--The GOP only cares about pushing tax cuts. It has been "transformed from a balanced-budget party to a tax-cutting party."
--Supply-siders continue to push the dishonest argument that tax cuts pay for themselves with increased revenue. The past 30 years has illustrated that this is not true, and it's practice has resulted in ballooning budget deficits under three Republican administrations.
--Given the above, it's clear that--notwithstanding their rhetoric--the GOP doesn't care about budget deficits (Cheney admitted as much). They aren't campaigning on any tough spending-cut choices--they're only offering the "free lunch" of more tax cuts.
--Since the Republican party isn't serious about deficit-reduction, it's unlikely the Democratic party will do anything about it either. They need only look back to what happened when President Clinton left office: the "austerity" compromises the Democrats agreed to then lead to budget surpluses which simply gave the GOP an excuse to cut taxes again (and once again we returned to record deficits).
Unemployment is at a decade's-long high, and despite the supposed economic recovery, job growth has been anemic at best.
The Fed's core mission with respect to monetary policy is to "influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates."
Is the Fed achieving this goal? We remain at risk for a double-dip recession. Is the Fed fully utilizing all its tools to stimulate economic growth?
Bottom Line: The Fed shows no sense of urgency with respect to the current economic situation, and appears prepared to endure a weaker second half with no policy shift. Moreover, even if the economy does worsen more than they expect, the likely candidates for policy action are more smoke than fire. The Fed knows this, and doesn't want to lose credibility on actions with little likelihood of success. A more aggressive policy stance Gagnon-style appears off the table as long as the Fed fears the possibility that such policy might actually work and push up long term rates. That means more significant action only after outright deflation expectations are evident. Appears extreme, but central bankers tend to be a conservative lot. Lacking a financial crisis, the need for more action is not apparent to them. They fundamentally believe they have done pretty much all that can be reasonably expected. Moreover, we need to reassess the Fed's inflation comfort level; they may think they are hitting one mandate just fine.
The economy is sputtering and policymakers seemingly have no sense of urgency to do anything more about it. Evidently the Fed will not be changing monetary policy anytime soon. Congress apparently won't be adopting any stimulative fiscal policy beyond extending unemployment benefits. The resulting outlook is for continued high unemployment for many more months, if not years.
The gist of the story Clay weaves is how we've spent the previous 50 years staring at televisions but the internet enables us to finally talk back, and even tiny slices of the time wasted watching TV when applied towards some collective output can result in massive repositories of information like Wikipedia. He shows many contemporary examples of online collaboration beyond Wikipedia.org and breaks down the motivations for contributors that cites plenty of sociology, psychology, and economics research to back his points up.
It's now easier than ever to share your knowledge or ideas with others:
Back in the early days of the web and even blogging, you had to be a programmer, developer, or at least technically minded enough to write your own software, publish your own HTML, and manage your sites using many disparate tools. It was very much like the days of very early television where the guys that could control the cameras wrote all the shows because there wasn't any other way. In 2010, we thankfully have a ton of simple to use tools like Twitter, Tumblr, and Posterous that take the need to be a programmer or developer out of the equation and simply let anyone say what they want with minimal knowledge and minimal friction.
If we can capture just a fraction of our extra cognitive capacity, we can accomplish a lot. Information is Beautiful visualizes the potential with this graph:
Here's a talk Shirky gave a couple years ago on this concept (with part II). It's something interesting to chew on. Thanks to our chronic unemployment problem, we've now got more cognitive surplus to tap into than ever before.
The Wall Street Journal reports that state and local budget woes are leading to rougher road surfaces:
Paved roads, historical emblems of American achievement, are being torn up across rural America and replaced with gravel or other rough surfaces as counties struggle with tight budgets and dwindling state and federal revenue. State money for local roads was cut in many places amid budget shortfalls.
In Michigan, at least 38 of the 83 counties have converted some asphalt roads to gravel in recent years. Last year, South Dakota turned at least 100 miles of asphalt road surfaces to gravel. Counties in Alabama and Pennsylvania have begun downgrading asphalt roads to cheaper chip-and-seal road, also known as "poor man's pavement." Some counties in Ohio are simply letting roads erode to gravel.
