Sunday, April 23, 2017

That time I chatted with Greg Mankiw...

On Saturday, I attended the annual Economics Teaching Workshop hosted by the University of Kentucky Gatton College of Business (alum, '02). The keynote was N. Gregory Mankiw. If you make a Venn diagram with a circle of of all economists and a circle of all people who have influenced me then Mankiw is at the intersection. Mankiw's Principles textbook (particularly Principles of Macroeconomics), his blog, and monthly column in the NY Times does a lot to explain economics to a lay audience, something sorely missing since good communicators like Milton Friedman have passed. Mankiw was one of the pioneer economics bloggers, and i'm not sure I'd still have this blog if he didn't still have his.

I got to tell Dr. Mankiw one of my favorite teaching stories: I first adopted his Macro textbook while a Grad Assistant (2006-2007) and irked the ire of my colleagues who told me Mankiw was "too conservative" and would be dangerous for young minds. Fast forward to 2009, I again adopted the text at another university where I was teaching full-time and was warned Mankiw was "too liberal" and would be dangerous for young minds. This symmetry is my idea of perfection. (His book came with the highest-quality powerpoints, Aplia, and test banks which was actually more important to me than ideology.) So, it was truly an honor to thank his hand and say "Thank you." I also got to ask him about my favorite topic, nominal GDP level targeting (see below).

Mankiw's keynote address was titled Today's Economy and its Discontents, which was generally exploring the idea of "secular stagnation" without using that term. Graphs he presented came from usual sources you've seen over the years if you have followed this issue. I have typed my notes from his talk below:

-Piketty and Saez note income gains in the US are increasingly going to the top one percent.
-In the US, there is slower growth of per-capita income relative to the early 1970s (as measured in 15-year averages), the decline has been steady but more markedly slower since the 2008 recession.
- However, this data is distorted by US tax-code changes over the years. As the tax code changes, people report income differently (ex: pass-through entities) and the tax code was never meant to be a way to measure economic data.

But supposing the data on income growth generally is correct, what explains the slower growth?
- Labor-force participation has declined, a demographic problem.
- Mankiw highly recommends Robert Gordon's book on why productivity growth has slowed. (Gordon summarizes some of his research in this paper  )
- One paper finds we have many more researchers than ever but flat total-factor productivity growth.
- Without mentioning Tyler Cowen, he makes similar arguments as Cowen's book.
- The boost from women entering the workforce has now been fully experienced.
- The latest inventions do not bring about the gains to productivity that ones 50 years ago did. (My example: We have fancier toilets today, but indoor plumbing was the real revolution.)
- What about the spread of markets worldwide and rapid growth in developed countries like India and China?
- Stagnation in productivity is seen in most-developed countries but less so in developing ones.
- This is little comfort to the American or European voter.
On inequality of growth in income:
- Mankiw also recommends Goldin and Katz's book the Race Between Education and Technology, calling it "The best explanation of inequality."
- Technology is replacing low-skilled workers. (His example: the ATM. Driverless trucks can't be far from now.)
- Education is a force to make people more equal. But increasingly, gains in earnings are only to Masters degrees and above.
- Educational advance has slowed in recent years, fewer people in US are pursuing the most-advanced degrees.
What about trade?
- Surveys show economists unanimously believe America gains from allowing China to produce goods in which it can do so relatively more cheaply than the US while the US does likewise.
- But economists also overwhelmingly agree that workers in these industries are hurt. So, economists agree with both of these and the need is to do a better job of explaining gains from trade to the general public.
- Gains are increasingly to "Superstars." The #1 draft pick earns multiples of what the #10 draft pick earns, for example.
- The women's movement and assortive mating also play a role.
- High-educated/high-income singles marry eachother, concentrating the wealth divide.
- In the 1960s there was a negative correlation between husband/wife earnings-- if the husband got a raise, the wife could work less.
- Now, husband and wife income are positively correlated.
How do we address the root causes of slower growth and widening inequality?
- Prescriptions are difficult and filled with caveats.
1. Education, with patience for results.
- Knows one researcher who is convinced that early preschool really helps. Implementing the perfect preschool law, however, would take another 20 years to have an impact when the first beneficiaries enter the labor force.
2. Open the door to skilled immigrants. "We ought to be handing out green cards with diplomas." (This struck me as not a good idea for the less-developed countries these students came from, however.)

What about the tax code?
His graph illustrated that changes in tax rates among quintiles from 1980 to today is quite modest relative to the change in income distribution growth over these decades-- Obama's rates were not that different from Reagans and the tax code doesn't appear to matter much.

Business taxation (See Mankiw's article in Friday's NY Times, he summed up his points in this lecture.): 
- The rate (not very interesting), worldwide vs. territorial, income vs. consumption, origin vs. destination-based.
- It's easier to tax at destination rather than at origin (how do you define where the multinational iPhone or pencil is made?)

Is there hope?
- Again, global extreme poverty and disease are in decline.
- US citizens at the federal poverty level are poorer than 85% of other US citizens, but richer than 85% of the world.
Rather than "Make America Great Again," Mankiw would like to "Make America Grateful Again," because we truly live in a wonderful age of prosperity.

Questions from the audience:
- I asked Dr. Mankiw whether he thought a NGDP level target would help. He admitted he had completely avoided monetary policy (because "that would require its own lecture") he voiced tacit support that it might be useful. But he felt like it's less useful when the instruments available (the interest rate, expectations channel, etc.) may not be as powerful as NGDP level target proponents hope, particularly when the interest rate is at the "zero lower bound."  

- One person voiced a hypothesis that we have too many researchers researching things not really useful to productivity growth. (Ex: Trying to find whether there was ever water on Mars instead of finding water for starving people in Africa.)

- What about household formation, as outlined in Charles Murray's book Coming Apart?
- Mankiw really likes the Murray book, household formation and stability might matter.

- What about a carbon tax, any hope of that?
- Mankiw revealed he and another economist had met with Donald Cohn at the White House to speak specifically about a carbon tax, and now he was hearing news reports that there was a "debate" inside the White House. He was not optimistic given Trump's favoritism of coal on the campaign trail, but is optimistic that there are several "debates" about issues like trade more favorable to mainstream economics.
- On trade, he felt that Kevin Hassett was probably in agreement that trade deficit doesn't matter and that the Administration would be better off working on other policies.
- A student speculated that the rising cost of college tuition relative to return on investment might explain the graph of slowing educational attainment. Mankiw noted that education economics, education as a signalling device, etc. is its own problem.

Issues I felt he did not address:
- Tyler Cowen's hypothesis that since leisure time and activities have never been cheaper (think YouTube and Twitter), along with basic necessities, people need to earn less to have the basic standard of living they wanted, hence have traded more work for leisure.
- Similarly, Cowen's "complacent class" thesis.
- The role of consolidation of major firms (banks, Time Warner-AT&T, etc.) and market power pushing out competitive forces and massive economies of scale discouraging start-ups.

In all, it was a good time. Mankiw is taller than I expected for some reason.

Sunday, April 16, 2017

The World of Jesus by Dr. William H. Marty (Book Review #9 of 2017)

The World of Jesus: Making Sense of the People and Places of Jesus' Day

This book is a good overview of the history of Israel from the Old Testament to the time of the first century AD told in very layman's terms, focusing on the "intertestamental period" and Jewish politics in the time of Jesus. I'm a Sunday school teacher who needed a better grasp of the context of the first century AD. I once heard John MacArthur, a hyper proponent of sola scriptura, say in a sermon "You can't understand the scene between Jesus, Herod, and Pilate without understanding first century Jewish-Roman politics." So, this is a good book to start learning.  Marty teaches undergraduates and this is at that level, highly readable, I recommend it to Bible study leaders. I highlighted a whole lot in my Kindle app and then was able to put those highlights onto Evernote where I can keep them as a reference forever.

I bought this Kindle book when it was a 99 cent deal. I would not, however, pay $8.99 for it. The information comes almost entirely from the Bible, Book of Maccabees, and the works of Josephus. It's mainly for Protestants who suspect it's sinful to even pick up the Book of Maccabees, much less apply it to their knowledge about the times of Jesus. (You should at least read 1 Maccabees before this book.) Dr. Marty does not point out any potential shortcomings of those sources; his goal is a simple narrative. There are dozens of names, multiple family trees, and various figures in Roman politics to keep track of, so Kindle x-ray is essential. Disappointingly, the author provides no timelines, charts, or other helps; I recommending finding a good study Bible that has these things for reference (NIV Study Bible edited by DA Carson has some helpful supplements and Rose eCharts has several charts and such available as well).  He also begins each chapter with a few paragraphs of ficticious dramatization of an event that he will later explain; these seem a bit out of place. He jumps forward and back chronologically at times to deal with issues like the temple, starting from what we know from the Bible and going back and explaining the context-- Jesus spoke about the temple, so who built the temple in Jesus' day, why did it take so long, why was it built, etc? It could have contained more information about the Decapolis, the area around Nazareth, various cites around Galilee, and more.

Each chapter has discussion questions, which are helpful both to quiz yourself on the material covered as well as think more deeply about it. Some are sure to evoke discussion. (I like this trend among Christian books today that include discussion questions, assuming either group reading or maybe just the need to retain the knowledge.) I give it 3 stars out of 5. It's short, and it will give any student or teacher a decent overview and whet your appetite to read more in-depth research into the history. I would also recommend reading Josephus' works as well as Paul Johnson's History of the Jews, various books on the Maccabean revolt, and Greek and Roman history such as Freeman's Egypt, Greece, and Rome.

