Tag Archives: Paul Krugman

Reading Is Fundamental, Mr. Krugman

Paul Krugman:

A followup on the post about mostly economics reading; on politics, culture, etc. there are other blogs I read fairly often. On politics, Greg Sargent, Josh Marshall, Digby, and I still get a kick out of Atrios, who gets to use all the words I can’t. And I’m a big fan of the folks at Crooked Timber.

Some have asked if there aren’t conservative sites I read regularly. Well, no. I will read anything I’ve been informed about that’s either interesting or revealing; but I don’t know of any economics or politics sites on that side that regularly provide analysis or information I need to take seriously. I know we’re supposed to pretend that both sides always have a point; but the truth is that most of the time they don’t. The parties are not equally irresponsible; Rachel Maddow isn’t Glenn Beck; and a conservative blog, almost by definition, is a blog written by someone who chooses not to notice that asymmetry. And life is short …

Mark Hemingway at The Weekly Standard:

Bear in mind that this paragraph comes right after Krugman lists a lot of perfectly respectable (though shamelessly ideological and hyperbolic) liberal blogs.

So in other words, if you’re reading this you’re probably more informed than at least one Nobel Prize Winner.

Scott Sumner at Wall Street Pit:

That’s right, and George Will isn’t Michael Moore; and a liberal blog, almost by definition, is a blog written by someone who chooses not to notice that asymmetry.  No need to read Marginal Revolution, Becker/Posner, Econlog, John Taylor, Greg Mankiw, Robin Hanson, Steven Landsburg, etc, etc.  Nothing of interest, just move right along folks.  I’m always amazed when someone so brilliant can be so clueless about life.  How someone can reach middle age and still live in a kindergartener’s world of good guys and bad guys.

Perhaps if Krugman would get out a bit more he might make fewer embarrassing errors,  like this one, where he forgot the fallacy of composition, something taught in EC101.  I guess none of his liberal friends have the nerve to point out these sorts of silly errors.  So it’s still there, uncorrected after two weeks.  A monument to his pride at being ignorant of the views of those with whom he disagrees.

You might ask whether I’m being a bit harsh calling him “ignorant.”  Actually, he’s the one who proudly flaunts his ignorance of conservative thought.

I find that reading good liberal blogs like Krugman, DeLong, Thoma, Yglesias, etc, sharpens my arguments.  It forces me to reconsider things I took for granted.  I’d guess that when Krugman tells people at cocktail parties that the post-1980 trend of lower tax rates, deregulation, and privatization was a plot devised by racist Republicans, they all nod their heads in agreement.  If he occasionally read a conservative blog he might learn that all those trends occurred in almost every country throughout the world after 1980, usually much more so than in the US.

I wonder if his blanket condemnation of reading conservative outlets would include books that attack silly liberal arguments for protectionism.  Or articles that show the folly of liberal opposition to sweatshops.  Are those conservative ideas also no longer worth reading?

Kevin Drum:

The problem is sort of a Catch-22: reading the loony tunes blogs isn’t worthwhile except for entertainment value, so I mostly don’t bother. Conversely, the more moderate types have interesting things to say, but they’re so out of touch with mainstream conservatism that they often don’t seem worthwhile engaging with either. I mean, what’s the point in arguing over some technocratic point that’s a million light years away from the views of actual, existing conservatism, which doesn’t yet admit that cutting taxes reduces revenues or spewing carbon into the air heats the globe? It all has a very ivory tower feel to it.I’ll go on reading the non-insane conservatives, because (a) it’s worth having my views challenged by smart people and (b) you never know: maybe someday the tea party version of conservatism will collapse and the moderates will regain a bit of power. That sure seems like a pipe dream right now, though.

James Joyner:

This is a recurring theme and, while I certainly read plenty of conservative pundits–and, indeed, still consider myself one–like Kevin, I read fewer than I used to. I prefer rational, facts-based analysis and find more of it across the aisle than on my own side.

Partly, it’s a function of the fact that academics and policy wonks with strong academic backgrounds are more likely to produce the kind of writing I find interesting and those groups tilt to the leeward side. But I’m not the only conservative who has noticed that even mainstream journals on the right have gone crazy. And the David Frums, Bruce Bartletts, and Daniel Larisons have largely been written off as RINOs angling for invites to liberal cocktail parties.

Are the rational conservatives simply being outshouted? Out-promoted? Or are there just too few to matter anymore?

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Filed under Mainstream, New Media

Choo Choo Canned Heat Collectivism

George Will in Newsweek:

So why is America’s “win the future” administration so fixated on railroads, a technology that was the future two centuries ago? Because progressivism’s aim is the modification of (other people’s) behavior.

Forever seeking Archimedean levers for prying the world in directions they prefer, progressives say they embrace high-speed rail for many reasons—to improve the climate, increase competitiveness, enhance national security, reduce congestion, and rationalize land use. The length of the list of reasons, and the flimsiness of each, points to this conclusion: the real reason for progressives’ passion for trains is their goal of diminishing Americans’ individualism in order to make them more amenable to collectivism.

To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they—unsupervised, untutored, and unscripted—are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.

Time was, the progressive cry was “Workers of the world unite!” or “Power to the people!” Now it is less resonant: “All aboard!”

Jason Linkins at Huffington Post:

One way of looking at high-speed rail systems is that they are a means by which distant communities get connected, economic development and jobs are fostered, and workers with a diverse array of marketable skills can improve their mobility and thus their employment prospects. But another way of looking at high-speed rail is that it’s some nonsense that came to a bunch of hippies as they tripped balls at a Canned Heat concert. That’s my takeaway with George Will’s latest grapple-with-the-real-world session, in which he attempts to figure out “Why liberals love trains.” It’s “Matrix” deep, yo

Sarah Goodyear at Grist:

In case you’re wondering about the provenance of that “collectivism” word — well, collectivism was a favorite demon of Ayn Rand, right-wing philosopher and the Ur-mother of libertarianism in the United States. Here’s a typical usage, from The Objectivist Newsletter of May 1962 (via the Ayn Rand Lexicon):

The political philosophy of collectivism is based on a view of man as a congenital incompetent, a helpless, mindless creature who must be fooled and ruled by a special elite with some unspecified claim to superior wisdom and a lust for power.

“Collectivism” also recalls some of the very worst communist ideas, including the “collectivization” of farms in the Stalinist Soviet Union — among the great atrocities of the 20th century (a crowded category).

Which makes it a pretty strong term to be throwing around when it comes to funding different modes of transportation in 21st-century America. But Will persists with his formulation:

To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they — unsupervised, untutored, and unscripted — are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.

A couple of things here. First off, automobiles are not the only vehicles capable of encouraging “delusions of adequacy.” Bicycles, one might argue, are a lot more capable of encouraging such delusions — fueled as they are entirely by the body of the “unscripted” individual. Which is perhaps why they seem to enrage people in cars, who have to worry about gasoline and the like, so very much.

Second, let’s talk about modern air travel. What mode of transport is more capable of sapping the human sense of possibility, more confining of the untrammeled human spirit? Perhaps before Will goes after high-speed rail, he should call for the defunding of the Federal Aviation Administration.

Paul Krugman:

As Sarah Goodyear at Grist says, trains are a lot more empowering and individualistic than planes — and planes, not cars, are the main alternative to high-speed rail.

And there’s the bit about rail as an antiquated technology; try saying that after riding the Shanghai Maglev.

But anyway, it’s amazing to see Will — who is not a stupid man — embracing the sinister progressives-hate-your-freedom line, more or less right out of Atlas Shrugged; with the extra irony, of course, that John Galt’s significant other ran, well, a railroad.

Matthew Yglesias:

But I do think this is a good look into the psychology of conservatives. Maybe high-speed rail is a waste of money and maybe it isn’t. I think it’s plausible to say we should just spend the cash on better regular mass transit or whatever. But I’ve long struggled to explain the right-wing’s affection for status quo American policies that amount to massive subsidization of the automobile. A small slice of that is spending on roads. A much larger amount is minimum lot size rules, parking mandates, the whole shebang. It’s a bit odd, and my instinct had been to say that this just goes to show that conservatism has nothing to do with free markets and everything to do with the identity politics of middle aged white suburban conformists. But Will offers another explanation here. Automobile use is not a sign of the free market, but an actual cause of it. Driving inculcates habits of freedom, and thus coercive pro-car regulations are, in a way, freedom-promoting.

More Krugman:

A bit more on this subject — not serious, just a personal observation after a long hard day of reading student applications. (My suggestion that we reject all applicants claiming to be “passionate” about their plans was rejected, but with obvious reluctance.)

Anyway, my experience is that of the three modes of mechanized transport I use, trains are by far the most liberating. Planes are awful: waiting to clear security, then having to sit with your electronics turned off during takeoff and landing, no place to go if you want to get up in any case. Cars — well, even aside from traffic jams (tell me how much freedom you experience waiting for an hour in line at the entrance to the Lincoln Tunnel), the thing about cars is that you have to drive them, which kind of limits other stuff.

But on a train I can read, listen to music, use my aircard to surf the web, get up and walk to the cafe car for some Amfood; oh, and I’m not restricted by the War on Liquids. When I can, I prefer to take the train even if it takes a couple of hours more, say to get to Boston, because it’s much higher-quality time.

Yes, your choices are limited by the available trains; if I wanted to take a train from beautiful downtown Trenton to DC tomorrow, I’d be restricted to one of 21 trains, leaving roughly once an hour if not more often, whereas if I wanted to drive I could leave any time I wanted. Big deal.

And don’t get me started on how much more freedom of movement I feel in New York, with subways taking you almost everywhere, than in, say, LA, where you constantly have to worry about parking and traffic.

So if trains represent soulless collectivism, count me in.

Atrios:

As Krugman says, trains really are the best way to travel, at least for travel times that are roughly competitive with air travel. That fact doesn’t automatically mean that therefore we should spend huge amounts of public money on it, but, you know, it does mean that people like trains for more reasons than their insidious collectivist promotion.

Scott Lemieux at Lawyers, Guns and Money:

Manypeoplehave, for good reason, taken their knocks at syndicated columnist William F. George’s ludicrous column about trains, with particular emphasis on the substantial amount of government subsidies that facilitate “individualistic” car travel.    In addition, I’d note that the flying experience is a good example of Republican “freedom.”   For some distances flying is of course necessary and useful, although a good high-speed train network would reduce the number of routes that make flying more practical. For the ordinary person, however, flying is a miserable experience — more waiting in line than a Soviet supermarket during a recession, the potentially humiliating security theater, and incredibly cramped and uncomfortable travel.     But — and here’s the rub — people as affluent as Will can buy their way out of the worst aspects of flying, with separate security lines, private lounges, and first-class seating.   With trains, on the other hand, the experience for the ordinary person is infinitely superior but the affluent can obtain an only marginally better experience.   So you can see why Will hates it.   The fact that trains might represent more meaningful freedom for you isn’t his problem.

More Krugman:

Some of the comments on my various pro-train posts have been along the lines of “Oh yeah, try taking the train to Los Angeles.” But that, of course, misses the point.

I think about the trains/planes comparison something like this: planes go much faster, and will continue to go faster even if we get high-speed rail; but there are some costs associated with a plane trip that can be avoided or minimized on a rail trip, and those costs are the same whether it’s a transcontinental flight or a hop halfway up or down the Northeast Corridor. You have to get to the airport at one end, and get from it at the other, which is a bigger issue, usually, than getting to and from train stations that are already in the city center. You have to wait on security lines. You have to spend more time boarding. So if we look just at travel time, it looks like this:

DESCRIPTION

Suppose that I put those fixed costs at 2 hours; suppose that planes fly at 500 miles an hour; and suppose that we got TGV-type trains that went 200 miles an hour. Then the crossover point would be at 667 miles. It would still be much faster to take planes across the continent — but not between Boston and DC, or between SF and LA. Add in my personal preference for train travel, and I might be willing to train it to Chicago, maybe, but not to Texas.

Now, if we got vacuum maglevs

More Yglesias:

I endorse Krugman’s analysis, but in some ways I think the fact that you can’t get to LA on a train actually is the point. You can’t take the train from New York to Los Angeles. You can’t drive from New York to Los Angeles. You need an airplane. But LaGuardia Airport has limited runway capacity and many daily flights to Boston. Clearly, though, you can take a train from New York to Boston. So money spent on improving the speed and passenger capacity of NYC-Boston train links is, among other things, a way to improve New York’s air links to the West Coast.

Now a separate question is whether there’s any feasible way to actually do this in a country that doesn’t have a French (or Chinese) level of central political authority empowered to build straight tracks through people’s suburban backyards. The answer seems to be “no,” but the potential gains from greater rail capacity in the northeast are large and would (via airplanes) spill over into the rest of the country.

More Goodyear:

In the dark days immediately after 9/11, Will seems to have had a revelation about how a certain mode of transportation could help our nation be stronger and more secure. In an Oct. 1, 2001 column syndicated in the Jewish World Review, Will recommended three steps in response to the attack that the nation had just sustained. First, buy more B-2 bombers. Second, cut corporate taxes. And third? Let Will speak for himself (emphasis mine):

Third, build high-speed rail service.

Two months ago this columnist wrote: “A government study concludes that for trips of 500 miles or less — a majority of flights; 40 percent are of 300 miles or less — automotive travel is as fast or faster than air travel, door to door. Columnist Robert Kuttner sensibly says that fact strengthens the case for high-speed trains. If such trains replaced air shuttles in the Boston-New York-Washington corridor, Kuttner says that would free about 60 takeoff and landing slots per hour.”

Thinning air traffic in the Boston-New York-Washington air corridor has acquired new urgency. Read Malcolm Gladwell’s New Yorker essay on the deadly dialectic between the technological advances in making air travel safer and the adaptations to these advances by terrorists.

“Airport-security measures,” writes Gladwell, “have simply chased out the amateurs and left the clever and the audacious.” This is why, although the number of terrorist attacks has been falling for many years, fatalities from hijackings and bombings have increased. As an Israeli terrorism expert says, “the history of attacks on commercial aviation reveals that new terrorist methods of attack have virtually never been foreseen by security authorities.”

The lesson to be learned is not defeatism. Security improvements can steadily complicate terrorists’ tasks and increase the likelihood of defeating them on the ground. However, shifting more travelers away from the busiest airports to trains would reduce the number of flights that have to be protected and the number of sensitive judgments that have to be made, on the spot, quickly, about individual travelers. Congress should not adjourn without funding the nine-state Midwest Regional Rail Initiative.

Now that it’s a Democratic administration advocating for rail, Will sees it not as a sensible solution for moving people from one place to another, but instead as a tool to control an unsuspecting populace:

To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they — unsupervised, untutored, and unscripted — are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.

