Bloomberg has a very interesting piece on 'Google Angels' up this weekend. The term is used to describe Google alumni who are re-investing wealth from stock gains into the latest and greatest start-ups, usually in the tech space. Though their investments are often high-risk in nature, the expertise that these specialized angel investors have in the tech sector has ensured some very strong results. Some of the bigger success stories include early investments in Twitter and Tapulous.
While seeing a Georgetown Law grad listed among the success stories hits a little too close to home, it is nice to see these new captains of industry re-investing in America's future and not just shiny new toys. Except, of course, for the Lamborghini guy. Nevertheless an interesting read, and, as always, comments and feedback are appreciated.
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India Provides Example for US on Green Development
Despite often being lumped with China in being used as a scapegoat by the US when explaining why it doesn't join targeted emissions reduction schemes, India has been taking some impressive steps toward green technology development. Perhaps recognizing, as China does, that green technological advances can lead to economic efficiencies, the nation has just announced a scheme whereby proceeds from taxed coal will be used to create a clean energy development fund.
With the move being applauded by both securities markets and green analysts alike, this is just the type of idea that should appeal to the pro-growth crowd that is sometimes skeptical of environmentalists. This is because the fund should allow for green development and its resulting future economic benefits without anything more than a marginal hit to the current economy. It is also an example of how the US is falling behind when it comes to creative green development solutions as it has not embraced the economic benefits of doing so. If the US could only follow China and India in coming up with creative solutions to problems the same way it follows them in refusing to join international agreements, it could be a stimulant rather than a hamper to global green development.
With the move being applauded by both securities markets and green analysts alike, this is just the type of idea that should appeal to the pro-growth crowd that is sometimes skeptical of environmentalists. This is because the fund should allow for green development and its resulting future economic benefits without anything more than a marginal hit to the current economy. It is also an example of how the US is falling behind when it comes to creative green development solutions as it has not embraced the economic benefits of doing so. If the US could only follow China and India in coming up with creative solutions to problems the same way it follows them in refusing to join international agreements, it could be a stimulant rather than a hamper to global green development.
Iceland's Experiment in Populism Gone Wrong
Among January's postings was a story of populism gone wrong as public outcry over public debt in Iceland lead politicians to declare a referendum vote over repayment rather than stick to agreements made with Dutch and British governments. The fact that the voice of the public is being heard by politicians, particularly in a nation of approximately 300,000, is admirable. However, Iceland is currently in serious financial and economic trouble and is in dire need of aid funds from organizations such as the International Monetary Fund. Financing is already in place, but payments have been, and will continue to be, frozen so long as lenders believe that the risk of repayment is too high. If current talks with the British government working toward yet another agreement break down, the nation is scheduled to hold its referendum on March 6th.
Despite anger over the perception that they are being forced to pay for the greed and excess of bankers, both the government and the citizens of Iceland would do well to step back from the situation and consider the long-term implications of a 'no' vote to repayment. Though The Financial Times is correct in pointing out that the British and Dutch have not been faultless in the situation, and that claims of bullying could be made, perception is everything in this situation. The government made international agreements with its counterparts in London and The Hague, and it would cause nearly irreperable harm were it to reneg on them as financiers and bankers would clearly think twice before future dealings with the island state. Rarely do potential actions have such clear cut negative impacts, particularly during the decision-making stage. The government of Iceland should consider that during current negotiations and before the citizens of Iceland do something in a fit of pique that cannot be undone.
Despite anger over the perception that they are being forced to pay for the greed and excess of bankers, both the government and the citizens of Iceland would do well to step back from the situation and consider the long-term implications of a 'no' vote to repayment. Though The Financial Times is correct in pointing out that the British and Dutch have not been faultless in the situation, and that claims of bullying could be made, perception is everything in this situation. The government made international agreements with its counterparts in London and The Hague, and it would cause nearly irreperable harm were it to reneg on them as financiers and bankers would clearly think twice before future dealings with the island state. Rarely do potential actions have such clear cut negative impacts, particularly during the decision-making stage. The government of Iceland should consider that during current negotiations and before the citizens of Iceland do something in a fit of pique that cannot be undone.
2.26.2010
The Switch to a Global Currency
Adopting a line of reasoning extolled in the past by, among others, China and Middle Eastern oil exporters, International Monetary Fund (IMF) head Dominique Strauss-Kahn today noted that a global currency could potentially lend stability to the global financial system. Though such an idea has been discussed among economists and global financiers for years, calls for a global currency reached a fever pitch at times during the recent financial crisis as the US financial system came as close as it ever has to collapse. Notably, much of the world's trade is transacted with dollars, including the oil trade, and many nations with trade surpluses hold a significant portion of their excess funds in dollars.
Although the IMF already potentially has the accounting and recordkeeping functions in place to take on such a task, it remains to be seen if states would submit to the affront to sovereignty that such a system would necessitate. For example, several of the members of the EU were very weary of the switch to the Euro, and pseudo-member England remains outside the currency bloc. Addtionally, it is difficult to imagine the US buying into such a system, though the dollars floating around in Middle Eastern and Asian reserve accounts may be enough to initiate such a system without the direct buy-in of the US.
A global currency with a basket of existing currencies providing its foundation has some appeal. Most notably, it would fluctuate less than the individual currencies making it up, could work some way toward evening trade imbalances, and it would be less prone to economic shocks in individual countries. However, such a regime is difficult to fathom at this point, and is, in any case, a far way off.
Although the IMF already potentially has the accounting and recordkeeping functions in place to take on such a task, it remains to be seen if states would submit to the affront to sovereignty that such a system would necessitate. For example, several of the members of the EU were very weary of the switch to the Euro, and pseudo-member England remains outside the currency bloc. Addtionally, it is difficult to imagine the US buying into such a system, though the dollars floating around in Middle Eastern and Asian reserve accounts may be enough to initiate such a system without the direct buy-in of the US.
A global currency with a basket of existing currencies providing its foundation has some appeal. Most notably, it would fluctuate less than the individual currencies making it up, could work some way toward evening trade imbalances, and it would be less prone to economic shocks in individual countries. However, such a regime is difficult to fathom at this point, and is, in any case, a far way off.
Book Review: Law and Economics of Contingent Protection in International Trade
Today I have the pleasure of introducing the latest guest contribution to the site. Today's contributor, Clare Cavaliero, has written a review of a new law and economics text, something that should be very interesting to friends of Blawgconomics.
The book begins with a basic introduction to the World Trade Organization’s (WTO’s) multilateral disciplines on subsidies related to international trade in goods and the unilateral measures taken to respond to these subsidies, countervailing duties (CVDs). The authors explain the historical and legal context of the Agreement on Subsidies and Countervailing Duties (SCM Agreement), and provide a legal analysis of its main provisions complete with relevant case law.
One author criticizes the WTO decision to eliminate the category of nonactionable subsidies, subsidies against which no action can be taken by affected Members, and argues for the current SCM Agreement to restore this category of protection. Through a case study, the authors highlight the inability of the current legal framework to deal with unusual cases and offer insight from economic theory regarding how to better address these issues.
