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Since I was last here, the auto bailout has already gone down. It looks like the president will use some of the $700 billion to step in where Congress (or really the Senate GOP) didn’t.
While I don’t know if bailout or bankruptcy is the right solution for the Big Three, I do know that the GOP rationale for not bailing out the industry just doesn’t make sense. If you want wage restrictions for companies that get bailout money, why did you fight so hard against executive compensation rules for the financial companies that, you know, got us into this mess? Why weren’t across the board wage cuts part of the AIG bailout, even if we ignore the executive compensation issue? Heck, the US Government is in huge amounts of debt. Why doesn’t a congressperson introduce a bill to cut the salary of congress by the same amount as the proposed UAW cut?
I honestly don’t have a problem with the people who are saying “They should just go into bankruptcy, because the consequences won’t be that bad, and it’s better in the long-term.” Salon quotes the conservative blog “Hot Air”, who says about the same thing:

If they’re convinced that economic catastrophe is inevitable and don’t want to burn any more taxpayer money trying to deflect the asteroid, that’s fine. If, on the flip side, they think the consequences of letting the Big Three fail and losing a million jobs in this economic climate won’t be that bad, that’s fine too. Both are good reasons to oppose a bailout. But make the case. Explain to me why, in the middle of a global economic crisis, propping up a failing industry to save jobs at least until the crisis is over is a worse option than pulling the plug now.

Now we have fallout from the bailout failing. First off, Andrew Leonard from Salon, with an ironic little story. Bob Corker of Tennessee was the GOP’s lead on killing the bailout. Once the bailout died, GM announced that it’s shutting down most of its plants, including the one in Spring Hill, TN. Whoops.
Next, we have Rachel Maddow with a pretty eloquent little rant about the GOP’s new platform: reducing the wages of American Workers. I can imagine the bumper stickers now.
And finally, every action in congress has political consequences. As Andrew Leonard points out, the economies of Michigan and Ohio are already in serious trouble. If this causes a lot of layoffs and the state economies get worse, do you see them voting for republicans any time soon? I’d say it’s pretty unlikely. The GOP is starting to look more and more like a regional party…maybe they like it that way, because they sure don’t seem to be making many friends.

Atlas Wants a Buyout Too

The title of this post was inspired by an update of Atlas Shrugged for the current crisis. The money quote is:

He walked toward her and sat informally on the edge of her desk. “Why make a product when you can make dollars? Right this second, I’m earning millions in interest off money I don’t even have.”

(via Andrew Sullivan)

  • Let’s talk bailouts! It looks like the Big Three will get a cool $15 billion. Steve Clemons has a great post pointing out that nothing in the bailout will prevent the big three from offshoring those jobs that we’re saving. There’s a link hidden in there that points out that we could buy the entire Big Three for about $3 billion, rather than give a loan of five times that.
  • Andrew Leonard points out, “Earth to G.M.: No one is buying your cars right now! Your business is kaput. How much more stigma can bankruptcy add than your own mismanagement has already spawned?”
  • Andrew Leonard again, pointing us to a Malcolm Gladwell article about how the Big Three stuck itself with all the pension liabilities, among other obligations. Leonard points out that if Detroit had fought for nationalized health care, they would probably be in a different situation.
  • Jonathan Gruber talks about why health care reform would be good for the economy. (via Mark Thoma)

We’ll stick with the short post today. Lots of economic things coming, and probably some talk of education too.

As of today, Barack Obama has officially unveiled more than half of his cabinet-elect (along with a few leaked members), but a few glaring omissions remain – particularly at the Department of Education. This is a story that we here at BTG will follow eagerly over the coming days and weeks, beginning with this list of 3 prominent candidates:

Joel Klein

Current Job – Chancellor of New York City Department of Education

Prospects: Klein has been a controversial figure during his tenure in New York, angering parents, community groups, and teachers at various times. At the same time, he is an old Washington hand and attorney (who led the anti-trust battle against Microsoft). Klein has won wide support from the philanthropic and corporate communities, as evidenced by the amount of private money used to support pilot initiatives in New York, though a New York Magazine feature details his complicated relationship with teachers’ unions. Smart money says that Klein elects to stay in New York, where his boss is seeking a 3rd term. At the same time, Klein’s reputation as a results-oriented pragmatist might appeal to Obama’s desire to address inequities in education.

