Bankers’ Pay On The Line Again

By Simon Johnson

The people who run big banks in the US have had a good year.? They pushed back hard on financial reform legislation during the spring and were able to defeat the most serious efforts to constrain their power.? They and their non-US colleagues scored an even bigger win at Basel this fall, where the international committee that sets financial safety standards decided to keep the required levels of equity in banks at dangerously low levels. ?And the counter narrative for the 2008 financial crisis, “Fannie Mae made me do it,” gained some high profile Republican adherents closely aligned with the men who will control the House Financial Services Committee in 2011-12.

But there is also a potential lump of coal in Santa’s sack for the biggest banks, in the form of restrictions of pay – both its structure and perhaps even the amounts (although officially the latter is not currently on the table).

The impetus here comes not from American “populists” of any kind – although reformers of left and right have been pushing for progress on this issue since massive bonuses were paid out by firms that were saved by the taxpayer in fall 2008 (and again in 2009 in some cases).? According to the Wall Street Journal, for 2008 there were nearly 5,000 bonus payments in excess of $1 million at “the largest US banks that accepted Treasury aid.”

Rather the push to constrain bank executive pay comes from officials and the political elite in continental Europe – supported by an increasingly effective pro-reform group around the Bank of England (led by Mervyn King, the governor).? There is also supportive language in the Dodd-Frank financial reform bill, although this by itself rather vague and completely open to interpretation by the regulators.

Still, the overall proposal is entirely reasonable and well thought through at a general level: “lock-up” a considerable fraction of bank bonuses until we see, after several years, exactly how the banks do.

The issue, of course, is that banks (with their ludicrously low levels of equity; if this point is not clear to you, see this primer) can juice their returns considerably by taking on more risk.? These risks may not be apparent for quite a few years – depending on how long it takes the credit cycle to run its course.? Eventually, if those risks threaten to bring down one or more big banks, there may be a rescue by the taxpayer – and there is nothing fair or politically palatable about that.

Bank executives hate the idea that their pay will be constrained in any way.? In Europe, where bankers are less powerful than in the US, they have already lost this battle – although there is still a lot of a fighting about details and implementation to be done.

In the US, as we head into 2011, expect to see three types of pushback from the banks’ very sophisticated PR machines.

a) “We already ended Too Big To Fail”.? But we didn’t, at least for the global megabucks that would be subject to these compensation restrictions.? There is no way to handle the failure of a cross-border systemic bank, although than through Lehman-like collapse.? The case for stronger preemptive action to reduce system risk is overwhelming.

b) “This would weaken us relative to our global competitors”. Not really – given that it is the regulators of our main competitors who are initiating this move.? To be sure, Chinese banks are not likely to follow suit, but that is hardly relevant – and since when do we let China dictate our regulations or supervisory practices?

c) “This represents an inappropriate extension of government into private business decisions”. But there is little new here – at least since the 1930s, the relevant authorities have had the power to limit dangerous-risk taking by systemically important banks; the intent of the Dodd-Frank financial reform act was definitely to update and strengthen those powers.? Banks are different from other businesses; their failure can jeopardize the entire economy – as we saw in 2008-09.?

The banks will also worry that such pay restrictions will encourage their top talent to leave and join the relatively unregulated hedge fund and private equity sector.? This is a legitimate point – and suggests that the pay reforms may actually be implemented.? When powerful people (the hedge funds) want a change because it will disadvantage their competitors (the big banks), such changes are much more likely to happen in the American financial system.

Pushing risk-taking into hedge funds or other relatively unregulated entities does not of course solve the deeper problems that brought us to the brink of disaster in fall 2008.? But attempts to develop a more comprehensive approach for the system – limiting size and leverage (debt relative to equity) for the biggest players – were defeated at the behest of the big banks.?

Pay restrictions are not the ideal solution and they are not the end of the reform story.? But we should take what we can get at this stage.? Or, as seems more likely, we should encourage this debate to move into a more public arena – perhaps the regulators will push for restrictions and House Financial Services will raise objections.

The fight to make our financial system safer has barely begun.

An edited version of this post appeared this morning on the NYT.com’s Economix blog; it is used here with permission.? If you would like to reproduce the entire column, please contact the New York Times.

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Shane McBride Leaves Colicchio & Sons

?After three years of working for Tom Colicchio (first at Craftsteak, then Colicchio & Sons), Shane McBride has left the kitchen at Colicchio & Sons. After Eater stumbled upon a farewell message of sorts that McBride posted on his Facebook page, Colicchio himself got on the Twitter to thank the chef for "3 great years" and congratulate him on his "new executive chef position." No word yet as to where that new position is, but speculation will doubtless follow McBride to his destination.

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Michael Psilakis Expounds Upon the Economy, Fish, Headaches

It's a slow news week, so slow that Bloomberg TV's Surveillance Today decided to dip its little toe into the roiling waters of the restaurant world. Yesterday, host Tom Keene invited Michael Psilakis onto his show, and after introducing him as "the Mario Batali of Greek American cuisine," asked the chef for his thoughts on the New York economy and fish. Psilakis talked for a bit about using Atlantic salmon because of its price point, stressed the importance of value, and hinted very vaguely that he may some day open more Fish Tags. He also revealed that his biggest "cost headache" is labor and product, though one assumes that Keene's inaccurate present-tense reference to Psilakis' involvement with Mia Dona (which the chef left in September '09), may have induced a mild headache of its own. [Via Grub Street]

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Stoner Chef at Broadway Panhandler Spills Bong Water on Himself, Changes Apron

?BEFORE

Like Rebecca said, it's a slow news day. So, when we stumbled on this costume change, we couldn't wait to tell you about it.

AFTER

?Blue matches his vacant eyes...

Which do you prefer?

Still stuck in the office, like us? Get the hell out of there!

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Where to Buy Wine for the Holidays

?

With the season comes many a holiday party, which means plenty of opportunities for wassailing and even more for drinking. Showing up to a party empty handed is a surefire way to garner a "Scrooge" nickname, but with so many liquor stores to choose from, the selection can sometimes be overwhelming, especially if you don't know your Sangiovese from your Syrah. To aid in the quest for the perfect hostess gift bottle, here are three region-specific wine shops offering a taste of something different.

For Chilean Wines - Puro Chile is the first exclusively Chilean wine store in the whole United States, and stocks over 200 wines from over 50 wineries in the South American country. In addition to wines, the shop sells Chilean food products like afe juices (which comes in flavors like plum and pear), dulce de leche, and olive oil. Handicrafts like carved rauli bowls and Mapuche Llepu woven baskets round out the selection. 221 Centre Street, 212-925-7876.

