Carbon Policy

Obama's big speech yesterday about the economy was.....fine.  I don't think he addressed our banking problems quite as forthrightly as a lot of people seem to think, but he didn't do too badly either.  I was more pleased, however, that he said this about transforming the economy to be less carbon intensive:

The only way to truly spark this transformation is through a gradual, market-based cap on carbon pollution, so that clean energy is the profitable kind of energy....We can no longer delay putting a framework for a clean energy economy in place. If businesses and entrepreneurs know today that we are closing this carbon pollution loophole, they will start investing in clean energy now. And pretty soon, we'll see more companies constructing solar panels, and workers building wind turbines, and car companies manufacturing fuel-efficient cars.

OK, it's not much.  But one of my complaints about Obama during the primary was that he didn't take the chance to actually sell the country on carbon caps.  Sure, cap-and-trade was always part of his plan, but on the stump it was all windmills and green jobs and other happy talk.  What would happen, I wondered, when the time came and suddenly Joe Sixpack realized that Obama was planning to raise energy costs via a cap-and-trade program?  That's still going to be a huge fight, but at least he's beginning to mention it in public now.  It's a start.

And as long as I'm writing about yesterday's speech, what's the deal with the White House website?  The speech is blared across the entire front page of the site, but if you click on "Read the Remarks" you cannot, in fact, read the remarks.  You can read a blog post excerpting a few of the remarks, but the blog post doesn't link to the full remarks.  If you click on "Speeches" instead, the most recent entry is from February.  Maybe the full speech is somewhere on the site, but I couldn't find it.

What gives?  Bush's website wasn't as pretty, but at least it was usually pretty complete and easy to navigate.  I never had trouble finding his speeches.

Stress Test Follies

Apparently the results of the stress tests being done on big banks will be revealed publicly after all.  Sort of:

The administration has decided to reveal some sensitive details of the stress tests now being completed after concluding that keeping many of the findings secret could send investors fleeing from financial institutions rumored to be weakest.

While all of the banks are expected to pass the tests, some are expected to be graded more highly than others. Officials have deliberately left murky just how much they intend to reveal — or to encourage the banks to reveal — about how well they would weather difficult economic conditions over the next two years.

....The administration feared that details on healthier banks would inevitably leak out, leaving weaker banks exposed to speculation and damaging market rumors, possibly making any further bailouts more costly.

....“The purpose of this program is to prevent panics, not cause them,” said one senior official involved in the stress tests who declined to speak on the record because the extent of the disclosures were still being debated. “And it’s becoming clearer that we and the banks are going to have to explain clearly where each bank falls in the spectrum.”

I'm not quite sure if this qualifies as good news or bad news.  Transparency is generally good, especially where billions of taxpayer dollars are concerned, but at the same time, there's no way Treasury would be doing this unless they've already decided that everyone is going to pass the tests pretty handily.  That's not so good.  Judging from the tone of this piece, it appears that there are going to be two grades handed out: "Great!" and "Maybe just a wee bit shy of great but still pretty damn good!"  If that's what we end up with, this is transparency we can probably do without.

Where Your Money Goes

To commemorate Tax Day, the fine chartmakers at the Center for Budget and Policy Priorities have created this look at where your tax dollars go.  It's nothing new for regular readers of this blog, but for lovers of wonky eye candy it's a nice way of showing that about 70% of the budget goes to a mere four things: defense, interest on the debt, Social Security, and Medicare/Medicaid.  This means that if you're serious about cutting the budget, you need to tell us what you're going to cut in those areas.  Hacking away at the remaining 30% just won't get you very far.

One nice touch is labeling all the various welfare program funded by Washington as "Safety Net Programs."  That's good framing!  Regardless of what you call it, though, that and education, which are usually the main target of the budget cutting crowd, only amount to 13% of the budget.  Scrooge himself couldn't squeeze more than few percent out of that slice of the pie.  Bottom line: cutting the federal budget in any way that's more than just symbolic is really tough.  Maybe that's why Republicans only get serious about it when they're out of power.

 

Trivia of the Day

The average time between major pushes for healthcare reform is 19.5 years.  If we blow it this time, our next chance won't roll around until 2028.

Deflation is Here

The latest economic news:

For the first time since 1955, prices fell from the same month a year earlier, reflecting a stark drop in the cost of gasoline and automobiles. Overall, consumers paid 0.4 percent less for a range of goods and services last month than they did in March 2008.

