Biden Pessimistic About November

April 29th, 2007

Tim Russert
"You interested in being vice president?"

Joe Biden
"No, I will not be vice president under any circumstances."

Avoid absolutes...

(HT: Passport)

Friday Playlist

This is my second playlist. It's mostly mildy obscure (None of these songs would be played on the radio in my area), some tracks are political, but all songs are pretty amazing. Also, I'm still a little cover-happy.

I have the whole playlist in youtube now, which should allow for easy viewing/listening. Enjoy:

1. The New Pornographers - Use It
2. Okkervil River - A Girl in Port
3. The Decemberists - O Valencia
4. Billy Bragg & Wilco - California Stars
5. The Wrens - Everyone Choose Sides
6. The Flying Burrito Brothers - Wild Horses
7. The Kinks - Muswell Hillbilly
8. Nirvana - The Man Who Sold The World
9. Billy Idol - Plastic Jesus
10. Guided By Voices - Teenage FBI
11. The Distillers - City of Angels
12. The Foo Fighters - Baker Street

Pindyck on Candidates' Energy Policies

Mark Thoma directs us to an interview with MIT Economics and Finance Professor Robert Pindyck. Pindyck gives some excellent commentary on the most recent economic proposals of the two main Presidential candidates. The prospects for a carbon tax look pretty dim.

Candidates' energy policies fuel economist's commentary
A Q&A with MIT
Professor Robert Pindyck
Stephanie Schorow, News Office
Correspondent
August 19, 2008

...

Q: Would either candidate's energy proposals make much impact on energy costs in the short term?

A: Neither of the candidate's plans would have any impact. The one exception would be McCain's proposal to eliminate tariffs on the importation of Brazilian ethanol. It would immediately reduce the cost of ethanol.

Q: How so?

A: We have a tariff on imported ethanol from Brazil, which is made from sugar cane. Ethanol here is usually made from corn. Sugar cane ethanol is about eight times more efficient than that made from corn. By removing the tariff, Brazilian ethanol becomes cheaper and will make ethanol-gasoline blends cheaper. It will reduce the use of corn ethanol, which would reduce the demand for corn, which would make corn prices drop slightly. There are many places where gasoline is blended with 10 percent ethanol. It would have a small impact, maybe a few cents, on the cost of blended gasoline.

Q: Is there anything in either candidate's proposal that would be particularly bad for holding down energy costs?

A: Most of the proposals are political and they involve subsidies to alternative energy sources. A lot of those subsidies are just ways of providing pork for different groups.

Q: It sounds like you are not impressed, to put it bluntly.

A: Look, what are going to be needed ultimately is a tax on carbon and a tax on gasoline -- a large one. Another way to have a tax on carbon is to have a cap-and-trade system so you only allow a certain amount of carbon dioxide to be emitted. That will raise the cost of carbon. A gasoline tax would greatly reduce gasoline use. It would create the incentives we need for other energy sources, including conservation.

No candidate is willing to get up and say, "We need a to have a high tax on gasoline." In fact, McCain wants to suspend the federal tax on gasoline for the summer and Obama didn't. Nobody is going to say, "We want to make sure we have a tax in place so gasoline prices are always going to be high." That encourages people to drive smaller cars and to conserve and that brings about investments in new technology. When people know that gas prices and fuel prices will stay high because of taxes, it means they have incentive to develop alternative energy supplies.

The question is will the candidates, nonetheless, do something when elected. Who knows?

Q: What do you think about Bush's recent decision to lift the longstanding executive ban on offshore drilling, which McCain and Obama support in some manner?

A: Offshore drilling is a tradeoff between pollution and producing oil. We've had the federal ban in place because we worry about oil spills. You could say: Why don't states make their own decisions? The reason is that if one state allows offshore drilling and there's a spill, the oil moves to the neighboring state. So whether we do that is how we trade off the environment with greater ability to produce oil domestically. And there's no right and wrong about that. What is clear is that even if we opened up offshore land for leasing and drilling, it's not going to result in any more oil production for five, six years.

The Housing Crisis is Andrew Cuomo's Fault!

Monday, Arnold Kling pointed to an article from the Village Voice which puts much of the blame for the Subprime Crisis on the HUD.

Clinton HUD Sectary Andrew Cuomo comes in for a beating in this piece:

In 2000, Cuomo required a quantum leap in the number of affordable, low-to-moderate-income loans that the two mortgage banks—known collectively as Government Sponsored Enterprises—would have to buy. The GSEs don't actually sell mortgages to borrowers. They buy them from banks and mortgage companies, allowing lenders to replenish their capital and make more loans. They also purchase mortgage-backed securities, which are pools of mortgages regularly acquired by the GSEs from investment firms. The government chartered these banks to pump money into the mortgage market and, while they did it, to make a strong enough profit to attract shareholders. That created a tug-of-war between their efforts to maximize shareholder value, which drove them toward high-end mortgages, and their congressionally mandated obligation to finance loans for those who needed help. The 1992 law required HUD's secretary to make sure housing goals were being met and, every four years, set new goals for Fannie and Freddie.

Cuomo's predecessor, Henry Cisneros, did that for the first time in December 1995, taking a cautious approach and moving the GSEs toward a requirement that 42 percent of their mortgages serve low- and moderate-income families. Cuomo raised that number to 50 percent and dramatically hiked GSE mandates to buy mortgages in underserved neighborhoods and for the "very-low-income." Part of the pitch was racial, with Cuomo contending that Fannie and Freddie weren't granting mortgages to minorities at the same rate as the private market. William Apgar, Cuomo's top aide, told The Washington Post: "We believe that there are a lot of loans to black Americans that could be safely purchased by Fannie Mae and Freddie Mac if these companies were more flexible."

