Some useful insight into the weakness of conservative economics

This post by Matthew Yglesias on Ricardian equivalence (see Wikipedia definition) is one of the funniest and most pungent putdowns of neocon economics that I have come across.

Why polls always need to be viewed with caution

Mark Blumenthal, of Pollster.Com had a brilliant post this week on a subject of continuing interest to TC.

He noted that often:

...pollsters are asking about something that a lot of respondents have not really considered before. Some call these "non-attitudes." As a general rule, it is hard to understate how often ordinary Americans are oblivious to the controversies that seem oh-so important inside the beltway, on cable news or the blogosphere.

In the case in point it was a contrived debate over whether Obama was doing too much - as in fixing the economy, doing something about health care and tackling global warming. So, not surprisingly, when the pollsters asked about it, the results were completely contradictory. In other words, the whole controversy meant nothing to most Americans so the results of the poll were entirely a function of the wording of the individual survey questions.

In fact, the U.S. President has many responsibilities, and pursuing several priorities simultaneously is no big deal.

Reid Poll

Another new poll, broadly similar to the others.

Recent Polls in Canada

There was a new poll release by Decima on March 13 that has the Liberals leading. Here are the national numbers plus the projected seat totals from my forecast model:

Cons.	32	114
Liberal	33	121
NDP	14	22
Bloc	9	50
Green	10	0
Other		1
Total		308

The Liberals are edging into minority government territory. Overall the numbers have not strayed much from the October 2008 election except in Quebec where Harper's support has cratered (other polls all confirm this). TC continues to expect further erosion of Conservative support as the recession deepens, a trend that personal insults directed at Ignatieff will not affect.

Decima seems to have a "house effect" of granting the Greens a bit too much support. There is no reason to think that Green support has grown 25% since the election but that is the implication of the poll. However, it is interesting that there remains significant Green support even while conventional wisdom has it that environmental concerns have evaporated in light of the downturn. This poll and others of recent vintage demonstrate this much at least. Supporting the Greens is for many, less a pure vote choice than a way of expressing concern about the environment.

There have been two other recent polls, one from Strategic Counsel and one from Ipsos (full details are behind a subscription wall), but there was about a month gap between them. Struggling media outlets may be having trouble coming up with the funds for polling, so we may see fewer in the coming months.

American Media Bias - Size of the Stimulus

Sometimes there is evidence of the conservative character of the "mainstream" media in the U.S. that is clear and unequivocal. One such case is identified by Paul Krugman and Media Matters who have drawn attention to the fact that the media, especially tv news, paid almost no attention to the argument that the size of Barack Obama's stimulus bill was too small. The fact that the downturn now appears to be worse than anticipated suggests that more stimulus will indeed be needed, but what should have been part of the initial debate was ignored despite the fact that there were important voices making that case.

I expect Obama and team will recognize the need for more stimulus. I don't agree with Krugman's column today that in effect argues they somehow won't notice. I do suspect that the limits on the size of the first package reflected a recognition that, given the difficulties of getting 60 votes in the Senate, it was all he could do initially. It will take time to build some general recognition of the need to do do more. Obama, the former community organizer, often likes to make it look as if he is being pushed to act. It would help if the media would broaden the terms of the debate because we are going to need more aggressive action on the economy to get out of this mess.

Update: The always invaluable fivethirtyeight.com has an excellent post on the politics of bank nationalization, which argues that the administration is playing for time and has not yet made up their mind on what to do. I think there is still much more to come from Obama on economic strategy.

Understanding the Crisis

Far and away two of the funniest and most insightful pieces of writing on the economic crisis are articles by Michael Lewis, the latest about the meltdown in Iceland. Last fall he dissected the collapse on Wall Street - both are brilliant and not to be missed.

Two more comments on the U.S. Fiscal Situation

Harold Chorney has recently put up two posts on the Obama budget and the U.S. fiscal situation. Both are worth reading in full but here are two highlights. First on the U.S. deficit:

The Obama administration has released a preliminary summary of their proposed budget in which they judge the deficit for the fiscal year to come in at 1.7 trillion dollars or about 12.3 % of the US GDP which in current dollars is $ 14.26 trillion. This is a substantial number the largest deficit since the Second world war.

During the war years the deficit was 14.2 % of the GDP in 1942, 30.3 % in 1943, 22.7 % in 1944 and 21.5 % in 1945 including both on and off budget items. (source Table 1.2 p.23, Budget of the U.S. Government Historical Tables , 2008, Office of management of the budget).During the 1930s the deficits as a percentage of the GDP were much smaller peaking at 5.9 % in 1934.

So the budget deficit is actually barely a third of what it was during the peak of the war years, when almost none of the expenditures were going to meet domestic needs.

Another key point that is distorted in public discourse: the holders of U.S. public debt do include China but that nation holds only 6% of the total:

As of February, 2009 there was a total of 10,877 billion dollars of US debt outstanding. A total of 3076.9 billion was held by foreign non residents or 28 %.

Of this amount as of december 2008 the Chinese held just 6 % of the debt outstanding, the Japanese just 5 %, the oil exporting countries principally the Gulf states plus Libya,Nigeria,Ecuador , Venezuela and Nigeria held 1 % and the Caribbean banking centres in the Bahamas, Bermuda, the Cayman islands the Dutch Antilles and Panama about 1 %.

All the other foreign holders held much less than that including the U.K., Brazil, Russia, Switzerland, Germany, Mexico, Singapore, Thailand, Korea, India, Italy, and France. intergovernmental holdings of the debt amounted to 4,297 billion or close to 40 %.So there is no large problem for the US to continue to finance its debt for the forseeable future.

Both are worth reading in full.