“Free-Marketers” and the Bank Bailout

I woke up, it was a Dean Baker morning, and…

“Free-Marketers” and the Bank Bailout

The Post tells us how the people who designed the bank bailout were committed to the free market. Interestingly, the key decisions that they made gave the banks much better terms than they could have received from the free market.

Since the post doesn’t really know the inner most thoughts of the bailout designers, let’s try an alternative hypothesis. They wanted to help the banks as much as possible with public money, yet they wanted to rationalize this give away of taxpayer dollars as somehow consistent with the free market. Their alleged belief in the free market is simply a cover for efforts to aid the rich.

I don’t know if this alternative hypothesis is true, but the Post certainly does not know that the story it presented to readers as fact is true. How about we just get the news media to skip the speculation about people’s ideologies and just report on where the money went.

—Dean Baker

It’s the Housing Bubble, Not the ***** Credit Crunch!

Dean Baker is sounding a little frustrated, don’t you think? Not without reason…

It’s the Housing Bubble, Not the ***** Credit Crunch!

No one will lend me $1 billion, that’s how bad the credit crunch has gotten. There are probably reporters at major news outlets who would print that.

The news media almost completely missed the housing bubble. They relied almost entirely on sources who either had an interest in not calling or attention to an $8 trillion housing bubble or somehow were unable to see it. As a result they did not warn the public that their house prices were likely to plunge in future years.

Having dismally failed in their jobs to inform the public, reporters are still relying almost exclusively on sources that completely missed the housing bubble. As a result, they are still badly misinforming the public, first and foremost by attributing the economic downturn to a credit crunch.

This is truly incredible. Homeowners have lost more than $5 trillion in housing wealth. There is a very well established wealth effect whereby $1 of housing wealth is estimated as leading to 5 to 6 cents of annual consumption. This implies that the loss of wealth to date would cause consumption to fall by $250 billion to $300 billion annually (1.7 percent to 2.0 percent of GDP). If you add in the loss of around $6 trillion in stock wealth, with an estimated wealth effect of 3-4 cents on the dollar, then you get an additional decline of $180 billion to $240 billion in annual consumption (1.2 percent to 1.6 percent of GDP).

These are huge falls in consumption that would lead to a very serious recession, like the one we are seeing. This would be predicted even if all our banks were fully solvent and in top flight financial shape. Even the soundest bank does not make loans to borrowers who it does not think can pay the loans back (except during times of irrational exuberance).

Obviously the problems of the banking system make the situation worse, but the real cause of the downturn is the collapse of the housing bubble, and the reporters who talk about the economy should know this. (Of course, they should have seen the housing bubble too.)

—Dean Baker

Obama wins Nebraska CD-2

Most states allocate their Electoral College electors on a statewide winner-take-all basis. The exceptions are Maine and Nebraska, which give an elector to the winner of each congressional district (the other two electors go to the state wide winner). It’s not quite (or even close to) proportional representation, as evidenced by the fact that neither state has ever split their EC delegation.

NebraskaThat appears to change as of this election, with the Omaha World-Herald reporting that Obama has won in NE CD-2, which contains Omaha itself. That leaves Obama with 365 electoral votes; only Missouri (11 votes) remains to be decided.

ZombieRunner in Palo Alto

ZRBrother Don and Friend Gillian, proprietors of the online runners’ supply (among other things) store ZombieRunner, have opened a physical (offline?) store in the old Fine Arts theater on California Ave in Palo Alto CA (if you’re not familiar with the terrain, think Silicon Valley, Stanford, etc, and you’ll have the general idea).

ZR cupGo there for your running needs, certainly, but the reason I go (brotherly love aside) is the coffee, than which there is none better on the Peninsula. Truly. I know about this. You’ll find Don behind the espresso cart; say hi for me.

Hours are noon–5, open till 8 on Thursday, 9–1 on Sunday. Check the ZR website for directions if you need them, and for any changes in hours.

Profile of Seymour Hersh

Rachel Cooke in the Guardian.

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The man who knows too much

After we finish breakfast, he takes me to the office. He is eager to put off the moment when he must get on with his Syria piece. The more time he wastes with me… well, the morning will soon be over. Inside he points out a few choice interior-design details — the Pulitzer (it nestles among dozens of other awards), the framed memo from Lawrence Eagleburger and Robert McCloskey to Henry Kissinger, their boss at the State Department, which is dated 24 September 1974, and reads: ‘We believe Seymour Hersh intends to publish further allegations on the CIA in Chile. He will not put an end to this campaign. You are his ultimate target.’ Then he roots around in a cairn of paper for a while — quite a long while — eventually producing a proof of one of his articles with Remnick’s editing marks on it. I’ve never seen anything so harsh in my life. Practically every other sentence has been ruthlessly disembowelled. ‘Yeah, pretty tough, huh?’ He also shows me one of his own memos to a contact. It makes reference to the current administration. ‘These guys are hard-wired and drinking the Kool-Aid,’ it says, deadpan. He laughs. He’s getting cheerier by the minute. Soon it will be time for lunch! Now he puts his feet on the desk, removes one training shoe and jauntily waves the sweaty sole of a white sock at me. A couple of calls come in. He is concise bordering on cryptic. Finally an old Times colleague arrives. ‘I knew this guy when he had hair!’ Hersh shouts as this fellow and I pass in a small area of floorspace not yet covered by books or papers. I’m leaving, but Hersh doesn’t get up and he doesn’t say goodbye. A breezy salute — and then his eyes fall ravenously on his pal.

