Matthew Yglesias's Blog, page 2343

Endgame

I'm on my own, I'm on my way:

— Hindu sacramental offerings creating ecological hazard in Queens.

— Karl Marx's congratulatory letter to Abraham Lincoln on his 1864 re-election.

— Monica Potts on pesticides and bee colony collapse.

— 10 year-old Eliza Sayer's open letter to "boys from around the world".

— NDP surging in Québec.

— Unidentified scientific instruments.

— Gandhi as a young lawyer in South Africa.

Fountains of Wayne, "Utopia Parkway" is the best song about Queens.

Budgeting For Stagnation

Medicare privatization gets all the attention, but in some ways I think this is the least important part of the budget plan the House GOP adopted this month. After all, it's not scheduled to happen for another ten years so it's kind of a freebie. The catastrophic disinvestment in science charted by my colleagues Adam Hersh and Sarah Ayres, by contrast, would start right away:

To return to Big Government Liberalism 101, scientific and technological advances have a lot of positive spillover effects. Consequently, we use the mighty power of the state to subsidize them in a variety of ways. One is that the patent system allows innovators to have time-limited government sponsored monopolies. A second is that the tax code offers an indirect subsidy to rich people who want to give money away for this purpose (among others). And a third—and important—way is that the government directly spends money on science and technology. This third leg of the stool plays a particularly important role in "the basics" while the patent system does more to encourage the direct application of science to marketable technologies.

Poor Economic Conditions Hammer Public Concern About Environmental Problems

Matthew Kahn highlights some research he's done with Matthew Kotchen that offers empirical support for the theory that a recession is a hard time to get people to care about the environment.

Here's the abstract for "Environmental Concern and the Business Cycle: The Chilling Effects of Recessions":

This paper uses three different sources of data to investigate the association between the business cycle—measured with unemployment rates—and environmental concern. Building on recent research that finds internet search terms to be useful predictors of health epidemics and economic activity, we find that an increase in a state's unemployment rate decreases Google searches for "global warming" and increases searches for "unemployment," and that the effect differs according to a state's political ideology. From national surveys, we find that an increase in a state's unemployment rate is associated with a decrease in the probability that residents think global warming is happening and reduced support for the U.S to target policies intended to mitigate global warming. Finally, in California, we find that an increase in a county's unemployment rate is associated with a significant decrease in county residents choosing the environment as the most important policy issue. Beyond providing the first empirical estimates of macroeconomic effects on environmental concern, we discuss the results in terms of the potential impact on environmental policy and understanding the full cost of recessions.

But of my pitch about why progressives need to care more about monetary policy is based around this. There are many, many, many more people working in Washington, DC on progressive environmental policy than on improved macroeconomic stabilization policy. But good economic conditions are a precondition for getting people to be broad-minded enough to worry about diffuse environmental hazards. Similarly, there are many, many, many more people working in Washington, DC on progressive immigration policy than on improved macroeconomic stabilization policy. But, again, poor economic conditions completely transform the political landscape in which immigration reform advocates are working in a way that makes it essentially impossible to be effective.

Limo Licensing in Nashville

The impact of high taxes on growth is typically exaggerated in a way that leads to underinvestment in public goods. Conversely, I think anti-competitive regulation is an underrated source of bad "big government." Take, for example, the case of Nashville's minimum pricing for car service rides:

Until 2010, sedan and independent limo services were an affordable alternative to taxicabs. A trip to the airport only cost $25. But in June 2010, the Metropolitan County Council passed a series of anti-competitive regulations requested by the Tennessee Livery Association—a trade group formed by expensive limousine companies. These regulations force sedan and independent limo companies to increase their fares to $45 minimum.

The regulations also prohibit limo and sedan companies from using leased vehicles, require them to dispatch only from their place of business, require them to wait a minimum of 15 minutes before picking up a customer and forbid them from parking or waiting for customers at hotels or bars. And, in January 2012, companies will have to take all vehicles off the road if they are more than seven years old for a sedan or SUV or more than ten years old for a limousine.

Cars, quite rightly, need to comply with various safety and environmental regulations to be on the road. But if a car is safe enough for you to to drive it yourself and safe enough for you to give a friend a ride for free in, it's also safe enough for you to give a customer a ride in in exchange for money. No single locally based anti-competitive rule of this sort is a huge deal on its own terms, but in the aggregate they're very pernicious and prevent new and better ways of doing business from coming into being.

