Showing posts with label irrationalism. Show all posts
Showing posts with label irrationalism. Show all posts

Thursday, June 6, 2013

South Korea: National Security or National Pride Regarding Japan?, by Krista E. Wiegand

South Korea: National Security or National Pride Regarding Japan?, by Krista E. Wiegand
Asia Pacific Bulletin, No. 214
Washington, D.C.: East-West Center
May 22, 2013
http://www.eastwestcenter.org/publications/south-korea-national-security-or-national-pride-regarding-japan

Krista E. Wiegand is Associate Professor of Political Science at Georgia Southern University and a recent POSCO Visiting Fellow at the East-West Center. She explains in this bulletin that "The South Korean government will not be able to deal with the larger issue of security relations with Japan until disputed issues symbolized by Dokdo/Takeshima are sufficiently resolved—and the likelihood of this happening anytime soon is fairly low."

Excerpts:
The first official state function of newly inaugurated President Park Geun-hye was a ceremony on March 1 commemorating Independence Movement Day—celebrating Korean resistance in 1919 to Japanese occupation—where she appealed: “It is incumbent on Japan to have a correct understanding of history and take on an attitude of responsibility in order to partner with us in playing a leading role in East Asia in the 21st century.” Her speech outlined a hard line stance regarding ROK-Japan relations. It also did not help that at the end of March, the Korean Foreign Ministry summoned a high ranking Japanese official in Seoul to strongly protest the inclusion of the islets as being called Takeshima in newly released Japanese school books. Japanese cabinet members then went to Yasakuni Shrine in April which further exasperated matters, resulting in South Korean Foreign Minister Yun Byung-se cancelling a proposed visit to Japan.

If Park wants to maintain high approval ratings and not lose credibility regarding her tough position towards Japan, she will have to take into account domestic public opinion on any future security plans with Japan, even under US pressure. Yet, taking this tough approach causes unconstructive tensions in the ROK-Japan-US security relationship, and at a time of recent unprecedented heightened tensions on the Korean Peninsula. Moreover, Korea’s role as an increasingly important actor in regional security indicates that Japan and South Korea will have to cooperate more in the future.  They are both democracies, have shared values and interests, and each looks to the United States as the preferred security partner. Park will have to balance Korea’s security interests with domestic opposition to closer ties with Japan, an extremely difficult challenge under current circumstances.

Even if Korean officials are not as supportive of the GSOMIA as their counterparts in Japan and the United States, moving forward on security relations with Japan is critical. Yet, domestic opposition to issues related to Japan has effectively prevented such cooperation. The South Korean government will not be able to deal with the larger issue of security relations with Japan until disputed issues symbolized by Dokdo/ Takeshima are sufficiently resolved—and the likelihood of this happening anytime soon is fairly low. The United States has encouraged better bilateral relations between its two closest allies in East Asia, yet at the same time, the US government has been hesitant to take sides in a dispute that the United States itself inadvertently created as a result of its ambiguity in its role as mediator of the 1951 San Francisco Treaty. President Park and future Korean presidents will have a tough time successfully pursuing any plans of security engagement with Japan as long as the Dokdo/Takeshima dispute and related issues flare up. The United States is in a unique position to influence both Korea and Japan and it should continue to pressure both states to work toward reconciliation.

Tuesday, April 2, 2013

Regulators Let Big Banks Look Safer Than They Are. By Sheila Bair

Regulators Let Big Banks Look Safer Than They Are. By Sheila Bair
The Wall Street Journal, April 2, 2013, on page A13
http://online.wsj.com/article/SB10001424127887323415304578370703145206368.html

The recent Senate report on the J.P. Morgan Chase "London Whale" trading debacle revealed emails, telephone conversations and other evidence of how Chase managers manipulated their internal risk models to boost the bank's regulatory capital ratios. Risk models are common and certainly not illegal. Nevertheless, their use in bolstering a bank's capital ratios can give the public a false sense of security about the stability of the nation's largest financial institutions.

Capital ratios (also called capital adequacy ratios) reflect the percentage of a bank's assets that are funded with equity and are a key barometer of the institution's financial strength—they measure the bank's ability to absorb losses and still remain solvent. This should be a simple measure, but it isn't. That's because regulators allow banks to use a process called "risk weighting," which allows them to raise their capital ratios by characterizing the assets they hold as "low risk."

For instance, as part of the Federal Reserve's recent stress test, the Bank of America reported to the Federal Reserve that its capital ratio is 11.4%. But that was a measure of the bank's common equity as a percentage of the assets it holds as weighted by their risk—which is much less than the value of these assets according to accounting rules. Take out the risk-weighting adjustment, and its capital ratio falls to 7.8%.

On average, the three big universal banking companies (J.P. Morgan Chase, Bank of America and Citigroup) risk-weight their assets at only 55% of their total assets. For every trillion dollars in accounting assets, these megabanks calculate their capital ratio as if the assets represented only $550 billion of risk.

As we learned during the 2008 financial crisis, financial models can be unreliable. Their assumptions about the risk of steep declines in housing prices were fatally flawed, causing catastrophic drops in the value of mortgage-backed securities. And now the London Whale episode has shown how capital regulations create incentives for even legitimate models to be manipulated.

According to the evidence compiled by the Senate Permanent Subcommittee on Investigations, the Chase staff was able to magically cut the risks of the Whale's trades in half. Of course, they also camouflaged the true dangers in those trades.

The ease with which models can be manipulated results in wildly divergent risk-weightings among banks with similar portfolios. Ironically, the government permits a bank to use its own internal models to help determine the riskiness of assets, such as securities and derivatives, which are held for trading—but not to determine the riskiness of good old-fashioned loans. The risk weights of loans are determined by regulation and generally subject to tougher capital treatment. As a result, financial institutions with large trading books can have less capital and still report higher capital ratios than traditional banks whose portfolios consist primarily of loans.

Compare, for instance, the risk-based ratios of Morgan Stanley, an investment bank that has struggled since the crisis, and U.S. Bancorp, a traditional commercial lender that has been one of the industry's best performers. According to the Fed's latest stress test, Morgan Stanley reported a risk-based capital ratio of nearly 14%; take out the risk weighting and its ratio drops to 7%. USB has a risk-based ratio of about 9%, virtually the same as its ratio on a non-risk weighted basis.

In the U.S. and most other countries, banks can also load up on their own country's government-backed debt and treat it as having zero risk. Many banks in distressed European nations have aggressively purchased their country's government debt to enhance their risk-based capital ratios.

In addition, if a bank buys the debt of another bank, it only needs to include 20% of the accounting value of those holdings for determining its capital requirements—but it must include 100% of the value of bonds of a commercial issuer. The rules governing capital ratios treat Citibank's debt as having one-fifth the risk of IBM's. In a financial system that is already far too interconnected, it defies reason that regulators give banks such strong capital incentives to invest in each other.

Regulators need to use a simple, effective ratio as the main determinant of a bank's capital strength and go back to the drawing board on risk-weighting assets. It does make sense to look at the riskiness of banks' assets in determining the adequacy of its capital. But the current rules are upside down, providing more generous treatment of derivatives trading than fully collateralized small-business lending.

The main argument megabanks advance against a tough capital ratio is that it would force them to raise more capital and hurt the economic recovery. But the megabanks aren't doing much new lending. Since the crisis, they have piled up excess reserves and expanded their securities and derivatives positions—where they get a capital break—while loans, which are subject to tougher capital rules, have remained nearly flat.

Though all banks have struggled to lend in the current environment, midsize banks, with their higher capital levels, have the strongest loan growth, and community banks do the lion's share of small-business lending. A strong capital ratio will reduce megabanks' incentives to trade instead of making loans. Over the long term, it will make these banks a more stable source of credit for the real economy and give them greater capacity to absorb unexpected losses. Bet on it, there will be future London Whale surprises, and the next one might not be so easy to harpoon.

Ms. Bair, the chairman of the Federal Deposit Insurance Corporation from 2006 to 2011, is the author of "Bull by the Horns: Fighting to Save Main Street From Wall Street and Wall Street From Itself" (Free Press, 2012).

Monday, March 18, 2013

In service of the country: Ted van Dyk

My Unrecognizable Democratic Party. By Ted van Dyk
The stakes are too high, please get serious about governing before it's too late.
http://online.wsj.com/article/SB10001424127887324128504578344611522010132.html 
The Wall Street Journal, March 18, 2013, on page A13

As a lifelong Democrat, I have a mental picture these days of my president, smiling broadly, at the wheel of a speeding convertible. His passengers are Democratic elected officials and candidates. Ahead of them, concealed by a bend in the road, is a concrete barrier.

They didn't have to take that route. Other Democratic presidents have won bipartisan support for proposals as liberal in their time as some of Mr. Obama's are now. Why does this administration seem so determined to head toward a potential crash and burn?

Even after the embarrassing playout of the Obama-invented Great Sequester Game, after the fiasco of the president's Fiscal Cliff Game, conventional wisdom among Democrats holds that disunited Republicans will be routed in the 2014 midterm elections, leaving an open field for the president's agenda in the final two years of his term. Yet modern political history indicates that big midterm Democratic gains are unlikely, and presidential second terms are notably unproductive, most of all in their waning months. Since 2012 there has been nothing about the Obama presidency to justify the confidence that Democrats now exhibit.