In examining the WTO rules and decisions concerning nonagricultural export subsidies, the authors attempt to determine why disputes in this area are so common. The authors explain the economic disadvantages of these export subsidies as well as the political economy justifications for their proliferation in current international trade. Although export subsidies are prohibited under the existing WTO framework, enforcement is inconsistent due to disagreements regarding the proper identification and definition of export subsidies and the appropriate level of penalty for their use in violation of WTO policies. The authors present opposing views on whether and to what extent an absolute prohibition on export subsidies should exist.
Next, the authors provide an examination of the WTO dispute resolution process as seen in the high-profile Boeing-Airbus litigation. One author suggests that Boeing, or one of its subsidiaries, might have fared better had it brought its complaint alleging the incompatible granting of state aid by European Community (EC) Member States to Airbus before the EC Commission rather than seeking redress in the WTO system. Conversely, another author exposes some of the inherent difficulties multinational corporations face in suits before the EC, notwithstanding the benefits of the EC’s state aid rules.
Law and Economics of Contingent Protection in International Trade is the third volume in the series Columbia Studies on WTO Law and Policy. The twenty-five authors invited to contribute provide an overview of the regulatory framework of contingent protection in the World Trade Organization (WTO). The book’s eleven chapters present a legal and economic analysis of subsidies and countervailing duties, antidumping, and safeguards.
The book begins with a basic introduction to the World Trade Organization’s (WTO’s) multilateral disciplines on subsidies related to international trade in goods and the unilateral measures taken to respond to these subsidies, countervailing duties (CVDs). The authors explain the historical and legal context of the Agreement on Subsidies and Countervailing Duties (SCM Agreement), and provide a legal analysis of its main provisions complete with relevant case law.
One author criticizes the WTO decision to eliminate the category of nonactionable subsidies, subsidies against which no action can be taken by affected Members, and argues for the current SCM Agreement to restore this category of protection. Through a case study, the authors highlight the inability of the current legal framework to deal with unusual cases and offer insight from economic theory regarding how to better address these issues.
In examining the WTO rules and decisions concerning nonagricultural export subsidies, the authors attempt to determine why disputes in this area are so common. The authors explain the economic disadvantages of these export subsidies as well as the political economy justifications for their proliferation in current international trade. Although export subsidies are prohibited under the existing WTO framework, enforcement is inconsistent due to disagreements regarding the proper identification and definition of export subsidies and the appropriate level of penalty for their use in violation of WTO policies. The authors present opposing views on whether and to what extent an absolute prohibition on export subsidies should exist.
Next, the authors provide an examination of the WTO dispute resolution process as seen in the high-profile Boeing-Airbus litigation. One author suggests that Boeing, or one of its subsidiaries, might have fared better had it brought its complaint alleging the incompatible granting of state aid by European Community (EC) Member States to Airbus before the EC Commission rather than seeking redress in the WTO system. Conversely, another author exposes some of the inherent difficulties multinational corporations face in suits before the EC, notwithstanding the benefits of the EC’s state aid rules.
2.25.2010
Healthcare Reform (un)Popularity Numbers
With today's Healthcare Summit stealing the headlines (at least until pundits bored of it), CNN released an extremely interesting set of poll numbers which suggest an otherwise simple point that politicians on both sides just don't seem to get; many Americans support healthcare reform and some form of legislation to accomplish it. Many even agree on certain actionable ideas. At the same time, most Americans disagree with the overall package being presented by Democrats.
These negative feelings probably have as much to do with the way the reform process has proceeded as well as perceptions that an untenable bill is being forced down people's throats as they do with the provisions themselves. Many blame this sentiment on the Republican Spin Machine, but for the sake of argument, let's assume that the average American is a thinking, considerate and intelligent animal not so impacted by talking heads that they have lost all powers of comprehension and logic.
Running with this assumption, perhaps the most logical thing for politicians to do would be to sift through these poll numbers, pick out the four or five most popular and sensible provisions, write an easy-to-understand bill, and pass it. How ironic it is that the two words I can think of after writing that last sentence are 'whimsical' and 'naive.' And that is arguably the problem with healthcare reform; logical solutions have been dispensed with for the sake of 'Rahm-ing' a comprehensive bill through, public opinion be damned. That is what the public has picked up on, and is the main reason many people oppose the overall bill. When vast majorities of Americans, far greater percentages than can be attributed to party lines, agree with certain reform ideas, yet only 25% like the packaging, this can be the only logical analysis.
Ultimately, it does seem that a comprehensive healthcare reform bill will be passed. Unfortunately, it may be too late to ensure that it is one that represents the will and interests of the people it is supposed to protect.
These negative feelings probably have as much to do with the way the reform process has proceeded as well as perceptions that an untenable bill is being forced down people's throats as they do with the provisions themselves. Many blame this sentiment on the Republican Spin Machine, but for the sake of argument, let's assume that the average American is a thinking, considerate and intelligent animal not so impacted by talking heads that they have lost all powers of comprehension and logic.
Running with this assumption, perhaps the most logical thing for politicians to do would be to sift through these poll numbers, pick out the four or five most popular and sensible provisions, write an easy-to-understand bill, and pass it. How ironic it is that the two words I can think of after writing that last sentence are 'whimsical' and 'naive.' And that is arguably the problem with healthcare reform; logical solutions have been dispensed with for the sake of 'Rahm-ing' a comprehensive bill through, public opinion be damned. That is what the public has picked up on, and is the main reason many people oppose the overall bill. When vast majorities of Americans, far greater percentages than can be attributed to party lines, agree with certain reform ideas, yet only 25% like the packaging, this can be the only logical analysis.
Ultimately, it does seem that a comprehensive healthcare reform bill will be passed. Unfortunately, it may be too late to ensure that it is one that represents the will and interests of the people it is supposed to protect.
Hummer Shutdown a Sign of the Times
Whatever side of the global warming debate one finds themselves on, nearly everyone can agree that driving a vehicle that gets about 14 MPG when gas is $3 per gallon is not the most efficient way to get around town. That is likely why sales of Hummer have dropped precipitously over the past few years. It is also one of the reasons behind GM's decision to send the brand to the scrap heap, joining other divisions such as Pontiac and Saturn.
Hummer has been on life support for a while now, but the last nail in the coffin came as Chinese regulators rejected a sale of the group to Tengzhong, a large manufacturer. Though Chinese officials are keen to buy foreign assets across many industries, this has not reduced their inclination toward being strategic purchasers, and ultimately the gas guzzlers didn't fit into the government's long-term plans.
This overall situation is representative of many of today's hot topics. First, Detroit's short-sightedness in the '90s and early 2000s was crippling and is one of many reasons why the government needed to prop up the auto industry last year. Secondly, and particularly in tough economic times, even Americans have become more price sensitive when it comes to fuel, a fact which will drive production going forward. Thirdly, and perhaps most influential in the long-term, China is much further along than the US in adopting a green approach to development.
Interestingly, this is not necessarily due to environmental concerns, but a very economic recognition that resources are limited, and therefore that development cannot rest on fossil fuels alone. Efficiency should be something that American manufacturers can embrace, but the transition has been slow to date. Despite this growing gap, however, America can take solace in at least one thing; we still have them in the Olympics...
