Kevin Drum - July 2009

The Transformation of Sarah Palin

| Sat Jul. 25, 2009 1:33 PM EDT

One of the enduring mysteries of Sarah Palin is the Jekyll/Hyde transformation she underwent when John McCain chose her as his running mate.  As near as I can tell, Sarah Palin v1.0 was a relatively pragmatic governor of Alaska.  Sure, she was conservative, but for the most part the tribalism and rancor she sometimes displayed as mayor of Wasilla was absent.  She worked across the aisle and got things done.

Then the 2008 campaign happened.  Palin spent a couple of months on the national stage and developed such a fondness for her role as cultural attack dog — or perhaps redeveloped such a fondness for it — that she found herself either unable and unwilling to bother with actual governance once she got back to Juneau.  As Suzy Khimm reports in TNR, Alaska was just too small for Sarah Palin v2.0:

All of Palin's major bills failed to pass this year's first 90-day session. But conversations with both Republican and Democratic legislators reveal that Palin's inability to get anything done has little to do with the media attacks the Alaska governor claims drove her from office. The lawmakers say it has more to do with how national exposure changed her, moving her much further to the right than she had been and making her nearly impossible to work with. And state Republicans seem just as incensed about it as the Democrats.

....Upon returning to Juneau last fall, "she managed to alienate most of the 60 members of [the Alaska] House and Senate," says Larry Persily, an aide to state Republican Representative Mike Hawker. "It wasn't a matter of burning bridges — she blew them up."

Palin made it clear that she wasn't going to back away from the hard-line conservative ideology that had propelled her to national prominence...."The little bit of time she spent on policy, she devoted ... to issues of national merit," says Republican Representative Jay Ramras. "It wasn't when but how she was going to throw Alaska under the bus."

Read the whole thing.  The main question it leaves in my mind is whether the national spotlight really changed her, or whether it merely reconnected her with an earlier style of politics-as-bloodsport that had been submerged for a short while she was in the Alaska statehouse.  Whatever the case, though, she clearly thrives on the know-nothing, resentment-based politics she practices with such gusto these days.  It's not going away anytime soon.

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Friday Cat Blogging - 24 July 2009

| Fri Jul. 24, 2009 4:33 PM EDT

Catblogging is late!  Sorry about that.  And if Inkblot and Domino were human, they'd be plenty upset at these somewhat less than flattering poses I caught them in.  Still, it's good motivation to slim down, which is exactly what they're going to do since I've put them both on a new diet.  As long as I can keep one of them (*cough*Inkblot*cough*) from hogging the limited portions I'm putting out, everything will be fine.  Wish me luck.

Yes, the Globe is Still Warming

| Fri Jul. 24, 2009 4:21 PM EDT

Jim Manzi defends George Will: "There has not been a lot of measured warming for the last ten years."  But that's just not true.  A fifth of a degree in the trendline is still a fifth of a degree in the trendline, even if you post a chart that uses a shorter timespan and displays the results by month instead of by year.

Now, it is true that the single year 2008 was cooler than the single year 1998.  It's also true that there hasn't been much warming over the past six years.  Noisy data can usually provide any answer you want if you cherry pick it well enough.  But neither of these things is the same as demonstrating that there's been no warming during the past decade.  There has been.  About a fifth of a degree.

Back to Square One on Pot

| Fri Jul. 24, 2009 2:55 PM EDT

Meet the new drug czar, not especially different from the old drug czar:

The federal government is not going to pull back on its efforts to curtail marijuana farming operations, Gil Kerlikowske, director of the White House's Office of National Drug Control Policy, said Wednesday in Fresno...."Legalization is not in the president's vocabulary, and it's not in mine," he said.

...."Marijuana is dangerous and has no medicinal benefit," Kerlikowske said in downtown Fresno while discussing Operation SOS — Save Our Sierra — a multiagency effort to eradicate marijuana in eastern Fresno County.

It's disappointing to hear him say that — and a bit cowardly.  But hardly unexpected.  Despite a flurry of optimism a few months ago, Obama and Kerlikowske have obviously come to the same conclusion as all of their predecessors: this isn't a fight worth fighting.  They've got other fish to fry, they know perfectly well there's no support for marijuana legalization in Congress, and there's no political upside in taking the side of a bunch of potheads.  It's better to simply denounce the demon pot, provide the culture warriors with nothing to complain about, and move on.

