WordPlay - Language, Culture, Media, and Meaning

It Really Doesn't Matter How the System's Rearranged . . .

I have not posted much about the debate over health care, mostly because the real issues are so nuts-and-bolts that anyone who does not have a clear understanding of how the system works (such as me) is well advised to stand clear. A little learning is indeed a dangerous thing. But the arguments became so heated and positions ultimately defined with so little flexibility, that a larger perspective may be useful - and mine tend to be ultra-large. So here goes.

Public Socialization v. Private Socialization. I have friends and family members who view the entry of the Federal government into the area of health care as an ominous and completely negative change in the structure of US society. But step back for a second for perspective. Socialized medicine in this country is nothing new. The system of health care first introduced in informally World War II, and codified in the Internal Revenue Code of 1954, of near-universal employer-paid health insurance, is nothing else than a system of private socialization. Insurance in large concept is nothing else than the socialization of risk. Whether it's private or public makes is conceptually irrelevant.

Which makes the 'change', in my in-this-case-genuinely humble opinion, in the ultra-high concept that I am discussing, is far more formal than substantive. There is no meaningful difference between the collection of premiums and disbursement of benefits by a distant conglomeration of private bureaucrats, and the collection and  and disbursement by public bureaucrats. I am aware that there are those who have a Manichean view of the matter, that massive private organizations are Good, and massive government organizations are Bad. But I don't see it. 'Good' or 'bad' depends on the details of administration. 

Which leads to the inference . . . . 

Inflexibility. I don't identify with either political party, but it seems to me that the Republican Party picked a very poor issue on which to draw a line in the sand. The principle 'it it's not broke, don't fix it' doesn't apply to US health care. The system is very badly broke.  Our scheme of private socialization has failed, both in the extent of coverage and in controlling costs. The most compelling criticism of the bill is one that the Republicans never made (to the best of my knowledge) that the candle wasn't worth the game, i.e., the changes are too slight to justify all the executive and legislative energy that went into the enacting of it. But equally so, all the sound and fury generated in opposition made no sense.

(It seems to me the Republican opposition to this bill in its excesses bears some analogy to the Democratic position on the war and security between 2002 and 2006. The extremists in the Democratic Party, the Demented Left, were so furious in opposition to the war and George Bush that they belittled the underlying cause, the threat of terrorism. By 2004, the public was lukewarm and mildly oppositional on the war, in the manner of most popular democracies. But it took the threat of terrorism very seriously. By giving the extremists voice, the Demented Left succeeded in losing a Presidential election it might otherwise have won. The Demented Right of the Republican Party, in fomenting a reaction to the Administration bill that is wildly disproportionate to the actual changes, risks doing the exact same thing to that party.)

Which leads to the truly substantive comment . . . .

Cost Control. The basic issue with respect to health care is controlling soaring costs. Private insurance companies have been pilloried for premium hikes, but to my way of thinking, that's to mistake the disease for the symptom. No doubt profits are too large and top executive salaries as out of line as they are in other segments of American business, but these are not the reasons why premiums are soaring. The reason is out-of-control costs.

To my way of thinking, the bill simply does not address those issues. To be sure, there was a great deal of talk about this. But here the equivalence of private with public socialization is compelling. If the private system of socialization now in place has been a dismal failure in terms of containing costs, why should there be any realistic hope that a public system will do any better? At any rate, I for one don't see any.

There is no revision of the fee-for-service protocol for the provision of medical services, which is the basic engine of cost expansion. Nor was there any meaningful tort reform, which might reduce the amount of GDP consumed by the parasitic medical malpractice 'industry'. I am fully aware that the great triumph of the bill is the expansion of coverage to the previously uninsured - but aren't the two matters directly related? The point of the exercise is to reduce the total percentage of GDP consumed by the health care system. If society is successful in reducing the costs of the fully insured, on a macro basis, the savings become available to apply to the uninsured. On the other hand, fail to reduce costs, and we all go broke together. 

So the ultimate bottom line to me is that I am not seeing all that much in the way of actual reform. We are still going to over-compensate medical and legal professionals as we have for three generations now. 

Which is why I re-wrote Gilbert to begin this piece:

It really doesn't matter how the system's rearranged

Because it hasn't really changed - nothing's really changed.

The Good That Men Do . . .

    Ted  Kennedy has been dead now nearly six months. His memorial service was as impressive an example of Catholic liturgy as ever you will see, which - when it is good, is very, very good. The eulogies spoken thereat seemed to me thoughtful and sincere. Collectively, they portrayed a personality of more nobility and depth than I thought the man possessed, for I was not sympathetic to him in life. These days, when I wander into Border's or the like, I see his posthumous book - I don't recall any prehumous - True Compass, with a picture of his handsome, weatherbeaten face on the cover, on the beach. The reviews are generally sympathetic. 

      Which leads me to my question, and the subject of this piece.

      Where is it?

      Where is the personal, truthful account of what really happened on the night of June 25th, 1969?  I'd prefer the document handwritten, but print would do. Most of the persons I respect would have perceived a moral necessity to account for the 40 years of life (plus two months) that Ted Kennedy had, that Mary Jo Kopechne did not. The event also had major consequences for the political history of this nation. Jimmy Carter likely became President in 1976 because the scandal prevented Kennedy from mounting a viable candidacy. The presidential election of 1980 was also affected. 

     But mostly it is required to do the right thing by a poor forlorn girl who died long before her time was due. 

     I can understand why the account might not be published at this time. The brutally direct account written by Seymour Hersh (back when he was an actual reporter) 'Chappaquiddick Plus Five', that appeared in the New Yorker, is not available on line. As I recall, there were five married men between 45 and 55 on that island. There were five unmarried women under thirty. There was a lot of vodka and party stuff. There is an implication in those basic facts that may still matter to living people even after 40 years. So maybe a few more years have to pass before the full truth can be aired. Just about the only thing that is known about that long ago night is that no one did tell the whole truth or even partial truth about what happened. 

