Matt Yglesias

Endgame

Listen to the tube train accelerator:

— Washington Post hands out horrible and repugnant advice to a rape victim.

— Turkish Star Wars.

— Will lobbyists wreck high speed rail?

— China says its currency is just fine thank you.

— Somali pirates seize oil tanker.

In New York on Friday I went to a bar where they played basically 40 percent Clash songs—I’ve heard worse ideas! “Clash City Rockers”.

Auto Concerns Holding Back South Korea Trade Deal

In principle, an agreement with South Korea to lower trade barriers should make more countries more prosperous. It’s all the more appealing in that we’re talking about two wealthy democracies, so you don’t even have concerns about systematic undercutting of American wages. But there are some problems:

President Barack Obama’s call to complete a trade deal with South Korea in 2010 is stirring a hornet’s nest among Michigan lawmakers on Capitol Hill.

They worry it will harm the U.S. auto sector and warn it will have to be significantly changed to win support.

“If we don’t get an agreement on access for American automakers, I can’t support moving forward on an agreement,” said Sen. Debbie Stabenow (D-Mich.) in a short interview last week.

As I said earlier, it’s hard for me to see how liberal trade regimes are going to be sustained—much less expended—in the face of weak labor markets as far as the eye can see. I would ordinarily be quite comfortable telling the U.S. auto industry that their interests can’t take priority over an overall beneficial measure. But given the state of things in Michigan, who’s really going to say Debbie Stabenow is doing the wrong thing for her constituents? Nobody likes becoming a victim of frictional unemployment, but if it really is just frictional you can say that it’ll all work out in the end and observe that these measures raise overall living standards. But sustained high levels of unemployment make flexibility an incredibly hard sell. Which is fine for “insiders” who’ve got jobs, but makes it hard to generate the kind of economic growth that provides employment for new entrants into the labor market.

Food Stamp Stigma

(cc photo by Mills Baker)

To an extent, the viability of social democratic public services depends on a cultural context that maintains a modicum of bourgeois distaste for dependence upon them. In other words, you want people to have the attitude that these services are available for people who are really in need, but that it’s preferable to earn what you need through work when possible. So I have some sympathy for Mickey Kaus’ idea that use of “food stamps” should be socially stigmatized, but I think he takes it too far:

But a stigma placed on cash-like welfare (which food stamps are) remains a positive sign of a healthy work ethic. If you came across two societies–Society A, in which food stamps were stigmatized, with families reluctant to go on the dole even if they were eligible, and Society B, in which they weren’t, you would want to bet on (and live in) Society A. It’s one thing to relax the stigma on welfare in times of epic economic decline. It’s another if the stigma doesn’t return with the possibility of employment. The CBPP chart would also have demonstrated that food stamp rolls have risen rapidly before–in the slump from 1988 to 1994–only to fall just as rapidly when the economy picked up in the mid-90s. Of course, at that time we had a President (Clinton) who was campaigning against “welfare as we know it.” It seems unlikely that President Obama will repeat the performance.

One thing here is that I just doubt that Clinton’s campaign promise to “end welfare as we know it” was really all that decisive in the decline in food stamp enrollment. Objective economic conditions improved rapidly during this period, with the late-1990s being the only period of substantial low-end wage growth of the past several decades. Whether food stamp use declines or not as we enter an economic recovery depends first and foremost on how robust that recovery actually is.

But as for Society A and Society B, whether or not I would bet on Society A is going to have a lot to do with whether Society A is suffering from much larger quantities of undernourished children. If it’s able to scrimp on food stamps without achieving that result then, yes, its bourgeois stolidity looks promising. But if Society B is doing a much better job of ensuring that its kids are healthy, then Society B is going to have a better-educated workforce, lower crime, less disability, and a generally better-off population and economy for years to come.

Which I think leads to the conclusion that the problem with SNAP isn’t that it ought to be more stigmatized, but that it’s too much like cash welfare. It’s called the Supplemental Nutrition Assistance Program and a supplemental program to assist people with obtaining adequate nutrition is a good idea. But if you read ye olde eligibility guidelines you’ll see that “nonalcoholic beverages, snack foods, soft drinks, candy, and ice.” are all eligible. I like Fritos, I like Diet Coke, I like Twizzlers, but none of this is supplementing anyone’s nutrition. Conversely, you can’t use SNAP money to buy any “foods that are hot at the point of sale” even though this restriction has nothing to do with promoting nutrition. I don’t think we need to go all the way in the direction of turning this into a monastic “fruit, vegetables, and whole grains only” program but we could surely go a good deal further in the direction of targeting the money at actual nutrition assistance.

