Quiz of the Day

Suppose you are going to be transported fifty years into the future. What country would you like to be transported to? Don't worry: you'll be magically equipped with the language and cultural skills you need to continue living a nice middle class existence no matter where you end up. But it's your choice: Italy, China, Brazil, Denmark, Egypt, the United States, you name it. Where do you think you'd most likely be best off? Why?

It's a slow day, so let's do some political strategizing. Here's what the LA Times has to say about yesterday's vote in the House to repeal healthcare reform:

The Senate showdown may not begin for several weeks, but promises to be substantially messier and more drawn-out than the debate just completed in the House....In the Senate, Republicans will have to use contentious procedural maneuvers to pressure Democrats to vote on a repeal measure. Democrats retain a 53-47 edge in the Senate, counting two independents who caucus with them, and Democratic leaders firmly oppose repeal.

"The Democratic leadership in the Senate doesn't want to vote on this bill. But I assure you, we will," Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement Wednesday after the House vote.

Here's my take: Democrats are nuts to take this attitude. They should bring the House bill up for a vote quickly, let Republicans speechify about it for a bit, and then vote it down, 53-47. End of story, time to move on.

But wait! With Republicans in control of the House, it's not like the Senate can really get much done anyway. So what's the harm in wasting a bit of time and making this a knock-down-drag-out fight? After all, the House leadership got a nice, clean repeal vote by bringing up the bill under a closed rule and allowing no potentially embarrassing amendments and virtually no debate. In the Senate, by contrast, Democrats control things, and they can bring up all the amendments they want. So maybe they should play along, hold hearings, and force Republicans to vote on, say, an amendment to the repeal bill that would keep the preexisting condition ban in place. And another one that would keep the donut hole fix in place. Etc. etc.

Is that better? Who would benefit more from a bunch of dueling amendments? And since Republicans seem to be dedicated to full and complete repeal, full stop, would they offer any amendments anyway? Comments?

Leave Google Alo-o-o-o-o-ne

John J. Miller at The Corner today:

Google is honoring the 50th anniversary of JFK’s inauguration. Let’s see what (if anything) it does on February 6, which is Ronald Reagan’s 100th birthday.

Just shoot me now. Can we please please please stop the relentless Google bashing every time they choose to commemorate something with one of their logo doodles? It's gotten way beyond tiresome.

Moral Dilemma of the Day

Keith Humphreys poses a real-life question:

Here is my colleague’s not-as-simple-as-all-that dilemma. He has pilot data showing that a cheap, generic drug has a potentially life saving medical application. He now has a grant from the NIH (i.e., not industry) to study it in a major trial. A for-profit company has a copycat version of the generic drug that is virtually the same but is still on patent and is thus highly expensive. The question is whether he should study the generic version or the proprietary one.

If the experiment proves that the generic version of the drug is effective, he will get a very nice paper in a medical journal. And that will be the end of it. We have a million studies showing that clinical practice is minimally influenced by journal articles alone. In contrast, if he studies the proprietary drug, a profit making company will send out their armies of marketers to physicians and get many of them to use it, making a great deal of money for themselves in the process...but this will also save lives, because aggressive marketing and promotion such as the industry does has been proven to affect clinical practice dramatically.

Italics mine. So what should he do?

Robot Riots Coming Soon?

If IBM can create a computer with enough truly human-like intelligence to win at Jeopardy, does this mean that semiskilled jobs will soon be a thing of the past? Adam Ozimek asks:

What happens in the future if artificial intelligence means that human-like robots start replacing jobs? When the machine that replaces you has a voice and a name, like Watson, it will feel different than when the machine is a big metal contraption that attaches widget A to widget B. I suspect that the more human-like the technology that replaces human work, the more people will begin to finally heed the arguments of free traders and reconcile their feelings towards technology driven versus globalization driven job destruction. Unfortunately, this won’t be in the direction we want. Instead, people will begin to see technological progress as a “they” who is “taking our jobs”.

I think he's right. Not for another decade or two, probably, but that's not really very far away. Our Caves of Steel future is closer than we think.

Hitlerizing the Discourse

Here is Rep. Steve Cohen (D–Tenn.), speaking late last night to a nearly empty House chamber, on the repeal of healthcare reform:

They say it's a government takeover of health care, a big lie just like Goebbels. You say it enough, you repeat the lie, you repeat the lie, and eventually, people believe it....The Germans said enough about the Jews and people believed it — believed it and you have the Holocaust.

That's pretty inflammatory. But hey — I'm on record as believing that Nazi analogies aren't always that big a deal. So perhaps I should be defending Cohen? Unfortunately, he followed up later with this:

"I said Goebbels lied about the Jews, and that led to the Holocaust," Cohen said. "Not in any way whatsoever was I comparing Republicans to Nazis. I was saying lies are wrong...I don't know who got everybody's panties in a wad over this statement."

Uh huh. My general take is that not all analogies to Nazi practices are necessarily deliberate comparisons of a person (or group) to Nazis. But then again, sometimes they are, and Rep. Cohen's feeble denial to the contrary, that sure seems to have been his intent here. I mean, it sounds an awful lot like he's saying Republicans are as bad as Goebbels, no?

Assignment desk: provide some guidelines for when Nazi analogies are OK and when they're not. Use examples where necessary. Go to it, commenters.