     Maybe there are good reasons for the silence. I'm not suggesting criminality or major scandal, just . . . .good reasons. Perhaps it is still too soon for full disclosure.  But I do believe that it is essential to know that such a document exists. If Ted Kennedy went to his grave without addressing that night, leaving the ghost of that girl wandering around restlessly, then all that beautiful liturgy was wasted. The singers might as well have been performing in concert, the speakers might as well have been addressing empty pews. However lovely the ceremony might have been, it was as empty of real humanity as the saints in the stained glass windows. No matter how wonderfully handsome the rugged, weather-beaten face might be, if he did not attempt to do right for someone whom he wronged so mightily (directly or indirectly), Ted Kennedy remains forever the insubstantial, irresponsible contemptible playboy of more cold-blooded assessment.  

      'The good that men do? Shakespeare finishes the thought, is oft interred with their bones. When I gave this piece that title, I wasn't thinking of Ted Kennedy. I was thinking of Mary Jo Kopechne. Ted Kennedy did not truly earn his beautiful funeral unless he gave her a send off of her own - so that everything she was or could have been does not go to her grave with her. 

Defining Victory in Afghanistan and Elsewhere

    On the civilized chat board on which I normally hang out, two posters from opposite ends of the political spectrum really go after each other. One is a literate, committed Annapolis grad and career navy officer, the other a well-read business executive committed to the view that the interventions of the United States in Iraq, Afghanistan, and elsewhere are doomed to futility. They agree on almost nothing. But they are in agreement that 'victory' in Afghanistan and elsewhere, in general on, the war on terror, is an impossibility. There is too much tribal rivalry to overcome, too little infrastructure, and too much history of futility. 

    This to me raises exactly the kind of linguistic issue I began this blog to address. It is obviously impossible to 'win' a war against 'terror', or a war against 'drugs' or 'crime' in the same way the South surrendered at Appomattox. 'Terror'  'drugs' (meaning drug sale or usage), and 'crime' are all concepts, or types of behavior. So let's for starters modify the meaning of 'victory' to a usage that actually has practical application to such abstractions. Let us say victory means 'the maximum positive result in practical terms'. Well and good - we at least have a working definition that can be applied to abstractions. But it is still devoid of content. What exactly is the maximum practical positive result in concrete terms?

     Philip Bobbit, a legal historian at the University of Texas, has written two enormously influential books in this decade - 'The Shield of Achilles' and 'Terror and Consent'. The second of these addresses this issue directly. The author attempted to write a book that would be academically credible as well as accessible, with the result that the book is a mite on the tomish side, and not as widely known as it should be. But the thesis is persuasive., Examining a variety of national and international conflicts over the last millennium, Bobbit postulates that organized nation states bring forth (for want of a better phrase) enemies that mirror their organization. For example, the city states of medieval Italy, whose armed forces were essentially bands of knights, were opposed by mercenaries, condottiere, organized in a similar way. The more sophisticated nation states that arose between the 17th and 20th Centuries generated opposition in the same way, with the military organizations of the rival states aping each other's military organization.

       Bobbit argues that the nation states that dominated world affairs until the end of the Cold War have been outmoded, replaced by what he calls the corporate state. The term is unfortunate, for 'corporate' has a connotation of 'business enterprise', which is not (I think) Bobbit's meaning. He uses the term to reference the extent to which the institutions of government and culture have become distributed globally, without any fixed locale, in the same manner in which a corporation does not have a physical identity. Thus, the financial institutions of global society cannot be said to be located on Wall Street, or the Bourse, or the Street, or the Rialto, or anywhere. They comprise a network which cannot even be described as 'international' (which implies a relationship of national identities), but metanational or transnational. Films and television programs are released now all over the world at the same time. Satellite capability makes any significant event a global event, no matter how localized. The corporate state exists independent of any locale or nation state.

     Per Bobbit's historical view, the corporate state will inevitably produce its own enemy, its nemesis, which will ape its primary characteristics. The adversaries of the corporate state, its deadly foes, are similarly 'corporate' and networked, without any fixed national base. The most notable of these is Al Quaeda, which has no physical location and only a vague ethnic center. Something of the same can be said of the other enemies of the corporate state, opponents of globalization and the like.

       This raises an obvious question. The historical motivation for nearly all conflicts - tribal, intranational, international, and so on - have been disputes over territory and resources. But these are not. (A witty friend of mine jokes that US involvement in the MidEast occurs because 'our oil is under their land'.  A nice turn-of-phrase, but I don't think that the United States has saved a single dollar on a single barrel of oil as a result of its involvement in Iraq and elsewhere. Christopher Hitchens recently put paid to the notion more trenchantly.) So if these conflicts are not about territory, what do they involve?

      Bobbit addresses this issue in the title of his book. He sees the great global conflict in progress at the moment as a war between governmental systems based on the consent of the governed (the model for most civilized nations on earth) and those who would undermine consent by force or terror, in the name of a religious utopia, worker's paradise, or what not. The use of the word 'consent' has a nice precision, as opposed to 'democracy', i.e., there are forms of consensual government that are not formally democratic. Note, too, that the concept embraces the most vigorous opponents of an established government, so long as their method of opposition is based on winning the consent of the governed. The enemies of consensual government are literally enemies of consent itself - seeking to undermine the foundations of consensual government itself, either by direct seizure of power or forcing the established government to respond to terror and the threat of terrorism with police measures that effectively destroy its own legitimacy. 

