Month: December 2013

More goodies for the asset class in our broken economy: most federal housing subsidy goes to households over $100K

by David Atkins

Danny Vinik notes in Business Insider that most federal housing subsidies are going to those with household incomes over $100K, while a whopping $34 billion in subsidies are going to household over $200K. Needless to say, households making over $200K are in the top 5% of incomes nationally.

Here is the chart:

This is madness on so many levels. First, of course, is the fact that the aid should be going to those who are most in need, not those least in need. It’s true that $100K household doesn’t go very far in the highest-cost-of-living areas, but the overwhelming majority of people even in those areas make far less than $100K household and still need to put a roof over their heads. Renters in particular are getting hosed in this economy.

But second, the country needs to be rethinking the very idea of housing subsidies. It’s going to be painful process to roll back 30-40 years of outrageously stupid economic policy, but it must be done.

In order to disguise and offset wage stagnation, American policy makers did three things: 1) attempt to reduce the price of consumer goods even at the expense of American labor; 2) extend credit as broadly as possible; and 3) drive everyone into assets. That last bit involved many pieces, including the switch from pensions to 401Ks and the idea that whatever was good for the Dow Jones was good for the broader economy. But, of course, by far the biggest asset everyone was pushed into was homeownership.

Not surprisingly, then, housing prices started to balloon upward in an almost preposterous fashion. To truly appreciate the price inflation in housing, simply watch the Case Shiller Rollercoaster:

That video goes through 2010. Note that wages have remained flat for the last 40 years, and it’s obvious that the purchase price of housing is far beyond what wages can sustain, even after the crash. The bottom hasn’t even started to fall out of the market to match wage reality. The housing market is almost entirely driven by investors and subsidies at this point. Actual human buyers are priced out.

But there’s an even bigger generational bomb going off. Let’s say you’re a baby boomer who lives in California or New York, and you bought your house for $200,000 back in the 1980s. In California, you benefit from Proposition 13 which keeps your property tax rate essentially locked in. Your house is probably worth around $500,000 to $1 million today, depending on location.

Congratulations! You won the generational lottery, largely through no particular skill or effort of your own. But what, exactly, is the next generation supposed to do? Commutes are already monstrous and fuel costs are rising, so getting cheap housing far, far away from job centers isn’t an answer. Buying densified, small condo-style situations is an option. But it’s not great for raising kids, and a dramatic reduction in quality of life from the spacious houses, yards and picket fences of the previous generation. And there’s absolutely no way that those $500,000 to $1 million homes are affordable at the wages most 20-40 year olds can command.

This is creating an aristocracy in housing, wherein those who bought property decades ago are leaving it to their heirs, who either move into the property or sell to investors in order to split the assets. But there’s no mobility for real wage earners there.

And it’s only exacerbated by the unequal distribution of subsidies that are artificially keeping prices high in order to maintain the only savings vehicle allowed to a cash-strapped middle class.

But the bomb is going to go off, the real estate bubble is going to pop again both through generational attrition and downward pressure from wages that aren’t meeting prices.

It’s just another way in which the economy is seriously broken with no sign of a coherent plan from either political party.

It’s holiday fundraiser time …

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Watching the freak show featuring George Carlin and Rick Perlstein

by digby

Annual holiday fundraiser:

Back when I first started blogging, pseudonymously, I wrote a lot about the history of conservatism as a child of the 60s and 70s. And for some reason it caught the attention of the premier historian of the era, Rick Perlstein. He chased me down and squeezed the information out of me, pretty much forcing to give up my real story to him and in the process becoming a close friend. We bonded over our shared understanding of the right wing, his born of scholarship, mine born of family and first person observation. He even referenced me very kindly in the acknowledgements of his blockbuster history Nixonland, an honor for which I’ll always be grateful.

