2011 - %3, December

Japan's Secret Plan to Dominate the World

| Mon Dec. 26, 2011 1:33 PM EST

And now for something completely different. The Counterparties blog today highlights an old post from Eamonn Fingleton arguing that Japan's "Lost Decade" is a myth. This is not the story I've heard before, suggesting merely that Japan has done pretty well considering its demographic problems. Not at all. This story suggests that Japan is just flat out lying about its economic growth. For example, here's a piece of data from Fingleton's blog:

In 2007 it was discovered that the long-term record in electricity output completely gainsaid the “lost decades” story. Adjusted to a per-capita basis, the figures showed that Japan’s electricity output in the 1990s rose 2.7 times faster than America’s!....Electricity output is widely accepted as an impartial, culture-neutral proxy for economic growth and it is indeed relied on by international organizations such as the IMF and World Bank when a government may not be following international accounting standards in calculating GDP growth.

Fascinating! But why is Japan supposedly lying about its economic growth?

For those who know Japanese history, a clue lies in trade policy. The fact is that, constantly since the 1870s (with the exception of a brief interlude in the late 1930s and early 1940s), Japan's pre-eminent policy objective has been to keep ramping up exports. That policy came very close to derailment in the late 1980s as a groundswell of opposition built up in the West. By the early 1990s, however, the opposition had largely evaporated as news of the crash led Western policymakers to pity rather than fear the "humbled juggernaut." It is a short jump from this to the conclusion that Japanese officials have decided to put a negative spin on much of the economic news ever since.

What is undeniable is that just as corporate executives enjoy great latitude to juggle their profits up or down for different disclosure purposes (generally up for shareholders, and almost invariably down for the Internal Revenue Service), government officials enjoy even greater latitude to vary a nation's ostensible growth rate. The fact is that the calculation of economic growth depends on a myriad debatable assumptions (value judgments are critical because most growth these days takes the form of better goods and services, rather than more, e.g. better health care) and, while most governments like to plump up the numbers, it is a simple matter to plug in ultra-conservative assumptions.

So the story here is that bureaucrats reacted to the wave of Japan bashing in the late 80s by bowing and scraping in public and pretending to be in dire straits. And it worked! Everyone felt sorry for them, and we've left them alone ever since.

Fingleton has been making this case for a long time, but unfortunately I can't find an awful lot of details on his blog site. His basic argument has to do with Japan's extremely healthy trade surplus, its strong currency, and its leading position in "producers' goods," a super-technologically demanding sector that includes highly miniaturized components, advanced materials, and super-precise machines that other countries (such as China) use to make final consumer goods.

Is Fingleton right? I have no idea. This is light years above my pay grade at the moment. He sounds a bit cranky on the subject because everyone's been ignoring him for so long, but that doesn't necessarily mean he's wrong. On the other hand, if Japan really has been manipulating its official statistics for two decades, this is one of the biggest, most complex conspiracies in history to stay secret for so long. By now, it would amount to something like a 20-30% cumulative difference between reported GDP and actual GDP, which would be damn hard for the rest of the world not to notice, and it would require the active collusion and silence of thousands and thousands of bureaucrats with not so much as a single leak over the course of 20 years.

Still, it would be interesting to see someone debate him on this subject. Not in a live debate, mind you, which I consider about the worst possible medium ever invented for getting at the truth, but in a printed debate. Bring your best evidence. Show us your tables and your charts. Take the proper time to both make and respond to arguments. I'd read it.

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Proposition 13 Goes to Court

| Mon Dec. 26, 2011 12:24 PM EST

Back when Proposition 8 — the anti-gay marriage initiative — was in court, one of the arguments made against it was that it represented a fundamental revision to the California constitution, not a mere amendment. As such, it should have required two-thirds approval from both houses of the legislature plus a majority of the public.

Gay rights supporters lost that argument, but Charles Young, the former chancellor of UCLA, had a brainstorm. Maybe Prop 8 wasn't a fundamental revision, but how about Proposition 13?

Passed at a time when property taxes were sharply on the rise and California was running a surplus, Proposition 13 limited property taxes to 1% of a property's value and restricted the annual increases on assessed values. Those provisions seem like a traditional amendment — they change or add specific rules within a larger constitutional set of provisions. But Proposition 13 also required that "any change in state statute which results in a taxpayer paying a higher tax" must be approved by two-thirds of both houses of the Legislature.

That language has had a profound impact on the power of the executive and the Legislature. The power that it constrains — the authority to raise public funds — is among the most fundamental of government. And the requirement gives more weight to some legislators — and, by extension, their constituents. As the lawsuit notes, "legislators opposing a tax increase are given the functional equivalent of more votes than those legislators who favor such proposals."

Young and William Norris, a retired U.S. 9th Circuit Court of Appeals judge, have filed a lawsuit making exactly this case. Merits aside, I'd be pretty surprised if any court were willing to overturn Prop 13 after more than 30 years on the books. But then again, the merits of the case, frankly, seem pretty strong. Moving from majority rule to supermajority rule strikes me as a pretty fundamental revision of the basic plan of government, especially when it applies to a core function of government like raising money to fund itself. Californians may be in for a surprise once Young and Norris get their day in court.

Not an entirely unpleasant surprise, either. Sure, everyone likes having their property taxes capped. But Prop 13 has had a helluva lot of unintended consequences aside from simply making it hard to raise revenue efficiently. It's also fundamentally changed the relationship between the state and local communities, putting far more power in Sacramento than in the past. It's created permanent special treatment for businesses, which tend to own property for a long time and therefore pay lower average property taxes than the rest of us. And since revenue has to come from somewhere, it's created an insane crazy quilt of "fees" that often make little sense but can be put in place by majority vote. Getting rid of all that would be no bad thing, even if it does mean that a few people might see their taxes raised more easily than before. Stay tuned.

Your Daily Newt: Mighty Morphin' Gingrich

| Mon Dec. 26, 2011 6:01 AM EST

TK: Tk/TK; TK/TKThe path not taken: James Colburn/ZumaPress; Andrea Renault/Globe Photos; photo illustration by Tim Murphy.As a service to our readers, every day we are delivering a classic moment from the political life of Newt Gingrich—until he either clinches the nomination or bows out.

Newt Gingrich's big ideas about killer-lasers and Moon colonies and highway-illuminating space mirrors do tend to make him sound like a super-villain. But on his first day as Speaker of the House in 1995, Gingrich solidly aligned himself with the forces of truth and justice and tights by inviting the Mighty Morphin' Power Rangers to perform for the House Republican Caucus (and their families). As the Los Angeles Times reported:

After going through their high-kicking, fist-throwing and crime-fighting television show routine, the Power Rangers stood, arms akimbo, as Gingrich rushed onto the stage.

Linking the Power Rangers' popularity with youngsters to his appeal with their parents, the Speaker noted that the Rangers' emphasis on "family values" and "anti-drug" messages fit nicely with GOP political themes. And, he added, "they are multiethnic role models with male and female characters."

Because it was the 1990s, Gingrich faced mild criticism for endorsing a television show that promoted violence—violence against the evil and often inept forces of Lord Zedd and Rita Repulsa, but violence nonetheless. The show had been pulled from the airways in Norway, Denmark, and Sweden, and banned by the Canadian Broadcast Standards Council. But Gingrich was undeterred. "You ride the waves in America, and if something's hot, it's hot," he told his fellow Republicans. Yes, there's video:

Gingrich, has elsewhere warned that the United States is under attack from gay and secular fascism, so we suppose it's worth pointing out that the blue ranger, "Billy," is gay.

Alan Lomax and the Original Social Network

| Mon Dec. 26, 2011 6:00 AM EST
Alan Lomax, circa 1942.

In an age where Justin Bieber can skyrocket to the highest heights of pop consciousness thanks to a couple well-placed YouTube videos, we've forgotten how hard it once was to spread popular music to the populace it described. In the 1930's and '40's, while Woody Guthrie, Lead Belly, and others were crafting the folk songs that laid the foundation for uniquely American styles like rock and roll and the blues, they mostly sang in obscurity to local audiences in the country quarters where they lived. Recording equipment was bulky, fragile, and expensive, and those who could afford access to recorded music were listening mostly to European imports and early jazz. Thus, the music that best captured the lives of workaday Americans could only be heard by lucky locals in small-town dance halls and living rooms.  

Enter Alan Lomax, an upstart folklorist who in his early teens began to accompany his father John on expeditions across the country, recording the songs of poor farmers, prisoners, bar musicians, and others whose music would otherwise have faded like a melody in the wind. Lomax's road stories are captured in a book by Columbia University musicologist John Szwed's Alan Lomax, to be released in paperback tomorrow. 

Courtesy PenguinCourtesy Penguin

Lomax was born on the outskirts of Austin in 1915, into a family that worked on the fringes of Unversity of Texas academia; his father made his career collecting the songs of Texas cowboys. Until his death in 2002 at the age of 87, Alan Lomax produced thousands of field recordings, many specifically destined for the Library of Congress, and was the first to "discover" Guthrie, Lead Belly, Pete Seeger, Jelly Roll Morton, and Son House, among other folk musicians revered today. They were progenitors of the singer-songwriter type we know so well today, leaving an incalcuable impact on everyone from Bob Dylan to Kurt Cobain to Jack White

But the real import of Lomax's work goes beyond bringing backwoods folk singers into the limelight. At the heart of his mission was a fervent belief in the democratizing effect of folk music. The real point of lugging recording equipment over praries, swamps, and mountains was to capture the voices of "miners, lumbermen, sailors, soldiers, railroad men, blacks, and the down-and-outs, the hobos, convicts, bad girls, and dope fiends," and bring their stories, wrapped in song, to the ears of middle- and upper-class whites. America "was hungry for a vision of itself in song," Szwed writes, and Lomax was determined to feed it.

MoJo Readers' Top Albums of 2011

| Mon Dec. 26, 2011 6:00 AM EST
Mike D, Adrock, MCA of the Beastie Boys in Barcelona 2007

Reader's choice lists are so often middling disappointments, full of safe popular music that we've been tired of since July. But not this one. The diverse and thoughtful Facebook recommendations from Mother Jones readers have already provided hours of procrastination—ahem, research—on YouTube.  (If you don't already follow us on FB, sign up here.) No Gaga, Kanye, or Beyoncé—not that we don't love Beyoncé. So without further ado, here are your top albums picks for 2011. (And check out our top albums of 2011.)

Merry Christmas!

| Sun Dec. 25, 2011 10:00 AM EST

And now for our traditional Christmas ornament greeting. Maybe someday Domino will get an ornament too. Until then, whether you celebrate Christmas, the War on Christmas, or some other holiday, enjoy the day.

By the way, have I mentioned recently that my sister designed this ornament? Well, she did. And now it's a holiday classic. It wouldn't be Christmas without it.

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Merry Christmas Eve

| Sat Dec. 24, 2011 5:17 PM EST

'Twas the night before Christmas, when all through the house
Not a creature was stirring, not even a cat.

That's how it goes around this house, anyway. And not just on the night before Christmas, either. Enjoy your sugar plums, everyone.

The Housing Bubble and the Big Lie

| Sat Dec. 24, 2011 1:37 PM EST

As longtime readers with good memories will remember, Peter Wallison of AEI has spent several years pushing the preposterous idea that Fannie Mae and Freddie Mac were responsible for the subprime bubble. (See here and here for background.) After Wallison's latest jeremiad, Joe Nocera has finally decided he can't take it anymore:

So this is how the Big Lie works.

You begin with a hypothesis that has a certain surface plausibility. You find an ally whose background suggests that he’s an “expert”; out of thin air, he devises “data.” You write articles in sympathetic publications, repeating the data endlessly; in time, some of these publications make your cause their own. Like-minded congressmen pick up your mantra and invite you to testify at hearings.

....Thus has Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis....Allies? Start with Congressional Republicans, who have vowed to eliminate Fannie and Freddie — because, after all, they caused the crisis! Throw in The Wall Street Journal’s editorial page, which, on Wednesday, published one of Wallison’s many articles repeating the Big Lie. It was followed on Thursday by an editorial in The Journal making essentially the same point. Repetition is all-important to spreading a Big Lie.

What's most remarkable about this is how brazen it is. As Nocera notes, Wallison's latest piece is about the charges the SEC brought last week against six former Fannie and Freddie executives. That's a plausible hook for Wallison's hobbyhorse, but even a casual reading of the case shows that the SEC isn't claiming that government mandates for affordable housing drove Fannie and Freddie headlong into the subprime market. Just the opposite: Starting around 2002, Wall Street banks started their subprime binge and Fannie and Freddie began to lose market share. A few years later, when Fannie and Freddie joined the subprime orgy, they were doing it to compete with their private sector rivals, not because Congress or anyone else was forcing them to.

How brazen is this? Just look at the chart on the right. In 2002, Wall Street banks start the subprime bubble. That same year, Fannie and Freddie see their market share start to plummet. It's not until 2005, at the tail end of the bubble, that Fannie and Freddie get back into the game.

This is butt simple stuff. All you have to do is look at one simple chart to see exactly what happened. And yet, conservatives don't care. As Paul Krugman says, this "isn’t just a case where different people look at the same facts but reach different conclusions. Instead, we’re looking at a situation in which one side of the debate just isn’t interested in the truth, in which alleged scholarship is actually just propaganda."

Fannie and Freddie were bad actors in a lot of ways, and that makes them an easy target for conservatives who are desperate to absolve the private sector of any blame for the financial crisis. But when it comes to assigning blame for the housing bubble, the evidence against them is laughably thin. Like it or not, this was Wall Street's fault.

Why Obama Won The Payroll Tax Fight

| Sat Dec. 24, 2011 12:10 PM EST

Peter Nicholas of the LA Times writes that President Obama won the payroll tax battle because he followed a shiny new strategy for dealing with Congress:

President Obama's success in getting congressional Republicans to renew a payroll tax cut flowed from a strategy the White House has employed since the summer: Bypass Congress and marshal the political power of middle-class voters fed up with Washington gridlock.

....The revised approach is rooted in lessons learned from a debacle over the summer. Obama spent weeks holed up in meetings with congressional leaders, trying to resolve a stalemate over raising the debt ceiling. In the end, Congress complied, but at a severe cost to the nation's credit rating and Obama's public standing. Obama could not persuade Republicans to ease deficits through a mix of tax hikes and spending cuts and was perceived as having surrendered to their demands.

...."If the short-term tactical approach was to distance himself from Congress and put him on the side of jobs for the middle class, you'd have to say that that tactical effort has stopped the bleeding and probably shored him up with his base, which was ready to jump ship after the debt ceiling fiasco," said William Galston, a senior fellow at the Brookings Institution.

I hope no one in the White House really believes this. Obama's new strategy might have had a modest effect, but the real reason he won this battle is pretty simple: his bargaining position was way better. During the budget showdown and the debt ceiling showdown, Republicans had the upper hand because (a) deficit reduction was popular with the public and (b) they could credibly threaten to shut down the government. During this showdown, they had a weak position because (a) lower taxes are popular with the public and (b) their only credible threat was to refuse to pass the payroll tax extension, something that wouldn't really cause the president much harm. It's pretty easy to hold out against that.

Forget "strategy." This showdown turned out differently because the fundamentals of the situation were different. This time, Obama held all the cards. Just about any strategy at all would have produced a better result than this year's other showdowns.

Social Conservatives Root for a Bachmann Comeback in Iowa

| Fri Dec. 23, 2011 6:58 PM EST
Rep. Michele Bachmann (R-Minn.) has fallen in the presidential polls since winning the Ames Straw Poll in August.

Cindy Pollard almost left Uncle Nancy's Coffeehouse in Newton, Iowa, in disgust on Friday when she overheard that Michele Bachmann was about to make a campaign appearance. But Pollard decided to stay after spotting local John Fruetel, who came to tell Bachmann his views on gay rights.

Pollard is chairwoman of the Jasper County Democratic Party. She's also a lesbian, and married her wife in 2010, about a year after the Iowa State Supreme Court voted unanimously to allow same-sex marriage in the state.

As Pollard recorded a video, Fruetel confronted Bachmann, who was walking around the coffeehouse visiting with about 60 potential supporters individually instead of making a stump speech. "Thanks for your comments," Bachmann replied, after Fruetel told her she was wrong to oppose same-sex marriage.