Kevin Drum - October 2008

Quote of the Day #2 - 10.29.08

| Wed Oct. 29, 2008 2:59 PM PDT

QUOTE OF THE DAY #2....From George Newman, arguing that it's the prospect of a Barack Obama victory next week that's caused the stock market to collapse and the economy to go into recession:

Have you thought of how a Treasury Secretary George Soros would engineer the double taxation of the multinationals' world-wide profits, and what this would mean for investors (to say nothing of full-scale industrial flight from the U.S.)? The market now has.

Have you thought of how an Attorney General Charles J. Ogletree would champion a trillion-dollar reparations-for-slavery project (whittled down, to be fair, to a mere $800-billion, over-10-years compromise), and what this would do to the economy? The market now has.

....Have you thought of how a Health and Human Services Secretary Hillary Clinton would fix drug prices (generously allowing 10% over the cost of raw materials), and what this would do to the financial health of the pharmaceutical industry (not to mention the nondiscovery of lifesaving drugs)? The market now has.

This is from — of course — the Wall Street Journal editorial page. But will even their loyal readers swallow something this inane?

Via Brad DeLong.

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Obama's Lead

| Wed Oct. 29, 2008 12:57 PM PDT

OBAMA'S LEAD....I notice that a number of liberal pundits are starting to worry in public that maybe John McCain is making up some ground and that maybe, just maybe, he could end up pulling ahead by election day. And sure, anything is possible. But I suspect that this growing fear is due in large part to the fact that, even now, a lot of people really aren't quite sure why Obama is winning.

That includes plenty of conservatives, too, who are practically insane with frustration over what's going on. After all, they've pulled out all the usual stops. They've called Obama a traitor, a radical, an appeaser, a terrorist lover, an Israel hater, and a socialist. And that stuff usually does the trick. So what's wrong this time?

Obama himself is part of it. He's been pretty unflappable and, like FDR, uses humor and mockery effectively to deflect a lot of the fever swamp stuff. His campaign is part of it too. It helps a lot when your response includes not just humor and mockery, but four TV ads to every one of McCain's.

And then there's the X factor: for some reason, the public just isn't buying the old swill this year. Is it because of the economy? Because they're tired of Republicans? Because they think Obama is The One? Who knows? And because we don't really, truly know, we're afraid that maybe if McCain finds just the right pitch, just the right attack line, just the right dodge, the whole thing could come crashing down and the public will, once again, start buying the old swill after all.

But I think that's exactly the wrong way to look at it. If it were just personality, maybe picking Sarah Palin as his running mate really would have turned things around. If it were just ads, maybe a better ad from McCain might do the trick. But if the real problem is that public opinion has turned against modern, GOP-style conservatism in a big way — and that really does seem to be the case — then Obama has the strongest possible kind of lead. Like Adam Smith's invisible hand, it may seem mysterious, but it's no less powerful for all that.

North Carolina Watch

| Wed Oct. 29, 2008 12:01 PM PDT

NORTH CAROLINA WATCH....Liddy Dole airs an ad against Kay Hagan accusing her of being a pagan:

"Godless Americans and Kay Hagan. She hid from cameras. Took godless money," the ad concludes. "What did Kay Hagan promise in return?"

This is like a spoof from Saturday Night Live or something. Godless money? Is the Republican Party really this bound and determined to give up what small shreds of credibility they still have left?

Watching this campaign has been sort of like watching The Office. (The Gervais version, anyway.) It's sort of excruciating, and you keep wanting to turn your head away in embarrassment, but you're mesmerized despite it all and you keep watching. And after each episode you think they really can't top that. But then they do.

Less than a week to go, though. It's longer than The Office, but the campaign still has to end eventually.

Media Bias Explained....Finally

| Wed Oct. 29, 2008 11:33 AM PDT

MEDIA BIAS EXPLAINED....FINALLY....You may have noticed that conservatives have gone absolutely ga-ga over the idea that the media has been not just biased against them during this campaign cycle, but virtually bought-and-paid-for chattel of the Obama '08 campaign. "The national media has become a feminized, electronic vote-for-Obama nagging machine," says Dan Perrin. "Will the Obamedia cover that?" sneers Andy McCarthy about the cost of Obama's plane trip to visit his dying grandmother. (Seriously.) "Michael S. Malone at ABC beautifully, if tragically, with shame, reports on the 'get-a-room' performance of the national media in this presidential election year," says Jules Crittendon.

Michael Malone? The right-wing tech writer? Yep. Malone, it turns out, has the usual litany of complaints: Why isn't the press interviewing Obama's drug dealer? Why aren't they staking out Bill Ayers' home? What's up with Joe the Plumber? Etc. Kinda tedious. But if you make it to the end, there's comedy gold when he finally explains why the media is so in the tank for Obama. The reason, it turns out, is because the press is run by a bunch of fifty-somethings working in a dying industry:

In other words, you are facing career catastrophe — and desperate times call for desperate measures. Even if you have to risk everything on a single Hail Mary play. Even if you have to compromise the principles that got you here. After all, newspapers and network news are doomed anyway — all that counts is keeping them on life support until you can retire.

