Category Archives: Government

Republican North Carolinians for Big Government: the Telsa Edition

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From North Carolina, a reminder of just how little anyone in office believes in a “free market.” The Republican Party in North Carolina has more power than they have had in decades, and they’re using it to stomp on just about everything liberals have ever fought for, all in the name of less government. But when it comes to buying cars? That’s a whole different story.

Last week, North Carolina’s Senate Commerce Committee unanimously approved a law that would ban car companies from selling their cars directly to consumers. Tesla, the electric car company, doesn’t want to work through dealerships. And the North Carolina Automobile Dealers Association isn’t happy.

it’s not Tesla per se that worries the dealers. It’s the precedent. The prospect threatens the livelihood of North Carolina’s 7,000 licensed dealers, who invest millions in building big lots and showrooms to efficiently move product, say supporters of the bill.
“We care about the franchise system,” said Robert Glaser, president of the N.C. Automobile Dealers Association. “The whole point of the retail system is to protect the consumer.”

The local dealer is the customer’s point of contact on malfunctions, defects and recalls, Glaser said. Automakers are designers, manufacturers and wholesalers that remain largely invisible to the car buyers, he said.

Apparently, Robert “Chairman Mao” Glaser doesn’t trust consumers to decide by themselves whether they want to use dealers for that – Big Government is going to get to decide for them.

But it’s not just about taking away consumers’ freedom.

“You tell me they’re gonna support the little leagues and the YMCA?” Glaser asked, directing his glance at the Tesla contingent milling about a few feet away in the legislative building.

Because Lord knows, that’s what a “free market” is all about – companies competing to show politicians who will sacrifice more of their profits to support whatever causes the politicians care about.

Although the bill passed unanimously, not everybody is entirely comfortable with it. Before he voted for it, Sen. Josh Stein of Wake County got assurances that the bill would be “fine-tuned.”

Stein considers Tesla a startup that should be exempt from the state’s dealership provisions until it becomes big enough to be considered a competitor.

Way to go with keeping government out of meddling with “the market,” Josh!

The article points out another state also has laws blocking direct auto sales to the public. Which commie pinko state would that be? Texas.

Is Tackling Climate Change Too Expensive? Not Compared to the Iraq War

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Is doing something serious about climate change too expensive? Using some number crunching by wind analyst Paul Gipe, Grist’s David Roberts says no:

The total cost of the Iraq War, including future costs to care for veterans, is $2.2 trillion. If we include the interest we have to pay on the debt we used to finance the war, that figure rises to $3.9 trillion by 2053….

So what could that get us? Gipe gets deep into the weeds on renewables cost and yields, but here’s the top-line conclusion:

If we had invested the $2.2 trillion in wind and solar, the US would be generating 21% of its electricity with renewable energy. If we had invested the $3.9 trillion that the war in Iraq will ultimately cost, we would generate nearly 40% of our electricity with new renewables. Combined with the 10% of supply from existing hydroelectricity, the US could have surpassed 50% of total renewables in supply.

He notes that his estimates are extremely conservative, and with some reasonable amendments, that 40 percent figure could easily become 60 percent.

So, let’s call it half. For the price of the Iraq War, the U.S. could have gotten halfway to a fully renewable power supply.

Now, imagine if someone had proposed, in 2003, spending $2.2 trillion of public money over the next 10 years on renewable energy. My God, the outrage! The wailing and rending of garments! It would have been scorned, mocked, dismissed outright by VSPs across the land. Such investments in the nation’s future are too expensive; it would bankrupt us; we would never recover.

And yet, the country survived spending that much on the Iraq War. The economy is growing again; the debt is shrinking. And that’s with $2.2 trillion almost entirely flushed down the toilet, to virtually no long-term benefit. The same money spent on renewables would have produced massive returns in energy security and resilience, new industries and jobs, and an international reputation as a courageous humanitarian leader (rather than a belligerent, lying warmonger).

Next time you hear that responding to climate change is too expensive, ask, compared to what?

And that’s not including the lives lost in the Iraq war — both Americans and Iraqis – vs the lives that could be saved by responding to climate change.

Republicans Understand Their Constituency just Fine

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A recent study found that

on each of the issues we examine, over 90% of politicians with conservative views appear to overestimate their constituents’ support for conservative policies. This misperception is so large that nearly half of sitting conservative officeholders appear to believe that they represent a district that is more conservative on these issues than the most conservative legislative district in the entire country despite the fact that over half of these officeholders actually support positions more conservative than their own districts’ median voter.
And yet smehow smart bloggers like Alex Pareene keep translating the study into posts like this:
And this explains it. Elected Republicans are more conservative than their constituents, but they think their constituents are basically all psycho Freepers.

