making become the example for other ailing metropolises to adapt to the 21st century.

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He’s Not God

Monday, June 29th, 2009

by Brien Jackson

I don’t know if it’s the central role the President plays in our contemporary political narratives, or a general desire to find one person to blame (for which The President is obviously a better stand-in than The Congress), but the tendency to blame Barack Obama for what are essentially Congressional, or structural, failings seems somewhat bizarre to me, if somewhat understanable, particularly coming from people who presumably spend enough time observing politics to understand the systemic problems. This post from Whiskey Fire seems representative of the genre:

The economy is in shambles and people realize that we need safety net services like extended unemployment and maybe a government health insurance option. The time is ripe to strike while the iron is hot and Obama is shrugging his shoulders and saying ” I don’t know what do you guys think we should do?” Spineless, like a jellyfish. They call themselves Centrists, but to me they are conservative reactionaries, including Obama. He seems to be waffling on all the important issues that he received my vote and that of many other liberals to address.

On health care he is providing little leadership and seems to be waiting for the lowest common denominator, in this case both parties, to decide what it will allow so that it looks like something is changing while allowing the insurance company fuckers to continue raping us all wholesale. He has made no movement on repealing the “don’t ask, don’t tell” policy and has completely left the gay community to hang out in the wind on the issue of marriage. Guantanamo is humming along with no real trials in site for the people detained there. Lest we forget, that 16 month withdrawal timetable in Iraq seems to have evaporated.

Now, I can empathize with the frustration, but putting all of this squarely on Obama is somewhere between unfair and childish. To take the points individually:

1. On the question of a timeline for withdrawing from Iraq, we do have a timeline in place, as part of the Status of Forces Agreement Agreement with the Iraqi government. It’s not exactly the plan Obama proposed, but it’s close enough that the costs of a new government unilaterally abrogating agreements with other countries would have outweighed the benefit of going with the plan Obama was proposing during the campaign. And really, this is one of those times where political observers should take pains to note that sometimes events change plans. When Obama was a candidate proposing a 16 month timetable for withdrawal, SOFA was not in place. By the time he was inaugurated, it had been agreed to by both the US and Iraqi government. So this isn’t so much an example of a politician saying one thing and doing another, so much as it’s an example of changing plans based on a new circumstance. And people who rightly mocked Bush for his “stay the course” attitude and complained about the hubris of unilateralism run amok during the last 8 years shouldn’t be complaining that the new President won’t rigidly adhere to a peviously outlined plan made under a different set of facts, nor unilaterally abrogate an agreement with another government.

2. As far as Gitmo goes, I don’t really see how you can make this kind of a complaint without so much as noting in passing that Obama asked Congress for the money to facilitate closing the place, but Congress rejected it. Regardless of the other issues surrounding Obama’s performance here, Congress certainly isn’t without substantial blame.

3. I haven’t written much about Obama and gay rights, mostly because I don’t care to challenge what seems to be a pretty comprehensive truism at this point, and because my argument against it isn’t really that riveting. Bsically, I just don’t see what Obama can actually do. The progressive line on gay rights strikes me as very similar to the neocon line on Iran; if only Obama would say X, everything would be awesome. The notion that Obama can unilaterally end DADT is just false. The UCMJ is law, and as such it requires an act of Congress to change it. Obama could take a tougher line on it, but he’s just not likely to walk into that minefield while healthcare reform is working its way through Congress. And he could theoretically issue a stop-loss order to prevent the discharging of indiduals found guilty under it, but that would leave the policy in place, officially, and probably destroy any will on the Hill to repeal it altogether, which doesn’t strike me as being desireable from a social justice standpoint. On the question of gay marriage, the President has even less authority. Obviously he can’t order the states to recognie same-sex marriage, and it’s not even clear to me that Congress would have the authority to pass such a bill. Unsatisfying as it may be, the only real way the federal government can move anything forward on gay marriage is through the courts, which Obama has no control over, short of appointing judges, and through a Constitutional amendment, which the President has nothing to do with, and which is also highly unlikely to be successful. So while I can appreciate that the lack of progress on gay rights is frustrating, I really don’t see what the President, any President, could realistically do to change that fact given the present circumstances.