Hummer has been on life support for a while now, but the last nail in the coffin came as Chinese regulators rejected a sale of the group to Tengzhong, a large manufacturer. Though Chinese officials are keen to buy foreign assets across many industries, this has not reduced their inclination toward being strategic purchasers, and ultimately the gas guzzlers didn't fit into the government's long-term plans.
This overall situation is representative of many of today's hot topics. First, Detroit's short-sightedness in the '90s and early 2000s was crippling and is one of many reasons why the government needed to prop up the auto industry last year. Secondly, and particularly in tough economic times, even Americans have become more price sensitive when it comes to fuel, a fact which will drive production going forward. Thirdly, and perhaps most influential in the long-term, China is much further along than the US in adopting a green approach to development.
Interestingly, this is not necessarily due to environmental concerns, but a very economic recognition that resources are limited, and therefore that development cannot rest on fossil fuels alone. Efficiency should be something that American manufacturers can embrace, but the transition has been slow to date. Despite this growing gap, however, America can take solace in at least one thing; we still have them in the Olympics...
Healthcare Timeline
The folks at Reuters were kind enough to put together a Healthcare Timeline that stretches back to the Clinton years and ends with today's Healthcare Summit. Though the summit has been billed as a last-gasp attempt at bi-partisan compromise, it is becoming increasingly clear that it is simply political posturing ahead Democrats going all-in next week. Though the majority has enough votes to push through the latest proposal by the White House, strong disapproval of the bill and the process make it likely that there will be a few more additions to any healthcare timeline before all is said and done.
2.24.2010
No Longer the New Kid on the Block, Google Faces EU Scrutiny
Perhaps it is a right of passage for technology companies to be considered too big, too influential or too dominant. If nothing else, it is an indication that a firm has reached a certain status in an industry with incredible amounts development stage risk as well as fierce market competition. However, it is little consolation for companies under scrutiny that they have 'made it,' as scrutiny has, in the past, typically lead to bigger problems for tech firms. The latest to reach this lofty status is Google who, like Microsoft before it, is receiving interest from EU regulators as rival search engines in the Union have alleged that the search giant's algorithms demote their sites.
Google has already received attention from US regulators based on its cozy relationship with book publishers, and it won't be too excited about this latest attention from across the pond. Though one may argue with the actual influence regulators had on Microsoft's monopolistic practices, the company was forced to spend tremendous amounts of time and treasure on litigation and fines. Google will be keen to avoid such costs.
As of right now, the interest by the EU seems to be limited to inquiries. However, with around 90% of the internet search market, Google must be preparing for battle. Certainly precedent doesn't seem favorable for the giant formerly known as the little search engine who could.
Google has already received attention from US regulators based on its cozy relationship with book publishers, and it won't be too excited about this latest attention from across the pond. Though one may argue with the actual influence regulators had on Microsoft's monopolistic practices, the company was forced to spend tremendous amounts of time and treasure on litigation and fines. Google will be keen to avoid such costs.
As of right now, the interest by the EU seems to be limited to inquiries. However, with around 90% of the internet search market, Google must be preparing for battle. Certainly precedent doesn't seem favorable for the giant formerly known as the little search engine who could.
2.21.2010
Buy the Rumor, Sell the Fact: The Africa Edition
A popular cliche among Wall St. old-timers and newbies alike is 'buy the rumor, sell the fact.' The staying power of the phrase highlights the fact that, even in our increasingly technological and well-connected world, 'perfect information' is, at times, a myth for the textbooks and an assumption for the scholars.
This past week provided a great example. Though always volatile, oil markets were especially testy after traders got wind of a possible armed conflict in the capital of oil-rich Nigeria. Although the country has flirted with controversy over election issues among others in recent years, oil wealth and economic growth generally lead to it being considered to be one of the more stable nations in the region. One must keep in mind as well that OPEC's membership isn't exactly a Who's Who of democratic and freedom-loving states. Therefore, the talk of instability in a typically stable Top-10 oil exporter left traders particularly shaky.
Fortunately, there was no armed conflict in Nigeria last week. Unfortunately, residents of neighboring Niger were not so lucky. It seems that traders got their African neighbors mixed up, as the conflict actually took place in the latter country, which has yet to produce oil. Therefore, last week's rise to around $80 per barrel lacked any reasonable fundamental basis. However, giving the cliche staying power and perhaps perpetuating its use among a new crop of traders, it was likely a profitable endeavor to buy on the Nigerian rumor last week. For obvious reasons, Benjamin Graham was unavailable for comment as we went to press, but I think it is safe to say that the more appropriate cliche in his case might be 'rolling in his grave.'
This past week provided a great example. Though always volatile, oil markets were especially testy after traders got wind of a possible armed conflict in the capital of oil-rich Nigeria. Although the country has flirted with controversy over election issues among others in recent years, oil wealth and economic growth generally lead to it being considered to be one of the more stable nations in the region. One must keep in mind as well that OPEC's membership isn't exactly a Who's Who of democratic and freedom-loving states. Therefore, the talk of instability in a typically stable Top-10 oil exporter left traders particularly shaky.
Fortunately, there was no armed conflict in Nigeria last week. Unfortunately, residents of neighboring Niger were not so lucky. It seems that traders got their African neighbors mixed up, as the conflict actually took place in the latter country, which has yet to produce oil. Therefore, last week's rise to around $80 per barrel lacked any reasonable fundamental basis. However, giving the cliche staying power and perhaps perpetuating its use among a new crop of traders, it was likely a profitable endeavor to buy on the Nigerian rumor last week. For obvious reasons, Benjamin Graham was unavailable for comment as we went to press, but I think it is safe to say that the more appropriate cliche in his case might be 'rolling in his grave.'
The Continuous Balancing of Privacy and Technology
Technology has long been a crucial ally of law enforcement in its efforts to combat terrorism, organized crime and securities law violations. However, the use of technology for security purposes can be a controversial area of the law, pitting the interests of safety against those of privacy. This has lead to a number of battles waged in the highest courts in the land to determine just what the outer edge of tech use in such situations should be.
A recent situation in Pennsylvania far removed from the realm of terrorists or the mafia has caught the public's attention and renewed debate on both sides of the argument. Despite possibly good intentions and the protection of its property, The Lower Merion School District is facing not only bad press, but a law suit for its use of web-cam technology to track where laptops are. Because students and parents were unaware of the cameras, which could presumably be triggered remotely whenever the student was on the internet, privacy issues have arisen. The incident leading to public awareness of the situation was actually instigated by school administration, as the high school's vice principal approached a student with a photo from a web cam of what appeared to the VP to be drugs. The student maintains it was candy. (On a side note, for any NBA fans, this is indeed Kobe Bryant's Lower Merion. History and politics buffs might also recognize the name Alexander Haig on the school's list of famous alums. Haig, who passed just recently, was a fixture in the White House under multiple administrations, culminating with a Secretary of State posting under Reagan.)
Though the school certainly has arguments in its favor, I would anticipate that the outcome of this case would be the discontinuation of the use of the cameras, or at the very least a mandate for disclosure if such technology is to be used. Arguably, such a disclosure would serve the administration's stated goal of property protection, as a student would be less likely to misuse property he knows could be tracked, so all parties could end up as winners in the end. Until then, the situation will add another log to the privacy/security debate fire, and is certainly one to watch.
