and Time’s #8 Buzzword of the year 2008 is …

Top 10 Buzzwords

8. PUMA

By John Cloud

Louise Ma
An acronym for “party unity my ass,” this term was the rallying cry of Clinton supporters who backed her candidacy even after many party leaders called for consensus around Obama in order to ensure a unified Democratic front going into the general election. As Barrett of doubletongued.org points out, PUMAs hoped to bring the Clinton-Obama fight “to a head-to-head smackdown vote at the [Democratic] convention.” Instead, Clinton threw her support to Obama well before the convention. This word, which disproportionately described female voters, recalls TIME’s 2007 buzzword of the year: cougar, i.e., an older woman seeking younger men.

Really Bad Numbers = ?

I’ve tried to lay off my econ-based threads so all those that celebrate national crass consumerism day could stay off the window ledges instead, enjoying the yuletide fireplace.  This year, I’m earning my title as dismal scientist and this post is not full of seasonal cheer.

Employment: The level of continuing first time unemployment claims stands at a 26-year high of 4.51 million.  The 1982 recession was the worst post WW2 recession to date.

2008 Yearly Market Performance: (11 year lows)

U.S. indexes
Dow Jones Industrial Average	-35%
S&P 500	-39%
Nasdaq	-42%
Dow Jones Financials	-55%
Amex Oil Index	-38%

Housing: House prices have fallen to their 2004 level. Sales of both existing houses and new construction are miserably low.  Resales were down 10.6%f this year.  Basically, we’re seeing the fastest decrease  in sales on record.

Consumer Confidence:

The Reuters/University of Michigan survey of consumers rose to 60.1, better than a preliminary reading of 59.1 released earlier this month and topping the 58.5 reading forecast by economists’ surveyed by MarketWatch.

It also marked a sharp improvement from November’s 55.3 reading, a 28-year low…

The index has tumbled 20% from last year and 38% from a peak reached in Jan. 2007

The Dakini’s Office Pool

 

It’s almost the New Year.  Having once dated a New Yorker for an extended period of time, I got used to William Safire (whose column I miss a lot) and his end of the year Office Pool.  He always had a list of predictions that challenged you to beat the pundit.  Some of my favorite questions had to do with the results of elections as well as topical things like the number of troops left in Iraq by the end of the year.

You can be as snarky, hopeful, truthful, or scary right on as you wish. 

 

Here’s a few of them to get you started:

 

The NY Times Joins the Pigou Club

A few weeks ago I opened a thread about a Pigouvian tax on gas.  I argued that it would accomplish several things.  The first is to discourage consumption of gas and oil.  The second to discourage consumption of gas and oil from foreign countries. The third was to discourage consumption of gas and oil that contributes to global warming and pollution.  The fourth was to switch consumption and product development to energy efficient and non petroleum-based energy sources.  It struck a nerve among a lot of people because it basically is going to cost all of us money at all levels of society.  I heard a  lot of folks saying that the impact on the poor would be ‘unfair’ because so many would be unable to transfer out of gas-guzzlers and long commutes in the short run.  I also suggested that this could be offset with some kind of manipulation of the tax code to give them more take home pay until they can change the behavior.  I know suggesting tax increases on every one but the extremely rich is a highly unpopular thing, but unfortunately, it’s not only the rich that adopt behaviors that pass on social costs to the entire society.  Every has a stake in energy indepency, energy efficiency, and cleaner energy technologies.  If folks don’t change voluntarily (and history has taught us in this case they don’t), some times we have to make it costly.

Since I wrote that thread, the NY Times editorial board came out for a petroleum tax.  Gas prices are still falling and are now at about 5 year record lows.  Just like the 1970s and the 1980s, the american public is returning to its old habits.  This was just published at CNNMONEY.COM.

NEW YORK (CNNMoney.com) — After nearly a year of flagging sales, low gas prices and fat incentives are reigniting America’s taste for big vehicles.

Trucks and SUVs will outsell cars in December, according to researchers at the automotive Website Edmunds.com, something that hasn’t happened since February.

Meanwhile the forecast finds that sales of hybrid vehicles are expected to be way down.