It’s been obvious for years that the Republican Party is massively overly responsive to its most conservative constituents, who are also usually its loudest. Ultra-conservatives don’t actually make up a majority of the Republican electorate, but Republicans govern like they do. It’s true that congressional Republicans are beholden to constituencies more conservative than America as a whole, but elected Republicans apparently think their constituencies are even more conservative than they actually are. This poll helps explain why the party keeps overreaching, imagining it has a mandate to impose radical and unpopular right-wing policies whenever candidates win low-turnout midterms, and even when they actually lose elections but remain in power thanks to quirks of our political system. Hence, the Gingrich shutdown, the Clinton impeachment, George W. Bush’s Social Security “reform” push, and just about everything congressional Republicans have done since January 2009.

No, no, no.

Republicans aren’t stupid. They aren’t mainly interested in their constituency. Most of them are in districts where if they win the primary, all other things equal they win the general election. Or to put it another way, they don’t care about who their constituency is, they care about who gets mobilized.

Even more importantly, the folks who ultimately call the shots aren’t primarily worried about who wins the presidency. What they care about is, are the rich and big corporations getting richer and are they basically getting to do what they want given the constraints that they face (i.e., you can’t win all the time). If that’s the case, then assuming their constituency is more conservative than all of the folks in their district actually are is not a problem — because that’s not their real constituency.

And yeah, in the long-term the position that a lot of Republican have staked out is not a winning strategy to rule the country. But so what? Every year they can slow down our side is a little more money that the rich and big corporations get to take record amounts of the wealth our society create. And when it gets the point where they start constantly lose, they will change direction.

But in the meantime? Well let’s put it this way. Who just won the last election? You could say the Democrats. Or you can take a look at the fact that in the middle of the worst economic depression the countries had in decades, we are focused on how much we can cut the government. You could remember that Wall Street got bailed out for Putting us into this horrendous economic crisis, and none of them are paying the price – nobody’s going to jail and the Big Boys are making record profits. So exactly won?

As WC Fields once said, you can fool some of the people all of the time, and you can fool all of the people some of the time, and generally speaking that’s enough to make a profit.

So if we want to win, can we please, please stop pretending that the Republicans are dumb?

Changing the Terms of the Debate: from Fixing “Entitlements” to Fixing Inequality

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When folks start talking about “fixing” Social Security, mostly they talk about cutting benefits. Sometimes – if they are liberals or lefties – they’ll talk about raising taxes (e.g., “popping the top”). But what almost nobody talks about is inequality.

The idea is pretty simple. In the past few decades, a greater percentage of the wealth our society produces has been going to folks at the top. That’s meant relatively less money is collected in payroll taxes. Krugman lays out the impact:

a substantial part of our social insurance system — Social Security and the hospital insurance portion of Medicare — is funded through dedicated payroll taxes. If payrolls lag behind overall national income, this will tend to leave those programs underfunded given the way the laws are currently written.

So as a percentage of GDP going to labor has fallen, Social Security and Medicare have taken a huge hit. That’s why earlier efforts to “fix” Social Security failed.

back in the 1980s the Greenspan Commission supposedly fixed Social Security’s finances for 75 years, that is, until 2060. Why, then, do most projections show the trust fund running out well before then? Not because life expectancy is rising — that was already built into the projections. No, the big reason is rising inequality, which has led to a growing share of income coming above the payroll tax cap, so that SS revenue lags behind overall compensation. And yet the conventional wisdom is that we should respond to a financing issue caused by rising inequality by slashing benefits, further increasing inequality.

But there’s no reason it has to be this way. If we don’t treat the change in who gets what percentage of the wealth our society generates as natural or inevitable, we could look at this problem very differently.

the money is still there to support the programs, it’s just coming in the form of capital rather than labor income. There would be no problem, at least in economic terms, in continuing the programs by adding revenue from general taxation, maybe even from dedicated taxes on capital income.

It is truly amazing how effective our elites have been at narrowing not just what problems we talk about but how we talk about them. That’s the bad news. The good news is that there’s plenty of room to force the debate wide open. There’s no reason that every single time some blithering pundit talks about cutting Social Security that we can’t use it as an opportunity to talk about cutting inequality – assuming, of course, we’re ready to fight to win.

New Year’s Resolution: Stop Falling into the Deficit Obsession Trap

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If our side needs another New Year’s resolution, I’ve got one: let’s stop getting trapped in Deficit Obsession.

