Kevin Drum - November 2011

GOP Blows Up Yet Another Norm

| Wed Nov. 23, 2011 7:12 PM EST

We all know that Republicans have done their best to hamstring President Obama's ability to get anything done via routine filibuster. That's old news. We also know that they've slow-walked his executive appointments for the same reason. That's also old news. We even know that they've tried to prevent the new Bureau of Consumer Protection from functioning at all by refusing to confirm a director — any director. That's yet more old news.

So what's next? Today Harold Meyerson passes along their latest brainstorm: they're going to prevent the NLRB, an existing body that already has existing board members, from operating by the simple expedient of refusing to show up for meetings. No quorum, no votes:

In a letter made public yesterday, Republican Brian Hayes wrote fellow GOP-er John Kline, chairman of the House Education and Workforce Committee, that he might well not participate in the Board’s scheduled November 30 vote on changing the rules for union certification elections.

In his letter, Kline complained that he was not privy to some of the deliberations of the board (that is, of the two Democratic members) and thus might fail to show up for the scheduled vote. But in a long and devastating letter that board chairman Mark Pearce sent to Hayes yesterday, Pearce documented more than a dozen instances in which he and the board’s staff invited Hayes and his own staff to participate in all aspects of the rule-development process — hearings, data collection, even just trying to get Hayes to tell him which portions of the proposed rule he supported and which he opposed, and negotiating a compromise based on that discussion — only to have his entreaties either rejected or ignored by Hayes and his staff. In essence, Pearce told Hayes, you moved heaven and earth to ensure your exclusion from the process.

Whenever Republicans blow up another longtime tradition of governance, I always think, "What can they do for an encore? What's the next norm to go down for the count?" This one isn't as important as the filibuster norm, or even the debt ceiling norm, but on a smaller scale it's certainly every bit as egregious.

But I wonder what's next?

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Yet More Gloomy News From Europe

| Wed Nov. 23, 2011 2:17 PM EST

Hmmm. It looks like I got my eurozone gloom in reverse order today. It wasn't exactly front-page news in most newspapers — hey, who cares if Europe is imploding? — but today brought yet more bad news on the bond auction front. Except this time the bad news wasn't from Greece, or Spain, or Italy, or even from Finland or the Netherlands. It was from the one place where the news was never supposed to get bad, Europe's Rock of Gibraltar. Ryan Avent explains:

Markets were still digesting news of Spain's terrible bond auction yesterday, in which the yield on its 3-month debt more than doubled, from 2.3% to over 5%. That was but an appetizer, however; in an auction of 10-year debt today, Germany failed to place some 40% of the issuance. The lack of appetite for German debt has come as a shock to many, and the language being used to describe matters is increasingly apocalyptic. "It is a complete and utter disaster", Reuters has one strategist saying.

When investors turn up their noses at German bonds, they aren't really saying they think Germany is doomed. They're saying they think the euro itself is doomed and they're getting out until someone steps up to fix things. From the Wall Street Journal: "The auction reflects the deep mistrust [of the] euro project rather than a mistrust [of] German government bonds," said Danske's chief analyst Jens Peter Sorensen. "As some investors say regarding the euro project—if it is broke, then fix it." In a similar vein, Kathleen Brooks of Forex offered an optimistic take on the German auction failure (investors just want higher yields), a pessimistic take (Europe is doomed), and this take:

The bond market is staging a buyers strike, essentially trying to push Germany to take action.... If this crisis isn't dealt with in the near-term then bond investors will ditch all of the Eurozone, even Germany. Thus, the effect of German belligerence in dealing with this crisis is today's failed auction.

Maybe so. Maybe investors are just telling the core eurozone countries to get off their asses and fix things. The problem is that (a) Germany and France and the ECB have so far not shown any kind of willingness to damn the torpedoes and do whatever it takes to rescue the eurozone, and (b) things have now gotten to a point where it's not clear if they could rescue the eurozone even if they did pull out all the stops. Megan McArdle:

Effectively, Germany and France and a handful of other tiny countries have to guarantee both the sovereign debt and the bank liabilities of the whole eurozone. Given the holes that recent events have exposed in these systems, can they credibly do that? Even if the Greeks and Italians don't use that guarantee as a blank check to avoid reform?

