Friday Fun: Job data

The BLS put out labor statistics that may raise some eyebrows. Want to find out more about your area? The map below is a screenshot, but to find more info click here.

PJ and BD

Penn Jillette is funny. I watched a few of his

shows and I laughed, but often felt as though he was not honest in his arguments. Maybe, that's too harsh, dishonest, but you could at least say skewed towards his point of view. So today, CNN puts up an article Jillette writes about Obama's economic policies. Here is the thesis:

Obama tells us that we can spend our way out of debt. He tells us that even though the government had control over the banks and did nothing to stop the bad that's going on, if we give them more control over more other bank-like things, then they can make sure bad stuff doesn't happen ever again. He says we can get out of all those big wars President Bush caused by sending more troops into Afghanistan. And I don't know. I really don't know.

Now, that link doesn't go to any statement by Obama to that effect. I don't remember Obama ever saying we can spend our way out of debt. I do know that economists on the right and left agreed that stimulus spending needed to be big. Which is to say, Jillette is bullshitting us. And that is disappointing.

Friday Fun: Budget Hero

The Republicans put out a their "Road to Recovery"
(and kudos to their SEO people, the document is very easy to find!). There aren't many details and this has upset some. On the other hand, writing a budget is hard.


Don't believe me? Well then, try creating one yourself here.

Halfway there...

The chart below from dshort.com should give us all some perspective as to how the current financial crisis aligns with those in the past.

We seem to be following the 1929-32 iteration more closely than 1973-4 or 2000-2. As others have noted, this may get worse before it gets worse.

Trash talking...Senate style

This is going to be everywhere tonight. Just remember you saw it here first.


Click here if the video doesn't work (of course that would mean you saw it there first, I guess).

MeFi repost

Over at MetaFilter, the poster named Mutant asks the following:

The Fed's Public Private Partnership Program, promises to clear down as much as $1T worth of "legacy assets" from banks balance sheets. Globally, equity markets responded positively. But what about assets held off balance sheet?

He continues...

Off balance sheet vehicles originally were designed to mitigate risk, focusing investments into subsidiaries so credit ratings or leverage ratios of parent companies wouldn't be impacted. Many financial firms improperly used such vehicles to hide poorly performing assets, culminating in the well known collapse of Enron in 2002. Last July The Financial Accounting Standards group postponed FAS statement 140 - which would require firms to move assets on to their balance sheets - for one year, an impending deadline that concerns many analysts.

How much is held off balance sheet? As of Q1 2009 off balance sheet assets at the four largest US banks - Wells Fargo, JP Morgan, Citigroup and Bank of America - totaled roughly $5T, or a sum potentially dwarfing Geithner's trillion dollar plan.

Regulators are aware of the problem and already are planning to increase requirements for economic capital, but considering how reluctant the United States was to adopt Basel II [.pdf] , a real fix could take a while.

All of this is to say, it looks like the hole is deeper than we are told.

Cover me, cover you

I'm not exactly sure what Obalesque is arguing here. It seems as though Rep. Schultz is for universal health care.

You down with PPIP?

The Public-Private Investment Program (PPIP), Treasury Secretary Geithner's plan to save the US financial sector from catastrophe, is...uh...complicated. I won't try to describe it (for that, I"d suggest going here). I will say that from what I understand, it is basically asking the private "investors" to price something that will mostly (completely?) be paid for with tax dollars.

I don't know if this is the right approach or not. I do want to note something I don't think other people have mentioned. In reading the Ryan Grimm piece about the nationalization of IndyMac, the following stood out:

Depositors didn't all stick around to see how things worked out. A year ago, the bank was sitting on those $19 billion in deposits. When it was finally sold last Thursday, that number had fallen to $6.4 billion.

From $19 billion to $6.4 billion. That is a drop of about 67%. People weren't made to feel secure enough by the FDIC to not pull their money out. I am left wondering if nationalization of the largest banks wouldn't create the same illiquidities and/or create runs on the banks involved? Is this why we are moving forward with TARP v.2?

Oh Canada

MattY had a post today about the border implications of global warming...namely, that they will have to be re-visited. Meanwhile, it seems that our, more mundane, boprder dispute with the Canadians has been resolved. Another quiet victory for the Bush Administration.

Bonus and bailouts

Fivethirtyeight.com's Nate Silver posted about the prospects for the passage of the bonus tax. By his logic, the bill has a very small chance of passing in its present form. In light of this, the question Ed Henry posed last night is not totally without merit:

Maybe a better question would have been "what are you going to do about the AIG bonus?" versus, "why did it take you so long to speak up?". I think that Obama's answer to the question posed couldn't be beaten. And as far as the "what are you going to do about it?" approach...well, it probably isn't going to be a tax.

Better minds than mine noted that the bill passed would create a law that...

would apply only to payments made from January 1, 2009 forward. But almost prospective is like half pregnant. The bill is retrospective for just long enough to clawback the politically fetishized AIG bonuses, while leaving those who made out during the thick of the toxic credit bubble completely untouched. It has all of the philosophical distastefulness of an ex post law, and no offsetting benefit whatsoever, other than punishing a few trophy miscreants from AIG. [em]

So, what do we take away from the sound and fury of this all? Krugman has already noted and others chimed in, "we are not going to stop, or change, the bailout plan. And there won't be another congressionally approved bailout, either. Those wads have been shot."

I hope that this consensus is wrong.

Sudent loan woes

Fully behind Incertus on this:

[I]t might be nice to think about those of us who've recently left and are struggling with some pretty crippling student loan debt...

And I'll go them one better--I don't require, or even request, a full-on bailout. I don't need something for nothing. Just make me a deal whereby I spend a handful of years in the public sector making what people in the field make--teaching in a public school, for instance, since
that's where my expertise lies--and in return, I get rid of my student loans.