Dean Baker: Thanks but no thanks on that Larry Summers

Missing the Stock Bubble and Housing Bubble Makes You Qualified to Fix the Crisis

I have nothing against Larry Summers, but I think there is some sense to having people evaluated based on their job performance. Larry Summers thought the stock bubble was cool, ignored the housing bubble, was in favor of the over-valued dollar and gave warmly supported financial deregulation.

This track record arguably make Summers one of the main villains in the current economic crisis. So why does the LA Times tell us that we need his wisdom to fix the situation?

I have no doubt that Summers is very bright, but his brilliance did not prevent him from supporting the policies that got us into this mess. Why do we think that his brilliance will lead him to choose the best policies to get us out of it?

—Dean Baker

Vote shifts 2004-2008

OK, yet another election graphic, NY Times via Sam Wang.

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Keep in mind that this is the shift from 2004 to 2008 (no, Utah didn’t vote for Obama). There’s lots to notice, but the most dramatic shift is the dark red, where McCain-2008 did 20+ points better than Bush-2004.

Also of interest is support for the home-state advantage idea: look at Arizona, Alaska, Illinois, Massachusetts, Wyoming, and Delaware. North Carolina is an exception; it went more heavily for Obama despite not having a homeboy in the race this year. Texas is inconclusive.

10 Most Annoying Phrases?

This list is purported represents “linguistic mangling and overused buzzwords in a database called the Oxford University Corpus”, as reported in a new book, Damp Squid: The English Language Laid Bare, by Jeremy Butterfield.

Oxford Researchers List Top 10 Most Annoying Phrases

1 — At the end of the day
2 — Fairly unique
3 — I personally
4 — At this moment in time
5 — With all due respect
6 — Absolutely
7 — It’s a nightmare
8 — Shouldn’t of
9 — 24/7
10 — It’s not rocket science

I dunno. With all due respect to the folks at Oxford, at the end of the day they shouldn’t of included “24/7”, which I personally think is a useful addition to the language.

Tote that bale!

Travis Kavulla at National Review Online.

It’s Obama Day in Kenya

Nairobi, Kenya — It must be the first time one country has celebrated the election of another country’s president with a day off. But that is just what has happened here in Kenya, where President Mwai Kibaki, with all the caprice of an African leader, has declared today a public holiday in honor of Barack Obama, whose father was Kenyan. Work is at a standstill, banks are closed, as are all government offices and most shops. (Ironically, Kibaki’s 2007 campaign slogan was ‘kazi iendelee’ — let the work continue.) Bars, however, are open and people are still hawking Obama paraphernalia and stars-and-stripes apparel. And then there are the glue-sniffing street children, who continue to beg. Sad that the first concrete effect of an Obama presidency on Kenya would be to further depress the productivity of a country that could really use a booster shot in that department.

Next thing you know they’ll be agitating for a 60-hour work week.

Evangelical teen sex

Read all about it. Andrew Brown.

Teenage sex among American evangelicals: who knew?

Mark Regnerus, a sociologist at the University of Texas in Austin, conducted a survey of 3,400 American teens from which it emerged that white evangelical Protestants have sex younger than any other religious group but black Protestants. They are also less likely to use contraception than other groups, especially secular ones.

Other sociologists turned up some fascinating facts about the “purity pledge” movement, an occasionally creepy attempt to get teens to pledge themselves to virginity until they marry. It does, sort of, work for a while: it seems to postpone sexual activity for 18 months on average, and when I was a teenager that would have seemed several lifetimes. But this only happens when the pledgers are a minority who can feel themselves superior. Once the proportion of pledgers in a school rises above 30%, the success rate for all of them shoots right down (or up, depending on how you count).

The New Yorker has the story.

How much is your vote worth?

That was the heading for this NY Times chart:

This map shows each state re-sized in proportion to the relative influence of the individual voters who live there. The numbers indicate the total delegates to the Electoral College from each state, and how many eligible voters a single delegate from each state represents.

vote weight

The accompanying article describes the usual small-state Electoral College bias, but goes on from there:

But there is a second, less obvious distortion to the “one person, one vote” principle. Seats in the House of Representatives are apportioned according to the number of residents in a given state, not the number of eligible voters. And many residents — children, noncitizens and, in many states, prisoners and felons — do not have the right to vote.