The American right wing is a subject I find endlessly fascinating. And unlike some of my liberal colleagues I believe it to be a timeless and permanent fixture of the American political landscape, its individual characteristics swinging between the twin poles of racism and money. It’s the yang to liberalism’s ying (which has it’s own set of pathologies.) I had always known this, having grown up in a family headed by a rock-ribbed conservative. But it wasn’t until I read early excerpts of Nixonland that it fully gelled for me. What I had assumed to be a liberal consensus (even living within a conservative home) never actually existed. An era of liberal dominance, yes, consensus, no. Indeed, we never have a real political consensus in this country. It is always a tug-of-war between the two competing political visions on which this country was founded. It’s true that the tug-of-war can pull the country pretty far in one direction — like into a civil war, for instance. But it’s never “settled.” The American character is defined by the battle.

I suppose a lot of people know that, but I don’t see much of that understanding in political or media circles. For them it’s either vacuous conflation of their own class solidarity with “bipartisanship” or a full-blown delusion of a national concurrence. For peace-loving liberals especially it’s terribly important that we do understand the nature of the fight — by failing to realize that this is a constant battle, and strategizing accordingly, the nation gets dragged farther and farther to the right by members of both parties.

That’s a big part of what I’m trying to do with my writing. We follow the day to day, of course. This is an immediate medium. But we also try to put these events in some historical context, both ancient and recent, serving as a form of institutional memory.

I found this Nieman piece from this morning quite interesting considering what I was planning to write about today:

My prediction isn’t particularly snazzy. It doesn’t require drones or sensors or wearables. It gets back to common sense, highlighting our role as an industry in creating informed citizens. 2014 will be the year of contextualization.

News organizations have so far been bad at contextualizing information. We publish articles on a 24-hour news cycle and expect readers to figure out how to connect the dots on their own. We use one sentence near the top of a story to rehash concepts we may have covered at length in previous articles. Rarely do readers follow a story from the beginning — but when they jump in at the middle, we don’t help guide them through what they’ve missed.

That’s what I try to do. I’ve been doing it seven days a week on this blog for over ten years. And I’d dearly love to keep doing it. If you think this is a valuable contribution to your understanding of our culture, our politics and our history I hope you will consider throwing a little something this way to help keep the doors open.

I saw Mommy kissing Santa Claus

by digby

Oh my …

h/t to @BeschlossDC

The NSA report

by digby

So the President’s NSA review report is out and it isn’t pretty. There’s a lot to say about it and a lot of people are saying it. I’ll just hit a couple of the highlights:

Report concludes bulk telephone metadata collection was responsible for preventing exactly zero terrorist plots. pic.twitter.com/wDtnGI3PHy
— Dan Froomkin (@froomkin) December 18, 2013

NSA report: Journalist’s “rights and security are indispensable to self-government” (page 47). pic.twitter.com/sIrEv5dfeh
— Josh Stearns (@jcstearns) December 18, 2013

A full rundown is here.

It’s a tougher report than people may have expected and it’s extremely helpful in terms of shifting the conversation in a civil liberties direction. But as I’ve written many times here, I’m skeptical of “reforms” to our surveillance state apparatus. Even the deepest of them rarely add up to much. Nonetheless, it’s important to at least make the secret government types pull back and pause from time to time and recognize that they don’t have free rein to operate in whatever way they’ve convinced themselves is necessary to do their jobs. We have a bill of rights for a reason.

The NSA program defenders are, shall we say, nonplussed. I guess they assumed they’d be rubber stamped as usual:

Whether you read this as a rejection of bad policy by an independent group that did exactly what Obama asked it to do or less favorably will probably depend on where you started on the issues. But this presumably was not the report Obama was imagining when he asked this group to take this on. The White House’s press release accompanying the report declares that: “The President expressed his personal appreciation to the group members for the extraordinary work that went into producing this comprehensive and high quality report, and outlined for the group how he intends to utilize their work.” He must have gritted his teeth while doing so. For Obama knows that—whatever the merits of the issues in question—his job just got a lot harder because of a review he commissioned and empowered.

