Clive Crook

Jonathan Chait's essay, When did liberals become so unreasonable?, is a brilliant piece of work. He argues that if liberals were to judge Obama by any intelligent standard--comparing him with the Republican alternatives, or with previous Democratic presidents--they would surely be impressed. Healthcare reform, financial regulation, the stimulus: by progressive lights, these are notable, even historic, achievements. But American liberals seem congenitally unable to apply such a standard.

Liberals are dissatisfied with Obama because liberals, on the whole, are incapable of feeling satisfied with a Democratic president. They can be happy with the idea of a Democratic president--indeed, dancing-in-the-streets delirious--but not with the real thing. The various theories of disconsolate liberals all suffer from a failure to compare Obama with any plausible baseline. Instead they compare Obama with an imaginary president--either an imaginary Obama or a fantasy version of a past president.

Chait traces the history of this syndrome at some length. The article is a compelling read, and I think on most points correct--though I have a couple of questions and quibbles.

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This week's issue of The Economist has a wonderful pair of articles on migration: The magic of diasporas and Weaving the world together. They urge you to look at migration and globalization as though people, as well as states, mattered. This change of perspective is something of a revelation.

Consider the difference between China and the Chinese people. One is an enormous country in Asia. The other is a nation that spans the planet. More Chinese people live outside mainland China than French people live in France, with some to be found in almost every country. Then there are some 22m ethnic Indians scattered across every continent (the third Indian base in Antarctica will open next year). Hundreds of smaller diasporas knit together far-flung lands: the Lebanese in west Africa and Latin America, the Japanese in Brazil and Peru, the smiling Mormons who knock on your door wherever you live.

Diasporas have been a part of the world for millennia. Today two changes are making them matter much more. First, they are far bigger than they were. The world has some 215m first-generation migrants, 40% more than in 1990. If migrants were a nation, they would be the world's fifth-largest, a bit more numerous than Brazilians, a little less so than Indonesians.

Second, thanks to cheap flights and communications, people can now stay in touch with the places they came from. A century ago, a migrant might board a ship, sail to America and never see his friends or family again. Today, he texts his mother while still waiting to clear customs. He can wire her money in minutes. He can follow news from his hometown on his laptop. He can fly home regularly to visit relatives or invest his earnings in a new business.

Such migrants do not merely benefit from all the new channels for communication that technology provides; they allow this technology to come into its own, fulfilling its potential to link the world together in a way that it never could if everyone stayed put behind the lines on maps. No other social networks offer the same global reach--or commercial opportunity.

Read on: it's fascinating stuff (and beautifully written too). The Economist's website has an interview with Robert Guest, the author. The articles draw on his new book, Borderless Economics: Chinese Sea Turtles, Indian Fridges and the New Fruits of Global Capitalism, which I immediately downloaded and will now get back to.

I've written another column about Europe for Bloomberg: To Put Europe Back on Track Try Listening to Voters.

Questions of sovereignty in the EU have moved from the theoretical realm to the street. People in Greece and other distressed countries are asking by what right foreign governments are demanding higher taxes, stripped-down public services and lower living standards. The current financial emergency isn't just a sovereign-debt crisis but also an EU constitutional crisis.

You see the problem. At a time when many of Europe's voters are blaming EU institutions -- and the euro in particular -- for their economic plight, they are unlikely to welcome a further transfer of political power from national capitals to the center. They think that this shift has already gone too far and needs to be reversed. Yet some further surrender of fiscal sovereignty must be part of any long-term plan to mend the euro system.

The problem is real, but not as insoluble as you might think. Curbs on public borrowing, as long as the issue of short- term flexibility can be dealt with, infringe on fiscal sovereignty in a relatively benign way...

Nonetheless, popular concerns about the drift of political power from Europe's nations to the EU's center are well-founded. New demands for central supervision must therefore be combined with a reversal of centrism in other areas. From now on, Europe should ask governments to surrender sovereignty only when strictly necessary. Starting now, voters must be talked to and heeded. Where integration has gone further than is necessary or wanted by voters, it should be rolled back.

