Ezra Klein

Recap: A cheat sheet on how the stimulus actually spent its money; a question about the markets and the foreclosure crisis; and Dean Baker is optimistic, for once.

Elsewhere:

1) Posts I want to respond to tomorrow, Part 1: David Roberts on whether clean-energy funding is politically easier than cap-and-trade.

2) Posts I want to respond to tomorrow, Part 2: Matt Yglesias on early-childhood education.

3) Also read Yglesias on the different bubbles that Israelis and Palestinians live in.

4) Chris Hayes on Hebron.

I was talking to the Center for Economic and Policy Research's Dean Baker about the foreclosure mess earlier today, and he was notably less concerned than some of the other voices I've featured on the blog. "The idea that it’ll bring wholesale collapse is far-fetched," he told me. "Some banks will be liable for lawsuits, and you could even see some people going to jail. They were signing documents saying they reviewed the paperwork when they clearly didn’t, and that can be criminal. But the idea that this would threaten the big banks? I have trouble seeing it."

Among the points he made was that if the underlying "note" on a home isn't valid, it doesn't mean the borrowers are free and clear. They still owe the bank for the amount of the loan. The bank just can't foreclose on them. In most cases, the homeowners will just continue to pay as much of their mortgage as they can. "The people still owe the money," Baker says. And over time, "it’ll be a pain for the banks to get the paperwork in order, but I imagine in 90 percent of the cases they’ll be able to do it."

As for whether lawsuits will force a trillion or so dollars of mortgages back onto bank balance sheets, Baker didn't buy it. "There might be some bank up to its neck in garbage," he says, "but it won’t be Bank of America. It'll be a small bank. This isn’t going to be TARP II."

Which isn't to say it won't register at all. Bank stocks are falling today, and credit derivative spreads are widening.

If Democrats get wiped out in this election, it'll be because the base stayed home. And the conventional wisdom on the base's apathy is that they've had to compromise too much, swallow their pride too often. They lost the public option. They shaved more than $100 billion off the stimulus. Further stimulus proposals were much too small. Cap-and-trade is dead.

But none of that, as Jonathan Cohn points out, is Nancy Pelosi's fault. The health-care bill the House passed had a public option. Her chamber also passed a cap-and-trade bill, hundreds of billions of dollars in further stimulus, repeal of Don't-Ask-Don't-Tell, and more. Cohn continues:

There are obviously a lot of people out there who really don’t like Nancy Pelosi and what she stands for. There are also a lot of people who are simply angry -- about the economy, about the way Washington works -- and to them Pelosi is a symbol of the status quo. Fine, fine. You expect these people to vote against her and her party. But, come November, it may be the disillusionment of progressives that keeps House Democrats from holding the majority and forces Pelosi out as Speaker. And that seems more than a little bit ironic.

It's not Pelosi's fault Congress didn't produce more liberal legislation. But she, not Harry Reid or Barack Obama, is the one most likely to lose her job because of that failure.

Photo credit: Melina Mara

The main objection I've been hearing in response to my columns on the need for more infrastructure spending is that the stimulus was supposed to have handled all of this for us and the fact that it didn't shows we can't trust this administration with more cash. "Obama had almost a trillion in stimulus dollars that was supposed to go to just that 'infrastructure spending,'' one reader wrote to me.

That suggests it would be useful to go back and review Recovery and Reinvestment Act's spending. The proposal finished at $787 billion. Of this, infrastructure accounted for a bit more than $100 billion. Where did the rest go? Well, $288 billion went to tax cuts and incentives. Another $150 billion went to the health-care system, most of it to help Medicaid and COBRA deal with the millions of Americans who'd lost their jobs and, thus, their health-care coverage. Education got another $100 billion, with most of it going to local school systems so they could avoid layoffs and continue with needed building maintenance. About $82 billion went to aid for unemployed workers, including unemployment benefits and food stamps. About another $50 billion went to scientific research, housing subsidies, miscellaneous other items like law enforcement. Wikipedia has a detailed breakdown here.