Mr. Obama was elected in 2008 on the basis of his persona and his pledge to end political and ideological polarization. His apparent everyone-in-it-together idealism was exactly what the country wanted and needed. On taking office, however, the president adopted a my-way-or-the-highway style of governance. He pursued his stimulus and health-care proposals on a congressional-Democrats-only basis. He rejected proposals of his own bipartisan Simpson-Bowles commission, which would have provided long-term deficit reduction and stabilized rapidly growing entitlement programs. He opted instead to demonize Republicans for their supposed hostility to Social Security, Medicare and Medicaid.

No serious attempt—for instance, by offering tort reform or allowing the sale of health-insurance products across state lines—was made to enlist GOP congressional support for the health bill. It passed, but the constituents of moderate Democrats punished them: 63 lost their seats in 2010 and Republicans took control of the House.

Faced with a similar situation in 1995, following another GOP House takeover, President Bill Clinton shifted to bipartisan governance. Mr. Obama did not, then blamed Republicans for their "obstructionism" in not yielding to him.

Defying the odds, Mr. Obama did become the first president since Franklin Roosevelt to be re-elected with an election-year unemployment rate above 7.8%. Yet his victory wasn't based on public affirmation of his agenda. Instead, it was based on a four-year mobilization—executed with unprecedented skill—of core Democratic constituencies, and on fear campaigns in which Mitt Romney and the Republicans were painted as waging a "war on women," being servants of the wealthy, and of being hostile toward Latinos, African Americans, gays and the middle class. I couldn't have imagined any one of the Democratic presidents or presidential candidates I served from 1960-92 using such down-on-all-fours tactics.

The unifier of 2008 became the calculated divider of 2012. Yes, it worked, but only narrowly, as the president's vote total fell off sharply from 2008.

Other modern Democratic presidents have had much more success with very different governing strategies. In 1961-62, John Kennedy won Republican congressional and public support with the proposals of his Keynesian Council of Economic Advisers chairman, Walter Heller, to cut personal and business taxes "to get America moving again," and for the global free movement of goods, services, capital and people.

In 1965, Lyndon Johnson had Democratic congressional majorities sufficient to pass any legislation he wanted. But he sought and received GOP congressional support for Medicare, Medicaid, civil rights, education and other Great Society legislation. He knew that in order to last, these initiatives needed consensus support. He did not want them re-debated later, as ObamaCare is being re-debated now.

Johnson got bipartisan backing for deficit reduction in 1967, when he learned that the deficit had reached an unthinkable $28 billion. Faced with today's annual deficits of $1 trillion and federal debt between $16.7 and $31 trillion, depending on whether you count off-budget obligations, LBJ no doubt would appoint a bipartisan Simpson-Bowles commission and use it to get a tax, spending and entitlements fix so that he could move on to the rest of his agenda. Bill Clinton took the same practical approach and got to a balanced federal budget as soon as he could, at the beginning of his second term.

These former Democratic presidents would also know today that no Democratic or liberal agenda can go forward if debt service is eating available resources. Nor can successful governance take place if presidential and Democratic Party rhetoric consistently portrays loyal-opposition leaders as having devious or extremist motives. We really are, as Mr. Obama pointed out in 2008, in it together.

It's not too late for the president to take a cue from his predecessors and enter good-faith budget negotiations with congressional Republicans. A few posturing meetings with GOP congressional leaders will not suffice. President Obama's hype about the horrors of fiscal-cliff and sequestration cuts, and his placing of blame on Republicans, have been correctly viewed as low politics. His approval ratings have plunged since the end of the sequestration exercise.

But time is running out for Democrats to get serious about governance. That concrete barrier—in the form of the 2014 midterm—lies just ahead on the highway, and they're joy riding straight toward it.

Mr. Van Dyk served in Democratic national administrations and campaigns over several decades. His memoir of public life, "Heroes, Hacks and Fools," was first published by University of Washington Press in 2007.

Saturday, March 9, 2013

The Real Women's Issue: Time. By Jody Greenstone Miller

The Real Women's Issue: Time. By Jody Greenstone Miller
Never mind 'leaning in.' To get more working women into senior roles, companies need to rethink the clock
The Wall Street Journal, March 9, 2013, on page C3
http://online.wsj.com/article/SB10001424127887324678604578342641640982224.html


Why aren't more women running things in America? It isn't for lack of ambition or life skills or credentials. The real barrier to getting more women to the top is the unsexy but immensely difficult issue of time commitment: Today's top jobs in major organizations demand 60-plus hours of work a week.

In her much-discussed new book, Facebook Chief Operating Officer Sheryl Sandberg tells women with high aspirations that they need to "lean in" at work—that is, assert themselves more. It's fine advice, but it misdiagnoses the problem. It isn't any shortage of drive that leads those phalanxes of female Harvard Business School grads to opt out. It's the assumption that senior roles have to consume their every waking moment. More great women don't "lean in" because they don't like the world they're being asked to lean into.

It doesn't have to be this way. A little organizational imagination bolstered by a commitment from the C-suite can point the path to a saner, more satisfying blend of the things that ambitious women want from work and life. It's time that we put the clock at the heart of this debate.

I know this is doable because I run a growing startup company in which more than half the professionals work fewer than 40 hours a week by choice. They are alumnae of top schools and firms like General Electric GE +0.38% and McKinsey, and they are mostly women. The key is that we design jobs to enable people to contribute at varying levels of time commitment while still meeting our overall goals for the company.

This isn't advanced physics, but it does mean thinking through the math of how work in a company adds up. It's also an iterative process; we hardly get it right every time. But for businesses and reformers serious about cracking the real glass ceiling for women—and making their firms magnets for the huge swath of American talent now sitting on the sidelines—here are four ways to start going about it.

Rethink time. Break away from the arbitrary notion that high-level work can be done only by people who work 10 or more hours a day, five or more days a week, 12 months a year. Why not just three days a week, or six hours a day, or 10 months a year?

It sounds simple, but the only thing that matters is quantifying the work that needs to get done and having the right set of resources in place to do it. Senior roles should actually be easier to reimagine in this way because highly paid people have the ability and, often, the desire to give up some income in order to work less. Flexibility and working from home can soften the blow, of course, but they don't solve the overall time problem.


Break work into projects. Once work is quantified, it must be broken up into discrete parts to allow for varying time commitments. Instead of thinking in terms of broad functions like the head of marketing, finance, corporate development or sales, a firm needs to define key roles in terms of specific, measurable tasks.

Once you think of work as a series of projects, it's easy to see how people can tailor how much to take on. The growth of consulting and outsourcing came precisely when firms realized they could carve work into projects that could be done more effectively outside. The next step is to design internal roles in smaller bites, too. An experienced marketer for a pharma company could lead one major drug launch, for example, without having to oversee all drug launches. Instead of managing a portfolio with 10 products, a senior person could manage five. If a client-service executive working five days a week has a quota of 10 deals a month, then one who chooses to work three days a week has a quota of only six. Lower the quota but not the quality of the work or the executive's seniority.

One reason this doesn't happen more is managerial laziness: It's easier to find a "superwoman" to lead marketing (someone who will work as long as humanly possible) than it is to design work around discrete projects. But even superwoman has a limit, and when she hits it, organizations adjust by breaking up jobs and adding staff. Why not do this before people hit the wall?

Availability matters. It's important to differentiate between availability and absolute time commitments. Many professional women would happily agree to check email even seven days a week and jump in, if necessary, for intense project stints—so long as over the course of a year, the time devoted to work is more limited. Managers need to be clear about what's needed: 24/7 availability is not the same thing as a 24/7 workload.


Quality is the goal, not quantity. Leaders need to create a culture in which talented people are judged not by the quantity of their work, but by the quality of their contributions. This can't be hollow blather. Someone who works 20 hours a week and who delivers exceptional results on a pro rata basis should be eligible for promotions and viewed as a top performer. American corporations need to get rid of the notion that wanting to work less makes someone a "B player."

Promoting this kind of innovation, where companies start to look more like puzzles than pyramids, has to become part of feminism's new agenda. It's the only way to give millions of capable women the ability to recalibrate the time that they devote to work at different stages of their lives.

We have been putting smart women on the couch for 40 years, since psychologist Matina Horner published her famous studies on "fear of success." But the portion of top jobs that go to women is still shockingly low. That's the irony of Ms. Sandberg's cheerleading for women to stay ambitious: She fails to see that her own agenda isn't nearly ambitious enough.

"Leaning in" may help the relative handful of talented women who can live with the way that top jobs are structured today—and if that's their choice, more power to them. But only a small percentage of women will choose this route. Until the rest of us get serious about altering the way work gets done in American corporations, we're destined to howl at the moon over the injustice of it all while changing almost nothing.

—Ms. Greenstone Miller is co-founder and chief executive officer of Business Talent Group.

Tuesday, March 5, 2013

Reef and Relations: Is the Philippines-US Alliance Finally Maturing? By Julio S. Amador III

Reef and Relations: Is the Philippines-US Alliance Finally Maturing? By Julio S. Amador III
Washington, D.C.: East-West Center. February 26, 2013
Asia Pacific Bulletin, No. 202
http://www.eastwestcenter.org/publications/reef-and-relations-the-philippines-us-alliance-finally-maturing

Julio S. Amador III, Foreign Affairs Research Specialist at the Foreign Service Institute of the Philippines, explains that the recent grounding in Filipino waters of the USS Guardian, "[s]hows just how delicate managing alliances can be, and the response by the Filipino and US governments also demonstrates a level of maturity in managing the issue."

