2009 - %3, September

Income Inequality Still Rising

| Tue Sep. 29, 2009 6:48 PM EDT

The Census Bureau reported today that income inequality increased in 2008.  Megan McArdle reacts:

I'm a little surprised; the work of Piketty and Saez seems to suggest that the incomes of the wealthy are disproportionately affected by crises, because they destroy so much asset value.  This effect may show up in the 2009 numbers, when the full effect of the carnage in the markets will be seen in high-end incomes.

My guess is that the destruction of asset values disproportionately affects only the very rich.  The top 10% are mostly just like the rest of us, but with a little more money, while the top 1% are quite different, relying for a lot of their income on capital gains and bonuses tied to asset values.  (And demonstrating a lot more income volatility, too.)  When Piketty and Saez produce their numbers for 2008, I wouldn't be surprised if income inequality has increased a bit if you look at 90/10 comparisons, but decreased a bit if you look at 99/10 or 99.9/10 comparisons.

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Politics and Art

| Tue Sep. 29, 2009 6:26 PM EDT

The NEA conference call nano-scandal has probably gotten all the attention it deserves already, but Conor Friedersdorf brings up an issue I'm curious about.  Ben Davis says the whole thing was a tempest in a teapot, "essentially a pitch for artists to make glorified PSAs about volunteer work," and Conor responds:

That sounds about right to me — the call wasn’t about furthering controversial elements of President Obama’s agenda, but it was about deliberately politicizing art — that is to say, encouraging artists to advance particular public policy goals rather than enabling them to spend their time and energy creating works of truth or beauty to the best of their ability....It is that effort that I find objectionable, as should anyone who values art or the autonomy or creative people.

So if this conference call had been with, say, a bunch of educator types, urging them to promote public service among schoolkids, would that have been OK?  Or how about law enforcement groups?  Or veterans groups?

Because I don't quite see the difference.  Artists don't exist on some kind of pristine plane of their own and they don't do their work in a vacuum.  They're all part of the same culture as the rest of us, and they react to it and try to influence it just like everyone else.  In fact, artists themselves probably view their work as more explicitly political, in the broad sense of the term, than practically any group of people outside of politicians themselves and the professional pundit/lobbyist/think tank industry that hovers around them.  The whole idea of "politicizing" art is as redundant as the idea of militarizing the Pentagon.

It seems to me that trying to persuade people to promote public service is either a good idea or it's not.  If it's too heavy handed, it's not.  If there are overtones of political payoff, it's not.  If there are insinuations that people who play along will get more grant money, it's not.  But I have a hard time buying the idea that it's affected one way or another by the allegedly delicate artistic sensibilities of the people involved.

Chamber of Commerce Goes on Spin Cycle

| Tue Sep. 29, 2009 6:01 PM EDT

The US Chamber of Commerce now wants you to know that they really do support climate legislation—just not any legislation they've ever seen. The group issued a statement on Tuesday arguing that their views on climate change "are mainstream, commonsense views" that "are shared by a broad majority of the American people, the business community, and a growing number of Democrat and Republican legislators."

"The U.S. Chamber of Commerce continues to support strong federal legislation and a binding international agreement to reduce carbon emissions and address climate change," said Chamber president and CEO Thomas J. Donohue in the statement. He also posted a new op-ed on the Chamber's site that was notably toned down from the "Let's Put a Lid On Cap-and-Tax" piece he penned in July.

The Democrats' Split Personality Disorder

| Tue Sep. 29, 2009 4:31 PM EDT

They are the best friends of the health insurance industry. They are fiercest foes of the health insurance industry.

I'm talking about Senate Democrats. On Tuesday afternoon, five Democratic members of the Senate finance committee—Max Baucus, Kent Conrad, Blanche Lincoln, Bill Nelson, and Tom Carper—voted with all ten Republicans on the panel to defeat Sen. Jay Rockefeller's amendment, which would set up a public health insurance plan to compete with private plans. These Democrats provided the winning margin in the 15-8 vote to kill a measure much dreaded by the health insurance companies. Such firms had plenty of reasons—billions, you might say—to celebrate what this band of Democrats did. On a subsequent vote for a weaker public option amendment offered by Democratic Sen. Chuck Schumer, Nelson and Carper returned to the Democratic fold and supported it, but Baucus, Conrad and Lincoln again sided with GOPers and defeated it.

