Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Thursday, February 26, 2009

1.75 Trillion Deficit? You better know what you're doing.

So President Obama has proposed a $ 3.5 trillion budget with a projected $1.75 trillion deficit. This means the budget is about half borrowed. It's scary. Ross Perot went ape over $300 billion deficits 16 years ago. The projected $500 billion deficits for 2007 and 2008 were equally scary. The Obama proposal is scary, even to a dyed-in-the-wool liberal like me. Admittedly, the $1.75 trillion figure also includes some budget honesty we never had before. The $500 billion deficit projection was actually much higher, because it didn't include the Iraq war and the AMT fix, which Obama budgets for. It is also true that this 2010 budget is not $1.75 trillion of additional new spending, but represents more a steep large dropoff in revenue. Still we are talking unprecedented annual borrowing. These are the kinds of numbers that are so big - 12% of GDP - that we don't get do-overs if something goes really wrong, if there is no recovery in 2010-2011.

The other comment to make is that the Bush borrow-and-spend policies left us with massive structural debt increases, a permanent and growing gap between revenue and expenses. Most of the "tax increases" are just letting Bush's tax cuts expire as all of Bush's budget projections calculated. If they were re-enacted, deficits would soar naturally. Bush never budgeted for that. Medicare costs keep skyrocketing too, unless some cuts are made. Bush's one big spending plan, Medicare Part D, is also just a debt-bomb.

It really is amazing to me. Barack Obama promised that he would (propose to) deal with health care costs notwithstanding the depression we are in. That is, apparently, the idea behind this budget: do the spending now despite how scary it looks, cut the rate of health care spending growth, and wait for those savings and economic growth to gradually put the budget in balance. It may be just crazy enough to work. What it relies on, however, is weaning Congress off of trillion dollar deficits. They better get it right or the whole country's finances will look like California... or Argentina.


The Kind of Liberal They Feared Most

For anyone who wondered how President Obama would govern, his extraordinary address on Tuesday and his massive proposed budget released today provide a clear picture. Unlike former President Bush, whose only real policy "achievement" (if you can call it that) was to squander the surplus on massive tax breaks to the wealthiest Americans, Obama has laid out a far more ambitious agenda. His budget redirects huge amounts of money and effort into his big three priorities: energy, health care, and education.

Unlike Bush, Obama's liberal values are not just window-dressing: he does not throw red meat to the angry activists while otherwise ignoring the basic principles upon which he was elected. Instead of wading into the culture wars or engaging in pointless social engineering, Obama has put hot-button wedge issues like abortion and gay rights on the back burner and has instead chosen to champion the liberal economic agenda. Obama is the kind of liberal the conservatives feared most.

The right-wing is in a panic. In his opinion piece today, conservative columnist William Kristol warns Republicans that they must, "obstruct and delay," President Obama any way they can.

"They can't allow Obama to make of 2009 what Franklin Roosevelt made of 1933 or Johnson of 1965."

Yeah, right--because we all know how horrible the New Deal and the Great Society were for this country? I almost dropped my coffee cup... The Republicans are so out of touch! The rest of the country is praying that Obama will be our next FDR, leading us out of this economic crisis. The man who beat Hillary Clinton and John McCain--the man who in four weeks got Congress to pass the largest spending/stimulus bill in history--has the personal popularity and political smarts to push through a New New Deal. For the conservative rear guard, that's the most frightening thing of all.


Wednesday, February 25, 2009

Walkback in 3 ... 2 ...

You might remember the story of Phil Gingrey and Rush Limbaugh. Basically, Gingrey said that congressional Republicans shouldn't be taking marching orders from Limbaugh because he can just sit in his studio and talk, and not have to deal with real-life issues that Republicans in Congress have to face. He was right, but you don't mess with Rush Limbaugh. His office got flooded with calls, and so he had to call in to Limbaugh's show and kiss his ... um ... ring. (Stephen Colbert has a great run-down).

Next! Mark Sanford (South Carolina's Republican governor) says that "Anybody who wants [Obama] to fail is an idiot". Now, he didn't mention Rush specifically, but it's pretty clear that the question was in reference to Limbaugh saying "I hope Obama fails."

So how long before he calls in to Rush's show? I'm going to put the over/under at ten days. Any takers?


Food, Folks and Fun: Why Agricultural Policy Differs from Other Trade Policies

RBR's arguments about subsidies distorting natural competitive advantage and reducing efficiencies are largely unassailable for most areas of trade. To my taste, RBR undervalues the economic pain and dislocation caused by changing trade rules in these areas, which should be part of the cost-benefit analysis, timing, etc. Also, RBR and I disagree as to whether reducing subsidies and tariffs should go hand-in-hand with requirements that our trading partners meet labor and environmental standards. RBR discounts the importance of this, as I see it. But the real issue I have is that arguments about free trade made in general do not apply as well to agriculture as one might think.

Agriculture, is a different kettle of wax, a different ball of fish, a horse of a different feather, and lots of other mangled metaphors. Food is more like a public good (like air and water) than other commodities. Food is a necessity of life. The demand curve for food is unlike most other products. Humans need around 2000 calories/day to thrive (broad averages) and even the most incredible athletes cannot consume more than about 7000 calories per day. Most humans live in the 2000-3000 calorie/day range. Until biofuels were discovered, it was impossible for any human to consume more food than that, regardless of wealth (we have discussed this tragedy elsewhere).

