2010 - %3, July

We're Still at War: Photo of the Day for July 30, 2010

Thu Jul. 29, 2010 11:55 PM PDT

 

A US Army CH-47 Chinook crew chief receives a high-mobility multi-wheeled vehicle slingload during Air Assault School at Camp Smith, N.Y., on July 25. Photo via the US Army.

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Phytoplankton Dammerung

| Thu Jul. 29, 2010 10:14 PM PDT

Today's global warming news is about phytoplankton. These are the little bitty plankton that get eaten by bigger plankton which in turn get eaten by fish and whales and other marine life. Bottom line: no phytoplankton, no marine life.

For now, our oceans are still teeming with phytoplankton. But according to a team of researchers from Dalhousie University, our oceans are teeming with a lot less phytoplankton than in the past. Their study, published this week in Nature, concludes that the worldwide supply of phytoplankton has been declining steadily for the past century and has dropped by about 40% since 1950. Various things drive the phytoplankton supply in the short term, but the long term trend is correlated with rising surface ocean temperatures. Here's the soothing version of the news from the BBC:

"Phytoplankton... produce half of the oxygen we breathe, draw down surface CO2, and ultimately support all of our fisheries," said Boris Worm, another member of the Dalhousie team. "An ocean with less phytoplankton will function differently."

The question is: how differently? If the planet continues to warm in line with projections of computer models of climate, the overall decline in phytoplankton might be expected to continue. But, said, Daniel Boyce, that was not certain. "It's tempting to say there will be further declines, but on the other hand there could be other drivers of change, so I don't think that saying 'temperature rise brings a phytoplankton decline' is the end of the picture," he said.

And here's the sirens blaring version from Michael O'Hare:

This finding — and I’m trying hard not to hyperventilate here — is not too far down the scary scale from discovering a small inbound asteroid. This is the whole ocean we’re talking about: the earth’s production of organic material is going down half a percent per year.

....We can’t live without the ocean, every time we look at climate change it’s worse than we thought....We are so f____ed.

So, anyway, as temperatures rise the plankton die. As plankton die, they suck up less carbon dioxide, thus warming the earth further. Which causes more plankton to die. Rinse and repeat. Oh, and along the way, all the fish die too.

Or maybe not. But this sure seems like a risk that we should all be taking a whole lot more seriously than we are. Unfortunately, conservatives are busy pretending that misbehavior at East Anglia means that global warming is a hoax, the Chinese are too busy catching up with the Americans to take any of this seriously, and you and I are convinced that we can't possibly afford a C-note increase in our electric bills as the price of taking action. As a result, maybe the oceans will die. Sorry about that, kids, but fixing it would have cost 2% of GDP and we decided you'd rather have that than have an ocean. You can thank us later.

Is All Politics Local?

| Thu Jul. 29, 2010 5:40 PM PDT

"All politics is local," said Tip O'Neill. But he was referring to an election he lost in 1935 when he said that. Is it still true? The congressional election in 1994 was, famously, "nationalized" by Newt Gingrich's Contract with America, and supposedly the same was true in 2002 thanks to George Bush's campaign heroics. Today Jonathan Bernstein tackles the question of whether congressional elections are just routinely more nationalized now than in the past, and suggests the answer is "probably so":

1. The national parties have grown. The formal party organizations have more resources than they did in 1970....

2. I think Colby is correct that the media mix has tilted from local to national since 1970....

3. Related to #1 above, but worth separating out...national activist and donor networks are far more evolved than they were in 1970....

Put all of that together, and it certainly makes sense that there would be a lot more likely to find candidates taking positions on national issues than it was forty years ago. The demand for it is higher. The cost, however, is lower; it's very easy now for local candidates to cut and paste their national party's positions onto the "issues" section of their website; if you've hired one or more staff person with national experience, they are likely to know those positions and be able to generate the correct rhetoric without a lot of difficulty.

I don't have a PhD or even any special evidence to amass, but all of this sounds right to me. Congressional politics, at least, is just a lot less local than it used to be.

"All I Wanted Was to See Happy Faces"

| Thu Jul. 29, 2010 5:36 PM PDT

The last time I saw Julie, she was agitated and having trouble taking deep breaths. That was a month ago, at a group therapy session for the wives of fishermen, where they discussed the anxiety, depression, and anger caused by the oil spill and the sudden disruption of their families' livelihood. That was when I named Julie "Julie" to protect the identity of her husband, who she said had talked about hunting down BP CEOs. But today, she's mostly pleased as pie.