It sounds like a temporary solution to recession-induced budget woes--cutting back on road maintenance costs while tax receipts are down. Thing is, changing a road surface isn't all that temporary,. like furloughing a worker. If you're grinding up the asphalt, you're likely doing away with the pavement for years to come.
There's another factor suggesting this may be a long-term trend rather than a quick budget fix: higher energy prices have made petroleum-based asphalt more expensive. Asphalt is made from bitumen, a by-product of oil distillation. Although bitumen is still quite readily-available, the recent surge in oil prices has made it more expensive to obtain and process the raw ingredients needed to pave roads. When the 2008 oil bubble hit, many counties and municipalities started cutting back on or deferring road projects before they saw a cataclysmic drop in tax revenues. I suspect that even if/when local governments are able to right their balance sheets, $80+ oil means we're not going to see repaving on the scale we once did.
The WSJ piece credits the automobile for the creation of our paved road system:
Paving grew in popularity in the early 20th century as more cars hit streets and spread when the federal government built the Interstate Highway System.
The bicycle, quite literally, paved the road for automobiles. The explosive popularity of the human-powered, two-wheeled vehicle sparked road construction across the Western world's cities. The League of American Wheelmen was a major vector for the political will necessary to build better roads with more than one million members (out of a mere 75 million people) at its peak. Sure they engaged in silliness like racing and bicycle polo (!) but at heart, the group was a potent, progressive social force that inadvertently helped bring about its own end by getting roads paved, thus making long distance "touring" possible in automobiles.
This is where the rubber meets the road for me. I don't often drive on remote, rural roads that are at risk for going gravel. But I occasionally bicycle them. And bicycles don't mix well with gravel, or chip-and-seal, or even potholes. So I hope graveling doesn't rear its ugly head in East Tennessee . . . at least not on any roads that matter.
I was listening to comedian Rush Limbaugh's rant against preventive medicine (Obamacare includes it, therefore it must be evil!) when I heard this beauty. It exemplifies the type of logical fallacy his listeners are constantly bombarded with:
And about this behavioral business, "Oh, yeah, we've really had a lot of success there." Remember when they told us, "You get people to quit smoking, and you get rid of secondhand smoke, and look at the health care cost savings that we'll have." Remember that? Oh, I do. I remember everything these little commie twits say.
I remember it, folks, because it's all BS. It is. Everything that comes out of their controlling, little, small minds is BS. So, "We can't have second-hand smoke, and if people will just quit smoking look at the cost savings in health care." Well, we've had a whole bunch of people quit smoking. In fact, it's very odd to see a smoker. The most commonplace to see a smoker is in a movie. On the screen not in the theater. Actors and actresses. That's where most smoking takes place these days. Yet last I heard, health care costs were skyrocketing at such a rate that we needed Obamacare to reduce the deficit. We've been successful with behavioral control. We have succeeded in convincing a vast majority of former smokers to give it up. Our health care costs, fshew! skyrocketed, as they continue to skyrocket.
In short, anti-smoking health policy advocates are wrong because they talked about cost-savings and health care now costs more than ever.
What's wrong with this analysis? For one thing it supposes that the only change accounting for a variation in health care costs between the 1960s and today is that now we have fewer smokers. In reality, there are plenty of non-smoking-related factors that have driven up the cost of care. Think of all the drugs, tests, therapies, machines, and specialists we use now that didn't exist forty years ago All of that stuff costs money.
Here's the catch: the reason smokers don't cost more is because they tend to die ten years earlier than non-smokers. Presumably anti-smoking health care advocates view death as a bad thing. That's one of the reasons they want people to stop.
Perhaps Rush (and his target audience) views premature death differently. Perhaps they welcome it. If I had to listen to that nonsense day after day, I might welcome it too.
You might recall how at the time that milestone was heralded as an earthshaking biological advancement--how it was going to usher in the age of personalized medicine where doctors knew in advance what health problems patients are genetically predisposed to develop and could treat them accordingly.