     (This implies a fairly cynical view of the motives of terrorists, but for better or worse, it's one I share. If there is one single characteristic that has marginalized modern liberalism, it is its inclination to rationalize and condone political violence when the stated reason therefor is perceived to be just.  Not so - murder is first of all murder, and this is one case where the end not only does not justify the means, but the means effectively corrupt whatever end there was, becoming an end in themselves.  Always and everywhere.)

     Putting all this together, it is possible at last to define 'victory' in Afghanistan in concrete terms. Victory in Afghanistan can be said to have been achieved when the conditions become such that a government of consent becomes possible. i.e., when the campaign of terror has been sufficiently marginalized that does not obstruct the processes of consensual government. 'Marginalized' means exactly that. All sorts of nations tolerate degrees of organized crime and violence - the United States has endured the existence of ethnic gangs, some of considerable size and power, for more than a century without any posing any real threat to the foundations of the nation. It was not possible to 'defeat' the Ku Klux Klan, the Cosa Nostra, the Blackstone Rangers, or the the Mexican Mafia, any more than it is possible to defeat the Taliban - not without destroying the foundations of the consensual state from the opposite direction, by stumbling into fascism. There is some residual criminality that a free society, alas, must endure if it is to remain free.  

     But what is possible is to diminish the effect of that criminality, the influence of terrorist opposition, to the extent that it doesn't signify all that much, so that the people who really matter can build an orderly and responsive society without being obstructed by those acts - a society based on the consent of the governed. It can't be eliminated, but it can be marginalized. The establishment of the conditions of a consensual government, freed from the obstructive influence of terrorist acts (since the complete elimination of such crimes is unfortunately not possible), is what constitutes victory in this milieu. Only a fool would predict whether these conditions ever will be established, or in what direction history will take the Afghani people if they are. 

     But to say that victory in Afghanistan and elsewhere according to this definition is not achievable is simply not correct. It is well within the realm of possibility, indeed, even probable. 

Sarah Palin, Jeremiah Wright, and PreacherSpeak

    When Sarah Palin became the Republican nominee for the Vice Presidency in August, 2008, her membership in the Wasilla Assembly of God, a Christian fundamentalist congregation, immediately came to the fore. Many of the best and brightest reacted reflexively. Her membership in such a church constituted at least presumptive evidence that she was, if not actually dangerous, at the very least, stupid.   

    I march to my own drummer. Sarah Palin had been too spectacularly successful in achieving too many goals - beauty pageants, girls's basketball, Alaskan municipal and regional politics - to be dumb, IQ scores and Ivy League degrees be damned. There was one success in particular that interested me. This was her renegotiation in 2006 of the Alaskan pipeline construction and lease with a consortium of oil companies. This was almost universally regarded as a triumph for Governor Palin, before her ascent in Republican politics provided cause to question her competence in all areas. There was some fairly neutral journalism written by a couple of local reporters documenting her success.

    I found this interesting in view of the former Governor's membership in the Wasilla Assembly of God. Think about it for a second. The simple existence of oil, the mere fact that such a substance is, is a devastating commentary on Biblical fundamentalism - unless a True Believer takes the position that God used this glop to cement the Earth together on Day Three or Four or whatever. I am not aware of any such theological approach. This is not to say a governor negotiating an oil pipeline contract has to become a petroleum engineer, because she obviously does not. But she does have to communicate with petroleum engineers, oil executives, and the like, all sorts of people and personalities with hyper-sophisticated scientific and technological backgrounds. She also has to be able to evaluate her own advisers and their advice, and distinguish the good from the bad - all of which Sarah Palin did, with considerable success.

    There are also those 80 percent approval ratings, obviously a demographic a lot larger than Christian fundamentalists. Those approving must have included a lot of erudite and sophisticated Alaskan citizens. All of this bespeaks a world view a lot larger than that of a Biblical literalist. Yet she is a member of the Wasilla Assembly of God, and clearly comfortable in the congregation. Interesting.

     So what goes on here? Does Sarah Palin's membership in the fundamentalist church brand her as stupid? The mainstream media thought so. Or does her ability to lay the tenets of the church to one side when dealing with the practicalities of Alaskan oil make her a hypocrite? That would certainly be the alternative position of the mainstream media, which has not exactly been charitable towards this particular public personality. My own thought is that both answers are way, way too simple. I think the answer lies elsewhere.

    I live in Santa Clara Valley, California, which most of the world calls 'Silicon Valley'. It's an extremely multicultural community - the high tech opportunities have brought, eager technologists from all over the world - and extremely sophisticated, dominated by Stanford and Santa Clara Universities, and only 35 miles south of San Francisco. In this ultra-civilized environment, there are more than 150 private schools in operation. Here's a list. Maybe two-thirds of these have religious affiliations, and maybe half of  those are committed to a philosophy most would characterize as Fundamentalist. (I am not including any Catholic or Episcopal schools in that number.) The vast majority of these institutions are Christian. There are a half-a-dozen Jewish affiliated schools, and one Islamic elementary school. Based on the school descriptions, these are apparently Fundamentalist as well.

   The enrolment in most Christian Fundamentalist schools is a mixture of Caucasian and Asian students, with Asian enrolment averaging around 40 percent. Here's another list, which contains that information. To the best of my knowledge, there is no site that summarizes the annual costs systematically, but from what schools DO disclose the figure, tuition begins at about $6,000 for elementary school. High schools cost around $10,000. Valley Christian, the flagship of these institutions and a local athletic power, charges a little over $13,000 for the first child, $12,000 for a second - many of these families will educate two or more children at such a school. 