You might say this is little to ask. In fact it will represent a wholly new approach.

My previous column argued among other things that an orderly dismantling of the eurozone was almost impossible to imagine. A reader referred me to an article in the FT that I had missed which develops this point at greater length: Greek default within the euro is the only real option. It's by Robert Jenkins, an external member of the Bank of England's financial policy committee (writing in a personal capacity). Those who think it's time to start thinning out the eurozone should read it. Jenkins describes a six-step process. The last step is this:

6. Bank lending across the EU ceases. Economic activity halts.

 

A belated word of congratulations to the joint winners of this year's Bastiat Prize, both of them current or one-time colleagues of mine: Tom Easton of The Economist and Virginia Postrel of Bloomberg View.

Easton's winning pieces were on China's entrepreneurs.

[The West] should...celebrate bamboo capitalism more broadly. Too many people--not just third-world dictators but Western business tycoons--have fallen for the Beijing consensus, the idea that state-directed capitalism and tight political control are the elixir of growth. In fact China has surged forward mainly where the state has stood back. "Capitalism with Chinese characteristics" works because of the capitalism, not the characteristics.

Postrel won for several columns, including one about the ban on incandescent light bulbs. Did I say ban? I meant new energy standard.

Strictly speaking, it's...true that the rules are neither mandates nor bans. They're standards: We don't tell you how to reduce the amount of energy your light bulb consumes. We just tell you that it can't use more than a certain amount.

It's as though, to spur innovation and encourage Americans to lose weight, Washington had decreed that no beer shall contain more than 8 calories an ounce. That wouldn't technically be a ban on traditional brews, but nobody but a pedant or a flack would call it anything else...

Stocks of incandescents may be running low, but pedants and flacks are always in ample supply. Postrel concludes:

The bulb ban makes sense only one of two ways: either as an expression of cultural sanctimony, with a little technophilia thrown in for added glamour, or as a roundabout way to transfer wealth from the general public to the few businesses with the know-how to produce the light bulbs consumers don't really want to buy.

Or, of course, as both.

Bastiat, the 19th century classical liberal for whom the prize is named, was famously interested in lighting. If you are unfamiliar with his candlemakers' petition, shame on you.

We ask you to be so good as to pass a law requiring the closing of all windows, dormers, skylights, inside and outside shutters, curtains, casements, bull's-eyes, deadlights, and blinds -- in short, all openings, holes, chinks, and fissures through which the light of the sun is wont to enter houses, to the detriment of the fair industries with which, we are proud to say, we have endowed the country, a country that cannot, without betraying ingratitude, abandon us today to so unequal a combat.

Some things never change. Easton and Postrel are worthy winners, I'd say.

Matt Miller makes some excellent points in his health-care brief for Supreme Court. I especially liked this one:

Consider Switzerland's model. The journal Health Affairs asked former Swiss health minister Thomas Zeltner why his country's individual mandate was acceptable to a nation known for ardently defending personal freedom. "That's easy," Zeltner replied. "We will not let people suffer and die when they need health care. The Swiss believe that in return, individuals owe it to society to provide ahead of time for their health care when they fall seriously ill. At that point, they may not have enough money to pay for it. So we consider the health insurance mandate to be a form of socially responsible civic conduct. In Switzerland, 'individual freedom' does not mean that you should be free to live irresponsibly and freeload from others."

This is how Republican reformers talked before Obama endorsed the idea.

Indeed.

Much as I agree with Miller on this subject, I would be even more pleased to find somebody else who believes, as I do, that Obamacare, for all its faults, is (a) a brave and worthwhile reform, far better than doing nothing, and right to include an individual mandate; and (b) unconstitutional (for the reason adduced by the 11th Circuit Court of Appeals: "The individual mandate as written cannot be supported by the tax power"). Perhaps I'm repeating myself, but isn't it strange that everybody who thinks Obamacare is good policy is sure the reform is constitutional, and everybody who thinks it's bad policy is sure it isn't? If you aren't puzzled by that, I think you should be.

