2010 - %3, November

Who Loves Inflation?

| Wed Nov. 24, 2010 12:02 PM PST

Karl Smith:

Reihan Salam has written a bunch of stuff I have been meaning to respond to but haven’t. The only point I want to address because its real quick is that inflation does not erode savings. It only erodes cash and the value of long bonds taken out before the inflation set in. However, the Fed is buying long bonds and propping their value. The only thing that is eroded in this scenario is cash.

Back in days of old, poor farmers loved inflation because it allowed them to pay back their loans with cheaper money. Rich Wall Street bankers hated inflation for the same reason. From this came populist demands for free silver at 16:1, crucifying mankind on a cross of gold, etc. etc. But none of this really matters any longer because interest rates all react to inflation: in the long term interest rates generally move up and down with inflation expectations and in the short term they're keyed to LIBOR or the prime rate or some other inflation-sensitive variable.

But there's one exception: fixed-rate loans. In particular, fixed-rate home mortgage loans, of which there are still quite a few. So for existing homeowners with traditional 30-year fixed-rate mortgages, higher inflation would be great. And for the bankers and investors who hold those loans, it would suck. Inflation may not erode savings, but it does erode the value of a fixed-rate mortgage, which means this whole argument isn't quite a dead letter yet — and bankers and the common man are still on opposite sides. Right?

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Quote of the Day: The Great Turkey Conspiracy

| Wed Nov. 24, 2010 11:02 AM PST

Peter Suderman tweets:

Oh sure, he'll pardon the turkey now. But what you don't know is that next week Obama will have it secretly assassinated.

You know, I'd really like to see the whole turkey pardoning thing go away. It was never really a very good schtick in the first place, and it's way outlived its sell-by date. But of course that's impossible now. If Barack Hussein Obama decided to end the tradition, it would be yet another sign that he hates everything that makes America great, despises our great Christian traditions, and wants to bring Sharia law to the United States. So thanks to Glenn Beck & Co., we're stuck with this dumb tradition for at least another six years. Thanks, guys.

Who's Making Money?

| Wed Nov. 24, 2010 10:51 AM PST

So what explains the crankiness of American business given the very high corporate profits they're raking in these days? Justin Fox crunches the BEA numbers and says the disconnect is simple: financial corporations are making loads of money but domestic nonfinancial corporations aren't:

So the reason that corporate profits are near their all-time highs would appear to be that financial corporations (mainly big financial corporations) and multinationals are making lots of money and paying less of it out in taxes. Hmmmm.

The corporate profit picture would seem to mirror what's been going on in the income distribution for individuals for the past few decades. The money is increasingly going to a select group at the very top of the economic food chain, who are able to reap the rewards of global growth, play the financial system astutely, and avoid taxes. You can spin this in a moderately positive way: these are very dynamic economic times, and the rewards are going to those companies and individuals who position themselves to take advantage of this dynamism. But there are an awful lot of negative ways you can spin it, too.

Something is odd here. Yesterday the Commerce Department emailed me a few charts about the economy, and one of them is over on the right. It's strictly domestic profits (i.e., it doesn't include overseas profits from multinationals), and although it doesn't say so, I assume it shows pretax profits, so it's not driven by differences in how companies play games with the tax code. And what it shows is a pretty similar trajectory for both financial and nonfinancial profits: they're both up sharply, and they're both just slightly below their 2006 peaks. There's no breakdown in the chart between big and small nonfinancial companies, but there's also no special reason to think the numbers are wildly different.

So....I'm not sure about this. Fox's analysis appeals to me, but I'm not sure the data supports it. More later if I get hold of some more detailed figures.

The Weird Hubris of the Columnist

| Wed Nov. 24, 2010 10:17 AM PST

Matt Bai on Obama's problems:

In this way, the “Don’t touch my junk” fiasco raises, yet again, what has become the central theme of Mr. Obama’s presidency: America’s faltering confidence in the ability of government to make things work. From stimulus spending and the health care law to the federal response to oil in the Gulf of Mexico, Mr. Obama has continually stumbled — blindly, it seems — into some version of the same debate, which is about whether we can trust federal bureaucracies to expand their reach without harming citizens or industry.

The conventional wisdom on display here is so lazy it probably wouldn't cross the room for another beer if it were thirsty. Seriously: does Bai really think that America is suddenly in the midst of a brand new national debate about the reach of the federal bureaucracy?

It's not. It's in the midst of a great national debate about the reach of specific pieces of the federal bureaucracy that Fox News doesn't like. Beyond that, it's the same old dislike of bureaucrats telling us what to do that we've been engaged in since forever. There is exactly nothing that's new here aside from the particular choice of topics that the Drudge/Rush/Fox axis happens to be focusing on.

Column writing is a peculiar business. Every week, Mother Jones asks me to write a semi-column that gets emailed out to subscribers on Friday morning and, lately, also gets published on the blog. It's a column because it's written in advance, so it's not just a standard news-reaction blog post, but it's a "semi" column because it's still written in the basic blog format. Point being, it's hard. You wouldn't think it would be considering the amount of ordinary blog copy I churn out weekly, but it is. Every week I struggle to find something to write about.

But it never occurs to me to just say the hell with it and skylark away about the great American psyche, as if I have any idea what that is. I might mention some poll results now and again, and I might talk about how I think the public will react to specific things here and there. But grand notions of what it's all about? I'm so keenly aware of my limited scope that I just wouldn't ever do it.

But columnists do this routinely, despite the fact that their scope is probably just about as limited as mine when it comes to these grand ideas. So what is it that gives them the hubris to do it? Especially when they almost always choose to ignore the more mundane things that explain their grand ideas? It is a mystery to me. Maybe a latter day Studs Terkel needs to interview a whole bunch of columnists and find out just how their minds tick.

The $5 Golf Cart Ride

| Wed Nov. 24, 2010 9:52 AM PST

USC tailback Dillon Baxter hopped on a golf cart for a ride across campus a few days ago, but it turned out that the fellow student driving the cart is a certified agent with the NFL Players Assn. and an aspiring sports mogul. Punishment was duly meted out:

Baxter was ruled ineligible for last week's game at Oregon State because the ride was regarded as a prohibited extra benefit. USC reported the incident to the NCAA, and Baxter is expected to be reinstated this week after making a $5 donation to charity — the approximate value of the benefit he received.

I'm thinking today is probably going to be a slow news day, so I just thought I'd share.

House of Pain: When Good Congressmen Go Bad

| Wed Nov. 24, 2010 9:28 AM PST

That man there on the left is Rep. Jonathan Cilley, a promising young Democrat from the great state of Maine. Or rather, he was a promising young Democrat, until his distinguished colleague, Rep. William Graves of Kentucky, a Whig, shot him in an 1838 duel. Like most duels, it was a little absurd; as the House website notes, "neither man had any known grievance with the other prior to the incident" (normally a deal-breaker). But Cilley had offended Graves' friend, and so Graves felt that it was only right—gentlemanly, even—to demand satisfaction on his behalf.

Never letting a good crisis go to waste, the House passed stringent anti-dueling legislation one year later in Cilley's memory, and then, in another timeless congressional tradition, totally ignored it. In 1860, six members convened for an epic 3 v. 3 gunfight in Maryland; that same year, one congressman challenged another to a battle with bowie knives.

And that was just the beginning. I dug up more than a dozen instances of our distinguished representatives in Washington beating the bipartisanship out of each other, police officers, and, occasionally, total strangers. Forget everything you've heard about how Washington is more polarized than ever before; armed confrontations are as much a part of the legislative process as backroom deals and motions to recommit. Check it out.

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Closing the Gigaton Gap

| Wed Nov. 24, 2010 4:00 AM PST

If countries follow through on the pledges they made in Copenhagen last year, the world could achieve 60 percent of the emissions cuts that scientists say are needed to avert the worst impacts of climate change. At last year's climate negotiations in Copenhagen, world leaders pledged to keep global warming to less than 2 degrees Celsius (or 3.6 degrees Fahrenheit). A new report from the United Nations Environment Program and the World Resources Institute released Tuesday indicates that while the pledges don't go far enough, following through on them would at least put the world on the right path.

Over the past year, 138 countries have either formally signed on to the Copenhagen Accord or signaled that they would—and combined they are responsible for more than 86 percent of global emissions. The nations of the world released a combined 48 gigatons of carbon dioxide and other heat-trapping gases in 2009. If countries follow through on their pledges, total global emissions would be reduced by six gigatons by 2020 (as compared to what we'd release if countries took no action to cut emissions).

If countries decide to go with their least-ambitious pledges, emissions would continue to climb to 53 gigatons per year. However, if the most-ambitious targets are met, they would grow to 49 gigatons. The report notes that even the more-ambitious route is still about five gigatons short of the meeting the goal of keeping warming to under 2 degrees. But it's much better than the alternative, which would mean allowing emissions to continue to shoot up to 56 gigatons, the path we're on if no one takes action.

The report authors hope the findings serve as a reality check for negotiators meeting in Mexico next week. "We need to heed and respond to these findings in Cancun, and countries need to make commitments that reflect them," said Janet Ranganathan, vice president of science and research for WRI.

Amy Fraenkel, director of UNEP's North America office, noted that closing that gap is achievable if existing clean energy technologies are implemented, efficiency is improved, further steps are taken to reduce deforestation, and steps to reduce emissions from the transportation sector are taking.

At last year's summit, world leaders also said they would consider lowring their goal for temperature rise to 1.5 degrees in future talks—which is what the countries most affected by climate change have said is needed to protect them. That, of course, would require countries to significantly improve their targets.

We're Still at War: Photo of the Day for November 24, 2010

Wed Nov. 24, 2010 3:30 AM PST

Spc. Kathryn Fish coaches a fellow soldier during a hands-on training portion of the Demon Academy, a leader development program created Nov. 14 on Camp Taji, Iraq. The academy was formed by senior enlisted leaders of the Enhanced Combat Aviation Brigade, 1st Infantry Division, in order to mentor young and future leaders, as well as prepare them for future professional development courses. Photo via U.S. Army.

Teachers Respond to 'Waiting for Superman'

| Tue Nov. 23, 2010 6:15 PM PST

-Mark Murrmann, Mother Jones-Mark Murrmann, Mother JonesBy now, you've probably either seen or read reactions to the most controversial education documentary of the year, "Waiting for 'Superman'" (WFS) directed by Davis Guggenheim. (In case you missed the brouhaha, my favorite in-depth, opposing views on the film are here and here.)

I plan to spend a lot more time in the schools before I dig deeper into some of the claims in the documentary, but I am always skeptical of silver-bullet solutions. Meanwhile, I have been trying to rally some veteran public school teachers to go see WFS with me. So far, I haven't been able to find one taker. The teachers tell me they think it's an attack on them, and are boycotting it.

Turns out, Guggenheim also wants to hear from teachers. Last week, he put out a call in the form of a blog post on HuffPo, "Teachers: Tell Me What You Think," and got an earful. The interesting thing is that out of 87 comments, as of today, not one is positive. (Well, there is one, but that comment is clearly an advertisement.) All comment writers say that they are teachers, some with decades of experience, and there are some important points. I read through all comments, and here are a few excerpts that seemed representative of the main themes and sentiments.

So far, Guggenheim hasn't responded.

Have you seen "Waiting for 'Superman?'" Really curious to hear what MoJo readers think of it.
 

Tea Partiers and Health Insurance

| Tue Nov. 23, 2010 5:24 PM PST

The latest from Public Policy Polling:

Most Americans think incoming Congressmen who campaigned against the health care bill should put their money where their mouth is and decline government provided health care now that they're in office.

Excellent! What makes this especially cool is that Democrats are pretty tolerant of conservative congressmen getting their healthcare. It's conservatives and independents — by a 30-point margin — who think tea party congressmen should put their money where their mouths are.1 Tom Jensen comments:

This is an issue where Democrats really have the opportunity to create tension between the newly elected officials and the Tea Partiers who put them there by highlighting the disconnect between the freshmen Republicans' rhetoric and their actions. Their base clearly expects them to act in a way consistent with their stated opposition to government provided health care but given Andy Harris' recent outburst about his care not starting quickly enough it's not clear the new electeds are getting the message.

I dunno. I'd like this to be true. It would be terrific to hoist these guys on their own petards. But it's hard to see how liberals can gin this up into any kind of media firestorm. Without that, it won't generate any real pressure, and without that it will die off soon and the tea partiers will never think about it again. But it's a nice idea.

1And what makes it extra super duper cool is that a lot of the tea party conservatives who think tea party congressmen should forego their government health insurance are themselves probably on Medicare.