In his recent screed against rail, Will explicitly dismissed arguments that it would be good for national security. He also didn’t mention air travel. Maybe that would have reminded him of what he himself wrote nearly 10 years ago.

David Weigel:

Good get, but if we’re going to be talking about stupid ideas people had right after 9/11, we’ll be here all day. Will’s rail fetish was a passing fancy, and since then he’s come around to the conservative consensus that rail can never, ever work as a replacement for air travel, so rail projects are essentially boondoggles.

This is an odd discussion to have as the Atlas Shrugged movie comes out. The book and the film absolutely fetishize rail; the film makes it clear that rail will become necessary once gas starts to really run out. And this is something liberal rail adherents point out, too. But I don’t see conservatives coming around to HSR, which needs a massive manpower and financial and land commitment to get going, outside of that sort of crisis thinking.

Jamelle Bouie at Tapped:

This isn’t to play “gotcha,” as much as it is to note a simple fact about our world: We’re all partisans, whether we admit it or not. Reason’s opposition to the individual mandate has almost nothing to do with the substance of what is truly a center-right policy and everything to do with current political circumstances. The mandate was implemented by a Democrat. Reason, as a right-libertarian institution, is part of the conservative opposition to the liberal president. Likewise, Will’s opposition to high-speed rail is purely a function of partisan politics.

This isn’t a bad thing. Yes, partisanship can be taken too far and veer into ideological blindness, but, in general, it is a useful way of organizing our thoughts on policies and politics. Indeed, it’s how most voters process political information. Political commentary would be much more bearable if pundits were willing to accept the partisan origins of their biases and skepticism, instead of playing a game where we pretend to be open-minded observers.  Most are anything but.

Gulliver at The Economist:

Mr Bouie might be overstating the influence of partisanship a bit, and it’s hard for people to know exactly what is driving others’ opinions—or even one’s own. Still, partisanship is certainly a useful frame through which to view both the most ardent opponents and the most passionate defenders of HSR. There is political science research that shows that a president weighing in on one side of a given debate (as Barack Obama has with high-speed rail) dramatically increases political polarization on that issue. Of course, if Mr Bouie’s theory is correct, we should be able to point to some lefty supporters of HSR whose support seems to be driven primarily by partisanship—or even a few who, like Mr Will, have switched positions on the issue. Anyone have a nomination? Let us know in the comments.

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Filed under Infrastructure, Mainstream, New Media

We Got Numbers On What The Public Thinks…

Michael Cooper and Megan Thee-Brenan at NYT:

As labor battles erupt in state capitals around the nation, a majority of Americans say they oppose efforts to weaken the collective bargaining rights of public employee unions and are also against cutting the pay or benefits of public workers to reduce state budget deficits, according to the latest New York Times/CBS News poll.

Labor unions are not exactly popular, though: A third of those surveyed viewed them favorably, a quarter viewed them unfavorably, and the rest said they were either undecided or had not heard enough about them. But the nationwide poll found that embattled public employee unions have the support of most Americans — and most independents — as they fight the efforts of newly elected Republican governors in Wisconsin and Ohio to weaken their bargaining powers, and the attempts of governors from both parties to cut their pay or benefits.

Americans oppose weakening the bargaining rights of public employee unions by a margin of nearly two to one: 60 percent to 33 percent. While a slim majority of Republicans favored taking away some bargaining rights, they were outnumbered by large majorities of Democrats and independents who said they opposed weakening them.

Those surveyed said they opposed, 56 percent to 37 percent, cutting the pay or benefits of public employees to reduce deficits, breaking down along similar party lines. A majority of respondents who have no union members living in their households opposed both cuts in pay or benefits and taking away the collective bargaining rights of public employees.

Paul Krugman:

The new poll reported in this morning’s Times will, I suspect, come as a shock to many political commentators. Quite a few news analyses of the assault on public-sector workers have simply assumed that the move was a political winner, with little if any thought given to the possibility that the general public wasn’t actually ready to go along. But whaddya know: while people don’t necessarily love unions — hey, I personally don’t necessarily love unions — most people apparently see them as having a legitimate role.

Again, I’m having Iraq flashbacks: there was a prolonged period when the inside-the-Beltway view was that only crackpots believed that Bush had misled us into war, even as polling indicated a substantial fraction, and eventually a majority, of the public already believed just that

Allah Pundit:

Fully 62 percent of independents (and 70 percent of Democrats) oppose weakening collective bargaining. As usual, the question provides no background on PEUs and why they present a unique problem for state budgets, especially when there’s a Democrat in the governor’s office:

On the other hand, the question about cutting public workers’ pay does explicitly mention state budget deficits — and there’s still heavy majority support for workers:

A near majority (49 percent) also supports letting cops and firefighters retire after 25 years with full pensions even if they’re in their 40s — which, in some cases for people of average lifespans, would mean more pay during retirement than while they were on the job. CBS, which co-sponsored the poll, asked Chris Christie for reaction. Quote:

Christie, who has been critical of teachers’ unions in his state, said the collective bargaining story was “entertaining,” though he said it wasn’t an issue in his state or most states. He then told a CBS News reporter that he was “sure you worded the poll in a way that kept [the story] going.”

“I’m the governor, I think I’ve got a better idea on public opinion in my state than CBS News does to tell you the truth,” he said. “If not, Katie Couric should run for governor of New Jersey.”

That’s cute, and I’m sure some will quibble with the sample (36D/26R/36I and 19L/37M/36C), but even if you tweaked it to add a few more Republicans, these numbers wouldn’t shift dramatically. And why should they? Remember this graph from Pew’s poll on America’s budget crunch a few weeks ago?

Up and down the line, not a single item draws a clear majority in favor of cuts. And what about this one?

Even tea partiers go wobbly when it comes to cutting spending on education and Social Security. For whatever reason — misinformation or simple denial — the public isn’t remotely serious yet when it comes to making painful choices on spending. When asked if budget cuts are a good thing in the abstract, they’re plenty supportive, but start identifying specific programs and industries that’ll have to make do with less and those cold feet start turning icy. If you can’t even get 50 percent to say they’re prepared to cut foreign aid, how on earth will you get 50 percent to support cuts to the “working man” in the form of public employees?

I don’t know what it’ll take to build popular support for greater austerity. Maybe nothing. Maybe we’re going to have to elect a bunch of Republicans who are fully prepared to sacrifice their careers by taking tough but necessary votes on the budget. Here’s Christie from yesterday’s “Face the Nation” gently reminding viewers that collective bargaining rights aren’t inscribed on the Mt. Sinai tablets.

Steve Benen:

The poll closely mirrors the results from Gallup last week, but offers more details about public attitudes. In this case, nearly all of those details suggest the arguments from the right are failing badly.

Indeed, one result in particular may cause heart palpitations in some GOP circles: “Asked how they would choose to reduce their state’s deficits, those polled preferred tax increases over benefit cuts for state workers by nearly two to one.”

That’s probably not what Wisconsin Gov. Scott Walker (R) wanted to hear.

What’s more, people in every income group oppose compensation and benefit cuts for public employees. Cuts had the most support from those making more than $100,000 a year, and even within this group, a plurality opposed cutting pay or benefits.

If Walker and his allies assumed Americans would rally behind them, these Republicans badly misread public attitudes.

Postscript: And in case that weren’t quite enough, a new survey from the Pew Research Center found Americans siding with workers over Wisconsin’s Walker, 42% to 31%.

Tim Cavanaugh at Reason:

Forget the pitiful polling performance, the shucking of friendly legislators, the phone punk that will live in infamy. Wisconsin Gov. Scott Walker’s greatest gift to the left is hidden in plain sight: He managed to turn a consensus position based on straightforward math into what looks like a partisan issue.

Just two weeks ago, the crisis of government employee pensions was an issue for Democrats. If you look closely at states around the country, it still is. New York Gov. Andrew Cuomo, California Gov. Jerry Brown, even Rahmbo himself, all are engaged to varying degrees in open campaigns to roll back compensation packages for government employees. In the Nutmeg State, Gov. Dan Malloy is seeking billion-dollar cuts in public sector compensation spending in his next budget. These Democratic executives and candidates are not alienating their union donors out of limited government principle; they’re doing it because they see the logarithmic cascade of pension liability as a threat to public parks, environmental programs, rail transit, and other budget items Democrats like.

All that has now been lost in a fog of Republocrat positioning. You’d think everything was going swimmingly until the meddlesome voters gave Republicans the upper hand in so many states.

It was probably inevitable that the government employee unions would find some Republican villain to be the foil for a George Lakoff-style reframing of the state fiscal crisis — and what do you know, here’s great Lakoff himself to suggest a new conceptual framework in which public employees’ unions, by seeking the maximum payout from taxpayers, are “raising deeper issues in which wealthy corporations and individuals play a huge role.”

But Walker’s angle of approach has allowed this national issue to bog down in sniping between people who think there’s a difference between the two parties. I can’t blame Walker for trying to use this moment to weaken the political power of government employee unions. (Though it’s not totally clear that collective bargaining is the decisive factor in fat government worker contracts or government employee political clout; some of the most crushing burdens — including California’s SB 400 — were accomplished legislatively rather than at the bargaining table.) But as Arnold Schwarzenegger found out with his failed ballot initiatives of 2005, directly targeting union political power is a great way to get your ass kicked. And Walker seems to have even less finesse than Arnold.

The problem is that once you’ve moved this national issue into the realm of left-right politics, you open the floodgates of horse pucky. Sure enough, The New York Times now would have us believe most Americans want to increase their own taxes and save less for their own retirements so that so that higher-paid cops, firefighters, and teachers can retire earlier with better pensions and benefits. Public Policy Polling claims Republicans in the Badger State are turning against Walker.

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Hey Kids, Tyler Cowen Wrote A Book!

Tyler Cowen’s new book, “The Great Stagnation”

Tyler Cowen:

That’s the title and it’s by me, the Amazon link is here, Barnes&Noble here.  That’s an eBook only, about 15,000 words, and it costs $4.00.  If you wish, think of it as a “Kindle single.”

Your copy will arrive on January 25 and loyal MR readers are receiving the very first chance to buy it.  Very little of the content has already appeared on MR.

Many of you have read my article “The Inequality that Matters,” but there I hardly touched on median income growth.  That is because I was writing this eBook.

Has median household income really stagnated in the United States?  If so, why?  Are the causes political or something deeper?  What are the important biases in how we are measuring national income and productivity and why do they matter for economic policy?  Are we getting enough value for all the extra money we are spending on the health care and education sectors?  What do some major right-wing and left-wing thinkers miss about this phenomenon?

How does all this relate to our recent financial crisis?

I dedicated this book to Michael Mandel and Peter Thiel, two major influences on some of the arguments.

Why did big government arise in the late 19th and early 20th centuries, what is its future, and why is science so important for macroeconomics?  How can we fix the current mess we are in?

Read (and buy) the whole thing.

Scott Sumner:

How great was Tyler Cowen’s marketing coup?  Well he forced a technophobe like me to actually learn how to use Kindle.  I wasn’t too happy about that, which makes me inclined to write a very negative review.  But that’s kind of hard to do credibly when I agree with the central proposition of the book; that technological progress (at least as traditionally measured) has slowed dramatically, and will continue to be disappointing for the foreseeable future.

In an earlier post I argued that my grandma’s generation (1890-1969) saw the biggest increase in living standards; most notably a longer lifespan (due to diet/sanitation/health care), indoor plumbing and electric lights.  Less important inventions included home appliances, cars and airplanes, and TVs.  From the horse and buggy era to the moon landing in one life.  And all I’ve seen is the home computer revolution.  Not much consolation for a technophobe like me.  I’m probably even more pessimistic than Tyler.

The parts of the book I liked best were those that discussed governance.  I had noticed that there was a correlation between cultures that are good at governance, and cultures that are good at running big corporations.    But Tyler added an interesting perspective, arguing that the technologies that facilitated the growth of big corporations also facilitated the growth of big government.  I don’t recall if he made this point, but I couldn’t help thinking that the neoliberal revolution, which led to some shrinkage in government size, was also associated with a move away from the big corporate conglomerates of the 1960s, towards smaller and more nimble businesses.

Tyler has a long list of complaints about the wasteful nature of our government/education/health care sectors, which he hinted is really just one big sector.  While reading this section I kept wondering when he was going to mention Singapore, which has constructed a fiscal regime ideally suited for the Great Stagnation.  When he finally did, on “Page” 830-37, he did so in an unexpected context, as an example of a society that reveres scientists and engineers.  He had just suggested that the most important thing we could do to overcome the stagnation was:

Raise the social status of scientists.

My initial reaction was skepticism.  First, how realistic is it to expect something like this to happen?  I suppose the counterargument is that every new idea seems unrealistic, until it actually occurs.  But even if it did, would it really speed up the rate of scientific progress?  My hunch is that if we doubled the number of people going into science, there would be very little acceleration in scientific progress.  First, because the best scientists (think Einstein) are already in science, driven by a love of the subject.  Second, with a reasonably comprehensive research regime, progress in finding a cure for cancer may require a certain set of interconnected discoveries in biochemistry that simply can’t be rushed by throwing more money and people at the problem.  Similarly, progress in info tech may play out at a pace dictated by Moore’s law.  Given Moore’s law, no amount of research could have produced a Kindle in 1983.  Could more scientists speed up Moore’s law?  Perhaps, I’m not qualified to say.  But that’s certainly not the impression I get from reading others talk about information technology.

Here’s another exhortation that caught my eye:

Be tolerant, and realize there are some pretty deep-seated reasons for all the political strife and all the hard feelings and all the polarization.

I couldn’t help thinking of Paul Krugman and Tyler Cowen, the two brightest stars of the economic blogosphere.  If only one of those two are able to have this sort of dispassionate take on policy strife, how likely are the rest of us mere mortals to be able keep a clear head and remain above the fray?  Still, it’s great advice.

Ryan Avent at Free Exchange at The Economist:

Mr Cowen’s book can be very briefly (too briefly) summarised as follows. The rich world faces two problems. The first is that a decline in innovation has reduced the growth rate of output and median incomes, making it hard for rich countries to meat obligations accepted when expectations were higher. The second is that a lot of recent innovation is occuring in places like the internet, where new products are cheap or free and create very few jobs.

Mr Sumner’s response is a good one. What Mr Cowen is essentially saying, he suggests, is that the actual price level is tumbling. Technology has created a lot of great things that are available for free, and so the price of a typical basket of household consumption is dropping like a rock. People used to spend a lot of money going to movies, buying books and records, making expensive long-distance phone calls, paying for word processing software, and so on. Now, a lot of that can be done at almost no cost. Prices are falling.

