Kevin Drum - December 2010

Quote of the Day: BP's Blossom

| Wed Dec. 29, 2010 2:37 PM EST

From Rep. Ralph Hall (R-Tex.), incoming chairman of the House Committee on Science and Technology, on the BP oil spill:

As we saw that thing bubbling out, blossoming out — all that energy, every minute of every hour of every day of every week — that was tremendous to me. That we could deliver that kind of energy out there — even on an explosion.

Words fail me.

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Yet More Whiny Bankers

| Wed Dec. 29, 2010 1:30 PM EST

Yesterday Politico ran the 28th in a series of articles about how much the business community hates Barack Obama (stats courtesy of TNR's James Downie). Tuesday's piece was specifically about Wall Street and how deeply hurt they are that Obama has very occasionally said some not very nice things about them. It's mighty sad. About halfway down, though, we get to the real nub of their discontent:

"You have to understand, it is very personal. He raised money from us," one executive at a top bank said. "Then he started calling us bad people. So forgive us for not wanting to buy him a drink after getting punched in the eye."

....Christopher Whalen, investment banker, author and cofounder of Institutional Risk Analytics, said the distaste isn't policy-related, it's personal. Wall Street disdains Obama," Whalen said. "Hate is too strong a term. Obama is publicly disrespectful, thus Wall Street complains."

....Brad Hintz, former Lehman Brothers chief financial officer and now an analyst at Sanford C. Bernstein, said [...] "the 2009 vilification of the entire financial-services industry by the political powers went beyond the pale and struck at the self-image of the leaders of Wall Street."

"Remember, Wall Street is dominated by Ivy-League-educated bankers who studied liberal arts at good schools, read the right papers and magazines, donated to good causes, advised their employees to perform community service, counseled their partners to live understated lifestyles, voted for the 'right' candidates and who live in populist suburbs of liberal blue states. It's not the oil industry."

Italics mine. No matter how many times I read pieces like this, I just can't get over how thin-skinned these guys are. Random bloggers get more criticism in a day than Wall Street has gotten in two years from the Obama administration, and of course even that mild criticism came along with enormous truckloads of concrete support for the banking industry. They got TARP, they got their bonds paid off at 100%, they got cramdown defeated, they got away with essentially no compensation limits, and they got a very industry friendly financial reform bill from the White House (which was only slightly tightened up by Congress). No banks were broken up, Chuck Schumer has made sure that the carried interest rule is still the law of the land, low interest rates have given banks an almost literal license to print money, Fannie and Freddie continue to prop up the housing market, and Wall Street profits are at all-time highs only two years after an epic global meltdown that was largely their fault. But they're still upset because Obama called them fat cats once and hasn't spent enough time on the phone stroking their egos and telling them how much the United States depends on their rock jawed stewardship of the capital markets.

Jesus Christ. Wall Street would be a smoking crater if it weren't for the fundamentally pro-banking orientation of the Obama administration. But that's not enough. I guess money isn't everything after all, even if you have lots of it.

Who Will Rid Us Of These Meddlesome Internets?

| Wed Dec. 29, 2010 1:00 PM EST

Atrios is amazed at the almost universal condemnation of WikiLeaks from mainstream journalists — a group of people who, of course, rely heavily on leaks both classified and unclassified to do their daily business:

It isn't exactly the same thing, but moments like this I'm reminded of a time years ago when I was talking at a conference about internets and stuff to a not entirely plugged in audience and a man stood up and said something like, "You mean, people can just say whatever they want on the internet? Don't we need to do something about that?"

I guess you shouldn't make too much out of a single comment, but this is astonishingly similar to something that happened to me. It was several years ago, when blogs were still sort of newish, and I was invited to speak to an informal group of West LA liberals about what the whole blog thing was about. I didn't end up saying much because the first two speakers pretty much said everything that needed saying, but I remember being flabbergasted when the whole concept finally sunk in and one lady in the audience asked (paraphrasing from memory), "So anybody can just say anything? Isn't that dangerous? Shouldn't somebody be responsible for all this?"

It left me slackjawed enough that I couldn't really think of a response, but I think Eugene Volokh stepped in to say something soothing. In fairness, I suppose comments like this might simply be poorly phrased concerns that loudmouths with no expertise and no real commitment to fairness are getting a lot of attention they might not deserve, which is surely a reasonable attitude. Except, of course, that this phenomenon predates the internet by about ten thousand years and has been an ever-present part of our modern media lives ever since Rush Limbaugh became the leader of the Republican Party. Good times.