We might legalize marijuana someday — de facto if not de jure — but not today.  Maybe in another ten years or so.

Making Lemonade

| Fri Jul. 24, 2009 1:34 PM EDT

Ezra Klein is frustrated that Congress is going on vacation when they're within spitting distance of constructing workable healthcare reform legislation:

To be so close to a finished product and a mark-up and a vote and then, for no actual reason, abruptly stop, is insane. It means a cessation to discussions, negotiations, relationships, hearings, to the work of legislating. It means that the hard work of creating this policy will stop for a month and give way to the politics of fighting over it. That's not healthy. "Ideas can melt in the sun," Nancy Pelosi said when I interviewed her Wednesday, "especially in August."

I'm not sure there's much that can be done about this, but there's more than one way to look at it anyway.  The first way is the conventional one: Republicans are hoping that the August recess will slow things down. It gives them more time for attack ads, more time to manufacture uncertainty, and more time to drive wedges between unsteady allies on the pro-reform side.

That's all true.  But the main thing that happens during the August recess is that everyone in Washington goes home and talks to people in their district.  If their constituents are largely opposed to healthcare reform, it hurts the cause.  But if they're pissed off about the status quo and want to know why Congress can't get off its butt and do something — well, that can actually speed things up.

Now, that's not normally what happens.  And it won't this time either — unless Barack Obama's army of supporters are still ready to go out and answer the call of reform.  I've long been skeptical about whether his famous electoral machine would continue to work after the campaign was over, but if there was ever a time to prove me wrong, it's now.  If Obama's army is still willing to go out and do battle, they should show up now and start putting the fear of God into their congressmen.  If that happens, the August recess will be the best thing that ever happened to healthcare reform.

I wouldn't bet the farm on that happening.  But congressmen listen to their constituents when they go home for the holidays, and there's no reason reform advocates can't use that to their advantage.  It all depends on whether we're really as motivated and as angry as the opposition.  Are we?

Chart of the Day

| Fri Jul. 24, 2009 12:19 PM EDT

Here's a fairly astonishing survey from the Pew Global Attitudes folks.  When they polled various countries on their general favorability toward the U.S., attitudes were improved since Barack Obama's election, but for the most part not improved dramatically.  European countries were generally far more favorable toward the U.S. compared to last year, but most of the rest of the world was only moderately more favorable.

But they also asked if respondents were confident that the U.S. would "do the right thing," and the results there were stunning.  With the sole exception of Israel, every single country registered an increase in confidence toward the U.S.  A few of the increases were moderate (Pakistan, Lebanon), but most of them were stratospheric (Egypt, Spain, Canada, Japan, Brazil).

Time will certainly erode this goodwill.  That's just the nature of these things.  But for now, the rest of the world has a spectacularly improved view of how they expect the United States to act on the world stage.  As Dan Drezner says, this is a hard measure of Obama's — and America's — newfound soft power.

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Yet More on Carbon Regulation

| Fri Jul. 24, 2009 11:43 AM EDT

I guess everyone knows by now what I think of the idea that Wall Street is going to turn the emissions trading market into the next trillion dollar bubble.  Basically, it seems like about #178 on the list of problems we should be worried about.  But aside from the fundamentals of the thing, one of the reasons I feel this way is that Waxman-Markey has regulation of the carbon market built in.  So what's to worry about?  Here's an update from worrier-in-chief Rachel Morris:

Well, Waxman-Markey had some good language regulating carbon and other energy derivatives....However, in the 300 pages of amendments added to Waxman-Markey just after 3.a.m on the night the bill passed, a few new sentences materialized that placed a big asterisk on those safeguards. The final text now says that the sections of the bill regulating carbon derivatives will be overridden by any derivatives legislation that the House passes later in the year.

Hmmm.  Still, that might not be so bad.  In fact, treating carbon emissions just like any other commodity, and then tightening up the entire market, might not be such a bad thing. Unless, of course, derivatives regulation gets captured by Wall Street shills like Rep. Michael McMahon of Staten Island.  Which, um, it turns out is in the process of happening:

McMahon, Bean and other New Democrats released their proposal for derivatives reform on Wednesday....Their bill would provide regulators with more information about derivatives than they have now, and it would establish an office in the Treasury for oversight of those instruments. But — similar to the proposal advanced by the Obama administration earlier in the year — it only requires standardized derivatives to be cleared, not exchange-traded, and calls for OTC derivatives to be reported to a trade repository, which is far less transparent than an exchange. Their provisions intended to prevent harmful speculation and market manipulation are also less explicit than those offered by Stupak.

