It doesn't matter where his supporters go, it still hurts Obama.

By withdrawing from the race, Edwards changes the dynamic in Congressional Districts with odd numbers of delegates. It used to be that just about wherever he cracked 15%, Hillary and Obama would split the same number of delegates (1-1, 2-2, etc.) and Edwards would walk away with a single delegate. Now, in an odd numbered district, the winner will always take more delegates.

So do the math. Edwards is most likely to crack 15% in heavily-white, largely poor areas. Who gains a delegate there? He was least likely to draw threshold support in heavily-black areas. So who does his withdrawal fail to benefit?

I wish it were otherwise. But the bottom line is that 15% of the vote for Edwards almost always helped Obama more than adding that same 15% of the vote to his own tally.

Posted at January 30, 2008 7:17 AM in response to Edwards Dropping Out Discussion

Actually, Brad is closer to the mark than Nathan here. A presidential campaign is a terrible place to offer detailed policy prescriptions - it rarely allows for nuanced debate, and for most policies, the devil is in the details. And I disagree that Obama has failed to finger the sources of our current discontent; his campaign is built upon a critique of the status quo.

But it's not a populist campaign. It doesn't pit the people against the powerful, the workers against the capitalists. And that would seem to be both the source of its broad appeal and of Nathan's own discontent.

Nathan's also wrong about what it takes to realign an electorate. For the most part, the first vote we cast helps to determine the rest of the votes we'll make throughout our entire lives. That's depressing, but true. If Obama continues to draw young, first-time voters to the polls in unprecedented numbers, as he did in Iowa, that will make a major difference on the American political scene for decades to come. An entire generation, firmly in the Democratic column. Irrespective, I might add, of why they've voted as they have.

Posted at January 4, 2008 7:25 AM in response to Obama Delivers on the Ground

My apologies. I leaped without looking. Even a cursory review of the literature would have shown that you have, in fact, played the role of Cassandra over the past five years. Thanks for your continued efforts to draw attention to the problem.

Posted at June 29, 2007 8:08 AM in response to Deflating the Housing Bubble

Ellen,

I'm all for assigning responsibility to consumers. But when you see interviews with people who took out a larger mortgage than they could actually afford, they generally offer some version of: it was complicated, but I assumed they wouldn't make the loan if I couldn't pay it.

That's actually a fairly compelling argument. Consumers rely on three safeguards. They assume government regulators weed out dishonest lenders. They assume that the banks have a vested interest in only lending to people who can pay back loans. And they assume that the broker has their best interest at heart.

Alas, regulators have been remiss in failing to effectively police the marketplace. Banks, until very recently, really did strive to make only reasonable loans - but CDOs have changed the structural incentives. And, perhaps most crucially, brokers have no obligation to serve the interests of their clients. That sets them apart from virtually every other licensed profession. Ordinarily, if you pay a fee to a professional, you can safely assume that they're obligated to work on your behalf. Most brokers present themselves that way. But in fact, brokers have every incentive to make their commission by selling you a loan, and face no sanction for making irresponsible loans.

If the housing market is going to rely on the ability of consumers to understand the 20 pages of convoluted legalese that constitutes most mortgage contracts, we're in a lot of trouble. But if we ask consumers to exercise a degree of caution, and then change the structure of incentives so that banks and brokers aren't trying to sell them products they shouldn't be buying, there's hope.

Posted at June 28, 2007 6:13 PM in response to Deflating the Housing Bubble

Wow. That's a whole lot of jargon without a great deal of common sense. Of course interest rates matter in driving up the cost of housing, because they lower the effective monthly price. So the Fed, I'll acknowledge, has a role. But my point is that it is, at best, secondary to the failures of regulatory agencies.

You posit that low interest rates "encourage people to sign a mortgage for an amount larger than they ought to chance." That's simply absurd. Consumers sign loans they can't afford because they make unreasonable assumptions about future income or appreciation, not because interest rates are low. The problem with the lending marketplace is that the institutions that approve the loans, the banks that repackage them, and the hedge fund managers who buy them are all playing with other people's money. Moreover, no one, at the moment, has a legal obligation to look out for the interest of the consumer. That's really easy to fix. In fact, word broke this evening that the five federal regulatory agencies responsible for housing will, for the first time, force lenders to weigh the "borrower's ability to repay the debt by its final maturity at the fully indexed rate." They'll also require some actual documentation of income. Those are simple changes that have nothing - nada - to do with interest, yet are likely to have a greater impact on the housing marketplace than any rate hike.

The bottom line is remarkably simple. Consumers trusted their brokers, who sold them loans that they couldn't afford. For a while, rising prices bailed them out. That's ended. The solution? Require brokers to take into account the ability of their clients to repay the loans they sell. Now why wasn't that done twenty years ago?

Posted at June 28, 2007 4:22 PM in response to Deflating the Housing Bubble

You provide a good snapshot of the present state of the real estate market, and a reasonable prognosis of what's to come, but your analysis is cursory at best, and seems disconnected from what precedes it. The Fed may be a convenient target, but it actually has relatively little responsibility for what happens in the real estate market.

There are two interrelated phenomenon that combined to produce the present bubble. The first is the cyclical nature of the real estate market. It booms and it busts, as it has for centuries. The second is the radical expansion of consumer credit that we've witnessed over the past two decades. That expansion served to fuel a larger-than-normal boom; we're still plunging downward into the corresponding bust.

In theory, broader access to the housing market is part of the liberal creed of equal opportunity. It's worth noting that the political left was (at least) as responsible as the right for aiding and abbetting the credit revolution. The problem was the creation of a marketplace that allowed lenders to extend ill-advised loans, bundle them, and sell them off to investors. While the market boomed, it all worked splendidly. Consumers who ran into trouble could always take out a subprime home equity loan to extract cash from their home, or if they need to, sell it for a profit. When the rate of increase began to slow, however, problems emerged. Consumers awakened to find themselves with loans that they couldn't afford, which were not infrequently worth more than the equity they retained in the property. They began to default. Most lenders didn't mind - they'd passed the bag to investors in CDOs. And where had the money come from to purchase these pools of risk? Why, from the burgeoning (and largely unregulated) world of hedge funds. And who were their investors? Institutions. That is, increasingly, pension funds. Of course, not all loans were sold into this private marketplace. Those extended to many of the poorest households were federally subsidized, in a program enthusiastically backed by the Dems. Secure in the knowledge that the government was assuming the risk, builders inflated the prices of their poorly built homes and assured consumers that appreciation would cover the cost, then signed them up for federally-guaranteed loans. That's the Beazer fraud case to which you alluded.

To sum up, this crisis wasn't caused by loose monetary policy, but by negligent regulators. The result is perverse - the very working Americans who were supposed to benefit from expanded credit are now being turned out of their homes, and soon they'll take a second hit as their pension funds or their government absorbs the losses.

You want to blame someone? The first place to look is the Office of the Comptroller of the Currency, and to a lesser extent, the Office of Thrift Supervision. These obscure regulatory agencies were asleep at the switch, and failed to set and enforce effective guidelines to protect consumers of loans. But there's plenty of blame to go around. When the executive branch failed to exercise its discretionary powers appropriately, Congress should have mandated action, updating antiquated laws to address the host of innovative financial products that have entered the marketplace over the past two decades. State legislatures should have stepped in to fill the federal void. And, let's be blunt - consumers should have exercised greater caution.

But the buck stops here. Too many of us, myself included, applauded expanding home ownership. Where were you, Mr. Baker, when record numbers of working Americans purchased their first homes during the past two decades? It all seemed great. But in the euphoria, I failed to pay enough attention to the easy credit that was fueling the boom. With better regulation, we could have had (much) of the benefit without (much) of the loss. Hopefully, we'll learn that lesson before the next boom.

Posted at June 28, 2007 3:12 PM in response to Deflating the Housing Bubble

I want to revisit the topic of the smoking ban, if I may. I'll confess to being somewhat irked at the backhanded concession that "perhaps" I'm right about the smoking ban.

The NYC Health Department (DOHMH) published a new study of smoking in the city this morning. According to the CDC, smoking nationwide has dropped from 22.5% in 2002 to 20.9% in 2006. That’s a 7% drop. Since 2002, New York City has seen a 19% drop, representing some 200,000 smokers. Epidemiology is an imprecise science, but using the CDC’s figures, that works out to some 50,500 fewer smoking-related deaths among residents of New York City than might otherwise have been expected. That reduction appears to be the result of several interlocking initiatives, including an advertising blitz and a workplace-smoking ban - and these numbers don't even count the exposure to second-hand smoke, which was the whole point of the ban.

At the time it was proposed, only California and Delaware had similar statewide bans, along with just 72 municipalities nationwide. Voters in the city supported the ban by a margin of roughly 2-1; but it was mostly smokers who felt that the issue might determine their votes, and they opposed it by a similar margin. That translated into a bitter pill for any politician to swallow. After the ban was passed, Bloomberg's approval ratings fell sharply, bottoming out at 31%. The New York Post ran a famous cover with a bar graph made of cigarette butts to illustrate the percipitous drop. (I should also note that an early property tax increase contributed to his early unpopularity; Bloomberg was determined to close the deficits that Giuliani had opened.)

He took risks to do what he felt was right, and some of them paid off. Tens of thousands of people will live longer because of that. I sure as hell think that's a substantive accomplishment. If it's not, I would challenge you to suggest something any politician has done that is more substantive.

As I wrote before, I'm profoundly disturbed by the prospect of a candidate self-funding a run at the presidency, and worried that his headstrong self-righteousness will tend to insulate him from public concerns. He's not a man I intend to vote for. But he's not a hack, and he's not just a creature of his circumstances. Writing him off as such is a dangerous mistake.

Posted at June 22, 2007 8:09 AM in response to The Bloomberg Bubble

What I meant (and clearly failed to express) was that Bloomberg's wealth and arrogance buffer him from the normal checks and balances of the democratic process. When he's right about something, that can be a terrific asset - he can afford to buck committed opposition in pursuit of his ideas. When he's wrong, it can be one hell of a liability. And on occasion, his approach succeeds in sinking what might otherwise have been a viable proposal, because he aliienates potential allies.
The point is that this accounts both for his popularity - voters love a politician who doesn't govern by the polls or defer to interest groups - and for some of his greatest blunders. Frankly, it frightens me. I happen to think elected officials ought to be responsive to the publics that elect them. But either way, it suggests that Bloomberg's brand of 'straight talk' may strike a chord with that sizable slice of the electorate that cottoned to Ross Perot (who had no more charisma that Bloomberg) and to John McCain. It's not just that he's rich; it's that his wealth makes him a maverick.

Posted at June 21, 2007 3:34 AM in response to The Bloomberg Bubble

Ed,

I'm no Bloomberg fan, but even I think you're being a little unfair. I take your central point that there's remarkably little any New York City mayor can do to affect the national economic trends that tend to determine the city's relative prosperity. And to be sure, Bloomberg's public and private largesse has pleased a large number of New Yorkers.
But the real hallmark of his tenure in office has been his technocratic approach. I don't think it was coincidental that he made this announcement the day before a press conference scheduled to highlight 311, the emblem of his administration. He has succeeded in pursuing, over the howls of entrenched interests, a series of initiatives that have led to more effective governance in a notoriously unmanageable city. That, I think, is what New Yorkers respect - his fierce independence, and his willingness to do what he feels is right with little regard for the consequences.
At its best, that impulse has yielded spectacular dividends. The smoking ban saved thousands of lives and, confounding its critics, actually led to an increase in business for bars and restaurants. Everyone knew it was right, but no one else had the guts to do it. At its worst, that impulse can lead Bloomberg to override the reasonable concerns and objections of experts and interest groups. The 2012 Olympics bid is the poster child for this extreme - a plan that might have succeeded had he built coalitions and moved venues to the outer buroughs. Its defeat was fortuitous for the city; despite Bloomberg's claims at the time, the far West Side is now being developed even without the games, the infrastructure is getting built, and all without giving away vital assets or saddlign the city with enormous debts.

I'll leave you to sort out the implications of his candidacy for the electoral field. But I'd urge you to take the man seriously - there's more to him than his wallet, for better and for worse.

Posted at June 20, 2007 6:56 PM in response to The Bloomberg Bubble