An Empire of Self-Delusion

Thomas Friedman’s recent “green” turn sometimes makes me feel bad that I ever said anything mean about him, but then you go read something like this:

Yes, after two decades in which U.S. foreign policy has been largely dedicated to rescuing Muslims or trying to help free them from tyranny— in Bosnia, Darfur, Kuwait, Somalia, Lebanon, Kurdistan, post-earthquake Pakistan, post-tsunami Indonesia, Iraq and Afghanistan — a narrative that says America is dedicated to keeping Muslims down is thriving.

Next time you’re asked to defend the proposing “U.S. foreign policy since the end of the Cold War has been largely dedicated to rescuing Muslims or trying to free them from tyranny” at a debate competition, you’re probably going to want to ask Friedman to join your team. But as a real characterization of American policy, this is laughable. And, indeed, from across the pond Alex Massie seems rather amused:

In one sense it is charming that the Cousins retain such a faith in their own idealism; in another it’s infuriating that they so often fail – Friedman being a regular exemplar of this – to appreciate that their idealism is a pretty cloak for America’s self-interest. There would be less wrong with this if America’s great idealism were applied more consistently. But since it isn’t it’s unwise to boast too much about it or to pretend that it’s the only motivation for US foreign policy and that if only this were more perfectly understood all would be well.

More than “charming” or “infuriating,” however, I think this sort of thing is positively dangerous. It’s one thing to make up fairy tales to amuse the children, but the danger the United States keeps stumbling into is a tendency among our elite to start believing the fairy tales. So before the invasion of Iraq we had people like Thomas Friedman and Jeffrey Goldberg assuring us that not only was invading a great idea but that invading would have a beneficial impact on Muslims’ assessment of the United States. Now we have Friedman stumbling around, baffled, as to why Muslims don’t see our policy as primarily driven by an effort to help them out. This kind of self-deception leads to very, very bad judgment.

Let Them Eat Debt Commissions

It looks like Evan Bayh, Kent Conrad and other “centrist” Democrats are really serious about voting to force the U.S. government to default unless they get a special “budget commission” to propose budget balancing initiatives. Meanwhile, I saw Senator Bayh on television earlier today attacking the idea of a war tax to pay for escalation in Afghanistan, saying instead that we should be looking at unspecified spending cuts. Then I read this op-ed from Bayh about the proposal, and it more and more looks to me like this idea is so vacuous that what its proponents really want is for liberals to kill the idea. Then they get to complain, foot-drag on climate and other crucial initiatives, and continue opposing each and every concrete proposal to reduce deficits that emerges:

The proposal I am supporting with Sens. Kent Conrad, D-North Dakota, and Judd Gregg, R-New Hampshire, would create a new debt-fighting commission. Conventional wisdom in Washington is that commissions are something politicians create to defer hard decisions. But our bipartisan panel would put all options on the table, including spending cuts and revenue raisers. Congress would then be compelled by law to debate the recommendations and take an up-or-down vote on the entire plan.

I think Bayh is right, commissions don’t have to be something politicians create to defer hard decisions. But Bayh’s specific proposal absolutely reeks of a desire to defer hard decisions. He doesn’t, for example, have an actual target in mind. Nor any suggestions whatsoever for guidelines to shape the commission’s deliberation. He thinks it should “put all options on the table” but also devise a specific plan (which presumably entails ruling many options off the table) that then gets an “up-or-down vote.”

It seems to me that in light of Bayh’s evident passion for this issue, maybe he should get his way and even be made chairman of the commission. Let him and his co-commissioners come up with a proposal that they’re willing to stand behind, and then congress can debate it. It almost seems like letting the deficit scaremongers off too easy to argue with them about whether or not we should initiate an argument about their ideas.

The ECB’s Continuing Deflationary Bias

Eurozone inflation has turned positive but only very slightly, a 0.6 percent annualized rate in November:

However the latest rise was driven largely by higher oil prices, although Eurostat gave no details. “Core” inflation, excluding volatile energy and food prices, is still on a downward trend. With economic activity still significantly below pre-crisis levels – resulting in widespread under-utilisation of production capacity – economists see little prospect of any early return to headline inflation rates within the ECB’s target of an annual rate “below but close” to 2 per cent. [...]

The ECB is expected at its governing council meeting on Thursday to leave its ultra-loose monetary policy largely unchanged, and financial markets expect the main policy interest rate to remain at 1 per cent – a record low – for most of 2010.

