Wednesday, January 23, 2008

A modest proposal

There is now talk of a bailout of bond insurers. And that gives me an idea.

For those just tuning in, during the housing bubble a lot of financial institutions issued arcane, risky securities -- especially mortgage-backed securities and the CDOs derived from them -- and then cleverly sold them to large investors who had no idea what they were buying.

To make these shitpiles even more alluring to investors, the issuers purchased insurance policies from specialized bond insurers, called monoliners – reputed to be the keenest analysts of credit risk in the business! -- who in turn guaranteed the securities against loss.

If anyone happened to ask, it was enough to reply: “Hey, it’s insured!” And much money was made by all, and assholes merrily bought luxury condos and brunched at Balthazar and ruined great cities like London and New York.

Now we find out that the keenest credit analysts in the business were either clueless or just out to make a quick buck, leaving someone else holding the bag. The result: Losses on these securities are now so massive that they threaten to do the monoliners in. If that happens, investors holding them will finally be obliged to acknowledge that the losses are real, leading to what most people assume to be an inevitable cascade of defaults and writedowns and perhaps the total collapse of the credit economy.

So people are talking bailout.

Here’s my proposal. I offer it at no charge to any member of Congress, presidential candidate or editorial writer willing to bear the calvary of getting the stink-eye next time at Harry Cipriani. If it becomes necessary to bail out the monoliners to prevent a depression, there will be terms. For once, the highly-paid beneficiaries of a taxpayer-financed bailout will not get off scot-free.

Congress shall specify that no bailout will take place unless and until (a) every bailed out monoliner and (b) every financial institution holding a bailed-out policy certifies that its employees have voluntarily agreed to accept a 25% federal income tax surcharge on every dollar earned above $200,000 for a period of 5 years. A young hotshot earning $300,000 would see $25,000 added to his tax bill. An elder pulling down $1 million would owe an extra $200,000. Since some of the biggest Wall Street multinationals are policyholders, and since this would apply to every one of their employees over $200,000, we could be talking about a lot of people and a lot of money. It could even go some way towards making the bailout pay for itself.

Politically, it’s a winner. Fiscally, it’s sound. It’s extraordinarily well-targeted to precisely the assholes who got us into this mess in the first place. John Edwards: Have your staff contact me through the comments box.

Monday, January 7, 2008

English pounds and Eskimo pence

Sadly No flags this rather idiotic London Times article (picked up by the Daily Mail and recently posted by Drudge) that claims that the UK is surpassing the US in living standards. Although I agree with SN's sentiment, this was among the stupider things published in a newspaper in recent times.

The supposed shift in "living standards" is actually an artifact of the dollar's depreciation. The article admits this, which just makes it even stupider. Think about it: The dollar has fallen about 25% against the pound since 2000. Do you feel 25% poorer than you were eight years ago? Swings in exchange rates are only marginally related to living standards.

Suppose the dollar fell 50%. Imports make up less than 15% of what we buy. Holding all other things equal and assuming that in response import prices rose by 50% (they wouldn't: we'd switch from imports to domestic goods and foreign companies would cut their prices to stay in the US market), our standard of living would fall about 7%. A 25% dollar drop would cause a 3.5% fall in living standards. And with the actual behavior of import prices, the fall would in fact be a lot less than 3.5%.

No, the right way to do this sort of thing is to strip out the effect of exchange rates by converting pounds to dollars using purchasing power parity (PPP). Wikipedia has a nice chart which shows that, according to IMF data, in 2006 the UK's GDP per capita was about 22% lower than ours and that number hasn't changed much since then. (Although, just because they're poorer, doesn't mean they don't have lots of rich people to ruin London.)

Of course, if you really want to measure living standards -- taking into account the potential leisure as well as the potential consumption that an economy generates -- then you'd look at the value of what we produce per hour of labor (a.k.a the level of labor productivity, a.k.a. GDP per hour worked). Here the UK lags behind us by 18%.

In France, on the other hand, the level of labor productivity is 2.5% higher than it is here. Which makes it puzzling why Obama's economics guru closed his recent New York Times commentary about American productivity with the following apropos-of-nothing quip: "The world economy may be tough on your industry but look on the bright side: you could be French."

Under President Obama, we'll be eating freedom fries - but with such idealism!

Wednesday, January 2, 2008

These are my principles. If you don’t like them, I have 37 policy proposals.

So many interesting things are being said about why the new progressive movement is, or is not, fucked. I hope I’m not violating some cosmic blog law by responding to comments with a fresh post. If I am, at least let it be said that I feel terrible about it.

