Speedkill

I’ve been pretty amenable to bailouts of late. I supported TARP (and I guess I still do) and haven’t really been too annoyed about auto bailouts or today’s CitiGroup bailout. Mostly, I’ve just wanted to stick my fingers in my ears, because I have no idea how this is supposed to end. I mean, we can’t literally bail out everyone, right? Are we just bailing companies out until our economy starts getting better? Given today’s Citi bailout, there are no reasons left to trust Paulson’s competence. If this government can’t even execute handouts in a comprehensible fashion, what the hell is the point? Nor do they seem to be able to get anything of value for us taxpayers (well, besides keeping these companies from failing). At least with socialism taxpayers get some kind of return.

Jeff Bush, Economy

I made a lot over Congress not being able to pass anything better than the bailout bill we got. It seems that world events have conspired to push Paulson towards what looks like the favored solution of most economists (partial nationalization and recapitalization) sans Congressional sign-off. So, hurdle cleared, I guess. I didn’t see that one coming; he is a Bush administration official, after all (ambiguity completely intended).

This is pretty seriously over my head, but…good…I think.

Jeff Economy

I meant to comment on this a couple days ago, but oh well. So the bailout has passed Congress. Unsurprisingly, the Senate had to attach some obnoxious tax cuts and other pork to it to get it through.

Sirota’s progressive populist victory was apparently very short-lived. It’s almost like it wasn’t progressive, populist, or a victory.

Hopefully this bill will help us limp through the current crisis and start to get things back on track. It may not, but it seems like a necessary step.

The really important part of all this is still to come. That’s what new regulations will be enacted to keep this from happening again. That’s the real battle and far more important than the bailout.

Jeff Congress, Economy

Thought I’d comment on Jay’s comment on my last post and his post at LitW in a new post of my own.

First off, let’s clear up what I meant in my first post:

“Pseudo” populism? I think a lot of opponents to the bill are real and genuine populists. Whether they’re right is moot, but I don’t think someone like Michael Moore, say, is faking his politics.

I was using pseudo more like someone would say pseudo-intellectual. I don’t think people are faking their outrage. I think their outrage is driving them to conclusions that are absurd. When you oppose the bailout because you don’t want to bail out those on Wall Street, it’s not a victory for populist politics. It’s a victory for irrational mob outrage. I’ll say it again: the fat cats on Wall Street are going to be fine. Maybe they have to give up a yacht and they may whine, but they’ll be fine. A small business owner who can’t get a loan to get through a rough patch? He and his employees aren’t going to be fine.

That’s if you’re ok with doing nothing. The other side of this is if you’re holding out for a better bill. I still say that’s fantasy. Republicans and blue dog Democrats didn’t vote against this bill because they wanted a more progressive bill. It wasn’t voted down by progressives, but conservatives. We’ve all seen the pattern of the last two years with progressive legislation: it passes the House, then dies in the Senate. If it makes it past the Senate, Bush vetoes it. That’s the fate of significantly more progressive legislation. We aren’t going to get conservatives on board with a more progressive bill, as much as we’d all like that.

The other thing in Jay’s post is a quote from Chris Bowers saying the bill failed because supporters failed to convince non-supporters. You can take that two ways. Whenever a bill fails, it’s trivially true that proponents failed to convince opponents. That’s sort of inherent in something failing. Bowers is using it to excuse opponents of blame for the bill’s failure. The second way you can take that is simply wrong on the merits. Nate at 538 has a good analysis of this. Swing state Congressman voted overwhelmingly against the bill. Outgoing Congressmen voted overwhelming for it. The rest were split. As in, it wasn’t arguments that convinced them, it was their electoral prospects. Those who had nothing to lose and should be the most open to argument voted for the bill. Those who had to deal with irrational mob outrage voted against it. This is why the bill will probably pass on the next go round. The bill is not unpopular; the polls were all over the place, depending on wording of the questions. The consequences of doing nothing are becoming more apparent and the outrage generated by people like Lou Dobbs will subside. Jay says he’s never seen a coalition like this, one that spans ideologies and parties. That’s correct. Guess what common interest those people have? Staying in power. That’s the key here.