To round this discussion out, it is important to remember the following:

[R]ight now we do student loans through a really pointless mechanism of basically laundering the money through private firms. All of the downside risk is borne by the government in case of default. And the lenders receive federal subsidies for doing the service of undertaking no-risk lending. But of course the companies also take a slice off the top for profits and salaries for executives and so forth. Consequently, this is more expensive than just directly lending the money. And the government is bearing all the risk anyway.

Stadium approved

(via....no, this one is ripped off of SFDB, nice pick Rick)
I'm not a Miamian, so I'll let one speak for himself on this:

The most infuriating part of Monday's discussion for me was when Bob Dupay, the president of Major League Baseball, stood up and said if Miami wanted to be considered a major American city then it needed to build the stadium.

Major League Baseball should be ashamed of themselves. They have created and fostered a system whereby communities are extorted for money. If Major League Baseball cared about the communities they serve they should have set up a fund a long time ago to help teams build their own stadiums. And the only reason Major League Baseball doesn't take responsibility for their own construction projects are because elected officials keep doing it for them.

Ouch. The whole article is great and I highly suggest heading over to read it.

Bailout back-and-forth

There seems to be a slowly mounting opinion about Obama. Bobby put it well yesterday:

It's way too early to pass judgment on the legacy of the Obama administration, but the one thing you can say is that all of the predictions made by folks on both sides of the political spectrum have been off the mark: he's not the wild-eyed socialist Black Panther liberal the right feared he was (and in a perverse way hoped he would be so they could raise campaign funds on secret photos of Angela Davis playing on the White House swing set), and he's not the crusading progressive mowing down the malefactors of great wealth and purveyors of narrow-minded homophobia and intolerance that the liberals hoped he would be, either. The most predictable -- and maddening -- thing Barack Obama has done is defy predictions.

Today, MattY follows up:

Meanwhile, I actually think the most distressing thing about the criticism from folks like Krugman and Stiglitz is what you can infer reading between the lines from how ferocious it is. They, and other leading critics, are acting like people who’ve been totally shut out of the consultation/communication loop. And it’s distressing to see people of their stature and expertise getting shut out while the administration works harder on kissing Wall Street’s ass to try to persuade the finance class to avoid deliberately sabotaging the economy.

The thing to keep in mind is that this type of behavior, while frustrating, is in line with Obama's behaviors during key moments in his past. Which is all fine and good except that this time it doesn't seem as though the bridges are getting buit. CQ reports that there are divisions with Obama's economic team:

So here was one of Obama's top economic advisers undermining Geithner's key claim (we have no choice!) and questioning Romer's characterization of the firms participating in the toxic assets program. This was not a confidence booster. And I wondered what it would be like to sit in the room when Obama's economic advisers get together and try to sort all this out.

Me too.

Burying public notification

(via Flablog)
Apparently, when the Legislature isn't trying to kill DCA they spend their time trying to do end runs around the public:

This legislation (SB 2292; HB 1477) by Sen. Ronda Storms, R-Brandon, and Rep. Juan Zapata, R-Miami, is the antithesis of open government and should be allowed to expire without further ado.

These proposals are, in fact, a great example of how government can labor in obscurity — and sometimes menacingly — if citizens, and the media, don't have ready access to information about city, county, school, state and federal agencies.

Legal notices are but one way, yet an important way, to be forewarned and thereby forearmed regarding proposed changes to your neighborhood, your street, your school zone or your wallet.

So, I think that public notification in newspapers is a good idea whereas the website approach is not as good. On the other hand, the view that says that your municipal planning staff is a Menace 2 Society is...uh...not exactly the most positive take.

Market assumptions

Between yesterday's Dow surge and today's small drops, it is important to remember this little gem from Dan Gross about the stock market being a public policy quality assessment instrument:

The market is made up of all types of participants: rational, irrational, some focused on the past, some on the future, some obsessed with Washington, others with China. In October 2007, with the Dow at 14,000, did the market "know" a recession was about to start and that a financial tsunami was about to hit? Um, no. Of course, over time the market does respond to fundamentals like earnings and dividend payments. But in the past half-dozen months, the fundamentals have been fundamentally unsound. The S&P 500 could be at around 700 because Obama is a Commie who wants to destroy free enterprise. Or it could be at around 700 because that's roughly 15 times the index's estimated operating earnings per share.

And if anyone knows about the market, inside and out, it's Dan.

The right on Crist

It looks like Obama is not the only one catching flak from both sides. Ambinder reposts Townhall about this Sun Sentinel story on Gov. Crist:

One hundred plane trips and nary a single disclosure as to what they're all about? I realize you don't have to, Charlie, but c'mon -- let us know about the special interests, or don't take the trips. I know you can do it. You're so cool.

The last line sounds a bit bitter to me. Could it be that there is weak support out side of Florida for a Crist Senate run?

Gold in thar' comments...

Felix Salmon wonders if we are on the verge of an honest-to-goodness class war:

In one corner are the technocrats not only in finance but also in government and the media: people who can understand the importance of distinguishing between a $250,000 base salary, a $2.5 million bonus, a $250 million bonus pool, a $2.5 billion bonus pool, a $250 billion bailout package, a $2.5 trillion monetary stimulus, and so on.

In the other corner are the real people, the angry people, the unemployed people -- and with them their elected representatives in Congress. They're not interested in such distinctions any more, they're not interested in what's fair or what's sensible. They saw their real wages stagnate for decades as the orgy of plutocratic self-congratulation reached obscene levels only to keep on growing. All they ever had was the American Dream: the idea that they, too, might one day become dynastically wealthy and join the overclass.

