Kevin Drum

Pay Cuts are Coming

| Thu Dec. 18, 2008 2:22 PM EST

PAY CUTS ARE COMING....Felix Salmon, after noting that FedEx has announced across-the-board pay cuts for just about everyone:

There's been a huge shift in power in recent years from labor to capital: corporate profits have been rising much faster than wages for some time now. It makes sense that capital would make use of its newfound power to reduce labor costs in a deflationary environment of rising unemployment. During the boom, companies laid off workers because those workers demanded, and cost, too much money. Now that workers have lost their negotiating leverage, we might start seeing more across-the-board pay cuts.

Heads I win, tails you lose! In boom times you get laid off, in slack times you get your pay cut. That's certainly one way to run an economy, I guess.

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Eat Your Almonds

| Thu Dec. 18, 2008 2:08 PM EST

EAT YOUR ALMONDS....A new blog called On the Public Record is written by a "low level civil servant who reads a lot of government reports." My kind of blogger! Today, LLCS brings to our attention the California Almond Board:

The good prices for almonds are the result of excellent work by the California Almond Board. The Almond Board has done magic and created demand for more than a billion pounds of California almonds in the past fifteen years. They have run marketing campaigns to get Americans to buy more almonds ("A can a day, that's all we ask." Do any of you really want a can of almonds a day?). They have created new almond drinks. They've introduced almonds into breakfast cereals. (Think back to the mid-nineties. Don't you remember that breakfast cereals rarely had almonds in them?) California almonds have replaced and destroyed every other major source of almonds in the world. Right now on the Almond Board front page, they report happily that almonds are the number one nut ingredient in food.

This really is superior work by the Almond Board and I can only imagine that the walnut and cashew boards look on in envy.

Later, after a persual of their website:

They're doing amazingly consistent high quality work and I wonder how that came about. Did they just happen to hire someone good, who built a good organization? Did that person love almonds or just doing good work? Coincidence that it was the Almond Board and not the Walnut Board or Citrus Board? Does everyone talk about almonds as the shining light of California agriculture because of some quirk of hiring and personality? Anyway, I don't know what almond growers pay for the board (I assume some small percent of their price/piece), but they're getting stellar value for it.

It sure seems to me that mixed nuts have a higher percentage of almonds (pronounced aamins, by the way, rhymes with famines) than they used to. Or is that my imagination? In any case, maybe the tofu folks need to hire away the guru behind the Almond Board's success. It would make Ezra Klein happy, anyway.

Keeping Power in Iraq

| Thu Dec. 18, 2008 12:47 PM EST

KEEPING POWER IN IRAQ....Matt Yglesias comments on the news that "elite" forces working for Iraqi prime minister Nouri al-Maliki have arrested several dozen officials in the Ministry of the Interior:

Maybe I'm just cynical, but this "elite counterterrorism force" sounds to me like a security organization whose primary purpose has more to do with bolstering Maliki vis-à-vis internal enemies than with counterterrorism as such. Not that I blame him, all kinds of other factions have their own armed wings and no loyalty to Maliki or the Iraqi state, so to stay in office he'll need friends with guns of his own.

That's a coincidence, isn't it? That's pretty much what it sounded like to me too. And who knows? Maybe these Interior officials really were trying to reconstitute the Baath Party. Seems pretty stupid to me, but stranger things have happened. The big question is, does "Baath Party" in this context really mean "Baath Party," or does it just mean "Sunni guys I don't like much"? Juan Cole is wondering too:

This cover story makes no sense, and it seems more likely that al-Maliki is continuing to clean house and is purging Interior of people placed there by previous governments or by the US CIA and Department of Defense. The Interior Ministry was set up by Naqib al-Falah, an ex-Baathist Sunni whose father had been a Baathist general who defected in the 1970s.

....When the Shiite United Iraqi Alliance won the 2005 elections, PM Ibrahim Jaafari gave interior to Bayan Jabr, a Turkmen member of the pro-Iran Supreme Council for Islamic Revolution in Iraq. Jabr reconfigured the special police commandos as a hard line Shiite unit. But neither Jaafari nor al-Maliki has had complete control of the bureaucracy, and many of Falah's ex-Baathists, whether Sunni or Shiite, managed to hold on to their jobs. Until now. Anyway, that is my guess.

Otherwise, it is not plausible at this late date that 28 people in Interior could make a neo-Baath coup.

Agreed. If this was a coup attempt, it was a pretty half-assed effort.

Desperation Time in Sacramento

| Thu Dec. 18, 2008 2:51 AM EST

DESPERATION TIME IN SACRAMENTO....California is $40 billion in the hole, give or take a billion or ten, and the only way out is to raise taxes and cut spending. But it takes a two-thirds vote to pass a budget or raise taxes in California, and California Republicans flatly refuse to raise taxes in any way, shape, or form. Result: deadlock.