Rachel has more in her piece, and it's not all bad news.  There are competing proposals that would be considerably tougher than McMahon's.  What's more, there are still some fundamental reasons to think that carbon trading isn't likely to be a huge gold rush. Still, this is obviously worth keeping an eye on.  There's really no legitimate reason to oppose fairly stringent regulation of carbon emission trading, and anyone who suggests otherwise should be given a very skeptical hearing indeed.

Sarah Palin is Sinking

| Fri Jul. 24, 2009 10:55 AM EDT

From the Washington Post:

As Alaska Gov. Sarah Palin prepares for the next stage of her political career, a majority of Americans hold an unfavorable view of her, and there is broad public doubt about her leadership skills and understanding of complex issues, according to a new Washington Post-ABC News poll.

Well, that's our elite-East-Coast-passport-wielding-NASCAR-hating media for you.  They've managed to convince everyone that Sarah Palin doesn't understand complex issues.  It's sad.  When will they ever learn that it's about country?

Goldman's Billions

| Fri Jul. 24, 2009 1:59 AM EDT

Earlier this month Matthew Goldstein of Reuters broke the story of Sergey Aleynikov, a naturalized Russian immigrant who's been charged with stealing trade secrets from Goldman Sachs.  The secret in question was computer code.  In particular, according to the feds, it was 32 megabytes of code that Aleynikov encrypted and uploaded to a UK-owned website in Germany prior to leaving Goldman to go work for a competitor at a much, much higher salary.

And what did this incredibly valuable code do?  Answer: it ran Goldman's high frequency trading operation, and it's drawn attention to the shadowy but wildly lucrative HFT trading sector.

Basically, HFT relies on speed.  Traders buy and sell stock thousands of times a second and their profits rely on being able make their trades slightly before ordinary traders make theirs.  Speed is so important that a key component of HFT — aside from fast computers, big pipes, and rocket science code — is colocation of their servers.  That is, they set up their operations physically close to stock exchange data centers so that trading data has less distance to travel before it gets to them.  A few milliseconds in reduced latency time makes all the difference.  And that's not all: you'll be unsurprised to learn that there's a regulatory loophole that provides HFT traders with yet another advantage over ordinary schmoes. The New York Times provides an example today of how it all works:

It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom’s price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.

The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

In less than half a second, high-frequency traders gained a valuable insight: the hunger for Broadcom was growing. Their computers began buying up Broadcom shares and then reselling them to the slower investors at higher prices. The overall price of Broadcom began to rise.

Soon, thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors’ upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares.

The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.

Tyler Durden has been all over this for a while and estimates that HFT might account for as much as a quarter of Goldman's total earnings.  And here I always thought that fixed income trading was where all the money was. Live and learn.

Anyway, HFT has turned into an arms race, but it's an arms race that only the elite are allowed to play.  You and I just get to foot the bill, a tenth of a cent at a time.  Sound familiar?

MoJo Mix: 23 July 2009

| Thu Jul. 23, 2009 7:11 PM EDT

Hey, Laura again. Kevin's usually optimistic about health care reform on odd-numbered days, but the news out of Congress is none too cheery at the moment, as you know. So, consider these 4 story recommendations your reform news chasers for the week:

1) Apocalypse Ciao: When the economic Rapture comes, will collapsitarians be the chosen ones?

2) Hippie, put your clothes on. California doesn't want to see your naughty bits at the beach anymore.

3) A zombie meme returns: Vaccines still don't cause autism. But you wouldn't know it from the comments on this article.

4) The Going Galt movement protests Obama with a collective shrug.

And what the heck, 5) A video of Amy Poehler hearting on Mother Jones with Sarah Silverman and a few other very funny ladies.

Laura McClure hosts podcasts, writes the MoJo Mix, and is the new media editor at Mother Jones. Read her investigative feature on lifehacking gurus in the latest issue of Mother Jones.