An Unhappy Juxtaposition

Compare and contrast: Garance Franke-Ruta's very informative article on the IRS commissioner's trips to "the White House" and Megan McArdle's fact-free attempt to gin up even more controversy to smear Obamacare and Obama, her seventh article on the evils of the IRS in the last month.

Dancin' With Who Brought You

It is laughable to see organizations such as National Review pretend they are morally offended by, for example, John Derbyshire's proud and blatant racism. These organizations were founded by racists, pay for racist propaganda, hire racists, and send racists on cruises to mingle with other wealthy racists, where they all can finally indulge in racist conversations without fear of public disgust.

Scaife-Funded Network Works Hard to Kill Immigration Reform by Katie Lorenze

With immigration reform advancing through Congress, an anti-immigrant network funded by a small group of right-wing foundations is trying to kill reform by pressuring moderate Republicans and appealing to the party’s xenophobic wing. The groups could stymie efforts by some Republicans to appeal to the country's growing Latino population by moving to the center on immigration.  

The anti-immigration Federation for American Immigration Reform (FAIR) and others are using shoddy research methods to claim that immigration is at fault for a whole host of problems in America, from crime to income inequality. ProEnglish, a lobbying organization that advocates for "official English,” has released a video attacking Senator Lindsey Graham (R-SC) for his work on the immigration bill. The Center for Immigration Studies has testified in Congress against reform, claiming “virtually all illegal aliens are guilty of multiple felonies.” All of these organizations are connected to John Tanton, a nativist who has formed a network of radical anti-immigration groups, all of which receive a significant portion of their funding from foundations tied to the Scaife family.  

John Tanton’s Anti-Immigration Network, Bankrolled by the Scaifes

Tanton was initially a population control advocate connected with the environmental movement – which now largely supports immigration reform – but has since dabbled in eugenics, openly professed his preference for white people, and been tied to white supremacists. Tanton has constructed a powerful array of anti-immigrant groups that for the past three decades has had significant influence over the immigration debate, with the help of millions of dollars from the Scaife family foundations.  

Tanton was a close friend of the late Cordelia Scaife May, an heir to the Mellon family's banking and oil fortune, and who until her death in 2005 was one of the richest women in America. Like Tanton, May was an environmentalist committed to population control -- and believed limiting immigration was the best way to do it -- and founded the Colcom Foundation to advance this goal, providing tens of millions to anti-immigrant groups as well as funding legitimate environmental organizations. Colcom's Vice President of Philanthropy, John Rohe, worked for Tanton for many years and wrote a fawning biography. Since 2001, Colcom has been the primary funder for many groups in the Tanton network, giving over $17 million to NumbersUSA and almost $15 million to the Federation for American Immigration Reform, and more than $6 million to the Center for Immigration Studies.  

Scaife May's billionaire brother, Richard Mellon Scaife, is a major supporter of right-wing causes perhaps best known for bankrolling the effort to try ousting President Bill Clinton after "troopergate" and more recently for funding the climate change deniers at the American Enterprise Institute. Scaife manages the Carthage Foundation and the Sarah Scaife Foundation, which together with the Scaife Family Foundation (controlled by Richard Scaife’s children since 2001) have donated more than $4 million to FAIR and more than $3 million to CIS since the early 1990s; additionally, since 2001, the foundations have given ProEnglish $285,000 and NumbersUSA $987,500. The Scaife Family Foundation is also the sole funder of ProEnglish.  

Richard Mellon Scaife is also a major funder and Vice-Chairman of the Heritage Foundation, which recently generated controversy for issuing an anti-immigration report written by an author who previously argued that immigrants have lower IQs than the “white native population.”

Read the rest.

These aren't people who lived a hundred years ago; they are financing a complaint media and propagandizing right now.

The personal is the political; people who hate and fear other races and ethnicities, or communists, or women or whatever use their resources to create political pressure. But naked hatred and fear and greed are not acceptable political programs, so the powerful make up other reasons such as safety and freedom. The Sarah Scaife Foundation funded a lot of right-wing organizations.

Sarah Scaife Foundation past relationships:  

Accuracy in Media - funder  

Acton Institute for the Study of Religion and Liberty - funder  

Allegheny Institute for Public Policy - funder  

American Academy for Liberal Education - funder  

American Civil Rights Institute - funder  

American Enterprise Institute - funder  

American Foreign Policy Council - funder  

America's Future Foundation - funder  

America's Survival - funder  

Atlantic Legal Foundation - funder  

Atlas Economic Research Foundation - funder  

Capital Research Center - funder  

Cato Institute - funder Center for Equal Opportunity - funder 

Center for Immigration Studies - funder  

Center for Individual Rights - funder  

Center for Security Policy - funder  

Center for Strategic and International Studies - funder  

Center for the Study of the Presidency - funder 

Claremont Institute - funder  

Collegiate Network - funder  

Commentary - funder  

Committee for a Constructive Tomorrow - funder  

Commonwealth Foundation - funder  

Competitive Enterprise Institute - funder  

Counterterrorism and Security Education and Research Foundation - funder  

David Horowitz Freedom Center - funder 

Ethics and Public Policy Center - funder  

Federalist Society - funder  

Fletcher School - funder  

Foreign Policy Research Institute - funder  

Foundation for Cultural Review - funder  

Foundation for Individual Rights in Education - funder  

Foundation for the Defense of Democracies - funder  

Freedom House - funder  

FreedomWorks Foundation - funder  

Galen Institute - funder  

George C. Marshall Institute - funder  

George Mason University Foundation - funder  

Heritage Foundation - funder  

Hoover Institution - funder  

Hudson Institute - funder  

Independent Women's Forum - funder  

Institute for Foreign Policy Analysis - funder  

Institute for Justice - funder  

Intercollegiate Studies Institute - funder  

Jamestown Foundation - funder  

Judicial Watch - funder  

Maldon Institute - funder  

Manhattan Institute for Policy Research - funder  

Media Research Center - funder  

Mercatus Center - funder  

Mountain States Legal Foundation - funder  

National Center for Policy Analysis - funder  

National Institute for Public Policy - funder  

National Legal and Policy Center - funder  

National Taxpayers Union - funder  

Pacific Legal Foundation - funder Pacific Research Institute - funder  

Reason Foundation - funder  

James C. Roddey - trustee  

Social Philosophy and Policy Foundation - funder  

Tax Foundation - funder  

University of Virginia School of Law - funder

Where would our libertarian elite pundits be today without Scaife May's racism and oodles of money? Or the Koches' largess, by way of the John Birch Society? True, everyone must be paid by someone, but it says a lot about their peers that they must stoop so low to find someone willing to publish their work.

