Platinum Coin Seigniorage Sounds Awesome

The more I think about minting trillion-dollar platinum coins to balance the budget, as an answer to debt ceiling problems or just for its own sake, the better it sounds.

The big problem with creating new money is that it might cause more inflation. But this is the time when we need more inflation! We need more people with money to think that their money is going down in value if they save it, so they'd better spend it now. That's how you escape the liquidity trap where nobody spends or invests because they're worried about their financial situation. Give them a reason to spend or invest (in the latter case, to develop resources that'll catch the fresh money coming into the system) and they'll be the demand you want.

That's the short-term way to put the case, but there's a long-term way too. If people on the Fed always feel that they shouldn't actively pursue looser money because that's not the stodgy banker thing to do or the rich cashed-up guy thing to do or whatever, they're always going to pursue excessively tight monetary policy. Turning fiscal policy into a vehicle for monetary loosening by setting a precedent for balancing budgets by minting platinum coins offsets the institutional bias towards excessively tight monetary policy.

Progressives should note that there's also a good distributive justification for inflation. Who has lots of cash? Rich people and rich corporations, almost by definition. Who doesn't have much cash? Poor folks and especially people in debt, who kind of have negative cash. So if you reduce the value of cash relative to other assets, you're putting poor people (who just have their future labor and some debt) in a better position relative to rich people (who have cash). Distributive win!

A Day At The Beach In Israel

I have to finish fixing up my defense of ethical hedonism for a talk at the University of Melbourne today, so I can't write any especially long blog posts. So let me link to this happy story about Israeli women who snuck Palestinian women to the beach so they could swim and have a good time. Because of laws restricting their movement, many of the Palestinians had never seen the sea before despite living so close to it. There's also a slide show.

Pessimistic Historical Revisionism

While perusing, I found this piece from digby, which gives me a chance to talk about something other than the inanity of our current political discourse. Money quotes towards the end:

It will be unlikely that we'll ever have the kind of leverage we had in 2008, with two candidates neck and neck for the nomination up to the very end and a totally pathetic opposition, unfortunately. But if liberals had resisted the urge to turn that primary into a season of American Idol, there might have been a chance to shape the administration in ways that would be difficult for him/her to escape.

On the contrary, liberals had an enormous effect on the policy debate during the Democratic Presidential Primary. The health care plans of John Edwards in 2008, Barack Obama, and Hillary Clinton were all dramatically to the left of the proposals from John Edwards in 2004, John Kerry, and Howard Dean, none of whom attempted to guarantee health care coverage to all Americans. Likewise, all major candidates signed on to some form of cap-and-trade legislation, something that didn't happen during the previous primaries. The Professional Left^TM ought to be proud of its accomplishments during the most recent Presidential cycle.

The reasons that the Liberal Dream have yet to be enacted stem from the composition of Congress more than. Cap-and-trade failed because even with sixty Democratic Senators, a large number of coal state Democrats were hesitant to enact the House bill into law. The fact that the 112th Congress is producing more conservative policy outcomes than the 111th Congress—which almost certainly produced the most liberal legislation since the late Johnson Administration—was baked into the cake on Election day in 2010. It's true that Republicans' "you will always receive zero votes that support even part of the President's agenda" attitude represents a new legislative strategy, but surely that can't be due to fact that Barack Obama is President instead of Hillary Clinton, nor that Obama promised to enact single payer through executive fiat during the primaries.

It's possible that a President who was less interested in early conciliatory gestures would be producing less conservative outcomes than Obama. And the administration's tone concedes the Republican worldview in a way that drives me crazy, rather than arguing for first-best policy results and then bending policy to political necessities. But the major driver of the craptacular debate we're getting now is the composition of Congress, not the personality traits of the President. If you want somewhere to focus your energies, start there.

Anders Behring Breivik And Osama Bin Laden

I imagine that Osama Bin Laden would've been absolutely tickled by the Norway massacre if he had been alive. I'm sure he saw 9/11 as the beginning of a big cycle of brown people killing white people and white people killing brown people. And sure, there'd be some brown people killing brown people in there too, because that's how a big military conflict in Afghanistan or Pakistan or Iraq is going to go. But a terrorist who looks like Draco Malfoy's uncle killing white Norwegians? Nifty.

