Postcard from a gun show

I went to my first gun show recently--part of my ongoing remedial education in American cultural literacy, which my (American) wife has lately taken in hand--and I have been turning the experience over in my mind these past few days. As a Brit, of course, I was conditioned to expect that the first time I saw an unholstered pistol would be when a mugger stuck one in my face. That is how it works in a civilized country. So for me it was passing strange to see many hundreds of pistols--not to mention shotguns, assault rifles, armor-piercing bullets, laser-sighting attachments and all manner of other lethal weaponry--arrayed for the delectation of ordinary citizens. They let me pick up a gun, for heaven's sake!

A few moments inside the exhibition hall, I was still puzzling over the perfunctory security check at the door--"Are you carrying firearms?" "No, but why would that be a problem?"--when I gaped as a rotund and cheerful old gentleman with a white beard walked past me to the exit, with what looked like an Armalite and attached bayonet slung casually over his shoulder. (I was pleased to see that the trigger was secured by a plastic tie. Dangerous otherwise.) Trade was brisk. The Supreme Court had just overturned DC's de facto prohibition on hand guns, upholding the Second Amendment as an individual rather than collective right.

Though a Brit, as I say, I did not bring the default attitude of many  Europeans (or East Coast liberals, same thing) to the event. I am by no means an instinctive gun controller. It is not obvious to me what is wrong with the argument that says, "The criminals already have guns; gun control disarms the rest of us." I don't know how many times I have heard that view sneered at, or laughed at, or pointed to as an infallible marker of stupidity. But I haven't ever heard it seriously confronted, let alone refuted. Thought experiment: would I feel safer walking around DC at night if the district allowed concealed carry, so that some fraction of law-abiding citizens on the street would be armed, or would I feel more at risk? Answer: safer. I don't say this settles the matter: I'm not sure what I think about gun control, and the seeming resistance in some quarters to any and all forms of regulation is ridiculous. But why is this not a legitimate consideration?

I don't think the Democratic nominee would have felt at home with this crowd. I heard several references to Comrade Obama, and saw one button (which I coveted) that said, "I am a BITTER gun-owner." They seemed to me an affable, friendly and very courteous bunch (well, you would be, wouldn't you?). I don't think you could mix with the show's visitors for more than five minutes without thinking it was nonsense to attribute their interest in guns to bitterness or disappointment or some form of social pathology. But of course there is a political dimension. Aside from other motivations--sport, self-defence--the gun-show universe is about pride, self-reliance, and resentment at being bossed around. Distinctively American traits, wouldn't you say? Best in moderation, no doubt--but still, where would the country be without those attitudes? I may get thrown out of Georgetown for this, but I say, good for them.

The end of the WTO?

Not with a bang but with a whimper. The failure of the latest efforts to revive the Doha Round hardly came as a surprise; the fact that farming (what else?) was the sticking point was not exactly shocking either. And you could argue that little was immediately at stake. The talks were partly about tariff and subsidy limits, as opposed to tariffs and subsidies actually in place (these are typically well inside their WTO bindings). The breakdown does leave the system more vulnerable to future setbacks, but no great imminent surge of trade will be blocked because of it.

The dispiriting thing is that the talks could founder over the refusal to compromise, when the costs of compromise were indeed so low. (The political costs, I mean. When a country binds itself not to resort to protection, the economic costs are not just low but negative.) Governments no longer judge a successful Doha Round to be capable of delivering them a net political gain. Since that was the reason for the WTO in the first place, the game appears to be up.

Multilateral trade liberalization brought the world an awfully long way after 1945, but that era has come to an end. The trade-reform agenda is unfinished--especially in the developing world--but future progress, if any, will come from unilateral unreciprocated liberalization, or from discriminatory bilateral (or plurilateral) agreements, or some blend of the two. There has been a lot of the first lately, which is good. The danger lies with the second. It is a trend that the United States pioneered with its proliferating (until recently) regional FTAs. A rationale often offered for that approach was that regional FTAs were building blocks for broader multilateral liberalization, with the WTO presiding over the subsequent assembly. Skeptics said no: regional FTAs would complicate the system and create frictions that would make broader trade reform more, not less, difficult. I'd say the skeptics have been proven right.

