Archive for category Politics

Tory Victory Not Really a Surprise

cameron

There is a sense of surprise at the re-election of David Cameron’s conservative party, which won 331 of the 650 mandates in the 2015 United Kingdom General Election.  That is the smallest number of mandates a majority party has won in a British election since after the second 1974 election.

The result wasn’t as big a surprise as one might think.

To be sure, polls had shown a tight race.   Most showed the Conservatives and Labour tied, or with a slight conservative lead at something like 36-35.  Consider the following graphic:

polls

Blue represents the Tories, red Labour, purple UKIP, yellow the LibDems, and green the Greens.  Although the two major parties are nearly tied at the end at around 35%, Labour had been steadily losing support while the conservatives had been slightly climbing.  If there was momentum, it was for the Tories.

Here are the actual results:  Conservatives – 36.9%, Labour 30.4%, UKIP 12.6%, the Lib Dems 7.9%  Scotish National Party 4.6%, Greens 3.6%

From this result here are the mandates:  Conservatives 331, Labour 232, SNP 56, Lib Dems 8, Unionists 8,  UKIP 1, Greens 1 Other 15.

One thing a single member district plurality (SMD-P) electoral system provides is that there can be a large swing in mandates won from a relatively small swing in total percentage of the vote.   SMD-P is a system where people vote in districts for one candidate.  Whichever candidate gets the most votes (known as a plurality) wins the seat.  That’s how we run most of our Congressional elections in the US.

This hurts smaller parties.  The anti-EU party could turn 12.6% of the vote into only one seat.  Yet geographically based parties like the SNP could turn 4.6% of the vote into 56 seats as they swept Scotland.   It also means that a 6.5% differential between the two top parties can turn into a difference of almost 100 seats, or 15% of the seats available.

This was a clear victory for Scottish natinalists who could use this to mount another demand for a referendum on independence

This was a clear victory for Scottish natinalists who could use this to mount another demand for a referendum on independence

Think of it this way.  If the vote was perfectly even in every district, a party could win 51% to 49% in every district; a close election would yield all seats going to the party with 51%!   Obviously some districts are safe for a particular party and others are contested at various levels.   But the result almost always is that the party that “wins” has a much larger majority in parliament than the vote total would indicate.

(Aside:  If you follow American politics you might counter that even though in 2012 the Democrats earned more votes than the Republicans, the GOP got a majority.  That happens in part due to gerrymandering — designing districts to get the optimum outcome for a party– but also because Democrats rack up huge vote totals in urban districts, while Republicans win closer suburban and rural districts.  In Great Britain the divisions aren’t so stark, so elections behave more like one would expect).

In 2010 Great Britain had its first hung parliament (no party gaining a majority) since 1974.  That’s because the Liberal Democrats got 23% and 57 seats.  The Conservatives only got 36.1% and 306 seats, while Labour got 29% and 258 seats.

The change from 2010 to 2015 for the top two parties was Conservative +0.8%, Labour +1.4%.  Both parties gained, but Labour gained a bit more than the Conservatives.  So why did the Tories gain 25 seats and Labour lose 26?  The answer is due to the smaller parties.  The LibDems went from 57 seats to only 8, while the SNP went from 6 to 56.  In Scotland alone Labour lost nearly 40 seats to the SNP – that means they gained seats in the rest of the country.

The LibDem loss should have been expected.   Small parties are always at risk when they form a coalition with larger parties, unless they can provide something unique that the voters want.  Nick Clegg couldn’t do that.  That loss of support translated to more mandates for the Conservatives.

That brings us to the polls.  The pollsters were pretty accurate for the small parties, and pretty close for the conservatives too.  The only real problem, then, was that Labour totals were inflated by about 3% consistently.   That’s not a huge amount, but still a significant gap given how much agreement existed in the polls.   The most likely reason is that conservative-leaning voters upset with the Cameron government told pollsters they were leaning Labour, but came home to the Conservatives on election day.  Not that they were lying to the pollsters, but there’s something about actually voting that can cause people to stick with a party they thought they might abandon.

Before the elections some conservatives voiced optimism that by moving Labour more to the left, Miliband might inspire higher Tory turnout than expected.  That sounded like the usual wishful thinking but may have actually happened.

Now former Labour Party leader Ed Miliband, who resigned his leadership role after the election.

Now former Labour Party leader Ed Miliband, who resigned his leadership role after the election.

Polls can be off, and as noted, just a few ticks in one direction can make a major difference in the result.  I am not surprised that the conservatives gained a majority.   The 2010 election was the first since 1974 with no majority, and it was obvious that the Lib Dems were not going to gain many seats this go around.   So it appeared that either the Tories would gain a small majority (which they did), or that Labour would have to work with the SNP.

