Sunday, June 29, 2008

CNN doesn't understand the role of commander in chief

CNN producer Alexander Mooney displays his ignorance of the U.S. President's role as commander in chief:
John McCain directed his trademark straight talk toward a former president, flatly calling Jimmy Carter a "lousy" commander in chief.

The Arizona senator has long attempted to portray Barack Obama's policies as in the mold of Carter's, though the Republican has previously held back criticizing Carter so directly.

But in an interview with the Las Vegas Sun published Friday, McCain was decidedly more blunt than he has been in the past. McCain, who is a proponent of nuclear reprocessing, was asked why he thought Carter was against the process when he was president.

"Yes, because Carter was a lousy president," McCain quipped. "This is the same guy who kissed Brezhnev."
The term commander in chief only applies to the President's role as leader of America's armed forces. It only appears once in the entire U.S. Constitution where Article II, section 2, refers the President as "commander in chief of the Army and Navy." The "lousy president" comment was in response to a question about Yucca Mountain, which is under the control of the Department of Energy, not the Department of Defense.

While it may seem that I am being picky about the use of the term commander in chief, the distinction is important. President Bush tried to use his title as commander in chief to justify illegally spying on U.S. citizens. Furthermore, many American civilians wrongly believe they owe loyalty to the President because he is commander in chief. Members of the military owe loyalty to the President. For everyone else, the President is their employee and he owes loyalty to them.

As for Jimmy Carter, he was a lousy President. That's why he didn't get re-elected. He has done great things since leaving office, however, and fully deserved his Nobel Peace Prize.

Saturday, June 28, 2008

How to fight pollution and global warming

Via Greg Mankiw: Irwin Stelzer suggests how to fight global warming without an overall increase in taxes:
McCain should spend ten minutes with his adviser Douglas Holtz-Eakin, who I would guess is still recovering from his embarrassment at McCain's call for a cut in gasoline taxes, to discuss the opposite: a tax on oil products, especially gasoline and heating oil. This doesn't mean abandoning his opposition to higher taxes. Indeed, the point is not to raise federal revenues. Every dollar that comes in should be rebated, perhaps by reducing the payroll taxes of everyone earning less than, say, $50,000 per year, the group Obama intends to benefit by raising taxes on those energetic small-business owners. The beneficiaries of the McCain shift in taxes from work to polluting, imported gasoline would see the reduction in taxes immediately--when they received their first salary check after the new regime was in place. But the main point is this: The money that the Saudis and other supporters of jihadists would otherwise get would be reducing the taxes of hard-pressed Middle America. Take that, Barack Obama. It's called straight talk.

Friday, June 27, 2008

The U.S. Government's Anti-Renter Policies

Princeton University economist Paul Krugman says America has an anti-renter bias.
Listening to politicians, you’d think that every family should own its home — in fact, that you’re not a real American unless you’re a homeowner. “If you own something,” Mr. Bush once declared, “you have a vital stake in the future of our country.” Presumably, then, citizens who live in rented housing, and therefore lack that “vital stake,” can’t be properly patriotic. Bring back property qualifications for voting!

Even Democrats seem to share the sense that Americans who don’t own houses are second-class citizens. ...

And the belief that you’re nothing if you don’t own a home is reflected in U.S. policy. Because the I.R.S. lets you deduct mortgage interest from your taxable income but doesn’t let you deduct rent, the federal tax system provides an enormous subsidy to owner-occupied housing. On top of that, government-sponsored enterprises — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — provide cheap financing for home buyers; investors who want to provide rental housing are on their own.

In effect, U.S. policy is based on the premise that everyone should be a homeowner. But here’s the thing: There are some real disadvantages to homeownership....

All I’m suggesting is that we drop the obsession with ownership, and try to level the playing field that, at the moment, is hugely tilted against renting.

And while we’re at it, let’s try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream — and still have a stake in the nation’s future.
In the full article, Krugman also points out some of the downsides to homeownership.

Thursday, June 26, 2008

High oil prices are good

The EconoSpeak blog speaks the truth:
The strategy of choice right now seems to be “blame the speculators”, and Obama has jumped on this bandwagon. Not a good idea, in my opinion, for two reasons. First, there’s not much evidence that speculators are the cause of this price runup. Second, high oil prices—in fact, much higher oil prices—are good. They will combat climate change...

Sunday, June 22, 2008

Senate Banking Committee chairman Chris Dodd is in Bank of America's back pocket gives details on Senator Christopher Dodd's sweetheart mortgage from Countrywide Financial, as well as Bank of America's political contributions. Bank of America is buying Countrywide.
Countrywide's VIP loan to Dodd, which saves the Banking Committee chairman $75,000 over 30 years, smells like a potential quid-pro-quo now that Dodd has pushed a bill that will save the company from itself, but what about Bank of America's behavior?