4. Finally, on healthcare, this is just a common refrain at this point; the bill has to go through Congress, and there’s nothing the executive can do to affect that. He can threaten to veto an ultimate bill, but that’s not going to work, because it just won’t be believeable, if for no other reason than that the White House needs a bill much more than Congress does. But this would be the case even if Obama were taking a more overtly active role in public; this would still be Congress’s baby, and the President would lack any real ability to substantively affect the sausage making.

On the one hand, I’m sure this all sounds like nit-picking, unjustified Obama defense. But I don’t really think that’s the issue. If you’re looking to “pressure” people i politics, it’s very important you pressure the right people. That goes for laying blame as well. If progressives are routinely blaming failings of Congress, or of the underlying system, on the White House, that just leaves you aiming at a target who can’t really respond to your criticism, because they’re not the problem, and it also deflects attention from the real problem spot, as well as giving Congress more cover to continue what they’re doing, because they’re not catching the heat for it.

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When No Bill Really Is Better

Wednesday, May 13th, 2009

by Brien Jackson

I really can’t emphasize enough how wrong Matt is in this post. It might be true that there’s not much difference between auctioning permits and giving them away from an environmental stand-point in a vacuum, but this stuff doesn’t exist in a vacuum. And when you account for likely political outcomes, a give away regime is about the worst thing you could possibly do.

Cap-and-trade is already politically dicey, and for reasons that are easy enough understand; it means people’s energy bills are going to increase. But this can be offset by rebating revenues earned from the program to consumers, if  the permits are auctioned. This is nice because it not only lessens the burden consumers have to bear, but if the rebate is allocated on a flat basis, consumers who consume less than average amounts of energy actually come out gaining money after the rebate, which creates a lot of incentive for consumers to lower their energy usage.

But if there’s no auctions, then there’s no revenue. And if there’s no revenue, there’s no money to rebate. This means consumers are going to be hit with the increased energy costs, with nothing to offset them. You’ll still have incentives to use less energy, obviously, but the difference is that the program will be extremely unpopular with the average voter. And as something that directly takes money out of their pocket, it will be the sort of very unpopular thing that actually sways votes. A cap-and-give away regime passed by a Democratic Congress and a Democratic President would spark a massive backlash against the Democratic Party, and create an opening for big electoral gains for Republicans. It would be about the closest thing to political suicide I could imagine Democrats coming up with. And that might be a sound trade off if you could somehow guarantee the program would remain in place forever, but is there anyone who doesn’t think a newly elected Republican governing majority wouldn’t shred the program with extreme haste? And then you’re left with no carbon pricing regime, a new Republican Majority, a Democratic Party that will be exceedingly unpopular and will never shake the perception that all they do is raise taxes on everyone, and cap-and-trade will be a dead concept entirely. It really is the worst possible course of action.

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Social Security: Still Fine

Wednesday, May 13th, 2009

by Brien Jackson

Of course the hubbub of the day is going to be the annual Social Security trustee’s report, if only because it paints a bleak picture on its face, and scaring people is always good for television news (I’m avoiding the Washington Post editorial page today, for obvious reasons), but ultimately, the report doesn’t really strike me as that bad.

The main takeaway seems to be two thing:

1. Social Security begins paying out more than it takes in on a yearly basis in 2016.

2. The Social Security Trust Fund runs out (that is, Social Security becomes insolvent) in 2037, 4 years earlier than was projected last year.

Now, there’s a couple of big caveats that Fred Hiatt and Pete Peterson won’t bother to tell you. The assumptions for future revenues are based on a projected baseline for growth in the next few decades. Obviously, no one really knows what’s going to happen to the economy 20 years from now. Someone could invent, say, an amazingly awesome new fuel source that creates millions of jobs overnight, sends growth through the roof, and provides a huge influx of cash to the government (we used to call this “the 90’s.”) In this scenario, “unexpectedly” high levels of growth would change the equation, providing more revenue than projected. On the other hand, there could be a global ebola pandemic 4 months from now that kills tens or hundreds of millions of people, decimates the global economy, and creates a situation that makes the Great Depression look like a weekend in Versailles. In that scenario, revenues will be much lower than expected (basically zero), very few people will be working, and Social Security insolvency will come sooner than this report projects. Of course, we’ll also have a lot more important things to worry about than Social Security, but you get the idea.

