Snippets of Knowledge

If Obama’s speeches aren’t as dramatic as they used to be, this is why: the White House believes a presidential speech on a politically charged topic is as likely to make things worse as to make things better. It is as likely to infuriate conservatives as it is to inspire liberals. And in a country riven by political polarization, widening that divide can take hard problems and make them impossible problems.

President Obama might still decide to give a speech about events in Ferguson. But it probably won’t be the speech many of his supporters want. When Obama gave the first Race Speech he was a unifying figure trying to win the Democratic nomination. Today he’s a divisive figure who needs to govern the whole country. The White House never forgets that.

There probably won’t be another Race Speech because the White House doesn’t believe there can be another Race Speech. For Obama, the cost of becoming president was sacrificing the unique gift that made him president.

DC Energy goes to great lengths to protect its winning formula. After one of its top traders, Jason Miller, left for Saracen Energy, another trading firm, DC Energy sued. The reason was that Saracen, based in Houston, had begun playing the New York congestion market, just like DC Energy. DC Energy said Mr. Miller violated confidentiality and noncompete agreements he had signed, and misappropriated trade secrets.

A lawyer for Mr. Miller, who denied all of the allegations against him in court documents, declined to make him available for comment.

Kevin Kelley, the president of Saracen, said in an emailed statement that Saracen’s increased activity in the New York market was because of the hiring of three traders last year, including Mr. Miller. He added that Mr. Miller had not used any proprietary information of DC Energy’s to trade for Saracen’s benefit.

“Saracen also entered the Long Island congestion contracts markets for the first time as a result of Mr. Miller’s background and experience with these markets while at DC Energy,” DC Energy said in its lawsuit, filed in federal court in the Eastern District of Virginia in January. Saracen, DC Energy claims, made $1 million last November and December on Long Island — profits that came at DC Energy’s expense, the suit contends. “DC Energy had emerged as the only consistently profitable trader in the congestion markets on Long Island,” the suit says.

For all the ways that the differences here may simply reflect cultural preferences, however, the main lesson of the analysis is a sobering one. The rise of inequality over the last four decades has created two very different Americas, and life is a lot harder in one of them.

Income has stagnated in working-class communities, which helps explain why “selling avon” and “social security checks” correlate with the hardest places from our index. Inequality in health and life expectancy has grown over the same time. And searches on diabetes, lupus, blood pressure, 1,500-calorie diets and “ssi disability” – a reference to the federal benefits program for workers with health problems – also make the list. Guns, meanwhile, are in part a cultural preference, but they are also a health risk.

The exception is education. If you exclude educational attainment, or lack of it, in measuring disadvantage, five counties in Mississippi and one in Louisiana rank lower than anywhere in Kentucky. This suggests that while more people in the lower Mississippi River basin have a college degree than do their counterparts in Appalachian Kentucky, that education hasn’t improved other aspects of their well-being.

As Ms. Lowrey writes, this combination of problems is an overwhelmingly rural phenomenon. Not a single major urban county ranks in the bottom 20 percent or so on this scale, and when you do get to one — Wayne County, Mich., which includes Detroit — there are some significant differences. While Wayne County’s unemployment rate (11.7 percent) is almost as high as Clay County’s, and its life expectancy (75.1 years) and obesity rate (41.3 percent) are also similar, almost three times as many residents (20.8 percent) have at least a bachelor’s degree, and median household income ($41,504) is almost twice as high.

Reagan’s promise was less to reach across the aisle than to unite conservatives—business conservatives, evangelical conservatives, Catholic conservatives, Jewish conservatives, national-security conservatives, working-class conservatives, etc. This he did better than Ford or Nixon, and this, combined with the widening of the conservative electorate in the 1970s, made Reagan unbeatable in 1980. The poetry of innocence, then, is an abstraction compared to the quotidian prose of Reagan’s coalition building, a work in progress from the ’40s to the ’80s.

Wikimedia Commons
Reagan and Nixon converse.
At least as important as Reagan’s small-town, greatest-generation air of innocence was his enjoyment of political warfare. Perlstein himself documents Reagan’s confrontations with radicals in Hollywood and Berkeley, persuasively claiming them as formative for Reagan and his initial supporters. Reagan’s very ideas were confrontational: They were, and are still, an affront to American liberalism. Moreover, Reagan promised to confront the Soviet Union, as had JFK in his presidential campaign, and not in the spirit of innocence. Considerable anger was contained behind the actor’s amiable façade, natural for a politician used to having—and seeing—enemies in his midst. After the Soviet invasion of Afghanistan, in 1979, Reagan’s anger was a political asset. Perlstein discerns too much Frank Capra in Reagan’s appeal and too little of the friend-foe dynamic that Reagan used to conceptualize and sustain his political base. If Reagan did not unify the nation in 1980, he unified it enough to get elected and then to govern. To this degree, Reagan united more than he divided or, more mystically put, he united the nation by dividing it. Such is the synthesis that can be spun from Perlstein’s oversimplified thesis.

Second, if social impact bonds catch on in any significant degree, they are going to end up creating all sorts of new groups who have a big interest in creating bonds and only a secondary interest in long-term social outcomes. The folks promoting these should be reading Josh Pacewicz’s excellent work on tax increment financing.

Tax increment financing is a now-common way of financing municipal economic development projects. It allows cities to sell bonds secured by the future increases in tax revenue that are expected to result from a development project. So the city borrows money for, say, waterfront development, and promises to pay it back with the tax revenues that it projects will come from the newly developed waterfront. But if the revenues don’t materialize, the city isn’t on the hook. Like social impact bonds, part of the appeal is that the risk is shifted away from the taxpayer.

The problem, though, is that cities have gone overboard with TIF. This means high debt levels and committing most of the tax revenues resulting from development to paying back the debt that made it possible.

According to Pacewicz, TIF didn’t take off because of huge investor demand for the debt. Its expansion was driven by a new group of economic development professionals who worked for cities. TIF gave these professionals influence because it made municipal finances more complex—to the point where they gained control over city budgets because no one else understood them.

These professionals are very aware that TIF is overused—that projections of tax revenue increases are too optimistic, that cities are taking on too much debt, and that many development projects are basically corporate welfare. And they regret it. But they advance in their careers by putting together big TIF projects. So they put together TIF projects, even when they think it’s bad for the city.

How does this apply to social impact bonds? Well, if SIBs take off, we can expect to see a new group of government professionals emerge whose job it is to create social impact bonds. And they, too, will most likely want to advance their careers by creating big, splashy SIBs. This could lead to the replacement of plain-vanilla government-provided social services with privately financed services, even if the latter cost more or involve more layers of bureaucracy than the original ones.

As reported by the U.S.-sponsored broadcaster Radio Free Europe, the Uzbek government stopped all internal Internet traffic and SMS messaging last Friday, between 8:30 a.m. and 1:30 p.m. The government’s explanation cited “urgent maintenance work on telecommunications networks,” but the hours of the outage suspiciously overlapped with the administration of the nation’s university entrance exam. When the test was over, the web worked again.

This ‘surprise’ fix-it-up outage has become an annual tradition in the central Asian nation. Reported as early as 2011, it’s one of many efforts the government takes to tamp down cheating for the high-stakes test. While more than 431,000 young Uzbeks take the test, there are only 56,000 openings in the country’s universities, according to Radio Free Europe—which has led to an extensive culture of cheating and bribery around the test. Reports talk of “parachute” cheaters, who throw their tests from windows to informed correctors below, and cheating “bunkers,” secret rooms in schools where tests can be corrected before they’re graded.