The Power and the Money

National health care, updated

  Megan McArdle, whom I respect, linked to a piece by Glenn Reynolds that basically says that his wife and father would be dead while his daughter and mother would have a much-impaired quality of life under socialized medicine.

But I have a question.  Two, actually.

(1)  The treatments for Reynolds' mother (hip replacement) and father (radioactive prostate cancer implants) were developed for a patient pool that is mostly subject to Medicare.  Which is socialized medicine by most definitions.  Why doesn't that fact show that the argument is fallacious?

(2)  If other countries generally force healthy young women to die or live impaired lives, why doesn't that show up in any of the comparative quality-of-life studies?

A third, fourth, and fifth might be:  Does Ms. McArdle really believe this argument?  If so, why?  And what does it have to do with any of the actual health care reforms that are on the table?

Meanwhile, Matt Yglesias points out why I have trouble staying friends with doctrinnaire libertarians.  This one's for you, Guy.

UPDATE:  Matt Miller has an interesting column in today's Financial Times.  He points out that save for the public option, the current reform plan essentially extends coverage using a basic template designed by Mitt Romney in Massachusetts.  In addition, one of the financing plans on the table (not my preferred one, I must admit, nor the President's) was basically proposed by John McCain.  Finally, the eye-popping cost is propaganda, caused by people's emotional reaction to the t-word; the right way to think about the cost is that it is 0.5% of GDP or 3% of total healthcare spending.  In short, the way to a compromise that should attract lots of Republican votes is obvious.

But I will add that since we aren't going to get any Republican votes, I will be very annoyed at my party and President should we get a bill that does not include a public option and that is not financed by a surtax on high earners like, uh ... really? ... my wife and me.

Great debate attempt #5

  Childless households making $200,000 a year in expensive Northeastern cities are undertaxed, and the acquaintance mentioned here gets no sympathy from me.  He is getting all bent out of shape about a tax rise of a couple hundred dollars:  4 percent of his income above $200,000.  Maybe.  And I lived in New York, I have friends living in New York, and no, it isn't that much more incomprehensibly expensive than Boston. 

My wife and I are in that category.  We are undertaxed. 

Sometimes the attitudes of my fellow citizens can be very depressing.

Finns marry other Finns? Uh, I guess so.

  Hmm.  I am somewhat ashamed to live in a country where the below is not a firing offense at a major television news network.  No matter how dumb the show may be.  I mean, in a decent country shouldn’t displays like the one below cost you so many viewers that the network simply has to let you go?  For the bottom line, of course.  (Hat tip:  Salon.) 

Apparently not in America.  That said, my wife doesn’t think Brian Kilmeade is being serious.  “He looks like he’s African, Italian, Moroccan, totally mixed up,” she says.  “Clearly a joke.”

Uh, I hope so. 

The great recession

  This weekend, my wife and I made our way up to Fort Lauderdale Executive Airport to grab a helicopter ride above ground zero for the real estate collapse.  It isn't just in marginal neighborhoods, as some observers have suggested.  Spot the foreclosure in this photograph.

In fact, if you look closely, you can spot a second distressed property in the picture. 

Nor is it only individual single-family houses.  South Florida is dotted with what Mexicans used to call “obras negras”:  stopped construction projects left to rot.  And in the South Florida humidity, they will rot:  unsealed foundations will flood and unprotected fixtures will erode.  They are calling them “ghost towers” down here. 

It was a Sunday, but note the lack of construction machinery around the site.

In fact, readers of this blog have already had contact with what became a pair of ghost towers.  Last year, we spotted my brother working on a high-rise located on the border of the Everglades, far out on the urban edge, near nothing but a ginormous shopping mall.  Now it is an infamously distressed complex in which, as far as the local papers can figure, no one lives.

Of course, the recession is also visible at ground level:

I want one!

  Yes, it is an environmental atrocity.  Sure, the purported safety of all the extra power exists only in my imagination.  Indeed, while quite comfortable, the cupholders are in a weird place and the dashboard looks kind of cheap.  And it's noisy as hell.

But it is fun to drive, and that growl makes up for any and all inadequacies you might have.  Would it really be a problem to get a child-safety-seat in and out of the back?  The front seats fold way forward.  Hell, people, I'm under forty, recently married, and we don't drive enough for it to cause an appreciable increase in our gasoline consumption over, say, the Fusion hybrid or a Prius.  And it isn't a convertible.  Plus, my wife loved driving it around Maine last weekend.  So it wouldn't be that pathetic.  Would it?

I really am wondering about those child safety seats in a two-seater.  Hmm.

The importance of form

  The heat is turning up on Honduras’s new government.  Ambassadors are leaving, the borders are closed, World Bank money is gone, as are the U.S. military’s training programs.  Meanwhile, the hemisphere is united against the new government.

There would seem to be three lessons here.  (Note my weasel phrasing!  It isn’t accidental, as all three regular readers know by now.)  First, form matters.  Steven Taylor alluded to this point, and I think he’s correct.  Now, I don’t think that he’s correct about the underlying legality.  The Honduran constitution makes no provision for calling a second constitutional convention.  The Supreme Court, therefore, was completely within reason to tell Zelaya to knock it off with the referendum. 

Nor (given the facts so far) am I sure that Taylor is right as a matter of domestic political strategy.  If it was simply a matter of domestic calculus, a Supreme Court order followed by a quick bundling of the president out of the country might have been the best way to avoid worse conflict.

But Professor Taylor is completely right that hustling the President out of bed at 3am looks terrible. In retrospect, it was certain to produce a bad international reaction, even though I wouldn’t’ve predicted how bad beforehand.  (Hey, I was wrong.  Yes Bernard, I’ll get to Ecuador one of these days.) 

What the Honduran military and Supreme Court and I missed was the reverse Chávez effect.  Once Hugo (inevitably) started tub-thumping and threatening war, the best way for the United States to undercut him was to walk back its initial position and bandwagon on the international opprobrium.  And man, has the United States been successful.  Nobody seems to note that Washington was behind the international curve. 

In short, Honduras has gotten itself into a pickle.  The Supreme Court and military should have thought more about the politics.  The confused messages about resignations and drug-dealing and all the rest did not help; it was propaganda aimed at five-year olds, people who watch Glen Beck, not serious observers.  Now, it would have been damned risky for the Court to issue an order removing and arresting the President, but it would have been much better to have done that (preferably with a concurring Congressional vote ) and hope that Zelaya would be a little slow in mobilizing support, giving you time to bundle him off to Costa Rica after having crossed all the constitutional T’s ... or at least having seemed to. 

Form matters, even when the substance is uncertain and impossible to determine.  Perhaps especially so.  And that goes double in a hemisphere where electoral democracy enjoys the contradictory status of being simultaneously hegemonic and fragile. 

A lack of leverage

  The U.S. really doesn't give a whole lot of aid to Honduras.  Look at the figures, including military aid, from the USAID Greenbook:

That isn't a whole lot of leverage.  Of course, small amounts of aid may make it more likely that they'll be yanked, since such yanking won't wreck the national economy.  But that is the problem with using aid as an instrument of empire.  Contingent bribes — e.g., do good and we will give you more money — are fairly easy to administer.  Contingent threats — do what we want or the cookie jar will be taken away — are a lot harder.  You need to be giving enough money for the recipient to care, but not so much that withdrawing it would cause drastic adjustments that would reverberate back upon the donor. 

