AnnotatedOpinions.com

Joseph “Joe” Arvin, the gear man, is at it again. . .  

. . . last week, when he sent me his latest — “A Nation on Borrowed Time: A Common Sense Look at the Economic Decline of America and How It Can Be Reversed” . . . everyone now understands our economy has been “hollowed out” — that our capacity to produce high value-added products has been shipped overseas to countries with cheaper labor, lower taxes and less regulation.  

The debate now is over what to do about it. The left wants to protect good-paying jobs by improving public education, raising the minimum wage and punishing imports. The right wants to roll back union wages, benefits and taxes on business investment.  

But Joe Arvin doesn’t play the either/or game. . . He suggests lowering taxes on domestic manufacture and insisting that foreign markets be as open to our products as ours is to theirs. Good ideas those.  

Joe Arvin’s solution is to bring back manufacturing. But until Chinese workers get paid as much as ours, it’s hard to make a case for assembly work. We’d do better to focus on material science, nanotech, bioengineering and other value-added pursuits already rising here in the Midwest.   

So keep the kids in school — maybe even go back yourself — and ask for a copy of Arvin’s $15 stocking-stuffer at anationonborrowedtime.com  

[AO: Allow me to explain:  

The Setup: “Joe” is a straight talker who pulls no punches. 

The Push: Joe bypasses the left/right divide and recommends actions that go beyond those that politicians argue about.

The Grind: The left wants “to protect good-paying jobs by
improving public education, raising the minimum wage and punishing imports.” The right wants “to roll back union wages, benefits and taxes on business investment.”

The Closer: Joe recommends fixing manufacturing by “lowering taxes on domestic manufacturing and insisting that foreign markets be as open to our products as ours is to theirs.”

The Finisher: But that won’t work. Better to stay in --or maybe even go back to-- school and “focus on material science, nanotech, bioengineering and other value-added pursuits.” Also, “ask for a copy of Joe’s $15 stocking-stuffer at anationonborrowedtime.com”  

The problem: Joe’s recommendation, cut taxes, is what the right recommends. The alternative solution the writer proposes, education, is what the left recommends. In other words, rather than recommending actions that go beyond what politicians on the left are advocating, Joe’s recommendations are just some version of those. Worse, the writer thinks Joe’s right-leaning recommendation is wrong and suggests a left-leaning one. Then he says: go by the book. Why?]

With unemployment stuck around 10 percent, President Obama has pledged “to take every responsible step to accelerate the pace of job growth.” Here’s a thought: Instead of trying to “create” jobs by tweaking this tax break or increasing that spending program, why not stop doing things that destroy jobs?  

. . . End federal protectionism and price supports for sugar. . . In 2006, the Commerce Department estimated that the sugar program cost three confectionery manufacturing jobs for each job it saved in sugar growing and harvesting.  

. . . Repeal the Davis-Bacon Act. Passed in the 1930s to “stabilize” the construction industry . . ., this law requires employers to pay the “prevailing” local wage on federally funded projects.

  . . . Reduce the federal minimum wage.  

[AO: It is true that President Obama has pledged to take every responsible step to accelerate the pace of job growth. However, job growth without an attention to attendant effects is not wise.   

The latter two suggestions, repealing the Davis-Bacon Act and reducing minimum wage, may well create more jobs. But it does so at the cost of lowering the salary of existing workers. This will not necessarily lead to an economic recovery.   

As has been explained on this site and by economists elsewhere, a key missing ingredient in the recovery is consumer spending. It’s down . . . way down. Consumers are not spending because many consumers are unemployed and others are concerned that they may loose their jobs. The latter two suggestions would slash consumers’ salaries. The effect will be to split a salary that would otherwise go to one person between multiple employees. This will not lead to increased spending by consumers. Indeed, the effect of the latter two suggestions may be increased employment numbers attended by no change in consumer spending because the economy is effectively not being grown. What we need is to create jobs without slashing the salaries of existing workers.  