Bank of America's political action committee (PAC) has donated $20,000 to Dodd since he became chairman of the banking panel 17 months ago. From January 2007 to March 2008, Bank of America employees have donated at least $50,400 to Dodd's campaigns, according to the Center for Responsive Politics. So, while Dodd's sweetheart loan from Countrywide saves him personally $200 per month, his chairmanship earns him politically more than $1,000 per week.

These aren't bank tellers funding Dodd, either, as contributors include Bank of America's director of government affairs John Collingwood and Barbara Desoer, who oversees the merger with Countrywide and will "run the combined companies' mortgage operations," according to The Los Angeles Times....

Bank of America stands to profit most from a bailout. It will take on Countrywide's bad loans, and under Dodd-Shelby, it could shift the worst ones onto the shoulders of taxpayers, via the Federal Housing Authority. Basically, Uncle Sam will buy Countrywide's stinky loans off of Bank of America.

Bank of America is kind of like an investor trying to "flip" a house: they buy a run-down property (Countrywide) for a discount, shell out some campaign contributions and earn some "sweat-equity" through lobbying. If Dodd gets his way, it will be a good investment for Bank of America.

Saturday, June 21, 2008

5 Reasons to love $4 gasoline

From Foreign Policy, here are five reasons to love $4 gas:
  1. The mass transit boom

  2. Lower obesity rates

  3. Fewer accidents

  4. Shorter commutes

  5. The biofuels craze
Hat tip to Greg Mankiw.

Friday, June 20, 2008

Financial speculation not responsible for high oil prices

Paul Krugman says today's high oil prices are based on actual supply and demand, not financial speculation:
Are speculators mainly, or even largely, responsible for high oil prices? And if they aren’t, why have so many commentators insisted, year after year, that there’s an oil bubble?

Now, speculators do sometimes push commodity prices far above the level justified by fundamentals. But when that happens, there are telltale signs that just aren’t there in today’s oil market.

Imagine what would happen if the oil market were humming along, with supply and demand balanced at a price of $25 a barrel, and a bunch of speculators came in and drove the price up to $100.

Even if this were purely a financial play on the part of the speculators, it would have major consequences in the material world. Faced with higher prices, drivers would cut back on their driving; homeowners would turn down their thermostats; owners of marginal oil wells would put them back into production.

As a result, the initial balance between supply and demand would be broken, replaced with a situation in which supply exceeded demand. This excess supply would, in turn, drive prices back down again — unless someone were willing to buy up the excess and take it off the market.

The only way speculation can have a persistent effect on oil prices, then, is if it leads to physical hoarding — an increase in private inventories of black gunk. This actually happened in the late 1970s, when the effects of disrupted Iranian supply were amplified by widespread panic stockpiling.

But it hasn’t happened this time: all through the period of the alleged bubble, inventories have remained at more or less normal levels. This tells us that the rise in oil prices isn’t the result of runaway speculation; it’s the result of fundamental factors, mainly the growing difficulty of finding oil and the rapid growth of emerging economies like China. The rise in oil prices these past few years had to happen to keep demand growth from exceeding supply growth.

Saying that high-priced oil isn’t a bubble doesn’t mean that oil prices will never decline. I wouldn’t be shocked if a pullback in demand, driven by delayed effects of high prices, sends the price of crude back below $100 for a while. But it does mean that speculators aren’t at the heart of the story.

Thursday, June 19, 2008

Backdoor bank bailouts

Back in March, Dean Baker of the Center for Economic Policy Research wrote a paper about the effects of the type of bill that the Senate is voting on this week. Not only will the bill be a backdoor bank bailout, but it will actually be harmful to many of the people it purports to help. Here is his conclusion:
The proposals currently being circulated to have the government buy up or guarantee mortgage debt for homeowners facing foreclosure are likely to benefit banks more than homeowners. Under proposals similar to the one developed by OTS, most homeowners aided by the plan would never accumulate any equity in their home. Furthermore, they would be paying nearly twice as much in monthly housing costs for the period that they stayed in their homes as if they rented a comparable unit. While this proposal does little to aid homeowners, it could lead to the transfer of billions of dollars, or even tens of billions of dollars from taxpayers to banks.

The current housing crisis was allowed to develop because those in positions of responsibility somehow failed to see an $8 trillion housing bubble. This bubble created an average of $110,000 in housing bubble wealth for every homeowner in the country, hugely distorting the housing market and the economy. It would be unfortunate if the same people who were responsible for this massive failure were allowed to compound the economy’s problems with ill-conceived bailout plans that ostensibly are designed to help homeowners, but really only benefit banks and other mortgage holders.
Everybody thank Senator Chris Dodd and Congressman Barney Frank for the bank bailout.

Tuesday, June 17, 2008

Ratio of Home Prices to Rents

This chart shows the ratio of U.S. home prices to rents since 1955. It does not show most of 2008.