To put the above figures in perspective, remittances from the U.S. averaged 16% of GDP over the same period, peaking at 21% in 2006. 

In short, the U.S. didn't have a whole lot of leverage to keep the military-Court combo from ousting President Zelaya, even if the Obama Administration had wanted to.

(Say, should I add a “Honduras” tag to the blog?) 

A dog not barking in Honduras

  The fact that none of my posts about the Honduran coup carry the “Empire” tag is remarkable, considering the history of U.S. involvement in Latin American politics.  Even more remarkable is the idea that should events evolve in such a way as to warrant such a tag (which I consider unlikely), it will probably be either due to either direct meddling by the Alba countries or pressure from Unasur/Río Group/Brazil, not the interference of the United States.  That is quite a shift. 

Of course, the U.S. is still quite hip-joined to Honduras.  There is Soto Cano Air Base.  There is CAFTA.  There is the Millenium Challenge Account.  There are remittances.  Honduras isn’t dollarized, but it is a great case for dollarization, what with remittances above 14% of GDP, a fixed exchange rate and about 24% of all loans denominated in U.S. currency.  And we train its military. 

But Washington isn't leading events.  Sure, maybe it could, but it’s resisting temptation.  (Thank God!)  And that is a very big change. 

More Doug in Senegal, and why you shouldn’t worry about the deficit

  It seems as though I start a lot of posts with the words “it seems.”  I will try to rectify this in the future. 

Ditto, “so,” a verbal tic I blame on my unbridled admiration for Doug Muir, who has, by the way, written a little more about Senegal.  He tells us about the Mourides, a powerful Muslim sect of which I am embarrassed to say I knew nothing.  He bemoans the crappy state of Dakar’s airport, and receives in turn a useful warning from Bernard.  Finally, he wraps his trip with a discussion of W, railroads, France, birds, the CFA franc (e.g., France yet again, although he doesn’t say so), the weather, the expats, and the clothes.  I am pretending not to be annoyed at not getting a shout-out on the France tip, which means that pique is not the reason why I am not explaining the story of the Senegalese railroads under French colonial rule. 

Which brings us to the U.S. federal deficit.  You hear a lot of worring about how interest rates are going to rise from all this wild borrowing.  Where will the money come from?  We are doomed, doomed!!  No links, because I actually like and respect many of the people doing the worrying.  But they need not.

I just had a colleague in my office with the latest BEA numbers, worrying about just that.   Where will the money come from?  So I pulled out a spreadsheet and showed him.  In the first quarter of 2009, annualized personal savings came to $620 billion, or 5.7% of personal income.  Total savings (again, annualized) came to $1,273 billion, or 9.1% of GDP. 

Personal savings is only going up.  If we assume that nominal GDP growth is flat in 2010 (meaning, most likely, that real GDP keeps falling), a rise in the personal savings rate to 10% will produce $468 billion of additional savings.  Retained earning are also likely to rise, say from 4.6% to 5.0% of GDP.  That’s another $47 billion.  Total of $515 billion in new savings ... just as the federal deficit is projected to fall by $393 billion.  Plenty of wiggle room should private investment rise (one can hope) or the current account deficit fall (which seems likely).  A rise in real interest rates does not seem like something we need to worry about.

Rather, what we need to worry about is a continuing shortfall in demand.  What if Americans don’t substitute domestic consumption for imports?  Final demand will fall.  What if domestic investment doesn’t quickly rebound?  (It was $2 trillion in 2008, a full 25% higher than in the beginning of 2009.)  Final demand will fall.  In that situation, we might be wishing for another round of stimulus, rather than worrying about the deficit. 

UPDATE:  The May numbers just came out from the BEA.  Looks like the personal savings rate hit 6.9% that month.  We are on track to exceed 10 percent in 2009, and in my opinion the country will permanently return to 1970s savings levels.  That said, past performance does not always predict future results.  Any counterarguments?

A real anti-imperial triumph

  It seems as though the Argentine ambassador in France will no longer need to pay embassy expenses out of his own pocket.  A French judge lifted the freeze imposed on April 3rd.  More importantly, a German judge released the funds that German companies owed Argentine tax authorities.  Interestingly, Judge Wölber did not base his decision on sovereign immunity.  Rather, he ruled that since the tax payments were owed by the companies’ Argentine operations, German courts had no authority.  It remains to be seen if this precedent will be followed by other European courts, but the Argentine government is optimistic.

Interestingly, U.S. courts have taken the same position.  In 1999, the New York-based Leucadia National Corporation sued Nicaragua over $26 million in defaulted debt that it had purchased for $1.14 million.  A New York court granted the company $87 million.  (No, I don’t know why.)  It tried to collect by attaching Nicaragua’s share of the ticket and landing fees paid by U.S.-based airlines that flew to that country.  U.S. courts, however, refused to uphold the judgment.  But don’t cry for Leucadia.  Eventually the World Bank paid off the debt at 4.5¢ on the dollar, including accrued interest.  By my calculations, Leucadia received about $7.8 million, for a nice return of 584%. 

I am increasingly unsympathetic to Argentina.  But I am also relatively unsympathetic to the vulture funds that try to use the judicial system to impose sanctions on defaulting governments.  I may change that position if we start seeing more ploys like President Correa’s brilliant gamble, but that’s still a hypothetical fear, not a real one. 

P.S.  It seems like I was wrong about Ecuador.  I’ll discuss why, but only if there’s interest.  No reason to admit error if nobody cares ...

Sometimes, libertarians have a point

  The New York Times today published a story on how foreclosures in New England are disproportionately hitting old triple-deckers.  “Triple-deckers” are squat three-story buildings common to the region (pictured below).  Most of them are condominiums these days, but many are owned by the resident of one of the units, who rents out the other two, or by absentee landlords. 

Unfortunately, the author didn't limit herself to simply stating that the foreclosures have disproportionately hit triple-deckers.  Instead, she decided to write a fact-free piece that implies, without any hard evidence, that the housing collapse is threatening to destroy the triple-decker, and with it, tear apart the urban fabric of New England.  What percentage of triple-deckers have are foreclosed?  We don't know.  What percentage of foreclosed triple-deckers are vacant?  We don't know.  We do hear stories about abandoned lots in New Bedford ... but New Bedford has been declining for decades.  Has the recent housing bubble really worsened things?  We have no idea.  It is a remarkably badly-written article. 

But there is one thing mentioned which, if true, is completely insane: 

Modern zoning laws, Ms. Friedman said, would never allow three units on such small lots.  “If we have four three-deckers on 12,000 square feet and could only get two on that amount of land now,” Ms. Friedman said, “we are losing six units. So it’s very important to us to sustain them.”

Can that be serious?  Boston zoning laws require less density than currently exists?  That is flat-out crazy.  I am not opposed to all zoning laws, of course.  I would hate to have somebody block out my ability to see the sun, for example.  But that is just egregious.  Of course, it’s only a problem if there is in fact demand for housing in the parts of Boston where buildings are being abandoned ... so I doubt the premise.  Ms. Friedman is probably worried about the housing for other reasons. 

That said, the general point holds.  Zoning is very costly in this country.  I do not approve. 

Natural gas, energy security, and silly reporting

  Earlier this week, I learned about this report from a Chilean energy executive, which was officially released yesterday.  It seems as though the USA has much much more natural gas than anyone thought.  The increase is due to shale gas. 

