Kevin Drum - September 2012

Friday Cat Blogging - 14 September 2012

| Fri Sep. 14, 2012 2:46 PM EDT

This is Domino doing her best Queen of Sheba pose. She's been quite perky lately, which Marian and I both appreciate except when she decides to become perky at 4 am. That seems to be settling down a bit, though. Today she waited until 6:30 to leap on my stomach.

You probably want an update on the pills, don't you? Well, a bunch of you recommended pill pockets, soft little bits of yumminess that you can stuff a pill inside and then feed to your cat. So we got some. My plan was this: feed some of them to Domino without any pills stuffed inside so she'd get used to them as ordinary cat treats. Then alternate throughout the week, sometimes giving her the treats with a pill inside and sometimes not, so she'd never associate the treats with the yucky green pills.

You've probably already figured out the ending to this story: she was too smart for me and refused to eat the treats whenever there was a pill inside. But no! For once, the humans outsmarted the cat. I have no idea whether my clever plan was necessary at all, but no matter. Domino inhales the treats eagerly whether there's a pill inside or not. We only have two more days of pills to give her, and the whole thing has been a breeze. Why didn't anyone tell us about this before?

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The Man Behind Ben Bernanke's Policy Announcement Yesterday Was Probably....Ben Bernanke

| Fri Sep. 14, 2012 2:15 PM EDT

Yesterday the Fed announced an open-ended commitment to monetary easing. That is, they didn't announce a specific amount of easing, they announced that they would buy $40 billion in mortgage-backed bonds every month for an indefinite period until the labor market showed signs of recovery. This was an attempt to leverage the "expectations channel" — that is, to affect the behavior of the market by making a credible promise that monetary policy will remain loose far into the future.

So who should we credit for the idea that Fed guidance could be an important policy tool when short-term interest rates are already at the Zero Lower Bound and can't be reduced further? Maybe the guy who wrote this in 2004:

Although communication is always important, its importance may be elevated when the policy rate is constrained by the ZLB. In particular, even with the overnight rate at zero, the central bank may be able to impart additional stimulus to the economy by persuading the public that the policy rate will remain low for a longer period than was previously expected. One means of doing so would be to shade interest-rate expectations downward is by making a commitment to the public to follow a policy of extended monetary ease. This commitment, if credible and not previously expected, should lower longer-term rates, support other asset prices, and boost aggregate demand.

The author of this paper, of course, is Ben Bernanke (along with Vincent Reinhart and Brian Sack). It's a pretty well known paper, and the only reason I bring it up is to provide a counterpoint to a bit of budding blogosphere triumphalism that credits economist Scott Sumner with being the driving force behind yesterday's Fed announcement. Tyler Cowen, for example, wrote that the Fed’s move "probably would not have happened [] if not for the heroic blogging efforts of Scott Sumner."

I'm not so sure. Sumner has done heroic work, writing energetically about the power of Fed guidance for the past couple of years. There's no question that he's raised awareness of the topic, and he deserves kudos for that. At the same time, Ben Bernanke is one of the foremost monetary economists of our time, a guy who's written extensively about historical episodes where conventional monetary policy has lost traction. I honestly don't think he needed Scott Sumner to remind him of his options.

I know this sounds a little churlish, and I apologize for that. But I suspect the real backstory is a lot more complicated — and probably a lot more interesting, too. After all, Bernanke didn't just have a sudden brainstorm yesterday. He already knew the expectations channel could be an important tool. What Bernanke really accomplished yesterday was to get near unanimity from his Fed colleagues to give the expectations channel a try, something I suspect he's been working on for a while. What that took wasn't a daily reading of Sumner's blog, it was the simple passage of events. Up to now, his colleagues on the FOMC hadn't all been convinced that further aggressive action was necessary, and a split FOMC obviously makes it impossible to make the kind of credible commitment that the expectations channel requires. But last year's QE2 had a limited effect, Congress appears to be deadlocked on any kind of fiscal stimulus, and the labor market over the past four months has continued to weaken. Yesterday, at long last, nearly everyone on the board was willing to agree that something more was necessary. They were finally ready — very softly and very gingerly — to make a small and fairly fuzzy effort to use Fed communication as a tool to set future expectations.

