The Chart the Debt Alarmists Don't Want You to See
How good is Thomas Piketty's forthcoming book Capital in the Twenty-First Century? So good that it makes tons of incidental points that are amazing and probably worthy of a whole book of their own but that have almost nothing to do with Piketty's main point or core thesis. For example, in this chart, which I made to be more readable than Piketty's black-and-white charts, he shows that on a net basis the United States of America does not have any public debt and perhaps never did.
The conventional way for debt scaremongers to measure the national debt is to compare gross public debt to GDP. But the normal way you measure the debt load of a business or a household is to ask for a net figure. Just because you have hundreds of thousands of dollars in mortgage debt doesn't mean you're a pauper. In fact it probably means you're a rich person who owns an expensive house. It is of course possible to take out a large mortgage and then end up "underwater" because house prices decline, but it's simply not the case that a large amount of gross debt is a sign of overextension. It's typically a sign of prosperity and creditworthiness.
It's Probably Good News That GOP Leaders Won't Embrace Dave Camp's Tax Plan
Rep. Dave Camp (R-Mich.) has finally released his long-awaited blueprint for tax reform (PDF), and it's a bit of an odd duck. It doesn't raise any revenue and doesn't make the overall tax code much more progressive, so liberals don't love it and it's difficult to see Democrats being eager to vote for it. At the same time, Camp really is pretty bold in taking on some special interests and sacred cows.
He limits the mortgage interest tax deduction in a distributionally progressive way. He also tackles the state and local tax exemption in a way that's part trolling of blue-state politicians, but also a genuinely sound reform. He has a version of a bank tax. He curbs the "carried interest" loophole. There's good stuff in here. Too much good stuff for the GOP leadership, which, per Jake Sherman and Kelsey Snell, is not exactly leaping at the opportunity to embrace Camp:
Asked if this bill was reflective of the House Republican position on tax reform, Boehner said “you’re getting a little ahead of yourself.”
“It’s time to have a public conversation about the issue of tax reform,” Boehner said. When pressed specifically on changes to the financial services industry, he replied by saying “bla, bla, bla, bla.”
Obviously this makes Camp look a little bad. When Paul Ryan writes a budget, everyone falls in line behind him. When Camp writes a tax bill, everyone runs for the hills.
But from the standpoint of actual legislating, this is actually the good option. Realistically, the odds of major tax reform passing in 2014 are nearly zero. Same for 2015 and 2016 and so on and so forth because legislating is hard and tax reform is especially hard. But were tax reform to happen it would happen precisely because of collaboration across the aisle between some entrepreneurial legislators. Creating a polarized debate between party leaders would be totally counterproductive.
The Guy Who Wants to Bring Subprime Lending Back
Binyamin Appelbaum brings us the story of Bruce Marks, the man who wants to bring subprime mortgage lending back.* He leads a nonprofit called the Neighborhood Assistance Corporation of America that has $10 billion in funding from Bank of America to, well, you know make loans to people who can't make a down payment and can't withstand a credit check.
It has enough money to mint about 50,000 homeowners, but Mr. Marks has a larger goal. He wants to show that it is possible to lend to lower-income borrowers on terms that are profitable and sustainable. He wants to expand homeownership. He wants to redeem the original idea behind subprime lending.
“I think that everybody should have an opportunity to own a home,” he said in a recent interview. “We’ve got to rekindle hope in people, especially minorities who threw everything into the dream of homeownership and lost it.”
To my mind, this just highlights the cost of all the public policy that goes into "encouraging" homeownership in the United States. Having started down the road of funneling massive subsidies to people who go into debt to buy houses, we create a situation in which people who can't go into debt to buy houses are being disadvantaged in a meaningful way. So then it seems to make sense to push the envelop in terms of what kind of lending strategies are facilitated by bank regulation. After all, it really is a problem to be locked out of homeownership in America.
But the right way to address this would be on the other side. Curb subsidies for mortgage debt. Curtail restrictions on multifamily construction. Focus on boosting incomes, not credit access. Make a life of renting a more viable one.
*Correction, Feb. 26, 2014: A previous version of this post misspelled the last name of Binyamin Appelbaum.
