Kevin Drum

Taxing Carbon

| Tue May 5, 2009 6:19 PM EDT

Should environmentalists concerned about global warming support a quick, simple carbon tax rather than a complicated, long-term cap-and-trade plan?  James Hansen thinks so, but Joe Romm explains the facts of life to him:

1. A carbon tax, particularly one capable of deep emissions reductions quickly, is a political dead end....

2. A carbon tax that could pass Congress would not be simple. Advocates of a tax argue that simplicity is one of its biggest benefits.  Again, those advocates seem bizarrely unfamiliar with the tax code in spite of the fact that they pay taxes every year....

3. A carbon tax is woefully inadequate and incomplete as a climate strategy.  Why?  Well, for one, it doesn’t have mandatory targets and timetables.  Thus it doesn’t guarantee specific emissions results and thus doesn’t guarantee specific climate benefits.  Perhaps more important, it doesn’t allow us to join the other nations of the world in setting science-based targets and timetables.  Also, a tax lacks all of the key complementary measures — many of which are in Waxman-Markey — that are essential to any rational climate policy, but which inherently complicate any comprehensive energy and climate bill.

It's true that in some pure economic sense a tax is a more efficient way of pricing carbon than a cap-and-trade plan.  But that's only if you get exactly the tax you want (you won't) and only if you accept a very specific sense of the word "efficient" (which you shouldn't).  And even if you magically got the simple, efficient tax you wanted, a tax lacks the one critical thing that cap-and-trade provides: a cap.  End of story.  If you want to reduce greenhouse gases, the best way to do it is to cap them.  This is something the public can easily understand.  The trading scheme that comes along with it is, admittedly, complex, but it's only there to allow us to go after the low hanging fruit first and reduce the cost of complying with the cap.  It's the cap itself that's key.

Like Romm, I don't really understand how it is that smart people don't get this.  Politically, cap-and-trade is the only climate plan that has even a remote chance of getting through Congress, it's the only plan that institutes a firm limit on greenhouse gases, and it's the only plan on the table.  Is it really worth giving all that up for the chimera of a tax that has some esoteric technical advantages on a whiteboard, but in the real world can't pass and wouldn't solve the carbon problem even if it did?  It's hard to see why anyone serious about real-world change would buy into this.

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Bloggers on the Bus

| Tue May 5, 2009 3:54 PM EDT

If you're interested in the political blogosphere and the netroots in general, Eric Boehlert's Bloggers on the Bus is a great read.  It's built around potted sketches of some of the best known liberal bloggers (Atrios, Digby, Jane Hamsher, John Amato, Arianna Huffington, Glenn Greenwald, and others) and some of the blogosphere's greatest campaign hits during 2008 (the Obama MySpace debacle, the John Hagee meltdown, the Sarah Palin eruption, the great sexism debate), and Boehlert really does a terrific job of diving in and explaining how everything unfolded.  I followed almost all of this stuff pretty obsessively in real time, but I still learned lots of details I'd never heard of before.

It's a very fast, entertaining read, and since it focuses (almost) exclusively on the liberal blogosphere it mostly avoids the sense of triumphalism you might get in a more partisan book.  Which is a good thing since it ends with this:

The bad news for liberal bloggers was that as the Obama campaign unfolded, as his new commuhity-based coalition was being built and celebrated, it became obvious that bloggers were never really invited to the party.  Liberal bloggers simply never became active partners with Obama in the way they had been with the Dean insurgency four years earlier, and the way they had been with scores of Democratic politicians in skirmishes throughout the Bush years.  Why?  Mostly because Obama didn't seem to want the bloggers around.

That's true, isn't it?  For all the hype, the liberal blogosphere in 2008 had its biggest impact in state and local races, just as it did in 2004.  It's true that it was much more successful in pushing stories into the mainstream media than it was four years ago, but in terms of being active in the Obama campaign itself, it wasn't.  And that was primarily a choice made by Obama himself, who apparently felt that the raw partisanship of the blogosphere was something he wanted to keep at arm's length.

There were a couple of things missing from the book that struck me.  The first is specific: the Jeremiah Wright firestorm, which begged to be included in any book about the 2008 campaign, but which Boehlert inexplicably never mentions.  The second is more general: Boehlert does a good job of showing how the blogosphere managed to gain attention for stories that might otherwise have gone unnoticed, but at times his account feels too blinkered.  The mainstream media played a pretty big role in all this too, and even in a book about the blogosphere this deserves a little more attention.  At the very least, there should have been a chapter devoted to the relationship between blogs and the MSM.

