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.

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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.

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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.

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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

Declining cities and vicious circles

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There’s been a lot of talk lately — indeed it’s renewed talk as we slide into hard times and deal with the foreclosure crisis — about the decline of American rust belt cities. I’ve long held the view that we truly exacerbate our urban ills with bad public policy choices — or at least bad public policies born out of accidents of history.

It’s clear to me that, in America at least, local governance — and especially the way local governance is financed — contributes to the sort of longer-term, truly pernicious urban decline apparent in places like Detroit and Cleveland, or in some of the smaller cities in my own backyard such as Lawrence or Brockton. I would argue it is bad policy to require a municipality to raise the bulk of its revenue from its own local economy. It would be wiser for all revenues to be raised at the state level; the economy of an entire state is larger than that of a municipality, after all, and therefore subject to less volatility. Raising all local governance money in a centralized fashion at the state level — and then distributing funds back to municipalities on a per capita basis — would help deteriorating cities resist decline. Under status quo arrangements (which typically require municipalities to rely heavily on the property values within their borders to finance local services), once economic decline sets in, it is often next to impossible to reverse, as a vicious circle is set off: A flagging economy and declining population reduce property values, which in turn decimates tax collections, which in turn makes it difficult to pay for adequate schools, infrastructure and public safety, which in turn exacerbates the economic decline and population exodus…

Centralized, state-level funding of local governance isn’t a magic bullet. But it is a concept that ought to seriously be considered as a means of arresting the seemingly inexorable decline of America’s hardest-pressed cities

Written by Jasper

November 18, 2007 at 11:51 pm

Posted in Cities, Economics, Policy

School choice: like kryptonite to liberals

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Ezra criticizes supporters of school choice, citing the example of a voucher program in place in the D.C. school system:

Given that a lot of this conversation (about vouchers) has actually been about the DC public school system, this data is relatively important. Again, it doesn’t mean that experimentation couldn’t have positive impacts — say, under charter schools, where pubic accountability is retained — but this intense focus on vouchers stems from a commitment to economic orthodoxy, not because the programs have any proven results.

I frankly don’t get the reluctance of my fellow economic liberals to support injecting competition and choice into the K-12 model. I agree that libertarians have a lot of nutty ideas with respect to the role of government and the efficacy of markets (they underestimate the former and overestimate the latter). But it seems to me they’re basically correct about the desirability of funding students instead of funding schools.

Now, just to clarify, I’m not some kind of concern troll here. On this and other forums I’ve called for an additional $600 billion in federal safety net enhancements (that’s totally doable, by the way — we’d only be looking at an additional 4-5 points of GDP, which would still leave us way south of the EU average). And I want to see this type of government funded with a rather Nordic combination of progressive income taxes and consumption taxation. Give me Denmark in America, baby. There’s no question but that I’m an economic liberal of a rather robust sort.

But as long as government is willing to spend what it ought to be spending, it seems to me it shouldn’t be engaged in actually owning, managing and operating the facilities that provide services (such as schools) unless there’s no alternative, or unless there’s some utterly compelling reason it’s better to do it this way. You don’t have to be a loony libertarian to like the cool things given to us by free markets. I likes me some big robust safety nettage and very free (albeit prudently regulated) markets.

And any way, lots of government benefits are already portable: Medicare, Medicaid, Food Stamps and Social Security to name a few. I would imagine the quality of, say, grocery store services enjoyed by retirees or poor people genuinely would suffer if, instead of issuing Food Stamps and Social Security checks, we “assigned” the recipients of such programs particular stores where they were required to do their shopping (the only way out being the purchase of an expensive address in an pricey “shopping district” where they have fancier stores). Anyway, I suspect we are already getting some sort of reduction in the quality of public education because of a similar lack of competition in public K-12. I don’t think this is a liberal or conservative thing. I think it’s simple human nature. Unless the possibility of failure exists (ie., losing your customers to the competition) there’s simply no sufficiently powerful leverage to insure that schools — just like, say, software companies and hospitals and law firms and universities – are constantly striving to improve their “product.” The latter institutions are all capable of losing their customers. But K-12 public school mostly aren’t.

I rather have the notion that school choice is for American liberalism what, say, the politics of homosexuality is for American conservatives. Surely a lot of libertarian-minded American conservatives know in their heart of hearts that, in addition to being immoral, it’s simply nonsensical to base much of your platform on being nasty to gay people.