Sumner may very well have played a role here. So did Michael Woodford. So, probably, did many others. But at a guess, the biggest role was played by exactly the guy you'd expect: Ben Bernanke.

Quote of the Day: Romney Still Not Making Sense on Taxes

| Fri Sep. 14, 2012 11:51 AM EDT

From Mitt Romney, explaining his tax plan:

So number one, [] don’t raise taxes on middle-income people, lower them. Number two, don’t reduce the share of taxes paid by the wealthiest. The top 5% will still pay the same share of taxes they pay today.

Hold on. The top 5% will pay the same share of taxes they pay today. But that means the bottom 95% will also pay the same share they pay today. Right? That's just arithmetic.

So everyone will pay the same share of taxes they pay today. But we're going to lower taxes on the bottom 95%. So that means we have to lower taxes on the top 5% too. That's the only way to keep their shares the same.

In other words, Romney is going to lower everyone's taxes. Not just tax rates, actual taxes. And yet, his plan is going to be revenue neutral. How? Most likely it has something to do with Romney's tax cuts creating new incentives that will supercharge the economy blah blah blah.

I guess believers gotta believe, but if you believe a word of this, you're the kind of mark who'd still fall for the wire scam even after seeing The Sting a dozen times on late-night cable. You've got no one to blame but yourself.  After all, it's been less than ten years since George W. Bush ran the same swindle, and we all remember how that panned out, don't we?

Mitt Romney Needs to Provide Us With More Than Playground Bravado

| Fri Sep. 14, 2012 10:49 AM EDT

On a more serious note than I ended with last night, it's worth a moment to do a little more than just mock Richard Williamson, the Romney advisor who insisted that if Mitt Romney were president, we'd be in a "different situation" in the Middle East. Those riots in Egypt? They wouldn't have happened thanks to Romney's "resolve." Ditto for Libya. And Yemen.

At one level, of course, this is just dumb campaign bravado. Your guy is weak and vacillating and our enemies laugh at him. My guy is strong and resolute and our enemies fear him. But it's also nonsense. Reagan's resolve didn't stop Lebanese militants from bombing a Marine barracks in Beirut. Bush Sr.'s resolve didn't stop Saddam Hussein from invading Kuwait. Bush Jr.'s resolve didn't stop al-Qaeda from destroying the World Trade Center and killing 3,000 Americans.

This kind of thing makes for pretty speeches, and Republican audiences lap it up. But there's nothing behind it. And it's especially laughable in Romney's case, since "resolve" is about the last thing anyone associates him with. Even his own supporters barely trust him not to change his long-held positions at the first whiff of political convenience. So if Romney truly has some ideas about how to improve our Mideast policy (aside from asking "how high" whenever Bibi Netanyahu tells him to jump) then he should let us know what they are. So far, though, he's been noticeably silent about just how he would have responded to the Arab Spring and how he'd respond to it in the future. Until he provides us with some concrete ideas on that score, instead of the pabulum he's shared so far, nobody should take his playground bravado seriously.

#RomneyStrength: The Birth of a Meme

| Fri Sep. 14, 2012 1:30 AM EDT

Here's how Twitter memes are born. First, one of Mitt Romney's advisors said this to the Washington Post:

“There’s a pretty compelling story that if you had a President Romney, you’d be in a different situation,” Richard Williamson, a top Romney foreign policy adviser, said in an interview....“In Egypt and Libya and Yemen, again demonstrations — the respect for America has gone down, there’s not a sense of American resolve and we can’t even protect sovereign American property.”

A few hours later, Benjy Sarlin of TPM gave the quote this gloss:

A top foreign policy aide to Mitt Romney suggested Thursday that the deadly attack on the U.S. consulate in Libya that killed Ambassador Christopher Stevens would never have happened if Romney were president. There wouldn’t even be anti-American protests in the Middle East if Romney were in charge, the aide said.

