NEW HAMPSHIRE—Are Barack Obama and Mitt Romney so different after all? Despite the media’s portrayal of Romney as a uniquely craven politician, the recent controversy over Obama’s views on gay marriage highlights the ways that both candidates—like nearly all politicians—have adjusted their positions over their careers for political reasons.
On Sunday’s Meet the Press, Vice President Joe Biden made unexpected news by saying he is “absolutely comfortable” with gay marriage—a remark that seemed to contradict Obama’s stated opposition to same-sex marriages. Though Obama adviser David Axelrod promptly denied that there was any difference between the two men’s views, many observers interpreted Biden’s statement as the latest example of the administration’s hedging of its position on the issue. President Obama indicated support for gay marriage in a questionnaire as a state senate candidate in Illinois but has opposed it since his 2004 US Senate campaign. As public support for gay marriage increases and the Democratic base’s demands grow more insistent, the President has acknowledged their concerns, stating last year that his views were “evolving” and that he “struggle[s]” with the issue.
In the wake of Biden’s comments and Education Secretary Arne Duncan’s open declaration of his support for gay marriage, White House spokesman Jay Carney was battered during his press briefing Monday by reporters who are frustrated by the administration’s doubletalk on the issue.
What’s striking, though, is the way in which the controversy has been framed. While reporters acknowledge the political concerns facing the administration, few have personalized the issue as providing some insight into Obama as a person. In Monday’s Boston Globe, for instance, correspondent Callum Borchers notes that Obama’s “position on same-sex marriage has vacillated over the years,” but does not portray the issue as one that reveals some weakness in the President’s character. Borchers even adopts the administration’s preferred framing of Obama’s changing views in the kicker to his report (though perhaps derisively), stating that “Some Democrats have called on Obama to include support for same-sex marriage in the party’s presidential platform, [b]ut Obama campaign officials have given no indication that the president’s policy on the subject will evolve further before November.”
The second wave of coverage of the debate Monday afternoon and Tuesday morning was more critical (see, for instance, this report from the AP’s Julie Pace), but with the exception of The Huffington Post’s Sam Stein, journalists still generally refrained from framing the issue as providing some insight into Obama’s character or psyche. (Disclosure: I sometimes blog for HuffPost.) If anything, Obama has been faulted not for his shifting views, but for failing to flip on the issue before the election (ABC’s Jake Tapper: “Why not just come out and say [that he supports gay marriage] and let voters decide?”).
By contrast, the press has treated the changing positions of Romney, the presumptive GOP presidential nominee, far more harshly. Consider the Globe, which has probably written more about Romney than any other publication due to his stint as Massachusetts governor. Reporter Glenn Johnson, for instance, has written of “the numerous flip-flops undertaken by Romney before, while, and since he served as governor of Massachusetts,” and suggested that they raise “character questions” about Romney. Like most of the press, the Globe thus gave significant coverage to the reference to “an Etch a Sketch” by Romney adviser Eric Fehrnstrom despite the ambiguity of the statement in question. Johnson himself wrote that “the Etch a Sketch comment affirmed basic truths about the candidate, his staff, and the nature of the campaign they have run for the nation’s highest office,” including the fact that “there appear to be few core beliefs that bind Romney to any governing or political philosophy.”
Why have Obama and Romney’s “evolutions” been covered so differently? As Joshua Green of Bloomberg Businessweek noted on Twitter, the difference between the candidates is far less clear than the media coverage would suggest. In both cases, electoral incentives are the primary factor shaping the positions that candidates publicly profess. When those incentives change, so do their positions.

Thanks to the author for noticing this small, but telling detail of the conventional narrative/vocabulary of American political reporting. The large media organizations select and frame what is 'news' based on quite profoundly-held ideas about what is going to be historically important, and what is not. Even the past is cherry-picked to support a narrative that came to dominate the thinking of the urban bourgeoisie as far back as the early days of 'modernism' in the last century.
It's remarkable how powerful this narrative is, extending even to the issues above. I don't think the urban/bourgeois narrative has been a very accurate predictor of the direction of history, but it retains its hold on journalists. Obama is recognizing the direction of history, you see, so he is 'evolving'. (One element of the urban/bourgeois narrative is to frame self-interest in pseudo-scientific form.) Romney is flip-flopping in order to 'pander'. (You can't 'pander' to the urban affluent, you can only recognize its superior evolution, in both moral and intellectual terms.) The problem with modernity and its offshoots like 'coolness' is that 'coolness' is usually a pose.
#1 Posted by Mark Richard, CJR on Tue 8 May 2012 at 12:21 PM
The differences between Barack Obama and Mitt Romney as individuals are not that huge.
They are both rich, pro-market, pro-choice, believers in mandated private health care coverage coupled with public subsidies, the list is long as to what they have in common.
