Kevin Drum - November 2010

Stuxnet Update

| Fri Nov. 19, 2010 1:13 AM EST

Here's the latest on the Stuxnet worm:

The paternity of the worm is still in dispute, but in recent weeks officials from Israel have broken into wide smiles when asked whether Israel was behind the attack, or knew who was. American officials have suggested it originated abroad.

The new forensic work narrows the range of targets and deciphers the worm’s plan of attack. Computer analysts say Stuxnet does its damage by making quick changes in the rotational speed of motors, shifting them rapidly up and down.

....Those fluctuations, nuclear analysts said in response to the report, are a recipe for disaster among the thousands of centrifuges spinning in Iran to enrich uranium, which can fuel reactors or bombs. Rapid changes can cause them to blow apart. Reports issued by international inspectors reveal that Iran has experienced many problems keeping its centrifuges running, with hundreds removed from active service since summer 2009.

Pretty clever of the Israelis, no?

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The War Against DADT Repeal

| Thu Nov. 18, 2010 10:55 PM EST

I'm not sure how seriously to take this, but Marcy Wheeler retweets this from petulantsage:

Every person I've talked to over the past 48 hours, who works for a 3 & 4-star agrees: it's open warfare. USMC and AF will kill repeal.

No surprise, I guess. The Marine Corps (too red-blooded for gays) and the Air Force (too evangelical Christian for gays) have always been the most opposed to repeal of DADT. We'll see who wins the war shortly.

New START and Its Discontents

| Thu Nov. 18, 2010 9:17 PM EST

Josh Marshall realized today that he didn't really know much about the New START treaty, so he made some phone calls to get up to speed. His report:

Have you heard this? Russia still has a massive strategic nuclear arsenal with pretty much the exclusive goal of being able to devastate the United States and kill pretty much all of us. For 15 years we had pretty robust right to inspect their arsenal many times a year, make sure they only had as many as they were allowed under our treaties and actually get up on the delivery missiles themselves and look at the payloads? Now we don't. In fact, we haven't since December 5th of last year.

At first that wasn't that big a deal. Not much can happen in a few weeks or few months. But now it's been almost a year. So all that trust but verify stuff Ronald Reagan was so into? Well, now we can't verify. And for as much as you're worried about some Muslim guy blowing up a plane and killing a few hundred people, these are weapons designed to kill hundreds of millions of people. Do you feel more secure knowing we're just taking everything on faith from the Russians? Or that our intelligence on their missile designs and practices is growing older by the day?

As it happens, yes, I have heard all this. But I think Josh is right: most people don't have a clue. And it does indeed seem like a massive messaging fail by the White House that they haven't been focused obsessively on pushing this message at every opportunity. Forget all the other aspects of the treaty. Forget the reduction in warheads, the reduction in ICBMs, or the reduction in heavy bombers. Forget about the quality of our relationship with Russia and its role in reining in Iran's nuke program. If there's anything that people ought to understand, it's that the treaty restores our ability to inspect and verify the Russian nuclear arsenal.

I've spent some time reading the technical objections that conservatives have to New START, and they're pretty inscrutable. Mostly they either strain the language of the treaty beyond recognition (to claim it obstructs missile defense, for example), criticize something the treaty doesn't even cover (tactical nukes, targeting strategies), object to provisions that both the military and the intelligence community say are fine (telemetry protocols, launch vehicle IDs), or simply rail against the whole idea of signing arms control treaties in the first place — as conservatives have done pretty much forever. There's practically nothing concrete to any of it.

But if we don't approve the treaty, we'll lose our ability to verify Russian nukes completely. That's about as concrete as you can get.

Popping the Corks for GM

| Thu Nov. 18, 2010 5:49 PM EST

Stephen Spruiell thows a bit of cold water on GM's much ballyhooed IPO:

Regarding the triumphalism attending GM’s IPO, let this post serve as a friendly reminder that GM still owes the U.S. government $43 billion; that its financing arm still owes $14.6 billion; and that its sick friend Chrysler still owes $8.2 billion.

....Let’s also keep in mind that many conservatives did not object to the idea of government-backed debtor-in-possession financing for GM and Chrysler at the height of the credit crisis, arguing that bankruptcy was unavoidable but that it might be necessary for the government to play a limited role in keeping the lights on at GM. The counterargument at the time, which one encountered constantly when arguing with bailout proponents, was that GM could not survive a bankruptcy — even a government-financed one — because the damage to its brand would be too great. Like many of the scare stories the automakers were telling at the time, this turned out to be false. It eventually became necessary for both GM and Chrysler to declare bankruptcy, and this did not prove fatal to either company. However, instead of providing simple debtor-in-possession financing, the TARP-financed bailout of the auto companies gave the Obama administration more control over the process, which it used to allow its union supporters to jump the line ahead of senior creditors. That’s exactly the kind of thing conservatives feared, and why we called for the government to have a much more circumscribed role if it was to have any role at all.

Look, no one is rooting for GM to fail, or for thousands of autoworkers to be laid off, or for the taxpayers to lose their entire stake in the company. But it is just ridiculous to start popping champagne corks left and right over the fact that an industrial problem child like GM managed to put its pants on today without falling on its face.