The first suggestion, ending sugar policy, is more likely to be successful. However, one must be careful. Just because the price of raw materials (here, sugar) is reduced doesn’t mean that business owners will necessarily employ more individuals. They might simply save the increased profits. If this happens, the economy will not receive the short-term boost in spending it needs. One reason employers may not employ more individuals is that they already are producing the maximum amount of product that the economy will purchase.]

On Tuesday, however, Obama announced a new, multibillion-dollar spending package . . . The plan includes a reported $50 billion for . . . infrastructure.   

We may need some new roads and bridges, but these are not short-term economic boosts. In any case, infrastructure accounted for less than 10 percent of a bill that was sold in large part as a “reinvestment” package that would pay dividends for decades. [AO: Creating jobs “now” is a short-term economic boost. One of the primary reasons the economic recovery has been tepid is that consumers are not spending. Consumers are not spending for a variety of reasons including unemployment. No reasonable consumer who looses his or her job will continue to make the purchases he or she made before the job loss. Therefore, helping unemployed Americans get jobs creates an immediate boost to the economic recovery. ]  

The new stimulus would spend nearly twice as much on infrastructure as the last stimulus included. . . But infrastructure is not the only dead end in this plan.  [AO: Infrastructure is not a dead
end. In fact, spending on infrastructure is one of the best ways to address our current economic problems. Unlike some of the other fixes, infrastructure projects require borrowing money to create assets that will be available for the benefit of future Americans who themselves help pay for the assets.  

Large-scale infrastructure projects like the interstate highway system and large dam projects helped make America great. It creates conditions for connecting the country, reducing cost of trade and so many other benefits. At a time when our infrastructure is crumbling, recession or not, we need to spend the funds necessary to rebuild our infrastructure that has been allowed to crumble for the last 50 to 80 years.   

The American Society of Civil Engineers gives America’s infrastructure a D and recommends a $2.2 trillion dollar five year plan to improve our infrastructure. Based on these numbers, the  amount of infrastructure funding the administration is considering is a drop in the bucket. But it will be money well spent.]  

A couple of Obama’s measures might spur small businesses to invest. These include an extension of these firms’ ability to expense immediately some investments, as well as a one-year elimination of the capital gains tax for investments in small companies (though committing to keeping the current top rate of 15 percent for all investments would have a larger positive economic impact).  

There’s also a tax credit for small businesses that hire workers next year. But it’s not as promising as it sounds. . . [AO: Like his view on what constitutes short-term investment, the author has an unreasonably narrow view of what benefits small businesses. The jobs creation measures and infrastructure improvements contemplated by the administration will also be a great help to small businesses. These initiatives will enable small businesses to hire more people or put their existing workers to work. It will create projects that small businesses can work on.]

Here’s a radical notion: Let’s rethink the cult of homeownership in America. . .  

We are a country still in the thrall of homeownership.   

Nearly a decade ago, a colleague and I edited a book about the promotion of low-income homeownership, with the subtitle “Examining the Unexamined Goal.” Study after study pointed out the risks of homeownership. One used repeat sales data to look at what properties bought from 1982 through 1999 sold for in Boston, Denver, Philadelphia and Chicago. In Chicago — which never had much price fluctuation, even in 1995, its worst year — only 9% of houses on the market sold at a loss. But in Boston, which had a larger price correction, 45% of houses sold in 1993 and 1994 sold at a loss. Worse still, 69% of houses in Denver sold in 1988 and 1989 sold at a loss.   

In places such as Los Angeles, which was not part of the study but where house prices cycle a great deal, high percentages of owners during periods of decline have had to hand the keys back to their lenders to get out of underwater mortgages, or fork over a lot of cash at the closing table when they sold.  

[AO: According to the writer, we ought to rethink the cult of homeownership in America. I agree. We should. During the last boom, too many people purchased homes who couldn’t afford it. They did this based on the mistaken assumption that prices would continue to increase and their mortgages would remain affordable. They were wrong and have had to pay the price. But the
writer, Eric Belsky, selects an odd example make his argument in favor of rethinking homeownership. As he tells it, because housing prices decrease during times of housing price correction, we should rethink the cult of home ownership. That’s odd. This oddity becomes more obvious when you make analogies to other purchases. For example, his argument could be extended to say that because stock prices decrease during economy downturns, we should rethink the cult of stock ownership. Or, because the value of art/jewelry/you-name-it decreases during downturns, we should rethink the cult of art/jewelry/you-name-it ownership.  

