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Get out and vote

by cactus

Some Last Thoughts About the Campaign

I am not involved in either campaign, nor do I have all that much to do with politics other than running the occasional numbers, expressing an opinion voting. That said, here are my thoughts on the mistakes made in the campaign by both candidates.

Obama’s Mistakes

This one is easy. He should have put more effort into tying McCain to the Bush. When the Dark Lord quietly endorsed McCain in Wyoming a few days ago, Obama made it into a commercial. But the pictures of Bush hugging McCain were there for the taking for a very long time. Plus, how do you let your opponent backpedal from Bush on the economy when his top economic advisor was one of Bush’s main economic advisors? It would be one thing if Holtz-Eakin had done some distancing for a few years, a la Colin Powell or Scott McClellan. But it didn’t happen.

Another mistake was not picking Hillary Clinton as his Veep, or at least not promising her something big (Sec of State?) early on. See, he could then have made an arrangement with Bill to have a position in his administration – perhaps a “minister without portfolio” that would allow him to go traipsing around the globe soaking in the worldwide adulation, because that’s what Bill likes. And Bill Clinton, unlike GW, is popular, and draws huge crowds and money, and his economic record contrasts nicely with the past eight years.

McCain’s Mistakes

McCain’s mistake was in having no understanding of strategery and human nature. He assumed that the folks who savaged him eight years ago (the whole illegitimate black baby thing being the worst example) would do anything for him, even assuming they were in a position to do anything for him (which given GW’s popularity rating, they weren’t). Even the footsoldiers among that crowd, the ones for whom he picked Palin, could never be enthusiastic for McCain; they remember making McCain into a b***** in prison parlance eight years ago, and to them, he’ll always be a be a b*****. I imagine there’s only way to move up from b***** in prison, and that’s to make the folks who made you into a b***** in the first place into yours. And the folks who made him into a b***** eight years ago could have been b*****ified very easily. See, they they had no choice but to vote for McCain, ’cause the alternative is Obama, and they are not voting for the alternative. Making matters worse, by pandering to the folks who made him into a b*****, he was also pandering to the folks who made many other people into a b*****. And now that GW has been crushed, many of those former b*****es are now rebelling, and endorsing his opponent. Basically, McCain should have made GW and the fighting 25% dance by playing to the middle. He could have made GW and the fighting 25% his b*****, he had the opportunity, but he preferred to keep that role for himself. Not exactly CinC material. And at some lizard brain level, most Americans understand that.

A lesser problem was not finding an issue/message and sticking to it. A useful one, like the economy. (Of course, for that he would have had to ditch the Bush hanger-onners like Holtz-Eakin, but that should have been easy to do.)

Anyway, whether you agree or disagree, if you haven’t already done so, get out and vote.
by cactus

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Exit Pollster Hell

Robert Waldmann

update: OK after getting burned in 200 and 2004 (to paraphrase our President:fool me once shame on you fool me uh fool … you can fool me twice) only a fool would believe in exit polls tonight (and note the obvious below). But I just can’t help myself.

Looks like the exit pollers are downplaying them everyone wants to tell me how the 71 votes counted in Georgia split. has average exit polls from the MSM financer/suppressors of exit polls.

Don’t start celebrating now, or, if you do, don’t blame me — blame

update 2: According to the exit polls which you should not trust it is McCain by one (1) in Mississippi. Oh my. For what it’s worth Obama is 9.5% above the Pollster trend from regular non exit polls. If I were Senator Wicker I would be worried, but I’m not so I don’t pay attention to exit polls.

notes the obvious.

This is going to be a longgggg day for exit pollsters. Given early voting, they are going to have to pool results from exit polls and earlier results from people who said they voted early in regular polls. This will not be possible without a wild guess.

They have data on how many people voted early and (bad) data on for whom they voted. The data from polls on early voters is based on a much smaller sample size than exit polls and is not based on a balanced sample of polling places, but it is still relatively OK compared to the number they just don’t have.

They will have information on total early votes and on the percentages of Tuesday votes by candidate, but they will just have to guess Tuesday turnout. I suppose they can ask at their sample polling places, but they will only have a number they can use after polls close (and they typically want to release exit polls the instant polls close).

Since it appears that a much larger fraction of early voters have voted for Obama than will Tuesday voters this will be critical. Assuming total turnout equal to 2004 turnout is a recipe for extreme embarrassment.

I’m sure they have some plan (I’m sure they all have different plans).

I’m not sure I’ll believe anything until actual votes are counted (tomorrow night looks like a longgg night over here at EST + 6 hours).

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WaPo on AIG

Robert Waldmann

read Carol Leonnig’s article which quotes many people arguing that the feds should have let AIG file for chapter 11. The point of the complainers is simple, the takeover has been very (realtively) good for counterparties but not so good for the treasury or, it is alleged, AIG shareholders. I don’t see how people can claim that shareholders would have ended up with something after bankruptcy proceedings, but it is costly to the treasury. Oddly no one mentions that the deal was great for Goldman Sachs, I guess that simple observation is too scurrilous for the Post.

I was interested in the discussion of what AIG did wrong.

AIG’s Financial Products division is the primary villain in the company’s free-fall. It made tens of billions of disastrously bad bets on mortgage investments but may not have carefully hedged those bets or properly estimated its risk.

OK this is simple, there is risk that can’t be hedged by everyone. Someone has to bear aggregate risk. The idea that risk is a problem that can be solved, if one hedges rationally is, uhm, crazy. The idea of an insurance company buying insurance is odd. AIG uhm insures people, helps them hedge, bears risk.

In this case, they took on risk that they shouldn’t have taken on, but there is no reason to think that there was a rational equilibrium in which AIG wrote CDS and then hedged them by shorting the underlying assets.

One can make money by bearing risk or by outsmarting other people. Why would anyone expect an insurance company to be able to outsmart the financial services sector ?

Someone somewhere on the web notes (without naming names) two eminent economists who said that the housing bubble wouldn’t be a huge problem as losses from bad mortgages would only be around $400 billion (similar to the losses when the dot com bubble burst) and the net value of derivatives is zero.

So, assuming people are rational, they will only have an unpleasant surprise similar to 2000.

However, if everyone thinks they are beating the market, because of their clever derivatives trading strategies, the moment of truth for derivatives (bankruptcy in the case of CDSs) will be a very painful shock. The fact that the total supply of derivatives is zero doesn’t mean that the total perceived expected value of derivatives positions is zero.

Similarly if everyone thinks they have hedged aggregate risk by buying and selling derivatives, a mere $400 billion hit which people rated as hedged but it wasn’t can be much more damaging than a $400 billion hit which people knew they might bear.

The argument is that if everyone were rational except for the people writing mortgage contract, then everything will be more or less OK is true, but the hypothesis can’t be reconciled with the volume of trade in derivatives.

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Dem and Repub political conflict in house


Roll Call reminds us that any talk of monolithic control by party is unlikely for Democrats. I am glad there are no ‘first 100 days’ goal posts for whoever wins the presidency…and watching certain races, such as Pelosi’s as well.

House Majority Leader Steny Hoyer (D-Md.) is turning a blind eye to his one-time rival Rep. John Murtha (D-Pa.), even as the veteran lawmaker appeals for help in what’s become the political fight of his career.

In recent days, Murtha has been turning to his fellow lawmakers for money, and many have answered the call — flooding his coffers with more than $130,000 in past few days.

But Hoyer, who dueled with Murtha two years ago for the Majority Leader post, has not. That makes him the only elected member of House Democratic leadership yet to contribute to the Pennsylvania Democrat’s suddenly tight re-election battle.

Hoyer and Murtha’s bitter contest in 2006 divided the Caucus and prompted then Speaker-designate Nancy Pelosi (D-Calif.) to weigh in on behalf of Murtha, her longtime ally. Hoyer won the race by 63 votes in what Pelosi at the time acknowledged was a “stunning victory.” But tensions between Hoyer and Murtha have lingered.

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Heritage Looks at the McCain and Obama Plans

by cactus

Heritage Looks at the McCain and Obama Plans

Its that time again. Heritage looks at the McCain and Obama plans and tells us which one is best. (This particular report is authored by William W. Beach, Karen Campbell, Rea Hederman, Jr., and Guinevere Nell.) Heritage being Heritage, I don’t think I have to tell you how it comes out, but these two quotes are a good overview:

Total employment grows an average of 915,800 jobs under Obama, and by 2,126,000 under McCain.

Increases in gross domestic product (GDP) under McCain are, on average, nearly three times higher than under Obama.

The report is chock full of numbery goodness, but basically Heritage lets us know that things are going to be much better under McCain than under Obama. Good enough for me. So I was all set to vote for McCain when I remembered something. See, I remember running some numbers eight years ago to try to figure out how the economy would do under either major candidate, and then coming across their study looking at the Bush and Gore plans. I remember being shocked at how different their conclusion was from mine.

A few highlights from their study….

Heritage told us that fiscal year 2000 real GDP at 9,330.7 billion (in 1996 dollars), and estimated that under a Bush administration, by the end of fiscal 2008, that is, end of Q3 of 2008, it would be at 11,720 billion. That amounts to a real GDP growth rate of 2.9% a year. Checking in with the BEA, we find that the real GDP grew by 2.2% a year between 200Q3 and 2008Q3. The difference may not seem like that much, but it is the difference between real GDP doubling in 25 years or doubling in 32 years. Give it a revision or two, and my guess is that 2.2% figure is going to drop by just enough to put GW dead last when it comes to growth rates among Presidents since Ike took office. (Right now GW just inches past his father.)

Heritage also told us that there would be an increase from 132,092,000 jobs at the end of fiscal year 2000 to 146,281,0000 jobs at the end of fiscal 2008, for an increase of 1.28% a year in the number of jobs. This one’s a bit baffling – the BLS tells us that the employment level was 136,790,000 at the end of Q3 of 2000. (Perhaps a number of jobs had several people in them in Heritage’s model?) By Q3 of 2008, the figure was 145,310,000, for an increase of 0.76% per year in the number of jobs. (By contrast, under Bill Clinton, the figure was 1.77% a year.)

But the most comical part, the part that told me eight years ago that Heritage couldn’t possibly be serious was the part of the model dealing with fiscal responsibility. For instance, they tell us that the real debt held by the public would be about 8.3% of GDP right about now, having shrunk from 36.6% of GDP in 2000. (The actual Q3 of 2000 figure was 35.1%.) Of course, its tough to conclude that promises of tax cuts plus increases in military spending were going to produce a shrinking debt. Tough, unless, you believe, as the Heritage folks apparently still do, that cutting taxes will produce increases in tax revenues.

BTW… Heritage’s comparison of Bush and Kerry is here. They seem to have gone out of their way to make it opaque – to figure out their predictions you have to work backwards from the CBO “baseline” prediction, but essentially, a Bush victory was gonna be a good thing, a Kerry victory, not.

I may have missed it, but I’m not sure they put out a Dole Clinton comparison. Here’s their look at the options in 1992. Here they were in 1993, with a paper entitledTaxes, Spending, Gimmicks, and Snake Oil: Why Bill Clinton’s Budget Is Bad for America, explaining how Clinton’s budget plan was going to destroy jobs, slow economic growth, and make the deficit explode.

After reading through the Snake Oil paper, my head hurts too much to go look for a Bush Dukakis report, or anything else, so back to the here and now. Now, at this point, my time is really limited. I have seen enough of Obama’s plan to get a bit of a chuckle, and enough of McCain’s for the hair to stand up on the back of my neck, but I don’t really have the time to run numbers. Unlike the folks at Heritage, I’m not getting paid for this. Still, it is kind of unsporting to criticize these, er, people without putting down my own guess. Fortunately, Heritage’s track record makes it very, very easy. So here are my guesses about what will happen if either candidate wins:

If Obama wins – what Heritage says to expect in case of a McCain victory.
If McCain wins – what Heritage says to expect in case of an Obama victory.

Feel free to call me on my forecast four years now. Even if the folks at Heritage don’t realize it, I do: the intertubes never forget.
by cactus

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Pension Benefit Guaranties

Cross post with Noni Mausa, Tunnel Under Snow

The manner to which they are accustomed — Stolen Quote of the Day

What to wear for Halloween? From the Slate overview of the daily papers for Oct. 31 2008, here:

Maybe wear a suit and monocle and go as a corporate fat cat? The Journal fronts a good analysis of how the banks now being bailed out by the government owe roughly $40 billion in unpaid executive pay, bonuses and pensions. While the Treasury Department is putting restrictions on what executives at bailed out banks can earn now, it won’t affect these debts. In the case of some companies, the debts to executives are greater than their entire pension program.

The whole story, in the Wall Street Journal, is here. [subscription]

And, we might ask, how safe are those programs?