A change in power to Labour was unlikely for another reason.  Labour leader Ed Miliband had not generated a sense that his leadership would provide a positive change.  Labour had been declining in the polls and people weren’t warming to Miliband.  Late deciders may have been swayed by Cameron’s positive economic results (compared to the rest of Europe).

Cameron has five years now to govern as a majority party, unless he calls an early election.  He has promised a referendum on EU membership by 2017.   The Cameron era continues.

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Maine’s Weird Race for Governor

Senator Angus King with Democratic candidate for Congress Emily Cain

Senator Angus King with Democratic candidate for Congress Emily Cain

Supporters of Governor Paul Le Page are livid.   They are mad at Angus King.   They have no reason to be, except that they fear their candidate will have a harder path to victory.  That’s because of the weird twists and turns of Maine’s gubernatorial contest.

Senator Angus King is an independent who caucuses with the Democrats.  King also served two terms as an independent Governor in Maine.   King, who has endorsed Democrat Emily Cain for the second district seat, earlier endorsed independent candidate Elliot Cutler for governor.    He’s also endorsed independent Larry Pressler in South Dakota.

Le Page supporters know that in a two way race between their man and Democratic candidate Mike Michaud, Le Page has no chance.  He is not the typical Maine Republican, he’s a tea party Republican who has made his mark by refusing federal funds to expand medicare, hurting both Maine citizens and hospitals who need the money.  Other Republicans, like Ohio Governor John Kaisich, praise medicare expansion – and have chosen to benefit from it.  That and his embarrassing quotes, bullying and temper tantrums make Le Page an unpopular governor.

Yet he could win the election if the opposition to Le Page splits their vote between Elliot Cutler and Mike Michaud.  The GOP has been pouring money into support for Cutler for the very purpose of undermining Michaud.     The anger against King comes because he changed his endorsement from Cutler to Michaud.

Maine's governor Le Page is a polarizing figure in Maine politics.

Maine’s governor Le Page is a polarizing figure in Maine politics.

Supposedly King was being a “traitor” by changing sides, or showing “no principle.”  That is absurd.   King supported Cutler as an independent.  But in a press conference yesterday Cutler admitted he was a long shot, and said voters should vote their conscience.  King, realizing that he did not want to see a second Le Page term, came out and changed his endorsement to Mike Michaud – following his conscience, as Cutler advised.

That is a principled, rational response to the conditions in this election.   King may have even talked with Cutler about it.  So why the fury against King?   It’s simply an emotional reaction to the sudden realization that the anti-Le Page vote may not be as divided as Le Page supporters hoped.  King’s change is symbolic of the possibility that many Cutler supporters will switch to Michaud, thereby making it much less likely Le Page will win.  The anger isn’t really with King, it’s with the possibility Michaud will be Maine’s next governor.

Mike Michaud, Maines's first openly gay candidate for governor, stands to benefit from King's endorsement.

Mike Michaud, Maines’s first openly gay candidate for governor, stands to benefit from King’s endorsement.

The dynamics of the three way race remain uncertain.  In 2010 Le Page barely bested Cutler, with each getting about 39%.  The Democrat Libby Mitchell was back with 22%.  Cutler almost won – hence he tried again.  Yet Michaud, a popular Congressman, is a much stronger candidate than Mitchell, and Cutler was never able to seriously challenge the two leaders.   The polls show a very tight race at the top – the Huffpost pollster has the race as 50-50, with Le Page and Michaud both averaging 40% in the polls.  Cutler has remained well below 20%, down to 7% in one poll.

It says something profound when one side thinks it can only win if it divides the opposition – Le Page supporters implicitly admit their candidate would not win a two person race.  Yet this also shows a weakness of a plurality vote; a third candidate messes up the works, creating unintended consequences – Le Page’s 2010 victory is an example of that.

The real solution is to ditch the plurality vote and create a run off election of the two top candidates if no one reaches 50%.  They do that in other states, we should do that in Maine.   The odds are good that this move away from Cutler will help Michaud win – but any three way race is hard to predict. Allowing a run off election would help independents because people could truly vote their conscience in the first round, and not need to worry about strategic voting.  Hopefully Maine will move in that direction in the next legislative session.

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Obama Destined to be Remembered as a Great President

Destined to be ranked among the greatest US Presidents

Destined to be ranked among the greatest US Presidents

The right wing has been obsessed with doing all they can to vilify and attack Obama.   But if you pay attention these attacks are either broad and empty (personal attacks on him, his experience or motives) or simply wrong.   The right wing was all over Obama because Putin attacked Crimea, showing real ignorance about Russian interest and world affairs, for example.