But what they have different is their constituents. The radical right wing is disciplined and focused enough to push awful right wing policy to make the recession worse than it is. Mitt Romney's economic background in the white house will be like treating cancer with dioxin. Democrats hate their base and have to attempt to marginalize and maneuver around groups like occupy to make their donors happy while giving enough to the 99% to keep their pitchforks sheathed. Romney and republicans are either made up of the most radical elements of their base, or they are scared to death of it. If they don't push the tea party, koch brothers, Limbaugh agenda, then they stand to get scorched by it.
You want to see how president Mitt Romney will govern? Easy. Look at the state legislatures where republicans dominate and push the same laws and act in the same manner. President Mitt Romney would be interchangeable from president Scott Walker or president John Kaisch or president Mitch Daniels. If you want a "right to work" nation, vote Republican. If you want to push a Ayn Rand inspired, Paul Ryan budget vote Republican. If you want neo-cons who are bringing the Bush Doctrine regime change band back together again under Romney, vote republican.
There is no voting for Mitt Romney. Mitt Romney is just an executive within the brand. He won't change the brand. If you vote Romney you are voting Republican.
The question you need to be asking is, "Who are the Republicans and do I want them in charge AGAIN?"
#2 Posted by Thimbles, CJR on Tue 8 May 2012 at 12:29 PM
Whoops, the link above was about the Bush economic team, not the Bush Doctrine team.
Sorry, my cut and paste skills aren't as good as a republican policy maker.
#3 Posted by Thimbles, CJR on Tue 8 May 2012 at 12:38 PM
WTF?!...
Fairhanded coverage of media bias from CJR?!....
Isn't this one of the Seven Signs of the Apocalypse?
Who is this new "watchdog" and how in the Hell did he get past the gatekeepers?
#4 Posted by padikiller, CJR on Tue 8 May 2012 at 12:47 PM
If you ask me, the state of political reporting in America isn't going to be measured by the Obama vs Romney race. The candidates are too similar and drawing from similar donor pools to really make a contrast in coverage. Romney is forced to look ingenuine because he needs to appeal to a base which knows it doesn't need the presidency to get much of its policy agenda, all it needs is 30% of the vote in strategically weighted districts to ensure a filibuster and then leverage that filibuster over debt limits and other acts of brinkmanship to make the majority beg for mercy from the minority.
So Romney is forced to run a schizo campaign to appeal to the hard core conservatives, and a lite campaign to appeal to the public (didn't Bush try this with his compassionate conservatism shtick?). Unfortunately for Romney, Bush had the affable doltishness required for the political press to give him the benefit of the "I'd rather have a beer with him than Gore" doubt.
Nobody wants to have a beer with Romney. You've got intellectual vs intellectual, one of whom really has to run two faced and has the lability of a hard to hide, financial elite background which America has really soured on. The competition will be close, but the outcome is pretty determined baring any electoral fraud/voter suppression.
No, the real contest that is showing how HORRIBLE the political press has become is the Brown vs Warren contest.
There you have an impeccable law professor who has been the leader of the Congressional Oversight Panel, the pusher of real financial reform, the person who has been talking about the deteriorating economics of the middle class since Clinton, the person who has crafted an entire consumer protection agency while the banks and many democrats stood opposed, a person who has proved she isn't owned by anyone but the people she knows requires help and hopes will elect her, and there is ample opportunity to talk about the records, politics, policies, economics, which motivate these candidates so we can see the contrast.
Instead, what is being talked about?
http://www.youtube.com/watch?v=zQ6RjP7MlXk
Jesus Christ.
We entrust the worst people in America to talk about its most important issues. No wonder the electorate has a hard time figuring out who to vote for. You've got Karl Rove on one side claiming she supported the bank bailouts and made nice with the bankers, you've got Scott Brown on the other side talking about how she's an affirmative action candidate.
Given all that, what's a press to do? Talk about something that matters?
No, the people are going to be more informed about the candidates' fractions of ethnicities than the actual qualities that qualify them to be representatives of the people.
It's really sad.
#5 Posted by Thimbles, CJR on Tue 8 May 2012 at 02:06 PM
Brendan writes, "The difference in their circumstances—and Romney’s lack of skill at glossing over his changed views—help explain the disparity in media coverage." Yes, those help explain the disparity in media coverage. What else could help explain the disparity? Let me put my thinking cap on. Damn, it's so hard to concentrate with this giant elephant in the room.
#6 Posted by RobC, CJR on Tue 8 May 2012 at 02:07 PM
According to Brendan Nyhan, the media says Obama "evolves," but uses the harsher term "flip flops" on Romney.
Why would the media judge the Republican more harshly than the Democrat for the same action?
Couldn't be because the political media is overwhelmingly Obama-voting Democrats. Nahhhh.
Brendan Nyhan, who got his start as a Dem Party staffer in Nevada, is only good for comic relief.
