Saying "I am an Argentinian" in Spanish?

First the healthcare bungle.  I am sure that now any healthcare reform will be canned until we find out how the midterm elections of 2010 turn out--if Republicans gain even a tad in 2010, then it is adios to healthcare reform.  Simply pathetic how quickly the political capital is being wasted away.

Now, it looks like the stimulus bill is heading for all kinds of disappointments.  Why?  It is not because of the nutcases who think there is no need for stimulus.  That is a minority.  But, because the bill is being packed with all kinds of things that have nothing to do with short-term spending that can then kick-start more spending.  There does not seem to be a sound enough economic logic that is driving the package anymore :-(

The Nation reports on the differences within the Democratic Party:

Key leaders of the "Blue Dog Coalition" that represents the conservative wing of the House Democratic Caucus are now openly revolting against the stimulus package's spending proposals -- a stance that dramatically strengthens the hand of Republicans who, for obvious partisan reasons, hope to undermine Obama's popular appeal and ability to move on critical economic issues.

The Blue Dog Coalition, which claims forty-seven House members, went public with its opposition to elements of the plan that Obama and Speaker Nancy Pelosi, D-California, are supposed to be promoting in a letter sent Thursday to the speaker.

No wonder then Niall Ferguson then points out the following (his entire column is a good read)

The Western world is suffering a crisis of excessive indebtedness. Governments, corporations and households are groaning under unprecedented debt burdens. Average household debt has reached 141% of disposable income in the United States and 177% in Britain. Worst of all are the banks. Some of the best-known names in American and European finance have liabilities 40, 60 or even 100 times the amount of their capital. 

The delusion that a crisis of excess debt can be solved by creating more debt is at the heart of the Great Repression. Yet that is precisely what most governments propose to do. 

The United States could end up running a deficit of more than 10% of GDP this year (adding the cost of the stimulus package to the Congressional Budget Office's optimistic 8.3% forecast). Nor is that all. Last year, the Bush administration committed $7.8 trillion to bailout schemes, in the form of loans, investments and guarantees.

....
Just how much more toxic waste is out there? New York University economistNouriel Roubini puts U.S. banks' projected losses from bad loans and securities at $1.8 trillion. Even if that estimate is 40% too high, the banks' capital will still be wiped out. And all this is before any account is taken of the unfunded liabilities of the Medicare and Social Security systems. With the economy contracting at a fast clip, we are on the eve of a public-debt explosion. And similar measures are being taken around the world. 

The born-again Keynesians seem to have forgotten that their prescription stood the best chance of working in a more or less closed economy. But this is a globalized world, where uncoordinated profligacy by national governments is more likely to generate bond-market and currency-market volatility than a return to growth.

There is a better way to go: in the opposite direction. The aim must be not to increase debt but to reduce it. 

This used to happen in one of two ways. If, say, Argentina had an excessively large domestic debt, denominated in Argentine currency, it could be inflated away -- Argentina just printed more money. If it were an external debt, the government defaulted and forced the creditors to accept less. 

Today, America is Argentina. Europe is Argentina. Former investment banks and ordinary households are Argentina. But it will not be so easy for us to inflate away our debts. 

Robert Barro, an economics professor at Harvard, comes out swinging big time.  I mean, big time.  Read what he says about Krugman:

He just says whatever is convenient for his political argument. He doesn't behave like an economist. And the guy has never done any work in Keynesian macroeconomics, which I actually did. He has never even done any work on that. His work is in trade stuff. He did excellent work, but it has nothing to do with what he's writing about.

Ouch.  Will this qualify as a "bitch slap"?  He does not have patience for most economists too:

Most economists haven't really been thinking about this issue, they haven't really focused on it. It's not their specialty. Most economists today, they haven't really been thinking about this kind of multiplier issue. Which goes back to that first question you asked about how come now we're so worried about this. I don't think most economists are focused on this, or that they're familiar with the empirical evidence. I don't think they've really worked on the theory. So I don't know, maybe they have some opinion that they got from graduate school or something. 