So has the Human Genome Project has been a bust? Was all the hype akin to the mid-twentieth-century predictions of flying cars?
Not exactly. Geneticists have made notable progress in their ability to plot the genome, they just haven't been able to figure out exactly what the markers mean. They're starting to find that some common genetic variations are statistically linked to certain diseases, but thus far those discoveries have only turned out to be one of a number of risk factors in predicting the disease.
What researchers need to do is map out many complete genomes to see if they can link rare genetic variations to diseases. Fortunately, this has now become technologically feasible:
Stunning advances in sequencing technology have cut the time it takes to decode a genome from a decade to a couple of weeks. The cost has dropped from $3 billion, about $1 for each of the genome's 3 billion chemical components, to less than $10,000, with the $1,000 genome in sight.
Geneticists will soon have a lot more data to crunch--whether or not it leads to meaningful advances in therapeutic medicine in the next decade remains to be seen.
Whenever this topic is raised one question I ask myself is this: How much do I want to know about my DNA? Do I really want to know that I have a strong chance of getting cancer, for example, particularly if there's little that can be done to prevent it?
A few years ago I would decisively said, "I want to know." And still today, on balance, I probably want to know. But a recent incident gives me more pause.
A few months ago I was experiencing some physical discomfort, so I went through WebMD and a couple other medical sites and looked up nearly all the diseases and conditions that might account for my symptoms. In the course of my investigation, I diagnosed myself with a number of serious--some even fatal--afflictions.
Suffice it to say, I don't have any of those diseases. But I got worried that I did. And, taken overboard, that reaction can be counterproductive.
If I'm getting worked up over the mere possibility of contracting a disease, even when I know the odds against it are high, imagine what kind of worrywart I might become if I'm armed with a little knowledge about my genetic predispositions? I can see myself going into red alert mode every time I experienced a fleeting symptom. It would be unhealthy for my emotional wellbeing.
For now it's a moot concern, since I haven't taken a DNA test. Perhaps by the time I do researchers will have found a cure for whatever disease that threatens me. Then I won't have to worry about it.
You know those people who say they will leave the country if candidate X wins the next presidential election? Now they have another excuse not to follow through with their threat: the expense.
Why does it cost so much? Congress has mandated that fees match the cost of services. Apparently a renunciation of U.S. citizenship generates a lot of work for a consular officer--it's a more involved process than simply deleting your name from the citizen list.
Incidentally, if you're curious just how one goes about renouncing citizenship, here's the general process:
A person who is a national of the United States whether, by birth or naturalization, shall lose his nationality by voluntarily performing any of the following acts with the intention of relinquishing United States nationality:
(5) making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state, in such form as may be prescribed by the Secretary of State; or
(6) making in the United States a formal written renunciation of nationality in such form as may be prescribed by, and before such officer as may be designated by, the Attorney General, whenever the United States shall be in a state of war and the Attorney General shall approve such renunciation as not contrary to the interests of national defense.
In most cases this requires that you make the renunciation outside the United States. It's possible to render yourself stateless if you renounce U.S. citizenship without having already acquired another nationality. With a few exceptions, renunciation of U.S. citizenship is an irrevocable--you cannot simply take it back if you change your mind.
So if you want to flee America to escape a Death Panel or some other threat, those are a few of the rules. But you better get cracking--come Tuesday it will cost you $450.00 more.
I usually find old newsreel movies to be interesting and/or entertaining. They offer a unique insight into how people at the time viewed the world, or at least how the powers-that-be wanted them to view the world. Often, they're also corny, whether unintentionally or by design.
(via Zero Hedge) Here's a 1933 film on how inflation can help lift the nation out of the Great Depression. At the time (as you can see in the nifty graphs) deflation was a millstone around the economy's neck. With prices falling, people had less of an incentive to make purchases immediately, so they hoarded instead of spent. And so the vicious cycle continued. Inflation was viewed as a means of getting money flowing again.
Today we see some economic parallels to 1930s deflation. Since the housing bubble burst, we've had significant monetary and credit contraction. Core CPI growth has remained below the Fed's target rate for price stability. People are saving rather than making the discretionary purchases that they used to make. It's a tough funk to get out of when you have a lot of extra productive capacity.
