Kevin Drum - April 2009

Listening in on Congress

| Wed Apr. 15, 2009 9:49 PM EDT

James Risen and Eric Lichtblau report in the New York Times today that the NSA may have exceeded the wiretapping authority it was given by Congress in 2008.  The whole story is pretty vague, and introduces the unknown-to-me euphemism "over-collection," which apparently means that technical problems led NSA to " 'target' groups of Americans and collect their domestic communications without proper court authority."

But then there's this buried in the middle of the story, which isn't vague at all:

New details are also emerging about earlier domestic surveillance activities, including the agency’s attempt to wiretap a congressman without court approval on an overseas trip, according to interviews with current and former intelligence officials.

....The agency believed that the congressman, whose identity could not be determined, was in contact as part of a congressional delegation to the Middle East in 2005 or 2006 with an extremist who had possible terrorist ties and was already under surveillance, the official said. The agency then sought to eavesdrop on the congressman’s conversations to gather more intelligence, the official said.

The official said the plan was ultimately blocked because of concerns from some officials in the intelligence community about the idea of using the N.S.A., without court oversight, to spy on a member of Congress.

Jesus.  If a member of Congress isn't a "United States person" protected from warrantless surveillance by every version of FISA that's ever been on the books, who is?  Shouldn't this have set off alarm bells at every possible level at NSA, rather than merely being "ultimately blocked" because "some" officials had "concerns" about it?

SILVER LINING UPDATE: Looking on the bright side, maybe this will finally motivate Congress to take NSA surveillance more seriously.  Having one of their own members come within a hair's breadth of being an NSA target ought to concentrate their minds wonderfully, if anything will.

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Press Freedom in Iraq

| Wed Apr. 15, 2009 7:12 PM EDT

The press is coming under renewed attack from the Iraqi government:

The Iraqi military put local journalists on notice on Monday that their organizations could be shut down for misquoting officials, while the Iraqi government accused the news media of deliberately seeking to promote sectarian strife.

The top military spokesman in Baghdad, Maj. Gen. Qassim Atta, said he was filing a lawsuit seeking to close the Baghdad office of Al Hayat, one of the most prominent newspapers in the Arab world, as well as the satellite signal of Al Sharqiya, a popular Iraqi television channel that has been a strong critic of the government.

Marc Lynch comments:

That's not a good sign. Reminds me of the bad old days of 2004-2005 when the Iraqi government and MNF-I were routinely attacking the Arab media for fueling the insurgency and the offices of al-Jazeera and other satellite television stations were shuttered....At a time when many Iraqis and Iraq-watchers worry about a creeping authoritarianism in the Maliki government, this move against al-Hayat and al-Sharqiya is a screaming red flag.  Let's hope that it is quickly reversed.

Some of this may be creeping authoritarianism, but it also seems to be related to the steady breakdown of the celebrated Sunni Awakening.  The Sunni tribal chiefs were basically bribed to cooperate with the central government, but as the bribes have dwindled so has the cooperation — and apparently the Maliki government would just as soon not have anyone around to report this.

Quote of the Day - 4.15.09

| Wed Apr. 15, 2009 2:37 PM EDT

From former Treasury Secretary Paul O'Neill, on banks that are rushing to return TARP money so they can escape limits on executive compensation:

"If banks now claim they want to return the money because they don't need it, why do they have to raise new capital to replace the money from we the people in order to repay the government?"

Right.  If Goldman Sachs never really needed their TARP money in the first place, they could have returned it without first doing a risky and ultimately disappointing share offering.  One can only conclude that, yes, they needed the money back in October, no matter what they say now.

In related news, Felix Salmon takes note of the fact that due to a legal fluke Goldman's FY2008 ended in November but their FY2009 started in January.  In December they reported huge losses, but those losses are now in sort of a weird limbo:

I suspect that when it comes to bonus time at Goldman, December 2008 will never matter. The 2008 bonuses will be paid based on the 2008 fiscal year, while the 2009 bonuses will be paid based on the 2009 fiscal year. And those $1.3 billion of losses in December — losses which will never show up in any annual report — will be conveniently ignored by the compensation honchos.