Sorry for focusing on something trivial -- it's just that as a blogger I try not to tell people what they're already thinking, and there's not much I can add to your appreciation of the abject horror of so many young people being brutally murdered.

The Future of Pot

Keith Humphreys has an interesting item up, reminding everyone that nationwide marijuana legalization would lead to a pot industry that would probably look a lot like the tobacco industry or the processed food industry, with a handful of large companies employing white-shoe lobbyists to fight taxes and regulations. Indeed, estimated domestic spending on pot is just over half our current spending on tobacco, and legalization would almost certainly drive up the spending on pot. While that's almost certainly the end game, one wonders if we'd see an intermediate period where no major food or tobacco producer wanted to be the first one to dive headfirst into selling weed.

Instead, we might have a period of experimentation where smaller, "edgier" companies rush to fill the niche, similar to the energy drink and alcoholic energy drink crazes. Eventually the majors would decide they wanted in on the action, but I suspect we'd see a bunch of bit players jostling for market share before being acquired by Coke, MillerCoors, Annheuser-Busch-Inbev, Philip Morris, etc.

(cc photo by flicker user Aaron Plewke)

Spotify: First Impressions

I lucked into a Spotify invite earlier this week, and while the service has its pluses, it's a nice way to playing music, including music you don't own, it doesn't give you a good way of discovering new music. So you've got millions of songs to choose from, but someone's got to help you figure out what to listen to first.

Using Spotify on a computer is more or less like using iTunes, Winamp, or any other music player, only with the added benefit that "your library" includes both the songs on your hard drive the estimated 15 million songs in their catalog. Their selection is good but not perfect; I was able to find a handful of tracks that aren't available on Amazon's MP3 store, though a few UK remixes and albums from smaller pop-punk bands were still nowhere to be found. If your tastes in music run into obscure artists or remixes, Grooveshark is still the best bet. The basics of managing playlists, including Smart Playlists based on genre, rating, artist, etc., are all there. Also, if you're the type of nerd who likes to use last.fm to track your listening habits, Spotify integrates easy with your account there. The client is not web-based—it's a standalone program, similar to other music players—and in my brief use it felt more responsive than iTunes or Winamp, though I hear that the most recent iTunes update included a number of performance improvements.

Spotify is free if you're listening on a computer while connected to the internet, though you'll be paying for your music with time, as the audio stream will insert ads in between songs. For $10/month, you can access their entire catalog on a smartphone, as well as download songs for offline playback if you're headed somewhere without very good 3G coverage.

What Spotify doesn't do is give you a good way to find new music in their giant catalog. One would think that one of the great uses of having such a large music catalog would be to expose listeners to new music in the hope that they might go buy it. That's the idea behind Pandora, Last.fm, Rdio, and ZunePass. Believe it or not, ZunePass has exactly what it is I'm looking for; the ability to blend a playlist full of songs I already own with similar music. If ZunePass ran on an Android Phone, I'd absolutely pay for a subscription. I hear Rdio might be able to give me what I'm looking for. But for now, I'll stick with Grooveshark for selection, Pandora to find music, and the stock Android music player when I'm on the go. To paraphrase William Gibson, the future is here, it's just not all in the same app yet.

Offer Concessions They Won't Accept. Then Hit Them With Platinum.

I've been out of the loop lately, with a bunch of fun conferences in New Zealand, but now I'm chilling in Tasmania and there's time to think about debt ceiling stuff. I liked the thing Nick linked to about Obama's high approval in polling on that issue.

I wonder how much the positions originally staked out by the participants affect the final outcome here. If this is a negotiation where the initial positions really don't bear on what happens at the end (perhaps because there are some awesome moves available to resolve the situation that one side isn't expecting, like minting trillion-dollar platinum coins or whatever) Obama's done a very good job. Graciously offering massive concessions that the other side is absolutely committed to ungraciously rejecting is a fine way to win PR battles.

Criticism that Obama's playing it wrong and conceding way too much too early assumes that we're in the kind of negotiation where both parties meet in a spot roughly equidistant from their earlier positions. Maybe we are, and then Obama's made some mistakes. But insofar as we're not, Obama may be doing this right.