But this is what happens when billionaires get millionaires to write campaign financing laws in their favor. The billionaires smear their hysteria all over everyone else's attempts to make money. Scaife  May already has tons of money and doesn't need to worry if the institutional racism she funded costs other people money and elections. The politicians they fund can't afford to be as cavalier.

Reinhart, Rogoff, and McArdle

While I was on my mental vacation hiatus, Megan McArdle was all over la affaire of Reinhart and Rogoff. As we all know, data is McArdle's bête noir. It didn't have to be that way. McArdle was always willing to hold up her side of the data bargain. She was perfectly happy to look for numbers that seemed to support her point, or perhaps a bar graph or one of those colorful little pie charts. True, the graph didn't always say what she seemed to think it said, but the spirit was willing even if the mind was weak. But those numbers betrayed her by being different from the numbers she envisioned in her head. Something was very wrong in McArdleland but never fear, McArdle was more than eager to Cuisinart the lemons of defeat into the lemonade of victory.

Bit of a bombshell in the econoblogosphere yesterday. Several economists from the University of Massachusetts are contesting one of the key findings by the authors of This Time is Different, a landmark study of financial crises and debt dynamics from Carmen Reinhart and Ken Rogoff. At issue is their observation that once the debt-to-GDP ratio passes 90%, growth slows down dramatically. We should be careful about what we're actually refuting. Since this critique broke, there's been a bit of strengthening up Rogoff and Reinhart's claims in order to beat them down--claiming, for example, that Rogoff and Reinhart asserted that high debt mechanically causes low growth. I've interviewed both of them about their work, and they've always been most modest in their claims, emphasizing that they've isolated an empirical regularity, not causality. While the paper under question does speculate about possible vehicles for causality, its claims are more modest than both its critics, and those who have bandied about the 90% statistic, would have you believe.

I would love to take McArdle's word for it that since she has met Reinhart and Rogoff she knows they would not claim a relationship between high debt and low growth. However the last time she personally vouched for a man that gentleman was David Koch. It would be wiser to go to the source, the Reinhart and Rogoff (R and R) paper Growth In A Time Of Debt.

Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes. In addition, for emerging markets, there appears to be a more stringent threshold for total external debt/GDP (60 percent), that is also associated with adverse outcomes for growth. Seldom do countries simply “grow” their way out of deep debt burdens. Why are there thresholds in debt, and why 90 percent? This is an important question that merits further research, but we would speculate that the phenomenon is closely linked to logic underlying our earlier analysis of “debt intolerance” in Reinhart, Rogoff, and Savastano (2003). As we argued in that paper, debt thresholds are importantly country-specific and as such the four broad debt groupings presented here merit further sensitivity analysis. A general result of our “debt intolerance” analysis, however, highlights that as debt levels rise towards historical limits, risk premia begin to rise sharply, facing highly indebted governments with difficult tradeoffs. Even countries that are committed to fully repaying their debts are forced to dramatically tighten fiscal policy in order to appear credible to investors and thereby reduce risk premia. The link between indebtedness and the level and volatility of sovereign risk premia is an obvious topic ripe for revisiting in light of the more comprehensive cross-country data on government debt.

According to Wikipedia, critical realist economists say:

The world that mainstream economists study is the empirical world. But this world is "out of phase" (Lawson) with the underlying ontology of economic regularities. The mainstream view is thus a limited reality because empirical realists presume that the objects of inquiry are solely "empirical regularities"—that is, objects and events at the level of the experienced.

McArdle is saying that R and R are just noting two things that happen and do not say one was a cause of the other. Clearly this is wrong and it's typical that McArdle thinks denial based on an appeal to authority is an effective means of argumentation. Especially when she has written about Reinhart's work before. In this post McArdle argues that Reinhart is right that our debt will drag down the economy.

One way or another, all the debt we've taken on has to be dealt with. And the least painful way, at least in the short term, is for central bankers to keep their hands on the interest rate levers--and their eyes on the government debt.

And if the R and R paper was not pointed enough, Reinhart emphasized the relationship in an interview with Der Spiegel.

You have to deal with the debt overhang one way or the other because the high debt levels are an impediment to growth, they paralyze the financial system and the credit process.

Perhaps Reinhart played McArdle or McArdle didn't understand a word the woman said. Or McArdle is attempting to re-write reality to agree with her personal opinions.

I've seen more than one suggestion today that Rogoff and Reinhart must have deliberately or subconsciously biased their work because they're such mad advocates of fiscal austerity. But I interviewed Rogoff about the fiscal cliff last fall, and he was emphatic that we should not simply slam on the brakes and cut spending drastically, immediately. In fact, he was moderately dovish on stimulus. For example, he said "Back in 2008-9, there was a reasonable chance, maybe 20% that we’d end up in another Great Depression. Spending a trillion dollars is nothing to knock that off the table." Rogoff is basically an austerity moderate: he thinks we should be spending a little more now, while making plans to cut back in the future. And note that the main vehicle by which they suggest high debt causes slow growth is . . . that it forces sudden fiscal contraction.

Apparently Rogoff does advocate austerity, just a slower, gentler type. And Reinhart believes austerity is absolutely necessary.

SPIEGEL: Do you think it is wrong for Europe to focus on austerity measures with inflation at such a low level? Reinhart: No. Restructuring, inflation und financial repression are not substitutes for austerity. All these measures reduce your existing stock of debt. Unless you do austerity you keep adding to the debt. There is no either-or. You need a combination of both to bring down debt to a sustainable level.

McArdle (incorrectly) throws austerity into the mix to distract her readers from the main issue, the data. Then she attempts to downplay the effect of the Reinhart and Rogoff paper by declaring it had only a trivial effect on some radicals. It is utterly impossible to believe that McArdle does not know of the impact of the R and R paper; at the very least she saw a description of it in the paper written by Herndon et al. As the important critique relates, the impact of R and R's paper was enormous.

