February 03, 2010
Quote of the Day
The larger lesson of the recent crisis is sobering. Modern, advanced democracies strive to deliver as much prosperity as possible to as many people as possible for as long as possible. They are in the business of creating perpetual booms. The cruel contradiction is that this promise itself may become a source of instability, because the more it is attained, the more people begin acting in ways that ultimately invite its destruction.... The quest for ever-more and ever-better prosperity subverts itself. It might be better to tolerate more frequent, milder recessions and financial setbacks than to strive for a sustained prosperity that, though superficially more appealing, is unattainable and ends in a devastating bust. That's a central implication of the crisis, but it poses hard political and economic questions that haven't yet been asked, let alone answered.
- Robert Samuelson
Posted by Cassandra at 08:28 AM | Comments (24) | TrackBack
December 23, 2009
Hubris
From little acorns:
“I have done more to take on lobbyists than any other candidate in this race … I don’t take a dime of their money, and when I am president, they won’t find a job in my White House.”- Barack Obama, November 2007
Main Street has had a tough year, losing jobs and seeing little evidence of the economic revival that experts say has already begun.But K Street is raking it in.
Washington’s influence industry is on track to shatter last year’s record $3.3 billion spent to lobby Congress and the rest of the federal government — and that’s with a down economy and about 1,500 fewer registered lobbyists in town, according to data collected by the Center for Responsive Politics.
.... “It is the most active time that I have ever seen in the advocacy business — from 1973 on,” Thurber added.
“We’ve never had as good a year,” said one lobbyist whose shop deals mostly with financial services and health care issues. “It’s been a tremendously busy year, and it’s going to keep getting that way,” the lobbyist said, noting that both health care and financial reform will remain active as congressional action moves from drafting legislation to implementation to the inevitable fixes.
...And the lobbying expenditure figures don’t include the heaps of cash interest groups are throwing at advertising, coalition-building, grass-roots and Astroturf outreach — all of which don’t get reported in the figures.
I remember listening to Obama go on and on about how his administration was going to change Washington. And I remember thinking to myself, "I don't think you have the first idea how our government really works, much less why it works that way." It's not surprising that Obama's much lauded "tough ethical standards" weren't too effective in reducing the influence of special interests on policy making. After all, even he found it impossible to get anything done without using lobbyists.
On the plus side, we now have evidence that all that federal spending is creating wealth. In the words of a great man, "I hope that you are satisfied."
Posted by Cassandra at 07:11 AM | Comments (9) | TrackBack
December 04, 2009
Butter Crowds Out Guns
From a speech given by Maggie Thatcher over 30 years ago:
... Britain cannot opt out of the world.If we cannot understand why the Russians are rapidly becoming the greatest naval and military power the world has ever seen - if we cannot draw the lesson of what they tried to do in Portugal and are now trying to do in Angola, then we are destined—in their words—to end up on ‘the scrap heap of history’.
We look to our alliances with America and NATO as the main guarantee of our own security and, in the world beyond Europe, the United States is still the prime champion of freedom.
But we are all aware of how the bitter experience of Vietnam has changed the public mood in America. We are also aware of the circumstances that inhibit action by an American president in an election year.
So it is more vital then ever that each and every one of us within NATO should contribute his proper share to the defence of freedom.
...This is not a moment when anyone with the interests of this country at heart should be talking about cutting our defences.
It is a time when we urgently need to strengthen our defences.
Of course this places a burden on us. But it is one that we must be willing to bear if we want our freedom to survive.
Throughout our history, we have carried the torch for freedom. Now, as I travel the world, I find people asking again and again, "What has happened to Britain?" They want to know why we are hiding our heads in the sand, why with all our experience, we are not giving a lead.
...The Socialists, in fact, seem to regard defence as almost infinitely cuttable. They are much more cautious when it comes to cutting other types of public expenditure.
They seem to think that we can afford to go deeper into debt so that the Government can prop up a loss-making company. And waste our money on the profligate extension of nationalisation and measures such as the Community Land Act.
Apparently, we can even afford to lend money to the Russians, at a lower rate of interest that we have to pay on our own borrowings.
But we cannot afford, in Labour's view, to maintain our defences at the necessary level...
I found it bizarre, the other night, listening to Obama complain about how NATO needs to contribute more and "do their part" while, out of the other side of his mouth, complaining that we can't afford all this horrid defense spending when what we really need is bloated entitlement programs.
I guess we can add the guns/butter decision to the long list of tradeoffs he's determined to ignore. Does this mean he thinks Europe is spending too much on entitlements - that they're not pulling their fair share of the weight? And if so, who does he expect to do the actual fighting when America becomes more like Germany and France?
Soldiers from Germany and France are well-trained, but they operate under a series of restrictions or "caveats" instituted by their parliaments. Some caveats limit the areas where troops can operate, permitting enemies to retreat to safety when engaged. The most controversial caveat is a prohibition on the offensive use of lethal force. (That is, they can defend themselves, but they can't attack.) Germany, which requires its soldiers to carry a card in their pockets explaining when they are permitted to fire, has received the most criticism on this particular rule. In 2008, German special forces had a Taliban commander in their sights. They weren't allowed to fire unless their detachment was under active attack by a Taliban force—so instead of killing the target they retreated meekly. (The German restrictions are loosening, but the piecemeal changes have led to confusion.) All in all, NATO countries have imposed nearly 80 caveats on their soldiers.
But it's not just the restrictions. Defense spending has a huge impact on combat readiness and efficiency:
Europe will add 5,000 soldiers to its contingent in Afghanistan, NATO Secretary General Anders Fogh Rasmussen announced Wednesday. It's not yet clear, however, which European countries will send troops. Georgia, the former Soviet republic, may be the largest contributor. England, Poland, and Italy have also pledged support. Does it matter where troops come from? Are some nation's soldiers better than others?Yes. Troops from Britain and Canada receive better training than many of their European counterparts. Smaller countries—or countries with smaller military budgets—often can't fund nearly as much target practice with live ammunition, and their war games are far less elaborate. British and Canadian equipment and tactics are also similar to ours, which makes it easier for them to integrate into a largely American-led operation.
Which leads me to ask, again: if America cuts defense spending even more, who will step into the breach we leave? Who is Obama depending upon?
China???
Posted by Cassandra at 08:38 AM | Comments (9) | TrackBack
November 04, 2009
The Clever Sillies Strike Again
Last Fall, the pitfalls of trying to solve the "problem" of low home ownership by making it easier and cheaper to buy homes on credit were graphically illustrated. The interesting observation is here:
... when banks set margins very low, lending more against a given amount of collateral, they have a powerful effect on a specific group of investors. These are buyers, whether hedge funds or aspiring homeowners, who for various reasons place a higher value on a given type of collateral. He called them "natural buyers."Using large amounts of borrowed money, or leverage, these buyers push up prices to extreme levels. Because those prices are far above what would make sense for investors using less borrowed money, they violate the idea of efficient markets. But if a jolt of bad news makes lenders uncertain about the immediate future, they raise margins, forcing the leveraged optimists to sell. That triggers a downward spiral as falling prices and rising margins reinforce one another. Banks can stifle the economy as they become wary of lending under any circumstances.
"It was evident to me that there was a cycle going on, not just in my little market, but all over the world," says Mr. Geanakoplos, who is still a partner at Ellington Capital. The "leverage cycle," he called it.
This idea had big implications for policy makers. For decades, they thought of interest rates as the most important indicator of supply and demand in credit markets, and the only variable they needed to adjust to achieve a desired economic result. Now, Mr. Geanakoplos was saying that something else -- lenders' collateral or margin demands -- could be even more important.
And yet the entire health care reform house of cards rests on the frankly ludicrous assumption that if government artificially holds down the cost of medical treatment, consumers of medical care won't consume more of it. Since demand is very much a function of price, this assumption defies common sense. But even if they were right; even if consumers demanded exactly the same amount of care under a government subsidized system, the addition of millions of new consumers would cause aggregate demand to rise.
What on earth do they expect to happen to prices when the number of consumers suddenly exceeds the capacity of existing medical professionals to provide care?
Prices are signals. They convey important information about which goods and services are in demand and the quantities desired. Government can certainly try to hold down prices, but they cannot change the underlying forces that cause prices to rise and fall. The only thing price manipulation does is hide information from those who need it most: producers and consumers.
In a sane world, the experience of just having watched "the smart people" nearly bring the global economy to its knees might have induced the more reflective among us to revisit the wisdom of giving them license to redesign the American economy along more "intelligent" and "equitable" lines:
... I have written about the absent-minded and socially-inept ‘nutty professor’ stereotype in science, and the phenomenon of ‘psychological neoteny’ whereby intelligent modern people (including scientists) decline to grow-up and instead remain in a state of perpetual novelty-seeking adolescence. These can be seen as specific examples of the general phenomenon of ‘clever sillies’ whereby intelligent people with high levels of technical ability are seen (by the majority of the rest of the population) as having foolish ideas and behaviours outside the realm of their professional expertise. In short, it has often been observed that high IQ types are lacking in ‘common sense’ – and especially when it comes to dealing with other human beings. General intelligence is not just a cognitive ability; it is also a cognitive disposition. So, the greater cognitive abilities of higher IQ tend also to be accompanied by a distinctive high IQ personality type including the trait of ‘Openness to experience’, ‘enlightened’ or progressive left-wing political values, and atheism. Drawing on the ideas of Kanazawa, my suggested explanation for this association between intelligence and personality is that an increasing relative level of IQ brings with it a tendency differentially to over-use general intelligence in problem-solving, and to over-ride those instinctive and spontaneous forms of evolved behaviour which could be termed common sense. Preferential use of abstract analysis is often useful when dealing with the many evolutionary novelties to be found in modernizing societies; but is not usually useful for dealing with social and psychological problems for which humans have evolved ‘domain-specific’ adaptive behaviours. And since evolved common sense usually produces the right answers in the social domain; this implies that, when it comes to solving social problems, the most intelligent people are more likely than those of average intelligence to have novel but silly ideas, and therefore to believe and behave maladaptively.
Sadly, I believe the clever sillies are about to strike again. No good can come from this. But as we survey the wreckage of a once robust economy, it will no doubt come as a great comfort that we were led over the cliff by the very best minds.
Posted by Cassandra at 08:10 AM | Comments (11) | TrackBack
October 29, 2009
Defining Poverty Down, Again
Ever noticed that the more Americans have, the more we can't live without?
If you earn less than 150% of the gummint-defined poverty line, that means those of us who earn more than that are going to buy you a phone *and* pay for your phone use.Soooooo, tell me, Congers, just *how* will this stimulate the economy? Exactly *what* benefit will this have -- aside from the obvious one of purchasing *you* a whole bunch of votes?
Notice the bolded part: it's no longer enough to be poor (as defined by the federal poverty line). You can make 50% over the cutoff income defined as "poor" and still rate a free cell phone.
This is precisely what's wrong with well intentioned programs like the so-called "War on Poverty" (well into its 4th decade with no exit plan in sight). They're inherently unwinnable because it's in the interest of politicians to arbitrarily redefine poverty upwards over time. It can never be eliminated because what was considered "poverty" yesterday is now "poverty plus".
Worst of all, since prolonged poverty has a lot to do with lifestyle choices, rewarding it means there is even less incentive to make the kinds of choices that result in prosperity.
On the other hand, creating a permanent underclass has proven extremely efficient at the ballot box. If you just look hard enough, you can always find a disadvantaged minority requiring urgent intervention from the federal government.
Posted by Cassandra at 08:36 AM | Comments (7) | TrackBack
October 26, 2009
We Have Learned Nothing From the Financial Crisis
"60 Minutes" did a fabulous exposé Sunday on Medicare fraud that should be required viewing for all people who support a government run healthcare program in this country.The facts and figures presented by CBS's Steve Kroft were disturbing as were the details concerning how shysters bilk the system for an estimated $60 billion a year.
As Kroft warned viewers in the segment's teaser, "We caution you that this story may raise your blood pressure, along with some troubling questions about our government's ability to manage a medical bureaucracy"
Now let me get this straight. We just suffered a devastating financial crisis. Industry and government analysts saw it coming years ago, but were powerless to avert it.
Having had our fingers badly burned by a massive national flirtation with disaster, some might conclude that caution and fiscal restraint were the order of the day.
They would be wrong. Instead, we've decided to stop paying the mortgage, untether major expenses from the tiresome obligation of earning money with which to pay them, and peel out for Vegas (en route to which, we plan to blithely "spend our way out of the doldrums", assuming levels of debt never before attempted - either in real terms or as a percentage of GDP).
What could possibly go wrong?
Certainly nationalizing health care will only make an already incestuous industry even more tightly interconnected? And no one seriously argues that Medicare and Social Security aren't already in over their heads:
The 2009 Social Security and Medicare Trustees Reports show the combined unfunded liability of these two programs has reached nearly $107 trillion in today's dollars! That is about seven times the size of the U.S. economy and 10 times the size of the outstanding national debt.The unfunded liability is the difference between the benefits that have been promised to current and future retirees and what will be collected in dedicated taxes and Medicare premiums. Last year alone, this debt rose by $5 trillion. If no other reform is enacted, this funding gap can only be closed in future years by substantial tax increases, large benefit cuts or both.
But why the long face? As long as we keep moving (continuing to expand government services and taking on even MORE debt we've no idea how to pay for) we ought to be able to keep our heads above water!
On average, every year since 1970, Medicare and Medicaid spending per beneficiary has grown 2.5 percentage points faster than per capita Gross Domestic Product (GDP). In the future, Medicare spending may rise even faster than the Trustees estimate. According to the Congressional Budget Office (CBO), if Medicare and Medicaid spending continues growing annually at 2.5 percentage points above GDP growth:* By 2050, Social Security, Medicare and Medicaid (health care for the poor) will consume nearly the entire federal budget.
* By 2082, Medicare spending alone will consume nearly the entire federal budget.
You'd think that, having just watched the banking industry nearly melt down, we'd learn that people do a really poor job of managing enormous, complex systems.
I work in software. Ten years ago software systems were enormous and they were failing with great regularity. The industry responded by breaking things down - carving up unmanageable behemoths into smaller, less complex projects that were easier to manage and measure. Not only were these smaller projects less likely to get into trouble; if one part of a project got into trouble, it was far less likely to take the rest of the project down with it.
Sounds suspiciously like common sense, doesn't it? We never learn.
Posted by Cassandra at 12:34 PM | Comments (5) | TrackBack
October 24, 2009
Why Price Controls Create Shortages, II
Following up on an earlier post of mine that explained why price controls inevitably create shortages, Ed Morrissey deftly wields the clue bat to good effect:
Fixing prices does not lower costs. Let me repeat that: fixing prices does not lower costs. “Costs” are borne by providers, who get reimbursed by either consumers (in a rational market) or by third parties (American health care) for their goods and/or services. In a competitive market, providers have to set their prices at an attractive level in order to get business without missing out on profit opportunities, but their prices have to cover their costs — or they go out of business.Not coincidentally, the latter is what happens when price-fixing is used. When government fixes the price of goods and services, it usually does so to mask costs, not reduce them. This is what Medicare has done for years, which is why doctors avoid Medicare patients now. When the fixed price becomes less than the actual cost to provide the service, the provider is forced out of business.
As I said the other day:
Prices operate as signals in a free marketplace, efficiently allocating goods to those who want them and are able to pay for them. Few Americans would accept the proposition that we don't need information to make intelligent decisions and yet too many Americans buy off on the notion that markets will operate efficiently if the federal government restricts the free flow of information between consumers and producers.
The idea that government bureaucrats have either the time or ability to set prices and respond to fluctuations in supply and demand for literally thousands of medical services is just plain laughable. What has Congress ever managed efficiently?
In a free market, this process happens automatically. There are no lengthy delays while Congressional committees study the issue to death.
Rationing, in some form or another, will always exist. In a free market rationing takes place when there are more potential buyers of a good or service than willing sellers. If there aren't enough sellers to satisfy demand, obviously not everyone who wants to buy will be able to.