This line of argument is not convincing. The point is that the value of most things decreases during a correction. However, that cannot be the basis for rethinking ownership of that thing. ]

Let’s instead consider programs that aggregate ownership of properties, especially two- to four-unit ones, in the hands of nonprofits that can rent them out. These small complexes are estimated to account for up to two in five foreclosures. It might make more sense to get these properties into the hands of nonprofits that own many properties, so that a single rental vacancy constitutes the loss of only a small fraction of rental income.

[AO: This is a good idea. But I have a number of concerns. The first concern is how to get the properties into the hands of the nonprofits without going through all of the economic mini-turmoils that accompany property sales under conditions the writer seems interested in addressing. In other words, if an owner currently owns a two-unit property and cannot afford to pay the mortgage, how does she get the property into the hands of a nonprofit without going through foreclosure, etc. On the other hand, if she does have to go through foreclosure, why would having a nonprofit as the buyer be batter than a for-protit entity? If our goal is simply to aggregate multiple properties perhaps we can give incentives to nonprofits and for-profits alike to acquire multiple properties. ]

MANY MARKET and regulatory failures led to the collapse of the nation’s financial markets last year. That collapse has led to a steep and painful recession and placed extraordinary burdens on working families. In response, the House Financial Services Committee, which I chair, is crafting a series of measures that will produce a comprehensive response. . .

In many ways, AIG represents the poster child for the combination of reckless behavior and failed oversight, and thus gives us a window through which to look at the impact of the committee’s response. . .

Many of the credit default swaps issued by AIG were based on portfolios of subprime mortgages that were packaged into securities and sold around the world. Many of those mortgages were made by un- or lightly regulated mortgage companies that because they never intended to hold them used weak underwriting standards, resulting in a wave of defaults that brought down AIG and drove the financial system to the brink of collapse.

Legislation passed earlier in the year by the House – that we will incorporate into the final reform package – addresses this failure in two important ways. First, all mortgage lenders for the first time will be subject to high national standards, so that the industry can no longer give someone a loan who cannot afford to pay it back. Second, since the ability to bundle mortgages and sell them as securities encouraged this pattern of poor lending habits, no lender will be able to sell 100 percent of what they lend. They will be required to hold a share of each mortgage, thus maintaining their own exposure to the risk they have created. . . .

[AO: Rep. Barney Frank makes an interesting argument for regulation. For my response here, I am going to focus on the potential likely effect of the regulation he identifies. In particular, I am interested in legislation that (1) subject lenders to a new high national standard and (2) prohibit lenders from selling 100 percent of what they lend.  

At first brush, these seem like sensible regulations. Indeed, they probably are. But they left me wondering: In light of what happened to so may lenders who sold loans to people who couldn’t afford it (think, Countrywide loosing thousands of jobs and billions of dollars), why would another lender repeat this? Considering what resulted when lenders sold 100 percent of their loans, who would another buyer agree to buy 100 percent of any lenders’ loans?   

I suspect Rep. Frank and his colleagues are concerned by predatory companies that will attempt these mistakes knowing exactly what might result. Or perhaps they are concerned that when the economy improves, executives might come under pressure to return to their erring ways. If so, fine. But we have to consider that in setting these standards and limits that we set them in the right place. In other words, if the national loan standards are set higher then necessary, they result in unnecessary cost to borrowers. If the limit on the amount of loans that can be resold is too low, the market will be inefficient. On the flip-side, if the limit is too high, lenders might take that unnecessarily high limit as a signal to sell right up to it. In other words, the limit would serve as a signal to all market participants.  