Publication, Citations, Public Impact, and Policy Relevance  

According to Reinhart's and Rogoff's website, the findings reported in the two 2010 papers formed the basis for testimony before the Senate Budget Committee (Reinhart, February 9, 2010) and a Financial Times opinion piece "Why We Should Expect Low Growth amid Debt (Reinhart and Rogoff, January 28, 2010). The key tables and figures have been reprinted in additional Reinhart and Rogoff publications and presentations of Centre for Economic Policy Research and the Peter G. Peterson Institute for International Economics. A Google Scholar search for the publication excluding pieces by the authors themselves finds more than 500 results. The key findings have also been widely cited in popular media. Reinhart's and Rogoff's website lists 76 high-profile features, including The Economist, Wall Street Journal, New York Times, Washington Post, Fox News, National Public Radio, and MSNBC, as well as many international publications and broadcasts. Furthermore, RR 2010a is the only evidence cited in the "Paul Ryan Budget" on the consequences of high public debt for economic growth. Representative Ryan's "Path to Prosperity" reports

A well-known study completed by economists Ken Rogoff and Carmen Reinhart confirms this common-sense conclusion. The study found conclusive empirical evidence that gross debt (meaning all debt that a government owes, including debt held in government trust funds) exceeding 90 percent of the economy has a significant negative effect on economic growth. (Ryan 2013 p. 78)

RR have clearly exerted a major influence in recent years on public policy debates over the management of government debt and fiscal policy more broadly. Their findings have provided significant support for the austerity agenda that has been ascendant in Europe and the United States since 2010.

But McArdle is not one to let reality rear its ugly head.

That said, many more radical austerity hawks have naturally been drawn to that 90% figure. Such a lovely, round, precise number is bonza for stump speeches and TV sound bytes, and unsurprisingly, it's been found in a lot of them. So it matters whether it's in error. And it does seem to be at least somewhat in error.

Tie me kangaroo down, sport! After mitigating and shading as hard as her little heart could, McArdle is forced to admit that mistakes were made. Little, inconsequential mistakes that would in no way destroy R and R's arguments. And that mistake never influenced policy at all.

The UMass authors (heretofore to be known as Herndon et al) argue that there are three major problems with Rogoff and Reinhart's work, or at least with the claim that very high debt causes negative average growth rates: 1. They excluded the immediate postwar-growth years for Australia, Canada, and New Zealand. 2. There is a coding error in the spreadsheet which caused them to exclude the first five countries in their analysis: Austria, Australia, Canada, Belgium, and Denmark. 3. They weighted each country's growth rate during high-debt episodes equally, rather than by the number of years for which the debt persisted.

Number one is arguably the most troubling, but funnily enough, it is mostly taken care of by the coding error. We're actually arguing mostly about New Zealand. Herndon et al. argue that New Zealand, plus the decision to weight by country, instead of the number of years that each country was in debt, lowers the growth rate during high-debt episodes from a somewhat robust 2.2% average to a terrible -0.1% average. Basically, they're arguing that because New Zealand had one year of very high debt and very bad growth, when you weight all the countries equally, you multiply that one bad year into a spurious "tipping point" where high debt destroys your GDP growth rate. Obviously this is a problem. I'm unable to tell exactly how much of a problem, because the country-year method is also arguably problematic. The years that a country spends in debt are serially correlated--which is to say that if you had a debt load above 90% of GDP last year, you're much more likely to have a similar debt load this year than a country which had a debt load in the 30% of GDP range. So weighting by country year is also likely to produce problems with your data. You could argue about how to calculate this for years--and I hope that these guys, and Rogoff/Reinhart, will do just that.

Because McArdle would much rather you argue methodology than discuss the effect of the methodology problems on the data and therefore conclusion. But what of McArdle's claim that serial correlation invalidates the country-year method? Let's had over this question to Josh Bivens at the Economic Policy Institute:

Some have argued that “serial correlation” in country/year high debt episodes—particularly when the years are consecutive—might mean that each country/year observation is actually not providing another fully independent data point in their sample and that weighting each as such might be inappropriate. Maybe, but it’s a long way from this insight to thinking that a proper fix is that the “year” part of the country/year observation should be completely ignored and each high debt year for a given country should just be collapsed into one single data point. Further, R&R have never been hugely clear about the economic transmission mechanism that allows high debt ratios to slow growth (indeed, they note that the most logical prime suspect—rising interest rates, do not seem to be up to the job of explaining this association). What they have strongly implied is that it is the problem of debt exceeding 90 percent is greatest when it comes in long-lived episodes rather than in one or two-year bursts (their latest paper on “debt overhangs,” in fact, focuses exclusively on episodes of debt exceeding 90 percent of GDP for five years or more). Given this, one might think that serial correlation would make their results stronger when one switches to country/year observations. That is, long-lived episodes of high debt (the 19 years in the UK) should be much more damaging to growth than one-off years that see debt barely move over the 90 percent threshold and then retreat (the one year of New Zealand data in their sample). But as HAP show, weighting each country/year observation equally (which should allow serial correlation to influence the results) actually makes most the R&R findings on debt exceeding 90 percent melt away.

After blowing smoke, McArdle helpfully hands her audience a convenient excuse to ignore the flaws in R and R's data:

Frustratingly, though the authors of the paper break out the results in various ways, the labelling is not very clear, and as far as I can tell they do not show you what the data looks like if you put all the New Zealand miscoded years back, but use the Rogoff/Reinhart weighting method. I'd really like to see this to get a sense of how much of their dispute hinges on omissions, and how much over disagreements about weighting methods.

Hernden et al tell us:

The exclusion of the missing years is alone responsible for a reduction of 0.3 percentage points of estimated real GDP growth in the highest public debt/GDP category. Further, RR's unconventional weighting method that we describe below amplifies the effect of the exclusion of years for New Zealand so that it has a very large effect on the RR results.

Not that the actual numbers matter to McArdle. She's already decided that there are two versions of R and R's conclusion, the actual "strong" one and an imaginary "softer" version that would be easier to defend.

Nonetheless, I think it's fair to say that a result should not hinge on a single bad year from New Zealand. And Herndon et al are arguing that the "strong" version of Reinhart-Rogoff, where debt levels of above 90 of GDP are actually correlated with negative growth rates, is almost entirely driven by that one bad year, plus the choice of weighting method. This is not, to put it mildly, a very robust result. The question remains: how much does it matter? As a policy matter, in my humble opinion is: not at all.

McArdle goes on to explain in great length why R and R's paper didn't really count because everybody else said debt was associated with slowdowns and Clinton reduced debt so liberal critics are just hypocrites and Europe's austerity had nothing to do with the paper and the US didn't count.

I think there is a roughly 0% chance that US economic policy would be detectably different if Reinhart and Rogoff had never been published. This is obviously going to be embarassing for Reinhart and Rogoff, because coding errors always are, and especially when your coding error produced a widely cited figure. To point out the obvious, conservative wonks and politicians should stop citing that result.

Most of all, McArdle wants us to learn a very valuable lesson from this unfortunate situation: Nobody can know anything ever.

