Matthew Yglesias's Blog, page 2491

When Ethnic Lobbies Clash

The main thing that really powerful political lobbies have in common is the absence of any kind of coherent opposition. But Ben Smith gives us a glimpse at what happens when an unexpected clash emerges:

Israeli leaders reacted warmly to an unexpected defense of Jews and Israel, and criticism of Iran, from Cuban leader Fidel Castro in an interview with Jeffrey Goldberg. Prime Minister Benjamin Netanyahu praised Castro's "deep understanding" and President Shimon Peres wrote in a warm letter to Castro that the comments were "a surprising bridge between the hard reality and a new horizon." Israeli officials, I'm told, saw the moment as an opportunity to widen a fissure in the hostility of the global left for Israel.

But Florida Rep. Ileana Ros-Lehtinen — a key player because of her position on Foreign Affairs, and a longtime supporter of Israel — was less pleased by the opening. A Cuban exile and fierce Castro foe, she made her displeasure known to the Israelis — and even received an apologetic call from Netanyahu, which appears effectively to have squelched the unlikely dialogue with Cuba.

Jeffrey Goldberg snarks, "Could you remind again which lobby is so powerful?"

The answer, of course, is that they're both powerful! But what's extraordinary here is how much quicker Netanyahu is to react to a Cuba-related brushback from Ros-Lehtinen than he is to pushes from the President of the United States. The difference is credibility. When a Cuban exile representing a South Florida district complains that someone is being soft on Castro, she's very credibly going to stick to her guns. And suddenly the patron-client dynamic between the mightiest empire the world has ever known and a small Mediterranean country snaps into place.

Accessory Dwellings and Household Size

Here's an excellent point from Ken Archer about the debate over whether to ease restrictions on "accessory dwellings" (basically letting people put separate rental apartments in their attics or basements):

In fact, the greater numbers of residents in existing buildings is actually part of the neighborhood's historic character. In 1950, DC had 13,151 people per square mile. As of 2000, it had only 9,316 people per square mile despite building more buildings. This happened because household sizes decreased; 44% of households have only one person compared to 14.3% in 1950, and the number of children declined 39%.

Allowing a childless couple or empty nester to rent out a basement apartment or carriage house actually lets Georgetown's historic buildings hold the same numbers of residents they used to hold, and bring potential customers to the neighborhoods' shops.

Of course the real issue here concerns parking. Currently street parking is priced cheaper than what a free market would bring. That's a regressive transfer of resources from poor people to rich ones. It also leads to parking space shortages. Rich people in Georgetown (and elsewhere!) would like to hold on to their regressive gains, but they also want to avoid a situation in which shortages become worse. Archer suggests that parking shortages "should be addressed by better management of on-street parking."

And I entirely agree. Better management of on-street parking, i.e. market prices, would be a great idea. But while that does solve the scarcity it doesn't really address the "I'm currently getting an unfair subsidy and I don't intend to give it up" issue. I think the best path forward would be for reformers to simply acknowledge that people who have these subsidies feel that a right to benefit from bad public policy was one of the things they bought when they bought their home, and for the recipients of the subsidies to acknowledge that they just want what's theirs and don't actually care about the rest of it. That would clear the way to a solution, namely a big increase in residential parking permit fees that grandfathers all the incumbents in. That's not optimal policy by any means, but it would let incumbents obtain their core demands at minimum cost to outsiders.

Trains, Planes, and Pollution

Fun chart from my colleagues:

What's more, not only is intercity rail energy efficient compared to other means of transportation but it's typically electricity which can be produced with much less pollution per unit of energy output. With automobiles, of course, we're all looking forward to the future of electrification as well. But I've never heard anyone outline a remotely credible low-pollution alternative to jet fuel. Now obviously there are also distances across which rail doesn't work as a credible alternative to air travel. But for shorter distance flights it's important to understand that air travel is currently benefitting from a major unpriced externality in the form of air pollution. If we started taxing greenhouse gas pollution, then rail starts looking like a much better option on a range of short routes that are currently popular for air travel.

For example, today there seem to be almost 30 flights daily between Seattle and Portland. Clearly a lot of people are making the trip. If you built a high-speed rail connection, a lot of people would take that. But how many would obviously depend heavily on how the price compared to the price of those flights. And that in turn would have a great deal to do with how we price pollution.

GOP Targeting Fannie and Freddie . . . Or Are They?

(cc photo by futureatlas)

Sean Lengell's Washington Times article is headlined "GOP targets mortgage bailouts: Vows to end aid to Fannie and Freddie" but it seems to me that arguably the reverse is happening. After all, the GOP has been throwing a lot of rhetoric fire in the direction of Fannie Mae and Freddie Mac for about two years now. But when last they held office they didn't undertake any serious effort to reform Fannie and Freddie. Now that they're back in the majority in the House, Spencer Bachus who'll run the House Financial Services Committee still calls this "my top priority."

But what's really going to happen?

Mr. Bachus cautioned that change won't take place immediately and that the problem must be handled delicately so as not to further disrupt the slumping housing market.

Republicans also are pressing for stricter government oversight and greater transparency of Fannie Mae and Freddie Mac's accounting practices, including the creation of a position for an independent inspector general.

"The Democrats failed to conduct any oversight; instead, they gave the administration a protective shield from answering any tough questions regarding their actions," Mr. Bachus told CNBC. "This protection will be gone when Republicans take control."

Bashing the $150 billion-plus bailout of the lenders is a "political no-loser" for Republicans, said Mark A. Calabria of the Cato Institute, a Washington think thank that advocates a free-market policy.

In other words, the Bachus/Calabria plan is to: a) keep Fannie and Freddie in place as-is indefinitely, b) go fishing for scandals, c) to "bash" the bailout while keeping it going, and d) to chortle to The Washington Times about what a "political no-loser" this is for Republicans. But I suspect the quantity of actual reforming that gets done will be similar to what we saw from GOP-controlled congresses in the 1995-2006 era.

Suck on This

Thomas Friedman, July 1, 2005, "Follow the Leapin' Leprechaun":

There is a huge debate roiling in Europe today over which economic model to follow: the Franco-German shorter-workweek-six-weeks'-vacation-never-fire-anyone-but-high-unemployment social model or the less protected but more innovative, high-employment Anglo-Saxon model preferred by Britain, Ireland and Eastern Europe. It is obvious to me that the Irish-British model is the way of the future, and the only question is when Germany and France will face reality: either they become Ireland or they become museums. That is their real choice over the next few years – it's either the leprechaun way or the Louvre.

Because I am convinced of that, I am also convinced that the German and French political systems will experience real shocks in the coming years as both nations are asked to work harder and embrace either more outsourcing or more young Muslim and Eastern European immigrants to remain competitive.

As an Irish public relations executive in Dublin remarked to me: "How would you like to be the French leader who tells the French people they have to follow Ireland?" Or even worse, Tony Blair!

As I've said before, the problem with this kind of punditry is that regulating your financial sector poorly so as to generate lots of bum real estate lending really does seem to be a can't lose path to growth in the short term. People need to check themselves against knee-jerk praise of leaders who preside over this sort of thing.

VATs Around the World

Catherine Rampbell observes that the idea of a value-added tax (VAT) is hardly a distinctively "European" notion:

All your success story nations, whether of a free market or a social democratic type, have VATs because pretty much everyone has a VAT. I think there are superior policy options available to us, but this is clearly the one that diverse political and cultural systems tend to converge on.

Vague Assertions of Copyright Infringement

I was all set to do a brief post about the odd nature of the party system in Ireland, and I was planning on citing a single sentence in a Financial Times article as illustrating the point. But look what happened when tried to copy the sentence and paste it here:

"Please use the link to reference this article. Do not copy & paste articles which is a breach of FT.com's Ts&Cs (www.ft.com/servicestools/help/terms) and is copyright infringement. Send a link for free or email ftsales.support@ft.com to purchase rights. http://www.ft.com/cms/s/0/63dd1d9a-f6...

Polls suggest Fine Gael, the conservative opposition party, will form a coalition with Labour, its traditional allies to become the next Irish government.

Obviously the FT can define its terms of service however it wants. I'm a paying customer of theirs since I find they deliver one of the few news products that it's consistently worth paying for. But if what I'm paying for is going to include a broad prohibition on copy and pasting any portion of the text of their articles I think I'll probably reconsider that decision. But the larger issue here is the assertion that this copyright infringement. Says who? People have always been allowed to quote other people's copyrighted works. There's an article here in the FT that quotes from a Human Rights Watch report. Was that copyright infringement? Did the author studiously avoid copy-and-pasting and instead retype the offending sentence? Was the quote negotiated in advance by lawyers?

It sometimes happens that I see entire posts from this blog copied and pasted elsewhere, and I of course don't like it. People shouldn't do that. But ability to quote and cite freely is integral to the spread of ideas.

