Kevin Drum

Dinner With Barack

| Wed Jan. 14, 2009 2:12 PM EST

DINNER WITH BARACK....Last night Barack Obama had dinner with conservative uberpundits Bill Kristol, George Will, David Brooks, and Charles Krauthammer. If George Bush had done something similar with liberal columnists eight years ago, Jon Chait thinks wingers would have gone ballistic:

And the reason is that they wouldn't have confidence in Bush or McCain to be surrounded by liberal ideas without being deeply influenced by them.

....And that's why liberals aren't having a cow. They know that Obama understands far more about policy than any of his right-wing dinner companions, is used to being exposed to opposing ideas, and won't come out of that dinner telling his staff, "Hey, did you know we cut half the capital gains tax and raise more revenue?"

I don't know if Obama thinks he can actually persuade Kristol & Co. to support his ideas, but he's self-aware enough to know that a face-to-face meeting can change the tone of criticism even if it doesn't stop it. Once you've met someone in person, it's just a little bit harder to be really nasty toward them in print. It's the same dynamic that makes it hard to unload both barrels against a debate opponent: things are different in person than they are when they happen second or third hand. Obama's demonstrating yet again that he's a smart cookie.

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Moving Ahead on Nukes

| Wed Jan. 14, 2009 1:31 PM EST

MOVING AHEAD ON NUKES....Hillary Clinton got all the press yesterday, but Steven Chu was up on Capitol Hill too and he got lots of questions about nuclear power during his confirmation hearing for Secretary of Energy. Blogger KB of NEI Nuclear Notes says, "If you're a proponent of nuclear energy in the United States, I'm not sure that Steven Chu's testimony...could be any more encouraging." Here's one excerpt from the transcript:

Senator Bob Corker (R-TN): The issue of nuclear. I'm gonna skip down and just be very brief since you've had now nine questions regarding that. I noticed a lot of people say that they support nuclear, but they also mention the waste issue. And it's as if once we solve the waste issue then we can pursue nuclear again. It's my understanding, based on what I've heard here today, you mean pursue nuclear now in spite of the, some of the issues that we have regarding waste. Is that correct? All out now? Loan guarantees, let's move ahead. We have 104 plants today. Probably need 300, let's move on?

Steven Chu: Yes, because I'm pretty confident, I'm confident that the Department of Energy, perhaps in collaboration with other countries, can get a solution to the nuclear waste problem.

Italics mine. Obama has been fairly ambiguous about nuclear power in the past. "We should explore nuclear power as part of the mix," he said during the primaries, but he's also insisted that his support was contingent on first solving safety, waste storage, terrorist attack, and weapons proliferation concerns. Conversely, Chu seems to be much more nuke friendly. I don't know how much of a bellwether this is, but it's worth noting. More at the link.

Prosecuting for Torture

| Wed Jan. 14, 2009 12:48 PM EST

PROSECUTING FOR TORTURE....Susan Crawford, head of military commissions, says charges can't be brought against Mohammed al-Qahtani because she has determined that he was tortured during his interrogation. Matt Yglesias argues that this demonstrates why Barack Obama should be willing to open prosecutions against Bush administration officials for authorizing torture:

We have here a legal determination that a captive in US custody was tortured. And if he was tortured, that means someone tortured him. And torture is a crime....To me, it doesn't make any sense to say that we're going to have determinations that people were illegally tortured and yet we're just not going to do anything about it. It'd be one thing to pardon people for this kind of thing as part of some larger legal or investigative strategy. But to just leave it hanging? If Crawford thinks Qahtani can't be prosecuted because he was tortured, then it stands to reason that there's someone who can be prosecuted for the torturing.

I won't pretend that I don't have mixed views on this, but basically I agree. There's one thing I'd be interested in seeing first, though, that I don't think I've seen before: a sober legal analysis of whether torture prosecutions are likely to succeed. The fact that Qahtani's case has been tainted is based on a certain set of legal principles, and Crawford almost certainly made the right ruling here. But there's a whole different body of statutory law and evidentiary requirements that would come into play if a prosecutor were trying to prove beyond a reasonable doubt that a specific person was guilty of breaking U.S. law by ordering or carrying out the torture of Qahtani. That's a much, much harder case to make.

I guess this is my worst case scenario: we end up bringing charges against Bush administration officials and then they get off. That would be tantamount to an official sanction for this stuff.

