Thursday, February 26, 2009

"It's easy to cut the deficit in half after you've quadrupled it"

I'm embarrassed that I haven't thought of/heard of this sooner, via Reason:

Republicans and some budget analysts noted that this highly touted goal is not particularly ambitious: This year's budget deficit [$1.75 trillion under Obama's fiscal plan] is bloated by spending on the stimulus package and various financial-sector bailouts, expenses unlikely to be repeated in future years. The nonpartisan Congressional Budget Office recently predicted that the deficit could be halved by 2013 merely by winding down the war in Iraq and allowing some of the tax cuts enacted during the Bush administration to expire in 2011, as Obama has proposed. That alone would cut the deficit to $715 billion, according to the CBO.

"It's easy to cut the deficit in half after you've quadrupled it," said Brian Riedl, a budget analyst at the conservative Heritage Foundation. "The end of the recession, the drawdown of Iraq spending and the end of temporary stimulus spending will by itself cut the deficit in half."

Sunday, February 22, 2009

Forgetting the Soviet Union collapsed

I love it when Russian politicians and bureaucrats get quoted in full, because so much of their speech gives away the fact that they've never really given up on the spirit of the Soviet Union:

Dmitri Peskov, a spokesman for Mr. Putin, called the song “hooliganism” and told the Ria Novosti news agency that he thought it unfortunate that Georgia would use the song competition to “promote pseudopolitical ambitions.”

They're talking about Georgia's Eurovision entry, which is a pretty awful English-language song that tells Putin that Georgia wants to dance, not fight.

Saturday, February 21, 2009

Russia's incentive to keep Iran belligerent

The Christian Science Monitor printed an article on Thursday about Russia's influence on Iran, acknowledging that the Russian leadership holds the key to disarming a potentially nuclear Iran. Whereas the article paints the conflict as being over the US missile shield in Poland and the Czech Republic on the one hand (threatening to Russia), and Iran's nuclear ambitions on the other (threatening to Israel, and by extension the West), in my opinion Russia has a much more devious and existential goal in helping Iran to poke its fingers in the eyes of the West: keeping Iran an enemy of the West so that it can never become a viable transshipment point for Caspian Sea oil and natural gas to Europe.

After all, wasn't that also the cause of the recent war in Georgia?

Friday, February 13, 2009

Greenspan: But the way up was sooooo good!

Alan Greenspan, in an incredibly candid moment about the incentives he faced as Fed Chairman:

The Fed’s “easy money” policy created an excess of cash that inflated equity and asset prices, leading to both the technology bubble of the late 1990s and the housing bubble in this decade.

While Mr. Greenspan acknowledges that he could have done something to avert the housing crisis, he contends his hands were tied.

“If we tried to suppress the expansion of the subprime market, do you think that would have gone over very well with the Congress?” Mr. Greenspan said. “When it looked as though we were dealing with a major increase in home ownership, which is of unquestioned value to this society — would we have been able to do that? I doubt it.”

Mr. Greenspan said that if he had taken steps to prevent the crisis, the outcome would have been painful.

“We could have basically clamped down on the American economy, generated a 10 percent unemployment rate,” he said. “And I will guarantee we would not have had a housing boom, a stock market boom or indeed a particularly good economy either.”

But Greenspan also almost stumbles onto the explanation to why the rating agencies' ratings failed so poorly, attributing it to "the Good Housekeeping seal of approval" as opposed to what it really was – Basel I and II requirements:

Mr. Greenspan also lays the blame on the ratings agencies and the people that trusted their judgment for the proliferation of the mortgage derivatives that were a major part of the current financial crisis.

“What we have created in this world is an aura around the credit rating agencies about certification from them is the Good Housekeeping seal of approval,” Mr. Greenspan said. “I will tell you the record of a lot of the forecasters of ratings have not been distinguished. They never were.”

