Kevin Drum - November 2008

Friday Cat Blogging - 14 November 2008

| Fri Nov. 14, 2008 4:19 PM EST

FRIDAY CATBLOGGING....A couple of weeks ago I mentioned that my mother had procured a new kitten from a local shelter. She named her Lily, and keeps her inside the house. A couple of days ago, though, she looked outside and Lily was under the car in the driveway. But how did she get there? Cat teleportation?

No. My mother opened the door and the cat under the car zipped into the house, ran into her arms, and started purring. But it wasn't Lily at all. It was a clone.

Then, a couple of hours later, there was some meowing at the front door. So my mother opened the door and discovered an orange kitten, who zipped inside and started purring.

Perhaps you can guess the rest of this story? There's no telling where they came from, but these two are obviously littermates, obviously friendly and accustomed to living with people, and took over my mother's house within minutes. Right now they show no signs of going away, so Mom has bowed to the inevitable. The black-and-white one is named Ditto, and the orange one is named Tillamook. On Thursday night all four of her cats slept in the bed with her. "I woke up kind of sleepy," she told me. Today, the new kittens are tearing around the house, knocking things over, and fighting my mother for every scrap of food she tries to eat. Things are getting lively in Garden Grove these days.

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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.

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.

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.

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.

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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.

Spam

| Thu Nov. 13, 2008 5:56 PM EST

SPAM....Wow. One spam host got taken offline Tuesday and the worldwide volume of spam dropped by two-thirds:

The volume of junk e-mail sent worldwide dropped drastically today after a Web hosting firm identified by the computer security community as a major host of organizations allegedy engaged in spam activity was taken offline, according to security firms that monitor spam distribution online.

....The servers are operated by McColo Corp., which these experts say has emerged as a major U.S. hosting service for international firms and syndicates that are involved in everything from the remote management of millions of compromised computers to the sale of counterfeit pharmaceuticals and designer goods, fake security products and child pornography via email....Immediately after McColo was unplugged, security companies charted a precipitous drop in spam volumes worldwide. E-mail security firm IronPort said spam levels fell by roughly 66 percent as of Tuesday evening.

I suppose the spam purveyors of the world will find another host before long, but still. One server farm was responsible for more than half the spam traffic in the entire world? Wow again.

Dingell Defeats Waxman

| Thu Nov. 13, 2008 5:25 PM EST

DINGELL DEFEATS WAXMAN... Tim Fernholz of the Prospect has some sad news:

At least two people who would know (blind quotes suck but that's the way of the world) don't expect the Waxman challenge to Dingell at the Energy committee to get anywhere, in part because the last two classes of new representatives are more conservative on the whole than other members and will support the incumbent. The leadership hopes that it won't come to a vote, because Waxman, who is more closely identified with Pelosi (who isn't taking a position on the challenge) will drop out when he realizes he doesn't have the votes.

Dingell, who has been in the House for over 50 years, is a caretaker of Detroit's interests and an impediment to bold action on climate change. It's a shame that he'll be chair of the Committee on Energy and Commerce during the Obama Administration.

You would think that as the House gets more and more Democratic, liberal priorities would get a stronger hearing. But every blue district in the country is already held by a Democrat. At this point, the DCCC is using conservative and moderate Democratic challengers to pick off seats in red areas. The paradoxical effect is that as the Democratic caucus grows more powerful, it also grows more conservative.

Dingell claims that he deserves the chairmanship because of his deep knowledge of and connections to the auto industry. But all Dingell has done with that knowledge/those connections is stand by and watch as the industry has driven itself into the ground. In fact, Dingell held the industry's hand the whole way. I'm not sure why he demands such respect, nor why anyone should consider his supposed qualifications as valid any longer.

Financial Meltdown Blogging

| Thu Nov. 13, 2008 3:12 PM EST

FINANCIAL MELTDOWN BLOGGING....Hi there. Kevin here. Turns out the jury room here in the Orange County Superior Court has free WiFi and plenty of desks and carrels to work at. Hooray! So, since my number hasn't been called yet, here's some miscellaneous financial meltdown blogging for you. Today, Atrios says:

I think it's important to keep in mind the fact that this looming economic disaster was preventable. The Wise Old Men of Washington and Wall Street have fucked everything up due to a combination of greed and and adherence to ideology regardless of what the facts are. There were many moments in the past few years when something could have been done to at least minimize the problems, and at every step they've done the wrong thing.

No argument on the greed and ideology front, but I'm curious: was there really anyone who made the right call on all this at a policy level? There were, of course, plenty of people who recognized the housing bubble for the idiocy that it was (Alan Greenspan notably not one of them), but were there any major voices making specific policy proposals to slow down the bubble? Or rein in the mortgage market? Or regulate the CDO/CDS market in a way that would have prevented some of the damage? I'm talking specifics here, not just general observations that the FIRE sector was out of control. Arguments about interest rates being too low count, if they were made for the right reason, but I'm interested mainly in more detailed recommendations.

I don't have any big point to make here. I'm genuinely curious. There were many moments in the past few years when perhaps something could have been done, but what? And who was proposing serious measures that would have helped? Any major Dems? Economic pundits? Wall Street mucky mucks? Who were the unsung heroes? Help me out here.

By the way, I'm typing this on the netbook I bought yesterday, an MSI Wind U100. About 400 bucks, the size of a trade paperback, decent keyboard (slightly smaller than full size), good battery life, readable 10" screen, and — annoyingly but not surprisingly — it outperforms my desktop PC in almost every way. So far, the only drawback is that the touchpad is maddeningly sensitive, but hopefully I'll eventually figure out a way to tweak that. More later after I've used it more.