Kevin Drum - September 2011

Chart of the Day: Housing Boom, Housing Bust

| Tue Sep. 6, 2011 1:29 PM EDT

Via Brad DeLong, this chart shows how much housing was "overbuilt" during the aughts compared to how much it's been underbuilt since the collapse of the housing bubble. As you can see, on net, we're now way, way underbuilt, which means we should be all set for a renaissance of housing construction. Assuming anyone still has the money to buy a house, that is.

Of course, there's another way to look at this: why did home prices rise so furiously even though we were building lots of homes? That's odd, no? Simple supply and demand suggests that when the supply of something goes way up, its price should go down. But it didn't — and it's not because the fundamental demand for housing suddenly skyrocketed. It was because Wall Street could make a lot of money from a housing bubble, so they invented the financial artistry to get one. Thanks, guys!

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Koch, Obama, and Saddam Hussein

| Tue Sep. 6, 2011 12:09 PM EDT

Brad Friedman has obtained an audio recording of a seminar held by the  Koch brothers earlier this year near Vail, Colorado, and today we've got a piece about the seminar up on our site. Here's how it starts:

"We have Saddam Hussein," declared billionaire industrialist Charles Koch, apparently referring to President Barack Obama as he welcomed hundreds of wealthy guests to the latest of the secret fundraising and strategy seminars he and his brother host twice a year. The 2012 elections, he warned, will be "the mother of all wars."

This has prompted a lot of people to insist that Koch compared Obama to Saddam Hussein. And maybe he did. But here's the whole passage:

But we've been talking about — we have Saddam Hussein, this is the Mother of All Wars we've got in the next 18 months. For the life or death of this country. So, I'm not going to do this to put any pressure on anyone here, mind you. This is not pressure. But if this makes your heart feel glad and you want to be more forthcoming, then so be it.

Can I offer an alternative explanation? Obviously Koch was a little muddled here and never finished his thought, so it's hard to say exactly what he meant. But Saddam Hussein famously called the first Gulf War "the mother of all battles," and it's quite possible that Koch intended something like, "Saddam Hussein called the Gulf War the mother of all wars, and for us, this is the mother of all wars we've got in the next 18 months."

I don't know this for sure, any more than anyone else knows what that stray fragment meant. Koch obviously had some kind of quip in mind, but never managed to actually deliver it. But suggesting that he meant to compare Obama to Saddam Hussein is a stretch. At the very least, there's at least one other quite plausible interpretation.

Quote of the Day: Voting for the Real Deal

| Tue Sep. 6, 2011 11:28 AM EDT

From Bruce Bartlett, commenting on the unwillingness of Democrats to stick up for their principles:

If Democrats are going to accept Republican premises, they shouldn’t be surprised if a majority of people eventually conclude that Republicans ought to be in charge of government policy.

Yep. Years ago, it was conservative Republicans who pointed out that if the choice was between a Democrat and a Democrat-lite, voters would most likely just vote for the real deal. They learned a lesson from that, and it's one that Democrats now need to learn. If you concede up front that deficits are our biggest problem, that tax increases are bad for the economy, that we can't afford any further stimulus, and that regulations are job killers, that's not going to win you many votes. After all, if this kind of thing appeals to you, why vote for a Democrat who only kinda sorta believes it? You might as well vote for the real deal instead.

Seeing the Future in California

| Tue Sep. 6, 2011 11:05 AM EDT

Remember those polls showing that Democrats and independents support political compromise far more than Republicans? And remember that Pew poll a couple of weeks ago showing that this was starting to change? Compared to four months ago, centrist-leaning voters were upwards of ten points more likely to think Obama should challenge the GOP more often. If this keeps up for a little while longer, the political landscape would look a lot different than it does now.

Well, my friends, the future is here. In California, Democrats and independents are fed up. According to a new LA Times poll, a full 60% agree that "I want Obama to stand up to Republicans more and fight for my priorities." If California is once again a bellwether for the nation, this is good news. Unfortunately, if California is once again a bellwether for the nation, it means the rest of the nation may soon be like California. This should give us all pause for thought.

The GOP's Love-Hate Relationship With Stimulus

| Tue Sep. 6, 2011 10:23 AM EDT

Ezra Klein rounds up a series of quotes from 2001 showing that Republicans loved the idea of fiscal stimulus back when a fellow Republican was wrestling with a recession. But now they hate the idea:

So what happened?

Some say the explanation for all this is obvious: Republicans want the economy to fail because that is how they will defeat President Obama. After all, didn’t Sen. Mitch McConnell say, “The single most important thing we want to achieve is for President Obama to be a one-term president”? How much clearer can it be?

I don’t believe this sort of behavior is quite that cynical.

Well, I think it's exactly that cynical. But not because Republicans want the economy to fail. Self-interest probably motivates them to believe they're doing the right thing when they oppose measures that might help the economy and therefore help President Obama's reelection, but that's about it. They don't literally want the economy to tank.

