Relevant and even prescient commentary on news, politics and the economy.

Don’t Forget to Donate

If you’ll look to your left, you’ll see a banner supporting Wampum’s Mary Beth Williams for Maine state representative (campaign site here). Today, there’s an interesting profile of her candidacy, with a lengthy discussion of the role of blogs in campaigns this year, in the Portland Phoenix. (Atrios, Kos, and Stirling are quoted at length in the article.)

At one point, the reporter asks an interesting question:

… the question still bears asking: At what point does the nationalization of local races tip the scales of influence from a candidate’s flesh-and-blood constituents to her readers in the blogosphere? What happens to representative democracy if funding is decentralized to the point of every candidate raising more money from a diffuse virtual constituency than from the actual human beings in his or her district?

Great question. And there’s one easy way to learn the answer: click on the Mary Beth Williams banner to the left and donate (via PayPal). Angry Bear (the blog — Kash and I, that is) are matching up to $100, so don’t forget to give. Many small donations are better than a few big ones, so $5 and $10 should do the trick. End your contributions in .89 (e.g., $5.89 or $10.89) so Mary Beth can keep track of donations from Angry Bear readers.


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Another Greenspan Update

Smart conservative Dan Drezner agrees that Greenspan’s comments are bad for Bush:

“The more Greenspan clears his throat like this, the more the current occupant of 1600 Pennsylvania Avenue is going to get nervous.”

Dan’s got a few other examples of Greenspan recently making statements that clearly weren’t run by Karl Rove first.

Let’s see: Mel Gibson apparently has a new movie out blaming Jews for the death of Christ … Commerce Secretary Don Evans says Bush believes he was chosen by God to lead the nation at this time (paragraph 12) … and Greenspan is a, well, you know, he’s an Objectivist … Connect the dots …


[Updated to facilitate connection of dots]

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A Little Logic

Teeing off on an excerpt from Mayor Gavin Newsom’s appearance Larry King Live, Slacktivist applies a bit of logic:

Newsom highlights the contradiction embraced by those who want to argue both that same-sex marriages are not constitutional and that the Constitution must be amended in order to make such marriages illegal.

If these marriages are not constitutional, then there is no need for the FMA.

If these marriages are constitutional, then one cannot argue that they are illegal or illegitimate.

Conservatives may want to ponder this. Of course, something can fail to be prohibited by the Constitution yet still be illegal — speeding and assault are two examples. Still, pursuing a Constitutional amendment against gay marriage is surely an admission by supporters that they believe that a federal law banning gay marriage would be unconstitutional. So to tighten up Slacktivist’s point, it’s actually an admission that it is [U.S.] constitutional for states to allow gay marriage.

A second issue is whether California’s Defense of Marriage Act (CA-DOMA) is [California] constitutional. Take a quick look at the first paragraph of California’s Constitution:

All people are by nature free and independent and have inalienable rights. Among these are enjoying and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining safety, happiness, and privacy.

Do life, liberty, happiness, and privacy combine to make the CA-DOMA unconstitional in California? Mayor Newsom thinks they do. Gov. Schwarzenegger disagrees, making it an issue for California’s Supreme Court, not the federal government, nor religious zealots in Alabama (via Atrios.)


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Greenspan Update

In a comment to Kash’s post, I said

Oddly, however, Greenspan actually saying this [SSI benefits need to be cut] makes his alleged long term goal less likely to come to pass, because it certainly isn’t a favor to Bush’s reelection odds.

Here’s Josh Marshall saying the same thing:

But Greenspan did the White House no favors with this one. McClellan will get asked about this tomorrow and it’ll be hanging around their necks for some time.

I’m sure Josh and others will have the transcripts from tomorrow’s breifing. Stay tuned.


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Greenspan on Social Security

Greenspan testified before the House Budget Committee today. Much of his talk was devoted to discussing the long-run fiscal implications of the retirement of the baby boomers.

His recommendation for solving the long-term forecast shortfall in the Social Security trust fund is simple: cut benefits.

I believe that a thorough review of our spending commitments–and at least some adjustment in those commitments–is necessary for prudent policy… I certainly agree that the same scrutiny needs to be applied to taxes. However, tax rate increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base. The exact magnitude of such risks is very difficult to estimate, but they are of enough concern, in my judgment, to warrant aiming to close the fiscal gap primarily, if not wholly, from the outlay side.

He’s wrong. Several studies have demonstrated that relatively small changes in the revenue side of the Social Security program would be sufficient to close most of the long-term SS gap. (See for example policy briefs at Brookings and the EPI.) Once again, Greenspan is single-mindedly pushing his agenda of smaller government, regardless of the underlying economic analysis.


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Japan Remains Reptilian

It’s a great metaphor, and we can thank a Morgan Stanley economist Osamu Tanaka for adding such poetry to the dismal science:

[W]e do not think any full-fledged rebound in personal consumption [in Japan] can be expected, because corporations continue to restrain personnel spending and households’ need to restore depleted savings both will weigh heavily on consumption. In this environment, manufacturing and capex activity cannot escape from their dependence on external demand — [Japan’s] economy will remain quintessentially “reptilian,” needing the warming sunlight of external demand to maintain its temperature and activity, and therefore subject to the vagaries of global cycles.

