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The New Yorker, July 2, 2012.

Plutocracy: J. P. Morgan Edition

Q: What does J. P. Morgan's campaign contributions to members of the Senate Banking Committee buy?

A: Superobsequious, epic-scale ass kissing of Jamie Dimon, the Morgan CEO, at a hearing that was supposed to investigate why the bank royally screwed up its derivatives bets earlier this year.

In this excerpt from yesterday's "The Daily Show," Senator Johanns (R, Nebraska) says to Dimon, in an appropriately awe-struck voice, "You are ... HUGE!"

And in this excerpt we see why its great being a Republican Senator.

The U.S. Senate is sometimes described as the "world's greatest deliberative body" -- not least by itself. But in a plutocracy, it was inevitable that, sooner or later, comedians would call its members yankers to get easy knee-slapping guffaws from the entire country.

Plutocracy: Sheldon Adelson, Again

Q: How tacky is this unending spectacle of America's plutocrats being fellated by her presidential candidates?

A: So tacky that the cast of Jersey Shore has just endorsed public financing of U.S. elections. (rim shot)

Look at this list of the top donors to SuperPACs: there's not one beneficiary that's a Democrat! But, not to worry, this might be a temporary phenomenon. Over time the Democrats will get better at the art of fellating the rich and some rough parity in campaign funding will eventually be established, I think.

The top donor in the list is Sheldon Adelson, the casino magnate. I have blogged about Mr. Adelson before. Mr. Adelson is interesting because his case makes clear that America's plutocrats aren't exclusively focused on pocketbook compulsions --- sometimes they go with their hearts!

Adelson had backed Newt Gingrich, to the tune of $21 million, against Mitt Romney in the Republican primaries. Take a good look at the half-hour anti-Romney film produced with Adelson's cash, "When Mitt Romney Came to Town". You'd think the film was made by Bolsheviks! (See also yesterday's episode of The Daily Show, 5:54.) It is a three-hanky tear jerker about the devastation wrought by Bain Capital, the private equity firm, under Mitt Romney.

So, is Adelson a bleeding-heart liberal? Not really. After all, he was supporting Newt Gingrich, who was, if anything, further to the right of Romney. Moreover, with the primaries over, Adelson has just written a check for $10 million to the same Mitt Romney he had savaged earlier for being a heartless capitalist.

So, what's going on here? What was "When Mitt Romney Came to Town" all about?

About nothing, really. The Bolshie rhetoric was just campaign strategy. As Wyatt Andrews' report suggests, Adelson's gifts, first to Gingrich and now to Romney, were all about his understanding of which candidate was good for Israel. In the primaries, he supported Gingrich because he liked Gingrich's views on Israel and on Palestinians; the anti-Bain Capital fulminations were just a smokescreen. Now that the primaries are over, Adelson is supporting Romney over Obama, not because he thinks Romney will be better than Obama for the poor people he cares so much about, but because he thinks Romney would be better for Israel. According to an article in today's Wall Street Journal, "Mr. Adelson, a leading member in the Republican Jewish Coalition, has publicly called Mr. Obama's support of Israel too weak."

Mystery solved!

The sad thing is that, while Adelson can throw cash at his preferred candidate, the campaign ads he pays for can't say out loud why he prefers that candidate. His proxies are reduced to making up lie after lie. First his money said that Romney was a heartless capitalist, and now his money will say Obama is a vicious socialist. The real reason behind Adelson's attacks will have to remain unsaid. Adelson is doing what he is doing out of love. But it is a love that can't speak its name.

Update, June 16, 2012: Sheldon Adelson has popped up on Senator John McCain's radar. Also, see this video.

Update, June 24, 2012: Whoa, an editorial in today's The New York Times says basically what I said in my post!

We're All Keynesians, Even Mitt Romney!

Check out this interview of Mitt Romney by Mark Halperin of Time.

Halperin asks: You have a plan, as you said, over a number of years, to reduce spending dramatically. Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office? Why not do it more quickly?

Romney replies: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression. So I’m not going to do that, of course.

How very sensible! How very Keynesian! But, here's the thing, Gov. Romney: If you agree that spending cuts will throw an economy into recession, would you not also agree that spending increases will pull an economy out of recession? You do? Then why do you not loudly oppose congressional Republicans who have stymied each and every Obama stimulus proposal? And why do you believe what you say you believe about the macroeconomic effect of government spending if you believe -- as you have been saying -- that Obama's stimulus was a failure?

It is becoming increasingly difficult to believe anything Romney says. When he's talking to Tea Party lunatics, he's all Mr. Austerity, and when there is a need to sound halfway sane -- as when talking to a Time magazine reporter -- he morphs into a lucid Keynesian! During the interview Romney repeatedly brags about his 25 years in business. It is now becoming clear that the only thing he learned from his years in business is how to make a sales pitch: let's just tell them what they want to hear!

And no matter how Keynesian Mitt Romney sounds in the Time interview, don't expect any let up in GOP propaganda that Obama's stimulus, tiny as it was relative to the size of the American economy, was a bust. Here's E. J. Dionne in his recent Washington Post column:

Yet the drumbeat of propaganda against government has made it impossible for the plain truth about the stimulus to break through. It was thus salutary that Douglas Elmendorf, the widely respected director of the Congressional Budget Office, told a congressional hearing last week that 80 percent of economic experts surveyed by the University of Chicago’s Booth School of Business agreed that the stimulus got the unemployment rate lower at the end of 2010 than it would have been otherwise. Only 4 percent disagreed. The stimulus, CBO concluded, added as many as 3.3 million jobs during the second quarter of 2010, and it may have kept us from lapsing back into recession.

So when conservatives say, as they regularly do, that “government doesn’t create jobs,” the riposte should be quick and emphatic: “Yes it has, and yes, it does!”

Indeed, our unemployment rate is higher today than it should be because conservatives blocked additional federal spending to prevent layoffs by state and local governments — and because progressives, including Obama, took too long to propose more federal help.

A Food Stamps System for India

Vikas Bajaj has an excellent report, on India's public distribution system (PDS) for staple foods, in today's New York Times (As Grain Piles Up, India’s Poor Still Go Hungry). It's a stupid and criminally wasteful system that defies reform even though most economics undergraduates would know how to fix it.

As the article makes clear, the national government buys foodgrains from farmers -- at prices high enough to keep the farmers' lobby happy -- and stores the food in warehouses. Each state government collects its share -- which is based on the number of poor people in the state -- and distributes the food at subsidized prices through what are called "ration shops". A great deal of the food rots or is eaten by vermin in the government's warehouses. Many poor people do not get acccess to the subsidized food because of administrative inefficiencies.

In Bajaj's article, Ashok Gulati, a highly-regarded agricultural economist, identifies the obvious solution to the system's problems: just adopt an American-style food stamps system. Give cash to the poor and let them buy food in the open market. This would directly meet the goal of helping the poor. Moreover, the increased purchases of food by the poor would raise food prices, thereby meeting the government's other goal of helping farmers get a good price for their crops. (Of course, farmers could be given direct subsidies too, if necessary.) In this system a lot of the waste that comes with the government's lackadaisical approach to food storage would come to an end.

It's all ridiculously simple. And it is not just a theory. Many countries -- rich and poor -- have effectively used the food stamps solution. And yet, how can one explain the fact that "most officials [including K.V. Thomas, the food minister!] say they are worried that if India switched to food stamps, men would trade them for liquor or tobacco, depriving their families of enough to eat"?

My hunch is that it is futile to argue supply-and-demand with a bureaucrat; there is no way to convince him/her that a big and sprawling government fiefdom needs to be dismantled and replaced by the market mechanism. This is basically the Upton Sinclair syndrome: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

But to take the specific argument about liquor and tobacco, men could just as well grab the foodgrains handed out by the government under the current PDS, sell it for cash, and then buy liquor or tobacco with the cash. Moreover, it is a bit disappointing that Bajaj does not go into the factual basis, if any, of this offensive and misandrist generalization, especially given that important public policy is being justified on the assumption that it is true. Finally, the question is not whether the food stamps solution is perfect. The question is whether it is superior to the current system.