For Italian Wines - Go Big or Go Home might be Italian culinary emporium Eataly's motto, and its wine shop Eataly Vino takes the same approach, offering 700 different Italian wines from 350 producers, covering every region of Italy. 200 5th Avenue, 212-229-2560.

For Spanish Wines - The diminutive East Village wine shop Tinto Fino features wines from Spain, including well-known cavas and sherries as well as lesser known varietals like Mencía and Monastrell. And for post-holiday imbiming, consider signing up for the store's wine club, available in subscription for three, six, or nine months. Tinto Fino 85 1st Avenue, 212-254-0850.

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Harrison's Taking Over Bowery Poetry Club Café; Expect 'Crap-Ton' of Roast Beef

?Following the relatively brief tenure of the Lower Eastside Girls Club's Celebrate Café, it seems the Bowery Poetry Club has found a new tenant to provide its patrons with sustenance: according to EV Grieve, who spoke with a partner in the deal, the space will soon serve roast beef sandwiches from Harrison's, a Massachusetts restaurant known for the black magic it works on bovine byproducts. A Yelper sums up the appeal of the place thusly:

"The good thing about Harrison's sandwiches is that you get a metric crap-ton of roast beef in your sandwich. You also get a crap-ton of sauce to go, if you want it. Hence, you'll need a crap-ton of napkins, so grab some before you leave."

Alrighty! Seems that at the very least, quantity won't be an issue here - though the quality will undoubtedly spark comparisons with that of This Little Piggy, also located in the neighborhood and selling its own gutbomb-worthy take on the roast beef sandwich.

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Westville East Is Closed for Renovations, but Will Re-Open Jan. 3

?It's been a busy year in home improvements for Westville East, which sparked a bit of a neighborhood kerfuffle earlier this year with its application for a sidewalk café. The Avenue A restaurant has now turned its attentions inwards: according to signs posted in its papered-up windows, the restaurant will be closed for renovations until Jan. 3. Per its Web site, its other locations in Chelsea and the West Village will remain open.

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Symbols and Substance

By James Kwak

Arnold Kling wins the prize for the most erudite post of the past week, a review of The Symbolic Uses of Politics, by Murray Edelman. Kling cites not only Sigmund Freud and J.D. Salinger, but Theodor Adorno and Seymour Lipset (with specific books, not just names), among others.

In Kling’s summary, Edelman divided the political sphere into insiders and outsiders (Kling’s terms). Insiders are basically special interests: small in number but well organized and with specific goals. Outsiders, or the “unorganized masses,” are the rest of us: we have some interests, but we are poorly organized to pursue them and therefore are generally unsuccessful. In particular, Outsiders suffer from poor and limited information, and therefore are especially susceptible to political symbols. In Kling’s words:

“Given these differences, the Insiders use overt political dramas as symbols that placate the masses while using covert political activity to plunder them. What we would now call rent-seeking succeeds because Outsiders are dazzled by the symbols while Insiders grab the substance.”

This seems like a pretty straightforward description of why interest groups are politically powerful. I think Edelman’s additional contribution is the emphasis on the use of symbols by the Insiders to distract the Outsiders: “For Edelman, symbolic reassurance and political quiescence were somewhat troubling phenomena. The masses were being lulled by symbolic gestures into accepting adverse political outcomes.”

In any case, Kling thinks that Simon and I are too positive about Elizabeth Warren — not because Warren is a bad person, but because, in his words, “expect the banks to be able to do a more efficient job of rent extraction with Elizabeth Warren in place than before.”

One the one hand, this is a valid point. I’m pretty sure that Kling and I agree that a major problem with our financial system has been the ability of entrenched incumbents to use government policy as a rent-extraction device; think, for example, of the banks lobbying the OCC and the OTS to preempt anti-predatory lending laws in the early 2000s. Since we live in a democracy, the ability of elites to use the government to their advantage requires our political institutions to have some minimum level of credibility. If everyone believed that government was simply a tool for the rich and powerful, the entire system would break down and would have to be maintained by force, if at all. (This is like my argument that a facially progressive yet riddled-with-regressive-exceptions tax code is just what rich people want — were it not facially progressive, it would have legitimacy problems.)

Seen from this angle, then, the Insiders want to lose some battles. If they were to win all of them, the Outsiders would get suspicious. So what the Insiders really want is to lose the symbolic battles and to win the substantive battles. And I guess Kling is arguing that the appointment of Elizabeth Warren is a symbolic battle, not a substantive one.

On the other hand, though, does that mean that I should be opposing the appointment of Elizabeth Warren? I don’t think Kling would go that far. Probably he would simply say that I am overestimating her potential impact in the grand battle with the Insiders of the financial sector. I agree that one should not overestimate the impact of one person or one agency, and I also suspect that some people in the administration were happy to go along with the Consumer Financial Protection Bureau because it gave them disproportionate political cover for a bill that, in many ways, and perhaps more important ways, is too soft on Wall Street.

But I don’t think I’m naive on this point. My big worry is what will happen to the CFPB when the next Republican president comes into office, and I don’t have a good answer for that — because I don’t think we’ve yet come up with a great answer to the problem of regulatory incentives. And in any case, Warren does have some power, and she will use it, and that will make some difference. An agency with the words “consumer protection” in its name will have a harder time screwing ordinary people than an agency with the words “comptroller of the currency” or “federal reserve” in it, although future directors will no doubt try. And an agency is a big, complicated organization, which means it will have a culture, and it will have inertia. So who starts up an agency can matter.

On balance, I still think the CFPB and Elizabeth Warren are good for the middle class, for poor people, and for America. I don’t think we can just call it a clever chess move by our Insider overlords. That leads to a view of the world that can too easily always explain everything.

And besides, isn’t all this “symbolic reassurance and political quiescence” stuff more applicable to the Tea Party, which is itself a big-budget re-run of What’s the Matter with Kansas? Or “is this time different”?

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“Washington and the Regulators Are There To Serve the Banks”

By James Kwak

It is too obvious to bear saying, but I’ll say it anyway.

At the urging of the administration, Congress passed a financial reform bill this past summer that expanded the theoretical powers of regulators, but also gave those regulators the power to write the rules implementing the bill and then to enforce the rules. The bill’s sponsors fended off efforts to write specific constraints, whether size limits or leverage limits, into the statute. Yet the bill did nothing that I am aware of to ensure that regulators do a better job than they did last time around, unless you count the creation of a standalone consumer protection agency. (Yes, this is a hard problem with no easy solutions, but ignoring it doesn’t make it go away.)