To put the matter bluntly, there is no way the administration will embrace a bunch of these recommendations. And from this day forward, any time the White House and the intelligence community resist these calls for change, the cry will go out that Obama, in doing so, is ignoring the recommendations of his own review panel. And the cry will be right. The White House declares that “Over the next several weeks, as we bring to a close the Administration’s overall review of signals intelligence, the President will work with his national security team to study the Review Group’s report, and to determine which recommendations we should implement.”

Good luck with that.

Oh heck. Now they’re going to have to put up with yet more cranks yammering on about civil liberties when they have to protect the babies from the terrible people who are trying to kill us in our beds. Except for the fact that these programs don’t do jack to protect us from the terrible people who are trying to kill us in our beds, I suppose that’s a really important point.

I’m sure you’ll all be shocked to learn that John Yoo believes the 4th Amendment clearly allows for warrantless spying on everyone. (But only if pain to the point of organ failure doesn’t elicit the information first.)

It’s holiday fundraiser time …

Chris Hayes asks the right questions, Elizabeth Warren gives the right answers.

by David Atkins

Chris Hayes and Elizabeth Warren had a great conversation. Chris Hayes rightly calls out the Democratic Party for failing to do enough about the decline of the middle class over the last 40 years, and Elizabeth Warren gives the right answers:

My favorite part of the conversation is this, wherein Warren explains the history of the struggling middle-class and the fundamentally broken and unsustainable economy in which we live.

WARREN: This isn’t about me. This is about the issues, about what’s happening to America’s families. America’s middle class, America’s hard working families have been hammered on for a generation now. And it’s not just one problem. It’s one after another after another. They’ve been hit with flat wages or even slightly declining wages. And all the core expenses of being middle class, of housing, of healthcare, of what it costs to keep a child in daycare or send a kid to college, to medical care. All of those costs have shot through the roof. That has put a squeeze on these families. They sent as many people as they could into the workforce, in two-parent families, they sent both Mom and Dad or both Moms into the workforce, but it still wasn’t enough. They turned to debt and then they were targeted by a credit industry that figured out you could make huge profits from lending to people who were already in a financial squeeze. And so what’s happened is that America’s middle class has just been under this enormous pressure, and parts of it are beginning to break apart. Our once steady, solid, almost dull middle class, that was the idea. We were so sure it would always be there. Pieces are starting to break away. Families can no longer say to their kids, “you’re going to do better than I did.” And that’s what it is we have to attack.

HAYES: Senator, here’s my question. The trend you’re talking about and have been tracking and are trying to address in legislation like this and other pieces of legislation you’ve introduced, these are 30 to 40 year trends.

WARREN: Yep.

HAYES: I mean, we’ve seen this kind of system, this sort of version of American capitalism, and the Democratic Party has been in power during periods in which that has exacerbated. Democrats voted for the bankruptcy bill which you opposed strenuously. I don’t know if Democrats have done enough to combat this. Has the Democratic Party focused enough on this core issue?

WARREN: Look, the question is what are we going to do going forward? We have to outline our priorities and we have to be willing to get in there and fight for them. And that’s what all of this is about. It’s about how we fight for our college kids, the ones who are trying to get an education and being crushed by student loan debt. It’s about how we fight for seniors to protect Social Security and to help people get more money into retirement savings. And in this particular case with this bill, it’s how we fight for people who have been hit with one economic blow or another and are out there trying to compete in the job market and just want a level playing field. You’re right, the pieces come together because a lot is broken, and it’s going to take a lot of pieces to get it fixed again.

The reason there’s a big movement to draft Elizabeth Warren for President is simply that she gets it. She understands the history. She doesn’t pay lip-service to the middle class while actually pushing for higher asset growth and broad social equality. She understands that the economy is fundamentally broken and requires big changes for the middle class to survive.

It’s holiday fundraising time …

Why not poor houses and orphanages? It worked for Queen Victoria.

by digby

Representative Jack Kingston wants to teach those poor children a lesson in the way the world works:

“One of the things I’ve talked to the secretary of agriculture about: Why don’t you have the kids pay a dime, pay a nickel to instill in them that there is, in fact, no such thing as a free lunch? Or maybe sweep the floor of the cafeteria — and yes, I understand that that would be an administrative problem, and I understand that it would probably lose you money. But think what we would gain as a society in getting people — getting the myth out of their head that there is such a thing as a free lunch.”