#7 Posted by Peter Zenger, CJR on Tue 8 May 2012 at 03:49 PM
"Why would the media judge the Republican more harshly than the Democrat for the same action?"
Question, which direction is the flip flop in?
Because when Obama flips to the left and starts calling out republicans in speeches, the press can't seem to help but push republican accusations of "Ooo! Class Warfare!".
Obama can "evolve" on issues which don't affect power. Flip the wrong way, and the press will start batting you around like a yarn ball.
#8 Posted by Thimbles, CJR on Tue 8 May 2012 at 04:24 PM
"The differences between Barack Obama and Mitt Romney as individuals are not that huge. They are both rich, pro-market ..."
Right, because we all know they oppose:
-- central banking and central economic planning (e.g., the Fed)
-- bailouts, "public-private partnerships," etc. (corporatism)
-- income taxation
-- sanctions, protectionist tariffs, etc.
-- subsidies to preferred industries and businesses
-- economic legislation by executive decree (e.g., "regulations")
Oh, wait! They both actually FAVOR all those big-govt/fascist/socialist things, plus aggressive wars against Americans (drug war, etc.) and foreigners (Afg., Yemen, Iran, etc.) that play no small part in the decimation of free enterprise.
But yeah, they are conceivably pro-market — from the viewpoint of, say, a Marxist.
#9 Posted by Dan A., CJR on Tue 8 May 2012 at 06:32 PM
To my defense, I said pro-market, not free market.
Which is why you have Mitt Romney's pro-market health care as Obama's "Big F'in Deal" accomplishment.
For that matter, it's why:
http://www.rollingstone.com/politics/blogs/taibblog/is-this-the-most-boring-election-ever-20120507
"Obama has turned out to represent continuity with the Bush administration on a range of key issues, from torture to rendition to economic deregulation. Obama is doing things with extralegal drone strikes that would have liberals marching in the streets if they'd been done by Bush.
In other words, Obama versus Bush actually felt like a clash of ideological opposites. But Obama and Romney feels like a contest between two calculating centrists, fighting for the right to serve as figurehead atop a bloated state apparatus that will operate according to the same demented imperial logic irrespective of who wins the White House."
Which is why I'm saying, it isn't about Obama and Romney as individuals, it's about the people they'll be taking in with them to the party. The republican party, right now, does not have good people. It has corporate backed sociopaths who have no problem beating the country with a bat until it votes their way again.
At least the democrats maintain the pretense of caring about the people getting beaten.
#10 Posted by Thimbles, CJR on Tue 8 May 2012 at 07:00 PM
Unfortunately, Brendan Nyhan seems to have become a professional false equivalentarian. Using the gay marriage issue as a way to suggest President Obama is some kind of waffler or flip-flopper like Romney is bogus, given that Obama is the president who pushed to end DADT in the military, has stated his support for state gay marriage initiatives, and told his Justice Department not to defend the "Defense of Marriage Act." He has consistently said he favors civil unions but not gay marriage. Where are the inconsistencies? Just because VP Biden took a different position makes Obama inconsistent?
Nyhan is one of the few journalistic observers who thinks Fehrnstrom's Etch a Sketch comment was "ambiguous." But many people already have taken Nyhan apart in comments on that one.
And how about this for the latest demonstration of Romney's vaunted "flexibility"? This on the auto industry bailout issue:
http://2012.talkingpointsmemo.com/2012/05/romneys-auto-rescue-claims-dont-hold-up.php?ref=fpa
#11 Posted by Harris Meyer, CJR on Tue 8 May 2012 at 09:16 PM
Don't be a sucker for the DEM-REP duopoly. With precious few exceptions and only the slightest difference in degree and selling points, both parties support every item in my previous list.
Preemptive war and sanctions? Check. Police state and official ("legal") mass murder? Check. Drug war? Check. Income taxation? Check. Central banking and economic planning? Check. Bailouts and protectionism? Check. Federal supremacy beyond constitutional limits, everywhere? Check.
Obama and Romney are leaves; the State is at the roots. You can keep raking and pruning while I dig and chop; just don't say you didn't hear "timber!"
#12 Posted by Dan A., CJR on Wed 9 May 2012 at 07:50 AM
The whole "gotcha" politics now practiced--take a quote out of context and twist it around--is not limited to media, but is only amplified by it.
Yet, it's nothing new. In the Illinois Senate Debates of 1858, Douglas accused Lincoln of inconsistency on the slavery issue...we'd call it flip-flopping now. When Lincoln went to Washington as President in 1860, he was against emancipation of slaves, but he later signed the Emancipation Proclamation (ok...he also exempted border states and states in the Union). Honest Abe..a founding father of the Grand Old Party...was he a flip flopper?
Romney has a straddle problem. So does the GOP, as the Atwater marriage between Goldwater Republicans and Social Conservatives is in serious trouble. The Dems moved towards the right since the days of Humphrey, McGovern, Jesse Jackson, and Carter. They're now right-center, even by Reagan standards. It's the GOP that's been dragged so far right that now any deviation from orthodoxy on right wing politics is punished (ask Dick Lugar!)