So we could use more inflation, and the federal government and the Fed have certainly adopted spending and monetary policies to promote it. The problem is--black and white propaganda film not withstanding--it's not something that policy makers can easily switch on or off whenever they desire. If it was, we won't have gotten in this mess to begin with. It's more like trying to turn around an aircraft carrier in a pond. They may or may not be able to turn the ship in the right direction. And, even if they do, they might not be able to keep it from running aground.
If only solutions were as easy as the newsreels made them out to be.
I've long been skeptical that our military efforts in Afghanistan will conclude with a happy ending. History has shown that occupying forces face strong headwinds when combating entrenched, highly-motivated insurgencies. This is particularly true in the treacherous landscape of Afghanistan--just ask the ancient Greeks, the British, or the Soviets.
For years it's been apparent that we have no clear exit strategy, or even a clear definition of victory, for that matter. Who and what are we fighting? Ostensibly we're there to combat the threat of al Qaeda terrorism. Yet CIA Director Leon Panetta recently stated that there may be fewer than 50 al Qaeda in Afghanistan. A majority of the fighters fled to Pakistan. So, as Fareed Zakaria asks, why are we continuing a major offensive in Afghanistan?
Now, last month alone there were more than 100 NATO troops killed in Afghanistan. That's more than one allied death for each living al Qaeda member in the country in just one month. The latest estimates are that the war in Afghanistan will cost the U.S. more than $100 billion in 2010 alone. That's a billion dollars for every member of al Qaeda thought to be living in Afghanistan in one year.
Look, I understand that al Qaeda is weak and small because we have been fighting them, chasing them, bombing their leaders. We should continue to do that. But why are we fighting this major war against the Taliban? Well, we fight the Taliban because they are allied with al Qaeda, so say people.
But if al Qaeda itself is so weak, why are we fighting against its allies so ferociously? This would be like fighting Italy in World War II after Hitler's regime had collapsed and Berlin was in flames just because Italy had been allied with Germany.
The whole enterprise in Afghanistan feels disproportionate, a very expensive solution to what is turning out to be a small but real problem. Beyond the military money, by the way, there's tens of billions of dollars that flow annually into Afghanistan in aid and logistical support. And how is that money being spent? Well, much of it is literally flying out of Afghanistan.
The "Wall Street Journal" says around $1 billion in cash is flown out of Kabul International Airport every year. As with most countries, private individuals may take money out as long as they declare it. The sums, however, that are leaving Afghanistan are staggering. $2,700,000 in cash is leaving the country every day, and that's only what's been declared. So more money is legally flying out of Afghanistan every year than that nation collects in taxes. The "Journal" reports that the exodus is so large U.S. investigators believe top officials in Afghanistan must be funneling billions of dollars to safe havens abroad. Now, some of this is inevitable. You have a very poor country in chaos and then tons of money pouring in from the outside, from the United States, Japan, Europe.
So my concern really remains the core one I started with. Why? Why are we investing so much time, energy, and effort when al Qaeda is so weak? Is there a more cost-effective way to keep al Qaeda on the ropes than fight a major land and air war in Afghanistan?
I would think there is a more cost-effective way: maintain a small network of military bases housing troops that can be deployed for firefights with any known strongholds al Qaeda may establish.
Instead, we've opted to go heavy, with nearly 100,000 troops and billions in long-term nation-building projects. In theory, it sounds like a good means of "winning hearts and minds" and establishing a western-friendly government. But in "Why West Lost Afghan War," Michael Scheuer contends that this approach is doing more damage than good. He asserts that even if we do succeed with such costly nation building projects (e.g., infrastructure improvements), the good will those material things generate still won't be enough to offset the resentment our occupation creates:
There are 3 million-plus more Afghan children in school today than in 2001; more electricity and potable water are available; many roads and irrigation systems have been rebuilt; and more primary health care is being delivered. Kilcullen, Nagl and their colleagues argued that such success would prompt the Afghans to turn away from the Taliban's religiosity and nationalism and isolate that purportedly small force from a population swelling with delight and loyalty to Karzai because of material improvements. In short, a social science-powered, mini-New Deal in Afghanistan would win with minimal use of US-NATO military power because Afghans would joyfully jettison God and country for better teeth and smoother roads.
