The Real David Brooks

I'd just about given up on David Brooks. Often described as the "liberal's favorite conservative," Brooks can both read and write. [That's an obscure T. E. Lawrence reference, actually.]

As a student at the University of Chicago, he wrote a satirical piece for the school newspaper about a William F. Buckley book called "Overdrive." When Buckley later gave a lecture at Chicago, he announced from the podium, "David Brooks, if you're in the audience, I'd like to offer you a job."

I wish Brooks wrote more satire. His satirical pieces are much, much better than his very serious pieces.

Take for example, this biography of The Real Romney:

Mitt Romney was born on March 12, 1947, in Ohio, Florida, Michigan, Virginia and several other swing states. He emerged, hair first, believing in America, and especially its national parks. He was given the name Mitt, after the Roman god of mutual funds, and launched into the world with the lofty expectation that he would someday become the Arrow shirt man.

Romney was a precocious and gifted child. He uttered his first words (“I like to fire people”) at age 14 months, made his first gaffe at 15 months and purchased his first nursery school at 24 months. The school, highly leveraged, went under, but Romney made 24 million Jujubes on the deal.

Mitt grew up in a modest family. His father had an auto body shop called the American Motors Corporation, and his mother owned a small piece of land, Brazil. He had several boyhood friends, many of whom owned Nascar franchises, and excelled at school, where his fourth-grade project, “Inspiring Actuaries I Have Known,” was widely admired.

The Romneys had a special family tradition. The most cherished member got to spend road trips on the roof of the car. Mitt spent many happy hours up there, applying face lotion to combat windburn.

The teenage years were more turbulent. He was sent to a private school, where he was saddened to find there are people in America who summer where they winter. He developed a lifelong concern for the second homeless, and organized bake sales with proceeds going to the moderately rich.

 The whole thing is here.

The Emperor's New Clothes

Why does Paul Ryan always remind me of The Emperor's New Clothes, the classic Hans Christian Andersen tale? In it, two weavers make a suit of clothes for the king that they claim is made of a special cloth, invisible to stupid people or people unfit for the office they hold. When the king dons his "new suit," and sees nothing at all, he and the members of his court are too afraid of seeming stupid or incompetent to admit aloud the obvious.

In his analysis of Ryan's famous "budget," Paul Krugman suggests the solution to my puzzle:

First, there are a set of tax cuts for higher income brackets and corporations. The Tax Policy Center (pdf) estimates the cost of these tax cuts, relative to current policy, at $4.3 trillion.

Second, there are spending cuts. Of these, approximately $800 billion comes from converting Medicaid into a block grant that grows only with population and overall inflation – a big cut compared with projections that take into account rising health-care costs and an aging population (since the elderly and disabled account for most Medicaid expenses). Another $130 billion comes from doing something similar to food stamps. Then there are odds and ends – Pell grants, job training. Be generous and call all of this $1 trillion in specified cuts.

On top of this we should add the $700 billion in Medicare cuts that Ryan denounces in Obamacare but nonetheless incorporates into his own plan.

So if we look at the actual policy proposals, they look like this:

Spending cuts: $1.7 trillion
Tax cuts: $4.3 trillion

This is, then, a plan that would increase the deficit by around $2.6 trillion.

How, then, does Ryan get to call himself a fiscal hawk? By asserting that he will keep his tax cuts revenue-neutral by broadening the base in ways he refuses to specify, and that he will make further large cuts in spending, in ways he refuses to specify.

And this is what passes inside the Beltway for serious thinking and a serious commitment to deficit reduction.

 Indeed.

Job Creators

Andrew Tobias recommended this 6-minute video, and so do I.

Sempringham Calls Another One

It was no surprise to the highly intelligent readers of Sempringham when Paul Ryan was announced as Mitt Romney's choice for vice president. After all, they'd had the tea leaves read for them.

Why The Stock Market Is Still Not A Safe Place To Be

Something very significant happened on Wall Street last Wednesday: HAL, the computer in 2001: A Space Odyssey, decided to get into the stock market at a firm called Knight Capital Group. Before they pulled the plug, HAL had lost the company $440 million. Not bad for a half-hour's work.

HAL was able to do it because the days of value investing in the stock market are close to over. Instead, the place is given over to boys with their toys: high speed computerized stock trading programs that buy and sell huge blocks of stocks several times a day based on penny differences in price. No "buy and hold" for this crowd.

Felix Salmon has an amazing animated graphic which illustrates the increase of computerized high frequency trading. Please take a look at it. Please, please, please. Keep an eye on the dates in the lower left-hand corner, and watch it to the end. (It's in a continuous loop, it will be obvious when it has started again.)

Salmon says:

Back in 2007, I wasn’t a fan of a financial-transactions tax; today, I am. And this chart shows better than anything why my opinion has changed. The stock market is clearly more dangerous than it was in 2007, with much greater tail risk; meanwhile, in return for facing that danger, society as a whole has received precious little utility. Are spreads a tiny bit tighter than they might be otherwise? Perhaps. But that has no effect on stock-market returns for long-term or even medium-term investors.