Now we will see the results. Via Mark Thoma, Andrew Leonard provides the money quote, from incoming House Financial Services Committee chair Spencer Bachus: “in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”

Of course, having written a book that argued that politics is more important than economics, this doesn’t surprise me. Nor does the decision by the Financial Crisis Inquiry Commission’s Republican appointees to deny that the shadow banking system even exists, or to write a dissenting “primer” whose only possible motivation can be captured in Barry Ritholtz’s post, “Repeat a Lie Enough Times . . .” But what frustrated me about the administration’s position over the spring and summer was the idea that, despite this basic fact, they marched forward as if government regulation is a purely technocratic problem that can be solved by simply finding smart men and women of integrity and conscientiousness.

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Why Citigroup?

By James Kwak

I think Ezra Klein is probably right about Peter Orszag:

“Citigroup is a really big, really powerful institution. Orszag’s position in it is the sort of position that could one day lead to being president of Citigroup. If you’re him, and you’re trying to figure out an interesting and high-impact way to spend the next 40 years, I can see why it’s appealing. But it’s the power and the job and the opportunity, more than the money, that make it appealing.”

Klein says the problem is that this kind of job transition makes people lose faith in government, and I agree with that. But I think there’s a deeper problem as well.

This is the mindset of the ambitious educational elite: You go to Harvard (or Stanford), maybe to Oxford (or Cambridge) for a Rhodes (or Marshall), then to Goldman (or McKinsey, or TFA), then to Harvard Business School (or Yale Law School), then back to Goldman (or Google), and on and on. You keep doing the thing that is more prestigious, opens more doors, has more (supposed) impact on the world, and eventually will make you more and more famous and powerful. Money is something that happens along the way, but it’s not your primary motivation. Then you get to Peter Orszag’s position, where you can do anything, and you want to go work for Citigroup? Why do our society and culture shape high-achieving people so they want to be executives at big, big companies that are decades past their prime? Why is that the thing people aspire to? Orszag wanting to work at a megabank — instead of starting a new company, or joining a foundation, or joining an NGO, or becoming an executive at a struggling manufacturing company that makes things, or even being a consultant to countries with sovereign debt problems — is the same as an engineer from a top school going to Goldman instead of a real company. It’s not his fault, but it’s a symptom of something that’s bad for our country.

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Ask the Critics: What Should I Do if I Get Food Poisoning?

?Rebecca F. asks: My boyfriend and I think we got food poisoning from a restaurant we ate at a few days ago since we both got sick within half an hour of each other. Are we supposed to tell the restaurant? What do we do?

Dear Rebecca: Getting food poisoning flat-out sucks. Unfortunately, resolving the poisoning does, too.

Food poisoning is a common occurrence, and the Centers for Disease Control and Prevention actually just published new findings reporting that one in six Americans will get sick from known and unknown bacteria, viruses, and microbes each year. That's about 48 million people, resulting in about 128,000 hospitalizations and about 3,000 deaths. Among these bacteria and viruses, norovirus causes about 60 percent of food-poisoning-related illnesses, while salmonella is the leading cause of hospitalizations.

However, the problem with food poisoning is that because microbes spread in so many ways, it's exceedingly difficult to know if your illness was caused by food or something else. Generally speaking, though, the time elapsed between ingestion and symptoms will be 24 to 72 hours. So if you get sick 20 minutes after eating oysters, don't be so sure that the oysters are to blame and immediately ring up the seafood restaurant where you dined.

I contacted the New York City Health Department with your inquiry, and their recommendation for consumers is not to call the restaurant directly, but to call 311, noting how many people in the dining party became ill. The Health Department will then follow up and interview callers about all food consumed, and will then follow up with the restaurants to determine if there is the possibility of a food-borne illness. If it's determined that there is a possibility, they will send an inspector to the restaurant. The Health Department also recommends keeping any suspicious food for possible testing, but, unless you suspect your diarrhea was caused by your takeout dinner, this can be rather difficult.

If you think your food poisoning was caused from something that you purchased, you can call one of two governmental hotlines. For meat, poultry, egg, and milk products, call the USDA Meat and Poultry Hotline at 888-674-6854. For any other food product, call 888-723-3366.

So that's the short end of it. Unfortunately, just because one person who got sick called 311 doesn't mean that everyone else who got sick from the same place called 311, making the likelihood of a restaurant inspection very small. It's probably best, though, if you and your boyfriend call 311 independently of each other. But basically you're shit out of luck. Literally.

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The Obama Renaissance

By James Kwak

President Obama is enjoying something of a political resurgence, at least among the commentariat. Ezra Klein points out that his approval ratings remain higher than those of his Congressional opposition, as opposed to Clinton in 1994 and Bush in 2006. In The New York Times, Michael Shear says the lame-duck session of Congress could be a “big win” for Obama, and Matt Bai hails the tax cut compromise as “responsible governance” and says it could lead to a successful presidency.

Obama is certainly in a decent position politically, and I would bet on him to be reelected comfortably in 2012. First off, his opponents in Congress are deeply irresponsible (admittedly:?“The single most important thing we want to achieve is for President Obama to be a one-term president.”) and face a huge political problem within their own party: a significant portion of the conservative base really does want lower deficits, yet the only thing the Republican caucus knows how to do is cut taxes. Klein points out that the Republicans will eliminate House rules that spending increases or tax cuts have to be offset elsewhere, and will instead say that “tax cuts don’t have to be paid for, and spending increases can’t be offset by tax increases.” Second, the Tea Party and Sarah Palin mean that Obama is likely to face an opponent who has been pulled dangerously close to the lunatic fringe during the primary (or, even better yet, Palin ?herself). And third, there’s triangulation.

Bai basically parrots the Obama administration’s line: they did the tax cut deal because it was good policy, it would stimulate the economy, and they got a good deal. In other words, it’s not a cynical political tactic, it’s good governance. And as I’ve said before, I think the Obama team may actually believe that, because their idea of good policy was centrist to begin with.

Did you notice that their key talking point on the tax cut issue was about not raising middle-class taxes in the middle of a recession? Well, this conveniently overlooks one key fact: they wanted to preserve the Bush tax cuts regardless of economic conditions. Even I forgot (until Klein reminded me in a post on something completely different) that the administration wanted to make the middle-class tax cuts permanent. Remember, these “middle-class” tax cuts go up to $250,000–around the 98th income percentile. And for true ordinary American households, they are negligible, because those households don’t pay much income tax; as of 2009, according to the Tax Policy Center, middle-quintile households have an average income tax rate of 2.3 percent. (They pay much more in payroll taxes.) So even Obama’s preferred policy — killing the tax cuts on the super-rich (over $250,000) and keeping them for the upper-middle class and the moderately rich — is a regressive policy: it lowers the tax burden on people making more than average, thereby forcing the government to cut services that benefit everyone.* And it increases the pressure to cut Social Security and Medicare, which do benefit ordinary people.

So no, I don’t think Obama is abandoning his principles for political advantage; I think these are his principles. And while I’m upset at him, I’m upset at him for being wrong on the policy level, not for abandoning anything or selling out. I think a lot of the bitterness on the left comes from people who thought he was more progressive than he is, and now feel betrayed. As I said in January, I always thought Obama was a moderate who looked like a progressive (certainly the most moderate of the three main 2008 primary candidates), and, as Nate Silver said, “what Obama has wound up with is an unpopular, liberal sheen on a relatively centrist agenda.” What’s happening now, if his good run continues, is he is shedding the liberal sheen and getting a centrist sheen on a centrist agenda. And politically, that’s all good for him.?Combine that with his obvious political skills, and the future looks bright for him.

* I know that the administration also supported extending other tax cuts and credits that are more progressive, but those were mainly intended to be temporary, such as the tax cuts in the 2009 stimulus bill.

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Posts of the Week

Without further ado, a backward glance at the last five days ...

Our 10 Worst Foodie Xmas Presents.

The Early Word on Saigon Shack.

Top Chef: "There's a fine line between homage and parody."

Some great photos from an epic Montreal food trudge.

Thirstbaràvin brings natural wine and fancy coffee to Prospect Heights.

Blue Ribbon's Bromberg brothers on Vegas, Vegas, and more Vegas (and Benihana).

Battle of the Christmas Fruitcakes: Myers of Keswick v. Dean & DeLuca.

Snow = time for maple taffy.

Hanson Dry brings '50s chic to Fulton Street.

Lima Limon's cow-tripe cau cau makes an excellent organ recital.

Here are five New York-centric food trends for 2011.

Fried Dumpling's eponymous treats have returned from the grave, and are as good as ever.

Have a tip or restaurant-related news? Send it to fork@villagevoice.com.

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Hibiscus Flowers Make Festive Xmas Mixer

?Hibiscus flowers are now available in Flatbush Caribbean markets.

Fresh hibiscus flowers are seasonally being sold in the lush vegetable markets that line Flatbush Avenue in Flatbush, Brooklyn. The blossoms are damp and leathery in texture, and the deep red color is striking.

These flowers form the base for a beverage popular in the Caribbean, but nowhere more so than in Jamaica, where the drink is called sorrel. In West Africa, bissap is the name, and it also goes by rosemallow and flor de Jamaica. The tart flowers also are responsible for the flavor and color of Celestial Seasonings' Red Zinger tea - the name gives you an indication of the power of the flower.

?Sorrel, the beverage (not to be confused with the herb of the same name) is generally available throughout the year, but most popular during the Christmas season, mainly for its Santa-red color and versatility in cocktail preparation. It mixes with just about anything, but rum is the best. Garnished with a small candy cane, mint leaves, a lime wedge, or a stick of cinnamon bark, it can also be served warm. Not that you care, but hibiscus - the flower of the Hibiscus sabdariffa shrub - is also rich in Vitamin C, to stave off that early winter cold, and it is also said to reduce blood pressure.

To make the tea, boil 8 to 12 hibiscus flowers in four cups of water for five minutes, then allow to cool. Remove flowers. The flowers are that potent! Add sugar or honey to taste.

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13 Bankers in Paperback

By James Kwak

Yes, that’s a new book photo in the sidebar to the right. The paperback edition will be available on January 11, 2011. It has a new epilogue taking the story from January 2010 (when we finished the hardcover) to September 2010, covering the financial reform debate in the Senate and the final Dodd-Frank Act.

Enjoy.

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Nils Noren Is Leaving the French Culinary Institute

?When we last heard from the French Culinary Institute, the school was busy announcing its plans to open a new campus in California. Today, the news coming from Grand Street hits a bit closer to home: Nils Noren, the school's Vice President of Culinary and Pastry Arts, is stepping down as of Jan. 1.

Per Eater, the school says that the Swedish chef, who previously earned accolades as the Executive Chef at Aquavit and was known for his avant garde experimentation, is leaving to write a book. He'll be replaced by Kevin Steussi, a former chef with management experience in Las Vegas hotels who will be helping the school open their new West Coast campus.

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Republican Splits, Fiscal Opportunity

By Simon Johnson

An informative and potentially productive political debate has broken out over fiscal policy.? Ironically, this is not between Democrats and Republicans – the leadership on both sides of the aisle is trying hard to agree that a moderate stimulus is worth increasing the national debt by nearly $900 billion.? And the new debate is not particularly due to the Bowles-Simpson bipartisan commission or other serious efforts to put the real math on the table; those technical discussions have so far been brushed aside.

Rather the intensifying and illuminating debate is within the Republican Party – particularly between people who are reasonably presumed interested in running for the presidency in 2012.?

On the one hand, there are those such as Newt Gingrich and Mike Huckabee, who are in favor of the tax deal currently on the table.? This seems to be where most of the Republican mainstream is.? On the other hand, Sarah Palin and Mitt Romney have come out strongly against the proposal.

On the merits of the economic argument – within the terms of reference laid down by Republicans themselves – Romney and Palin have the advantage.? The House Republican Pledge to America, after all, said clearly and forcefully, “We will put government on a path to a balanced budget and pay down the debt.”? This is hardly where the latest fiscal stimulus is leading, including with pork barrel measures that the Republicans just spent months saying they would never pass.

Of course, this really this is all about politics.? Romney and Palin are betting that unemployment will still be over 9 percent in 2012 (at least during the primaries) and anyone who supports any kind of stimulus now can be represented as a partial owner of that continuing human recession.? Gingrich and Huckabee are betting that a broader economic recovery will be underway, so they can say: the 2009 Democratic stimulus didn’t work, but the 2011 Republican-led tax cut package made all the difference.

Who is making the right judgment?? The Barney Frank Principle will be in effect – Frank is famous for emphasizing that voters never judge politicians relative to some hypothetical, but rather on the basis of how badly they dislike the actual outcome.

