Kevin Drum

Buyer's Remorse on Wall Street

| Mon Oct. 11, 2010 2:09 PM EDT

A sad story from the Wall Street Journal:

Securities firms dangled big bucks to lure thousands of brokers away from rival companies during the past two years. Now those signing bonuses are causing an epidemic of buyer's remorse.

Some of the star financial advisers who were promised six- or seven-figure payments to jump ship have been huge disappointments, failing to generate profits for their new employer. Others quickly abandoned the brokerage firm that wooed them.

Brings tears to your eyes, doesn't it?

In other, totally unrelated news, there might be more to the honeybee colony collapse story than the New York Times told us a few days ago. Details here.

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Thinking Small

| Mon Oct. 11, 2010 12:37 PM EDT

Infrastructure is the word of the day:

President Obama called on lawmakers Monday to back an ambitious initiative to modernize the nation's crumbling roads, railways and airports, saying the strategy would not only improve the economy in the long run but create good jobs now.

....The Rose Garden statement capped a series of White House activities intended to highlight Obama's infrastructure initiative, unveiled a month ago as the White House came under increasing pressure to address unemployment before the Nov. 2 congressional elections. The proposal would create an infrastructure bank to prioritize projects of national importance and fund it with $50 billion generated by eliminating certain tax benefits for oil and gas companies.

Well, I'm all for this, but the effect would be so minuscule that it's hard to get really excited about it. It's fully funded, so it doesn't really provide much in the way of stimulus. It works out to $8 billion per year, so it would have only a small effect on construction employment. And, as Annie Lowrey says, "Congress has proved intransigent." So it's unlikely to ever see the light of day.

We're just stuck. It seems likely that the Fed is going to provide some additional quantitative easing in the near future, which will probably be helpful, but it would sure be a lot more helpful if it were matched by something serious on the fiscal side. Unfortunately, that wouldn't be good for Republican electoral chances, so it's not going to happen. Welcome to 1937.

Paging Glenn Beck

| Mon Oct. 11, 2010 11:26 AM EDT

Dana Milbank, Media Matters, and Steve Benen are promoting the idea that Glenn Beck bears some responsibility for Byron Williams' recent shootout with highway patrol officers on a freeway near Oakland. After all, Williams later said he was planning to kill people at the Tides Foundation and the ACLU thanks largely to things he learned from watching Beck's TV program. Here's Steve, for example:

I continue to strongly believe criminals are ultimately responsible for their crimes, but Beck is whipping up a confused and easily-misled mob into a rage, lying to them with deranged theories, and pointing them in a direction. That's legal and his speech is protected by the First Amendment. But the sooner Beck, his network, his sponsors, and the media conglomerate that signs his checks show some restraint, and take some responsibility for dousing a simmering flame with lighter fluid, the safer we'll be.

This is carefully hedged, but it still goes too far for me. Beck is a conspiratorial loon, but he's just not responsible for a guy like Williams. Full stop. No more than environmentalists are responsible if some crackpot takes a shot at the CEO of Exxon or Keith Olbermann is responsible if one tosses a bomb onto the floor of the New York Stock Exchange.

If Beck were advocating violence, that would be one thing. But he isn't and hasn't. Ever. Fox ought to take Beck off the air, but they should do it because he's crazy and promotes ignorance, not because Byron Williams says he learned about the Tides Foundation from him. This is not a game that liberals should start dipping their toes into.

UPDATE: This isn't a very popular post. I'm disappointed, but not surprised. Unfortunately, the general attitude of the anti-Beck commenters is, "There are lots of unstable folks out there, so you should be careful what you say." I don't find that a very persuasive argument from the left, and I promise not to find it a persuasive argument the next time it comes from the right either. Not from Pam Geller aimed at Muslims, not from Andy McCarthy aimed at NSA whistleblowers, and not from Ari Fleischer saying that Americans need to "watch what they say, watch what they do." Sorry gang.