Shale gas is found very deep, and it is rather expensive to extract.  Deep wells need to be drilled, the rock fractured, and horizontal wells dug to extract the gas.  A 2007 study found that even the cheapest shale gas deposits aren't viable at a price below $5.40 per million BTU (MMBTU).*

Which makes the market's reaction a little odd.  More accurately, it makes the reporting about the market reaction seem very silly.  Gas prices have been below the level that would make shale gas viable since the beginning of 2009.  So why attribute a tiny little drop to the report's release, especially since (a) the findings have been known to market insiders for some time, and (b) the price is currently below the level that would make shale gas viable. 

That said, the news is important.  U.S. reserves have risen from 79 years of consumption, up from 57.  More importantly, it means that annual production can (in theory) be upped.  That means that none of the LNG terminals approved by various U.S. agencies will be built anytime soon.  American natural gas prices will rise, but not as much as they might, and the U.S. will be one step closer to strong energy security.

Unless it won't be.  Because, well, why did prices spike in the first place?  Gas and oil must be better substitutes at the margin than people think, and that means that gas prices will be subject to pressure from oil shocks for some time to come. 

* Michael Godec, Tyler Van Leeuwen, and Vello A. Kuuskraa, “Rising drilling, stimulation costs pressure economics,” Oil & Gas Journal, 15 Oct. 2007: pp.45-51.  

Brooks on assimilation

  Gah.  I wrote the below two days ago, but stuck it in “drafts” instead of publishing it:

David Brooks published a column today about Sonia Sotomayor.  The first paragraph is interesting.  “Sonia Sotomayor had bad timing. If she’d entered college in the late-1950s or early-1960s, she would have been surrounded by an ethos that encouraged smart young ethnic kids to assimilate. If she’d entered Princeton and Yale in the 1980s, her ethnicity and gender would have been mildly interesting traits among the many she might possibly possess.”

The last sentence is clearly true.  In a striking coincidence, my wife has several dear friends from Yale who like Sotomayor spent their teenage years in Co-op City after humbler origins.  Identity politics wasn't and isn't particularly salient.  And the first sentence has a point.  The 1970s were ground zero for identity politics in the United States.  I view 1970s-style identity politics as a phase both good and inevitable, but it made for an atmosphere that seemed odd at the time (to white guys) and looks a little strange in retrospect (to everyone).  I cannot more strongly recommend Nixonland to get some of the flavor of the time. 

But the middle sentence is wrong.  First, it assumes that Sotomayor were male.  Second, a hypothetical male Sotomayor would not have gotten into those schools at that time.  Third, and perhaps most importantly, “smart young ethnic kids” did not assimilate at those schools.  Of course, you needed to fit in to get in at all, but that's pretty much still true.  And some did let go their heritage, of course, and I don't think there was anything wrong with that.  But more were not allowed to completely assimilate, regardless of their desires, because of how they looked or how their names sounded or how reluctant they were to completely abandon family customs and communal links.  And yet more still chose not to abandon their heritage.  The 1950s were more like today and less like the fantasyland of the great American assimilation machine than Brooks implies, as anybody with smart old “ethnic” relatives can attest, particularly if they are Jewish or Japanese-American. 

The financial meltdown goes nuclear

  I just learned that in 1992 the U.S. Congress decided to help the nuclear industry by making it easier for plant operators to save for the future cost of decommissioning their plants.  How did they do that?  First, they lowered the tax rate on such savings from 34% to 20%.  Second, they removed the requirement to invest decommissioning funds in low-yield government bonds. 

The first didn't go far enough.  Why tax the funds at all?  They're a provision for a future expense. 

The second ... uh oh.  I really hope somebody walked that back between 1992 and today.  I really doubt anybody did.

War and remembrance, American version

  The story of the Finnish Guard has been fascinating.  And it has one excellent modern parallel.  In the South End of Boston, in a formerly Puerto Rican area (now filled with native-born Americans pushing baby carriages) you can find the following monument:

Monument to the memory of the 65th Infantry of Puerto Rico

This monument is dedicated to the heroic Puerto Rican soldiers who made up the glorious 65th Infantry Regiment, whose actions on the battlefield surpassed the standards of bravery and determination. 

They said to us, “We will have peace even though we have to fight for it,” and so we fought in the mountains of Heartbreak Ridge and marched from Inchon.  We froze in the winter and broiled in the summer.  There were moments when we were completely outnumbered but we kept fighting and many of us gave our lives for liberty, justice, and peace.

The 65th Infantry Regiment played a key role in the most heroic episodes ever seen, showing the courage, valiance, and heart of the Puerto Rican soldier in the person of Ángel Luis García Ledesma, the most decorated Puerto Rican soldier in history.  This brave fighter sacrificed his life to cover an enemy grenade with his body, absorbing all its explosive power, thereby saving his compatriots.  For this heroic deed, he was decorated with the Congressional Medal of Honor, the Purple Heart, and monuments have been erected in memory of this transcendental moment of contemporary history.  Today we honor with pride the 65th Infantry Regiment, an example of valor and determination in defense of liberty.

What words aren’t in the monument? 

Bronx, accents, Supreme Court

  And it goes to the woman who saved baseball™!  Excellent.  But I want to discuss accents.  Sonia Sotomayor is from the Bronx, you see, and will bring a third New York accent to the bench, after Antonin Scalia from Queens and Ruth Bader Ginsburg from Brooklyn.

Sotomayor has an accent of the older type, with modern elements, which many people (of all ages) in the New York region still speak.  The fellow who gives the New York speech lessons certainly does, as do I with my relatives.  But it is not a fully modern accent of the sort spoken by my younger in-laws.  See here at minute 1:52 (it is worth it) or here or here. 

What about the other two New York members of the Court?

Not-so-secret prisons at Bagram

  This, if accurate, is un-American and must be stopped.  I was not aware that the U.S. held prisoners at Bagram who were captured outside Afghanistan.  That is wrong.

While I think the decision to keep the torture photos under wraps is a mistake, I am not so sure of my position as to become upset about it.  No laws are being violated, and the administration's propaganda rationale is quite valid.  In addition, I also think that it would be a bad idea to extend habeus corpus to prisoners taken in Afghanistan as long as there is an active rebellion under way.  Denying those rights during a rebellion does not violate American law nor American tradition nor a decent respect of the opinions of mankind.  Finally, I have no problem with American forces swooping down and arresting somebody outside the United States, even in violation of the jurisdiction in which the swooping occurs.  After all, even now, two decades later, and despite all the gray, it still seems to me that Bush the Elder's decision to invade Panama and arrest Manuel Noriega was the right thing to do. 

But I have a serious problem when the swoopee is not transferred to an American federal court but rather transported to an extraterritorial outpost and held with no judicial protections whatsoever.

I understand why the President wants to punt on the Bagram issue.  I am supremely cynical, and unlike many of his early supporters I found the man an attractive candidate early on because I beleived that he was even more supremely cynical in the sort impersonal way that makes for successful presidencies.  But cynicism has its limits.  He does not have my support on the fate of the Bagram detainees captured outside the Af-Pak theater, and they should be tried in American courts or released.   

Trust, but verify

  Every so often you come across something that just makes your day.  The following letter has made my week.   It even made up for running into monuments like the below while driving around Alabama, southwestern Georgia, and the Florida panhandle.

