Animal Spirits

Conor Clarke has an interview today with George Akerlof, co-author (with Robert Shiller) of Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. One of the things Akerlof says is this:

What are the implications of your theory for the sort of fiscal policy we should be pursuing?

Well, one of the things is that one of the roles of the government is to offset the animal spirits. So that when animal spirits are high — and people are too trusting and they engage in investment projects that they shouldn't engage in — one of the roles of the government is to offset them. More should have been done to curb the over-exuberance and excesses in the housing market. That's one.

Felix Salmon comments:

This is much bigger than the idea that it's the job of central bankers to identify bubbles and gently deflate them before they get too big. For one thing, it draws no clear distinction between fiscal policy and monetary policy; instead, it looks at the animal spirits of the country as a whole, and tries to keep them on a relatively even keel.

....On an individual level, it's really important to examine one's own biases as pitilessly as possible; on a national level, I see the job of entities such as Paul Volcker's Economic Recovery Advisory Board to be one of gauging the level of animal spirits across the country — something that all central bankers do by nature, which is one reason that Volcker is a good choice to head it.

I am totally on board with this.  In fact, I'm basically on board with nearly any idea that's based on taking away the punch bowl in boom times and spiking it in bad times.

Still, this is not as easy as it sounds, is it?  We would need some kind of Animal Spirits Index to make it work.  And as far as I know, even in retrospect, we don't have one.  Economic expansions always end eventually, but nobody has ever been able to consistently predict ahead of time when things have started to get out of hand.  So while I love the concept, it needs some serious meat on its bones before it can become an actual policy instrument.  Unfortunately, I'm not optimistic that anyone can do that.

Darrell and Arnie

Steve Benen informs me that Rep. Darrell Issa (R–Lemmingstan) has suddenly become concerned over the proper retention of White House emails:

Issa, easily a #2 seed on my bracket for Most Ridiculous Member of Congress competition, also asked the White House to respond to a series of additional questions about the administration's email archiving. He said the answers are due in two weeks.

The irony, of course, is that Issa couldn't care less about an actual scandal regarding White House emailing archiving. Bushies lost untold thousands of emails, with no archive or backups. Indeed, the former president's team deliberately created a "primitive" email system that created a high risk that data would be lost — there was "no automatic system to ensure that e-mails were archived and preserved."

Hmmm.  Only a #2 seed?  I guess the competition is pretty tough in this category.  Here in California, though, I think we'd bump him up to #1.  After all, he was the bright boy who decided it would be cute to use his car alarm fortune to fund a recall of Gray Davis less than a year after he was elected, thereby making Arnold Schwarzenegger governor and turning a dismal economic mess into a complete catastrophe.  No Darrell, no Arnold.  That's his legacy to the Golden State.

The Center on Budget and Policy Priorities, a left-leaning economic think tank, has a little-covered idea that it argues must be incorporated into a comprehensive climate change bill. "Even a modest 15 percent reduction in greenhouse-gas emissions would cost the poorest fifth of Americans an average of $750 a year per household," it says. "These households have average annual incomes of only about $13,000." To make sure that our transition to a new energy economy doesn't place unreasonable burdens on the country's most vulnerable families, CBPP is proposing a "climate rebate" that, for the very low-income, could be rolled into the Electronic Benefit Transfer (EBT) systems that currently distribute food stamps and other forms of financial assistance. For moderate-income working families, "climate rebates" could be incorporated into a tax credit. Here's CBPP's pitch:

Policies that restrict greenhouse gas emissions will significantly raise the price of fossil-fuel energy products — from home energy and gasoline to food and other goods and services with significant energy inputs. Such policies are necessary to encourage energy efficiency and greater use of clean energy sources. They will, however, cut into consumers’ budgets.

Low-income consumers are the most vulnerable because they spend a larger share of their budgets on necessities like energy than do better-off consumers. They also are the people least able to afford purchases of new, more energy-efficient automobiles, heating systems, and appliances. Protecting low-income consumers therefore should be the top priority of the consumer relief provisions included in climate change legislation.  The Center on Budget and Policy Priorities has designed a "climate rebate" that would efficiently offset the average impact of higher energy-related prices on low-income households. The rebates would be funded with revenues raised by climate change legislation, most likely from the auctioning of emissions allowances under a cap-and-trade system.

Such a rebate would ensure that the burdens of fighting climate change and ending our dependence on fossil fuels would be borne by the wealthy and upper-middle class, which doesn't necessarily match Obama's campaign rhetoric on the issue, which emphasized shared sacrifice. But in a recession that is threatening to turn into a depression, maybe that isn't such a bad thing.

Whoever booked this show is playing with fire. Don't they understand that even if it's for a good cause, like War Child's 15th anniversary, putting Chris Martin, Brandon Flowers and Bono all on the same stage could cause a horrifically destructive chain reaction, as their gigantic egos compete for the limited photons, ultimately exploding in a massive wave of highly-charged self-importance particles? Coldplay had just lost every Brit award they were nominated for in London on Wednesday night, so the be-tassled Martin was extra mopey as the band made their way over to the O2 arena for the charity event. Perhaps this meant his ego was "in check" enough to make room for the Killers and U2 frontmen (as well as Snow Patrol Take That's Gary Barlow, whose ego size has not yet been determined). But here's another baffling thing: despite the long list of quality songs between those four bands, what did this supergroup decide to perform? The Killers' bombastic, overwrought "All These Things That I've Done." (Watch above). Yeech! HuffPo calls it "The Best Encore Ever," but even if you're a fan of these blowhards, shouldn't this be "The Biggest Missed Opportunity Ever"?

Earmarks

CQ reports on the latest earmark scandal:

More than 100 House members secured earmarks in a major spending bill for clients of a single lobbying firm — The PMA Group — known for its close ties to John P. Murtha , the congressman in charge of Pentagon appropriations.

....PMA’s offices have been raided, and the firm closed its political action committee last week amid reports that the FBI is investigating possibly illegal campaign contributions to Murtha and other lawmakers.

No matter what the outcome of the federal investigation, PMA’s earmark success illustrates how a well-connected lobbying firm operates on Capitol Hill. And earmark accountability rules imposed by the Democrats in 2007 make it possible to see how extensively PMA worked the Hill for its clients.

Now that's how the game is played: 100 congressmen, $300 million in spending, and $1 million in campaign contributions.  And it might even be illegal!  Or not.  But while we're waiting to find out, click here if you're curious to see if your congress critter was involved.

UPDATE: Stuart Staniford, who obviously has way too much time on his hands, sends along a scattergram of earmarks vs. campaign contributions that demonstrates the difference between Democratic and Republican corruption: "Republicans apparently do this stuff pretty much for a small flat fee (on average) but Democrats need to be paid about 1/2 cent on the dollar."  Coincidence?  Science says no!

Bipartisanship

Mike Tomasky defends Barack Obama's efforts to reach out to Republicans:

The standard criticism of Obama's bipartisan outreach goes like this. He met with Republicans on Capitol Hill. They stiffed him. They showed that they're impossibly troglodytic. Why should he waste any more time on these people? Just crush them.

But here's the thing. This criticism, and this entire debate about the efficacy of his bipartisan overtures, presumes that Obama's audience for his bipartisan talk is the Republicans in Congress and the conservatives in Washington.

But that is not his intended audience. His audience is the country.

True, he went to see congressional Republicans in an attempt to fire up the peace pipe. Well, as Barry Goldwater famously said, you have to go to hunting where the ducks are. But I think that even those meetings were conducted only partially for the benefit of those Republicans. They were conducted for citizens, so they could see that he was trying something different.

This is a good point, but frankly, I'd go further.  I'd say those meetings were almost entirely about optics.  The fact is that Republican critics are right: Obama really didn't do much beyond symbolism to reach out to the GOP during the crafting of the stimulus package.

I know, I know: $300 billion in tax cuts, lots of yakking, family planning cuts, etc. etc.  But seriously.  Was any of that really the result of negotiating with Republicans?  The tax cuts were mostly in there for two reasons: (a) they were campaign promises, and (b) the Obama team couldn't come up with $800 billion in spending that would feed into the economy fast enough.  Tax cuts weren't there because Obama asked Republicans what they wanted in the bill, they were there because he didn't have much choice.

Beyond that, what did Republicans get?  Nothing much.  A few symbolic cuts in culture war outlays that are almost certain to be restored in the regular budget anyway.  Some meetings where Obama listened carefully, said some soothing words, and didn't change a thing.  And that's about it.  In the end the final package included some modest changes demanded by three centrist Republicans, but that was only because they held the whip hand and were able to force them on him.  Bipartisanship had nothing to do with it.

And you know what? I think this is fine.  The crackpot wing of the GOP was never going to come around anyway (they're going to need several more years in the wilderness before they start to regain their sanity), and in the meantime Obama gets to bask in warm national glow of having tried his best.  Eventually this will pay off as a few vulnerable Republicans figure out that endless obstructionism isn't doing them any good in the polls — and look over there, there's a midterm election coming up!  Then, suddenly, genuine bipartisanship will be back in style.  And Obama will end up the winner.

I think time is short for Roland. Especially considering these newest revelations:

The names of lobbying clients that Sen. Roland W. Burris declared to a state legislative panel do not match those on records he filed over the last decade with Illinois and Chicago agencies, a CQ analysis of the records has found.

The discovery comes as Burris, an Illinois Democrat, is fending off calls for his resignation for failing to fully explain his dealings with impeached former Gov. Rod Blagojevich, who appointed him to succeed President Obama. The Senate Ethics Committee also is looking into discrepancies in his statements to the Illinois House Impeachment Committee.