Chinese Bootleg DVD Marketing Needs a Little Work
China is well-known for its bootleg copies of Western intellectual property, but it seems that the marketing aspects of the industry still haven't perfected their work:
Chinese bootleg of OLDBOY remake features the best review quote. pic.twitter.com/tdV4vTgsMl-- Hi, I'm Kevin Church (@Kevin_Church) February 26, 2014
In the American context, I would say that's an unnecessarily harsh review. For better or for worse, American audiences are habituated to watching English-language films and are unlikely to check out a Korean movie. The remake is perfectly enjoyable. On the other hand, I'm not sure why a Chinese audience would want to see it rather than the original.
Even on an All-Pizza Diet You Can Still Eat Carrots
Julie Scharper at the Baltimore Sun has an amazing profile of a man who eats pizza every day and in fact subsists on a nearly all-pizza diet. It sounds super-fun.
Janssen said he ate a normal "meat and potatoes" diet when he was growing up, but decided to stop eating meat for ethical reasons when he was a young teenager.
And, since he didn't like vegetables, he started only eating pizza.
"Nothing to me tastes as good as pizza," he said. "Why should I eat a carrot when I can eat pizza?"
If you want to try this at home, I might suggest putting some carrots into your pizza sauce. There are no carrots in a canonical New York–style pizza sauce, but Mario Batali's basic tomato sauce recipe devised with pasta in mind adds some carrot to the tomato and onion and herbs, and it's great. That's still not going to be a huge nutritional boost, but in terms of trolling everybody I think it would be a major advance.
New York Auto Dealers' Lobby Prepping New Anti-Tesla Legislation
Tesla is currently unable to sell cars in Texas, due to many American states' fascination with protectionist legislation for car dealers. Now some legislators in New York, apparently joined by the state's governor, want to adopt similar legislation in the Empire State. Precise practices vary from place to place, but the general spirit of the regulations is that instead of a manufacturer selling cars to consumers, they should sell cars to dealers who mark them up and then divide the profits with state legislators.
Oh, sorry, it's about protecting consumers.
[Deborah Dorman] said the bill was designed to protect consumers because it required companies to create a storefront in the state and was not directed at Tesla because it sold electric vehicles. Some environmentalists have claimed the bill unfairly targets electric car manufacturers.
But protecting them from what? OK, actually it's about protecting car dealers:
“Everyone is selling electric cars, it has nothing to do with that,” she said. “If you allow someone to come into the market with no overhead, that's an unfair advantage,” she said.
It's definitely an advantage but is it unfair?
One of the great things about the journalism industry is that thanks to the First Amendment, it's very challenging for incumbents to try to use this kind of business strategy. Owners of print magazines can't complain that it's "unfair" for Slate to enter the marketplace with its low-overhead Web-first strategy.
Scotland Mostly Sells Scotch Whisky
Scotland is best known for its Scotch whisky, but the economic aspects of the Scottish independence debate have mostly centered on North Sea oil. And yet it turns out that at the end of the day the Scottish people really are mostly selling booze not oil:
Malt state: over half of Scotland's exports fall into 6 categories, the largest of which is whisky pic.twitter.com/pe9NxHybkN-- Eric Rauchway (@rauchway) February 26, 2014
About half the world's whiskey is produced and consumed in India where UB Whiskey churns out beverages that have little appeal to people outside the subcontinent. But economic growth in China and environs has produced a booming demand for higher-end booze, greatly benefiting producers in Scotland and the United States alike. Because Scotland is really small, that adds up to a much bigger difference in their national aggregates.
The Entitlements Debate, in Two Tweets
Here's Sen. Orrin Hatch (R-Utah) arguing that it's bad for the government to try to reduce the amount of money it spends bolstering the living standards of senior citizens:
"These Medicare Advantage cuts are misguided, threaten a successful program for seniors, and must be overturned” http://t.co/tEh3zu8fLd-- Senator Hatch Office (@SenOrrinHatch) February 24, 2014
And here's Sen. Orrin Hatch (R-Utah) arguing that it's bad for the Obama administration to refuse to reduce the amount of money it spends bolstering the living standards of senior citizens:
It’s sad to know that Pres Obama has taken chained CPI off the table. We need to get serious about entitlement reform http://t.co/Gbcvl4JRDq-- Senator Hatch Office (@SenOrrinHatch) February 25, 2014
Do note here, however, that while there is hypocrisy about entitlements in the air, it's not a question of pure hypocrisy. The CPI issue and the Medicare Advantage issue differ from each other in that while some of the benefits of excessively generous Medicare Advantage payments make their way to senior citizens, a fair amount of the value is captured by insurance companies and doctors and hospital executives. Hatch's proposal on chained CPI is to simply reduce cash Social Security payments, directly taking money out of the pockets of the elderly.