But the important takeaway, as far as I can tell, is this; Social Security is a pretty fiscally durable program. I mean, consider that we’re probably at, or near, the nadir of what most economists expect to be the deepest recession since the Great Depression, and the decreased revenues expected for Social Security are such that, on paper, insolvency is only reached 4 years earlier. That’s really not that big of a hit when you consider the present economic situation. And that’s not to say the actuarial problems don’t exist, just that they’re really very minor, and can be fixed with very minor tweaks to the financing mechanism.

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Let Them Have Premium Yankees Tickets!

Thursday, April 23rd, 2009

by Brien Jackson

This is a whole new level of stupid for Sirota. I don’t even know where to start with it, so I’ll just list my grievances in list form:

1. For Yankee Stadium, as one of Sirota’s commentors pointed out, the city issued tax free bonds, which are cheaper than direct funds, which is how most new stadiums receive subsidies. Perhaps that doesn’t make it any better in Sirota’s eyes (or yours), but it certainly seems worth noting.

2. Sirota focuses only on premium seats to argue that you could never, ever, afford a ticket if you’re not a Wall Street player, which is a little like arguing that, because there are bottles of wine in the world that sell for $50,000+, the working class could never dream of having a glass of wine. Of course, the presence of really expensive wine doesn’t mean that there aren’t more affordable bottles out there, and the fact that the high dollar seats at Yankee Stadium go for an astronomical sum doesn’t mean there aren’t more reasonably priced seats available. You’ve also got to adjust for New York City price levels.

(On a side note, I think this is what annoys me the most when people bitch about baseball ticket costs. Honestly, you don’t have a right to a first base box seat that’s priced to your budget. You may, in fact, have to sit in an outfield seat, or even a higher deck. It’s not the end of the world, and you’re not the victim of some cosmic injustice because of it.)

3. Good on his commentors, and Rob Farley, for hammering Sirota for complaining about infrastructure improvements to accomodate the stadium. Aside from Sirota’s rank hypocrisy, this doesn’t even make sense. As Farley notes, if you want to have a successful mass transit system, then you need transit lines that service the place large volumes of people want to go. If you aren’t providing easy access to a stadium that ~45,000 are going to 85 times a year, give or take, then you’re going to see an influx of traffic into the area on those days, you’re going to need to devote a large amount of space for game day parking, etc. Which is to say that, even if the Steinbrenners had put up every penny for the stadium themselves, the city would still have needed to improve the transit infrastructure servicing Yankee Stadium (and Citi Field for that matter).

Aren’t you glad MSNBC didn’t hire Sirota to host a show? Now if we could only get CNN and Maddow to stop inviting him onto their programs.

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These Socialists Want to Save You Money

Monday, April 13th, 2009

by Brien Jackson

It’s worth keeping in mind that, when you hear a Congressional Republican railing against socialism or declaring something a dangerous threat to capitalism, it’s very likely that by “capitalism,” they really mean “free government money for large corporations.” Consider, for example, this situation, in which the Seattle public transit system is no longer allowed to provide shuttle service from park and rides to the stadium for Seattle Mariners games because a private firm put in a bid to provide the service…for three times the cost. Why is the vastly more expensive option being undertaken? Because the Bush administration wrote a regulation prohibiting public entities from providing services in the event a private firm is willing to provide them, irregardless of costs. The CEO of the company in question asserted that the policy “saves taxpayers money,” but it’s not exactly clear how. Previously, the cost of operating the shuttles was offset by a rider’s fee of $3, and a reimbursement from the Mariners for the rest. Presumably the new arrangement will be similarly funded, it will just cost 3 times as much for the Mariners and their customers. Also, the University of Washington, a taxpayer funded institution, finds themselves in a similar circumstance.

