Somebody really, really doesn't want Elizabeth Warren to run the new Consumer Protection Financial Bureau, or "CFPB," which she first envisioned and proposed. Who? The big banks, for sure, as well as others who don't want their misbehavior brought to light. And Tim Geithner, whose vision of Wall Street and its problems is fundamentally different from Geithner's. There are others, too - ideologues like Megan McArdle of theAtlantic, who has made something of a cottage industry out of attacking Warren on specious grounds.
The President's attempting to split the baby when it comes to appointing Ms. Warren, but the facts and public perception are aligned and present him with a stark reality: He must choose between appointing Ms. Warren or placating the big banks. There is no Third Way. Unfortunately for the President, Elizabeth Warren is a yes or no question.
The ideological opposition to Warren's appointment is usually grounded in the false notion that the relationship between, say, a bank and a lender, is a symmetrical exchange between equals taking place in a mythical "free market." They've failed to heed the lesson taught by Freud in Civilization and its Discontents: "Civilization ... obtains mastery over the individual's dangerous desire for aggression by weakening and disarming it and by setting up an agency within him to watch over it, like a garrison in a conquered city."
An agency outside the individual is necessary to a well-functioning civilization, too, especially when confronting an oligopolistic banking system with a history of fraud and predation.
There have been at least two empty and ineffective lines of attack against Elizabeth Warren: The first is that she's opposed to "financial innovation," and the second is that she lacks the necessary "managerial experience." Ms. McArdle attempts to open a third: That Prof. Warren is a bad scholar. McArdle fails miserably, misquoting or misunderstanding other academic papers and Warren's own work while failing some basic analytical challenges. She does succeed, however, in showing the lengths to which some will go to block this appointment.
Despite the fact that McArdle is " the business and economics editor for The Atlantic," numbers don't seem to be her thing. She infamously miscalculated the effect of repealing Bush's tax cuts for each American by a factor of 10, arriving at $25 instead of $250 per person, and then blithely explained: "The calculator on my computer won't go into the billions, and I truncated incorrectly. The main point stands; even a very optimistic set of assumptions doesn't yield huge net benefit." Actually, $250 for every man, woman, and child in the US - and that's only for the next two years - is serious money. And as for that calculator problem, Ms. McArdle, there's only one word for that: Spreadsheets. You've heard of them, I trust.
Spreadsheets are particularly handy when you're making statements like this: "Does it matter if we have a regulator that can use data consistently?" In this piece McArdle leans on an old Wall StreetJournal anti-tax screed by Todd Wysocki. "More weird metrics for Elizabeth Warren," her headline quavers. McArdle eagerly repeats Wysocki's suggestion that family living expenses are actuallyless than they were in the 1970s. But Wysocki's stacking the deck (and making a completely different point) by using pre-tax rather than after-tax figures. Warren's point is that two-earner families have less disposable income today than one-earner families did in the seventies, even with both adults working.
She's right. I used a spreadsheet (highly recommended) to look at the increases in expenses, using the figures Wysocki (and the McArdle) cites. Here's what I found: Mortgage costs increased from 18% to nearly 20% of after-tax income. Health insurance premiums increased from 3.5% to 3.63%. (That doesn't include increases in out of pocket expenses like copays and deductibles.) And there was a whopping new expense of nearly 20% for day care, which wasn't needed with a one-earner family. Add in car payments and the expenses Wysocki cites went from 39% of after-tax income to 62.3% - which pretty effectively underscores Prof. Warren's point, don't you think?
McArdle saves her real "firepower," such as it is, for a piece she calls "Considering Elizabeth Warren, the Scholar." It's a blend of deception, misdirection, and poor analysis, chock full of comments like this one about Warren't book on two-earner families: "... Warren simply fails to grapple with what her thesis suggests ... Admittedly, I don't quite know what to say, but at least I can acknowledge that it's a pretty powerful problem for the current family model. Warren kind of waves her hands and mumbles about social programs and more supportive work environments. There is no possible solution outside of a more left-wing government."
