Kevin Drum - July 2010

A Note to the Right

| Wed Jul. 21, 2010 12:44 PM EDT

There have been three big conservative outrages that have choked the airwaves over the past couple of weeks. #1 was about a bunch of scary black men, the New Black Panther Party. #2 was about a bunch of scary Muslims who want to build a triumphal mosque on the sacred soil of Ground Zero. #3 was about a vindictive black woman who works for the government and screws the white people she deals with. The running theme here is not just a coincidence.

Honest to God, someone on the right needs to start talking about this. Not David Frum or Andrew Sullivan, who have long since been purged from the ranks of real right wingers. Someone that conservatives actually listen to. Pronto. Who's going to start?

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Corruption in Paradise

| Wed Jul. 21, 2010 12:01 PM EDT

Have you heard of the city of Bell? I didn't think so. It's one of the dozens of little municipalities that surround Los Angeles, and it's now on the surprisingly large list of such municipalities that are in trouble. In this case, it's because of an LA Times story revealing that the City Manager earns about $800,000, his assistant earns $400,000, the police chief makes nearly half a million dollars, and the city council members pay themselves $100,000 per year. All for a town with a population under 40,000.

Surprisingly, this is not actually all that surprising. The variety of corruption varies from town to town around LA, but there's a helluva lot of it. And Bell's is typical, the result of a small cadre of insiders who manage to gain control of the municipal apparatus and basically run it as their own little fiefdom. But the question is, have they actually done anything illegal? California law limits the pay of city councilmembers, but they got around that via a technicality: paying themselves not for being on the council, but for being on a variety of planning boards — all of which met infrequently and consisted solely of city councilmembers. The city manager and the police chief got loads of cash, but there's nothing illegal there. The city council voted to pay it to them fair and square.

But it's even worse than that! Here's the latest:

Bell City Council members are seeking the resignations of the city manager and two other top officials amid growing public outcry over salaries that appear to be among the highest in the nation, according to three sources close to the discussions.

Resigning would make City Manager Robert Rizzo, Police Chief Randy Adams and Assistant City Manager Angela Spaccia eligible for lucrative pensions. But the three also have contracts that protect them from being fired without cause.

As a result, unless they agree to resign, the city would face the prospect of buying out their contracts, which could cost hundreds of thousands of dollars in additional payments.

Isn't that great? These guys connive with the city council to get paid astronomical salaries, and when the gravy train finally ends they have (enforceable!) contracts that pay them big bucks if they're fired without cause. And since pensions are based on salary levels, they're entitled to astronomical pensions even if they do leave.

All I can say is: there just has to be something illegal here. I don't know what, but is it really possible that such an obvious abuse of the public trust can be legal? I know the answer to this: yes, it's possible. But in practice, I sure hope someone manages to figure out how to pin something on these guys.

The Chronic Jobless

| Wed Jul. 21, 2010 11:10 AM EDT

Mitch McConnell blasted President Obama's plan to extend unemployment insurance yesterday by claiming that his trillion dollar stimulus had failed and pointing to the "three chronically unemployed Americans" who stood next to Obama at a press conference on Monday as evidence. Greg Sargent:

The GOP game plan: Amid the debate over benefits, point to "chronic" joblessness — that's a word you'll be hearing more often — in order to illustrate that Dem economic policies are failing.

And later: While it's unanimously assumed that Dems hold all the political cards in this standoff, Republicans have their own strategy here. They believe that while Dems can milk this for short term advantage, over time any discussion of "chronic" joblessness — a term you'll hear more often — draws attention to the failure of Dem economic policies and feeds the GOP's larger critique of the inefficacy of the Dems' big spending ways.

True — but I think there's something more to it: talking about "chronic" joblessness is also a way of suggesting that some of the unemployed are shiftless and lazy. Someone who's "chronically unemployed" isn't your unlucky next door neighbor, it's those guys in the ghetto or down in the hollow who just hang around all day and have never held an honest job in their lives for more than a few weeks at a time. Are these the kind of people you want to run up the national debt for?

