Matt Yglesias

Endgame

Got real estate, I’m buying it all up in outer space:

— Howard Dean lines up with the bad guys.

— Ted Olson lines up with the good guys.

— College versus a stereo.

— What’s a good value in college education?

— “The Best Class Money Can Buy”.

— Reading things like this I wonder if there’s a case for a Romani State.

— Porajmos, the Romani Holocaust.

— Alaska politicians are the most hypocritical kind of politicians.

Fresh from the Scott Pilgrim soundtrack it’s my favorite Canadian band, Metric, playing as The Clash At Demonhead: “Black Sheep”.

The Coup of 2011

It occurred to me today that there’s at least some chance that in January of 2011 the US Senate will have 49 Democrats, Joe Lieberman, Charlie Crist, and 49 Republicans. Which is to say that Lieberman & Crist could form a two-man caucus, hold the balance of power, and drive organization of the Senate. Crist could leapfrog seniority and chair a committee. And if it looked like that might happen, mightn’t it make sense for Northeastern moderate Republicans (Snowe, Collins, Brown, Castle) and Southern moderate Democrats (Landrieu, Pryor, Hagan) to join their rebellion against the two party system? After all, Duverger’s Law predicts that we should only have two parties in any given place but it might make sense for those to be different parties in the different regions.

I recall back when Jim Jeffords switched parties in 2001 thinking that it would have been canny for Collins, Snowe, Specter, and Lieberman to all band together with him to form some centrist bloc that could control the agenda. There turn out to be lots of reasons why that sort of thing doesn’t happen. But one thing I’ve learned over the past nine years is that the American political system is very norm-driven in addition to rule-driven, and sufficiently entrepreneurial politicians can change things up quite a lot.

Development is Hard

One of the weirder things to happen over the past few years has been to see defense policy circles basically just recapitulate the errors made by in-retrospect-naïve development economists decades ago. That’s what came to mind when I read Reihan Salam’s post on Pakistan where he observes that though there’s a compelling case for humanitarian assistance in an emergency, it seems doubtful that there are good prospects for improving Pakistan’s economy over the long term through aid:

Planting crops, building infrastructure, restoring the agricultural and economic base: though I can certainly see how the U.S. and other affluent countries can be helpful in these domains at the margin, it’s fair to ask whether Pakistan’s government is willing to take the difficult steps it needs to take to provide a basis for long-term growth. Here are a few steps that come to mind: (1) a serious, long-term commitment to women’s literacy; (2) religious freedom for the Ahmadiyyas and various oppressed Muslim sects, Hindus, Christians, and other minorities; (3) aggressive land reform that would break the back of feudalism in rural areas; and (4) a sharp reduction in military expenditures directed at countering the supposed threat from India.

Until these steps are taken, one can plausibly argue that aid flows to Pakistan will essentially subsidize the country’s corrupt, militaristic elite. Money, after all, is fungible. It is the Pakistani elite that decided to invest in nuclear weapons rather than the rural poor, not the much-despised United States. But the U.S. has helped keep the Pakistani government afloat despite abominably bad human capital policies by transferring billions in military assistance.

But rather than target this critique at a hypothetical plan for Pakistan, why not focus on the actual plans unfolding across the border in Afghanistan? As I understand it, our policy there puts economic development at the core of our strategy. But if the US government knew how to produce development in foreign countries just because we want to see it happen, the world would be a very different place. The fact of the matter, however, is that promoting development is really hard. We know a fair amount about how to do humanitarian assistance. And we’re learning more and more about how to be helpful in supporting governments that want to do the right thing. But we don’t know much about how to promote sustainable development in the teeth of Afghanistan’s corrupt elites.

And I think we need to worry much more about the possibility that even though we’re nominally committed to improving governance, in practice we’re basically feeding the parasites whose malgovernance is stifling the Afghan people’s aspirations. My colleague Caroline Wadhams has repeatedly raised the point, for example, that Afghanistan’s budget is completely unsustainable absent massive, continued government-to-government financial transfers. That means that we’re creating an Afghan state whose real clients are in Washington rather than Afghanistan; a state whose officials would risk a massive financial hit if the war were to end.

Nominal Wage Cuts

The combination of sky-high unemployment and policymakers’ apparently determination to persistently undershoot inflation targets means that the only way for the economy to adjust is via a cycle of difficult nominal wage cuts. Steven Greenhouse’s article on workers at a Mott’s plan resisting demands for such reductions helps illustrate the difficulties of the process:

“It’s disgusting, honestly, that they want to take things away from the people who made them profitable,” said Ms. Muoio (pronounced MOY-oh), a $19-an-hour machine operator who has worked at the plant 15 years.