Should the stimulus have been all infrastructure? Or more infrastructure? I'd say unemployment benefits, food stamps, state and local aid, and Medicaid and COBRA benefits were the most pressing priorities. Infrastructure would come next in my book. Then the long-term investments, like health information technology, research funding and other items that were aimed at keeping our long-term growth prospects healthy. The tax cuts don't quicken my pulse, though I see the case for them. President Obama is right to be self-critical, I think, in reflecting on his decision to simply add his own tax cuts and assume that would be seen as a bipartisan compromise rather than forcing Republicans to offer up a proposal and take ownership over part of the package. But that's a political argument.

Whatever we should have done on infrastructure spending doesn't change what we did do on infrastructure. About $100 billion, spread over two or three years. Let's call it $40 billion a year for the first two years, with the rest trickling out after that. According to official data, that's funded about 30,000 infrastructure projects across the country so far. That's a lot. You can use this stimulus-watchdog site to track the money more precisely.

We've got about $2.2 trillion in needed infrastructure spending. A bipartisan group of former transportation secretaries released a report saying we need about $194 billion in annual infrastructure spending through 2035. To improve our infrastructure, we need more than $200 billion every year. There's no way the stimulus's $40 billion or so could've wiped that out.

The bottom line on infrastructure is the same as the bottom line on stimulus: The fact that we did a lot doesn't mean we did enough. The fact that the numbers were large doesn't mean that the needed numbers weren't larger. This is perhaps clearer on infrastructure than on stimulus. The stimulus arguments rely on calculations of the "output gap," which are necessarily abstract. When it comes to infrastructure, if the stimulus didn't give the state enough money to fix a particular road, those potholes remain present when you drive it.

Photo credit: Jeffrey MacMillan for The Washington Post.

This lecture is about changing education, though I continue to think that what's really revolutionary about it is the animated medium in which it's delivered:

McDonald's is currently trying to convince people that its burgers can, in fact, grow mold. This is considered a selling point, at least in the modern world.

Photo credit: Jeff Chiu/AP.

This Kenyan man has no background in aviation or engineering. But he's always loved planes. And after spending months researching on the internet, he's trying to build one in his yard. The test flight is scheduled for next week.

James Fallows comments:

It is easy to think of people in poor countries as "people in poor countries," or the "third world masses," "the global poor," and so on. It is easy to do that from rich countries, and easy from the rich big-city enclaves of still-poor countries. It's also easy to do this while still granting in theory that, sure, all people everywhere have common dreams, and blah blah blah.

But in my experience -- mainly in Ghana and Kenya during the ’70s, in Southeast Asia in the 1980s, and in China these past few years -- there is a cumulatively very different and very powerful experience that comes from meeting person after person like the Kenyan aviator-aspirant. That is, people whose material circumstances and range of experience are vastly different from a typical person's in London or high-end Shanghai or San Francisco, and who objectively have nowhere near the same opportunities -- but who take their own life drama and possibilities just as seriously and can dream just as ambitiously. For instance, I am thinking of a man in his 70s in a village in western China whose consuming project is a handwritten history of life in his village, from his boyhood during the era of war in the late 1930s and 1940s, through the Great Leap Forward of the 1950s, to the Cultural Revolution of the 1960s, and onward. He is someone who wears the same pants, shirt, and jacket virtually every day, because that's what he has. He is part of "the rural poor," but he has a plan and a dream.

The foreclosure mess really looks pretty bad. Here's one vision of the worst-case, bad-case and even not-so-bad scenarios. They're all grim. Here's a "doomsday scenario." The words "TARP" and "two" are getting thrown around a lot, and congressmen are musing that we might need to take our new financial bill -- and, in particular, the resolution authority letting us kill off failing firms -- "out for a spin." There's obvious uncertainty. J.P. Morgan just set aside a billion dollars for legal fees. And yet the markets seem totally unbothered:

At another time, I might chalk this up to markets being overconfident. But they've not been overconfident over the past two years. They've been terrified. They're running from all conceivable risk. And it's not as if they just haven't noticed. Citibank hired Adam Levitin, an associate professor of law at Georgetown University, to brief its clients. We don't know what he said, but he told The Washington Post that "if you read through court decisions, there's a pretty consistent picture that there are all kinds of problems in the chain of title. It's not clear how it's going to be resolved. There's a question mark hanging over the whole housing system." That doesn't seem comforting.

