Kevin Drum - March 2011

Tight Money, Lousy Economy

| Thu Mar. 24, 2011 3:36 PM EDT

Economist Scott Sumner is aghast at his profession:

If pressed, Keynesians will usually point to real interest rates as the right measure of monetary ease or tightness. By that criterion the Fed adopted an ultra-tight monetary policy in late 2008. Monetarists will usually say that M2 is the best criteria for the stance of monetary policy. By that criterion the ECB adopted an ultra-tight monetary policy in late 2008. And yet it’s difficult to find a single prominent macroeconomist (Keynesian or monetarist) who has publicly called either Fed or ECB policy ultra-tight in recent years. Maybe tight relative to what is needed, but not simply “tight.”

I’m calling out my profession. Do they really believe what they claim to believe about good and bad indicators of monetary tightness? Or in a crisis do they atavistically revert to the crudest measure of all, nominal rates.

Tight money and inadequate fiscal stimulus, two terrible tastes that taste even worse together. It's almost as though we want our economy to suck for as long as it possibly can.

Advertise on MotherJones.com

Europe's Problem

| Thu Mar. 24, 2011 1:29 PM EDT

Ryan Avent is nervous about Europe:

It seems clear that Greece is insolvent, and Ireland probably is too. Portugal is more of a borderline case, but it's becoming less so by the day. Angela Merkel is demanding austerity in exchange for a bail-out; well, the government just revised down expectations for the economy this year. It now says that Portugal's economy may shrink by 0.9% in 2011, where before it was expected to grow at a 0.2% pace. Austerity will likely slow the economy further, reducing Portugal's ability to pay its debts. And remember, the European Central Bank is about to raise interest rates.

There are several big problems to handle here, but one big one is obvious—Greece, Ireland, and Portugal are probably all busted. They simply can't meet their obligations. Their debt will almost certainly need to be restructured. The euro zone isn't excited about doing this now, partially because it's worried about its banks and partially because it's hoping it won't come to that. But default looks inevitable.

It's easy to say this from a distance, but Merkel and other European leaders have their heads in the sand. They don't want Greece, Ireland, or Portugal to default because that would mean big losses for banks in their own countries, which would then have to be bailed out. But they also don't want to directly bail out the insolvent countries, because voters wouldn't like that much. So they're kicking the can down the road with half measures and hoping that somehow things turn up. It's a recipe for stagnation at best and disaster at worst.

Chart of the Day: Who Are the Rebels?

| Thu Mar. 24, 2011 12:15 PM EDT

So who are the Libyan rebels that we're now supporting in their fight against Muammar Qaddafi? Mark Thompson reports that a lot of them are the same folks who were fighting us in Iraq four years ago:

A West Point analysis of the foreign fighters involved in the increasing carnage showed that the nation sending the most militants to Iraq from August 2006 to August 2007, was, on a per-capita basis, Libya....Drilling down into the data, the December 2007 examination from the U.S. Military Academy's Combating Terrorism Center showed that nearly all of the Libyan fighters came from the northeastern part of the country [Darnah and Benghazi in the pie chart above], which is where the rebels we are now helping hail from. It's a small sample, but something to keep in mind.

Just another data point to tuck into the back of your mind as all this stuff unfolds.

The Coming GOP Spectacle

| Thu Mar. 24, 2011 11:00 AM EDT

Speaking of Sarah P., I just want to say that I am so looking forward to the Republican primary campaign this cycle. It looks like Michele Bachmann is going to run, Palin might run, Newt Gingrich is probably going to run, Jim DeMint seems like he might run, and I suppose Ron Paul will run again too. This is a freak show of stupendous proportions, and it would be perfect if Donald Trump really did decide to join all these nutbags on the stage during the debates.

I guess I'm wondering how these debates are going to go. I mean, the party line even among the relatively sane wing of the GOP holds that Obama is a socialist Kenyan sleeper agent, global warming doesn't exist, millionaires are taxed too highly, and Ben Bernanke is courting hyperinflation. Parroting those positions won't make you stand out from the pack, so the crazy wing is going to have to up the ante. But how? Obama needs to turn over a DNA sample to prove he's not a mutant mole? Our real danger is the potential for ice caps to start forming in Los Angeles by the middle of the century? We should take a cue from the airlines and give rich people a million-dollar-club card from the government that exempts them from all taxes for the rest of their lives?

Can the Republican Party survive a spectacle like this? Sadly, yes, it can. Can Mitch Daniels and Tim Pawlenty and Mitt Romney? Probably not. But at least it should be entertaining.

