Archive for the ‘Uncategorized’ Category

Wisconsin: Don’t lose sight of the big picture.

Sunday, February 20th, 2011

Much of the nation has noted with intrigue the events in Madison, WI this week. Gov. Scott Walker (R) and the Republican controlled Assembly and Senate are preparing to pass a controversial “budget repair bill” that, among other things, bans collective bargaining for public employees (including teachers). The bill notably exempts fireman and police officers. Tens of thousands have decended on Madison’s Capital Square to protest the bill, primarily motivated by the collective bargaining provisions. Democratic Senators have fled the state in an attempt to prevent a quorum (effectively a state-level fillibuster, except unlike at the federal level, you have to actually do something).

All the attention to the collective bargaining provision by protestors is great. While I sometimes think public employee unions can be short-sighted in negotiations (and that on the teacher front, employing the best and brightest is advantageous to blindedly protecting seniority), the right for collective bargaining is essential to maintaining an effective and robust public work force, avoiding a run-to-the-bottom, insulating civil service from political whims, and protecting workers rights. That said, all the attention on collective bargaining runs the risk of under-emphasizing other really really bad parts of this bill.

For example, The Cap Times had a great piece this morning discussing how the medicaid reforms in the bill could be disastrous, cutting medicaid benefits to 50,000 people, in a state with a strong history on healthcare and in an era when we should be finishing up the job of providing healthcare to all. The Medicaid provisions are particularly important given that Scott Walker’s new health department secretary has repeatedly suggested that states end Medicaid.

Importantly, the bill itself doesn’t make cuts to Medicaid, but gives Scott Walker unilateral authority to do with Medicaid as he pleases. Presumably republican assembly and senate members would prefer not to be on the hook for such drastic changes, and Scott Walker appears more than willing to take the brunt.

Wisconsin is open for business. But not the poor, working class, or unhealthy.

7th Graders Care About Privacy

Thursday, November 18th, 2010

We live in a brave new world! Privacy is dead! Today’s kids are growing up without privacy! Or so we’re told… often by those with a financial interest in a world where that’s actually the case. Danah Boyd’s done a lot of work showing that, in fact, kids do care about their Privacy. Though the extent to which they care didn’t really hit me until this week (since, my life as a 28-year old Chicago attorney and part-time entrepreneur doesn’t really have me interacting with 13-year olds that often).

This week, that changed. I participated in a great program run by the Constitutional Rights Foundation of Chicago which brings Lawyers into classrooms to run through programs designed to teach kids about law and the Constitution. The lesson plan called for discussing the merits of a simple rule: “You can’t Bring electronic devices to school.” First off, the level of engagement of these kids on the subject matter was off the charts, everyone wanted to say why they thought the rule should or shouldn’t apply to given situations. The hypotheticals we ran through covered all sorts of devices: cell phones, cameras, iPods, medical devices, etc.

One surprising theme came up over and over again in support of NOT allowing electronic devices in School: Privacy. In particular, lots of kids didn’t want their peers taking pictures without their permission that would end up on Facebook. “It happens all the time, and I don’t like it!” I never believed that kids didn’t care about privacy, but I didn’t think they’d care so much as to agree that electronic devices should be banned in school. What’s particularly striking about this is that often the discussion about privacy on the internet as applied to kids revolves around a presumption that the youth of tomorrow “just don’t understand” the implications of online sharing. Where, actually, they get it. They get it a lot. They don’t need to worry about embarrassing information affecting a job interview, they’re worried about embarrassing Facebook info that might affect them the next day at school.

Of course, this gets us into other issues worthy of discussion, such as cyber-bullying. But the idea that kids don’t care or that they don’t get it is SO wrong. They might actually be getting better prepared for a world of online sharing than the generation currently in college.

pii2010 Panel on Competing on Privacy

Friday, October 22nd, 2010

In August, I participated in a Panel discussion at the Privacy, Identity, and Innovation conference in Seattle.  The panel’s focus was “Competing on Privacy”.  I discussed my concerns about Facebook’s aggregation of market power, and the implications for privacy.  This took place the day after Facebook announced “Facebook Places”, so there’s some good discussion of that too… including someone shouting “That’s a Lie” from the audience.  Video’s below.

pii2010 panel discussion: Competing on Privacy from Marc Licciardi on Vimeo.

Financial Reform: As much of a “Bailout” as a Root Canal

Tuesday, April 27th, 2010

The Republican strategy to block everything Democrats want to do in Congress has taken a hit with the pending financial reform bill.  It’s hard to gather populist sentiment on you’re side when you’re defending the right of giant Wall St. banks to develop completely incomprehensible  risk-hiding investment products that make fat-cats billions while driving the U.S. economy into ruin.  But that doesn’t mean they haven’t tried.

The most recent attempt to bring populist anger against the financial reform bill has been to characterize it as a “Bailout” for the financial industry.  Bailout is a hot word in polito-speak these days, and it’s a powerful one.  I mean, we all hate bailouts right?  Even Obama derided bailouts during the State of The Union.  Even FedEx has tried to disingenuously fight against legislation that would strip away a profitable loophole for them as a “bailout” for UPS.  Anti-Bailout fever is taking America by storm!  So a Democrat-sponsored bailout for Wall St. seems like a pretty bad idea, so why do they want to do that!?!?… oh wait… they don’t

The strongest (though still weak) argument one can make in characterizing the financial reform bill as a “bailout” involves the FDIC-like $50 Billion fund that would help cover the costs of winding down and breaking up a failing Wall St. bank.  Just like the current FDIC fund is used to help cover the costs of winding down failing banks and insuring deposits.  A couple things to note:  A $50 Billion fund might be enough to bail out a Wall St. Banker but it can’t bail out any of the leading Wall St. banks.  So to argue that the money is really going to be used to bail-out all of Morgan Stanley or Goldman Sachs is being pretty disingenuous.  Furthermore, the fund isn’t going to be created from general tax-payer dollars.  Much like the FDIC it will be developed through levies on Wall St. financial institutions themselves.  That’s right, we’re not paying for it, Wall St. is.

The other characterizations of the bill as something that could lead to future bailouts involve the lack of any express provision prohibiting future bailouts.  This is a weird argument to make… taken to it’s logical conclusion ANY bill EVER passed could lead to future bailouts, since it doesn’t explicitly bar bailouts.  Oh no! That resolution honoring the Girl Scouts?  It’s actually a bailout for big cookie conglomerates!  Ridiculous right?  It’s also silly since Congress is the actor that controls the purse-strings.  No branch of the government can just go around granting bailouts willy-nilly. Congress passed the bailouts of the past few years, and Congress can over-turn any language that attempts to limit it’s ability to make future bailouts.  (Thats why we rarely see futile language in bills trying to bind future actions of Congress).  But if pointless language will bring compromise on this bill, then so be it.

A true “bailout bill” would be to do NOTHING in the context of Financial Reform.  This would allow the sort of  behind-the-scene risk-hiding derivatives trading that propagated the financial crisis to flourish.  Forcing the government into having to choose between bailouts and breadlines once again in the future.

Who Should Obama Nominate?

Thursday, April 15th, 2010

When it comes nominating someone for the Supreme Court, there are two possible routes for President Obama: He can appoint someone unabashedly liberal, or he can go with someone a little more reserved and possibly moderate.  So what should he do?

Some have pointed out the political implications of the decision, and how appointing someone “too liberal” could alienate voters in the midterm election, and create a rallying cry for Republicans and Tea-Partiers.  But let’s be honest, that rallying cry is going to exist no matter who gets appointed.  We’re talking about a political atmosphere where a largely free-market driven healthcare reform package, supported by numerous economists and the healthcare industry, gets attacked as a socialist government takeover.  To political opponents, whoever gets nominated will be “too liberal”, and Obama’s shortlist is well-experienced and respected enough to make it through Senate Confirmation.

Furthermore, weighing the implications of a single election cycle in determining a Supreme Court nominee is silly.  The Supreme Court has tremendous power relative to any single session of Congress, and it has consistently been the source of incredible changes in our society.  It is the last line of defense to protect minority rights from the tyranny of the majority.  This is the body that invalidated segregation, gave defendants the right to legal counsel, and women the right to choose.  It’s also the reason we have any sort of monetary policy or regulation of commerce.

All that said, Obama’s got a decent list of well qualified folks who could go toe-to-toe with the current conservative-leaning court.  I’m personally a fan of Diane Wood, she has a few “outsider” characteristics (educated at the non-Ivy University of Texas, lives in Chicago unlike most of the east-coasters on the court) and she’s a brilliant jurist who has experience building consensus with those she disagrees with on the 7th Circuit, including two of the greatest conservative/libertarian judges of our time: Frank Easterbrook and Richard Posner.  By all accounts Judge Wood is respected by her cohorts and would do a fantastic job on the court.

Obama could go with someone younger to maximize the time his nominee sits on the court (as Bush did with Roberts), but I’m a fan of quality over quantity.

An interesting point of irony, it’s possible that whoever Obama nominates, given Justice Steven’s “liberal” record (In the 70’s he was considered a moderate conservative… ponder that for a moment), he might continue moving the court further to the right.

Greg Mankiw Cries Wolf Again

Monday, April 12th, 2010

Greg Mankiw is one of my favorite economists because he helps confirm one of my favorite biases.

Most of us who went to MIT tend to be a bit dismissive of the quality of instruction at “that school up the road” where Mankiw teaches (and where it’s easier than it should be to get an A). The disingenuous nature of the links he posts on his blog repeatedly confirm my bias that spending $50k a year on an MIT education was a much better value than dropping a few more thousand on a diploma from Harvard. I don’t know whether he doesn’t bother to read the papers behind the links he posts, or whether he intends to deceive his readers, cackling maniacally as he types. Either way, I get to feel smug every couple weeks.

This weekend’s gem was a link to a Washington Post article listing five myths about your taxes. Sandwiched in between a set of kind of insightful points came “myth” number three: “Higher taxes could eliminate the federal deficit.”

The ”myth” claims that the federal government would need to raise tax rates by almost 40% to reduce the deficit to 3% of our GDP in 2015. 40%!!! That’s HUGE!

It sounds terrifying, like the federal government has exploded in size and become completely unmanageable since Obama took office. Unlike the Clinton years in which the government actually ran a surplus, and the relatively lean Bush years, where the deficit hovered around 3% of GDP, the authors of the article imply that something fundamental has changed in the past year.

It doesn’t quite pass the sniff test. Laying aside the hyperbole in the title of the “myth” – (clearly, if the government decided to confiscate everything, the deficit would be eliminated), it seems strange that the mere fact that we had the audacity to elect a black president during a recession has made it so that there’s no way, ever, to get the deficit under control again without gutting the federal government.

And as usual, when Greg links to an article with a “striking” conclusion (as he puts it), a deeper reading of the paper behind it shows that the “myth” section, as written, is either an accidental misrepresentation of the truth or outright dishonesty.

The relevant data appears in a table on page 13 of the report. The context of the estimates is mentioned in the text of the paper, but nowhere to be found anywhere in the article Greg pointed to.

It turns out that needing to raise income taxes by almost 40% in order to reduce the deficit to 3% of GDP is actually not based on US tax law but, um, based on a big giant fantasy tax code.

The authors of the study present data for what tax law changes would do under a variety of different assumption sets. The 40% figure is from the “administration baseline deficit” – the numbers that the Obama administration published explicitly to show how terrible the fiscal conditions they inherited from George W. Bush’s administration were. These aren’t numbers that the administration expects to have happen, they’re numbers that, let me repeat, they released JUST to show just how god-awfully the Bush administration ran things (with Greg Mankiw as one of their economic advisors).

This set of numbers assumes that a Democratic President with a Democratic Congress will, all of a sudden, decide to make all of the Bush tax cuts, which they OPPOSED, permanent. That’s never going to happen.

The authors of the paper use this case to provide data for what would happen if there’s too much political fallout from letting the tax cuts expire during a recession. If, on the other hand, the tax cuts (40% of which went to the highest-earning 1% of households, tax cuts that Greg Mankiw helped push) expire as planned, and the rest of the current tax law is maintained as it is currently written, guess what the deficit will be as a percentage of GDP in 2015.

3.1% of GDP. Without doing a single thing to tax law, let alone passing a 40% tax increase. Just by leaving tax law exactly like it is, the budget deficit will be only 0.1% more of GDP than the article’s target in 2015. To reach that target, the federal government would need to collect $43 billion extra in revenue.

However, the authors of the study used information from before when the new health-care bill was signed into law. Fortunately, the new health-care bill (which Greg opposed) takes care of $16 billion of the $43 billion shortfall. So we’re left with $27 billion left to raise. Guess what the real tax increase needed to get the deficit to GDP from current tax law is?

Not 40%. Not 4%. Not even 0.4%.

0.2%. Whup-de-friggin do.

Of course, while I’m being more up-front at this point than the authors of the article, that’s not the whole story either. The Obama administration may decide to extend some of the Bush tax cuts permanently, and the threshold for the alternative minimum tax will almost surely be raised before 2015. So there may need to be more changes in the distribution of the tax code.

But the idea that Congress needs to pass a 40% tax increase in order to keep spending at the same levels is just absurd.

One more note: why target a deficit of 3% of GDP (as the Obama administration is) instead of completely eliminating the federal deficit? The answer is that the size of the national debt in a vacuum is just a number. What matters for interest rates and for the long term outlook is national debt as a percentage of GDP. And when annual deficits are approximately 3% of GDP, economic growth means that the national debt won’t be increasing as a percentage of GDP – basically, we could run at an average of 3% of GDP deficit forever, with no harm done.

Sorry for the lack of profanity this time around ;)