Now, of course, that dream is shattered -- and, what's worse, it turns out that very overclass is responsible for the working classes' own present straits. While the talking heads in New York and Washington throw around their millions and billions and trillions before commuting home to their comfortable middle-class-and-better lifestyles, the rest of the country is mad as hell, and ain't gonna take it any more. They're not interested in constructive solutions or in leveraging private capital or in the sanctity of contracts: fuck that shit. Those days are over. They want to see jail time, confiscatory policies, and worse.

A commentor responds:

And just imagine what an American revolution might look like... proper pensions, a labour movement, maybe even an NHS...Good god, it'd bring them kicking and screaming into the twentieth century.

Meanwhile, not having 60 Democratic Senators means that programs like the ones above may have to go through all sorts of contortions to have a chance at being passed.



Photo by Flickr user nycmonkey used under CC license.

The business of America is...what?

John Mellencamp wrote a piece for HuffPo (yeah, that John Mellencamp), that is interesting but, I think, fundamentally off-base. I'd suggest that you read the whole thing, but the one portion that stands out for me is the following:

These days, some people suggest that it is up to the artist to create avenues to sell the music of his own creation. In today's environment, is it realistic to expect someone to be a songwriter, recording artist, record company and the P.T. Barnum, so to speak, of his own career? Of course not. I've always found it amusing that a few people who have never made a record or written a song seem to know so much more about what an artist should be doing than the artist himself. If these pundits know so much, I'd suggest that make [sic] their own records and just leave us out of it.

I understand what Melencamp is saying here, but I think it is also important to recognize that artists and the record companies that supported them (parasitically fed off of them?) both benefitted from the same anachronism. In the past, the ability to play a song when you wanted to play it meant owning a tactile product (Record, CD, etc.). This created a scarcity since this required actually manufacturing something. Today, with digital music, there is no scarcity. Producers thought they were selling music...they were really selling plastic. The music itself, it seems is worth, in money terms, less (which is why, I believe, there is so much unrepentent music "sharing"). The problems is in the selling of it.


I can see that this position would be patently offensive to many. But among the many psychological distortions created when you view the world through a lassiez-faire perspective is that the only way of expressing worth is through something's value in money. But there is real value in time spent helping kids learn to read. There is value in providing pro-bono legal services to homeless veterans. The fact that our version of the capitalist system deems these projects not as valuable as a facelift and tummy tuck should not mean that they are actually worth less.


Now, this is a political website, not a cultural one. And as far as I am concerned, the problem isn't even capitalism. The problem is with an economic philosophy that believes "constant insecurity is what opens up the possibility of genuine happiness". I think economic security, vis-a-vis a more robust safety net, would allow us to survive with less, be more creative, sell less music, perform more music cheaply, but ultimately, and this is most important, be happier.


I think am correct about this. I may be wrong. I'd suggest anyone who disagrees provide me with the data that proves me wrong.

Friday Fun: ReDistricting Game

Fair Districts Florida has all sorts of important information about the re-districting issue. It's an important issue to be sure. I say, however, why bother reading about it when you can play an online video game in which you become the tawdry re-districting official yourself!

Play the ReDistricting Game. Have a nice weekend everyone.

Florida snark

Flapolitics reviews the deteriorating budget situation in the state

and finds a silver lining:

The saving grace in all this of course, is that Floridians aren't saddled with that "insidious" intangibles tax on wealthy investors, that raised hundreds of millions in tax dollars.

Oooh, burn.

Local recession data

NYT has a very interesting interactive map of

the unemployment rate in the US ,by county. Several Florida counties are getting hit pretty badly (note: the national average is 8.5%):

• St. Lucie 12%
• Lee - 11.5%
• Charlotte - 11%
• Indian River - 10.8%
• Okeechobee - 10.7%
• Hendry - 10.7%

Other metrics are also available at the page linked above.

Keeping it real

The war between who is to blame (Wall Street/Washington) for the financial crisis continues. Here is the Wall Street Journal:

The housing trouble began -- as most of AIG's troubles did -- when the company's board buckled under pressure from then New York Attorney General Eliot Spitzer when it fired longtime CEO Hank Greenberg. Almost immediately, Fitch took away the company's triple-A credit rating, which allowed it to borrow at cheaper rates. AIG subsequently announced an earnings restatement. The restatement addressed alleged accounting sins that Mr. Spitzer trumpeted initially but later dropped from his civil complaint.

Having layed the blame at the feet of a figure hated on Wall Street, the WSJ continues:

Other elements of the restatement were later reversed by AIG itself. But the damage had been done. The restatement triggered more credit ratings downgrades. Mr. Greenberg's successors seemed to understand that the game had changed, warning in a 2005 SEC filing that a lower credit rating meant the firm would likely have to post more collateral to trading counterparties. But rather than managing risks even more carefully, they went in the opposite direction. Tragically, they did what Mr. Greenberg's AIG never did -- bet big on housing.

Shorter WSJ: malicious investigations forced AIG to bet on housing. What does this evil doer have to say for himself?

When my office, along with the Department of Justice, warned that some of American International Group's reinsurance transactions were little more than efforts to create the false impression of extra capital on the company's balance sheet, we were jeered at for attacking one of the nation's great insurance companies, which surely knew how to balance risk and reward.

Ouch, what does he say about the current state of affairs?

The appearance that [the AIG bailout] was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

So, the WSJ piece knocks on Spitzer for being too aggressive in the context of a piece questioning the lack of oversight by the government (huh?). Meanwhile, Spitzer points out something that is verifiable and public - AIG is shoveling government money over to wealthy people. Yeah, I'm going to go with the zealous prosecutor.