The stock market today is a war zone, where algobots fight each other over pennies, millions of times a second. Sometimes, the casualties are merely companies like Knight, and few people have much sympathy for them. But inevitably, at some point in the future, significant losses will end up being borne by investors with no direct connection to the HFT world, which is so complex that its potential systemic repercussions are literally unknowable. The potential cost is huge; the short-term benefits are minuscule. Let’s give HFT the funeral it deserves.

That would be a start, but just a start.  Glass-Steagall, the repeal of which played a large part in the Crash of 2008, is no closer to being restored than it was then. Not a confidence builder.

Andrew Sorkin reports, "Of 878 students at 18 high schools across 11 different states surveyed by the Financial Literacy Group, three-quarters of them said they agreed with this statement: “The stock market is rigged mostly to benefit greedy Wall Street bankers.”

Pretty smart kids.

Very Cool

Don't miss this little video that compares the speeds of Olympic 100-meter sprinters since 1896. Maybe, like me, you don't really care about track and field. Watch it anyway. It's very cool.

Romney's Tax Plan

Kevin Drum is my go-to guy for clear analysis of tax policy. This rundown on the recent Brookings Institution/Tax Policy Center report on Romney's proposed tax cuts lays it out very clearly.

There are two parts to Mitt Romney's tax plan. Here they are:

Part 1: Romney wants to lower tax rates. This part of his plan is extremely detailed. Tax rates would be cut by a fifth across the board. Taxation of investment income would be eliminated for families with incomes under $200,000. The estate tax would be eliminated. The Alternative Minimum Tax would be eliminated. Obamacare's payroll tax increase on the wealthy would be repealed. The corporate tax rate would be cut to 25%.

Part 2: Romney wants to eliminate or reduce various tax credits and deductions in order to increase revenue. This would make up for the lost revenue from Part 1. However, he has provided zero detail about this part of his plan.

Isn't that odd? Romney has extremely specific thoughts about lowering tax rates and is willing to share chapter and verse. But when it comes to the part where you raise some taxes to make up for it, he suddenly thinks he ought to defer to Congress on the details instead of doing their job for them. Why is that?

The analysts at the Tax Policy Center provide a pretty good clue today. Romney himself won't say anything about the credits and deductions he'd target, so they made the most progressive assumptions they possibly could about them by "starting at the top." That is, they made a list of all the possible credits and deductions and then completely eliminated them for the highest income group. This would produce the largest possible increase for the wealthy. Then they worked their way down, and by the time they got to the bottom group they reduce the credits and deductions only enough to make the whole plan revenue neutral. This produced the smallest possible increase for the non-wealthy.

So: the biggest possible increase for the wealthy, the smallest possible increase for the less wealthy. For technical reasons, they could only model this down to $200,000, but that's enough to show what Romney's plan would do. ... When you combine the decrease in rates and the increase from credits and deductions, millionaires would get a tax cut of 4.1%. Everyone under $200,000 would get a tax increase of 1.2%.

At this point, President Obama's problem is trying to get people to believe that Romney actually supports a plan that's so outlandishly friendly to the rich. When the Priorities USA Super PAC tried to inform voters about Paul Ryan's similar plan, Robert Draper reports that "the respondents simply refused to believe any politician would do such a thing." And Romney, of course, will hide behind the fact that he himself hasn't endorsed any particular basket of tax increases to make up for his rate cuts, so the Brookings analysis is just guesswork.

 

Mr. Bean goes to Poland

Loved this, from Paul Krugman:

So on the third leg of his foreign tour, Mr. Bean Mitt Romney lavished praise on the Polish economy. It wasn’t quite as big a blooper as his praise for Israel’s single-payer-plus-price controls health care system, but it wasn’t good.


For one thing, Poland has substantially bigger government than the US; in 2007, that is, pre-crisis, the Polish government spent 42 percent of GDP, compared with 37 in the United States. And despite what Romney claimed, there was no obvious trend toward smaller government; Polish spending as a share of GDP was about the same in 2007 as it had been in 2000.

Oh, and universal health care too.

What's the Matter with Texas?

Ian Millhiser at Think Progress offers a profile of Ted Cruz, who will be the Republican candidate for Kay Baily Hutchinson's seat in the Senate. According to Millhiser, Cruz has "considerable intellect." I guess the bar for considerable intellect has been lowered considerably lately. As Millhiser details, Cruz:

1) Believes George Soros is behind a U.N. plot to eliminate golf courses.

2) Thinks Social Security is a Ponzi scheme.

3) Thinks two states can join together to ignore national laws they don't like.

4) Thinks Sharia law is an enormous problem in the U.S.

And my personal favorite:

5)

Cruz’s very first campaign ad encouraged GOP primary voters to support him because he helped make it easier for Texas to kill an “illegal alien.” According to the ad, “Cruz fought all the way to the Supreme Court” after “the UN and World Court overruled a Texas jury’s verdict to execute an illegal alien.” In reality, the case Cruz won had nothing to do with whether Texas had the authority to kill this man. Rather, it concerned whether Texas could defy a treaty requiring it to inform foreign nationals who are arrested of their right “to request assistance from the consul of his own state.” Even North Korea honored this treaty that Cruz fought to undermine.

Something is misfiring in this considerable intellect.