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

A Caution Concerning the Kooky Conservative Conjecture

There is definitely a meme in the progressive blogosphere that conservatives and liberals think differently. People try to be polite, but I don’t think I’m the only person who perceives it to be really about the hypothesis that conservatives are not capable of rational thought.

One way of putting this is that “The Republican Brain” may have joined “What’s the Matter with Kansas” and “The Emerging Democratic Majority” and everything Richard Perlstein ever wrote on the list of books (which I haven’t read) which every progressive much read.

Also a favorite topic of mine is public it’s not a matter of opinion polling. Occasionally pollsters ask about verifiable facts (famously what fraction of the US Federal budget goes to foreign aid) and find the most remarkable beliefs.

There is some evidence that Conservatives’ beliefs are further from reality than liberals’ beliefs.

(non irony alert)

I think the evidence which I discuss below is not convincing, because the studies may be skewed, because the facts have a liberal bias.

In the USA the winter of 2012 was extraordinarily warm. Chris Mooney himself links to a study which notes that Liberals are more likely than conservatives to recall it that way.

Bill Gardner described a study (pdf warning) by Wendy Gross, Tobias Stark, Jon Krosnick, Jash Pasek, Gaurav Soods, Trevor Tompson, Jenifer Agiesta and Dennis Junius which shows the more people know about the Affordable care act, the more likely they are to favor it.

Fox News viewers didn’t know the facts about the US invasion of Iraq.

OK but I wasn’t joking about the liberal bias of the facts. The researchers who study the phenomenon have to choose a set of facts before testing knowledge of the facts. In the case of the warm 2012 Winter, the fact clearly fit the anthropogenic global warming hypothesis. A crafty conservative social scientist, could argue that liberals don’t accept the facts by asking if 1998 or 2012 were hotter (1998 is the base year for all conservacalculations of global warming, since it was extraordinarily hot).

Also in the case of the ACA the correct answers to the questions of fact were facts which tended to suppor the case for the ACA (at least the ones I looked at were).

The data which I have seen do not reject the hypothesis that
1) people’s beliefs of fact are influenced by their general ideology
2) this is equally true of liberals and conservatives
3) The whole body of evidence gives balanced support for liberalism and conservatism
4) the particular facts selected for the studies support liberal conclusions and so liberals are more likely to believe them.

I am very confident that part 3 of this hypothesis is false. But the recent research to which I linked, doesn’t test, let alone reject, the joint hypothesis 1-4.

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Yglesias totally Nails National Review Online

You really do want to read this post by Matt Yglesias

It is too good to excerpt, especially because the best part is the screen capture.

There are many things one could say about this comparison, starting with the fact that unlike a proper caudillo such as Augusto Pinochet, Obama hasn’t had thousands of people detained and tortured without trial. Or, indeed, that it was actually Obama’s predecessor who was having people detained and tortured without trial. But perhaps the strangest thing about it is that when American conservatives analogize Obama to a Hispanophone military dictator, we are meant to understand this a criticism when the historical reality is that American conservatives have generally been quite enthusiastic about caudillos.


Indeed, thanks to the miracle of modern-day traffic recirculation methods, old National Review content singing Pinochet’s praises falls directly adjacent to complaints about Obama’s caudillismo.

He has the screen capture to show this in all it’s Orwellian duckspeaking blackwhite glory (one odd thing is that the post contains 0 (zero) references to “1984” which is doubleplusungood).

And in conclusion

It is certainly possible that conservatives, genuinely terrified by the totalitarian menace of insufficiently vigorous deportations, have simply changed their minds on the merits of caudillismo. But it looks an awful lot like throwing Spanish words around for no real reason.

Ah snark. Nobody does it better.

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Incoherent and Incoherenter

I have comments on Brad DeLong’s question asked of Richard Koo.

Re: Brad Delong

which is

Re: Richard Koo
“I am not sure that I can ask this question coherently.”

I think the question is plenty coherent. The post-script does a better job of capturing not your personal confusion but just how confusing the issues are.

Brad’s first question

The conventional arguments of those whom Martin Wolf calls the Austerians runs more-or-less like this: someday QE will succeed in shifting beliefs from an expectation of permanent depression to an expectation of rapid normalization. Savers then look at their holdings of maturing government bonds and roll them over only if they are offered a normal and positive real interest rate. And then the price level will rise very rapidly to a value at which–as John Maynard Keynes said of France during its inflation of the 1920s–real future government primary surpluses discounted at the normal real interest rate are equal to the nominal debt divided by the price level.

