Kevin Drum - May 2010

Shilling for America

| Mon May 24, 2010 11:41 AM EDT

Matt Yglesias and Ezra Klein are both in China on some kind of junket, and both are complaining about the corporate shillishness of the American pavilion at the Shanghai World Expo. One of the videos that comprise America's message to the world, says Ezra, is just a "long series of advertisements from the pavilion's corporate sponsors, including a representative from Chevron who tells us that oil will have to be part of our energy future and actually uses their marketing buzzwords 'human energy.'" But hey — that's a World Expo for you. Compare and contrast this to a souvenir coin from the 1939 Golden Gate Expo in San Francisco, which happily informs us that "A dollar spent for petroleum products never stops circulating. It pays for wages, taxes, materials and brings countless benefits to every business." Indeed. And still does, apparently.

Anyway, I have no real point to make. I just wanted an excuse to post a picture of that coin again.

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The End of Lost

| Mon May 24, 2010 10:40 AM EDT

So: what did you think of the Lost finale? I gotta say, when the show's creators told us a few months ago that they weren't going to answer every question, I was OK with that. Gotta maintain an air of mystery, keep the focus on characters instead of obsessing over minutiae, etc. etc. But honestly, I wasn't expecting them to answer no questions. Shouldn't they have at least answered one or two just as a demonstration of good faith?

Crankery 101

| Sun May 23, 2010 1:54 PM EDT

Here's a quick rule of thumb: You can judge the Crank Factor™ of an op-ed about the financial crisis by how long it takes the author to say something like:

Yet in truth, it was government housing policy that was at the root of the crisis.

It takes AEI president Arthur Brooks about a thousand words to get there in the Washington Post today. That wouldn't be too bad, actually, except that it's a 2,500-word piece. That's about 40% of the way in, so let's give Brooks a CF of 60. Frankly, I think he could have done better.

I can't figure out why conservatives insist on repeating this nonsense. The evidence against it is overwhelming, so they can hardly be unaware that they're BSing. (Details here.) And usually you save BSing for arguments that actually have some traction. But this one doesn't. As near as I can tell, even tea partiers don't really buy it unless you throw in a bit of CRA/minority lending demagoguery — which, at least in this piece, even Brooks doesn't quite have the brass to try to pitch. Maybe he saves that for the Wall Street Journal crowd.

Anyway, you can add "government housing policy caused the financial crisis" to this handy list of phrases that immediately let you know that you've been sucked into reading not a judicious exposition of conservative thought, but the most vapid, PowerPointy form of right-wing crankery:

  • Supply side economics: Arthur Laffer showed that tax cuts pay for themselves.
  • Healthcare: It can take as much as a year to get a hip replacement in Canada.
  • War on terror: Saddam Hussein supported al-Qaeda.
  • Tax policy: Half of all Americans don't pay any taxes.
  • Climate change: McIntyre and McKitrick have shown that global warming is a fraud.

Roughly speaking, no one who's actually serious about any of these topics would write any of this stuff. If you see it, it's as much a flashing light as pining away for the gold standard or railing about the giveaway of the Panama Canal. Got other examples? Feel free to add to the list yourself. And conservatives are welcome to construct a similar list for liberals. Have at it, folks.

Off to Chicago

| Sat May 22, 2010 3:56 PM EDT

In a few weeks Marian and I are going to Chicago to visit for a few days. Aside from the obvious (Art Institute, Magnificent Mile, Field Museum), any recommendations? All help much appreciated!

Friday Cat Blogging - 21 May 2010

| Fri May 21, 2010 2:57 PM EDT

Ah, the glories of a wide angle lens. Domino looks like she's a furry python or something. If furry pythons also had whiskers and paws, that is. Over on the right, we have a repeat of last week. What can I say? Inkblot was out in the garden again yesterday, Marian plonked him down on a rock, and this is the picture that came out. Anyway, I figure it won't be spring forever, so we should enjoy the flowers while we can.

