Kevin Drum

The Widening Gyre

| Fri Oct. 17, 2008 12:59 PM EDT

THE WIDENING GYRE....Over at MojoBlog, David Corn reports on the latest crop of last ditch attacks being waged by loony right groups against Barack Obama. The nickel version:

Mohamed Atta's Driver License....Obama is a Socialist....Obama Is a Secret Muslim Plotting With an Evil Billionaire....Obama Is Fronting for Islamic Jihadists....

I guess things really are different this year. This stuff just sounds pathetic, not scary. Details here if you want to read up on the latest.

Advertise on MotherJones.com

Reading the Moose Entrails

| Fri Oct. 17, 2008 12:32 PM EDT

READING THE MOOSE ENTRAILS....Apropos of nothing in particular, I want to go on the record with a prediction that Sarah Palin will disappear into a well-deserved obscurity after the election is over. She is not a "comer." She is not the future of the Republican Party. She will not run for president in 2012. In fact, she won't maintain any kind of serious national political standing at all. At best, she'll spend the next few years being a celebrity starter at NASCAR races and speaking at Republican prayer breakfasts. At worst, she'll be an occasional butt of late night comics.

Palin is lazy, ill-informed, contemptuous of policy, and way too convinced that everybody in the country is dazzled by her folksy energy and thousand-watt smile. Yes, the diehard GOP base is rapturously in love with Palin and her media mockin' ways, but that's more a reflection of the base's future, not hers. Palin is a three-day wonder who's already a month past her sell-by date, and on November 5th she'll disappear to Wasilla for good.

Just wanted to get that off my chest. Anybody disagree?

Congress Update

| Fri Oct. 17, 2008 12:26 PM EDT

CONGRESS UPDATE....Via email from Congressional Quarterly:

Illinois 14th – CQ Politics has updated this race from Leans Democratic to Democrat Favored (less competitive).
Indiana 2nd – CQ Politics has updated this race from Democrat Favored to Safe Democrat (less competitive).
Indiana 3rd – CQ Politics has updated this race from Republican Favored to Leans Republican (more competitive).
Indiana 7th – CQ Politics has updated this race from Democrat Favored to Safe Democrat (less competitive).
Indiana 8th – CQ Politics has updated this race from Democrat Favored to Safe Democrat (less competitive).
Iowa 4th – CQ Politics has updated this race from Safe Republican to Republican Favored (more competitive).
Minnesota 1st – CQ Politics has updated this race from Leans Democratic to Democrat Favored (less competitive).
Nebraska 2nd – CQ Politics has updated this race from Republican Favored to Leans Republican (more competitive).

Every single change favors the Democrats, and there are 16 more that they'll cover in a separate story tomorrow. Details here. And Karen Tumulty reports that trends are similar in Senate races. Bottom line: If you're a Republican, life really sucks right now.

The Shah and Us

| Thu Oct. 16, 2008 9:54 PM EDT

THE SHAH AND US....Here's a bit of interesting historical work on the roots of the Iranian revolution:

A new report based on previously classified documents suggests that the Nixon and Ford administrations created conditions that helped destabilize Iran in the late 1970s and contributed to the country's Islamic Revolution.

....The report, after two years of research by scholar Andrew Scott Cooper, zeros in on the role of White House policymakers — including Donald H. Rumsfeld, then a top aide to President Ford — hoping to roll back oil prices and curb the shah's ambitions, despite warnings by then-Secretary of State Henry Kissinger that such a move might precipitate the rise of a "radical regime" in Iran.

....Analysts and historians often contend that President Carter, a Democrat, fumbled Iran, allowing the country to eventually become one of the chief U.S. opponents in the region. But the report suggests that his Republican predecessors not only contributed to the shah's fall but also were inching toward a realignment with Saudi Arabia as the key U.S. ally in the Persian Gulf.

....We should get credit for what happened at [OPEC's Doha summit in December 1976]," Kissinger told Ford. "I have said all along the Saudis were the key. . . . Our great diplomacy is what did it."