I didn't think so. But guess what? Democrats do!

Tom Vilsack Needs to Rehire Shirley Sherrod. Now.

| Tue Jul. 20, 2010 9:40 PM EDT

I've already tweeted a bit about this, but it's worth a blog post too. The full video of Shirley Sherrod doesn't show that she's a racist. What it shows is her telling a story about how, 24 years ago, she had to overcome her own underlying racial resentments in order to do her job properly. It shows her telling a story about how, with God's help, she learned that her job was about helping the poor, not about whether you're white or black or Hispanic. In other words, it's the exact opposite of what Andrew Breitbart tried to paint it as.

This should go without saying, but Tom Vilsack needs to apologize and rehire Sherrod, and he needs to do it with the same dispatch that he fired her with in the first place. If stories like Sherrod's are out of bounds, we've truly reached a new low in conservative mau mauing and racial cowardice.

Shirley Sherrod Update

| Tue Jul. 20, 2010 7:58 PM EDT

I've written a bunch of updates to my post this morning about the video of USDA Director of Rural Development Shirley Sherrod — the one posted Monday at BigGovernment.com where she allegedly fesses up to treating white people poorly — but you might have missed them if you don't routinely revisit posts you've already read. So here they are:

UPDATE: Agriculture Secretary Tom Vilsack, who quickly fired Sherrod after the video was posted, stands by his firing. The White House says they had nothing to do with it. The NAACP condemned Sherrod but then mysteriously deleted their statement from their website and announced they were "conducting an investigation." Andrew Breitbart says he doesn't have the entire video, just the edited version he put up. The guy who shot the video says he's sent the whole thing to the NAACP and hopes to post it when he gets permission.

That's the latest for now.

UPDATE 2: The NAACP backtracks: "With regard to the initial media coverage of the resignation of USDA Official Shirley Sherrod, we have come to the conclusion we were snookered by Fox News and Tea Party Activist Andrew Breitbart into believing she had harmed white farmers because of racial bias. Having reviewed the full tape, spoken to Ms. Sherrod, and most importantly heard the testimony of the white farmers mentioned in this story, we now believe the organization that edited the documents did so with the intention of deceiving millions of Americans."

Jeez. Fox News and Breitbart ginning up a phony outrage over some alleged liberal atrocity? Helluva hard thing to believe, isn't it?

UPDATE 3: The full video is here. The segment in question starts at 16:30 and goes for about five minutes. "You know," she starts, "God will show you things, and can put things in your path, so that you realize that the struggle is really about poor people." Then, after telling the story of Roger Spooner, she ends with this: "Working with him made me see that it's really about those who have versus those who don't. And they could be black, they could be white, they could be Hispanic."

Chart of the Day: Social Security

| Tue Jul. 20, 2010 7:20 PM EDT

According to Gallup, 60% of Americans now believe that they'll never see a dime from Social Security. As Dean Baker points out, this is a remarkable victory for the Social Security doomsayers. They've spent decades claiming that Social Security will go broke, and now a large majority of Americans believe them. They don't believe merely that benefits might be reduced — a perfectly reasonable guess — but that Social Security won't be able to pay them a benefit at all. That's loony tunes territory, and it's now what most Americans believe.

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China's Rough Seas

| Tue Jul. 20, 2010 3:28 PM EDT

On top of the jaw-dropping news that land values in Beijing have increased 800% over the past seven years, Gideon Rachman and others note that China is also losing some of its best friends: multinational CEOs, who have been a bulwark against China alarmism but are now growing tired of China's increasingly protectionist and nationalistic business policies. Rachman thinks that even taking account of its recent miscues China is still playing a pretty smart hand, but Dan Drezner disagrees:

And here I must dissent from Rachman. In some ways, I do think the Chinese government has been pretty stupid over the past year in executing its "Pissing Off As Many Countries As Possible" strategy. China rankled the Europeans over its climate change diplomacy at Copenhagen. For all of Beijing's bluster, it failed to alter U.S. policies on Tibet and Taiwan. It backed down on the Google controversy. It overestimated the power that comes with holding U.S. debt. It alienated South Korea and Japan over its handling of the Cheonan incident, leading to joint naval exercises with the United States — exactly what China didn't want. It's growing more isolated within the G-20. And, increasingly, no one trusts its economic data.

