What is Job Creation?

Tuesday the Washington Post’s fact-checker awarded three Pinocchios (“significant factual error and/or obvious contradictions”) to Mitt Romney’s claim to have created 100,000 jobs through his work at Bain Capital.

Meanwhile, Romney’s opponents were assailing him as a job destroyer, a “predatory corporate raider” according to a pro-Gingrich SuperPAC. Rick Perry accused Bain of looting companies and “getting rich off failure“.

Lost in all this attack-and-defense is the question: What does it mean to create a job, anyway? Let me repeat something I wrote a little over a year ago:

A bunch of factors need to come together to create a job. There has to be something worth doing, a worker willing and able to do it, a capitalist to pull together all the tools and materials of production, and a customer willing and able to pay for the product or service.

So the economic environment needs to supply an opportunity and people need to fill three roles: worker, capitalist, and customer. Conservatives assume that workers and customers always appear by magic, so a job is created whenever a capitalist shows up. If that were true, then conservative economics would make perfect sense: Keep rich people’s taxes low, and they’ll be able to fill the capitalist role in more and more places, creating more and more jobs.

In fact, though, any one of the three roles might be scarce. Picture a rural hospital that would love to have a cardiologist. The money and the customers are there, they just don’t have a worker. (We don’t usually think of cardiologists as “workers”, but they are.)

During construction booms, production might be held up by all kinds of worker shortages — plumbers, electricians, carpenters. Maybe the only thing holding up a new restaurant in Tulsa is that the local workforce doesn’t include the right kind of chef. In these cases, it’s the worker who is the “job creator”, not the capitalist. What triggers the existence of the job is the arrival of the scarce worker, who could be hired by any of a number of interchangeable capitalists.

In the recent recession, workers and capitalists have both been abundant, but customers have been scarce. Business Insider puts it like this:

If a company is going to hire someone, then a crucial question they must ask is: Is this person going to help make or do something that someone is going to buy. You can talk all you want about taxes or regulation, but if end demand for a product or service isn’t there, there’s no reason for a company to hire.

That’s the logic of stimulus: Put more money in people’s pockets and they will create jobs by becoming customers.

(That insight, by the way, provides the proper response to the slogan “I never got a job from a poor person”. You’ll also never get a job from a capitalist with no customers, no matter how rich he is or how little tax he pays.)

Finally, let’s consider the economic environment. Suppose a new interstate gets built, with an exit near a town that has a lot of unemployment. Three local businessmen want to build a fast-food franchise on a choice piece of land near the exit, and the Burger King franchisee outbids the McDonalds and Dunkin Donuts franchisees. So the Burger King gets built and employs 15 burger-flippers.

As soon as the new interstate changed the economic environment, all three roles were abundant. So who “created” those 15 jobs? The government did, by building the interstate. Government infrastructure projects have created jobs as far back as the Erie Canal, which made Buffalo into a grain-processing center.

But wait. Government can’t create jobs. Everybody knows that: Rick Perry, Ron Paul, Herman Cain, Eric Cantor, everybody. If you’re too stupid to understand why not, this conservative economist will explain it to you.

Maybe they all need to think it through again.

But let’s get back to the original topic: How many jobs did Mitt Romney create or destroy during the business career that netted him a quarter billion dollars?

Quite possibly none. If capitalists weren’t the scarce commodity in the deals he did, Romney might have been just another interchangeable cog in the economic machine. He probably is no more responsible for the jobs at Staples than the clerks who man the counters or the people like me who get our copying done there. Maybe the store would be in a different place, wear a different name, and employ different people, but as far as the overall economy is concerned it would make no difference.

Ditto for the job destruction in companies like AmPad. Money was there for pirates to capture, and there were plenty of them around. Mitt was the pirate who captured that particular treasure ship (and he’ll have to work out the ethics of it with his conscience and his God) but did he change anything? Ultimately, probably not.

January 16, 2012 – 12:16 pm Categories: Articles | Comments (9)

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Truth Vigilantes and other short notes

The most clueless post of the week came from the NYT public editor Arthur Brisbane: Should the Times Be a Truth Vigilante? Brisbane was

looking for reader input on whether and when New York Times news reporters should challenge “facts” that are asserted by newsmakers they write about.

So if a “newsmaker” says the sky is green, should the Times let that stand? or explain to its readers that the sky is actually blue?

That post drew 327 comments and countless responses from bloggers and other pundits, almost unanimously (except for National Review) saying: If you have to ask that question, the Times is in worse trouble than we thought.

Brisbane wrote a follow-up claiming that we had all misunderstood the question, which prompted another avalanche of responses saying that we understood it perfectly.

Greg Sargent sums up current practice, which is to print a fact-check column once (maybe), but not reference it when a false claim gets repeated again and again. Result: “any Times customer reading [the false claims] comes away misled.”

Glenn Greenwald translates newsmaker to mean “those who wield power within America’s political and financial systems” and points out that critics of the newsmaking elite get a different treatment: “their statements are subjected to extreme levels of skepticism in those rare instances when they’re heard at all.”