So what's with the air of easy confidence? Are they just sure that the government won't let things get bad again? Or do they think this is just the media hyping a story? I'm puzzled.

Graph credit: Google Finance.

You may have heard that if you take out infant mortality, car accidents, murders and suicides, life expectancy in the United States looks pretty good compared with other developed nations. It isn't true.

Yesterday, my colleague Steve Pearlstein wrote a case for wage cuts. Matt Yglesias responded here. Pearlstein asked me to post this reply:

Matt has it exactly right. If we are going to live within our means as a country, there's no question that our standard of living -- our collective income and wealth -- has to come down. I wish I'd made the point myself.

As I've written in several previous columns, there are various channels by which that can be accomplished, including inflation, devaluation of our currency, nominal decreases in real wages and nominal decreases in the value of our assets, Most likely, it will be a combination of all of them. Although they are all related in some way, they all have different time lags and macroeconomic consequences, as well as very different distributional consequences. I would agree with Matt that, in principle, currency devaluation and inflation are in many ways the fairest and most effective but, as the Chinese remind us, its not totally within our control to determine which ones will be used.

But Matt is wrong to disregard the benefits from decline in value for some assets and wages in some sectors, since these are necessary preconditions for markets to clear and provide a foundation for future growth. While those of us who already own houses don't like it, for example, it is a good thing that house prices are being forced back to levels that are more consistent with incomes. Similarly, its good in the long run that industries that compete in global markets have wage rates that are, well, competitive when adjusted for productivity and other factors.

There's a point at which some industries will never be globally competitive, but autos is not one of them -- we need jobs that pay $15 to $25 an hour in wages plus benefits to high school graduates doing semi-skilled work. In some ways it is sad that those jobs can no longer pay $28 and guarantee a middle class lifestyle, as people often say, but comparisons to what was aren't particularly useful at this point when the economy is stuck in an equilibrium that is delivering no average wage gains and unemployment and underemployment of 17 percent.

If and when the dollar is allowed to decline against the yuan or inflation kicks up, then those rates should naturally rise. But until then, it's better to take the pain and move on with it. Even better if we raise taxes a bit on the "winners" in this scenario and use the money to increase the after-tax income of the lowers or provide public services, from good schools and parks to health care and day care, that improve their lives no less than a slightly fatter pay check. I suspect Matt would agree with that.

Kevin Drum speaks some hard truths on education and poverty policy:

I'm going to get the ed people mad at me again -- and I guess I'll add the poverty people too this time -- but I continue to think that the biggest problem here is simply that no one has any really compelling answers. Movies like Waiting for Superman (which I haven't seen), along with an endless stream of credulous punditry, keep suggesting that the answers are out there if only we'll fund them and take them seriously. But they aren't. Charter schools are great, but they're no panacea. (Not yet, anyway. Maybe someday after we figure out which ones work.) High-stakes testing might be a necessary evil, but it hasn't proven to have any long-term value yet either. Etc. You can go down the list of every ed reform every touted, and they either can't scale up, turn out to have ambiguous results when proper studies are done, or simply wash out over time. ...

So is the answer is to address concentrated poverty? Sure. Except that, if anything, attempts to address poverty have a worse track record than attempts to improve education. Hell, attempts to address poverty have such a bad track record that even credulous pundits rarely bother writing about it anymore. Nobody really seems to have any compelling answers, and for about 90% of the country it's just too easy to ignore the problem entirely. They won't phrase it quite this way, of course, but basically they're willing to let the cities rot.