At the same time Democratic senators were undermining a key Democratic initiative and helping out the insurance industry, the communications center for the Senate Democrats was zapping out a long email—headlined, "Insurance Companies: Profits Over People"—detailing the evils perpetuated by private health insurance companies:
 

Boxer Bill Outlines More Ambitious Cuts than Waxman-Markey

| Tue Sep. 29, 2009 3:06 PM EDT

The climate bill that Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) will officially unveil tomorrow will include tougher near-term emissions targets than its House counterpart, according to a leaked draft now circulating around the Hill. It's likely not the final version, as sources close to the bill's authors say that last minute details are still being worked out.

The bill aims to cut emissions 20 percent below 2005 levels by 2020, up from a 17 percent cut outlined in the bill that the House passed in June. The bill also notably preserves the Environmental Protection Agency's authority to regulate emission of greenhouse gases from large sources like coal-fired power plants, a provision that environmental activists were pushing for.

There were multiple leaked drafts on Tuesday. The latest—weighing in at 801 pages—is expected to be close to the final draft, and it includes four titles: a cap-and-trade title, an energy research title, a transition and adaptation title, and a title outlining emissions reductions in other areas. Outside of a few changes, the Boxer-Kerry bill largely mirrors the House effort. It aims to reduce carbon dioxide 42 percent by 2030 and aims to reduce emissions 83 percent by mid-century.

The bill leaves the portions on credit allocation and how the money derived from the sale or permits would be spent largely blank, however, portions expected to be among the most contentious. Those portions are expected to be filled in when Boxer releases her chairman's mark sometime in mid-October, following initial hearings on the bill in her committee, Environment and Public Works.

5 Creative Uses for: Vinegar

| Tue Sep. 29, 2009 2:55 PM EDT

Next up in our series on clever alternative uses for surplus stuff: vinegar. Reuse fans, this is a good one. The acidic liquid cleans, heals, and deskunks, not to mention its salad dressing potential. Here are just five of its myriad (thanks AltUse.com) uses:

1. Kill a wart: Soak a small piece of cotton wool (end of a q-tip works well) in cider vinegar. Fasten the cotton wool over the wart with medical tape or a band-aid. Reapply as needed.

2. Unclog drains: Use 3-4 tablespoons of baking soda and one cup of white vinegar to keep bathroom sink drains clear without damaging your pipes.

3. Heal a bruise: Apply white vinegar for one hour to a bruise. The vinegar will reduce the discoloration and aid healing.

4. Brighten tiki torches: Soak the torches' wicks in distilled vinegar for a few hours, then let dry. When lit, the flames will burn longer and brighter.

5. Remove skunk odor: Rub vinegar full strength into your pet's fur and then rinse with cool water. Pat dry with a clean towel.

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CREW: Sen. David Vitter is a Hypocrite, Should be Investigated

| Tue Sep. 29, 2009 2:22 PM EDT

Sen. David Vitter shot himself in the foot this month. The Louisiana senator has been outspoken in his criticism of ACORN, the embattled community organization, for offering financial advice to individuals posing as a pimp and a prostitute. But the Washington watchdog group Citizens for Responsibility and Ethics in Washington (CREW) filed a complaint Tuesday asking the Louisiana Office of Disciplinary Counsel to investigate Vitter's violation of the state's lawyerly conduct rules for his ties to prostitution in Louisiana.

CREW's press release explains the details:

In 2007, it was revealed that Sen. Vitter's telephone number was included in the so-called "D.C. Madam," Deborah Jeane Palfrey's, list of client telephone numbers. The senator confirmed he had sought Ms. Palfrey's services, saying in a statement, "this was a very serious sin in my past for which I am, of course, completely responsible." Two other women also alleged Sen. Vitter had engaged the services of prostitutes. Jeanette Maier, the "Canal Street Madam," claimed Sen. Vitter visited the New Orleans brothel several times in the mid-1990s. In addition, a woman who worked as a prostitute under the name of Wendy Cortez said Sen. Vitter was a regular client of hers between July and November 1999.

Under D.C. and Louisiana law, it is a crime to solicit for prostitution. CREW filed a complaint against Sen. Vitter with the Senate Ethics Committee, which dismissed the matter without action in September 2008.

"Sen. Vitter's zeal to see ACORN criminally investigated for offering advice in setting up a prostitution ring reminded me he has yet to be held accountable for his own role in a prostitution ring," said CREW executive director Melanie Sloan. "While ACORN's conduct is indefensible, so is Sen. Vitter's and what is good for the goose is good for the gander."

