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February 2008

Paul Kedrosky: Paulson's Project Lifeline: The Non-Plan Plan

Paul Kedrosky: Paulson's Project Lifeline: The Non-Plan Plan: I'll say it again: Rates are not the primary reason people are walking away from mortgages. Get that? It's not rates, not rates, not rates. Yes, I know that is the implication in all the nattering about adjustable-rate mortgages -- rate resets are hurting people -- that's not the main cause of foreclosure.

So, what is it, at least at present? It's declining home prices. When people find home prices falling, especially when the value of their mortgage exceeding the value of their home, they walk away and the homes are foreclosed. Freezing mortgage payments, as Henry Paulson's goofy Project Life non-plan plan announced today does in some circumstances, is irrelevant, sort of like hoping that fixing your car's broken window will cause the tires to re-inflate.

Now, the deeper question is this: Is there anything politicians can do to cause home prices to stabilize or go back up? No, blessedly, and that's a good thing in the long run.


Why Oh Why Can't We Have Better Horse-Race Journalism?

The Atlantic and others are rushing into print... well, onto LCD screens... with things like this, from Joshua Green:

Inside the Clinton Shake-Up: By all accounts, Solis Doyle's firing [from the Clinton campaign] became imminent after the first loss [in Iowa], as the extent of the damage sank in.... She'd been dispatched to Iowa to oversee operations in the final weeks before the caucuses, and Clinton still finished third. She'd been placed in charge of the campaign's relationship with John Kerry and hoped to get an endorsement, but he'd chosen to back Obama.... Solis Doyle's departure took a near-mutiny to bring about.... In one sense, Solis Doyle performed exactly as Hillary had hoped. Somewhat to my surprise, the longstanding fissures in Hillaryland never truly erupted when Clinton came under presidential-campaign pressure, certainly not the way they did in 2000. For all the chaos and disillusionment with Clinton's performance so far inside the campaign, very little of it had leaked to the press until just recently...

This seems to me to get the main story wrong. For example, consider this:

20080212_primaries.xls

Had Hillary Rodham Clinton faced only Republican-quality opposition in the primaries, she would be rolling to an overwhelming victory with 80%+. It's only the fact that she's facing a very strong and very good candidate who has struck an immensely rich vein within the Democratic Party that leads to the pack-journalist consensus that the HRC campaign has gone badly wrong. It hasn't. It just has not (yet) been quite good enough, given the caliber of the other choices Democratic Party members have this year.

It's not the horse-race journalism I mind so much, it's the incompetent horse-race journalism. HRC's team is running a fast race here.


Cosma Shalizi Criticizes One of the Sartorial Geniuses of Our Age

Cosma Shalizi is driven into shrill unholy madness by Inside Higher Ed the Chronicle of Higher Education:

Clothes Make Working for the Man Easier: I have just had one Prof. Erik M. Jensen's op-ed "A Call for Professional Attire" referred to me by multiple sources (none especially pointedly, thanks), and I find myself greatly irritated. Jensen says that contemporary American academics generally fail to dress up, in the modes that are supposed to reflect seriousness and status, and spends about 2000 words bemoaning this, long for a lost "golden age" (his phrase), and trying to ridicule, brow-beat, and shame his audience into complying with his wishes. The closest he comes, in all of this, to present an actual reason for doing so is saying this: "People generally act better when they're dressed right. If a professor is sending a signal of seriousness, of civility, students will pick it up." This is backed up by a causal reflection on how " in DiMaggio's day ... [t]he men wore white shirts and ties under coats and hats, the proper attire in public, even at a ball game."

This is a style of cultural commentary which drives me up the wall.... It is not that hard to think of an actual rationale for what Jensen wants; it would go something like this. (These are, of course, my words, not his.) "Academics are supposed to impart knowledge and skills to their students, to critique their work, to direct their intellectual and to some extent their moral development; in all these tasks they are supposed to exercise authority over students. They may also be called upon to supervise student or other employees, which is another exercise of authority. They will do so more effectively if they display the recognized external markers of high status and of seriousness, which includes dressing in certain ways and adopting certain demeanors. In fact, if they do this, their authority is more likely to be accepted as legitimate, leading to fewer occasions on which it must be explicitly insisted upon and made into naked acts of domination. Furthermore, academics are often called upon to represent their schools and/or their scholarly communities to the outside world, and this, too, will be done more effectively if they dress in ways which their audiences take to convey seriousness."

This is a reasonable argument... [about] consequences... with empirical premises, and one susceptible to balancing --- how much extra effectiveness is the extra expense, hassle, infringement on personal choice, etc., of this mode of dress worth?... One could imagine a reasonable essay which... thought through the trade-offs.

Jensen... just wants to take his internalized... transparently parochial... [norms] and pretend that they are... universal laws.... This is by far the more common rhetorical mode when people try to criticize manners and customs, and it strikes me as deeply stupid... since it gives you no reason to believe that acting as the author wants will make things better...

A professor's clothes--supposed to lie somewhere on the spectrum between total nudity and the purple-red dress of a Byzantine emperor--need to serve four purposes:

  1. To make the appropriate people envy, in an appropriate way, the professor's (actual or counterfactual) spouse.
  2. To make the professor comfortable.
  3. To make the students more willing and eager to learn.
  4. To take a particular stand on the great debate between the courtier Lord Chesterfield on the one hand and the intellectual Samuel Johnson on the other, summed up in Johnson's remark that Chesterfield's fashion-centered advice to his illegitimate son taught the boy "the morals of a whore and the manners of a dancing master."

I will pass over (1) as requiring a knowledge of evolutionary biology and a working aesthetic sense--which disqualifies me on both counts. I will pass over (2) as requiring a knowledge of biological thermodynamics which I do not have, save to observe that the traditional tweedy professor male academic clothes are, from a thermodynamic point of view, appropriate only for some British or New England campus without effective central heating. But I will say:

With respect to (3):

  • I have found that wearing my doctoral robe to class is counterproductive. It
    • is hot pink, and
    • leads my students to think that I may be crazy, or
    • am making fun of them, unless
      • the class is on the medieval university, or the middle ages more generally--then wearing the doctoral robe can be very effective at focusing the class
  • I have found that running shorts and a t-shirt is also counterproductive. The students think that:
    • I was too self-absorbed to figure out it was time to leave the gym, or
    • I am too self-absorbed and eager to get to the gym
    • But Matt Rabin achieves great success with his tie-died t-shirts and shorts
      • Matt Rabin, however, won the Clark Medal
  • I have found that wearing a suit and tie is very effective if done occasionally with non-math-oriented students. It tells them that I care because it shows that I have taken sufficient time to prepare and teach the class even though I am a busy person whose schedule requires meetings with:
    • some powerful political figure,
    • some powerful economic figure,
    • some powerful university administrative figure, or
    • some TV interviewer
  • With math-oriented students, however, a tie tells them that I spend too little time thinking about isomorphisms
  • And if done too often, a tie tells even non-math-oriented students that I am not focused enough on the life of the mind to be worth paying much attention to
  • My National Journal "I won a budget battle" federal budget expert t-shirt and my 1993 Clintona administration "budget victory" t-shirt (awarded to all those who worked in Roger Altman's rapid-response room) are very effective with students interested in policy or politics
  • Otherwise, there is no discernible pattern

With respect to (4):

  • The most important signal of expertise that a professor can send is that he or she is so monomaniacally focused and on intellectual task as to be completely outside the normal status hierarchies
  • Thus it is very important that their values and tastes appear visibly different from those of either the striving poor or the smug rich
  • And the best way to do this, from a sartorial point of view, is to make it appear that the professor had better and more important things to think about than mere appearance while getting dressed that morning
    • There is a faction that thinks that the best way to appear to have had better and more important things to think about is to never care at all about appearance--so that whatever one thinks of is automatically more important than how one looks
    • There is another faction that thinks that true unconcern is too risky, and that one must utilize great art in appearing artless in one's dress
      • But systematic artful artlessness is an impossibility
      • Pulling things at random from one's closet may, however, come close

Jim Hamilton on Reputational Failure in the Mortgage Market

One thing that happens in bubbles is that organizations begin viewing the current period as the terminal period capital-T, and thus see their reputations as things to be cashed in. Jim Hamilton:

Econbrowser: No-doc loans: Just an anecdote, but an interesting one. From SFGate.com (via Calculated Risk):

One Oakland woman, who asked not to be identified, explained how she exaggerated her income-- with encouragement from her mortgage broker-- when she refinanced her home. "He didn't say anything illegal out loud," she said. "He didn't say 'lie,' he just made a strong suggestion. He said, 'If you made $60,000, we could get you into the lowest interest level of this loan; did you make that much?' I said, 'Um, yes, about that much.' He went clickety clack on his computer and said, 'Are you sure you don't remember any more income, like alimony or consultancies, because if you made $80,000, we could get you into a better loan with a lower interest rate and no prepayment penalty.' It was such a big differential that I felt like I had to lie, I'm lying already so what the heck. I said, 'Come to think of it, you're right, I did have another job that I forgot about.'"

