Jasper Smith

Commentary on politics, economics, culture and sports.

Archive for the ‘Policy’ Category

Bailing out Detroit

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I’ve pretty much come around to the idea that doing something with taxpayer money now is better than doing nothing when it comes to the Big Three. Again, if we weren’t coasting along (or headed toward) the bottom of a vicious recession at the present moment, I’d no doubt stick with my free market instincts. But letting them slip into Chapter 7 right now strikes me as very high stakes poker. Yglesias, needless to say, is having none of it:

Part of what makes the auto bailout conversation difficult to have realistically is that this $25 billion number is hanging out there. That’s a lot of money, yes, but it’s actually a relatively small amount of money relative to the scale of the Big Three’s operations. Under the circumstances, a bailout looks a bit like a good deal.

But by the same token, I don’t see any reason to think that $25 billion would actually turn these firms around or even forestall collapse for very long. The car industry in general is in a big slump, and these companies in particular have been on a downward trajectory for a long time.

So what if they money doesn’t stave off collapse “for very long?” If it buys us only ten months it may be worth it. If it ultimately costs $75 billion (probably something under 2% of what Keynesian measures are ultimately going to cost the government over the next few years) but buys us three years, I think it will definitely be worth it. Letting all of the big three go under precipitously at the present time is extremely risky. Sure, maybe the economy would make the adjustments to post-big three life smoothly, but I’d rather not tempt fate. Nobody’s arguing we shouldn’t structure the best deal possible — one that is optimal with respect to the national interest (and that unfortunately means a lot fewer automobile-related rust belt jobs).

Handing out a million and a half pink slips in gradual fashion over the next, say, four years (even if this costs the taxpayers a lot of money), is a safer course of action than handing out two million over the next twelve months. It may be a cheaper (for us taxpayers) course of action, too, although our lack of easily observable parallel universes will make it impossible to prove either way.

I think this is basically our choice.

Written by Jasper

November 18, 2008 at 8:56 pm

Fair and balanced radio

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Matt Yglesias ponders the conservative obsession with the Fairness Doctrine:

Am I the only one who’s confused by all this conservative organizing against the re-imposition of the “fairness doctrine” on talk radio? I understand why they oppose that move, but why are they putting so much energy into blocking something that nobody is trying to do. A Fairness Act bill was submitted in the House in 2005, but it only 16 cosponsors. No such bill was submitted in the last conference. Barack Obama opposes reintroducing the Fairness Act. And speaking as a paid-up member of the vast left-wing conspiracy, nobody on our side is getting any marching orders about this.

I guess they need something to talk about on the radio shows, but I’d just focus in on Obama’s plan to turn the United States into a socialist dystopia.

Well, I’ve heard that senators Schumer, Durbin and Feinstein have all been making noises about reintroducing the Fairness Doctrine, so perhaps there is a bit of there there. Frankly it was news to me to learn that President-elect Obama is not a fan of this first amendment restriction.

Anyway, needless to say, I’m not a big fan of this kind of thing, and with respect to talk radio, I’m not overly eager to hear a reduction in radio wingnuttery — mainly because of its genuinely robust entertainment value. There’s nothing to keep you company — and keep you chuckling — when you’re heading up I95 through the wilds of Maine to the Canadian border — like Rush Limbaugh.

And, in fairness to the wingnuts, it’s not like their side would be setting the rules, so I think this time their usual paranoia might be somewhat justified.

In other news, it appears talk radio might not need persecution from Stalinist liberals, given its shitty demographics and declining listenership.

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November 8, 2008 at 2:44 pm

Obama’s carbon tax plans

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Megan McArldle doubts the political viability of battling climate change with carbon taxation:

The Democrats right now are divided into deficit hawks, who think that the nearly $1 trillion deficit headed down the pike means they can’t afford any big programs, and the big spenders, who say to hell with the deficit, let’s spend as much as we can to make it look like we’re really doing something.  More on this later.  But one wrinkle that hadn’t seemed as important as it now does is that the Democrats do not have the luxury of proposing unpassable legislation in order to look like they’re doing something.  They can’t make good on Obama’s electoral promises about global warming by putting up a program the Republicans hate enough to take down, because there aren’t enough Republicans to credibly blame for the bill’s destruction.  So they either have to actually pass a carbon bill that will be massively unpopular when it raises energy prices, or explain why Obama didn’t really mean it.

If the Democrats are smart, they’ll pass a carbon bill that will only gradually raise energy prices, and that won’t really kick in in a serious way for another 5-7 years. Modest rises in energy prices in the short term will not prove to be “massively unpopular” and more substantive increases — while no doubt not exactly something the public will love — will be tolerated if the economy as a whole is once again growing briskly, and median income is once again increasing, and people see real progress in developing the kind of infrastructure that helps them deal with said higher energy prices.

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November 6, 2008 at 3:24 pm

Paulson Watch

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More troubling news on the bailout front:

U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years…

Critics, including economists and members of Congress, question why banks should get government money if they already have enough money to pay dividends — or conversely, why banks that need government money are still spending so much on dividends.

“The whole purpose of the program is to increase lending and inject capital into Main Street. If the money is used for dividends, it defeats the purpose of the program,” said Sen. Charles E. Schumer (D-N.Y.), who has called for the government to require a suspension of dividend payments.

The Treasury plans to invest up to $250 billion in a wide swath of U.S. banks in return for ownership stakes, which the government will relinquish when it is repaid.

Among other restrictions, participating institutions cannot increase dividend payments without government permission. They also are barred from repurchasing stock, which increases the value of outstanding shares.

The 33 banks signed up so far plan to pay shareholders about $7 billion this quarter. Companies generally try to pay consistent dividends and, at the present pace, those dividends will consume 52 percent of the Treasury’s investment over the initial three-year term.