Jay Rosen gives a long-term perspective:

Something happened in our press over the last 40 years … the drift of professional practice over time was to bracket or suspend sharp questions of truth and falsehood in order to avoid charges of bias, or excessive editorializing. Journalists felt better, safer, on firmer professional ground–more like pros–when they stopped short of reporting substantially untrue statements as false.

Salon’s Marcus Cederstrom asks the question I’ve been wondering about for weeks: What if Tim Tebow were Muslim?

In all the uproar about American Marines urinating on Taliban corpses, one point hasn’t gotten much attention: All the way back to George Washington, America has tried to maintain a code of honor for its troops. (We didn’t always succeed, but we always tried.) Why?

Here’s why: The American ideal is the citizen soldier who eventually rejoins civilized society. America’s fighting men and women are not supposed to be packs of jackals that we unleash on our enemies and then forget about. They are us, and when they’re done with the disagreeable job of war, we intend to welcome them home.

So when Dana Loesch says, “Come on, people, this is a war“, she may think she’s supporting our troops, but she isn’t. By implying that barbaric behavior is normal in our military, she’s undermining our soldiers’ eventual re-integration into civilian life.

If this is how Loesch pictures Marines, how will she feel when an ex-Marine moves in next door or wants to marry her little sister? Or has the distance between Marines and media stars grown so great that such possibilities are unthinkable now?

While I enjoy Jon Stewart’s pokes at our political system from the outside, nothing tops the way Stephen Colbert demonstrates its abusrdity from within.

When it became clear that unaccountable Super-PACs were going to dominate the 2012 election cycle, Colbert started one: Americans United for a Better Tomorrow Tomorrow. It’s a stunt, but it’s not just a stunt. He really raised money and put ads on TV in Iowa.

This week, Colbert demonstrated the absurdity of Super-PACs that are devoted to one candidate (but allegedly don’t co-ordinate with that candidate’s campaign) by transferring his Super-PAC to Jon Stewart and then announcing his own candidacy for president. Colbert and Stewart worked out their “non-cooperation” agreement on national TV.

Vodpod videos no longer available.

And now, the Super-PAC has the absurd anti-Romney attack ad Mitt the Ripper on the air in South Carolina: If Romney really believes corporations are people, then he was a serial killer during his time at Bain Capital.

It was amazing to watch how quickly and effectively the Republican establishment moved to shut down criticism of Romney’s “vulture capitalism“. TPM’s 100-seconds series captured it:

Vodpod videos no longer available.

The point here seems to be that capitalism transcends good and evil. To make any moral comment on Romney’s business practices is beyond the pale, and puts you on the road to Soviet Communism. Such a nihilistic argument is pretty weird for a party that claims to be the natural home of American Christians.

Dahlia Lithwick: “If a Republican successor of Obama gets to replace both Kennedy and Ginsburg, it’s fair to predict that the Roberts Court may include five or even six of the most conservative jurists since the FDR era.” We wouldn’t just see a loss of abortion rights, but “a jurisprudence that skews pro-business, pro-life, anti-environment, and toward entangling the church with the state.”

If you haven’t checked out Vi Hart’s YouTube channel, you’re missing the Internet’s best example of charming geekiness.

It’s always important on MLK Day, to remember just how radical King was. He didn’t promote a vague be-nice message, but took outside-the-current-mainstream stands on major issues.

January 16, 2012 – 11:50 am Categories: Short Notes | Comments (1)

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Inventing the Narrative

When we talk about the process, then, we are talking, increasingly,
not about “the democratic process,”
or the general mechanism affording the citizens of a state a voice in its affairs,
but the reverse: a mechanism seen as so specialized
that access to it is correctly limited to its own professionals,
to those who manage policy and those who report on it,
to those who run the polls and those who quote them,
to those who ask and those who answer the questions on the Sunday shows,
to the media consultants, to the columnists, to the issues advisers,
to those who give the off-the-record breakfasts and to those who attend them;
to that handful of insiders who invent, year in and year out,
the narrative of public life.

– Joan Didion, “Insider Baseball” (1988)

In this week’s sift:

  • Escalating Bad Faith, Part I: Recess Appointments. The controversy over President Obama’s recent recess appointments sounds boring and technical, but it’s a symptom of a cancer in our democracy that has been growing for decades.
  • The Four Flavors of Republican. How NeoCons, Corporatists, Theocrats, and Libertarians co-operate and conflict.
  • My Boring Primary Season and other short notes. Ah, for the halcyon days of 2007, when presidential candidates by the dozen vied for my attention all summer. Mitt as “locust capitalist”. Why “equality of opportunity” is a risky meme for conservatives. The real lesson of Kim Jong Il. Santorum’s Grampa was “free” to owe his soul to the company store. Montana’s Supreme Court rejects corporate personhood. And more.
  • Last week’s most popular post wasn’t that popular: Under-reported Stories of 2011 got 143 views. The most-clicked link was the Salon Hack List.
  • This week’s challenge: If you don’t already know, find out who the likely congressional candidates are in your district, and whether you have a senatorial election this year.
January 9, 2012 – 1:08 pm Categories: Weekly summaries | Post a comment

Escalating Bad Faith, Part I: Recess Appointments

This week conservatives had a new reason to be outraged at President Obama: He appointed Richard Cordray head of the new Consumer Finance Protection Bureau, plus he added three members to the National Labor Relations Board.