And to point out the somewhat-less-obvious, people on all sides should be cautious about lovely, round numbers. Even if there had been no coding error, no disagreements about the country weights, this still would have been one number from one study. People were relying on this figure because it gave the illusion of precision. For some stupid reason, things sound more like a fact if there's a number attached.

Especially liberals.

On the flipside, no one should be acting as if discrediting this single number somehow defeats the hawkish arguments over government borrowing. Even if this one number is wrong, there is still ample reason to worry about debt dynamics and crowding out--some of that evidence from Reinhart and Rogoff, but also from many other sources. Indeed, Herndon et al show a relationship. They say that this relationship is not statistically significant. But "not statistically significant" is not the same as "unlikely to be true". There is other empirical work, and some good theoretical reasons, to think that too much debt is dangerous. The reasons for debt hawkery can certainly be argued with. But they neither stand nor fall on a single paper, much less a single number from it.

I predict within a week or two, McArdle will be reminding us that it has been proven statistically that high debt slows growth, and will link to this article as proof. I also predict that if a liberal made these sorts of mistakes (or if McArdle could convince people that a liberal made these sorts of mistakes), McArdle would be the first to call them dishonest and ideological, as she attempted to do with Elizabeth Warren.

Less Tall Megan: Drugs and Taxes

Shorter Megan McArdle: Get rid of corporate taxes and only tax individuals.

Money quote:

To sum up, the best way to react to the fact that Apple shelters income abroad is to get rid of the corporate income tax, and at the same time, get rid of the special tax rates for dividends and capital gains.  That would not only remove the incentive for these sorts of shenanigans, but also give other companies incentives to headquarter here.  And as a bonus, it would collect more taxes from individuals, progressively, so that Warren Buffett doesn't pay the same tax rate as the widow with a few utility shares.

Bonus Material: Shorter Flashback Megan McArdle: You  can't raise taxes on individuals; they would just find some way to avoid paying them.

Money quote, made while discussing the possible repeal of the Bush tax cuts:

Too, this basically assumes that there are no dynamic supply-side effects from the tax increase.  And it assumes that the multiplier from a tax cut is the same as the lost GDP from a tax increase, which is not necessarily the case--where you start matters.  In this case, we're starting in the middle of a recession, when people may find a tax increase more worrying, because they're already feeling more financially insecure.  To be sure, that worry might push them to work harder, or to hunker down and do as little as possible.  But there's no reason to think that it's somehow steady state through good times and bad.

So we should repeal the corporate tax and tax individuals instead, which would also be impossible because they would just avoid paying higher taxes.

Another Shorter McArdle: Drug companies should not have to pay for clinical trials. The government should pay for them. Money quote:

It's also possible that it's time for a broader rethink: why are the companies, rather than the FDA itself, conducting the clinical trials required to approve a drug? The answer seems to be that clinical trials are very expensive. But the clinical trials get paid for anyway, by all the taxpayers who take drugs at some point in their lives--which is to say, most taxpayers. The tradeoff hardly seems worth the obvious problems with effectively asking industry to conduct their own inspections.

 
Yes, since almost all of us take drugs at one time or another, we should pay the drug companies' expenses, since they pass on those expenses to their customers.  Likewise, if you see Jamie Dimon getting out of a taxi you should pay his fare because almost all of us have money in banks and he'll just write off the business expense anyway.

Jane Austen and Game Theory

Jane Austen and economics are natural matches, since few people before or since do a better job of showing how financial matters control or affect the direction of a person's life. I wrote an article on Austen and income inequality so I got a kick out of this article on Austen and game theory by Michael Chwe.

I believe that Austen is a game theorist herself, interested in how people make choices and how people anticipate the choices of others. Like any game theorist, Austen's interest is both practical and theoretical. For example, what distinguishes game theory, and economics generally, from other social science approaches is its emphasis on individual choice. That's how economists explain behavior. For Austen, choice is an obsession.

Women, especially back in the day, have always been forced to tolerate a constraint of choices. Middle class women had little hope of earning enough to support themselves; Louisa May Alcott--spinster and extremely important source of revenue in her family--often wrote of young women's frustration when they try to use their talents to earn a living. Austen's women had even fewer choices and they were often shrewd observers or experts in gaming the system that excluded them.

Every choice had to be considered, to calculate the effect it would have on others and how these reactions would affect the women's lives. Marianne Dashwood had a wealthy father but the law excluded her from inheritance. She had to marry because a husband was the only source of income available, and anything that affected her marriage affected her ability to support herself. She was considered foolish because she ignored the consequences of her actions and their probable effect on her financial future. Austen was realistic about the realities of her time and therefore was able to be extremely perceptive regarding people's motivations. People usually act for their own benefit, for good and ill.

I would disagree a little with the author's statement that "Austen consistently argues for commensurability: the many aspects of an alternative are in the end reducible to a single feeling;" in his example Catherine is just a teenager enjoying a novel experience; she is not old and experienced enough to go through the kind of financial panic that other Austen heroines endure. Elizabeth Bennett loves Darcy but she must constantly calculate the effect her circumstances has on her chances of marriage. The feelings might be simple but the choices never are.

"Whatever The Facts..."

It's great to be a right-winger. You don't have to be truthful, honest, hardworking, or responsible. You can say any damn dumb thing that you want, and best of all someone will pay you for it. For instance, Megan McArdle:

[...This has been the most scandalicious week in living memory.  I mean, sure, none of it rises to the level of Watergate.  But while the gravity may pale in comparison, the volume is breathtaking.  So breathtaking that it's tempting to think that the administration is doing this deliberately.

In finance, there's an art known as "Big Bath Accounting" which is used to manage earnings expectations.  Here's how it works:  if you know you're going to have a bad quarter, you look around for anything else that might go wrong in the future, and you decide to "recognize" that bad news now.  Inventory looking a little stale?  Write it down, man!  Customers getting a little slow to pay?  Now would be a good time to write off their accounts as bad debt.  Is there some uncertainty in the projections about depletable assets like oil stores?  For heaven's sake, why not use the low end of the projections rather than the medium or high end? And we should really book some sort of charge to account for the risk that the Yellowstone supervolcano will explode, killing hundreds of thousands and covering the entire western half of the United States in volcanic ash, and in the process severely dampening demand for our premium line of Wyoming-themed memorabilia.
 

Corporations call this "cleaning up the balance sheet".  Accounting professors call it things I can't print because this is a family blog.
 

The theory is that there is only so much bad news people can take in all at once, so you might as well cram all the bad stuff into one action-packed earnings call.  

...

The Obama administration are past masters of this strategy on the budget, and it almost makes me wonder if they didn't decide to dump bad news about the AP phone searches and the IRS scandals while Benghazi and Sebelius were already making news.  There are only so many hours on the cable news channel, and by definition, if people are talking about one scandal, they can't be talking about another.  So while a lot of commentators are calling this "a very bad week for Obama", I sort of suspect he's having a very good week.  He's managed to get a lot of scandals off his balance sheet at what will probably be a fairly affordable political cost.

The sheer number of scandals, you see, forces McArdle to wonder, no doubt in horror and grief, what is coming next. After all, Obama might--not that she is saying he has, mind you--but he might have orchestrated an entire right-wing noise machine to manufacture a non-stop drip, drip, drip of hysteria over anything that has even the hint of a potential for scandal to the blindly partisan. And why would he do this utterly illogical, not to mention extremely complicated, course of action? 

It's not that the right is frothing at the mouth at the opportunity for even the most minute amount of political gain. It's not that the right knows that catering to the vast number of racists in its midst by dangling impeachment before them is a sure-fire way to gin up donations. And it certainly is not because the right has a bottomless hunger for any scrap, any iota of evidence that they are good and their enemies are evil. No, it's because there just have to be more Obama "scandals" out there.

But what if  Obama didn't leak the scraps of information that the right has attempted to blow up into newer if not better Watergates? Eh, it doesn't matter!

Of course, that's true even if the administration had nothing to do with the explosion of scandals, and it's all just a fantastic coincidence.  Each of these revelations would have hurt a lot more if they'd come out on their own, with nothing else to do but exhaustively explore all the nuances and implications.  Obviously, it would be better still for the administration if they'd never happened at all.  But if you have to have some scandals--and virtually all second-term presidents seem to--then all at once is the way to go.

Considering she married a guy who created fake websites to gin up outrage against the bailout of homeowners destroyed by the financial industry, McArdle has a very strange ignorance of the ways of the rat-f*ucker. Perhaps she should lean over in bed and ask her hubby about the manufacture and breeding of scandals and other political machinations.

ALEX CHADWICK, host:
Congress is moving closer to passing a bill that could steer as much as 300 billion dollars to homeowners who are hurt by the housing downturn. But some are not happy with this plan. According to a report in the Wall Street Journal today, an online site called AngryRenter.com has had more than 44,000 people sign a petition protesting the bailout package. The journal also says the site is a fake grassroots effort. With us is Wall Street Journal reporter Michael Phillips, who wrote the story. Michael, what is the essence of this here? What have you got?  

Mr. MICHAEL PHILLIPS (Reporter, Wall Street Journal): Well, the AngryRenter.com site purports to be a grassroots site coming from the public. In fact, it's a production of an organization called FreedomWorks, which is chaired by Dick Armey, the former House majority leader, a Republican from Texas. Another board member, Steve Forbes, well-known publishing magnate and others, and these are guys who are very interested in Libertarian views, free market views. And this site is the attempt of their organization to generate an aura of grassroots-i-ness for their work in opposing the bailout.

The right duly passed on links to the site because scandal and hysteria generate income for them.

However Megan McArdle is apparently utterly ignorant of the political world in which she has managed to insert, maneuver and enrich herself. The Koch brothers finance journalists because they just want to support the journalism business, and, after all, the business of America is business. The right-wing scandal industry is just a lot of nice, sincere people who are genuinely outraged about, well, anything and everything that Obama does. And Megan McArdle spends most of her time writing about how "Obamacare" will kill millions because she cares so very much about you and your family. Even if she has to make up shit to do so.

She's just special that way.

K-Lo Goes To Confession: Death And The Maiden

Father: Kathryn Jean, welcome back to New York. So, what do you have for me today? A little sloth, or maybe your talked back to your mother?

K-Lo: (muffled murmur)

Father: I beg your pardon?

K-Lo: (clearly) Sorry, Father, my veil was making it hard to talk. Just pretend I'm wearing it, okay? I don't want God to get mad at me. You know how he loves to smite. Can I start again?

Father: Yes, go ahead.

K-Lo: Bless me Father for I have sinned. It has been twenty-two hours since my last confession. Oh my God I am heartily sorry for what I have done and what I have failed to do. I have sinned against You which was really wrong but I'm sorry now, so no hard feelings, right? I took the name of the Lord in vain a few times in the course of my duties at The Corner as a Helpmeet for the Lord and any male who needs a woman to be his moral center and guiding light.

Father: And?

K-Lo: Sorry, Father, but that's it. I've been really busy with the funeral arrangements. There's just so many things to attend to and of course I'm not at my best right now with a death in the immediate family and all. Do you like my mourning outfit, Father? I figured you can't go wrong with a black suit, and maybe a piece of jewelry made out of the hair of your loved ones, like Good Queen Bess and Prince Albert.

Father: I think you mean Queen Vic---. Never mind. I am so sorry to hear of your loss and I hope we have not lost either of your good parents.

K-Lo: Oh, gosh, no, they're fine. Besides, they told me ages ago that they weren't going to die for a very long time, so don't worry.

Father: An uncle or aunt or cousin perhaps?

K-Lo: Nope.

Father: Ah, Kathryn Jean, you don't have any other immediate relatives.

K-Lo: (Bursts into loud sobs.)

Father: Katharyn Jean, is there something you need to tell me?

K-Lo: It's all the babies, Father. There are dead babies everywhere! It's so sad!

Father: Your tender feelings do you credit, Kathryn Jean, but God is here to help you with your burdens.

K-Lo: I know, Father, and I pray all the time but people still have abortions! We have to do something to save the babies! (Sobs)

Father: Kathryn Jean, you have enough to worry about right now. Let God shoulder your burden for a little while or you might become overwhelmed.

K-Lo: It's okay, Father, I have a plan to fight back against modern hedonism and sexual depravity. If we could only get people to realize that they are having an abortion then they would stop having abortions. They have no idea what they are doing! The need to be told before it's too late! (blows nose)

Father: Kathryn Jean, remember your faith and trust in God . And  your restraining orders.

K-Lo: But Father! Depravity! Death! Baby Armageddon!

Father: The people who work in abortion clinics know they are working in abortion clinics, Kathryn Jean. And you have other things to worry about.

K-Lo: But they don't know about the poor babies, Father! If they only realized that they were killing sweet little baby people they would stop!

Father: They are, indeed, all our children. So you are participating in the Priests For Life protest?

K-Lo: In a way.

Father: And that way would be...?

K-Lo: They are doing such wonderful work by naming and remembering all the poor dead babies that I wanted to do my part too. That's okay, isn't it? I mean, terms-of-probation-wise.

Father: And your part would be---.

K-Lo: Father, you are cordially invited to a funeral for my future fetus, to be held tonight in the park across the street from Mama and Daddy's apartment building.

Father: Your---.

K-Lo: Future Fetus. My baby-to-be, God and ChristianMatch willing.

Father: Your---.

K-Lo: Doesn't he deserve a funeral, Father? We can't harden our hearts to God's gift of life! He's a person, he needs a name, dammit! Oh, sorry, Father, that was for extra oomph, I don't really want to name my egg Dammit. How would he know if someone was calling his name or just cursing?

Father: Your---.

K-Lo: First we are going to have the service and then we'll have a candlelight vigil in Mama and Daddy's backyard, where they're buried.

Father: They?

K-Lo: Be sure you're careful where you step, Father, it's getting kind of crowded back there and people keep on stepping on the tiny little tombstones and knocking them over.

Father: Okay.

K-Lo: Then I can go ahead with the funeral arrangements?

Father: Okay.

K-Lo: Swell! See you tonight, Father! Oh, wait, don't you want me to say a Hail Mary or something?

Father: Okay.

K-Lo: Gosh, Father, you're kind of quiet. Are you feeling okay?

Father: Actually, Kathryn Jean, I am feeling a little unwell and will probably stay home and rest tonight. Be a good girl and give my best to your parents.

K-Lo: Sure thing, Father. Although I was hoping to ask you to be godfather to Jonah Junior. I'd be honored if you would say yes. And I'm running out of people to ask.

Father: That's---very kind of you, Kathryn Jean.

K-Lo: No problem, Father. Children need good Catholic influences in their lives. I'll text you with the details. And I'm going to live-Twitter the funeral so you can follow along if you want.

Father: Thank you. Now run along, young lady.

K-Lo: Don't you have any advice for me Father? You usually do.

Father: No, I don't think that would be any use. Useful. I can't think of anything useful to say.

K-Lo: No problem, Father. See you soon!

Useful Idiot

The two most notable things about Megan McArdle's work are the weakness of her arguments and the grateful fervor with which they are received. The first has nothing to do with the latter, of course; weak or strong, numerate or innumerate, moral or immoral, one can always find a small chorus of supporters for her arguments. It's difficult to be a follower unless someone tells you what to do and the right is very grateful to their leaders for sparing them from the burden of free will and choice.

Which explains why McArdle keeps revisiting the Elizabeth Warren well, despite her embarrassing Elizabeth Warren-related failures in the past. Warren is an official enemy of the right and especially the financial industries. She disavows allegiance to the elite instead of sucking up to it in the hope of enriching herself, which is so alien a concept to McArdle that she is certain Warren must be dishonest. If Warren is right then McArdle is wrong and we all know how McArdle feels about that.

And to make all these matters worse, Warren succeeded where McArdle failed; making a name for herself in the financial world, within touching distance of trillions of dollars whirling around in virtual space like the world's best snow globe, only with money instead of glitter and McArdle on her hands and knees instead of a snowman.

Elizabeth Warren Wants the Fed to Get Into the Student Loan Business 

How foolish of Warren to want the government involved in the government-backed student loan business.

Should students get the same loan rates as banks at the discount window?

 

Senator Elizabeth Warren (D-MA) has just introduced a new bill, the Bank on Students Loan Fairness Act, to offer student loans at the same rates that the Federal Reserve charges big banks through its discount window lending program. At the moment, that rate is about 0.75%. The rates on federally guaranteed student loans, meanwhile, is set to double to 6.8% this summer.

"Some may say we can't afford this proposal," said Senator Warren as she introduced the bill. "I would remind them that the Federal Government currently makes 36 cents in profit for every dollar it lends to students . . . meanwhile, the banks pay interest that is one-ninth of the amount that students will be asked to pay. That's just wrong. It doesn't reflect our values." 

"Some explain that the banks get exceptionally low interest rates because the economy is still shaky and banks need access to cheap credit to continue the recovery." She sighed loudly. "But our students are just as important to the economic recovery as our banks, and the debt they carry poses a serious risk to that recovery." [my bold]

Note that this is Megan McArdle's reporting, not a quote from someone else. The woman does not have the faintest idea of how to be a journalist. This post is far more journalistic in style than most of her posts but even when she tries she cannot be professional. She doesn't know how, or maybe  just can't overcome her biases long enough to write an impartial news item.

Maybe obtaining your journalism training from a Koch institute isn't the best way to develop professional skills and ethics.
 

It's probably true that some say banks need low interest rates to keep the economy growing. But no one except possibly a lunatic has told Elizabeth Warren that banks are getting 0.75% at the discount window as a thank you for all the hard work they're doing helping the economy. Discount window loans are cheap for three reasons: the borrowers have assets and income that are easy to seize, the loans are quite short term, and the banks are required to put up collateral.

Elizabeth Warren did not say that banks are getting 0.75% at the discount window as a thank you for all the hard work they're doing helping the economy.  She said, "Now some explain that the banks get exceptionally low interest rates because the economy is still shaky and banks need access to cheap credit to continue the recovery." Those two sentences are not the same, in word or meaning, which means McArdle is, SIGH, not telling the truth once again.
 

As you'll have discovered with your own mortgage or car loan, the shorter the term of the loan, the lower the interest rate. You will also have discovered that loans secured by collateral, like your car loan or mortgage, carry lower interest rates than loans such as credit card expenditures, which are secured by nothing more than your heartfelt promises to pay. You may even have noticed that the more durable the collateral, the more attractive a rate your banker will extend on it.

So it is with loans to other people, and businesses. Banks get a very low rate because they're borrowing for very short periods of time--often overnight, always less than a year. The Fed correctly figures that the bank is unlikely to go out of business by next month--and anyway, they're putting up collateral, which is unlikely to lose all its value in such a short period of time.

This jaw-dropping bit of elision is more comprehensible when you remember that McArdle is doing her best to forget that 2008 ever happened. The banks were likely to go out of business, which is why they were bailed out in the first place. But these are unfriendly facts, the kind that make a person question her every assumption, and therefore must be repressed.
 

Students, on the other hand, are borrowing for a decade, and the only thing they're putting up as a guarantee is their character. How good a collateral is their character? In 2011, 9.1% of borrowers had defaulted on their student loan within the first two years of the payment period.