In your framework, that would be a sudden very large shift in private-sector net savings behavior from surplus to deficit. And in your framework such a shift is almost inconceivable. But in their framework such a shift seems almost inevitable. Can you tell me why judgments of likelihood of a near-hyperinflationary collapse upon normalization are so different in the two frameworks?

I think even in your charitable inerpretation, the neo-Austrian theory is based on a false dichotomy, a falacy more common than any other and more common than any valid method of reasoning. In your story, there are two states of expectations, so a shift must be a jump so there is either liquidity trapping or high inflation.

In mainstream macroeconomics (including I think Koo) all functions are assumed to be continuous and all dynamics are assumed to be saddle path stable (exactly as many eigenvalues with positive real parts as forward looking variables). This means jumps can only occur when there is an exogenous surprise such as a shift in policy. It is an assumption (an independent core assumption — not an implication of rational expectations and all that) that economic fluctuations are stationary around a unique balanced growth path equilibrium.

So we have two inconsistent falacies and no reason to put any trust in either.

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Why Congress Should Not Get Out of the Way of the Postal Service

invisible hand Guest Post by Mark Jamison, retired Postmaster. News of Ron Johnson the Tea Party favorite from Wisconsin taking over as chair of the Senate committee on Homeland Security & Governmental Affairs has caused an overwhelming sense of panic among progressives and postal workers. Johnson will control oversight of the Postal Service in the Senate.

There may be good reason to think this has the makings of disaster. Johnson is on the record stating that it would be a good idea if the Postal Service went into bankruptcy and got privatized. His training is in accounting, but he has refused, with an aggressive ignorance, to acknowledge the basic tenets of accounting. When witnesses come before his committee, he bullies them and waves his arm abrasively. His dislike of unions is so intense he is willing to set aside his worship of the business principles of a contract to concoct a bankruptcy scheme to abrogate postal labor agreements.

Is the coming of Ron Johnson any reason to panic?

Tom Coburn, the current ranking member on the committee, has said virtually all of the same things as Johnson (in his quiet, deadly way). Several of the other Republicans on the committee — Rand Paul, Mike Enzi, and Kelly Ayotte — have also said many of the same things Johnson has. All of them have shown a disdain for the Postal Service as an institution. All of them have questioned the Postal Service role as a national infrastructure.

Never mind too that Tom Carper, the Democrat from Delaware and current chair of the committee, has endorsed virtually every cut, every closure, every act of outsourcing that PMG Donahoe has engaged in or even imagined. On postal matters, his views are not that far from Johnson’s.

It could be the end

While Ron Johnson will probably just carry on like Carper, Coburn, and the other Republicans on the committee overseeing the Postal Service, the specter of Senator Johnson as chair is haunting progressives.

The sky is falling atThink Progress, where Kira Lerner tells us that with Johnson “it could be the end of the Postal Service as we know it.” Lerner therefore hopes that Congress passes legislation — any legislation at all, bad as it might be — before Johnson can pass something worse.

How likely is any legislation coming out of a lame duck session will be good? Anything likely to come out of the Senate would carve in stone the current agenda of cuts to the workforce, reductions in service, and secret NSA agreements. Plus, any bill passed by the Senate would have to go to conference with whatever Darrell Issa comes up with in the House. The result will be further degradation of the postal network. There is little chance it will make those who care about postal services in this country very happy.

Over at Daily Kos, Laura Clawson seems just as frightened of Johnson as is Lerner. Faced with Johnson’s statement that the Postal Service should go through a bankruptcy process, Clawson says, “Another solution is for Congress to get out of the way of the Postal Service making money providing needed services like banking for tens of millions of people who don’t have access to financial institutions.”

Postal banking might be useful for the millions of unbanked citizens, but it is worth giving this notion of “getting Congress out of the way” a bit more thought. The idea seems to be almost everyone’s answer for what ails the Postal Service. Blaming Congress is apparently something folks everywhere on the political spectrum can agree on.

That should come as no surprise, considering that Congress has become less popular than a shady used car salesman. But would all be right with the Postal Service if Congress just got out of the way?