What’s the problem with that? Well, these are recess appointments, a power that the Constitution gave the President so that vital posts wouldn’t go unfilled during the months when Congress was out of session.

In the era of cell phones and jet planes, recess appointments are an anachronism, because it’s quick and easy to call Congress back into session for anything really important. But in the last few administrations they’ve become part of an escalating power struggle between Congress and the President. As the struggle continues, the positions of both institutions (under either party) get further and further from anything the Founders wanted or should have wanted.

The point of this series (for which recess appointments are just the most timely example) is to highlight a crisis that gets very little attention in the mainstream media: escalating bad faith in government. Whoever started it (being a Democrat, I see most fault on the Republican side), these downward spirals are very hard to stop, and they’re extremely dangerous to the future of democracy.

History. The recess-appointment struggle starts with Article II Section 2 of the Constitution:

[The President] … by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law … The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.

For years that clause was interpreted to mean that the two branches would work together in good faith: The President would nominate reasonably acceptable people and the Senate would approve them unless they found something seriously wrong. Just disagreeing with a nominee was generally not enough — to reject him or her you needed to find a scandal of some sort. (That’s the plot of the 1959 Pulitzer-winning political novel Advise and Consent.)

Until recent decades, rejections were rare. In 1968, the Senate filibustered President Johnson’s appointee for Chief Justice, pointing to some questionable speaking fees. (The vote was roughly bipartisan, with 19 Democratic senators voting not to end the filibuster.) In 1989, President Bush’s nomination of John Tower as Secretary of Defense was rejected because of his personal life. (Only one Republican senator voted against him.)

President Reagan and the Democratic Senate both escalated the battle in 1987: Reagan slapped the new Democratic majority in the face by nominating the extreme conservative Robert Bork to the Supreme Court, and the Senate slapped back by rejecting the nomination on ideological grounds, without finding a scandal.

Filibusters on ideological grounds, at least for judicial nominations, became standard during the Clinton and Bush Jr. administrations, but most posts within the executive branch continued to be filled with only minor friction, on the principle that the President should be able to work with people of his own choosing.

Two major non-judicial nominations the Democrats held up during the Bush years were John Bolton as UN ambassador and Steven Bradbury as head of the Justice Department’s Office of Legal Counsel. Bush Jr. used a series of temporary recess appointments to put them in office long-term — clearly not what the Constitution meant that power for. The Senate struck back by holding pro forma sessions — leaving a skeleton crew in Washington to open and close the Senate every week, so that it would not legally be in recess — even though it was in recess in any practical sense.

Since their numbers increased in 2010, the Senate’s Republican minority has escalated again: Nominees are filibustered (or their nominations are simply ignored) not even because of their ideology, but because of general policy issues unrelated to the nominee. Republicans don’t want the NLRB or the Consumer Finance Protection Bureau to function at all. But they don’t have the votes to abolish them, so they refuse to consider nominations for those positions. They have defended that refusal against recess appointments with the same pro-forma-session technique the Democrats used against Bush. (With this added wrinkle: The Senate’s Democratic majority can’t end the session because the Constitution won’t let it as long as the Republican-controlled House is in session.)

Now Obama has re-escalated by refusing to recognize the pro forma sessions and making recess appointments anyway. This, Republicans say, is a “tyrannical abuse of power“.

And it is, in some sense. But without it the Senate minority’s abuse of power stands unchallenged. The Founders never intended any of this.

This is part of a pattern in which all sides are acting in bad faith, and have been for decades. (And it’s not the only example, as I’ll discuss next week. Signing statements are another.) It creates a vicious cycle in which each escalation challenges the other side to either accept a defeat that seems illegitimate or to escalate further. There seems to be no obvious place for this to stop.

Next week: At the end of this road democracy unravels, because democracy depends as much on good faith as on elections and constitutions.

January 9, 2012 – 1:04 pm Categories: Articles | Comments (10)

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The Four Flavors of Republican

As I’ve explained elsewhere, the news media does a good job at telling us what is new today, but a bad job of explaining the context-providing frames that the insiders have known all along.

That is showing up big-time in the coverage of the Republican presidential campaign. Let a new poll come out or one candidate launch a new sound bite at another, and CNN is all over it, whether it actually makes any difference or not. That’s how we wind up with so much coverage of manufactured events like August’s Iowa Straw Poll, which in retrospect did not even say much about last Tuesday’s Iowa Caucus, which in itself was a bit of a manufactured event.

On the other hand, the background truths that insiders take for granted are never “new”, so they don’t make headlines.

I thought I’d fill in one of those gaps by asking: What is this thing called “the Republican Party”? What are its components? How do they fit together? And how do the various candidates relate to them?

The four components. Republicans come in one of four basic flavors: NeoCons, Corporatists, Libertarians, and Theocrats. I don’t call them factions because the boundaries between them aren’t clear-cut. You can pitch many of the same pitch ideas to all four, but each requires its own spin.

Take global warming. All four flavors are potential climate-change deniers, but each requires its own argument: Tell Corporatists that regulating or taxing carbon will cut profits. Tell Libertarians that global warming is a conspiracy to impose world government. Theocrats will also buy the conspiracy angle, if you emphasize that the plot was concocted by the same evil scientists behind the evolution conspiracy. Tell NeoCons that any carbon restrictions we accept will work to the advantage of the Chinese.

