Politics Night: Wikileaks

We had our third politics night on Tuesday (11/30/2010). We discussed Wikileaks. I will summarize my position. Others can add theirs in the comments if they so choose.

Let me start by saying two things about state secrets that do not directly relate to Wikileaks. First, I think people in government abuse state secrets privileges (see my post on Claim of Privilege). So I am not a zealot on protecting classified documents. And related to that, I think there can be really important instances when leaked documents tell the public what they need to know but the government has been hiding from them.

Now, as to Wikileaks, I don't think that this last release was necessary nor has it been helpful at all. As many commentators have already said, the release was gossip and nothing more. And that gossip hasn't told the public anything useful, but it has potentially hurt our ability to work with partners like Russia, Pakistan, and Saudi Arabia.

Governments should be able to talk privately. Of course, in the end, their decisions, and the information that went into making those decisions should be made public. But we don't need to know all private conversations.

I don't remember the previous releases too well, except that in general they didn't say a whole lot that we didn't already know. I think there were certain events that we didn't know about, but overall, there didn't seem to be a message that the government was hiding that came out in the releases.

I believe that the reason the Wikileaks information hasn't been that helpful in general stems from Julian Assange's motives. If we are to believe him, his goal is to make everything government does public. If we are to believe others, he just wants to embarrass the US. Either way, these intentions have lead, and will continue to lead to, unedited information dumps that are mostly useless but sometimes harmful.

When someone's intention is to highlight wrongdoing or bad decision-making, then we are likely to get information that furthers those goals. But when one's motives come from an absurd notion about democracy, or just a hatred of the US, then we will get a lot of information that is not helpful for the public to know and in some cases is harmful.

Update:
One of the Politics Night faithful pointed me to a debate between Glenn Greenwald and Steven Aftergood on Democracy Now. Also, so that Julian Assange can speak for himself, here is a link to some of the interviews with him recently.

Shame HuffPo

While I mostly blame cable news for ruining constructive debate in our country, there are definitely on-line news sources that are doing their part. I have seen Huffington Post a number of times, and it always enrages me, present a headline and even a description of someone's talking points that is incorrect and needlessly inflamatory.

In this example, HuffPo says that Juan Williams is saying unemployment benefits weaken regular work values. But in watching the video, I don't see Williams saying that at all. He says that when a person chooses to stay home instead of work, it erodes their work values. And while he might acknowledge that some people are incentivized against working by the extension of unemployment benefits, I don't see him accepting that argument at large.

I know that as Democrats we like to think that only Fox News distorts what people say. But clearly, that isn't the case.

Does the Punishment Fit the Crime?

Tom Delay
I’m not sure how I feel about the Delay conviction. In fact, I think I agree with parts of this Wall Street Journal editorial.

Tom Delay certainly seems to have violated the spirit of the campaign finance rules. But it seems like he found a way around them so that he couldn't be convicted of actually violating them.

But I am not convinced that he is guilty of money laundering; at least I don’t think his crime fits in with the purpose (or spirit) of the money laundering law. But if there are experience lawyers out there that feel otherwise, feel free to convince me.

On a related note, I discovered a really good blog on New York State politics the day it shut down. Oh well. Here is a really good post on Joe Bruno's legal issues.

Charles Rangel
I think the Rangel case is interesting if not a little frustrating. I agree with the people that say his crimes don't seem to fit with previous censures. However, his crimes seem worse than behavior that received reprimands.

And as bad as Rangel's actions were, I can't believe for one minute that he is the only one of the 535 members that have used their stationary for private fund-raising or forgotten to count rental income from second or third houses in their taxes. (The rent stabilized apartments situation is probably unique to New Yorkers.)

Basically, I feel that the House is making an example out of Rangel - Democrats to pretend they are tough on ethics violations and Republicans to make a Democrat look bad. But really, there are probably other examples of similar bad behavior that are missed or ignored. In other words, censure only seems strong because of how bad they probably are in cracking down on all violators.

To conclude, to the extent that justice was served in these two examples, it was imperfect justice. Maybe that is all we can hope for.

If I were President: Budget Deficit

I played the NY Times' Budget Puzzle. Here is my first attempt. I fixed the deficit with 43% tax increases and 57% spending cuts. Again, this was just a first cut. I basically went through and checked things I could live with. But I didn't do a great job of comparing all of the options and only choosing the least painful ones. I was surprised how easy it was. Of course, capping Medicare really helped (saving $562 billion!).

