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."

Monday, June 18, 2012

Another 2 Cents Worth on Europe and the Euro Crises

Hi Everyone,

With the latest election results in Greece and France there is another round of media coverage on the ongoing crises in Europe.  I say “crises” plural because there are, in fact several national crises with different causes and different possible solutions.  All of them are contributing to an overall problem for the Eurozone as a whole.  That much is covered well in the press.  I heard this point in particular made today on NPR.  But what is not discussed is how the fact there are different types of crises in Greece, Italy, Spain and Ireland leads to different options for responding to each of them.  This is fitting because in a real sense, all of these problems result from a flaw in the Euro zone which was that there was no way to establish a single monetary policy that would be optimal for both rapidly developing but poor countries like those currently in crisis and the wealthier, slower growing countries of Northern Europe.  Just as there was no one optimal policy for the entire Euro zone before 2008, there is no one-size-fits-all solution to the various problems today. 

For example, in Greece the problem is that the government is incapable of enforcing its own tax laws.  Even though its population might have been able to support the level of government spending established in the heady days after the Athens Olympics, that would only have been possible if everyone actually paid their taxes – or at least a sufficiently high percentage of people that any losses to evasion would be manageable.  The problem is that the Greek government spent its resources during the boom largely on gifts to constituents.  Policies like lower retirement ages, more generous pensions, more generous vacations, etc, did not prepare Greece for the problems it might face in the future.  There was little emphasis on investing in things that might have enable Greece to weather an economic downtown.  Greece did not, for example, invest in civil service reform or professionalization.  While the world economy was inflating the global bubble, Greece could borrow money to finance all of this.  But as soon as borrowing became in practical, the Greek government simply did not have funds to function.  So  when the 2008 recession hit, much of the revenue available to the government disappeared just when demands for government services spiked and the government was incapable (note: not necessarily unwilling) to respond effectively to either development.  Now Greece is in a situation where its spending is unsustainable with locally attainable resources and its debt load is such that it cannot borrow more to keep things going through the current recession.  The debt load is so big that it cannot manage the payments on existing debt, let alone assume more debt on its own.  Greece has no choice but to cut spending and try to raise taxes (although it is unlikely to successfully increase revenue in proportion to its tax increases).  The only way Greece can do anything other than a massive austerity package for years to come is if someone else pays for it.  Even a devaluation would probably have to be so draconian that it would devastate not only the Greek economy with hyperinflation but risk dragging down the rest of the Euro zone along with it.  And by “someone else” of course I mean German and other Northern European tax payers.  And even in that event, the long term problem of the inability of the Greek civil service to effectively manage the political economy of the country would not likely be solved  by any bailout – at least not one envisioned by any of the key parties involved so far.  Greeks opposed to bailout/austerity package frequently complain that austerity is being forced upon them from the outside.  But their proposed solution, that German tax payers write a blank check to the Greek government is no less undemocratic and has the added flaw of being grossly unfair. 

Italy, Ireland and Spain
But in Spain and Ireland the government was relatively responsible.  Prior to the 2008 crash debt/deficit levels in these countries were manageable if a bit on the flabby side.  Italy and Spain in particular had recent histories of seemingly sustainable spending levels.  Italy had actually been paying down its debt for over a decade.  But the sustainability of their long term debt schedules were dependent on continued economic growth.  The 2008 crash hammered the real estate and construction bubbles in these three countries.  Even after that pounding, the Irish government could raise its corporate tax rates (for example) quite a bit and still have the lowest corporate tax rates in the Euro zone.  Another possible solution for these countries would be a relatively modest devaluation of the Euro (say back to its original value against the dollar at one-to-one).  That would boost exports and possibly stimulate some growth not only in the Mediterranean but in export dominated Germany as well.  The difference between these three countries and Greece is that IF these countries could manage to borrow  (or print) enough money to stimulate their economies back into growth, these three countries could be back on track in relatively short order (like a year or two instead of the decade or more of misery that Greece faces).  In these cases the people of these countries who complain about harsh austerity being imposed by Germany may have a point.  Other options are viable. 