Unfortunately, the market price of food is such that about ¼ of the human race cannot afford their 2000 daily calories. This is not too surprising, when you think of what a market is. A market optimizes. It makes the best price for the most people, but it does not ensure a price low enough for each consumer's demand to be satisfied. Think of any product: housing, medical care, gummi bears, and you will acknowledge that the market creates optimal prices, but does not satisfy all needs. This is a problem when applied to food: each consumer's demand must be satisfied. (IMHO, it is a problem for medical care too). Therefore, unless we subsidize food purchases – whether through lowering prices, payments to farmers to reduce prices, or direct payments to the hungry – starvation results. So, at some level, subsidies for agriculture just have to be part of the world food production scheme. A world free market in agriculture simply cannot feed everyone, and it is not designed to do so. Free trade alone won't do; we need some world agricultural policies.

Think of how subsidies work. If it is true that developed countries "dump" food on third world countries at prices below those which their own farmers could afford to produce and sell food, this may drive those farmers out of business, but it also keeps food prices down. It's a mixed blessing. Allowing the price of food to rise so those farmers would be profitable (by ending subsidies and dumping) would help the farmers but hurt the starving neighbors with higher food prices. If we want to help devloping world farmers without raising food prices, it sounds like more subsidies are needed, just in a different place.

Food calories also are not fungible. Quality matters. Taste matters. Calories are not widgets. If for some reason a rupture in the time/space continuum allowed sufficient quantity of calories for the entire human race to annually appear free of charge, like manna, in the Faroe Islands, this would not be the best of all possible worlds. Fruits and vegetables there would spoil before they could reach the rest of the world. There would be large carbon expenditures in shipping it, too. What I mean by this example is that it is simply impossible to imagine that one can import all foodstuffs and achieve the same quality in all products as is possible with local agricultural production. RBR doubts this is the case, believing that we can basically import everything; I disagree. Steps to make local agricultural production more expensive, therefore, would have the negative effect of increasing prices on high quality products and reduce the number of people who could afford the higher quality products that cannot be imported.

Agriculture is also a way of life that people value. Many people prefer the existence of local agriculture to the more efficient world without it. One could argue that subsidies for rural life in Europe are, in fact, the public's way of "purchasing" or "valuing" the existence of local rural life. As a society, are we not free to value quaintness the way we value other things, such as pretty scenery and the arts?

So there are (1) good reasons to support and maintain local agriculture and (2) good reasons to encourage very low food prices in developing countries, even if that means "dumping" foodstuffs there at prices below that which their own farmers could afford to sell the food. I think any agriculture policy must take these into account. We cannot simply end food subsidies in the developed world and expect that the results will be beneficial in the short term or even the long term.


Are the Benefits of Free Trade "Just a Theory?"

LTG argues that the benefits of free trade are "theoretical."  He gives every indication that he thinks benefits from trade are pie in the sky.  That we are better off with the status quo than we are taking an essentially blind leap into free trade based on the fantastic and "theological" arguments of economists.  

But is there evidence that free trade helps more people than it harms?  Yes.  Centuries of it actually.  I'll just present one bit of evidence here because it deals with agriculture protectionism.  In 1846 Great Britain abolished the Corn Laws.  The Corn Laws were a system of tarrifs on food imports designed to prop up British farmers who could not compete with - in particular - American farmers from the rapidly developing Midwest.

Some highlights:  

The price of corn in the two decades after 1850 averaged 52 shillings. Due to the development of faster transportation through rail and steamboat and the modernisation of agricultural machinery, the prairie farms of North America were able to export vast quantities of cheap corn. Every corn-growing country decided to increase tariffs in reaction to this, except Britain and Belgium. In 1877 the price of English-grown corn averaged 56 shillings, 9 pence a quarter and for the rest of the nineteenth century it never reached within 10 shillings of that figure. In 1878 the price fell to 46 shillings, 5 pence. By 1885 corn-growing land declined by a million acres (4,000 km²) (28½%) and in 1886 the corn price fell to 31 shillings a quarter. Britain's dependence on imported grain in the 1830s was 2%; in the 1860s it was 24%; in the 1880s it was 45%, for corn it was 65%. The 1881 census showed a decline of 92,250 in agricultural labourers since 1871, with a 53,496 increase of urban labourers. Many of these were previously farm workers who migrated to the cities to find employment, despite agricultural labourers' wages being the highest in Europe.

There are three points here I think are worth mentioning because of arguments LTG makes.  First, the price of corn in Britain fell - it did not rise as LTG suggests.  Second the ag workers who lost their jobs in Britain moved to the cities to find employment in other sectors - the labor side of what Pombat referred to in her comment.  A great number of these workers probably migrated farther... to North America or Australia.  Third, the US at the time was in the role of countries like Mexico now.  American farmers increased their earnings greatly by exporting ag products to Britain's rapidly urbanizing workers.  They were not impoverished by the move to trade but enriched by it.  Both the North American farmers and the British workers benefitted.  Of course some agricultural interests in Britain suffered but the gains were such that had the British government chosen to, they could have compensated them with a percentage of the welfare gains from trade.