(And just for the record, I can afford to take this lightly because I believe Obama is a shoo-in for reelection. Short of Great Depression 2.0 or something like that, Republicans have zero chance of regaining the White House next year.)

Quote of the Day: No More Whining For Sarah

| Thu Mar. 24, 2011 10:27 AM EDT

From Sarah Palin, promising to turn over a new leaf:

I'm through whining about a liberal press that holds conservative women to a different standard, because it doesn't do any good to whine about it.

Well, OK. But what does she have left to talk about if whining about the media is now off her plate?

Stimulus vs. Anti-Stimulus

| Thu Mar. 24, 2011 9:58 AM EDT

See update below.

Matt Yglesias reminds me of something this morning. He says:

Federal spending cuts shrink the federal budget deficit and constitute a negative shock to aggregate demand. States have to balance their budgets, so the alternative to a lower level of spending would be a higher level of taxes. In [aggregate demand] terms, it’s basically going to be a wash either way. It's the failure of congress to enact some kind of state/local bailout appropriation that’s forcing the anti-stimulative state level stuff.

This is based on the basic GDP formula: GDP = Consumption + Investment + Government Spending - Taxes + Net Exports. If state spending goes up, that represents an increase in GDP, but if it's matched dollar for dollar with increased taxes, then it's a wash. Ditto for spending cuts. It's different for the federal government, of course, because the feds can raise spending without raising taxes. States can't.

This comes up because I posted a chart a couple of days ago showing reductions in state spending over the past four years and commented that these reductions "wiped out nearly the entire effect of the federal stimulus package." A reader emailed to say this was wrong, that they were actually neutral if they were accompanied by reductions in tax revenue. I realized he had a point, though this depends a lot on details, especially on whether state spending reductions have outpaced declines in tax revenue; whether states can increase their bond issues instead of raising taxes; and whether states have been dipping into their rainy day funds sufficiently. Still, it's a good point, and I'd like to hear a response from some of the economists who have said otherwise. Is there something missing here that complicates the picture?

In any case, it's true that the real failure is the federal government's failure to bail out the states temporarily, which would have been one of the most effective stimulus measures possible. Surely states deserve a bailout at least as much as AIG and Citigroup did?

UPDATE: Robert Waldmann writes in comments that I'm wrong. Taxes don't show up in the GDP identity. He's right. So this whole post is screwed up and you should ignore it.

But.....there's still something off here. Increasing federal spending is stimulative because you can do it without raising taxes. Likewise, decreasing it is anti-stimulative if taxes stay the same. But state spending generally has to match taxes, so raising or lowering state spending has no stimulative or anti-stimulative effect except at the margins. Right?

Or not right? Somebody help! It's true that states have a certain amount of borrowing capacity (bond issues, spending down rainy-day funds, etc.), and also true that higher spending balanced by taxes on the rich might be mildly stimulative. But that's a fairly small effect.

Anyway, for now, ignore all this. If someone provides some kind of definitive answer, I'll link to it.

Advertise on MotherJones.com

Libya's Thousand-Man Rebellion

| Thu Mar. 24, 2011 12:52 AM EDT

The New York Times reports on what an insider says about the state of the rebellion in Libya:

After the uprising, the rebels stumbled as they tried to organize. They did a poor job of defining themselves when Libyans and the outside world tried to figure out what they stood for. And now, as they try to defeat Col. Muammar el-Qaddafi’s armed forces and militias, they will have to rely on allied airstrikes and young men with guns because the army that rebel military leaders bragged about consists of only about 1,000 trained men.

A thousand men? If that's true, then there's virtually no chance of Qaddafi losing this war. For this and other reasons, Adam Garfinkle believes it's almost a certainty that the French and British will have to send in ground troops if they're genuinely committed to expelling Qaddafi, and this in turn could spell trouble for us:

So what happens if the French and British try but do not succeed in a reasonably expeditious way? What happens is about as obvious as it gets: not Suez happens. The Americans come and save the day, as they demurred from doing in October 1956. The French and British know in their heart of hearts that we cannot let them fail miserably at this, or that’s what they suppose. I suppose they’re right.

What this means is that the President may before very long be forced to make the most excruciating decision of his life: to send American soldiers into harm’s way to save the Western alliance—even from an operation that is not explicitly a NATO mission!—in a contingency that has no strategic rationale to begin with; or not, leaving the alliance in ruins and Qaddafi bursting with plans to exact revenge.

What's worse, even if Garfinkle is being unduly pessimistic and we manage to oust Qaddafi successfully, we still don't seem to have any idea whether the rebellious tribes are really any better for Libya or for us than the tribes currently aligned with Qaddafi. Helluva war we have going here.

