Krugman Then and Now

Ben Wallace-Wells has a nice profile of Paul Krugman in New York magazine this month, and it's worth a read. For some reason, though, it prompted me to reread my interview of Krugman from back in 2003. Here's a snippet of our conversation that picks up at a point where we were talking about long-term economic woes and the Republican desire to slash entitlement programs:

I don't think politically you can cut those programs.

Train wreck is a way overused metaphor, but we're headed for some kind of collision, and there are three things that can happen. Just by the arithmetic, you can either have big tax increases, roll back the whole Bush program plus some; or you can sharply cut Medicare and Social Security, because that's where the money is; or the U.S. just tootles along until we actually have a financial crisis where the marginal buyer of U.S. treasury bills, which is actually the Reserve Bank of China, says, we don't trust these guys anymore — and we turn into Argentina. All three of those are clearly impossible, and yet one of them has to happen, so, your choice. Which one?

Well, how about your choice? What's your best guess?

I think financial crisis, and then how it falls out is 50-50, either New New Deal or back to McKinley, and I think it's anybody's guess which one of those it is....I don't see any noncatastrophic solution to this, I don't see an incremental stepwise resolution. I think something drastic is really going to happen.

....What happens if [] foreign countries stop buying U.S. bonds? Is this a real concern, or a tinfoil hat kind of thing?

Oh, I don't think China is going to do it to pressure us. You can just barely conceive of a situation where they're mad at us because we're keeping them from invading Taiwan or something, but more likely they just start to wonder if this is really a good place to be putting their money.

So what happens is a plunge in the dollar when they decide to stop buying and start cashing in, and a spike in U.S. interest rates. But you might also get in a situation where the interest rates the government has to pay to roll over its debt become so high that you get an accelerating problem, which is what happened in Argentina. What happened was that suddenly no one would buy Argentine debt unless they paid a twenty something percent interest rate, and everybody says, but if they have to roll over their debt at a twenty percent interest rate, there's no way they can pay that back. So the whole thing grinds to a halt and the cash flow just dries up.

....If you were king of the economy, what's the Krugman plan?

A phased elimination of all the Bush tax cuts, plus some additional taxes. I'd probably look first at some way to make the corporate profits tax actually effective again — the nominal rate is 35% but the effective rate is only 15% or so. Look at some cuts, maybe you start to talk about retirement age, and possibly some means testing of Medicare, and that's enough to bring the budget under control.

Obviously the financial crisis of 2008 has intervened since then, but I wonder how much of this still represents Krugman's current thinking?

Civility and Lying

Politicians have always lied, says Rick Perlstein. So why does it seem like there's so much more lying than there used to be? The difference, he says, isn't with the politicians, it's with the right's successful attack on the liberal media in the post-Nixon era:

There evolved a new media definition of civility that privileged "balance" over truth-telling — even when one side was lying. It's a real and profound change — one stunningly obvious when you review a 1973 PBS news panel hosted by Bill Moyers and featuring National Review editor George Will, both excoriating the administration's "Watergate morality." Such a panel today on, say, global warming would not be complete without a complement of conservatives, one of them probably George Will, lambasting the "liberal" contention that scientific facts are facts — and anyone daring to call them out for lying would be instantly censured. It's happened to me more than once — on public radio, no less.

....The protective bubble of the "civility" mandate also seems to extend to the propagandists whose absurdly doctored stories and videos continue to fool the mainstream media. From blogger Pamela Geller, originator of the "Ground Zero mosque" falsehood, to Andrew Breitbart's video attack on Shirley Sherrod — who lost her job after her anti-discrimination speech was deceptively edited to make her sound like a racist — to James O'Keefe's fraudulent sting against National Public Radio, right-wing ideologues "lie without consequence," as a desperate Vincent Foster put it in his suicide note nearly two decades ago. But they only succeed because they are amplified by "balanced" outlets that frame each smear as just another he-said-she-said "controversy."

I guess I'll need to think about this. Rick might be right. But then again, many thoughtful conservatives would place the blame elsewhere. I recommend that the New York Times public editor assemble a panel of media analysts from across the political spectrum and hold a round table discussion on this topic. That should clear things up.

Outwitted by the Taliban Again

If it weren't for the fact that they're a gang of murderous 13th-century religious fanatics, you could almost admire the Taliban's latest prison break. Sort of embarrassing for the putative good guys, though.

Terrorism and the ISI

Here's an interesting tidbit from today's WikiLeaks release of the military's assessment of every prisoner ever held at Guantánamo Bay. Neither the Washington Post nor the New York Times bothered to mention it, so this passage is from the Guardian:

US authorities listed the main Pakistani intelligence service, the Inter-Services Intelligence Directorate (ISI), as a terrorist organisation alongside groups such as al-Qaida, Hamas, Hezbollah and Iranian intelligence. Interrogators were told to regard links to any of these as an indication of terrorist or insurgent activity.

....The inclusion of association with the ISI as a "threat indicator" in this document is likely to pour fuel on the flames of Washington's already strained relationship with its key regional ally. A number of the detainee files also contain references, apparently based on intelligence reporting, to the ISI supporting, co-ordinating and protecting insurgents fighting coalition forces in Afghanistan, or even assisting al-Qaida.

As with so many documents released by WikiLeaks, this is hardly a surprise in one sense. Still, it's one thing to "know" something and quite another to see it officially documented in a classified file.

Bonus Easter Catblogging

Easter is the excuse for today's bonus catblogging, but really, who needs an excuse? Yesterday Marian brought home a couple of new catnip plants, and as you can see, Inkblot got blissfully stoned out of his little feline gourd on one of them. Happy Easter, everyone!

Friday Cat Blogging - 22 April 2011

The cats were a little boring this week, so I didn't have a lot of new pictures to choose from. So here's the same bench from last week, but this time with both cats on it. I should note that this little scene of domestic bliss didn't last long. They never do. Eventually Inkblot gets a burr up his butt and ends up with the bench all to himself.

In other cat news, here's the story of George, who survived the fires raging in Texas this week and returned home in fine fettle. Apparently sardines did the trick. And I want to remind everyone that next Friday is the day of the royal wedding of Wills and Kate. With the help of my Anglophile sister, I'll try to have appropriate catblogging pictures to mark the great occasion. Assuming the cats cooperate, of course. Which they might. Or might not. Check in next week to find out.

Pack and Crack: Now Even Better!

The Washington Post reports that blacks are increasingly migrating into the suburbs, making the GOP's "pack and crack" gerrymandering strategy even easier than it used to be:

“The practical effect is great for the GOP,” said Dave Wasserman of the Cook Political Report. “In state after state, it’s allowing Republicans to pack more heavily Democratic close-in suburbs into urban black districts to make surrounding districts more Republican.”

....Over the last few rounds of redistricting, Republicans have made a habit of “packing” as many reliably Democratic black voters into as few districts as possible, virtually guaranteeing black representation for those districts while also making nearby ones more winnable for the GOP.

In a way, this is almost a bipartisan, or perhaps biracial, strategy. Republicans like it because packing all the black voters in one place gives them more winnable districts elsewhere, and Democrats go along with it because it gives African-American candidates a chance to win congressional seats. Unfortunately, this is pretty much their only chance: only a handful of black members of Congress come from majority white districts because the sad truth is that, for the most part, white voters are still largely unwilling to vote for black candidates. And just to restate the obvious, this works out pretty well for Republicans, which goes a long way toward explaining why Fox News spent practically the entire summer last year scaring the hell out of white people.

Apple Knows Where You Are

When I first heard that Apple iPhones were collecting location data on users, I was a little skeptical of the possibility that this was just a mistake. The data, you see, was collected in a .db file, and that's not really something you're likely to do by accident. If your intent is to hold just the current location data in memory (and there are plenty of good reasons to do that), you'd just hold it in memory. You wouldn't create a database structure to do it.

Well, according to the Wall Street Journal, my skepticism was warranted:

Apple Inc.'s iPhones and Google Inc.'s Android smartphones regularly transmit their locations back to Apple and Google, respectively, according to data and documents analyzed by The Wall Street Journal—intensifying concerns over privacy and the widening trade in personal data.