The transaction between the broker and customer was just the first link in the mortgage securitization chain. To the extent that the originator washed his hands of the whole thing by immediately selling off the loan to the next sucker in the chain, you can understand the incentives for the originator to cheerfully go clickety clack on his computer. But as I've said many times, the big question (and fundamental problem) arises from the incentives for investors further up the chain who willingly poured in the cash necessary to fund these deals.

One key problem with that chain of incentives seems to be the off-balance-sheet status of the bankruptcy-remote trusts that ultimately held the loans...


Short-Term Macro Forecasting

From Paul Krugman, who writes:

How bad is that ISM report?: The ISM non-manufacturing report... it’s bad... we should take this seriously: the same report called the upturn in employment in summer 2003, so the fact that it has fallen off a cliff should worry us.

But how bad is it?... Here’s the historical relationship between the index (horizontal axis) and the actual monthly change in employment, in thousands (vertical axis), data since July 1997. If this report is at all right, we’re in serious recession territory.

Memory Monitor


Print and Brainwidth

Hoisted from Comments:

Grasping Reality with Both Hands: You have three points:

  1. Podcasts are wonderful and consume lots of bandwidth.
  2. Uploaded backups are wonderful and consume lots of bandwidth.
  3. Videoconferencing is wonderful and consumes lots of bandwidth.

To which I respond:

  1. Podcasts are very low brainwidth, compared to Gutenberg technologies: text and graphics. Most of us knowledge workers spend all day behind computer screens--reading things. This doesn't need bandwidth. Podcasts are not quite entertainment, but they're not that important.
  2. I'm not a trusting soul. I prefer to safeguard my own data. (BTW, I'm cognizant of the need for offsite. But see point #1; personal data don't require that much bandwidth.) If you still feel confident in the willingness of the informatics industry to safeguard your data, read the terms and conditions of the service provider of your choice. They ain't liable to nobody for nothing.
  3. Whether or not teleconferencing cures global warming, my post specifically excluded business applications.

I know only that my knowledge of the relationship between print, audio, interactive audio, video, interactive video, and face-to-face is much too shallow and incomplete. Anybody have any help to offer?


Matthew Yglesias on the DC Democratic Primary

He writes:

Fear of a Black Plurality (Politics): While Precinct 22 (pictured above) where I vote was pretty heavily black during the 2004 cycle, when I voted there this morning it was about half and half. And yet, while Obama has a volunteer standing outside in the cold by a table full of campaign literature, urging passersby to vote for Obama, Clinton had nobody... [no] "HILLARY" signs into the hands of any of the residents of my neighborhood.... Clinton feels that she can't maintain the pretense that Maryland and Washington and Virginia and The Other Washington and Maine and Nebraska and the US Virgin Islands and Louisiana "don't count" if she bothers to campaign in these places. But thanks to the way Democrats allocate delegates, there's a substantial difference between "losing" a jurisdiction and getting blown out in that jurisdiction. My guess is that Clinton... is... leaving delegates on the table.


The Lost Art Of Democratic Narrative: Vintage Robert Reich

Jeebus! He is good at this:

The Lost Art Of Democratic Narrative: Democrats are finally waking up to the fact that Republicans have succeeded in framing the issues to their advantage. Tax "relief," tort "reform," regulatory "burden," and "opportunity society," for example, have all defined public debate in a way that benefits the GOP. But, though Democrats have finally started talking about how they can recast their ideas to best appeal to the public, they've failed to realize that the rhetorical challenge they face is deeper than simply finding the right words and phrases. For Democrats to win back the heart and soul of the electorate, they have to speak to the basic stories that have defined and animated the United States since its founding.... There are four essential American stories. The first two are about hope; the second two are about fear.

The Triumphant Individual. This is the familiar tale of the little guy who works hard, takes risks, believes in himself, and eventually gains wealth, fame, and honor. It's the story of the self-made man.... The Benevolent Community. This is the story of neighbors and friends who roll up their sleeves and pitch in for the common good. Its earliest formulation was John Winthrop's "A Model of Christian Charity"... in which the new settlers would be "as a City upon a Hill," "delight in each other," and be "of the same body." Similar communitarian and religious images were found among the abolitionists, suffragettes, and civil rights activists of the 1950s and 1960s.... The Mob at the Gates. In this story, the United States is a beacon light of virtue in a world of darkness, uniquely blessed but continuously endangered by foreign menaces.... The Rot at the Top. The last story concerns the malevolence of powerful elites. It's a tale of corruption, decadence, and irresponsibility in high places... King George III....

Speak to these four stories and you resonate with the tales Americans have been telling each other since our founding--the two hopeful stories rendered more vivid by contrast to the two fearful ones. But the challenge isn't just to find a good speechwriter or a cunning political consultant, or to mine focus groups and polls. Candidates must say what they believe and speak the truth as they see it.... These four mental boxes are always going to be filled somehow--if not by Democrats, then by Republicans--because people don't think in terms of isolated policies or issues. If they're to be understandable, policies and issues must fit into larger narratives about where we have been as a nation, what we are up against, and where we could be going...


Why Oh Why Can't We Have a Better Press Corps? (Yet Another New Republic Edition)

This one is outsourced to Spencer Ackerman of the Washington Independent:

What is Leon Wieseltier Talking About? - The Washington Independent - U.S. news and politics - washingtonindependent.com: My old TNR colleague Leon Wieseltier has a weird column that judges Barack Obama insufficiently simple-minded, unwise and bloodthirsty. This, to Leon, is a bad thing.

The question of whether Barack Obama will make a fine commander-in chief finally depends on your view of the direction of history in the coming years. I cannot escape the foreboding that we are heading into an era of conflict, not an era of conciliation. I do not mean that there will be many wars, though I cannot imagine that the threat to American security from Al Qaeda and its many associates can be met without a massive and sustained military operation in western Pakistan, and I cannot imagine any Pakistani government ordering such an operation.

Was no one editing this piece to remind Leon of a certain controversy from August? In which Obama addressed precisely this point?

Obama said if elected in November 2008 he would be willing to attack inside Pakistan with or without approval from the Pakistani government, a move that would likely cause anxiety in the already troubled region. "If we have actionable intelligence about high-value terrorist targets and President Musharraf won't act, we will," Obama said.

Ah, but such facts do not satisfy Leon.

Yes, he made a "muscular" speech in Chicago last spring; but I have been pondering his remarks about foreign policy in the ensuing campaign and I do not detect the hardness I seek, the disabused tone that the present world warrants. ... My problem is that Obama's declarations in matters of foreign policy and national security have a certain homeopathic quality. He seems averse to the hurtful, expensive, traditional, unedifying stuff.

"Seems," eh? No need for evidence here. No need to specify what rhetorical Viagra Leon wants Obama to swallow. Perhaps this sort of column is what Obama has in mind when he talks about ending the mindset that got us into Iraq. Indeed, when the other Democrats were attacking Obama for his willingness to go after al-Qaeda in Pakistan, here%u2019s how he responded:

"I find it amusing," said Obama, "that those who helped to authorize and engineer the biggest foreign policy disaster in our generation are now criticizing me for making sure that we are on the right battlefield and not the wrong battlefield in the war against terrorism."

Same goes for those who promoted and apologized for that disaster.


Hilzoy's Morning Political Report

She writes:

Obsidian Wings: More News About Democrats: As everyone already knows, Barack Obama won Maine in a landslide. By my calculations (based on these results), with 99% of precincts reporting, Obama has won 59.47% of the delegates to Clinton's 39.93%. (OK, I like decimal points: so sue me.) In a state that a lot of people thought might go for Clinton, that's huge. But this is almost as important:

"Around the country we've seen high Democratic turnout and Maine has joined the chorus of other voices across the nation calling for change," said Arden Manning, Executive Director of the Maine Democratic Party. "The numbers tell a story here. Earlier this month, 5,000 Republicans gathered around the state to caucus for their nominee. Today, close to 45,000 Mainers attended the Democratic caucus. The message is clear: Mainers have seen what 8 years of Republican control looks like and they are ready for a change."

Sunday's Democratic turnout exceeded the previous record, set in 2004, by almost 28,000 votes.

To repeat what I said in comments: nine times as many Democrats as Republicans caucused, and they more than doubled the previous turnout record. That's astonishing.

(2) As everyone probably also knows, Hillary Clinton's campaign manager, Patti Solis Doyle, has been replaced. There are a couple of interesting things buried in the coverage of this. First, several stories about Doyle's departure say things like this:

The mother of two young children, Solis Doyle is like many in the campaign who had expected the nomination fight to have been wrapped up one way or another by Feb. 5, Super Tuesday, and are exhausted and somewhat demoralized to think this struggle might last weeks or even months longer.