However, Jean-Claude Trichet, ECB president, is expected to announce further gradual moves to unwind the exceptional measures taken to support financial markets since the collapse of Lehman Brothers in September 2008. These are expected to include the ending of the provision of unlimited one-year liquidity.

The European Central Bank’s decision-making is very hard to understand. As Willem Buiter noted in October, the ECB’s attitude seems to be that it should switch between focusing on core and non-core inflation according to which metric will justify tighter policy. Thus in 2008 when we had high headline inflation but low core inflation, they raised rates. But then in early 2009, they say there was no need to move to a Zero Interest Rate Policy because core inflation was still positive, albeit below the target level and heading downward. Now that energy prices are on the rise, this becomes a reason to stand pat even though core inflation continues its downward trend and both core and non-core inflation are below the ECB’s target.

Instead of talking about going looser, Jean-Claude Trichet is talking about unwinding extraordinary measures. But why? Inflation is low-to-nonexistent in the Eurozone and unemployment is high and rising. This seems totally insane. The ECB has the sturdiest independence in the world, since even if European politicians wanted to try to pressure it to do something the decision-making mechanisms of the EU are so cumbersome that they’d probably fail. But that only further underscores central bankers’ responsibility to do their jobs correctly. Instead the ECB seems to revel in its ability to cause human suffering without consequence.

Defense Spending on Personnel is Over $300 Billion a Year

In the DOD’s official breakdown of its budget, it has a $136 billion line item for “personnel.” But as Jim Arkedis points out this is a pretty massive undercount by any reasonable standard. A better account gets you a figure more like $301 billion:

Note that this leaves the money we’re talking about spending on universal health care absolutely in the dust.

In policy terms, Arkedis makes the point that this means you can’t make any really large reductions in the defense budget purely by going after the interests of the contractors who make weapons systems. The soldiers themselves are the military’s most important weapons, and also the most expensive ones. And the only way to reduce these costs is to either have fewer soldiers, or else to over time accept a lower quality of recruits. And that in turn would mean giving them either fewer missions, less ambitious missions, or some combination of the two.

This is worth thinking about not only in terms of Afghanistan, but also in broader strategic terms. Over time as technology advances and wages and health care costs rise, most organizations seek to do their work in a less labor-intensive manner. But the rise of counterinsurgency doctrine in the military implies a shift in the direction of a more labor-intensive strategic concept. There are some good reasons for this turn, but it has a lot of underdiscussed and underdebated budgetary implications.

Senate Bill Will Lower Insurance Premiums, Even for Families Ineligible for Subsidies

The health care debate has gotten a bit bogged down in technicalities and the hot-button fights over the public option and abortion. It is, however, worth emphasizing the point made by MIT economist Jonathan Gruber in his latest analysis namely that the restructuring of the individual insurance market envisioned in the bill would save people a lot of money:

In the very short run, this won’t impact very many people since most people aren’t in the individual insurance market. But in the long run it’s hugely significant. After all, one of the most infuriating aspects of the health insurance market is how little consumer choice you have. I got an announcement this morning about a significant decision the CAP HR department made about our insurance coverage. Personally, I would have been happier had this choice gone another way. But they felt (I think correctly) that more people would have been upset with the other choice. But the point is that it’s odd that this decision had to be undertaken collectively. Different people place a different amount of value on “more choice of doctors” versus “more cable channels” as a use of our marginal dollar of monthly compensation, and in principle everyone would be happier making their own decision for themselves.

But the individual health insurance market is a disaster, so nobody actually wants their employer to cash out the value of their health benefits and let them go buy the insurance they want. Gruber is pointing out that the Senate bill will make the individual market work much better. This will save money, but also lead to more consumer choice and, hopefully, everyone ending up with options that are better-tailored to their actual desires.

Trade and Depression

Paul Krugman highlights this chart from a new paper by Barry Eichengreen and Doug Irwin which makes the point that contrary to what you sometimes hear, it’s very hard to see how rising protectionism could have caused the Great Depression:

Protectionism was a result of the Depression, not a cause. Rising tariffs didn’t even play a large role in the initial trade contraction; like the spectacular trade contraction in the current crisis, the decline in trade in the early 30s was overwhelmingly the result of the overall economic implosion. Where protectionism really mattered was in preventing a recovery in trade when production recovered.

