2013 - %3, January

The US Senate Will Now Have More Black Members Than Ever in Its History: 2

| Wed Jan. 30, 2013 12:05 PM EST
Sen. Tim Scott (R-S.C.)

With Democratic Massachusetts Gov. Deval Patrick appointing his former chief of staff William "Mo" Cowan to fill the Senate seat vacated by incoming Secretary of State John Kerry, the United States' upper legislative chamber will make history by boasting more black members than ever before: two.

This will be the first time the Senate has had more than one black member at once. Last December, Republican South Carolina Gov. Nikki Haley appointed Rep. Tim Scott (R-S.C.) to fill the Senate seat vacated by Jim DeMint, who left to run the conservative Heritage Foundation. The Senate's high-watermark of two black members may not last long, though: Cowan's seat will be permanently filled by the winner of a special election in Massachusetts in June, and Scott's seat will be up for grabs next year.

Throughout American history, there have only been eight black senators in total; in addition to Scott and Cowan, they include: Hiram Rhodes Revels (R-Miss.), Blanche Kelso Bruce (R-Miss.), Edward Brooke (R-Mass.), Carol Moseley Braun (D-Ill.), Barack Obama (D-Ill.), and Roland Burris (D-Ill.). Of these, only Brooke, Braun, and Obama were directly elected by popular vote; Revels and Bruce were appointed by their state legislatures, and Burris was appointed by embattled Illinois Gov. Rod Blagojevich. Eighty-five years separated the tenures of Bruce and Brooke, who served as the first black senator since Reconstruction. Before Scott, there hadn't been a black senator from the South in over 130 years. 

The Senate, in other words, has historically been a very difficult plateau for blacks to reach, and getting there hasn't grown much easier since the Civil War. 

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Economic Performance in Q4 is....Hard to Get a Handle On

| Wed Jan. 30, 2013 12:01 PM EST

Economic growth turned negative last quarter, with GDP dropping 0.1 percent:

The drop was driven by a plunge in military spending, as well as fewer exports and a steep slowdown in the buildup of inventories by businesses. Anxieties about the fiscal impasse in Washington also contributed to the slowdown....The 22.2 percent drop in military spending — the sharpest quarterly drop in more than four decades — along with the drop in inventories and exports overwhelmed more positive indicators in the private sector, he said.

That's both odd and normal at the same time. It's odd because there's no real-world reason for military spending to jump around so much. A few percent from month-to-month, sure. But 22 percent in one quarter?

But it's also normal, because every quarter there's something like this when you dive into the internals of the GDP report. Final inventories rose or fell unexpectedly. State spending spiked or plummeted. Airplane sales or timber or durable goods or something showed an unusually big change.

So I guess my inclination is to simply take the headline number at face value: the economy was weak in Q4. Still, I'd temper that a bit. The military spending thing really is odd, and other economic indicators (employment, income growth, etc.) were reasonably strong last quarter. I wouldn't be surprised if we see some upward revisions to this.

On a political note, it would be nice if this report persuaded some people that government spending really does affect economic growth. Unfortunately, the kind of people who refuse to believe this seem to have a weird, walled-off section in the brains that makes an exception for military expenditures. Higher spending on bombs and aircraft carriers is good for the economy, but higher spending on bridges and electrical grids merely saps business from the private sector. I don't know if the anti-Keynesians really believe this or are only pretending to believe it, but it works out the same either way. A report like this won't change their peculiar views one whit.

Bizarre Utah Bribery Case Sucks In Harry Reid

| Wed Jan. 30, 2013 11:26 AM EST
Senate Majority Leader Harry Reid (D-Nev.)

Utah may be best known for its clean-living, teetotaling Mormon culture, but the state has long had a reputation as the home for less savory activity: financial fraud. Long known as the "scam capital" of the world, Utah has the dubious distinction of producing large numbers of con artists, penny stock scammers and other charlatans—so many that the Securities and Exchange Commission has an office in Salt Lake City (which is unusual for the agency). Yet another one of these sordid stories is underway in the state right now, and this time, an accused scammer has said he tried to bribe a big name: the highest ranking Democrat in the US Senate, Sen. Harry Reid (D-Nev.), himself a Mormon with many ties to Utah. 

