I agree wholeheartedly with the position the editors of the Washington Post have articulated on “net neutrality”:

IN THE war over net neutrality, it’s clear where the country should end up. Americans should pay for the bandwidth they consume, and they should consume any legal content they want, without interference from the network operators that transport the packets of information into their homes. That’s not just the way to maintain the free flow of information and services on which the Internet thrives; it’s also the way to encourage service providers to improve their networks rather than just manage traffic on their existing wires.

[…]

For years, the FCC has attempted to use old law to regulate broadband. The best way out of this mess is to create new law. That would settle the jurisdictional question between the FCC and the FTC, and it would make net-neutrality rules legally unassailable. Sen. John Thune (R-S.D.) and Rep. Fred Upton (R-Mich.) have proposed a net-neutrality bill, but it has little chance of becoming law because it strips the FCC of some useful regulatory authorities. That shouldn’t be the end of the legislative discussion.

The part of the discussion that I find astounding is that so many libertarians and anarcho-capitalists have raised the red banner in support of the service providers who for the most part achieved their positions through government-granted monopolies as opposed to the upstarts like Google, NetFlix, or Facebook who didn’t. They saw opportunities and exploited them which would seem to me to be the free marketers’ paragon. There is nothing whatever that stopped Verizon, AT&T, or Comcast from creating world-spanning search engines, streaming services, or social media nexuses other than a lack of the will to innovate. Why should they? They got where they are by government fiat and they know they can darn well stay there by government fiat.

I’ve just published a foreign policy-related post at Outside the Beltway:

IR TOs WH NSS

If you’re puzzled by the title, it’s shorthand for “International Relations Ticks Off White House National Security Strategy”. “Ticks off” is, of course British slang for harshly criticizing. I thought the acronyms might be more eye-catching than if it were spelled out.

What do I think about it? I think that like everything else in the present administration the NSS is primarily about domestic politics. The post is a round-up of reaction, favorable and unfavorable. Yes, there has been some favorable reaction.

I disagree with T. Boone Pickens’s assessment of President Obama’s energy policy. I don’t think it’s “Kill the Pipelines”:

News that acclaimed American author Harper Lee has a follow-up book to “To Kill a Mockingbird” triggered an energy-focused parallel thought in my mind as it relates to President Obama. His views on the Trans-Alaska pipeline and the Keystone pipeline are nothing more than: “To Kill the Pipelines.”

Should the president make this view a reality, America’s energy security will be dangerously undermined, and the prospects of a prolonged downturn in gasoline prices that benefit consumers to the tune of $720 per year will be in serious jeopardy.

I think it’s actually simpler than that. I think that either a) he believes that producing less energy would be good for America and the world or b) he thinks that solar, wind, etc. can replace coal, oil, and gas for energy production and that would be good for America and the world.

I think that either of those are obviously ill-conceived. More and cheaper energy makes all sorts of things possible that would not otherwise be possible and in an economy in which growth is either slow or declining that’s vital. And if the president believes b) he’s been misinformed. The only present viable alternative to coal, oil, and gas is nuclear.

There an article at Nature on something that is almost certain to prove controversial. It is being proposed that Chronic Fatigue Syndrome be renamed “Systemic Exertion Intolerance Disease” and its diagnostic criteria be revised:

The mysterious disease known as chronic fatigue syndrome (CFS) has long defied classification, as the millions of people who suffer from it show a wide variety of symptoms. Now a panel commissioned by the US Department of Health and Human Services (HHS) has produced what is sure to be an influential report on how the disease should be diagnosed. This new definition comes with a new moniker: systemic exertion intolerance disease (SEID).

The report, released by the US Institute of Medicine (IOM) on 10 February, says that the new name better reflects the key symptom of the disease — extreme exhaustion after any exertion. It argues that other symptoms, such as poor sleep and cognitive impairment, are secondary. But some experts are already challenging the name and revised diagnostic criteria.

IMO this is a good move and advocates should view the renaming as an opportunity rather than a threat. CFS is obviously a real condition but people with it are treated too frequently as malingerers. It may take them decades and a parade of physicians before they get what little treatment there is for the condition. If the new diagnostic criteria are clearer and more targeted, the renaming might be an advance.