To be clear, I don’t mean to belittle anyone who disagrees with the bailout. I have my opinion, you have yours, none of us are certain. What I am pretty sure of is that basing your opposition on populist outrage and a fantasy about what kind of bill Congress can pass is wrong.

Jeff Congress, Economy

I have little sympathy for Wall Street at this point, but the pseudo-populism of some liberals is getting annoying. We’re not being asked to rescue Wall Street fat cats. Those people are going to be just fine regardless of what we do. They’re rich, they have a cushion. The smarter ones have probably already taken off.

You know who’s not going to be fine? The people who depend on the financial markets not being seized up. You know who that is? The fucking rest of us. The people who need the services state and local governments are struggling to provide. It goes beyond just the stock market.

I realize the bailout isn’t perfect. I’m hardly an expert, but it does seem like there are better ideas. But there’s a reason smart people think an imperfect bill is necessary. It probably won’t just be a sweetheart deal for Wall Street, either. For all the whining about Democrats caving to Republicans, the fact remains that they exist and they can fight legislation. Thinking Democrats can get a significantly better bill through in this environment is fantasy. This is how our system works.

And while I’ve veered into partisan politics in this rant, the entirety of the Republican party is a joke. Boehner blames his failure to secure enough Republican votes on a speech by Nancy Pelosi. This is pathetic. Regardless of whether or not you’re for it, that was a monumentally important vote and House Republicans were swayed because a speech hurt their feelings. Are they a bunch of third graders? How fundamentally ridiculous the current Republican party is has never been laid out so clearly.

The final thing is, I wish people would stop saying this is going to cost us $700 billion. It’s not. It’ll be less than that. How much less we don’t know, but no one thinks these toxic mortgages are actually worth nothing.

Update: This:

So sure: we should all hope that after the election we can pass legislation that attacks the roots of the financial crisis. This includes financial market regulatory reforms, macroeconomic stimulus, and broad relief measures. Maybe it even includes a better bailout program if this one isn’t enough. But right now, we have what we have, and complaining about it is like refusing to turn a fire hose on a burning building because you’re afraid the water is flouridated. It’s time to pass the bill.

Jeff Economy

Quote of the day:

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

Did they really say that? That’s…incredible.

My understanding of all of this is generally fuzzy, but I know it’s so important that John McCain suspended campaigning and wants to call off the Friday debate. Or McCain’s that desperate. The fact that it’s a foreign policy debate and the performances will be drowned out by economic news and that he wants to move to the VP debate slot points to the latter. I suppose it would be hard for McCain to swoop in and grandstand, then debate with Obama for a couple hours, but I think he could do it. It’ll build character.

Jeff 2008 elections, Economy

In the GOP E-Brief:

FACT: The 92.1 million taxpayers with annual incomes of less than $50,000 in 2003 saw a 47 percent reduction in their average tax bill from President Bush’s 2001-2003 income tax relief. (“Who Benefits Most From Tax Cuts On Investment Income,” The New York Times, 4/5/06)

The 26.9 million taxpayers with annual incomes between $50,000 and $100,000 in 2003 saw a 20 percent reduction in their average tax bill from President Bush’s 2001-2003 income tax relief. (“Who Benefits Most From Tax Cuts On Investment Income,” The New York Times, 4/5/06)

Why does the GOP think this is noteworthy? Beats me. Democrats claim Bush’s tax cuts are unfairly weighted towards the rich. From the article the E-brief cites:

About 3.5 million taxpayers filing their returns for last year are being hit by the alternative tax. But that figure will balloon this year to at least 19 million taxpayers, making as little as about $30,000, unless Congress restores a law that limited its effects until now, according to the Tax Policy Center in Washington, a joint project of the Brookings Institution and the Urban Institute, whose estimates the White House has declared reasonable.

