2012 - %3, February

We Are All Gordon Gekko Now

| Tue Feb. 28, 2012 9:34 AM PST

Christine Negroni writes in the New York Times today about all the innovative ways that airlines plan to make money in the future since it's now obvious to them that they can't make money merely by flying people around. Matt Yglesias thinks the ideas all sound kind of dumb except this one:

Continental Airlines, which merged with United Airlines last year, is also taking business ideas from the world of finance. A year ago, it began selling options on ticket prices. The program, FareLock, lets would-be travelers freeze a ticket price for as many as seven days by paying a small fee which the airline keeps regardless of whether the customer ultimately makes the purchase. United will adopt the program next month, when its reservations system is merged with Continental’s.

“It’s a value to people like a stock option is a value,” said Jeff Smisek, the president and chief executive of United Continental Holdings. It lets you buy stock at a fixed price. Well, this is an option on a seat.”

So this is a....nonrefundable deposit? With a fancy new name to make it sound more like high finance? Give me a break. I agree that it's not necessarily a bad idea, but do we really have to adopt such an idiotic euphemism for a retail practice that was commonplace before I was born?

UPDATE: On a related subject, in comments Model62 says:

Just a nit, here, but the checked baggage fees the NY Times writer notes in the story's intro are not primarily a way to generate more cash flow. They are a tax avoidance scheme; airline FAA fees are calculated based on fares, not the various attached "fees." The more services the airline can strip out of the fare price and re-add as a fee, the less it pays to the government.

In a way the airlines have been acting like finance types for some time now; quants figuring out the most efficient ways to route traffic around the tax code.

Interesting! I didn't know that. Still, can't it be both: a cash flow generator and a tax avoidance scheme?

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GOP Lawmaker: Party Kingmakers "Whispering" About Drafting New Candidate

| Tue Feb. 28, 2012 9:07 AM PST
Rep. Peter King (R-N.Y.)

With Mitt Romney, the GOP establishment's pick in the 2012 presidential nomination battle, still unable to win over dyed-in-the-wool Republicans, the chatter about drafting a new, more popular candidate continues to grow.

On CNN Tuesday morning, Rep. Peter King (R-N.Y.), chair of the House homeland security committee, hinted at a whisper campaign among "top Republicans" who want a GOP favorite such as New Jersey Gov. Chris Christie or Rep. Paul Ryan (R-Wisc.) to enter the race if Romney loses the Michigan or Arizona primaries or struggles on Super Tuesday, when ten states controlling 437 delegates hold GOP primaries on March 6. "I think there’s going to be more of an interest, more of an emphasis on having someone ready if on Super Tuesday... Mitt Romney does not manage to break loose, and to have that candidate ready to come in," King said. He added, "Again, I have no inside knowledge. Just whispering and mumbling here among top Republicans who are concerned that Governor Romney has not been able to break loose."

King told CNN's Soledad O'Brien that he sees the Michigan primary as a make-or-break moment for the Romney campaign. "From my perspective, if Romney does not win Michigan, it creates real problems for his candidacy," he said. "I think you then will start seeing more activity among the Republican establishment, whatever that is, talking to people like Chris Christie, Jeb Bush, Paul Ryan, Mitch Daniels, people like that."

Romney heads into the Michigan primary with a razor-thin 1 percentage point lead over former US senator Rick Santorum, according to RealClearPolitics polling data. Romney fares even worse in national polls, trailing Santorum by 3 percentage points, according to RCP. The pressure on Romney to dig out a win in Michigan is huge, given that he grew up there and that his dad, George Romney, served as governor from 1963 to 1969. Yet Romney's opposition to the federal bailouts of General Motors and Chrysler has dented his support there, and he finds himself locked in a bitter fight with the surging Santorum.

Romney could very well pull off a win in Michigan. Even if he does, though, he's been humbled in a state he once called home.

Credit Default Swaps Are Back in the News

| Tue Feb. 28, 2012 8:57 AM PST

Credit default swaps are in the news again:

An unidentified market participant has asked a committee of the International Swaps and Derivatives Association to rule on whether the passage of legislation approving collective-action clauses for Greek debt should trigger payouts on credit-default swaps tied to Greek sovereign bonds.

At stake are payouts from sellers of a net $3.2 billion of CDS on Greece currently outstanding, and the stigma associated with lending credence to an instrument policy makers have long reviled.

I hope the ISDA takes the case, and I hope they rule in favor of the CDS holders. I'm not a big fan of CDS, and I suspect the world would be a better place if CDS were banned outright, but for now they're legitimate contracts bought and sold in a legitimate way. So if Greece has defaulted, the contracts should pay out — and Greece has defaulted. The European claim that the haircut on Greek bonds is "voluntary" is the worst kind of sophistry, and allowing it to stand because of bullying from the EU would be a travesty. The ISDA shouldn't be a party to this fiction, and shouldn't encourage other governments to expect a continuing supply of get-out-of-jail-free cards in the future. That's moral hazard for you.

Default is part of the latest European deal. Part of the price of that deal is the cost of CDS payouts. Everybody should stop pretending otherwise.

Convicting Alleged Terrorists Is Hard When You Torture Them

| Tue Feb. 28, 2012 7:43 AM PST
A guard tower at the Guantanamo Bay detention facility.

Gitmo detainee Majid Khan, accused of being a facilitator for alleged 9/11 mastermind Khalid Sheikh Mohammed, is reportedly in the midst of a plea deal with military prosecutors that will lighten his sentence in exchange for his testimony against other suspected terrorists. This has former Bush administration speechwriter Marc Thiessen in an absolute rage:

Giving this killer a reduced sentence is outrageous. Khan is no run-of-the-mill terrorist. He was directly subordinate to KSM and was selected by the 9/11 mastermind to conduct terrorist operations inside the United States. Khan even passed a test KSM orchestrated, which showed Khan was committed to being a suicide operative. Khan agreed to help KSM set up a front business to smuggle explosives into the United States for use against economic targets and to lead a KSM plot to blow up gas stations along the East Coast, but he was captured before he had the chance to enter the United States. He had been charged with war crimes, including murder, attempted murder, spying and providing material support for terrorism — all of which could have earned him a life sentence. Instead, he might now be released.

The Khan plea deal is a direct consequence of policies Thiessen supported. Thiessen is a huge apologist for the Bush-era CIA torture program, which was of dubious usefulness but nevertheless made it vastly more difficult to actually prosecute suspected terrorists because the evidence against them is tainted. Khan has said that he was tortured so badly that he attempted to commit suicide by chewing through his own arteries. His statements about his treatment have been censored by the US government, however, so we don't even know all of what he says was done to him. 

Thiessen has also vocally advocated for the prosecution of Gitmo detainees in military commissions and against the transfer of any detainees to American soil for trial. Although the rules of military commissions favor the government, federal trials tend to hand out much harsher sentences. Why would Khan's fate be any different from the trickle of detainees convicted in military commissions, several of whom are already free?

Thiessen and other conservatives who have defended the use of torture and blocked federal trials for detainees only have themselves to blame for Khan's reduced sentence. They've done everything possible to ensure things would play out this way. 

We're Still at War: Photo of the Day for February 28, 2012

Tue Feb. 28, 2012 6:31 AM PST

Petty Officer Third Class Michael Soto, the corpsman for Bridge Platoon, Alpha Company, 9th Engineer Support Battalion, directs the litter-bearers as they load an injured marine into a helicopter during a medical evacuation in the district of Garmsir, Helmand province, on January 30, 2012. Soto, a native of Lake Villa, Ill., has been with 9th ESB for the past year and is the primary caregiver to the marines of bridge platoon as they serve on the frontlines of Afghanistan. Photo courtesy of the United States Marine Corps.

The PR Man Behind the Oscar Night Anti-Humane Society Slam

| Tue Feb. 28, 2012 4:00 AM PST

Americans who endured Sunday night's Academy Awards ceremony were treated to a surprisingly aggressive campaign-style ad attacking the Humane Society for supposedly spending less than one cent of every dollar it takes in on animal shelters. The ad opens with a blaring siren on one side of the screen and footage from a Humane Society TV spot on the other. "Consumer alert!" a voiceover declares. "If you've seen this ad or donated to the Humane Society of the United States, you should know that only one penny of every dollar donated goes to local pet shelters." 

Take a look:

The group behind the ad is the Center for Consumer Freedom, a creation of the Washington PR guru Rick Berman, who runs an array of corporate-funded front groups targeting public-interest outfits, unions, and other organizations that pose a threat to the bottom line of Berman's clients. (As Mother Jones has reported in the past, Berman's firms have also shilled for predatory loan companies.) The Center for Consumer Freedom largely focuses on opposing laws and regulations that are bad for the food and beverage industries. The group is known for fact-bending ad campaigns downplaying, among other things, the amount of mercury in fish and the number of drunk-driving deaths. In 2007, Berman told CBS's 60 Minutes that he essentially sees himself as a warrior against an encroaching nanny state that seeks to deprive Americans of all the delicious foods they love to eat.

According to the Center for Consumer Freedom's 2010 tax filing, the group set aside about a million dollars to set up its anti-Humane Society website "Humane Watch." Berman has created a separate group with the oddly Humane Society-sounding name, the Humane Society for Shelter Pets. Its website snarks at the Humane Society for failing to provide more money for animal shelters.

Berman's group openly acknowledges that it is supported by restaurants and other food companies. But as a 501(c)(3), it doesn't have to disclose its donors, allowing the Center for Consumer Freedom's corporate funders to avoid being tarnished by attacks like the one CCF aired during the Oscars.

"You can take money from any source; you don't have to worry about contribution limits or anything like that. The donors are kept secret, so there's no disclosure of who's ultimately paying for the ad," says Bill Allison, the editorial director of the Sunlight Foundation. "You can have a political impact without necessarily disclosing who you are and what you're doing."

So why would a group funded by the food industry group go after the Humane Society? Both the Humane Society and the Center for Consumer Freedom seem to agree this is not about lost puppies. Rather, it's about the Humane Society's success in altering laws and regulations dealing with animal cruelty, which can sometimes increase the cost of doing business.

"They seek to use ballot initiatives and lobbyists to change laws in ways that are not in line with consumer demand," says Justin Wilson, senior research analyst at the Center for Consumer Freedom. "If you want to buy cage-free hand-foraged eggs from the farmer who grows them on the roof of a building in Williamsburg, Brooklyn, that's great. Alternatively, if your view of these things is different from people who want to spend that much money, that should be their choice."

Wilson argues that the Humane Society's ads give donors a false impression of where their money goes, and that his group is simply informing the public of what the Humane Society actually does. So does the Humane Society really gives just 1 percent of its budget to animal shelters? Yes, says Humane Society President and CEO Wayne Pacelle—but that's a statistic he calls a "false frame," both because the group spends tens of millions on sterilization, sanctuaries, and animal rescues all over the country, and because the group has never claimed to simply fund animal shelters. According to its 2010 annual report, the Humane Society spent $27 million on "direct care and service" for animals and about $53 million on "advocacy and public policy." Pacelle says all the footage in their ads comes directly from Humane Society staffers.

"The only reason he's attacking us is that we're the most effective animal protection group in the world, not because we're bad at what we do," Pacelle says. He pointed out that just a few weeks ago the Humane Society persuaded McDonald's to stop confining pregnant pigs in cramped gestational crates. "They'd love it if we put all our money exclusively into rescuing animals on the street and didn't get to the source of the problem."

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Video: Eric Schlosser Talks Food and Class

| Tue Feb. 28, 2012 4:00 AM PST
Will Allen of Growing Power gives a composting workshop in inner-city Milwaukee.

One of the most effective arguments against transforming our food system is the class one: Sure, it's great if well-heeled coastal urbanites want to pay up for food grown without chemicals, but that kind of agriculture can never be productive enough to feed poor people. For that reason, we need monocropped fields of corn and soy, factory-scale livestock operations, and annual monsoons of agrochemical.

In this view, food system reform advocates like me are raging elitists, and Big Food institutions like McDonald's and Walmart are populist champions of the working poor.

I call it the two-food-systems solution: a niche local-organic one for the few willing to pay up; a dominant chemical-driven one for everyone else. In essence, that model describes what has evolved here in the United States over the past 20 years: vibrant islands of farmers markets and CSAs in a vast swamp chemically produced calories.

But what if we transformed the entire food system—precisely because it so ill-serves low-income people, who do the behind-the-scenes dirty, dangerous work to keep it humming?

At a conference I attended last May in DC, I heard Eric Schlosser—whose seminal 2001 book Fast Food Nation exposed the brutal working conditions that underpin what he called "all-American meal"—deliver a brief, damning refutation of the claim that Big Food is somehow the anti-elitist champion of America's working poor. The context of Schlosser's remarks was somewhat ironic, for he was introducing perhaps the most elite proponent of sustainable agriculture on Earth: His Royal Highness, Prince Charles of Wales, who went on to give an equally lucid and clear-eyed indictment of global industrial agriculture.

Republicans Are Crazy, But That's Pretty Normal

| Mon Feb. 27, 2012 10:56 PM PST

Ten years ago John Judis and Ruy Teixeira wrote The Emerging Democratic Majority, which argued that a variety of demographic trends spelled doom for the Republican Party. Unfortunately for Judis and Teixeira, Republicans ignored their demographic doom and won a convincing victory in 2004. But hey, that was due to 9/11 and Iraq and the war on terror, and who could have predicted that? Then Democrats chalked up big wins in 2006 and 2008 (whew!), but in 2010 Republicans came roaring back. But hey, that was because of an epic recession, and who could have predicted that? Any day now, those demographics are going to kick in and Republicans will be doomed once and for all. Honest.

I am, obviously, being a smart-ass about this. In fact, as Jon Chait writes today in "2012 or Never," the demographic trends that Judis and Teixeira wrote about really are continuing apace. Smart Republicans are well aware of this, and they're especially well aware that one of the biggest demographic trends working against them is the growth of the Latino population. So a few years ago, as a way of peeling off some Latino votes from the Democrats, they took a stab at passing a moderate immigration bill. Unfortunately, their base went into a full-bore revolt and began demanding a harsher anti-immigrant policy instead of a more moderate one. As Jon says, this was about like publicly announcing an electoral suicide pact on national TV.

And it gets worse. At the same time that Republicans are deliberately adopting policies that spell long-term disaster, they've also adopted an uncompromising all-or-nothing political strategy that appeals to their existing base but has cost them dearly in the form of short-term Democratic victories. A more moderate party could have stopped or watered down health care reform, but instead they got Obamacare. A more moderate party could have struck a historic spending deal with Obama, but instead they got nothing. And like lemmings going over a cliff, virtually all of them voted for Paul Ryan's budget roadmap, which was extremely unpopular with most voters. What's going on?

The way to make sense of that foolhardiness is that the party has decided to bet everything on its one "last chance."…Grim though the long-term demography may be, it became apparent to Republicans almost immediately after Obama took office that political fate had handed them an impossibly lucky opportunity. Democrats had come to power almost concurrently with the deepest economic crisis in 80 years, and Republicans quickly seized the tactical advantage, in an effort to leverage the crisis to rewrite their own political fortunes.

…During the last midterm elections, the strategy succeeded brilliantly…In the long run, though, the GOP has done nothing at all to rehabilitate its deep unpopularity with the public as a whole, and has only further poisoned its standing with Hispanics. But by forswearing compromise, it opened the door to a single shot. The Republicans have gained the House and stand poised to win control of the Senate. If they can claw out a presidential win and hold on to Congress, they will have a glorious two-year window to restore the America they knew and loved, to lock in transformational change, or at least to wrench the status quo so far rightward that it will take Democrats a generation to wrench it back. The cost of any foregone legislative compromises on health care or the deficit would be trivial compared to the enormous gains available to a party in control of all three federal branches.

Jon doesn't actually offer any evidence that this is what's motivating Republicans, and likewise, I can't really marshal much evidence that he's wrong. But I have a hard time buying this. If I'm reading him correctly, he's saying that Republicans know they're doomed, and they're deliberately adopting a catastrophic long-term strategy in the hopes that one last hurrah will be enough to keep America conservative even if they do lose every election for the next 20 years.

But this simply doesn't pass the human-nature test. I can't peer into the souls of Republicans, but I don't get any sense that they believe themselves to be doomed. People just don't think that way. Rather, I get the sense that they're true believers who think that, deep in its heart, America agrees with them.

This also doesn't pass the common sense test. Even if Republicans do win control of all three branches, they aren't going to win 60 seats in the Senate. They aren't even going to come close. So if they try to roll back the New Deal, or whatever their plan is, Democrats will filibuster it. Republicans have already shown them how, after all. The GOP will certainly be able to move the dial a bit if they win in November, but there's no way anyone in the party thinks they can "lock in transformational change" over a two-year period with 52 votes in the Senate.

Basically, I just don't think there's a huge mystery to be solved here. When Democrats lost to Reagan, they nominated first Walter Mondale and then Michael Dukakis before finally tacking to the center and putting Bill Clinton in the White House. That was a 12-year stretch. Britain's Labour Party spent a decade moving left before they finally tacked back to the center after losing to Margaret Thatcher. It took them 18 years to finally regain power. Republicans have only been in the wilderness for either four or six years, depending on how you count. If it takes until 2016 for them to come to their senses, that would be a pretty normal progression.

Republicans don't think they have one last chance before the fat lady sings them off the stage. They're just reacting emotionally to a big defeat by convincing themselves that they were rejected because they hadn't been true enough to their principles. That happens all the time. They'll come around eventually.

Corn on Hardball: Is the GOP Race Slipping Away?

Mon Feb. 27, 2012 6:12 PM PST

David Corn and Time magazine's Mark Halperin joined Chris Matthews on MSNBC's Hardball to discuss the latest political poll results and what they say about the GOP's chances in the 2012 election. Recent polls show Barack Obama's approval rating is at 53 percent, up nine points since November. The polls also show that when Obama is pitted against Mitt Romney and Rick Santorum, he beats them by 10 and 11 points, respectively. The Republican primary fight has dragged on for months and promises to continue well into the future. Has all the candidates' mudslinging started to harm the GOP's image and turn off voters?

Creditmongering, Take 2

| Mon Feb. 27, 2012 6:00 PM PST

I wasn't planning to revisit the creditmongering post I wrote earlier today, since I suspect that only a tiny fraction of my readership cares very much about it. But I've gotten a few responses to it that seem worth addressing, in particular this one from Aaron Carroll. So.....

When should you credit other people in your writing? For starters, I'd draw a sharp distinction between journalism, blogging, and academia. For lack of a better way of putting this, I'd also draw a sharp distinction between ideas and IDEAS.

Journalism first. I stick by my belief that being first with a garden-variety story by a few minutes or a few hours simply isn't worth crediting. The person who got there first thinks it's a big deal, but honestly, no one else does. Besides, journalism is a business. No one credits their competitors in other industries if they can help it, and I'm not sure why we expect journalists to be any different. So I guess my rule here is: If someone else breaks a genuinely big story, it's right and proper to credit them. If it's just a few-hour lead on a piece of commodity news, get a life. The warm glow of being first is all you're going to get out of it.

Next, blogging. After giving this some thought, I realized that I do follow some rough rules on linking and crediting. I've just never put them in writing. So here they are:

  • If I'm responding directly to someone, of course I link to them.
  • Even if I don't respond directly to someone, but only to a piece they linked to, I'll probably provide a link if they said something interesting.
  • If someone links to a common story that I would have seen anyway, I don't.
  • If someone links to a story I probably wouldn't have seen on my own, I usually give credit one way or another.
  • If the link comes from a link roundup, I'm less likely to bother giving credit. If my readers click through, I'm wasting their time.

Next, academia. This is a whole different culture with its own rules. Extensive endnotes are common. Literature reviews are customary. Credit to others is splashed all over the place not only because it's expected, but because it demonstrates a certain level of erudition on the part of the writer. Nothing else I've said here applies to academics.

Beyond that, though, several people have suggested that if you get an idea from someone, you should credit them regardless of any other linking/credit rules you might follow. This is where I'd make the distinction between ideas and IDEAS. The former is inspiration: if I read something that makes me want to dig into the plight of the long-term unemployed, I'm not likely to credit anyone. It's just a topic. Lots of people have addressed it, and the fact that I happened to get my inspiration from one person rather than another probably doesn't matter much.

But an IDEA is different: this is a very specific theory or model or explanation for something. Or maybe an original insight. If you mention an IDEA, or riff on it to produce one of your own, you should credit the originator.

One more thing. I think every blogger has had the experience of writing something, and then seeing someone else write something suspiciously similar a few hours later without giving credit. Be careful. I suspect that most of the time we're getting worked up over a coincidence. Most of our ideas aren't really as original as we think.

But that might just be my temperament speaking. I tend not to care much if I get credit for my ideas. Mainly, I just like to see them spread. If someone echoes me, then my ideas get broadcast into the ideasphere — and, truthfully, it's probably more effective if it looks like someone has independently had the same thought than it is if they're writing a post explicitly agreeing with me. So I'm happy either way. But I recognize that other people have different feelings about this and get a bigger kick than I do out of being the center of a new meme. So I guess maybe the overriding rule for credit is this: it doesn't cost anything and it can't hurt. If in doubt, give credit.