Month: October 2010

There's something deeply unsettling – perhaps because I'm a Polack, or maybe this applies more broadly – about Germans talking about race, cultural differences, and how people of different nationalities can best get along. Sorry guys. I'm sure Germans hate hearing this with a passion, but…too soon. I know, I know. It was 60-plus years ago. But Germany may have permanently forfeited its right to lecture the rest of us on assimilating religious and ethnic minorities.

That said, I noted with great interest these comments from Chancellor Merkel over the weekend, echoing sentiments she has been expressing more often lately:

"The approach of saying, 'Well, let's just go for a multicultural society, let's coexist and enjoy each other,' this very approach has failed, absolutely failed," she said…"We've all understood now that immigrants are a part of our country, (but) they have to speak our language, they (to) have receive an education here," Merkel told CNN's "Connect the World" program September 27.

Has multiculturalism been a failure? Well, yes, inasmuch as tolerance of different cultures within the same borders is nonexistent outside of the western world and very, very poor within it. Sure, the U.S. or Germany probably do a better job of having diverse ethnicities get along than, say, Sudan or anywhere in Central Asia or the Middle East, but we still suck at it. The U.S. has a serious race problem and a level of xenophobia that looks tame only when compared to most of Europe.

But has multiculturalism failed so clearly that the idea itself is a failure?
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This is the difference between saying something hasn't worked and that it cannot work. In fifteen years of thinking about this question I haven't come to any useful conclusions. I understand why forced assimilation is both undesirable and infeasible. At the same time, I think I'm to the right of most of my ideological brethren in that I also readily admit the problems caused by too little assimilation. On the one end of the spectrum you have a concerted effort to erase the cultural identity from different groups of people and on the other you have a permanent, ghettoized underclass that is there-but-not-really-there, hidden away in the shadows of mainstream society.

The real problem as I see it is that I don't think many people – America certainly isn't exceptional on this point – have the cognitive capability to appreciate/respect marked cultural differences without seeing the members of those groups as "others." The average person in the U.S., for example, understands that immigration is a permanent feature of American society and will accept, perhaps grudgingly, that different people will celebrate "weird" ethnic holidays and eat different food and generally not be the same as white people in rural Kansas. But that same person struggles, I think, to see immigrants as fundamentally the same – every bit as American as you or I or apple pie – when they talk, look, dress, act, and live differently. Some people can handle that; I don't have faith that their numbers are very large relative to the size of our country.

So even if it's Right and even if people approach the issue with good intentions, I think multiculturalism has failed, as the Chancellor points out, and will continue to fail as long as people remain incapable of seeing their neighbors as simultaneously very different and fundamentally the same. Adults should be able to handle that kind of higher-level thinking but it does not appear that they can. I guess that we will continue our futile, counterproductive practice in the West of lashing out at people who look, talk, and believe differently for refusing to assimilate, thereby making it substantially more difficult for them to do so…

not to mention less likely.

It's a great system. It's working well for Germany's Muslims, not to mention Latinos in the U.S.

Michael Barone has an interesting if shallow piece about Indiana Governor Mitch Daniels as a GOP presidential contender for 2012. I firmly believe that Daniels is the only Republican who could plausibly beat Obama. While the casual observer might consider Obama eminently beatable at the moment, incumbency is a powerful advantage and being unpopular doesn't matter as much if the opposition can't field a good candidate (see 2004). Daniels' great political asset, the one that places him head and shoulders above the sad Republican pack, is the fact that he looks and sounds like a normal human being.
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He always, and I mean always, sounds like he knows what he's talking about. He sounds like he went to college and might even read books in his leisure time. The same can probably be said about Mitt Romney, but unlike Daniels he comes off as fake, plastic, and insincere. Whether he has learned it through diligent practice or was lucky enough to be born with the skill, Daniels has that widely coveted ability to look and sound natural, like a Normal Guy.

Because most voters make a superficial investment in electoral politics at best, these traits make Daniels extremely popular in Indiana even as Obama won the state in 2008. Democrats and Independents, at least the kind who don't bother learning anything about a candidate's record, are easily won over by Daniels' earnest, not-too-folksy Straight Talk.

Think of a younger version of John McCain (circa 2002, not the embarrassing thing we saw in 2008) with better camera skills and more money.

