Saturday, February 28, 2009

Toilets: The New Partitioned Kiddie Plates

NEW YORK, New York -- Call it "Much Ado About Poo." If America, or at least its president, is lurching toward a new direction of some degree of responsibility vis-a-vis the energy we use and the waste we create, one of the most neglected nexuses of waste and energy has got to be poop, following close behind pee.

But maybe not for long. The Times is going gangbusters with its fecal reporting, perhaps realizing that its reporting should mirror its medium-term financial prospects, which are shit.

This weekend brings a relative tidal wave of bathroom-humorless stories, namely one about cowpie fertilizer from Connecticut (the state's second-biggest export, after blogs) and another on dual-chambered toilets that separate urine from feces. That's why I like to think of toilets as the 21st-century version of Hello Kitty-brand partitioned plates like I once had.

Boston newspaper readers, always a few steps ahead of New York, naturally, were treated to a much more comprehensive look at the issue last summer -- and the Boston Globe article in question may have been good reading for the Times' Rose George. Ms. George, filing her piece from England, implies that Americans are so far behind in their compost-toilet technology that we need to travel to China to see the toilets in action, or to Sweden to import them. A quick scan of the first half of last summer's Globe article would've shown her, however, that companies in Lawrence, Massachusetts, have been manufacturing the toilets for schools in Weston, Massachusetts, for starters.

Nonetheless, our relationship with human waste is a somewhat ... wasteful ... one, and people are getting smart to this. The getting-smartest thing I've seen, oddly, probably came from a big New York developer that offered a plan to build a huge new skyscraper development in Manhattan's Hudson Yards area that would recycle wastewater and feature "flushless" toilets. Though the developer, Tishman Speyer, failed to sign for the project after its bid was selected and the entire project may be on hold for a long time yet, the day when No. 1 stays away from No. 2 may be fast approaching.

Follow-Up: Recession and the Arts

NEW YORK, New York -- A few weeks ago, we wrote about the parlous state of the arts during the recession and explored the idea of government intervening to aid foundering arts groups.

At the time, $50M in the stimulus bill that was targeted to the arts was under fire from congressional Republicans who see the arts as part of the Democratic Party's "permanent agenda" and not a jobs engine worthy of government stimulus money.

Although this is old news now, the $50M -- or 1/16,000th of the stimulus bill -- was saved by Representative Louise Slaughter of New York and others, increasing the endowment of the National Endowment for the Arts by 33%.

A number of people, including at Bloomberg, were shocked that such a small amount of the stimulus bill could be singled out by Republicans led by Oklahoma Senator James Coburn as examples of "waste" or "pork" to justify killing the entire economic-rescue plan. In the end, a group of congresspeople galvanized in part by Robert Redford helped keep the $50M, as the New York Times reported.

As before, the arts seem to be walking on a razor's edge between becoming an "anti-American" punching bag for many on the right and gaining newfound broader acceptance thanks to the mainstreaming effect the Obama family's patronage of the arts may provide. In the end, nobody can really say if classical music or painting will be nearly forgotten in 20 years or enjoying a new renaissance, or how much of an influence government involvement may even have (NPR recently took up some of these questions here). And this episode may well be just another example of how arbitrary the approaches society takes on a "macro" level toward centrally important issues can be.

Recession Special Series God-Not-Again Post-Finale: Three That Aren't Really Free (Part 7 of 6)

NEW YORK, New York-- Okay, okay, the "three-fer" series was supposed to be dead. But then I discovered three medium-cost policies that were overlooked but fit in with the recession-friendly series of ways to make America more like Duffland for all of us without spending too much.


1. Pay for performance in healthcare. You've probably been hit with this feeling before. Maybe while reading the Sunday paper over breakfast. Or while watching the news at night. You've probably thought to yourself at various points in the last month, "It sure is nice to have a president with a brain in his head." And it is nice. The economy's handbasket may already be burning in hell, but President Obama's budget speech was a breath of optimism in its focus on energy, healthcare and education as opposed to, say, going to war with Syria.

Despite the fact the president seems involved in working to improve it, though, healthcare is a mess. Medicare costs are set to bankrupt the government and perhaps private sector as well by mid-century if current rates of cost inflation continue. And for all the money we spend on healthcare, we're neither healthy enough nor are enough of us insured.

If, as Obama plans, state-supported health plans are to be expanded, they need to lead the way toward a pay-for-performance system for payment of treatments. This is a big issue that can, and does, fill books. (I can recommend Obama adviser David Cutler's "Your Money or Your Life," and I've been meaning to read Ezekiel Emanuel's "Healthcare Guaranteed.") But the short of it is that health plans currently pay doctors based on how much money they spend on treatments. The upshot is that health professionals are incentivized to order many tests, and expensive ones at that. This may be great for pushing up costs, but it doesn't make people any healthier. And while doctors get green for ordering you a battery of tests, they aren't incentivized to follow up with patients when they're ill or check in when they're healthy. In short, the system isn't set up to keep people healthy; it's set up to create ever-more costly procedures.

One of the ideas getting tossed about is a "pay-for-performance" model whereby doctors are incentivized to keep people healthy. This could entail payments for check-in calls between physical exams to see how people are doing, or follow-ups to make sure a patient is taking his pills. The focus would be on making sure doctors are making people healthy, and positive health outcomes would be incentivized rather than expensive procedures.

IBM has recently prevailed upon the payor it uses to insure its employees in Arizona to adopt a pay-for-performance model. It will be watched closely by many who hope it will rein in costs and improve the health of plan subscribers. If it works, the government will be smart to move Medicare toward this model.
Cost to federal gov't: Too difficult to say given that we want to go to bed tonight!

2. Implement carbon quotas. It's unclear whether a cap-and-trade system, which is not working particularly spectacularly in Europe, or a flat-out emissions tax without capping carbon, is preferable. But something needs to be done to slow global warming. A few common concerns are that government will make things like turning on the lights more expensive. Well, duh, that's kind of the point -- to encourage energy efficiency. But if the Obama administration is counting on pulling in tens of billions every year in carbon taxes, it may make sense to have a payroll-tax decrease accompany any carbon tax so that modern conveniences aren't prohibitively expensive, as some suggest.

Also important, though controversial, would be to levy a carbon tax on imported goods from countries that do not have equally stringent carbon legislation. Without this, there would certainly be an exodus of manufacturing from US shores; and, from the other side, the US would be cleaning itself at poorer countries' expense. Net gain for the global climate: nil. Cost to the federal gov't: Right, uh... I guess nobody knows this...

3. Begin a foreign business intership program for college grads: This is the only suggestion in this post that borders on original, and it's the least likely be seriously considered by Congress. The idea would be to initiate a program that would allow high-achieving college graduates to intern as business attaches in the US's foreign embassies for one- or two-year stints. Graduates would work for the Commerce Department or US Chamber of Commerce, if it's too far beyond the purview of the Commerce Dept, to research foreign companies and markets and act as liaisons between US businessmen and potential overseas partners.

The motivation behind this idea comes from a global business trend that the US has appeared to be left out of in recent years. Non-First World countries including Russia, China, the Middle East and myriad other Asian, European and African nations arrange many foreign business deals for both private and state companies on official trips. The prime minister of, say, Bulgaria will bring along business leaders when he goes on a state visit to Turkey. There will be a raft of deals, all pre-arranged with the two governments' blessings, that the businessmen will sign while the prime ministers look on approvingly. The US seems largely not to take part in this (admittedly sketchy) way of doing things.

Personally, I'm fine if Obama doesn't have CEOs trailing him every time he goes on a state visit, but at the same time you don't want to lose out on real opportunities for fear of playing this sketchy, state-capitalist game. An internship program like the one proposed could be a step toward compromising those two positions.