Linda Darling-Hammond

Current Job - Professor at Stanford University School of Education

Prospects: Obama recently tapped Professor Darling-Hammond to serve as the chair of his education policy working group. Her expertise is in the area of merit pay, and she has been a consistent and principled opponent of NCLB. In a 2007 piece for The Nation she called for a new Elementary and Secondary Education Act that would broaden the criteria for school evaluation, and introduce a new Marshall Plan for teaching to improve recruitment, training, and retention. Darling-Hammond is especially interested in rectifying our educational debt (rather than achievement gap) by making federal funding to states contingent on the demonstration of progress towards equal access to educational resources and opportunities. Darling-Hammond has made waves by criticizing Teach For America, saying “If one takes the lowest possible standard and accepts that as a goal, then Teach for America is great.” At this point in the game, I think it’s fair to say Darling-Hammond would represent the premiere academic choice for Obama. Her qualifications as a researcher is unparalleled, and her emphasis on teacher development might appeal to Obama, who has gone so far as to suggest his support for merit pay.

Arne Duncan

Current Job: CEO, Chicago Public Schools

Prospects: What’s not to like? Duncan is from Chicago (Obama’s Hyde Park, even), runs the Chicago Public Schools, and had a career in professional basketball. He has championed small neighborhood schools, early childhood education, and “clean slating” failing schools by dismissing staff. Will it matter that Richard Daley wants Duncan to stay in Chicago? Duncan has introduced merit pay in Chicago, a sign of his willingness to challenge certain liberal orthodoxies. Over at the daily tracking poll at EdExcellence’s Flypaper, Duncan remains the odds-on favorite for the appointment. Duncan was the only prominent educator to sign the manifestos advanced by both the Bigger, Bolder Approach to Education camp and the Education Equality Project. A Duncan choice would demonstrate the kind of broad, pluralistic vision that Obama might want in his cabinet.

In the Long Run We’re All Dead

So said John Maynard Keynes.  Except that his writings and his understanding of economics is something that we are finding very important these days, and that leads us into some links for today.

  • We start with Krugman, like we often do. Krugman responds to some criticism from Mankiw, but also makes the point that while parts of the economy have changed, and the language of economics has definitely changed, Keynes’s analysis remains very valid today.
  • We have a one-two punch of takedowns on an article that Wall Street Journal that goes after Krugman’s ideas of Keynesian fiscal policy. First, Krugman with the direct rebuttal, and second, Delong pointing out that her argument is totally incoherent.
  • I’ve been calling Mark Thoma’s work “Economist’s View,” and while that’s the blog title, he doesn’t post anonymously. I’ll be changing that in the future, though it’s the same writer. Here is Mark Thoma, then, with a very interesting point. We are working on liquidity, capital, and solvency. What about the information flows that we’re used to? We no longer trust them. Analysts no longer trust numbers coming out of companies, investors no longer trust analysts, and nothing is being done to rectify the situation. It’s a bit long, but well worth the read. He has a great point, and he spells it out much better than the “crisis of confidence” language that some have been using.
  • Two interesting things from Brad DeLong. First, he talks about what he was expecting from the economy and why he didn’t see the current crisis. Second, in a column he talks about the two big mistakes that were made in this crisis. To recap: they let Lehman Brothers fail, and the fed tried to avoid nationalizing all or part of banks. I wish he expanded on his second point more, because I’d like to hear more about why he believes that was the second big mistake, and not any number of other things.
  • The Thrilla in Manila it ain’t, but Krugman talks a bit about the Milton Friedman-Keynes debate on how to look at the Great Depression, and more importantly, how big a role the Federal Reserve and its monetary policy could have had in preventing it. Again, Keynes is looking better and better, while Friedman has taken a solid hit recently.
  • Krugman reminds us that once we’re done with the current crisis, don’t forget to regulate the stuff that got us into it!
  • The Washington Post had a great look back at Paul Volcker and how much he was hated at the time, but as we get farther and farther from his tight interest rate control, how he looks smarter and smarter. Volcker, of course, will chair Obama’s Economic Recovery Advisory Board.
  • Finally, we’ll end on a lighter note: college football. Someone on Deadspin suggests a soccer-style relegation/promotion system be instituted in college football. It’s a fascinating idea that will never happen. One more story from college football. Rhodes Scholar and Florida State Football are being used together to talk about one student. (he got the scholarship) Who ever would have thought that would happen?

Same as the Old Boss

As we wind down toward a holiday weekend, here are some links that I’ve found interesting in the past few days.

