The Cleanest Dirty Shirt

On the Tuesday after S+P downgraded US debt from AAA to AA+, the dominoes continue to fall. The national spectacle of the debt crisis debate is rippling in a way which will make it hard for anyone to claim that the embarrassing debt ceiling show was not a big deal. Maybe you can argue it shouldn't it have been, But guess what, it turns out that perception DOES matter. Oopsie! And the perception is that our nation simply doesn't have its shit together.

This is about our government's large and undiminishing gap between revenues and expenditures. As it relates to both our credit and our fiscal sustainability, no one outside the US really cares what pastiche of polices are used to close the gap. They just care that we close it. That means both liberal and conservative sacred cows (social security, medicare, no new taxes) need to go up on the block.  

The most noticeable trend in the immediate aftermath of the downgrade has been an increased flight to quality and security: to gold, and into the currencies (and bonds, probably, if there are any) of countries with sound balance sheets. For the time being, american treasury notes are still among the cleanest dirty shirts in the opinions of investors. But this downgrade has clearly made global investors substantially more committed to shopping for clean shirts. This is the end of the beginning of the realization that America needs to live within its means. 

Countries that produce more than they consume won't keep propping us up. We're clearly operating on borrowed time, no pun intended. I am deeply pessimistic that our current congress can come up with any solutions that amount to more than inadequate half measures coupled with WIMPY promises that they'll gladly pay us tuesday for a hamburger today.

What we all need to do as Americans is to let BOTH PARTIES know that they are sadly mistaken if they think we're going to just keep ping-ponging between their nitwit paddles. Republicans and democrats have never been more in the way than they are today.

What Does "A Failure of Leadership" Mean in August 2011?

In the aftermath of President Obama's capitulation to a debt ceiling deal that did not include tax hikes, he is being widely criticized for a failure of leadership. That makes me wonder what effective presidential leadership is supposed to look like when a divided congress disagrees fundamentally about the right approach on, well everything.

What does a solid independent middle bloc of Americans support when it comes to bringing our deficit under control?

• Reforming SS and medicare to include things like means testing? Yup.
• Closing corporate tax loopholes while lowering the rates, to broaden the tax base? Yup.
• Making serious attempts to cut discretionary spending broadly by level funding at federal agencies across the board?  Yup.
• Saving money on the big military budget by winding down our commitments in Afghanistan and Iraq while also making cuts and consolidations in all service branches? Yup?
• Ending the tax break for top bracket income earning and restoring the previous top bracket rate? Yup.

OK. Add up all those positions. Who has supported most of them. Congressional Republicans? Congressional Democrats? Or Obama? Noiw, if you believe that OBama has failed yo lead, describe to me the Oval Office Critter that could, in this climate, forge a legitmate consensus? because I can't envision it.

This is not a crisis of leadership. This is a crisis of inflexible, cowardly, politically self-interested followers. There are good reasons why there's no such thing as a successful cat herder. Obama tried anyway, because he is in the very small group of national politicians who BOTH has the entire nation's interests at heart and understands that politics is the art of the possible. Until we have a congress that gets the latter, the DC farce of 2011 will endure.

This Institution Needs An Enema

Standard and Poor's has just downgraded US credit from AAA to AA+. For the first time ever.. Let that sink in. For the first time ever. Ever.

We deserve it. Let's not waste time pretending we don't. After the sad spectacle of the last 6 weeks or so, the inadequacy of the outcome, plus our absymal deficit and debt, we deserve it. Let's skip the denial part. S + P isn't the only ratings agency that has taken this action, so shooting the messenger just doesn't work.

The United States credit rating has been downgraded because in the span of 11 years we have gone from a balanced budget to spending about $1.72 for every dollar we collect. The 2010 budget estimate figures show that we collected about 2.2 trillion dollars, and we spent 3.7. That's the problem, and the cause of this downgrade. The rest is static.

The soundbites in the immediate aftermath of the downgrade announcement should make it crystal clear to all Americans that the folks in congress are uncommitted to working together to address the issue. Or unable. The only thing either side seems eager to do is blame the other side for being unable to do the right thing. The debt council negotiations are certain to be a fiasco. I wish there was a way to bet money on it.

I'm convinced that the best way past this is for Americans to join together and sign our own pledges for the election of 2012. We should all promise to vote for every single non-incumbent congressional candidate (senate or house) that seems reasonable and promises to work outside the confines of partisan ideology to close the gap between government spending and government revenue by every means necessary.

Nothing will straighten up our alleged leaders better than an extremely loud shot across their bow. We need 60-70-80% turnover in the house and the ouster of most senators running for re-election. This institution needs an enema.

This Bears Repeating

Tyler Cowen over at Marginal Revolution cites a tidbit that is worth repeating. Over and over. Folks should IMHO be pounded over the head with this until the lightbulb goes on:

…what separated those with modest but significant predictive ability from the utterly hopeless was their style of thinking. Experts who had one big idea they were certain would reveal what was to come were handily beaten by those who used diverse information and analytical models, were comfortable with complexity and uncertainty and kept their confidence in check.