Well, no such thing occurred. As the trend line for these accomplishments rose, the positive trend line for the Taliban-led insurgency rose faster. The once southern-Afghanistan-based insurgency spread across the nation; the Taliban and its allies struck in Kabul at their pleasure; and the large military/social-work operation to clear insurgents from Marjah District in Helmand Province--framed as the test case to validate US-NATO strategy--became, in McChrystal's words, an endless, 'bleeding ulcer' as the Taliban has gradually reasserted control there.
The enraging and unifying impact on Afghans of the US-NATO occupation of the country; Western support for the unrepresentative and corrupt Kabul regime; and the secularizing campaign by Western governmental agencies and NGOs has not and will never be negated by purer water and more refrigeration. The Afghans will appreciate and pocket the material improvements even as more of them take up arms to drive out occupiers they perceive as the enemies of God and Afghanistan. Western leaders should have recalled they're not fighting Westerners, for whom more ice cubes and tetanus shots might have been enough to give up their faith.
If Scheuer is correct about the mindset of Afghans--I trust he knows more about their culture than I do--this bodes poorly for our prospects of ever having our military fix the failed Afghan state. We'll never make them happy. We'll just keep spinning our high-tech wheels in that tribal morass--staying the course!--for X more years and ultimately arrive at a destination not much different from where we are today.
After I last updated my Movable Type installation (why I continue to use the platform is a mystery even to me) I noticed that--for whatever reason--it changed my web syndication location to:
http://www.brianarner.com/weblog/atom.xml
Because some subscribers might not have been aware of the switch, I'm changing it back to the old address:
Wednesday morning Chicago Federal Reserve president Charles Evans appeared on CNBC's "Squawk Box." We don't often see a person in his position giving such an open interview on TV, and his observations are an interesting insight into what the powers-that-be are seeing.
I've summarized his comments below the video link.
--Predicts 3.5% economic growth for 2010, including the second half.
--Is cautious about reading too much into one or two sluggish monthly economic reports.
--Has gotten feedback from many companies suggesting that they currently have the right-sized workforce to meet demand, thus he thinks jobs growth will continue to be weak for months, as employers have no reason to do much hiring. Corporate managers have told him that they can meet future demand growth largely through increases in productivity, but he thinks it will eventually lead to more hiring.
--European financial woes do pose a risk for the U.S. recovery. It's creating a "headwind" against our moderate recovery.
--Much of the business demand we're currently seeing is replacement demand rather than expansionary demand.
--Uncertainty regarding future government policy is not a significant brake on business growth plans.
--The Fed will not be tightening monetary policy anytime soon because we are not seeing normal price stability (deflation risk) and we are under performing the Fed's goal of promoting maximum employment growth.
--Inflation will remain under 2% (a target range) for the next three years or more.
--Thinks the Fed has taken extraordinary steps to fight deflation and doesn't think it will do much more on that front unless conditions deteriorate.
--Doesn't foresee jobs growth in the next year exceeding 100,000-200,000/month. Unemployment will remain historically high for years.
--Commercial real estate loans continue to pose a risk for financial institutions.
--Is wary of the government's ability to effectively promote growth through additional fiscal stimulus at this point in the economic cycle. However, he believes last year's large stimulus bill was useful and necessary in helping the economy bottom out. Among other effects, it provided a psychological reassurance when it looked like we might fall into the abyss. It's difficult to quantify the benefit of the stimulus bill because it's hard to prove what didn't happen in the alternative.
--Says there's nothing "average" about the recent recession and ongoing recovery, thus comparisons to the time frames of previous recoveries are not very illuminating on what we should expect today. Thinks we will have a prolonged period of sluggish growth compared to our previous V-shaped recoveries.
--Is cautious about implementing any additional short-term stimulus programs that essentially just push demand forward (e.g., first-time home buyer tax credit).
--State budget woes pose a clear "headwind" to national economic growth.
