Kevin Drum - May 2010

Tackling the Deficit

| Tue May 11, 2010 1:16 PM EDT

Responding to Jonathan Chait, NRO's Kevin Williamson says he'd support a compromise plan to reduce the deficit that included both spending cuts and tax increases. But he's gloomy about the prospects:

Closing the gap from revenues that equal 15 percent of GDP and spending that equals 25 percent of GDP still looks pretty hard to me. To repeat yesterday's thought-experiment, say we construct a point-by-point trade-off, equalizing spending and revenue at 20 percent of GDP. I don't see Republicans supporting a 33 percent tax increase or Democrats supporting a 20 percent spending cut. Lots of readers have made clever suggestions about how we get there, but none of them seem convincing to me. The trade-offs would have to be pretty significant, like collecting that 20 percent of GDP via a flat tax and enacting deep entitlement reform.

I think you need to look at this two ways. First, there's medium-term deficit reduction, which is perhaps a little easier than Williamson makes it out to be. A lot of the current federal deficit is driven by a combination of increased spending and decreased tax revenue caused by the Great Recession, and as the economy improves and stimulus spending ends the deficit will drop dramatically all on its own. Further combinations of spending cuts and tax increases to reach primary balance (i.e., excluding interest payments) would be on the order of $250 billion or so. In rough numbers, this means a 5% increase in taxes plus 5% decrease in non-entitlement spending. That's a lot, but it's not fiscal Armageddon.

Longer term, the problem is worse, primarily because of growing healthcare costs. But while I may be a crazy optimist, I think there's at least some hope of getting a bipartisan consensus on long-term cuts to the growth of Medicare and Social Security combined with long-term tax increases to support somewhat more modest versions of those programs. I know there doesn't seem to be much hope of that at the moment, but the only question is how long it's going to take before everyone's heads get banged around enough that they realize they have no choice. Maybe in 2013, after Obama has won a second term and the screechers in the Republican Party have yelled themselves hoarse and the adults finally decide to take over. It sounds like a longshot, but it's not impossible.

Ideally, what I'd like to see takes a few different tacks. First, national defense needs to be on the table for spending cuts every bit as much as any other discretionary program. Second, we need to get serious about reining in healthcare spending. This really does require bipartisan consensus since neither party can afford to make the unpopular decisions this will require on their own. Third, do a simple deal on Social Security that balances its long-term prospects with a modest basket of growth cuts and payroll tax increases. This really ought to be easy since Social Security's deficit is genuinely small and manageable. And fourth, start thinking seriously about alternative sources of tax revenue. It doesn't have to be income taxes and it doesn't have to be a VAT. The combination of a financial transaction tax and a serious carbon tax would raise a considerable sum of money and would do it by taxing activities that we'd like to see a little less of anyway.

This is all pie in the sky at the moment, and I think Williamson's dream of keeping federal spending to 20% of GDP is just that: a dream. But at some point in the near future we either get our act together or else the entire country turns into California. And we've already got one too many Californias.

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Askers vs. Guessers

| Tue May 11, 2010 12:10 PM EDT

According to the Guardian, a short comment to a 2007 blog post that asked for advice about how to deal with a visiting friend has "achieved minor cult status online." The poster and his wife were annoyed with someone who had asked if she could stay with them in their apartment for a few days and were anguishing over how to turn down the request politely. Andrea Donderi responded:

This is a classic case of Ask Culture meets Guess Culture.

In some families, you grow up with the expectation that it's OK to ask for anything at all, but you gotta realize you might get no for an answer. This is Ask Culture.

In Guess Culture, you avoid putting a request into words unless you're pretty sure the answer will be yes. Guess Culture depends on a tight net of shared expectations. A key skill is putting out delicate feelers. If you do this with enough subtlety, you won't even have to make the request directly; you'll get an offer. Even then, the offer may be genuine or pro forma; it takes yet more skill and delicacy to discern whether you should accept.

Sadly, I'm a Guesser. But I wish I were an Asker, and I wish everyone else were too — though that's assuming that Donderi is right about Askers all taking turndowns in stride. I have my doubts about that. Still, I hate Guess culture. And yet I'm a Guesser. We all have our little problems, don't we?

But at least I learned about a minor internet tradition today. And now, back to my cave, where I have to neither Ask nor Guess. Can I just be a Writer instead?

Is a Climate Bill Dead?

| Tue May 11, 2010 11:20 AM EDT

I think climate change legislation is dead. There's not enough time for a bill to go through the committee process, get passed by the Senate, sent to conference, amended, and then passed by the full Congress before the midterms, and after the midterms Democrats will probably be reduced to 53 or 54 members in the Senate. Some of them won't vote for a climate bill, which means you'd need to find ten or a dozen Republicans to break a filibuster, and that's just not gonna happen.