Opposition To Spending Cuts Makes Taxes Higher Than They Otherwise Would Be

The long-term level of taxation is determined by the level of spending. Currently, spending is on autopilot to increase from year to year. But the President of the United States supported by many members of his political party is pushing efforts to reduce spending relative to baseline. Senator Tom Coburn of Oklahoma seems to understand that if you want taxes to be low, what you want to do is find a way to say yes to the President on this score. But conservative orthodoxy, enforced by Grover Norquist and others, says that conservatives should say "no" on the grounds that Democratic spending-cutters also want to increase taxes.

Nick Schultz at the AEI blog tries to explain why the orthodoxy makes sense:

What they are missing are the implications of what I call Wallison's Maxim—"it is far easier to spend than to tax."

Once this idea is grasped, it becomes clear why it is not a "compromise" when the Republicans agree to tax increases while the Democrats agree to spending cuts. Without a mechanism that ties spending to tax revenues—like the balanced budget requirement in state constitutions—tax increases don't necessarily decrease or eliminate a deficit.

History supports this. Given Wallison's Maxim, the real friends of big government aren't tax hawks. They are folks who refuse serious institutional restraints on spending. Matt even identifies those people—"the wing of the Democratic Party that disagrees with Obama about the desirability of enacting spending cuts."

This completely misreads the situation. In the current political configuration, conservative Republicans + Barack Obama + Democrats who are to Obama's right = a working legislative majority. What's more, both Barack Obama and conservative Republicans seem to favor spending cuts. So why aren't such cuts passing? Well at the moment they're not passing because Obama and the Obama faction of the Democratic Party are insisting that spending cuts must be paired with tax increases, and conservative Republicans are rejecting that proposal. But the correct way to understand the Wallison point is that taxes are irrelevant—money that's spent will be paid for out of taxes. Spending cuts are both necessary and sufficient to reduce the long-term level of taxation. And since once spent money has to be repaid with interest, delay induces higher taxes. What spending cutters need to do is learn to take "yes" for an answer.

Alternatively, they can let Digby and I have the last laugh.

NB: I don't think the current conservative movement posture is irrational, it's just inconsistent with its professed desire to make the American tax burden as low as possible over the long run. This goal just isn't nearly as important to the conservative movement in practice as it likes to tell itself.

Taxes In The MMT Perspective

This is a side remark, but after some helpful discussions with Steve Randy Waldman I think I know have a better grasp on the "Modern Monetary Theory" point that Paul Krugman dismisses here:

Well, the feds have the Fed, which can print money. But there are constraints on that, too — they're not as sharp as the constraints on governments that can't print money, but too much reliance on the printing press leads to unacceptable inflation. (Cue the MMT people — but after repeated discussions, I still don't get how they sidestep the issue of limits on seignorage.)

So taxes are, first and foremost, about paying for what the government buys (duh). It's true that they can also affect aggregate demand, and that may be something you want to do. But that really is a secondary issue.

That's the standard view. Taxes are about paying for government spending. And it's also true that tax and spending decisions impact aggregate demand. And it's sort of true that the government needs tax revenue to buy things, but also true that the government could just print the money. But it's ability to print money is limited by demand issues. So you have two multiple government funding sources—taxes and the printing press—both of which independently impact aggregate demand.

I think the MMT view would say that they have a more parsimonious account of this. The US government buys things with dollars. It also has a monopoly on the production of new dollars. So the way the US governments buys things is with the dollars it produces. But this of course raises the question of why anyone would want to have dollars. And the reason is that the US government also throws people in jail for failing to pay their taxes, and it demands payment of taxes in dollars. So you have a single loop. The government funds purchases by creating financial assets and it manipulates aggregate demand by threatening to throw people in jail unless they turn financial assets over to the government.

I can see some serious lacuna in this model. It ignores, for one thing, the actual institutional set-up of our government. Though I suppose the MMT reply would be that this shows that our set-up is misguided. It also ignores the fact that you see money in, for example, prisoner of war camps so it's not clear that the emergence of social conventions around mediums of exchange is really all that dependent on coercive tax power. Last, I suspect there's a case to be made that the entire operation of the financial system depends on people having the view that the people running the government don't see things this way. So even if the MMT view is correct, it may be important in a Straussian way for people not to believe in it. That said, all models have flaws and I think this one illustrates some important points about the artificiality of our functional separation of the "borrowing money" function from the "manage the money supply" function.