Today, though, Democrats in Sacramento came up with a plan. It turns out that revenue-neutral tax changes only require a majority vote. And user fees only require a majority vote too. So Dems have proposed a two-step tap dance. First, raise a bunch of taxes and eliminate a bunch of fees in a revenue neutral way. Pass it with a majority vote. Then put all the fees back in place under a different name and kick them up a notch. Pass that with a majority vote too. Voila! A tax increase with only a majority vote. Toss in $7 billion in spending cuts (schools, healthcare, etc. — the usual) and we're halfway down the road to fiscal solvency!

It's clever, I'll give them that. And there's nothing to keep them from doing it over and over again, thus raising taxes whenever they want to with only a majority vote. Because of that, and regardless of whatever supporting opinion they managed to wrench from the Legislative Counsel's office, this is so plainly contrary to the spirit of the state constitution that I have a hard time seeing how it will pass judicial muster. But I guess it's worth a try. Any port in a storm.

Equal Protection

| Thu Dec. 18, 2008 2:13 AM EST

EQUAL PROTECTION....Is Norm Coleman really trying to prevent ballots in the Minnesota senate race from being counted by using Bush v. Gore as precedent for an Equal Protection Clause claim? The same Bush v. Gore decision that was so contrary to previous conservative opinion that the court specifically (and to considerable mockery) stated that "Our consideration is limited to the present circumstances"?

Why yes. Yes he is. The mind reels.

The Art of Being George

| Wed Dec. 17, 2008 5:10 PM EST

THE ART OF BEING GEORGE....In a package called "Art and Culture In the Bush Era," Newsweek asked its cultural critics to pick the "one work in their field that they believe exemplifies what it was like to be alive in the age of George W. Bush." Let's argue over some of their choices, OK?

First off, there are the two TV critics, who practically bent over backward to avoid naming 24. I'm not saying that Battlestar Galactica and American Idol are bad choices, mind you, and I know that maybe it seems a little too obvious for guys who are paid to think nonobvious thoughts about this stuff, but come on: 24 is George Bush's America. Case closed.

Art critic Peter Plagens chose Jeff Koons's "Hanging Heart," but he's wrong. The only possible choice is everything ever manufactured by Damien Hirst, who has made a career out of convincing people to give him fantastic sums of money for stuff that everyone knows is obvious crap — and then lying about it on the occasions when people don't. Read this, for example, and tell me if it doesn't scream "George Bush":

There was the summer of 2007 when thousands of people lined up outside White Cube waiting to glimpse a human skull cast in platinum and covered with 8,601 diamonds that he claimed to have sold at its $100 million asking price. When he was pressed, however, it turned out that the buyer was actually a consortium of investors that included the artist himself; Jay Jopling, owner of White Cube; and Frank Dunphy, Hirst's business manager.

Music critic Lorraine Ali chooses Green Day's "American Idiot." Wrong again. The correct answer is a tie between the insane protest over Dixie Chick Natalie Maines saying "we're ashamed the President of the United States is from Texas" and Toby Keith's "Courtesy of the Red White and Blue." Yes, yes, I realize that Natalie Maines's comment is not technically an actual work of art, but we shouldn't let that stand in the way of a higher truth.

The book critics chose The Corrections and Rick Warren's The Purpose Driven Life. Wrong and wrong. In the fiction category, the iconic book of the Bush era is clearly The Pet Goat. Right? The nonfiction category is a little tougher, but I think Jane Mayer's The Dark Side deserves the nod for the book that best represents what Bush and Cheney were really all about. A close second, perhaps, goes to Glassman and Hassett's Dow 36,000, which represents Bush and Cheney's own personal fantasy of what they were all about. Yes, it was written in 1999, but remember that we're going for higher truths here.

The movie critics chose Blackhawk Down and Borat. I guess those choices are OK. But instead, how about the second Star Wars trilogy, another painful reminder that sequels are usually a disappointment?

UPDATE: In comments, PureGuesswork makes a strong case in the music category for Britney Spears: "She spent the last eight years coming up with new ways to fuck up, and now she is worried about her legacy."

UPDATE 2: In the movie category, lots of votes for Idiocracy. Hard to argue with that.

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Bubble Economics

| Wed Dec. 17, 2008 3:34 PM EST

BUBBLE ECONOMICS....Does the economy need a $600 billion stimulus? Think bigger:

A number of economists, including former advisers to Republican presidential candidate John McCain, have suggested to Obama's team that the economy needs a much bigger cash infusion, possibly up to a $1 trillion over two years.