It’s interesting to me that for a long time, the populist criticism of banks was that they did not give out enough loans to poorer people. Now, the criticism of banks is that they gave out too many loans to poor people ("loans the banks knew could not be repaid").

Generally, on the subprime crisis, I tend to agree with John Taylor’s comment on EconTalk this week:

I think people are looking for problems with the markets when frequently it's
problems with people. It's dysfunctional people really who haven't don't the
right job. You have that when your have markets or don't have markets. I think
they (markets) have worked very well over this crisis.

Private markets have issues but generally they work. …I can’t help but think this situation would be much improved if the government didn’t try to manipulate the housing market to serve political purposes.

Name Change

I looked at moving the site to Wordpress, but didn't like their features (or rather didn't want to pay for them).

The Liberal Evolution continues, but this blog is now renamed 'A Positive Externality'. Among other things, I got a little tired of the Evolution name as evolution is a more brutal and slow process than hopefully the continued liberal revolution will be.

The Parties of Low-Information Voters

In his August 7th commentary, New York Times columnist and sometimes excellent economist, Paul Krugman blast the Republicans plan to increase offshore drilling, calling them ‘the party of stupid’. I’m generally sympathetic to criticizing politicians for pushing stupid ideas, and Krugman is generally critical of Republicans for doing so. Here is his broadly correct attack on the simple arguments Republicans in Congress, who are

…Pretending that more drilling would produce fast relief at the gas pump. In fact, earlier this week Republicans in Congress actually claimed credit for the recent fall in oil prices: “The market is responding to the fact that we are here talking,” said Representative John Shadegg… What about the experts at the Department of Energy who say that it would take years before offshore drilling would yield any oil at all, and that even then the effect on prices at the pump would be “insignificant”? Presumably they’re just a bunch of wimps, probably Democrats.

Krugman is right to infer that offshore oil drilling is quite unlikely to have much effect on crude prices in the short-term (Oil prices have fallen, but few analysts are saying it's because of the huge supplies expected to come from future American drilling). Republicans are wrong to take credit for falling gas prices, and I don’t think they are getting credit. However, Krugman should admit that at some margin, offshore drilling would exert downward pressure on oil prices. This probably will not much, but possibly a sizable amount. Something will be pumped that would not otherwise and as long as the laws of supply and demand still hold, that will have an effect. I would think that just because this would not happen until a few years down the road, Krugman would not oppose this policy. This seems like a policy that will be mildly helpful, and if nothing else, is not an extremely misguided like, say, our current ethanol policy ...Incidentally, I don’t recall seeing Paul Krugman criticize the profoundly wrong and economically nonsensical positions of Democrats such as Hillary Clinton and Barack Obama on ethanol. Although, Krugman agrees with approximately 100% of economists who don’t work for Archer Daniels Midland.

Also, a little further down the piece, Krugman criticizes the cult of personality around George W. Bush. This is an odd criticism for someone who now supports Obama, but I’m pretty sure Krugman’s definition of rigorousness dictates only opposing cults of personality around Republicans. But, perhaps I'm being excessive in my criticism... Anyway, Democracy in America points us to an opportunity for equal treatment. The Obama campaign has a new anti-foreigner ad blaming John McCain for the closure of an Ohio shipping hub, stating:

But there’s something John McCain's not telling you: It was McCain who used his influence in the Senate to help foreign-owned DHL buy a U.S. company and gain control over the jobs that are now on the chopping block in Ohio.

And that's not all: McCain's campaign manager was the top lobbyist for the DHL deal...helped push it through. His firm was paid $185,000 to lobby McCain and other Senators.

Now 8,200 Ohioans are facing layoffs, and foreign-owned DHL doesn't care.

Here’s the Economist’s take:

This is dubious on multiple levels. It is true, to be sure, that Mr McCain's campaign manager, Rick Davis, lobbied to allow the American parcel delivery firm to merge with the German company Deutche Post. But the reason the DHL jobs existed in the first instance was that the merger allowed the company to launch a $1.2 billion expansion in America that, among other things, built up the Wilmington Air Park.

Perhaps more to the point, the company's decision to let competitor UPS handle its airborne traffic was surely dictated not by some stony Saxon indifference to the plight of the American worker, but by perfectly cosmopolitan economic considerations. Even if the Ohio jobs would have existed without the post-merger expansion, is there some compelling reason to think that an American-owned company would have made a different decision, foregoing cost savings as some sort of patriotic duty? If not, this just seems like a nasty bit of xenophobia.

I agree unfortunately, that the Republicans advertise to ‘low-information’ voters. Perhaps you could call them ‘the party of stupid’. What would you then label the party that puts this out, in addition to pushing through ethanol subsidies? …It’s unfortunate.

The Georgian War

Robert Farley and Jacob Heilbrunn have an excellent (and quite well named) discussion on Bloggingheads about the fighting between Russia and Georgia. Highly Recommended

Also, I promise to get back to regular full length posts later this week.

Reason For Optimism in Detroit

It's nice to see a politician who is so ridiculously incompetent and and obviously corrupt finally go to jail. Most countries would benefit from more accountability from elected officials and higher costs to misgoverning. More of this type thing would not be bad for U.S. Politics.