I would really, really like someone to tell me I'm wrong. So far, though, no one has. At least, not to my satisfaction. But I'm willing to be schooled if anyone thinks I'm missing the big picture here.

That mostly describes my thinking, too. I'm up for trying things like merit pay and charter schools, but their supporters way oversell their benefits. As of now, actually, we're not entirely sure they have benefits. The thing that we're pretty sure does work (pdf) is early-childhood education, but for some reason, it's hard to get people interested in that. But putting $20 billion and serious political capital into that bucket would get you much larger returns than anything you can do for existing schools or entrenched poverty.

It's becoming clearer that the foreclosure mess is likely to require some sort of federal response. In a good scenario, agencies like Fannie and Freddie can simply take of this on their own. In a bad scenario, where investors are able to push the rotten mortgages back onto the banks that sold them, we could be looking at another insolvency crisis.

But there's opportunity here, too. The foreclosure mess is new, but the foreclosure crisis has been going on for years now, and homeowners still need help. That the banks were this lazy and shoddy and potentially fraudulent when the consequences would be on them is a good reminder of how many homeowners were sold mortgages that they not only didn't understand, but that were simply misrepresented to them.

If we have to help the banks get through this, then we also need to do more to help the homeowners get through this. A good start would be allowing courts to negotiate down principal balances to help underwater homeowners (that's the "cramdown" idea that the House passed and the Senate rejected some months ago), and another idea would be expanding right-to-rent, where foreclosed homeowners have the right to rent their home at fair market value. Either way, it's increasingly clear that if the banks need help to stay out of trouble, they're going to get it. But as the full dysfunction of the mortgage markets continues to reveal itself, it's time to do more for the distressed homeowners the market got into trouble.

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Federal regulators are beginning to address the foreclosure mess -- but mostly just by having banks conduct internal reviews, report Zachary Goldfarb, Dina ElBoghdady and Ariana Eunjung Cha: "While [the Federal Housing Finance Agency] does not oversee banks or most other financial firms directly, the regulator can still exert pressure by way of its authority over Fannie and Freddie, which now own or guarantee well over half the nation's home loans. If banks and other lenders do follow the policy prescriptions, the FHFA could threaten to impose financial penalties and other sanctions. The policy statement tells lenders to make sure that documents used as part of the foreclosure were properly reviewed and signed. If they weren't, lenders must work with local lawyers on a fix. This could include filing new paperwork."

The American people should get mortgage help in return for the bank bailouts, writes Tim Fernholz: "Fannie and Freddie own or insure most of the mortgages in the U.S., and the government could overlook the paperwork irregularities so that Fannie and Freddie can absorb the losses rather than send them back to the banks...People suffering from employment problems, those whose mortgages are underwater due to the drop in home prices, and the victims of fraud should have the opportunity for deep principle write downs and substantial loan modifications. Those have been hard to access because servicers devote few resources to working out sustainable loan agreements with borrowers. That could change if the government has the option of putting a serious package of bad loans back onto the banks - primarily Bank of America, J.P. Morgan Chase, Wells Fargo, and Citibank."

Sen. Mary Landrieu is refusing to release her hold on OMB nominee Jack Lew: http://bit.ly/aADayP

Congressional liberals want the Bush tax cuts for income over $250,000 to end in order to reduce income inequality, reports Lori Montgomery: "'I just really believe it's an argument we can win,' said Rep. Tim Ryan (D-Ohio). 'If you look at our tax structure from World War II to 1980, we had a system where the wealthiest paid more, we kept reinvesting back into our country, and we had a strong middle class.' Since then, the rich have raked in a growing share of the nation's income even as their tax rates have fallen. 'It's just been this sucking sound up the ladder to the wealthiest Americans,' he said...Rep. Sander Levin (D-Mich.), chairman of the tax-writing House Ways and Means Committee, wants to go further in taxing the wealthy, by treating their dividends - a large chunk of earnings in top households - as regular income."

