Kevin Drum

Rough Justice

| Thu Mar. 19, 2009 11:50 AM EDT
The LA Times reports on an ad hoc bankruptcy proceeding in Israel:

First came the employees, shortchanged two months' pay and laid off by the supermarket called God's Blessing. They rifled through their shuttered workplace, helping themselves to crates full of groceries.

As word spread through the small town, the store's jilted creditors joined in. They dismantled the light fixtures, ripped out wiring and absconded with the cash registers, even as television cameras rolled.

Within hours the parking lot was jammed with ordinary shoppers. They left car engines running and brought their children to help pick the shelves clean. Finally even the shelves were hauled away, leaving latecomers to scrounge the floor for leftover fruit.

This is not what you'd call an orderly liquidation.  Is it a harbinger of things to come?

Advertise on MotherJones.com

Quote of the Day - 3.19.09

| Thu Mar. 19, 2009 11:31 AM EDT
From Matt Yglesias, commenting on the fantastic amount of money we spend on the Pentagon:

It seems to me that if you told the man on the street that you had a plan to spend double on defense what China, Russia, North Korea, and Iran spend combined that said man would assume you were proposing to spend a healthy amount of funds on national defense. Such a standard would, however, imply very large cuts.

If you want to project power over thousands of miles, it costs a lot of money.  Most countries don't really want to do this.  We, on the other hand, are pretty seriously addicted to it.

Helicopter Ben

| Wed Mar. 18, 2009 10:58 PM EDT
Ben Bernanke has long said that even with interest rates near zero, the Fed still has plenty of monetary ammunition left to stimulate the economy.  Today he put his money where his mouth is and announced that the Fed would be buying up a trillion bucks worth of treasury bills and mortgage securities.  This is known as quantitative easing, aka printing money.  The Wall Street Journal rounds up some reaction:

Guy LeBas of Janney Montgomery Scott provides the basics: "Even today’s announcement that the Federal Reserve plans on purchasing everything in America that isn’t nailed down raised relatively few eyebrows on our end....Effectively, the Fed is monetizing the Treasury’s debt, a strategy that appears in the encyclopedia under the heading 'how to trigger inflation.' "

David Greenlaw of Morgan Stanley says the purchase of mortgage securities is designed to drive down interest rates: "In 2008, the average mortgage rate on the outstanding stock of loans was about 6.50%. So, if the Fed brings 30-yr fixed rate mortgages down to 4.50% and all homeowners are able refi, the aggregate permanent cash flow savings would be on the order of $200 billion per year."

Paul Dales of Capital Economics isn't sure that $300 billion of Treasury purchases is enough: "This could just be the opening salvo....Overall, no one knows whether these measures will work. Much depends on whether banks loan out the cash they raise from selling Treasuries and whether households and businesses spend, rather than save, any extra borrowing....At the least, no one can say that the Fed isn’t trying."

So there you have it.  $300 billion in new money, another $200 billion over time from lower mortgage rates, and a clear message that the threat of deflation is being taken seriously.

That's what the adults were up to, anyway.  Back in make believe land, meanwhile, it was AIG bonus time 24/7.  Gotta keep Congress busy with something, I guess.

Healthcare This Year?

| Wed Mar. 18, 2009 2:14 PM EDT
Jon Cohn's tick-tock in the New Republic about Obama's healthcare plan is mostly fairly ordinary stuff: some of Obama's advisors wanted to go slow, others wanted to seize the moment, meetings were held, etc. etc.  But through it all, Obama was Obama:

Health care, in the end, might have gotten pushed aside — except that one very senior official in the administration kept insisting that it stay on the agenda. That official was Obama himself. Repeatedly, the president made clear that he was not abandoning health care reform.

....By the end, the debate had coalesced around three options: investing around $1 trillion over ten years, offset by new revenue and some substantial reductions in Medicare and Medicaid spending; investing a slightly lower amount, in the neighborhood of $600 billion, which could be offset by more modest revenue increases and reductions in Medicare and Medicaid; or putting aside just $300 billion, offset mostly by changes to Medicare and Medicaid. A final decision wasn't made until Friday, February 13, as a deadline for setting the budget loomed. Rejecting the $1 trillion proposal, because the offsets it required seemed too severe, Obama went with the $600 billion option — $634 billion, to be precise.

This seems to be typical Obama: he really does know what he wants, and he really does insist on getting it.  At the same time, as long as things are moving in the right direction, he seems profoundly willing to compromise about how fast he gets there.  I haven't quite figured out yet whether I think this is good or bad, but it's what we've got.  We may have a liberal in the White House, but we don't have one who's temperamentally likely to knock heads and try to make history.

The Presidential Bracket

| Wed Mar. 18, 2009 1:36 PM EDT
Jeez.  Not much love for the Pac Ten from our hoops loving president.  A first round win for Washington is all he's got for us in his NCAA bracket.  Somebody needs to take this up with him when he shows up here in Orange County later today.