But in a free market, these buyers are then able to perform an important set of calculations: just how badly do I want this good or service? How important is it, compared to other goods and services? What other, less important purchases might I forgo in order to get what I want? Do I need to work longer hours or change careers to afford the things I want? What's the most I'm willing to pay? In a free market producers, noticing that there are more buyers than sellers, are able to command a higher price and - by so doing - entice more producers to enter the market and remedy the shortage. Buyers and sellers participate in price setting and consequently prices reflect their priorities.
In a government run system with price controls, the price can never rise high enough to remedy shortages in supply. The inevitable result is a shortage of the good or service at that price. As we saw in my earlier post, the most efficient producers exit the market and gravitate to opportunities that offer a salary commensurate with their ability.
The result is a degradation in quality. Fewer providers and poorer quality: somehow, this doesn't sound like an improvement on the current health care situation.
But at least it will be fair.
Posted by Cassandra at 06:40 PM | Comments (7) | TrackBack
October 23, 2009
ECON 101: Price Controls Create Shortages
"When Western countries in the past were as poor as Third World countries are today, these Western countries nevertheless had one big advantage: There was no large and influential class of the intelligentsia to impede their progress with unsubstantiated theories and counterproductive propaganda." -- Dr. Thomas Sowell
Nothing demonstrates the gap between abstract theories and practical consequences quite like an object lesson in cause and effect:
"There's no question people have left because of uncertainty of our ability to pay," said an executive at one of the affected firms. "It's a highly competitive market out there."At Bank of America, for instance, only 14 of the 25 highly paid executives remained by the time Feinberg announced his decision. Under his plan, compensation for the most highly paid employees at the bank would be a maximum of $9.9 million. The bank had sought permission to pay as much as $21 million, according to Treasury Department documents.
At American International Group, only 13 people of the top 25 were still on hand for Feinberg's decision.
It is downright scary to think that this country is being run by supposedly educated people who insist on making policy that ignores the effect of incentives, supply and demand on human behavior. The idea that prices can be manipulated without affecting either supply or demand doesn't even make sense in theory. So why would any rational person expect it to work in the real world?
Whether government officials who have demonstrated a stunning ignorance of basic economic principles should be formulating economic policy is a question no one seems to be asking. But then again, understanding that prices, supply and demand are interrelated is so fundamental a concept that anyone with common sense ought to be able to grasp it:
When there is a "shortage" of a product, there is not necessarily any less of it, either absolutely or relative to the number of consumers. During and immediately after the Second World War, for example, there was a very serious housing shortage in the United States, even though the population and the housing supply had both increased about 10 percent from their prewar levels and there was no shortage when the war began.In other words, even though the ratio between housing and people had not changed, nevertheless many Americans looking for an apartment during this period had to spend weeks or months in an often vain search for a place to live, or else resorted to bribes to get landlords to move them to the top of waiting lists. Meanwhile, they doubled up with relatives, slept in garages or used other makeshift living arrangements.
Although there was no less housing space per person than before, the shortage was very real at existing prices, which were kept artificially lower than they would have been because of rent control laws that had been passed during the war. At these artificially low prices, more people had a demand for more housing space than before rent control laws were enacted. This is a practical consequence of the simple economic principle already noted in Chapter 2 that the quantity demanded varies with how high or low the price is.
Some people who would normally not be renting their own apartments, such as young adults still living with their parents or some single or widowed elderly people living with relatives, were enabled by the artificially low prices created by rent control to move out and into their own apartments. These artificially low prices also caused others to seek larger apartments than they would ordinarily be living in. More tenants seeking both more apartments and larger apartments created a shortage, not any greater physical scarcity of housing relative to the population. When rent control laws expired or were repealed, the housing shortage likewise quickly disappeared.
As rents rose in a free market, some childless couples living in four-bedroom apartments decided that they could live in two-bedroom apartments. Some late teenagers decided that they could continue living with mom and dad a little longer, until their pay rose enough for them to afford their own apartments, now that apartments were no longer artificially cheap. The net result was that families looking for a place to stay found more places available, now that rent-control laws were no longer keeping such places occupied by people with less urgent requirements.
None of this was peculiar to the United States. The same economic principles can be seen in operation around the world and down through history.
How's that whole "offering more services to more people for less money" thing going again?
If something sounds too good to be true, it probably is.
Price controls don't work in real estate and they don't work in medicine. In fact, I'd be shocked if anyone can show me a single instance where they didn't have disastrous consequences?
It's interesting, and of course to be expected, that Gralla frames the downside of this in terms of how it might hurt government coffers. The real bad part is the lack of freedom it gives to the building owners--and the lack of incentive to provide apartments for all future New Yorkers that will create widespread aggravation and shortages down the line.
Prices operate as signals in a free marketplace, efficiently allocating goods to those who want them and are able to pay for them. Few Americans would accept the proposition that we don't need information to make intelligent decisions and yet too many Americans buy off on the notion that markets will operate efficiently if the federal government restricts the free flow of information between consumers and producers.
It's almost as though we were living in an alternative universe where reality is kept strictly at arm's length.
Then again, maybe that's the problem.
"One of the most important reasons for studying history is that virtually every stupid idea that is in vogue today has been tried before and proved disastrous before, time and again." -- Dr. Thomas Sowell
Posted by Cassandra at 12:30 PM | Comments (4) | TrackBack
October 16, 2009
Money for Nothing
I remember an eminent professor’s telling me, with a barely concealed exultation, that he was making nearly $1,000 per day, week after week, merely by owning a very large house in a fashionable area: an amount that, needless to say, dwarfed any savings he might salt away from his salary. The government could not have been better pleased, for the majority of the population, who owned their own homes, felt prosperous as never before and attributed their affluence to the government’s wise economic guidance.
But asset inflation—ultimately, the debasement of the currency—as the principal source of wealth corrodes the character of people. It not only undermines the traditional bourgeois virtues but makes them ridiculous and even reverses them. Prudence becomes imprudence, thrift becomes improvidence, sobriety becomes mean-spiritedness, modesty becomes lack of ambition, self-control becomes betrayal of the inner self, patience becomes lack of foresight, steadiness becomes inflexibility: all that was wisdom becomes foolishness. And circumstances force almost everyone to join in the dance.
Except in one circumstance, that is: the possession of a salary and a pension that the government promises, implicitly or explicitly, to index against inflation. This is the situation of public-sector workers and is a pyramid scheme, too, perhaps the biggest of the lot, since events may require the government to renege on its obligations. But meantime, such employment will seem a safe haven, and the temptation will be for government to expand it, with the happy consequence—for itself—of increasing dependence. And dependence, too, undermines character.
Posted by Cassandra at 06:55 AM | Comments (4) | TrackBack
August 31, 2009
WaPo Asks: Is That a Recovery in Your Pants?
...or are you just happy to see me?
You have to love lamestream journalists. Let's face it - without the evenhanded analysis and perspective the media provide, the American public might get the wrong impression about the economy:
Is there a double standard in how the struggling economy is being portrayed during the Obama presidency vs. the Bush administration?While the 1% contraction in the economy reported on Friday was seen as a "hopeful sign" by the Times, "crystallizing expectations of a turnaround," actual economic growth of 1.9% during the Bush years was just another "arrow" seen pointing to a recession.
Saturday's lead story by Catherine Rampell and Jack Healy focused on the Gross Domestic Product figure issued by the Commerce Department, showing a 1% contraction in the U.S. economy in the second quarter of 2009. The Times portrayed it in positive terms: "In Hopeful Sign, Output Declines At Slower Pace ...
A slower rate of decline.... now that's real progress! But wait! There's more spin sunshine where that came from!
In fact, Friday's figures mark the first time in years the economy has contracted for four straight quarters. But the Times buried that findings in the 21st of 25 paragraphs: "The economy withered during each of the last four quarters, its longest string of declines in at least 60 years"
As everyone knows, nothing says "prosperity is just around the corner" like the longest string of declining GDPs in 60 years! On the bright side, if a slower decline in GDP is cause for celebration, an actual increase must mean it's time to break out the Dom Perignon and engage in a little retail therapy ....right?
You know, stimulate the economy.
Silly reader. This is why feats of journalism should be left to the professionals:
By contrast, one year ago, the Bush administration released GDP figures showing the economy had grown 1.9% in the second quarter of 2008, a substantial increase from 0.9% in the first quarter of 2008.Did the Times celebrate that uptick in growth during a Republican administration? Hardly. The headline over Peter Goodman's August 1, 2008 story: "More Arrows Seen Pointing to a Recession."
Not to be outdone by the Papir of Record, the WaPo finds a ray of hope lurking in the National Underwear Drawer. Now before we go on, let's stop and make sure we understand the dynamics of the Underwear Index.
1. Because underwear are a necessity, men generally buy new boxers or briefs every year.
2. But when times get hard, the average underwear shopper saves money by deferring the purchase of new u-trau.
3. This causes a decline in the total number of tighty whities sold in America. We'd make a joke about income elasticity here, but we can't duck fast enough.
At this point, alert readers may be scratching their heads and muttering, "OK... but according to the chart, the Underwear Index appears to be going down...
Heh. She said... oh, never mind.
Fear not, gentle readers! This is indeed what normal people might think, but you would be stupid and wrong to draw such an outlandish conclusion. Luckily for us, the Post is about to stun its readership senseless with a virtuoso display of positively Timesian analytical prestidigitation:
The growth in sales of men's underwear began to slow last year as the recession took hold, according to Mintel, another research firm. This year, Mintel expects sales to fall 2.3 percent, the first drop since the company started collecting data in 2003.But the men's underwear index -- or, conveniently, MUI -- may also have a silver lining. Mintel predicts that next year, men's underwear sales will fall by 0.5 percent, and as with many economic indicators, a slowing of a decline can be welcomed as a step in the right direction.
Well there you go! When underwear sales begin to decline more slowly, can blue skies be far away? This just goes to show that no matter what those pesky economic indicators may say, when a Democrat is in the White House better times are always just around the corner.
Just ask the media.
Posted by Cassandra at 04:48 AM | Comments (29) | TrackBack
July 20, 2009
Planning for Failure
To the extent that people are preoccupied with equality for its own sake, their readiness to be satisfied with any particular level of income or wealth is guided not by their own interests and needs but just by the magnitude of the economic benefits at the disposal of others. In this way egalitarianism distracts people from measuring the requirements to which their individual natures and their personal circumstances give rise. It encourages them instead to insist upon a level of economic support that is determined by a calculation in which the particular features of their own lives are irrelevant.How sizable the economic assets of others are has nothing much to do, after all, with what kind of person someone is. A concern for economic equality, construed as desirable in itself, tends to divert a person’s attention away from endeavoring to discover—within his experience of himself and his life—what he himself really cares about and what will actually satisfy him, although this is the most basic and the most decisive task upon which an intelligent selection of economic goals depends. Exaggerating the moral importance of economic equality is harmful, in other words, because it is alienating.
- Harry Frankfurt, "Equality as a Moral Ideal"
If you haven't already done so, you should the paper that quoted Frankfurt. It's a bit long, but well worth the effort.
The gist of it is that measuring economic inequality by measuring the disparity in income alone can be highly misleading since we don't work for income itself, but so we can buy things we want or need. By this measure (consumption equality), the gap between the undeserving and evil rich and deserving poor looks quite different. While income inequality itself has risen, consumption equality (what we buy with our unequal incomes) has remained relatively unchanged.
And then there are more subjective measures of well being and equality such as happiness. How equal are we in terms of satisfaction? It turns out that as income inequality has risen, inequality of happiness has actually fallen as the poor and minorities have actually increased their subjective sense of well being. All of this doesn't stop economists like Paul Krugman from claiming the poor are worse off than ever before. It matters not that their purchasing power is greater than it has ever been.
Someone else has more, and government must confiscate this excess wealth in the name of "fairness". This creates a series of perverse incentives designed to punish industry and success and reward failure and inefficiency:
Money can't buy love? For proof, look no further than Goldman Sachs. Last week, the firm reported a spectacular quarterly profit -- close to $3.5 billion for the bank and about $385,000 in compensation for each employee for the first half of the year -- and right on cue, the braying began for the heads of the Goldmanites. Earlier this month, Rolling Stone's Matt Taibbi, in a comprehensive exercise in conspiracy mongering, primed the pump of outrage with his article "The Great American Bubble Machine." Now a chorus of supporters has chimed in, shocked that in a recession the evil Goldman could turn such profit.The rhetoric of outrage has come full circle: Before, the villains were the banks that were stupid and greedy enough to fail; now the villains are those -- a small club, basically just Goldman and J.P. Morgan Chase -- that have been smart and greedy enough to succeed.
What began as an effort to keep the financial industry from repeating its mistakes has turned into, as at other points in history, an attack on the idea of trading profit. It is no longer enough that the banks should be reformed; the opportunity to make this kind of profit should be eliminated.
The same perverse incentives are on display in our foreign policy. In Afghanistan, our soldiers and Marines are told they will have to do a far more complex job - and do it faster - with fewer boots on the ground:
Often Taliban fighters flee when helicopters arrive, Sun said, but this time they stayed, and attempted to fire a rocket-propelled grenade at one of the aircraft. The Huey made two strafing runs with its Gatling guns over the tree lines, while the Cobra fired missiles, finally ending the firefight. The helicopter crew spotted at least two dead Taliban fighters.Although the Marines asked to pursue the Taliban fighters south, more senior commanders denied the request. Sun said he thinks the problem was a lack of helicopters to provide air power and to evacuate any possible casualties, as well as roads that had not been cleared of bombs.
"Due to the limited numbers of helicopters available, it would not have been in our best interest to get decisively engaged," Sun said. In addition, moving south would leave the bazaar open to attack, he said.
But some Marines voiced disappointment at not being able to track the Taliban, saying that decision may have allowed the insurgents to stage fresh attacks on the bazaar later in the afternoon. Faddis, Kowalski and their machine-gunning team were on guard duty in a mud-brick structure in the market that had a window facing fields to the south when shots broke out from a nearby compound. Faddis spotted a target and fired back. "They're moving out of the compound!" one Marine yelled, unleashing another volley of machine-gun fire.
The gun battle was complicated by the presence of women, children and shepherds in adjacent fields. Having staked out a claim in Lakari Bazaar, Sun said, the question remains whether his company should continue to hold this relatively strung-out position or pull back, knowing such a move would allow the Taliban to return, at least temporarily.
A local villager states the obvious:
"If you leave, everything will be the same," a middle-aged man who called himself Sayed Gul told McCollough. "If you guys stay for a long time, everything will be fine."
The upside, of course, is that when your metric for success is not how many of the enemy you kill or disarm but how many civilians you "protect", success becomes - as with Obama's promise to "save or create" millions of jobs - just another exercise in political ass covering.
They have a year.
Posted by Cassandra at 07:17 AM | Comments (1) | TrackBack
May 29, 2009
In Praise of Mathematics
Via Bird Dog, this interesting quote by Harvard economist Greg Mankiw:
Your math courses are one long IQ test. We use math courses to figure out who is really smart.
Not sure whether I agree with this or not, but more on that later. Full disclosure here. My Dad majored in math at Dartmouth. My brother has a PhD in number theory which, although it has practical applications, is more what I think of as pure or theoretical mathematics than applied math. His eldest daughter did quite well in math in high school and is currently contemplating majoring in finance.
The blog princess, on the other hand, had little use for math in high school. But then she had little use for most subjects, the allure of boys and generalized mischief having exerted a greater pull upon her time and attention than academics of any kind. But if she could have been said to display aptitude for any one thing, that subject would have been language: English composition and grammar, foreign languages (she took 4 years of French, 2 of German, three of Spanish in high school and leapt into a mad infatuation with Russian during her brief flirtation with college).
I was ahead of my grade level in most language arts classes but behind my private school peers in mathematics. Somehow I managed to graduate without a single Calculus class, but did quite well on the SAT Math section despite consistently having taken the easiest math courses offered.