Clever!  And it shows that Bill Gates was right.  As William Cohan reminded us yesterday, he once said that Microsoft’s biggest competitor was Goldman Sachs. “It’s all about I.Q.,” he said. “You win with I.Q. Our only competition for I.Q. is the top investment banks.”  And this is exactly the kind of thing that Wall Street has spent the last decade applying its galactic brainpower toward.  Too bad they aren't researching a cure for cancer instead, isn't it?

Sarah Palin Update

| Wed Apr. 15, 2009 2:07 PM EDT

The latest on Gov. Sarah is here.  She continues to amaze.

(No, this has nothing to do with Bristol and Levi Johnston.  That's a soap opera I'm not touching.  This is something completely different.)

Carbon Policy

| Wed Apr. 15, 2009 12:52 PM EDT

Obama's big speech yesterday about the economy was.....fine.  I don't think he addressed our banking problems quite as forthrightly as a lot of people seem to think, but he didn't do too badly either.  I was more pleased, however, that he said this about transforming the economy to be less carbon intensive:

The only way to truly spark this transformation is through a gradual, market-based cap on carbon pollution, so that clean energy is the profitable kind of energy....We can no longer delay putting a framework for a clean energy economy in place. If businesses and entrepreneurs know today that we are closing this carbon pollution loophole, they will start investing in clean energy now. And pretty soon, we'll see more companies constructing solar panels, and workers building wind turbines, and car companies manufacturing fuel-efficient cars.

OK, it's not much.  But one of my complaints about Obama during the primary was that he didn't take the chance to actually sell the country on carbon caps.  Sure, cap-and-trade was always part of his plan, but on the stump it was all windmills and green jobs and other happy talk.  What would happen, I wondered, when the time came and suddenly Joe Sixpack realized that Obama was planning to raise energy costs via a cap-and-trade program?  That's still going to be a huge fight, but at least he's beginning to mention it in public now.  It's a start.

And as long as I'm writing about yesterday's speech, what's the deal with the White House website?  The speech is blared across the entire front page of the site, but if you click on "Read the Remarks" you cannot, in fact, read the remarks.  You can read a blog post excerpting a few of the remarks, but the blog post doesn't link to the full remarks.  If you click on "Speeches" instead, the most recent entry is from February.  Maybe the full speech is somewhere on the site, but I couldn't find it.

What gives?  Bush's website wasn't as pretty, but at least it was usually pretty complete and easy to navigate.  I never had trouble finding his speeches.

Stress Test Follies

| Wed Apr. 15, 2009 12:26 PM EDT

Apparently the results of the stress tests being done on big banks will be revealed publicly after all.  Sort of:

The administration has decided to reveal some sensitive details of the stress tests now being completed after concluding that keeping many of the findings secret could send investors fleeing from financial institutions rumored to be weakest.

While all of the banks are expected to pass the tests, some are expected to be graded more highly than others. Officials have deliberately left murky just how much they intend to reveal — or to encourage the banks to reveal — about how well they would weather difficult economic conditions over the next two years.

....The administration feared that details on healthier banks would inevitably leak out, leaving weaker banks exposed to speculation and damaging market rumors, possibly making any further bailouts more costly.

....“The purpose of this program is to prevent panics, not cause them,” said one senior official involved in the stress tests who declined to speak on the record because the extent of the disclosures were still being debated. “And it’s becoming clearer that we and the banks are going to have to explain clearly where each bank falls in the spectrum.”

I'm not quite sure if this qualifies as good news or bad news.  Transparency is generally good, especially where billions of taxpayer dollars are concerned, but at the same time, there's no way Treasury would be doing this unless they've already decided that everyone is going to pass the tests pretty handily.  That's not so good.  Judging from the tone of this piece, it appears that there are going to be two grades handed out: "Great!" and "Maybe just a wee bit shy of great but still pretty damn good!"  If that's what we end up with, this is transparency we can probably do without.

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Where Your Money Goes

| Wed Apr. 15, 2009 12:05 PM EDT

To commemorate Tax Day, the fine chartmakers at the Center for Budget and Policy Priorities have created this look at where your tax dollars go.  It's nothing new for regular readers of this blog, but for lovers of wonky eye candy it's a nice way of showing that about 70% of the budget goes to a mere four things: defense, interest on the debt, Social Security, and Medicare/Medicaid.  This means that if you're serious about cutting the budget, you need to tell us what you're going to cut in those areas.  Hacking away at the remaining 30% just won't get you very far.