The Republican Agenda

| Wed Dec. 29, 2010 12:33 PM EST

Matt Yglesias speaks truth here:

One of the weirder things about the discussion in the media during the 2010 election campaign was people were acting like there was some big mystery about the likely policy direction of the Republican Party. But we’re not talking about a 1952 scenario where a group of people who’ve been out of office for a long time suddenly come back. There was a Republican congress from 1995 until 2006. There was a Republican President from 2001 until 2008. We had unified GOP control in 2003, 2004, 2005, and 2006 plus most of 2001. The agenda was cutting taxes and making regulatory supervision of various things as lax and business friendly as possible.

When the dust settles, I think it's pretty safe to say that will be the Republican agenda in 2011 as well.

He Said, She Said

| Wed Dec. 29, 2010 12:21 PM EST

David Sessions reads a New York Times piece about end-of-life consultations, which will be funded by Medicare starting on January 1, and notes that the only dissenting view in the article comes from Elizabeth Wickham, a conservative activist with no credentials to speak of, no real influence within the conservative movement, and a history of extremism. He's unimpressed:

Here is another unfortunate instance of the Times throwing in a social conservative to maintain “balance.” Look through the paper’s archives and you’re sure to find dozens of iterations of this formula, on issues ranging from abortion to women’s health to repealing Don’t Ask Don’t Tell. After the story lays out the expert or scientific consensus and the generally agreed-upon facts, a random social conservative — often one without any credentials on the issue or with a trail of insane statements to their name — will be trotted out to dispute them.

....My point here is not, of course, that dissenting or conservative viewpoints should be banned from the New York Times. In fact, this sort of drive-by citation of ideologues does a disservice both to conservatives when they actually have legitimate points and to readers who want to consider alternate perspectives. Wickham’s quote was transparently included just to establish “balance,” and readers are left without any clear idea of whether there is reason to doubt the consensus view. If there is serious disagreement, the reporter should find a credible source and thoroughly explain his or her position. If a prominent Republican or conservative leader vowed to fight the measure, then make note of it. But if there is no serious opposition, or if the serious opposition is dealing in paranoid cant, then I’d love to read a newspaper with the balls to say so.

I suppose there's a liberal version of this too, and you can certainly make an argument that news organizations shouldn't restrict themselves solely to comments from major politicians and big national interest groups. Still, Sessions has a point. Is there really any serious opposition to end-of-life counseling? Does anyone in Congress plan to do something about this? Does Elizabeth Wickham speak for much of anyone, or is she the activist equivalent of digging up a blog comment somewhere because you can't actually find anyone more important to provide the comment you're looking for? That would be good to know.

The Housing Market's Double Dip

| Wed Dec. 29, 2010 12:02 PM EST

The LA Times greets my return to blogging with some grim news this morning:

Prices of previously owned single-family homes fell 0.8% in October from the same time last year, according to the Standard & Poor's/Case-Shiller index of 20 metropolitan areas. The closely watched index fell 1.3% from September to October as six metro areas hit fresh lows.

"It is grim, baby. We don't see any basis for sustained price increases in 2011," said Glenn Kelman, chief executive of online brokerage Redfin. "Prices are going to be in the doldrums all year, and usually you look for housing to lead the overall recovery, but that seems doubtful."

We're now starting to see housing data that fully reflects the end of the end of the housing tax credit earlier this year, and sure enough, prices have started to fall again. Ezra Klein points us to Gary Shilling for more, and I find Shilling partly persuasive and partly not. However, the bulk of his argument is sound, especially his observation that housing inventory is still abnormally high:

This huge and growing surplus inventory of houses will probably depress prices considerably from here, perhaps another 20% over the next several years. That would bring the total decline from the first quarter 2006 peak to 42%.

This may sound like a lot, but it would return single-family house prices, corrected for general inflation and also for the tendency of houses to increase in size over time, back to the flat trend that has held since 1890.

I guess, in the end, I'm not quite sure if I'm that pessimistic. But I'd say that a further decline of 10% is almost inevitable, and 20% is certainly quite possible. What that does to the broader economy is still a question mark.

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Housekeeping Note

| Mon Dec. 27, 2010 1:15 AM EST

We're going to take another crack at painting my underground lair study on Monday, and that means I have to unplug everything, including my cable modem and thus my internet connection. At least, that's what I think I'll have to do. If I get desperate, I may find some local WiFi spot and do a bit of blogging, but probably not. Most likely, I'll be offline all day Monday and maybe a bit longer. However, I'll be back Tuesday evening at the latest. See you then.