Dayton, Ohio, August 7, 1865

To My Old Master, Colonel P.H. Anderson
Big Spring, Tennessee

Sir: I got your letter and was glad to find you had not forgotten Jourdon, and that you wanted me to come back and live with you again, promising to do better for me than anybody else can. I have often felt uneasy about you. I thought the Yankees would have hung you long before this for harboring Rebs they found at your house. I suppose they never heard about your going to Col. Martin’s to kill the Union soldier that was left by his company in their stable. Although you shot at me twice before I left you, I did not want to hear of your being hurt, and am glad you are still living. It would do me good to go back to the dear old home again and see Miss Mary and Miss Martha and Allen, Esther, Green, and Lee. Give my love to them all, and tell them I hope we will meet in the better world, if not in this. I would have gone back to see you all when I was working in the Nashville hospital, but one of the neighbors told me Henry intended to shoot me if he ever got a chance.

I want to know particularly what the good chance is you propose to give me. I am doing tolerably well here; I get $25 a month, with victuals and clothing; have a comfortable home for Mandy (the folks here call her Mrs. Anderson), and the children, Milly, Jane and Grundy, go to school and are learning well; the teacher says Grundy has a head for a preacher. They go to Sunday School, and Mandy and me attend church regularly. We are kindly treated; sometimes we overhear others saying, “Them colored people were slaves down in Tennessee.” The children feel hurt when they hear such remarks, but I tell them it was no disgrace in Tennessee to belong to Col. Anderson. Many darkies would have been proud, as I used to was, to call you master. Now, if you will write and say what wages you will give me, I will be better able to decide whether it would be to my advantage to move back again.

As to my freedom, which you say I can have, there is nothing to be gained on that score, as I got my free papers in 1864 from the Provost Marshal General of the Department of Nashville. Mandy says she would be afraid to go back without some proof that you are sincerely disposed to treat us justly and kindly—and we have concluded to test your sincerity by asking you to send us our wages for the time we served you. This will make us forget and forgive old scores, and rely on your justice and friendship in the future.

I served you faithfully for thirty-two years and Mandy twenty years. At $25 a month for me, and $2 a week for Mandy, our earnings would amount to $11,680. Add to this the interest for the time our wages has been kept back and deduct what you paid for our clothing and three doctor’s visits to me, and pulling a tooth for Mandy, and the balance will show what we are in justice entitled to. Please send the money by Adams Express, in care of V. Winters, esq, Dayton, Ohio. If you fail to pay us for faithful labors in the past we can have little faith in your promises in the future. We trust the good Maker has opened your eyes to the wrongs which you and your fathers have done to me and my fathers, in making us toil for you for generations without recompense. Here I draw my wages every Saturday night, but in Tennessee there was never any pay day for the Negroes any more than for the horses and cows. Surely there will be a day of reckoning for those who defraud the laborer of his hire.

In answering this letter please state if there would be any safety for my Milly and Jane, who are now grown up and both good-looking girls. You know how it was with Matilda and Catherine. I would rather stay here and starve—and die if it comes to that—than have my girls brought to shame by the violence and wickedness of their young masters. You will also please state if there has been any schools opened for the colored children in your neighborhood. The great desire of my life now is to give my children an education, and have them form virtuous habits.

Say howdy to George Carter, and thank him for taking the pistol from you when you were shooting at me.

From your old servant,

Jourdon Anderson

Churchill, paraphrased, sort of

  American electricity transmission is regulated in an odd way.  You’ve got 50 state regulators.  Then you’ve got three interconnected grids (the Eastern, the Western, and the Texan) and a separate grid in Puerto Rico.  (Alaska and Hawaii don’t have statewide grids.  Hawaii is an archipelago, and Alaska is too thinly populated.)  On top of the three Conus grids you’ve also got ten North American Electric Reliability Council (NERC) regions.  Only Texas, under the Electric Reliability Council Of Texas (ERCOT) coincides with an integrated grid.  Then on top of it all sits the Federal Energy Regulatory Commission (FERC).  The Energy Policy Act of 2005 — as best as I can tell, a not-bad piece of Bush-era legislation — gave it real powers for the first time.

A lot of that act was due to the work of Pat Wood, who ran FERC between 2001 and 2005.  Unlike a lot of political appointees from that era, Wood was supremely competent and very non-dogmatic.  You can get a taste of his approach in this 2001 interview.  He left FERC to go work for Airtricity, and thus in that capacity I’ve had the opportunity to hear him speak on several occasions.

Like a lot of people, he isn’t happy with America’s lack of an intelligent energy policy.  Where’s the carbon tax?  The centralized grid?  The feed-in tariffs?  And, of course, working in the Bush Administration didn’t help.  Admittedly, I last heard him back when “Drill baby drill” still echoed across the land, but as I watch the ugly sausage of cap-and-trade inching its way through the Congressional meat-grinder, with the threat of EPA regulation as a stick in the background, I can understand the disillusionment. 

Even if I wouldn’t take it quite so far as to say, in public, at an HBS conference, “Maybe in a country of 300 million people, democracy, even a republican form of democracy, doesn’t work that well.  But that’s a debate for the law school.”

Supreme court vacancy

  So, Justice Souter is retiring. 

Me, I vote for Sonia Sotomayor.  Why?  C'mon, it's obvious.  First, she's from the Bronx.  Second, she ended the baseball strike back in '95.  Third, I need a third?

I reserve the right to change my opinion should I discover that she does not have a New York accent of the modern type.

But I'd sure love to have a guest post about the Court from somebody who, you know, actually knows something about it.  Hint.

Really unbecoming American sensitivity

 Most of the (few) readers of this blog are certainly aware that in 1978 the United States agreed to transfer full control the Panama Canal back to Panama in 1999.  (I'll discuss the reasons benind that agreement that in another post, if anyone's interested.)  The resulting treaties were controversial.  Most Americans forgot about it right quick, but the Texas Republican party continued to rant about it until 2003.  From their old platform: 

“The Party urges Congress to support HJR 77, the Panama and America Security Act, which declare the Carter-Torrijos Treaty null and void. We support re-establishing United States control over the Canal in order to retain our military bases in Panama, to preserve our right to transit through the Canal, and to prevent the establishment of Chinese missile bases in Panama.”

That's a whole lotta crazy.  But it represented a defensive nationalism that seemed pretty much to be over.  After all, the United States is not a country that harkens back to a grand imperial past.  We are not a country bothered by our military defeats.  We are not a country afraid to recognize past wrongs, we move past ours, we ask others to move past theirs.  Nor does relative decline bother Americans; if we become more prosperous and more secure, there is no worry that others have overtaken us.

Oh, wait!  That's some other country I'm talking about.  Maybe Finland.  We get things like this:

My oh my.  But thank God for Geraldo.  America owes a lot to half-Jewish half-Latin guys from the New York metropolitan area, that's what I always say. 

Unbecoming Canadian sensitivity

  I am an unabashed Canadaphile.  The Canadian constitution is rather better designed than the American one, other than not having a popularly-elected governor-general.  The health care system is not the one I’d design from scratch, but it has ours beat cold.  The federal system makes more sense.  They don’t fetishize local government.  Plus, they play good baseball and make good hip-hop.  And I have in-laws in the Mounties.  How Canadian is that, eh?

