Kevin Drum

Carbon Fail

| Tue Feb. 24, 2009 12:28 PM EST
This is a huge disappointment.  The Orbiting Carbon Observatory, which was designed to fill in missing gaps in our understanding of greenhouse gas levels in the atmosphere, failed to reach orbit:

Three minutes [after liftoff], during the burning of the third stage, the payload fairing — a clamshell nose cone that protects the satellite as it rises through the atmosphere — failed to separate as commanded.

....“The fairing has considerable weight relative to the portion of the vehicle that’s flying,” said John Brunschwyler, manager of the Taurus rocket program for Orbital Sciences of Virginia, which built both the rocket and the satellite.

“So when it separates off, you get a jump in acceleration,” said Mr. Brunschwyler. “We did not have that jump in acceleration. As a direct result of carrying that extra weight, we could not make orbit.”  The satellite fell back to Earth, landing in the ocean just short of Antarctica.

More here from Jonathan Hiskes at Gristmill about what the OCO was supposed to do.

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More Trouble on Wall Street

| Tue Feb. 24, 2009 2:52 AM EST
Even the relatively healthy banks are starting to bulk up in anticipation of Timothy Geithner's stress tests:

J.P. Morgan Chase & Co. cut its quarterly dividend by 87% to a nickel a share, a surprise move aimed at beefing up the bank's capital cushion as the economy deteriorates and putting it in a position to potentially repay funds received from the government more quickly.

....[CEO James] Dimon said the decision, which came as the government is preparing to test whether banks' portfolios can hold up under a severe economic stress, was voluntary and doesn't reflect any unexpected problems in the bank's results. In fact, he said the bank remains profitable more or less in line with Wall Street's expectations.

....The reduction in the dividend will let J.P. Morgan hang on to an extra $5 billion a year — enough, Mr. Dimon said, to help the bank weather a scenario in which the recession drags on for two years, unemployment tops 10% and home prices ultimately drop 40% from their peak.

JP Morgan has been widely viewed as the strongest of the big money center banks, so the fact that even they're feeling nervous about their ability to pass Geithner's test doesn't bode well for the rest of them.  It's a smart thing to do, but it's still a little unnerving that they feel like they have to do it.

Cap and Trade

| Mon Feb. 23, 2009 4:17 PM EST
Hey, guess what?  I've got a piece on cap-and-trade in the latest issue of Mother Jones.  You should go read it.  It's designed to explain cap-and-trade for people who kinda sorta know what it is but are still a little vague on the details.  The basic structure is "Ten Things You Should Know About Cap-and-Trade," and here's #10:

10. It's not a panacea. "Cap and trade is just a tool," says the NRDC's [Dale] Bryk. It might be the backbone of any effective long-term carbon reduction policy, but it's not the only tool we need. Or even necessarily the best. If you want to improve vehicle mileage, for example, raising federal fuel-efficiency standards is "much cheaper for consumers than raising the price of gas," she says. Michael O'Hare, a public-policy professor at UC-Berkeley, emphasizes the need for the government to take a more active role than just setting carbon prices. Sure, higher energy prices might motivate people to change their behavior. "But," he points out, "even if I want to take the tram, I can't do it if there's no tram."

In other words, command and control will remain absolutely necessary. As will taxes. Even with a well-designed cap-and-trade plan in place, we'll need tougher efficiency standards, higher fuel taxes, more sensible land-use policies, green research programs, and plenty more. But in the same way that cutting calories is the core of any weight loss no matter which fad diet you follow, raising the price of carbon is the core of any climate plan. With luck, this could be the year we finally figure that out.

Bottom line: cap-and-trade is just one piece of an overall energy/environment policy.  But it's a good piece!  And it helps make all the other pieces work better.  Read the whole thing for more.