I think this illustrates one of the reasons why conventional, market-oriented neoliberal types ought to be more concerned about the labor market situation. If you convince people that it’s not possible for monetary authorities to boost employment, and that it’s unwise to use fiscal policy to boost employment, then it starts to look irresponsible for politicians not to use trade restrictions to protect the jobs of people in their state/district. When an economy is near full employment you can say trade makes the pie bigger and people who lose their jobs will get new jobs. But we’re years away from full employment—which both the Fed and the White House seem to think—then getting laid-off is catastrophic.

The trade restrictions put in place as a response to the Depression exerted a small-but-meaningful drag on growth year after year after year for decades. Going back in that direction would have very deleterious long-run consequences. But it’s going to be extremely difficult to avoid if we can’t prouduce a healthy labor market.

Pipes: Swiss Referendum “A Triviality” but Will Have Beneficial Impact in Terms of Legitimating “Anti-Islamic Sentiment”

Daniel Pipes thinks the Swiss minaret ban is “a triviality” with limited practical impact. I agree. He also thinks it mostly serves as an expression of bigoted anti-Muslim sentiment. But the way he sees it, this is a good thing:

But on another level, the 57.5 to 42.5 percent vote represents a possible turning point for European Islam, one comparable to the Rushdie affair of 1989. That a large majority of those Swiss who voted on Sunday explicitly expressed anti-Islamic sentiments potentially legitimates such sentiments across Europe and opens the way for others to follow suit. That it was the usually quiet, low-profile, un-newsworthy, politically boring, neutral Swiss who suddenly roared their fears about Islam only enhances their votes’ impact.

He’s writing in NRO, and I can only think it’s fitting that the magazine that had the courage to stand up against Martin Luther King and voting rights for African-Americans should also take this stand. For non-repugnant commentary on this issue, I recommend Tyler Cowen.

A Conspiracy So Vast…

I don’t have a great deal to say about the alleged scandal revealed by emails stolen from the University of East Anglia’s Climate Research Unit. Anyone who’s read their Kuhn will know that there’s some politicking in science, particularly regarding scientific issues that have important political implications, but the fact of the matter is that the natural sciences and the institutions associated with them have been enormously successful in expanding humanity’s capabilities. And they are telling us quite clearly that human activity is creating higher-and-higher concentrations of atmospheric greenhouse gases and this higher gas concentrations are driving problematic shifts in the global climate.

What I wonder for those, like Senator James Inhof and Cato Institute Vice President Roger Pilon, who seem to think these emails prove the existence of a nefarious conspiracy to defraud the public about the evidence for anthropogenic climate change is what’s the purpose of this conspiracy? You can see why, having decided that he really wants to pass a clean energy bill, John Kerry might be well-motivated to fudge the facts around the edges about various things. But what’s the upside for Kerry in taking this issue up in the first place? Or Barbara Boxer or Henry Waxman? How is it that the government of China, which is clearly reluctant to reduce its greenhouse gas emissions, doesn’t seem to have any qualms with this science? Maybe political parties from across the spectrum in France endorse consensus climate science because they’re under the influence of the nuclear energy industry, but why does this political consensus extend to the U.K. and all across continental Europe? Are David Cameron and Angela Merkel in the grips of growth-hating socialist ideology? And what about the scientists themselves? Where’s the upside? Normally to posit a giant conspiracy you need some plausible account of the motives.

It shouldn’t take a genius to note that opposition to the scientific consensus is extremely concentrated among political movements with strong ties to the coal and oil industry. You can easily see where the upside is for them in getting this wrong. But adopting the view that the IPCC is correct really is “inconvenient” from a political point of view. Indeed, even political leaders who accept the basic outline of this climate consensus rarely actually argue in favor of reductions that are sufficiently sweeping to meet IPCC guidelines specifically because doing so is so politically problematic. This just isn’t a “good issue” to take on. But it happens to be a real problem and so, reluctantly, leaders around the world are trying to take it on.

Elections Have Consequences?

John Meachem offers us an example of the problems with a journalism model in which it’s more important for pundits to be interesting and buzzworthy than to say something true and informative:

But I think we should be taking the possibility of a Dick Cheney bid for the Republican presidential nomination in 2012 more seriously, for a run would be good for the Republicans and good for the country. (The sound you just heard in the background was liberal readers spitting out their lattes.)

Why? Because Cheney is a man of conviction, has a record on which he can be judged, and whatever the result, there could be no ambiguity about the will of the people. The best way to settle arguments is by having what we used to call full and frank exchanges about the issues, and then voting. A contest between Dick Cheney and Barack Obama would offer us a bracing referendum on competing visions. One of the problems with governance since the election of Bill Clinton has been the resolute refusal of the opposition party (the GOP from 1993 to 2001, the Democrats from 2001 to 2009, and now the GOP again in the Obama years) to concede that the president, by virtue of his victory, has a mandate to take the country in a given direction. A Cheney victory would mean that America preferred a vigorous unilateralism to President Obama’s unapologetic multilateralism, and vice versa.