    The point should be obvious. The parents who pay this sort of money to send their sons and daughters to these sort of schools are not doing so with the expectation that these students will go on to divinity schools at bible colleges and become pastors of small, revelation churches. They have the same dreams and ambitions for their children as those who send theirs to secular schools. The academic presentation at The King's Academy, a Christian school in Sunnyvale, is typical. The school is unambiguously and unapologetically Christian,  describing itself as a "Christ-centered college preparatory middle and senior high school for students who have teachable hearts and coachable spirits. We offer a loving, family environment where students are encouraged to grow in their relationship with Jesus, their family, teachers, and other".  This is a philosophy that can fairly be described as Fundamentalist. Enrollment is about 800, a quarter of whom are Asian, 10 percent Black/Hispanic, and the balance Caucasian. Annual tuition is just under $10,000.

    To these students, the school offers AP classes in chemistry and biology, as well as calculus, history, and English. According to its presentation, about 60 percent of the AP candidates score 3, 4, or 5.  College counseling focuses at the University of California and California State University system. The students who attend the school fully expect to matriculate there, or at a any number of quality schools around the country.

    I don't want to overdo this. Santa Clara County abounds with private schools that emphasize intense academic performance and achievement. The King's Academy is not one of them. But it should be apparent that the families who choose this secondary education for their children have pretty much the same ambition for them as any of the families who go the secular route. Also, it is not possible for the King's Academy students even to sit for AP examinations in biology and chemistry without a thorough grounding in contemporary scientific theory. Yet the school's emphasis on a direct, personal  relationship with Jesus clearly marks it as fundamentalist in nature.

    One preliminary point before heading toward the crux. It's a big mistake to equate Fundamentalist Christianity with Biblical literalism, or even that a believer is necessarily unscientific. Congregants in Fundamentalist sects exhibit the same infinite variety and degrees of belief in the orthodoxy of the faith, and the same flexibility with respect to difficult facts, as believers in any other faith. (I hope that does not sound too patronizing.) That's why Palin could be a devout member of the Wasilla Assembly of God, and simultaneously handle oil pipeline negotiations so capably. The apparent cognitive dissonance no more troubles her than it troubles religious people in faiths that are more 'acceptably' mainstream.

    Which segues neatly to the major point. It's a fair bet that the parents who choose The King's Academy have the same awareness of the difficulty of truth, the same experience of the problems of faith, the same issues reconciling higher principles with self-interest, the same doubts as to any absolute in a universe in which so much is relative, as those of my neighbors who adopt the more conventional, secular humanistic point of view. The core theology of all the traditional religions flies squarely in the face of scientific fact and theory that they accept without question in every day life, that some of them use daily - they know that, too. They know also of the social stigma that attaches to adherents of Fundamentalist congregations. So there is a real question as to why these choices are made by intelligent people, in the face of so much they know and experience - for, as noted above, I believe it's a slander to think that this is a matter ot diminished intelligence. 

    It has been my own belief for many years that these are actually ethical and values decisions masquerading as metaphysical and religious. Fundamentalists don't accept the dogma of the religion and then adopt its values. They seize on the values and then adopt the dogma to reinforce and emphasize their significance. The dogma serves two purposes - first, grounding the values in religious text of infallible quality makes the values themselves immune from the attack of relativism. Second, the dogma is a mechanism for unifying the community, a set of shared symbols under which the believers can gather. The fact that the belief system is the object of scorn and derision generates a nice stigma of oppression that gives the unifying religious metaphors all the greater unifying force. Fundamentalists defend the truth of Genesis because they're scared to death that, if it goes, the Ten Commandments go with it. As committed members of a community of the committed, they are likely to undercut publicly these unifying symbols. But at the personal level, one individual and the next, the ultimate privacy of the soul, belief in their literal truth? I doubt it very much - and this fact, though unacknowledged, is implicitly understood throughout the community.

    That's the reason why The King's Academy can describe its principal goal as developing the personal relationship of its students with Jesus, and simultaneously offer classes in AP biology and chemistry. The two different languages don't correlate. The first is  'preacherspeak', an articulation of a moral and metaphysical approach to the problem of finding meaning in this dark and obscure universe. The second is scientific. The first don't signify with respect to the second. Stephen Gould, the wonderful and much missed Harvard palaeontologist, made this same point at much greater length and infinitely greater eloquence in his 1999 book 'Rocks of Ages. The applicable acronym is 'NOMA', Non Overlapping MagisteriA'.

  It's as easy to nod your head in recognition of the insight of the Harvard public intellectual, as it is to overlook the fact that the fundamentalists at The King's Academy are practicing exactly what Gould preached. The difference - and it is not at all a small one - is the tacit acceptance of the duality. That has to do (in my opinion) with the hostility the fundamentalists perceive towards their social and moral values. They feel too besieged to admit the obvious fact that they do not apply the religious Magisteria to scientific matters.  

    The same insight applies to some of the more extravagant stated beliefs of the members of Jeremiah Wright's megagchurch in Chicago, Trinity United - for example, the notion that the AIDS virus was concocted by the United States government for some fiendish genocidal purpose. Talk to the Wright's congregants one at a time, and my belief is that you will find few, if any, that will sign on to this set of beliefs as individuals. What they are is a set of shared symbols that serve to express the collective - and rather profound - social alienation felt by the community as a whole.

    (And why not? I am not African-American, nor do I believe that AIDS is a form of state-created germ warfare. But if I were, I might just possibly answer affirmatively to a pollster's question, regardless of what I thought. Why should I undercut the community of which I am a member, the friends that I like, in favor of an abstract and irrelevant truth? Besides, the expression of that belief says something important about what I think the of the relationship between the inner city African-American community and larger society. The bottom line is that talk is cheap. How I answer the poll isn't going to change anything - I know that - and the incorrect answer says much more about how I actually feel about the world than the literal truth.)