Calomiris explains how the government essentially gave up regulatory power to the ratings agencies:

Unlike typical market actors, rating agencies are more likely to be insulated from the standard market penalty for being wrong, namely the loss of business. Issuers must have ratings, even if investors don’t find them accurate. That fact reflects the unique power that the government confers on rating agencies to act as regulators, not just opinion providers. Portfolio regulations for banks, insurers, and pension funds set minimum ratings on debts these intermediaries are permitted to purchase. Thus, government has transferred substantial regulatory power to ratings agencies, since they now effectively decide which securities are safe enough for regulated intermediaries to hold.

Ironically, giving rating agencies regulatory power reduces the value of ratings by creating an incentive for grade inflation, and makes the meaning of ratings harder to discern. Regulated investors encourage grade inflation to make the menu of high-yielding securities available to them to purchase larger. The regulatory use of ratings changed the constituency demanding a rating from free-market investors interested in a conservative opinion to regulated investors looking for an inflated one.

The problem here is that the government realizes that it cannot itself tell investors which financial products are good investments, so rather than realize that that's something that has to be left up to the market, they close their eyes, hand power off to the ratings agencies, and hope it all turns out okay. Surprise, it didn't!

Saturday, February 7, 2009

The Guardian's god-awful American political coverage

I don't remember who, but I read somewhat recently someone saying that the British press' coverage of American politics is hilariously bad. Ever since then, I've tried to read it more attentively, and it's paid off. Today, the most prominent story on is called "The next president of America?" and it's about Cory Booker, mayor of Newark, NJ. Here are some choice quotes:

In 2002 he was approached to run for the Senate - a move that, had he won, would have made him the first African American there, two years ahead of Obama.

False. First of all, the first black US senator was Hiram Rhodes Revels, voted into the US Senate by the Mississippi State Senate (because that's how they did it back then). The first black senator voted into office by popular vote under the modern rules was Edward Brooke, a Republican from Massachusetts. Perhaps what they meant to say was that he would have been the only black senator in that legislative session?

Booker is a light-skinned black man with blue-grey eyes and a serial Ivy League education (Stanford, Oxford, Yale)

First of all, almost all blacks in America are "light-skinned" in the sense of being of mixed African and European heritage (with some Native American thrown in for good measure) – I don't know how it is in England, but I don't think that being light-skinned really means anything in America. You're still seen by everyone as "black."

As for a "serial Ivy League education," only Yale is an Ivy League school.

While Newark's poor reputation would seem to position it as an exceptional city, to see it as unusual is to miss the point. It has been home to many historical moments that make it an American landmark: George Washington's army slept in one of its parks; Abraham Lincoln stopped to give an address here on the way to his inauguration; Booker T Washington's doctor founded a hospital in Newark to treat African Americans.


Not everyone was ready for Booker when he came to power - not the drug dealers who threatened his life, nor the old-guard residents who were unused to such eloquence in a leader.

I'm sorry, but when did drug dealers threaten the life of Cory Booker?? Surely not when he was younger, since he grew up in the white suburbs and then spent the next ten years studying. And probably not since he's become a prominent politician, or Google would know about it. Did you...make that up?

Thursday, February 5, 2009

The Nation's mass transit hypocrisy

I was heartened to see an article about the need for mass transit in the pages of The Nation, though I was severely disappointed by the magazine's own hypocrisy and historical blindness. The article is in all ways a standard left-liberal screed against the car and for mass transit, which is a topic close to my heart, though I'd prefer a more libertarian approach to returning America to its mass transit roots as opposed to the publicly-funded version that The Nation advocates.