There are a ton of problems with this, especially the odd description of Democratic behavior during the Bush years,* but let’s just stick with this implicit contrast. Why didn’t Obama vs McCain have this impact. McCain is a “vigorous” unilateralist. And he ran on a platform of lower taxes, and deregulating health care. Obama ran on multilateralism, higher taxes on the wealthy, and more stringent regulation of health insurers. And guess what, despite his electoral victory the people in congress who want to vote down his agenda still feel comfortable doing so.

The fact of the matter is that American political institutions give parties that lose elections a substantial amount of ability to influence public policy. If you think this is a bad thing, then the thing to do is push for changes to those institutions. The low-hanging fruit here is elements of senate procedure like the filibuster and the practice of putting “holds” on nominees.

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Overcapacity in China

If you want to be optimistic about the current economic course, China seems to be leading the world toward recovery. If you want to be pessimistic, China seems to be riding some kind of strange investment bubble:

In a disturbing new report, the European Chamber of Commerce in China lays out the challenge in six sectors: aluminium, where the capacity utilisation rate is forecast to be 67 per cent in 2009; wind power, on 70 per cent; steel, on 72 per cent; cement, on 78 per cent; chemicals, on 80 per cent; and refining, on 85 per cent. Yet vast additional capacity is on the way.

The scale of the excess capacity is breathtaking. At the end of 2008, China’s steel capacity was 660m tons against demand of 470m tons. This difference is much the same as the European Union’s total output. Yet, notes the report, “there are currently 58m tonnes of new capacity under construction in China”. To the extent that gross domestic product is driven by such absurd spending is a measure of waste, not of economic welfare.

This highlights some of the problems with China’s stimulus measures. But I think it also highlights the basic absurdity of these large economic downturns and of the fatalist view that we can do nothing about the situation except wait around with everything stagnating as some “recalculation” takes place. There are right now around the world billions of people who would like to have more stuff. And we possess in the world the ability to make more stuff. And there are lots of people who would like to take jobs building stuff, moving stuff, selling stuff, installing stuff, doing accounting for the people doing all of that, making advertisements for the stuff, writing articles for publications that sell advertisements for stuff, and performing all sorts of high- and low-end personal services for people who would pay for services if they had jobs and incomes.

The responsibility of the world’s monetary authorities is to try to make Say’s Law work in practice. Instead, the ECB and Bank of Japan seem obsessed with inflation, while the U.S. Federal Reserve is just a bit better and still constantly looking over its shoulder and worrying about an exit strategy.

(As a side note, how is it that China has substantial overcapacity in wind power, plus in steel, but also “needs” to build lots of new coal plants to keep growing? Couldn’t they just use the excess wind power capacity and use some of the excess steel to build more windmills?)

Switzerland Bans Minarets

Europe is generally ahead of the United States with regard to high-quality public services, but the United States is generally far ahead of Europe in terms of tolerance for cultural differences. Thus you get things like the passage, via referendum, of an odious law banning the construction of minarets in Switzerland.

The referendum is the latest in a series of political wins by the Swiss People’s Party. Traditionally these right-wing populists had been the smallest of the four parties in Switzerland’s perpetual four-party coalition (along with the center-left Social Democrats, the center-right Christian Democrats, and the business oriented Free Democrats) but they’ve become the largest party in parliament and in various ways disrupted the cozy traditions governing Swiss politics.

They’re also pretty much a straightforwardly racist party, prone to doing things like promising “creating security” by kicking the black sheep out of the Swiss flock. So you get things like this minaret ban. And you have to wonder how many other European countries might follow suit if they had the kind of referendum-heavy system of government that you see in Switzerland.

Public Somewhat Indifferent to “Public Option” Concept

Public option supporters have taken a lot of heart from polling that indicates pretty widespread popularity for the idea of including a public option in health reform. But an interesting item from the NYT points out that this popularity masks something of an underlying indifference:

Two weeks ago, the Pew Research Center for the People and the Press asked respondents the main reason they either supported or opposed the health care bills. Among supporters, only 2 percent cited the public option. Among opponents, only 3 percent did so. [...]

For example, a nationwide Quinnipiac poll conducted shortly after the House passed its bill asked: “Do you support or oppose giving people the option of being covered by a government health insurance plan that would compete with private plans?” Fifty seven percent said they supported the option, while 35 were opposed.