My goal here is not to argue against the babble on talk radio or the right wing blogosphere, but point out that President Obama is amassing a record that all but assures that his Presidency will be remembered as not only a success, but one of the greatest.   The reasons full into four categories:  1)  Policy success, including fundamental changes in the nature of public policy; 2) A successful foreign policy, shifting US interests to adjust to new political realities while extricating the US from two painful wars; 3) Economic success, preserving through the deepest economic crisis since the great depression; and 4) Personal and cultural factors – who he is, and the shifting culture of the times.

Domestic Policy:   The White House was almost giddy as enrollments in Obamacare reached over 7 million, a number nobody thought they’d reach after the problems with the website roll out last year.   It is almost inconceivable that this law will be repealed – the cost and disruption of doing so would be immense, and it would create a massive health care crisis.    There will be reforms; once the GOP realizes the law is here to stay they’ll work on fixing problems in it rather than waging ideological jihad.  But President Obama did what Nixon, Carter, and Clinton all failed to do: achieve a major health care overall to expand coverage to tens of millions (ultimately) uninsured, and slow the rate of health care cost increases.

It took patience and persistent leadership, but President Obama claimed success this week as Obamacare enrollment hit the 7 million goal

It took patience and persistent leadership, but President Obama claimed success this week as Obamacare enrollment hit the 7 million goal

Obama has amassed a series of other major policy victories that often get neglected, but will shape the nature of US politics in the 21st Century.   He turned around the auto industry which stood on the brink of collapse in 2009.   He got an economic stimulus package passed that started creating jobs, including for the first time in decades an increase in manufacturing jobs.    Wall Street reform is major improvement on what we had before, and likely will protect the US from the kind of Wall Street induced crisis like that of 2008.  Relatedly, the recapitalization of banks, while controversial, avoided an entire collapse of the credit market in the US and allowed for a quicker recovery than I expected – I thought in 2008 we were looking at a decade before the economy would come back.

He repealed “Don’t Ask Don’t Tell,” and his justice department gave considerable support to the growing move to legalize gay marriage by recognizing such marriages at the federal level, being on the right side of an irreversible cultural shift.  He also worked to get the banks out of the student loan business, increase Pell grants, and make student loans easier and more accessible at a time when education is becoming more expensive.   Also under Obama’s stewardship the US became the world’s leading producer of natural gas and oil for the first time since the early 70s.

Other policies involve significant education reform, toughening fuel efficiency standards, major credit card reform, improved veterans benefits, food safety, an emphasis on nutrition that may be turning around the obesity epidemic among the youth, federal regulation of tobacco, expanded national park service, massive investment in green technology (which will pay benefits long after Obama leaves office), new sentencing guidelines, and more.   Obama has reshaped the policy landscape. That’s one reason the right is so beside itself hating him: he’s an effective leader that has altered the political environment and put the US on a fundamentally different path than had been the case six years ago.

At time when child obesity threatens both the health system and young people's future, Michelle Obama's focus on nutrition is a needed shift in thinking

At time when child obesity threatens both the health system and young people’s future, Michelle Obama’s focus on nutrition is a needed shift in thinking

Foreign Policy.   The US has undertaken a quiet but very successful shift in foreign policy, including military downsizing, the Asian pivot, support for nascent democratic movements in the Mideast, and an effective effort to collaborate on international financial regulations.   He ended the war in Iraq and is ending US involvement in Afghanistan, reoriented US missile defense, helped topple Gaddafi in Libya, and supported South Sudan independence.  Osama Bin Laden was eliminated, and al qaeda is a shadow of what it was in 2008.    Due to unprecedented cooperation between countries (even ones not exactly friendly with each other) on intelligence about terrorism, terrorism has gone from being a threat feared by Americans daily to just a nuisance.

For me, a scholar of international relations, Obama's foreign policy has been a remarkable success in that he turned around policy content and America's image in a way many Americans don't yet grasp.

For me, a scholar of international relations, Obama’s foreign policy has been a remarkable success in that he turned around policy content and America’s image in a way many Americans don’t yet grasp.

Perhaps most importantly by ending torture policies and having two very capable Secretaries of State – Hillary Clinton and John Kerry – US prestige and clout is at its highest point since the end of the Cold War.   President Obama is respected internationally, and has shown himself capable of engineering significant breakthroughs with Iran and – if reports are right – soon in the Israeli/Palestinian conflict.   When people claim that Putin’s taking the Crimea is a failure of Obama, they are grasping at straws.  That is, as I noted, a sign of Putin’s weakness and desperation.   Obama has reinvigorated US international leadership.

Economic success.   When President Obama took office, the US was bleeding jobs, and the budget was out of control.   Now the deficit is far lower than anyone predicted (federal spending has grown much more slowly than during the Bush Administration), and more jobs have been created than during the entire Bush Administration when the US was experiencing a bubble economy. The economy looks set to take off with increased job creation this summer, meaning that the book ends of Obama’s Presidency will be an inherited economic crisis of immense proportions at the start, and a growing and revived economy by the end.