So you see, these things are just made up, pulled out of the butt of some economist with a copy of Road to Serfdom in one hand and a ouija board in the other.  There are historical examples of countries successfully switching to the free trade approach.  

Benefits from trade is a "only a theory" in the same way that evolution is a "only a theory."  


Tuesday, February 24, 2009

Ag Subsidies From the Developing World's Perspective

Hi Everyone,

In a comment to the thread "The Problem With the Central Valley" I asked LTG, in the interest of an exchange of ideas, to list the best reasons he can think of for supporting ag subsidies broadly defined.  I thought I would get the ball rolling with what I understand to be the biggest problems of ag subsidies from the point of view of the developing world.  I'm not an expert on the political economy of agriculture but I have a kind of hobbyists interest in it and I'd like to think I've got a half way decent understand of the basic political and economic issues at play.

1)  Dumping and import restrictions:  When developed countries subsidize and otherwise protect their own ag sectors it directly hurts farmers in the developing world in at least two ways.  First, it artificially lowers the costs of ag products from big farms in the developed world which gives them an unfair advantage in the world markets - this is dumping.  Second, it may actually lock out imports from developing country producers, cutting them off from potentially lucrative markets.  

2)  Debt:  Often, the governments in developing countries respond to the ag subsidies in the rich countries by instituting their own subsidies.  This was a popular strategy in the 1960s and 1970s.  The problem is that subsidies cost a lot of money.  Developed countries can pay for them through tax revenue but many developing countries had to borrow the extra cash.  When interest rates spiked in the late 1970s and early 1980s, these countries found themselves in debt crises.  Many governments were destabilized by this.  

3)  Neo-feudalization:  In his classic book about the political economy of agriculture in Africa, Robert Bates described how government agriculture projects designed to encourage commercial agriculture through subsidies and price controls, led to the emergence of rural elites that had not existed before.  These are not the old tribal and clan elites but rather commercialized land owners with vested interests in perpetuating the costly subsidy programs.  The problem here is that many theorists of democratization - see especially Barrington Moore - have argued that the presence of an entrenched agrarian elite in rural areas can hinder democratization.  

4) The Incentive to industrialize:  If developing countries cannot succeed trading agriculture products that fit their comparative advantage, they turn to industrialization as a means to successfully engage with the globalizing market.  The problem is that since many of these countries may not have comparative advantages and factor endowments that favor export oriented industrialization, they have to subsidize the new industries.  This costs more money and brings on more debt.  

5) Migration:  As ag subsidies in the rich countries undermine the profitability of farms in developing countries, the millions of rural poor who had eeked out a living farming are forced off their farms.  They migrate to cities within their own countries leading to more pollution and urban overcrowding and poverty.  They also may migrate to adjacent rich countries.  This is what we see in the US.  Many of the illegal immigrants that come to the US from Mexico and Central America are people who were forced off their farms back home and come to the US looking for work - often on our own subsidized farms.  

There are more reasons but this should get us started.  Enjoy!


Taxation with some Representation

It is worth revisiting the DC Vote Act after three years. This bill would give the District of Columbia a seat in the House of Representatives and another seat to the state of Utah, increasing the total number of seats to 437. The increase to 437 would be permanent.

One effect of this bill never mentioned anywhere else other than this blog, I think, is on the electoral college. It would increase the number of presidential electors by one, to 539. Note that it would not increase the number of electors by two, because DC gets 3 electoral votes according to a constitutional amendment and that will not change. The extra vote for UTAH, however, would be added to Utah's total (EV = Senators + Representatives). In one sense, this is irrelevant because the next census will realloate seats before the 2012 election anyway. So Utah doesn't get an "extra" seat for that 2012 election unless the census so determines. But by increasing the H of R permanently to 437, it increases the total number of EV permanently to 539. This means that a tie in the electoral college is no longer possible, although it is possible for no person to get a majority of the electoral college (what throws a presidential election to the H of R is lack of a majority, not a tie, but third party EV are rare). Nate Silver will want to change the name of his blog from to, but it is already taken (I just checked and would have nabbed it for myself).

Is it a good idea, this law? Most of the Republicans voting against it are not doing so on principle, but on the political calculation that this is a freebie seat for the Democrats. They argue that it is unconsitutional without a constitutional amendment, but conspicuously do not support such an amendment, so the argument that they are opposing it merely on constitutional grounds is a bit thin.

Is it constitutional? The argument that it is not constitutional is straightforward: Article I and Amendment XIV of the Constitution provides that the House of Representatives shall be chosen by the people "of the several states." DC is not a state. Done and done.

Does this preclude granting DC residents the right to vote? The argument on the other side is (1) that the constitution gives the Congress the right to legislate for DC in "all cases whatsoever," which is sweeping broad language found nowhere else in the constitution and (2) DC is sometimes treated as a "state" for legal and constitutional purposes where Congress declares it should be so. Quick examples (1) Article IV, requiring states to give "full faith and credit" to proceedings of other states applies to DC courts also. (2) The diversity jurisdiction grant of Article III (giving any person the right to take a case to federal court if sued by a citizen of "another state") works when that "other state" is DC. (3) the prohibition of Aritcle I, Section 8 (e.g., no state shall enter into any treaty with a foreign state or grant any title of nobility) clearly applies to DC government as well (4) the guarantee of Aritcle IV of a "republican form of government" surely applies to DC government.