That has a couple of implications. It suggests that real incomes are actually rising, at least for those consuming the bulk of the free online content. And perhaps real incomes are too high, in some cases, for labour markets to clear. Given broader disinflation (understated because non-purchased goods aren’t included in price indexes) both prices and wages may need to adjust, but if they’re sticky, then they won’t. What’s needed is reinflation.

To a certain extent, Mr Cowen is concerned about society’s ability to pay off old obligations, and one reason society might struggle to do this is that new innovations deliver value through non-monetary transactions. But the value is still there, and that’s what should really matter for the paying-off of obligations. When you borrow, you’re offering to compensate the lender with more utility tomorrow for less utility today. Thanks to the internet, utility today is cheap, and that’s only a problem because the obligations we acquired yesterday were denominated in dollars. But we can print enough money to meet yesterday’s obligations. Indeed, we should, in order to offset the deflationary pressures from the cheap innovations.

Imagine a world in which technology has advanced to the point that robots can build robots that operate at basically no cost at basically no cost, such that people can have anything that want anytime for free; the only constraint on consumption is the time available. That would be a cashless economy, and as a result, debtors would be totally unable to pay creditors. But does that matter?

Paul Krugman:

Tyler Cowen argues that technological change since the early 1960s hasn’t been as transformative for ordinary peoples’ lives as the change that went before.

I agree. I wrote about that a long time ago, using the example of kitchens:

Better yet, think about how a typical middle-class family lives today compared with 40 years ago — and compare those changes with the progress that took place over the previous 40 years.

I happen to be an expert on some of those changes, because I live in a house with a late-50s-vintage kitchen, never remodelled. The nonself-defrosting refrigerator, and the gas range with its open pilot lights, are pretty depressing (anyone know a good contractor?) — but when all is said and done it is still a pretty functional kitchen. The 1957 owners didn’t have a microwave, and we have gone from black and white broadcasts of Sid Caesar to off-color humor on The Comedy Channel, but basically they lived pretty much the way we do. Now turn the clock back another 39 years, to 1918 — and you are in a world in which a horse-drawn wagon delivered blocks of ice to your icebox, a world not only without TV but without mass media of any kind (regularly scheduled radio entertainment began only in 1920). And of course back in 1918 nearly half of Americans still lived on farms, most without electricity and many without running water. By any reasonable standard, the change in how America lived between 1918 and 1957 was immensely greater than the change between 1957 and the present.

Now, you can overstate this case; medical innovations, in particular, have made a huge difference to some peoples’ lives, mine included (I have a form of arthritis that would have crippled me in the 1950s, and in fact almost did 20 years ago until it was properly diagnosed, but barely affects my life now thanks to modern anti-inflammatories.) But the general sense that the future isn’t what it used to be seems right.

David Leonhardt interviews Cowen at NYT

Derek Thompson at The Atlantic:

Tyler Cowen’s celebrated Kindle publication “The Great Stagnation” has received a lot of attention from the Web community. The New York Times David Leonhardt gets the author to sit for an e-interview on his e-book and asks a good first question: If our innovation motor is broken, what should we do know?

Cowen responds that we should double down on science…

The N.I.H. has done a very good job in promoting medical innovation and this is in large part because it allocates funds on a relatively meritocratic basis; Congress doesn’t control particular grants and on many important fronts the N.I.H. has autonomy. It is one reason why the United States is the world leader in medical research and development and I would expand its funding, provided it retains this autonomy. Basic research is often what economists call a “public good” and it offers economic and health returns for many years to come.

… and get realistic about clean energy.

“Clean energy” is a very important issue, for reasons of climate change, but it won’t be a job creator in a useful sense. In terms of energy production, fossil fuels are quite powerful. With green energy, at this point, we are simply looking to break even, namely to receive some of our current power but without the negative environmental consequences which accrue from carbon. That’s a worthy goal, but we shouldn’t start thinking about green energy as speeding up economic growth or creating jobs. It’s more like a necessary burden we will have to bear and the fact that these costs lie in front of us – from both the climate change and from the technological adjustments — is a sobering thought.

These are smart thoughts from a very smart guy. But let’s think about NIH funding from a jobs perspective. If the government increases science funding and this results in more pharmaceutical drugs coming online, that’s a great thing for the pharmaceutical industry. But new drugs, like any new technology, can be disruptive. For example, a drug to ease the side-effects of end-of-life diseases might replace the need for home health aides, which are projected to be one of the fastest growing jobs in the country for low-skilled workers. That’s not a reason not to develop a totally useful rug! But it throws a wrench into a claim (one that I’ve often made, too) that innovations in biosciences are pure job-creators.

Ezra Klein:

Cowen’s characterization of plumbing, fossil fuels, public education systems, penicillin and so forth as “low-hanging fruit” bugs me a bit. It took human beings quite a while to figure all that out. But Cowen is right to say that once discovered, those innovations produced extremely high returns. From the economy’s perspective, the difference between having cars and not having cars is a lot larger than the difference between having cars and having slightly better cars. A 1992 Honda Accord and a 2010 Honda Accord aren’t the same, but they’re pretty close.

The obvious rejoinder to this is, “What about the internet?” The problem, as Cowen points out, is that the Internet is not yet employing many people or creating much growth. We needed a lot of people to build cars. We don’t need many people to program Facebook. It’s possible, Cowen thinks, that the Internet is just a different type of innovation, at least so far as its ripples in the labor market are concerned. “We have a collective historical memory that technological progress brings a big and predictable stream of revenue growth across most of the economy,” he writes. “When it comes to the web, those assumptions are turning out to be wrong or misleading. The revenue-intensive sector of our economy have been slowing down and the beg technological gains are coming in revenue-deficient sectors.”

Maybe the Internet just needs some time to come into its growth-accelerating own. Or maybe the Internet is going to be an odd innovation in that its gains to human knowledge and enjoyment and well-being will serve to demonstrate that GDP and even median wage growth are insufficient proxies for living standards. Either way, we’re still left with a problem: Stagnant wages are a bad thing even if Wikipedia is a big deal.

And it’s not just the Internet. Even when we’re growing, things look bad. The sectors that are expanding fastest are dysfunctional. We spend a lot of money on education and health care, but seem to be getting less and less back. The public sector is getting bigger, but it’s not at all clear it’s getting better. For much of the last few decades, the financial sector was was generating amazing returns — but that turned out to be a particularly damaging scam. And economic malaise is polarizing our politics, leaving us less able to respond to these problems in an effective or intelligent way.

Kevin Drum:

Tyler makes a bunch of other arguments in “The Great Stagnation” too, some more persuasive than others. Like some other critics, I’m not sure why he uses median wage growth as a proxy for economic growth. It’s important, but it’s just not the same thing. Besides, median wage growth in the United States slowed very suddenly in 1973, and it’s really not plausible that our supply of low hanging fruit just suddenly dropped by half over the space of a few years. I also had a lot of problems with his arguments about whether GDP generated by government, education, and healthcare is as “real” as other GDP. For example, he suggests that as government grows, its consumption is less efficient, but that’s as true of the private sector as it is of the public sector. A dollar of GDP spent on an apple is surely more “real” than a dollar spent on a pet rock, but there’s simply no way to judge that. So we just call a dollar a dollar, and figure that people are able to decide for themselves whether they’re getting the same utility from one dollar as they do from the next.

The healthcare front is harder to judge. I agree with Tyler that we waste a lot of money on healthcare, but at the same time, I think a lot of people seriously underrate the value of modern improvements in healthcare. It’s not just vaccines, antibiotics, sterilization and anesthesia. Hip replacements really, truly improve your life quality, far more than a better car does. Ditto for antidepressants, blood pressure meds, cancer treatments, arthritis medication, and much more. The fact that we waste lots of money on useless end-of-life treatments doesn’t make this other stuff any less real.

To summarize, then: I agree that the pace of fundamental technological improvements has slowed, and I agree with Tyler’s basic point that this is likely to usher in an era of slower economic growth in advanced countries. At the same time, improvements in managerial and organizational efficiency thanks to computerization shouldn’t be underestimated. Neither should the fact that other countries still have quantum leaps in education to make, and that’s going to help us, not just the countries trying to catch up to us. After all, an invention is an invention, no matter where it comes from. And finally, try to keep an even keel about healthcare. It’s easy to point out its inefficiencies, but it’s also easy to miss its advances if they happen to be in areas that don’t affect you personally.

David Brooks at NYT

Cowen and Matthew Yglesias on Bloggingheads

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The Smoked Salmon At Iwo Jima

Alexander Burns at Politico:

THE REVIEWS ARE IN – SNAP POLL FROM CBS: “An overwhelming majority of Americans approved of President Obama’s overall message in his State of the Union on Tuesday night, according to a CBS News Poll of speech watchers. According to the poll, which was conducted online by Knowledge Networks immediately after the president’s address, 92 percent of those who watched the speech approved of the proposals Mr. Obama put forth during his remarks, while only 8 percent disapproved. … Americans who watched the speech were generally more Democratic than the nation as a whole.” … FROM CNN: “A CNN/Opinion Research Corporation survey indicated that 52 percent of speech watchers had a very positive reaction, with 32 percent saying they had a somewhat positive response and 15 percent with a negative response. … Those numbers indicate that the sample is about nine to ten points more Democratic than the population as a whole.” … AND FROM GQR, VIA POLITICO44: “The firm monitored the reactions of swing voters and unmarried women from Colorado as they watched the speech. According to the analysis, before the address, the test group’s approval of the president was 30 percent – by the end of the speech, the approval rating had gone up to 56 percent.” http://bit.ly/dMdVnT and http://bit.ly/fhBhgN and http://politi.co/ffVLil

Jonathan Chait at The New Republic:

The substance of Obama’s speech was moderate liberalism — we like business, but government has a role too, neither too much nor too little, etc. It’s hard to attach that kind of case-by-case pragmatism to an overarching theme. But I do think Obama pulled it off pretty well. He took a fairly hackneyed idea — the future — and managed to weave it into issue after issue, from infrastructure to energy to deficits to education and even foreign policy.

I thought Obama explicated his idea about American unity better than he has in the past. The notion of unity has always sat in tension with the fierce ideological disagreement of American politics, and indeed the latter has served as a rebuke to the former. I thought Obama effectively communicated that the messiness of political debate is a part of what makes America great, to turn that into a source of pride. He simultaneouly placed himself both within and above the debate.

Ross Douthat:

If you were a visitor from Mars, watching tonight’s State of the Union address and Paul Ryan’s Republican response, you would have no reason to think that the looming insolvency of our entitlement system lies at the heart of the economic challenges facing the United States over the next two decades. From President Obama, we heard a reasonably eloquent case for center-left technocracy and industrial policy, punctuated by a few bipartisan flourishes, in which the entitlement issue felt like an afterthought: He took note of the problem, thanked his own fiscal commission for their work without endorsing any of their recommendations, made general, detail-free pledges to keep Medicare and Social Security solvent (but “without slashing benefits for future generations”), and then moved swiftly on to the case for tax reform. Tax reform is important, of course, and so are education and technological innovation and infrastructure and all the other issues that the president touched on in this speech. But it was still striking that in an address organized around the theme of American competitiveness, which ran to almost 7,000 words and lasted for an hour, the president spent almost as much time talking about solar power as he did about the roots of the nation’s fiscal crisis.

Ryan’s rejoinder was more urgent and more focused: America’s crippling debt was an organizing theme, and there were warnings of “painful austerity measures” and a looming “day of reckoning.” But his remarks, while rhetorically effective, were even more vague about the details of that reckoning than the president’s address. Ryan owes his prominence, in part, to his willingness to propose a very specific blueprint for addressing the entitlement system’s fiscal woes. But in his first big moment on the national stage, the words “Medicare” and “Social Security” did not pass the Wisconsin congressman’s lips.

Paul Krugman

Allah Pundit

David Frum at FrumForum:

What to like in Obama’s SOTU:

  1. The gracious congratulations to the Republicans and John Boehner.
  2. His reminders of the country’s positive accomplishments, including the country’s huge lead in labor force productivity.
  3. His explanation that the challenge to less-skilled US labor comes much more from technology than from foreign competition.
  4. Opening the door to firing bad teachers.
  5. Call for a stepped-up national infrastructure program. If only he’d explained how this would work.
  6. Call for lower corporate tax rates with fewer loopholes.
  7. Openness to amendments on healthcare reform.
  8. Endorsement of cuts to Medicare & Medicaid.
  9. Endorsement of malpractice reform.
  10. Bringing forth the designer of the Chilean miner rescue tunnel. Nice!

What’s not to like:

  1. The disingenuous suggestion that China’s growth is driven by superior Chinese education system. Don’t confuse Amy Chua’s kids with off-the-farm peasants in Chinese factories.
  2. The call for more creative thinking in American education. Creative thinking is good, obviously. But the kids who are in most trouble need more drill, not more questions about their feelings.
  3. The too clever-by-half slip from the need for government to invest in basic research (yes) to the value of government investment in development of particular energy technologies (a record of failure).
  4. The pledge to put electric vehicles on the roads. So long as 50% of our power comes from coal, electric vehicles are not “clean.”
  5. The pledge to reach 80% clean electricity by 2035. If this is done by neutral across -the-board means like carbon taxes, fine. If done by favoritism for particular energy forms – and especially by tax credits or subsidies – it’s national industrial planning and is bad.
  6. The misleading implication that bestowing more college degrees will address educational deficits. It’s the low quality of American secondary education that is the problem.
  7. The endorsement of DREAM – made worse by the total fuzz of the commitment to immigration enforcement.
  8. No mention of Colombia FTA in trade section of speech.
  9. Very backhanded comments on deregulation
  10. Repudiation of benefit cuts to future Social Security beneficiaries.
  11. Silly earmarks pledge 100% guaranteed to be broken.
  12. Graceless comment about restoring America’s standing: ill-judged from a president whose foreign policy becomes more continuous with his predecessor’s seemingly with every month.

Jennifer Rubin:

If you were expecting a moderate Obama or a bold Obama, you were disappointed, most likely, by Tuesday’s State of the Union Address. In a nutshell: Obama proposed a ton of new domestic spending, promised to freeze discretionary spending (attained by savaging defense), abstained from offering specifics on entitlement reform and largely ignored major foreign policy changes. Moreover, the delivery was so listless that this State of the Union address likely garnered less applause than any address in recent memory.

But the mystery is solved: There is no new Obama, just a less snarly one. But it was also a flat and boring speech, too long by a third. Can you recall a single line? After the Giffords memorial service, this effort seemed like Obama had phoned it in. Perhaps that is because the name of the game is to pass the buck to Congress to do the hard work of digging out of the fiscal mess we are in.

