Tonight we had a panel full of Type As, but at least they were well informed Type As. Good show, but as always, there are a few things to go over, clarify, and rebut.
1. Racism and Ann Coulter: I hate Ann Coulter. To me, she symbolizes the worst elements the Republican Party. She's annoying, rude, boorish, and demagogues every issue. There are legitimate points that she tried to communicate but they got lost in the miasma of her noxious personality.
But I do agree, for instance, that at a state and Federal level, racism essentially doesn't exist if you define racism as the systematic and concerted use of state power to disenfranchise a racial minority. "Intelligence" tests are gone. Poll taxes are gone. Grandfather clauses to shield whites from Jim Crow are gone. Segregation is gone. Any vestige of real racism, where there was a systematic and concerted effort by the government to disadvantage blacks has long since bitten the dust.
The new "racism" today is driven by "disparate impact analysis" and "the legacy of racism". For example, blacks as a whole have trouble obtaining non-FHA insured mortgages. This is not because the banks and mortgage brokers are being racist. It's because, on average, blacks have lower credit scores, incomes, and wealth than the rest of the country. This is where a left-leaning person would say that the legacy of racism disparately impacts black people and that something should be done about it, such as regulating banks to "encourage" them to give mortgages to people they would otherwise deny.
I don't think we should do that. Although I think that the government does have a certain limited responsibility to help people in the lower socioeconomic classes, it doesn't warrant regulating the private sector to encourage a different outcome. It should be a direct subsidy to the person in need, such as the EITC.
And when it comes to education, we should give families the freedom to choose where they send their kids to school rather than forcing them to go to a certain public school because that's where they are zoned for. That encourages the cloistering of like socioeconomic groups into sheltered and isolated communities and creates tears in the social fabric.
2. Confirmation Bias and the Veep Debate: Maher is utterly convinced that Biden won the debate. But he's suffering from an overwhelming obvious case of confirmation bias. He saw what he wanted to see, Biden aggressively tearing into Ryan and the Republican Party, and assumed that the rest of America wanted to see it as well.
I've already given my thoughts on the issue. Biden was a boorish debater who fought Ryan to a draw on substance. But given the fact that he was so rude, Ryan edges him out slightly only because he acted like a dick while Ryan kept calm and collected. I'm glad that Affleck saw and admitted that Biden was being... discourteous. I think it forced Maher to at least rethink how the rest of America saw the debate.
3. Sheila Bair For Senator: During the financial crisis and the subsequent events, I did not have any strong opinion toward Bair one way or the other. She was a relatively minor player compared to people like Paulson, Bernanke, Bush, Geithner, Obama, and the Congressional leadership. But I was extremely impressed with how she handled herself on the show.
She was level headed, reasonable, incredibly well spoken, intelligent, and informed. She is an ideal government bureaucrat (I mean that in complete sincerity) and I think she was largely wasted on the Federal bureaucracy. She belongs in Congress because of two things I plan on discussing immediately after.
4. Blowing Bond Bubbles: Maher asked Bair what she thought the next bubble was gonna be and she immediately said the bond bubble. She could not have been more correct. This is why: As of today, the yield on the 10 year Treasury Note was 1.663%. That means a dollar invested in a Note today will turn into 1.18 10 years from now.
But interest rates have to come back up eventually. Nobody (not even Bernanke) knows when that time will come, but it will come and when it happens it's gonna be bad. Let's say in order to stave off rapidly rising inflation, the Fed brings the Federal Funds Rate back up to 8% and that's where the 10 year note settles at. That means a dollar turns into 2.16 10 years later.
For the person who invested in a 10 year note at 1.663%, he is in a terrible financial position. Nobody is going to buy a 10 year note yielding 1.663% when the government is issuing them at 8%. In order to get it on par with the government's offering, he'd have to offer it at 54 cents on the dollar. Or if he decides to hold onto his bond, he'll likely see his nominal gains wiped out (and then some) by inflation.
The damage would be even worse in the corporate bond market. Because nobody is going to be interested in corporate debt when the Federal government (who is always going to be more creditworthy than a private company) is issuing bonds that yield far more than the going rate for both investment grade and high yield corporate debt.
Consumer finance experts love to talk about the impending student debt bubble (and make no mistake, that's a bubble as well), but the 1 trillion dollars in outstanding student loans has nothing on the 32 trillion dollar US bond market.
5. Respect My (Bureaucratic) Authority: The other salient point that Bair made was Dodd Frank's outsourcing of authority to the executive branch. Congress, living up to its popularity ratings (~7%), hates making real decisions. This is ironic considering the original intent of the Founders was to give the most power to the legislative branch.
But they keep ducking responsibility. Dodd-Frank was hailed as sorely needed financial regulation. But the problem is Congress doesn't know what it's actually going to do. Dodd-Frank is nothing more than general guidelines that they want the bureaucracy to target. The actual implementation is completely up to the regulatory agencies.
This delegation of practical authority is disastrous because it places too much power in the hands of unelected bureaucrats who only answer to the President. It consolidates too much practical and effective power in the executive branch, making it even more important who is in the White House.
When you have an anti-business President like Obama, this can be a bad thing. It might not even go over well with a pro-business candidate like Romney simply because of the possibility of the executive branch being too unwieldy to effectively manage.
Dodd-Frank (as well as most other recent "reform" overhauls of Federal law) represents nothing more than prosecutorial discretion writ large, which opens the door to corrupt government. For example, state and local governments empower police officers the ability to arrest a person based on their own judgment and interpretation of the law. The less clear the law is, the more effective power the police officer has. If the police officer is virtuous, then this isn't necessarily a bad thing. But let's be real. There are tons of bad eggs in public service. Giving them greater incentive to be corrupt is definitely not in the public interest.
6. Peace Through Strength: Maher, per usual, harped on defense spending again on the show. But this is something I don't get. The government, at all levels, wastes an incredible amount of money. Defense wastes its fair share too. But in terms of dollars spent, defense represents the government's greatest and most effective program. We have the strongest military that no other country can compete with.
We spend more on health care per capita in Medicare alone than entire countries' single payer systems and our health outcomes are much worse. We spend more on education per capita than any other country (barring the super rich and super tiny countries like Luxembourg) on Earth but our math and reading at a K12 level are in the lower lower half of the OECD.
For all the money we waste on defense, we still have a military that is the envy of the world and second to none. We can't say the same on education or health care, the two other major public programs that governments are responsible for. That is significant.
Wow, this turned out to be pretty long. I hope you guys enjoyed it.
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