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Obama Advertising in Variety of Video Games

| Wed Oct. 15, 2008 3:30 PM EDT

Back when Obama bought an entire channel on the Dish Network, I wondered if his campaign has too much money on its hands. I think it's safe to say the answer is yes.

obama_video_games.png

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Asset Bubbles

| Wed Oct. 15, 2008 2:59 PM EDT

ASSET BUBBLES....Should the Fed (and other central banks) try to prick asset bubbles before they get out of hand? In theory, sure, but as Mark Thoma points out, the problem is that we're not very good at recognizing bubbles in the first place: "If we didn't identify one of the largest bubbles in memory, and for the most part people didn't, I'm not confident we will be able to come to any kind of consensus about 'ordinary' sized bubbles before it's too late. And if that's the case, waiting until we are certain we are observing a bubble will delay policy beyond the point where it can be helpful."

So what to do? Mark suggests a simple solution: the Fed already reacts to ordinary inflation, which is calculated as a complex weighted average of the prices of various goods and services. When these prices rise faster than long-run fundamentals dictate — creating micro-bubbles, if you will — the Fed reacts by raising interest rates. But the Fed's definition of inflation is incomplete:

There is one set of prices, however, that theory says ought to be part of the rate-setting decision, but they are missing. And interestingly, and perhaps only coincidentally, the one set of prices that are not monitored and responded to just happen to be the place where bubbles erupt — asset prices. But if we include these prices in the Fed's policy rule so that whenever asset prices rise the Fed responds by increasing the target interest rate, and if we weight the asset prices properly so that some prices, e.g. housing prices, receive more weight (house prices are notoriously sticky, so theory says they ought to receive a lot of weight), then perhaps it's much less likely that a little bubble turns into a big bubble. Asset price inflation will be stopped by increases in the federal funds rate (and if it isn't stopped by interest rate hikes, then other measures can be implemented). With this approach, you don't have to debate whether a particular price run is a bubble or not; if it is creating asset price inflation, then there will be an automatic response of the federal funds rate to temper the increase. To me, not having to know if it is a bubble or not is an attractive feature.

This might just be an example of the recency effect on my part, but it sure seems as if the last couple of decades have produced more than the usual number of asset bubbles. What's more, they've become steadily more dangerous. On a proportionate scale, the U.S. subprime bubble wasn't actually any bigger than either the Japanese or Swedish real estate bubbles of the late 80s/early 90s, but a combination of derivative speculation and the absolute size of America compared to either Sweden or Japan magnified it into a global disaster that previous bubblemeisters could hardly dream of.

So yes: it's time to pull our heads out of the sand and start giving asset inflation some weight in Fed anti-inflation policy. It doesn't have to dominate Fed policy, it merely needs to be a factor in it. Remember: the point isn't to eliminate asset bubbles, only to try to tame them a bit. I imagine Ben Bernanke has other things on his mind at the moment, but this seems like something worth a serious rethink once the current crisis calms down a bit.

What Would an Obama Administration Mean For Rock 'n' Roll?

| Wed Oct. 15, 2008 2:56 PM EDT

mojo-photo-obamanirvana.jpgI know, I know: don't jinx it. But seriously, have you seen the latest polls? With a 14-point lead, I think a little creative visualization is allowed. So, a Democratic president takes over from an unpopular Bush-led administration after an Iraq war doesn't quite turn out as hoped, as the economy goes spiraling into the pooper. Sound familiar? An eerily similar set of circumstances was at play 16 years ago, and at the same time, an edgy, independent new genre of punk-inflected rock came to dominate American culture and redefine the notion of "alternative" music. Grunge was both idiosyncratically local and an inevitable product of its time, an expression of anguish and frustration at the world: the failing economy, monolithic pop culture, an out-of-touch government. Granted, Nirvana's Nevermind hit #1 on the Billboard album charts in January, 1992, just as candidate Bill Clinton was fighting off the now-almost-quaint-seeming Gennifer Flowers scandal, and clearly, the Northwest grunge scene had been bubbling under for a few years before that. But right now, rock, as such, seems primed for a revival: charts are dominated by hip-hop and American Idol winners, and the underground is all electro, all the time. Could a generation of kids be about to lose their jobs and pick up guitars?