I think this is a pretty rare instance of the broad public actually being closer to the mark than political activists. You could imagine a version of the public option—one that would pay Medicare rates and one whose patients providers would have to accept if they also wanted to accept Medicare clients—making a huge difference in the American health care system. Unfortunately, that idea had tragically little support in congress. Consequently the public option got defined down to something that’s much less significant.

At this point, the most important question determining the quality of the health insurance options that will be available to Americans in the future probably has to do with the design and implementation of insurance exchanges. The Senate contemplates this being done on a state-by-state basis, with the House contemplating a much larger state role. State government’s record as a regulator is, I think, quite poor. And the quality of insurance available to people over the long-run is going to be mostly determined by the quality of Exchange regulation. Do it the Senate’s way and residents of many states are going to end up with pretty lousy insurance, with the regulatory bodies mostly run by insurance companies. Do it the House’s way, and the outcome will probably be much better.

Huckabee In for Some Trouble

Apparently the man suspected of executing four police officers in Washington State would be in prison in Arkansas today were it not for the fact that former governor Mike Huckabee granted him clemency back in 2000. That probably spells trouble for a guy who seems to still have political aspirations. But based on the few facts I have available, this looks like a reasonable use of clemency authority:

In 1990, Clemmons, then 18, was sentenced in Arkansas to 60 years in prison for burglary and theft of property, according to a news account. Newspaper stories describe a series of disturbing incidents involving Clemmons while he was being tried in Arkansas on various charges. [...]

When Clemmons received the 60-year sentence, he was already serving 48 years on five felony convictions and facing up to 95 more years on charges of robbery, theft of property and possessing a handgun on school property. Records from Clemmons’ sentencing described him as 5-foot-7 and 108 pounds. The crimes were committed when he was 17.

60 years for burglary and theft for an eighteen year-old seems incredibly excessive. In this case, of course, you can’t help but wish he were in fact still in prison. But it’s hard to see what about a record of involvement in burglaries would make you think this was a guy at risk of doing something like this.

Bush and Rumsfeld Let Osama Escape

The main reason policy toward Afghanistan is so vexing, in my view, is that we basically failed in our main mission back in 2001 and 2002. Demands were made on the Taliban to hand over key al-Qaeda leaders, the Taliban refused, we went to war, and even though we succeeded in marginalizing the Taliban we didn’t succeed in achieving for ourselves what we’d been demanding the Taliban do. Having failed at that mission, we then shifted gears into a hazily defined effort to remake Afghanistan.

A new Senate report, thankfully, finally focuses attention on how we failed and why:

“The decision not to deploy American forces to go after Bin Laden or block his escape was made by Secretary of Defense Donald Rumsfeld and his top commander, General Tommy Franks,” the report says.

“On or around December 16, two days after writing his will, Bin Laden and an entourage of bodyguards walked unmolested out of Tora Bora and disappeared into Pakistan’s unregulated tribal area. Most analysts say he is still there today.”

Rumsfeld’s argument at the time, the report says, was that deploying too many American troops could jeopardize the mission by creating an anti-US backlash among the local populace.

The report dismisses arguments at the time from Franks, Vice President Dick Cheney and others defending the decision and arguing that the intelligence was inconclusive about Bin Laden’s location.

“The review of existing literature, unclassified government records and interviews with central participants underlying this report removes any lingering doubts and makes it clear that Osama bin Laden was within our grasp at Tora Bora.”

Another reminder of the horrible legacy of the George W. Bush administration.

Superprojects

I liked Louis Uchitelle’s article on the dearth of infrastructure “superprojects” in the contemporary United States. The strangest thing about the situation, which he notes and doesn’t quite dwell on as much as I would have, is that the Obama administration actually is pursuing two superprojects—the construction of a national high-speed rail network, and the construction of a national health care information technology backbone. But it’s somewhat oddly shied away from making the case for really funding them at the required level:

If there is anything in the Obama administration’s approach that can be compared to the megaprojects, it would be the giant computer system, now being planned, to make health records available in hospitals and doctors’ offices across the country. Some economists argue that computerized records would raise economic output just as the Hoover Dam did 73 years ago. Still, only $19 billion has been set aside; the project is expected to cost nearly $100 billion, and who knows if the funding will materialize. [...]

Mr. Obama has allocated just $8 billion as a down payment for high-speed rail — in Mr. Rendell’s view not a drop in a $3 trillion bucket, a bucket that seems unlikely fill anytime soon.