Insurers will be able to charge more from families with sick children if they ask for insurance outside open enrollment periods, reports Robert Pear: "In September, the administration said that insurers could establish open-enrollment periods — for example, one month a year — during which they would accept all children. Now, on Wednesday, the administration, answering a question raised by many insurers, said they could charge higher premiums to sick children outside the open-enrollment period, if state laws allowed such underwriting, as many do....The problem may be solved in 2014. If Democrats can beat back Republican efforts to dismantle the law, most Americans will be required to carry health insurance, starting in 2014, and insurers will be required to accept all applicants, regardless of pre-existing conditions."

Got tips, additions, or comments? E-mail me.

Jon Cohn offers a simple test to apply to stories touting big disruptions from the Affordable Care Act: "Here are three basic questions to ask every time you hear a story about changes the Affordable Care Act is unleashing: 1) Is something actually changing? 2) Is the change related to the Affordable Care Act? 3) Is the change really for the worse?" As he details, the stories we're hearing fail at least one of the tests more often than you'd think.

Live indie interlude: Beach House plays "Norway".

Still to come: Fannie and Freddie have begun investigating the foreclosure mess; the oil spill commission is split over the future of deepwater drilling; Obama calls for extending a tax break for students; and a man builds an airplane from scratch.

Recap: What to do about state pensions; part two of my interview with Steve Rattner; and the next hope for slowing climate change.

Elsewhere:

1) Peter Baker catches President Obama in a reflective and self-critical mood.

2)Starbucks decides to focus on quality, sacrificing speed.

3) If we have to help the banks again, what should we get in return?

4) What happens when a four-star restaurant finds a roach?

Recipe of the day:: I should make pizza dough more often.

I've spent the past few weeks gathering string on a column about the best strategies for addressing climate change without a carbon price. Unfortunately for me, David Leonhardt wrote that exact column today. Fortunately for you, he did a better job with it than I would've.

The basic story here is that for years, climate-policy wonks advocated a market-based solution to climate change: We'll slap a price on carbon that reflects its cost to society, and as high-carbon activities and products become more expensive, people will move toward low-carbon alternatives, and research money will flood toward clean-energy technologies. The market, in other words, will work its magic.

But the U.S. Senate wasn't much interested in that solution. So a new approach is emerging: applying industrial policy to global warming.

Ray Fisman summarizes recent research showing that management consultants can help companies in developing nations make huge productivity gains:

In an earlier study, Bloom worked with a pair of London School of Economics researchers to conduct a worldwide survey of management practices, using metrics of management quality similar to those employed by Accenture. They hired MBA students to interview managers at corporations in 17 countries. India ranked third from the bottom -- just behind Brazil and one position ahead of China. Together, these three terribly managed economies constitute nearly 40 percent of the world's population. [...]

The study's findings suggest that we might do well to direct at least some of our aid funds toward building business schools in India and elsewhere in the developing world to provide their economies with the consultants and middle managers they need to create the corporate bureaucracies we so love to hate in America. Study co-author David McKenzie argues that another implication is that India should allow more multinationals to set up shop to serve as training grounds for managers. Of course, these multinationals will also drive the worst-managed Indian companies out of business, making this proposal a tough sell in a country with a history of economic nationalism.

America's auto industry seems healthy today. Sales are up, and so are profits. GM is readying an IPO. "An apology is due to Barack Obama," wrote the Economist, which opposed the government's intervention into the automobile market. "His takeover of GM could have gone horribly wrong, but it has not."

Some of the credit for that goes to Steve Rattner, the private-equity specialist whom President Obama tapped as "auto czar." Ratner's new book, "Overhaul," reconstructs those frenzied months and provides the first insider perspective on the administration's policymaking process. This transcript -- which focuses on the auto bailout and related financial-rescue policies -- is the second of a two-part interview. Part 1, which came out yesterday, focused more specifically on how the government was working amid the chaos of the financial crisis. The transcript has been lightly edited.

