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More is More

| Fri Nov. 14, 2008 4:05 PM EST

MORE IS MORE....Apparently John McCain was right about something after all: We really should adopt lower corporate tax rates just like Ireland. But there's a bit more to the story. Matt has the details here.

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Bailing Out GM

| Fri Nov. 14, 2008 3:29 PM EST

BAILING OUT GM....The basic argument against bailing out GM (and Ford and Chrysler) is fairly simple: They're dinosaurs who can't compete, don't make good cars, have a terrible corporate culture, and will never get better. If we're willing to bail out companies like these, where will the bailouts stop?

The basic argument in favor is also fairly simple: Even if all that stuff is true, and even if in normal times we'd let them die, right now we're on the edge of a truly catastrophic recession. Killing them off, along with the 2-3 million jobs they support, could be just the catalyst that turns a catastrophic recession into a full-blown depression. We'd be cutting off our economic noses to spite our free market faces.

But would Chapter 11 reorganization really be all that terrible? Maybe not. Maybe the companies would shed a few jobs, but in the end come back leaner and stronger. That's an argument that strikes me as persuasive, but what if it turns out that Chapter 11 isn't an option? Jon Cohn explains:

In order to seek so-called Chapter 11 status, a distressed company must find some way to operate while the bankruptcy court keeps creditors at bay. But GM can't build cars without parts, and it can't get parts without credit. Chapter 11 companies typically get that sort of credit from something called Debtor-in-Possession (DIP) loans. But the same Wall Street meltdown that has dragged down the economy and GM sales has also dried up the DIP money GM would need to operate.

That's why many analysts and scholars believe GM would likely end up in Chapter 7 bankruptcy, which would entail total liquidation.

If this is true, it probably tips the scale in favor of a bailout — especially given the cost, quality, and labor reforms that all three automakers have already put in place over the past few years. Maybe. For now, I'm just passing this along, but I'll keep my eye out for anyone else either confirming or debunking the Chapter 7 scenario.

The Newest GOP Myth: We've Drifted from Our Principles

| Fri Nov. 14, 2008 2:49 PM EST

This was first posted at www.davidcorn.com....

In the aftermath of a decisive defeat, Republicans and conservatives are nursing their wounds and wondering what went wrong. Many have come up with an easy answer: the GOP has drifted from its core principles; consequently, the voters have handed it the pink slip.

But is the drift more to blame than the principles?

Let's look at one example of this argument. Michael Steele, the former Maryland lieutenant governor and an unsuccessful candidate for Senate in 2006, is running to become the new head of the Republican Party. In a statement he released on Thursday, he said,

The Republican Party must present a vision for the future of America that relies on our conservative values and core principles. It is wrong to believe the voters have suddenly become liberal. They have just lost any sense of confidence that the Republican Party holds the answers to their problems. We must face the fact that our party has failed in recent years to live up to our own principles -- we have failed to be 'solutions oriented' in addressing the concerns of all Americans.

Does Steele have it right? Has his party failed to present "solutions" in recent years? Not really. The Republicans have presented plenty of "solutions," but the voters have not cared for them.

What are the two core principles of the Republican Party? Cutting taxes (to ensure a smaller government) and swinging a big stick when it comes to national security. There's also the social issues, such as opposing abortion rights and gay rights. But those lifestyle issues have often been a second-tier matter for many Republican leaders.

Now look at the George W. Bush presidency and the John McCain campaign. The core issues were tended to by both. Bush pushed tax cuts and started two wars (one of them elective!). How loyal to the core was that? He didn't crusade against abortion rights and gay marriage, but he said the right things (from a social conservative perspective). Sure, government spending did go up on his watch--as did the deficit and the national debt (due to his tax cuts)--but much of that was attributed to increased military spending (another conservative idea) and expanding Medicare benefits. Does Steele and his fellow GOP handwringers believe they can get back to the White House by downsizing the Pentagon and undoing that Medicare expansion?