 

With that in mind, Canadian defensiveness towards the U.S. perplexes me, and it pops up in the most unexpected places.  Frex, as I didn’t know until I read Randy’s blog, it seems that Janet Napolitano may have accidently confused the Millennium Plot with 9-11 during a press conference.  OK, that’s a little embarrassing.  I’ve been there myself.  But enough to produce this reaction?  Or this one? 

The Globe and Mail column is particularly confusing.  After all, the sensible ripost to any mention of the Millennium Plot is to say, as the column did, that the U.S. blocked the terrorists at the border and the system worked.  Instead it brings up security theater that has nada to do with Canada (shoes in airports) and stuff that’s really aimed at keeping track of Americans, like requiring passports.  And that after a claim that Janet Napolitano is just like Dick Cheney.  Erm?  From whence this excitement?

Now, there are countries where people are understandably worried about perceived slights from the United States.  Like Mexico, where there are umpty-scrump reasons for people to be defensive with respect to their 800-pound neighbor.  Among other things, Mexico lost its war with the United States.  That sensitivity is why the U.S. needs to apply the same border controls to the northern and southern frontier, or at least be publicly seen to be doing that; otherwise key segments of Mexican public opinion would be enflamed, making cooperation unnecessarily harder. 

But similar Canadian sensitivity I don’t get.

Baumol’s disease, perfect competition, and finance

  A colleague points out that Baumol’s model requires perfect competition.  If profits have risen in the financial industry, then it’s probably not the explanation. 

The above graph from Simon Johnson does not at first glance seem consistent with a diagnosis of Baumol’s disease.  The rub is that I don’t know what profits consist of in the financial services sector.  Are we sure that all profits are indeed profits, and not disguised labor payments?

If we are, then we may have to abandon the Baumol hypothesis.  Help?  Anyone? 

Baumol’s disease and the financial industry

  The Baumol effect (or “disease”) suggests that the parts of the economy with the slowest productivity growth are likely to grow the fastest.  Howzat, you ask?  Well, say productivity grows in widget-making but not in article-writing.  The cost of writing articles will rise, because the only way you'll get RA's to write them for you necessary research assistance is to pay higher wages.  Otherwise they'll all go away and make widgets.  So (if you make a bunch of other assumptions that I won’t get into here) the amount of money spent on article-writing will rise.

Simon Johnson recently published a disconcerting chart that showed finance profits rising dramatically as a % of all corporate profits, starting in the 1980s and peaking in 2006 at a rather mind-boggling 41 percent.  I’m honestly not sure how to think about that, so I went to the BEA and downloaded data on the financial industry’s share of value-added and employment.  That produced this chart, of data between 1948 and 2007:

 

Finance’s share of GDP grows monotonically over the last sixty years.  Employment in finance, however, grows about as fast as value-added until the 1980s, when it starts to accelerate, and the 1990s, when it takes off. 

There are three ways to think about this, it seems.  One is that productivity within the financial sector grew dramatically in the 1990s.  “Financial innovation” and the like, whatever that is.

The second is that the financial industry became much less competitive in the 1990s.  The bankers managed to extract rents from the rest of society and increase their share of the pie without producing any equivalent benefit.  Some of those rents went to finance employees, while others went to the firms’ owners and creditors, but is was all about the rents.

The third is that the relative productivity of the financial industry collapsed during the 1990s.  Capital and skilled labor could earn a lot more elsewhere, so the financiers needed to offer them more in order to keep their services.  Some of the higher cost per financial-service went to capital and some to labor, but the growth of the sector was due to Baumol’s disease.

The $64,000 — $64 billion, $6.4 trillion, whatever — question is:  how can you distinguish between these three different hypotheses? 

And the meta-question:  does knowing which of the three best fits the facts change the analysis of the financial collapse?  That is, does the question matter?

Happy tax day!

  So today is tax day in the United States.  I feel like celebrating.  Man, taxes are low in this country.

¡Viva ... uh ... Texaco?

  A while ago, insecure Americans got themselves all worked into a stupid dither about a Mexican vodka ad.  Now, in a sign of great maturity, Mexicans are refusing to get worked up about a European hamburger ad for something called the “Texican” that Burger King has run in the United Kingdom and the madre patria. 

Burger King is going to pull the ad anyway, just like Absolut pulled its.  You be the judge.

Hat tip:  Ganchoblog.

Raisuli my ass

  Who's the biggest pirate-fighter in the last century of American presidents?

From Big Crush, via  Mojo.

Word.

Keep on trucking

  A while ago, I wrote that I was fairly sanguine about the Buy-USA provisions in the stimulus bill.  I prognosticated that they would probably not be applied to our NAFTA partners, and even if they were, the NAFTA dispute-resolution mechanism would limit the damage.  Now along comes another dispute, this time over trucking, that poses a greater threat to trade ... although I am still confident that it will end well.

What's the story?  In 1994, NAFTA passed the U.S. Congress.  It mandated that all three countries open up their long-distance trucking markets to the others.  The U.S., however, punted when it came to Mexico, claiming that Mexican trucks weren't safe.  In 1998, Mexico took the U.S. to NAFTA arbitration.  On February 6, 2001, the U.S. lost ... partially.  The panel ruled that the U.S. couldn't issue a blanket ban on Mexican trucks, but that it could assess their safety on a case-by-case basis.  The Bush administration pushed Congress to issue enabling legislation that would bring the U.S. into compliance with the ruling, and with the political capital gained from 9-11, finally succeeded in November 2001.  (Not everything the Bush Administration did was wrong, although much was botched ... keep reading.)    Congress authorized the FMCSA to inspect Mexican trucks, and the Bush administration issued the required regulations to implement the law. 

Problem solved!  Not quite.  The Bush regulations had some, well, holes big enough to drive a truck through.  More below the fold.

Getting serious about the cartel wars

  Much of Mexico's organized crime problem derives from the United States.  First, obviously but intractably, the U.S. provides most of the demand for illegal narcotics.  Second, and more tractably, the U.S. provides most of the weapons.  This is not to deny that the weakness of Mexican law enforcement and local government is a necessary condition for the current violence.

There are several ways around the problems of Mexican law enforcement.  The simplest one is to use foreign agents.  In fact, that's happened.  In Operación Limpieza, the Mexican government recently busted open a corruption ring inside SIEDO, the agency charged with fighting organized crime.  Except ... the info originally came from an FBI agent operating in Mexico.  (Hat tip:  Patrick Corcoran.)  This will be a diplomatic problem, especially considering how long it took the Americans to pass the information along.

Except it shouldn't be a problem.  In fact, embedding Americans inside the chain-of-command of Mexican law enforcement might be one of the most effective ways of improving its efficacy.  So would spending much more U.S. money on training, or subsidizing Mexican salaries.  This is not to say that Americans are uncorruptible; it is to say that it's much harder to suborn an American agent without discovery.  The incentives are just too different.  The same applies (albeit to a lesser extent) to a better-paid Mexican agent.

A serious American reaction would involve reinstating the assault rifle ban and giving Mexico much more money.  A serious Mexican reaction would involve allowing Americans to bring their investigatory knowledge to Mexico, and use Americans to police Mexican law enforcement. 

Which isn't to say that organized crime is intractable without American help.  It isn't.  It's merely to say that entirely-understandable nationalism on both sides of the border ― “Why should we spend money to help Mexico do things it should be able to do for itself?”  “Why should we allow gringos hipócritas malintencionados to give orders to our own people on our own soil?” ― keeps some of the best tools out of the kit.  And that seems like a shame. 

