Friday, January 19, 2018

Friday music: If you don't love jazz, you hate America

Not pure jazz, but here's Trombone Shorty, "On Your Way Down," from Backatown.

Shutdown threats and non-germane policy demands

As I wrote the other day, government shutdown showdowns are blame games.  Whichever side takes the public relations hit has to back down.  Historically, the GOP doesn't have a good record with this.  Both Bill Clinton and Barack Obama "won" their shutdown fights in 1995/6 and 2013.  Clinton won, essentially, because Gingrich was demanding cuts to Medicare as part of the budget in 1995, and that was unpopular.  Clinton just had the more popular position in terms of public policy.  The 2013 shutdown fight was more complicated, and was based around the general negotiating tactic that the Republican Party adopted after the 2010 election.

In 2010, the Republican Party won control of the House of Representatives, but not the Senate (and obviously, not the White House).  They decided that their method of winning policy fights would be to take hostages.  Mitch McConnell even admitted as much, referring to the debt ceiling as, "a hostage that's worth ransoming."  This was nuts.  The Treasury needed the authority to issue bonds in order to cover the spending that Congress had already ordered, and without the authority to do so, we risked worldwide financial calamity.  Republicans were demanding policy concessions in order to not tank the economy of every country on the planet.  At least both things related to the spending, though...  Obama caved in 2011 and gave the GOP the 2011 Budget Control Act, but eventually he wised up on the debt ceiling and stopped paying ransom.

In 2013, though, Senate pied piper Ted Cruz led a bunch of House rats (the Freedom Caucus, mostly) to their demise.  He told them that they should demand a government shutdown in exchange for a delay in implementation of Obamacare, or possibly defunding, or possibly, something, 'cuz... OBAMACARE!!!!  Yeah, that didn't work out so well.  The GOP had to cave.  Boehner and McConnell knew that would be the result.  They always hated Ted Cruz.  The point, for Cruz, was always that Boehner and McConnell would cave, and that Cruz would be able to call them cuckservatives for doing so.  He really is a shitbag.  This is kind of the critical story, though, because the 2013 shutdown failed spectacularly.  The GOP was demanding completely unrelated concessions in exchange for the continued operation of government.  It made them look like assholes.  The way you win a shutdown is by making the other side look like assholes.  That's hard to do when Ted Cruz is leading your side's charge...  That's also hard to do when your demand is unrelated to the primary issue at hand-- the continued operation of government.

So, here we are.  The House passed a continuing resolution.  Why a continuing resolution?  Because actual appropriations bills are soooo 20th century!  Whether or not we get a shutdown now depends on the Senate, and specifically, Senate Democrats.  PredictIt right now puts the odds at just below a coin toss.  The problem is that right now, their demand is DACA, and DACA is dead.  More than that, it is not germane to the shutdown itself.

If the Senate Democrats shut down the government over DACA, they are pulling a Ted Cruz.  Will they?  Odds right now are slightly against it, but at this point, things are uncertain.  If they do go for a shutdown, what happens?  Part of Ted Cruz's problem was that he is Ted Cruz.  It is hard to look like the bad guy when your adversary is Ted Cruz.

But you know who managed that task?  Trump.  By calling Cruz's wife ugly and accusing his father of participating in the Kennedy assassination.  Of course, Ted Cruz managed to undercut any sympathy anyone might have for him by allowing himself to be brought to heel, but this sort of makes an important point about the dynamic here and the underlying question.

Yes, if the Senate Democrats shut down the government over DACA, they are doing what Republicans used to do.  Same fuckin' thing.  Hostage-taking.  The thing that puts them in a somewhat better position is that their adversary is... Donald Trump.

Remember, though, that in 1995, when Newt Gingrich shut down the government, Bill Clinton was considered politically inept.  His first two years consisted of nothing but bumbling.  A lot of people look back on Clinton as a political operator of rare gift, but in 1995, that wasn't what people thought of him.

Will Trump show some heretofore unseen stable-genius-ness?  Ummm... not likely.  That isn't what the Montreal Cognitive Assessment assessed.  However, don't assume you know how this plays out.  If the Senate Democrats shut down the government here, they are the Ted Cruz of this situation, regardless of what you think of the policies they are pursuing, and Gingrich wrote off Clinton's ability to beat him.

Right now, I have no idea how this plays out.

Thursday, January 18, 2018

Bitcoin is bullshit, Part XIII: Ideology and asset pricing

Screw it.  We have no idea what is happening with the potential shutdown, and bitcoin just had another massive price plunge, so I'm doing another bitcoin rant.