Excerpts:

The two countries have had a long history of working together and the military aspect of the alliance is an important facet of the overall relationship, but further cooperation in other areas should be emphasized and supported. The incident in Tubbataha opens up a new opportunity to cooperate on environmental protection, which is an issue that strikes a chord among citizens of both countries. Already, there are reports that the US government is willing to provide additional assistance including radar and communications equipment to help the Philippines’ reef rangers and coast guard improve their capacity to protect Tubbataha. This would be of great value in ensuring the reef’s survival. Further collaboration should be encouraged such as scientific partnerships between marine science institutions in the United States and the Philippines, environmental tourism, and investment in coral reef conservation.

Protocols that cover US naval movements near protected areas could also be adopted so that future accidents can be avoided. As a result of this incident, such a move could allay any fears that the United States is running roughshod over the Philippines. Acknowledging local expertise and information should also be something that US naval officers take into consideration when navigating through Philippine waters. On the Philippine side, coordination among the various government agencies involved should be emphasized so that there are no conflicting messages. A
lead agency should be designated that addresses this issue on behalf of the government. A comprehensive rehabilitation plan for Tubbataha also needs to be developed to showcase how serious both two sides are in managing the aftermath of the incident.

Going forward, managing the alliance should not be too difficult for the Philippines and the United States, as both states have a long history of working and cooperating together. That does not detract from the fact that US officials should be more respectful of Philippine navigational laws and restrictions regarding its sovereign territory. Nor should it make the Philippine side complacent with regard to implementing its environmental laws. However, what this incident illustrates is the capacity of the allies to be more mature in managing a potentially serious diplomatic incident.

That the United States has already acknowledged some responsibility is an indication of its respect towards its ally. The Philippine side, meanwhile, has demonstrated a pragmatic and principled stance to an otherwise incendiary issue; thus, the government’s ability to be firm with regard to the implementation of its environmental laws and its capacity to separate this issue from the military relationship is commendable.

How the two allies will work together after this incident will be a good indication of the maturity and future direction of the alliance. Looking at the current situation, the outlook is positive.

Wednesday, February 13, 2013

Views from Japan: Comments on the incidents with China's naval forces

Q&A session with "aki", a Japanese citizen, on contemporary politics

Q: Maybe you'd like to publish some short comments on the incidents with China's naval forces

A: yes, i've been interested in it indeed.

Chinese government seems pushing themselves to the edge of cliff. they are scared of that their citizens make disorder against the them, so they need to make "scapegoats" outside of the country to distract the people's view to protect themselves.

recently Chinese citizens' been tending to show their frustration to the government, because of the corruptions of politics and unfair distribution of wealth.

they are trying to make Japan the "scapegoat" now. but the government of Japan never reacted their provocations, just do what we should do in internationally "right" way. that makes China nervous - if they stimulate japan more, they will be censured in the world, but never can show their citizens compromising attitude... these days, their behavior looks like north Korea's. never look they are the economically 2nd biggest country.

need to watch it carefully. (personally, a sort of fun to see how they do)

aki

Sunday, January 20, 2013

Are there clear affinities of Communism with Fascism?

Political philosopher John N. Gray on liberals' totalitarian temptation
Times Literary Supplement, Jan 02, 2013:

One of the features that distinguished Bolshevism from Tsarism was the insistence of Lenin and his followers on the need for a complete overhaul of society. Old-fashioned despots may modernize in piecemeal fashion if doing so seems necessary to maintain their power, but they do not aim at remaking society on a new model, still less at fashioning a new type of humanity. Communist regimes engaged in mass killing in order to achieve these transformations, and paradoxically it is this essentially totalitarian ambition that has appealed to liberals. Here as elsewhere, the commonplace distinction between utopianism and meliorism is less than fundamental. In its predominant forms, liberalism has been in recent times a version of the religion of humanity, and with rare exceptions— [Bertrand] Russell is one of the few that come to mind—liberals have seen the Communist experiment as a hyperbolic expression of their own project of improvement; if the experiment failed, its casualties were incurred for the sake of a progressive cause. To think otherwise—to admit the possibility that the millions who were judged to be less than fully human suffered and died for nothing—would be to question the idea that history is a story of continuing human advance, which for liberals today is an article of faith. That is why, despite all evidence to the contrary, so many of them continue to deny Communism's clear affinities with Fascism. Blindness to the true nature of Communism is an inability to accept that radical evil can come from the pursuit of progress.

John Gray is professor emeritus at the London School of Economics

Saturday, January 5, 2013

We, Too, Are Violent Animals. By Jane Goodall, Richard Wrangham, and Dale Peterson

We, Too, Are Violent Animals. By Jane Goodall, Richard Wrangham, and Dale Peterson
Those who doubt that human aggression is an evolved trait should spend more time with chimpanzees and wolvesThe Wall Street Journal,January 5, 2013, on page C3
http://online.wsj.com/article/SB10001424127887323874204578220002834225378.html

Where does human savagery come from? The animal behaviorist Marc Bekoff, writing in Psychology Today after last month's awful events in Newtown, Conn., echoed a common view: It can't possibly come from nature or evolution. Harsh aggression, he wrote, is "extremely rare" in nonhuman animals, while violence is merely an odd feature of our own species, produced by a few wicked people. If only we could "rewild our hearts," he concluded, we might harness our "inborn goodness and optimism" and thereby return to our "nice, kind, compassionate, empathic" original selves.

If only if it were that simple. Calm and cooperative behavior indeed predominates in most species, but the idea that human aggression is qualitatively different from that of every other species is wrong.

The latest report from the research site that one of us (Jane Goodall) directs in Tanzania gives a quick sense of what a scientist who studies chimpanzees actually sees: "Ferdinand [the alpha male] is rather a brutal ruler, in that he tends to use his teeth rather a lot…a number of the males now have scars on their backs from being nicked or gashed by his canines…The politics in Mitumba [a second chimpanzee community] have also been bad. If we recall that: they all killed alpha-male Vincent when he reappeared injured; then Rudi as his successor probably killed up-and-coming young Ebony to stop him helping his older brother Edgar in challenging him…but to no avail, as Edgar eventually toppled him anyway."

A 2006 paper reviewed evidence from five separate chimpanzee populations in Africa, groups that have all been scientifically monitored for many years. The average "conservatively estimated risk of violent death" was 271 per 100,000 individuals per year. If that seems like a low rate, consider that a chimpanzee's social circle is limited to about 50 friends and close acquaintances. This means that chimpanzees can expect a member of their circle to be murdered once every seven years. Such a rate of violence would be intolerable in human society.

The violence among chimpanzees is impressively humanlike in several ways. Consider primitive human warfare, which has been well documented around the world. Groups of hunter-gatherers who come into contact with militarily superior groups of farmers rapidly abandon war, but where power is more equal, the hostility between societies that speak different languages is almost endless. Under those conditions, hunter-gatherers are remarkably similar to chimpanzees: Killings are mostly carried out by males, the killers tend to act in small gangs attacking vulnerable individuals, and every adult male in the society readily participates. Moreover, with hunter-gatherers as with chimpanzees, the ordinary response to encountering strangers who are vulnerable is to attack them.

Most animals do not exhibit this striking constellation of behaviors, but chimpanzees and humans are not the only species that form coalitions for killing. Other animals that use this strategy to kill their own species include group-living carnivores such as lions, spotted hyenas and wolves. The resulting mortality rate can be high: Among wolves, up to 40% of adults die from attacks by other packs.

Killing among these carnivores shows that ape-sized brains and grasping hands do not account for this unusual violent behavior. Two other features appear to be critical: variable group size and group-held territory. Variable group size means that lone individuals sometimes encounter small, vulnerable parties of neighbors. Having group territory means that by killing neighbors, the group can expand its territory to find extra resources that promote better breeding. In these circumstances, killing makes evolutionary sense—in humans as in chimpanzees and some carnivores.

What makes humans special is not our occasional propensity to kill strangers when we think we can do so safely. Our unique capacity is our skill at engineering peace. Within societies of hunter-gatherers (though only rarely between them), neighboring groups use peacemaking ceremonies to ensure that most of their interactions are friendly. In state-level societies, the state works to maintain a monopoly on violence. Though easily misused in the service of those who govern, the effect is benign when used to quell violence among the governed.

Under everyday conditions, humans are a delightfully peaceful and friendly species. But when tensions mount between groups of ordinary people or in the mind of an unstable individual, emotion can lead to deadly events. There but for the grace of fortune, circumstance and effective social institutions go you and I. Instead of constructing a feel-good fantasy about the innate goodness of most people and all animals, we should strive to better understand ourselves, the good parts along with the bad.

—Ms. Goodall has directed the scientific study of chimpanzee behavior at Gombe Stream National Park in Tanzania since 1960. Mr. Wrangham is the Ruth Moore Professor of Biological Anthropology at Harvard University. Mr. Peterson is the author of "Jane Goodall: The Woman Who Redefined Man."

Thursday, December 6, 2012

Remarks of Under Secretary for Domestic Finance Mary Miller at the Office of Financial Research (OFR) and Financial Stability Oversight Council (FSOC) Conference on “Assessing Financial Intermediation: Measurement and Analysis”

Remarks of Under Secretary for Domestic Finance Mary Miller at the Office of Financial Research (OFR) and Financial Stability Oversight Council (FSOC) Conference on "Assessing Financial Intermediation: Measurement and Analysis"
Dec 6, 2012
http://www.treasury.gov/press-center/press-releases/Pages/tg1789.aspx

As Prepared for Delivery
WASHINGTON – Good morning and thank you to the OFR and the Council for the opportunity to join you here today.