I'm surprisingly sympathetic to much of this. I remember my main reaction to the GM/Chrysler question at the time being, "I'm sure glad I'm not president of the United States right now." I really detested the whole idea of bailing out GM, but at the same time it was hard to convince myself that if I were actually in charge I'd be willing to risk the loss of another million jobs during the depths of the biggest economic turndown since the Great Depression.

And now? Like Spruiell, I'm far from convinced that GM is truly out of the woods, but I'm not as downbeat as he is over how this all played out. He's right about GM eventually declaring bankruptcy and coming through it OK, but the argument against bankruptcy, as I recall it, was mostly an argument against an uncontrolled bankruptcy. The main virtue of the eventual government involvement was not just that the feds provided some money, but that they were able to create a credible restructuring plan and then run it through the courts as a quick prepackaged bankruptcy. It's impossible to say for sure how much difference that made, but given that the feds were going to be on the hook for a lot of money regardless, it's hard to argue that it was worth taking any more chances than we had to.

And what was the downside? In the end the Obama administration didn't exercise all that much control over the company. The union deal has always stuck in conservative craws, but it was pretty defensible on purely practical grounds, and in any case the UAW almost certainly didn't come out of the process much better than they would have in a standard bankruptcy. And in the post-bankruptcy stage, the administration has taken an almost obsessive hands-off attitude toward GM's operations, especially considering that they were a 61% shareholder.

The precedent the GM bailout set wasn't great. But in the end, I think even conservatives ought to acknowledge that it was handled quickly and competently, and that afterward the Obama administration showed very clearly that it had absolutely no interest in using the government's stake to exercise control over the company. I wouldn't get too triumphal about GM's IPO either, but I guess I also wouldn't be too churlish about acknowledging that, all things considered, it turned out pretty well.

Are Dems Growing a Brain?

| Thu Nov. 18, 2010 3:06 PM EST

Greg Sargent reports:

Steny Hoyer, the number two in the House Dem leadership, told Democrats at a caucus meeting this morning that they would get to vote this year on just extending the Bush tax cuts for the middle class, a senior Dem aide tells me, signaling support for a confrontational move towards the GOP that liberals have been pushing.

I don't believe this. It's too smart. Not like Democrats at all.

Chart of the Day: Conservative Economists

| Thu Nov. 18, 2010 2:47 PM EST

I'm not sure what to say about this one. Mike Konczal recently surveyed a random selection of conservative economists who had signed a Cato letter opposing the stimulus bill in early 2009 to find out what they were thinking these days. It was totally unscientific and he ended up getting 29 responses. But unscientific or not, it's enlightening. According to these economists, neither low consumer demand nor an overvalued dollar really has much to do with our economic woes. By far the biggest problem, in their view, was regulatory uncertainty, closely followed by concerns over the budget deficit and Barack Obama's hostility toward the business community. Seriously. That's what they think. The mind reels.

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NPR's Nazis

| Thu Nov. 18, 2010 1:49 PM EST

Fox News chief Roger Ailes goes off the reservation about NPR executives:

They are, of course, Nazis. They have a kind of Nazi attitude. They are the left wing of Nazism.

Come on, Roger. Sure, NPR executives are Nazis. That goes without saying. But the left wing of Nazism? Don't you know that Jonah Goldberg long ago demonstrated that Nazis were actually liberals? This means that NPR executives are the Nazi wing of Nazism. Please clear this up with your staff ASAP before something like this gets on the air.

A Closer Look at Domenici-Rivlin

| Thu Nov. 18, 2010 1:24 PM EST

I got pretty burned out on deficit blogging after spending nearly a week writing about the Simpson-Bowles plan, which I continue to think is a poor starting point for a serious discussion of deficit reduction. So when the Domenici-Rivlin plan (henceforth D&R) came out, I only wrote one post based on their Washington Post op-ed and then couldn't work up the energy to say much more.

Which is too bad. To the extent that long-term deficit reduction is something we should try to address now, D&R is really a much better starting point. So here are some selected bullet points and comments about their plan:

