2012 - %3, February

American Political Campaigns are Really Expensive

| Tue Feb. 21, 2012 3:23 PM EST

After reading half a dozen blog posts this morning about mega-billionaire Sheldon Adelson and his support of Newt Gingrich, I got curious about campaign financing laws in other countries, something I know nothing about. In Britain, it turns out, paid political advertising on television is banned (though the parties get a bit of free TV time during election seasons), party expenditures are limited to about $50 million during the year prior to an election, and individual candidates are limited to expenditures of about $10,000 each. But what about third parties, the bane of American campaigns these days? Here you go:

Individuals or groups that aim to promote or disparage electoral candidates are also subject to controls and restrictions on the campaigning that they can do. They may incur expenditure [] by holding public meetings or organizing public displays, or by issuing advertisements, circulars, or publications. They can spend up to £500 (approximately US$700) at a general election “presenting to the electors the candidate or his views, or the extent or nature of his backing or disparaging of another candidate.”

$700! Take that, plutocrats!

Roughly speaking, these limits mean that total campaign expenditures for a general election in Britain amount to $100-150 million or so (it depends a bit on exactly what you count). We have about 5x their population, so this would translate to something in the neighborhood of $500-750 million if the same rules applied here. That compares to actual expenditures of about $5 billion on federal offices during the 2008 campaign.

I don't have any real point to make here. This is just a pure information dump. Anyone with serious knowledge of British (or other) campaign law should feel free to chime in if I've gotten anything seriously wrong here.

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Working for a Living Not Such a Great Deal Anymore

| Tue Feb. 21, 2012 2:35 PM EST

Karl Smith predicts that this chart will "make the rounds," and since Karl is always right I guess I'd better post it. Here it is:

Technically, the point of this chart is that prices go up at about the same rate as labor costs, but no more. If you try to raise prices too much, competition will eventually force you to lower them. Likewise, if you try to push labor costs down, workers will go elsewhere and you'll eventually have to increase wages to attract new employees. Generally speaking, labor gets a fairly steady percentage of economic output, and as productivity goes up, wages go up.

Until about 2000, that is, when wages began to stagnate but prices rose steadily anyway. Output continued to increase, but none of the increase was going to workers. Karl's thesis is that the Industrial Revolution was a one-time deal and it's over now:

We are returning to an environment where productivity gains do not accrue to unskilled labor because they are imbedded in the brains of the innovators....What this chart hides, but I believe is also true is that capital is facing a similar collapse....For now, it is still in the interest of innovators to tap public equity markets and doing so means that they come under some — but not absolute — pressure to pay a dividend.

However, I have a hard time believing this will not come to an end. The money available in private pools will be sufficiently large that innovators can strike side deals that let them walk away with almost all the profits.

Savers will get nothing.

Is this true? I don't know. The big brains will have to fight it out. The reason I'm posting this chart is because it's a new addition to my collection of evidence that our current economic problems started not in 2008, but in 2000 — or, possibly, in the mid-90s, but masked for a few years by the dotcom boom. Something fundamentally changed around then, and you can see this in a whole host of economic indicators.

But what? There are plenty of theories, but I'm not sure which ones to believe. However, I've sort of semi-promised my editors a magazine piece on this subject sometime in the year 2014 or so, so I'm continuing to collect this stuff.

Hearts and Minds Not Being Won in Afghanistan

| Tue Feb. 21, 2012 1:54 PM EST

The Washington Post reports that mobs of angry Afghans converged on Bagram Air Base today, outraged over reports that American workers had burned copies of the Koran. Gen. John Allen has apologized profusely, but what really happened here? The Post explains:

U.S. officials said that the copies of the Koran were mistakenly included in a bundle of material bound for an incinerator on the base. The books were quickly removed once Afghan employees told American soldiers that burning them would be deeply sacrilegious.

But that intervention happened only after the pages of some books were charred. Afghan employees of the base carried those remains outside the Bagram’s front gate as evidence of what had happened, galvanizing a growing crowd of protesters. “The people who do this are our enemies,” said a 27-year-old who has worked at a warehouse on the base for two years. “How could I ever work for them again?”

So some soldiers made a mistake, it was immediately corrected, but nonetheless "pages of some books were charred." Riots ensued.

There's really nothing to be learned here about American waste disposal procedures on foreign bases. It was a screwup. Screwups happen. I don't have the slightest doubt that Allen will make it crystal clear to everyone in his command that this had better never happen again.

Rather, the lesson to be learned is that stuff at this level is inevitable. You will never run an operation so perfectly that nothing like this ever occurs. And yet, this is precisely the kind of thing that is routinely used to gin up outrage at a moment's notice. We think we can somehow win the hearts and minds of Afghans, but how can we do that when an incident like this can easily ruin a year's worth of good works? Even with the most perfectly run operation, incidents like this are going to happen at least once a year.

We are not going to win their hearts and minds. In the past half-century American military operations have never successfully won anybody's hearts and minds. It's time to acknowledge this and leave Afghanistan.

What Sheldon Adelson and Barack Obama Have in Common

| Tue Feb. 21, 2012 1:48 PM EST
Casino mogul Sheldon Adelson

The media have jumped all over casino mogul Sheldon Adelson's remark in a new interview with Forbes that he would spend up to $100 million of his fortune to elect Newt Gingrich president. Such a donation would be unprecedented in American history and would rock the GOP presidential race. Adelson and his wife have already pumped $11 million into the pro-Gingrich super-PAC Winning Our Future, helping resuscitate Gingrich's campaign, and reportedly plan to give $10 million more.

But what pops out even more in the Forbes interview is Adelson's take on super-PACs, which can raise and spend unlimited sums of money to influence elections so long as they don't coordinate with candidates or campaigns. Put simply, Adelson doesn't like them. "I'm against very wealthy ­people attempting to or influencing elections," he says. "But as long as it's doable I'm going to do it." That sounds an awful lot like the man Adelson is trying to defeat: President Barack Obama.

Earlier this month, Obama, who had railed against super-PACs, changed his tune, urging his donors to give to the pro-Obama super-PAC Priorities USA Action. Obama's campaign manager, Jim Messina, explained that the president's shift grew out of the realization that "we can't allow for two sets of rules in this election whereby the Republican nominee is the beneficiary of unlimited spending and Democrats unilaterally disarm." Obama didn't suddenly warm to super-PACs; he realized, as Sheldon Adelson has, that to compete you have to use the tools available to you.

Adelson, for his part, is unabashed about his support for Gingrich. "I have my own philosophy and I'm not ashamed of it," he says. "I gave the money because there is no other legal way to do it. I don't want to go through ten different corporations to hide my name. I'm proud of what I do and I'm not looking to escape recognition."

Adelson's beef with Obama, he insists, is not personal, but instead over what he calls "socialist" policies aimed at redistributing wealth in America. According to Forbes, Adelson's net worth has leapt by $21.6 billion while Obama's been president—more than any other person in America.

Newt's National Security Demagoguery

| Tue Feb. 21, 2012 12:27 PM EST
2012 GOP Presidential Candidate Newt Gingrich.

How dangerous is President Obama? According to Newt Gingrich, the president who ordered the raid on Osama bin Laden's hideout in Pakistan is "incapable of defending the United States," later offering as an example the fact that the authorities "barely got a guy on Saturday who's tried to blow up the US Capitol.” 

Authorities "barely" foiled the plot only if, by "barely," Gingrich means they controlled the entire thing from beginning to end. Last Friday, an undocumented Moroccan immigrant named Amine El Khalifi was arrested in an alleged plot to suicide bomb the US Capitol—a plot that, according to the criminal complaint, was being monitored by the FBI for the past thirteen months and was planned only after Khalifi made contact with an undercover agent. When Khalifi finally showed up to carry the operation out, according to the complaint, it was with equipment he had been given by the FBI: A bomb that wouldn't detonate and a gun that wouldn't fire. This kind of sting operation, where the plot itself is never really in danger of actually coming to fruition, and which critics say amount to entrapment, has been a prevailing trend in domestic counterterrorism for the past few years. You could almost say Gingrich has a "fundamental misunderstanding" of how these things work. 

Our Screwed-Up Tax System

| Tue Feb. 21, 2012 11:52 AM EST

Bruce Bartlett writes today that the federal tax code violates principles of both horizontal and vertical equity. The table below illustrates his point:

Reading across the chart, people who make roughly the same amount of money can pay wildly different tax rates. In the middle quintile, tax rates vary from 1.7% to 23.5%. In the richest quintile, tax rates vary from 12.1% to 29.3%. That's a violation of horizontal equity, the principle that people who make similar amounts of money ought to pay roughly similar taxes.

The red ovals illustrate the violation of vertical equity, the principle that people who make more money ought to pay higher tax rates. Although the federal tax system is generally progressive, there are startling exceptions. The most heavily taxed segment of fourth quintile, which represents incomes of around $80-100 thousand, pays higher rates than the most lightly-taxed segment of the fifth quintile, which represents incomes of $100+ thousand.

The reason for this is partly because we tax different kinds of income very differently, and partly because the tax code is littered with targeted deductions and tax credits that some people can claim but not others. If you make a lot of money from dividends and capital gains, you pay a much lower rate than someone who makes a similar amount from wages. If you own a big home, you get to take a mortgage interest deduction not available to someone who doesn't.

In theory, tax rates are lower on capital gains and dividends because this raises the stock of capital, which is good for the economy. But as Bruce dryly points out, "The empirical question of whether sharply lower taxes on capital, and hence the wealthy, has actually raised saving, investment and productivity is one I will revisit. Suffice it to say that since 2003, when the current tax rates on capital gains and dividends were instituted, the economy offers little, if any, evidence on this score." He has more at the link.

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We're Still at War: Photo of the Day for February 21, 2012

Tue Feb. 21, 2012 6:57 AM EST

Pfc. Cory Miller, I Battery, 1st Squadron, 11th Armored Cavalry Regiment, fires the FIM-92 Stinger missile at a MQM-170 Outlaw drone plane (target practice). The FIM-92 Stinger is a personal portable infrared homing surface-to-air missile. US Army photo by Casey Slusser.