On an inside-baseball note, I wrote this article back in October, but thanks to the miracle of print magazine lead times it's only now hitting the stands.  My hope was that this would be good timing, because Barack Obama would be introducing his cap-and-trade plan in March and everyone would be eager to learn what it all meant.  In the event, the stimulus bill and budget have pushed everything else off the stage for the moment, but with any luck cap-and-trade will still make its debut sometime soon. So be prepared!  Read all about it now!

(But stay away from the comments.  Yeesh.  Some wingnut organization has apparently already gotten wind of the piece and sent its slathering hordes over to let us all know that GLOBAL WARMING IS A HOAX!  You have been warned.)

Chart of the Day - 2.23.2009

| Mon Feb. 23, 2009 2:52 PM EST
The changes here are mostly pretty small, but Gallup reports that Barack Obama's approval rating has increased over the past month among Democrats and Independents, but dropped among Republicans.  The drop is especially big among conservative Republicans — which is hardly a surprise.  If I spent all day listening to Rush Limbaugh and watching Fox News, I'd probably think Obama was a herald of the end times too.

Gobbledegook From the Treasury

| Mon Feb. 23, 2009 2:23 PM EST
Felix Salmon ran the latest missive from the Treasury through a readability calculator and says that it scored only 15 out of 100.  Funny.  Except that I ran the passage through the same calculator he used and it actually produced a score of 0.  Ka-ching!  As near as I can tell, that means it's unintelligible even if you have a PhD in finance.

Anyway, the Treasury's statement is all about further capital injections into banks, and Felix takes his best shot at deciphering it:

I'm not sure I understand this myself, but the government here seems to be coming up with ever-more-obscure forms of capital which it can inject into the banks. We're relatively familiar with preferred shares, common equity, and warrants to buy common equity; now we must add to that list this new animal: mandatory convertible preferred shares, which had a brief moment in the sun back when banks were raising private capital rather than having to go to the government for bailouts.

....What's weird is that the government starts off talking about capital being "in the form of mandatory convertible preferred shares", which implies that those shares are capital, before then going on to say they will "be converted into common equity shares only as needed over time to keep banks in a well-capitalized position" — which implies that they're not really capital unless and until they convert.

Clear as mud, right?  And even the financial press doesn't seem to agree on what message is being sent by all this gobbledegook.  The Wall Street Journal said the Treasury's statement was designed to "quell fears about the viability of major U.S. banks," while the New York Times called it an "unexpectedly assertive" statement that "amounted to a roadmap under which the federal government could, if it wants to, demand a major and possibly a controlling stake in systemically important banks like Citigroup and Bank of America."

So which is it?  My take is this: the Obama brain trust understands that they're almost certainly going to have to nationalize one or two big banks sometime in the next few months.  So they need to prepare the ground for that.  At the same time, fear of nationalization is bad for everyone, so they're also doing their best to publicly claim that it's the farthest thing from their minds and they remain fully dedicated to the idea of keeping the banking system in private hands.  That's a pretty tough tightrope to walk in plain English, so they really have no choice except to resort to Greenspanian gobbledegook.  We should probably expect more of this in the future.

The Sin City Express

| Mon Feb. 23, 2009 1:33 PM EST
Is Senator Straight Talk still telling lies about all the rail money in the stimulus bill being earmarked for a train between LA and Las Vegas?  Yes he is.  Of course, you may recall that he was also happy to lie endlessly about Sarah Palin rejecting an earmark for the Bridge to Nowhere during last year's campaign, so I guess this is no big surprise.  Dogs don't change their spots.

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Faking a Filibuster

| Mon Feb. 23, 2009 1:12 PM EST
Over the past couple of years it's become a liberal rallying cry that if Republicans want to filibuster every bill, then Harry Reid ought to make them carry out a real filibuster, Jimmy Stewart style.  Make 'em talk.  Make 'em read from the phone book.  Put it all on CSPAN and let the American public see what GOP obstructionism is really all about.