Miller resolves the issue by telling the Court, in effect, "We all know the Constitution, as written, is a nullity. Forget what it says, it's what you tell us it is. Here's a good policy. That's all you need to know. Let it stand." Well, all right, but then why have a constitution with enumerated federal powers and a Court to adjudicate the law in the first place? The Supreme Court becomes the unelected Supreme Leadership Council. If they like a policy, it stands; otherwise, it doesn't.

You might wonder what I would recommend policy-wise, given (a) and (b). Obviously, make the "penalty" an explicit tax. Thus, the reform is constitutional. This could have been done in the first place, of course--except that it would have meant a tax increase...

Starting this week I'll be writing a column for Bloomberg View. I'll be ranging more widely than US politics, my terrain of late. My first article is on the euro:

One thing nobody can say about the euro-region crackup: We never saw this coming. We saw it coming, all right. Europe's currency area is falling apart at the very fault lines skeptics described in detail when the plan was still just a plan.

Sovereign-debt crises in peripheral countries? Collapsing governance in Italy? German intransigence on "sound money" and the role of the European Central Bank? Color me amazed...

My main point, though, is this: although the skeptics have been proved right, and we have learned that the design of the euro system was deeply flawed, trying to dismantle it now, or allowing it to collapse, would be an even bigger mistake. The system has to be made to work.

Daniel Gros at Vox:

As Italy's debt crisis enters the danger zone the question arises: Can Italy ever overcome its decade-old growth slump? This column shows that Italy's growth fundamentals are all in pretty good shape, except one - good governance. [The World Bank's] Worldwide Governance Indicators show a dramatic worsening during the Berlusconi governments especially when it comes to the rule of law, government effectiveness, and control of corruption. Progress on improving these might in the end be more important for growth than the reforms the EU demands.

Gros points out that Italy now ranks lower on quality of governance than any other eurozone country, including Greece.

James Hamilton provides a typically crisp, clear overview of the administration's new plan to promote mortgage refinancings. The scheme's main innovation is to remove obstacles to refinancing for underwater borrowers so long as they are up to date on payments. Like other analysts (see Calculated Risk), Hamilton concludes that the plan is helpful, as far as it goes.

My conclusion is that the direct consequences of the proposal potentially may entail a modest adverse budget impact, but that indirect benefits to the overall economy and perhaps even to the Treasury as well outweigh these. The proposed modification of HARP looks to me like a reasonable plan.

(One of Hamilton's commenters references a CBO working paper which goes through the arithmetic of a generic refinancing plan in detail. Worth reading.)

I agree with Hamilton's assessment. I only wonder, since the issues are straightforward and the execution not that complicated, what took the administration so long?

The new HARP is good in its own right. The problem is that its reach is limited. The economy needs principal reduction as well as refinancings, and support needs to find borrowers who have fallen behind in making their payments--the ones at imminent risk of adding to the foreclosure overhang--as well as those who are current. On fairness and moral hazard grounds, there needs to be a quid pro quo for principal reduction (equity transfer is one possibility) and this makes wider intervention more complicated. The upfront taxpayer cost will be much bigger too. But repairing the housing market--and hence the wider economy--will take far longer without it.

The Fed should target nominal GDP not inflation, argues Christy Romer in the NYT. I agree with her, for reasons I argued here.

There are two parts to this, and one is more troublesome than the other. The simpler part is that the Fed can influence changes in NGDP--the money value of output, or "demand"--more directly than it can influence inflation. The Fed has no control over the way a change in demand divides between higher real output and higher prices. Therefore, it should not be held accountable for the split. But it can and should be held accountable for how the combination of the two--NGDP--evolves.

The trickier question is whether to express the target as an annual rate of change or as a medium-term path. This choice, by the way, has to be made whether you target NGDP or prices. Setting the target as a path aims in effect to claw back some of the fall in demand--or deviation in the track of prices, as the case may be--which happens during a recession. The Fed strives to get NGDP back to where it would have been if the recession had never happened.

