Let old banks die, use the money to start new banks

Paul Romer suggests using the TARP money to just start new banks rather than throwing good money after bad in bailing out banks that are full of toxic assets.

Tom Philpott, over at Gristmill promises to discuss other banking models. He links to Martin Wolf at the Financial Times who writes, "a sizeable proportion of [U.S.] financial institutions are insolvent: their assets are, under plausible assumptions, worth less than their liabilities."

The Independent reverses its opinion of pot.

The Independent, which was an active campaigner for the shift in status from Class B to Class C for cannabis, now reverses its stance and issues an apology.

Congressional Budget Office declares Obama plan is worse than doing nothing.

The CBO reported on Wednesday that Obama's economic recovery package will actually hurt the economy more in the long run than if he were to do nothing, by .1 to .3% GDP. CBO does report the Senate bill would produce between 1.4 percent and 4.1 percent higher growth in 2009 than if there was no action, but the cost beyond the near term into the medium term would exceed the benefit.

I recall during the ill-advised steel tariff, Mickey Kaus pointing out that the cost per job saved was around a quarter million per job.

This "stimulus" is in the same ballpark. Given the most generously small package, $750 billion and the most generous jobs creation figure 4.1 million, I get $183,000 per job saved. Given that maximal job production at optimal spending is unlikey, the quarter million figure is probabaly more accurate.

With that kind of money, you could pay people not to work until the next recession. Rinse and repeat.

Obama and Congress make hiring a liability

The Lilly Ledbetter Fair Pay Act will have the effect of depressing wages and employment. Making today's HR choices a long term liability will make employers hiring shy. Or more precisely, more shy than they already are.

And this in an environment in which unemployment is higher among men than women. In which pay is as high or higher for women for the same work. And in which women graduate from college more than men.

If the economy were strong, this would be merely misguided. But in a down economy (and unemployment is a lagging phenomenon, so will recover after the recovery is in effect) doing anything to make hiring less attractive is bad medicine.

Obama's Positivism

In the past several months, during the transition, two characteristics have emerged that have caught my attention. One is the President is interested in talking to anyone from the intellectual elite, right, left, or center. A sit down dinner at George Will's house with Bill Kristol and David Brooks being just the kind of thing I am thinking of. His appointments have struck the same tone, selecting well respected experts, including Bush Administration folks, rather than selections calculated to please his base.

Throughout the campaign, and mentioned again during the Inauguration, was a declaration of a post-partisan approach: "the stale political arguments that have consumed us for so long no longer apply." The combination of an appreciation of expertise and intellectualism plus a rejection of ideology is often a signal of Positivism.

"The question we ask today is not whether our government is too big or too small, but whether it works (...)." Is this pragmatism, or Pragmatism? The philosophy of Pragmatism being an American variety of Positivism.

In government, the most common variety of Positivism is Technocracy. The fact that Obama was always very nebulous (Hope and Change) and short on actual explanations on the how can now be read as meaning there never was any agenda more specific than to put the experts in charge. Technocracy is the form of government where the experts decide policy and administrate its implementation. Technocracy, like all other forms of Positivism fancies itself scientific, and hence non-partisan.

Obama said "On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord. On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn out dogmas, that for far too long have strangled our politics." To him, politics is not a process in which interested groups meat, contest, dispute, and sometimes compromise. Such a notion is petty, false, and worn out. Rather disinterested experts will be the arbiters of policy and the intrusion of the pubic into the affairs of government will be regarded as ungrateful, petty interference.

Discarding the will of the people, all to common for the technocrat, for the expert opinion arrived at scientifically by the best and brightest might be worth it, if it worked. It does not. Experts possess a general expertise about abstract examples, general circumstances, but no one is an expert in their own circumstances but themselves. Great plans devised by benevolent experts are always a mess.

Do not impose experts on the people, but let the people decide themselves, through the political process and through the market.