I don’t mean to scare you, but I found out some stuff this morning. Man! I don’t even want to tell you guys. It’s just so horrible. Ezra Klein writes, 11 Shocking, True Facts About Simpson-Bowles.

See your home interest deduction vanish!
Feel capital gains cuts taxed as income!
Scream at defense budget cuts!
See Night of the Simpson-Bowles if you dare!

Yes kiddos, the Simpson-Bowles plan is more liberal than you probably know. But that’s not because it is liberal. (There is a proposal that I will write about later, but it ain’t Simpson-Bowles.) It is just that with the conservative bias of debt discussion even on liberal MSNBC, their proposal doesn’t look that bad.

Klein lists 11 items that are supposed to shock us. In fact, most of them are not even surprising. But a few are:

1. Simpson-Bowles ends the the Bush tax cuts for income over $250,000 (I know)
2. There are a lot of tax increases in Simpson-Bowles (I know)
3. There are so many tax increases that the plan is nearly 1:1 (hmm)
4. Simpson-Bowles taxes capital gains and dividends as normal income (great)
5. Charities, homes, health care and states (needlessly complicated)
6. Simpson-Bowles raises the gas tax by 15 cents (good)
7. Congress has already passed 70 percent of the discretionary cuts (not surprising)
8. Simpson-Bowles cuts security spending by $1.4 trillion, not including drawing down the wars (yep)
9. The Social Security changes (I know; the cap raise is great)
10. Paul Ryan voted against Simpson-Bowles (I know)
11. Simpson-Bowles went down in the House, 382-38 (not surprising)

So there is really nothing shocking in this list. It is nice to see that the Simpson-Bowles proposal is not quite as bad as I’d thought. But mostly, it was fun to do the poster.

Joseph Stiglitz’s new book The Price of Inequality is a great book. Unlike the books of Paul Krugman, which are also very good, Stiglitz goes into much depth. In fact, the book is kind of like taking a short course on what has been going on in our economy. It is as good as Winner-Take-All Politics, but from an economic standpoint.

One of the high points of the book is Chapter 2: Rent Seeking and the Making of an Unequal Society. In it, he goes after one of the most aggravating aspects of the free market religion. Companies may get big by innovating, but they don’t stay big that way. Stiglitz notes that Microsoft, “Did not develop the first widely used word processor, the first spreadsheet, the first browser, the first media player, or the first dominant search engine.” Microsoft has used its lucky original contract with IBM to establish a monopoly, which it then used to stifle competition and steal others’ innovations.

Another example of this is the ethanol industry:

There are so many things to discuss in the book, let me just mention two other things. First, he tackles sociological aspects of market behavior that tend to get ignored in economic models. In particular, he talks about how many economists claimed that racial discrimination couldn’t exist in a free market. Wrong again, Bob! He also shows how people actually do care about each other beyond their simple economic interests. One striking case had to do with an after school program. In order to stop parents from picking their kids up late, the program started charging them extra. It did not work. The parents we’re already doing their best to get their kids on time (these were not rich parents). When the program turned it into a simple economic transaction, many parents just made the calculation that rushing to pick the kids up was not worth the extra money they would have to pay. When it was just caring about others’ time, the parents did better.

Stiglitz’s academic work looks at the effects of imperfect information in a market. Traditionally, economic models assume that everyone knows the value of a product or service. In a sense, this is why people claim that markets are perfect: they assume them to be perfect. Stiglitz showed that the effects of information asymmetries were large. Late in the book, he relates the story of conversations he had with free market fundamentalist Milton Friedman:

Stiglitz ends the book with a series of recommendations for what we can do to fix our economy. They are solid and I don’t see how any reasonable person can question them. However, because of our corrupt political system, there is little hope that more than a little around the edges will be done. So I fear we must first fix our politics before moving on to our economic problems.

This sign that has been posted all over New York City, reads “NYPD Drones: Protection When You Least Expect It.”

It is an excellent example of urban art which makes a difference. And thus, it has to be stopped!

The NYPD held a weeks long manhunt for the artist. They finally arrested Essam Attia and charged him with 56 trumped-up charges, including a weapons charge for an unloaded 22 rifle he kept under his bed.

Explain to me again how we don’t live in a police state.

I try not to read David Brooks, but last night, Matt Yglesias tricked me into reading him with this tweet:

So I went ahead and read The Truly Grand Bargain. What Brooks is doing is a bit of a mystery. Normally, I would think he was just admitting that some Republican demands are hopeless. For example, the top marginal tax rate will go up to 39.6% automatically on 1 January. But he isn’t calling for that. Instead, he claims that the Republicans should be, “Willing to see top tax rates go up to 36 percent or 37 percent.” What?!

But it gets worse. He wants major cuts to Medicare and Social Security in exchange for this one or two percentage point increase in the top tax bracket and a one year ceasefire in the Republican war on the United States credit rating, know as the debt ceiling. Dean Baker did some calculations on this offer. He finds that Brooks is asking for a 6% cut to poor retirees’ incomes and in exchange, Brooks is offering a 1.5% cut in the incomes of the rich through tax increases.

Baker notes, “It’s interesting to think about what he would suggest putting on the table if the Republicans had won the election.”

Afterword

I don’t understand everyone who is claiming that the Republicans should do what Obama wants because the Democrats won the election in a big way. Elections don’t have consequences because anyone has a mandate; they have consequences because someone has power. Obama is not in a better bargaining position because he won the election—at least that isn’t the critical element. He is in this position because the Republicans gave him the power when they assumed he would lose. Now two things are going to happen that the Republicans don’t want: tax increases and military cuts. If these were not coming regardless, Obama’s win would not mean anything in this negotiation.

Matt Yglesias sent us to a YouGov BrandIndex article by Ted Marzilli, Anti-Obamacare rhetoric and restaurant Buzz. It provides data for what I’ve always said: it is a big mistake to bring your politics into your business—especially when your business isn’t a necessity, like dining out at low quality restaurants. (That’s not an insult; I’m rather fond of Denny’s.)

Marzilli presented the graph below. It shows the Buzz score, “Which asks respondents, ‘If you’ve heard anything about the brand in the last two weeks, through advertising, news or word of mouth, was it positive or negative?'” Basically, it measures how a brand is doing. I think it is is fascinating.

The data for Denny’s is very telling. My take on it is that all John Metz’s bitching about Obamacare caused the Denny’s reputation (that was never that high) to plummet—all the way down to zero. And Metz is just a franchise owner. But as it became widely know that Denny’s CEO John Miller slapped down Metz and set about cleaning up the mess, people felt better about the chain. I think the main thing is that people learned that Metz didn’t speak for the company.

I think this final bit is critical, because of what’s happened to Papa John’s. On 20 November, John Schnatter announced that he wasn’t going to screw his employees or increase prices and that it was all a big misunderstanding. His words were “twisted.” That statement is at best questionable. Regardless, the people didn’t buy it. In fact, when Schnatter made his twisted comment, it seemed only to have reminded people of what an asshole he is, because their Buzz score went down even further.

All of these places will eventually recover from this. Soon most people will forget it ever happened—not that long term damage hasn’t been done. But this shows very clearly that business owners should shut up and run their businesses. But I think these people are as sheltered as anyone else in the right wing bubble. I’m always reminded of Bill O’Reilly’s comments about “far left wing extremists.” That’s his way of saying “the other.” And for people like John Metz and John Schnatter, they probably think that Democrats are strange people far away and not what they really are: well over half of their customers.