But they aren’t just tribes speaking different languages. Their substantive differences show up most clearly on drugs. Libertarians want to legalize drugs, because what business is it of the government’s anyway? This position is anathema to the Theocrats, who see the government as the guardian of public morality. NeoCons fundamentally don’t care, while Corporatists would happily make money selling either heroin in elementary schools or helicopters to the DEA or both.

Get the idea? Now let’s go through them one by one.

  • NeoCons are the people who gave us the Iraq War. Their highest priority is that the United States remain the top military power in the world, and that we use our power to prevent the rise of any rival powers. Their #1 issue in this election is Iran. When a candidate says we have to do “whatever it takes” to prevent Iran getting a nuclear weapon, he (now that Bachmann has dropped out I’ll refer to candidates as he) is appealing for NeoCon support. Of all the remaining candidates, Newt Gingrich is the clearest NeoCon choice.
  • Corporatists champion the interests of corporations and want to weaken government, unions, or any other power that might resist corporate dominance. Often they borrow the individualistic rhetoric of the Libertarians, but their motivation is different: They want decisions made by individuals because individuals are no match for corporations. Mitt Romney was the corporatist candidate even before he said, “Corporations are people, my friend.“
  • Libertarians want government restricted to defending people and property against crime, defending the borders against invasion, and enforcing contracts. If you don’t want the government to restrict your neighbor’s right to build a nuclear power plant in his back yard, you’re a Libertarian and your candidate is Ron Paul.
  • Theocrats (a.k.a. Social Conservatives or the Religious Right) believe that morality is eternal and established by God, and that society will collapse if it diverges from this God-given script. Therefore the government should promote true morality and punish deviance. They are especially obsessed with anything that changes gender roles: abortion, gay rights, and even contraception.

It’s possible to organize them on two axes, as in the diagram: Corporatists and Libertarians want weak government, while Theocrats and NeoCons want government strong enough to control your bedroom and tap your phone. Libertarians and Theocrats have a populist/outsider mentality that is suspicious of experts and prone to conspiracy theories. Corporatists and NeoCons have an elitest/insider mentality, believing that people are stupid and need to be manipulated into doing what’s best. Insiders see outsiders as useful idiots; outsiders sense this attitude and resent it.

Trust and volatility. This coalition goes back to Reagan, who virtually invented the useful-idiot theory, using social issues as bright, shiny objects to get Theocrats’ attention, but not actually doing anything about them once in office. As Thomas Frank put it in What’s the Matter With Kansas?:

Values may “matter most” to voters, but they always take a backseat to the needs of money once the elections are won. … Vote to stop abortion, receive a rollback in capital gains taxes. Vote to make our country strong again; receive deindustrialization. Vote to screw those politically correct college professors, receive electricity deregulation. Vote to get government off our backs; receive conglomeration and monopoly everywhere from media to meatpacking. Vote to stand tall against terrorists, receive Social Security privatization. Vote to strike a blow against elitism; receive a social order in which wealth is more concentrated than ever before in our lifetimes, in which workers have been stripped of power and CEOs are rewarded in a manner beyond imagining.

The outsider groups have been catching on lately, which is how they turned the tables in the 2010 elections: The Tea Party was supposedly all about economic issues, but once in office the first priority was restricting abortion.

That’s why the Republican electorate has been so jittery in the 2012 cycle, jumping from candidate to candidate and asking who the “real” conservative is. Everybody is afraid of getting played — except for the Corporatists, who have complete confidence in Romney.

Agree/Disagree. Four groups means six relationships.

  • Corporatist/NeoCon. Agree: Control the world’s oil. Install pro-capitalist, pro-globalization governments. Disagree: Iran (Corporatists want to make money trading with them) and immigration (NeoCons worry about the border, Corporatists want cheap labor).
  • Corporatist/Libertarian. Agree: Cut taxes and regulations, including regulations on campaign contributions. Disagree: convergence of Wall Street and Washington (Libertarians want to abolish the Fed, Corporatists want cheap loans from it).
  • Corporatist/Theocrat. A diagonal relationship; mostly they can co-operate because their issues have so little to do with each other. Agree: oppose anti-poverty programs, see wealth as a sign of God’s blessing. Disagree: globalization.
  • NeoCon/Libertarian. Another diagonal relationship, but more fraught. Agree: on substance, not much. Disagree: foreign wars, civil liberties.
  • NeoCon/Theocrat. Onward Christian soldiers. Agree: American exceptionalism, Pro-Israel, anti-Muslim, no gays in the military. Disagree: NeoCon indifference to social issues.
  • Libertarian/Theocrat. Agree: against liberal judges. Disagree: government as a moral watchdog.

Unifying rhetoric. Talking out of four sides of your mouth is a good trick, even for a professional politician. So spinmeisters have developed variety of rhetorical tropes so that the same words are heard differently by different people.

To give just one example, Theocrats and Libertarians share attitudes, but not policies. Both are nostalgic: Libertarians for the Robber Baron era of the late 1800s, Theocrats for the Great Awakening of the 1700s.