Accents, Brooklyn

  Over at Randy's place, he's got a neat post on the survival of Dutch in New York City.  Seems like it held on for a couple centuries after the English took it over.  In the post, Randy suggests that the “Brooklyn” accent derives from Dutch.  Peter takes issue, debate ensues. 

Goin' Back To Brooklyn @ Yahoo! Video

Here, I'd like to say three things about New York accents.

1. There are no geographic variations.  None.  Zip.  Say-roe.  All of what seems to be geographic variation is due to race, immigration, or social class.  All of it.  Anyone who tells you otherwise is either confused or f*@king with you.  I have been asked this question every goddamned time I go to Britain.  It ain't true.  Somebody from New York, they say different, they probably be playing games.   
2. The traditional New York accent is dead.  (For a brief period in college, I tried to affect one, for reasons which are beyond me.  My natural speech is bad enough.)  Its more modern variations are also in fact dying, save for ...
3. ... the accent exemplified by Rosie Perez, held by most children of Latino immigrants in the New York metropolitan area, and now spreading throughout the Northeast. It is somewhat different from the previously dominant version of the accent, and it is replacing that version very rapidly.  Even among non-Latinos.

For your edification, click here for Ms. Perez on Letterman, with the new New York accent.  It's worth it.  (For some reason, the damned embedding won't work.)  My older sister isn't quite young enough to talk like this, although I have some very non-Latino in-laws in their twenties who do.  You can see two more examples of the same accent coming from the eyewitnesses in the below BBC report around minute 2:06.

Finally, here is a fellow who gives pretty good lessons in the older version of New York English, the one I speak with my siblings.  He does confuse class and geography, presumably ingenuously, when he describes his accent as a mix of Westchester and Staten Island.  There is no speech difference between a blue-collar dude from Rosebank or one from southeastern Yonkers, or between the child of Ivy League graduates in Todt Hill or in Scarsdale.  He is simply cottoning on to the fact that there are a lot more upper-class types in Westchester County than in Richmond County, and a lot fewer plumbers and police officers. 

Now that you been schooled in the Kings English, what sort of English do you speak? 

Cars of Februaries past

  After World War 2 ended, pent-up consumer demand meant that the auto manufacturers could pretty much sell whatever crap their factories could churn out.  It took, in fact, four years for the carmakers to start selling new products incorporating all the technological advances of the Depression and war years. 

Oldsmobile kicked it off with the restyled Futuramic Rocket 88.  It included the Hydramatic automatic transmission and a brand-new V-8 engine.  Now, neither was new.  Olds introduced the automatic transmission in 1940 and it had been building V-8’s since 1932, but the two things hadn’t been put together in a designed-from-the-chassis up vehicle.  In addition, the Rocket V-8 was the first overhead-valve design, allowing the engine to take up much less space and producing less vibration when accelerating.  It also had an AM radio that could sorta kinda be heard with the top down at cruising speed maybe if you had lots of imagination. 

My father, therefore, wanted one.  But they were hard to find in February of 1949.  Yet the above pic from 1949 shows that he got one.  (Well, actually the Rocket 76 with the Big Six engine.) Only wanting is not having.  How did he make that leap? 

How bad is it?

  We really need a labor economist.  Anyone?  Anyone?  Kaplan?

Calculated risk produced a chart based on a chart published by Barry Ritholtz.   It shows the peak-to-recovery job losses for the recessions back to 1948.  So far, it's been about as bad as 1981-82.  I thought it would be interesting to add 1929 and 1937.  How does the situation look compared to the opening months of the Great Depression and the so-called “Roosevelt recession” of 1937? 

To do that, I had to use the “total employment” series from the BLS Current Population Survey in order to make the post-1939 numbers comparable to the Depression-era data.  What I got looked somewhat different from the charts currently running around the internets. 

The big red line is the current downturn.

Qualitatively, the above picture gives the same picture as the other charts.  The current downturn is more-or-less tracking 1981, 1974, 1957, and 1948, all pretty bad recessions.  And since past performance does not predict future results, we are not promised the same sort of rapid recovery we saw from those four.

But two things surprised me, and are very different from the other data. 

Cars

 So I was just in Washington on business.  But I managed to get in some fun, visiting the Auto Show on Saturday evening.  Very cool.  In one sign of the recession, they have put all of the spokesmodels in more clothes than is usual. 

Here's the car I want.

Here's the car I don't want, but would feel very patriotic to have.

Here's the car I really want, but can't possibly justify.  As in, its existence.  On any level.

And here's the car I really really want.  It even has a five-point safety belt and a racing roll bar, which I'm sure would make my wife much happier about spending $39,990 on a tricked-out death machine.

What I'm going to get, however, will probably be either a Mini Cooper Clubman S or the Honda Insight.  Unless I think of something better.  What car do you want?

Yet another modest proposal, in which I outrage my friends by advocating protectionism but please Canadians and Mexicans by saying it shouldn't be aimed at them

  The new stimulus bill requires that all steel be purchased domestically.  Brad Delong is unhappy:

“If there's little excess capacity in the U.S. steel industry — so that the price of steel is high enough to induce people to look outside for suppliers — then a stimulus won't be much needed. If there's a lot of excess capacity so that a stimulus is needed, then steel customers should be able to bargain prices down to marginal cost — in which case foreign producers will have an extremely difficult time competing on price given that steel is heavy and distances are great.”

Well, maybe.  Marginal cost can vary a lot, and there are two steel-producing nations whose companies enjoy almost as good access to American markets as their American competitors:  Canada and Mexico.  The price of the same product imported from the two countries varies between 14% and 65%.  (December price data below the fold.)  Meanwhile, China has achieved significant import penetration, despite prices which exceed Canadian ones by 40% on average, and by 11% in the chief product category China exports to the United States.  The implication is that American firms are high cost.

Normally, the fact that U.S. firms are high-cost wouldn't change anything.  It would make sense to buy the cheapest steel from wherever.  American consumers would save by going to the lowest cost producer, and Americans as a whole would be better off, even if American steel producers would suffer. 

Under depression conditions, however, I'm not sure the above logic still holds.  Under depression conditions, using public money to buy from domestic high-cost producers has three advantages that don't mean anything in normal times.  First, domestic high-cost producers will spend more of their revenues, not park them as saved profits ... after all, they have high costs!  Second, the workers and suppliers of American steel companies (who make up the chief costs of the domestic producers) are far more likely to spend their wages and earnings on American goods and services than their foreign counterparts, keeping the multiplier higher than it would be otherwise.   Finally, having steel mills shut down in American towns and American workers thrown out of work will have psychological costs for American consumers and businesses.  They could worsen the downturn.  Such costs will be much less if the workers being tossed on the dole are in Ontario or Hebei.   In short, when American resources are unemployed and their unemployment looks set to last, buy-USA provisions can make the country better off as a whole.   

More below the fold.

Wisdom

  I had a post about the Cristina-Hugo summit and all that good stuff, with two pretty cool pictures, but the damned Typepad editor crashed and the autosave appears to have failed.  Since I have two books and one case to finish, that's the end of that.  Apologies!

But here is some very sage advice about Latin America policy for the Obama Administration.  Short version:  be wary of having a Latin America policy.  My instinct tells me that the Obama-Clinton team will heed this advice.

A modest proposal

  I have really got to start cross-posting on AFOE.  They've given me permission; I just don't feel like my Europe stuff lives up to their standards.