The Month That Never Was

Do you remember, back at the end of 2008, when Goldman Sachs switched its status from investment bank to commercial bank? This provided it with various benefits that allowed it to avoid imminent destruction, and as long as they were doing it, the Goldman partners decided to switch their fiscal year from one that starts on December 1 to one that starts on January 1. Because of that, December 2008 was part of no fiscal year at all, and Goldman cleverly booked huge losses that month that never showed up on any of its annual reports.

But that's not all. The New York Times reported today on a vast trove of stock options that Goldman granted recently to its partners, and guess when they were granted? Felix Salmon:

There’s much more to be said on this matter. For one thing, the monster option grant took place during Goldman’s notorious orphan month, meaning that it would never appear in an annual report. And for another thing, it was very expensive even at the time....Add it all up, and the various stock-related grants given in one month of 2008 (we’re not including annual bonuses here) were worth $1.9 billion at the time, and are worth somewhere in the neighborhood of $7.6 billion now.

Remember that December 2008, when Goldman made these grants, was the worst month in the company’s history: it lost $1.3 billion, and was mired in the depths of the financial crisis. Yet many partners will have received stock and options awards that month which are worth hefty eight-figure sums today. Not bad for a month’s work.

Ain't life grand? It sure is if you work on Wall Street, where planet-annihilating financial crises are a problem only for the little people.

Quote of the Day: In the Crosshairs

From CNN's John King last night:

Before we go to break, I want to make a quick point. We were having a discussion about the Chicago mayoral race. My friend Andy Shaw used the term "in the crosshairs" in talking about the candidates. We're trying, we're trying to get away from that language. Andy is a good friend, he's covered politics for a long time, but we're trying to get away from that kind of language.

Stop it! Stop it stop it stop it! This is just ridiculous. The English language is chock full of martial metaphors, and there's simply no reason to think they have anything to do with actual, nonmetaphoric people taking actual nonmetaphoric shots at other actual nonmetaphoric people. This whole thing has gotten way out of hand, and we need to strangle it in the crib.1

1No, I don't plan to strangle any actual babies in any actual cribs. And no one reading this will be suddenly consumed by the idea of doing so either.

Foreclosures and the Economy

What's holding back a stronger economic recovery? For the millionth time: it's not regulatory uncertainty or lack of financing or inability to find good workers or fear of healthcare reform. It's lack of customers. Mike Konczal points us to the conclusions of Atif Mian and Amir Sufi of the Federal Reserve Bank of San Francisco:

Overall, the county evidence strongly suggests that credit demand is weak because of an overleveraged household sector. This view is supported by survey evidence that the main worry of businesses is sales, not financing. The October 2010 National Federation of Independent Business survey (Dunkelberg and Wade 2010) shows that almost no small businesses viewed credit availability as their primary problem. In fact, the NFIB has reported that weak sales were the top problem facing small businesses throughout the recession. Weak consumer demand also helps explain the enormous cash balances currently held by U.S. corporations (see Lahart 2010). These results have important policy implications. If the main problems facing businesses relate to depressed consumer demand due to a household sector weighed down by debt, investment tax subsidies and lower interest rates may have a limited effect on business investment and employment growth.

An effective regime for foreclosure relief would have done wonders for economic recovery, but it would have hurt the interests of the financial sector, which fought furiously to kill it in early 2009. And they won. Not because they were right, but because they had the raw muscle to get their way and middle-class homeowners didn't. That was good for banks, not so good for the rest of us.

Any explanation of the financial crisis and its aftermath that relies exclusively on economic analysis, without taking full account of the raw political power behind the economics, is doomed to failure. Economists would do well to rediscover this simple and timeless truism.

Public Benefits, Private Benefits

Andrew Sullivan quotes an LA Times piece today that says average retirement benefits for California public sector workers are "now valued at more than $1.2 million. The taxpayers who pay for those retirement benefits have an average of $60,000 saved for their own retirement." Then he asks this:

California is a state where citizens can legislate at the ballot box. How long will they tolerate public employees more than $1 million richer in retirement benefits than they are?

I don't want to dismiss this concern. Public sector retirement benefits are generally pretty good, pension accounts are underfunded, and there are clearly some abuses in the system — prime among them the practice of piling on overtime in your last 12 months because pension benefits are calculated only on your final year's income. But you still have to compare apples to apples. Here are three things to keep in mind:

  • An average American one-earner couple planning to retire in ten years has Social Security and Medicare benefits worth about $900,000 (interpolated from data here). So the average Californian probably has roughly $960,000 in retirement benefits compared to $1.2 million for public sector workers. That's still a sizeable difference, but nowhere near what the LAT article suggests. (Control for education levels etc. and the difference would probably come down even further.)
  • Average public sector benefits are heavily skewed by the very generous retirement plans for public safety workers. These benefits may or may not be defensible, but cops and firefighters aren't the ones that politicians usually point to when they complain about this stuff. Your average worker in the county clerk's office probably has benefits well under that $1.2 million figure.
  • Pension accounts are indeed underfunded, but some of that is simply an artifact of the 2008 financial collapse. Pension funds always look bad during economic downturns, and they look better when the economy recovers. So take the astronomical figures that are tossed around on pension underfunding with a grain of salt.

There's no question that public sector pensions are a political problem, or that they've been mismanaged for years. (Private sector pensions too.) At the same time, keep in mind that there's only so much that Californians can do about it, ballot box or no ballot box. Even the voters aren't allowed to unilaterally abrogate contracts, so they can't just vote to slash benefits for public workers that were agreed to long ago. Like everything else, this is going to get settled via long, grinding negotiations, not a ballot box revolution.

UPDATE: Social Security and Medicare benefit levels revised to use the latest data from the Urban Institute.