All of this is not to say that these regulations are a bad idea. To be clear, I am generally in favor of regulation, but provided they make sense. I think we should be careful here so that appropriate standards and limits are set. ]

Veterans Day

·       A set of dog tags, a clipping, a father revealed: A reflection on Veterans Day of a son trying to reconcile two very different sides of his father. [Boston Globe]

·      On Veterans Day, feeling the cost of war: Afghanistan was abstract, until my friend’s flag-draped coffin came home. [LA Times]

·      Healing our troubled vets: Suicide, homelessness, stress disorders — caring for today’s veterans will be a long-term and costly commitment. [LA Times]

·       Homeless on Veterans Day: Washington and communities across the country should support a national drive to end veteran homelessness. [New York Times] 

·      Recalling ‘Mother of Normandy’: A Frenchwoman dedicated herself to tending the graves of American troops. [Philadelphia Inquirer]

·      Veterans Day [USA Today]

·    Standing tall in harm’s way: Still Army-strong – The image of a traumatized military stemming from Fort Hood doesn’t square with reality. [Washington Post]

·    Taking care of our military: It used to be said that for kids, the military took care of its own. Now help is needed. [Washington Post]

Cruel and unusual: No life without parole for juvenile offenders The Supreme Court should rule against life without parole for juvenile offenders. [Houston Chronicle]

A National Disgrace: A court’s overt disregard for the central role of judges in policing executive branch excesses has frightening implications for safeguarding civil liberties. [New York Times]

Obama’s duty to tamp down anti-Muslim bias [Atlanta Journal-Constitution]

Dithering heights: Filibustering Republicans and three Democratic enablers bring the Senate to a halt. [Washington Post]

Pawlenty: GOP’s newest ideological enforcer [Boston Globe]

A comprehensive solution to combustible markets: Barney Frank delineates his committee’s approach to preventing another financial collapse. [Boston Globe]

Cruel, Pointless Games: The case of the American hikers is only the latest example of the Iranian government misusing and undermining its judiciary for political ends. [New York Times]

Bodyguard of lies: The House health-reform bill looked better after I heard a GOP blizzard of falsehoods about it. [Washington Post]

No fount of wisdom for GOP: Health care is much too complicated for
Congress [Chicago Tribune]

The W. and Bill no-show: It’s too bad the two former presidents pulled out of two scheduled evenings of policy debates, er, policy discussions. [LA Times]

After the wall, Bush was right: The celebrations of the 20th  anniversary of the fall of the Berlin Wall this week failed to note that reunification of Germany was once a topic of great contention. [Boston Globe]

East Germans feel nostalgic for the bad old days [Chicago Tribune]

Army must be on guard for extremism: For Maj. Nidal Hasan, religion might just have been the lens through which his inner disquiet focused itself. [LA Times]

Fort Hood tragedy: Terror or typical workplace violence? [USA Today]

China, the U.S. and Taiwan: The U.S. could use arms sales as leverage to ease tensions between mainland China and Taiwan, pave the way for closer Sino-American ties and promote peace and stability in Asia. [LA Times]

‘One child’ horrors: Chinese government policy is leading to forced
abortions. [Washington Post]

Kabul, Taliban are talking: Karzai’s government is reaching out to the
insurgents – with U.S. support. [Philadelphia Inquirer]

A little steel, please: Afghanistan strategy could use a little passion from a professorial president. [Washington Post]

The Trouble With ‘Zero Tolerance’: Schools should not be criminalizing students for what are essentially normal childhood behaviors. [New York Times]

Getting in holiday spirit when out of work [Chicago Tribune]

Trucks, Trains and Trees: Without a new system for economic development in the timber-rich tropics, the only Amazon your grandchildren will ever know ends in dot-com and sells books. [New York Times]

Let’s end the War on Drugs [Atlanta Journal-Constitution]

Growth, at last [Chicago Tribune]

Too Little of a Good Thing: The Obama stimulus plan is helping, but it not nearly enough. Unless something changes, high unemployment will continue for years to come. [New York Times]

Six Tests for Equality and Fairness: Political battles in six jurisdictions could have a profound impact on whether the United States will extend the right to marry to same-sex couples. [New York Times]

So what if they promote it? Let’s suppose, for a moment, that conservative critics are correct: Gay educators want to “promote homosexuality” in American schools. [Philadelphia Inquirer]

