Debt-ceiling deal appears imminent

Jonathan Chait is exhorting us to “stop fretting: the debt-ceiling crisis is over!” And indeed, it appears Speaker Boehner is finally willing to bring a vote to the House floor, even if it is the Senate bill, and even if it will not earn the support of the radicals. Speaking of whom, Heritage Action, Jim DeMint’s headquarters, is on record urging the radicals to vote against any such bill. Conventional wisdom says Boehner puts his job as Speaker on the line as soon as he brings a vote. Maybe, maybe not. The person who perhaps should be more worried is Senate minority leader Mitch McConnell, who is in the process of being “primaried.” And who faces rhetorical onslaughts like these by radicals with media audiences:

Chait suggests we see the debt-ceiling deal as “a huge Democratic success — or, at least, the closest thing to success that can be attained under the circumstances.” This is a victory, Chait argues, because Obama did not cave and give a ransom, thereby refusing to institutionalize extortion into everyday American politics. The delegitimation of debt-ceiling extortion would indeed be a victory, but we should not get ahead of ourselves. We will only know for sure come January and February — when the continuing resolution keeping government open runs out and the debt-ceiling is reached once again. As usual, I’m with Martin Wolf: the only real victory would have been to eliminate the debt ceiling altogether. As a structure of law, the debt-ceiling makes no sense. Congress has already enshrined the spending; the debt-ceiling only makes possible the paying of bills and financing of debt already put in motion. It is an obstacle without a purpose; a risk with no reward. Unfortunately, the radicals prefer to think “the debt ceiling is a built-in balanced budget mechanism.” This is because default would mean “prioritization” — the government would pay only those it can afford to pay: creditors, presumably, at the expense of Social Security and Medicare recipients. Such prioritization would save the US Treasury. More to the point, it would cut entitlement spending like the radicals want. But it would almost certainly push the domestic economy into a recession.

The deadline for Social Security payments is November 1.

All in all, at the moment it appears that, yes, the United States will live to see another day. We shall see at what cost. Survival can often extract so much.

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Posted in 2007-2012, debt, democracy, politics, qualitative sociology of economics and politics, The End of the GOP | Leave a comment

Three days till debt-ceiling breach

What would it take to foster an actually thriving domestic labor market? What kind of political and policy relationship between government and private industry would it take? I am of the mind these questions, or variants of them, should represent the central topic being debated by the US governing class. They are not. Instead, we have manufactured fiscal crisis after manufactured fiscal crisis. Both parties are willing to live with these manufactured crises: pushing them fires up the GOP’s base audience. GOP leaders willingly pretend they have no choice but to succumb to whatever the base wants. The Democrats play along, because as the opponent ever-intensifies its audience, any chance that opponent has to expand to new audiences becomes impossible due to widespread alienation. GOP has their loud minority. Democrats look reasonable by comparison. Fiscal stalemate, seen this way, is win/win. And so it continues.

Only, this picture is a lie. Stalemate is a fictional performance, a mask for radical changes that continue to take place underneath the surface. Check out two graphs, presented by Bill McBride at the wonderful blog Calculated Risk. In one it shows that under the Bush Administration (2001-2009), private sector employment actually fell. That’s right: there were fewer private-sector jobs at the end of his eight years, than at the beginning. Pretty remarkable. Granted, most of the problem was the historic recession that nailed the US economy at the end of his eight years. Which means he can be forgiven; what really needed to happen was proper recovery-driven policies coming out of the recession. Except look at the second graph, which is my main point. Under Obama, we see an unprecedented fall in public-sector employment. And by unprecedented, I mean unprecedented: No recent administration was subject to the drop in public-sector unemployment that has been foisted upon the current one. What makes that fact, and McBride’s graph, all the more remarkable is the context in which it has occurred. For one, we are coming out of a historic recession, with stubbornly high levels of unemployment. For two, as Krugman points out, we have now reached five years of liquidity trap economics — that is, five years of zero-bound interest rates. In this context, monetary policy’s effectiveness is severely limited; fiscal expansion becomes the more effective tool. Instead: fiscal austerity, US style. Fiscal contraction, not out in the open but behind the backs of citizens who don’t know what they don’t know.