Likewise:

As I write, Hillary is on a campaign crisis conference call to spell out what she's going to do to stop Obama's momentum. But the fact is the Clintons are making it up as they go along now -- they never expected anything beyond Super Tuesday to matter. The Obama campaign, by contrast, forsaw a war of attrition and invested heavily in states like red states Nebraska -- where his big win last night netted him a lot of delegates."

That the Clinton campaign wasn't planning on having to go on past Super Tuesday is supported by their bizarre explanation of Obama's victories last night:

The Obama campaign has dramatically outspent our campaign in these three states, saturating the airwaves with 30 and 60 second ads. The Obama campaign has spent $300,000 more in Louisiana on television ads, $190,000 more in Nebraska and $175,000 more in Nebraska.

If they hadn't assumed the campaign would be over by the time they got to those states, why on earth didn't they contest them more seriously? Now it's conventional wisdom that Obama wins heartland caucus states, but this wasn't at all obvious back when the campaigns should have been making decisions about building organizations, making ad buys, and so forth.

This is just bizarre. The Clinton campaign should never have assumed that the campaign would be over after Super Tuesday. It was obvious at the 2004 convention that Obama had extraordinary political talent, and simply assuming that someone like him would not catch on -- assuming that in the way you'd have to do to base your strategy on that thought -- is a big mistake. But it's just incomprehensible if anyone in the Clinton campaign assumed that the primary campaign would be over on Super Tuesday after, say, mid-November, when it became clear that Obama was catching on. Mid-November was several months ago. The Clinton campaign has had time to adjust its strategy, and its staffers have had time to adjust their expectations. And yet none of the coverage sounds as though they have done so; nor can I see any obvious reason for them to be saying this if it isn't true.

The Clinton campaign has always struck me as strangely overconfident. They were, of course, way ahead in the polls about three months ago. But it doesn't take much political experience to learn that a lot can change in a few months, and that a lead that far out is nothing to count on. (Parenthetical note: this is why media coverage of the horserace months in advance is completely and utterly pointless, and stories about the supposed inevitability of any candidate written before a single vote has been cast are (to me) a sign that I do not have to pay attention to anything the person who writes them says in future.) They also had a candidate with strong negatives in significant chunks of the population, and one who (to my mind) has always lacked a credible story about why, exactly, she is running. There were, in addition, plenty of warning signs, like the Obama campaign's success in fundraising.

Moreover, the Obama campaign arguably had more reason than the Clinton campaign to focus on the earliest contests and slight the later ones. Obama, after all, was coming from behind. He had to win some of the early contests. If he had lost every state through Super Tuesday, it would have been all over for him. He therefore had a pretty strong reason to put everything he had into those states, and hope that whatever momentum he got would carry him through in places like Maine and Nebraska. Clinton, by contrast, only had to anticipate that Obama might win enough states to keep going to know that she had to focus on the post-Super Tuesday states. She has a lot less excuse for making this misjudgment than Obama did. But she made it, and he did not. That tells me something.

I also found this account fascinating:

Initially, Clinton's former White House chief of staff, Maggie Williams, was brought in to run the campaign even though Solis Doyle was still there. The result was confusion and awkwardness for the staff, who weren't sure who was really in charge. But even more problematic was the campaign's money crunch. Over the last seven years, Clinton had raised $175 million for her reelection and her presidential campaign. But Solis Doyle didn't tell Clinton that there was next to no cash on hand until after the New Hampshire primary. "We were lying about money," a source said. "The cash on hand was nothing."

In turn, Clinton didn't tell Solis Doyle that she was lending her own money to keep the campaign afloat. Solis Doyle found out third-hand. And when she asked Clinton about it, the senator told her she couldn't understand how the campaign had gotten to such a point.

Did they actually burn through all that money? Without creating strong organizations in post-Super Tuesday states? And did they lie about it? How, and when? I'd love to see some more reporting on this.

I'm also struck by how dysfunctional the Clinton campaign sounds. When a campaign organization is set up well, a campaign manager does not discover that the candidate is making multi-million dollar loans to the campaign third hand, nor does that campaign manager fail to tell the candidate that they have serious money problems. You certainly don't have staffers not being sure who's in charge. And you probably don't have what sounds like a whole lot of people on the inside talking off the record about the various strains and divisions that led up to the firing either.


Postmoderation Recessions

Paul Krugman writes:

Postmoderation recessions: Calculated Risk says much of what I'd say about housing and the prospects for quick economic recovery. But I'd like to offer a bit more analysis. A lot of what we think we know about recession and recovery comes from the experience of the 70s and 80s.... very different from the recessions since. Each of the slumps... caused, basically, by high interest rates imposed by the Fed to control inflation. In each case housing tanked, then bounced back when interest rates were allowed to fall again.

Since the mid 1980s.... Post-moderation recessions haven%u2019t been deliberately engineered by the Fed, they just happen when credit bubbles or other things get out of hand. And while they haven't been as deep as the older type of recession, they've proved hard to end... in terms of employment... because housing -- which is the main thing that responds to monetary policy -- has to rise above normal levels rather than recover from an interest-imposed slump. That's why I think our current problems will last a long time. CR says 2009; I say 2010.

Paul Krugman - Op-Ed Columnist - New York Times Blog


Barack Obama Surprises on the Upside

A horse-race post. First, Hilzoy:

Obsidian Wings: Blowout Yesterday, Who Knows What Today?: I expected Obama to win yesterday's primaries and caucusses, but not necessarily by such huge margins: 57%-36% in Louisiana, 68%-32% in Nebraska, 68%-31% in Washington, and 89.9.%-7.6% in the Virgin Islands. Obama seems to have beaten not just my projections, but his own campaign's: his campaign had projected a ten point victory in Louisiana and twenty point victories everywhere else, which was low by ten points in all three states, and way, way low in the Virgin Islands.

No one seems to know what will happen today in Maine. The Obama projections show Hillary Clinton winning narrowly. For what little it's worth, here's Pollster.com's Maine page: the last poll, taken in October, has Clinton up by 46% to 10%, with 5% for Edwards and 35% undecided. Maine seems to be one of the states in this phase of the contest that people think Clinton has a decent shot at taking, so it will be interesting to see what happens.

And now David Kurtz:

Talking Points Memo: by Joshua Micah Marshall | Big Win for Obama?: With 44% reporting in Maine, Obama is up 57-42. Late Update: We're now up to 59% reporting, with the same 57-42 split.


Robert Kuttner on Health Care Costs

He writes:

NEJM -- Market-Based Failure -- A Second Opinion on U.S. Health Care Costs: Changing demographics and medical technology pose a cost challenge for every nation's system, but ours is the outlier. The extreme failure of the United States to contain medical costs results primarily from our unique, pervasive commercialization.... Profits, billing, marketing, and the gratuitous costs of private bureaucracies siphon off $400 billion to $500 billion of the $2.1 trillion spent, but the more serious and less appreciated syndrome is the set of perverse incentives produced by commercial dominance of the system... medicine... does not lend itself to market discipline. Why not?

The private insurance system's main techniques for holding down costs are practicing risk selection, limiting the services covered, constraining payments to providers, and shifting costs to patients. But given the system's fragmentation and perverse incentives, much cost-effective care is squeezed out... unnecessary medical care is provided for profit, administrative expenses are high, and enormous sums are squandered in efforts to game the system. The result is a blend of overtreatment and undertreatment....

Great health improvements can be achieved through basic public health measures and a population-based approach to wellness and medical care. But entrepreneurs do not prosper by providing these services.... [C]onsistent application of standard protocols for conditions such as diabetes, asthma, and elevated cholesterol levels, use of clinically proven screenings... and changes to diet and exercise can improve health and prevent larger outlays later on. Comprehensive, government-organized, universal health insurance systems are far better equipped to realize these efficiencies....

Many U.S. insurers do reward physicians for following standard clinical practices, but these incentives do not aggregate to an efficient national system of care....

A second cost-containment tactic is to hike deductibles and copayments, whose frank purpose is to dissuade people from going to the doctor. But sometimes seeing the doctor is medically indicated, and waiting until conditions are dire costs the system far more money than it saves...


Attempted Tim Burke Smackdown Watch...

In comments, Michael, a New York Times reporter, complains about my quoting Tim Burke's assessment of the Times as fairly corrupt" and as living in "Anton Ego’s world, only more conspiratorial and incestuous..."

Michael's problem, of course, is that the month that the New York Times hires William Kristol is not the month to deny that the New York Times is corrupt, and not the month to deny that the New York Times is incestuous. In fact, the year that the New York Times hires William Kristol is not the year to deny that the New York Times is corrupt, and not the year to deny that the New York Times is incestuous. The decade that the New York Times hires William Kristol is not the decade to deny that the New York Times is corrupt, and not the decade to deny that the New York Times is incestuous. The century that the New York Times hires William Kristol is not the century to deny that the New York Times is corrupt, and not the century to deny that the New York Times is incestuous.