Can McCain Get Back in the Race?

| Wed Oct. 15, 2008 2:48 PM EDT

I think bloggers/journalists/pundits giving campaigns advice is a bad and unproductive little habit, but my posts today about how raising Ayers won't get McCain back in the race has got me thinking about what will.

Just to be clear, I think McCain going after Obama's associations is a choice fraught with as much danger for McCain as for Obama. (See the last two posts for why.) So what can McCain do instead? He can paraphrase Bill Clinton and label himself "a new kind of Republican." He can slam Bush. He can denounce the way the country has been run for the last eight years by a Republican White House and, for the most part, a Republican Congress. In short, he can capitalize on the disastrous condition of the Republican brand, instead of suffering from it.

And he can match this rhetorical move to the center with policies that, in most cases, stay solidly to the right. (In a way, he would mirror Obama.) As a result, he has a good chance of retaining the Republican base and an improved chance of swaying independents. Does this path guarantee victory for McCain? Of course not, but it's a lot better than his current strategy, which is... what exactly?

And I have to point out that had McCain pursued this strategy from the beginning, it would have been awfully tough for Obama to tie McCain to Bush as successfully as he has. Would it have depressed turnout somewhat among hardcore Republicans? Sure. But look where a half-hearted attempt to play to the base has gotten him so far.

Another Reason Why Ayers Won't Work

| Wed Oct. 15, 2008 2:34 PM EDT

Making attacks on Ayers a centerpiece of McCain's campaign signals the intellectual bankruptcy of the conservative movement he purports to lead. The conservative David Frum, writing about a week ago:

We conservatives are sending a powerful, inadvertent message with this negative campaign against Barack Obama's associations and former associations: that we lack a positive agenda of our own and that we don't care about the economic issues that are worrying American voters.

And besides, it won't work.

Republicans used negative campaigning successfully against Michael Dukakis and John Kerry, it's true. But 1988 and 2004 were both years of economic expansion, pro-incumbent years. 2008 is like 1992, only worse. If we couldn't beat Clinton in 1992 by pointing to his own personal draft-dodging and his own personal womanizing, how do we expect to defeat Obama in a much more anti-incumbent year by attacking the misconduct of people with whom he once kept company (but doesn't any more)?

Pre-Debate Analysis: McCain's Ayers Quandary

| Wed Oct. 15, 2008 2:14 PM EDT

It's well known that John McCain has promised to "whip [Obama's] you-know-what" in tonight's debate, in part by bringing up William Ayers.

But there are a number of problems with raising Ayers tonight in New York. I'll let Noam Scheiber explain:

If McCain goes that route, doesn't that mean he's mostly wasted the last several days, when he and Palin have substantially toned down their Ayers rhetoric? (Days he can hardly afford to waste, I might add.) It seems strange to pursue one strategy in the days leading up to a debate, then another strategy during the debate--particularly when the strategies are contradictory....
[But] if McCain doesn't mention Ayers tonight, he's going to get hammered in the press for making empty threats (cue the erratic meme) and essentially wimping out.

This has been about as haphazard as any media messaging strategy could be. And I'll add that by letting Obama and his debate prep staff know in advance that he plans to raise the Ayers attack, McCain gave them the opportunity to prepare a response. I suspect it'll go something like, My opponent wants to continue the old tired politics of guilt by association. I want to talk about how we're gonna fix this economy.

How does McCain come out a winner here? I just don't see it.

Update: Check back tonight for a debate live-blog. Here's an example of how we roll, so you know what to expect.

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Who Benefits From McCain's Proposal to Cut Capital Gains Taxes?

| Wed Oct. 15, 2008 1:47 PM EDT

Surprise! It's the wealthy! Here's TaxVox:

TPC's Katherine Lim has crunched some numbers on John McCain's proposal to temporarily cut capital gains tax rates from 15 percent to 7.5 percent. In 2009, under a plan that lowers taxes on both gains and dividends, those making $1 million or more would get two-thirds of the benefit, and an average tax cut of more than $72,000. Those making less than $50,000 would get, on average, nothing.