Got it? McArdle says Warren's book is a failure because a) Warren fails to solve one of the problems she identifies, b) not that McArdle knows what the answer is, but c) "Warren kind of waves her hands" (get me rewrite!) and "d) mumbles about social programs etc." - which means she doespropose solutions, but they're ones that involve e) "more left-wing government." Which McArdle doesn't think is the solution, even though she acknowledges that she doesn't have a solution.
Does it matter if we have a "business and economics editor" who can use data ... and logic ... consistently?
McArdle then suggests that Warren doesn't understand numbers because Warren asserts that (says McArdle) "housing consumption hasn't increased much ... by less than a room per house." McArdle conclues that this is a "twenty percent" increase, given a starting size of five rooms per house, although if consumption's gone up by less than a room per house it's less than twenty percent per house (no calculator needed for that one!) And that's with two people working full-time instead of one.
"The square footage of new homes has increased dramatically since 1960," writes McArdle. But how much of that is McMansions and other high-end homes? She doesn't say, presumably because she doesn't know. Since we're talking about housing consumption among middle- and lower-income working families, a basic understanding of "mean," "median," and "average" would make that kind of information critical to McArdle's argument.
But McArdle's main line of attack is on the papers that Warren has co-authored on medical bankruptcy. Yet at times she's not criticizing the paper itself, but what Warren's co-authors may or may not have told the press. As for the article itself, it's entitled "Illness And Injury AsContributors To Bankruptcy," and comes replete with appropriate cautions like these: " We cannot presume that eliminating the medical antecedents of bankruptcy would have prevented all of the filings we classified as 'medical bankruptcies.'" Yet McArdle repeatedly claims Warren et al. suggested medical bills were the sole cause of these bankruptcies, then beating this nonexistent claim to death.
McArdle also makes the analyst's most basic mistake - fallacy based on anecdote - by repeatedly saying that by definition "Patty Barreiro" is a "medical bankruptcy" case. Barreiro is the wife of Edmund Andrews, the financial writer who wrote about their own bankruptcy. She's become a bete noir for all of those who believe that bankruptcy is most commonly a character defect, not an unfortunate combination of circumstances. McArdle's fixation on her isn't just bizarre. It's also bad analysis. The definition Warren et al. use for "medical bankruptcy" is $5,000 or 10% of income, and those are appropriately high figures for anyone familiar with the real world.
For those who argue that Warren lacks managerial experience, I have three words: "Chief Administrative Officer." Warren understands the mission better than anyone, and she'll be able to hire someone to handle the logistics. And, as for her alleged hostility to "financial innovation," there's no sign of that. Some "financial innovations" destroyed the economy, and she's right to be a little "hostile" to them.
Elizabeth Warren's view of what needs to be done to fix Wall Street is fundamentally different from Tim Geithner's or Larry Summers'. Her view is correct - and it's also more popular politically. The President's attempt at a "nuanced" solution - that Elizabeth Warren will "play a role" even if she's not appointed to lead CFPB - is a nonstarter. The banks, and the public, would see that decision for what it is: A surrender to financial interests at the expense of the American consumer.
The Megan McArdles of this world will wail and gnash their teeth If Elizabeth Warren is appointed, but that doesn't matter. What does matter is that if Warren doesn't run CFPB, the same regulators who mismanaged the economy in general - and consumer protection in particular - will still have the upper hand. Any answer but "yes" to the Warren question would be a disaster, both on its merits and politically. You don't need a spreadsheet to figure that out.
I've been named an "Affiliate Scholar" at the Institute for Ethics and Emerging Technologies, so I thought I'd think about where I fit in the Humanist/Transhumanist matrix. Then I thought I'd draw a Venn diagram or two.
Somewhere along the line we've developed the habit of announcing that, thanks to new technology, we're forever on the verge of revolutionizing what it means to be human. Maybe it came in with the Industrial Revolution and our parallel discovery of modern medical science. Whatever the source, consider this 1933 quote from British engineer Allan Young, in his book Forward From Chaos. As Jo-Anne Pemberton noted in her book Global Metaphors, Young heralded the dawn of what he called the 'Electric-Machine-Power Age' as follows:
"The advent of radio art has provided a revolutionary change in the method and rate of thought dissemination. The human voice is now able to encircle the globe in the twinkling of an eye ... It is thus possible for me to project my thoughts instantly into the mind of someone living on the opposite side of the planet ..."