Atrios says he generally agrees that media figures aren't responsible for the actions of the mentally deranged who listen to them, but "Having said that, it is the case that Beck really is getting close to, and crossing, that line by using obvious violence-endorsing rhetoric even as he disavows the violence part." OK. But he needs to cross the line first.

UPDATE 2: Steve responds:

I know Kevin's right. Really, I do. But to augment an old metaphor, I feel like Beck is close to the point at which he's in a crowded theater shouting, "Fire! But try not to trample anyone. There's a fire right here in this very theater that may kill you! But there's no need to make a mad dash for the exits."

Baggage Fee Blues

| Mon Oct. 11, 2010 10:59 AM EDT

A maker of fashionable traveling vests got his ads booted from Delta's inflight magazine last month:

The proposed ad read: "The most stylish way to beat the system. Scottevest travel clothing has specialized pockets to help you stay organized and avoid extra baggage fees."

Scottevest founder Scott Jordan claims the ad got nixed because Delta Air Lines didn't want to bring attention to those annoying baggage fees. In the second quarter this year, Delta collected $256 million in baggage fees — the most of any airline in the industry.

You know, there's another way Delta could avoid attention being directed at their annoying baggage fees.....

Peter Diamond Wins Nobel, Not Fed Seat

| Mon Oct. 11, 2010 10:38 AM EDT

I see that Sen. Richard Shelby (R–Ala.), in addition to just being an all-around prick, is now responsible for blocking the appointment of a Nobel prize winner to the Federal Reserve. Nice work, GOP!

At this point, I'm increasingly open to the idea of a constitutional amendment limiting the Senate's confirmation authority to, say, 50 executive branch positions. They can pick whatever 50 they want. But surely having veto power over the 50 most important spots is enough? Aren't they supposed to spend most of their time considering legislation, after all?

Chamber of Commerce Update

| Mon Oct. 11, 2010 12:49 AM EDT

This weekend's campaign news:

The White House intensified its attacks Sunday on the powerful U.S. Chamber of Commerce for its alleged ties to foreign donors, part of an escalating Democratic effort to link Republican allies with corporate and overseas interests ahead of the November midterm elections.

The chamber adamantly denies that foreign funds are used in its U.S. election efforts, accusing Democrats of orchestrating a speculative smear campaign during a desperate political year.

Well, look, this isn't a hard thing. Either money from overseas goes into the Chamber's general fund, which is the same fund used to buy attack ads on Democrats, or it doesn't. All the Chamber has to do is demonstrate the latter and this will all go away. So what's the holdup?

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Liberal Branding

| Mon Oct. 11, 2010 12:35 AM EDT

Sara Robinson brings up a familiar lament today:

Every American over the age of ten knows what the GOP and the conservative movement stand for. Sing it with me now: low taxes, small government, strong defense, traditional families. See? You know the tune, and the harmony line, too....Everybody knows what the conservative brand stands for, because the conservative leadership has spent four decades nurturing a consistent brand identity for themselves. Back in the early '70s, the fathers of the modern right wing distilled down to its essence what it means to be their kind of American.

....Progressives, on the other hand, have never tried to brand themselves in any kind of organized, coherent way−which is why even progressive leaders are often caught flat-footed when asked about the core values our movement stands for. There's no self-defined narrative through-line that carries us from one election to the next....And this failure has several important consequences that put both our candidates and our whole movement at a decided disadvantage.

I didn't have any good answer for this five years ago and I still don't today. But I think it's worth pushing back on one of the premises here. The problem isn't that conservatives branded themselves four decades ago, it's that conservatism, by its nature, has always had roughly the same branding. Conservatism is fundamentally about conserving the prevailing social and economic order, and that means strong support for family and country and a strong defense of the existing power structure. The details change a bit from era to era and country to country, but it inevitably produces something like a defense of traditional families, appeals to nationalism, and economic and political policies that benefit the current haves against the have-nots.

