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

I Take No Joy in Raping and Pillaging

Chris Christie moves New Jersey into the 17th century:

Christie is cutting $475 million in aid to school districts, $62 million in aid to colleges and $12 million to hospital charity care. He is pulling all funding from the department of Public Advocate….He is cutting state subsidies for NJ Transit, a move Christie said could lead to higher fares or reduced services but would force the agency to become “more efficient and effective.”…

“I take no joy in having to make these decisions. I know these judgments will affect fellow New Jerseyans and will hurt,” Christie said. “This is not a happy moment. However, what choices do we have left?”…

Senate budget chairman Paul Sarlo (D-Bergen) said cutting funding for schools was not the same as cutting state spending, and would simply raise property taxes.

Chris Christie reprising the plan Christie Whitman used to “balance” the budget: the one created by Cokehead that has led to property taxes rising by 50% in the first seven years of this decade alone.

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Today is International Toilet Day

And, if I were a better person, you would be reading my interview with David Kurla, CEO of IkoToilet/Ecotact in this space.

But I’m not, so go to his website, especially the links for school, urban, and slum toilet provisions, and then see this John Sauer piece at the Huffington Post, and check out the information at Sauer’s organization, Water Advocates.

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CGI 2: Opening Ceremony / Initial Plenary Session (1 of 2)

This one’s going to be long because a lot of general themes get presented. Those looking for the shorter version may want to just go to the website and watch the videos.*

William Jefferson Clinton (WJC) introduces the proceedings by giving a background on the Clinton Global Initiative (CGI). CGI began in 2005, and required each participant to make a specific, measurable commitment. (This statement is followed by shot of Jessica Alba and Cash Warren, possibly because they started dating that year, but probably just because the director liked the shot.) Almost all commitments that were made then were multi-year (generally 3- to 5-year commitments). Five years into the CGI, about one-fourth of the commitments made have been fully completed. The CGI has, for instance, given 48 million people better access to health care. (Isn’t that just about what National Health Insurance would do for the US alone? Still, it’s 48 million people who are often ignored.)

There have also been “unvaluable but invaluable” effort at reconciliations. (I checked this; “unvaluable” is indeed a word.) Unlike other conferences, attendees will receive only a gift bag—the gift to participants is “only a bag.”** Each attendee (not certain if this includes the press, but I assume not) has been allocated 200 “points” that can be used at the “Giving Back Center.” For instance, one can donate “a P&G water filtration system” for 10 points.

I should mention that the organizers and donors to the conference are the clearest indication of the payoff from WJC’s “third way” efforts: Tom Golisano, for instance, is cited as a founding and continuing sponsor. Other major sponsors and donors to the conference include P&G, ExxonMobil, and APCO Worldwide (who are providing Wi-Fi access). I half expected to see ADM listed. (Matt Damon’s appearance sponsored by?)

(That ExxonMobil is a major sponsor of a conference that is placing Climate Change front and center in its discussions [see below] is a sign of either encouragement or a coming paradigm shift. Perhaps both.

WJC noted that Participants not invited back unless they do something toward their commitment during the year. However, due to the Global Financial Crisis, several previously-made commitments have had to be extended. (Three-year goals have become five-year goals, fives have become seven. This mirrors the year in which I expect to be solvent again.)

And then WJC talks about what WJC is best at talking about: po9litics. He notes that there are two questions that are asked in any political discussion: 1) What are you going to do? 2) How much money are you going to spend on it? Politicians almost never discuss how to do it to maximize positive impact in other people’s life. And it is that discussion that the CGI is all about.

He proceeds then to introduce a pairing that was made possible by last year’s CGI: Gary White and Matt Damon of water.org. The statistics flow from his (WJC’s) tongue: one billion people lack water, and 2.5 billion lack sanitation facilities. He loves this, and it’s somewhat infectious.