“The terms of our capital purchase program were set to encourage participation by a broad array of financial institutions so they strengthen their financial positions,” Treasury spokeswoman Michele Davis said.

The Treasury’s approach contrasts with decisions by foreign governments, including Britain and Germany, to require banks that accept public investments to suspend dividend payments until the government is repaid. The U.S. government similarly required Chrysler to suspend its dividend payments as a condition of the government’s 1979 bailout.

Heckuva job, Paulsie.

Written by Jasper

October 30, 2008 at 11:39 am

Like a chicken with its head cut off

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I strongly suspect this situation directly flows from Bush-Paulson’s rudderless, schizophrenic approach to fnancial crisis strategy:

The bailout is now the hottest lobbying game in town.

Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.

The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession.

These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.

The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.

Lobbying efforts are intensifying.

Sounds very unfocused, and rather depressing.

Written by Jasper

October 25, 2008 at 5:35 pm

Obama and Ottawa

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Commenting on John McCain’s enthusiastic pro-Nafta speech this week north of the border, John Ibbitson writes:

Mr. Obama,  on the other hand, is a NAFTA skeptic. “NAFTA and its potential were oversold to the American people,” his website declares. “Obama will work with the leaders of Canada and Mexico to fix NAFTA so that it works for American workers.” When Austan Goolsbee, Mr. Obama’s chief economic adviser, reportedly told Canadian diplomats that Mr. Obama’s statements on NAFTA were mere campaign rhetoric, the ensuing controversy embarrassed both the candidate and the Canadian government. Mr. Obama does appear to be trying to distance himself from some of his earlier tough talk, telling Fortune magazine that some of his trade rhetoric was “overheated and amplified.” But his support for increased trade ties with Canada is lukewarm at best, and he could actually prove hostile to the bilateral trading relationship.

I think the significant majority of Canadians who feel Obama’s politics more closely match their own political ideals (and therefore are inclined to favor his candidacy over McCain’s) are right not to worry too much about the Illinois senator’s nods to the protectionists and anti-globalists in the Democratic party. Nearly all parties of the left in rich democracies count within their ranks substantial numbers of people opposed to the further integration of the global economy. And the thing is, a number of states Obama either badly wants to win (Ohio) or absolutely must win (Pennsylvania) are home to large number of culturally conservative unemployed/marginalized blue collar workers who may abandon the culturally liberal Obama if they perceive he’s an excessively enthusiastic fan of free trade.

I believe it’s clear Obama knows the path to securing the living standards of working people lies in strengthening the safety net and not in erecting barriers to trade.

This is simply American presidential politics 101. There’s no serious prospect of an Obama administration’s igniting a trade war between the US and Canada. And in the unlikely event that a President Obama were to broach the subject of labor standards and worker protections with Ottawa (over the Nafta issue), Canadians would have nothing to worry about, since any resulting action would mean it is the US that would be beefing up its standards to match the practices of the more Western European-style Canadians.

Written by Jasper

June 21, 2008 at 12:40 pm

Obama v. Clinton: deciding factors

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Barrack Obama supporter Matt Yglesias has been fairly tough on Hillary Clinton lately. Foreign policy wonk that he is, Matt’s objections to Clinton, not surprisingly, focus on this area:

When I see a race between two politicians, one of whom got Iraq wrong and one of whom got it right, to me that establishes a presumption in favor of the candidate who got it right, no matter whose husband the wrong one is. When it turns out that the one who got it wrong also has a group of advisors heavily weighted toward the group of pro-war “experts” who helped push so many Democratic politicians into taking her wrong position on the war in 2002, that re-enforces my presumption. When the one who got it right is closer to a circle of people who were cast out of favor due to their opposition to the war or willingness to associate with Very Shrill Howard Dean, that re-enforces my presumption. Stuff like the Kyl-Lieberman vote, the funny business on nuclear weapons, the “naive and irresponsible” bit all further re-enforces my presumption. And I think once you look at it that way, the whole race looks different. There’s been a ton of commentary about how Barack Obama hasn’t said or done anything to debunk people’s presumption that Hillary Clinton should be the nominee. And that appears to be true. But what if you don’t start with that presumption? And I don’t think we should. To me, the presumption that a candidate who can say he has a record of sound foreign policy judgment that can be contrasted with Republican X’s record of support for Bush administration fiascos makes a lot more sense than the presumption that Clinton should get the nomination.

All good points by Matt; this line of thinking could certainly seal the deal in favor of Obama for a person favorably disposed toward either of the two Democratic frontrunners, if such a person is basing his/her vote primarily on foreign policy and national defense.

I know there’s an argument out there that foreign policy is exactly what you should base your decision on, given the executive branch’s primacy in this area, and Congress’s prominence in domestic affairs. But dammit, the country’s domestic political economy is might screwed up at the moment, and, personally, I’m really jonesing for sanity, competence and proper priorities in this area, too. And here — at least from the little I’ve gleaned about Senator Obama’s positions from following the campaign — his instincts really seem worryingly off-kilter. Especially for someone who cut his political teeth as a community organizer. Obama’s views on Social Security strike me as particularly ill-informed, and his proposal to remove millions of old people from the income tax rolls is just bizarre. And his health care proposal is frankly awful. In a word, Obama seems to me like a real rookie when it comes to bread and butter issues.

Anyway, none of this may make much difference if a President Obama allows a more heavily Democratic Congress to set the agenda on domestic affairs, and said Congress is lead by Democrats with sound principles. But I’d feel much more comfortable voting for Senator Obama in the primary were he to show more substance on kitchen table issues — even if that meant — heaven forbid — modifying some of his earlier positions and risking the dreaded charge of flip-floppery.

Written by Jasper

November 20, 2007 at 5:51 pm