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November 2008

"Third Ways" in Theory and Practice

Last week's reading:

John Maynard Keynes (1932), Essays in Persuasion (London: Macmillan).

This week's reading:

Wladimir S. Woytinsky (1961)Stormy Passage: A Personal History Trhough Two Russian Revoutions to Democracy and Freedom, 1905-1960/a> (New York: Vanguard Press).

Next week's reading:

Edmund Wilson (1940), *To the Finland Station: A Study in the Writing and Acting of History (New York: New York Review of Books).

Earlier readings:

Donald Sassoon (), One Hundred Years of Socialism
Janos Kornai (), Economics of Shortage
Milovan Djilas (), The New Class
Sheri Berman (), The Primacy of Politics
John Maynard Keynes (), Economic Consequences of the Peace
John Maynard Keynes (), A Tract on Monetary Reform
Kevin Lansing (2008), "Exploring the Causes of the Great Inflation," FRB San Francisco Economic Letters
Alan S. Blinder (1982), "The Anatomy of Double-Digit Inflation in the 1970s," in Robert E. Hall, ed., Inflation: Causes and Effects (Chicago: Univ. of Chicago Press), pp. 261-282.
J. Bradford. DeLong (1997) "America's Peacetime Inflation: The 1970s" in C. Romer and D. Romer, eds, Reducing Inflation: Motivation and Strategy (Chicago: University of Chicago Press), pp. 247-276.
Robert Hetzel (1998) "Arthur Burns and Inflation," FRB Richmond Economic Quarterly
Steven Braun (1984), "Productivity and the NIIRU (and Other Phillips Curve Issues)" (Washington: Federal Reserve Working Paper 34).
Thomas J. Sargent (1999) The Conquest of American Inflation (Princeton: Princeton University Press).


I still remember the morning I woke up to find that the Federal Reserve had bought an insurance company.

Now Felix Salmon has thoughts on the restructuring of the deal:

The Curious Capitalist: The government's dilemma is that the people at AIG responsible for this mess really do deserve to be tarred and feathered, or maybe drawn and quartered. There's ample reason to be punitive. But once they made the decision that AIG was too systematically important to fail--and I'm not saying that was the wrong decision--the Fed and Treasury needed to structure their bailout in a way that allowed AIG to survive, at least until the financial situation improved dramatically. They didn't do that the first time around, which is why they had to restructure the deal on Sunday...

I think this is a significant mistake: the Federal Reserve is handing a present to AIG's shareholders and bondholders that they do not deserve.

I say full nationalization, and then privatization of the insurance company parts of it. It is not clear to me that any private firm has any business offering insurance against systematic mortgage financial risk anyway.

Why Oh Why Can't We Have a Better Press Corps? (National Review Edition)

Larry Kudlow writes:

Kudlow's Money Politic$ on National Review Online: Mustard Seeds [Larry Kudlow]: Many Wall Street analysts are forecasting a steep 3 to 4 percent Q4 contraction. But they are not factoring in the roughly $200 billion dollar drop in consumer energy expenses that is accruing from the collapse in oil and gasoline prices. This huge energy tax cut effect will be a big booster for consumers and businesses. Not only will it benefit consumer purchasing power, it will also improve the profits picture, and as a result, the stock market...

But the stock market is a forward-looking animal. Unless you think investors are really stupid, the effect of falling oil prices on profits and future dividends has already been incorporated into stock prices--it has just been overwhelmed by the bad news about the financial crisis.

At some point predictions that the stock market is about to rise are going to be true. But if they are true now, it is not because "Wall Street analysts are forecasting a steep 3 to 4 percent Q4 contraction. But they are not factoring in the roughly $200 billion dollar drop in consumer energy expenses that is accruing..."

Does Ezra Klein Use Information Technology for Evil?

Ezra Klein writes:

Ezra Klein: I have a Yahoo Tubes feed for Ponnuru, so I don't miss his writing amidst the clutter of The Corner...

This seems to me to be very strange--akin to "I get dead rodents delivered to my doorstep every morning by DHL."

There is a belief--in spite of his hanging out in the very, very bad neighborhood that is National Review--that Ramesh Ponnuru is a decent, smart person whom one can learn something by reading. Where does this belief come from? What has Ramesh Ponnuru ever written that people find worth reading for its own sake? And why has Ponnuru's reputation as a "decent" right-winger survived his approval of the dust jacket copy for his... remarkable book The Party of Death?

Is the Democratic Party the "Party of Death"? If you look at their agenda they are.

IT’S NOT JUST abortion-on-demand. It’s euthanasia, embryo destruction, even infanticide—-and a potentially deadly concern with "the quality of life" of disabled people. If you think these issues don’t concern you—guess again. The Party of Death could be roaring into the White House, as National Review senior editor Ramesh Ponnuru shows, in the person of Hillary Rodham Clinton. In The Party of Death, Ponnuru details how left-wing radicals, using abortion as their lever, took over the Democratic Party-—and how they have used their power to corrupt our law and politics, abolish our fundamental right to life, and push the envelope in ever more dangerous directions. In The Party of Death, Ponnuru reveals:

  • How Hillary Clinton could use the abortion issue (but not in the way you think) to become president
  • Why the conventional wisdom about Roe v.Wade is a lie
  • How the party of death-—a coalition of special interests ranging from Planned Parenthood to Hollywood-—came to own the Democratic Party
  • How the mainstream media promotes the party of death
  • Why Jesse Jackson, Al Gore, and other leading liberals gave up being pro-life
  • How liberals use animal rights to displace human rights
  • The Democratic presidential candidate who said that infanticide is a mother’s "choice"
  • How doctors-—and other health care professionals—-are being coerced, by law, into violating their consciences
  • The ultrasound revolution: why there’s hope to stop the party of death

Ponnuru’s shocking exposé shows just how extreme the Party of Death has become as they seek to destroy every inconvenient life, demand fealty to their radical agenda, and punish anyone who defies them. But he also shows how the tide is turning, how the Party of Death can be defeated, and why its last victim might be the Democratic Party itself.

The Bible Sez: Newsweek Is THE BEAST of the Apocalypse!!

It is all clear in Revelations 13:

John of Patmos, After Eating the 'Shrooms: And I stood upon the sand of the sea, and saw a beast rise up out of the sea, having seven heads and ten horns, and upon his horns ten crowns, and upon his heads the name of blasphemy. And the beast which I saw was like unto a leopard, and his feet were as the feet of a bear, and his mouth as the mouth of a lion: and the dragon gave him his power, and his seat, and great authority.... And there was given unto him a mouth speaking great things and blasphemies; and power was given unto him to continue forty and two months. And he opened his mouth in blasphemy against God, to blaspheme his name, and his tabernacle, and them that dwell in heaven...

The Chapter 7 bankruptcy of the Washington Post company is coming in May 2012. You read it here first.

Why am I so certain that Newsweek is the blaspheming beast of the Book of the Apocalypse of Saint John the Theologian? Because of this episode of... well, I can't call it he said-she said journalism because Lisa Miller doesn't quote anybody who is not anti-Obama, does she?

Belief Watch: Is Obama the Antichrist?: On Nov. 5, Todd Strandberg was at his desk, fielding E-mails from around the world. As the editor and founder of, his job is to track current events and link them to biblical prophecy in hopes of maintaining his status as "the eBay of prophecy," the best source online for predictions and calculations concerning the end of the world. Already Barack Obama had drawn the attention of apocalypse watchers after an anonymous e-mail circulated among conservative Christians in October implying that he was the Antichrist.... One of the winning lottery numbers in the president-elect's home state was 666— which, as everyone knows, is the sign of the Beast (also known as the Antichrist). "It is very eerie, and I take it for a sign as to who he really is," wrote one of Strandberg's correspondents.... According to a 2006 study by the Pew Forum on Religion & Public Life, a third of white evangelicals believe the world will end in their lifetimes.... In this world view, "the spread of secular progressive ideas is a prelude to the enslavement of mankind," explains Richard Landes, former director of the Center for Millennial Studies at Boston University.

No wonder, then, that Obama triggers such fear.... Mat Staver, dean of Liberty University's law school, says he does not believe Obama is the Antichrist, but he can see how others might.... The people who believe Obama is the Antichrist are perhaps jumping to conclusions, but they're not nuts: "They are expressing a concern and a fear that is widely shared," Staver says.... Strandberg says Obama probably isn't the Antichrist, but he's watching the president-elect carefully. On his Web site, he has something called the Rapture Index, a calculation based on signs and prophecy of the proximity of the end. According to Strandberg, any number over 160 means "fasten your seat belts." Obama's win pushed the index to 161.

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

Lessons from the Great Depression Blogging

Apropos of Krugman's evisceration of the underbriefed George F. Will

Path Finder

I have never been able to make any sense at all of the right-wing claim that the New Deal prolonged the Great Depression by creating a "crisis of confidence" that crippled private investment as American businessmen feared and hated "that Communist Roosevelt." The crisis of confidence was created by the stock market crash, the deflation, and the bank failures of 1929-1933. Private investment recovered in a very healthy fashion as Roosevelt's New Deal policies took effect.

The interruption of the Roosevelt Recovery in 1937-1938 is, I think, wel understood: Roosevelt's decision to adopt more "orthodox" economic policies and try to move the budget toward balance and the Federal Reserve's decision to contract the money supply by raising bank reserve requirements provide ample explanation of that downturn. And once those two factors had run its course the continuation of Roosevelt's policies was no obstacle to an investment recovery driven by war-related exports monetary expansion produced by capital flight from Europe.

You can argue--and I occasionally do--that had the Supreme Court not ruled the NIRA unconstitutional it would have exerted a significant drag on medium-run economic recovery. But the Supreme Court did rule the NIRA unconstitutional, 9-0, Brandeis voting alongside MacReynolds.