What I wonder is where the US economy’s “warming sunlight” will come from later this year…


p.s. note that this reading agrees with the skepticism many commenters expressed last week about the strength of Japan’s recovery.

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US Money Supply

Numerous people have commented in recent weeks about the drop in the US money supply over the past few months. The graph below illustrates the concern. “Narrow” money supply (M1) grew more slowly in the end of 2003, but not unusually so. However, the growth in M2 (which includes cash, checking accounts, savings accounts, and money market accounts) took a dramatic tumble toward the end of 2003.

This obviously raises two questions: what caused this fall in M2, and is it a cause for concern? To answer these questions, I talked to a friend who’s an economist in the Federal Reserve System, and is probably among the 50 most knowledgeable people in the world on the subject of the US money supply. (The other 49 are probably also Fed economists.)

First, the causes of the drop in M2. There are three.

1. When homes are refinanced, the old mortgage is paid off with a new one. But most mortgages have been bundled together into a mortgage-backed security, which is then held by a large-scale investor (e.g. a bank or insurance company). Due to the accounting procedures necessary to adjust the mortgage-backed security for the early repayment of one of the mortgages that it contains, the balance refinanced is held for a short time in a special type of account. When there are more refinancings, these accounts swell the size of M2; when refi activity falls, these accounts shrink and M2 falls. During the second half of 2003 mortgage refinancing activity slowed considerably, so the size of those accounts fell, reducing M2. This is a technical side-effect of the slowing of refi activity, and has no economic impact whatsoever.

2. Another cause has to do with the effects of cash-out refinancings. People built up large balances in their checking and savings accounts as they took cash out of their house from refinancing. As refi activity has slowed, less cash has been taken out of houses, so that addition to the money supply has tapered off. Additionally, people have been spending the money that they took out of their houses in 2002 and early 2003. So M2 balances have fallen. So in part, the fall in M2 simply tells us that we’ve seen the end of major refi-related spending.

3. The third cause has to do with the stock market. Since the resolution of the uncertainty surrounding the war in Iraq in the spring of 2003, individuals have poured money at an accelerating rate into the stock market. To do that, people take money out of their savings and money market accounts. The result is a fall in M2.

Now the next question: is it a cause for worry? The short answer is no. First of all, some people (such as my monetary expert at the Fed) make the argument that the size of M2 is irrelevant to anything that we care about. The only possible use it may have is if it contains information about other things in the economy that we do care about. But even a sharp, sustained fall in M2 would have no repercussions for the economy in and of itself.

Second, the causes of the fall in M2 in this case are generally not anything we didn’t already know. We already knew that mortgage refi activity slowed in the end of 2003 (though this confirms that people have largely spent all of their refi cash by now), and we already knew that people have been shifting money into the stock market. So in this case, the fall in M2 doesn’t provide us much new information. And anyway, M2 is starting to grow again as these effects peter out. Within a few more months it will probably be growing at its usual healthy clip.

So, to make a long story short, don’t lose any sleep over the wiggles in M2 growth. As I’ve written about many times before (including yesterday on The American Street), we have plenty of other economic problems to worry about.


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On the Lighter Side …

This is very funny. (Via Cynical-C.)

And speaking of funny, read this letter from Rep. John Dingell (D-MI) to Council of Economic Advisors Chairman Mankiw. And no, it’s not a parody, it’s a transcription of the actual letter. Click and see Dingell explain his nomination of the Hon. Mayor McCheese for the Assistant Secretary for Manufacturing position.


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The Triple-X Amendment

Democrats need to highlight the idiocy of Bush’s proposed bigotry amendment. I think the best way to do that is to fight to attach bans on turpitude in all its forms: adultery, divorce, fornication, hand-jobs, sodomy, you name it. If it’s not missionary with your opposite-gendered spouse, then by God, the XXVIIIth will outlaw it. Even better, if we can pass two other amendments first, we can call this one the “Triple-X” amendment.


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Andy, Meet Light. See the Light

Andrew Sullivan waxes eloquently on Bush’s blatant pander to ignorance, fear, and prejudice:

The president launched a war today against the civil rights of gay citizens and their families. And just as importantly, he launched a war to defile the most sacred document in the land. … Not since the horrifying legacy of Constitutional racial discrimination in this country has such a goal been even thought of, let alone pursued. Those of us who supported this president in 2000, who have backed him whole-heartedly during the war, who have endured scorn from our peers as a result, who trusted that this president was indeed a uniter rather than a divider, now know the truth.

Now, if Andy could manage to start caring when it’s other people’s rights and interests being harmed by conservatives…


UPDATE: I strongly encourage you to visit this Newsweek/MSNBC page, first look at the top picture, then scroll down to the “Photo Gallery,” and look at the photos. As you’ll see, they are just people. Really, really, happy people. Now go about your business. Via Josh Marshall.

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