It wasn't until I returned to finish my undergraduate studies at the age of 30 that I discovered I rather enjoy math.
I spent a good 3 months before enrolling in my first classes working my way through a College Algebra refresher course at the dining room table. At first it was quite difficult. I'd been out of school for 12 years and had mostly coasted on my natural problem solving skills in high school. As a result, I had learned few of the formal rules that govern algebra. It was acutely painful to discipline my wayward brain to go painstakingly, step by step through problem after problem without indulging in intuitive leaps to the answer that breezily dispensed with the bothersome necessity of showing my work.
Consequently I was not only an intuitive, but a lazy thinker. Years of prodigious reading and a near perfect memory left me weak in formal reasoning skills. All too often, I "leapt into" the answer, only to find myself utterly unable to explain how I'd gotten there (much less why that particular answer was correct).
When I embarked on my adult studies, I planned to major in the liberal arts - my natural strength. But by the end of my first semester, I found myself drawn to more quantitative subjects. There were several reasons for this:
1. English and political science didn't challenge my mind the way math did. Both subjects played to my natural aptitudes, and so neither was a stretch.
2. In the humanities and social sciences, the answer never seemed to be the answer. Oddly enough for someone who normally values the open-ended over the concrete, I found this squishiness annoying.
3. A large part of the reason I returned to school lay in the idea of becoming a more well rounded thinker. I felt lopsided, and college would force me to take subjects I would never have bothered with on my own.
Interestingly enough, I ended up tutoring and leading supplemental courses in College Algebra, Elementary Probability and Stats, and Business Law. All three were interesting subjects that imposed a disciplined reasoning process over the analysis of information. One of my economics profs led a series of after class sessions that covered the same macro- and micro- theory, but from a math based rather than chart driven perspective (i.e., we examined the formulas behind the theories rather than taking the more traditional approach that illustrated economic concepts by way of graphs).
I was mildly shocked to find that I understood most theories better after having gotten into the math. Part of this may be because I am one of those morons who (like the blonde who puts WhiteOut on her computer screen) often had to place her fingers on the axes of a graph in order to grasp the relationships between two variables. I could "see" that relationship better when it was expressed via an equation than when it was depicted on a chart. Low structural visualization. So much for my nascent interest in engineering.
Anyway, interesting post. I think we concentrate far too little energy on good mathematics instruction because it's "hard" and in the warm/fuzzy politically correct atmosphere of academia, teachers are somehow supposed to perform the Vulcan Mind Meld on lazy students -- anything, rather than asking them to exert themselves to understand difficult subjects. Despite having some aptitude, math never came easily to me. Or perhaps I was just so good at language that math seemed comparatively difficult.
Either way, there is something to be said for struggling to understand and fully master a subject. I'll never forget my first Calc class. The prof was an egotistical ass, but he ended up making me so angry that I would have died before giving him the satisfaction of watching me fail (and that was his stated expectation - that most of us would fail the class).
I completed the class with a 96 average. Smart man. Not terribly likeable, but extremely shrewd :p He also turned out to be quite willing to help me when I got stuck on differentiation with respect to two variables. All I had to do was persist.
What a concept. At any rate Mankiw's observation on the correlation between math competence and IQ probably holds true on his level. But in lower level courses, I think success in math has more to do with the willingness to put in the time and effort needed to succeed. I tutored Algebra, Stats, Probability and Calc I and II in college. The people who succeeded were nearly always the ones who didn't give up. Even if it took them two tries to pass Calc. I also found that because math knowledge relies more upon the accumulation of learned theory/skills, it's damned hard to keep up unless you have the right foundation going in. Passing Calculus has far more to do with your basic Algebra skills than it does with being a huge, pulsing math brain and if your Algebra is weak, you'll have a tough time keeping up. For this reason, I often advised students who were failing to drop the class and sign up for a good, basic Algebra course (even if they'd already taken it) to refresh their basic skills.
Preparation and effort can trump natural ability, at least in lower level math. Most male students in my classes showed far more natural aptitude than I did. I nearly always outperformed them, but it was a matter of effort and not ability every time.
Posted by Cassandra at 05:58 AM | Comments (30) | TrackBack
May 20, 2009
From My Cold, Dead Hands
You know, I have tried to be fair.
I have bent over backwards to give this administration a chance. But some things are just intolerable in a civilized society:
Joe Six-Pack may have to hand over nearly $2 more for a case of beer to help provide health insurance for all.Details of the proposed beer tax are described in a Senate Finance Committee document distributed to lawmakers before a closed-door meeting Wednesday. Senators are focusing on how to pay for expanding health insurance for an estimated 50 million uninsured Americans, a cost that could range to some $1.5 trillion over 10 years.
And will someone please alert the irony police here?
The idea behind the proposed increases is to tax lifestyle choices that contribute to rising medical costs. Obesity puts people at risk for diabetes and heart problems. Alcohol abuse is a risk factor in several types of cancer, liver disease and psychological problems.
This country is going down the tubes. Read my lips: I'm not asking for national health coverage. I don't want it. So don't tax my "risky lifestyle choices" to pay for something that's going to break the federal piggy bank as a back door means of giving the Nanny State carte blanche to tell me how to run my life.
I stopped smoking when I was 14. Idiocy like this just makes me want to start up again.
Posted by Cassandra at 03:57 PM | Comments (80) | TrackBack
April 28, 2009
The Caine Mutiny
As I've commented many times, economics is the study of human behavior. And it's not exactly earthshaking to find that people don't go to work every day to provide a heaping helping of "social justice" to people they've never met.
They work to provide a better life for themselves and those they care for:
"The Government has taken tax up to 50 per cent, and if it goes to 51 I will be back in America," he said at the weekend. "We've got 3.5 million layabouts on benefits, and I'm 76, getting up at 6am to go to work to keep them. Let's get everybody back to work so we can save a couple of billion and cut tax, not keep sticking it up."
Unsurprisingly, they also feel this strange sense of "entitlement": it's almost as though they think they should be allowed to keep what they earn.
As the saying goes, "read the whole thing". And then try and tell me this wasn't entirely predictable.
Posted by Cassandra at 12:08 PM | Comments (10) | TrackBack
April 21, 2009
The Federal Deficit for Dummies: Inumeracy Edition
White House Press Secretary Robert Gibbs condescends to explain the relative size of Obama's proposed spending cuts to the federal deficit:
LOVEN: "Ohhhhhhhhhh..... look."
TAPPER: "What what WHATWHATWHAT WHAT WHAT???"
LOVEN: "Hmmmmmm..... DEFICIT".
TAPPER: "OHHHHH!!! DE-FI-CIT. Yep yep yep yep yep. Uh-huh uh-huh."
LOVEN: "Mmmmmmmmmmmmmmm. Deficit not.... funny. Nope nope nope. Deficit...GI-NOR-MOUS."
TAPPER: "Yep yep yep yepyep. HU-MONG-GOUS."
TOGETHER: "Yep yep yep yep yep. Uh-huh uh-huh."
LOVEN (spying movement at the front of the White House briefing room): "Ohhhhhhhhhh......"
TAPPER: "What what whatwhatwhat what what???"
LOVEN: "Press Secretary"
LOVEN: "Helllloooo. Why spending cuts so.... small?Deficit... GINORMOUS... yep yep yep. "Spending cuts...... miniscule. Yep yep yep...tiny.
TAPPER: Yep yep yep. Small. Cuts... not add up.
GIBBS (flabbergasted): "You two numbskulls aren't from around here, are you? I don't know what planet you bozos came from, but where I grew up $100 million is a lot of money....
Only in Washington, D.C. is $100 million not a lot of money. Jeez, what a stupid question. $100 million is a lot of money, I'm telling you! It is. At least it is where I'm from. It is where I grew up. And I think it is for hundreds of millions of Americans.
Can you two even count? Because I love to watch it add up: 1 million, 2 million, 3 million.... after a while it's easy to forget you're playing with other people's money.
Hundreds of millions, by the way, is a LOT of people. More than two. It's a really BIG number.
You two nitwits DO understand the concept of "big", don't you? It's not too complicated for you? You're outnumbered, which means your so-called "opinions" don't count. Hundreds of millions is big enough that I feel perfectly justified in heaping scorn on your ignorant and ill-informed question.... losers."
Next? Someone? Anyone??? Jeez. Throw me a bone here, people....
LOVEN: Ummmmmm....whatever.
Point is... cuts not big part of deficit..
TAPPER: NOPE NOPENOPENOPENOPE. Few weeks ago, you call $8 billion dollars... $8 billion in earmarks ... small....$100 million ..."a lot"... but $8 billion .... small?
LOVEN: Yep yepyepyepyepyep. Uh-huh.
GIBBS: Jennifer, you ignorant slut.It all adds up. Just as the president said...If you think we're going to get rid of $1.3 trillion deficit by eliminating one thing, I'd be -- and the administration would be - innumerably happy for you geniuses to let us know what that is.
You morons. [deep breath]
All right. OK. Let's walk through this slowly so that even you two can understand.
The president has laid out LOTS of cuts. Some are LARGE. Some are small. A million here, two million there. Sooner or later it's like dealing with real money.
But we are cutting back. For instance, we've installed super saver flourescent light bulbs in every room of the White House. And President Obama is making personal sacrifices. The next time he wants a pizza, the President will have one of his people call Domino's.
We have COUPONS, you know: 4 personal pan pizzas for $19.95 and if you order for two or more, you get a 2 liter bottle of Coke Zero thrown in for free!
No more sending jets to halfway St. across the country just because he has the munchies. Nossir, the President is leading the way. He recognizes the need for sacrifice.
And we've set up a special White House Task Force. Did you know that using DiGiorno instead of carry out, you can save mega bucks! As any economist will tell you, every bit helps you know.
REPORTERS: Ohhhhhhhhhhh. [looking at each other] OHHHHHHHHHHHHHHHHHH!
GIBBS: Jennifer, you can believe the president when he promises to cut the deficit in half in four years because he quadripled it in just three months. This is math - complicated stuff, you know. It's scientific. And we're certain we can count on the efforts of good folks like Chris Matthews, who will remain solidly in the tank for this administration.But frankly, I have to say that you two are not helping. It's not exactly rocket science we're talking here:
- The president is making cuts. LOTS AND LOTS OF CUTS.
- Some of those cuts are - now stay with me, because this is complicated - LARGE.
- Some of cuts will be ... small.
- But they all add up. Just don't ask me how.And don't give me that "Waaah!!!! The deficit is ginormous! We're heaping debt on our grandchildren! We're headed down the path to socialism!" rubbish. That's a lot of hysterical nonsense, and frankly it makes you sound a bit unhinged. What do you care, anyway? It's not "your" debt. Your taxes are going down. You aren't personally affected.
It will be future generations - those greedy, selfish little buggers who are mooching off you even as we speak - always borrowing the car and leaving you with an empty tank and going over on their cell phone minutes - who will pull us out of this hole we've dug for them. Serves 'em right, the little b**tards.
TAPPER: Noise. Secretary make.... noise.
LOVEN: 3.69 trillion... $100 million... Not add up, no matter what planet you from.
TAPPER: Not make sense. Need book. Book book book book.
Earth book.
REPORTERS, TOGETHER: Ohhhhhhhhhh. Ohhhhhhhh!!!
Joke.
LOVEN: Make joke. $3.69 trillion... small. $100 million... large. Ha! Joke joke joke joke jokejokejoke. Funny, funny funny.TOGETHER: happy happy happy happy boing boing boing boing ....
GIBBS: Jennifer, right now I am crushing your head. Do you understand that?
What that means is that my awesome Nonsequitur-Fu just turned both your cerebral cortexes into a mass of quivering jelly.
TAPPER and LOVEN: Yep yep yep yepyep. Uh-huh uh-huh uh-huh.
Posted by Cassandra at 06:09 AM | Comments (11) | TrackBack
April 15, 2009
The Obligatory Tea Party Post
Merde.
The blog princess can no longer live with the guilt of being the only conservative site on the 'Net not to wax fulminatious on the subject of Tea Parties.
Consider this her one and only mea culpa.
Watching this whole tea party thing, the Princess can't help but feel slightly bemused by the astounding feats of rhetorical excess to be seen on both sides of the political aisle. She likes her vodka as much as the next person, but sometimes a Martini is just a Martini:
To be continued...
OK.
That was scary. Way too reminiscent of the small but prestigous Virginia prep school I graduated from (but only after spending my entire Junior year trying to get kicked out). Failure can be so humiliating.
Seriously, it has become something of a cliche to note the way both parties seem to have exchanged principles of late. Suddenly, conservatives are marching in the streets, speaking truth to power. And Liberals, the former guardian angels of patriotic dissent? Liberals are outraged... outraged, I tell you! that anyone would dare to question Barack Obama's absolute authoriteh.
Of course, questioning authority was all the rage during the Bush years. In fact, dissent was widely considered the hallmark of the true patriot in the leftosphere.
But that was Then.
This is Now. Inexplicably, the ascension of the Candidate of Change to the Oval Office transmogrified the vibrant expression of dissent once deemed the very lifeblood of a free and democratic society into a pathological disease (and who among us wouldn't rather be called a sociopath than a non-patriot?)
Are you better off than you were 4 years ago? If you dare to question that premise, you're obviously insane. Or selfish.
Dissent, these days, is no longer an unalloyed good in lefty circles. The free exercise of political speech must be evaluated by the standards they propose. Dissent they agree with? Good. Dissent they disagree with? Insanity. Degenerative mental illness, Progressive strictures against demonizing the other and hampering diversity notwithstanding. If you're confused, you're not alone.
Predictably, Andrew Sullivan is indulging his inner diva again:
...it seems odd to describe this as anything but a first stab at creating opposition to the Obama administration's spending plans, manned by people who made no serious objections to George W. Bush's. The tea-parties are as post-partisan as Reynolds, one of the most relentlessly partisan bloggers on the web. When you see them holding up effigies of Bush, who was, unlike Obama, supposed to be the fiscal conservative, let me know.
Creating opposition? Good God. These people have always opposed Obama. Hell, they opposed Bush, and he was a Republican. Sorry, but this is spectacularly dishonest.
I can say that, because for four years I defended George Bush against other conservatives who felt betrayed when he fulfilled promised he'd made over and over on the campaign trail.
I can understand disagreement. That's legitimate. The betrayal meme was utter unreconstructed hogwash. With George Bush, you always knew exactly where he was coming from. Though I don't agree with these folks, I can be honest enough to admit that in this instance, they're being intellectually consistent. To call it hypocrisy when Republicans who criticized George Bush for deficit spending are unhappy with a President they didn't vote for who has, in few short months, already outspent his predecessor is not only factually inaccurate, but downright dishonest.
Posted by Cassandra at 05:36 PM | Comments (20) | TrackBack
March 28, 2009
The Root Causes of Income Inequality: Why Bigger Government Is Not The Answer
In November of 2008 a charismatic and gifted politician with little or no executive experience was elevated to what is arguably the world's most difficult and powerful position. Both historically and statistically speaking, Obama's victory was remarkable:
Since the Civil War, 49 men have won a major-party presidential nomination. Only three of these nominees were less qualified, by traditional measures of leadership and experience, than Obama.... None of those men was able to win the White House.
In retrospect it seems obvious no private sector corporation would hire a Chief Executive Officer with no prior experience. It seems obvious that an amateur whose sales pitch consisted of detail-free promises ("Yes, We Can!") and a belief that successful individuals and entities are "greedy" would possess neither the leadership skills nor the financial acumen needed to lead us out of the current economic crisis.