But that’s not nearly as pernicious as the gnashing of teeth over President Obama’s budget proposal to eliminate government guarantees of private student loans in favor of direct loans to the same, which has reached near apoplectic heights. For those not familiar with the program and the proposal, Jon Chait explains it quite well:

For many years, the federal government supported college education by guaranteeing bank loans to students. If a student defaulted on his loan, Washington would simply pay back the difference. In 1993, Clinton undertook to reform the program by cutting out the middlemen and simply having the federal government issue the loans directly. Clinton hoped to save money for the government and plow some of those savings into lower interest rates for students. Of course, private lenders who benefitted from the no-risk profit stream balked and forced a compromise whereby both kinds of loans–guaranteed private loans, and direct loans from the government–would exist side by side.

Recent years have shown beyond a doubt that the direct lending program works better. Every independent analysis–by the Congressional Budget Office, by the Office of Management and Budget under each of the last three presidents, and by the New America Foundation–has found that direct lending is cheaper. The guaranteed-loan program managed to cling to life through its congressional patrons and through simple graft. In 2007, a major student-loan scandal emerged when it turned out that private lenders paid off college administrators to drop out of the direct lending program and steer students to them.

In other words, the government currently guarantees the student loans private banks make, essentially eliminating all the risk from said loans. If they didn’t, many, many fewer banks, if any at all, would provide loans for tens of thousands of dollars to 18-20 year olds to go to college, which would mean a college education would be harder, if not impossible, for most people to attain. The government also has a smaller program that directly provides loans to students, and this program is dramatically cheaper than the guarantee program. Which makes sense; by funneling money through private banks, the government is being left on the tab for various fees and penalties accrued, driving up the bill. By simply making the loans directly, the government can save something in the area of $5 billion annually. But Republicans, notably Sen. Judd Gregg (R-NH), don’t particularly care for this, and neither do banks, as you’d expect. And guess what, they’re tossing around the specter of socialism to make their case:

“The administration has decided that it wants to capture the profits of federal student loans,” said Kevin Bruns, executive director of America’s Student Loan Providers, a trade group that is fighting Mr. Obama’s plan.

Sounds awful. But then, those “profits” Mr. Bruns is referring to are nothing but unnecessary costs that taxpayers cover and which could be eliminated by simply moving the program entirely to direct loans. But that would, admittedly, be bad for the bottom line of the banks who handle the loan programs. The question then, basically, comes down to whether you think $5 billion in taxpayer money is best spent on an unnecessary transfer from the public coffers to a few large banks, or whether there’s a better use of for that money. But this is crony capitalism at its finest; fleece the taxpayers for money allocated inefficiently, and then deride anyone who wants to eliminate the waste as anti-capitalist.

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Wherein I Concede McMegan is Right

Tuesday, April 7th, 2009

by Brien Jackson

As a rule, I try to avoid agreeing with Megan McArdle but, broken clocks and such, I must concede that she is right in this post critiquing Glenn Greenwald, particularly this graf:

Glenn Greenwald once lashed out at me for asking an “ignorant” question on a topic I admitted I didn’t understand.  A petty person would point out that his post on Larry Summers displays not only ignorance, but a total lack of awareness of any gaps in his understanding.  (emphasis mine).

Putting aside the discussion of whether or not it’s true that the only people who really understand finance market issues are people whoare seemingly too close to the industry as to be unbiased (I think they are, but that’s not really material), I think this is a rather succinct, deadly accurate critique of Greenwald’s style, which is basically to assert a series of premises upon which to build an argument, and then to plow forward at breakneck pace to obscure any sort of quibbling with the underlying premises. It’s great rabble-rousing if you agree with Greenwald, and I’m sure you’re glad to see someone making your point so forcefully, but it’s not so good if you disagree with him. Worse still, it’s really not good if you agree with Greenwald on the fundamentals, but feel like he’s missing a point or going a bridge too far, especially if that’s built around a misconception of what he simply treats as a given (doubly so because he’ll turn his fire-breathing on you if you deign to point it out). As such, I feel like “Glennzilla” tends to be ignored more than he should be by all but a legion of netrooters who rarely disagree with anything he says. Not that that’s a bad bit of positioning, mind you, just ask Limbaugh.

