Sunday, January 31, 2016

How the Iowa Caucus is like Major League Baseball

Institutional arrangements matter and in turn they help us predict and understand outcomes of policy and elections. In the case of the upcoming Iowa caucus those rules vary between the parties and one must wonder if those important differences are too complex for the accompanying media narrative. So like Major League Baseball the two parties/leagues have different rules (thinking designated hitter here).

In Iowa on the democratic side the caucus is a caucus. Participants gather and listen to people give brief talks on behalf of the various candidates and then huddle in corners for their respective candidates. The goal is to elect delegates to a county caucus as the first step in the process of selecting national convention delegates, a process that won't be completed for several months. All indications are that the number of people attending the caucus will be pretty evenly split between Sanders and Clinton with almost nobody caucusing for former Governor O'Malley. This is critical as to have a viable group to elect a delegate(s) to the county convention you must have at least 15% of the attendees of your precinct in your group. As O'Malley is polling at less than 5% he will have very few precincts where his supporters make a group above the threshold. In a close race it could be determinant as to where his supporters go ... Of course there is the option of going home or being in a larger uncommitted group. But there are always rumors of deals among the campaigns ... Say like if you support Sanders to help him win the precinct his supporters will elect your folks to the county convention.

The fascinating question is always which set of numbers will the press use to create the narrative? Is it caucus goers when they huddle or the results of delegate elections? Here are figures from The New York Times in 2008 where the results were results as state convention equivalents. This style of reporting basically eliminates less popular candidates. (The candidates not Obama, Edwards or Clinton split 3.1%.)

On the Republican side the caucus has an additional step. When caucus goers arrive they participate in a straw poll which allows them to indicate their first choice preference.In the same Times link they were indicated for the Republicans. Note for example, eventual nominee John McCain came in fourth with 13.1%. If the results were reported based on state delegate equivalents elected (like in the Democratic race) then McCain would have faired worse as he might have not been viable in half the locations. Would that weak of a showing enabled McCain to win the New Hampshire primary shortly thereafter?

These rules have an impact on tactics, spin and reporting. In the end one must remember that the Iowa event is not an election it is by design a gathering of the hard core party faithful, a party possibly crashed by newly enthusiastic "outsiders". The final Des Moines Register poll is out and the trend continues as described above. Trump leading Cruz for the R's and Clinton with a slight lead over Sanders for the D's. 

Wednesday, January 13, 2016

GE is coming to Boston and it is a very bad deal

It was announced today that General Electric picked Boston as the site for a new corporate headquarters fleeing its long time base in Fairfield County, CT. While the final site has not been picked it looks like there are two contenders in the Seaport District of Boston. So the irony is that they probably picked the only other spot in New England where property values are as high as Fairfield County. So it is not surprising that along with the announcement came word that the City of Boston and Commonwealth of Massachusetts are promising tax incentives of up to $150 Million dollars over some period of time (probably 20 years) to sweeten the pot.

graphic from Citizens for Tax Justice

Keep in mind that this is the same GE, one of the largest firms by market value in the US, which had over $90 Billion in cash at the end of 2014. And now they must get millions of dollars per year to relocate to one of the hottest commercial and residential neighborhoods in North America. There is no way that these incentives will ever be worth the money payed out to this firm. While Boston is chronically underfunding its schools and Massachusetts is looking at a billion dollar hole for next year's budget it might make more sense for GE to be giving money to the government. The only hope is that since GE doesn't really deign to pay state taxes anyway so that the incentives which are based on state income taxes won't ever be used. That leaves Boston holding the bag for the property taxes forgiven as part of the horrendous TIF.

As I will have a longer piece coming soon to this point I won't belabor it here but these incentives are most effective at making politicians look good in the face of weak coordination of job and workforce development efforts. Smiling and holding a big pair of scissors is good for big votes. It is not good for public finances or public policy.

Wednesday, December 30, 2015

The Year in Film ... All Roads Cross in Ex-Machina

I suppose it should be no surprise that given previous posts about film ... that two of the three actors that made the year 2015 would be Alicia Vikander and Oscar Isaac. The third would be the Irish actor Domnhall Gleeson. Given that he is the son of the great Brendan Gleeson, it might not come as a huge upset that he is an accomplished actor but given this list of films in the past year ...

Star Wars
The Revenant
Ex Machina

he has a resume in one year that most actors would be thrilled to have in a career. Typically cast as a sweet if somewhat goofy young man (see About Time) he was unrecognizable as the stern young General Hux in Star Wars. It bodes well for his future success.

The three wonderful young actors were cast together in what might prove to be the film of the year, Ex Machina. They have the three speaking roles (basically) in the story of a young man asked to spend a week evaluating the artificially intelligent life form (Vikander) at the behest of a dark tech mogul (Isaac) in a remote complex shut off from the world. (Nod to Sonaya Mizuno whose unspeaking character plays a major role as well.)