....You can view the failed auction as a referendum on the instability of the euro, and hence the German banking system, in which case maybe "fixing" the euro with German guarantees fixes the problem. But you can also view it as a referendum on membership in the euro, full stop. The market may be saying that as long as Germany is tied to these other, troubled, countries, their debt looks more dangerous. In which case, deeper integration doesn't really help.

This might just be a bump on the road. That's certainly the official response from German officials and the ECB (the auction failed "for technical reasons," explained ECB Vice President Vítor Manuel Ribeiro Constâncio). Alternatively, it might be the beginning of the end, as the great delevering really kicks in and Hyun Song Shin's vicious circle of a banking crisis feeding into a sovereign debt crisis takes off in earnest. In any case, I assume your seat belts are already fastened, so I won't tell you to fasten them. But at least keep them fastened, OK?

Quote of the Day: Jon Kyl's Scorched Earth Politics

| Wed Nov. 23, 2011 1:36 PM EST

From Dana Milbank, describing how Arizona Sen. Jon Kyl amost single-handedly torpedoed any chance of a compromise agreement in the supercommittee:

“Walking napalm” is how one Democratic aide involved in the supercommittee described Kyl this week. And if the senator makes some mistakes as he burns down the village — well, that’s just a cost of doing business.

This pretty much describes Kyl's entire career. He's been a cold-blooded front man for the interests of the tanned and wealthy since the day he showed up on Capitol Hill, and nothing has changed in 25 years. He's leaving exactly the way he arrived, most likely tickled pink at this latest description of his scorched-earth legislative style. It'll probably end up inscribed on his post-Senate business cards.

Cliff Diving in Europe

| Wed Nov. 23, 2011 12:44 PM EST

Worried about Europe? You should be! Via Stuart Staniford, here's the latest bad news from the eurozone: In September, as the chart below shows, industrial orders plunged 6.4% in the euro area (pink line) and 2.3% in the broader EU (black line). Here's Stuart:

There have been indicators suggesting mild contraction for a while — eg retail trade. But this is the first indicator I've seen that looks like the kind of sharp non-linear contraction characteristic of an out-and-out recession. I guess there's always the possibility that October will be better. However, given the financial news flow in the last six weeks, it's hard to imagine too many European executives getting all giddy and excited in approving new projects.

He's got more bad news at the link, if you have the stomach for it.

The Problem With Electric Cars

| Wed Nov. 23, 2011 12:08 PM EST

Electric cars are having a tough time finding buyers. Brad Plumer takes a crack at explaining what the problem is:

GM is struggling to meet this year’s sales target for the Chevy Volt, and Nissan has sold just 8,000 all-electric Leafs. Part of that might be due to the recession and the steep price tag: Like any new technology, the cars are pricey (the Volt goes for $40,000, though buyers can qualify for a $7,500 federal tax rebate). But a recent NPR report by Sonari Glinton highlighted another reason sales might be flagging — the fact that early models can’t go very far before needing a recharge, which gives would-be buyers “range anxiety.”

Electric-car advocates have occasionally dismissed range anxiety as irrational. After all, the vast majority of Americans commute less than 40 miles a day. So even a Nissan Leaf, which, realistically, gets about 65 miles on a single charge, should satisfy most of our daily needs. But what about slightly longer trips? Consumers really do worry about getting stranded on the road with a dead battery. Plus, as an executive at Better Place once told me, drivers don’t like feeling hemmed in. “Our research shows that people want to feel like they can get into their car and drive across the country at if they have to,” he said. “It might sound silly, but it’s real.”

At the moment, car companies are racking their brains for ways to allay these fears.

Wait a second. What am I missing here? Of course consumers are worried about getting stranded with a dead battery. That can't possibly be a revelation to the car industry, can it? It's the obvious #1 problem with electric cars: even if I normally drive 20 miles a day, occasionally I'm going to want to visit grandma in San Diego and I need a car that can do it. Who on earth thinks this sounds silly?

Besides, the Chevy Volt has a gasoline engine as well as a battery, so its range is the same as an ordinary car. Range anxiety can't be the problem there unless Chevy has been monumentally incompetent in its marketing campaign. (Always a possibility, of course.)