Scott Johnson at Powerline:

Obama’s domestic policy is big on “investments” — not yours, the government’s. That is, spending. It’s a throwback to the vocabulary of the Clinton era. “The kids” must not be far behind. And there they are. They need more of your dough for their education.

“We do big things,” Obama says. I think when he says “we,” he means big government. The speech is long on domestic policy cloaked in the characteristically disingenuous rhetoric designed to conceal the substance. Obama advocates some kind of a freeze in federal spending. I’m not sure how that squares with the call for more “investments.”

Obama acknowledges the tumult in Tunisia thusly: “We saw that same desire to be free in Tunisia, where the will of the people proved more powerful than the writ of a dictator. And tonight, let us be clear: the United States of America stands with the people of Tunisia, and supports the democratic aspirations of all people.” Where does the United States of America stand tonight with respect to the people of Iran? We’re still waiting to hear from Obama on that one, but I guess we can infer he supports their aspirations as well. The people of Iran are included in “all people.”

The speech does have several good lines. Here is one of them: “I call on all of our college campuses to open their doors to our military recruiters and the ROTC.” It’s a pity that Obama has to gild it with the usual gay rights boilerplate. This line also deserves a nod: “I know there isn’t a person here who would trade places with any other nation on Earth.” Unlike most of the rest of the speech, it has the advantage, as Henry Kissinger might say, of being true.

Obama’s advent gets the usual iteration tonight: “That [American] dream is why I can stand here before you tonight.” And he includes Biden: “That dream is why a working class kid from Scranton can stand behind me.” But Biden’s rise too is a tribute to the advent of Obama.” And he includes an uncharacteristically gracious salute to Speaker Boehner: “That dream is why someone who began by sweeping the floors of his father’s Cincinnati bar can preside as Speaker of the House in the greatest nation on Earth.”

It’s a pity that Obama hasn’t found previous occasions to articulate American exceptionalism. Indeed, he has essentially denied it. Maybe he didn’t think it was true before the advent of the Age of Obama, or maybe he chooses not to share his innermost thoughts on the subject with his fellow citizens tonight.

Erick Erickson at Redstate:

Much has been made of Michelle Bachmann’s “Tea Party” response to the State of the Union.

For days the media has been playing this up as a major conflict within the Republican Party. In fact, a number of Republican leadership aides pulled out all the stops trying to get the networks to ignore Michelle Bachmann.

Kudos to CNN for its willingness to cover the speech in full.

I must admit I was deeply nervous about the speech, but I am delighted to say I was wrong. Michelle Bachmann gave the best speech of the night.

While the President sputniked and Paul Ryan went off on some high minded rhetoric, Michelle Bachmann kept to nuts and bolts. Her speech was based on actual economic data with actual, substantive policy suggestions for change.

Paul Ryan’s speech was okay. His blood shot eyes and Eddie Munster, Jr. haircut could have used some work. But he was good. Michelle Bachmann, however, shined in an easy to understand speech with a common man touch.

I’m glad I was wrong. And it just goes to show that the narrative of concern, built up in the media in large part by nervous Republicans, was silly. It yet again shows the GOP is unwilling to seriously treat the tea party movement as a legitimate player.

Mark Joyella at Mediaite:

Rep. Michele Bachmann made history tonight–not just for being the first representative of the Tea Party to give a State of the Union response, but also for flatly refusing to look America in the eye.Bachmann, who came equipped with charts and Iwo Jima photos, began her speech looking slightly off camera. As Bachmann spoke, viewers–including the former MSNBC host Keith Olbermann–took to Twitter to ask a simple question: “what’s she looking at?”

As Olbermann tweeted, “Why isn’t Rep. Bachmann LOOKING AT THE DAMNED CAMERA?” He added later, “Seriously, somebody at the Tea Party needs to run on the stage, grab her, and POINT TO WHERE THE CAMERA IS.”

On CNN, Erick Erickson reported that Bachmann mistakenly focused on a camera recording the speech for the Tea Party Express, instead of the other camera capturing the speech live for the entire country. Jeepers.

Compared to President Obama’s traditional SOTU speech, and Rep. Ryan’s response, the Bachmann speech was unique. It had charts and multimedia, and it had the weird vibe of listening to a person who seems to be talking to somebody else.

Conor Friedersdorf at Sully’s place:

He still loves his wife. But after 25 years of marriage, he has lost his enthusiasm for sex with her. Still. It is Valentine’s Day. And she has been hinting. So he takes her to a nice dinner, uncharactertistically orders an after-dinner drink, and feels extra discouraged when it only makes him more tired. He is 55. And so tired. Upon returning home, he wants more than anything to just fall asleep, but damnit, he makes the effort. He surprises her with a gift, lights candles, and dutifully makes love to her in the fashion he thinks that she will most enjoy.

It is with similar enthusiasm that some responses to the State of the Union are penned. Everyone expects that it will be covered by political bloggers, newspaper columnists and magazine writers. Especially at movement magazines on the left and right, lots of people are going through the motions,  feigning passionate intensity that isn’t there. In marriage, it is perfectly understandable for one partner to occasionally perform despite not being in the mood. Sex is built into the expectations. Justifiably so. But I’m skeptical about the system of expectations in political letters. Fresh insights are nice. I’ve read good stuff about last night’s SOTU. We’ve linked some of it here. What I find pointless is the completely predictable boilerplate that gets published. The banal right-leaning editorial inveighing against the speech. The left-leaning editorial vaguely extolling its virtues. If every possible reader will agree with everything in a piece what exactly is the point of writing it?

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Shall I Compare Thee To A Snake, A Gorilla, A Jungle, Bananas, Sex…

Uri Friedman at The Atlantic with a round-up.

Paul Kedrosky:

Over the weekend I tried to buy a new dishwasher. Being the fine net-friendly fellow that I am, I  began Google-ing for information. And Google-ing. and Google-ing. As I tweeted frustratedly at the tend of the failed exercise, “To a first approximation, the entire web is spam when it comes to appliance reviews”.

This is, of course, merely a personal example of the drive-by damage done by keyword-driven content — material created to be consumed like info-krill by Google’s algorithms. Find some popular keywords that lead to traffic and transactions, wrap some anodyne and regularly-changing content around the keywords so Google doesn’t kick you out of search results, and watch the dollars roll in as Google steers you life-support systems connected to wallets, i.e, idiot humans.

Google has become a snake that too readily consumes its own keyword tail. Identify some words that show up in profitable searches — from appliances, to mesothelioma suits, to kayak lessons — churn out content cheaply and regularly, and you’re done. On the web, no-one knows you’re a content-grinder.

Charles Arthur at The Guardian:

The reason why this has happened is obvious: Google is the 900-pound gorilla of search, with around 90% of the market (excluding China and Russia), and there’s an entire industry which has grown up specifically around tickling the gorilla to make it happy and enrich the ticklers. I’ve not come across anyone who describes their job as “Bing results optimisation”, nor who puts that at the top of their business CV. Well, I’m sure there are people inside Microsoft whose job title is exactly that. But not outside it.

There are two lines of thought on what happens next.

1) Google comes back from the Christmas break newly determined to fix those damned scraping sites that don’t originate content, because it says in its own webmaster guidelines that “Google will take action against domains that try to rank more highly by just showing scraped or other auto-generated pages that don’t add any value to users.”

The only value those scrapers add, in fact, is to Google, because they display tons of AdSense ads. (Well, you can make a fair bet that they aren’t Bing’s equivalent.)

Wait – the scrapers that dominate the first search page, the place from which 89% of clicks come (for only 11% of clicks come from the last 990 results out of the first thousand, or at least did in 2006, a number that has probably only shifted down since then) all benefit Google financially, even while it sees market share improvements? That’s not quite the disincentive one might have hoped for that would make Google act.

2) People start not using Google, because its search is damn well broken and becoming more broken for stuff you care about by the day. This could happen. The question is whether it would be visible enough – that is, whether enough people would do it – that it would show up on Google’s radar and be made a priority.

Over at Hacker News, the suggestions in the comments echo the idea that Google’s search really isn’t cutting the mustard any more (“vertical search” is the new watchword). Which means that really, Google does need to implement method (1) above. It might not notice if a few geeks abandon it – but once the idea really gets hold (as it will through the links they offer and comments they drop) that Google’s search is broken, then the rout begins.

I haven’t been able to get a comment from Google on this, though I’m sure it would run something along the lines of “Google makes every effort to make its search results the best and takes seriously the issues raised here.”

Update: Google responded to this article: “Google works hard to preserve the quality of our index and we’re continuing to make improvements to this. Sites that abuse our quality guidelines or prove to be spam are removed from our index as fast as possible”. (For clarification, I didn’t initially contact Google as it was a public holiday when I wrote the original article. Matt Cutts did not respond to Twitter contact as he is on holiday, Google says.)

It would be crazy not to. The question is whether it really can make a difference.

Vivek Wadhwa at Tech Crunch:

This semester, my students at the School of Information at UC-Berkeley researched the VC system from the perspective of company founders. We prepared a detailed survey; randomly selected 500 companies from a venture database; and set out to contact the founders. Thanks to Reid Hoffman, we were able to get premium access to LinkedIn—which was very helpful and provided a wealth of information.  But some of the founders didn’t have LinkedIn accounts, and others didn’t respond to our LinkedIn “inmails”. So I instructed my students to use Google searches to research each founder’s work history, by year, and to track him or her down in that way.

But it turns out that you can’t easily do such searches in Google any more. Google has become a jungle: a tropical paradise for spammers and marketers. Almost every search takes you to websites that want you to click on links that make them money, or to sponsored sites that make Google money. There’s no way to do a meaningful chronological search.

We ended up using instead a web-search tool called Blekko. It’s a new technology and is far from perfect; but it is innovative and fills the vacuum of competition with Google (and Bing).

Blekko was founded in 2007 by Rich Skrenta, Tom Annau, Mike Markson, and a bunch of former Google and Yahoo engineers. Previously, Skrenta had built Topix and what has become Netscape’s Open Directory Project. For Blekko, his team has created a new distributed computing platform to crawl the web and create search indices. Blekko is backed by notable angels, including Ron Conway, Marc Andreessen, Jeff Clavier, and Mike Maples. It has received a total of $24 million in venture funding, including $14M from U.S. Venture Partners and CMEA capital.

In addition to providing regular search capabilities like Google’s, Blekko allows you to define what it calls “slashtags” and filter the information you retrieve according to your own criteria. Slashtags are mostly human-curated sets of websites built around a specific topic, such as health, finance, sports, tech, and colleges.  So if you are looking for information about swine flu, you can add “/health” to your query and search only the top 70 or so relevant health sites rather than tens of thousands spam sites.  Blekko crowdsources the editorial judgment for what should and should not be in a slashtag, as Wikipedia does.  One Blekko user created a slashtag for 2100 college websites.  So anyone can do a targeted search for all the schools offering courses in molecular biology, for example. Most searches are like this—they can be restricted to a few thousand relevant sites. The results become much more relevant and trustworthy when you can filter out all the garbage.

The feature that I’ve found most useful is the ability to order search results.  If you are doing searches by date, as my students were, Blekko allows you to add the slashtag “/date” to the end of your query and retrieve information in a chronological fashion. Google does provide an option to search within a date range, but these are the dates when website was indexed rather than created; which means the results are practically useless. Blekko makes an effort to index the page by the date on which it was actually created (by analyzing other information embedded in its HTML).  So if I want to search for articles that mention my name, I can do a regular search; sort the results chronologically; limit them to tech blog sites or to any blog sites for a particular year; and perhaps find any references related to the subject of economics. Try doing any of this in Google or Bing

Anil Dash:

Noticing a pattern here?

Paul Kedrosky, Dishwashers, and How Google Eats Its Own Tail:

Google has become a snake that too readily consumes its own keyword tail. Identify some words that show up in profitable searches — from appliances, to mesothelioma suits, to kayak lessons — churn out content cheaply and regularly, and you’re done. On the web, no-one knows you’re a content-grinder.

The result, however, is awful. Pages and pages of Google results that are just, for practical purposes, advertisements in the loose guise of articles, original or re-purposed. It hearkens back to the dark days of 1999, before Google arrived, when search had become largely useless, with results completely overwhelmed by spam and info-clutter.

Alan Patrick, On the increasing uselessness of Google:

The lead up to the Christmas and New Year holidays required researching a number of consumer goods to buy, which of course meant using Google to search for them and ratings reviews thereof. But this year it really hit home just how badly Google’s systems have been spammed, as typically anything on Page 1 of the search results was some form of SEO spam – most typically a site that doesn’t actually sell you anything, just points to other sites (often doing the same thing) while slipping you some Ads (no doubt sold as “relevant”).

Google is like a monoculture, and thus parasites have a major impact once they have adapted to it – especially if Google has “lost the war”. If search was more heterogenous, spamsites would find it more costly to scam every site. That is a very interesting argument against the level of Google market dominance.

And finally, Jeff Atwood, Trouble in the House of Google:

Throughout my investigation I had nagging doubts that we were seeing serious cracks in the algorithmic search foundations of the house that Google built. But I was afraid to write an article about it for fear I’d be claimed an incompetent kook. I wasn’t comfortable sharing that opinion widely, because we might be doing something obviously wrong. Which we tend to do frequently and often. Gravity can’t be wrong. We’re just clumsy … right?

I can’t help noticing that we’re not the only site to have serious problems with Google search results in the last few months. In fact, the drum beat of deteriorating Google search quality has been practically deafening of late.

From there, Jeff links to several more examples, including the ones I mentioned above. As Alan alludes to in his post, the threat here is that Google has become a monoculture, a threat I’ve written about many times.

Felix Salmon:

It turns out that the banana we all know and love — the Cavendish — is actually the second type of banana grown in enormous quantities and exported across Europe and North America. The first was the Gros Michel, which was wiped out by Tropical Race One; you might be saddened to hear that “to those who knew the Gros Michel the flavor of the Cavendish was lamentably bland.” Indeed, Chiquita was so sure that Americans would never switch to the Cavendish that they stuck with the Gros Michel for far too long, and lost dominance of the industry to Dole.

In both cases, the fact that the same species of banana is grown and eaten everywhere constitutes a serious tail risk, even if today’s desperate attempts to genetically modify a disease-resistant Cavendish bear fruit:

A new Cavendish banana still didn’t seem like a panacea. The cultivar may dominate the world’s banana export market, but, it turns out, eighty-seven per cent of bananas are eaten locally. In Africa and Asia, villagers grow such hetergeneous mixes in their back yards that no one disease can imperil them. Tropical Race Four, scientists now theorize, has existed in the soil for thousands of years. Banana companies needed only to enter Asia, as they did twenty years ago, and plant uniform fields of Cavendish in order to unleash the blight. A disease-resistant Cavendish would still mean a commercial monoculture, and who’s to say that one day Tropical Race Five won’t show up?