“Despite all the public discussion of fuel efficiency, SUVs and trucks are the industry’s biggest sellers right now as a remarkable number of buyers seem to be compelled by three factors: great deals, low gas prices and winter weather,” commented Michelle Krebs, Senior Editor of Edmunds’ AutoObserver.com.

This month, trucks and SUVs will make up 51% all vehicles sold in the U.S., according to Edmunds.com. Before the spike in gas prices earlier this year, market share for trucks and SUVs had been even higher than that, said Edmunds.com sales analyst Jesse Toprak.

It just seems that we some people never learn.  That is when a Pigou tax in necessary.

Thomas Friedman in today’s NY Times  advocated the tax on petroleum for the same reasons.  Quoting Friedman is not something I usually do.  He’s has,however, spent some time studying the problem.  Here’s his take:

The two most important rules about energy innovation are: 1) Price matters — when prices go up people change their habits. 2) You need a systemic approach. It makes no sense for Congress to pump $13.4 billion into bailing out Detroit — and demand that the auto companies use this cash to make more fuel-efficient cars — and then do nothing to shape consumer behavior with a gas tax so more Americans will want to buy those cars. As long as gas is cheap, people will go out and buy used S.U.V.’s and Hummers.

There has to be a system that permanently changes consumer demand, which would permanently change what Detroit makes, which would attract more investment in battery technology to make electric cars, which would hugely help the expansion of the wind and solar industries — where the biggest drawback is the lack of batteries to store electrons when the wind isn’t blowing or the sun isn’t shining. A higher gas tax would drive all these systemic benefits.

The same is true in geopolitics. A gas tax reduces gasoline demand and keeps dollars in America, dries up funding for terrorists and reduces the clout of Iran and Russia at a time when Obama will be looking for greater leverage against petro-dictatorships. It reduces our current account deficit, which strengthens the dollar. It reduces U.S. carbon emissions driving climate change, which means more global respect for America. And it increases the incentives for U.S. innovation on clean cars and clean-tech.

The Times Editorial mentioned some of the same numbers.

The recent infatuation with the Toyota Prius and other fuel-efficient cars could well come to a similar end. It took a gallon of gas at $4.10 to push the share of light trucks down to 45 percent in July. But as gasoline plummeted back to $1.60 a gallon, their share inched back up to 49 percent of auto sales in November.

There are several ways to tax gas. One would be to devise a variable consumption tax in such a way that a gallon of unleaded gasoline at the pump would never go below a floor of $4 or $5 (in 2008 dollars), fluctuating to accommodate changing oil prices and other costs. Robert Lawrence, an economist at Harvard, proposes a variable tariff on imported oil to achieve the same effect and also to stimulate the development of domestic energy sources.

In both cases, the fuel taxes could be offset with tax credits to protect vulnerable segments of the population.

So, here are the arguments again with the evidence that people will not do what’s best without the stick.  Please think about it and discuss.

Yet another Russian Revolution

While many analysts in  foreign offices of various countries have been increasing;y worried that the global slow down would bring China’s economy closer to social unrest, the focus has now shifted to Russia.  The quick slide of petroleum prices plus the financial market crisis has left the former Soviet Union with restless workers demanding more.  

This information is from the U.K’s Financial Times.   Newspapers in Europe are interested in more than just the upcoming Obama annointment and actually have foreign offices rather than armies of reporters chasing the PE on beaches in Hawaii.   Perhaps Russian adventurism in the neighborhood will stop given this unnerving analysis.  We can only hope.

 It’s interesting to note that Russian cars makers also need a bail out from Mama Bear.  It appears no one likes their domestic drives any more.

One of the most interesting things I find with both of these transition economies has been the dance between enjoying increasing levels of consumer goods in return for accepting politically repressive regimes.    Folks in both China and Russia have been willing to trade freedom for stuff.  Now that the stuff is less available, what will happen?   Take that thought one step further and are all that different?  Exactly how much freedom do we sell for our daily bread and Wii?  While our expression of frustration were vented in the recent vote, how long and deep can this recession go before we too start demanding results from all this change?  Better yet, what happens when the candidate that promised to change things so drastically can’t really deliver.