It is also surprising how many reasonable things I did not do, which shows that there is wiggle room. I did not choose to decrease the size of the Navy nor reduce Iraq and Afghanistan troop levels to 60,000 or (gasp) 30,000. I did not increase the Medicare eligibility age or the Social Security retirement age. I choose a moderate estate tax proposal (Obama's instead of Kyl's or Clinton's). But since I did choose the millionaire's tax, some of the things listed above could offset that if it is unreasonable.

CEO Pay

A colleague and I were debating about CEO compensation. We were actually talking about the music industry and my colleague suggested that the decrease in revenues could be mitigated if the CEO took a pay cut.

My response, and I am confident that I am right about this, was that a cut in the CEO's salary would have little effect on any companies' overall profit picture. I offered him, and now I offer you dear reader, this challenge: Find me a CEO that makes in salary more than 0.1% of the companies' revenue.

In fact, I'll even give you a head start. This page on the AFL/CIO website lists CEO salaries. Once you have that, you can find the companies' revenue by searching the company name and "annual report".

I am willing to bet though that all CEO salaries will be well below the 0.1% of revenue. In fact, I looked at one random company today and found that the CEO was making 0.03% of revenue.

With salaries this low as a percentage of revenue, cuts to their salaries will not help with budget problems. If the company sees a decrease in revenue of 3%, having the CEO work for free will only cover 1% of that gap. Therefore, even that big cut will only be symbolic.

Now, that isn't to say that symbolic gestures are meaningless. I do believe that symbols can be very important. A salary that is 0.03% of revenue can still be considered obscene and a big cut can send an important message. So I am not suggesting that it shouldn't happen in a company in difficult times. I am just saying that it will do very little for the companies fiscal problems.

Some Music and Some Econ 101

This weekend, I had a pleasant debate about the music industry and downloading of music for free. My overall point was that downloading music is and should be illegal and the government should work to increase enforcement. While I do think the record industry has been slow to evolve with new technology, I don't think stealing music is a good (moral or effective) way to force the industry to change.

Although I do like to recap arguments on my blog sometimes - with the intention of synthesizing my thoughts, not to get the last word - this is not the point of this post. As I was falling asleep last night thinking about the debate, I realized a way to better show a fear I have with the illegal downloading of music - through a supply and demand graph!

One of the points I made was that in the market place, consumers have the choice to show their dissatisfaction with a product by refusing to purchase it. I argued that it gives the consumer an unfair advantage in the marketplace if they can get the product without paying for it (fairness within a transaction is necessary for a well-functioning market system - I can explain further if anyone wants me to). This will drive the price down to an unsustainable level.


Here is where the economics comes in. For a given product, consumers are willing to pay a certain price to have that product as opposed to not having it. That price is shown by the original equilibrium, P1, Q1. When a consumer can choose to have the product without paying for it, or have the product and pay for it, their price is no longer the value of the product, but the value of feeling good about how they obtained the product. Clearly that price will be much less than the previous price.

What you see in this scenario is a shift in the demand curve from D1 to D2. And when the demand curve shifts back, you see a lower equilibrium price, but more importantly, a lower quantity. This means that in this scenario, prices decrease and less music is produced. And I don't think anyone wants that.

A colleague of mine theorized that getting free music mitigates - possibly completely - this shift in the demand curve. He thinks that getting free music leads the consumer to purchase new music. I think this argument is weak and an attempt at justification. Consumers are not so irrational that they spend the same amount of money for the same quantity of music whether there is the option to steal music or not. And if it mitigates but not completely, then all we are talking about is magnitude - but the direction of the effect is still the same.

I also think a musician should have the ability to choose to make that investment instead of consumers forcing that situation on them.

Anyway, enjoy the flash back to Econ 101. And feel free to challenge my model or my assumptions.

My Ignorance of Historians

In my post on Definitive Biographies, I remarked that I was skeptical of Jon Meacham's book on Andrew Jackson because he is a journalist and not a historian. I am embarrassed about my ignorance. I was right that he is not a historian but I had no idea how many of the great popular history writers are also not historians.

I only recently learned this fact that many of my favorite / respected authors of history do not have PhD's in history. David McCollough only has a BA in English Literature. Ron Chernow also has only a bachelor's degree (granted, I haven't read his stuff, but his book on Alexander Hamilton is on the top of my history list). Robert Caro has a degree in English. And Doris Kearns Goodwin has a PhD but in Government.

This article in the New York Review of Books, which by the way is a glowing review of Chernow's George Washington biography, explains this development over the last 50 years or so. It seems that historians are busy specializing in very specific issues and are mostly debating each other. While this is valuable for debates in history, it is usually not very accessible to a non-historian audience.

So Jon Meacham, I owe you an apology. And when I make time to read more biographies, I'll be sure to check out your book American Lion.

What A Liberal Would Have Done

I saw this post by James Galbraith on what Obama should have done to stem the financial crisis.