The key thing is that with a target expressed as a path, NGDP would need to grow faster than normal during a period of catch-up following a recession. Setting the target as an annual growth rate, with no allowance for the shortfall just experienced, would fold the recession-induced decline in NGDP into a new baseline.  

Romer argues for a target path. I agree, because the policy should allow for some catch-up. However, advocates have to admit that this complicates things. A deep and long recession may undermine the economy's long-term capacity. Getting back on the pre-recession track may be difficult or even impossible--and trying to do so regardless would be inflationary.

In practice, therefore, discretion re-enters. The target path will sometimes need adjustment. This makes it harder for the Fed to explain what it is up to, and lessens the presentation-and-accountability benefits of switching to an NGDP regime. It's another way of saying: however you do it, monetary policy cannot be mechanical. But it can be improved, and a switch to NGDP would help. That point stands.

Keeping Paul Krugman's strictures on the separation of advocacy and activism carefully in mind, I dropped by Zuccotti Park last week. People seemed to be having a good time. David Rushkoff, an admirer of the movement, described the mood pretty well:

[U]nlike a traditional protest, which identifies the enemy and fights for a particular solution, Occupy Wall Street just sits there talking with itself, debating its own worth, recognizing its internal inconsistencies and then continuing on as if this were some sort of new normal. It models a new collectivism, picking up on the sustainable protest village of the movement's Egyptian counterparts, with food, first aid, and a library.

What more do you need, really? Society as a sustainable protest village. With food, first aid and books sourced from other sustainable protest villages. The idea, according to the Chronicle of Higher education, has deep intellectual roots:

Occupy Wall Street's most defining characteristics--its decentralized nature and its intensive process of participatory, consensus-based decision-making--are rooted in other precincts of academe and activism: in the scholarship of anarchism and, specifically, in an ethnography of central Madagascar.

It was on this island nation off the coast of Africa that David Graeber, one of the movement's early organizers, who has been called one of its main intellectual sources, spent 20 months between 1989 and 1991. He studied the people of Betafo, a community of descendants of nobles and of slaves, for his 2007 book, Lost People.

Betafo was "a place where the state picked up stakes and left," says Mr. Graeber, an ethnographer, anarchist, and reader in anthropology at the University of London's Goldsmiths campus.

In Betafo he observed what he called "consensus decision-making," where residents made choices in a direct, decentralized way, not through the apparatus of the state. "Basically, people were managing their own affairs autonomously," he says.

The process is what scholars of anarchism call "direct action." For example, instead of petitioning the government to build a well, members of a community might simply build it themselves. It is an example of anarchism's philosophy, or what Mr. Graeber describes as "democracy without a government."

I wonder if there are limits to what local communities can "simply" decide to do--we're OK for wells where I live--but you see the point. BusinessWeek has a longer profile of Graeber, and says a little more about the Betafo model.

Because of spending cuts mandated by the International Monetary Fund--the sort of structural-adjustment policies Graeber would later protest--the central government had abandoned the area, leaving the inhabitants to fend for themselves. They did, creating an egalitarian society where 10,000 people made decisions more or less by consensus. When necessary, criminal justice was carried out by a mob, but even there a particular sort of consensus pertained: a lynching required permission from the accused's parents.

No plea bargains?

As I write, Europe's leaders are still meeting in Brussels, wrestling for the nth time with a debt-restructuring scheme for Greece and, much more important, a plan to address the wider European sovereign-debt crisis. It is important to understand that these are very different issues.

If the Greek state is insolvent (admittedly, not everybody thinks it is), then dealing with its debts is a question of apportioning unavoidable losses among creditors and taxpayers (domestic and EU-wide). Obviously, in political terms, that is an extremely difficult task. But states such as Italy and Spain, to say nothing of EU governments as a group, are plainly solvent (for now). In their case, the question of apportioning losses need not arise if the crisis of confidence can be arrested--and it could be, rather easily, if only EU governments would stop deluding themselves.

The WSJ reports:

The [EU leaders'] summit follows a vote in the German parliament, which approved further changes to the role of the European Financial Stability Facility, the euro zone's rescue fund, but sought to limit the European Central Bank's role in bailout policies, including ending its purchases of euro-zone bonds of troubled member nations once the EFSF is in place.

German Chancellor Angela Merkel said in an address to the parliament that governments must ensure that the debt crisis doesn't spread from Greece to other countries.

Interesting, because limiting the role of the ECB as a buyer of eurozone bonds is a good way to ensure that the crisis does spread from Greece to other countries.

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The other day I commented on Herman's Cain's 9-9-9 plan, which turns out on closer analysis to be three VATs for the price of one. Replacing taxes on incomes and profits with a national sales tax, which is what Cain appears to be proposing, would indeed be simple--but not if you collected it in three tranches, each with its own tax-gathering apparatus and associated complexities.

Now, in something of the same spirit, the US is offered the alternative simplicity of the Perry flat tax.

This simple 20% flat tax will allow Americans to file their taxes on a postcard, saving up to $483 billion in compliance costs. By eliminating the dozens of carve-outs that make the current code so incomprehensible, we will renew incentives for entrepreneurial risk-taking and investment that creates jobs, inspires Americans to work hard and forms the foundation of a strong economy.

I note in passing that Perry's flat tax is not flat. (For families earning less than $500,000, he says, exemptions for mortgage interest and state and local taxes would remain. Effective tax rates would therefore vary according to circumstances. Also, the marginal rate would spike in some range of incomes above $500,000 as the exemptions were denied, then fall back at higher levels of income.) I also note in passing that this tax, at the rate indicated, has no chance of raising the 18% of national income that Perry intends to spend, or anything close to that. But for the moment I'm concentrating on the Republicans' difficulty with the concept of simplicity.

The comical thing is that this new tax would be voluntary: taxpayers could choose to be taxed under the existing code if they preferred. This is simpler? To know which code saves you money, you would obviously have to calculate your taxes under both systems. You or your adviser would still have to comprehend the "carve-outs that make the current code so incomprehensible". Maybe if you opted for the Perry tax you would be able to file on a postcard--but before making that choice you'd need to do your taxes the old way first. Thanks for nothing.

In future, I dare say, taxpayers could look forward to even greater complexity, as Congress tinkered with not one but two tax codes. In the fullness of time, to relieve the added burden, a new measure could be introduced: an even simpler Very Flat Tax, also voluntary, allowing taxpayers to choose from three codes, with the option for qualifying households of filing by tweet. Think of the compliance savings.

Ken Rogoff gives an excellent interview to the McKinsey Quarterly. I wasn't surprised by his emphasis on the housing market.

The Quarterly: Is there any way to accelerate our pullout from this contraction?

Rogoff: ... [U]nfortunately, there is no easy out. Perhaps the best chance would be to find a way to get ahead of the mortgage defaults--that is, to have restructurings and debt forgiveness, albeit with some kind of quid pro quo. That is very hard to do. But if there were a way to write down and forgive some of the mortgage debt, that would be money well spent. In ten years, we will probably end up forgiving a big chunk of it. As Carmen [Reinhart] has noted, this is a little like Third World debt that was carried on the books forever, even though it was a joke...

Beyond that, we need to think about long-run structural reform. Most financial crises have at their root very, very high leverage. To hit the nail on the head, I think we have to do something about the prevalence of nonindexed debt instruments. I would start with changing our corporate-tax law and any overt incentives that favor debt. Obviously, the US home mortgage tax deduction makes no sense, given the risk that debt entails. I understand the political imperative, but let's not subsidize debt in an overt way. I think public-finance experts need to methodically go through the system and strip debt subsidies out.

Alan Blinder's new column in the Wall Street Journal also focuses on housing.