But Dave Roberts thinks there's still a slim chance:

There is still a narrow (and, yes, improbable) path to passage. Here's how it goes: Kerry and Lieberman introduce their bill on Wed., looking roughly like it looks now, with drilling provisions intact like Lieberman wants. It fizzles, lost amidst Elena Kagan, tornadoes, and Gordon Brown. After a couple weeks, buoyed by public opinion that is clearly turning against drilling and in favor of clean energy, Reid takes control of the process, strips drilling out, boosts the energy efficiency and renewable energy provisions, and gives the bill a big, public push.

For this to happen requires two things, which also require each other. First, public opinion has to keep moving and getting louder. There has to be a sense of urgency behind passing a bill....But for public opinion to crystallize and become a serious force, it must be echoed, amplified, and directed by the only politician that most Americans still trust: Barack Obama. I've said this before and it remains true: the only way this thing gets done is if Obama lays himself on the line for it. (It would also help, incidentally, if the left pushed to mobilize the public behind a bill, though at this point the left seems content just bitching and moaning about it, as they've done throughout the entire process.)

Unfortunately, I don't think there's any chance of Reid taking over the bill after only a few weeks. He's pretty deferential to the committee process. And even if he did, the words "Harry Reid" and "big public push" don't often show up in the same sentence. Reid is an inside guy, not an outside guy.

As for Obama, who knows? But my take is pretty simple: if there's one thing that Obama has demonstrated for us over and over again, it's the fact that he's pretty sensitive to the political tea leaves. He doesn't tilt at windmills, and he certainly doesn't ask members of his own party to take seat-threatening risks shortly before an election in service of a lost cause. It's just not his style. So I'd be pretty shocked if made the kind of public push Dave wants, and I'd be surprised if it worked even if he did.

I'm not sure what the next step is. Assuming that Dems still control both houses of Congress next year, we can try again. But the left's bitching and moaning has mostly been a reaction to the relentless watering down of the current climate bills, and if you think this year's bills are watered down, just wait until you see what a Congress with a hair-thin Democratic majority produces. The left will not be pleased.

If I had to guess, I'd say that cap-and-trade (or a carbon tax) is dead for the near future, and our best bet is to regroup and attempt to pass a bill without it. There are actually plenty of things we could do to reduce carbon emissions in the short term that don't involve carbon pricing (in fact, carbon pricing in the near term would have only a small impact even if we put it in place immediately), and maybe we're best off focusing on that stuff for now and waiting for a better opportunity to get a carbon fee established. Opinions?

The Market Tank: Take 2.5

| Tue May 11, 2010 2:12 AM EDT

The Wall Street Journal has a long story today about Thursday's big stock market tank that roughly confirms the one I wrote about last Friday. In their version, the market was already skittish over Greece and the euro when Universa, a hedge fund advised by Black Swan author Nassim Nicholas Taleb, placed a biggish bet that stock prices would fall. The guys on the other side of the bet sold stocks to hedge their position, and before long things had started to spin out of control:

By 2:37 p.m., the overload seemed to have taken its toll on the NYSE's Arca electronic-trading system. At that point, its rival, the Nasdaq, owned by NASDAQ OMX Group Inc., detected what it felt was questionable information in the data. It sent out a message saying it would no longer route quotes to Arca.

This step — known as declaring "self-help" — doesn't happen often among the major exchanges. But in the coming minutes, the BATS exchange also stopped automatically routing orders to Arca.

For a crucial set of players — high-frequency-trading hedge funds — all this turmoil was becoming too risky to handle. One fear that would prove all too real was that in the extreme swings, some — but not all — trades would later be canceled, leaving them on the hook for unwanted positions.

....With the high-frequency funds either selling or pulling out of the market, Wall Street brokerage firms pulling back and the NYSE stock exchange temporarily halting trading on some stocks, offers to buy stocks vanished from underneath the market. Normally there can be hundreds of offers to buy the iShares Russell 1000 Growth Index exchange-traded fund, but at 2:46 p.m., there were just four bids north of $14 for a fund that had been trading at $51 minutes earlier, according to data reviewed by The Wall Street Journal.

Even if this turns out to be the right story, it still doesn't explain everything. Universa's trade only totalled $7.5 million, not really that big even against the background of an already agitated market. So how could a trade that size cause a trillion dollar meltdown? "It did point out that there is a structural flaw," said Gus Sauter, chief investment officer at Vanguard Group, and that seems like an understatement. The Journal authors point out that high frequency trading has become so ubiquitous (accounting for two-thirds of all stock market volume) that in practical terms HFTs are now responsible for maintaining an orderly market. Unfortunately, they don't have any regulatory responsibility for this, and when markets become disorderly they simply flee, causing the problems to become even worse. The solution isn't yet clear, but we'd better figure out something before HFTs become 99% of the market.