Here's the critique, saying that I had "outsourced my brain" by quoting Tim:

Brad De Long Death Spiral Watch: Brad Outsources Brain: Where oh where to start?... [Lee] Seigel is a serious thinker.... [T]he Lanchester review is in fact fairly negative, even if the writer employs wry turns of phrase rather than the sledge-hammer style preferred by death spiral bloggers.... So what's the evidence offered? More or less ... nothing. This isn't to argue that every review is a wise one, or to argue against the notion that books and reviewers are sometimes mismatched or that reviewers sometimes work out grudges in unseemly ways in print. I'm sure that never, ever, happens at Berkeley or Swarthmore.... Ah, but the blog post does not stop here. Then we are told that other nub of the problem is that the New York Times "sees itself as one of the leaders of the charge against new media.... "

Double wow. And the evidence adduced here? An unnamed New York Times reporter once told our fair professor that he was unhappy with the internet. But this conspiracy theory runs aground on a shoal of fact. Speaking as (full disclosure) a New York Times reporter, I can testify that the New York Times is pouring vast sums into the internet, on the wise assumption that the web is the future....

And save for a few of our grumpier colleages, most of us are fascinated by the web and in fact read blogs like this one regularly. Not to mention that on a very ego-centric and parochial level, I would like to see this grand enterprise continue and frankly I'd be perfectly happy if my stories were transmitted via the tooth fillings of Swarthmore and Berkeley professors.

But of course this is all so very fact based. And conspiracy theories are so much more fun...

Here's Clark Hoyt on the incestuous background of the Kristol hiring:

He May Be Unwelcome, but We'll Survive - New York Times: IN 1972, Arthur Ochs Sulzberger, the publisher of The New York Times, was looking for a conservative columnist for his left-leaning Op-Ed page. At a charity dinner, he wound up sitting next to William Safire, the Nixon White House speechwriter who coined Spiro Agnew's famous denunciation of the press as "nattering nabobs of negativism." They soon had a deal. But, as described in The Trust, the authoritative history of the family that has controlled The Times for more than a century, Sulzberger neglected to involve John Oakes, his cousin and the editor of the editorial page, in the decision. Oakes was appalled when he heard about the negotiations, and not realizing it was too late, offered alternatives. How about Irving Kristol, he suggested.

More than 35 years later, Sulzberger's son, Arthur Jr. -- this time in full partnership with his editorial page editor, Andrew Rosenthal -- has hired another conservative columnist for their left-leaning Op-Ed page: Irving Kristol's son, William...

And here is Gabriel Sherman:

Gabriel Sherman: The Fifth Columnist: At the Times, Kristol's appointment rankled reporters and editors, who interpreted the move as the latest in a series of tone-deaf decisions by Sulzberger, including his $100-million investment in the Discovery Times TV channel and his crusade to free Judith Miller during the Valerie Plame leak investigation. Times staffers feel Kristol is an unimaginative writer with a rancorous history of attacking the paper. Sulzberger sought to make a splash in hiring Kristol, but, like many of his management decisions, it has backfired.... Times staffers felt Kristol just wasn't a very good writer. "Having a robust conservative voice on the page is a good idea. But you want quality," one staffer said. "In general, he's mediocre. He doesn't seem like the best choice, and the first column was crap." "It was a very odd choice," a senior staffer added.... Clark Hoyt, acknowledged the Kristol kerfuffle in his column on Sunday, January 13, writing of Kristol's hiring: "This is a decision I would not have made." When reached by phone, Safire told me: "I saw the excellent piece that the public editor wrote the other day, and that pretty much tells the story."...

According to a former Times staffer, criticism from Kristol and other conservatives weighed heavily on the Times' pre-war coverage, which turned more hawkish under then-executive editor Howell Raines and Washington bureau chief Jill Abramson. In September 2002, Judith Miller's credulous front-page pieces on Saddam Hussein's weapons of mass destruction began appearing with increasing frequency and were echoed in The Weekly Standard. Miller's discredited coverage created a near-open revolt in the newsroom... worried that Kristol's columns signaled that "Judy [Miller]'s point of view has returned." (Miller doesn't share her former colleagues' reservations. "[I]t's an appointment that's a long time coming. The page needed balance," she told me. But "an unabashed neocon without remorse is unacceptable to Times people. . . . He's not kosher in that sense.")...

"My personal opinion is it's an appalling choice," a former veteran Times staffer said of Kristol's appointment. "Not because he's been wrong about so much, but because he called for prosecuting the Times for treason. You're entitled to your opinion, but, in all due respect, go f--- yourself." (Sulzberger and Rosenthal declined to comment on the appointment; a spokeswoman said the paper had "brought Mr. Kristol on board after a long and thoughtful search." Kristol declined to comment...)

Why oh why can't we have a better press corps?


Michael Froomkin Watches the New York Times Water Its Brand...

Why oh why can't we have a better press corps?

Michael Froomkin writes::

Discourse.net: NYT Times Waters Its Brand: Shorter David Brooks: I have finally achieved my ambition of writing a column as tactical and mendacious as William Safire.

Scott Horton deconstructs the NYT's spinelessness when criticized by the Administration.

And this is our best newspaper.

Here's Scott Horton:

Scott Horton: I commented on a recent story authored by Gall and Worthington... “Time Runs Out for an Afghan Held by the U.S.,” concerning the death in Guantánamo detention of Abdul Razzaq Hekmati. This was an important article in several respects. First, it put a human face on one of the prisoners held in Guantánamo who was held unjustly.... Second... it pointed to the smoldering conflict between the Karzai Government and the United States over detention policy. Everyone who works this turf and deals with the Karzai Government’s representatives knows about this issue, but there seems to be a conspiracy of silence surrounding it.... I was pleased to see this finally work its way into the public record. But to my astonishment, today this “editor’s note” was posted under the article:

A front-page article on Tuesday described the problems of the tribunals at the American military base in Guantánamo, as seen through the failure to resolve the case of Abdul Razzaq Hekmati, an Afghan war hero who died there Dec. 30 after a five-year-long detention. The article quoted several Afghan officials who said they were prepared to offer evidence that he was falsely accused, but were never given a chance to do so. Andy Worthington... listed as its co-author, did some of the initial reporting but was not involved in all of it, and The Times verified the information he provided. That included the fact of Mr. Hekmati’s death, and the content of transcripts released by the Pentagon showing that the accusations against Mr. Hekmati had been made by unidentified sources and that the tribunal at Guantánamo had never called outside witnesses requested by detainees.

Mr. Worthington has written a book, “The Guantánamo Files: The Stories of the 774 Detainees in America’s Illegal Prison,” in which he takes the position that Guantánamo is part of what he describes as a cruel and misguided response by the Bush Administration to the Sept. 11 attacks. He has also expressed strong criticism of Guantánamo in articles published elsewhere. The editors were not aware of Mr. Worthington’s outspoken position on Guantánamo. They should have described his contribution to the reporting instead of listing him as co-author, and noted that he had a point of view....

I have a pretty good guess what happened. A call came to the New York Times from a Bush Administration figure complaining bitterly about the article, and viciously attacking Worthington. Since the Bushie attack dogs rarely do anything halfway, I’d wager Worthington was tarred as some sort of barking leftist kook. And the Times editors... did what they usually do... cowardice... buy peace with the powers that be by assailing their own writer.

So we see a note in which Worthington’s views on Guantánamo are described as “outspoken” and the Times distances itself from them.

What’s really going on here? The Bush Administration has fed the media the most vitriolic propaganda about the Guantánamo camps for over six years. The detainees were labeled as “the worst of the worst” and the Chairman of the Joint Chiefs of Staff was quoted saying they were the kind of people “who would gnaw their way through cables to make a plane crash.” These claims were reported without contradiction or criticism. They were untrue and known to the government officers who uttered them to be untrue. In the Times view, however, Government officials are free to lie without contradiction.... The story that Gall and Worthington presented exposed a ... lie, and it produced a retaliation. The Times editors are not forthcoming enough to give an honest account of what happened; they are focused on accommodation with the Pentagon’s PR machine, and they are prepared to sacrifice good journalistic ethics to get it.

The still more preposterous aspect of the “note” is the suggestion that there is something “outspoken” in calling to close Guantánamo and labeling the facility what it is. The posture adopted in Worthington’s book is indeed very radical. Among the radicals who have embraced it are the American Bar Association, Pope Benedict XVI, the Archbishop of Canterbury, the Dalai Lama, Chancellor Angela Merkel, the English Lord Chancellor, Lord Falconer, and hundreds of other political and spiritual leaders around the world. Come to think of it, the list of radicals includes the editorial board of the New York Times.

This “note” is a badge of shame for the New York Times. It shows a paper whose editors operate to demonstrably lower standards than the journalists they employ. The editors promised that in the wake of the gross mistakes they made in the run-up to the Iraq War, they would reform and demonstrate a higher level resistance to efforts at undercover manipulation by the Government. On that promise, their integrity hangs. But they are failing in it.


Why Oh Why Can't We Have a Better Press Corps?