Job growth has been consistent and beyond levels during the Bush years; many economists expect increased job creation towards the end of 2014

Job growth has been consistent and beyond levels during the Bush years; many economists expect increased job creation towards the end of 2014

Finally, when the GOP tried to hold the US economy hostage on the debt ceiling, Obama starred them down, refused to bend, and ultimately the GOP was forced into a humiliating retreat, being blamed for a government shut down, a downgrade in the US credit rating, and playing Russian roulette with US jobs.   That was an example of the successful leadership that defines Obama’s stewardship of the economy.

Personal/cultural factors:  Although the right has tried to find one, Obama has had a clean and scandal-free Presidency.   He has shown himself to be a strong personal leader, using speeches, visits, and his own influence to guide policy.  He is, of course, the first black President, and reflects an America that is more cosmopolitan, tolerant, and diverse.   Just 20 years ago it would have been inconceivable that a black man named Barack Hussein Obama could win the Presidency.

The so-called Tea Party in the US, made up of mostly older white folk (my demographic), reflects shock at the scope of this change.  They believe they are losing America to some strange force which Obama – the black President with the funny name maybe born in Kenya – personifies.  He’s not “one of us,” he went to a radical church, he travels, he’s well educated, he’s not a good old boy like “W”. In that, Obama is indeed symbolic the emerging culture shift.   The process is just beginning, and Obama is destined to be associated with these changes.  He took office as the old order collapsed in an economic crisis and failed wars; he’ll leave office with the country revived and heading down a different path.  He symbolizes a pivot to a new direction for the 21st Century.

Just as most people now forget the attacks on Reagan by the left, or the vicious attacks on Clinton by the right – the two are both remembered fondly by most Americans – the attacks on Obama will fade from the collective memory.   Within ten or twenty years it’ll be clear that his Presidency was not only successful, but ranks alongside America’s greatest Presidents.

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Bashing the Poor

stewartpoor

Jon Stewart has recently taken on Fox New’s shameful and completely irrational effort to claim that the poor in America are moochers and are somehow ripping off the American people.   After FOX news responded to the first report, Stewart doubled down and completely demolished Eric Bollingsworth’s effort to “school” Stewart.   Why don’t pundits ever get that Stewart lives for such responses and uses them to create some of his best work?

Fox’s argument was straight forward.   The poor in America are moochers.  First, they aren’t really poor.  They have refrigerators, they can use EBT cards at organic markets, purchasing stuff like “wild organic salmon.”   To be poor, apparently, means you have to live in third world conditions, barely scrapping by.   Government aid should be used to buy the cheapest food possible, preferrably expired, definitely not organic.  And you shouldn’t have a television or any modern convenience since those aren’t actually necessary for survival.   If you’re not suffering, you’re not really poor.

Poverty is always relative; you compare wealth within a country, not to some objective standard that applies to the third world and the past as well as now in the US.

Poverty is always relative; you compare wealth within a country, not to some objective standard that applies to the third world and the past as well as now in the US.

The second point is that the poor are able to game the system.   But they can’t prove how often this happens.   Instead they find anecdotal evidence, like “Surfer guy” who did truly abuse the system, and claim that he “literally represents millions of poor.”   He doesn’t, they offer no proof that he does, they just try to ignite anger and emotion from their viewers.

Stewart’s ire is correctly tuned on Fox news here because they are engaged in a cheap propaganda ploy designed to support an ideology that argues against community or anything but the so-called “free market.”   Never mind that free markets cannot exist without a strong, effective state.   Unregulated markets collapse, because there is no check on the abuse of power by those with the most wealth and clout.

Fox relies on the ignorance of Americans about just how skewed wealth distribution is towards the very wealthy, and how far it is from the ideal Americans hold.

Fox relies on the ignorance of Americans about just how skewed wealth distribution is towards the very wealthy, and how far it is from the ideal Americans hold.

And, of course, poor people really live rough lives sometimes.  I know poor students who work 40 hours a week, study, and have to live off the cheapest food possible.  Yes, they do have refrigerators – and stoves, heat in winter, and cupboards.   Compared to the third world, or American life in the early 1800s, they have conveniences beyond belief.  They even have electric lights!   Often they have computers (necessary to study) and even a TV.   But that does not make for an easy go at things.

Single parents find the situation even more difficult.  To work they need child care, child care is expensive.  They want to feed their kids healthy food, but that’s more expensive.   To get good food for their kids, they often sacrifice their own diet.   They might have nice clothes for their kids and themselves – but usually that’s been purchased at a second hand or thrift store.   Or perhaps they find cheap made in china toys and clothes at Walmart.