Essay Mills

| Wed Mar. 18, 2009 1:03 PM EDT
Alan Jacobs proposes a novel theory for the success of essay mills in cranking out low-cost papers for slothful college students:

It seems to me that the most noteworthy fact here is this: essay mills of this kind can succeed only because college professors all over the Western world assign precisely the same kinds of papers. No wonder some of the writers can turn out dozens of the damned things in a week — “I can knock out 10 pages in an hour,” one of them says. “Ten pages is nothing.” The assignments we professors give are so woodenly predictable that they positively invite woodenly predictable essays in response.

I can feel a contest coming on: Propose a topic that's truly essay-mill-resistant.  Better yet, propose a general algorithm that makes any topic harder to fake from a distance.  Remember: extra credit for originality!

Advertise on MotherJones.com

Wilkerson on Guantanamo

| Wed Mar. 18, 2009 12:31 PM EDT
Over at Washington Note, Larry Wilkerson writes about several dimensions of the debate over Guantanamo Bay that he thinks haven't gotten enough attention:

The first of these is the utter incompetence of the battlefield vetting in Afghanistan during the early stages of the U.S. operations there....The second dimension that is largely unreported is that several in the U.S. leadership became aware of this lack of proper vetting very early on and, thus, of the reality that many of the detainees were innocent of any substantial wrongdoing, had little intelligence value, and should be immediately released.

....The fourth unknown is the ad hoc intelligence philosophy that was developed to justify keeping many of these people, called the mosaic philosophy. Simply stated, this philosophy held that it did not matter if a detainee were innocent....All that was necessary was to extract everything possible from him and others like him, assemble it all in a computer program, and then look for cross-connections and serendipitous incidentals.

....Thus, as many people as possible had to be kept in detention for as long as possible to allow this philosophy of intelligence gathering to work. The detainees' innocence was inconsequential. After all, they were ignorant peasants for the most part and mostly Muslim to boot.

Read the whole thing.  He presents some compelling evidence that although shutting down Guantanamo might be politically difficult thanks to Dick Cheney's "recent strident and almost unparalleled remarks about the dangers of pampering terrorists," it's almost certainly not much of an operational challenge at all.

Damn Liberals

| Wed Mar. 18, 2009 11:33 AM EDT
ThinkProgress glosses a Roll Call story today telling us that Evan Bayh is spearheading a group of 15-20 Democratic senators "seeking to restrain the influence of party liberals in the White House and on Capitol Hill."  And it's about time, isn't it?  We've now gone nearly a full two months without Democrats forming a circular firing squad designed to bring down a Democratic president and prove that Democrats can't actually get anything done.  I say, that's two months too long.

But at least a bunch of senators will get to preen a bit about how they managed to water down progressive legislation and get the White House to beg them for their votes.  And that's what public service is all about, isn't it?

Quote of the Day - 3.17.09

| Wed Mar. 18, 2009 12:50 AM EDT
From Sen. Judd Gregg (R–NH), on the possibility of using the budget reconciliation process to pass healthcare and cap-and-trade bills in the Senate:

"That would be the Chicago approach to governing: Strong-arm it through.  You're talking about the exact opposite of bipartisan. You're talking about running over the minority, putting them in cement and throwing them in the Chicago River."

Hell yes.  This is supposed to be a democracy.  Why, allowing legislation to pass based on nothing more than a simple majority vote would be just this side of mob rule.

Ex Post Punitive

| Tue Mar. 17, 2009 11:32 PM EDT
Would it be legal to pass a law that retroactively taxed away the bonuses of all those AIG traders who destroyed the planet?  The main constitutional objections are that such a law might be construed as either ex post facto or a bill of attainder.  So what about that?

Well, Conor Clarke talked to certified expert Laurence Tribe, and he says not to worry about bill of attainder issues: "It would not be terribly difficult to structure a tax, even one that approached a rate of 100%, levied on some or all of the bonuses already handed out (or to be handed out in the future) by AIG and other recipients of federal bailout funds so that the tax would survive bill of attainder clause challenge."

Great!  So what about the problem with it being retroactive?  The Supreme Court has upheld retroactive taxes against ex post facto arguments before, and over at Interfluidity Steve Waldman quotes Daniel Troy, author of Retroactive Legislation, on a similar objection to the Superfund legislation: "Because the ex post facto clauses do not apply to civil laws, Superfund therefore would have to be characterized as punitive in nature to be classified as an ex post facto law. The current Court, though, has suggested that unless a law is exclusively punitive, it will not come within the scope of the ex post facto clauses."

Italics mine.  So it looks like the answer here is simple: even though the purpose of this tax would pretty clearly be punitive with extreme prejudice, we need to carefully pretend that it's not.  And we need to make sure the legislative history shows that it's not (it should be "manifestly regulatory and fiscal" Tribe says).  Then everything is kosher!  We can tax their socks off!

So there you have it.  Now we just have to figure out if most of these guys are actually U.S. citizens in the first place.  I hear that New York state AG Andrew Cuomo is working on that.