Though Daniels could conceivably beat Obama, Barone glosses over the obvious fact that he probably can't win a Republican primary.
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Teabaggers, Glenn Beck fans, Evangelicals, neocons, and the various other inmates in the GOP asylum will tear this guy to pieces. Despite being substantially conservative on both fiscal and social issues (he famously promised to shut down Planned Parenthood in his 2004 gubernatorial campaign, although he may have been lying to win over some Dobsonites) any internet item about Daniels is immediately filled with wingnuts declaring him a "RINO." His laid back, friendly doctor persona lacks the kind of WWF-style theatrics that play well with the GOP base. And for the kind of urban, college educated Republican who actually cares about issues (I know, there aren't many) Daniels may have a hard time living down some of his dubious decisions as Governor. I'm referring primarily to his deal to sell off Indiana toll roads to a Spanish corporation. The state netted $2 billion in cash for a 100 year lease, and toll revenues over that 100 years are projected at $80 billion. This is the exact same logic as taking out a payday loan. "I don't care if I have to pay back $3000 eventually – I get $500 right now!" More than one primary opponent will ask if that's the way Daniels approaches problem-solving.

2010 is going to be a good year for the GOP, but it is a harbinger of some very turbulent times in the party's near future. As Tea Party affiliated GOP strategist Richard Viguerie said recently, "We’re all on the same page until the polls close Nov. 2. (After that) a massive, almost historic battle for the heart and soul of the Republican Party begins.

" Pat Buchanan has also forecast a pitched battle for ideological dominance in the party. Teabaggers, emboldened by what they will perceive as a mandate in 2010, will demand that the entire party hop into their Crazymobile and mash the gas pedal to the floor. Fundies will try in vain to refocus the agenda to include their pet social issues. Neocons won't give an inch on the ridiculously expensive wars in the Middle East and the overseas American military empire in general. And the moderate quasi-libertarian faction will wonder why the party they knew is now composed mostly of people who are so obviously fucking insane.

With the great Democratic victories in 2006/2008 came the unhappy realization that they would have to attempt to govern their way out of a mess of epic proportions. Similarly, the GOP will celebrate its 2010 gains only until the realization sets in that no one has any idea which one of the five different claimants to the title of Leader of the Conservative Movement is in charge. Sometimes, as one party has discovered and the other will shortly, the worst thing is getting exactly what you ask for.

Anti-tax zealots are the Harlem Globetrotters of politics. Having mastered the arts of deception and loaded their repertoire with all kinds of sleight-of-hand tricks, they can magically turn any argument about taxes into a series of bewildering hypotheticals that collapse under the slightest hint of scrutiny. That just happens to be far more scrutiny than an American reader, TV viewer, or (especially) talk radio listener will impose on any argument that involves the appropriateness of our current levels of taxation.

Greg "Meadowlark" Mankiw puts on a legendary performance in his recent New York Times editorial, "I Can Afford Higher Taxes. But They’ll Make Me Work Less," which proceeds from the faulty premise that Greg Mankiw's work is socially useful and anyone gives a shit how much of it he chooses to do. Sweet Greg begins by placing himself in the income brackets that will be affected by the expiration of the Bush tax cuts, admitting that he won't exactly be suffering any hardships if that happens ("I have been very lucky nonetheless. Unlike many other Americans, I don’t have trouble making ends meet. Indeed, I could go so far as to say I am almost completely sated.") Honestly, that is more than most whining top-bracketers can do, so I suppose we should give him a little credit for admitting that.

Any semblance of dignity in his argument deteriorates rapidly thereafter.

Suppose that some editor offered me $1,000 to write an article. If there were no taxes of any kind, this $1,000 of income would translate into $1,000 in extra saving. If I invested it in the stock of a company that earned, say, 8 percent a year on its capital, then 30 years from now, when I pass on, my children would inherit about $10,000.

Now let’s put taxes into the calculus. First, assuming that the Bush tax cuts expire, I would pay 39.6 percent in federal income taxes on that extra income. Beyond that, the phaseout of deductions adds 1.2 percentage points to my effective marginal tax rate. I also pay Medicare tax, which the recent health care bill is raising to 3.8 percent, starting in 2013. And in Massachusetts, I pay 5.3 percent in state income taxes, part of which I get back as a federal deduction. Putting all those taxes together, that $1,000 of pretax income becomes only $523 of saving.

And that saving no longer earns 8 percent. First, the corporation in which I have invested pays a 35 percent corporate tax on its earnings. So I get only 5.2 percent in dividends and capital gains. Then, on that income, I pay taxes at the federal and state level. As a result, I earn about 4 percent after taxes, and the $523 in saving grows to $1,700 after 30 years.

Most people don't want to see how magic tricks are performed. It takes away the sense of mystery and with it some of the enjoyment. If you are one of those people, look away, for I am about to pull back the curtain on Mankiw the Magnificent's version of the water torture cell.