1. Now, some people are saying that the Right didn’t really work out an elaborate ideology over the last 40 years - it’s just an illusion. Or it’s not a real ideology, it’s just a bunch of hallucinations from crazy people; we can all safely ignore it. This argument seems to be associated with the mistaken belief that somehow in arguing for the existence of a coherent conservative ideology, I was saying it’s an attractive ideology that we should all stand in admiration of. To state what I thought would be obvious, I am not a conservative! Far, far from it. That’s the whole reason I wrote this post. There’s a difference between saying the Right has an elaborately worked-out ideology and saying you agree with it or think it should be emulated.

2. Nevertheless - at the enormous risk of making it seem even more like I’m defending conservatism (which I’m not!) - let me say that I think the attempts by some of the commenters to “prove” that the Right’s ideology is nothing but smoke and mirrors are misguided. And here, let me be clear that I’m not talking about the idiotic vulgarized ordure that gets flung by Sean Hannity or whoever - I’m talking about the ideas that Hannity is vulgarizing. First, it’s not vital that an ideology be entirely consistent or empirically well-grounded for it to win broad appeal. I recently read a brief little introductory textbook on political philosophy, written by a British professor. He dealt with all the classics – Hobbes, Locke, Rousseau, Mill, Marx, etc. For every one of these thinkers he was able to present a devastating counterargument (usually formulated by some later philosopher) that uncovered a fatal hole in the original author’s thesis. And these are the great thinkers of the Western tradition! Proving that a system of thought has serious flaws does not prove that the system is gibberish. That’s why the philosophy journals are still to this day publishing arguments by modern-day Lockeans, utilitarians, Marxists, etc., trying to improve and refine their arguments.

3. Some of the arguments attempting to prove that conservative ideology is nonsense don’t do a very good job of it. Worse, they do liberalism no favors. To say that “conservatism isn’t really about getting government off our backs” and pointing to abortion or gay marriage or wiretaps has two big problems. One is that it doesn’t work very well. The Right says it wants limited government – a government limited essentially to the task of protecting persons and property. But since they famously believe that fetuses are unborn persons – indeed, they won’t shut up about it! – banning abortions doesn’t really violate that stricture. Wiretaps are supposedly about protecting the nation from terrorists, so those are kosher. And as for gay marriage, permitting it is neither more nor less statist than outlawing it. For the state to refuse to marry gay couples is discriminatory, but it’s not a case of government interference.

4. But the real problem with the “they’re not consistent!” argument is the unstated message it sends. Every time I hear liberals critique conservatism by saying it’s not consistent about getting the government off our backs, I always think: Is that your objection? Does that mean you’d be for privatizing Social Security as long as the Republicans were consistent about all the other stuff? There is a strong odor of insecurity coming from such rejoinders; deep down, they seem to accept the premise of the ideology they claim to have contempt for.

5. I’m surprised no one has directly attacked the weakest point of my original post, which is that I never made a case for why a coherent ideology should even be necessary for a successful movement in the first place. Some people did say they thought an ideology isn’t desirable, though. There were two lines of thought here. Grodge said we should forget about ideologies - it’s pragmatism that you really need to govern a country. Anonymous said (I think): we have no time for abstruse theories and dogmas – we have to win an election and get these fascists out of office!

All I can say is that these comments represent a very different idea of what our goals should be than mine. Which is fine; for the moment, we’re all facing in the same general direction. But I do think these sentiments – once again - reflect how enormously successful the conservative movement has been. It’s a matter of scale. Many people don’t realize or remember how radically and fundamentally Reagan changed the political horizon. It’s become a cliché to say that Clinton was working within the parameters set by the Reagan Revolution. It’s true. It’s also a cliché to say that the radicalism of the Bush administration lay in its drive to push the Reagan movement forward even further. Also true. We’ve come a long, long way since 1980. (One modest indicator: The top marginal tax rate is now 35%. The Democratic candidates say they want to restore it to 39.6%. The Republicans want to make it permanent at 35%. When Reagan came in it was 70%.) What’s astonishing to me is the number of people who are absolutely up in arms over what Bush has done, ready to revolt, stiffened by righteous anger...And yet, if you probe a bit, you find that their idea of victory is more or less to get us back to 1997. Don’t get me wrong – 1997 is a lot better than 2002. But it still puts us snugly within the Reagan parameters. (And maybe that’s on purpose: So often you hear liberals saying things to the effect that “Reagan would never have done what Bush is doing.” Yeah. Good old Reagan.) Looking at it historically, the sheer scale of the difference between that vision and mine makes me dizzy. Personally, I’m fond of 1937.