But the obvious thing Ezra doesn't mention is that all of those 2001 mash notes to stimulus were based on the prospect of getting an even bigger tax cut for the wealthy than they had counted on. Republicans don't really care about stimulus one way or the other. They care about upper-income tax cuts, and back in 2001, portraying them as a stimulus measure was a handy way of getting them passed. If Obama were to offer up the same deal — big, permanent cuts in the top marginal rates — they'd be happy to become Keynesians for a day if that was the price of admission.

Cynical? Sure. But this is all pretty much common knowledge. Republicans like tax cuts for the rich, and they'll adopt whatever argument comes to hand to get them. If we're in a recession, tax cuts are a short-term stimulus measure. If the economy is doing well, tax cuts are a long-term productivity enhancement. If estate taxes are at issue, they're trying to save family farms. If it's capital gains, cuts are a vital tool for energizing our manufacturing base. Any port in a storm.

Quote of the Day: Republicans and Roads

| Mon Sep. 5, 2011 4:12 PM EDT

From Barack Obama, after noting that millions of the unemployed could be put back to work if Congress approves his upcoming plan to rebuild roads, bridges, and other infrastructure:

We’re going to see if we’ve got some straight shooters in Congress. We’re going to see if congressional Republicans will put country before party.

I predict that Obama will get his answer pretty quickly.

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Europe's Day of Reckoning

| Sun Sep. 4, 2011 10:54 PM EDT

Ezra Klein recommends this LRB piece about the current phase of our economic crisis by popularizer John Lanchester. And why not? It's pretty good.1 European banks, he says, are in way worse shape than they've ever been willing to admit. This is true — and it's something that a lot of us have been puzzling over for a good many years. Our puzzlement was related to the fact that although European banks really did appear to be in bad shape, they mostly managed to sail along seemingly unscathed regardless. But Lanchester thinks the era of the brave facade is finally over, and a day of reckoning is near. Unfortunately, as always, Europe is still unwilling to fully recognize reality and do what it must to fix things properly. The best-case scenario is already out of reach:

The next scenario — the one we are on course for at the moment — is not so much the next-best as the next-least-worst. It is modelled on what happened to other parts of the world over recent decades, from Latin America to Russia to South-East Asia, as they underwent debt crises and consequent economic collapse. In all cases, the relevant economies recovered, after about a decade of hard times and widely shared economic pain. In this model, the debts are gradually paid down, the economy is slowly and miserably rebalanced, and eventually things grow back to where they were when the bubble burst. There is a general sense of baffled incomprehension in the West at the idea that this should be happening to Us, instead of to Them; it turns out that this trajectory of crisis and slow recovery is a lot more bearable when it happens to other people, ideally in far-away countries of which we know little. But that is what we look to be on course for at the moment.

Unfortunately, I think I agree with Lanchester. I'd prefer to think that we'll all come to our senses soon and do what needs to be done, but as he says, "I fear that the grip of anti-spending ideology is so strong throughout the West, and the politicians’ fear of the banks is so entrenched, that the ten-year slog looks more likely." Urk.

1And be sure to read the footnote!

What's in a Name?

| Sun Sep. 4, 2011 11:11 AM EDT

From the Washington Post today:

Next up: How Kafakaesque was Kafka? Was Old Blood and Guts really bloody and gutsy? How Platonically lovely was Plato's life? Did Oedipus actually have an Oedipus complex? Was Christ a Christian? Was Buddha a Buddhist?  Did Henry Ford truly practice Fordism? Was Julius Caesar born by Caesarean section? Did Jelly Roll Morton eat jelly rolls? Was Homer really homeless? All this and more in Part 2 of this series.

Friday Cat Blogging - 2 September 2011

| Fri Sep. 2, 2011 1:54 PM EDT

This week's catblogging plan originally focused on cats and laser pointers. Unfortunately, it was too dark and none of the pictures turned out. So instead we get preprandial playtime—a fixture of our day around here. On the left, Inkblot is rolling around and looking at a big black blob. That would be Domino. On the right, Domino is now plonked on the carpet staring at someone. Guess who? This all lasted about five minutes, until one of Inkblot's alpha-cat neurons fired and Domino decided to hightail it out into the yard. But it was fun while it lasted. Dinner followed shortly after that.

Have a nice Labor Day weekend, everyone. Go Trojans!

Caving In on the Economy

| Fri Sep. 2, 2011 1:02 PM EDT

Barack Obama has pretty much caved in to the Republican contention that budget deficits are the biggest problem our economy faces. He's pretty much caved in to the Republican contention that higher taxes are bad for the economy. And he's pretty much caved in to the Republican contention that nothing big can done to improve the unemployment picture.

So what's his next cave-in on the economy? Apparently this. I guess regulatory uncertainty is what's holding us back after all. So much for the agenda-setting power of the presidency.