Tara McKelvey on the Washington Post's Dana Milbank:

Homo Politicus: They belong to “the Gang of 500,” as Mark Halperin, formerly of ABC News, describes (in Milbank’s words) “the lawmakers, strategists, journalists and officials who, collectively, define the social order of Potomac Land.” And they are the focus of “Homo Politicus.”

So much to skewer, so little time. The book is a collection of profiles and essays that mix faux anthropology (the Aztecs and the Aborigines get mentioned) with descriptions of local culture (“black helicopters,” “the ‘Kerry Kalamity,’ ” Wonkette), all thrown together.... In a sense, Milbank has written a Book of Schadenfreude, taking special delight in the moment someone falls from grace and becomes, as he puts it, “the punch line of a joke.” Too often the people he mocks seem more misguided than blameworthy. The 23-year-old ex-mistress of former Congressman Don Sherwood is one example: “In Sherwood, two and a half times her age, the young Peruvian beauty saw an opportunity,” Milbank writes, adding that she eventually accused Sherwood of “repeatedly choking and attempting to strangle” her. She does not seem like the kind of person you would make fun of — yet somehow Milbank does.

He homes in on physical traits in an awkward way (Mike DeWine was “a diminutive Republican senator from Ohio who brought to mind the film ‘Honey, I Shrunk the Kids’ ”), and he is also quick to point out things that seem déclassé: “Save the Children novelty ties,” security badges worn “after work at bars” and fancy jackets (“Even the lowest White House aide, earning $20,000 a year, wears a sharp business suit”). The laughs are in short supply.

There is a difference between satire and mockery. Satire, in its highest form, is inspired by rage. Milbank’s book does not have much of that. Instead, the writing seems smug and complacent when he takes pot shots not only at the powerful but also at those on the margins, mainly for tackiness. Milbank is at his best when he lets “Potomac Man” speak for himself. For instance, he quotes Ari Fleischer, then the White House spokesman, on the fact that Saddam Hussein’s weapons of mass destruction were nowhere to be found. “Fleischer reasoned: ‘I think the burden is on those people who think he didn’t have weapons of mass destruction to tell the world where they are.’ ” No satirist, however brilliant, could improve on that.


links for 2008-02-10


links for 2008-02-08


Richard Eskow Talks to David Cutler

Eskow writes:

Richard Eskow: Hillary Clinton, John Edwards, and Barack Obama have each presented detailed proposals for health reform. The Clinton and Edwards plans include health mandates, which require Americans to obtain health care coverage or face (unspecified) sanctions. The Obama plan does not include mandates.

Health mandates are popular among many Democratic-leaning health policy analysts. The Clinton campaign has been going after Obama aggressively on this issue. They've said that the absence of mandates is a basic flaw in Obama's plan; suggested a cynical political calculus behind Obama's position said that his position feeds a Republican narrative; and took the position that Obama's plan is politically vulnerable while theirs (and Edwards') is a political plus in the general election.

(The preceding positions were echoed today by Paul Krugman - see my response, "Why Paul Krugman Is Wrong...)

I don't support any Democratic candidate, but I do have strong opinions about health mandates. As a long-time healthcare policy analyst and health manager in the private sector, I disagree with Paul Krugman, Ezra Klein, Jacob Hacker, and others who support mandates. My differences are based on policy effectiveness, issues of fairness, and Democratic political strategy. I think mandates pose more problems than they solve, and that they could be a political loser for Democrats in the general election.

I've been engaged in a collegial debate with Klein, blogger/consultant Joe Paduda and others on this topic for some time (see, for example, here, here, here, and here). During an exchange with Klein over the last week it became apparent that, while I had reasons to support Obama's policy, it was unclear to me what his team's current thinking was on the topic.

The team published a rebuttal to Clinton's campaign late today. Earlier I spoke with David Cutler about mandates. Cutler is Professor of Applied Economics at Harvard, Obama's senior health advisor, and the principal architect of the Obama plan.


David Cutler: I'd like to start with a general comment.... Two possible reasons why people don't have health coverage are usually given. One is that the uninsured are gaming the system. The other is that they can't afford it and don't know where to get it. Most of the literature suggests that the explanation is mostly the latter. That means the single biggest thing we can do to help the uninsured is to make coverage affordable and accessible.

That's why all the Democratic plans focus on removing excessive profits where they exist, improving information technology, and so forth. All the plans do those things, although I think the Obama plan does the most.

The mandate argument is: You must buy something %u2013 but I'm not going to tell you what it is, how much it will cost, or where you're going to get it.

It comes down to this. You'll never get someone to buy something if it's not affordable and not accessible. People just don't do it.

Richard Eskow: That's an area where the Edwards campaign has taken the lead. They suggest automatic enrollment whenever an American intersects with the health care system or government services.

David Cutler: You can enroll them and then forcibly collect the premiums. That's one way to solve the problem. But it's not necessary to do that. A better approach is to do everything possible to make it affordable and available. When it is, almost everyone will have it."

Richard Eskow: There are a couple of concerns about that approach. One is the problem of "adverse selection." Sicker people %u2013 or people with a greater likelihood of becoming sick %u2013 will enroll. That will drive plan costs up, making it prohibitively expensive.

David Cutler: Let's look at the level of coverage you can get without a mandate. Our estimates, based on studies in the literature, is that we can get 98% or 99% coverage without a mandate for adults. There may be some small pockets of people who choose not to buy it.

Richard Eskow: What about those people?

David Cutler: If there are free riders, Obama is open to mandates. But what he is saying is %u2018Look, mandates seem like a panacea, but that's not where the hard work needs to be done.' Auto insurance is a mandate, too, and not everyone has that. You've got to prove to the public that you're willing to do the hard work.'

Richard Eskow: Would mandates be considered at that point?

David Cutler: He hasn't ruled anything out. It's a matter of priorities. The fact is, the policy differences on the mandate issue aren't that large at all. Sen. Obama believes they're an option down the road, if other approaches don't work.

Richard Eskow: And yet Sen. Clinton made another speech about mandates and universal coverage yesterday. And the Clinton had ( Clinton Campaign Manager) Patti Solis Doyle and (Policy Director) Neera Tanden talk about health care differences with reporters this morning. And Paul Krugman weighed in on the pro-mandate side of the debate, too.

David Cutler: I know the arguments, but look at the evidence. What really matters is: Can they afford the coverage?

Richard Eskow: Part of the debate involves political communications: Is the mandate issue a winner for Democrats in the general election, or a liability?

David Cutler: I don't get involved in the politics of it.

Richard Eskow: What about the concern %u2013 which I and others share %u2013 that insurance premiums are an inherently regressive form of 'taxation.' The state of Massachusetts has had to waive the mandate for 20% of the uninsured as a result. All the campaigns have been forced to create fairly complex subsidy structures in an attempt to offset that regressivity, but paying for some portion of health insurance out of general tax revenues %u2013 either for a public system or some type of voucher %u2013 would be less regressive. What about taxation as a funding mechanism?

David Cutler: That doesn't seem to be on the table now for any of the candidates.

Richard Eskow: Then the devil is in the details, isn't it? What would premiums costs? Who would get a subsidy, and for how much? Nobody is debating these issues with any specificity, and yet that's where %u2013 arguably %u2013 the real debate should take place.

David Cutler: That's why we're suggesting that we lower costs first. Otherwise, you're saying you want to force people to buy something, but we don't know how much it will cost or what you'll get in return.

Richard Eskow: There's been talk that a consensus is forming among policy analysts that 10% of income is the right number for total out-of-pocket health costs, including premiums, copays, and deductibles. But that's a very high number for lots of people.

David Cutler: Well, healthcare is 16% of the GDP now. Some of that cost is being borne through taxes already. So it depends what you want to count.

Richard Eskow: But 10% for whom? $4,000 for a family of four with income of $40,000 is a devastating figure. Whereas there are probably very few people in the top 2% of income who spend 10% on healthcare.

David Cutler: That's where the subsidy debate comes in, and is another reason to address the cost issue first.


Richard Eskow: Overall, Prof. Cutler had a clear and well-articulated response to many of the objections raised to the plan. Since he is not part of the campaign's communication strategy, I did not ask him about the Clinton campaign's accusation that Obama had been misleading in suggesting he had a universal coverage plan. He did make it clear that he feels a 98% enrollment level is possible without mandates, and that if that fails Obama will consider their use.

In my opinion, both the Clinton and Obama campaigns could have communicated their points more clearly - and with less heat. It was for this reason that I contacted Prof. Cutler. I have asked him for more background on that 98%-99% enrollment estimate. He says its an "internal calculation," and it seems quite high to me. I'll provide any further information as I receive it.


Moral Philosophy and Controlling Global Warming

Dani Rodrik writes:

Dani Rodrik's weblog: The American economist's vice: Mark Thoma points us to an excellent review by Angus Deaton of the controversy surrounding the Stern climate report. Much of the discussion on the report has revolved around Stern's use of a very small discount rate, on the ethical assumption that we have no reason to value the wellbeing of a future generation less than we value our own. American critics have objected on the ground that people do not really behave like this, and that the discount rates implicit in market outcomes suggest a much higher discount rate.