Another argument I might make is that Amendment XV reads as follows: "The right of citizens of the United Staes to vote shall not be denied or abridged by the United States or by any State on account of race, color, or previous condition of servitude. Congress shall have the power to enforce this article by appropriate legislation." One can argue that - although not contemplated when it was adoptedin 1870 - this amendment gives Congress the right to remedy the problem created by denying the vote to DC residents when it is now a city of 750,000 and 80% of the residents of DC are African-American.

Amendment XXIII passed in 1961 gives DC residents the right to vote for Pressident (or rather it gives Congress the right to direct how DC shall choose electors). Amendment XXIV, passed in 1964, bars a poll tax "by the united states or any state." Surely this applies to DC also in presidential elections.


Monday, February 23, 2009

The Problem With The Central Valley

Hi Everyone,

I was going to post this as a response to Pombat's questions and to LTG's passionate defense of farmers in California against the market and nature.  But there were so many good links that I found that I thought I would just start a new post.  

I won't reprise my basic arguments in detail.  If you are interested you can see the comment stream on LTG's thread about "Rain Rain Went Away."  There is also this excellent Q&A with an economist about agricultural subsidies here.  His short answer to "Are there any good reasons to have agriculture subsidies?" is "No."  

Also, Pombat raised several good points.  How much of the water is being used by farmers as opposed to cities.  According to this link, the national proportion in the USA is that farmers use 75% of the water and everyone uses the rest.  According to this story in the SF Chronicle, California farmers use 80% of the water so they are relatively thirstier than the national average.  

That first link also points out that pricing is the critical problem.  Farmers everywhere pay about $20/acre foot of water.  Residential consumers pay $1000/acre foot.  This is what I was alluding to when I said that California farmers have less incentive to select less thirsty crops, more efficient crop rotations or take other steps to conserve water.  Indeed, the story in the SF Chronicle includes some rather defensive statements from California agribusiness lobbyists opposing improving the efficiency of the irrigation system in the Central Valley.  Instead, they want the taxpayers to build more dams up in the mountains to increase storage capacity.

This is now in the realm of basic economics.  When you have people arguably paying about 2% of the market price for a commodity they will over consume it and this will lead to shortages.  The reason this is a bigger problem in California than in places like Iowa is not because of some snobbishness on my part.  Rather it is because, in Iowa, farmers get their water from natural rain fall and ground water pumped up locally with small scale windmills and powered wells.  In California the farmers get the overwhelming majority of their water from publicly funded irrigations projects that bring water from melting snow packs many miles away or divert rivers.  For this water the California farmers are paying 2% of the market price.  
So we have a region where farmers are dependent on government funded irrigation for the overwhelming majority of their water.  They only pay a minute fraction of the cost for that water.  Is it surprising that they over use it?  That they have developed too many farms on marginal land?  

And how have these poor suffering farmers thanked their urban benefactors?  They rail against racial minorities, push racist policies designed to keep Latinos poor and exploitable, provide the core of the votes for Prop 8, Prop 13, and others.  And their representatives veto budgets for months until the state is in a nearly perpetual fiscal crisis.  We're talking about a part of the state that is so political anti-progressive that the term "Calibama" fits all too well.  And they're completely dependent on cash payouts in the form of nearly free water for their ability to do all this.

This is system is extremely vulnerable.  As the available supply decreased relative to farming demand, the price should have gone up - thus discouraging additional development.  But instead, California's farmers were carried "on the cuff" so to speak by the taxpayers.  So when we have a temporary - although with global climate change this drought may be increasingly common - shock, the effect is enormous.  I'm sorry but given the political economy of this whole situation I won't be shedding too many tears for the Central Valley on this one.  

BTW:  Australia has no ag subsidies.  GOOD ON YA!  I do have a question for Pombat and Spotted you guys know if Australian farmers pay market rates for their water?


Saturday, February 21, 2009

Rain, Rain, Went Away, Along with Everything Else

So, on top of all of California's economic ills (statewide unemployment at 9%) and governmental ills (see posts below) we now have a severe drought. Although clouds are overhead as I write this, the truth is we have had only a handful of rainy days since April of last year. This is causing severe hardships in the Central Valley. According to the NYTimes (not the crappy LA Times, of course), unemployment rates in many farming towns are hovering in the 30-40% range. The likelihood is that the federal water controllers will allocate zero water this year, for a variety of reasons related to conservation. So we are in deep, dry, doo-doo. Whatever your opinions are about California agriculture, I'm sure you will agree that the last thing we need in the middle of a growing depression is another dustbowl.

Of course, California's pathetic government is doing all it can to make things worse. Feds are trying to stimulate government and cut taxes. The new state budget does the opposite: it raises sales taxes to 9.25% statewide, slaps 0.25% surcharge on income taxes, and slashes spending on everything from infrastructure to education. Call it the anti-stimulus. The reason? Prop 13 has created an unfair and unstable tax system that rewards the old, rich, and idle while punishing the young, poor, and working. And CA can't do what the feds can do: just print dollars. The obvious solution was for the Feds to fill the budget caps, but the GOP blocked that in the senate.

The only bright spot is that CA's economy is somewhat independent of the rest of the country, so a more severe downturn here will have less effect on the rest of the country than it otherwise might.

