Jon Taplin's Blog

Why Conservatives Can't Dance

This is one of the greatest exhibits of cluelessness in the history of the Internet.

[youtube=http://www.youtube.com/watch?v=lkeZ2P4SiY8&eurl]

Pathetic.

Banking Interregnum

The central thesis of my Interregnum meme is “the old is dying, but the new cannot be born”. This is because the revanchist forces still fight from their bunkers. Case in point, the Big Banks are fighting Obama on derivative reform.

For credit-default swaps, information about intraday trades and prices has long been controlled by a handful of large banks that handle most trades and earn bigger profits from every transaction they facilitate if prices aren’t easily accessible.

For example, credit-default swaps tied to bonds of companies such as General Electric Capital and Goldman Sachs typically have a pricing gap of 0.1 percentage point between the bid and offer price. That translates into a $40,000 margin for every $10 million in debt insured for five years. Greater price transparency could narrow that gap, lowering costs for buyers and sellers but reducing fees for banks.

Goldman Sachs and the other big trading banks have never liked transparency, because their trading and arbitrage profits have always been based on an information imbalance.

Why would they want to change this?

Postcards from the Edge

I’m not sure why I connected these two stories as indicators of our present reality, but they seem telling.

Tori and Dean

“Tori & Dean” (which begins anew on Tuesday) is itself an exercise in controversion, as Ms. Spelling’s attempts to avoid photographers with long lenses are in turn filmed by the camera crew she has invited to follow her around while she navigates life with her husband, Dean McDermott, and their children Liam and Stella Doreen. An added strangeness lies in the couple’s incessant conversation about spreading themselves too thin, when they could add so many more happy hours to their week simply by refusing to appear in a reality show about their inclination to overextend themselves.

Texting Disorder

American teenagers sent and received an average of 2,272 text messages per month in the fourth quarter of 2008, according to the Nielsen Company — almost 80 messages a day, more than double the average of a year earlier.

Michael Hausauer, a psychotherapist in Oakland, Calif., said teenagers had a “terrific interest in knowing what’s going on in the lives of their peers, coupled with a terrific anxiety about being out of the loop.”

The psychologist Mihaly Csikszentmihalyi has described the optimal state for creativity. which he calls Flow, because for the great artist, musician or scientist, when things were going well,  they are in an almost automatic, effortless, yet highly focused state of consciousness. Tori Spelling’s utter lack of “self-consciousness” (her inability to understand the irony of her complaints about lack of privacy while being filmed by her own crew 24/7) and the average teenager’s fear of being out of the loop, seemed connected to our complete lack of “flow”. We are the ADHD society, incapable of being in a “highly focused state of consciousness” and if we don’t understand what texting, twitter and Tori mean for our future, we are really in trouble.

Krugman on California

I can be pretty critical of Paul Krugman, but this morning he absolutely nails the current California Fiscal Crisis.

The seeds of California’s current crisis were planted more than 30 years ago, when voters overwhelmingly passed Proposition 13, a ballot measure that placed the state’s budget in a straitjacket. Property tax rates were capped, and homeowners were shielded from increases in their tax assessments even as the value of their homes rose.

The result was a tax system that is both inequitable and unstable. It’s inequitable because older homeowners often pay far less property tax than their younger neighbors. It’s unstable because limits on property taxation have forced California to rely more heavily than other states on income taxes, which fall steeply during recessions.

Even more important, however, Proposition 13 made it extremely hard to raise taxes, even in emergencies: no state tax rate may be increased without a two-thirds majority in both houses of the State Legislature. And this provision has interacted disastrously with state political trends.

As sad as I am that it has taken 30 years for this situation to reach crisis proportions, perhaps the next few months will be enough to force us to the Constitutional Convention needed to remedy the damage caused by Prop. 13.

Interesting

From Floyd Norris

FOR many years, unemployment in the United States was lower than in Western Europe, a fact often cited by people who argued that the flexibility inherent in the American system — it is easier to both hire and fire workers than in many European countries — produced more jobs

That is no longer the case. Unemployment in the United States has risen to European averages, and seems likely to pass them when international data for April is calculated.

“The current economic crisis,” wrote John Schmitt, Hye Jin Rho and Shawn Fremstad of the Center for Economic and Policy Research, a research organization in Washington, “has turned the case for the U.S. model almost entirely on its head.”

California Constitutional Convention

As I said a few months ago, the only way out of the current dead end of California politics is a Constitutional Convention.

Gov. Arnold Schwarzenegger returned home from a White House visit on Wednesday to find the state dangerously broke, his constituents defiant after a special election on Tuesday and calls for a constitutional convention — six months ago little more than a wonkish whisper — a cacophony.

As the notion of California as ungovernable grows stronger than ever, Mr. Schwarzenegger, a Republican, has expressed support for a convention to address such things as the state’s arcane budget requirements and its process for proliferate ballot initiatives, both of which necessitated Tuesday’s statewide vote on budget matters approved months ago by state lawmakers.

There is no reason this can’t be organized quickly. The era of the referendum system is dead.

The Sea Change

“You don’t need a weatherman to know which way the wind blows”-Bob Dylan

As the Republican Party continues to shrink (see charts above) the one clearest sign of a political sea change is the fact that business has surrendered in two great battles they have fought for years:auto emissions and climate change. Yesterday all of the major auto companies lined up behind the President in raising the CAFE standards for cars to 39 MPG. and in a sign of how desperate the Republicans are, they have decided to strike out at the energy utilities who have sided with Obama on Cap and Trade.

In a strategy memo obtained by POLITICO, Republican staffers for the Senate Committee on Environment and Public Works say Republicans should argue that Democrats are embracing “Wall Street traders,” “polluters” and “others in corporate America” who are “guilty of manipulating national climate policy to increase profits on the backs of consumers.”

As one of the Utility lobbyists stated,“The GOP business model is probably busted forever.”Of course for Republicans to continue to live in Bizarro World, where they are on the side of the little guy against corporations, they need a true leader like Michael Steele to tell them what’s happening.

“The era of apologizing for Republican mistakes of the past is now officially over. It is done. The time for trying to fix or focus on the past has ended. The era of Republican navel-gazing? Done. We have turned the corner on regret, recrimination, self-pity and self-doubt. Now is the hour to focus all of our energies on winning the future.A Republican renaissance has begun!” 

You know I like a good political fight as much as the next person, but this is pathetic.

A Deal is a Deal

The government  took warrants when it bailed out the banks. Now the banks are trying to weasel out of the deal by buying back the warrants cheap when they pay back the TARP money.

For taxpayers, a lot of money is at stake. The government has an option to buy stock in 579 banks. By some estimates, the warrants on JPMorgan alone are currently worth more than $1.1 billion. They could be worth much more if JPMorgan’s share price rose. So far, one publicly traded bank, Old National Bancorp in Indiana, has repaid the government in full by returning its bailout money and repurchasing its warrants. (Two small privately held banks have done the same.)

This is insane. A private investor, having bailed out a failing firm, would never sell back the warrants at a discount. The government should hold the warrants for the full ten years and cash them in at the point of maximum gain.

Obama at Notre Dame

I think this is pretty impressive. 

[youtube=http://www.youtube.com/watch?v=W_3bxyEUptA]

Nothing New Under the Sun

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