Deaton frames this as a conflict between British and American economists, with the former more at ease with making ethical assumptions and the latter preferring to defer to markets. Deaton leaves no doubt which he thinks preferable--he is definitely not on the side of the country he lives in.

Whatever it is that is generating market behaviour, it is not the outcome of an infinitely lived and infinitely far-sighted representative agent whose market and moral behaviours are perfectly aligned, and who we can use as some sort of infallible guide to our own decisions and policies. The optimal savings and growth models that used to be taught in development courses as tools of central planning, along with careful explanations of why their solutions cannot not be decentralized by the market--remember the transversality conditions?--are now routinely taught in macroeconomics courses as descriptively accurate accounts of the economy. According to some stories, the government does better, correcting our collective missteps, but is it really possible to seriously imagine that an administration that dismissed global warming without economic analysis is nevertheless making optimal provision for future generations? Zero pure time preference, if it is a vice, is surely a minor one. Relying on markets to teach us ethics is very much worse.


Tyler Cowen: What To Do About Climate Change?

Tyler Cowen writes:

Marginal Revolution: What to do about climate change?: A new Cato study, by Indur Goklany, suggests that instead of carbon taxes we should spend money on better water policy, drought prevention, anti-malarials, sea level protection, and so on. In general we should make the world as wealthy as possible. Here is the link, the piece is intelligent throughout and well worth reading.

Two questions suggest themselves. First, is the choice either/or? I don't see arguments against a revenue-neutral carbon tax. Second, is there really enthusiasm for the proposed measures or is the real intent to do little or nothing on carbon? Since this is both a Goklany piece and a Cato piece, an interesting question arises: who exactly is now obliged to push for anti-malarial foreign aid? Cato? Goklany? Either/or? Both? Or is it enough to just make the comparison once and leave it at that?


The Republican Clown Show Continues...

Starring Mitt Romney:

If I fight on in my campaign, all the way to the convention, I would forestall the launch of a national campaign and make it more likely that Senator Clinton or Obama would win. And in this time of war, I simply cannot let my campaign, be a part of aiding a surrender to terror...

Everybody who has worked for, contributed to, or voted for Mitt Romney owes America an abject and public apology. Everybody.

Time to shut the Republican Party down and replace it with a pro-America opposition to the Democrats.


Jan de Vries on Historical Demography

Jan de Vries on Historical Demography

Policy questions and historical research advances

  • How does pop growth affect exon growth?
  • In what demographic setting did exon growth emerge?

A Malthusian world?

  • Models
  • Realities
  • High vs. low pressure
  • Eueipean marriage pattern
  • Really a "motionless" society?

The Demographic Transition

  • How did it start? Exog or endog?
  • Why fertility decline when?
  • How does the transition end?

American Exceptionalism?

  • Malthus in a benign environment
  • Antebellum puzzles
  • Declining fertility--target and strategic bequests
  • Rising mortality
  • Immigration
  • Baby booms and busts: echoes

The Clown Show Over at National Review

We have Andy McCarthy feeling sad because John McCain is mean to him:

The Corner on National Review Online: I was not being subjected to vituperation about Sen. McCain; I, among others, was being subjected to vituperation from Sen. McCain.... We had dared suggest that our law's categorical ban on torture ought to be rethought. Sen. McCain's approach was not reasoned dialogue. He labeled us torture mongers. I found this vituperation particularly dismaying because (a) my proposal was intended to reduce incidents of torture and other prisoner abuse...

Right. If you want to reduce the frequency of most things, you change them from "forbidden" to "allowed." That's really smart.


Econ 101b: February 6 Lecture: Extending the Solow Growth Model: From Malthus to the Singularity

Econ 101b: February 6 Lecture: Extending the Solow Growth Model: From Malthus to the Singularity

Lecture Audio



links for 2008-02-06


Asymmetric Loss Functions and the Balance of Risks

Over at Martin Wolf's place, Chris Carroll writes:

Economists' Forum: Bernanke's reflation gamble may work too well: Martin Wolf channels a plausible concern that... if the US economic slowdown reflects supply problems like the soaring price of oil, rather than faltering demand, then monetary and fiscal stimulus alike will result in higher inflation which will have to be unwound by painful future stringency....

But at the moment, the Fed's gamble seems well judged, not because the concerns of the inflation hawks are unwarranted but because they are balanced by a more dangerous possibility on the opposite side.... I will edge to the to the side of the trail away from the precipice, even if this means an occasional scraped ankle or a bit of extra scrambling.... The cliff, for monetary policy, is the possibility of deflation, whose dangers were calamitously illustrated by the Japanese government during the 1990s.... Guillermo Calvo... [suggests that] the unfolding events in the US look more like a credit crunch than like either a traditional demand or supply shock.

Calvo argues that neither monetary nor fiscal stimulus is well targeted for clearing up dysfunctional credit markets. But one has to ask, "compared to what?"... This situation provides a more than sufficient rationale for the Fed's dramatic actions: Deflation combined with a debt crisis make a toxic combination, because as prices fall, real debt rises. This point was amply illustrated in Japan, where deflation amplified both the number of zombies and the degree of zombification (among the initial stock of the undead). It was also the basis of Irving Fisher's theory of what made the Great Depression great, and has clear echoes in the macroeconomic literature on the "financial accelerator" pioneered by none other than Ben Bernanke (along with a few other authors who have pursued more respectable careers).

In this context, the risk of an extra year or two of an extra point or two of inflation (if the deflation jitters prove unwarranted and the subprime crisis proves transitory) seems a gamble well worth taking.


Ezra Klein on Today's Endorsements

He is somewhat surprised at the near-consensus for Obama:

EzraKlein Archive | The American Prospect: Been puttering around the internet today trying to think of things to write, and mainly what I see are endorsements for Barack Obama.... I really didn't foresee this unanimity. A couple months ago, Hillary Clinton had far more traction among this group, and Obama hadn't come anywhere near assuaging concerns abut his candidacy.

I think three things turned the tide decisively against Clinton:

The first was her post-Iowa campaign, where Bill Clinton was comparing Obama to Jesse Jackson and an endless procession of hacks were being paraded out... it's a type of politics few want to support.... The second was that Obama simply got more specific, particularly on foreign policy... speaking about ending the "politics of fear" and attacking the mindset" that led us into Iraq.... [T]he third force was simply that his victories in Iowa and South Carolina made it look like his movement might be real....

Now, elites don't actually matter much, and I still think Hillary will win the primary. My basic belief is that Obama is more progressive on foreign policy, she's more liberal on social policy, but he's more likely to lead towards a more progressive moment... almost in site of his own policy shop...


New York Times Death Spiral Watch (Reviewing Lee Seigel Edition)

Outsourced to Timothy Burke of Easily Distracted http://weblogs.swarthmore.edu/burke:

Barbarians at the Gate: I’m not the only one to take note of the New York Times‘ baffling decision to review Lee Siegel’s new anti-Internet broadside not once, but twice. Both times, moreover, the assignment was given to reviewers who were clearly predisposed to sharing Siegel’s hostility to all things online and favorable in their outlook towards the author himself. You’d think, if you’re going to review a book twice, that you’d seek a more sharply critical perspective for the second one, just to create something of a debate.

This points to two issues that the Siegel reviews raise, actually. The first is largely specific to the Times itself, and its long-standing attempts to choreograph the conversations of the highbrow American (or at least New York) intelligentsia.... Who should a review editor assign to do reviews, anyway? To someone you know has a favorable take, who will protect the reputation of a favored author or performer? To someone who will do a hatchet job? I don’t think it’s stretching things to say that highbrow editorial staff and their critics have indulged in fairly corrupt answers to these questions.... That’s Anton Ego’s world, only more conspiratorial and incestuous....

I don’t pick up the Times looking for a hostile review of Siegel so as to comfort me, nor react against it simply because the reviews were positive. What I care about first is simply whether they’re interesting to read, whether the reviewer writes compellingly, whether there’s an original take or appreciation of the work....

In that context, wasting two reviews on anything short of The Great American Novel is lamentable.... In that context, assigning a review to someone who is as uncurious and temporizing as John Lanchester in the Sunday section was seems a waste of space. Lanchester at least observes that it’s possible that the book isn’t particularly true, though he does so in the most mealy-mouthed way....

This goes to the second problem with the Times... [it] sees itself as one of the leaders of the charge against new media.... I met a Times reporter last year whose work I really respect.... I was fairly startled when the conversation briefly turned to the revenue situation of the major daily newspapers at the reporter’s bristling and unreserved hostility towards digital media, just because he seemed so much less reflective at that moment....

