Monthly Archive for January, 2010

Obama The Debater

Obama gave a speech and responded to questions at the House Republican retreat in Baltimore. See the full video on C-Span here. The transcript can be found here.

I disagree with Obama on many things. Alot of which he discussed in this video. But it is clear from the dialogue that Obama has a far better command of the issues than present day Republicans. He clearly cleaned their clocks in this discussion.

Correcting Obama On The Recent Supreme Court Decision

I assume that Obama’s comments about the recent Supreme Court ruling were meant to be intentionally misleading and/or inaccurate in order to score political points. After all, Obama is a constitutional lawyer who knows better.

Nevertheless, to kill some of the rumors going around, here are some further clarifications on why Alito was correct in his statement that what Obama said was simply ‘not true’:

This time, Justice Alito shook his head as if to rebut the president’s characterization of the Citizens United decision, and seemed to mouth the words “not true.” Indeed, Mr. Obama’s description of the holding of the case was imprecise. He said the court had “reversed a century of law.”

The law that Congress enacted in the populist days of the early 20th century prohibited direct corporate contributions to political campaigns. That law was not at issue in the Citizens United case, and is still on the books. Rather, the court struck down a more complicated statute that barred corporations and unions from spending money directly from their treasuries — as opposed to their political action committees — on television advertising to urge a vote for or against a federal candidate in the period immediately before the election. It is true, though, that the majority wrote so broadly about corporate free speech rights as to call into question other limitations as well — although not necessarily the existing ban on direct contributions.

Or another explanation here:

The Court held that 2 U.S.C. Section 441a, which prohibits all corporate political spending, is unconstitutional. Foreign nationals, specifically defined to include foreign corporations, are prohibiting from making “a contribution or donation of money or ather thing of value, or to make an express or implied promise to make a contribution or donation, in connection with a Federal, State or local election” under 2 U.S.C. Section 441e, which was not at issue in the case. Foreign corporations are also prohibited, under 2 U.S.C. 441e, from making any contribution or donation to any committee of any political party, and they prohibited from making any “expenditure, independent expenditure, or disbursement for an electioneering communication.”

This is either blithering ignorance of the law or demagoguery of the worst kind.

More can be found at the articles here and here. If you read anything on this Supreme Court decision, read Glenn Greenwald, writing in, here and here.

Origin Of The Minimum Wage In The United States

Economist David Henderson explains:

Proponents of the minimum wage, when it was legislated in 1938, were disproportionately from Northeastern high-wage states where a minimum wage would be binding only on a very small segment of the labor force. They used it to narrow the differential in wages between the Northeastern states and the Southeastern states, where black men were a much higher fraction of the labor force and where the minimum wage would be binding on a much higher fraction. I posted about the role of Senator John F. Kennedy in the 1950s and his explicit statement that he wanted to hobble competition from black labor.

Much more at the full post here.

Quote Of The Day

“At the risk of rambling on redundantly, I want to stress one thing about my attitude toward the Citizens United case: We’ve been focusing on this question of “corporate personhood” because that’s the legal frame we’ve been handed, but it’s pretty much irrelevant to my thinking about this question. The root conviction here is just that when someone has produced an unflattering political documentary about a sitting senator who is seeking higher office, and the government seeks to prohibit it from airing just because the person to whom it pertains is seeking political office, that cannot possibly be compatible with the First Amendment. Who produced or funded it are beside the point.  Now, if you tell me that with such-and-such a fact pattern, given a framework of other legal decisions, this result requires the court to treat corporations as bearers of First Amendment rights, so be it. If you tell me the courts have an alternative means of reaching the same result while denying that corporations have such rights, fantastic. I have no real independent commitment to a position either way on this question, except insofar as it appears to be necessary to avoid carving a huge loophole in protections for political speech.” — Julian Sanchez

Explaining The Supreme Courts Decision To Overturn Campaign Finance Reform


CATO explains.

Quote Of The Day

“The anguished cries of left-leaning folk over the Citizens United ruling seem to me to be emanating from an alternate universe, so bizarre are they. This was a case about whether the state can suppress the distribution of an unflattering documentary about a powerful political candidate produced by a small group of private citizens. The crazy thing to me is that anyone ever thought that such a rule was not in blatant violation of the First Amendment. The extra-crazy thing is that four Supreme Court justices evidently think this kind of state censorship of political speech is hunky dory. I’m going to chalk up some of the freakout to this week’s spectacular pileup of disasters for progressives. Sorry guys. I know it’s been rough. But I have to say I was taken aback by the vehemence with which people I like and admire have insisted that the state must selectively silence political speech. I didn’t realize that this was such a profound point of disagreement. As I see it, these regulations have accomplished very little other than to protect the interests of powerful, entrenched incumbent politicians against public criticism.” — Will Wilkinson