The tax cut analysis was based on estimates from a computer model developed by Citizens for Tax Justice, which asserts that the tax system unfairly favors the rich. The group’s estimates are considered reliable by advocates on differing sides of the tax debate. The Times, which also did its own analysis, asked the group to use the model to produce additional data on the effect of the investment tax cuts on various income groups. The analyses show that more than 70 percent of the tax savings on investment income went to the top 2 percent, about 2.6 million taxpayers.

That’s just investment income, of course. How about this:

WASHINGTON, Aug. 12 – Fully one-third of President Bush’s tax cuts in the last three years have gone to people with the top 1 percent of income, who have earned an average of $1.2 million annually, according to a report by the nonpartisan Congressional Budget Office to be published Friday.

A third. Maybe you could say that segment of the population makes more and therefore should get more of a cut. But that much? The top 1% make ~15% of income in this country. Seems to be roughly twice what might be fair.

Jeff Economy

Hey, you know how all those wimpy leftist economies are trounced by the powerhouse right wing economies?

Yeah, not so much.

Every year since 1995, the Heritage Foundation and the Wall Street Journal put out an Index of Economic Freedom, ranking countries on their fealty to the precepts of free markets and free trade….

…

A more interesting test than Heritage’s would be to see how countries’ scores in a base year correlated with subsequent growth. Investments are planned and career choices made on the basis of expectations for the future, and expectations are formed mainly by conditions in the present and recent past. And it’s rare that political, economic, and social structures change radically over a few years. So assuming the index means anything at all, it should have some bearing on future performance.

Let’s see how scores in 1996 correlate with economic growth in the following years. And we’ll take a closer look at a version the Heritage/WSJ measure, the change in freedom and its correlation with growth.

And what did he find?

…For the statistically inclined, the correlation is -.02, which means that the association is actually in the opposite direction – more “freedom” means less growth – but the correlation is meaninglessly small.

…

Running the numbers on the report’s measure, the improvement in the index vs. GDP expressed in 1995 U.S. dollars, produces somewhat better correlations (.33, to be precise). But that’s still very far from impressive;…

(via MaxSpeak)

UPDATE: I misread the second chart. It looks like this is pretty much meaningless.

Jeff Economy

Mostly because the point I’m about to make is in agreement (sort of) with reflexively anti-anything-involving-a-Democrat types. Over at Pandagon:

I’ll have to find it, but one of the funniest Bush-era critiques of Clinton’s policies was that we would have grown even faster if not for Clinton. Since there was no demonstrable failure in a large-scale economic sense, Clinton’s policies (particularly the tax cut) were simply an anchor on the speedboat that was the 90s. Luckily, since there was nothing that actually existed to point to, the author could just throw out larger numbers than the 90s economic growth figures, and call it a thesis.

I just finished up Contours of Descent by Robert Pollin, a terrific book. He analyzes the Clinton boom, among other things. His conclusion is that the primary factor behind it was the stock market and the corresponding jump in spending by people whose net worth went up. This jump was almost completely confined to the rich; the top 20% income group jumped up from spending 95.1% of their personal disposable income to spending 104.4%. The next highest income group went up by 1.6%, the other three dropped by .1%, 2.9%, and 2.3%, respectively. So it does follow that if Clinton hadn’t raised taxes on the top 2% or whatever it was, that group may have had more to spend and the economy may have grown even faster. However, it probably wouldn’t have made much difference to most people.

Of course, I may have mangled Pollin’s economics in there somewhere, and I’m not an economist, so take that as you will.

Jeff Economy

CNN, from Angry Bear, via Kevin Drum.

computer science graduates make $49,691 a year, up 4.8 percent

Yay! That means, I could slack off, graduate with mediocre grades and still make, what 40k out of the gate? Right? Right?

Maybe I’m taking the wrong message out of that.

Good news in any case.

I say “in any case” a lot. Wordpress says that phrase is in 34 of my 681 posts.

Jeff Economy