Combined with the fact that some creature invaded my garden last night, pulled up parts of the sod, and destroyed my spinach planting bed I laid down last week (nothing will germinate there now, I bet), I'm pretty pissed. Somehow my need to sprinkle fox urine pellets seems in keeping with the whole state economy right now. I need a drink, and it's only 10am.


Wednesday, February 18, 2009

Banged Up and Busted in California

It goes without saying that we know how we got here. But the worst of it is that no one is on the mood to fix it. A while back RBR made the bold statement that us Californian's should get out while we still could. This guy agrees with you. I am beginning to think he may be right. Crumbling schools, water rationing, soaring budget deficits, a failed state government . . . if this were a country, we'd be taken over by the IMF and made to fly right.

After being in lock down all night, the state of California does not yet have a budget plan. State employees are looking at layoffs and furloughs. While the rest of the country looks forward to huge publically funded building projects, our state is looking to put some 300 such projects on hold. Pink slips are going out to state employees. With all those people out of work the revenue stream will only shrink what little revenue stream we have. All this goes on while California natives take over important roles in Washington. I mean, come on, we have the Speaker of the House, the head of the CIA, roles on powerful committees! Why is it that we can decent, smart politicians to Washington, but can't produce any to help run the state? We rather elect actors!

We've tried throwing the bastards out with term limits. That hasn't worked out. We tried protecting schools with voter approved budget mandates, thus sucking the shrinking general fund dry. But that is proving not to work out so well either because schools are being cut. We jettisoned a decent governor for Mr. Muscles. West Virginia is looking better and better to me. And here's the worst part: the public is nearly helpless to change things. It is as if this is mess that only the legislature deals with, the rest of us just sit and wait for the shit to run downhill.

In the latest news: the State GOP kicked out its Minority Leader for agreeing to 14.4 bil in tax hikes. Ok, so let me get this straight. We have a $42 billion budget deficit no revenue stream, and a bunch of programs that require funding. Republicans are dead set against tax hikes of any kind. They want to cut, cut, cut. The Democrats don't see how you can cut enough to make up the shortfall and no one wants to be the deciding vote. In short, it is a monumental cluster fuck.

So here is what I want to know: What would it take to force the state into a new constitutional convention short of armed conflict? Why haven't we stormed the capital with pitchforks?


National Bank Holiday

In 1933, Roosevelt closed all banks for four days in March, and when they reopened they were under new rules and FDIC (federal deposit insurance). It was called a "Bank Holiday" (which is why some Americans get confused at British "bank holidays" that are totally different). This dramatic action largely put a stop to the destabilizing problem of runs on banks.

We are headed the same way. All of our national banks are insolvent. Period. The only reason they do not appear insolvent is that they refuse to "write down" the mortgage-backed securities on their books, meaning they refuse to acknowledge their true value of pennies on the dollar. If they do so, they are insolvent. Piecemeal attempts at putting one big bank or another in receivership will prolong the agony. Amputate the leg and cauterize; do not just keep slicing off another few inches of flesh every couple hours when the gangrene gets too severe.

We need a simple and effective plan: close down BofA, Wells Fargo, Chase, Citigroup - all banks, actually - for a week in March 2009. While they are closed down, replace almost all the senior management and restructure their books, with the taxpayers taking bad assets in exchange for shares in the banks future prosperity. Make sure that the government gets a working majority on the boards of each such bank through its investment. The public needs and deserves to see the executives let go who have failed so badly with their banks. Not let go with golden parachutes; just let go. This, by the way, is the only way to incentivize the next set of bank management not to take irrational risks. They must know that they, personally, will bear some responsibility.

During this Bank Holiday, we must commit all the banks renegotiate all mortgages to reflect ACTUAL current asset value. This can be done. Total residential mortgage indebtedness is around $9 trillion. This tells you what $1 trillion can do. Revamp lending standards at all banks so that they lend not with the reckless abandon of 2000-2008, but with the sensible standards of the 1990s. The current model - some sort of 19th century No Credit to Nobody - must go. Banks cannot behave conservatively (for the first time in a decade) and wait for others to take the risks that the economy will do well. Banks need to take the risks now. Banks also need to restructure credit lines to companies that are struggling rather than turn them off. Again, the banks - backed by the US govt - need to put money out there and take the gamble that the economy will recover. That behavior is the only way the economy will recover.

(As an aside, my family bought a new car this weekend thanks to good deals and the Stimulus package giving an above-the-line dedux for sales tax. This is how we do it, people: we don't retrench, we get out there and continue economic activity).

This is what we need. We need to declare 2009 a Year Zero for finance. The sooner we do this, the sooner we can begin a recovery.


Tuesday, February 17, 2009

OK, so this is cool...

The Obama administration has set up a website,, where you can find information on the economic stimulus package (the American Recovery and Reinvestment Act). The website is fairly basic (but still interesting) at the moment, having only gone live this morning, but in the weeks to come it will expand so we can track where our tax dollars are going. For now, you can read the full bill, see a few summary statistics, and see the timeline of when the additional information should become available. promises to give us detailed information on where exactly the money is going, down to the Congressional district, and also to whom the money is going, down to the individual federal contractor. Given that this is perhaps the largest appropriations bill in history, and that much of the money will be spent at the state and local level, gathering this information together is no mean feat.

