Politics, Economics and other Stuff

Tax History

I see that former HR Clinton supporter and fundraiser and now McCain supporter Lynn Forester de Rothschild -- she married into the Rothschild family, starting out as a NYC Democrat -- doesn't like Obama's tax policy.  She writes:

In the guise of a "middle-class tax cut", Senator Obama is actually adding a new tax in order to create a new welfare program that will add to the annual $400 billion that we currently spend on our welfare system. According to the Tax Policy Center, each year Barack Obama will take $70 billion from the 2% of small businesses and individuals who create over 16 million jobs and will send checks for almost $100 billion to over 40%, or approximately 60 million Americans, who pay no [income] taxes at all. Cleverly, Senator Obama has called his transfer a "refundable tax credit" instead of "income redistribution". Indeed, to label as a "refund" a payment which the recipient has never funded is wordsmithing on steroids. ...
The fundamental problem with Senator Obama's stealth economics is that his dogma will not make America stronger or fairer. Today, the top 1% of earners contributes 40% of the nation's $2.6 trillion tax intake and the bottom 50% pay 2.9% of our nation's total needs. It has been shown that reductions in tax rates increase tax revenues because private enterprise strengthens the economy which in turn creates a larger tax base. For example, in 2003 the richest Americans paid $136 billion in taxes and after the Bush tax cut in 2006 they paid $274 billion.

She also provides a historical gloss:

During our last devastating global economic crisis, Franklin Roosevelt protected this country from the statist dictatorships that were emerging in the rest of the world. He protected capitalism by creating programs and institutions to protect innocent people but did not raise taxes and did not remove incentives for private wealth creation. In another era, with real fiscal deficits larger than we face currently, President Kennedy reduced taxes. The historical evidence is clear that nations that stifle private enterprise have less robust economies with slower growth and less innovation, opportunity and diversity.

It was the reference to FDR that caught my attention, specifically the claim that FDR 'did not raise taxes and did not remove incentives for private wealth creation.'  What a nice opportunity to look up some tax history.  What does one find about for 1933-1940 period (excluding the WWII and immediate pre-WWII tax increases)?

Hm, finding comprehensive data online is hard...and I don't want to post snippets here.  The big income tax rate increase is in the 1932 Revenue Act, still done under Hoover, with substantial payroll tax, estate tax and corporate income tax increases under FDR, especially in 1935 and 1936.  Lots of tightening up in tax administration occurs in the run up to WWII, that is after 1938, as well as substantial rate increases on the non-wealthy, part of a waning of the reformist/confrontational impulse in the New Deal towards a war directed corporatism that cracks down both on radicalized labor and wealthy elites. 

Hm, very bizarre, it is hard to find much on the Revenue Act of 1932 online.  Time to hit some physical books. 

One note: the 1930s are a period in which federal excise taxes are still a significant source of revenue, as are corporate income taxes, both about as large as individual income taxes.  Also, Republicans in Congress tried to pass a national sales tax as part of the 1932 Act, but the Hoover Administration together with  Democrats preferred higher income and estate taxes.  

Time for me to figure out what happened in 1935, with the 'Attack on Wealth' from the FDR Administration and the 'Soak the Rich' Revenue Act or Wealth Tax Act of 1935 and its aftermath, or the undistributed profits tax of 1936.  Looks mostly like estate taxes on very large fortunes that do indeed raise revenue and decimate quite a few fortunes. There is also FDR's loopwhole closing campaign of 1937. It is unclear to me what actually played out. 

But the bottom lines seems to be that the two big pushes to increase taxes are 1932 under Hoover and 1940-45 under FDR, with the New Deal period less transformative for taxation (outside, maybe, of the estate tax and the creation of a federal payroll tax). 

Some date on the estate (and gift) tax from the 1930s, from The Estate Tax: Ninety Years and Counting by Darien B. Jacobson, Brian G. Raub, and Barry W. Johnson. Note the big increase in the top rate under FDR from 45% to 77%, after the increase from 20% to 45% under Hoover.  These increases are real, as can be seen by the increased revenue collected. 

Why do so many evangelical teen-agers become pregnant?

The New Yorker reports, via MR. 

Yes, this is starting to be a problem

But it does solve costume angst for about 1/6th of the population.  via Ezra Klein from August Pollack:

An actual Liz Dole Ad Update

For the sake of completeness, the Kay Hagen response to the Liz Liddy Dole ad I posted previously.  A nice bonus: the atheists that Dole is complaining about are Wendy Kaminer and her husband.  Kaminer is someone you have probably heard about (or not).  She has pretty wide exposure writing in places like The Atlantic and the WSJ.  Overall a Kaminer comes across as a pretty conservative person politically, just culturally liberal (I think she's from NYC and now lives in the Boston area, but I'm not sure...).  In any case, unrefuted charges of atheism are still dangerous deadly in US politics.  Good to know poeple like me are in the Bill Ayres and Rashid Khalidi category.  Okay, not quite, I don't put my name to my blog for one thing...   

Obama's Mother has an undergraduate degree in Math

Obama's Mother, born 1942, has an undergraduate degree in Math. Oh, I had a shot at being President myself.  The things one's learns from the 2008 campaign.   (link --- yes, the math BA part appears to be true.)

McCain's National Campaign Spokesman Michael Goldfarb promotes the Talking Point of the Day

Looks a bit, well, what's the word?  Via Ben Smith.

Obama is a Muslim Polling

via TPM

23% of Texas thinks Obama is a Muslim

49% say Obama is Christian, rest don't know.  Full poll here.  Sample is only 613, so there is a standard error here of around 4%.  Still getting Obama is Christian to Obama is Muslim of 2:1 is impressive. 

Annoyingly, the poll has no demographic crosstabs.

Rashid Khalidi Update

Well, today's scandal in the view of the McCain campaign is that the LA Times has a video of Obama and Rashid Khalidi together at some event, and the LA Times won't release the video since they promised their source not to release it.  What, as they say, raises questions! 

It is just bizarre that the way this plays out in the TV media is that this is anything but totally silly...hundreds if not thousands of people know Rashid Khalidi, including my wife.  Having this sort of thing float around without people laughting at it is surreal and sadening.

Religion

Nature has a nice essay by Pascal Boyer titled Being human: Religion: Bound to believe?  I'm not sure it goes much beyond a humanistic take on religion without taking a look at more of what Boyer has written, but I did like its concise summary of trends in the relevant literature. 

One important finding is that people are only aware of some of their religious ideas. True, they can describe their beliefs, such as that there is an omnipotent God who created the world, or that spirits are hiding in the forest. But cognitive psychology shows that explicitly accessible beliefs of this sort are always accompanied by a host of tacit assumptions that are generally not available to conscious inspection.

For instance, experiments reveal that most people entertain highly anthropomorphic expectations about gods, whatever their explicit beliefs. When they are told a story in which a god attends to several problems at once, they find the concept quite plausible, as gods are generally described as having unlimited cognitive powers. Recalling the story a moment later, most people say that the god attended to one situation before turning his attention to the next. People also implicitly expect their gods' minds to work much like human minds, displaying the same processes of perception, memory, reasoning and motivation. Such expectations are not conscious, and are often at odds with their explicit beliefs.

Research has shown that unlike conscious beliefs, which differ widely from one tradition to another, tacit assumptions are extremely similar in different cultures and religions. These similarities may stem from the peculiarities of human memory. Experiments suggest that people best remember stories that include a combination of counterintuitive physical feats (in which characters go through walls or move instantaneously) and plausibly human psychological features (perceptions, thoughts, intentions). Perhaps the cultural success of gods and spirits stems from this memory bias.

Humans also tend to entertain social relations with these and other non-physical agents, even from a very young age. Unlike other social animals, humans are very good at establishing and maintaining relations with agents beyond their physical presence; social hierarchies and coalitions, for instance, include temporarily absent members. This goes even further. From childhood, humans form enduring, stable and important social relationships with fictional characters, imaginary friends, deceased relatives, unseen heroes and fantasized mates. Indeed, the extraordinary social skills of humans, compared with other primates, may be honed by constant practice with imagined or absent partners.

It is a small step from having this capacity to bond with non-physical agents to conceptualizing spirits, dead ancestors and gods, who are neither visible nor tangible, yet are socially involved. This may explain why, in most cultures, at least some of the superhuman agents that people believe in have moral concerns. Those agents are often described as having complete access only to morally relevant actions. Experiments show that it is much more natural to think "the gods know that I stole this money" than "the gods know that I had porridge for breakfast". ...