I think my sense is that the sentiment has been moving against this kind of approach both within the economics profession and more broadly. I think the initial view was that "yeah, this is a terrible situation" -- which I agree with -- "and we've got to do something about this, and maybe this will work." I think there was support in that sense.

So, if there is not much of an agreement among these so-called-economic-experts, then .... Am reminded of Casey Stengel, who said:

"You look up and down the bench and you have to say to yourself, 'Can't anybody here play this game?'

Valentines Day in India: what a stupid controversy!

Don't they have better things to do in India, than to come up with some Hindu version of the fashion mullahs?  These nincompoops are carrying out god's tasks?  Bizarre!  Read this:

BANGALORE: After their recent attack on young women at a Mangalore pub, the Sri Ram Sene has now announced an action plan to target couples found dating on February 14, Valentine’s Day.

At a press conference here on Thursday, Sri Ram Sene leader Pramod Muthalik, who is now on bail, said Sene activists across Karnataka would not only hold protests outside colleges, hostels and hotels, where Valentine’s Day celebrations are held, but also forcibly marry off couples found dating in public.

“Our activists will go around with a priest, a turmeric stub and a ‘mangal sutra’ on February 14. If we come across couples being together in public and expressing their love, we will take them to the nearest temple and conduct their marriage,” he said. If the couples resisted the move, the girl would be forced to tie a ‘rakhi’ to the boy.

Mr. Muthalik said his outfit would ensure that Valentine’s Day greeting cards were not sold. Activists would check out stores that sold such cards.

Do recessions worsen income inequality?

I read the following sentence in Megan McArdle's post:

Most of what recessions do is deepen the gap between the haves and the have-nots.

At a gut level, this has been my worry all along. For the very reasons that McArdle writes about. Earlier this morning I was at the Saturn dealership for the oil change, and the conversation with the folks there was a reminder yet again that there is a high probability that my job and income are safe, while the number of unemployed increases, and while prices are in-check or even in decline. Sure, the high-flying investment bankers have been grounded now, and therefore there is a little bit of flattening at the top of the income distribution ..... but, ....

... the researcher side in me, that is suspicious of instincts and gut-feelings, wants/wanted to find if there is evidence to support this. Don't have much time to devote to this, given that I still have 15 test papers to grade before my class meets in two-hours-plus. (well, in between I have a lunch commitment too!) However, from a quick scan of the academic literature on this, I spotted an article in the April 2004 issue of Economic Journal, where the authors (Murat F. Iyigun and Ann L. Owen):

examined the relationship between income inequality and variability in aggregate consumption growth. In low-income countries, higher levels of inequality appear to be associated with less fluctuations in consumption growth, and in high-income countries, more inequality seems to be associated with greater fluctuations.

More inequality is associated with greater fluctations. Well, we know very well that income distribution got significantly skewed during the go-go boom years. And now, the downturn is also huge.

But, the article does not say anything about whether nasty economic downturns further widen the income gaps .... if a rising tide lifts all boats, then does a rapidly falling low tide strand catamarans while yachts continue to float away?

More on this later.

Obama Considers Tax on Cabinet

President Barack Obama is mulling a controversial new tax program that would require members of his Cabinet to pay taxes owed under the Federal tax code, the White House confirmed today.

While the unorthodox tax proposal is reportedly "only in the planning stages," it is being eyed as a possible way to balance the Federal budget.

"According to projections, if members of the Cabinet actually paid their taxes, we could wind up with a budget surplus in excess of $18.2 billion," said Obama economic adviser Paul Volcker.

Mr. Volcker said he strongly favored the plan, but added, "Fortunately for me, I'm not officially in the Cabinet."

But imposing taxes on Cabinet members may be easier said than done, critics of the plan warn.

"Remember, these people are not used to paying taxes," said one White House source. "They are going to be hopping mad about this."

Another wrinkle in the plan is how the taxes would actually be collected, with President Obama reportedly favoring a cash-at-the-door entry fee for every Cabinet meeting.

"If they don't have the money, they don't get in," said the source. "They're not going to be able to just sail into the White House for free like the Jonas Brothers."

When told of Mr. Obama's plan to make his Cabinet members pay taxes, Fmr. Sen. Tom Daschle responded, "Whew! Sounds like I dodged a bullet."