"The evolution of the radio machine ... seems to be one of the very biggest happenings in our civilization ... I stresss the importance of the great acceleration we are now witnessing in the whole process of translating thought into action ..."
To which the modern mind can only add, "Really? From radio?" If he were alive today, Allan Young would probably be a Transhumanist like most of my friends at the IEET. In 1933, as in the decades before and since, people have been announcing that technology is about to radically alter the scope, power, and nature of human existence.
And the funny thing is, then it actually does. Humanity was transformed by radio - and by what Young called "the aeroplane." By the time these transformations became ubiquitious, however, they had also become ordinary - even boring. The truth is that we've been transforming our minds and our bodies for generations. Take life extension, a favorite topic for Transhumanists: Life expectancy increased from 18 years in the Bronze Age to 25 years in Colonial America (although infant mortality affected the numbers significantly), and it approaches 80 years in that country today.Medicine and public health lowered infant mortality in London from nearly 75% before the Industrial Revolution to 31% afterward[i].But these advances have been unequal.Life expectancy in the poverty-stricken Calton area of Glasgow, for example, is 8 years less than in the Lenzie neighborhood less than ten miles away.[ii]
Somebody already engineered the human lifespan - but they did it with the (often unequal) distribution of resources like food, shelter, disease and accident prevention, and medical care.
The "teachable moment" cliché may be overused, as Jason Linkins observed the other day, but what the White House really needed this week was a learnable moment. The Administration and other leading Democrats had an opportunity this week to understand the nature of the opposition they face. The President's...
This week's big story is that a faker scammed the media, trashing an innocent USDA employee's career in order to push a false right-wing narrative. But another scam's underway too, and it's targeting Social Security and other entitlement programs. As Republicans (and at least one Democrat) pushed budget-busting...
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Fareed Zakaria is an interesting writer who says some sensible things, as when he called the intensity of the war in Afghanistan "disproportionate" to the threat. But he also reflects the biases and distorted perceptions of a punditocratic subculture that continues to paint average citizens as reckless children and business executives as Delphic sages. Zakaria all but blamed the Great Recession ongreedy consumers a while back: "If we wanted a bigger house, a better TV or a faster car, and we didn't actually have the money to pay for it, no problem. We put it on a credit card, took out a massive mortgage and financed our fantasies."
Now he says that corporations are sitting on $1.8 trillion in unused cash, money that could stimulate the economy, in part because business leaders are frightened of the President. How does he know? He says he spoke to a "series" of non-randomly-selected CEOs (he doesn't say how many) and, like hive-mind children in a Village of the Damned sequel, they spoke the same words and thought the same thoughts: "They still admire him," Zakaria writes, but they "all think that he is, at his core, anti-business." He is not of our kind ...
The Hive Mind unanimity of these proclamations are cause for skepticism in themselves. And I haven't read Zakaria's interview transcripts, but trust me: If these CEOs could safely make money by spending that cash today, Leon Trotsky could be in the White House painting it red and they'd still get busy writing checks.
The Great Recession was created in boardrooms and not living rooms. Bankers' decisions are tying these non-bank CEOs' hands. And if you take the "greedy consumer" idea to its logical conclusion we would be a society that imprison the marks and bails out the con men.
Oh, wait ...
Zakaria insists, based on his secret conversations with CEOs "who did not want to be quoted by name," that they're not just hoarding cash because of economic uncertainty (although he acknowledges that as the "primary cause"). What makes it worse, he says, is that they all think Obama's too much of a lefty.
Zakaria also adds that while "there is a strong case" (albeit a lefty one) for "a temporary and targeted stimulus," it looks "politically impossible." If enough people in his position repeat that idea, of course, it becomes a self-fulfilling prophecy. And if a stimulus is proclaimed impossible and these CEOs are sitting only the only remaining big chunk of cash, what's the only remaining conclusion? We better give them what they want.