Anyway, the Economist had an interesting column about Iceland and the European Union.  The conventional wisdom is that Iceland would like the euro.  But there are political difficulties.

So why not associate with the United States?  I don't mean become a state, that would be stupid.  Icelanders aren't Americans, and truth be told, they don't seem real likely to become Americans.  They don't listen to reggaetón or country, they don't build malls, they don't put neon-tubing on the underbodies of their cars or shoot guns for fun.  (Cue Jussi telling me that I'm a nationalist.  I am coming around to his point of view.  That is not a good thing.)  But what about becoming a Commonwealth, like Puerto Rico or the Northern Marianas?  They'd have to give up membership in the European Economic Area, but what has that ever gotten them?  They wouldn't have to give up membership in all those Nordic agreements, although they would have to allow Americans to become Icelandic citizens after one-year residency, same as Puerto Rico does. 

So what would this magnanimous move cost the American taxpayer?  Nothing!  Icelanders over age-65 wouldn't qualify for social security under current law; they haven't paid anything in.  But let's say the U.S. waived that, and paid Icelandic pensioners the minimum benefit, just to be nice.  What would be the cost?

A back-of-the-envelope calculation:

El Caribe americano

  Lots of Stars-and-Stripes on the Mall of course, a few Texan ones, two French tricolors, one Ghanaian Black Star, a Californian red-star-and-bear ... and multiple Trinidadian, Jamaican, Haitian, Grenadine, Grenadian, and Guyanese flags. 

The Commonwealth Caribbean has an interesting emotional relationship with the United States, all the more so with this inauguration. 

P.S.  Why is Washington overrun with the Miami P.D.?  Dude.  Miami??

P.P.S.  Did Governor Paterson just call Hillary Clinton the best senator that New York City has every had?

P.P.P.S.  That's a lot of booing for the still-President.  I suppose I shouldn't be surprised.  I much prefer the singing, "Hey hey hey, good bye."

“Champagne on Ice”

 This comes from the archives.  It was posted on another blog on January 21, 2008.  Considering that the football postseason is now entering full swing (and that only Philadelphia survives as a team that can grab my interest) I thought it apropro to repost it now.

It was cold yesterday.  It was cold in Massachusetts.  It was even colder in Green Bay, like negative 17 degrees ... negative 31 with the wind.  Third-coldest postseason game in NFL history. 

The New England game ended the way I like.  The Green Bay game did not.  Overtime, Green Bay wins the toss, an interception, and then Lawrence Tynes gets the third field goal attempt after botching the first two.  Did anyone catch Giants coach Tom Coughlin's temper tantrum after Tynes messed up the first?  I hadn't seen anything like it since basic training.  Sadly, though, it seems to have worked as a motivational device.

Anyway, I know Giants fans, and they simply don't deserve the victory.  Everyone disenchanted with money-drenched professional sports has to love the plucky little municipally-owned team.  And anyone annoyed by fair-weather fans (as a former Bleacher Creature, this often afflicts me at baseball stadiums not located in Boston or the Bronx) has got to love the dedication of those who love the Packers.

“It makes me feel like a sissy,” said Troy Aikman on national television when Fox cut to that shot.  I have to agree.  Over to you, Carlos.

Great Debate Attempt #1: The U.S. Senate, plus a good $30 cigar

  Resolved:  $30 is not too much to pay for a really good cigar in the Commonwealth of Massachusetts.  In inflation-adjusted terms, that would be only 37 times the price of the good cigar that Vice-president Thomas Marshall claimed the United States needed in 1917. 

Further resolved:  The U.S. senate is an undemocratic travesty, and needs to be reformed in order to better reflect the population distribution of the United States.  In 1787 the United States was a federation of 13 different nations with a common colonial heritage.  We are no longer a federation of nations.  The European Union is a federation of nations.  The United States of America has become a single continental federal nation, and it would be better and more fairly governed if the second chamber of its legislature more closely reflected that fact. 

At the very least, our rather well-governed nation to the north should not emulate our bad example the way that Argentina (with some historical justification), Brazil (with rather less), and Mexico (with no good reason at all) have done.

God bless small children, cigar smokers, the federal-nation-formerly-known-as-Dominion of Canada, and the United States of America.

ADDENDUM:  How many senators would the states have if the U.S. Senate were apportioned in the same way as the House?  29 states would have one senator.  The rest would be distributed as follows:

Minnesota	2
Arizona	2
Maryland	2
Wisconsin	2
Missouri	2
Tennessee	2
Washington	2
Indiana	2
Massachusetts	2
Virginia	2
North Carolina	3
Georgia	3
New Jersey	3
Michigan	3
Ohio	4
Pennsylvania	4
Illinois	4
Florida	5
New York	6
Texas	6
California	10

There would still be a gap between the representation of the smallest state and the largest, but it would be reduced to only 5:1 from something more like 57:1. 

The empire's demise has been prematurely reported

  The United States just announced that the the Millenium Challenge Corporation will suspend $60 million in grants to the government of Nicaragua.  The reason?  Rigged local elections.  Now, I don't expect the aid suspension to accomplish much.  It's important to bear in mind that the U.S. still provides more aid than the Bolivarian Republic to most putative members of the Bolivarian alliance. 

In other Revolutionary news, the Bolivarian summit in Caracas announced that the alliance would consider establishing a common currency.  That is rather weak brew, and I will be very (albeit pleasantly) surprised if it happens.  Why pleasantly?  Well, a common currency spanning Venezuela, Nicaragua, Cuba, Honduras, Bolivia, Dominica and possibly Ecuador would be a fascinating monetary experiment to watch.  Sadly, I feel pretty confident that it isn't going to happen. 

Why Ohio flipped

 You get the sense of a great machine that has been set in motion and cannot be stopped.  It forecloses on homes that have no value and ejects their inhabitants to no purpose. 

It was tragic to watch.  The quiet desperation in the exurban garage sales was perhaps truly worse than what you see here in the inner suburbs of Cleveland, but this is much more distilled.  I wonder what became of the family that lived here until the day this photo was taken. 

Deeper thoughts in another post.

This land is my land, this land is your land

 Where have I been?  Well, I've been travelling a lot lately.  An interesting combination of academic or personal and election work.  Conference in Miami?  Chance to lobby your relatives' state representative to pressure Governor Crist into extending early voting hours!  Paper presentation in Cleveland?  Chance to knock on doors.  Got to go to a family gathering in Fort Lauderdale?  Opportunity to talk to a small business organization about what a Democratic administration means for them.  

And so, I am now in North Carolina.  Today I discussed HSBC's purchase of Banistmo and the future of the Panamanian banking industry with an anonymous banking executive in Charlotte.  Tomorrow I go off the clock, and work to get Barack Obama elected the next president of the United States.  

I've seen a bit in my travels.  Watch this space.

Reposted from a parallel universe

  A casino, a liquor store, a Bureau of Indian Affairs office, a corrupt judge, a BATF operation gone way wrong, and a bewildered FBI investigator trying to understand how the high price of Coca-Cola fits into the other strange goings-on in San Cristobal County ...

“In syncretistic religions, Scully, the attributes of one religious figure,” Mulder taps a case containing a weeping St. Catherine, “are given to another. In this case, John the Baptist’s connections with water: rivers, dunking ...”

“Baptism?”

“... made him the prime candidate to represent Chac, the Mayan water god.”