Sending high-achieving graduates to foreign countries could be potentially beneficial by:

-Providing future business leaders with firsthand knowledge of foreign cultures, languges and markets;
-Providing graduates with solid business experience;
-Spreading international best practices in products and services to the US -- think of it as a cross-pollination that would make US businesses more innovative at home and more competitive abroad. If a returning intern comes back with his head full of interesting cell-phone payment systems he saw in Finland, he could start a business that could offer attractive services or rates to US cell-phone subscribers;
-Having "boots on the ground" to build personal relationships with companies in foreign countries for the benefit of US firms;
-Offering a ready-made body of information and intelligence on local markets for US firms interested in expanding operations into them either via acquisitions or organically but not knowing what local firms are out there, how trustworthy they are, or how sophisticated their business models are;
-Generating opportunities for small and medium-sized US firms to tap into resources they may not be able to afford in order to identify and secure new export markets at a time when rebuilding exports is increasingly important to ensuring long-term economic growth;
-Providing those small firms with some follow-up after deals are signed to let them know how their products are received, potentially help with marketing, and generally make places like Tajikistan more receptive to US business by having a token smiling, friendly American around to allay Tajik businessmen's fears of those devious Americans

Fortune 500 firms wouldn't really need this sort of thing. But for small and medium-size companies with little international experience, it could present myriad new opportunities.

The flip side to this program would be expanding grants to bring foreign students to the US. I can't say anything bad about that idea -- programs like the Fulbright Scholarship are a long-term good way to build up good will, international relationships and cultural understanding, and an expansion of them is always going to offer good ROI. Cost to the federal gov't: Maybe $25M per year for 500 interns at estimated $50K of expenses per year.

Friday, February 27, 2009

The Warzone to the South, the 2nd Amendment and San Francisco

NEW YORK, New York -- It's not a particularly new thing for foreigners to criticize either the abundance of guns in the US or the ease with which Americans purchase them. And it's pretty much custom that most of us bristle up and mutter about "damn gay foreigners" when this happens, maybe not any more convinced in the sense of letting people own lots of guns but not about to back down before tax-loving Euroqueers who have no idea what they're talking about.

Except that maybe they do know what they're talking about sometimes.

One of the best-kept secrets of America's neighbors is that Mexico is descending into an uncontrolled vortex of violence as drug cartels fight back against state efforts to halt the narcotics trade that were stepped up in 2006. As a simple Google search turns up, the news bubbling up from South of the border is almost uniformly related to the drug violence that some say is on the verge of spiraling into civil war after 6,000 were killed in drug-related fighting last year and Mexican President Calderon prepares for further bloodshed. The city of Juarez, on the US border and Spanish for "Screwed," is set to receive 5,000 fresh Mexican soldiers for policing. If you thought fighting effete, aristocratic slave owners was bad, imagine what a mess a civil war against heavily armed narcobarons would be.

The US fits into this in more than the obvious way. Of course, as anyone who saw the crappy movie "Traffic" knows, America's rich prepsters and hipsters as well as inner-city drop-outs fuel demand for Colombian cocaine, transported north via Mexico. But the more interesting twist -- and this is where the Second Amendment comes into play -- is that much of the narco firepower is allegedly supplied by US gun dealers in border states like Texas, Arizona, New Mexico and California.

The New York Times recently reported on the link between US gun shops and the Mexican warfare, and we won't repeat their statistics and revelations here. But while it's fairly safe to say that the Bush administration, if faced with the facts from the ground in Mexico, would grit its teeth and harden its opposition to any restrictions, whatsoever, on gun sales in the US, the Obama administration to its great credit seems to be bringing common sense to its approach toward guns. Reports suggest President Obama is working toward a ban on assault rifles like the one that existed until 2004, seemingly motivated (at least in part) by the Mexican violence.

As goes without saying, any attempt to curb the rights of gun owners would likely result in a vicious congressional and popular battle. Already, Utah's congressional delegation is apparently girding for a showdown, and the nefarious Nev. Senator John Ensign this week took it upon himself to rewrite city laws for Washington DC after it tried to enforce gun-ownership laws, meaning he'd likely be pretty mad about anything gun laws that may affect his own state. But it would be a fairly monumental and, for recent history, unprecedented moment if the US were to amend the rights of its own citizens out of recognition that those rights are causing harm to foreigners or due to foreign pressure. (That Americans' rights were violated post-9/11 to the likely delight of certain -- al-Qaida-affiliated -- foreigners isn't quite the precedent we have in mind here.) Time will show what happens with gun rights, which The Legionnaire knows have become a hot topic in the Rocky Mountain states. But if there is any movement to curb sales of, say, AK-47s or alien tractor beams, it will be itneresting to see whether the NRA and kindred spirits latch on to the fact that any change in gun rights may be presented as a response to Mexican pleas for help.

One other relevant area here, naturally, is American drug policies, i.e., the "war on drugs." (Our take on this asinine "war" can be found here.) There are new signals that President Obama may offer a more laissez-faire approach to enforcement of drug laws, even if he doesn't seem to intend to legalize any substances on a national level. This is important because drug policies are, of course, formulated not only on a national but also on the state and municipal levels. And on the municipal level, there have been some interesting recent developments.

Most significantly, California state legislator Tom Ammiano on Monday introduced a bill that would legalize marijuana for recreational use in the state. The bill's purpose has more to do with closing California's $42 billion budget deficit than averting civil war in Mexico, but it could have a salutary effect in places like Juarez if California can bring the trade of marijuana into legal channels. Granted, cocaine, not marijuana, is the bigger problem, but a start's a start. Here's wishing Ammiano & Co. luck.

Recession Special Series Finale: Three to Finish 'Er Off (Part 6 of 6)

NEW YORK, New York -- After an eventful day of political and economic policy (see here if you've just emerged from a cave), it's time for us to finish off the special recession-related series "Three-fers." We initially billed the series as picking up marketing hints from dime stores ("dollar stores," as I believe the youngsters call them today), so we'll hope that, after this grand finale, our batches of "three-fers" don't fall apart on you like the last SuperSoaker I bought at a dime store did.


1. Allow gay marriage. No, "finish 'er off" here does not refer to the "institution of marriage as we know it." I don't know what that's supposed to mean, anyway; the only water that nonsensical phrase holds is as potable as St. Petersburg's tap water. Granting gay couples the right to marry may not fix the economy (or would it?), but extending the rights of some to all has historically and without exception made America a better, freer place for all.

2. Overturn the stem-cell ban. This appears to be in the works, but until it's a done deal, any rational person should be demanding it. The positive economic gain from this, by the way, would extend well beyond wedding cakes and plastic, tuxedoed figurines.

3. Bust the trusts.
Whatever happened to the trust-busting ethos of the man whose name became synonymous with political courage and reform among both parties this election cycle?

I'm referring, of course, to T.R. himself, Theodore Roosevelt. It was pretty bully when Teddy broke the stranglehold of the quasi-monopolies that had wrapped around the US economy during the Robber Baron era -- a time of great consolidation of power among a few tycoons; plutocratic neutering of government; gaping wealth disparities; and rising angst and social instability among the working classes.

Sound familiar? It's not without reason that the suddenly distant-seeming Bush years were dubbed by many as a
second "Gilded Age." But while the period from 1865-1910 laid
the groundwork for much of industrial America (e.g., railroads, steel smelters, etc.), it was actually not a particularly economically robust time. The Long Depression of 1873 to 1897 kept growth low to the turn of the century; and a quick look at the original Dow Jones Industrials Average belwether companies in 1896 betrays a fairly top-heavy, monopolistic and nearly Soviet economic structure, dominated by regional monopolies. Take the first 5 companies (by alphabet) in the original DJIA: American Cotton Oil; American Sugar; American Tobacco; Chicago Gas; Distilling & Cattle Feeding. You could substitute in "Romania" for "America" and you'd have some nice Ceausescu bluechips.

But where are we today? The government is eagerly consolidating the financial sector, herding the tottering small -- and not so small *cough, cough, Wacoughia* -- banks into a small number of big, supposedly safe banks. The effect, naturally, is to create a class of banks that are systemically "too big to fail" ... and may not be so safe, after all.

The financial industry is not alone, however. The chemicals industry, whose products are in nearly everything we use and consume, saw
great consolidation in recent years. After the industry was ravaged by high input costs during the peak of the oil boom last summer, its road to recovery appears to be through ... more mega-mergers and a folding up of players with the prodding of the state-owned Gulf majors like Saudi Arabia's SABIC and the Kuwaiti government that are increasingly powerful (and as closely held and opaque as ever) in the industry -- and cognizant of that new power.

