Tuesday, January 29, 2013

Obama: Tragic Hero?

Maybe just tragic.  I get what David is saying, but I think it's not quite right.  I agree that Obama's continued fetish for a bipartisan Washington is tragic, but not because Republican's are such assholes and he refuses to recognize that.  I think that the Republican positioning makes sense.  It is problematic in our political system, but when I vote for someone (as opposed to against someone else) I do so hoping that they will fight for things they (and I) believe in.  Republicans do so.

Yes, most people in this country voted for Democrats, which should mean that we get Democratic governance, but there are lots of people who voted for Republicans, and they don't want Democratic governance.  If we had a parliamentary government, that wouldn't really matter because Democrats would just do whatever they wanted, and if things went well, they would continue to be in power.  If things were to go poorly then we the people would toss them out, replace them with Republicans who would then have a go.

We don't have a parliament, however.  We have a Congress made up of a dysfunctional Senate and a heavily gerrymandered House.  Compromise is ostensibly necessary for anything to get accomplished...particularly for Democrats.

My impression from Obama isn't so much that compromise is necessary and good for a functioning government but rather that compromise produces the best results.  But it doesn't.  There are many health care systems in the world, and we know which work better and worse.  The compromise plan that is Obamacare will not be even close to a best performing system.  It will be a bit better than what we have had, but that's it.  If we wanted a good system, then it would have been Medicare for everyone.

Our government requires compromise, but that is because our system of allotting congress critters and the congresses themselves are dysfunctional.  Seeking compromise as an end in and of itself is really quite stupid.

What Would Really Happen If...

The helicopter drop occurred?

Imagine every American who filed a tax return this year got a magical, fed-created refund of $100k...

Obviously the extra $20-30T in cash money would create real inflation, and in some places there would likely be shortages of some items (which would likely mean a serious jump in employment to meet demand and therefore recovery, Huzzah!).  The dollar would also certainly weaken vs. other currencies, possibly by quite a bit. 

I would guess that, in particular, the housing and construction markets would rebound strongly, since that is enough in many places to buy a house outright, and covers lots of renovation and other work that people would like to do.

I would also guess that gasoline prices would surge, possibly to over $6/gallon, and that heating oil would see a temporary spike.  Precious metals would probably go through the roof on the combined front of some people buying jewelery, and other people trying to hedge against the now fairly certain inflation (pawn shops may sell out of gold/silver/platinum jewelery all together).

On the other hand, there isn't reason to think that all commodities, goods, and/or services would see increased demand--particularly not sustained--and some may see slack: people trading cooking in for restaurant dining or hamburger for steak.  I mean, any given person can only eat so much.  In addition, most people have a tv and a microwave, and unless an appliance is in bad shape or just particularly lacking, there isn't a huge reason to replace it.  There may be lots of TV's sold right away, and that could create shortages, but once the rush is done, and everyone has the latest TV, sales would pretty much come back to normal. 

Also, lots of people would use the money either as seed for something (starting a business, going to school) or to pay off existing debt (actually not a great idea in this case) and these things do not necessarily produce inflation.  In fact if new businesses are started that are in competition with existing, then that could completely offset any increase in demand leading to pricing staying the same.

Assume this is a one-time jump and the fed removes this from circulation by selling off treasuries over a 10 year period. 

Now pare that back to $10k each...

$2-3T extra monetary base in our current situation is far less likely to create much inflation.  It may still weaken the dollar (strengthening exports, and domestic production).  And that amount of extra money in people's pockets would create more demand, though not necessarily enough to cause shortages, this would likely lead to an increase in employment, which would, hopefully, create enough extra demand to get the recovery going at a brisk pace.

This isn't enough, however, to make a large impact on housing--if it spurred recovery, then that would come back into improved housing/construction, but not this on its own.  It also isn't enough to make starting a new business as easy as it would be in the first case.