There are better approaches to resolving the problems in Ukraine than escalating the conflict there, the path the U. S. is on, and Raymond Smith proposes one in his article at National Interest. He begins by articulating something near and dear to my heart, the idea that policy should advance vital national interests:

I suggest that America’s vital national interests can also be succinctly defined: 1) prevent an attack on the homeland; 2) enhance the stability of the international system; 3) fulfill our security-alliance commitments. The first of these is presumably clear enough in principle; the second and third perhaps less so. We want to maintain the stability of the international system, because we are the most powerful state in it and its structure is advantageous to us. If we are perceived as unwilling or unable to maintain our security-alliance commitments, that will have a profoundly destabilizing effect on the international system.

That’s a good list. I would add an additional one: freedom of air traffic, sea traffic, and the flow of information. But that’s a good list.

Here’s the summary of Mr. Smith’s article:

• The U. S. does not have a vital interest in Ukraine.
• Russia does.
• Giving arms to Ukraine escalates the conflict.
• That’s against our vital interests.

He proposes a trilateral trade agreement among the U. S., Russia, and Ukraine that would allow Ukraine to serve a different role than it would as a NATO member:

Ukraine could be a bridge between the West and Russia, rather than a prize to be fought over. Ukraine must negotiate a relationship with Russia that both countries can live with. There is no reason that cannot include an economic relationship with the European Union that encourages desperately needed reform within Ukraine, while at the same time promoting trilateral economic ties beneficial to all three parties. The EU leadership can help with this. If we have no vital interests in Ukraine, European countries do have vital interests in not seeing a large-scale ground war break out on their continent. The clarity of our decision making on this issue would improve if we stopped demonizing Russia’s leader. He is not Hitler, and Ukraine is not Czechoslovakia. Putin is an authoritarian leader in a country that has known nothing but authoritarianism and disorder, and prefers the former to the latter. His brand of authoritarianism is, to date, less restrictive than the political practices in China, Saudi Arabia and Egypt, to name just a few. Russia considers its interests in Ukraine vital, but its objectives have been limited, as have been the means chosen to achieve them. It will escalate if necessary to protect its interests, but it would rather negotiate.

Such an agreement would need either to partition Ukraine or provide for Russian access to the Crimean peninsula and the rights of ethnic Russians within Ukraine but it’s a start.

And it has the advantage of advancing our interests rather than running counter to them as our present policy does.

There’s an article at The Guardian on the pension cliff the U. S. is facing that you might find worth reading. It’s not just public pensions that are problematic. It’s that Americans just haven’t been saving enough and the condition has persisted for a very long time.

Social Security retirement benefits were never intended to provide a prosperous retirement, merely to prevent absolute penury in old age. Although many in my parent’s generation could depend on company or union pensions in their old age, that day has long passed. When he died at a relatively young age and far from old, my dad had nothing set aside for his retirement and with multiple kids to put through college few prospects for doing so. I presume that he intended to work forever but when he died that left my mom in something of a fix.

I’ve already argued my opinion here: Social Security is here to stay for a multitude of reasons that are not merely political. Not only do I think that it’s impractical for most people to save enough to avoid penury in old age (do the math: assume less than 1% return on your savings) I think it would be disastrous for an economy that is largely dependent on consumer spending. Sure, there would be more saving. What guarantees that would be invested in the U. S. of A.?”

However, let’s turn to another question and just in time for President’s Day! It is time to revisit presidential pensions? I think it is.

The move towards granting former presidents substantial pensions began when U. S. Grant died destitute largely through having made bad investments. His widow was left with very little other than the royalties for his memoirs, paid generously by Sam Clemens, the former president’s friend and publisher.

It’s a lot different today than it was 150 years ago and former presidents earn millions through book sales and the modern day equivalent of the 19th century lecture circuit. They don’t really need us any more. Add to that few of today’s presidents are exactly paupers when they enter the presidency. Seeking the presidency has never been more of a rich man’s game than it is right now. Why pay them a pension?

I recommend you read Robert VerBruggen’s disquisition on Peter Wallison’s latest book which takes the position that government actions caused the financial crisis, a subject we’ve discussed around here from time to time. Here’s the meat of Mr. Wallison’s argument:

The story begins in 1992, when the Department of Housing and Urban Development (HUD) decided to impose affordable-housing goals on “government-sponsored enterprises” (GSEs) Freddie Mac and Fannie Mae, institutions that buy mortgages and securitize them to provide liquidity to the market. Historically, Fannie and Freddie had been rather conservative about the loans they acquired, insisting on sizable down payments, good credit histories, and reasonable debt-to-income ratios.

