J. Bradford DeLong's Blog, page 2109

Dwight D. Eisenhower: The Chance for Peace

April 16, 1953:

Dwight D. Eisenhower: The Chance for Peace: What can the world, or any nation in it, hope for if no turning is found on this dread road? The worst to be feared and the best to be expected can be simply stated. The worst is atomic war. The best would be this: a life of perpetual fear and tension; a burden of arms draining the wealth and the labor of all peoples; a wasting of strength that defies the American system or the Soviet system or any system to achieve true abundance and happiness for the peoples of this earth.

Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.

The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.

This is, I repeat, the best way of life to be found on the road the world has been taking.

This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron. These plain and cruel truths define the peril and point the hope that come with this spring of 1953.

This is one of those times in the affairs of nations when the gravest choices must be made, if there is to be a turning toward a just and lasting peace. It is a moment that calls upon the governments of the world to speak their intentions with simplicity and with honesty. It calls upon them to answer the question that stirs the hearts of all sane men: is there no other way the world may live? The world knows that an era ended with the death of Joseph Stalin. The extraordinary 30-year span of his rule saw the Soviet Empire expand to reach from the Baltic Sea to the Sea of Japan, finally to dominate 800 million souls.

The Soviet system shaped by Stalin and his predecessors was born of one World War. It survived with stubborn and often amazing courage a second World War. It has lived to threaten a third. Now a new leadership has assumed power in the Soviet Union. Its links to the past, however strong, cannot bind it completely. Its future is, in great part, its own to make.

This new leadership confronts a free world aroused, as rarely in its history, by the will to stay free. The free world knows, out of the bitter wisdom of experience, that vigilance and sacrifice are the price of liberty. It knows that the peace and defense of Western Europe imperatively demands the unity of purpose and action made possible by the North Atlantic Treaty Organization, embracing a European Defense Community. It knows that Western Germany deserves to be a free and equal partner in this community and that this, for Germany, is the only safe way to full, final unity. It knows that aggression in Korea and in southeast Asia are threats to the whole free community to be met only through united action.

This is the kind of free world which the new Soviet leadership confronts. It is a world that demands and expects the fullest respect of its rights and interests. It is a world that will always accord the same respect to all others. So the new Soviet leadership now has a precious opportunity to awaken, with the rest of the world, to the point of peril reached and to help turn the tide of history.

Will it do this?

We do not yet know. Recent statements and gestures of Soviet leaders give some evidence that they may recognize this critical moment...

Egypt Leaves the Internet

James Cowie:

Egypt Leaves the Internet - Renesys Blog: James Cowie on January 27, 2011 7:56 PM: Confirming what a few have reported this evening: in an action unprecedented in Internet history, the Egyptian government appears to have ordered service providers to shut down all international connections to the Internet. Critical European-Asian fiber-optic routes through Egypt appear to be unaffected for now. But every Egyptian provider, every business, bank, Internet cafe, website, school, embassy, and government office that relied on the big four Egyptian ISPs for their Internet connectivity is now cut off from the rest of the world. Link Egypt, Vodafone/Raya, Telecom Egypt, Etisalat Misr, and all their customers and partners are, for the moment, off the air.

At 22:34 UTC (00:34am local time), Renesys observed the virtually simultaneous withdrawal of all routes to Egyptian networks in the Internet's global routing table. Approximately 3,500 individual BGP routes were withdrawn, leaving no valid paths by which the rest of the world could continue to exchange Internet traffic with Egypt's service providers.... This is a completely different situation from the modest Internet manipulation that took place in Tunisia, where specific routes were blocked, or Iran, where the Internet stayed up in a rate-limited form designed to make Internet connectivity painfully slow....

What happens when you disconnect a modern economy and 80,000,000 people from the Internet? What will happen tomorrow, on the streets and in the credit markets? This has never happened before, and the unknowns are piling up. We will continue to dig into the event, and will update this story as we learn more. As Friday dawns in Cairo under this unprecedented communications blackout, keep the Egyptian people in your thoughts.

Update (3:06 UTC Friday): One of the very few exceptions to this block has been Noor Group (AS20928), which still has 83 out of 83 live routes to its Egyptian customers, with inbound transit from Telecom Italia as usual. Why was Noor Group apparently unaffected by the countrywide takedown order? Unknown at this point, but we observe that the Egyptian Stock Exchange (www.egyptse.com) is still alive at a Noor address. Its DNS A records indicate that it's normally reachable at 4 different IP addresses, only one of which belongs to Noor. Internet transit path diversity is a sign of good planning by the Stock Exchange IT staff, and it appears to have paid off in this case. Did the Egyptian government leave Noor standing so that the markets could open next week?

Update (17:30 UTC Friday): The Internet routing situation for Egypt continues to be bleak, with an estimated 93% of Egyptian networks currently unreachable. Renesys saw no significant improvements or changes in Egyptian international Internet routing overnight. We have examined the takedown event more closely.... [T]his was not an instantaneous event on the front end; each service provider approached the task of shutting down its part of the Egyptian Internet separately.... [T]his sequencing looks like people getting phone calls, one at a time, telling them to take themselves off the air. Not an automated system that takes all providers down at once; instead, the incumbent leads and other providers follow meekly one by one until Egypt is silenced.

Mike Konczal Has Time to Read and Think About the Financial Crisis Inquiry Commission Report

The man must simply not sleep. Mike:

FCIC Report, 1: The False Politicalization of the Final Report. « Rortybomb: [T]he Financial Crisis Inquiry Commission Final Report... is an excellent guide through the financial markets and how they’ve changed over the past 30 years, as well as the lead-up to the financial crisis. The Republicans and conservatives did a great job trying to hatch-job and politicize the reception of this volume by breaking away and writing a dissenting opinion, since the FCIC’s opinion has virtually all the honest conservative thoughts expressed in there.

Two items in particular jumped out at me in the first skim.  First, the role of regulator’s 2001 Recourse Rule has been blamed... for increasing the demand for securitization... [by] strong libertarians, maybe even a kind of anarchist in some cases – they are to the right of most of the discussion on the financial sector. Here’s the FCIC report which features the same argument:

In October 2001, they introduced the “Recourse Rule” governing how much capital a bank needed to hold against securitized assets. If a bank retained an interest in a residual tranche of a mortgage security, as Keystone, Superior, and others had done, it would have to keep a dollar in capital for every dollar of residual interest. That seemed to make sense, since the bank, in this instance, would be the first to take losses on the loans in the pool.... The Recourse Rule also imposed a new framework for asset-backed securities. The capital requirement would be directly linked to the rating agencies’ assessment of the tranches. Holding securities rated AAA or AA required far less capital than holding lower-rated investments.... The new requirements put the rating agencies in the driver’s seat....

And they spend a lot of the report blasting the ratings agencies too:

We conclude the failures of credit rating agencies were essential cogs in the wheel of financial destruction.

There’s a debate about when the concept of Too Big To Fail enters the financial elite's minds.... Nicole Gelinas [made] the case that the failure of Continental Illinois was the introduction of Too Big To Fail mentality.... [T]he FCIC report [agrees]. FCIC:

In 1984, federal regulators rescued Continental Illinois, the nation’s 7th-largest bank…These banks had relied heavily on uninsured short-term inancing to aggressively expand into high-risk lending, leaving them vulnerable to abrupt withdrawals once conidence in their solvency evaporated. Deposits covered by the FDIC were protected from loss, but regulators felt obliged to protect the uninsured depositors—those whose balances exceeded the statutorily protected limits—to prevent potential runs on even larger banks that reportedly may have lacked sufficient assets to satisfy their obligations, such as First Chicago, Bank of America, and Manufacturers Hanover.... This was a new regulatory principle, and within moments it had a catchy name. Representative Stewart McKinney of Connecticut responded, “We have a new kind of bank. It is called ‘too big to fail’—TBTF—and it is a wonderful bank.”

The report spends a lot of time analyzing how the GSEs failed, and what the CRA’s role in the crisis was, and handles the topics in a fair, critical and investigative manner.... [T]he full... by the three Republican members... look[s] like an aesthetic critique at best... the Republicans don’t actually call out Wall Street in any serious manner. I think David Dayen gets it right here:

My sense is that somebody told the Republicans on the commission that they’d better not assent to the final report, or else there would be some kind of consensus for action.

The Wallison dissent is almost Sid Vicious punk rock; the other GOPers kick him out of the band, and he just goes ahead and does it his way. For the Wallison solo dissent, I predicted:

I can’t respond to this argument because there are no numbers or citations. It is likely that Wallison is using Edward Pinto’s idiosyncratic definition of what constitutes a subprime mortgage, renaming prime loans with FICO < 660 as subprime, and not industry standard, as James Kwak has taken apart elsewhere.

I should have also noted that it was almost 100% likely that Wallison’s report was going to be exactly what he and a handful of other true-believers at the conservative think tank AEI believed before the FCIC panel. Sure enough.... This report is exactly what he believed in 2009.  Think about this. We paid this guy at a level IV of the Executive Schedule, which is a juicy six-figure salary, for the days he worked. He had a staff, subpenoa power, researchers, documents, access, interviewers. And he ultimately had a responsibility to be an investigator.  And his final product is a handful of AEI white papers from 2009 stapled together...