Well at least he’s concerned that it would lose them money. Let’s not pretend this fellow has no compassion at all.

And what could possibly be wrong with making little poor children sweep up after their betters for food? It makes perfect sense. I’m sure they’ll all grow up with a healthy respect for each other. Because that’s how people are.

Merry Christmas, losers.

“Dropping out of the labor force” doesn’t mean people are dropping dead

by digby

AEI (yes, AEI) offers up some evidence that austerity policies are bunk. Not kidding:

Earlier this year, as The New York Times reported, the North Carolina legislature cut unemployment benefits, reducing (a) the maximum payout by a third and (b) the number of weeks residents can receive jobless aid. As a result, starting in July the state lost its eligibility for the federal Emergency Unemployment Compensation program. (This is the extended benefits program scheduled to expire nationally at year end.)

So how’s that worked out in the Tar Heel State?

Well, if you listen to Republicans, it’s worked out pretty well. The state’s unemployment rate has dropped to 8.0% in October from 8.8% in June. So clearly cutting jobless benefits creates jobs and gets residents back in the workforce, right?

When you dig a bit deeper, things look less bright.

1.) In June, the month before benefits were cut, there were 416,314 residents classified as unemployed. In October, there were 371,756. That’s a decline in unemployment of 44,558.

2.) Over that same period, the number of employed residents only rose by 1,902 from 4,292,251 to 4,294,153. So what happened to those 42,656 residents who left unemployment but did not move to employment?

3.) The state’s labor force participation rate tells the story. It plunged from 62.2% in June, before the benefits cut, to 61.4% in October. If that rate had merely stayed steady, the state’s jobless rate would have increased to 9.1% rather than sharply declining.

In other words, it looks like the cut in unemployment benefits moved people out of the labor force rather than into employment. Likewise, the state employment rate — the share of adults with jobs — declined from 56.7% in June to 56.5% in October. Did reducing the number of North Carolina residents eligible for federal extended unemployment benefits boost employment? These data suggest it did not, a reality Washington policymakers might want to consider.

Uhm, yes they might want to consider reality. Good idea. But get a load of this:

Update: Bloomberg’s Evan Soltas has noticed the same impact. His conclusion: “Cutting unemployment insurance apparently hasn’t encouraged the unemployed to look harder for work: It has caused them to drop out of the labor force altogether.”

Did you see that little sleight of hand there? I knew that you could.

We have hard evidence that forcing people off of unemployment insurance does not result in these people becoming employed, as all the Republicans insist will happen. Instead, they simply fall off the grid and have no discernible income at all. But that update tells exactly how this is going to be rationalized. It’s not the obvious fact that there are no jobs for these people. It’s that even with this “tough love” these lazy sods refuse to look harder for work.

I was being facetious when I wrote that these austerians were encouraging crime and prostitution, but there is more than a grain of truth in all this. If there are no jobs for people who are losing their unemployment benefits, then it stands to reason that they will have to do something to keep a roof over their heads. Some will undoubtedly survive on the underground economy. Some will find some generous charity or family member from whom to supplicate. Some will just become homeless and live on the very edge of society. But there will be people who become thieves and prostitutes. What choice are we giving them?

If it weren’t such an insufferable movie, I’d suggest we send every Republican a copy of the recent remake of Les Miserables. (The book doesn’t have any of the adolescent bodice ripping they love so much in Atlas Shrugged, so I doubt they’d read it.) Is there a Classic Comic version by any chance?