Still there is a big opportunity lurking here for the Democrats.? The president owns the recession and its aftermath, whether or not you (or he) think that is fair.? The tax deal with the Republicans may bring on board some unlikely co-owners, but it doesn’t much diminish Mr. Obama’s vulnerability in the general election.

But the White House can still get ahead of events by setting up a Tax Commission, to be directed by Alice Rivlin.? This should not be another attempt to build bipartisan consensus – as we can see from recent events, there is no way this would lead in a responsible direction.? Rather Rivlin, a former Congressional Budget Office director who is immensely sensible and respected across the political spectrum, should be empowered to come up with sweeping tax code changes that would reduce rates, lower complexity, and – here’s the point – raise revenue.

The economic opportunity here is that the US tax code is a complete mess.? Sensible reform would reduce distortions while also increasing revenues.? Rivlin has already made some reasonable proposals in this direction, but she needs the political authority to go further.

The weakness in the Palin-Gingrich position is that while they want to balance the budget, they want to do so primarily by cutting spending.? This is very difficult to do, as most of the spending issues over the next 30 years are about Social Security (a little) and Medicare (a lot); see this primer.

Cutting or limiting nonmilitary discretionary spending may play well with voters but it is simply not big enough to make that much difference.? If Palin and Gingrich are willing to put military spending on the table, that would help, but this is fast becoming a taboo subject for all Republicans.

Most of all, the Republican side of the aisle is against increasing federal government revenue (as a percent of GDP) under any circumstances.? This is not a strong position because how much revenue you want to raise should depend on what it costs (due to the distorting effects of taxes) and how you will use it – for example, as more people retire, do you really want to cut average pensions in real terms?

The Rivlin Commission would at least be insurance against the downside scenario – that we face a serious fiscal crisis, with sharply rising interest rates, at some point in late 2011 or early 2012.? This could very well happen as the eurozone is likely to sort out its problems – serious but not insuperable – over this time frame. ?Our underlying fiscal position is no stronger than European countries now under pressure and our ability to make effective fiscal adjustments under pressure is just as likely to be tested (and initially found wanting) by financial markets.

Both Republican factions might not worry too much about a perceived fiscal crisis in the run-up to 2012.? This would let them play to their themes of “we must cut spending,” and a major lesson from the current eurozone debacle is that crises do lead to big spending cuts – whether or not those make sense from a longer term productivity and fairness point of view.? (In this regard, consider Congressman Brad Miller’s important points on Social Security.

Rivlin-type proposals would give the president a powerful counterweapon.? Instead of “just cut spending” as the response to rising long-term interest rates, he could present a menu of sensible comprehensive tax reform steps.? Then the 2012 presidential campaign could, in part, be about the extent to which people would like to (a) cut Social Security, or (b) reform the tax code.

And, hopefully, if we are really having an adult conversation at that time, let’s hope that both sides agree on the need to control future increases in heathcare costs – as reflected in Medicare and Medicaid, but also more broadly.? Without that, we are bankrupt in any case.

An edited version of this post appeared this morning in the?NYT.com’s Economix blog; it is used here with permission.? If you would like to reproduce the entire article, please contact the New York Times.

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Weather Up Tribeca Takes Menus to New Levels of Casualness

Sorry, Readability was unable to parse this page for content.

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Red Rooster's Infused Bourbon Lineup

?

Bourbon infusions aren't new to the cocktail game, and it's true that there won't be an infusion of greater genius than the bacon one created a while back at PDT. Still though, the selection that will be offered at Red Rooster (310 Lenox Avenue, 212-792-9001) looks mighty enticing.

As the menu illustrates, the infusions will all be made using Bulleit bourbon and include the following varieties: Ginger, Green Tea & Chamomile Flower, Cinnamon, Roasted Fig & Pears, Nutmeg, Maple-Peanut, Wild Hibiscus & Lemongrass, and Cocoa Nib and Vanilla Bean.

But since the restaurant won't open for a few more days, why not try making an infusion at home? Grab your favorite flavorings (cardamom, apricot, coffee beans, orange peel, almonds, and sour cherries are a few easy ideas), toss them in with your favorite bourbon, and refrigerate for about a week (fruits should be closer to 3 days, while spices and dry flavorings can go longer). Try making an eggnog with infused bourbon - getting drunk never tasted so good.

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Anthony Mackie's Bed-Stuy Bar 'Should Open Next Year'

?In August, word surfaced that Anthony Mackie -- an actor best-known for his role in The Hurt Locker and currently starring as a former Black Panther in Night Catches Us -- was planning to open a bar in Bed-Stuy. At the time, a September opening was projected for the establishment, but today, via an interview Mackie did earlier with NPR, comes news that the bar, called No Bar, "should open next year." Vague, yes, but less vague is the fact that Mackie, who splits his time between the neighborhood and New Orleans, is modeling the place after late-1800s France, and building all of its furniture.

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This American DREAM

By James Kwak

Brad DeLong reminded me that the DREAM Act is being considered by Congress right now and has an outside chance of passage. If you are a Senator on the fence about this issue, or you work for one, you should listen to the last segment of this This American Life episode, starting about forty-six minutes in. It will break your heart.

Oh, and given that opposition has been basically along party lines: aren’t the people who would qualify for citizenship under the act natural Republican voters, anyway? Basically the act would reward people who pull themselves up by their bootstraps, without the benefit of federal aid. Or is that no longer what the Republican Party is about?

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Barbara Fairchild's Website Will 'Probably' Launch Next Month

?Barbara Fairchild may have ceded Bon Appétit's reigns to Adam Rapoport, but she's got still plenty to occupy her appetites. In an interview with LA Weekly's Squid Ink blog, the former ed-in-chief discusses the food site she's planning to launch "probably right after the first of the year." It won't be a recipe site, she says, "because I feel that my areas of interest are more along the lines of chefs, restaurants and travel, as well as the food industry as industry."

Fairchild is also open to doing consulting and teaching, especially if it takes her to places like Paris or Napa. According to her Twitter feed, she's been taking some meetings in New York, where her itinerary has included Maialino, Union Square Café, Ed's Chowder House, and the National. And Amtrak, whose coffee, she marveled, is "[h]ot brown liquid with absolutely no taste. This must be difficult to achieve."

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Who Wanted What?