Similarly, most liberals these days are perfectly comfortable with free markets. We enjoy the better restaurants, fancy IPhones and improved coffee competition brings us. Indeed, we’re quick (and rightly so) to sic the Justice Department on would-be monopolists, because we know restraint of trade harms society.

So, why, when there are no reasons based on technical feasibility or efficaciousness to oppose a market approach to K-12, are we so stubborn? After all, such liberal societies as Sweden and The Netherlands have apparently enjoyed pretty good success with allowing taxpayer money to follow students to the schools of their choice. And indeed in America we ourselves have enjoyed world-leading success with the way we structure post secondary education– a sector characterized by competition, choice, and funding portability. A sector, in other words, that is structured a lot like a voucher program.

Written by Jasper

November 5, 2007 at 9:24 pm

A little Sunday Wal-Mart bashing

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Kevin Drum thinks Wal-Mart can do better by its employees:

Labor expenses only amount to about 10% of revenues for Wal-Mart. If you increased the pay of every single clerk, greeter, and stocker in the chain by two or three bucks an hour, it would only increase Wal-Mart’s prices by about 2%. Their prices would still be the lowest around because it’s not labor costs that account for most of their efficiency. It’s world class logistics, aggressive offshoring, enormous sales volumes, and ruthless bargaining with suppliers that account for most of it. If Wal-Mart had to offer low wages and lousy benefits just to stay in business, that would be one thing. But they don’t. We should expect them to do better.

Personally I think this is the wrong approach. Wal-Mart no doubt could afford to pay higher wages, but, like nearly all companies, they don’t pay more than they have to to attract and retain the workers they need. Pfizer or Goldman Sachs don’t pay the wages they do because they’re nice firms, they pay the wages they do because they have no choice: workers who possess such skills as analytical chemistry and currency arbitrage are more expensive than shelf stockers. And, although offering a “buck or two more” might not break the bank for Wal-Mart, offering significantly more robust benefits probably would have more of an adverse effect on their profits than Kevin’s glib assessment indicates. Health insurance is very costly in America. Unlike other, wiser nations, we rely on employers to act as purchasing agents for health benefits. It’s a stupid practice. Wal-Mart and McDonald’s shouldn’t be disparaged for a rational response to a policy that is not their fault.

I think Liberals waste a lot of energy engaging in corporation bashing. A company’s job is to make money. Not to provide for a just society. That’s government’s role. By all means spend more money on a stronger social safety net and universal healthcare, and raise taxes if you have to. But let companies get on with what they know how to do best: generate profits for their owners.

Written by Jasper

September 30, 2007 at 3:24 pm

Posted in Economics, Policy

Farm subsidies: even worse than you think

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Matt Zeitlin takes Robert Samuelson to task, not for his opposition to farm subsidies, but for his poor argument:

Robert Samuelson should be shooting a fish in the barrel, launching to a perennial column about the the evil of agricultural subsidies. Before I criticize Samuelson, let me make something clear, I support the total elimination of all agricultural subsidies, protections, tariffs, quotas and price supports. Not only do they distort the domestic market, but they also have a fair amount of culpability for hundreds of thousands of deaths and persistent poverty in the agricultural sector of the third world. Samuelson, seemingly afraid to argue that having a domestic supply of food isn’t all that important, tries to go the other way and ensure his readers that even without agricultural price supports and subsidies, there’d still be agriculture in the US…

I’m not going to re-quote the lengthly Samuelson excerpt Matt provides. I will key in on one conclusion he (Zeitlin) arrives at, however, that I believe is erroneous (even as I wholeheartedly agree with both Zeitlin and Samuelson about the evil of agricultural subsidies):

So if the US meat sector is doing well, it is largely because we subsidize it indirectly through keeping the price of corn low. This is, however, not an argument against getting rid of subsidies.

I’m extremely skeptical of Matt’s argument here, but it’s one I hear often. I think there’s a widespread belief out there that, although farm subsidies are a harmful policy as a whole, they at least keep food cheaper. I’m pretty sure this logic isn’t sound however, and here’s why.