The FTA tendency is capable, given an enfeebled WTO, of eventually unwinding some of what has been achieved over the past half-century. (On this, see Jagdish Bhagwati's new book.) If a growing China, India and Brazil follow the US example and use their muscle to develop their own hub-and-spoke networks of trade preference, the eventual costs in forgone trade and income could be great. The logic of trade protection never sleeps.

Column: The presidential image war

Barack Obama's trip to Europe and the Middle East did what it was supposed to. It untapped a stream of presidential images: the candidate addressing 200,000 delighted Berliners; the candidate mingling comfortably with American soldiers, riding in military helicopters like a commander-in-chief; the candidate dealing with foreign leaders as an equal. For most voters, it is the images that will stick - what else was there? - and they are priceless. John McCain's chief line of attack against Mr Obama, that he lacks experience especially in foreign affairs, has been blunted if not neutralised.

Poor Mr McCain had the worst week of his campaign. Unable to lie low and let Mr Obama have his European moment, the only wise course, he made matters worse. He ran a television spot that said "blame Obama for the high price of gas", a patently ludicrous assertion. (Republicans were laughing at their own candidate.) Campaign officials said he might announce his vice-presidential choice - a sad and unsuccessful attempt to steal some of Mr Obama's limelight. And having spent months goading Mr Obama for his lack of foreign affairs experience, Mr McCain portrayed his own schedule of dreary and sparsely attended small-town events as proof of his superior authenticity.

In this election, the image war is turning into a rout. As Mr Obama grows in self-assurance (not that he was lacking any to begin with), Mr McCain looks older and less sure-footed. The greater surprise, though, and the real let-down in this campaign, is that the image war is all there is. In a way, last week's contrasts sum things up. And what a pity this is. This was supposed to be an election about substance, with candidates - each of them an outsider in his own way - capable of mutual respect, capable of challenging party loyalists and keen to engage with each other in a new kind of politics. Instead we have the old kind of politics, only more so.

You can read the rest of this column for the FT here.

Obama in Berlin

I thought his speech was disappointing. He played it very safe. What he said was insubstantial even by his standards, and sometimes painfully banal. And it seemed to me to lack the flair in delivery that usually makes up the deficit. There were no memorable lines. All that stuff about tearing down (metaphorical) walls was predictable and lame. It was a mistake to evoke memories of "Tear down this wall," an unrepeatably dramatic stroke. And who thought it was a good idea to recycle "This is the moment"? Old hat by now in the US and entirely without resonance in Germany. He seemed subdued and a little nervous, too, which would be understandable, since it is difficult to please two such different audiences--the one in Berlin, and the one back home--at the same time.

Speaking at home, a favorite device is to challenge his listeners a little (as recently, when he reminded a teachers' union that he supports merit pay and charter schools). There was a smidgen of that in Berlin--he called on Europe to increase its support for US efforts in Afghanistan--but no more, most likely because he did not know the audience well enough to be confident about getting the balance right.

For what it's worth, Der Spiegel was none too impressed.

The images of the cheering crowd--200,000 was a decent turn-out, I'd say--are a great plus of course. And he avoided the main mistake he might have made, so far as American voters are concerned: there was no pandering to anti-American sentiment, and almost none to anti-Bush sentiment. At one point, the reference to Iraq, the crowd was about to get behind that feeling and he stifled it. This denied him the roars of adulation which were there for the taking, but which would have dealt him a serious and possibly lethal blow back home. So it was steady, but dull.

How long, one wonders, will Germany stay in love with Obama if he is elected? My guess is not long. The real question, once America's and Europe's diverging interests start to be asserted, is whether his Euro-fans will feel mildly let down or outrageously betrayed. See this piece by David Aaronovitch, "Eventually, we will all hate Obama too".

So Barack Obama, en fête around the world, will one day learn that there is no magical cure for the envy of others. What makes America the indispensable power (and even more indispensable in the era of the new China), is precisely what makes anti-Americanism inevitable.