Bush has ended up an unpopular president because he was both conservative and incompetent. He launched an unnecessary war in Iraq and then mismanaged it. He lost an American city. On economic policies, he was a market-oriented fellow who snorted at regulation. For most of his presidency, his economic policy was essentially tax cuts, tax, cuts, tax cuts--and let the market sort out the rest. That conservative approach didn't work. Now he's a corporate socialist, throwing hundreds of billions of dollars at corporations that screwed up. But he had turned off the public long before making that lurch.

As for John McCain, he, too, ran on core conservative principles. He called for an across-the-board freeze on federal spending. He supported supply-side tax cuts (that he had once opposed). He called for a robust national security posture. And he did what many conservatives do: he accused the Democrats of being tax-and-spend liberals ("socialists," his running mate called them) and claimed the Ds were dangerously weak on national security. On health care, he proposed market-oriented tax credits. He and Sarah Palin opposed abortion rights.

So what was there for a voter seeking Republicans loyal to core conservative principles not to like? McCain was offering lots of solutions. He had his (erratically-derived) proposals for addressing the economic meltdown and housing crisis. He said he had a plan for nabbing Osama bin Laden.

It seems that voters just aren't keen on conservative solutions now. They do not appear to be yearning for a smaller government that does less. Many actually are hoping that the government will take steps to help them and their fellow citizens in these tough (and getting tougher) times. If conservatives are going to claim, as Palin explicitly did, that government is the problem and an obstacle to freedom, they can be credited for sticking to their ideological guns, but they're not likely to put together a governing coalition at this moment.

There certainly have been periods when the conservatives' siren song of lower taxes and less government appealed to many Americans. But it's easier for conservatives to sell those core notions either (a) during not-so-hard times or (b) after a left-of-center administration has messed up. (For the latter, think Jimmy Carter.) In a vacuum, American voters don't crave conservative solutions. For many Americans, ideology is relative. That is, what they want depends on what is happening around them.

So Steele and his comrades are stuck--with a lousy brand (thank you, President Bush) and with core principles that are not in sync with the current market demand. This is not to say that the party is dead. There are no permanent majorities in the United States. If the Democrats botch the job in the next two years, that ol' pendulum could swing back and knock them on their backsides. But for the time being, the Republicans must move beyond this return-to-core-principles line--unless they are content to tread water in a pool of self-delusion.

If Steele truly believes his back-to-the-future rhetoric, Democrats ought to be rooting for him.

Green Energy

| Fri Nov. 14, 2008 2:44 PM EST

GREEN ENERGY....Riffing off a piece by Dave Roberts about gasoline taxes (politically hard and not very effective, he says), Ezra Klein muses about carbon pricing:

There's no doubt that market signals are powerful. But I think there's fair concern over whether they're enough. The next issue of The American Prospect will feature a Nordhaus and Shellenberger piece arguing that liberals have locked themselves into a peculiarly conservative frame in which they presume that the swift deployment of market forces can provide a proportional response to the dangers of carbon emissions, when in fact this is the sort of national threat that calls for a heavier dose of central planning and coordinated efforts.

....I'm not sure where I fall on all this, and it's not clear that investment is in tension with pricing, but as someone versed in the history of health reform, it's not hard to imagine a scenario in which the environmental movement launches a massive campaign for a gas tax or carbon pricing that ends in total failure, and five years later everyone wishes they had seized the moment to fight for huge investment expenditures instead. What Roberts is arguing, in effect, is that the harder thing might well not be better here, and if he's right, that's an important and unintuitive point.

I just wrote a long piece about carbon pricing which will probably appear in the magazine in a few months (lead times are tough in this business), and my frame was "Ten Things You Need to Know about Cap-and-Trade." One of those ten things was "It's not a panacea," and I think that's the right way to think about this. A broad-based carbon pricing regime is almost certainly one of the backbones of an effective energy policy, something that encourages conservation, motivates utilities to switch to green energy sources, and provides a revenue stream for research and investment. That's why it's worth writing about. But just like a human backbone, it's nowhere near enough all by itself. If you want cars to get higher mileage, you can do it a lot more efficiently by increasing CAFE standards. If you want better mass transit, you need direct government action to fund and operate it. If you think carbon eating trees are feasible, then you need a federal R&D program to investigate it, since private industry has no incentive to care about such things.