Age and Long-Term Unemployment

Ezra Klein:

Ezra Klein - Too young not to work, too old to get a job: The interplay between age and unemployment really worries me. On some level, we have a rosy view of "structural unemployment": It's a guy in Reno, Nev., who has skills better suited to the job market in Boulder, Colo. That's not an easy problem to fix -- our Reno resident doesn't scan Boulder's "help wanted" ads -- but it at least points toward a way the problem can be fixed. But a lot of older workers have found that employers just don't want to hire them. They are, in the words of one job-seeker in Warren County, N.J., "too young not to work, but too old to work." Or, more to the point, too old to get a job. When they apply for jobs much below their previous position, they're rejected as overqualified. When they try to hold the line, employers default to younger workers. And in both cases, there's a quiet assumption that young workers will be better at learning new skills than older workers will be.

Eventually, the unemployment rate in this country will come down. But it's very likely that there'll still be a core of a couple of million hardcore unemployed -- people who're a bit older, who're underwater on their houses in an area with a weak labor market, and who are becoming less employable as both their age and their time out of work come to seem more and more glaring on their resumes. What are we going to do for them?

Heather Hurlburt on What to Watch in Egypt

HH:

Five Things To Understand About The Egyptian Riots: Here are five points that American observers should keep in mind....

Revolutions often erupt with little warning.... [N]o one saw Tunisia coming, and few believed that unrest would spread to Egypt—except the Egyptian activists, apparently young and secular at the core, who have been out on the streets every day since. This morning, I had the chance to ask a member of the House Intelligence Committee whether they had ever been briefed that such a thing was possible. Answer: No. So when the Beltway “experts” tell you what’s going to happen next, take it with a grain of salt....

*Watch the military:.... Years of repression and neglect mean that there’s no obvious civilian—much less secular—force that can immediately step in to govern Egypt. But there are institutions: the military; the security services; blocs of elites around business, academic, and religious institutions; and the political parties and movements. The choices they make now will be central to what happens and how. Right now, it appears that the police have withdrawn from the street rather than escalate to live fire, and that the army is in the street and being welcomed by the protestors—the military has not been deployed in Cairo since 1986 and has never fired on Egyptian civilians, though confused reports of its actions in Cairo today are still emerging.

America can’t stop this revolt. Commentators across the political spectrum can’t seem to keep themselves from implying that Barack Obama and Hillary Clinton, by their choice of adjectives, can “save” President Mubarak.... We can, however, exert some control over whether we are perceived by the citizenry in Egypt and elsewhere as part of the solution. Our diplomats and spokespeople are now at pains to prove, in real time, that when we talk about stability, we mean it in a way that favors the governed, and not just the governors.... [W]ith talk of a negotiated departure for Mubarak shooting around Twitter, there may come a time when the United States has to become even more involved.

After Mubarak, what? The Egyptian government has done an excellent job of preventing the emergence of rival power centers—and not just those who could pose a threat to Mubarak, but anyone who could serve as a potential successor....

The ‘Islamist Menace’ is overblown. Some American commentators have argued that Al Jazeera is somehow fanning Islamism and anti-Americanism with its coverage. But as Marc Lynch has pointed out, Egyptian citizens... are so—justifiably—angry at their governments that it’s hard to imagine what new provocations the station could come up with. Similarly, concern about the relative strength of the Muslim Brotherhood, which espouses a fundamentalist strain of Islam and has championed and employed violence in the past, should be balanced against three other facts: (1) The Brotherhood has renounced violence and it has been active in Egyptian politics, transformed by an internal debate about whether and how to participate, for some time now; (2) Thus far, observers on the ground report that it is young, secular Egyptians who are leading this revolt; (3) The Islamist Muslim Brotherhood, the largest opposition organization in Egypt, is a first-rank enemy of Al Qaeda, and has been for decades.... Meanwhile, it is reasonable to be concerned about the future role of radical extremists... but this kind of scaremongering is actually quite ignorant; it’s also disheartening and potentially damaging to the true democrats—some of whom organize around Islam, and some of whom don’t—that are doing the struggling and dying right now...

The Obama Administration Bewilders Ezra Klein

EK:

Ezra Klein - Can we win the future if we lose the present?: Mike Konczal says that "in a non-crisis time, [Obama's State of the Union] would have been a great vision of the role of government in the economy." But this isn't a non-crisis time. Unemployment is stuck above 9 percent.... We just had an election in which both parties proclaimed jobs the central issue, but the State of the Union had few answers for those who're out of work.

I sat in on a briefing yesterday where various "senior administration officials" explained the theory behind the State of the Union. When they were asked about shifting their focus to the future when the economy was so bad in the present, they explained that they got pretty much everything they thought they could get -- and, in fact, more than they thought they could get -- in the tax-cut deal, and it was time to let that work. Left unsaid is that they can't get anything more out of a Republican House, and so there's little point in begging.