....Obama's economic team believes that to put unemployment on a downward trajectory with a goal of 7.5 percent or less over two years would require a stimulus package of about $850 billion. That would generate about 3.2 million jobs by the first quarter of 2011.

....Among those whose opinions Obama advisers sought were Lawrence B. Lindsey, a top economic adviser to President George W. Bush during his first term, and Harvard professor Martin Feldstein, an informal McCain adviser and former chairman of the Council of Economic Advisors under President Ronald Reagan.

Over at RBC, Jonathan Zasloff poses a few good questions about how to spend this dough. On this very narrow issue, I think my first question would be, how much of this program should be spending and how much should be tax cuts? Can we really spend this much money quickly even if we want to? Would a payroll tax holiday make sense as part of this package?

More broadly — and I know I'm being a bit Chicken Little-ish here — I continue to wonder if a massive stimulus package that spurs domestic consumption means that just as we propped up the economy in 2002 by replacing the dotcom bubble with a housing bubble, we're now propping up the economy in 2008 by replacing the housing bubble with continuing support for our ever-ballooning trade deficit bubble. See Tim Duy for more on this. I don't know if he's right, but I don't feel too bad for bringing this up since no one else really seems to know either.

In any case, I do know that pretty much every economist in the country agrees, in general, that eventually U.S. consumption has to go down, savings have to go up, and we have to start exporting more than we import. It's just a question of whether we can afford to worry about that with the economy collapsing around our heads. Still, here's a thought: if this is a serious long-term concern, shouldn't we at least try to construct a stimulus package that stimulates export industries more than other sectors of the economy? If so, how would we go about doing that? And what else should we be doing to prepare for the day when the current panic subsides, the great T-bill bubble bursts, and the rest of the world decides that 0% yields on treasuries suck and they don't want to buy any more of them? And what they'd really like instead are some tangible goods and services, thankyouverymuch?

I don't know. Maybe we really can't worry too much about this at the moment. But the trade deficit bubble is going to pop eventually just like the dotcom bubble and the housing bubble. We at least ought to be thinking about this a little bit.

Chart of the Day - 12.17.2008

| Wed Dec. 17, 2008 2:52 PM EST

CHART OF THE DAY....From "Spatial patterns of natural hazards mortality in the United States," this map shows where you're most likely to die from natural disasters. (Data is from 1970-2004.) As you can see, my hometown of Orange County is one of the safest places in the country, despite its worryingly close proximity to the San Andreas fault. You see, although you may think that earthquakes are dangerous, it turns out they are a mere rounding error when it comes to dying at the hands of nature's awesome wrath. By far the biggest causes of death by natural disaster are cold weather, hot weather, lightning, flooding, and tornadoes. Earthquake deaths are so microscopic they don't even get a category or their own.

On the other hand, we're still waiting for the Big One out here. This map could change color at any time.

(By the way, just eyeballing this, it looks to me like Massachusetts is the safest state in the union. Connecticut and Rhode Island are pretty good too. Who knew?)

Public Works

| Wed Dec. 17, 2008 1:21 PM EST

PUBLIC WORKS....California is on the verge of cancelling hundreds of public works projects because it can't sell the revenue anticipation bonds needed to continue financing them:

Road, levee, school and housing construction projects throughout California are on the verge of being halted or delayed, as state officials prepare to shut off their financing in the most drastic fallout yet from California's cash crisis.

Officials plan to meet today to freeze financing on these projects and about 2,000 others, including park improvements, environmental restoration and repairs to state prisons.

....Lockyer told legislators last week that halting public-works projects would have a ripple effect through California's economy, costing private companies $12.5 billion and eliminating 200,000 jobs.

Let me just say up front that California's problems are largely of our own making. If the rest of the country has zero sympathy for us, I don't really blame them.

Still, this is a national problem, not just a local one. And if infrastructure spending is good stimulus, but the problem is that it takes a long time to get it up and running, then surely, at a minimum, you wouldn't want to lose a single dollar of infrastructure spending that's already in progress. Especially when the immediate problem has been caused by the freezing of the credit markets more than by California's fiscal recklessness. TARP to the rescue?

Person of the Year

| Wed Dec. 17, 2008 12:41 PM EST

PERSON OF THE YEAR....In a shocking surprise, Time has named Barack Obama their person of the year. Yawn. I would have voted for one of those cheesy group picks, in this case "America's mortgage bankers and Wall Street rocket scientists." I mean, if touching off the 21st century version of the Great Depression doesn't make you person of the year, what the hell does it take?

Runners up were Henry Paulson, Nicolas Sarkozy, Zhang Yimou, and, in a tremendous diss to poor old John McCain, Sarah Palin. Feh. Tina Fey would have been a more deserving choice.