Unfortunately, I think Aaronovitch is right.

The CBO on Fannie and Freddie

Peter Orszag's short letter to Congress on the cost of the proposed help for Fannie and Freddie is well worth reading in full. It is a bit misleading to say, as most reports did, that the Congressional Budget Office believes the bail-out "could cost $25 billion"--a less scary figure than many on Capitol Hill had apparently been expecting. This is a probability-weighted average of two more likely, but very different, scenarios. One (rated a better-than-50 percent bet) is that the Treasury will not need to hand over anything at all. If all goes well, merely announcing that it is ready to do whatever it takes will be enough to reassure the markets. The other possibility is that the markets are not reassured, in which case the necessary bail-out would likely be much more than $25 billion, and possibly more than $100 billion.

CBO's estimate recognizes that there is a significant chance--probably better than 50 percent--that the proposed new authority for the Secretary would not be used before it expired at the end of December 2009. If the proposal is enacted, private markets might be sufficiently reassured to provide the GSEs with adequate capital to continue operations without any infusion of funds from the Treasury; during that time, it is possible that expectations about the duration and depth of the downturn in the housing market may brighten. Under that scenario, the temporary authority would not be used and thus would involve no budgetary cost. In CBO's view, however, that scenario is far from the only possible result. Indeed, many analysts and traders believe that there is a significant likelihood that conditions in the housing and financial markets could deteriorate more than already reflected on the GSEs' balance sheets, and such continuing problems would increase the probability that this new authority would have to be used. CBO's cost estimate therefore accounts for both the possibility that federal funds would not have to be expended under the new authority and the possibility that the government would have to use that authority to provide assistance to the GSEs... CBO's estimate of $25 billion in costs over the 2009-2010 period reflects a probability-weighted average of how large those injections might need to be, including zero as a potential outcome.

And the letter's last paragraph makes a point worth pondering:

A strong argument can be made that if the Treasury used the proposed authority, the GSEs' operations should be incorporated directly into the federal budget. That is, the proposal, especially to the extent it would result in any government acquisition of an equity stake in the GSEs, raises a significant budgetary question. Currently, data on the GSEs are reported along with federal budget information each year, but the activity of those entities is not encompassed within the budget. That treatment could change if the federal government's financial stake or control changes in a significant way.The

All praise Vox

A word of congratulations to Vox, a most successful cross between a blog and an economics journal, which has recently been celebrating its first anniversary. The site is published under the auspices of the Centre for Economic Policy Research (a Eurocentric research network not unlike the NBER) and headed by Richard Baldwin, a professor at the Graduate Institute of Geneva. Vox has a starry cast of contributors from around the world, but as you would expect has a particular strength in European scholars. It accepts column-length submissions from academics: sometimes they engage with current controversies, sometimes report new research, and often do both at once. They are told to be policy-relevant and research-based, and to write "at an analytical level that is higher than a typical newspaper column but very much more accessible than a journal article".

Sample from just the past week or two Charles Wyplosz on the argument between Larry Summers and Willem Buiter over financial crises and bail-outs. Stefan Tangermann on biofuels and food prices. Gabriel Felbermayr and Farid Toubal on using scores in the Eurovision song contest to explore the links between cultural proximity and trade. Thorvaldur Gylfason with as much as we probably need to know about the Icelandic economy. ("Iceland has never been boring," he begins. Did somebody say otherwise?) Nick Crafts explains why Europe needs to develop some respect for creative destruction. From the shop-window of CEPR "Policy Insight" papers on the right of the home page, read Axel Leijonhufvud on "Keynes and the Crisis".

It's an excellent formula. There should be an American equivalent.

Column: An Obama landslide

[Apologies for the delayed posting of this. A technical glitch. As if MobileMe weren't enough to contend with...]

Head-to-head polls show McCain in with a fair chance of winning--despite a political and economic context which is about as unfavorable to Republicans as it could be. How come? The simplest explanation may be that the head-to-head polls (especially with more than three months to go) tell you very little, and are best ignored. According to political scientist Alan Abramowitz, the broader political climate tells you much more about what will happen in November.