The company that owns Mott’s, the beverage conglomerate Dr Pepper Snapple Group, counters that the Mott’s workers are overpaid compared with other production workers in the Rochester area, where blue-collar unemployment is high after years of layoffs at employers like Xerox and Kodak.

Chris Barnes, a company spokesman, said Dr Pepper Snapple was seeking a $1.50-an-hour wage cut, a pension freeze and other concessions to bring the plant’s costs in line with “local and industry standards.”

The company, which has 50 brands including 7Up and Hawaiian Punch, reported net income of $555 million in 2009, compared with a loss of $312 million the previous year. Its 2009 sales were $5.5 billion, down 3 percent.

The problem here is that both sides are right. Thanks to economic developments unrelated to the juice industry, there is high unemployment in the United States of America and especially high unemployment in the Rochester area where major employers Kodak and Xerox have been hurt by technological shifts. The result is that exactly as Dr Pepper Snapple says, the full employment wage for the area has gone down and thus in some sense wages at the plant “should” decline. Conversely, as the union observes Dr Pepper Snapple is a profitable firm even under current conditions and operating the plant at the current wage level is a profitable undertaking. There’s a lot of economic surplus to be had in operating this plant, it’s currently divided between the workers and the owners, and the workers quite reasonably don’t feel like giving it all to the owners for no reason. So now we’re in a classic bargaining standoff where there are a whole range of outcomes that would be better for both sides than a continued strike but precisely for that reason neither side wants to give in.

Appropriate monetary policy would, by getting the price level up, help ameliorate the difficulties involved in these wage adjustment issues. What’s more, it would do so while avoiding the debt-deflation problem that would arise if the entire economy tried to Mott-ify and start paying everyone less simultaneously.

Sharon Angle and the Depression

I haven’t written much about the Sharon Angle Follies, but this exchange is quite interesting:

Q. Did Keynesian economics, the stimulus spending, work in the Depression of the ’30s?

A. No. And I think history has really proven that to be true. Most economists agree that the thing that really worked, which is a sad commentary, is the war.

And she’s right. Stimulus spending during the 1930s had little positive impact on the economy since there was in fact very little stimulus spending during the 1930s. Expansionary monetary policy moves made a great deal of difference in FDR’s first term, but then contractionary fiscal and monetary measures undertaken in 1937 prompted a new recession. Shortly thereafter, World War II revived the economy. But as Steve Benen says “The war was a shot in the economy’s arm because of all the spending.” The war is a textbook example of how deficit spending by the government can boost the economy by mobilizing real resources for some public purpose.

Now obviously it would be morally wrong to revive the economy over the next two years via a deficit-financed effort to destroy Germany and Japan. But the point is that if we use deficit spending to target and mobilize idle resources, the economy will grow. What’s more, if we target those resources and mobilize them to do something useful we’ll reap substantial benefits.

Department of Excuses

I was hanging out last night with an old friend from high school who’s pursuing his PhD in philosophy. And I was saying I think studying philosophy as an undergraduate is a useful thing for a political pundit to do. Realistically, you’re never going to “know more” than all the people out there. But people commit blunders of reasoning all the time, and if you can spot them you can add value to the conversation.

For example Narayana Kocherlakota (who the bankers of Minnesota, Montana, North Dakota, South Dakota, northwestern Wisconsin, and the Upper Peninsula of Michigan have selected to exercise important public functions) certainly knows more about economics than me. So when he says “[m]ost of the existing unemployment represents mismatch that is not readily amenable to monetary policy” I’m prepared to defer to him or to leave the job of explaining why he’s wrong (if he is wrong) to other people. But it’s worth observing that as a reason to avoid monetary stimulus this makes no sense, and is just a piece of misleading rhetoric that distracts people from the real issue.

The US unemployment rate stood at 4.5 percent in November of 2007. If it rose to 6.5 percent and none of the increase was due to structural factors, then Kocherlakota would advocate monetary stimulus to bring it back down to 4.5 percent. After all, if you can decrease unemployment by 2 percentage points you do it. But instead of rising to 6.5 percent it’s risen to 9.6 percent. Say that of that 5.1 percentage point increase, 2 percentage points are due to inadequate demand and 3.1 percentage points are due to structural factors. Then it be true that “[m]ost of the existing unemployment represents mismatch that is not readily amenable to monetary policy” and it would also be true that monetary expansion could reduce the unemployment rate by 2 percentage points. And using monetary policy to reduce the unemployment rate by 2 percentage points is a good thing to do. After all, 2 percentage points of unemployment is a big deal. If we could reduce unemployment by 2 percentage points, we’d alleviate a substantial quantity of human suffering up to and including suicide. We’d increase the total quantity of goods and services available for the world to enjoy. We’d reduce Unemployment Insurance expenditures and increase tax revenue, reducing the budget deficit.