Google and Apple are gathering location information as part of their race to build massive databases capable of pinpointing people's locations via their cellphones. These databases could help them tap the $2.9 billion market for location-based services—expected to rise to $8.3 billion in 2014, according to research firm Gartner Inc.

Neither Apple nor Google have deigned to comment on this issue. If they actually have an explanation for this, that better change pronto.

Who's Really Courageous Here?

Paul Ryan is "courageous" for proposing huge cuts to Medicare and Medicaid in order to finance tax cuts and balance the budget by 2050. But how about the Congressional Progressive Caucus? Their plan balances the budget sooner than Ryan's, and their numbers are more honest to boot. So why haven't they gotten any attention? Matt Steinglass thinks he knows:

The budget savings come from defence cuts, including immediately withdrawing from Afghanistan and Iraq, which saves $1.6 trillion over the CBO baseline from 2012-2021. The tax hikes include restoring the estate tax, ending the Bush tax cuts, and adding new tax brackets for the extremely rich, running from 45% on income over a million a year to 49% on income over a billion a year.

....Mr Ryan has been fulsomely praised for his courage. The Progressive Caucus has not. I'm not really sure what "courage" is supposed to mean here, but this seems precisely backwards. For 30 years, certainly since Walter Mondale got creamed by Ronald Reagan, the most dangerous thing a politician can do has been to call for tax hikes. Politicians who call for higher taxes are punished, which is why they don't do it. I'm curious to see what adjectives people would apply to the Progressive Congressional Caucus's budget proposal. But it's hard for me to imagine the media calling a proposal to raise taxes "courageous" and "honest". And my sense is that the disparate treatment here is a structural bias rooted in class.

Bingo! The Beltway elite mostly understands things like Medicare and Medicaid as academic subjects. They themselves don't really need them, so they can accept big cuts with considerable equanimity. But taxes are a different story. Higher tax rates affect them and their friends directly, so they're wide open to intellectual just-so stories about how high taxes are economically destructive.

This same personal dynamic also leaves them wide open to believing that entitlement cuts are courageous while tax increases on the well-off aren't. Ask a Wal-Mart clerk, though, and their life experience would probably push them in exactly the opposite direction. Neither one is inherently correct, but the difference is that Wal-Mart clerks don't usually get op-eds printed in the Washington Post. Beltway elites do. So one meme takes off and the other doesn't, even though both are equally rooted in little more than personal experience and class bias.

Raw Data: Everyone Loves Oil

"Price elasticity" is a measure of how people react to rising prices. A high number means they cut back sharply when prices rise. A low number means they just suck it up and keep buying.

So what's the elasticity of oil prices? This is important, because it tells us, for example, how people are likely to react to higher taxes on gasoline. Will they use less and find other ways to get around? Or is it damn the torpedoes, keep burning the stuff, and figure out other places to cut back?

Stuart Staniford draws our attention to the latest estimates from the IMF, and as he says, they're pretty eye popping. Here's the table:

Take a look at the bottom row. "Non-OECD" means poor countries, and the IMF figures that short-term price elasticity in poor countries is -0.007, which means that a 1% increase in price leads to only a 0.007% decrease in consumption. Put another way, even a 50% increase in price leads to only a negligible 0.35% decrease in consumption1. Long-term elasticity is higher, but even here a 50% price hike would lead to only a 1.8% decrease in consumption.

The rich world is modestly more sensitive. In the short term, a 50% price increase produces a 1.2% decrease in consumption. In the long term, it produces a 4.7% decrease.

Part of the reason for these tiny effects is that income elasticity is quite large. That is, when income goes up, oil demand also goes up. In the short term, a 1% income increase in the poor world produces a 0.7% increase in oil demand. So as long as incomes are going up in the developing world (and they are), the effect of higher incomes swamps the effect of higher oil prices.

If these numbers are right, they're pretty stunning. Even in the rich world, it apparently takes massive price increases to significantly reduce the demand for oil, even over a 20-year horizon. In the developing world, forget it. As long as incomes are going up, demand will go up. Urk.

1Actually, elasticity isn't necessarily linear, so a 50% increase might have a bigger effect than 50 times a 1% increase. However, it's probably not wildly non-linear at these levels, so the response to a 50% price increase is still likely to be quite small.