Monday, August 22, 2011

John McCain: Not Fit to Run A Baskin Robbins

It's an idea that is astonishing in its singular stupidity: John McCain wants to impose reparations costs on the Libyan people for the money we spent supporting their revolution:

How this guy could ever have been taken seriously as a presidential candidate is a complete mystery, because as this tweet shows, McCain clearly hasn't the intellect, the temperament or the wisdom to manage a Baskin Robbins, let alone the world's lone Superpower. Recall that McCain isn't just another U.S. Senator: he was the GOP's last presidential candidate. There are certain responsibilities that inhere with that emeritas role, and one of the things the onetime GOP standardbearer absolutely should not do is go around antagonizing a nascent democracy and potential ally by shooting his mouth off in such a stupid manner.

(Via Wonkette)

Thursday, August 18, 2011

Taking down Kevin Williamson

Andrew Sullivan today links to a critique of Paul Krugam's analysis of the so-called "Texas Miracle" in job creation over the past few years. The critique is by Kevin Williamson and appears in the National Review. I won't quote from the article extensively (you can follow the link and read it yourself) but I will offer my own rebuttal of its claims:

1) Cost of living: Krugman specifically acknowledges that Texas has lower cost of living (when noting the lower cost of housing), and that this lowered cost of living plays a factor in attracting both immigrants and businesses (since they can pay lower wages). So why Williamson spends so much time arguing against this straw man is a mystery to me. What is important is the significance of this lower cost of living to the current political debate: Texas' lower cost of living is not something that can be replicated on a national scale, so it can't possibly speak to Perry's attractiveness as a presidential candidate. Krugman sees this. Williamson, for some reason, does not.

2) Health insurance: Williamson dismisses statistics showing that Texas has a distressingly high percentage of uninsured residents by noting that the state has a high proportion of people under age 18. This is a perfectly bizarre defense of Texas' low rates of insurance. For one thing, residents under the age of 18 should be more likely to be insured, since they are generally covered under their parents’ plans. Furthermore, statistics also show that Texas has one of (if not the) highest rate of uninsured children in the nation. It's puzzling, then, that Williamson thinks that demographics somehow excuse the sad state of health insurance rates in Texas.

3) Unemployment: when you track actual job growth against population growth, you see that Texas pretty much follows national trends these past few years, and this statistic by itself refutes the notion that Texas has showed exemplary job growth. Williamson's entire article is premised on the notion that it was job growth spurred immigration into Texas and not vice versa. But the high unemployment rate in Texas belies this thesis, because what this high unemployment rate means is that for Texas to have been an engine of jobs in an otherwise depressed economy, it would have had to be very peculiar engine of jobs. It would have to have been an engine that created jobs that could only be filled by people outside Texas. Think about it: you've got an economy that is supposedly creating thousands of jobs intrinsically (that is, they are not being created as a result of population growth) but these are jobs that cannot be filled by native Texans (who live there, and don't have to deal with the economic burden and inconvenience of selling their homes and moving). Instead, they must be filled by out-of-staters. And even if this (credulity straining) situation proved true it would merely speak to the exceedingly poor state of education in Texas (and don't forget that Perry and the GOP legislature have slashed billions from education in recent budgets, as a way to avoid raising taxes.)

Monday, August 8, 2011

No right to judge...

Standard & Poors' recent decision to downgrade the United States credit rating from AAA to a AA+ has caused not a little handwringing among the chattering classes. The move dominated the financial news over the weekend, and investors the world over are wondering just what it means for the future borrowing costs of the world's largest economy.

Which is pretty silly.

Because truth be told, in the grand scheme of things and once the dust settles, Standard & Poor's rating of United States debt will prove about as relevant to investors as an unknown blogger's review of the latest Hollywood blockbuster is to the movie industry as a whole. Which is to say: about none at all. Indeed, it's a mystery why the the rating downgrade caused any sort of flare up at all, given Standard and Poor's miserable track record issuing ratings over the past few years. As both Paul Krugman and Daniel Gross have pointed out in recent columns, Standard & Poors' poor judgment in assessing the risks of securitized mortgage debt helped enable the 2008 economic collapse. Krugman is amazed at the Chutzpah:
America’s large budget deficit is, after all, primarily the result of the economic slump that followed the 2008 financial crisis. And S.& P., along with its sister rating agencies, played a major role in causing that crisis, by giving AAA ratings to mortgage-backed assets that have since turned into toxic waste.