So let’s do it!

Ending Homeownership Support

According to Tim Fernholz’s reporting, everyone is still really jazzed about the idea that government intervention into the economy is necessary to promote homeownership. Also according to Fernholz, this consensus is a good thing. I’m really dubious. He does make the very good point, however, that you can’t just lazily assert that you want to see the government get out of this business and “leave it to the private sector.” If we leave it to the private sector, things will look very different:

Before the government became involved in the mortgage market, homeownership was largely based on down payments and five-year mortgage loans that put borrowers at the mercy of short-term economic changes; in short, homeownership was for the wealthy. [...] Were the United States to ditch federal involvement in housing finance completely, as some critics have suggested, some of the trade-offs would include rising mortgage interest rates, reduced access to home loans and a dearth of long-term credit for home loans; not to mention that doing so immediately would lead to irrevocable economic damage.

I think it’s important here to distinguish between the short-term and long-term issue. I think introducing a chaotic reorganization of housing finance into the current economic mess would be an unwise risk.

But think about the long-run equilibrium here. There’s all this housing stock in the United States. And there are all these households in the United States. Households will want to live in houses and will be willing to pay for the privilege of doing so. And housing stock exists in which for them to live. If it’s not feasible for non-wealthy households to borrow funds to purchase homes, but non-wealthy households still have income they’re willing to spend on housing, then it will become profitable for cash-rich firms or individuals to start (or invest in) businesses that pay cash for houses and then rent them to non-wealthy families. The current existence of large subsidies for homeownership means that the rental market is dominated by efforts to serve the non-creditworthy with low-quality housing, and by amateurs engaged in small-scale landlording spurred by temporary relocation or as part of some kind of speculative scheme.

Absent such subsidies, there would be an obvious business opportunity for larger-scale professionalized residential property management companies. The analogy would be, I think, to the current market for office space which firms generally lease from other firms that specialize in the field of owning and renting office space. It’s a perfectly workable system, and shifting housing in that direction would inject some much-needed flexibility into the economy. It would also appropriately shift risk off the shoulders of middle class families and onto the shoulders of larger firms who are more capable of hedging and managing that risk.

Private Buses

Bus lines don’t have the power to transform neighborhoods that rail construction possesses. But buses are by far the cheapest and simplest way of adding mass transit, and municipal leaders should always have their eyes on potential ways to improve things. One possibility that naturally suggests itself is to let entrepreneurs start private intracity bus lines just as we have inter-city buses running from New York to DC, Philadelphia, Boston, etc.

Unlike the barbering field I would want to see regulation of this kind of activity since there are genuine public safety issues and it would be useful to consumers to impose some kind of uniformity so that buses are recognizable, have interoperable farecards, etc. New York City features sufficient demand for this kind of thing that the local authorities sporadically find themselves doing “dollar van” crackdowns. I’m not sure real market opportunities for this kind of thing would exist anyplace else, but it would probably be worth other cities’ while to try to find out. Ultimately, instead of a publicly-operated and publicly-subsidized set of bus lines, you could have a set of competing private bus companies with government subsidies provided directly to the consumer.

Parking Feedback Loops

Tyler Cowen recently did a column lamenting mandatory parking regulations which prompted a bizarre-but-predictable retort from Randall O’Toole who thinks libertarians shouldn’t worry about this kind of regulation. Which wouldn’t be so noteworthy except that O’Toole is the only person who does transportation policy at two different flagship institutions of American libertarianism. Fortunately, Tim Lee was able to chime in on the Cato blog to observe some of the pervasive impacts of mandatory parking lots on the urban fabric.

But I think Lee leaves out what is perhaps the most important dynamic here, the feedback loop.

The building I live in is two years old. Directly to its north is a vacant lot. To its south is a vacant lot. And to its west is a vacant lot. But it’s actually a very walkable area—only five blocks from the corner of 7th and H which is probably the most vibrant spot in the whole city. So a person moving into the building could get by without a car, but also might plausibly want to have one. If the developer had been required to build more than one parking space in the garage per unit in the building then a couple of things would have followed from that. One is that the building would have had to have been shorter, and thus contain fewer units, since it’s not feasible to dig the garage any deeper than its current depth. The other is that parking spaces in the building would have been “free” to anyone who bought a condo. Making it cheaper to buy a parking space would, at the margin, increase the proportion of residents who own cars.

So now you’ve got fewer people, a larger proportion of whom own cars. And what does that mean? Well, it means the neighborhood will support fewer walking-distance retail options. So what does that mean when the apartment under construction on the lot to the north is completed? Well, it means that car ownership is more desirable than it otherwise would have been. Which means a higher proportion of people will own cars. Which, again, means less pedestrian-oriented retail. And you can lather, rinse, and repeat.