The world has quite a few funny people, including Andy Borowitz, who wrote that tax piece. I am immensely thankful to all these people who make me laugh.

Politics is about moralizing. Ergo, problems.

Governance involves deciding for people what we can or cannot do. It is a kind of moral police. Most of us fully understand that we don't, and can't, always practice what we preach. But, sometimes the dissonance is too much to ignore. And that is what Tom Daschle ran into. On the one hand, I feel sorry for the guy. On the other hand, this is, unfortunately, the nature of the ballgame--more so in the YouTube era:

Ideological Melting Pot, v. the Postmodern Salad Bowl

I am a member of a small group of people from India who switched careers after doing an undergraduate degree in electrical or electronics engineering. Sometimes other fields too. While I am not sure what the reasons for the rest are, in my case it was a simple one: when I was in high school, it was a given that the smart kids went on to engineering or medicine, and the rest went somewhere else. Well, that is what we were brainwashed into thinking, and how wise can a 17-year old be anyway!

Here is another such example (though I am not sure if the guy was born in India, or here in the US) Shankar Vedantam is a national correspondent writing about science and human behavior for the Washington Post. Vedantam has a master's degree in journalism from Stanford University and an undergraduate degree in electronics engineering. BTW, the name sounds very much like a Tamil name--I wonder about the degrees of separation between him and me :-)
Vedantam notes that:

About two in three Americans say they prefer to live around people belonging to different races, religions and income groups. In reality, however, survey research shows that people are increasingly clustering together among those who are just like themselves, especially on the one attribute that ties the others together -- political affiliation.

Nearly half of all Americans live in "landslide counties" where Democrats or Republicans regularly win in a rout. In the 2008 election, 48 percent of the votes for president were cast in counties where President-elect Barack Obama or Sen. John McCain (R-Ariz.) won by more than 20 percentage points, according to the Pew Research Center.

The clustering of Democrats in Democratic areas and Republicans in Republican areas has been intensifying for at least three decades: In 1976, only about a quarter of all Americans lived in landslide counties. In 1992, a little more than a third of America was landslide country.

As I read this, I was thinking that it sounded more like Bill Bishop's arguments that I have blogged about before. Sure enough, later Vedantam quotes Bishop:

"These are the kinds of differences that are political in America today," Bishop and Cushing said in an e-mail they composed together. "People don't see themselves as members of demographic groups -- a white working-class man, an educated woman. Like the woman in California who described herself to us as an 'ocean-oriented person,' Americans define themselves by their interests: the bands they listen to, the foods they eat, the sports they follow, the spiritual beliefs they adopt."

Political polarization, according to this explanation, is a consumer phenomenon: You like Cheerios; I like Wheaties. Americans have lots of choices -- you can live in a cul-de-sac surrounded by fellow Mormons, or in a gay enclave, or in a neighborhood where yoga studios outnumber fast-food outlets.

I bet the Public Choice people are thrilled every time they see such arguments.

I like Vedantam's concluding remarks:

The yoga people simply can't stand what the lawn-chemical people represent, and vice versa. This might explain why, despite all of Obama's calls for an America that is larger than its differences, political polarization at the county level intensified between 2004 and 2008.

Kenya, according to the Daily Show :-)

The creative guys deliver, again :-) And they call it "Oliver's Travels" ..... ha ha funny

The Daily Show With Jon StewartM - Th 11p / 10c

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Remembering Melina Mercouri

One of the characteristics of getting old is, I suppose, we think about the lives we had.  And, all of a sudden pop up in our minds events we didn't even know had registered in our memories.  

I had one of those this evening.  I have no idea what led to me thinking about Melina Mercouri's visit to India--this was when I was back in India, working on my undergrad degree.  I wonder if her trip registered in my memory because it was at then that I had read "Zorba the Greek". Anyway, I recall thinking that Mercouri as a minister was so much like the politicians in Tamil Nadu, who had extensive movie connections.  The chief minister at that time, MGR, was a big time movie star before he became a full-time politician.  For that matter, the party to which he belonged for the longest time before breaking away, the DMK, was founded and led by Annadurai and Karunanidhi--both screenplay writers .... 

