Monday, January 25, 2010

A good definition of "independents"

Or at least I think this Newsweek article about Obama's relationship with independents defines them in a way that describes my attitudes pretty well:

They yearn for "good government"—government that is open, fair, efficient, free of special interests' domination, and nonpartisan or bipartisan in spirit. They find no glory in ideological combat; they see it as destructive. They search for leaders who exhibit a sense of good will. They tend to fret about deficits and debt, but not in a reflexively antigovernmental way. They are not against social programs, but want them administered with old-school thrift. They are not "centrists" in the sense that they exist in some mathematical middle ground between "left" and "right." Nor are they necessarily angry "populists," eternally resenting and distrusting anyone with any power. They are outsiders who wish Washington were a better place

Wednesday, January 20, 2010

Brown victory in Massachusetts

So Massachusetts elected a conservative Republican to succeed Ted Kennedy. I'm not a fan of many of his positions. For example, I do not support waterboarding (I think it undermines our values and is not terribly useful), I support some form of cap-and-trade, and I think our health care system is flawed (although I don't claim to know enough to accurately judge whether the Democrats' proposed overhaul would make things better or worse).

But I'm actually happy that he won. Why? Because regardless of how I feel about his individual positions, I am a fan of competition. Having one party which is able to exert its will unchecked seems to me to be far more dangerous than any particular particular issue going some way that I don't like. Competition is good in the marketplace, and it's good in government because it reins in the worst excesses of either side. Compromises in legislation and policy are ugly sausage making, but nevertheless it's necessary to get any sausage at all, much less sausage that is edible.

Thursday, January 14, 2010

Punishing banks

Today the Obama administration is proposing hefty new taxes on large banks, including ones that never took TARP money or have paid it back.

This has "bad idea" written all over it. It is nakedly vindictive and punishing people and companies for the sin of bad business practices. (And where the greater sin of actual fraud took place, tax policy in place of judicial action simply makes no sense, especially since it punishes the honest as well as the guilty.)

I don't mean to diminish the emotional appeal of the proposal. All taxpayers are (or should be) justifiably angry that they had to bail out the industry, and it is absolutely unseemly to see those very banks handing out huge bonuses to their executives. Alas, emotion and smart policy are rarely connected, and today's proposal from Obama is populist pandering at its worst.

But if we calm down for a moment and look at the situation, we see that we had banks that were teetering on the brink. We held our noses and gave them billions of dollars with the express goal of stabilizing them so that they could live another day to make another loan. They did, and in fact have been making profits (which is precisely the key ingredient to the very stability we wanted) and those banks that have been making profits have been paying back the TARP money. Wasn't that precisely our best-case scenario?

In the case of one of the banks most vilified for bonuses, Goldman Sachs, they paid it back in full (and my understanding is that they never wanted the money in the first place). In other words, they did exactly what we asked them to do, more quickly than we expected, and now we want to punish them for it?

There are many good reasons for reforming the financial industry. In particular, we need to ensure that no company is "too big to fail" (as I've posted before, this is not a statement of size per se but rather a statement of systemic risk posed by a company) so that we can let companies that make bad bets fail without worrying that they will bring down the entire economy with them.

This tax proposal from the administration is nothing more than a feel-good measure that punishes the banks for playing by the rules of the environment in which they found themselves. The only word I can think of for this is "stupid." If there was fraud, prosecute it. But if you just didn't like the way that banks responded to the incentives of the environment in which they operated, don't blame the banks - fix the incentives and regulations.

Sunday, January 10, 2010

A great article on our response to terrorist threats

As usual, Fareed Zakaria pretty well captures my thinking about how we should (and should not) respond to terrorist threats.

I think he nails it that having us spend billions of dollars making travel miserable for millions of innocent non-terrorists and diverting planes and scrambling swat teams whenever somebody crosses into a secure area that wouldn't have been secure if not for the threat of terrorism seems like doing the terrorists jobs for them (admittedly, and thankfully, minus the bloodshed). But to the critical point: it doesn't make us any safer, it is a huge drain on our economy, and it perpetuates the very fear and tension that the terrorist seeks to create. How is that possibly justifiable as "defeating terrorism?"

Tuesday, January 05, 2010

The Israeli model for the US?

I've seen a number of posts such as this one since the failed Christmas bombing attempt about whether or not it's time for the TSA to adopt more Israeli-style security methodologies.

I completely agree that the TSA seems to be a bureaucrat's idea of security rather than an actual security mechanism. While I'm sure that it actually does prevent the casual/amateur/copycat/wannabe terrorist (and that's a good thing), I think that the harm it does in terms of false positives (i.e., people getting busted not because they actually are a security threat but because they break security-related rules, resulting in a security scare) and overall expense and hassle far outweighs the benefit. And as the Christmas attempt shows, any halfway trained professional can get through TSA-style security.

The Christmas attempt also shows that fellow passengers are among the best security mechanisms available. They stopped Richard Reid, they stopped this guy.

In other words, we are spending billions of dollars and untold delays and hassles for the appearance of security, without actually providing significantly improved security. And I would argue that appearance of security is worse than actual security, because it diverts attention and resources from finding true threats.

Which goes to prove the next point, which is that the folks advocating Israeli-style security for the US are on the ball when it comes to the fact that it is not about x-rays and removing shoes, it's about behavior. While I'm not wild about the intrusiveness of this approach, it's certainly a lot more effective and a lot more efficient.

My main concerns with Israeli-style security are twofold: scalability - we have dramatically greater numbers of air passengers, and the necessary intrusiveness which violates both our explicit constitutional protections and implicit expectations with respect to the degree to which we have to prove to our government that we have the right to travel before we are allowed to do so.

Nevertheless, I think we could learn a lot from Israel in this space and adjust our procedures to focus more on what works rather than on what "looks" secure. I suspect that we can both improve our security and lesson the burden, if only we were to take a data-driven approach to the problem.