Elena Kagan's Scholarship: Take Two

| Mon May 10, 2010 10:45 PM EDT

This weekend I linked to Paul Campos's criticism of Elena Kagan's scholarly output, so it seems only fair to link to a quite credible opposing view as well. Eugene Volokh, a First Amendment expert at UCLA, after noting that Kagan was a working scholar for only eight years between 1991 and now, has this to say:

In those eight years, she wrote or cowrote four major articles....She also wrote three shorter but still substantial pieces....Quantitatively, this is quite good output for eight years as a working scholar.

....Moreover, two of her articles have been judged to be quite important by her colleagues. Presidential Administration has been cited 305 times in law journal articles (according to a search of Westlaw’s JLR database) — an extraordinarily high number of citations for any article, especially one that is less than 10 years old....Chevron’s Nondelegation Doctrine has been cited 75 times, a very high number for an article’s first 10 years; I suspect that only a tiny fraction of one percent of all law review articles are cited at such a pace. Private Speech, Public Purpose has been cited 129 times, likewise a very high number.

....On then to my own evaluation of the First Amendment articles: I think they’re excellent. I disagree with them in significant ways [...] But I like them a lot.

This answers the tenure question, I think. In 1995, when Kagan was granted tenure at the University of Chicago, she had two major articles and three shorter ones that were either published or in press. If the quality was good, I imagine that's normally plenty. And contra Campos's view that "Kagan's scholarly writings are lifeless, dull, and eminently forgettable," Volokh suggests they're actually quite good, based both on his own opinion as well as how often they've been cited.

Obviously I can't referee this. But I thought I should at least point it out. On a related Kagan note, Jonathan Chait suggests today that whether she's a mainstream moderate liberal or not, conservatives will gin up plenty of reasons to dislike her:

Now, maybe these concerns will remain marginal in the face of a selection that enjoys the support of Republican elites. But the last 15 months have shown that, in the face of conservative outrage or organized Republican opposition, the support of a smattering of Republican elites tends to melt away very quickly. What Republicans are going to want to invite a Tea Party-backed primary challenge by voting to confirm Kagan? In the end, I think no more than a couple GOP Senators will be left standing. If the White House predicts a 70+ vote cakewalk, I suspect it's mistaken.

I have a feeling Jon is right, but I hope he isn't. Partisan opposition to Supreme Court nominees has been increasing for more than two decades, and we really can't afford to get to the point where these things become literally party line votes. Unfortunately, although I think Republicans have offered greater provocation in their choice of nominees, the evolution of increasingly partisan votes is something where Democrats have probably been the guiltier party. So the moral high ground is a little ambiguous here. Still, the fact remains that Kagan is a moderate appointee, and at the very least she deserves to get confirmed by the same kind of margin that John Roberts did.

The Problem With Superheroes

| Mon May 10, 2010 6:50 PM EDT

After musing on the question of what Iron Man 2 would be like if it were just the story of an ordinary person without any kind of superpowers, Ross Douthat muses on the question of what superhero movies have done to the cinema recently:

Sometimes I try to imagine what the 1970s would have been like if comic-book movies had dominated the cinematic landscape the way they do today. Francis Ford Coppola would have presumably gravitated toward the operatic darkness of the Batman franchise, casting first Al Pacino and then Robert De Niro as Italian-American Bruce Waynes. Martin Scorsese would have become famous for his gritty, angry take on the Incredible Hulk, with Harvey Keitel stepping into Bruce Banner’s shoes and Diane Keaton as his love interest....[Etc.]....If this revision of the ’70s sounds like a cinematic paradise, you probably liked “The Dark Knight” a whole lot more than I did.

This strikes me as backwards. After all, Godfather the book was just a garden variety genre bestseller — basically the beach reading equivalent of a good quality comic book. It wouldn't show up on any literary critic's list of the best 20th century novels. But Godfather the picture shows up on practically every film critic's list of the best 20th century movies, so genre obviously wasn't a problem here. Likewise, the problem with superhero movies probably isn't the genre, it's what today's directors do with them. In the same way that Coppola transcended the usual boundaries of mob flicks and John Ford did the same for westerns, maybe they would have made great comic book adaptations too if they'd given it a whirl. And if they hadn't? Well, it's not as if both of them didn't make plenty of clunkers too. Maybe Coppola's Batman would have replaced Coppola's Tucker, not his Godfather.

Or not. Who knows? But instead of wondering what Iron Man would be like without the superpowers, wouldn't a better question be: if the story was any good to start with, why should superpowers ruin it? Maybe it's inherent in the genre, but I sort of doubt it.

