Matthew Yglesias's Blog, page 2350

India Facts of the Day

Charles Fishman:

India spends 2 percent of its GDP treating diarrhea, according to TERI, one of the country's most prestigious scientific research institutes [...] Not one of the 35 largest cities in India has water service more than an hour or two a day–including the name-brand cities we've all heard of: Hyderabad, Mumbai, Bangalore, and Delhi.

I think doing what we can to assist India's economic development and public health ought to be a substantially higher priority for American foreign policy.

Interest Rates, Not S&P Ratings, Are The Key Metric For America's Sovereign Debt

You should almost certainly ignore this: "Standard & Poor's Ratings Service has lowered its long-term outlook for the United States' sovereign debt to 'Negative' from 'Stable' due to risks from the country's growing deficit."

The thing about the United States of America is that we're not an obscure country. Nor is our sovereign debt an obscure financial instrument. No major investor is going to be outsourcing his research on the desirability of American bonds to the S&P ratings service. There are two metrics to keep an eye on when assessing American debt. One is the interest rate the Treasury has to offer to get people to buy the debt. Currently that number is low. The other is the "spread" between bonds that are indexed for inflation and bonds that aren't indexed for inflation which serves, among other things, as a gauge of market assessment of the risk that we'll have no choice but to inflate the debt away. Currently that number, too, is low.

The Declining Effective Tax Rate Of America's 400 Highest Earning Individuals

You often see progressives touting charts that illustrate the steep decline in the top marginal income tax rate, but it's really not clear how to interpret that kind of information since the tax base is always changing. But ThinkProgress has looked at some newly released IRS data that lets you calculate the effective tax rate being paid by the top 400 highest earners:

At the same time, their incomes have skyrocketed:

This is only 400 people so it's not like you can balance the budget just by soaking them, but "If the richest 400 Americans simply paid the same effective rate in 1995 as they did in 2007, the government would have collected over $3 billion in additional revenue." That's not nothing.

The Future Of Sportswriting

(cc photo by theseanster93)

It seems to me that journalism is more vulnerable to outsourcing to Bangladesh than to automation, but NPR has a story about a "robot journalist" (i.e., computer program) outperforming a human sportswriter and certainly the "game recap" genre of news articles looks like it should be pretty feasible to automate. That's especially true for baseball where we already have a lot of experience with using scorecards to summarize games in a way that would be machine readable.

Realistically, the main reason I think we won't see the automation of this kind of sportswriting is that I have to believe you'd be able to get people to do the job for free. America has a large and growing pool of retired people, many of whom are of sound mind and body and many of whom are sportswriters. If you were able to offer them free good seats to see their home team play and write up summaries of what happened for a large audience, it seems to me that someone perfectly competent would be thrilled to take the "job" for a few years. Alternatively (and in some ways more likely) the beat reporter function will just wither away since amateur bloggers will be doing the job anyway and there's no point in trying to compete with free.

The Perverse Distributional Consequences Of Tax Breaks Are a Feature To Some On The Right

Progressives have developed "tax expenditures" as a term to communicate with the public about the proliferation of loopholes in the tax code. A certain strain of libertarian has decided to object to this verbiage in pursuit of the goal of minimizing federal revenue. Since the ultimate level of revenue is determined by the level of spending rather than by the structure of the tax code, I don't think this will achieve anything for them. But the point either way is that if your concern for "small government" is about the idea that public policy is distorting the operation of the market economy rather than tax-fetishism, then tax loopholes are distorting in exactly the same way as direct spending would be. A large direct government expenditure on housing would shunt an artificially large share of social resources into the housing sector, and a giant tax break for housing has the same impact.

The main difference, as CAP's Seth Hanlon explains, is that doing it with a tax break gives most of the benefits to rich people:

Consider the mortgage interest deduction, which is by far the largest government housing program. Its estimated cost of $98.6 billion in the upcoming fiscal year is more than twice as much as the discretionary budget for the Department of Housing and Urban Development. If a family in the 15 percent tax bracket claims the deduction (assuming it itemizes its expenses, which is unlikely), the government essentially matches 15 cents for every dollar in mortgage interest paid. Families in the highest 35 percent tax bracket get the largest benefit: 35 cents for every dollar in mortgage interest.

Of course, taxpayers in higher tax brackets tend to have bigger homes and bigger mortgages, and therefore more deductible interest. And so wealthy taxpayers with larger homes get the greatest benefit from the deduction:

Now of course in principle that government could frame a program of direct expenditures on housing such that the richer people and people with fancier houses get more help than people with average incomes and average houses. But in practice that would never happen, since it would be insane. Doing it through the tax code gives you all the pernicious (or perhaps you think it's beneficial) economic distortions, and also structures the benefit in an upside down way. So, again, if your worry about big government is that you think smaller government will promote human well-being then you ought to be very worried about tax loopholes, whether or not you want to call them "tax expenditures."