In a nutshell, taxpayer money flowing to farmers tends to prop prop up inefficiency. Without subsidies, some acreage devoted to corn or soybeans or whatever would indeed be allowed to go fallow (or converted to golf courses, or whatever). But, to the extent that the domestic market (read meat producers and food processors) demanded it, any decrease in US agricultural output created by the ending of government subsidies would simply be met by higher efficiency farms. In other words, farmers in Iowa or Alberta or Brazil would meet the demand, and they’d do so on an economically efficient basis (otherwise they’d not be profitable). Over the long term this would almost certainly have the effect of lowering the price of agricultural commodities, and, by logical extension, meat and other foods.

By “enabling” inefficient producers to stay in business, or to control greater market share, or simply to produce less efficiently than they would need to in a subsidy-free environment, taxpayer supported subsidies mean that animal feed and other agricultural commodities are probably more expensive, and this must surely hurt the profits of meat producers. It also means we all get hit with higher prices at the dinner table.

Farm subsidies indeed create all kinds of economic distortions, and they absolutely hammer both taxpayers and developing world farmers. Thing is, though, they’re even worse than most people think.

Written by Jasper

September 17, 2007 at 9:19 am

Iraq policy: just how crazy?

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Matt Yglesias talks about possible motivations behind US policy in Iraq:

…while the absence of political reconciliation is probably Iraq‘s biggest problem, it’s not a particularly large problem for the American military presence. On the contrary, a unified Iraq — especially one swayed by Iraqi public opinion — might be very likely to give the US the boot. By contrast, in a divided and chaotic Iraq one can easily imagine the main players resenting the US presence but preferring it to anarchy. Indeed, Bush seems to have convinced both the Maliki government and the Anbar Salvation Front that they need American troops to protect them from each other. Meanwhile, the Kurds want us to defend them from the Turks, and the Turks want us to keep the Kurds in line and there’s really no sign of an end to the tensions and violence. From one point of view it looks like a quagmire, but from another point of view it’s more-or-less ideal.

It’s really really really hard for me to believe that even some of the certified crazy people running US foreign and defense policy these days think our current situation in Iraq is “more-or-less ideal.” Unless they’re a whole lot more fucking crazy than I thought.

First, the meat grinder that is Iraq without question is putting enormous stress on the US military, and is surely negatively impacting its effectiveness. How the hell would would the US be able to respond to an outbreak of trouble in, say, East Asia? How can that be “ideal”? Moreover, the Iraq debacle is costing the Treasury over ten billion a month, if you believe the wildly conservative, unrealistic estimates (which fail to properly account for things like medical costs for rehabbing vets, etc.). Even for a country as rich as the US, writing an eleven figure check every freaking month ain’t chicken feed. What’s so vital about Iraq’s geography that couldn’t be emulated a lot more cheaply by bases in Kuwait or the UAE?

I’m personally no longer able to perceive any rational basis whatsoever behind US policy in Iraq. It’s now all about George Bush’s worries with respect to the history books.

Written by Jasper

September 16, 2007 at 7:29 am

Britain, guns, and the American model

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According to Briton Richard Munday,

America’s disenchantment with “gun control” is based on experience: whereas in the 1960s and 1970s armed crime rose in the face of more restrictive gun laws (in much of the US, it was illegal to possess a firearm away from the home or workplace), over the past 20 years all violent crime has dropped dramatically, in lockstep with the spread of laws allowing the carrying of concealed weapons by law-abiding citizens. Florida set this trend in 1987, and within five years the states that had followed its example showed an 8 per cent reduction in murders, 7 per cent reduction in aggravated assaults, and 5 per cent reduction in rapes. Today 40 states have such laws, and by 2004 the US Bureau of Justice reported that “firearms-related crime has plummeted” In Britain, however, the image of violent America remains unassailably entrenched. Never mind the findings of the International Crime Victims Survey (published by the Home Office in 2003), indicating that we now suffer three times the level of violent crime committed in the United States; never mind the doubling of handgun crime in Britain over the past decade, since we banned pistols outright and confiscated all the legal ones.

Anyone else agree with me that Mr Munday uses some mighty deceptive statistics?

“Violent crime” means different things in different places. The bar fight meriting a simple police caution in one country results in felony assault charges in another. By the “gold standard” in objective crime statistics — murder (you can’t fake a corpse, after all) — the United States reigns supreme among rich countries, with a rate three time that of the United Kingdom. Surely all of this disparity cannot be attributed to America’s lax gun controls. But surely some of it can.

It makes sense to allow law-abiding citizens to own firearms provided simple precautions are in place. But in America many of the fifty states eschew even the most basic, common sense controls, resulting in a surreal excess of guns that renders laws aimed at criminal gun use utterly meaningless and unenforceable.