Worshipful rhetoric about the Founders is designed to appeal to both. Theocrats believe the Founders established a Christian Republic, while Libertarians identify the Founders with limited government — too limited to get into your bedroom or your medicine cabinet. So a candidate need only say “the Founders” and each group will fill in the picture it likes.

Fault lines. Ronald Reagan and George W. Bush unified the four flavors, but this year no candidate does. NeoCons can’t support Ron Paul, Libertarians can’t support Rick Santorum, and Theocrats can’t support Mitt Romney. That’s why Republican insiders keep having fantasies about some new candidate — it’s basically the same fantasy they had about Rick Perry before he turned out to be an idiot: a tough-talking, pro-business, Christian Reconstructionist who wants to abolish the EPA.

Each non-fantasy candidate exposes a different fault line, so expect Obama to run differently depending on who the Republican nominee is. His increasing economic populism of late is evidence that he expects to run against Romney.

January 9, 2012 – 12:57 pm Categories: Articles | Comments (10)

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My Boring Primary Season and other short notes

Primary season in New Hampshire has been dull this year. There’s no Democratic race, and Republican candidates conceded the state to Romney a long time ago. Plus, it’s been harder to find out where candidates are, and a lot of their speeches are at business-club meetings or other gatherings the rest of us aren’t invited to.

Ah, the old days. About a dozen candidates campaigned here all through the summer of 2007. It didn’t take effort to see them, it took effort to avoid them. One day I saw a crowd gathering in front of City Hall, and found myself at a Fred Thompson rally. My wife and I went to one of our usual restaurants and discovered that Barack Obama was answering questions behind the divider.

This time around, Republican candidates didn’t arrive in force until this week. I feel like they’re asking me to dance only because prettier girls turned them down.

Wednesday I stirred myself to go hear Newt Gingrich in Manchester, and he didn’t even answer audience questions. (John McCain spoiled me. The whole point of his NH campaign was to demonstrate his amazing ability to answer unscripted questions 12 hours a day.) Here’s what I learned: Newt doesn’t want Iran to get a nuclear weapon; in spite of George W. Bush’s 8-year failed experiment, he still believes in supply-side economics; and he talks a lot about Reagan but never mentions Bush.

Stop the presses.

I suppose I’d still like to see for myself whether Rick Santorum is as scary as he seems on TV. But it’s got to be today or tomorrow, and my heart isn’t in it.

Nate Silver is giving Mitt Romney a 98% chance of winning tomorrow. Sure. Why not?

David Waldman demolishes the “Mitt Romney, job creator” myth and coins the great phrase locust capitalism. Several of Romney’s business take-overs resemble what Tony Soprano used to call a “bust out“: You borrow a bunch of money in the company’s name, take it, then declare the company bankrupt and fire everybody. Mitt is a great businessman because he figured out how to do a bust out without breaking the law.

Looks like it’s not just liberals making this point.

Once again in December: Private sector employment up, public sector down. Where is this huge expansion of government the Republicans keep talking about?

The Obama jobs record in a nutshell: During the first six months of his administration, the continuing Bush downturn destroyed 3.1 million jobs. Since then, 1.2 million jobs have come back.

As I pointed out two months ago in Jobless Recoveries Are Normal Now, it’s hard to either credit or blame Obama’s economic policies for this, because although this recession is deeper than the last two (and was already on Inauguration Day) the shape is the same. That pattern is continuing.

A popular Republican talking point is that they represent “equality of opportunity” while Democrats want government to guarantee “equality of outcome”. More accurately: Both sides want equality of opportunity, but Democrats regard inequality of outcome as evidence of inequality of opportunity, while Republicans believe the poor deserve their fate.

Paul Krugman makes two points that can’t be repeated often enough:

  1. America has less equality of opportunity than “socialist” countries like Canada.
  2. Republicans are against any attempts to make opportunity more equal.

The Economist adds this comment on the politics of the opportunity/outcome argument:

The risk in Mr Romney’s position is that, to the extent that people recognise that the staggeringly rich keep getting wealthier while regular people aren’t getting anywhere, arguing that this represents “equality of opportunity” is saying that regular people don’t deserve to get ahead. The reason Mitt Romney is fabulously rich and you aren’t, on this telling, is that he deserves it and you don’t.

Try telling that to this couple.

Want to explain “socialism” to your conservative friends and family? Let Nurse Pam help.

I love Keith Olbermann — not the least for giving Rachel Maddow her big break — but do you get the impression he might be hard to deal with?

I keep waiting for somebody to draw the right lesson from the death of Kim Jong Il: Kim had nuclear weapons for the last 3-5 years of his life and never used them.

Every time the NeoCons beat the drum to attack another country (as they’ve doing with Iran for years now), the message is: “Their ruler is crazy. Deterrence won’t work with somebody like that.” We heard it about Saddam, and now we’re hearing it about Ahmadinejad.

This is great framing for the warmongers, because it tempts peaceniks to defend the sanity of somebody the American public doesn’t like. “Saddam/Ahmadinejad/the-next-villain is saner than you think” isn’t a winning political message.

Now we have a better response: “Is he crazier than Kim Jong Il?”