The answer to that depends a lot on what you want the Postal Service to do with its newfound freedom.

Getting Congress out of the way

For many people, “getting Congress out of the way” means that the Postal Service should be free to compete. It should be allowed to deliver wine and beer, it should be allowed to get into the banking business, and it should be allowed to expand its products and services in many other ways now prevented by law. Even Vermont Senator Bernie Sanders, one of the most enlightened members of Congress, likes to say that the Postal Services needs to be free to compete so that it can increase revenues and sustain itself.

That all sounds fine — unless you’re one of the companies that has to compete with the Postal Service. In fact, one of the reasons that legislation has been stalled for the past four years is there are many interests who don’t want to free the Postal Service to compete. The mailers want cheap rates, the package industry wants a cheap way to fill the last-mile, ideologues on the Right want to kill labor, legislators with rural constituencies want to protect the infrastructure and services that benefit their communities. Everybody wants something, but no one really wants competition.

Other advocates of “getting Congress out of the way” have something else in mind. They’re thinking about how Congress had made it difficult to close post offices, interfered with ending Saturday delivery, and tried to stop the closure of most mail processing plants and ending overnight delivery.

For these folks — like the large mailers who think downsizing will keep their rates down — getting Congress out of the way means giving the leaders of the Postal Service more freedom to do exactly what they have been doing for the past several years — closing plants, reducing service, and all the dismantling we’ve witnessed.

Still another view of “getting Congress out of the way” involves ending the prefunding mandate, i.e., the law passed by Congress in 2006 (the Postal Accountability and Enhancement Act) that unnecessarily requires the Postal Service to prefund its retiree health benefit fund (RHBF) to the tune of $5.5 billion a year. According to this view, the main problem facing the Postal Service is that it is running so deep in the red — a problem caused almost entirely by the RHBF payments.

But prefunding is not really the problem. It is just an excuse. The Board of Governors and the senior leadership in L’Enfant Plaza have been using the crisis created by the RHBF payments — along with the drop in volume associated with the Great Recession — as an excuse to advance an agenda they have long held dear. It is an agenda that goes back way, long before prefunding became an issue.

Transforming the Postal Service

The corporate elite has sought a more corporatized Postal Service, free of regulation and oversight, at least since the Postal Reorganization Act of 1970, if not before. Postal management has consistently helped achieve that goal. Since 2003 when former PMG Jack Potter offered his Transformation Plan, the goal of the Postal Service has been to do exactly what Mr. Donahoe has done over the last five years.

The management of the Postal Service does not want the agency under its stewardship to function as an institution that serves the needs of millions of average Americans. It wants to be a corporate player. So when the leaders of the Postal Service talk about getting Congress out of the way, they’re saying they don’t want government oversight and regulation to interfere with allowing them to turn the Postal Service into a corporation — more specifically, a delivery company.

To that end, then, postal leadership has been very clear about wanting to jettison the retail network, especially thousands of small post offices that do not make significant profits but that have been essential to rural communities across this country. Donahoe, his predecessors, his enablers on the BOG, and politicians of both parties have sought to reduce employment, undermine labor agreements, degrade the mail-processing network, as part of this move toward a corporate model. They continue to sign secret agreements with companies like Amazon, Staples, UPS, and FedEx while reducing service standards for the American public. They have abandoned any pretense of “binding the nation together.”

Yes, the 2006 PAEA put what seemed to be a big impediment in the way of postal progress in the form of the RHBF prefunding payments. But a closer look at the law reveals all sorts of ways in which Congress “got out of the way” — with some very problematic results.

PAEA divided products into two categories, which has led to the Postal Service’s practice of moving products from the more regulated market-dominant category into the competitive category, which is less regulated and often shrouded in secrecy. PAEA has fostered more Negotiated Service Agreements, which has resulted in the likelihood of more, not less, monopoly in the package delivery market. The rate cap regime set up by PAEA may have looked like a grand advance supposedly creating a predictable rate system; but, it further endorsed the idea the Postal Service exists for the benefit of stakeholders, primarily a narrow sector of the mailing industry, and not as an infrastructure designed to benefit the American economy and the American people as a whole.

The public good

The problem is that government — and the Postal Service is a legitimate function of government — does not exist to compete. Government exists to facilitate commerce, communication, transportation, and all the rest. One of its main functions is to build infrastructures that promote the general well being of both the economy and the civic space. The postal network is one of the government’s great infrastructures. It is not supposed to be a competitive player in the marketplace.