It’s perfectly appropriate that some places are built around this dynamic. Everyone owns cars so all the retail facilities assume car ownership so anyone who moves there buys a car. But it’s pernicious that in many metro areas all places are like that. And mandatory parking regulations essentially make their emergence inevitable. There are tipping points where you either have a critical mass of retail that’s meant to be accessed on foot, or else you don’t.

We Are Here to Seek Your Rents

Under current law, radio stations pay royalties to songwriters but not to performers. Naturally, performers don’t like that rule but radio stations do. Obviously, I understand that performers want to make more money, but it’s hard to see what the policy problem with the status quo is. You don’t see artists with big radio hits starving in the gutter, you see artists clamoring for the opportunity to have their songs played on the radio. Given that radio spectrum is in much shorter supply than songs, the economic logic of the situation is that artists ought to pay radio stations, not vice versa, which is why you have endless payola scandals.

But instead of standing on principle, the National Association of Broadcasts seems to have hatched a plan to perfectly exhibit the concept of rent-seeking:

Radio would agree to pay around $100 million annually to artists and their representatives. In return, Congress would mandate FM radio chips in all handheld mobile devices. The deal is reportedly being worked out between the National Association of Broadcasters and the music industry, and could be taken to Congress later this year.

Now instead of simply transferring wealth from radio stations to artists (”and their representatives”) we’re going to transfer wealth from device makers and consumers to radio stations, and then have the stations pass a share of that wealth on to artists. All to solve the non-problem of artists not receiving any compensation for allowing radio stations to give them massive amounts of valuable free publicity. The good news is that device-makers have a lobby too, and in situations like that there’s actually some room for congress to consider the merits of an issue. Anyways, I wouldn’t want to get too melodramatic about this, but I think you’d have to say that the “handheld mobile device” sector is the single most vibrant slice of the American economy at the present moment so it’d be mighty odd to slap a de facto tax on their for no reason whatsoever.

LA Public School Quality

Kevin Drum writes a bit of a prelude to the latest Los Angeles public school controversy:

I don’t live in Los Angeles and don’t follow its affairs closely, but there’s at least one thing I can say about this: every single person I know who does follow LA politics, both liberal and conservative, thinks the LAUSD is a complete disaster. Obviously some of this is simply because LA has all the usual pathologies of urban school districts: it’s huge, it’s heavily poverty-ridden, it’s fantastically expensive to build new schools, and virtually all the middle class parents who normally drive concerns over quality have long since abandoned it for private schools. Still, even beyond that LA seems to be almost uniquely bad.

Fortunately, in some American cities this question is amenable to analysis since they agree to participate in the National Assessment of Educational Progress’ Trial Urban District Assessment program. And one of the few good things you can say about the LA Unified School District is that they’ve been consistent NAEP TUDA participants. So here’s a convenient summary of TUDA districts’ performance on 8th grade math relative to the average large American city. We see that LA’s black kids do worse than the average big city black kid. LA’s Latino kids do worse than the average big city Latino kid. And LA’s poor kids do worse than the average big city poor kid. LA’s non-poor kids, its white kids, and its Asian kids are average for kids in big city public school systems. Relative to the national average LA’s 8th grade math scores are below average for blacks, Hispanics, and Asians. They’re below average for poor kids and they’re below average for non-poor kids. But LA’s non-Hispanic whites do right in line with the national average.

Poking around on the TUDA site can show you more, including scores for other grades and scores in other subject matters. But judging by the 8th grade math score, the conventional wisdom that LAUSD schools are bad seems to be right on the mark—they’re doing substantially worse than the average big city. That said, middle-class white parents should perhaps relax a bit since about the only thing LAUSD seems to be average at is educating middle-class white kids. And perhaps if more middle class white families were involved in the system there’d be more political support for improvements.

At any rate, the idea that all big city public school systems are equally troubled is a fairly pernicious myth. TUDA isn’t a perfect statistical analysis of every subgroup imaginable, but it reveals substantial differences in system performance from city to city. More cities should participate and more people should learn the data.

Petraeus’ Pace of Withdrawals

Andrew Breitbart decided that he’d successfully driven Spencer Ackerman out of journalism back on July 19, but apparently nobody told General David Petraeus since the two of them sat down for an interview published today at Wired wherein Petraeus explains his strategy for reducing troop levels in Afghanistan:

Some units pulled out of stable districts might find themselves heading for more volatile ones. “You maybe take one company and send it somewhere else. Maybe send it home,” Petraeus explains. “We want to reinvest some of the transition.” It won’t necessarily be the case that a unit that “thins out” from a district heads directly home. “Some will, certainly,” Petraeus qualifies. “And this is all premature.”