Sumner H. Slichter (1938), "The Downturn of 1937," Review of Economics and Statistics 20:3 (August), pp. 97-110.

UPDATE: Pro-Growth Liberal also weighs in:

And we have,,,,,,

And Debra Cooper emails:

Back in the bad ole days, not so long ago....George Will would have said his nonsense, looking and sounding professorial; Cokie Roberts would have seconded in her no nonsense kind of way (after all her parents were Democratic party icons) and the another lie would have sustained the right wing economic hegemony on elite opinion. Now we have a Nobel Prize winning economist to put away in a few quick, well chosen, well sourced progressive views that George Will just spouts crap.

Paul has had a column since 2000, but he hasn't had the impact he deserved. The internet has lent great support to that.

In addition to taking due credit for the election of a center left Democrat, the netroots should take an enormous and continuing bow for changing the media environment for the better.

Aimai on Her Grandfather, I.F. Stone

She writes, stream-of-consciousness first draft:

If I Ran the Zoo: One Hundred Years Of I.F. Stone: Yesterday we had a blast honoring my grandfather, I.F. Stone... marvelous speakers, among the best of whom was Jack Beatty, Chris Lydon, and Tony Lewis. Among the most controversial, apparently, was your own Aimai.... I believe firmly that she who blogs first, laughs last so I woke up this morning at four a.m. to get my account into print first....

Jack Beatty's talk.... Look, he said, (more or less and forgive me, Jack, for any misquotes) Izzy was increasingly both blind and deaf. And he was always and eternally himself. He never let the audiences expectations govern his behavior. He spoke at a dinner celebrating Walter Lippman... launched into a tirade against him, leaving my poor grandmother, who could actually see the faces in the celebrity audience, to face the brunt of the audience's rage and horror as Izzy ceremonially stomped Lippman's legend into the dust. Picture Izzy doing the same thing at a film about the wonders of communism when, as an imagined "man of the left" the audience turns to him for approbation and gets a fifty minute disquisition on the horrors of communism and the glories of the red, white and blue. My favorite of Jack's stories... Thanksgiving Dinner with Morton Kondracke and Kondracke's family of young children... asked, ceremoniously, to speak on the wonders of g-d and when they came 'round to Izzy he said forthrightly (and oh, how Jewishly) something on the order of "G-d? that *&^%$ criminal? If there is a g-d he's responsible for more war, pestilence, and murder of children than any single human in history. He's got a lot to answer for. I'd rather believe in no g-d than have to impeach the bastard with his crimes."...

I seem to have gotten up and from the point of the older journalists there, barked like a puppy or, perhaps more accurately, peed on the carpet. I said what I, and my brother, and probably the entire bloggosphere have long thought. If he'd lived long enough Izzy would certainly have been a blogger. That is because the best of his work, which he famously did alone and without help, wasn't really facilitated in any way by large newspaper bureaus and increasingly, in the modern world, would not require the auspices and the power of a newspaper's backing... the historical depth, the ability to link, the ability to write as much as you want without increasing cost, and the targeted, partisan nature of blog readership would have made a blog the natural heir to The Weekly.

Frankly, I thought what I had to say was uncontroversial but I had forgotten how much vested interest and angst the self described journalists in the room place on the war between bloggers and journalists. I also hadn't realized, or remembered, what it was like to be parachuted into a room filled with altecockers with turf to defend. I won't name any names but various elder statesmen tried to put me in my place with windy pronouncements on the inability of blogs and bloggers to take the place of journalists. This left my withers unwrung because, of course, I don't think blogs are replacing journalists--they seem to be doing a nice job of making themselves extinct--but that blogs are competing with newspapers and are, in their own way, a more hospitable place for honest journalistic endeavours....

But we were talking past each other, as that basic mismatch between what I'd said and what they'd heard demonstrates. They don't really read blogs..... Basically they think blogs and bloggers are "all about opinion and we have too much opinion" so you say "well, what about Josh Marshall at Talking Points and his *&^% Polk? Oh yes, of course *he's good, they say--in fact his award inclines them to think him so much a journalist.... Or, what about Bilmon? (Chris Lydon, bless his heart, brought up Bilmon) but the others had never heard of him and what's with the weird name? Or Glenn Greenwald, or Juan Cole? But, they said to me triumphantly, they have "day jobs!"? So, what, they can't be considered journalists?...

Well, anyway, we'll be sorry when we've killed off the newspapers with our cruel inattention. What? How did I kill the Globe? It was destroyed by the new owner's insistence on packing the pages with week old reprints of news from the Washington Post, the AP and the Times. Well, sure, says unnamed altecocker, they made some bad business decisions but that wasn't the Globe's fault, "they" sold the Globe. (I realized then that we were thrashing around in an emotional swamp since apparently there was a Platonic ideal of the "Globe" under discussion. I'd have thought that we were only going to talk about real world entities like the Globe (no air quotes) and its actual owners and their actual decisions but I would have been wrong.)

We got onto what seemed to be of chief concern among the older journalists which was how some of them proposed to save Newspapers by figuring out this darned web advertising thing and learning to charge for content.... [T]hey were all fresh off congratulating themselves for awarding the IF Stone Award to McClatchy for its coverage of the Iraq War, coverage that famously didn't cost the newspaper company any more than the expensive and hideously bad coverage of the Times (aka Judy "I was proved fucking right" Miller). Nevertheless, they kept offering up these bizarre blogger focussed attacks on blogs and the internet for the downfall of newspapers....

I brought up Nate Silver... startled that they actually knew somebody's name but unaware that Nate might be classed as a blogger--he has a product to sell, his expertise, but....but...he must be some kind of exceptional case. Because they had never thought of him before, and knew him primarily from his TV appearances, they didn't grasp the way Nate's blog and the special election coverage and polling that he had done busted wide open the barriers they thought existed between journalism and blogging. But hey, lets not let facts get in the way of a good group grope on the subject.

I haven't been around that much testosterone poisoning since graduate school.... Someone who shall remain nameless was doing the beltway freak out that the vagina dentata known as Hillary Clinton had been offered the SOS job--although they admitted that she hadn't been offered it but it was bad of Obama to make it look like she had been.... They agreed that so far Obama had been more sure footed than not on all matters having to do with the election and managing the transition but he had really, really, really made a huge and unreversible mistake this time with the Hillary Clinton Offer That He Hadn't Made...

Felix Salmon Says: Not Bailout or Bankruptcy But Bailout and Bankruptcy for GM

He writes:

GM: The Bailout vs Bankruptcy Meme: At heart, this argument is simple. There's no available DIP financing for an orderly Chapter 11 bankruptcy, and Chapter 7 liquidation would be disastrous, therefore we need a bailout which avoids any kind of bankruptcy at all. But I don't see why a government bailout must, ipso facto, avoid any kind of bankruptcy. GM alone has $35 billion in long-term debt, most of which is trading at about 20 cents on the dollar. That might only be a drop in the bucket compared to its total liabilities of $193 billion, but it's a good place to start: if bondholders took an 80% writedown while the government pitched in $12 billion of preferred equity in the post-restructuring entity, that's a $40 billion improvement to GM's balance sheet right there. And of course bankruptcy would give GM the opportunity to renegotiate onerous contracts with its dealers, as well as other real and contingent liabilities.

This is what I've been referring to as a "bail-in", and it makes quite a lot of sense on its face. Let the government provide the necessary financing, but ensure that bondholders share some of the pain as well, especially since doing so would simply ratify the mark-to-market losses they've already taken.

Such a plan would involve working out the details of a bankruptcy in advance: there are large dangers involved when a company the size of GM enters bankruptcy without any clear conception of how it might exit. So there would need to be serious negotiations between all of GM's stakeholders and the government -- negotiations which, I'll concede, would be all but impossible during this uncomfortable interregnum between the election and the inauguration. Even if GM can somehow muddle through until January, it can hardly expect such negotiations to be concluded in a matter of weeks. So there's a timing problem here, given that the present administration has demonstrated zero inclination to help out Detroit. But I still think that it would be useful to stop thinking of a bailout as an alternative to bankruptcy, and start thinking more imaginatively about the different mechanisms, including both government funds and bankruptcy, which could help put Detroit on a more sustainable footing.

The government could, for one thing, provide DIP financing...

Republicans Dive Deeper into Fantasy

If there is a prominent reality-based Republican officeholder, his name is Arnold Schwarenegger. Paul Krugman has evidence that there is no prominent reality-based Republican officeholder:

Fannie Freddie Phony: So I was listening to Arnold Schwarzenegger before doing the "This Weak" round table, and he was mostly making sense — except for one thing. He asserted, as a simple matter of fact, that “government created the housing bubble”, because Fannie and Freddie made all these loans to people who couldn’t afford to pay them.

This is utterly false. Fannie/Freddie did some bad things, and did, it turns out, get to some extent into subprime. But thanks to the accounting scandals, they were actually withdrawing from the market during the height of the housing bubble — the vast majority of the loans now going bad came from the private sector.

Yet it’s now clear that the phony account of the crisis — that it’s all due to Fannie, Freddie, and nasty liberals forcing poor Angelo Mozilo to make loans to Those People — is setting in as Republican orthodoxy, part of what you have to believe to be a respectable member of the party.


Felix Salmon finds linkrot: — Broken link datapoint of the day: Four years ago, Apartment Therapy ran a Sleeper Sofa competition. (Evidently, four years ago the switch from "sofabeds" to "sleeper sofas" had already happened.) Apartment Therapy put together a shortlist with 15 sofas on it. I found it quite quickly, when I started looking for a sofabed myself. And how many of the links to those 15 sofas are now broken? All of them. People, I'm all in favor of keeping websites fresh. But don't break all your old links when you do so.