The key to many magic tricks is misdirection. The preceding sentence is an example of misdirection, because the key to Mankiw's trick is simply to lie and omit a lot of relevant information. Here's how the trick works:

I rarely find compelling anything Bob Herbert has to say, but today I came dangerously close to cut-and-pasting this in its entirety to ensure that you will read it. I'll restrict myself to an excerpt and some strong encouragement (really, read it).

We can go to war in Iraq and Afghanistan, and threaten to blow Iran off the face of the planet. We can conduct a nonstop campaign of drone and helicopter attacks in Pakistan and run a network of secret prisons around the world. We are the mightiest nation mankind has ever seen.

But we can’t seem to build a railroad tunnel to carry commuters between New Jersey and New York.

The United States is not just losing its capacity to do great things. It’s losing its soul. It’s speeding down an increasingly rubble-strewn path to a region where being second rate is good enough.

The railroad tunnel was the kind of infrastructure project that used to get done in the United States almost as a matter of routine. It was a big and expensive project, but the payoff would have been huge. It would have reduced congestion and pollution in the New York-New Jersey corridor. It would have generated economic activity and put thousands of people to work. It would have enabled twice as many passengers to ride the trains on that heavily traveled route between the two states.

The project had been in the works for 20 years, and ground had already been broken when the governor of New Jersey, Chris Christie, rejected the project on Thursday, saying that his state could not afford its share of the costs. Extreme pressure is being exerted from federal officials and others to get Mr. Christie to change his mind, but, as of now, the project is a no-go.

This is a railroad tunnel we’re talking about. We’re not trying to go to the Moon. This is not the Manhattan Project. It’s a railroad tunnel that’s needed to take people back and forth to work and to ease the pressure on the existing tunnel, a wilting two-track facility that’s about 100 years old. What is the matter with us?

I wrote about this exact topic back in March in response to the stimulus bill's curious lack of emphasis on repairing our nation's crumbling basic infrastructure. If anything, Herbert understates the problem. It isn't merely that we can't build a new railroad tunnel; we can't even keep what we have from falling apart. At one time we didn't think any challenge – technological, economic, military, or social – was too big. Now, in the misguided belief that penny-pinching is going to solve our problems, everything is too big.

How pathetic is this? There is a fine line between American Exceptionalism – the swaggering hubris that accomplishes nothing positive – and a healthy optimism. Everywhere we see the signs not only of three decades of lousy political leadership but of giving up anything resembling concern (let alone hope) for the future. We gut forward-looking investments like education and healthcare because we don't give a flying shit about tomorrow. We hear nothing except how we can't afford anything…and who among our neighbors we should blame (Unions! Welfare queens! Mexicans! The elderly! Greedy GM retirees! Teachers! Doctors! Lawyers! EVERYONE!!) Of course we believe we can't accomplish simple goals when we're bombarded with a carefully orchestrated campaign to make us hate each other.

To paraphrase Jimmy Carter's famously unsuccessful speech, we've sunk into a deep malaise.** It's so deep that keeping a public school open or fixing century-old urban infrastructure seems impossible. And there's no need to do any dramatic soul-searching to figure out why and how it happened. Generally speaking, when I can plausibly tell a group of people that their pessimism has gone too far, it's not a good sign. It's time to face the fact that we could build the stupid tunnel if we wanted to, just like we could give everyone healthcare, old age financial security, or a decent education if we wanted to. The problem is that we don't want to. We don't want to because we're depressed, because we're constantly told we can't, and because we don't give enough of a crap about one another to care who goes without what.

**If you're ever in a trivia contest, note that the word "malaise" appears nowhere in Carter's "Malaise speech."

How does one explain a concept like banking to a small child? If your education was anything like mine, the first time you encountered the concept it was explained with very basic hypotheticals.

Suppose Mary earns $100 and puts it in the bank. The bank has to hold onto her money for her, but they know that Mary probably won't want to take out the whole $100 anytime soon. So they loan from Mary's money to Bob, and they charge Bob "interest.

" Bob pays back $11. Mary's $100 is safe and the bank has made $1. Capitalism for tots.

This oversimplification is an effective way to explain banking to a 6 year old (or, as I've seen in macroeconomics textbooks, concepts like reserve requirements to 18 year old). I think it underscores an important point that seems very far removed from the minds of most people who think about abstract things like "the housing crisis", bank bailouts, and foreclosures. When we borrow money – and I say "we" because I doubt many of us go without a credit card, an auto loan, a student loan, or a mortgage – the bank is giving us someone else's money. We think of it more often than not as The Bank's Money, but the bank has no inherent resources independent of what it can convince customers and investors to deposit with it. You already know this, but I'd be surprised if many people thought about it very often.