A few weeks ago, the economist blogger Eschaton succinctly summed up why. Brad DeLong had made this point about deficits under Bush I vs. Clinton:

Remember the context: Mankiw loved the Bush-era fiscal policies to create long-run structural budget deficits, and worked hard to implement them–the unfunded war and unfunded tax cut and unfunded entitlement policies that did so much to create our structural deficit. Mankiw did his best to join in the process of taking the work that we in the Clinton administration had done in the 1990s to restore America’s fiscal balance–work that was very well done, very important, and work that we were and are very proud of–and casually smashing it on the floor.

Eschaton replied:

But Republicans will inevitably see a balanced budget as an opportunity to give money to rich people (tax cuts and crony capitalism). The reward for liberals for this well done very important work? Tax cuts for rich people and unpaid for disastrous wars.

Liberals should spend their time in office figuring out how to implement a sticky liberal agenda, one which is hard to dislodge, not figuring out how to create a pot of money for Republicans to steal when it is their turn.

It’s not that deficits don’t matter at all. We don’t want to spend too much of our budget paying interest on the deficit. And at some point a truly enormous deficit could we could eventually spook the bond market – although as we’ve seen from the past couple of decades, it would take far more debt than even the wildest lefty argues for to get us into that kind of trouble. But for the most part, focusing on the deficit is a trap and it’s time we stopped getting caught in it.

Climate Change and the 1%: the Progressive Era's Battle with the 1%

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[Part 2 of Reframing Climate Change around the 1%]

Defenders of the short-sighted men who in their greed and selfishness will, if permitted, rob our country of half its charm by their reckless extermination of all useful and beautiful wild things sometimes seek to champion them by saying the ‘the game belongs to the people.’ So it does; and not merely to the people now alive, but to the unborn people. The ‘greatest good for the greatest number’ applies to the number within the womb of time, compared to which those now alive form but an insignificant fraction. Our duty to the whole, including the unborn generations, bids us restrain an unprincipled present-day minority from wasting the heritage of these unborn generations. The movement for the conservation of wild life and the larger movement for the conservation of all our natural resources are essentially democratic in spirit, purpose, and method.

So said Pres. Teddy Roosevelt, in the first era of the modern fight against the 1% and the rise of the environmental movement. Like an activist trying to stop climate change today, Roosevelt passionately argued that

The conservation of natural resources is the fundamental problem. unless we solve that problem it will avail us little to solve all others.

Roosevelt saw conservation as a part of the broader Progressive Era battle to rein in the 1% whose unbridled rapaciousness was threatening to undermine the capitalist economy and the environment.

During the Gilded Area, the economy had grown at an astonishing rate – but at a very high price. The 1% argued the only way to continue to build a powerful economy was through “laissez-faire”: keeping the government off their backs and letting them do whatever the market would allow. And if that meant letting them create monopolies over almost every aspect of the economy or relying on children to work in their factories for 60 to 70 hour weeks so their families wouldn’t starve or selling tainted meat and worthless drugs or pillaging the wilderness, so be it.

But as conservationists pointed out, the 1% didn’t really believe in laissez-faire. Lumber and mining companies – and the financial giants that controlled them–- might argue that they should be able to do whatever they wanted with their property. But the reality was that most of the lumber, mining, and other natural resources in the Western states were actually owned by the government. The real issue was who got to decide how they would be used.

Similarly, the 1% had made massive fortunes off railroads with government contracts and by manipulating land-use laws. They counted on the government to back their play overseas when oil, minerals, bananas, or other commodities were at stake. And they relied on the government, including armed federal troops, to forcibly stop some types of large-scale strikes.

And while the 1% passionately argued for the sanctity of property rights, they didn’t hesitate to use government to strip away other people’s property and other rights. In the West, the 1% used the government to strip Native Americans of their property rights and force them off of their land. And the Southern 1%’s system of sharecropping could not have survived without a complex web of public and unchecked private use of physical and economic violence that was held together by de facto denying African-Americans the right to vote.

So although the Progressive Era was often framed as a debate over how much the government should intervene in the economy, that wasn’t the real issue. The real question was who would benefit. Would we build an economy largely around the needs of the 1% or around a broader set of concerns?

During the Progressive era, activists fought and won a number of battles to rein in the excesses of the 1%. Jon Muir, founder of the Sierra Club, was able to convince Roosevelt to create National Parks and other ways of limiting the rapaciousness of the 1% from devouring the environment. Progressives managed to pass the Meat Inspection Act and the Pure Food and Drug Act. They broke up some concentrations of power and put limits on monopolies.

