Sad Day for my Constitutional Debates

The Debt Ceiling is constitutional, demands massive inflation after August 2nd if we don't fix it, and I am a fail at thinking.

Unfortunately, when considering the legal options for making payments on our obligations I made a rookie mistake.  Brad DeLong cleared things up for me, with help from Yglesias. I forgot that the United States Government is not anything like businesses or households with respect to its finances.  It holds debt in a currency that it has the legal authority to print.  Sadly, this deeply undermines all of my earlier arguments re: constitutionality:

1. Because we can print the money that our debt is in, we need not ever default on our debts.  We can simply print money to satisfy them.  Therefore, the debt limit does not specify a mandatory legal point of default, but instead specifies a mandatory legal point of printing money to pay for things.
2. Because of 1, there is no reason to believe that in passing laws of a certain cost, congress intended to pay for it through borrowing rather than money printing, ergo, making a decision to borrow rather than print money seems clearly to be out of the powers of the presidency.

To add insult to injury, all this implies that there IS a legal way out of this mess if we don't raise the debt ceiling, and since it's the only way I can figure out that doesn't require us to either default (unconstitutional), fail to pay our obligations (illegal), or borrow more money (illegal), we actually have to do it.  Unfortunately, that way is to cause massive inflation and behave like a banana republics or a failed state.

Now, lots of smart people think a little inflation might be nice for our economy right now, but somehow I don't think a shot of a couple trillion new dollars straight into the pockets of real people doing actual spending (rather than, say, giant and growing uninvested bank reserves ala QE1&2) is the safest way to do it.  Either way, I can't imagine our creditors will be thrilled with the whole "let me print you some money for that bill" strategy, so it would probably do bad things to our borrowing ability in the future, but it seems like the only legal way out.  THIS IS STUPID.  

Dear Congressional Republicans, I fire you.  Love, Rory.

P.S.  On an Ironic note, the Gold Bug Anti-Inflation Hawk Republican Congress may be forcing us to adopt highly inflationary policies.  I love politics.

Reason #1 that the debt debate is insane

1. Lenders want to give us money for free.

For most people, borrowing money now means paying back more money later, so of course it seems reasonable to think the same is true for the government, but as Yglesias points out current interest rates on short term loans to the US government are less than inflation expectations. To put this another way.  We can borrow 100 real dollars and pay back 95 real dollars (fake numbers for example purposes).  THIS IS FREE MONEY.  Under these circumstances, it is insane to believe that we need to borrow less in the short term.  Obviously these interest rates wont last forever, and are subject to supply & demand &c, but consider that if we refinanced our whole debt at current rates we would effectively reduce its size.

Everyone (sane) agrees that any austerity measure (whether it be tax increases or spending reductions) will negatively impact the economy, so why do it when investors are willing to give us money for nothing (which we could then use to improve the economy through Keyensian stimulus).  In the long run, we have a deficit problem that needs to be addressed, but in the short run people are willing to give us free money that can help address our long term problem by a) reducing our real debt long term, and b) allowing us to accelerate the recovery by increasing demand for goods and services through further stimulus spending.

People are complaining that politicians want to kick the can down the road on deficit reduction.  It turns out that that's the fiscally responsible thing to do.

I am sad now

Dear Politicians,

It has come to my attention that you are more or less incapable of doing anything in America at the moment.  Please quit mucking about and do something useful.  A couple basic guidelines:

1. Evidence - please use it, and please present it in context.  Large numbers are scary, but large numbers when compared to other historical or projected large numbers are much less so.
2. Consistency - I know it is bad politics to hold logically consistent beliefs, but I think that maybe if you don't someone should call you on it, and in a public easy to understand way, not in the clever but not terribly accessible way my favorite bloggers do.

Point 1 is for the pragmatists.  If you care about the impact of your legislation, and not terribly much on the abstract values behind the way it works, then you should be a slave to Evidence.  For those of you who are primarily interested in a legislative enactment of some value-system, you should be checking to make sure your enactment doesn't undermine your values by its effects.

Point 2 is for values-politicians.  If you're holding a core set of beliefs and want to enshrine them in law, then you should at the very least make sure that they don't contradict each other.  For pragmatists, this might not matter as much in your implementation, but you should be watching the aggregate effects to make sure they still do what you hope they will.

I know this is a hopeless and empty plea, but I'm burnt out on real world politics and needed to get that off my chest.  Expect more bounds on taxation and other abstract policy discussions in the near future.

Love,
Rory

Random Representation

Despite routine assertions of the moral superiority of Democracy, people seem uncomfortable with any ideas about implementing one in which the people actually decide anything (we're talking about direct democracy here).  We often get excuses about this under the heading of "impracticality", though in the internet age that argument gets increasingly difficult to swallow.  It really seems like people are just uncomfortable with the idea.