In pharmaceuticals: Consolidation. Here, it's Pfizer potentially starting a
trend of major pharma players buying one another (as opposed to picking off biotechs, as had been the trend).

How about retail? The
extinction of Circuit City means that in many markets Americans will buy almost all of their electronics at Best Buy -- if they can afford not to shop at that monopolist of monopolists, Wal-Mart.

And the struggling auto industry is also likely to see consolidation, a surprise to few at this point.

But while governments and big corporations are eager to shepherd weaker companies
into bigger ones to keep tottering industries alive, is anyone, anywhere asking questions about the longer-term repercussions of increasingly monopolist industries? You don't have to be a WTO protester ... or a US Army lackey sent to a future where one massive corporation controls production and distribution of everything that an unthinking, debased human species uses ... or a decidedly 20th-century robot in the year 2700, to realize the ill effects of monopolization.

The genius of capitalism, especially in the US, is the diversified and vibrant private
sector it brings about, where "regular folk" own their businesses, giving them greater incentive to do a good job at what they do. And when there are lots of businesses out there, each one competes to offer customers better products, services and prices. But once you have a few quasi-monopolies in a sector, there's a fine line between private corporations and government-run "state champion" industries with little need to compete against anyone in quality, service or price. Going back to our buddy Nicolae, Soviet-era Romania may have had a few things in common with, say, the US electronics retail industry in the coming months.

If you have a creeping feeling that the products we buy and the service involved in
their distribution and maintenance is getting worse and worse, this consolidation may be why. While that's all a speculative theory, it does stand to reason: When pharmacies or retail outlets are staffed by low-paid zombies who work for store managers who don't really care about the store ... and themselves work for mid-level corporate managers who don't really care about a company they'll only be at for a short time ... all of whom sell products sent by multinationals made in town-size factories in a country they've never been to ... at what stage can you expect anyone to care about the product they're making, or service they're offering?

For all the scorn the likes of
Flaubert and other ... ehm, French people ... hurled at the petit bourgeois in past centuries, the independent shopkeeper or small manufacturer's ownership in his trade, his work ethic and, ultimately, his quality of life outshine those of the vast majority of Americans (or anyone else, for that matter) today.

George W. Bush actually seemed to have a sense of this when he spoke of his
"ownership society" -- and the germ of his idea wasn't so off, I think. Unfortunately, though, for him "ownership" meant: You own a home, and a handful of massive banks owns your mortgage. A pretty stunted ownership society for our 7th-worst president. Perhaps if No. 44 wants to do better, he should realize that when the banking sector is dominated by companies called Bank of America and CitiBank, the parallels to the era known as the Long Depression are, at least semantically, fully in place. That would be change you can say "bully" to.

Thursday, February 26, 2009

Transdnistria: Border Politics and the Geopolitical Gaze

BOULDER, Colorado -- As reported in the Moscow Times Thursday, the AP's Masha Danilova wrote a story about the efforts of the Russian government to distribute Russian passports to ethnic Russians living in former Soviet republics. Recently, Russia has been aggressively distributing passports in Moldova's breakaway region of Transdnistria - 135,000 of the region's 550,000 inhabitants now hold Russian passports.

Since splitting from Moldova after a brief civil war in 1992, this narrow sliver of land has been a close ally of Moscow - like Georgia's breakaway regions, it is also patrolled by Russian "peacekeepers" who are really just occupation troops. Transdnistria is one of the many pseudo-states that dot the former Soviet space. Without international recognition, these places represent geopolitical "black holes" - they are breeding grounds for criminal enterprises, like trafficking in drugs, weapons and people, enterprises that are usually run by the elites in control of the government. With a reliable patron like Russia, citizens can receive the benefits of an internationally-recognized passport, while the state can remain outside the purview of international institutions and regulations. Transdnistria especially has deserved this reputation as a gangster state, as it is a hotbed of smuggling in people and weapons, rackets allegedly under the control of the authoritarian president, Igor Smirnov.

Russia is not the only country in the region engaged in passport politics. Romania has periodically allowed Moldovan citizens to apply for Romanian passports (which now also makes them EU citizens). The Moldovan government has criticized this move as undermining their statehood, but many in Romania (and Moldova) hope to eventually unify the two countries, as their languages and cultures are nearly indistinguishable. Moldova had traditionally been part of Romania until World War II, when it was annexed by the USSR. The language of the region was switched from Latin to Cyrillic script, and the Romanian speakers now under Soviet control were declared to be a separate ethnic and linguistic group, called "Moldovans."

What particularly intrigues me about Transdnistria is the geopolitics of the region's name. This is a contested region that straddles the line between East and West. In English, its name means "across the Dniester River" - looking eastward, it hugs the far bank of the river. For the Ottoman and Austro-Hungarian empires, this region was the farthest extent of their eastward push along the Black Sea's northern coast. The "civilizational" divide between these empires and the Russians to the east can be seen in the frontier fortresses that dot the area. The gaze from the other direction has the opposite meaning - its name in Russian is Pridnistrove, where the prefix "pri" means "in front of," so it is thought to lie on the near bank of the Dniester.

In the context of the contemporary border politics of Europe, this distinction holds a great deal of meaning. The European Union has drawn a bright line across the continent. Countries within its borders are promised prosperity, security, and freedom of movement for citizens; outside, they are subject to the machinations of a newly-assertive Russia and beyond the reach of EU cash. Of course, the line is never as bright as it appears at first. Knowing that it can never truly be a "fortress Europe," the EU extends all manner of assistance to its neighbors, especially for immigration controls and border security though its Border Assistance Mission. The fancy PDAs now carried by Ukrainian border guards were bought with EU cash.

Like in Transdnistria, Russian diaspora communities have provided a number of challenges to Moscow and the host countries since 1991. Since Putin's ascent to power in 2000, Russia has seen them as an asset rather than a liability. Through passports, as well as overt and covert support of nationalist political groups, the Russian government has found supporters of its foreign policy goals inside neighboring countries. Ethnic Russians in Ukraine want to keep the country out of NATO and keep the Black Sea Fleet in the Crimean port of Sevastopol; in Estonia, they agitate against the country's nationalist language and citizenship policies. They are especially useful in breakaway regions, like Transdnistria, and Georgia's restive republics of South Ossetia and Abkhazia, where nearly everyone holds Russian citizenship, is eligible for a Russian pension, and government workers have their salaries paid by Moscow. In the case of Georgia, these benefits are not only extended to ethnic Russians, but to the entire population; should Russia gain a stronger footing in Transdnistria, they would probably also offer passports to the Ukrainians and Gagauz who occupy the territory, though likely not to ethnic Moldovans.

Transdnistria is comically awful place, and I can hardly fit all of the entertaining bits of information I know about this geopolitical querio into a single blog post, but I can point you to other resources. The author of news*diet will be spending the next year of his life studying "Moldovanness" for his dissertation, and he has made many forays into the hermit kingdom of Mr. Smirnov. Also, check out the research by geographers John O'Loughlin and Vladimir Kolossov on pseudo-states. Transdnistria's English-language propaganda newspaper, the Tiraspol Times, is always good for a laugh. The few minutes it took for my train to cross this sliver of land on my way from Moscow to Chisinau was all the time I needed to spend in Transdnistria, and I do not have any plans to return.

Wednesday, February 25, 2009

Wednesday's Links: The $1 Trillion Man

BOULDER, Colorado -- I encounter a lot of news items in the course of each week while not doing my work, but I don't always have time to post about them, or I am simply too lazy or too engaged in other activities, like watching Law & Order and playing Donkey Kong (after a week, I can now make it to the third barrel stage, which I think is pretty good).

So, I have decided to create a new feature at the Walter Duranty Report - each Wednesday, I will post a compilation of some of my favorite links from the past week. Some of them are fresh news items, but most of them are random videos and strange sites that I came across while searching for the end of the internet.

FAIR: Babies are an anchor, pulling America down to the inky depths. According to the Federation for American Immigration Reform, pregnant illegal immigrants are flooding into this country just to have their babies on American soil - so-called "anchor babies" - and it is all the fault of the dastardly fourteenth amendment.