This doesn't sound like a government that has executed a brilliant grand strategy. It sounds like a country that's benefiting from important structural trends, while frittering away its geopolitical advantages. Alienating key supporters in the country's primary export markets — and even if Chinese consumption is rising, exports still matter an awful lot to the Chinese economy — seems counterproductive to China's long-term strategic and economic interests.

In the long term, yes, most of these are just nits that will soon be forgotten. Still, they add up, and China is entering a phase in which growth is almost certainly going to be harder to come by than it has been for the past three decades. My guess is that they know this and don't really know what to do about it. I expect more in the way of stormy seas ahead.

The GOP Choice: Now With Added Science!

| Tue Jul. 20, 2010 1:57 PM EDT

Last night I suggested that whenever Republicans do something that excites their tea party base, it scares off independent voters and actually helps Democrats. But all I did was eyeball a couple of Gallup charts to come up with this theory. Political scientist Phil Klinkner decided to run some numbers, which he emailed to me:

I correlated partisan levels of enthusiasm with independents' support for Democrats in the generic ballot. Here are the results:

Dem Enthusiasm -0.05
Ind Enthusiasm -0.1
Rep Enthusiasm .17

So, Democratic and Independent enthusiasm has no relationship with Indendents' generic ballot preferences. On the other hand, as Republicans become more enthusiastic, Independent support for the Democrats goes up.

This may be the key to a Democratic victory. Get Republicans so ramped up that they drive Independents into the D column. A quick estimate says that if 100 percent of the GOP is very enthusiastic about voting, then Independents will favor the Democrats by 3 points, in which case the Democrats should win by about 11 points.

Phil goes on to joke that Democrats should "buy blocks of TV time and give them free of charge to Joe Wilson, Michele Bachmann, and Mark Williams." In any case, I just wanted to let everyone know that my gut feel is now Backed Up By Science™.

Our Big Fat Housing Problem

| Tue Jul. 20, 2010 1:47 PM EDT

National Review editor Rich Lowry tweets, "If you read one piece on housing policy — and I know you might — make it this one." Well, I think I've already read about a hundred pieces on U.S. housing policy, but hey — what's one more? So here's "We Can’t Afford This House," by Christopher Papagianis and Reihan Salam:

At the end of June, the House of Representatives voted to extend the $8,000 homebuyers’ tax credit, by an extraordinary margin of 409–5. The Senate approved the measure on a voice vote. At a polarized political moment, this near unanimity was noteworthy in itself. Conservative Republicans and liberal Democrats, from cities and suburbs and small towns across the country, joined together to shower a bit more taxpayer largesse on one of America’s favorite industries: real estate. But there’s a problem with this bipartisan idyll.

Though the homebuyers’ credit was sold as a stimulus measure, we have no reason to believe that it is anything other than another wealth transfer to a large and powerful industry, one with allies conveniently situated in every congressional district. Casey Mulligan of the University of Chicago has suggested that the credit had almost no economic impact. As Harvard economist Edward Glaeser observed, it did little more than create an incentive for “mindless house swapping.” It didn’t even have a meaningful impact on the behavior of first-time homebuyers — people already planning to make purchases simply moved them forward a few months. Yet this is where we find a consensus in policymaking: We can’t agree on balancing the budget or reforming entitlements or the tax code, but we can agree to churn the housing market so that a handful of real-estate agents can make a buck on commissions while the economy crumbles.