This is exactly what I was talking about a year ago, in my post about Dan Barber, world hunger, and locavorism, when I talked about how monocultures are naturally prone to disastrous outbreaks of disease, and how a much more heterogeneous system of eating a variety of locally-grown foods is much more robust and equally capable of feeding the planet.

[…]

The problems with monoculture aren’t purely agricultural, either. Anil Dash has a post up today about the decline of Google search quality, and diagnosing the problem as being that “Google has become a monoculture”; Alan Patrick quotes a commenter at Hacker News as saying that if search were more heterogeneous, spamsites would find it more costly to scam every site.

I’m not completely convinced that seeing large numbers of SEO sites atop search results for consumer goods is entirely a function of the fact that Google is a monoculture. My guess is that in fact what we’re seeing is simply the result of enormous numbers of SEO sites, all using slightly different methods of trying to game the Google algorithm. Even if only a small percentage of those SEO sites succeed, and even if they only succeed briefly, the result is still a first page of Google results dominated by SEO spam — a lose-lose proposition for everybody, but one which wouldn’t be solved by having heterogeneous algorithms: they would all simply have different SEO sites atop their various search-result pages.

But maybe if Google wasn’t a monoculture, there wouldn’t be quite as many SEO sites all trying to hit the jackpot of, however briefly, landing atop the Google search results. In general, monoculture is a bad and brittle thing — and that goes for search as much as it goes for bananas.

Brad DeLong

Paul Krugman:

Brad DeLong takes us to two articles on trouble with Google: basically, scammers and spammers are doing their best to game the search engine, and in the process making it less useful to the rest of us. And people are turning to other search engines that are less affected, precisely because they’re less pervasive and the scammers and spammers haven’t adapted to them.

This makes me think of sex.

If you follow evolutionary theory, you know that one big question is why sexual reproduction evolved — and why it persists, given the substantial costs involved. Why doesn’t nature just engage in cloning?

And the most persuasive answer, as I understand it, is defense against parasites. If each generation of an organism looks exactly like the last, parasites can steadily evolve to bypass the organism’s defenses — which is why yes, we’ll have no bananas once the fungus spreads to cloned plantations around the world. But scrambling the genes each generation makes the parasites’ job harder.

So the trouble with Google is that it’s a huge target, to which human parasites — scammers and spammers — are adapting.

I’m not quite sure what search-engine sex would involve. But Google apparently needs some.

Matthew Elshaw:

And that’s not all, there are a large number of other posts which share the same thoughts on Google’s declining search quality.

While the major problems with Google’s search quality appear to be the rise of content farms and review sites, some posts also mention a number of other grey hat SEO tactics like link buying and doorway domains that are still working for some sites.

With the number of posts on this topic, I don’t think it will be long before a Google representative steps in to clear the air. In the mean time, what do you think about Google’s search results? Have you seen a decline in quality in recent months?

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Filed under Technology

Tucson

James Fallows:

After this horrible news from Tucson….

… let me amplify something I said half-coherently in a live conversation with Guy Raz on All Things Considered a little while ago. My intended point was:

Shootings of political figures are by definition “political.” That’s how the target came to public notice; it is why we say “assassination” rather than plain murder.

But it is striking how rarely the “politics” of an assassination (or attempt) match up cleanly with the main issues for which a public figure has stood. Some killings reflect “pure” politics: John Wilkes Booth shooting Abraham Lincoln, the German officers who tried to kill Hitler and derail his war plans. We don’t know exactly why James Earl Ray killed Martin Luther King, but it must have had a lot to do with civil rights.

There is a longer list of odder or murkier motives:
– Leo Ryan, the first (and, we hope, still the only) Representative to be killed in the line of duty, was gunned down in Guyana in 1978 for an investigation of the Jim Jones/Jonestown cult, not any “normal” political issue.

– Sirhan Sirhan horribly transformed American politics by killing Robert F. Kennedy in 1968, but Sirhan’s political causes had little or nothing to do with what RFK stood for to most Americans.

– So too with Arthur Bremer, who tried to kill George C. Wallace in 1972 and left him paralyzed.

– The only known reason for John Hinckley’s shooting of Ronald Reagan involves Jodie Foster.

– It’s not often remembered now, but Manson family member Lynette “Squeaky” Fromme tried to shoot Gerald Ford, again for reasons that would mean nothing to most Americans of that time.

– When Harry Truman was shot at (and a policeman was killed) on the sidewalk outside the White Blair House, the attackers were concerned not about Cold War policies or Truman’s strategy in Korea but about Puerto Rican independence.

– The assassinations of William McKinley and James Garfield were also “political” but not in a way that matched the main politics of that time. The list could go on.

So the train of logic is:
1) anything that can be called an “assassination” is inherently political;
2) very often the “politics” are obscure, personal, or reflecting mental disorders rather than “normal” political disagreements. But now a further step,
3) the political tone of an era can have some bearing on violent events. The Jonestown/Ryan and Fromme/Ford shootings had no detectable source in deeper political disagreements of that era. But the anti-JFK hate-rhetoric in Dallas before his visit was so intense that for decades people debated whether the city was somehow “responsible” for the killing. (Even given that Lee Harvey Oswald was an outlier in all ways.)

That’s the further political ramification here. We don’t know why the Tucson killer did what he did. If he is like Sirhan, we’ll never “understand.” But we know that it has been a time of extreme, implicitly violent political rhetoric and imagery, including SarahPac’s famous bulls-eye map of 20 Congressional targets to be removed — including Rep. Giffords. It is legitimate to discuss whether there is a connection between that tone and actual outbursts of violence, whatever the motivations of this killer turn out to be. At a minimum, it will be harder for anyone to talk — on rallies, on cable TV, in ads — about “eliminating” opponents, or to bring rifles to political meetings, or to say “don’t retreat, reload.”

Jack Shafer at Slate:

The attempted assassination of Rep. Gabrielle Giffords, D-Ariz., and the killing of six innocents outside a Tucson Safeway has bolstered the ongoing argument that when speaking of things political, we should all avoid using inflammatory rhetoric and violent imagery.

“Shooting Throws Spotlight on State of U.S. Political Rhetoric,” reports CNN. “Bloodshed Puts New Focus on Vitriol in Politics,” states the New York Times. Keith Olbermann clocked overtime on Saturday to deliver a commentary subtitled “The political rhetoric of the country must be changed to prevent acts of domestic terrorism.” The home page of the Washington Post offered this headline to its story about the shooting: “Rampage Casts Grim Light on U.S. Political Discord.”

The lead spokesman for the anti-inflammatory movement, however, was Pima County Sheriff Clarence Dupnik, whose jurisdiction includes Tucson. Said Dupnik at a Jan. 8 press conference in answer to questions about the criminal investigation:

I’d just like to say that when you look at unbalanced people, how they are—how they respond to the vitriol that comes out of certain mouths, about tearing down the government, the anger, the hatred, the bigotry that goes on in this country is getting to be outrageous. And unfortunately, Arizona, I think, has become sort of the capital. We have become the mecca for prejudice and bigotry.

Embedded in Sheriff Dupnik’s ad hoc wisdom were several assumptions. First, that strident, anti-government political views can be easily categorized as vitriolic, bigoted, and prejudicial. Second, that those voicing strident political views are guilty of issuing Manchurian Candidate-style instructions to commit murder and mayhem to the “unbalanced.” Third, that the Tucson shooter was inspired to kill by political debate or by Sarah Palin’s “target” map or other inflammatory outbursts. Fourth, that we should calibrate our political speech in such a manner that we do not awaken the Manchurian candidates among us.

And, fifth, that it’s a cop’s role to set the proper dimensions of our political debate. Hey, Dupnik, if you’ve got spare time on your hands, go write somebody a ticket.

Sheriff Dupnik’s political sermon came before any conclusive or even circumstantial proof had been offered that the shooter had been incited by anything except the gas music from Jupiter playing inside his head.

For as long as I’ve been alive, crosshairs and bull’s-eyes have been an accepted part of the graphical lexicon when it comes to political debates. Such “inflammatory” words as targeting, attacking, destroying, blasting, crushing, burying, knee-capping, and others have similarly guided political thought and action. Not once have the use of these images or words tempted me or anybody else I know to kill. I’ve listened to, read—and even written!—vicious attacks on government without reaching for my gun. I’ve even gotten angry, for goodness’ sake, without coming close to assassinating a politician or a judge.

From what I can tell, I’m not an outlier. Only the tiniest handful of people—most of whom are already behind bars, in psychiatric institutions, or on psycho-meds—can be driven to kill by political whispers or shouts. Asking us to forever hold our tongues lest we awake their deeper demons infantilizes and neuters us and makes politicians no safer.

Alex Massie:

So apparently a pretty stupid Sarah Palin poster from last year in which gunsights were slapped over 20 districts carried by John McCain from which the Democratic incumbent had voted for Obamacare, is now to be considered the inspiration for this atrocity. Mrs Palin has some influence, but let’s not get carried away. For what it’s worth – and readers know that I’m hardly her greatest fan – I do not think she is very much more responsible for this abomination than Jodie Foster was for John Hinckley’s attempt to murder Ronald Reagan. In any case, Palin’s poster was only a souped-up version of a campaign trope that both parties have been happy to employ in the past. (That said, Palin Presidential Futures, already worth shorting, took another dive yesterday.)

But the sordid temptations of politics are such that people who argue there’s little sensible connection between Hollywood “violence” and real-world violence now suddenly insist that it just takes a silly poster and plenty of over-heated rhetoric to inspire America’s Top Kooks to come out of the closet, all guns blazing. And of course the reverse is also true: people happy to blame Grand Theft Auto for just about anything now insist there’s no connection at all between the tone of political discourse (“Second Amendment Solutions!”) and some nut taking these notions just a little bit too seriously.

Clearly, things are a little more complicated than that. While you cannot legislate for lunatics there’s also little need to give them any encouragement. But the more we learn about Jared Loughner the more it seems probable – at this stage – that he’s the kind of mentally unstable person who neither needed nor took any inspiration from Palin or the Tea Party or anything other than powerful fantasies that were his own creation.

And this too is normal. Political violence of this type is almost definitionally unhinged but it’s striking how rare it turns out to be the case that the perpetrators can be fitted into one neat political profile or another. And even when they can their targets are frequently so at odds with the meaning of their supposed “philosophy” that trying to “make sense” of such matters becomes an even more frustrating task.

Anyway, we may think these are unusually turbulent times, fanned by unusual quantities of cheap and phoney populism, scaremongering and hysteria but this is not in fact the case. ‘Twas ever thus and the 1960s offer a perspective that might be worth looking at if only, despite all the huffing and puffing, to appreciate how calm and at peace America is these days. Remember McKinley and Garfield too, if you want to go still further back. America ain’t tearing itself apart these days, no matter how much Paul Krugman tries to persuade you it must be. The paranoid style has rarely lacked followers and, just as significantly, the centre has also always had a healthy paranoia of its own. Sometimes, as is the case today or in the aftermath of any other act of grim violence, this will seem unusually plausible.

Most of the time, however, the scare stories about a new era of Militiamen or whatever are seriously over-cooked. The temper of these American  times – despite what you will read everywhere today and tomorrow – is not unusually rebarbative or even uncommonly obtuse. (What might be said, mind you, is that the level of rhetoric is out of proportion to the stakes involved in the political game these days.)

The fact of the matter is that a country of 300 million people cannot help but be generously larded with oddballs, freaks, paranoids and assorted other nutters. Couple that with the American genius for self-realization and you soon begin to wonder why there isn’t more politically-themed violence than is actually the case

Radley Balko:

We’re going to hear a lot of talk in the coming days about putting an end to anti-government rhetoric. I’ve been listening to it all morning on the Sunday talk shows. Let’s get the obvious out of the way, here: Initiating violence against government officials and politicians is wrongheaded, immoral, futile, and counterproductive to any anti-government cause. As is encouraging or praising others who do. I ban anyone who engages in that kind of talk here.

But it’s worth remembering that the government initiates violence against its own citizens every day in this country, citizens who pose no threat or harm to anyone else. The particular policy that leads to the sort of violence you see in these videos is supported by nearly all of the politicians and pundits decrying anti-government rhetoric on the news channels this morning. (It’s also supported by Sarah Palin, many Tea Party leaders, and other figures on the right that politicians and pundits are shaming this weekend.)

I hope Rep. Giffords—and everyone wounded yesterday—makes a full recovery. It’s particularly tragic that she was shot while doing exactly what we want elected officials to do—she was making herself available to the people she serves. And of course we should mourn the people senselessly murdered yesterday, government employees and otherwise: U.S. District Judge John Roll, Dorothy Murray, Dorwin Stoddard, nine-year-old Christina Green, Phyllis Scheck, and Gabe Zimmerman.

That said, I long for the day that our political and media figures get as indignant about innocent Americans killed by their own government—killed in fact, as a direct and foreseeable consequence of official government policy that nearly all of those leaders support—as they are about a government official who was targeted by a clearly sick and deranged young man. What happened this weekend is not, by any means, a reason to shunt anti-government protest, even angry anti-government protest, out of the sphere of acceptable debate. The government still engages in plenty of acts and policies—including one-sided violence against its own citizens—that are well worth our anger, protest, and condemnation.

Michelle Malkin

Jonathan Martin in Politico

Keach Hagey in Politico

Nick Gillespie at Reason:

There’s no question that the GOP and its proponents are more than ready to play a similar game. Any moral lapse by a Democrat, for instance, is an ethical rot that stems directly from the malefactor’s stance on the minimum wage or Don’t Ask Don’t Tell, say, while hypocrites such as Sen. Larry Craig and Tom DeLay are ethical one-offs. The most-unbelievable response in the immediate aftermath of the 9/11 attacks was longterm GOP activist Jerry Falwell’s announcement on Pat Robertson’s TV network that gays and women wearing pants etc. were responsible for radical Islamists killing 3,000 people (even more sadly, years after Falwell apologized for his self-evidently retarded statement, conservative writer Dinesh D’Souza blew out the thesis into a full-length book). I’m not trying to be “fair and balanced” here by bringing up GOP stupidity; I’m trying to point out that we’re in a decade of this sort craptastic instantaneous spin that latches on to everything in its path. I say this as someone who was fingered as broadly responsible for the culture that produced “American Taliban” John Walker Lindh.