UPDATE: The use of laptop cameras in this case might have been far more extensive than people originally thought. The details can be found here.
UPDATE: The results are in...
A recent situation in Pennsylvania far removed from the realm of terrorists or the mafia has caught the public's attention and renewed debate on both sides of the argument. Despite possibly good intentions and the protection of its property, The Lower Merion School District is facing not only bad press, but a law suit for its use of web-cam technology to track where laptops are. Because students and parents were unaware of the cameras, which could presumably be triggered remotely whenever the student was on the internet, privacy issues have arisen. The incident leading to public awareness of the situation was actually instigated by school administration, as the high school's vice principal approached a student with a photo from a web cam of what appeared to the VP to be drugs. The student maintains it was candy. (On a side note, for any NBA fans, this is indeed Kobe Bryant's Lower Merion. History and politics buffs might also recognize the name Alexander Haig on the school's list of famous alums. Haig, who passed just recently, was a fixture in the White House under multiple administrations, culminating with a Secretary of State posting under Reagan.)
Though the school certainly has arguments in its favor, I would anticipate that the outcome of this case would be the discontinuation of the use of the cameras, or at the very least a mandate for disclosure if such technology is to be used. Arguably, such a disclosure would serve the administration's stated goal of property protection, as a student would be less likely to misuse property he knows could be tracked, so all parties could end up as winners in the end. Until then, the situation will add another log to the privacy/security debate fire, and is certainly one to watch.
UPDATE: The use of laptop cameras in this case might have been far more extensive than people originally thought. The details can be found here.
UPDATE: The results are in...
2.19.2010
Justice Obama?
Even if President Obama only serves one term, some may think that it is still a bit early to be considering his future employment plans. However, Professor Jeffrey Rosen does just that in The Washington Post today. Professor Rosen lays out a few plausible scenarios which, if they came to fruition, could lead to Obama following in the footsteps of one-term president William Taft, who was elected in 1908, failed in a re-election bid, and went on to arguably made a bigger impact than he ever did in the White House as a Supreme Court justice.
Though many would be happy to see Obama seek and win a second term, some have speculated recently that Obama is more interested in creating actual change than in re-election. This could lead to changes come 2012, particularly if the recent backlash against policies such as healthcare leads to voter action. However, if the President is, indeed, more concerned with change and social reform than his political career, getting as much legislation passed while he is in office before going to the Supreme Court could ultimately prove to be the best move he could make as a self-styled progressive. Any talk of a Supreme Court posting at least implicitly concedes this line of reasoning, though the biggest supporters of a Court featuring Obama likely view this as a worst case scenario.
To Americans used to presidents who leave office and put the heavy lifting aside to write memoirs, give speeches and work on charities, it might be a bit of a curiosity to have a retired Commander-in-Chief sitting on the highest court in the land. However, it is not entirely without precedent, and such a move may be the best way for a frustrated reformer to impact the nation.
Though many would be happy to see Obama seek and win a second term, some have speculated recently that Obama is more interested in creating actual change than in re-election. This could lead to changes come 2012, particularly if the recent backlash against policies such as healthcare leads to voter action. However, if the President is, indeed, more concerned with change and social reform than his political career, getting as much legislation passed while he is in office before going to the Supreme Court could ultimately prove to be the best move he could make as a self-styled progressive. Any talk of a Supreme Court posting at least implicitly concedes this line of reasoning, though the biggest supporters of a Court featuring Obama likely view this as a worst case scenario.
To Americans used to presidents who leave office and put the heavy lifting aside to write memoirs, give speeches and work on charities, it might be a bit of a curiosity to have a retired Commander-in-Chief sitting on the highest court in the land. However, it is not entirely without precedent, and such a move may be the best way for a frustrated reformer to impact the nation.
2.18.2010
Fed Raises Discount Rate
The discount rate is the interest rate that the Fed charges member banks for emergency overnight funds in the event that liquidity is low. Though it is not advisable for banks to step up to the window too often, it is a safeguard put into place to make sure that trouble for one bank doesn't snowball and lead to more systemic issues. During down times, or times of crisis, lowering the discount rate is one weapon in the Fed's arsenal, allowing it to lend cash to banks short term without big announcements or causing panic.
Earlier this evening, the Fed decided to raise this rate to 0.75%. Though this is not directly linked to any impact on consumers, and though it is not directly related to the more well-known federal funds rate, this move could be a sign that the central bank is looking at reigning in some of the emergency measures it put into place during the worst of the banking crisis. For now, it is unlikely that this move will act as a precursor to any other Fed action, and such a move would typically only interest Fed watchers and the banks themselves. However, in the current economic environment, beggars cannot be choosers. This move is a positive signal that those most in-tune with the status of the economy believe that banks are past the danger zone, and that is a positive sign for everyone.
Earlier this evening, the Fed decided to raise this rate to 0.75%. Though this is not directly linked to any impact on consumers, and though it is not directly related to the more well-known federal funds rate, this move could be a sign that the central bank is looking at reigning in some of the emergency measures it put into place during the worst of the banking crisis. For now, it is unlikely that this move will act as a precursor to any other Fed action, and such a move would typically only interest Fed watchers and the banks themselves. However, in the current economic environment, beggars cannot be choosers. This move is a positive signal that those most in-tune with the status of the economy believe that banks are past the danger zone, and that is a positive sign for everyone.
When the Best Paid Reach for More
I am very happy to be able to present the latest in a series of guest posts on Blawgconomics. Today, my good friend Florian Seelig has written about the announcement of a pilot strike against German airline Lufthansa. Unlike many postings which see me pontificating about topics which I have little to no practical experience with, Mr. Seelig has unique insight into the situation as both a German citizen and student of the law. As always, comments and feedback are appreciated.
A few days ago, the labor union of Lufthansa announced that, starting Monday, its membership of over 4,000 German pilots will strike for pay and job security. Though the pilots, like every other member of a labor union, have the right to regular salary increases to adjust for higher costs of living, two factors are disturbing in this particular action.
First is its length. With the strike lasting four consecutive days (from Monday until Thursday), it will be the longest announced strike in the history of Lufthansa and possibly the European Community. This could set a precedent and lead to a new dimension of refusal to work. Because there have rarely been such strong positions on each side from the beginning of a strike, the union will try to gain more influence for its members concerning business decisions and operations; essentially the pilots want to take part in the management of the corporation and won’t be satisfied with a mere increase in salary. However, this already difficult task in these shaky economic times becomes even more difficult as Lufthansa will now have to determine how to deal with certain losses from such a long lay-off next week. Therefore, the length of the strike could not only hurt the airline, but could work against the union and the demands it is trying to make.
Second is its basis. Lufthansa pilots are among the best earning workers in the field. Their starting salaries are roughly the equivalent of starting salaries for associates in corporate law firms, and they can quickly earn amounts in excess of €100,000 within their first ten years. This amount could be more than doubled by the end of their careers as long as no significant mistakes occur during their time at Lufthansa. Not to mention that they live the life of a pilot and actually only fly between 70 and 80 hours a month.
The question is therefore, is the behavior of the union reasonable, especially in these unique times of economic uncertainty, or if it is just sending a wrong signal. I think the latter.
The following sources were used for this posting:
http://www.spiegel.de/wirtschaft/unternehmen/0,1518,678462,00.html
http://www.zeit.de/wirtschaft/unternehmen/2010-02/lufthansa-streik-piloten
http://online.wsj.com/article/SB10001424052748703444804575070933980477898.html?KEYWORDS=lufthansa#printMode
http://www.handelsblatt.com/unternehmen/handel-dienstleister/lufthansa-worum-es-beim-lufthansa-streik-geht;2531319
A few days ago, the labor union of Lufthansa announced that, starting Monday, its membership of over 4,000 German pilots will strike for pay and job security. Though the pilots, like every other member of a labor union, have the right to regular salary increases to adjust for higher costs of living, two factors are disturbing in this particular action.
First is its length. With the strike lasting four consecutive days (from Monday until Thursday), it will be the longest announced strike in the history of Lufthansa and possibly the European Community. This could set a precedent and lead to a new dimension of refusal to work. Because there have rarely been such strong positions on each side from the beginning of a strike, the union will try to gain more influence for its members concerning business decisions and operations; essentially the pilots want to take part in the management of the corporation and won’t be satisfied with a mere increase in salary. However, this already difficult task in these shaky economic times becomes even more difficult as Lufthansa will now have to determine how to deal with certain losses from such a long lay-off next week. Therefore, the length of the strike could not only hurt the airline, but could work against the union and the demands it is trying to make.
Second is its basis. Lufthansa pilots are among the best earning workers in the field. Their starting salaries are roughly the equivalent of starting salaries for associates in corporate law firms, and they can quickly earn amounts in excess of €100,000 within their first ten years. This amount could be more than doubled by the end of their careers as long as no significant mistakes occur during their time at Lufthansa. Not to mention that they live the life of a pilot and actually only fly between 70 and 80 hours a month.
The question is therefore, is the behavior of the union reasonable, especially in these unique times of economic uncertainty, or if it is just sending a wrong signal. I think the latter.
The following sources were used for this posting:
http://www.spiegel.de/wirtschaft/unternehmen/0,1518,678462,00.html
http://www.zeit.de/wirtschaft/unternehmen/2010-02/lufthansa-streik-piloten
http://online.wsj.com/article/SB10001424052748703444804575070933980477898.html?KEYWORDS=lufthansa#printMode
http://www.handelsblatt.com/unternehmen/handel-dienstleister/lufthansa-worum-es-beim-lufthansa-streik-geht;2531319
The List: The Most Valuable Teams in Sports
Blawgconomics missed this annual favorite from Forbes by about a month; ironic considering how much we love both sports and pictures. That's right folks, the magazines' global ranking of team values is available, and it is accompanied by a worthy pictorial.
Football dominates whether or not you think it is played with a round or oval-shaped ball as the list is composed nearly entirely of NFL teams and European football clubs. Indeed, the only other team on the list from another sport is the New York Yankees, helped by the fact that the team's ownership controls its own cable network, YES. The list is headed by English powerhouse Manchester United. Not wishing to ruin the suspense however, we will leave the rest of the spots on the list for curious readers to explore for themselves.
Football dominates whether or not you think it is played with a round or oval-shaped ball as the list is composed nearly entirely of NFL teams and European football clubs. Indeed, the only other team on the list from another sport is the New York Yankees, helped by the fact that the team's ownership controls its own cable network, YES. The list is headed by English powerhouse Manchester United. Not wishing to ruin the suspense however, we will leave the rest of the spots on the list for curious readers to explore for themselves.
2.17.2010
Public Service Announcement: A Quick Look at New Credit Card Rules
2.16.2010
Simon Deal a Sign of Life in a Barren Economic Landscape
Even if you are not familiar with Real Estate Investment Trusts (REITs), commercial real estate or the stock market, you are probably familiar with Simon Property Group. This is because Simon is also known as the main owner of the ubiquitous malls dotting the suburban landscape from sea to shining sea. Today, it also gained attention as one of the reasons for a higher stock market.
One notable result of the recent economic troubles has been a dramatic slowdown in M&A activity as companies have found easy financing harder to come by and as they avoid taking on the risk and debt necessary to complete deals. However, today Simon offered to rescue beleaguered General Growth Properties in a $10 billion deal which includes the settlement of certain of GGPs debts. The deal, subject to judicial and shareholder approval, would allow General Growth to avoid bankruptcy.
Simon is a strong company despite the economic downturn, and this proposal represents a canny attempt to buy assets at a discount. It is also a sign that financing might be loosening up and that the nation's premier retail REIT believes better times are ahead. If Simon is right, it could be good not only for its shareholders, but for the whole economy.
One notable result of the recent economic troubles has been a dramatic slowdown in M&A activity as companies have found easy financing harder to come by and as they avoid taking on the risk and debt necessary to complete deals. However, today Simon offered to rescue beleaguered General Growth Properties in a $10 billion deal which includes the settlement of certain of GGPs debts. The deal, subject to judicial and shareholder approval, would allow General Growth to avoid bankruptcy.
Simon is a strong company despite the economic downturn, and this proposal represents a canny attempt to buy assets at a discount. It is also a sign that financing might be loosening up and that the nation's premier retail REIT believes better times are ahead. If Simon is right, it could be good not only for its shareholders, but for the whole economy.
2.15.2010
The Status of the European Experiment
A recent opinion piece on Reuters' website is sure to stimulate thought in readers on both sides of the pond. Pointing to a plethora of economic data, Bernd Debusmann claims that the EU is not only on par, or even ahead of America, in terms of productivity, but that it is a much better place to live as well. Debusmann, notably a German, probably succeeded more in stimuluting a vigorous debate in the comments section than in making a convincing argument himself. The 'best place to live' will always be a subjective measure, and many could use equally compelling statistics to point to American economic supremecy or emphasize the astronomic growth in much of China. The truth is, there are costs and benefits to living anywhere in the world. Everyone values things differently, both in economic and social terms, and this is reflected in their analysis of where to live (assuming they are as lucky as Debusmann in having a choice).
Aside from the great debate over quality of life and which statistics to use in proving economic supremecy, Debusmann addressed one topic that was interesting mostly for how he glossed over it; the Greek debt crisis. The crisis, which becomes more intriguing by the day, has stimulated conversation among Europe's elite as to just what the role of the Union is in its' members affairs, how states are required to act in relation to each other, and what the future of the euro should be after rapid depreciation and wild swings in the currency. It also highlights why there will never be a 'United States of Europe' that an American would identify with his own United States. Not that this is a bad thing. Many Europeans I have met both while in Europe and in the US have expressed support for European integration and its many benefits. However, nearly all of those also express great pride in their own national, or even regional, identities and would be loathe to ever identify themselves as 'European' the way someone from the States identifies themselves as 'American.'
The crisis in Greece will work itself out as these things invariably do. Whether it is ultimately assistance from its' EU neighbors or the international community at large (for example, the G20 has funds available for just this type of situation, a fact highlighted in Prime Minister's Questions this week), the problem will be addressed. Therefore, there is probably no major threat to the EU as an institution based on these recent events. However, it does highlight the lack of a coherent vision as to the EU's role in state affairs, and emphasizes that, despite obvious problems in America, considering the Union the equal of the US in productivity terms is not statistically responsible. Quality of life is another matter entirely, and something that Blawgconomics may be willing to concede some points on, particularly with an extended stay in the heart of the Union forthcoming.
Aside from the great debate over quality of life and which statistics to use in proving economic supremecy, Debusmann addressed one topic that was interesting mostly for how he glossed over it; the Greek debt crisis. The crisis, which becomes more intriguing by the day, has stimulated conversation among Europe's elite as to just what the role of the Union is in its' members affairs, how states are required to act in relation to each other, and what the future of the euro should be after rapid depreciation and wild swings in the currency. It also highlights why there will never be a 'United States of Europe' that an American would identify with his own United States. Not that this is a bad thing. Many Europeans I have met both while in Europe and in the US have expressed support for European integration and its many benefits. However, nearly all of those also express great pride in their own national, or even regional, identities and would be loathe to ever identify themselves as 'European' the way someone from the States identifies themselves as 'American.'
The crisis in Greece will work itself out as these things invariably do. Whether it is ultimately assistance from its' EU neighbors or the international community at large (for example, the G20 has funds available for just this type of situation, a fact highlighted in Prime Minister's Questions this week), the problem will be addressed. Therefore, there is probably no major threat to the EU as an institution based on these recent events. However, it does highlight the lack of a coherent vision as to the EU's role in state affairs, and emphasizes that, despite obvious problems in America, considering the Union the equal of the US in productivity terms is not statistically responsible. Quality of life is another matter entirely, and something that Blawgconomics may be willing to concede some points on, particularly with an extended stay in the heart of the Union forthcoming.
Lessons in Love for the Economist
Fans of Ferris Bueller may not realize that the monotonous stimulus for some of the title character's adventures was played by an economist. That's right, aside from acting and playing the straight man in eye drop commercials, Ben Stein is actually a fairly well known economist who regularly makes the rounds on the cable networks. He also does a bit of writing on the topic, typically in an easy to understand manner, a trait which can be frustratingly rare in the realm of academics.
A few years back, Stein also proved himself to be a bit of a romantic, penning this economist's guide to love. It may be a day late for the Valentine's Day faithful (of which Blawgconomics is most certainly not), but bloggers can take liberties, and in any case, it is a long weekend, perhaps allowing for the extension of Valentines festivities for some. Undoubtedly, anyone engaging in such festivities will not have the time to read Blawgconomics today. However, some will find the time to visit the site today, and they can take solace in the fact that they are not celebrating the almost certainly awful death of an early Christian. Happy Valentine's Day indeed.
A few years back, Stein also proved himself to be a bit of a romantic, penning this economist's guide to love. It may be a day late for the Valentine's Day faithful (of which Blawgconomics is most certainly not), but bloggers can take liberties, and in any case, it is a long weekend, perhaps allowing for the extension of Valentines festivities for some. Undoubtedly, anyone engaging in such festivities will not have the time to read Blawgconomics today. However, some will find the time to visit the site today, and they can take solace in the fact that they are not celebrating the almost certainly awful death of an early Christian. Happy Valentine's Day indeed.
2.14.2010
Making Money off Giant Blue Space Creatures
Luckily, and despite leaving the theater to face the dismal, slushy landscape of post-Snowpocalypse DC late this week, I have yet to exhibit any of the tell tale symptoms of Avatar Syndrome. However, I have been pondering the future impact of the box office phenomenom after being blown away by both the obvious and the more-nuanced features of the 3D technology used in the movie. Sometimes it was the depth given to a doorway, or the differentiation noted between hands raised in prayer in the fore- and background of a zoom shot. At other times, it was a barely noticeable beadlet of sweat, or the subtle depth given to something as simple as a leaf. At all times it was extraordinary, and it is not difficult, even for a self-proclaimed rationalist such as myself, to see why some have been so emotionally impacted by the world James Cameron has created.
With everyone from the English Premier League to the fashion house Burberry to ESPN and the producers of the Harry Potter and possibly the James Bond franchises getting on board with the technology, it is possible that the reach of Avatar will go far beyond box office success and will have an even greater impact on movie-making and technology in general. (Anyone worrying that the above list is not quite Anglophilic enough will take solace in the fact that even US-based ESPN is planning on using the technology to broadcast World Cup matches).
Besides the alarming impact this could have on the aforementioned masses bed-ridden with debilitating bouts of Avatar Syndrome, there could be some opportunities to put smiles on peoples' faces as well with many companies involved in the requisite technology being publicly traded. Although this should by no means be taken as investment advice, and though the initial Avatar-linked wave might be over, it looks like 3D tech is here to stay, and for those with the means and the strong stomachs in a volatile investing environment, that could mean healthy investment opportunities.
With everyone from the English Premier League to the fashion house Burberry to ESPN and the producers of the Harry Potter and possibly the James Bond franchises getting on board with the technology, it is possible that the reach of Avatar will go far beyond box office success and will have an even greater impact on movie-making and technology in general. (Anyone worrying that the above list is not quite Anglophilic enough will take solace in the fact that even US-based ESPN is planning on using the technology to broadcast World Cup matches).
Besides the alarming impact this could have on the aforementioned masses bed-ridden with debilitating bouts of Avatar Syndrome, there could be some opportunities to put smiles on peoples' faces as well with many companies involved in the requisite technology being publicly traded. Although this should by no means be taken as investment advice, and though the initial Avatar-linked wave might be over, it looks like 3D tech is here to stay, and for those with the means and the strong stomachs in a volatile investing environment, that could mean healthy investment opportunities.
2.13.2010
A Muse, a Muse...My Kingdom for a Muse
After Blawgconomics' recent, self-imposed hiatus from the blogosphere, and after a few failed attempts to shake off the malaise and ennui stemming from a weeklong shutdown of the District, I went in search of inspiration today. I am happy to report that I found my muse in the form of a brilliant painting by Claude Monet. The particular offering from the French master that caught my attention was one of his impressions (pardon the pun) of Venice (the curious can find it here). It was as notable for his use of blues as for the fact that, despite my extraordinary luck in having visited some of the most spectacular museums in the world, I don't believe I have ever seen one of this series. And for an admittedly amateur, though passionate fan of the Impressionists, that was enough to inspire me back to the keyboard for a posting.
Though monsieur Monet inspired the action, the inspiration for today's topic was the current home of his Palazzo da Mula, also known as the National Gallery of Art. For those who have not had the opportunity to visit the US capitol, the National Gallery is one of a number of free cultural experiences in the city including the Smithsonians and the National Botanic Gardens, among many others, with one thing in common notable for law students on budgets; there is no entrance fee. This contrasts very favorably with the museums in, for example, my hometown of Boston, or my adopted second city New York. In these cities, as well as many others I have had the opportunity to visit, museums at the very least post a strongly encouraged 'donation' which one is invariably guilted into. In my experience the vast majority have more than a strongly encouraged price, with admission costing anywhere from $10 to $20 for a student. In any case, an afternoon of culture can end up being a very pricey proposition in many cities around the world. And with good reason. Between paying the lighting, cooling, heating and staff bills, not to mention the security costs of protecting some of the most valuable assets in the world, the monthly layout for these institutions make my cellphone bill look like a grain of sand on a beach.
However, today's excursion was different. My trip to the National Gallery was free. And though the Gallery has, since its founding, been the beneficiary of nearly incalculable private support, many of the day to day functions of the facilities are funded by Uncle Sam. Though it is tough to say in while in the midst of the Great Recession, and particularly while I am personally (euphemism alert) in between jobs, it is important for such treasures as the Gallery and the Smithsonians to recieve public funding. The fact is, I don't mind some of my tax money going to such things. In fact, I prefer it. This realization lead to an earth-shattering, mind-blowing, history-changing idea that could solve the problems of the nation, put the US back on track to retaining its superpower status in a world of growing Chinas and EUs, and eliminate the budget deficit, yet nonetheless has no chance of happening. Though admittedly whimsical, it would go something like the following.
Change our tax system to a flat tax which those below the poverty level are exempt from, then allow Americans to chose where that percentage of their incomes goes. Maybe it would be the Gallery. Maybe schools. Maybe roads, police, or fire. Though there would, of course, need to be many details worked out, we can, for the sake of brevity, dispense with many of the more niggling ones because of the inescapable certainty of the idea not coming to fruition. In all fairness, however, it would not be impossible to work out some of the major details. Anyone who has seen a congressional budget knows the excrutiating detail these annual bills go into; otherwise it wouldn't be so easy to hide 'bridges to nowhere.' Would it really be difficult to code all of these line items and put them online? Many studies put in-home internet access anywhere from 70-80%; others have the ability to access the internet at relatives' homes or other places, such as the local library. People could reasonably look up their pet project and choose to fund it.
What if something would be perpetually underfunded? A certain percentage of tax dollars could be allocated to state governments to make sure essentials are covered. This percentage would also go to other essentials such as defence and the running of the government itself. What about particularly popular items which would always be overfunded? Budgets could be submitted ahead of time; when that budget is met, allocation dollars could go to other, needier projects. What about items people don't consider every year, such as roads? This actually acts as a self-corrective; if a road is underfunded one year, users are more likely to notice and fund it the following.
There are problems. Accountants probably wouldn't appreciate being made redundant as a profession. Members of congress probably wouldn't appreciate losing their influence as well as the perks they receive from lobbyists looking to sway that influence. The latter is the most realistic barrier to such an idea. However, it would also represent a massive, positive shift in the policy of the nation from what is an increasingly government-influenced economy to a much more populist model where money is more efficiently allocated and spent. It would also better reflect the ever-changing ideals of the nation where constant feedback is given to those holding the pursestrings in the form of allocation votes. The best thing of all; the only money spent would be the money coming in from taxes, therefore eliminating the deficit, shoring up the value of the dollar and ensuring economic strength for the future.
Of course this is an admittedly whimsical idea. It is unrealistic, unfeasible, and politically impossible. However, it is interesting to think 'what if?' sometimes. America, and many other parts of the developed world, are in rough shape these days. That said, there are a lot of people in Washington, DC tonight that could do a lot worse than ponder over some fresh ideas, however wacky they may at first blush seem.
Though monsieur Monet inspired the action, the inspiration for today's topic was the current home of his Palazzo da Mula, also known as the National Gallery of Art. For those who have not had the opportunity to visit the US capitol, the National Gallery is one of a number of free cultural experiences in the city including the Smithsonians and the National Botanic Gardens, among many others, with one thing in common notable for law students on budgets; there is no entrance fee. This contrasts very favorably with the museums in, for example, my hometown of Boston, or my adopted second city New York. In these cities, as well as many others I have had the opportunity to visit, museums at the very least post a strongly encouraged 'donation' which one is invariably guilted into. In my experience the vast majority have more than a strongly encouraged price, with admission costing anywhere from $10 to $20 for a student. In any case, an afternoon of culture can end up being a very pricey proposition in many cities around the world. And with good reason. Between paying the lighting, cooling, heating and staff bills, not to mention the security costs of protecting some of the most valuable assets in the world, the monthly layout for these institutions make my cellphone bill look like a grain of sand on a beach.
However, today's excursion was different. My trip to the National Gallery was free. And though the Gallery has, since its founding, been the beneficiary of nearly incalculable private support, many of the day to day functions of the facilities are funded by Uncle Sam. Though it is tough to say in while in the midst of the Great Recession, and particularly while I am personally (euphemism alert) in between jobs, it is important for such treasures as the Gallery and the Smithsonians to recieve public funding. The fact is, I don't mind some of my tax money going to such things. In fact, I prefer it. This realization lead to an earth-shattering, mind-blowing, history-changing idea that could solve the problems of the nation, put the US back on track to retaining its superpower status in a world of growing Chinas and EUs, and eliminate the budget deficit, yet nonetheless has no chance of happening. Though admittedly whimsical, it would go something like the following.
Change our tax system to a flat tax which those below the poverty level are exempt from, then allow Americans to chose where that percentage of their incomes goes. Maybe it would be the Gallery. Maybe schools. Maybe roads, police, or fire. Though there would, of course, need to be many details worked out, we can, for the sake of brevity, dispense with many of the more niggling ones because of the inescapable certainty of the idea not coming to fruition. In all fairness, however, it would not be impossible to work out some of the major details. Anyone who has seen a congressional budget knows the excrutiating detail these annual bills go into; otherwise it wouldn't be so easy to hide 'bridges to nowhere.' Would it really be difficult to code all of these line items and put them online? Many studies put in-home internet access anywhere from 70-80%; others have the ability to access the internet at relatives' homes or other places, such as the local library. People could reasonably look up their pet project and choose to fund it.
What if something would be perpetually underfunded? A certain percentage of tax dollars could be allocated to state governments to make sure essentials are covered. This percentage would also go to other essentials such as defence and the running of the government itself. What about particularly popular items which would always be overfunded? Budgets could be submitted ahead of time; when that budget is met, allocation dollars could go to other, needier projects. What about items people don't consider every year, such as roads? This actually acts as a self-corrective; if a road is underfunded one year, users are more likely to notice and fund it the following.
There are problems. Accountants probably wouldn't appreciate being made redundant as a profession. Members of congress probably wouldn't appreciate losing their influence as well as the perks they receive from lobbyists looking to sway that influence. The latter is the most realistic barrier to such an idea. However, it would also represent a massive, positive shift in the policy of the nation from what is an increasingly government-influenced economy to a much more populist model where money is more efficiently allocated and spent. It would also better reflect the ever-changing ideals of the nation where constant feedback is given to those holding the pursestrings in the form of allocation votes. The best thing of all; the only money spent would be the money coming in from taxes, therefore eliminating the deficit, shoring up the value of the dollar and ensuring economic strength for the future.
Of course this is an admittedly whimsical idea. It is unrealistic, unfeasible, and politically impossible. However, it is interesting to think 'what if?' sometimes. America, and many other parts of the developed world, are in rough shape these days. That said, there are a lot of people in Washington, DC tonight that could do a lot worse than ponder over some fresh ideas, however wacky they may at first blush seem.
2.12.2010
Risking Power for Principles
Peggy Noonan wrote a very insightful piece in The Wall St. Journal yesterday where she concluded that much of President Obama's current agenda is rooted in a belief that it would be better to have an impact as a one-term president than to spend eight years pandering to the middle and accomplishing nothing on his agenda. Though many presidents might publicly claim that they were of the same mind, Noonan believes that Obama actually believes it.
Though admirable, this could end up being detrimental to not only his own political aspirations, but those of his party. Much of the trouble the administration has faced over the past year has come from alienation of the ever-growing 'independent party.' A belief that it would be more impactful to push through items such as healthcare this year than get an extra four years in the White House would risk the votes of a wide swathe of American voters in 2012. It could also cost Democrats Senate and House seats this year, a fact underscored by a recent Republican Senate victory in the otherwise liberal bastion of Massachusetts.
Though Obama thinks things are tough now, a Congress without Democratic majorities could, in retrospect, make his historic first year in office look like a cakewalk. However, it seems that he may be willing to risk his political future, as well as that of his party, to tick as many objectives off of his agenda as possible. Principled, yes. Politically intelligent, no. However, it is possible that legacy is more important to Obama that longetivity. Of course much of both Noonan's article and this post is speculation. If there is, however, any truth to this analysis, America can expect a lot of attempts at change this year as President Obama attempts to put his stamp on both the nation and his presidency before the tide inevitably turns.
Though admirable, this could end up being detrimental to not only his own political aspirations, but those of his party. Much of the trouble the administration has faced over the past year has come from alienation of the ever-growing 'independent party.' A belief that it would be more impactful to push through items such as healthcare this year than get an extra four years in the White House would risk the votes of a wide swathe of American voters in 2012. It could also cost Democrats Senate and House seats this year, a fact underscored by a recent Republican Senate victory in the otherwise liberal bastion of Massachusetts.
Though Obama thinks things are tough now, a Congress without Democratic majorities could, in retrospect, make his historic first year in office look like a cakewalk. However, it seems that he may be willing to risk his political future, as well as that of his party, to tick as many objectives off of his agenda as possible. Principled, yes. Politically intelligent, no. However, it is possible that legacy is more important to Obama that longetivity. Of course much of both Noonan's article and this post is speculation. If there is, however, any truth to this analysis, America can expect a lot of attempts at change this year as President Obama attempts to put his stamp on both the nation and his presidency before the tide inevitably turns.
2.11.2010
Stimulus Package Success Story?
After a brief hiatus, Blawgconomics is back up and running. If anyone is curious, we decided to take a little time off during what was, at various times, billed as 'Snowmaggedon,' 'Snowpocalypse,' and finally, 'Snoverkill' as the nation's capitol barely survived a 12-rounder with Mother Nature. No comment on whether or not global warming is responsible for the four to five foot drifts currently residing on the sidewalks outside the White House.
However, the vacation is over, and today we will revisit an old friend, the American Recovery and Reinvestment Act of 2009. Although Blawgconomics has been critical of the legislation in the past, proponents of the bill often stress the need to be patient when analyzing its merits. And rightly so. Opponents of the plan were always going to take too short-term a view of the situation in criticizing lawmakers and the Obama administration. Hopefully short-termism is the only issue that the plan faces, as little benefit was felt heading into the final quarter of 2009. However, discussion of the stimulus package has recently reached a new fever pitch of partisanship as some on the right are using lack of progress on the economy as a proxy for poor leadership by Democrats, and denisons of the left make somewhat disengenuious claims that opponents of the bill are unintelligent at best or liars at worst.
It is not our intent (for today at least) to beat a stimulus package while it is down, but we would like to point to a story that has been making its rounds after this gem was written post-State of the Union. Partisans can argue all day (and they do) about the infamous average cost per job computations made, mostly by opponents of the bill, while discussing its merits. However, the aforementioned story stemming out of the SOTU should be disturbing for anyone getting ready to write a tax check to Uncle Sam over the next few months. Despite advocating for green technological development in the past, Blawgconomics feels that the government and nation are facing bigger problems in the immediate future than electric transportation engineering. Therefore the only word that can describe spending nearly $100 million on 50 jobs in the field is wasteful.
Some people feel that the stimulus package was necessary, particularly in light of the lack of tools the Fed has at its disposal with interest rates already hovering around 0%. Others argue against it for reasons based on everything from economic principles to pure partisanship. There will be debate about how many jobs the package will 'create or save' over its lifetime far after the last dollar is spent. However, both sides should be able to agree on at least one point. The bill is signed, the money has been printed, the government has inserted itself into the middle of the economy. The least it can do is oversee where this money is going.
Is this too much to ask? Perhaps. After all, the administration actually invited the owner of the technology company to the State of the Union, leading one to believe that it felt his was actually a success story. It is possible that government is too out of touch to watch over dollars with the same watchful eye as so many Americans must in the current environment. However, at least a few people used the power of the pen to voice their displeasure with such a situation. Hopefully this will continue, because it seems that those at the top have no incentive to make sure that dollars are being used as efficiently as possible.
However, the vacation is over, and today we will revisit an old friend, the American Recovery and Reinvestment Act of 2009. Although Blawgconomics has been critical of the legislation in the past, proponents of the bill often stress the need to be patient when analyzing its merits. And rightly so. Opponents of the plan were always going to take too short-term a view of the situation in criticizing lawmakers and the Obama administration. Hopefully short-termism is the only issue that the plan faces, as little benefit was felt heading into the final quarter of 2009. However, discussion of the stimulus package has recently reached a new fever pitch of partisanship as some on the right are using lack of progress on the economy as a proxy for poor leadership by Democrats, and denisons of the left make somewhat disengenuious claims that opponents of the bill are unintelligent at best or liars at worst.
It is not our intent (for today at least) to beat a stimulus package while it is down, but we would like to point to a story that has been making its rounds after this gem was written post-State of the Union. Partisans can argue all day (and they do) about the infamous average cost per job computations made, mostly by opponents of the bill, while discussing its merits. However, the aforementioned story stemming out of the SOTU should be disturbing for anyone getting ready to write a tax check to Uncle Sam over the next few months. Despite advocating for green technological development in the past, Blawgconomics feels that the government and nation are facing bigger problems in the immediate future than electric transportation engineering. Therefore the only word that can describe spending nearly $100 million on 50 jobs in the field is wasteful.
Some people feel that the stimulus package was necessary, particularly in light of the lack of tools the Fed has at its disposal with interest rates already hovering around 0%. Others argue against it for reasons based on everything from economic principles to pure partisanship. There will be debate about how many jobs the package will 'create or save' over its lifetime far after the last dollar is spent. However, both sides should be able to agree on at least one point. The bill is signed, the money has been printed, the government has inserted itself into the middle of the economy. The least it can do is oversee where this money is going.
Is this too much to ask? Perhaps. After all, the administration actually invited the owner of the technology company to the State of the Union, leading one to believe that it felt his was actually a success story. It is possible that government is too out of touch to watch over dollars with the same watchful eye as so many Americans must in the current environment. However, at least a few people used the power of the pen to voice their displeasure with such a situation. Hopefully this will continue, because it seems that those at the top have no incentive to make sure that dollars are being used as efficiently as possible.