Ezra Klein: Let's go back to what you said about the government stepping in when the market failed. How do you apportion blame for what happened here? How much was the auto industry managing itself poorly and how much was a once-in-a-generation economic crisis that froze the credit markets?

SR: It's a bit of both. The best argument for why it was their own fault is Ford. They faced all the same pressures: competition from Japan, UAW contract, gasoline prices, and they got through it. Why? Better management. It's not that complicated. GM and Chrysler deserved to go bankrupt. They ran their company poorly in the case of GM, they were over-leveraged in the case of Chrysler. But in a normal environment, there would have been financing to get them through bankruptcy; everyone would have lost some money, but the companies would have survived.

But this was also a hundred-year storm, so it tested everybody. In this environment, there was no financing. If we had not provided capital, those companies would have shut their doors and liquidated and you would've had a million people out of work for no really good reason, just because the capital markets stopped functioning. So nobody got bailed out here. Everybody took pain in the auto sector. Shareholders were wiped out. Lenders got about 30 cents on the dollar. The UAW made significant concessions for both current workers and retirees.

EK: Was the pain equally shared? People say the auto bailout was just a giveaway to the UAW, that they got special treatment.

SR: Honestly, it was. If we were doing this purely in the private sector, maybe everyone would've taken more pain. Was the government going to try to break the UAW or J.P. Morgan? No. But I think we got a very fair deal out of all of them. You can debate who did better and who did worse, but there was a lot of precedent in the steel bankruptcies for different people being treated differently. Everybody likes to talk about the UAW here, but if you were a warranty holder, you were at the same place in the capital structure as the UAW, and you got 100 cents on the dollar and the UAW took a haircut. A lot of Americans got treated better than the UAW, a lot of suppliers got treated better than the UAW. We did what we felt was right for each constituency in order to have a functioning company going forward.

EK: What would have happened if you'd done nothing?

SR: There's no doubt. Look at [George W.] Bush. He was under enormous pressure from the Cheney wing to do nothing. And [then-Treasury Secretary Henry] Paulson and Joel Kaplan went in and said, c'mon, this is insane. The car companies would have run out of money, closed their doors, and all the employees would've be gone. Then all the suppliers would have shut down. Then Ford and the Japanese transplants would have shut down because they couldn't get parts from their suppliers. And you would've had well over a million people, or maybe 2 million people, out of work in a week or two. I'm a free-market guy. I'm a centrist. But when markets fail, that's what governments are for.

EK: Has there been much reaction from the Obama administration to the book?

There's been an interesting conversation happening about why the GOP is the only major right-of-center political party that doubts the science behind global warming. See Ron Brownstein and Bill McKibben's contributions, and then read this take from Ross Douthat, which I find convincing:

What’s interesting, though, is that if you look at public opinion on climate change, the U.S. isn’t actually that much of an outlier among the wealthier Western nations. In a 2007-2008 Gallup survey on global views of climate change, for instance, just 49 percent of Americans told pollsters that human beings are responsible for global warming. But the same figure for Britain (where Rush Limbaugh has relatively few listeners, I believe) was 48 percent, and belief in human-caused climate change was only slightly higher across northern Europe: 52 percent in the Czech Republic, 59 percent in Germany, 49 percent in Denmark, 51 percent in Austria, just 44 percent in the Netherlands, with highs of 63 percent in France and 64 percent in Sweden. (Doubts about anthropogenic global warming are considerably rarer, the study found, in southern Europe, Latin America and the wealthier countries of Asia.)

There’s a reasonably large Western European constituency, in other words, for some sort of climate change skepticism. (And probably a growing one: In Britain, at least, as in the United States, the economic slump has dampened public enthusiasm for anti-emissions regulation.) But the politicians haven’t been responding. Instead, Europe’s political class, left and right alike, has worked to marginalize a position that it considers intellectually disreputable, even as the American GOP has exploited that same position to win votes.

