It's Friday! Hooray! Time for cats. On the left, Domino is helping Marian as she works on some pattern drafting. This help consists primarily of sitting on her left arm, which she doesn't really need anyway. So it all works out.

But what about Inkblot? What's he doing? Answer: looking wistfully at the TV wondering how long he has to wait until Kevin shows up on Bill Moyers Journal. Not long, Inkblot! It airs on PBS, and David Corn and I will be on tonight at 9 pm (though you should probably check your local listings to make sure that's when it airs in your area).  We'll be talking about the finance lobby and its almost unchecked influence over both Congress and the country as a whole during the past several decades. Hopefully I was not totally incoherent as I railed against banks, talked about the evils of excessive leverage, described the outrageously favorable treatment that the financial sector gets from Congress, and chastised Barack Obama for not doing enough to fight back. A program description is here. And the article that sparked my television debut, "Capital City," is in the latest issue of the magazine.

FUN TIDBIT ALERT: When they put on makeup for the show, they applied it to both my face and my hands. Apparently it's important to make sure your skin tone is even for all exposed parts of your body.

Employment Woes

I don't really know what kind of track record these guys have, but e-forecasting now thinks that GDP grew 5% in the final quarter of 2009. At the same time, the economy lost 85,000 jobs in December, for a total of over 200,000 jobs lost in Q4. Using the rule of thumb that we need to add about 400,000 jobs per quarter just to tread water, this means that we fell behind by about 600,000 jobs even as GDP was growing at a pretty good clip.

I don't know quite what this means. Maybe e-forecasting will turn out to be wrong. But if we're really still losing jobs at this clip even with GDP picking up smartly, it doesn't suggest anything good. I sure hope the conventional wisdom that employment is just a lagging indicator and it will soon start climbing rapidly turns out to be right. I don't think I believe it, though. A long, slow recovery still seems more likely than not.

UPDATE: More here: "Total underemployment — the famous U-6 — is still extremely and stubbornly high at 17.3%, and the total number of unemployed persons, at 15.3 million, is double what it was at the start of the recession in December 2007....The bigger picture [] is important. And it shows a US workforce which is underemployed and looking at jobs which, when they do exist, are insecure and often temporary. Capital took its lumps in 2008 and the early months of 2009; it then recovered astonishingly quickly. It’s labor which is suffering the real hangover."

Carter's Legacy

Matt Yglesias pushed back yesterday against the idea that the only people who think Jimmy Carter was a good president are "people who are too young to actually remember the Carter years." But then he conceded: "Does that mean Carter was a great president? No. Obviously, he left little in the way of enduring achievements."

I think that deserves some pushback of its own. Carter was president during a difficult period, and politically he turned out to be fairly tone deaf and ineffective. As someone who didn't vote for his reelection in 19801 I won't defend him as a great president, but substantively he left behind more in the way of enduring achievements than most people give him credit for. He was the first president to make human rights a centerpiece of our foreign policy, a stance that Ronald Reagan adopted to great effect and something that's been a part of American diplomatic relations ever since. He managed to return the Panama Canal to Panama, a brave, politically costly fight that could have been disastrous if he'd lost it. He helped make peace between Israel and Egypt at Camp David. He appointed Paul Volcker as Fed chairman and allowed him to begin squeezing inflation out of the economy — something that very possibly cost him the 1980 election. He began the wave of deregulation that Reagan and others extended for the next 30 years. He started the secret war against the Soviets in Afghanistan. And although his efforts to push energy conservation died after he left office, they look prescient now.

This is actually a pretty substantial legacy — but it isn't entirely liberal or conservative. Liberals generally look favorably on Carter's work on human rights and the Middle East. Conservatives favor — or should favor, if they're being honest — his deregulatory efforts, the appointment of Volcker, and his willingness to engage the Soviets in Afghanistan. I've always suspected this is why Carter gets so little love: his overall legacy has too many conservative elements for liberals to really embrace him, but his non-hawkish attitude toward the Cold War and his inability to rally the country make him a conservative bête noir. And of course, his achievements have been overshadowed by his ultimate association with stagflation, oil shocks, and the Iranian hostages. But none of that alters the fact that, for better or worse, he changed the country more substantially than I think most people realize.

1Since I always get asked this, no, I didn't vote for Reagan. I voted for John Anderson.

In announcing a new plan for oil and gas leasing earlier this week, Interior Secretary Ken Salazar made it clear that the Obama administration is taking a different tack from its predecessor when it comes to offering public land up for drilling.

"The difference is that under the prior administration, the oil and gas industry were essentially the kings of the world," said Salazar. "Whatever they wanted to happen essentially happened. This department was essentially a handmaiden of the oil and gas industry."

"We have brought that to an end," he continued.