This is, essentially, a bet: The economy isn't currently growing fast enough to bring down the unemployment rate. But the administration expects that it will be growing that fast very soon. The early numbers are looking good, the forecasts are optimistic, and Americans are more confident than they've been at any time in the past three years. But if that doesn't happen, it's not at all clear that they have a workable policy or political theory for what to do about it. And so far as the future goes, it doesn't matter how many tax credits you offer for college students: If 8 percent unemployment becomes the new normal, we've lost.

Patent Trolls

Matthew Yglesias:

Yglesias » And You Will Know Us By The Trail of Patent Trolls: One line from last night’s speech that really left me cold was this: “No country has more successful companies, or grants more patents to inventors and entrepreneurs.”... [T]he quantity of patents the government hands out to inventors and entrepreneurs is measuring two different things simultaneously. One is how many new ideas do inventors and entrepreneurs send in patent applications for. The other is how loosey goosey does the patent office get about what it deems patentable.... [By] 21st century standards Isaac Newton should have patented calculus (“A Method For Using Fluxions To Determine Instantaneous Rate of Change”) and then waited patiently until Leibniz published his superior method and then sued the pants off anyone who tried to take a derivative without coughing up a hefty license fee. But would that world have been a better place? The issue isn’t really so much the rents that Newton would have thereby extracted (I’m not going to begrudge one of human history’s greatest geniuses a fortune) but the barriers to entry that would have been created as a secondary consequence. A world in which smart people have access to the stock of existing human knowledge and are free to apply it in new ways is a world of competition and innovation. A world where you need to consult with an army of lawyers first isn’t. If you ask the people who care most about promoting entrepreneurship in America about this they kind of shrug, concede that the patent system is hopelessly broken, and then confess to despair that it can or will be fixed...

Harold Pollack on Sensible Economists Support Health Care Reform

HP:

Dog bites man: 270+ health, public finance, and labor economists oppose repeal of health reform: Several of us drafted the economists’ letter. It opposes the repeal of health reform. It also rebuts the “job-killing” charge Republicans are making about the Affordable Care Act. We got more than 270 signatures, and counting. With a tiny number of exceptions, we confined the letter to health, labor, and public finance economists. Had we included other public health and health policy experts and clinicians, we could have easily gotten huge numbers.

It makes an interesting contrast to a similar Republican effort here. I hope that readers look at both letters.

Consider the tone and the quality of the arguments. To take an obvious example, The Republican letter criticizes ACA as “A crushing debt burden,” and writes the weasel words “could potentially [ialics mine] raise the federal deficit by more than $500 billion during the first ten years and by nearly $1.5 trillion in the following decade.” They do not acknowledge that the Congressional Budget Office scores the repeal legislation as raising the deficit by $230 billion.

Less obviously, look at who signed. Andrew Sabl has knocked the Republican letter already for its lack of luminaries. That’s not my point. Their list includes some very accomplished people.

Their list does not include many people at the core of health policy analysis and research. With the exception of Douglas Holtz-Eakin, Joseph Antos, June O’Neill and a very small number of others, their list does not even include many of the standard Republican policy experts I would expect to see. Then look through our 270 names. It includes people like Hank Aaron, Alice Rivlin, Kenneth Arrow, David Cutler, Alan Krueger, Jon Gruber, Uwe Reinhardt, Hal Luft, Charles Schultze, and many more. These are not ideologues. They are not only at the top of the profession. These are pioneers in the fields of public finance and health services research who in many ways provided the intellectual groundwork and the empirical research on which current health policy debate is based.

Partisan noise aside, the overwhelming majority of serious health policy and public finance researchers support the Affordable Care Act and want it to work. Indeed, I believe that most Republican policy wonks who would repeal the provisions that cover the uninsured still support the delivery reforms embodied in the new law. The dirty secret of Washington politics is that policy wonks on both sides have much more in common with each other– say on the new Independent payment Advisory Board, or on overpayments to Medicare Advantage plans–than either side has in common with, say, Congressional committee chairs who want to meddle in Medicare reimbursements for surgeries and medical devices.

I hope, as we move forward, that a responsible, incremental Republican opposition emerges that makes possible improvement and genuine negotiation in the implementation of this new law.

Antos, Holtz-Eakin, and O'Neill ought to know better. Hell, they do know better.

Why Oh Why Can't We Have a Better Press Corps?

Did the Washington Post really spend its subscribers' money to send a team of six people to Davos?

Much Better than a Poke in the Eye with a Stick

A 3.2% GDP number