(Meanwhile it's odd that the "conservative opposition party" is "traditional allies" with Labour—weird system)

Ireland Bailout

A couple of brief points on this. One is that just as with any other time there's a bailout, it's always worth emphasizing that though "Ireland" gets some benefit from this, the real winners are those who lent money to Ireland and will now be repaid. Specifically, people lent to Irish banks without doing due diligence on the soundness of the enterprises and without recognizing that the Irish banking sector was too big for the Irish government to bail out. Then the Irish banks got their government bailout and now Ireland is (inevitably) being backstopped by the broader European Union. The political economy of this all works because at the end of the day there's a lot of German and other "core" banks holding that debt.

Felix Salmon says the package here is actually small relative to the size of the problem. And Ireland as a country is small relative to the size of, say, Spain. It seems to me that there's simply no way the key vulnerable EU members can repay their debts under currently predicted growth. And there are no policy options available to them that would get growth levels up to something workable.

I guess to put a positive spin on the European policy trajectory, if you keep kicking the can down the road long enough then it's always possible a "positive shock" of some kind will emerge from abroad. And what's the alternative anyway to can-kicking? But I get the sense that even more so than on our side of the Atlantic, dialogue around policy options is hobbled in the EU by a reluctance to admit that any major pre-crisis steps may have been mistaken.

Taxing Nonprofits

A sad window in Michigan's continuing decline and the ongoing collapse of state and local budgets, to be sure, but also an instance of a public policy oddity:

The mayor of Mount Clemens, Barb Dempsey, sent a letter this week to 35 tax-exempt organizations asking them to voluntarily contribute to the city's general fund, which pays for services like fire protection, streetlights and roads. Ms. Dempsey said the city has already drastically cut its expenses, having disbanded the police department six years ago, but still faces a $960,000 deficit that is projected to reach $1.5 million next year.

"Those are all services that they utilize at no cost to them," Ms. Dempsey said. "We figured it can't hurt to send out letters. If you don't ask, you never know."

Mount Clemens, about 25 miles northeast of Detroit, collects no taxes from 42 percent of the property within its borders. The 4.2-square-mile city has about 17,000 residents and is home to 26 churches, a hospital, several schools and the headquarters of Macomb County, the third largest in Michigan. If not exempt, the properties would pay at least $1.2 million, enough to wipe out the deficit, Ms. Dempsey said.

The income tax-deductibility of charitable contributions is, I think, more of a mixed bag than people generally realize but I think it does have a valuable role to play. But I wonder about the impact of these broader exemptions from taxation. Over and above the sort of revenue issues Dempsey is pointing to, when certain kinds of institutions are exempted from property taxes it can end up promoting very inefficient uses of land. Conveniently located space is a precious commodity, and there are widespread benefits to making sure that it's generally occupied by high-intensity uses.

Kids These Days

Matt Richtel in the NYT about the the new generation's brain being fried by technology:

Students have always faced distractions and time-wasters. But computers and cellphones, and the constant stream of stimuli they offer, pose a profound new challenge to focusing and learning.

Researchers say the lure of these technologies, while it affects adults too, is particularly powerful for young people. The risk, they say, is that developing brains can become more easily habituated than adult brains to constantly switching tasks — and less able to sustain attention.

"Their brains are rewarded not for staying on task but for jumping to the next thing," said Michael Rich, an associate professor at Harvard Medical School and executive director of the Center on Media and Child Health in Boston. And the effects could linger: "The worry is we're raising a generation of kids in front of screens whose brains are going to be wired differently."

Maybe. Certainly this line of research is worth undertaking. To me, though, brains that are wired to perform well in an environment of task-switching sounds like a step forward. When looking at something like the anecdote that opens the piece—a kid who's supposed to be reading Cat's Cradle but keeps screwing around online instead—I think it's worth taking an initial stab at a more deflationary account.

Circa 1810 there were very few things one could do to entertain oneself at home. Even reading a book posed serious logistical challenges after sunset. Then throughout the 19th century, illumination technology steadily improved inaugurating a golden age of reading long books. Then in the early 20th century we got the player piano, better phonographs, the radio, movies, movies with sound, movies with color, broadcast television, broadcast television with color, cable television, the VCR, the Walkman, video rental stores, videogames, CDs, DVDs, on-demand television, MP3s, HDTVs, Netflix, YouTube, Blu-Ray, etc., etc., etc., That's a large increase in the number of ways you could be entertaining yourself. But since the incandescent lightbulb and rural electrification, we haven't devised new ways to fundamentally increase the amount of time one has in the day to do things. Under the circumstances, things that you could do in 1810—to wit, read a book—are bound to tend to get squeezed, neurology aside.