What we won’t be paying for (at least not much) in thirty years is literary and cultural reviews and op-ed pieces. Not just because better can be had already online, in many cases, but because the old media ill-serves educated readers in those areas and has always ill-served them. This brings us back to the ethics and aesthetics of the closed world of editorial elite and the literati.... We don’t have to settle for the choices that come out of small incestuous circle-jerk of New York editors, from their dispensing of favors through their immediate social networks.

That in the end is what made Lee Siegel so furious, as Ezra Klein noted. He’d been handed a microphone, because he was an already-anointed cultural critic of note within those small social worlds.... He was given the stage and a big introduction, only to find that most of the audience had left the building, and those few that stayed threw rotten tomatoes. That’s a long way from getting a seat at the Algonquin Round Table.

So no wonder there are others in that small world who feel sympathy for Siegel and praise his rage against the Internet. They’ve got a union card for a closed shop that once had a monopoly, but suddenly the world is full of little entrepreneurial factories churning out commentary and reviews that’s more readable, interesting and diverse.... So they’re not about to consider that the angriest, most isolated, most asocial person on the Internet in his day might have been Lee Siegel himself, that the skunky odor around his TNR column wasn’t generated by his detractors but wafted from the main entries, and that the main thing being destroyed, at least as far as cultural criticism goes, is a tottering, threadbare cocktail-party monopoly built on self-congratulation.


Gurk!

From Deborah Lynn Blumberg:

Service-Sector Activity Contracts, Fueling Concerns About Recession: NEW YORK -- Service sector activity contracted sharply in January for the first time since March 2003, with the surprise drop further fueling fears about a slowing U.S. economy. On Tuesday, the Institute for Supply Management reported that its January non-manufacturing index slid to a reading of 41.9, from December's revised figure of 54.4. The data were released early Tuesday morning, at 8:55 a.m. EST compared to the usual 10 a.m. EST, due to a possible breach of information on Monday, ISM said.

Readings over 50 indicate growth, and forecasters had expected the overall index to have hit 52.5 in January. The figures reflect a new composite index for the nonmanufacturing sector, following a revision in the formula in 2008 that more closely predicts the gross domestic product for the past several years. ISM also developed a similar composite index for the manufacturing sector.

The survey results are "downright disastrous. These are recessionary readings," said Stephen Stanley of RBS Greenwich Capital. "The tea leaves are quickly accumulating. Payroll employment has flattened. The Christmas retail season was weak. Consumer spending seems to have weakened further in January, as auto sales fell noticeably and chain store reports seem to have been quite soft. And of course the housing sector is a mess."

"Growth has been slowing," Anthony Nieves, chairman of the Institute for Supply Management non-manufacturing business survey committee and senior vice president of supply management for Hilton Hotels Corp., said about January's weak figures. The low figure "is surprising to me looking at the past data," he said. "Did I anticipate this? Absolutely not. You have to see how this trends out though before anyone gets too excited."... Data showed a sharp drop in the employment and new orders indexes, with employment index for January coming in at 43.9, the lowest since February 2002, from December's 51.8. The new orders index stood at 43.5, the lowest since October 2001. It was at 53.9 in December.

The figures are yet another piece of evidence that adds to growing anxieties that the U.S. is in or is headed toward a recession, as weakness in the housing market takes it toll on the broader economy. The report's sharp fall in employment corroborates last week's especially weak January jobs report, and keeps investors' hopes for further interest rate cuts alive and well.


I Just Voted for Barack Obama...

I just voted for Barack Obama in the California primary.

It has, this year, been an embarrassment of riches on the Democratic side--a half-dozen or so candidates any one of whom would have a reasonable shot of being in the top 20% of American presidents if elected, compared to zero on the Republican side. Now we are down to two: Barack Obama and Hilary Rodham Clinton.

The arguments against Barack Obama are:

  1. He has no administrative experience running a large organization.
  2. He is too liberal.
  3. He is Black, and thus vulnerable to the politics of personal destruction, and will not get elected.

The arguments against Hilary Rodham Clinton are:

  1. Her performance running Clinton-era health care reform in 1993 and 1994 gives no confidence in her ability to run the large organization that is the U.S. government.
  2. She is too centrist.
  3. She is female and a Clinton, and thus vulnerable to the politics of personal destruction, and will not get elected.

The response to (1) for both sides is by this point very convincing: both have now demonstrated an ability to run an excellent political campaign. Running a successful presidential political campaign is not the same thing as governing a country, but both have demonstrated substantial administrative competence over the past two years--and neither has betrayed the moral failure of telling big lies or making themselves hostage to special interests in the way that, say, George H.W. Bush did and thus crippled their presidency in advance. A Barack Obama who was just a pretty face who could give a nice speech could not have run the campaign he has run over the past two years. And the Hilary Rodham Clinton who made such an administrative mess of health reform in 1993-1994 could not have run the campaign she has run over the past two years. Thus I am now confident that either has a reasonable shot of being in the top 20% of American presidents.

The response to (2) is that the policy differences are incredibly minor, and are being amplified by both campaigns as they play a negative-sum game for the party and for the country as a whole. Barack Obama is a more liberal senator than Hilary Rodham Clinton,[1] and yet the big policy difference is that he is to the right of Clinton on health care? Our experience with auto insurance mandates tells us that HRC's individual mandate to purchase health insurance would get us close to universal coverage only if it were administered through the tax system--and maybe not even then. Barack Obama's "pay or play" requirement that employers either offer health insurance or kick in money to the system is very close to being an employer mandate if the "pay" component is set at a serious level. Either plan could produce effectively universal coverage. Either could fall short--with the devil being in the details.

What is going on is that, as Matthew Yglesias wrote somewhere I cannot find right now, both campaigns are magnifying their policy differences on health care and Iraq in order to have something to talk about. But what policy differences there are are insufficient to push anybody toward one rather than the other.

And as for (3), it is also not a consideration. The Republican Party is very good at the politics of personal destruction, and the press eats it up--no matter who the Democratic candidate. When draft-dodger Dick Cheney can impugn the patriotism of WWII bomber pilot George McGovern without any journalistic pushback--well, we already knew that America's Washington village journalists are completely without honor. And we already knew that the only Republicans with honor are those who are openly and publicly committed to the radical transformation and reform of their party. We do live in Romuli faece, and not in Platonis πολτειαι. We have to deal with it.

So none of the arguments against either candidate seems to me to weigh one way or another. So why did I vote for Barack Obama rather than HRC? Because he gives a really nice speech.


[1]Barack Obama is not, however, the most liberal senator. The National Journal, which claims he is, has for some reason gone into the tank on this one, and is now downgraded from "reliable" to "must be verified."



More on the Stimulus Package

On the phone just now, Larry Summers just moved me appreciably toward enthusiastic support of the stimulus package by arguing, roughly:

  • The big arguments against the stimulus package are two:
    • It will become a destructive lobbyist Christmas tree
    • It will increase the deficit and yet fail to stimulate the economy
  • We appear to have dodged the bullet on the first argument
  • The second argument is incoherent because:
    • The U.S. government is not going to go bankrupt
    • Hence the reason to fear increasing the deficit is the fear that increasing the deficit will reduce national saving
    • But if the stimulus package fails to boost spending, it will be because people save their tax rebate checks, in which case the stimulus will have no effect on national saving. Hence you can believe:
      • Either that the stimulus package will be ineffective as a stimulus but will not reduce national saving--in which case it is a zero.
      • Or that it will be effective as a stimulus--in which case it will be both good for employment and probably good for national saving as well, because few things are worse for national saving than a recession.
      • But the argument that the stimulus package is bad because it will be ineffective at boosting demand and will reduce national savings is not coherent


San Francisco Bay and the Golden Gate

I have been in this office for a decade and still cannot believe I have this view:

iPhoto

iPhoto

If I were Chancellor of U.C. Berkeley, I would confiscate all offices on the south and west fronts of Evans Hall and rent them out to hedge funds to boost Berkeley's cash flow. Just sayin'...


Paul Krugman Watches the Ongoing Credit Crunch

Paul Krugman sends us to the Federal Reserve Senior Loan Officer Opinion Survey:

Senior Loan Officer Opinion Survey: January 2008: About 60 percent of domestic respondents indicated that they had tightened their lending standards for approving applications for revolving home equity lines of credit over the past three months. Regarding demand, about 35 percent of domestic banks, on net, reported that demand for revolving home equity lines of credit had weakened over the past three months...

Credit crunch - Paul Krugman - Op-Ed Columnist - New York Times Blog

That is, he says, a greater share of loan officers tightening lending strategies than ever seen before in the history of the survey.


Antitrust Protectionism

Alex Tabarrok observes that if Microsoft-Yahoo really were anticompetitive and likely to generate monopoly rents for the merged entity, Google would be being very quiet right now:

Marginal Revolution: Antitrust Protectionism: Best evidence that the merger between Microsoft and Yahoo will increase competition?

Publicly, Google came out against the deal, contending in a statement that the pairing, proposed by Microsoft on Friday in the form of a hostile offer, would pose threats to competition that need to be examined by policy makers around the world.


