4 more years

Barack Obama says a John McCain victory would amount to a third term of the Bush presidency. What he doesn’t say: an Obama victory would, too.

While both nominees love to talk about their big agendas for change, whoever wins will take office with their obligations defined and options constrained by what Bush dumps on their lap.

The focus right now – and probably for many months to come – is the bailout binge aimed at saving our financial system. All told, the government will likely put more than $1 trillion on the line (with hope the money will be recouped down the road).

Then there are the two wars, in Iraq and Afghanistan. The combined cost is fast approaching $1 trillion, too – and both will eat up the time and budgets of the next president.

Then there is also the prescription drug benefit Bush added to Medicare. It carries a projected price tag of nearly $700 billion over ten years and serves as a powerful reminder of how big – untenably big, many experts say – our entitlement programs have grown.

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As the candidates debate the nuances of their health care plans or tax cuts, consider:

How can you cut taxes when the government is so deep in the red? The budget deficit is projected to top $400 billion – and that was before the bailout.

How can you expand health care coverage when the country is broke? The federal debt is now expected to top $11 trillion by 2010.

How can you focus on “earmarks” and “waste” when everyone knows they make up a meaningless fraction of the federal budget?

How you tackle spending without a serious discussion of serious cuts to Medicare and Social Security, which account for 43.5 percent of federal spending?

How can you focus on anything but war, when you inherit two conflicts with outcomes that are very much in doubt? (U.S commanders say the war in Afghanistan is going worse then ever and will require many more troops to win.)

A lesson of the Bush binge is the awesome weight of the choice for president. His eight years of surprises shows that you never know exactly what you’re voting for.

He ran as a compassionate conservative who promised to restrain spending and practice a humble foreign policy. Instead, he launched two big wars and oversaw the biggest expansion of federal government in history.

Monolithic party views

...[I]n recent years...partisans have come to identify with their parties in much the manner that sports fans identify with their teams. The strong views they feel on many issues do not drive their party affiliation; it is their party affiliation that drives their strong views.

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There is a... piece of evidence that party identification rather than ideology is behind the growing polarization of the electorate: On a variety of unrelated issues -- gun control, the economy, war, same-sex marriage, abortion, the environment, the financial bailout -- the views of Republicans and Democrats have become increasingly monolithic. There is no reason someone who is against abortion should necessarily also be against gun control or for economic deregulation, but that is exactly what tends to happen among committed Republicans. Loyal Democrats have similarly monolithic views on unrelated issues.

"Party identification is part of your social identity, in the same way you relate to your religion or ethnic group or baseball team," said Gary C. Jacobson, a political scientist at the University of California at San Diego. This explains why, on a range of issues, partisans invariably feel their side can do nothing wrong and the other side can do nothing right. By contrast, moderates don't feel there is a yawning divide on issues because they don't identify with one party or another. Moderates, in other words, are like people who are uninterested in sports and roll their eyes when fans of opposing teams hurl abuse at each other.

The crisis is China's fault, too

In the United States, there were two key decisions. The first, in the 1970’s, deregulated commissions paid to stockbrokers. The second, in the 1990’s, removed the Glass-Steagall Act’s restrictions on mixing commercial and investment banking.

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Of equal importance were the rise of China and the decline of investment in Asia following the 1997-1998 financial crisis. With China saving nearly 50% of its GNP, all that money had to go somewhere. Much of it went into US treasuries and the obligations of Fannie Mae and Freddie Mac. This propped up the dollar and reduced the cost of borrowing for US households, encouraging them to live beyond their means. It also created a more buoyant market for the securities of Freddie and Fannie, feeding the originate-and-distribute machine.

Again, these were not outright policy mistakes. Lifting a billion Chinese out of poverty is arguably the single most important event in our lifetimes. The fact that the Fed responded quickly prevented the 2001 recession from worsening. But there were unintended consequences. The failure of US regulators to tighten capital and lending standards when abundant capital inflows combined with loose Fed policies ignited a furious credit boom. The failure of China to move more quickly to encourage higher domestic spending commensurate with its higher incomes added fuel to the fire.

Where the hell was Chris Dodd?

Senator Chris Dodd — formerly ranking member and now chairman of the Senate Banking Committee, with oversight over Freddie and Fannie — recently said on Bloomberg Television: “I have a lot of questions about where was the administration over the last eight years.”

Excuse me? Just where the hell were you, Senator? Oh, right. You were standing in line at the bank in order to deposit the political contributions Fannie and Freddie were lavishing upon you. At least they got their money’s worth — until the party ended and the American people got the bill.

Members of Congress — aided and abetted by their many waterbearers in the media — wonder why their collective approval rating is about on par with colon cancer’s. The reason is simple enough: Congress is the sick man of Washington; a textbook example of the truism that institutions tend to evolve in ways that benefit their elites, at the expense of the people they were created to serve.

U.S. trade with China has reduced prices and mitigated inequality

The [Christian Broda-John Romalis] paper, “Inequality and Prices: Does China Benefit the Poor in America?,” shows that from 1994 to 2005, much of the increase in U.S. income inequality was actually offset by a decline in the price index of the goods that poorer households consume. Inflation for the richest 10 percent of U.S. households, which tend to spend more on services, was 6 percent higher than inflation for the poorest 10 percent, which tend to spend more on nondurable goods, the type of goods often imported from China and sold at Wal-Mart.

Broda and Romalis found that in the sectors where Chinese imports have increased the most (especially nondurable goods such as canned food and clothing), prices have fallen dramatically. They estimate that about one-third of the price decline for the poor is directly associated with rising imports from China. “In the sectors where there is no Chinese presence,” Broda says, “inflation has been more than 20 percent.”

Where does Congress get the money to create jobs?

They won't get it from the Tooth Fairy or Santa Claus; they must get the money from taxpayers. That means if Congress collects $100 from a taxpayer for highway construction, he cannot use that $100 for some other expenditure that would have created a job. If Congress borrows the money for highway construction, it causes interest rates to be higher and therefore less job-creating investment. The bottom line is that Congress can only shift employment or unemployment but cannot create net new jobs.

Many politicians and pundits claim the credit crunch and high mortgage foreclosure rate is an example of market failure and want government to step in to bail out creditors and borrowers at the expense of taxpayers who prudently managed their affairs.

These financial problems are not market failures but government failure. The Community Reinvestment Act of 1977 is a federal law that intimidated lenders into offering credit throughout their entire market and discouraged them from restricting their credit services to low-risk markets, a practice sometimes called redlining. The Federal Reserve, keeping interest rates artificially low, gave buyers and builders incentive to buy and build, producing the housing bubble.

Lenders were willing to make creative interest-only loans, often high-risk "no doc" and "liar loans," to allow people to buy more housing than they could afford. Of course, with the expectation that housing prices will continue to rise, it was no problem for lenders and borrowers but housing prices began to fall, leaving some people with negative home equity and banks in trouble.

The credit crunch and foreclosure problems are failures of government policy. In fact, what we see now is a market correction to foolhardy government policy. Congress' move to bail out lenders and borrowers who made poor decisions will simply create incentives for people to make unwise decisions in the future.

Regulations spawn workarounds

Mindles H. Dreck via Tyler Cowen:

...regulation is often the derivative salesman's best friend. Complicated rules encourage complex transactions that seek to conceal or re-shape their true nature. Regulated entities create demand for complex derivatives that substitute proscribed risks for admitted risks. If a new risk is identified and prohibited, the market starts inventing instruments that get around it. There is no end to this process. Regulators have always had this perversely symbiotic relationship with Wall Street. And the same can be said for the ridiculously complicated federal taxation rules and increasingly byzantine Financial Accounting Standards, both of which have inspired massive derivative activity as the engineers find their way around the code maze.

Scientific Narrative

Because there are so many diverse forms, scholars often define story structure, known as narrative, by explaining what it is not. Exposition contrasts with narrative by being a simple, straightforward explanation, such as a list of facts or an encyclopedia entry. Another standard approach defines narrative as a series of causally linked events that unfold over time. A third definition hinges on the typical narrative’s subject matter: the interactions of intentional agents—characters with minds—who possess various motivations.

However narrative is defined, people know it when they feel it. Whether fiction or nonfiction, a narrative engages its audience through psychological realism—recognizable emotions and believable interactions among characters.

“Everyone has a natural detector for psychological realism,” says Raymond A. Mar, assistant professor of psychology at York University in Toronto. “We can tell when something rings false.”

But the best stories—those retold through generations and translated into other languages—do more than simply present a believable picture. These tales captivate their audience, whose emotions can be inextricably tied to those of the story’s characters. Such immersion is a state psychologists call “narrative transport.”

Researchers have only begun teasing out the relations among the variables that can initiate narrative transport. A 2004 study by psychologist Melanie C. Green, now at the University of North Carolina at Chapel Hill, showed that prior knowledge and life experience affected the immersive experience. Volunteers read a short story about a gay man attending his college fraternity’s reunion. Those who had friends or family members who were homosexual reported higher transportation, and they also perceived the story events, settings and characters to be more realistic. Transportation was also deeper for participants with past experiences in fraternities or sororities. “Familiarity helps, and a character to identify with helps,” Green explains.

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Empathy is part of the larger ability humans have to put themselves in another person’s shoes: we can attribute mental states—awareness, intent—to another entity. Theory of mind, as this trait is known, is crucial to social interaction and communal living—and to understanding stories.

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Perhaps because theory of mind is so vital to social living, once we possess it we tend to imagine minds everywhere, making stories out of everything. A classic 1944 study by Fritz Heider and Mary-Ann Simmel, then at Smith College, elegantly demonstrated this tendency. The psychologists showed people an animation of a pair of triangles and a circle moving around a square and asked the participants what was happening. The subjects described the scene as if the shapes had intentions and motivations—for example, “The circle is chasing the triangles.” Many studies since then have confirmed the human predilection to make characters and narratives out of whatever we see in the world around us.

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[Steven Pinker, a Harvard University evolutionary psychologist, in the April 2007 issue of Philosophy and Literature posits] that stories are an important tool for learning and for developing relationships with others in one’s social group. And most scientists are starting to agree: stories have such a powerful and universal appeal that the neurological roots of both telling tales and enjoying them are probably tied to crucial parts of our social cognition.

As our ancestors evolved to live in groups, the hypothesis goes, they had to make sense of increasingly complex social relationships. Living in a community requires keeping tabs on who the group members are and what they are doing. What better way to spread such information than through storytelling?

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Anthropologists note that storytelling could have also persisted in human culture because it promotes social cohesion among groups and serves as a valuable method to pass on knowledge to future generations. But some psychologists are starting to believe that stories have an important effect on individuals as well—the imaginary world may serve as a proving ground for vital social skills.

...common narrative themes reveal our basic wants and needs. “Narrative involves agents pursuing some goal,” says Patrick Colm Hogan, professor of English and comparative literature at the University of Connecticut. “The standard goals are partially a result of how our emotion systems are set up.”

It's not gouging

Shannon Love writes:

I’ll say it one more time for those who can’t be bothered to actually ask someone who owns a gas station. Gas stations set prices for the gas they sell today based on the wholesale price of the gas they will have to buy to replace it. Get it? The price you pay for a gallon today is the cost of the gallon the station will have buy to replace the one you just bought.

Gas stations sell gas at or near cost, so if they did not use replacement pricing any sudden spike in gas prices would shut them down and you couldn’t get any gas. I simply do not know why our public and private talking heads cannot understand and communicate this simple fact.

You won't get promoted by publishing negative results

Go to a bookstore, and look at the business shelves: you will find plenty of books telling you how to make your first million, or your first quarter-billion, etc. You will not be likely to find a book on "how I failed in business and in life"—though the second type of advice is vastly more informational, and typically less charlatanic. Indeed, the only popular such finance book I found that was not quacky in nature—on how someone lost his fortune—was both self-published and out of print. Even in academia, there is little room for promotion by publishing negative results—though these, are vastly informational and less marred with statistical biases of the kind we call data snooping.

Obama's voting record is anti-trade

Obama's voting record is more anti-trade than McCain's or even Biden's.

Where are the pro-Palin feminists?

...in a world where mainstream feminists almost unanimously backed Bill Clinton during the Paula Jones scandal and now excoriate McCain for choosing Palin, I'm not totally clear on what feminism entails -- if not simply support for the Democratic Party.

Less medical coverage=more happiness

We'd actually be better off if insurance companies reduced the portion of medical expenditures they pay for. Your monthly insurance payments would end up costing you less, and while you'd shell out more for hospital stays and other medical expenses if illness struck, well, at that point you wouldn't be healthy enough to enjoy spending the extra cash anyway.

McCain and Obama are both neglecting the problem

The trouble with casting medical care as a "right" is that this ignores how open-ended the "right" should be and how fulfilling it might compromise other "rights" and needs. What makes people healthy or unhealthy are personal habits, good or bad (diet, exercise, alcohol and drug use); genetic makeup, lucky or unlucky; and age. Health care, no matter how lavishly provided, can only partly compensate for these individual differences.

There is a basic dilemma that most Americans refuse to acknowledge. What we all want for ourselves and our families -- access to unlimited care paid for by someone else -- may be ruinous for us as a society. The crying need now is not to insure all the uninsured. This would be expensive (an additional $123 billion a year, estimates the Kaiser study) and would provide modest health gains at best. Two- fifths of the uninsured are young (19 to 34) and relatively healthy.

Sincere or hypocritical, they're all nauseating

Christopher Hitchens writes,

Interviewed by Rick Warren at the grotesque Saddleback megachurch a short while ago, Sen. Barack Obama announced that Jesus had died on the cross to redeem him personally. How he knew this he did not say. But it will make it exceedingly difficult for him, or his outriders and apologists, to ridicule Palin for her own ludicrous biblical literalist beliefs. She has inarticulately said that her gubernatorial work would be hampered "if the people of Alaska's heart isn't right with god." Her local shout-and-holler tabernacle apparently believes that Jews can be converted to Jesus and homosexuals can be "cured." I cannot wait to see Obama and Biden explain how this isn't the case or how it's much worse than, and quite different from, Obama's own raving and ranting pastor in Chicago or Biden's lifelong allegiance to the most anti-"choice" church on the planet. The difference, if there is one, is that Palin is probably sincere whereas the Democratic team is almost certainly hypocritical.

Victimizing the poor

With the exception of high-end footwear, more than 95% of the shoes Americans wear are produced outside the U.S. Yet the U.S. still imposes a tax on imported shoes that can reach as high as 67%, a legacy (believe it or not) of the Smoot-Hawley tariff of 1930. Shoe tariffs raise more money than auto tariffs, and the tax is applied most heavily on the lowest-priced imported footwear.

"This is the most regressive policy in America today," says Ed Gresser of the Progressive Policy Institute. "The biggest victims are poor, single mothers." He's right. The tariff steals about $5 billion a year from U.S. consumers, and a family that shops at Payless or Wal-Mart typically pays a $5 duty on a $15 pair of sneakers.

How to rank a nation's sporting prowess

Actually, if you rank a nation's sporting prowess by how many Olympic gold medals it wins per capita, Jamaica - which won 2.2 gold medals per 1 million inhabitants - is, hands down, the supreme sports power on the planet. China, with a population of 1.3 billion, ranks 47th, and the US, with 305 million people, 33rd. Such calculations may seem flippant, but they also point out the dubiousness of equating a country's Olympic performance with its standing as a nation - athletic or otherwise.

The reason Chinese athletes achieved such glory is not the general fitness and athletic talent of its people. Rather, it is China's large and expensive scouting and training system, reminiscent of those in the former Soviet Union and East Germany, that selects children as young as five for Olympic training and turns them into state-sponsored athletes. Also, particularly for this past Games, in which the host was determined to shine, the Chinese sports bureaucracy chose to target sports that offer relatively weak international competition.

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Meanwhile, however, the real China, in stark contrast to the Olympic China, exercises little and, perversely, seems to be getting fatter in the cities while remaining undernourished in the countryside. With spectacular images of the "Bird's Nest" and the "Water Cube" still lingering, it is easy to forget that most Chinese continue to live in rural areas, where poverty and malnourishment are commonplace. At the same time, in the burgeoning cities, American-style obesity has become a problem.