Russia braced for unrest

By Isabel Gorst in Moscow and Anuj Gangahar in New York

Published: December 26 2008 19:53 | Last updated: December 26 2008 19:53

 

Russia is bracing for further unrest as the rouble on Friday slid to a new low against the euro after a succession of moves to devalue its currency.

A cut on Friday extended six weeks of devaluations by Russia’s central bank designed to offset the impact of the global economic crisis and falling oil prices as the country’s main export commodity approached its lowest level since 2004.

Mikhail Gorbachev, the former Soviet leader, warned Russia faced “unprecedentedly difficult and dangerous circumstances” and could be “heading into a black hole”. “It is not clear what the fate of our rouble will be or if society has sufficient financial and moral resources,” he said.

After the depreciation, which was the eighth so far this month, the rouble declined as much as 1.2 per cent to Rbs29.06 versus the dollar on Friday, a four year low. The rouble has now lost nearly 20 per cent of its value against the US currency since August.

Analysts at Barclays Capital said the best case scenario would see Russian policymakers, facing the mounting evidence of a recession, allowing a one-off depreciation of 10 per cent or more.

The rouble’s slide comes as the government faces scrutiny over its policies. A demonstration earlier this month in the far eastern city of Vladivostok marked the first major challenge to the Kremlin since the onset of the global financial crisis.

Mikhail Sukhodolsky, a deputy interior minister, warned on Christmas Eve that there could be further protests. “The situation may be exacerbated by a growth in frustration of workers over the non-payment of wages or those threatened with dismissal,” he said.

His remarks coincided with criticism of the Kremlin’s rough handling of the protests in Vladivostok. Moscow-based Omon riot police detained about 61 people in the protests against car import duties designed to prop up domestic car producers, but making foreign vehicles prohibitively expensive for ordinary Russians.

Fear and Loathing in Algier’s Point

Algier’s Point has a history of racism.  It’s a small neighborhood and mostly white enclave located on the west bank of the Mississippi River in New Orleans.  It  started as the place in New Orleans where human beings were bought and sold.  The Slave Market was placed far across the river from the main part of the city that was filled with folks of mixed race, free people of color, and the many assorted European transplants that made it home.  Now it’s a quaint little neighborhood that has shown an ugly white face to the world.

You may remember hearing about the West Bank when the Sheriff of Gretna (another mostly white  working class enclave) stopped many folks from crossing the Crescent City Connection in attempt to wall off the west bank from those fleeing the flooded city.  There was a lawsuit that was recently dismissed and the event attracted attention from national media and civil rights leaders.  The West Bank and its after-Katrina aftermath is once more at the epicenter of controversy.  ‘The Nation’ broke a story last week that included this video-taped admissions from White vigilantes in Algiers Point.  You can  listen to them admit  to shooting Black men on sight for just being in the neighborhood during Katrina.

One transplant from Chicago brags in only the way the truly stupid can:

“It was great! Like pheasant season in South Dakota. If it moved, we shot it.” 

 (You can catch this jerk around the 5:40 mark).

Charges of racism have been bandied about this election so readily that I’ve frequently worried we’ll become immune to the real things when it happens.  This weekend, I actually heard on commentator say that it was racist to even think about running any one against New York Governor Patterson in an upcoming election.  Just about anyone who supported Hillary Clinton during the primary had the racist meme thrown at them.  I was tired of the entire subject, frankly.

 

Watch this video.  It’s the real deal and you’ll recognize it.  It’s incredibly appalling and I hope the MSM airs the most offensive parts because there is an incredible level of hatefulness here that signifies racism at its worse.  I know it when I see it.

Charges of racism have been bandied about this election at the drop of a hat to the point that I’ve worried the nation will become immune to the real thing when it happens.  This weekend, I actually heard one commentator say that it was racist to even think about running any one against New York Governor Patterson in upcoming elections.  Just about every one who supported Hillary Clinton in the primary had the racist meme thrown into their faces. Again, I worried about folks becoming numb to the real deal.

 

Watch this video.  My guess is even if you did support Hillary in the primary and you think it’s possible some one might want to run against Patterson because he could appoint Caroline instead of other pols that you’ll till recognize the real deal.  It’s completely appalling and I hope the MSM airs the most offensive parts because there’s an incredible level of racism there.  I know it when I see it.