Saturday, April 15, 2017

Boomerang by Michael Lewis (Book Review #8 of 2017)

Boomerang: Travels in the New Third World by Michael Lewis

I finished Liars Poker (1989) and Boomerang (2011) consecutively; I'd read some of Lewis' other works years ago (The Big Short, Moneyball, The Blind Side) and some of his Vanity Fair articles that contributed to this book. It is interesting to observe Lewis' progression as a commentator on Wall Street and the financial system over the years. Liars Poker has a rather humorous feel written from a more innocent time, but by Boomerang the choices of Wall Street traders were no longer funny as they contributed to a massive economic crisis and backlash against government institutions and the Western capitalist-democratic system itself. If Lewis is forgiving in Liars Poker, he is quite caustic and ominous in Boomerang.

Much of this book is made up of long-form articles Lewis wrote as he traveled Europe. Lewis' Vanity Fair article on Greece ("Beware Greeks Bearing Bonds") is a must-read on how the Eurozone is doomed. The government itself cooked the books and lied to the EU, World Bank, the EU, and everyone else about its budgets. What's to keep other countries from doing similarly? Lewis' stories on Greek priests owning assets is humorous, but avoiding and evading taxes is a national sport.
It may have been able to kick the can for a decade now, but the next economic slowdown or financial crisis will doom it.

Lewis starts in Iceland, whose debt crisis attracted far more attention than a country of 300,000 deserves. But the small population and limited economic potential makes the capital inflow and lending boom even more difficult to understand. Lewis was already a celebrity writer and his visit attracted attention. He was invited to speak to the Prime Minister, but everyone can see the PM there whenever he wants. As the bubble inflated, people moved from fishing to banking-- as though Iceland's banks had discovered a magic elixir that made everyone rich. Economists who had visited and given some warning of bubble bursting were roundly ignored. By the time Lewis gets there in the midst of the meltdown, he is awakened by the noise of people blowing up their Range Rovers because they can no longer make the loan payments and instead rip off their insurance company. Debts are nationalized, people are outraged, but change or prevention of the next crisis did not appear forthcoming. One cultural insight is sexism-- the ruling political party is made up entirely of men.

I suppose this book was controversial because of Lewis' commentary on cultural traits. The European crisis is the result of not only violating the Mundell-Fleming criteria for optimal currency areas but also an attempt to join diverse cultures in harmony. Greek is pretty much a developing country, one need only look back to its independence and rebuilding in the mid-1800s (after war with the Ottomans) to see institutions haven't been modern there for a while; and the monks that Lewis highlights are steepend in a culture that is ancient.

From Greece, Lewis goes to Ireland, where the problem was purely a real estate boom and bust that everyone wanted to ignore. A whopping 25% of Ireland's GDP was in the housing sector as people bought and sold houses that there were not enough to live in. Unlike the US, the big shots and CEOs went down with the banks and were bankrupt. In Ireland, people declaring bankruptcy are publicly shamed and face restrictions on activities like traveling abroad. However, Ireland nationalizes the losses of the banks themselves and justifies this in various ways. Lewis points out that Irish politicians cited law that didn't say explicitly that bondholders and creditors needed to be made whole-- they made up reasons for the bailout that just weren't factual.

Lewis then travels to the mainland, Germany. He begins citing from obscure sources about a weird German fascination with... feces. This fascination is evident in German vernacular, there are many words, idioms, and rumored sexual practices that Lewis armchair psychoanalyzes. He then relates this to how Germans got involved in the financial crisis and are currently dealing with filthy countries like Greece, that need German consent to bailouts. In The Big Short, it's the Germans who were still buying subprime mortgage-backed securities after the rest of the market was finally getting the whiff that they might be...well, feces. German bank runs also led to German bank bailouts. It is powerhouse Germany that basically sets monetary policy for the rest of the Eurozone, which is unfortunate. Greece and Ireland would benefit from higher inflation than would be tolerable to Germany, and the ECB maintained a less-expansionary policy than the US or UK central banks.
In Germany, patriotism is "taboo," contra Ireland, where Lewis writes many people are patriotic even though few Irish patriots actually live in Ireland. Lewis explains the insanity of the German-driven Greece debt restructuring, how increased austerity guaranteed that Greece would not be able to hit its next payoff target leading to the Germans to call for even more austerity, and the vicious cycle continues. Greece is the feces that Germans are fascinated with but don't want to own themselves.

Lest the American reader think the financial crisis is behind him, Lewis travels back to the US to look at the looming unfunded pension crisis that was exacerbated by the recession. From New Jersey to California, there are an estimated $3.5 trillion in unfunded state and local pension liabilities. (I live in Kentucky which, not mentioned by Lewis, is among the worst-funded state pensions in the nation, roughly 11% by some estimates.) This is on top of another estimated $3.5 trillion unfunded for federal pensions. Federal funding is one thing, Lewis focuses on California, whose budget crises seem intractable. He begins by bike riding with Arnold Schwarzenegger (there's an amusing anecdote of him hearing a woman on her cellphone mistake Arnold for Bill Clinton, "another guy with a sex scandal," the ex-Governor quips). Lewis recounts Schwarzenegger's political rise and his battle with Republicans and impossibility of balancing the budget in the face of the housing price crash. Lewis pays attention to the city of Vallejo's unfulfilled promises to police and fire fighters and the angst in the community as the bankrupt city had to cut its public protection and find revenue. There were angry meetings where the police and fire fighters held out against making concessions in their benefits while the citizens got angry-- threatening the very fabric of civic culture. This disaster faces Detroit, New Jersey, Kentucky, Illinois, and a host of others -- not to mention Puerto Rico. These unkeepable promises of politicians that drive Lewis to real moralizing, for which he draws on various other writers.

Lewis makes the point that a culture of instant gratification is killing society. We want our cake now, not when we're 67. As Raguram Rajan pointed out in his book on the financial crisis, housing was one vehicle for people to get rich quick. Politicians loved Fannie and Freddie and low-interest loans for low-income people because housing creates jobs for low-skilled, middle-class people, helps people feel wealthy and spend more, raises tax revenue for localities as houses increase in value, and happier communities vote for the incumbent. Americans have a time-consistency problem-- we know for our long-term health we should eat right and exercise, but today it feels so good not to do those things. Same thing with credit, we know we'll have to pay it in the future but we want it now; and then when our interest rates reset we cry "foul." Lewis fears that society, as a whole, has lost its ability to self-regulate. As developing countries embrace Western lifestyles and marketing, they too want to "super-size" their fast food and drive up credit card debt (I would personally point to Turkey, currently, as an example). Like all the other financial crises before it, the problem is so obvious that no one wants to see it. Lewis finds this maddening. He's been writing about this behavior since Liar's Poker, and Boomerang makes it sound like he's finally pulling his hair out, saying "Stop the madness!"

I give this book 4 stars out of 5.

Thursday, April 13, 2017

Liar's Poker by Michael Lewis (Book Review #7 of 2017)

Liar's Poker: Rising Through the Wreckage on Wall Street

I finished Liar's Poker (1989) and Boomerang (2011) consecutively; I'd read some of Lewis' other works years ago (The Big Short, Moneyball, The Blind Side) and several of his articles. It is interesting to observe Lewis' progression as a commentator on Wall Street and the financial system over the years. Liar's Poker has a rather humorous feel written from a more innocent time, but by Boomerang the choices of Wall Street traders were no longer funny as they contributed to a massive economic crisis and backlash against government institutions and the Western capitalist-democratic system itself. If Lewis is forgiving in Liar's Poker, he is quite caustic and ominous in Boomerang.

Lewis lucked into a job at Salomon Brothers by striking up conversation with the CEO's wife at a posh dinner party in England. Lewis had earned an economics degree from the London School of Economics, and apparently in the early 80's everyone did that to become a trader. Lewis describes the job interview and the long orientation process. Supposed geniuses from Princeton and Harvard didn't seem to know much about finance but they wanted to be part of the culture that was Salomon Brothers. It had less to do about what you knew and more about who you knew and the attitude with which you carried yourself.

The reader is introduced to people like the "Human Pirahna," and the inner workings of a rather dysfunctional management style where roles are driven more by personalities than skills. Salesman have to sell, while traders do the math or know score. Everyone plays off of one another's ignorance in order to sell their junk. Lewis is played as a fool in one of his first deals, being praised by the company bosses for "jamming" (offloading) junk at the expense of a poor sap client. Lewis relies heavily on another man for info while selling and trying to build business for Salomon, something Lewis was apparently skilled at. Everyone is faking it until they make it, maybe never understanding the global financial market and how it affects bond prices, and skill is obviously an illusion.

The 1980s was the real estate boom and bust era and the invention of the junk bond. Lewis describes well the frathouse culture of Salomon, where most women didn't have a chance and the greatest compliment for traders and salesmen was to be a "big swinging dick." There is a bizarreness to the culture, Lewis describes "freeding fenzies" where traders would order and consume massive amounts of food-- an image of Wall Street excess where there was no such thing as "too much." Liar's Poker is the name of a game the big-shots play that is about being willing to raise the stakes, bluff heavily, and hope you're lucky.