And quote enough of the context you are referring to for your own posts to be intelligible.

What a Change! "The Week" Gives Airtime to an Expert

It is remarkable. In addition to their substance-free bloviators--George Will, Cokie Roberts, et cetera--The Week puts Paul Krugman on the air. And people watching can actually learn something:

Steve Benen comments:

The Washington Monthly: On ABC's "This Week" earlier, George Will explained his belief that FDR financial/regulatory policies discouraged investment and created an environment in which the "depression became the Great Depression." Fortunately, Will was sitting next to Paul Krugman. To hear Will tell it, the Roosevelt administration stood in the way of investors. In a fairly devastating 45 seconds, Krugman not only set the record straight, but explained that it was FDR's desire to balance the budget and cut federal spending that contributed to a decline in 1937.

My antipathy towards Will has lessened this year, after he had some genuinely sharp criticism of the McCain/Palin ticket, but he's still spouting conservative nonsense on economic issues, and it was highly entertaining to see him receive some well-earned comeuppance from the Nobel laureate to his left.

Thanks to our friends at Firedoglake for posting the clip to YouTube.

Record Interest Rate Spreads

Will somebody please tell Chari, Christiano, and Kehoe that there is too a credit crunch?

Memory Monitor

Calculated Risk:

Calculated Risk: Record Spreads between 30 Year Corporate and Treasury Yields: Here is another measure of credit stress... the spread between 30 year Moody's Aaa and Baa rated bonds and the 30 year treasury. The Moody's data is from the St. Louis Fed.... There are periods when the spread increases because of concerns of higher [long-term corporate] default rates (like in the severe recession of the early '80s), but the recent spread is unprecedented.

In Which I Think Andrew Samwick Misses the Point...

I am not concern trolling--that is, I am almost certainly that I am not consciously concern trolling--but I think Andrew Samwick misses the point when he writes:

The Right Wing Strategy | Capital Gains and Games: I suspect it will take months or even years for those on the political and ideological Right to map out a strategy to compete in national elections after two sound defeats in 2006 and 2008. The first step has been to assign blame.... Christie Todd Whitman in yesterday's Washington Post lays the blame on "social fundamentalists." I don't know how constructive that is -- each Party has a base, and if you alienate the base, you have to make inroads substantially across the political center to make up for it. The most liberal Republican he could have picked for his running mate would have been Whitman herself. I don't think that ticket would have run any better against Obama-Biden this year...

Andrew Samwick has no influence on how the next Republican presidential and congressional candidates will campaign. But he does have the potential to have considerable impact on how those Republican members of congress (and perhaps presidents) govern: to push them toward governing in a constructive conservative manner--rather than be, say, a rerun of Gingrich-Armey-DeLay-Boehner-Dole-Lott-McConnell-Bush governance, which has been "conservative" only in its social policy.

So I want to hear something very different from Andrew this winter: I want to hear what ideas and policies the Republican Party could serve as a carrier for that would make America a better country and the world a better world, and I want to hear how all of us can help make the Republican Party the carrier of those ideas--rather than the ideas of, say, National Review, The Weekly Standard, and Rush Limbaugh, to name three sets that America and the world would be better off without.

Spinning the Wheels

I think that if the G-20 summit was worthwhile, it was the conversations that were not part of the formal summit that were worthwhile--and I do not know what they were.

I do know that Dani Rodrik is disappointed:

Dani Rodrik's weblog: I was not expecting any substantial agreement on international regulatory coordination or any semblance of a new Bretton Woods, so I am not disappointed on that score.  What I was looking for were three things: (i) coordination on fiscal stimulus; (ii) a commitment to provide more liquidity support, as needed, to prevent a further spread of the crisis to emerging nations; and (iii) a clear commitment not to engage in trade protection, with a monitoring mechanism to ensure the pledge is being observed.

How does the statement do in these regards?  So-so.  There is no coordination in the fiscal arena, the promises made to emerging markets are vague, and even though there is a clear statement on protection and export subsidization, there is no monitoring or enforcement mechanism.

What about the longer-term issues? The fundamental dilemma of financial globalization is that regulation and supervision remains national while financial markets are international.  The statement recognizes this dilemma...

Senatorial privilege:

U.S. Constitution: Article I: [Senators and Representatives] shall in all Cases, except Treason, Felony and Breach of the Peace, be privileged from Arrest during their Attendance at the Session of their respective Houses, and in going to and returning from the same; and for any Speech or Debate in either House, they shall not be questioned in any other Place.

Makes me think that as soon as the Senate ceases its session, the Georgia courts can throw Saxby in jail for contempt and keep him there until the Senate comes back into session, no?

Alice Massini:

Chambliss Refusing to Speak in Imperial Sugar Case: News Three was the first to tell you Georgia Senator Saxby Chambliss had been subpoenaed by Savannah Attorney Mark Tate in the case against Imperial Sugar. Tate, who represents families of the deceased, subpoenaed Chambliss because he believes Chambliss has pertinent information for the case. In a News Three follow-up, we've gotten word that Chambliss' lawyer is moving to quash the subpoena. Tate says attorneys for Chambliss claim he has immunity because he's a U.S. Senator. "Our clients have said to reporters that they have felt like he was trying to influence them and dissuade them from filing lawsuits. That's the kind of activity a U.S. Senator does not enjoy privilege to conduct," explains Tate. We were unable to reach Senator Chambliss' Office for comment. We will continue to follow this story and bring you the latest.

Bruce Bartlett Is Blogging at the Arena

I think that his ought to be an important public voice on economic policy over the next four years--diversified intellectual portfolio, you know:

The Arena: Palin: Before the Palin thing is completely forgotten, I just want to throw in my two cents. I think she was a disaster for McCain because she destroyed the logic of his candidacy. His best argument was that we live in perilous times and can’t afford to have a president with no experience in foreign policy and national security. But McCain destroyed this argument by appointing as his vice president someone with even less experience than Obama. In a stroke, McCain took off the table not only his best argument for being president but really his only argument. He should have picked Lieberman and run on a campaign of bipartisan national unity. It might not have worked, but at least McCain would have lost with some dignity.

Autos: I think it would be a terrible mistake to simply write a check to the auto industry without demanding major, major restructuring of its labor contracts. Without that the money will simply go down a rat hole and the automakers will just be back again in a year or two asking for more money. Obama has a strong hand to play here and I hope he uses his leverage. With bankruptcy as the only alternative to federal aid, he can drive a very hard bargain with the auto workers. If he caves and just writes a blank check, everyone will know he can be rolled and he will pay a heavy political price for it. If Obama shows toughness on this issue, I think it will pay enormous dividends for him down the road.

Felix Salmon Is Unhappy with George W. Bush

It is still not too late to impeach him and his administration. In fact, it would be a very good idea: I don't think anyone who worked for Bush should hold any office of trust or profit under the United States constitution ever again.


Bush's Peculiar Wall Street Speech: Bush's speech on Wall Street today is a most peculiar thing -- a mixture of free-market platitudes, cryptic code, and outright weirdness. For instance, what does this mean?

One vital principle of reform is that our nations must make our financial markets more transparent. For example, we should consider improving accounting rules for securities, so that investors around the world can understand the true value of the assets they purchase...

"Accounting rules for securities" -- that sounds like mark-to-market, right? But even the people who want to abolish mark-to-market accounting don't go so far as to say that doing so will improve transparency or make "the true value of assets" more obvious. This statement is the kind of thing which would be made by someone urging a move to mark-to-market accounting, not a move away from it. Does Bush think there isn't enough mark-to-market accounting?

Bush then continues:

We should move forward with other significant reforms to make the IMF and World Bank more transparent, accountable, and effective. For example, the IMF should agree to work more closely with member countries to ensure that exchange rate policies are market-oriented and fair...

Is this a reference to China? Is Bush really trying to outsource to the International Monetary Fund responsibility for getting China to play nice with its exchange rate?

After that, Bush gets downright disingenuous:

We must recognize that government intervention is not a cure-all. For example, some blame the crisis on insufficient regulation of the American mortgage market. But many European countries had much more extensive regulations and still experienced problems almost identical to our own...

Yes, George -- because they bought American mortgages! But he's not done with this theme:

History has shown that the greater threat to economic prosperity is not too little government involvement in the market - but too much. We saw this in the case of Fannie Mae and Freddie Mac. Because these firms were chartered by Congress, many believed they were backed by the full faith and credit of the United States government. Investors put huge amounts of money in Fannie and Freddie, which they used to build up irresponsibly large portfolios of mortgage-backed securities. When the housing market declined, these securities plummeted in value. And it took a taxpayer-funded rescue to keep Fannie and Freddie from collapsing in a way that would have devastated the global financial system. There is a clear lesson: Our aim should not be more government - it should be smarter government...

Oh, come on. The problem with Frannie wasn't "government involvement in the market" -- it was government deliberately exempting Fannie and Freddie from the capital-adequacy rules which applied to everybody else, and thereby encouraging them to maximize the amount of leverage they took on -- all in the name of "encouraging homeownership". What we needed was precisely more government: a Frannie regulator with teeth, and a government which refused to let nominally-private corporations lever up to obviously-dangerous levels. The implicit government guarantee wouldn't have been a problem if it wasn't for the amount of leverage involved.

But even if you concede Bush's point about Frannie, it's still weird how contentious and cryptic he's being elsewhere in the speech. What's the signal he's trying to send, and who is he trying to send it to? Does he really think that the G20 summit is going to be full of people lauding the merits of the economic system in Cuba? I'm rather puzzled by the whole thing.