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How to Tame a Deficit

| Mon May 10, 2010 6:20 PM EDT

The Economist's Allison Schrager writes about America's future:

Willem Buiter reckons the American debt situation has gotten so bad that future policy makers will face two options: default or inflate. That’s certainly a possibility, but not yet inevitable. If the American economy experiences reasonably high growth in the future (at least on par with the last few decades) AND the government miraculously summons the political will to cut entitlements, America can spare itself a sovereign debt crisis.

Hmmm. I could swear there's an alternative that's missing here. Maybe something you could do in addition to cuts. But what? The opposite of cutting something, I suppose. Damn. It's on the tip of my tongue. I'm sure it will come to me in a few more minutes.

HuffPo Turns Five

| Mon May 10, 2010 2:02 PM EDT

CJR asked a few writers to give their short takes on the Huffington Post on the occasion of its fifth birthday, and I think Ryan Chittum captured its zeitgeist the best:

Let’s get it out of the way up top that I think The Huffington Post is a mess — a schizophrenic, mostly unreadable hunk of tabloid journalism leavened with serious stuff.

I mean, where else can you read a droning missive on the BP oil spill by the Ecumenical Patriarch Bartholomew, helpfully identified as “Spiritual leader of 300 million Orthodox Christians worldwide,” on the same screen as “Lawrence Taylor RAPE Arrest: NFL Legend ARRESTED For Attacking Teenager” and “Elisabeth Hasselbeck SLAMS Erin Andrews’ Clothing, Excuses Stalker”?

Eyeballs JARRED. Reader GOOGLY-EYED After Reading HuffPo.

At the same time, he's also right about this: "But that’s a superficial (if understandable) read these days. In the space I cover, the business press, the site has been doing some serious reporting lately." HuffPo does do a fair amount of very good reporting on business and financial reform issues. It requires a seemingly endless stream of flotsam and jetsam to subsidize all this, but hey — you've got to subsidize it somehow. If you're not the Wall Street Journal, covering this stuff just doesn't pay.

I suppose this kind of tabloidy mashup of salacious trivia with serious reporting might be a model for the future. Not the one we all had in mind when news first started going online, but it wouldn't be the first time the human race was surprised by what ended up working and what didn't.

Quote of the Day: Men on the Court

| Mon May 10, 2010 12:50 PM EDT

From Kathryn Jean Lopez, tweeting about Elena Kagan's nomination to the Supreme Court:

just wondering: are men allowed to be nominated to the supreme court anymore?

It's pretty remarkable just how little it takes to bring out the pity party in conservatives. Two women in a row and suddenly men are an endangered class in the American legal profession. Conservatives may not care much about discrimination against minorities, but they sure do snap to attention quickly whenever they spy any potential slight against the majority, don't they?

Gordon Brown Quits

| Mon May 10, 2010 12:28 PM EDT

Well, over in Britain Gordon Brown is out. He now admits that the election was a judgment by the voters and plans to ask the Labour Party to organize an election for a new party leader. From the Guardian's blog:

Here are the main points.

  • Gordon Brown is going to resign. He wants to stand down as Labour leader before the next Labour conference in the autumn. But he intends to remain as prime minister until then (if he can).
  • Nick Clegg has formally opened talks with Labour. Brown said that Clegg rang him recently (presumably after the Lib Dem meeting) to say he would like to have formal talks with a Labour team.
  • Brown is proposing a "progressive" government, comprising Labour, the Lib Dems, and presumably the SNP, Plaid Cymru, the SDLP and the Alliance. Electoral reform would be a priority.

Alex Massie comments:

And so, playing Salome, Clegg has got Gordon's head on a platter and we now have the extraordinary sight of the Lib Dems negotiating with both parties at the same time. This is madness and invites the public to view the Lib Dems as a party of political hoors prepared to sell their services to the highest-bidder for nothing more than self-evidently narrow, selfish interests.

That's their choice but it reduces their seriousness and seems likely to leave Clegg open to the notion that he's no better, and perhaps worse, than any other politician. This invites all kinds of trouble for the Lib Dems at the next election.

Constitutionally there's no problem with having another "unelected" Prime Minister but having two in a row brought to power in such a fashion seems, politically at least, a rather different matter. And how on earth can Clegg agree to a coalition deal without knowing who the Prime Minister is going to be?

So what the hell is going on? Perhaps as Philip Stevens suggests this is simply a wrecking maneovre by Brown. Whatever else it is, however, it's not necessarily the kind of arrangment that is likely to leave voters more enthused about the idea of electoral reform.

Stay tuned! It's certainly more interesting than American politics at the moment.