But the center Dems are "occupying" much of the space formerly reserved by the GOP! Who had the last balanced budget? Who was President the last time unemployment was 4%? Who bailed out the Auto Industry, saving millions of jobs? Who kept the banks from imploding? Who was President when the WTC was sucker punched in 2001? During whose watch was job loss of 800,000 per month turned into job gains in the private sector?
And Ann Romney thinks she's your typical average stay at home mom who made the "hard choice" to stay home with her children? In Texas, the GOP thinks women are so stupid or evil that they need trans-vaginal ultrasounds courtesy of the state legislature.
Thirty years of Reaganomics brought us to deregulation retribution...my friends, it turns out (after all) that government wasn't the problem...intentionally underfunded and incompetent government WAS the problem!
Where was Brendan when John Kerry was raked by the Swift Boaters? Where was he when Kerry was accused (inaccurately, it turns out, if you're into facts) of flip-flopping on Iraq?
Does anyone think that Obama has changed his view on gay marriage?
#13 Posted by JKinIL, CJR on Wed 9 May 2012 at 12:36 PM
'Intentionally underfunded government . . . ' Don't know whether to laugh or cry. In the US, government consumes over 40% of the gross national product. How much more 'til we get to Utopia? The answer will always be 'more'.
California has one of the costliest public sectors in the country, and perhaps its most dysfunctional fiscal sector, by an amazing coincidence. France's state is now 56% of its entire GNP, but unemployment remains high, and its young Moslem population remains restive. Like most of the rest of the western European welfare states, it now suffers from the rise of 'rightist' extremist-nationalist parties and 'leftist' representatives of the entitlement mentality.
Some state-worshipper needs to explain why, but the chattering classes positively refuse to examine, for example, California's problems with fresh and non-ideological eyes. Paul Krugman's thoughts on California as a multi-cultural, high-tax, high-regulation civic environment/model for the rest of the country would be interesting. But freedom of speech entitles you to avoid talking about what may be embarrassing to your ideology.
It's annoying that the concept of 'socialism' has been mixed up with the idea of 'big government', when in fact a large state apparatus may just be an expression of old-fashioned dirigisme. Louis XIV was a 'big government' man, too.
#14 Posted by Mark Richard, CJR on Wed 9 May 2012 at 12:54 PM
People -- commenters here demonstrably included -- see things through their own biases. Does anybody dispute that the editorial boards of the New York Times, Washington Post, etc., as well as those who control the major news networks, are overwhelmingly Democrats? The Times, to cite just one example, hasn't endorsed a Republican for president since 1956.
The explanation for why a collective news media so slanted in one direction would demonstrate bias in that direction is neither mysterious nor complicated.
#15 Posted by DJR, CJR on Wed 9 May 2012 at 04:24 PM
"In the US, government consumes over 40% of the gross national product. How much more 'til we get to Utopia?"
First off, that figure includes all government, which if you look at revenues for federal, state, and municipal, "consumes" between 35 and 38% of GDP.
Second, it's not like government spending gets you nothing back. Healthy elderly, children, schools, roads, bridges, water systems, etc.. cost money. For some reason that money has not been spent maintaining those systems and it isn't because it costs so much more to build a road (healthcare inflation is your likely culprit).
It sounds like, if you really cared about the subject, you could do a study to find where money is being misallocated and shift those funds to areas in desperate need of public investment.
As it stands, yes there is a lot of tax revenue being starved through tax avoidance, fraud (MERS for instance), payroll caps, differing rates for capital gains and etc.. and yes, if we want to keep up with China, that money has to be captured and spent in similar fashion to the ways the Chinese government does to attract American business.
And don't yell at me about emulating the Chinese government, yell at the American businesses who are taking advantage of free trade, the large educated work force, and the friendly, subsidized business environment to relocate their manufacturing.
Playing by conservative rules has not worked out for 99.9 percent of America. That's your fault. It's not like you conservatives haven't been in charge the majority of the time for the last 30 long years.
#16 Posted by Thimbles, CJR on Wed 9 May 2012 at 04:56 PM
"Paul Krugman's thoughts on California as a multi-cultural, high-tax, high-regulation civic environment/model for the rest of the country would be interesting."
Citation Needed.
California is a problem child with a conservative midwife.
#17 Posted by Thimbles, CJR on Wed 9 May 2012 at 05:22 PM
It seems to me the fundamental difference is that President Obama is acknowledging the change in his views, while Mitt Romney appears to want us to forget that he ever held views diametrically opposing his current stances.
#18 Posted by Steve Holden, CJR on Wed 9 May 2012 at 08:18 PM
Well it looks like Obama's declared his same sex beliefs after a couple of prods from the Daily Show.
So let's talk about what's new on the Elizabeth Warpath:
"Oh, McDreamy, you stepped in it this time.
Things were going pretty well. The locals were keeping that nothingburger about Elizabeth Warren's professed Cherokee ancestry — something she shares with approximately 192.7 percent of everyone born in Oklahoma after about 1881 — heating up. The Warren campaign seemed unclear how to respond to aggressively promoted nonsense, a real rookie mistake in American politics in 2012. But then you had to go back to Washington and be a senator again, and things went badly wrong.
You see, Senator Brown, in Massachusetts, especially here in Boston, college is sort of like what cars used to be in Detroit and country music in Nashville. It's kind of what we do. College students — those double-parking, jaywalking, projectile-vomiting little parcels of disposable income — are our most important product, to borrow the old GE slogan. At last count, there were something just short of 350,000 of them living in the greater Boston area alone. And, yesterday, you voted to make sure the interest rates on all their student loans will double in July. The Republican party, because it is insane at its base and its congressional caucus is made up of nihilists and vandals, filibustered to death a Democratic attempt to keep the increase from happening. And you voted against a cloture motion that would have opened the floor to a vote in the bill, which would have passed with relative ease. So, come July, most of those 350,000-odd at-the-very-least partial constituents, many of whom already look at your opponent like she's the headliner at a Fillmore East show in 1969, will be paying almost seven percent on their loans."
Ties into something I was yapping about here.
I do like me some Charles Pierce.
#19 Posted by Thimbles, CJR on Wed 9 May 2012 at 08:40 PM
Of course Obama changed his mind, after all Obama came from Chicago THE politically corrupt city. Till not so long ago he was for civil union ONLY. I think that in his heart of heart he still against gay marriage, but when he realized that in 2012 there will be no repeat of OBAMAMANIA like in 08, he decided to come out with support for gay marriage, which has to be State law, not Federal. V.P Biden knew what he's "cooking" last Sunday on Meet The Press. Today Obama secured gay votes!
I'm for gay marriage and don't understand why it is an issue, for God sakes people are strugling these days to find jobs, and gay marriage issue became high priority for almost a week?
What now? Will all 50 State will accept gay marriage? If not, Obama's support will not help much. If couple live in NYS where gays can get marry, and had to move to other state (for some reason) which don't have gay marriage in State law what then?
#20 Posted by Sima Aharon, CJR on Thu 10 May 2012 at 03:49 AM
"The straight-talking politician who always says what he thinks and never changes his mind for political reasons is a fiction."
Ron Paul?
#21 Posted by Flagg, CJR on Thu 10 May 2012 at 05:13 AM
Ron Paul has a huge following and is quietly racking up delegates. He has earned the state county to be included at Tampa. This race is not over. And HE has NEVER lied or changed positions. Contrary to this op's conclusion, ONE candidate has never lied or changed positions, he's been "evolved" for decades and always true to Constitutional law, letter and spirit. Forget the RepubliCrat duopoly. Vote ObamNey, vote for the same awful policies. Vote Ron Paul, the true voice of opposition to the establishment.
#22 Posted by jtsgrandmom, CJR on Thu 10 May 2012 at 05:33 AM
The WaPo editorial board today dutifully trotted out the "evolution" terminology.
#23 Posted by Tom T., CJR on Thu 10 May 2012 at 02:08 PM
"If they don't push the tea party, koch brothers, Limbaugh agenda, then they stand to get scorched by it."
Hiya, Bye-ya Dick Lugar.
"If you want to push a Ayn Rand inspired, Paul Ryan budget, vote Republican."
Wow, they can't even wait until after the election to push it.
http://www.mcclatchydc.com/2012/05/07/148157/romney-gop-dare-to-tackle-social.html
"The popular programs, designed primarily to provide health care coverage and income security for seniors, have been politically untouchable for decades.
But presumptive GOP presidential nominee Mitt Romney, as well as most congressional Republicans, embrace sweeping changes that, among other things, would alter dramatically how seniors get health coverage a decade from now...
Study after study has found that to pare the government’s record debt significantly, the ever-rising costs of [WRONG]Social Security[/WRONG] and Medicare must be slowed. Social Security and Medicare accounted for 36 percent of federal spending in fiscal 2011, and as baby boomers age, those costs are projected to keep rising...
The GOP plan, proposed in several similar formats, works generally like this: After 2022, seniors newly eligible for Medicare would get federal subsidies to buy insurance coverage. They could purchase that coverage from Medicare, but they would have the option of buying a policy from a private company.
All insurance plans would have to offer coverage “at least comparable to what Medicare provides today.” If seniors wanted a more expensive plan, they would have to pay the difference between the federal aid and the premiums’ price. No one currently 55 or older would be affected.
Should they pick a less expensive plan, they could use the leftover federal funds to pay other medical expenses, like co-pays and deductibles. The Romney camp provides no cost or savings estimates.
The Heritage Foundation, a conservative think tank, likes the idea...
[MORE RIGHT. SHOULDN'T BE IN THE BOTTOM PARAGRAPHS] Social Security’s financial shortfall is less urgent; the trustees estimated that its trust fund reserves will be exhausted in 2033.[/MORE RIGHT. SHOULDN'T BE IN THE BOTTOM PARAGRAPHS] After that, tax income would be enough to pay only about three-quarters of scheduled benefits through 2086.
Medicare’s situation is more dire. The trustees estimated that the program’s hospital insurance trust fund will be depleted by 2024."
#24 Posted by Thimbles, CJR on Thu 10 May 2012 at 02:08 PM
"Study after study has found that to pare the government’s record debt significantly, the ever-rising costs of [WRONG]Social Security[/WRONG]"
As said here:
http://economistsview.typepad.com/economistsview/2012/05/dont-blame-budget-problems-on-the-safety-net.html
"It's hard to say this enough. The long-run budget problem is a health care cost problem, "which affect costs for private-sector care as much as for Medicaid and other government health care programs""
#25 Posted by Thimbles, CJR on Thu 10 May 2012 at 03:02 PM
And here's a good piece on Romney's grotesque Etch a Sketching on gay rights and gay marriage. Brendan, show us one issue where Obama has flopped around like this.
http://www.npr.org/2012/05/10/152431577/romneys-views-on-gay-marriage-also-evolving
#26 Posted by Harris Meyer, CJR on Fri 11 May 2012 at 01:47 AM
To Thimbles, Krugman's case is the borderline-pathetic one that Proposition 13 - passed thirty four years ago - is the cause of California's fiscal disorder. It must have lain dormant for the first 20 years or so, I guess. California was still bounding along in the 1980s after the tax-limitation was passed. If California's policy makers were too dumb to adapt and readjust the state's policies these 34 years to account for Proposition 13, then I think Krugman has inadvertantly made my case.
California's taxes are among the highest in the nation, and its commercial regulations, especially the environmental ones beloved of the states Hollywood and Marin County rich, are the most onerous. Krugman's answer is that Califoria needs more tax revenue. I wonder if even he really believes this. A lot of states passed tax-limitation laws in the late 1970s. Oddly enough, none of them has reeled from crisis to crisis as has California. New York City went technically bankrupt in 1975, and it wasn't because NYC taxes were too low. What did Santayana say about those who ignore history, etc.?
#27 Posted by Mark Richard, CJR on Fri 11 May 2012 at 11:36 AM
"To Thimbles, Krugman's case is the borderline-pathetic one that Proposition 13 - passed thirty four years ago - is the cause of California's fiscal disorder. It must have lain dormant for the first 20 years or so, I guess."
Oh wow, that's the argument used when certain people try to blame the CRA for the housing crisis.
A totally valid argument, were the effects of proposition 13 really nothing as the cra's was.
What the prop did was begin a hollowing out of the state, the municipalities, California's infrastructure, and California's schools so that services were cut back and more regressive sources such as sales taxes and tailored taxes designed to fund specific projects were employed to make up the losses.
So the state was crippled for a long time after proposition 13, but this was masked over by the successes of the silicon and network industries and the housing bubble.
What happened in 2000?
The internet bubble imploded and Enron screwed California power markets.
You can see that happening here:
http://www.usgovernmentspending.com/spending_chart_1990_2012CAb_10s1li111lcn_H1sH1l
Then, in 2007, the housing bubble burst.
In all these cases, it was the conservative ideas about deregulating the power market, deregulating housing finance, and the ability of investment markets to self regulate that led to financial breakdown.
And collapsed state and local revenues are making it difficult to rebuild.
#28 Posted by Thimbles, CJR on Fri 11 May 2012 at 09:51 PM
"California's taxes are among the highest in the nation..A lot of states passed tax-limitation laws in the late 1970s. Oddly enough, none of them has reeled from crisis to crisis as has California."
Citations Needed
#29 Posted by Thimbles, CJR on Fri 11 May 2012 at 09:57 PM
Time to toll The Reality Bell:
"The most popular beliefs as to what caused the U.S. mortgage crisis and subsequent economic collapse are wrong, according to a new study by the Federal Reserve Bank of Boston.
The report rejects the popular explanation that industry insiders misled borrowers and investors by pushing mortgages that they knew were likely to default. Instead, they argue that both borrowers and lenders had overly optimistic views of home prices, which led to bad decisions in purchasing and lending."
Spin down the turbines on your Chittum 5000 Black Helicopters, fellas!...
#30 Posted by padikiller, CJR on Sat 12 May 2012 at 10:16 AM
Pretty bad little paper.
http://www.bostonfed.org/economic/ppdp/2012/ppdp1202.pdf
"The bubble theory therefore explains the foreclosure crisis as a consequence of distorted beliefs rather than distorted incentives."