But Ryan Grim, in an interesting piece over at the Huffington Post today, concludes that it's not going to happen.  Apparently Reid's office has studied the history of the filibuster and says that although at least one Republican senator can be forced to stay on the Senate floor to prevent a vote, he can't be forced to talk.  Bob Dove, who worked as a Senate parliamentarian from 1966 until 2001, agrees:

As both Reid's memo and Dove explain, only one Republican would need to monitor the Senate floor. If the majority party tried to move to a vote, he could simply say, "I suggest the absence of a quorum."

The presiding officer would then be required to call the roll. When that finished, the Senator could again notice the absence of a quorum and start the process all over. At no point would the obstructing Republican be required to defend his position, read from the phone book or any of the other things people associate with the Hollywood version of a filibuster.

....Since [Strom Thurmond in 1957], says Dove, the only time the majority tried to jam a bill through the Senate without having 60 votes ahead of time ended in failure.

Robert Byrd, a Democrat from West Virginia, was majority leader in 1988, when Democrats controlled 54 seats and wanted to push through campaign finance reform. But Republican minority leader Alan Simpson of Wyoming was easily able to block it by sitting on the Senate floor and occasionally noting the absence of a quorum, thwarting a vote...."It was almost a farce," says Dove. "The bottom line is the bill never passed."

Back to square one, then: get rid of the filibuster entirely.  I wouldn't hold my breath waiting for that to happen, though.

Chatting with Michael Pollan

| Mon Feb. 23, 2009 12:31 PM EST
In our current issue, we interview Michael Pollan, the man of the moment in liberal food policy.  One way to get people to eat better, he says, is to team up with allies whose economic interests happen to line up with healthier eating:

MJ: Does WIC [the Women, Infants, and Children program] still specify that you buy dairy?

MP: Yes. We had a huge fight to get a little more produce in the WIC basket, which is heavy on cheese and milk because the dairy lobby is very powerful. So they fought and they fought and they fought, and they got a bunch of carrots in there. [Laughs.]

MJ: Specifically? Who knew: the carrot lobby?

MP: Specifically carrots. The next big lobby. But there is also money in this farm bill for fresh produce in school lunch. The price of getting the subsidies was getting the California delegation on board, and their price was $2 billon for what are called specialty crops — fresh fruit and produce grown largely in California.

Hooray for California!  But the reality is, this is how things get done.  Read the rest of the interview for more interesting food stuff.

Common Sense on Hedge Funds

| Mon Feb. 23, 2009 2:03 AM EST
Noam Scheiber points to some genuinely good news in today's New York Times piece about Barack Obama's upcoming budget outline.  From the Times:

The president will propose to tax the investment income of hedge fund and private equity partners at ordinary income tax rates, which are now as high as 35 percent and could return to 39.6 percent under his plans, instead of at the capital gains rate, which is 15 percent at most.

Senior Democrats in Congress joined with Republicans in 2007 to oppose that increase. But with Wall Street discredited and lucrative executive compensation a political target, the provision could prove more popular among lawmakers.

This refers to the "carried interest" loophole, which allows hedge fund management fees to be counted as capital gains on the theory that — well, there was never really much of a theory for it at all.  If you invest your own money and make a return, that's a capital gain.  But if you get a piece of the return for managing someone else's investment, that's a management fee.  It's ordinary income, and there's really no plausible theory under which it should be counted as capital gains.

Except, of course, under the theory that hedge fund managers would prefer to pay low capital gains taxes on their income, and since hedge fund managers contribute lots of money to political campaigns they usually get whatever they want.  It really was just about that crude, and Democrats displayed colossal cowardice when they refused to eliminate this loophole two years ago.  It's good to see that Obama is going to try to embarrass them into finally doing the right thing and making rich people pay the same rate on their income as everyone else.

Nate Silver Finally Gets One Wrong

| Sun Feb. 22, 2009 9:49 PM EST
Penélope Cruz won the Oscar for Best Supporting Actress?!?  But Nate Silver said it would be Taraji P. Henson.  Can we ever trust him again?

UPDATE: Ben Stiller's Joaquin Phoenix bit was pretty funny.