Quote Of The Day

“It’s really hard to get rid of bad legislation. Most people (almost everybody?) think ethanol subsidies are a loser except for the people who get rich from them directly, Archer Daniels Midland and maybe some others. But do we fix it? We don’t. That’s the way the system works. There’s a lot of inertia. It’s hard to get health care changed. And once it’s changed it’s hard to change it back. So advocating something horribly flawed as Collins and others have done on the grounds that we can fix it later is absurd. It won’t get fixed.” — Russ Roberts, on why its a bad idea to pass the healthcare bill now and ‘fix it later’

Quote Of The Day

“Thus, I disagree with Josh Tucker that the election isn’t that consequential. First, the pivotal Senator will now be a Republican, not a Democrat. The parties put a lot of pressure on moderate members of Congress to vote one way or the other; it’s often unsuccessful, but its a pretty powerful source of influence. Second, that pivotal Senator will be Brown, not Snowe (if my prediction proves accurate). Finally, this pivotality will exist on every issue, not just health care reform, which probably just expired in its current form. Not too shabby as a consequential election, right?” — Boris Shor, assistant professor in the Harris School at the University of Chicago, on the political implications of the Brown win

Why A Bank Tax Is A Good Idea

Greg Mankiw explains:

One thing we have learned over the past couple years is that Washington is not going to let large financial institutions fail.  The bailouts of the past will surely lead people to expect bailouts in the future.  Bailouts are a specific type of subsidy–a contingent subsidy, but a subsidy nonetheless.

In the presence of a government subsidy, firms tend to over-expand beyond the point of economic efficiency.  In particular, the expectation of a bailout when things go wrong will lead large financial institutions to grow too much and take on too much risk.

You may recall that I made precisely this argument regarding Fannie Mae and Freddie Mac some years ago when I was CEA Chair.  (No, I was not a prescient genius.  The potential problem was apparent to anyone who cared to look.)  But now the problem of implicit subsidies is far more widespread.  We have in effect turned much of the financial system into government-sponsored enterprises.

What to do?  We could promise never to bail out financial institutions again.  Yet nobody would ever believe us.  And when the next financial crisis hits, our past promises would not deter us from doing what seemed expedient at the time.

Alternatively, we can offset the effects of the subsidy with a tax.  If well written, the new tax law would counteract the effects of the implicit subsidies from expected future bailouts.

Will the tax law in fact be so well written?   It certainly won’t be perfect.  But it is possible that it will be better than doing nothing at all, watching the finance industry expand excessively, and waiting for the next financial crisis and taxpayer bailout.

The full post can be found here.

Update: University of Chicago economists Douglas W. Diamond and Anil K Kashyapagree agree and explain why here.

The Best Way To Help Haiti Victims

Paul Romer gives my preferred solution:

There is a natural complementary approach that is a much better bet than giving colonialism another chance–letting Haitians migrate somewhere with better governance and rules. This is the surest answer to the question posed in the beginning. It can give them access to the urban infrastructure, buildings, equipment, and the know-how that can support jobs in areas like garment assembly.

Immigration, like free trade, is the greatest poverty alleviation tool the world has ever seen.

Quote Of The Day

Alabama has the same per capita income and slightly faster growth rate as the Social Democratic EU.15, which Krugman wants us to believe is a “Dynamic” region that the US should “learn from”. Has Paul Krugman ever written a column asking us to learn from the economy of Alabama? Of course not. That would be simply idiotic. Alabama is poor, and has a lower standard of living, just like the E.U 15. It only manages to grow faster than others because it starts off at such a low level (the EU doesn’t even manage to do that).” — Super Economy blog

Obama’s Impact On Race Relations

After Obama was elected President of the United States, I wrote:

If there is one thing this election showed, it is that the view that a Black person cannot be president, that racism continues to play a significant role in todays economy, was flat out wrong. Personally, I never doubted that a Black man can become president but many people I know did. An Obama presidency proved they were wrong and will be a strong argument against anybody who continues to believe that race plays a significant role in limiting minority upward mobility. How his presidency will affect the Black community is something to watch.

With Obama’s first year behind us, it seems to be going just as I had hoped:

Despite the bad economy, blacks’ assessments about the state of black progress in America have improved more dramatically during the past two years than at any time in the past quarter century, according to a comprehensive new nationwide Pew Research Center survey on race.

For the full press release by the Pew Research Center go here.

Marginal Difference

Related to yesterdays post, I have previously tried to explain the concept of marginal return and why, because of the already overwhelming flow of educated minorities going into social services fields, the hard sciences may be the place to make the biggest impact – if that is your end goal.

I wrote:

Second, it is inefficient. Minorities in education, in community outreach, and in most other nonprofits are literally “a dime a dozen”. Another minority, because of diminishing returns, is not likely to make much of a difference. Factor in the effectivity of community outreach (very low) and the contributions that minorities in education add, and you are looking at near insignificant levels of added value.

Contrast that to the number of minorities in the for profit fields like engineering, chemistry, and technology. They are a scarcity and companies are thirsty for more. In short, you are likely to do more good for yourself and for the community as one additional engineer than as one additional member of a community outreach program.

This argument escaped some of my friends, they simply didn’t understand it. On my bicycle ride to work this morning, while listening to a bloggingheads discussion on genes, a related point was made.  Except that instead of social workers and engineers, it was doctors vs engineers, and how an additional engineer may make more of a difference than an additional doctor. Well, being a big supporter of outsourcing, I will let them explain what I tried to explain before:

The full bloggingheads discussion can be found here.

More On Majors And Why Chicano Studies Is Garbage

A frequent topic of discussion in my family is what university, what major and the return to investment my sister should pursue after finishing high school. My dad is a man of modest means and is the only bread winner in a family of five – 3 children of which, have yet to pursue a college degree. Aside from the financial help I provide, he has nobody else to rely on. My families situation is not that different from other minorities, at some point – regardless of grants and financial aid – you have to weigh the trade-offs and cost/benefit of sending your child off to college.

Long time readers of this blog know my position, which is fundamentally that the two most important variables are: what major you choose and the grades you get. Everything else is secondary at best and more likely irrelevant. I’m so extreme in my beliefs that I advised my dad that unless my sister chooses something in the hard sciences, he refuse to pay for her education (she would still be able to get her own grants, financial aid and his blessing – just not his money).  Also, despite the fact that my sister went to a good public school (my parents fake their address),  took advanced classes – AP and honors Math, Physics, English, History etc – and finished near the top of her class, I still advised her to go to a Cal State. Even the relatively cheap cost of the UC’s, had she applied (to avoid the temptation, she didn’t even apply) and been accepted, would not have been worth the costs, IMHO. The hiring premium between say a Berkeley student and a Cal Poly student is not that much (trust me, I’ve done interviews for my company) and it certainly doesn’t cover the long term debt difference the two schools would leave the student with (debt that comes not just from the tuition but also the living costs of living in the area). Factor in years of experience and, I strongly believe,  in the long run there is no difference between the two schools that cannot be attributed to personal characteristics (IQ, work ethic, connections, etc).

This is one of the main disagreements I have with Chicano Studies and the culture it creates for minorities entering college. A year or so ago I wrote:

One of the many things I dislike about Chicano Studies as a major is its over emphasis on “nonprofit activism” vs “personal interest”. In the status circles of Chicano Studies students, you are admired more for your desire to ‘build a community outreach center for disadvantaged children’ than for say, getting an engineering degree and ‘making the big bucks’….a kid from the ghetto is taking an enormous risk by accepting a low salary. They are, in effect, “putting all their eggs in one basket”. And unless they are the lucky ones, they are doomed to rear their next generation of children in the very same environment they were raised in.

I called it a luxury of the rich to pursue a college degree based solely on personal interest and void of personal gain. Some of my friends disagreed then. Some of my friends disagree now. They think I am too harsh in my advice on my sister. They think instead she should be able to ‘pursue her dreams and interests’ as if all family situations were the same (remember, my dad has finite dollars – every dollar spent on my sister is one less he can spend on the rest of the family…a high return is a necessity, not a luxury).

Well, for those who still disagree I point you to this well written advice column in The Chronicle of Higher Education. It’s not completely related but it still hints at the same conclusions and remarks I mentioned before – only better written and communicated. The full article really should be read in full but for those of you short on time, I quote below his concluding remarks:

As things stand, I can only identify a few circumstances under which one might reasonably consider going to graduate school in the humanities:

  • You are independently wealthy, and you have no need to earn a living for yourself or provide for anyone else.
  • You come from that small class of well-connected people in academe who will be able to find a place for you somewhere.
  • You can rely on a partner to provide all of the income and benefits needed by your household.
  • You are earning a credential for a position that you already hold — such as a high-school teacher — and your employer is paying for it.

Those are the only people who can safely undertake doctoral education in the humanities. Everyone else who does so is taking an enormous personal risk, the full consequences of which they cannot assess because they do not understand how the academic-labor system works and will not listen to people who try to tell them.

It’s hard to tell young people that universities recognize that their idealism and energy — and lack of information — are an exploitable resource. For universities, the impact of graduate programs on the lives of those students is an acceptable externality, like dumping toxins into a river. If you cannot find a tenure-track position, your university will no longer court you; it will pretend you do not exist and will act as if your unemployability is entirely your fault. It will make you feel ashamed, and you will probably just disappear, convinced it’s right rather than that the game was rigged from the beginning.

But please do read the article in full. It can be found here.

Quote Of The Day

“If Obama really wants to “bend the curve” of health care costs why not try outsourcing Medicare and Medicaid to India?  The harsh version: The government only reimburses an amount equal to the Indian price tag plus the travel cost.  If you want the luxury of U.S. treatment, you pay the difference.  The palatable version: The government still pays for U.S. treatment, but offers patients 10% of the cost savings if they go abroad.  (If you made it much higher, you’d spark another kind of moral hazard – people feigning medical problems in order to get their share of the cost savings).” — Bryan Caplan, on another method to bend the cost curve of healthcare