Here are the amazing numbers:

the Pension Benefit Guaranty Corporation (PBGC), the government agency that is supposed to protect the private pension system, recently estimated that the amount of money currently owed to cover pension liabilities is $450 billion; 851 pension plans are underfunded by at least $50 million. United Airlines may have been the biggest pension default ever but we’re looking at a looming financial catastrophe: The PBGC, which takes over defaulted plans, had a $23 billion deficit in 2004 and that’s just the proverbial tip of the iceberg. Part of the crisis stems from the 1990s collapse of the stock market and low interest rates (which keeps returns on bonds low).

That was from 2005. I can’t imagine it has gotten any better since then. Anxiety much?

UPDATE: An interesting chart from here:

To make the obvious more obvious: have a peek:

Why is it that the party that hates big government seems to end up taking over the obligations of companies who don’t want the fuss and bother of keeping their promises to their retirees? Or are Republican regimes just bad for business?

MORE UPDATE: In reading the 2007 report from the PBGC, I note this paragraph:

The table below shows the ten largest plan termination losses in PBGC’s history. Nine of the ten have come since 2001.

These defaulting companies and the years of plan termination are (about a third of the way down the page):

Pan American Air, 1991, 1992 [business collapsed 1991]
Trans World Airlines, 2001 [renamed TWA Airlines LLC in 2001, acquired by American Airlines in 2001]
LTV Steel, 2002, 2003, 2004 [filed for Chapter 11 bankruptcy on December 29, 2000, merged with Weirton Steel to form the International Steel Group.]
National Steel, 2003 [filed for bankruptcy in 2002, sold to US Steel in 2003]
Bethlehem Steel, 2003 [filed for bankruptcy 2001, acquired by the International Steel Group 2003]
US Airways, 2003, 2005 [Still in business, merged with America West in 2005]
Weirton Steel, 2004 [bankrupt 2008]
Kaiser Aluminum, 2004, 2007 [Still in business. “In 2005, it recorded revenues of roughly $1.1 billion and employed more than 2,000 people…” Wiki]
Delta Air Lines, 2006 [Still in business. Filed for Chapter 11 bankruptcy in 2005,emerged from bankruptcy protection in 2007. “(Delta’s) bankruptcy exit strategy was vastly different from that of United in that it expanded its way out of bankruptcy, rather than retrenching ” –Wiki]

Times are tough, okay. So I am wondering: why not just have the PBGC take over ALL pensions, since that would probably save money, time and effort (not to say anxiety) in the long run?
by Noni Mausa (cross posted with permission of the author)

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Maybe Not This Time…

…at least not so directly:

The Treasury Department has turned down a request by General Motors for up to $10 billion to help finance the automaker’s possible merger with Chrysler, according to people close to the discussions.

Instead of providing new assistance, the Treasury Department told G.M. on Friday, the Bush administration will now shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department.

I guess that’s why Ford plans to build more trucks.

But it is an excuse to add Yet Another Oldie-but-Goodie:

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Matching Obsessions

It is no secret that the only movie I’m waiting to see this year is Quantum of Solace, even if they did have the poor taste not to use Janelle.

Well, Paul McAuley saw it more than two weeks ago, and confirmed it is everything viewers of the recent Casino Royale would expect.

So far this wouldn’t fit on an economics blog. But see the comments to the movie:

I’m somewhat boggled by the concept of a secret international organisation corrupting third-world countries for profit when the World Banks does a perfectly good job of that already…

to which the only possible response was:

This is a super-secret world bank – but yes, their methods are somewhat similar.

Wonder if Dani Rodrik would agree. On a possibly-related note:

Consider this an open thread discussing international development and “aid.”

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What We Learn from Sports

Compare and contrast:

Philadelphia, after a first-time-in-25-years win:

The School District of Philadelphia – as if to prove you don’t need miserable weather to rain on a parade – has no plans to close for a victory celebration, no matter how momentous the occasion might be.

“Our expectations are that students will report to school just like any other weekday – and report on time,” said Fernando Gallard, spokesman for the school district, this morning.

An entire Georgia county, before a midseason football game:

Call it a case of the Red and Black flu.

Tired of struggling to find enough teachers to staff its classrooms on the Friday before the annual Georgia-Florida football game, the Clarke County (Ga.) School District — which includes Athens, home of the University of Georgia — decided to cancel school altogether.

As a Philadelphia native, I’m proud of the first decision (which was, undoubtedly, be honored in its breech). As an MBA from the University of Georgia, I’m embarrassed.

But not so much as the UGA fans probably are.

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