Author: Jonathan

Fiona Harvey: Ice loss sparks new climate change fears

One of the arguments commonly invoked against global warming “alarmism” is that the models have a significant degree of uncertainty.

But that uncertainty cuts both ways.

Fiona Harvey: Ice loss sparks new climate change fears

Evidence of ice loss from both poles this week has sparked fresh fears that global warming is progressing faster than scientists had predicted.

Arctic ice has thinned dramatically, as well as shrinking in area, according to US research. Thin seasonal ice, which melts and refreezes each year, now makes up about 70 per cent of the Arctic winter ice, up from about 40 to 50 per cent in the 1980s and 1990s, leaving far less of the older, thicker ice that is harder to melt.

In the Antarctic, an ice bridge connecting an island to the Wilkins ice shelf – a sheet of ice about the size of Northern Ireland – shattered as scientists monitored it through satellite observations.

“What we’re seeing is very dramatic,” said Andrew Fleming, remote sensing manager at the British Antarctic Survey. “It’s very worrying.”

Scientists believed the effects were linked to the “very strong warming” at the poles, he said. The Antarctic peninsula has warmed by more than 3ºC in the past 50 years. “That’s a staggering rate of warming, and it’s still going up,” said Mr Fleming. …

via Brad DeLong

Why Tax the Well Off as if They Were Wealthy?

We all know that the upper tax brackets used to be a lot higher rates than they are now. But David Leonhardt points out that they didn’t kick in for most well-to-do incomes.

Richly Undeserved — Why Tax the Well Off as if They Were Wealthy?

It’s well known that tax rates on top incomes used to be far higher than they are today. The top marginal rate hovered around 90 percent in the 1940s, ’50s and early ’60s. Reagan ultimately reduced it to 28 percent, and it is now 35 percent. Obama would raise it to 39.6 percent, where it was under Bill Clinton.

What’s much less known is that those old confiscatory rates were not as sweeping as they sound. They applied to only the richest of the rich, because yesterday’s tax code, unlike today’s, had separate marginal tax rates for the truly wealthy and the merely affluent. For a married couple in 1960, for example, the 38 percent tax bracket started at $20,000, which is about $145,000 in today’s terms. The top bracket of 91 percent began at $400,000, which is the equivalent of nearly $3 million now. Some of the old brackets are truly stunning: in 1935, Franklin D. Roosevelt raised the top rate to 79 percent, from 63 percent, and raised the income level that qualified for that rate to $5 million (about $75 million today) from $1 million. As the economist Bruce Bartlett has noted, that 79 percent rate apparently applied to only one person in the entire country, John D. Rockefeller.

Today, by contrast, the very well off and the superwealthy are lumped together. The top bracket last year started at $357,700. Any income above that — whether it was the 400,000th dollar earned by a surgeon or the 40 millionth earned by a Wall Street titan — was taxed the same, at 35 percent. This change is especially striking, because there is so much more income at the top of the distribution now than there was in the past. Today a tax rate for the very top earners would apply to a far larger portion of the nation’s income than it would have years ago.

Not Even At the End of the Beginning

The worst isn’t over. Robert Reich edition.

Robert Reich’s Blog: Why We’re Not at the Beginning of the End, and Probably Not Even At the End of the Beginning

… But we’re not at the beginning of the end. I’m not even sure we’re at the end of the beginning. All of these pieces of upbeat news are connected by one fact: the flood of money the Fed has been releasing into the economy. Of course mortage rates are declining, mortgage orginations are surging, and people and companies are borrowing more. So much money is sloshing around the economy that its price is bound to drop. And cheap money is bound to induce some borrowing. The real question is whether this means an economic turnaround. The answer is it doesn’t. …

Consumers and Health Care

Matthew Yglesias, commenting on Ramesh Ponnuru’s assertion that individuals should be shopping for health coverage. Go to the source for links and such.

Consumers and Health Care

… And when it comes to health insurance, the subjective is really really really unimportant. Whether or not I “want” prostate cancer screening has just about nothing to do with anything. There are tables one could draw about age and other risk factors and the reasonableness of performing such-and-such a test. And this is integral to our understanding of what a medical interaction should be like. Visiting the doctor is not like visiting a car salesman, where he’s working on commission trying to upsell you and you’re trying to be on guard and strike a good bargain. That would be terrible. This is why we make doctors take oaths and so forth. And it’s true, of course, that the doctor-patient falls far short, in practice, of the ideal of a commerce-free trust between a healer and a patient. But this is a problem. As is the commercial nature of the interaction between a health insurance company and a person trying to get medical care. Someone really does need to tell you that certain procedures are unnecessary or unduly speculative. But should that person be a representative of the interests of a profit-maximizing firm? Not really. Which is why we wind up having all these regulations.

