Choices, Choices...... and Dilemnas

I was talking this week with a young woman I know who is a political neophyte.  She knows she is a Conservative, as her father is conservative and she senses he is right about stuff, but she's just contemplating getting more educated and figuring out why she feels the way she does (I hope that doesn't seem mocking at all, because it's not intended to be- we all start someplace politically, for no better reasons than what she has). 

Anyway, we were talking about entitlements, and she talked about how we "can't afford" the Social Security and Medicare benefits that we are promising right now.  This got me to thinking again about the different categories of government spending; there are some things that governments legitimately can't afford, and there are other things that governments and societies decide not to pay for.  And there's a difference between those two.

Greece, for example, is screwed.  They mismanaged their debt so badly, along with a dash of fraud to keep creditors coming a few years too long, and now they're in a hole so deep and wide that there's just no way out.  They can't keep spending what they were spending.  They have to raise much more in taxes than they have been raising.  And the austerity measures needed to get the budget in line are so crushing that they're destroying the entire economy in the country and pushing unemployment to record levels.  They're in a vicious circle in which further austerity just makes the economy worse, which in turn depresses tax receipts and continues the cycle further.  And they're so far in the hole that even Keynesian deficits are totally unsustainable because creditors (rightly) won't fund the deficits.  There's no way out it seems, except for Germany and others to just give them money.  This is an example of stuff "we can't afford".

Back home, on the other hand, we have a looming Medicare and Medicaid crisis.  Health care costs are rising much faster than inflation, and there seems no end in sight to this.  Overall health care spending as a percentage of GDP is rising.  Something has to change.  This is a really hard problem to solve, in that we can raise Medicare and other taxes in the short term, but in the longer term we just have to find a way to stop the explosion of health care costs.  ObamaCare has a commission that is tasked with doing that, though it's hard to predict whether that will work.  Conservatives want to do it by unleashing the free market, but Liberals point out that health care is already a free market in the US, one that seems to work differently from, say, the auto market. (Picture you're going for a knee replacement, and you get a marketing call from another hospital offering to do the same surgery for 25% less money.  Would you do it?  Most people wouldn't take those sorts of risks when it comes to their health, so they trust doctors to decide- it just doesn't work the same).  So this crisis is really hard to solve, but not impossible.

Then you have the problems that are easy to solve- we just have to decide how to do it.  Social Security is my favorite example.  Baby Boomers are retiring, the population is getting older, the ratio of workers to retirees is getting worse, and the math no longer works for making Social Security solvent in the long term.  This isn't because of bad government or poor administration- it's just demographics.  But the good news is that we have a huge buffet full of possible solutions!  We can:

1. Cut benefits to retirees by a modest amount
2. Raise SS taxes in all our paychecks
3. Raise the ceiling so that rich people pay more SS taxes while leaving the rest of us unchanged
4. Increase the retirement age
5. Make SS means-tested so rich people don't get benefits
6. Some combination of any of these

There are probably more solutions I haven't thought of too.  And I hate some of these solutions (4, 5) and would fight hard against them.  But Social Security fits clearly in the category of stuff that has a solution.  We just have to pick one of the plans and implement it.

I Don't Hate Scott Brown

Alright, I admit it.  Although I'm very liberal and very partisan in my politics, I find Scott Brown quite unobjectionable.  He doesn't talk like a fire-breathing radical, he occasionally votes with Democrats, and he seems like a thoughtful character.

But that doesn't mean I'm voting for him.  It's not that I'm unable to vote for any Republican (OK, maybe it's that too).  But first of all, Elizabeth Warren stands where I stand on the issues (Scott Brown is against any financial regulation of Wall Street, for example).  Most importantly though, he's a vote for Mitch McConnell for Senate Majority Leader, and he's a vote for very conservative Supreme Court justices.

So if I comment on the Warren-Brown race in the next few months, I hope to take it easy on Scott Brown and avoid calling him names that should be reserved for the really crazy (Hello, Michelle Bachman) and cynically evil (that's you, Newt) in the GOP.

Is It Only Called Terror When Someone Does It To Us?

This is just so disturbing:

On December 30 of last year, ABC News reported on a 16-year-old Pakistani boy, Tariq Khan, who was killed with his 12-year-old cousin when a car in which he was riding was hit with a missile fired by a U.S. drone. As I noted at the time, the report contained this extraordinary passage buried in the middle:

Asked for documentation of Tariq and Waheed’s deaths, Akbar did not provide pictures of the missile strike scene. Virtually none exist, since drones often target people who show up at the scene of an attack.

What made that sentence so amazing was that it basically amounts to a report that the U.S. first kills people with drones, then fires on the rescuers and others who arrive at the scene where the new corpses and injured victims lie.
In a just-released, richly documented report, the Bureau of Investigative Journalism, on behalf of the Sunday Times, documents that this is exactly what the U.S. is doing — and worse...