My Monday column for the FT explains. Go here and here for two recent pieces by Abramowitz (thanks to Larry Sabato's site).

Al Gore's modest proposal

And speaking of satire...

When I read Al Gore's latest speech on global warming, my reaction was much like my initial response to that New Yorker cover (see previous post): What am I supposed to make of this?

The call to produce "100 percent of our electricity from renewable energy and truly clean carbon-free sources within 10 years" is off the charts. To blandly claim that this is both "achievable" and "affordable" is a typical Gore touch--as is the hyperbole about the end of life as we know it if we fail to do as he advises. Gore says, "The leading experts predict that we have less than 10 years to make dramatic changes in our global warming pollution lest we lose our ability to ever recover from this environmental crisis." Well, among other things, that depends what you mean by "dramatic"; so far as am I aware, nobody else is saying, "eliminate carbon from the US electricity supply by 2018 or we are doomed."

Gore is right, however, that meeting his target would be "transformative". That is why the inevitable invocation of Kennedy's moon-shot commitment is ill-conceived. Putting a man on the moon within nine years of getting the first American into space was self-evidently a staggering accomplishment. But unlike what Gore is calling for, it did not represent "a challenge to all Americans - in every walk of life: to our political leaders, entrepreneurs, innovators, engineers, and to every citizen."

I agree with Gore about some things. I agree with his preference for a carbon tax over other carbon control regimes. And history has been on the side of technology optimists. At today's energy prices, progress on new technologies for conservation and renewables will probably happen much faster than we think. (See this for instance.) But eliminating carbon from electricity within 10 years? Does he even mean it? "I see my role as enlarging the political space in which Senator Obama or Senator McCain can confront this issue as president next year," he says. Translation: I advocate the impossible so that the possible becomes more probable. Fair enough, one might say. But propaganda in a good cause is still propaganda, isn't it?

Chuckling over the New Yorker

I would be happier with the idea that the New Yorker’s cover was satirical, as editor David Remnick claimed, if it was funny. Isn’t satire supposed to be funny? (Jeffrey Goldberg alerts me to the fact that an editorial writer at the New York Sun chuckled over it for several minutes. I didn’t chuckle even for a moment. It wasn't that I was offended. I was just puzzled. What am I supposed to make of this, I wondered?)

Imagine the cartoon were not on the cover of the New Yorker. Most people, I think, would then read it not as reducing a certain idiotic view of Barack Obama and his wife to a comical absurdity, but as expressing that idiotic view with caricatural emphasis. Would it have been satirical (in the sense David Remnick means) on the cover of National Review? At best, without a caption or headline to send the image up, its meaning is unclear: it is a joke without a punchline, and just doesn’t work (except, of course, as a way to get people talking about the magazine).

Obama rightly made light of it. He called it (I'm paraphrasing) an attempt at satire that failed. That is exactly what it was.

Fannie and Freddie: the art of muddling through

Hank Paulson's Sunday evening announcement on Fannie Mae and Freddie Mac (the two gigantic pseudo-private enterprises that own or guarantee about half of the country's mortgages, and whose shares investors have been dumping) was mostly a request to Congress for temporary permission to act "if needed". He wants the Treasury to be able to lend to them, and to provide them with new capital (by buying equity or some kind of preferred stock). Meanwhile, the Fed has announced that it will provide liquidity support if required.

Paulson hopes, of course, that he will not have to use the methods he is asking Congress to allow, and that merely requesting the option will be enough to calm the markets. We shall see. The problem with the Treasury's approach is that, even while asking for these powers, thus confirming that it cannot let the enterprises collapse, it insists that they must continue "in their current form". If the enterprises prove unable to finance themselves privately, then they cannot, by definition, continue in their current form. So on reflection I don't know whether the announcement is about the art of muddling through or the art of self-contradiction. Maybe both.

My Monday column for the FT discusses Fannie and Freddie at greater length.

Will Fannie and Freddie fail?