It’s true that deregulating the insurance market would make it more “efficient” according to one technical sense of efficiency. It’d be more like the market for cheeseburgers or sneakers. And everyone would, by definition, wind up with the insurance package they want. But it wouldn’t produce good health outcomes, or efficiently allocate dollars toward health-maximizing ends.

50 Years of Stupid Grammar Advice

Geoff Pullum has for some time now led the charge against Strunk and White’s “horrid little book”. On the occasion of the 50th anniversary of The Elements of Style, Pullum pulls his criticisms together in the Chronicle of Higher Education.

April 16 is the 50th anniversary of the publication of a little book that is loved and admired throughout American academe. Celebrations, readings, and toasts are being held, and a commemorative edition has been released.

I won’t be celebrating.

The Elements of Style does not deserve the enormous esteem in which it is held by American college graduates. Its advice ranges from limp platitudes to inconsistent nonsense. Its enormous influence has not improved American students’ grasp of English grammar; it has significantly degraded it.

…

It’s sad. Several generations of college students learned their grammar from the uninformed bossiness of Strunk and White, and the result is a nation of educated people who know they feel vaguely anxious and insecure whenever they write “however” or “than me” or “was” or “which,” but can’t tell you why. The land of the free in the grip of The Elements of Style.

So I won’t be spending the month of April toasting 50 years of the overopinionated and underinformed little book that put so many people in this unhappy state of grammatical angst. I’ve spent too much of my scholarly life studying English grammar in a serious way. English syntax is a deep and interesting subject. It is much too important to be reduced to a bunch of trivial don’t-do-this prescriptions by a pair of idiosyncratic bumblers who can’t even tell when they’ve broken their own misbegotten rules.

If Economists Knew Arithmetic

Dean Baker.

There are several articles floating around with the general message that an uptick in the stock market or bank profits does not mean that the economy is finally “fixed”. I’ll try to post a couple Real Soon Now.

If Economists Knew Arithmetic, We Might Waste Less Money on Banks

There is no doubt that the economy would be better off if most of our banks were not insolvent, but only those who are really bad at arithmetic would think that repairing the banking system will restore prosperity. The economy would still be faced with a massive shortfall in demand with the unemployment rate soaring into the double digits.

The basic problem is that the economists who missed the housing bubble (EMHB) somehow still don’t understand how the bubble drove growth earlier in this decade. There were two main channels:

Residential construction expanded from its average of 4 percent of GDP to more than 6 percent of GDP at its peak in 2005; and

Consumption boomed based on ephemeral housing bubble wealth, as the adjusted saving rate turned negative over the years from 2004 to 2008, compared to a post World War II average of 8 percent.

The collapse of the bubble has derailed these engines of growth. Housing construction is now less than 3 percent of GDP and the adjusted saving rate is approaching its post-war average. This is why the economy is slumping and the unemployment rate is soaring. There is no sector that can readily fill a gap in demand in the neighborhood of 8-9 percentage points of GDP. …

There’s more, of course.

What Next For Banks?

Simon Johnson, in a fascinating followup to his Atlantic piece, concludes:

What Next For Banks?

… The big issue is of course the financial sector reform process.   Some of my colleagues expressed great satisfaction with the progress made by the G20.  But progressing down a blind alley is not something to be pleased about.  I have yet to hear a single responsible official in any industrial country state what is obvious to most technocrats who are not currently officials: anything too big to fail is too big to exist. 

If the bankers were just stupid, as suggested by David Brooks, then regulatory fixes might make some sense.  But we know that bankers are smart, so it is their organizations that became stupid.  What is the economic and political power structure that made it possible for such stupid organizations to become so large relative to the economy?  Answer this and you address what we need to do going forward.

At a high profile conference in the run-up to this crisis, someone destined to become a leading official in the Obama Administration responded to a sensible technocratic critique of the financial system’s incentive structure (from the IMF, no less) by calling it “Luddite”.  By all accounts, this is the prevailing attitude in today’s White House.

But the right metaphor is not breaking productive machines, or peasants with pitchforks, or even the poor vs. the rich.  It’s as if the organizations running the nuclear power industry had shown themselves to be stupid and profoundly dangerous.  You might wish to abolish nuclear power, but that is not a realistic option; storming power plants makes no sense; and the industry has captured all regulators ever sent after them.