Still, all that said, price signals work. They aren't the whole answer by a long way, but they work. Raise the price of carbon steadily over the years and it will amplify every other program you put in place. Solar and wind will become more competitive, everyone will be motivated to drive cleaner cars and drive them less, utilities will be motivated to really find out if carbon sequestration is possible, and private industry will have increased incentives to turn basic R&D (from the feds) into actual green energy sources for the real world.

As Dave says, "We need to start thinking at the scale of the problem." It's beyond enormous. We need all this stuff, and the sooner the better.

Chart of the Day Year - 11.14.2008

| Fri Nov. 14, 2008 1:16 PM EST

CHART OF THE DAY YEAR....Consumer spending has fallen off a cliff:

Dragged down by plummeting automobile sales, retail sales fell by a record amount in October, the Commerce Department reported on Friday.

....Sales of cars and auto parts plunged 23.4 percent from last year, the Commerce Department said....Sales of furniture and home-furnishings fell by 13.5 percent compared with 2007, the latest report said, and Americans also spent less money at retailers who sell home electronics, appliances and sporting goods, books and clothes.

The chart below, from Calculated Risk, shows the numbers adjusted for inflation (in blue). Those are the ones that count. Just as it's ridiculous to say that "spending at gasoline stations dropped sharply," as if that's meaningful (people didn't buy less gasoline, after all, they merely benefited from lower prices), it's also ridiculous to claim that overall retail sales were down 4.1% from last year when they were really down nearly 9%. Like it or not, that's a much better indication of how much actual stuff people were buying. (Or not buying, in this case.)

Anyway, Paul Krugman's $600 billion stimulus is looking better all the time. I'm still unsure what to think about an auto industry bailout (though leaning against), but the argument against a broad fiscal stimulus is pretty much nonexistent now. Congress needs to get moving.

Joe the Increasingly Desperate for Attention

| Fri Nov. 14, 2008 12:54 PM EST

Joe the Plumber has a website. Here's the link. There's not a whole lot you can do on it yet. You can get a free "We Are Joe" membership or, for committed JTP fans, a $14.95 "Freedom" membership. You can advance order a copy of Joe's book, which is titled "Fighting for the American Dream." Soon you'll be able to read Joe's blog and use Joe's discussion forum to talk directly to Joe. You can look at pictures of Joe.

I've never been so convinced in my life that someone is planning on running for office. Any Republican who has been building his or her resume over the course of several years with the hopes of someday representing Ohio's 9th district, just put away your power tie or pantsuit now. You're going to get steamrolled in the primary by Joe the Media Darling. See you in 2010, Joe, you living manifestation of the Republican Party's crippling anti-intellectualism!

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A Striped Pants-Suit for Hillary?

| Fri Nov. 14, 2008 12:32 PM EST

A STRIPED PANTS-SUIT FOR HILLARY?....Al Kamen reports today on "increasing chatter" that maybe Barack Obama will offer the position of Secretary of State to Hillary Clinton. In fairness, chatter is what Kamen's column is all about, but still, you have to wonder: what the hell is that supposed to mean? Is this chatter from people who might actually have Obama's ear? Chatter from bored think tankers at cocktail parties? Chatter from the blogosphere? What?

This is really ridiculous. There's exactly zero evidence for Kamen's contention that "healing remaining divisions" is any kind of issue at all within the Democratic Party. As near as I can tell, the party is virtually rapturous these days, Clinton supporters are fully on board with Obama as president, and there's no reason to think Hillary Clinton would want to be Secretary of State even if Obama offered her the job. The whole thing is crazy.

But — psst. You know what I heard? It's not Hillary Clinton he's thinking of at all. It's Bill! Actually, Obama is thinking of co-Secretaries of State: Bill Clinton and Tony Blair! Wouldn't that be great? It would be like teaming up Superman and Spiderman! And you heard it here first. My sources, by the way, are extremely well connected. Honest.

Don Siegelman Update

| Fri Nov. 14, 2008 12:13 PM EST

DON SIEGELMAN UPDATE....Remember the Don Siegelman case? He was the popular Democratic ex-governor of Alabama who was planning to run again in 2006 but was conveniently prosecuited on flimsy corruption charges and thus put out of action. Background here, here, and here.

Today, Time reports that John Conyers, chairman of the House Judiciary Committee, has yet more evidence that Leura Canary, the U.S. Attorney in Alabama who was a major supporter of Siegelman's Republican opponent, remained involved in the case even after she claimed she had recused herself:

Conyers says the evidence raises "serious questions" about the U.S. Attorney in the Siegelman case, who, documents show, continued to involve herself in the politically charged prosecution long after she had publicly withdrawn to avoid an alleged conflict of interest relating to her husband, a top GOP operative and close associate of Bush adviser Karl Rove. Conyers' letter also cites evidence of numerous contacts between jurors and members of the Siegelman prosecution team that were never disclosed to the trial judge or defense counsel.

....The documents — whose authenticity is not in dispute — include e-mails written by Canary, long after her recusal, offering legal advice to subordinates handling the case. At the time Canary wrote the e-mails, her husband — Alabama GOP operative William J. Canary — was a vocal booster of the state's Republican governor, Bob Riley, who had defeated Siegelman for the office and against whom Siegelman was preparing to run again...."A recused United States Attorney should not be providing factual information ... to the team working on the case under recusal," Conyers wrote Mukasey last week.

Will Mukasey do anything about this? Who knows? But if he doesn't, a Democratic replacement just might. Stay tuned.

Wanna Work for Obama? Prepare for a Strip Search

| Fri Nov. 14, 2008 9:58 AM EST

CNN has the scoop on the background check it takes even to be considered for a 'Bama job:

The Obama transition team is sending a seven-page, 63-item questionnaire to every candidate for Cabinet and other high-ranking positions in the incoming administration.

The questions cover everything from information on family members, Facebook pages, blogs and hired help to links to Fannie Mae, Freddie Mac, American International Group and troubled banks as well as lawsuits, gifts, resumes, loans and more.

...It also asks about writings, speeches, testimony, online communications and even personal diaries.

An entire section requests details on any criminal or civil legal action in which the applicant may have been involved. The last question in that 11-item section asks for details on any child support or alimony orders.

In an apparent effort to avoid the problems faced by several nominees in the last two administrations, a block of four questions is devoted to ferreting out details—including the immigration status—of any domestic help the applicant may have hired....

I include these details (follow the link for the full Monty) just to camouflage which, of many, would disqualify me. But I think this one is enough without his henchmen ever getting to that pesky marijuana farm I, or someone who bore a striking resemblance to 'me,' ran. Allegedly.

Four Dams Down...

| Fri Nov. 14, 2008 12:58 AM EST

Wpdms_shdrlfi020l_klamath_river.jpg A tentative agreement has been reached to begin decommissioning four aging dams on the Klamath River—the largest dam-removal project ever undertaken. The agreement marks a major shift in the battle over Klamath water, reports AAAS.

The Klamath flows from southern Oregon through northern California. It's the third most important salmon river in the lower 48 after the Columbia and Sacramento. The dams provide cheap renewable energy and irrigation for farmers but not enough water for salmon. During the 2001 drought, federal officials shut off the irrigation water for the sake of the fish. In 2002, after protests from farmers, they reversed course and shunted flows back to Oregon's potato and alfalfa fields. At least 33,000 salmon died as a result of that decision, in one of the worst salmon kills in US history. In 2007 declining salmon in the Klamath produced a severely curtailed commercial fishing quota. Everyone got burned. Fish worst of all.

According to the new agreement, the dams will come down starting in 2020. Before that, scientists and engineers have to figure out what to do with all the silt accumulated behind them. Loosing the silt into the river's flow will likely suffocate everything downstream. Meanwhile Oregon and California will also use the time until 2020 to raise money to pay for the dam removal. Under the agreement, PacifiCorp customers will pay a 2% surcharge on their utility bills to raise up to $200 million for the dam removal. California is expected to issue general obligation bonds to raise an additional $250 million.