Kevin Drum

Infrastructure

| Tue Dec. 9, 2008 5:26 PM PST

INFRASTRUCTURE....What kind of infrastructure program is Barack Obama likely to support once he gets into office? Well, Obama's choice to head up the OMB is Peter Orszag, so Alex Tabarrok suggests looking at Orszag's previous statements on infrastructure when he was head of the Congressional Budget Office.

With that in mind, then, here's a chart from testimony he gave to Congress last May. For a range of activity, it shows that the infrastructure budget ought to be increased $20 billion to maintain current service levels, but that nearly $80 billion more could be economically justified. However, here's what he says about the highway portion:

[A]ccording to a detailed analysis that the FHWA provided to CBO, over the next five years, investments required to maintain current levels of highway service would represent 58 percent of the total spending for all economically justifiable investments for highways, but they would provide 83 percent of the net benefits.

More than likely, then, Orszag won't be pushing for lots of additional spending on roads and bridges, since he believes the net benefit is pretty small once you get past the initial boost needed just to maintain the current system.

Alex suggests that Obama should instead focus on congestion pricing and electricity infrastructure (the famous "smart grid" that everyone talks about but no one ever seems to make any progress on). Here at Mother Jones, in a piece that just went online today, James K. Galbraith proposes a long-term investment program (not just a "stimulus") that includes aid to states, increased Social Security benefits, a payroll tax holiday, and this:

Finally, we must change how we produce energy, how we consume it, and above all how much greenhouse gas we emit. That's a long-term proposition that will require research and reconstruction on a grand scale: support for universities, for national labs, for federal and state planning agencies, a new Department of Energy and Climate. It's the project around which the economy of the next generation must be designed. It's the key to future employment and future growth — and to our physical survival.

Obama's radio speech this weekend outlining his stimulus-related spending plans had some decent points but wasn't exactly a barnburner. After he rolls out his environment team later this week, hopefully green energy development and smart grids will get a little more attention.

Advertise on MotherJones.com

Chart of the Day - 12.09.2008

| Tue Dec. 9, 2008 4:33 PM PST

CHART OF THE DAY....Adapted from Secular Right, here's a graph showing frequency of prayer plotted against strength of partisanship. The data is from the General Social Survey. Apparently, strong political partisans also tend to pray a lot. Weak partisans and independents, not so much. The effect is roughly the same if you confine the analysis to whites only.

Why? Is it just a reflection that some people are strong believers and others aren't, and this temperamental cast applies to everything they believe in? Or is it something else? Speculate away!

Blago Update

| Tue Dec. 9, 2008 12:04 PM PST

BLAGO UPDATE....Thanks partly to this being a slow news day and partly to the sheer juiciness of the whole thing, the blogosphere is ablaze with chatter about the arrest of Illinois governor Rod Blagojevich on corruption charges. Main theme: the guy has been under investigation for three years by the same prosecutor who convicted both Scooter Libby and the previous governor of Illinois, but he was merrily blathering away to friends anyway about selling off Barack Obama's senate seat to the highest bidder? What kind of fucking moron is this guy?

Other, slightly more substantive comments from around the 'sphere:

  • Who are the six possible candidates for Obama's senate seat mentioned in the idictment? Adam Serwer tries to track them down.

  • It wasn't just senate seats in play! Blago also told the Tribune Company that he wouldn't approve any state financial assistance for their effort to sell the Chicago Cubs unless they fired some editorial board members who had been critical of him. Apparently Blagojevich told the Tribune Company's representative, "our recommendation is fire all those [expletive] people, get 'em the [expletive] out of there and get us some editorial support."

  • Is Barack Obama implicated in any of this? At a press conference today, prosecutor Patrick Fitzgerald said no: "I should be clear that the complaint makes no allegations whatsoever about the president-elect or his conduct." What's more, the indictment quotes Blagojevich telling a friend that he wasn't willing to appoint Obama's favored candidate to the Senate because "they're not willing to give me anything except appreciation. [Expletive] them."

    Still, Time's Michael Scherer thinks this is going to be a problem for Obama anyway: "The President of the United States has a higher burden than just about any elected official anywhere. His staff will be called on by the press to account for all their conversations with Blagojevich and his aides. Obama will have to explain what he knew about these discussions." Etc. My guess is different: I think Obama will be so open about this, and so obviously uninvolved, that it won't cause him any pain whatsoever. It's an Illinois story, not an Obama story.

  • My colleage Jonathan Stein runs down the corruption record of Illinois governors since 1973. It's not pretty.

  • Bizarrely enough, despite his 4% approval rating and ongoing corruption investigation, Blago seriously considered appointing himself to Obama's open senate seat because he thought it would a good launching pad for a 2016 presidential run. The mind reels.
    Anyway, that's your Blago roundup for the morning. More, much much more, to come later, I'm sure.

The Kids These Days....Part 476

| Tue Dec. 9, 2008 11:38 AM PST

THE KIDS THESE DAYS....PART 476....Here's the latest international report card on how American kids are doing in science and math. Short answer: not badly, really. According to the latest TIMSS report, eighth grade Asian kids outscore everyone, and American kids outscore nearly everyone who's not Asian (only Hungary, England, and Russia do slightly better). The story in science is about the same. TIMSS doesn't conduct their tests in every country, but among the countries that do worse than the U.S. are Australia, Sweden, Italy, Norway, and Israel.

Full results here. They're pretty much the same as in years past, by the way. It would obviously be nice if American kids were doing even better, but the evidence hardly suggests that the United States is some kind of educational hellhole. In science and math, anyway, we're better than most and roughly average among our first world peers.

UPDATE: Sorry, I guess the charts are a little hard to decipher. Basically, they show what percentage of kids scored at or above various levels on the TIMSS test. For example, 92% of American eighth graders scored above the cutoff point for low performance on the math test and 67% scored above the intermediate level, compared to an international average of only 75% and 46% respectively. Basically, at every single level, more American kids scored above the cutoff point than the international average.

However, keep in mind that these international averages include lots and lots of very poor countries. If you look only at other rich countries, the United States is right around average.

Social Happiness

| Tue Dec. 9, 2008 10:50 AM PST

SOCIAL HAPPINESS....Remember all those news reports from last week hawking a study about how happiness is spread via social networks? Via Justin Wolfers, a couple of spoilsports have done a competing study that looked at a few other characteristics. From their writeup:

As we intended to investigate potential biases in previous methods, we looked at three health outcomes that could not credibly be subject to social network effects and were available in all three waves of the data: self reports of skin problems, self reports of headaches, and height over time.

Long story short, they found network effects for all three of these things even though network effects almost certainly don't exist. The problem, they say, is that shared environments (same school, similar eating habits, etc.) can explain much of the supposed "contagion," but the datasets used for social network studies often don't include enough information on individual environments to allow it to be factored out.

In other words, be careful accepting breathless claims about the spread of this or that via social networks. Maybe it's true, maybe it isn't. On the other hand, it can't hurt to have happy friends, can it?

BCS Uber Alles

| Tue Dec. 9, 2008 10:19 AM PST

BCS UBER ALLES....Via Lee Sigelman, apparently this has been circulating virally:

After determining the Big-12 championship game participants the BCS computers were put to work on other major contests and today the BCS declared Germany to be the winner of World War II.

"Germany put together an incredible number of victories beginning with the annexation of Austria and the Sudetenland and continuing on into conference play with defeats of Poland, France, Norway, Sweden, Denmark, Belgium and the Netherlands. Their only losses came against the US and Russia; however considering their entire body of work — including an incredibly tough Strength of Schedule — our computers deemed them worthy of the #1 ranking."

Questioned about the #4 ranking of the United States the BCS commissioner stated "The US only had two major victories — Japan and Germany. The computer models, unlike humans, aren't influenced by head-to-head contests — they consider each contest to be only a single, equally-weighted event."

German Chancellor Adolph Hiter said "Yes, we lost to the US; but we defeated #2 ranked France in only 6 weeks." Herr Hitler has been criticized for seeking dramatic victories to earn 'style points' to enhance Germany's rankings. Hitler protested "Our contest with Poland was in doubt until the final day and the conditions in Norway were incredibly challenging and demanded the application of additional forces."

The French ranking has also come under scrutiny. The BCS commented "France had a single loss against Germany and following a preseason #1 ranking they only fell to #2."

Japan was ranked #3 with victories including Manchuria, Borneo and the Philippines.

Time for Obama to get cracking on that college football playoff he says he favors. That would be change we can believe in.

Advertise on MotherJones.com

Malaria Vaccine

| Tue Dec. 9, 2008 9:26 AM PST

MALARIA VACCINE....My morning paper reports some spectacularly good news for Africa:

A vaccine against the parasitic disease malaria cut illnesses by more than half in field trials and could be safely given with other childhood inoculations, two studies have reported.

....Malaria kills nearly 1 million people each year and sickens about 2 million others, according to estimates from the World Health Organization. Most of the deaths are among children younger than 5 in sub-Saharan Africa, the population that the vaccine targets.

More here.

Idiocy in Illinois

| Tue Dec. 9, 2008 9:12 AM PST

IDIOCY IN ILLINOIS....I seem to recall reading somewhere recently that Illinois governor Rod Blagojevich has a 4% approval rating. So I guess he figured he had nothing to lose:

Gov. Rod R. Blagojevich of Illinois was arrested on Tuesday morning and charged with corruption, including an allegation that he conspired to profit from his authority to appoint President-elect Barack Obama's successor in the United States Senate, prosecutors said.

As Mr. Blagojevich mulled the Senate appointment, prosecutors say, he discussed gaining "a substantial salary" at a nonprofit foundation or organization connected to labor unions, placing his wife on corporate boards where she might earn as much as $150,000 a year and trying to gain promises of campaign money, or even a cabinet post or ambassadorship, for himself.

A 76-page affidavit from the United States Attorney's office in Northern Illinois says Mr. Blagojevich was heard on wiretaps over the last month planning to "sell or trade Illinois' United States Senate seat vacated by Pres-elect Barack Obama for financial and personal benefits for himself and his wife."

....According to the statement from prosecutors, Mr. Blagojevich told an adviser last week that he might "get some (money) upfront, maybe" from one of the candidates hoping to replace Mr. Obama. That person was identified only as "Candidate 5."

In an earlier recorded conversation, prosecutors say, Mr. Blagojevich said he was approached by an associate of "Candidate 5" with an offer of $500,000 in exchange for the Senate seat.

Jeebus. Is Blagojevich also the world's biggest moron? The evidence says yes.

Race and Status

| Mon Dec. 8, 2008 9:31 PM PST

RACE AND STATUS....Blacks are often stereotyped as having lower status than whites. That won't surprise anyone. But does it work in the other direction too?

Apparently so. The LA Times reports today on a study suggesting that people are more likely to be identified as black if their status changes for the worse. In a review of data from the National Longitudinal Survey of Youth, in which subjects are interviewed annually (biannually after 1994), a pair of researchers found that people who had been identified by interviewers in one year as white were less likely to be identified as white the next year if they were in jail, unemployed, or impoverished:

"Race isn't a characteristic that's fixed at birth," said UC Irvine sociologist Andrew Penner, one of the study's authors. "We're perceived a certain way and identify a certain way depending on widely held stereotypes about how people believe we should behave."

....For example, 10% of people previously described as white were reclassified as belonging to another race if they became incarcerated. But if they stayed out of jail, 4% were reclassified as something other than white, the study said.

I don't have any special views on the "race is a social construct" question, but this certainly suggests, at the margins at least, that social status does indeed have an effect on how race is perceived. The full study is here.

Risk

| Mon Dec. 8, 2008 5:33 PM PST

RISK....Brad DeLong says that, ultimately, the global stock of capital fluctuates based on five factors: (1) savings and investment, (2) good and bad news out in the real world, (3) the default discount, (4) the liquidity discount, and (5) the risk discount. The first two haven't changed recently. The third has produced about $2 trillion in mortgage losses and $4 trillion in followon recession-based losses. The fourth, thanks to heroic efforts from central banks, has had a positive impact of about $3 trillion. So in Brad's estimate, the first four factors have produced a net loss of about $3 trillion worldwide. However, total actual losses worldwide during the economic crisis of the past year have come to about $20 trillion so far:

Thus we have an impulse — a $2 trillion increase in the default discount from the problems in the mortgage market — but the thing deserving attention is the extraordinary financial accelerator that amplified $2 trillion in actual on-the-ground losses in terms of mortgage payments that will not be made into an extra $17 trillion of lost value because global investors now want to hold less risky portfolios than they wanted two years ago.

....Our models predict that in normal times, with the ability to diversify portfolios that exists today, the risk discount on assets like corporate equities should be around 1% per year. It is more like 5% per year in normal times — and more like 10% per year today. And our models for why the risk discount has taken such a huge upward leap in the past year and a half are little better than simple handwaving and just-so stories. Our current financial crisis remains largely a mystery: a $2 trillion impulse in lost value of securitized mortgages has set in motion a financial accelerator that we do not understand at any deep level but that has led to ten times the total losses in financial wealth of the impulse.

.... $2 trillion shocks to global wealth [] happen every several years, every time there is a recession or a big rise in the prices of natural resources. But financial distress of the magnitude we see today happens once a century. Since the Bank of England developed its lender of last resort doctrine in the 1830s, we have only had two episodes this bad: the Great Depression and today.

If I had to guess, I'd say the financial accelerator was so outsized this time around because of the size and scope of the uncertainty it generated. During an oil shock, say, or a dotcom bust or a Latin American default, investors have at least some idea of which investments are going to be hardest hit and — more importantly — which ones aren't. But this time around, because of the size of the initial losses and their fundamental opacity, every investment has become suspect. After all, until the global derivative chains are somehow unwound, virtually every bank, hedge fund, and corporation with any serious exposure to modern financial instruments is — maybe, possibly — bankrupt. A housing bust wouldn't normally affect IBM very hard, for example, but what if it turns out that IBM has a bunch of CDS counterparty exposure to mortgage losses somewhere on its books? They probably don't, but how sure are you of that? Multiply that uncertainty by every company in the world, and you get $17 trillion in losses.

Eventually, I guess, the housing market will bottom, the toxic waste sloshing around the financial system will once again have a reasonable range of values, and the question of who has exposure to the losses will start to get narrowed down. Until then, the risk premium will probably stay sky high.