As with any strong brand, there are both benefits and drawbacks to this. The benefit is obvious: people know what you stand for. The drawback is obvious too: it's hard to change your message when you need to. You see this all the time when companies famous for low prices try to enter the luxury end of the market and vice versa. It's a tough transition, and conservatives suffer from it from time to time too.

Liberals have the opposite problem: liberalism just isn't, by its nature, an ideology that means the same thing all the time. In the 18th century liberals supported capitalism and free trade. By the 20th century liberals mostly wanted to regulate them both. A century ago plenty of progressives were dazzled by the potential of eugenics. By the 1980s liberals would dump a pitcher of water on your head for so much as suggesting that IQ had any biological component at all.

So our brand is never going to be as strong as theirs. Sure, egalitarianism will always be at its core, but that expresses itself in different ways in different times. It's opposition to slavery in one era, support for women's suffrage in another, and a push for national healthcare sometime after that. These may all spring from a roughly similar impulse, but their political manifestation is so different that it's hard for most people to see that.

So today's liberals want to fight global warming, something we didn't even know existed 50 years ago. We're for reproductive rights and gay marriage, things we didn't care about a century ago. We support more humane immigration laws, something that wasn't even on anyone's radar screen two centuries ago. There's just no way to take a history like this and turn it into a timeless brand. Yes, we're generally for the have-nots — though even that's been suspect over the past few decades — but beyond that I'm not sure there's much more long-term branding we can do. For good or ill, adaptable but fuzzy might just be part of the package.

Mankiw's Taxes

| Sun Oct. 10, 2010 1:19 PM EDT

Greg Mankiw admits that he could afford to pay higher tax rates, but says that higher rates do affect his incentives to take on more work:

I could go so far as to say I am almost completely sated. One reason is that I don’t aspire for much more than a typical upper-middle-class lifestyle....I don’t want to move to a bigger house or buy that Ferrari, but I hope to put some money aside for my three children. They will never lead lives of leisure, but I hope they won’t have to struggle to find down payments to buy their own homes or to send their kids to college.

[Explanation of how $1,000 in income from a writing assignment grows to $10,000 over thirty years without taxes, but only to $1,700 with Obama-level taxes.]

Then, when my children inherit the money, the estate tax will kick in. The marginal estate tax rate is scheduled to go as high as 55 percent next year, but Congress may reduce it a bit. Most likely, when that $1,700 enters my estate, my kids will get, at most, $1,000 of it....By contrast, without the tax increases advocated by the Obama administration, the numbers would look quite different. I would face a lower income tax rate, a lower Medicare tax rate, and no deduction phaseout or estate tax. Taking that writing assignment would yield my kids about $2,000. I would have twice the incentive to keep working.

Do you see the card he palmed? Basically, the effect of letting the Bush cuts expire is so tiny that the only way to make it noticeable is to compound it over 30 years, which reduces the eventual payout of his writing assignment from $2,000 to $1,700. (And even that's probably overstated, since it assumes Mankiw pays all his taxes at their full statutory rate, which virtually no one does.) The rest of the reduction down to $1,000 comes solely from the estate tax. But even on the heroic assumption that you should take this year's zero rate as the baseline for comparison, the estate tax has an exemption of several million dollars. Unless Mankiw leaves his kids a helluva lot more than they need for a down payment on a house, they won't pay a dime of estate tax.

This is why the tax posse has such a habit of wildly overstating things. If they don't, there's no there there. It turns out that the effect of letting the Bush tax cuts on the rich expire is so minuscule that the only way to make it look sensational is to pick a scenario in which you (a) overstate effective tax rates, (b) compound those tax rates over 30 years, (c) slash the final number nearly in half by ignoring the estate tax exemption, and (d) use this year's highly unusual zero rate as your baseline. It's a virtuoso performance.

UPDATE: I should make something clear before I start getting emails about this. If you believe that taxes affect incentives — and I do — then you should also believe that small changes in tax rates affect incentives in small ways. I believe that too. My problem isn't with the idea that higher taxes will cause Mankiw to work less, it's with his final conclusion about the effect of the lower Bush rates on guys like him: "I would have twice the incentive to keep working."