Zakaria's CEOs chant in unison about the evils of regulation, but for a hive mind they're surprisingly vague on specifics. Zakaria mentions health reform, although essentially all of the "top 500" nonfinancial companies already provide coverage; cap-and-trade, whose future is uncertain; and financial reform, which is likely to help these nonfinancial companies obtain credit (while retaining their access to the kinds of derivatives they use for risk management purposes.)
The CEOs are uniformly polite, as such collective entities usually are in sci-fi movies. "Many ... voted for Barack Obama." "They still admire him." It's the "politics," and their (eerily unanimous) perception that he's "anti-business," that adds an additional brake on their desire to spend. Here's the bottom line: Any executive of a publicly-traded company who failed to spend the money needed to serve a ready-to-buy customer base would be violating her or his duty to stockholders and would probably be fired immediately.
Their problem isn't politics -- it's customers. As in, they don't have any.
Business isn't spending because consumers aren't spending. Consumer expenditures are flat and savings rates are up. Households have the same concerns about the economy that CEOs have, and they're reacting the same way: by spending less and hoarding cash. Granted, they don't have to answer phone calls from Fareed Zakaria while they're doing it, which simplifies their day somewhat, but otherwise the reaction is strikingly similar.
Greedy consumers: Where are they when you really need 'em?
Then there are the problems that banks have created for these CEOs. (Remember, they run non-financial corporations.) One of their greatest problems is that they can't trust their banks to be there when they need them. As theWall Street Journalreported: " In the darkest days of late 2008, even large companies faced the threat that they wouldn't be able to do the everyday, short-term borrowing needed to make payrolls and purchase inventory." One of the reasons companies keep cash on hand is out of fear that could happen again. And, as we've discussed before, banks have slashed lending to the small businesses that represent a large customer base for these companies.
Banks aren't lending to consumers, either, or they're lending at inflated rates. And thanks in part to the "Greedy Consumer" folktale, there is no political will to pressure banks to write off some of the inflated value of the mortgages on their books. That would free up more money for other spending while potentially reducing the foreclosure rate, and it would distribute the "moral hazard" of greedy behavior a little more fairly. But we're inevitably going to be told it's "politically impossible."
To be fair, Zakaria never specifically endorses the purported views of these CEOs as his own. He just lets the impression drift into the ether: An anti-business Obama is frustrating business and stifling growth. His piece is especially frustrating because all the right information and conclusions are there. But like a Blair Witch inscription or a backward-looped message on a rock song, the message has to be decoded and the real information extracted: "There is a strong case for a temporary and targeted government stimulus." "Big government spending can only be a bridge ..." (Nobody denies that.) "Economic uncertainty was the primary cause of (business) caution."
The commentariat subculture which sees these facts yet still repeats the myths does so, I suspect, because it is determined to be bravely "centrist" -- no matter where the facts may lead.
Make no mistake. Zakaria is absolutely right when he says that "Obama needs to outline a growth and competitiveness agenda that is compelling to the (nonfinancial) business community." But that agenda must include returning the financial business community to sound and productive lending practices. It must give customers the wherewithal needed to buy the products these businesses make -- which means jobs. It must rebuild our infrastructure. Then these businesses will undoubtedly free up more of their $1.8 trillion, knowing that it can be used to create products for a market that's able to buy them. Which all sounds great, except that according to Fareed Zakaria it's "politically impossible."
Apparently there's more than one Hive Mind on the loose these days.
i thought they were wind chimes in the streets at night
They say they love our country, but you cannot love the nation if you don't love the land. If you desecrate the ground we walk upon you don't love the land. If you pursue your own interests and ignore the fate of the planet, you don't love the land. If you allow those who walked these lands before us to remain in poverty, you don't love the land.
with my young eyes i looked to the east and the distant ringing of ghost ponies rose from the ground
I have quoted from d. a. levy's poem "the bells of the Cherokee ponies" before. levy was a Beat-era poet from Cleveland. He went to San Francisco, the Beat epicenter, but returned to Cleveland. He had a sense of place. He was rooted in the American soil, in the soil under the streets and sidewalks of Cleveland. There he lived and there he died.
i looked to the east seeking buddhas to justify those bells weeping in the darkness
Why quote an obscure and long-dead poet on the Fourth of July? Isn't this a time for brass bands and fireworks? Yes, it is. But somewhere in the rockets' red glare, long-dead ponies still run.
