Matt Yglesias

The Funniest Thing I’ve Heard All Week

In a couple of tweets the morning, Joshua Foust said:

I finally figured out what bothers me so much about Wikileaks, and it is precisely what bothers me about the DOD: a sense, on both sides… … Of hypocritical entitlement, combined with arrogance and a blithe disregard for consequences. Wikileaks is the Left’s Pentagon.

Provocative! To which Andrew Exum replied:

@joshuafoust You’re being to harsh on the Pentagon: DoD has both systems of accountability and civilian and congressional oversight.

Congressional oversight! Of the Defense Department! We’re truly doomed.

That Old Clinton Magic

Josh Marshall puts his finger on what’s so odd about the new idea that Bill Clinton is some kind of political svengali who can/could help Democrats avoid their current political problems with his bold acts of strategic genius:

But let’s not be born yesterday. Anyone over 35 has a good adult memory of the 1994 midterm. That’s when Stan Greenberg was telling congressional candidates to run away from President Clinton, just two years after Stan helped engineer his election. Clinton was considered toxic politically in broad swathes of the country — swathes that anyone around then has to remember look an awful lot like the swathes where President Obama is toxic today. And even though the country was then in a comparatively mild economic funk rather than a full blown catastrophic and persistent recession, for all his political skills President Clinton couldn’t do anything the stem the tide. He was impotent, diminished, helpless, crushed and all the rest.

Conversely, Bill Clinton cruised to re-election and survived a major sex scandal thanks to the fact that US economic performance got very strong. I think it’s a mistake to write that all off to “good luck” or deny that real political skills were involved, but the skills at hand had to do with keeping himself, his administration, and his party focused on delivering the goods even as they were buffeted by all kinds of nonsense. Politics matters, a lot, but the reason it matters is that holding a political coalition together matters for policy and policy outcomes matter in people’s lives. But popularity as such stems from improved quality of life, not message.

Commodity Prices: The Good, The Bad, The Ugly, and The Irrelevant

People continue to struggle in vain to produce some kind of possible bad consequences of “currency wars.” The latest, the WSJ says that if everyone tries to devalue simultaneously the price of oil will go up:

When one country devalues its currency, others tend to follow suit. As a result, nobody achieves trade gains. Instead, the devaluations put upward pressure on the prices of commodities such as oil. Higher commodity prices, in turn, can cut into global economic output. In one ominous sign, the price of oil is up 8.7% since August 27.

If you try to reason in this direction, you end up tying yourself into knots. Is a higher price of oil “ominous.” Well it depends why it’s going up. If a bunch of equipment in the North Sea breaks, then the price of oil is increasing because the quantity of oil available to the world economy has declined. That’s bad because oil is useful. But conversely, if the US economy were to start growing rapidly that would increase the demand for oil and lead to a price increase. That, however, would be a good thing. If the world’s central banks engage in coordinated monetary stimulus, that will result in some inflation (and hence higher nominal oil prices) but some inflation would be helpful at the moment. But if Israel and Iran go to war, that will also increase the price of oil and it’ll be terrible.

In general, higher supply of useful commodities is good (and leads to lower prices) and higher demand for useful commodities is a side-effect of good things (and leads to higher prices) so you can’t just look at commodity prices and draw any conclusions about what’s happening.

True Grit

It’s pretty obvious that there’s more to doing well in school—or, indeed, to getting ahead in any endeavor—than being smart. Apparently we’re supposed to call this nexus of qualities grittiness:

There’s a lot of interesting, if methodologically questionable, research on these findings. Check out this 2007 study, which attempted (via surveys, some administered online) to correlate the “grittiness” of a few thousand adults with their life outcomes. The researchers identified two major types of grit: “consistency of interests” and “consistency of efforts,” asking respondents to rate themselves on a 5-point scale as to whether “new ideas and new projects sometimes distract me from previous ones,” or “I have achieved a goal that took years of work.”

The study concludes that even when IQ is controlled for, grittiness is associated with degree attainment and higher GPAs. The grittiest people, however, do not have the highest SAT scores. Perhaps those who perform well on standardized tests have so many other advantages going for them that they aren’t forced to be particularly gritty in order to achieve their goals.