We now know that human brains have a set of security and precaution networks dedicated to preventing potential hazards such as predation or contamination. These networks trigger specific behaviours such as washing and checking one's environment. When the systems go into overdrive they produce obsessive-compulsive pathology. Religious statements about purity, pollution, the hidden danger of lurking devils, may also activate these networks and make ritual precautions (cleansing, checking, delimiting a sacred space) intuitively appealing. ...

studies of social and evolutionary psychology demonstrate a specifically human coalitional capacity, which has an impact on religion. Humans are unique among animals in maintaining large, stable coalitions of unrelated individuals, strongly bonded by mutual trust. Humans evolved the cognitive tools to achieve this. They know how to gauge others' reliability. They can recall episodes of interaction and infer what people's characters are like. They can emit and detect costly, hard-to-fake signals of commitment.

This coalitional psychology is involved in the dynamics of public religious commitment. When people proclaim their adherence to a particular faith, they subscribe to claims for which there is no evidence, and that would be taken as obviously wrong or ridiculous in other religious groups. This signals a willingness to embrace the group's particular norm for no other reason than that it is, precisely, the group's norm. ...

We should not try to pinpoint the unique origin of religious belief, because there is no unique domain for religion in human minds. Different cognitive systems handle representations of supernatural agents, of ritualized behaviours, of group commitment and so on, just as colour and shape are handled by different parts of the visual system. In other words, what makes a god-concept convincing is not what makes a ritual intuitively compelling or what makes a moral norm self-evident. Most modern, organized religions present themselves as a package that integrates all these disparate elements (ritual, morality, metaphysics, social identity) into one consistent doctrine and practice. But this is pure advertising. [Really?  This seems like an essential feature in making something a religion, and per se something that works in a way that is worth elaborating.  Stefan]

Fox News thinks Oregon is a swing state

via Sullivan, I see that Fox News thinks Oregon, which hasn't had a poll with Obama leading less than 10% in six weeks, is a swing state.  Furthermore, all indications are that OR, which has mail in voting that starts early, is seeing less considerably less voting in Republican than in Democratic counties.

Via Kos, here's Bill O'Reilly's map, just so you can see what a real journalist, free from any partisan bias, makes of the race:

Update #1: David comments

To qualify as a swing state, the candidates have to come visit. None of the candidates came to Oregon after the Democratic primary.

Finally, Fox News seems to have cleaned up their act by today, Oct.30 (or Daily Kos posted an old map?). The current map looks fine. 

An actual Liz Dole Ad

via Politico

Sen. Elizabeth Dole’s latest advertisement suggests her Democratic opponent, Kay Hagan, is a godless heathen.

“A leader of the Godless Americans PAC recently held a secret fundraiser for Kay Hagan,” the 30-second spot says, showing footage of the group’s members talking about their atheist beliefs on cable news.

“Godless Americans and Kay Hagan. She hid from cameras. Took godless money,” the ad concludes. “What did Kay Hagan promise in return?”

At the very end of the ad, a voice sounding like Hagan's says: "There is no God."

The ad is airing across North Carolina.

The democratic origins of poll taxes in the Early Republic

Morgan Kousser (author of The Shaping of Southern Politics: Suffrage Restriction and the Establishment of the One-Party South, 1880-1910, 1974):

In the colonial era, men had to own a certain amount of property in order to vote. (Women were almost always disfranchised.) But between 1775 and 1791, New Hampshire, Delaware, Georgia, and North Carolina adopted constitutions allowing men to vote if they paid any state tax, and all began to levy a poll tax. Thus, by 1791, the poll tax made possible virtually universal white male suffrage in four states, half of them in the South, giving those states the broadest suffrage in the world at the time.

The End Game

Noam Scheiber comments:

Judis makes a great point in his otherwise overly-optimistic post on the polls:

I mention the Bradley effect because I think, too, that McCain and Sarah Palin's attack against Obama for advocating "spreading the wealth" and for "socialism" and for pronouncing the civil rights revolution a "tragedy" because it didn't deal with the distribution of wealth is aimed ultimately at white working class undecided voters who would construe "spreading the wealth" as giving their money to blacks. It's the latest version of Reagan's "welfare queen" argument from 1980. It if it works, it won't be because most white Americans actually oppose a progressive income tax, but because they fear that Obama will inordinately favor blacks over them.

Agreed.

Worse, though I have no evidence for this (nothing new there), I worry that these insinuations are reinforced in the minds of working-class whites by the millions of African-Americans lining up early to vote for Obama. How sad for the country if McCain ends up jujitsuing something (i.e., record turnout) that should be a source of pride.

More agita this afternoon...

P.S. I think this stuff really underscores the wisdom of buying that half-hour block of television tonight. It's just hard to think "scary socialist" or, for that matter, scary anything when Obama addresses you directly.

Update #1: Steve Benen also picks up on Judis' analysis:

I think that[Judis]'s absolutely right. Pay particular attention to the way McCain phrases his ridiculous rhetoric: "That's what change means for the Obama administration. They're redistributing. It means taking your money and giving it to someone else."

McCain doesn't say who "someone else" is, but for the white working class undecided voters he's targeting, he's hoping he doesn't have to.

Douthat and Matt Yglesias also notice:

Ross Douthat replies:

I’m sure I’m displaying my immense naivete about the sinister machinations of Steve Schmidt and company here, but if I had John McCain’s disposable income I’d happily put up tens of thousands of dollars betting that the “don’t let Obama spread your wealth to shiftless blacks” ploy that Judis is describing has not once been a topic of conversation in any McCain strategy session throughout the whole “Joe the Plumber” phase of the campaign. (Though maybe it’s such a subtle strategy that even the strategists themselves don’t realize they’re employing it!)

Moreover, under the standard Judis is using, it seems as though any attack a conservative could possibly launch on a black Democrat’s liberalism is racially-charged by definition. Seriously - is there any attack McCain could launch against Obama at this point, whether policy-driven or personal, that couldn‘t be read, in some tortured fashion, as a racist appeal?

Well, obviously you could read just about anything as a coded racist appeal. And I think a case could be made that you’d be right to. The simple fact of the matter is that the politics of economic conservatism in the United States have a lot to do with the politics of race. I always think it’s worth recalling the practical constituency for libertarian economic policies as seen in the 1964 elections:

Now that’s not to say that the politics of American conservatism are exclusively about race. Lots and lots of people in places like Idaho, Montana, Wyoming, North Dakota, South Dakota, New Hampshire, Maine, etc. where there were no racial tensions in 1964 (no black people in those states) voted for Barry Goldwater. It just wasn’t a majority. And next week lots of people are going to vote for John McCain because they believe his opponent favors the murder of innocent unborn children, whereas a President McCain could plausibly appoint Supreme Court justices who would dramatically curtail said slaughter. There are lots of things in play. But voting behavior is very tied up with race and with attitudes about race even when it’s two white candidates facing off against each other.

Meanwhile, we’ve got a black candidate. And the crucial phrase in Judis’ argument is “if it works.” If McCain’s strategy works, he’s saying, it’ll be not because Americans are opposed to progressive income taxation or because Americans think refundable tax credits are welfare. It’ll be — if it works! — because Americans fear that Obama will take their money and give it to black people.

Is this a version of the genetic fallacy or not?  Probably not, in context.  So, what if you get elected due to racism?   Is that necessarily a problem, especially if there are alternative accounts?  More later...maybe....

Also, this is probably the time to mention Benabou and Ok, SOCIAL MOBILITY AND THE DEMAND FOR REDISTRIBUTION: THE POUM HYPOTHESIS. 

This paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they, or their offspring,maymake it up the income ladder. This “prospect of upward mobility” (POUM) hypothesis is shown to be fully compatible with rational expectations, and fundamentally linked to concavity in the mobility process. A steady-state majority could even be simultaneously poorer than average in terms of current income, and richer than average in terms of expected future incomes. A first empirical assessment suggests, on the other hand, that in recent U. S. data the POUM effect is probably dominated by the demand for social insurance.

Update #2: Michael Crowley writes:

I was initially skeptical about John Judis's suggestion that McCain's fixation with Obama's "spread the wealth" comment is really a dog-whistle message about race--i.e. an implication that Obama wants to take money from white America and give it to blacks. But McCain's appearance on Larry King tonight has me thinking again. Check out this very weird exchange, which begins with King finally (if clumsily) asking the obvious question about this line of attack:

KING: Concerning spreading the wealth, isn’t the graduated income tax spreading the wealth? If you I and pay more so that 'Jimmy' can get some, some for him--or pay for a welfare recipient, that’s spreading the wealth.