Police these pills and powders: Congress should give the FDA the power it now lacks to regulate the dietary supplements industry. [Boston Globe]

Don’t count illegal immigrants? That doesn’t add up [LA Times]

‘Public option’ politics: The government-run option is a good compromise, but lawmakers avoided dealing with its true cost. [LA Times]

What’s next for health care: The battle now is not about whether to pass a bill, it’s over how to define the product. [Washington Post]

Adrift in an ocean of complexity: The important work of being informed about public issues has been crowded out of our lives at the very time that big money has found a way to insinuate itself into nearly every cavity of government. [Boston Globe]

Saving the news [Chicago Tribune]

The Court and Your Savings: Congress wisely put limits on the ability of mutual funds to overcharge investors. The Supreme Court needs to give the law the power that Congress intended. [New York Times]

Superpowers with super problems: Most Russians are peculiarly willing to accept their place. This is a horrifying idea to most Americans, who have deeply absorbed our sense of a Jeffersonian democracy. [Boston Globe]

Afghanistan’s drug war: The farmers aren’t the enemy – Opium cultivation and heroin production fuel corruption and aid the Taliban, but targeting the growers isn’t the answer. [LA Times]

Inside Iran’s opposition: Even if its leaders supplant the current regime, the biggest changes might be of style. [Washington Post]

Our sense of troubled normalcy returns: One year after the financial panic was at full bore the US economy is more shackled than ever to a military budget, which is money spent, for all its benefits, on death. [Boston Globe]

We’re killing communication: At 78 years old, I can authoritatively say that ‘talking’ isn’t what it used to be [USA Today]

The Shepard Fairey-AP case: A clearer picture: The dispute over the popular Obama poster gives the courts a chance to better explain what is fair use of creative works. [LA Times]

Cape Wind: The Wampanoag tribes’ attempt to block a clean energy project off the Massachusetts coast should be rejected by the responsible federal and state officials. [New York Times]

Wind power might blow a hole in bird populations: Some species will not nest near the turbines, while eagles, hawks and migratory flocks can be cut down by the spinning blades. [LA Times]

Shale game: A boom in natural gas drilling in Pennsylvania will ease energy demands and boost the state economy. But there’s reason to be concerned that environmental regulators won’t be able to keep up with this new gold rush. [Philadelphia Inquirer]

Science, faith used to be allies: Tellingly, President Obama’s pick to head the National Institutes of Health — Francis Collins — touts this symbiotic relationship today. In recent years, some Americans have come to view science and religion as consistent antagonists, butting heads over everything from the origin of the cosmos to when human life begins (abortion) and when it ends (euthanasia). [USA
Today]  

A year ago, New York State joined nine other Eastern states from Maryland to Maine in an innovative program to control greenhouse gases by charging power plants a fee to emit carbon dioxide. Nine of the 10 agreed to use the proceeds exclusively for renewable energy, advanced technologies and other programs to address the challenge of global warming. New York did not . . .   

Now Gov. David Paterson has announced that he plans to take what is left in the fund, about $90 million, and use it to help close the state’s yawning budget deficit. The governor is desperate for  money: programs large and small are being slashed — including health care and education — and it can be fairly argued that nothing should be off-limits. That said, we strongly hope that the other states hold the line. We also urge Mr. Paterson not to make this a habit. . .  

[AO: I beg to disagree with the New York Times on this matter. Indeed, I urge Mr. Paterson and other governors to continue to make prudent decisions. When faced with ensuring that funds are available to provide necessary healthcare or continue essential education of our children, if finds are available in another program that does not present similar urgency, governors must make the appropriate decision to fund the higher priority necessities. Of course, governors should not make a habit of this. Ideally, governors will take steps to increase funding to the raided programs when the state’s budget is one again healthy. However, in a midst of a recession or depression, when people are going without needed healthcare and education of our children is at risk, money should not be expended on lower priority projects.]

What can government do to crank up America’s creaky job machine? We’ll be arguing ferociously about that in coming months, and the answer, frankly, isn’t clear. Die-hard Keynesians insist that only more government spending and tax cuts will accelerate job growth. But many other economists fear that exploding federal debt — incurred partly to pay for more spending and tax cuts — could trigger a new crisis that would destroy jobs. . .

