Friday, July 27, 2007

A great way to referee the Obama-Clinton debate

Barack Obama and Hillary Clinton have been a fussin' and a feudin' since their disagreement at the YouTube debate over whether they would be willing to negotiate with foreign dictators. The Washington Post's campaign blog summarizes the state of play:

Sen. Barack Obama accused Sen. Hillary Rodham Clinton of taking the same closed-door approach as President Bush in handling rogue states.

"You'll have to ask Senator Clinton, what differentiates her position from theirs?" Obama challenged reporters in a conference call on Thursday.

Clinton waited a few hours, then fired back. "What ever happened to the politics of hope?" she said in a CNN interview, tweaking the optimistic Obama campaign theme.

Their tussle -- the first real verbal engagement of the Democratic primary between the top two candidates -- began during Monday night's debate in South Carolina.

Asked whether they would agree to meet leaders from hostile countries such as North Korea and Iran in their first year in office, without preconditions, Obama had said he would. Clinton said she would not. Clinton advisers quickly cast Obama's answer as a rookie mistake, and in an interview on Tuesday, Clinton referred to him as "irresponsible and naïve."

Obama, who has promised to run a "different kind of campaign" free of acrimony, did not shy away from quarreling with Clinton over the substantive policy question at hand. "The Bush administration's policy is to say that we will not talk to these countries unless they meet various preconditions. That's their explicit policy," Obama said. But he did qualify his earlier answer about meeting with rogue leaders without preparation.

"Nobody expects that you would suddenly just sit down with them for coffee without having done the appropriate groundwork. But the question was, would you meet them without preconditions, and part of the Bush doctrine has been to say no," he said.

By late Thursday, officials from the Clinton and Obama campaigns were squabbling on a split-screen on CNN over the matter.

Now campaign reporters love this sort of thing, for obvious reasons. For the rest of us, it's still too damn early.

However, this particular tiff provides a great way to divine whether there's a real difference in their foreign policy approaches. Campaign reporters, please steal the following question from this blog and pose it to both the Clinton and Obama camps:

Yesterday Cuban leader Raul Castro signaled his willingness to negotiate with the person who succeeds George W. Bush as president. This is the third time Castro has stated this desire since assuming power a year ago. If elected, would your administration be willing to negotiate directly with the communist regime in Havana? Would you be willing to meet with Castro personally? Would you attach any preconditions to such a meeting?

posted by Dan at 08:06 AM | Comments (8) | Trackbacks (0)

Thursday, July 26, 2007

Matthew Yglesias agrees with John Bolton

Matt Yglesias doesn't like the nuclear deal with India:

What's happening in this deal is that we're granting India concessions related to its nuclear program and India is giving us . . . essentially nothing in exchange....

Meanwhile, from a neoconnish perspective the fact that this undermines the nonproliferation regime is probably a good thing. They hate the idea that diplomatic agreements might actually work and undermine their efforts to start an endless series of wars.

Yeah... there are a few problems with this interpretation. The biggest, of course, is that the biggest neocon involved in the nonproliferation question opposed the India nuclear deal.

As for Matt's interpretation of the deal.... I've defended it before, but I'll ask the same question again -- under what set of magical circumstances was India ever going to agree to give up their nuclear weapons?

Not everything the Bush administration does is part of the neocon grand plan. Indeed, I think we can all agree that "neocon grand plan" is a really bad joke.

posted by Dan at 04:45 PM | Comments (6) | Trackbacks (0)

I'm very rarely right, so I'm going to savor this

Three years ago, I argued in Foreign Affairs that the growth projections about offshore outsourcing were wildly overstated. Others have suggested that growth projections about offshore outsourcing are wildly understated.

This Economist story provides a point for me and against the Blinder-Friedman hypothesis:

The latest quarterly report on the state of global outsourcing from TPI, a consultancy, was published earlier this month. It showed that both the number and value of contracts awarded during the first half of this year had declined in comparison with the same period in 2006. In 2007 the total value of contracts awarded in the first six months was the lowest since 2001....