Nor did the bad judgment stop there. Notoriously, S.& P. gave Lehman Brothers, whose collapse triggered a global panic, an A rating right up to the month of its demise. And how did the rating agency react after this A-rated firm went bankrupt? By issuing a report denying that it had done anything wrong.

So these people are now pronouncing on the creditworthiness of the United States of America?

And Gross reminds us that S&P's ratings of sovereign debt are both capricous and irrelevant:
S&P, which covered itself in a substance other than glory during the mortgage crisis, may have a poor record and strange methodology when it comes to sovereign ratings. France, which has a far higher debt per capita ratio than the U.S., still enjoys a AAA rating. And a downgrade, alone, doesn't mean U.S. interest rates will spike -- on Monday or at any time in the future. Japan's credit rating was downgraded several years ago, when the interest rates its government paid on bonds was already extremely low, and they've generally trended lower in the years since

My personal view is that, given the rating agencies' dysmal performance throught the 2000's, the current move by Standard is little more than an attempt to appear "serious, prudent" and "conservative" by issuing a "shocking" judgement that, on closer examination, looks to have been arrived at through the arduous, precise and scientific process of dilligently exaggerating currently fashionable cliches. Because S&P's downgrade of U.S. debt is an obvious and laughably transparent over-correction. Having given Lehman and the Subprime Mortgage market an undeserved vote of confidence just before they collapsed, Standard & Poor's seeks to repair its reputation by issuing the United States and undeserved downgrade. Yet as the driver who swerves left to avoid a ditch well knows, over-correction can just as surely leave you stranded in a ditch on the opposite side. The collapse of Lehman and the securitized mortgage market revealed a corrupt, incestuous relationship existed between the ratings agencies and the debt issuers to the point that the former were unable or unwilling to perform their job. What we see here is the little man behind the curtain, imploring us to ignore the little man behind the curtain, even as he hurriedly speaks those words into a microphone and frantically turns dials and flips switches. And if there were still some doubt that Standard and Poor's assessment of U.S. debt is a joke, the revelation that the agency crunched the debt reduction numbers wrong to begin with should settle it:
Before downgrading U.S. debt, S.& P. sent a preliminary draft of its press release to the U.S. Treasury. Officials there quickly spotted a $2 trillion error in S.& P.’s calculations. And the error was the kind of thing any budget expert should have gotten right. After discussion, S.& P. conceded that it was wrong — and downgraded America anyway, after removing some of the economic analysis from its report.

As I write this, the markets are in turmoil. That's not too surprising. In the short term the stock market reflects a casino mentality as traders attempt to gauge investor mood and market direction in hopes of making a quick killing. The long term trends should remain relatively unaffected after the inital rumblings subside. That's not to say everything's hunky dory with the nation's finances, but the long-term trends are as unaffected by Standard & Poor's rating as a freight train smacking a butterfly. Just ask Japan.

(Note: This essay also appears in Stinque)

Friday, August 5, 2011

Double Dip Recession

Brought to you by your friends at the Tea Party... with a helping hand by the Mainstream Media (AKA: the GOP talking points echo chamber) and a spineless Democratic party.

As international markets echo the Dow Jones Industrial Average's 500+ point tumble, just two days after Congress and the President negotiated a deal that pulls 2.6 trillion dollars out of the U.S. economy over the next 10 years (with a promise of another trillion or two in cuts to be announced later), one can't help but be overcome by simultaneous feelings of anger, betrayal and depression. Contempt and disgust are the correct emotions to feel towards the media. When they are not actively promoting a GOP agenda aimed at weakening the U.S. economy that a Democratic president might be defeated in 2012, they're playing the role of useful idiots to the Right, complicit in the Tea Party's contemptible (and potentially treasonous) economic terrorism by virtue of their spinelessness and/or evident intellectual incuriosity. Those who are ignorant of history are condemned to repeat its mistakes, as George Santayana used to say, and the mainstream media has betrayed astonishing ignorance in their reportage. This intellectual deficit might be excusable in a laborer who puts in his daily 8 to 10 hours at a construction site then spends his evening sprawled out on the couch watching American idol, but in the men and women who are tasked with bringing and explaining the world to us it is nothing short of a crime (don't doubt for a second that your average CNN reporter spends more time putting on makeup than researching the subjects he'll be reporting on). After all, it's not like we haven't been down this road before, and it's not like we haven't seen what happens when the government slashes spending in the midst of a poor economy. It's not like we haven't been warned.