“I see. Like a mid-season replacement.”

Mulder glowers. “Now, traditionally, fermented corn mash was used as the sacrament in Mayan ritual, mixed with some magic herbs. A little binge, a little purge, and soon you're seeing visions.”

Scully looks around at the vaguely Catholic ornamentation encrusting the church. “I can’t imagine why.”

“The Spanish must have stopped the magic mushroom part of the ceremony, but you still had the folk belief that to receive the numinous, you had to expel the profane. Hence the burping contest we saw at Mass.”

“And that’s where the Coca-Cola comes in.”

“Yeah. What a racket. No wonder El Jefe owns the bottling plant.”  Mulder looks up at a garish mural, Salome being presented with the martyred St. John’s head. Not too many redheads in Spanish colonial religious art.

A ditch not dug

In 1911, U.S.-Latin American relations almost took a dramatic turn for the different.

In October of that year, the head of the Panama Canal Zone's civil administration, Maurice Thatcher, told a U.S. Senate committee, “We must have courts ...  I would like to see an American civil population here ... These Americans would come here to live, make their homes here, and they would prefer to live under the dominion of the American government, under American laws.” 

George Goethals, the rather un-Brooklyn-like Brooklynite in charge of construction thought differently.  “Introduce the franchise, and we’d go to pieces.”  The Taft administration agreed with Goethals.  The Canal Zone was not to receive elected government, civil courts, or even private property.  The Zonians remained a population of transients.  (Vocal, obnoxious, and slightly-crazy transients, but transients.)

But what if Thatcher had won the argument?  The Zonians would have owned farms and businesses.  They would set their own tax rates.  They would elect their governor.  The strange monopoly that the federal government held over ancilliary businesses would not last.  The Zonians would not all work for the federal government.  They would be a settled population, certainly larger than the actual Canal Zone population, which bounced around 50,000 in the 1950s and '60s.  And it is hard to imagine them lacking a non-voting representative in Congress.

Under such circumstances, could Congress have agreed to give the Canal Zone back to Panama?   

What? Already???

  This is not a political post.

As some of you know, I like zombie movies.  One of my favorite genres.  Don't ask me to explain it.  Dawn of the Dead got into my head when I was a kid, scared me to death, and I suppose I never got it out. 

I also have no problem with remakes.  Some, like Cape Fear, beat cold the original. 

But a remake of a movie that only came out last year?  What??  And a Spanish movie at that.  It doesn't even qualify as a foreign-language film.

So go rent Rec.  Don't see Quarantine. 

That's filmmaking.

A thought on the politics of inequality

Something occurred to me while I was driving on I-595 earlier today, right after the bailout package failed in Congress.  Might it have been easier to pass had we not seen the massive increase in income inequality over the past few decades?  After all, when income differences between financiers and the average worker loom gigantic, it becomes very difficult to sell people on the idea that the financial system needs an infusion of government money.  On the other hand, if the banks were smaller and their executives poorer, people might feel more of an emotional connection to them, making a bailout easier to sell.

The real effect of a bailout wouldn't change, of course.  Executives would have been hosed under the Dodd-Frank plan, and the average person would have benefited hugely from keeping the financial system afloat.  But the emotional politics are all different in a world where the financiers have pulled away into a different economic universe from the person on the Port Everglades Expressway.

Does this make sense? 

Policy of Attraction, part 2

  The Philippines came under American military rule in 1898.  In 1902, Congress authorized a civilian government known as the Philippine Commission, which ruled the place until the Philippine Autonomy Act of 1916. 

 

By the admittedly low standards of colonial governments, the Philippine Commission ran the islands rather well.  It spent heavily on infrastructure and education.  It purchased rice overseas during shortages and sold it at subsidized prices.  It ran a wide array of public enterprises, including a credit system.  It even ran an agricultural research program that managed to double crop yields. 

How did it pay for this?  By taxing the Philippines quite highly by contemporary standards.  Strangely, an entire literature has developed around the idea that the Commission government undertaxed the Philippines.  That literature simply happens to be wrong.    

El Hugo del extremo norte

In a previous post, I wrote that total taxes as percentage of revenues on hydrocarbon extraction in Alaska were 25 percent.  Well, I've just had a chance to play with the data, and it turns out that my estimate was flawed.  (It failed to take into account that profit margins in Alaska are substantially higher than the overall profit margins in hydrocarbon extraction across the United States.)  Direct taxes on Alaskan oil & gas actually turn out to be 32 percent of gross revenues ... 33 after Governor Palin's tax hikes. 

One-third of revenues is a nice round number that you can use to put hydrocarbon tax burdens in other countries into perspective.  Bolivian taxes, for example, had fallen impressively low by the time Evo Morales assumed office, and some revision was almost certainly in order.  Time will tell whether he found the right level, and the means by which he raised taxes caused unnecessary uncertainty, but a substantial tax hike on the industry was the right thing to do by the people of Bolivia.  Regardless of whether you're a Bolivarian.

Alaska is American!

I just want to say, unequivocally, that I oppose the independence of Alaska, and should a minority of that state impose secession, I will rejoin the Army and risk my life, fortune, and sacred honor to keep it part of the United States.

There really was a revolution

My previous post on the Bolivian hydrocarbon nationalization of 2006 made it seem like nothing changed.  And in terms of the security of supply (in price or quantity), not much did.  Ditto, the industry wasn't really nationalized.  Rather, the decree gave Bolivia's state hydrocarbon company, YPFB, a mandated 32% share of the output of the San Alberto and San Antonio fields, on top of a 2005 law that cancelled the preferential tax treatment the previous law had granted new gasfields.  Thus, Brazil's equanimity in the face of “nationalization.”

In other words, the nationalization was in fact a tax hike, and a rather large one.  According to work by Luis Carlos Jemio, the state's take of gross revenues jumped from 28% in 2004 to 41% in 2005 and 65% in 2006. 

How high is that?  Well, I just spent more time than I should have estimating the total value of taxes (including corporate income taxes) paid to the federal and state governments by oil and gas companies operating in Alaska.  The result?  In 2006, they paid 25% of their gross revenues (or 50% of their declared profits) in taxes and royalties.  Now, these estimates do not include gasoline taxes, or any other taxes on refined products ... because the Bolivian figures don't either.  They also do not include the tax hikes that the Palin administration just pushed through, but those hikes will only up the figure on gross revenues to 26%.

In other words, Bolivian tax revenues went from around the level found in Alaska to almost 2½ times that level.  There really was a revolution.  (And now you understand why the gas-producing provinces in the east are so damn upset.)

Was it a good idea?  I'm undecided.  Investment in exploration boomed in 1996, with the passage of the law favoring new fields, but started declining in 1999 and was down two-thirds by the time 2005 rolled around.  If one makes the assumption that geology drove that decline, then Morales hiked taxes at just about the right time.  If no more investment is coming anyway, why worry about discouraging it?

To be fair, foreign direct investment in exploitation (not exploration) did collapse in 2006.  That said, Bolivia could potentially make up for that via service contracts and the like.

The reason that I'm undecided is that I don't know how much of the exploration decline was due to geology, and how much was due to the increasing political instability in Bolivia.

But I'm not that undecided.  In this case, I think a massive tax hike on the industry was fully justified, and probably the best thing for the people of Bolivia.  Now if only they can figure out how to divvy up the new revenues without blockading roads or shooting at each other ...