Keynes and the Europeans
The interesting thing here is that the differences between Greece on the one hand and most of the rest of the European countries facing deficit crises is that it underscores the necessity of professionalized and effective government institutions for the success of a Keynesian approach to political economy.  Absent effective institutions, any attempt to apply the kind of Keynesian stimulus approach to a recession will only result in the kind of quagmire Greece faces today.  Eventually, no more new borrowing will be allowed and the government will have no other means of sustaining existing government services. But if there is a minimally effective government in place, Keynesian stimulus might be an option that deserves more consideration in Europe than it currently receives.  

Lessons for and false comparisons with the US
The US has a functioning and professional civil service.  The US also has historically low tax rates across the board.  When Republicans begin to shout that the current deficit/debt situation in the US will lead us to become “like Greece,” they are simply wrong.  If there are any useful analogies to be found for the US in Europe, they are Ireland with its low tax rates and fairly straight forward housing bubble collapse.  For both Ireland and the US simply raising taxes – even selectively and not dramatically - is a perfectly workable, long term solution.  It is also worth noting that the US economy is already flirting with growth rates that are high enough to make even the Italian debt levels sustainable based on their pre-2008 bond yield rates.  Unfortunately for Italy, Italian bond yield rates are now far higher, requiring a much higher growth rate to sustain continued borrowing. US bond yield rates however are very very low.  So we can engage in a lot of Keynesian stimulus and "get away with it" contrary to Republican rhetoric.  


Sunday, May 27, 2012

Capitalism and Accountability

There is an old saying they use to have in Soviet Russia. "They pretend to pay us and we pretend to work." This bears some thinking. Capitalism works when there is autonomy leading to motivation and resulting in accountability. And in today's market, dominated by corporate entities, the common clerk or local manager has little autonomy and thus, even less motivation to make a decision. Accountability in today's market is a depersonalized annual appraisal. Office Space, the movie, shows a new kind of Marxism in action. As a moderate Democrat, I can definitely understand why some Republicans get their dander up about over-regulation in some areas. Part of our employment problem, I think, is less about money and more about the pure hassle of getting a good employee to begin with and then getting rid of bad ones. And it is all tied into this question of autonomy and accountability, which has much larger ramifications for society and economy.

Marx was quite clear about the alienation that can come from mass production. Well, we are seeing the results in spades- in the service industry. In my case, I see it most immediately in my daily interactions which usually involve retailers. But I see it my office as well. We see this lack of accountability since 2008, in banks, insurance dealers, and the like. I am afraid capitalism and communism have become in essence the same thing by another means. I am sure this will spark some long-missing, lively blog discussion. But let us consider: What is the difference between a government centralizing production and prices and corporate entities that even if they don't totally control prices or production, are so big, they no longer respond to customers (i.e citizens) and who have monopolistic tendencies?

Here are some examples from my daily life-

1) I discovered last week that someone had paid off the $38K balance I still owe on my student loan. After a hear-racing moment, I called the USDE only to discover, like many others before me, that the USDE no longer administers my loan. It has now contracted out the Missouri Higher Education Loan Authority (MHELA)- a non-profit created specifically to get this kind of deal. This happened with no prior notice to me. Had I not chanced to log into my USDE account, I would not have known that the payment address and account number had totally changed. Good to know ahead of time, don't you think? "Doesn't my government owe me the courtesy of an explanation letter BEFORE they screw with the account", I ask the customer service rep. "Never mind," I say. It's not your fault."

2) Michaels: I was sent two coupons by Michaels, a chain craft store. One was for 50% off a regular priced item May 25-27th. The second was 20% off the entire purchase, but only good on Monday. So I took the 50% off coupon and selected my full price item. At the counter, I learn that the item is actually on sale (it wasn't marked as such on the shelf) so I can't use the coupon. The coupon would be a better deal than the sale price. "Can you take the 20% off today and I'll surrender the coupon?" "Nope. Come back tomorrow." "Forget it," I reply. They lost a $35 sale and the local and state government lost the tax revenue from the purchase. I won't be going back. No point telling the clerk off. It's not her fault. The store belongs to some distant entity, she pretends to work, and they pretend to pay her. I am sure she gets little better than minimum wage.

3) Staples: I am a photographer. I use a lot of ink. Staples use to give you $3 credit on recycled ink cartridges. You would take recycled cartridges in, buy new ink, and get an immediate price cut. No more I recently discovered. Now you have to go online, sign in, print a certificate (ironic considering you are now using the very ink you are trying to conserve, or you may not be able to print if you are out of ink) and bring it to the store when you want to buy your ink. I complain to the clerk, "So what used to be possible in one trip now takes 2 trips,and you are going to make me jump through hoops? That's not service. But I know, It's not your fault." She agreed it was dumb, and that it wasn't her fault. But it ensures that fewer people take advantage of the program. It is made to look like the company is giving you a deal, hoping that you won't actually take them up on it. It's like rebates that get advertised as sales

Get the theme? No one is a fault. We have a specal deal on boots today. Get in line. Yes, all of them are red and all them are size 12! But they are on special today! What does it remind you of?

Now let's look at how we shut a majority of people out of the system entirely- reverse discrimination. In an attempt to play by the numerous hiring rules, to avoid litigation, and to be sensitive to the less fortunate in society, we have succeeded in making hiring a nightmare for everyone. Since the very fact that I select means that I discriminate, then we prevent me from really selecting, but then try to hold me responsible for the outcome.

1)In my office, I want to hire someone to do a job. But I can't just hire someone who is qualified. This person must log on to a special website. Spend 60 minutes posting their information (we used to call it a "resume") and then wait for a confirmation number. This process has been streamlined substantially by the Obama Administration by the way. It used to take several hours. Then some computer system will filter all the candidates who applied for the job. I will get a list of people ranked based on their points. Points are given for veterans and current competitive service employees, disabilities, and god knows what else. After that, an only after that, do your qualifications count. Then we are told that we don't hire enough people with disabilities. And that while we don't have quotas, we have a goal of having 20% disabled on the staff. But we aren't allowed, I point out to ask on a form if someone is disabled. Yes, we are told, but the person can volunteer to declare themselves disabled. So, I point out, if you actually could get everyone currently on staff who is on Prozac to admit it, then we might actually exceed the "goal". I am told that this is true. So rather than selecting and being responsible for the selection, I need only ask for a list containing, excuse me for the crassness, a veteran with a gimpy leg or head injury of minority status. And then I can randomly choose 5 people an hope for the best. Because, after all, it won't be my fault. Who cares if the government gets stuck with some one of lesser qualifications, that they then can't fire even if performance is poor.

So I am looking around, and asking myself who is responsible? We have centralized so much, that some mystical, Kafkaesque emerald castle runs everything and we aren't sure who is behind the curtain. For any system to work, but particularly for capitalism to work, there must be a sense of responsibility and a sense of autonomy and accountability based on individual decisions. What we have now is defeatism, and a surrender of responsibility to computer systems and organizations where everyone is responsible, so no one is responsible. And don't even think of challenging the system too much. The Occupy Movement was the closest we got and it seems now invisible- the way the green revolution is in Iran, the protesters are in Russia now that Putin is elected.

When there is no autonomy, no one is responsible, and therefore, we pretend, and they pretend. How is it really differently from the system we claimed to defeat in 1989?


Sunday, March 25, 2012

What the Cal State Gambit Says about Public Education Costs

Recently the California State University announced that unless a referendum passes that will partly restore their funding levels, they cannot afford to admit more students. So they won't. They're going to freeze admissions.

Think about what that says. Populist rhetoric would have you believe that the reason the costs of education are rising because universities are gauging students. I often hear my students complain about the costs of their education (the university I work at has the lowest tuition in its peer group). They believe that these costs are simply a result of feckless professors and administration gauging the students because they can. But in a world where state support for public education is dropping fast, in large part because the same politicians who use and encourage this populist view are arguing that they have to punish the professors and administrators for the rising costs by cutting funding further.

In response public universities have tried to keep tuition costs down. But the result is now that every new student that comes in the door of the universities represents a loss. That is, it costs more to educate that student (especially in a Science/Technology/Engineering/Math) than their tuition covers. I've talked to lots of professors in various colleges, disciplines etc and they all tell the same story. Tuition doesn't even cover half of the costs of operating the program. The populists will tell you that is because professors costs more. But here's a secret. Tuition never covered costs - ever. Public education was always subsidized by tax money and private education was subsidized by charitable donations and endowments.

That the CSU system sees freezing enrollment as a viable budgetary strategy tells you that cuts to public education have gotten so bad that the universities can no longer afford to keep operating unless they get more money from the state or dramatically increase tuition to the point where most of their students couldn't afford to attend.


Friday, March 23, 2012

Terrorism in Toulouse

While the French media ask how a man who was under surveillance managed to amase a weapons cache, I have a bigger question, one that I am sure the French will be asking themselves once the memorals are over and the bodies burried: What social forces push these people toward delinquency that would land them in jail to be radicalized? Did this young man, and his brother who seems to also be radicalized, feel marinalized? These are questions we ask every thime there is an attack.

Toulouse is heavily populated with Pieds Noirs, North African born French who are often resented in France, or at least noted as something “Other”. Mohamed Merha was French, born of Algerian immigrants. This also made him an “other”. And being "other" in France means exclusion. The French media focuses on his troubled teen years, his delinquency, and even refers to him as the “madman”, but that is just too easy. Madmen aren't born. They are made. They are products of their homes and communities.

Toulouse is a agriculture region that, true to form, votes conservative. Le Pen or his party reps usually do pretty well in conservative Southern France. However, in the last elections, the socialists took the Midi-Pyrenees, the department where Toulouse dominates. This is in large part because Muslim voters, who made up about 5%of voters in the 2007 election, went socialist. That doesn't sound like a large share, but made a huge difference. Sarko’s get-tough on immigrants talks scared many of them away. Toulouse is a first and foremost, a city of immigrants.

Today on the streets of Toulouse there was a “million person march” in honor of the victims. And this weekend, there will be another silent march to the Jewish school where the students and teachers were shot. Among the banners being unfurled in Toulouse today were two in particular that were noted in the Depeche Du Midi, the regional daily newspaper. The two were written in French, Arabic, Hebrew, and Occitan (regional dialect). One said: “Live Together: equality, solidarity, dignity” and the second said: “Jews, Christians, Muslims, same God:Love”. The meta message beyond the multilingualism is clear and strikes me as a changed attitude. In my days in Toulouse, in the late 1990s, such a thing would not have been seen. Let's hope it will continue.


Friday, February 24, 2012

The No-Reality Primary

Every day we see more and more bizarre statements from Santorum, Gingrich, and Romney that are so far removed from reality it is hard to know how to respond. All three say that President Obama is going to turn the United States into a socialist state. There is no evidence for this idiotic statement, and none is ever adduced. At the same time, and without irony, they complain that the new health care law reduces funding for Medicare. Santorum said this morning that the United States is alienating every ally and appeasing every enemy. It is hard to know where this comes from. The only ally whose relationship is not MUCH stronger now than it was under Bush is Israel and Pakistan, and that is only because Obama have a much more irascible Netanyahu to deal with and Paksistan is such a freaking mess. The charge of appeasement of enemies is hard to fathom. Killing Osama Bin Laden on Pakistani soil was appeasement? Apparently an apology for soldiers stupidly burning the Koran is appeasement, which is nonsense. A moral person apologizes for his own wrongs even if others have also committed wrongs against him. What else?

