Tag Archives: Politics

Fed Lends Millions to Well-Connected Wives

This story is by Matt Taibbi, so you should expect some hyperbole, but the basic facts are that two well-connected Wall Street wives, with no financial experience, managed to get $220 million in low interest loans from the Fed. They then invested the money in higher yielding securities, essentially minting money on the spread. And they still haven’t paid back $150 million of their loan.

Data on Taxes

With President Obama recently saying that he plans to let the Bush era tax cuts expire, it seems like a good time to clear up some myths about US taxes. Fortunately, Pulitzer Prize winning tax journalist David Kay Johnston did exactly that in a long article printed in a variety of weekly newspapers. You can read it here, or read Felix Salmon’s summary here. Two brief tidbits:

  • The bottom 90% of wage earners saw their income grow by 1% from 1980 to 2008. Not 1% per year. One percent total. Folks in the top percent of wage earners saw their income double during the same time.
  • The federal income tax is less that half of federal taxes and only 20% of taxes paid at all levels. Social security, medicare, unemployment, sales taxes….they make up the other 80%.

Does Morality Vary By Culture?

Those of us who have grown up in a single culture (ie. almost all of us) often forget that our worldview is culturally mediated, and that people from a different culture might see things entirely differently. Not that we should be required to understand, or try to incorporate, other worldviews, but it can often be instructive to see how other cultures view things. For example, I recently read an interesting article about how morality operates in the Confucian worldview.

According to this article (and I should stipulate here that I am taking the article on face value, since it was written by an expert on the subject and published in a serious journal. I know virtually nothing about Confucianism, except what my fortune cookie tells me), in a Confucian world you cannot separate personal ethics from societal structure. The set of principles that structures society and guides the ruling classes “are mandated by Heaven, an abstract source of both natural order and human norms.” So too are personal ethics; they are part of the same system: “Heaven’s pattern for human affairs is what in fact works best, as a matter of natural logic.”

This has implications for how people should live, particularly those people who are in the power elite. The elites are held to a higher standard, because if they don’t follow Heaven’s pattern they “will inevitably undermine the basic solidarity and sense of fairness that every social order needs.” Leaders have a responsibility, to Heaven and to society, to follow the rules. If they “put their own private interests above the common interest, then they have lost their legitimacy.” Although this comes from a distinctly Eastern worldview, it is not that different than the very Western concept of noblesse oblige, or from the maxim of Spiderman’s Uncle Ben: “With great power comes great responsibility.”

However, it’s also a significant distance from the dominant Western worldview, which is one of free enterprise, in which individuals pursuing their own self-interest will be guided by Adam Smith’s mighty hand into patterns that will benefit society. In our system, there is no duty to maintain the social order and the ruling elites aren’t expected to have higher moral standards than anyone else. In the Western view, the system takes care of all that.

I’m not saying that this Confucian system is any better than ours; merely different. But it’s certainly interesting the way the worldview plays out in how individual are supposed to behave. Of course, given the willingness of Chinese executives to put poison into milk just to make an extra yuan or two, it’s not clear that the Confucian system really works.

Joe Stiglitz on Income Inequality

He’s a Nobel Prize winner, so he must be smart.

Read his article here.

Links to Great Articles

Yves Smith on the macro effects of oversized Wall Street pay.

I normally don’t love Paul Krugman, despite his Nobel Prize, since he is too strident and preachy and predictable, but this take on what really separates Right from Left in America is pretty interesting.

John Mearsheimer on American foreign policy and realpolitik.

John Cassidy on whether Wall Street adds value to society. Hint: it doesn’t. This is from the New Yorker, so it won’t be available online forever.

Law professor David Beatty compares American constitutional jurisprudence to how they do it in other countries. I’m no expert, but I found it fascinating.

On Airlines, Hospitals, Blizzards and Flu Outbreaks

Here is a really interesting article comparing the airline industry to the public health system, with full service hospitals being the legacy carriers, serving everyone and subsidizing low fare services with high fare ones. Specialty hospitals are the upstart airlines, able to focus on only providing profitable services. And as they all cut capacity to remain profitable, what happens when crisis hits? We just saw what happens to airlines when a blizzard strikes; so what happens to hospitals when a pandemic hits?

Free Trade Works, But Can Cause Real Pain

I understand and appreciate free trade. I was an economics major at a college with a pretty conservative econ department (our professors regularly write op-eds in the Wall Street Journal), so I was well inculcated in the ways of Ricardo. Comparative advantage works: each country exports what it’s good at and everyone comes out ahead.

The developing world’s comparative advantage is generally cheap labor. That’s why China exports clothing and furniture. America’s comparative advantage is innovation and creativity. That’s why we export Avatar. Unfortunately, we also export Charlie’s Angels 2, but that’s a different issue. This theory also explains why the US invents iPods and China makes them.

The theory postulates that in the long run, as the developing world does more and more labor, the developed world will move into higher value services and creativity and all will be good. Everybody’s standard of living continues to go up. In the short term, however, dislocations can occur. Think of the television factory in Pennsylvania that shuts down, laying off a thousand workers, because the corporate parent can make things cheaper in China. Under free trade theory, those workers will shift into jobs that leverage America’s comparative advantage: something creative or innovative, something involving technology.

But in the short run, how do they do that? They live in the middle of Pennsylvania, likely with just a high school education. They can’t design iPods or program social networking sites. They can’t all move to Hollywood and become gaffers. For classic blue collar factory workers, their comparative advantage IS their labor. That advantage is now gone, taken by the developing world. So for free trade to work for everyone (at the micro level that is; we know it works at the macro level), we need to figure out ways to smooth those short term dislocations. Education and training for dislocated workers is the most obvious path, but I’m sure there are others.

Interesting Thoughts on the Federal Deficit

From the smart folks at the Roosevelt Institute, including Nobel prize winner Joe Stiglitz.

Summary: 1) there are smart and there are less smart ways to reduce the deficit; and 2) it’s not clear that the deficit is as terrible as some are making it out to be.

US: Religiously Diverse, Tolerant and Turning Liberal

As I pointed out in a previous post, Robert Putnam has a new book out describing the current status of religion in America, based on a large survey he conducted. I recently heard Putnam give a lecture about his new book. One of his key theses is that America is highly religious, but extremely diverse and tolerant.

Putnam’s survey, like others in the field, reveals that most Americans describe themselves as religious and many go to church regularly. The numbers in America are significantly higher than in other developed countries. This religiosity is spread across a wide diversity of faiths and denominations. Interestingly, although the vast majority claims to be religious, there is a strong polarity in how seriously they take their religion. When asked whether they said grace regularly, sometimes, or never, the responses were 44%, 10% and 46%, respectively. In other words, people either practice hard or not at all, with very little in the middle. This matches the polarization of politics that is tied to religion.

However, unlike the political polarization, in which the two sides seem to hate each other, when it comes to religion America is highly tolerant despite its polarization. When asked whether they had positive views of other faiths, most Americans said yes. The most popular faiths: Judaism, Catholicism and mainline Protestantism. Only 13% of Putnam’s respondents said that their faith was the only path to heaven, and 80% said there was some truth in all religion.

Why such tolerance? Putnam, who thinks like a sociologist despite being a political scientist, provides a social explanation: diversity breeds tolerance. With all the different faiths in America, and more geographic mobility than in the past, we are all more likely to know, and like, someone of a different faith.  Putnam supports this with data showing that more people change religions now than ever before, and pointing out that the majority of marriages are now interfaith, at 51%, compared to 25% a century ago. Putnam calls this the “Aunt Susan” phenomenon. We all know someone, perhaps our aunt by marriage, who is of a different faith, but who is totally awesome. How can Aunt Susan not go to heaven just because she is Methodist rather than Catholic?

An additional reason for the tolerance, which Putnam didn’t point out but I will, is that while Americans are broadly religious, they are also somewhat shallow about it. In other words, and despite the data on saying grace mentioned above, many Americans don’t take the teachings of their faith that seriously. For example, not only do 87% of Americans believe people of another faith can go to heaven, but 54% of evangelical Protestants believe that non-Christians can go to heaven. This means that 54% of evangelical Protestants are rejecting (or don’t understand) a basic tenet of their faith. Catholics, at 22% of the country, should alone swamp the 13% figure, but they clearly don’t. In other words, Americans’ willingness to ignore (or ignorance of) some of the key teachings of their faiths allow them to be more tolerant of other faiths.

Religion and Politics is a New Mix

I recently went to hear a lecture by Robert Putnam, a Harvard professor who is best known as the author of Bowling Alone, a book about the decay of civil institutions in America. Putnam has a new book out, called American Grace, about religion in America and its intersection with politics, and his lecture was a summary of that book. The book is based on both historical study and a large survey of US citizens, and has two main theses:

  1. The mix of religion and politics in America is new and massively polarizing
  2. American religion is so diverse and tolerant, especially among the younger generation, that the above polarization will likely moderate over time

This post is about Putnam’s first thesis; I will add another post soon summarizing his second thesis.

Putnam started his lecture by describing the rise of the religious right and how this is a new development in America. Of course the founding fathers were – mostly – deeply religious men; that’s how people rolled 250 years ago. But historically you could not correlate a person’s religious belief with their political beliefs. There were devout Christians who were liberal and secularists who were conservative. The Democratic and Republican parties each contained a mix of religious beliefs and commitments.

Things began to change in the 1960’s, with the rise of hippies and free love and drugs and rock & roll (all the stuff my parents dug, man). In reaction to this libertine environment, conservative people moved toward more bedrock values, generally in the form of evangelical Christianity. These people got more serious about their religion and then certain church leaders (eg. Jerry Falwell) saw an opportunity to turn that movement into political power. As the religious right gained power there was something of a backlash, and non-evangelicals moved further toward secularism.

Thus you have significant movement to the poles – the religious right and secularism – without any growth in the center. And now you have, according to Putnam, significant correlation between religion and politics. Putnam says the best way to understand how someone will vote is to ask about their church-going, or vice versa. This plays right into the polarization that we are seeing in modern American politics. Of course, Putnam’s theory of religious trends is not the only explanation for the rise of the religious right and political polarization. There were also geographic, economic and racial trends at work. But religion clearly played a role, and this is Putnam’s bailiwick, so I give his theories some weight.

An interesting side note: Putnam says that according to his research, if a person’s politics and religion don’t match, they are more likely to change their religion than their politics. In other words, conservative people move to more conservative churches and liberals move to more liberal churches or to none at all. Given that religion controls your soul whereas politics affects your pocketbook, this is surprising, but the surveys say what the surveys say. Another, less interesting, side note: the waves of religion and backlashes toward secularism described by Putnam could make for a classic dialectic, with their thesis and antithesis, but there is no synthesis. Instead, the movement trends apart rather than together. This is further proof of my pet theory that Hegel was an idiot.

Here is a photo of someone bowling, possibly alone:

Nixon bowls, possibly alone