Some may consider this a gimmick, but I don't think so. Indeed, they promise to make the data available in XML format to allow web developers to make their own "mashups and gadgets" to analyze and display the information. I think this really raises the bar for transparency in government--I am going to want to start seeing this for State budgets and for all future spending bills. This website promises to give non-politicians a real window on the way government functions. I hope they Obama administration will deliver!


Oh man, OTAN!

In a recent turn,French President Nicky Sark wants to make France a full fledged member of NATO.

The Obama Administration is expressing support for full French NATO membership and for a joint European Defense scheme. This is a break from the past. And of course, the Administration will appreciate French . . . ah hummm . . . "help" in Afghanistan. And since the French are pulling troops out of Africa, there will be some ready to go.

The US has had an ambivalent attitude toward joint European defense schemes for three main reasons: 1)Getting all of the EU members to agree to a defense policy seems to be a long shot (no pun intended). 2)Also, Europeans haven't proven themselves terribly effective when they have tried joint efforts. (The former Yugoslavia comes to mind.) 3) America likes dominating NATO and doesn't want the nuisance of French competition.

To prove his dedication to joint European defense, Sarkozy is allowing a German troops to be stationed in Eastern France. Stop and think about that for just a little while. German troops in Alsace! How far we have come!

The Socialists in the National Assembly have demanded a debate and vote on this issue. They are hostile toward full NATO membership claiming that it would undermine joint European defense.

In the long run, a joint European Defense might be more helpful to NATO than harmful. It may well turn out that a joint European Defense Command would be the perfect sister/brother to NATO.

As an amusing side note: Sarko expects to declare his policy change in April when NATO members meet for organization's the 60th anniversary and he expects to be seated right next to the Secretary General. He said that if he couldn't sit next to Jaap de Hoop Scheffer, he wouldn't come, whaaaaaaaaa! So now they will let him sit where he wants for photos and then everyone will take their normal seats when the cameras leave the room. I'm sure the Russians are loving all of this!


Monday, February 16, 2009


The United States government controlls the export of armaments through the International Traffic in Arms Regulations (ITAR). Of course, the notion of what constitutes a weapon these days keeps growing. Military-related technologies are now often classified as weapons systems of a sort under ITAR. For example, so-called "strong" cryptographic techniques, are classified as ITAR restricted, which causes a host of problems across the internet.

Another wrinkle in the ITAR regulations is that it sometimes restricts the flow of information based on a combination of citizenship and birthplace. For example, a Chinese-born Australian citizen would be restricted from viewing certain data, even if the US were to issue a waiver to share that technology with Australia. (As I understand it, this is because the waivers and restrictions inhabit slightly different portions of the law.) One of our Aussie friends notes this poses a serious obstacle to business because Australian law does not permit the government to discriminate based on birthplace.

ITAR costs American companies significant export business around the world in sales that would not harm US security--and that is no joke. This is one area of trade liberalization where the conservatives stymie themselves: it seems their xenophobic ideology gets in the way of their free-market ideology. It is part of a pattern, actually. The US tends to be rather overbearing in its dealings with foreigners, especially so during the past eight years. Anyone who wonders why ITAR is the way it is just needs to look at the Transportation Security Authority (TSA) or the INS.

I hope the Obama administration will look into streamlining ITAR. It would improve diplomatic and trade relations with our allies, help our allies better defend themselves (which might even relieve some pressure on the US military) and struggling US businesses economically over the longer term. [Note: many thanks to our Aussie friends for raising this issue and suggesting a post. I hope I have represented their views along with my own.]


Friday, February 13, 2009

RBR for Commerce Secretary

This should be an easy sell.
1. He's from a politically important state in the heartland.
2. He's all gooey about free trade.
3. He's got no recent campaign finance scandals.
4. I doubt he owes back taxes from the early 2000s -- or if he does, it's probably less than $28,000. Hard to rack up big tax debts while earning a Ph.D.
5. No nannygate.
6. He can say, in response to comments about budgets being bloated with pork, "I ain't afraid of pork, I eat pork for breakfast."
7. He understands something about how the EU works.
8. He seems to understand the scientific rationale behind using statistical sampling in the census.
9. He wears glasses. That means he's smart.
10. He already has his own subscription to "The Economist."

As far as I can tell from watching the media reports and the doings on Capitol Hill, these appear to be the only important qualifications.

Finally, he's not going to quit before Senate confirmation hearings. Jeez, what is up with Granitehead Gregg?


The Bipartisanship Process

Keep going, President Obama. To break the atmosphere of hyper-partisanship in Washington, you have tried little things and big things. You have invited Republicans into your new home for cookies, cocktails, and watching the super-bowl. You have invited Republicans into your Administration, including key Cabinet posts. You have gone to the Capitol to speak directly with the Republican caucus. Keep going.

No one should be surprised that the first three weeks of effort have failed to alter a culture poisoned by a decade of determined effort. The real test of your determination to bring about change is not really how well you make the first overtures, but how gracefully you handle their first refusals. Turn the other cheek and keep trying. The good that can come of this thankless effort to thaw the ice may long outlast your Presidency.

Like peacemaking anywhere, bipartisanship is a process, and it takes time. Bipartisanship is not about winning votes but winning hearts and minds; it is not about building support for your policies but building relationships with the opposition, and trannsforming the proverbial political aisle from a dividing wall into a meeting place. In honor of Valentine's Day, Mr. Obama, keep handing out the roses and don't fret too much about the thorns.