When I left off with Part XII, I commented on the relationship between currency preferences and ideology, arguing that bitcoin-bugs are basically just goldbugs, updated for the computer era, and that we should be aware of the ideological history of currency preferences.  When conducting transactions, though, most consumers just want to conduct transactions smoothly and easily, so while bitcoin-bugs will pay transaction costs for the ideological satisfaction of using their favorite currency, most consumers won't.

As has been clear for a long time, the market fluctuations in the price of bitcoin are driven, not by currency traders converging toward the proper exchange rate between dollars and bitcoin, but by market speculators buying bitcoin at an inflated price hoping to turn around and sell it to a bigger sucker at an even higher price because for a while, that strategy was successful.

You just can't keep that going forever.  That plan, for the housing market, is what crashed the entire world economy back in 2007 and 2008, in case anyone forgot.  Fortunately, not many people actually own bitcoin or get involved in this scheme, so bitcoin can't crash much of anything, but... remember 2007-8.  This is a stupid plan.  House flipping made some people money.  Until the housing market crashed and took the world economy with it.

There came a point at which the speculators and flippers got out of the market.  For a while, anyway.  Real estate is a tempting market for scammers and con artists, and it always will be.  Just sayin'...  Sometimes, when an asset bubble bursts, there are longer term consequences.  Consider the tech bubble from the 1990s and early 2000s.  There were a bunch of companies that pretty much did jack fucking shit.  But, venture capitalists and market speculators threw money at any company that put a ".com" in their names because... well, because.  People were dropping out of college to earn six-figure salaries to build web pages.  Yes, really.

That couldn't last.  The companies that had no business plans just went belly-up and their stock collapsed.  Since then, the tech sector has done quite well, market-wise, and investors haven't been willing to invest in tech companies that didn't have business plans.  I guess they learned that lesson.

Once the speculators got out of the market, assets wound up being priced appropriately.  For a lot of those companies, that meant... well, they couldn't give stock away.

The point is that markets need to kick the damned speculators out in order for assets to be priced appropriately.  The speculators are still driving things in the bitcoin market, but once they're gone, it won't be quite like the tech bubble bursting with bitcoin.  Why?  Ideology.  That, and criminals.

Remember that there are a couple of types of people drawn to bitcoin:  techno-libertarians who are just making an ideological statement, hipsters who just want to be different (fuck you, I'm not that kind of hipster), and crooks-- people who are either moving illegal goods, or just avoiding taxes.  They'll still use cryptocurrencies.  Maybe not bitcoin.  Hell, the hipsters will probably prefer Dogecoin because it's even more ironic.  Still, that's a market.

What you may see now in the analysis is a bunch of people doing conventional stock analysis of whether or not bitcoin's price has hit important "technical" levels that indicate either stabilization or further decline.  That completely misses the point because bitcoin is not an asset backed by anything.  They can't even use the kind of analysis that would usually be done for currencies.  Bitcoin is way too volatile, which as I keep reminding you, makes it useless as currency anyway.  Speculators are freaking out because of rapid price drops.  They should.  Bitcoin could climb again.  Or drop more.  There isn't history for anything quite like bitcoin, and the people involved in this particular market speculation have no clue what they are doing.  Obviously.  So, a lot of them are losing a lot of money, unnecessarily.

At some point, though, they will get sick of losing money on that volatility, and leave the bitcoin market.  When they do, there won't be the highs anymore, because the market highs are driven by speculators.  Where will it settle?  Wherever the hipsters, techno-libertarians and crooks want it to settle.  We have no clue where that is, but if I had to guess based on empirical data, some point around where it was before all of the stupid market speculators jumped on board.  Pick a point representing that, and there's your price.

Remember, though, a currency doesn't work as currency unless it is a stable store of value.  Any movement, up or down, and it is useless as currency to one party in any exchange, and since bitcoin has no value as anything other than currency, its movement itself makes bitcoin a joke.

Bitcoin is bullshit.

I think I have probably covered most of what I want to cover here.  At some point soon, I'll wrap this up, do a summary and compile the links.  Besides, with the shutdown possibility, and politics ramping up again, I don't need to keep stalling.  Perhaps I'll come back to this, but look for a wrap-up post on this soon.

Wednesday, January 17, 2018

The chances of a government shutdown

And heeeere we go again...