Greenwald goes on to describe in intimate and devestating detail how our US government is guilty of war crimes, right now, in our ongoing drone campaign.  He later laments the fact that current public opinion, even among Liberals, continues to favor drone attacks in spite of the overwhelming opinion against such attacks when undertaken by the Bush campaign.

I can't really add much to Greenwald's analysis, but I'm struck as he is by how alienated from mainstream opinion one is when opposing torture and terror actions by our own government.

Imagine if you can that you are an innocent citizen of the US, minding your own business, when a missile launched by another government lands in your front yard and kills your whole family.  We actually don't have to try very hard to imagine it, as it's not too far away from what happened on 9/11 to us.  We are perpetrating terror attacks via drone that are experienced in exactly the same way by citizens of the countries who are victimized by these actions.  Our only justification is that we're the most powerful country in the world and therefore nobody can stop us.  There's just nothing else there.

President Obama, like President Bush before him, is guilty of War Crimes.  And since nobody in a position of power here is willing to say so, it's going to continue.  Ron Paul is the only person speaking against this to whom anyone is listening.  It's shameful.  In November, I'll be forced to choose between Obama, whom I see as a war criminal, and Romney, whose criticism in these areas is that he's not tough enough.  Awful.

Wall Street Profits Down!

This article in New York magazine really struck me.  Key quote:

With all the major banks unable to wager their own funds on big bets [due to Dodd-Frank], there’s a growing sense that the money that was being made during the Bush boom won’t be back. “The government has strangled the financial system,” banking analyst Dick Bove told me recently. “We’ve basically castrated these companies. They can’t borrow as much as they used to borrow.”

... On Wall Street, the misery index is as high as it’s been since brokers were on window ledges back in 1929. But sentiments like that, accompanied by a full orchestra of the world’s tiniest violins, are only part of the conversation in Wall Street offices and trading desks. Along with the complaint is something that might be called soul-searching—which is, in itself, a surprising development. Since the crash, and especially since the occupation of Zuccotti Park last September (which does appear to have rattled a lot of nerves), there has been a growing recognition on Wall Street that the system that had provided those million-dollar bonuses was built on a highly unstable foundation. Disagreeable as it may be, goes this thinking, bankers have to go back to first principles, assess their value in the economy, and take their part in its rebuilding. No one on Wall Street liked to be scapegoated either by the Obama administration or by the Occupiers. But many acknowledge that the bubble­-bust-bubble seesaw of the past decades isn’t the natural order of capitalism—and that the compensation arrangements just may have been a bit out of whack. “There’s no other industry where you could get paid so much for doing so little,” a former Lehman trader said. Paul Volcker, whose eponymous rule is at the core of the changes, echoes an idea that more bankers than you’d think would agree with. “Finance became a self-justification,” he told me recently. “They made a lot of money trading with each other with doubtful public benefit.”

It's a long article and a great read, and goes on to note that the big investment banks are closing down their proprietary trading departments, the ones that basically acted like hedge funds, and their "star traders" are quitting to start their own hedge funds because the rules don't allow the big banks to take the kinds of risks that produce 8-figure annual salaries.  This makes sense to me- Too Big To Fail banks shouldn't act like risky hedge funds, because as we saw in 2008, when they fail they take too much collateral damage along with them.

I first read the article as sort of neutral reporting, or even a bit of a Liberal take.  Near the end there are quotes from various Wall Street leaders in favor of higher taxes on their huge salaries, and little in opposition to that.
Matt Taibbi reads it this way:

But in reality? Please. Wall Street people complain a lot, but in the last six months, the grave impact of Dodd-Frank on bonuses hasn’t even been within ten miles of the things these people are really panicked about. The comments I’ve heard have been more like, "My asshole has been puckered completely shut for four months in a row over this Europe business," or, "If the ECB doesn’t come up with a Greek bailout package, I’m going to have to sell my children for dog food."
Bonuses are indeed down this year, especially when compared with the bonuses of recent years, but let’s be clear about why. It has nothing to do with Dodd-Frank. We can posit three other factors:
1. Banks have unfortunately had to give up the practice of simply printing trillions of dollars out of thin air by selling off worthless mortgages for huge profits and/or making millions of synthetic copies of those same worthless mortgage assets;
2. After twice being saved from the execution chamber by Ben Bernanke’s Quantitative Easing programs, which printed trillions of new dollars and injected them straight into Wall Street’s arm, Wall Street was rocked this summer when Helicopter Ben decided to temporarily forestall QE3;
3. Europe, a slightly more than minor factor in the global financial picture, is imploding, causing mass hoarding of assets all over the world, severely impacting the business of investment banks everywhere. 

I don't know what's right.  But to me lower profits on Wall Street are a feature, not a bug.  That's not because I hate rich people, or because I'm jealous.  It's because the enormous profits on Wall Street happened because of the enormous risks being taken, and when it came crashing down taxpayers took the hit.  Individualized gains and socialized losses don't work.

So if Dodd-Frank is the reason for Wall Street whining, then I give it three cheers.

The Deserving Poor

 Matt Yglesias has a blog post here that interested me.  It says in part:

If you arrange your society such that 5% of the population is going to occupy some extremely unpleasant social roles, it may well be the case that the specific people who come to occupy those roles do so for specific behavioral reasons that are outside the scope of what we'd commonly call "bad luck."

...[But] Someone or other is destined to be the "marginal worker" in any labor pool, and if the central bank conducts this kind of asymmetrical stabilzation policy then marginal workers are going to be screwed. If everyone had more human capital or a better work ethic then average living standards might be higher, but someone would still be victimized by a bad arrangement of social institutions

 I would take that a step further; in a capitalist society, even one in which the central bank is acting optimally, there will still be jobs that pay poorly.  Someone has to flip the burgers and clean the toilets and pick the tomatoes, and since those jobs don't require much skill there are plenty of people to do them, and consequently those jobs aren't going to pay much.  And that's fine- there are relative winners and relative losers in life.

But the Right's demonization of the Poor just doesn't make sense.  We have these low-paying jobs, and we need them to be accomplished by someone.  Blaming the working poor for their plight is just stupid- if the janitor starts his own business and becomes rich, someone else is going to have to clean the floors!  And that guy is going to be poor.

Econo-Thoughts

Some thoughts about the good economic news that came out this week.

Job numbers are really good.  The economy is creating jobs at a steady rate in the private sector.  Unemployment, while still high, is coming down.  We can't really say that the economy is booming, but we can say it's recovering.

• If things keep going like this through the year, Obama would be very likely to be re-elected.  Elections can usually be predicted by the economy, and when it's good the incumbent generally gets the credit.
• That doesn't mean that Obama deserves the credit for the economy, of course.  All recessions end, and recoveries always happen eventually, even when the government screws things up.  One fear I've had is that the economy would continue to stink through 2012, leading to a Republican sweep, and then things would improve right on schedule in 2013, just in time for the GOP to claim credit.  Of course, that would have meant that Obama had not succeeded in getting things moving fast enough, so in a sense he would have deserved it.
• In another sense, however, he wouldn't have deserved it, since he's been successfully stymied by Congress from implementing any jobs bills.
• On the other other hand, though, that's a good reason to say that the President doesn't really deserve credit now, since he's been stymied by Congress- one can argue that Washington's inaction has worked out a lot better than proposed actions would have.

Economics is frustrating this way, as good experiments are hard to come by in the real world.  So I return to the standard I've been talking about for a few years now- the one experiment we could identify.  That's the US vs. Europe.  Both went into recession at the same time for similar reasons.  The US did significant stimulus (though not enough according to liberal economists), while Europe did relatively much less stimulus.  Thus far, the US recovery has been quicker and better than just about anywhere in the Eurozone.  Now in fairness, they're dealing with a sovereign debt crisis there, which we don't have here, so it's not a perfect experiment, but nothing is.

Another way to look at it is to note that the Right has been forecasting Doom due to the huge budget deficit and loose money policy of the Fed.  It's clear that we haven't seen that come to pass.  I guess it could still be coming, but I don't think so.

Photo is of Panama Canal workers.  I'm reading the David McCullough book about the canal now, which I highly recommend!

Romney and Concern for the Poor

I've always liked the definition of a political gaffe as when a politician accidentally says something he really believes.  Many have jumped on Mitt Romney for his comment in a CNN interview that he's "not concerned about the poor".  Now this can be taken out of context, no doubt.  Romney went on to clarify that he wasn't concerned about the Poor because "there's a safety net" for them, just as he's not concerned for the Rich because they have money and will be fine.  His point was that the Middle Class is his focus.

And that's a good strategy, since most Americans see themselves as "middle class", even those who are objectively pretty rich (remember the brouhaha from the well-off complaining that there shouldn't be higher taxes on thos making $250,000/year, since "that's not rich!"- never mind that $250K is more than four times the median salary in the US).

But let's be clear about the implications of Mitt's statement.  He's not concerned about the Poor because "there's a safety net".  But in reality that safety net is pretty thin and tattered.  And the GOP's plan is to lower funding for the safety net- if Mitt's elected, the Poor will require a lot more of our concern, since they'll be losing services as government shrinks so we can afford tax cuts for the wealthy.

Hey, that's still a legitimate point- Republicans believe that poor people are at fault for being poor, and safety net programs just encourage them to stay poor.  I think it's wildly inaccurate for Romney to claim that he's "not concerned about the Poor".  Everything in his platform and rhetoric suggestes he's quite concerned about the Poor, because they're mooching off the public trough.  So he's lying about his lack of concern.  But of course lying is just what Mitt does- every time he opens his mouth.