Trailer for Tarantino's "Django Unchained"

When I first found out that Quentin Tarantino was making a revenge film with slaveowners in the American Deep South as his villains, my reaction oscillated between relief ("Finally! Yesss!") and indignation ("What took you so long? What took Hollywood so long to see those homegrown plantation creeps as worthy villains?"). I had long felt that there needed to be a temporary moratorium on Nazis, Russians, etc., as Hollywood movie villains and that Hollywood's attention needed to turn to homegrown baddies. I had felt that there was a need for some effective, pulpy, trashy movies that brought down cathartic fictional vengeance on slaveowners and, even more urgently, on those who were responsible for the genocide of the Native Americans of North America. I had half hoped that some German or French filmmaker would deliver even if Hollywood didn't. But those foreign filmmakers turned out to be far too serious and sophisticated to cater to my base expectations. Anyway, I am psyched to see Tarantino's Django Unchained when it comes out this Christmas.

Plutocracy: Scott Walker Edition

The campaign leading up to yesterday's election on the recall of Republican Governor Scott Walker of Wisconsin -- which Walker won -- was marked by an unusually large disparity in campaign spending by the contenders. According to this chart in today's New York Times, Scott Walker spent $29.3 m or ten times the $2.9 m spent by Tom Barrett, his Democratic opponent. (If you count spending on behalf of the candidates by groups other than the campaigns themselves, the disparity is smaller: $45.6 m for Walker and $17.9 m for Barrett. However, it is not clear to me why, in the New York Times's chart, the $4.5 m spent by "Wisconsin for Falk," a group that supported Kathleen Falk, Barrett's primary challenger, is counted as spending on behalf of Barrett.) As E.J. Dionne argues in today's Washington Post, Walker's huge advantage in early spending was critical as "nearly 9 in 10 people said they had made up their minds before May, according to exit poll interviews." Barrett closed the spending gap somewhat towards the end, but by then it was too late.

The point of plutocracy is to drown out opposing views by buying up as much as possible of the finite windows into voters' minds. Voters aren't dummies, but they are busy, they have lots of stuff to do and to think about; so it is understandable that they may let others do their thinking for them. If a candidate can't make a clear case and can't remind the voter of her counter-argument every time an opponent makes a pitch, then the opponent gets a free pass into the voter's heart. (There may be limits to this line of reasoning, however. Some day we may find out what today's North Koreans, who have little or no access to opinions other than those of the state, really think and believe.)

Therefore, in today's America, with its high and growing inequality of income and wealth, one can expect the left to get ever more insistent on the need for Robin Hood policies, thereby inviting an ever greater financial disadvantage -- and, therefore, continued lack of success -- in election campaigns. At some point, the left may simply give up, seeing no way to influence the voter. At that point, America's political system will have all the moral majesty of Saudi Arabia's.

Right now, the role of spending disparities is somewhat dampened by the fact that money for a candidate tends to follow the electorate's enthusiasm for the candidate. This is why Barack Obama managed to raise a huge amount of money, mostly in small contributions, to fight his 2008 campaign. This rough parity between the distribution of genuine political support across candidates -- by which I mean the notional political support that candidates would receive in a hypothetical world in which all candidates spent equally -- and the distribution of campaign spending across candidates, means that the latter can't prevail over the former: money can only amplify what would have happened anyway. But this situation is likely to end as economic inequality increases in America.

When economic inequality rises beyond some threshold -- a threshold that I am unable to pinpoint, sorry! -- the distribution of campaign spending across candidates will cease to reflect the distribution of genuine political support. When that happens, money will do all the talking, and candidates with views not held by the plutocrats will simply give up and withdraw. And, as I said earlier, at that time we'll feel as free as the people of Saudi Arabia.

The rise of Scott Walker in Wisconsin also heralds the death throes of labor unions and collective bargaining in America. But, in truth, the time to fight for union rights has long passed. Unionization rates have been falling for decades. At this point, something like 6 percent of private-sector workers belong to unions. Naturally, most people see unionized public-sector workers going on strike to extract concessions and say, I don't have collective bargaining rights. Why should these public-sector workers have rights that I don't have? And why should they be able to use those rights to extort juicy pay packets, gold-plated pensions, and easy working conditions, all at my (that is, the tax payer's) expense? (By the way, when John and Jane Doe expresses these sentiments, don't expect Fox News or the people on the right to decry their thinking as the "politics of envy.")

If the American left wanted to preserve collective bargaining rights, the time to act was long, long ago, before the slide in unionization rates began. Now, the battle is over and public sector unions may as well just pack it in.