By James Kwak

Look, I’m familiar with the argument for the tax cut deal. It’s not a terrible argument. In simple form, it goes, the top priorities are to stimulate the economy and to cushion the impact of unemployment, and a two-year tax cut extension was worth it to get that, especially since we can kill the Bush tax cuts in 2012. Now, no one who wasn’t born yesterday buys that bit about killing the Bush tax cuts in 2012, but you could still make the argument that two years of stimulus is worth making the tax cuts effectively permanent. (I don’t agree, but it’s not a crazy argument.)

But that’s not Austan Goolsbee’s argument on YouTube.

Here’s his slide:

Basically he’s trying to convince you that Obama won: Republicans wanted the top-end tax cuts and Obama wanted the “middle-class” tax cuts, and Obama conceded the top-end tax cuts, but in exchange he won lots of other great things: unemployment insurance extension, some sweeteners to the earned income tax credit, American Opportunity tax credit (for college), some sweeteners to the child tax credit, lower payroll tax, and an extension of some business investment credits. Notice which column he put them in.

To call this framing disingenous would be kind. Republicans also wanted the “middle-class” tax cuts; they were the Bush tax cuts, after all, and I don’t recall any Republican saying we should only extend them for the very rich.

And if I try to imagine what it would be like to be a Republican, I’d have to say I probably like the extension of the investment tax credits (because they’re for business, and they’re LOWER TAXES); I probably like the American Opportunity credit (first because it’s not very progressive–you have to be going to college in the first place, and it only phases out above $160,000 for married filers–and second because it’s LOWER TAXES); and I probably like the payroll tax cut (first because it’s a tax cut that benefits everyone–the more you make, the more it benefits you, up to the cap–second because I like anything that hurts the funding for Social Security, and third because it’s LOWER TAXES). I’m probably neutral on the child tax credit; I like subsidizing families, and it is LOWER TAXES, but this one might be a little bit progressive. And I’m probably against expanding the EITC (because it feels like welfare to me), and I’m definitely against extending unemployment benefits (because I think they’re all deadbeats).

So I would reorganize this as follows:

• Both sides wanted tax cuts for the lower 98%, the payroll tax cut, the investment tax credits, and the American Opportunity credit.
• Obama wanted the EITC expansion, extended unemployment benefits, and the sweetened child tax credit.
• Republicans wanted tax cuts for the top 2%.

I’d say Republicans got a pretty good deal, especially since, as Goolsbee says, everything in the second bullet is temporary, while many observers are thinking today that the third bullet is forever.

I just noticed, thanks to Ezra Klein, that Goolsbee’s argument, minus the crazy claim that tax cuts for the lower 98% were not something Republicans wanted, is the core of the White House’s marketing campaign:

To which I make the same response as to Goolsbee’s video.

But let’s leave aside this “who won” question. I admit I don’t know what the Republicans want and don’t want. But I wouldn’t necessarily trust what they are saying, either. If you’re John Boehner, you want to pretend you don’t want things that you secretly want, so you can “concede” them in negotiations. And anything that lowers tax revenue is good for a fair number of Republicans. (In any case, this question turns largely on the question of whether or not Republicans are happy with the payroll tax cut. A lot of people have addressed that question already. Here’s Mike Konczal.) Finally, note that Mitch McConnell has said that the vast majority of Republicans will vote for the deal. That should tell you something.

There’s a bigger issue. If you watch the video, the flow goes like this: “We wanted these tax cuts. The Republicans wanted these other tax cuts, and they were holding our tax cuts hostage. But we won, because not only did we get our tax cuts and they got theirs, but we got all these other tax cuts!” Face it, the only thing on that board that isn’t a tax cut is extended unemployment benefits, although you can certainly make the argument that the EITC is more like a welfare program than a tax cut (and I’m certainly a fan of the EITC). The same goes for the chart.

So if you’re Grover Norquist and what you want more than anything else is lower tax revenue, you should be celebrating like it’s Christmas and your birthday at the same time. We had an argument where one side wanted tax cuts A, the other side wanted tax cuts B, and they compromised by adding tax cuts C? Here’s a great illustration from Klein, who despite the chart is still in favor of the deal:

And the Democratic argument–trying to get support from the base–is “we got more tax cuts than they did”?

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Someone Finally Calls Bullshit on Baked by Melissa's $1 Mini Cupcakes

?Ragging on unstoppable cupcake proliferation is a wearying task, so props to Midtown Lunch for calling out what is possibly the biggest, steamiest turd in the cupcake canon: the $1 Baked by Melissa "mini" cupcake, which is the size of a quarter. Quoth writer Blondie, "I like cupcakes, but when I saw the prices for these, I threw up in my mouth a little." Couldn't have said it better ourselves.

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The Moderate Republican Stimulus

By James Kwak

One of the great things about the Internet, as opposed to, say, law school, is that other smart people will do my homework for me. Last week I said that Obama’s position on the tax cuts was a “moderate-Republican line in the sand” and that the tax deal was closer to the Republicans’ ideal outcome than the Democrats’, but the latter argument was based on some guesses about Republican preferences. Now Mike Konczal has done some of the harder argument, uncovering hard evidence that the Republicans would have agreed to the extended child tax credit sweetener anyway and presenting five points for the argument that the Republicans wanted payroll tax cuts – in particular, they wanted them more than Making Work Pay tax credit that they replaced.

Here’s Mike’s version of the administration’s chart:

He calls it the “Moderate Republican Stimulus Package 2.0.”

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The Moderate Republican Stimulus

By James Kwak

One of the great things about the Internet, as opposed to, say, law school, is that other smart people will do my homework for me. Last week I said that Obama’s position on the tax cuts was a “moderate-Republican line in the sand” and that the tax deal was closer to the Republicans’ ideal outcome than the Democrats’, but the latter argument was based on some guesses about Republican preferences. Now Mike Konczal has done some of the harder argument, uncovering hard evidence that the Republicans would have agreed to the extended child tax credit sweetener anyway and presenting five points for the argument that the Republicans wanted payroll tax cuts – in particular, they wanted them more than Making Work Pay tax credit that they replaced.

Here’s Mike’s version of the administration’s chart:

He calls it the “Moderate Republican Stimulus Package 2.0.”

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The Eataly Effect Is Felt on West 23rd Street

?Much as Keith McNally may have inspired landlords in the vicinity of Pulino's to raise their rents, Eataly seems to be giving their West 23rd Street counterparts a few ideas.

Crain's reports that since the Italian food megalith's opening in August, rents within a block or two have increased 15 percent. Its success has also inspired other restaurateurs to make fat-ass footprints on the neighborhood: Schnipper's Quality Kitchen will open a 4,800-square-foot restaurant at 1 Madison Avenue, where it will be joined by a 3,600-square-foot wine bar called Gustavo America.