IMHO, the (few) people interested in the substance of economic policy in the Bush administration have given up all contact with White House speechwriting--they have better things to do. And so you have a bunch of ideologues, spinmasters, and speechwriters putting words together at random.

One can wonder whether the Bush White House ever passed the Turing Test. It clearly dos not do so now.

Washington Post Crashed-and-Burned Watch (Yet Another Deborah Howell Edition)

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

Deborah Howell on Remedying Perceptions of Media Bias: Thousands of conservatives and even some moderates have complained during my more than three-year term that The Post is too liberal; many have stopped subscribing, including more than 900 in the past four weeks.... [S]ome of the conservatives' complaints about a liberal tilt are valid....

[T]he drumbeat of polling stories saying Obama and the Democrats were likely to win, a few Tom Toles cartoons, and TV critic Tom Shales's debate reviews -- both are liberals who are paid to offer opinions -- and conservatives decided that The Post was cheerleading.... It's not hard to see why conservatives feel disrespected.

Are there ways to tackle this? More conservatives in newsrooms.... Editors hire not on the basis of beliefs but on talent in reporting, photography and editing, and hiring is at a standstill because of the economy. But newspapers have hired more minorities and women, so it can be done...

Yes, Deborah Howell believes that newspapers have hired more women and minorities by passing over white male candidates who are more talented in reporting, editing, and photography.

And she believes that the Washington Post has an obligation to hire untalented conservatives as reporters.


New York Times Crashed-and-Burned Watch (Minnesota Election Edition)

Why hasn't the New York Times taken any action to save its credibility in re Christina Capecci?

Chris Steller:

Minnesota Independent: ‘Ordinary voter’ in New York Times recount story has strong GOP ties: A man presented as an “ordinary voter” in a New York Times article today about the impending recount in Minnesota’s U.S. Senate race has strong ties to the Republican Party and conservative causes that the article does not reveal.... [R]eporter Christina Capecchi (who also writes for MinnPost), identifies Noah Rouen only as a 34-year-old who “swore off political talk on a pheasant hunt last weekend.” When he and his buddies heard of the now-legendary (and debunked) 32-ballots-in-a-car-trunk story, Capecchi writes, “They could not help but hatch a conspiracy theory.”

One reason Rouen might be given to such theories about votes favoring Democrat Al Franken is that Democrats accused him of participating in a conspiracy to distribute false campaign materials against Franken last summer.... The complaint says Rouen was a delegate to this year’s Republican National Convention (RNC) and for two years a staff member for former U.S. Sen. Rod Grams (R-Minn.)... In an interview with the Minnesota Independent, Rouen said that he worked for Grams’ campaign as well from 1999 to 2000. He said while that level of partisan activity is in his past — he called work for the “Vote Yes Minnesota” referendum campaign his most partisan activity this year — he “makes no bones” about being a Republican or having voted for Coleman.

Rouen said he gave Capecchi, who found him via a Facebook group called “Looking for Coleman Ballots,” his whole background during a 30-minute interview two days ago. He said he was surprised to be identified only as a pheasant hunter in the Times article, and in fact was somewhat surprised to be included at all, given how the ballots-in-the-trunk story has since “evolved.” (On Minnesota Public Radio today, Secretary of State Mark Ritchie reiterated that the story was false, calling for those who started the rumor to speak up).

Capecchi did not return phone messages and e-mails from the Minnesota Independent...

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

Spam Is an inferior Good

Yes, that is the technical economic term: "inferior good." Just as the technical economic term is "zombie bank."

Andrew Martin:

Spam Turns Serious and Hormel Turns Out More: AUSTIN, Minn. — The economy is in tatters and, for millions of people, the future is uncertain. But for some employees at the Hormel Foods Corporation plant here, times have never been better. They are working at a furious pace and piling up all the overtime they want. The workers make Spam.... Americans have turned to the glistening canned product from Hormel as a way to save money while still putting something that resembles meat on the table.... Hormel is cranking out as much Spam as its workers can produce. In a factory that abuts Interstate 90, two shifts of workers have been making Spam seven days a week since July, and they have been told that the relentless work schedule will continue indefinitely....

A 12-ounce can of Spam, marketed as “Crazy Tasty,” costs about $2.40. “People are realizing it’s not that bad a product,” said Dan Johnson, 55, who operates a 70-foot-high Spam oven. Hormel declined to cooperate with this article....

Even as consumers are cutting back on all sorts of goods, Spam is among a select group of thrifty grocery items that are selling steadily. Pancake mixes and instant potatoes are booming. So are vitamins, fruit and vegetable preservatives and beer, according to data from October compiled by Information Resources, a market research firm. “We’ve seen a double-digit increase in the sale of rice and beans,” said Teena Massingill, spokeswoman for the Safeway grocery chain, in an e-mail message. “They’re real belly fillers.” Kraft Foods said recently that some of its value-oriented products like macaroni and cheese, Jell-O and Kool-Aid were experiencing robust growth. And sales are still growing, if not booming, for Velveeta....

Spam developed a camp following in the 1970s, mainly because of Monty Python, the English comedy troupe. In a 1970 skit, a couple tried to order breakfast at a cafe featuring Spam in nearly every entree, like “Spam, Eggs, Sausage and Spam.” The diners were eventually drowned out by a group of Vikings singing, “Spam, lovely Spam, wonderful Spam.” (Familiar with the skit, Internet pioneers labeled junk e-mail “spam” because it overwhelmed other dialogue, according to one theory.)...

No independent data provider compiles sales figures that include all the outlets where Spam is sold, including foreign stores, so it is not clear exactly how much sales are up. Hormel’s chief executive, Jeffrey M. Ettinger, said in September that they were growing by double digits.... “We are scheduled to work every day except Thanksgiving and Christmas,” said Darwin Sellers, 56, a Spam “formulator” who adds salt, sugar and nitrates to batches of Spam. “Mr. Ettinger is negotiating with the man upstairs to get us to work eight days a week.” Mr. Sellers said he had not seen much of his family in recent months, but the grueling schedule had been good for his checkbook. He bought a new television and planned to replace a 20-year-old refrigerator...

Death to Acorn Woodpeckers

We too suffer from woodpeckers--just like the people at the retirement community just over the hill. But we have not yet applied for our Depredation Permit:

Dennis Cuff: A Walnut Creek retirement community where deer nibble on lawns and wild turkeys strut across the golf course is calling in a hit man to shoot woodpeckers that drill into homes to stash acorns. Two Rossmoor homeowner associations are bringing in a federal hunter soon after receiving U.S. Fish and Wildlife Service permits to kill as many as 50 acorn woodpeckers... the homeowner groups contend that they have installed nets, hawk squawk boxes, owl decoys and battery-operated spiders, and yet homes are still getting drilled by the birds. "People here don't want to shoot them, but after spending eight years and $170,000 without success, the homeowner groups don't know what else to do," said Maureen O'Rourke, a Rossmoor spokeswoman. "The birds can do a lot of damage."... The shooting is expected to start within a week or two once the hunter, who works as a nuisance wildlife controller for the U.S. Department of Agriculture, is available.

The license to kill — called a depredation permit — was granted in June and is good for one year under federal rules aimed at balancing the needs of wildlife and protecting human crops and property, said Al Donner, a spokesman for the U.S Fish and Wildlife Service. Acorn woodpeckers, which are highly communal creatures that will raise other acorn woodpeckers' young, depend heavily on acorns for food. The permit allows killing by a shotgun, pellet gun, or snap trap....

One option is to erect a decoy tree for the woodpeckers to drill into rather than into people's homes....

To protect [Duke] Robinson's house, his homeowners association installed sound-activated spiders, which scared away the birds, he said. But when the spider batteries went dead, the homeowners association did not replace them, Robinson added. Gary Beeman, a Lafayette biologist who hires himself out to control wildlife problems, said he has used the spiders to scare off woodpeckers with "90 percent" success at many homes...

Why are the woodpeckers scared of these battery-operated robot spiders? How large are they? That is what I want to know...

Birds-Away Attack Spider

A testimonial:

Birds-Away Attack Spider® - Woodpecker Deterrent Testimonials: These spiders work great.  They have other applications as well.  Thanks again for your prompt service and a wonderful product. Ray Reed. Coarsegold Ca

The Disruption of the Cosmic Order...

The Financial Times is the best newspaper in the world--but once every three months its "How to Spend It" supplement turns me, for a week, into someone who believes that a just social order would have everybody paid identical hourly wages and dressed identically--preferably in overalls--with kerchiefs over their hair:

Google Image Result for 576�90 pixels

Alex Bertram of ING Capital appears to share my view: / Comment & analysis / Letters - You have disrupted the cosmic order: Mr Alex Bertram: Sir, Ken Lotery questions your editorial judgment (Letters, November 8/9). I go one step further. I place the Financial Times wholly responsible for the entire global financial and economic meltdown... you published a magazine called How to Spend It. Such reckless adulation of consumption was bound to disrupt the cosmic order. Long after its passing, we will remember it as fondly as such folly as "Reinvention of risk management", "Decoupling", and "The end of the business cycle".

Thank you FT, you went and jinxed it for all of us.

Alex Bertram,
Vice-President Infrastructure Advisory,
ING Capital.


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Mit Schlag

Via Malcolm Gladwell:

Path Finder

gladwell dot com - java man: "There was a little known Russian émigré, Trotsky by name, who during World War I was in the habit of playing chess in Vienna's Café Central every evening," Bealer and Weinberg write.... A typical Russian refugee, who talked too much but seemed... a pathetic figure.... One day in 1917 an official of the Austrian Foreign Ministry rushed into the minister's room, panting and excited, and told his chief, "Your excellency... Your excellency... Revolution has broken out in Russia." The minister, less excitable and less credulous than his official, rejected such a wild claim and retorted calmly, "Go away... Russia is not a land where revolutions break out. Besides, who on earth would make a revolution in Russia? Perhaps Herr Trotsky from the Café Central?"

The minister should have known better. Give a man enough coffee and he's capable of anything.

Worst Economic Downturn since the Great Depression?

It has been the worst financial crisis since the Great Depression. I am now going to stick my neck out and say it will probably be the worst downturn since the Great Depression.

Calculated Risk:

Calculated Risk: Retail Sales Collapse in October: The Census Bureau reports that retail sales collapsed in October:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $363.7 billion, a decrease of 2.8 percent from the previous month and 4.1 percent below October 2007. Total sales for the August through October 2008 period were down 1.3 percent from the same period a year ago. Retail trade sales were down 3.1 percent from September 2008 and were 5.0 percent below last year.

The following graph shows the year-over-year change in nominal and real retail sales since 1993. To calculate the real change, the monthly PCE price index from the BEA was used (October PCE prices were estimated based on the increases for the last 3 months)... [R]eal retail sales declined by 8.8% (on a YoY basis). This is the largest YoY decline since the Census Bureau started keeping data. Retail sales are a key portion of consumer spending and real retail sales have fallen off a cliff.

Path Finder

Paul Krugman is considerably more optimistic:

Depression Economics Returns: The economic news, in case you haven’t noticed, keeps getting worse. Bad as it is, however... we probably won’t see the unemployment rate match its post-Depression peak of 10.7 percent, reached in 1982 (although I wish I was sure about that).

We are already, however, well into the realm of what I call depression economics... in which the usual tools of economic policy... have lost all traction. When depression economics prevails... virtue becomes vice, caution is risky and prudence is folly.... [W]ith no possibility of further interest rate cuts, there’s nothing to stop the economy’s downward momentum. Rising unemployment will lead to further cuts in consumer spending, which Best Buy warned this week has already suffered a “seismic” decline. Weak consumer spending will lead to cutbacks in business investment plans. And the weakening economy will lead to more job cuts, provoking a further cycle of contraction.

To pull us out of this downward spiral, the federal government will have to provide economic stimulus in the form of higher spending and greater aid to those in distress — and the stimulus plan won’t come soon enough or be strong enough unless politicians and economic officials are able to transcend several conventional prejudices. One of these prejudices is the fear of red ink. In normal times, it’s good to worry about the budget deficit — and fiscal responsibility is a virtue we’ll need to relearn as soon as this crisis is past. When depression economics prevails, however, this virtue becomes a vice.... Another prejudice is the belief that policy should move cautiously.... Under current conditions, however, caution is risky.... Finally, in normal times modesty and prudence in policy goals are good things. Under current conditions, however, it’s much better to err on the side of doing too much than on the side of doing too little....

The Obama administration will almost certainly take office in the face of an economy looking even worse than it does now.... My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion. So the question becomes, will the Obama people dare to propose something on that scale? Let’s hope that the answer to that question is yes... it would be very dangerous to give in to conventional notions of prudence.

More on ProPublica's Unwillingness to Defend Its Goldman Sachs Story...

Felix Salmon wrote that he thinks that ProPublica--Sharona Coutts, Marc Lifsher, and Michael A. Hiltzikgot--got played by California State Treasurer Bill Lockyer (who I think is an excellent guy) in its Goldman Sachs story:

ProPublica's Goldman Sachs Hatchet Job: ProPublica is a non-profit investigative-journalism shop founded by Paul Steiger, the former managing editor of The Wall Street Journal. So you'd expect that when it moves into the world of finance, during a credit crisis which has thrown up its fair share of scandals, it would produce something really good. Instead, it's produced something really bad: a non-story about Goldman's sell-side research on munis, larded generously with ridiculous overreach and, naturally, a generous pinch of CDS demonization.... The only really investigative bit of the story is that ProPublica's Sharona Coutts has managed to get her hands on some sell-side research. Unfortunately, instead of simply phoning up Goldman's press office and asking for it, she clearly got it through other channels -- and as a result, her copy of the research has a "Proprietary and Confidential" stamp on it. Which is obviously all she and Steiger needed to conclude that there was scandal afoot...

And ProPublica clams up:

How Banks Need to Mollify the Public Sector: I just got off the phone with ProPublica's Dick Tofel; we talked quite a bit about the Goldman Sachs story they put out yesterday, but unfortunately they don't seem inclined to say anything on the record.... My view is that this constitutes bullying tactics on the part of California: it's trying to prevent Goldman from sharing its opinions with its buy-side clients, by kvetching loudly to the press and (presumably) punishing Goldman by no longer using them to underwrite its bond issues. Companies often do much the same thing, when analysts put "sell" ratings on their stocks and bonds, but companies don't have the political wherewithal of states...

Felix Salmon adds more:

The Semi-Daily Journal of Economist Brad DeLong: Why Oh Why Can't We Have a Better Press Corps? (ProPublica Edition): Anna, I can tell you that it wasn't me putting things off the record. Dick Tofel had every opportunity to put certain things he told me on the record, but he didn't do that. Instead, he called me, and the first thing he did was make clear that everything he was about to say was off the record, and that I was not going to be able to talk to the journalist who wrote the story. I can assure you that if they promised a source anonymity, I would never ask who that source was, let alone publish the name of that source. And equally, they would never tell me who that source was, either on or off the record. Posted by: Felix Salmon | November 14, 2008 at 05:49 AM

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

Washington Post Crashed-and-Burned Watch (Michael Fletcher Edition)

That Barack Obama has an economic advisory team that consists of lots of very smart and public spirited people who think differently is not a problem but an advantage, no matter what Michael Fletcher thinks:

Some Supporters Worry Differences Might Divide Group: As President-elect Barack Obama works to set his governing priorities, some of his supporters are watching warily as he weighs advice from a team of economic advisers who... include free traders and "fair traders," deficit hawks, Wall Street executives, corporate moguls and labor advocates... emblematic of the sharp differences in economic policy that have divided the Democratic Party in years past. "He had a broad base that got him elected, including some progressives as well as some business-oriented people like [former Treasury secretaries] Bob Rubin and Larry Summers," said Dean Baker, co-director of the Center for Economic and Policy Research. "There are some real differences there. He is clearly keeping his options open."...

Those old debates continue to lurk in the background, even as the current economic crisis has forged a broad consensus.... But many of Obama's supporters worry about what he will do after a stimulus package is enacted. Obama's supporters at labor unions and "fair trade" groups are hoping that the new president builds an economic team determined to move quickly on a range of actions to adjust the terms of international trade, tighten control of the financial system and rebuild a fraying safety net for millions of workers. At the top of their list is revamping the nation's health-care system and enacting the Employee Free Choice Act, which would make it easier for workers to organize unions. Obama has championed both proposals, but it is not clear how quickly he will move on them....

Still, many of Obama's supporters look at his advisers and worry about the path that he will choose. During the campaign, Obama frequently consulted with Summers and Rubin, as well as former Federal Reserve chairman Paul A. Volcker and billionaire investor Warren E. Buffett (a director of The Washington Post Co.), two business-oriented counselors whose involvement some analysts said seemed aimed at reassuring voters. Before holding a news conference last week, the president-elect met with an economic advisory board that included his campaign advisers, as well as former representative David E. Bonior (D-Mich.), an outspoken critic of the free-trade policies promoted by Summers and Rubin during the Clinton administration; Los Angeles Mayor Antonio Villaraigosa; and Gov. Jennifer M. Granholm of Michigan, the state with the nation's second-highest unemployment rate.

"This is a moment of both political euphoria and unprecedented economic urgency," said Harley Shaiken, an economist at the University of California at Berkeley. "I don't think his choice of advisers was meant to convey a coherent point of view. He has put together some people that he thinks can work together but think differently. He hopes that results in some pragmatic steps forward..."

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

Sunspots 36000!

Somebody... I don't know if I should call him a "friend," because he sends me to a Kevin Hassett column.

Shorter Kevin Hassett: Markets are perfect! Perfect! Perfect, I tell you! Pay no attention to the evidence of your eyes!!

Yes, Kevin Hassett says that the financial crisis is the fault of... the liberal media!!! And Fannie Mae and Freddie Mac!!. Because they lend to Black people!!!

Kevin Hassett: Don't Let Sunspots or Headlines Make You Panic: Oct. 13 (Bloomberg) -- With the world's attention turned to the financial crisis, a strange celestial occurrence went virtually unnoticed. For more than 200 days this year, the sun was devoid of sunspots. That historic run, the longest since 1954, ended last week when a small spot appeared and then disappeared. That financial events and freakish sunspot behavior are coinciding will doubtlessly encourage nonsensical speculation by astrologers. For the thoughtful, the coincidence provides an interesting parallel to circumstances in the late-1800s that ignited an economic theory based on sunspots. While the early work ended up being a dead end, it led to frontier theoretical work a century later....

High priests of the free market have long argued that government regulation or intervention should be minimal, because the market will inevitably produce the most efficient outcomes.... If stock prices drop, it is always because some fundamental, like profits, has worsened. Cass and Shell showed that an unregulated market is far from perfect in its outcomes.... Suppose... everyone believes... [sunspots] cause business cycles. Then firms might look at the sun, see a bad cycle coming, and begin laying off employees. Workers might look at the sun, see a bad cycle coming, and cut back their expenditures. The action of the firm would reinforce the belief of the worker that sunspots cause downturns. The actions of consumers would reinforce the belief of firms that sunspots cause downturns....

In the current crisis, we are doubtlessly experiencing sunspot equilibrium....

The financial institutions themselves have failed because of their own bad decisions and because of the nuclear bomb set off in the housing industry by Fannie Mae and Freddie Mac. But how did that set off this unprecedented wholesale panic? Liberal pessimism... has likely been a key contributor. The U.S. media have been in a sour mood ever since President George W. Bush took office.... Economist Donald Luskin, one of the few bold enough to publicly stand up against the landslide of negativity, did a Google News search in mid-September of ``since the Great Depression'' and found 4,500 hits in the previous month. The problem is, if you keep telling people that our system is fundamentally broken, they will lose faith in it and run for the exits when real distress occurs.

The influence of the profoundly negative reporting and destructive partisan rhetoric is apparent in the numbers.... [P]olitical bias is apparent in the data as well.... All of which suggests we have two possible paths forward.

On the one hand, we can work to restore faith in markets and provide the government backbone needed to do that.

On the other, we can decide we have learned that markets fundamentally don't work. That belief, like one in the effect of sunspots, would be self-fulfilling.

The choice is ours.

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in the 2008 presidential election...)

I think it is long past time that Bloomberg axed this guy--AEI too, and the McCain campaign should retroactively ax him. These organizations do have reputations to preserve, after all... Well, actually AEI and the McCain campaign don't, but they should ax him anyway.

Why oh why canT we have a better press corps?

Washington Post Crashed-and-Burned Watch (Deborah Howell Edition)

It is an insult to the shades of Peter Zenger and John Milton that the Washington Post still publishes at all.

Matthew Yglesias:

Matthew Yglesias: Deborah Howell: No Matter How Bad McCain Is, Our Opinion Pages Must Pretend He’s Great: Washington Post ombudswoman Deborah Howell calls for less intellectual honesty on the Post’s opinion pages:

The op-ed page ran far more laudatory opinion pieces on Obama, 32, than on Sen. John McCain, 13. There were far more negative pieces (58) about McCain than there were about Obama (32), and Obama got the editorial board’s endorsement. The Post has several conservative columnists, but not all were gung-ho about McCain.

This is pretty absurd. Some institutions try to put forward a fairly consistent ideological point of view. It’s clear that The Washington Post op-ed section tries to do no such thing. Instead, its columnists represent a range of views. And it’s surely to the Post’s credit that when George Will, one of their conservative columnists, found himself not-so-psyched about John McCain and his campaign that he said so. Similarly, Anne Applebaum is a Post columnist who’s hard to classify but might at one point have been thought likely to be enthusiastic about John McCain. But she didn’t like the direction he and his campaign took, so she wrote a column laying out her thinking:

Yesterday, while reading the latest polling data on John McCain, Sarah Palin and their appeal — or growing lack of it — to ” independent women voters” it suddenly dawned on me: I am one of these elusive independent female voters, and I have the credentials to prove it. For the past couple of decades, I’ve sometimes voted Democratic, sometimes Republican. I’m even a registered independent, though I did think of switching to vote for John McCain in 2000. But because the last political party I truly felt comfortable with was Thatcher’s Conservative Party (I lived in England in the 1980s and 1990s), I didn’t actually do it.

The larger point, though, is that if I’m not voting for McCain — and, after a long struggle, I’ve realized that I can’t — maybe it’s worth explaining why, for I suspect there are other independent voters who feel the same. Particularly because it’s not his campaign, disjointed though that has been, that finally repulses me: It’s his rapidly deteriorating, increasingly anti-intellectual, no longer even recognizably conservative Republican Party. His problems are not technical; they do not have to do with ads, fundraising or tactics, as some have suggested. They are institutional; they have to do with his colleagues, advisers and supporters.

Presumably, this sort of thing is what an ideologically diverse op-ed page is supposed to be doing. The fact that the Post’s liberals were more enthusiastic about Obama than the conservatives were about McCain reflected an enthusiasm gap that existed in the country. The fact that a centrist Post columnist like Applebaum had a lot of nice things to say about McCain the man and McCain the maverick but ultimately didn’t like the 2008 vintage McCain reflected the fact that McCain was extremely popular with independents and moderates at one time, but became less popular as he re-remade himself into a more orthodox conservative. Similarly, that a neocon like Charles Krauthemmer liked McCain more than did a traditionalist conservative like Will reflected reality on the ground.

What should the Post have done? Told Applebaum that to maintain balance she had to vote for McCain? Told Will he was going to get fired unless he joined Krauthammer in becoming a McCain enthusiast? That would have been bizarre.

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

The Bankruptcy of GM

We don't like to let financial firms go bankrupt because bankruptcy shuts down their business. Buying and selling financial assets is what they do, and bankruptcy requires that financial claims be largely frozen while the court sorts it out.

By contrast, there is no good reason not to let non-financial businesses go into chapter 11. They keep running--as businesses--and emerge from bankruptcy or do not.

I understand that the argument "you saved X from bankruptcy, why won't you save GM from bankruptcy?" is very hard to deal with in a soundbite. And I believe the federal government has an obligation to autoworkers and retirees. But this obligation is not well-exercised by keeping GM out of bankruptcy.

Maybe you could call it "conservatorship" or something?

Justin Fox:

The Curious Capitalist: I've been among those arguing that GM ought to shut up about a government bailout and use the well-established bailout/reinvention tool that is Chapter 11 bankruptcy to pave the way for a better future. Now here, courtesy of the WSJ's John Stoll, are GM's three arguments for why that's not an option--followed by my analysis in italics.

  1. Getting debtor-in-possession financing "would be practically impossible, given the state of the credit markets and the size of GM's obligations." Debtor-in-possession, or DIP, financing is what keeps companies in Chapter 11 alive until they've restructured their way back to better health. If GM really can't get it, maybe there's a case to be made for direct federal DIP financing for GM.

  2. GM has already dealt with two of the main things that companies use Chapter 11 to fix: legacy costs and capacity utilization. That's at least partly true, but the company has dealt with these issues (fully funding its pension plan in particular) largely by borrowing money, with GM's debt going from about $9.6 billion in 2000 to more than $40 billion today. Which is why it's headed for bankruptcy without government intervention.

  3. Nobody would be willing to buy a car from a bankrupt company.... Here's GM CEO Rick Wagoner... said that, in light of people's reluctance to shop a bankrupt car company, a Chapter 11 filing may actually be impossible for GM. “If your revenue line falls, you would not be talking about a reorganization, you would be talking about a liquidation.” Wagoner could be right about that. But again, GM is headed for bankruptcy without government intervention. So any government intervention ought to be structured like a bankruptcy: Current shareholders wiped out (they're almost there already), debt converted to equity, top management out. We could just, for the sake of not scaring car buyers, call it something else. "Government-arranged workout"? "Bailoutruptcy"? "GMerdämmerung"? "Economic stimulus"?

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

The weird turn pro. Crusading journalists for open information--ProPublica--go off the record and clams up when questioned about its Goldman Sachs story.

Felix Salmon:

How Banks Need to Mollify the Public Sector: I just got off the phone with ProPublica's Dick Tofel; we talked quite a bit about the Goldman Sachs story they put out yesterday, but unfortunately they don't seem inclined to say anything on the record...

A word to ProPublica: in the age of the internet, answering questions about your stories is part of the job. Clamming up--saying that you will not answer questions about why you wrote the stories you did unless you can take it off the record--is the quickest way to burn credibility I can think of.

You don't get that many chances, guys...

New York Times Death Spiral Watch (John Tierney Edition)

Outsourced to Mark Kleiman:

The Reality-Based Community: Ask-me-a-hard-one Dep't: John Tierney, as quoted by Glenn Reynolds:

If, as some social scientists have been telling us, 88 percent of whites have an “implicit bias” against blacks and in favor of whites, and if, according to exit polls, whites made up 74 percent of the voters on Tuesday, why is Barack Obama going to be the next president?

Ummmm ....

  1. Because the black candidate in the contest was exceptionally intelligent, eloquent, and decent?
  2. Because the black candidate in the race presented more attractive policies on the questions of economic recovery, health care, education, tax justice, and national security?
  3. Because the black candidate in the race had a spectacularly skillful campaign?
  4. Because the white candidate in the race was a turkey?
  5. Because the white candidate in the race represented the party whose policies had driven the nation into a ditch, headed my a man who, as Charlie Rangel said, had put paid once and for all to the myth of white supremacy?
  6. Because the white candidate in the race ran a campaign that was at once disgustingly nasty and astonishingly inept?
  7. Because of Sarah Palin?

Yes, Barack Obama's election is evidence of a decline in racial prejudice, and his service as President is likely to be the cause of further decline. But "declining" is not the same idea as "small," let alone "nonexistent."

What's in the Daily News? I'll Tell You What's in the Daily News. I Am

We are live:

J. Bradford DeLong, "John McCain's new foreclosure plan is a giveaway to the banks": Tuesday night, reaching for a populist answer to the economic crisis that has put the country and incidentally his campaign on its heels, John McCain said that were he President, "I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes - at the diminished value of those homes and let people be able to make those . . . payments and stay in their homes. Is it expensive? Yes."

Everyone - well, we economists - immediately asked: Just how expensive?...

Barack Obama Seems to Be Being Clever...

President-Elect Barack Obama says that he welcomes Joe Lieberman's continued presence in the caucus of the Democrats in the Senate:

The Washington Monthly: President-elect Barack Obama has endorsed keeping Sen. Joseph I. Lieberman (I-Conn.) in the Democratic caucus, suggesting to the leadership that the two sides reach a compromise in the conflict over the former Democratic vice presidential nominee's future, sources said yesterday. In a phone conversation last week with Senate Majority Leader Harry M. Reid (D-Nev.), Obama said that expelling Lieberman for his support of the Republican presidential ticket would send the wrong signal after Obama's promises to set partisanship aside, according to a Senate Democratic aide familiar with the conversation...

This makes it very clear to everybody that if Joe Lieberman joins the Republican caucus it is his own doing: that if Lieberman leaves the Democrats it is Lieberman who will be breaking his promises to the voters of Connecticut, rather than the Democrats who are throwing Lieberman out.

It seems to me Barack Obama has just eliminated any bargaining power Lieberman had vis-a-vis Harry Reid with respect to his committee assignments...

Excessive Leverage

Myron Scholes is once again unable to keep his promise to investors to provide them with liquidity.

Saijel Kishan: Platinum Grove Asset Management LP, the hedge-fund firm co-founded by Nobel laureate Myron Scholes, temporarily stopped investor withdrawals from its biggest fund after it lost 29 percent in the first half of October. The decline left Platinum Grove Contingent Master fund with a 38 percent loss this year through Oct. 15, according to investors. Funds employing a similar approach of exploiting differences in the value of related securities fell 14 percent last month and 30 percent this year, according to data compiled by Chicago-based Hedge Fund Research Inc.

The suspension is necessary given current market conditions,'' Ryebrook, New York-based Platinum Grove said in an e-mailed statement today.Platinum Grove will use this period to consult with its investors and counterparties, determine their future intentions and manage the assets of the fund accordingly.''... A surge of investor redemptions forced firms such as Blue Mountain Capital Management LLC and Deephaven Capital Management LLC to freeze funds to stem the tide of withdrawals...

Southern Whites for McCain

Doug Henwood on the share of white vote for McCain:

Alabama 88%
Mississippi 88%
Louisiana 84%
Georgia 76%
South Carolina 73%
Texas 73%
Oklahoma 71%
Arkansas 68%
North Carolina 64%
Tennessee 63%
Kentucky 63%
Virginia 60%
West Virginia 57%
Florida 56%
California 46%
Connecticut 46%
Minnesota 46%
New York 46%
Vermont 44%
Massachusetts 42%
Vermont 31%

Outside the "south"--which for these purposes includes Texas, Oklahoma and Florida--McCain lost the white vote.

U.S. News Crashed-and-Burned Watch (Michael Barone Edition)

I confess I never liked the Almanac of American Politics. It was useful for reporters trying to get up to speed before interviewing members of congress, but not for anybody else. Its ignorance of interest groups and policy substance and of the web of commitments of members of congress to each other that made it possible to pass or block items of legislation made it, I always thought, a basically wrong-footed enterprise.

Mark Schmitt says that Michael Barone has made the latest edition of his book even worse:

Michael's Poor Almanac | The American Prospect: The Almanac of American Politics... has always been what reporters scan before interviewing a member of Congress.... Since the very first Almanac, published in 1971 on the cusp of an ideological and generational shift in Congress, its preeminent voice has been that of Michael Barone, now a fellow at the American Enterprise Institute. In credits that suggest a Hollywood agent's negotiation, Barone is the "Author" of the new 2008 edition, although he is also credited with the introduction and several other short sections, while a single "Co-Author" (Richard E. Cohen), an "Editor" (Charles Mahtesian), and various writers and researchers are credited as well....

[B]ehind the reams of data in the Almanac lies both a theory... to quote the 1974 preface, "much can hinge on the politics, the beliefs, and the idiosyncrasies of 535 people." The ground truths of American politics would be found in the complicated, pluralistic zone where congressional districts and states... intersected with individual political actors.... How much is omitted from such a definition of "American Politics"! The presidency.... State legislatures.... Interest groups... organized constituencies.... Even Congress' committees and caucuses....

The Almanac's focus on 535 individuals marks it as a product, much like C-SPAN, of the transformation of Congress in the early 1970s. Before 1970, most members of Congress were irrelevant as individuals, dutiful pawns in a game run by a few elderly committee chairs. But with the growth of government (enabling members to acquire clout by becoming experts or public advocates on technical subjects), the breakdown of the seniority system, and the challenge to executive power prompted by Vietnam and Watergate, the opportunity emerged for members of Congress to operate as legislative entrepreneurs, using political skill and brainpower to push their own ideas.

The early Almanac chronicled this opening up of the legislative branch.... Over the later 1970s and into the 1980s, the Almanac reflected the new appreciation... [of] old-style political machines, lavishly praising Tip O'Neill, Dan Rostenkowski, and others who came out of such machines to achieve work of national significance.... The Almanac's profiles of the early Republican revolutionaries -- Newt Gingrich, Bob Walker, Vin Weber -- were admiring and enlightening....

Barone's recognition of Gingrich's skills, and his own abrupt move to the political right, culminated in the most extravagant of all his introductions, bearing a title and crazy wrong brilliance worthy of Gingrich himself: "The Restoration of the Constitutional Order and the Return to Tocquevillian America." In 23 dense pages, Barone argued that the 1994 election had "settled the argument" between New Deal historians like Arthur Schlesinger Jr. who believed that politics turned on economic questions, and those who believed it was a high-stakes "cultural war ... in which propagators of liberal values have used government to impose them in every segment of American life." Not only was the interpretive argument settled but so was the culture war itself: Americans had rejected once and for all the "educated elite" and their weak "culture of caregiving."...

Since the mid-1990s, three developments have challenged the Almanac's relevance. First, much of the information... is now a Google search away.... Second... [i]n an era of strong and ideological political parties and the restoration of the imperial presidency, the "beliefs and idiosyncrasies" of 535 people don't seem quite as important... little payoff in learning the precise differences in temperament and background... districts they represent are less likely to embody distinct communities.... [W]rite-ups in the current Almanac begin with a vivid rendering of, say, Jacksonville or Austin, only to admit a few sentences later that the actual district contains only parts of that city, plus a narrow strip of counties extending hundreds of miles out....

Third, Barone's political evolution didn't stop at Gingrich... a strange kind of conservatism... based largely on the conviction that liberals are soft and stupid. Barone also seems to be consciously rejecting everything about his younger self.... [H]e wrote that... "Richard Nixon, by obstructing investigation of the Watergate burglary, unwittingly colluded in the successful attempt to besmirch his administration." Thus the man who in the 1974 Almanac called Nixon "the politician who presided over the most lawless presidential campaign in American history," now sees Nixon simply as a victim, like Bush, of liberal vitriol and a long campaign to delegitimize conservative rule and the presidency itself....

Barone has come to embrace a strict dualist view of the world... incoherent distinction between "crunchy" and "soggy" policies and politicians.... The world of Theodore Dreiser's novels is admirably Hard, John Dewey's theories of education are Soft. Social Security: Soft. Rudy Giuliani: Hard. Intellectuals: Soft. Most baby boomers: Soft. But George W. Bush: "a consistent advocate of Hardness." And the ultimate in Hardness: "our amazing victories in Afghanistan and Iraq."... If everything is darkness or light, what's the use of an Almanac of American Politics? What do you really need besides an up-to-date Enemies List?...

Barone's... ideological journey made him an appropriate and sympathetic guide to the turns of both 1974 and 1994, so how has he handled the third great turn, the Democratic takeover of 2006? He doesn't even try.... I won't try to argue with his prediction that "there may be surprises to come," but is that an insight worth the Almanac's $75 price tag?...

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

Worst Recession since WWII

That is Goldman-Sachs's New Forecast. Rex Nutting:

Goldman forecasting biggest rise in joblessness since WWII: WASHINGTON (MarketWatch) -- The unemployment rate is expected to rise to 8.5% by the end of next year and inch even higher in early 2010, economists for Goldman Sachs wrote Friday. The cumulative trough-to-peak increase of more than 4 percentage points in the jobless rate would be the most since World War II, they said. Goldman analysts lowered growth forecasts for the next three quarters, and said they now expect the Federal Reserve to cut its interest rate target to 0.50% by December. "The main reason for these changes is the accumulation of evidence that U.S. domestic demand and production are dropping sharply," they wrote. "We do not see a resumption of anything close to trend growth before 2010."

James Hamilton Calls for Quantitative Monetary Easing

He writes:

Econbrowser: The new, improved fed funds market: Yet another week of institutional changes that render all those nice macroeconomic texts and professors' lecture notes obsolete. The interest rate at which banks lend their Federal Reserve deposits to one another overnight is known as the fed funds rate. For the last 20 years, U.S. monetary policy has been primarily implemented by setting a target for this interest rate.... The Fed announced on Tuesday that it will raise the interest rate it pays on both required reserves and excess reserves to the level of the target itself, currently 1.0%.

My first reaction was, How in the world could that work? Why would any bank lend fed funds to another bank at a rate less than 1%, exposing itself to the associated overnight counterparty risk, when it could earn 1% on those same reserves risk free from the Fed just by holding on to them?... [T]he effective fed funds rate reported for Thursday-- the first day of the new regime-- was 0.23%. So much for that theory. But what's going on?... [T]he GSEs and some international institutions also have accounts with the Fed. But unlike regular banks, these institutions earn no interest on those reserves.... [T]he FDIC that banks pay a fee to the FDIC of 75 basis points on fed funds borrowed in exchange for a guarantee from the FDIC that those unsecured loans will be repaid.... [Y]ou get a floor for the fed funds rate somewhere below 25 basis points under the new system....

This means a couple of things for Fed watchers. First, fed funds futures contracts... are primarily an indicator of how these institutional factors play out... signal little or nothing about future prospects for the target. Second, the target itself has become largely irrelevant.... There's surely no benefit whatever to trying to achieve an even lower value for the effective fed funds rate....

What we need is some near-term inflation, for which the relevant instrument is not the fed funds rate but instead quantitative expansion of the Fed's balance sheet. I continue to have concerns about implementing the latter in the form of expansion of excess reserves, which ballooned by another quarter trillion dollars in the week ended November 5. Instead, I would urge the Fed to be buying outstanding long-term U.S. Treasuries and short-term foreign securities outright in unsterilized purchases, with the goal of achieving an expansion of currency held by the public, depreciation of the currency, and arresting the commodity price declines...

James Hamilton on the Liquidity Trap

He writes:

Econbrowser: The new, improved fed funds market: Yet another week of institutional changes that render all those nice macroeconomic texts and professors' lecture notes obsolete. The interest rate at which banks lend their Federal Reserve deposits to one another overnight is known as the fed funds rate. For the last 20 years, U.S. monetary policy has been primarily implemented by setting a target for this interest rate. Changes in the Fed's target are widely discussed in the financial press as key economic developments. There was yet another announcement from the Fed this week that caused my jaw to drop, though you'd think I'd be getting used to such surprises by now. The Fed announced on Tuesday that it will raise the interest rate it pays on both required reserves and excess reserves to the level of the target itself, currently 1.0%.

My first reaction was, How in the world could that work? Why would any bank lend fed funds to another bank at a rate less than 1%.... But I've always been more persuaded by facts than by theories, and the effective fed funds rate reported for Thursday-- the first day of the new regime-- was 0.23%. So much for that theory. But what's going on? The answer begins with the observation that the GSEs and some international institutions also have accounts with the Fed. But unlike regular banks, these institutions earn no interest on those reserves, so they would in principle have an incentive to lend out any unused end-of-day balances as long as they earn a positive interest rate. But that's not a sufficient answer by itself.... Wrightson ICAP (subscription required) proposes that part of the answer is the requirement by the FDIC that banks pay a fee to the FDIC of 75 basis points on fed funds borrowed in exchange for a guarantee from the FDIC that those unsecured loans will be repaid. If you have to pay such a fee to borrow, it's not worth it to you to pay the GSE any more than 0.25% in an effort to arbitrage between borrowed fed funds and the interest paid by the Fed on excess reserves....

That means a couple of things for Fed watchers. First, fed funds futures contracts, which are based on the average effective rate rather than the target over a given month, are primarily an indicator of how these institutional factors play out-- how much the effective rate differs from the target-- and signal little or nothing about future prospects for the target. Second, the target itself has become largely irrelevant.... There's surely no benefit whatever to trying to achieve an even lower value for the effective fed funds rate. On the contrary, what we would really like to see at the moment is an increase in the short-term T-bill rate and traded fed funds rate, the current low rates being symptomatic of a greatly depressed economy, high risk premia, and prospect for deflation.

What we need is some near-term inflation, for which the relevant instrument is not the fed funds rate but instead quantitative expansion of the Fed's balance sheet.... I would urge the Fed to be buying outstanding long-term U.S. Treasuries and short-term foreign securities outright in unsterilized purchases, with the goal of achieving an expansion of currency held by the public, depreciation of the currency, and arresting the commodity price declines.

But the last thing we should expect to do us any good would be further cuts in the fed funds target.

The Economic Policy Consensus Emerges...

  1. The current financial crisis means that the Obama-Biden administration should do more, not less.
  2. Reform as the first priority.
  3. Investing in America as the second priority.
  4. Medium-term deficit reduction as priority number three.

Ed Luce of the FT:

Obama set to push ‘big bang’ reform package: US President-elect Barack Obama intends to push a comprehensive programme of social and economic reform beyond an immediate emergency stimulus package, Rahm Emanuel... indicated on Sunday. Mr Emanuel brushed aside concerns that an Obama administration would risk taking on too much when it takes office in January. He said Mr Obama saw the financial meltdown as an historic opportunity to deliver the large-scale investments that Democrats had promised for years.... Mr Obama will meet Mr Bush on Monday and is likely to seek the outgoing president’s reassurance that he would not veto any stimulus package that could be passed as soon as next week when Congress meets for a “lame duck” session.

Sunday’s comments also reinforce the impression that Mr Obama’s transition economic advisory board – which includes leading lights of the Clinton era, such as Lawrence Summers and Robert Rubin – is tilting heavily towards a “big bang” approach that would combine a short-term stimulus with large public investments.... “We can’t afford to wait on moving forward on the key priorities that I identified during the campaign, including clean energy, healthcare, education and tax relief for middle-class families,” said Mr Obama. “We also need a rescue plan for the middle class that invests in immediate efforts to create jobs and provides relief to families watching their paychecks shrink and their life savings disappear.”...

In contrast to 1992, when Mr Clinton postponed longer-term investments in favour of urgent budget deficit reduction, advisers to Mr Obama, including Mr Summers, who is tipped by some as his first Treasury secretary, are tilting towards investments. They emphasise that Mr Obama will stick to a medium-term goal of restoring fiscal discipline.

On Larry Summers...

I see that Sheryl Sandberg is writing--corectly--that Larry Summers has "[been] a tireless advocate for girls' education... fought for social security benefits for women working in their homes, better enforcement of child support obligations, and an expansion of child care tax credits..." in addition to being "a supportive and deeply caring mentor for [her] and many other women who had the opportunity to work for him" and the Harvard Economics professor who "helped us the most" when Sheryl started her new student organization: Women in Economics and Government.

All this is true.

And it is also true that, as one of us once said as we ran out of a building, "being Larry's friend is never dull."

But as important, I think, is that the upsided to putting Larry in high federal office right now is so very great.

  1. Larry is--in Paul Krugman's words--a "a force of nature -- and also very, very smart. He would get things moving from day minus one..."

  2. You can bring him up to speed on anything in fifteen minutes. And if you can be interesting enough to keep his attention for half an hour, he will start throwing out hypotheses and what-ifs and suggesting connections you would never have thought of.

  3. If you do a piece of something for him excellently--a link in a chain, say--he will do his damnedest to make sure that all other links in that chain are done equally excellently.

  4. If he thinks you know more about something than he does, he will listen to you very patiently and then trust and act on what you have told him.

  5. Very good people want to work for Larry because he will, if he thinks you can handle it, push you forward into the limelight and give you more responsibility than you thought you could handle. It's the Bob Rubin style of management. There is the story Frank Brosens tells: '"Frank, could I see you for a minute?" [Bob] Rubin had followed partner Frank Brosens out of a management committee meeting. The meeting had been a triumph. Brosens had presented a compelling case for a bold commitment to arbitraging Japanese equity warrants.... Brosens had made the entire presentation but, as a learning experience, he had invited Zachary Kubrinick to sit in on the meeting as an observer. Brosens... could hardly believe Rubin had been so impressed that he would leave the meeting to compliment him immediately. Brosens was right; Rubin was not rushing to compliment him.... "Frank," said Rubin in his soft, relaxed voice, "you and I both know that, as young as he is, Kubrinick knows all that you know about Japanese warrants and he could have made the case equally well. You really should have let him make the case--and get the experience of coming before the management committee. By not taking the credit, you become more effective. If you do right by people, they win and you win. Frank, always go out of your way to share credit"...' Larry operates the same way.. In world of of bureaucratic, administrative, and academic snakepits that is more often kiss-up-kick-down control-the-access steal-the-credit, Larry's way of operating is very refreshing--and can be far more effective than the workings of those who use their great powers of social perception for evil or aggrandizement.

These are, I think, the skills we want in high federal office right now. Why? Because the situation is unclear and confused enough that we want really smart people serving as intellectual coordinators and traffic cops as the Obama-Biden administration assembles its policies. I am reminded of Keynes's reflections on Leon Trotsky:

Notes: Keynes on Trotsky: Granted his assumptions, much of Trotsky's argument is, I think, unanswerable. Nothing can be sillier than to play at revolution if that is what he means. But what are his assumptions? He assumes that the moral and intellectual problems of the transformation of Society have been already solved--that a plan exists, and that nothing remains except to put it into operation.... [But a]n understanding of the historical process, to which Trotsky is so fond of appealing, declares not for, but against, Force.... We lack more than usual a coherent scheme of progress, a tangible ideal. All the political parties alike have their origins in past ideas and not in new ideas and none more conspicuously so than the Marxists. It is not necessary to debate the subtleties of what justifies a man in promoting his gospel by force; for no one has a [true] gospel. The next move [must be] with the head...

Six Top Economic Policy Jobs in the Obama-Biden Administration

The more I think about it, the more I think that there are six key economic positions that Barack Obama needs to fill:

  • OMB Director--the budget master...
  • CEA Chair--the voice that advocates for rational economic policy...
  • National Economic Council chair--the consensus chair...
  • The Federal Reserve Chair in waiting--appointed to the Board of Governors now, to succeed Bernanke in two years...
  • The Treasury Secretary...
  • The SEC Chair--to serve also as legislation design point person for the reform of the financial regulatory framework...

It seems to me that six different people are needed for these jobs--that trying to combine them is asking for trouble. And of these, it seems to me that SEC Chair--including the task of designing the system going forward for regulating financial markets--is the most important.

Ed Glaeser Asks for a Large Inceases in Federal Education Spending

He writes:

Want better schools? Hire better teachers: This election marks a new beginning. Improving our schools may be the most important way that President-elect Obama can leave America stronger than he found it. He must avoid any small plans. America doesn't need an $18 billion Band-Aid. The country needs a massive education overhaul, and better teachers will be the most important element in that overhaul. Spending more and attracting able teachers is the best way to use resources to improve the human capital of our children and the future of our nation...

IMHO, the K-12 educational establishment still acts as though we were back in the 1950s--as if women could be nurses, secretaries, waitresses, laundresses, and teachers and nothing else--and so you didn't have to pay teachers a reasonable wage to get high quality.