It is a pleasure for me to note that this is the second annual conference hosted by the OFR and the Council.  These two organizations have come a long way since their creation in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Conferences like this one are a key way that the OFR and the Council are leveraging their expertise by calling on experts from academia, industry, and elsewhere in government to bring diverse perspectives on questions related to system-wide financial stability.

The Dodd-Frank Act designed the OFR to act as a catalyst to foster a broad examination of questions related to financial stability.  One of the OFR’s goals involves cultivating a virtual network of academics, researchers, and others to enrich and expand the OFR’s reach in fulfilling its mission.

The Council and the OFR work together to produce important and timely research and analysis on a range of issues—for example, on the risks presented by money market funds.  In addition, the OFR plays a central role in the international initiative to implement a global data standard to identify uniquely the entities in financial transactions.  This legal entity identifier, or LEI, is essential for governments and the financial industry to assess exposures and interconnections within the vast network of financial market participants.  And both the Council and the OFR have published detailed annual reports to engage the public with their work.

Today’s conference provides an opportunity to build on those accomplishments and to continue a discussion on the best ways to promote financial stability. 

The financial services marketplace is constantly changing, as market participants seek new and better ways to do business, as technology and techniques evolve, and as government adjusts the regulatory and supervisory framework.

This process of evolution creates exciting opportunities, but it also represents a moving target of possible risks that can grow into potential threats to financial stability.  That is where the Council and the OFR come in and that is where this conference will turn its focus.

Before the Dodd-Frank Act, the United States did not have one single agency tasked with looking at systemic risk across the financial system and considering how to respond to it – what we call a macroprudential approach.  That shortcoming resulted in a critical blind spot to risks building in the financial system and, once the crisis began, blocked a clear view of what was happening as the nation plummeted into the financial crisis.

The Council and the OFR are designed to correct that lack of comprehensive vision – to provide visibility across the financial services marketplace and across the areas of the compartmentalized responsibility of federal and state financial regulators.  It also allows us to inspect the inner workings of the financial system for an understanding of the interconnections that can transmit and compound systemic risks.

As 2012 draws to a close and Dodd-Frank implementation continues, our resolve is stronger than ever to resist any attempt to roll back these reforms and return our country to the precarious environment of misplaced incentives and inadequate controls that got us into such serious trouble.

We must also be mindful that, as the economy continues to recover, we must remain vigilant about detecting emerging risks and taking appropriate action.

In my experience, you are never handed the same script for a financial crisis or shock.  The next financial crisis is unlikely to look like the last.  Innovative thinking is essential as we recognize that the past approaches for assessing and managing system-wide risks are inadequate for facing the challenges of today and tomorrow.  New ideas must be applied to these problems and government cannot generate all of the good new ideas on its own.  There must be a partnership with academics, industry, and others—and conferences like this one are incubators for new ideas to emerge and begin to develop.

I would like to thank all of the conference participants for contributing to this effort and for helping to expand our collective knowledge of financial stability.  Your time and energies are providing a valuable service to our country, its economy, and its citizens.

###

Sunday, December 2, 2012

Human Nature: Jim Sinegal Dividend Tax Decision - Costco Will Borrow To Pay Dividends

Costco's Dividend Tax Epiphany. WSJ Editorial
Obama's fans in the 1% vote to beat Obama's tax increase.The Wall Street Journal, November 30, 2012, on page A14
http://online.wsj.com/article/SB10001424127887324705104578149012514177372.html

When President Obama needed a business executive to come to his campaign defense, Jim Sinegal was there. The Costco COST +2.07% co-founder, director and former CEO even made a prime-time speech at the Democratic Party convention in Charlotte. So what a surprise this week to see that Mr. Sinegal and the rest of the Costco board voted to give themselves a special dividend to avoid Mr. Obama's looming tax increase. Is this what the President means by "tax fairness"?

Specifically, the giant retailer announced Wednesday that the company will pay a special dividend of $7 a share this month. That's a $3 billion Christmas gift for shareholders that will let them be taxed at the current dividend rate of 15%, rather than next year's rate of up to 43.4%—an increase to 39.6% as the Bush-era rates expire plus another 3.8% from the new ObamaCare surcharge.

More striking is that Costco also announced that it will borrow $3.5 billion to finance the special payout. Dividends are typically paid out of earnings, either current or accumulated. But so eager are the Costco executives to get out ahead of the tax man that they're taking on debt to do so.

Shareholders were happy as they bid up shares by more than 5% in two days. But the rating agencies were less thrilled, as Fitch downgraded Costco's credit to A+ from AA-. Standard & Poor's had been watching the company for a potential upgrade but pulled the watch on the borrowing news.

We think companies can do what they want with their cash, but it's certainly rare to see a public corporation weaken its balance sheet not for investment in the future but to make a one-time equity payout. It's a good illustration of the way that Federal Reserve Chairman Ben Bernanke's near-zero interest rates are combining with federal tax policy to distort business decisions.

One of the biggest dividend winners will be none other than Mr. Sinegal, who owns about two million shares, while his wife owns another 84,669. At $7 a share, the former CEO will take home roughly $14 million. At a 15% tax rate he'll get to keep nearly $12 million of that windfall, while at next year's rate of 43.4% he'd take home only about $8 million. That's a lot of extra cannoli.

This isn't exactly the tone of, er, shared sacrifice that Mr. Sinegal struck on stage in Charlotte. He described Mr. Obama as "a President making an economy built to last," adding that "for companies like Costco to invest, grow, hire and flourish, the conditions have to be right. That requires something from all of us." But apparently $4 million less from Mr. Sinegal.

By the way, the Costco board also includes at least two other prominent tub-thumpers for higher taxes— William Gates Sr. and Charles Munger. Mr. Gates, the father of Microsoft's MSFT -1.22% Bill Gates, has campaigned against repealing the death tax and led the fight to impose an income tax via referendum in Washington state in 2010. It lost. Mr. Munger is Warren Buffett's longtime Sancho Panza at Berkshire Hathaway BRKB 0.00% and has spoken approvingly of a value-added tax that would stick it to the middle class.

Costco's chief financial officer, Richard Galanti, confirms that every member of the board is also a shareholder. Based on the most recent publicly available data, they own more than 4.1 million shares and more than 1.3 million options to purchase additional shares. At $7 a share, the dividend will distribute roughly $29 million to the board, including Mr. Sinegal's $14 million—at a collective tax saving of about $8 million. Even more cannoli.

We emailed Mr. Sinegal for comment but didn't hear back. Mr. Galanti explained that while looming tax hikes are a factor in the December borrowing and payout, so are current low interest rates. Mr. Galanti adds that the company will still have a strong balance sheet and is increasing its capital expenditures and store openings this year.

As it happens, one of those new stores opened Thursday in Washington, D.C., and no less a political star than Joe Biden stopped by to join Mr. Sinegal and pose for photos as he did some Christmas shopping. It's nice to have friends in high places. We don't know if Mr. Biden is a Costco shareholder, but if he wants to get in on the special dividend there's still time before his confiscatory tax policy hits. The dividend is payable on December 18 to holders of record on December 10.

To sum up: Here we have people at the very top of the top 1% who preach about tax fairness voting to write themselves a huge dividend check to avoid the Obama tax increase they claim it is a public service to impose on middle-class Americans who work for 30 years and finally make $250,000 for a brief window in time.

If they had any shame, they'd send their entire windfall to the Treasury.

How dare Fannie and Freddie try to charge for their risks?

Senators for Housing Busts. WSJ Editorial
How dare Fannie and Freddie try to charge for their risks.The Wall Street Journal, December 1, 2012, on page A14
http://online.wsj.com/article/SB10001424127887324352004578139543792750584.html

For proof that politicians have learned nothing from the Federal Housing Administration's insolvency, look no further than a November 19 Senate letter to Edward DeMarco of the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae FNMA 0.00% and Freddie Mac FMCC 0.00% . Mr. DeMarco wants to let the toxic mortgage twins charge higher fees to cover their risks. Oh, the horror.

At issue is a little-noticed September FHFA proposal to discriminate between states with efficient foreclosure practices and those where judicial and regulatory burdens prolong the process. Specifically in Connecticut, Florida, Illinois, New Jersey and New York, foreclosures can take years.

Starting next year, Fannie and Freddie would charge borrowers in those states a one-time upfront fee of between 0.15% and 0.30%, which on a 30-year, $200,000 fixed-rate mortgage equates roughly to "an increase of approximately $3.50 to $7.00" on a monthly mortgage payment, according to FHFA.

The agency explained that the fees Fan and Fred charged before the housing crisis "proved inadequate to compensate for the level of actual credit losses" the duo sustained, which "contributed directly to substantial financial support being provided to the two companies by taxpayers." Total taxpayer cost so far: $138 billion. The change would relieve borrowers in low-cost states from subsidizing those in high-cost states. FHFA would lower or eliminate the levy if states sped up their foreclosure processes, which would also speed up the housing recovery.

Cue the outrage from Capitol Hill. "As you know, certain state and local governments have put in place increased regulatory and judicial scrutiny of foreclosures to protect consumers from mortgage loan servicing and foreclosure abuses," Democratic Senators from New York, New Jersey, Connecticut and Florida, plus Independent Joe Lieberman, declared. They want the higher fees withdrawn.

Translation: The Senators are embarrassed that FHFA is exposing the cost of their antiforeclosure crusade and are trying to pin the blame on bankers. Recall that the "robo-signing" scandal never unearthed a wave of current borrowers wrongly ejected from their homes. The politicians want Fan and Fred to keep churning out below-market-rate mortgage insurance, regardless of the eventual cost to taxpayers.