All of which inspires a sort of weird nostalgia for the days when the length of the Shake Shack line was more or less the only thing to make gastronerds obsess about the neighborhood -- and which was, of course, a big part of why people are swarming 23rd Street for fresh mozzarella today.

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This American DREAM

By James Kwak

Brad DeLong reminded me that the DREAM Act is being considered by Congress right now and has an outside chance of passage. If you are a Senator on the fence about this issue, or you work for one, you should listen to the last segment of this This American Life episode, starting about forty-six minutes in. It will break your heart.

Oh, and given that opposition has been basically along party lines: aren’t the people who would qualify for citizenship under the act natural Republican voters, anyway? Basically the act would reward people who pull themselves up by their bootstraps, without the benefit of federal aid. Or is that no longer what the Republican Party is about?

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Joseph Leonard Re-Opens Tomorrow, and Veselka Bowery Will Open in March

?Two months after it was shut down by an electrical fire, Joseph Leonard is back in business: per Eater, the Sheridan Square restaurant will open for dinner tomorrow.

Farther east, it looks like Veselka Bowery will debut "in the middle of March," according to the Feast's interview with the restaurant's owner, Tom Birchard. Birchard says that the second Veselka will be "very similar" to the original Second Avenue Veselka, though it will also have a full liquor license and a larger kitchen that will allow for "more involved dishes." It will also be open 24/7, so "people will very much know they're at another Veselka."

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Cow-Tripe Cau Cau at Lima Limon in Jackson Heights

?The turmeric-laced tripe stew at Lima Limon

Peruvian newcomer Lima Limon offers the usual range of variety meats seen in Peruvian restaurants. There are anticuchos, flame-grilled kebabs of veal heart, served with potatoes, a choclo of corn with outsize kernels, and a fiery red cilantro hot sauce. But even better is cau cau.

Cau cau is the way Peruvians prepare cow stomach tripe. Though turmeric is often regarded as little more than a coloring agent, here the spice shines as an earthy flavor unto itself. The tripe is stewed with small cubes of potatoes, and cilantro creates an altogether different flavor vector. If you normally are a little queasy about eating tripe, you won't be when you taste this wonderful stew, which is served with rice and an opaque green sauce that is only one among many heat options at Lima Limon.

Lima Limon
94-20 Roosevelt Avenue
Jackson Heights, Queens
718-651-5002

?The interior of Lima Limon may be too brightly lit for some.?You may enjoy shopping for some Colombian fetish clothes just down the street, after dining at Lima Limon.

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Today in Things That Are Stupid: Chocolate Library Not Allowed to Be Called Chocolate Library

?Due to the 2006 state Business Corporation Law, Not-for-Profit Corporation Law, Partnership Law, and Limited Liability Company Law, it seems that the Chocolate Library, the recently opened chocolate store in the East Village, cannot be called the Chocolate Library. Why? Because said law forbids companies to use the word "library" -- along with "kindergarten," "school," "academy," and "institute" -- in their names.

Per Diner's Journal, that means that Byron Bennett, the Chocolate Library's owner, has had to change his business's name to Chocolate 101, which, while still quasi-scholarly, sounds more like something you'd find in a New Jersey strip mall.

Bennett is making an appeal to the State Education Department, which had initially rejected his application to incorporate his business; a spokesman for the state told the Times that they might reconsider the application. Meanwhile, the Brandy Library, Hudson Library, and Library Hotel continue to not confuse the public with their intentions.

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Who Wanted What?

By James Kwak

Look, I’m familiar with the argument for the tax cut deal. It’s not a terrible argument. In simple form, it goes, the top priorities are to stimulate the economy and to cushion the impact of unemployment, and a two-year tax cut extension was worth it to get that, especially since we can kill the Bush tax cuts in 2012. Now, no one who wasn’t born yesterday buys that bit about killing the Bush tax cuts in 2012, but you could still make the argument that two years of stimulus is worth making the tax cuts effectively permanent. (I don’t agree, but it’s not a crazy argument.)

But that’s not Austan Goolsbee’s argument on YouTube.

Here’s his slide:

Basically he’s trying to convince you that Obama won: Republicans wanted the top-end tax cuts and Obama wanted the “middle-class” tax cuts, and Obama conceded the top-end tax cuts, but in exchange he won lots of other great things: unemployment insurance extension, some sweeteners to the earned income tax credit, American Opportunity tax credit (for college), some sweeteners to the child tax credit, lower payroll tax, and an extension of some business investment credits. Notice which column he put them in.

To call this framing disingenous would be kind. Republicans also wanted the “middle-class” tax cuts; they were the Bush tax cuts, after all, and I don’t recall any Republican saying we should only extend them for the very rich.

And if I try to imagine what it would be like to be a Republican, I’d have to say I probably like the extension of the investment tax credits (because they’re for business, and they’re LOWER TAXES); I probably like the American Opportunity credit (first because it’s not very progressive–you have to be going to college in the first place, and it only phases out above $160,000 for married filers–and second because it’s LOWER TAXES); and I probably like the payroll tax cut (first because it’s a tax cut that benefits everyone–the more you make, the more it benefits you, up to the cap–second because I like anything that hurts the funding for Social Security, and third because it’s LOWER TAXES). I’m probably neutral on the child tax credit; I like subsidizing families, and it is LOWER TAXES, but this one might be a little bit progressive. And I’m probably against expanding the EITC (because it feels like welfare to me), and I’m definitely against extending unemployment benefits (because I think they’re all deadbeats).

So I would reorganize this as follows:

• Both sides wanted tax cuts for the lower 98%, the payroll tax cut, the investment tax credits, and the American Opportunity credit.
• Obama wanted the EITC expansion, extended unemployment benefits, and the sweetened child tax credit.
• Republicans wanted tax cuts for the top 2%.

I’d say Republicans got a pretty good deal, especially since, as Goolsbee says, everything in the second bullet is temporary, while many observers are thinking today that the third bullet is forever.

I just noticed, thanks to Ezra Klein, that Goolsbee’s argument, minus the crazy claim that tax cuts for the lower 98% were not something Republicans wanted, is the core of the White House’s marketing campaign:

To which I make the same response as to Goolsbee’s video.