Can't be both eh? Because by claiming it's a bubble - some force of nature no man could avoid, the Boston Fed let's themselves, the NY Fed, and the Federal Reserve off the hook.
"As we argue in Section 3, neither the facts nor economic theory draw an obvious causal link from underwriting and financial innovation to bubbles."
Wrong, but completely natural thing for neo-classical economists to say .
"As noted above, some analysts claim that the credit expansion occurred because of improper incentives inherent in the so-called originate-to-distribute model of mortgage lending. Yet mortgage market participants had been buying and selling U.S. mortgages for more than a century without much trouble."
Yeah, but the authors seem to forget that CDO's (making upper tranche garbage rated AAA) and CDS's (making the risk of garbage AIG's problem) and a prolonged low interest period from the Fed and the light regulatory approach from both the Fed and SEC and the electronic database that would make securitized housing flippable without the docs, registers, and fees that traditional mortgage market participants had been using "for more than a century without much trouble" were new in the last 2 decades.
The regulatory environment changed. The products on the market changed. Those who put their money into the non-traditional market LOST THEIR MONEY while others made their bonuses and bets.
Fannie and Freddie did not have near as many failures, even in their most risky Alt-A products, because they maintained a semblance of the practices "traditional mortgage market participants had been using for more than a century without much trouble".
No one forced bankers to lend irresponsibly. No one forced brokers to direct their clients to destructive products which were solicited for and filed fraudulently in boiler room fashion. The places that had tight regulation in place on lending (like Texas) did not have the bubble/pop market breakdown (or suffer the pump and dump profit model, as the insiders call it) that places like California did.
The literature on this subject is extensive. Once again, when given an opportunity to absolve a bank, padi dives into it.
PS. Shouldn't this be in the Michael Hudson thread?
#31 Posted by Thimbles, CJR on Sat 12 May 2012 at 01:27 PM
I mean this paper has really got to be a joke.
"When we turn to the winners the pattern is equally stark. The biggest beneficiary from the crisis was hedge fund manager John Paulson, who bought billions of dollars of credit protection on subprime deals in 2006 and 2007. When those deals defaulted en masse at the end of 2007, Paulson made $15 billion in profits (Zuckerman 2010).
Paulson and his lieutenant, Paolo Pellegrini, were complete mortgage industry outsiders."
This John Paulson?
http://dealbook.nytimes.com/2010/07/15/goldman-to-settle-with-s-e-c-for-550-million/
Are they serious?
"Critics might contend that treating bubbles like earthquakes is reminiscent of a doctrine often associated with Alan Greenspan: policymakers should not try to stop bubbles, which are not easily identified, but should instead clean up the damage left behind when they burst. To some extent, we concur with this doctrine, because we believe that policymakers and regulators have little ability to identify or to burst bubbles in real time. 56 Yet this strategy works only when the financial system is robust to adverse shocks.
As we mentioned earlier, the reforms of the 1930s [many of which were eroded if not torn down] failed to prevent a bubble from forming
in the stock market in the late 1990s. But the early 2000s stock market collapse did not lead to an economic crisis or to widespread financial problems among households. Why not?
One possible explanation is that the reforms of the 1930s made the financial system “bubble resistant,” at least for equities."
No, they are not serious at all.
#32 Posted by Thimbles, CJR on Sat 12 May 2012 at 01:53 PM
LOL...
I suppose we must discount the concerted findings of a dozen professional economists because Thimbles has determined that they are "bad" and "wrong".
Too, too funny!
#33 Posted by padikiller, CJR on Sun 13 May 2012 at 10:41 AM
"I suppose we must discount the concerted findings of a dozen professional economists because Thimbles has determined that they are "bad" and "wrong"."
I suppose we should trust the dozens economists who didn't see the bubble coming and didn't see the systemic fraud taking place under their regulatory noses over the professionals who did.
Tanta once said:
http://www.calculatedriskblog.com/2007/03/unwinding-fraud-for-bubbles.html
"It often seems as if the industry just stopped believing that it could ever really be at risk.
My theory of the Fraud for Bubbles is, in a nutshell, that it isn’t that lenders forgot that there are risks."
But why did the industry forget there were risks? For the same reason this paper denies since "MBSs, CDOs, and other “complex financial products” had been widely used for decades".
The idea behind CDO's was that you can achieve risk elimination through risk diversification. Once you achieved setting that perception, you can pump any garbage through the pipeline and make your bonuses, something they started doing en masse in 2004, 2005.