It ought to be possible to allow law-abiding citizens to own guns while denying their use to criminals. Unfortunately, one cannot look to the United States to find out how this is done.

Written by Jasper

September 7, 2007 at 11:04 pm

Posted in Crime, Policy

Long live flexicurity

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A great Ezra Klein comment thread was generated from his post entitled: Wal-Mart and the Mom-and-Pops. I won’t do a major excerpt (read the whole thing), but will just mention that a sub-discussion got involved using the example of Wal-Mart, and its efforts to browbeat the maker of Crest into lowering prices, and how this cycle plays out in the form of poor wages and benefits for workers. Anyway, one commenter opined that

It’s a stupid argument that Wal-Mart or Crest or any other company can thrive only by treating workers like shit and paying them little.

Yes, but who exactly is arguing that undervaluing workers is the “only” way a company can thrive? Talk about straw man arguments. Obviously plenty of enormously successful private sector employers in the United States pay excellent wages and benefits. Indeed, American workers are some of the world’s most expensive. The key question is: what if any role should government play in mandating how much workers should cost.

While it may be true that sometimes firms can prosper quite nicely while paying a relatively high price for labor (see Ford Motor Company circa 1928) it’s equally true that employers can sometimes perform pretty dismally while overpaying for labor (see Ford Motor Company circa 2007). All in all I’d just as soon have a firm’s owners, and not government, determine how much they can afford to pay for labor. I doubt Goldman Sachs or Boeing or IBM or Pfizer are paying more than they have to for their American workers. It’s just that the going rate for skill sets in those fields is high — a lot higher than the going rate for the skill sets involved in stacking shelves or flipping burgers.

Not that workers doing these types of less skill-intensive tasks ought to be treated badly. Far from it. They ought to enjoy — like their counterparts in other rich countries — the generous protections of a robust, taxpayer-supported safety net. The big advantage to relying on government for social protections — rather than private sector mandates — is that government is too big to fail. One can certainly imagine a GM, say, or a Caterpillar having trouble paying for healthcare or pensions. But the United States government is very unlikely to give up ownership of its printing presses.

Very robust safety net + very free markets: the Nordics have it right.

Written by Jasper

September 6, 2007 at 5:41 pm

More on housing

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A commenter on Greg Mankiw’s blog opines thusly on one of the various plans being floated to help financially distressed homeowners:

As someone who is saving for a down payment for a house in the DC area, I’m selfishly against it. I want the foreclosed houses coming on the market droping the prices.

Hmmm.  About the only thing I can think to say in reply is: AMEN.

I don’t think anyone welcomes the prospect of an increase in homelessness, but giving your house back to the bank and re-joining the ranks of the renters is hardly the same thing. This is the problem I have with all the current schemes out there designed to help people stay in their homes: they’re anti-free market in a most fundamental (and unwise) way. And yes, they’re also very unfair to a class of people who tend to be (on average) even poorer than financially stressed homeowners: renters.

Written by Jasper

September 4, 2007 at 5:38 pm

Posted in Economics, Policy

Subsidizing the American Dream

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Matt Yglesias ponders government policy with respect to home ownership:

If we didn’t subsidize howmownership, people would own less home and own more stocks and bonds instead. Some of that owning “less home” would come from people renting rather than buying, and some would come from buyers simply buying smaller houses. That’s be good for the environment, and more capital would be available for business operating in non-housing sectors. Meanwhile, I feel like if we weren’t specifically encouraging an ideology of home ownership (“American dream” and all that), you might get less of the risky behavior that seems to be causing trouble of late. I feel like there are a lot of people who would never dream of doing something so exotic as margin trading who’ve been basically willing to do the same thing with their investment in the housing market. If anything, it seems to me that we should be work at the margin to discourage people from treating their homes as speculative investment commodities.

A number of Matt’s commenters raised objections to the above line of thought, perhaps best summarized by the line:

Homeownership is encouraged to make sure economics and democracy are properly aligned.

That’s all well and good, but this still doesn’t say why government (as opposed to, say, one’s family or friends, or the desire to have a golden retriever,  or the wish to paint one’s living room midnight blue) needs to “encourage” the consumption of owner-occupied housing — especially via massive tax code subsidies as is currently the case. I mean, if it were a matter of, say, having a 30% home ownership rate vs the actual 69%, the mortgage interest deduction might make more sense. But there are plenty of good reasons to own a home entirely independent of the government cash involved, and countries whose governments subsidize home ownership to a lesser degree than ours (Britain, for instance) enjoy home ownership rates comparable to America’s.