The Labor Department reported that its consumer price index fell 0.1 percent in March from February as lower consumer demand for a range of goods and services kept a lid on rising prices.

The party line on this is that it's not too big a deal because the decline was mostly centered on energy-related products and services.  Maybe so.  But I wouldn't bet the ranch on it quite yet.

Glenn Beck Advocates Secession

I suppose we knew it would come to this eventually. Glenn Beck is the tip of the spear for the conservative talkers and activists who are convinced that America is descending into tyranny under Obama. (I like Jon Stewart's line: that's not tyranny; that's just being in the minority.) The Fox News host is (1) often the first major media figure to adopt the crazy right-wing conspiracy theories that circulate on the web, thus pulling them into the mainstream; and (2) takes right-wing talking points the furthest, like when he suggested that Obama is turning America into a Nazi state. The tag line on his Fox News show ought to be: "First Among Nut Jobs: the Glenn Beck Program!"

So it was inevitable that Beck would be the first to suggest that if you oppose Obama enough, you have the right to secede. Here's Beck (audio at the link):

"You can't convince me that the Founding Fathers wouldn't allow you to secede. The Constitution is not a suicide pact. If [a] state says, "I don't want to go there because that's suicide," they have a right to back out! ...I sign into this union, and I can never, ever get out?? No matter what the government does, I can never get out??"

Here's my prediction -- in 12-18 months, conservatives will learn how to be out of power again and we'll see a lot less of the tea parties and Glenn Beck-type ranting. But I gotta wonder: Why didn't conservatives get this worked up when their party controlled the White House and they could actually pressure the president to do what they wanted? The activist/blogosphere left knows how to harness its grassroots energy when it actually matters. It doesn't complain about its politicians, the way conservative activists complain(ed) so bitterly about Bush. It works hard to get its politicians to do what it wants.

Update: Looks like Beck did this once before, in 2008.

2009 Hasselblad Photography Award

Lakewood

 

Oregon photographer Robert Adams won this year's prestigious Hasselblad Award. The Fraenkel Gallery in San Francisco hosted the award ceremony, only the third time the award has been presented outside of Hasselblad's hometown of Gothenburg, Sweden.

Adams' work focuses on the American West. His 1974 book The New West looked at the changing landscape of Western states, documenting the creation of suburban landscapes in once pristine, rural areas. The photographs in this body of work helped define Adams' style as a no-frills, descriptive documentary photographer in the tradition of Walker Evans.

Over the course of 40 years as a photographer, Adams' unflinching and unsentimental eye has captured the enviornmental transformations of the Western landscape -- from forests hit by clear cutting and wide mountain landscapes to the rise of housing tracts, motels, supermarkets and trappings of suburbs.

The Hasselblad Foundation gives the photography award each year to a photographer who has contributed significantly to the field and is one of the most significant prizes to be awarded for photography. The past winners list reads like a Who's Who in Photography: Henri Cartier-Bresson, Ansel Adams, Susan Meiselas, Irving Penn, Richard Avedon, Robert Frank, Nan Goldin, Lee Friedlander, William Klien, Josef Koudelka, William Eggleston, and so on. Adams finds himself in excellent company. The winner receives a gold medal (usually presented by the Swedish royal family), a certificate and a monetary prize of 500,000 SKE.

 

How to Think About Taxes

Here's my contribution to today's tax day festivities: an effort to get you to think about federal taxes a little bit differently than usual.  Normally, when we talk about taxes, we end up talking about percentages of people: the top 1% pay a certain amount, the bottom third pay a different amount, etc.  But this is the wrong way to look at things.  What we ought to be looking at is percentages of income.

Have your eyes glazed over yet?  Just wait!  It's going to get worse.  But first a caveat: the numbers that follow aren't exact.  I don't think they're way off the mark, but they're the result of some rough interpolation from several different data sources.  Anyone with access to more detailed data is welcome to correct this, but in the meantime it should be close enough to give you an idea of how to look at this stuff.

