Disasters and the traps of poverty and wealth –Who do we blame for the earthquake in Haiti earlier in the year on January 11th that killed around a quarter of a million people? Is the answer that no one is to blame because the disaster was categorized as natural? Was human agency uninvolved? There is an old and true saying among seismologists – earthquakes don’t kill people, buildings kill people. Virtually the only cause of death in an earthquake is the massive trauma caused by building collapse when homes, businesses and schools transform from familiar sunny places of comfort to dark alien tombs. You need an earthquake to have an earthquake disaster, that’s the natural part of it but you equally must have buildings and buildings are man-made. So if buildings kill people and people build buildings then do people really kill people in earthquakes? Could proper action have avoided disaster just like in the Gulf of Mexico? Failure to enforce building codes, that’s the answer! That’s what we always hear. The Earth writhed and the buildings killed because they were not built to code. It is equally easy to blame corruption, even neglect and malfeasance or regulatory failure in The Gulf of Mexico too. But the Earth writhed there as well. It pushed back hard at the drillers as they tried to complete the well and move on to the next.
The New Financial Elite, Rubinites and the Democratic Party – There’s been a series of back-and-forths about the rumored short-list of the National Economic Council spots, and the ties between those on the list and Wall Street. Brad Delong notes that he has been a Rubinite for 18 years and that “you want to draw your White House staff from successful managers…and that there are only three groups of successful managers who are Democrats: Hollywood studio executives and their ilk, people who have made careers in government and academia, and executives who have worked for traditionally-Jewish investment banks. If you want managers in a Democratic administration, that’s where they have to come from. ” Felix Salmon responds here and here. Brad’s point seems to restate the issue, which is: why is there such an overlap between Wall Street and the Democratic Party, and what consequences does that have? Finance is a big sector, and Democrats could be picking from any number of places within it (or elsewhere), yet they go for the large investment banks. I’d point out a few reasons why this has consequences.
Gene Sperling 101 – President Obama is said to be ready to name Gene Sperling the chairman of the National Council of Economic Advisers. Mr. Sperling, 52, who held the same job under President Bill Clinton, will succeed Lawrence Summers. Here’s a quick biography and reading list for those who want to get up to speed on Mr. Sperling: He worked for Mario Cuomo, then the governor of New York, in the early 1990s, before joining Mr. Clinton’s presidential campaign. Mr. Sperling worked for the Clinton administration from start to finish — 1993 to 2001. He’s particularly proud of the work he and colleagues did to create the Earned Income Tax Credit, which has become a big part of federal anti-poverty policy. On the ideological spectrum, Mr. Sperling falls between centrist and liberal Democrat. It’s probably fair to say he’s to the right of Robert Reich (the prolific writer who was Mr. Clinton’s labor secretary) and to the left of Timothy Geithner (the current Treasury secretary).
The Shameful Attack on Public Employees – In 1968, 1,300 sanitation workers in Memphis went on strike. The Rev. Martin Luther King, Jr. came to support them. That was where he lost his life. Eventually Memphis heard the grievances of its sanitation workers. And in subsequent years millions of public employees across the nation have benefited from the job protections they’ve earned. But now the right is going after public employees. Public servants are convenient scapegoats. Republicans would rather deflect attention from corporate executive pay that continues to rise as corporate profits soar, even as corporations refuse to hire more workers. They don’t want stories about Wall Street bonuses, now higher than before taxpayers bailed out the Street. And they’d like to avoid a spotlight on the billions raked in by hedge-fund and private-equity managers whose income is treated as capital gains and subject to only a 15 percent tax, due to a loophole in the tax laws designed specifically for them. It’s far more convenient to go after people who are doing the public’s work – sanitation workers, police officers, fire fighters, teachers, social workers, federal employees – to call them “faceless bureaucrats” and portray them as hooligans who are making off with your money and crippling federal and state budgets.
Who Benefits from Tax Expenditures? – Ezra Klein points out a new tax expenditure database from The Pew Charitable Trusts. More attention to tax expenditures — exceptions in the tax code that reduce tax revenue or, put another way, subsidies channeled through the tax system* — is always a good thing. But Klein also says something interesting that I don’t agree with: “they’re basically the welfare state for the middle class, cleverly arranged such that they don’t look like the welfare state for the middle class. If every year, the government sent every American — from the richest CEO to the greenest public-school teacher — a check covering 30 percent of their health-care costs, we’d think that a bit weird. We’d think it much weirder if we only sent the checks to the workers who happened to be at firms that offered benefits. . . .” I agree with all of that, except the bit about the middle class. Tax expenditures primarily benefit the rich, for a few reasons.