What you have from these Republicans is blind hatred of Barack Obama for reasons more or less unrelated to the man or his policies, or anything in reality. This is not how you win an election with persuadable independent voters. This is why the primary is so volatile and strange. It is not based in reality.

This is, at heart, an inside debate by a core Republican electorate that is reacting from the unspoken, unacknowledged feeling that something is going very wrong if a black man is President of the United States of America.


Monday, February 06, 2012

Quit Politicizing Women's Health

There has been a lot of news the last couple of weeks about changes to medical policies that directly affect women’s health. The most recent has been the Obama Administration’s declaration that all medical care providers who receive federal funding and who serve diverse populations will have to offer birth control. Before that, it was the Susan G. Komen For a Cure foundation. That foundation was going stop paying Planned Parenthood for mammograms.Before that, we've had political discussion about HPV vaccinations.

Everyone just needs to stop politicizing women’s health. I can’t think of a single men's heath issue that is politicized or made such an open subject for public scrutiny. No one is talking about offering condoms or vasectomies to men, both opposed by the Catholic Church. Nothing about Viagra or testosterone supplements. What about reproductive services? Unless something has changed, the Church doesn’t like infertility treatments either. All of these health decisions that MEN and women make daily are private choices. They should not be fodder for religious and political games.

Freedom of religion means that you have the right to choose to practice your faith or not. And you can choose to practice any faith you wish. That said, forcing religiously affiliated institutions to offer an array of health services and reproductive services does not violate religious rights. It simply allows people to have a choice. If I am a practicing Catholic, then I can choose not to use birth control. So what these institutions are really saying is that they don’t want to offer choice because most people would choose “wrongly”.

Religiously affiliated medical facilities and universities should be medical facilities and universities FIRST and religious organs last.


Tuesday, January 03, 2012

Iranian Saber Rattling- Don't Panic

Iran has been threatening to close the Straits of Hormuz- again. They do this periodically. I doubt very much it will actually happen. I think this is “North-Koreaesq”/”Saddamesq” game playing of a desperate regime. What they really want is a spike in energy prices to further weaken Western economies. They are using the tools they have.

The Iranian government is weak and slowly collapsing. There have been reports of tensions between the Ayatollahs and Ahmadinejad. The latest round of sanctions is aimed at the Iranian Central Bank and seeks to hasten the process. And while we haven’t heard much publicly about the Green Movement, it is alive and well underground. It still threatens the regime. Choking off money with these sanctions will fan the coals. That is what we want.

Some have speculated that the saber rattling over Hormuz is intended to draw first fire from the US or its allies, which would then re-entrench the current government and its Ayatollahs. I doubt they are hoping to get the US to shoot first, but they may be baiting Israel. With the Syrian regime weakened, Israel is probably feeling queasier than usual. But Iranians are intelligent gamblers. They know we won’t strike militarily in an election year. We don’t have the money. They do know what a spike in Energy prices would do. The mere threat has already caused a spike. But then, it doesn't take much to cause an oil price hike.

Another news commentator on NPR said that Saudi is increasing its oil production and that we are hoping for Libya’s oil to come back on line as well as Iraqi oil. I wouldn’t count on that. Iraqi security is obviously a problem and the Iraqi government isn’t going to do too much to anger its Shia cousins in Tehran. We may have live with higher oil prices and take the hit.

We should not underestimate the game Iran has been playing over the last 30 years. They have been more effective that Libya ever was at creating terror cells. They have kept their population poor by turning their oil money into guerrilla movements, like Hezbollah and Hamas. But they have also funded several other groups in places like Pakistan, Iraq, Afghanistan, and India. This is well known and documented. I myself have commented on it several times in this blog. Wherever there was an opening for insecurity and mayhem, Iranian money could be found. It’s a rogue state- but a very ancient civilization that has survived by skillfully playing diplomatic and military games. So while we should be wary, we should not panic. We need to see this for what it is. The worst thing we could do is to attack or allow our allies to attack!