McArdle took out a student loan for $100,000, which paid for the MBA that is the basis for her claim of economic literacy. Her English degree wouldn't have gotten her gigs at The Economist or The Atlantic, and probably wouldn't have gotten her a place at the aforementioned Koch institute. She is repaying every penny of her loan and by God you will too.

The interest paid by the folks who don't default is the only thing keeping this program from hemorrhaging money. Elizabeth Warren proposes to cut that interest rate to less than the rate of inflation. 

Of course, this isn't really a serious proposal, in the sense that it has any chance of getting passed. Elizabeth Warren is a very smart woman who knows how the financial system works; she's very well aware of why student loans are expensive relative to the Fed's discount window. And I presume that she is aware that the CBO will score her bill as costing rather a lot of money.

But passing this bill probably isn't the point. Rather, it's a populist values statement: we like students, we don't like banks. As such, it's probably going to be quite effective. But only among people who don't know much about the banking system.

Simple-minded slogans for simple-minded people. She knows her audience. McArdle ignores the whole issue of crushing student debt. She ignores Warren's statements on investing in people or her concern that a generation of new workers saddled with out-of-control debt will harm the economy. No, the problem is that Warren is a liberal demagogue, as McArdle's commenters insist, and therefore doesn't like banks. And liberals will applaud because unlike McArdle, who comes "from a family of academics who are actually intellectually intimidating," they know nothing about anything.
 
Edit: Weird html thing corrected.

Value(s)

Bangladesh may or may not need tougher workplace safety rules, but it's entirely appropriate for Bangladesh to have different—and, indeed, lower—workplace safety standards than the United States.   Matthew Yglesias

 [...S]hould we lean on US and European corporations to impose our safety standards on Bangladesh? Or any safety standards? I don't think that answer is obvious, even if we concede that the Bangladeshi government is inadequately responsive.  Megan McArdle

The lives of the poor mean nothing to the callous rich.

Photograph of Bangladeshi factory workers from Hullabaloo.

What's Wrong With Everyone Else

You can call it tribal loyalty, authoritarianism, insecurity, political expediency or personal enrichment, but in the end it's just another round of Megan McArdle's favorite parlor game, What's Wrong With Everyone Else.

Why Gay Marriage Will Win, and Sexual Freedom Will Lose

In the future, gay marriage will not only be legal, but practically mandatory.

You know what's wrong with liberals? They think they are so tolerant with their gay marriage and right to privacy but they'll be sorry because they are wrong, wrong wrong.

[...]In some sense, the sexual revolution is over . . . and the forces of bourgeois repression have won.

That's right, I said it: this is a landmark victory for the forces of staid, bourgeois sexual morality. Once gays can marry, they'll be expected to marry. And to buy sensible, boring cars that are good for car seats. I believe we're witnessing the high water mark for "People should be able to do whatever they want, and it's none of my business." You thought the fifties were conformist? Wait until all those fabulous "confirmed bachelors" and maiden schoolteachers are expected to ditch their cute little one-bedrooms and join the rest of America in whining about crab grass, HOA restrictions, and the outrageous fees that schools want to charge for overnight soccer trips.

You know what's wrong with gays? They want to have what Megan McArdle has, when they are not Megan McArdle. They keep butting into Megan McArdle's group demanding to join in with her inner circle of specialness without sucking up properly first. They won't tell her she is always right and is smarter than anyone else, or help her career by supporting conservatives, or vote for lower taxes, or anything. They don't deserve to be in her group.

Not that all married people are special, mind you. Those suburban schlubs certainly aren't special, they're whiny and boring.  They have expensive children and crabgrass and rules and regulations to follow. Not like McArdle, who lives in a charming Victorian rowhouse in a nearly desirable neighborhood in an exciting, vibrant city. Her imported car is cute and hip, not boxy and boring.

You know what else is wrong with liberals? They think they'll get to have a life of "permanent infatuation" and continue their 'licentious, "anything goes"' immoral ways. But they won't, because there are pendulums and circles and ovals that are actually tracks that go around and around. Victorian morality will return and the liberals will be left behind. Already the elite, whom are all Republicans, are staying with their wives more and more!

But even though the liberal elite are wrong, so are the non-elite, who are not getting married, evidently because "progressive academics of the 1970s" told them not to. It seems poor women have children because they are post-modernists who have moved beyond bourgeoisie morality in favor of serial partners and indiscriminate parenthood, not because they have difficult, chaotic lives. After all, one of the other things wrong with the poor is that they just make bad decisions. It's not that the difficult life led to the bad decisions, because as Mr. Matthew Yglesias would tell us, we are all equal on the playing fields of the Lord.

McArdle, who blogs about economics, does not mention the money factor in all of their moral calculations. Poor women can't afford to marry. Middle class women can't afford to divorce.

She does, however, note that it's a shame that people no longer shame unwed mothers, but she is very hopeful that this will change in the future, as the track is rounded or pendulum is swung or whatever. Because another thing that is wrong with liberals is their desire for "carefree sex," and if everyone can marry "they," whoever "they" are, will stop defending sex and children outside of marriage and there goes that pendulum again. So when gays can marry, heterosexual elites will no longer defend sex outside of marriage and gays will be forced to live lives of suburban quiet desperation, when they are not repressing public morality to ensure they are not left for a younger man.

Finally, there's something wrong with the kids out there today who are putting off marriage. McArdle put off marriage but she is discussing what is wrong with everyone else, not what is wrong with Megan McArdle, which is nothing, so there.

If I had to guess, I'd also put late marriage on the endangered list. I married at 37 myself, so I'm not judging, here. But if we want childbearing to take place inside marriage (and I think we do), then the average age of first marriage can't get higher; it probably shouldn't even stay so high. As that average age rises, you get two unwanted phenomenon on the tails of the distribution: babies born to unmarried parents at the low end, and couples who want children but can't have them on the high side. So the current upper-middle-class tendency to push marriage later and later while people finish their educations and get settled doesn't seem very stable to me--even before we consider the difficulty of finding a mate to match your settled life, which Keith Humphreys has dubbed The Problem of Grandma's Lamp.

Of course, predictions are hard, especially about the the future. Nonetheless, here is mine: whatever the Supreme Court decides, gay marriage will soon be legal throughout the land. But this will not mean that we drive ever onwards towards greater sexual freedom--rather, it will mean quite the reverse. The sexual revolution is over. And the revolutionaries lost.

It's very sad that Megan McArdle has led such an unstable life, with her premarital fornication and living in sin with various and assorted men who came and went or came and stayed and her putting off marriage until late in life when she is much less likely to reproduce.

If it were anyone else, it would be downright wrong.