6. But there’s still that lingering question of whether an ideology is even necessary for success. I can’t prove that it is. But I’ll say this. In the long term, politics only really changes because of passionate minorities. Only superficially is it affected by the average median swing voter. When passionate minorities take shape – sociologists call them social movements – they exert a powerful, gravitational force on the rest of the public.

Ordinary, day-to-day politics is about politicians and parties vying over who most faithfully embodies the electorate’s conventional wisdom. Social movements change the conventional wisdom. In fact, at any given moment, the conventional wisdom of the day is nothing more than a sedimented accretion of ideas that were once propagated by previous social movements. There are a limited number of social movements in U.S. history, but the main examples include the Republican/antislavery insurgency of the 1840’s-1850’s; the Populist movement, 1885-1896; the CIO organizing upsurge of 1935-38; the civil rights movement; and the conservative movement of the 1960’s.

We are living in an era whose conventional wisdom was largely scripted by that movement. And that will not fundamentally change unless a new social movement of some kind materializes. If it doesn’t, Mitt Romney might still lose in 2008 -- but I guarantee you another Mitt Romney will come along and win a few years later. And with just a touch of incompetence and a debt to his base, it will be more or less a repeat of the Bush years.

Here’s my point: There has never in history been such a thing as a genuine movement committed to pragmatism and throwing the bums out. It can only happen with an ideology, a creed.

No ideology, no movement. No movement, no change in conventional wisdom.

No change in conventional wisdom and we will be alternating between Bushism and Clintonism – between 2002 and 1997 -- for the rest of our lives.

Monday, December 24, 2007

Why the “new progressive movement” is fucked

Well, maybe that’s a little too strong. It’s sometimes hard to tell what all the hoopla is about when it comes to the great progressive ascendancy that’s supposedly underway, but it’s clear that something is happening and there are a few genuinely hopeful signs.

For one thing, many liberals seem to be shedding the crippling allergy toward the left that was such a debilitating feature of Cold War-era liberalism. Some of the old shibboleths about American foreign policy are being slowly shaken off and it is now possible to occasionally stumble on once-verboeten terms like “imperialism” in the pages of respectable liberal outlets.

Of course, these verdant shoots of spring are products of the political awakening that has unfolded in the Bush years. When I started writing about politics in the mid-to-late 1990’s, the political landscape was much different. As I saw it, on this side of the valley was The Left, of which I considered myself a part. On the other side of the valley were the neoliberal centrists who played liberals on TV: fake liberals - like Cokie Roberts or Thomas Friedman. And in between there was a great empty expanse. Now that expanse is being populated by genuine liberals - bloggers like Eschaton, columnists like Paul Krugman and commentators like the younger staff of the American Prospect. All of this is good news.

So why do I say that the new progressive movement is fucked? Because they have no ideology. They lack any semblance of a creed. Now, naturally, the progressives would vigorously dispute this. Of course we have a creed! We believe in universal healthcare, combating global warming, protecting the right to abortion… [etc., ad infinitum] But that’s not a creed, it’s a list of policies. And of course, what happens when you have only a list of policies as your lodestar is that crafty politicians come along who loudly claim to embrace your goals before quietly vitiating them with a lobbyist’s scalpel and reams of fine print.

The minute these new progressives try to put their creed into words, it melts into a flavorless mush of insensible campaign rhetoric, the kind imperishably satirized by the Simpsons in an episode broadcast during the 1996 Clinton-Dole campaign. The space alien Kodos, doing his best to impersonate an American politician in a live televised debate, delivers his opening statement:

My fellow Americans. As a young boy, I dreamed of being a baseball. But tonight I say, we must move forward, not backward! Upward not forward! And always twirling, twirling, twirling towards freedom!

Now, don’t accuse me of making blanket statements without backing them up. I’m going to do no less than prove my point scientifically! A good way to illustrate what I’m talking about is to compare the mission statements of two think tanks. The first is the Center for American Progress, a central hub of the new progressivism. The second is that hallowed bastion of the conservative movement, the Heritage Foundation.

Here I will apply what I believe to be a useful technique of rhetorical analysis. Political scientists like to speak of positional issues and valence issues. The first are statements that clearly demarcate people according to their particular ideology. If a politician says “I believe gay marriage is a sinful abomination,” that's a positional statement - it puts him squarely in one camp and separates him clearly from millions of people who support gay marriage. By contrast, when a politician says, “I believe in a strong economy,” he's using a valence issue. Pretty much everyone wants a “strong economy,” whatever that means.