Cowen cites that from Tetlock and Gardner's Why Most Predictions Are So Bad, at Forbes. This shouldn't be a revelation to many folks, but apparently it is. It's a multivariate world, whether you we like it or not. Base your predictions on one variable, and you'll usually get it wrong.

Use Rail to Solve Problems That Trains Are Good Solutions For

A modest proposal to guide new rail projects:

I am a fan of train projects when those projects start with a problem that might be solved by a train, and then work forward to the train. The problem is that in America, those routes are difficult to build, because they're places where there's already a lot of stuff. Rights of way are expensive and time-consuming to obtain, and the project is bound to be blocked by well-organized NIMBYs.

And so the idea seems to have become to build trains where it's possible to build trains, and hope that development follows.  But trains succeed where they are better than some alternative form of transportation.  In the case of Tampa to Orlando, they're worse than a car, and there isn't even any air travel to replace; in the case of Fresno-to-Bakersfield, it may be better than a car for a few passengers, but there are too few passengers to make the trains better than cars for the environment.

Meanwhile, projects that do make economic sense, like an actual high-speed Acela, or Southeastern High-Speed Rail Corridor, are going nowhere.  They might have a better chance of success if rail advocates hadn't abandoned them in favor of building whizzy demonstration projects with dubious economic appeal. 

Sound thoughts via Megan McArdle here, for sure. The Acela, which goes right behind my house, could travel the 222 miles from Boston to NY with a handful of stops in, what, 90 minutes at 150 mph? Or in 2 hours at 120 mph. So, make that happen? Oh, no! Keep it slow, take 4 hours or more, and charge almost as much as a plane ticket. Spend money, accomplish almost nothing.

See, this gets right at Obama's alleged goal of investing in ideas that will really make us better and keep us ahead. Let's get rid of "if we build it they will come" and replace it with"if we really need it we should build it." File this under not brain surgery.

So, Do We Do Acid Tests Or Not?

Does evidence matter? If something that seems like a great idea has been shown not to really pan out, are we capable of moving on and trying something else instead. Or is it the case that once an imagined virtue has been embraced by the heart, it must forever endure? Are we impervious to evidence?

Head Start -- the romance of a government program that would provide care, nutrition, education, and skills to impoverished preschoolers in order to erase, to the degree possible, the handicaps poverty imposes. That was the idea in 1965, when Head Start was founded. Lyndon Johnson declared, upon signing the enabling bill that "Today, we reach out to five and half million children held behind their more fortunate schoolmates by the dragging anchor of poverty." Head Start, he promised, would be their "passport" out.

By 1987, even the program's founder, Yale psychologist Edward F. Zigler, declined to claim educational benefits for the program. But as the Thernstroms concluded, "Everyone could agree that poverty was hard on blameless children, so any federal effort purporting to help them was difficult to attack without seeming mean-spirited."....

A just-released study by the Department of Health and Human Services delivers incredibly harsh news about Head Start. A large, nationwide survey of 4,600 preschoolers who were randomly assigned to either the Head Start (experimental group) or no program (control group) were studied on 114 different measures ranging from academic skills to social-emotional development, to health status. The study found no statistically relevant effects from the Head Start program by the end of first grade.

So, what's the deal? What say you? How much evidence is enough for us to be willing to conclude that something that seemed like a no-brainer just isn't helping? Isn't it true that if one has occasion to cite studies in support of their views, then one must be willing to adjust their views when a host of studies indicates something contrary to what you'd hoped?

And what's the best case that can now reasonably be claimed as the virtue of Head Start?

Middle East Revolutions and the Bush Doctrine

The count on middle east Revolutions stands at 2.9 by my count. Tunisia. Egypt. Libya set to topple in days, if not hours. And in addition to the despots already given the hook, it looks like there's bullpen action in a few other spots already.

So obviously revolution and reform in the Middle East is a huge and growing story right now. It occurs to me that few if any folks seem eager to talk about this in the context of the Bush doctrine. You know, where we'd set up a starter democracy or two, hold some open houses, see if anyone else wanted to buy in. Marketing via twitter, facebook, skype, and so on.

From the beginning, I viewed the Bush Doctrine first and foremost as extremely risky. Too risky for my tastes, in fact. Bush decided to gamble big and roll the dice. And at this point in time, I would say that the dice are still a-tumblin'.

Maybe that's why neither liberals nor conservatives seem eager to discuss the connection. Generally, partisans prefer to know the outcome first, and then opine comfortably in sanctimonious hindsight. That's precisely why NOW is such a great time to talk about whether there's a real substantive connection, and what its extent is. C'mon, say whether you think it makes sense to connect things before you know whether you're handing out credit or assigning blame. Now THAT would be revolutionary.