Ok, back to Melina Mercouri.  So, thanks to YouTube I pulled up the famous song from Never on Sunday, which, of course, I heard for the first time during her visit to India.  Here is the clip:

After that, I thought I should revisit Zorba the Greek; here is that famous dance scene that is also the movie ending

Big time casualties of the meltdown? The poor in poor countries

A few days ago, The Daily Beast ran an excerpt from a recent book by Mohammad Yunus, the Nobel Prize-winning economist/microcredit guy from Bangladesh. In that, Yunus notes:

Millions of people around the world who did nothing wrong are suffering. And the worst effects, as usual, will be felt by the poor. As economies falter, as government budgets collapse, and as contributions to charities and NGOs dwindle, efforts to help the poor will diminish. With the slowing down of economies everywhere, the poor will lose their jobs and income from self-employment.

It has been disheartening to see many of the world’s poorest falling back toward poverty just when we thought the planet was ready for a big step forward. We had thought food shortages were a thing of the past, but now they are back – not due to any lack of productive capacity on the part of the world’s farmers, and certainly not due to lack of effort by the poor themselves, but largely because of forces that could have been averted—the financial crisis and the world’s failure to pay enough attention to the need to improve agricultural technology to increase yields. We have to focus our attention at the global level to tackle this great new challenge to the world’s poorest.

One might think that Yunus will be biased--after all, he has been a big time champion of the poor, microcredit for the poor ..... But, not so.
David Rothkopf notes in his Foreign Policy blog that the scariest news is:

the Institute for International Finance's estimate that net private sector capital flows into the emerging world will fall in 2009 to one fifth their 2007 levels. That's, right, an 80 percent reduction in private sector cash into a group of fragile countries for whom such cash is the peace-keeper, the hope-giver.

Daschle gone. Good call!

So, now two nominees who have withdrawn because of not quite clean money deals. As someone who was not thrilled with Daschle's nomination, while Howard Dean was shunned, I am glad that Daschle has withdrawn from the race; I like the BBC's title for the news report:
"Obama suffers blow over nominees", which then reports that:

Only hours before Mr Daschle pulled out of the process, Nancy Killefer, nominated by Mr Obama to be the government's budget watchdog also withdrew over tax issues.

In January, New Mexico Governor Bill Richardson announced he was withdrawing from consideration as commerce secretary after an investigation was launched into a state contract that had been given to his campaign donors.

Republican Senator Judd Gregg was on Tuesday appointed instead, the second from his party to join Mr Obama's cabinet.

US Treasury Secretary Timothy Geithner was confirmed last week only after long arguments over his failure to pay $34,000 (£24,500) in taxes he owed until shortly before he was nominated.

Announcing his withdrawal, Mr Daschle, the former Senate Democratic leader, said he would have not been able to operate "with the full faith of Congress and the American people".

He said he would "not be a distraction" to Mr Obama's agenda.

How would you spend $3000?

Imagine if you suddenly came upon $3000 just simply there. For you to use it. It is all yours. The only catch is that the note says you have to spend it. Not save it. Not pay down your debt. But go out and spend that $3000. And spend it within one year. How would you spend it?

You think I am nuts? Nope. The stimulus package, which is edging closer and closer to a trillion dollar mark, essentially means that is the amount per person in America. This is one huge amount. I probably will spend it on the following:
A spring break vacation to a warm place: $1000
Paint the outside of the home: I am sure it will be more than the remaining #2000.
I think these will generate good enough multipliers, won't they? Painting the home will mean hiring two to four people for, say, three or four days. Those guys will then go spend the money on consumer goods, and so on. Vacation will prop up airline and hotel usage, which will at least help stop their bleeding.

How will you spend your $3000, if the government says it will reimburse you for expenses up to that amount?

Fiscal responsibility

Outsourced to the Economist:

TODAY'S award for Best Shooting Self in Foot by a Political Spokesperson goes to Brendan Daly, a flack for Nancy Pelosi, the speaker of the House. The subject: Why 11 Democrats voted against the stimulus package.