The Need To Discipline The Fed

You sometimes hear blog posts about whether the Fed should be concerned more with "core" inflation or more with "headline" inflation. The right answer is core, and the better answer is they should actually totally ignore past inflation and target inflation expectations. However, as Niklas Blanchard implies the real institutional dysfunction is that we're talking about this at all:

Core inflation has closely tracked a median ever since the Fed concerned itself with keeping inflation low (and stable). But what you really have to ask yourself is; what good is having a target when you are able to move between whatever measure suits your inclination at the moment? There is, of course, a mechanism by which inflation in energy prices (and thus broad inputs) can translate into a higher trend in core inflation (60′s-80′s), but this hasn't been the case for thirty years.

Outsourcing the operational conduct of monetary policy to a group of kinda sorta apolitical technocrats is a great idea. But by giving them an extremely hazy mandate and then letting them work in secret, we've created an accountability-free zone. Last summer my HVAC was broken so I hired an apolitical technical expert (viz, HVAC repair guy) to deal with the situation. After he worked on it for a while the HVAC machine was working again so I paid him. While I may not have the requisite knowledge to fix an HVAC machine, I can assess wether or not the room gets cooler when I put the AC on. By the same token, if there were anything at all we were specifically telling the Fed to try to do, we could then as citizens clearly assess whether or not they're doing it. Instead, individual governors can basically play Calvinball between switching inflation measures, talking dual mandates, hand-waving about what "price stability" amounts to, etc.

Washington: A Life

Ron Chernow's Washington: A Life is a pretty hilarious reading experience. Essentially Chernow understands the Founder Biography genre all too well. The thesis of the book has to be that the subject was a unique genius for whose every sneeze we are indebted. At the same time Chernow gives every indication of in fact being a sophisticated and intelligent man. So time after time you'll get a clear description of Washington being inept, or grouchy, followed by a sentence about how he was actually being brilliant. The fact that Washington was a giant hypocrite about slavery, who recognized its fundamental wrongness and kept telling French and/or Yankee acquaintances that we was against it but who never lifted a finger out of political opportunism and greed is laid bear, but then excused.

Yet as I say, it's really all right there on the page. You could have kept 95% of the sentences the same, retitled the book Right Place At The Right Time: The George Washington Story and it'd be brilliant. As written, it's slightly silly.

What's more, for whatever reason Chernow has written a narrative that carries a strong subtext of a torrid affair between Washington and the Marquis de Lafayette. I can't do justice to this material, but I would have loved to see a review by Eve Sedgwick. At any rate, like Chernow and Daniel Walker Howe I'm a fan of the Whig and proto-Whig political traditions in America so I give a thumbs up to the idea of this book influencing popular consciousness. Chernow's op-ed on the tea party is recommended. My own entry into the Founder Bio genre would be titled James Madison: History's Greatest Monster but I doubt it would achieve bestseller status.

Sympathy for the Entertainment Raters?

By Alyssa Rosenberg

I haven't played video games in any sort of sustained way since I dabbled in Half Life and Counterstrike in high school. But when the Entertainment Software Rating Board announced that they'd be moving to a new system of determining ratings based on a questionnaire to keep up with the vast expansion of the gaming market, particularly games that are available through browsers, rather than through brick-and-mortar storefronts, I was intrigued. Rating entertainment is a notoriously tricky business, one that reveals weird political biases, generation gaps, and the unevenness of cultural norms and community standards. So I called Eliot Mizrachi, the director of communications at ESRB, to talk through how the new system works.

"What we've seen over the last few years is there's been a significant increase in digitally delivered games," he told me. "They tend to be more casual in nature, E-rated [for everyone], E 10-rated [for everyone ten or older], and lower-budget. They tend to be more like party games or puzzle games, or that sort of fare." In other words, it's not so much that there's been a boom in overall gaming, but rather a boom in a kind of game that's fairly easy to rate. Sure we can debate whether the Angry Birds are actually suicide bombers, but a questionnaire can quickly determine the fairly predictable level-to-level content and its impact on viewers.

