Blogs

Ho Ho Ho

| Wed Jan. 14, 2009 12:11 PM EST

HO HO HO....December sales, as expected, were pretty miserable:

Retail sales tumbled by 2.7% last month from the previous month on a seasonally adjusted basis, the Commerce Department said Wednesday.

....The producer price index, due for release Thursday, is expected to show a 2% drop in prices. Consumer prices due out Friday are expected to have declined 0.8%.

Adjusted for inflation, then, sales were down only 1.9% I'd do better if I could, but that's about the most positive spin I can come up with.

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Strawman Watch

| Wed Jan. 14, 2009 12:00 PM EST

STRAWMAN WATCH....Mickey Kaus thinks economic growth and tight labor markets are the key to low-end wage growth. Unions aren't. I disagree, and a few days ago wondered how Mickey proposed to get to his paradise of endless economic growth anyway. Today he responds:

And Drum has a plan for "low-end wage growth" that doesn't involve restoring the economy? Good luck with that. There's a double Nobel waiting for him, I guess. A triple Nobel if he can boost wages at the bottom while simultaneously letting in millions of unskilled low-wage immigrants. ... P.S.: Drum seems to be explicitly embracing "pie-slicing" — redistributing shares of a non-growing economy — as an alternative to "pie enlargement." Nothing, at first glance, so terribly wrong with that. But can Drum point to a period in modern American history when low-end wages grew without an expanding economy?

Is this supposed to be serious? For the record: yes, of course I support economic growth. Of course it's a precondition for low-end wage growth. I've never even hinted at anything so idiotic as "redistributing shares of a non-growing economy." But we've had economic growth for most of the past three decades and it hasn't been enough to boost median wages more than a smidge. It's pretty obvious by now that we need more than just economic growth to get median (and low-end) wages growing again, and I think greater union density (it's currently less than 10% in the private sector) is probably part of the answer.

As for reducing the influx of low-wage immigrants, I'm fine with that. I always have been — though I have different ideas about how to get there than Mickey. Still, the evidence suggests that this will have only a tiny effect on low-end wages. We're going to need a better plan than just building a fence along the southern border.

Judge to Bush Administration: Preserve Your Emails

| Wed Jan. 14, 2009 11:50 AM EST

In its final week in office, the Bush administration might have some serious work to do: recovering millions of emails. For over a year, the administration has battled a lawsuit by two Washington-based watchdog groups seeking to force the White House to locate unaccounted for internal emails, and on Wednesday morning a federal judge issued a last minute preservation order [PDF].

In full, it reads:

The Executive Office of the President ("EOP") shall: (1) search the workstations, and any .PST files located therein, of any individuals who were employed between March 2003 and October 2005, and to collect and preserve all e-mails sent or received between March 2003 and October 2005 and (2) issue a preservation notice to its employees directing them to surrender any media in their possession–irrespective of the intent with which it was created–that may contain e-mails sent or received between March 2003 and October 2005, and for EOP to collect and preserve all such media.

This is a major assignment for the Bush administration, which has to date been tight-lipped about what it has or has not been doing to preserve its emails for post-administration archiving. "The EOP [Executive Office of the President] is going to have to go to each of the workstations and find PST files and save them," says Meredith Fuchs, one of the lawyers representing the National Security Archive in the case. "It also means all of the EOP employees who may have used CDs, DVDs, external hard drives, zip drives, memory sticks, etcetera, to save emails are going to now have to turn them over before they leave."

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

| Wed Jan. 14, 2009 11:31 AM 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:

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

| Wed Jan. 14, 2009 10:53 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 1:43 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.

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Yet More Bailout

| Wed Jan. 14, 2009 1:08 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 12:27 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 8:12 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!

Tuesday Tree Blogging

| Tue Jan. 13, 2009 7:35 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.