Apple Doesn't Need a Mega-Acquisition to Think Bold
Recent large-dollar acquisitions by Google and Facebook have created a new surge of chatter about the idea that Apple is being excessively cautious with its cash and ought to be out there spending on some exciting high-profile acquisitions.
John Gruber is right to be skeptical of this idea. Firms tend to make mistakes when they betray their own cultures, and it's simply not in Apple's nature to make that kind of move. Apple does acquisitions, but they tend to be relatively modest in scale and aimed at incorporating specific technologies into Apple's products. The kind of thing Facebook is doing with Instagram and WhatsApp where it buys a big well-known company and then basically just socks it away for future consideration isn't the Apple Way, and there's no sense in trying to change that.
That said, I don't really think it can be denied that Apple's gargantuan stockpile of cash has become more of a distraction for management than a useful tool for flexibility. Adding more cash to the pile is hardly the best way to help the company over the long term at this point.
So why not cut prices?
The high prices and high margins for the flagship iPhone model—the iPhone 5S, currently—make a ton of sense to me. This is the most popular phone in the world at its current price, and during peak demand times Apple always struggles to produce as many phones as people want to buy. So thumbs up for high prices and high margins. But what about Macs? The PC industry is now shrinking, but it's shrinking slowly and Apple has such a small share of the overall PC market that it would be easy for Apple to increase sales and strengthen its overall platform by making some of this stuff cheaper. By the same token, the Thunderbolt Display is just a fantastic piece of equipment but almost nobody is going to buy it at its price.
But more importantly, it seems to me that there's a strong case for aggressively priced downmarket iOS devices. The iPhone 5C isn't on the cutting edge of technology, but it's hardly a piece of junk. If priced as a low-margin device, it would be a huge hit. Same with the non-retina iPad Mini. Apple makes so much money from its core sales of state-of-the-art iPhones and iPads that making the lower-end iOS devices genuinely cheap would still leave them with a growing cash stockpile. But it would also make these devices exactly the kind of devices Apple likes to make—great devices. The 5S would be the best phone, and the 5C would be the best value phone.
More NYC—a Progressive Campaign for Upzoning New York
It doesn't exactly have cutting-edge Web design, but yesterday Nathan Newman unveiled a new organizing campaign he's calling More NYC—essentially an effort to build a progressive pro-development coalition for New York City.
The core of the idea is to zone for more residential density in key high-demand areas of Manhattan (that's the pro-development part) and then do a left-wing value recapture scheme. Essentially instead of the backdoor tax of an inclusionary zoning mandate where for every seven units of market rate (i.e., very expensive) housing you need to include two or three subsidized units, he wants to make developers simply pay a straightforward tax. Then that tax revenue will be used to directly finance the construction of affordable housing units in other lower-cost areas of the city and to finance public services. This is very much the economically sound take on things like IZ—better to do it directly as a fee and then use the money efficiently than to create a tangle of mandates.
At any rate, it's a very interesting idea. Michael Bloomberg had a pro-development and pro-developer public image due to a handful of high-profile upzonings and his general rich guy-ness, but, as Sarah Laskow has recently written, the actual zoning record is much more complicated and vast swathes of the outer boroughs were actually downzoned during the Bloomberg administration.
Somewhat shockingly, she writes, "the city planning department doesn’t track, for instance, how much potential space was gained or lost" during rezonings so it's not actually possible to do a straightforward calculation of what the net impact of Bloomberg-era zoning was. The one thing we really can know for sure is that there are potentially huge amounts of economic surplus to be created through broad upzoning. The question is who can create the political coalition that would unlock that surplus, and what would its objectives be. One possibility would be a broadly libertarian or "pro-business" coalition, but another would be the coalition that Newman is proposing—one that would unite the interests of private-sector labor unions in the building trades with public-sector unions that need more tax revenue.