Readers of this site know I’m no Sarah Palin fan, but to accuse her of complicity in the murderous spree of a clearly insane person is one of the main reasons that partisan political parties are losing market share. I had myself tweeted that blaming Palin for Jared Loughner’s mass killing would be like blaming J.D. Salinger for Mark David Chapman shooting John Lennon (and as Jesse Walker pointed out, in Chapman’s case, at least we could be sure Chapman had read Salinger). Given Loughner’s fixation on grammar and the supposed lack of literacy evinced by most Americans, maybe William Safire and S.I. Hayakawa should be held responsible.

Like Matt Welch and Jack Shafer, I don’t think that today’s political rhetoric is particularly overheated or vitriolic and, even if it were, I don’t think that would be a problem. I suspect that most people are like me in that they respond to folks who actually believe something and are willing to fight for it when it comes to a particular political issue. I don’t like bipartisanship, which usually means that all of us get screwed, but it’s easy enough to respect someone you virulently disagree with if you think they are arguing in good faith.

The problem isn’t with the current moment’s rhetoric, it’s with the goddamn politicization of every goddamn thing not even for a higher purpose or broader fight but for the cheapest moment-by-moment partisan advantage. Whether on the left or on the right, there’s a totalist mentality that everything can and should be explained first and foremost as to whether it helps or hurt the party of choice.

That sort of clearly calculated punditry helps explain one of last week’s other big stories, which is how both the Dems and the GOP have really bad brand loyalty these days. In its most recent survey of political self-identification, Gallup found that the Dems were at their lowest point in 22 years and that the GOP remains stuck below the one-third mark. The affiliation that has the highest marks for the past couple of decades on average and is growing now is independent. Faced with the way that the major parties and their partisans try to bend every news story, trend, box office hit or bomb, you name it, whether truly horrific (as Saturday’s shooting was) or totally banal, is it any wonder that fewer people want to be affiliated with the Dems and Reps? This is a long-term trend. Indeed, Harris Poll numbers that stretch back to the late ’60s show the same trend: Fewer and few folks want to view themselves as Democrats and the GOP has never been popular (even though far more people consider themselves “conservative” than “liberal”). And note what Gallup are Harris are talking about there is not party registration. It’s identification and self-affiliation; how you see yourself. It’s a cultural identity.

Paul Krugman at The New York Times

Ross Douthat at The New York Times

Tom Maguire on Krugman

Nick Baumann at Mother Jones:

At 2:00 a.m. on Saturday—about eight hours before he allegedly killed six people and wounded 14, including Rep. Gabrielle Giffords (D-Ariz.), in Tucson—Jared Lee Loughner phoned an old and close friend with whom he had gone to high school and college. The friend, Bryce Tierney, was up late watching TV, but he didn’t answer the call. When he later checked his voice mail, he heard a simple message from Loughner: “Hey man, it’s Jared. Me and you had good times. Peace out. Later.”

That was it. But later in the day, when Tierney first heard about the Tucson massacre, he had a sickening feeling: “They hadn’t released the name, but I said, ‘Holy shit, I think it’s Jared that did it.'” Tierney tells Mother Jones in an exclusive interview that Loughner held a years-long grudge against Giffords and had repeatedly derided her as a “fake.” Loughner’s animus toward Giffords intensified after he attended one of her campaign events and she did not, in his view, sufficiently answer a question he had posed, Tierney says. He also describes Loughner as being obsessed with “lucid dreaming”—that is, the idea that conscious dreams are an alternative reality that a person can inhabit and control—and says Loughner became “more interested in this world than our reality.” Tierney adds, “I saw his dream journal once. That’s the golden piece of evidence. You want to know what goes on in Jared Loughner’s mind, there’s a dream journal that will tell you everything.”

Peter Beinart at Daily Beast:

Liberals should stop acting like the Tea Party is guilty of inciting Rep. Gabrielle Giffords’ shooting until proven innocent. That’s unfair. If someone finds evidence that violent anti-government, or anti-democratic, rhetoric helped trigger Jared Lee Loughner’s shooting spree, then the people making those statements should pay with their political careers. But so far, at least, there is no such evidence. Of course, Sarah Palin should stop using hunting metaphors to discuss her political opponents. She should stop doing that, and a dozen other idiotic things. But just as Tea Partiers are wrong to promiscuously throw around terms like “communist” and “death panels,” liberals should avoid promiscuously accusing people of being accessories to attempted murder. That’s too serious a charge to throw around unless you have the goods. I want Barack Obama to derail the congressional Republicans as much as anyone. But not this way.

The Giffords shooting doesn’t prove that Sarah Palin has blood on her hands. What it does prove is that when it comes to terrorism, people like Sarah Palin have a serious blind spot. On the political right, and at times even the political center, there is a casual assumption—so taken for granted that it is rarely even spoken—that the only terrorist threat America faces is from jihadist Islam. There was a lot of talk a couple of weeks back, you’ll remember, about a terrorist attack during the holiday season. And there’s been a lot of talk in the last couple of years about the threat of homegrown terrorists. Well, we’ve just experienced a terrorist attack over the holiday season, and it was indeed homegrown. Had the shooters’ name been Abdul Mohammed, you’d be hearing the familiar drumbeat about the need for profiling and the pathologies of Islam. But since his name was Jared Lee Loughner, he gets called “mentally unstable”; the word “terrorist” rarely comes up. When are we going to acknowledge that good old-fashioned white Americans are every bit as capable of killing civilians for a political cause as people with brown skin who pray to Allah? There’s a tradition here. Historically, American elites, especially conservative American elites, have tended to reserve the term “terrorism” for political violence committed by foreigners. In the early 20th century, for instance, there was enormous fear, even hysteria, about the terrorist threat from anarchist and communist immigrants from Eastern or Southern Europe, people like Sacco and Vanzetti. In the aftermath of World War I, large numbers of immigrant radicals were arrested and deported. Nothing similar happened to members of the white, protestant Ku Klux Klan, even though its violence was more widespread.

Similarly today, the media spends the Christmas season worrying how another attack by radical Muslims might undermine President Obama’s national-security credentials. But when Jared Lee Loughner shoots 20 people at a Safeway, barely anyone even comments on what it says about the president’s anti-terror bona fides. And yet Loughner’s attack is, to a significant degree, what American terror looks like. Obviously, jihadists have committed their share of terrorism on American soil in the last couple of decades—from the attempted bombing of the World Trade Center in 1993 to the 9/11 attacks to Army psychiatrist Nidal Malik Hasan’s murder of 13 people at Fort Hood in 2009. But there have been at least as many attacks by white Americans angry at their own government or society. For almost two decades, culminating in 1995, Unabomber Ted Kaczynski sent mail bombs to people he considered complicit in industrial America’s assault on nature. (A surprising amount of recent American terrorism comes from militant environmentalists.) That same year, Timothy McVeigh blew up the Alfred P. Murrah Federal Building in Oklahoma City, the second-largest recent terrorist attack on U.S. soil after 9/11. In 1996, Eric Rudolph bombed the Atlanta Olympics to protest abortion and international socialism. According to the FBI, opposition to abortion also played a role in the 2001 anthrax attacks (you know, the ones Dick Cheney were sure had been masterminded by Saddam Hussein). In 2009, Wichita, Kansas, abortion doctor George Tiller was murdered. (He had already been shot once, and his clinic had been bombed.) That same year octogenarian neo-Nazi James Wenneker von Brunn shot a security guard at the U.S. Holocaust Memorial Museum. Last February, a man angry at the federal government flew a small plane into an IRS building in Austin, Texas.

Instapundit at The Wall Street Journal

Ezra Klein:

None of this, of course, will ease the suffering of Giffords or her family, nor of any of the other individuals and families directly affected by this morning’s slaughter. For them, the process of grieving and recovering has barely begun. Loughner’s shooting might’ve been motivated by mental illness, but the people in that parking lot were motivated by democracy: It was a meeting between a congressional representative and those she represents. They were attacked for being good citizens, and nothing can ever put that right.

But one way that people might pay tribute is to follow their example and attend the next meeting held by their representative. It is so easy and safe to participate in the American political system that we sometimes take doing so for granted. Today was a horrifying look into a world in which that isn’t so, and it should leave us with renewed appreciation for, and determination to protect, the world we have. On this, Giffords was way ahead of us: When the 112th session of the House of Representatives convened to read the Constitution earlier this week, she chose to read the section guaranteeing Americans the right “peaceably to assemble.”

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Filed under Crime, Political Figures, Politics

We Have A Letter From Ireland Here

Niamh Hardiman:

Ireland’s fiscal crisis is largely caused by the collapse of the house price bubble and over-reliance on revenues from construction-related activities. This is bad enough, but by itself it would be difficult but manageable. The millstone around the neck of the Irish people is the vast scale of the crisis in the banking sector. Ireland’s banking crisis is not primarily about complicated and risky financial products: it is a common-or-garden result of reckless lending for property development and an inadequate regulatory regime. Between 2004 and 2007, the banks had escalated the scale of their lending to construction and property development enormously. When financial meltdown was imminent in September 2008, the government undertook to guarantee all of the banks’ losses, bondholders as well as depositors. In what is now widely regarded as a terrible mistake, the government in effect socialized the enormous private debt of the banks.

The true picture of what is entailed has been slow to emerge. The government’s attempts to shore up the banks have not involved outright nationalization, but the creation of a National Asset Management Agency (NAMA) to transfer the bulk of the banks’ non-performing property-backed loans into a special purchase vehicle, at a discounted rate. This amounts to indirect recapitalization of the banks. The total cost of Nama-type loan loss is now estimated at €66 billion. This is, in effect, half of GNP (the best measure of the taxable resource base of the Irish economy), which in 2009 amounted to €131.2bn. Mortgage and personal loan losses have not yet come fully into focus, but may amount to an additional €25 billion.

The present government, a coalition between the dominant centre-right Fianna Fáil and the Green Party, must go to the polls soon, and they will certainly be trounced. But unpopular though it is, the government was adamant until almost the last moment that it did not need or ask for the rescue package. Borrowing needs were fully met until mid-2011, and government had no need to go back to the bond markets. ECB as well as European Commission representatives had been on an extended visit to the Department of Finance, inspecting plans for the budget due on 7 December, in line with the strengthened fiscal oversight practices in the Eurozone. EU Commissioner for Economic and Monetary Affairs Olli Rehn had declared himself happy with the plans he had seen.  Austerity measures were projected to take some €4bn out of the economy as part of the planned fiscal consolidation strategy. This was intended to ensure conformity with the Stability and Growth Pact requirements of 3% deficit by 2014.

Yet Ireland is now committed to an IMF-EU rescue package worth €85bn over the coming years, to fund both government spending and to support the costs of sorting out the crisis in the banks. It all happened very quickly, and indeed one government minister said they were bounced into it. The terms are set out in the government’s new four-year fiscal plan. The interest rate involved is not low, at an average of 5.87%. The total fiscal contraction will come to €15bn, though the deadline is now extended until 2015. The December budget alone will take out €6bn in a mix of spending cuts and tax increases. This is tougher than anything that had been envisaged so far. In addition, the National Pension Reserve Fund, a rainy-day measure set against future public pension liabilities, is to be used as part of the bail-out package. Most controversially from the point of view of Irish taxpayers, while these public assets are to be committed to the front line of bank recapitalization, the banks’ bondholders are not to be required to bear any losses. The most equitable adjustment measure, from the point of view of the Irish taxpayers, would have required some element of writing down outstanding debt through an orderly restructuring, that is, burning the bondholders. But this could damage government’s capacity to raise future funds through borrowing; government ministers stress that they really had no option in this. Yet there is palpable anger in Ireland at the outcome which ensures that the banks will be bailed out while the cost is to be borne in full by the taxpayers.

Paul Krugman:

Kevin O’Rourke has put out a beautifully written, heartfelt piece on Ireland’s woes. Read it and weep.

Update: Gah — we seem to have overwhelmed the hamsters at Eurointelligence. I’m going to put O’Rourke’s text under the fold for the time being.

Letter from Dublin

It is one thing to know that someone you love is terminally ill; their death still comes as a shock.

I certainly don’t want to compare the arrival of the EU-IMF team in Dublin last week to a bereavement. But I was surprised at how upsetting I found it, given that it came as no surprise. It had been clear for a long time that the blanket guarantee given to the liabilities of Ireland’s rotten banks, in September 2008, had saddled the State with a debt that was too big for it to handle. Ten successive quarters of declining real GNP, and one attempt too many to draw a line under the losses of our banks, made our exclusion from international capital markets inevitable. But to know something is one thing; to see it actually happen is something entirely different.

I am not alone in feeling this way, it seems. The economics editor of the Irish Times, Dan O’Brien, wrote that

nothing quite symbolised this State’s loss of sovereignty than the press conference at which the ECB man spoke along with two IMF men and a European Commission official. It was held in the Government press centre beneath the Taoiseach’s office. I am a xenophile and cosmopolitan by nature, but to see foreign technocrats take over the very heart of the apparatus of this State to tell the media how the State will be run into the foreseeable future caused a sickening feeling in the pit of my stomach.

This is not to say that we would be happy to have our country’s affairs managed by the current, disgraced, government. I yield to no-one in my loathing of the men and women who have done this to my country. What has been the intellectual low-point of the last couple of years? Was it the cash-for-clunkers stimulus package (Ireland does not produce any cars)? Or the statement by our Finance Minister that Ireland need not fear a bank run, since Ireland is an island? Or the biggest Irish joke of them all, which underpinned the bank guarantee in the first place: that if we wanted investors to retain confidence in the creditworthiness of the Irish State, we needed to make sure that nobody who invested in our (private sector) banks ever lost a penny?

The latter decision is the one that sank the country. It was the last great act of hubris of the Celtic Bubble, and was immediately denounced by one of the heroes of the crisis, my old UCD colleague Morgan Kelly. On the night the guarantee was announced, Kelly pointed out that while it was the right policy if the Irish banks were facing a liquidity crisis, it was a terrible policy if they were insolvent, which was in fact the case. As they always do when confronted with someone smarter than them, the Dublin establishment circled the wagons, and Kelly was dismissed as an irresponsible young troublemaker of no consequence. He has been proved right, of course, but the establishment is still at it, making the
same fundamental mistake of thinking that a solvency crisis is just a liquidity crisis. Now, however, the establishment is European as well as Irish, and it is the State rather than the banking sector which is insolvent.

Clive Crook:

David Gardner draws my attention to this Letter from Dublin by Kevin O’Rourke, one of Ireland’s most distinguished economists. It might be the best single thing I’ve read on the Irish crisis. Analytically astute, and moving too. Just how profound a blow this has been comes through. It is not just an economic and political crisis, but a full-blown constitutional crisis. And the European Union has made it all so much worse than it needed to be.