This isn't a very popular statement, but there is a role for elites in public life. Just like I want knowledgeable CEOs running companies and knowledgeable doctors performing surgeries, I want knowledgeable legislators crafting public policy. That's why we have a representative democracy, rather than some form of government-by-referendum. But of late, the elites in the Republican Party are abdicating their roles, preferring to pander to the desire for free tax cuts and the hostility to Al Gore than make tough and potentially unpopular decisions to safeguard our future. That isn't to say, incidentally, that Republican politicians should agree with me. But maybe they could agree with AEI fellow and former Reagan biographer Stephen Hayward.

Twitter CEO Biz Stone explains why he bought a suit and came to the Capitol:

Twitter executives did a meet-and-greet with federal lawmakers in recent months because they wanted to establish a good relationship with politicians when the company is in the enviable state of not needing anything from them, Stone said.

“A couple of months ago, our general counsel told me, ‘Look, everyone in Washington thinks Twitter has 30,000 employees who are jerks. So buy a suit and we’ll parade around all the senators and you will say hello and how can we help you,’” Stone recalled (Twitter has 300 employees now). Political leaders “are supposed to represent the people, and they need to stay connected to people. Almost all of the senators are on Twitter. The Russian president came to our office to send his first tweet.”

I can only hope they spent some time with Sen. Chuck Grassley:

As some of my recent posts suggest, I've been spending more time lately looking into state and local finances. And what's really amazing is how, well, familiar it all seems.

The federal government is facing a short-term economic problem driven by a collapse in revenues (which means it has less money to spend) and a sharp rise in unemployment (which means there are more people who need temporary government help). In the longer run, there's a pension problem, but the bigger issue is health-care costs.

Oh, I'm sorry. Did I say "the federal government?" I meant state and local governments. The problems are similar at all levels. The differences are that the federal government can deficit spend to smooth out the short-term crunch, which no state but Vermont can do, and that pensions make up more of the long-term problem for the states than for the feds, as the states don't have responsibility for Medicare.

The background to the pension problem is similarly familiar. States have essentially deferred their employee compensation into the future. That led them to hire more and/or better people without fully paying for it. If that sounds a bit to you like the recent consumer credit bubbles, where people bought more and/or better things while deferring the costs into the future, well, that's exactly right.

If you liked the Insane Clown Posse profile I linked earlier, you need to see the "SNL" parody:

"Are children small or are they just far away?" These are the great questions of our time.

This post by Jonathan Chait is, somewhat inadvertently, an interesting commentary on the upsides and downsides of maintaining a strong party brand. Chait is looking at the West Virginia Senate race, where the Democratic nominee is Joe Manchin, the popular governor whose campaign ads currently feature him shooting a gun at a copy of the cap-and-trade bill. His ads, in other words, are about what a hard time he'll give the party. But those ads are, in part, why he'll likely win. And then he'll get to the Senate, vote for Harry Reid as Senate majority leader, and vote for most, but not all, Democratic initiatives. The Republican candidate in the race, by contrast, makes no similar concessions to West Virginia's populist political culture.

It's hard to have a concrete brand when a guy like Manchin is part of your party. It'd be a bit like if Coca-Cola sold not just Cokes, but a brand that spent its advertising budget convincing people that Coke was gross, and hired guys to yell at people who ordered Cokes in stores.

But though Manchin makes thematic coherence difficult, he makes it easier to have a congressional majority. The party discipline that the Republican brand requires makes it difficult to tailor candidates to individual races. So you'll see campaigns like Delaware and West Virginia, where Democrats are likely to win seats a different kind of Republican could've captured, and major policy achievements like health-care reform that only happened because Democrats decided against kicking Joe Lieberman out of the party, and senators like Arlen Specter and Jim Jeffords, who simply switched sides to get away from the GOP's party discipline.

The flip side of this, of course, is that Republicans are better at getting all of their members to vote the same way, and better at getting their candidates to move to the far right. But aside from tax cuts, I'm not really sure what that's gotten them. George W. Bush expanded the federal role in education, Medicare and campaign finance, not to mention starting both the bank and auto bailouts. Civil rights, feminism and sexual equality have all made enormous strides. Barack Obama passed a massive stimulus plan followed by a near-universal health-care bill. Conservatives might have the stronger brand, but liberals, in recent years, have had the more successful one.