While we have been focused on shithole-gate,* there is something of more substantive importance going on, but it is actually related to the whole-shithole/house thing.  Appropriations are about to run out again.  When federal agencies run out of money, they can't pay their employees, who get furloughed, starting with the least-essential employees.  The longer it goes on, the worse it gets.  And we've got through the week to see how another one of these stupid fights shakes out.

No, this isn't normal for unified government.  It is semi-normal for divided government, which tells you something.  Specifically, the Republican Party is a mess.  Paul Ryan can't manage the Freedom Caucus, just as John Boehner couldn't, so the GOP is often dependent on Nancy Pelosi to provide Democratic votes for must-pass legislation.  In the Senate, the GOP isn't using budget reconciliation, so their bills can be filibustered, which means they need to peel off at least nine Democrats, presuming they keep all GOPers in line, but that includes "the Drama Club" (Rand Paul, Ted Cruz, Mike Lee and Ron Johnson).  Frankly, they'll probably have an easier time winning Doug Jones's vote than they would have with Roy Moore, although I suppose they could have offered him a Senate page to seal the deal...

Shutdown fights in divided government have historically been "won" by the president.  Bill Clinton forced Newt Gingrich to cave in 1995 and 1996, and Barack Obama forced John Boehner and Mitch McConnell to cave in 2013, although Boehner and McConnell both knew it would happen, and neither wanted to fight that fight.  After that shutdown, McConnell said, "there is no education in the second kick of the mule.  The first kick was in 1995."  Why did they do it?  They felt their hands were forced by assholes like Ted Cruz, as part of a stunt building towards his presidential campaign.  See what that got him...

Anyway, though, we don't have any data on extended shutdown fights during unified government.  'Cuz they don't fucking happen.  Shutdown fights are blame games.  Whoever takes the blame publicly, by looking more unreasonable, caves.  In 1995, Gingrich looked like an asshole, because he is an asshole, and the position of the GOP came across as more unreasonable, so they had to cave.  That was the main dynamic in 2013 too.  It is all about public perception.  Whichever side takes the public relations hit caves.

So, in unified government, what happens?  First, it is really hard to avoid the perception that the GOP isn't "responsible."  Not impossible, just hard.  After all, if a shutdown happens, which chamber of Congress fails to pass appropriations?  If the problem is that the House can't pass anything, blaming Nancy Pelosi is pretty fucking ludicrous.  When Pelosi was Speaker, she never needed Boehner for must-pass legislation.  If the Freedom Caucus and the Opposable Thumb caucus can't agree, and that's what causes a shutdown, the Democrats don't get blamed.

What about the Senate?  There it gets trickier.  It is highly unlikely that a bipartisan bill passes the House, but fails in the Senate.  But, what if the GOP holds together in the House, and passes something with no Democratic support there, and the bill can't get through a Democratic filibuster in the Senate?  Does a shutdown get blamed on the GOP just 'cuz they're the majority, or on the Democrats for filibustering?  Now we're in public relations territory.

You win this public relations fight by looking reasonable.  The problem for the GOP is that their most visible figure is... Donald Trump, who goes out of his way to be Donald Trump.  The Senate was negotiating DACA, and after first telling the group that he would sign anything, Trump shut down the bipartisan compromise framework, then opened his shithole, and finally told his flunkies to lie on his behalf, and claim that he never said, "shithole."  Personally, I don't give a flying fuck whether it was "shithole" or "shithouse," and neither do any of the Democrats.  Trump's behavior had two effects.  First, it undercut anything like good faith negotiation.  Second, it undercut his party's attempt to look like the reasonable party.

The Democrats' original plan was to demand a DACA deal in exchange for avoiding a shutdown.  As I keep writing, there won't be a DACA deal.  That was never in the cards.  What happens, though, if Democrats force a shutdown over it?

They can, because Republicans aren't using reconciliation in the Senate.  I don't know what happens then.  There is no obvious connection between DACA and the continued operation of government, so it winds up looking a lot like hostage-taking.  The GOP did that a lot during Obama's administration, and it didn't go over well for them.  They lost the 2013 shutdown.  Badly.

Of course, Trump isn't Obama.  Obama was calm and composed.  Not much of a tactical or strategic brain in his head, but he was calm.  Trump is...

Well, let's remember what the Montreal Cognitive Assessment does and does not assess.  If a shutdown happens, he'll open his shithole, and even if his party has a structural advantage, he'll undercut it by being Trump.

That said, Democrats don't have much of a hand to play here, and they don't have a history of playing their hand aggressively.  At PredictIt right now, they're putting the odds of a shutdown at right around 1 in 4.  Sounds about right to me, but hey...  with Trump, who knows?  Shit happens.  In houses and holes, whatever Tom Cotton and David Perdue say...


*While I obviously detest Trump, as a George Carlin fan, I revel in the fact that he forces the political world to confront some of its more stupid linguistic rules.  Some of my "profanity" might be considered gratuitous by small-minded people, but when I write, "shithole,"... nope!  I actually need to write, "shithole!"  Or possibly, "shithouse," but same difference...

Tuesday, January 16, 2018

Jeff Flake and Republican congressional support for Trump

Retiring Senator Jeff Flake (R-AZ) is no fan of Trump.  He has drawn a connection between Trump's constant attacks on the press for their criticism of him and Stalin's opposition to a free press.

Let's get the facts straight here.  Donald Trump does not believe in the concept of a free press.  He wants to prevent the press from criticizing him.  If he could imprison and execute anyone who criticizes him, he would.  I don't think anyone can seriously challenge that, given what we have observed from Trump.  He idolizes Vladimir Putin, Kim Jong Un, Saddam Hussein... And he does so precisely because of their authoritarianism.  This is on record, and not a debatable point.

What he has done, though, is talk endless shit.  His lawyer has filed a suit about Fire and Fury, but that ain't goin' nowhere.  We can ask about the blocking of AT&T's acquisition of Time Warner, but at the end of the day, what Trump has done is talk shit.  And holes.  Shitholes!  Tom Cotton and David Perdue are fuckin' liars, is what I guess I'm trying to say here.  At least Lindsey Graham isn't going along with the lie.

Anyway, there is a great deal of damage that can be done by trash-talking because there are a lot of people stupid enough to believe Trump.  Information is necessary.  The more Trump undercuts people's willingness to accept information, the more democracy is undercut.  Let's throw in that Woodrow Wilson quote here.  Yeah, Wilson was as racist, or maybe even more racist than Trump, but the quote is relevant.

America is the place where you cannot kill your government by killing the men who conduct it.  The only way you can kill government in America is by making the men and women of America forget how to govern, and nobody can do that.

Um... beg to differ, there, Woody.  Donny-boy is doing a pretty good job making the men and women of America forget how to govern.  If people decide that there are no sources of information, then they have no information with which to make decisions.  And we're all fucked.  Yes, you can make the men and women of America forget how to govern.  To borrow a phrase from Upton Sinclair, it can happen here.

It hasn't, but it can.  Without information.

But Trump hasn't done to the press what Stalin did.  This is not the the crushing of democracy.  This is the slow erosion of democracy.

Yay?

Jeff Flake is an anomaly within the GOP, though, for saying anything at all negative about Trump.  The obvious point is the right one.  He is retiring.

There is scholarly research on the role of sincerity in legislative behavior.  How much of what legislators do is because they are being pressured by electoral or other considerations, and how much is because it is what they really think is right?  Look at retiring legislators.  Once legislators decide to retire, they can do whatever the fuck they want.  So, they will reveal their sincere preferences.  This line of research began with John R. Lott, and has been picked up by several co-authers with Lott, as well as Lawrence Rothenberg & Mitchell Sanders, and a bunch of others, but point being, there's a... lot.  Get it?  Anyway, elections actually kind of suck.  They make legislators... insincere.

The retiring legislators are the ones who have been going after Trump.  Mostly.  Sort-of.  Flake talks a lot of shit about Trump.  Corker, in the past, talked a lot of shit about Trump, but in case you haven't noticed, he backed off of that right around the passage of the tax bill, when he caved on his bullshit anti-deficit rhetoric (which, hey, I called it and should never have questioned my original judgment).  In fact, Flake made noises about not liking deficits too, and he also caved.  What did Flake get?  A "seat at the table" for DACA negotiations.  You know-- the ones that just got flushed down Trump's shithole!  Translation:





Corker and Flake caved because they are cowardly, weak and foolish.  And they occasionally lash out in ways that are empty, feckless and laughable.

Do they like Trump?  No.  Very few congressional Republicans actually like him.  But even in retirement, they are mostly cowed by him.

The analogy that I have regularly made about Trump and the GOP is that Trump has an electoral bomb strapped to him with a dead-man trigger, and the entire Republican Party is chained to him.  If he goes down, he takes the entire party with him, so the party feels compelled to support him no matter what.  If they don't, the party relives the sequence of the 1974 and 1976 elections, in which the party suffered a series of backlashes after the Watergate scandal, resulting in a massive Democratic landslide (a real one...) in Congress, and the election of "history's greatest monster."

The interesting question is how much this matters to retiring legislators like Flake and Corker?  Are they concerned about the party after they go?  Maybe!  Or, maybe there's something else.  The other analogy I have made to the relationship between Trump and his party is "learned helplessness."  Donald Trump is an abuser.  This isn't an analogy.  He brags about sexual assault.  He does so many horrible things that we, as a political culture, tend to move on to the next outrage, and we are currently focused on shitholegate, but really, we shouldn't have moved on from the fact that he brags about getting away with rape.  He is an abuser.  He enjoys bullying people, and when people have been bullied for too long within a relationship, the psychological effect is often to decide that there is nothing they can do about it.  So, they give up.

A lot of congressional Republicans have simply given up and decided that they must accept fealty to Donald Trump.  They simply don't think they can fight him, so they submit to him, the way that abuse victims submit to abusers.  Paul Ryan, Mitch McConnell... they are truly afraid of Donald Trump.  And they should be!  Within the Republican Party, if Trump decided to go to war with any one of them, he would destroy them.

This brings back the concept of the collective action problem, which I have addressed multiple times in this context, but the point is that Trump has brought the GOP to heel.  Note that even Lindsey Graham is being round-about in backing Dick Durbin.  He isn't just flat-out saying, "Durbin is right, Trump said it, and now Trump, Cotton and Perdue are lying."

If he were retiring, he might.  Then again, maybe not.  Even in retirement, Corker and Flake were malleable.

Tuesday music: If you only listen to American music, you just suck

Ok, so I bashed Norwegian music in Friday's music post.  I believe I have one Norwegian musician in my collection:  this guy.  Bjørn Berge.  Why?  Because he doesn't play Norwegian music.  He's a blues musician.  You know, that African-American music style?  Here's "Look On Yonder Wall," from Stringmachine.


Monday, January 15, 2018

Presidential bargaining for dummies, I mean, stable geniuses

Last week, I predicted that nothing would happen on DACA.  However, my original prediction was that the House Freedom Caucus would kill any legislative deal to restore it.  Then... Trump did his Trump thing, and yesterday, he essentially killed any further negotiations by tweeting (of course) that he didn't think there would be a deal because Democrats didn't want one.

Scholarly reference time.  Tim Groseclose and Nolan McCarty, "The Politics of Blame: Bargaining Before an Audience," American Journal of Political Science Vol. 45 No. 1, January 2001, pp. 100-119.  Sorry, I can't give you an ungated link, but if you are on an academic terminal, this will work.

Short version:  Legislative failure can happen if you have an uninformed audience, where the president is trying to appear moderate, but Congress traps the president into a veto, making the president look more extreme by writing a bill, intentionally, that they know the president can't sign.

Within the model, though, Congress doesn't want a policy to pass.  Their goal is to make the president look like an extremist.  And the president doesn't reject deals needlessly.

Enter the Stable Genius!

First, Trump says he'll sign any deal.  Then, he rejects a bipartisan deal framework put together by the Senate's "gang of six."  Why?  'Cuz...  Was that deal veto-bait?  No.  Would the deal have passed the House?  No.  The Freedom Caucus would have killed it there.  What did he have to gain by rejecting it, then?  ...

Trump currently wants to blame Democrats for this falling apart, which... 

That's not how this works.  DACA was a Democratic policy, enacted through executive action by Obama.  Republicans challenged it as "executive overreach," going so far as to call it unconstitutional.  Trump reversed DACA personally, then personally rejected the bipartisan compromise worked out by the Senate's gang of six.  He can't avoid the blame for killing DACA.

The funny thing is, if Trump wanted to do that, he could have!  He could have let the House Freedom Caucus kill the gang of six plan!  But... that's not how our Stable Genius does things.  When Trump is the guy who walks away from negotiations after a compromise is worked out (sort of, anyway), on a policy that he already personally killed, it is hard to shift blame.  What's going on?

Groseclose & McCarty's model is about the drive to appear moderate.  Remember that dust-up during the recorded meeting when Trump said he'd sign anything, even a clean DACA bill?  His party freaked the fuck out.  Trump's goal is not to appear moderate.

Really, this has all been a sham.  DACA never had a chance.  As I said last week, I expected the Freedom Caucus to kill it in the House.  Then, Trump opened his shithole...