This is the kind of thinking that led Fan and Fred to supercharge the subprime lending boom and pushed the FHA into its money-losing expansion. As long as politicians run the housing markets, they will continue promoting such behavior. Kudos to Mr. DeMarco, a career civil servant, for trying to impose a more rational policy, but don't be surprised if the Obama Administration tries to replace him in a second term.

Saturday, December 1, 2012

Debate: Progressives & Conservatives on Entitlements

Progressives

Sorry, Erskine, America Rejected Simpson-Bowles. By John Nichols
The Nation, November 29, 2012 - 8:46 AM ET
http://www.thenation.com/blog/171513/sorry-erskine-america-rejected-simpson-bowles
Erskine Bowles, who is sort of a Democrat, met Wednesday with House Speaker John Boehner to help Republicans promote proposals to cut entitlements, as part of the “fiscal cliff” negotiations.

This is the right place for Bowles, who has long maintained a mutual-admiration society with House Budget Committee chairman Paul Ryan, R-Wisconsin. The former Clinton White House chief of staff has always been in the corporate conservative camp when it comes to debates about preserving Social Security, Medicare and Medicaid.

It’s good that he and Boehner have found one another. Let the Republicans advocate for the cuts proposed by Bowles and his former Wyoming Senator Alan Simpson, his Republican co-conductor on the train wreck that produced the so-called “Simpson-Bowles” deficit reduction plan.

After all, despite the media hype, Simpson-Bowles has always been a non-starter with the American people.

Last summer, at the Democratic and Republican national conventions, so many nice things were said about the recommendations of the National Commission on Fiscal Responsibility and Reform that had been chaired by former Wyoming Senator Alan Simpson, a Republican, and Bowles that it was hard to understand why they were implemented. Paul Ryan went so far as to condemn President Obama for “doing nothing” to implement the Simpson-Bowles plan—only to have it noted that Ryan rejected the recommendations of the commission.

But, while a lot of politicians in both parties say a lot of nice things about the austerity program proposed by Simpson-Bowles, there is a reason why there was no rush before the election to embrace the blueprint for cutting Social Security, Medicare and Medicaid while imposing substantial new tax burdens on the middle class.

It’s a loser.

Before the November 6 election, Simpson and Bowles went out of their way to highlight the candidacies of politicians who supported their approach—New Hampshire Republican Congressman Charlie Bass, Rhode Island Republican US House candidate Brendan Doherty, Nebraska Democratic US Senate candidate Bob Kerrey. Bipartisan endorsements were made, statements were issued, headlines were grabbed and

The Simpson-Bowles candidates all lost.

Americans are smart enough to recognize that Simpson-Bowles would stall growth. And they share the entirely rational view of economists like Paul Krugman.

“Simpson-Bowles is terrible,” argues Krugman, a Nobel Prize winner for his economic scholarship. “It mucks around with taxes, but is obsessed with lowering marginal rates despite a complete absence of evidence that this is important. It offers nothing on Medicare that isn’t already in the Affordable Care Act. And it raises the Social Security retirement age because life expectancy has risen—completely ignoring the fact that life expectancy has only gone up for the well-off and well-educated, while stagnating or even declining among the people who need the program most.”

On election night, Peter D. Hart Research Associates surveyed Americans with regard to key proposals from the commission. The reaction was uniformly negative.

By a 73-18 margin, those polled said that protecting Medicare and Social Security from benefit cuts is more important than bringing down the deficit.
By a 62-33 margin, the voters who were surveyed said that making the wealthy start paying their fair share of taxes is more important than reducing tax rates across the board (62 percent to 33 percent).

But that’s just the beginning of an outline of opposition to the Simpson-Bowles approach.

To wit:
* 84 percent of those surveyed oppose reducing Social Security benefits;
* 68 percent oppose raising the Medicare eligibility age;
* 69 percent oppose reductions in Medicaid benefits;
* 64 percent support addressing the deficit by increasing taxes on the rich—with more than half of those surveyed favoring the end of the Bush tax cuts for those making more than $250,000.

Americans want a strong government that responds to human needs:
• 88 percent support allowing Medicare to negotiate with drug companies to lower costs;
• 70 percent favor continuing extended federal unemployment insurance;
• 64 percent support providing federal government funding to local governments;
• 72 percent say that corporations and wealthy individuals have too much influence on the political system.

AFL-CIO president Richard Trumka is right. On November 6, “The American people sent a clear message.”

With their votes, with their responses to exit polls, with every signal they could send, the voters refused to buy the “fix” that Erskine Bowles is selling.


---
Conservatives

The Crisis of American Self-Government. By Sohrab Ahmari
Harvey Mansfield, Harvard's 'pet dissenter,' on the 2012 election, the real cost of entitlements, and why he sees reason for hope.
The Wall Street Journal, November 30, 2012, on page A13
http://online.wsj.com/article/SB10001424127887323751104578149292503121124.html

Cambridge, Mass.

'We have now an American political party and a European one. Not all Americans who vote for the European party want to become Europeans. But it doesn't matter because that's what they're voting for. They're voting for dependency, for lack of ambition, and for insolvency."

Few have thought as hard, or as much, about how democracies can preserve individual liberty and national virtue as the eminent political scientist Harvey Mansfield. When it comes to assessing the state of the American experiment in self-government today, his diagnosis is grim, and he has never been one to mince words.

Mr. Mansfield sat for an interview on Thursday at the Harvard Faculty Club. This year marks his 50th as a teacher at the university. It isn't easy being the most visible conservative intellectual at an institution that has drifted ever further to the left for a half-century. "I live in a one-party state and very much more so a one-party university," says the 80-year-old professor with a sigh. "It's disgusting. I get along very well because everybody thinks the fact that I'm here means the things I say about Harvard can't be true. I am a kind of pet—a pet dissenter."

Partly his isolation on campus has to do with the nature of Mr. Mansfield's scholarship. At a time when his colleagues are obsessed with trendy quantitative methods and even trendier "identity studies," Mr. Mansfield holds steadfast to an older tradition that looks to the Western canon as the best guide to human affairs. For him, Greek philosophy and the works of thinkers such as Machiavelli and Tocqueville aren't historical curiosities; Mr. Mansfield sees writers grappling heroically with political and moral problems that are timeless and universally relevant.

"All modern social science deals with perceptions," he says, "but that is a misnomer because it neglects to distinguish between perceptions and misperceptions."

Consider voting. "You can count voters and votes," Mr. Mansfield says. "And political science does that a lot, and that's very useful because votes are in fact countable. One counts for one. But if we get serious about what it means to vote, we immediately go to the notion of an informed voter. And if you get serious about that, you go all the way to voting as a wise choice. That would be a true voter. The others are all lesser voters, or even not voting at all. They're just indicating a belief, or a whim, but not making a wise choice. That's probably because they're not wise."

By that measure, the electorate that granted Barack Obama a second term was unwise—the president achieved "a sneaky victory," Mr. Mansfield says. "The Democrats said nothing about their plans for the future. All they did was attack the other side. Obama's campaign consisted entirely of saying 'I'm on your side' to the American people, to those in the middle. No matter what comes next, this silence about the future is ominous."

At one level Mr. Obama's silence reveals the exhaustion of the progressive agenda, of which his presidency is the spiritual culmination, Mr. Mansfield says. That movement "depends on the idea that things will get better and better and progress will be made in the actualization of equality." It is telling, then, that during the 2012 campaign progressives were "confined to defending what they've already achieved or making small improvements—student loans, free condoms. The Democrats are the party of free condoms. That's typical for them."

But Democrats' refusal to address the future in positive terms, he adds, also reveals the party's intent to create "an entitlement or welfare state that takes issues off the bargaining table and renders them above politics." The end goal, Mr. Mansfield worries, is to sideline the American constitutional tradition in favor of "a practical constitution consisting of progressive measures the left has passed that cannot be revoked. And that is what would be fixed in our political system—not the Constitution."

It is a project begun at the turn of the previous century by "an alliance of experts and victims," Mr. Mansfield says. "Social scientists and political scientists were very much involved in the foundation of the progressive movement. What those experts did was find ways to improve the well-being of the poor, the incompetent, all those who have the right to vote but can't quite govern their own lives. And still to this day we see in the Democratic Party the alliance between Ph.D.s and victims."

The Obama campaign's dissection of the public into subsets of race, sex and class resentments is a case in point. "Victims come in different kinds," says Mr. Mansfield, "so they're treated differently. You push different buttons to get them to react."

The threat to self-government is clear. "The American founders wanted people to live under the Constitution," Mr. Mansfield says. "But the progressives want the Constitution to live under the American people."

Harvey Mansfield Jr. was born in 1932 in New Haven, Conn. His parents were staunch New Dealers, and while an undergraduate at Harvard Mr. Mansfield counted himself a liberal Democrat.

Next came a Fulbright year in London and a two-year stint in the Army. "I was never in combat," he says. "In fact I ended up in France for a year, pulling what in the Army they call 'good duty' at Orléans, which is in easy reach of Paris. So even though I was an enlisted man I lived the life of Riley."

A return to the academy and a Harvard doctorate were perhaps inevitable but Mr. Mansfield also underwent a decisive political transformation. "I broke with the liberals over the communist issue," he says. "My initiating forces were anticommunism and my perception that Democrats were soft on communism, to use a rather unpleasant phrase from the time—unpleasant but true." He also began to question the progressive project at home: "I saw the frailties of big government exposed, one after another. Everything they tried didn't work and in fact made us worse off by making us dependent on an engine that was getting weaker and weaker."