On the substance of Summers, I think McMegan is simply more right than Glenn. Summers was basically an academic and policy maker for his entire career, prior to a scandalous departure from Harvard that seemed to have doomed his career in public life, at which point he entered the private finance world to make a lot of money. Whatever you feel about Summers policy positions, to use this as evidence that he’s unethically close to Wall Street interests doesn’t seem to me, in relative terms, to be quite accurate. This, in fact, is one problem I have with jumping onto the anti-Geithner bandwagon when it’s heavily couched in criticism of his “Wall Street ties,” even though Geithner has never worked in private finance, and has been a technocrat for his entire career. The closest he’s come to working on Wall Street was a stint running the New York Federal Reserve Bank. It’s perfectly fine to make the argument that moneyed interests are invariably linked to government and that Geithner and Summers are more caught up in that than most, but somehow I get the feeling that’s not the argument being made or, if it is, that the people making it are ok if the audience comes awa with a misconception, so long as they come away agreeing that Geithner and Summers are Very Very Bad.

McMegan is also obviously right to note that the idea that Summers would have seemed like a likely choice to be put into a high position in an Obama administration in April of 2008 is just laughable. Simply put, Summers was still a pariah at that point, and remained one until he enjoyed a rapid comeback after the collapse of Lehman Brothers. Moreover, with the economic problems not seeming quite so tragically stark, I’m not sure a need for “star power” in these positions would have been felt, and I think it’s likely that either Jason Furman or Austan Goolsbee would have Summers’s position. But the rapid economic downturn necessitated a top line of economic officials with a higher profile. And, of course, the idea of high profile public figures and/or former government officials bringing in 6 figure payouts for speeches is hardly unusual, nor something that is widely seen as improper. It’s ok if Greenwald thinks it is, in fact, improper, but even then he shouldn’t be trying to give the impression that the practice isn’t common and, largely, seen as being an ok thing to do in a number of policy fields. To do so is simply rank intellectual dishonesty.

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Specter’s Switch Not Death of EFCA

Wednesday, March 25th, 2009

by Brien Jackson

The biggest non-Geithner related story of the day yesterday was the announcement from Sen Arlen Specter (R-PA) that he will oppose cloture on the Employee Free Choice Act (EFCA). With a maximum 59 Democrats in the Senate, Democrats needed at least one Republican vote for cloture to end debate on the bill and Specter, as the only Republican to suport cloture on the bill in the last Congress, and as someone who has enjoyed a good relationship with Labor for much of his Senate career, was the most obvious choice. With Specter announcing he will oppose cloture, the prospect of getting any other Republicans on board is highly unlikely, meaning that EFCA probably is on hold, for now.

However, Specter’s volatile political situation likely means that the bill itself is far from dead. Specter’s new position should be understood as a matter of naked political positioning, designed entirely to stave off a primary challenge from former Congressman and Club for Growth President Pat Toomey, who nearly defeated Specter in a 2004 race in which former President George W. Bush had to be brought in to campaign for Specter just days before the election. Specter has never been liked by the conservative activist base of the GOP and, faced with the prospect of a business community angry over his potential support of a bill to make union organizing easier, was looking at a campaign in which he would have no base of support whatsoever. Now, although he will likely remain unpopular with the Republican base, he can count on support from a business community grateful for his putting EFCA on hold, at least, and who will view him as having a better chance to win a general election than the right-wing Toomey. That said, Specter’s switch likely makes it difficult for him to win in November anyway. Labor groups were major backers of Specter in 2004, and Specter has been more popular with Democrats than Republicans in Pennsylvania for some time. In a state that is increasingly trending in a Democratic direction, as well as being mor elabor friendly than most, this move makes it very likely that a well positioned, high profile Democratic candidate will unseat Specter in 2010. With that in mind, this move might even make the passage of EFCA more likely in the long run, given the prospect of a marginal Republican being replaced by a mainstream Democrat in a pro-labor state. And I wouldn’t discount the possibility that Specter will flip-flop again between the primary and the general election, in a craven bid to win another term in office, either. So while we’ve probably heard the last of EFCA for at least the next 12-18 months, it’s certainly not dead, either in Democratic politics or in the U.S. Senate.

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