The Underground Horses are rising
Utica NY was a gritty, dirty place to be born. It was so corrupt that Life Magazine named it "Sin City USA" when I was nine years old. We would watch the fireworks from a small park near our house. Railroad tracks ran through the park. I would look down those straight, rusted tracks as far as I could see - probably not even past the outskirts of town - and imagine I was seeing Nebraska, Indiana, and all the other places I had heard of and never seen.
Utica was in the Mohawk Valley, named for the tribe that once lived there. The Mohawks were not always a peaceful people - blood is in all of our histories - but they were part of the Iroquois Confederacy. The five nations of the confederacy had negotiated peace, developed a common currency, and created a Constitution before they ever came into contact with Europeans. We learned that in school.
We also learned that they lost their land. Did we ever dream in long-ago Utica that one day we might lose ours?
Cherokee, Delaware, Huron we will return your land to you
We can still return the land to its rightful owners in a way - by recognizing its value, and by remembering its previous inhabitants. They are our ancestors now, too. We're joined forever by the common covenant of this land.
the young horses will return your land to you to purify the land with their tears
Environmental standards have been "relaxed" (what a bucolic word for an act of violation!) all over this country. Our greed and consumption is threatening the very planet we depend on for survival. People are barely beginning to awaken to the urgency of our situation. This is being done by political and business leaders (is there a difference anymore?) who are already buying their retirement homes in Dubai.
d.a. levy is gone, but the Hopi elders are still here. So are Gary Snyder, Bill McKibben, Al Gore, and thousands of other "environmentalists" who fight for our very survival. So are the spiritual leaders who remind us of the interconnectedness of life. Does that sound New-Agey to you? It won't seventy-five years from now, if you're still around to feel the heat and observe the suffering.
The Underground Horses are rising to tell their fathers
"in the streets at night the bells of Cherokee ponies are weeping."
I'm going to a potluck today. There I'll talk with old friends and watch fireworks with my Godchildren. I'm just another American who loves his country and his Constitution. I'll be eating potato chips and watching the rockets with the crowds. But I'll try to remember that I'm standing on American land, native land, the same land our ancestors walked.
There's a new conventional wisdom forming in Washington, DC this July 4th, one that transcends party lines and the usual classifications of "left" and "right" as they're understood in that city. It's only being recognized now, because it deals with a number of different economic issues, but the underlying theme is the same: The American dream of financial independence and security is gone. The sooner you accept that and raise the white flag the easier it will be, so stop struggling.
Theyre saying the ideal of "life, liberty, and the pursuit of happiness" is dead. Deal with it.
Why, there hasn't been this much unanimity among Washington elites since - well, since they "knew" there were weapons of mass destruction in Iraq. Here's what they "know" now: The United States is doomed to a future of staggeringly high unemployment. Social Security is part of our national deficit and, like that notorious village in Vietnam, we need to destroy it in order to save it. And we must face an open-ended future where the public treasury and personal security are held hostage to the whims of a few "too big to fail" banks.
Some of these "conventional wisdoms" have been around for years, while others are forming as we speak. Most of them began as politically partisan ideas, but have only been Sacred Truths for a few months. Yet they're already acquiring the false gravitas of ancient received wisdoms. What's the common thread behind these three ideas? They provide a rationale for not resisting the enormous political influence of corporations and wealthy Americans.
The last few days - ironically, those that led up to our celebration of Independence - saw a sudden rash of white-flag declarations. This latest wave of surrender demands involves joblessness. First Digby noted that Jonathan Alter said the following in an interview with Chris Hayes on the "Ed Show" : "We are going to have to accustom ourselves to some higher than, you know, old normal percentage of unemployment. You know, I don't know whether it's seven percent, six percent, whatever."