We do not expect highway systems to compete. We do not expect water and sewer systems to compete. We expect these infrastructures to function well and to extend access and service broadly.

The postal network, even as technologies change, serves as a fundamental infrastructure for both information and goods. The Founding Fathers saw the value in that sort of infrastructure, and that view is no less valid today. The network that we have created can and should adapt, but it remains essential.

We have lost our appreciation for public goods and the public square. All around us we see the basic fundamental structures of our society being captured by private, rent-seeking interests. We are told that our schools and universities would be better if they competed — in other words, if we introduced the profit motive. The same thing goes for our prisons and law enforcement. Everything will supposedly work better if private enterprise takes over.

This kind of thinking reduces everything in life to a single paradigm of profit and loss. It co-opts and perverts words like “effective” and “efficient,” reducing their meanings to a very narrow slice of human experience.

But different elements of society have different goals, different ways of measuring success, efficiency, and effectiveness. Trying to stuff everything into a model of competition simply doesn’t work. Businesses should pursue profits, schools should educate, infrastructures should facilitate.

The postal network has been built over generations to serve the American people. It has done that job well by connecting every corner of America, by maintaining the most affordable rates in the world, and by adapting to changing technologies. It has done this while providing a sense of identity to thousands of communities and meaningful employment to hundreds of thousands workers.

Yet in spite of all the Postal Service has accomplished, its leaders remain committed to turning the Postal Service from useful infrastructure into nothing more than a delivery company.

Doing the work of the people

The Postal Service does not need to be set loose, and it does not need to be freed from Congressional control. Giving the leaders of the Postal Service a free hand is not going to help matters. They will continue doing exactly what they have been doing.

Instead, the Postal Service needs to be properly managed, properly maintained, and properly directed towards fulfilling its role as a basic national infrastructure, owned by all Americans.

The problem is not that Congress needs to get out of the way but that Congress needs to do its job.

Congress needs to ensure that the Postal Service operates under a robust universal service mandate that is clearly defined. It needs to ensure that the management structure of the Postal Service works for the American people, not its own agenda. It needs to find appropriate means to maintain our existing postal infrastructure while adapting it to 21st century needs and technologies. Congress needs to do its job and properly tend to and care for public goods and national assets.

The new Congress probably isn’t going to do any of those things, but passing bad legislation in a lame-duck session or giving the management of the Postal Service more freedom to degrade the institution is not going to solve anything.

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Racism or a Nation’s Reality ? ? ?

invisible hand Crooks and Liars has a post up on it’s site here: Wingnut Cartoonist At Indy Star Gets His (Gary Varvel) Cartoon Yanked Claiming the cartoon was overtly racist, the Indianapolis Star eventually yanked it after initially removing the mustache off of the man coming through the window claiming the mustache created an image too ethic. For all I know and being of Italian descent, the man could have been Italian.

One emotion portrayed by this cartoon (and missed by many) is the overall tenor of America’s attitude towards legal and illegal immigrants coming from south of the US border. Without knowing Gary’s thoughts and approach towards immigration and about the people he depicts in his cartoon, one could take the opposite view of the cartoon in how it portrays White America. We have changed again from a nation asking for other countries to:

“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed, to me:
I lift my lamp beside the golden door.” Emma Lazarus

to a nation of:

Send us your technically qualified and those who can get an H-1B and are willing work for less wages. Doctors are most welcome! We will take advantage of you; but if you qualify, you can sup at our nation’s table of economic reward and pay taxes. All others need not apply even if you live under the threat of violence and poverty.

I do not know Gary and his ideas or political beliefs. Maybe Gary’s cartoon was drawn upon a foundation of racism; but, it does demonstrate one clear fact. The politics of this nation and the character of its people has changed over the last decade or so and we have become a nation of fear. We are afraid of different hues, cultures, and religions so much so we ban them altogether from our borders, our neighborhoods, and our homes. Our nation’s politicians of recent are doing nothing to foster any change in these attitudes and are actively fanning the flames of fear of immigrants and a president who took action.

Thinking of the upcoming Thanksgiving Holiday, when was the last time you have celebrated it with strangers from outside of your family?