Salazar, who had quite a week between this big announcement and the rumors that he might head back to Colorado to run for governor, ticked off plenty of oil fans with the remark. The most virulent response, however, has come from Oklahoma Democratic Rep. Dan Boren, who blasted off what his own office described as a "blistering letter" to Salazar:

Why do policy-makers within the administration deny the connection between your so-called American energy "kings of the world" and the millions of American jobs they provide? The companies affected by these reforms are not global corporate conglomerates. Rather, they are smaller, independent producers that drill 90 percent of the wells in the U.S. struggling to stay alive in this dwindling economy. To these companies, and the people behind them whose blood, sweat, and tears have helped to build this country, statements such as your "kings of the world" comment are a profound affront.

Of course, Boren's earnest defense of the oil industry isn't too unexpected. His is among the most dismal environmental records for congressional Democrats, with a 36 percent grade from the League of Conservation Voters in the 110th Congress, and a 27 lifetime score. He was also one of the Democrats who voted against the House climate bill last June.

He is, however, a favorite of the oil and gas industry. It has been his biggest contributor during his three terms in office, at $484,360. Which of course puts his valiant defense of the industry in perspective.

The latest unemployment data released today paint a somewhat disheartening picture—the jobless rate remains at 10 percent, and the economy shed 85,000 jobs last month—especially for this reason: Although jobs were lost, the unemployment rate held steady from the month before, meaning a large number of people had simply given up looking for a new job.

Which brings me to this graph from Calculated Risk. The blue line represents the number of people out of work for more than 26 weeks, and the red line represents the percentage of the workforce those long-term unemployed people represent. As you'll see, those 6.13 million people unemployed for more than 26 weeks constitute 4 percent of the civilian workforce—a record since the the Bureau of Labor Statistics started collecting this data in 1948.

Now, there are a few bright signs in today's jobs report. A crucial manufacturing index showed an encouraging uptick, raising the possibility of some growth in manufacturing industries, while the Labor Department revised jobs estimates from November to reflect gains of 4,000 jobs (the government had originally projected 11,000 lost jobs), the first gain in jobs in almost two years.

Krugman says the report supports his and others' belief that the stimulus was too small, and Brad DeLong uses the report as evidence that our economic recovery, if that's what this actually is, is likely going to be a jobless one. All in all, a decidedly mixed report, especially when it comes to the record numbers of the chronically unemployed, a total that's only likely to grow in the coming months.

(H/T Calculated Risk)

Paul Krugman and Megan McArdle agree: the housing bubble wasn't caused by either predatory lending or the evil CRA. How do they know? Because if either of those were the explanation, then only residential housing would have been affected. But in fact, commercial real estate went through essentially the same boom/bust cycle,as shown in the chart on the right.

I think that's basically right. There was plenty of predatory lending, but I suspect that causation goes in the other direction: the bubble provided more opportunity for predatory lending, not the other way around. And the right-wing theory about the Carter-era Community Reinvestment Act being responsible for the bubble has never been anything other than crazy. There's just no evidence for it at all.

The one thing that does tie together both the residential and commercial bubbles, however, is leverage. In both cases, prices were propped up by vastly increased use of debt and leverage at all levels. Home buyers were allowed to take out mortgages with tiny (or no) down payments. Loan-to-value ratios (the rough equivalent in the CRE world) took off. The resulting mortgages were securitized and sold off so they wouldn't count against bank capital requirements. Those in turn were transformed into derivatives with lots of additional baked-in leverage. The derivatives were then insured via credit default swaps to essentially remove them from bank balance sheets. And all along the way, both the SEC and international regulators obligingly reduced bank capital requirements. Put together, all of this allowed effective leverage ratios at big banks and hedge funds to soar and debt levels among consumers to reach record heights.

All of that affected the pool of money that drove both the residential and commercial real estate booms in multiple countries. It's not the only explanation for the bubble (fraud and predatory lending helped feed the fire, as did Ben Bernanke's "savings glut" and the insane belief in the ability of derivatives to hedge away all risk), but it's at the core. It was at the core of this bubble, just as it was at the core of the collapse of Long Term Capital Management, the Asian crisis of 1998, the Nordic bubble of the early 90s, the Japanese bubble of the late 80s, and, if you want to back further still, the stock market crash of 1929. If you want to control asset bubbles, you have to control leverage. Not eliminate it, but control it. The fact that neither U.S. nor European regulators have seriously taken this on over the past year is a very discouraging sign that all we're doing with regulatory reform is tinkering around the edges. If we don't get serious about leverage, 2008 is going to happen all over again in another decade.

Healthcare and Wages

Do increases in healthcare costs restrain wage growth? Or, put another way, can we blame skyrocketing healthcare premiums for the fact that cash wages over the past three decades have been largely stagnant for the middle class?