Obvious, that is, to everyone but The Economist:
HILLARY CLINTON’S most effective quip, in her long struggle with Barack Obama for the Democratic nomination last year, was that the Oval Office is no place for on-the-job training. It went to the heart of the nagging worry about the silver-tongued young senator from Illinois: that he lacked even the slightest executive experience......Mr Obama has had a difficult start. His performance has been weaker than those who endorsed his candidacy, including this newspaper, had hoped. Many of his strongest supporters—liberal columnists, prominent donors, Democratic Party stalwarts—have started to question him. As for those not so beholden, polls show that independent voters again prefer Republicans to Democrats, a startling reversal of fortune in just a few weeks.
The Economist attributes Obama's disappointing performance to two factors: a tardy and unfocused response to the financial crisis and clumsy handling of Congress. But the deficiencies cited are not the root causes of Obama's failure. They are the symptoms of far more serious problem. Simply put, Barack Obama has no idea what drives the American economy.
If the presidency is a leadership test, Barack Obama has already flunked:
... even before I go into a company, or even if we’re looking at a business here at CCMP, I’m constantly asking the question, “What are the two or three levers that, if done right, if pulled correctly, will really turn this business?”
Obama's scattershot approach to fixing the economy betrays a fundamental misunderstanding of how individuals create and hold onto wealth. Recently he cited rising health care costs as "the biggest threat to the U.S. economy". Left unexplained was the precise role rising health care costs played in last Fall's mortgage banking crisis. But to hear Mr. Obama tell it, nationalizing health care will insulate America from fluctuations in the business cycle in much the same way it has protected Europe from the consequences of market instability.
According to Barack Obama, affluence "trickles up" from the lowest earning and least productive sector of the economy to the greedy and undeserving rich. Obamanomics identifies income inequality, not inefficient or unwise economic decisions, as the real enemy of prosperity. In Obama's consequence-free world there are no bad decisions; only unfair outcomes visited upon the the deserving poor by the well to do:
More than anything else, the proposals seek to reverse the rapid increase in economic inequality over the last 30 years. They do so first by rewriting the tax code and, over the longer term, by trying to solve some big causes of the middle-class income slowdown, like high medical costs and slowing educational gains....Before becoming Mr. Obama’s top economic adviser, Lawrence H. Summers liked to tell a hypothetical story to distill the trend. The increase in inequality, Mr. Summers would say, meant that each family in the bottom 80 percent of the income distribution was effectively sending a $10,000 check, every year, to the top 1 percent of earners.
Barack and Michelle Obama tell a heartrending story of stalled progress for America's poor and middle class: one in which gains at the top of the income scale are achieved by stealing from those at the bottom. But the facts tell a different story:
In 1971, only about 32 percent of all Americans enjoyed air conditioning in their homes. By 2001, 76 percent of poor people had air conditioning. In 1971, only 43 percent of Americans owned a color television; in 2001, 97 percent of poor people owned at least one. In 1971, 1 percent of American homes had a microwave oven; in 2001, 73 percent of poor people had one. Forty-six percent of poor households own their homes. Only about 6 percent of poor households are overcrowded. The average poor American has more living space than the average non-poor individual living in Paris, London, Vienna, Athens and other European cities.Nearly three-quarters of poor households own a car; 30 percent own two or more cars. Seventy-eight percent of the poor have a VCR or DVD player; 62 percent have cable or satellite TV reception; and one-third have an automatic dishwasher.
For the most part, long-term poverty today is self-inflicted. To see this, let's examine some numbers from the Census Bureau's 2004 Current Population Survey. There's one segment of the black population that suffers only a 9.9 percent poverty rate, and only 13.7 percent of their under-5-year-olds are poor. There's another segment of the black population that suffers a 39.5 percent poverty rate, and 58.1 percent of its under-5-year-olds are poor.
Among whites, one population segment suffers a 6 percent poverty rate, and only 9.9 percent of its under-5-year-olds are poor. Another segment of the white population suffers a 26.4 percent poverty rate, and 52 percent of its under-5-year-olds are poor.
What do you think distinguishes the high and low poverty populations? The only statistical distinction between both the black and white populations is marriage. There is far less poverty in married-couple families, where presumably at least one of the spouses is employed. Fully 85 percent of black children living in poverty reside in a female-headed household.
Poverty is not static for people willing to work. A University of Michigan study shows that only 5 percent of those in the bottom fifth of the income distribution in 1975 remained there in 1991. What happened to them? They moved up to the top three-fifths of the income distribution -- middle class or higher. Moreover, three out of 10 of the lowest income earners in 1975 moved all the way into the top fifth of income earners by 1991.
The facts, when the lifestyle choices of individual Americans are taken into account, are striking. In general, the "greedy rich" owe their ill-gotten gains to three factors: they stay in school, they work longer hours, and they reside in dual income households:
Looking at the median number of wage earners in various income brackets is instructive:
America's most prosperous households do one other thing differently from their poorer neighbors: they are, to an overwhelming degree, married:
One frequently overlooked dimension of the gap between the "rich" and the "poor" is how much it is affected by marital status.20 As Chart 10 shows, only about 30 percent of all persons in Census's bottom quintile live in married couple families; the rest either live in single-parent families or reside alone as single individuals. In the top quintile, the situation is reversed: Some 90 percent of persons live in married couple families. In this case, equalizing the numbers of persons within the quintiles makes little difference; even after each quintile is adjusted to contain the same number of persons, 85 percent of persons in the top quintile continue to live in married couple families compared with one-third in the bottom.
Wikipedia puts it more succinctly:
In the United States the increasing gap between the top 30% and the bottom 70% of society is attributed to the large increase of single parent households.
It stands to reason that any government program purporting to encourage prosperity should encourage behavior that creates wealth and discourage behavior that impedes the creation of wealth. But Obama's proposed solutions get this equation exactly backwards: he proposes that our tax system punish workers who make smart economic decisions and reward those who make inefficient decisions:
...the most astonishing sentence in the op-ed is this one: “His plan would not raise any taxes on couples making less than $250,000 a year, nor on any single person with income under $200,000.” It amounts to a declaration of war on two-income families, a marriage penalty of punitive proportions.If those two single persons with income just under $200,000 get married, Mr. Obama is going to hammer them with a huge tax increase. If the second earner, who in many cases is the woman, is going to have to give 54% of what she earns to the government, she might as well stay home with the children.
While one may well argue the societal benefits of having one wage earner stay home with the children, it's hard to argue that punishing stable families who have figured out how to create and hold onto wealth encourages fiscally responsible decision making. The fact is that under the Obama's planned restructuring of the American economy, less productive and responsible behavior is rewarded while time-tested and more efficient economic decisions are punished. The Obama plan for economic recovery, in a nutshell: find the levers that move the economy... and then break them.
... why don’t we organize society so that it rewards hard work! We could even see that people who work harder and do better make more money! And then their efforts would pay off in more general societal prosperity, making life better for everyone! And we could . . . Naaaah.
Posted by Cassandra at 09:05 AM | Comments (8) | TrackBack
February 27, 2009
More Perverse Incentives: the Cost of Class Warfare
The Democrats may wish to take notes.
Posted by Cassandra at 08:19 AM | Comments (17) | TrackBack
Obama and Perverse Incentives
Betsy Newmark has an excellent piece up on the role of incentives in shaping decision-making:
One of the most basic lessons in economics is that people respond to incentives. They will adapt their behavior according to the incentives. But apparently, the people putting together Obama's budget writers missed that day's class in Economics 101.In keeping with Obama's campaign promises not to tax the middle class, he's hoping to gain the money he needs for all his spending goals by increasing taxes on the wealthy. And they're looking to whatever they can increase to get more money from those higher earners. Here is one example.
About half of the money that Obama wants to raise for a healthcare overhaul would be generated through changes in the way that the wealthiest Americans itemize deductions for charitable donations, state taxes or interest payments on a home.Under the president's proposal, joint filers making more than $250,000 a year would only recoup 28% of the value of qualified deductions, rather than higher percentages laid out under current law.
That could mean a couple in the 35% tax bracket who once could have recouped $3,500 of a $10,000 donation to a charity would now recoup only $2,800.
The White House estimates the change would generate about $318 billion over 10 years.
She points out that a 1990 tax on luxury items, lauded by its Democrat sponsors as a nifty way to increase tax revenues and force the Chinese-toy-loving-minions-of-the-richest-2% to pay their "fair share", didn't just fail to increase revenue.
It put lower-income taxpayers out of work:
... it wasn't long before even those die-hard class warriors noticed they'd badly missed their mark. The taxes took in $97 million less in their first year than had been projected — for the simple reason that people were buying a lot fewer of these goods. Boat building, a key industry in Messrs. Mitchell and Kennedy's home states of Maine and Massachusetts, was particularly hard hit. Yacht retailers reported a 77 percent drop in sales that year, while boat builders estimated layoffs at 25,000. With bipartisan support, all but the car tax was repealed in 1993, and in 1996 Congress voted to phase that out too.
As I pointed out several months ago, only two days after the election the mere prospect of a hike in marginal tax rates had baseball agents pondering ways to shelter their clients' income from an Obama tax increase:
Looking ahead to the possibility of an Obama administration, some baseball agents already are thinking about trying to beat a possible tax increase for their well-paid clients.
Democratic presidential candidate Barack Obama has proposed increasing the top federal income tax rate from 35 percent to 39.6 percent, where it was under the Clinton administration. If signing bonuses are paid before Jan. 1, they likely would be taxed at the current rate and would not be subject to any tax increase.As we noted before the election, rational actors (that's people to the folks at home) adjust their decisions in response to incentives.
With entirely foreseeable consequences.
These days we are hearing an awful lot about fairness, which seems to be a progressive code word for a rather startling assertion on the part of the Obama administration: namely, that government has the right to seize the private property of those judged to be "too wealthy" and hand it over to those judged to be "economically disadvantaged". But as I observed yesterday, simply looking at one side of the tax picture - marginal tax rates - doesn't give an accurate picture of the redistributive effects of tax policy because it looks at just one side of the equation: how much is paid into the tax "pot" by taxpayers in various income brackets.
What is conveniently ignored is the other side of the equation: what does government do with this money? How are tax proceeds disbursed to taxpayers in different tax brackets?
This chart, created with the help of the Tax Foundation, shows the dollar for dollar "return on investment" received by households in each income bracket.
As you can see, when you look at the net effects of government spending (leaving out public goods** which are enjoyed by all households), our current tax code accomplishes much more in the way of redistributing income than mere examination of what is paid into the system can possibly reveal:
Figure 9 compares household tax burdens to the amount of government spending received by Americans. It answers the following question: “For every dollar of taxes paid, how much government spending is targeted at households in return?” As is clear from the figure, when government spending is considered along with tax burdens, the overall picture of the fairness of government policy is dramatically different from the usual picture of tax burdens alone. Some households clearly benefit much more from current tax and spending policy on a dollar-for-dollar basis than others. Overall, households in the bottom three quintiles are net beneficiaries from tax and spending policies.They received more than one dollar of government spending for every dollar of taxes they paid in 2004. In contrast, households in the top two quintiles are net fiscal payers, receiving less than one dollar of government spending for every tax dollar paid to governments.
When all government spending is included, households in the lowest quintile received about $8.21 in spending for every dollar of taxes paid. Households in the middle quintile received $1.30, and households in the top quintile received $0.41.
Question for the ages: is this "fair"?
Posted by Cassandra at 07:23 AM | Comments (21) | TrackBack
February 23, 2009
Infuriating Proposition of the Day: "Let's Raise Taxes!"
So says this gentleman:
The first of several stimulus packages has just passed but it is just the beginning of our efforts to address our immediate and long-term economic problems.After 2010, the federal operating budget will face trillion-dollar deficits as far as the eye can see. They have to be addressed for the long-term prosperity of our country and our future credit-worthiness in the world.
Eventually every American has to dig in and pay more taxes to help our country and our fellow citizens. We must put in place the laws and mechanisms to steadily increase taxes after 2010. We have to owe up to our massive public and private financial messes. Cutting federal earmarks and waste will not eliminate even half the annual deficits. The federal budget gap will require increasing taxes by over $500 billion by 2011. Fiscally irresponsible and spoiled children hate to hear this news but it’s our only choice for our collective long-term prosperity.
Actually, there's an argument to be made for raising taxes.
We've just finished levying an obscene amount of debt upon our children and grandchildren. They didn't vote for this - we did (we being our elected representatives, who wouldn't be where they are if more Americans hadn't voted for them than the number who voted for the other party).
How long can we keep increasing the deficit without addressing the fact that our national house has taken on more and more debt every year? If a family increases their debt, they don't have the option to reduce the amount they're paying on their loans: as the principal goes up, so do their payments.
The argument to be made here is that our continuing refusal to pay as we go only encourages more bad decisions and incites Congress to new heights of fiscal irresponsibility. Some wag once remarked that pain is an excellent motivator. Perhaps what our Congressional overlords really need is an object lesson in cause and effect.
And perhaps if the tax burden becomes uncomfortable enough, fiscal conservatism will find more (and more ardent) supporters among the voting populace.
Discuss amongst yourselves.
Posted by Cassandra at 07:46 AM | Comments (24) | TrackBack
February 10, 2009
Graphoria
The Editorial Staff meant to lob a few digital spitballs at this earlier, had we not been steadfastly determined to proclaim an end to the petty grievances and false promises, the recriminations and worn-out dogmas that for far too long have strangled our politics:
Ms. Pelosi has been rather busy of late conducting a lonely one-woman battle against the politics of fear and the divisive, fear-mongering fear mongers (God love 'em!) who practice that dark art. In furtherance of this effort, her office recently produced the following chart to help bolster consumer confidence and get those stuffy old banks to loosen the heck up:
As Jim Manzi notes, there are a few problems with Ms. Pelosi's use of statistics. As the old saying goes, (liberal mantras about the inefficacy of coercive interrogation notwithstanding) if you torture numbers long enough, eventually you can get them to confess to just about anything:
...there are a couple of odd things about this. First, it shows absolute job numbers, rather than unemployment rate (that is, job losses per capita). This matters, because the U.S. labor force is a lot bigger now than in prior recessions. Second, it ignores the recession of 1981—1982, which was by far the most serious of recent recessions.
How conveeeeeeeeeeeenient. Manzi produces a different chart comparing the rates of unemployment. It shows unemployment increasing at roughly the same rate for all of the postwar recessions....
...all of which helps to place Mr. Obama's cheery, not-fear-mongering pep talk of yester'een into better perspective:
They can't pay their bills. They've stopped spending money. And because they've stopped spending money, more businesses have been forced to lay off more workers. In fact, local TV stations have started running public service announcements to tell people where to find food banks, even as the food banks don't have enough to meet the demand.As we speak, similar scenes are playing out in cities and towns across America. Last Monday, more than 1,000 men and women stood in line for 35 firefighter jobs in Miami [Florida]. Last month, our economy lost 598,000 jobs, which is nearly the equivalent of losing every single job in the state of Maine.
[deep, cleansing breath]
Hmmm. No waygu steak for the folks in Elkheart, eh? But wait! There's more sunshine and not-fear where this came from!
...we also inherited the most profound economic emergency since the Great Depression.....deficits that could turn a crisis into a catastrophe...
...Question: Thank you, Mr. President. Earlier today in Indiana, you said something striking. You said that this nation could end up in a crisis without action that we would be unable to reverse.
Can you talk about what you know or what you're hearing that would lead you to say that our recession might be permanent when others in our history have not? And do you think that you risk losing some credibility or even talking down the economy by using dire language like that?
Dear God. I just fell in love with a female reporter from the Associated Press. Obama is right. The apocalypse is at hand.
Obama: No, no, no, no.
Phew! Spoke too soon - we're back to the world I recognize.
Manzi makes an interesting observation here:
What seems to matter in getting to really bad job losses is the duration of the recession. So, speed in passing a stimulus bill is probably a lot less important than getting our countermeasures right. This is, of course, diametrically opposed to the natural conclusion one would reach in looking at the first chart.
I wasn't certain the chart he showed supported his logic. First of all, there's always a lag effect with economic stimulus measures, so the remark about time not being important has to be evaluated in light of what happens when we wait to act and in the mean time things continue to get worse and then continue to get worse while we wait for the inevitable lag between action and reaction? So, I went looking for more information and found another way of looking at the same data here:
Polley observes:
we can see the current recession (orange) is very similar to the 1981 recession (light green) in terms of job losses as a percentage of peak employment. But we have had sharper downturns in percentage terms.If you believe that this recession is not fundamentally different from other demand-driven post-war recessions, then a forecast of job losses continuing for another 6 to 9 months would not be out of line. Furthermore, looking at past cycles, one would expect it will be at least a year (possibly more if the recovery looks more like that after the 2001 recession) before employment reaches the previous peak. Personally, my expectation is that it will take 18 to 24 months (from now) to get back to the previous peak.
Interesting, no es verdad? Viewed this way, the data doesn't exactly support Mr. Obama's cheery 'worst crisis since the Great Depression' mantra now does it? On the other hand, it's not exactly a resounding confirmation of Manzi's take either. Perhaps, as is so often the case, the truth is somewhere in the middle?
I decided to take another look at his rate graph, overlaying the current rate of increase (aqua) over each of the other time series graphs to make visually comparison of their slopes a bit easier (I work with a lot of log-log graphs in my job, so I know graphs can be visually deceptive):
Two observations:
1. The rates of increase are not the same. It doesn't matter where the current trend is overlaid - the beginning points coincide but the end point for the current recession is always higher than the endpoint for the one it's being compared to.
2. Of the three recessions, the current rate of increase most closely resembles that experienced during the most severe (the 1982) recession.
This dovetails neatly with Polley's cumulative job loss view. I tend to have more confidence in an observation when I see the same thing regardless of how I look at the data (assuming of course that I'm not looking at meaningless or dimensionless numbers).
The other interesting observation? I'm always interested in patterns (remember the Presidential approval ratings?). I see two possible shapes here and I'd like to suggest a possible thesis.
The more common shape is a sharp increase in unemployment that bottoms out and then is followed by a sharp rise in employment. I couldn't help but think of homeopathy here (OK - try not to let your heads explode here - I'm not trying to score partisan points or prove anything. I'm just exploring ideas.) Maybe when things get bad enough in the economy, an equally strong response is stimulated that triggers recovery - sort of a 'no pain, no gain'? (shut up, Jimmy :p)
These "sharper" troughs don't last as long but they're painful in terms of magnitude. Then there a second type (2001, 1990) that is gentle and prolonged. Anyway, fascinating stuff if you're not one of the folks without a job.
Posted by Cassandra at 09:45 PM | Comments (23) | TrackBack
December 04, 2008
Perspective, Risk, and the Financial "Crisis"
I saw and approached the hungry and desperate mother, as if drawn by a magnet. I do not remember how I explained my presence or my camera to her, but I do remember she asked me no questions. I made five exposures, working closer and closer from the same direction. I did not ask her name or her history. She told me her age, that she was thirty-two. She said that they had been living on frozen vegetables from the surrounding fields, and birds that the children killed. She had just sold the tires from her car to buy food. There she sat in that lean- to tent with her children huddled around her, and seemed to know that my pictures might help her, and so she helped me. There was a sort of equality about it.- Dorothea Lange, on the making of "Migrant Mother", the eponymous image of Depression-era desperation
The family depicted in this photo had just sold their tent in order to buy food. Seventy three years later, Katherine MacIntosh (only four years old when her mother was photographed) remembers what it was like back then:
"...People was starving in that camp. There was no food," she says. "We were ashamed of it. We didn't want no one to know who we were."The photograph helped define the Great Depression, yet McIntosh says her mom didn't let it define her, although the picture "was always talked about in our family."
"It always stayed with her. She always wanted a better life, you know."
Her mother, she says, was a "very strong lady" who liked to have a good time and listen to music, especially the yodeler named Montana Slim. She laughs when she recalls her brothers bringing home a skinny greyhound pooch. "Mom, Montana Slim is outside," they said.
Thompson rushed outside. The boys chuckled. They had named the dog after her favorite musician.
"She was the backbone of our family," McIntosh says of her mom. "We never had a lot, but she always made sure we had something. She didn't eat sometimes, but she made sure us children ate. That's one thing she did do."
Her memories of her youth are filled with about 50 percent good times, 50 percent hard times.
It was nearly impossible to get an education. Children worked the fields with their parents. As soon as they'd get settled at a school, it was time to pick up and move again.
Her mom would put newborns in cotton sacks and pull them along as she picked cotton. The older kids would stay in front, so mom could keep a close eye on them. "We would pick the cotton and pile it up in front of her, and she'd come along and pick it up and put it in her sack," McIntosh says.
They lived in tents or in a car. Local kids would tease them, telling them to clean up and bathe. "They'd tell you, 'Go home and take a bath.' You couldn't very well take a bath when you're out in a car [with] nowhere to go."
She adds, "We'd go home and cry."
McIntosh now cleans homes in the Modesto, California, area. She's proud of the living she's been able to make -- that she has a roof over her head and has been able to maintain a job all these years. She says her obsession to keep things clean started in her youth when her chore was to keep the family tent clean. There were two white sheets that she cleaned each day.
"Even today, when it comes to cleaning, I make sure things are clean. I can't stand dirty things," she says with a laugh.
With the nation sinking into tough economic times and analysts saying the current economic crisis is the worst since the Great Depression, McIntosh says if there's a lesson to be learned from her experience it is to save your money and don't overextend yourself."
In those days people waited in line for everything: soup, bread, the promise of a job.
Now a deep, pervasive fear fills the land again... a fear of doing without. The long lines are back as once again Americans reach deep within their souls to find that elemental grit, that scrappy resourcefulness that lifted a ragtag collection of British colonies to world superpower status.
Oh yeah. We've still got "it". Or do we?
The greatest danger in the current economic crisis is that the United States will lose its historic appetite for risk. The mood now is that risk-taking got us into this mess. Risk, though, is the quintessential American trait that built the nation -- from the Battle of Bunker Hill to the rise of the microchip. If we let risk give way to a new ethos of commercial reserve and regulatory restriction, the upward arc of the U.S. ascendancy will flatten. Maybe it already has.By "we" I mean the policy makers in Washington who will write the new rules of finance, our stunned bankers and businessmen, and the average Joes of Main Street who with reason have lost confidence. If all lose faith at once in the American idea of risk, refinding it when the recession ends may prove difficult.
This is the moment for Americans to rediscover the "frontier thesis" of Frederick Jackson Turner. In a seminal paper delivered in 1893 to the American Historical Association, "The Significance of the Frontier in American History," Turner argued that the U.S. found its identity as it pushed away from the Eastern seaboard and crossed a series of frontier "fall lines": the Allegheny Mountains, the Mississippi, the Missouri, the plains, the Rocky Mountains and California.
Every American absorbs the frontier experience from reading biographies of great Americans or from movies. Frederick Turner, however, made it clear that with this effort to transform the wilderness the Americans broke decisively with what he called, believe it or not, "old Europe." "Here is a new product," Turner wrote, "that is American."
"From the conditions of frontier life," Turner believed, "came [American] intellectual traits of profound importance . . . coarseness and strength combined with acuteness and inquisitiveness; that practical, inventive turn of mind, quick to find expedients; that masterful grasp of material things, lacking in the artistic but powerful to effect great ends; that restless, nervous energy, that dominant individualism, working for good and for evil." These, he said, are "the traits of the frontier."
Turner's ideas on the frontier lie at the center of many political fights today over domestic and foreign policy. It is hard to overstate how abhorrent Turner's frontier thesis became to the American left, especially its new historians. His paper has been called "notorious and troubling" and a "myth." Their problem with Turner's view of the Americans' tendency to "incessant expansion" needs no elaboration. His critics have called him a racist.
This is unfair. Turner himself later described the political tensions in the new 20th century between Morgan's banks, Harriman's railroads -- "wealth beyond their power to enjoy" -- and the new forces of reform.
If indeed the Democrats' intellectuals want to disown Turner, the conservative movement could profit from adapting what he admired on the frontier. Everyone's ancestors made the frontier, but if it's just a Republican thing now, so be it.
Turner's purpose wasn't to idealize America but to try to understand the wellsprings of its remarkable and self-evident success. He found it, persuasively, in the lessons learned settling a continent.
For our purposes, amid economic meltdown and fiasco, the telling phrase in his list of shaping frontier traits is "that dominant individualism, working for good and for evil."
These days, whether the topic is foreign policy, economics, education, or even parenting the signs of a widespread loss of confidence in the spirit of American enterprise are everywhere. Everyone, it seems, needs help. We have become a nation of whiners, scared of our own shadows, desperate for someone to rescue us from the terrifying consequences of every day life - the same consequences our parents, grandparents, and great-grandparents face with far fewer resources than we possess -- and far less complaining.
From the pages of every newspaper come admonishing reminders that the realists are back in town; the adults are back in charge. No more leaps of faith, no grand strategies, no more bold foreign policy initiatives with their concommitant risk of failure (not that either Iraq or Afghanistan has failed yet, unless one listens to the Senate Majority Leader's premature pronouncements uttered last Spring before our Surge troops were even in place). But no matter, neither his patriotism nor his judgment can be questioned.
So long as we are willing to completely disregard our own history, it will remain pitifully easy to manipulate us with frankly silly and afactual analogies that don't stand up to reasonable scrutiny.
But this country wasn't built by men (that's right, I said "men" - get over it) who shrank from the possibility of failure or stuck their hands out every time a reversal of fortune dealt them an unlucky hand. It isn't excessive risk-taking but excessive fear of risk that is causing today's angst-fests, and the answer isn't to retrench until America becomes a shadow of her former self but to tighten our belts and rediscover our appetite for hard work and the excitement that comes from knowing we still have the ability to succeed.
Or fail. Our parents understood that adversity hones the character. Our current set of leaders seem determined to convince us that it is somehow the proper function of the federal government to eliminate all adversity from our daily lives.
You tell me where that type of public policy leads? Hint: it's right up there with moral hazard.
Isn't that how we got here in the first place?
Posted by Cassandra at 07:20 AM | Comments (15) | TrackBack
October 16, 2008
Caring and Sharing with Obama
While we're all drinking happy juice in the warm afterglow of Juicy Obamaliciousness, let me throw one more thought out there. We are becoming a more caring and sharing society.
Every day, in every way, America just keeps getting better and better. Since 1980, the share of federal income tax revenue paid by the top 10% of tax payers in the US has increased by over 20%.
Have a listen to this audiovisual guide to understanding Obama's tax plan for sharing the wealth and contemplate your navel to this soothing thought. If The Club for Growth can be believed:
According to the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937, in 2006 the wealthiest 1% of U.S. taxpayers paid more taxes than ever before:
The basic story that comes from this newly available data for tax year 2006 is that the share of income (as measured by AGI) and the share of taxes paid by the top 1 percent of tax returns are once again at all-time highs.
Kind of undercuts the Obama mantra of harmful tax cuts harshing the national mellow, doesn't it? They also have a handy-dandy summary of the candidate's tax plans that makes it very easy to compare the basic elements of both plans.
Now, in the interests of fairness (and because The Princess has been having An Earnest Conversation for the last few years weeks via email [don't hit me!!!!] with an old high school friend who is a Democrat and will vote for Obama, the gist of which is that all politicians lie like Big Dogs in order to get elected, but also that each of us secretly thinks Our Dude lies less than The Anti-Christ Other Dude) the Blog Princess will now cite a Balanced Thrashing of Both Candidates on Tax Policeh:
Key graf on the McCainster: (yes, the Editorial staff howled when we heard this too)
Early in the debate, John McCain once again voiced his concern over the rising national debt and claimed that he could balance the budget in his first four years in office. But given that his tax policies contain major tax cuts that will not pay for themselves (especially in 2011 and 2012 after Bush tax cuts expire), it is a pretty safe bet that Sen. McCain is not going to be balancing the budget in 2012. We definitely know that neither Obama nor McCain is going to balance the budget in the first year or two of his administration.
Ya think?
On to the main attraction. The Lightworker gets schooled, old-style:
Throughout the debate, Sen. Obama repeatedly showed an unfortunate ignorance of one of the fundamental principles of taxation: all taxes are paid by people. On multiple occasions, Obama claimed that businesses or corporations "can afford" to pay higher taxes. But such a statement is just ridiculous. Companies have no "ability to pay" taxes. Does the corporation's building pay the tax? How about its fax machine or water cooler? No. People pay the taxes. Here is one such example of why Sen. Obama would get an F in public finance:Then Exxon Mobil, which made $12 billion, record profits, over the last several quarters, they can afford to pay a little more so that ordinary families who are hurting out there -- they're trying to figure out how they're going to afford food, how they're going to save for their kids' college education, they need a break.
What Sen. Obama doesn't understand or doesn't want to tell the American public is that when Exxon Mobil writes that check to Uncle Sam, some PERSON is paying the price for that. In the short-run, that person could be a shareholder, a worker, or a consumer. But the fact that Exxon Mobil has a lower after-tax profit means that some PERSON is worse off. For example, Exxon Mobil would likely reduce its dividend payment, or its share price could fall, and that hurts every PERSON who was invested in Exxon Mobil at the time the tax was enacted.
As they say, read the whole thing. I laughed until tears were running down my face. And they call econ the dismal science...
Posted by Cassandra at 08:53 AM | Comments (15) | TrackBack
October 01, 2008
Heh...
I needed a good laugh today.
Posted by Cassandra at 02:27 PM | Comments (10) | TrackBack
September 24, 2008
About Those "Unsound Fundamentals"
Via Maggie's Farm, a quiz on the economy:
1. Which of the following countries had the highest economic growth since 2000?
1. France2. Japan
3. Germany
4. U.S.A.
2. Which of the following countries has the highest GDP per capita?
1. U.K.2. Germany
3. Japan
4. U.S.A.
3. Which of the following countries had the highest household consumption in 2005?
1. U.K.2. Canada
3. France
4. U.S.A.
4. Which country spends the most per capita on health services?
1. U.K.2. Germany
3. Canada
4. U.S.A.
5. What percentage of the U.S.A.’s population is covered by health insurance?
1. 55%2. 65%
3. 75%
4. 85%
There's plenty more here, plus the answers. While you're contemplating the mysteries of the universe, the Editorial Staff would also like to commend to you this interesting chart:
Click for larger, interactive version of chart
A few points:
1. Unlike the media, who formally define a recession (before going on to tell us that regardless of what the data say, "it sure feels like we're in a recession") as two or more quarters of declining real GDP, the NBER's definition of a recession includes more than GDP:
A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.
2. The data for the most recent recession (in 2001) was mixed enough that it required a judgment call to even term it a "recession":
The most recent recession in our chronology was in 2001. According to data as of July 2008, the 2001 recession involved declines in the first and third quarters of 2001 but not in two consecutive quarters. Our procedure differs from the two-quarter rule in a number of ways.- First, we consider the depth as well as the duration of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in economic activity."
- Second, we use a broader array of indicators than just real GDP. One reason for this is that the GDP data are subject to considerable revision.
- Third, we use monthly indicators to arrive at a monthly chronology.
To sum up, newly revised GDP data show declining GDP in quarters 1, 2, and 3 of 2001. Until recently, however, the data only showed GDP declining in quarters 1 and 3. By the traditional definition, this would NOT have been a recession. By the newly revised data, it would qualify. It also means George Bush inherited an economy already headed into recession. if you accept the traditional definition.
2. Interestingly enough, despite the nearly constant warnings of impending (and current) recession the Editorial Staff have endured from pundits, television news anchors, and unbiased economic reporters over the last 8 years, the NBER - and the data - have some surprising things to say on that subject:
The National Bureau's Business Cycle Dating Committee maintains a chronology of the U.S. business cycle. The chronology identifies the dates of peaks and troughs that frame economic recession or expansion. The period from a peak to a trough is a recession and the period from a trough to a peak is an expansion.
Now here's the killer quote:
According to the chronology, the most recent peak occurred in March 2001, [Ed. note: Six months before 9/11 for you folks without a pocket calendar. Since both the original and revised data showed declining GDP growth in the first quarter of 2001, this would seem to make claims that the "recession" is due to Republican White House policy roughly equivalent to saying Bush was single-handedly able to turn the economy around in a mere 6 weeks. Quite an achievement, wouldn't you say?] ending a record-long expansion that began in 1991. The most recent trough occurred in November 2001, inaugurating an expansion.
That's right. An expansion. Since November of 2001, the U.S. economy has experienced a period of uninterrupted economic expansion despite a major terrorist attack and two wars.
Posted by Cassandra at 06:55 AM | Comments (0) | TrackBack
September 23, 2008
And The Jackassery Continues....
Hidden in an article reporting that Cheney's going to go hunt up some support for the $700,000,000,000 bailout is this admission that the Bush Administration has been sitting on it for some time:
Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough. [my emphasis]Which raises three questions for me:
A) First, as we'll discuss today in the book salon on Woodward's War Within, the Bush Administration refused to admit Iraq was FUBAR even while, for seven months, they were drumming up a new strategy because it was FUBAR. They did so because they didn't want to affect the mid-term elections. So has the Bush Administration been formulating a plan to bail out their buddies, in secret, because they didn't want to let the voters know how badly they had fucked up the American economy before November?
B) And if that is true, how much worse has the economy gotten--and how much more expensive will the bailout be--because the Bushies were trying to hide yet another colossal Republican failure?
C) Or, did they simply not tell us about their f***-up so they could spring the $700,000,000,000 surprise on us on a Friday and demand results by Monday? The Shock Doctrine at work!
Though, I guess "A" and "C" are not necessarily either/or propositions.
*sigh*
Once again, facts are stubborn things. Never mind that the Bush administration implored Congress to regulate GSE no fewer than 18 times during 2008 alone (that's roughly twice a month).
Never mind that Barney Frank "saw no crisis" and pooh-poohed talk of regulating Fannie Mae and Chuck Schumer blocked the 2005 reform bill:
I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We have recently had an accounting problem with Freddie Mac that has led to people being dismissed, as appears to be appropriate. I do not think at this point there is a problem with a threat to the Treasury.
Never mind that in the wake of the worst financial crisis in recent history, Barney Frank was still pushing GSEs to make risky loans:
Stunned global investors won’t give financial firms any more money, forcing the firms into bankruptcy if they’re not lucky, or into the arms of Uncle Sam or of much bigger companies, if they are. But as the House Financial Services Committee proved on Tuesday, the public sector somehow feels it can continue to ignore reality—at least for a little longer.The committee, chaired by Massachusetts Rep. Barney Frank, took steps to gut a modest reform of the bad lending policies that helped get us into this mess. By voice vote, members moved to overturn a ban on something called “seller-financed down payments” for some government-guaranteed mortgages. Congress largely banned government support for such mortgages just two months ago at the request of the Federal Housing Administration.
The FHA and the Department of Housing and Urban Development have provided ample evidence that these loans are just too risky for taxpayers to take on. Under a seller-financed down payment, a homebuyer doesn’t put any money down. Instead, the seller, usually a property developer, provides the homeowner with funds to prod along the sale of the house. The first problem with this approach is that it gives the homeowner little incentive to negotiate on the purchase price of a home, since it seems to him that he’s getting a good deal—after all, the developer is kicking in thousands of dollars, which seems generous. The developer in turn finds it easier to charge an inflated price for the house, making it more likely that the government won’t get its money back if the home ever goes into foreclosure. And in fact the homeowner is more likely to default: since the value of the home is quite likely inflated, he is more likely to have difficulty selling it for the price he paid if he runs into financial trouble. Having none of his own money at stake, he also has less incentive to struggle to make his payments.
As HUD official Margaret Burns testified last year, seller-financed down payments “have had a significant negative impact on FHA’s business for the last several years. Loans made to borrowers who rely on these types of seller-funded gifts perform very poorly. The foreclosure rates on these loans are more than twice those of all other home purchase loans insured by FHA. Moreover, FHA experiences higher loss rates from the sale of the properties associated with these particular foreclosures, a reflection of the overvaluation that occurs with these programs.” Those loss rates could get worse; the government compiled them before the most severe period of housing declines began in many markets.
Why on earth, then, did Barney Frank & co. overturn the seller-financing ban, increasing the risk to the taxpayer?
...Frank and his colleagues remain keen on coddling the tenacious bad-lending lobby (including the National Association of Homebuilders and what’s left of the banking industry), which desperately needs suckers to buy newly built homes at inflated prices so that builders can pay back at least some of their construction debt to the banks and investors. Frank is certainly not looking out for average-Joe home buyers and sellers with this action. Just as bad, it seems that he and his colleagues haven’t noticed that the rest of the country, and indeed the world, have begun paying the price of the private sector’s era of no-down-payment, 100-percent home-loan financing.
But then this should not surprise us. After all, past performance is often a good predictor of future events:
If only the really smart folks had been able to stop George W. Bush and those horrid Republicans from causing this problem in the first place:
Fannie Mae Eases Credit To Aid Mortgage LendingBy STEVEN A. HOLMES
Published: September 30, 1999Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits....
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
And then there are all those Republicans (like the top three beneficiaries of campaign contributions from Fannie Mae/Freddie Mac) who are in the pay of the GSEs:
Chris Dodd
Barack Obama
John Kerry
Yep. Not only should the Republicans not have caused this problem which (according to the arch-conservative NY Times) was predicted in 1999 when the Clinton administration began its drive to increase minority home ownership and could have been avoided by a Republican reform bill that was blocked by Democrats, but they really had no business actually being prepared for the disaster they repeatedly warned the public about and tried to prevent.
Got it.
Here's a thought for you. How about knocking off the finger pointing and concentrating on a solution? Because I have a funny feeling there's plenty of blame to go around.
Or is that too bipartisan for you?
Posted by Cassandra at 07:54 PM | Comments (15) | TrackBack
Barney Frank Discovers Regulation!!!!
Sacre bleu! Avec le hindsight, it is possible for Monsieur Frank to see things which happened not!!!
Q.Why not bail out Lehman Brothers?A. What you had was a lot of conservatives saying, oh, let's let them go belly up. And as I've said, as it turns out, looking at a dead belly isn't as enjoyable as they thought it would be.... their failure to regulate sensibly has so endangered the economy and so burdened it with bad stuff that it's become very vulnerable.
Q.So suddenly the government is in the business of intervening in corporate America. What does that mean?
A. The Republicans - their own philosophy blew up in their face. They were so extreme in their insistence that there be no government intervention that they have wound up provoking far more government intervention than the Democrats ever would have.
All this retrospection... it is of the most confusing, n'est pas? Surely M. Frank was not referring to this kind of government intervention:
How did we get here? Let's review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.
Allow us to interrupt the narrative for a moment to allow a little Blast from the Past: a reprise of M. Frank's wit and wisdom on the desirability of regulating government sponsored entities (GSEs):
Hearing from September 2003 on an administration proposal to alter the regulation of GSEs like Fannie Mae and Freddie Mac. See Congressman Barney Frank's opening statement, which begins at 4:40. It's rather amusing. Here's an excerpt of his opening statement:
I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We have recently had an accounting problem with Freddie Mac that has led to people being dismissed, as appears to be appropriate. I do not think at this point there is a problem with a threat to the Treasury.I must say we have an interesting example of self-fulfilling prophecy. Some of the critics of Fannie Mae and Freddie Mac say that the problem is that the Federal Government is obligated to bail out people who might lose money in connection with them. I do not believe that we have any such obligation. And as I said, it is a self-fulfilling prophecy by some people.
So let me make it clear, I am a strong supporter of the role that Fannie Mae and Freddie Mac play in housing, but nobody who invests in them should come looking to me for a nickel--nor anybody else in the Federal Government. And if investors take some comfort and want to lend them a little money and less interest rates, because they like this set of affiliations, good, because housing will benefit. But there is no guarantee, there is no explicit guarantee, there is no implicit guarantee, there is no wink-and-nod guarantee. Invest, and you are on your own.
Now, we have got a system that I think has worked very well to help housing. The high cost of housing is one of the great social bombs of this country. I would rank it second to the inadequacy of our health delivery system as a problem that afflicts many, many Americans. We have gotten recent reports about the difficulty here.
Fannie Mae and Freddie Mac have played a very useful role in helping make housing more affordable, both in general through leveraging the mortgage market, and in particular, they have a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing, and that is what I am concerned about here. I believe that we, as the Federal Government, have probably done too little rather than too much to push them to meet the goals of affordable housing and to set reasonable goals. I worry frankly that there is a tension here.
The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disastrous scenarios. And even if there were a problem, the Federal Government doesn't bail them out. But the more pressure there is there, then the less I think we see in terms of affordable housing.
In that brief statement, the Editorial Staff counted the following:
Times M. Frank stated "there is no crisis": 4
Times M. Frank stated "there is no threat to the Treasury": 1
Times M. Frank averred the government has no obligation to investors in GSEs: 4
Times M. Frank stated his overriding concern that GSEs provide "affordable housing": 4
M. Frank was joined in these sentiments by his colleague, Monsieur Schumer (D, Affordable Housing), who took vigorous exception to both the administration's attempts to regulate GSEs and to Chairman Greenspan's warnings:
As Congress began again to work on legislation to strengthen oversight of Fannie Mae and Freddie Mac, two of the nation's largest mortgage finance companies, Alan Greenspan, the Federal Reserve's chairman, urged lawmakers today to impose sharp limits on the $1.5 trillion holdings of the companies.Appearing before the Senate Banking Committee, Mr. Greenspan said the enormous portfolios of the companies - nearly a quarter of the home mortgage market - posed significant risks to the nation's financial system should either of the companies face extensive problems.
"We at the Federal Reserve remain concerned about the growth and magnitude of the mortgage portfolios of the government-sponsored enterprises, which concentrate interest rate risk and prepayment risk at these two institutions and makes our financial system dependent on their ability to manage these risks," Mr. Greenspan said. "To fend off possible future systemic difficulties, which we assess as likely if G.S.E. expansion continues unabated, preventive actions are required sooner rather than later."
Most of the assets in the portfolios are mortgage-backed securities that the companies find more profitable to hold than to sell in the secondary markets. Mr. Greenspan said those holdings did nothing to further the mission of the companies of providing market liquidity and lowering mortgage interest rates but was solely a method of increasing earnings.
In previous years, lawmakers have failed to approve legislation imposing stronger oversight of the companies and changing the way they do business. The two companies have been formidable lobbying forces and been able to block attempts made by lawmakers, often with the support of rival mortgage companies, to restrict them.
But some lawmakers say this year presents the best opportunity in a long time to adopt legislation as the two companies because both companies have struggled through accounting scandals.
Mr. Greenspan's testimony went beyond previous statements in which he has urged tighter scrutiny of the two companies. His approach towards the companies of heavier scrutiny and regulation stands in strong contrast to his overall deregulatory approach in other areas, like hedge funds, and that distinction was noted today by a handful of senators who questioned the need to force Fannie Mae and Freddie Mac to reduce their portfolios.
In several pointed lines of questioning, Senator Charles E. Schumer, Democrat of New York, criticized Mr. Greenspan's recommendation and called it both inconsistent with his other views on regulation and potentially damaging to the housing markets. Without identifying anyone in particular, he also suggested that some people who have advanced tougher regulation of the two housing finance companies are really pushing a broader agenda to eliminate the companies and their mission of providing affordable housing.
"I see an analogy to Social Security," Mr. Schumer said. "Social Security has a problem and there are ideologues who want to undo it. Fannie and Freddie have problems and there are ideologues who want to undo them. But there are ways to fix the problems short of what's been proposed. When the sink is broken, you don't want to tear down the house."
Indeed. And with that brief trip in the Wayback Machine, we resume the narrative:
It is important to understand that, as GSEs, Fannie and Freddie were viewed in the capital markets as government-backed buyers (a belief that has now been reduced to fact). Thus they were able to borrow as much as they wanted for the purpose of buying mortgages and mortgage-backed securities. Their buying patterns and interests were followed closely in the markets. If Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. Their accounting had just been revealed as fraudulent, and they were under pressure from Congress to demonstrate that they deserved their considerable privileges. Among other problems, economists at the Federal Reserve and Congressional Budget Office had begun to study them in detail, and found that -- despite their subsidized borrowing rates -- they did not significantly reduce mortgage interest rates. In the wake of Freddie's 2003 accounting scandal, Fed Chairman Alan Greenspan became a powerful opponent, and began to call for stricter regulation of the GSEs and limitations on the growth of their highly profitable, but risky, retained portfolios.If they were not making mortgages cheaper and were creating risks for the taxpayers and the economy, what value were they providing? The answer was their affordable-housing mission. So it was that, beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to grow. Subprime and Alt-A originations in the U.S. rose from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period the quality of subprime loans also declined, going from fixed rate, long-term amortizing loans to loans with low down payments and low (but adjustable) initial rates, indicating that originators were scraping the bottom of the barrel to find product for buyers like the GSEs.
Megan McArdle points out the futility of the current blame game:
Naturally, the two presidential candidates are moving quickly to deal with this crisis -- that is, to blame it on everyone except themselves. John McCain and his surrogates are pushing the dubious notion that the primary problem is a lack of transparency and accountability. He might send someone down to Lehman's trading floor to ask the people packing up their desks whether they feel they've gotten away with something.Meanwhile, Barack Obama is pointing the finger at John McCain, or at least Senator McCain's ideas...
This may play well on television, but it is rather disappointing coming from the man who promised us a new kind of politics. There have been no significant changes to the financial regulations in the last eight years that might credibly have created this crisis (the one major alteration, Sarbanes-Oxley, moved things in the other direction). And it's hard to blame loosened oversight when the entire market systematically overvalued the now-toxic securities. Lehman Brothers was not, after all, trying to put itself into receivership for the sheer joy of molesting taxpayers. The SEC is an extremely valuable agency, but even its crack regulators are not omniscient demigods who can instantly divine the "true" price of a complex security. Nor does it make sense to blame overpaid CEOs. Rick Wagoner's millions may be ill-deserved, but they did not force his customers to take out unreasonably large bank loans, nor compel investment managers to buy the securities into which those loans were packaged.
But both candidates are right about one thing: America's financial regulatory structure is badly outdated, and in need of a massive overhaul.
I'm not so sure the record bears her out on the question of loosened oversight. The problems we faced last week were twofold: GSEs were allowed to crowd other lenders out of the market by offering cheap, poor quality loans. But they could only do this so long as Congress was willing to turn a blind eye to their machinations. The price of Congressional acquiescence, it turns out, was "affordable housing". Had the 2005 regulatory reform bill been passed, it's arguable we would have experienced more sluggish growth, but averted last week's meltdown:
In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Democrats, remained silent.Now the Democrats are blaming the financial crisis on "deregulation." This is a canard. There has indeed been deregulation in our economy -- in long-distance telephone rates, airline fares, securities brokerage and trucking, to name just a few -- and this has produced much innovation and lower consumer prices. But the primary "deregulation" in the financial world in the last 30 years permitted banks to diversify their risks geographically and across different products, which is one of the things that has kept banks relatively stable in this storm.
As a result, U.S. commercial banks have been able to attract more than $100 billion of new capital in the past year to replace most of their subprime-related write-downs. Deregulation of branching restrictions and limitations on bank product offerings also made possible bank acquisition of Bear Stearns and Merrill Lynch, saving billions in likely resolution costs for taxpayers.
If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.
For whatever it may be worth, if you had any doubts about how well informed and intelligent the average voter is on economic issues, consider that the Bush administration called for reform of GSEs no fewer than 17 times in 2008 alone. That's approximately twice a month for those of you without a calculator.
Moral of the story: it pays to own the megaphone.
