Tag Archives: Politics

Richard Clarke on Terrorism Policy

Posted on February 10, 2010 | Leave a comment

Richard Clarke, who was a lead anti-terrorism official in both the Clinton AND Bush administrations, recently wrote a piece in the NY Daily News discussing the current status of our policies and some of Obama’s recent decisions. As you might expect from someone who worked in both Democratic and Republican administrations, Clarke takes a pretty rational approach and tries to cut through all the political noise. The article is worth a read. Check it out here.

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Why Americans Hate Congress

Posted on February 5, 2010 | 2 comments

This is just one example, but of course there are zillions. Richard Shelby, Senator from Alabama, has put a blanket hold on 70 Obama nominees. Not because he has any concerns about those nominees, but because he is pouting that funds haven’t been released to build an FBI explosives center in Alabama and because he thinks the Air Force tanker procurement system isn’t fair to Northrup Grumman, which has facilities in Alabama. So let’s be clear: despite the massive deficit, Senator Shelby wants pork for his district, and he is willing to let all sorts of government agencies go unmanned until he gets his way.

And let me remind you that Alabama has 4.7 million people, or 1.7% of the US population. So one guy, representing 2% of the population, can put big chunks of government on hold until he gets his share of wasteful spending. And then he will give speeches about the importance of fiscal discipline. This is why polls show that Americans no longer respect Congress.

Read the story here, complain on his website here.

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Posted in Politics, Trends

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The Christmas Bomber and Miranda

Posted on February 4, 2010 | 2 comments

Bad timing for David Rivkin, who used Tuesday’s Wall Street Journal for one of his monthly attacks on some Obama policy. This time it was about the Christmas Day bomber, with Rivkin saying that not immediately sending the bomber into military detention was “an intelligence failure of massive proportions.” Too bad that the very next day, today, the exact same newspaper reported that the Christmas bomber is again talking to the FBI, providing “valuable intelligence.” This also damages the arguments of this guy and this woman. Look, there are valid reasons to say that terrorists should be viewed as wartime combatants rather than criminals. But claiming that we won’t get good information from terrorists held in the civilian legal system is clearly not a valid reason. And there is at least one good reason not to throw them in military brigs: it creates an appearance of the US being at war with Islam, which appearance seems to generate more terrorists. Finally, I would like to note, again, that George W. Bush also tried terrorists in civilian courts. For Republicans to now claim that this approach is terribly weak is to be hypocrites of the worst sort. Which is, I supposed, to be expected from politicians.

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Posted in Politics, Uncategorized

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Judge Posner Embraces Keynes

Posted on February 1, 2010 | 1 comment

Judge Richard Posner, at the University of Chicago, is a big wheel intellectual who virtually invented the economics and law analysis that currently dominates US jurisprudence, and who is as responsible as anyone outside of Milton Friedman for the Chicago School of economics and its embrace of free markets. So when Judge Posner announces that the Chicago School is wrong, that unfettered free markets don’t work, and that Keynes was right all along, that is a big freaking deal. Well here is an article by Judge Posner titled How I Became A Keynesian. Here is a link to a new book by Judge Posner about how free-market capitalism failed. Here are a bunch of interviews with Chicago economists who are all defensive about how their theories failed. It’s not that Judge Posner is the final arbiter of anything (in fact, my prior post on him was a strong disagreement with something he said), but when a main force behind a movement leaves that movement behind, we should at least pay attention.

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Wall Street: “Trust Us.” Me: “No!”

Posted on January 18, 2010 | 4 comments

Last week the Wall Street Journal wrote an article on the SEC‘s efforts to ban “naked access,” which is a system whereby big stock traders are given direct access to brokers’ computers so that they can trade faster. The SEC fears that this could be destabilizing to markets. Wall Street says that naked access improves liquidity. They also say that “high-speed trading firms are sophisticated and have risk-management tools that limit the likelihood of destabilizing trades.”

Haven’t we heard that song before? Wall Street said that they were sophisticated traders of mortgage-backed securities, and that their risk-management models would keep them from getting in trouble. We know how that turned out. I’m no expert on naked access, but I know that when Wall Street says “trust us,” I make sure they haven’t just stolen my wallet.

Along the same lines, here is an article in Slate describing how Wall Street has always complained about regulations that ended up helping the industry.

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Terrorism: As Dangerous As A Tornado?

Posted on January 11, 2010 | 2 comments

The Wall Street Journal this weekend ran a very interesting article about terrorism, and how incredibly unlikely it is for an American to die in a terrorist attack, and how Americans should maybe toughen up and look at the numbers instead of spending billions of dollars and millions of hours taking off their shoes at airports to prevent something that is statistically rare. The main article is here, and the sidebar that runs the numbers in detail (by Nate Silver!) is here.

The chance of an American dying in a terrorist attack is 1 in 3,000,000, or about the same as being killed by a tornado. Every day, 50 Americans are murdered, but we certainly aren’t spending the time and money to prevent those deaths that we are spending on the much less deadly terrorism. Obviously, this is a complicated issue that can’t be decided purely on statistics, but the point that we are maybe not focusing on the right things, and that we are maybe giving the terrorists a bigger psychic role than they deserve, is a good one.

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Politicians Should Start Their Careers Outside Politics

Posted on January 11, 2010 | 3 comments

I was reading recently about Senator Byron Dorgan’s retirement, and the article claimed that he had been in politics for 40 years. I looked up his biography on his official site and on Wikipedia, and both confirmed the 40 year figure. Dorgan worked in business for 2-3 years, and then became State Tax Commissioner at age 26, and has been an elected official ever since.

Then this weekend’s NY Times magazine had a long piece on the GOP’s moderate vs. Tea Party battle, as personified by the race in Florida between Charlie Crist and Marco Rubio. It turns out that Rubio has never done anything but hold elective office, serving as a West Miami city commissioner right out of law school.

Dorgan and Rubio might be great legislators — I don’t know enough about either of them to judge — but doesn’t it seem like we should want our politicians to have lived in the real world? Think of all the things we regular folks have to do: hunt for jobs, worry about insurance, cooperate with coworkers we hate, shop for cars, get things done at work, etc. Career politicians don’t have to do any of that stuff. They never need to execute and accomplish, and they get rewarded for being obstinate. They stop worrying about money, since they get to pay their family as “consultants” out of campaign funds. And they have staff to take care of life’s little details.

I’m not expecting our politicians to follow the lead of Cincinnatus, who left his farm to run Rome, and then returned to his farm. But maybe some experience in the real world, not the political world, would get our legislators to work — WORK — on policy, instead of spending all their time posturing and campaigning.

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Financial Regulation Does Not Hinder Growth

Posted on December 17, 2009 | 1 comment

David Wessel of the Wall Street Journal wrote a column today in which he proposes that the US has to choose between economic stability and economic growth. I am usually on board with Wessel, who does not follow the Journal’s usual slash and burn libertarianism, but in this case I think he’s wrong. His dichotomy is false.

The regulation that Wessel is discussing is financial regulation to curb the boom and bust cycle that we have just lived through. He asks whether “wise government rule to prevent market excesses” would also prevent the dynamic innovation that fuels economic growth. I answer emphatically NO.

As I noted yesterday, financial innovation is unrelated to business innovation. In yesterday’s post, I pointed out that the companies driving recent growth – the Googles of the world – have not depending on the innovations coming out of Wall Street. But today I will go even further. Between World War II and the S&L crisis, we had a long period of mostly financial stability, without the crises we’ve seen since then, and with a regulatory regime that had general consensus on Wall Street and in Washington. That long period of stability didn’t hinder economic growth; in fact, as the graph below shows it was one of the greatest growth periods in our nation.  Notice how much higher the growth is (the red lines) before the S&L crisis in the mid-1980’s.

Growth in GDP

Growth in GDP after WWII

I would argue that not only did financial stability and economic growth coexist during this period, but that the stability was actually helping the growth. After all, it’s a lot easier for companies to plan and budget if the financial markets are not booming and busting. And potential entrepreneurs are more likely to take the leap and start a new business if they aren’t worried about their retirement savings disappearing in a Wall Street flame-out.

So let’s not worry about financial regulation slowing down growth. Let’s focus on smart regulation that will spur growth.

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Paul Volcker on Financial Regulation

Posted on December 16, 2009 | Leave a comment

Speaking of reasonable voices when it comes to financial regulation (see my post below), Paul Volcker is coming out strong for a much more rigorous set of regulations. Volcker ran the Federal Reserve before Alan Greenspan, and was considered a guru while Greenspan was still ladling Ayn Rand’s soup on Saturday nights.

Here is a link to an interview Volcker gave to the WSJ, and here is a link to a New Republic article by Simon Johnson about that interview.

The money quote from Volcker: “I have found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy.”

Again, that is a voice of reason. We all agree that capital markets are important to the economy, and that some financial innovation is a good thing. For example, developing ways for big companies to hedge their raw materials risks can help the economy. But developing ever more complicated derivatives and securities which are backed by securities which are backed by securities which are backed by assets?  How do those innovations help the economy?

This last point is the one that puts the lie to free market ideologues. They say that financial innovation is key to fueling the American economy. But financial innovation has nothing to do with the economy outside of Wall Street. Think about the great engines of American growth that these ideologues love to mention: Wal-Mart, Apple, Home Depot, Google or Tommy Hilfiger. They all grew large and hired thousands of people without building their business on credit default swaps or mortgage backed securities. None of them care about the hundredth of a penny reduction in spread that dark pool trading creates. Real innovation in the American economy is disassociated with Wall Street. The only thing that Wall Street innovation drives is Wall Street pay packages.

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Reason & Financial Regulation

Posted on December 15, 2009 | 2 comments

National Affairs recently ran an article on financial markets and regulation that was the most clear-headed, non-ideological commentary I have seen. The author, Nicole Gelinas, makes five main points:

  1. Capital markets are important because they allocate a key resource (money!) among various projects and sources
  2. A free market of buyers and sellers, or lenders and borrowers, is the most efficient form of capital market
  3. Some regulation is essential to the smooth working of a free market
  4. This includes regulation of leverage, speculation and complicated instruments
  5. Explicit or implicit government guarantees (eg. too big to fail) distort the free market

But read the article yourself. It’s not long, and it’s awesome.

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