MCCAIN: That’s spreading the wealth in the respect that we do have a graduated income tax. That’s a far cry from taking from one group of Americans and giving to another. I mean that’s dramatically different. I mean Senator Obama has clearly talked about for years redistributive policices. And that’s not the way we create wealth in America. [emphasis added]

Taking from one group and giving to another? In some "dramatically different" way from graduated income taxation? What on earth is McCain talking about?

This is either complete nonsense--or else Judis is right: It's a vile insinuation.

Polling State Effect Questions

1. Is the bad housing market in Arizona, one of the worst in the US along with California and Florida, one of the reasons Obama is polling so close to McCain -- within 7% on average, with some polls within 2%, not that AZ will go for Obama in the end -- in McCain's home state?  And if the housing market matters, why isn't Florida going more for Obama?  Is it the larger age effect this year between McCain and Obama interacting with Florida's population structure?  [Update: according to Case-Shiller data, Phoenix has had the largest home price decline since its peak of any major metro area in the US, a bit more than a third, though Las Vegas, Miami and San Diego are in the same category.]
2. Does Obama running solidly ahead in Virginia, a historically Republican state, reflect no only new inmigration but also the fact that Virginia elected a popular and successful black governor 18 years ago, removing some of the fear of black elected officials among rural/suburban whites the state? 

BTW, I'd not realized that Wilder started his electoral career in 1969 as the first (!) black state senator in Virginia since Reconstruction.  I would have assumed there were some occasional white Democratic controlled black state senators before then.  Did Virginia lag other southern states here?

Polling Update

Polls continue to look good, with Florida being the only serious weak spot.  North Carolina is polling leaning Obama, but not by much, tighter than a few weeks ago.  Ohio could be wider, but still polls fine, but I do worry it may be a state with Bradley effect issues.  McCain should stay under 200 electoral votes or, if Florida goes his way, a tad above that:

I am still hoping for a landslide though (i.e. McCain under 175 electoral votes), which is well within the range of the probable (~1/3?). 

Nate Silver has a nice write-up of McCain's last hope, undecides breaking for McCain in large numbers.  The bottom line is that this, on optimistic assumptions for McCain, might be worth 1%.    Turnout and cellphone biases are supposed to go the other way by more than 1%, but I'd be loath to count on that. 

Below, among seven current polls which have released racial breakdowns, are the numbers of voters who did not declare their support for either major-party candidate. These totals include undecideds as well as third-party votes -- a group that I refer to as "uncommitted" voters.

Undecided + Other

Pollster White Black Hispanic
===========================================
Gallup  6 5 8 
Research 2K 8 2 4
Rasmussen 3 6 7
Battleground 7 5 7
Economist 10 5 11
Pew   12 9 --
Zogby  6 3 --
===========================================
AVERAGE 7.2 5.4 7.4

A somewhat higher proportion of whites (and Latinos) are uncommitted, but the differences are not overwhelming. Suppose that McCain were to win 2/3 of white uncommiteds -- which I'd probably consider optimistic, although perhaps not since the uncommitted whites appear to be fairly downscale. Suppose also that Obama wins 90 percent of black uncommitteds and 60 percent of Latino uncommitteds. Suppose furthermore that the breakdown of white/black/Latino voters is 74/12/10, reflecting slight increases in the latter two groups from 2004's 77/11/8. Under these assumptions, McCain would pick up 3.9 points from uncommitteds and Obama 2.8 points, a net gain of 1.1 points for McCain:

Uncommitted Allocation I

Group % of Electorate to McCain to Obama
White 5.33 --> 3.55 1.78
Black 0.65 --> 0.06 0.58
Latino 0.74 --> 0.30 0.44
===================================================
Total 6.72 --> 3.91 2.81

As I said, however, these assumptions are arguably optimistic for McCain. What if, instead, the distribution of the uncommitteds roughly resembles that of committed voters within each racial group, which means that whites go about 57/43 for McCain, blacks go 95/5 for Obama, and Hispanics go 65/35 for Obama? Under this set of assumptions, the undecideds split essentially evenly:

Uncommitted Allocation II

Group % of Electorate to McCain to Obama
White 5.33 --> 3.04 2.29
Black 0.65 --> 0.03 0.62
Latino 0.74 --> 0.26 0.48
===================================================
Total 6.72 --> 3.33 3.39

Another problem is that we haven't been distinguishing undecided voters from third-party voters. There is an argument that third-party voters should be treated as quasi-undecided voters, since third party support tends to collapse at the voting booth. Nevertheless, Bob Barr and Ralph Nader will probably pick up a collective 1-2 percent of the electorate, and third party support tends to be overwhelmingly concentrated among white voters.

Four of the seven polls distinguished undecided voters from third-party voters. Looking only at those four polls:

"True" Undecideds

Pollster White Black Hispanic
===========================================
Research 2K 2 2 1
Rasmussen 2 5 4
Battleground 4 3 4
Economist 6 3 11
===========================================
AVERAGE  3.5 3.3 5.0

With the third-party votes removed, there is essentially no difference between the number of white and black undecideds, though Latinos perhaps are undecided at somewhat higher rates.

Long story short ... given optimistic assumptions (McCain wins 2/3 of white undecideds, 100 percent of third-party support collapses), the undecided vote is worth a net of about a point for McCain. Given what I'd consider to be more neutral assumptions, there's no particular reason to think that the undecided vote favors him.

My guess is that the truth is somewhere in between and that this is worth, say, half a point for McCain. Even give him the full point if you like. This effect is probably smaller than that of the cellphone problem, from which there may be 1-2 points of cushion in Obama's direction. If on top of that the polls are being overly conservative with their likely voter modeling, the numbers are more likely to be underestimating Obama's standing than overestimating it.

Porsch-VW Short Squeeze Update II

The press is now quoting figures around Euro 30 billion for Porsche's profits from its short squeeze, for instance the FAZ.   The FT is skeptical and comes up with a Euro 4 billion figure:

Difficult to say, of course, but we’d be sellers of the €30bn figure being banded about by newspapers as they struggle to explain how speculators borrowed shares in Volkswagen, not knowing they belonged to Porsche, sold them, and then seemingly had to buy them back (from Porsche) at five times the price, before giving them to Porsche. (We won’t address the pref side of the trade!)

The €30bn figure would seem to come from taking the raw “borrowed stock” position in VW from Data Explorers (12.9 per cent), subtracting the notional freefloat in VW (5.9 per cent) , multiplying the resultant number of shares by €1,000 - and then adding €10bn to please the news desk.

It’s the financial media equivalent of a crime reporter - charged with providing colour on the scene of a domestic murder - looking in a local estate agency window, finding the most expensive property in the locale and then doubling the price for effect.

In reality, exchange data suggests something like 22m shares in VW have actually changed hands at prices ranging from €210 to €1005. Without getting too VWAP-ish about this, stripping out double counting, that points to maybe €6bn of business conducted at the “wrong” price. Slap a random €200-a-share price tag on VW and the realised losses come in at maybe €4bn.

Painful for those funds caught in the mire, yes - but far from fatal for the global hedge industry.

The damage to Germany’s financial markets, meanwhile, is unquantifiable.

Also, a the notion that 'cash settlement' options need not be reported while 'stock settlement' option do need to be reported is a nice example of the legal perspective at work --- in most circumstances these two types of options are economically equivalent, since both will be hedged the same way the the option issuing firm, i.e. in both cases the two option types represent the same amount of control over the underlying asset. 

Also nice the FT headline: If history repeats, Porsche will now go bust.  

Somebody needs to write up the German law and regulatory situation here. Some of the mess may stem from harmonization of German law with European law, and a resulting temporary gap in regulatory coverage. Not clear where and why the gap originated though...

EU State Formation and the Supremancy of EU Law

Not surprisingly, the European Court of Justice found, for the first time, that EU law is supreme in the EU and international law and the UN charter must conform to EU law.  See  Kadi vs. Council and Commission, handed down Sep. 3.  I had missed it until now (via. Volokh and Global Administrative Law blog here and here). This is what states do, and the fact that the EU hadn't yet done so is a reflection of where EU state formation stands. 