There was some discussion of this topic while I was away, but I think it got a bit confused because there are actually two questions here. First, if employers have to pay more for healthcare, will they pay less in wages? I don't think there's any question that this is the case. Austin Frakt rounds up the academic evidence here, but frankly, you hardly need it. The effect of healthcare costs will vary over short-term periods thanks to economic conditions and general wage friction, but over the long term employers are plainly willing to pay only a certain amount for certain jobs. That amount includes wages, benefits, retirement, payroll taxes, and so forth. There's just no way around that. Money paid for healthcare is not some magical source of income that doesn't count against a company's income statement, and every company in the world bigger than your local dry cleaner works on the basis of total burdened payroll, not just cash wages.

But the second question is quite different. Lawrence Mishel of EPI tries to argue here that healthcare premiums don't have much effect on wages, but all he really shows is that the correlation is imperfect over short time periods. That's not controversial. Over the long term, however, it's simply not plausible that healthcare costs don't affect total compensation on pretty much a 1:1 basis.

But Mishel does answer the second question: can we really blame healthcare for stagnant middle class earnings?

Health care costs were just 7.6% of total compensation and 9.4% of total wages (all wages paid, including premium pay, paid leave, and so on) in 2007. The share of health care in total wages (in nominal, non-inflation adjusted terms) grew from 7.2% in 1989 to the 9.4% in 2007, suggesting that the expanded role of health costs could have reduced wage growth by 2.2% over this entire 18-year period, or 0.12% each year.

A couple of months ago, I did a quick and dirty calculation of healthcare costs over the past decade and concluded that their overall effect was small. In pure cash terms, median wages went down about 4%. If you add in healthcare premiums, median wages went up 1%. That's a difference of about 0.5% per year, which is nothing to sneeze at, but the fact remains that even if you count healthcare premiums, average incomes were almost completely flat. I've done the same rough calculation for the past three decades and come to the same conclusion over that period: There's no question that healthcare premiums have an effect on wages, but even when you account for them, median income still grew very slowly. Healthcare simply isn't more than a modest part of the explanation for sluggish wage growth.

The majority of the world's leading asset managers are not factoring in climate-change in their decision-making, finds a new study from the sustainable business group Ceres. Climate change will create risk factors for some businesses and opportunities for others, argues Ceres, and smart money managers should be accounting for that.

The group surveyed the world's 500 biggest asset managers, and received responses from 84 who manage $8.6 trillion in assets. Of those, 71 percent said they currently are not factoring in climate risks when considering investments—though half said they believe that some sectors have "significant exposure to climate risks." Forty-four percent said that they don't consider climate risks at all "because they do not believe that climate change is material to their investment decision making."

Risks associated with climate change range from the direct impacts of increased severe storms, droughts, and flooding, to the cost increases of doing business if or when a price is put on carbon dioxide. But there are also opportunities for companies who are providing low-carbon solutions or otherwise adapting to the changing climate. The Ceres analysis found that most money managers are not looking very far into the future when assessing these risks and opportunities and choosing investments.

Part of the challenge the report identifies is that clients are not requesting this kind of information: 49 percent said their investor clients aren't asking them to consider this kind of risk, so they're not doing it yet. Most said, however, that they are in the preliminary stages of figuring out how to assess climate-related factors.

"The vast majority of the asset managers who responded to the survey are only in first gear on climate change," said Mindy Lubber, president of Ceres. "This is disappointing--it defies reality and the very real numbers... The survey makes clear that the investment community is still overly focused on short term performance and dismissive of long-term risks like climate change."

Joe Sacco's Gaza Strips

Cartoonist-slash-reporter Joe Sacco is back with his densest work yet, a 418-page plunge into a little-known episode of the Israeli-Palestinian conflict: the 1956 shooting of 386 Palestinian refugees by Israeli soldiers in Rafah and Khan Yunis, impoverished towns in the Gaza Strip. As in earlier works such as Safe Area GoraĹžde, Sacco combines rich black-and-white illustrations and extensive interviews to unravel a tortuous history. Footnotes in Gaza is heavy, but never feels like homework. Read an interview with Sacco at

Ka-Boom: EPA study reveals blowing up mountains is pretty hard on mountains.

Dead System Walking: Major law institute finds death penalty corrupt, but changes unlikely.

Cat Crash: Fifteen percent of endangered cougars in Florida lost to car crashes. [MongaBay]

Winds of Change: Cape Wind turbine farm suffers setback, big energy companies cheer.

Retirement, Sort of: Sen. Byron Dorgan's retirement plans include private sector energy work.

Autism Risk: Study finds clusters of kids of white, highly-educated parents. [Planet Ark]

Whole Truth: Whole Foods CEO John Mackey believes in organic lettuce, but not global warming.