Before the viewer could utter a Scooby Doo "ruh-roh," The New Republic published a piece by William Galson called "America Will Never Be the Same." In reviewing a Pew study's findings on the Great Recession's impact, Galston writes: "... (W)e do have reason to believe that ... we're in for a slow recovery and historically high levels of unemployment for much of this decade." And, as if on cue, CNN Money published an piece called "7.9 million jobs lost - many forever."
In an article entitled "Spend or Scrimp? Two Sides in a White House Debate," we learned this week that those in the White House who are "focused on deficits - or at least on positioning Mr. Obama to show his concern -- are his chief strategist, David Axelrod, other political advisers and Rahm Emanuel, the White House chief of staff, according to Democrats."
Axelrod says, "it's my job to report what the public mood is," as if the President were merely a passive observer of public opinion and not a potential shaper. Adds Axelrod, "I've made the point that as a matter of policy and a matter of politics that we need to focus on (deficits)." And what better way to erode resistance to that approach than by building a consensus among friendly liberals? The new consensus view: It's impossible to provide the sorts of stimulus that would be needed to address high unemployment, so "we" (by which is meant the jobless - not "we" at all) have to accept it.
Am I suggesting a White House-led conspiracy to undermine stimulus thinking? No. The White House understands that some stimulus will be needed. As with most such consensus thinking, "a conspiracy of shared values" is more than enough. And, as with all Washington trends, a "consensus" is formed by persuading liberals to adopt right-wing ideas, not the other way around. "We'd all love to bring unemployment down," the thinking goes, "but it's just not going to happen."
Let's be clear: Every American who is condemned to long-term unemployment has been shut out of the American dream. When DC insiders encourage us to accept that fixing the problem is too politically challenging, they're telling us that we as a nation must accept profound economic misery for millions of our fellow citizens.
They're also telling us to accept a more racially-divided nation, with a race-based gap in unemployment so severe that it could rightfully be called "jobs apartheid." When African American unemployment is virtually double that of whites and we're asked to accept that structural unemployment is here to stay, we're being told that Martin Luther King's dream of economic equality between the races is one we can no longer afford.
Bear in mind, there has been no NAFTA-like change in the US job situation to explain these new unemployment figures. The Great Recession, not outsourcing, took this last wave of jobs. Why can't we work to rebuild our economy on a firmer foundation than the housing bubble and get many of those jobs back? The answer comes, in large part, because of fear of what Paul Krugman calls the "invisible bond vigilantes." The fear - or the stated fear - is these bogeymen will make sure that bond markets don't invest in the United States unless we slash government spending. (As Krugman points out, the "wisdom of the market" says they like our government's actions just fine, but that's apparently beside the point.)
Cui bono - who benefits? One can only speculate. If a government that has spent trillions to rescue the banking industry now spends billions to get people back to work, that could result in a drive for greater taxation of those who benefited from the bank bailout. The same with the new "bipartisan" assault on Social Security. Social Security's minor long-term financial problems could easily be fixed by raising the contribution levels. But that would render it politically immune to being used as a piggy bank for fixing tax-cut-driven deficits. They want to use it as a regressive tax on middle-class earnings instead. What's more, cuts to Social Security would drive more people to invest their savings with the very banks that created that deficit - a double win for Wall Street.
Banking interests are one reason there's been little support so far for economist Robert H. Frank's proposal - a program that restructures consumer debt through direct Federal loans to credit card holders buried by what they owe. Morally, it's no different than the bank bailout. The benefits for the overall economy (in increased spending) would be immediate and real. But the right people don't benefit so it hasn't become part of the Washington consensus.
Americans need jobs, and jobs would benefit the economy. Social Security is one of the most stable government programs we have. And Federal actions should benefit the entire economy and its participants, not just a few wealthy bankers. These are the kinds of truths our nation's founders once called "self-evident."
In the halls of government nowadays, unfortunately, self-evident truths aren't what they used to be.