Salomon pioneered trading in the mortgage-backed security and the implications of securitizing American home loans, even if they were made up of bad loans, seemed apparent to Lewis in 1989. This experience certainly helped him write The Big Short decades later. The 1980s featured leveraged buyouts and Salomon wasn't immune to rumors of corporate raiding. The author chronicles the downfall of Michael Milken, the junk bond market, and the 1987 crash leading to layoffs at the firm. Warren Buffet was called on to bail out the firm at one point. Lewis writes of the betrayal many felt in the company as management battled on what businesses Salomon should pursue or shut down. Lewis apparently kept his job but left voluntarily in 1988.

I listened to Lewis interviewed recently on a podcast and he briefly summed his time at Salomon and the disconnect he saw between prices--the earnings of traders and their firm-- and the actual value added to the economy. He was from New Orleans and had been taught values from working people-- he knew who was earning his money and who was a fraud. It's clear the financial largess and prowess bestowed upon Wall Street chafed at Lewis, and following this book up with Boomerang really gives one an impression on how much more chafed Lewis has become as the world refuses to learn from crises and just repeats them.

In all, I give this book four stars out of five. I assigned The Big Short as required reading in a Money and Banking course I taught in 2011; I wanted to inoculate students from any rosy visions they had of Wall Street corporate culture or anyone who claimed to be a financial expert. This book serves just as well in that capacity, maybe better since it's of the perspective of someone who was just out of school at the time. 4 stars out of 5.

Saturday, April 08, 2017

Made to Stick by Chip and Dan Heath (Book Review #6 of 2017)

Made to Stick: Why Some Ideas Survive and Others Die

This book is one of the most-recommended business books and was a disappointment. It's three stars. They have sequels, I might get to them, but it's not high-priority. The book is basically a continuation of the research highlighted in Malcolm Gladwell's Tipping Point. If you're familiar with heuristics and cognitive biases (Kahneman and Tversky) then you may not glean much from this book. Maybe, as the authors remind me, I just suffer from the curse of knowledge-- where I know something and forget what it is like not to know it. The tips of the book are useful to anyone who needs to create a message, from a team manager trying to instill a direction or process, to a pastor who wants to make his sermon or church's mission statement memorable.

I finished this in early 2017 and applied this book to explaining why Trump won the election:
Trump's campaign had a "sticky" slogan that everyone can repeat-- Make America Great Again (MAGA). (The authors give the example of the successful Texas anti-litter campaign "Don't Mess with Texas," very similar.) This hearkened back to the Presidential campaigns of the 1800s where candidates had theme songs played at beer halls and train stops along the way (Thanks to the Washington Post's Presidential podcast for the knowledge there). Whoever had the best song won. (Turkey and other countries today have catchy songs in their political commercials today.) MAGA fits the Heaths' six principles for making an idea "sticky," their acronym SUCCES:
Simple - "Find the core of your idea" - MAGA is an idea summed in four words.

Unexpected - Generate curiousity about your idea. If it's counterintuitive, they will think about it more and thus be more interested.
This is the "again" part of MAGA. To me, that's counterintuitive because we're already great.

Concrete- Make sure an idea is memorable. Use concrete images and proverbs. It helps if you narrow the scope. The authors point out that if you ask people to name white objects in a kitchen, they will struggle to point out many compared to when you ask them to "name white objects in a refrigerator." You narrow the scope and it's easier, even though all items in the refrigerator are also found in a kitchen.
This is the "America" part of MAGA-- it's not about broad concepts like the "future," or       "freedom," the entire world, or human rights. America is narrow enough.

Credible- It can't just be a compact phrase or a "sticky, untrue statement." It must be true and convey an idea. Be "compact and core."
MAGA is compact and core but you can argue it isn't credible. If America is already great (what I argued made the statement counterintuitive) then the statement isn't true. I think we've seen enough lies repeated as truths through 2016-2017 (I know I go to Snopes to debunk fake news stories now more than years ago) that this idea doesn't hold. Every person clings to ideas you think are true but are actually not. It CAN be a sticky, untrue statement in 2017; people will repeat the lie until it is true (Goebbels). In fact, the authors examine various urban legends and myths that were "sticky" even though they were false.

Emotional- The idea must create empathy and appeal to identity. MAGA appeals to patriotism (and also nationalism). The emotional response helps make it sticky, which is also why I would say it can also be untrue in this day and age. It doesn't matter that vitamin C drops don't appear to do anything for anyone, the idea that it does makes people think it does-- placebo effect.
"America great again" makes one think back to childhood or an earlier period when he/she was happy to be an American. Probably a 4th of July picnic before you had to pay taxes or worry about childcare. That's the emotion the slogan appeals to, subconciously.

Stories- People remember stories even if they don't remember the content. People like a good comeback story, rag-to-riches, etc. If you can make that part of your message, it sticks.

Trump's campaign garnered so much attention because it was initially seen as a circus sideshow joke with little chance of winning. Everyone seemed eager to watch him lose at every stage. We all know how that turned out. But Trump also told stories about violence, jobs being shipped to China, Mexican druglords, etc. Those were largely verifiably false but people believed the stories. (Can you remember any stories Hillary told?)

Other details in the book:
Everyone is overconfident in his knowledge and thus many a high-paid marketer has gotten fired for creating a sure-fired campaign that wasn't sticky. But that also relates to the Counterintuitive essential of the sticky idea--your message must show the person's "knowledge gap." "Did you know...?" Knowledge gaps are painful and people naturally want to close them. If you can hook them with something they think is counterintuitive, then they hear the entire message and it will likely stay with them (and maybe they Google more about it later).

Limit the paramaters of your message (see above refrigerator example). If using statistics, or diagrams, you'll want to use the proper scale.
Beware of availability bias and other cognitive biases.

One note on psychology to keep in mind-- people tend to ask "What's in it for my group?" and not just "what's in it for me?" This tribalism is important. People subconciously ask themselves "How are poeple like me expected to think or behave?" In the "Don't Mess with Texas" campaign the appeal was Texans and gave an ideal standard of a "real Texan." This created an identity decision "If I'm a real Texan, I mustn't litter." Images of litter evoked empathy and the slogan appealed to identity-- what does my tribe take pride in?

Your message should also choose a "plot" to go along with the story. Person X did Y and the result is Z. It could be an underdog story or something else. The epitomy of SUCCES, according to the authors, is the Subway Jared Fogle commercials. "Eat subs, lose weight." It was counterintuitive-- it violated the schema we think of when we think "fast food." It was the story of a normal guy who accomplished something big. It was counterintuitive-- anyone can do this! It appealed to emotions--Americans struggle with weight and shame. The story was true and verifiable.

The authors spent time researching where various urban myths and beliefs like "nice guys finish last" came from. It's nice to hear the roots of these stories to help ward against our cognitive blinders.

In all, I give this book 3 stars out of 5. Like most best-selling business books, you're better off reading a review or a summary than the actual book. But you likely forfeit the stories in the book that make it "stick," (but hopefully my review has given you a couple stories to help you remember).

Friday, April 07, 2017

The Affordable Care Act: Examining the Facts by Purva Rawal (Book Review #5 of 2017)

The Affordable Care Act: Examining the Facts (Contemporary Debates)

So, given I work for a Medicaid managed care company (the best one, by the way), was really close to Medicaid budget and policy in an Expansion state under both a Democratic and Republican administration, and spend much of my free time reading KFF, Health Affairs, etc. it only made sense that I read the definitive book on the Affordable Care Act. Because a part of me thinks it's still useful to have well-informed policy debates even in 2017 when facts don't seem to matter.

This book is a great compilation of every policy argument, budget analysis, and the history of the years-long negotiations and political wrangling of passing the Affordable Care Act. At the time I read it, there was not a single review on Amazon under five stars. The author is partial to the ACA, having worked as an analyst in its passage. This causes her to leave out tidbits like the "Cornhusker kickback," but to attack various Republican myths and scaremongering related to the ACA. Previous to this, I'd read Steven Brill's America's Bitter Pill on the history and passage of the ACA (with focus on Kentucky's exchange rollout), Jonathan Alter's The Center Holds along with Axelrod's memoir that recounts a lot of the politics (Mitch McConnell's memoir as well, though briefly). I've also read books on Medicaid by both Brookings Institute and Avik Roy. This book recounts all of the negotiations with multiple parties and the budget math behind the ACA and answers every claim about the ACA in a chapter-by-chapter Q & A format.

I made a lot of highlights in this book (61 pages of Google Doc highlights), it's a bible of ACA information and stats. Here are just a few points:
People forget the context under which the ACA was passed, the wake of the Great Recession. Health care reform was a centerpiece of the 2008 election, both sides were going to do something radical-- even John McCain's plan would apparently be anathema in 2017's political world after the rise of the Tea Party.

"A record nearly 50 million individuals were uninsured in the wake of the Great Recession, and health care costs accounted for nearly 17 percent of Gross Domestic Product" (p. 16). In 2008, the debate was about healthcare inflation including rising premiums, people--including children-- being denied coverage for reasons that came down to prexisting conditions, and hospitals and other providers complaining about complaining about indigent care because not enough had insurance. Republicans, in particular, were concerned about the national debt driven largely by projected increases in Medicare. How do you get insurance companies to cover more people and conditions, get more people to pay for coverage, and get the least-likely to sign up into coverage, all the while not increasing the long-term debt situation? Well, in a rational world you gather proposals from health care economists, negotiate with managed care entities and insurers, and wrangle with the various budget committees in Congress to find a way to get it to pass. The work began in bipartisan fashion.