    I don't want to press the analogy to the point of foolish consistency. There are some obvious differences between adherence to ancient religious orthodoxy and modern urban legend. But both are ultimately instances of 'preacherspeak' - a set of shared icons and/or social beliefs that, though expressed collectively as factual truth, in reality have metaphorical significance, as a statement about moral and social values. The individuals in the respective communities have a tacit understanding of the limitations of the symbol set,  demonstrating an instinctive understanding of Gould's NOMA. That's why Sarah Palin can negotiate oil pipeline leases skillfully, The King's Academy can post proud reports about the good performance on AP biology tests, and the members of the Trinity Church can do business with a health establishment that in theory of the same membership s trying to kill them all.

    So what are the conclusions from all this? The basic point is the reason I wrote this post. The kids at The King's Academy, the congregants in Trinity United, aren't stupid. You can make them sound stupid by focusing on the symbols in which they express the strength of their convictions, but you'll be saying something about yourself, not them. If you want to engage them, you discuss the values that underly the metaphors, not the metaphors themselves.

    But that leads to the second point. The stridency arises because the governing conventional wisdom of this culture never does engage with its opposition. It derides, it scorns, it excludes. it ignores - it never debates. Almost its primary governing characteristics is its snarkiness. Oh, so that's the sort of person you are. When Charlton Heston spoke to the membership of the NRA, the point that brought down the house wasn't his insistence on Second Amendment rights. They don't take us seriously, he said. They call us all nuts and crazies. They don't listen. That was the theme that resonated, not any of the substantive issues of gun ownership. They respond to the ridicule with zealotry, because dialog simply isn't possible.

    I don't like zealotry, or, for that matter, fundamentalist religions, or true believers in urban myth. It seems to me that the challenge of living authentically in these times of feverish information overflow, is to insist on the core values of enlightened Western culture, a combination of basic Judaeo/Christian and English liberalism, without descending into any absolute. But on those annoying occasions when I'm mistaken for a conservative (I'm too idiosyncratic for any categorization, but more the oldest of old-style liberal than anything else), it's because I do share the same sense of embattlement with respect to these traditions. An insistence on the fundamental worth of all human beings, tolerance for others in the sense of letting them alone, a demand for equal treatment for everyone - this stuff began in churches like Wasillia and Trinity, not in faculty lounges or editorial offices. With few exceptions, the trendsetters all go over like ten pins when the bad times come and the winds change. If history is any gauge, they'd all be wearing armbands within a fortnight if a Fascist regime actually came to be. The only thing that never changes is the sneer.

    Finally, the bottom line in all this is that the Wasilla Assemby of God and the Trinity United Church have a great deal in common - most notably, an understanding of the limits of preacherspeak and a profound sense of alienation. One fine day, Sarah Palin, or her like, who knows those feelings, is going to stroll in the Trinity United Church, or the likes of Jeremiah   Wright will find his way to Wasilla - and then maybe, just maybe, we will experience the kind of bloodless revolution in which this nation has specialized since 1965 - a searching look at the power structures that dominate our legal, financial, political, and educational landscapes, maybe a scorching look at the massive accumulations of wealth and influence we have allowed to build up since the turn of the last century. My most fervent wish for my country is that that day is not too long in coming. 

The Notch Effect

    I have often used the 'belling the cat' metaphor as shorthand for the difference between high concept strategy (always extremely easy) and actual implementation (always extremely difficult). I'm way overdue for a concrete example. Given the current discussion about health care reform, the 'notch effect' is a good illustration.

    The notch effect bedevils social welfare schemes. I first learned the phrase in a book published by Daniel Patrick Moynihan in 1971, 'The Politics of A Guaranteed National Income'. It may be hard to believe post-Watergate, but the first Nixon Administration actually produced some innovative ideas. Many environmentalists would be astonished to learn that the EPA was founded then. Moynihan, the resident token Democrat intellectual in the Cabinet, attempted a massive overhaul of the welfare system, based on the notion of a guaranteed base income, which was borrowed from Milton Friedman's concept of a negative income tax. The reform failed completely, under merciless fire from both Left and Right. Moynihan wrote about the experience in the book I mentioned. Good reading, although the ordinary arithmetic (sic - not math) becomes mind bending within the first hundred pages. In any case, it was in that reading I became aware of the Notch Effect.

    Suppose you are a conscientious Out. You make sincere speeches to the effect that a nation that can create the Internet can provide decent education, housing, health care to all the uninsured Poor. Now, suddenly, you are an In, and you have to translate that goal into practice. How do you do so?

    I'll use 1970 type numbers for convenience. Who exactly are the Poor? You are a reformer, not a mad man, so you eliminate able bodied adults who can support themselves even if they choose not to. You restrict the definition to the disabled, and families with dependent children, with income of  less than $5,000, You structure a system of education, housing, and health benefits to remedy the effects of this poverty. Well and good.

    It is here that the notch effect shows up. When you set the poverty line at $5000 and provide substantial benefits for those below, you create a notch at that level. Someone who earns $4,999 a year receives benefits worth a several thousand dollars. However, if that someone works one more hour at the Burger King, and end up with $5,001, he or she gets nothing. A 2 dollar difference makes a (say) $5,000 difference. You unutterable fool. You are going to pin down the poor to permanent welfare dependency, unless the family (improbably) can leapfrog to an income position at which it can do without the subsidized benefits.

       That obviously won't do, so you are going to have to include some graduated scale according to which benefits are phased in, and then fazed out. Well and good, but your simple little system just went up several levels in complexity. (That's why the arithmetic in Moynihan's book began simple but became mind numbing).

    And of course, we are only thinking of income as a simple, one dimensional variable.  What about illegal and non cash income? Drug dealers? Madams? Applicants with huge undisclosed cash resources? That clearly won't do. You obviously can't effectively police this sort of fraud at the administrative level, but you can regulate against it and criminalize the receipt of benefits when such conduct is turned up by other police investigations? But that's a whole new set of regulations, and another layer of complexity.