Superpost: AIG Exectutive Compensation

Dean Baker has a take on what Treasury officials knew about the AIG bonuses:

One may reasonably conclude that Geithner, as head of the New York Fed, had a good understanding of the sort of compensation packages that were used at financial institutions like AIG. It is also reasonable to assume that if he didn't explicitly take steps to change these practices following the Fed's takeover of AIG, that the practices would still be in place.

In other words, insofar as he gave the matter any thought at all, it is reasonable to assume that Geithner knew that AIG would be paying large bonuses to most-valued employees. If he did not give it any thought then it was because he did not care that a firm receiving more $160 billion worth of taxpayer dollars was paying multi-million dollar bonuses to its top executives. It is implausible on its face that Geithner was surprised by this situation. [emphasis mine]

This type of thinking lines up well with something I came across yesterday while listening to Ian Bremmer talk about his WaPo article (h/t Planet Money). Bremmer writes:

It's an utter waste of government time and money to go on the offense and direct senior government people to do something about the bonuses, no matter how distasteful. Not to mention, Congress is busy today putting AIG's senior management through the wringer, when many of those now in power at AIG were in fact not on duty when the ship went down. Edward Liddy, AIG's current CEO, for example, was appointed in September last year to help get the life boats out.

There is no shortage of blame to go around. But there is a shortage of time and political will, which should not be squandered on hopeless cases like this one.

It is important to be clear about what happened and the order of events.

1. 9/16/08 - AIG receives the first in a series of TARP money.
2. 2/11/09 - The US Senate passes the stimulus bill (also known as ARRA) including language to limit executive compensation for anyone who had received TARP money (ie AIG).
3. 2/?/09 - That language is removed, the bill is amended.
4. 2/17/09 - Obama signs the amended stimulus bill.

Some say that it was Geithner and Summers pushed to remove the language regarding the limits on compensation. I say that we need to remember the context of the ARRA Senate voting context. The Obama administration was actively trying to curry Republican support. The list of concessions to Republicans was very outsized and painful (here is such a list, see the "What's Out" heading). But those are programs and there were other changes that the Republicans wanted. Most salient here is Mitch McConnell talking about his opposition to limiting compensation:

It is a tough challenge. I think we are all appalled by these -- some of these executive salary arrangements and bonus arrangements and perks and all the rest. On the other hand, I really don't want the government to take over these businesses and start telling them everything about what they can do. Then you truly have nationalized the business. So it is a delicate dance to try to prevent blatant abuses and still not have the government as a result of taking an equity position in the government telling them, for example, you can't pay dividends or you can't -- I mean, things that are just ordinary business practices. We have to resist the temptation to basically dictate to these businesses how to run every aspect of their operation.

So let me be clear about what I believe. Wall Streeters (including Geithner and Summers) are desensitized to the meaning of these massive sums for the majority of Americans. This is a group of people who believe that $500,000/year is not enough. They craft a stimulus bill that is fraught with political compromises (compromises that they do not know will be pointless as they will not receive support for them from the opposition party). Included in the raft of concessions is a limit on executive compensation...essentially allowing for a handout to wealthy AIG employees.

I imagine that the thinking is that this concession will lead to a bigger simulus dollar figure in the end (because it wasn't actually in the stimulus package...the money came from the TARP allocations, direct bailout dollars, etc...not ARRA). Could they have substituted $165 million in, say, transportation money in exchange for the bonuses? I doubt it. I don't know if anyone had calculated how much the bonuses would be at all. I do know it was giving in to the Republicans during a contentious moment when the Obama peope thought they could get bi-partisan support. I also know that the government wanted money to be spent.

Do I think that the AIG bonuses were proper? I think they're outrageous. Do I think that Bremmer is correct? I agree that compared to the size of the whole crisis, this is small. I also agree that spending a week on this is not the best use of anyone time in light of the crisis. But I think that the public might need to be outraged in order to push forward other parts of the agenda that they may otherwise be ambivalent about (for example EFCA, whose support is growing but still needs more help).

Bloomberg may be correct, though...a currying of outrage, if this is what the administration is doing, may backfire.

Progress on SBA investigation

FPC reminds me about a subject I've been thinking about for a while:

In Wednesday’s NY Times, this article: New Jersey Sues Over Its Lehman Losses - DealBook Blog - NYTimes.com served as a reminder of how Florida got ripped off in the same way. Has Florida sued? Not mentioned in the article, though California was cited as having sued before
New Jersey.

Where are we? Why no suit?

New Jersey is out $180 million thanks to the collapse of Lehman. Florida also lost many millions, though a light search doesn’t reveal how much. There is an interesting similarity between Florida and New Jersey, in that both states had a board of officials supposedly overseeing the operation of the fund — like the money market funds we ordinary citizens have been forced to use by our friendly banks — where revenue was parked until needed by local governments to pay their staff and other obligations. In Florida it’s the State Board of Administration.

The Bond Buyer reports that the wheels are actually starting to turn in the investigation by the SEC of the State Board of Administration (I can't copy and paste the text, so here is a snap):
The SEC letter is here. As FCP notes, there seemed to have been connections between Jeb Bush and Lehman Bros.

Shovel-ready

PBP reports that the Palm Beach County MPO made its decision:

The Palm Beach Metropolitan Planning Organization, a board of city and county leaders who set transportation priorities, voted today to send the final, eight-item list to Tallahassee, estimating the projects would create at least 720 jobs.

The vote clears the way for Florida to begin receiving federal stimulus cash, as Palm Beach County's was the last transportation board in the state to have not already submitted its project list. State transportation officials will review this and other stimulus wish lists from across the state to ensure all projects are eligible before forwarding them to the legislature for final approval. [Emphasis mine]

The article has a line describing each of the eight projects. None of these are transit-oriented.