(And what is Inkblot looking at? Birds, of course. There's a nest in our neighbor's tree nearby and the birds get pretty territorial about the whole thing. But their strategy is bad. All their chirping and buzzing just makes Inkblot all the more curious. Luckily for them, he's also gravity bound and has a short attention span. So they're in no danger.)

Pakistan and the Times Square Bomber

| Fri May 21, 2010 2:19 PM EDT

ProPublica fills in a few more details on the Times Square bombing:

U.S. and Pakistani investigators are pursuing a new lead in the failed Times Square bombing: That a major in Pakistan’s army knew of Faisal Shahzad’s plans to attack U.S. targets months before Shahzad tried to ignite a car bomb in the heart of New York City.

....Pakistani authorities arrested the military officer this week, officials said. U.S. investigators have been told by Pakistani officials that the major learned of Shahzad's plans from another suspect who is accused of funding the operation, according to a senior U.S. anti-terror official. The major has since resigned from the military, said the official, who requested anonymity because the case remains open.

....Allegations about the major, if confirmed, would deepen U.S. concerns about the role of the Pakistani military and intelligence in the fight against terrorism....The former military man was arrested not by the ISI, Pakistan's most powerful spy agency, but by a military intelligence service. While the ISI has played a central role in the Times Square investigation and in other major terror cases, the spy service and other branches of the security forces have also periodically been accused of colluding with Islamic extremists.

Oddly enough, we seem to have gotten this information from Shahzad without torturing him. Probably just a lucky break. Via Spencer Ackerman.

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Quote of the Day: Don't Know Much About History

| Fri May 21, 2010 1:20 PM EDT

From right-wing Texas State Board of Education member David Bradley, explaining who should be included in history books and who shouldn't:

I am very reluctant to include persons who are still alive. By definition of “history,” you must be dead, because you never know when you might embarrass us later.

Actually, that might be the only sensible thing he has to say on the subject of history. I mean, look at Rand Paul. You just never know, do you?

Stuck in Neutral

| Fri May 21, 2010 12:01 PM EDT

Paul Krugman says the United States isn't in any danger of turning into Greece:

The truth is that policy makers aren’t doing too much; they’re doing too little. Recent data don’t suggest that America is heading for a Greece-style collapse of investor confidence. Instead, they suggest that we may be heading for a Japan-style lost decade, trapped in a prolonged era of high unemployment and slow growth.

.... It’s not that nobody understands the risk. I strongly suspect that some officials at the Fed see the Japan parallels all too clearly and wish they could do more to support the economy. But in practice it’s all they can do to contain the tightening impulses of their colleagues, who (like central bankers in the 1930s) remain desperately afraid of inflation despite the absence of any evidence of rising prices. I also suspect that Obama administration economists would very much like to see another stimulus plan. But they know that such a plan would have no chance of getting through a Congress that has been spooked by the deficit hawks.

In short, fear of imaginary threats has prevented any effective response to the real danger facing our economy.

That's true. But the core problem is that growing government debt is a problem in the long term. Ideally, then, what we'd do is gather support for a strong stimulus now by credibly promising to address our various fiscal imbalances in the future. But how do we do this? As far as I know, it's not possible. There's simply no way to guarantee future behavior in any way that the market would take seriously. So we're stuck.

Making Finance Safer

| Fri May 21, 2010 11:06 AM EDT

I think Edmund Andrews has a pretty solid take on the financial reform bill that passed the Senate last night:

Before all the armchair pundits begin carping and tut-tutting, let us first appreciate how much the Senate bill actually does accomplish and how difficult it is to do anything at all when the full force of the financial industry is against you. Remember also that Dodd and the other Democrats had to contend with the hardball intransigence of the Republican Party, whose leaders tried to obstruct or gut just about every meaningful reform in the bill without proposing any of their own. This was not, repeat not, a philosphical disagreement between those who believe in the wisdom of government regulation and those who believe in the wisdom of free markets. However sincere Alabama's Dick Shelby might be in his fear of overbearing government, this fight was about denying Demorats a "victory." It was all straight from Mitch McConnell's playbook for political success: just say no, no, a thousand times no — no matter how venal it makes you look.