The first bit of historical blindness comes at the end of the second paragraph, when The Nation argues for government investment in mass transit on the grounds that it will "strengthen labor, providing a larger base of unionized construction and maintenance jobs." But don't they realize that the demands of organized labor were one of the straws that broke the privately-owned mass transit camel's back during the first half of the twentieth century? Joseph Ragen wrote an excellent essay about how unions in San Francisco demanded that mass transit companies employ two workers per streetcar instead of one, codifying their wishes through a series of legislative acts and even a referendum. Saddled with these additional costs, the streetcar companies could not make a profit, and eventually the lines were paved over to make way for the automobile. Mass transit companies, whether publicly- or privately-owned, cannot shoulder the burden of paying above-market wages and still hope to pose any serious threat to the automobile's dominance.

The second, and perhaps more egregious error, comes a little later, when The Nation lays the blame on every group but itself for the deteriorating state of mass transit in America:

Nonetheless, smart growth and transportation activists still have high hopes that the Obama administration and a Democratic Congress will revitalize mass transit. But institutional stumbling blocks--including generations of federal policy favoring roads and cars; pressure from fiscal conservatives; and the power of auto, oil and highway construction lobbies--may cause them to miss this opportunity.

Smart growth, though not a libertarian movement, has a distinctly libertarian issue at its core: reversing the mandatory low density zoning and parking regulations that afflict almost every city, town, and village in America. But who started the movement for zoning and low-density planning in the first place? Progressives, a group which The Nation fancies itself a member of.

And in fact, a search of The Nation's archives reveals that my suspicions were correct: the magazine was, sure enough, among those who were calling for a de-densification of America, and railing against the inefficiencies of mass transit. From the April 24 issue published in 1920, there's an article entitled "The Lack of Houses: Remedies" in which the author, Arthur Gleason, lays out his policy prescriptions for dealing with what he considered to be a dearth of housing in America. Regarding zoning (which at the time almost always meant separating homes from jobs and decreasing density – anathema to the New Urbanist call for mixed uses and density), Gleason was wholeheartedly in favor of it:

Zoning regulates and limits the height and bulk of buildings, and regulates and determines the area of courts, yards, and other open spaces. It divides the city into districts. It regulates and restricts the location of trades and industries and the location of buildings. It conserves property values, directs building development, is a security against nuissance, a guarantee of stability, and an attraction to capital.

Not only did The Nation circa 1920 abhor density, but it also treated mass transit with disdain, writing that "[s]ubways make a slum out of a suburb." This is typical of Progressives of the era, who saw mass transit as capitalistic and backwards. There was also a tinge of racism to the attitude, as the "slum" was populated largely by Polish, Italian, Irish, and Jewish immigrants, while the "suburb" contained more acceptable non-immigrant Americans.

The Nation pays lip-service to America's mass transit-laden past, writing that "it predates the automobile," but then conveniently forgets the reasons that mass transit in America ceased to exist. And that's convenient, because the reasons – almost all driven by government intervention against streetcars, subways, and density – were once causes that The Nation championed.

Wednesday, February 4, 2009

Government-sponsored earthquakes

The Telegraph is running a story that claims that scientists in the US and China have concluded that the massively destructive 7.9 magnitude earthquake that hit Sichuan Province in China last May was caused by the Communist Party's insistence on building the Zipingpu dam in 2004. The earthquake killed 80,000, displaced a million, and has had reverberating political repercussions in China.

Unlike global warming, where there's a collective action problem, in a free market there would be ample incentive for entrepreneurs to not build damns that burst at the seams, undoing all their work after only five years of operation.

Evidently the US is not immune to the problem of massive public works projects causing earthquakes, though not on the magnitude of China:

There is a history of earthquakes triggered by dams, including several caused by the construction of the Hoover dam in the US, but none of such a magnitude.

Tuesday, February 3, 2009

Brits have no love for liberal ex-KGB Russian oligarch

I'm a firm believer in the idea that the neo-KGB and the Russian state have extended their tentacles farther than most people realize (*cough*al-Qaeda*cough*), but the recent outrage in Britain over the Russian oligarch Aleksandr Lebedev's purchase of the Evening Standard is pretty ridiculous in light of his history with media companies. Along with Gorbachev, Lebedev owns 49% of the dissident Russian newspaper Novaya Gazeta, the last bastion of oppositional print media in an increasingly authoritarian Russia. His company has been a vociferous critic of the Putin administration – at least four of its journalists have been assassinated for their work, and the rest are fearful.