  • In the “Meet the new boss, same as the old boss” category, we have a few stories of prominent people looking at new roles. Bill Clinton? The next senator from New York? I’d say it’s unlikely, but possible. As pointed out, an interesting change of gender roles, where the husband gets appointed to fill out the wife’s term. Next, Chris Matthews may be looking at Arlen Specter’s seat (note that I skipped any of the obvious “Hardball” jokes there). Again, unlikely but possible. Finally, where does Dick Holbrooke fit? Special Envoy to the Middle East sounds good to me. (thanks to Flan for the Clinton link
  • Three(!) items on John Maynard Keynes too. First, Krugman letting us know that one of Keynes’s early essays is now available–this one before he had developed his general theory. Worth a read. Second, here is Keynes’s Open Letter to Roosevelt, as published in the NY Times in 1933. Again, this is before his General Theory (which he published in 1936), but it’s clear that he’s already developing many of the ideas–notably how expansion of government spending is so important to helping the national economy. Finally, an economist interpreting a letter to Roosevelt in 1938. Very interesting. Remember, this is now after his General Theory was published, and after some of the new deal spending had started to have an effect. 1938 was actually when Roosevelt listened to those who were calling for “restraint,” and the economy actually slowed its recovery.
  • A bonus historical article by John Kenneth Galbraith. When a recession hits, don’t panic. Good advice, methinks.
  • A few different people try to answer the question: “How much does creating a job cost?” First, Greg Mankiw calculates that $700 billion for 2.5 million jobs makes it $280,000/job. He says that sounds unreasonable. Over at Economist’s View, there’s a much deeper analysis of how much it actually costs to create a job. It’s pretty interesting to see the numbers actually get run and how government spending can actually affect things.
  • Three angry posts on the Citigroup bailout. Nobody really seems to like it. Krugman calls it an outrage. Economist’s View has quite the lineup of economists talking about how bad the whole thing is. Also, Economist’s View wrote a more general idea on designing a bank bailout that might work. Finally, Brad DeLong wonders in great deal about the whole structure of Citi.
  • If the Fed is confusing Krugman, how do the rest of us have a chance?
  • Brad DeLong is angry. Economics is really complicated, and if journalists who write about it don’t know what they’re talking about, it’s not helping the general public understand.
  • We’ll end today with a few foreign policy links. The middle east and Afghanistan get more of the press, but there are other places where the US has interests. Next, an argument that we need to get away from the left-right spectrum when talking about foreign policy.

Last but not least, from GraphJam (via Andrew Sullivan)

On Losing Campaigns

Like in 2004, Newsweek has recently published their giant story on the presidential campaign. It’s very long, but definitely worth a read.

After reading both the 2004 campaign review and the 2008 campaign review, one thing struck me about the three losing campaigns that they talked about (McCain, Clinton, and Kerry).  In all three campaigns, the candidate was portrayed as being indecisive and reluctant to make personnel decisions, while in the winning campaigns, the candidate really wasn’t even asked to make personnel decisions–they had a strong campaign manager (Axelrod, Rove) who simply handled all of that for him.  In all the stories, the losing candidate’s problems with making personnel decisions led to infighting and strategy that was all over the map.

We have three things that I’m interested in: a candidate’s skill at making personnel decisions, campaign infighting, and being a winning campaign.  What is the relationship among those three, and should any of these things be something that we select for in choosing future candidates? (aside from winning, obviously–we want any selected candidate to win)

There is clearly a strong correlation between an infighting campaign and a losing campaign, and causation is probably impossible to pick up in that case.  Most likely, there is a downward spiral where some infighting leads to a few early losses, which leads to more infighting, and so on.

That leaves us with personnel management.  In the winning campaigns, the candidate wasn’t even really involved with personnel decisions–they had a campaign manager who took basically took care of it, but there wasn’t much for micromanaging.  On the losing campaigns however, the common theme was that the candidates were involved in the day-to-day personnel decisions.  In addition, the candidates were always either waffling on their personnel decisions or simply not making personnel moves.

I wonder–which came first.  Does a candidate’s direct involvement in day-to-day personnel decisions cause turmoil and therefore losing, or does the losing and turmoil necessitate direct involvement, which the candidate then isn’t able to handle?  Clearly the indecision in personnel matters once the problems start happening is not a skill that we want in a high leadership position, but I wouldn’t have thought that it was a killer fault until this article.

My last question then is: Should we be selecting for these skills, and how do we do that?  Or is the more important thing that we find campaign managers who are better at handling these matters and delegating authority?

Something to think about as you’re waiting for the Franken-Coleman recount to end.

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