David Brooks and the Centralization Meme
September 01, 2009

I consider David Brooks one of the two-to-three best columnists in the business, and he's obviously warmly disposed toward Obama, so I doubt he intends to be uncharitable in today's column. But I think that's where he ends up nonetheless. Particularly this: "By force of circumstances and by design, the president has promoted one policy after another that increases spending and centralizes power in Washington." Do Obama's policies--both enacted and proposed--centralize power in Washington? Of course.

Military Spending as Fiscal Stimulus?
September 01, 2009

Martin Feldstein -- Harvard economist, McCain advisor, and member of Obama's Recovery Advisory Board -- wants more resources devoted to defense spending: The focus on domestic economic policies in the 1930s and the desire to remain militarily neutral delayed the major military buildup that eventually achieved the economic recovery. The administration’s current budget point to a one‐fifth reduction in the share of GDP devoted to defense over the next decade.

SEC to Fraudster Banks: We're Coming
August 31, 2009

After the stress test results came out a few months back, I did a piece  about how, while the government's scrubbing of bank balance sheets was certainly welcome, there were still a lot of things the banks weren't fessing up to. One of those things was loss reserves--that is, the amount of capital banks set aside to absorb losses on loans that turn bad. Here's a brief explanation: The real problem is that the banks won't fully acknowledge their losses. One of the more elusive concepts in all of accounting is an exercise known as reserving.

Worth Reading
August 31, 2009

NYT talks up TARP profits and WSJ warns of big FDIC losses. The pain of being a middle-aged former finacial-sector employee. How cities can prevent empty-storefront-ification. Men's underwear sales foretell a gradual rebound in spending. Did Hoover's generosity to workers cause the Depression? Justin Wolfers will have plenty of bedtime chatter tonight.

Implementing ARRA--Another Way to Gauge Stimulus Success
August 31, 2009

With the President Obama’s $787 billion stimulus package (aka, the American Recovery and Reinvestment Act or ARRA) six months old now, it's fair to ask like everybody else is: How’s it working? One way to decide is to simply count the jobs created and jobs preserved. And on that front the commentariat has been quick to pronounce.

The Two-Track Economy Arrives
August 31, 2009

The notion of a two-track economy seems to be taking hold. We kicked the concept around pretty well last week--your 130 comments (as of this morning) helped clarify a great deal of what we know, don’t know, and need to worry about. The two-track concept overlaps with, and builds on, long-standing issues of inequality in the U.S., but it’s also different. Within existing income classes, some people find themselves in relatively good shape and others are completely hammered. New dimensions of differentiation are also taking hold within occupations and within industries--the WSJ this morning has

Are Speculators to Blame for Oil Prices?
August 29, 2009

A new paper by Ken Medlock and Amy Myers Jaffe of Rice University on oil speculation attracted a lot of unquestioning attention late this week. In the study, Medlock and Jaffe accuse the CFTC of missing the way rampant speculation may have driven up oil prices earlier this decade. But after reading the paper, it’s pretty clear that Medlock and Jaffe don’t have anything resembling a smoking gun. They largely rely on one correlation to support their case: That volume in oil futures contracts increased sharply at the same time that oil prices did.

Who Knew? Mickey Did.
August 28, 2009

My friend Mickey Kaus has a rejoinder to my latest column, in which I suggest that the emphasis on cost-cutting--while most likely a strategic mistake--was nevertheless easy to understand in retrospect. Among other things, he suggests, some people did predict this. Like, for example, Mickey. Well, he's absolutely right about that. He was a critic of this argument as far back as April: Isn't it an epic mistake to try to sell Democratic health care reform on this basis?

The Metro Orbit of Small Town America
August 28, 2009

Given the American appetite for rankings as well as hometown pride, it’s not surprising that our media is awash with lists of the most desirable communities. This month’s entry came from Money Magazine, with its annual list of “100 Best Places to Live in America.” As part of the effort, “America’s best small towns,” were chosen with special focus placed on communities of moderate size (populations between 8,500 and 50,000), desirable location (within 60 miles of a major airport) and a modicum of diversity. As the magazine tantalizingly described, “Yes, local economies still exist. These small

Why Taxing Trades Could Make Sense
August 27, 2009

The UK's top financial regulator, Adair Turner, has suggested a tax on all financial transactions around the world. The purpose of this tax, he argues, would be to prevent the return of "business as usual" for the banking sector: "If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit." Transaction taxes -- better known as Tobin taxes after Yale economist James Tobin -- have been proposed and implemented in the past to discourage speculative short-term trades and reduce market volatility.