In keeping with Petraeus’ admitted addiction to PowerPoint, the general passes on a briefing slide, titled “Transition,” to explain his thinking. The assessment for drawing down will be built around “Districts, Provinces, Functions [and] Institutions,” looking for what can be handed to Afghans with minimal disruptions in security. In our interview, he elaborates that “institutions” means U.S. functions like training the Afghan security forces — jobs that don’t have to remain American duties indefinitely. According to the slide, it’s a process that will draw on what security gains the U.S. command in charge of training Afghan security forces believes the Afghans can maintain; and the Afghan government itself.

On the substance, I think there’s a kind of faux-commonsense around the idea that withdrawals should be “conditions-based.” Obviously it would be absurd to say that conditions in Afghanistan are irrelevant to the optimal allocation of U.S. military forces to Afghanistan. At the same time, the question “how many resources should the United States of America devote to a military presence in Afghanistan” is an important one to which many things outside the four walls of Afghanistan or even the larger walls of CENTCOM are relevant. To state the obvious, if tomorrow North Korean artillery starts shelling Seoul, that’s going to change our thinking about Afghanistan. But the same issue—that questions of overall resource-allocation are important—exists even in the absence of war in Korea.

Looking Back at DP World

Something I’ve heard a few people raise over the past two days is the analogy between the Park51 controversy and the firestorm over Dubai Ports World taking over management of several American ports. Rather than debate how precise an analogy this is (analogies are always tricky), this made me think of a point about self-deception in politics which I think is probably more widespread than most people recall. My current boss, ThinkProgress editor Faiz Shakir, shared yesterday his dissenting blog post in support of DW World written before he was editor at a time when the TP line was against the deal.

Reading it today, I find Shakir’s argument entirely convincing. I can’t even begin to imagine why it was that I thought Chuck Schumer was right about this. It wasn’t at all the sort of argument I normally agree with, and Schumer has very much the reputation of being a guy who’s good at ginning up tempests in teapots. Heck, I even interned for his communications director at one point and thus participated peripherally in some tempesting.

But at the time, as I recall I was 100 percent convinced that there was more to this opportunistic demagoguery than opportunism and demagoguery. And so I wrote stuff about how, yes, there was opportunism and demagoguery flying around but really there were also these sophisticated “high road” reasons why a DP World takeover would be terrible. In retrospect, I’m sure there were some conservatives who read that stuff and thought “Yglesias is too smart for this nonsense, it’s too bad he’s decided to be dishonest about it.” Which has been my reaction to a lot of conservative rationalizations about various demagogic arguments put forward by the right in the Obama years. But I’m almost certainly not alone in falling into this kind of trap of self-deception.

Do Straight Razors Justify Barber Licensing

A number of people, including many commenters here and even alleged conservative James Joyner think you should need a professional license to become a barber because you might hurt someone with a straight razor. Uh huh. At best this would be an argument for regulating people who do shaves with a straight razor, which would be considerably narrower than current comprehensive regulation of hair stylists.

Meanwhile, though “torts and the free market will take care of it” isn’t the answer to everything, it’s surely the answer to some things. Getting some kind of training before you shave a dude with a straight razor is obviously desirable in terms of strict self-interest. If you screw it up in a serious way, you’ll face serious personal consequences and the only way to make money doing it—and we’re talking about a very modest sum of money—is to do it properly. People also ought to try to think twice about whether their views are being driven by pure status quo bias. Barbers are totally unregulated in the United Kingdom, is there some social crisis resulting from this? Barber regulations differ from state to state, are the stricter states experiencing some kind of important public health gains?

Last you really do need to look at how these things play out in practice. If you just assume optimal implementation of regulation, then regulation always looks good. But as I noted in the initial post the way this works in practice is the boards are dominated by incumbent practitioners looking to limit supply. One result is that in Michigan (and perhaps elsewhere) it’s hard for ex-convicts to get barber licenses which harms the public interest not only by raising the cost of haircuts, but by preventing people from making a legitimate living. States generally don’t grant reciprocity to other states’ licensing boards, which limits supply even though no rational person worries about state-to-state variance in barber licensing when they move to a New Place. In New Jersey, you need to take the straight razor shaving test to cut women’s hair because they’re thinking up arbitrary ways to incrementally raise the barrier to entry.

In principle, you could deal with all these problems piecemeal. But realistically this sort of problem is inevitably going to arise when you pit the concentrated interest of incumbent haircutters against the diffuse interest of consumers. It’s hard enough to make sure that really important regulatory functions related to environmental protection, public safety, and financial stability are done properly.