Water.org is an outgrowth, I gather, work that Gary White has been doing since 1990. Mr.White describes the economy before Watercredit was founded, where people paid 25% of their gross income for clean water, or had to borrow money from loan sharks at 125% interest rates to install toilets. By combining microfinance with technology transfer, water credit was able to ameliorate this situation in many areas—and its loans are repaid 97% of the time. I can think of several mortgage lenders who would like that repayment ratio.

Matt Damon then announced a new commitment for water.org, in that they are extending their efforts into Haiti, where 51% of the rural population lacks clean drinking water and 29% of the urban population lacks proper sanitation facilities. They are able to do this in part due to a generous commitment from the Ex;it Foundation. Many organizations are getting some good, useful publicity here.

The next presenter is Linda Lockhart of Global Give Back Circle, whose group is devoted to Educational Progress in Kenya for girls. Again, the source for this group was through CGI Connect. (Ms. Lockhart claims to have been surprised when she entered the keywords for her group’s goal [education, women] and immediately received multiple responses from organizations. (We clearly do not travel in the same circles.) The group’s efforts were rewarded when they discovered one of the root causes of women dropping out: lack of shoes. Teaming up with, among others, Microsoft, they presented the feel-good moment of the Opening Ceremonies with three Kenyan girls speaking–often in unison, sometimes sotto voce—about the good that Global Giveback Circle did for them.

At this point, the Plenary Session begins. WJC introduces Muhtar Kent, President and CEO of Coke. Mr. Kent speaks how Equal allocation of resources in Sub-Saharan Africa would, in and of itself, increase production 10-20%. In the current situation, women’s mobility is severely more restricted than men’s, of course. Kent, too, seems amazed to have learned this.

Kent is followed by Michelle Bachelet, current President of Chile and also, the first female defense minister in Latin America. Being a female politician, she not only has noticed but also has a strong interest in “soft” issues.

Mike Duke, the current CEO of Wal-Mart (WMT), ran the International Division before ascending to the chairmanship. WJC notes that WMT now offers health insurance to its employees, as well as having made a major effort to reduce its greenhouse gas emissions. (WJC stated, I believe, that WMT’s stock began rallying only when they announced their “global warming initiative.” I cannot find the evidence of this, though I didn’t do a thorough search.) Duke notes that a 5% reduction in their packaging alone was the equivalent of taking 210,000 diesel trucks off road. (And it saved them money. This theme will recur throughout from the CEOs.)

After this, WJC introduces Australian Prime Minister Kevin Rudd, describing him as having spoken about climate change in “excruciating detail,” which may well be the first time someone has done that to WJC instead of the reverse. Rudd notes that Australia is the country that has been the hardest hit by Anthropogenic Global Warming, and is the leading proponent of the other first-day theme: the G-8 giving way to G-20.

The particpants’s discussion on a Rock Following.

*If they post them; let me know in comments if you can find the video on the site and I’ll add a direct link.

**Compare with most conferences, where you get a bag and almost enough “swag” to cover the retail cost of the membership (which, for attendees, was $1,000 minimum).

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PSA

It’s true that I have been a bit nastier than usual with some posts (especially this one and this one—though the latter was rather justified by preceding events, as Tom detailed.) The sight of economists who should know better saying “Ewww, tariffs” in the manner of second grade boys who think girls have “cooties” is rather tiring. It’s almost as if they note that a strong rule of law is necessary to ensure that problems of asymmetric information are remedied and then complaining when those laws are actually used. Oh, wait…

Part of this is that people who should know better—maybe not Max B., but certainly Barry O.—keep pretending that Democrats have no obligation to be better than Republicans at addressing issues of inequality and opportunity. In which case one might as well vote for Republicans, if one can find those small-government, fiscally-conservative candidates that only Andrew Samwick seems to believe still exists.

But I am cautiously optimistic today. Thanks to Lance Mannion, I’ll be spending most of this week blogging/reporting the Clinton Global Initiative in New York City. While many of the participants are The Usual Suspects, there is at least some hope that they will approach the world better than they appear to approach their electorate.

If there is anything, especially on Thursday, that someone especially wants to cover, feel free to note it in comments. (Or, if you’re going to be there, say hello.)

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A Short Note on Optimality

Via Eszter, there is one thing that is very clear from this graphic (duplicated below because I can’t figure out how to embed it):

There is an excess of home-based internet capacity in the United States, for which people are definitionally paying too much.

The question is whether this is a problem. If you argue it is not—that the excess spending gets reinvested and used to develop new products and services that, on balance, benefit the economy—then please explain this in the context of any contemporary economic model.

Discuss in comments.

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How to Manage Variable Costs, Arkansas-Style

Via the Chronicle of Higher Education (link may not be public):

The Arkansas legislature is taking a different approach to reining in soaring tuition costs: Today it sent a bill to the governor’s desk that would cap the amount of money public colleges can spend on scholarships.

Increases in scholarship aid lead to higher tuition costs, State Rep. Bill Abernathy, who shepherded the Senate-passed bill through the House of Representatives, told Associated Press. “You almost have the reverse Robin Hood scenario,” said Mr. Abernathy, a Democrat. “You’re taking from the poor and giving it to the rich in some cases.”

Will Governor Beebe, whose post-secondary education is entirely in the Arkansas Public system, view this as a way to keep people from having his opportunities, or will he “make the tough decision” and decide not to invest in Human Capital?

That #32 ranking and improving educational environment will be interesting to revisit in five years. Just when the pump has been primed, the water supply is rerouted.

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Nuclear Option and Trust

by divorced one like Bush
Updated comment at end

So, now that the Democratic Party has the majority and the White House, why am I not hearing about the use of the Nuclear Option? I mean, it occurred to me that if there was a way to end the partisan old ways, the Nuclear Option is it. It sure worked well for the Bush administration. You need 60 votes? Bring in the non-executive executive senate menber: Biden. Oh, you think there needs to be a tie to be broken before our hatchet man can be used? Well I have news for you. Being that everything comes down to breaking the 60 vote line to get anything done, by precedent of calling for a record number of filibusters the Republicans have set the new definition of a tie: 59/41. Biden makes it 60/41.

This gets me to the trust issue and I’m going to toot my own horn here for those who think human capital is bunk regarding getting us out of this mess. (Did I mention the flower shop was off 13% for Christmas and 45% for January? Yeah, I got skin in this game.)

Seems on the same day I posted my message to the Republicans and the Blue Dogs, a man officially of the economic science posted on the same subject (via C & L via Naked Capitalism).
Willem Buiter.

Here is what I said:

The greatest harm that is coming from the republican’s drive to instill their minority will on the many out of selfish want, is to further the demise of the people’s trust. For the blue dogs it is their ignorance of their economic ideology that creates the mistrust. The republicans/blue dogs, and those helping them by lending their “professionalism”, think they are only effecting a political strategy. In truth, they are destroying the very basis for the wealth they desire. Their entire campaign for decades to discredit, to instill mistrust in the primary institution we have, the US (We the People) government, has been the primary cause to our economic decline. To increase the level of distrust is to decrease the available “intangible capital” which is 77% of our wealth generating power.

Here is Willem Buiter:

As part of this widespread erosion of social capital, both citizens and markets lost faith in the ability of governments to commit themselves to any future course of action that was not validated, at each future point in time, as the most opportunistic course of action at that future point in time – what macroeconomists call time-consistent policies and game theorists call ’subgame-perfect’ strategies.

This morality tale has important consequences for a government’s ability to conduct effective countercyclical policy. For a fiscal stimulus (current tax cut or public spending increase) to boost demand, it is necessary that the markets and the public at large believe that sooner or later, measures will be taken to reverse the tax cut or spending increase in present value terms. If markets and the public at large no longer believe that the authorities will assure fiscal sustainability by raising future taxes or cutting future public expenditure by the necessary amounts, they will conclude that the government plans either to permanently monetize the increased amounts of public debt resulting from the fiscal stimulus, or that it will default on its debt obligations.

Mr. Buiter is prescribing a different solution to the lack of trust than what I’m going to suggest. He thinks more money to the banks is needed to promote lending. Well, isn’t that kind of giving to those you know you can not trust, not to mention just adding to the debt that he notes no one seems to want to consider? He did state the following as part of his “morality tale”:

During the decade leading up to the crisis, current account deficits increased steadily and became unsustainable. Strong domestic investment (much of it in unproductive residential construction) outstripped domestic saving. Government budget discipline dissipated; fiscal policy became pro-cyclical. Financial regulation and supervision was weak to non-existent, encouraging credit and asset price booms and bubbles.

Hope was the word. Trust is the need. I’ve seen and lived what the Republicans and Blue Dogs can do. I’m willing to take a chance for the benefit of building future trust, thus building with the 77% of our power, thus nurturing hope, and let Obama send in Biden to the Senate. Hell, maybe it’s time they come up with the unitary vice executive theory and take it for a spin in the Senate! In-other-words, my solution is for Obama et al to just take god damn control and do what they want, then we’ll have something to compare to along with “Republican brand” bipartisanship. We can decide come November 2012 how the brands compare. (Catch that “bringing business to governance” lingo of how to speak civics?)

We survived the last 4 years, we know where we’ll be if we keep going as we are (no thanks to our free press), so I say let the Dem’s pull a republican move: redefine what a tie is, have the Obama’s legal council write up the unitary vice executive theory and send in Biden to the Senate.

I trust that it will not be worse than what we have now. And that, “my friends” is using our fullest economic power.
Almost forgot: Can we please broaden the discussion now?

Update: Two commentors noted that the tie break may not work as I suggested. RonE notes there is no need for the 60, just change the rules to a simple majority. TStockmann notes that we would not get all the Dem’s to go along. I assumed the Dems would act tribal if they had someone to lead them, that is what is needed when you are fighting another tribe You can’t beat the other tribe by acting all independent thinking virtuous as to the ideal bipartisanship.

But here is where my plan works. We’re going to have the unitary vice executive who is president of the Senate just as soon as Obama has his attorney write it up. Or, maybe Biden should just have his attorney write it up ala Cheney. Then, he goes in and changes the rules (because he’s the Unitary Vice Executive President) to a simple majority, we’re golden.

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Not Just Developing Countries

The most interesting presentation I saw at the AEA last January was Maccini and Yang’s discussion of the effect of rainfall on the health and growth of Indonesian babies.* It was subsequently discussed as an NBER working paper** by Jason Shafrin, and the thing that made it most interesting is that Maccini and Yang found an effect on female children, but not one on male children.

But that’s a developing economy. Would the same type of thing happen in a developed nation?

Apparently, via Mark Thoma’s links, the answer is yes.

People who suffer from cardiovascular diseases at advanced ages may have reason to suspect that the cause of their illness lies far away … around the date of their birth. A team of European researchers reports that if economic conditions at the time of birth were bad, then this leads to a higher risk of cardiovascular mortality much later in life.

The researchers used Danish twins born around the turn of the (19th into 20th) century as their baseline. And the nature-nurture difference appears to be at the margin:

The twin data come with an added bonus. They make it possible to check whether a twin pair’s health outcomes are more similar later in life if they were born under adverse conditions than if they were born under good conditions. It turns out that, indeed, they are more similar later in life if the starting position was bad. Conversely, if an individual is born under better conditions, then individual-specific factors dominate more. In short, individual-specific qualities come more to fruition if the starting position in life is better.

The full paper is available here (PDF).

*The reasoning for such a study seems fairly straightforward: babies are most affected in their earlier years, rainy seasons—especially in subsistence-farming areas—should tend to produce a better crop yield and therefore marginally more calories available to babies. So the alternative hypothesis should be that rainy seasons produce healthier children, as reflected in schooling accomplishments and height, among other things.
**[Free version here; PDF]

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