The Progressive Era was a major step towards a better future. But it was just the first step.

Up next: the rise of the white middle class and the growth coalition.

DOT's "Invisible Hand"

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Argue in favor of creating more walkable cities & suburbs and odds are you’ll end up bumping heads with someone who accuses you of being a socialist who wants to defy the freedom loving dictates of the free market. The next time you end up in that kind of argument, here’s Exhibit 14,526 why that’s a con job.

According to Greater Greater Washington’s Miriam Schoenbaum, parents in the Clarksburg, Maryland new development called Gateway Commons wanted to be able to walk their kids to school, which takes about 5 min. The only catch – the most sane way to do it is to cross at Stringtown Road and Observation Drive, which has a pedestrian path to the school on the other side but doesn’t currently have a crosswalk that will get you to the pedestrian path. So, some of the parents asked Montgomery County Department of Transportation (MCDOT) if they could put in a crosswalk. MCDOT said no. Why?

First, according to the MCDOT traffic engineer who first denied the request, the crossing at Observation Drive is in “close proximity” to the marked, signalized crosswalks at Frederick Road (MD 355), 550 feet to the northeast, and Gateway Center Drive, 650 feet to the southwest.

From a windshield perspective at 35+ mph, these crosswalks are indeed in close proximity. But they are not so close from the perspective of Gateway Commons parents and children walking to school. For them, crossing at these crosswalks instead of at Observation Drive means an extra ¼ of a mile out of their way and double the travel time.

Second, if MCDOT marked the crosswalk, then people might use it, and that would be unsafe. According to an e-mail from Emil Wolanin, chief of MCDOT’s Division of Traffic Engineering and Operations, “inappropriate crosswalk installations” dangerously “encourage pedestrians to cross at a less than optimal location”.

This is an odd reason, given that the request for the crosswalk came about specifically because pedestrians are already crossing there, and the crossing is already unsafe.

And for whom is the location less than optimal? Not for pedestrians, or else they wouldn’t have asked MCDOT to mark the crosswalk there.

Third, not enough people cross at the crosswalk. MCDOT’s study found “little or no pedestrian activity”, according to an e-mail from an engineer at MCDOT. And, again according to Mr. Wolanin, “[i]nstalling marked crosswalks at locations with very low pedestrian volumes diminishes their overall effectiveness. When motorists cross [marked crosswalks] rarely if ever seeing a pedestrian they are “trained” to not expect someone to be using them.”

The people who asked for the crosswalk installation are walking evidence that there are pedestrians at this crossing. And, by the logic of Mr. Wolanin’s previous argument, a marked crosswalk might even increase their numbers.

So how does MCDOT suggest folks get to school?

Fourth, the safe way to get across Stringtown Road is to take the school bus that Montgomery County Public Schools (MCPS) provides to Gateway Commons because crossing Stringtown Road on foot is not safe.

The school bus stops on the south side of Frederick Road, at the entrance to Gateway Commons. It then goes 2 miles southeast on Frederick Road to pick up children from another development, turns around, and goes the same 2 miles back, plus another half a mile, before finally dropping the children off at school.

The bus trip takes about 20 minutes. Walking takes about 5.

In other words, because the Department of Transportation sees drivers as its primary customer, they’re suggesting that rather than adding a crosswalk so kids can walk 5 min., they should take the bus for 20 min.

Which free-market forces decided that drivers come first? None, of course. It’s a decision being made by politics, not by the market or by consumer choice. It’s one of tens of thousands of decisions that shape cities and suburbs that appear to be natural or market-driven but aren’t.

Stiglitz, Pareto, and Copernicus

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Recently a friend sent me an article by Joseph Stiglitz from way back in 1993 in which Stiglitz wrestles with Bowles and Gintis, two Marxists who were big names in lefty circles at the time. Here’s how he summarizes the main argument.

Of the many reasons that information economics has identified that markets “fail,” Bowles and Gintis focus on what they call “contested exchange”—the problems that arise because monitoring and enforcing contractual relationships is costly. They provide a clear and intuitive discussion of why the resulting resource allocations may be inefficient; for instance, firms do not distinguish between real resource expenditures that enhance contract enforcement and rent payments, but society should.

Stiglitz, one of the granddaddies of information economics, agrees with their basic point (or his interpretation of it) but thinks they overstate its implications. One thing he said really struck me:

It is in their implicit or explicit policy prescriptions that radical economists fail to make their case. The contention that markets are not constrained Pareto efficient does suggest a role for government, but even that needs to be qualified: the theorems have little to say about whether actual governments can undertake the appropriate roles. Moreover, proving that markets are imperfect does not necessarily imply anything is radically wrong with the capitalist system.…

The critique of information economics can also be interpreted in more conservative terms—that while markets are imperfect, the appropriate response is a limited reliance on a relatively small number of well-designed government interventions, taking into account the limitations of government, including its limited information, with each intervention carefully aimed at a particular market failure.