Now, obviously no prosecution is ever certain, and fear of failure is a poor reason for doing nothing. But I'd still like to know that there's a decent chance that the legal case here is strong enough that convictions are at least likely. And I'd like to hear it from someone without a huge vested interest one way or the other. Without access to all the evidence this would be something of a whiteboard exercise, but still, has anyone with the appropriate background ever scoped this out?

Ho Ho Ho

| Wed Jan. 14, 2009 12:11 PM EST

HO HO HO....December sales, as expected, were pretty miserable:

Retail sales tumbled by 2.7% last month from the previous month on a seasonally adjusted basis, the Commerce Department said Wednesday.

....The producer price index, due for release Thursday, is expected to show a 2% drop in prices. Consumer prices due out Friday are expected to have declined 0.8%.

Adjusted for inflation, then, sales were down only 1.9% I'd do better if I could, but that's about the most positive spin I can come up with.

Strawman Watch

| Wed Jan. 14, 2009 12:00 PM EST

STRAWMAN WATCH....Mickey Kaus thinks economic growth and tight labor markets are the key to low-end wage growth. Unions aren't. I disagree, and a few days ago wondered how Mickey proposed to get to his paradise of endless economic growth anyway. Today he responds:

And Drum has a plan for "low-end wage growth" that doesn't involve restoring the economy? Good luck with that. There's a double Nobel waiting for him, I guess. A triple Nobel if he can boost wages at the bottom while simultaneously letting in millions of unskilled low-wage immigrants. ... P.S.: Drum seems to be explicitly embracing "pie-slicing" — redistributing shares of a non-growing economy — as an alternative to "pie enlargement." Nothing, at first glance, so terribly wrong with that. But can Drum point to a period in modern American history when low-end wages grew without an expanding economy?

Is this supposed to be serious? For the record: yes, of course I support economic growth. Of course it's a precondition for low-end wage growth. I've never even hinted at anything so idiotic as "redistributing shares of a non-growing economy." But we've had economic growth for most of the past three decades and it hasn't been enough to boost median wages more than a smidge. It's pretty obvious by now that we need more than just economic growth to get median (and low-end) wages growing again, and I think greater union density (it's currently less than 10% in the private sector) is probably part of the answer.

As for reducing the influx of low-wage immigrants, I'm fine with that. I always have been — though I have different ideas about how to get there than Mickey. Still, the evidence suggests that this will have only a tiny effect on low-end wages. We're going to need a better plan than just building a fence along the southern border.

Barack Obama 2.0

| Wed Jan. 14, 2009 1:43 AM EST

BARACK OBAMA 2.0....Barack Obama is apparently planning to create a permanent political organization designed not just to help him win reelection in 2012, but to help him get his policy agenda passed in the meantime:

The organization, known internally as "Barack Obama 2.0," is being designed to sustain a grass-roots network of millions that was mobilized last year to elect Obama and now is widely considered the country's most potent political machine.Organizers and even Republicans say the scope of this permanent campaign structure is unprecedented for a president.

....Though the plan still is emerging, one source with knowledge of the internal discussion said the organization could have an annual budget of $75 million in privately raised funds. Another said it would deploy hundreds of paid staff members — possibly one for every congressional district in certain politically important states and even more in larger battlegrounds such as Florida, Ohio, Colorado, Virginia and North Carolina.

....The Obama system will be used at least in part to influence members of the president's own party. For example, Democratic lawmakers in Republican-leaning districts might resist voting for an Obama-backed global warming bill. In that case, the White House or DNC could use the new network for phone campaigns, demonstrations or lobbying trips to push lawmakers to stick with Obama.

This is something that Mark Kleiman more or less predicted many months ago. (To me, anyway. I'm not sure if he blogged about it.) His conjecture was that Obama's organization had fundamentally redefined presidential politics thanks to its huge pool of dedicated volunteers and its ability to quickly raise unheard-of sums of money. After all, what congressman is likely to buck the boss if the boss can offer — or withhold — hundreds of thousands of dollars without batting an eye and mobilize — or withhold — hundreds of thousands of phone calls and telegrams depending on how closely you toe the presidential line? Every president has a certain amount of power he can bring to bear against holdout legislators, but Obama's organization brings this to a whole new level.

If this turns out to be right, Congress is going to learn pretty quickly that the ballgame has changed. Should be fun to watch.