Personally, I only like to see the term used in the context of the southern breakfast food, the Liberal Party of Canada, or the phrase “gritty urban realism.”

Broadband Matters

Jay Ackroyd convinced me I should make explicit something that’s only implicit in yesterday’s post on the vast consumer surplus associated with digital media, namely that the case for some form of subsidization of fast internet access is very strong. When this is talked about it’s normally discussed in terms of the idea that digital infrastructure is important to economic growth. And it is. But what that misses is the huge amount of value that can and will be created and distributed for free if people have the means to do it.

Exactly what that means in policy terms is another question. There are a lot of different things you could do. But as just a small example it would make a lot more sense for your cell phone bill to be tax deductible than your home mortgage interest.

More ambitiously, instead of having a US Postal Service whose main mission is to provide subsidized delivery of pieces of paper to low-density areas, we could have a government telecommunications entity whose purpose is to provide fast wireless broadband everywhere.

Bob Perry

Bob Perry, a longtime donor to Republican causes, has given $7 million since September to American Crossroads, the conservative group the strategist Karl Rove helped start.

Eric Lichtblau and Michael Luo profile rich homebuilder Bob Perry who “has given $7 million since September to American Crossroads, the conservative group Mr. Rove helped start.”

I think it’s pretty obvious that Perry didn’t do this in order to get elected officials to continue subsidizing his business. But it’s a reminder that while there are a lot of issues in this country where a more free market approach would be helpful—and the endless parade of subsidies for suburban homebuilders is one of them—merely voting for candidates who are disposed to say “free markets” a lot is unlikely to produce that result.

Endgame

You’re so great and I’m so bored:

— UK has so few veto points they’re imposing a carbon tax by accident.

— Writing sex scenes well is impossible.

— NFL owners making implausible claims of poverty.

— US calls for Keynes-style restrictions on trade surpluses that US kept out of Bretton-Woods when we had the big surpluses.

— French school lunch (healthy and appealing).

— Finnish school lunch (gross but healthy!)

In a desperate effort to get Kathleen Hannah to give me a sweater or some zines, here’s “Breakout A-Town”.

Helicopter Drop

Ezra Klein suggests that the United States could use a dose of fiscal/monetary coordination:

The answer is obvious: “explicit (though temporary) cooperation between the monetary and fiscal authorities.” In practice, that would mean Bernanke gets John Boehner, Nancy Pelosi, Harry Reid and Mitch McConnell in a room and says the politics and specifics of this are their job, but the economy needs more fiscal stimulus if it’s going to recover, and the Federal Reserve stands ready to make that not only possible but also virtually costless. Inasmuch as Republicans aren’t big fans of further government spending right now, the best option could be the exact one that Bernanke recommended to Japan: a Fed-financed tax cut. Perhaps a payroll-tax holiday for the next year or two.

Politics aside, the best way to do money-financed fiscal policy is on the spending side. Identify some useful infrastructure projects—like the now-abandoned NJ/NY ARC Tunnel—and print the money needed to pay for them.

If you’re going to go the tax cut route, however, you almost don’t need congressional cooperation. A money-financed payroll tax cut is awfully close in spirit to the old Friedman/Bernanke thought experiment of dropping money out of helicopters. More practically, you could place the money in envelopes and put the envelopes in the mail. The postage involved would even help forestall US Postal Service insolvency.

How the CPB Subsidizes National NPR

I think the case for getting the federal government out of the public broadcasting business is pretty straightforward—a given sum of money could be given to public radio or it could be going to preschool—so I’m not sure why National Review has come up with this somewhat misleading editorial on the subject:

NPR’s supporters argue that what it provides is not “media,” but news and journalism that consumers would otherwise be unable to find anywhere. NPR itself does not receive any direct federal funding, but its supporters howl whenever Republicans try to defund the CPB, because 40 percent of NPR’s revenues come from station programming fees, and many of its member stations, especially in rural areas, are dependent on CPB largesse. In this sense, NPR is sort of like Amtrak: Self-sufficient in urban areas where it has lots of listeners but dependent on taxpayer subsidies to broadcast its programming nationwide.