Through 1979 the wealth gap was decreasing, since then there has been a radical relative shift of wealth from poor to rich

Through 1979 the wealth gap was decreasing, since then there has been a radical relative shift of wealth from poor to rich

So when the poor are demonized as moochers, it’s really a “big lie.”  The poor are worse off.  This affects nutrition, makes it less likely they will get adequate health care, dental care, and educational opportunities.   Yes, they will have a TV and a refrigerator, but won’t have access to what most of the country takes for granted.

I took my kids to swim at the fitness center today.   I skied all winter with them, amazed at how they mastered the mountain (and scary jumps) at such young ages.  I purchase shoes that help me avoid a recurrence of planter fasciitis.   My wife and I eat out when we decide we want to, and sometimes take all four kids (each of us has two from a previous marriage).   We’re hoping for a vacation this summer – nothing fancy, but getting away and doing something fun.   We’ll go to water parks, buy camping equipment, even if we use it in the backyard.   And while it was a stretch, we splurged on a hot tub.

Every well off family has these opportunities.  The very wealthy have no boundaries, they can’t spend all their money on stuff, so they look to invest it to create more money.   In theory that should be good for the economy, but in practice so much money seeking only to make more money inflated bubbles.

After taxes and transfers the US has the biggest gap in wealth in the industrialized world.  Our tax system is the least progressive.

After taxes and transfers the US has the biggest gap in wealth in the industrialized world. Our tax system is the least progressive. GINI index measures wealth distribution; the lower the number the more equal the distribution.  It is used by the CIA and seen as the best measure, especially in a comparative sense.

The poor struggle.  Drive through rural Maine, or the rural south.   Go into the inner city and look at living conditions.  Talk to people who are struggling.   It is perverse that a working class man not on welfare sees the single mother with an EBT card as the enemy, while the upper crust chuckle about how they rigged the game and make it seem like those with the least wealth and power are the problem!   Fox news is their propaganda wing.

 

Although the wealthiest Americans are the wealthiest in the world, our median - the middle of earners - is not close.

Although the wealthiest Americans are the wealthiest in the world, our median – the middle of earners – is not close.  Our middle class is worse off than most middle classes in the industrialized world.

So if you look at the real picture, the very wealthy have been using deregulation and a warped ideology to try to convince those losing out that somehow less taxes and less regulation is good for them.  More “freedom.”  That, again, is the big lie.   The most perverse aspect of all of this is how it’s built on massive debt.   That has created an economy that while still huge, no longer is sustainable.   Unless things change, Americans will soon look back at the 20th Century as the good old days now gone, nostalgic for the time America’s middle class was envied.  Those days are already gone, America is no longer the best place to live in the industrialized world, especially for the poor and the middle class.

Total debt  - public and private - is at unprecedented levels.  Only during the height of the great depression did it get close, and that was short.  This is a sign of endemic economic weakness.  Our foreign debt is 100% of our GDP - creating real vulnerability.

Total debt – public and private – is at unprecedented levels. Only during the height of the great depression did it get close, and that was short. This is a sign of endemic economic weakness. Our foreign debt is 100% of our GDP – creating real vulnerabilities.

The reality of these statistics will ultimately shape the politics of this country.   People are not going to take this, and they’re not going to take how wobbly our economy has become.   A few can still believe that somehow America’s the envy of the world and has the best standard of living, but that’s simply not true any more – and things are likely to get worse.

It’s important to break the misguided ideology of free markets, ultra low taxes and deregulation.  That does not increase freedom, it destroys the fabric of our society – and ultimately will send the US on a downward spiral.

 

Hard to read:

Hard to read: Box one, Trump (as Bill the Cat): My God, this is such a quality country.  Little Girl: What do you mean, Mr. Trump?  (2) Trump:  My Palm Beach cottage has 118 rooms, how many rooms does your cottage have?  Girl:  One, but we have nine beds; Reynalda sleeps in a box.  (3)  Trump:  I have a boat, do you have a boat?  Girl: When the plumbing breaks our sofa floats.  (4)  Trump:  I have a dream, a dream that one day I might get six points on margin for the Eiffel tower deal.  (5)  Trump:  What do you dream about?  Girl:  Dinner.   (6)  Trump: And imagine in this great, quality nation, folks like you haven’t strong folks like me up by their intestines.  (7)  Doll:  Yet.  Girl: Hush.

 

 

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The Far Right is Driven by Fear!

tristin

And that’s just one of the many tweets and posts of racist outrage over a Coca-Cola commercial celebrating diversity.   If you want to see a series of screen shots of equally or even more offensive bizarre-ness, click .here

So what did Coca-cola do to offend America’s brownshirts?  Seems they had a commercial where “America the Beautiful” was sung in a number of different languages.   The song reflects a sense of love for the splendor and diversity of this land.  To me it was the perfect song for Coca Cola to use to celebrate America’s rich and diverse cultural heritage.