#34 Posted by Thimbles, CJR on Sun 13 May 2012 at 12:43 PM
Investors thought they were protected by CDO's and banks thought they were protected, by CDS's. According to here:
http://www.vanityfair.com/politics/features/2009/08/aig200908
"The banks that used A.I.G. F.P. to insure piles of loans to IBM and G.E. now came to it to insure much messier piles that included credit-card debt, student loans, auto loans, prime mortgages, and just about anything else that generated a cash flow. “The problem,” as one trader puts it, “is that something else came along that we thought was the same thing as what we’d been doing.” Because there were many different sorts of loans, to different sorts of people, the logic applied to corporate credit seemed to apply to this new pile of debt: it was sufficiently diverse that it was unlikely to all go bad at once. But then, these piles, at least at first, contained almost no subprime-mortgage loans.
Toward the end of 2004, that changed dramatically—but just how dramatically A.I.G. F.P. was extremely slow to realize."
"In June 2004 the Fed began to contract the money supply, and interest rates rose. In a normal economy, when interest rates rise, consumer borrowing falls—and in the normal end of the U.S. economy that happened: from June 2004 to June 2005 prime-mortgage lending fell by half. But in that same period subprime lending doubled—and then doubled again. In 2003 there had been a few tens of billions of dollars of subprime-mortgage loans. From June 2004 until June 2007, Wall Street underwrote $1.6 trillion of new subprime-mortgage loans and another $1.2 trillion of so-called Alt-A loans—loans which for some reason or another can be dicey, usually because the lender did not require the borrower to supply him with the information typically required before making a loan. The subprime sector of the financial economy clearly was responding to different signals than the others—and the result was booming demand for housing and a continued rise in house prices. Perhaps the biggest reason for this was that the Wall Street firms packaging the loans into bonds had found someone to insure against what turned out to be the rather high risk that they’d go bad: Joe Cassano."
"That’s when Park decided to examine more closely the loans that A.I.G. F.P. had insured. He suspected Joe Cassano didn’t understand what he had done, but even so Park was shocked by the magnitude of the misunderstanding: these piles of consumer loans were now 95 percent U.S. subprime mortgages. Park then conducted a little survey, asking the people around A.I.G. F.P. most directly involved in insuring them how much subprime was in them. He asked Gary Gorton, a Yale professor who had helped build the model Cassano used to price the credit-default swaps. Gorton guessed that the piles were no more than 10 percent subprime. He asked a risk analyst in London, who guessed 20 percent. He asked Al Frost, who had no clue, but then, his job was to sell, not to trade. “None of them knew,” says one trader. Which sounds, in retrospect, incredible. But an entire financial system was premised on their not knowing—and paying them for their talent!"
"What no one realized was that it was too late. A.I.G. F.P.’s willingness to assume the vast majority of the risk of all the subprime-mortgage bonds created in 2004 and 2005 had created a machine that depended for its fuel on subprime-mortgage loans."
Fraud inflated the bubble. Your paper is wrong.
#35 Posted by Thimbles, CJR on Sun 13 May 2012 at 12:58 PM
A nobel prize winning economist on the cause of the crisis
http://www.house.gov/apps/list/hearing/financialsvcs_dem/stiglitz.pdf
http://www.cfr.org/foreign-policy-history/roaring-nineties-new-history-worlds-most-prosperous-decade/p6492
And some helpful notes on a previous stock market bubble discussion:
"The short answer was that there were put into place a set of incentives, CEOs, accounting, bank, a whole set of incentives that led to distorted information. The information that people had to evaluate stock prices, to evaluate what was going on, was distorted.
The result of distorted information is that prices do not reflect reality. As an economist, we know how important price are. They give signals to where investment ought to go. If prices are distorted, investment decisions are going to get distorted. The result of that is you've got excess investment in some areas, and shortages of it in other areas, particularly the excesses. And whenever you get these excesses, eventually you get over capacity, and you get a bubble. And the bubble breaks. So that is, in some sense, a short description of what was going wrong.
In terms of what my own economic theories were, my own economics were, it was very much related, because my work was economics of information. One of the main results of my work was to suggest that in rules in which there are problems of asymmetric information, it just means different people held different things, where asymmetric information is important, the standard analysis of economics often doesn't work."
"And I asked the question, you know, individual's incentives, and if the information is imperfect, they have incentive, you know, take the stock option, they have incentives to, they get more money by giving bad information than they do by creating wealth. And so you put into place an incentive to have distorted information."
Fraud was incentivized during both the internet stock bubble and the subprime mortgage bubble. Fraud, not belief, becomes the distorted information which inflates the bubbles and passes the pop onto investors and consumers. The paper you posted is trying to pin the blame on beliefs when it is the activities that profited from beliefs and lied to sustain the profits from those beliefs which is too blame.
Why? Because these guys were supposed to be watching out for fraud and they instead followed the Maestro:
Greenspan: “Well, Brooksley, I guess you and I will never agree about fraud,”
Born: “What is there not to agree on?”
Greenspan: “Well, you probably will always believe there should be laws against fraud, and I don’t think there is any need for a law against fraud. I think that the market will figure it out."
#36 Posted by Thimbles, CJR on Sun 13 May 2012 at 02:32 PM