Obama's Inner Circle

If you hate Rahm Emanuel — and I know lots of you do — you're going to love Edward Luce's Financial Times piece that blames Barack Obama's reliance on a small inner circle of aides for his first-year growing pains:

In dozens of interviews with his closest allies and friends in Washington — most of them given unattributably in order to protect their access to the Oval Office — each observes that the president draws on the advice of a very tight circle. The inner core consists of just four people — Rahm Emanuel, the pugnacious chief of staff; David Axelrod and Valerie Jarrett, his senior advisers; and Robert Gibbs, his communications chief.

....Administration insiders say the famously irascible Mr Emanuel treats cabinet principals like minions. “I am not sure the president realises how much he is humiliating some of the big figures he spent so much trouble recruiting into his cabinet,” says the head of a presidential advisory board who visits the Oval Office frequently. “If you want people to trust you, you must first place trust in them.”

In addition to hurling frequent profanities at people within the administration, Mr Emanuel has alienated many of Mr Obama’s closest outside supporters. At a meeting of Democratic groups last August, Mr Emanuel described liberals as “f***ing retards” after one suggested they mobilise resources on healthcare reform.

“We are treated as though we are children,” says the head of a large organisation that raised millions of dollars for Mr Obama’s campaign. “Our advice is never sought. We are only told: ‘This is the message, please get it out.’ I am not sure whether the president fully realises that when the chief of staff speaks, people assume he is speaking for the president.”

This comes via Steve Clemons, who says Luce's observations aren't getting as much currency as they should:

This Luce piece is unavoidably, accurately hard-hitting, and while many of the nation's top news anchors and editors are sending emails back and forth (I have been sent three such emails in confidence) on what a spot-on piece Luce wrought on the administration, they fear that the "four horsepersons of the Obama White House" will shut down and cut off access to those who give the essay 'legs.'

....President Obama needs to take stock quickly. Read the Luce piece. Be honest about what is happening. Read Plouffe's smart book again. Send Rahm Emanuel back to the House in a senior role. Make Valerie Jarrett an important Ambassador. Keep Axelrod — but balance him with someone like Plouffe, and get back to putting good policy before short term politics.

Noted without comment, since I don't really know if Luce and Clemons have it right. But both pieces are worth a look, and anyway, I figure there's a good audience out there for a bit of good anti-Rahm porn. Enjoy.

Simon Johnson is following the economic crisis that's mounting daily in Greece — and in Spain, Portugal, Ireland, and Italy — and is deeply pessimistic:

The IMF cannot help in any meaningful way.  And the stronger EU countries are not willing to help — in part because they want to be tough, but also because they do not have effective mechanisms for providing assistance-with-strings.  Unconditional bailouts are simple — just send a check.  Structuring a rescue package that will garner support among the German electorate — whose current and future taxes will be on the line — is considerably more complicated.

The financial markets know all this and last week sharpened their swords.  As we move into this week, expect more selling pressure across a wide range of European assets. 

As this pressure mounts, we’ll see cracks appear also in the private sector.  Significant banks and large hedge funds have been selling insurance against default by European sovereigns.  As countries lose creditworthiness — and, under sufficient pressure, very few government credit ratings will hold up — these financial institutions will need to come up with cash to post increasing amounts of collateral against their derivative obligations (yes, the same credit default swaps that triggered the collapse last time).

I can't pretend to have any kind of deep knowledge about this. But ever since the 2008 bank bailout I've had a persistent buzz in my head telling me that another shoe is likely to drop somewhere. I thought it might be Eastern Europe, channeled through Austria, or maybe something in Asia. The Dubai default seemed like a canary in the coal mine. Or even some kind of shock in the U.S. related to ARM resets. But now it looks like it might be Greece.

Hopefully Johnson is just being overly pessimistic. But one of the key lessons of the 2008 crash was how fast things can go south when markets lose confidence. If Greece fails, it won't just slowly slide into default, it will get pushed there by opportunistic investors who suddenly decide to place huge bets on its failure, aided by panicked investors who see what's happening and all try to head for the exits at once. If and when that happens, Europe or the IMF or the United States will have only a few days to act to prevent it from becoming a continent-wide rout.

On the other hand, Greece's sale of treasury bonds last week went pretty well. So maybe things aren't as bad as we think. That's what I keep telling myself, anyway.