Here’s the ad:

Reactions from the right have been swift and harsh.   Besides the neo-nazi vomit one can find on the link above, pundits put their feet in their mouths reacting.    In a surreal statement, Fox’s Allen West said that the commercial showed that Americans are not “proud enough” and that this commercial was truly disturbing.  More from West:

 If we cannot be proud enough as a country to sing “American the Beautiful” in English in a commercial during the Super Bowl, by a company as American as they come — doggone we are on the road to perdition. This was a truly disturbing commercial for me, what say you?

The irony.   If you are scared, defensive and weak, you will fear that an ad showing diversity somehow threatens ones own status.  Fear of other languages singing “America the Beautiful” is the response of a coward, of someone who doesn’t understand or accept the reality of American diversity and change.

Over at Breitbart Patrick Leahy whines about an “openly gay couple” being in the ad (how dare they do that in America!) and claims:

As far as the executives at Coca Cola are concerned, however, the United States of America is no longer a nation ruled by the Constitution and American traditions in which English is the language of government. It is not a nation governed in the Anglo-American tradition of liberty. It is instead a nation governed by some all inclusive multi-cultural synthesis of the various forms of government in the world, as expressed by the multiple languages used in the Super Bowl ad to sing a uniquely American hymn that celebrates our heritage.

Besides the fact that Katherine Lee Bates, who wrote the lyrics for the song, was a lesbian, what on earth in that commercial opposes the Constitution?   And really – liberty is only an Anglo-American tradition?   Are the only free people those who speak English?

It’s fear.  They fear diversity, they fear a country in which soon over half the population will not be white, and an ever growing hispanic minority gains political and cultural clout.  The fear globalization, they fear change, they fear the inevitable.  They are scared little children, grasping at something that is already slipping away.

Fear drives the worst in our nature.   People afraid lash out angrily.   They hurt others, thinking that the damage is justified.  They rationalize heinous acts, believing them defensive.  They lose the capacity to see just how absurd and bizarre their claims are.  Rational thought is the first victim of fear.

Do they forget that America is made up of immigrants - about 80% come from families who originally did not speak English!

Do they forget that America is made up of immigrants – about 80% come from families who originally did not speak English!

Glenn Beck demonstrates this by being unable to separate homage to American diversity from everyday politics:

“It’s an in your face — and if you don’t like, if you’re offended by it, then you’re a racist. If you do like it, you’re for immigration, you’re for progress. That’s all this is, is to divide people.”

Uh, no.  It doesn’t say a thing about immigration.  And why on earth would one be offended by it?  Oh wait, I know!  FEAR.  Glenn Beck is very scared man – he recently thought that Kenmore was in a liberal plot to change America because it calls some of its dishwashers and vacuum cleaners “progressive.”

Sigh.   They are right on one thing – America is changing, and they can’t stop it.   Just as America in 1985 was fundamentally different than America in 1935, so it will be profoundly different in 2035.   Change is the American way, and increases in diversity and the impact of globalization can’t be stopped.  It is inevitable that they will lose the strange “English only” fantasy of what they think America should be.    They are fearing the inevitable.

Yet it floors me that they don’t realize how pathetic and whiny their reactions sound.   They are humiliating themselves, making themselves laughingstocks, and they don’t even know it!

cartoon2

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They Got Away With It

The new semester is underway and I’m teaching an honors course:  “Consumerism, Politics and Values.”  We start with the book  The Big Short by Michael Lewis, describing the housing bubble and derivative market mania that caused the collapse of the economy in 2008.

bigshort

The housing bubble and subsequent crisis was created by the big banks who were able to pull off the equivalent of a high stakes ponzi scheme and get away with it.  Alan Greenspan, onetime devotee of Ayn Rand, even admitted that events had proven his “markets get it right” philosophy wrong.

Markets don’t always get it right; unregulated, markets can create calamities.   We shouldn’t forget what happened.

Back in 2000 we entered a recession thanks to the puncturing of the dot.com bubble.  It had been a classic bubble and when the bubble burst the economy went into a needed recession to balance out the excesses of the late 90s.  Then on 9-11-01 al qaeda attacked the US with a devastating blow to the American economy.  The blow wasn’t a direct result of the terrorist attack, but an indirect one – the federal reserve decided to offer extremely cheap credit to help pull us out of the recession.  That turned out to be poison.  That is the one area where the government shares the blame – bad monetary policy.  But that alone could not have created this crisis.

The housing bubble was also not a sub-prime lending problem, nor one related to Fannie Mae and Freddie Mac.  They had their faults, some extreme, but nothing they did could have caused the economic collapse.   What happened can best be viewed by considering risk and incentives.

It doesn't take a genius - this is adjusted for inflation home prices since 1890 - look at the insane bubble after 2002!