    Are you talking about one income or two? The core issue of American social aid systems. Are you going to determine poverty on the basis of individual or family income? Individual? You fiscal idiot. By that measure, every minor child qualifies, no matter that his daddy's rich and his ma is good looking. You'll break the bank.

    Ok. so eliminate minor kids and determine their eligibility by reference to parent's income. Sorry, but you still have a problem. Every stay-at-home mom with a conniving soul has suddenly become eligible, no matter that her loyal husband is a rock star. You fiscally irresponsible rad-lib.

    Ok, so let's include the husband's income. WHAT????? You've just disincentivized and demoralized the most marginal fathers in society, if the benefits you are offering equal or exceed the income the father can provide.

    Ooooooooooookay . . .  why don't we include a 'presumptive minim income' from the father, regardless of actual earnings, so that he has no motive to leave? WHAT???? You heartless bastard. You are going to deny or limit benefits to needy families on the basis of PRESUMPTIVE income? Money that is non existent? Don't you know how difficult it is for a single mother of limited education actually enforce her rights?

    And on and on and on. What about parental support? What about families headed by single women with children of multiple fathers? And I am simplifying by treating housing and health as unitary variables. Easy enough with the basics, but what about the grey area? Take acne with adolescents. Maybe it's a single zit below the lip of an impossibly vain cheerleader, or maybe it's the kind of major disfigurement that turns a formerly well-adjusted child into a social misfit. How do you decide coverage? By pimple count?

    I have made (I hope) my point, without (I hope) insulting anyone's intelligence. The target here isn't anyone on the Left or Right. The target is empty sloganeering. For what it's worth, I think there's a moral imperative to assist the poor, and in such a way -  to the extent practicable - that they are not disempowered. (This is my version of belling the cat.) I think most Americans have exactly the same value. Persons who are skeptical about this program or that do not necessarily have different values. They may have a different view of just what the task of belling involves, and how well it will really work.

What Happened to the Family Farm

You have owned the family farm for a couple of generations. It has endured some hard times, but you endured. About 30 years ago, times got a little better. You could finally plant the crops you thought would do well, you did just that, and you made some money. Some of this gee-whiz computer stuff made your operation a little quicker, and you did much better. So did every one else.

So good that you relaxed. You started to spend more than you could sell the crops for. No problem, since the Great Bank of China (Warlords with a Heart!) was willing to loan you all you needed, and the market for the crops seemed unlimited. Then times got tough overseas, some of your workers went off to war, and you lost some ground there. You became a little lazy, and let a few of your seed fields go to flower. Not good - you'd gone from a pretty good manager to a lousy one.

But at least you knew this. You also knew you'd been there before and found a way out. Acts of mismanagement can be corrected by acts of good management. You deserved a good kick in the rear for all your complacency, but at least you had identified the problem. Nothing for it, but to solve it.

That is, until your youngest son came home and told you that he'd lost the deed to the farm in a poker game. That, you had not counted on. That knocked you for a loop.

 . . .

A little parable about the comparison between the problems with economic fundamentals in this society, and the disaster that has occurred in the financial institutions. I have been trying for two months now to get someone with more economic acument than I have - there are a ton of 'em - to tell me I'm wrong - but no one ever does. Meanwhile, I keep reading editorials deploring the management of Fannie Mae and Freddie Mac. It's true, of course, that they were mismanaged - but that's not why we're in this mess.

Fannie Mae and Freddie Mac are mortgage insurers. Their predecessors were founded during the New Deal to make home ownership possible to the middle class. After the Second World War, their ambit was vastly expanded to provide home ownership benefits for returning veterans.

The impact and importance of the program cannot be underestimated. Unless you are a very exceptional individual, you and every one you know owns a home based on a 15 or 30 year mortgage (and I am including ARM's, which in theory are amortized over that period.) It might surprise to you to know that that feature of the American middle class landscape is solely due to the creation of Federal mortgage insurance. In the 19th century and the first decades of the last, real estate mortgages were 5 year renewable notes. That's because lenders knew that collateral could lose value as well as gain, which was the case in the 19th Century. They would not loan on the collateral for longer than 60 months. (That's the reason you could have melodramas with Snidely Whiplash beasting about, threatening to foreclose on little Nell. He's not there because she missed a payment on a 30 year fully amortized note. He's there because the five years are up, the real estate market has changed, and the family farm is no longer adequate security.)

Fannie Mae changed all that by guaranteeing the mortgage so that the lender doesn't have to worry about collateral losing value. Nearly every middle class family in the US has benefited from that program. It was a valuable innovation, as important in its way as Federal deposit insurance. There would be very, very few families that would own homes did this institutional machinery not exist.

O.K. Bear with me. Sometime ten or 12 years, this mortgage insurance company began to lose its bearings. It encouraged lending that was too high risk and guaranteed the same. Its risk analysis was way, way off. No question that's bad. It's going to cause a real issue with the reserves that have to be allocated to pay off bad loans, etc. Like any other insurer, it's going to have to take stepso insure its liquidity and the adequacy of its cash reserves. BUT . . . . .

  . . . IT SHOULD NOT TRIGGER A GLOBAL BANKING CRISIS. The reason why all these financial institutions are in trouble is NOT the (still relatively low) level of foreclosures in the subprime market. It's that this home ownership was monetized, collaterized to a fare-thee-well, and traded between large institutions.

And why did this happen? What on earth is the point of monetizing and trading collaterized debt obligations? It bears absolutely no relation to the original point of Fannie Mae policy, which is to promote home ownership. It bears absolutely no relationship to the conventional creditor-debtor relation of bank and homeowner. It exists, so far as I know, only because the extremely sophisticated computer programs by which financial instruments are analyzed seduced financial managers of large institutions into believing they could make huge, 'safe' trading profits - and pay themselves huge bonuses accordingly. The market for these 'securities', if it can be called that, is entirely artificial. Traditionally, no one thought of home equity as a marketable security on which someone could make trading profits. There has never been a trading market for home mortgages.