So: percentages of income.  What I mean by this is that you'd expect a group of people with, say, one-fifth of the nation's total income to pay one-fifth of total federal taxes.  (Note: one-fifth = 20%, or one quintile in tax-speak.)  It doesn't really matter if that group has one-fifth of the people or not, just that it has one-fifth of the money.  Like this:

But hold on.  That's a flat tax, and I want to appeal to your native sense of fairness here.  Even most conservatives agree that taxation ought to be at least mildly progressive, so let's make this mildly progressive.  First, let's say that the middle quintile, almost by definition, ought to pay 20% of total taxes.  Like so:

The next quintile up ought to pay a higher share, and the quintile above that even more.  The slope of the increase doesn't need to look like a hockey stick, but it should trend clearly upward.  Let's say it should be 8% more for each quintile:

Likewise, the quintile below the middle ought to pay a lower share, and the poorest quintile ought to pay even less.  Something like this:

Question: does this seem roughly fair to you?  If you're a die-hard flat-taxer, it won't, but for most people, even conservatives, it ought to seem reasonable.  It's progressive, but the slope is moderate and consistent.  So now let's take a look at the income cutoffs that produce our five quintiles.  Here they are:

Most people are surprised at how high the income cutoffs are.  But that's how it works out.  If you add up the incomes of every single household that makes less than $50,000 — all 50 million of them — they earn only a fifth of the total income.  If you add up the tiny number of people who make more than $300,000, they also earn a fifth of total income.  So now, instead of looking at our theoretical progressive system, let's see the actual numbers.  Here they are:

As you can see, when you add up all federal taxes and compare it to where the money is, our system is only barely progressive at all.  The bottom quintile doesn't do too badly, though they're probably paying a little more than they should, but CEOs and bankers are paying only slightly more than teachers and engineers.  And if you add in state and local taxes, even this small amount of progressivity goes away.  You can come at this from a lot of different angles, but you always end up with the same answer: taken as a whole, our tax system is close to flat.  Does this seem fair to you?  It shouldn't.

NOTE: As I said above, these numbers are rough interpolations from several sources.  The high-end income data is from Piketty and Saez, here.  The middle income aggregates and cutoffs are from Census figures, here and here.  Tax shares are from the CBO, here.

Now that Somalia's finally gotten our attention, it's worth rereading a piece David Case filed for MoJo in late 2007, after (unlike most of the people who now claim expertise on the subject) actually spending time in the region. At the time, Case was one of the few reporters noting the US role in supporting the Ethiopian invasion, which helped turn a failed state into a full-on war zone:

Somalia may barely register with the American media, but the [post-invasion] bloodshed is a major story on Al Jazeera. Across the Middle East, Somalia is viewed as another hostile front in Bush's war against Islam, says Colin Thomas-Jensen of the Washington-based Enough Project. "In the minds of Muslims, this is the third time the U.S. has supported the toppling of an Islamic government with no political plan for the aftermath, leaving behind chaos."

In other words: Pirates are the least of our problems. Read the whole thing.

 

 

Paying Back the Feds

Over at TNR, Simon Johnson talks about what might happen if Goldman Sachs is allowed to pay back the TARP bailout money it was given back in October.  The government money came with certain restrictions, including restrictions on executive compensation, and Johnson argues that removing these restraints would allow Goldman to go back to the swashbuckling business model that got us into our current mess in the first place.  Plus there's this:

Another risk is the effects on other banks.  If Goldman can really attract all the talent, which is what they're arguing, and really go back to an earlier business model, that's going to take away profits and remove future profitability from other banks, and that could increase the pressure on them.

Hold on a second.  I thought high earners didn't deserve their pay because it turns out they produced huge losses instead of huge gains?  So why would Goldman Sachs be so eager to hire them all back?  And even if they do, who cares?  The rest of the industry is better off without them.  Isn't that the party line?

Not anymore, I guess.  Johnson is basically admitting here that if Goldman can use high pay to attract top talent, then they'll be more profitable and competitors will suffer.  But if that's the case, no direct cap on executive pay is ever going to stop firms from bidding top talent into the stratosphere.  They'll always figure a way around any cap we put in place, and trying to keep up is a mug's game.

Much better is to let them pay whatever they want, and focus instead on ways to shrink both the size and profitability of the industry as a whole.  A limit on bank size is one possibility.  Limits on leverage are another.  Stricter regulation of opaque credit derivatives and off-balance sheet accounting is yet another.  Or, if you want to focus on pay itself, do it indirectly by creating tax advantages for long-term restricted stock grants that motivate better investing behavior.  And needless to say, do this for everyone, not just banks that took TARP funds.  Do this, and deflation of the Wall Street pay bubble will follow naturally.