How Many Birds?

| Wed Mar. 23, 2011 4:49 PM EDT

OK, so how big is our bird predation problem? Did I get an answer to my question from last night?

Probably. But first a few related items that multiple people pointed out in comments. First, habitat destruction is a way bigger problem than cats, so if you want to worry about the fate of North American birds, that's #1 on your list. Second, overall numbers are only part of the story. Even if cats aren't responsible for wholesale decimation of the bird population, they might still be responsible for serious damage to specific species in specific places. Third, although it's true that it's natural for cats to kill birds, the cat population in the United States is artificially high thanks to all of us cat lovers who keep them as pets. So the total amount of feline bird hunting is higher than it would be in a state of nature. There's more in the comment thread if you're interested.

Still: how many damn birds are there in the United States? John Trapp rounds up the literature here and figures the best guess is around 10 billion birds in spring and 20 billion in the fall. Meanwhile, the aptly named book, "How Many Birds Are There?" estimates 200-400 billion birds for the entire world, which is pretty consistent with 10-20 billion in the U.S.

So, assuming once again that cats really do kill 500 million birds a year, as the American Bird Conservancy claims, it means they kill something like 3% of the total bird population of the country. The error bars are probably fairly large on this number, but at least it provides the right ballpark. So now you know.

The New Media Rules

| Wed Mar. 23, 2011 12:59 PM EDT

ThinkProgress has a post up today that shows Newt Gingrich unequivocally supporting a no-fly zone over Libya two weeks ago and then equally unequivocally opposing it today. The only thing that's changed in the meantime is that two weeks ago President Obama opposed a no-fly zone and today he supports it. So Gingrich is consistently taking the anti-Obama position, whatever that happens to be.

Well, whatever. With Obama being a socialist tyrant out to destroy America and all, anti-Obamaism is pretty much the state religion of Republicans these days. But I always kind of wonder what these guys are thinking when they do such an obvious and public U-turn. Do they think no one is going to catch them? Or do they not really care because they don't think the public really cares?

I think it used to be the former, but has lately become mostly the latter. Back in the day, I remember a lot of people saying that it was getting harder for politicians to shade their positions — either over time or for different audiences — because everything was now on video and the internet made it so easy to catch inconsistencies. But that's turned out not to really be true. Unless you're in the middle of a high-profile political campaign, it turns out you just need to be really brazen about your flip-flops. Sure, sites like ThinkProgress or Politifact will catch you, and the first few times that happens maybe you're a little worried about what's going to happen. But then it dawns on you: nothing is going to happen. Your base doesn't read ThinkProgress. The media doesn't really care and is happy to accept whatever obvious nonsense you offer up in explanation. The morning chat shows will continue to book you. It just doesn't matter.

And that's got to be pretty damn liberating. You can literally say anything you want! And no one cares! That's quite a discovery.

The Latest From Karl Rove

| Wed Mar. 23, 2011 12:38 PM EDT

David Corn reports that Karl Rove, that well-known champion of openness in government, has started up a new project called Wikicountability.org, which plans to collect documents about the Obama administration obtained via the Freedom of Information Act and offer them for crowd-sourcing in one, easy-to-access place. David is unimpressed:

This Crossroads GPS project, though, is built upon a profound incongruity. The conservative organization is championing accountability and openness, yet it does not disclose the well-heeled funders and special interests underwriting its own efforts to shape the political system....NBC News reported that a "substantial portion of Crossroads GPS' money came from a small circle of extremely wealthy Wall Street hedge fund and private equity moguls." Crossroads GPS is the poster-nonprofit for secret campaign mega-money....But now this secretive organization is deploying the issue of open-government to assail the Obama administration, which has a better record on openness issues than previous administrations.

I don't really see this. Rove runs a private group that's not required to release information about itself. The federal government is a public institution that is supposed to release information about itself. Even if Crossroads GPS were required to divulge its major donors (a good idea, I think), it would still be able to keep the vast majority of its inner workings confidential, and rightly so. It's just not comparable to a government agency that works for the public.

So I guess I'd absolve Rove of any serious hypocrisy here. So far, though, his new project does seem to be trafficking in both idiocy and inaccuracy, which is a little harder to defend. David has more about this at the link. Still, if Rove wants to keep an eagle eye on the Obama administration in order to gain partisan advantage, I can't complain. Who's going to keep a better watch on possible government corruption than political opponents, after all? It's the idiocy and inaccuracy, which I have no doubt are going to continue, that are harder to take.