There is no silver bullet; we need different remedies for different types of (actual or prospective) foreclosures. And to succeed, we must overcome the three barriers. Foreclosure mitigation is expensive. It will encounter political resistance. It probably requires bending some property rights. Not very appetizing. But remember, the alternative may be continued stagnation...

He wants Fannie and Freddie to lead the way on refinancings; he proposes a big new effort aimed at principal reductions, with some sharing of equity; and he says the government should lend to investors willing to convert foreclosed properties into rental units.

Housing, housing, housing.

Odd that a plan whose main virtue, according to supporters, is its simplicity should be causing such confusion. I had a moment of confusion myself yesterday. I haven't been paying close attention to Herman Cain, so when I read Laurence Kotlikoff describe 9-9-9 as a personal income tax plus a sales tax plus a VAT, I thought he had blundered--even though I know he knows a lot about taxes. 9-9-9 is a personal income tax plus a corporate income tax plus a sales tax, right? Why would anybody propose both a sales tax and a VAT? A VAT is just a sales tax collected another way (in slices rather than all at once). Why have a retail sales tax of 9% and a VAT of 9% when you could just have a single sales tax (collected one way or the other) of 18%? Absurd.

I would be interested to hear Cain's view on this because it turns out of course that Kotlikoff is right, as Bruce Bartlett and Josh Barro noted a while back, and as the Tax Policy Center further explains. Cain's "business tax" has been widely reported as a proposed tax on earnings (eg in the FT), and just yesterday Arthur Laffer defended it as such in the Wall Street Journal: the "now famous" plan includes a tax on "net business profits", he said. But Cain's policy document makes it clear (fairly clear) that he is proposing a business transfer tax--a tax on revenues, with deductions for purchases (and dividends) but not for wages. That, my friends, is a VAT.

Strange, is it not, that this has been so widely overlooked? And while we are adding up the VATs in Cain's plan, the Tax Policy Center reminds us that the personal tax component in 9-9-9 is a variant of the well-known Individual Flat Tax--Cain's document uses that term--first proposed by Robert Hall and Alvin Rabushka.

The flat tax is a subtraction method value-added tax, similar to the [business transfer tax], with the exception that businesses may deduct wages paid and workers must report and pay taxes on their wages. With a single rate, however, it makes no difference whether the worker or the business remits the tax. (The original flat tax proposal would have allowed workers to claim exemptions for themselves and dependents, but the Cain proposal has no such adjustment.)...

We assume that the national sales tax and business flat tax are imposed independently on businesses so they sum to sales tax rate of 18 percent. The individual flat tax, however, is applied to real wages that have been reduced by 18 percent by the other two taxes. The 9 percent individual tax thus applies to only 82 percent of tax-inclusive consumption, making its effective rate 7.38 percent of all consumption. Therefore, the three taxes combined are equivalent to a 25.38 percent national sales tax... [emphasis added].

I can see the case for making consumption the base for the tax system. (Important point: this need not be regressive, as Kotlikoff points out.) I can see the case for a VAT. But I can't see the case on grounds of simplicity for a sales tax collected one way plus plus a sales tax collected another way plus (in effect) a sales tax collected a third way. Maybe Cain can explain.

Let foreclosures hit bottom and let the housing market work, says Mitt Romney.

In an interview published Tuesday ahead of presidential debate, Romney told Las Vegas Review Journal's editorial board that solving the foreclosure crisis would require letting banks proceed against homeowners who have defaulted on their mortgages. New investors could then rent out the homes until markets adjusted.

"As to what to do for the housing industry specifically and are there things that you can do to encourage housing: One is, don't try to stop the foreclosure process. Let it run its course and hit the bottom," Romney said.

Romney elaborated during the presidential debate Tuesday night. "The idea of the federal government running around and saying, We're going to give you some money for trading in your old car...or we're going to keep banks from foreclosing if you can't make your payments...", Romney said, "The right course is to let markets work."