Because of the lower impact on housing, business starts, and inflation, using this for extra savings/debt reduction becomes a more attractive option, but that fights against the recovery, not for it.

Pare back further to $1k...

It seems this is an amount that would make a large difference to a very small subset of the population, but that would have a much, much smaller impact on the overall economy.  For most people this would do much less; either they would save (or pay off debt) or they would simply shift a future expected purchase back in time. 

I think the way to look at this is to see how much income and debt a person has and how much "free" money it would take to impact their behavior.

$10k/filer is probably the sweet spot between action and danger.  That is a very large amount of money to most people, but the total increase in the monetary base is not completely ridiculous.

Tuesday, January 22, 2013

Inequality and Economy

Joseph Stiglitz's longish OpEd on Inequality Holding Back the Recovery seems to be the big thing on a lot of progressive blogs.  Krugman responded with a light "but" (and then responded to responders).

First: Krugman is right, of course, in that economics is not a morality play and we can [theoretically] have an economy with full employment that features a handful of super rich and the rest of us as peons.  But...and there had to be a "but"...that result is a weaker economy than one with less inequality, even if it does feature full employment.

Second: if reducing inequality would increase the rate of recovery (Atrios' point, which Krugman agreed with).  Is that not the definition of inequality holding back the recovery?  If we are on a 2% growth trend with current inequality, but we would be on a 4% growth trend if we could put in place programs reducing inequality then inequality is slowing growth and hampering recovery.

Back to point the first...

In an extreme vision of the economy that Krugman postulates, with the very wealthy on top, and the vast majority of the rest of us engaged in activities that support their lifestyles, we are pretty clearly stuck in a bad situation.  People with enormous potential born to the lower caste are pretty much doomed to that fate, and society as a whole is worse off for that.  You get less innovation, exploration, culture and many other things that make for great societies.  In that situation you also foment crime, disease and rebellion (though how much and of which type depends pretty heavily on government and policing).  It is a dystopic vision, not because the economy is not recovered (again, it could be at full employment), but because it has stagnated on a grander scale.

Friday, January 18, 2013

PA Alcohol Privatization

Pennsylvania has some of the strangest alcohol related laws in the country.  Many places have wet and dry counties, or no sales on Sunday or before noon, or rules for who can sell what (e.g. grocery stores some places can sell 3.2 beer only, other places beer only, others beer and wine, and some can sell anything).  In many states hard liquor is only available in liquor stores, which may be state run.

In PA, wine and liquor are sold in state run "Wine and Spirits" stores operated by the liquor control board, and beer is sold by beer stores in cases (only).  Some "restaurants" are allowed to sell up to 2 six packs worth of beer.  Restaurant liquor licenses are so expensive and hard to get that PA has many restaurants which are BYOB (this is actually quite popular, but very strange to people not from here).  The LCB operates far too few wine and spirits shops in the state (600).

Something that simplifies things, and improves access would be great.  It could even include privatization.  That said, whatever ends up getting passed will just be another layer of complexity and will likely mean higher prices (particularly for spirits).

Oh, as for the other end of the anti-privatization...As much as it can be a bit of a pain in the ass, I'm pretty sure that people who want to get drunk don't have any problems doing so with the current situation.

Tuesday, January 15, 2013

Holy Bad Idea, Batman!

The frequency with which vehicle miles tax (VMT) pops up is insane.  It is a very, very bad idea (in our current situation, and maybe in any situation).  A higher gas tax in superior in almost every way imaginable...

1) We already have a gas tax, so increasing it incurs ~$0 in terms of collection costs.
2) There is no "government tracking" issue to deal with.
3) There is nearly zero fraud potential to deal with.
4) It appropriately encourages people to shift to higher mileage vehicles which:
   a) provides additional benefits in terms of lower carbon emissions and
   b) are generally lighter and do less damage to the roads than heavier vehicles.
5) Congestion pricing is built in, albeit very small by comparison.