The tale is a convoluted one. But it starts with Jeremy Johnson, a St. George businessman and high-profile political donor in the state who has been indicted on a variety of fraud charges stemming from his running of an internet marketing company. In 2010, the Federal Trade Commission sued Johnson's company, iWorks, alleging it had engaged in a far-reaching scam to defraud consumers through bogus money-making offers online. The company was the source of lots of those ads promising free money from government grants after the 2009 stimulus bill passed. Instead of making money, the FTC has alleged, consumers who responded to the ads ended up with unwanted charges on their credit cards that netted iWorks and its principals more than $275 million in ill-gotten gains. (The case is still ongoing.)

After he was indicted on bank fraud and money laundering charges, Johnson came to the Salt Lake Tribune with a bizarre allegation: He claimed that in 2010, when the FTC was investigating iWorks, he tried to bribe Reid, whom he thought could make the FTC investigation go away.

Johnson said the scheme was the idea of John Swallow, a Republican and Utah's newly elected attorney general. Johnson had sought Swallow's help fending off the FTC, and according to Johnson, Swallow, a former lobbyist for a Provo-based payday loan operation, persuaded him that his best chance was a well-placed bribe. Swallow, Johnson said, initially wanted $2 million but settled for $600,000 for Reid.

Swallow put Johnson in touch with Richard Rawle, a Reid donor who owned the payday loan company for which Swallow had lobbied. Rawle, now deceased, supposedly bragged to Johnson that Reid had helped him successfully beat back payday loan regulations. Johnson claimed he paid about $300,000 to a shell company set up by Rawle, with the understanding that it would be used to enlist Reid's help in squashing the FTC investigation. Not long afterward, the FTC sued Johnson. His assets were frozen and he was arrested in the Phoenix airport en route to Costa Rica, and charged with mail fraud.

Clearly unhappy with the turn of events, Johnson said he demanded that Swallow return his bribe money. When the money wasn't forthcoming, Johnson went public with his allegations—shortly after Swallow took office this year. Johnson provided the Salt Lake Tribune with a host of financial records and emails allegedly documenting his exchanges with Swallow.

Everyone Johnson has implicated denies doing anything wrong. Swallow has claimed that the money Johnson gave him was for lobbying, not a bribe. Reid has denied receiving any money from Johnson or any other involvement in the mess. After the audio of a meeting between Swallow and Johnson was released Monday, Reid's office released a new statement to the Tribune:

The allegations of bribery by Mr. Johnson, a man with a background of fraud, deception and corruption, are absurd and utterly false. Bribery is a crime for which Senator Reid has personally put people behind bars. Senator Reid will not have his integrity questioned by a man of Mr. Johnson’s low record and character, and his outrageous allegations will not go unanswered. Clearly, a desperate man is making things up.

The story gets weirder. The Tribune tracked Johnson's money trail to a law firm associated with Jay Brown, a Las Vegas lawyer and payday loan industry lobbyist whose name has repeatedly surfaced in organized crime investigations. Brown is an old friend of Reid's, and in 2006, Reid offered to amend his financial disclosure forms after failing to fully disclose the details of his involvement in a land deal with Brown that netted Reid around $700,000. Meanwhile, the US Attorney's office in Utah announced Friday that the Department of Justice and the FBI are both investigating Swallow.

We're Still at War: Photo of the Day for January 30, 2013

Wed Jan. 30, 2013 10:54 AM EST

Soldiers and sailors assigned to Provincial Reconstruction Team Farah and leadership from the Farah directorate of agriculture, irrigation and livestock file onto a CH-47 Chinook helicopter after a key leader engagement in Lash-e Juwayn, Jan. 24. U.S. Navy photo by HMC Josh Ives.

The Surprising Connection Between Food and Fracking

| Wed Jan. 30, 2013 7:01 AM EST
A farmer spreads synthetic nitrogen fertilizer on a field.

In a recent Nation piece, the wonderful Elizabeth Royte teased out the direct links between hydraulic fracturing, or fracking, and the food supply. In short, extracting natural gas from rock formations by bombarding them with chemical-spiked fluid leaves behind fouled water—and that fouled water can make it into the crops and animals we eat.

But there's another, emerging food/fracking connection that few are aware of. US agriculture is highly reliant on synthetic nitrogen fertilizer, and nitrogen fertilizer is synthesized in a process fueled by natural gas. As more and more of the US natural gas supply comes from fracking, more and more of the nitrogen fertilizer farmers use will come from fracked natural gas. If Big Ag becomes hooked on cheap fracked gas to meet its fertilizer needs, then the fossil fuel industry will have gained a powerful ally in its effort to steamroll regulation and fight back opposition to fracking projects.

It's True: The Fed Really Can Print All the Money It Wants To

| Wed Jan. 30, 2013 1:02 AM EST

Over the past few years, the Fed has been hugely profitable, sending more than $50 billion annually to the Treasury. The Wall Street Journal reports today that this gravy train may come to an end a few years from now, but don't shed too many tears for the folks in the Eccles building:

If the Fed were to record a loss, it could print its own money to cover its expenses—at no cost to the Treasury. The Fed would record a loss as a deferred asset, which would represent how much money the Fed would need to make up before it started sending profits to the Treasury again.

How great is that to be an agency that can just twiddle a few bits in its computer system whenever it needs to cover its budget? Sure, you knew already that the Fed could print money, but this makes it all a little bit more concrete, doesn't it?

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Corn on MSNBC: Will Immigration Reform Survive Congress?

Tue Jan. 29, 2013 9:48 PM EST

President Obama rolled out a plan for immigration reform today, but immigration is a tough sell in the US, where it's both an economic and a cultural issue. Watch DC bureau chief David Corn discuss how immigration reform will fare in Congress with Rep. Tony Cardenas (D. Calif.) on MSNBC's Martin Bashir:

David Corn is Mother Jones' Washington bureau chief. For more of his stories, click here. He's also on Twitter.

Amazon Defies Gravity For Yet Another Quarter

| Tue Jan. 29, 2013 7:17 PM EST

Amazon announced higher revenue today but sharply lower profits. Investors don't seem to care much: Amazon shares closed down a bit on the news, but as I write this they've already made up all of the loss and then some in after-hours trading. Matt Yglesias is amazed:

Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way. And the competitive pressure of needing to square off against Amazon cuts profit margins at other companies, thus benefiting people who don't even buy anything from Amazon.

It's a marvel, all right. The general idea, as near as I can tell, is that Amazon will build up lots of brand loyalty and will eventually be able to raise prices a bit without losing its customers. Maybe. I suppose I'd probably be willing to pay a slight premium to buy something on Amazon if my only alternative were an outfit I didn't know anything about. (Or if I'd gotten some Amazon gift cards for Christmas, which I did.) So maybe they'll eventually be able to pull this off. The problem is that, increasingly, their competition won't be small e-retailers I've never heard of, but a handful of fellow giants who all have good reputations, good service, low prices, and easy checkout. That's a tough space to make a profit in.

I suppose it's also possible that selling actual stuff will merely be a loss leader for the Amazon services that make money in the future: remote storage, cloud computing, rakeoffs from Amazon affiliates, etc. Maybe maybe maybe. Still, my daddy taught me that a P/E of 3,479 was just a wee bit optimistic. I think I'll stick to the craps tables in Vegas. The odds are better.

CHART: Which Kills More Birds, Cats or Turbines?

| Tue Jan. 29, 2013 6:34 PM EST

Last month Fox News reported on the "grizzly deaths" of 500 songbirds in West Virginia. Behind the fell deed: a wind farm, caught red-turbined. "To date, the Obama administration... has not prosecuted a single case against the wind industry," the Fox reporter laments. Opponents of renewable energy love to trot out the risk wind turbines pose to birds, and some engineering work has gone into making them more avian-friendly. But a new study released today in Nature shows that if you really want to protect birds, forget about wind: You need to lock up Kitty.

Chart by Tim McDonnell

The study, conducted by scientists from US Fish & Wildlife and the Smithsonian, found that "free-ranging cats... are likely the single greatest source of anthropogenic mortality for U.S. birds and mammals." No word yet on whether the Obama administration plans to prosecute these renegade felines.

Obama Lays Out His Pitch for Immigration Reform

| Tue Jan. 29, 2013 6:26 PM EST
President Barack Obama following remarks on immigration reform in 2011

Speaking to an audience in Las Vegas, President Barack Obama made his case for immigration reform Tuesday, invoking the idea of America as a nation of immigrants and saying he believed Republicans were truly committed to getting reform done.

"It's easy for the discussion to take on a feeling of 'us' versus 'them,'" Obama said. "A lot of folks forget that most of 'us' used to be 'them.'"

Obama's proposal resembles, to a large degree, the one put forth by the bipartisan Senate "Gang of Eight" Monday. It proposes adding more resources for immigration enforcement and border security, a mandatory employment verification system, and a path to citizenship—what critics will call "amnesty," but that the White House has referred to as "earned citizenship." Like the Senate bill, undocumented immigrants on temporary legal status while they are "going to the back of the line" to apply for citizenship would not be eligible for federal benefits.

On these broad principles, the Senate and the White House are in agreement; but, of course, the details matter, and there are key differences:

  • No security requirement for the path to citizenship: While the Senate plan describes border security requirements that may have to be met before undocumented immigrants already in the US can complete the legalization process, the White House plan has no such requirement. The dispute over what, if any, border security requirements must be met could endanger the passage of any bill. (To be eligible for legal status or citizenship under both plans, undocumented immigrants still have to pay fines and pass background checks).
  • Nothing resembling a guest worker program: While the Senate proposal calls for a "humane and effective system" for "immigrant workers to enter the country and find employment without seeking the aid of human traffickers or drug cartels," the White House fact sheet provided to reporters does not address this issue. That's a problem, because some kind of system for foreign workers is necessary to deter illegal immigration in the future.
  • Families headed by same-sex couples are treated as other families: The White House's proposal "treats same-sex families as families by giving U.S. citizens and lawful permanent residents the ability to seek a visa on the basis of a permanent relationship with a same-sex partner." Republicans on the Gang of Eight have treated this issue as unimportant. Sen. John McCain (R-Ariz.) said same-sex couples are "not of paramount importance," while Sen. Lindsey Graham (R-S.C.) asked sarcastically, "Why don't we just put legalized abortion in there and round it all out?"
  • DREAMers get an expedited citizenship process, but agricultural workers do not: The Senate proposal exempted not just DREAM Act undocumented immigrants, who were brought here as children and are poised to go to college or join the military, but agricultural workers "because of the role they play in ensuring that Americans have safe and secure agricultural products to sell and consume." The White House plan only expedites "earned citizenship" for DREAM Act-eligible undocumented immigrants, presumably because they're slightly less fond of Big Ag than the upper chamber of Congress.

The two variables that are likeliest to cause friction between the White House and Congress are security requirements on the path to citizenship and the length of the path to citizenship itself. This afternoon on the Senate floor, Sen. Marco Rubio (R-Fla.), one of the Republican members of the "Gang of Eight," warned Obama: "If this endeavor becomes a bidding war to see who can come up with the easiest, quickest, and cheapest pathway to a green card possible, this thing is not going to go well." The clear implication is that despite bipartisan agreement on a path to citizenship, Rubio—and by extension, other Republicans currently supporting a reform pushcould easily withdraw their support, based on how that path is paved. 

Obama made it clear that if the Senate bill fails, he won't simply be giving up. "If Congress is unable to move forward in a timely fashion," Obama said. "I will send up a bill based on my proposal and insist that they vote on it right away."

Here's the speech: