Category: Current Affairs

My departure from Manila was a timely one

At least a third of this overpopulated capital and its suburbs were submerged on Tuesday as torrential rains battered the city and floodwaters poured in from almost all sides. An overflowing lake in the south sent water coursing into a river that slices through Manila; water poured from the open floodgates of a dam to the north, and high tide brought flooding from the bay to the west.

“It’s like Waterworld,” said Benito Ramos, who heads the government’s disaster relief agency, referring to the movie with Kevin Costner depicting a submerged earth.

Here is more, and I wish the best to all those left behind.

300 Million Without Electricity In India After Restoration Of Power Grid

According to estimates, roughly one-third of a billion Indian citizens were left without power Wednesday after workers successfully repaired the nation’s electrical grid and brought all of its systems back online. “Since restoring our infrastructure to 100 percent capacity following Monday and Tuesday’s blackouts, vast swaths of India are now completely without access to electricity,” said the country’s power minister, Veerappa Moily, who confirmed that three out of every four residents lacked access to such basic amenities as lighting, food refrigeration, and the use of simple appliances now that the country’s grid had fully recovered. “We are currently not monitoring the situation, as everything appears to be functioning normally again in India.” Government officials also stated that the widespread power outage had in no way compromised their ability to provide adequate sanitation to 31 percent of India’s citizens.

The Onion hits on a hard truth.

What’s with the eurozone update?

A few of you have emailed and asked.  I understand the latest as follows: Draghi basically understands the problem, but is hemmed in by Germany.  He is now to some extent freelancing and daring Germany to pull him back in.  He’ll print money to target short-term yields for the debt of the periphery, which he feels Germany might eventually accept, for lack of better alternatives and because it also keeps up the pressure for policy reforms.  He’s rather audaciously trying to redefine what the ECB’s mandate should be taken to mean by defining a lot of “extracurricular” activity as keeping the system up and running.  He’ll push for the banking license for ESM (which would allow them to significantly expand what they do and in essence bypass some of the charter restrictions on the ECB itself), which he probably feels Germany won’t accept but what the heck he’s gotten this far so why not keep on trying?  It’s easy enough to criticize him for not having made any kind of full commitment, but he’s already played more of a dare game than most observers thought possible.  I say he is doing a high-quality tightrope act which probably will fail but which increases the chance of the whole thing pulling through.

He’s daring the Germans to zap him, knowing he stands some chance of going down in history as the central banker who saved the eurozone, knowing that he has nowhere else to go, knowing the Germans have nowhere else to go, and knowing that he has nothing to lose from being fired or otherwise emasculated.  He also knows he has a lot of other eurozone nations on his side.

Just not the ones who will end up paying the bills.

Brad Plumer adds useful comment with a survey of opinion.

Investment vs. the Warfare-Welfare State

In Launching the Innovation Renaissance and my Atlantic article The Innovation Nation vs. the Warfare-Welfare State I showed that the Warfare-Welfare state has crowded out federal investment in research in development.

In a short report titled Collision Course: Why Democrats Must Back Entitlement Reform, Jessica Perez, Gabe Horwitz, and David Kendall cut the data in a slightly different way but come to the same conclusion:

 

Entitlements are squeezing out public investments. In 1962, spending on investments was two and a half times that of entitlements. But today, as a result of this Great Inversion, entitlement spending is three times that of investments. And this trend will only accelerate in time as the Baby Boomers retire and their benefits grow faster than inflation and wages.

…The fact that entitlement spending is crushing investments is bad news for U.S. growth.

Hat tip: Arnold Kling.

Goldman Sachs Invests in POP Bonds

Goldman Sachs is investing in a New York City pay on performance bond (POP bond also called a social improvement bond). The Pop bond is based on recidivism rates for adolescents, as described by the NYTimes:

The Goldman money will finance a program called Adolescent Behavioral Learning Experience…which seeks to improve prospects for black and Latino adolescents. The jail program, which will offer counseling and education for an estimated 3,400 incarcerated adolescent men each year, will be run by two nonprofit organizations, Osborne Association and Friends of Island Academy, and overseen by MDRC.

…If the program reduces recidivism by 10 percent, Goldman would be repaid the full $9.6 million; if recidivism drops more, Goldman could make as much as $2.1 million in profit; if recidivism does not drop by at least 10 percent, Goldman would lose as much as $2.4 million.

…Currently, nearly 50 percent of young men released from Rikers reoffend within a year.

As I wrote earlier:

For Pop bonds to work it is critical that outcomes be measured and marked to an appropriate, randomized, control group. If not carefully monitored, the private sector will also excel at innovative and creative gaming at the public expense.

The involvement of Goldman Sachs makes me fear that my last sentence will prove prophetic.

Yet again the tragedy of the commons, for Indian power generation

Surendra Rao, who was the chairman of the Central Electricity Regulatory Commission in 2001, when the nation’s last major blackout occurred, said that a fairly sophisticated system of circuit breakers should have prevented the failures on Monday and Tuesday. But, he said, the people manning the circuit breakers are bureaucrats beholden to state government officials, who are loath to have the power in their locality shut off — the usual prescription when power surges threaten the national grid.

Here is more, and for the link I thank Fred Smalkin.

James Cameron moves to the culture that is New Zealand

The story is interesting throughout, I liked this bit:

Adrienne Staples, mayor of the South Wairarapa District Council, recalls that being her first reaction when told in early February that a supposedly famous filmmaker had bought farmland in her zone.

It was not a particularly easy day for Ms. Staples. An avid horsewoman, she was trying to impregnate a mare with semen being flown to Wellington from a Spanish stallion on the South Island. She drove across the Rimutaka Range, twice, to get the semen; juggled calls from the press; and offered to bake Mr. Cameron a cake, because, after all, this is rural New Zealand.

Medicaid wars, continuing

Phil Galewitz and Matthew Fleming surveyed all 50 states to find out how Medicaid budgets are changing. They found that 13 states had made cuts this year..Seven have Democratic governors; six are led by Republicans. Three are in the south and an equal number are in New England. Two, California and Connecticut, seem to really like the Medicaid program: They volunteered to start the health law’s Medicaid expansion early, well before it’s required in 2014. Others, like Louisiana and Florida, are not fans at all: They plan to sit out that Obamacare provision.

All told, it’s pretty hard to find any narrative that explains why these states have cut their Medicaid programs, aside from some broad truths: Budgets are still squeezed and Medicaid is eating up a growing chunk of state spending.

From Sarah Kliff, here is more.

I once suggested this in jest

Yet Ireland will do it for real:

About 1,850 housing developments, unfinished after the bubble burst in 2008, pockmark the Irish landscape, according to government figures. This week, Ireland’s National Asset Management Agency, the state agency set up in 2009 to purge banks of their most toxic commercial property loans, started the destruction of an apartment block for the first time.

“There’ll be some places where the most sensible decision that can be made will be to demolish,” Housing Minister Jan O’Sullivan said in an interview in her Dublin office on July 10. “If nobody wants to live in them, then the most practical thing to do possibly will be to demolish what is there.”

In part it is a safety issue.

CBO forecasts Medicaid Wars

In 2022, for example, Medicaid and the Children’s Health Insurance Program (CHIP) are expected to cover about 6 million fewer people than previously estimated, about 3 million more people will be enrolled in exchanges, and about 3 million more people will be uninsured…

Only a portion of the people who will not be eligible for Medicaid as a result of the Court’s decision will be eligible for subsidies through the exchanges. According to CBO and JCT’s estimates, roughly two-thirds of the people previously estimated to become eligible for Medicaid as a result of the ACA will have income too low to qualify for exchange subsidies, and roughly one-third will have income high enough to be eligible for exchange subsidies.

There is more here.

Iceland and Ireland

From a new Mercatus working paper by David Howden, here is the conclusion:

When the tale of these two crises is told, the conclusion is typically that one set of policies was more beneficial than the other. In this paper we have shown that the truth lies somewhere in the middle. Icelanders have benefited by evading a debt overhang through an undue bank bailout that has shielded entrepreneurs and investors from losses. The Irish commitment to open capital flows and willingness to reduce domestic prices to regain competitiveness has allowed prices to return to levels necessary for entrepreneurs to use as signals to invest. Countries facing similar crises—be they currency, banking, or general economic crises—would be well-advised to heed these two lessons when drafting recovery plans of their own.

Price inflation in Syria

…as the conversation deepened and tea flowed, he spoke of prices. Mr. Hamed leads a battalion near Aleppo. The demand for weapons on his turf is so high, and supplies are so short, he said, that he has had to pay more than $4 for a single rifle or machine-gun cartridge. A Kalashnikov assault rifle, he said, costs $2,000 or more.

In the history of conflict, these are high prices…

What will the supply elasticity be?

…full RPG-7 systems (a reusable launcher with two or three high-explosive antitank rounds) cost more than $2,000, and each replacement grenade costs $500. PK machine guns, another common firearm, cost $6,000 to $7,000. No modern infantry rifle is available for less than $900. Some cost several times that. Thus, arming three riflemen, a machine gunner and a man with a rocket-propelled grenade could easily cost a commander more than $10,000 — not counting ammunition.

Because of lack of ammunition, they are using M-16s as sticks, not guns.  Here is much more, interesting throughout.  For the pointer I thank Peter Somerville on Twitter.