It doesn’t take a genius – this is adjusted for inflation home prices since 1890 – look at the insane bubble after 2002!

Risk:  Between 2002 and 2005 virtually all risk was removed from the mortgage market – or so it seemed.  Banks and mortgage brokers knew they’d sell their mortgages to one of the big Wall Street banks.   That meant they had no risk – so every home loan was a win for them, regardless of whether the lender could pay it back.  The banks then took the mortgages and turned them into mortgage backed derivative bonds which they sold, pushing the risk to the investors.  These bonds received a AAA rating from the rating agencies, meaning they were viewed as the safest form of investments.  98% of mortgages get repaid.   Investors gobbled them up, thinking they were essentially risk free.   There was, it seemed, no risk!

Incentives:  Mortgage brokers thus had incentive to cheat – to make loans they knew couldn’t be repaid.   This started the housing market booming.   As prices went up, banks, brokers and buyers had incentive to create risky mortgage instruments.  Since value was going up so fast, it appeared that if you could buy a house at $100,000, it would be worth as much as $150,000 in two years.  So if you couldn’t afford a standard mortgage, you could buy one with artificially low payments for two years.   At that time the house would be worth more, you could refinance at a standard rate and take out a home equity loan for easy money.   Everyone wins!   Meanwhile, the banks gobble up more and more mortgages as they are making massive amounts of money – hundreds of trillions of dollars in mortgage backed derivatives!

Derivatives include futures markets and anything where the value is derived from something else.  But the huge spike in derivative trade from 2000 to 2007 was due to unregulated mortgage backed bonds

Derivatives include futures markets and anything where the value is derived from something else. But the huge spike in derivative trade from 2000 to 2007 was due to unregulated mortgage backed bonds

As with any bubble, everyone thinks all is great until it pops.   Housing prices started to drop in early 2007.  The first pain was in the worst loans, the subprime market.   No one panicked – that market wasn’t big enough to cause a crisis.   Little did people realize that the entire derivative bond market, even bonds with the best loans, were toxic.

Soon prices started to drop.  Thanks to the people at CNBC and the other business “reporting” networks, people had the belief that real estate prices might level off, but wouldn’t go down.   While some like Peter Schiff had been warning people, most of the media were predicting real estate price growth as late as 2007.  People simply didn’t believe the party was ending.

Many people were directly affected.  People who had adjustable mortgages planning to refi with a higher value ended up bankrupt.  People who bought the AAA ranked derivative bonds ended up losing their entire investments.  This included groups like fire departments and school systems which thought a AAA bond was no-risk.   People who had been doing real estate speculation thanks to the rising prices went from being nouveau riche to old fashioned poor.  Those who simply bought houses at record high prices ended up under water – they often owe tens or even hundreds of thousands of dollars more than their homes are worth.

Of course, this all lead to massive loses on Wall Street and an economic downturn that is still with us today.   People totally outside the housing market lost their jobs or their investments when the economy tanked.  The ones who suffered the most were the poor.  The wealthy can take a hit on their portfolio and still enjoy nice homes and an easy life style, after all.

Yet the ones who did this – the ones who created the derivative bonds and then worked to disguise or avoid risk, taking massive short term profits even knowing that in the long run everything could collapse – they’re doing well.  No one had to repay their bonuses or their income from the bubble years.  Most simply found new work.   Sure, Bear Stearns, Lehmann Brothers, and a number of other banks went under.  Yet the people working there found other work.   Some  probably ended up with a dramatic downsize in lifestyle, but prison time or actual penalties?  Nah, they were just doing business.

Many people are still livid about the lack of accountability, but that’s the its always been.   The wealthy have power and clout, and can usually avoid accountability, especially if they’re in the financial sector.  In this case both Democrats and Republicans accepted the free market mantra and refused even modest regulation.  Yet tighter regulation might have avoided the collapse and we’d be at 5% unemployment now.

During the Clinton Administration Brooksley Born tried to regulate the derivative industry; Greenspan, Summers, and Rubin led the attack to stop her, documented in the PBS special "The Warning."

During the Clinton Administration Brooksley Born tried to regulate the derivative industry; Greenspan, Summers, and Rubin led the attack to stop her, documented in the PBS special “The Warning.

It’s also proof – absolute proof – that the ideology that the market is always best is dead wrong.   It is just as wrong as the Communist belief that a state run economy is more fair.  Ideologies delude more than enlighten. Reality is messy, ambiguous and paradoxical.   People enslaved by simplistic ideological beliefs tend to interpret reality in a way that suits their beliefs and avoid cognitive dissonance at all costs.  We need accountability, rule of law, and transparency — especially in the market.

So now six years from the collapse we’re still reeling, trying to correct imbalances that could have been avoided.  The people who created the mess and made huge profits off the bubble got away with it.