Monday, February 09, 2009

CSPAN Cracks the Nielsens

Not yet, but it will if this comes to pass. Porn star for Senator in Louisiana? At least she won't be sleeping with prostitutes, like Senator David Vitter. Imagine that! College kids hunkering down for a six-pack of Natural Light and a good filibuster. CSPAN 2 will be affectionately known as "the deuce." I mean, sure, the Italians already did this, but that's small beans. Just imagine someone addressing Stormy Daniels as "The distinguished gentlelady from Louisiana." Imagine the possibility of wardrobe malfunction!

Here's the best line: "She said she's planning a "listening tour" around Louisiana to talk about a range of matters, including the economy -- which along with women in business and protection of children are the three issues listed on her Web site. When told Vitter can be a tough opponent, she said she's "always up for a good fight."

I can see it now. Stormy Daniels and Kay Bailey Hutchison tear at one another's blond hair right down to the non-blond roots. You've come a long way, baby. Maybe this is why Hillary Clinton wanted out.


Sunday, February 08, 2009

Wombat Roast

I just found out that it seems that much of southeastern Australia is on fire and over a hundred have died. How does this not make it to the news? Oh, right. I know, but really. Now I hear arson? Any news from the Aussies on the blog?


Friday, February 06, 2009

Will there Be a Recovery Package?

The "stimulus" or recovery package may happen soon. At least two Republican senators have broken ranks with their obstructionist brethren. But this bodes ill for the future. While spewing rhetoric about bipartisanship, McCain, McConnell and the rest offered no such thing. They demanded that the Congress accept their package or nothing. Their package was just a redux of the 2001 GWBush Tax cuts: call it Bush Tax Cuts II. More big tax breaks for the wealthy and very little for the consumers whose lack of spending will drive a depression.

In the end, it looks like the President will win on this one. We'll get some big spending that will hopefully put contractors and then subcontractors back to work, re-employing some of the 3.5 million who have lost their jobs since September and re-invigorating local economies. But if Obama needs 60 votes for each piece of legislation from here on out, and if the Republicans take the Rush Limbaugh line ("I want Obama to fail") then it's going to be a long four years. Especially because the American public has never been good at understanding whom to blame. They will as likely blame Democrats for the Republicans' obstructionism, simply complaining that the Democrats did not fulfil their promises, without analyzing why. Republicans appear to be counting on this. All in all, it has been a good week for them. But a very bad week for America. It could be worse, though. It could be what Democrat Sam Nunn of Georgia did to his own party, skewering President Clinton and handing him his first major defeat of his presidency, keeping in place a bar on millions of Americans from serving in the military just because they happen to be gay.


Thursday, February 05, 2009

The Changing Family II

I thought I'd throw up a graph regarding the demographic shift LTG discussed in his previous post. This graph, which I threw together from the US Census, shows the percentage of children living in a househould with 0, 1, or 2 of their parents.

Percentage of Children Living with 0, 1, or 2 Parents

Source: US Census, Survey of Income and Program Participation

While this is not precisely the same shift LTG discussed (his post dealt with birth rather than household living arrangement) I think it reveals the same phenomenon. One critical feature is quite evident from the graph: the demographic shift has already happened. The change happened during the 1970s and 1980s, and it has now stabilized. Before 1970, consistently about 10% of children used to live in households with only one parent; after 1990, that figure is now 25%.

This fits nicely into the generational scheme discussed here a while ago. Generation X was born during the decades of upheaval--which may help explain why divorce and single motherhood are more sensitive topics for children of that time. The Millennial generation is the first to be born entirely in the post-shift years--they are the faces of the new American family. The good news is that they seem to be doing just fine.


Wednesday, February 04, 2009

The Vatican Retreats

In the face of worldwide condemnation for reinstating a Holocaust denier as Bishop (even Chancellor Angela Merkel complained publicly), the Vatican Secretariat of State Cardinal Bertone has now issued an unsigned statement from the Holy See reading in part:

Bishop Williamson, in order to be admitted to episcopal functions within the church, will have to take his distance, in an absolutely unequivocal and public fashion, from his position on the Shoah, which the Holy Father was not aware of when the excommunication was lifted.

Furthermore, perhaps as penance for embarrassing the Pontiff, the Vatican has now also commanded the four former members of the St. Pius X Society to publicly affirm their support for the Second Vatican Council--the very issue that got them excommunicated in the first place.

What bugs me about the Vatican's statement, however, is their dishonest claim that somehow the Pope was innocently unaware that Bishop Williamson was a Holocaust denier. That's crap and everyone knows it. The Pope was just more concerned about taking a political dig at Vatican II than he was about re-admitting a hateful schismatic into the fold.

Meanwhile the Obama Administration just dis-appointed two Cabinet-level officials who had merely underpaid their taxes--a far cry from denying the Holocaust--and President Obama himself personally admitted, "I screwed up." While that is not good news, it is at least a refreshing change from the former President's blanket insistence that he never made any mistakes worth mentioning. Perhaps there is a parable here for Pope Benedict XVI regarding the relative virtues of personal humility versus a doctrine of infallibility.