The perversity of this is that you’re really unlikely to find better times than 2009, 2010, and 2011 to spend a bunch of money on large-scale projects. Most of the time, this kind of spending would involve a short-term economic cost in exchange for a long-term economic benefit. But faced with such a weak labor market, it’d be a short-term benefit with even more benefits over the long-term. Clearly there are limits to what you could actually get done in a 30 month time frame—$3 trillion worth of new passenger rail wouldn’t be doable—but the allocations that have been made don’t really seem to be designed to test the limits of the possible.

There also seems to me to be a somewhat counterproductive obsession with avoiding waste. Like there’s an implicit idea that doing $100 million worth of useful projects is better than doing $180 million of useful projects plus $20 million worth of stuff that doesn’t work out. I see the political logic in that, sort of, but it doesn’t really make sense.

Ben Bernanke’s Credibility

Via Mark Thoma, Ben Bernanke makes the case for more power and autonomy for the Fed. He makes a number of good points. He also argues that the Fed’s “ability to take [emergency rescue actions] actions without engendering sharp increases in inflation depends heavily on our credibility and independence from short-term political pressures.”

It’s worth asking what might be going on right now if Bernanke had a bit less credibility. Suppose people were anticipating two percent inflation for 2010 probably rising the three or higher in 2011. Well, then it seems to me that prosperous folks (people who are employed in jobs that give them higher-than-average levels of disposable income and who were probably really freaked out six months ago about 401(k) losses and layoffs everywhere, but are feeling secure now that the situation has stabilized) would probably decide that in light of likely rising prices, it probably makes sense to take advantage of the discounts available right now. Maybe this Christmas is the time to upgrade to a Blu-Ray player and a TV with true 1080p display capabilities. Maybe it’s a good time to get the kitchen remodeled. Maybe you get extra generous with your gifts to the kids. After all, stuff is relatively cheap right now thanks to the weak economy, but Bernanke’s got no credibility and prices will be rising soon.

By the same token cash-rich businesses and very wealthy individuals are probably going to say that the super-safe investment vehicles they parked their money in back during the summer/fall of 2008 are suddenly looking not so safe. After all, they’re not safe from the inflation bug and Bernanke’s not credible. So there’s no real choice but to get out of all cash and treasuries and start loaning to businesses again.

Conveniently, what with prosperous folks going on their pre-inflation spending spree, there’s a need to start giving retail sales people more hours. There’s also more employment in transporting goods, in building trades, and to an extent in manufacturing. Business is perking up at the ports. And at the coffee shops and bars near the ports, and the truck stops along the highways. So the unemployment rate is falling, inventories are needing to be restocked, and those business loans are mostly paying off as people need to expand their activities to meet this surge in demand. All those sales fuel state and local tax revenues, so cops are working overtime again and the library is keeping longer hours. That’s more convenient for people, and also more income. Of course inflation is eating away at some of that income. But American households are pretty heavily indebted, so even a mere increase in nominal income makes debt service easier.

Basically, we’re on the road back to prosperity.

The problem, as I’m sure Bernanke would tell you, is that getting onto that road to prosperity by wrecking the credibility of American monetary policy would cause a lot of problems down the road. But the best way to avoid that is not to insist on two more years of grinding near-deflation and sky-high unemployment. The way to avoid that would be for Bernanke to observe that nominal GDP growth is way below its long-run trend and unemployment is ridiculously high and that he’s committed—credibly!—to catching up to trend and returning to something like a normal level of employment.

Americans still enjoy consuming goods and services, and Americans who’ve lost their jobs over the past 18 months—or who’ve left school and can’t find jobs—are just as capable of producing goods and services as they were 18 months ago. It’s absurd for us to be sitting around so blithely accepting of such a large proportion of the population sitting around idle.

Healthy Lifestyles Lead to Good Health

Melanie Warner has a piece in the NYT about companies looking to reduce their health care costs by engineering healthier cafeteria items for their employees and the like. Since employees don’t stick around forever, there’s reason to believe this can be made to work. Eat right and exercise and you probably won’t develop any major medical problems until Medicare is picking up the tab. What’s a lot less clear is whether this kind of information saves money overall, since living to 104 in an assisted living facility can be very expensive. But as I was saying yesterday this is probably the wrong way to think about it.