His first teaching post came in 1960 at the University of California, Berkeley. In California, he came to know the German-American philosopher Leo Strauss, who at the time was working at Stanford University. "Strauss was a factor in my becoming conservative," he says. "That was a whole change of outlook rather than a mere question of party allegiance."

Strauss had studied ancient Greek texts, which emphasized among other things that "within democracy there is good and bad, free and slave," and that "democracy can produce a slavish mind and a slavish country." The political task before every generation, Mr. Mansfield understood, is to "defend the good kind of democracy. And to do that you have to be aware of human differences and inequalities, especially intellectual inequalities."

American elites today prefer to dismiss the "unchangeable, undemocratic facts" about human inequality, he says. Progressives go further: "They think that the main use of liberty is to create more equality. They don't see that there is such a thing as too much equality. They don't see limits to democratic equalizing"—how, say, wealth redistribution can not only bankrupt the public fisc but corrupt the national soul.

"Americans take inequality for granted," Mr. Mansfield says. The American people frequently "protect inequalities by voting not to destroy or deprive the rich of their riches. They don't vote for all measures of equalization, for which they get condemned as suffering from false consciousness. But that's true consciousness because the American people want to make democracy work, and so do conservatives. Liberals on the other hand just want to make democracy more democratic."

Equality untempered by liberty invites disaster, he says. "There is a difference between making a form of government more like itself," Mr. Mansfield says, "and making it viable." Pushed to its extremes, democracy can lead to "mass rule by an ignorant, or uncaring, government."

Consider the entitlements crisis. "Entitlements are an attack on the common good," Mr. Mansfield says. "Entitlements say that 'I get mine no matter what the state of the country is when I get it.' So it's like a bond or an annuity. What the entitlement does is give the government version of a private security, which is better because the government provides a better guarantee than a private company can."

That is, until the government goes broke, as has occurred across Europe.

"The Republicans should want to recover the notion of the common good," Mr. Mansfield says. "One way to do that is to show that we can't afford the entitlements as they are—that we've always underestimated the cost. 'Cost' is just an economic word for the common good. And if Republicans can get entitlements to be understood no longer as irrevocable but as open to negotiation and to political dispute and to reform, then I think they can accomplish something."

The welfare state's size isn't what makes it so stifling, Mr. Mansfield says. "What makes government dangerous to the common good is guaranteed entitlements, so that you can never question what expenses have been or will be incurred." Less important at this moment are spending and tax rates. "I don't think you can detect the presence or absence of good government," he says, "simply by looking at the percentage of GDP that government uses up. That's not an irrelevant figure but it's not decisive. The decisive thing is whether it's possible to reform, whether reform is a political possibility."

Then there is the matter of conservative political practice. "Conservatives should be the party of judgment, not just of principles," he says. "Of course there are conservative principles—free markets, family values, a strong national defense—but those principles must be defended with the use of good judgment. Conservatives need to be intelligent, and they shouldn't use their principles as substitutes for intelligence. Principles need to be there so judgment can be distinguished from opportunism. But just because you give ground on principle doesn't mean you're an opportunist."

Nor should flexibility mean abandoning major components of the conservative agenda—including cultural values—in response to a momentary electoral defeat. "Democrats have their cultural argument, which is the attack on the rich and the uncaring," Mr. Mansfield says. "So Republicans need their cultural arguments to oppose the Democrats', to say that goodness or justice in our country is not merely the transfer of resources to the poor and vulnerable. We have to take measures to teach the poor and vulnerable to become a little more independent and to prize independence, and not just live for a government check. That means self-government within each self, and where are you going to get that except with morality, responsibility and religion?"

So is it still possible to pull back from the brink of America's Europeanization? Mr. Mansfield is optimistic. "The material for recovery is there," he says. "Ambition, for one thing. I teach at a university where all the students are ambitious. They all want to do something with their lives." That is in contrast to students he has met in Europe, where "it was depressing to see young people with small ambitions, very cultivated and intelligent people so stunted." He adds with a smile: "Our other main resource is the Constitution."

Mr. Ahmari is an assistant books editor at the Journal.

Tuesday, October 30, 2012

U2's Bono realizes the importance of capitalism

Notable & Quotable: U2 frontman and anti-poverty activist Bono realizes the importance of capitalism
The Wall Street Journal, October 30, 2012, on page A23
http://online.wsj.com/article/SB10001424052970203922804578080453358300198.html

Staff writer Parmy Olson writing at forbes.com, Oct. 22

Bono has learned much about music over more than three decades with U2. But alongside that has been a lifelong lesson in campaigning—the activist for poverty reduction in Africa spoke frankly on Friday about how his views about philanthropy had now stretched to include an appreciation for capitalism.

The Irish singer and co-founder of ONE, a campaigning group that fights poverty and disease in Africa, said it had been "a humbling thing for me" to realize the importance of capitalism and entrepreneurialism in philanthropy, particularly as someone who "got into this as a righteous anger activist with all the cliches."

"Job creators and innovators are just the key, and aid is just a bridge," he told an audience of 200 leading technology entrepreneurs and investors at the F.ounders tech conference in Dublin. "We see it as startup money, investment in new countries. A humbling thing was to learn the role of commerce."

Tuesday, October 23, 2012

Globalization and Corporate Taxation. By Manmohan Kumar, and Dennis Quinn

Globalization and Corporate Taxation. By Manmohan Kumar, and Dennis Quinn
IMF Working Paper No. 12/252
October 22, 2012
http://www.imfbookstore.org/IMFORG/9781557754752

Summary: This paper analyzes the extent to which the degree of international economic integration, both financial and trade, affects corporate tax rates. It explores this issue in the context of strategic behavior by countries, taking into account other global and domestic political economy factors. Tax rates are analyzed using a unique tax dataset for advanced and developing economies extending over five decades. We report a number of novel results: there is no general negative relationship between financial globalization and corporate tax rates and revenues—results vary according to country grouping with OECD countries showing a positive relationship; the United States exhibits a “Stackelberg” type of leadership on other countries; trade integration is inversely correlated with tax rates; and public sentiment and ideology affect tax rates. The policy implications of these findings, particularly given budgetary pressures in the aftermath of the global crisis, are noted.

http://www.imf.org/external/pubs/cat/longres.aspx?sk=40059.0

Wednesday, October 17, 2012

Bipartisan Agreement On Single-Sex Education

A Right to Choose Single-Sex Education. By Kay Bailey Hutchison and Barbara Mikulski
For some children, learning in girls-only or boys-only classes pays off. Opponents of the idea are irresponsible.October 16, 2012, 7:11 p.m. ET
http://online.wsj.com/article/SB10000872396390443768804578038191947302764.html

Education proponents across the political spectrum were dismayed by recent attempts to eradicate the single-gender options in public schools in Virginia, West Virginia, Alabama, Mississippi, Maine and Florida. We were particularly troubled at efforts to thwart education choice for American students and their families because it is a cause we have worked hard to advance.

Studies have shown that some students learn better in a single-gender environment, particularly in math and science. But federal regulations used to prevent public schools from offering that option. So in 2001 we joined with then-Sen. Hillary Clinton and Sen. Susan Collins to author legislation that allowed public schools to offer single-sex education. It was an epic bipartisan battle against entrenched bureaucracy, but well worth the fight.

Since our amendment passed, thousands of American children have benefited. Now, though, some civil libertarians are claiming that single-sex public-school programs are discriminatory and thus illegal.

To be clear: The 2001 law did not require that children be educated in single-gender programs or schools. It simply allowed schools and districts to offer the choice of single-sex schools or classrooms, as long as opportunities were equally available to boys and girls. In the vast and growing realm of education research, one central tenet has been confirmed repeatedly: Children learn in different ways. For some, single-sex classrooms make all the difference.

Critics argue that these programs promote harmful gender stereotypes. Ironically, it is exactly these stereotypes that the single-sex programs seek to eradicate.

As studies have confirmed—and as any parent can tell you—negative gender roles are often sharpened in coeducational environments. Boys are more likely, for instance, to buy into the notion that reading isn't masculine when they're surrounded by (and showing off for) girls.

Girls, meanwhile, have made so much progress in educational achievement that women are overrepresented in postgraduate education. But they still lag in the acquisition of bachelor's and graduate degrees in math and the sciences. It has been demonstrated time and again that young girls are more willing to ask and answer questions in classrooms without boys.

A 2008 Department of Education study found that "both principals and teachers believed that the main benefits of single-sex schooling are decreasing distractions to learning and improving student achievement." The gender slant—the math-is-for-boys, home-EC-is-for-girls trope—is eliminated.

In a three-year study in the mid-2000s, researchers at Florida's Stetson University compared the performance of single-gender and mixed-gender classes at an elementary school, controlling for the likes of class sizes, demographics and teacher training. When the children took the Florida Comprehensive Assessment Test (which measures achievement in math and literacy, for instance), the results were striking: Only 59% of girls in mixed classes were scored as proficient, while 75% of girls in single-sex ones achieved proficiency. Similarly, 37% of boys in coeducational classes scored proficient, compared with 86% of boys in the all-boys classes.

Booker T. Washington High School in Memphis, Tenn., the winner of the 2011 Race to the Top High School Commencement Challenge, went to a 81.6% graduation rate in 2010 from a graduation rate of 55% in 2007. Among the changes at the school? Implementing all-girls and all-boys freshman academies.