Consider this thought experiment proposed by Yglesias (an experiment bearing marked similarities to conversations my lab mates and I have had in the past few months).  Basically the idea goes like this:

1. Assume that direct democracy is still unfeasible for logistical reasons.
2. A mathematically pleasing proxy is just to take a random statistically representative sampling of the population and make them the representatives of the people.  Do that, and let them rule.

or

3. In Yglesias' argument, you make them a sort of check on the actual governing body (say a city council and/or mayor or whatever) so that they are just approving (or denying) actions and budgets rather than making policies, and occasionally deciding whether we need a new governing body.

One would imagine that almost by definition this would better represent the spread of views in the population than the results of a "winner takes all" style election.  I know you all agree with me, but are still squirming in your seats as you contemplate the various sorts of people who would get minor positions of authority in this setting.  I like Yglesias' take on it, because it makes them into a sort of check on the person or people doing the actual governance, rather than the governors themselves, which seems to alleviate the majority of my squirming (a squirming I firmly believe is more closely tied to prejudice than to practicality).  I can even imagine that in the right small town you might be able to convince people to agree to give this a try.  Anyone want to form a new community with me and give this a shot?

Money as Speech

I typically agree with most of what Ygelsias has to say, but this post really rubbed me the wrong way.  Here's the most relevant section:

My starting point is that the “money isn’t speech” mantra clearly has some real problems with it. [...]

The issue, most broadly, is that money is a big help when communicating with the public. Restricting a person’s ability to obtain money for the purpose of communicating with the public is a means of restricting that person’s ability to communicate. It is true that this means that people with more money have a disproportionate impact on the public dialogue just as they have disproportionate access to big houses and fancy dinner and quality medical care. And you don’t have to be happy about any of those facts. But they’re part of a general question of inequality and economic justice.

This seems extraordinarily perverse to me.  First of all, it turns the argument on its head.  It's patently not the case that people would be restricted from attempting to get monetary support for their communication.  Most campaign finance reform proposals allow you to do so by getting a lot of people to give you money, and they certainly don't prevent you from making money in other ways in order to fund your outreach.  They prevent DONORS from unfairly influencing the platforms of politicians by virtue of their wealth.  Furthermore, as far as restrictions on free speech go, we already have some strong ones on advertisements, which would seem to fit into the same sort of category as ads for politicians (but don't).

I suppose one could argue that having more money is kind of like being photogenic or having a good prose style - useful traits that are inherently differently distributed and contribute significantly to communication efficacy.  It seems unreasonable, for instance, to say that every blogger should have to write at a 4rd grade reading level in order to even the influence playing field.  If you really believe that money and eloquence have no significant moral difference, then I guess you can buy Yglesias' argument.

But here's the thing.  As Tom Lee points out, the primary reason that money is important in speech is for purchasing network media time.  Network media time (as distinct from internet media time) is, by its nature, finite and one person's purchase necessarily crowds out another's.  This is patently not true for things like eloquence and good looks.  So, since tv time is zero-sum, restricting the ability of one person to purchase a lot of it doesn't restrict speech in general, but rather prevents a private individual from purchasing away the power of speech from the rest of the field.  From that lens (which I think is more sensible) we can see campaign finance reform as promoting, not limiting, free speech.  Also, since we're talking about media companies in particular, it might be reasonable to talk about limiting the company's speech, rather than the pundits.   In other words, we could put upper bounds on the amount of stuff they can broadcast from a single funding source, or something along those lines.  Media providers are already subject to many restrictions, so I can't think of a free speech argument against this, though I imagine implementation of such a law would suffer from serious practical and political difficulties.

Internet Digest: the things that are interesting in my news feed

Rather than pretending to come up with original content today, I'll just link you to all the things I read and vaguely cared about this morning.

This post on unemployment and education level was interesting, but I wish it had a graduate degree line.  Might help inform some of our earlier discussions about the goodness/badness of grad school.

The Japanese regulate the darndest things.

Apparently Paul Krugman's is the right blog to read.

Here, we use Paul Krugman, a New York Times columnist, as an example to show how our PVS system works.

From a random sample of his columns and television appearances, we tallied 17 testable predictions. Krugman was awarded one point if he either predicted an event would happen and that event took place, or if he predicted an event not happening and that event ultimately did not take place. When Krugman made a prediction and the opposite outcome occurred, we subtracted one point from his total. Hedged predictions did not receive any points.

Of the 17 predictions, there were 15 instances where Krugman made a correct prediction and only one instance where he made an incorrect prediction. With the single hedged prediction included, Krugman’s final tally was +14. We took the final tally (14) and divided that by the total number of testable predictions made (17), which we then multiplied by ten. Krugman’s final score was 8.235#.

All in all the internet has given me a very validating morning.