Walking back the meaning of new housing data

MSNBC reports that the Commerce Department released (pdf) an eye-opening figure: "construction of new homes and apartments jumped 22.2 percent in February compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units". The Curious Capitalist wonders:

So what's going on with starts? A big part of the jump came from condos, apartments and townhomes. And a fair amount of that activity flowed from warmer-than-expected weather. If that leads you to think maybe we should give the data another month or two before we start drawing trend lines, I'd be likely to agree with you. As one analyst cautioned, we might be looking at a "weather-related fluke."

It could also be a data-related fluke. Journalists almost never report on statistics precisely, which I'm sure drives all manners of social scientists batty. Here's the actual wording from the press release: "Privately-owned housing starts in February were at a seasonally adjusted annual
rate of 583,000. This is 22.2 percent (±13.8%) above the revised January estimate of 477,000, but is 47.3 percent (±5.3%) below the revised February 2008 rate of 1,107,000."

In other words, housing starts could be up 36%, or they could be up 8.4%. It's a range. And, technically, we're only 90% sure the real figure is in that range.

What about construction-related work? Enter, the American Institute of Architecture:

“Despite a higher [Architecture Billings Index] score than last month, we are likely to see light demand for new construction projects through much of the year,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “There is hope that the stimulus bill will result in more project activity, but that is also dependent on banks easing lending standards in the months ahead." [emphasis mine].

CR tells us what this means, "Since the index is still well below 50 (anything below 50 means contraction in billings), this suggests non-residential investment in structures will decline all year (no surprise!)".

My DSM code is 301.81. What's yours?

Slate is on the cutting edge of psychological assessment, Diagnosis by Unnamed Quote. Here's more:

A line from a New York Times profile of [Rod Blagojevich] is as trenchant a description of narcissism as is found in most psychology textbooks: "[He] is unapologetically late to almost everything, and can treat employees with disdain, cursing and erupting in fury for failings as mundane as neglecting to have at hand at all times his preferred black Paul Mitchell hairbrush." There it all is: the sense that other people don't matter, the belief others are instruments for the narcissist's use, the self-admiration.

All kidding aside, this kind of pop-psychology must be pretty popular because Emily Yoffe (previously) has done it before. But popular isn't always good. And Yoffe is firing off labels without respecting how difficult it is to define and determine a disorder/disability as a part of someone's thoughts/behaviors/feelings. Of course, this culminates in a smallish statement about our culture in general, "If the observers who say that part of our economic troubles result from a mass case of narcissism, from consumers who thought they should have the house of their dreams financed on bad debt to bankers who thought they deserved eight-figure bonuses for packaging that bad debt, then perhaps we are about to be cured". Interestingly, there's no mention of wage stagnation regarding consumer debt. Very naughty, Slate. thoughts/behaviors/feelings.

"Up" is "down", "In" is "out"

This is insane, "Florida began this year with a budget of $66.5''billion, but general revenue was only about 35 percent of the total". [emphasis mine] Economix has a map showing that Florida budget deficit declines in the last quarter of 2008 (vs. that of 2007).

Supply-side economists tells us that if we lower taxes, we get more revenues. In Florida, one primary revenue generator is the sales tax. Our sales tax has many, many exemptions (adult entertainment being one of them). I guess this means we need to raise more revenue by exempting more.

Meanwhile, Florida is one of only seven states in which taxing the Madoffs income is illegal.

CYA in the USA

The "Politics" section of Fark is just not a good source for reasonable political discourse. You can get funny headlines, every now and then, and that's worth something. Most of the time, though, it is an echo chamber (at worst, a popularizer of bad information). With that in mind, here is the headline:

Not funny and not true. Bad Fark. Jane Hamsher has the goods:

But the bill that passed the Senate actually made the compensation limits retroactive, according to the Wall Street Journal...

Who pushed back against Dodd, and told him to neuter the provision? The WSJ says Geithner and Summers...

Dodd's version prohibited TARP recipients from paying out bonuses, retention awards or incentive compensation to the 25 most highly compensated employees. It also prohibited any employee of a company receiving TARP funds from making more than the President. Both provisions would have been in effect so long as a company was receiving TARP funds. Since AIG just paid out $1 million in bonuses to 73 employees, Dodd's version limiting all employees to
what the President made (roughly $500,000) would have substantially nipped that in the bud...

So -- in the end, all compensation limits only applied to contracts written after February 11, at the specific request of Timothy Geithner, and AIG was able to pay out $286 million in bonuses on Sunday...

Between this and the public declaration of Geithner's job being safe, one is left wondering who exactly is directing the cover-your-ass campaign? Has the party given up Dodd for dead?
(h/t Brian Beutler)

We were so innocent

Quiet campaign

I know I've been on an AIG kick for a while, sorry about that. Unfortunately, there's more.

Probably the most infuriating thing about the explanations of AIGs corner of this mess was the idea that....well, I'll let George Will state it himself (at the :50 second mark):


"The point of the bailout, I understand, was to keep AIG in business".

That's false. It is false in a conniving way. I think George Will knows that the vast majority of the money is going to the counter-parties that AIG insured. I also think he knows that this is a subtle point that will be lost on most people. He knows that conflating that fact with this "bonus" news makes the Democrats look bad, regardless of the possibility of a global economic collapse if the Democrats didn't support the CDS payments.

As Ezra notes, "we really didn't bail out AIG: We bailed out the Credit Default Swap market and used AIG as our point of entry". Felix Salmon carefully walks us through the rationale for the use of AIG as this "point of entry". And we shouldn't kid ourselves, it isn't as the the whole AIG intervention is clean and transparent, either (the orignal deal was brokered by the former CEO of the largest recipient of AIG/taxpayer cash). My point here, though, is beware of the right's quiet smear campaign to associate Democrats with AIG largesse.