Actually, there is no “right” answer; the multiplier will vary depending on economic circumstances. In this case, the Obama administration is more plausible than its critics. In early 2009, consumer and business spending was collapsing. The stimulus has helped stabilize the economy, though it hasn’t been the most powerful stabilizer. (The Federal Reserve played that role.) It has saved jobs that otherwise would have been lost. Interest rates didn’t rise. But just because the earlier stimulus was justified doesn’t mean that another would be, because circumstances are changing. . .  

Economists Mishel and Rogoff frame the debate, the first impatient, the second prudent. A middle way would be to scour government for policies that discourage job creation.   

Consider the Environmental Protection Agency’s recent proposal requiring permits for large industrial facilities emitting 25,000 tons of greenhouse gases annually. New plants or expansions would need permits demonstrating they’re using “the best practices and
technologies” (whatever they might be) to minimize six greenhouse gases. Permits would be granted on a case-by-case basis; the proposed rule is 416 pages of dense legalese.   

How could this promote investment and job creation, except for lawyers and consultants?  

[AO: Right. How could this promote investment and job creation except for lawyers, consultants, construction companies, researchers, laborers, and others? Of course, my point is not simply that jobs that would be created by companies seeking to comply with environmental regulation will go well beyond consultants and lawyers. No, the more important point is that you can’t solve one problem, here lack of jobs, by creating other problems, whether they be environmental or otherwise. If we follow the logic of the op-ed, we should eliminate occupational health laws. See, if we didn’t care so much about how many people die during building construction we could employ more people in the building industry as costs are driven down due to construction companies having to take less precautions. But why stop there: next we could eliminate the FDA. Why limit drug companies from producing and selling? After all, manufacturing and selling drugs will lead to more jobs! As you can see, in our attempt to create more jobs we cannot simply abandon all other safeguards as Samuelson in the Washington Post implies we should.]

A New Deal for Recovery: Break the cycle of high unemployment and income stagnation with public investment. [Washington Post]

The essence of diplomatic engagement: The president’s critics are misguided in decrying his willingness for dialogue with adversaries. [Boston Globe]

Comedy catches up with Obama [Chicago Tribune]

No peace in the Swat Valley: Its residents remain trapped between Pakistan’s army and the Taliban. [LA Times]

Trusting the blogosphere: Is the FTC’s focus on enforcing Internet advertising standards more heavy-handed than with traditional media? [LA Times]

Bleeding Holders of Debit Cards Dry: Congress should act to rein in banks and their overdraft policy abuses. [New York Times]

The Mojave cross case: Editorial: Will the Supreme Court stand up for the 1st Amendment? [LA Times]

The Constitution and the Cross: The Supreme Court should rule that a large cross that has been placed on federal land in California violates the establishment clause of the First Amendment. [New York Times]

Nominate, Vote, Wait: Slow-walking nominations is a bipartisan sport, and now it’s Obama’s turn to suffer. [Washington Post]

Our Three Bombs: Today’s youth are growing up in the shadow of three bombs — the nuclear, debt and climate bombs — any one of which could go off and set in motion a radical change in their lives. [New York Times]

Russia’s Silent War: Democracy can’t flourish when the pursuit of journalism carries an informal death penalty. [Washington Post]

More time for learning: A longer school day provides one way to bolster the nation’s failing urban public schools. [Philadelphia Inquirer]

Gourmet Magazine, 1941-2009: A recipe for obsolescence – A recipe for Gourmet’s fading importance on the culinary magazine scene. [Boston Globe]

Health care for all — even Republicans [Chicago Tribune]

A Good Return on Investment: Congress could help rescue struggling families by putting money into the National Housing Trust Fund, which was signed into law in 2008 but has never been financed. [New York Times]

Mortgage predators: Many of the same sleazy operators who helped fuel the real estate bubble through dubious subprime lending practices are now taking advantage of homeowners through “foreclosure-rescue” scams. [Philadelphia Inquirer]