Chowhound took data from StarChefs.com's 2009 salary survey and pulled together this graph comparing the effective hourly wage of chefs de cuisine -- that is, the No. 2 chef at nice restaurants -- with the pay of a bus driver or a trash collector. On first glance, the chefs come out okay, making nearly $60,000 a year. But when you break that down by their 62-hour workweeks, it gets a little less impressive:

Tough business.

Later today, Rep. Barney Frank, Rep. Ron Paul and 55 congressional co-signers are sending a letter to the National Commission on Fiscal Responsibility and Reform advocating defense cuts. The letter is good not just on cuts, but on theory: It's as much about where we can save money as why we don't need to spend the money. Here's the core of it, with my emphases:

The Department of Defense currently takes up almost 56% of all discretionary federal spending, and accounts for nearly 65% of the increase in annual discretionary spending levels since 2001. Much of this increase, of course, is attributable to direct war costs, but nearly 37% of discretionary spending growth falls under the “base” or “peacetime” military budget. Applying the adage that it is necessary to “go where the money is” requires that rigorous scrutiny be applied to military spending. We believe that such an analysis will show that substantial spending cuts can be made without threatening our national security, without cutting essential funds for fighting terrorism, and without shirking our obligations as a nation to our brave troops currently in the field, our veterans, and our military retirees.

Much of these potential savings can be realized if we are willing to make an honest examination of the cost, benefit, and rationale of the extensive U.S. military commitment overseas, which in large part remains a legacy of policy decisions made in the immediate aftermath of World War II and during the Cold War. Years after the Soviet threat has disappeared, we continue to provide European and Asian nations with military protection through our nuclear umbrella and the troops stationed in our overseas military bases. Given the relative wealth of these countries, we should examine the extent of this burden that we continue to shoulder on our own dime.

We also think that significant savings can be found if we subject to similar scrutiny strategic choices that have led to the retention and continued development of Cold War-era weapons systems and initiatives such as missile defense. While the Soviet Union and its allies nearly matched the West’s level of military expenditure during the Cold War, no other nation today remotely approaches the 44% share of worldwide military spending assumed by the United States. China, for instance, spends barely one-fifth as much on military power as the United States. Instead of protecting us against a clear and determined foe and enemy, Defense Department planning and strategic objectives now focus on stemming the emergence of new threats by maintaining a vast range of global commitments on all continents and oceans. We believe that such commitments need to be scaled back.

Additionally, we believe that significant savings can be realized through reforming the process by which the Pentagon engages in weapons research, development and procurement, manages its resources, and provides support services. Former Secretary of Defense Donald Rumsfeld has speculated that waste and mismanagement accounted for at least 5% of the Pentagon budget annually, and despite a long history of calls for reform from outside the Pentagon, and actual reform initiatives within it, it is clear that much more remains to be done.

That last bit is important: Because it's politically difficult to cut the defense budget, a lot of waste and redundancy builds up. Budget areas that are easier to cut -- think public health, or transportation -- are often leaner, as legislators looking to fund their priorities cut the obviously wasteful programs in those sectors long ago.

Anyway, you can download the full Frank-Paul letter here, and a longer report from the Sustainable Defense Task Force here.

This profile of the newly evangelical Insane Clown Posse is amazing. That is all.

The political science journal PS (can you guess what it stands for?) solicited a number of articles forecasting the coming election and kindly left them outside the paywall. Read them here. James Campbell's survey notes that if you tally together 2006 and 2008, Democrats won 54 House seats. One of the interesting metrics in this election will be whether all of those gains are wiped out, or Democrats remain ahead of where they were after 2004.

Campbell, for the record, predicts a 51- or 52-seat gain for the Republicans. That's more than any of the other models foresee, but it seems plausible to me.