But what happens when we’re talking about far more than “a relatively small number” of interventions? Regardless of which party is in power, the government has consistently intervened in a deep and profound way into virtually every sector of the economy. That so-called “relatively small number,” “carefully aimed” looks less like a few exceptions that prove the rule and more like Copernicus’ model right before it was tossed out by folks like Galileo.

This doesn’t mean that you therefore have to believe that capitalism doesn’t work. And the quote may not be reflective of where Stiglitz is today – although where exactly he now stands is pretty unclear after I’ve read his latest book. But I still think it’s a useful crystallization of the precarious position in which a lot of moderate and liberal economists find themselves.

Econ Stats, Get Your Econ Stats!

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If you ever need to get your policy geek on but are having trouble finding the data to, say, smacked down some lying little pundit-weasel, a new project by Investigative Reporters and Editors and the Sunlight Foundation is just the ticket: Econocheck. It’s designed

to point reporters and the public to data sets that can help answer those questions and more. Econocheck provides quick links to statistics on employment, taxes, government spending, inflation, healthcare, housing, income and wealth, plus helpful advice on using and interpreting them.

Econocheck is not a fact checking site, but rather a resource for those who want to find out more about the statistics politicians rely on when seeking votes. But it has uses beyond that.… it can be used to provide statistical support for stories documenting the economic hardships Americans face.

It’s very nicely done, and I’m sure a lot of Econ policy geeks & reporters will get a lot of use out of it.

Big Banks: We Can't Break up, We'd Lose Our Best Corporate Welfare!

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“Stockholders, analysts, and industry veterans,” says Business Week, are calling on big banks to break up. Why aren’t they? Because if they sold off their investing arm, that new investment firm would lose all of that big, fat, juicy corporate welfare it’s depending on now.

A securities firm or investment bank that didn’t accept deposits and couldn’t turn to the government for help in a crisis would have to pay a premium to bondholders to reflect the lack of a safety net.… “If you divorce them from the mother ship, you’d also be divorcing them from the government at the same time, and that’s where the subsidy is,” says Cornelius Hurley, director of the Boston University Center for Finance, Law, & Policy.

Not only would they need to have more capital “as a cushion against losses,” they’d also need more capital to convince investors to invest in them. A major investor explains why:

Bank of America, JPMorgan Chase (JPM), and Goldman Sachs are safer to own than a “high-risk security” such as Jefferies, says William Larkin, a fixed-income money manager who helps oversee $500 million at Cabot Money Management. He says he doesn’t believe statements by government officials and regulators that no bank is too big to fail. “When I look at companies, I think, ‘What can kill the company?’ And right off the bat, I say the exact opposite of what the government says. I say, ‘That’s a company that’s too big to fail,’ ” he says of Bank of America. “So that protects me.”

And it would also mean losing the enormous subsidy of getting money cheaply – which is a really, really big deal when you’re in the money business.

As record-low interest rates limit returns on loans, banks have become more focused than ever on keeping their own borrowing costs down. That’s led them to lean more on the cheapest form of money available: federally insured deposits. Bank of America pays about $500 million a quarter in interest for its $1 trillion of deposits, compared with about $2.5 billion for $300 billion of long-term debt, CEO Brian Moynihan said on a July 18 investor call. Eric Aboaf, treasurer of Citigroup, told a similar story to investors on a July 20 call. “We have focused on reducing our borrowing costs by substituting maturing long-term debt in the bank, which is a more expensive source of funding, with deposits, our lowest cost of funds,” he said.

JPMorgan, led by Weill’s former deputy Jamie Dimon, finances its operations with $1.12 trillion of deposits and $982.7 billion of market borrowing. Goldman Sachs has more than doubled its deposit base to $57 billion since 2008 and wants to raise more because it is a cheaper way to borrow money than issuing debt: It pays 2 percentage points less on three-year deposits than it does on three-year bonds, Treasurer Elizabeth Beshel Robinson said on a July 24 call.

When folks talk about whether they are in favor of “big government” or “less government,” it’s important to remember that what government directly spends is only a small part of how it subsidizes players in the market. If somebody ever complains to you about “welfare queens” or the “culture of dependence,” just ask, “are you talking about Bank of America or Citi?”