The Priorities of the Left

| Mon Dec. 27, 2010 1:06 AM EST

My post earlier today about the decline of organized labor and the rise of rights-based activism within the post-60s liberal community provokes an obvious question: was this a good thing?

Obviously it was good for African-Americans and women and gays and others who benefited from it. But it wasn't so good for the economic fortunes of the working and middle classes. And that was almost certainly the tradeoff we made. In the 70s and beyond, probably 80% of the money and emotional energy that sustained the Democratic Party came from environmental and rights activists. But within the Republican Party, money and energy were about evenly divided between social conservatives and the business community. What happened after that was unsurprising: on social issues, where 80% of the liberal party was fighting 50% of the conservative party, liberals made a lot of progress. On economic issues, where 20% of the liberal party was fighting 50% of the conservative party, liberals steadily lost ground. And when Democrats decided to become more "business friendly" in the late 80s, we lost even more ground. That's how things played out, and under the circumstances that's pretty much exactly how you'd expect them to play out.

But if you could travel back in time and change things, would you? Would you prefer that organized labor had retained its traditional power broker role in the Democratic Party and fought the rise of corporate power and middle class wage stagnation more effectively, even if it meant that progress on social issues had been quite a bit slower than it was? Would you?

At the time this was all unfolding, I don't think anyone consciously realized the choice that was being made. But even now, when that choice is clearer in hindsight, I don't know if it was the right one. Comments?

The World's Real Oil Problem

| Mon Dec. 27, 2010 12:39 AM EST

Paul Krugman writes about the rising global price of commodities:

Oil is back above $90 a barrel. Copper and cotton have hit record highs. Wheat and corn prices are way up. Over all, world commodity prices have risen by a quarter in the past six months.

....Today, as in 2007-2008, the primary driving force behind rising commodity prices isn’t demand from the United States. It’s demand from China and other emerging economies. As more and more people in formerly poor nations are entering the global middle class, they’re beginning to drive cars and eat meat, placing growing pressure on world oil and food supplies.

And those supplies aren’t keeping pace. Conventional oil production has been flat for four years; in that sense, at least, peak oil has arrived. True, alternative sources, like oil from Canada’s tar sands, have continued to grow. But these alternative sources come at relatively high cost, both monetary and environmental.

Oil plays a role in the world economy that's far more important than any other commodity, so when I'm in a mood to worry I worry about oil prices. I don't know if we've hit peak oil, but we have reached the point at which the growth of supply has reached the point where it can barely keep up with growing demand in a normal economy. (More here about that.) This means that whenever the economy is growing at a decent pace (and driving up demand for oil with it), the price of oil will inevitably rise sharply and slow down the global economy (at best) or throw us into another recession (at worst). In other words, oil has become a permanent limit to world economic growth.

Or maybe not. Like I said, it's just something to worry about when I'm in a worrying mood. Feel free to ignore this if you have other things to worry about.

Democrats and Their Interest Groups

| Sun Dec. 26, 2010 12:42 PM EST

Neal Gabler thinks modern Democrats are a bunch of milksops:

In the days of FDR, the Democratic Party, despite its factions and disagreements, coalesced around one overriding tenet: muscular government action, especially in behalf of the powerless....Belief in the efficacy of government was a prerequisite to gaining the nomination. Democratic aspirants didn't lurch rightward or pray for common ground. They stood and fell on principle. But that was then. The fact is that nowadays you don't get the Democratic presidential nomination unless you are willing to soft-pedal activist liberalism.

OK, but why have Democrats become such wimps?

Sometime in the 1970s, the Democratic Party became basically an "interests" party. It stopped pressing government action as an overriding binding principle and began instead to appeal to individual interest groups: African Americans, Hispanics, women, labor, gays, youth and even Blue Dogs. Anyone who hopes to make headway in the nominating process has to find a way to appeal to many if not all of them. Still, most of these are situated at the left of the political spectrum. Prospective nominees must also appeal to elected Democrats, party officials and, perhaps most of all, those realists who, remembering McGovern's quixotic anti-Vietnam debacle, want desperately to win and believe that only a centrist can do so. This compels aspirants both to placate and temporize.

But this is only half the story. If power in the Democratic party fragmented and then flowed to individual interest groups dedicated to social issues in the 70s, it must have flowed away from a big, well-organized interest group devoted to government action as a way of comprehensively helping the poor and the working class. I wonder which interest group this could be?