Deadspin: A-Rod is a terrible liar. There was not an ounce of truth in his crocodile-tear laden apology to, um, America? The Yankees? Madonna? Further proof that this guy is emotionally retarded. Perhaps the Onion was right.

Youtube: Gentlemen, we can rebuild [the economy]. I'm pretty sure this is what President Obama was talking about in his speech last night.

The Hockey News: At least Ontario has junior hockey. The blighted cities of Ontario, which actually leads Michigan as the world's largest car-producing region, can at least take comfort in watching their junior hockey teams as the Big Three collapse.

New Haven Independent: Beat down posse. The latest installment of editor Paul Bass' v-log news summary, in which he discusses some troubling trends in New Haven's community policing policies. Be sure to scroll down to a response from Mayor Destefano.

Denver Post: Real justice for victims. Colorado is contemplating scrapping its death penalty and using some of the savings (estimated at anywhere between $300,000 and $4 million per year) to investigate unsolved homicides.

60 Minutes: 18 is the new 21. Personal acquaintances of mine, former Middlebury College president John McCardell and Boulder PD chief Mark Beckner discuss the benefits of lowering the national drinking age.

Gawker: NYU sucks on so many levels. Hilarious video of the NYU jackasses who occupied the university food court. How you like "consensus" now?

Christian Science Monitor: Their hearts just weren't in it. The accused killers of Russian journalist Anna Politkovskaya were acquitted, but no one was really surprised since the prosecutors were not trying terribly hard to convict them.

Pilki FM: Head like a fucking orange. For the acolytes of RSK (that's Ricky Gervais, Stephen Merchant and Karl Pilkington for the uninitiated), you can listen to a stream of their old Xfm radio show 24/7.

Finally, I would like to point you towards a great news aggregating site, news*diet, which is linked in the menu to the left. A friend of mine runs it, and he periodically compiles a newsletter of noteworthy stories, which you can subscribe to via email. There is a lot of great content about government transparency and press freedom, though it is a bit heavy on sources related to sex trafficking - that just happens to be the author's area of research. So check it out, and get your fill of news.

Using Crappy Geographic Methods to Not Find Osama bin Laden

BOULDER, Colorado -- Two researchers at the UCLA Department of Geography say they have found Osama bin Laden's hiding place, somewhere in the Tribal Areas of Pakistan along the Afghanistan border. But will this supposed discovery be of actual use to anyone?

It has long been assumed that bin Laden was holed up somewhere in this area - his last known whereabouts was just over the frontier in the caves of Tora Bora, way back in 2002 - but professors Tom Gillespie and John Agnew have narrowed it down to three possible buildings in the town of Parachinar.

Eeny, meeny, miney, moe ...

The researchers used Geographic Information Systems to crunch data about the local terrain and population, and about bin Laden himself. They then employed two biogeographic models normally used to explain and predict the distribution of plant and animal populations. Distance-decay theory, which states that the farther one moves away from a given location, the less likely one will find the same distribution of species as they did at the first (the species here being what, terrorists? Members of the bin Laden family?) Island biogeography is also a straightforward biology model - the bigger the island and the closer it is to other landforms, the great diversity of species that it will support.

Finally, the researchers used bin Laden's "life history characteristics," also a practice taken from biology. They would need to identify a city and a structure that fulfilled certain requirements, like having enough rooms to house his entourage, and with access to electricity to power his dialysis machine (even though the claims of his serious kidney problems have long since been debunked.) Noah Schachtman at Wired rightly points out one of the biggest problems of this model - "garbage in, garbage out." While perhaps useful as a thought experiment, the authors claim such a high degree of precision that is based on unreliable or false data and assumptions that it makes the whole exercise less than illuminating.

Murtaza Haider in Toronto's Globe and Mail
points out another important shortcoming of the study - the authors have miraculously managed to identify the only majority-Shiite city in the entire tribal region. Ms. Haider is a native of Pakistan's Northwest Frontier Province and finds it highly unlikely that the leader of a global Sunni Islamist terrorist network would choose to hide in the one town where the residents are least likely to provide him with cover. Spatial methods can be incredibly powerfully tools, but applying biological models like these, and relying on aerial photography to crudely identify buildings and landforms will create more bad targets than real intelligence. As Haider worries, and not without justification, this analysis may do more harm than good:
If the gullible UCLA professors are taken seriously by trigger-happy NATO forces, who lack ground intelligence in the tribal areas and cannot tell friend from foe, the Shiites of Parachinar may have to fend off bombs from American drones, while they are fighting for their survival against the Taliban on the ground.
To be helpful, these methods need to be combined with other techniques, like ground-truthing remote sensing data to actually test if the information you have collected tells you what you thought it did. Getting basic facts about bin Laden's biography would also be useful.

John Agnew is a well-respected and widely-read scholar in geography. Recently he has become enamored of spatial methods, but he appears to have little grasp of their nuances and shortcomings. Last year he released a study, along with Gillespie, Jorge Gonzalez and Brian Min, about the effectiveness of the American troop surge in Iraq in 2007. Titled "Baghdad nights: evaluating the US military 'surge' using nighttime light signatures" and published in Envirnment and Planning A (2008, vol. 40, pgs. 2285-2295), the study also relied on remote sensing data, this time employing nighttime light emissions in Baghdad.

Density plot of the occurrence of deaths in Baghdad (Jones Report, 2007).

Comparing light emissions from periods immediately after the US invasion in 2003 through the surge in 2007, they concluded that light emissions had increased until 2006 and then went into a rapid decline, which coincided with the eruption of Iraq's so-called sectarian civil war. Their conclusion is that the surge had no observable effect on violence, but rather that the conclusion of ethnic segregation led to improved security. The areas of decreased light do coincide with areas of violence - people were driven from their homes by ethnic militias, turned off the lights, and never came back.

There is evidence to support this claim, but not from looking at lights from space. It has been widely documented that American forces indirectly facilitated ethnic cleansing in Baghdad by encouraging residents who had been targeted by militias to move to ethnically-homogeneous neighborhoods. Troops have constructed a vast network of blast walls throughout the city to divide Sunnis and Shiites, ostensibly to protect them from inter-ethnic violence. It may be difficult to argue that the increase in American forces had no discernible effect on the security situation, but certainly violence has decreased in part because the militias have already achieved their goals of turning Baghdad into a segregated city. But reaching this conclusion requires analyzing a wide array of data sources, much of it coming from on-the-ground reports and first-person accounts of the violence. There is only so much we can learn about an urban-scale ethnic conflict, or the location of a single man, from space.

John Krygier over at Making Maps: DIY Cartography has commented on the Iraq surge article, and he has been nice enough to post the original.

Tuesday, February 24, 2009

Jindal's Awful Speech

NEW YORK, New York -- If I gave birth to a child and it was Louisiana Gov. Bobby Jindal's response to President Barack Obama's address to the joint session of Congress, I'd name it Blather McBlather-Lies.

The guy's main point -- that government shouldn't be a savior, but people must save themselves -- is something I think we can all agree with. Maybe too much so -- throughout his own speech, Obama spoke of not wanting "big government" (even if what he was proposing would expand government) and Jindal's rebuttal sounded like he was setting up straw men rather than actually arguing with Obama.

Stepping back, however, if the problem with the Johnson through Carter administrations was that government was too big then, today it's too small where it matters. To that end, Obama's argument that saying "big government is good" (or its opposite) is inane holds truer than Jindal's more ideological tone, especially since bigger government in the Bush years would've been able to regulate finance better, prevent Katrina from being such a disaster, and slow the widening rich-poor gap.

Indeed, Jindal's prime example of the dysfunctionalness of government was none other than the Hurricane Katrina that ravaged his state. But Jindal is from the same party as the people who botched Katrina, and the egg seems to fall on his face here. After all, to most Americans, Katrina proved not that government is too big and slow but that the recent Republican administration was too small, uncaring and uninvolved -- oh yeah, and that George Bush hates black people.

Beyond that, in his rebuttal Jindal carried the latter-day Republican torch of taking an $800 billion bill and calling it "wasteful" by drawing attention to the same one or two $200 million projects -- perhaps some (but certainly not all) of them are regrettable, but they're drops in the sea. Like hundreds of Republicans before him, he harped on the $300 million the federal government will use to buy new cars (the fact is, though, the federal government, just like Mr Jindal's state government, does own lots of cars, and now is probably the single best time to buy cars given the precipice-hugging state of the auto industry).