NOTE:  you can read more about this and make comments at the website of  the New Orleans Times Picayune

 

 

When Inclusion is Really Exclusion

When I heard that Rick Warren was invited by PE Obama to say a prayer at the inauguration,  my first thought was that Obama’s pandering to the religious right was more than just electioneering.  Obama seems intent on including them in his administration.  To me, this  bodes poorly for science, rational thought, and civil rights.   I was hoping he might ask some one like Rev. Gene Robinson, an Episcopalian Bishop to give the prayer because it would demonstrate a true commitment to civil rights.  Rev. Robinson is openly gay and his appointment has been an ongoing source of controversy.

I was pleased to read Jeffrey Feldman’s blog today to find there was some one else out there with similar feelings.  I always find the Feldman’s analysis of how people looking for positions of power  ‘frame’ cultural and political issues fascinating.  Feldman believes that Obama is not leading on civil rights issues but ‘tinkering’ and points to previous democratic leaders who took bold stands on civil rights issues.  I’m going to highlight his main points, but would suggest you go look at the entire essay.

Obama, Feldman believes,  comes up short on the leadership scale.

Marriage equality for gays and lesbians is not just some “social issue” akin to school uniforms, warning labels on music or smoking in restaurants.  It is the current epicenter of the civil rights movement in America.

…  When Lincoln took office, the abolition of slavery was the epicenter.  When Wilson took office, the women’s suffrage movement was the epicenter.  When FDR took office, poverty was the epicenter. When Kennedy took office, segregation was the epicenter

Thinking about Obama’s presidency in terms of an  ‘epicenter’ of civil rights changes how we think about Rick Warren speaking at the inauguration.

Rick Warren is not just a pastor opposed to gay rights. He is a highly political leader of a mega-church who has compared abortion to the Holocaust and opposed marriage reform in terms equivalent to the bigoted plaintiffs in Loving v. Virginia–the landmark 1967 civil rights case overturning anti-miscegenation marriage laws.  In an era where gay rights are the epicenter, Rick Warren is a widely recognized voice arguing against those rights. 

Translating Rick Warren into the terms of previous civil rights eras is the key to seeing why his role at Obama’s inauguration is so troubling. By comparison, if this were Lincoln’s inauguration, Rick Warren would have been the equivalent pro-slavery pastor giving the invocation.  If this were Wilson’s inauguration, Rick Warren would have been the equivalent of an anti-women’s suffrage pastor saying a prayer.  For FDR, he would have been the same as inviting a pastor opposed to rights for the poor. For Kennedy, he would have been the same as inviting a pastor who spoke out repeatedly about the dangers of desegregation. 

In each of these cases, for the President-elect to invite the a voice known for arguing against progress–and to do so in the name of political peacemaking, as Barack Obama has done with Rick Warren–would have revealed a tinkerer on civil rights, not a leader.

Feldman raises just one faucet of leadership where Obama fails.  Obama’s cabinet appointments are being ‘framed’ as pragmatic.  Obama has said he wants to be surrounded by folks that are not idealogues, but folks that will get things done.  I guess I have to raise the question of how important is getting a bureaucracy to work when the overall goals are based on functionality and not vision.  This is where I think Feldman sees the gay rights as symptomatic of Obama’s lack of leadership skills.  As President, Obama should be doing more than just making history based on appearances.  If Obama is ’symbolic’ of civil rights gains, then what does it say to choose Warren, some one who assaults the civil rights of both women and GLBT Americans? 

I feel compelled to add my voice to those asking Obama to disinvite Warren.  What would it say if Obama, instead, asked Rev Robinson to contribute this prayer instead?   Wouldn’t the inclusion of Rev. Gene Robinson make a compelling statement towards the future of  civil rights in this country?  Wouldn’t this be a strong statement given that the President Elect’s supporters contributed so heavily to the defeat of Prop 8 in California?  This would be a sign of leadership and not just a going along with what worked to get Obama elected.