"Chairman Baucus and Ranking Member Grassley (R-IA) plotted out a bipartisan process to craft a health reform bill. The pair held three roundtables on the main pillars of the legislation—coverage expansion, payment and delivery reforms, and financing options. Following each roundtable, the committee publicly released reform options...In addition to informal involvement, the President held numerous meetings with members of both sides of the aisle" (p. 29, 31).

As the details took shape, so did much of the buy-in from the healthcare industry.
"The pharmaceutical and hospital industries publicly announced agreements with the Senate Finance Committee and the Administration in the summer of 2009" (p. 34). The author details what each industry got and offered. "The device tax is still the most contested of the industry fees or payment cuts as the sector continues to push for repeal of the tax" (p. 38). Grassley pushed for and got Medicare payment and service delivery reform, meaning the ACA would be able to reduce Medicare spending. Although Republicans had wanted to reform Medicaid for years, they blamed Obama for "cutting Medicare to seniors" when this goal was achieved via the ACA.

No piece of legislation is perfect, and anything large takes grease to get through. The more grease, the worse it gets. You bring big pharma along by requiring all insurance to provide prescription drug coverage. You bring hospital associations along by promising more people will show up at the ERs with insurance. You promise Senators something for their home town, etc.

There were flaws in the final version of the bill, in part because of all the concessions made to get it passed. Premium subsidies likely needed to be larger and more available to those over 400% of FPL. There needed to not be such a cliff of premiums and deductibles for a family going from 138% of FPL to 139%. There also needed to be a mandate with consequences to ensure the young & healthy jumping into the pool. Exchanges only worked because risk corridors worked like reinsurance. When Marco Rubio and Republicans kicked those out from under the exchanges, of course they collapsed.

"To protect against the uncertainty in the risk in the health insurance exchange markets, the ACA included three mechanisms—risk corridors, reinsurance, and risk adjustment—collectively known as the 3Rs. The first two are in effect from 2014 through 2016, and risk adjustment continues in perpetuity"  (p. 236). This idea was nothing new, and similar method was used to stabilize the market in the Republican-passed Medicare Part D a decade prior. But it's now clear that these risk corridors were required to keep insurers in the exchanges. The more uncertainty Congress has now created about what 2018 will be like, the worse it gets.

The author notes that the $15 billion public health fund that partly went to fund the Navigators was a controversial use of the funding, and Republicans quickly made it a priority to stop that, calling it a "slush fund" and working in states like Kentucky to end funding for any marketing efforts for Medicaid or the exchanges. Likewise, even though Congress worked hard to keep abortion out of the bill, Republicans alleged the ACA made abortion funding more prevalent.
"To try to avoid an abortion-related debate during health reform, lawmakers applied the long-standing Hyde Amendment, which prohibits the use of federal funds for abortion unless the pregnancy is a result of rape or incest, or the woman’s life is in danger. In addition, the ACA does not preempt state abortion laws, such as waiting periods or parental consent or notification (Salganicoff, Beamesderfer, and Kurani, 2014). However, the claims that the ACA would fund abortions—and increase funding to abortion providers—have continued" (p. 274).

Rawal's greatest criticism of President Obama is his promise that "If you like your plan, you can keep it," which would always be impossible given that the ACA adds the ten Essential Health Benefits to every plan. I personally found the politics behind delaying the mandate a year and allowing people to keep plans as grandfathered problematic-- it created more uncertainty in the insurance markets. But much of the criticism belongs to Republicans, particularly long-serving ones who flipped their positions on certain aspects of reform:

"Senators Orrin Hatch (R-UT) and Charles Grassley (R-IA). In 2009–2010 both of these men were still in the Senate, and they both sat on that body’s powerful finance committee. But their opposition to the ACA led them to denounce the very individual mandate that they had once praised. In 2009, days before the ACA passed the Senate, Sen. Orrin Hatch (R-UT) voiced his opposition to the individual mandate, 'Congress has never crossed the line between regulating what people choose to do and ordering them to do it. The difference between regulating and requiring it is liberty' (Hatch, 2009)" (p.305).

Given the hyper-partisan Congress in 2017 and the failure we have seen in recent weeks of Republicans to reach an agreement on what should be done about Obamacare after 7 years of vowing to repeal it, I'm largely convinced that the Affordable Care Act will be the last bill ever to pass Congress with this level of complexity. This book deftly explains the complexity, economics, and politics that went into this legislation.

Five stars. A must-own if you want to have all the information through 2015 about the ACA at your fingertips.

Monday, March 27, 2017

The Courage to Act by Ben S. Bernanke (Book Review #4 of 2017)

The Courage to Act: A Memoir of a Crisis and its Aftermath

2017 has really sapped my heart for reading memoirs related to economics and politics because the discourse and attitude of the current Administration is so hostile toward PhD economists like Bernanke. The current President has a woefully understaffed Council of Economic Advisers (CEA) and National Economic Council (NEC) and one wonders what the consequences may be. Bernanke's memoir made me thankful for men and women like him who were able to make a difference at critical junctures in America's history.

I found Bernanke's memoir to be among the most satisfying I have ever read. I followed the economic crisis closely and I remember all the articles, blogs, and books wondering what Bernanke was thinking and making various policy suggestions. Bernanke appears to have read every single one. The Chairman uses this book to painstakingly address criticisms, explain his thinking and the Federal Reserve's actions, and give context about the politics at the time. He's smart but also down-to-earth. The deeper I got into the book the more sad I became that experts like him may not be at the helm during the next economic crisis.

Criticisms of Bernanke and the Fed during the crisis come in three general categories:
1. The Fed did too little. It should have seen the crisis coming and should have also bailed out Lehman Brothers, etc.
2. The Fed did too much, inventing too many new ways of intervening in the economy and keeping interest rates too low for too long.
3. The Fed needs to pursue other policies, generally. An explicit inflation target or nominal GDP level target or some other explicit rule would be more optimal.

I fall into #3, having been persuaded by the arguments of Scott Sumner, David Beckworth, and others for a Nominal GDP level target. I was pleasantly surprised at how much time Bernanke spent in the book responding to these arguments. He clearly took the time to read their blogs and current reseearch, and think deeply about the issue, and found it worthy of response. (Hopefully David Beckworth will have Bernanke on his excellent Macro Musings podcast soon, I think Bernanke would be open to it.) Bernanke prefers a long-term inflation target but much of the book is his frustration of taking an academic idea and implementing change in a government entity under the scrutiny of Congress that is allergic to change. I think Bernanke hopes his legacy is having moved the Fed on its first steps to move toward such a policy by laying the groundwork of being more transparent with the public in explaining its policies.

Bernanke was raised in South Carolina, 60 Minutes went there for their profile of him in 2009. His father owned a drugstore, he grew up middle class, was friends with blacks and aware of his own Jewish heritage, although his family was not devoutly religious. Bernanke was gifted and wanted to be a writer, he was good enough at math and a mentor encouraged him to go to Harvard. While there, he realized he was woefully unprepared for Harvard mathematics and studied hard to get to a higher level. He discovered economics there as an outlet for making sense of mathematics and having mathematical concepts explained in narrative. Throughout the book, Bernanke comes across as well-rounded in his drawing from various strains of economics along with a knowledge of psychology as well as historical context. He explains the "neoclassical synthesis" to the reader quite well. He returns to Bagehot, Friedman and Schwartz, and other classical works for context and to help him learn from history.

The Chairman harkens back to his criticism of Japan's central bank in their low-inflation period. He advised them to use the same unconventional methods he would be criticized by the #3 crowd above for not trying in the US. He now has the wisdom of knowing that optimal monetary policy is not always politically feasible. Every country has a different system and their central banks are governed by different rules and oversight bodies. So, he regrets the "harshness" of his criticism of Japan.

He recounts his interview with George W. Bush in becoming his selection for the Board of Governors. Bernanke's brief tenure on a school board "counts a lot" in Bush's administration, and he is a pretty easy choice. Bernanke learned a lot from Greenspan and other long-time Fed hands. Bernanke isn't critical of Greenspan, but it's clear he wanted to take the Fed in a more transparent direction and not be seen as the "Maestro" that Bob Woodward had made Greenspan out to be. Bernanke also did not like Greenspan's bottom-up forecasting approach. Bernanke would then chair Bush's CEA and be a familiar name for the President to nominate as Fed Chairman in 2006. His wife cried when he got the nomination because she understood what it meant.

I was in graduate school at the time and I can remember concern that Bernanke was an inflation dove. Bernanke was ever-aware of his public perception as "Helicopter Ben" and learned over time to craft his statements more clearly so as not to be misunderstood. This is in contrast to Greenspan who didn't want any of his words understood. Bernanke prefers an explicit long-term inflation target that can be hit over a number of years. Inflation in any given year can be flexible, if you undershoot one year, you make it up with "catch-up inflation" in others. He finds an explicit inflation target the easiest to explain to the public and argues it would do better to hit the Fed's dual mandate of full employment and low inflation than other methods. It is more politically feasible, he argues, than the NGDP level target.

