(1) Zingales proposes:
How to restart the lending
One solution is the one I advanced last Fall. It requires passing a new piece of legislation introducing a new form of bankruptcy for banks, where derivative contracts are kept in place and the long term debt is swapped into equity. As Pietro Veronesi and I have shown in a recent article, such conversion will fully recapitalize the banking sector and bring down the level of risk of debt (as measured by the credit default swaps level) to pre-crisis level.
When I proposed it in September they told me that there was not enough time. When I re-proposed it in October they told me that there was no chance to reconvene Congress after the election. But time has passed and the Congress has been reconvened after the election, but there has been no discussion of this alternative that can save hundreds of billions of dollars to taxpayers.
If the solution is so simple why has it not be done before? First, because it is much simpler to get money from the government than to obtain it through hard work.
(2) Alesina and Zingales have called for extending unemployment subsidies and putting in place large temporary tax incentives. A number of left-of-center economists have backed the stimulus package as offered by the Democrats, in part because of the fear that tax incentives won’t actually increase spending. This seems like a straightforward debate over second-best scenarios: federal and state governments are going to waste large sums, simply by virtue of limited absorptive capacity, and any tax cuts will also involve “leakage.” Like Alice Rivlin, I think it would have been best to split the plan.
“Such a long-term investment program should not be put together hastily and lumped in with the anti-recession package. The elements of the investment program must be carefully planned and will not create many jobs right away,” said Rivlin, a fellow at the Brookings Institution. The risk, she said, is that “money will be wasted because the investment elements were not carefully crafted.”
(3) A number of conservatives have criticized home weatherization subsidies in the stimulus legislation. Whether or not these subsidies should be part of a stimulus package, I’d just like to note that the federal government should definitely spend more on home weatherization than on home heating subsidies. As Randall Parker explains,
If a government is going to subsidize heating I’d rather in subsidize insulation rather than fuel supply. Insulation is far more cost effective. It reduces pollution, reduces waste, and cuts our dependence on dwindling supplies of imported oil.
Kevin Hassett has argued along similar lines, though he advocates a more sweeping approach that would encourage passivhaus construction. Hassett also praises the Obama environmental agenda for its “impressive attention to rational economic details.”
(4) Matt Crawford’s brilliant Shop Class as Soulcraft will soon be published by Penguin. It really is one of the best books I’ve read in years. But for now you can read this post on post-industrial education from the always-provocative John Robb. I’m guessing that Crawford would disagree with at least some of Robb’s take, but my sense is that the agendas and sensibilities are broadly compatible.
(5) Twitter as a payment gateway? But why? And how? Joe Hall’s thought re: URL control seems more plausible.
(6) John Howard is a polarizing figure. In Australia, many on the left see him as a Bush-like figure — truculent, narrow-minded, and aggressively partisan, and also too willing to embrace military adventurism. On the rare occasions when Americans pay attention to Howard, they’ve seen him through the same distorted lens. And it’s true that Howard’s populist conservatism bore some resemblance to the tone of U.S. center-right politics. But the truth is that Howard was a far shrewder politician and a far more successful economic manager than Bush. Though the Rudd government will try to lay the blame for Australia’s economic downturn on Howard, the Liberal government maintained large budget surpluses, a stable macroeconomic climate, and strikingly low unemployment through most of its tenure. Howard may have overstayed his welcome, but it is silly to deny his economic acumen.
At the end of his time in office, during the toughest political fight of his life, Howard was accused of crude politicking when he launched a massive federal intervention in several Aboriginal communities in the Northern Territory, where child abuse, alcoholism, and severe economic deprivation had reached crisis proportions. Yet as the Wall Street Journal reported last month, Howard has been vindicated.
Mr. Howard sent in the army and deployed extra police. Suspending Australia’s 1975 Racial Discrimination Act, the government slapped alcohol and pornography bans on Aboriginal areas — but not on neighboring white towns — and restricted Aborigines’ ability to spend their welfare checks freely. It seized the management of Aboriginal townships, overriding the permit system and opening the doors to non-Aboriginals.
The intervention sparked accusations of racism from many Aboriginal leaders and from some officials in Australia’s Labor Party. Marion Scrymgour, currently the country’s most senior Aboriginal government official, at the time labeled the intervention “a vicious new McCarthyism.”
Ms. Scrymgour, the Northern Territory’s deputy chief minister and a member of Labor, has since endorsed many aspects of the intervention, such as welfare controls.
And the Rudd government has also embraced the policy shift.
The reason: evidence that the intervention is working, according to Jenny Macklin, Australia’s federal minister for families, housing, community services and indigenous affairs. Ms. Macklin says she believes the policies are improving Aboriginal child nutrition and cutting the use of alcohol and tobacco. She points to a recent government survey that shows the overwhelming majority of stores in the outback that are licensed to sell to Aboriginal welfare recipients are reporting higher sales of healthy foods like fresh vegetables and fruit, and of clothing, particularly for children.
Ms. Macklin says the government is now experimenting with extending similar welfare “quarantining” to Aboriginal communities outside the Northern Territory. She says there are also plans to make Aboriginal welfare payments conditional on recipients’ children’s school attendance, hoping to tackle sky-high illiteracy rates in communities where as many as half the kids routinely stay away from school.
This might represent Howard’s most lasting legacy. As for the timing of the intervention, there was no realistic way for Howard to have launched the intervention earlier — it would have constituted political suicide. It is entirely possible that Howard knew that his time was running out. He knew that this was his lost chance to do something about the wretched conditions in Australia’s indigenous communities, and he seized it.
To be sure, Howard made many missteps. His stance on immigrant detainees struck many as needlessly inhumane, though I don’t know enough to evaluate the contending claims. Chances are that Howard would have benefited from a somewhat more conciliatory style. But there was also much to recommend the man.
(7) As an avid reader of John Robb, and as a friend of the great Dan Kurtz-Phelan — one of the finest foreign policy minds in Democratic circles — I’ve been obsessed with Mexico’s struggles with narcogangs for a long time, and, as Chris Brose notes, the crisis is now garnering the attention of key policy elites. Brose wants to tamp down the hysteria.
The gangs have no political agenda; their main goal remains selling dope. They are not providing basic services to Mexico’s citizens, nor are they trying to create a parallel system of political order to rival the Mexican state and erode its legitimacy in the eyes of the people. In fact, even if most Mexicans think the gangs are winning, they by all accounts still hate them and what they are doing to the country. In that sense, Mexico’s gangs are not a true insurgency. There are signs — literally, in this sense — that the gangs are beginning to compete for the allegiances of the Mexican people and wage a strategic communications battle against Calderon. This is a troubling development. But for now, these campaigns are not focused on advancing rival forms of gang-led governance; their goal is simply to brand their cartel opponents as illegitimate in the eyes of the Mexican people.
In Colombia, what began as an ideological insurgency evolved into a racket. It is too easy to imagine the narcogangs layering a thin ideological patina over their efforts to undermine the Mexican state. We’re pouring arms and assistance into Mexico, just as we did in Colombia, and this approach will eventually yield dividends. But to help this process along, we really, really need to consider easing marijuana prohibition. The cartels depend on the stable leg of marijuana revenue to finance everything else.