Chapter 3: In which Kat joins the Pigou Club

This thread is going to speak to solving several major problems we have in our Economy in a way that is not going to be highly popular with folks outside the Pigou Club.  If you slept during or avoided your microeconomics course, or blocked the bad memories the minute you finished the course, you undoubtedly are asking yourself wtf is the Pigou Club?  If you do remember who Pigou is and what he suggested, you’re asking yourself, why would any economist suggest raising taxes on anything during a major recession?  Well, get ready to discuss using a tax to shape social behavior because that’s what Pigou suggested and that’s what we now do on things like alcohol and cigarettes.

Arthur Cecil Pigou was a Brit economist who was part of the Cambridge school that also produced John Maynard Keynes.  Pigou’s major work was in an area that we call welfare economics.  You can read more about him if you’d like but this is from Wikipedia and gives you the major idea.

Pigou’s major work, Wealth and Welfare (1912, 1920), brought welfare economics into the scope of economic analysis. In particular, Pigou is responsible for the distinction between private and social marginal products and costs. He originated the idea that governments can, via a mixture of taxes and subsidies, correct such perceived market failures — or “internalize the externalities“. Pigovian taxes, taxes used to correct negative externalities, are named in his honor.

So what do the members of  Greg Mankiw’s Pigou Club want to tax?  Well, the answer is that now is the perfect time for a federal tax on gasoline and other petroleum products.  It appears that the incoming energy secretary, Steven Chu, is also a member of the Pigou Club.    Another Obama appointee, Lawrence Summers also supports the idea.  Here is a description of Chu’s idea from the WSJ.

In a sign of one major internal difference, Mr. Chu has called for gradually ramping up gasoline taxes over 15 years to coax consumers into buying more-efficient cars and living in neighborhoods closer to work.

“Somehow we have to figure out how to boost the price of gasoline to the levels in Europe,” Mr. Chu, who directs the Lawrence Berkeley National Laboratory in California, said in an interview with The Wall Street Journal in September.

But Mr. Obama has dismissed the idea of boosting the federal gasoline tax, a move energy experts say could be the single most effective step to promote alternative energies and temper demand.

That last sentence is the important argument is signficant.  A Pigou tax on gasoline, heating oil, and other petroleum products would, in fact, be extremely effective in promoting alternative energies, decreasing dependence on foreign sources of the products, and giving us more leverage in the world with countries we have to endure just because they have oil.   Check out today’s Market Watch and the new threat from OPEC.  Threats from OPEC are nothing new, we’ve been dealing with them since the 1970s, but ineffectively, because they can negatively impact our economyand the way we deal with certain oil exporting countries with terrorist tendencies.  We also know they loosen up the supply and let prices drop anytime we threaten energy independence which causes auto companies and stupid americans who love big vehicles to buy them. 

NEW YORK (MarketWatch) — The Organization of Petroleum Exporting Countries has decided to cut its oil output by 2.2 million barrels a day from current output, or 4.2 million barrels a day from September levels, the Wall Street Journal reported on its Web site Wednesday.

…

OPEC faces a world where oil prices are set by factors outside of the traditional supply and demand. Currency and interest rate moves, as well as jitters tied to the global economic crisis, have pushed oil prices down precipitously of late.

Analysts at Pritchard Capital Partners noted that the lowered production target is expected to take effect on Jan. 1, with actual cuts coming mostly from Saudi Arabia, United Arab Emirates and Kuwait

 

Now is the perfect time to do this since prices are incredibly low.  I’d like you to know that I am personally goring my own ox while suggesting that.  I currently have a weekly commute that has caused my gas consumption to go from a tank a month to about 1 1/2 tanks a week.  Believe me, I’m perfectly happy with gas prices around $1.50 a gallon but I’m willing to say that it’s about time we putting an increasing Pigou tax that will cause us, once and for all, to stop our dependence on foreign fossil fuels.  This will give automobile makers a signal that they should drop the big old fuel guzzlers because it will shut off demand for them.  This will give incentive for alternative energies, because they know that gas prices will continue to go up.  This will give us incentive to actually go green and not just wait for the next downturn in energy prices to ignore the problem. 

So how about it, do you want to join the Pigou Club and really do something for our future?  Better yet, will the two members of the incoming Obama Team convince the PE that this would be a better way to raise taxes for a national health program than a windfall profits tax on Oil Companies?

 

 

 

 

 

A message from PEER

As a public employee, I found myself frequently in the position of watching higher-ups do things that were not ethical, responsible or mindful of the public welfare.  I have less problems with that now that I work for a University as a prof endowed with intellectual freedom.  Other agency employees don’t have that same protection.  I have worked for ‘other’ agencies. There was also very little I could do about it.  One of the groups I support is PEER.  This is a group called Public Employees for Environmental Responsibility.  It was formed, in part, because of the incredible suppression of scientific evidence that has occurred recently to further business interests.

I’d like to bring this latest action memo to your attention as I think you’ll agree, it’s an interesting one.

 

As word of President-elect Obama’s environmental team was being authoritatively leaked around town, one name jumped out at us – Lisa Jackson, until recently head of the New Jersey Department of Environmental Protection, was tapped to head EPA. 

Anguished DEP employees (and a few who had resigned in disgust) urged us to put the word out about Jackson, including her -

• Failure to tell parents or workers at the Kiddie Kollege day-care center for three months about mercury contamination in the former thermometer factory it was located in (kid you not);
• Efforts that set water quality standards so low that aquatic life in the state’s rivers and lakes would be poisoned – and that was according to the Bush administration, which also had to intervene to rescue New Jersey’s crippled Superfund program; and
• Suppression of science, politicized decision-making, and an embrace of secrecy (even invoking “executive privilege” to shield her meeting calendars from public view).

In short, her former staff at DEP would be the last to nominate her for promotion.  The stories from DEP workers are eerily reminiscent of what we have been hearing from dispirited EPA staff during the Bush years.

As one might imagine, our note of dissent on the Jackson pick is being drowned out by a chorus of happy talk.  We will be urging the Senate and anyone else who seriously want to evaluate Ms. Jackson’s record to talk to the parents of the Kiddie Kollege toddlers.

As one might imagine, I have a feeling that in the coming years, more than ever, PEER will be called upon to tell inconvenient truths. 

The Economic Downlook: Retro Numbers

I’ve actually been avoiding writing about the economic news these days because frankly I don’t want to harsh your  mellow this holiday season.  The Fed’s Open Market Committee is meeting the next few days and Dr. Bernanke’s study about Monetary Policy at the Zero Bound is  likely to be on the agenda.  We’re so close to zero interest rates in the credit markets, traditional monetary policy is basically off their table.  You’re going to hear words like liquidity trap (where the interest rates are so low that every one prefers to sit on cash and banks really don’t want to lend at that rate).  You’ll also hear about ‘quantitative easing’.  This is where the Fed uses it’s own balance sheet and it’s own assets to try to prop up the economy.  These are all moves tried by Japan in the 1990s during its lost decade.  We’re still debating their efficacy and the results look mixed.  The Fed can look around its tool box all that it wants but it’s doubtful to find a stash of viagra.  If you want a medical metaphor, the Fed is basically using untested methodology–like those tests of procedures they only let participants into if they’re terminal.  The Fed’s on the side lines.  We’re going to have to rely on stimulus from the folks in Congress and the incoming/outgoing adminstrations now.  (Greater Ethos help us!)

I’ve been looking over the recent numbers (yes MyIQ2xu, i’m throwing those fried chicken entrails again) and what’s really got me in a quandry is the number of times I see leading indicator numbersthat are only comparable to Hoover’s time.  In my three decades of economic study, I have NEVER had to harken back to Hoover’s time as anything more than a history lesson.  We seem to be hitting records on the downside that are puzzling even the brightest economist and believe me, I’m not among those.  However, I’ll try to give you a feel for some of the major indicators and why the global economy appears to be in for a long period of distress.

The Fed is likely to cut interest rates to 50 year lows some time in the next two days.  As I said, no one is expecting that to do much good but it will act as a signal that the Fed continues to follow serious expansionary policy to boost the economy.  It has a lot of leeway now because the recent inflation numbers are astounding.  Economists are expecting Thursday’s inflation rates to be the lowest since 1938 on the upside (1.4%) and the lowest since 1933 on the downside of the forecasts. Estimates by some economists have the U.S. economy experiencing its first negative year over year inflation since the 1950s.  This news is a mixed bag.  Basically if you’re a consumer, everything you want is about to become very cheap.  The problem is with the next set of numbers.  How many folks will be in the position to buy them?