The technocratic options are simple, (1) assume a better regulator, of a kind that has never existed on this face of this earth, (2) make banks smaller, less powerful, and much more boring.

Geithner’s Stress Test “A Complete Sham”

Barry Ritholtz.

Geithner’s Stress Test “A Complete Sham”

The bank stress tests currently underway are “a complete sham,” says William Black, a former senior bank regulator and S&L prosecutor, and currently an Associate Professor of Economics and Law at the University of Missouri – Kansas City. “It’s a Potemkin model. Built to fool people.” Like many others, Black believes the “worst case scenario” used in the stress test don’t go far enough.

He detailed these and related concerns in a recent interview with Naked Capitalism. But Black, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis, says the program’s failings go way beyond such technical issues. “There is no real purpose [of the stress test] other than to fool us. To make us chumps,” Black says. Noting policymakers have long stated the problem is a lack of confidence, Black says Treasury Secretary Tim Geithner is now essentially saying: “’If we lie and they believe us, all will be well.’ It’s Orwellian.”

There goes the spacetime neighborhood

Who is IOZ?

I See A Bad Moon Risin’
Gaymarriage will take away my peanut butter and jelly sandwich. Gaymarriage will make hockey players skate on gravel. Gaymarriage will create weakly godlike artificial intelligences that will destroy you, soft, weak human. Gaymarriage will disassemble all of the planets and non-stellar matter in the solar system and create a matrioshka brain of infinite computational power that will achieve demiurgic godhead. Gaymarriage will alter the Planck Constant reordering the physical structure of spacetime itself and causing baryonic matter to cease to exist.

Overview of the crash

John Cole passes along this concise WSJ account of the events leading to the present crash.

The 2001 recession might have ended the bubble, but the Federal Reserve decided to pursue an unusually expansionary monetary policy in order to counteract the downturn. When the Fed increased liquidity, money naturally flowed to the fastest expanding sector. Both the Clinton and Bush administrations aggressively pursued the goal of expanding homeownership, so credit standards eroded. Lenders and the investment banks that securitized mortgages used rising home prices to justify loans to buyers with limited assets and income. Rating agencies accepted the hypothesis of ever rising home values, gave large portions of each security issue an investment-grade rating, and investors gobbled them up.

…and everybody lived happily ever after.

Obama’s Ersatz Capitalism

Joseph Stiglitz chimes in.

Obama’s Ersatz Capitalism

… What the Obama administration is doing is far worse than nationalization: it is ersatz capitalism, the privatizing of gains and the socializing of losses. It is a “partnership” in which one partner robs the other. And such partnerships — with the private sector in control — have perverse incentives, worse even than the ones that got us into the mess.

So what is the appeal of a proposal like this? Perhaps it’s the kind of Rube Goldberg device that Wall Street loves — clever, complex and nontransparent, allowing huge transfers of wealth to the financial markets. It has allowed the administration to avoid going back to Congress to ask for the money needed to fix our banks, and it provided a way to avoid nationalization.

But we are already suffering from a crisis of confidence. When the high costs of the administration’s plan become apparent, confidence will be eroded further. At that point the task of recreating a vibrant financial sector, and resuscitating the economy, will be even harder.

Flat, flat river

Red River

I grew up, in part, near the Red River, in Kittson County MN, closer to Winnipeg than Fargo. My chief memory of the terrain: flat. But I never realized just how flat until I read this in the NY Times this morning.

…the Red River, though fairly modest compared with some more famous rivers, [is] devilishly hard to predict, partly because of its shallow channel. The Colorado River has been carving out the Grand Canyon for millions of years. The Red, by contrast, dates back to perhaps only a few thousand years before the Pyramids. That means it has not had that long to cut deep channels that can contain water during floods.

On top of that, the river flows very slowly across a pancake-flat landscape. Imagine raising an eight-foot-long sheet of plywood just enough to slip a single sheet of paper under the raised end. The resulting minuscule tilt of the board represents the average slope of the Red River’s bed.

What that means is that the river, when it goes awry during a flood, spills every which way across the countryside.

Kennedy MN, where I lived, is about 15 miles from the river on US 75, and it wasn’t uncommon for the spring thaw to spread the river as far as that highway and beyond. The farmers in that direction, with heavy gumbo soils and late, wet springs, needed Caterpillars to draw their plows, where my uncles and cousins to the north and east of town employed conventional wheeled tractors on their lighter, sandier and better-drained fields.

