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The United States and China in the 21st Century

I will be going today:

The United States and China in the 21st Century

2013 Madeleine Korbel Albright Institute for Global Affairs, Wellesley College, MA

Former Secretary of State Madeleine Albright ’59 and Former Secretary of the Treasury Henry “Hank” Paulson share the stage to discuss U.S.-China relations and the importance of that relationship to global politics. Cokie Roberts ’64, senior correspondent for ABC News and NPR, will moderate at the Madelaine Albright conference at Wellesley College today. The conversation will include a discussion of political leadership in China, trade policies, environmental policies, and how these issues might be addressed during President Obama’s second term.

The live stream URL is: http://web.wellesley.edu/PublicAffairs/Live/

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Social Security Data Mining

Social Security Data Mining

Mrs. Rustbelt, the sweet young lady I married, decided to investigate future benefits from Social Security, even though she is only “39.” I am her designated data entry clerk, so we sit down and establish an account and log-in for her. Near the end of the set-up process the software tells us she has to answer some multiple choice questions about her personal data. Ok.
I was stunned when the questions popped up. None of them had anything to do with Social Security, and were clearly mined from IRS and credit bureau data.  She had been profiled by SSA with data the SSA had no need to know. Anyone have any experience or insights on this?

Rusty sent this note my way, so I thought Nancy Ortiz, a retired employee at SSA and expert in its workings,could provide some beginning answers in two e-mails slightly edited for readability:

From what I have read on the “Social Security News” blog, SSA recently set up an online benefit estimate program combining earnings information SSA routinely gets from IRS (from SF-941 payroll tax forms) and information gathered by Experian, one of the private big three credit rating companies. I’m not happy that the current SSA Commissioner has done this. SSA has never before used privately gathered information from any source. The deal is that the SS Act authorizes SSA to gather specific information for “program purposes only.” SSA shouldn’t gather or transmit to others any information it has without specific written authorization to do so (under the Privacy Act.) BUT, this administration or the previous one could have asked Congresss for a change in the law to permit this practice. It would almost certainly slip under the radar, as it did for me until I read about it on “SS News.”

I do not know whether this has passed muster as a regulatory change or actually refects a change in the law. So I’ll look around to see what other information I can come up with. In the past, Republican administrations have sought to sell SSA’s data to private industry without success. The problem with the current administration is that it is quite casual about who is running the shop over in Baltimore. So, until his term recently ended, the Commish was a Bush administration appointee who favored privatization. Alas, Obama’s people don’t really seem to care very much about things like this. SSA/SS just aren’t sexy enough to attract much interest.

I couldn’t find a recent article on SS News even though I remember one. The website doesn’t have a search function, so I couldn’t get anywhere on that site. However, the SSA site’s explanation is detailed. Unfortunately, it is not very encouraging to someone like me who opposes the use of any data from outside organizations without express authorization from the claimant/online user.

I would need more information in order to form a more complete view of any potential security risks to the online user and SSA itself. However, in general I think that SSA already has enough information on its own internal data bases to verify the identity of the online user. SSA says that Experian doesn’t keep any of the information the online user provides. SSA also denies it keeps any information used in the online estimate request. But, information floats around for a while inside and possibly outside of SSA. This is a risk I wouldn’t take were I running this project. The mere fact that Experian is a commercial enterprise which has every reason to retain or reuse information argues against it.

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Are banks too big to jail?

Update:  Dealbook at the NYT interviews the producers of ‘The Untouchables’.

Yves Smith at Naked Capitalism comments begin:

Lanny Breuer, former Covington & Burling partner and more recently head of the criminal division at the Department of Justice, resigned abruptly today. The proximate cause may be a Frontline show that ran two nights ago, part of a series on the financial crisis…

and ends

But sadly, Breuer’s resignation is unlikely to be a bellwether that lying does not pay. He simply didn’t lie well enough and that made him an embarrassment.

David Sirota at Salon discusses the significance of:

PBS Frontline’s stunning report last night on why the Obama administration has refused to prosecute any Wall Streeter involved in the financial meltdown doesn’t just implicitly indict a political and financial press that utterly abdicated its responsibility to cover such questions. It also — and as importantly — exposes the genuinely radical jurisprudential ideology that Wall Street campaign contributors have baked into America’s “justice” system. Indeed, after watching the piece, you will understand that the word “justice” belongs in quotes thanks to an Obama administration that has made a mockery of the name of a once hallowed executive department.