Is the Sun Sentinel mocking the unemployed

Let's say you have been laid off. You've got a mortgage to pay for. Feeding your family isn't cheap. That credit card you used to get you through the holidays still needs to be paid off. Oh, and that insurance coverage you used to rely on your company to pay for part of? That's now all your responsibility. In short you need to find a new job. Luckily, the Sun Sentinel is there to help:

Clicking on the link you'll find a photo essay of the jobs, but here they are in a bulleted list:

• Network administrator
• Systems analyst
• Nurses
• Physicians and surgeons
• Pharmacists
• Medical health managers
• Physical therapists
• Firefighters
• Police officers

It may be true that these jobs are recession-proof (I can't say). It is also true that most require a significant time commitment towards education, not to mention some degree of passion for the field. What's more, some of these have a few more candidates than postions available, which leads to the question, is this some kind of SS joke?

Populism and the economic crisis

Something I have noticed since last week is that the outrage over the AIG bonuses has been described as "populist". Over at Marc Ambinder's Atlantic page, you might have seen the picture on the right.

When I hear the term "populist", I hear a slur, an insult. But before I go further, I want to take a second to define the term. Constitutional Scholar Jack Balkin writes:

As its name implies, populism sees itself primarily devoted to furthering and defending the interests and attitudes of ordinary citizens. It has traditionally been distrustful of large and powerful organizations, whether public or private. It views massive government bureaucracy and corporate privilege with equal suspicion. Moreover, concentrations of power and privilege held too long by the same persons lead inevitably to moral and political corruption. This view has two consequences: The first is a preference for regular rotations of positions of authority and power. The second is a preference for popular participation in economic and political structures that affect the lives of ordinary citizens.

You could say that any grouping of the "ordinary" citizens implies that there is some implicit group of "extraordinary" citizens and that that idea is insulting. On the other hand, denying that there are people with more power in any given group is not accurate. In this way, I have to recognize that I am ok with the term "ordinary" as a way of saying "not as empowered as others are".

All of this is to say that I am not insulted if this is the definition of "populism". But if it is, I don't think that it necessarily applies to the outrage over the financial crisis. I think that there is another dynamic going on though. The AIG bonuses, the money transfers, these all seem, if not illegal, then morally wrong. The "wrongness" of these actions has nothing to do with the "extraordinariness" of the people committing them.

I think it is the same outrage that one feels when:

• A local PT overcharges for Medicaid services she never actually provided,
• An executive director of a rehab facility steals money from her own organization,
• Two judges funneling kids into prison for their own profit.

Now, Ambinder has some analysis noting the implications of this outrage if it really is populist. But ultimately I think that the angry responses have more to do with a more basic sense of justice. Fraud is wrong, and it is deeply unsettling.

The future direction of conservativsm

I've said it before, it makes sense to listen to the political discussion about what conservatives think the direction of their party should go. In that light, here is David Frum laying out a four-point approach:


David Frum, by the way, wrote an article for Newsweek ("Why Rush is Wrong") questioning Limbaugh's approach after CPAC that lead to an interesting debate in our own neck of the woods.

Discounting evidence-based decisionmaking

Hanna Rosin wrote an article for the Atlantic that is sure to rile up some folks. In it, she lays out the "Case Against Breast-Feeding". Except, she doesn't actually make acase against breast-feeding. Instead, it's a case against the popular literature that preferences breast-feeding. This is fair because, if we believe her, the scientific evidence about the value of breast-feeding shows that...well, it shows that there isn't too much value in it.

Reading the article sensitized me about this as a contentious social issue that I had no clue about. Beyond that, I have no position, pro- or con-, on breast-feeding. I do have a problem with the ending of the piece, though:

Breast-feeding does not belong in the realm of facts and hard numbers; it is much too intimate and elemental.

For an insightful article, this conclusion is very disappointing. Look, sex could be described as elemental and its definitely intimate, but to argue that facts like STD rates should be ignored because of that is silly. And the medical comparison is appropriate because people argue that breast-feeding is important because it has health consequences. The point is, discounting evidence because of a hazy, romantic conceptualization is just as anti-intellectual as anything else.

One email to screw them all...

PBP reports:

The federal transportation stimulus money that's supposed to create jobs the fastest is being held up in Florida by Palm Beach County.

Ouch. Why the hold up?

Palm Beach County Commissioner Jeff Koons...blamed the county's tardiness on confusion over when cities had to submit their lists of projects for stimulus consideration. For example, Riviera Beach, Royal Palm Beach and Wellington never responded to the MPO's call for cities to submit wish lists.

Koons said the MPO never gave the cities a clear deadline by which to respond.

With all correspondence being publicly available, you'd think that we could actually see if the MPO is covering for someone or if they shot off an email without a date.

Embarrassing interviews have consequences

Jon Stewart's interview with Jim Cramer last Tuesday has, apparently, motivated a number of voices to call for change at CNBC. Sam Stein reports:

Building off of the momentum from last week, in which CNBC personality Jim Cramer was subjected to an embarrassing lecture by the Daily Show's Jon Stewart, the group is launching, alongside its letter, a website: http://fixcnbc.com/.

"Americans need CNBC to do strong, watchdog journalism -- asking tough questions to Wall Street, debunking lies, and reporting the truth," the letter reads. "Instead, CNBC has done PR for Wall Street. You've been so obsessed with getting 'access' to failed CEOs that you willfully passed on misinformation to the public for years, helping to get us into the economic crisis we face today. You screwed up badly. Don't apologize -- fix it!"

Considering that Cramer's show, in particular, went back to normal the day after the interview, this call may fall on deaf ears. I say "may" because, at the end of the day, I don't think Cramer was ever the problem (and the letter tacitly acknowledges this). In his show, Jim Cramer is not a journalist, he is a former hedge fund manager...an insider. CNBC, on ther other hand, touts itself as a news outlet. In other words, real change needs to occur in order for the network to fulfill this role in good faith, not on the set of Mad Money, but on that of the Squawk Box and The Call.

