Kevin Drum - November 2008

Car Tax Update

| Thu Nov. 20, 2008 7:49 PM PST

CAR TAX UPDATE....I see that the California legislature is thinking of taking my advice and raising the vehicle license fee back to the same rate (2% of assessed value) that we had for most of our history:

The plan creates a potential political quandary for Gov. Arnold Schwarzenegger. The last governor to triple the vehicle license fee was his predecessor, Gray Davis, and it played a large role in his recall. In his first act in office, Schwarzenegger cut the fee back down to its current rate.

Yeah, that's a quandary all right. Poor Arnold.

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Apple Woes

| Thu Nov. 20, 2008 7:22 PM PST

APPLE WOES....So remember how you guys were all over me for years about how bad PCs sucked and how I should get a Mac to solve all my problems etc. etc.? And so I finally got one a few months ago, and it worked fine. (Not really any better than a PC, to be honest, but it was fine.) Remember all that?

Well, guess what? I haven't used my MacBook for a couple of months, but I pulled it out the other day and discovered that Macs don't hibernate in order to extend battery life. They just go into standby mode when you close the lid, and then hibernate right before the battery goes completely dead. So of course my battery was completely dead. No big deal, though: I just plugged in the charger and went away for a few hours.

And nothing happened. The notebook no longer recognizes the battery and declines to charge it even a tiny bit. Reinstalled the battery, but that didn't do any good. So now what? Take it into an Apple store and find out what's wrong, I guess. What a pain. Why can't Apple make decent hardware, anyway?

Blog Bleg

| Thu Nov. 20, 2008 1:36 PM PST

BLOG BLEG....I need more blogs to read. Who do you recommend? All subject areas and political affiliations welcome as long as they have interesting things to say. Leave your top picks in comments.

More CDS Chatter

| Thu Nov. 20, 2008 12:33 PM PST

MORE CDS CHATTER....Megan McArdle, who has been skeptical of the role of credit default swaps in the financial meltdown, publishes an email today from a reader that, I think, gets it about right:

As someone with a front-row seat to this crisis, let me say that there are people who trade CDS and do not understand crucial details of contract terms and bond seniority....Moreover, street-side participants in CDS have realized that they are counterparties to obligations they often don't understand, and this has certainly played a role in both a) their unwillingness to extend credit and b) their inability to get credit from lenders who are uncertain of what their CDS obligations mean. THAT is why Buffett called them "financial weapons of mass destruction" — not because they START a war, but because they have immense capacity to radically ESCALATE it.

....[After the fall of Lehman Brothers] everyone started worrying about collateral, and then discovered that they were not able to properly worry about collateral, since they did not fully understand derivative collateral requirements. All they knew is that they were facing something big and scary, and so — once again collectively and naively — we all stopped lending just to be safe.

This is, roughly speaking, my understanding of what happened too. The CDS market is a highly useful one, but it's too opaque; it's too hard to truly know what your CDS counterparty risk really is; and collateral requirements can amplify a downward spiral and cause bank failures that otherwise wouldn't have happened. There are regulatory answers for all these things, and although they probably wouldn't eliminate problems in the future (nothing can do that, I imagine), they might reduce them considerably.

On another note, Megan has apparently cast her vote for "CDSs" as the plural of CDS. I'd opt for "CDSes" myself, but I'm open to anything that's an actual, rather than an implied, plural. Perhaps this will start a trend.

Nonconventional Warfare

| Thu Nov. 20, 2008 12:07 PM PST

NONCONVENTIONAL WARFARE....Speculating on what might happen if Robert Gates stays on for a while as Secretary of Defense seems a little frivolous when we don't even know if Gates is truly in contention for the job, but let's do a bit of it anyway. Gates has taken the position that the Army should focus almost exclusively on counterinsurgency and irregular warfare in the future, something that Michele Flournoy, who's heading Obama's defense transition team, has criticized:

She said the document appropriately emphasizes irregular warfare — focused on terrorists and rogue regimes bent on using insurgency or weapons of mass destruction — but might go too far. "I think irregular warfare is very important, particularly in contrast to preparing solely for conventional warfighting, but it shouldn't be our only focus," Flournoy said, adding that countries such as China likely are preparing for "high-end" warfare and attacks involving anti-satellite technologies and cyberspace.

Barron YoungSmith thinks this is going to cause some tension:

If Gates ends up staying on at the Pentagon, he and Petraeus will almost certainly be able to impose these counterinsurgency-oriented priorities on what Flournoy, who has long-standing plans to revamp DoD, hoped would be a top-down review starting from scratch.

I'll take the other side of this issue. My guess is that the Army's institutional culture is so dedicated to conventional warfare that even a massive push from Gates and Petraeus in the other direction will turn the battleship only a few degrees. Especially if all this stuff is part of a top-down review (which it will be, since the QDR process will be starting up in 2009), a clear and concentrated focus from the start on nonconventional warfare is probably the only way we'll make any progress at all. I think I might be on Gates's side on this.

You Are What You Blog

| Thu Nov. 20, 2008 11:27 AM PST

YOU ARE WHAT YOU BLOG....Via Andrew Sullivan, this is just scary. The Typealyzer sucks in the contents of your blog and spits out your Myers-Briggs personality type about two seconds later. Like pretty much everyone of a certain age who's worked in the business world, I've taken the Myers-Briggs test a couple of times, and the typealyzer got my personality type exactly right. (Though my recollection is that it was a close call on the Sensing/Intuition scale.) This is especially impressive considering that upwards of a third of the text on the blog is excerpts from news articles and other blogs.

Methinks the web is getting too smart for its own good. Granted, my personality type probably isn't too hard to figure out even from a 30-second conversation, but it's a little unnerving that some heap of silicon can do it. If they can already do this, how long will it be before our robot overlords take over completely?