Thing is, it’s not even clear the tax code actually boosts the ownership rate, because that’s not the same thing as boosting the consumption of owner-occupied housing (which current policy most assuredly does accomplish). I think it’s entirely possible that the increase in the consumption of owner-occupied housing observable in increases in average home size and amenities (and, of course, price) largely cancels out hoped-for gains in the ownership rate (especially in areas where the subsidized increase in demand can’t easily be accommodated by new inventory).

What we should be asking ourselves is: is the cost of the tax subsidies and attendant misallocation of capital justified by the extra (say) three points of home ownership we may (or may not) gain as a result.

My guess would be “no.”

Written by Jasper

September 3, 2007 at 11:34 pm

Posted in Economics, Policy

A false choice?

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Will Wilkinson is skeptical of Ezra Klein’s claims about middle class economic anxiety. He also believes the benefits flowing from globalization strongly outweigh the negatives:

I think lots of firms will be seeking less-expensive foreign labor, that this will have a significant effect on the jobs available to Americans, but also on the price of many goods and services (down) and on the incentives to acquire new and/or improved skills (stronger).

Although I don’t disagree with any of this, and although I’m a committed fan of globalization, I’m skeptical that a government guarantee of health insurance, say, or a dollop of wage replacement insurance for those too old to make the transition into a new career would do all that much to blunt the incentives to upgrade skills. Moreover, I’m increasingly convinced that lack of health/economic security is exerting at least some negative impact on the ability of Americans to fully partake of the so-called “Ebay economy.”

I guess what I’m saying is that I suspect to a substantial degree we can have our cake and it eat it, too: Sam’s Club protections combined with Brave New Economy opportunities and efficiency. I reject the notion that we must choose either/or because it least appears to my eyes that a number of other places (New Zealand? Ireland? Canada?) are rejecting this false choice to their great benefit.

Written by Jasper

September 3, 2007 at 4:34 pm

Survival of the fattest

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“British School Kids Shun Healthy Foods” thunders this AP headline picked up by The NY Times:

Please sir, we don’t want any more! Naked Chef Jamie Oliver’s push for healthier foods to replace greasy french fries, chicken nuggets and turkey twizzlers on British school menus is in a twist. Apparently, the students aren’t anxious to try it. The celebrity chef has led a nationwide campaign to improve the quality of food served in schools, demanding more money for meals and a ban on junk food. His TV series ”Jamie’s School Dinners” exposed how cafeteria menus relied on prepared foods like chicken nuggets or the turkey twizzler — a corkscrew of mainly reconstituted turkey scraps and preservatives. Such meals, usually served with piles of fatty french fries, could cost as little as 66 cents. Spurred to action, the government set up the School Food Trust in 2005 to help schools improve the quality of their food. Sample menus for the new program included vegetarian quiche, lentil burgers and mushroom tagliatelle. But more than 424,000 students opted out of their school meal plans in the first two years of the program, according to government figures obtained by the opposition Liberal Democrats and released Monday.

You mean to tell me that a government’s efforts to get a group of people to eat healthily is being trumped by homo sapien’s five million year evolutionary history — you know, the one that favored the survival of those who love to eat fatty, carb-laden, calorie-rich foods to better ward off the next episode of famine?

I’m shocked, I tell you, simply shocked!

Written by Jasper

September 3, 2007 at 3:19 pm

Beggar thy neighbor

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Kevin Drum brings to our attention an LA Times opinion piece by one L. J. Williamson, who apparently is miffed at the efforts of the lunch ladies to get a little health insurance:

Part-time food service employees are seeking the same health benefits — including coverage for their families — that their full-time counterparts enjoy. Extending these benefits to cafeteria staff who currently work only three hours a day would cost an estimated $40 million a year, according to school board calculations…This is fat that the food service’s too-lean budget simply doesn’t have. If health benefits were extended to these part-time workers, the CFPA estimates it would mean that the per-plate meal budget would be reduced from 85 cents to 49 cents. Making healthy food available for that amount would take a miracle of biblical proportions. So we’d be improving the healthcare of nearly 2,000 part-time workers at the expense of the 500,000 children who eat in public school cafeterias every day.