But it would prove to be a Pyrrhic victory....The shah's government, shaken by the loss of oil revenue, imposed a harsh austerity budget that threw thousands out of work, collapsed investor confidence and panicked middle-class Iranians. Economic chaos and unemployment quickly spread.

Within a year of the Doha summit, the first mass demonstrations that grew into revolution broke out on the streets of the Iranian capital.

The collapse of oil prices in the mid-80s, also engineered by the Saudis, was one of the key factors in the disintegration of the Soviet Union. So apparently Saudi Arabia can claim at least partial credit for both the rise of the Iranian revolution and the fall of communism. Not bad for a country with a population of 20 million or so.

Recapitalization

| Thu Oct. 16, 2008 9:18 PM EDT

RECAPITALIZATION....Via a link from John Quiggin, here's some raw data for you. It's several years old (too old to include data on Japan's banking crisis), but it includes historical data on the initial cost of recapitalizing banking systems after most of the other financial crises of the past few decades. Given the different nature of every crisis, and the different nature of small countries vs. big countries, it's hard to suggest that there's any kind of "average" recapitalization required after a banking collapse. Nonetheless, the historical records suggest that 5% of GDP would be a reasonable guess and 10% would hardly be out of line, especially given the epic nature of our current meltdown.

And how are we doing in comparison? So far the Treasury has committed $250 billion as part of the Paulson bailout plan and another $100 billion or so to Bear Stearns, AIG, and Fannie/Freddie. To get to 5% of GDP we'd need to increase that to $700 billion. To get to 10% we'd need to increase it to $1.4 trillion. Just some benchmarks to keep in mind.

Quote of the Day - 10.16.08

| Thu Oct. 16, 2008 6:43 PM EDT

QUOTE OF THE DAY....From Joe Klein:

Ronald Reagan used to say that the most frightening nine words in the English language were "I'm from the government and I'm here to help." That is no longer true. This year, the most frightening eight words are "I'm John McCain and I approved this message."

Actually, that's just the best prepackaged zinger from the linked post. The most genuinely penetrating piece of wordsmithing was this:

We have had 30 years of class warfare, in which the wealthy strip-mined the middle class.

That's a very good metaphor. Personally, I'm not very interested in income redistribution. I'm interested in getting the distribution right in the first place. For three decades we've artificially kept middle class wage increases far below the growth rate of the economy, and this trend has been even more pronounced over the past eight years. This has created an enormous pool of extra money that's been — yes — strip mined and redirected to the rich, and fixing this is Barack Obama's biggest and longest-term challenge. If we restore the normal growth of middle class wages, it provides a sustainable consumer base for the entire economy; it reduces the demand for endless credit card debt; it brings down income inequality naturally; and it goes a long way toward keeping the financial sector under control and reining in Wall Street salaries without putting in place a bunch of artificial (and probably fruitless) regulations.

And that's just for starters. Stop the strip mining and economic vigor will follow. It's at the core of everything.

Advertise on MotherJones.com

Priorities

| Thu Oct. 16, 2008 6:11 PM EDT

PRIORITIES....Pakistan's economy is about to implode and they're looking for help:

President Asif Ali Zardari arrived in Beijing on Tuesday for a four-day state visit as concern has surged over a possible debt default by Pakistan that could cripple its economy and spark more civil unrest. While the amount of money Pakistan needs in the short term is relatively small — $4 billion to $6 billion — analysts say the climate of crisis and public anger over domestic bailouts in the United States and Western Europe have made even a modest infusion from its Western allies politically difficult.

....The Bush administration and Congress have been shaping a long-term economic and military assistance package for Pakistan, but there is no indication the United States is able to step in with a short-term financial lifeline.

Pakistan is going to the Chinese now "because you go to the guys with the money," a senior International Monetary Fund official said. "And right now, the Chinese are the ones with the money."

By itself, this isn't a big deal. Pakistan has long been friendly with China, so there's no reason they shouldn't ask them for assistance.