Greece Gets Another Reprieve

| Tue Feb. 21, 2012 1:41 AM EST

After receiving €110 billion in bailout money two years ago, Greece received another €130 million today. Before it was approved, however, the eurozone finance ministers received a confidential report with some grim news. The Financial Times got hold of a copy:

The 10-page debt sustainability analysis, distributed to eurozone officials last week but obtained by the Financial Times on Monday night, found that even under the most optimistic scenario, the austerity measures being imposed on Athens risk a recession so deep that Greece will not be able to climb out of the debt hole over the course of a new three-year, €170bn bail-out.

It warned that two of the new bail-out’s main principles might be self-defeating. Forcing austerity on Greece could cause debt levels to rise by severely weakening the economy while its €200bn debt restructuring could prevent Greece from ever returning to the financial markets by scaring off future private investors.

....The report made clear why the fight over the new Greek bail-out has been so intense. A German-led group of creditor countries — including the Netherlands and Finland — has expressed extreme reluctance to go through with the deal since they received the report.

It's not clear to me why this report changed anyone's attitude toward Greece. Of course the austerity measures being imposed on Greece are going to send them into an even more wrenching recession. And of course no one in their right mind is going to loan money to Greece for many, many years to come. This can't possibly have come as a surprise to anyone, could it?

If Europe wants Greece to survive as part of the eurozone, its member countries are probably going to have to commit to a nearly open-ended flow of fiscal transfers, just as California is implicitly committed to an open-ended flow of fiscal transfers to Mississippi:

A “tailored downside scenario” in the report suggests...Greece would need about €245bn in bail-out aid, far more than the €170bn under the “baseline” projections eurozone ministers were using in all-night negotiations in Brussels on Monday....Even under a more favourable scenario, Greece could need an additional €50bn by the end of the decade on top of the €136bn in new funds until 2014 being debated by finance ministers on Monday night.

I'm willing to bet that even these scenarios are unduly rosy. A more realistic analysis would probably produce even grimmer news, but that's the price of a fixed-exchange-rate area. If the eurozone's rich countries aren't willing to sign up for this, they probably should have just cut the cord now and thrown Greece to the wolves.

UPDATE: Felix Salmon is blunter than I am: even the "tailored downside," he says, "still looks astonishingly optimistic." His whole piece is worth a read. It explains the deal in pretty lucid terms.

In Which I Finally Learn What Women are For

| Mon Feb. 20, 2012 6:53 PM EST

A few days ago James Poulos wrote an essay in the Daily Caller titled "What Are Women For?" After I saw it linked for the tenth or twelfth time I finally clicked through to see what all the clamor was about, and I'm not being snarky when I say that I simply couldn't figure out what he was getting at. The writing was so circuitous and so pseudo-academic that it was inscrutable. Then, a followup essay declared that "The wave of anger and condemnation that has come from some quarters is dramatic evidence that the column’s central contention is right." I sort of doubt that, but in any case there's no way of judging this until we know what the column's central contention is.

Luckily for me, Rich Yeselson has better antennae than I do, and he doped it out:

Poulos is actually up to something at once deeply derivative and banal, yet astonishing in the residual, reactionary power he brings to it....[The argument] comes down to this: he thinks that women are closer to nature because they are able to give birth, i.e they have a “privileged relationship to the natural world.” And, therefore, “what they are for”, as he argues in the second essay (which is actually the more lucid of the two) is to civilize those who “fill up the world with stuff — machines, weapons, ideologies, and so on — that often objectifies and instrumentalizes people, and often distracts us from its own sterility as regards fruitful human living.” That would be men.

Aha! The role of women is to civilize men! Apparently that's the meaning of this sentence: "I’m not alone in thinking that women are uniquely able to help humanity avoid becoming enthralled to the more sterile cultural creations of men" — with sterile creations being "machines, weapons, ideologies, and so on."

That is a musty trope, isn't it? Yeesh. So I owe Rich thanks twice over. First, for letting me know that I wasn't the only one to find these essays all but impenetrable. And second, for explaining what it was all about. For more on the illustrious history behind this, just click the link.

Choosing the Right Article is Sometimes Harder Than You'd Think

| Mon Feb. 20, 2012 6:16 PM EST

Suzy Khimm asks:

Should we have a FDA for financial products?

You'll have to click the link to get Suzy's take on this question. My question is different: should it be "a FDA" or "an FDA"? If you mentally spell out the acronym, it's properly "a Food and Drug Administration." But if you mentally just sound out the letters, it's properly "an Eff Dee Ay."

This is even trickier with an acronym like, say, SAC. Even if you don't mentally spell out the whole acronym, it's still the case that sometimes this is pronounced "sack" and sometimes "Ess Ay Cee." So you might say "a SAC bomber" or "an SAC bomber." Which should it be?

This is one of those urgent Presidents Day questions. Speaking of which, is it Presidents Day or Presidents' Day? Who decides these things, anyway?