Playing a Bad Hand Well, Continued

Oliver Willis spots a new CNN poll showing that, basically, the efforts to portray the Republican party as irresponsible negotiators has been political success. Having actual good policy would be a much better idea, but this is at least better than nothing.

Weird Al Yankovic Explains President Obama's Debt Ceiling Negotiating Goals

Matt Yglesias hints at the reason President Obama is bending over backwards to get a bipartisan vote on a spending cuts-plus-tax increases austerity package: anything that's going to pass through Congress will require Democrats to swallow cuts they're incredibly unhappy about, and he wants to make sure that Congressional Republicans share the pain by eating a tax increase. It can be the Gang of 6 plan, the grand bargain, Bowles-Simpson; heck, it doesn't matter who's wrong or right on the merits, just eat the damn tax hike:



If you believe that messaging and policy positions matter in elections, rather than economic outcomes, then this makes sense. Obama's goal here is pretty straight forward: get Republicans to go along with any tax increase, and the right-wing infrastructure will implode, all the GOP Presidential candidates will immediately go on record as against any sort of compromise, the veneer of reasonableness will be peeled off, etc. But as something of an economic reductionist, the direction of the unemployment rate seems much more likely to matter.

Perhaps the most charitable way to interpret this situation is that Obama is playing a bad hand the best he can. Any sort of fiscal stimulus isn't going to pass. Federal Reserve nominees who might be supportive of monetary policy that would help boost aggregate demand and thereby pick up some of the slack in the labor market haven't been able to get through Senate confirmation. So all he can do is wedge the Republicans somewhere where the public agrees with Obama and try to paint the GOP the party of tantrum-throwing kindergarteners. It seems unlikely to work, but somehow more likely to work than actually enacting policy that might improve economic outcomes.

The Gang of Five is Dead! Long Live The Gang of Six!

Apparently our Senate overlords have a latest and greatest version of The Only Plan That Can Be Taken Seriously Because It Has Support In The Senate, a rehash of the old Gang of Six's deficit reduction plan. Considering the original version was an agreement between centrist Democrats, conservative Republicans, and Dick Durbin, it's not exactly my idea of sound public policy. Chiefly, the Gang of 6 continues the only in America idea of collapsing the upper-middle class and the ultra-rich into the same tax bracket. There's nothing "complex" about adding another bracket that kicks in at $500,000 or $1 million. What's more, having such a bracket is entirely consistent with the original aims of the income tax, which was almost purely a soak-the-rich tax.

I'm also not sure the numbers add up, though I will leave it up to the CBO. The idea is that by eliminating some deductions from the tax code (and the Alternative Minimum Tax!), you can end up with lower rates but still raise revenue. Except, to do this, you'd have to do an awful lot of stuff:

• Treat capital gains income the same as earned income, or at least raise the tax rate.
• Eliminate the "carried interest loophole" that allows hedge fund managers to treat income as capital gains.
• Cap or eliminiate the mortgage interest deduction.
• Further cap or eliminate the deduction for charitable giving.
• Cap or eliminate the deductibility of employer-sponsored health insurance.

If you think any of those things have a snowball's chance in hell of making it through Congress, I can get you a great deal on the Brooklyn Bridge.

Poverty in America

The big differences in living standards between the poor, working class, middle class, and the well-off in America don't have that much to do with electronics. About a year ago I ran across an old article by Elizabeth Warren on just which items in the household budget are causing a financial squeeze. Sure, rich people have better refrigerators and larger televisions, but the big differences in quality of life come from housing costs; having one car per driving age member of the household; and having high quality education, child care, and health care. It's difficult imagine there being no disparity in the quality of these services available to the rich and the poor, but certainly public policy could do more to lessen the gap. The reasons for doing so aren't purely altruistic, of course, since poor health and low-quality education are a drag on economic productivity.

I'm Glad I Gave These People Money

A while ago Nick Kristof wrote a column mentioning Deworm the World, the same charity that I gave $8000 to a while ago. They sent him this email:

As a direct result of your article dated December 23, 2009, we have received donations from 468 people, totaling USD 61,166 as of today. At our current operating costs, it will enable DtW to support governments around the world to deworm around 1.8 million school-aged children at risk of infection, and allow Deworm the World to continue in its mission to increase access to education through supporting, coordinating, and advocating for school-based deworming programs. Also, as your DtW statement contains about 64 words, please be advised that each word benefits 28 thousand children.