So, here’s the situation: While the House GOP is said to suffer from historically bad poll numbers — a recent poll puts the Tea Party at 21 percent favorability — on policy, the Tea Party has won. Under Obama, the US governing class has indeed gutted government, as measured by employment. US political economy is being run by Tea Party infused principles, only nobody realizes it because they are watching the spectacle, listening to the noise, not seeing the signal.

So, then, three days out, will the US breach its own arbitrary debt-ceiling limit? I still put the chances low: I say, 10-15 percent likely, based on the assumption that at the last moment Speaker Boehner will bring a Senate bill to the House floor for a vote, and it will pass with mostly Democratic support plus enough Republicans.

Still, while I don’t want to say a default doesn’t or won’t matter, to some degree the damage is already apparent. Read Felix Salmon’s post “The default has already begun” from this morning for a similar take. For now, let me wonder: Why does it seem nobody in policy or political circles emphasizes the needs of the domestic economy? Why does nobody ask, or seem interested in asking, what it would take to foster an actually thriving domestic labor market? The answer is because, even as it has pretended to do the opposite, US governance has become dominated by the Tea Party. The Tea Party has won, even as it has become ever more despised.

Indeed, how can it be that the year after Obama’s re-election is the year in which Paul Ryan spending levels became the new “middle ground”?

The damage from these years of lies will take years to undo, if the damage is undone at all.

Posted in 2007-2012, an actually thriving labor market, democracy, economic recovery, political sociology, politics, qualitative sociology of economics and politics, The End of the GOP, the great contraction, the great contraction 2007-2012 | Leave a comment

Four days till debt-ceiling breach

What do you need to know about US politics? How about this: The policies it would take to foster an actually thriving labor market are not on the table. But unprovoked debt default is.

The Republicans are no longer interested in fostering domestic economic growth; that would take finding a nuanced position on the relationship between government and markets. It would take eliminating the ‘manufactured crisis’ from their playbook. It would take a willingness to grow deficits when private spending slacks. It would take investments in things like infrastructure, universal preschool, science, and welfare.

Democrats are no longer interested in pushing Republicans to the middle or left; they are content letting the GOP live out on the edge of sanity where they harbor no chance at growing their audiences. Indeed, nothing has been better for the Democrats’ chances in 2016 than this past month’s Cruz-led suicide caucus. Obama and Democrats can give the GOP Paul Ryan-level spending levels, which are stunting economic growth, and look sane while doing it, because the GOP refuses it anyway without a fuller ransom. This makes the Democrats look good by comparison, but it masks a very bad policy outcome. It is a loss-loss: we get a stupid party (GOP) while maintaining a stupid policy (sequester).

Republicans are at all-time low favorability ratings, but the country is not better off for it, because the GOP will get what they want anyway: lower government spending. That is their answer to everything: lower spending. Even when the context is a weak recovery coming out of a historic recession, lower spending. Even when private spending remains anemic, lower spending. Even when beset by a liquidity trap in which interest rates cannot go any lower, lower spending. Always lower spending.

This lower government spending is damaging the US domestic economy. Brookings Institution researchers Greenstone and Looney estimate post-recession cuts in public spending have cost 2.2 million jobs. They conclude:

By cutting jobs during a period of already high unemployment, budget policies have contributed to the tepid pace of labor-market recovery and stand out as a departure from typical policy responses after recessions.

Notice what Greenstone and Looney are saying: Budget policies during this recovery have been at odds with how we reacted during previous recoveries. If the goal is to help the domestic economy, budget policy has been demonstrably irrational: we have ignored policy truths that we used to simply know.

Which leads me to the debt ceiling.

