Blogs

To Win Back Congress, Conservatives Need Economic Ideas that Aren't Insane

| Wed Jan. 14, 2009 12:31 PM EST

You may have noticed that Senate Minority Leader Mitch McConnell is answering Barack Obama's call for suggestions on how to create a better stimulus by proposing a two-year suspension of payroll taxes. McConnell's conservative colleagues in the Senate support the idea, despite the fact that it (1) eliminates funding for Social Security and identifies no replacement, and (2) denies the government a huge portion of its income during a period of massive deficits.

This is a catastrophically bad idea, an idea so bad and so naive and so completely impossible to implement that it almost makes you laugh. But keep in mind, this idea isn't being proposed by some backbencher in the House Republican caucus. This is the Senate Minority Leader. This is the best Republicans can think up!

It's this vacuum of solid policy thinking, which gets filled with ideologically driven nonsense, that caused conservative blogger Daniel Ruwe to rip into his brethern. Here's what he had to say on a slightly different tax idea the Right thought up:

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Fixing the Bureaucracy: Will DOJ Be Obama's Most Difficult Task?

| Wed Jan. 14, 2009 11:53 AM EST

The Obama Administration has to rebuild a lot of broken federal agencies: the FDA, the EPA, FEMA, and on and on. But there may be no federal body that has fallen further than the Department of Justice, which has gone from being a trustworthy independent actor to being an appendage of the White House run by nincompoops and right-wing zealots.

If you ask anyone who has worked in the Justice Department (and we have), they'll tell you that agency's most famous controversy — the fired US Attorneys scandal — was simply one stage in a long-running effort to politicize the place from top to bottom. Conservatives in, liberals out. And now an internal DOJ report has found new evidence that purge-like conditions were created inside the building by Bush political appointees. This would be hilarious if it wasn't so sad:

Barack Obama 2.0

| Wed Jan. 14, 2009 2:43 AM EST

BARACK OBAMA 2.0....Barack Obama is apparently planning to create a permanent political organization designed not just to help him win reelection in 2012, but to help him get his policy agenda passed in the meantime:

The organization, known internally as "Barack Obama 2.0," is being designed to sustain a grass-roots network of millions that was mobilized last year to elect Obama and now is widely considered the country's most potent political machine.Organizers and even Republicans say the scope of this permanent campaign structure is unprecedented for a president.

....Though the plan still is emerging, one source with knowledge of the internal discussion said the organization could have an annual budget of $75 million in privately raised funds. Another said it would deploy hundreds of paid staff members — possibly one for every congressional district in certain politically important states and even more in larger battlegrounds such as Florida, Ohio, Colorado, Virginia and North Carolina.

....The Obama system will be used at least in part to influence members of the president's own party. For example, Democratic lawmakers in Republican-leaning districts might resist voting for an Obama-backed global warming bill. In that case, the White House or DNC could use the new network for phone campaigns, demonstrations or lobbying trips to push lawmakers to stick with Obama.

This is something that Mark Kleiman more or less predicted many months ago. (To me, anyway. I'm not sure if he blogged about it.) His conjecture was that Obama's organization had fundamentally redefined presidential politics thanks to its huge pool of dedicated volunteers and its ability to quickly raise unheard-of sums of money. After all, what congressman is likely to buck the boss if the boss can offer — or withhold — hundreds of thousands of dollars without batting an eye and mobilize — or withhold — hundreds of thousands of phone calls and telegrams depending on how closely you toe the presidential line? Every president has a certain amount of power he can bring to bear against holdout legislators, but Obama's organization brings this to a whole new level.

If this turns out to be right, Congress is going to learn pretty quickly that the ballgame has changed. Should be fun to watch.

Yet More Bailout

| Wed Jan. 14, 2009 2:08 AM EST

YET MORE BAILOUT....When Barack Obama asked President Bush to request the second $350 billion in TARP money, I got sort of a sinking feeling. After all, he wouldn't do that unless he figured the economy was still in such dire shape that there was a good chance he might need the money right away. Apparently that's the case:

On Tuesday, [Ben] Bernanke publicly made the case that one of the most unpopular and most scorned programs in Washington — the $700 billion bailout program — needs to pour hundreds of billions more into the very banks and financial institutions that already received federal money and caused much of the credit crisis in the first place.

The most glaring example that the banking system needs even more help is Citigroup. Though it already has received $45 billion from the Treasury, it is in such dire straits that it is breaking itself into parts.

....Since last September, no major banks have failed and the credit markets have thawed somewhat. But analysts said the problems are still acute, if less apparent on the surface. Banks have received $200 billion in fresh capital from the Treasury since last fall and have borrowed hundreds of billions of dollars more from the Fed. But in the meantime, the economy fell into a severe downturn last fall that is likely to continue until at least this summer.

....Citigroup is not alone. JPMorgan Chase, Bank of America, Wells Fargo and most other big banks all expect enormous losses as millions of consumers default on their mortgages, credit cards and automobile loans. Other losses are expected on loans made to commercial real estate developers, small businesses and for highly leveraged corporate buyout deals.

It's not as if this is a big surprise or anything, but still. Crikey.

Super Contango

| Wed Jan. 14, 2009 1:27 AM EST

SUPER CONTANGO....Normally, it costs more to buy a barrel of oil for delivery six months from now than it does to buy a barrel of oil today. After all, if you're not going to take delivery of my oil until July, then I'm going to want the spot price of the oil plus the cost of storing it plus the cost of having to wait for my money. So maybe a barrel of oil that costs you $38 today will cost you $41 for delivery six months from now.

But instead of $41, what if the July price is $53? Then anyone who wants to can make a guaranteed killing. Accept the contract, buy a tankerful of oil, store it for six months, and then deliver it. Even after the cost of storage and the interest on the loan you took out to buy the oil, you'll make a quick and easy twelve bucks per barrel profit.

Sounds nice, but since this profit opportunity is so obvious it should get arbitraged away almost instantly. In short, a situation like this should never happen — certainly not for long periods, anyway. But it has:

On Monday, oil for February delivery closed at $37.59 a barrel on the Nymex, or nearly $15 lower than July's contract price....Such a distance between contracts is unusual, sparking industry insiders to term the phenomenon — which reached an apex in late December — "super contango."

When the price spread is greater than the storage cost, "there is an opportunity to arbitrage at a profit without risk," said James Williams, an economist at energy research firm WTRG Economics.

So what's going on? One possible explanation is that most of the easy storage is already full, so it's not really possible to make a quick buck on this even if you want to. But even if that's the case, there's yet another option: oil producers can pump less oil now (essentially "storing" it in the ground) and then pump it out in July for delivery at the higher price. But apparently they're not doing that. John Hempton figures there are two possible explanations: (1) they're already pumping at full capacity, so they can't promise to pump extra oil in July even if they want to, or (2) oil producers are so desperate for cash that they're willing to take money now even if it's way less than they could get for the same stuff six months from now.

#1 doesn't seem to be true. So that leaves #2: thanks to plummeting oil prices, OPEC countries are in serious economic turmoil and desperate for any cash they can get their hands on right now. Either that or else there's an option #3 that's not obvious. Any ideas?

Deconstructing W

| Tue Jan. 13, 2009 9:12 PM EST

DECONSTRUCTING W....Howard Fineman on Hardball yesterday:

George Bush has never accepted the proposition that the world is complicated.

Me in the Washington Monthly three years ago:

I've long viewed George Bush as a temperamental conservative, the kind of guy you meet in a bar who slams down his drink and asks belligerently, "You know what this country needs?" — and then proceeds to tell you.

I think we're both saying about the same thing. But I was more colorful! In any case, I think this is about the closest I've ever come to describing Bush's essential character. Just thought I'd share.

UPDATE: Matt Yglesias thinks I'm being unfair to drunk guys in bars. Maybe so!

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Tuesday Tree Blogging

| Tue Jan. 13, 2009 8:35 PM EST

TUESDAY TREE BLOGGING....The wind was too strong for the tree removers to come yesterday, but today the Santa Anas died down and our Jacaranda is no more. A sad moment, but it had to be done. Tomorrow the roots come out. Your before and after tree blogging is below.

One More Problem With Wind Power: Space Aliens Ramming Our Windmills

| Tue Jan. 13, 2009 6:55 PM EST

Via the New York Times comes this ITN report about a wind turbine in England that seems to have been hit by an unidentified flying object, which we can only assume was an alien spacecraft. Apparently local observers saw lights moving rapidly across the sky one night last week, and the next morning, it was discovered that a nearby wind farm's turbine had been damaged, with one blade missing and one bent. Sure, the Guardian says it could have been an ice chunk or fireworks, and the idea that intergalactic superbeings could manage to fly here across the vast reaches of space but aren't smart enough to avoid fender-benders with windmills doesn't make a whole lot of logical sense, but never mind, the spooky video report is highly entertaining. They can't find the missing blade!! Plus, there's got to be a way for Republicans to turn this news into a call for more drilling, right?

Back on Tracks

| Tue Jan. 13, 2009 6:20 PM EST

BACK ON TRACKS....One of the big problems with our economy in recent years has been the massive growth of the FIRE sector — Finance, Insurance and Real Estate — at the expense of sectors that produce actual useful goods and services. Corporations have spent too much of their time engaged in M&A and stock buybacks instead of investing in new businesses, the savings glut from overseas flowed into the housing and finance market, and either through indolence or inability to attract attention, more traditional industries stagnated. In the current issue of the Washington Monthly, Phil Longman argues that this is roughly what's happened to America's freight railroads. Even though they're cheap, green, and efficient compared to trucks, they're short of track, hobbled by bottlenecks, and unable to haul a fraction of the freight they ought to:

Why don't the railroads just build the new tracks, tunnels, switchyards, and other infrastructure they need? America's major railroad companies are publicly traded companies answerable to often mindless, or predatory, financial Goliaths. While Wall Street was pouring the world's savings into underwriting credit cards and sub-prime mortgages on overvalued tract houses, America's railroads were pleading for the financing they needed to increase their capacity. And for the most part, the answer that came back from Wall Street was no, or worse. CSX, one of the nation's largest railroads, spent much of last year trying to fight off two hedge funds intent on gaining enough control of the company to cut its spending on new track and equipment in order to maximize short-term profits.

....There are many examples around the country where a relatively tiny amount of public investment in rail infrastructure would bring enormous social and economic returns....Chicago, America's rail capital, [] is visited by some 1,200 trains a day. Built in the nineteenth century by noncooperating private companies, lines coming from the East still have no or insufficient connections with those coming from the West. Consequently, thousands of containers on their way elsewhere must be unloaded each day, "rubber-wheeled" across the city's crowded streets by truck, and reloaded onto other trains. It takes forty-eight hours for a container to travel five miles across Chicago, longer than it does to get there from New York. This entire problem could be fixed for just $1.5 billion, with benefits including not just faster shipping times and attendant economic development, but drastically reduced road traffic, energy use, and pollution.

As regular readers know, I have my doubts about pouring lots of money into long-haul passenger rail, high-speed or otherwise, but freight is another story entirely. I don't need much convincing on this score. Trains can haul freight far more cheaply than trucks, both in money and carbon emissions, and an infrastructure overhaul that included electrification would make them more efficient yet. Longman suggests that an investment of $250 billion to $500 billion over the next 20 years would get 85% of all long-haul trucks off the nation's highways, reduce the nation's greenhouse gas emissions by 38% (and oil consumption by 22%), and thanks to logistical efficiencies, would also leave the our economy 13% larger by 2030 than it would otherwise be.

This is a program that would far outlast any short-term stimulus bill, of course, but that's not a bad place to get the whole thing kick started. There are plenty of projects that could begin immediately, and if they're successful then private funding would likely take over much of the burden in the out years. And for those of you who are more enthusiastic about passenger rail than I am, there's another bonus: upgrading the freight infrastructure upgrades the passenger infrastructure at the same time. What's not to like? For more, the whole piece is here.

Why Some Enviros Hate Obama's EPA Pick

| Tue Jan. 13, 2009 5:53 PM EST

eastickmarr.gif Only a few of Obama's cabinet nominations have received any criticism during this transition period; most have been fuss-free. But Lisa Jackson, commissioner of the New Jersey Department of Environmental Protection since 2006 and Obama's pick to head the enervated Environmental Protection Agency, has been slammed by an environmental nonprofit called Public Employees for Environmental Responsibility (PEER) that has blasted her in the toughest terms, calling her incompetent, weak, and unaccomplished.

Other environmental groups are cheering Jackson as she heads to the Senate for a confirmation hearing on Wednesday. But PEER has produced pages and pages of research (PDFs available here) that it claims serve as an indictment of her 31-month tenure as the Garden State's top environmental officer. The organization points out that in 2006 Jackson said publicly that "developing a new ranking system to prioritize" polluted sites due for cleanup was "the most important thing" her department was working on. Without a ranking system for the state's more than 15,000 contaminated sites — the longest such list in the nation — her department could not identify New Jersey's most dire pollution problems. But, PEER complains, Jackson never delivered a ranking system and then proposed to outsource clean-up responsibilities to private contractors. Jeff Ruch, the executive director of PEER, says, "She never developed a coherent plan. This was supposed to be her specialty, because the time she had spent previously at the EPA was spent on toxic cleanup. But she never displayed any expertise in a way that was helpful."