Metrics for “Hope”

I watched the president’s speech last night with two of my Republican friends, who, despite the occasional doctrinaire outburst that they don’t bother defending (“tax cuts work! we just need more tax cuts!”), raised some valid criticisms.  The best question of the night in my mind came from an ABC reporter, who asked, “how can the American people gauge whether or not your programs are working? Can they — should they be looking at the metric of the stock market, home foreclosures, unemployment? What metric should they use when and how will they know if it’s working or whether or not we need to go to a Plan B?”–sometimes the best questions are the most straightforward.

The President’s response was that he was looking first to create or “save” 4 million jobs.  The problem is that neither of these numbers seem easy to measure.  One of my friends went to the extreme with this and said that as long as 4 million people are still employed by the end of this stimulus package then we can declare the program a success.  Thats a bit extreme in my mind, but it raises the fair point that there is no clear, measurable result yet for all of this spending.  Creating jobs is just as hard to measure in terms of a direct cause and effect relationship.  Ultimately, the president said that the true measure of success is getting the economy growing again, but that is too obvious to be the real answer.  As of right now, we have no idea about how to determine if spending a trillion dollars will have any direct effect on the problem.  I find that worrisome.

We’re supposed to pay taxes?!

I don’t have much knowledge about the tax code other than the fact that it is extremely complicated.  I once went to a luncheon with a tax attorney I worked for about the various different legal entities that doctors could create to shield their practices from law suits and tax liability.  The speaker talked non-stop for an hour and was nowhere near giving a comprehensive introduction on the subject.

Now three of President Obama’s nominees have been exposed for having tax issues–one of them will oversee the IRS, another of them actually helped write the tax code.  The latter of these two examples, Tom Daschle, has now withdrawn his nomination.  While there is no real excuse for either of these men not figuring out how to pay their taxes, the fact that it can validly be considered a “mistake” for someone to not pay tens of thousands of dollars in taxes should give us pause.  Does the problem lie with the individual or is it more a problem of the tax code?  Of course both are flawed, but it seems to me that the tax code is the bigger problem.  This raises more questions.  Perhaps most importantly, why do we have such a complicated tax system?  There are good reasons to have some complex tax policies in order to smooth income across socio-economic groups or reward/punish certain behaviors, however, we have clearly gone too far when some of the most intelligent people can’t get it figured out.  So, when was it enough and how did we go too far?  How do we fix it?

“Politics as Usual” works the way its supposed to…at least for once

The withdrawal of Tom Daschle as the Secretary of Health and Human Services, while unfortunate, makes good sense.  Former Senator Daschle seemed like an extremely knowledgable leader of a healthcare transformation and clearly knew how to work with congress since he’d been the Senate majority and minority leader.  However, his issues with taxes aside, he has apparently been a lobbyist in everything but name only.  The democrats seemed willing to look past this clear fault, but republicans–undoubtedly for political reasons only–shed light on the fact that this candidate really violated Obama’s own standards on ethics and influence.  The tax problem really seemed like a separate issue (more on that in a separate post).

In this case, I think the old partisan ways worked.  Obama came into office putting forward sweeping ethics changes and challenging the role lobbyists play in Washington.  By challenging and ultimately forcing the withdrawal of his nominee, they are holding the new president to his word.  More importantly, they are hopefully raising a very necessary discussion on what should be the role of lobbyists and de facto lobbyists alike.   A friend of mine raised the very good point that lobbyists, in some form, should be involved in government.  They are not only knowledgable on their subject matter, but knowledgable on the desires of important concentrated interests.  Eventually we will need some balance on this issue that maintains a certain distance between government and influence but nonetheless absorbs the knowledge that lobbyists have to offer.  Any thoughts?

Is Caroline Kennedy a good choice?

This is a very tough question. I feel like I should agree with Kennedy’s critics but then I like the idea of Senator Kennedy so much. Have I fallen victim to the Kennedy mystique? Is there anything to be said for a Senator Kennedy that doesn’t involve some sort of nostalgia for RFK and JFK?

Perhaps – it might make sense to bring in someone trusted as a national figure yet removed from the corruption of politics until now. Caroline Kennedy may be inexperienced, but we should be able to feel confident that she won’t sell out to the highest bidder when controversial issues are on the table, not least of which because she’s rich but also because she has the good Kennedy name to defend.

Of course there’s always higher ambition and I seriously doubt Caroline Kennedy would be interested in just the Senate seat. Might Caroline have her sights on the presidency, as the first female president? It’s way too early for speculation to that effect, but I doubt she hasn’t considered it. In that case, New Yorkers might have a right to be suspicious of Senator Caroline Kennedy.

Nevertheless, I think all candidates for higher office ultimately have some even higher office in mind. Caroline Kennedy seems like a responsible, well-intentioned politician that might pleasantly surprise in the Senate.

The Shape of the Race for new energy

The competition for the development of lithium-ion batteries is justifiably heating up.  Battery technology will be at the center of our future energy consumption patterns.  The progress of wind and solar energy generation are great developments, but the pressing problem is as much where to store the energy as it is how to develop it.  If energy has to travel large distances from the great plains to major cities, then much of the benefit of generating wind and solar energy will be lost.  This consortium of companies looking for federal money for the car battery might be the next step in this technological evolution.  I’ll definitely keep my eye on it:

http://bits.blogs.nytimes.com/2008/12/26/electric-car-battery-makers-seek-federal-funds/?scp=1&sq=lithium%20ion%20battery&st=cse

Open Question: What should 9/11 mean?