Surely the answer here is obvious. For pure electric cars like the Leaf, the issue is indeed range. Obviously. For the Volt, the issue is its fantastically high price tag. It's a Chevy Cruze (yours for $15K or so) that costs more than $30,000. That's my guess, anyway. Mickey Kaus has a different take:

I recently rented a Nissan Leaf all-electric car. No gas engine, just silent, battery propulsion. It worked fine. It did everything it was supposed to do. It was just incredibly boring.  Not just “doesn’t corner well” type of boring — though it doesn’t corner well — but boring in some corrosive, fundamental, existential way.

I don't think the Leaf is meant for car guys who want the thrill of a V-8 powering them through tight corners. It's meant for people who like boring cars. You know, Camry owners. So I'm skeptical that this is an issue either. But then again, I've never driven one.

Al-Qaeda is....Dead....Kind Of

| Wed Nov. 23, 2011 1:24 AM EST

The Washington Post reports that the terrorist group founded by Osama bin Laden is all but dead:

The leadership ranks of the main al-Qaeda terrorist network, once expansive enough to supervise the plot for Sept. 11, 2001, have been reduced to just two figures whose demise would mean the group’s defeat, U.S. counterterrorism and intelligence officials said.

Ayman al-Zawahiri and his second in command, Abu Yahya al-Libi, are the last remaining “high-value” targets of the CIA’s drone campaign against al-Qaeda in Pakistan, U.S. officials said....“We have rendered the organization that brought us 9/11 operationally ineffective,” a senior U.S. counterterrorism official said. Asked what exists of al-Qaeda’s leadership group beyond the top two positions, the official said: “Not very much. Not any of the world-class terrorists they once had.”

However, pretty much the entire rest of the piece is devoted to "U.S. officials" telling us that (a) none of this really matters, (a) al-Qaeda remains an enormous threat, and (c) we can't afford any kind of reduction in our overseas military presence. So don't let this get your hopes up.

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Tonight's Debate Wrapup (Sort Of)

| Tue Nov. 22, 2011 10:12 PM EST

I'm sorry, but I just don't have it in me to try and say something intelligent about tonight's debate. Generally speaking, it wasn't quite the train wreck that some of the others have been, but that's faint praise. And it's appalling that for the second time in a row, a foreign policy debate had no questions — not one — about Europe. The entire continent is on the verge of imploding, and possibly taking us down with them, and Wolf Blitzer doesn't care. And at the end, when the candidates got a freebie question to talk about any issue they felt wasn't getting enough attention, no mention of Europe again. It's just baffling.

Anyway, here's my Twitter stream for the night. That's the best I've got for you.

5:08pm Good to see Romney singing along. Looks authentic!

5:25pm I think Santorum just lost the Muslim vote.

5:28pm Newt Gingrich is....AWESOM-O!! ow.ly/7CnWd

5:32pm "Huntsman’s problem....is that he doesn’t seem to hate Democrats." ow.ly/7Co0n

5:34pm Hey, Perry mentioned India! Progress!

5:56pm And literally. RT @RichLowry: did newt just use candidly and frankly w/n abt 5 words?

6:04pm How much oil does Gingrich think we have in America?

6:04pm Oh, and Lean Six Sigma!

6:10pm Perry seems unaware that budget trigger was originally a Republican proposal.

6:13pm How long are we going to have to wait this time before Europe gets mentioned?

6:41pm This debate is only two hours, right?

6:42pm Why are candidates promoting drones on border instead of blimps? America needs a stronger blimp fleet.

6:43pm Jeez, such a whiner. RT @MaxBoot: No mention yet of Arab Spring, with demonstrations in Egypt, open revolt in Syria, etc.

6:45pm Already spent an hour talking about Iran, Iraq, Israel, Pakistan. But we're going to "widen" the conversation by going to the Middle East?

6:46pm Surprise final questioner will be George W. Bush! #secretsourcestoldme

6:50pm RT @RichLowry: a no fly zone is not a sanction its an act of war

7:05pm Virtues again from Perry. Is this some kind of dog whistle I don't understand?