Endgame

I’m not scared to go home:

— Measuring gentrification by the pace of bulletproof glass removal.

— By this standard email died years ago, and yet I send and receive tons of email every day.

— Walker-Jones school in my neigborhood has a cool new farm.

— But student achievement is way below average even by DC’s below-average standards.

— Beyond la promesa de Obama.

Ladytron, “I’m Not Scared”.

Homeownership vs Big Homes

I didn’t go to today’s big housing policy pow-wow, but one thing to keep in mind in this regard is that as we think about housing policy we should distinguish between policies that encourage people to buy houses as opposed to renting them and policies that encourage people to buy expensive houses as opposed to less expensive ones. If you told everyone that they could deduct the cost of buying a car from their taxes, that would tend to boost car ownership marginally. But the biggest impact it would have would be to encourage people—particularly prosperous people—to buy more expensive cars.

A lot of our current housing policies have that character—encouraging people to increase the share of income spent on housing—but fly under the banner of encouraging ownership. That was all part of a postwar industrial policy focused on suburbanization, highway building, and the domestic auto industry that I think was always fairly misguided but certainly produced some decent results. The cost in ecological sustainability has been high, however, and its left the country uniquely vulnerable to oil price shocks. It also seems very unlikely that we can derive much further benefit from pushing people to live in even bigger houses when Americans already enjoy the biggest houses in the world.

Mysteries of Deflationary Bias

Guest hosting for Rachel Maddow last night, Chris Hayes brought complaining about the Fed to a new medium:

He’s the TV expert, not me, but I actually think explaining this through analogies makes it more complicated than it needs to be. The Fed controls the money supply. If you create too much money, the money becomes worthless and we get inflation. But right now the price level is way below its trend rate, so we need more money to create more inflation to stabilize the economy.

Meanwhile, the main arguments against more aggressive action are twofold. One is the (incorrect) argument that it can’t work, and the other is the argument that if the Fed creates more inflation to save the economy then we’ll . . . have more inflation which is bad because . . . well . . . because of some reason. But all we’re talking about is creating the inflation rate we had when it was morning in America and nobody thought inflation was out of control.

Joe Gagnon offers some specifics as to what could be done.

Meanwhile, it would be nice if the Fed’s Open Market Committee actually took proper votes. I wonder to what extent the inaction is being driven by regional Fed Presidents who are appointed by private, for-profit banks and then given policymaking authority.

Don’t Soak the Rich Too Much

Robert Waldmann is very upset that I said a program of lower Medicare benefits for the rich, higher Social Security taxes for the rich, higher income taxes for the rich, higher corporate income tax, and lower Medicare payment rates is “not the soundest policy agenda in the world” and says that he thinks it in fact “is the soundest policy agenda in the world.

In terms of optimal policy, I think defense cuts and carbon pricing need to be on the table. In terms of problems with this agenda, I worry that if you simultaneously make Medicare patients a worse deal for doctors and make Medicare a worse deal for rich people that you’ll see a spiral in which better doctors stop seeing Medicare patients, richer seniors stop using Medicare, and the system threatens to unravel. Since Medicare payment rates are lower than private sector payment rates even if SGR “patches” keep passing, I think the winning strategy for reducing payments is to implement a public option or a Medicare buy-in. We should also be doing the Affordable Care Act’s payment reform stuff more aggressively.

Liberalism “In the European Sense”

This “five books” interview with Brink Lindsey on traditional and liberal conservatism is very much worth your time. But one thing I noticed that Lindsey didn’t address is that his interlocutor in two cases identified “liberalism in the European sense” with “libertarianism, as we call it” and I think this is a mistake.

European liberal parties are mainstream movements that lead parliamentary coalitions (currently Denmark, Sweden, Norway, soon to be joined by the Netherlands) or participate in them as junior partners (currently Germany, UK). And this happens on a continent that overall has much higher taxes and more generous welfare benefits than the United States. Consequently, European liberal politicians regularly espouse views that would be denounced as socialism by American libertarians. It’s true that European liberals generally want to move policy in a libertarian direction relative to other European political parties. And I suppose it’s possible that Frederick Reinfeldt and Lars Løkke Rasmussen and Nick Clegg and other European liberals harbor secret desires to enact Paul Ryan’s Budget Roadmap, and are merely pretending to support high taxes and universal health care out of political expediency. But I don’t think that’s the case, I think the most plausible story is that these politicians are generally like moderate “neoliberal” US Democrats, genuinely trying to balance belief in free markets with support for the welfare state. But even if so, there are still plenty of voters who are comfortable identifying as supporters of liberal parties without backing extreme libertarian economic policies.