Fed’s Hoenig Defends Role of Dissenter –The man who opposed every official action taken by the Federal Reserve last year continued to express his opposition to the current stance of monetary policy Wednesday, and said he believes the economy should continue to recover and add jobs in 2011. “The economy is in recovery, although at a moderate pace,” Federal Reserve Bank of Kansas City President Thomas Hoenig said. “Barring unexpected surprises, the recovery should gain momentum, which will encourage hiring and slowly bring down the unemployment rate,” he said, adding that while it would be nicer to see a faster retreat in the unemployment rate, the economy is undergoing a major readjustment that slows the rate of improvement. Hoenig’s comments come from the text of a speech he was to give in Kansas City before the Central Exchange. He has rotated out of the voting roster of the interest rate setting Federal Open Market Committee, after an action packed stint in 2010. The official cast dissenting votes at all eight of the Fed’s meetings, worrying that the very low stance of interest rates, followed by the resumption of a program to buy longer-dated Treasury bonds, were setting the stage for future financial problems.
The Caveat Behind the Strong ADP Jobs Gain – A strong gain in a preliminary measure of private payrolls has raised hopes for the official Labor Department employment report to be released this Friday, but the numbers may be inflated by seasonal issues. The U.S. added 297,000 private-sector jobs in December, according to a report by payroll giant Automatic Data Processing and consultancy firm Macroeconomic Advisers. Some raised their estimates in the wake of the ADP report, with the median forecast rising to 150,000. But there is a seasonal quirk in the ADP number that may have inflated the December number. ADP and Macroeconomic Advisers do a seasonal adjustment that takes into account a typical December purge, where employers who have fired workers over the course of the year but don’t remove them from officials payrolls right away clear the rolls. Ben Herzon of Macroeconomic Advisers explains: “If companies were laying off fewer employees throughout 2010 than had been the case in recent years, the amount by which the seasonal adjustment process subtracted from [ADP National Employment Report] growth last year through November was too great. Following the same logic, fewer layoffs through November implies fewer December purges than in recent years, so the boost to December employment growth to offset the normal December purge may have been too large.”
Blogging, brand building and idea retention – Anil Dash has a great post up talking about how blogging, in that it is “permanent and persistent,” allows for the maturation and development of ideas. Anil writes: Now, while I’d like to self-servingly pretend that everything I say here is “big” in the sense of being important, really what I meant is that some ideas are just bigger than 140 characters. In fact, most good ideas are. More importantly, our ideas often need to gain traction and meaning over time. Blog posts often age into something more substantial than they are at their conception, through the weight of time and perspective and response. Discussions on Twitter are chaotic affairs that are often difficult to follow. Also when a debate takes place on a forum like Twitter it likely lost for posterity. In that sense the only way a discussion becomes permanent or memorialized is if it works its way into the blogosphere. Some worthy debates do occur in the comment sections of blogs, but that effort can be misdirected. David Merkel was wondering why some people were willing to write long comments on his blog. Some one like this should have their own blog. David writes: You have ideas and energy. Build your brand. Why waste your wisdom on the paltry few that read blog comments?
Chrystia Freeland has a long essay in the Atlantic on the new global elite, which will eventually become her next book. It’s well timed to coincide with the self-congratulatory plutocratic gabfest that is Davos, which kicks off in three weeks’ time, and with which Chrystia is very familiar.
How to deal with the plutocrats – The difference between the new global elite and the old global elite is that today the world is owned and run largely by first- or second-generation money: people who tend to think that they’ve earned it, somehow, especially if they came to their wealth from a background in the lower-middle classes: It’s not that these people are utterly bereft of noblesse oblige: Chrystia points out that “in this age of elites who delight in such phrases as outside the box and killer app, arguably the most coveted status symbol isn’t a yacht, a racehorse, or a knighthood; it’s a philanthropic foundation.” But those philanthropies don’t benefit the left-behind middle classes: they tend to follow a barbell distribution, with the money going either to the world’s poorest or else to well-endowed universities and cultural institutions. The US middle class is sneered at for being fat and lazy and unworthy of their wealth:
Prison Populations, Crime and “Present Orientedness” – In 2011 criminal sentencing reform might be on the table. Collapsing state budgets and ever-increasing prison populations (and the costs associated with them) are forcing the issue. .To understand where this may go, we need to understand where we’ve been. There’s been a massive increase in the prison population since 1980. This increase has been helped intellectually by the widespread acceptance of two strains of conservative thought. We discussed them recently over the winter break (one, two). The first is the school of thought known as Incapacitation Theory, a theory that says, in the words of James Q. Wilson: “Wicked people exist. Nothing avails except to set them apart from innocent people.”The second is known as Broken Windows, the idea that a neighborhood could be separated into orderly and disorderly people. As disorder sets in, orderly people flee or retrench from the neighborhood, and new disorderly people are emboldened to enter and take over. It also points to an idea of a police force that doesn’t solve crimes but rather one that maintains order. In this vision, the police force isn’t there to investigate crimes, present evidence to a prosecutor who then presents evidence to a jury.
Income inequality: Our global oligarchs – The Economist -Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition—and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves….[T]he global “nation” in which they increasingly live and work is doing fine—indeed, it’s thriving. For the super-elite, a sense of meritocratic achievement can inspire high self-regard, and that self-regard—especially when compounded by their isolation among like-minded peers—can lead to obliviousness and indifference to the suffering of others.