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Yet More Bailout

| Wed Jan. 14, 2009 1:08 AM EST

YET MORE BAILOUT....When Barack Obama asked President Bush to request the second $350 billion in TARP money, I got sort of a sinking feeling. After all, he wouldn't do that unless he figured the economy was still in such dire shape that there was a good chance he might need the money right away. Apparently that's the case:

On Tuesday, [Ben] Bernanke publicly made the case that one of the most unpopular and most scorned programs in Washington — the $700 billion bailout program — needs to pour hundreds of billions more into the very banks and financial institutions that already received federal money and caused much of the credit crisis in the first place.

The most glaring example that the banking system needs even more help is Citigroup. Though it already has received $45 billion from the Treasury, it is in such dire straits that it is breaking itself into parts.

....Since last September, no major banks have failed and the credit markets have thawed somewhat. But analysts said the problems are still acute, if less apparent on the surface. Banks have received $200 billion in fresh capital from the Treasury since last fall and have borrowed hundreds of billions of dollars more from the Fed. But in the meantime, the economy fell into a severe downturn last fall that is likely to continue until at least this summer.

....Citigroup is not alone. JPMorgan Chase, Bank of America, Wells Fargo and most other big banks all expect enormous losses as millions of consumers default on their mortgages, credit cards and automobile loans. Other losses are expected on loans made to commercial real estate developers, small businesses and for highly leveraged corporate buyout deals.

It's not as if this is a big surprise or anything, but still. Crikey.

Super Contango

| Wed Jan. 14, 2009 12:27 AM EST

SUPER CONTANGO....Normally, it costs more to buy a barrel of oil for delivery six months from now than it does to buy a barrel of oil today. After all, if you're not going to take delivery of my oil until July, then I'm going to want the spot price of the oil plus the cost of storing it plus the cost of having to wait for my money. So maybe a barrel of oil that costs you $38 today will cost you $41 for delivery six months from now.

But instead of $41, what if the July price is $53? Then anyone who wants to can make a guaranteed killing. Accept the contract, buy a tankerful of oil, store it for six months, and then deliver it. Even after the cost of storage and the interest on the loan you took out to buy the oil, you'll make a quick and easy twelve bucks per barrel profit.

Sounds nice, but since this profit opportunity is so obvious it should get arbitraged away almost instantly. In short, a situation like this should never happen — certainly not for long periods, anyway. But it has:

On Monday, oil for February delivery closed at $37.59 a barrel on the Nymex, or nearly $15 lower than July's contract price....Such a distance between contracts is unusual, sparking industry insiders to term the phenomenon — which reached an apex in late December — "super contango."

When the price spread is greater than the storage cost, "there is an opportunity to arbitrage at a profit without risk," said James Williams, an economist at energy research firm WTRG Economics.

So what's going on? One possible explanation is that most of the easy storage is already full, so it's not really possible to make a quick buck on this even if you want to. But even if that's the case, there's yet another option: oil producers can pump less oil now (essentially "storing" it in the ground) and then pump it out in July for delivery at the higher price. But apparently they're not doing that. John Hempton figures there are two possible explanations: (1) they're already pumping at full capacity, so they can't promise to pump extra oil in July even if they want to, or (2) oil producers are so desperate for cash that they're willing to take money now even if it's way less than they could get for the same stuff six months from now.

#1 doesn't seem to be true. So that leaves #2: thanks to plummeting oil prices, OPEC countries are in serious economic turmoil and desperate for any cash they can get their hands on right now. Either that or else there's an option #3 that's not obvious. Any ideas?

Deconstructing W

| Tue Jan. 13, 2009 8:12 PM EST

DECONSTRUCTING W....Howard Fineman on Hardball yesterday:

George Bush has never accepted the proposition that the world is complicated.

Me in the Washington Monthly three years ago:

I've long viewed George Bush as a temperamental conservative, the kind of guy you meet in a bar who slams down his drink and asks belligerently, "You know what this country needs?" — and then proceeds to tell you.

I think we're both saying about the same thing. But I was more colorful! In any case, I think this is about the closest I've ever come to describing Bush's essential character. Just thought I'd share.

UPDATE: Matt Yglesias thinks I'm being unfair to drunk guys in bars. Maybe so!

Tuesday Tree Blogging

| Tue Jan. 13, 2009 7:35 PM EST

TUESDAY TREE BLOGGING....The wind was too strong for the tree removers to come yesterday, but today the Santa Anas died down and our Jacaranda is no more. A sad moment, but it had to be done. Tomorrow the roots come out. Your before and after tree blogging is below.