But let’s leave aside this “who won” question. I admit I don’t know what the Republicans want and don’t want. But I wouldn’t necessarily trust what they are saying, either. If you’re John Boehner, you want to pretend you don’t want things that you secretly want, so you can “concede” them in negotiations. And anything that lowers tax revenue is good for a fair number of Republicans. (In any case, this question turns largely on the question of whether or not Republicans are happy with the payroll tax cut. A lot of people have addressed that question already. Here’s Mike Konczal.) Finally, note that Mitch McConnell has said that the vast majority of Republicans will vote for the deal. That should tell you something.

There’s a bigger issue. If you watch the video, the flow goes like this: “We wanted these tax cuts. The Republicans wanted these other tax cuts, and they were holding our tax cuts hostage. But we won, because not only did we get our tax cuts and they got theirs, but we got all these other tax cuts!” Face it, the only thing on that board that isn’t a tax cut is extended unemployment benefits, although you can certainly make the argument that the EITC is more like a welfare program than a tax cut (and I’m certainly a fan of the EITC). The same goes for the chart.

So if you’re Grover Norquist and what you want more than anything else is lower tax revenue, you should be celebrating like it’s Christmas and your birthday at the same time. We had an argument where one side wanted tax cuts A, the other side wanted tax cuts B, and they compromised by adding tax cuts C? Here’s a great illustration from Klein, who despite the chart is still in favor of the deal:

And the Democratic argument–trying to get support from the base–is “we got more tax cuts than they did”?

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How to Lose Weight: Think About Eating Instead of Actually Doing It

?The Los Angeles Times reveals the diet trick of anorexics everywhere: Imagine that you're eating food and then you won't be hungry.

Explaining the findings from the latest edition of Science, the newspaper notes that merely thinking about a food without actually seeing, touching, smelling, or tasting it can help sate hunger. The process is called habituation, but requires the somewhat tedious act of pretending to eat multiple bites of food (in the study, the participants visualized consuming 30 M&Ms, one after the next).

This seems like a reasonable diet, mostly because it takes almost half an hour to imagine chewing and swallowing 30 bites, and, by then, one's hunger pangs are probably diminished. But it also sounds like an eating disorder waiting to happen. Whatever, double chocolate crumb cake, you look so tasty.

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Posts of the Week

It's late Friday afternoon, and thus time for what it's always time for on late Friday afternoon ...

The Top 10 Fast Food Items That Don't Totally Suck.

Where should I send my 21-year-old godson for some birthday fun?

Top Chef: "It's like the Spice Girls and their bodyguard."

Toloache's Julian Medina talks about his taco triple threat, what he learned to cook growing up, and the similarities between Jewish and Mexican cooking.

Taking another look at Lupa, Mario Batali's Roman restaurant.

The Tap Room's Matthew MacCartney talks wine, beer cocktails, and Australian hangover cures.

A three-way Texas ranch dressing battle between Dallas BBQ, Hill Country Chicken, and SouthWestNY.

Behold: Xocolatl de David, the world's most expensive caramels.

Ta?m Mobile's hummus sandwich and split pea soup are vegetarian delights of NYC.

Make Back Forty's One-Pot Pozole Verde.

Can New York City make good bourbon?

Here's the Early Word on Cocoron ...

... and Doug E.'s.

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What Is Wrong With Cutting Taxes?

By Simon Johnson

The president and congressional Republicans have reached a deal that would cut taxes “for all Americans.” Their argument is that this package will stimulate the economy, create jobs and help lead to economic recovery and sustained growth.

This proposal, which seems likely to pass Congress, is not a good idea. Why? (To see me explain these points in a five-minute video, click here.) Vice President Dick Cheney said, loud and clear, in 2002: “Reagan proved deficits don’t matter.”

He was right that Ronald Reagan showed the Republican Party that you can get away with running significant deficits as a result of tax cuts – exactly the strategy of President George W. Bush.

But Mr. Cheney was completely wrong with regard to the implication that there are no economic consequences of sustained fiscal deficits.

I suggest you talk to the Greeks (now in the International Monetary Fund’s emergency ward) or the Portuguese (who are headed in that direction.) For that matter, listen to any policymaker in the European Union – they are all focused on bringing down deficits in a credible manner. And watch the European financial markets – people there are doubting and testing the fiscal credibility of all governments throughout the euro zone.

In fact, try persuading any responsible policy analyst anywhere in the world outside the United States that cutting taxes in the United States from current levels will boost growth so much that the cut will pay for itself” and end up reducing or at least controlling the fiscal deficit (the proposition of the Laffer Curve). You will be met great skepticism.

If the I.M.F. could speak truth to authority in the United States, it would tell you this most forcefully.

This does not mean that we should immediately move to cut our fiscal deficit – efforts to panic us in this regard are completely misplaced. Ironically, some of the fear-mongering emanates from the same part of the political spectrum as the vociferous demands for lower taxes; there are no true fiscal conservatives in America. Again, here, too, is a sharp contrast between the United States and anywhere else in the world.

But our “fiscal space” is limited – we cannot afford to blithely increase our national debt. It can be done – and should be done given the parlous state of our economy and our disastrously high unemployment levels. But it must be done carefully, so we get as much stimulative effect on jobs as possible for our debt-increase dollars.

Cutting taxes for the very rich is an ineffective way to stimulate the economy in the short term (for a detailed discussion, see this post by my colleague James Kwak). On this there is widespread agreement, including from the pages of The Wall Street Journal, where Robert Frank, a careful student of the rich and famous (and editor of The Journal’s Wealth Report and author of “Richistan”), said: “When I ask wealthy business owners and entrepreneurs why they’re not hiring, they rarely mention taxes. They say consumer demand. And jobs.”

Three much more effective ways to support consumer demand and jobs would be:

Really extend unemployment benefits. There is nothing in the proposal on the table that will help people who have already been unemployed for 99 weeks – see this explanation from Nevada.

Don’t lay off teachers anywhere in the country. The broader goal, of course, is to increase teacher quality, which is not easy and takes time (see the film“Waiting for Superman”). But firing teachers at any level of K-12 education makes no sense in the short or medium run.

Immediately hire more people to teach in community colleges. The unemployed – and those at risk of being fired – need new skills, particularly around information technology and the ability to run businesses. Give the long-term unemployed the opportunity and incentive to attend these classes. Help them get jobs – or start their own businesses. Even if those companies fail, the entrepreneurial experience will keep them in the labor force and enable them to enhance their skills – and become more productive employees when larger companies decide to start hiring in earnest again.

This post appeared on the NYT Economix blog this morning; it is used here with permission.? If you would like to reproduce the entire post, please contact the New York Times.

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