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Merkel’s Faux Victory?

merkel

Germany’s election of September 22, 2013 appeared for awhile to suggest that Angela Merkel would be able to form a majority government, not needing a coalition partner.    That has happened only once in German post-war history:  the CDU/CSU under Konrad Adenauer had a majority from 1957-61.

The result, however, turned out slightly – and only slightly – different.

With over 71% voting, here is the result of the second ballot, the ballot where Germans choose their party preference:

chart

Clearly the CDU/CSU total of 41.5% is far above that of any other party.  But there are a few quirks in the German system.   First, a party has to get 5% to have any seats in the Bundestag.   This means that in the Bundestag the parties on the left earned 42.7% of the vote.   After that and a host of extra seats were figured out the end result in the Bundestag is this:

bundestagseats

(*Aside for political science folk:  In Germany half the seats are apportioned through single member districts, and half through a second ballot with party preference.  However, the allocation of the second ballot seats is done to get the Bundestag to reflect the second ballot results, meaning the second ballot is the most important.   This is done at the state level, not the national level.   Sometimes in a state a party may win more seats in the first ballot than they deserve based on the second ballot result.  They don’t get any new second ballot seats, but can keep the extra seat – the Bundestag is expanded for that purpose.  All parties who get under 5% on the second ballot are denied representation in the Bundestag, but can keep any seats won on the first ballot.  If they win three first ballot seats they get their second ballot representation.  So if the FDP had won 3 first ballot seats, they’d get their 4.8% of Bundestag seats.  They didn’t do that).

So with 630 seats, the Union has a conservative block of 311 seats, while the parties of the left have 319.  Conservatives would protest that the 4.8% for the FDP and 4.7% for the AfD reflect conservative values (though the AfD’s anti-Euro stance is completely opposite of Merkel’s position), meaning that most voters had a preference for a party on the “right.”  Yet those parties didn’t make the Bundestag.

So it’s possible that the SPD, Greens and Linke (left) will form a red-red-green coalition.   That seems unlikely.   The SPD hates the fact the Linke even exists.   Die Linken are getting most of the votes on the left in former East Germany.   In the West the SPD got 27.3% and the Linke only 5.3%.   Here are results from the East:

eastvote

In the East the Linke get 21.2 vs. 18.8% for the SPD.   The SPD has vowed to defeat the Linke, which was built atop the old Communist party of East Germany, and it’s successor party, the Party of Democratic Socialism (PDS).   However, the Linke are not going away – they even got 5% in the West!   Perhaps the SPD needs to recognize that the left is divided in Germany and deal with the Linke.   Twenty years ago that was impossible because the old PDS was still too communist in orientation.   Now that’s faded.

The Greens, also more popular in the West than East, have a strong civil rights background that cause them to see former communists as anathema.  All this has meant that the division on the left has been insurmountable – the Linke were poison.   Yet that hasn’t been true at the state level, and maybe now that the Cold War is nearly a generation in the past the SPD and Greens need to have serious talks with the Linke.

Merkel, on the other hand, is left in a situation where no one wants to govern with her.  From 2005 to 2009 she joined with the SPD for a left-right “Grand Coalition.”  The SPD was hurt by that, and there is virtually no desire within the party to join Merkel again – they have nothing to gain and a lot to lose.  Better to be an opposition party.   The Greens could reach an agreement with the CDU, but on policy grounds they come from a very different perspective.   The negotiations would be tough.  Beyond that, they see what happened to the FDP, who ruled with Merkel from 2009 to now.   In 2009 the FDP had 14.5.   They dropped down nearly 10% to the point that their future as a party has been questioned.   Governing with Merkel could be poison for the Greens.

So Merkel might end up having a minority government, tolerated by the SPD and Greens (meaning they’d vote alongside the government on most issues while not joining it).   That could work, but minority governments are inherently unstable.   If a new Euro crisis emerged, she might not be able to get her priorities through the Bundestag.

So her victory is tainted.   She’ll have a tough time getting a stable coalition partner and may have to rule a minority government.  Or perhaps the SPD will decide that their party is floundering and it’s worth the risk to forge an agreement with the Linke and Greens to create a government of the left.  That would shock the world, but certainly is possible.    Back in 1969 President Nixon called CDU Chancellor Kurt Kiesinger to congratulate him on the election, only to find that the SPD would reach an unexpected agreement to form a coalition with the FDP, making Willy Brandt Chancellor.  It’s possible, though unlikely, that Merkel won’t remain Chancellor.

So today the world reports on Merkel’s victory, and the CDU/CSU as the strongest party in Germany, gaining significantly from their 2009 result.  But thanks to Germany’s electoral quirks, this victory may prove hollow – and it may not be a victory at all.  Stay tuned!

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