That said, we have seen an upsurge in rightwingers expressing a different concern. Representative Paul Ryan is a fan of Ayn Rand and Harvard economist and former Bush Council of Economic Advisers Chairman Greg Mankiw has explained that progressive taxation is immoral even though it promotes higher levels of human welfare. Under the circumstances, you might think the economic distortion of tax loopholes isn't a big deal and their upside down nature is a feature rather than a bug. After all, according to this view improving the welfare of humanity as a whole is small potatoes compared to undoing status quo policy's unconscionably immoral treatment of rich people.

Europe's Silent Bank Runs

If you have Euros, and you want a bank account, you can put your money in an Irish bank. But then again, you could also put it in a Dutch or German bank. And increasingly, nobody wants to keep money in Irish banks where private sector deposits dropped at an annual rate of 9.8 percent in February. Tyler Cowen explains the significance:

This flight of capital reflects a centuries-old economic principle known as Gresham's Law, sometimes expressed casually as "bad money drives out good money." In this context, if two assets — euros inside and outside Ireland — are not equal in value in the eyes of the marketplace, sooner or later the legally fixed price parity will fall apart.

If enough depositors fear frozen accounts, the banks will be emptied out, and they also will require additional government bailouts, on top of the bailouts for the bad real estate loans. The banks come to resemble empty shells, conduits for public aid but shrinking and unprofitable as businesses — and, to a large extent, that is already the case in Ireland. Portugal is moving in this same direction, toward being a land inhabited by zombie banks.

It seems like only six years ago that Ireland was the hottest thing in right-wing think tankery.

Grover Norquist Is The Left's Best Friend

Ernest Luning's report on a recent deficit cutting confab in Colorado hosted by the state's two Democratic Senators offers a window into the problems would-be spending cutters are having with anti-tax activist Grover Norquist:

[Alan] Simpson said he confronted anti-tax crusader Grover Norquist when the commission met and they exchanged words over the legacy of Ronald Reagan, claimed by both as their personal hero. When Reagan was president, he raised taxes 11 times, Simpson said, a bit of history that made Norquist squirm.

"I knew Ronald Reagan and you, Grover, are no Ronald Reagan," Simpson said he told the president of Americans for Tax Reform, who famously said his goal was to make government small enough it could be drowned in a bathtub. Reagan didn't raise taxes to give Norquist something to complain about, Simpson said. "He probably did it to make the country run."

I'm not sure if Norquist understands this or not, but in the current moment of institutional weakness for American liberalism, he's the most powerful advocate we have. At the end of the day, the long-term level of taxation is determined by the level of money that's spent. Every dollar the federal government spends will be repaid, with interest, out of taxes. And currently in Washington we have lots and lots of Democrats—from Barack Obama to Senators Mark Udall and Michael Bennet—arguing for reductions in scheduled spending. And the main thing standing in their way is Grover Norquist, his tax pledge, and his insistence that no Republican vote for any spending cutting bill that also includes some increases in revenue. So far, that's denying cuts-oriented Democrats the working legislative majority they need to implement their agenda, and giving congress' small number of hard-core progressives the ability to veto cuts in Social Security.

In the present circumstances with interest rates and inflation low and unemployment high, frankly I thank him for his invaluable efforts. But it's a strange thing for a nominal conservative to be doing.

Politics In A Steep Recession

Some people have expressed surprise that the Great Recession hasn't proven to be a boon to left-wing political movement. I think the expectation that something like that would be the result of a financial collapse is based on an over-generalization of FDR and the New Deal. If you look at the 1930s in a global context, the predominant trend was the rise of far-right nationalist parties, not just in Germany and Japan but across a huge swathe of Europe. And today's lesser recession is prompting a

Change Cubans Can Believe In

Good news, it seems to me:

"We have arrived at the conclusion that it is advisable to limit the fundamental political and state offices to a maximum period of two consecutive periods of five years," Mr. Castro said in a speech opening the Sixth Communist Party Congress, the first such gathering since 1997. He said his generation had failed to prepare a new crop of younger leaders, and called for a "systematic rejuvenation of the whole chain of party and administrative posts." [...]

[Castro] praised the expanded opportunities already extended to entrepreneurs; the government has granted 180,000 licenses for small businesses like coffee vendors, fast-food stands and house rentals, with tens of thousands more expected to be issued in the coming months. Yet he appeared to reject as "contrary to socialism" the loosening of rules on buying and selling homes, a change some analysts had speculated was coming.

This sounds like an effort on both the political and economic front to move in a more Chinese direction, away from personal dictatorship and toward greater economic freedom. Should be good news for the Cuban people.

Transit Oriented Punk

Spencer Ackerman asks "is there a punk or hardcore band that writes more about riding buses than Rancid?"

Probably not. But I would note that Rancid is multi-modal. To be sure, they take the 60 Bus out of downtown Campbell (headed to San Jose, perhaps) but I was also quite tickled during the one trip I ever took to the Bay Area to find myself "at the stations / Daly City train" just as the song says. If only they'd gone into greater detail about how they got from 6th street up to the corner of 52nd and Broadway. Walk up to 8th street NR stop and take the train to 49th and 7th seems most probable.