It’s annual holiday fundraiser time …

Assets versus workers again: Wealth inequality is even more disturbing than income inequality

by David Atkins

Matt Yglesias can often be frustrating and infuriating, but he does occasionally get things very right. This post on income versus wealth inequality is one of those times, riffing on this chart that has been going viral in progressive circles over the last week:

[T]he distribution of capital income is much more unequal than the distribution of wage income. Which is to say that the gap between LeBron James’ salary and the salary of a middle-class sales manager at the Miami Heat is small compared with the gap between Micky Arison’s investment income and the income earned by that sales manager’s 401(k) holdings. All discussions of inequality that talk about labor unions compressing the wage scale, human capital, superstar effects, etc. are talking about inequality of labor income. But even though labor income is unequally distributed it isn’t all that unequally distributed.

In contrast to labor income, we understand the sources of the unequal distribution of capital income extremely well. Capital income is unequally distributed because wealth itself is very unequally distributed. There’s no substantial controversy about this. The distribution isn’t skewed because investing skill is massively skewed; it’s skewed because money-to-invest is skewed. Now of course you can get wealth in various different ways—you could found a business, you could get a high paying job and save a lot, or you can get your fortune the old-fashioned way and inherit it. But once you’ve got your fortune, wealth begets wealth…

These points all matter because they point to the existence of two different axes of inequality. One is the wage gap between the high earners and the low or median earners. But the other is the traditional class conflict between the people whose earnings are dominated by work and the people whose earnings are dominated by wealth-possession. In particular, a structural shift in the economy to become less favorable to people who work for a living (including rich people like King James) in favor of people who own things (including the relatively modest fortunes of “middle-class” retirees living off accumulated savings) isn’t necessarily going to do anything to the wage-distribution curve. And yet the clash between peasants and landowners, between factory workers and factory owners, and now between people cheered by the S&P recovery and those saddened by the wage slump is probably the more significant political issue.

One issue this poses is that analysis of political issues in terms of “income” quartiles can get pretty misleading. A married couple where Dad earns $65,000 a year and Mom works part-time bringing home $15,000 a year is in the fourth quartile of the American income distribution. A 70-year-old widower whose $2 million in savings bring him an annual income of approximately $80,000 is also in the fourth quartile. But their policy-relevant economic interests are unlikely to have very much in common since in reality their financial situations are entirely dissimilar.

Democrats are often afraid to talk in these terms because it sounds positively Marxist to do so. But while I don’t consider myself a Marxist, I’ve been writing for a long time now that it’s important to recognize that we have an asset class and a wage-earner class–and their interests don’t align at all.

For most of the wage-earner class, increasing home values are an impediment to having a decent home, not an asset for their retirements. For the asset class, rising wages constitute a deterioration of their incomes; for the wage-earner class it’s the reverse. For the asset class, the recession ended a long time ago. For the wage-earner class, it’s been grinding on for more than five straight years.

The challenge we have politically isn’t just moneyed corruption and campaign spending. It’s that all of policy is designed by the asset class, for the asset class. In the same way that the struggles of the very poor are all but invisible to the comparatively comfortable middle classes, the struggles of the wage-earning middle classes are all but invisible to the asset classes, who simply assume that if asset prices are rising, then growth will follow to the benefit of the invisible wage earners.

But that’s just not so. And in a world of increased globalization, mechanization and deskilling, the decoupling of the asset class from the working class is going to become even more severe.

I’m not the first person to say this, but just because Marx didn’t have the right answer, that doesn’t mean he wasn’t asking the right questions. State Communism was obviously a dramatic failure. But that doesn’t mean our dominant economic system represents the pinnacle of human freedom and progress, either.

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More reports from the NSA field trip. (Maybe we should send Dennis Rodman next time)


by digby

Here’s another report from the field trip a few journalists and academics took to the NSA the other day.  The takeaway from this one seems to be quite similar to Dan Drezner’s. They are both stunned by the obtuse ignorance of the principles underlying our constitution as well as the naive authoritarianism exhibited by the NSA people they encountered:

[T]he best example of this cognitive dissonance is one specific exchange late in our day on campus. One official described the difficulties he had while speaking to school groups about the NSA, and his inability to convince students that Snowden was a “bad guy” who had done serious harm to U.S. national security. He asked us how he could more compellingly and convincingly make that case to young people. Bewildered, we asked why the merits of the surveillance programs turn in any way on whether Snowden’s a patriot or a traitor. Even President Obama has conceded that the public debate we’re now having is “welcome,” regardless of where we end up as a result.