In House races, 10 eligible voters in California, a state with many residents who cannot vote, represent 16 people in the voting booth. In New York and New Jersey, 10 enfranchised residents stand for themselves and five others. (And given that only 60 percent of eligible voters turn out at the polls, the actual figures are even starker.) Of all the states, Vermont comes the closest to the one person, one vote standard. Ten Vermont residents represent 12 people.

The state-to-state difference is dramatic. In fact, though, for many of us, the actual situation is even worse. Voters in California (like me) or in Wyoming, despite the big difference in voting weight as shown in the above map, have approximately zero chance of influencing the outcome of a presidential election, simply because our electors are allocated on a winner-take-all basis, and our states very reliably go for one party or the other.

(A possible fix for this is the National Popular Vote project, but the main subject of this post is the nifty graphic.)

Sheila Bair for Treasury?

Dean Baker thinks it’d be a good idea. (How about we let Dean pick the new CoS?)

The Next Treasury Secretary: What’s Their Track Record?

It would be a really bad start to his administration if President Obama picked a Treasury Secretary who shares a substantial part of the blame for the bubble economy and the financial crisis. It will not be easy to pick up the pieces and get the economy back on its feet, but we would be going in the wrong direction to put one of the people responsible for getting us in this mess in the top economic position in the Obama administration.

Sheila Bair, the current head of the Federal Deposit Insurance Corporation, can boast of clean hands. Unlike other contenders, she never obstructed regulation of the $60 trillion credit default swap market. Nor did she push to maintain the over-valued dollar that gave us an $800 billion trade deficit. Unlike many others dealing with the fallout from the housing crash, she has noticed that people are losing their homes and has made preventing this a top priority.

President Obama has a chance to make a fresh start. He would handicap his administration by relying on those whose mistakes helped to bring about about this economic crisis.

Open letter to Governor Palin’s supporters

Michael Bérubé. I won’t even try to summarize it, but here’s the opening graf.

Open letter to Governor Palin’s supporters

The election is over.  It’s time to put our differences aside, come together as Americans, and reach out across the aisle in a spirit of bipartisanship.  And so today I address myself to those of you who were so energized by Sarah Palin’s historic campaign.

A useful dose of reality from Sam Smith

I’m pleased with Obama’s win, on balance, and certainly grateful to be out of earshot of Ms Palin for at least a few months. But let’s not get too carried away.

Can we talk about the real Obama now?

As things now stand, the election primarily represents the extremist center seizing power back from the extremist right. We have moved from the prospect of disasters to the relative comfort of mere crises.

Using the word ‘extreme’ alongside the term ‘center’ is no exaggeration. Nearly all major damage to the United States in recent years — a rare exception being 9/11 — has been the result of decisions made not by right or left but by the post partisan middle: Vietnam, Iraq, the assault on constitutional liberties, the huge damage to the environment, and the collapse of the economy — to name a few. Go back further in history and you’ll find, for example, the KKK riddled with members of the establishment including — in Colorado — a future governor, senator and mayor after whom Denver’s airport is named. The center, to which Obama pays such homage, has always been where most of the trouble lies.

The only thing that will make Obama the president pictured in the campaign fantasy is unapologetic, unswerving and unendingly pressure on him in a progressive and moral direction, for he will not go there on his own. But what, say, gave the New Deal its progressive nature was pressure from the left of a sort that simply doesn’t exist today.

Above are listed nearly three dozen things that Obama supports or opposes with which no good liberal or progressive would agree. Unfortunately, what’s out there now, however, looks more like a rock concert crowd or evangelical tent meeting than a determined and directed political constituency. Which isn’t so surprising given how successful our system have been at getting people to accept sights, sounds, symbols and semiotics as substitutes for reality. Once again, it looks like we’ll have to learn the hard way.

Andrew Brown points out elsewhere that Obama is fundamentally a conservative. ACB seems a little happier about that than I am, but he’s not wrong on the basic point, and I’m no conservative.

I suppose I would have been less shocked and disappointed if Obama had lost than when Kerry did because I could not, still cannot, imagine how anyone could have regarded Bush as even minimally competent by November 2004. But still it was extraordinary to wake at ten past four this morning, and switch on the kitchen radio in the middle of McCain’s concession speech. It was the best news since 1989. I don’t really suppose that Obama can rescue America but what gives me hope is the fantastic volunteer effort that got him elected. It’s impossible to imagine that kind of popular movement in this country, even for donkey welfare.

One other point: Tim Bray, in his comments, was lamenting the absence of a credible conservative voice in American politics. But as far as I can hear, this is exactly the voice they have elected. Just as Kerry was an Eisenhower Republican, Obama seems to me to be exactly the kind of conservative who understands when change is inevitable. The great question is he will prove enough of a statesman to manage things so that everything changes in order for everything to stay the same. Whatever else he is, he’s not a destructive revolutionary, far less so than Bush was in his blundering way.