UPDATE: More here: "The EU's refusal to offer Greece anything beyond stern words and a one-month deadline for harsher austerity — while admirable in one sense — is to misjudge how fast confidence is ebbing. Greece's drama has already metastasised into a wider systemic crisis. The world risks a replay of the Lehman collapse if this runs unchecked, this time involving sovereign dominoes."

Earlier this morning I posted a chart showing how much money had been spent lobbying against a tax on sugared beverages by Pepsi, Coke, and the American Beverage Association. I just want to make one more point about it.

Assuming the LA Times did its sums correctly,1 this is one of the clearest examples you'll ever see of how much money can be spent lobbying on one specific piece of legislation. Usually that's hard to figure out, since industries spend a lot of money lobbying all the time, and it's hard to say how much is spent on one issue vs. another. But for six straight years, these three companies spent about $3 million on lobbying activities. Then in 2009 that suddenly jumped to $37 million. Since there wasn't much else going on that would have seriously affected them, that means they spent $34 million just to defeat the sugar tax.

For comparison, that's nearly as much as the entire aerospace industry spends on lobbying for the entire defense budget each year. It's five times more than the sugar lobby itself spends lobbying on all sugar-related issues each year. It's about as much as organized labor spends on all lobbying activities for everything.

That's the kind of muscle that the business community can bring to bear when it cares to. As much as the entire annual lobbying budget of organized labor or the aerospace industry, all for one single piece of legislation that never really had a ton of support in the first place. That's a lot of leverage.

1The caveat here is that the Times used CRP figures for 2003-08 but its own research for 2009. So it's possible that the comparison isn't apples-to-apples due to different methodologies.

Sarah Palin is a PR genius. The same way that Madonna is a PR genius or Al Sharpton is a PR genius. No matter how tired we get of them, somehow they always figure out a way to keep themselves in the public eye.

Yesterday Palin delivered a routine stemwinder to a medium sized crowd and managed to get a ton of publicity for it. But that's not all! It turns out that last night's speculation was right: she really did have a cheat sheet on the palm of her hand that she consulted during the softball Q&A after the speech. Just like your average seventh grader taking an algebra test. Has any politician in history ever done this before?

And even the notes themselves are fascinating. Here's what she wrote down:


Budget Tax Cuts

Lift American Spirits

The most obvious question is: why would anyone need to write this stuff down? It's not like she's trying to remember the quadratic equation or anything. For someone who swims in the seas that Palin swims in, this is about the equivalent of writing down a note to remember your birthday.

But enough mockery. At this blog we prefer a more high-minded, policy-oriented critique of our major politicians. So here it is: it turns out that Sarah Palin doesn't believe in budget cuts. In fact, she went to the trouble of deliberately crossing it out. Just like every other garden variety faux fiscally conservative Republican, she doesn't really want to cut the budget because that runs the risk of annoying some interest group or another. She only wants to cut taxes. Normally, though, we don't have graphological proof of this. With Palin, now we do.

Today's all purpose post begins with the quote of the day. It comes from the LA Times:

From the beginning, fast food and beverage company executives were uneasy about President Obama. He and his wife were known advocates of healthy eating.

That is scary! Advocates of healthy eating could pose a real problem. The industry's response is our chart of the day:

The entire story is worth reading. As a policy matter I'm not sure whether I support a tax on sugared beverages or not, but in the end it really doesn't matter. What matters is that the food industry doesn't want it, they're willing to spend a lot of money to make sure it never happens, and both interest groups and politicians are unwilling to risk losing their support. So, no tax.

Commercial banks typically make long-term loans, something that can be risky because it ties up their money for years at a time. But usually this isn't a big problem, since commercial banks also have a very stable deposit base that provides the bulk of their funding.

Conversely, investment banks get a great deal of their funding from overnight loans in the repo market. This can be inherently risky too, but usually it's not a big problem either because their investments aren't in long-term loans, but in liquid securities that can be bought and sold quickly if their funding goes south.

But what happens when you have a mismatch? What if institutions with volatile, short-term funding are tying up their money in long-term loans? Via Mike Konczal, Raj Date says this is the real problem we need to address, not Paul Volcker's plan to prevent commercial banks from doing proprietary trading:

Many of the credit bubble╩╝s excesses can be traced to the “shadow banking” sector, which is essentially the intersection between commercial banking and investment banking business models: shadow banks take illiquid credit and interest rate risk (like commercial banks), but fund themselves principally through the wholesale markets (like investment banks). Because of long-recognized regulatory loopholes, shadow banks were also frequently able to operate with significantly lower capital requirements than commercial bank competitors. With both capital and funding advantages in hand, shadow banks grew to some 60% of the U.S. credit system.

....With that context in mind, the focus of the Volcker Rule, as currently described, seems misplaced — or at least too narrow. The crisis did not stem from commercial banks stumbling into investment banking businesses; the crisis did stem, in the main, from allowing firms that fund themselves in the wholesale markets to take on credit and rate risk as though they were commercial banks or hedge funds.

Note that cheap credit + low capital requirements = enormous leverage. And that makes the entire shadow banking system extremely fragile. The key chart in Date's presentation is below, but the entire thing is short and worth reading. More later.

The Power of Palin

Andrew Sullivan watched Sarah Palin's speech to the tea party convention tonight and came away scared:

Above all, she is capable of generating a personality cult — much, much more so than Obama, because she can harness Christianism to her divine destiny. The power of this kind of appeal — of a charismatic, beautiful woman, an icon of the pro-life cause, persecuted by the evil elites, demonized by libruls, and commanding the biggest military on earth — should not in my view be under-estimated.

I totally get this. On the other hand, here's the New York Times:

The convention had gathered here to try to turn the activism of the Tea Party rallies over the last year into actual political power. Her speech was the keynote event of the convention, and the big draw for many of the 600 people who had paid $549 to attend — another 500, organizers said, paid $349 just to see for her speech alone.

Granted, that's a fair chunk of change for the average tea partier. Still, only about a thousand people were willing to pay it, and a thousand people is really not a huge number. Palin obviously has an impressive gut feel for the politics of resentment, but over time I think her Fox News gig is going to have the same effect that running for vice president did: it's going to make her less popular. As she makes the inevitable transition from fascinating pop icon to dreary regular commentator with nothing original to say, her star is going to wane.

Plus there's the apparent fact that she writes notes on her hand to remind her of things to say. Or so it seems. You be the judge about 45 seconds into this clip. (Alternative explanation: There was nothing on her hand. Looking down was a deliberate stunt designed to start lefty tongues wagging, thus providing her with yet another example of how liberal elites are so threatened by her that they have to invent ridiculous sneers every time she so much as moves her head a few inches. But does she have the animal cunning to plan something like that? Your call.)

Jon Cohn thinks Barack Obama should be working harder to broker a healthcare deal, but at the end of a long review of the current state of play he adds that nothing is likely to happen unless progressives start pushing for it too. Armando comments:

Progressives have been marginalized and insulted throughout the process. Many, if not most, do not care for the Senate health bill. And now one of the people who did the marginalizing and insulting (one of the big proponents of the bill killing excise tax), insists progressives have to fight for the Senate health bill? Amazing.

More importantly, it is not going to happen. Unless someone is offering up a public option (which is not on the table of course), forget about progressives whipping for the passage of the Senate health bill. The Senate health bill is Jon Gruber's and Max Baucus' and Barack Obama's and the Villagers' baby. It is on them. You can't spend a year ridiculing, ignoring, and insulting progressives and then expect them to rally to YOUR cause.

This is both absolutely true1 and utterly pathetic at the same time. It's true because....well, it's true. Obama has always kept his distance from both the netroots and the broader lefty base, and the congressional leadership largely did the same during healthcare negotiations. And it's not just that they ended up with a policy choice that progressives were unenthusiastic about. It's that they never even pretended to take progressives seriously. This is a mistake that George Bush and Karl Rove never made. The conservative base frequently didn't get what it wanted from them, but they always felt like they had a friend in the White House whose heart was in the right place. Progressive groups, conversely, have mostly felt like they got the back of the hand from the White House on healthcare. So it's understandable that they've either given up or, in a few cases, actively turned against the whole process.

But this is also utterly pathetic because....well, it just is. So Max Baucus didn't listen to us. Big deal. So we didn't get invitations to White House tea parties. Who cares? It may be understandable that progressives feel dissed, but are we really all such delicate flowers that we're going to give up on a cause we've spent a century on because the current bill isn't quite what we'd like and Rahm Emanuel is mean to us? Jesus.

In 20 years this bill will be entirely forgotten except as the first step toward broad national healthcare. The excise tax, the public option, the subsidy levels, the exchange — all forgotten because they will have been steadily replaced by an entirely different infrastructure. It's true that some of that infrastructure will be path dependent on the details of the current bill, but most will simply evolve as a result of technology and public demand. By 2030 arguments over the public option will seem as antiquated as rants against the tin trust.

But that's 20 years from now, and we won't get there unless we take the first step. So the White House needs to start listening seriously to progressive ideas and progressives need to suck it up and understand that they're going to lose most of the battles. That's just the nature of consensus politics. But speaking for me, that's OK as long as we win the war. And the only way to do that is to pass the damn bill. So let's pass it.

1Absolutely true in general, that is. To the best of my knowledge, though, Jon Cohn has done absolutely no "marginalizing and insulting" of progressives during the past year. I really don't know why Armando insists on saying stuff like this.

A new study shows how North American birds have changed the shape of their wings in the past century as the landscapes around them have been fragmented by clear-cutting

The research by André Desrochers from Université Laval involved the examination of 800 birds from museum collections. From his paper in Ecology:

Major landscape changes caused by humans may create strong selection pressures and induce rapid evolution in natural populations. In the last 100 years, eastern North America has experienced extensive clear-cutting in boreal areas, while afforestation has occurred in most temperate areas. Based on museum specimens, I show that wings of several boreal forest songbirds and temperate songbirds of non-forest habitats have become more pointed over the last 100 years. In contrast, wings of most temperate forest and early-successional boreal forests species have become less pointed over the same period. In contrast to wing shape, the bill length of most species did not change significantly through time.

Desrochers points out that these results are consistent with the habitat isolation hypothesis: that songbirds evolve changes in their mobility in response to changes in the amount and size of available habitat. Boreal forests have suffered severe deforestation over the past century. Thus, Desrochers predicted, songbirds from those areas would develop more pointed wings to enhance their flying abilities over the longer distances between habitat patches. Pointed wings are more energy efficient for sustained flight.

Another example of the complexity of landscape changes and their knock-on effects is given by Paul Ehrlich, David Dobkin, and Darryl Wheye in one of their excellent online ornithology essays on the Stanford U website. Here they describe the huge range expansion of cowbirds, a species that practices nest parasitism:

When Christopher Columbus landed, cowbirds are thought to have been largely confined to open country west of the Mississippi, because the continuous forests of the eastern United States did not provide suitable habitat for their ground feeding or social displays. As the forests were cleared, cowbirds extended their range, occupying most of the East but remaining rare until this century. Then increased winter food supply, especially the rising abundance of waste grain in southern rice fields, created a cowbird population explosion. The forest-dwelling tropical migrants—especially vireos, warblers, tanagers, thrushes, and flycatchers—have proven very vulnerable to cowbird parasitism. And that vulnerability is highest for those birds nesting near the edge of wooded habitat and thus closest to the open country preferred by the cowbirds.

Desrochers points out that the rapid physical evolution seen in the birds in his analysis could mitigate—though not necessarily prevent—regional extinctions.

Thanks to Rob Goldstein for his excellent blogging at Conservation Maven for the heads-up on the Ecology paper.

A bi-partisan group of legislators from the House Education and Labor Committee has approved a bill that will protect students, especially those with special needs, from teachers who use restraint and seclusion as punishment.

According to a Government Accountability Office report published last spring, special education teachers have disciplined students by sitting on them or strapping them into devices that look like electric chairs. Many children have survived such torture, albeit with physical and emotional scars, but for others like Cedric Price, whose mother spoke before lawmakers at a committee hearing last May, the treatment was fatal.

Though the GAO report speculates that this type of abuse is widespread, and even though there are laws protecting children from such abuses in hospitals and other facilities that receive federal health funding, there are currently no federal laws addressing restraint and seclusion in schools. The bill now awaits a full vote in the House before it moves onto the Senate. “This bill makes clear that there is no place in our schools for abuse and torture,” said committee chair Rep. George Miller (D-Calif.). “The egregious abuse of a child should not be considered less criminal because it happens in a classroom—it should be the opposite."

The bill will apply to public and private schools, but it's uncertain what effect it would have on residential treatment centers like the Judge Rotenberg Center in Massachusetts, which uses electric shocks to discipline its special needs students. At very least, the bill would establish national reporting standards, documenting for the first time the frequency and number of students being restrained or secluded.