Josh Marshall then tweeted a promo for Sarlin's piece:

Romney Adviser: If Romney were prez no one wld attack r embassies because of Romney strength.

And thus was born the #RomneyStrength hashtag. A few examples:

@MlTTR0MNEY: A cop pulled me over once. I let him off with a warning. #Romneystrength

@UOJim: Mitt Romney once pulled Corey Booker out of a burning building. #RomneyStrength

@buckaroo1260: He swam the Delaware ahead of Washington to clear the way. #Romneystrength

@radiobobkansas: Lance Armstrong had all those titles taken away because he was caught using #Romneystrength

@Clarknt67: Mitt has fired more people than @realDonaldTrump. #RomneyStrength

@erinscafe: Built his tax shelters with his bare hands. #Romneystrength

@AzureGhost: Can lose his head when all about him are keeping theirs. #Romneystrength

@JoshuaGreen: woulda freed Willie in the first five minutes of the movie. #Romneystrength

So there you have it. Blink and you'd miss it. By Friday it will probably be completely forgotten by all but a few diehard Twitter junkies.

Why "Innocence of Muslims" Doesn't Really Matter Very Much

| Fri Sep. 14, 2012 12:41 AM EDT

An awful lot of press attention has been focused on "Innocence of Muslims," the anti-Islamic film at the center of this week's turmoil in the Middle East. In the latest twist in the story, Google, which owns YouTube, has blocked access to the video in both Egypt and Libya.

But there are a couple of good reasons that we probably shouldn't get too consumed by the video itself or the backstory behind its creators. Shadi Hamid provides the first reason:

The anti-Islam film in question was a pretext much more than the cause of yesterday's violence. It could have been anything. Anti-American anger, even in Libya, the most pro-American country in the Arab world, remains palpable, lingering underneath the surface of apparent gratitude. But, that aside, even if the United States did everything on Arabs' wish lists, there would remain a small, influential fringe that would find another reason to hate — or at least dislike and distrust — the United States.

The extremist groups who are behind the kind of violence we saw this week will always be able to find some pretext for their actions, and the exact nature of the pretext is no more important than the exact nature of a lightning strike that starts a forest fire. As long as there's enough dry tinder around, you'll get a fire eventually. Likewise, it's the underlying hatred of the United States that provides the real fuel for anti-American violence in the Middle East, and the reason for that hatred is much more about past and present American policies than it is about some shoddily-produced YouTube video. In that sense, getting hung up on the video just distracts us from the real — and much more difficult — issues at hand.

Robert Wright provides us with the second reason, which is even more compelling: even as a pretext, the video probably wasn't the inspiration for the violence anyway.

Here is what now seems to be the case: the anti-Islam film wasn't made by an Israeli-American, wasn't funded by Jews, and probably had nothing to do with the American deaths [in Libya], which seem to have resulted from a long-planned attack by a specific terrorist group, not spontaneous mob violence.

....And there may be one more misconception: the idea that the Egyptian protests were originally spontaneous. El Amrani reports that "the initial Egyptian protests were in good part due to a call by a small Salafi group... and timed for the anniversary of the 9/11 attacks."

To recap: In Libya, the video probably had nothing at all to do with the attacks. In Egypt, it was probably little more than a convenient way to add some extra energy to a 9/11 protest that had been planned long before. This had the intended effect, of course, and now the video really is at the center of the ongoing protests. But it's still just a pretext. In and of itself, it's probably not worth all the ink that's been spilled on it.

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Here's What Big Money Buys You in the 2012 Presidential Campaign

| Thu Sep. 13, 2012 9:56 PM EDT

Via Andrew Sullivan, the chart below compares TV ad buys for the presidential contests of 2008 and 2012. The raw data comes from Kantar Media's Campaign Media Analysis Group, as reported by Elizabeth Wilner of Advertising Age. The big takeaway is that 2012 spending in battleground states is running at about three times its 2008 level. Based on past patterns, Wilner figures this means that the two campaigns will be airing about 43,000 ads per day for the rest of the election cycle.