It remains unclear whether CREW's complaint will yield a substantive investigation. But this is clearly bad news for Vitter, who faces a number of tough challengers, including a porn star, for his seat in 2010.

The Politics of Climate Change

| Tue Sep. 29, 2009 2:03 PM EDT

Did you see prediction guru Bruce Bueno de Mesquita on Jon Stewart last night?  He's the guy who claims that the CIA says his judgments are accurate 90% of the time.  Fellow forecasting guru Philip Tetlock describes his methodology:

Bueno de Mesquita declares that, once we have mapped the option space, we simply need to follow his four-step formula for making accurate predictions. First, get the best-possible experts to identify every individual or group with a “meaningful” interest in trying to influence the decision. Second, get the experts to estimate as accurately as possible which options each of the identified players is advocating in private — that is, what they want. Third, get experts to estimate how big an issue this is for each of the players — how motivated they are to prevail. Fourth, get experts to estimate the relative political clout or influence of each player in this issue domain.

OK then.  So what does Bueno de Mesquita think about the odds of getting any kind of serious global action on climate change?  Our own Michael Mechanic asked him:

MJ: What's the outlook for Copenhagen?

BBdM: Our analysis shows that the Copenhagen setting will be used to put together what I would describe as a feel-good agreement without teeth....The analysis shows that over the first few years there will be improvement, and then commitment will erode steadily and move away from enforcing the agreement. At the same time, technology changes will be pushing in a positive direction. The other thing this shows is that if the US were committed to a fundamental change in greenhouse gas emissions, it doesn't need Copenhagen; it doesn't need an international agreement. This could be done unilaterally. If Congress decided that it's gonna put a fixed tax on gasoline to ensure that gas doesn't fall below some optimal price, say $5 a gallon, people would change their behavior. There's nothing stopping the US from doing that.

MJ: So somebody has to commit political suicide to make this happen?

BBdM: That's probably correct. Every sensible politician will be in favor of something happening off of their watch: Yes, we will commit to reducing greenhouse gas emissions starting year X — X being the year they're no longer in office.

MJ: Was anything surprising about these results?

BBdM: What surprised me is that support built a head of steam, but it collapses quite dramatically within 5 to 10 years. I was surprised at how quickly and sharply it erodes.

Well, that sucks.  The only glimmer of good news here is that Bueno de Mesquita didn't do this analysis himself.  A bunch of his undergrad students did it.  They were "a particularly smart group of kids," he says, but still.  Undergrads have been known to be wrong before, haven't they?

Eating Your Own Dog Food

| Tue Sep. 29, 2009 1:32 PM EDT

Wall Street has a demonstrated aptitude for bundling up and securitizing pretty much anything: mortgages, credit card debt, parking meter collections, naked swaps, bundles of bundles, etc. etc.  So why not put this ability to good use as a way of motivating ratings agencies to care about the accuracy of their ratings?  A reader emails with this elegant suggestion:

Require them to sell collateralized rating obligations. The idea is that they will bundle tranches of ratings together into a form of a put. If the tranche of, say, AAA ratings fail at a rate greater than whatever the published risk of default of the class is, they will be forced to pay a contracted amount to the purchasers.

I like it!  There's no income stream associated with ratings, which is a problem, but surely one that Wall Street can solve.  Instead of paying a fee for getting their securities rated, maybe issuers should instead be required to set aside 0.1% of the income stream from each of their products to be bundled into a Ratings Backed Security.  Agencies would be allowed to sell half the RBS immediately, but would have to hold on to the other half for a set period of time related to the maturity period of the underlying securities.

Or something.  Details are left as an exercise for the reader.  But I like the out-of-the-box thinking here!

Chart of the Day

| Tue Sep. 29, 2009 12:25 PM EDT

Republicans took their best shot at sinking healthcare reform over August, but it turns out that public support for their position was sort of a like a convention bounce: sharp but short-lived.  At least, that's the takeaway from the latest Kaiser poll, which shows that support for healthcare reform has already recovered from the beating it took during the summer townhalls.  This is pretty much what I expected all along, and I wouldn't be at all surprised to see public support creep back into the low 60s if Obama and the Democrats continue to lower the temperature and work steadily to produce a solid, defensible bill with demonstrable benefits for the average consumer.  With this level of support, healthcare reform is decidedly doable.