Law, policy and politics all pointed in one direction: turn the systemically dangerous banks over to Sheila Bair and the Federal Deposit Insurance Corporation. Insure the depositors, replace the management, fire the lobbyists, audit the books, prosecute the frauds, and restructure and downsize the institutions. The financial system would have been cleaned up. And the big bankers would have been beaten as a political force.

Team Obama did none of these things. Instead they announced "stress tests," plainly designed so as to obscure the banks' true condition. They pressured the Federal Accounting Standards Board to permit the banks to ignore the market value of their toxic assets. Management stayed in place. They prosecuted no one. The Fed cut the cost of funds to zero. The President justified all this by repeating, many times, that the goal of policy was "to get credit flowing again."

The banks threw a party. Reported profits soared, as did bonuses. With free funds, the banks could make money with no risk, by lending back to the Treasury. They could boom the stock market. They could make a mint on proprietary trading. Their losses on mortgages were concealed -- until the fact came out that they'd so neglected basic mortgage paperwork, as to be unable to foreclose in many cases, without the help of forged documents and perjured affidavits.

Maybe it wouldn't have been as easy as it sounds here, but the fact is that the bail-out plan was not successful and has not gotten us out of the woods. One of the reasons banks are able to report profits again is because much of their balance sheets are not properly valued. We see this with single-family mortgages, and we definitely see it with the multifamily stock.

The solution so far has been to be easy on banks, lest they fail. But while Obama is going easy, state and local governments - and homeowners and tenants - are paying the price. All so that we didn't have to take over the banks and be accused of being socialists. Except that happened anyway.

What Kind of Teacher?

This post is going to focus on how we recruit the best teachers. President Bush thought all we needed to do was make prospective teachers get degrees and certifications and take tests. This might require decent training and prevent some bad teachers, but it does not in itself recruit good teachers. Instead, we need to focus on incentives that would attract and retain more of the best and the brightest. Teaching can be an exciting and rewarding endeavor. But for public schools, we would need to change some things first.

Salary
Of course salary is a big issue. Granted, teachers, after a couple decades of service, do pretty well. However, I do think it is less than other occupations where workers have similar credentials. I also think though that salary isn't the only thing.

Flexibility
I am confident that most of us highly value flexibility in our jobs. We don't want rote tasks dictated to us from on high. Having direction is good. But no flexibility is bad. With teaching, the more strict curricula become, the less likely people are going to be to want to teach. Teachers should be told generally what the students are expected to learn, and they should be free to operate within that. We lose central control, but we would recruit better teachers. This is one of the reasons talented teachers choose independent / private schools; they have flexibility over curriculum.

Responsibility
With flexibility should come responsibility. A fairly recent David Brooks column has this quote that I agree with:

"What’s needed, Howard argues, is a great streamlining. He’s not calling for deregulation. It’s about giving teachers, doctors and officials the power to actually make decisions and then holding them accountable. Some of their choices will be wrong, Howard acknowledges, but it is better to live in an imperfect world of individual responsibility than it is to live within a dehumanizing legal thicket that seeks to eliminate risk through a tangle of micromanaging statutes."

For teachers, this specifically means eliminating tenure and using test scores and a lot of other measures to evaluate a teachers effectiveness.

Grow and Learn New Things
There are two other things people value in a job: the ability to gain new responsibilities and the ability to learn new things. For the former, there are some opportunities for teachers - move to administration or become a team leader / mentor. But that is about it. So if we want to attract and retain smart people in teaching, we should be heavy on the later. Staff development for teachers is not only good to keep teachers' knowledge up to date, but serves to recruit people to teaching that want to be lifelong learners. We should be prepared to spend a lot more on staff development.

What We Have Now
Instead of the above benefits, we have a system whose main attractions are summer vacations and job security. And when those are the main benefits, you don't attract the best and brightest.

The point isn't to disparage teachers. I do think that most of our teachers are capable, smart, and dedicated. The goal though is to replace the ones at the bottom of the curve with more people at the top of the curve. We can only do this by changing the incentives on the margins.

Many really smart people work in jobs where there is little security because they are confident in their ability and believe that they will have a boss will be reasonable and make the right decision in most cases. Teaching could be the same way. As for summers off - I would not argue that teachers do not deserve it. I just think that right now, absent incentives for more really good teachers, it attracts people to teaching for the wrong reasons.

I will say, and I think I have said it before, that the unions are a serious impediment. In other occupations as well, they go out of their way to protect people from management at all costs. But this means you are not rewarded for good performance and not punished for poor performance. Everyone moves along in a uniform system. This protects everyone, but does nothing to attract the best we can have.