The Frontline report is titled “The Untouchables,”

As this excerpt from Breuer’s 2012 speech to the New York City Bar Association shows, that characterization of Breuer’s declarations is not an overstatement (emphasis added):

To be clear, the decision of whether to indict a corporation, defer prosecution, or decline altogether is not one that I, or anyone in the Criminal Division, take lightly. We are frequently on the receiving end of presentations from defense counsel, CEOs, and economists who argue that the collateral consequences of an indictment would be devastating for their client. In my conference room, over the years, I have heard sober predictions that a company or bank might fail if we indict, that innocent employees could lose their jobs, that entire industries may be affected, and even that global markets will feel the effects.

In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders, just as we must take into account the nature of the crimes committed and the pervasiveness of the misconduct.

I personally feel that it’s my duty to consider whether individual employees with no responsibility for, or knowledge of, misconduct committed by others in the same company are going to lose their livelihood if we indict the corporation. In large multi-national companies, the jobs of tens of thousands of employees can be at stake. And, in some cases, the health of an industry or the markets are a real factor. Those are the kinds of considerations in white collar crime cases that literally keep me up at night, and which must play a role in responsible enforcement.

Save for the intrepid Marcy Wheeler and now Frontline, this speech received almost no news media attention despite being arguably one of the most important statements to come from a top law enforcement official in recent history.

The highlighted parts of that speech are what is so significant. In them, Breuer is saying that enforcing the law should not be — and no longer is, in the Department of Justice — prosecutors’ chief priority. Rather, he says listening to Wall Street’s economic arguments about the alleged cost of stopping and/or punishing lawbreaking should be.

… After all, it was Breuer who sculpted the Obama administration’s settlement with megabank HSBC after the bank admitted laundering money for drug cartels and terrorist organizations.
In that decision not to criminally prosecute any HSBC executive who had enabled such laundering, Breuer explicitly cited the same radical Too Big to Jail principle aired in the PBS Frontline report. He said: “Our goal here is not to bring HSBC down, it’s not to cause a systemic effect on the economy, it’s not for people to lose thousands of jobs.”

For pure adversarial and investigative journalism horsepower, the PBS Frontline piece rivals Bill Moyers’ epic PBS indictment of those charlatans who enabled the Bush administration’s march into the Iraq War. It is a must-watch in the truest sense of the overused term because it so powerfully explains how Obama’s campaign motto of “change” meant something entirely different than what many thought. In the case of financial crime, it meant the embrace of a radical Too Big to Jail ideology, one that creates a moral hazard, encourages exactly the same kind of crimes and therefore makes it more likely that another financial meltdown will happen.

UPDATE: A mere hours after the PBS Frontline piece aired, Lanny Breuer just announced he is resigning his post at the Justice Department. Meanwhile, PBS reporter Martin Smith just reported that in response to his report, the Obama White House has decided to block access to Frontline reporters in their future reporting.

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Jim Manzi Disappoints on the Devastation of Lead and Crime

And Kevin Drum disappoints in his own defense.

Regular readers will know that (at least sometimes) I like to seek out and highlight the very best, most cogent and convincing arguments countering my beliefs, trying to figure out what might be wrong with those beliefs, and hoping to understand what’s really going with the subject I’m considering.

Jim Manzi — a guy with a decidedly conservative/libertarian bent — has often been my go-to guy on that front. His thinking about global-warming mitigation, for instance, doesn’t try to deny the IPCC conclusions. He accepts and adopts them, building on them for further thinking and calculation about the costs and benefits of mitigating the undeniable — and undeniably human-caused — climate changes that we’re facing. (I’m not saying his reasoning or conclusions there are flawless, by any means. But at least he starts by accepting a large dose of reality that many or most among his conservative cohort prefer to deny, distort, or just blithely dismiss.)

But in his recent response to Kevin Drum’s article on lead and crime (a subject I’ve gone on about), Jim disappoints me utterly. (And Kevin’s response — which limits itself to answering Jim’s cherry-picked objections to one bit of evidence without pointing out all the evidence that Jim inexplicably ignores — is decidedly limp-wristed.)

Short story, Jim looks at one study (Reyes 2007) that Drum talks about, and pokes procedural holes in its analysis and conclusions. “There might be confounding variables! She should have controlled for X!” I can’t tell right off whether he actually looked at the paper, or just responded to Kevin’s description of it.