Quite appropriately, today is a day remembering the victims of the September 11th attacks. In New York and Washington DC, family members are once again gathering to remember fallen loved ones at ground zero and the Pentagon. Thankfully, the presidential candidates are also stepping back from politics to participate together in a forum on public service at Columbia University. The day itself remains sacrosanct.

However, our memory of September 11th is not so holy in American politics the other 364 days of the year. Politicians use their roles on that day or what that day now symbolizes in the war on terror for their own gains on a regular basis. Perhaps we are still not far enough removed from that day politically for us to have the proper perspective. A good indication of that is the fact that Giuliani and George W. Bush, the mayor of New York and the President on September 11th, are still very active in American politics. I think we are already starting to see from McCain and Obama that politics is moving on, albeit at a very slow pace.

Personally, I think the day should eventually be remembered as an everyman’s version of December 7th 1941. Something that unites us as a country into remembering that there are bigger things than politics. That we are all citizens of this country, that at our core we all stand together, and that we all have the potential to stand for something heroic.

That´s just my opinion though, and I think this merits some discussion.

Gates and Bloomberg: praiseworthy, but it raises questions…

First of all, I want to say that I personally appreciate the principle behind what these two are doing to curb smoking. A true libertarian might argue that a campaign like this on what is essentially a lifestyle choice is oppressive, and cigarette smokers might just think that these two guys being up on their high horse telling them what they shouldn’t do is as annoying as 8th grade D.A.R.E. class, but I’m not either of those, so I say kudos. Cigarette smoking is addictive and unhealthy and at the very least someone should make sure that people are well-informed about that worldwide. Nonetheless, I think this raises some interesting questions.

I’ll start with Bloomberg. Yes, he’s a billionaire, but he is also the current mayor of New York and an oft-discussed potential presidential candidate. Is it right for him to publicly use his money in a way that could influence voters–even if it is for charity? Let’s imagine that instead of funding an anti-smoking campaign he purchased lunch for a number of poor voters in Ohio and Florida, would that be alright? How different are these two? Referring back to avschwarm’s post on campaign finance, is this also an unfair political use of money?

Alright, on to Gates. Its hard to argue that what he has been doing with his money isn’t a good thing, and I don’t intend to do so. However, I think there are some broader questions about him that deserve some discussion: is it a socially beneficial outcome for someone to be able to accumulate such wealth (through arguably monopolistic behavior) so that they can then decide how to spend that money trying to fix the social problems of an unequal society? Rockefeller and Carnegie were both quite philanthropic with their money and society benefitted tremendously, but would we have been better off had they not become rich through monopolistic means? Does Gates have an obligation to give money away through his foundation? On a personal level, what obligation do we all have to be public servants-billionaires or not?

Finally, what does it say about society that we tacitly depend on the whims of billionaires to address some of our most pressing global problems?

Alright, so the last question is certainly heavy-handed, but nonetheless important. They are all tough questions, but I do not think we should shy away from them.

Financial Literacy/Transparency and The Debt Burden

There’s been quite a lot of discussion recently about the crippling burden of debt faced by many Americans, and understandably so – the rippling effects of the mortgage crisis have a number of analysts suggesting that the U.S. economy is heading towards recession.

Unfortunately, it doesn’t seem that many lessons from the recent crisis are especially clear, at least as far as policy prescriptions might go. While it is true that many lenders were certainly irresponsible, many borrowers freely admit that they were, too. And while the availability of easy credit certainly contributed to the growth of debt, it’s important to recognize that, in general, access to credit is a very positive thing, provided that it is offered and taken responsibly, with rational pricing of risk all around. To put it more concretely, while access to credit and the resulting growth of debt led to many Americans losing their homes, access to credit helped put some of them in those homes in the first place, and it helped others improve aspects of their lives, if only in the short term given how events played out. Without excusing irresponsibility on the parts of the various players involved in the recent debt crisis, I think it’s essential to note that addressing the problems in these markets entails what might end up being a fairly delicate balancing act, and that the parameters governing such an act aren’t necessarily known.

I can’t help but wonder, though, if we wouldn’t be able to achieve a lot by focusing on some of the informational aspects of the decisions made by consumers. Specifically, I wonder about the role financial illiteracy and opacity played in convincing borrowers to take on risky high-interest-rate loans of various sorts. Was it the case that many borrowers didn’t understand the economic risks they faced in general (e.g. the risk of medical emergencies or layoffs), some of which might be large enough to force them to default? Did they, perhaps, fail to understand the risks associated with ARMs, or the terms underlying their credit-card debt, or the specifics of any of the myriad of other debt instruments that were purchased? It’s an empirical question, surely, though I think it’s somewhat intuitive: who hasn’t been at least somewhat confused by the terms and fees associated with a bank account or credit card? If it is indeed the case that these sorts of misunderstandings were important in the evolution of the current financial crisis, perhaps there is a role to be played by government in promoting financial education or enhanced transparency of financial contracts, independently of any regulation of the terms of those contracts.

From what I know of the literature in general, the evidence about the efficacy of financial education and transparency interventions is mixed. But I can’t help but think that it’s important to continue exploring this area. The economic world becomes more complex every day, and it seems that the importance of the effective management and transmission of information grows with it. Perhaps focusing on better financial education and transparency on the ground will prove to be a more valuable (and workable) approach than playing an outmoded blame game.

What do you guys think?