In reply comes a morning rant from Kevin:

It’s true that the growing gap between public workers and private workers is a real problem. In the past, there was something of a tradeoff: public sector workers generally got paid less than private sector workers but made up for it with job security and benefits. Today, though, public workers generally get higher salaries and better benefits and more vacation and earlier retirement and more lucrative pension packages compared to comparable private sector workers. And private sector workers are understandably annoyed by this. But their annoyance would be better directed not at the lucky public sector workers, but at the mahogany row executives and conservative politicians who pretend that the only possible use for the mountains of cash generated by decades of economic growth is to give it all to mahogany row executives and the billionaires who contribute to conservative politicians.

That Drum fellow sure can write.

Written by Jasper

August 28, 2007 at 7:17 pm

Britain’s murder spike

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Iain Dale discusses Britain’s recent increase in gang-related, US-style gun homicide:

All the evidence points to the lack of a male role model being a key part in a child’s descent into dark places. That’s not criticising single mothers, it is just a statement of fact. Chances are that a child with two parents will emerge into adulthood as a more rounded individual that if it doesn’t have two parents. This is especially true in inner city areas. This cannot be turned around within a few years, but if we do not do something in our education system to explain the benefits of duo-parenthood then if the current trend continues I fear not only for the future of our inner cities but wider areas too. As someone who in the past has aspired to hold political office, I don’t mind admitting that issues like this leave me reeling. I admire those who are thinking about the answers because I suspect very few of us can point to individual measures which we could take immediately to make a difference. Should we be adopting zero tolerance policies in inner cities, or would that push the crimes out into the suburbs? Should we seek to understand less and punish more, or would that entrench criminality for life? Whatever we do, we must learn from other countries. It’s clear that parts of our major cities are experiencing the kind of violent crime which used to afflict many major US cities. We need to learn from from them how they have tackled it and reduced it. New York is not the only example to look at. But we need to do it quickly.

It seems to me the sociological “causes of crime” approach is overly ambitious. Provide people with a good economy and solid education system by all means, but there’s not a whole lot that government can do besides that. All this talk of lack of role models and the bad influence of gangsta culture leaves me underwhelmed. While no doubt these things do add to an atmosphere that encourages violent crime, what exactly can government do about them?

Last time I looked Britain’s murder rate was still only 1/8th or so of America’s, so the British must be doing something right. As a Yank, I’d frankly be tickled pink if the USA had to deal with Britain’s (much smaller) violence “problem.” I mean no disrespect to the victims or families impacted by the recent violence, of course. But by world standards the United Kingdom is still a remarkably peaceful place.

What government can do, of course, is provide swift, efficient justice and effective policing targeting those who commit violent crimes, and those who would seek to profit from violent crime through the black market sale of firearms.

A big part of “effective and swift justice” means putting violent offenders in prison, where they no longer represent a threat to the general public. Imprisoning large numbers of people should make everyone a bit squeamish. And America’s record in this respect is frankly a national scandal (America imprisons a shockingly high percentage of its population). What I don’t think is right is to put huge numbers of non-violent offenders in jail. But I don’t see an alternative to putting away the violent ones. And without a doubt, such a strategy has played an important role in helping the US reduce the incidence of violent crime. It’s not pretty. And it sure isn’t cheap. But building prisons and confining violent criminals inside them has to play a role in any civilization’s quest to protect itself from its most violent elements.

Finally, though there’s not much that can be done about knives (we all have to cut our meat and vegetables, after all), I suspect Britain could redouble its efforts to remain a relatively firearms-free country. Again, this isn’t cheap, and will mean hiring more police specifically charged with the task of going after the illegal guns trade. But making it once again difficult to obtain an illegal gun in Britain will surely go a long way toward reducing the level of murder and mayhem on British streets. As I have argued on numerous occasions (and regrettably to little effect) to pro-gun Americans, being forced to rely on knives and fists turns many a would-be murder into a survivable assault.

UPDATE: I don’t know where I picked up that “Britain’s murder rate is 1/8th of America’s” stat. Well, actually I do, but the blog in questions shall remain nameless. Anyway, I don’t have a link at the moment, but I think recent statistics show America’s murder rate is “merely” triple that of the United Kingdom, not eight times.

Written by Jasper

August 26, 2007 at 6:10 pm

Posted in Crime, Culture, Policy