Conan meets his match: California

Remember when rising energy costs pissed off enough Californians to push Gray Davis out of Sacramento? Well, those were the good 'ol days:

Yesterday, the Economist's Free Exchange blog argued that, indeed, California is too big to fail. And though we're deeply uncomfortable with the concept, under the general notion of that idea, we'd say they're probably right:

California is the world's eighth largest economy, and it contributes roughly an eighth of total American output (and drives much of the output in surrounding states). It's very difficult to imagine the European Union standing by and allowing a budget crisis to ravage the German economy, or the IMF doing nothing at all to assist a Russia or a Brazil as they melted down.

Were California forced to make significant cuts to its spending, the ramifications could be quite serious. School systems and universities would be endangered (which would threaten the state's long-term economic prospects). Increases in crime, homelessness, and serious poverty would encourage residents to leave. Service cuts could threaten key industries. In short, the recession could grow far more serious in the state than it already is. That would threaten recovery across the nation.

It will be fascinating to see what a federal bailout for a state the size of California might look like. Fascinating in the way an autopsy determines a death sort of way, I mean.

And not that I'm blaming Gov. Schwarzenegger for Cali's economic crisis but, really, what would it take to get a recall petition going for him? How could anyone do worse? Would California actually have to split off from the continent?

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Entitlement

Sounds a lot like this:

“No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?” e-mails an irate Citigroup executive to a colleague.

And

“I’m not giving to charity this year!” one hedge-fund analyst shouts into the phone, when I ask about Obama’s planned tax increases. “When people ask me for money, I tell them, ‘If you want me to give you money, send a letter to my senator asking for my taxes to be lowered.’ I feel so much less generous right now. If I have to adopt twenty poor families, I want a thank-you note and an update on their lives. At least Sally Struthers gives you an update.”

And

“We’re in a hypercapitalistic society. No one complains when Julia Roberts pulls down $25 million per movie or A-Rod has a $300 million guarantee. We have ex-presidents who cash in on their presidencies. Our whole moral compass has shifted about what’s acceptable or not acceptable. Honestly, you can pick on Wall Street all you want, I don’t think it’s fair. It’s fair to say you ran your companies into the ground, your risk management is flawed—that is perfectly legitimate. You can lay criticism on GM or others. But I don’t think it’s fair to say Wall Street is paid too much.”

And

"You can’t live in New York and have kids and send them to school on $75,000,” he continues. “And you have the Obama administration suggesting that. That was a very populist thing that Obama said. He’s being disingenuous. He knows that you can’t live in New York on $75,000.”

Not much comment is necessary. These quotes - from unidentified sources, of course - speak for themselves. But the laid-off JPMorgan vice-president responsible for the third quote has clearly never listened to sports talk radio before.

And to address that last point, hilzoy astutely notes that the median family income in New York was $52,871 in 2007. That suggests that an awful lot of people in New York are living - or dying - in squalor. Like more than half of them. Or they're zombies. Either way, it's probably true on some level.

Meh. I can't wait for some of these people to disappear into Galt's Gulch. Continue Reading »

The Real Road to Recovery

Instead of just saying "no," Congressional Republicans have finally offered a budget alternative. You're not going to believe this, but they're suggesting more tax cuts, eliminating wasteful spending and paying off the national debt.

Shocking, I know.

Nate Silver got an advance copy of this "Road to Recovery" budget, which includes a few more specifics since they initially left out things like numbers and budget estimates. Take a gander:


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Irreplaceable?

There's not many of us who fall into that category. And the least of those are the crooks and scam-artists and half-wits who created this deepening financial crisis.

So if they believe they need million-dollar "retention" bonuses to fix the mess they created, I say let them walk. We really can't afford the expertise they have to offer.

With that in mind, Kevin Drum points us to Charles de Gaulle:

“The cemeteries of the world are full of indispensable men.”

Here, I'll go one better - Albert Einstein:

"We can't solve problems by using the same kind of thinking we used when we created them."

I find it highly unlikely that the only people who can rescue our sagging economy - AIG, for example - are the same ones who ran it into the ground.

For years, even decades, they've done an admirable job of bullying the American public into believing in the collective power of their financial genius. They could handle all the heavy lifting when it comes to futures or derivatives or stock options, we should just nod our heads and pass the collection plate.

And in theory, that makes sense.

What could Main Street know about our financial gears and levers and pulleys that Wall Street didn't? We were talking about business school stars, the best and brightest of our top colleges. People like me, well, I'm just a journalism graduate and something other than gifted when it comes to complex financial matters. They were the rightful gatekeepers of the American economy.

Except they weren't. Hilzoy explains:

A couple of years ago, it would have been hyperbole to suggest that we would all be better off if the senior executives at all our major financial firms were people picked entirely at random out of the phone book. Now, it's arguably true. People picked at random would, admittedly, be likely not to have been to business school. They might not know a lot about futures or derivatives or put options. But so what? At least they might have been more likely to know that they were clueless, and a few of them might have had the common sense to ask questions like: will housing prices really go up indefinitely?

In any case, what's the worst they could have done? Bankrupted their companies with ludicrously risky gambles that fell apart once markets went south? Destroyed trillions of dollars in value? Brought the world financial system to the brink of collapse? Left taxpayers across the globe on the hook for trillions of dollars Bankrupted entire countries?

Oh, right.

Right. Save it.

Everything they own in a box. To the left. To the left. Continue Reading »

On the money

In case you missed it, Jon Stewart absolutely mashed CNBC and its hacktacular hosts - Santelli, Cramer, Baritromo, etc. - on last night's edition of "The Daily Show."

In fact, the entire half-hour was one of the best I've seen on TV in some time. Stewart's interview of New York Times business writer Joe Nocera was masterful.

To echo the words of John Cole, "I think I need a cigarette."

Watch and enjoy:

The Daily Show With Jon StewartM - Th 11p / 10c

CNBC Gives Financial Advice

Daily Show Full Episodes
Important Things With Demetri Martin

Political Humor
Joke of the Day

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What we deserve

I had a moderately interesting e-conversation this week about government "entitlement spending." In general, I loath the sort of rhetoric that suggests that federal funds are being wasted on an undeserving class of citizens.

In case you're new to this blog, let me state up front: my heart bleeds liberally. Got that? I think that part of living in a civilized society means that sometimes our tax money will be used to provide for poor single mothers, underprivileged youth and seniors whose pensions don't cover enough of their needs. Even if they're prone to making ridiculous decisions.

I feel this way not only because I have a general concern for my fellow citizens, but because I'm smart enough to realize that life doesn't always unfold according to my plans. Anyone can be laid low by terminal illness, unemployment (I have two good friends who have a total of four kids that were laid off in the past few months) or even divorce.

That said, Atrios pretty much echoes my thoughts about this issue:

It is, of course, true that any government program may provide a benefit to someone who "we" think is "undeserving." That could be because of corruption, poor program design, mistake, gaming of the system, etc. But as Hilzoy suggests, setting up some elaborate system to weed out undesirables is costly and intrusive and often more trouble than it's worth.

Even simple means testing, very common of course, sets up perverse incentives for people. But one day I hope this country grows up and recognizes that the fear that maybe someone is getting something I'm not and they don't deserve shouldn't be the primary philosophy of governance.

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