Matthew Yglesias's Blog, page 2356

Oil-Driven Trade Flows

Earlier this week it was reported that for the first time since 2004, China ran a quarterly trade deficit. That's not because China stopped exporting manufactured goods, nor is it because China is suddenly buying tons of American imports. Instead, it's because of oil. As oil gets more expensive, the dollar value of oil imports surges, pushing China into deficit.

America, of course, uses far more oil per capita than China and just like in China when the price goes up the short term impact is much higher spending and relatively little in the way of reduced demand:

Since households are constrained in the amount of money they can spend, this means that in the short-term spending on goods and services that aren't oil needs to fall in response. This could be fine if oil-exporting nations were taking all their profits in terms of American manufactured goods. And, of course, some of this happens. Persian Gulf states are huge customers for American military equipment and airplanes. But spending all that money on current consumption would be a pretty irresponsible thing for oil exporters to do, and largely they don't do it. The result is a big drag on American output. Even worse, hawks on the Federal Reserve and (even more so) the European Central Bank interpret the higher cost of oil as "inflation" and push to respond with tighter money, further cutting output.

DC Council Candidates Back Higher Density

Washington, DC is currently facing the need to elect a new at-large member of the City Council and according to Lydia DePillis at a debate last night all the candidates agreed that it would be desirable to support raising building height limits around the city's monumental core if Congress would agree.

(cc photo by cbdowns)

I don't think this is going to lead to any kind of short-term policy change, but I do take it as a good sign that the politics of the city are evolving in a healthier direction. The nation's capital experienced a painful decades-long spell of urban decline, but even though the city still has a lot of problems that trend has clearly turned around. And one enormous strength we have is incredibly demand for downtown office space, where rents are now the highest in the nation. Allowing more of that demand to be met by supply would do a lot to give us the resources we need to further improve things.

JP Morgan Profits Surging

Shannon Bond reports that JP Morgan Chase is winning the future and "reported a 67 per cent jump in first-quarter profit, as better performance of its credit card division offset losses from its troubled mortgage business."

Recall that as recently as March 31, JP Morgan Chase CEO Jamie Dimon was warning us that the new Dodd-Frank bill would be "the nail in the coffin" for giant American banks. He also warned one year ago that derivatives reform might cost his firm a few billion in revenue and Senator Jim DeMint (R-SC) cited the touching plight of Dimon and his business as a reason to further deregulate banks.

The Senate And The Debt Ceiling

As long as we're taking hostages, I don't see what's stopping Democratic Senators—who, after all, constitute a majority—from starting to talk about what concessions they're planning to demand in exchange for a debt ceiling increase.

That would be the ideal negotiating framework. White House demands clean debt ceiling increase, House majority demands big spending cuts, Senate majority demands partial repeal of Bush tax cuts, and we all compromise on just doing the damn debt increase.

Call The Hostage Takers' Bluff

Raising the debt ceiling is unpopular, which may seem to militate against taking a hard line on it, but the reality is that the debt ceiling is going to get raised. This isn't a voting issue for anyone in the electorate, but as Politico reports it is life or death for Wall Street:

MONEY THEFT — WALL ST. TO BOEHNER: DON'T MESS WITH DEBT — From POLITICO's Morning Money — EXCLUSIVE: GOP SPOOKED ON DEBT LIMIT? – M.M. hears that House Speaker John Boehner has been reaching out to top Wall Street players asking how close Congress can get to the May 16th deadline (or July 8th drop-dead date) for raising the debt limit without seriously unnerving financial markets. The questioning is not going over well. "They don't seem to understand that you can't put everything back in the box. Once that fear of default is in the markets, it doesn't just go away. We'll be paying the price for years in higher rates," said one executive. Boehner's office last night would not confirm the conversations.

This is why the correct posture for the White House is as follows:

— Complete and utter willingness to raise the debt ceiling. Enthusiasm, even.

— Complete and utter unwillingness to exchange anything for a debt ceiling increase. Rabid hostility, even.