Isaac brought us through Show Me a Hero and for the third year in a row has a film that closes the year and is considered a must see triumph:

Star Wars (2015)
A Most Violent Year (2014)
Inside Llewyn Davis (2013)

How many hearts swooned (among them several friends on Facebook apparently) at his portrayal of Poe in Star Wars? Any of us interested in politics, social justice and the challenges of urban America marveled at his work as the Mayor of Yonkers.

But 2015 was the year of Vikander. Something I tweeted about in the spring after watching her play Vera Brittain in Testament of Youth. Her year has been recognized in the press. Vogue and Vanity Fair among them. In US theaters this year ...

Testament of Youth
Man from UNCLE
Ex Machina
The Danish Girl

... plus smaller roles in lesser films. She has been nominated for two Golden Globes (Danish Girl and Ex Machina) which is remarkable because Testament (which was released in the UK in 2014) was a revelation. Somewhat ironically, there is an upcoming documentary about Ingrid Bergman which should bring forward some comparisons. I believe that we will see an amazing career unfold (perhaps the strongest by a woman since Streep?). Vikander brings an energy and character that belies her slight frame and easy beauty. Both Danish Girl and Testament open with long shots of her face. Smart, pained and lovely ... an elegance she can not shake. A future that is promising and broad and deep.

Thursday, December 17, 2015

What the FED also did this week

Anyone staying on top of the news knows that the Federal Reserve finally gave the orders to raise interest rates above the zero level, an action long predicted by Fed watchers, bankers and economists. The headlines were about the increase in the target range for the Federal Funds Rate (the rate that banks charge one another for very short term lending) from 0 -.25 to .25 to .5 . While taking this action the Fed expressed optimism about the near term fortunes of the US economy and signaled a slow rise of rates at a pace of about a percent per year. But there were two other announcements in the technical note that should garner some attention.

Other observers, such as Harold Meyerson in the Washington Post and Dean Baker of the CEPR have commented on the political and economic downside of the steps toward higher rates given the changes in US political economy that make one doubt that wage based inflation was anywhere ahead. Typically the Fed will bring the rates up based on concerns about price levels once the economy approaches full employment. The concern with the headline action is that we do not have that strong of a labor market and price inflation is historically low. For example, there is weak demand for commodities across the board keeping prices in check. Wages have seen tepid increases at best.

But hidden in the Fed's message (because the press never writes about this) is another action taken by the Fed to raise a key interest rate ... the interest paid on required and excess reserves. Banks are required to keep money on deposit to the Fed equal to about 10% of their deposits. That is money they are not allowed to lend or invest in another manner. It has to be there to take care of customer demand for their money. If banks get caught short they can temporarily borrow to get back in balance. But starting during the economic crises banks started to accumulate gigantic amounts of excess reserves and a change in law allowed the Fed to start paying interest on those reserves.

Today the amount of excess reserves stands at about $2.4 Trillion (yes with a T). This is a result of the Fed buying securities from the banks as part of its extraordinary measures to fight the crisis. Some of that are capital inflows into the US from foreign depositors as a result of the Euro crisis and instability in global equities and bonds (even negative rates some places). People like parking money in the US even though the return has been low. It is safe.

Since the Fed pays interest on these monies it is also a profit making center for the commercial banks that own these excess reserves. This week the Fed increased that rate to keep pace with the Fed Funds rate. At current levels this means an additional $5 to $6 billion per year in revenues to the banks. Money that might otherwise be returned to the taxpayers. Outside of being friendly to bankers (which sadly the Fed does too often) the technical reason is so that the mountain of reserves doesn't flow speedily into the real economy and spark inflation by a build up of money. The obvious question becomes is this going to continue as further interest rate increases occur? Is this their plan to wind down the positions in cash taken by the banks?

It is ironic that as they take actions to weaken worker wages and employment they take more actions to help banks.

Tuesday, October 20, 2015

Canadian Election 2015

Pollsters have taken on the chin this year. The UK has a public panel looking into how they were so far off on the final results from earlier in 2015. The Gallup Organization in the US recently announced that they are ditching polls during the presidentially primary season. The good news is that some did a good job forecasting the Canadian result. In fact the often quoted Forum Research poll had results that showed the Liberals at 39, Conservatives at 31 and NDP at 19, as close to perfect as one could hope.

Except that poll was from June 2014, fifteen months before the actual election. They had another in October 2014 with the Liberals at 38, Conservatives at 34 and NDP at 18. Pretty close to the results. What does this mean? That in the end the campaign meant very little except that it confirmed the opinion that people had a year before. They wanted change and that meant a bigger rejection of Harper than in previous elections. So the question was which of the opposition parties would be the face of that change. And Canadians like Trudeau and voted for him and his Liberal Party. This result should not be a surprise as it was called a year before the election.