Last week I put the chances at a debt-ceiling breach somewhere between 6-10 percent. Today, four days till the so-called “X date” I put the chances higher, but not by much: maybe solidly 10-15 percent. But rising. Why I don’t say fifty-fifty like many others is the sheer consequence that could (probably will) entail. Every remotely reasonable Washington actor must be keenly aware, and should right now be fearful of being responsible for home-made catastrophe.

Why is the percentage not zero then? Why is there any chance at a default?

Because neither party shows much inclination in pushing a truly domestic growth-centered set of policies, and neither party is being held accountable for terrible fiscal policies. Republicans push crisis after crisis, firing up their base audience but no one else. Democrats happily let them, because it is good politics on their part.

A debt-ceiling breach would harm the US economy, probably the world economy. But so does sequestration. So did 2011’s debt-ceiling debate. So does the Paul Ryan budget. So does putting the debt-ceiling on the negotiating table to begin with. Almost every action Washington has taken since 2010 has been bad for the domestic economy.

Furthermore, I’m not sure how much a breach would harm, if at all, the GOP’s main clients, the world-economic and financial elite, who have been doing quite well throughout this period of never-ending crisis. Profits are extraordinary. And amazingly, 95 percent of post-recession wealth is going to the wealthiest 1 percent. So yes, GOP clients seem pretty well insulated. As Krugman put it, “the modern GOP is bad for business, [but] it’s arguably good for wealthy business leaders.”

And, I’m fairly confident a debt-ceiling breach would politically help the Democrats, both in 2014 and 2016.

Bottom line: Those who matter are less susceptible, perhaps almost totally immune, to the risks of a debt-ceiling breach. It is possible a debt-ceiling breach would further the interests of the most powerful. That this is possibly true is the only reason default remains on the table.

That said, these predictions and analysis are presented with caution. There are complex incentives here. The only thing I’m certain is nothing is as it seems. To make sense of it I’ll be following the interests.

Posted in 2007-2012, an actually thriving labor market, political sociology, politics, qualitative sociology of economics and politics, The End of the GOP, the great contraction, the great contraction 2007-2012 | Leave a comment

A discussion on in-depth interviews. What are they good for?

I have been reading an interesting internet discussion on the analytical efficacy of in-depth interviews, based around this paper by Samuel Lucas. Two other sociologists — Andrew Perrin here, and Fabio Rojas here and here — provide responses. I feel no need to disagree with anything yet said. However, I feel the need to add an additional perspective on the value of in-depth interviews untouched by Lucas or the others.

The part of Lucas’s argument most interesting to me goes like this: Studies that rely on in-depth interviews often begin with qualifiers about how the study’s sample cannot be used to generalize to a population, but then proceed to draw generalized conclusions anyway. This is a problem because studies featuring in-depth interview data tend to use non-probabilistic sampling techniques — most notably, snowball and purposive sampling. I rely heavily on both these techniques, indeed almost exclusively, so his argument is of particular interest to me.

Why do snowball samples and purposive sampling lead directly to unrepresentative samples? Because of what Lucas calls the “lumpy” nature of the social world. Meaning: similar facts, variables, mindsets, beliefs tend to congregate, or at the very least, are not randomly distributed among different locales. A snowball sample, where you rely on respondents to give you the names of further respondents, seems especially prone to this problem. Lucas puts it this way:

“[I]n the large-dimensioned social space there are concentrations of entities, and sparse locales; some constellations of characteristics are common, others rare; hills and mountains rise from some spots on the social terrain, valleys and ravines mark others”

This point sounds theoretically solid. In fact, I think Lucas’s paper empirically demonstrates it. One of the characteristics of this discussion on in-depth interviews is it is being done by academic sociologists with academic sociology as the vantage point. No mention has been made that a growing amount of sociological research is being done in the private sector — most of this is quantitative analysis, and irrelevant to the discussion on in-depth interviews. But a growing minority is indeed qualitative and ethnographic. And, in my case, based on in-depth interviews.

