Monday, February 4, 2008

Who Benefits from Economic Stimulus?

When the White House proposed its $150 billion economic stimulus package, the primary message was that immediate action was urgently needed; and the House of Representatives wasted little time in heeding this message and approving the package. The Senate, on the other hand, seems more inclined to deliberate; and, since the American media tend to buy into the general culture of fear that prefers action to deliberation, we have to look overseas to determine whether or not the Senate is on the right track. So it is that, once again, we are likely to be better informed by reading the Financial Times (or at least their Web site), since they have a reporter in Washington, Jeremy Grant, trying to tease out the real issues at stake in the stimulus package.

As is often the case, those issues can best be appreciated in terms of their advocates, since those positions of advocacy often get to the heart of who is most likely to benefit (and who is at greatest risk of being neglected). Now that, unlike some of his colleagues, Christopher Dodd is no longer preoccupied with the campaign trail, he can concentrate on his knitting in chairing the Senate banking committee; and Grant uses him as a point of departure for his analysis of whether or not Senate deliberation is likely to be a good thing in the long run. He has reported the following quotation from Dodd, which provides an excellent perspective of the nature of the problem and, therefore, the assessment of possible solutions:

To the extent this economic crisis has a face: it’s housing. And to the extent there’s a face on the housing crisis, it’s the foreclosure crisis.

As a disclaimer I should say that I strongly support Dodd's use of the "face" metaphor. It gives the lie to the cliché that keeps getting hauled out by the media: It's not the economy (stupid); it's the people whose lives (including efforts to deal with the basic needs of food, clothing, and shelter) are impacted so strongly by the economy! The question that Dodd seems to wish to address is whether or not those people will benefit from the proposed stimulus package.

Having established these ground rules, Grant then introduces some actors in the narrative that have received little attention:

In October, the administration assembled the Hope Now Alliance, a coalition of mortgage lenders, mortgage servicers and counsellors to help subprime homeowners refinance in order to stay in their homes.

While this was billed as an “aggressive, comprehensive plan”, some Democrats say it is moving too slowly. Last week the non-profit Center for Responsible Lending claimed Hope Now would prevent foreclosures in only 3 per cent of the outstanding subprime mortgages with adjustable rates. It said foreclosures were outnumbering loan modifications by 13:1.

The Mortgage Bankers Association takes issue with the report, citing figures from rating agency Moody’s that show that more than 50 per cent of borrowers with subprime adjustable rate mortgages due to reset in the first eight months of 2007 refinanced or otherwise paid off their loans prior to reset.

In other words we have, on the one hand, the experts informing the White House, who appear to come from the Hope Now Alliance and the Mortgage Bankers Association, and other experts now getting the attention of Senate Democrats, such as the Center for Responsible Lending. What seems to be troubling Dodd and leading him to push for further deliberation is the suggestion that the primary beneficiaries of the stimulus package will be the Hope Now Alliance, with little (if any) attention being given to the victims of the predatory lending practices that provoked this mess in the first place. In other words while it is undoubtedly all "well and good for business" to see to the interests of the lending institutions, those who are most in need of assistance are the borrowers. As early as last March I had suggested that we were already seeing a parallel with the government's reprehensible treatment of another class of victims, those who survived Hurricane Katrina:

As was the case with Katrina, the processes of the governmental system have once again demonstrated an inability to recognize who the victims are and to give serious consideration to how they should be treated as subjects (rather than objects in the databases of the lending institutions).

Perhaps it is just as well that Dodd got bumped out of the race for the White House. He may now be the strongest ally that the real victims of subprime lending now have in the face of an administration rushing to push through a solution package that ultimately ignores them. Lest we forgot, the War Against the Poor is still being waged as strongly as ever; and we have two Senators missing from the front lines when they may be most needed.


America Jones said...

The stimulus package is aimed at those most likely to immediately spend the rebate, who are in debt, who worry about making ends meet. Which makes me think the population is used as a complex accounting scheme - certain sums of money need to be moved from one ledger to another. Which calls to mind an idea I've been kicking around for a bit, that given how much consumer data is collected from citizens, perhaps the population is being used as a type of analog computer to perform sophisticated computations.

I'm also reminded of Albert Einstein's suggestion during WWI, that if 5% of the eligible population on all sides of the conflict refused the draft, the war would have to end in a year. I wonder what would happen if 15% of Americans took their rebate and invested it in gold...

Stephen Smoliar said...

That analog computer hypothesis provides a fascinating take on just who the "subjects" and "objects" are in this affair!

Complex Event Processing said...

There are certainly an awful lot of feedback mechanisms built into an information/consumerist economy.

I've also been noticing in the past couple years an increase in the number of statistically-improbable "meaningful coincidences" I experience. Shocks of recognition: the White House reads my blog too...

Digital computers are founded on homology - isomorphism - insofar as one can choose from among multiple formally-equivalent expressions for a given set of symbols. Microsoft Word is either a collection of binary states, C++ statements, phenomenological user experiences, or a single large integer.

There are analogies to be drawn between procedural programming and Fordist Industrialization; between the articulation of social networks (more specifically, how natural-langauge phrases pass through "consumerized" social networks) and recursive functions. Remember, the consumer is a statistical construct distinct from (but correlated with) the citizen. You have to admit there's a lot of time and money invested in the population outputting "Democrat" or "Republican" on a regular basis...

The relationship between information and thermodynamics (ala Claude Shannon) seems relevant here.


The Nature of the Extended Analog Computer
by Jonathan W. Mills

"The -digraph defines a semantic hierarchy that bridges the paradigms of
analogy and algorithm. It shows how many applications for the Extended Analog Computer (EAC) are developed by choosing the semantics for an analogy, rather than programming an algorithm."


What Lies Beyond the Mountains? Computational systems beyond the Turing limit
by J. F. Costa and J. Mycka

“When we observe natural phenomena and endow them with computational
significance, it is not the algorithm we are observing but the process. [But in the 1940’s it was] digital technology and theory that was to become the main paradigm of computation…[processing] information transformed and coded in
binary. With analog machines, on the contrary, there would be few or no steps
between natural objects and the work and structure of computation.”

Stephen Smoliar said...

Back in 1978 James Grier Miller wrote a 1000-page book entitled Living Systems. About a decade later there were a bunch of theoretical physicists at Los Alamos who started citing Miller in conjunction with their studies in complexity and artificial life, but I am not sure that any of them ever gave him a serious reading. (By way of a disclaimer, I should state that I, myself, have not gotten beyond familiarizing myself with Miller's analytical framework.) Now we have Freeman Dyson (another theoretical physicist) proclaiming that we live in the "
century of biology
." There seems to be an interesting pattern here in that the membership of the "living systems fan club" apparently has more theoretical physicists than biologists!

I do not say this to dismiss the idea of viewing "life itself" (in the words of the late Robert Rosen, who specialized in both physiology and biophysics) as a (probably "complex," which is to say nonlinear) system. I am personally interested in picking up Dyson's torch and carrying it into the domain of business information systems and their relation to organizational communication. I even have a working outline for a paper on this topic; but, given how hopelessly uninformed my "professional peers" are in their area, I am going to have to do one hell of a lot of background reading before I can turn that outline into a text worth reading!