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Failure to deflate: flat consumer prices only slightly help real wages, sales

– by New Deal democrat     (from Bonddad blog)

Failure to deflate: flat consumer prices only slightly help real wages, sales

Usually changes in the inflation rate are all about the price of gasoline.  Not in October.  Although gas prices fell -6.4% (compared with a decline of -5.0% a year ago), unlike one year ago net consumer price failed to decline, instead remaining flat.

Over a two month period, a -8.6% decline in gas (vs. -6.1% in 2013) coincident with a 0.1% increase in prices, vs. a gain of +0.2% in 2013.  There seems to have been no single culrpit.  A wide variety of other prices slightly more than expected.
As a result, while measures of real sales and real wages did increase, they did not do so as much as expected.
First of all, here are real retail sales:

These returned to August levels.

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Does fixing a mistake make it worse?

Dan here…Sometimes I don’t know the questions to ask.  Here is a note on water….

by David Zetland  (from Aguanomics)

Does fixing a mistake make it worse?

EC writes from Florida:

One of the big questions staring me in the face is… as we reach the limits of sustainable use without “significant harm” to the environment and reuse more and more wastewater, what happens to the systems that have adapted to the volume of discharge provided by our waste stream outfalls?
We have looked at many issues to determine if there is extra available water in our basins, but the amount of “freeboard” available for additional human use may be equivalent to the volume projected to go into reuse — purple pipe systems here — in the future.
Reuse is fantastic for farmers recapturing and reusing fertilizer runoff, cities looking for less regulated water sources for esthetic irrigation, and water quality improvements in general. It is terrible for salinity intrusion up rivers with lower discharge volumes, groundwater recharge areas fighting salinity intrusion, hydro periods in flat wetlands, migratory species looking for a critical water depth, and other water volume dependent issues.
Have you looked at that?
Also variability in the demand for water reuse is a big issue. Spray fields used to help discharge extra water exceeding reuse storage volume, almost always occurs on rainy days or after the soils are saturated. That is when lawns don’t need to be watered and spray fields are least effective at handling the runoff. It seems to be when reuse water managers run the spray field pumps 24-7. What is your experience with the expense of reuse water storage?


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Top-Down approach is not working… Go Bottom-Up

bottom up sign

Economics is full of ideas for fiscal & monetary policies. But these policies are Top-down approaches. They work through investment and the financial system.

Yes, China lowers its benchmark rate from 6.0% to 5.6%, but China is supporting a failing policy of over-investment. Debt rises… and non-performing loans are increasing.

Yes, Draghi wants to do whatever stimulus is necessary to battle super weak inflation in Europe, but he is not getting to the root of the problem. Real wages are being cut in an effort to increase competitiveness for Euro-zone exports.

Yes, Japan has decided to raise the stimulus of Abenomics as consumers react to the increased sales tax. However, unless real wages rise (not just “for show” bonuses), Abenomics is doomed to failure.

And in the US, M2 velocity is still falling. Graph below is “Percent change from year ago” updated to 3rd quarter 2014. Falling M2 puts downward pressure on inflation, against which aggressive monetary policy has to fight. People are not receiving enough income. Consumer credit from the financial industry is not strong like before the last 2 recessions. People are spending cautiously. If Main Street has more money in their hands, M2 velocity will rise.

update m2 velocity yoy

The answer is to raise real wages across advanced countries. The approach must be Bottom-up.

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Mel Watt?

Via Naked Capitalism:

Elizabeth Warren tore into FHFA director Mel Watt over his failure to develop a program for Fannie and Freddie to provide principal modifications to underwater borrowers at risk of foreclosure. She also got in a dig for his failure to stop the agencies from pursuing deficiency judgments. That means going after former homeowners when the sale of the house they lost didn’t recoup enough to cover the mortgage balance. In the stone ages, when banks kept the mortgage loans they made, they never pursued deficiency judgements. They knew there was no point in trying to get blood from a turnip. Not surprisingly, the sadistic Fannie/Freddie policy has also proven to be spectacularly unproductive in financial terms. An FHFA inspector general study found thatrecoveries were less than 1/4 of 1% of the amount sought. Moreover, since those mortgage balances were often inflated by junk fees and other dubious costs, and mortgage servicers have done a poor job of maintain properties (they are too often stripped of copper and appliances, or get mold), any deficiency might be significantly or entirely the servicer’s fault.

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