Perhaps the most difficult part of the book for me is accepting Bernanke's resignation that these ideas were not actually feasible. I think those of us in Group #3 would argue he did not do enough to make his case while in office. Some op-eds might have gone a long way, but they might have been risky in roiling the markets. The book's title is "The Courage to Act," but risk aversion is apparently an essential characteristic of a Fed Chairman.

I have read several chronicles of the 2007-onward financial crisis, but I think this book is the best of the bunch as Bernanke painstakingly retells the entire story almost day-by-day. This is way better than Geithner's memoir. (Bernanke didn't initially want Geithner as Treasury Secretary but was "proven wrong.") Bernanke admits his error in not understanding how mortgage-backed securities and credit default swaps were a ticking time bomb, seeing no reasons why a slow-down in the housing market would bring down the larger economy. He justifies the Fed's decision not to raise interest rates to prick the asset bubble-- one never knows how big the bubble is and why put the rest of the economy at risk for one sector? The Fed instead proposed regular reports on the financial stability of the economy. A lot of smart people in the Fed missed what was going on. Bernanke remembers the Jackson Hole conference where Raghuram Rajan warned of impending doom while the rest of the room was toasting Greenspan's tenure.

Who remembers the BNP Paribas failure that triggered it all? Central banks were eager to assert their role as lenders of last resort in order to stabilize financial markets. One challenge was to convince banks to come to the Fed's discount window. Despite the housing market collapse, a lot of underlying economic indicators like consumer spending still looked strong. Inflation was a nagging concern, as Fed transcripts later showed the FOMC was still worried about inflation while NGDP was falling off a cliff. Bernanke never saw the 2007 Jim Cramer rant but he knew about it-- his wife or others would send him such articles to make sure he knew the craziness outside. Bernanke now regrets his hesitation on fed funds rate cuts, optins instead to implement unorthodox policies like the term asset facility and term auction facility. An inflation targeting policy would have given him more optimal flexilibility in that moment, he argues.

Bernanke's encouragement of "blue sky thinking," thinking about problems as an academic exercise rather than a heated moment in a crisis is something I have since seen and heard repeated in other business books. "In an ideal world, what tools would we have to deal with this?" is a decent exercise to keep notes on for after the crisis. (It is close, however, to Ronald Reagan's joke about economists assuming they have a can opener.) We've long forgotten the Bush tax credits as stimulus. Bernanke recounts those days when firms were looking for Section 13-3 loans, emergency meetings, Maiden Lane, and the Bear Stearns bailout negotiations. Then came the biggest fed funds rate cut since 1982.

Bernanke recalls the details of the Bear Stearns negotiations and is confident Treasury and the Fed did the right thing. They were able to find a buyer with some help-- Bank of America. The run on Lehman Brothers would be worse, would require more capital, and they had difficulties in finding a buyer and were left with few legal options. There were details about the Lehman saga that I did not know, including the difference between British financial laws and US laws causing a problem in finding a potential suitor from the UK. Even AIG would later have collateral to legally secure a loan whereas Bear Stearns did not. Bernanke argues persuasively that given we are a nation of laws, there was nothing in the Fed's power it could do to save Lehman. Interestingly, Bernanke includes a brief bio on Dick Fuld, the CEO of Lehman, with some commentary on his life and choices. I am curious how Fuld feels about a former Fed chairman giving commentary on his life. In the end, as Geithner put it, "all we can do is put foam on the runway," as Lehman imploded.

AIG wasn't even on the Fed's radar until after the Lehman weekend. Late in 2007, I attended a seminar at the St. Louis Fed where President Bullard recalled seeing Bernanke's face on a video conference after learning of AIG's problems. He was "furious." The Fed was already dealing with the potential failure of Fannie Mae and Freddie Mac and the problem of international creditors who thought the GSE's had implicit government backing, a problem that Greg Mankiw and others had long warned about under GW Bush but Congress had ignored. Now, they had to examine the books of an extremely complex international entity whose failure would definitely be felt worldwide. President Bush had given Paulson and Bernanke a free hand to negotiate, but policy specifics like the Trouble Asset Relief Program were a tough sell. Bernanke recalls a few times when FOMC Chairwoman Sheila Baier needed convincing on issues as well. Paulson and Bernanke preferred straight capital injections over purchasing troubled assets, but there was no taste for that in Congress and when the program basically went toward capital injections anyway, Republicans howled about socialism.

Another under-appreciated aspect of the Fed's monetary policy was the coordinated central bank rate cuts. Bernanke was persuasive in getting nations to work together, even though doing so in the face of a global panic seems like common sense, it is difficult in practice. Geithner called Bernanke the "Buddha of central banking," for his calm and rational approach. The non-bullying nature of Bernanke was needed in international rate policy diplomacy. Bernanke's memoir returns to international issues in examining Europe's problem with Greece and the effect that worry over massive sovereign defaults had on markets. Nonetheless, Bernanke criticizes the European Central Bank's policies similar to how he criticized Japan 15 years ago. This seems odd given he spends much of the book explaining the difficulty of doing policy in a political environment; he never acknowledges that the ECB faces the impossible task of balancing the interests of a diverse group of countries.

Once the Fed hit the "zero lower bound," Bernanke had Japan's problem. The Fed had set a floor for the federal funds rate by paying interest on reserves, a move which also garnered criticism from Scott Sumner and others. Bernanke explains why they did not want to reduce the IRR to zero-- it would not affect interest rates much but risk destabilizing the money market. I think Sumner and Beckworth would respond that thinking about monetary policy through the lens of interest rates is the problem in the first place. Bernanke writes that once the Fed hit the zero bound, the Fed needed other "creative ways" to conduct policy and an inflation target would have been the best option but it was "too early" to have Congress go along. He did, however, discuss the feasibility of NGDP targeting with Kohn, Janet Yellen, and others before launching their second round of Quantitative Easing policy (QE2). NGDP targeting was discussed at the November 2011 FOMC meeting but the Committee decided it was too much of a paradigm shift and too hard to explain. Bernanke wanted to call it "credit easing" rather than "quantitative easing" because he wanted to state he was targeting long-term interest rates rather than just increasing the money supply. But QE2's results in improving asset markets proved a "false dawn," precisely because the FOMC was more concerned in overdoing stimulus and unconventional policies. Fed Presidents were eager to raise rates or at least have a concrete plan for a "return to normalcy." It is an economic tragedy that Bernanke spent as much mental energy convincing others the Fed would one day return to normal policy in a smooth, orderly fashion than doing what was necessary to stem the crisis at the time.

The Republicans in Congress made Bernanke's efforts a political issue. Conservative economists were in the media criticizing low interest rate policies, asset purchases, and warning of impending hyperinflation. Bernanke had to defend his actions in Congressional testimony and speaks of the annoyance of always having to defend a fiat currency from Ron Paul. Bernanke doesn't disparage Paul, but shows the weakness of Paul's arguments and points out other areas where Paul seems to lack evidence for his wild claims. It's clear Bernanke doesn't like Rand Paul picking up where his father left off. John Boehner and others in Congress took to bashing Bernanke without bothering to consult him. Senator Shelby filibusters a Fed nominee over base closings in Alabama, etc. Following QE2, the Fed's "Operation Twist" was followed by more GOP Fed-bashing and Texas Governor Rick Perry's "we'd treat him real rough down here in Texas" comment, all of which Bernanke found disturbing. If he could deal with the politics, Bernanke had at least an equal frustration with traders misunderstanding his policies. He'd made it a point to be more transparent than Greenspan, and yet the market seemed to be confusing his messages that the Fed would one day be ready for a return to normal policy with thinking that the Fed was ready to raise interest rates. The ECB's actions and the Greek crisis led to more flights to US Treasuries for safety, pushing down interest rates further.

Some of the regulatory reforms like Dodd-Frank were initially difficult for the Fed to embrace. They did not want to give up their own oversight and education role to the new Consumer Financial Protection Bureau, but Bernanke eventually came around to endorse the CFPB. He writes that Dodd-Frank "does much good," and would not support its repeal. He pushes back on former Fed Chair Paul Volcker's "Volcker rule" and notes that even had Glass-Steagall not been repealed it would not have affected anyone's trades except Citigroup. Bernanke never mentions that Obama was slow in nominating others to vacant Board of Governors positions at a time when Bernanke needed all the help he could get on the FOMC. That was one criticism of Obama I remember from Brad DeLong and other left-leaning economists and maybe one weakness of this book.

Bernanke does give some insight into his home life during the stress. He enjoys both the support and remarkable disinterest of his wife. He enjoys baseball and tells anecdotes from his trips to Nationals games. He closes the book with explicit leadership lessons on doing policy and working with others, much of which is pretty bland. In all, I give this book 4.5 stars of 5. It's a must-read on the financial crisis. It's an interesting read about Fed life. I'm more thankful for Bernanke now.

Saturday, March 18, 2017

The Long Game by Mitch McConnell (Book Review #3 of 2017)

The end of 2016 and, frankly, the events following January 20th, 2017 have stolen my will to read and write.

