Archives: 08/2012

Explaining Ryan’s Budget in the Wall Street Journal

Even though I’ve already made clear that I am less-than-overwhelmed by the thought of Mitt Romney in the White House, I worry that people will start to think I’m a GOP toady.

That’s because I’ve been spending a lot of time providing favorable analysis and commentary on the relative merits of the Ryan budget (particularly proposed reforms to Medicare and Medicaid) compared to President Obama’s statist agenda of class warfare and bigger government.

I’ve already done a couple of TV interviews on Ryanomics vs Obamanomics and the Wall Street Journal this morning published my column explaining the key features of the Ryan budget.

Here are some highlights.

In one of my early paragraphs, I give Ryan credit for steering the GOP back in the right direction after the fiscal recklessness of the Bush years.

…the era of bipartisan big government may have come to an end. Largely thanks to Rep. Paul Ryan and the fiscal blueprint he prepared as chairman of the House Budget Committee earlier this year, the GOP has begun climbing back on the wagon of fiscal sobriety and has shown at least some willingness to restrain the growth of government.

I probably should have also credited the Tea Party, but I’ll try to make up for that omission in the future.

These next couple of sentences are the main point of my column.

The most important headline about the Ryan budget is that it limits the growth rate of federal spending, with outlays increasing by an average of 3.1% annually over the next 10 years. …limiting spending so it grows by 3.1% per year, as Mr. Ryan proposes, quickly leads to less red ink. This is because federal tax revenues are projected by the House Budget Committee to increase 6.6% annually over the next 10 years if the House budget is approved (and this assumes the Bush tax cuts are made permanent).

Some conservatives complain that the Ryan budget doesn’t balance the budget in 10 years. I explain how that could happen, but I then emphasize that what really matters is shrinking the burden of government spending.

To balance the budget within 10 years would require that outlays grow by about 2% each year. …There are many who would prefer that the deficit come down more quickly, but from a jobs and growth perspective, it isn’t the deficit that matters. Rather, what matters for prosperity and living standards is the degree to which labor and capital are used productively. This is why policy makers should focus on reducing the burden of government spending as a share of GDP—leaving more resources in the private economy. The simple way of making this happen is to follow what I’ve been calling the golden rule of good fiscal policy: The private sector should grow faster than the government.

Actually, I’ve been calling it Mitchell’s Golden Rule, but I couldn’t bring myself to be that narcissistic and self-aggrandizing on the nation’s most important and influential editorial page.

One final point from the column that’s worth emphasizing is that Ryan does the right kind of entitlement reform.

One of the best features of the Ryan budget is that he reforms the two big health entitlements instead of simply trying to save money. Medicaid gets block-granted to the states, building on the success of welfare reform in the 1990s. And Medicare is modernized by creating a premium-support option for people retiring in 2022 and beyond. This is much better than the traditional Beltway approach of trying to save money with price controls on health-care providers and means testing on health-care consumers. …But good entitlement policy also is a godsend for taxpayers, particularly in the long run. Without reform, the burden of federal spending will jump to 35% of GDP by 2040, compared to 18.75% of output under the Ryan budget.

The last sentence of the excerpt is critical. If the Golden Rule of fiscal policy is to have the private sector grow faster than government, then the Golden Goal is to reduce government spending as a share of GDP.

I’ve commented before how America will become Greece in the absence of reform. Well, that’s basically the Obama fiscal plan, as illustrated by this amusing cartoon.

What makes the Ryan budget so impressive is that it includes the reforms that are needed to avoid this fate.

No, it doesn’t bring the federal government back down to 3 percent of GDP, so it’s not libertarian Nirvana.

But we manage to stay out of fiscal hell, so that counts for something.

Did Broadband Deregulation Upend NSA Wiretapping?

One of the great mysteries of recent national security surveillance policy is exactly why the controversial FISA Amendments Act of 2008 was necessary. The Foreign Intelligence Surveillance Act had always defined the interception of the contents of a “wire communication” as “electronic surveillance” requiring a court order if and only if either the sender or the recipient of that communication was inside the United States. Intelligence surveillance of strictly foreign-to-foreign wire communications was always understood to be allowed, even if the interception was done domestically, when the communication happened to pass through a U.S. telecom switch.

But in early 2007, something changed. Then–House Minority Leader John Boehner (R-Ohio) publicly declared that a secret ruling by the (normally highly deferential) Foreign Intelligence Surveillance Court had found a problem with a National Security Agency surveillance program, and the Court’s opinion was alleged to require a warrant for interception of even wholly foreign communications.  Supporters of broader spying powers characterized the decision as requiring a warrant for all interception of foreign-to-foreign communications, including phone calls, but that turns out not to have been quite accurate: Kenneth Wainstein, at the time a high-ranking Justice Department official, later clarified that the problem was specifically related to interception of e-mail, where the locations of both parties to the communication might not be known to NSA in advance.

Even this, however, was a little peculiar. E-mail was not exactly a new technology in 2007,  after all, so what had changed? Most of us at the time assumed that the issue had to do with the greatly increased breadth of the surveillance NSA was trying to conduct—but flipping through the latest edition of David Kris and Douglas Wilson’s invaluable National Security Investigations and Prosecutions, I’ve just realized there’s another possibility that fits the public facts extremely well.

To understand what might have happened, we need to understand a few things about both the complex structure of the FISA law and the specifics of how NSA’s Internet surveillance worked. Thanks to whistleblower Mark Klein, formerly an engineer at AT&T, we know that the NSA maintained a series of secret rooms at the offices of major telecommunications companies, where the entire stream of Internet traffic was copied and diverted into a sophisticated piece of surveillance equipment: the Narus Semantic Traffic Analyzer. NSA could then program the device to filter out and record particular communications for human review according to selected criteria—such as e-mail or IP addresses, and perhaps even particular keywords in the e-mails themselves.

Initially, this almost certainly would have been classified as “electronic surveillance” of a “wire communication” under FISA—one of four somewhat complicated categories of “electronic surveillance” defined by the statute. Specifically, it would have been covered by 50 U.S.C. 1801(f)(2), which requires a warrant for the “acquisition by an electronic, mechanical, or other surveillance device of the contents of any wire communication to or from a person in the United States.” Crucially, FISA’s definition of a “wire communication” covered any communication—telephonic or digital—in transit over facilities operated by a “common carrier.” This is actually a bit of an anachronistic holdover specific to FISA: The statutes governing criminal wiretap investigations were amended in 1986 to make a provider’s “common carrier” status irrelevant, but the language in FISA remained.

Then, in 2005, came the Supreme Court’s decision in National Cable & Telecommunications Services vs. Brand X Internet Services. On its face, the case had nothing to do with surveillance, but with the contentious debate over “net neutrality.” In 2002, the FCC had issued a controversial ruling that broadband Internet over cable wires should be classified as an “information service,” rather than a “telecommunications service” (like traditional telephone service). Small ISPs like Brand X, as well as advocates for government-enforced “net neutrality,” believed that federal law required broadband to be classed as a “telecommunication service” subject to “common carrier” requirements, meaning that they had to make their infrastructure available at low cost to competitors. The Supreme Court ultimately rejected that argument, finding that the FCC had discretion to decide how cable broadband should be categorized. The FCC promptly acted on that ruling—but provided for a one-year transition period before those common carrier requirements entirely expired.

This gives us a conspicuous coincidence: The mysterious FISC decision described by Boehner would have happened shortly after broadband providers were freed of the last vestiges of “common carrier” status. At that point, interception of the Internet traffic flowing through those NSA Narus boxes would cease to be “electronic surveillance” of a “wire communication” for FISA purposes.  But then, what would it be?

The most likely answer, as Kris and Wilson argue, is that NSA’s digital eavesdropping would now be covered by 50 U.S.C. 1801(f)(4), which was originally primarily intended to cover surveillance using hidden microphones or cameras. This definition explicitly excludes surveillance of a “wire communication,” which means it would not have applied so long as Internet providers were considered “common carriers,” but otherwise applies to “the installation or use” of a surveillance device “for monitoring to acquire information… under circumstances in which a person has a reasonable expectation of privacy and a warrant would be required for law enforcement purposes.”

This definition is importantly different from the definition that applies to “wire communications” in several ways. Instead of specifically requiring a warrant to intercept the “contents” of a message, it covers any kind of “monitoring to acquire information.” Instead of turning on the location of the senders or recipients of a communication, it applies whenever “a person”—not limited to the parties to the communication, and so potentially including also the provider itself—has some reasonable expectation of privacy. Finally, it depends on whether comparable surveillance for law enforcement purposes would require a warrant—and in many cases it’s clear that the statutes governing both “live” interception and acquisition of stored communications would require a warrant, regardless of the user’s location. In other words, a regulatory change having no obvious connection to NSA surveillance could have suddenly knocked out the legal basis for the NSA’s ongoing Internet surveillance program—and left the telecoms with serious doubts about whether the law allowed them to continue providing technical assistance with that program.

So is this what happened in early 2007, leading to the supposed crisis that ultimately resulted in the passage of the FAA, with its broad authorization of programmatic spying? Those of us without security clearances can’t know for sure, of course, but it should at least be suggestive that David Kris—probably the country’s top expert on FISA law—devotes a fairly lengthy section of his book to an analysis of the “common carrier” question, specifically citing the Brand X decision. Following publication of the first edition of the book, Kris left the private sector to head the National Security Division of the Justice Department from 2009–2011, making him one of the few people who actually know for certain what the issue was. The just-published second edition contains a new section discussing the causes of the recent “modernization” of FISA, and specifically points to the problem of conducting international e-mail surveillance under the aegis of 1801(f)(4).  There, he writes that “everyone who understood this problem” agreed legislation was needed to ensure that foreign-to-foreign Internet traffic was treated in the same way as comparable telephone traffic—which is to say, as a “wire communication.”

But then why not solve this problem in the obvious, narrow way: By bringing FISA in line with criminal wiretap statutes, discarding the “common carrier” language, and once again treating Internet traffic as a “wire communication”?

Kris suggests that the answer lies in the difficulty of determining when, in fact, the ultimate sender and recipient of an Internet communication are both foreign. A Pakistani might send an e-mail intended for a Gmail user in Yemen, but at the time the e-mail is sent, the only observable “wire communication” might be between the sender in Pakistan and the intermediary “recipient”: Google’s servers in California. But if the government’s problem is an inability to reliably determine the location of parties to a communication, it’s not clear why we should be confident that interception under this broad new authority can reliably avoid acquiring many purely domestic communications.

Perhaps Kris is correct that a narrower solution to the problem would have been unworkable. On the other hand, perhaps legislators would have tried a bit harder to craft a viable narrow solution if they—and the general public—had clearly understood exactly what the problem was. If the FISA court ruling limiting Internet surveillance was indeed an unintended side-effect of broadband deregulation, lawmakers and civil liberties groups might have been inspired to work on devising legislative changes that responded to that immediate issue. But because nobody outside the Intelligence Community understood the problem, spy agencies were able to present their extraordinarily broad solution—providing authority they had long sought quite independently of the “common carrier” issue—as the only alternative.

Correcting a Massive Typo by USA Today

Although this line is attributed to many people, Wikiquote says that Gideon Tucker was the first to warn us that “No man’s life, liberty, or property are safe while the legislature is in session.”

This cartoon about Keynesian economics sort of makes the same point, but not with the same eloquence.

But that’s not the point of this post. Instead, I want to focus on this grossly misleading headline in USA Today: “This Congress could be least productive since 1947.”

I don’t think it’s a case of media bias or inaccuracy, as we saw with the AP story on poverty, the Brian Ross Tea Party slur, or the Reuters report on job creation and so-called stimulus.

But it does blindly assume that it is productive to impose more laws. Was it productive to enact Obamacare? What about the faux stimulus? Or the Dodd-Frank bailout bill?

Wouldn’t the headline be more accurate if it read, “This Congress could be least destructive since 1947”?

Here are the relevant parts of the USA Today report.

Congress is on pace to make history with the least productive legislative year in the post World War II era. Just 61 bills have become law to date in 2012 out of 3,914 bills that have been introduced by lawmakers, or less than 2% of all proposed laws, according to a USA TODAY analysis of records since 1947 kept by the U.S. House Clerk’s office. In 2011, after Republicans took control of the U.S. House, Congress passed just 90 bills into law. The only other year in which Congress failed to pass at least 125 laws was 1995. …When Democrats controlled both chambers during the 111th Congress, 258 laws were enacted in 2010 and 125 in 2009, including President Obama’s health care law.

To be sure, not all legislation is bad. Now that the Supreme Court has failed in its job, Congress would have to enact a law to repeal Obamacare. Laws also would need to be changed to reform entitlements, or adopt a flat tax.

And some laws are benign, such as the enactment of Dairy Goat Awareness Week or naming a federal courthouse.

But I’m guessing that the vast majority of substantive laws are bad for freedom and result in less prosperity.

So let’s cross our fingers that future Congresses are even less productive (and therefore less destructive) than the current one.

Skinning the Fourth Amendment: The Sixth Circuit’s Awful GPS Tracking Decision

In the summer of 2006, agents of the Drug Enforcement Agency used GPS tracking technology to locate drug courier Melvin Skinner’s prepaid phone, ultimately seizing more than 1,000 pounds of marijuana from Skinner’s mobile home. The judges on the Court of Appeals for the Sixth Circuit then apparently smoked all of it before issuing their ruling in United States v. Skinner this week, because the opinion approving DEA’s use of GPS technology in this case is easily one of the most muddled examples of legal reasoning I’ve ever encountered—a surreal potpourri of factual misunderstandings, inapt analogies, sloppy and selective appeals to precedent, and logical leaps worthy of Nijinsky.

A very brief summary of the case: DEA was already investigating a drug trafficking organization, and through the use of lawful wiretaps learned that a courier code-named “Big Foot” would be driving a large shipment of marijuana from Tucson, Arizona to Mooresburg, Tennessee in his mobile home. “Big Foot” was using a prepaid (or “burner”) mobile phone purchased for him by his co-conspirators, which meant one thing DEA didn’t know was Big Foot’s identity, because the prepaid phone wasn’t registered in his name. (While this makes them appealing to drug dealers, they’re also very popular with ordinary, law-abiding citizens: Prepaid phones now account for 25 percent of mobile phone subscriptions.) Agents then obtained a court order—but not a search warrant based on probable cause—to “ping” the phone’s GPS chip and precisely track its location in realtime. Tracing it to a truck stop near Abilene, Texas, authorities brought drug dogs to sniff the perimeter of the mobile home, and when the dogs alerted to the presence of drugs, performed a search—finding the drugs, and arresting Skinner, now revealed as “Big Foot.”

The Sixth Circuit’s Fourth Amendment analysis is disturbing right from the outset. “If a tool used to transport contraband gives off a signal that can be tracked for location,” the argument begins, “certainly the police can track that signal. The law cannot be that a criminal is entitled to rely on the expected untrackability of his tools.”  This is bizarre and circular: It suggests that criminals categorically lack Fourth Amendment privacy interests in any “tool” they use to conduct criminal activity, in which case no search would violate the Fourth Amendment if it actually turned up evidence of criminal conduct. But the whole point of requiring a warrant is to let a neutral magistrate determine whether there’s probable cause to believe such conduct will be uncovered. The court hastily acknowledges this in a footnote, clarifying that there’s no expectation of privacy for anyone in cell phone GPS data, but beginning in this way suggests the court is reasoning backwards to a desired conclusion, based on Skinner’s now-established guilt.

The court proceeds through a series of lazy and underdeveloped analogies:

Otherwise dogs could not be used to track a fugitive if the fugitive did not know that the dog hounds had his scent. A getaway car could not be identified and followed based on the license plate number if the driver reasonably thought he had gotten away unseen. The recent number of cell phone technology does not change this. If it did, then technology would help criminals but not the police. It follows that Skinner had no expectation of privacy in the context of this case, just as the driver of a getaway car has no expectation of privacy in the particular combination of colors of the car’s paint.

But it does not follow at all. “What a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection,” the Supreme Court explained in the seminal case of Katz v. United States, “But what he seeks to preserve as private, even in an area accessible to the public, may be constitutionally protected.” Any member of the public can buy a dog and follow a scent. Any member of the public can view and copy down a license plate number. Any member of the public can view the external paint job of a car. But any member of the public cannot just track the GPS signal of a random cell phone—and if they could, most of us would be extremely wary about carrying cell phones. Unlike all these other examples, GPS tracking as employed here depends crucially on the ability of police to invoke state authority—a seemingly salient distinction the court fails to take any note of.

Finally, the judges move on from these dubious analogies and cite an actual precedent: United States v. Knotts. In Knotts, police had placed a relatively short range tracking “beeper” in a can of chloroform sold to suspected drug manufacturers. Having monitored the sale of the canister, police followed the car in which the suspects had placed it, using the beeper to supplement their visual observation of the car’s public journey, and ultimately relying on it to recover the trail when they lost the suspects. The Supreme Court held that no Fourth Amendment  expectation of privacy had been violated, because the location of the car police had been tailing was information exposed to any observer on the road. Here too, the court reasoned, Skinner’s RV was moving along public roads visible to any member of the public.

Unfortunately, this falls apart as soon as you begin thinking about it for a moment. The information that is exposed to the general public, in all these cases, is that a car with a particular external appearance is at such-and-such location at such-and-such a time. Having already observed their lojacked canister being loaded into the suspect’s car, that was the very information the police needed to maintain their tail.

Skinner presents a very different situation. It’s true that any member of the public could observe that Skinner’s RV was one of probably hundreds traveling on public highways in mid July of 2006. But that was not the information investigators relied upon here: What the GPS tracking here revealed was the non-publicly observable fact that one particular mobile home, which police had never encountered before, contained a particular phone believed to be in close proximity to illegal drugs. These are importantly different facts. The Secret Service even relies on that difference to help protect the life and safety of the president: Anyone can observe dozens of limos or SUVs with tinted windows leaving the White House on public roads each day, but which of these contain the president is not so exposed. Because the salient fact for the purposes of the police investigation was not the location of a particular vehicle on public streets, but rather the location of a particular personal effect in a private mobile home, the relevant precedent isn’t Knotts, but rather United States v. Karo. The government might then argue that the contents of a mobile home aren’t entitled to the same high level of protection as the contents of the residence at issue in Karo, but having incorrectly framed the issue, the Sixth Circuit panel never takes up that question.

The court does at least gesture in the direction of the idea that it might somehow matter that police didn’t initially know the identity of “Big Foot,” and had not previously observed his vehicle. They deem this immaterial with a truly breathtaking bit of hand-waving:

As for not knowing his identity, this is irrelevant because the agents knew the identity of Skinner’s co-conspirators and could have simply monitored their whereabouts to discover Skinner’s identity. Using a more efficient means of discovering this information does not amount to a Fourth Amendment violation.

It is, I think, an open question what police could or could not have discovered in a parallel universe where they employed a completely different set of investigative methods (as opposed to the physical tail actually employed in Knotts and supplemented by a beeper), but it’s not clear why this is really germane. That a postal letter might have been retrieved from the trash of a suspect who never shreds his correspondence does not make it any less an illegal search to intercept the unopened letter. Remarkably, the court does not deign to even mention the 2001 Supreme Court case Kyllo v. United States, which contemplated and rejected a similar argument. Writing for the majority, Justice Scalia explained that the use of thermal imaging to detect marijuana growing lights in a garage was not immunized from Fourth Amendment scrutiny by the fact that other permissible means might have revealed facts about the temperature of a home:

The dissent’s comparison of the thermal imaging to various circumstances in which outside observers might be able to perceive, without technology, the heat of the home–for example, by observing snow melt on the roof […]–is quite irrelevant. The fact that equivalent information could sometimes be obtained by other means does not make lawful the use of means that violate the Fourth Amendment. The police might, for example, learn how many people are in a particular house by setting up year-round surveillance; but that does not make breaking and entering to find out the same information lawful.

That argument seems to present at least a potential problem for the court’s reasoning here, and seems more generally relevant insofar as it concerns the use of technology to gain information about the contents of a home, but again, Kyllo is not even mentioned.

Since this is a case involving phones, the Sixth Circuit also takes a stab at breezily invoking Smith v. Maryland—the basis for the much-criticized “third party doctrine”—where a suspect was held to lack an expectation of privacy in dialed phone numbers that had been voluntary exposed to the phone company, which routinely retained that information in its ordinary business records for billing purposes. Without much analysis the court asserts that “[s]imilar reasoning compels” a parallel conclusion here.

But on closer examination, the fact that both cases involve phones is about as far as the similarities go. Dialed numbers are information actively and consciously exposed to the phone company by the user, and then retained in billing records as a matter of course, independently of any government investigations. Unfortunately, as both Orin Kerr and Jennifer Granick note, the court seems fuzzy on the very different characteristics of the GPS technology used here. The GPS chip contained in the phone—which apparently the suspects were unaware of—would not normally transmit any information to the phone company at all. Rather, the chip would have calculated its precise location coordinates and transmitted them to the company only in response to a “ping” initiated by law enforcement. To be sure, the company might be physically capable of sending such a ping on its own, just as it would be physically capable of intercepting the contents of a phone call. And if it had built the phone with a secret capability to be remotely activated as a microphone, it would also be physically capable of remotely gathering information about the user’s activities in that way as well. Fortunately, the Fourth Amendment is not limited to pointlessly prohibiting only physically impossible surveillance.  The technological capabilities of the phone company or the government do not determine what has been “knowingly exposed”—and it seems clear here that Skinner did not knowingly expose, to either the general public or the phone company, the precise GPS coordinates of his phone.

The Fourth Amendment status of the kind of GPS tracking employed here is hardly a slam dunk either way: There are strong arguments on both sides, and the issues involved are complex. Alas, this opinion doesn’t even begin to address them adequately.

A Comprehensive List of Hyperinflations in History

Cato senior fellow Steve Hanke and co-author Nicholas Krus have carefully documented all 56 episodes of hyperinflation in world history in a new Cato working paper. Until now, a complete list of hyperinflationary experiences has not been available in the scholarly literature for reasons the authors explain, including poorly defined terminology and a lack of a consistent methodology.

Below, I reproduce some data on the top 10 hyperinflationary episodes in history (taken from the table on page 12). All of the hyperinflations in the comprehensive table occurred in the twentieth century with the exception of France’s in 1795 and Zimbabwe’s, which began in 2007 and became the second highest in history. Some might be surprised not to see a Latin American country in the top 10. The region came close; there are six Latin American countries on the overall list, with Peru ranking highest in twelfth place. The country had a monthly hyperinflation of 397% in August 1990, a rate at which prices doubled every 13 days. North America and the Middle East are the only regions that do not make the list, while only three countries in East Asia appear and their inflationary episodes occurred in the 1940s. (They are China, Taiwan and the Philippines, which really is more like a Latin American country in major respects.)

Canadian Wheat Board Loses Monopoly Powers

Reform has finally caught up with one of North America’s longest-entrenched socialist institutions, the Canadian Wheat Board. From the 1940s down through the first of this month, farmers in western Canada were legally forbidden to sell their wheat and barley other than through the official board, which by abolishing competition between farmers was supposed to assure fairer and higher prices. (Technically the Board enjoyed a “monopsony,” which is what economists call a monopoly over buying something as distinct from selling it.) Farmers have complained for years that the board not only behaved arbitrarily and was hard to deal with but also that it often paid less for grain than farmers in nearby American states like North Dakota were getting. The board continues to exist, but stripped of its compulsory powers it will need to persuade growers to trade with it voluntarily. Economist David Henderson, who lived in a Manitoba farm community as a kid, has more.

The battle to free the farmers was long and fierce – the left-leaning New Democratic Party (NDP) and National Farmers Union greeted the August 1 decontrol with undisguised bitterness – and no one played a more central role in the victory, or put more political capital on the line, than Canadian Prime Minister Stephen Harper. Per the CBC,

Harper has a long history of supporting the farmers who fought the wheat board. In 2001, he wrote a review of a book on that battle, calling the wheat board an “oppressive monopoly” that used “legal bullying” against farmers.

Harper and Agriculture Minister Gerry Ritz were at the farm to mark the first official day in which prairie wheat and barley farmers can sell their products to whomever they choose.

Harper is also pardoning a group of farmers arrested under the old law. Last fall, I had the chance to meet Saskatchewan Premier Brad Wall, another key backer of the reform, and a couple of his aides at a free- market gathering out West. When he heard I was with the Cato Institute, Wall said he’d long been a warm admirer of the Institute’s work. With good ideas as with other good things: “first the blade, then the ear, then the full grain in the ear.”

Negative Home Equity Is Nothing New

With the near constant calls for mortgage restructuring and the proposals to reduce mortgages via eminent domain, you would think that no homeowner in America has ever before had negative equity (i.e., a situation where a homeowner owes more on his mortgage than what his house is worth).  If you did think that, you’d be wrong.  A recent article published in the HUD journal Cityscape examines the trend in negative equity from 1997 to 2009 (incorporating the most recent American Housing Survey data). A nice summary table of the data is below the jump.

Without a doubt, the percent of underwater housing units jumped significantly since the housing bubble burst. But even during the peak of the bubble, say 2005, around 5 percent of units were underwater.

Interestingly enough, the biggest driver seems to be among mobile or manufactured homes, with over a fourth underwater even at the peak of the bubble.  Many mobile home owners do not own the land their house sits on, which likely explains this trend. The lack of political concern over their situation (I don’t recall anyone in 2005 calling for write-downs) is likely due to the fact that mobile home owners are mostly rural, white and working class, which don’t generally get the sympathy of the readers of, say, the New York Times.

But it isn’t just a rural issue.  In 2002, before the housing bubble started, about 7 percent of owners with a mortgage living in Buffalo, N.Y. were underwater.

I’ve written elsewhere that I don’t see a convincing or compelling economic justification for write-downs.  The more honest proponents of forced write-downs and re-financing argue it is ultimately about “fairness,” not economics.  I appreciate the honesty of such a position.  If, in general, you hold a position because you feel it is “just” or “fair,” you only undermine your case by trying to use shoddy economics to justify it.

But those who believe that write-downs would be “fair” need to explain why they didn’t argue for write-downs when it was just the residents of Buffalo or rural Mississippi who were underwater.  Suddenly, when residents of swings states like Florida, Nevada, and Arizona are underwater, it becomes an issue of fairness.