Against that backdrop, it's astonishing that the Senate bill actually became stronger as the process dragged on. The proposed consumer financial protection agency is stronger and I believe more independent than it would have been in the original Senate bill (more on that in a moment). The multi-trillion market in financial derivatives, which is almost unregulated right now, would for the most part have to be take place on exchanges or at least through clearinghouses — either of which require greater transparency and more upfront capital by the players. Banks, whose deposits are federally insured, would be prohibited from trading derivatives. And as an added surprise bonus, from none other that freshman Senator Al Franken, the bill includes a very smart reform to fix the corrupt busines model of credit-rating agencies.

I'd add Susan Collins' amendment tightening bank capital standards to this list. If both her regs and the House's 15:1 leverage limit survive the conference committee it will have a substantial effect on the way banks do business. It's not the root-and-branch breakup of the banking system that Simon Johnson and James Kwak would like to see, but let's face it: that was never anywhere within light years of getting support from 60 senators. Given what the realm of the possible included, I'd say that clearing derivatives, limiting leverage, regulating the ratings agencies, and creating a Consumer Finance Protection bureau are surprisingly strong responses to the financial crisis. What's even more surprising is that the first three of these things got added as the bill progressed and the fourth got improved (I've come around to the view that putting the CFPB in the Fed is probably a good thing since it guarantees a stable funding source for its activities). Aside from some early losses over vanilla consumer products and reinstating a version of Glass-Steagall, the only thing that got seriously watered down was resolution authority — and frankly, I never thought resolution authority was a key part of the bill. I still don't, and I suspect that it's virtually never going to get used early enough to make a big difference. It's obviously nice to have a clear legal regime for winding up a big failed bank once its failure is obvious, but that's all we're getting out of it.

In the end, this goes to show how strong a role public opinion can play in the legislative process. It's obviously not always decisive, but in this case anti-bank sentiment was so strong that senators spent the past few months one-upping each other to introduce amendments that Wall Street hated. And the upcoming election, which normally makes serious legislating nearly impossible, actually made this legislation better. Celebrate this while you can because you're not likely to see an election year make a bill better again in your lifetime.

All in all, not bad. Not as good as I hoped for, but better than I expected. Now let's hope that Wall Street can be fended off just enough longer to get this thing through conference in decent shape. (Read Andy Kroll for more on that.) The fat lady hasn't sung quite yet.

How Big is the Oil Spill?

| Thu May 20, 2010 8:04 PM EDT

We got a small bit of good oil spill news the other day when BP announced that its attempt to insert a smaller pipe inside the broken end of the main undersea pipe had succeeded. But it turns out there's bad news too:

BP said Thursday that it is now capturing 5,000 barrels a day of crude oil and 15 million cubic feet of natural gas from a leaking pipe at the bottom of the Gulf of Mexico, the first official admission that earlier estimates of the amount of oil spilling into sea were too small.

The amount of oil being captured is only a portion of the total because the company is catching oil from only one of two leaks. BP has also released a video that shows additional unquantified amounts of oil continuing to spurt out of the damaged pipe where the company is capturing oil through a new tube insertion. The smaller of the two leaks continues to spill unobstructed and accounts for 15 percent of the total flow, BP officials reiterated Thursday.

If BP's siphon is catching 5,000 barrels a day, the main pipe must be spilling a whole lot more than that. How much more?

The latest glimpse of video footage of the oil spill deep under the Gulf of Mexico indicates that around 95,000 barrels, or 4 million gallons, a day of crude oil may be spewing from the leaking wellhead, 19 times the previous estimate, an engineering professor told Congress Wednesday.

If that's the case, it means that probably more than 100 million gallons has already spilled into the gulf. That will soon make this, by far, the biggest peacetime oil spill in history. Kate Sheppard has more here and here.

And why has BP been so cagey about the size of the spill? Because the smaller it is, the lower their liability will be. “It’s always a bottom-line issue,” says Marilyn Heiman, a former Clinton administration Interior Department official who now heads the Arctic Program for the Pew Environment Group. “Any company wouldn’t have an interest in having this kind of measurement if they can help it.”