It's a pretty good piece, and it gives me a chance to distinguish between good and bad in this particular genre. It's almost indisputable, I think, that the federal government has massively favored the expansion of homeownership over the past six decades. Government policy in a wide variety of areas — taxes, veterans programs, mortgage securitization, etc. — have all been designed to make homeownership ever more attractive for an ever greater portion of the population.

This is the good version of this story, and Papagianis and Salam do a good job with it. The bad version, which stories like this devolve into way too often, is to specifically blame the recent housing bubble on the Community Reinvestment Act and the GSEs — Fannie Mae and Freddie Mac, who are charged with buying up and securitizing conforming mortgages. Now, as near as I can tell, the CRA simply had nothing to do with the housing bubble at all. Blaming the CRA is just a plain invention designed to somehow blame Jimmy Carter and liberal race guilt for a housing bubble that was primarily engineered by Wall Street. The Fannie/Freddie story is a little more complicated, but most of the evidence I've seen suggests that although they were far from faultless in the housing bubble, they simply weren't a big driving factor. They screwed up badly, and taxpayers are going to pay a lot of money to make up for their screwups, but they were mostly following the market, desperately trying to regain market share from private actors who were extending ever screwier loans in an effort to prop up the great derivative machine that was making so many Wall Street bankers rich. Fannie and Freddie made things worse, but it was Wall Street that was driving the show.

So that's the good and the bad. If by "government policy" you mean the CRA and the crude version of the Fannie/Freddie story, you're just demagoguing. But if by "government policy" you mean the vast panoply of federal and state preferences for homeownership that have built up over the past half century, then you have a pretty good point to make. Papagianis and Salam tell the latter story, and it's worth a read.

It's hard to imagine anything actually happening, of course, because there are far too many homeowners who are registered voters to allow all these goodies to be taken away. It's the kind of thing that could only be done on a bipartisan basis, and the odds of that are slim indeed. But without that, Democrats won't dare do anything even if they were inclined to. The status quo has us stalemated.

Can Elizabeth Warren Run the CFPB?

| Tue Jul. 20, 2010 12:52 PM EDT

I only have one real concern about Elizabeth Warren as head of the new Consumer Financial Protection Bureau, and the Washington Post's Neil Irwin outlines it here:

Warren has an exceptional track record as an intellectual and as a public spokeswoman. But those are only a small slice of the responsibilities of an agency head. The leader of the new consumer financial protection bureau will need to hire hundreds, maybe even thousands of people, create an administrative structure from scratch, and oversee what is likely to be a long and arduous process of writing regulations that will govern millions of transactions. He or she will need to be sufficiently savvy in the inter-agency rulemaking process to avoid getting rolled by other regulators, particularly Sheila Bair at the FDIC and a newly named vice-chair for supervision at the Federal Reserve. Then there's the more basic task of maintaining good relationships in the White House and on Capitol Hill.

Looking at Warren's CV, it appears that her current job, as chair of the Congressional Oversight Panel, is her most extensive experience in or around government (she has also served on the FDIC's Committee on Economic Inclusion, among other advisory roles). She may well be an extraordinary manager who can finesse the policymaking process and who would have as deft a touch at managing an agency's internal politics as she is at managing her public profile. But given that she doesn't have that experience — or much policymaking experience at all — on her resume, the burden of proof will likely be on she and her allies to make that case.

I'm not really sure how you make a judgment about this. It's a serious issue, since starting up and running a big government bureaucracy is something that requires a very specific kind of administrative talent. But how do you know if someone who lacks previous managerial experience is likely to make a good manager?

Obviously, a personal interview as well as references from people who know her would be a big part of it. Beyond that, I think my take is that I'd choose Warren but insist that she hire a couple of very experienced, very DC-savvy deputies. That's a combination that often works well.

Via Ezra Klein, who notes that Irwin also mentions the possibility that Warren could end up being too much of a consumer protection crusader. Given the institutional pressures working in the opposite direction, though, I doubt very much that this is a big issue.