Despite Lebedev's sponsorship of Russia's last remaining major print source of critical news and analysis, Britain's xenophones will not be convinced. Sir Peregrine Worsthorne, prominent media figure at the Sunday Telegraph, can't be bothered to look past Lebedev's KGB pedigree, and thinks "it's one more example that we are no more a serious nation that we allow a serious paper to be taken over in our capital by a Russian oligarch."

Fortunately, not all in the British press have an instinctual repulsion to Lebedev – Luke Harding of the Guardian wrote fondly about Lebedev's sophistication and distinct lack of the typical oligarchical pretensions, as well as less superficial things like his anti-authoritarian streak. But I think that such things border on hagiography, as they ignore an obvious point of contention: the source of Lebedev's wealth. I don't know much specifically about Lebedev, but given what I do know (he was a KGB agent who became very rich in the Great Russian Plunder of the 1990s), it's likely that he's done some things that we in the West would consider outright theft – there was simply no other way to earn the money that he did otherwise.

But it's easy for us to sit hear and judge, when the entire Soviet state was for the taking, and ultimately I think he's probably one of the more honest and liberal of the oligarchs. He hasn't made peace with Putin, risking the fate of fellow politically-motivated über-oligarch Mikhail Khodorkovsky, and has continued to bankroll the leading voice of Russia's liberal opposition. It's just sad to see that even in Britain, with its open press and history of being the setting of Russian political dramas, people are ignorant enough about the place to insinuate that Aleksandr Lebedev might still be sympathetic to Russia. On the other hand, it's important not to downplay the oligarchs' crimes, while always keeping in mind the institutional incentives that allowed the oligarchs to rise and led to the backlash that has resulted in the creeping re-nationalization of the Russian state.

Monday, February 2, 2009

The upside of being dirty

The NYT has a fascinating article on something that I've long suspected is true: we're too clean. Here's the gist:

When my young sons were exploring the streets of Brooklyn, I couldn’t help but wonder how good crushed rock or dried dog droppings could taste when delicious mashed potatoes were routinely rejected.

Since all instinctive behaviors have an evolutionary advantage or they would not have been retained for millions of years, chances are that this one too has helped us survive as a species. And, indeed, accumulating evidence strongly suggests that eating dirt is good for you.

In studies of what is called the hygiene hypothesis, researchers are concluding that organisms like the millions of bacteria, viruses and especially worms that enter the body along with “dirt” spur the development of a healthy immune system. Several continuing studies suggest that worms may help to redirect an immune system that has gone awry and resulted in autoimmune disorders, allergies and asthma.

These studies, along with epidemiological observations, seem to explain why immune system disorders like multiple sclerosis, Type 1 diabetes, inflammatory bowel disease, asthma and allergies have risen significantly in the United States and other developed countries.

Though the article isn't very rigorous or quantitative, it also hints at the fact that some development efforts aimed at "deworming" could possibly be counterproductive:

In studies in mice, Dr. Weinstock and Dr. Elliott have used worms to both prevent and reverse autoimmune disease. Dr. Elliott said that in Argentina, researchers found that patients with multiple sclerosis who were infected with the human whipworm had milder cases and fewer flare-ups of their disease over a period of four and a half years. At the University of Wisconsin, Madison, Dr. John Fleming, a neurologist, is testing whether the pig whipworm can temper the effects of multiple sclerosis.

In Gambia, the eradication of worms in some villages led to children’s having increased skin reactions to allergens, Dr. Elliott said. And pig whipworms, which reside only briefly in the human intestinal tract, have had “good effects” in treating the inflammatory bowel diseases, Crohn’s disease and ulcerative colitis, he said.