Rick Perlstein: To Rick Santorum, “freedom” means owing your soul to the company store.

My prediction of a Santorum victory in Iowa was off by eight votes. Or was it?

Montana’s Supreme Court just made a direct challenge to Citizen’s United. I’ll try to explain better after I read the decision.

When banks become hot investments, watch out. Good banking is boring banking.

January 9, 2012 – 12:35 pm Categories: Short Notes | Comments (2)

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Predictions

I confess that in 1901, I said to my brother Orville that man would not fly for fifty years . . . Ever since, I have distrusted myself and avoided all predictions. — Wilbur Wright, 1908

Within the next few decades, autos will have folding wings that can be spread when on a straight stretch of road so that the machine can take to the air. — Eddie Rickenbacker, 1924

In this week’s sift:

  • Is a Boom Coming in 2012? Karl Smith and Matt Yglesias predict one, for not-entirely-crazy reasons.
  • Iowa Preview. Santorum? Could it really be Santorum?
  • Under-reported Stories of 2011. While the media was telling you about Charlie Sheen and Kim Kardashian, some genuinely important things were happening.
  • Strategic Voting and other short notes. When does it make sense to vote in the other party’s primary? WikiLeaks has a priceless commercial. What real 3DTV looks like. Why Romney won’t release his taxes. And two good Krugman columns.
January 2, 2012 – 1:22 pm Categories: Weekly summaries | Post a comment

Is a Boom Coming in 2012?

One of the big debates on the economic blogs right now is whether the upbeat end of 2011 was just a blip or the beginning of a genuine trend.

“What upbeat end to 2011?” I hear you ask. So let’s back up and start there.

Recent numbers. The most obvious thing was the decrease in the unemployment rate from 9.1% in September to 8.6% in November.

By itself, though, that number isn’t too impressive, particularly since it’s only partly due to new jobs and partly to people leaving the work force. But other numbers support the idea that things are turning around: In November and December, housing starts began to increase and more people bought new cars. Plus, Christmas spending was up.

The optimistic view (championed by Karl Smith at the economic blog Modeled Behavior and popularized by Slate’s Matt Yglesias) says that (1) these things are important, and (2) they will continue.

Houses and cars matter. At the most immediate level, recessions happen because people stop spending. That causes production to drop, so other people lose their jobs. Then they also stop spending, and things spiral downward.

But this is like saying that you’re hungry because you haven’t eaten enough — it’s true, but it ignores any underlying causes. You might be dieting or hunger-striking. Or maybe there’s a famine or you’re poor in a rich country or your jailer has cut your rations. Telling a hungry person “You should eat more” isn’t wrong, but it’s not always helpful.

Bearing in mind that why we haven’t been spending might matter, a huge part of how we haven’t been spending is that we haven’t been buying cars and houses. Smith points at this graph of domestic spending with (red) and without (blue) housing and transportation.

The blue graph looks like a relatively mild recession, while the red one reflects the deep recession we really had. Smith says that the drop in (red) spending amounted to $400 billion, of which $200 billion was decreased construction. Over a somewhat longer period, the construction-spending drop was $500 billion and the automobile-spending drop was $240 billion.

And that makes sense: If (like most people) you continued to have an income during the recession, you probably didn’t stop eating or paying your utilities. But you quite likely did get anxious enough to put off buying a new car or house.

Why the up-tick might continue. Trends always spread too far and last too long. People who are honestly worried about losing their jobs really shouldn’t buy new cars or houses. Once a recession gets going, though, even people who need, want, and can afford new stuff will delay buying it out of a general sense of uneasiness.

But eventually those people get tired of waiting for the sky to fall, and go out and buy stuff anyway. When they do, a virtuous cycle replaces the vicious cycle of recession: Their spending gives other people jobs, so those people also spend more, and so on.

Smith and Yglesias see pent-up demand that is about to burst out. Seattle TV station KOMO reports:

Back in 2008, when Consumer Reports asked people about their primary vehicle, the average age was 5 years old. Today, it’s 9 years old.

Ditto for housing: We more-or-less stopped building houses in 2008, but new households keep forming. Smith believes the household-to-house ratio is approaching 1, and that any uptick in the economy will increase household formation even further. He predicts:

this is at least suggestive that there is a looming outright housing shortage.

And Yglesias amplifies the point:

But every downward tick in the unemployment rate is another twentysomething moving out of his parents’ basement, stimulating a return to a more normal level of construction. … This increase in economic activity will boost state and local tax revenue and end the already slowing cycle of public sector layoffs. Re-employment in the construction, durable goods, and related transportation and warehousing functions will bolster income and push up spending on nondurables, restaurants, leisure and hospitality, and all the rest. Happy days, in other words, will be here again.

Why it might not. Yglesias suggests one reason his rosy scenario might fail: The boom would also increase inflation, which the Fed might decide to resist by raising interest rates, thereby smothering the boom in its cradle.

But other economic bloggers (and even other Smiths) doubt the whole scenario. Naked Capitalism’s Yves Smith, for example, gets back to that underlying-cause thing:

People and businesses are not going to borrow and invest if they are not confident of their future. With short job tenures, over 30 years of stagnant real worker wages (and falling in the most recent 12 months), exactly what is there for the bulk of the population to be optimistic about?