Let me make the same point another way. Assume that me and a number of other men and women have bought term life insurance with a given company. That produces a cash flow of premiums, against which ultimately the company will have to pay certain cash sums, discounted over time. Assume that in some Alice-in-Wonderland world, the company, and others like it, are allowed to monetize the premiums, turning the cash flow into one large bond, and sell it. Assume further that the financial managers of the world have sophisticated analytical programs, with which they can analyze the actuarial assumptions of the company, compare them with others, and decide which of the life insurance bonds are irregular, i.e., the cash flow from the premiums is going to be a little more than necessary to pay off the contracted payouts, so the bond has economic value due to the projected surplus. Of course the differential is too small to make any significant trading profit - so it buys the bond at the insurance company par, leverages it thirty to one, and sells it at a premium based on the anticipated surplus - believing of course that the premium cash flow is absolutely safe.

(Does this seem like madness? In macro economic terms, it sure is. (Don't confuse this monetization with coinsurance, a type of risk sharing, which is another thing altogether.) The purpose of the term life insurance was to provide policy holders with protection against certain assumed risks. These policies aren't investment vehicles, and were never intended as such. The fact that you can ascertain a market irregularity with a variant of the Black-Scholes equation doesn't mean you have identified a marketable secutiry.)

If the insurance company has miscalculated its actuarial assumptions, it may run short of money to pay benefits and maintain reserves. That's serious, but correctable. You can raise premiums to new policy holders, and take various measures. But you are not going to collapse the banking system. That can only happen if you have monetized the premium flow, collaterized it to astronomical heights, and sold it highter and yon - insurance policies which were never meant to be traded, and for which there is no regular market. When the actuarial assumptions fail then, so does the colalterized bond, and the walls a'come a tumblin' down.

One final trope - if you're going to be stabbed by a knife, you'll do a lot better if you're fit, trim, with firm solid musculature, than you will if you're flabby and out of shape. (Note to me: stick to that New Year's resolution.) But the big problem is the knife wound, not the being out of shape.

Here's a link to a really good 12 minute 60 Minutes presentation on the same subject.

I close noting that all this is subject to correction. But I have yet to receive it. My tentative thought is that trading in this stuff is madness, and must be stopped or subjected to the strictest regulation.

A Reckoning for The Newspaper of Record

    I am of two minds about the New York Times. On the one hand, the existence of at least one newspaper with the resources and expertise to do in-depth reporting on complex current issues seems to be essential. Its current series on the financial crisis ("The Reckoning") is superb. On the other, the Times can degenerate into the crassest type of propaganda. Its columnists are bad enough - an incessant preaching to the choir, conducted at a deafening decibel level.

    But it is even worse when the propaganda comes disguised as 'objective' journalism. Its coverage of continuing news stories such as the Iraqi War and the recent Presidential campaign reflected an editorial bias that became downright embarrassing. This heart-before-head approach to factual stories damages the credibility of the institution as newspaper of record - a fact that may be reflected in its declining circulation and its financial difficulties.

    So a dose of reality may be a good idea for the paper itself. It is about to get two of them. First, it seems the Pulitzer Prize people are seriously considering revoking the Pulitzer Prize awarded to the dreadful Walter Duranty in 1932 for his coverage of the famine in the Ukraine. About time. Duranty is one of the most embarrassing figures in the history of the New York Times. Even more embarrassing is the fact that an entire series of editors never cottoned on to the fact that he was a propagandist, not a journalist. (The rumor is that the NKVD caught him in a honey trap and effectively dictated his stories.) To its credit, the story is carried by the Times itself.

    Even more interesting is the claim of slander filed by Vicki Iseman last Tuesday. Iseman was the lobbyist whom the Times linked to John McCain, in what was easily the most notorious and deplorable article of the Presidential campaign - a sewer of innuendo and speculation that would have been unworthy of the National Enquirer, let alone the newspaper of record. Ms. Iseman has her work cut out for her. To prevail, she has to either show negligence (if she is not a public figure) or malice (if she is) on the part of the Times. She can expect to meet a well-funded, determined resistance from the Times, aimed at ending the lawsuit with summary judgment, i.e., a decision by a judge that the case is without merit. If Ms. Iseman wins there, she can expect a generous settlement offer.

    But I sure hope that she wins the summary judgment and refuses the settlement offer.  My fondest hope is that the lawsuit does NOT resolve short of trial, and that the Times is forced to wash in open court all of the dirty linen that led to the publication of the article. I can't think of anything that would do it more good.

    I do believe that the editors of New York Times believe that credibility is theirs by divine right, a gift from a just and generous creator. Well, so did the FBI and the Office of the Presidency, once upon a time. Those institutions have both seen the implicit public trust that was once near absolute, damaged or destroyed by the abuse of the power with which they were entrusted. The same thing can happen - is happening - to the Times, as disbelieving as its principals might be. A chastening trip to the woodshed is long over due. 

 

What Happened to the Family Farm

You have owned the family farm for a couple of generations. It has endured some hard times, but you endured. About 30 years ago, times got a little better. You could finally plant the crops you thought would do well, you did just that, and you made some money. Some of this gee-whiz computer stuff made your operation a little quicker, and you did much better. So did every one else.

So good that you relaxed. You started to spend more than you could sell the crops for. No problem, since the Great Bank of China (Warlords with a Heart!) was willing to loan you all you needed, and the market for the crops seemed unlimited. Then times got tough overseas, some of your workers went off to war, and you lost some ground there. You became a little lazy, and let a few of your seed fields go to flower. Not good - you'd gone from a pretty good manager to a lousy one.