Posted by Cassandra at 06:20 AM | Comments (14) | TrackBack
July 08, 2008
Why Rising Prices Don't Affect Behavior That Much
Via Glenn Reynolds, all the hyperbolic hand-waving on the nightly news aside, rising gas prices don't seem to have had much of an effect on local leadfoots:
TIGERHAWK LOOKS AT GASOLINE PRICES AND BEHAVIOR MODIFICATION, and doesn't find much of the latter. "When I pulled on to the New Jersey Turnpike I set my cruise control at 66 mph (substantially faster than I would drive -- 55 or so -- if I wanted to maximize my fuel economy), got in the right lane, and started counting cars that passed me. I was passed by more than 40 cars before I came up behind another vehicle going more slowly than me, and it was a step van trying to exit. I gave up counting when more than 100 cars passed me without me passing anybody. At 66 miles per hour."Yeah, I noticed that people weren't slowing down much this weekend -- and where they were it seemed more connected with the heavy holiday-weekend police presence in a few areas than with fuel-saving, because once the cops were gone people sped up again.
UPDATE: From the comments: "Virtually nobody is willing to substitute their time for the money they would save slowing down, and several have offered very cogent economic reasons why they would not. It is a little indication of the enormous cost to the economy and to our personal freedom imposed by the government actually mandating a 55 mph speed limit."
But it's not just a question of time. The time vs. money tradeoff has been exaggerated, too. In real terms (how long does it take the average American to earn a gallon of gasoline) the price of gas has not gone up as drastically as we've been lead to believe:
As Americans know, today’s rising food and energy prices are crimping household budgets. But there are other ways to understand the relative size of the rise of food and energy costs. For example, in terms of time worked at the average pay rate, the real cost of a 12-item basket of basic foods has hardly budged. And while the work-time price of gasoline doubled in recent years, a gallon of gasoline still goes for less than 11 minutes of work (Fig. 3). At 20 miles per gallon, an hour of work will get you 110 miles down the road; at 30 mpg, you can go 165 miles.
When it comes to how hard we have to work for food and fuel, we still face far lower burdens than our grandparents did. Living standards rise on the ability to use productive resources to churn out more goods and services—that is, to advance productivity. As the economy has become more productive decade by decade, Americans have reaped the gains, first and foremost by consuming more.There’s more to the good life than goods and services, however, and we’ve taken some of our added productivity in other ways. We’ve gained more leisure time, improved our working conditions, enhanced safety and security, and added variety to our choice set. All of these benefits become increasingly important as we climb up the income ladder.
The lament-filled anecdotes about long hours and low pay just don’t stand up to the test of hard data. Real total compensation—wages plus fringe benefits, both adjusted for inflation—has been rising steadily for several generations (Fig. 4). Over time, the fringes have become a larger share of the rewards for work, dampening the statistics on wage increases. At the same time, we’re spending less time at work. An average workweek has fallen from 39.8 hours in 1950 to 36.9 hours in 1973 to 33.8 hours today.
So if you're wondering why all the gloom and doom at the gas pump doesn't translate into behavior modification on the highways, it's easy.
We can afford to drive fast. We have more leisure time and more money, relatively speaking, than our grandparents did. So increases in the price of gas and groceries don't impact us as much.
Thanks to OBH for the tip.
Posted by Cassandra at 12:11 PM | Comments (64) | TrackBack
May 29, 2008
Obama as Robin Hood: Why Soaking the Rich Doesn't Work
For months now, Barack Obama has been campaigning as a latter-day Robin Hood. He touts a vision of an America in which he will take from the evil rich and give liberally (pun fully intended) to the worthy poor:
John McCain has served his country with honor, and I respect that service. But for two decades, he has supported policies that have shifted the burden on to working people. And his only answer to the problems created by George Bush’s policies is to give them another four years to fail. Just look at where he stands and you’ll see that a vote for John McCain is a vote for George Bush’s third term.Four more years of George Bush’s tax cuts for the wealthiest Americans who don’t need them and didn’t ask for them.
Four more years of a health care plan that works for the healthy and the wealthy while tens of millions go without care, and families struggle with rising costs.
...Four more years of a White House that is run by the kind of lobbyists who run John McCain’s campaign, while Washington tells the American people – “you’re on your own.”
... We can’t continue an economic program that rewards Wall Street at the expense of Main Street because then we all end up hurting. It’s time to end a failed approach that tries to build prosperity from the top down, and renew our common prosperity from the bottom up.
Instead of a tax code that rewards wealth and not work, we’ll provide an income tax cut of up to $1,000 for a working family, and eliminate income taxes altogether for any retiree making less than $50,000 per year.
Instead of more inaction on health care, we’ll finally bring this country together, stand up to the drug companies and insurance companies, and make health care affordable and accessible for every single American.
Instead of putting a secure retirement at risk, we’ll safeguard Social Security, we’ll protect pensions instead of CEO bonuses, and we’ll help all Americans save more so they can have a retirement that is dignified and secure.
But what would Obama's hopeful change really look like? Steve Moore got out his calculator to find out:
Obama would like voters to believe that he's the second coming of JFK. But with his unbelievable spending and new-government-agency proposals he's looking more and more like Jimmy Carter. His is a "Grow the Government Bureaucracy Plan," and it's totally at odds with investment and business.
Obama says he wants U.S. corporations to stop "shipping jobs overseas" and bring their cash back home. But if he really wanted U.S. companies to keep more of their profits in the states he'd be calling for a reduction in the corporate tax rate. Why isn't he demanding an end to the double-taxation of corporate earnings? It's simple: He wants higher taxes, too.
The Wall Street Journal's Steve Moore has done the math on Obama's tax plan. He says it will add up to a 39.6 percent personal income tax, a 52.2 percent combined income and payroll tax, a 28 percent capital-gains tax, a 39.6 percent dividends tax, and a 55 percent estate tax.
Not only is Obama the big-spending candidate, he's also the very-high-tax candidate. And what he wants to tax is capital.
Doesn't Obama understand the vital role of capital formation in creating businesses and jobs? Doesn't he understand that without capital, businesses can't expand their operations and hire more workers?
Moore is spot on. Obama's 'big money' rhetoric may be popular with disgruntled voters, but it doesn't survive a collision with the facts. Let's look at what has actually happened to tax revenues in the wake of the evil Bush administration's reduction on corporate income tax. As the chart above shows, tax receipts as a percentage of GDP increased - yet Obama can't wait to close off those horrid "loopholes" that are allowing the economy to grow and corporations to invest and hire more workers.
But the worst thing about Barack Obama's vision for change is that, like most of the Reality Based Community's plans for changing the world, it isn't based on anything even remotely resembling reality. Unfortunately for this latter-day Robin Hood, contrary to popular opinion decades worth of data show little correlation between changes in the tax rate and tax revenues. What does appear to increase tax revenues is stimulating the economy, and you don't do that by taking money out of the hands of those who have the greatest ability to produce wealth and giving it to those who are the least efficient at doing so:
The data show that the tax yield (revenues divided by GDP) has been independent of marginal tax rates from 1950 to 2007 (see chart above), but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich – if they knew about it.
Sadly for the Barack Obamas of this world, reality can sometimes spoil a perfectly good campaign promise. The question then becomes, are they willing to look at the hard data on income redistribution, even if it flies in the face of their cherished theories?
Will increasing tax rates on the rich increase revenues, as Barack Obama hopes, or hold back the economy, as John McCain fears? Or both?Mr. Hauser uncovered the means to answer these questions definitively. On this page in 1993, he stated that "No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP." What a pity that his discovery has not been more widely disseminated.
The chart nearby, updating the evidence to 2007, confirms Hauser's Law. The federal tax "yield" (revenues divided by GDP) has remained close to 19.5%, even as the top tax bracket was brought down from 91% to the present 35%. This is what scientists call an "independence theorem," and it cuts the Gordian Knot of tax policy debate.
The truth is out there. The question is whether Barack Obama is interested (and brave enough) to find it.
CWCID: OBH for the Carpe Diem link. Oddly enough, I'd seen the same chart along with a bunch of others this morning on the Heritage.org site, but reading that post really got me thinking!
Posted by Cassandra at 08:10 AM | Comments (29) | TrackBack
March 18, 2008
Never Let Inconvenient Facts Screw With The Narrative
File under, "I hate to say I toad you so...."
The Spousal Unit and I were discussing the Bear Stearns debacle last night over a post-prandial glass of wine and he opined that it was only a matter of time before The Shrieking began. And Lo!, not twelve hours later the piteous wail of progressiva schadenfreudensius was heard in the land. For it doth well appear that We the People must now add failure to predict that greed is bad economic policy to the growing list of The Shrub's crimes:
The economic meltdown is beginning to sound like a bad rewrite of the Iraq occupation. The experts are staring in disbelief.
Former Treasury Secretary Robert Rubin was at a session at the Brookings Institution this morning at which said that "few, if any" people anticipated the sort of meltdown that we are seeing in the credit markets at present.I've been predicting the Bushenomic house of cards was going to crash for at least three years now. Of course no one listens to me. I'm not a well credentialed policy wonk. I'm just a cranky old lady who has has an unimpeded view of the street from here in my bargain basement. Unfortunately it turned out I had clearer sightline than those so safely ensconced in their ivory towers.
Egad, but the BushReich has a lot to answer for. If only it had launched a recklessly illegal pre-emptive invasion of the free market system:
Dale Franks said...Huh. And this has what, exactly to do with "Bushenomics"?
I remember president Bush pushing through some tax cuts. But, oddly enough, I don't remember him setting up structural credit problems in the housing market, leading to problems in housing price declines, and increased foreclosures.
You know, sometimes--just very occasionally--the economy does things that really have nothing at all to do with what the president does.
I know. I was just shocked when I learned that. I think I was in the tenth grade at the time.
3:17:00 PM
Blogger Libby Spencer said...Oh, silly me. Here I thought high level presidential appointees who dictate policy, the wholesale evisceration of regulatory controls that would have prevented deceitful lending practices and the invention of convoluted investment instruments and the president's repeated assurances that the economy was just really great and everyone should keep on shopping might have had something to do with it.
Dale Franks said...
*sigh*
Bear Stearns is an investment bank. Always has been. So, even if Glass-Steagal hadn't been repealed--a repeal signed into law by ultra-conservative president Bill Clinton in 1999--it would have nod no effect whatsoever on the current problem.
Indeed, as far as regulation goes, the majority of the subprime loans originated from firms that are not, and never have been, subject to Federal regulatory scrutiny. In 2005, 52% of subprime mortgages were issued by firms who are not subject to any federal regulation at all. Another 25% were issued by firms with only an indirect regulatory relationship with the fed. As Fed Governor Susan Bies said, "What is really frustrating about this is [federal regulators] don't have enforcement authority to do anything with these state-licensed, stand-alone mortgage lenders."
You see, those mortgage brokers are regulated by the states. Not the Federal government.
So, it doesn't matter who the "presidential appointees" are, or what the federal regulatory environment is, when that regulatory environment doesn't apply to the mortgage brokerage.
In addition, "invention of convoluted investment instruments" simply wasn't covered by the regulations either, since no regulatory scheme can cover entirely new innovations that pop up in the derivatives market, and weren't even envisioned when the regulations were promulgated.
Moreover, many of the problems that are clear now, were simply masked by rising home prices. For instance, the FDIC--while not perfect--does tend to jump in when consumers complains about predatory lending. The trouble in this case was that...no one was complaining because as long as the homeowner had an asset whose value was appreciating, they could always sell the house, make a ton of money on the sale, and clear the mortgage. Once housing values started to decline...well, it was too late to look into the problem.
Moreover, if you're gonna require that much tougher regulation be imposed for loan standards, well, that's fine, but then no fair coming along later and complaining that low-income families can't get a mortgage, because you've implemented a regulatory regime that in effect dries up their access to credit.
It seems to me that the problem isn't that Bush is my guy, but rather that he's so not your guy that you are straining to blame Bush for things that he literally has very little to do with.
The president really isn't some economic czar, who can benevolently guide the economy by fiat.
But when all else fails, shift the goalposts:
Libby Spencer said...Give me a break Dale. Don't pretend I'm blaming everything on Bush specifically. Bushenomics implies a systemic and deliberate incompetence that encouraged short term greed to the benefit of relative few over long terms gains that would benefit the many. Of course Bush is not personally responsible and I'm aware that economic trends build over units of time that span beyond single administrations, but to say that Bush and those he put in charge of the show had little to no effect sounds more like denial than neutral analysis to me.
Franks obviously needs to get a life before he goes off the deep end and starts sounding like a complete whack job:
This is, to me, the synthesis of this worldview with which I now found myself disenchanted: that everything is always wrong.But in my life, a brief review revealed, everything was not always wrong, and neither was nor is always wrong in the community in which I live, or in my country. Further, it was not always wrong in previous communities in which I lived, and among the various and mobile classes of which I was at various times a part.
And, I wondered, how could I have spent decades thinking that I thought everything was always wrong at the same time that I thought I thought that people were basically good at heart? Which was it? I began to question what I actually thought and found that I do not think that people are basically good at heart; indeed, that view of human nature has both prompted and informed my writing for the last 40 years. I think that people, in circumstances of stress, can behave like swine, and that this, indeed, is not only a fit subject, but the only subject, of drama.
...I began to question my hatred for "the Corporations"—the hatred of which, I found, was but the flip side of my hunger for those goods and services they provide and without which we could not live.
And I began to question my distrust of the "Bad, Bad Military" of my youth, which, I saw, was then and is now made up of those men and women who actually risk their lives to protect the rest of us from a very hostile world. Is the military always right? No. Neither is government, nor are the corporations—they are just different signposts for the particular amalgamation of our country into separate working groups, if you will. Are these groups infallible, free from the possibility of mismanagement, corruption, or crime? No, and neither are you or I. So, taking the tragic view, the question was not "Is everything perfect?" but "How could it be better, at what cost, and according to whose definition?" Put into which form, things appeared to me to be unfolding pretty well.
Do I speak as a member of the "privileged class"? If you will—but classes in the United States are mobile, not static, which is the Marxist view. That is: Immigrants came and continue to come here penniless and can (and do) become rich; the nerd makes a trillion dollars; the single mother, penniless and ignorant of English, sends her two sons to college (my grandmother). On the other hand, the rich and the children of the rich can go belly-up; the hegemony of the railroads is appropriated by the airlines, that of the networks by the Internet; and the individual may and probably will change status more than once within his lifetime.
What about the role of government? Well, in the abstract, coming from my time and background, I thought it was a rather good thing, but tallying up the ledger in those things which affect me and in those things I observe, I am hard-pressed to see an instance where the intervention of the government led to much beyond sorrow.
But if the government is not to intervene, how will we, mere human beings, work it all out?
I wondered and read, and it occurred to me that I knew the answer, and here it is: We just seem to. How do I know? From experience. I referred to my own—take away the director from the staged play and what do you get? Usually a diminution of strife, a shorter rehearsal period, and a better production.
The director, generally, does not cause strife, but his or her presence impels the actors to direct (and manufacture) claims designed to appeal to Authority—that is, to set aside the original goal (staging a play for the audience) and indulge in politics, the purpose of which may be to gain status and influence outside the ostensible goal of the endeavor.
Strand unacquainted bus travelers in the middle of the night, and what do you get? A lot of bad drama, and a shake-and-bake Mayflower Compact. Each, instantly, adds what he or she can to the solution. Why? Each wants, and in fact needs, to contribute—to throw into the pot what gifts each has in order to achieve the overall goal, as well as status in the new-formed community. And so they work it out.
See also that most magnificent of schools, the jury system, where, again, each brings nothing into the room save his or her own prejudices, and, through the course of deliberation, comes not to a perfect solution, but a solution acceptable to the community—a solution the community can live with.
... I recognized that I held those two views of America (politics, government, corporations, the military). One was of a state where everything was magically wrong and must be immediately corrected at any cost; and the other—the world in which I actually functioned day to day—was made up of people, most of whom were reasonably trying to maximize their comfort by getting along with each other (in the workplace, the marketplace, the jury room, on the freeway, even at the school-board meeting).