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Business and Labor

| Thu Nov. 20, 2008 10:44 AM PST

BUSINESS AND LABOR....At the Wall Street Journal's CEO Council yesterday, the one where Rahm Emanuel told business leaders that the Obama administration would "throw long and deep," he also took a question about the Employee Free Choice Act:

He was asked his views on the push by labor unions to allow workplaces to be organized with the signing of cards attesting to union support rather than a secret ballot. Mr. Emanuel declined to say whether the White House would support the legislation, but he said the unions are addressing the concerns of a middle class that has seen U.S. median income slide over the past eight years, while health care, energy and education costs have soared.

Does this mean Obama won't actually push for passage of EFCA, even though he said during the campaign he would? Who knows. But apropos of my comment the other day about anti-unionism being at the core of Main Street conservatism, what it does show is that Emanuel felt pretty comfortable telling the gathered CEOs that Obama would push for global warming controls, healthcare reform, lots of deficit spending on an economic stimulus package, and a comprehensive new set of financial regulations. That's all socialism, of course, but he knew the titans of American industry wouldn't fuss about it too much.

But a proposal that might end up increasing private sector union density from its current 7.5% to, say, 8.5%? (Or, if you're really optimistic, maybe 9.5%.) That, he knew, would send the place into a frenzy. Like I said on Monday, there's nothing that gets business leaders more panicked than the idea of workers organizing for higher wages. Nothing.

On a related note, here's a prediction: Obama will need a few votes from Senate Republicans to pass his legislative program. I'll bet he'll get it on global warming controls, healthcare reform, economic stimulus, and financial regulation. But on EFCA, he'll have trouble getting even a single Republican vote. That will be considered the make-or-break vote from the business community. Just wait and see.

Parking

| Thu Nov. 20, 2008 9:21 AM PST

PARKING....Matt Yglesias suggests that conservatives ought to apply free market thinking to issues of urban development:

To my way of thinking an enormous amount of good could be done if conservatives were more interested in applying really basic free market principles to transportation policy. For example, why not allow developers to build as much or as little parking as they want to build when they launch a new development? Why not charge market rates for curbside parking on public streets? How about fewer restrictions on the permitted density of development? Why not reduce congestion on the most-trafficked roads through market pricing of access?

Well, sure. Actually, though, I think conservatives are generally fairly open to the idea of letting developers do whatever they want just on general pandering-to-business-interests grounds. The problem is that the public tends to be rabidly opposed to this kind of thing, and nobody who proposes it has a chance of getting elected (or reelected). So discretion ends up becoming the better part of valor.

Of course, there's also a chicken and egg problem here. You really can't build enormous apartment complexes with little or no parking if everyone who lives in the area owns a car. Nobody will rent your apartments if they can't park their cars, after all. Mass transit is the obvious answer to this, but it's still the case that no one will rent your apartment unless transit is so good that they can ditch their car entirely and therefore don't need a parking place. But in most places mass transit is nowhere near that good, so parking spaces continue to be needed. But as long parking spaces are freely available, the pressure to improve mass transit remains minimal.

What to do? Cities have some pretty good options for improving transit, along with a populace that's less car crazy than the rest of the country, but they usually have huge budgetary constraints. Suburbs and rural areas, conversely, sometimes have the money but seem hopelessly distant from any kind of reasonable solution in anything but the longest term. Here in Orange County, for example, you'd almost literally have to bulldoze the entire place and build anew to get even close to the density you'd need for a decent mass transit system to work.

Maybe motor scooters are the answer. If we all owned one car and one little Vespa out here in suburbia, instead of two cars, we could start cutting back on parking spaces gradually and save gasoline in the process. An electric Vespa with 30 or 40 miles of range on a charge would be even better. Maybe development of a Volt-based scooter ought to be a condition for a GM bailout.

Might not be very popular outside the warm weather south, though. Any other ideas?

Waxman Wins

| Thu Nov. 20, 2008 9:19 AM PST

WAXMAN WINS....The news keeps getting better and better. The House Democratic caucus just voted 137-122 to replace John Dingell (D–General Motors) as chair of the Energy and Commerce Committee. The new chair will be Henry Waxman, who cares deeply about global warming and will be a huge ally in the fight to get serious carbon legislation passed next year. This is change we can believe in.

Gutting the Trout

| Thu Nov. 20, 2008 9:12 AM PST

GUTTING THE TROUT....Ezra informs us today that the healthcare insurance industry has blinked. But it's sort of a Sarah Palin blink:

The big news of the day is that the insurance industry has offered a deal: In return for a mandate in which every American must purchase health care coverage, they will stop refusing to sell insurance to those with preexisting conditions. Some deal. They're basically saying that if we legislate that every American must purchase insurance coverage, they will sell insurance coverage, at some price, to every American.

Needless to say, this is a deal that every industry in America would love. Take GM, for example. Why bother bailing them out with taxpayer cash? Just pass a law instead mandating that every American has to buy a Chevy, let GM set the price, and they'd be back in business!

Of course, it's actually worse than that. At least if you mandated car purchases, the car companies would still compete for business by lowering prices. Healthcare companies, conversely, don't want your business if you have a preexisting condition. Why would they? So they'd actually do just the opposite, jacking up prices steadily to ensure that someone else will end up getting your business if you happen to be a diabetic or have a family history of coronary trouble.

Ezra explains all this in more detail, but for now I'll just observe that a blink is a blink, even if the deal on the table is patently ridiculous. It means the health insurance industry is scared that we might actually do something in 2009 and they want to be seen as something other than completely obstructionist. That means only one thing: they've shown fear, and now it's time to bore in for the kill and gut them like trouts. Let's get to it.