But the NSA official’s reply seemed to suggest that these two perspectives are mutually exclusive—that we must choose between Snowden and the NSA. If we believe Snowden is a bad guy, then the NSA must be right. And if we believe he acted in what he thought were the best interests of the country, the NSA must be wrong.

The premise of the question suggested that we would all be better off if the American public were still as ignorant about the surveillance programs disclosed as a result of Snowden’s action. For the NSA, the problem appears to be about the need to respond to transparency and not the substance of the programs themselves (or the fact that they were authorized in secret).

In the end, this is the most entrenched problem I encountered during my visit: the NSA remains committed to the idea that, because a surveillance program will be much more effective if no one knows about it, it necessarily follows that the public should remain ignorant of it. Therefore, the NSA’s programs must be approved and implemented in secret unless and until the next Snowden reveals them.

I think I understand now why Judge Leon was so impassioned in his legal opinion — he saw documentation underlying these programs and like those who were invited on this NSA field trip it was probably a frightening window into the thinking of the people we are being asked to trust with the kind of power that demands a much more sophisticated worldview than these people obviously have. (I’ve suspected this from reading interviews with Alexander and Hayden, but I thought they might just be playing politics. I now believe we’re talking about the NSA culture at large and it’s more dangerous than I thought.)

The author explains the reasons for alarm quite well, but it’s worth reiterating that even aside from the mind-bogglingly odious request that these visitors help the NSA figure out how to discredit Edward Snowden with schoolchildren (where are we, North Korea?) this  idea that their effectiveness is all that matters is simply chilling. If that were true, we would allow police to storm down citizens’ doors at will, arrest without probable cause, imprison without due process and otherwise behave as if the entire country is … a battleground. Or Guantanamo.

If you’re looking for a good overview of the Leon decision you can’t go wrong with the New Yorker’s Amy Davidson’s typically incisive take:

[W]hat his ruling does is deprive the N.S.A. of the argument of obviousness: the idea that what it is doing is plainly legal, plainly necessary, and nothing for decent people to worry about. (He says that the government has given him no evidence that bulk collection and analysis are essential to the fight against terrorism.) This judge is worried.

Also Emily Bazelon in Slate:

Thank you, Judge Leon, for the wake-up call. And also for giving me reason to question, once again, the Obama administration’s insistence on treating Edward Snowden, as a criminal. Yes, he leaked everything on the farm. But without him, we’d never have this lawsuit or the alarm bells it joined in sounding. “If someone discloses a secret govt program that a Federal Court rules violates the Constitution, that person’s a whistleblower, right?” Greenwald tweeted Monday. Yes—that should be about right.

Yes, that should be about right.  But since the NSA and plenty of other people rest their fatuous arguments on the notion that Snowden is a “bad guy” I’m not going to hold my breath.

Meanwhile, it’s holiday fundraising time …

Democrats saving the Republicans from themselves

by digby

I didn’t think those cuts to military retiree pensions would stick. Democratic Senator Jeanne Shaheen:

“The plan I am going to introduce will undo changes to future cost of living adjustments for military retirees and will instead achieve savings by closing corporate tax loopholes. It’s a smart, pragmatic fix and I hope it will generate bipartisan support.”

Ayotte and Graham reiterated their desire to reinstate the retiree pensions. I have a sneaking suspicion this is going to get done. This constituency is very powerful. I can’t help but wonder what might have happened if the Democrats had been willing to leverage them for more concessions in the budget deal.

Meanwhile:

Though neither Shaheen nor the group of GOP senators mentioned it, the budget deal also includes cuts to the pensions of future federal civilian employees.

Of course not. They are a Democratic constituency. The only people who get protection from austerity’s whip are people who vote Republican. And military retirees do tend to vote Republican.

(This is not to say they deserve to have their pensions cut — they don’t. But neither do federal employees.)

It’s holiday fundraiser time …