When I read about things like "strategic default" – defaulting on a mortgage when the value of the property collapses even though the borrower can afford to continue making payments – it is particularly important to keep the basics of lending in mind. While I am among the most enthusiastic critics of our financial system and the ethics of private enterprise in this country as a whole, it is difficult to understand how responding with equally dubious ethics will lead to better outcomes for any of us:

Jeff Horton, a 33-year-old Orlando, Fla., technology manager, is among those who recently decided to take the step.
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He told his lender that he's done making payments on the condo he bought in 2005 and the home he bought in 2007, because he wants to move from Florida and can't sell or rent the properties at a price nearly high enough to cover his payments.
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Jeff Horton, a 33-year-old Orlando, Fla., technology manager, is among those who recently decided to take the step. He told his lender that he's done making payments on the condo he bought in 2005 and the home he bought in 2007, because he wants to move from Florida and can't sell or rent the properties at a price nearly high enough to cover his payments. "Life is too short," said Horton, who has mortgages totaling about $400,000 with Bank of America — about twice as much as he thinks he would get if he could sell the property. He says he has little choice because the bank has refused to refinance the mortgages or adjust original terms…"I felt guilty at first," said Horton. "It all stopped when I saw them take $90 million in executive bonuses. They take bailout money and do nothing for the little guy. They wouldn't do anything for me."

I applaud Mr. Horton's remarkable skill at rationalizing his selfish behavior. Nonetheless, to describe this approach as short-sighted would be an understatement. In whose interest is this "strategic" default? Mr. Horton won't be getting another loan anytime soon. The bank raises the cost of borrowing to everyone – including those credit cards Horton likely uses to make ends meet – to cover its losses on the defaulted loans. And if enough people engage in this behavior, the government has to step in, through either the political process or FDIC, to cover what depositors are owed.

I would prefer that We maintain the moral high ground in this crisis. Banks have only themselves to blame for their lack of ethics, abandonment of lending standards, and borderline sociopathic inability to accept responsibility for their actions. I understand that when people cannot pay a loan they are going to default on it. The question is, are we at a place as a society at which it's OK to blow off an obligation just because we no longer feel like repaying it? I have no sympathy for a bank that lends money to some yahoo who quite obviously has no hope of paying it back. That said, I have a difficult time mustering sympathy for a borrower who makes an investment – using someone else's money, mind you – and then expects to be absolved of the obligation when the investment loses its value.

When the Democratic Party fell under the spell of the Clintons and the Democratic Leadership Council in the early 1990s, American politics ceased to have two opposing sides on free trade and most other major economic issues. We have two parties that quibble on the margins – Should we cut everyone's taxes all the time or just 98% of the country's taxes most of the time? – but no meaningful disagreements over the free market, go-where-labor-is-cheapest policies that have taken the opportunities for non-college educated Americans to earn a decent living overseas to China, Mexico, India, and elsewhere.

As is typical of American politics, we deluded ourselves into thinking that a painfully obvious outcome from NAFTA and other free trade policies – a large pool of people with less than a college degree either unemployed or working unskilled service industry jobs – would not happen. Those readers old enough to remember the Clinton campaign in 1992 will recall that education would make all young Americans hi-tech wizards (because that kind of work will never be done overseas!) and older laid-off workers would be retrained (in some vague and unspecified way) and made useful in the New Economy. Perhaps you recall the "Silver Bullet" speech from the TV show The West Wing, which was Clintonomics in a nutshell. Let the jobs go, we'll just focus on getting everyone up to speed for the newer, better jobs that await us.

The problem, of course, is that we can retrain people until the cows come home and it won't matter because the jobs aren't there. We keep adding more people to the game of musical chairs, and if the number of chairs doesn't increase it really doesn't matter how quick the players are. So when the White House announces the thousandth "job training initiative" of the last 20 years in response to the current levels of unemployment it is hard not to laugh. Retraining for what? The stated goal is to match the unemployed with the needs of the major companies behind the plans, including Gap and McDonald's. It's sad that people need to be retrained to reach the level of competence necessary to fold sweaters at Old Navy or supervise high schoolers at McDonald's. Anyone else wonder if the difficulty in filling those positions, if indeed there is any, has anything to do with the fact that an adult can't live off of the money they're paying? Can't quite "retrain" ourselves around that problem, can we.

If the government spent half as much time trying to create decent jobs as it has spent teaching the unemployed to run around in circles or master the skills necessary for $9/hr no-benefit jobs, we might actually find our way out of this mess at some point. But since the odds of that happening are so slim, I guess we'll just piss away another couple hundred million retraining people for jobs that aren't there.