Negotiating With Fanatics

| Tue Nov. 22, 2011 7:55 PM EST

I want to thank Ezra Klein for reminding me about this passage in Politico's postmortem on the failure of the supercommittee to reach an agreement. It's a description of the "wish lists" from each side:

House Republicans wanted to repeal Obama’s health care law, implement the controversial House GOP budget drafted by Rep. Paul Ryan (R-Wis.), save $700 billion by block granting Medicaid, cut $400 billion in mandatory spending, slash another $1.4 trillion in other health care mandatory spending, save $150 billion by slicing the federal workforce and put a $60 billion cap on tort reform.

Republicans were no more pleased to see what Democrats wanted: the president’s $447 billion jobs bill plus well over $1 trillion in new taxes.

Right. Toss in the extension of the Bush tax cuts, which Politico leaves out for some reason, and you've got $3.7 trillion in tax cuts in addition to repealing Obamacare, making massive cuts in domestic spending, and adopting Paul Ryan's scorched earth budget blueprint.

Democrats, by contrast, agreed up front to a $3 trillion deficit reduction package but wanted it divided into roughly two-thirds spending cuts and one-third tax increases. Plus a jobs bill since, you know, unemployment remains sky high.

Do these two lists sound roughly similar to you? Of course not. They aren't even from the same galaxy. The Republican list is a conservative wet dream. It's not even remotely a starting point for negotiation. By contrast, the Democratic list is a bog ordinary opening bid.

Ezra calls this an example of "asymmetrical polarization." That's a new term for me. I call it "negotiating with fanatics."

The President and the Pentagon

| Tue Nov. 22, 2011 6:06 PM EST

From the mailbag today:

I've been reading your prediction that Republicans will simply find a way to overturn any built-in cuts to defense spending. With Obama's veto threat, do you still see things the same way?

This is too hard to answer. The most obvious question, of course, is how resolute Obama will be. His past behavior certainly suggests a very strong preference for finding some kind of compromise position rather than digging in his heels, but then again, he doesn't usually make flat-out veto promises either. So maybe this time is different.

But I'm not sure it matters. Here's the only thing that's really important: the defense cuts don't kick in until 2013. In other words, not until after the 2012 election. And let's face it: all bets are off at that point. Maybe president Gingrich will be in charge then. Maybe Obama will win and cut a deal with the lame duck Congress, like he did last year. Maybe we'll be in the middle of a war with Ubeki-beki-beki-stan. Who knows? A year in politics is a long time to begin with, and a year plus a presidential election is like an eternity. Basically, after everyone has finished up wailing about the fecklessness of Congress and moved on to some other shiny new object — a process that should take no more than a week — the whole thing will be forgotten. When it's suddenly thrust back into the spotlight next December, we'll be living in a whole new world. Anything could happen.

Still, the smart money says that "anything" doesn't include very much in the way of cuts to the defense budget. There's just too much institutional and political pressure to keep money flowing to the Pentagon. No president in recent memory has stood up to it, and I doubt that Obama will be the first.

The Fed Speaks: Inflation Delenda Est!

| Tue Nov. 22, 2011 3:15 PM EST

Via Matt Yglesias (writing from his new Moneybox home at Slate), I see that the Federal Reserve has, unsurprisingly, declined to adopt a policy of targeting nominal GDP growth:

A number of participants expressed concern that switching to a new policy framework could heighten uncertainty about future monetary policy, risk unmooring longer-term inflation expectations, or fail to address risks to financial stability. Several participants observed that the efficacy of nominal GDP targeting depended crucially on some strong assumptions, including the premise that the Committee could make a credible commitment to maintaining such a strategy over a long time horizon and that policymakers would continue adhering to that strategy even in the face of a significant increase in inflation.

Matt is unimpressed: "The claim that this would 'heighten uncertainty' seems to me to be just flat-out wrong." Of course it is. But that part of the statement is just window dressing anyway. The part that matters is in bold. Targeting higher NGDP levels would clearly involve tolerance for higher inflation, and there are lots of FOMC members who just aren't willing to go there, no matter how weak the economy is, how high unemployment is, or how big the risks from Europe are. Just as the Germans seem to be forever reliving the 20s, in the U.S. we are forever reliving the 70s. Inflation delenda est, baby.