And that's just presidential ads. It doesn't count Senate races, congressional races, ballot measures, or state races. This is just Obama vs. Romney.

The other big takeaway is the difference in strategy between the two campaigns. Up to now, their ad buys have been about even. But that's going to change as the Romney campaign — aided by oceans of outside money — ramps up its spending:

The Obama campaign has seen this contest as a seven-month run, while the Romney campaign has seen it as a three-month sprint. Team O. has bet a few hundred million advertising dollars on winning by undercutting Romney's candidacy before the airwaves become completely saturated and September and October ads start reaping diminishing returns.

....The Romney campaign is betting on total saturation this fall to persuade voters that the country can't afford another four years with Obama in charge of the economy....As we enter this eight-week ad whiteout, whichever campaign has made the right bet will win the presidency.

Fasten your seat belts. Especially if you live in Ohio.

Living With the Muslim Brotherhood

| Thu Sep. 13, 2012 5:04 PM EDT

David Frum says you don't need to toss around slanders about how the president "sympathizes" with the killers of Americans in order to criticize Barack Obama's approach to Islamism in the Middle East. Instead, there's a perfectly legitimate critique to be made:

Obama's Foolish Embrace of Egypt's Muslim Brotherhood

The Obama administration has staked its foreign policy on the assumption that the best way to deal with radical Islam is by engaging with radical Islam, thus splitting the men of violence from the men willing to try politics.

By this theory, the problem with radical Islam was its method (terrorism), not its goals (establishing Muslim Brotherhood style governments).

Some in the Obama orbit hoped that the entry into government would modulate and moderate Islamist goals. Others believed that even if the Islamists did not moderate, it was still preferable to live with them than to do what was necessary to resist them.

My friend Dean Godson of the British think tank Policy Exchange has a fascinating lecture — it would make a brilliant book — about how this approach derives from the British experience in Northern Ireland. Under Tony Blair, the British government had followed a double Irish policy: a more effective approach to kill or capture IRA terrorists — combined with vigorous negotiations that offered IRA leaders willing to abjure violence the very role in government they had been fighting to seize.

If you notice a similarity to the Obama policy in Afghanistan, it's not a coincidence.

Unfortunately, that's all Frum has to say. So here's my question: if you think this is the wrong approach, then just what do you think Obama should have done instead in Egypt? What leverage did he have to keep Hosni Mubarak in power? Or, if you agree that Mubarak was a lost cause and nothing could have stopped the tide of democracy, what leverage did he have to keep the Muslim Brotherhood out of power?

Nobody thinks that military force was an option. Nobody (I hope) believes we still live in an era when the CIA could quietly engineer a friendly election result. There's always money, of course: we could have threatened to cut off aid to Egypt if the Brotherhood took power. At a guess, though, that would have helped the Brotherhood, not hurt them — and would have had about the same effect as hanging out a huge neon sign announcing that America believes in democracy only when we approve of the election results. That probably wouldn't help our cause any in the Middle East.

Conservatives too often assume that American power can accomplish anything we set our minds to. But it's not so. Sometimes there just aren't any good options, and the best path forward is to ride out the storm and refrain from doing anything foolish. It's not very satisfying at a gut level, but nine times out of ten it's the best you can do.

Frum may disagree, but if he does I'd sure like to hear his side of the argument. What exactly is the more tough-minded policy that he thinks would have produced a better result?

The Fed Finally Takes Action, But Is It Enough?

| Thu Sep. 13, 2012 1:30 PM EDT

Today the Fed braved Republican wrath and announced a new program of monetary easing. The previous one was QE2, so this one is QE3. It has two components:

  • An announcement to buy $85 billion in mortgage-backed securities per month through the end of the year, and $40 billion per month after that for as long as it takes to get the economy back on track.
  • A statement that it plans to keep interest rates low through 2015, about six months longer than it's previously promised.

The vote was nearly unanimous, with only Richmond Fed president Jeffrey Lacker, as usual, voting against. Here's the Fed's justification:

The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.