And I realized that the time had come for me to avow my participation in that America in which I chose to live, and that that country was not a schoolroom teaching values, but a marketplace.
In other words, maybe this is all just the market's way of correcting a situation that could not have continued indefinitely. An economomist would think of it as a system seeking equilibrium: the proper balance between supply and demand, risk and reward, profit and and loss.
Maybe there is no sinister "system of greed" at work here, unless you consider the vast numbers of people who willingly signed mortagages for houses they could not realistically afford to be greedy and wish the federal government had stepped in earlier, against the law, to strip them of their ill-gotten gains?
Or perhaps you wish the government had forced lenders to take it in the shorts earlier, which loss would likewise have rippled through the economy in the form of layoffs, corporations going under and taxpayers feeling exactly the same stress they are now experiencing? Except, of course, many of the sufferers in that case would not even have had the comfort of ever having enjoyed said 'ill-gotten gains' first?
Ah. What could have been.
Posted by Cassandra at 08:10 AM | Comments (20) | TrackBack
February 08, 2008
Mitt! Mitt! Where Art Thou???
Having shuffled off to elysium last night in a deep state of Romney-induced funk, the Blog Princess sprang from betwixt the sadly vacant marital sheets this morning grimly determined to find something to be cheerful about. Thus, when the alarm clock commenced its detestable chirping, she smashed it with more vigor than was strictly necessary, donned her trusty red bathrobe, and began the long trudge towards redemption in the form of a massive infusion of caffeine and a smidgeon of good news.
Dropped by Grim's place as I usually do of a morning to see what trouble he was causing. Was reminded it is now The Year of the Rat. This got me thinking about all sorts of thinks I like; like fireworks...
China welcomed in the Year of the Rat Thursday with a bonanza of fireworks and festivals, but the celebrations for many were subdued due to ferocious cold weather that kept them from their families.Explosions of colour could be seen in the skies of Beijing and across China in a centuries-old fireworks tradition that is meant to scare off evil spirits but this year also sought to raise national morale after the horror cold snap.
...and Chinese horoscopes. The Princess was (watch it, guys!) born in the Year of the Pig. This makes her honest and extremely loyal, but also stubborn and a bit naive:
The Pig is true to his goals and beliefs. Their natural simplicity makes Pigs popular and loyal - once a friend, they'll be your friends for life. Pigs can be stubborn, but they will give in for the sake of peace. A Pig is happy to share what he or she has but needs to be the one taking the initiative in giving and wants to be rewarded for it. Sensual and energetic, she is persuasive and perceptive. The Pig sees and remembers everything.
So just remember that, peoples. I know all, and see all. Downright omniscient, I am; from the tip of my cute little nose to the tip of my curly little tail...
As I sagaciously sipped my morning java, I pondered with piglike perspicacity the many hopeful signs portended by the incoming Year of the Rat:
Super Bowl Indicator? Whatever. The real coincident indicator to pay attention to is the Year of the Rat, which is the year the Chinese calendar is now in.Phil Roth, chief technical analyst at Miller Tabak — with tongue planted firmly in cheek — notes in commentary today that “the rat is honest, popular, ambitious, clever, and inventive, at least according to Chinese mythology. That sounds bullish to me.”
Indeed. With a bit of backward-reconstruction analysis, Mr. Roth finds that in more than 200 years, there’s only been one very bad Year of the Rat — 1842, when stocks fell about 20%. Recent performance has been steady, including a 20% gain in 1996 and a 15.6% rise in 1972.
It would seem that Hope is just busting out all over the place!
Romney has been faulted for lacking "authenticity," but this is probably unfair. He is--authentically--a cool technocrat, a management consultant at heart. But a leader, as opposed to a manager, needs not just analytical skills but also intuition and emotion, not just information but also conviction. He needs to be able to consult his gut as well as the data when deciding how to proceed.Romney, in the end, failed to inspire. By contrast, Barack Obama is nothing but inspiring--so inspiring that it is becoming deeply creepy. The Boston Globe reports on a new music video touting Obama:
Inspired by the speech Barack Obama delivered in Nashua the night of the state primary, will.i.am [of the Black Eyed Peas] set Obama's text to simple guitar and a soulful melody, recruited 36 artists to appear in a music video that was conceived, shot, and edited over three days last week, and posted "Yes We Can" online over the weekend. . . .The split-screen video features clips of the candidate speaking alongside shots of R&B singer John Legend, actress Scarlett Johansson, rapper Common, jazz pianist Herbie Hancock, actor-singer Nick Cannon, rocker Ed Kowalczyk, and others echoing Obama's spoken words in song. Will.i.am set the song's tempo to synch up with the New Hampshire audience, which supplies the song's rhythm with chants of "We want change, we want change!" . . .
"I do think it allows people an accessible way into politics," Jesse Dylan said. "Rallies can be dry, but Will has taken the words and dramatized them with these wonderful artists and it gives people an easy way to become passionate."
The video, which you can watch here, depicts people who appear to be in some sort of trance as they mouth along with Obama's various rhetorical flourishes from his speeches, then repeat the mantra "Yes, we can." The whole thing has the feel of a cult of personality.
We aren't the first to make that observation. The other day one Kathleen Geier, who says she voted for Obama and considers him "a good progressive," took to the liberal TPMCafe site to declare that she is "increasingly weirded out by some of Obama's supporters":
She quotes from a Sacramento Bee article that she (and we) found "unsettling":
"He looked at me, and the look in his eyes was worth 1,000 words," said [Kim] Mack, now a regional field organizer. Obama hugged her and whispered something in her ear--she was so thrilled she doesn't remember what it was. . . .She urged volunteers to hone their own stories of how they came to Obama--something they could compress into 30 seconds on the phone.
As Geier notes, "this sounds more like a cult than a political campaign":
The language used here is the language of evangelical Christianity--the Obama volunteers speak of "coming to Obama" in the same way born-again Christians talk about "coming to Jesus."But he's not Jesus! He's not going to magically enable us to transcend the bitter partisanship that is tearing this country apart.
ABC's Jake Tapper notes other enthusiasts and detractors from the enthusiasm, all on the Democratic left. "I've been following politics since I was about 5," Chris Matthews tells the New York Observer. "I've never seen anything like this. This is bigger than Kennedy. [Obama] comes along, and he seems to have the answers. This is the New Testament."
On the other side, Time's Joe Klein writes that there is "something just a wee bit creepy about the mass messianism" of the Obama campaign, which "all too often is about how wonderful the Obama campaign is." Adds the dyspeptic leftist James Wolcott:
Perhaps it's my atheism at work but I found myself increasingly wary of and resistant to the salvational fervor of the Obama campaign, the idealistic zeal divorced from any particular policy or cause and chariot-driven by pure euphoria. . . . I don't look to politics for transcendence and self-certification.What are we to make of Obama himself in the midst of all this adulation? A cynic would say that he is a manipulator if not a demagogue, exploiting the gullible to further his own ambitions. A more charitable view is that his intentions are all to the good, that he has simply figured out how to tap into a genuine desire for inspiration in politics, and that if elected he will use his political powers to do good for the country.
I, too, find myself deeply disturbed; not only by Obama's vagueness and his followers' over-enthusiastic response to it, but by my own party's response to Mitt Romney's campaign.
Of course I knew he was fighting an uphill battle, but I hoped in my heart of hearts that people would see what I saw in him, the qualities that were so astonishingly plain to me that it made the choice over before it started. I mentioned a few weeks ago that I was forming a theory about how the vast majority of people choose presidential candidates. In the ensuing weeks I have had many conversations on this topic and have seen nothing to dissuade me from this theory and much to bolster it. It is not a theory that inspires much confidence in an informed and rational American electorate:
As Barbara Poole of Greenville listened to presidential candidate John McCain speak at a campaign stop, she had a gut reaction.“I can’t recall what he was talking about, but he really impressed me,” Poole said. “It’s kind of like when you meet someone and you immediately like them or don’t like them. It’s hard to put into words.”
As South Carolinians head to the polls Saturday for the Republican primary and Jan. 26 for the Democratic one, many voters will choose the primary to vote in and the candidate to vote for on the basis of something other than voting records, decision-making experience or position papers.
Poole, for instance, likes McCain’s talk about hard issues. She says it is honest and direct. “When he talks about war, he knows first-hand what it’s about.”
Being likable is a basic test on the road to the White House. But it’s a test that can make or break a candidate.
“Voters really don’t vote on the issues to any significant extent,” said Ken Warren, pollster and political scientist at St. Louis University. “It’s mostly because they don’t know how the candidates differ on the issues. The difference are so subtle, particularly in primaries, that even analysts have a hard time keeping them straight. So (voters) rely on the candidates’ persona instead.”
The confusion created by subtle differences is compounded this year by a crowded field of candidates and a quick-paced primary schedule. That leaves voters to ponder whether they simply like the candidate.
“We want a president who is (similar) to us but a little bit better,” said Betty Glad, a USC professor whose expertise is political psychology. “Someone who we can relate to, but without our flaws.”
In some ways, this may not be an irrational way to choose a candidate. Politicians have to make a lot of empty and contradictory promises to get elected; there is no way they can keep all of them. But on the other hand one has to wonder whether personal charm is really the best predictor of executive performance?
The current crop of candidates offers a particular compelling example of this problem. The two front runners are United States' Senators.
In over two hundred years of American history, we have only elected a Senator with no executive experience twice:
Abraham Lincoln
John F. Kennedy
Interestingly enough, both were assassinated. One has to wonder at the rationality of a republican base that utterly discounted a candidate with more quantitative and qualitative experience than the entire rest of the field: Mitt Romney, because he wasn't "exciting" enough. Hearing Romney talk about his experience running a state government, a successful company, and the Olympics was compelling to this author. When I hear someone interview for the job of the leader of the most powerful nation of the free world, I am not impressed by a candidate who thinks on-the-job training is any kind of substitute for a proven track record. I cringe when I hear the "exciting candidates" sneer at a man for being good at making money and giving other Americans paying jobs. Is that really what the "party of ideas" is all about? Not impressive.
It utterly mystifies me why anyone in my party thought the ability to quote from the Federalist papers and the Constitution was more important to running the Executive branch than the demonstrated ability to run a large organization, keep its budget out of the red, and work with the opposing party?
Yet demonstrably, it was. Because Mitt Romney wasn't "passionate" enough? "My" party has a long track record of fooling itself and rewriting history. George W. Bush ran in 2000 and again in 2004 as a compassionate conservative. These are ideas he believes in passionately. He was never shy about articulating them, and anyone in the Republican base who claims they were "fooled" wasn't paying their attention bill. The ugly truth conservatives don't want to face is that America is a centrist nation; neither a left wing, nor a right wing one. We are not, and have never been a nation of idealogues. We may poll one way, but when we are faced with the practical consequences of some of those harsh policies that sound so attractive on paper, we back down quickly. Like it or not, we do not live in a majority conservative nation.
And perception is reality for most people. Which is fine, until it leads to eye-roll worthy excesses such as likening the Bush presidency to a "national near death experience" or (as Peggy Noonan breathlessly informs us) pronouncing that "George W. Bush is responsible for the demise of the Republican party".
Give it a rest, Peggy. You're starting to sound like a reich-wing Randy Rhodes:
ANNOUNCER: The following is a paid advertisement from Republicans for Mitt Romney, or mass suicide. If John McCain is the Republican Presidential nominee, it will destroy the Republican Party. We’re Romney supporters and we know. Cause, if you vote for John McCain, we’re going to go on a killing rampage. Hey, better dead then moderate.”REPUBLICAN CHARACTER VOICE: "Look, I for one don’t want to die in a hail of gun fire from crazed Mitt Romney supporters, but it’s better then nominating a man who opposed the Bush tax cuts. Hell, John McCain spent years in a North Vietnamese prison. A prison? That doesn’t make him a hero. That makes him an ex-con.”
ANNOUNCER: Exactly, and um, you know what men do in prison. You see if John McCain is President, he’ll make sodomy mandatory. Now, Mitt Romney, well, he believes all sex should be outlawed.
Can we all just give the hyperbole a rest?
The last eight years have been wearisome. It seems the only person who hasn't been a complete jerk is the object of most of this venom: George W. Bush:
Watch him - in a foreign and hostile land - go rescue the Secret Service agent who was being detained and kept from protecting him. See him shoot his cuffs, afterwards, and greet his host.I don’t care what anyone says - Bush is one cool customer; This guy is due some serious appreciation, even if you feel “betrayed” by him. Name the president who got it all right, all the time.
A much-esteemed, long-neglected friend sent an email this morning, which was delightful to recieve. At one point he mentioned this post from yesterday and wrote:
I think (President Bush) has lost his bearings. but then, so did Moses from time to time, it’s quite understandable.
That made me wonder a little - has President Bush lost his bearings, or have we? Is it President Bush who has broken faith with “his base” or have they?
When I read my friend’s line, I thought of a line from Pride and Prejudice, in which Elizabeth Bennett says in new appreciation of Mr. Darcy,
“In essentials, I believe, he is very much what he ever was.”
Perhaps I am a dim bulb, but President Bush has never surprised me, and that is probably why I have never felt let down or “betrayed” by him. He is, in essentials, precisely who he has ever been.
That was what I saw in Mitt Romney.
Something solid.
Something - at the core - true. Dependable. I didn't need to feel "excited" by him. I didn't need him to entertain me: to tell me bedtime stories, to motivate me. I can provide my own motivation. I don't need him to "sell" me the war on terror. I'm not a child who needs to be propped up every twenty seconds. I can read a newspaper. I have my own mind. Don't patronize me.
This is not what Presidents do. I don't want a cheerleader with pom-pons and a ponytail. I want someone who will be cool, calm and collected in times of trouble, not someone who will fly off the handle. I want steadiness. Bush had that quality. Romney has it.
I don't see it in John McCain. I'll say it bluntly: I think my party are fools, though I suppose I'll support them come election day, because I'm not a child and hope doesn't put dinner on the table:
Obama's whole campaign is based on some of the most noble and inspiring sentiments in political life: hope, togetherness, bipartisanship.As he proclaimed last February at a Democratic National Committee meeting: "There are those who don't believe in talking about hope. They say, 'Well, we want specifics, we want details, and we want white papers, and we want plans.' We've had a lot of plans, Democrats. What we've had is a shortage of hope. And over the next year, over the next two years, that will be my call to you."
He's stayed true to that pledge. Not only does he talk about hope - a lot - he talks about the importance of talking about hope. He talks about how he hopes to talk more about talking about the importance of talking about hope. Hopefully.
He touts unity the same way. If we all buy into his "message of hope," he explains, then everybody - blacks and whites, men and women, Republicans and Democrats, lions and gnus, bears and park rangers, Superman and Lex Luthor - will be united!
But united toward what end, exactly? Or does it all boil down to being united about being hopeful and hopeful about being united?
...What if you disagree with Obama's ideas? Are you suddenly against hope?
Perish the thought. I knew what George Bush was when I voted for him. I didn't like the prescription drug bill, but I liked many of the other things he stood for. I took the good with the bad and I've never regretted my choice. Nor have I fooled myself about what the man campaigned on: a compassionate conservatism plank that was designed to appeal to moderates, not classic conservatives. This is precisely what won him the crossover vote and put him in the Oval Office.
Own it.
Posted by Cassandra at 06:01 AM | Comments (44) | TrackBack
January 22, 2008
And They Say *Women* Are Irrational...
“It is like a funeral in here,” Ken Masuda, senior equities dealer at Shinko Securities in Tokyo, said. “No one knows what is going to happen tonight in New York. It is like we’ve gone blind, you don’t know what’s coming.“Until we see New York, all we can do is sell.”
Looks like it's time to hide the chocolate and break out the Midol drip.
Posted by Cassandra at 07:35 AM | Comments (19) | TrackBack