The speaker has said many times that the members are representative of their district. Many of the districts are more conservative, and they campaigned on fiscal responsibility, and we understand that.

Did the other 246 Democrats in the House campaign against fiscal responsibility? Did the new president? That's what's being implied here. But what Mr Daly is referring to is the way that some Democrats run against deficit spending as a way of blunting Republican attacks. The other members of their party roll their eyes but tolerate this, because once in office these Democrats don't prevent the majority from passing its spending. Mr Daly surely didn't mean to reveal this.

Healthcare fiasco. Again? Even before the gates opened?

What is with Democratic Presidents and healthcare?  President Clinton bungled it big time, when he had a wonderful opportunity.  President Obama nominated Tom Daschle with the hope that Daschle's legislative experience will be an asset when pushing for healthcare reform.  Well, Daschle is fast dashing those hopes; at least, that is what I sense from this report:

Tom Daschle collected nearly a quarter of a million dollars in fees in the last two years speaking to leaders of the industry President Barack Obama wants him to reform as the administration's health secretary.

That was just a portion of the more than $5.2 million the former South Dakota senator earned as he advised insurers and hospitals and worked in other industries -- real estate, energy and telecommunications among them, according to a financial statement filed with the Office of Government Ethics.

I tell you, this situation would never have happened if Obama had not punished Dr. Howard Dean, but had rewarded him with this critical cabinet position.  Oh well ....

Subsidies and bailouts explained by Calvin and Hobbes!

I joke with my students that everything we need to understand in this world is right there in Calvin and Hobbes comics. Of course, I do use some of them in my classes--particularly Calvin's comments on school and education, and we know he had quite some views :-)

Thanks to Mankiw's post linking up to a Calvin piece, we now can explain why GM or any other business needs a government bailout! What a brain that Bill Watterson had; if only he had not abruptly called it quits :-(

(click on the image for a larger and clearer one)

Don't be obsessed with the GDP

Fopr years, lefties have complained about the preoccupation with the Gross Domestic Product (GDP).  About how, for instance, how hiring more police officers adds to the GDP, when this is something that should actually warn us that there are some serious problems in society--instead of addressing those problems, we are hiring police officers, with the perverse effect of increasing the GDP!  That is merely one example of what is screwed up with the GDP.

Such thinking, more so when it came to poorer countries that were trying to figure out solutions to a slew of problems, led to alternative measures of how well countries are doing.  Thus was born, for example, the Human Development Report and its Human Development Index.  The king of Bhutan went one step more and called for Gross National Happiness.  I appreciated his idea, but thought it was a contradition of sorts to have the word "gross" in it :-)

Now, we are in a worldwide economic recession that seems to be getting deeper and deeper with every passing day.  A recession is, of course, by definition tied to the GDP--a contraction in the GDP for at least two consective quarters.  So, now once again people are thinking about whether GDP is a good measure .... Including the Financial Times!  It recognizes some of the shortfalls, such as:

GDP was never meant to be an overall measure of how well a society is doing. It is a measure of production not even designed to capture all economic output. GDP is blind to non-monetised production – it includes care given in crèches and old people’s homes but not the same care given by family members for free. And a country that whittles down its non-renewable resources may record high GDP growth while really just using up its wealth.

And then the paper points out, correctly, that governments have a restricted role in making decisions on tradeoffs:

In spite of this, GDP remains, fetish like, the yardstick for economic performance. Attempts to improve on it must distinguish the technical question of how to measure what we care about from the political question of whatwe (and governments) should care about. We can measure economic production better and Mr Sarkozy has recruited some of the world’s best economists to tackle the technical part.

But we should not pretend to engineer a figure that will tell us how important economic production and wealth are relative to other values. We ought to resist turning “happiness” – which one of the commission’s working groups is looking at – into a new fetish for governments. Instead, elevate other objective indicators of human well-being (such as already existing health, education and environmental sustainability measures) to the status now enjoyed by GDP.

Material wealth remains crucial; most of the world has too little of it. It is governments’ duty to promote growth while securing non-material values voters hold dear. Better statistics can help voters force politicians to make the best trade-offs. They cannot choose on their behalf