AIG employee contracts

The idea of corporate America as a singular entity is just laziness. It isn't as though GM defended the pay of its employees in the same way that AIG has defended the pay of theirs.

Anyhow, it seems as there are two prongs to the argument being made by AIG. First, they are contractually-bound to pay. Two, they need the expertise of these employees. I think that Felix Salmon is right regarding the response that Obama should make in light of these arguments:

"We know we promised you this money, but it's clearly politically impossible for us to pay it to you. So you're not getting the bonus you were counting on. Sorry about that. At this point, you have three choices. You can continue to work for us, and keep your job. You can quit, and find a better-paying job elsewhere. Or you can quit, and sue us for the bonus that we promised you. Your call. But if you choose the third option, you'll probably want to hire a PR person at the
same time as you hire a lawyer"

One thing that is not mentioned as much as I would like it to be is the employment realities faced by these workers. Of all the careers out there, would you want to be:

1. A hated financial industry expert,
2. During the worst financial crisis in decades,
3. With AIG on your resume?

Maybe you could roll the dice on a new job. Or maybe you'd just shut up and get back to work.

Cheap dates

The Herald has a story about lobbyist dollars, and points out something I didn't know:

Florida law bans legislators from accepting more than $500 from each donor who contributes to their individual campaign accounts.

But there is no limit on the amount of cash that lawmakers can collect from all manner of special interests in separate fundraising committees that the lawmakers create to advance broadly defined public purposes, such as getting one another reelected.

So who are the biggest givers?

The Hospital Corporation of America, a major hospital chain seeking to change the way more than $1 billion in hospital money is awarded each year, donated the most money to the committees: $269,500 in the past two years. HCA also donated an additional $865,000 to other committees and to individual lawmaker campaigns in the same two-year period.

U.S. Sugar Corp. of Clewiston, which has hired 41 lobbyists in seeking to sell much of its land to the state, is next with $226,260. It donated an additional $365,000 to lawmakers and other political groups this election cycle.

AT&T, which is seeking favorable phone legislation this year, was the No. 3 contributor with $151,500.

Meanwhile, one in ten floridians uses food stamps.

The annals of poor tax policy

Take it away, Gary:

Back in 2005, former Gov. Jeb Bush trumpeted the fact that Standard and Poor's increased the state's bond rating to AAA, citing the "state's strong reserves and long term planning to avoid budget crises" as reasons for the decision. The reason it was big news is that with a better bond rating comes a much better borrowing rate.

All of the rating agencies have placed Florida on a negative outlook, said Ben Watkins, director of the State Division of Bond Finance, although none have yet downgraded the state's actual rating. [emphasis mine]

Of course, the point Fineout makes is that there is more information that the agencies haven't accounted for:

Right now it appears that the state will drain another $700 million from the [Lawton Chiles Endowment] by June 15 in order to balance this year's budget.

It looks like the hole may very well get deeper soon. Meanwhile, the legislature is debating whether or not Super Bowl tickets and skybox seats should be taxed.

Risen and Shown (?)

Photo by Flickr user PetitPlat by sk_ used under CC license.

Newspaper filler

There is a difference between knowing something and talking like you know something. Some people are good at the latter. Andrew B. Hellinger shows us he is not one of them:

Initiatives to lure suburbia's residents into Miami's urban core need to be considered to maximize what development has already occurred and to prevent Miami from becoming an urban wasteland. Given the scarcity of local, state and federal funds, this will be a challenge for our civic leaders.

I emphasized the words above because they make the author sound like he is knowledgeable. I am going to say that its a bluff, because someone who actually knows about urban planning in Miami would know that something along those lines already exists. But there is nothing substantive in Hellinger's "view" about that plan, or Miami's Comp Plan, or the many, many other plans that are available to the public to read regarding Miami. If Herald editors are hard up for planning analysis, I'd suggest that they solicit fewer Hellingers and request more opinions from people in the know.

Friday Fun: How progressive are you?

I saw this quiz on Ezra Klein's blog and I agree that without any reliability or validity data, it isn't exactly a sound assessment instrument (that scale is problematic, why didn't they go with a Likert?) . Still, it's interesting to play around with. See it here and have a great weekend!

Unpacking the post

Yesterday, Panet Money posted about new forclosure data. It's a bit too concise, but iportant and I wanted to take a moment to go over what is being said. Ready? Lets go:

Foreclosures spiked by 30 percent last month. All told, 290,631 homeowners got either the news or the boot, depending on how far along in the process they were. The Mortgage Bankers Association calculates that 11.18 percent of all loans was either in foreclosure or at least one payment behind.

One thing to note is that, historically, 3% of all mortgages will end in a foreclose. This is a reality, and mortgage lenders expect this. The 3% figure is based on the number of mortgages and does not have anything to do with dollar amounts being lent out.

This financial crisis all began because people had expected that that 3% default rate would be consistent regardless of whether or not the people who were getting the loans today met the same qualification standards as those people from yesterday (from which the 3% figure was derrived). The crisis, therefore, is that the default rate is higher (at 11.8%, it is almost four times higher) than anyone had planed it to be. This led to all sorts of other problems, which I won't get into here. Anyhow:

The fear now is that the new foreclosures are driven by rising unemployment, and not fallout from the subprime mortgage crisis. New weekly claims rose by 9,000, to 654,000.

Keep in mind that the first wave of foreclosures came because interest rates were resetting, or home prices fell so that they were upside-down on their loans, or they could contractually no longer pay only interest on the loan. The above section tells us that the first wave of foreclosures hurt the economy, but that now the hurt economy is leading to more foreclosures.