Eric Posner comments:

Posner suggested 4 different implications that the Kadi decision may have:

1) There was a real risk that it would weaken international law, undermining its coherence and favouring instead increased fragmentation, particularly as this decision may well encourage other national courts to adopt a similar stance. However, he also acknowledged that it may have the opposite effect: if the EU is indeed emerging and beginning to act as a single, powerful state, then its traditionally strong support for international law could ultimately lead to a strengthening of the system. Lastly, he noted that the ECJ had sent a clear message to France and Britain that they cannot expect their positions as permanent members of the Security Council to lead to any special treatment.
2) The judgment also raised significant questions over the issue of European constitutionalism. Given that recent attempts to bring an actual “European Constitution” into force have been rejected by the publics of a number of different EU Member States, it is perhaps surprising to see the ECJ rely so heavily on the idea of “constitutional principles” of the European legal order in this judgment. Although this is by no means a new tactic by the Court, the question remains of whether recalcitrant European publics will accept this judicial advancement of the European constitution, when the political route has been blocked.
3) There is a risk that the judgment might undermine the putative universality of human rights law, as the ECJ relies only upon the European human rights regime.
4) Lastly, there is a sense in which the European criticism of the US Supreme Court, and its frequent refusals to consider international law as a factor in its judgments, now rings hollow. Echoing Franck, Posner suggests that the ECJ has simply reaffirmed the US Supreme Court’s view that national constitutional standards take precedence over international law.

Eyal Benvenisti:

Eyal Benvenisti , referring to the likelihood that the Kadi judgment would lead to the creation of some kind of hearings and review mechanism within the Sanctions Committee, argued that what we are witnessing is not (or not only) the birth of the European State, but also the Europeanization of the UN system. In further support of this, he referred to Advocate General Maduro’s suggestion, in his Opinion in the Kadi case and which displayed, in some respects at least, the same logic as that relied on by the Court, that all Member States are compelled, in all of their activities, to act in accordance with the basic principles of European law. “As Members of the United Nations, the Member States, and particularly – in the context of the present case – those belonging to the Security Council, have to act in such a way as to prevent, as far as possible, the adoption of decisions by organs of the United Nations that are liable to enter into conflict with the core principles of the Community legal order. The Member States themselves, therefore, carry a responsibility to minimise the risk of conflicts between the Community legal order and international law” (see para. 32 of the Opinion). This could, if it is an accurate reflection of EU law, have huge implications for the future direction of the UN. Benedict Kingsbury, however, noted that the ECJ itself had remained completely silent on this question.

US Dollar decline for the next month?

I don't usually do my FX forecasts here, but, hey, why not.  I predict USD decline for the next few weeks with moderate probability (~55+%?).  This is against the other big currencies CAD, EUR, GBP, AUD, NZD, JPY, SEK.  Intuitively not a hard call. 

Porsch-VW Short Squeeze Update

Sorry, I have no link for this, but it seems that Porsche's short squeeze on VW using undisclosed cash settlement options would not have been legal until recently and will not be legal again by the Spring.  There was a recent determination that cash settlement option need not be reported, like they had been, given the way the law was written, which lead to the law being revised, but with this lack in regulatory coverage for a period.  Or so it seems.  

Time to buy oil

The FT reports

Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term de­mand. The effort will become even more acute as prices fall and investment decisions are delayed.

The IEA, the oil watchdog, forecasts that China, India and other developing countries’ demand will require investments of $360bn each year until 2030.

The agency says even with [this?] investment, the annual rate of output decline is 6.4 per cent.

The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say.

“The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand,” the IEA says.

The watchdog warned that the world needed to make a “significant increase in future investments just to maintain the current level of production”.

The battle to replace mature oilfields’ output could even offset the decline in demand growth, which has given the industry – already struggling to find enough supply to meet needs, especially from China – a reprieve in the past few months.

The IEA predicted in its draft report, due to be published next month, that demand would be damped, “reflecting the impact of much higher oil prices and slightly slower economic growth”.

It expects oil consumption in 2030 to reach 106.4m barrels a day, down from last year’s forecast of 116.3m b/d.

The projections could yet be revised lower because the draft report was written a month ago, before the global financial crisis deepened after the collapse of Lehman Brothers.

All the increase in oil demand until 2030 comes from emerging countries, while consumption in developed countries declines.

As a result, the share of rich countries in global demand will drop from last year’s 59 per cent to less than half of the total in 2030.

This is the clearest indication yet that the focus of the industry on the demand – not just the supply – side is moving away from the US, Europe and Japan, towards emerging nations.

First Mitten

Made by my wife for kid #1.  Looks pretty good for the first try. And no, this isn't the first thing she has knit, just the first mitten. 

Southern Exceptionalism is getting stronger?

ABC News - WP polling (via Sullivan):

Obama is outperforming any Democrat back to Jimmy Carter among white voters, getting 45 percent to McCain's 52 percent. But in the South, it is a very different story. Obama fares worse among Southern whites than any Democrat since George McGovern in 1972.

Whites in the East and West tilt narrowly toward Obama (he's up 8 and 7 points, respectively), and the two run about evenly among those in the Midwest. By contrast, Southern whites break more than 2 to 1 for McCain, 65 percent to 32 percent.

That stark divide is not simply a partisan difference. While white Democrats outside the South give Obama margins of 80 points or more, he leads by a more modest 65 points among white Southern Democrats. The Democrat is up 55 points among liberal whites in the region, far under his performance among those voters elsewhere, where he is up by 79 points.

Southern white independents are also far more likely than politically independent whites in other regions to support McCain: They break 62 to 33 percent in his favor. White independents in the West favor Obama by a similarly wide margin, 63 to 34 percent. White political independents in the East and Midwest divide much more evenly.

Update #1: Jody comments

There is a chance, albeit a small one, that if Obama wins, he can change that dynamic for a generation. Sometimes you need external events to sneak someone into office, and then they can do the work necessary to transform the landscape.

I was pointing below to some pol sci literature that suggests white Democrats and Independents react well to the election of black mayors, with large falls in aversion to black politicians.  Not clear that this applies to Southern whites with Obama, but I'd guess that it would, at least for Democrats and Independents (but there's always the issue that Southern Democrats and Independents might be different, i.e. much closer to Republicans). 

Marketing

McCain Chief Economic Advisor Holtz-Eakin goes off message

via Swampland, quoting CNN:

Younger, healthier workers likely wouldn't abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain's senior economic policy adviser. "Why would they leave?" said Holtz-Eakin. "What they are getting from their employer is way better than what they could get with the [McCain proposed] credit."

Which goes to show what fine line McCain's health care plan treads. Which in itself doesn't make shifting from an employer tax deduction to an employee tax credit a bad idea, if done correctly. Not clear to me how the Obama plan is supposed to work either, or the HR Clinton plan was supposed to work. 

Porsche executes the biggest short squeeze in history

It seems Porsche is executing the biggest short squeeze in history in VW.   You think regulators would shut this sort of behavior down, but politically that may now be hard to do in Germany.   Litigating this after the fact isn't going to save the funds this wipes out and is going to push firms out of the market (which may be the intent) and tp me it isn't clear what German law/regulations this violates (in the US 'market manipulation' is prohibited and this would count as such since it is a short squeeze by a dominant equity investor, though there may be some safe harbors).  (FTD, FAZ)  I've seen guesses that fund managers have been taken for around $15 billion, but that could go higher.  Not clear if Porsche can pocket all the money, or who else is free riding on Porsche's move.   

Like financial markets didn't have enough troubles right now. 

Update #1: the FT writes up the state of play as of yesterday.  Note that this behavior by Porsche is implied by the FT to be illegal due to a reform coming into force next Spring, not clear what the reform is though. Ah, it appears to be a reg on disclosure of cash settled option.  So what Porsche has been doing here is buying lots of undislosed options to buy VW from banks, which then go out and buy VW stock to hedge the option they've written, and then lend the stock out to short sellers.  Porsche then calls the option, the banks recall the stock from the short sellers, and sell it to Porsche, which pays by calling the option. 

Taking the concept of excellent cornering to a new level, Porsche casually announced at the weekend that it had amassed a holding of 74.1 per cent in that other piece of German financial engineering, Volkswagen.

Held in the form of a 42.6 per cent holding in shares and then a further 31.5 per cent in so-called “cash settled options,” Porsche said it was making the disclosure “due to the dramatic distortions on the financial markets.” According to official records - last updated on August 5 - Porsche’s previous holding amounted to just 30.29 per cent.

Net result on Monday? The most dramatic market distortion of a leading European company we have seen in some time as shares in Volkswagen were catapulted 85 per cent higher to €391.

This has nothing to do with the fundamental value attached to Porsche seemingly being close to its stated goal of achieving of “domination of the Volkswagen group by Porsche.”

It is about squeezing the hedge funds that had sold VW short in the understandable belief that the shares were comically over-priced. Note this sneering paragraph in the Porsche release:

Porsche has decided to make this announcement after it became clear that there are by far more short positions in the market than expected. The disclosure should give so called short sellers — meaning financial institutions which have betted or are still betting on a falling share price in Volkswagen — the opportunity to settle their relevant positions without rush and without facing major risks.

Max Warburton, the Sanford Bernstein analyst who undoubtedly hurried the Porsche disclosure, points out that in shorting VW stock over recently months, hedge funds must have been borrowing shares (indirectly and unknowingly) from Porsche itself. After all, aside from the Porsche holding, almost 20 per cent of VW is held by the Lower Saxony state, leaving a “free float” of less than 6 per cent.

Here’s the summary of  a new Bernstein note sent to clients on Monday:

• So was it more than a “fairytale”? Porsche announced on Sunday 26th that it controls 74.1% of VW’s  Ord shares — 42.6% directly and 31.5% via cash-settled options. This announcement is overdue in our  view and appears to support many of the ideas we put forward in our recent report, “Porsche: The Fruit  Machine? A Possible Explanation for VW’s Inexorable Rise” — that Porsche was near 75%, that the daily  volume seen in VW could likely only be short selling, that only Porsche or its banks could be providing  the supply of stock and that Porsche was likely profiting from these transactions. Last week, Porsche  described our report as a “fairytale” to the press.

• Shutting down the Fruit Machine. Porsche’s disclosure effectively shuts down The Fruit Machine — a  potentially money making situation that only worked when Porsche owned more of VW than the market  realised, and when there was a ready supply of hedge funds willing to put money into the slot, in the hope  of a payout if the freefloat eventually traded on fundamentals. Now it is confirmed that there is no  significant freefloat, and no payout, there will be no more players willing to feed the Fruit Machine.

• Disclosure at last. Porsche states that it “has decided to make this announcement after it became clear  that there are by far more short positions in the market than expected”. We find it surprising that Porsche  can claim there were more shorts than expected given Porsche and its counterparties own nearly all the  stock, so only they can have supplied stock for lending (aside from Lower Saxony), so they should have  been reasonably aware of short positions. Information on short interest is also available publicly.

• Short squeeze to infinity? Porsche also states that “the disclosure should give the so called short  sellers…the opportunity to settle their relevant positions without rush”. This is surely an ironic statement:  we think it is likely there will be a stampede to close shorts. From whom will the hedge funds repurchase  stock if Porsche and its counterparties own all but 5.9% of the freefloat? Do other funds (temporarily)  hold VW shares that are ultimately already owned by Porsche? Did Porsche buy the shares from the short  sellers for a second time? At what price will these other funds — or Porsche and its counterparties — sell  VW shares back to the hedge funds? At a “nice” price to defuse the situation? Or at €300? €400? €500?  Infinity?

• One last jackpot for Porsche? The consequences of this disclosure are complex for the share prices of  VW Ords, VW Prefs and Porsche. We discuss potential outcomes in this note but in simple terms we  believe we will see a massive short squeeze on VW Ords, a further fall in VW Prefs (short term — but not  long-term — might Porsche now eventually have to bid?) and probably some upside in Porsche. In theory, we believe that Porsche (if it so chooses) can make one last big profit from VW as the shorts are settled. Porsche also clearly believes it can soon get its hands on VW’s cash pile.

Porsche appears to have made many billions of euros employing this fruit machine.

On one level, the hedge funds playing VW deserve everything they have got. The market was clearly “false” - if only in the sense that VW’s valuation and daily price moves did not in any way tally with economic reality. And the dim-witted nature of Germany’s financial regulators has been known for some time.

But such activity, had it had occurred in the UK, would have caused investors to reach for their lawyers and/or call the financial police. In Germany, the relevant legislation does not come into force until next Spring.

In the meantime, Porsche has brought the German equity market into disrepute - albeit in spirit rather than the letter of outdated laws.

This episode suggests that allowing naked shorts, properly collateralized, is important for markets to function. 

Kids and Food

My wife made tofu lasagna today -- there has to be some 'food exclusion theorem' that applies here.  One out of three liking it isn't bad. 

Cutting up and rebundling cash flows and financial market (dis)equilibrium

One way of understanding what financial institutions do is that they cut up and rebundle cash flows of assets they manage, and then sell these restructured cash flows to investors. 

More later...

Finance-led Growth and Inequality

Greg Mankiw quotes Larry Summers and then provides a corrollary:

The crisis has also reminded us of the lessons of the technology bubble, Japan’s experience in the 1990s and of the US Great Depression – that finance-led growth is problematic. The wealth and income gains from the easy availability of credit were highly concentrated in the hands of a fortunate few. The benefits also proved temporary. In retrospect, the fact that 40 per cent of American corporate profits in 2006 went to the financial sector, and the closely related outcome – a doubling of the share of income going to the top 1 per cent of the population – should have been signs something was amiss.

A corollary: Remember that "problem" of an increasing share of income going to the superrich? Most likely, it has been solved.

Do we have a quantitative model of finance-led growth leading to increased concentration of wealth and income, and do we have data that suggests that finance-led growth is a big part of the increased income and wealth inequality of the last three decades?  Obviously in an accounting sense finance sector bonuses and other sorts of compensation are part of the story, but is there anything beyond that?    I could see this being a big deal, but the argument deserves elaboration and some contact with empirical evidence. 

Lots of non-causal mechanisms could be at work as well, for instance countries with political systems that are good at tolerating income inequality also have political systems that are good at providing a setting in which finance led-growth flourishes.  One would want to think about what the mechanisms are and what data is relevant to assessing them, and what it means for policy and the future. 

And what specifically makes finace-led growth work this way?  Are there other forms of finance-led growth that would not work this way? I suspect that a large fraction of the problem is more specific than 'finance-led growth.'

And yes, I've even taught some of the play models on finance, growth and inquality (for instance Oded Galor, or Piketty, The Dynamics of the wealth distribution and the interest rate with credit-rationing, see Raquel Fernandez for a modern syllabus), I'm asking here for an credible integration of modeling with empirical evidence.   It is an active area of research, but I don't see any great landmark paper yet.  Writing a literature review might be fun. 

Update #1: a model with endogenous firm size depending on the financial system should be important, with three regimes: small self-financed firms, large self-financed firms, large externally financed firms, with the firm size distribution and the incentives for externally financed firm manager driving earning inequality.  The idea being that externally financing allows for the rapid creation of large firms with highly paid upper management. 

There is also the issue of creating a firm and then selling it to externally financed investors, some thing that can create large wealth differences. 

Reports from West Virginia

Ruth Marcus of the WP visits the parking lot of a Wal-Mart in West Virginia:

"If I do vote, it will be Republican," said Charles Mount, a 31-year-old mechanic and registered Democrat. "There's just something about Obama. You hear so much about him being a Muslim. I don't personally believe that but I don't know that. I'm not going to take a chance on the leader of our country."

"If Barack Obama gets in, it basically will be giving our America away to whatever . . . ," said Jamie Willis, 42, who voted for Clinton in the primary. Her husband, Brent Willis, 37, a contractor and registered Democrat, filled in the blank. "To be brutally honest with you, if Obama goes in there the [blacks] are going to go crazy -- and I'm not a prejudiced person."

Terry Sanders, a court clerk, said he "wouldn't vote for Obama if he was running for dog catcher. His values are completely different from mine. Why's he got a problem with the flag? He wouldn't put his hand over his heart. It casts a lot of doubt about what kind of man is this fellow."

These are not incendiary quotes cherry-picked from among multiple interviews or cajoled out of people reluctant to express a view. They came from the first eight people who stopped to answer my questions -- of whom just one said she supported Obama, citing the backing of the mineworkers union.

I was going to write up a bit on the pol sci literature on how white voters react to black mayors, but I ought to get to bed.  The good news is that white Democrats and Independents become much more willing to vote for blacks after two years under a black mayor, and decide pretty much that 'the blacks don't go crazy'.  People do learn from the experience of having a black mayor and fear based racial classification schemes weaken considerably for non-Republicans whites.   Or so a superficial reading of the literature seems to indicate...see for instance Zoltan Hajnal.  He has a 2001 APSR paper,  White Residents, Black Incumbents, and a Declining Racial Divide:

Despite the hopes of the civil rights movement, researchers have found that the election of African Americans to office has not greatly improved the well-being of the black community. This study focuses on the white community, however, and finds that black leadership can have a profound effect. Under black mayors there is positive change in the white vote and in the racial sentiments expressed by members of the white electorate. Although white Republicans seem largely immune to the effects of black incumbency, for Democrats and independents an experience with a black mayoralty tends to decrease racial tension, increase racial sympathy, and increase support of black leadership.

Update #1: the NYT reports from western Pennsylvania:

In Ambridge, a Beaver River factory town named after the company that gave it fame — American Bridge — Olga Permon, a 71-year-old steelworker’s widow and a lifelong Democrat, climbs the stoop of her yellow-brick home. She considers the field: Mr. McCain? A grouchy old man. Ms. Palin? Please. No way. What about Mr. Obama?

Her pause goes on and on. “He scares me,” Mrs. Permon said. “The coloreds are excited, but my friends and I plan to write in Hillary’s name.” ...

The white-haired Judy Miller, “Miss Judy” to customers, slaps together a turkey hoagie in Hookstown, near the West Virginia border. Mention of Mr. Obama brings a frown. “Who is he? Who’s behind him?” she said. “This radical at the university thing, the Muslim stuff.” ...

“This is McCain’s Hail Mary; they looked at the huge margin here for Hillary Clinton in the primary and figured, ‘Hmm, we have a shot,’ ” said G. Terry Madonna, director of the Center for Politics and Public Affairs at Franklin & Marshall College, in Lancaster. “But it’s going to be very difficult here for him to get the margins needed to offset the cities and the eastern suburbs.”

McCain: "I've been tested" or how did being a POW make McCain an experienced international crisis manager?

Larision writes to day:

“I’m gonna test them,'’ Republican John McCain said at a campaign rally in New Mexico this morning. “They’re not gonna test me.'’ ~The Swamp

If you take McCain at his word, this means that he is going to cause an international crisis in the first six months of his administration, which is exactly what everyone who opposes McCain fears and it is one reason why Obama is going to win in a week and a half.  No matter who is elected, there may be a crisis, and either one of them might perform terribly, but McCain distinguishes himself as the candidate who will almost certainly get us into a new crisis and who reassures fewer and fewer people that he can lead in a crisis.

If you look at the reporting of this McCain stump speech quote, you find that McCain said (sorry, I cannot find more of the transcript -- I did hear more of it on the radio today and I don't think I'm leaving out context in a misleading manner):

"I have been tested.  I'm gonna test them. They're not gonna test me.''

This seems to refer to McCain having been a POW for five years.  But that isn't international crisis experience at a high level.  Or even a low level.  So what international crisis management experience does McCain have?   This seems to be more of McCain's "Guantanamo isn't a prison, its a leadership academy" stance, just this time a international crisis management leadership academy.  I could see McCain going after Obama's lack of international high level crisis management experience if McCain himself had some, but McCain does have any.  Like HR Clinton, who famously had to duck snipers in Bosnia to have tea with the wives of local politicians, McCain seems to believe having been in the public eye for more years than Obama, he can claim more high level international crisis management experience and success than Obama, even if that claim doesn't have any actual foundation. 

Obviously, McCain could talk about all his good work going to Nato-security conferences and talking to German members of parliament and the various deputy chiefs of staff of European foreign secretaries, but I don't think that would sound quite as impressive as a slam on Obama. 

I'd all be up for considering voting for an politician with actual high level foreign policy crisis management experience.  But we don't have one of them in the running, just a pretender. 

Sam Wang's median electoral vote estimate in 2008 and 2004

Here is Sam Wang's median electoral vote estimator for 2008 and 2004, using meta-analysis of state polls.  Wang claims he does no sophisticated adjustments.   Note the 95% confidence interval.  Jumps are not from large noise but from the combination of a median estimator with large state discreteness. 

Plumbers

Writing about Joe the Plumber, Michael O'Hare starts off:

First, some nice words about plumbers: I don't have the citation, but I read somewhere that if you separate the drinking water from the sewage, which is precisely what plumbers do and what most of the plumbing code provisions are designed to assure, you double life expectancy from 35 to about 70; adding all of medicine's wonders gets you maybe another five.

Pay for Performance

Mark Kleinman writes about today's report that Palin's makeup person is now the highest paid McCain-Palin staff member:

Consider, for example, the pseudo-fuss being kicked up because Sarah Palin's makeup artist was paid $22,000 for just the first two weeks of October, far more than any of McCain's speechwriters or policy advisers.

Why not? Just compare the way Palin looks with the way McCain sounds.

One might want to be a bit careful here, since payments over a short period may not reflect earnings.  Finally, you'd expect speechwriters would want to work for McCain, if just for the professional reputation it creates, whereas a first rate makeup artist would be in it soley for the money. $40K for the hassle of being on the campaign for a month and dropping other clients doesn't seem like that much. 

Why not vote for Obama?

NPR has a nice report from rural York, Pennsylvania, including a nice articulation of concerns some people have about what an Obama victory will mean.  I've actually recently tried to explain to my kids that this view is held by some non-Obama voters. 

"I don't want to sound racist, and I'm not racist," Moreland says. "But I feel if we put Obama in the White House, there will be chaos. I feel a lot of black people are going to feel it's payback time. And I made the statement, I said, 'You know, at one time the black man had to step off the sidewalk when a white person came down the sidewalk.' And I feel it's going to be somewhat reversed. I really feel it's going to get somewhat nasty."

Moreland says she doesn't think all black people will "want payback." "I'm not talking about you, and I'm not talking about them. I'm talking about the people that are out on the street looking for trouble. Putting a black man in the White House — and if he gets there, he gets there; I'm going to live under his presidency and everything. And I'm still going to be friends with anybody black that wants to be my friend and everything. But I really feel there's going to be a time of adjustment. I really feel it. I hope I'm wrong. I hope I'm wrong."

Update #1: Jody comments

This came up in the New Yorker a few weeks ago, too -- the expectation that a Black presidency means it's black payback time. It's a fascinating insight into what people expect when other's get power -- or more accurately, into how they view their own power-holding. 

The thing here isn't that this sort of view is always wrong or that this sort of view of one's own power-holding is always wrong, it simply is that it seems pretty far off for electing the President of the US in 2008.  So where does it come from?  And how wide-spread is it?  Is it a view that makes more sense at the city level and then gets extrapolated upward to statewide and Presidential elections?   I assume this attitude shows up locally -- but is there any evidence that electing black mayors, for instance, worsens black crime or increases white flight (correctly instrumented, which might be hard)?  So far we haven't had more than two black governors, and the 2nd one is at the end of his 2nd year.  The first one seem to be safely above the median for his performance.     

Driving

via CR, the vehicle miles driven in the US through August 2008.  So far it looks like the 1973 or 1981 recessions, not the lighter 1991 or 2001 recessions.  But that's only what happened through August.  Gasoline prices, on the other hand, are way down.

Bush's Twofer

Boris Johnson on the presidential race.  Not that he is terribly deep, but he does seem pretty on point.

The legacy of George Bush may take years, if not decades, to determine.

But at present he seems to have pulled off an astonishing double whammy.

However well-intentioned it was, the catastrophic and unpopular intervention in Iraq has served in some parts of the world to discredit the very idea of western democracy.

The recent collapse of the banking system, and the humiliating resort to semi-socialist solutions, has done a great deal to discredit - in some people's eyes - the idea of free-market capitalism.

Democracy and capitalism are the two great pillars of the American idea.

To have rocked one of those pillars may be regarded as a misfortune.

To have damaged the reputation of both, at home and abroad, is a pretty stunning achievement for an American president....

[McCain's] chief problem is that he does not seem to offer any hope of repair to those American ideals.

Or, to put it another way, it is not clear how America under McCain would recover her standing in the eyes of the world.

His chief selling-point is his grasp of foreign affairs, and his staunch belligerence in the pursuit of American interests....

But is this bellicosity really what the world is crying out for today?

 

Who was John M. Palmer?

The NYT endorsed Obama today, no surprise, and put up a retrospective on their past endorsements for President.  In 1896 they endorsed John M. Palmer, who ran in the same race as McKinley and Bryan. Who the hell was Palmer?  I'd never heard of him. 

Turns out Palmer was born in 1817, was part of Illinois territory and state politics, ended the Civil War as a general and was the officer in charge of the occupation of Kentucky until 1868, then served as the governor of Illinois 1869-73 and Senator from Illinois 1892-96. 

Palmer ran for president with Simon Bolivar Buckner, Sr, a former Confederate general and governor of Kentucky, as running mate on a gold standard platform.  At the time of his endorsement by the NYT for President Palmer was 79 years old.  The ticket received 1% of the popular vote. 

Palmer had multipe party switches in his career, ending up running as a National Democrat in 1896. Lot of nice sectional politics here. 

The FX Carry Trade Blows out

via Alea, the classic foreign exchange carry trades give up all returns since 2001.  Well, no more papers on the puzzling excess return in this trade.  The big question is if the trade will come back --- it just might given the recent events, since it's going to be hard to get past risk managers and investors after this blow out.  I thought it would mostly fade into the woods after a smaller blow out. 

What is it like to be a bar-tailed godwit?

via Cowen, from the WP:

The bar-tailed godwit, a plump shorebird with a recurved bill, has blown the record for nonstop, muscle-powered flight right out of the sky.

A study being published today reports that godwits can fly as many as 7,242 miles without stopping in their annual fall migration from Alaska to New Zealand. The previous record, set by eastern curlews, was a 4,000-mile trip from eastern Australia to China.

The birds flew for five to nine days without rest, a few landing on South Pacific islands before resuming their trips, which were monitored by satellite in 2006 and 2007....

The nonstop, over-water route is free of predators and substantially shorter than a hopscotching route down the eastern coast of Asia, which is the alternative. Landing and eating -- literally, refueling -- would expose the birds to disease and parasites when they are probably somewhat immune-suppressed. Refueling also would add weeks to the trip and itself take energy....

The nonstop, over-water route is free of predators and substantially shorter than a hopscotching route down the eastern coast of Asia, which is the alternative. Landing and eating -- literally, refueling -- would expose the birds to disease and parasites when they are probably somewhat immune-suppressed. Refueling also would add weeks to the trip and itself take energy....

The birds weigh no more than 1.5 pounds when they leave. Half of that is fat, which they burn off completely during the flight. Some of the males may have lost their transmitters in flight as their bodies shrank.

map below via USGS:

Yet more people looking for jobs

via Ben Smith:

At his Northern Virginia headquarters, some McCain aides are already speaking of the campaign in the past tense. Morale, even among some of the heartiest and most loyal staffers, has plummeted. And many past and current McCain advisors are warring with each other over who led the candidate astray.

One well-connected Republican in the private sector was shocked to get calls and resumes in the past few days from what he said were senior McCain aides – a breach of custom for even the worst-off campaigns.

“It’s not an extraordinarily happy place to be right now,” said one senior McCain aide. “I’m not gonna lie. It’s just unfortunate.”

Meanwhile, 538's estimated probability for McCain winning the election are down to a new record low of 3.7%. On the other hand, Nate Silver now feels able to call Taxas, Louisiana and Arkansas for McCain. 

Who is McCain?

Wieseltier on McCain:

I used to think of my dilemma this way: Obama's conception of America is better than he is, McCain's conception of America is worse than he is. But McCain is looking more and more like his America, which is Bush's America: a country of capitalists and Christians.

Jon Swift also has a nice summary of crazy right wing blog lore on Obama. 

Why do McCain and Palin campaign in Iowa and New Hampshire?

MY writes:

Meanwhile, I agree with Ambinder that I think Sarah Palin should be understood as the frontrunner for the 2012 nomination. I would also further note that the McCain campaign’s idiosyncratic ideas about which states are the battleground states in this election has taken her to Iowa and New Hampshire.

Obama is up by 13% in Iowa in the average poll right now. Up by on 8% in New Hampshire, about where the average swing state now polls.

How archaic is marriage as an institution for raising children in Germany?

One claim I run into is that --- I'm now quoting my understanding of the claim -- marriage is no longer the dominant institution for raising children in Germany.  The standard quoted statistic is that  30% of births in Germany in 2006 are to unmarried women, up from 17% in 1996.  However, this statistic is a bit misleading, since it appears to me from a brief glance at the literature that lots of unmarried German women who give birth subsequently marry the father of the child, unlike the US or France, where marriage to the father is much less likely.    Looking at the same data source, it appears that unmarried cohabiting couples make up only 7.8% of all couples with children in Germany, and the fraction of children with unmarried cohabiting parents is closer to 5% or less, since cohabiting parents have fewer children than married parents (see Would you Marry me? The Effects of Marriage on German Couples’ Allocation of Time) and not all children are raised by two parents.  In general, what seems to be happening in Germany -- though change is rapid and the future may be different -- is the move into a system in which a large segment of the non-poor population is moving to 'birth first, then marriage to the father of the child after a few years'.  Which means that unmarried cohabitation is Germany is associated with different child raising outcomes than in France or the US, where the rate at which fathers stay around after the birth is quite low (<10% for the US even after just a year, even if they don't marry the mother -- there is a least one blog post I could write on that data point).  What does this mean?  To me it looks like marriage is not being abandoned as a way of raising children in Germany to the extent the 30% of births out of wedlock figure would suggest.  Instead, for the non-poor Germany is simply moving to a system that includes a birth followed by marriage (for around 75% of all out of wedlock births -- and the other 25% is mostly couple dissolutions, not unmarried couples raising kids together) option.  [I'd need to firm up the evidence for family dissolution being a class phenomena.] 

Update #1: Looking at the table on page 11 of Would you Marry me? The Effects of Marriage on German Couples’ Allocation of Time I get 1.6% of children raised by couples that stay together but never marry.   That seems too low, but maybe the timing of the sample, which I don't yet fully understand, explains it, but I'm a bit worried there are some biases here I'm not aware of. For instance, how many people with young children are unmarried in the sample and get counted as never married, but then marry later? 

There is no evidence here that unmarried stable couples are making anything but tiny inroads on married stable couples as the way to raise children in Germany. 

The notion that 'why do gays object to being excluded from marriage to raise their kids together when the staying together different-sex parents of 1.6% of all kids make this choice?' seems misguided.   

Update #2: Jody comments

I've heard stories for years that such is the pattern in Norway and Sweden -- first comes cohabitation, then comes baby, then comes kindergarten wedding. I don't know if the stats support it, but that's the rumor, anyway. I don't find any gay-marriage argument on the basis of children etc. compelling. Marriage comes with a heap of benefits, and we're not about to decouple them, so it's just blatant injustice to deprive gay people of access to marriage. Not to mention, it's cruel, bigoted, and constitutionally indefensible.

Single Earner Same-Sex Couples with Kids

One of the claims I hear is along the lines of 'why should we give same-sex couples pension and survivor benefits designed for single earner heterosexual couples with kids?'  The obvious counterargument is that one might want instead to address this problem by redesigning pension and survivor benefits for different-sex couples without kids or dual earner different-sex couples instead of excluding single earner same-sex couples with kids from pension and survivor benefits designed for, well, single earner couples with kids. 

We are not talking a vanishingly small number of people here.  Around 800,000 same-sex couples show up in US census surveys in 2005 (believed to be an undercount), with 19,6% having 1.8  children under 18 on average.  Among these couples 32.8% are single earner couples, compared to 34.8% among married different sex-couples with children.  48.3% of different-sex married couples have children under 18.  So what we see here is that same-sex couples are around 2.5 times less likely to have children, but given that they have children look pretty similar to different-sex married couples for labor market participation. 

All in all, we are looking at around 300,000 children under 18 in same-sex households, with 50,000 non-working spouses at any one time taking care of the kids. 

Obviously, you cannot look at the static  numbers here to gauge the incidence of the burden discrimination in family benefits places on gay people, since this discrimination has an impact on family formation and labor force participation.  It seem a bit odd to claim that there is not reason to provide family benefits to single earner same-sex couples with kids because there are not that many of them, in part since we don't provide family benefits to single earner same-sex couples with kids.  Indeed, usual the reasoning is the other way around: providing same sex couples with these benefits is cheap, so it can and should be done.  A back of the envelope calculation also suggests that the fiscal burden created by providing dual earner or no kid different-sex couples with family benefits is somewhere around 1,000 times as large as providing these benefits to single earner same-sex couples with kids would be (conservatively assuming 1% of the population is same-sex couples, 2.5 times less likely to have kids, 1/3 single earner, 25% of different sex couples with no kids ever). It is the no kid single earner different-sex couples that are causing the fiscal problem and excluding same-sex couples from family benefits by barring them from marriage doesn't address the overwhelming cause of fiscal problem. 

The surprise to me here is that the fraction of same-sex couples with kids that are single earners is so high.  Why is this?  Is it that in order to have kids as a same-sex couple you need to really be into having kids that means you are more likely to stay home to raise them?  That's what it look like to me. But there are also going to be other statistical biases here, for instance a single-earner same-sex couple is more likely going to show up in the census as a same-sex couple than a dual-earner same-sex couple. 

One issue here is that we are comparing married different-sex couples to all same-sex couples, leaving out cohabiting different-sex couples.  It is not clear to me what difference this makes.  I don't think it makes any difference for the points I'm trying to make above.  An aside here: unmarried cohabitation with kids is not as common as some people assume, and it is very much a phenomena of minorities, the poor and the young (i.e. not a small fraction of the population), not a mainstream phenomena.  Unmarried couples with kids are accepted among the established upper middle class, but they are very rare.  Indeed, same-sex couples with kids might make up an appreciable fraction -- around a third? -- of this group among the established upper middle class. [Yes, it is a bit over a third: the census reports 103,000 males and 113,000 females with college degrees in unmarried different-sex family groups with joint biological children under 18, compared to 128,000 individuals with college degrees in same-sex couples with children under 18 from the above data, assuming no difference in child numbers by education and noting 40% of same-sex couple members have college degrees, makes for 37% of all unmarried couples with a college degree and children under 18  being same-sex.  By the time you get to people with graduate degrees it is probably over half, or that's what it looks like from where I sit.  So much for marriage being 'archaic'.] 

Data via the Williams Institute.       

What did Palin get for those $150,000 in fashion purchases last month?

Palin on the trail (via DeLong, in Newsweek).  I'm still surprised the Democrats seem to be maintaining snark superiority. 

I assume it is a two sided scarf with elephants on the other side, but still...or maybe not, there are lots of photos of this online now, no elphants in sight.  It may be the photo of the day. 

Goolsbee vs. Holtz-Eakin

Obama advisor Goolsbee shows his U Chicago honed debating skills.

Below a bit of overlap with the above, but with some additional material at the end:
 

Harsh TV coverage of the McCain camp

NBC New political director Scott Todd is harsh:

"We are at a critical juncture inside this campaign for the McCain folks and that is who is trusting who? You have got people worrying about their reputations. Now you are wondering do the candidates trust the staff? Does the staff trust the candidates? This is a dangerous time in a campaign that is behind. They desperately need some good news because you do wonder if cohesion is disappearing on the inside."

When did upholding racial segregation cease being a legitimate state interest?

When did federal courts cease citing unholding racial segregation as being a legitimate state interest?  State courts in the various states?   I should know this, but I don't. 

Indeed, thinking of Plessy, segregation may never have been held by federal courts to have been a legitimate state interest in itself, just a social background fact the state could reasonably accommodate.  So when it the last time the Supreme Court cited Plessy affirmatively before Brown 1954? 

Ah, here is the last affirmative Supreme Court citation of Plessy, searching citations on Findlaw, STATE OF MISSOURI EX REL. GAINES v. CANADA, 305 U.S. 337 (1938):

In answering petitioner's contention that this discrimination constituted a denial of his constitutional right, the state court has fully recognized the obligation of the State to provide negroes with advantages for higher education substantially equal to the advantages afforded to white students. The State has sought to fulfill that obligation by furnishing equal facilities in separate schools, a method the validity of which has been sustained by our decisions. Plessy v. Ferguson, 163 U.S. 537, 544 , 16 S.Ct. 1138, 1140;

It takes another 16 years until Plessy is partially overturned. 

It is now 22 years since that last anti-equal protection for gays case, Bowers vs. Hardwick in 1986 (overturned in 2003 in Lawrence), and 12 years since Romer vs. Evans in 1996 started the move towards serious equal protection for gays.   We'll see where we are in eight years. 

The ironic thing here is that the US Supreme Court upholding an equal protection right to same-sex marriage would be less of a stretch than what the Court did in the far more confused Romer vs. Evans.  But since the Court cannot yet politically go there we get stuff like Romer. 

Constitutional Amendments to repeal Fundamental Rights?

Thinking about California Prop. 8, which eliminates what the California Supreme Court just found was the basic civil or human right to marry for homosexuals under the California State Constitution, I'm trying to come up with other constitutional amendments, either to the Federal Constitution or constitutions of the various states, to roll back supreme court findings of fundamental civil rights.  I cannot come up with any now and I don't think there are any federal constitutional amendments that roll back fundamental individual rights.  I assume there are state constitutional amendments that do so, especially in regards to voting rights and rights to equal and adequate access to education, but I cannot think of any off the top of my head. But it is what I'd expect to see in the South in the 1970s. 

Similarly, there must be constitutional amendments that undue fundamental individual rights in other countries, but what are they? 

To be clear, I'm not talking about the courts themselves rolling back these rights, but constitutional amendments, so Dred Scott or Plessy don't count. Nor do I count legislative repeal of rights that survives constitutional scrutiny. 

For instance, there does not seem to have been any serious push back on the California Supreme Courts 1948 finding in Perez vs. Sharp that the 'fundamental right to marry' voided interracial marriage bans:

Marriage is thus something more than a civil contract subject to regulation by the state; it is a fundamental right of free men. ...Legislation infringing such rights must be based upon more than prejudice and must be free from oppressive discrimination to comply with the constitutional requirements of due process and equal protection of the laws. ...The right to marry is the right to join in marriage with the person of one’s choice.

The closest I can come up with for the Federal Constitution is the passage of the 16th Amendment to the US Constitution in 1913, overturning Pollock v. Farmers' Loan & Trust Co. (1895). But Pollock did not find an individual right, but a limitation upon the federal government not grounded in an individual right. 

The probably biggest example are Southern state constitutions in the Redemption Period through 1905 or so -- note that it takes from the End of Reconstruction in 1877 until 1905, more than 25 years --, for instance the 1901 Constitution of Alabama.  But I need to assume that earlier Alabama constitutions established rights that were abolished in 1901.  But the 1901 Alabama Constitution did create a system of voter registration, poll taxes and literacy test that lead to mass disenfranchisement, upheld as complying with US Constitution equal protection standards by the US Supreme Court in Giles v. Harris (1903) since the system applied equally to whites and blacks and the Court held that it had no ability to supervise conduct and order remediation of discrimination in application of the formal law. The Court is very upfront about this:

The other difficulty is of a different sort, and strikingly reinforces the argument that equity cannot undertake now, any more than it has in the past, to enforce political rights, and also the suggestion that state constitutions were not left unmentioned in 1979 by accident. In determining whether a court of equity can take jurisdiction, one of the first questions is what it can do to enforce any order that it may make. This is al- [189 U.S. 475, 488]   leged to be the conspiracy of a state, although the state is not and could not be made a party to the bill. Hans v. Louisiana, 134 U.S. 1 , 33 L. ed. 842, 10 Sup. Ct. Rep. 504. The circuit court has no constitutional power to control its action by any direct means. And if we leave the state out of consideration, the court has as little practical power to deal with the people of the state in a body. The bill imports that the great mass of the white population intends to keep the blacks from voting. To meet such an intent something more than ordering the plaintiff's name to be inscribed upon the lists of 1902 will be needed. If the conspiracy and the intent exist, a name on a piece of paper will not defeat them. Unless we are prepared to supervise the voting in that state by officers of the court, it seems to us that all that the plaintiff could get from equity would be an empty form.

BTW, is seems that Alabama still hasn't managed to amend Section 256 of its state constitution, created in response to Brown 1954 (but this doesn't count as an example of what I'm looking for, since Brown isn't based on Alabama state law):

Duty of legislature to establish and maintain public school system; apportionment of public school fund; separate schools for white and colored children.

The legislature shall establish, organize, and maintain a liberal system of public schools throughout the state for the benefit of the children thereof between the ages of seven and twenty-one years. The public school fund shall be apportioned to the several counties in proportion to the number of school children of school age therein, and shall be so apportioned to the schools in the districts or townships in the counties as to provide, as nearly as practicable, school terms of equal duration in such school districts or townships. Separate schools shall be provided for white and colored children, and no child of either race shall be permitted to attend a school of the other race.

The reason it appears amendments to Section 256 have failed so far is that people are worried that the state courts will get into the equal protection business and mandate substantially equal and adequate school funding (which federal courts cannot do under the US Constitution, see San Antonio Independent School District v. Rodriguez 1973)

Obama is a Muslim Polling

More polling from Pew: