2008 - %3, December

New Credit Card Rules

| Fri Dec. 19, 2008 11:08 AM EST

NEW CREDIT CARD RULES....New regulations designed to stop some of the most egregious credit card abuses were adopted yesterday. That's the good news. Here's the not-so-good news:

The regulations, which take effect in July 2010, would block card companies from applying higher interest rates on existing balances. Late fees could not be charged without giving consumers at least 21 days to make a payment.

You know, some regulatory changes need a substantial amount of lead time because they're fairly complex to implement. These aren't those kind. They don't require 18 months of preparation. They barely require one month of preparation. They could have taken effect January 1st if regulators had been inclined to make a statement. Another opportunity missed.

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Capital Gains

| Fri Dec. 19, 2008 10:53 AM EST

CAPITAL GAINS....Today, the New York Times reports that the housing bubble was partly fueled by tax changes in 1997 that eliminated capital gains taxes on home sales:

The different tax treatments gave people a new incentive to plow ever more money into real estate, and they did so....By itself, the change in the tax law did not cause the housing bubble, economists say. Several other factors — a relaxation of lending standards, a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall — probably played larger roles.

But many economists say that the law had a noticeable impact, allowing home sales to become tax-free windfalls. A recent study of the provision by an economist at the Federal Reserve suggests that the number of homes sold was almost 17 percent higher over the last decade than it would have been without the law.

Of course, that's not the only thing the 1997 law did. It also reduced the general capital gains rate from 28% to 20% just as the dotcom boom was taking off, helping turn that into a monstrous bubble too. Nice work, Washington!

US Refuses to Ratify International Call to Decriminalize Homosexuality

| Fri Dec. 19, 2008 10:44 AM EST

This administration (1) doesn't know how to play well with others, and (2) continues to makes a pathetic mockery of its own principles. We're a country that launched a preemptive war, in part, to spread freedom. And yet, this:

Alone among major Western nations, the United States has refused to sign a declaration presented Thursday at the United Nations calling for worldwide decriminalization of homosexuality.
In all, 66 of the U.N.'s 192 member countries signed the nonbinding declaration — which backers called a historic step to push the General Assembly to deal more forthrightly with any-gay discrimination. More than 70 U.N. members outlaw homosexuality, and in several of them homosexual acts can be punished by execution.
Co-sponsored by France and the Netherlands, the declaration was signed by all 27 European Union members, as well as Japan, Australia, Mexico and three dozen other countries. There was broad opposition from Muslim nations....

So why were we the only Western nation to opt out?

According to some of the declaration's backers, U.S. officials expressed concern in private talks that some parts of the declaration might be problematic in committing the federal government on matters that fall under state jurisdiction. In numerous states, landlords and private employers are allowed to discriminate on the basis of sexual orientation; on the federal level, gays are not allowed to serve openly in the military.

Sure. Why would we sign an internationally supported declaration in favor of human rights? It would keep local landlords and private employers from discriminating. We can't have that!

More on the Rick Warren Wrangle: It's Not About Gay Marriage

| Fri Dec. 19, 2008 9:03 AM EST

rick-warren-250x200.jpg

On Friday morning, I was on the CBS' The Early Show to talk about the Rick Warren controversy. Opposite me (via satellite hookup) was Robert Jeffress, a Baptist pastor from Dallas, who was billed as a friend of Warren.

Asked by Harry Smith to explain why gay and lesbian outfits and progressives were upset by Barack Obama's decision to hand Warren the invocation slot at the presidential inauguration, I noted that it was good that Obama has an inclusive approach toward political and policy debates, that he should make common cause with Warren on issues like poverty and climate change, and that it was wrong for him to grant Warren this high-profile platform because Warren's anti-gay remarks--he recently compared homosexuality to incest and pedophilia--are insulting to a large number of Americans, particularly many who worked long and hard to bring Obama to the White House. It's one thing to sit at the table with Warren and discuss how best to alleviate poverty; it's another to enhance his status.

When Jeffress had his chance, he went on about how it was unfair to slam Warren as a hate-monger because of his fervent opposition to gay marriage.

Gay marriage? Who said anything about gay marriage? Not me. I had pointed out that Warren's big sin had been to equate gays and lesbians with loathsome pedophiles. Is that hate-mongering? Some people might see it that way. But I was not going to judge Warren on that front. His words speak for themselves--and for him.

Closing Gitmo

| Fri Dec. 19, 2008 1:27 AM EST

CLOSING GITMO....This is more a contingency plan than a firm commitment, but it's still good to hear that Gitmo may be on its way to the dustbin of history:

The Defense Department is drawing up plans to close the Guantanamo Bay military prison in anticipation that one of President-elect Barack Obama's first acts will be ordering the closure of the detention center associated with the abuse of terror suspects.

....The prison, built to hold suspected terrorists after the 2001 U.S.-led military intervention in Afghanistan, now houses about 250 detainees, including Khalid Sheikh Mohammad and others accused in connection with the Sept. 11, 2001, terrorist attacks.

...."If this is one of the president-elect's first orders of business, the secretary wants to be prepared to help him as soon as possible," Morrell said. "The request (for a closure plan) has been made, his team is working on it so that he can be prepared to assist the president-elect should he wish to address this very early in his tenure."

It's worth reiterating that closing Guantanamo doesn't address the fundamental issue of what to do with all the detainees. There are still some very difficult issues to settle on that score. But it would be a helluva good start.

The President Speaks

| Thu Dec. 18, 2008 9:03 PM EST

THE PRESIDENT SPEAKS....George Bush is leaving office in style, isn't he? In his farewell interviews so far, he's said this:

Bush: One of the major theaters against al Qaeda turns out to have been Iraq. This is where al Qaeda said they were going to take their stand. This is where al Qaeda was hoping to take ...

Raddatz: But not until after the U.S. invaded.

Bush: Yeah, that's right. So what?

Then he explained his approach to economic management:

I've abandoned free-market principles to save the free-market system.

And finally there was this, after Ben and Henry gave him some bad economic news:

So I analyzed that and decided I didn't want to be the President during a depression greater than the Great Depression, or the beginning of a depression greater than the Great Depression.

That's some analysis. He's really decided to go out with a bang, hasn't he?

In related news, Pew has a new poll out in which they asked people to describe Bush in a single word. The biggest gainers since 2004 were incompetent, idiot, and ignorant. You're shocked, aren't you?

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Was Keynes Right?

| Thu Dec. 18, 2008 7:37 PM EST

WAS KEYNES RIGHT?....Tyler Cowen is skeptical that a massive spending-driven stimulus plan will bring the economy back to life. For various reasons he discounts the usual Depression-era examples (the New Deal, Nazi rearmament, WWII) and then says:

My point is simple: it is very hard to find examples of successful fiscal stimulus driving an economic recovery. Ever. This should be a sobering fact....The bottom line is this: we are being asked to believe that a big, trillion or even multi-trillion fiscal stimulus can boost the current macroeconomy. If you look at history, there isn't good reason to believe that. Any single example, such as the Nazis, can be knocked down for lack of relevance or lack of correspondence to current conditions. Fair enough. But the burden of proof isn't on the skeptics. It's up to the advocates of the trillion dollar expenditure to come up with the convincing examples of a fiscal-led recovery. Right now we're mostly at "It wasn't really tried." And then a mental retreat back into the notion that surely good public sector project opportunities are out there.

But do we need examples? I'd argue that we're basically in terra incognita today. In the postwar era, we've virtually never seen an industrialized country, let alone the whole world, stuck in a liquidity trap before. The only example that comes to mind is Japan in the 90s, and their experience with fiscal stimulus was pretty mixed. Depending on your preconceptions, you could take the Japanese experience either as proof that massive stimulus doesn't work or as evidence that not enough was done. And either way, it's only one example, so it would hardly be proof enough for skeptics anyway.

That leaves us with theory, which suggests that government spending when monetary policy has lost traction helps to stimulate the economy. But even if doesn't, my question to Tyler is this: what harm does it do to try? Assuming that stimulus spending is implemented even modestly well, it will, at a minimum, help out a bunch of people with continued employment and produce a bunch of infrastructure improvements that will enhance our future welfare. The downside is more debt, and I'm open to the argument that this is a bad thing to the extent that this debt is funded from overseas and produces further deterioration in our current account balance. But is that the argument against spending? Or is it something else?

Hilda Solis

| Thu Dec. 18, 2008 5:44 PM EST

HILDA SOLIS....Rick Warren may have left a bad taste in the leftosphere's mouth, but we're all thrilled with his choice of Rep. Hilda Solis as Labor Secretary. Here's Jonathan Stein:

Quit yur bellyaching! Obama's pick for Secretary of Labor is reportedly California Rep. Hilda Solis, the proud daughter of a union mom and union dad. In addition to a background as a management analyst at the Office of Management and Budget and a 100 percent rating from the AFL-CIO in 2007, Solis brings a reputation as one of Washington's leading proponents of green jobs....If you were to sketch an ideal Labor Secretary, you could hardly do much better.

Solis sounds great, and her one-minute tribute to the Employee Free Choice Act (above) is terrific. If I have any cautionary note to add, though, it's this: what did you expect? Of all the senior-level appointments Obama had to make, this was the only one that was virtually assured from the beginning of being a gift to the left. And it was. So I wouldn't take this as any slam dunk indication of how seriously he's going to take labor issues.

Don't get me wrong: I'm not trying to throw cold water on Obama's choice of Solis. It's just that his overall cabinet picks have been mainstream enough that it's probably not wise to take anything big away from any one of them. Hopefully Solis will help prod Obama to appoint some good NLRB members and put some serious political capital behind the push for passage of EFCA, and that's what I'll be watching for. A labor-friendly pick for Secretary of Labor is just a start.

Analysis Shows White Dudes Dominated Billboard Charts in 2008

| Thu Dec. 18, 2008 4:01 PM EST

mojo-photo-laweeklychart.jpgBoy, am I glad I didn't have to do the Excel work to come up with these charts. A dogged reporter named Randall Roberts at the LA Weekly has delved into the Billboard Top 10 album and singles charts for every week this year, tallied up demographic data about the artists, and made some dandy little diagrams with the results. It turns out that Americans really like white guys. Whites outnumbered blacks on the charts by 63 to 36 per cent (with Latinos grabbing the leftover 1%), while men outnumbered women on the charts by nearly a 5-to-2 ratio. High five, bros! As far as musical genre goes, R&B/hip-hop dominated the singles charts, while pop/rock commanded the album charts, so, combined, they're just about equal, with country way behind. Other odd statistical revelations include the fact that the South was the region that produced the most Top 10 hitmakers by far (attributable to an "unlikely Southern coalition" of country and R&B) and Rihanna singlehandedly helped her native Barbados to the Top 7 list of foreign countries represented on our charts. Okay, Barbados, you get a high-five too.

Yum Yum

| Thu Dec. 18, 2008 3:36 PM EST

YUM YUM....Entertaining news from the gnomes of Zurich:

Credit Suisse Group said Thursday it will use up to $5 billion of its own illiquid assets such as mortgage securities to pay senior staff year-end bonuses at its investment bank, a move meant to spread risk more evenly between the bank and its employees.

The Zurich-based bank plans to pool commercial mortgage-backed securities and leveraged loans it can't sell because demand has seized up, then dole out units in the entity to managing directors and directors as part of this year's pay, according to a memo made available by a spokesman.

There's certainly an appeal to this, isn't there? Eating their own dog food, so to speak. Or their own toxic waste, as the case may be. I wonder if this idea will spread to Wall Street?