Glenn Hubbard, who is advising Romney, takes a different view. He tells the FT that the housing market is broken, and needs to be repaired.

[F]inancial frictions make it difficult for households and businesses to respond positively to fiscal stimulus or to low interest rates. Policy actions need to mitigate this broken link in the chain. In particular, frictions in the mortgage market and low equity levels have restricted the ability of tens of millions of borrowers to take advantage of very low interest rates by refinancing their mortgages.

This has blunted a key channel of monetary policy and led to large numbers of foreclosures. Household balance sheet repair would be accelerated if every homeowner with a mortgage through Fannie Mae and Freddie Mac who is current on payments were allowed to refinance their mortgage at the current very low rates. It would reduce debt-service burdens and offer the equivalent of a long-term tax cut (over the life of the mortgage) of up to $70bn annually. The credit risk of these mortgages has been borne by taxpayers since 2008 anyway, so the refinancing would not increase the Treasury's risk exposure. It should reduce it, as defaults diminish...

The positive effects of low interest rates on refinancing, household incomes and wealth have been cancelled out by mortgage market imperfections that can be straightforwardly fixed.

Good advice. Romney should pay closer attention.

In any other year I would have been rooting for Andy Miller, an esteemed former colleague of mine, to get the Booker prize for "Snowdrops"--but since that was not to be, it was good to see the great Julian Barnes win, finally.

It's beyond ridiculous that the judges denied him so long. They cheated him in 1984 ("Flaubert's Parrot"), 1998 ("England, England"), and 2005 ("Arthur and George"), short-listing his books each time but giving the prize to conspicuously inferior efforts. In 1984 the winner was Anita Brookner. (You perhaps hadn't realized that "Hotel du Lac" is better than "Flaubert's Parrot". That year's short-list, by the way, also included J.G. Ballard's "Empire of the Sun" and David Lodge's "Small World"; so obviously the prize went to Anita Brookner). In 1998 it was the much over-rated Ian McEwan (for "Amsterdam", which even disappointed his fans). And in 2005 it was the barely readable John Banville ("The Sea"). My favorite Barnes novels--"Talking It Over" and its sequel "Love, Etc"--weren't short-listed. Quite a record, and it makes me worry that Barnes's winning novel, "The Sense of an Ending", which I haven't yet got around to, might be a rare dud. We'll see.

Speaking of novels, I'm a fan of Geoff Dyer, ("Jeff in Venice, Death in Varanasi") as you may recall. I recommend this short article of his on how to write fiction.

The satisfactions of writing are indistinguishable from its challenges and difficulties. It is constantly testing all your faculties and skills (of expression, concentration, memory, imagination and empathy) on the smallest scale (sentences, words, commas) and the largest (the overall design, structure and purpose of the book) simultaneously. It brings you absolutely and always up against your limitations. That's why people keep at it - and why it's far easier to give advice about writing than it is to do it.

(Thanks, Clif.)

I've been surprised in recent days to see Democrats up to and including the president associate themselves with the Occupy protests. The demos reflect "broad-based frustration about how our financial system works," said Obama. David Plouffe thinks "the protests you're seeing are the same conversations people are having in living rooms and kitchens all across America." Really?

The protesters' grievances, as far as one can understand them, have a radical edge. (I assume the White House is aware that the occupiers are bitter critics of the administration.) Militancy, civil disobedience, and outright anti-capitalism are unlikely to appeal to mainstream voters. Such confrontations always have the potential to turn nasty: they often involve a minority that wants them to turn nasty. Democrats probably shouldn't condemn the protests, but they certainly ought to keep a safe distance.

Pollster Doug Schoen has been asking the Wall Street protesters about their views. His findings are roughly what you would expect:

What binds a large majority of the protesters together--regardless of age, socioeconomic status or education--is a deep commitment to left-wing policies: opposition to free-market capitalism and support for radical redistribution of wealth, intense regulation of the private sector, and protectionist policies to keep American jobs from going overseas...