As growth slows it is clear that making money is becoming more difficult for outsourcing firms. Competing on price is getting ever harder. Established vendors are hiring workers in the same low-cost locations as their offshore rivals—the likes of Accenture and IBM have been furiously ramping up their operations in India, for example. One response is to keep searching for ever-cheaper locations, both within India and outside it, but a race to the bottom on price threatens both the quality of service and profit margins. For the top-tier providers, the way to stand apart from the crowd is to deliver more valuable services....

Outsourcing firms are moving into more countries in order to deliver the right mix of cost, risk and quality. As Western providers concentrate on beefing up their presence in low-wage centres, Indian vendors are focusing on the markets where the buying decisions are made. Physical and cultural proximity is important for building closer client relationships, for delivering certain types of services (such as unscripted selling) and for soothing concerns about data security and confidentiality. Hiring locals also has the effect of cutting down on visa hassles.

Wipro, one of the big three Indian providers (along with Infosys and Tata Consultancy Services), is close to reaching an agreement with the authorities in Atlanta, Georgia, to set up its first software-development centre in America. The three other cities shortlisted during the selection process—Austin, Texas; Raleigh, North Carolina; and Richmond, Virginia—stand a good chance of hosting other centres. Azim Premji, Wipro's chairman, says that the proportion of local employees (as opposed to visiting Indians) in the company's overseas locations will rise from 10% to one-third over the next three years.

Few providers expect the topic of offshoring to lose its political sting—despite plenty of evidence, including a recent OECD report on the subject, showing that it is not a big cause of job losses and has an overall positive effect. But the maturing of the outsourcing industry ought to mean that scaremongering about jobs flowing from rich countries to poor ones will sound less and less convincing.

posted by Dan at 01:36 PM | Comments (8) | Trackbacks (0)

The power of the farm lobby

The New York Times' David Herszenhorn explains in depressing detail why farm subsidies will not be cut back anytime soon -- despite the fact that market conditions are at an ideal point for doing so:

For the many critics of farm subsidies, including President Bush and Speaker Nancy Pelosi, this seemed like the ideal year for Congress to tackle the federal payments long criticized as enriching big farm interests, violating trade agreements and neglecting small family farms.

Many crop prices are at or near record highs. Concern over the country’s dependence on foreign oil has sent demand for corn-based ethanol soaring. European wheat fields have been battered by too much rain. And market analysts are projecting continued boom years for American farmers into the foreseeable future.

But as the latest farm bill heads to the House floor on Thursday, farm-state lawmakers seem likely to prevail in keeping the old subsidies largely in place, drawing a veto threat on Wednesday from the White House.

“The bill put forth by the committee misses a major opportunity,” Agriculture Secretary Mike Johanns said Wednesday. “The time really is right for reform in farm policy.”

Faced with fierce opposition from the House Agriculture Committee, Ms. Pelosi and other Democratic leaders lowered their sights and are now backing the committee’s bill, in part to protect freshman lawmakers from rural areas who may be vulnerable in the 2008 elections....

A group of dissident lawmakers led by Representatives Ron Kind, Democrat of Wisconsin, and Jeff Flake, Republican of Arizona, is still pushing a plan to curtail the subsidies sharply.

But they have been largely outmuscled by the Agriculture Committee. It 46 members are slightly more than 10 percent of the House but their districts received more than 40 percent of all farm subsidies from 2003 to 2005, according to a database compiled by the Environmental Working Group, which opposes the subsidies.

Critics in Congress include fiscal conservatives who deride the payments as wasteful government spending and liberals who call them corporate welfare for agribusiness. All say the measure will simply perpetuate the overly generous subsidy system, at a point when American farmers are well-positioned to weather changes.

“When farm prosperity is as good as it is right now, this is the time to reform,” said Representative Paul D. Ryan, Republican of Wisconsin and a member of the dissident group. “If we can’t reform these farm programs at this moment in our history, we will never be able to do it.”