But aside from the fact that Mankiw plays fast and loose with the actual tax laws, this is only true if (a) you're motivated solely by how much money you leave your children, and (b) you care about income 30 years in the future as much as you do about income right now. This doesn't describe any actual human beings, and I don't think it describes Mankiw. (I doubt very much that he doubled his production of outside writing after the Bush tax cuts went into effect.) If he'd laid out the incentives honestly — a small tax increase might reduce his incentive to write misleading op-eds by a small amount — that would have been OK. But that's not what he did.

Republicans and Filibusters

| Sun Oct. 10, 2010 12:25 AM EDT

Sen. Susan Collins (R–Maine) writes that the Senate has become increasingly nasty and partisan. For example:

During the past two years, the minority party has been increasingly shut out of the discussion. Even in the Senate, which used to pride itself on being a bastion of free and open debate, procedural tactics are routinely used to prevent Republican amendments. That causes Republicans to overuse the filibuster, because our only option is to stop a bill to which we cannot offer amendments.

It's true that Harry Reid has filled the amendment tree a little more often than his predecessors: nine times in the 110th Congress vs. six times for Bill Frist in the 109th. And while I can't find a tally for the 111th Congress, I wouldn't be surprised if it were higher still. But is Collins seriously trying to suggest that this is the direction that causality runs? That Republicans are only resorting to filibusters and other delaying tactics because they haven't been allowed to offer serious, substantive amendments more regularly?

I'm willing to be schooled by a congressional expert on this, but reality seems just the opposite: Republicans have adopted a whole host of aggressive delaying tactics since they became a minority party, and one of them is the practice of offering dozens or hundreds of dilatory amendments in order to suck up endless floor time. The only way to avoid that is to fill the amendment tree, invoke cloture, and then try to round up 60 votes. If you don't, your bill is effectively dead.

I'll be curious to see if any veteran Congress watchers weigh in on this. I don't doubt that Democrats have become more tactically aggressive over the years, but in this case it really doesn't seem that they were the first movers. Comments welcome on this.

Hayek and Rand

| Sat Oct. 9, 2010 12:00 PM EDT

Tyler Cowen semi-defends F.A. Hayek's The Road to Serfdom:

The most important sentence in the book is "This book, written in my spare time from 1940 to 1943..." In those years, how many decent democracies were in the world? How clear was it that the Western powers, even if they won the war, would dismantle wartime economic planning? How many other peoples' predictions from those years have panned out? At that time, Hayek's worries were perfectly justified.

On a completely unrelated subject, this is one of the things that's always struck me as so peculiar about Atlas Shrugged. If it had been published in 1937, it would have made a kind of sense. Capitalism was on the ropes, there were lots of serious adherents of central planning, and the NRA was a pretty good example of the kind of law that Rand condemns in her novel. Likewise, even if it had been published in 1947, it might have made a bit of sense in an extravagant sort of way. As Tyler notes, it was unclear how the postwar economy would pan out, lots of people assumed that wartime planning would make the transition to peace, and communist parties in Europe were, at the time, very active and very successful.

But it was published in 1957, and even aside from its train-themed plot it seems wildly out of tune with its times. The United States was firmly capitalist, the New Deal had settled down into a quiet adolescence, the country was rabidly anti-Soviet and anti-communist, and celebration of big business leaders was the order of the day. Hayek at least had the excuse of writing his book in the early 40s and publishing it in 1944, when it might have been an over-the-top but still understandable attempt to warn against continuing wartime planning and socialist control of industry after the war was over. But Rand took a decade to write her book and apparently did nothing to make it relevant to its eventual time. And so it feels like an antique.

But hey — it's sold a bazillion copies or so and continues to resonate with a certain kind of temperament to this day. So who am I to criticize? And maybe its antiquarian timelessness is part of its appeal. I guess no matter what era you live in, the veneer of capitalism is always thin and the looters are never more than a snail darter away from taking over society.