All of which perhaps is to say that one way to think of what Lindsey is talking about in that piece is that he wants to reformulate American libertarianism as something more like liberalism “in the European sense”—an ideology that exists in constructive dialogue with the political forces pushing for egalitarianism and the welfare state, rather than a rejectionist one that identifies with the impulse to stand athwart history yelling stop.

What Can Climate Activists Learn from the NRA?

I think the answer to that question is pretty simple: not much.

Robert Walker thinks otherwise and has a post at Grist arguing that “Supporters of climate-change legislation have much to learn from an organization that is often rated as the most powerful lobby in Washington: the National Rifle Association.” I think the real lesson of the NRA is the same as the real lesson of the similarly powerful AIPAC—the most valuable asset you can have is the lack of an effective opposition. I’m a gun rights supporter, but I don’t really care about the issue. A candidate for federal office who agrees with me about climate change and taxes will get my vote regardless of his stance on guns. A candidate for local office who agrees with me about education and transportation will get my vote regardless of his stance on guns. It’s a very low priority for me. But there are many people—people who own guns and people who earn a living selling guns—for whom this is a high priority. And the NRA organizes them. For a while in the early nineties crime was a high-salience issue, some gun controllers put a high priority on it, and gun control groups won a bunch of political battles. But since the nineties crime drop the only people who care agree with the NRA, so the NRA runs the table.

The problem for climate change activists is that nothing is going to make the fossil fuel producers or energy-intensive manufacturers go away or somehow forget that they care about this issue. So you’ll never achieve the kind of dominance over the congressional landscape that the NRA has. Which is why any real-world climate change bill is likely to, à la Waxman-Markey, represent a compromise between sound climate policy and the demands of relevant interest groups.

This is too bad, and it’s a reason that people who care about climate change also need to care about political reform. Interest group politics matter in pretty much all political systems—US, Denmark, China, Iran, wherever—but how much the matter does vary. The US system’s proliferation of veto points and slow speed tends to enhance the power of interest groups relative to ideologues and technocrats. And that’s a problem.

Health Reform Counterfactuals

I agree with almost everything in this Ezra Klein post, including his first two points and even most of point three, but I think this is a bad example:

Third is that voters don’t approach elections with strong views on policy issues. Instead, they look to the political leaders they already trust to tell them what their views should be. If President Romney had proposed ObamaCare before a mostly Republican Congress, it would’ve gotten an easy majority of Republicans — both in Congress and in the country — and almost zero Democrats. Party affiliation drives policy opinions, and not the other way around.

The thing is that we actually do have an example of Mitt Romney working on a similar bill in Massachusetts and what happened is that it passed with overwhelming bipartisan support:

House Speaker Sal DiMasi compares the new health law to the Mayflower Compact that the pilgrims wrote after they landed on Plymouth Rock in 1620.

“It was supposed to be a community of people where laws were made for the common wealth. That’s why we became a commonwealth,” he said. [...]

Gov. Romney, a Republican and a former businessman, bases his support on economics. When Romney became governor three years ago, a business colleague urged him to do something about the 500,000 or more Massachusetts residents without health insurance. Nearly nine out of ten are in working families. [...]

Ed Haislmaier, of the The Heritage Foundation, a conservative Washington think tank, which helped frame the legislation — agrees with Romney.

The point I would make is simply that Republican politicians haven’t historically been universally averse to the mandate/regulate/subsidize framework. Had they chosen to negotiate in good faith within the mandate/regulate/subsidize framework, it’s likely that a bill similar to the Affordable Care Act would have passed, but with many Republican votes. What’s more, given the opportunity to dissent from the left without spiking the bill, a bunch of progressive Democrats would have done so. And had that happened, the resulting legislation would be substantially more popular with Republicans and Independents than the current legislation is. And the change in public opinion would have been driven by the change in elite signaling rather than by the change in the content of the legislation.

But I don’t think it’s a given that the opposition party’s leaders will reject the president’s proposals out of hand. It really depends on what they’re more interested in doing. The Democratic Party showed in the 2005 Social Security debate that it’s possible for a Republican President to formulate a proposal that meets with a response of massive resistance, but on most issues—taxes, Medicare, immigration, K-12 education, invading Iraq—there were always Democrats who were eager to cut deals with the Bush administration.

The Ground Zero Coat

This is sort of beside the point, since major issues of principle are at stake, but it’s sort of amusing to anyone who used to live in Manhattan to understand the extent to which the “Ground Zero Mosque” debate is being semi-dominated by misunderstanding of the area’s geography.