The Sorrow And The Pity

It is time for my blogging hiatus to come to an end; I can ignore war, bombings, and economic malfeasance but Matthew Yglesias blogging about pizza must not pass by unnoticed.

It seems someone told Mr. Yglesias that it is possible to create good pizza at home with some special equipment, and Mr. Yglesias is all astonishment in response. Why should anyone want to make pizza at home when he can buy excellent pizza anywhere?

You might have noticed a slight switching of pronouns right there; "we" became "he" because our Thought Leaders feel free to speak for the less educated and therefore less wise masses. Fortunately we have Mr. Matthew Yglesias to think for us all and tell us what to do, and even more fortunately it seems that the entire world wants exactly the same thing as Mr. Yglesias, at least when it comes to pizza. So we can safely assume that if Mr. Yglesias does not want or need to make pizza at home, nobody else should either. QED.

The issue is that while great pizza is fairly simple to make, cooking it properly requires an expensive piece of capital equipment. Your oven can't get nearly hot enough to cook a pizza correctly. To do it, you need a pizza oven. To install a good pizza oven in your house would be a waste of both money and space. It just doesn't make sense to construct one unless it's going to cook a lot of pizza. And while pizza is delicious, for the sake of your health you should probably try to avoid subsisting on an all-pizza diet. The superior strategy is to let someone else install a pizza oven in his commercial establishment. Then you show up occasionally, and in exchange for money he'll give you pizza. Then with all the money that his pizza oven helps him collect, he and the members of his staff can purchase adequate nonpizza sustenance to stay alive and well. It's a triumph of the division of labor and good old fashioned commerce. For the roughly $200 that Alt wants you to spend on equipment to turn your grill into an ersatz pizza oven, you could just buy 16 margherita pizzas at my favorite D.C. pizza establishment. And, again, for reasonable adults the financial cost of purchasing excellent pizza at a restaurant is not the operative factor in limiting pizza consumption. In the scheme of things, pizza is pretty cheap.

Now of course, to each his own. If what you want is some home-cooked pizza, I'm sure this is a great way to do it. But it's a bit nuts. And excessive focus on the issue obscures one of the great economic triumphs of our time—the enormous increase in the availability of quality pizza all around America.
 

Ah, the wonder of the American economic system, the greatest in this or any other world. Mr. Yglesias has money--lots of money--and other people have pizza--lots of pizza. One demands, the other supplies, and through the miracle of economic progress a brand new baby financial transaction is born.

But there's a tiny little glitch in this system. When "we" open up our wallets to pay for that pizza, we are forced to use our own money, not Mr. Yglesias's money. Mr. Yglesias's bank account has a lot more money than our bank account and despite the fact that he has told us to just buy pizza instead of making pizza, we usually choose a less expensive option, such as making pizza at home or not having pizza at all. Despite our desire for and the availability of pizza, "one of the great economic triumphs of our time," we are not, actually, Mr. Matthew Yglesias, and therefor his advice and wisdom is inapplicable to our wants and needs.

We suspect that we are not the only people in the world who are not Mr. Yglesias, and would perhaps not benefit from his economic wisdom. Perhaps we live in the Hinterlands of the US, not Dupont Circle, and a good pizza is hard to find. Perhaps we enjoy making pizza; it is fun to be self-sufficient, gustatorally speaking, and we can make a very decent pizza with a pizza stone, a long resting time, and filtered water. The possibilities are endless. But it does not seem to occur to Mr. Yglesias that the rest of the world is not just like him, only with less money and maybe a bit more hair, depending on the region.

Most of the rest of the world did not come from a wealthy family of writers, and by happenstance become a writer themselves. They do not live in million dollar homes or go to Harvard or prep school. Most people do not have very many options in life due to circumstances out of their control. The fortunate few who are relatively wealthy are still nowhere near as wealthy as Mr. Yglesias.  Most people are forced to think about bodily harm and poverty because they are one workplace accident or job loss or illness away from such dire economic circumstances. Mr. Yglesias is not and cannot imagine what it would be like to be one of these anxious masses.

Which is odd because we don't have to be poor to have empathy for the less fortunate. We just have to have a little imagination, a little curiosity, and a little emotional development. Our parents teach us to think about others, to consider others' needs and wants and pains as well as our own.  Or perhaps our parents and the rest of our society teach us that there are different rules for the valuable and the, uh, less valuable.

And that is the how and why of Matthew Yglesias's latest oopsie, his statements that showed a callous disregard for the consequences of his policies and philosophies. If people don't want to work in an unsafe factory in Bangladesh they can just find some other job. After all, unsafe American jobs are available and highly paid (he says), so surely unsafe Bangladeshi jobs must simply be another option in the marketplace that one can take or leave. Just as Mr. Yglesias's wallet is Everyman's wallet, his economic options are Everyman's options.

Safety rules that are appropriate for the United States would be unnecessarily immiserating in much poorer Bangladesh. Rules that are appropriate in Bangladesh would be far too flimsy for the richer and more risk-averse United States. Split the difference and you'll get rules that are appropriate for nobody. The current system of letting different countries have different rules is working fine. American jobs have gotten much safer over the past 20 years, and Bangladesh has gotten a lot richer.

Because they are poor, Bangladeshis must accept unsafe working conditions. A risky job is better than no job, right? There are rules for the rich and there are rules for the poor. It's just the way it is.

Megan McArdle agrees. After all, nobody can do anything ever. Why should we invade other countries with our safety standards when they make our goods? We invaded Iraq, and look how that turned out.

You can argue that the workers shouldn't face those terrible tradeoffs, but absent an immediate revolution, they do. Should we shut down a factory that provides jobs, and great danger, or should we let it continue to operate, even though it may harm future workers who may not really grasp the risks? I don't know the answer to that in my own country. How can I answer it for Bangladesh? 

Even if we allow that the Bangladeshi government is thouroughly captured by the garment interests, it doesn't therefore follow that our intervention will be an improvement . . . just as you can think that Saddam Hussein was a horrible dictator who was dreadful for his country, and still think that the Iraq War was a bad idea.

What Erik Loomis is proposing is left-wing economic imperialism. It's not as bad as the version where you invade a country and take their stuff, but it has many of the same deep problems. We are susbstituting our choices about the safety and employment tradeoff for the judgement of people who are closer to the situation, and far more invested in the country. Maybe they're terrible people, but even so, this is just inherently problematic--something that the left understands quite well when Westerners start questioning the choice of economic systems, or left-wing strongmen, in the developing world.

Watch out liberals, safety regulations lead directly to Pinochet.