We’ve had a very successful three decade effort to break the bargaining power of labor, and covered that up with rising consumer debt levels. That paradigm is over, but no one in authority seems willing to go back to an economic model where rising worker wages drive economic growth. Until we get policies that address that issue, I don’t see a reason to be expect robust growth levels.

She also doubts that house-construction will make any serious move until the overhang of foreclosed properties gets sold to people who can afford them.

The business cycle. At its root, the Smith/Yglesias boom prediction is a classic business-cycle argument: Things only go so far up or down before natural forces turn them around.

Like Yves Smith, I’ve been arguing for a while (here and here) that we don’t have a classic business cycle any more. As wealth gets more concentrated, our booms and busts have more to do with investment bubbles than with production and consumption. We don’t “recover” quickly, because what we’re “recovering” to was never real.

Some of Karl Smith’s pent-up demand isn’t real either. For example, I am one of those people driving an old car: My 2002 Saturn Vue has 168K miles on it, more than I’ve put on any other vehicle. But because quality has improved, it still runs great. I’m not pining to get rid of it as soon as I have a little money.

I also have a 5-year-old laptop computer. Not so long ago, a 5-year-old laptop was a museum piece, a 286 in a Pentium world. But in the cloud-computing era, 5-year-old laptops also work just fine.

Then we come to housing, and those under-employed 20-somethings who want to get out of their parents’ houses — my nephew, for example. The career path of most 20-somethings I know doesn’t resemble anything my generation would have called a “career” thirty years ago. Today’s “career” is a string of temporary jobs, possibly united by some kind of theme.

If we have a boom, those temporary jobs will last longer and pay more — maybe even a lot more, if things really get rolling. But they won’t become pre-Reagan-era careers, so buying a house still isn’t going to make sense. The argument that housing always goes up — people really said that not too long ago — isn’t going to ring true for a long time to come. And if your next temporary job is a thousand miles away, that house you can’t sell is an albatross, not an asset.

So I agree with bankruptcy lawyer Max Gardner: “We’re turning into a Nation of renters rather than homeowners.” We can’t invest in stable housing because (even in good times) we don’t have stable jobs.

Split the difference. When I examine my objections, though, they mainly say that the forces the optimists point to aren’t as strong as they think, not that those forces don’t exist at all. My Vue and my MacBook aren’t going to last forever. And maybe my nephew will rent an apartment rather than buy a house, but somebody will still have to build that apartment and make the appliances to fill it.

So even if the business cycle isn’t the only thing happening any more, there still is a business cycle, and it does seem to be pointing up.

So are happy days going to be here again in 2012? Probably not. Has the country solved its long-term economic problems? No. But I think it’s as if we’re in the spring of a cold year: We’re still going to get a summer, and it will be warmer then than it is now.

January 2, 2012 – 1:17 pm Categories: Articles | Comments (3)

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Iowa Preview

Given how accurate Nate Silver was in predicting the primaries in 2008, my basic rule of thumb says: Whatever polls can tell you, Nate has already figured out. His Iowa model is here. Last I looked it had Mitt Romney as the favorite, narrowly ahead of Ron Paul and Rick Santorum.

So I start with Nate’s projections and then ask, “What can’t polls tell you?” In caucuses, a lot of factors are impossible to poll, like: Who’s going to show up? A caucus is a bigger time commitment than just voting — it’s an actual business meeting of the local party and takes all evening. So Republicans who are busy Tuesday night or aren’t that interested in politics aren’t going to turn out. On the other hand, all voters willing to change their registrations to Republican are eligible to vote at a Republican caucus, so a certain number of Independents and even Democrats (who nobody has been polling) are going to be there.

Since a caucus is a face-to-face event, a candidate’s supporters get one more chance to convince the undecided. Lots of people (41% in the final Des Moines Register poll) say they could still be convinced to change their minds — how do you poll for that?

So if you want to go beyond what’s in the polls, you need to ask: Who are these mercurial voters? What’s going to make them enthusiastic enough to give up an evening of their lives? And why might they change their minds at the last minute?

For weeks, reporters have been combing the plains of Iowa looking for the typical Republican caucus voter. To me, the one that sounds most authentic comes by way of TPM’s Evan McMorris-Santoro: Curtis Jacob is a religious-right social conservative who voted for Huckabee last time around and thought a few weeks ago that he would vote for Herman Cain.

Jacob describes a three-step process of deciding who to support. First comes the ideological hurdle — the candidate’s got to say the right things. This is a non-factor in this election, because (other than Ron Paul’s isolationism) it’s hard to tell the difference between the candidates’ positions.

Then there’s the authenticity hurdle: “ok, is this person real? — are they the same in person as opposed to the speeches they give?” Jacob eliminates Romney and Huntsman, apparently because he believes their hearts really aren’t in all the social conservative positions they’re taking (and maybe — he doesn’t say this — because they’re Mormons).

Finally he asks who can win.

And that’s why the yo-yo in the polls, because, ok, we think this is what we want, is electable then they get beat up and we think, ‘oh, maybe not.’ So then we go for the next one.

The candidates who have been yo-yoing are the ones he’s choosing among. (Romney has steadily polled around 25% while Bachmann, Perry, Cain, and Gingrich have each had a boom/bust cycle.)

Of the candidates in Jacob’s acceptable pool, Paul and Santorum are having the final surges. Each has an additional advantage: Santorum’s surge has come so late that nobody is running negative ads against him, and Paul is going to pick up votes from unpolled Democrats who want to end the wars and repeal the Patriot Act.

If Jacob is really typical of undecided Iowa Republicans, you’d expect to see support bleed away from Bachmann, Perry, and Gingrich at the last minute and flow to Santorum or Paul. The final polls (showing Romney narrowly leading) probably accelerate that process. The most persuasive caucus-day message is going to say: If you’re not voting for Santorum or Paul, you’re handing the victory to Romney.

Any of the three could win, but if I had to bet, I’d say Santorum.

January 2, 2012 – 12:59 pm Categories: Articles | Comments (5)

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Under-reported Stories of 2011

You didn’t need some blogger to tell you that Charlie Sheen flipped out in 2011, or that Kim Kardashian got married and divorced. It was everywhere. You couldn’t miss it. But one valuable service that the blogosphere and the alternative press provide at the end of every year is to raise the question: What important stuff didn’t you hear about?

It’s got a few flaws, but my favorite such list for 2011 is AlterNet‘s. These stories weren’t censored, exactly, they just went by so fast that you had to really be paying attention to catch them.

  1. 2011’s carbon emission increase was the largest ever.
  2. 50,000 Iraq War refugees have been forced into prostitution in Jordan or Syria. (Thanks for liberating us, America.) [Caveat: The links AlterNet gives are horrifying, but I can’t find the 50K statistic in either of them. This study looks authoritative and says 5,000, which is bad enough. Maybe somebody at AlterNet typed too many zeroes.]
  3. More activity-duty troops are killing themselves than are dying in combat.
  4. Drone strikes kill innocent civilians.
  5. Record numbers of US kids face hunger and homelessness. The homeless total is higher than after Hurricanes Katrina and Rita in 2006. The 2010 raw numbers for hunger were a record, but the percentages were about the same as 2009.
  6. Prison hunger strikes protest long-term solitary confinement. If you aren’t crazy when you start your ten-year time-out, you will be when you finish.
  7. 5,000 kids are native-born American citizens, but they’re in long-term foster care because we deported their parents.
  8. The FBI is training its agents to suspect all Muslims. The religious bigotry here is bad enough by itself, but it also promotes the very terrorism the FBI is supposed to fight: “depicting Islam as inseparable from political violence is exactly the narrative al-Qaida spins — as is the related idea that America and Islam are necessarily in conflict.”

Several other most-under-reported lists were less interesting (New Republic‘s, for example). But BlackAmericaWeb.com has a suggestion that could be on the list every year: any missing black woman. Derrica Wilson of the Black and Missing Foundation says, “It just seems like our lives are less valued.”

A couple of stories suggested by Current TV’s Josh Sternberg are worth a look:

Every year has dogs that didn’t bark — important things that should have happened, but didn’t. Usually those non-events pass without notice, so hats off to the NYT for highlighting this one: After investigating the 2010 Upper Big Branch mine disaster, Congress should have closed the loopholes that let Massey Energy risk its employees’ lives until 29 of them died. But it didn’t.

Religion never gets covered properly in the corporate media. When the media pays attention at all, it’s usually for some stupid reason like the trumped-up War on Christmas, or to cover some tiny sect of weirdos like the Westboro Baptists. But religion is pretty important in America and important developments must happen there from time to time. So who covers that stuff?

Check out Religion Dispatches. In particular, look at their Top 2011 Religion Stories That Weren’t: the Vatican’s clout in historically Catholic countries like Spain and Ireland is shrinking; a pioneering gay-friendly church is losing its identity now that mainstream denominations are open to gays; fewer Americans believe the US plays a special role in God’s plan; plus several other developments you won’t see on CNN.

But I especially want to call your attention to this neglected religion story: “Upside-Down Ideas About Religious Liberty” (which Kevin Drum also noticed).

In the past, the social service arms of religious bodies understood that if they wanted public money they would need to honor public law regarding the disposition of the money: i.e., provide the full range of mandated services on a universal basis. We used to say to objectors, “If you don’t like the mandate, don’t take the money.”

Apparently such a commonsensical response is now insufficiently deferential to religion. More and more people seem willing to say that if a Catholic health care provider doesn’t “believe” in providing reproductive health care to women, that private belief can trump public law.

A lot of attention has come to this issue lately because Catholic Charities is pulling out of Illinois rather than help gay couples adopt children. The bishops are getting away with painting this as a religious liberty issue when it really is nothing of the kind.

The principle here is pretty simple: If you take public money, you have to serve the public — the whole public, not just the portion of the public you happen to like. Nobody in Illinois state government is stopping Catholic Charities from arranging adoptions. They can even keep discriminating against gay couples, as long as they raise their own money. The only change is that Illinois tax dollars will no longer support a bigoted program. That’s right and just, and infringes no one’s religious liberty.

January 2, 2012 – 12:49 pm Categories: Articles | Comments (2)

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