Well okay, yeah, the Reyes study is in no way definitive. No single study ever is. He’s absolutely right that the Reyes study, all by itself, “is way short of making a convincing case for spending $400 billion of taxpayer money.” No duh.

Which points out the real problem: Jim doesn’t seem to have even looked at any of the the (other) research available on the subject (at least he doesn’t mention it), notably the body of work — robustly highlighted in Kevin’s article — by Rick Nevin. (Meanwhile Jim refers to Reyes’ work as Kevin’s “key econometric source” — which it isn’t; it’s just one of them, and not the strongest source, which is what I would expect Jim to address.) Nevins shows correlations between lead and crime across nine countries over many decades. It’s pretty convincing stuff that you’d think Jim would have looked at and considered if he really wanted to understand what was going on.

Even more surprising: Jim’s main question is whether it’s worth spending $20 billion a year over 20 years (which he presents as an undiscounted figure of “$400 billion”) to mitigate lead in the environment. But he doesn’t seem to have looked at or considered the paper that analyzes exactly that question, in the very terms he prefers when making his own arguments (Zahran, Mielke, et. al. 2010).

I can point out many other problems with Jim’s response.

• When discussing what evidence that might support the lead/crime hyphothesis, he fails to note that a higher concentration of lead in the blood of convicted criminal as adults would be rather convincing.

• He points out that Reyes doesn’t find a correlation between environmental lead and burglary, but he doesn’t note that Nevin finds (because he apparently hasn’t even looked at Nevin) a significant correlation between blood lead and that conservative bogeyman, unwed pregnancy.

These are niggling (though important) details. But they’re representative. There’s a lot know out there, and Jim doesn’t seem to have any interest in knowing it — only in shooting (certainly, potentially, valid) holes in a single study.

I find in Jim’s response, much to my disappointment, a prima facie case for confirmation bias — a small-minded and unconvincing effort to undercut and dismiss information that strongly suggests conclusions contrary to core conservative and libertarian beliefs:

1. Expert research can provide more useful and actionable information than market prices, and

2. Government action — including quite restrictive regulation — can provide hugely positive returns on investment.

He’s making another (in this case, dispiritingly lame) stab at the argument that’s lurking right at the heart of his book Uncontrolled: because the world is so complex, whatever we’re doing right now must, obviously and inevitably, be the best of all possible worlds, and absent massively overwhelming evidence that’s universally agreed upon, we shouldn’t do anything different because we just don’t know enough. We should instead rely on market forces and the price mechanism — the only capable social calculator — to solve any problems.

Jim will deny he believes that, or hews to that belief dogmatically, but I believe this lead/crime response, with its obvious confirmation bias, strongly suggests otherwise.

I won’t argue all the merits of the lead-abatement issue here, or the evidence supporting it. I will simply state what I’ve concluded by looking at lots of different research on the subject, sifting it, and steadily adjusting my priors based on my evaluation of the how convincing that research is:

1. Lead in the environment (resulting largely from the auto/gas industry’s profit motives) has cost us trillions of dollars in measurable economic damage over the decades, and has had a devastating, unmeasurably destructive effect on hundreds of millions of lives. (Lifetime income doesn’t really quite capture or measure the value of a robust life endowed with one’s full, inherited endowment of cognitive, emotional, and social skills…)

2. That damage continues, due to the residue of lead in buildings and dusty soil that is still poisoning our children, constantly, every year.

3. A mitigation effort as suggested in the literature on the subject would deliver an excellent, really massive, return on investment before even considering the unmeasurable manifest benefits to humans whose brains would not be stunted and retarded by mitigatable poisoning.

Mitigatable through collective action, and only through collective action. Which means: government action that is often the only counter to destructive market forces.

Cross-posted at Asymptosis.

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O Brotherhood, Where Art Thou? (Ezra Klein versus … Me (and Others))

Oh, dear.  I like Ezra Klein. A lot.  So I’ll leave out the sarcasm–a necessity anyway, since I’ve already exhausted this week’s supply.

But I do want to point out, because he’s so influential now, that Klein’s piece yesterday siding with those who thought Obama’s speech Monday should not have set forth liberal policy positions in so in-your-face a manner, and should not have called the Republicans on their conservative ones, seems, best as I can tell, to conflate two distinct points.  More important, it fails to recognize that the events of the last week concerning the debt-ceiling issue prove one of those points wrong.

Klein argues, weirdly, in my opinion, that the presidential bully pulpit is not very effective, because most people don’t watch presidential speeches.  And it’s certainly true that, in the current era, most people don’t watch presidential speeches.  They may see short clips from it on the TV news, or see headlines about it in a newspaper or online, but even if they see the speech itself, it won’t change many people’s minds; almost everyone already has made up their mind about the subjects addressed in the speech.  And, by making an ideological speech, Obama made it less likely that the congressional Republicans will cooperate with him at all–a presumption disproved by this morning’s headlines confirming what already had been reported yesterday as likely.

O, brotherhood, where art thou?  Thou art back in the first nearly-four years of Obama’s first term, in which he failed even to publicly correct patent disinformation by the Republicans, such as about what the debt ceiling is and what “raising it means–and doesn’t mean.

Klein’s right that the speech itself probably didn’t change any minds.  He’s wrong, though, that it was intended to do that.  It was an inaugural speech, not, say, a highly publicized press conference at which he finally educates the public about such things as the debt ceiling statute and thus demonstrates to the Republicans that the success of that particular bit of their disinformation campaign is at an end.  

I can’t understand why so many political pundits–and why Obama himself, for so long–have found it so hard to grasp the difference between political rhetoric and clear statements of actual fact and refutations of misrepresentations of fact.  

And, if it’s true that the presidential (and presidential-candidate) bully pulpit has little effect in educating and persuading, then why have presidential campaigns, at all?  In fact, this last one was quite effective in deconstructing critical disinformation by Romney, Ryan, and the “conservative movement,” wasn’t it?

Klein’s piece was titled, “Reminder: Big presidential speeches (mostly) don’t matter.”  True, when the speech is just rhetoric rather than an invocation of actual fact.  Or when the speech is not intended to throw down an ideological gauntlet, as this one was. And did.

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Do Good Wall Street Days Translate to Good Days for Most Americans?

by Linda Beale

Do Good Wall Street Days Translate to Good Days for Most Americans?

As usual, there was one of those all-knowing snippets in the news last Friday about what the direction in the stock market meant for the economy.  Observing high corporate profits and buoyed by the idea that the GOP might not play its “just say no” game on the debt ceiling issue (at least for three months), Wall Street profits rose.  See Wall Street at 5-year high, New York Times Business Insider, Jan 18, 2013.

Should we so easily consider Wall Street’s well-being as a general sign of the well-being of the economy?  Sometimes it seems that it marches to its own tune, while ordinary Americans continue to struggle.  Foreclosures, job losses, offshoring, state actions to make union membership harder even when most Americans say union membership should be easier, huge inequalities in incomes and wealth and the social problems that go with those inequalities–there are all kinds of things going on that still don’t bode well for ordinary Americans whose income is mostly made up of wages and not preferentially taxed capital gains and who don’t own much of the financial assets of this country.  Democratic egalitarianism isn’t satisfied by such a system that consistently rewards one class of income over another based on what amounts to class distinctions–the kind of income that requires hard work is less rewarded than the kind of income that comes with a silver spoon at birth.

In other words, corporate giants making high profits doesn’t provide much reassurance to ordinary guys about the stability of their own personal economies.  High profits seem to translate to higher payouts to corporate managers/shareholders, but ordinary workers don’t get more than a trickle of a share of those productivity gains.

Trickle down hasn’t trickled much down the last few decades, if it ever did. Inequality is growing worse, and with that comes even more influence so that the politically powerful are the same as the economically powerful, yielding a return on lobbying that the Founders couldn’t have imagined.

The unequal society that is today’s United States has many problems that are at least partially caused by the high level of inequality–from teenage pregnancy to illiteracy rates to lifespan of the underclass to low birth weights to college graduate rates and many other indicators of a less than optimal quality of life.  And those problems are exacerbated by the continuing blind faith of so many Washington politicians in the “degenerating discourse of mainstream economics” (the link is to a recent post on Yves Smith’s Naked Capitalism by Philip Pilkington).  We continue to look to Wall Street, and ignore the blight of wealth and income inequality that besets Main Street, because economists have fabricated a convenient theory of equilibrium that is most successful at hiding what is really going on from us while protecting the “free market” impulses of brute force capitalism.

Perhaps one of the positive results of the buoying of Wall Street is the general consumer attitude, which does result in more spending (still perhaps beyond one’s means for much of the underclass)?  That spending increases business demand, and could even result ultimately in more job creation, especially if accompanied by more federal spending rather than the counter-stimulus current focus on spending cuts and “balanced” budgets (in at least one sense an oxymoron for a federal government that can print its own money).  But those jobs will require a better educated public than the US is likely to have. Again, partly due to the mainstream economic discourse, we are effectively debilitating public education through cuts in funding, exploitation of teachers, and privatization for the profit-making gains of education profiteers, rendering what was our greatest strength our greatest weakness.\

But what really happens to most of the wealth created by those increases in corporate profits (and those demands for ever higher returns that the wealthy have come to view as their norm, accompanied by those terribly preferential tax rates that mean the wealthy get to keep more of their unearned wealth while ordinary workers cannot)?  One suspects that much of that ‘extra’ wealth heads out of the country–to offshore tax havens, invested in yet another vacation home abroad, put into emerging markets, following the promise of higher returns without much regard for the impact on the US economy.

As long as we are facing the kind of inordinate reward to the uberwealthy and underreward to ordinary Americans, I find it hard to get excited about a five-year high on Wall Street.  It’s main effect is to drive home the need for Congress to develop better tax policy to at least use tax as a means to help, on the periphery, cut back on inequality.  Eliminate the preferential taxation of capital gains and dividends and estates.  Don’t listen so much to the deficit scolds who want to decimate earned benefit programs like Medicare and Social Security.  Invest more in physical infrastructure, particularly mass transit and environmentally sounder energy policies.  Don’t listen so much to the militarists (who are often in company with said deficit scolds) who want to continue allowing the military budget to engorge itself.

cross posted with ataxingmatter

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Taxes and job creators

Via Robert Waldmann Richard Thaler at Bloomberg provides a different take on innovators and job creators:

A recurring theme of this year’s presidential campaign is the need to encourage the formation of new businesses. Republicans in general, and Mitt Romney in particular, have stressed that the best way to stimulate such startups is via low tax rates on high-income earners.

In other words, this is a strategy that emphasizes maximizing the after-tax returns if and when you hit it big. Yet if you think about the way most new businesses are started, it should be clear that these tax incentives have very little to do with the decisions facing most new entrepreneurs.

The typical business startup (think Joe the Plumber) begins with an initial stake that has been saved or borrowed, and 97 percent of small-business owners make less than $250,000 a year. It is a good bet that when Bill Gates, Steve Jobs and Larry Page were creating their new businesses in their proverbial garages, they weren’t giving much thought to the tax rate they would have to pay if they struck it rich.

The essence of Stewart’s idea goes to the heart of why our economy is largely organized around limited-liability public corporations. When successful entrepreneurs decide to take their businesses public, they are selling some of the upside to other shareholders in return for making sure that they can’t lose all their wealth if something at the company goes wrong.

So-Called Reform

What about smaller startups that don’t begin their lives as corporations? One thing that would help stimulate this sort of business creation is making sure that a business bankruptcy is not ruinous to the entrepreneur’s family. But the Republican- sponsored bankruptcy “reform” law of 2005 changed the rules in the opposite direction. For someone who uses a credit card to help open a bakery or landscaping business, this law raised the cost of failure.

Austin Goolsby speaks to the issue on the Jon Stewart Show,  and Jon is spot on.

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A Question About Apple

by Mike Kimel

A Question About Apple

My wife has been an Apple user for a long time. I on the other hand have tended to avoid purchasing Apple products for myself – I just cannot get around the concept of a single button on a mouse, nor why I should be interested in buying a product whose manufacturer apparently makes conscious decisions to remove features based on someone’s aesthetic sense rather than usability. That said, I did notice that Apple products had a tendency to be reliable, though that reliability certainly came at a price.

Recently, my wife convinced to ditch my Droid for an i-Phone so we could use facetime. Perhaps because of that, I’ve become overly sensitive to issues involving Apple products as of late. My mom has a keyboard for her iPad which seems to have stopped working. (I was the one who originally recommended she buy an iPad as I figured it would be easy enough for someone as technologically unsavvy as her to use easily.) The only way I can get my iPhone to admit I have a voice-mail is to power it off completely and then turn it on again. It’s been that way from day one – at first I chalked it up to yet another thing about the phone, but my wife told me it wasn’t supposed to behave that way. And I notice my wife has been complaining about her Mac – something that didn’t happen except rarely with its umpteen predecessors.

Is this just something from my immediate circle (i.e., random anecdotes) or are the company’s products becoming less reliable? Anyone else notice anything?

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