But these are nits.  If you're looking for a blog's eye view of Campaign '08, Bloggers on the Bus is a terrifically readable and carefully reported book.  Highly recommended.

Defending the Defenders

| Tue May 5, 2009 1:00 PM EDT

From the Washington Post:

Ex-Bush Officials Launch Bid to Soften Interrogation Report

Former Bush administration officials are lobbying behind the scenes to push Justice Department leaders to water down an ethics report criticizing lawyers who blessed harsh detainee interrogation tactics, according to two sources familiar with the efforts.

In recent days, attorneys for the subjects of the ethics probe have encouraged senior Bush administration appointees to write and phone Justice Department officials, said the sources, who spoke on condition of anonymity because the process is not complete.

Can't say as I blame them, I guess.  But surely they realized that someone at DOJ would rat them out, didn't they?

Civic Order

| Tue May 5, 2009 12:11 PM EDT

David Brooks says that if Republicans had learned the right lessons from watching Westerns, they'd be a little less interested in rugged individualism and a little more interested in community and civic order:

They would begin every day by reminding themselves of the concrete ways people build orderly neighborhoods, and how those neighborhoods bind a nation. They would ask: What threatens Americans’ efforts to build orderly places to raise their kids? The answers would produce an agenda: the disruption caused by a boom and bust economy; the fragility of the American family; the explosion of public and private debt; the wild swings in energy costs; the fraying of the health care system; the segmentation of society and the way the ladders of social mobility seem to be dissolving.

But the Republican Party has mis-learned that history. The party sometimes seems cut off from the concrete relationships of neighborhood life. Republicans are so much the party of individualism and freedom these days that they are no longer the party of community and order. This puts them out of touch with the young, who are exceptionally community-oriented. It gives them nothing to say to the lower middle class, who fear that capitalism has gone haywire. It gives them little to say to the upper middle class, who are interested in the environment and other common concerns.

I think this column suffers from Brooks' usual weakness for extending metaphors beyond their useful life, but his central point is a pretty good one.  The American public is obviously in the mood for a little less cowboy capitalism and a little more stability, and there are both liberal and conservative ways of getting there.  Democrats obviously support the liberal path, and to compete the GOP needs to stop offering up its usual menu of non-answers and instead figure out a conservative way to tell the business community to behave itself, a conservative way to produce more clean energy, and a conservative way to genuinely address everyday healthcare concerns.  It's not impossible, but the true-believer rump of the party wants nothing to do with it — and they're suffering the consequences.  They could do a lot worse than to spend a little less time listening to Rush Limbaugh and a little more time listening to Brooks.

Obama and the Business Community

| Tue May 5, 2009 10:26 AM EDT

I nominate this for the least surprising news of the year:

President Obama's plan to crack down on what he called abuse of overseas tax loopholes was met Monday with quick and unusually sharp opposition from big business, threatening to produce the administration's first major confrontation with a broad segment of corporate America.

The fiercely negative reaction to the plan, much of which requires congressional approval, contrasted strongly with the business community's muted criticism, at most, of the president's sweeping government intervention in the banking and automobile industries.

Imagine!  The business community was OK with the government shoveling hundreds of billions of dollars into the business community, but is unhappy when the government wants to take away their PO boxes in the Cayman Islands.  Who could have guessed?

Credit Report

| Tue May 5, 2009 12:52 AM EDT

The latest on credit conditions:

Although credit conditions remain strained, an April survey of loan officers by the Federal Reserve found a smaller number of banks were tightening loan standards compared with a few months ago.

Glimmers of improvement were most notable in commercial lending. The Fed said 40% of the 53 domestic banks it surveyed between March 31 and April 14 said they tightened standards on commercial and industrial loans, a smaller percentage than the 65% that said in January that they tightened standards.

Other metrics apparently show the same thing: banks are still cutting back on lending, but they aren't cutting back quite as much as before.  In other words, the economy is still getting worse, but not quite as fast as it was earlier this year.  These days, that counts as good news.

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Quote of the Day - 5.4.09

| Mon May 4, 2009 6:34 PM EDT

From Paul Krugman, ruminating over the recent leaks about the results of the Treasury's stress tests:

Even Brad DeLong, who has been relatively sympathetic to the administration here, is disturbed by the idea that regulators are negotiating with the banks about the test results. Now it seems as if the report's contents may also be dictated by what, based on the response to leaks, the informed public is willing to swallow. ("Would you believe it if we say Citi is fine? OK, what if we say they need $5 billion? Not enough? How about 10?")