The Canadian system is unique as it is a very pure form of first past the post. This means with three strong parties the winner can have even less than 40% nationwide, as frequently happens. Looking at the fate of the NDP in Toronto where three very strong candidates, women all, were defeated by more than 20% reinforces the conflicting nature of the vote .. while the election is decided by 338 ridings, it is in fact a national election, modified by provincial conditions, that make the individual personalities of the candidates less important than they are in a race for Congress in the US.

I am sure there will continue to be some soul searching by the NDP as to why they could not build on their extraordinary performance in 2011. I have read quite a bit of criticism regarding the issue of taxes and spending, the face covering issue and revival of the Bloc in Quebec and the personality of the leader Tom Mulcair. In my opinion the biggest factor was the impression made a year ago that Canadians wanted the Liberals. An opinion not unusual from their past. In the US we were in awe of an election cycle that was so short ... 78 days. While the longest official run up to the poll in modern history ... the politicking and positioning of the parties operates on a permanent cycle in Canada just like the US. It is why Forum, and I am sure others, had the numbers right a year ago.

Monday, September 7, 2015

Labor Day Thoughts

Here are some Labor Day thoughts from some folks whose ideas and talents I truly admire ...

Harold Meyerson for A Happy Labor Day

David Cay Johnston on why American Workers Deserve Better

The New York Times on Wages and Interest Rates

The President takes action on Paid Sick Leave while in Boston

John Lippitt on Investment in Human Capital

Friday, September 4, 2015

Show Me a Hero

There are three issues in US politics ... money, race and gender. Everything falls into this framework or across the issues. The campaign of Donald Trump, fueled by the fear of the immigrant and the mass resentment of working people offered a simple scapegoat for their economic stagnation. This is not a unique scene in our political landscape. We've seen this over the decades with Fr. Coughlin and Huey Long, with Strom Thurmond, Lester Maddox, George Wallace ... not to mention the 19th Century "Know-nothings" and other racist tendencies. 

The most painful episodes are when these figures pit one group against the other. This is the story behind the recently concluded HBO series. It is a must watch for anyone interested in politics, urban affairs, housing, race and gender. The story follows the fight between the City of Yonkers, NY and the Federal courts over a housing desegregation plan which required the city of 200,000 plus to build 200 units of low income housing and another 800 units of affordable housing in various predominately caucasian neighborhoods.

Like the Forest Hills controversy in Queens or many of the busing controversies in the 1970's this issue pitted middle class homeowners against the poor and working poor. Be it Mario Cuomo or Tom Foglietta, some admirable public servants emerged from these fights. They had careers that took them to national prominence or Congress ... or in some of the names above ... infamy. In Yonkers the story shows the same type of positioning by politicians, leading the charge on behalf of the white residents until the city's intransigence forced municipal bankruptcy and contempt for members of its Council.

The main character in the study is the one term Mayor and multiple term councilman, Nick Wasicsko.     He enters the story as an opponent of the housing plan. Over time, as the constraints of the system overtake the actors, he becomes one in a line of politicians that realize that the city must accommodate the court's order and build the housing. Even his successor, who ousted Wasicsko on the basis of opposition to the project, eventually must make his peace. He too loses and is followed by another one term Mayor, consumed by the challenges of urban America.

The six hour series was done by David Simon, the creator of The Wire, and his writing partner, William Zorzi. They make even mundane City Council meetings, gripping drama. As he did in The Wire, Simon and company show the struggle for power between the vain and ambitious, between the venal and the courageous. He paints the good and the bad of the urban experience. The crime, the hopelessness of poverty, the violence and neglect are contrasted with the struggle for a better life and a peaceful way forward. 

The show also depicts the capability, or not, of political actors to let go. How can you live outside the limelight once you have been at the center? I have seen this in my own career (nine years as a local elected in Massachusetts). I know people who can't let go and those that have and need to make a clean break. There is nothing quit so disaffected as a former elected watching and questioning the every move of their successors, even knowing that they are making fatal mistakes. There is a scene toward the end of the show where Wasicsko goes to the newly built town homes, now occupied in large part by former residents of horrid high rise public housing. He starts knocking on doors trying to engage the residents thinking they would remember him and the sacrifices he made on behalf of the project. They have no idea who he is or what he wants from them. He is hurt. Forgetting that you can't do the work for gratitude, but for the intrinsic value of the work itself.

This is a beautifully done series. Sharp and smart and candid. The title comes from a quote from F Scott Fitzgerald ... Show me a hero and I'll write you a tragedy. Watch it and enjoy. Think about what we need to do to pull together to make life better for all without the resentments and conflicts and ignorance. As we watch the drama unfold in Europe this week, another reminder that we are tied together in a common humanity with the urge to make things better for ourselves and hopefully for all our neighbors.