This distinction — between academic and privatized sociology — matters, because privatized sociology is usually done for particular clients with particular needs, interests, products, and audiences. Academic sociology has qualitatively different bases of funding. Often the source of funding is government, or departmental. In both these cases, generalizing from samples to populations is very important. In the case of particular private clients, however, generalizing to populations is not important, indeed it is counter-productive. In Lucas’s terms, clients want to live within the lumpiness, not transcend it. In my terms, clients want to be experts on particularized audiences. Why do people from the upscale neighborhood shop at our competitor and not us? Why do black audiences in the area immediately surrounding our store ignore us?

These are a kind of question clearly not on the mind of Lucas, and I don’t blame him. By raising these questions I do not mean to criticize. His mind is elsewhere, and his paper deserves to be dealt with on its terms, not mine.

But when Lucas writes that “non-probability sampling is of extremely limited utility, providing grounds, at best, only for existence proofs,” he is writing from within his social lump, not mine.

So let me make three particular points.

1. A growing amount of sociology is private, not academic, for private clients not government or departmental, and in these private circles generalizability is less essential and particularistic analysis (e.g. case studies) more so.

2. Interview data based on snowball and purposive sampling do a good job of raising and sometimes providing an answer to the most important question private clients need to know: Why? Why do people behave the way they do? I could probably agree that representative samples better answer what: e.g., how many people are behaving that way? But snowball samples provide me a network of people, and purposive sampling provides me especially important and articulate “informants.” It is from these people, and because of these techniques, that I can start to answer why.

Now, indeed, any “why” answer relies heavily on theory. I can’t get around that.

3. Finally, the closest thing I have to a criticism of Lucas’s approach to this question is that his “lumpy” vantage point puts too much stock in government-based sources of funding. While governments have every interest in generalizing to populations, I think one can argue that where sociological methods are growing is in the private sector, for clients who have less interest in, or need for, generalizing. They need particular knowledge, they need it now, and even if you don’t have a perfectly formed dataset, you need to make a decision using sound theory and intuition.

Of course, I might be wrong about where sociology is and is not experiencing growth. My own lumpiness may be telling me things that aren’t broadly true.

Posted in contextualized vs aggregative data, hard data, intangible assets, intellectual property, qualitative sociology of economics and politics, retail work, sociology, sociology of business, the database | Leave a comment

Cautiously disagreeing with Yochai Benkler on NSA data collection

Experience tells me you disagree with legal scholar Yochai Benkler cautiously and with great risk knowing that you, not he, will probably end up being wrong. I once wrote an MA thesis on intellectual property rights and democratic theory, and of everyone I read and wrote about, Benkler’s analysis of how the intellectual properties of the internet were providing a space to turn “consumers” into “users” proved most correct, much more correct than, say, Lawrence Lessig’s comparatively pessimistic view of intellectual property as eroding space for creativity. At the time, I sided with Lessig. Benkler proved more right.

That said, I disagree with Benkler again! He has a short article in The Guardian, in which he argues the NSA should immediately shut down its data collection and analysis program. His argument is that the data are not providing NSA anything useful, thus inverting “the basic model outlined by the fourth amendment: that there are vast domains of private action about which the state should remain ignorant unless it provides clear prior justification.” Benkler argues there is no “credible evidence” that the NSA data program is “critical to national security.”

A few thoughts: First, if Benkler prefers an ignorant NSA, what he really prefers is no NSA. Perhaps I do too. Especially at the present moment, in which none of us can verify knowledge of the NSA with any certainty: we simply don’t know who controls it, what are its private objectives, why it wants relatively innocuous data, etc. We really don’t know any of these things. If someone says they do, they are either lying or pretending. We know only the public information, which is probably at best barely reflective of the private facts. Under this circumstance, I can share the anti-NSA sentiment.

Second, Benkler equates NSA with the state. This is where I start to disagree.