If listeners in Dubuque want NPR content, let them pay for it. We are tired of kicking in contributions so that coastal liberalism may find an audience in Ogallala. NPR offers many fine programs, but it is towering arrogance to imply, as some supporters of public funding do, that residents of Big Sky would be left stranded on an island of ignorance if forced to do without Morning Edition. If it’s really that important to them, they can increase their yearly contributions to Yellowstone Public Radio. If not, why should taxpayers in other parts of the country make up the shortfall?

This tries to make it seem like eliminating federal funding to the Corporation for Public Broadcasting would have no impact on NPR listeners in New York or Chicago or Los Angeles or whatever other enclaves of decadent coastal liberalism you care to name. But if the only thing at issue were the availability of NPR programming in rural areas, the whole thing would be almost totally a non-issue. The point, however, is that not only do rural stations depend on CPB largess to keep broadcasting, but they kick some of that money back upstairs in fees to the producers of NPR (and PRI) shows. Thus, the CPB’s subsidies to rural stations are, in part, subsidizing the creation of some of the programming that big city NPR listeners hear.

Meanwhile, over at Reason Jesse Walker has an excellent piece about why the CPB never actually gets de-funded—conservatives just like to wield this threat in order to intimidate public broadcasters into changing their programming decisions.

Note that conservative politicians lacked principled opposition to the CPB during the Bush years when they were in a position to do something about it. After all, that coincided with their period of maximal influence over the system. Then, once Juan Williams got fired conservatives rediscovered their principled objections as part of one of their periodic fits of anti-anti-racist passion. At the end of the day, this repeating farce and the leverage it gives the right over NPR mostly strikes me as reason to favor moving toward privatization. NPR is a major 21st century media success story and I think that if given a reasonably scheduled phase-out of government support could certainly find a way to keep operating and then be free of political interference.

Chinese Professor Remix

My colleagues downstairs at Campus Progress did a parody/remix of the Citizens Against Government Waste “Chinese Professor” ad we discussed earlier:

Unsurprisingly, CAGW decided to respond to this by immediately abandoning their belief in economic freedom and threatening to call the copyright police to get the video removed. But for now it’s still up.

Deleveraging

I have persnickety reasons for objecting to Richard Koo’s idea of conceptually distinct “normal” and “balance sheet” recessions, but I did like this Koo-inspired post from Mike Konczal and have every intension of poaching a chart:

The fundamental issue here is that middle class households have no choice but to deleverage and pay down their debts. Business as a whole, by contrast, actually does have a choice. But if you think that future household deleveraging is going to make it hard to find customers for your goods then it doesn’t make sense to go into debt to finance investments in expanding your activities. It also doesn’t make sense for cash-rich firms (think Apple, Google) to spend their stockpiles down. The problem is that if businesses don’t invest, then people don’t have incomes, so paying down debt becomes even harder.

This is where there’s a role for short-term debt-financed government activities. Such activities both provide income to households, facilitating a speedier deleveraging process, and also provide some assurance to businesses that there will be demand in the form of government purchases. That, in turn, should spur further business investment which will provide additional income to households further speeding the deleveraging process. When household deleveraging is done, it would be necessary to reverse course and reduce public debts. But by maintaining a decent pace of GDP growth during the process we can ensure that public debt is paid down from a relatively strong economic base.

Similarly, monetary action matters a great deal. The more rapidly the price level increases, the more rapidly deleveraging can be accomplished. When the inflation rate runs below the target number, the necessarily painful process of deleveraging becomes more painful. By contrast, if we use level targeting to achieve some “catch-up” inflation we can make the process more rapid. Similarly, those firms and individuals who aren’t currently indebted will be more likely to exchange their cash for real assets if inflation expectations rise. That will create income for households and further speed deleveraging.

Tablets In Hospitals

Monifa Thomas at the Chicago Sun Times reports on the latest must-have device at Chicago hospitals—iPads:

Not only does the iPad allow doctors to view electronic medical records, wherever they are, it also gives them a way to show patients their X-rays, EKGs and other lab tests on an easy-to-read screen. Plus, it’s lighter and has a longer battery life than many laptops, making it convenient for doctors to take on rounds.

Within the next month, the University of Chicago Medical Center plans to provide iPads to all of its internal medicine residents, expanding on a pilot program launched earlier this year. Similarly, Loyola University Medical Center in Maywood has given iPads to all of its orthopedic residents as part of a pilot program.

This is a nice window into the interplay between technological progress and health care costs. Even though the price of electronic devices tends to fall pretty quickly, if hospitals across the country start replacing clipboards and paper with iPads then that’s going to increase costs. But making health care cheaper per se isn’t the only thing in life. If getting more expensive gadgets into doctors hands actually leads to major improvements in health outcomes, then the expense will be very much worthwhile.

That said, in most industries one thing people try to do with new technology is find ways to reduce their cost structure. Initially, that leads to higher profits. But as competing firms also adopt cost-cutting technologies, the dominant strategy involves price cuts and the profit rate returns to the pre-innovation equilibrium and consumers benefit. The US health care system, however, is set up so as to strongly discourage price competition. So hospitals are relatively unlikely to focus on the ways in which new technology can reduce their cost structure, and even if they do this they’re unlikely to end up passing reductions on to consumers in the form of lower prices.

I Wanna Try On Your Clothes

Buzzfeed reports that “13-year-old fashion blogger Tavi Gevinson met with the former Bikini Kill/Le Tigre front-woman during New York Fashion Week and scored her iconic ‘Feminist’ sweater and some zines.”

That’s nice of her, but like Kriston Capps I can’t help but think the sweater belongs in a museum or something. And that goes double for “some zines.” A lot of culturally significant stuff happened in low-volume zines whose physical manifestations weren’t exactly built to last. We need to be collecting and archiving them so that future generations will be able to see them.

Bruce Josten and the Chamber of Secrets

Bruce Josten, chief lobbyist for the Chamber of Commerce, explains exactly what’s wrong with the organization keeping its corporate donors secret:

“The major supporters of us in health care last year were confronted with protests at their corporate headquarters, protests and harassment at the C.E.O.’s homes,” said R. Bruce Josten, the chief lobbyist at the chamber, whose office looks out on the White House. “You are wondering why companies want some protection. It is pretty clear.”

The chamber’s increasingly aggressive role — including record spending in the midterm elections that supports Republicans more than 90 percent of the time — has made it a target of critics, including a few local chamber affiliates who fear it has become too partisan and hard-nosed in its fund-raising.

So there you have it. The Chamber’s political finance arm exists, in essence, to help Republicans win elections. But many people are not Republicans! Even George McGovern got 37.5 percent of the vote. So individuals, as consumers and as citizens, may choose to not support businesses that take their money and spend it on a political party they don’t like. Naturally, no sensible business executive wants to do that. Michael Jordan was famously reluctant to get involved in partisan politics because “Republicans buy sneakers too.” Anonymity is so much more convenient.

But does it serve the public interest for this to be kept secret? It seems that for all the reasons the Chamber’s members don’t want you to know what they’re doing that you do want to know who they are. Since these very same business interests successfully beat back congressional efforts to make disclosure legally mandatory, it becomes essentially a journalistic problem. It’s possible for diligent reports to find out who the donors are, which is what my ThinkProgress colleagues have been looking into and today’s Times piece sheds some further light on. For example, “Prudential Financial’s $2 million donation last year coincided with a chamber lobbying effort against elements of the financial regulation bill in Congress.”

Citizens Against Government Waste Promotes Economic Ignorance, Anti-Chinese Demagoguery

On Monday I said I was surprised there was so much hue-and-cry over Jack Conway’s campaign advertising when to my mind the ugly advertising story of this campaign is the endless parade of anti-Chinese demagoguery I’ve seen. The largest quantity of these ads seem to be from Democrats complaining about tax treatment of foreign corporate earnings, but the American right loves it some nationalism and has devised a whole range of its own China-bashing ads.

This one from Citizens Against Government Waste is both the best-produced and the most ridiculous:

There are a whole range of absurd things here. For starters, how likely is it that China’s living standards will surpass America’s by 2030? Well, if you assume China manages to grow faster in the future and achieve 10% per capita GDP growth every year for the next twenty years, and America experiences no per capita GDP growth whatsoever during this period, they’ll end up slightly ahead of us.

But perhaps the Chinese haven’t actually surpassed us. After all, though the touchpad device that one student is using looks pretty cool, its features are only very slightly more advanced than what’s available in today’s iPad. If you consider what counted as a state-of-the-art portable electronics wonder 20 years ago (back when we were paranoid about Japanese catch-up growth), the lack of progress being forecast for the Chinese middle class is actually pretty bleak.