The group has proposed an amendment to the farm bill that would cut subsidies and increase spending on environmental conservation, rural development and nutrition programs, including food banks. It would end subsidies to farmers earning more than $250,000 a year, similar to the $200,000 cap proposed by the Bush administration. It would also substantially limit payments that farmers receive under guaranteed loan programs.

The effort by Mr. Kind has exposed divisions among House Democrats, some of whom argue that he could cost the party its new majority. The fear is that freshmen Democrats from rural swing districts could lose their seats if voters blamed them for lower farm subsidies. Mr. Kind rejected such assertions. “The vast majority of our new members benefit from our proposal,” he said....

The strategic maneuvering by the administration, and some unusual alliances on Capitol Hill, reflect the curious politics of farm policies, cutting across party lines and mirroring regional interests more than partisan loyalties.

The keen interest in the bill, even among urban lawmakers from districts without a corn or barley field, underscores the vast scope of the farm bill, which includes not just agriculture policies but nutrition programs like food stamps, and an array of energy, land conservation and other programs.

posted by Dan at 11:20 AM | Comments (2) | Trackbacks (0)

A post in which I send my readers on a blog hunt

President George W. Bush and New York Governor Eliot Spitzer both seem way too fond of executive privilege.

Bush, of course, has gone so far as to order Harriet Miers and Josh Bolten ignore Congressional subpoenas. The AP story sums up the state of play:

Miers' testimony emerged as the battleground for a broader scuffle between the White House and Congress over the limits of executive privilege. Presidents since the nation's founding have sought to protect from the prying eyes of Congress the advice given them by advisers, while Congress has argued that it is charged by the U.S. Constitution with conducting oversight of the executive branch.

The dispute extended to Congress' request for information on other matters, including the FBI's abuses of civil liberties under the USA Patriot Act and Bush's secretive wiretapping program.

But it is a pair of congressional subpoenas for two women who once were Bush's top aides that has moved the disagreement to the brink of legal sanctions and perhaps a court battle.

Former White House political director Sara Taylor appeared Wednesday before the Senate Judiciary Committee and in a tentative performance sought to answer some lawmakers' questions and remain mum on others, citing Bush's claim of privilege. Senators didn't seem eager to cite her with contempt, but Chairman Patrick Leahy, a Democrat, said he had not yet made that decision.

Miers, in contrast, chose to skip the House hearing Thursday, citing White House Counsel Fred Fielding's letter to her lawyer conveying Bush's order not to show up. In letters sent the night before to Judiciary Committee Chairman John Conyers and Sanchez, Bush and Fielding cited several legal opinions that they said indicated that the president's immediate advisers had absolute immunity from congressional subpoenas.

Miers and Bolten now face possible contempt of Congress charges.

Now we turn to Eliot Spitzer. Danny Hakim summarizes the state of play in the New York Times:

Gov. Eliot Spitzer vowed on Wednesday to fight any State Senate inquiry into his administration’s internal operations, even as Republican senators were laying the groundwork for an investigation that could lead to subpoenas of top officials.

The administration’s stance sets the stage for a potential showdown with the Senate, and it came amid rising concerns even among Mr. Spitzer’s fellow Democrats about whether the governor and his staff had been candid about their office’s effort to discredit a political rival.

A scathing report issued on Monday by Attorney General Andrew M. Cuomo concluded that the governor’s staff had broken no laws but had misused the State Police to gather information about Joseph L. Bruno, the Senate majority leader, in an effort to plant a negative story about him.

The governor has maintained that he was misled by his staff and knew nothing about the effort to discredit Mr. Bruno. But two of his closest aides refused to be interviewed by the attorney general’s investigators, intensifying suspicion, especially among the governor’s critics, that Mr. Spitzer and his staff had not been forthright.

At a fiery press conference in Saratoga Springs, Mr. Bruno, the state’s top Republican, lashed out at the governor and signaled that the Senate fully intended to examine the matter further....

[W]ith the decision to fight a Senate inquiry, Mr. Spitzer appeared to be shifting from quiet contrition to a more confrontational stand. The move not only sets up a potential constitutional clash over executive privilege, but could also create a major distraction in the Capitol. Senator George H. Winner Jr., the chairman of the Senate Committee on Investigations and Government Operations, wrote to Mr. Cuomo on Wednesday, seeking copies of depositions, statements and e-mail traffic he had obtained. Mr. Bruno, asked if a Senate committee had the power to subpoena the governor, said “I am told by counsel that we have subpoena powers and that we can subpoena the governor, anybody.”

But Christine Anderson, the governor’s press secretary, said in a statement, “The State Senate lacks the constitutional authority to conduct investigatory hearings into the internal operations of the governor’s office.”

Assignment to blog readers: is there anyone in the blogosphere partisan enough to defend one of these claims of executive privilege but attacked the other?

posted by Dan at 10:40 AM | Comments (7) | Trackbacks (0)

Wednesday, July 25, 2007

A small Harry Potter break in the blogging.... and we're back and grumpy

Am reading Harry Potter and the Deathly Hallows with spare time.

[It took you five days to get the book?--ed. No, it took the Official Blogwife that many days to read it and then give it to me.]

Everyone go away for a while. Like Megan McArdle, I'm going into semi-withdrawal for a few days.

UPDATE: Is it just me, or does anyone else derive satisfaction from tearing through Rowling at warp speed? I normally don't plow through 750 page books in a day, but I always read Harry Potter about twice as fast as other books. My hunch is that Michael Berube is correct -- the books are a combination of a fully imagined world and the pure essence of plot and narrative. I feel the same way reading a Harry Potter book as I do when I was running a really fast wind sprint.

ANOTHER UPDATE: Fans of both Harry Potter and the Sopranos should really click here.

FINAL UPDATE: OK, I've finished the book and opened the comment thread back up. My critical take on the book appears after the jump [WARNING: MASSIVE PLOT SPOILERS AHEAD]:

I have to say, I thought Deathly Hallows was the weakest of the bunch. Part of this was inevitable -- the ending can't satisfy everyone, a lot of loose ends needed tying up, and there is a clear tension between what Rowling's adult fans and younger fans wanted to see happen. These tensions existed in the previous books as well, but Rowling was always able to kick the can down the road in the earlier volumes. As a reader, I was always confident that unanswered questions (what is Snape up to?) would be dealt with before the series ended.

Now that the series has ended, however, there are still a bunch of cans lying on the road. Rowling has always been able to control her unruly plots, but when I finished this book, I had a hell of a lot of questions:

1) How the bloody hell does the sword of Gryffindor get into the friggin' Sorting Hat? UPDATE: I knew Wikipedia had its uses: "The two items share a particular bond; whenever a "true Gryffindor" needs it, the Sword will let itself be pulled out of the hat."

2) Does anyone completely buy Dumbledore's explanation for why Harry survived Voldemort's attack in the forrest? Reminded me a wee bit of this.

3) What purpose does the Deathly Hollows portion of the plot serve?

4) Why does Rowling completely whiff on Draco Malfoy's character? She sets him up for some interesting character developments at the end of Half-Blood Prince. In Deathly Hallows, Potter saves him, he's alreay feeling unsure about Voldemort, and he still tries to join the Death Eaters?

More generally, I'm with Russell Arben Fox on this: "I wanted to see Horace Slughorn lay it on the line to the Slytherin students, shut Pansy Parkinson up, and demonstrate (as Phineas Nigellus insisted) that there's a real reason for Slytherin House after all."

5) Is it just me or does the final duel between Potter and Voldemort revolve around.... correctly defining the property rights of wands?!

6) This one is the biggest, and touches on Megan Mcardle's complaint that, "most of [the characters] spend the latter books pointlessly withholding information from each other that, if shared, would end the installment somewhere around page ten." Let's see if I have this straight: At the last minute, Harry Potter needs to be told that he has a Horcrux in him and must be willing to die when he faces Voldemort. Following secured, compartmentalized information protocol, Dumbledore entrusts this information to Snape and Snape alone. Dumbledore then has Snape promising to kill him at the right moment -- which he does, in front of Harry Potter, who has no idea why this is happening.

So, here's my question -- how in the hell was Snape ever going to relay the necessary information to Potter in a way that Potter would have believed him? Harry hates Snape -- how could he possible have believed him? Rowling comes up with a way, but surely Dubledore could not have counted on this serendipitous series of events taking place.

Even Potter knew to tell Neville about dispatching Nagini before he heads into the woods, because Ron and Hermione might not make it. Why didn't Dumbledore also tell McGonagall or Mad-Eye this crucial bit of info?

It wasn't all bad. The scene with Harry walking to his doom, accompanied by all the dead who love him, was particularly affecting. The battle of Hogwarts was friggin' awesome (one looks forward to seeing that on film). Rowling always knows when to surprise with the humor. And I think I liked the epilogue more than most -- Harry and his friends have more than earned their happiness. On the whole, though, Michiko Kakutani is full of it -- Dealthly Hallows is a disappointment.

For other takes, see Russell Arben Fox, Ross Douthat, and Slate's Book Club.

Rowling provides a few more details about the epilogue here.

posted by Dan at 12:10 PM | Comments (8) | Trackbacks (0)

Tuesday, July 24, 2007

When should experts matter?

An underlying theme of a few recent posts is the role that experts could and should play in a democracy. There is no clear-cut answer to this question. One can extol the wisdom of crowds -- except when crowds are sometimes mobs. One can extol experts -- except that experts are frequently wrong. This issue is especially sticky with social science questions, because while expertise exists, it is more inexact and generally less respected by publics.

Of course, even "hard science" has its problems in the policy world. For a non-American example, the following New York Times story by Elisabeth Rosenthal:

Amflora potatoes, likely to become the first genetically modified crop in the last decade to be approved for growth in Europe, have become the unlikely lightning rod in the angry debate over such products on the Continent.

The European Commission now says it will approve the potato “probably this fall,” even though European ministers have twice been deadlocked on approval over the last eight months, with only a minority voting in favor. According to European Union procedures, “the ministers have not been able to take a decision, so we will have to reaffirm our earlier opinion to recommend it,” said Barbara Helferrich, spokeswoman for the European Commission’s Environment Directorate.

But European environmental groups are critical of Amflora potatoes, saying they could release dangerous genes into the environment. Approving Amflora would make “a mockery of E.U. law,” said Marco Contiero, an expert on genetically modified organisms at Greenpeace in Brussels.

Still, perhaps the biggest hurdle for Amflora is the visceral popular reaction against genetically modified crops on a continent whose food culture is ancient and treasured.

“I just don’t like the idea,” said Monika Stahl, 31, waiting for a bus with a sack of fresh vegetables in Mannheim, just 12 miles from the Amflora field. “I worry about safe food and about the environment. I have children and worry about them.”

In one sense, the irony is that Amflora is not a food at all. Although it looks, feels and smells like any other potato, each one is actually a genetically engineered factory for amylopectin, a starch used to make glossy paper coatings, clothing finishes and adhesive cement.

A few questions to readers:
1) Is massive public hostility to GMOs a sufficient reason to ban their use?

2) As I discuss in All Politics Is Global, here is a strong scientific consensus that GMOs are as safe as conventionally cultivated crops. If this scientific consensus, in and of itself, is insufficient to change public attitudes, can anything change public opinion on this point?

3) The scientific consensus on GMOs cannot refute concerns about possible losses in biodiversity. Is this unknown still a sufficient reason to ban their use? In other words, when is the precautionary principle sufficient to warrant regulatory action?

posted by Dan at 10:01 AM | Comments (17) | Trackbacks (0)

In honor of great aunt Shirley

The White Plains Times runs a story about my great aunt Shirley Rodkinson, who celebrated her 106th birthday last month. My favorite part of the article:

It’s clear that Shirley has always lived her life by her own terms. According to Richard, his grandmother has “rode life at a very even keel,” and has always been both independent and “firm in her opinion.” He added, with a laugh, that “Shirley’s not your typical Jewish grandmother; she never tried to tell you how to live your life.”

[Her daughter] Florence also makes note of her mother’s strong spirit, recalling when Shirley was first admitted into White Plains Center for Nursing Care. Her first reaction? “When do I get out of here?”

Aunt Shirley is my late grandfather's older sister. I'm very fond of her -- despite her New York Yankee loyalties.

posted by Dan at 09:18 AM | Comments (1) | Trackbacks (0)

Monday, July 23, 2007

Why TAA is not a valuable bargaining chip

I've had enough conversations with Hill staffers to know the political lay of the land on expanding Trade Adjustment Assistance to service sector workers:

1) Everyone recognizes that the current TAA rules -- which only apply to the manufacturing sector -- make little sense in a world where more and more services are tradeable;

2) Everyone also recognizes that the cost of expanding TAA is pretty small by federal gov't standards -- we're talking a billion or two;

3) Democrats want to expand TAA, but for the past five years Republicans have held TAA hostage for something valuable in return -- support on a particular free trade agreement, an extension of fast track, etc.

4) No deal has ever been made.

I bring all this up because of Lori Montgomery's front-pager in the Washington Post today:
As part of their campaign to soothe an anxious middle class, congressional Democrats are preparing legislation that would significantly expand federal aid to the most obvious victims of the global economy: workers whose jobs move offshore or are lost to foreign imports.

Under a Senate bill to be introduced today, computer programmers, call-center staffers and other service-sector workers who make up the vast majority of the nation's workforce would for the first time be eligible for a generous package of income, health and retraining benefits currently reserved for manufacturing workers who lose their jobs to international trade.

Democrats say the expansion of the Trade Adjustment Assistance (TAA) program would begin to reweave the social safety net for the 21st century, as advances permit more industries to take advantage of cheap foreign labor -- even for skilled, white-collar work. By providing special compensation to more of globalization's losers and retraining them for stable jobs at home, they say, an expanded program could begin to ease the resentment and insecurity arising from the new economy.

A similar bill is nearing completion in the House, and Democrats hope to approve the expansion before the program expires Sept. 30. Trade Adjustment Assistance typically gets strong bipartisan support; Sen. Olympia J. Snowe (R-Maine) is co-sponsoring the bill with Sen. Max Baucus (D-Mont.).

But this year, rancorous politics have developed around broader trade issues, threatening the proposed expansion and, potentially, the program's survival.

"This is not going to be a slam-dunk," said Howard Rosen, executive director of the nonprofit Trade Adjustment Assistance Coalition....

Republicans as well as Democrats have long called for an overhaul of Trade Adjustment Assistance. President Bush has praised the program and promised to improve it. But the politics of trade have been complicated since Democrats took control of Congress with the help of many candidates who campaigned against further trade liberalization.

In the past, Trade Adjustment Assistance has been renewed alongside legislation granting the president fast-track authority to negotiate trade deals without congressional interference. But Bush's fast-track authority expired in June, and House Democrats have made it clear that they do not intend to restore it.

In addition, many Republicans feel scalded by Democratic delays on free-trade deals that the Bush administration has negotiated with Peru and Panama. Those agreements, and more politically divisive agreements with South Korea and Colombia, have not been brought to a vote since a deal to move them forward was made in May.

Now, even some Republican champions of Trade Adjustment Assistance say they are reluctant to sign on to its renewal unless Democrats reconsider their opposition to fast-track authority.

"Frankly, TAA is a very integral part of our efforts to reduce barriers and expand trade . . . and my view is they ought to go together," said Sen. Charles E. Grassley (R-Iowa), the senior Republican on the Finance Committee.

The Bush administration was actively working on a reauthorization proposal for Trade Adjustment Assistance when fast-track expired, the program's advocates said. Now, the administration appears to have backed off to recalibrate its strategy.

I'd love it if the GOP could get this quid pro quo, but it ain't gonna happen. I can't see any TAA program that would convince Democrats to renew fast track.

This is so partly because although many Democrats genuinely want to expand the program, others are offering it only lip service. Unions, in particular, loathe TAA, because even if it provides fiscal relief to their members, it also facilitates the movement of workers to non-union sectors. In other words, TAA undercuts the organizational power of unions. They can't outright oppose it, because they've been calling for it for decades now, but they don't love it.

So, an interesting question -- knowing that fast track ain't happening, should TAA be exapanded? I say yes, because of the poll numbers discussed in the last post. My hunch, however, is that GOP congressmen are going to say no.

The two direct losers from this kind of impasse: service sector workers displaced by offshore outsourcing, and free trade advocates. The first group is small -- the second group is smaller.

posted by Dan at 12:14 PM | Comments (4) | Trackbacks (0)

Sunday, July 22, 2007

The public aims at the wrong bogeymen


What you see above you is the result of a Financial Times/Harris poll among various OECD countries about globalization (note, by the way, that the FT wierdly flip-flops the categories halfway through the graph). The associated story sums it up as follows:

The depth of anti-globalisation feeling in the FT/Harris poll, which surveyed more than 1,000 people online in each of the six countries, will dismay policy-makers and corporate executives. Their view that opening economies to freer trade is beneficial to poor and rich countries alike is not shared by the citizens of rich countries, regardless of how liberal their economic traditions.
Indeed, as the poll shows, there's either majority or plurality enthusiasm for "setting pay caps for the heads of companies." The breadth of support surprises Mark Thoma.

For a pro-globalization type like me, there's not a lot that's funny about this kind of public sentiment. There is something ironic, however, about the extent to which publics believe that this kind of measure will reduce income inequality. On this point, I click over to Marginal Revolution and find the following:

We consider how much of the top end of the income distribution can be attributed to four sectors -- top executives of non-financial firms (Main Street); financial service sector employees from investment banks, hedge funds, private equity funds, and mutual funds (Wall Street); corporate lawyers; and professional athletes and celebrities. Non-financial public company CEOs and top executives do not represent more than 6.5% of any of the top AGI brackets (the top 0.1%, 0.01%, 0.001%, and 0.0001%)....

...we do not find that the top brackets are dominated by CEOs and top executives who arguably have the greatest influence over their own pay. In fact, on an ex ante basis, we find that the representation of CEOs and top executives in the top brackets has remained constant since 1994. Our evidence, therefore, suggests that poor corporate governance or managerial power over shareholders cannot be more than a small part of the picture of increasing income inequality, even at the very upper end of the distribution. We also discuss the claim that CEOs and top executives are not paid for performance relative to other groups. Contrary to this claim, we find that realized CEO pay is highly related to firm industry-adjusted stock performance. Our evidence also is hard to reconcile with the arguments in Piketty and Saez (2006a) and Levy and Temin (2007) that the increase in pay at the top is driven by the recent removal of social norms regarding pay inequality. Levy and Temin (2007) emphasize the importance of Federal government policies towards unions, income taxation and the minimum wage. While top executive pay has increased, so has the pay of other groups, particularly Wall Street groups, who are and have been less subject to disclosure and social norms over a long period of time. In addition, the compensation arrangements at hedge funds, VC funds, and PE funds have not changed much, if at all, in the last twenty-five or thirty years (see Sahlman (1990) and Metrick and Yasuda (2007)). Furthermore, it is not clear how greater unionization would have suppressed the pay of those on Wall Street. In other words, there is no evidence of a change in social norms on Wall Street. What has changed is the amount of money managed and the concomitant amount of pay.

Oh, and there's no apparent correlation between higher pay and the openness of a sector to international trade.

To be fair, I suspect publics would support capping the income of Wall Street groups if they were asked. CEOs might simply be a proxy for "evil capitalist pg-dogs." That said, CEOs do tend to be the first target whenever this kind of sentiment is translated into political action.

I can't dispute the rising resentment about rising inequality -- but that doesn't mean that the resentment has acquired the correct target (I don't think there is a clear target, but that's a topic for another day). There is support, clearly, for some really stupid policies.

posted by Dan at 11:51 PM | Comments (13) | Trackbacks (0)