  The Long Game: A Memoir by Mitch McConnell

This is, I believe, the 4th autobiography by a Senator that I have read (Clinton, Cruz, Paul, Rubio). I read it because I'm a Kentuckian and I like to know who is representing me. This book lends Mitch McConnell to the criticisms of liberals lately, namely that McConnell lives to empower McConnell at the expense of anything else. In fact, the New York Review of Books review of this book and Alec MacGillis' biography have more interesting detail about McConnell's rise than this does. The "Long Game" McConnell's title refers to is that of his lifelong desire to be Majority Leader. He states this motivation up front, unapologetically, so I guess he gets points for not pretending to be motivated by public service or maintaining fidelity to America's founding principles. James Madison knew the personal ambitions of politicians when he wrote the Constitution, writes McConnell, so he embraces that ambition rather than hide it. He now has the power he has always sought and will fight to keep it.

The tragic irony of this book is that McConnell criticizes the scorched-earth politics of the right wing of his party (Jim DeMint is the only Republican name McConnell heaps scorn on) while he has engaged in it against the Democrats for his entire career. He speaks of the need to compromise and work across the aisle but never demonstrates it himself. The Senate ceased to be the world's longest-running and most-admired deliberative body when McConnell was willing to put politics ahead of America and refuse to hear Merrick Garland's nomination to the Supreme Court. That event is not in the book, but is the logical result of an entire career built on playing political games for personal power. The only principles he fought tooth-and-nail for was to attack McCain-Feingold's campaign finance reforms all the way to the Supreme Court. That appears to be his proudest accomplishment as a legislator.

McConnell was born in Alabama and lived a stint in Georgia before his family moved to Louisville. He claims his parents were "unusual" by instilling in himself a belief in the importance of civil rights despite being Southerners with strong Confederate history. (The picture below suggests McConnell may not necessarily disown that history.)

His father wrote him a letter about his happiness over the passage of the 1964 Civil Rights Act, even while McConnell was a staffer for an ultra-conservative Congressman who opposed it. Oddly, McConnell mentions admiration for Kentuckian Henry Clay, whose actions perpetuated slavery, and does not mention Henry's brother Cassius Clay. This is sharp contrast to fellow Senator Rand Paul, who writes that Cassius and not Henry is the most admirable of the two. But McConnell does not seem to be a deep thinker or particularly well-read. If he enjoys the arts, he does so with his immediate family, who he refuses to talk about in the book-- making the memoir somewhat cold and impersonal. The only thing he returns to as his love in the book is University of Louisville sports, living and dying by every game.

The future Majority Leader got his start running for student body president at Emmanuel high, when he had the ingenious idea of lining up endorsements from popular kids and publicizing them. McConnell kept up the student body campaigning and even led a civil rights march at the University of Louisville while he worked for aforementioned Republican congressman. He regrets Barry Goldwater's positions. (According to McConnell, he also stood up to Pres. Reagan on apartheid in his first Senate term.) He went to law school and got married, and then regretted the marriage and divorced (and that's all he has to say about that, as well as his children from that marriage who he apparently has good relations with). It is never clear in the book why McConnell is a Republican. His dad had liked Eisenhower, but it's not clear why McConnell disliked Kennedy.

Once a lawyer, McConnell realized he hated practicing law and would die if he had to do that every day, he missed politics and felt that was his calling. He got a job working in the Justice Department where the bureaucracy was like purgatory. He escaped and ran for Jefferson County Judge Executive, a powerful position over the state's largest county, beating incumbent Todd Hollenbeck (who would remain in state politics for years). He was re-elected in 1981 and mentions he went through his divorce. McConnell decided to run for US Senate on a platform of limited government, fiscal conservativism, etc.

In the midst of that 1984 campaign, when things weren't going well, McConnell has what appears to be his only spiritual moment in the book. On the edge of a nervous breakdown, living alone, he seemingly almost wants to surrender his life, will, and campaign to God. But in that moment he gets off his knees, somehow puts away his doubts, and resolves that the Senate is all he really wants. McConnell hired Roger Ailes to manage his media, and a new Republican marriage was made. Aile's famous ad from this race is the bloodhound ad, attacking his incumbent opponent's voting record. McConnell squeaked out 5,100 vote win. He benefited from large campaign backing, raising almost $3.2 million in today's dollars, which was unheard of back then. Not incidentally, keeping campaign finance reform laws off the books becomes the issue he delves most deeply into in his memoir.

McConnell's dad died as he won re-election but he would soon meet Elaine Chao and fall in love. He opened the McConnell Center at Louisville and attends as many football and basketball games as he can. As he advanced up the Senate leadership, he opposed campaign finance reform, refused to sign Gingrich's Contract with America (Mitch opposes term limits), and breaks with conservatives on flag burning because of the same Constitutional principles. He made the decision to expel Bob Packwood from the Senate. He liked managing the floor, whipping up votes, etc. Everything was another step closer to the Majority Leader position.

The Senator from Kentucky spends much of his criticisms on Democratic presidents Clinton and Obama. He rehashes the 1990s Clinton impeachment but perhaps considers the midnight pardon of Mark Rich to be the most egregious act-- "Even Jimmy Carter said it was disgraceful." Obama, meanwhile, is professorial who wastes time lecturing Republicans rather than getting to work or letting them do their jobs. Perhaps the greatest sign of respect he shows for Obama was when candidate Obama came to DC with John McCain in the campaign suspension in the midst of the financial crisis. Obama spoke for the Democrats at the meeting, clearly understood the issues, and clearly had the Democratic establishment deferring to him. That, Mitch says, is the when they knew what they were in for. Even where McConnell basically admits that the debt ceiling debacles were Republicans' fault, and blames his right-wing, it's still Obama's fault for scolding them or giving speeches when they needed to work out negotiations, etc. He tells the old saw that Boehner or McConnell could take phone calls from Obama, put the phone down, pick it up minutes later and the President would still be lecturing about the virtues of his position.

There is a noted lack of hindsight bias in his view on the 2003 Iraq war. McConnell believes we should have attacked Iraq FASTER, and states it would have been "reckless to dismiss the intelligence" that Saddam Hussein had weapons of mass destruction. He ignores that he (like all other Senators) never looked at the intelligence report the CIA made available to the Senate-- he took the Administration's word for it. It does not enter his memoir that the intelligence was wrong, or that it's been a trillion dollar mistake, etc. He doubles down by saying Qaddafi's giving up his weapons was a vindication of Bush policy, in which he must be either ignorant or intentionally deceitful-- negotiations with Qaddafi had been ongoing since the Reagan Administration and had little to do with Iraq. We've since seen what happens when you break Libya, anyway. Maybe just as alarmingly, McConnell never mentions the sscandals and other GOP problems that cost them the 2006 midterms, which also led to Democratic overhaul of ethics. If you hadn't actually kept up with the news during this period you might not notice its absence, but fortunately I was watching closely at the time.

Jim DeMint, who would go on to head the Heritage Foundation, is McConnell's only Republican foil in the book. It's clear at times he's talking about Ted Cruz but never mentions his name. DeMint would "backbite" but not air grievances privately with members, instead preferring leaks to the press or public shows. McConnell fought against his right wing in passing the TARP and was determined not to let the Senate cave to populist pressures in the face of financial meltdown. Yet, the Tea Party fervor that DeMint whipped up provided the "resurrection of the Republican Party," particularly the Tea Party outrage about Obamacare. McConnell rehashes some of the politics of the ACA but ignores the years-long negotiations with insurance companies, the town hall meetings, meetings with President Obama, input by economists and other Republicans, etc. He blasts the partisan nature of the ACA but never once mentions the partisan tricks Republicans used when passing Medicare Part D.

Another enemy of McConnell is the media, particularly the Louisville Courier-Journal. McConnell oddly keeps a collection of negative stories written about him, often having the writer or cartoonist autograph it. He criticizes the C-J for forgiving Democrats like Robert Byrd for using the n-word while hypocritically calling on Republicans to resign for saying it. McConnell grew to power while his hometown grew more liberal. He got used to having organized rallies outside his home, or signs on his lawn. But he was increasingly uneasy about the growing threat from Republicans. His 2008 race was rather close and was quite emotional. His manager convinces him not to throw in the towel when he's this closer to being Majority Leader. He reserves criticisms of his 2014 primary opponent, Matt Bevin, probably because Bevin went on to become Governor, but it is clear McConnell relished the primary win. He clearly hated the Tea Party Republicans that were supporting Bevin.

Fending off the Tea Party and increasing the debt ceiling while seeing sequester implemented was the next "great accomplishment" for the Majority Leader. His greatest annoyance is having to miss Louisville games either on TV or in person during these trials. He notes the need to "be at peace with imperfect outcomes" and treats his right wing like petulant children. He notes that Democrats have a similar problem of eating their own in a quest for ideological purity, and seems skeptical of functioning politics but never acknowledges that his own use of Senate rules and playing scorched-earth politics helped contribute to the environment.

He is also proud of his work in support of Burmese dissident Aung Sung Suu Kyi. (Hillary Clinton also praised McConnell for this work.) That is just about the only admirable part of the memoir. Another annoying note, he's reading his own book. He pronounces 2004 "twenty oh-four" and does so for all the aughts; that's odd. I give this book 3 stars out of 5. If you've followed his career, or the news enough to remember what he's not mentioning then it will irk you like it did me. If not, you probably think better of McConnell after reading the memoir.

Sunday, February 26, 2017

Marks of the Messenger by J Mack Stiles (Book Review #2 of 2017)

Marks of the Messenger: Knowing, Living, and Speaking the Gospel

I'd heard (via podcast) Stiles preach at churches in Kentucky and the Middle East before coming across this book at a local Goodwill. Like all of the 9Marks books, this is succinct and thought-provoking. It is not an anti-evangelism book but Stiles is against the mentality that most efforts toward evangelism have cultivated. This is not a how-to guide with steps on what to say and do or scripts to follow-- you're not selling insurance. Stiles begins with encouraging the reader to ask "Christian, who do you want to be?" rather than "What do you want to do?" (p. 17). Moving from focusing on "doing" to "being" changed his life and ultimately led to moving his family to the Middle East. "Acting without a Biblical understanding of who Jesus wants us to be is the reason so many become unhealth in their spiritual lives, producing unhealthy disciples and unhealthy churches" (p. 18).

Programs and pragmatism (likely driven by a focus on numbers as growth, IMO) have created a performance mentality that has replaced Gospel-centered focus of who we are in Christ. "Pragmatic evangelism counts: converts, members, programs but rarely counts faithfulness..." Evangelism becomes a way to fill seats or lead someone to a conclusion/decision rather than Jesus. We focus on methods rather than being who we are meant to be in Christ. "Play jazz if you want, but play to glorify God in and of itself, not to do evangelism." "People don't come to faith because of the excellence of our presentation or because we provided the perfect circumstance...(but) because God draws them" (p. 77). "The ultimate mark of not walking an aisle, but picking up a cross" (Dever).

Stiles cautions evangelists against "assuming the Gospel," or assuming basic biblical literacy or true understanding of who Jesus is. Test: "Could you have preached that sermon if Christ had not died on the cross?" Does the message connect us with the identify of who we are or rather focus on doing more? It depends less on you than your pride wants to admit.

Stiles tells a powerful story of leading a group of youth on a trip to Guatemala where they come across the place of a massacre of local Christians, which suddenly identifies for them the lost parents of the orphans they have been ministering to in the nearby village. The natural questions lead to "what can we do?" but Stiles again notes that what matters is understanding who we are to be in the midst of suffering, persecution, and injustice. A sociologist researching Guatemala found that Christian social justice movements, initially well-intentioned, resulted in murder. Advocacy, aid and social programs "upholds the gospel... but it is not the gospel, and it is not equal to the gospel." The mayor of a village explains that hearing the real gospel-- how Jesus died to save them from their sins and was resurrected proving it was enough -- remarkably changed the lives of many men in the area and "did more to eliminate hunger than fish farms or crop rotation ever did. We must never forget that the gospel brings more long-term social good than any governmental program ever developed." The gospel is not me-centered and God is not in the business of making everything as we think it should be.

Stiles encourages the reader to practice "the gospel in a minute." I would second that but add that you need to practice it (and your testimony) in the simplest English possible to reach the widest audience. I recently did that in ESL training and found it helpful--particularly if you're a language learner and are familiar with what the top 1,000 words are in a given language. Stiles also encourages prayer, out of a normal habit as we're encouraged by the Apostle Paul, but also for opportunities and wisdom.

Apologetics and arguments take up a lot of Christians' study and training, but "the best way to demonstrate that Jesus is from the Father and that we are his followers is not through method or techniques or apologetics. It's through loving, unified community among believers" (ie: just as Jesus prayed for)(p. 105). Being united in love, as we're supposed to be, does more to invite people to Jesus than anything we could formulate or memorize as a script.

My criticism of the book are that the examples of evangelism in given from Stiles' own life come largely from people who already acknowledge God and reject secular humanism and are already exploring the idea of Jesus-- ie: Muslims and Hindu immigrants in the Middle East who visit his church. Example: He leads an Indian man to faith after the man's entire family had come to faith and passed a Bible on to him, which he was already exploring. He's debating Muslims who at least agree with him on the existence of Jesus. There's less insight for loving and speaking to a rigid atheist who believes in a multiverse.

Stiles gains points for putting his personal email in the book with an invitation to contact him. (Would that every author would do that.) He also has the Kentucky connection working in his favor in my review.

4 stars out of 5.

Tuesday, February 14, 2017

Don't sign the petition. A letter to the editor of the Scott County News-Graphic

One of my 2017 resolutions was to write more letters, and I hope to publish some, along with their responses, here. The News-Graphic recently published a letter I wrote. Context: the local school board election in November was basically a referendum on building a second high school to relieve the very overcrowded -- and only-- high school in the fastest-growing county in Kentucky. The board is now pro-build, an architect has been hired (the second firm, actually; the project has been in the works for years) but a citizens group is again circulating a petition to force a special election on the property tax increase. The election would cost the district $30,000 or more and the citizens group seems to deny the actual need or to subscribe to "alternative facts."

To the Editor,

I would like to express my opposition to the petition circulating to force an expensive special election on the school district in an attempt to prevent or delay the construction of the new high school, and to urge my fellow citizens not to sign it. The Kentucky State Data Center at the University of Louisville projects that 1,000 more 15-19 year olds will live in Scott County in the year 2025 than did in 2015, and that there will be almost 5,500 total individuals in that age cohort by 2035. The county would do well to put together a long-range financial plan to build several schools, and not just the ones currently on the drawing board, to make room for the almost 8,000 additional school-age students projected to be here less than 20 years from today. I am sympathetic to wanting to keep overall taxes low, and I would support a petition to stop some of the poor tax policies our county and cities pursue. But a real crisis is upon us now; not doing what is immediately necessary to alleviate the rapidly growing burden on SCHS simply compounds the errors of the past and will make future choices even more painful.

Justin Tapp

Someone else wrote a letter that I liked enough to publish an excerpt here:

As I start this letter I am somewhat sad that some of our citizens are so “tight” with their money that they want to fight against providing our future citizens and leaders a decent place and environment in which to learn. Folks, the Scott County Education Board is not asking for much money. A $150,000 house would cost the owners about $.25 or a quarter a day more. This would be about $85.00 per year,  the amount you would spend on a night out or  maybe a UK basketball ticket.

In doing a little research, I discovered that Scott Co. has the lowest tax rate in Central  Kentucky. A $150,000 house is compared as follows:

         Scott Co.--------$1023/yr

         Woodford Co---$1101/yr

         Fayette Co------$1440/yr

         Franklin Co-----$1342/yr

         Grant Co--------$1225/yr

Even with the increase Scott Co. would be near the bottom when compared to our neighboring counties.

We need an educated community. We need to be a community that supports, values and should even covet a good education for all its citizens.

Charles Adams

Saturday, February 11, 2017

Immigration is just trade by another name. @jbarro

When you buy a finished product made in Taiwan or Brazil, you purchase the factors of its production that went into making it. (See previous example with a pencil; the uncoordinated actions of thousands of people from diverse countries combine to make every single product and service we buy.) The Tawainese or Brazillian laborer cannot immigrate to the US and likely don't want to, but they provided a good or service that no one locally was able to provide at the same price (assuming you're rational and wanted to get the greatest amount of value for your dollar). Likewise, the goods and services that Americans produce are consumed abroad by people unable to find the same value at a lower price locally. (Wanting to get the most for their dollar seems to be a universal trait among humans.)

So, we Americans meet the need of others with our goods and services and others meet our needs, and everyone benefits. We're all humans, just living in different places. Restricting that flow of trade by limiting the amount of goods that can be sold from other countries (quotas) or artificially increasing the price of those goods or services (tariffs) restricts the ability to meet each others' needs. If you're legally restricted in where you can sell your product, then people who would have bought it have to settle for someone else's where they don't get as much bang for their buck and you're both worse off. Unrestricted trade alone allows us to find all the ways to create the greatest value for others.

Many economists are for open migration for the same reason. Some Taiwanese or Brazilians or Americans may not be able to send goods and services but they could do the job if they were physically present here-- think barbers, engineers, surgeons, farmhands, etc. So goes the logic, why restrict each others ability to physically provide that value? Free trade applies to right of residency as well. I may be willing to trade my spot in America for someone else's spot in Turkey. We're both humans, why not trade those spots the same way I might sell a book to a Turkish person or buy a book from them?

Our current President is both hostile to free trade and to immigration. But in the wake of the immigration protests this week, Josh Barro wrote a decent column this week that begs the question of how the Progressive Left can logically be hostile to trade but open to immigration-- it would seem to be a paradox at least. If Bernie Sanders blasts trade for "taking jobs from American workers" by allowing us to buy products and services from other locations, how is it any different when workers who compete for those exact same jobs abroad come into the country and do so here? There would seem to be no logical difference.

"(E)ventually, Democrats will need to be able to make a case that their preferred immigration policies serve the national interest. They're not yet positioned to do so." Other than altruism for refugees, Barro doesn't see a clear argument on the Democratic side for allowing in other workers who would compete directly with American workers, be unable to vote, and (at least initially) consume more government services than they would pay in taxes. Barro doesn't quite connect the dots to the trade and utility maximization logic above-- that's a shame. The understanding that trade makes both parties better off and more trade is better than less used to be much more bipartisan (see the US leadership in Bretton Woods, GATT, and the WTO) and, when not bipartisan, championed much more by Republicans. That's what makes Trump so problematic for the GOP. Barro is really just highlighting that the Democrats' weakness is their logical inconsistency. Trump is wrong both about the benefits of trade and immigration, but his logical consistency gives him an advantage.

So, the next time you buy a product that wasn't made here, ask yourself why. You'll likely find it's because you wanted the most bang for your buck. Likewise, the next time you criticize the President's executive orders on immigration, ask yourself why. If you find you don't want to give foreigners a chance to provide the greatest value for your dollar regardless whether the foreigner lives in Taiwan or in America, then you're with Trump. If you're sad you bought the foreign product but also sad Trump wants to keep the foreigner from coming in to make a similar product, then you've got a problem of logical inconsistency. Because immigration and trade are different types of the same activity.

Thursday, February 09, 2017

Innocents Abroad by Mark Twain (Book Review #1 of 2017)

The Innocents Abroad by Mark Twain.

Free to read on
I was eager to check out this book because I have read several books by American travelers of Europe and the Middle East in the 1800s and saw Twain's description of Istanbul referenced in Orhan Pamuk's Istanbul (one of my favorite cities). The difference between Twain's account and that of others in the same period is that Twain is the greatest wordsmith in American history. I did not know that this was one of the best-selling books of the 19th century.

Twain's trip was in 1867 and the reader is quickly struck with how fragile Americans are as travelers today. You can tour the "Holy Land" in a week and be back on your couch in days. Modern inconveniences are doing without McDonald's or maybe a lukewarm shower. In 1867, such a journey would take the better part of a year and you very might well die. There is no medicine, few baths, you will ride in a rickety ship for weeks on end in close quarters with people you might not like, you will ride various animals for long journies across wastelands, and you will be subject to robbery and trickerey. Phoning home hasn't been invented yet.

The journey is a pleasure cruise in a retired Union vessel with some of the well-to-do of America. Twain apparently sent some of his observations back to the US as newspaper articles and compiled all his notes into this 1869 work. Twain notes how many travelers eagerly keep journals the first few days, but every day on the ocean is roughly the same and they lose motivation to continue. Twain tolerates the eccentricities of his companions, some of the men seem prone to pretend knowledge on subjects they literally know nothing about. This sometimes leads to humor. Time zones are a complete mystery to one passenger who is certain that his watch has stopped working properly. Currency exchange rates also cause confusion, passengers go from thinking they're being extorted in dollars when actually being quoted a cheap price in a European currency. They overcome all.

The cruise lands in Tangiers, Morocco in its first major disembarkment. When noting the legend of Hercules' relation to Tangier, Twain remarks: "Antiquarians concede that such a personage as Hercules did exist in ancient times and agree that he was an enterprising and energetic man, but decline to believe him a good, bona-fide god, because that would be unconstitutional." (If you love those one-liners that would play just as well in the 21st century, they are hidden like nuggets in this book.) In Morocco, as in other places, the travelers call on the American Consular General. This apparently is a "god-send" for the Consul because
"Tangier is full of interest for one day, but after that it is a weary prison. The Consul General has been here five years, and has got enough of it to do him for a century, and is going home shortly. His family seize upon their letters and papers when the mail arrives, read them over and over again for two days or three, talk them over and over again for two or three more till they wear them out, and after that for days together they eat and drink and sleep, and ride out over the same old road, and see the same old tiresome things that even decades of centuries have scarcely changed, and say never a single word! They have literally nothing whatever to talk about." Note the polite picture he sketches:

From Morocco, they north to France. There is little about Europe's treasures that impress Twain, he glosses over the tours that become monotonous and focuses on the misadventures of his companions. In Paris, they find that no barbers give shaves, or at least none that they can cajole to shave them. They get shaved by some wig-makers or people of some other trade in tortuous fashion.
Twain writes rather disdainfully about the endless collection of relics, fake relics, that are displayed in museums and on tours across Europe. They've seen all the various shards of the cross and other imaginable relics that the Catholic Church sold as indulgences and continues to make money in Twain's time, while he remarks the faithful peasants are kept quite poor. Twain remarks that Jesus ranks pretty low in the Roman Church hierarchy, much more attention seems given to Mary, Peter, and more.

The band continues traveling to Milan and on to Rome. As Twain wanders the streets of Europe, he notes the different rhythm than in the US, and again writes something for the 21st century:
"Afterward we walked up and down one of the most popular streets for some time, enjoying other people’s comfort and wishing we could export some of it to our restless, driving, vitality-consuming marts at home. Just in this one matter lies the main charm of life in Europe — comfort. In America, we hurry — which is well; but when the day’s work is done, we go on thinking of losses and gains, we plan for the morrow, we even carry our business cares to bed with us, and toss and worry over them when we ought to be restoring our racked bodies and brains with sleep. We burn up our energies with these excitements, and either die early or drop into a lean and mean old age at a time of life which they call a man’s prime in Europe. When an acre of ground has produced long and well, we let it lie fallow and rest for a season; we take no man clear across the continent in the same coach he started in — the coach is stabled somewhere on the plains and its heated machinery allowed to cool for a few days; when a razor has seen long service and refuses to hold an edge, the barber lays it away for a few weeks, and the edge comes back of its own accord. We bestow thoughtful care upon inanimate objects, but none upon ourselves. What a robust people, what a nation of thinkers we might be, if we would only lay ourselves on the shelf occasionally and renew our edges!"

There are other tales of hygiene hijinx, such as bathhouses with no soap. One can only imagine what this travel would be like for a woman. Twain finds Venice to be full of melancholy and decay, not quite the tourist destination it is today. He is definitely not impressed with the Medici mausoleums and other Italian displays, and everyone grows quite tired of Michaelangelo by the time they reach the Vatican in Rome. There is a humorous scene where the Americans troll their guide in Rome who is eager to show them something written by Colombus and a statue/bust of Columbus:
"“Ah — Ferguson — what — what did you say was the name of the party who wrote this?”
“Christopher Colombo! ze great Christopher Colombo!”
Another deliberate examination.
“Ah — did he write it himself; or — or how?”
“He write it himself! — Christopher Colombo! He’s own hand-writing, write by himself!”
Then the doctor laid the document down and said:
“Why, I have seen boys in America only fourteen years old that could write better than that.”
The doctor put up his eye-glass — procured for such occasions:
“Ah — what did you say this gentleman’s name was?”
“Christopher Colombo! — ze great Christopher Colombo!”
“Christopher Colombo — the great Christopher Colombo. Well, what did he do?”
“Discover America! — discover America, Oh, ze devil!”
“Discover America. No — that statement will hardly wash. We are just from America ourselves. We heard nothing about it. Christopher Colombo — pleasant name — is — is he dead?”
“Oh, corpo di Baccho! — three hundred year!”
“Ah — which is the bust and which is the pedestal?”
“Santa Maria! — zis ze bust! — zis ze pedestal!”
“Ah, I see, I see — happy combination — very happy combination, indeed. Is — is this the first time this gentleman was ever on a bust?”

The crew ascends Mount Vesuvius, inspects the ruins at Pompeii, and devise a clever escape from their quarantines in Athens. (Americans definitely don't can't comprehend the ubiquity of 1800s quarantines today.) Then, it's onto Istanbul and Asia. Twain does not have many deep observations about Istanbul. Twain notes the cultural diversity of the city and that Armenians are known Christian liars. The crew crosses the Black Sea and visits Sevastopol too close to the end of the Crimean War for that not to be somewhat somber. The Americans then travel back through Turkey down to Smyrna (Izmir). Twain remarks about this point of his interaction with Russian ladies, their long names and endless charms. So, Russian ladies impress him as much as anything else in Europe or the Holy Land and I'd say that's about right. Smyrna is just a short train ride to the ruins of Ephesus, and Twain seems actually impressed with it as well. He notes the long list of international historical figures who have come through Ephesus from Alexander the Great to the Apostle Paul to many others. He retells the Legend of the Seven Sleepers, it seems like one he wish he'd written himself.

From Smyrna, the group treks south toward Damascus. They have to telegraph ahead to US Consulates in Damascus and Beirut to arrange transport, make sure there are enough horses, etc. It's a 13 hour horse trek to Damascus, and Twain suffers from a bout of cholera while there. Through the Levant, the crew is always hounded by beggars asking for "bakhshish." The poverty and the culture of begging foreigners for money seem quite embedded. Palestine is much smaller than Twain imagined. He makes a good point that there have been many books published by American Christians describing their trips to the Holy Land, but each describes Palestine according to its denomination's desires. None seem to remark that the events of Jesus' life take place in an area the size of an American county. The Holy Land trek inspires Twain to write an awful lot of biblical commentary, retelling the Bible stories with his own insights and dry wit. If you like it, it goes on for quite a while. Eventually, the American travelers exit the future Israel out of the port at Joppa.

There is a stopover in Egypt and the pyramids that Twain didn't seem keen to write about. "We suffered torture no pen can describe from the hungry appeals for bucksheesh that gleamed from Arab eyes and poured incessantly from Arab lips. Why try to call up the traditions of vanished Egyptian grandeur;...?" He ends the description of that rather quickly, and the crew then voyages home and through another quarantine. Twain wrote a newspaper immediately upon return that apparently sparked controversy among his crew mates. "The pleasure cruise was a funeral excursion without a corpse." But Twain has since grown fonder of the memories of the voyage in the year since he traveled. He survived to tell the tale, at least.

I give this book 5 stars out of 5. What book doesn't have flaws, but this is basically an American classic written by the classic American English wordsmith.