So here’s what I’m going to do. I’m going to reproduce each think tank’s mission statement below. Position-speak will be displayed in red. Valence-speak will be in blue. The acid test is whether or not a politician with the opposite ideology could comfortably mouth the same words. If he could, it's mere valence-speak.

Now, one caveat. In one sense, all political discourse is valence-speak. We all try to put our ideas into words that our audience will be most likely to accept. The anti-abortion movement obviously chose the moniker “pro-life” because everyone would like to think of themselves, in some sense, as pro-“life.” (Same goes for “pro-choice.”) But declaring oneself “pro-life” is nevertheless unmistakably positional, and for a very simple reason: Everyone understands exactly what it means. There is no warm, fuzzy ambiguity about it. It means only one thing: “I want to restrict abortions.”

Sometimes, however, rhetoric can be deliberately ambiguous. It can seem to point somewhat to a particular ideological position without being entirely clear. Such language is weakly positional and it will appear in green. Finally, an obvious point: My coding is ultimately, to some extent, subjective. So I'll deliberately give CAP the benefit of the doubt.

Okay, here goes. First up, the Heritage Foundation statement, which is short and sweet:

Founded in 1973, The Heritage Foundation is a research and educational institute - a think tank - whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.

There you have it. In Heritage’s brief statement, bold, clear, straightforward ideology – red predominates by a wide margin, with just a hint of blue sprinkled in.

Next up we have the Center for American Progress, which rambles on and on (already a bad sign):

As progressives we believe that America should be a country of boundless opportunity—where all people can better themselves through education, hard work, and the freedom to pursue their dreams. We believe this will only be achieved with an open and effective government that champions the common good over narrow self-interest, harnesses the strength of our diversity, and secures the rights and safety of its people.

Real progress will be achieved only through innovative solutions borne of open collaboration.

To realize our vision we must:

Build an opportunity nation where every hard-working person, regardless of background, can realize their dreams through education, decent work and fair play.

Reawaken America’s conscience, our sense of shared and personal responsibility, to build healthy, vibrant communities.

Reform government so that it is of, by and for the people: open, effective, and committed to the common good.

Use America’s strength to bring the world together, not pull it apart.

CAP’s blurb is a sea of meaningless blue nonsense. “Innovative solutions borne of open collaboration”? Even the language I generously coded as positional - "harness the strength of our diversity," "bring the world together" - is basically reheated PR-speak that one could find in any quarterly report to the shareholders.

The conclusion is inescapable: Liberals just don’t have a creed that they feel comfortable expressing in direct and straightforward language. Now, why is this? There are two reasons, I suspect. First, it’s partly a legacy of postwar ADA-style liberalism, which frequently went out of its way to depict itself as a non-ideology; a program of technocratic pragmatism and cautious experimentation - the Vital Center, in other words.

But I think the deeper reason is that if liberals tried honestly to formulate their principles in abstract terms, they would quickly discover how poorly they echo the American vernacular. Many swing-voting Americans would simply recoil from them. After all, Americans are, in the famous phrase, programmatically liberal but ideologically conservative. The hard fact is that this country’s political culture has evolved in such a way that what passes for harmless valence-talk here is actually quite right-wing, when you think about it.

For a progressive movement aspiring to ascendancy, facing that fact, and how it came to be so, would require a searching reexamination of great swaths of the hallowed American history and tradition that liberals seem to feel a constant need to pay reverent homage to – the Constitution, the Democratic Party, any number of past liberal heroes.

Much easier to keep talking about “building healthy and vibrant communities.”

Thursday, November 1, 2007

In politics, the enemy is your friend

Brad DeLong misses his rendez-vous with Carl Schmitt:
There are, in general, three ways to compete for the majority of the votes:
  1. To demonstrate that you will implement policies that will make the majority of potential voters freer, more prosperous, and happier.
  2. To convince a majority of voters that they are under an obligation to vote for your party because that is, fundamentally, who the are.
  3. To convince a majority that they are threatened by vicious and deadly enemies--and that the other party is, at some level, in league with those enemies.

The northern Democratic Party has by and large pursued the first. The northern Republican Party used to pursue the second--with Civil War memorials and Lincoln Day speaches and how the sainted martyr Abraham had saved in the Union and it was our duty to his memory to carry forward his banner.

Starting early in the twentieth century, however the Republican Party has been increasingly pursuing the third...