The source of the stress test leaks is mysterious, but it's the numbers themselves that baffle me more.  Most of the leaks, for example, suggest that Citigroup will be told it needs additional capital of $10 billion, a figure so low it would barely be worth bothering with.  Conversely, most of the numbers I've seen thrown around from independent analysts come to ten times that amount or more.  If it turns out that Citi really is short by only $10 billion, it means we can all breathe a sigh of relief and declare an end to the banking crisis.  I woldn't count on that, though.

Lovely, Lovely Pears

| Mon May 4, 2009 5:44 PM EDT

Taylor's Gold pears are back in my local supermarket!  Hooray!

The Bloated Financial Industry

| Mon May 4, 2009 5:27 PM EDT

James Surowiecki writes that the reason the financial sector has grown so spectacularly over the past couple of decades is because, compared to the boring 50s and 60s, the demand of modern businesses for capital has also grown spectacularly:

The financial sector’s most important job is channelling money from investors to businesses that need capital for worthwhile investment. But in the postwar era there wasn’t much need for this....Thomas Philippon, an economist at N.Y.U., has shown that most of the increase in the size of the financial sector [during the period 1980-1999] can be accounted for by companies’ need for new capital....Philippon suggests that, given the demands of businesses for capital, a normal financial sector would be about the size it was in 1996.

But this is only part of the story.  The need for capital may well have gone up considerably, but the combination of globalization, automation, and greater competition should also have made the finance industry far more efficient at providing it.  As Felix Salmon says:

One would hope and expect that between sell-side productivity gains and a rise in the sophistication of the buy side, any increase in America's financing needs would be met without any rise in the percentage of the economy taken up by the financial sector. That it wasn't is an indication, on its face, that the financial sector in aggregate signally failed to improve at doing its job over the post-war decades — a failure which was then underlined by the excesses of the current decade and the subsequent global economic meltdown.

Most information technology sectors — and finance is decidedly one of them — have become far more efficient over the past few decades.  They may be bigger in absolute terms, but the price per unit of whatever they're selling — MIPS, bandwidth, gigabytes, etc. — is far lower.  In the case of finance, the units they're selling are dollars of capital.  But has the per-unit cost of providing capital gone down substantially since, say, 1980?  If not, why not?

Bankers and Congress

| Mon May 4, 2009 2:02 PM EDT

The power of the financial lobby, even in the wake of an epic economic collapse fueled largely by its own excesses, never ceases to amaze.  The current front, of course, is a Senate proposal to curb credit card abuses.  Mike Lillis of the Washington Independent reports:

The proposal, sponsored by Senate Banking Committee Chairman Chris Dodd (D-Conn.), would prohibit rate hikes on existing balances, give cardholders longer notice to pay their bills, and prevent card companies from charging fees when customers pay their bills on time.

....A similar credit card reform proposal, sponsored by Rep. Carolyn Maloney (D-N.Y.), passed the House easily last week, but the Senate bill goes even further to protect card users from unexplained fees and surprise rate hikes. The question now on the minds of many anxious consumer and lending advocates is this: How strong can Senate Democrats keep those consumer protections and still have the bill pass the upper chamber?

....For consumers, there’s a great deal hinging on what credit card reform provisions the Senate can pass. The Maloney bill in the House, for example, allows card companies to hike rates on existing balances when the borrower is more than 30 days late on a payment. The Dodd bill, by contrast, prevents retroactive rate increases in all cases. An analysis conducted by The National Consumer Law Center found that roughly 10 million Americans would still be vulnerable to those retroactive hikes if Maloney’s version of the provision were adopted instead of Dodd’s.

Really, this is beyond belief.  Retroactive rate hikes on existing balances are indefensible under any circumstances.  A third grader on a playground would understand why.  Despite this, every single effort to ban the practice has failed.  Over and over and over, they've failed.  And now, even with the finance industry on its knees, hated and despised for its lavish compensation packages financed by trillions in taxpayer bailout cash, there's still some question about whether Congress can pass this no-brainer of a bill.  Instead, we might end up merely banning retroactive rate hikes for 30 days.

This practice (which goes by the charming name of "universal default") should have been banned the first time it ever reared its ugly head.  The fact that there's even a chance of it continuing to survive in any form at all after the events of the past couple of years should dispel any questions about the death grip the finance industry has on American politics.  It's the smoking gun that bankers own the country.