...records with the secretary of state show Burris representing the Council of Independent Tobacco Manufacturers of America from 2003 to 2005 and the Illinois Association of Mortgage Brokers in 2007. But those clients don’t appear in his filing with the Impeachment Committee.

Dick Durbin, Burris' fellow senator from Illinois, who happens to be the number two Democrat in the Senate and a close friend of the president's, said that Burris' bumbling answers to the questions about his relationship with Rod Blagojevich raised "serious questions." With new scandals about his lobbying background piled on top of those problems, I'd be stunned if he remains.

The stimulus package is an environmental boon, the EPA will probably regulate carbon, and Sen. Harry Reid wants to take a green pen to the Energy Bill. It looks like the best week in years for environmentalists--until, that is, you step out of the Beltway. To help close massive budget deficits, states across the country are weakening environmental rules.

Exhibit A is California, where today legislators closed a $41 billion budget gap in part by nixing air pollution rules that would have cost the housing industry millions. The measure delays requirements for builders to retrofit diesel construction equipment, slashing by 17 percent the emissions savings that the state had hoped to achieve by 2014. The move will probably prevent Los Angeles, the San Joaquin Valley, and other highly polluted regions from meeting federal air quality deadlines. It will also reduce the "green jobs" the state had hoped to create by retrofitting old equipment. The Sierra Club's California director told the LA Times: "With the magnitude of the forces at play here, the environmental issues have taken a back seat to taxes."

California's move follows on the heels of other states. In Oklahoma:
State agencies that protect public water supplies, manage the state's flood plains and protect Oklahomans from the dangers of hazardous waste would bear some of the biggest cuts under Gov. Brad Henry's proposed state budget for the upcoming year.
The Oklahoma Department of Environmental Quality, which monitors the state's air and water quality as well as solid, hazardous and low-level radioactive waste, lost almost $2 million in appropriations from its current $9.7 million budget, a reduction of 20 percent.

The Oklahoma Water Resources Board, responsible for setting water quality standards, enforcing dam safety regulations and managing Oklahoma's flood plains, lost more than $1.1 million from its $4.6 million budget, a 25 percent reduction.
And that's not all: Pennsylvania's proposed budget reduces funding for three state environmental agencies by 1.5 to 9 percent. The state of  Washington's panel that tracks pesticide exposure was axed. And the budget for New York State's Environmental Protection Fund, which buys open space, parks, and clean water projects, is being slashed from $300 million to $205 million.

As things get worse, Republican state legislators are likely to push for even deeper cuts. After all, enviro regs cost businesses money and slow down "shovel ready" projects. In Florida yesterday the St. Petersburg Times reported:

Florida legislative leaders want to make it easier to get permits to destroy wetlands, tap the water supply and wipe out endangered species habitat, all in the interest of building houses, stores and offices.

They say streamlining the permitting process will get the economy moving again.
All of this should be a sobering counterpoint to optimism about the stimulus bill and the new green tone in Washington. Without more direct aid to cash-strapped states, it will be hard to fix things faster than the provinces burn through the green.

Kurdistan

The recent provincial elections in Iraq excluded the four provinces of Kurdistan but did include the mixed border province of Nineveh, which was won by Al Hadbaa, an Arab nationalist party. McClatchy's Leila Fadel reports:

Along a 300-mile strip of disputed territory that stretches across northern Iraq [] the elections have rekindled the longstanding hostility between Sunni Muslim Arabs and Sunni Kurds, and there are growing fears that war could erupt.

....Because Iraqi Prime Minister Nouri al Maliki ran on a strong central government platform and America's restraining influence will wane as U.S. troops draw down during the next three years, there may be nothing to stop a Kurdish-Arab war.

"They will actually try to draw a new green line," said Joost Hiltermann, the deputy program director for the Middle East and North Africa at the International Crisis Group. "Kurds have been strong since 2003, and now they're not as strong and they've somewhat overreached. The question is: Are they going to concede some things or are they going to fight over this?"

"Violence could happen for sure," Hiltermann said. "Eventually, the strongest is going to win. The question is, who is the strongest? The Kurds have pushed the bridge too far, and they don't have the power to realize it."

The good news, I suppose, is that a Kurdish-Arab war has been right around the corner for years, but it never happens.  So maybe it won't this time either.  But this is still the soft underbelly of Iraqi federalism and worth keeping an eye on.

He's only been out of office a month, but already the public is clamoring to see George W. Bush—Will Ferrell as Bush, that is.

In the Broadway show You're Welcome America. One Final Night with George W. Bush, Ferrell reprises his popular SNL impression of Dubya. And while few have made pilgrimages to see the real 43 at his Texas digs, Ferrell's lampooning has already drummed up $5 million in advance sales.

Critics are calling the show—which opened early this month and will run through mid-March—fun, if predictable. Notes The Guardian: "It does not induce surprise or provoke new debate...(but) it does offer a perfectly competent performance; rather more than you could say of its subject."

Is it too much to hope that Tina Fey/Sarah Palin will be next?