Brad DeLong

Barry Eichengreen:

The Irish “rescue package” finalized over the weekend is a disaster. You can say one thing for the European Commission, the ECB and the German government: they never miss an opportunity to make things worse.

It pains me to say this. I’m probably the most pro-euro economist on my side of the Atlantic. Not because I think the euro area is the perfect monetary union, but because I have always thought that a Europe of scores of national currencies would be even less stable. I’m also a believer in the larger European project. But given this abject failure of European and German leadership, I am going to have to rethink my position.

The Irish “program” solves exactly nothing – it simply kicks the can down the road. A public debt that will now top out at around 130 per cent of GDP has not been reduced by a single cent. The interest payments that the Irish sovereign will have to make have not been reduced by a single cent, given the rate of 5.8% on the international loan. After a couple of years, not just interest but also principal is supposed to begin to be repaid. Ireland will be transferring nearly 10 per cent of its national income as reparations to the bondholders, year after painful year.

This is not politically sustainable, as anyone who remembers Germany’s own experience with World War I reparations should know. A populist backlash is inevitable. The Commission, the ECB and the German Government have set the stage for a situation where Ireland’s new government, once formed early next year, rejects the budget negotiated by its predecessor. Do Mr. Trichet and Mrs. Merkel have a contingency plan for this?

Kevin Drum:

As a resident of California, I have some advice for the EU: something good is really unlikely to turn up. Kicking the can down the road just makes the can mad. Like it or not, you’re better off dealing with this stuff sooner rather than later.

Megan McArdle:

There’s no question that it is morally outrageous for taxpayers who had nothing to do with the overlending to be saddled with the costs, while bondholders who should have watched where they put their money, walk away scot free.  Moreover, I cannot but believe that this is creating considerable moral hazard; investing in bank debt starts to look something like investing in the sovereign debt of the country where the bank is.

And yet it seems to me that the practical question remains: is Ireland actually better off if it does this?  Are the taxpayers?  Couldn’t the contagion get worse?  We’re talking about a country that has been the net recipient of a lot of foreign capital over the years (which is why, in part, the Irish are so outraged.)  The government is running a sizeable primary deficit, and as far as I can tell, expects to for at least a couple of years.  If telling the bondholders to take a haircut triggered capital flight, wouldn’t that mean dramatic austerity right now, as the government was suddenly forced to balance its books?  What about the contraction of household credit?
I’m asking the question, not answering it: I genuinely don’t know.  The EU could have backstopped Ireland’s government spending without a guarantee for the bondholders, of course.  Probably, they should have.  But was that very likely to happen?  These are countries where the banks are “too big to save”–where the bank liabilities are twice GDP, or even higher.  They’re very wary of anything that makes their financial sector even slightly less sound.
Have there been any really successful situations where the bank bondholders were not made whole? Again, I’m asking, not answering; I would feel a lot better about saying Ireland should take this course if I knew of instances where it had been successfully pulled off in the past.  As far as I can tell, even famously “tough” solutions like the Swedish nationalization ultimately made the bondholders whole, as the FDIC does in our own country.  The logic is simple: a run on bank bonds looks like a slow-motion run on the banks.
To be clear, I am not arguing that bailing out the bondholders at taxpayer expense is right or fair; it is not right, and it is monstrously unfair.  I am only arguing that doing the fair and right thing, and making the bondholders eat the losses instead of the taxpayer, might end up costing taxpayers even more.  For example, I’d argue that whatever it might have cost taxpayers to prop up all the banks in 1929, that burden would have been infinitely preferable to the Great Depression.

I guess we can find some small comfort in the fact that another country is doing it even more wrong.

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“The Moment Of Truth,” In Theaters Near You… Or Not

Derek Thompson at The Atlantic:

The president’s deficit commission released its final recommendation for reducing the debt and reforming the budget this morning. Dramatically named “The Moment of Truth,” the plan offers a mosaic of reforms that promise to cut $4 trillion from the debt before 2020.

The plan would also cap tax revenue at 21 percent, limit spending to 22 percent, and reduce debt as a percentage of GDP to the key figure of 60 percent by 2023.

The 18-member commission will vote Friday on the plan, which requires a 14-person majority to go to Congress. But you don’t have to wait until then to learn the basics. Here is your executive summary, with “bottom line” conclusions to give you a sense of how I see things.

Discretionary/Mandatory Spending 

The goal is clear: cut $100 billion from defense and $100 billion from non-defense spending by 2015. The road there is less clear, because the discretionary budget is a vertiginous array of programs.

So the report keeps things broad. Spending in 2012 will equal spending in 2011. Spending in 2013 will come down to pre-crisis levels, adjusted for inflation. The president will propose annual limits for war spending. Disaster funds will be set up to manage unforeseen tragedies. A new 15-cent per gallon gas tax will pay into a transportation fund so that roads and bridges rely less on general revenue. Agencies will be responsible for their own diets, but in the event that they don’t lose the weight themselves, a new, bipartisan “Cut-and-Invest Committee” will offer guidance.

On the mandatory spending side, the report recommends reforming civilian and military retirement plans, cutting agricultural subsidies, but protecting income support programs.

Bottom line: The commission doesn’t particularly care where the spending cuts come from so long as they draw equally from both security and non-security spending and don’t hurt education, infrastructure or support for low-income families.

Taxes

The name of the game here is: Broaden the base, lower the rates. That means eliminating most tax expenditures (explanation here) that don’t protect the low-income, while slashing tax rates for both individuals and companies.

For individuals, tax brackets move to a new scale of 12%/22%/28% (for comparison: under Clinton, those brackets were 15/ 28/ 31/ 36/ 39.6). Welfare provisions like the Earned Income Tax Credit and the Child Tax credit stay put. Itemized deductions are eliminated and capital gains and dividends are taxed as ordinary income, dramatically raising effective tax rates on rich folks who both itemize heavily and get more income from investments. The mortgage interest deduction [Flashcard here] becomes a tax credit to make it more progressive and the employer health care subsidy [Flashcard here] is capped and phased out slowly.

OK, so the upshot: After-tax income would decline proportionately — between one and two percent — on almost all quintiles except for the richest one percent, who would pay significantly more to Uncle Sam.

Alison Acosta Fraser at Heritage:

As a stalemate appears increasingly likely, what appears to be an updated “chairman’s mark” to guide the commission’s discussions over the next several days was released. Like its predecessor, the report, puzzlingly titled “The Moment of Truth” (as if this will somehow garner enough votes), has some strong elements, both positive and negative.

Overall, this proposal does much the same as the previous report, though it would cut spending deeper and faster, bringing discretionary spending to 2008 levels (adjusted for inflation) and balancing the budget two years earlier by 2035. Rather than wait to phase in cuts, it would reduce spending by $50 billion immediately, by starting “at home” with congressional and federal workforce pay and other common-sense ways to reduce federal spending.

Yet, as if taxes and spending are somehow equal bookkeeping maneuvers, the tax hike is bigger and faster than the earlier version. The commissioners appear to have wasted their opportunity to be truly transformational, such as in health care, by resorting to “pilot” trials of the Rivlin–Ryan Medicare premium support proposal. And notably, again, they leave Obamacare in place, save for one major improvement: the repeal or reform of the massively irresponsible long-term care benefits in the CLASS Act section of the law.

Ed Morrissey:

I’m hoping to get through the entire proposal later tonight, perhaps as an insomnia cure, but none of this sounds either outrageous or surprising.  Raising the retirement age for Medicare and Social Security eligibility should have been done years ago.  The original retirement age for both programs were set at or past the average life expectancy for a good reason — because to do otherwise invites financial ruin.  People live longer and healthier lives and do not need taxpayer support at age 65 any longer, and the systems should recognize that.

The elimination of the two major tax breaks will almost certainly doom this proposal, even though each makes sense in certain contexts.  The ObamaCare debate should have demonstrated by now the market-distorting effect of tax-free employer-provided health insurance, which has kept American workers dependent on employers and less mobile in the marketplace for decades.  However, the elimination of the tax break without real reform in the entire third-party payer system in the US will put those workers at even more risk for financial ruin.  That tax break should only be eliminated if Congress at the same time removes the barriers to interstate sales of health insurance, ends coverage mandates, and strengthens the HSA system — and ObamaCare took the opposite approach, which will make the system even worse as a result.

Similarly, the mortgage tax exemption is another government intervention in the housing and lending markets.  Unfortunately, millions of Americans built that deduction into their current purchases, which means that revoking it should only be done in a revenue-neutral manner.  That would happen if the US adopted a rational flat-tax system, or even a Fair Tax system where people could limit their tax liability by controlling consumption.   The mortgage tax exemption should literally be the last to go in tax reform.  If Congress thought the Tea Party was a serious issue in this last midterm election, just wait until millions of homeowners have thousands more dollars in tax liabilities thanks to this idea of reform.  It simply won’t happen unless Congress eliminates every other deduction and loophole in the tax system.

Under the circumstances, it’s small wonder that no elected official wants to affix his signature to the proposal, no matter how reasonable it might be.   It’s also telling that Bowles and Simpson didn’t write this in legislative language, which means that it will take months before all or even a portion of this makes it to the floor of the House.  There may be some good starting points for debate and action in this plan, but as a coherent proposal, it requires more reform than it demands.

Paul Krugman:

I think it is worth pointing out that like so many proposals from that side of the political spectrum — for this is, very much, bipartisanship as a compromise between the center-right and the hard right — this one involves a fundamental piece of strange logic. Namely, it argues that in order to head off the dire prospect of future cuts in Social Security benefits, we must … cut future Social Security benefits.

Also: in response to the point many of us have made about raising the retirement age — that only the affluent have seen life expectancy rise faster than the retirement-age rises already in the law — the plan promises special exemptions for those with physical hardships.

Let’s think about that. Right now we have a retirement system that has the great virtue of not being intrusive: Social Security doesn’t demand that you prove you need it, doesn’t ask about your personal life, doesn’t make you feel like a beggar. And now we’re going to replace that with a system in which large numbers of Americans have to plead for special dispensation, on the grounds that they’re too feeble to work for a living. Freedom!

Joan McCarter at Daily Kos:

The catfood commission has released the final report [pdf], and will vote on it Friday. It hasn’t substantially changed from the chairs’ mark preemptively released by Simpson and Bowles a couple of weeks ago. It still has the disastrous ratio 2:1 ratio of spending cuts to revenue increases, includes a payroll tax holiday (reducing further Social Security’s take), a regressive tax structure and arbitrary spending caps.

[…]

The question now is what happens next. Yesterday, Reid promised a vote, but with conditions, as David Dayen notes: “the commission must provide legislative language in hand, and they must get at least a majority vote on the commission, which would be 10 votes.” The legislative language condition is not going to be met, unless they find volunteers do translate for free. They didn’t create legislative language and officially cease to exist after today.

The other question is whether they’ll reach 10 votes–a bare majority. Kent Conrad and Judd Gregg have agreed to it, as far as the rest go, I agree with dday that it’s very much in question.

I think the House Republicans, led by Paul Ryan, are no votes. Jan Schakowsky, who came up with her own plan, is also a no. So we’re at 7-4.

What else do we know? Dick Durbin said he’s “studying” the proposal and didn’t have a commitment either way. Durbin did say that raising the retirement age was “acceptable.”

Joining Durbin on the fence is Andy Stern; Senators Max Baucus, Mike Crapo and Tom Coburn; and Democratic Reps. Xavier Becerra and John Spratt. To get 14 votes, they’d have to run the table. I’m not sure they get any of them, and could easily see 7 votes total for passage.

However, bits of this will survive as policy proposals and possibly in next year’s budget. The White House’s renewed commitment to bipartisanship seems destined to end up with Americans having to work longer for less secure retirements, and the wealthy continuing to do just fine.

Daniel Foster at The Corner:

That sounds, more or less, like the same great(ish) taste, now with more fiber. But getting the approval of 14 of the 18 panel members is still an uphill battle, and the co-chairmen have delayed a final vote on the proposal until at least Friday in the hopes of doing some last-minute arm twisting.

Josh Barro at Real Clear Markets:

…the Commission is exceeding my expectations, but perhaps that is because my expectations were always that it would serve a different mission than it purported to. In my view, the probability that 14 commission members would sign onto a consensus report was zero all along; so was the probability that we would get a comprehensive deficit reduction deal out of the 112th Congress, absent a sovereign debt crisis or other economic crisis that forces the hands of elected officials.

Instead, I view the Commission’s purpose as furthering a long-range process: driving an elite discussion about deficit reduction options so that, when the right economic time comes to actually close the budget gap, we have a clear vision of the steps we will need to take-and what compromises politicians will be willing to make. Viewed from this frame, the Commission has been a success, in part because it could not reach consensus and released several reports instead of one. These reports, and political players’ reactions to them, have helped to clarify those questions and identify a path toward budget sustainability.

Ross Douthat:

None of this makes a compromise inevitable, or even necessarily likely. (The fact that Paul Ryan didn’t join the “yes” votes represents a missed opportunity, I think, for the reasons that Allahpundit sketches here.) But if America does manage to pull back from the fiscal precipice, there’s a good chance that we’ll remember the Simpson-Bowles proposals as a significant and clarifying step toward figuring how to make that pullback work.

Felix Salmon:

I’m fascinated by the various headlines reporting the deficit commission’s 11-7 vote.

Some treat the plan as some kind of independent entity which was lobbying for votes: the WSJ runs with “Deficit Plan Fails to Win Panel Support,” while Reuters plumps for “Deficit-cut plan falls short, offers framework” and Fox News has “Deficit Commission Report Fails to Advance to Congress.” The Washington Post goes long: “Deficit plan wins 11 of 18 votes; more than expected, but not enough to force action.”

Other headlines concentrate on the panel as the key actors, and the range of views here is very wide. Bloomberg says bluntly that “Debt Panel Rejects $3.8 Trillion Budget-Cutting Plan,” in line with the FT’s “Panel reject US budget deficit plan”. Politico is a bit softer — “Debt panel falls short on votes” — while NPR is positively upbeat: “Majority Of Deficit Commission Endorses Plan; Not Enough To Make It Automatic.” Ezra, too, looks on the bright side, plumping for “The fiscal commission succeeded — sort of.”

My feeling here is that the second group is probably better than the first: the news here should properly focus on the deficit commission and what it has failed or succeeded in doing. It was the commission which was charged with putting a bipartisan plan together, it was the commission which faced the very high hurdle of getting 14 votes (a 78% supermajority), and it was the commission which ultimately didn’t manage to get there.

Michael Crowley at Swampland at Time:

So there are two ways you can look at this outcome. One is that failing to win a supermajority is clearly a disappointment, and means that Congress won’t feel strong pressure to take action on the plan. Another is that winning a majority wasn’t an obvious outcome, and is certainly better than the embarrassment–and sense of futility–that would come with not winning a majority. Ezra Klein, for one, thinks the vote–and some encouraging words even from the plan’s opponents–good enough to give the plan credibility if Obama wants to run with it. (One option would be to build some of its elements into his 2011 budget proposal.) Look for Obama’s take when he returns from Afghanistan.

One thing the commission clearly did accomplish was to focus attention on the medium-to-long term debt threat and ways of mitigating it. That was the basis for Bowles’s claim, at a press conference earlier this week, that the panel had achieved “victory” regardless of the final tally. Of course, not everyone agrees on the importance of having that conversation right now, especially with the economy still bleeding on the emergency-room floor. Now that the panel is folding up its tent, we’ll see whether Obama and leaders in Congress agree.

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After The Love Is Gone…

Andrew Ross Sorkin at Dealbook at NYT:

Daniel S. Loeb, the hedge fund manager, was one of Barack Obama’s biggest backers in the 2008 presidential campaign.

A registered Democrat, Mr. Loeb has given and raised hundreds of thousands of dollars for Democrats. Less than a year ago, he was considered to be among the Wall Street elite still close enough to the White House to be invited to a speech in Lower Manhattan, where President Obama outlined the need for a financial regulatory overhaul.

So it came as quite a surprise on Friday, when Mr. Loeb sent a letter to his investors that sounded as if he were preparing to join Glenn Beck in Washington over the weekend.

“As every student of American history knows, this country’s core founding principles included nonpunitive taxation, constitutionally guaranteed protections against persecution of the minority and an inexorable right of self-determination,” he wrote. “Washington has taken actions over the past months, like the Goldman suit that seem designed to fracture the populace by pulling capital and power from the hands of some and putting it in the hands of others.”

Over the weekend, the letter, with quotations from Thomas Jefferson, Ronald Reagan and President Obama, was forwarded around the circles of the moneyed elite, from the Hamptons to Silicon Valley. Mr. Loeb’s jeremiad illustrates how some of the president’s former friends on Wall Street and in business now feel about Washington.

Mr. Loeb isn’t the first Wall Streeter to turn on the president. Steven A. Cohen, founder of the hedge fund SAC Capital Advisors and a supporter of the Obama campaign, recently held a meeting with Republican candidates in his home in Greenwich, Conn., to strategize about the midterm elections, according to Absolute Return magazine.

Other onetime supporters, like Jamie Dimon, chief executive of JPMorgan Chase, also feel burned by the Obama administration, people close to him say.

That the honeymoon between Washington and Wall Street has turned to bitter recriminations is not news, given that the administration had long pledged to revamp Wall Street regulation in the wake of a crisis that rattled the global financial system.

Less than two years ago, Democrats received 70 percent of the donations from Wall Street; since June, when the financial regulation bill was nearing passage, Republicans were receiving 68 percent of the donations, according to an analysis by the Center for Responsive Politics, a nonpartisan research group.

But what is surprising is that some of the president’s biggest supporters have so publicly derided his policies, even at the risk of hurting their ability to influence the party in the future. Issues like the carry-interest tax on private equity or the Volcker Rule have become personal.

Why so personal? The prevailing view is that bankers, hedge fund mangers and traders supported the Obama candidacy because he appealed to their egos.

Mr. Obama was viewed as a member of the elite, an Ivy League graduate (Columbia, class of ’83, the same as Mr. Loeb), president of The Harvard Law Review — he was supposed to be just like them. President Obama was the “intelligent” choice, the same way they felt about themselves. They say that they knew he would seek higher taxes and tighter regulation; that was O.K. What they say they did not realize was that they were going to be painted as villains.

Paul Krugman:

I talked to some financial-industry backers of Obama back during primary season; they really didn’t know or care much about policy issues, but were in love with Obama over his style — and also over the prospect of being in his inner circle, something they knew wouldn’t happen with Hillary. Now they’re mad because they don’t feel that they’re getting enough stroking.

And you have to bear in mind that this comes after Obama has made immense efforts to placate the financial industry. There were no bank nationalizations; there were hardly any strings attached to bailouts; the financial reform bill was by no means draconian given the scale of the disaster. But Wall Street is furious that Obama might even hint that they caused the crisis — which he does, now and then, because, well, they did.

And as far as I can tell, hardly any of the new anti-Obamanites is thinking at all about what will really happen once John Boehner is speaker.

You know, one might have thought that having all the money in the world would make people less petty, less concerned about whether they feel that they’re in the in-group. But nooooo [/Belushi]

Daniel Indiviglio at The Atlantic:

In fact, most of those who I know on Wall Street aren’t particularly politically principled. They basically have the view that the government can do its thing, and they can do theirs. More regulation? They’ll just shrug and find loopholes or new ways to make money. Higher taxes? They have accountants with sophisticated income recognition strategies that handle that sort of nuisance. Their involvement in politics essentially consists of donating money to important politicians so that they can be relatively sure that government will generally leave them alone, or lend them a helping hand in case of emergency.

And that’s what they expected from President Obama. Instead, he adopted the popular narrative that Wall Street was the villain. This was a shock, because these bankers don’t share that view. As far as they’re concerned, a very small portion of them actually were responsible for the problems that led to the financial crisis. Indeed, many of them suffered disproportionally, as they had a year or two where their bonuses were far below what was anticipated, even though their individual performance hadn’t declined. They felt that they were in many ways victims of the housing bubble as well, even if their consequence wasn’t foreclosure or long-term unemployment like so many Americans.

That’s not to say people — or even President Obama — should necessarily by sympathetic to their bruised egos. This is just the explanation. If these Wall Street bankers and traders had analyzed President Obama and his base’s politics on a deeper level, then they would have seen precisely the treatment they got. Frankly, it could have been worse if the far-left progressive wing got their way. Of course he would vilify Wall Street after a credit crunch nearly caused another depression. After all, politicians need someone to blame in such situations. What other outcome could they have reasonably expected?

Naked Capitalism:

Please. Are you going to seriously tell me big financial players are up in arms because Team Obama occasionally calls them bad names? That explanation is so obviously bogus as to call for a look for the real reason. There’s a much more straightforward explanation, and it’s called “follow the money.”The key omission from this story is the name Rahm Emanuel. Rahm, a former partner at Wasserstein Perella, was particularly effective at fundraising from private equity funds and hedge funds.

So re-read this key phrase: ” They say that they knew he would seek higher taxes and tighter regulation; that was O.K.” But what the article buries in plain sight is the fact that the plans to tax hedge and PE funds carried interest at ordinary income tax rates, rather than a preferential capital gains tax rates, has the 2 and 20 crowd seeing red. And in case you had any doubts, there was no justification for this special treatment in the first place. Loren Steffy of the Houston Chronicle noted (hat tip Independent Accountant) provides a deft skewering:

Dear IRS: Please note that beginning this year, I am no longer earning an income. From now on, I am compensated through what I like to call column interest. It isn’t pay. It’s a capital gain that I receive in exchange for providing about 2,000 words a week to this newspaper. Please lower my tax rate accordingly. hey, you can’t blame me for trying. After all, a similar strategy has worked for years for money managers at hedge funds and private equity firms. … The private investment community is decrying the move as a massive tax increase, is if oblivious to the fact that it’s enjoyed an unfair tax break for years. … Let’s set aside the rather silly notion of private equity as an engine of job creation–most buyouts result in big job cuts–and focus on the inequality. Private equity managers typically collect a 2 percent annual fee on assets in the fund, which is taxed as income. They also scoop up 20 percent of their funds’ annual profits, which is known as carried interest. … Profit-sharing plans for just about everyone else are taxed as income. … Tax law is a murky world, but one basic principle of our tax code is that people who perform similar jobs for similar pay should receive similar tax treatment. That’s not the case in the investment world.

Sorkin does mention Steve Schwarzman’s infamous outburst (”likened the administration’s plan for taxes on private equity to ‘when Hitler invaded Poland in 1939.’”) but does not indicate the fact that this is the major reason for the falling out among Obama’s former backers. It’s one thing to raise taxes generally, the big boys can stomach that. But it’s quite another to raise taxes in a way that targets them. (And note, by the way, that this measure failed, but the industry was still deeply offended at this show of disloyalty).

Similarly, Sorkin later argues for the reasonableness of the revolting businessmen:

Mr. Loeb’s views, irrespective of their validity, point to a bigger problem for the economy: If business leaders have a such a distrust of government, they won’t invest in the country. And perception is becoming reality.

Just last week, Paul S. Otellini, chief executive of Intel, said at a dinner at the Aspen Forum of the Technology Policy Institute that “the next big thing will not be invented here. Jobs will not be created here.”

Yves here. This is patently ridiculous and disingenuous. First, Sorkin chooses to overlook that Otellini’s comments about inventions and jobs is based on his throwing in his weight with the venture capital industry, which was one of the groups that fought the proposed taxes on carried interest. The argument, implicitly is that the VC industry would shrink or disappear were there no carried interest tax break, and that we’d therefore see much less new business formation.

Both those ideas are questionable. Yes, the VC business as it is currently constituted might shrink, but a lot of angel investors do deals as principals or with small syndicates. One can as easily argue with so many people now possessing Wall Street experience, we’d likely see capital move through new channels to small ventures.

But more important, the idea that VC is critical to new business growth is complete urban legend. Amar Bhide, in the first systematic study of successful new ventures, determined that VC contributes very little to the funding of new businesses, even the most successful ones (his proxy was the Inc. 500).

Second, the line that Sorkin parrots from big businesses, “Be nice to us or we’ll quit investing,” is also bunk. Guess what? As we’ve indicated, big businesses were net disinvesting even during the corporate-friendly Bush Administration. And to the extent they are leery of investing now, far and away the biggest reason is macro uncertainty. It’s awfully hard to plan if you aren’t sure whether the outlook is for inflation or deflation. But businesses will cavil like crazy about government intervention because it is one of the few variables they might be able to influence.

And it’s also remarkable that Sorkin can treat the self-serving and misleading canard, “We’re mad that Obama is treating us like bad guys” seriously. For anyone at the TBTF firms, it’s patent rubbish. The firms got overt and back door bailouts so they could shore up their equity capital, and what do they do? Pay a big chunk of government-provided largesse out to themselves in record 2009 bonuses. It’s one of the most blatant acts of looting on record, and the industry deserves every bit of scorn the authorities can muster dumped on its head.

Felix Salmon:

Now Sorkin and Dealbook are the exemplars, at the NYT, when it comes to the journalistic virtue of putting primary documents online. Their Scribd account has over 100,000 subscribers and has had over 2 million visits; it’s much more active than the parallel documents.nytimes.com format used by much of the rest of the paper.

But anybody reading Sorkin’s column today simply has to take him at his word when he says that Loeb’s letter “sounded as if he were preparing to join Glenn Beck in Washington over the weekend.”

If I wanted, I could paint I different picture of the letter. I could point out that there are no fewer than three quotes from Barack Obama on its first page, talking about the importance of helping others and spreading wealth across the whole American population. I could note that Loeb is just as harsh on capitalists as he is on the government.

Many people see the collapse of the sub-prime markets, along with the failure and subsequent rescue of many banks, as failures of capitalism rather than a result of a vile stew of inept management, unaccountable boards of directors, and overmatched regulators not just asleep, but comatose, at the proverbial switch.

And he also sees new government rules being helpful on this front:

Many of the boards we have come across are populated by individuals who rely on the stipends they receive from numerous corporate boards and thus appear motivated primarily to ensure continuing board fees, first-class air travel and accommodations, and a steady diet of free corned beef sandwiches until they reach their mandatory retirement age. We are therefore encouraged by the recently finalized proxy rules, which will ease the nomination and election of directors by shareholders.

He’s even pulling with the government when it comes to cracking down on sleazy for-profit colleges:

Our perspective on the government’s increased willingness to use its regulatory muscle enhanced our short positions in the for-profit education space. Indeed, this summer certain government actions taken regarding these companies served to accelerate the unfolding of our thesis on these names.

So, who has the more accurate view of Loeb’s letter, me or Sorkin? The answer is Sorkin: I’ve been quoting very selectively. But in one crucial respect I’m being much more open and transparent about the letter than he is: I’m linking to it. He’s not.

There’s no legal or journalistic reason why Sorkin shouldn’t link prominently to the letter. When I spoke to Richard Samson, the NYT’s top lawyer on such matters, he was clear that although there are copyright reasons why the NYT might not post the letter itself, there’s absolutely nothing to stop the paper from linking to where the letter is posted elsewhere. And in general, Sorkin’s Dealbook blog is pretty good when it comes to external links.

I see a few possible reasons why Sorkin might not link to the letter, none of them good.

First, he might be moving Dealbook away from the blog concept (and it was always more of an email newsletter than a blog to begin with) to something much more self-contained. Dealbook has been hiring aggressively, and is clearly setting itself up in opposition to, and in competition with, other online sources of financial news. Maybe that makes Sorkin more hesitant to link out than he was in the past.

Alternatively, maybe Sorkin is happy to link out in theory, but he has problems linking specifically to the relatively juvenile and tabloid Dealbreaker. I don’t think that’s true: Dealbook does link to Deabreaker on a semi-regular basis.

There’s a couple of other possibilities, too, which are more worrying. Perhaps Sorkin got the letter directly from Loeb himself, on the condition that he not publish it, and he felt that linking to it would violate the spirit of that agreement. Or maybe there was no formal agreement at all, but Sorkin just felt that linking to the letter would annoy Loeb, and therefore decided not to do so in order to help maintain his relations with a source.

Or maybe it was just an oversight, further evidence that linking to primary sources simply isn’t very important at the NYT.

James Kwak at The Baseline Scenario:

I’ve criticized the Obama administration in many more words than Daniel Loeb. But putting the blame on certain categories of people does not somehow absolve “capitalism.” Our capitalist system–which until recently we considered the best, most pure version in the world–allowed incompetent people to become executives (and to run hedge funds), allowed incompetent people to become directors and to avoid any responsibility for their actions, and allowed companies to swamp regulators with battalions of high-priced lawyers and lobbyists.

This is a basic category error. Capitalism is an economic system; managers, directors, and regulators are people. They are not mutually exclusive. If you want to say that capitalism necessarily means universally good managers, responsible directors, and effective regulators, then that’s an argument you have to make (and good luck making it).

Just because you make a lot of money doesn’t mean you know what you’re talking about. Unfortunately, in this country if you make a lot of money, a lot of people listen to you.

(Here’s the full letter. Along the way, Loeb says that the current decline in confidence and economic activity is due to the SEC’s lawsuit against Goldman.)

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