Further as James Fallows says “if you know anything about the Chinese economy, the actual analytical content here is hilariously wrong.”

The ad has the Chinese official saying that America collapsed because, in the midst of a recession, it relied on (a) government stimulus spending, (b) big changes in its health care systems, and (c) public intervention in major industries — all of which of course, have been crucial parts of China’s (successful) anti-recession policy.

I actually think the message of this ad is something they could stand to hear in China where they really could use a bit more emphasis on market-driven consumer demand for products and a bit less central planning of megaprojects aimed at impressive foreigners.

Finally, it’s worth noting that this portrayal of Chinese purchases of US government debt as part of some kind of long-term plot to enslave Americans is promoting a frightening level of ignorance as to what’s happening. The policy of the Chinese government is, in effect, to tax Chinese consumers and use the revenue to provide subsidies to politically powerful exporters and their customers. This is bad policy and it violates WTO rules to boot. So the PRC has decided that it’s discovered a loophole in WTO rules that allow it to in effect tax Chinese consumers to subsidize exporters and their foreign customers by buying US government debt to artificially boost the purchasing power of the dollar and artificially depress the purchasing power of the RMB. Rather than this being a reason for us to reduce borrowing it is, if anything, a reason for us to temporarily increase our borrowing in order to finance useful ventures since the Chinese government has committed itself to lending us the funds at sub-market rates.

Nominal Wage Cuts in the NBA

The best way out of a recession is a combination of expansionary fiscal and monetary policy to bolster aggregate demand. Failing that, you need to have a grinding process of nominal wage cuts and unbalanced deflation that can take years to end and cause massive human suffering in the meantime. David Stern wants the National Basketball Association to do its part to make the dream a reality:

Stern said the league wants player costs to drop $750 million to $800 million. Deputy commissioner Adam Silver said the NBA spends about $2.1 billion annually in player salaries and benefits. [...]

Stern and [Deputy Commission] Silver spoke after completing two days of meetings with league owners, who are seeking major changes to the current CBA that expires June 30. Silver said the league has told the union that owners are in a “diseconomic situation,” with projected league-wide losses of about $340 million to $350 million this season.

Though season ticket sales are up, both insisted that no matter how well the league does at the box office, it won’t change the fact that an overhaul is necessary to a system in which the players receive 57 percent of basketball-related income.

“Even though we reported we have record season ticket sales over the summer and otherwise very robust revenue generation, because of the built-in cost of the system, it’s virtually impossible for us to move the needle in terms of our losses,” Silver said.

This kind of pleading always strikes me as unpersuasive on the merits. If I owned a business that was losing tens of millions of dollars a year, I’d be eager to sell the business for a relatively small amount of money. When the Washington Post Company put Newsweek up for same, for example, they were ultimately willing to part with the firm for $1 on the condition that the new owner assume Newsweek’s pension liabilities. Similarly, when General Motors and Chrysler were revealed to have an unsustainably high labor cost structure, nobody wanted to buy either firm at any price so the government had to step in.

By contrast, when Mikhail Prokhorov bought the New Jersey Nets—by no means the league’s most lucrative franchise—he paid $200 million for the privilege. Ted Leonsis bought the Wizards, a terrible team, from the Pollard family for over $500 million this past summer. The high price of NBA franchises strongly suggests that operating one is valuable even with 57 of basketball-related revenue going to player salaries. Part of the issue is that the teams themselves can be in some ways loss-leaders for businesses whose real profit center is an arena or a cable network. Accounting can be misleading, actual asset prices are telling you something.

Temporary Monetary Stimulus Is Unlikely to Offer Many Benefits

I’ve read Joe Stiglitz’s Q&A with Ezra Klein on quantitative easing thrice now and I can’t quite decide if my view is that I agree with him or disagree. I suppose I just wouldn’t put the points the way Stiglitz does. But I agree with this: “People recognize that this is a temporary intervention and the government won’t maintain it for long, so they won’t run to spend that money.”

Temporary monetary interventions don’t really do anything. Which I see less as a reason to oppose quantitative easing than as a reason to urge permanent intervention.