Monday, February 02, 2009

Holder, Mark Rich, et all

I keep hearing the media talk about Holder's role in the Mark Rich pardon, but no one reminds us why Mark Rich was such a persona non grata, nor are we made aware of his links to the like of Lewis Libby and Bernie Madoff. Also, what did Holder do exactly? So I thought it worth reminding everyone of what the big deal is. And I used Wikipedia heavily here, so . . .

Mark Rich was a commodities trader in New York. He was one of the people who worked in oil commodities and developed a spot market for oil. This put him in the thick of it with countries like Iran. In addition, it was said he had ties to the Israeli Intelligence community.

When the hostages were taken in Iran, Rich was accused of cutting illegal oil deals despite an embargo on Iranian products. Furthermore, he was charged with evading taxes. He and his partner fled to Switzerland and did not return following their indictment in 1983. They were placed in the FBI's most wanted list. Rich, with $1.5 bil to his name was listed as the 246th richest America in 2006. Some of that was through ill-gotten gains, no doubt. He had a wife and three children at the time that he left in New York.

Rich was indicted under the Racketeer Influenced and Corrupt Organizations Act (RICO) which was initially developed to prosecute the mafia. The Act covers some 35 crimes. If two of these crimes is committed within a 10 year period, the guilty party can be fined up tot 25,000 and get 20 years in prison per racketeering count. In additional, all gains from illegal acts must be forfeited with interest. Those hurt by the racket can file hefty civil suits against the guilty party for damages as well. So you can see why Rich would want to avoid such things.

In 1989, the Justice Department stopped using RICO in tax cases like the one against Rich and relied on civil suits. This is the first justification for Clinton's pardon.


Clinton explained that Rich was not a criminal, but that he was subject to civil suit. And a condition of his pardon was that upon his return to the U.S., he would abandon procedural defenses against suits brought against him. He has yet to return to the US, probably never will, and Clinton knew that. He holds a Spanish and Israeli passport and there are questions about his abandoning US citizenship.

It is also said that Clinton was "bribed" by donations from Rich's ex-wife to the DNC and the Clinton library. Furthermore, Clinton stated that tax specialists had determined that Rich was not guilty of tax evasion. People ranging from Ehud Barak to King Juan Carlos I supported the pardon. Lewis Libby represented Rich from 1985 until the spring of 2000 and agreed that tax laws had been observed by Rich, but that he was wrong (not guilty mind you) to trade with Iran.

Rich had money invested with a hedge fund run by J. Ezra Merkin who in turn was invested with Madoff. Guess how has lost some big money recently? It is estimated that he lost $10-15 mil.

Where is Holder in all of this?

Clinton granted a controversial pardon of Rich upon leaving office in 2000. Eric Holder recommended the pardon, over the objections of the U.S. investigator, James Comey.

I think, the Republican's have a legitimate beef with Holder over the Rich pardon. No matter how you look at it, the pardon looks pretty fishy, as if they were doing legal gymnastics to justify it for political reasons. That would make Holder little better than the Bush appointees. Will it hold up his nomination? Yes. Will it stop it? No. But people will be watch Eric Holder very closely once he is in place.


The Changing Family

I stumbled upon this quote this morning

"IN 1960, UNMARRIED MOTHERS accounted for about 5 percent of births in the United States. Now they are having almost 40 percent of the country’s babies. About half of these women are on their own, and the other half are living with a man at the time of the birth, according to Pamela Smock, a sociology professor at the University of Michigan."

That is a staggering change in America's family life, no matter how you slice it.

But here's what's new in the article:

"What’s less familiar is what these women do next. Increasingly, instead of giving their children a father, they give them a sibling. Schmidt’s data show that second births to unmarried college-educated women have risen even more rapidly than first births — nearly sevenfold since 1980. For Fran and her friends, a second child, not a husband, becomes the path to normalcy. "

Now, I'm not sure about whether having a second child is really about replacing a husband, as this article seems to suggest, or just about a decision to have another child because the first one worked out well. What it does show is that many women are now having "a family" out of wedlock, not just "a child." That is a new thing.

Yet this is not about the collapse of fatherhood. Although the article doesn't mention it, fatherhood is not really declining in the USA. As I believe from my first-hand experience recently having taken 6 weeks of paternity leave and interacting with other young fathers, where men are part of families, their role as parents in child-rearing is increasing, not diminishing.

What is going on here, then? Let's take a look at all adult men and women. 1. About half or more join families together and raise children together, whether married or as European-styleu unmarried-but-committed couples. 2. Another large and growing segment never have children. 3. Then there is a segment of that have their own families as single women, which is now exploding in size. Except that the MEN aren't present in this last segment, just the women. What are the men in this segment doing? This is a question worth asking because of how big the group must be. Demographically, what does this mean for the future of the country? Any thoughts?


Senator Judd Gregg (R-NH) for Commerce Secretary?

What gives? I hear now from MSNBC (tv) that some sort of deal has been struck to replace Gregg in the Senate with a Republican caretaker who will be there for two years and not run in 2010. That's an awful idea. That sort of person will be unaccountable and may be more likely to filibuster than Gregg who - it seems- is sympathetic enough to this administration to join it. This is a lot to do to ensure that Gregg will not filibuster the stimulus package (remember, it only takes one GOP senat0r to ensure no filibuster). Heaven help us if the re-appointee is Sununu.