The so-called Government Sponsored Enterprises, Fannie Mae and Freddie Mac, together with the Federal Home Loan Bank, have played a central role in shoring up the housing-finance market since the sub-prime meltdown began. It is not much of an exaggeration to say that they have become the entire market. But the more money they have pumped into housing, the faster their own financial condition has deteriorated. Now investors are ditching Fannie and Freddie stocks; on Thursday shares in Freddie fell nearly 20 per cent, to their lowest since 1991. Anxiety had been building for a while, then worsened suddenly when Bill Poole, a former head of the St Louis Fed, said that Freddie was technically insolvent in the first quarter under mark-to-market accounting (that is, the value of its assets was less than the value of its liabilities).

It is inconceivable that the government would stand aside and let these institutions go down: to say that they are too big to fail hardly does the case justice. Their liabilities are now larger than those of the entire federal government. If regulatory forbearance--the traditional approach to the GSEs--should fail, and the choice comes to standing by or outright nationalization, it would be the latter in a heartbeat. The question is not whether there would be a bail-out, but how hard the terms would be on creditors and shareholders. (Bear Stearns was not allowed to fail--but its shareholders were crucified.) We may very well discover the value of that fabled "implicit guarantee". Owners and lenders alike are having second thoughts about it: shareholders are running for the door and lenders have raised their spreads sharply.

Will a recovering housing market come to the GSEs' rescue? Not for some while yet. Consider what Janet Yellen, boss of the San Francisco Fed, told the UCSD Economics Roundtable this week (via Econbrowser):

Unfortunately, it appears to me that there are at least three reasons for thinking that housing prices have further to fall. First, the ratio of house prices to rents—a kind of price-dividend ratio for housing—still remains quite high by historical standards, despite having fallen from its historical peak reached in early 2006. That suggests that further price declines may be needed to bring housing markets into balance. Second, inventories of unsold homes remain at elevated levels. This "excess supply" of available homes will put downward pressure on housing prices. Indeed, these inventories are likely to directly depress construction activity, since there is little point in building new homes when there is already a large backlog of unsold homes. Third, the futures market for house prices predicts further declines in a number of metropolitan areas this year. In particular, the Case-Shiller composite index for home prices shows a 15 to 20 percent year-over-year decline in the second half of this year. The bottom line is that construction spending and house prices seem likely to continue to fall well into 2009.

In short, the GSEs' financial condition is going to get worse before it gets better. If it happens, a rescue of Fannie and Freddie would dwarf not only anything seen up to now, but anything even contemplated. This crisis isn't over.

Reflections on the G8 breakthrough

Even by the dismal standards of these events, this year's G8 summit in Japan was a wearisome spectacle. I cannot think that what was achieved--nothing--justified the meeting's doubtless impressive carbon footprint. I think I will remember it mainly for the quotation from IPCC head, R.K. Pachauri, who told reporters (according to the BBC) that the developed countries "should get off the backs of China and India" (and Pachauri wasn't even at the summit; he was speaking in Delhi). Yes, I understand that he wants the rich countries to move first--but is it wrong to expect anything of the countries which before long will be the world's biggest GHG emitters? I mean, isn't the planet in peril, or something?

Aside from that, all you need to read is the all-purpose report on pointless international meetings by the FT's Alan Beattie, which I saw on Gideon Rachman's blog, and which deserves the widest possible circulation.

Readings on education

My column on America’s educational assets—diminishing relative to those of other countries, and maybe in absolute terms as well—yielded some suggestions for further reading. Of the ones I've had a chance to look at so far, I recommend the following.

Roger Pielke Jr (author of “Honest Broker: Making Sense of Science in Policy and Politics”) directs me to his observations on a new Rand report on competitiveness, which suggests that the situation is far from desperate. I agree, of course: I wasn't describing an imminent crisis, but a slowly developing threat to future American growth. Roger also notes that intelligent discussion of this issue is more difficult than it need be because of lack of reliable data (a point I touch on, in referring to the debate over high-school graduation rates). This is true, he says, of many issues at the intersection of technology and policy.

Gail Mellow, president of LaGuardia Community College, also sent me a couple of very interesting documents: “Each and All: Creating a Sustainable American Higher Education System” (a lecture to the American Council on Education; look at the charts on page 7), and “Reach Higher, America” (a report from the National Commission of Adult Literacy).