The other day at church coffee hour, of all places, I met a guy who does risk management for a major bank. He says they're solid through 10 or 11 percent unemployment. That's in the neighborhood of the Federal Reserve's "adverse scenario" for stress testing banks, at 10.3 percent unemployment next year.

This is the really scary part. The risk manager is saying that as long as unemployment rates stay below 10 or 11%, their bank (or the banking system generally, I'm not sure about which) is safe. This aligns with what the Treasury Department says. According to Planet Money, unemployment reached 8.1%.

Cramer addendum

About two years ago, Henry Blodget (currently of Clusterstock) wrote about Jim Cramer admitting to market manipulation. If anyone is interested in having a clearer sense of what Cramer is saying (by someone in the know about the law) via an annotated review, I'd recommend checking it out.

Lauderdale tea party

Get out your calendars, Naked Politics is reporting
that there will be another Lauderdale Tea Party on Saturday (1:00 pm). I have a few questions about this, though...

1. Do participants have to dress up like Native Americans this time?
2. Is tea ecologically-friendly, or is the turbidity just a side benefit?
3. The original tea party was intended as a blow against protectionism. Is this party an indication that the attendees are against agricultural subsidies?

So many questions...

Public financing of sports

I don't know why 26-P doesn't use permalinks, so I'll start by re-posting his piece below:

My problem here is the statement, "Sports can and does bring money". This conveniently misses the point, which is do sports investments bring in more money than they cost? There is much controversy on this. Here comes the research (pdf):

• By 2001, the public sector had spent $16 billion to participate in major league construction projects
• Stadia were found to provide little economic benefit once substitution effects were accounted for
• Real costs of public funding are likely to be under-reported.

It is difficult to argue using this type of reasoning, however, when a more politcally powerful argument is being made to the decision-makers.

Cramer vs. Stewart

I don't like Troy Patterson's writing because I don't think it is very clear. As far as I am concerned, when someone name-checks Jürgen Habermas in a piece about "The Daily Show" it just alienates most people. Having said that, Patterson is pretty direct in describing John Stewart's argument from last night:

The notion was that the networks, being aware of a gap between image and reality that they had steadfastly refused to address in their coverage, had abdicated their journalistic responsibilities..."

I think that going any further than this wouldn't be helpful. It's easy for people on the left, like me, to suggest that CNBC had slipped into a propaganda outfit. It's easy to cynically assert that they did this to better accomodate the advertisers that their company depends on. These points are arguable. That they stopped serving as a good faith provider of news is not and that's damning enough.

Rise and Shine

Photo by Flickr user : : w i n t e r t w i n e d : : used under CC license.

Superpost: Thoughts on inequality

The GINI Coefficient is a measure of inequality of income distribution. The more unequal a society distributes its wealth, the higher the GINI figure will be. Let me decribe this further.

Let's say that countries X and Y each produce an income worth 100 dollars a year. Let's also say that both countries are 10 people big. Country X distributes all 100 dollars to 1 person. Country X would have a high GINI figure. Country Y, on the other hand, equally distributes its money (all 10 people receive 10 dollars). Country Y would have a low GINI fingure.

The NY Times blog, Economix, has a post about the implications of having a high GINI index. On the one hand, long-standing conventional wisdom was that "efforts to reduce income inequality would be punished by lower economic growth". On the other hand, "Richard Wilkinson’s new book, 'The Impact of Inequality,' summarizes evidence from comparative studies that violence is greater — and trust and cooperation lower — in more unequal societies."

What does this have to do with the efficiency argument noted above? The post author notes that higher violence rates may lead to a higher need for private gaurds and private gaurds are an inefficency. They then post the graph on the right (I circled Miami).






There are a few pieces of important information provided here. One, Miami has an oddly high GINI index (over 63%, which is similar to the indices of countries in the developing world), which is to say, Miami has a highly unequal distribution of wealth.

Two, Miami also has a large number of private gaurds as a percent of total employment. Again, according to the post authors this represents an ineficiency (and this makes sense since guards don't "produce" much, and they definitely don't "produce" anything beyond what law enforcement does).

Three, the dispersion of the points on the graph show a pattern of points being lower on the left and higher on the right. Typically, this indicates that there is a relationship between the two variables. Here, it shows that, for US cities, a higher GINI index correlates with more security.

If you have read this far congratulations. But, there's more. One, doing an analysis with only two variables present is never the best design. Two, the notes on the statistics say that the effect of one of the variables explains 64% of the variation in the other. That means that 36% of the variation is being caused by other things (and this is quite possibly lower than reality since only two variables are included in the model).

The point I am trying to make is that understanding this information is difficult. It is, however, important to understand statistics. The media ignoring complicated models (or uncomplicated one like this one) does not serve anyone.

I am also saying that Miami is scarily unequal.

FPL vs its employees

(via Eye on Miami)
The Herald reports:

At 1:09 one afternoon last year, 90 metal rods slid into the cores of the two nuclear reactors at Turkey Point, part of an automatic shutdown that had been triggered by a utility worker's blunder moments earlier at a substation miles away. A million customers lost power.

Florida Power & Light executives ordered that the reactors be back online within 12 hours, according to court documents. The plant's top nuclear operator, David Hoffman, said that would be dangerous. When FPL executives disagreed with him, he walked out at 8 p.m., refusing to participate in actions he felt were unsafe.

Why bother with experts when you have executives in charge? Anyhow, the article goes on to say that employees are not allowed to publicly talk about the company. They do have an internal policy to deal with employee concerns and the Herald helpfully quotes an employee about it, "'Most are afraid of coming forward,' said Mike Kohl, a nuclear operator at Turkey Point."