  • One-year payroll tax holiday in 2011 to stimulate the economy. In one sense, this has nothing to do with deficit reduction. In fact, it increases the deficit. But as with tax reform, the argument here is that near-term stimulus is good for long-term growth, and long-term growth is good for deficit reduction. In any case, it's a good compromise idea for trying to get our stagnant economy moving again.
  • NOTE: Throughout the rest of this, keep in mind that my comments are strictly academic. I don't expect Republicans to even pretend to take any of this stuff seriously. In that spirit, a payroll tax holiday is a "good compromise idea" in a theoretical sense, but since in the real world Republicans are solely interested in tax cuts that permanently benefit rich people, there's no actual chance that this will gain bipartisan support. With that caveat out of the way, onward.
  • Cut tax rates, eliminate most deductions and credits. This is similar in spirit to Simpson-Bowles. One oddity of D&R is their endorsement of a reduction in the number of tax brackets to two (15% and 27%). I've never understood the infatuation with this idea. The complexity of the tax code has nothing to do with how many brackets we have, it has to do with how income is calculated and how many different loopholes there are for reducing your taxes. So the whole thing is pointless. What's more, although the D&R tax plan is more progressive than Simpson-Bowles, I suspect that it still gives a considerable break to the very highest earners. For that reason, I'd propose, at a minimum, a third bracket of 40% that kicks in at some very high level. Perhaps $1 million and above.
  • Add a VAT. For some reason D&R call their new tax a Debt Reduction Sales Tax instead of just calling it a VAT. I'm not sure why, but basically it's a 6.5% VAT. I don't have any big problem with this, though I'd probably prefer a carbon tax, which accomplishes much the same thing and helps reduce energy use. In any case, the DRST is basically an acknowledgment that an aging population is going to require higher spending levels than we're used to, so we can't pretend to cap spending forever at 21% of GDP. It's a welcome concession to reality.
  • Rein in the growth of Medicare. D&R do this by phasing out the employer tax break on health benefits, raising Medicare premiums, reducing prices paid to drug companies, bundling payments, medmal reform, and — of course — capping benefit growth to GDP + 1%. I'm beginning to think that this last provision has become the equivalent of "And may God bless America" at the end of presidential speeches: sort of a rhetorical flourish that everyone expects and you can't leave out. And who knows: maybe something like this will actually work. I have my doubts, though. If you say you're going to cut something, I want to hear concretely how you're going to cut it. Telling me instead that you're going to artificially cap growth is a cop-out. That said, D&R do have some useful ideas on Medicare, though they're just a starting point. We'll need much more before this is all done.
  • Fix Social Security. This part of their plan is almost eerily identical to Simpson-Bowles, but it doesn't raise the retirement age. I've already commented favorably on the Simpson-Bowles Social Security plan, and I think D&R is even better. I'd still tweak it a bit, but it's a perfectly fine starting point.
  • Freeze discretionary spending starting in 2012. I'm not a big fan of across-the-board freezes, and I doubt you can make something like this stick in any case. I'd rather see concrete proposals for program cuts, if that's what you think needs to be done. (D&R do make a few specific proposals, but they don't add up to much.) As I've said before, discretionary spending is pretty clearly not a big part of our long-term deficit problem; cuts would almost certainly come from weak claimants, not weak claims; and the political fight it would take to save a small amount of money just isn't worth it. Frankly, I'd jettison this part of the plan entirely, though I realize that by Beltway definitions of "serious," you have to have something like this to be taken seriously as a deficit cutter. Too bad.

That's the nickel version of D&R. As these things go, it's not bad, and unlike Simpson-Bowles it's fairly balanced between spending cuts and tax increases. It also doesn't assume a fundamentally conservative frame from the start by pretending we can limit federal spending to 21% of GDP forever. And the full plan includes a lot more serious detail than Simpson-Bowles, which should make it easier for tax experts to score.

For these reasons, of course, this means that it's a nonstarter with conservatives. It really is pretty balanced, and because of that I expect it to be pretty roundly denounced by all the same righties who denounced liberals for not loving a fundamentally conservative deficit plan.

California, Bellwether for the Nation

| Thu Nov. 18, 2010 11:47 AM EST

This comes from the LA Times, but I think it could be the lead story in pretty much any newspaper in the country:

Californians object to increasing taxes in order to pare the state's massive budget deficit, and instead favor closing the breach through spending cuts. But they oppose cuts — and even prefer more spending — on programs that make up 85% of the state's general fund obligations, a new Los Angeles Times/USC Poll has found.

That paradox rests on Californians' firm belief that the state's deficit — estimated last week at nearly $25 billion over the next 18 months — can be squared through trimming waste and inefficiencies rather than cutting the programs they hold dear. Despite tens of billions that have been cut from the state budget in recent years, just a quarter of California voters believed that state services would have to be curtailed to close the deficit.

Well, there you have it. This is America in a nutshell.

Of course, one might well wonder just why voters are so convinced that nearly a quarter of the state budget is waste and inefficiency. Certainly some of the budget falls into that category, but a quarter? Where could voters have gotten that idea? Any guesses?

The Rescue of Ireland

| Thu Nov. 18, 2010 11:20 AM EST

Here is your unsurprising news of the day:

Irish officials acknowledged for the first time Thursday that the country was seeking aid from international lenders to end the debt crisis that has hurt confidence in its long-term finances and renewed doubts about the stability of the euro....“We’re talking about a very substantial loan for sure,” Patrick Honohan, governor of the Central Bank of Ireland, said earlier in a radio interview on the Irish state broadcaster RTE, and such a rescue would be “in the tens of billions” of euros.

Gee, who could have guessed that Ireland was going to take a bailout even though they kept saying everything was fine? My only real question at this point is whether anyone actually believes this loan is ever going to be paid back. I'm pretty skeptical. Then again, a few weeks ago I read that the final debt payment from World War I had finally been paid off, so I suppose maybe this stuff should be thought of on a century-long timescale. Perhaps by 2110 we'll all be pure energy creatures and won't care about money anymore. That should solve Ireland's problem nicely.