At first the change wasn’t a big deal. In fact, the initial goal–that 30 percent of the GSEs’ loans be to borrowers below the median income of the area they lived in–was below what the GSEs were already doing. There’s nothing inherently wrong with loaning to these “LMI” (low- or moderate-income) borrowers, so long as they demonstrate an ability to pay and a history of meeting their credit obligations.

But the goals, which covered several other categories besides LMI, quickly ramped up. By 2001–at which point the bubble had been expanding for about four years, judging by the Case-Shiller index of home prices–the LMI goal reached 50 percent, and in 2008 it was 56 percent. The goals certainly seemed to work: The GSEs’ loans to the targeted categories closely tracked the percentages they were required to meet.

Wallison does a terrific job of documenting how much of a struggle it was to find enough qualified borrowers. A 2003 Fannie presentation noted that, in the scramble to meet the previous year’s goal, the GSEs “did deals at risks and prices we would not have otherwise done.” Two years later, in another presentation, Fannie complained about “having to compromise credit standards,” deals that were “producing negative cash flow,” and exotic products that “encourage[] continuation of risky lending.”

However, there’s a counterargument, too, something I’ve mentioned occasionally:

Min has noted, for example, that while the federal government owned or guaranteed 67 percent of all mortgages, it was responsible for just 32 percent of serious delinquencies–while private-label securities generated 13 percent of loans and 42 percent of serious delinquencies. Similarly, at a recent event for Wallison’s book, Moody’s analyst Mark Zandi pointed out that, relative to debt outstanding, realized losses on residential mortgages at Fannie and Freddie were just 3 to 4.5 percent, compared with 6 percent for banks and 23 percent for private-label securities. Jason Thomas of the Carlyle Group has written that, while Fannie and Freddie imploded and needed to be placed into conservatorship, had they “simply been required to hold equity capital in roughly the same proportion that banks are, shareholders would have absorbed all of the losses.”

It seems to me that there’s a counter-counterargument. As house prices rose it might be the case that the ever-larger loans became increasingly difficult to secure and that the bubble ended when the market “froze” for lack of ability to purchase the stock that was coming onto the market. I don’t know that’s the case but it would certainly be an interesting avenue for someone to research.

I don’t want to dwell on the “who shot John?” aspect of this question but to turn to a different aspect. What was the actual policy objective of the government’s actions and did they succeed? It seems to me that if the objective was to make lower income people homeowners it was only partially successful and it was a byzantine way of accomplishing the objective. If that were the objective, why not just give them houses?

If, on the other hand, the objective was to saddle lower income people with debt, it was wildly successful and the project is still in full swing in the form of educational loans.

Finally, if the objective was to inculcate financial responsibility in lower income people, it was a complete flop. It might even have been counterproductive. I would go on to question the legitimacy of federal government projects to make better people not just from a moral standpoint but from a practical one. You can improve the human condition but humans are not perfectible and projects intended to solve human problems by perfecting human beings are doomed to failure.

Early voting has started in the Chicago mayoral election and I am being absolutely deluged with robocalls. They’re coming in at the rate of from one to four an hour. I honestly don’t know why. Everybody knows the outcome already.

Emanuel will be re-elected. There might be a run-off. In fact there’s likely to be a run-off with five candidates, each with his own constituency. Based on current polls of registered voters certain to vote in the election, Emanuel has 42%, Cook County Commissioner Chuy Garcia has 18%, Alderman Bob Fioretti has 10%, Willie Wilson has 7%, and Dock Walls has 2%. I’m not even sure that one or more of the candidates pulling out and throwing his support behind Emanuel will avoid a run-off. In some sense every other candidate is an anti-Emanuel protest candidate.

He only won by 55% when he was first elected. In Chicago terms that’s a squeaker.

There’s a post I found genuinely interesting at Reason.com on the gulf that separates most people’s opinions about public pensions from those held by public workers. I recommend reading the whole thing.

Here in Illinois I believe the issue is moot. Under the state’s constitution the legislature doesn’t have the power to correct a problem that’s completely out of control. As I see it there are only two, equally politically impossible solutions: amend the state’s constitution or stagger along until the state takes the unprecedented step of declaring bankruptcy.