The problem with America’s giant health care expenditures isn’t so much that they’re large per se (though they are) as it is that we don’t seem to be getting that much for our trouble. Investments in healthy lifestyles, by contrast, have pretty modest costs and very large benefits in terms of better health and longer lives. Whether that better health and longer life ultimately results in lower overall costs is an interesting question to pursue, but ultimately public health interventions that buy us a lot of extra high-quality life years at low cost are worth undertaking on their own merits.

The correct worry about high health care spending is that much of what we spend isn’t very useful. Useful spending, however, is good.

Super Emo Friends

A little fun for your Sunday morning. My favorite is Jokie. I kind of want to see this expanded into a real comic book.

(Hat tip to Alex Gutierrez).

What if Western European Disarmanent Movements Had Triumphed?

A fairly bizarre Economist leader slams new EU foreign policy chief Catherine Ashton for her work in the 1980s on the Campaign for Nuclear Disarmament. They argue that involvement in such groups ought to be considered on a par with involvement in apartheid South Africa:

The real scandal, though, is the West’s continuing amnesia about the cold war. Given the Soviet Union’s history of mass murder, subversion, and deceit, it is astonishing that even tangential association with Soviet-backed causes in the past does not arouse the moral outrage now that is still so readily evoked by connections with the (undisputedly revolting) regime in South Africa. Most CND veterans see their peacenik days, at worst, as romantic youthful idealism. Warm-hearted but soft-headed, maybe: but better than being cold-hearted and hard-headed.

That is a shameful cop-out. Imagine a 1980s Europe where CND had triumphed, with left-wing governments in Britain and Germany scrapping NATO, surrendering to Kremlin pressure and propping up the evil empire. Her opponents complain that Lady Ashton is ineffective. As a CND organiser, that may have been a blessing.

I find the reasoning here slightly bizarre on several levels, but I think the interesting question is the one they raise at the end.

I mean, suppose that in the 1980s the European left had triumphed. Suppose the Pershing missiles were withdrawn from West Germany in 1982, and then following the 1983 election a Labour government came to power in the UK committed to dismantling the British nuclear arsenal. Would this have resolved the underlying problems in the Soviet economy? Would it have changed the fact that exercising control over Central Europe had high costs and few benefits for Moscow? I think the peace movement in the 80s got a lot of things wrong, but I’m skeptical that the details of western foreign policy had all that much to do with the dissolution of the Soviet Union.

Free Darko!

Legendary bust Darko Milicic says he’s going to look to head to Europe once his contract expires at the end of this year. It’s probably a good idea. The odd thing about Darko is that having been a such a disappointment as the number two pick in a draft that included Dwayne Wade, Chris Bosh, and Carmelo Anthony he’s now probably become underrated. He’s a below-average player, but so are half the guys in the league. There’s at least one backup center on every team, and Darko fits right in with the rest of ‘em. People don’t give Solomon Jones a hard time, but they’re basically the same. But Darko will never wear off the taint of his draft class and his foreigness—if he goes to Europe he’ll be a pretty good player and everyone will forget about it.

But man oh man how much better-off would Detroit have been if they’d managed to trade down in that draft?

Improving Efficiency, Not Just Cutting Costs

There are a number of different dimensions to the idea of reducing health care costs. One of the most important ones is, I think, simply improving the efficiency with which health services are delivered. But a pure green eyeshades approach sometimes winds up slighting the promise of these methods. Thus, this otherwise excellent piece (PDF) on reducing health care spending from The New England Journal of Medicine (via Bruce Bartlett) ends up being oddly dismissive of something that sounds great to me:

We also examined “value-based” insurance designs, in which drug copayments for patients with certain chronic diseases are reduced to give them an incentive for taking their medications regularly. Substantial evidence suggests that lower copayments lead to better adherence to drug regimes among patients with chronic diseases, but the effect on total health care spending would probably be small, since the resulting reduction in the use of hospital and other services would be relatively modest.

What I think this misses is that we’re talking about a “relatively modest” reduction in costs that’s achieved 100 percent by improving the health and quality-of-life of patients. That’s a really good idea! I don’t think it’s at all clear that high levels of national health spending would be all that problematic if it were also the case that the spending was all arranged in a very efficient, quality-of-life-improving kind of way. But it isn’t. Consequently, measures that actually succeed in both reducing costs and improving health outcomes are hugely valuable.

The Neverending Debt

Via Brad DeLong, a fascinating paper (PDF) by François Velde:

The French government currently honors a very unusual debt contract: an annuity that was issued in 1738 and currently yields 1.20 Euros per year. I tell the story of this unique debt, which serves as an anecdotal but symbolic summary of French public finances since the 18th century.

Turns out to have been a very bad contract the government signed back in 1738.