In other words, without action they believe the economy will remain weak and inflation will fall below their goal of 2%. Naturally, Republicans were questioning the propriety of Fed action even before it happened. Here's a piece in The Hill from this morning:

“It really is interesting that it is happening right now before an election,” said Rep. Raul Labrador (R-Idaho). “It is going to sow some growth in the economy, and the Obama administration is going to claim credit.”

....“They are the ones who always say they want to remain independent. So they should consider, just how independent are they when they come out, only 50 days before the election, with this?” said Rep. Scott Garrett (R-N.J.).

....Rep. Rob Woodall (R-Ga.) said he does not personally think the Fed is being political, but predicted the public will question its motivations if major actions are announced. Asked if people are going to ascribe political motivations, he said, “Folks are going to interpret it that way.”

This is pretty crude stuff: these guys are more or less admitting that monetary policy might boost the economy, and they don't want that to happen before the election.

They probably shouldn't worry, though. Monetary action has, in Milton Friedman's famous phrase, long and variable lags, and it's unlikely the Fed's action will have any substantial immediate effect. The most likely impact will probably be in early 2013, so it has as much chance of helping Mitt Romney as it does Barack Obama.

What's more important, though, is whether it will help the economy and get people back to work. That's a question for professional analysts to weigh in on, but one thing we can look at immediately is the sheer size of the Fed's action. It amounts to about $700 billion over the next 15 months, a fairly modest amount compared to the previous round of easing, QE2, which expended about $600 billion over seven months. On the plus side, it's an open-ended commitment, not a set amount, and it was accompanied by a promise to keep interest rates low through 2015. This is an effort to affect behavior via the "expectations channel" — the hypothesis, as Paul Krugman explains it, "that QE works, to the extent it does, largely because markets see it as a form of forward guidance." In other words, QE works best when investors believe the Fed has promised to continue it for a long time, even after the recovery starts to pick up steam.

Overall, my guess is that QE3 will have some effect, but not that much. It's not a huge program, and the Fed's easing programs are probably getting less effective with each round anyway. But it's a bit of an insurance policy, especially given the very real possibility of irresponsible congressional action when negotiations over the fiscal cliff rev up later this year.

And on a wonky note, since the actual size of QE3 is fairly modest, it will be an interesting test of the expectations channel theory. If QE3 has a significant effect on the economy despite its small size, it probably means that expectations setting is pretty important. If it doesn't, it probably means that expectations are overrated. Granted, this will only be a single data point, and one that will be drowned in lots of noise, but it's still an intriguing experiment.

I'll have more later as the pros weigh in.

A Blast From the Past: The Media vs. Al Gore

| Thu Sep. 13, 2012 11:59 AM EDT

Paul Krugman writes in passing that reporters who covered the 2000 election "liked Bush and didn’t like Gore, and as a result they treated Bush with kid gloves while gleefully passing on every smear against his opponent." Andrew Gelman pushes back:

Far be it from me to question something that was “obviously true to anyone who lived through it”—as a non-T.V. owner, I think it’s safe to say that I did not actually live through the 2000 election campaign—but . . . really??? Even if it’s true that reporters liked Bush and didn’t like Gore (again, I’d like to see the evidence), one thing we do know is that twice as many journalists are Democrats as Republicans.

Hoo boy. I've told Bob Somerby before that I think he obsesses too much over the 2000 election, but I guess someone needs to if the media's treatment of Gore in the 2000 campaign still isn't common knowledge. So for those of you who think Krugman was over the top, here are some reading assignments:

  • Robert Parry, writing in real time, on the press corps' contempt for Gore ("The national news media have repeatedly portrayed the vice president...as a willful liar who may even live in a world of his own delusions").
  • Evgenia Peretz, seven years later, describing the treatment of Gore by Kit Seelye, Ceci Connolly, and other campaign reporters ("They just wanted to tear Gore apart," said a major network correspondent).
  • Jonathan Schwartz summarizing the great debate incident ("The media groaned, howled and laughed almost every time Al Gore said something").

And for the longer version of all this, there's Bob's own "How He Got There" — not a finished product yet, but up to Chapter Six anyway. Read and be amazed.