But at least you knew this. You also knew you'd been there before and found a way out. Acts of mismanagement can be corrected by acts of good management. You deserved a good kick in the rear for all your complacency, but at least you had identified the problem. Nothing for it, but to solve it.

That is, until your youngest son came home and told you that he'd lost the deed to the farm in a poker game. That, you had not counted on. That knocked you for a loop.

 . . .

A little parable about the comparison between the problems with economic fundamentals in this society, and the disaster that has occurred in the financial institutions. I have been trying for two months now to get someone with more economic acument than I have - there are a ton of 'em - to tell me I'm wrong - but no one ever does. Meanwhile, I keep reading editorials deploring the management of Fannie Mae and Freddie Mac. It's true, of course, that they were mismanaged - but that's not why we're in this mess.

Fannie Mae and Freddie Mac are mortgage insurers. Their predecessors were founded during the New Deal to make home ownership possible to the middle class. After the Second World War, their ambit was vastly expanded to provide home ownership benefits for returning veterans.

The impact and importance of the program cannot be underestimated. Unless you are a very exceptional individual, you and every one you know owns a home based on a 15 or 30 year mortgage (and I am including ARM's, which in theory are amortized over that period.) It might surprise to you to know that that feature of the American middle class landscape is solely due to the creation of Federal mortgage insurance. In the 19th century and the first decades of the last, real estate mortgages were 5 year renewable notes. That's because lenders knew that collateral could lose value as well as gain, which was the case in the 19th Century. They would not loan on the collateral for longer than 60 months. (That's the reason you could have melodramas with Snidely Whiplash beasting about, threatening to foreclose on little Nell. He's not there because she missed a payment on a 30 year fully amortized note. He's there because the five years are up, the real estate market has changed, and the family farm is no longer adequate security.)

Fannie Mae changed all that by guaranteeing the mortgage so that the lender doesn't have to worry about collateral losing value. Nearly every middle class family in the US has benefited from that program. It was a valuable innovation, as important in its way as Federal deposit insurance. There would be very, very few families that would own homes did this institutional machinery not exist.

O.K. Bear with me. Sometime ten or 12 years, this mortgage insurance company began to lose its bearings. It encouraged lending that was too high risk and guaranteed the same. Its risk analysis was way, way off. No question that's bad. It's going to cause a real issue with the reserves that have to be allocated to pay off bad loans, etc. Like any other insurer, it's going to have to take stepso insure its liquidity and the adequacy of its cash reserves. BUT . . . . .

  . . . IT SHOULD NOT TRIGGER A GLOBAL BANKING CRISIS. The reason why all these financial institutions are in trouble is NOT the (still relatively low) level of foreclosures in the subprime market. It's that this home ownership was monetized, collaterized to a fare-thee-well, and traded between large institutions.

And why did this happen? What on earth is the point of monetizing and trading collaterized debt obligations? It bears absolutely no relation to the original point of Fannie Mae policy, which is to promote home ownership. It bears absolutely no relationship to the conventional creditor-debtor relation of bank and homeowner. It exists, so far as I know, only because the extremely sophisticated computer programs by which financial instruments are analyzed seduced financial managers of large institutions into believing they could make huge, 'safe' trading profits - and pay themselves huge bonuses accordingly. The market for these 'securities', if it can be called that, is entirely artificial. Traditionally, no one thought of home equity as a marketable security on which someone could make trading profits. There has never been a trading market for home mortgages.

Let me make the same point another way. Assume that me and a number of other men and women have bought term life insurance with a given company. That produces a cash flow of premiums, against which ultimately the company will have to pay certain cash sums, discounted over time. Assume that in some Alice-in-Wonderland world, the company, and others like it, are allowed to monetize the premiums, turning the cash flow into one large bond, and sell it. Assume further that the financial managers of the world have sophisticated analytical programs, with which they can analyze the actuarial assumptions of the company, compare them with others, and decide which of the life insurance bonds are irregular, i.e., the cash flow from the premiums is going to be a little more than necessary to pay off the contracted payouts, so the bond has economic value due to the projected surplus. Of course the differential is too small to make any significant trading profit - so it buys the bond at the insurance company par, leverages it thirty to one, and sells it at a premium based on the anticipated surplus - believing of course that the premium cash flow is absolutely safe.

(Does this seem like madness? In macro economic terms, it sure is. (Don't confuse this monetization with coinsurance, a type of risk sharing, which is another thing altogether.) The purpose of the term life insurance was to provide policy holders with protection against certain assumed risks. These policies aren't investment vehicles, and were never intended as such. The fact that you can ascertain a market irregularity with a variant of the Black-Scholes equation doesn't mean you have identified a marketable secutiry.)

If the insurance company has miscalculated its actuarial assumptions, it may run short of money to pay benefits and maintain reserves. That's serious, but correctable. You can raise premiums to new policy holders, and take various measures. But you are not going to collapse the banking system. That can only happen if you have monetized the premium flow, collaterized it to astronomical heights, and sold it highter and yon - insurance policies which were never meant to be traded, and for which there is no regular market. When the actuarial assumptions fail then, so does the colalterized bond, and the walls a'come a tumblin' down.

One final trope - if you're going to be stabbed by a knife, you'll do a lot better if you're fit, trim, with firm solid musculature, than you will if you're flabby and out of shape. (Note to me: stick to that New Year's resolution.) But the big problem is the knife wound, not the being out of shape.

Here's a link to a really good 12 minute 60 Minutes presentation on the same subject.

I close noting that all this is subject to correction. But I have yet to receive it. My tentative thought is that trading in this stuff is madness, and must be stopped or subjected to the strictest regulation.