Then the question becomes "do a majority of members of congress favor raising the debt ceiling?" And the fact of the matter is that the answer is yes. Boehner isn't even asking Wall Street whether or not raising the ceiling is a good idea. He takes it for granted that it's a good idea. He's just asking them how much screwing around he can get away with. And they're telling him that they don't like screwing around. Of course these are rich people, so they'll tolerate some screwing around if it's done in pursuit of lower taxes on rich people. But at the end of the day if the White House simply refuses to get sucked into a negotiation, the debt ceiling will be raised.

There Are More Valuable Players Than Derek Rose

Given that the media seems to have pre-emptively designated Chicago Bulls point guard Derek Rose as the NBA's Most Valuable Player, I suppose it's not too early to start complaining about how crazy this is. Nor is it too early to start noting that it's based on a very simple analytic error—ignoring defense.

The case for Rose is basically that he's the main offensive initiator on a very successful team. But why is Chicago so successful? Is it because their Rose-initiated offense is hot stuff? Well, no. They score 105.4 points per hundred possessions. League average is 104.5 points per hundred possessions. If you combined their Rose-led offense with an average defense, you'd have a team with a modest winning record bragging about its 6th or 7th seed in the East. San Antonio and Denver both score 109.5 points per hundred possessions. The gap between the best offenses and Rose's crew is as large as the gap between Chicago and the lowly Minneapolis Timberwolves.

The reason the Bulls are so successful this year is their stellar defense. They only give up 97.4 points per hundred possessions. That's the best mark in the league. And obviously Rose is doing his part in that. But does anyone think Derek Rose is the best defender in the NBA? That he's the key to Chicago's defense? Of course not. But if you're going to credit someone for Chicago's success, you need to credit someone who's making a huge difference on the defensive end.

Andrew Cuomo Is Very Popular

Andrew Cuomo got himself elected Governor of New York last fall promising lower taxes and spending cuts, and as governor he's enacting spending cuts and lowering taxes. And for his trouble, he's got good poll numbers:

The poll offers the newest evidence of the political coup that Mr. Cuomo, who marked his 100th day in office on Sunday, achieved with the budget that lawmakers approved two weeks ago.

Seventy-three percent of voters in the poll, by the Siena Research Institute, said they viewed the governor favorably, compared with 69 percent last month and 70 percent shortly after he took office in January. Even two-thirds of Republicans said they looked happily upon Mr. Cuomo, a Democrat.

It tells you a lot about the state of American politics that this is where things stand in what's clearly a left of center state. On the one hand, there genuinely is an electoral appetite for spending cuts and on the other hand self-identified Democratic voters are much, much more tolerant of ideological deviation from incumbent politicians than are self-identified conservatives.

Endgame

But I know:

— The myth of the irrational mother.

— Some smoke and mirrors in the appropriations deal.

— In chart form.

— Maybe Barack Obama is a true believer in style of governance.

— Or maybe he's a true believer in increased public spending on health care.

— Equal Pay Day tips for working women.

Gonna go with Sheryl Crow's version of "The First Cut Is The Deepest" now that I know some of these cuts aren't really as deep as initially advertised.

Is It So Hard To Imagine A Southerner Winning The GOP Presidential Nomination In 2012?

This was the state of the Intrade betting on the 2012 GOP primary as of around 4PM this afternoon when I got distracted and stopped working on this post for a while:

Am a crazy, or does this seem to be an underestimation of Haley Barbour? There are a lot of reasons to think Barbour won't be the nominee, but at the end of the day the governor of a southern state in a southern-based party has to be seen as at least plausible. Add to that the fact that Barbour has unusually good DC and national media connections for a small state governor, and I'm thinking it's more like 10 percent than 4.2 percent.

The Cost Of a Law Degree

I can't speak to the merits of the program Michael Coyne is advocating for as the solution here, but surely this is a problem:

Tuition costs at law schools accredited by the American Bar Association have doubled in the past nine years; total inflation during that same period was less than 25%.

This is, however, increasingly what we're finding in all aspects of the higher education system. Annie Lowrey wrote a month ago that in the law school sub-element of this, we're finally seeing applications to law school decline in response to the increasingly bleak value proposition law schools have to offer.