And then the opportunity presents itself — an attractive young candidate whose politics likely matches yours, but more important, he offers the prospect of a transformed Washington with the power to fix everything that has gone wrong in your career.

With luck, this monolithic, single-party government will crush the alternative media via a revived fairness doctrine, re-invigorate unions by getting rid of secret votes, and just maybe be beholden to people like you in the traditional media for getting it there.

That's the answer! It's not reporters who are the real problem, it's a cabal of middle age editors who are desperately trying to elect a president who will pay them back for their support by destroying blogs and rejuvenating the Newspaper Guild. Seriously. That's his theory. And, of course, it was worth a link from Instapundit.

But the big question is: how did he find out? Who leaked? Whoever it is, we need to find the bastard and make him pay. This could ruin everything.

Spreading the Wealth

| Wed Oct. 29, 2008 10:40 AM PDT

SPREADING THE WEALTH....It seems as if shortly before every election someone starts pushing a story about how congressional Democrats are being stingy in sharing their personal warchests for the common good. Tom Edsall has this year's version:

While sitting on more than $100 million in donations and most facing no contest this year, the Senate's 51 Democrats have given the party's key Senatorial Campaign Committee, the DSCC — headed by Chuck Schumer (D-NY) this year — $11.3 million, or just over $220,000 apiece on average.

....New York Senator Hillary Clinton, who is not up for election until 2012 and who has $6.68 million cash on hand, gave a total of $115,000 to the DSCC. Indiana's Evan Bayh, who has $11.3 million on hand and is up in 2010, gave $15,000. Barbara Boxer who has an even $4 million in the bank in preparation for her re-election bid in 2010, donated $30,000.

Come on, fat cat senators. Spread the wealth! Wouldn't it make your collective day to kick Mitch McConnell out of the Senate?

Quote of the Day - 10.29.08

| Wed Oct. 29, 2008 10:23 AM PDT

QUOTE OF THE DAY....From flat-taxer Andrew Sullivan, coming around to the idea that maybe progressive taxation is OK after all:

We have seen a massive shift in income inequality in the last couple of decades. Over time, that inequality can destabilize a democracy. It removes many from income tax altogether, it concentrates wealth in too few hands who can use it to corrupt the political system, and it leads to an oligarchy susceptible to populist onslaught (hello, Mr Dobbs). Aristotle's advice that polities should be concerned about the strength of the middle class, and that no democracy can long endure without one, is well worth absorbing.

A reader emailed me about this with understandable annoyance ("I give him two weeks before he quotes himself as coming up with this whole idea"), but I say: welcome to the party. Sure, Andrew's probably only saying this because he's currently in defend-Obama-at-all-costs mode, but still, Aristotle was right:

Those who have too much of the goods of fortune, strength, wealth, friends, and the like, are neither willing nor able to submit to authority....On the other hand, the very poor, who are in the opposite extreme, are too degraded....Thus arises a city, not of freemen, but of masters and slaves, the one despising, the other envying; and nothing can be more fatal to friendship and good fellowship in states than this: for good fellowship springs from friendship; when men are at enmity with one another, they would rather not even share the same path. But a city ought to be composed, as far as possible, of equals and similars; and these are generally the middle classes.

....Thus it is manifest that the best political community is formed by citizens of the middle class, and that those states are likely to be well-administered in which the middle class is large, and stronger if possible than both the other classes, or at any rate than either singly; for the addition of the middle class turns the scale, and prevents either of the extremes from being dominant. Great then is the good fortune of a state in which the citizens have a moderate and sufficient property; for where some possess much, and the others nothing, there may arise an extreme democracy, or a pure oligarchy; or a tyranny may grow out of either extreme — either out of the most rampant democracy, or out of an oligarchy; but it is not so likely to arise out of the middle constitutions and those akin to them.

You'd think that if Aristotle could figure this out 2,300 years ago, modern conservatives could figure it out too. Maybe soon they will.

UPDATE: From comments: "Aristotle was a damn Socialist! How come you don't have a counter-point from Hermias the Plumber?" Indeed.

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Arnie's Taxes

| Wed Oct. 29, 2008 9:48 AM PDT

ARNIE'S TAXES....California Governor Arnold Schwarzenegger yesterday warned schools to expect huge budget cuts this year:

The news, delivered in a conference room outside the governor's office, came as a shock to the educators, who were told to prepare for immediate cuts in the range of $2 billion to $4 billion.

....Analysts say early data indicate that the state budget — passed only a month ago — has fallen about $10 billion into the red. A deficit that size represents nearly 10% of all general fund spending.

....School officials say the governor is focused on the sales tax because it is one of the few available sources of new revenue that would create immediate cash. Other potential tax hikes, such as increased income taxes for the wealthy, would not boost state coffers for more than a year, when taxpayers begin to file under the new rates.

Golly, governor, California already has the highest state sales tax in the country, but I can think of at least one other broad-based revenue source that could be brought on line fairly quickly: an increase in the vehicle license fee that returns it to the same rate California had for virtually its entire history — had, that is, until you demagogued your way into office on a platform of slashing it by two-thirds and stopping all that "crazy deficit spending," a promise that you broke almost instantly when you asked the voters to replace the lost revenue with heavy borrowing in the middle of our last budget crisis. Increasing the VLF back to its historical 2% rate would bring in about $5 billion or so and could be enacted right away. How about it?

POSTSCRIPT: Yes, I'm still bitter about this. Very, very bitter. Can you tell?

Obama's Agenda

| Wed Oct. 29, 2008 9:06 AM PDT

OBAMA'S AGENDA....Matt Ygelsias thinks Barack Obama is more activist than some people give him credit for:

Every time I read Ezra Klein pooh-pooing Barack Obama's domestic agenda, I feel a bit baffled. He's running on a platform that promises universal preschool, dramatic cuts in carbon emissions and investments in clean energy infrastructure, health insurance that would be affordable for all, comprehensive immigration reform, substantial labor law reform, large new spending on K-12 initiatives, and tax reform to make the federal code much more progressive overall.

I think that's a fair point. I'd say that his positions on tax reform (where the public face is primarily an endlessly repeated promise to cut taxes for almost everyone) and immigration reform (which hasn't gotten much public play at all) have been decidedly understated, but Obama has pretty clearly put himself on the side of big, important reforms in the areas of energy, healthcare and union organizing. (I'm a little less sure about education, where I feel like I sometimes get mixed signals about how big a priority this is with him. But that might just be the luck of the draw in which ads and speeches I happen to have seen.) He's also committed to withdrawal from Iraq, and so far at least, he hasn't backed away from that.

No question then: if Obama manages to get out of Iraq and pass significant legislation in the areas of healthcare and energy, and nothing more, that would make his first term wildly successful. If he also adds some serious labor law reform and financial market regulation to the mix, progressives ought to be pretty delirious by 2012.

The only question is, will he do it? The foundations all seem to be there (majorities in Congress, a viable electoral coalition, and a public seemingly open to change), but Obama's past history, both in the Illinois Senate and the U.S. Senate, is clearly one of caution and tactical compromise. In my case, then, my doubts lie not in whether he has the right policy instincts, but in whether he's got the temperament to seize the moment, stick to his guns, force recalcitrant committee heads to follow his lead, and get a big agenda passed. I sure hope so, but I think that's the big question mark, not whether he's campaigning on the right set of priorities.

The Cost of the Crisis

| Tue Oct. 28, 2008 11:51 PM PDT

THE COST OF THE CRISIS....The latest international bailout news:

Hungary has been granted a multi-billion dollar rescue package by the IMF, the EU and the World Bank. The deal, worth $25bn (£15.6bn;19.6 euro), is intended to help Hungary cope with the ongoing effects of the world financial crisis.

Given the numbers that we've all gotten used to lately, I know this doesn't like all that much. But it's over 10% of Hungary's GDP. Meanwhile, BBC Business Editor Robert Peston estimates that taxpayers around the globe have spent (so far!) about $8 trillion to shore up the world's banks. That's more than 10% of total global GDP.

Given that, it seems likely that when it's all said and done, the U.S. is also going to spend 10% of GDP or more to bail out the financial industry here. That would be somewhere in the neighborhood of $1.5-2 trillion — double or triple what we've allocated so far. That fits the data I presented a couple of weeks ago, and it's also about what Paul Krugman thinks is possible. Buckle up.

Chart of the Day - 10.28.2008

| Tue Oct. 28, 2008 7:50 PM PDT

CHART OF THE DAY....Newspaper accounts of housing prices usually provide year-to-year comparisons, which are useful for some purposes but not for others. In particular, if house prices start to stabilize, you won't see it in the year-to-year charts because prices will still be way below their level from a year ago even if they aren't dropping any further. "21% below their peak" doesn't really tell you much about what's happening now.

For that, you want to see how prices compare to the previous month. Back in August I posted a Case-Shiller chart showing monthly comparisons (through June) that suggested prices might be stabilizing, but with a caveat that this stuff is seasonal and the good news might not hold up. Sure enough, it hasn't. Here is this month's chart (with prices through August), and it shows that month-to-month prices are not only still declining, but declining faster than they were earlier in the summer.

The rate of decline is still nowhere near its nadir in February, but this is yet more evidence that we still have a ways to go before housing prices bottom out. And people know it: this month the consumer confidence index fell to 38.0, lower than during the 1974 recession, lower than during the 1980 recession, lower than ever recorded before. And credit card companies are "sharply curtailing" credit lines. And to top it all off, we're running up an "ecological debt" of $4 trillion per year.

But the stock market is up! Why? Apparently because investors are looking forward to the Fed cutting interest rates tomorrow. Sure, the Fed is only contemplating this because the signs of recession are so bleak, and it's unlikely that interest rate cuts will have much of an effect anyway, but who ever said Wall Street investors were smart?