Abigail's Magic Garden

Robert Shiller attacked at NRO

Brad DeLong explains why Donald Luskin's NRO article attacking Robert Shiller is unfounded.

I love Robert Shiller because, unlike most pundits, he's a realist, and he has data to back up his realistic assumptions. But because most people are unrelenting optimists (see my previous post about optimism), a realist appears to be a pessimist.

People would rather believe that the stock market will forever have unrealisticly high returns, creating free money for America's retirees if only we let the Republicans change the law so that people automatically have their money invested in the stock market.

Only tangentially related to the Social Security issue, Robert Shiller has also documented how there is currently a bubble in real-estate prices, a fact which will have painful repurcussions for the economy when the bubble bursts.

Republicans, Schiavo, and states' rights

The Republicans are the party that say they favor states' rights.

Well the Schiavo incident reveals that Republican support for states' rights is a fraud. Interfering with the right of Florida's courts to resolve the issue, Republicans in Congress passed a special law allowing Schiavo's parents to bring a lawsuit in fedearl court.

Ronald Reagan often quoted Thomas Jefferson who said "the government governs best that governs least." Well here we see the Republicans ignoring the words of Reagan and giving us some extra government when the state of Florida is perfectly capable of dealing with this issue itself.

See this editorial at USA Today.

Evolution and the party of idiots

A post by Yuval Rubenstein at the Left Coaster recommends that the Democratic Party seek the evolutionary middle:

By fully embracing the theory of evolution, Democrats risk alienating millions of voters in our nation's heartland who would otherwise be attracted to our party's agenda. Therefore, instead of turning their backs on these Red State evolution skeptics, we strongly encourage Democrats to embrace the "evolutionary middle."

Of course, Brad Delong and Pharyngula say this post is a parody, but it doesn't seem like much of a parody to me.

One needs to understand that a sizable percentage of the voting public are stupid people who believe that God created the world and created man just as it says in the Bible, and therefore they know that evolution is not only wrong, but is a dangerous creation of Satan. How can one argue against the insanity of religion?

Even people who claim to be secular have religious-like beliefs in nonsense. "Knowledge" based on not actually knowing anything is always dangerous, but that's the topic of a future blog post.

I know that the people in the top 1% who control our political process are laughing at how they have convinced poor religious folks to vote against their own economic interests because they believe that Republicans give them the hope that evolution might be banned from the schools. (See my previous post, Democrats and the red state voters.)

But this is what makes the Republicans the party of idiots who support teaching nonsense in school in favor of science, and hypocrites because I'm sure a lot of the anti-evolution Republicans are too smart to actually believe the Biblical account, they just pretend to believe in it in order to win elections. At least the Democrats have integrity.

Let's abolish tax incentives for savings

Sorry I haven't blogged in a few days. But I renew my blogging with a link to a NY Times article about the low U.S. savings rate:

Personal savings have declined fairly steadily for more than two decades, even as tax incentives for savings have proliferated. According to a recent analysis by Elizabeth Bell, Adam Carasso and C. Eugene Steuerle at the Urban Institute, the federal government now spends more on tax breaks for retirement savings than Americans actually save.

Tax breaks for retirement programs cost $112 billion in 2004, according to the Office of Management and Budget. Personal savings - for any purpose - totaled only $100.8 billion, according to estimates by the Federal Reserve.

I do think it's a problem that Americans don't save enough. It's being in debt that makes most Americans slaves to their employers. But obviously the tax incentives to encourage savings aren't helping. All they are doing is giving tax breaks to affluent Americans who don't need tax breaks. They don't help lower income people who need the most help.

The article notes how savings have been continually declining even though tax incentives increase. I think we should acknowledge that these tax incentives have been a failure, and we should abolish all the tax incentives and the 401k programs and the IRAs and just let people save or not save as they wish. This would save the government money by eliminating the hundreds of billions of dollars of tax breaks (we all know how big the budget deficit is), and this would also make our economy more efficient by removing the administrative costs associated with these programs.

The unemployed with college degrees

Phil, in a comment to my previous post, pointed out this article in the LA Times about the unemployed with college degrees.

A college degree by itself is relatively worthless in the job market, as evidenced by the extremely low starting salary paid to a college graduate without any work experience.

The behavior of employers show that experience is what they are looking for. So when an older experienced worker with a college degree loses his job because of outsourcing, he’s pretty much screwed if the specific type of experience he has is no longer in demand. The mere fact that he has a college degree means nothing, unless he wants to start at the low entry level salary of a new college graduate, and even then, employers wouldn’t touch him because it’s considered bad to hire someone who is accustomed to a much higher salary—such an employee will eventually become resentful that his salary is so much lower than it used to be.

College keeps poor people poor

Wait, isn't that all backwards? Doesn't college allow poor people to join the ranks of the upper middle class?

Well maybe that's the way it used to work once upon a time, but not today. Today, the college graduate is burdened with student loans, starting out life already in debt. And about a decade ago, Congress passed a law prohibiting student loans from being discharged in bankruptcy.

Many people graduate college unable to find jobs, and if they do find one, the salary is probably pretty low, hardly enough to justify the crushing debt of student loans. A college degree isn't needed for the majority of jobs that college graduates get placed in. Two generations ago, those same types of jobs were offered to people without college degrees.

But rich people go to elite colleges, and their parents pay for their education so they graduate debt free and obtain $120,000/year jobs like Chelsea Clinton.

Yes, our college education system is set up to help the rich stay rich and the poor stay poor. We need to stop deluding ourselves into believing that college opens up opportunities for poor people. Apprenticeships, where people learn valuable skills and get paid at the same time is what we need.

Democrats cave in

The bankruptcy reform bill has passed all of its procedural hurdles in the Senate, and there’s little doubt that the Republican majority will pass it. AP.

In a post at The American Street entitled betrayed, eRobin says she feels betrayed by the Democrats who didn't try very hard to stop it.

I agree with her take. The Democrats will filibuster some judical nominee, as if the average American really cares who get's appointed to a lower federal court. And maybe Democrats will make a big stink about Bush's new appointment to the U.N. But none of this stuff matters as much as the bankruptcy bill. A family screwed over by usurious credit card comapnies doesn't care if Bush's U.N. ambassador is a "tough guy."

No wonder why the Democrats keep losing elections.

How weddings keep the poor people poor

Catherine at unrequited narcissism has figured out what weddings are really about:

did you know weddings are a racket? really, they are. i hadn't really figured this out earlier because i haven't been to a lot of weddings in my 25 years, but after talking with some friends last night, it's totally obvious. weddings are like...a republican institution or something. they're all about benefiting the rich and, um, helping out corporations like, um, pottery barn and williams-sonoma, and giving ridiculous material possessions only to straight folks

Our society has a lot of scams designed to make sure the poor stay poor. The only way to really become wealthy in this country is to accumulate capital, but the big corporations, run for the benefit of the top one percent, conspire to ensure that regular people don't accumulate any capital.

And probably nothing is a bigger waste of material resources than a wedding. Guests spend money to buy/rent clothing that will only be worn at that one event, they spend money traveling, and spend money on useless wedding gifts purchased from big retail chains. And on top of that there's the huge amounts of money spent by the bride, the groom, and their families. Weddings prevent the poor from accumulating capital and becoming rich.

If a man ever asks to marry me, I would prefer he give me a Cubic Zirconia engagement ring and a brokerage account with Ameritrade funded with the money saved, rather than an overpriced diamond that will just further enrich the super-wealthy principals of the DeBeers Diamond Cartel.

Competition in the credit card industry

Phil asks:

Could you further explain how the change in change in bankruptcy laws would only result in a "temporary profit spike for credit card issuers?"

Sure. The credit card industry features a large number of competitors with little product differentiation (every Visa card does the same thing). Barriers to entry are low—as far as I understand it, any bank can issue a Visa card, and there are thousands of banks in the United States. The result is intense competition between firms and low profits.

I suspect that credit card issuers lose quite a bit of money for every new cardholder they obtain. This is the cost of marketing in a highly competitive market. They then hope to make the money back when the cardholder uses the credit card as a loan and pays interest on his balance. They also hope he will make late payments so he can be socked with the big late payment fees (as high as $39).

So you see, the main reason why credit card issuers aren’t making as much money as they would like is not because of bankruptcy laws, but because there is so much competition. After bankcrupty reform, profits will increase if the card issuers maintain their same business practices. But they won’t, because with each new account now being more profitable than before, more money will be spent trying to obtain new cardholders, driving down profits to where they are now.

Blue stater visits a red state

Phoebe has an interesting series of posts about what it’s like for a blue state woman to visit a red state. (Post 1, Post 2, Post 3) Julie Saltman and Kevin Drum add their opinions.

The difference between blue states and red states is certainly a topic worth writing about, and I think Kevin Drum brushes it off too quickly. And he brings up David Brooks, who isn’t such a bad guy as far as evil conservatives go, except of course for when he writes lovingly about the upper middle class, whom he affectionately calls bobos.

I drove through some red states once. You have to learn to eat greasy food, there's not a salad to be found anywhere.

UPDATE

The following comment from a book review of Tom Wolfe's I Am Charlotte Simmons found at the right-wing NRO is interesting in light of the current conversation:

Modern U.S. society is addled with class snobbery. Poor and rural Americans are coarse-looking, ill-dressed, speak in dialect, and have lousy dietary habits. Rich suburban and high-urban Americans would much rather have nothing to do with them. When confrontations do occur, the rustics are insecure but defensive, the rich patronizing but impatient, with a frisson of guilt.