Arguing the state as a whole should remain ignorant of these data raises a problematic issue: Does Benkler really prefer no state agency have access to these data? Should Google, Facebook, Twitter — for that matter, retailers like Target Corp. — have access to data and knowledge that government does not? If so, why?

My question to Benkler and other NSA critics is this: Would it make you feel better if a different government agency other than NSA were the one collecting and analyzing these behavioral metadata? For example, the Commerce Department? Within Commerce, it would seem fitting for these data to be analyzed by the Bureau of Economic Analysis. Would this put our minds at ease?

I raise this question because the data under scrutiny are valuable intellectual property. Perhaps, as Benkler argues, they are not that useful in providing national security, but the data are certainly valuable and provide incredible new understandings of economic behavior, as private corporations all over this country and the world are proving.

I may share your wish for an ignorant or perhaps non-existent NSA. But I don’t want an ignorant government. If we are to argue these data are too touchy for all levels of government, we have to explain why they are not too touchy for private corporations.

Now I’m just going to wait, continue reading Benkler, adapt my position according to new information, and probably learn soon enough why he is right and I am wrong. It’s happened before.

Posted in advanced capitalism, hard data, intangible assets, intellectual property, the database | Leave a comment

The business elite is letting GOP put domestic economic sabotage on the negotiating table

There is a piece of knowledge emerging in which the Republicans are no longer the party of Big Business. Statements of this knowledge can be found in BusinessWeek, National Review, and the Washington Examiner. It is based on the view that the current “crises” — especially the debt ceiling — are (1) being pushed by the GOP; and (2) against the interest of Business. The first view is demonstrably true, as this New York Times report helps document. The second view, however, has not been established as empirically true. Indeed, a closer look suggests the idea that the GOP has abandoned Big Business is probably wrong.

In fact, there is reason to believe the interests of business and the wealthy are being well served during this present period of GOP intransigence.

First, corporate profits are exceptional. Look, for example, at this graph. Corporate profits, after falling sharply in early Fall 2008, have rebounded quite nicely, to say the least. Indeed, corporations are killing it, and have killed it consistently throughout both the rise of Obama and the institutionalization of the crisis-sowing House Republicans.

Second, not only corporations, but wealthy individuals are doing more than well. This famous study by Emmanuel Saez (at least, it should be famous) documents that since the end of the recession, the wealthiest 1 percent have garnered 95 percent of the country’s income gains. 95 percent. Basically every dollar.

We should immediately stop assuming the GOP has abandoned the business elite, and instead ask: How do the business elite and the wealthiest 1 percent continue to prosper right through domestic political and economic dysfunction?

Simon Johnson, a great economist, stumbles in a recent blog post by not raising this question. He argues “really stupid fiscal policy threatens to bring the United States down.” I’m fine with that proclamation, if you have in mind domestically-anchored small business and consumers going “down.” But what comes next is about the business elite, and here, I think, the economist becomes wrong-minded. Johnson provides three assumptions I think miss the point:

1. “The silence of much of the business and financial elite on the debt ceiling — as well as on the sequester and the government shutdown — is somewhat shocking.”

It is not that shocking, given the US and world economy have had five or six years of crisis after crisis, throughout which the business and financial elite have prospered.

2. “The trajectory of current fiscal policy will hurt the pocketbooks of this elite.”

There is not only ZERO evidence for this assertion, there is ample evidence to the contrary, as shown above.

3. “If the business elite cannot speak truth to the Republican Party — and persuade its leadership and enough members of Congress to return to a more moderate stand — there is not much hope for the United States in today’s global economy.”

The crisis-after-crisis-after-crisis political economy of the past few years has hurt the domestic-based sectors of highly leveraged advanced economies. The manufactured crises have not, however, damaged the globe-trotting elite. This is because there are still high-growth emerging economies characterized by middle-class ascension and rising consumer demand. The fact is this: Consumption is still growing, but this growth is not based in the domestic economies of the globe-trotting US elite. It is based overseas.

Now, perhaps it is true that a debt-ceiling breach will damage the world economy in a way political paralysis and government shutdown do not. Perhaps it is true the US elite will thus find it necessary to have the GOP toe the line. Perhaps Paul Ryan’s op-ed in the WSJ yesterday is the first sign of this.

That said, it is hard to escape these empirically-based impressions:

For the business elite,

1. It is the world economy that matters, more than the US domestic consumer economy.

2. Domestically, it is tax rates that matter, not middle-class investment.

3. It is emerging-economy consumers who look so attractive right now, rather than overspent, over-politicized US households.

I think these three impressions, if as true as they seem to be, explain why the business elite is so quiet right now. They view it as in their interests.

*    *    *

For what it is worth, I put the chance at a debt-ceiling default at 6-10 percent. Unlikely, but not as wild a proposition as it should be. And if you were to ask me, what’s the likelihood of a short, temporary default? I would say even higher, maybe 20 percent. This is because nobody knows what would or will happen in the event of a debt-ceiling breach. Would the US default on its creditors? Would it prioritize payments to bondholders at the expense of, say, social security payments? What effects would these choices have on its creditors, the US economy, the world economy? Nobody really knows. A little data to help some have better knowledge of what would happen in the event of a breach might serve some interests. Not all interests, but a select few. So: A breach is not likely, but as the GOP continues to make clear, and its clients seem ok with: a breach is on the table.

Posted in 2007-2012, debt, democracy, economic recovery, macro-economics, political sociology, politics, qualitative sociology of economics and politics, sociology, The End of the GOP, the great contraction, the great contraction 2007-2012 | 2 Comments

The budget is the actual issue at stake

The Republicans aren’t going to goad Obama into defunding Obamacare. The Democrats aren’t going to magically “break the fever” and get Republicans to see the error of their anti-government ways. Neither of these goals is at this point remotely on the table.

Instead what is actually on the table being negotiated underneath all the noise was, has been, and is the US budget — both the size of the budget and the constituent parts.

I’ll have more to say on this during the next few days and weeks, but for now let me make two quick points. First, the continuing resolution offered by the Democrats and so far rejected by the House Republicans sets the budget at or even below Paul Ryan-like levels. Yes, that is right: Paul Ryan levels. See this figure published by Derek Thompson at The Atlantic, and also by Ezra Klein at his Wonkblog. The original 2011 Paul Ryan budget plan put 2014 discretionary spending levels at $1.095 trillion. The continuing resolution being debated — and, again, offered by the Democrats, rejected by the GOP — puts discretionary spending below that: at $986 billion. This number is just above Paul Ryan’s latest budget, which would put discretionary spending slightly lower, at $967 billion.

The take-away is this: Underneath the noise of “polarization,” the Paul Ryan budget is in a bipartisan fashion steadily being institutionalized into effect by the United States government. This is bad. Bad for domestic investment. Bad for the domestic economy.

Which leads me to my second point. The current impasse thus marks the second time this year that significant spending cuts have been adopted into the US budget with neither side claiming actual authorship. Earlier in 2013, we had the “sequester”; now we have the “shutdown showdown.” Both sides blame the other for sequester. And neither side will claim victory once the shutdown is behind us. The truth is both sides are engaged in steady bipartisan cuts to domestic, middle-class spending. And neither side is getting in trouble, because they do it hidden beneath shiny media horse-race analysis with ready-made names (“sequester,” the “shutdown”) able to obscure the underlying truth.

This is bad. Bad for domestic investment. Bad for the domestic economy.

We are barely at all removed from a historic economic recession. We have experienced at best a lackluster recovery from this historic downturn.  A largely jobless recovery at that: unemployment remains stubbornly high; indeed, too high.

And the US government is institutionalizing further spending cuts behind its citizens’ backs, while a complicit media uses faulty narratives to make it possible.

This is not good.

Posted in 2007-2012, an actually thriving labor market, democracy, economic recovery, macro-economics, political sociology, politics, the great contraction, the great contraction 2007-2012 | Leave a comment