And he said the $8 billion to fund high-speed rail was nothing more than an attempt to build a maglev (technology that allows trains to hover via magnetic levitation -- China's one of the only places building them) train between LA and Las Vegas, two bastions of the out-of-touch and sinful. But this is bullshit. That project is decidedly not happening (here's one of the many articles pointing that out), and high-speed rail is both one of the most important things this country can do to improve efficiencies in business, economic competitiveness, quality of life for citizens, and reduce greenhouse gases. Perhaps one day Republicans will apply for passports, travel to foreign countries, and understand that people living in countries with high-speed rail (otherwise known as the G-20, minus North America) really don't have it so bad.

OK, two more favorite Jindal moments:

When he "reassured" Americans that Republicans remain fully committed to fiscal prudence, despite the way Bush "warped" the party. Right. Republicans went along with Bush kicking and screaming about the deficit-inducing tax cuts and wars in Iraq and "on terror." And it must be one of those ironies of history that Reagan and both Bushes either took surpluses inherited from Democrats and turned them into deficits, or widened existing deficits. I'm sorry, Governor Jindal, but you're a liar and not a very bright hope for the Republicans if they think they'll recapture the White House with you.

Finally, was it just me or did this guy have the most obnoxious, condescending voice I've ever heard on a politician? I got the sense Gov Jindal thinks we non-gubernatorial Americans -- who, as he repeatedly noted, can "do anything" and don't need guvment -- are a bunch of half-wit slobs. The man's tone was so insulting that I'm tempted to wager the good governor was a college debater in his day. And if he was, he handily lost tonight's tournament.

State of the "Obamanation"

NEW YORK, New York -- Obama's speech was pretty good, but it could've and should've been better.

A more basic, fundamental, FDR-style explanation of why banks are important -- and why, if necessary, nationalization should not be held up for ideological reasons -- would've been nice.

And all this crap about how people need to get new mortgages and banks need to be forced to lend ... uh, terrible idea. This mess came about because banks were giving too many people too much money. Real disposable income was stagnant for the last 9 years while credit and mortgage lending exploded.

The answer is not to keep giving any schmuck a mortgage to prop up house prices that are still artificially high (remember: during the prime boom years, house prices were rising at nearly 20% nationally while median incomes actually decreased; dangerously easy credit and huge inflows of Chinese Central Bank investment made this possible, not any increase in income). House prices, unfortunately, need to keep falling until demand catches up with supply. The other alternative is to bulldoze the massive housing surplus.

Here're the ingredients in the witch's brew:
-A vacant homes for sale inventory at 2.6 million homes -- versus a historical average of 1.3 million
-A net change in households at approximately 700,000 in 2008
-Historical home ownership rates of 65% (it's closer to 68% now, down from 70% a few years ago, and it will probably fall to the sustainable historical average)

If we assume housing starts stop tomorrow (and they won't, unfortunately -- they're still actually outpacing housing sales!), then we have excess supply of 1.3 million homes, and a net change in home-owning households of about 500,000 per year. That means it'll take 2.6 years -- with no new houses built -- to work out the excess supply.

Obama and Congress need to stop incentivizing builders to construct new homes, and they need to stop giving huge tax breaks on mortgages (encouraging people to buy homes rather than rent, even if they don't have the money for a down payment or have a long-term stable job justifying mooring oneself to a home). The huge pustule of housing inventory needs to be burst either by destroying excess homes, or by slowly letting the people who can actually afford them buy them. Insofar as the second option leads to wrenching, gradual declines in house prices, the first is far preferable.

Instead, Obama seems to want to re-grease the credit wheels. That may mean buyers will burn off the supply a bit quicker, but it'll also encourage irresponsible developers to keep building (bad), and it will result in lots more people who can't afford homes buying them (really bad).

Similarly, Obama's comments that "I intend to hold these banks fully accountable for the assistance they receive, and this time they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer" are a horrible, horrible move. I hope it's populist, political posturing. Banks have lent way, way too much. Debt-service ratios are at record highs versus real personal disposable income.

What's needed is to increase income and get bank leverage (the amount of debt a bank has versus its capital) to normal levels. The first can be done only by creating good, high-paying jobs. And Obama's smart enough to realize that investment in education, healthcare and energy is what'll do that. I'd add immigration reform and infrastructure investment to that list, along with a number of smaller policies, but his Big Three sure kick the crap out of their Detroit counterparts.

And nationalization of banks in order to clean out their debts via asset sales, including to a money-printing Treasury, is needed to get them out of the bad situation they're in -- which was caused by a government that encouraged increased mortgages and lending to people (see a pattern?). Obama needs to bite that bullet and, while I know Taro Aso was in the White House today and Japan's a pretty cool place, stop mimicking Japan on playing coy with bank losses. Clean them up by nationalization sooner rather than later.

The "pretty good" grade I'd give Obama comes from the fact most of his speech excellently pointed out the need for long-overdue in energy, healthcare and education -- the fundamental elements of an equally long-overdue US competitiveness strategy. But the banks, oh, the banks. Stop playing dumb, Barack, and put the silver bullet of nationalization in the heart of the insolvent zombie banks.

Sunday, February 22, 2009

Recession Special Series: Three Cheers for Liberty (Part 5 of 6)

NEW YORK, New York -- Sorry for the delay in posting the conclusion of the "three-fer" series on low-cost policies the US can and should pursue to improve itself and its citizens' lives -- we at the Walter Duranty Report were busy looking for a subprime mortgage, and it sure is tough these days to buy a $1 million in California's Imperial Valley when you don't have a job.

Today's trifecta of cheap-but-not-in-a-slutty-way policies all aim to increase liberty, either in the most common, political definition of the word, or economic liberty. Clearly we were scraping for an umbrella theme to put these under.

1. Let's have some truth, and reconciliation: George Bush, purveyor of Democracy With a Big Freaking D, gave us liberty at its best: Unwarranted telephone wire-taps of US citizens; secret prisons and "extraordinary renditions" for uncharged terror suspects around the world; suspension of habeas corpus for suspects imprisoned on US territory, including US citizens; torture; politicization of the Justice Department; fishy ten-fingers boosts to businesses it favors ("Halliburton, don't want to bid? Why, this is your lucky day!"); and falsifying and manipulating intelligence to go to war (leading to tens of thousands of deaths) under false pretenses.

OK, so maybe you've heard about the tag-team hooker joke involving Bush, Cheney and Lady Liberty ...

Given all of those little pokes in the red eye of freedom, it's probably not surprising that many Americans would like to see a knee-capping of Bush and his cohorts. What is surprising is that the overwhelming majority of the American public wants legal action of some sort taken, according to a survey earlier this month. Depending on the violation in question, 62% to 71% of the country would like to see either a criminal investigation or panel investigation of Bush-era practices. Senator Patrick Leahy of Vermont, recipient of a "fuck you" from Dick Cheney some years back, is pushing for a commission to determine in exactly what ways the Bush White House abused its power, to head off any repeat episodes. What form any investigation or other legal action might take is explored in a New York Times piece today.

And yet President Obama is not inspiring on this count. He has implied that he is against any Congressional or other investigation or truth commission. As is becoming more and more apparent to reporters covering the terror beat, much of Obama's war on terror resembles Bush's. Just as Bush ludicrously prevented any of the "extraordinarly rendered" terror suspects it whisked across the globe from receiving trials by arguing that their cases were "state secrets" even federal judges were not privy to, Obama's lawyers are upholding the "state secrets" argument. The Justice Department decided Friday to adhere to Bush policies of holding "enemy combatants," Dick Cheney's made-up term, indefinitely without charge in Afghanistan. And the Pentagon has just "concluded" that Gitmo does not violate the Geneva Conventions establishing standards of humane treatment for POWs.

Combine that with Obama's expansion of a clandestine robo-war in Pakistan (OK, they're unmanned drone aircraft, but this is a robo-war if I've ever seen one), which as a CIA operation the US government officially will not comment on, and things are not looking good for liberty. Cost to the federal gov't: Whatever it costs to turn Obama from the Dark Side.

2. Beef up manufacturing incentives: It's not news to anyone that the economy of the Bush years, like everything else of the Bush years, was illusory and shite-y. Nor is it news that the decades-old decline in the US's manufacturing capacity accelerated dramatically during the Bush years (sounds like a Born Again version of a TV show, doesn't it?). But it sure is amusing that the economy during that time, measured by the loss of manufacturing capacity, was so garbageaceous that the internationally reviled "Buy American" provision of the stimulus bill looks largely toothless because, well, since nothing is made in the US, the impossibility of following Buy American means it won't be legally binding.

But what's funny today is disastrous tomorrow. Reliance on foreign countries for the things we actually need and use in life (the things waiters, lawyers, nail-salon employees, consultants and plastic surgeons don't make) is the next great bubble that we should see coming. And just as the country conveniently ignored the danger of securitizing subprime mortgages and selling them to Norwegian fishing villages, few today are awake to the threats the decline of manufacturing causes in an economic, fiscal or strategic sense.

So without sounding too much like Lou Dobbs, in order to reclaim economic liberty and the liberty of being able to make geopolitical moves without worrying about how the countries that supply you with your toothbrushes, sneakers and computers will react, Washington should move to bring back it manufacturing base -- and perhaps the middle class with it.

Here are some ways to do it:
a) Offer competitive R&D tax credits. This $7 billion tax credit was actually part of the wildly unpopular TARP of last October. When Congress first introduced R&D tax incentives, it was a global innovator in doing so. In recent years, however, America's R&D tax-credit competitiveness has slipped to 17 out of 30 among OECD countries. And before the TARP re-established tax credits that can be applied to up to 20% of R&D spending, the US Congress in its pre-eminent incompetence had allowed 10 months to pass during which there were no credits at all as congressmen demanded more comprehensive tax legislation before re-introducing the R&D tax.

b) Re-introduce CapEx tax credits. This used to exist but no longer does. Why, we can only guess. But if the US wants a functional (i.e., not based on subprime mortgages and a trashed Wall Street) economy, it needs to re-embrace manufacturing. Doing so means making it attractive for companies to open factories and fill them with machinery.

c) Sponsor manufacturing incubators. As a candidate and president-elect, Barack Obama had two excellent ideas in his economic policy platform: an Advanced Manufacturing Technology Fund that would fund basic research toward manufacturing technologies that would allow US companies to develop and purchase new machinery to make US manufacturing lower-cost and more competitive; and doubling the budget of the Manufacturing Extension Partnership, a public-private venture that was previously successful (before getting slashed by Bush) in identifying cost-cutting strategies and efficiencies for manufacturers and implementing new technologies in factories. His current economic platform, however, is a skeleton sketch for the already-passed stimulus bill. Barack, what gives?
Cost to the federal gov't: $7 billion to double the R&D tax credit, $14 billion for a similar CapEx tax credit, $1 billion for the technoloy fund, and $100 million to beef up the MEP.

3. Embrace the nudge. To provide future generations of Americans with financial liberty, Obama should follow the behavioral economics teachings of Richard Thaler and Cass Sunstein and embrace the nudge. Assuming Obama stops acting like a moron (see above, on "War on Terror") and rediscovers his UChicago self, this is feasible -- after all, Sunstein has just been nominated to oversee nothing less than all regulation in the US, and Thaler is a UChicago colleague and friend of Obama economic adviser Austan Goolsbee. "The nudge" means that an organization helps people make an enlightened decision. In this case, it'd be government.

But what is this exactly? Suffice it to say that Thaler's favorite application of the nudge is the fly decal on the urinals in the Amsterdam airport. Airport officials were worried about unsanitary conditions around the urinals (read: pee everywhere), so they identified the place in the urinal where, when hit with a stream of urine, would minimize spray. They put a fly picture in that spot. Men mosey up the pissoir, unzip and aim for the fake bug. And it's worked, apparently.

Thaler doesn't really want Obama to force airports from Houston to Bangor to clean up their pee puddles (though he probably isn't against it). What he's going for is financial and other higher-stakes nudging. Here's three examples of what that could be -- the start of a long relationship with nudging that Obama would do well to take up, and all for free!

a. 401(k) plans. This is how most of us build our retirement funds these days, and many people don't put enough (or any) into theirs, which means they'll kinda screw with the government and the rest of us taxpayers when they're older because they're lazy today. As Thaler argued, most people simply don't even take the time to sign up for a 401(k) out of sheer lassitude. Since the default option is not to have a 401(k) and you have to actually do something to sign up, Thaler suggests making the default having a 401(k) and letting people opt out. Same with credit cards, mortgages and other sorts of loans, which with their myriad rates, underwriters and suppliers cause much confusion. While government oversees only a small number of 401(k)s (for gov't employees) and loans, this policy could be applied elsewhere, including...

b. Medicare and Medicaid. The gov't health insurance plans are known for confusing lots of people because they offer so many alternative medicines and pharma companies for every ailment. If you have arthritis, Medicare may prompt you to say what medicine you want, giving you a list of 20 pharma suppliers. In the Economist, Thaler suggests taking best practices and "nudging" those on Medicare or Medicaid toward the best, simplest plans and treatments to cut back on confusion, mistakes and cost overruns.

c. Childhood trust funds. As introduced in the UK, these state funds would provide every child with a small fund upon birth to provide all kids with some flexibility when he or she is 18 and the fund has matured. Obama spoke during the campaign of establishing such funds in the US and particularly of linking them to higher education. That would arguably be smarter than the UK policy -- knowing you can only touch your $5K if you go to college would be a potentially effective way to get inner-city kids to take school more seriously.
Cost to the federal gov't: Nothing more than the already-existing bureaucracy to oversee these new policies.

Thursday, February 19, 2009

Recession Special Series: World Hold On (Part 4 of 6)

NEW YORK, New York -- Bush is the dude who made it cool to hate America. A 2007 BBC survey found less than one-third of respondents around the globe said America had a "positive influence" on the world. Ouch. As any dope middle-schooler knows, you don't gotta spend bling to become cool. Here's how America can (maybe try to) get a prom date with a part-time grocery store cashier's wages.

1. Stop treating Israel the way Bahrain treats Michael Jackson. One of the biggest US foreign policy problems can be greatly relieved by doing one simple thing: Realizing that Israel isn't infallible. Although the source of Arab (and Muslim) ire at the US has many complicated reasons, one of the most-cited reasons for hatred of the US is its unflagging support for Israel. Both because the exercise of any logic whatsoever dictates the US shouldn't uncritically support any state, including itself, when it errs; and because tackling a huge foreign policy challenge means building trust with the Muslim world, the United States needs to use its brain in relations with Israel. Israel's one of the US closest allies and, barring some huge change in Israeli policies, that shouldn't change. But when it does something ridiculous, like kill hundreds of Gazans for a few Roman Candles, Congress needs to finally put on its thinking cap. As Gideon Rachman and the Economist have both recently noted in sharp pieces, doing so is the only way to truly protect Israel's interests. Cost to the federal gov't: $0 and all the international good will that comes with it.

2. Chill out on drugs. The world hates our "war on drugs." It wastes billions of taxpayer dollars every year, including on opaque operations across Latin America and elsewhere. It results in billions more (plus lost economic potential) waste on a quarter of a million incarcerations. It pushes users to get their drugs unsafely. It treats adults like half-witted children. But most appallingly, it simply doesn't work (as a blue-ribbon Latin American panelconcluded last week); people from Michael Phelps to Bill Clinton to Barack Obama and scores of other prominent politicians have all used drugs, and you'd be hard-pressed to find a significant percentage of students at the country's universities who have never used an illegal substance. 

In continuing to pursue the "war on drugs" first coined by Richard Nixon but ramped up by Ronald Reagan, the United States angers allies with its single-minded intransigence and generally looks ridiculous when countries from Canada to Holland thrive despite having -- gasp! -- legalized marijuana.  Moreover, Washington fails its citizens in waging a "war on drugs." We force users to jail time or an unnecessary early grave by making substances like marijuana illegal, rather than regulating their use. Nobody says heroin should be illegal, yet; start with a pot pilot program and expand things as makes sense. By legalization coupled with tough regulation, drug use could be restricted to certain, safe areas; it could become a revenue-generating taxed item rather than a drain on resources; and it may well be less attractive to kids. Smoking pot illegally is cool. But paying a 50% tax to smoke something that John Boner(technically) approves of -- way less cool. 

Luckily, there is hope that the Obama administration -- itself headed by a confessed formerpot-smoker and coke-user -- will move toward decriminalization of Class D substances and adopt harm-reduction practices. We'll see. Cost to federal gov't: Up to $1bn needed to embrace "harm-reduction" policies outweighed by tens of billions in dollars in savings on persecuting a wasteful "war" and keeping large numbers of people imprisoned. 

3. Throw weight behind international organizations. The United States emerged victorious from WWII and put in place an international system designed not only to prevent a repeat episode but also to firm up its own geopolitical primacy. The IMF, the World Bank, the WTO, the G-7 (now G-8), NATO, and, most importantly the UN are all organizations that give Washington the top place at the head table. 

Although there is wide consensus that all of these organizations need reform, one of George W. Bush's fundamental stupidities was to neglect them, obviate them, and generally undermine them for being "anti-American." Bush, as everyone knows, was a man too thick to understand where the United States' strategic interests actually lie. President Obama seems aware of this, but it's necessary to hammer home the importance of giving these organizations new life. They create a stability badly needed in the midst of a global economic crisis, growing terrorism problems and myriad issues that will grow more acute while/if India, Brazil and China grow wealthier. 

And they are also a cornerstone of US foreign policy interests that prizes democracy, open markets and transparency. Give the IMF vastly expanded powers to oversee international finance, derivatives, securities, and bailout efforts. It'd be fair to say a mechanism for monitoring and stabilizing global capital markets is badly needed, but it already exists in the IMF. Sharpen its teeth, and let it assume that role. Expand the G-8 to include India, Brazil, China and perhaps Mexico or South Africa. Reinvigorate the WTO's Doha Round by dropping US agricultural subsidies. Give Japan, India, Germany and Brazil Security Council seats in the UN. Give the UN some real teeth by giving it broader powers over climate change and the environment -- a truly global cause that needs some adjudication -- or create a new body to do so. Finally (or firstly), realize this ensures that rising powers become invested stakeholders in a system that benefits the US and the world it created after WWII. Cost to federal gov't: The US is already the largest donor-country to the UN. This change would require only political capital.

Tuesday, February 17, 2009

Recession Special Series: Three Jeers for Bureaucracy (Part 3 of 6)

NEW YORK, New York -- Bureaucracy sucks. So on a day when President Obama signed one of the most expensive single pieces of legislation ever into being, here's three low-cost ways to beat back the maddening bureaucracy horde:

1. Simplify taxes. This sounds obvious. But the man who ultimately oversees the IRS, Treasury Secretary Timothy Geithner, claims he didn't pay tens of thousands of dollars in income taxes in the 1990s because he didn't understand the system. Ditto for other high-profile Obama administration nominees including Tom Daschle and would-be performance tsar Nancy Killefer. Whether or not they were honestly tripped up by the tax system, I can say that I have great difficulty figuring out how to do my taxes, even with TurboTax. I always feel it's a bit of a crapshoot whether I pay correctly. And with an estimated $300 billion not collected in taxes each year, there's no denying that the system is inefficient. 

To maximize tax revenues and minimize confusion, Washington should streamline the way we pay income taxes. That means simplifying the forms by putting them online and allowing taxpayers to electronically connect banking statements to their tax forms, and making it clear exactly what percentage of one's income they should be paying. Other potential solutions merit closer review, including analyses of what marginal rates (without raising taxes) would optimize tax collection revenues. If the government could actually raise more money by charging some people less, it of course should.

2. Simplify bureaucracy for businesses. One of the great strengths of the US economy is its simplicity and fairness for businesses. While starting a business in countries like Russia, Brazil, Italy or India is a mess, it's supposed to be very easy in the US. Relatively speaking, that may be true. But a story about a friend starting a business in New York City destroyed any notions that starting a business in any place in the country is a necessarily easy process. 

When trying to legally incorporate her business last year, my friend had to send -- by post -- a letter to a state office in Albany to request permission to register her company. Once she received -- by post -- permission to do so, she had to send -- by post -- the proposed name of her business. Albany rooted around its files only to tell her weeks later -- by post -- that the name was taken, and that she could kindly inform them -- by post -- of her second choice. The same procedure of rooting around the files and replying by post was repeated. 

For an unimaginative restaurateur named John, you can see how an entrepreneur could waste months or years on shockingly trivial questions: "John's Restaurant." "Taken." "Chez John." "Taken." "John's Pizza." "Taken." "Papa John's Pizza." "Totally taken." "John's Italian Food." "Taken." There's 5 months, and you don't even know what the place will be called.

There is no reason why businesses can't be started online, or why the incorporation process can't be reduced to a single-digit number of simple steps. Granted, business incorporation is a local issue, but if one state (like New York) can lag behind so much, the federal government would do well to set some basic standards. Let states handle the actual admin work, but force them all to adopt extremely simple 10-step (or 9- or 8- or 11-step) procedures so that a business can be incorporated in a week. To any Republicans listening, that as much as tax cuts would be a great boon to the country's would-be entrepreneurs. Cost to the federal gov't: maybe $10 million in training and advertising to make states and citizens aware of the new rules.

3. Privatize infrastructure and other assets that government does not need to manage. We at the Walter Duranty Report have joined the chorus of voices calling for 21st-century infrastructure for America as a way of creating efficiencies in travel and transport, improving the economy and making quality of life better for all of us. But the American Society of Civil Engineers, in a report cited recently by President Obama, says it will take $2.2 trillion to repair the US's crumbling infrastructure. Add to that new infrastructure, including light rail in cities and suburbs, high-speed trains, a new electrical grid for alternative energy along with the turbines and solar panels to power it, new airports and air-control systems, and you have a hefty price tag. 

The US government is facing fiscal catastrophe and will be hard-pressed to afford the necessary investments in infrastructure to keep our economy competitive and us people happy. But by enlisting public-private partnerships to build new infrastructure and hand over existing assets to private managers, government can monetize its assets, making lots of money. Additionally, the timing is right for private-equity funds as well, once they can get some credit. While low-yield infrastructure deals weren't too sexy during the boom years, anything that does, as they do, provide a stable, steady yield will be pretty attractive in the next few years.

The sale of rights to manage (and collect tolls from) Chicago's Skyway toll road netted Illinois $1.8 billion in 2005. Pennsylvania would have benefited to the tune of $12.8 billion last year by leasing its Turnpike to a Spanish toll-road operator. When the state's legislature failed to approve the deal, the offer expired -- and the state now faces a $2 billion+ budget gap and the Turnpike and other roads are in disrepair. Not surprisingly, people are peeved that the state decided to hang on to an asset it doesn't need to manage and is now in the red. The US today is behind most of Europe and Asia in privatizing infrastructure. But to keep government costs down and grow new revenues, privatization should accelerate in the years ahead. Cost to the federal gov't: The government will need to spend billions on infrastructure regardless. Privatization can monetize existing assets and keep costs down on new infrastructure needs going ahead. 

Monday, February 16, 2009

Florida and the Atlantic

NEW YORK, New York -- Unfortunately, this isn't about a Hemingway short story, as the title may imply. It's about Richard Florida, author and urban theorist; and The Atlantic magazine.

Florida's piece "How the Crash Will Reshape America" in this month's Atlantic is well worth reading for two reasons. But before that, it's worth pointing out the flaws both of this piece and of The Atlantic as a whole, of which they are indicative.

The article, like so many The Atlantic now publishes, takes a huge theme and offers it up for some mind-onanism/voodoo thought exercises. Like many of these Atlantic pieces, it takes a trend and projects many, many years into the future to tell us how this trend will permanently make an imprint on history. In Rome, they called this Bitingoffus Moreus Thanus YouCanChewus.

A classic example is the May 2001 cover story "Russia Is Finished." It explained in the broad detail expected of a child using sidewalk chalk why Russia was totally irrelevant and doomed to eternal penurity. As anyone who has read a newspaper in recent years knows, stories about the "resurgent Russia" have flooded the presses since, well, June 2001. (Tayler is now writing for The Atlantic about the resurgence of Russian professional hockey, of all things -- another dubious claim.)

For his part, Florida makes lots of ridiculous generalizations about why he *feels* that New York will benefit from the crisis and Detroit will become a "ghost town." Most of this is based on his definining argument, outlined in his book The Rise of the Creative Class, that "knowledge economy" types are the way of the future -- scientists, singer-songwriters, novelists, and Farrah Fawcett. The dots are connected by the claim that New York has lots of these creative types, while Detroit has few. As Florida tells it, "New York is more of a mecca for fashion designers, musicians, film directors, artists, and -- yes -- psychiatrists than for financial professionals."

Has this man been to New York? The 3,000 hipsters in Williamsburg are neither a large part of New York's population nor of its economy. The economy is based on finance -- every one of New York's 200,000 finance jobs supports 3 other jobs, according to the city's comptroller. And those jobs pay 33% of income in the city. The population, meanwhile, is largely individuals of minimal education and income. Despite the many Wall Street jobs paying on average nearly $400,000, income in New York City is below the national median. And poverty levels are 150% that of the national level. Not to sound like John Rocker, but most of the teenage mothers of 3 I share a subway with every morning are neither stylish, hip, nor especially "creative" as far as I can tell. Florida's "evidence" for his statement is that New York "is home to high-tech companies like Bloomberg, and boasts a thriving Google outpost in its Chelsea neighborhood." Calling Bloomberg, a financial information provider, a high-tech company along the lines of Apple or Dell is absurd. And the Google floor of office space employs about 100 people and is similar to other outposts in Boston and elsewhere. The truth is, New York has very, very few life sciences, engineering, high-tech manufacturing or even non-financial management jobs per capita when compared with San Francisco, Boston, North Carolina, Seattle, Chicago or even Austin or Minneapolis.

The "creative class," titans of commerce, descend on Bedford Ave.

Moreover, Florida's underlying assumption -- that production jobs are dead and the future economy is in film directors and grunge rockbands, and that this is a good and viable thing -- makes me think he's on crack. A typical statement would be this: "Jobs in the 'tangible' sector -- that is, production, construction, extraction and transport -- declined by nearly 1.8 million between December 2007 and November 2008, while those in the intangible sector -- what I canll the 'creative class' of scientists, engineers, managers, and professionals -- increased by more than 500,000."

Yeah, those 500,000 fairy-dust "intangible" jobs make up for the loss of 1.8 million lesser, "tangible" jobs. I guess "tangible" jobs only get 3/5 of a vote. So Florida's claims are delusional and counterproductive. Let's count the problems: Not everyone can be in the "creative class" because scientists and executives are culled from the highest ranks of graduates; the "creative class" exists largely because of capital generated by years of production that is now migrating away as quick as possible (goodbye, career in YouTube filmmaking; hello, RiteAid job!); and if manufacturing is in China, you can be sure management and R&D will be there soon for logistical as well as cost reasons.

More reliable and profitable than the Hipster Sapiens

Because of the fundamental idiocy of Florida's argument and of so much of what The Atlantic prints in its quest for that evasive Best Reporting in Futurology and Speculation Pulitzer, I am skeptical of the parts of his article that make sense and have begun doubting myself and pulling at my hair.

Nonetheless there are two valuable points that make this article worth reading:

1. The spatial economy: Florida raises an interesting point about the relationship between our spatial/geographic existence and economic trends. Before the Long Depression of 1873, the US economy was based on an agricultural-cottage industry model wherein most people lived in rural areas and small mill towns like Lowell, MA, were the centers of industrial production. Afterward, and until the Great Depression, large industrial concerns gained predominance, with mass migration to man factories in cities where people rented space in tenements. But after the Depression and war, the creation of Fannie Mae and use of tax deductions on mortgage payments, which effectively subsidizes home ownership over renting, saw home ownership rise from 44% to 62% between 1940 and 1960 as people fled to the suburbs and affordable homes.

Owning a home, with the government's prodding, came to be a symbol of freedom and end in itself. Moving from dirty cities made sense for residents as well as businesses that could buy land cheaply in the suburbs. And the automobile and Interstate Highway system meant people could easily get to work from any suburban location. And in recent years, President Bush's "ownership society" and homeownership drives by both parties in Congress led to homeownership rates of 70%. It also became the greatest source of both equity and debt for people -- and was directly to blame in building a debt-laden, consumer-based economic order that has proved to be disastrous.

This all seems like an accurate telling of history, and clearly leaves us wondering what, if anything, comes next. Florida argues there will have to be a return to cities to allow for the cross-pollination that fuels the "creative class." I think he's partly right -- cities will increase in importance in part because of young people wanting to be hip and to be among other hip people. Of course, the "creative class"'s engineers aren't the heppest cats out there, and I wonder if anyone's ever told Florida that they really don't feel a need to be near a Nobu. And if there is to be any viable economy, manufacturing will have to return in some form or other to make the products the "creators" dream up, or else there'll just be more capital flight along with RiteAid clerks taking out loans based on their future rent payments or what-have-you in order to buy the imported products the "creators" dreamt up.

The next great spatial/geographic/economic step?

2. Make cities more attractive to power a new economy: Given the crisis in the prevailing model of life/geography/economy that we've adopted since WWII, the other interesting point Florida makes is that government now needs to act to make cities relatively attractive just as at different key moments it acted to make various geographies and spatial arrangements attractive to people. Subsidies for homeownership, he argues, deprive more important programs like alternative energy or medical or research spending from funding. Moreover, the cult of homeownership has left the population less flexible -- a smaller portion of Americans moved last year than at any time since 1940. With economic uncertainty and companies folding and (hopefully) opening at a quickened pace, restoring that mobility will be very crucial.

Moreover, with the popping of the credit bubble, people simply won't be able to afford homes. And with the popping of the home equity lines of credit bubble, they won't be able to fill McMansions with baubles. With the threat of gasoline price volatility affecting people's ability ot commute from one suburb to another, smaller, denser, rented homes will by necessity gain in prominence.

Florida is convinced that an ever-smaller number of mega-cities in the US (and world) will have larger and larger shares of output. I think that's a lot of speculation. But he's right to note that the US has succeeded so well in part because it has traditionally been farsighted enough to invest in new means of transportation that open new sectors of the economy and new geographies to exploit them: from canals that allowed fur and timber from the Old Northwest to reach the Atlantic; to railroads that shipped agricultural products, minerals and manufactured goods West; to the sewers that gave rise to cities; to the Interstate Highway that brought us suburbia -- we have always been progressive in transportation. Until recently.

Obama will have to pick up the ball that he dropped in his attempt to "bipartisanate" with the Republicans. New realities have developed in the environment, society and the economy. While production is a necessary part of a healthy economy, new modes of production will have to come about. And yes, the "creative class" will remain important -- as it always has been. While it'd be nice to think every American will be a researcher, that's not going to happen. But that doesn't mean Florida's focus on cities is wrong -- building links between colleges, hospitals, consumers and business is key; so is living more sustainable, affordable lives. The city will need to shave a few points off the exurban model for this to happen. There will have to be spending, and change. Mortgage subsidies need to end (no, that won't encourage people to buy more of the many homes going unsold now -- but they shouldn't be encouraged to buy them anyway; government needs to plow down the 1.5 million surplus "zombie" homes that were idiotically built in the Sunbelt if there isn't any demand for them). Zoning codes will need to be changed to allow denser, taller development, with mixed-use neighborhoods (i.e., a mix of retail, institutions and homes, as opposed to the cul-de-sac developments of tract housing miles from any retail or services). Transit-oriented hubs (housing development around mass-transit stations). Trains to go between cities. Subways to go within them. And light rail and commuter trains to move from suburb to city or, importantly, suburb to suburb. Key to it all is a variable gas tax to discourage wasteful driving and ensure gas-price stability once the price of a barrel of oil shoots up again, which it will as soon as the economy returns to health. On these points, Florida is dead on.