My friend Frank Vogl, publisher of EthicsWorld and a trustee of the Committee for Economic Development, pointed me to this CED paper from 2005, "Cracks in the Education Pipeline".

Incidentally, Ben Wildavsky at the Kauffman Foundation also drew my attention to this education blog (which I hadn't seen before: Ben says it's good, and I shall read it from now on). It links to my column and asks, before going on to make a couple of fair points, whether I'm anti-American. Please! I'm an ardent Americanophile and indeed a would-be American--all the zeal of a convert, as my (American) wife will confirm.

Notes from Aspen 4

Austan Goolsbee (a senior economic adviser on the Obama team) and Jack Kemp talked about the economy, under Walter Isaacson’s direction. Kemp returned again and again to taxation, accusing Obama of planning a big tax increase. Goolsbee said no, almost all taxpayers will get a tax cut—and the proposed rise in capital gains tax, especially deplored by Kemp, would still leave the rate in the low twenties, which had been consistent with rapid growth and a booming stockmarket in the past. Goolsbee had much the better of this argument. (Although it would have been more accurate to say that under Obama’s plan, rather than getting an entirely new cut, almost all taxpayers will retain the one they have already had, courtesy of George W. Bush. This sounds less bold, of course, and clashes a little with the idea that the Bush tax cuts were an unmitigated crime.)

Goolsbee denied that Obama had any plan to apply the full rate of payroll tax to incomes over $250,000, something the campaign has not been too clear about. Rates of 3-5% had been looked at, he said. Goolsbee was at his least persuasive in my view, in seeming to oppose any kind of stockmarket-based “personal retirement account” supplement to Social Security. Equities are too risky, he said. Even as an add-on?

Continue reading "Notes from Aspen 4" »

Notes from Aspen 3

David Kennedy and John Yoo, with Jeffrey Rosen moderating, discussed "The Presidency and the Constitution". It was brave of Yoo--a principal architect of the Bush administration's constitutional-law doctrines--to appear in front of an audience as hostile to the White House as the liberal Aspen crowd. He did well, partly I think through seeming like a normal, even likeable, human being, something few in the audience were prepared for. As one questioner put it towards the end (I'm paraphrasing), "You don't seem like Darth Vader at all."

Continue reading "Notes from Aspen 3" »

Creative capitalism 2

On the Creative Capitalism website, Brad DeLong attacks Milton Friedman's position on the social responsibility of business as "weak toast"--an expression I was unfamiliar with, but a good one which I intend to start using. Friedman famously argued that it was better for shareholders to decide what good causes to support than have managers of the companies they own decide for them. Brad asks, why?

This is weak toast. This is thoroughly unconvincing. What reason is there not to turn this around? What reason is there not to say, instead:

* If customers don't want to pay higher prices and so buy from corporations that pursue social responsibility, they are (as long as product markets are competitive) free to do so at their option.
* If workers don't want to receive lower wages by working for corporations that pursue social responsibility, they are (as long as labor markets are competitive) free to do so at their option.
* If investors don't want to receive lower profits by investing in corporations that pursue social responsibility, they are (as long as capital markets are competitive) free to do so at their option.

If workers, customers, and investors expect that the executives of the corporations they deal with will pursue social-responsibility objectives, where's the foul? The executives aren't doing anything wrong at any level -- they are in fact performing a valuable function by as workers', customers', and investors' trusted and honest agents by pursuing social-responsibility goals. They are helping them pool their resources to achieve what they want to see happen. This pooling-of-resources agency function is an important one--it is, after all, why we have large organizations in the first place. So why limit it to narrowly profit-maximizing goals?

I've posted a quick reply.

I don't know what Friedman would have said to that, but my reply is "no foul"—in the sense, anyway, that nobody is being cheated. There would also be no foul, in that same sense, if a company said it intended to dedicate itself exclusively to good works, and had no intention of making any money at all—again, so long as everybody, including investors, was content with this. And for that matter there would also be no foul if a company said it would dedicate itself to making its workers miserable, asking its customers to pay double what they needed to, and bilking investors of every last cent—no foul, as before, so long as all interested parties were in the picture and thought it was fine. Caveat emptor, by all means.

The question is not "where's the foul?" but "where's the harm?" What counts is which of this potentially limitless set of no-foul organizing principles is likely to produce the best results. Friedman believed that the profit motive was hugely underrated as an organizing principle tending to produce socially beneficial results. In my view, he was surely right about that. Ordinary profit-seeking capitalism gets a terrible press. Even capitalists who have done as much as Bill Gates to advance social welfare aren't willing to defend it. And this is where corporate social responsibility comes in. It is a response, in substantial part, to a widely held misconception about the profit motive. I think that Friedman mainly wanted to correct the misconception, and draw attention to the unintended consequences of adopting organizing principles different from, and supposedly more enlightened than, the profit motive.

If the views of workers, customers and investors are influenced by a misunderstanding about the social value of profit-seeking enterprise, it is not enough to say that nobody is being cheated by CSR. Would the wide adoption of a broader corporate goal than seeking profits really make us better off? As I argue in my previous post, if Gates had been a CSR enthusiast right from the start, I doubt that there would ever have been a Microsoft or a Gates Foundation.

Column: Rewriting the intergenerational contract

In a new column for National Journal, I discuss an article by Isabel Sawhill and Emily Monea of the Brookings Institution, which calls for America's "intergenerational contract" to be rewritten:

The current contract, Sawhill and Monea say, was written in the 1930s when Social Security was born, revised in the 1960s with the addition of Medicare and Medicaid (which pays nursing home benefits), and then revised again in the current decade with passage of the prescription drug benefit.

The authors point out that this contract takes several things for granted: that workers will continue to retire at 65; that most seniors are too poor to support themselves in retirement or to pay for their own health care; and that younger Americans are, on average, better off than elderly Americans. Those assumptions, they argue, need to be challenged.

The poverty rate among the elderly (partly thanks to Social Security, of course) fell from 35 percent in 1959 to 9 percent in 2006. The poverty rate among working-age households is much higher, at 13 percent.

Some 80 percent of the elderly own their own homes, and three-quarters of those have paid off their mortgages. Social Security and Medicare have succeeded almost too well. The fiscal cost of that success keeps rising, and it is falling on working-age Americans who feel beleaguered--and who in many ways are worse off than the contract's beneficiaries.

A new deal needs to be struck, they say. But what should be the terms of this revised compact? And what are its chances, politically? You can read the column here (the link expires in a fortnight).

Notes from the Aspen Ideas Festival 2

I meant to say something about Walt Mossberg's session (on Tuesday) on "The Future of the Internet and the Rise of the Cell Phone"--though I acknowledge a slight impediment, having arrived late to find the session packed out and impossible to get into. Sources tell me it was about how devices like the iPhone constitute an entirely new computing platform, and are as momentous a turning point as the PC was in its day.

Well, sure. As a devoted reader of Mossberg's Personal Technology column in the WSJ, I was already familiar with that notion. Like the throngs of listeners overflowing into the hallway, I expect, I never miss his column, even though I cannot remember a single occasion when it told me something I didn't already know. (There must have been some; they just don't spring to mind.) Do not misunderstand me: Mossberg's popularity is entirely deserved. There is something very satisfying about reading an engaging, straightforward, intelligible treatment of familiar facts. It is a rare treat. They should teach that in journalism school.

A disappointment for me on Wednesday was the cancellation of the session on "The Dumbing Down of American Culture: Fact or Fiction?", apparently due to the non-appearance of some of the speakers. I had been looking forward to listening to the always interesting and multi-faceted Joel Achenbach (the putative moderator) navigate that terrain. I was curious to know if anybody would attempt to argue that American culture is not being dumbed down. What might such an argument look like? Next time, I hope. In the meantime, there is Joel's blog.

All the speakers--Sandra Day O'Connor, Judith Kaye, Ted Olson, and Stephen Carter-- showed up for "How Do We Choose Our Judges?" Concern was expressed about the dangers of judicial elections--which 39 states now hold. (As an illustration of the dangers of mixing election money and the courts, Olson recounted the remarkable tale of West Virginia's chief justice, who was pictured vacationing on the French Riviera with a CEO whose company had a case pending before the court.) But the discussion moved quickly to the appointment of Supreme Court judges. Carter would prefer the justices to be less visible. He deplores confirmation hearings and thinks that televising the court (as suggested by Olson, since people who see the court in action usually have a higher opinion of it) would be a disaster. To make them visible is to subject them to political pressure, Carter believes: they should be kept apart from politics, which means apart from the public.

Would making justices less visible make them less political? I don't know that it would. Politics and the court are hard to keep apart. The decisions the justices have to make are often politically freighted, and sometimes politically momentous: it cannot be any other way. Given this, a public confirmation process seems desirable--and so does televising the court. Shrouding the court in secrecy is just too undemocratic. I think you get the right kind of court not through invisibility, but through judicial modesty. It falls to the president to nominate justices inclined to exercise a particular kind of restraint--capable, that is, of deferring to elected politicians when the law's meaning is disputed, and when they (the justices) are themselves closely divided.

Notes from the Aspen Ideas Festival 1

I’m in Aspen for the Ideas Festival. I’ll write a daily note, updated now and then, on things that strike me as interesting.

One thing that already keeps coming up—in this environment rich in high-tech executives and entrepreneurs—is the unfathomable bone-headedness of a US immigration policy that discriminates against the skilled. Intel’s Craig Barrett railed against this at a session last night and University of Maryland’s Dan Mote picked the theme up again this morning. What other country, Dan asked, deports its freshly minted science PhDs? Every PhD should come with a green card attached, he said.

A session featuring Sean Wilentz on his new book about the Age of Reagan disappointed me. I wanted to know how a card-carrying liberal commentator came to conclude that Reagan was a great president. He dealt with this perfunctorily at the beginning—saying (a bit oddly, I thought) that he wrote the book as a historian, thus using only a part of his brain, and setting his prejudices to one side. Are we to conclude that he writes his political commentary with the other part of his brain, letting his prejudices rip and suppressing his sense of historical detachment and disinterestedness? Anyway, I came away with no sense at all of why he thought Reagan was a great president despite (on Wilentz’s view) being wrong about most things.

A session on “Where will the next technological breakthroughs come from?”, featuring the aforementioned Dan Mote, was valuable even though the panel ignored that interesting question entirely. The brilliant Danny Hillis (pioneer of parallel processing) described three levels of innovation: building blocks (lasers, microprocessors), products that bundle them together (iPods, etc), and adaptation to innovations of the second kind (think of the way the telephone transformed business and society). Intriguing to think of the third level as itself a kind of innovation. America has great strengths in this area of adaptation—a flexible and relatively lightly regulated economy, an ability to reinvent itself—but perhaps some weaknesses too, at least as compared with rising Asia. Installed infrastructure can make adaptation difficult. In some ways it helps to have a blank slate—the better to leapfrog a technology (think of the way rural India and Africa are moving directly from no phones to cellphones).

Creative capitalism: a conversation

Mike Kinsley and Conor Clarke have outsourced production of a book on "creative capitalism"--the subject of a much-noted speech by Bill Gates earlier this year--to the internet. Gates, if you recall, jumped on the corporate social responsibility bandwagon and argued that ordinary capitalism will no longer do. We need a new kind. The new website invites posts and comments on the subject, and the discussion appears to be thriving. I recently posted a note with my own first take on the issue.

When somebody says “Microsoft,” my first thought is unlikely ever to be “good corporate citizen.” I am more likely to think, “world-transforming innovator,” “awesome creator of wealth,” and “ruthless competitor.” (Sorry, Bill, no disrespect.) One wonders what would have become of this company if in its first decade or two its founder had spent significant time and effort—as he urged his audience at Davos—on good works not directly related to his goals for the enterprise. My main reaction to Bill’s speech was that it was a comical instance of “Do as I say, not as I did.” Microsoft’s shareholders and the world at large can thank their lucky stars that Bill did not follow his own advice.

You can read the rest of that post, and all the others, here.