For example, I just last night learned that the proposed Park51 location is where the Burlington Coat Factory used to be. I own a coat that I bought there. Normally I would have gone to a store closer to my house in Greenwich Village, but I got it into my head to go downtown and try to find a good bargain at Century 21. Century 21 is literally across the street from where the World Trade Center once stood, and I think it’s fair to say that people described it that way—”right by the World Trade Center,” but I don’t think I’ve ever heard anyone describe it as a “Ground Zero Department Store” or anything like that. Still, maybe I’m out of touch. But certainly it wouldn’t occur to anyone to refer to the entire panoply of things that are in a 2-3 block radius from the WTC superblock as somehow being “at” Ground Zero:

As you can see, there are actually a whole bunch of different subway stations in that radius but only one is the World Trade Center stations. J&R Music World isn’t a “Ground Zero Discount Electronics Shop,” it’s perhaps “near City Hall.” This morning I heard Chuck Todd on MSNBC raise the reasonable question of why it’s taken so long to rebuild anything on the former WTC site. But what he actually asked was “why it’s taken so long to rebuild Lower Manhattan.” I promise you, however, that if you visit Lower Manhattan you’ll swiftly see that it’s not a neighborhood that needs rebuilding. It’s a vibrant, enormously dense tangle of narrow streets, giant buildings, and a wild riot of uses. Then if you stumble around just the right corner, you see the blank spot where the towers used to stand—a sport that frankly looked weird and a bit out of place even before 9/11. There’s not some Ground Zero District and never was.

Anyways, I haven’t focused on this aspect of the controversy because unlike the rest of it, this is something the Park51 planners partially brought down on their own heads by overselling the site’s link to the Ground Zero site. But the factoid that the location in question is the unremarkable block where I bought my winter coat struck me.

Transit Score

The great web utility Walk Score that assesses the walkability of different neighborhoods in America now also features a “Transit Score” metric. They’ve only got these cool heat maps for a few cities, but here’s San Francisco featured on the right.

My one critique of this is that I think their scoring is a bit too generous and optimistic. My address scores as a perfect 100 out of 100 in terms of transit. And in some ways that’s justified. I’m very close to the Gallery Place/Chinatown Metro station, which is the single most important transit node in one of America’s most transit-oriented cities. At the same time, it’s just way, way, way less of a transit friendly location than the apartment in New York where I grew up or the one in Paris I stayed in for a while. Which is just to say that there’s no location in DC that’s as transit-friendly as many locations in truly first-rate mass transit cities like New York or Paris or Moscow or London (or, presumably, Tokyo and Seoul and other places I haven’t been).

Power Without Consequence

The overwhelming conventional wisdom is that the European Parliament is a bit of a joke. And here’s a great catch from Joshua Tucker who notes that in a recent “Charlamagne” column, the Economist described the problem thusly: “The parliament is elected but not truly accountable. Members can vote down any law without risking the fall of a government and snap elections: that is power without consequences.”

This is, as Tucker notes, similar to the structural problem with the United States Senate in the era of routine supermajority.

But our system adds to that a large helping of responsibility without power. Voters judge incumbent officeholders on the basis of results, but the incumbents are not actually capable of steering the ship of state without substantial assistance from the opposition party. Of course we can’t know whether current conditions would be better or worse had Barack Obama been able to govern with a freer hand. But what we do know is that insofar as Mitch McConnell’s interventions into the policy process have made things better, the political benefits of those interventions have flowed to Democrats. Conversely, insofar as McConnell has made things worse, the benefits flow to McConnell’s legislative caucus. The latent problems with this system were muted for most of the 20th century because the political parties were very ideologically heterogeneous, but in a world of well-sorted parties there are a lot of bad incentives lurking in this neighborhood.

The Bond Vigilantes Who Weren’t There

Floyd Norris:

As 2010 began, there was nearly unanimous agreement in financial circles on at least one thing: Interest rates were sure to rise during the year. Quite to the contrary. As Labor Day approaches, interest rates have collapsed, plunging along with economic optimism. That turn of events, which has shocked savers and stunned investors, appears to indicate that financial markets’ worries are turning in a very different direction from those of many governments.

The governments are seeking ways to bring down budget deficits, fearing that without austerity they could go so far into debt that they would never be able to borrow again. Investors in the financial markets seem to be much more concerned by the possibility of renewed recession and a general deflation that could send asset values and prices down.

Macoreconomic stabilization policy isn’t easy, but it isn’t that hard either. When savers & investors all decide that the thing they want to invest in is United States government debt, then the United States government needs to find some useful projects to spend money on. Ideally, projects that can be undertaken at least to some extent by mobilizing the currently idle resources in an economy that’s full of idle resources. Finding useful projects and way to mobilize genuinely idle resources is a non-trivial undertaking, but congress isn’t even trying. Similarly, when the general level of demand for goods and services tumbles and the general level of demand for money increases, the central bank needs to create a lot more money until people decide they’ve got plenty of money and want to start trading it for goods and services.