In Dallas, the all-boys Barack Obama Leadership Academy opened its doors last year. There is every reason to believe it will follow the success of the first all-girls public school, Irma Rangel Young Women's Leadership School, which started in 2004. Irma Rangel, which has been a Texas Education Agency Exemplary School since 2006, also took sixth place at the Dallas Independent School District's 30th Annual Mathematics Olympiad that year.

No one is arguing that single-sex education is the best option for every student. But it is preferable for some students and families, and no one has the right to deny them an option that may work best for a particular child. Attempts to eliminate single-sex education are equivalent to taking away students' and parents' choice about one of the most fundamentally important aspects of childhood and future indicators of success—a child's education.

America once dominated educational attainment among developed countries, but we have fallen disastrously in international rankings. As we seek ways to offer the best education for all our children, in ways that are better tailored to their needs, it seems not just counterproductive but damaging to reduce the options. single-sex education in public schools will continue to be a voluntary choice for students and their families. To limit or eliminate single-sex education is irresponsible. To take single-sex education away from students who stand to benefit is unforgivable.

Ms. Hutchison, a Republican, is the senior senator from Texas. Ms. Mikulski, a Democrat, is the senior senator from Maryland.

Wednesday, September 12, 2012

China's Solyndra Economy. By Patrick Chovanec

China's Solyndra Economy. By Patrick Chovanec
Government subsidies to green energy and high-speed rail have led to mounting losses and costly bailouts. This is not a road the U.S. should travel.WSJ, September 11, 2012, 7:21 p.m. ET
http://online.wsj.com/article/SB10000872396390443686004577634220147568022.html

On Aug. 3, the owner of Chengxing Solar Company leapt from the sixth floor of his office building in Jinhua, China. Li Fei killed himself after his company was unable to repay a $3 million bank loan it had guaranteed for another Chinese solar company that defaulted. One local financial newspaper called Li's suicide "a sign of the imminent collapse facing the Chinese photovoltaic industry" due to overcapacity and mounting debts.

President Barack Obama has held up China's investments in green energy and high-speed rail as examples of the kind of state-led industrial policy that America should be emulating. The real lesson is precisely the opposite. State subsidies have spawned dozens of Chinese Solyndras that are now on the verge of collapse.

Unveiled in 2010, Beijing's 12th Five-Year Plan identified solar and wind power and electric automobiles as "strategic emerging industries" that would receive substantial state support. Investors piled into the favored sectors, confident the government's backing would guarantee success. Barely two years later, all three industries are in dire straits.

This summer, the NYSE-listed LDK Solar, the world's second largest polysilicon solar wafer producer, defaulted on $95 billion owed to over 20 suppliers. The company lost $589 million in the fourth quarter of 2011 and another $185 million in the first quarter of 2012, and has shed nearly 10,000 jobs. The government in LDK's home province of Jiangxi scrambled to pledge $315 million in public bailout funds, terrified that any further defaults could pull down hundreds of local companies.

Chinese solar companies blame many of their woes on the antidumping tariffs recently imposed by the U.S. and Europe. The real problem, however, is rampant overinvestment driven largely by subsidies. Since 2010, the price of polysilicon wafers used to make solar cells has dropped 73%, according to Maxim Group, while the price of solar cells has fallen 68% and the price of solar modules 57%. At these prices, even low-cost Chinese producers are finding it impossible to break even.

Wind power is seeing similar overcapacity. China's top wind turbine manufacturers, Goldwind and Sinovel, saw their earnings plummet by 83% and 96% respectively in the first half of 2012, year-on-year. Domestic wind farm operators Huaneng and Datang saw profits plunge 63% and 76%, respectively, due to low capacity utilization. China's national electricity regulator, SERC, reported that 53% of the wind power generated in Inner Mongolia province in the first half of this year was wasted. One analyst told China Securities Journal that "40-50% of wind power projects are left idle," with many not even connected to the grid.

A few years ago, Shenzhen-based BYD (short for "Build Your Dreams") was a media darling that brought in Warren Buffett as an investor. It was going to make China the dominant player in electric automobiles. Despite gorging on green energy subsidies, BYD sold barely 8,000 hybrids and 400 fully electric cars last year, while hemorrhaging cash on an ill-fated solar venture. Company profits for the first half of 2012 plunged 94% year-on-year.

China's high-speed rail ambitions put the Ministry of Railways so deeply in debt that by the end of last year it was forced to halt all construction and ask Beijing for a $126 billion bailout. Central authorities agreed to give it $31.5 billion to pay its state-owned suppliers and avoid an outright default, and had to issue a blanket guarantee on its bonds to help it raise more. While a handful of high-traffic lines, such as the Shanghai-Beijing route, have some prospect of breaking even, Prof. Zhao Jian of Beijing Jiaotong University compared the rest of the network to "a 160-story luxury hotel where only 11 stories are used and the occupancy rate of those floors is below 50%."

China's Railway Ministry racked up $1.4 billion in losses for the first six months of this year, and an internal audit has uncovered dangerous defects due to lax construction on 12 new lines, which will have to be repaired at the cost of billions more. Minister Liu Zhijun, the architect of China's high-speed rail system, was fired in February 2011 and will soon be prosecuted on corruption charges that reportedly include embezzling some $120 million. One of his lieutenants, the deputy chief engineer, is alleged to have funneled $2.8 billion into an offshore bank account.

Many in Washington have developed a serious case of China-envy, seeing it as an exemplar of how to run an economy. In fact, Beijing's mandarins are no better at picking winners, and just as prone to blow money on boondoggles, as their Beltway counterparts.

In his State of the Union address earlier this year, President Obama declared, "I will not cede the wind or solar or battery industry to China . . . because we refuse to make the same commitment here." Given what's really happening in China, he may want to think again.

Mr. Chovanec is an associate professor of practice at Tsinghua University's School of Economics and Management in Beijing, China.

Friday, August 24, 2012

Regulators Captured - WSJ Editorial about the SEC and money-market funds

Regulators Captured
The Wall Street Journal, August 24, 2012, on page A10
http://online.wsj.com/article/SB10000872396390444812704577607421541441692.html


Economist George Stigler described the process of "regulatory capture," in which government agencies end up serving the industries they are supposed to regulate. This week lobbyists for money-market mutual funds provided still more evidence that Stigler deserved his Nobel. At the Securities and Exchange Commission, three of the five commissioners blocked a critical reform to help prevent a taxpayer bailout like the one the industry received in 2008.

Assistant editorial page editor James Freeman on the SEC's nixing a proposed rule that would hold money market funds more accountable.

SEC rules have long allowed money-fund operators to employ an accounting fiction that makes their funds appear safer than they are. Instead of share prices that fluctuate, like other kinds of securities, money funds are allowed to report to customers a fixed net asset value (NAV) of $1 per share—even if that's not exactly true.

As long as the value of a fund's underlying assets doesn't stray too far from that magical figure, fund sponsors can present a picture of stability to customers. Money funds are often seen as competitors to bank accounts and now hold $1.6 trillion in assets.

But during times of crisis, as in 2008, investors are reminded how different money funds are from insured deposits. When one fund "broke the buck"—its asset value fell below $1 per share—it triggered an institutional run on all money funds. The Treasury responded by slapping a taxpayer guarantee on the whole industry.

SEC Chairman Mary Schapiro has been trying to eliminate this systemic risk by taking away the accounting fiction that was created when previous generations of lobbyists captured the SEC. She made the sensible case that money-fund prices should float like the securities they are.

But industry lobbyists are still holding hostages. Commissioners Luis Aguilar, Dan Gallagher and Troy Paredes refused to support reform, so taxpayers can expect someday a replay of 2008. True to the Stigler thesis, the debate has focused on how to maintain the current money-fund business model while preventing customers from leaving in a crisis. The SEC goal should be to craft rules so that when customers leave a fund, it is a problem for fund managers, not taxpayers.

The industry shrewdly lobbied Beltway conservatives, who bought the line that this was a defense against costly regulation, even though regulation more or less created the money-fund industry. Free-market think tanks have been taken for a ride, some of them all too willingly.

The big winners include dodgy European banks, which can continue to attract U.S. money funds chasing higher yields knowing the American taxpayer continues to offer an implicit guarantee.

The industry shouldn't celebrate too much, though, because regulation may now be imposed by the new Financial Stability Oversight Council. Federal Reserve and Treasury officials want to do something, and their preference will probably be more supervision and capital positions that will raise costs that the industry can pass along to consumers. By protecting the $1 fixed NAV, free-marketeers may have guaranteed more of the Dodd-Frank-style regulation they claim to abhor.

The losers include the efficiency and fairness of the U.S. economy, as another financial industry gets government to guarantee its business model. Congratulations.

Saturday, June 30, 2012

Jonathan Haidt's The Righteous Mind: Why Good People Are Divided by Politics and Religion

Jonathan Haidt: He Knows Why We Fight. By Holman W Jenkins, Jr
Conservative or liberal, our moral instincts are shaped by evolution to strengthen 'us' against 'them.'
The Wall Street Journal, June 30, 2012, page A13
http://online.wsj.com/article/SB10001424052702303830204577446512522582648.html

Nobody who engages in political argument, and who isn't a moron, hasn't had to recognize the fact that decent, honest, intelligent people can come to opposite conclusions on public issues.

Jonathan Haidt, in an eye-opening and deceptively ambitious best seller, tells us why. The reason is evolution. Political attitudes are an extension of our moral reasoning; however much we like to tell ourselves otherwise, our moral responses are basically instinctual, despite attempts to gussy them up with ex-post rationalizations.