I hope I someday write a word that benefits 28 thousand children.

PPP Pennsylvania Polling

I'm wondering what to make of Mitt Romney's good head-to-head poll numbers against Barack Obama in a general election. PPP has him tied with Obama in Pennsylvania, which is much better than the other Republicans do. One set of questions has to do with the predictive value of these numbers for a general election. Another set has to do with explaining why Obama is trouble in a usually Democratic state. David Nir writes:

Tom thinks that "Hillary Democrats" are causing problems for the president, and while I think the evidence he cites is a little thin (74% approval among Dems, 70% among white Dems), I could still believe it. (As a completely irrelevant aside, I'm still amazed that Hillary Clinton, of all people, somehow turned into a touchstone for conservative, white, working class/blue collar Democrats.)

It might be better to think of these people as "Clinton Democrats". They liked Bill Clinton, and their likings transferred more naturally to Hillary than to Barack. Anyway, I'd assume that these people's voting behavior is pretty strongly affected by the state of the economy, so that's probably what I'd talk about first.

Printing Press Beats Debt Ceiling

Suppose that debt ceiling Armageddon comes to pass. The government is barred from issuing debt and what it's legally required to spend exceeds what it's legally allowed to produce. But since it's the federal government, there's still a way to get money. Ben Bernanke in 2002:

But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Of course, Bernanke was talking about ways to fight against deflation, not ways to avert debt ceiling catastrophe. But right now we're in a time with dangerously low inflation leading to ridiculously high unemployment. There's no better time to print some money.

DSCC Solicits the Koch family for contributions

Cynical as I am, I'm slightly surprised the Koch Brothers don't understand the rules.



Update: it turns out the DSCC ask the Koch Brothers for money because the Koch Brothers have given to the DSCC before. Is anyone else shocked to find gambling in this establishment?

$150,000 is a lot of F***ing Money Outside of a Half Dozen Metropolitan Areas

Oliver Willis flags a PPP poll showing that people are more interested in raising taxes on high-income earners than previously thought. In fact, raising taxes on households earning as "little" as $150,000 has wide popularity. There's not enough money to eliminate the entire deficit through this sort of tax increase, but this sort of policy is dramatically more popular than cuts to Social Security, Medicare, or education.

Because such a large number of the major news-producing figures tend to be rich, and tend to live in areas of the coutnry where lots of people who make six figures don't "feel" rich, the fact that this kind of money allows one to live an extremely comfortable lifestyle outside in almost the entire country can be a little obscured. Also obscured is the fact that socio-economic stratification means that most non-rich people have few to no rich friends, so asking them about this sort of tax is almost on par with asking them about a tax on hotels; it's not going to affect them at all.

Michelle Bachmann and the Polls

You're ignoring them entirely, right? That's all I have to say about them.

Stealth Social Security Benefit Cuts on the Table

There's really only one way to respond to the idea of cutting benefits through formula tweaks:



The premise of the switch from regular CPI to chained CPI is that regular CPI is "too high" relative to the actual level of inflation. But even if that makes the benefit increases "more accurate", you'd only need to do that if you believe the initial benefit is "too high". Which you might believe if you're a DC print or television journalist with a defined benefit pension or 401k, or career civil service employee with a pension, or a political appointee doing a brief tour before selling out to the private sector. But in the real world, a huge number of retirees depend almost entirely on their Social Security checks. There's no good reason that this particular constituency ought to bear the brunt of any budget deal.

Fatalism: It's Been Tried (and failed) Before

Atrios wonders why our elite discourse is incredibly fatalistic. Gone are the days of FDR's "bold experimentation", JFK's call to put a man on the moon, or even Ronald Reagan's City on the Hill. In the face of persistent 9% unemployment (and a much higher U-6), the scope of our policy debate ranges between "cut spending without cutting taxes", and "cut spending while also making a temporary cut in the payroll tax rate". It's not exactly folk song material.