The Bush Budget Clown Show

Roger Runningen and Brian Faler of Bloomberg report on the Bushies' proposed budget for fiscal 2009:

Bloomberg.com.S.: President George W. Bush sent Congress a $3.1 trillion federal budget that trims Medicare and health care programs, boosts military spending and projects the deficit this year and next will hit near-record levels. The spending blueprint for fiscal 2009... would slow the rate of growth in spending for entitlement programs such as Medicare for savings of $208 billion over five years. Pentagon spending would rise 7.5 percent to $515 billion, the 11th consecutive year of increases....

Bush's spending plan stands little chance of being adopted. Criticism came today from Republicans as well as Democrats. "There's a lot of games, smoke, mirrors, incomplete numbers, basically there's not much realism" in the budget, Senator Judd Gregg, the top Republican on the Budget Committee, said in an interview. "They're playing the usual games."... The budget deficit is projected to reach $410 billion this year. That is up from $162 billion in 2007, reflecting a slower economy generating fewer corporate tax receipts, the cost of a $146 billion economic stimulus measure and spending on the wars in Iraq and Afghanistan. The deficit is forecast at $407 billion in 2009... 2.9 percent of the $13.2 trillion U.S. economy....

Bush, after meeting with his Cabinet this morning at the White House, called it a "good, solid budget" that puts a priority on national security and keeps spending in check. "Congress needs to pass it," he said. Lawmakers took a different view. House Budget Committee Chairman John Spratt, a South Carolina Democrat, said it "bears all the hallmarks of the Bush legacy -- it leads to more deficits, more debt, more tax cuts, more cutbacks in critical services"...

Their reference to "near-record levels" of the deficit doesn't give a full and fair account of the magnitude of what can only be called a clown show. The headline deficit number ought to be $738 billion--we have a $331 billion Social Security surplus for 2009, and an honest and honorable administration would be using that surplus to pay down the government debt in order to get ready for the challenges that our aging population will pose for the federal budget over the next two generations. The headline number shouldn't be 2.7% of GDP; it should be 4.8% of GDP. That is how far Bush fiscal policy is from what a prudent and responsible fiscal policy should be.

Now that we have an actual Bush administration proposal in print--one that Republican senator Judd Gregg doesn't think much of--it is time for an accountability moment. The Bush administration and its flacks and flunkies have long promised that the administration was going to "cut the deficit in half" by the time in left office in fisal 2009. The press by and large reported this straight--not pointing out that the "cut in half" was from a highballed projected peak deficit number that was artificially inflated in order to set the bar artificially low, not pointing out that such a deficit still left fiscal policy far from where it ought to be, and not pointing out that the Bushies' policies would produce such a reduction only if everything broke right and we had four uninterrupted years of macroeconomic good news. Republican economists who cared more about pleasing White House communications than in informing their audience chimed in--why, I get 100 hits on Google for Greg Mankiw saying both when he was under and since he came out from under message discipline that George W. Bush's proposals were projected to reduce the deficit by half by 2009 http://www.google.com/search?num=100&hl=en&client=safari&rls=en-us&q=mankiw+%22the+deficit+in+half%22&btnG=Search. Not under any projection that I would recognize as straight.

Among Republican economists Andrew Samwick has sounded the alarm about Bush administration fiscal policy. Bruce Bartlett has sounded the alarm. Damned few others. Among center and center-right commentators Stan Collender has told the story straight, and in context. Damn few others. Those three deserve to have their reputations and authority substantially boosted--because they have shown that they are more in the information than in the pleasing-White-House-communications business.

We want to run a budget that is in surplus during boom, in deficit during recession, that borrows in order to fund investments that benefit the future, and that runs surpluses and pays down debt in order to fund future expenditures that benefit today's taxpayers. The Bushies have not done that.


Morning Coffee: The Bush Budget Clown Show


Econ 101b: February 4 Lecture: Extending the Solow Growth Model

Econ 101b: February 4 Lecture: Extending the Solow Growth Model: Natural Resources and Malthusian Equilibrium

Lecture Audio



Why Oh Why Can't We Have a Better Press Corps? (New Republic Edition)

Ezra Klein writes:

EzraKlein Archive | The American Prospect: I think it's fascinating that Marty Peretz doesn't understand why people don't like him after his magazine lies about them. [Hilary Rodham Clinton] didn't snub you, Marty. She treated you with precisely the lack of respect you deserved after that shameful debacle.


Some context:

EzraKlein Archive | The American Prospect: The lies [of the Clintons] were not as bad as Bush's - WMDs and torture," writes Andrew Sullivan. "But the stakes were much lower. The arrogance and condescension of the healthcare debacle were revealing of a classically bad left-liberal mindset on Senator Clinton's part. She knows best; she always has; everyone else is part of the VRWC." Check that passivity! As if the "healthcare debacle" was simply a result of the Clintons' "arrogance and condescension," and had nothing to do with a broad, coordinated attempt to smear, misrepresent, and, in Sullivan's own words, "torpedo" their health care plan. I'm genuinely curious if this recitation of Clinton's personal failings is some sort of barely submerged explanation for why Sullivan published and championed a dishonest, fearmongering article meant to sink the Clinton health care plan -- and it was recognized as such even at the time. Thanks to The Atlantic's open archives, you can read the fairest man in journalism, James Fallows, take it apart in a feature article called "A Triumph of Misinformation." McCaughey's article, which Sullivan commissioned, published, and praised, was, Fallows said, "simply false." Yet Sullivan still touts it in his biography...

And:

Marty Peretz: When Hillary Snubbed Me: Poor Hillary was snubbed by Barack Obama.  I suppose she thinks he should have snubbed Senator Claire McCaskill of Missouri instead.  He was closer to McCaskill then he was to Hillary who was, in any case, already engaged in false pleasantries with Senator Kennedy.  What's more, Hillary is known to snub people all the time. In fact, she even snubbed me once at a reception at the White House.  I was talking to someone in the Rose Garden, and she came over to greet the someone with whom I was already chatting.  That someone, in turn, introduced me, saying, "Of course, you know Marty Peretz," which actually she did not.  I had never been in a room with Hillary that didn't also contain a thousand other people.  That didn't phase her at all.  And she responded, "Indeed, I do," and turned on her heel and left. I don't have an explanation.  Except that The New Republic was not especially enamored of her health plan which, in retrospect, has impeded health reform for a decade and a half.  As it happens, we had published a devastating analysis of the proposal by Elizabeth McCaughey; and somehow, in the mysteries of Washington, this became the vivid center of the debate.  The White House actually put out what I recall as a nine page rebuttal to the TNR critique, another tactical mistake in the genius presidency.  Anyway, it is to this article that her snub to me may be attributed. But it could be something even more petty.


Matthew Yglesias Watches the New York Times Death Spiral

Why oh why can't we have a better press corps? Outsourced to Matthew Yglesias:

The Difference?: David Leonhardt previews Barack Obama's approach to economic policy. He notes that "Indeed, Mr. Obama and Mrs. Clinton hold similar or identical positions on a host of economic issues, and Democratic economists not aligned with either campaign often speak positively about both." Quite true, I think. He tries to sex things up by observing that "the two candidates offer strikingly different strategies for achieving their economic agendas." To me, though, the argument on that score is pretty unconvincing.

When you control for the fact that it would sound silly for the candidates to just agree that they don't really have clear disagreements on the main issues, I mostly see two campaigns trying to make mountains out of molehills for the sake of having something to talk about. What's more, in practice there's only so much that "strategies for achieving" your legislative agenda can actually do. What matters most is not the strategy but the outcome of the congressional elections.


Paul Krugman on Federal Spending Mythology

Bush increase in spending = Defense + Medicare + Medicaid:

Federal spending mythology: One thing I’ve written about a number of times, but becomes especially worth emphasizing now that John McCain is the presumptive Republican nominee, is the myth of runaway federal spending under the Bush administration. McCain has said on a number of occasions that he doesn’t know much about economics — although, straight-talker that he is, he has also denied having ever said such a thing. But one thing he thinks he knows is that the Bush administration has been spending like a drunken sailor. Has it?

Consider the actual record of spending. Never mind dollar figures, which grow because of inflation, population growth, and other normal factors. A better guide is spending as a percentage of GDP. And this has increased, from 18.5% in fiscal 2001 to 20% in fiscal 2007.

But where did that increase come from? Three words: defense, Medicare, Medicaid. That’s the whole story. Defense up from 3 to 4% of GDP; Medicare and Medicaid up from 3.4% to 4.6%, partially offset by increased payments for Part B and stuff. Aside from that, there’s been no major movement.

Behind these increases are the obvious things: the war McCain wants to fight for the next century, the general issue of excess cost growth in health care, and the prescription drug benefit.

So the next time Mr. McCain or anyone else promises to rein in runaway spending, they should be asked which of these things they intend to reverse. Are they talking about pulling out of Iraq? Denying seniors the latest medical treatments? Canceling the drug benefit? If not, what are they talking about?