Thomas Frank wrote an excellent article this last weekend, Finally, Wall Street Gets Put on Trial: We Can Still Hold the 0.1 Percent Responsible for Tanking the Economy. I’ll give you a basic rundown and some thoughts here, but you should read the whole thing. It calls into question the administration’s claims that they couldn’t go after the bankers because “financiers simply could not have committed fraud, since you would expect fraud to result in riches and instead so many banks went out of business.” This is nonsense, of course.

As I have admitted before, I find finance and the whole idea of money to be mystifying. But this is very clear. We know only too well that from the CEOs on down, people at banks were able to enrich themselves in the short run by doing things that were bad for the banks in the long run. Of course, because the administration has shown so little interest prosecuting the bankers, it’s worked out for them in the long term too. And it mostly hasn’t been bad for the banks because the government was there to bail out the whole industry.

As you may recall, after the financial crisis, the conservative narrative was that the problem wasn’t the banks. No, it was those greedy poor people who bought houses they couldn’t afford. It was Rick Santelli’s neighbor who made an addition to his house. It was Freddie and Fannie and Barney Frank pushing “those people” to buy homes they couldn’t possible afford because everyone knows that “those people” don’t have jobs! But as Frank noted, “Sure enough, when taking on ordinary people who got loans during the real-estate bubble, the president’s Department of Justice has shown admirable devotion to duty, filing hundreds of mortgage-fraud cases against small-timers.” When it comes to the people giving out the loans, Mitt Romney could hardly have been more forgiving.

One of these cases of the federal government going after those mean poor people occurred recently in Sacramento. It concerned a “group of eastern European immigrants” who bought houses in 2006. They got what are called “liar’s loans” where those applying didn’t have to prove their income. All they had to do was state it on the loan application. The bank would not check. That was the main selling point of the loan:

The way the government sees it, the banks have been victims in all of this. Of course, there is a case to be made for this. But the banks were not victims of people taking these loans; the banks were victims of their own people who were selling these loans. But the government prosecutors apparently haven’t even considered this. In these cases, they haven’t even talked to the management at the banks. When a federal agent was asked if he was concerned about the conduct of those loaning the money, he replied, “No. I would consider — they’re the victims in this case. That’s how I consider them.” Note how the conduct of Trayvon Martin and Michael Brown are very much of interest to prosecutors.

Regardless, there is this thing in the law that states that fraud must be “material.” That means that it has to have been part of the decision process. So if you told your loan officer that you never cheated on your wife when you had, that would not be material because it wouldn’t be part of deciding if you got the loan. Well, with these “liar’s loans” it is clear that the banks didn’t care if the borrower was telling the truth or not. They were going to give out the loan because they were going to make money regardless.

Using this fact, the defendants were acquitted of the fraud charges. It’s very good news. And now other people are going to use the same defense. The problem, however, is that there are many (probably most) judges who won’t even allow the behavior of the banks to be considered in the trial. These are poor people: we can’t allow them to get away without punishment! And dragging the behavior of the rich bankers through court will be so unfair! But this is at least a little bit of great news.

Of course, the Obama administration has no intention of easing up:

Wow was I excited when I saw that Jonathan Chait had written a new article with a promising title, Why the Worst Governments in America Are Local Governments. Chait was been writing a lot about Education Reform recently, an issue he knows little about. So this sounded great, especially since for years, I have been harping on the nonsense about local government always being better. In fact, it is usually local governments that are most abusive and corrupt.

But Chait decided to partake of a healthy dose of false equivalence with an argument so facile it barely occupies a single dimension. Chait claimed that after Ferguson, “The problem, Democrats and Republicans concurred, was militarized police.” Really?! Because I don’t remember that. I remember Rand Paul going on about it. And I remember some liberals talking about it as one of many problems. But that was it. As is sometimes the case, Chait was really stretching to make his “I am the great centrist!” argument connect. And that was his second sentence!

After pointing out the “Orwellian monstrosity” in Ferguson, where the government bleeds the poor dry with fines as a way to fund the government, he went on to equate it to small minded politicians in cities who won’t agree to increase zoning or get rid of licensing requirements for barbers or dental hygienists.[1] There are a couple of problems with this. First, of course: they really aren’t equivalent. What is going on in Ferguson (and to one extent or another, everywhere) is not nearly as bad as disallowing people to start barber shops in their apartments.

Second, what liberals are against getting rid of these laws? Unlike the “local is always better” argument on the right, there is not widespread agreement about these policies on the left. I’ve been talking about housing density and stupid regulations for a long time. As a small businessman myself, I hate all the stupid regulations that are far more of a burden on me than they are on larger businesses. I especially hate inventory taxes, which have made me completely stop selling things like books and computer equipment. I know a lot of liberals haven’t figured out some of this stuff yet. But it is largely because they are too focused on cops shooting kids in the street.

Another thing is that Chait was swinging wildly in the article. Although licensing and housing do add to inequality, they are minor parts of it. The major aspects of inequality are due to systemic policies at all levels of government that take from the poor and give to the rich. Allowing anyone to start their own barber shop is a good idea, but it would simply redistribute money among people who are relatively poor. It would do nothing about the major inequality that is at the very top of the income scale. What Chait has offered is similar to conservatives saying that inequality is all about education. It isn’t. And allowing more people to be barbers or dental hygienists isn’t going to revolutionize our macro-economy.

What’s more disappointing about Chait’s article is that he’s just using Ferguson as an excuse to push his pet policy changes. He noted that licensing requirements exist because they protect people who are already in a particular field. But he made no mention of why Ferguson is effectively running a con on its poorest citizens: because they just won’t raise taxes. This is just a way of taking the local taxes that are generally pretty flat and making the poor pay far more than their fair share. These kind of fee and penalty based systems exist because it would never fly to have such an outrageously regressive tax.

I’m really beginning to wonder if it is even worth reading Jonathan Chait anymore. Over the last month, he seems determined to claim some kind of middle ground of practical-libertarianism. But as in this article, he doesn’t provide any details. There’s a lot more to changing the barber profession than licensing! But instead, it’s just, “Yeah, those Republicans are bad; but look at the Democrats!” And there are any number of other columnists I already avoid for that reason. I read the better conservative writers. I don’t need someone who is trying to thread the needle without trying very hard.

[1] Chait apparently doesn’t know any more about dentistry than he does education. The major cost premium with hygienists is not their licensing, it is that they have to work under the “supervision” of a dentist. But it shows a shocking lack of understanding of what hygienists do to think that the job is equivalent to cutting hair. If you aren’t going to have licensing requirements for hygienists, I don’t see the need for licensing requirements for dentists. And, in fact, I don’t see the need for licensing requirements for dentists. But I doubt Chait would agree, and regardless, that would never happen because dentists have lots of money. It is typical of what Chait calls “modern Democrats” to do this kind of surface level analysis that will end in — Get ready for a big surprise! — more competition added to a market except where it might hurt the profits of the already rich.

Yesterday, over at Political Animal, David Atkins wrote, With Courage, Democrats Can Still Win With Seniors. It is about a new poll that finds that older people would reward a party or candidate who pushed for increased Social Security benefits. Atkins proposes increasing entitlement spending by raising taxes on the rich and cutting corporate welfare. He’s quite right that the Republicans would have an extremely hard time countering that kind of proposal.

Of course, the Democrats will not promise such policies. It all goes back to my much repeated observation that we really don’t live in a democracy. Such ideas are simply “off the table” while very unpopular ideas like cutting Social Security are perennially Good Ideas™. But my question is why Obama spent the whole of his first term looking for the ultimate bipartisan prize: the Grand Bargain. Politically, it made no sense.