There are maybe a couple downsides to a gas tax over a VMT.  One is that that congestion pricing is not really very good, but the VMT would almost have to be the [much more unpopular] GPS type to account for this.  The other really doesn't come up until we live in a more utopic society: basically if a very large fraction of cars don't use gas, then there will be less revenue from the gas tax, but we will still have road damage.  While I see this "problem" as a huge benefit, and one I think we should look forward to having to deal with, it is a long, long, long way off (and when it ever arrives some form of weight-adjusted VMT may be an appropriate solution).

Oh, and as for increasing the gas tax being politically difficult: I can't even begin to comprehend how it is that people think that the VMT will be [comparatively] popular.

And Yet The Comparisons Will Continue

It should be obvious to anyone with a half-functioning brain that the federal government is not a household and debt and expenditures do not work the same way, but we keep hearing (too often from people who should really know better) about tightening belts and "if you tried to run your house like the government..."

Monday, January 14, 2013

Weaponized Keynesianism

Ever since I read through the "Stimulus or Stymied" transcript I have to say I was very puzzled by Valerie Ramey, and not Krugman's critique, which I agree with, but don't really care about for this. 

Making a bomb provides nothing of secondary value to the economy.  Military goods are not for public consumption.  They also don't generally improve other aspects of our economy (the interstate highway system being a notable exception).  If we spend $1 billion making a bunch of bombs, that money did employ some people, so the multiplier isn't zero, but it isn't as big as if it were to spread to or enhance other economic activity.  (In fact, if a large fraction was employed elsewhere it could even be less than 1.)

On the other hand, if you improve transit then many other businesses and individuals can see a boost.  If you rehab the power grid to be more efficient and less prone to failure then there are huge potential economic gains as a result.  Massive military spending just doesn't do that.

I understand why she would chose military spending, for the study, but if you look at a "fiscal multiplier" as a measure of economic boost, then no one should expect military spending to be terribly large, particularly if this is to be used to generalize to other spending on things like infrastructure.

Yglesias makes something resembling this point when talking about the new, Japanese nationalist Abe.

Friday, January 11, 2013

Money and Happiness

A new paper comparing income to happiness, mostly as national GDP.

Wealthier countries having happier people makes sense: a wealthy country can afford to have a well fed, clothed, housed, and entertained populous. 

But at the same time the US serves as a counter example, and this also makes sense.  While GDP gains in many other advanced nations (e.g. most of Europe) have also lead to increases in social insurance (i.e. "welfare") programs, in the US the opposite has occurred.  We have had a big jump in GDP, but most programs for the poor have gotten less generous, and social security, medicare, and medicaid are constantly in danger of cuts by politicians [on the right...including Obama]. 

Our social safety net is getting weaker as our country has gotten wealthier.  That is a recipe for unhappy people, even when people in general have more money.  Someone making $30k/year who doesn't have to worry about losing health care, her house, and having problems getting food for her child is going to be more content than someone making twice as much that has to concern herself with those things.  Even someone making $100k a year in the US can quickly find herself in dire straits if she looses his job.  Mortgage/rent can eat through savings fast, and a single visit to the ER can be thousands of dollars (and COBRA is not cheap). 

Friday, January 04, 2013

"The [Housing] Bottom is Here"

...Again.  This has been predicted every year since 2007.  Not sure how housing will recover with lots of unemployed people, lots of debt overhang and still stagnant wages.

That said, it does seem like there is lots of opportunity for willing and able people to do well with rental properties--not the huge funds but individuals owning a few smaller multifamily places, and maybe single family.

Thursday, January 03, 2013

Not Sure Which is Worse

Ezra and MattY both wants liberals to calm down about the Austerity Bomb deal. Ezra says the White House won, and Matt that it lost.  In either case, liberals should definitely not be calm.  If this deal represents Obama winning, then there is no hope for liberal policy, because Obama will never pursue it.  If this deal represents Obama losing, then there is very little hope for liberal policy because Obama was in the strongest bargaining position he's had in at least 3.5 years, if not since the beginning of his presidency, and he couldn't manage a win?!?

Basically liberals are screwed, because even though liberal positions are overwhelmingly popular, and even though liberal positions would boost the economy and shrink the debt, there is no chance of them happening because we have a Democratic president who is either pathetically weak or a Republican.  (Note, my opinion is clearly the latter.)

Reminder: Obama is NOT a Liberal

Cannot be repeated often enough.  Obama is a "Moderate" Republican...at least to the extent that Ronald Regan was a moderate.

E Readers

I still just read books, in part because can do so during takeoff and landing.  Also, I'm paranoid about having my entire library (or a lot of it) wiped out or out of order for some reason.  Still, in a few decades, I wouldn't be surprised if Kindle meant book and people added content and stories.

Note: obviously, I'm playing with the site today.  No real reason other than curiosity.

Bush-Obama Tax Cuts

Similar to the Bush-Obama war on terror and the Romney-Obama health care plan.

That's what we have now.  The piddly shit top-end bit notwithstanding.  Obama seems to wish in his heart of hearts that Democrats were all more like Republicans.  As for the "liberals" who are either cheering or at least not fuming about this: you are a major part of the problem. 

One year and 5 year extensions on some good things in exchange for making the Bush tax cuts permanent is not a good trade off.  Extending the lower rates for another 5 years would have been a better deal.  Going over the cliff, blaming Republican intransigence and then negotiating a new tax cut would have been better politics.

Wednesday, January 02, 2013

Overweight and Healthy

There is a new study out saying that people who are slightly overweight (not obese) live longer than those who are not overweight.  It isn't really a surprising finding to me, nor is the reaction to it.  In particular it was pretty offensive to hear the [Harvard] doctor on NPR flat out rejecting the study as garbage. 

Scientists (as well as MD's) do, in fact, trash other scientists' work and findings.  Usually this happens when one scientist publishes something that directly refutes an other's work and findings.  This initial reaction is not meaningfully different than the way politicians react to the other side, and it is damaging to research overall...particularly in a time when an overlarge number of people are already inappropriately skeptical about science. 

The proper response (and the one that the doctor on NPR should have taken) was to say something like: "The study offers some interesting data, and it would be good to go further to look at possible specific cause and effects."

Having more or less body fat isn't really a "cause" of much of anything.  It highly correlates with quite a few medical issues (heart health, diabetes, ...), but it is this correlation that is the reason it is used as an indicator, and that is fine.  Just because correlation doesn't equal causation doesn't mean we should ignore correlation as indicators. 

By the same token, with respect to this study, if people who live longer are more likely to be a little overweight than not, then that could be an indicator that either something has changed in the environment, that something is up with our society, or that the measure of overweight is not as good as it should be.  That should be taken seriously, and obviously the Harvard doc doesn't take it seriously.

Why the American People Can't Win

Despite the fact that Republican policies (and actual Republicans) are deeply unpopular with the American people, we nevertheless get "deals" that are very Republican-policy heavy.  It shouldn't be that way and there are lots of little things that add up to get this result (a pretty good rundown in this piece).  The short of it is that Republicans are much better at the game of politics than Democrats.  If that doesn't change then neither will our political results.

Unfortunately it really can't change in large part because people who support Democrats are [generally] offended by the way that Republicans play the game, and so if Dems were to do the same, a fair number of people, who are already hard to get to the polls, would be even less inclined to participate, making it easier for Republicans to win (even when they lose). 

In order to unwind the problems in our politics, Democrats would have to act (a lot) more like Republicans, but people hate the way Republicans act (particularly supporters of Democrats).  It's a catch-22.

Note: If you want to know if you are one of those people there is a pretty easy test: how do you feel about Nancy Pelosi?  If you like her, you support stronger Democrats, if you don't then, like it or not, you support the crap situation we are in.