Paul Krugman wrote the best piece on this twelve years ago long before the current crisis arose:

Of course the Bank of Japan does not announce whether its changes in the monetary base are permanent or temporary. But we may argue that private actors view its actions as temporary, because they believe that the central bank is committed to price stability as a long-run goal. And that is why monetary policy is ineffective! Japan has been unable to get its economy moving precisely because the market regards the central bank as being responsible, and expects it to rein in the money supply if the price level starts to rise.

The way to make monetary policy effective, then, is for the central bank to credibly promise to be irresponsible – to make a persuasive case that it will permit inflation to occur, thereby producing the negative real interest rates the economy needs.

This sounds funny as well as perverse. Bear in mind, however, that the basic premise – that even a zero nominal interest rate is not enough to produce sufficient aggregate demand – is not hypothetical: it is a simple fact about Japan right now. Unless one can make a convincing case that structural reform or fiscal expansion will provide the necessary demand, the only way to expand the economy is to reduce the real interest rate; and the only way to do that is to create expectations of inflation.

That was right then and it’s right today. And if it’s deemed to be difficult, in practice, for a bunch of sober-minded central bankers to commit themselves to higher inflation then they need to throw a crackpot blogger onto the FOMC. Someone with a track record of urging drastic action and a more rapid increase in the inflation rate. Either that or they need to adopt a level-targeting doctrine. Either way, the point is that it’s possible to get the job done but you have to face the problem squarely and not do the stop/start thing where you pull back from expansion the moment it seems to be working. As Stiglitz says, you can’t really trick people like that.

Endgame

I know you won’t listen to me:

— It’s not possible to not have a monetary policy, the only question is which policy would be best.

— Forced dissaving.

— Rob Portman wants to create lots of moral hazard.

— What would Milton Friedman do?

— I want to see a Social Network remake where Sean Parker urges Mark Zuckerberg to move his company to South Dakota.

— Helvetica ad from 1966.

— Could Pelosi get the boot even if Democrats hold the House?

Sufjan Stevens, “Bad Communication” is good but also makes me nostalgic for Ill Communication.

UK Austerity Budget Highlights Nonideological Case For Filibuster Reform

I think the Cameron-Clegg austerity budgeting in the United Kingdom is excessive and very unlikely to work as macroeconomic stabilization policy. And I think it’s clear that at least one reason they’re going so far all-in in this direction is simply that the UK Tory Party is a right-of-center party that has an ideological aversion to government spending.

But I do hope that American conservatives will look at the UK and recognize that even though they may have enjoyed the filibuster in 2009-2010, the extremely cumbersome nature of the American political process will make it forever impossible to enact these kind of sweeping cuts in the United States.

From where I sit, the system they have in the UK where you can simply sweep opposition objections aside is actually the right way to do bipartisanship. Call it bipartisanship by alternation. When Labour wins the election, Labour has the chance to implement a bold agenda creating and expanding programs in a way that they think will make Britain a better place to live. Then when the Tories come in, they’re able to be brutal in their efforts to pare back or eliminate things that they think aren’t working. Over the long term, you get a trajectory where programs survive if and only if they’re so widely regarded as successful that no mainstream party would dare abolish them. In the United States, it’s hard to do anything but then once anything’s been put in place it’s almost impossible to scrap or alter it as long as any non-trivial constituency is willing to back it.

The net result, it seems to me, is government that’s “smaller” than what you see in most other democracies but also much more focused on bad or poorly designed programs.

Anti-Anti-Racism

My friend Dave Weigel writes that Juan Williams “has instantly become a sort of icon for conservatives angry about media bias.”

I think that’s a pretty naïve read of what it is conservatives are angry about. What we’re seeing is episode one million in the American conservative movement’s passionate attachment to the cause of anti-anti-racism. Relatively few conservatives are interested in expressing racist views, but virtually all conservatives are united in the conviction that anti-racism run amok is ruining the country and almost no conservatives are interested in combatting racism. You normally see this in a black-white context, but increasingly over the past two years it’s emerging in a Muslim-Christian context. The central conservative passion when it comes to these bias issues is the bizarre notion that it’s hard for members of the majority group to get a fair shake and then unwarranted suppression of alleged anti-minority views is a much bigger problem that actual bias against minority groups.