Even worse, it made no sense economically. The idea was always that in exchange for the Democrats’ agreeing to cut entitlement spending, the Republicans would agree to raise taxes. Let’s think this through. We are in a liquidity trap — there is too little demand in the economy. So the Grand Bargain would cut government spending. This would be bad for the economy because it would reduce demand. And the Grand Bargain would raise taxes. This would be bad for the economy because it would reduce demand. Economically speaking, the Grand Bargain is a lose-lose proposition.

There’s only one reason for the Grand Bargain: to cut the federal government’s budget deficit. But we need bigger deficits right now, not smaller deficits. Just look at total government spending after the last four recessions. Do you notice anything? The government is not spending the way it normally does and we’ve had effectively no recovery. In 1937, Keynes said, “The boom, not the slump, is the right time for austerity.” But apparently we’ve forgotten. (Or more likely: we now have a major political party that will destroy the economy until they get power.)

So the Grand Bargain is bad politics. And the Grand Bargain is bad economics. So why is Obama so interested in it? Why do I still fear if the Senate goes Republican next year that he may bring it back with even more concessions? (“I’ll tell you what, if you agree to get rid of just one loophole, I’ll raise the retirement age to 88 and end the food stamp program!”) I think he has a kind of addiction to being seen as The Reasonable One™ among those we refer to as the Very Serious People. A year and a half ago, I wrote, Return of the Son of the Night of the Simpson-Bowles. I noted then that trying to get credit from such people was a fool’s errand because they will always proportion the blame evenly between the Democrats and Republicans.

I would like to think that Obama has learned his lesson, but I don’t think he really has. Nor has the Democratic Party learned the most basic fact about politics in the United States. The one area where the Democratic Party is truly liberal — on social policy — the nation is conservative. On liberal economic policy — which is wildly popular — the party is conservative. But like I said: we don’t live in a democracy — at least one where every person has an equal vote. “All Americans are equal, but some Americans are more equal than others.” But I don’t expect Obama or the rest of the Democratic establishment to ever admit that.

I didn’t know it, but Kroger is the largest supermarket in the United States. The reason is that the company uses a lot of different names for its outlets. For example, around here in the Bay Area, we have Foods Co. And I have to admit: I liked shopping at Foods Co. But I am more than willing to boycott them. Currently, the grocery chain is being targeted by Moms Demand Action. According to the group, “Kroger, the largest grocery chain in the country, has policies that allow customers to openly carry guns in its stores.” And so they are investing six-figures into an ad campaign using images like the one above.

The idea here is that Kroger forbids skateboards in its stores because they are dangerous. And that is a good policy. But they have no problem with the open carrying of the guns. Most people would agree that people walking around grocery isles with loaded guns is dangerous. But the open carry crowd think it is just fine. And they are freaking out even as they claim there is nothing to see. They claim that it is “bullying.” But then, any political action they disagree with is “bullying.”

This is rich. We have a civilization where we do not need to haul around guns with us. So the ostentation display of guns is a provocative act. But if a mother with her two young children has a problem with some unknown man walking around with a semiautomatic rifle and a 30-round banana clip, then it is her who is the bully. That’s really quite amazing. People don’t have any problem with those who demand that people not do their shopping naked, but the people who request that their children not be placed in harm’s way are bullies. In a sane world, it would be unbelievable. Unfortunately, it is very believable.

One would think that after asking Kroger to change the policy, it would have done so. After all, the vast majority of people do not want to see gun fanatics walking around their grocery stores. But here is the Kroger response (pdf) in full:

It’s remarkable for its cognitive dissonance. They don’t want to put their employees in a position of having to confront people with guns. That makes sense. After all, these people have guns. If politely told of the store policy, these people might go crazy and kill the employee. It is also true that a slow checker might set someone with a gun off. Or another customer accidentally bumping into someone with a gun. This is why people walking around with guns everywhere is a bad thing.

Kroger also asks customers to “be respectful of others while shopping.” The problem is that some idiot walking around the store with a gun is by definition not being respectful of others. He is doing it to get in people’s faces — to make a point. He knows full well that seeing some anonymous man walk around with a gun is upsetting to other people, because they have no reason not to think him a murderer.

But what most impresses me is the false equivalence: “our customers are passionate on both sides of this issue.” That’s right, the vast majority of people who want to shop in peace compared to a tiny slice of the population who just want to be annoying. Even the generic polls that ask people about open carry find strong opposition to it. Let a man with an assault rifle walk through a suburban supermarket and then ask those people what they think of open carry.

Most of civilization is not about laws; it is about norms. In general, you shouldn’t have to have policies against carrying guns into supermarkets and churches. But this is what has become of conservatism in the United States. This is why the Senate filibuster had to be neutered. And it is why gun advocates feel they should bring rifles into fast food restaurants. Conservatism has become revolutionary. They care far more about their own extreme ideology than the niceties of getting along in a diverse society. Just the same, I have little doubt that Moms Demand Action will win this fight and Kroger will fold like a card table.

Andrew Prokop wrote an excellent article over at Vox yesterday, Why Election Forecasters Disagree About Who Will Win the Senate. It gives far too much attention to Nate Silver, but it still manages to provides little nuggets of information that I had been wondering about. For example, as I had thought, The Monkey Cage model used to be fully fundamentals based. Now that we are so close to the election, it is mostly polls based. That’s why a couple of months ago, it gave the Republicans an 86% chance of taking the Senate and now it only gives them at 53% chance.

But overall, the article doesn’t provide any surprising information. Basically, the differences in the conclusions of the models is based upon just how much each model uses fundamentals like the approval rating of the President. According to the articles, the modelers have looked at the effect of fundamentals in the past at certain points in the election cycle and they have found that they really do predict better than poll-only models. I think there is a major problem with this claim.

These modelers have not looked at the effects of fundamentals-based models before the fact. They’ve developed models based upon what they’ve seen in the past. Basically: they do multiple regressions and see how much each element affects the final result. So of course these models would predict the past better than the polls-only models. The fundamentals-based models have the conclusions built into them to some extent.

No one thinks that these multiple regressions are the truth. There is no theoretical basis for the belief that the President’s approval rating will affect the election outcome. It is simply a tendency that has been experimentally derived. And it turns out that generally the President’s approval rating is correlated with a “generic ballot” where people say who they would rather vote for: a generic Democrat or a generic Republican. Well, as Nate Cohn explained last week, these two have diverged. Obama’s approval rating is very low at about 40%, but the Democrats have a three percentage point advantage in the generic poll. For contrast, the Republicans had a three point advantage in 2010.

What I wonder about is if the fundamentals aren’t generally useless in off-year elections. Even in presidential elections, there is really only one important fundamental: economic growth. The change in GDP for the three quarters before the election is responsible for almost half of the variation in how well the parties do. My hunch is that all the other fundamentals are just added noise. Yes, they’ve correlated in the past, but it isn’t real. And that takes us to Sam Wang’s conclusion, “Because polls are a direct measure of opinion, and fundamentals are indirect, it’s generally a risky move to add fundamentals to a measurement.” In other words: fundamentals just add noise to the models.

It is important to remember that these are just models. What’s more, the polling data itself could be wrong. This isn’t a presidential election with nationwide polling. The competitive states are getting decent polling coverage, but they are hardly what we would want. And in the end, it will all come down to who shows up to vote. Right now, the polls are mostly of registered voters. Soon they will provide “likely voter” estimates. As a first brush, this tends to help the Republicans. Just the same, in 2012, many “likely voter” estimates overstated Republican voters because roughly half of the people who said they were unlikely to vote ended up voting anyway. So it is a muddled mess.

I’m back to what I thought a year ago: the Republicans have a 50-50 chance of taking over the Senate. And I’m kind of gloomy on that issue, because I’ve trained myself to be pessimistic in situations like this. Even in 2012 when I predicted that Obama would win 332-206 (which is what he won by), I wasn’t willing to say that Obama was certain to win. The truth is that we just don’t know. But we ought to know the evening of 4 November.