In the real world, (2) and (3) are actually the same thing and (1) is not possible without the other two. The only way to convince people that your political party is, fundamentally, who they are is to also make it clear that those people -- those people over there, you know who I'm talking about -- are not. They're your enemies, they want to do you harm and if you vote for the other ticket, you're voting for them.

Take the northern Republican Party of yore that Brad admires (and not wholly without reason). Of course they held Civil War memorials and made Lincoln Day speeches. But then in the peroration, they would always remind their audience once more of the perfidy of that party, the party of Rum, Romanism and Rebellion. (See the Thomas Nast cartoon above - the priest and the Irishman carving up the goose that laid the Democrats' golden eggs.)

What about the Northern Democratic Party of yore, supposedly a follower of (1)? Tom Frank once wrote about Harry Truman's Turnip Day speech, which he delivered during the 1948 campaign:

Truman was explicit: “[T]he Democratic Party is the people’s party, and the Republican Party is the party of special interest, and it always has been and always will be.” He reveled in what Mr. Klein would call “class war,” calling a Republican tax cut a “rich man’s tax bill” that “helps the rich and sticks a knife into the back of the poor” and describing politics as a contest between the “common everyday man” and the “favored classes,” the “privileged few.” Even more astonishingly, Truman went on to talk policy in some detail, with special emphasis on Mr. Klein’s hated “jobs, health-care, and blah-blah-blah”: He called for the construction of public housing, an increase in the minimum wage, expansion of Social Security, a national health-care program and the repeal of the Taft-Hartley Act. And this sort of high-octane oratory propelled Truman on to win the election in a historic upset.

Note that in this speech, Truman clinches (1) through a studied combination of (2) and (3). And if you read the speeches of Robert Wagner or FDR you'll find the same thing.

And today's Democratic Party? Over the past few decades, aided by a capacious social vision and and soaring oratorical command, the Democrats have perfected a form of political appeal more stirring and irresistible to the democratic masses than any ever devised. I'd summarize it this way: "This election isn't about ideology. It's about competence."

Tuesday, October 30, 2007

David Brooks: Hope springs eternal

Today's Brooks on "The Happiness Gap":

this election will be shaped by the gap within individual voters themselves — the gap between their private optimism and their public gloom....

....The polling — and I, for one, believe people are pretty sensible when it comes to evaluating their own lives — suggests that people are not personally miserable or downtrodden.

Their homes are bigger. They own more cars. They feel more affluent. In a segmented nation, they have built lifestyle niches for themselves where they feel optimistic and fulfilled.

Today's report from Stan Greenberg's polling shop (PDF):

In the focus groups, we handed people a page of
positive facts about the economy – and we nearly
had to rescue the moderator from the disbelieving
and angry participants. In fact, before this
exercise, we asked people to write down two
important things happening with the economy and
none of the 40 participants said anything
positive, with their negative notations centered
on the high “cost of living.” It is hard to
underestimate the power of a Democratic message
that simply recognizes the economic realities
that are very real for these voters. Indeed, the
very invisibility of their issues is for them
evidence that this economy works for the big
economic actors, not for average Americans: “this
applies to a bigger business and the wealthy”;
“it’s about big business, not the little guy”;
“CEOs at the top of corporations worrying more
about themselves instead of their companies”;
“yes, thank you”; “It is not for the average
family”; “this is probably true but not for us.”


These swing voters – about half non-college and
half college graduates – nearly attacked the
moderator because many are on the edge: “Over
half of Americans are what? Two paydays away from
living on the street”; “absolutely”; “that’s me.”
Nobody except the super-rich has seen salary
increases in years; not if you are in a “straight
regular job”; “people don’t make any raises,” and
if you are lucky, your spouse gets 2 percent in
some years. Some are working 2nd and 3rd jobs
because they “can’t make ends meet”; “I’ve never
known so many people to have two jobs or more
than I have lately.” Still, “they are cutting
back on everything.” They are struggling to fill
up the gas tank twice a week; and they fear a
visit to the hospital will wipe them out. They
are watching their own companies, even the large
ones, reduce and freeze hiring. They talk about
Wal-Mart almost wistfully – not with resentment
or anger – as a place where a lot of people
losing out on good jobs “have to put food on the
table. They have to pay the electric bill.” And
one woman interrupted the moderator trying to
move on, “I hope I don’t get to the point where
I’m that desperate where I have to go work at
Such an optimistic bunch. They even talk "wistfully" of having to work at Wal-Mart.