"I owe my daughter four years' worth of birthday parties. One year we was in a FEMA trailer, one year we had to use the money to fix the boat trouble, another year we had [Hurricane] Gustav, another year we had the problems with the boat again. So I owe her four parties, and this is like a great, big party."

I've caught up with the fishermen's wives at a day camp they've organized at J.F. Gauthier Elementary School in St. Bernard, Louisiana, and there's hot dogs, barbecue burgers, chips, baseball, water guns, and a bouncy-castle waterslide. Earlier this month, Julie and Brenda, another woman I met at the therapy session, organized three days of entertainment for about 60 local kids with the help of the St. Bernard Project, a community organization founded in the wake of Katrina. Julie surveys the kids running around and squealing in bathing suits with her hands on her hips. "We wanted to give them something to do, something fun. Normally, they'd be fishing with their dads. Fishing, swimming in the bayou, aggravating dad on the boat." All the food and entertainment is donated, the product of endless phone calls and solicitations. "I haven't even been thinking about the oil spill these last two weeks. I've just been trying to get something to do for the kids."

The donations go well beyond picnic fare. Inside the school gym, big cardboard boxes are piled along the walls. Earlier this morning, pickup trucks pulled up and volunteers helped unload a miscellany of hastily assembled aid: Many bottles of water. Huge stacks of Levis in a several sizes. Bratz-branded tennis shoes, kids' slippers with Shrek on them. Kitchen disinfectant. About a million Band-Aids. Women walk the perimeter carrying Mastercard tote bags someone dropped off, filling them with anything they can use. None of the Levis are in Julie's size. Someone else complains that the tennis shoes are only for girls and the baby shoes are only for boys.

"We really need diapers and school supplies," Julie tells me. "School's coming up, and a lot of people are gettin' worried about buying uniforms." (Here, all schoolchildren have to wear uniforms.) With BP's claims checks coming late or in vastly reduced amounts, unemployed fishermen's families may be low on cash. Catholic Charities has been picking up some of the slack, giving away millions of dollars worth of grocery vouchers and rent assistance, but many people still need basics like toiletries and clothes.

"Also," Julie says, "we need people who aren't affected to stop coming and taking the donations from those in need." She lowers her voice. "Like this gang behind you."

I've already talked to the women she's referring to as they sorted through free low-quality tank tops; they are indeed not spill victims. And in this still-drowned-out part of town—the houses across the street from the school still bear the National Guard's post-Katrina spray-paint markings—"need" is sort of a relative term. One of the women looking at tank tops recently moved out of a FEMA trailer. She asked me nervously if there were any school uniforms available or if I knew when or where she might be able to get some. But right now, in this gym full of children dragging each other around on empty cardboard boxes, need refers only to people who may still be struggling from the last rash of disasters and have been smacked by Deepwater Horizon.

The wives' next project, Brenda tells me back outside, is a weekend-long fundraiser. It may involve a car wash with the kids, among other things. They're still trying to get donations to put on another camp in August, trying to get the kids involved in the planning—"the water balloons we have here were their idea"—trying to find someone to spring for the uniforms. She has no idea what to do about the larger and longer-term issues. "All these kids, by the time they're in high school, they're workin'. As soon as they're of age, they work on a boat. When they're in high school, they earn enough money to buy cars. By the time they get outta high school, they buy a boat."

She's quiet about that for a moment, then waves her hand dismissively. "Anyway, settin' this up was a lot of time. I been so busy. It just kept my mind off the oil spill. I wanted to do something I knew I could make it happen, and all I wanted was to see happy faces."

Chart of the Day #2: The Deflation Trap

| Thu Jul. 29, 2010 5:13 PM PDT

This chart comes from Seven Faces of “"The Peril," ”a paper by St. Louis Fed president James Bullard. Bullard has generally been considered an inflation hawk, but in this paper he describes a technical problem with inflation targeting. Most central banks follow something called the Taylor Rule, in which interest rates are raised when inflation gets too high and lowered when things cool off. But Bullard notes that a standard model of the Taylor Rule has two points where it's in equilibrium — in the chart below it's where the red line meets the black curve. The one on the right is fine: it corresponds to an interest rate of about 2.8% and inflation of 2.3%. This is roughly where the U.S. has been until recently. But the one on the left is trouble: it corresponds to an interest rate of zero and deflation of about -.5%. This is where Japan has been.

Bullard's conclusion is simple and direct:

The U.S. economy is susceptible to negative shocks which may dampen infl‡ation expectations. This could possibly push the economy into an unintended, low nominal interest rate steady state [i.e., deflation]. Escape from such an outcome is problematic. Of course, we can hope that we do not encounter such shocks, and that further recovery turns out to be robust— but hope is not a strategy. The U.S. is closer to a Japanese-style outcome today than at any time in recent history.

....To avoid this outcome for the U.S., policymakers can react differently to negative shocks going forward. Under current policy in the U.S., the reaction to a negative shock is perceived to be a promise to [keep interest rates] low for longer, which may be counterproductive because it may encourage a permanent, low nominal interest rate outcome. A better policy response to a negative shock is to expand the quantitative easing program through the purchase of Treasury securities.

The problem we have right now is that if you grind through the usual arithmetic of the Taylor rule, what pops out of the formula is a negative interest rate. But interest rates can't be negative. So for all practical purposes, monetary policy right now is quite tight even with interest rates at zero. What Bullard suggests is that if the economy suffers any further shocks, the Fed needs to respond even though it can't lower interest rates any further. And the way to do that is to fire up the printing presses.

Meet the Mule Lobby

| Thu Jul. 29, 2010 3:25 PM PDT

Philadelphia, Mississippi—Ray Lilley is technically head of the Mississippi Mule Association, but he prefers his unofficial title: "I'm top ass," he says. He’s decked out today in what I’d imagine would be his Monday–Saturday best: blue overalls, an old yellow shirt, and a maroon hat with a pointy-eared mule on the front. He and his friends Rusty and Jim, farmers both, are handling the livestock competition today at the Neshoba Giant Fair.

"Tell 'em we don’t like Nancy Pelosi," says Jim, and they all laugh. Noted.

The Neshoba County Fair has, over the last century or so, become more well known by its other name, Mississippi’s Giant Houseparty. Some 600 cabins of varying degrees of luxury, priced at as high as $300,000 and habitable for only 10 days each year, occupy the fairgrounds, divided into streets and neighborhoods. But it's still a county fair at heart, which means that if you have a favorite dairy cow, steer, watermelon, or artichoke, you can still bring it the grounds to get measured, appraised, and certified.

Things go relatively smoothly over at the weigh station, with one notable exception: One cow, appropriately the only one not brought in by a young kid, does a nose-dive onto the scale and doesn't feel like leaving. Our Bessy cheked in at either 400 or 440 lbs.—a big spread, admittedly so Rusty took the average—and then she pretty much checked out. Some days you just don’t feel like showing off for the head of the Mississippi Mule Association.

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This Week in National Insecurity

| Thu Jul. 29, 2010 1:59 PM PDT

Whichever side of the fence you land on, chances are you agree that America's not a very secure nation these days: economically, electorally, and of course, physically. So we grabbed our lensatic compass, rucksack, and canteen, then mounted out across the global media landscape for a quick recon. Whether you're scared because our military isn't good enough—or you're scared because it's too good—here's all the ammunition you need, in a handy debrief.

In this installment: Fine, WikiLeaks. Also, Newt Gingrich fancies himself an imam; military women win and lose; soldiers are fat; lightning is bad; Condie plays piano; Danger Room scares the hell out of everyone; and Al Qaeda states the obvious.

The sitrep:

The United States government's national threat level is Elevated, or Yellow. You're welcome.

"He was a nice kid, but I guess he wasn't"

| Thu Jul. 29, 2010 12:29 PM PDT

Dog Whistles: When Reagan came to Philadelphia in 1980, the town's past never came up.Dog Whistles: When Reagan came to Philadelphia in 1980, the town's past never came up.Jackson, Mississippi—We spent eight hours yesterday at the Neshoba County Fair in Philadelphia, known to locals as "Mississippi's Giant Houseparty" (that's a registered trademark), and to outsiders as the place where Ronald Reagan kicked off his presidential campaign in 1980 without once mentioning the three civil rights workers whose bodies were found outside of town in 1965.

If Reagan couldn't talk about Philadelphia, Philadelphia at least can't stop talking about Reagan. "You know, Ronald Reagan came here in '81 or '80, I can't remember," one woman tells me. I get this a lot. On stage during the day's political festivities, the succession of candidates hold onto their little slice of history with both hands. "I am proud and humbled to be standing on the podium where Ronald Reagan once stood," declares Wally Pang, a self-described Tea Partier who's running for Congress as an Independent. "Ronald Reagan began his campaign for the presidency right here in these fairgrounds!," notes Vernon Cotton, incumbent circuit court judge for Mississippi's eighth district. Reagan's name comes up, sooner or later, in pretty much every conversation I have at the fair.

I'll cover the rest of the fair in another post (or two, or three—it was pretty wild), but for now, here are two quick thoughts on the town's past from fairgoers old enough to remember.

Round 2 on Interchange Fees

| Thu Jul. 29, 2010 12:09 PM PDT

I tend to think that going back and forth with other bloggers on a particular issue has diminishing returns pretty quickly. I'd say that most of the time a single set of posts from each side exhausts the argument, and two posts does it 90% of the time. After that the argument usually just spirals downward along one of several increasingly predetermined paths, none of them good.

So I normally say my piece and then quit. Which I should probably do here. But I guess I'm feeling stupid this morning, because I'm going to push back yet again on the issue of credit card interchange fees. On Tuesday I linked to a Boston Fed article suggesting that the net result of interchange fees was a transfer of wealth from the poor (who pay higher prices generated by the fees even though they mostly use cash) to the middle class and the rich. I wasn't happy about this, but Matt Yglesias and Megan McArdle push back:

Matt: Once you keep in mind the fact that the median household income in 2008 was slightly above $52,000 it’s not at all obvious to me that this is any kind of scam. Instead, it appears to be a classic positive sum business interaction. Credit card companies use interchange fees to cut into retailers’ monopoly rents and then rebate a share of the fee to consumers via reward programs, and on net consumers benefit and the median household appears to benefit....Now it’s true that in this particular case my conscience is pricked by the fact that poor consumers end up losing out. At the same time, do we really think it’s feasible to conduct distributive analysis of every new business model and only accept the ones that are beneficial to poor consumers?

Megan: I never understood why the progressive consumer finance types got so worked up about interchange fees, which are essentially a knock-down fight between two very powerful business lobbies, not a cosmic injustice perpetrated against the American consumer....To be sure, the current system benefits the wealthy most. But that is broadly true of many business models; shall we outlaw Costco because the poor cannot afford lavish pantries and large chest freezers in which to store their warehouse-club bounty?

First off: I'm mystified by the "retailers’ monopoly rents" that Matt talks about. I have no idea what this is supposed to mean. So maybe I'm genuinely missing something here.

But barreling ahead regardless, I'm pretty sure the issue is more on the other side: it's the card networks (Visa and Mastercard control the vast majority of the credit card market) that are effective monopolies. So the question is: are they using their monopoly position to charge interchange fees that are too high? To put it another way: who actually pays these fees, anyway?

I did a bit of desultory research to see if anyone knows the incidence of interchange fees, and the answer appears to be no. There's been some theoretical work, but not much in the way of empirical studies. This is important, because if the net effect of the fees is merely to reduce merchant profits a bit, or to balance the costs between merchant and purchaser banks, then Megan is right: who cares? Let the giants fight it out on their own. But if merchants pass along most of the fees directly to consumers, then it matters.

However, although there's no definitive evidence on this score, there are some reasons for thinking that fees are too high and that consumers do end up paying at least part of them. There's the Boston Fed study, of course. And here's an ECB report suggesting (unsurprisingly) that in a monopoly environment interchange fees will always be set too high. And there's this New York Times piece about swipe fees in the debit card market, which makes it pretty clear that Visa's fees are simply egregious abuses of its monopoly power. And if they're abusive in the debit card market, they're probably abusive in the credit card market too. Finally, there's the fact that current fees are so high that card issuing banks can afford to rebate a big chunk of them in rewards programs, something that flatly makes no sense in a sane world.

Now, even if this is all true, it's also true that on the list of ways in which the poor are screwed, this doesn't make the top ten. It probably doesn't even make the top 100. But I hate the idea of dismissing it anyway. The problem is that this is practically a paradigm example of how all this screwing works throughout the financial industry: most of it is small stuff. It's a few dollars here and there, and banks have a huge incentive to keep it that way. That way nobody really thinks it's worthwhile to bother addressing even though those dollars add up to billions if you screw enough poor and vulnerable people at a time. And Wall Street does. That's why this kind of thing deserves attention even if it's not, by itself, all that big a deal: because there's a lot of it, and it basically all benefits the haves at the expense of have-nots. We lose our humanity when this becomes merely a shrug of the shoulders and a "to be sure."

Beyond that, let's make it clear what I'm proposing. I don't want to eliminate interchange fees. Card payment networks cost money to operate and there's nothing wrong in theory with using interchange fees as a way of offsetting those costs. In fact, I'm not sure I even want to limit interchange fees. What I'm opposed to is their invisibility. All I want to do for now is bring them into the open.

There are two ways this could happen. The first would be to eliminate the merchant charge and have card companies simply add the interchange fee directly onto consumers' bills. So every month you'd get your Visa bill, and at the bottom there'd be a charge of a few dollars that represents the interchange fee. This way consumers know just how much their cards actually cost them

However, this assumes that consumers are already paying 100% of these fees, and they probably aren't. It's probably a mix of consumers, merchants, and banks. So a better, more modest idea is to keep interchange fees intact as a merchant charge but allow merchants to pass that charge along to customers if they want to. Right now, Visa and Mastercard prohibit this, something they can get away with because they're monopolies and merchants have little choice but to accept their terms. I'd like to do away with this prohibition and let merchants raise the price for credit card purchases if they want to. If they don't, that's pretty good evidence that card networks are charging a fair price for the service merchants get from them (increased sales, less handling of cash, etc.). And there's no harm done. But if they do tack on the charge, it's pretty good evidence the networks aren't charging a fair, market-clearing price. I say: let's find out. Interchange fees are hardly the biggest injustice in the world, but then again, this is hardly the most intrusive remedy in the world either. Everyone ought to be in favor of transparency, and everyone ought to be opposed to allowing monopolies to set abusive terms in their contracts. Sometimes God is in the details, and this is one detail I'd like to expose to a little sunshine.

Media Runs Defense for BP, Again

| Thu Jul. 29, 2010 11:34 AM PDT

First there was the bizarre AFP report asking where all the oil in the Gulf could have possibly gone. Then a breaking news alert from the New York Times landed in my inbox Tuesday night declaring "Gulf of Mexico Oil Slick Appears to Vanish Quickly," which seemed to imply that because a few reporters hadn't noticed much crude on a flyover, it must have magically disappeared. (The alert failed to mention the 1.8 million gallons of dispersant that BP dumped on the spill to do exactly that).

Today we have yet another example of the news media promoting the idea that the Gulf disaster might not be all that bad after all, with Time's big piece, "The BP Spill: Has the Damage Been Exaggerated?"

The story starts out by offering Rush Limbaugh as a voice of reason on the disaster against all the "end-is-nigh eco-hype," even while calling him an "obnoxious anti-environmentalist." That should give you a sense of where the story is heading. And then it goes there:

Well, Rush has a point. The Deepwater explosion was an awful tragedy for the 11 workers who died on the rig, and it's no leak; it's the biggest oil spill in U.S. history. It's also inflicting serious economic and psychological damage on coastal communities that depend on tourism, fishing and drilling. But so far — while it's important to acknowledge that the long-term potential danger is simply unknowable for an underwater event that took place just three months ago — it does not seem to be inflicting severe environmental damage. "The impacts have been much, much less than everyone feared," says geochemist Jacqueline Michel, a federal contractor who is coordinating shoreline assessments in Louisiana.

In short, the story is classic man-bites-dog, knee-jerk counterintuitivism. In reality, we have no idea yet how bad the damage in the Gulf is. The federal government is still only in the early stages of a natural resources damage assessment, a process to determine the full extent of the destruction. The government hasn't even come up with an estime of how much oil leaked into the Gulf. And BP hasn't yet finished the relief wells, meaning the disaster isn't over yet. Meanwhile, the environmental impacts of the natural gas that has also been seeping into the Gulf remain unclear. And the article gives scant attention to the nearly 2 million gallons of dispersant applied by BP to break up the spill, which the country's top environmental official has acknowledged is a science experiment of monumental proportions.

"The amount of oil and toxic dispersant pumped into the Gulf is unprecedented, and we know the marine impacts will be massive, we simply don't know how long it will take for the ecosystem to rebound, and how significant the decrease in productivity will be until it recovers," says Aaron Viles, campaign director at the Gulf Restoration Network.

Referring to the Time article's author, Michael Grunwald, National Resources Defense Council lawyer David Pettit says, "I'm not sure what boats he's been out on. When I went out from Plaquemines Parish two weeks ago, there were oiled marshes as far as the eye could see, plus all the islands we saw were oiled. I would agree that it's too early to say what the long-term effect of that oiling will be, but by the same token I don't think anyone can credibly say that there will be little or no effect."