Thus Occupy Wall Street is a group of engaged progressives who are disillusioned with the capitalist system and have a distinct activist orientation. Among the general public, by contrast, 41% of Americans self-identify as conservative, 36% as moderate, and only 21% as liberal. That's why the Obama-Pelosi embrace of the movement could prove catastrophic for their party.

On Friday the latest Allstate/National Journal Heartland Monitor poll was released. The focus of this latest study was the interaction between household confidence and debt, personal and public. Ron Brownstein describes the findings for NJ: Credit Scarred. The full poll results, well worth browsing through, are here. Seen as a forward-looking economic indicator, they are bleak. They make especially painful reading for Democrats, by the way, because they suggest that persistent or worsening pessimism over debt is eroding support for the president. From Brownstein's article:

Three-fourths of those polled said they believed they personally would be better off if they carried "no debt by paying off all your loans right now." Just one-fourth accepted the idea that debt made them better off by allowing them "in effect [to] borrow from your future income." On that ringing declaration, the views of whites and minorities, the young and the old, those with and without college degrees, and even the wealthy and the poor varied little. Jared Quincy, a lawyer in Herriman, Utah, eloquently expressed the aspiration inherent in that finding. "I think too many people confuse the American Dream with 'I can have whatever I want' and believe debt is a pathway to having whatever you want," he says. "I would submit that the American Dream is self-determination, and enslaving yourself to creditors is no way to self-determination."

Most Americans may not be able to achieve that ideal (83 percent reported holding at least one form of debt), but many are looking to steer their lives in that direction. When asked whether the economic downturn had required them "to cut back on spending on things such as clothing, vacations, and dinners out in order to pay down your debt or not acquire any new debt," more than three-fifths said yes, while only about one-third said no.

At an event yesterday to launch the poll, I moderated a panel of experts (Joe Gagnon, Jeff Lubell, Margaret Simms, and Terry Savage) to discuss the issues raised. Not wishing to put words into their mouths, I'd say they agreed that fears (not necessarily well grounded) about public debt, together with the seeming incapacity of Washington to deal with that problem, were compounding household anxieties about personal finances: a vicious circle, because household pessimism slows the economy and worsens the long-term fiscal outlook.

Terry Savage (among other things, author of "The Savage Truth On Money", a volume of sound, deftly delivered advice about household finance) underlined the point made in the clip above: she reckons this recession will cause a generational shift in the American idea of prosperity from "What do I own?" to "Am I financially secure?" It's an intriguing idea. It would have far-reaching economic implications.

Rebecca Rosen investigates.

[S]he'll book your appointments, check the weather for you, remind you to pick up something at the store. These are classic personal-secretary tasks, and somewhere around 97 percent of all secretaries in America are of the female persuasion. She can be a little saucy, but just a little. (Interestingly, Siri is not a lady all around the world. Her British self is a man; her Australian self is a woman. Feel free to float your own theories about that...

Is the British version really a man? It may have something to do with Jeeves. They all have butlers over there.

Since the early days of this recession, Harvard economist Martin Feldstein has been arguing for audacious action to repair the housing market. He warned that a growing overhang of foreclosed properties would suppress the recovery, and how right he was. It's a difficult problem but the failure to confront it effectively has been the biggest missing piece in the policy response of the administration and the Fed. Feldstein is still banging on about it (How to Stop the Drop in Home Values):

[F]or political reasons, both the Obama administration and Republican leaders in Congress have resisted the only real solution: permanently reducing the mortgage debt hanging over America. The resistance is understandable. Voters don't want their tax dollars used to help some homeowners who could afford to pay their mortgages but choose not to because they can default instead, and simply walk away. And voters don't want to provide any more help to the banks that made loans that have gone sour.

But failure to act means that further declines in home prices will continue, preventing the rise in consumer spending needed for recovery. As costly as it will be to permanently write down mortgages, it will be even costlier to do nothing and run the risk of another recession.

The article suggests a plan to write down mortgage principal that could cost up to $350 billion. I did say "audacious".