One nice touch is labeling all the various welfare program funded by Washington as "Safety Net Programs."  That's good framing!  Regardless of what you call it, though, that and education, which are usually the main target of the budget cutting crowd, only amount to 13% of the budget.  Scrooge himself couldn't squeeze more than few percent out of that slice of the pie.  Bottom line: cutting the federal budget in any way that's more than just symbolic is really tough.  Maybe that's why Republicans only get serious about it when they're out of power.

 

Trivia of the Day

| Wed Apr. 15, 2009 11:49 AM EDT

The average time between major pushes for healthcare reform is 19.5 years.  If we blow it this time, our next chance won't roll around until 2028.

Deflation is Here

| Wed Apr. 15, 2009 11:19 AM EDT

The latest economic news:

For the first time since 1955, prices fell from the same month a year earlier, reflecting a stark drop in the cost of gasoline and automobiles. Overall, consumers paid 0.4 percent less for a range of goods and services last month than they did in March 2008.

The Labor Department reported that its consumer price index fell 0.1 percent in March from February as lower consumer demand for a range of goods and services kept a lid on rising prices.

The party line on this is that it's not too big a deal because the decline was mostly centered on energy-related products and services.  Maybe so.  But I wouldn't bet the ranch on it quite yet.

How to Think About Taxes

| Wed Apr. 15, 2009 3:52 AM EDT

Here's my contribution to today's tax day festivities: an effort to get you to think about federal taxes a little bit differently than usual.  Normally, when we talk about taxes, we end up talking about percentages of people: the top 1% pay a certain amount, the bottom third pay a different amount, etc.  But this is the wrong way to look at things.  What we ought to be looking at is percentages of income.

Have your eyes glazed over yet?  Just wait!  It's going to get worse.  But first a caveat: the numbers that follow aren't exact.  I don't think they're way off the mark, but they're the result of some rough interpolation from several different data sources.  Anyone with access to more detailed data is welcome to correct this, but in the meantime it should be close enough to give you an idea of how to look at this stuff.

So: percentages of income.  What I mean by this is that you'd expect a group of people with, say, one-fifth of the nation's total income to pay one-fifth of total federal taxes.  (Note: one-fifth = 20%, or one quintile in tax-speak.)  It doesn't really matter if that group has one-fifth of the people or not, just that it has one-fifth of the money.  Like this:

But hold on.  That's a flat tax, and I want to appeal to your native sense of fairness here.  Even most conservatives agree that taxation ought to be at least mildly progressive, so let's make this mildly progressive.  First, let's say that the middle quintile, almost by definition, ought to pay 20% of total taxes.  Like so:

The next quintile up ought to pay a higher share, and the quintile above that even more.  The slope of the increase doesn't need to look like a hockey stick, but it should trend clearly upward.  Let's say it should be 8% more for each quintile:

Likewise, the quintile below the middle ought to pay a lower share, and the poorest quintile ought to pay even less.  Something like this:

Question: does this seem roughly fair to you?  If you're a die-hard flat-taxer, it won't, but for most people, even conservatives, it ought to seem reasonable.  It's progressive, but the slope is moderate and consistent.  So now let's take a look at the income cutoffs that produce our five quintiles.  Here they are:

Most people are surprised at how high the income cutoffs are.  But that's how it works out.  If you add up the incomes of every single household that makes less than $50,000 — all 50 million of them — they earn only a fifth of the total income.  If you add up the tiny number of people who make more than $300,000, they also earn a fifth of total income.  So now, instead of looking at our theoretical progressive system, let's see the actual numbers.  Here they are:

As you can see, when you add up all federal taxes and compare it to where the money is, our system is only barely progressive at all.  The bottom quintile doesn't do too badly, though they're probably paying a little more than they should, but CEOs and bankers are paying only slightly more than teachers and engineers.  And if you add in state and local taxes, even this small amount of progressivity goes away.  You can come at this from a lot of different angles, but you always end up with the same answer: taken as a whole, our tax system is close to flat.  Does this seem fair to you?  It shouldn't.

NOTE: As I said above, these numbers are rough interpolations from several sources.  The high-end income data is from Piketty and Saez, here.  The middle income aggregates and cutoffs are from Census figures, here and here.  Tax shares are from the CBO, here.