Our constellation of moral instincts arose because it helped us to cooperate. It helped us, in unprecedented speed and fashion, to dominate our planet. Yet the same moral reaction also means we exist in a state of perpetual, nasty political disagreement, talking past each other, calling each other names.

So Mr. Haidt explains in "The Righteous Mind: Why Good People Are Divided by Politics and Religion," undoubtedly one of the most talked-about books of the year. "The Righteous Mind" spent weeks on the hardcover best-seller list. Mr. Haidt considers himself mostly a liberal, but his book has been especially popular in the conservative blogosphere. Some right-leaning intellectuals are even calling it the most important book of the year.

It's full of ammunition that conservatives will love to throw out at cocktail parties. His research shows that conservatives are much better at understanding and anticipating liberal attitudes than liberals are at appreciating where conservatives are coming from. Case in point: Conservatives know that liberals are repelled by cruelty to animals, but liberals don't think (or prefer not to believe) that conservatives are repelled too.

Mr. Haidt, until recently a professor of moral psychology at the University of Virginia, says the surveys conducted by his research team show that liberals are strong on evolved values he defines as caring and fairness. Conservatives value caring and fairness too but tend to emphasize the more tribal values like loyalty, authority and sanctity.

Conservatives, Mr. Haidt says, have been more successful politically because they play to the full spectrum of sensibilities, and because the full spectrum is necessary for a healthy society. An admiring review in the New York Times sums up this element of his argument: "Liberals dissolve moral capital too recklessly. Welfare programs that substitute public aid for spousal and parental support undermine the ecology of the family. Education policies that let students sue teachers erode classroom authority. Multicultural education weakens the cultural glue of assimilation."

Such a book is bound to run into the charge of scientism—claiming scientific authority for a mix of common sense, exhortation or the author's own preferences. Let it be said that Mr. Haidt is sensitive to this complaint. If he erred, he says, it was on the side of being accessible, readable and, he hopes, influential.

As we sit in his new office at New York University, he professes an immodest aim: He wants liberals and conservatives to listen to each other more, hate each other less, and to understand that their differences are largely rooted in psychology, not open-minded consideration of the facts. "My big issue, the one I'm somewhat evangelical about, is civil disagreement," he says.

A shorthand he uses is "follow the sacred"—and not in a good way. "Follow the sacred and there you will find a circle of motivated ignorance." Today's political parties are most hysterical, he says, on the issues they "sacralize." For the right, it's taxes. For the left, the sacred issues were race and gender but are becoming global warming and gay marriage.

Yet between the lines of his book is an even more dramatic claim: The same moral psychology that makes our politics so nasty also underlies the amazing triumph of the human species. "We shouldn't be here at all," he tells me. "When I think about life on earth, there should not be a species like us. And if there was, we should be out in the jungle killing each other in small groups. That's what you should expect. The fact that we're here [in politics] arguing viciously and nastily with each other, and no guns, that itself is a miracle. And I think we can make [our politics] a little better. That's my favorite theme."

Who is Jon Haidt? A nice Jewish boy from central casting, he grew up in Scarsdale, N.Y. His father was a corporate lawyer. "When the economy opened out in the '50s and '60s and Jews could go everywhere, he was part of that generation. He and all his buddies from Brooklyn did very well."

His family was liberal in the FDR tradition. At Yale he studied philosophy and, in standard liberal fashion, "emerged pretty convinced that I was right about everything." It took a while for him to discover the limits of that stance. "I wouldn't say I was mugged by reality. I would say I was gradually introduced to it academically," he says today.

In India, where he performed field studies early in his professional career, he encountered a society in some ways patriarchal, sexist and illiberal. Yet it worked and the people were lovely. In Brazil, he paid attention to the experiences of street children and discovered the "most dangerous person in the world is mom's boyfriend. When women have a succession of men coming through, their daughters will get raped," he says. "The right is right to be sounding the alarm about the decline of marriage, and the left is wrong to say, 'Oh, any kind of family is OK.' It's not OK."

At age 41, he decided to try to understand what conservatives think. The quest was part of his effort to apply his understanding of moral psychology to politics. He especially sings the praises of Thomas Sowell's "Conflict of Visions," which he calls "an incredible book, a brilliant portrayal" of the argument between conservatives and liberals about the nature of man. "Again, as a moral psychologist, I had to say the constrained vision [of human nature] is correct."

That is, our moral instincts are tribal, adaptive, intuitive and shaped by evolution to strengthen "us" against "them." He notes that, in the 1970s, the left tended to be categorically hostile to evolutionary explanations of human behavior. Yet Mr. Haidt, the liberal and self-professed atheist, says he now finds the conservative vision speaks more insightfully to our evolved nature in ways that it would be self-defeating to discount.

"This is what I'm trying to argue for, and this is what I feel I've discovered from reading a lot of the sociology," he continues. "You need loyalty, authority and sanctity"—values that liberals are often suspicious of—"to run a decent society."

Mr. Haidt, a less chunky, lower-T version of Adam Sandler, has just landed a new position at the Stern School of Business at NYU. He arrived with his two children and wife, Jane, after a successful and happy 16-year run at the University of Virginia. An introvert by his own account, and never happier than when laboring in solitude, he nevertheless sought out the world's media capital to give wider currency to the ideas in the "The Righteous Mind."

Mr. Haidt's book, as he's the first to notice, has given comfort to conservatives. Its aim is to help liberals. Though he calls himself a centrist, he remains a strongly committed Democrat. He voted for one Republican in his life—in 2000 crossing party lines to cast a ballot for John McCain in the Virginia primary. "I wasn't trying to mess with the Republican primary," he adds. "I really liked McCain."

His disappointment with President Obama is quietly evident. Ronald Reagan understood that "politics is more like religion than like shopping," he says. Democrats, after a long string of candidates who flogged policy initiatives like items in a Wal-Mart circular, finally found one who could speak to higher values than self-interest. "Obama surely had a chance to remake the Democratic Party. But once he got in office, I think, he was consumed with the difficulty of governing within the Beltway."

The president has reverted to the formula of his party—bound up in what Mr. Haidt considers obsolete interest groups, battles and "sacred" issues about which Democrats cultivate an immunity to compromise.

Mr. Haidt lately has been speaking to Democratic groups and urging attachment to a new moral vision, albeit one borrowed from the Andrew Jackson campaign of 1828: "Equal opportunity for all, special privileges for none."

Racial quotas and reflexive support for public-sector unions would be out. His is a reformed vision of a class-based politics of affirmative opportunity for the economically disadvantaged. "I spoke to some Democrats about things in the book and they asked, how can we weaponize this? My message to them was: You're not ready. You don't know what you stand for yet. You don't have a clear moral vision."

Like many historians of modern conservatism, he cites the 1971 Powell Memo—written by the future Supreme Court Justice Lewis Powell Jr.—which rallied Republicans to the defense of free enterprise and limited government. Democrats need their own version of the Powell Memo today to give the party a new and coherent moral vision of activist government in the good society. "The moral rot a [traditional] liberal welfare state creates over generations—I mean, the right is right about that," says Mr. Haidt, "and the left can't see it."

Yet one challenge becomes apparent in talking to Mr. Haidt: He's read his book and cheerfully acknowledges that he avoids criticizing too plainly the "sacralized" issues of his liberal friends.

In his book, for instance, is passing reference to Western Europe's creation of the world's "first atheistic societies," also "the least efficient societies ever known at turning resources (of which they have a lot) into offspring (of which they have very few)."

What does he actually mean? He means Islam: "Demographic curves are very hard to bend," he says. "Unless something changes in Europe in the next century, it will eventually be a Muslim continent. Let me say it diplomatically: Most religions are tribal to some degree. Islam, in its holy books, seems more so. Christianity has undergone a reformation and gotten some distance from its holy books to allow many different lives to flourish in Christian societies, and this has not happened in Islam."

Mr. Haidt is similarly tentative in spelling out his thoughts on global warming. The threat is real, he suspects, and perhaps serious. "But the left is now embracing this as their sacred issue, which guarantees that there will be frequent exaggerations and minor—I don't want to call it fudging of data—but there will be frequent mini-scandals. Because it's a moral crusade, the left is going to have difficulty thinking clearly about what to do."

Mr. Haidt, I observe, is noticeably less delicate when stepping on the right's toes. He reviles George W. Bush, whom he blames for running up America's debt and running down its reputation. He blames Newt Gingrich for perhaps understanding his book's arguments too well and importing an uncompromising moralistic language into the partisan politics of the 1990s.

Mr. Haidt also considers today's Republican Party a curse upon the land, even as he admires conservative ideas. He says its defense of lower taxes on capital income—mostly reported by the rich—is indefensible. He dismisses Mitt Romney as a "moral menial," a politician so cynical about the necessary cynicism of politics that he doesn't bother to hide his cynicism. (Some might call that a virtue.) He finds it all too typical that Republicans abandoned their support of the individual health-care mandate the moment Mr. Obama picked it up (though he also finds Chief Justice John Roberts's bend-over-backwards effort to preserve conservative constitutional principle while upholding ObamaCare "refreshing").

Why is his language so much less hedged when discussing Republicans? "Liberals are my friends, my colleagues, my social world," he concedes. Liberals also are the audience he hopes most to influence, helping Democrats to recalibrate their political appeal and their attachment to a faulty welfare state.

To which a visitor can only say, God speed. Even with his parsing out of deep psychological differences between conservatives and liberals, American politics still seem capable of a useful fluidity. To make progress we need both parties, and right now we could use some progress on taxes, incentives, growth and entitlement reform.

Mr. Jenkins writes the Journal's Business World column.