The questionnaire, Mizrachi said, doesn't represent any particular change in the Board's rating priorities. Rather, it tracks depictions of things ranging from sex, to gambling, to alcohol use, and tries to elicit information about three dimensions of gaming: perspective, incentives, and level of control. In perspective, a game like Risk where the player moves whole divisions is determined to be less immersive than a war game where a player shoots enemy soldiers directly (I asked if the system considers that acting like a general sacrificing troops could be more desensitizing than playing as a soldier who feels the cost of war, but that's not a nuance the system weighs). The questionnaire rates games where players are incentivized to avoid harming game elements as less intense than those where you're rewarded for kills or behavior that would be anti-social if you did it in real life. And finally, the more control a player has within a game, the more intense (and thus more highly-rated) it's assumed to be — static video you watch but can't interact with is considered, within the system, to be the least intense. I'd be curious to see some analysis of how these categories interact with each other: if you have a high level of control, but are incentivized to do good things, like run a field hospital, or protect children within a game, does the level of control intensify the incentives score, pulling the overall rating down?

After ratings are assigned by the questionnaires and games hit stands (and not all games will have their ratings assigned solely based on questionnaires), ESRB testers will check the games within 48 hours to make sure the gamemakers have described their content honestly and the ratings match. If they've flagrantly lied about content or perspective, incentive, and control issues, ESRB can have the game pulled from sale, along with the game's marketing materials. And there will be an appeals process available to gamemakers who disagree with the ratings their games are assigned: they'll be able to ask a 3-5 member board of raters, who are distinct from testers, to go through the game and check for nuance and context that might lead to a different ratings assignment.

It's not just the way the categories interact that strikes me as a challenge for ESRB — it's the need to simultaneously make sure that, as Mizrachi puts it, "the ratings we're assigning match the expectations of the cultural consumer," while simultaneously avoiding ratings creep even as the expectations of those cultural consumers shift with the times. As singers push the boundaries on obscenity in pop, it'll be interesting to see how standards adjust, not to mention how long the MPAA's confused language triggers in the ratings last in their current forms. I don't have an answer for how to reconcile those competing demands, much less how raters are supposed to represent a broad swath of consumer expectations. Given that games trigger concerns about issues as diverse about advertising to young kids, to conduct in war, to depictions of sex, it's hard to imagine that a five-person panel can have developed and representative opinions on everything that might arise. It's easy to slam ESRB and MPAA for bad ratings calls, but they've got an impossible task in trying to satisfy everybody.

Koch Industries Says That Koch Political Activities Are Motivated By Considerations Of Corporate Profit

Political movements need money. And that means that political movements tend to owe some debt to rich people who give them money. One question that naturally arises is whether those rich people are giving money out of ideological conviction, or as part of a business oriented lobbying strategy. And certainly this has been one interpretive front in the ongoing battle over how to understand the political activities of the Koch Brothers. Their defenders would like you to believe that these are just two rich guys who happen to love liberty. Their detractors tend to note that the liberty to pollute mankind's commonly owned atmosphere is actually a pretty strange form of liberty, albeit one that serves the interests of a firm heavily involved in the natural resource extraction industry.

Nobody in life is purely cynical, and doubtless the Koch Brothers believe in their own mission, but time and again they seem primarily interested in a conception of liberty that's good for their bottom line. A report in the Nation yesterday that Koch Industries was instructing its employees how to vote offers some compelling evidence in favor of the progressive interpretation of these events. This kind of conduct used to be illegal, but thanks to Citizens United it's now arguably permitted for firms to try coerce their employees to vote for favored candidates. But are the Kochs trying to use their economic power to advance abstract political ideals, or are they trying to boost Koch Industries' profits?

According to the Koch Industries PR team it's all about the bottom line:

Today's article in The Nation Magazine contains a series of inaccurate and irresponsible claims about Koch Industries and its outreach to employees regarding the endorsement of individual political candidates. Our October 2010 letter to employees clearly stated, " …deciding who to vote for is a decision that is yours and yours alone, based on the factors that are important to you. Koch and KOCHPAC support candidates we believe will best advance policies that create the economic conditions needed for employees and businesses such as ours to survive and prosper."

The materials in the packet are entirely consistent with the law and Koch Industries' record of public statements in support of free-market policies and previously disclosed contributions by KOCHPAC to candidates for public office. Unions have long communicated their preferences to their members knowing full well that inside the voting booth those members would make their own decisions. We are confident that our employees who reviewed the information we sent them did the same.

That seems pretty clear cut. The Kochs are rich businessmen and their wealth gives them social and political influence that they want to use to advance the interests of their company.