The man who stood strong (and largely alone) against the Bush tax cuts because they disproportionately benefited the wealthy is suggesting making our tax code less progressive. Here are the numbers used in the calculations, and here is more on McCain's newly proposed economic policies.

From the Annals of Airport Security

| Wed Oct. 15, 2008 1:31 PM EDT

FROM THE ANNALS OF AIRPORT SECURITY....Jeffrey Goldberg and Bruce Schneier explain why the no-fly list is not just a gargantuan monster that's gotten completely out of hand and made the lives of uncounted innocent people miserable, but a useless gargantuan monster that's gotten completely out of hand and made the lives of uncounted innocent people miserable:

To slip through the only check against the no-fly list, the terrorist uses a stolen credit card to buy a ticket under a fake name. "Then you print a fake boarding pass with your real name on it and go to the airport. You give your real ID, and the fake boarding pass with your real name on it, to security. They're checking the documents against each other. They're not checking your name against the no-fly list — that was done on the airline's computers. Once you're through security, you rip up the fake boarding pass, and use the real boarding pass that has the name from the stolen credit card. Then you board the plane, because they're not checking your name against your ID at boarding."

What if you don't know how to steal a credit card?

"Then you're a stupid terrorist and the government will catch you," he said.

What if you don't know how to download a PDF of an actual boarding pass and alter it on a home computer?

"Then you're a stupid terrorist and the government will catch you."

I couldn't believe that what Schneier was saying was true — in the national debate over the no-fly list, it is seldom, if ever, mentioned that the no-fly list doesn't work. "It's true," he said. "The gap blows the whole system out of the water."

Other tips: you can carry all the liquid on board a plane that you want as long as you put it in a bottle marked "saline solution." Or hide it on your person in a Beerbelly™. Just don't look too nervous while you're doing it, OK?

Pakistan Update

| Wed Oct. 15, 2008 1:06 PM EDT

PAKISTAN UPDATE....McClatchy reports on an upcoming U.S. intelligence assessment on Pakistan:

A U.S. official who participated in drafting the top secret National Intelligence Estimate said it portrays the situation in Pakistan as "very bad." Another official called the draft "very bleak," and said it describes Pakistan as being "on the edge." The first official summarized the estimate's conclusions about the state of Pakistan as: "no money, no energy, no government."

Juan Cole adds some perspective to the report and ultimately suggests that it's off base: "People who know Pakistan well are more afraid of the right wing elements in the Pakistani military (whom the CIA has long funded and coddled) than they are about an elected civilian government being weak or corrupt." To be honest, both of these assessments sound about right to me.

There are also intelligence reports on Iraq and Afghanistan coming down the pike, and McClatchy reports that they are "intended to support the Bush administration's effort to recommend the resources the next president will need for Iraq, Afghanistan and Pakistan at a time the economic crisis is straining the Treasury and inflating the federal budget deficit." Unfortunately, it appears that the intelligence community plans to say that we need more troops and more resources in all three areas, which doesn't sound all that helpful. Hopefully President Obama and his team are already working on assessments of their own.

Drawing Conclusions from Early Voting (Georgia Edition)

| Wed Oct. 15, 2008 1:04 PM EDT

From the Atlanta Journal-Constitution (via Ambinder), a dispatch on early voting in Georgia:

Just cast an early vote in Cobb County. Only took one hour, forty-five minutes -- exactly three weeks before Election Day.
A long line folded itself three times in a relatively hot October sun, shortly before lunch-time. Perhaps a dozen people couldn't stick it out -- they left before getting to the front of the line.
Every one of those who gave up the effort was white. Once in, not a single African-American walked away while I was there. If voter fatigue becomes a factor over the next three weeks, and on Election Day itself, one has to wonder if Republicans are more likely to lose out than Democrats.

If you remember the Ohio vote in 2004, you know that black voters were faced with hellacious lines while upper-class white neighborhoods encountered few problems. My understanding is that a strong-willed and very competent Secretary of State in Ohio is working to make sure that doesn't happen again, but it may not matter. This report suggests African-American voters nationwide will simply not be deterred this time around.

And, for what it's worth, Obama is dominating early voting.