Rawls, Cohen and the Laffer hypothesis

John Quiggin, restating the obvious.

Rawls, Cohen and the Laffer hypothesis

… There’s very little reason to believe the Laffer hypothesis or equivalent claims about the banks. The reason tax rates aren’t higher and bankers are getting bailed out on hugely generous terms isn’t because Rawlsians have outvoted Cohenites behind the veil of ignorance, or even because lots of economists believe the Laffer hypothesis. It’s because the rich and powerful are, well, rich and powerful. Not only can they promote ideas, however dubious, that serve their cause, they can bring powerful force to bear against any government or political movement that threatens their interest. All of this is obvious enough, but after thirty years in which any mention of these facts has been shouted down as the “politics of envy” or “class hatred”, it may be necessary to restate the obvious. …

Here’s a meta-quandry: I categorized this post (and a couple of other recent posts) under Politics as well as Economics. I’ve been debating the wisdom of doing so, though. In the past, I’ve tended to omit the Politics category on the grounds of redundancy, at least within the context of this blog. What to do…

Obama as Hoover

Edward Harrison at Naked Capitalism.

Barack Obama as Herbert Hoover

Edward Harrison here. For months now, we have been hearing the Obama — FDR comparisons, all suggesting that Barack Obama is a modern day Franklin Delano Roosevelt, with the opportunity to lead us out of Depression with a new New Deal. I have some serious problems with this comparison. In my view, a comparison between Barack Obama and Herbert Hoover is more apt. …

… This recession turned into the Great Depression, with the economy hitting bottom in March 1933. So, the entire recession we remember as being the depths of the Great Depression occurred while Herbert Hoover was President, not during FDR’s presidency. …

Why does this matter? Go read the post.

Lobbyists rarely lose in California Legislature

This is the first in a new series of articles in the Sacramento Bee. This is, of course, nothing new, but it can’t hurt to keep pointing it out.

Lobbyists spend millions — and rarely lose in Legislature

… The oil industry spent more than $10.5 million to influence the Legislature and state agencies. A 2007 industry association report touted that even in a Democratic-controlled Legislature, “of the 52 bills identified as priorities (in 2007), only three that we opposed were approved by the Legislature.”

Of those three, Gov. Arnold Schwarzenegger vetoed two.

A Bee analysis of this past two-year session found the 10 highest-spending employers of private lobbyists shelled out a total of more than $70 million working the halls of state government. They rarely lost. …

… The corps of lobbyists truly is California’s third house – and a bigger one at that. Registered lobbyists outnumber lawmakers in Sacramento 8-to-1.

That ratio allows the richest interests the luxury of swarming the Legislature for key policy battles.

The California Teachers Association, the No. 4 lobbying spender, and the California Chamber of Commerce, ranked No. 8, each deployed nine full-time lobbyists last session.

AT&T had three staff lobbyists – and contracts with nine outside firms.

Frustrated lawmakers taking on a moneyed interest often describe the lobbying ranks aligned against them in military terms.

“I was outgunned,” said Sen. Ellen Corbett, D-San Leandro, who estimated that 30 lobbyists were working against her 2008 bill to ban perfluorinated compounds, or PFCs, from food packaging.

Her bill passed the Legislature, but Schwarzenegger vetoed it.

“I would see them in the hallways meeting, outside the chambers, at committee hearings,” said Assemblywoman Fiona Ma, D-San Francisco, recalling her 2007 fight with the chemical industry. “They were all over the place.”

Ma’s bill – banning phthalates in plastic toys – became law. But it was the only successful chemical ban of a dozen attempted over two years. …

… Legislators and interest groups alike insist the gifts have no impact on lawmaking.

But Don Palmer, a professor who studies ethics and social responsibility, said human nature suggests otherwise.

“Sociologists call it the ‘generalized norm or reciprocity,’ ” said Palmer, associate dean at the UC Davis Graduate School of Management. “We all learned it in kindergarten: When someone is nice to you or generous to you, then you feel obligated to be nice to them.”

AT&T racked up $250,000 in such giveaways to lawmakers, staff and their families in the past two years. The company declined to be interviewed.

“(AT&T) will support everybody,” said former Senate Republican leader Dick Ackerman. “They will invite everybody to their boxes, both Reeps and Dems, because they just want to try and have relationships with everybody.” …

And a sidebar: how AT&T spreads the wealth.