But if you think this situation is unique in American history, think again. Arthur Delaney's twitter feed pointed me to this Washington Post op-ed, which walks through the happenings of the first "Great Depression", in the 1870s (the depression of 1893 was also called a "Great Depression" in its time):

Cooke’s collapse launched the first economic crisis of the Industrial Age. For 65 straight months, the U.S. economy shrank — the longest such stretch in U.S. history. America’s industrial base ground to a near halt: By 1876, half of the nation’s railroads had declared bankruptcy, almost half of the country’s iron furnaces were shut and coal production collapsed. Until the 1930s, it would be known as the Great Depression.

In the face of economic calamity and skyrocketing unemployment, the government did, well, nothing. No federal unemployment insurance eased families’ suffering and kept a floor on demand. No central bank existed to fight deflation. Large-scale government stimulus was a thing of the distant future.

...

Neither political party offered genuine solutions. As historian Richard Hofstadter put it, political parties during the Gilded Age “divided over spoils, not issues,” and neither Democrats nor Republicans were inclined to challenge their corporate masters.

Two points worth noting. The first is that the scale of both human misery and direct action response as a result of the current downturn are both more muted than in the fast, mostly because overall living standards have risen a lot since the late 19th century. It's one thing to watch the banksters destroy the world and then not get fired while you grind through a year of part time jobs and freelancing work while figuring out which bills you can get away without paying. It's another to watch them destroy the world when you don't know where your next meal is coming from.

The second is that we are once again reminded that FDR's activism in the face of an economic crises is the exception, not the rule. Over the past 150 of democracy in the industrialized world, depressions usually cause a rightward shift in politics. The America of the 1930s was highly unusual in this respect, and even then, it should be noted, the actual FDR of that era (as opposed to our idealized remembrance of the man) was denounced by populists like Huey Long as whatever the word for "neoliberal sellout" was at that time.

In Defense of the Perp Walk

Since it appears that Dominique Strauss-Kahn may not be History's Greatest Monster, but his accuser may be, and no one but the two of them will really know what happened, I want to offer a counterintuitive take on why it was okay to "perp walk" Dominique Strauss-Kahn, or really any number of high-profile upper class defendants. Read Mark Kleiman for the case against.

The U.S. legal system operates, properly I might add, on the basis that defendants are innocent until proven guilty. But there is no reason that as a society we must pretend that people who have never been convicted of a crime are all equally morally upstanding. Strauss-Kahn appears to have a history of being a womanizer, independent of the facts of this particular case. That's wrong. But he can obviously afford high profile lawyers, and even without, there's a good chance he would have never faced any consequences for his actions. Having his face plastered all over the news and reducing the chances that he will run for the French Presidency is all the punishment he'll probably see. That certainly beats no punishment for being a douchnozzle.

And this isn't Strauss-Kahn specific. The DA who dropped the charges against Ben Roethlisberger was right to continue referring to his accuser as "the victim" even after declining to go to trial and face Robo's high-priced lawyers in court. Bart Giamatti was correct to express his personal opinion that he thought Pete Rose bet on baseball, even though the MLB agreed that the league would make no such finding. Proving criminal financial misconduct is incredibly difficult, so I tend to think Giuliani isn't History's Greatest Monster for perp-walking the junk bond dealers and their brethren in the '80s, even if it was also an act of political grandstanding. After all, even the banksters who were convicted of crimes are eventually allowed back into polite society. So make it hurt while you can, that's my motto.

Age Ain't Nothing But A Number Way To Engage In Subtle Discrimination

Naomi Cohn's story of going from unemployed to underemployed in two years contains what I think is one of the more underreported aspects of the Little Depression:

Like my readers, despite my persistence, I could not find a job. In all that time, I had about half a dozen interviews. Most of them were conducted by men who were significantly younger than me. Some of my interviewers asked questions that revealed their possibly unconscious age discrimination. One, for example, asked nonchalantly, "so, how old are your kids?" It was clear in most of the interviews that they were looking for someone with whom they would feel comfortable socially -- and a fifty-two-year-old woman was not that person.

this particular problem facing many of the jobless has been more or less ignored by our political discourse. And yet it still exists.