Still, this is the kind of thing that's a canary in the coal mine. Global power generally flows to "the ones with the money," and to the extent that this is China, not the United States, our influence in the world inevitably wanes. In other words, it's not just a platitude to say that getting our economic shop in order really is at least as important as the fact that we can project military power into places like Iraq and Afghanistan. In fact, considering how well that projection has gone lately, it's probably more important — and that means that it's time to get our priorities in order. This is decidedly not the right way to do it.

UPDATE: Dan Drezner says, "this is a very small canary." I agree.

Joe the....Um....Whatever

| Thu Oct. 16, 2008 5:23 PM EDT

JOE THE....UM....WHATEVER....Chris Orr is agog at the attention conservatives are paying to supposed weathervane du jour Joe the Plumber:

Do not expect this ardor to be dampened by the facts that Wurzelbacher is not an independent, makes nowhere near the $250,000 that prompted his question to Obama, and is not, in fact, a licensed plumber.

Okay, but at least his name really is Joe, isn't it? That counts for something.

UPDATE: I was just kidding, but it turns out his name isn't Joe. It's Samuel. Sheesh. But I guess he goes by Joe.

Oil Bubble Watch

| Thu Oct. 16, 2008 3:24 PM EDT

OIL BUBBLE WATCH....The latest on oil prices:

In New York, oil futures fell as much as 8 percent to $68.57 a barrel on Thursday, their lowest since June 2007. Oil has lost half its value since hitting a record closing price of $145.29 a barrel in July.

....Global oil demand is undeniably slowing, particularly in developed nations. Japanese oil consumption dropped 12 percent in August, while in the United States, demand has been cut by 8 percent in September.

Still, consumption is growing in developing nations, albeit at a slower pace. The International Energy Agency expects global oil demand to grow by just 400,000 barrels a day this year, to 86.5 million barrels a day. At the beginning of the year, the agency was expecting growth of more than 2 million barrels for 2008.

So does this mean that this year's runup in oil prices was a speculative bubble after all? At first I didn't think so, but by the middle of the year I was beginning to wonder. Still, even at the height of the bubble in June, the best I could say was that the price spike "had a bit of a bubbly feel to it" but that I didn't really have any solid evidence to back that up.

I still don't, really. The problem is that there were genuine supply and demand issues pushing prices up beginning in 2007. But as prices skyrocketed, demand eventually went down. Then the banking crisis kicked into high gear and everyone got afraid that we were headed for a global recession. Those are both perfectly normal reasons for the price of oil to fall.

On the other hand, the "Enron loophole" that the bubble pushers kept talking about got closed in June too. And a couple of months ago the CFTC discovered that "financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency." So maybe it really was a speculative bubble after all.

Bottom line: Occasionally you get a massive, long-running thing like the housing bubble, which is visible (to some people at least) even while it's happening. Most of the time, though, bubbles are pretty hard to identify. This particular runup is hard to call even in hindsight.

POSTSCRIPT: However, one thing is obvious: this kind of price instability is going to be with us for a long time as oil demand bumps up against maximum oil production. Full story here.

Shorthand

| Thu Oct. 16, 2008 1:59 PM EDT

SHORTHAND....Via Sullivan, John Podhoretz says McCain screwed up last night:

The problem, in my view, is that the shorthand in which McCain spoke about these matters made them comprehensible only to those of us who are already schooled in them. In almost every case, Obama answered McCain's shorthand with longhand — with detailed, even long-winded answers that gave the distinct impression he was more in command of the details of these charges than the man who was trying to go after him on them.

That's what I meant last night when I said McCain was talking in "code." Over and over he'd respond to Obama with a brief staccato outburst — "health of the mother," "statute of limitations," "marketing assistance program," "helping FARC," etc. — that political junkies might have understood, but probably no one else. He sounded like a guy who had so many preplanned attacks lined up that he could barely spit all of them out in the allotted time. At times he almost seemed like he was gasping for air.

Overall, I don't take too seriously the insta-polls that are released right after the debate. They show that Obama won, but a lot of that was just because Obama has high support levels right now, and you're way more likely to think your guy won the debate than the other guy. Still, I think this was the worst of McCain's debate performances. He might have pepped up the base a bit, but he didn't help himself with anybody else.