Kevin Drum

Suffering From Schumeritis

| Tue May 10, 2011 2:07 PM EDT

Chuck Schumer is, basically, a good liberal senator. But here's my question: how many stupid, illiberal things does he need to support before we should all give up on him? If the rule is three strikes, his stands on the Dubai ports issue, the carried interest rule, and now his superlatively idiotic proposal of an Amtrak no-ride list, would put him out on the streets. And that's not even counting his leading role in making the Democratic Party a handmaiden of Wall Street over the past decade.

But I guess he's politically invulnerable, isn't he? And he's not up for election until 2016 anyway. And any replacement would probably be even worse. Blecch.

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Behind the Commodities Crash

| Tue May 10, 2011 12:46 PM EDT

A few days ago I read that high-frequency trading in stocks had died down recently, apparently because the stock market has been a little too stable lately. "Hmmm," I thought as I read this. "If they're dropping out of equities, I wonder what the supercomputers are up to now?"

The answer, it turns out, is commodities, and Reuters reports that algorithmic trading is likely responsible for a big part of the rout in commodity prices over the last couple of weeks:

In many cases, computer algorithms sold for technical reasons, as oil dropped through levels that, once breached, could trigger ever larger waves of selling yet to come...."Computers don't care. Momentum just increases until nobody wants to stand in front of it," said Peter Donovan, a floor trader for Vantage on the New York Mercantile Exchange.

Some big Wall Street traders watched their own systems sell into the down trend but couldn't know for sure who had initiated the selling spree. They only knew that similar machines at other firms, from New York, to London, Geneva and Sao Paulo, would be automatically selling in much the same manner.

...."We believe the magnitude of the correction appears in large part to have been exacerbated by algorithmic traders unwinding positions," Credit Suisse analysts wrote in a report. High frequency trading and algorithmic trading accounts for about half of all the volume in oil markets.

What else? George Soros started selling silver, everyone else piled on, and eventually traders started selling oil too. Before long, panic set in. Cheap money was also to blame:

A range of factors, both economic and political, were also at play. The recent rise in raw goods has been fueled in part by the U.S. Fed pumping cash into the markets by purchasing $600 billion in bonds. This program has pushed interest rates extraordinarily low, making borrowing essentially free once adjusted for inflation. Investors have been using the super-cheap money to buy into commodity markets. But the Fed's program is slated to end on June 30.

"Funds were likely to take profits before June when the direct (Fed) bond purchases stop. All were eyeballing each other to see who would take profits first," said a London-based oil trader.

It would be nice if Wall Street were using the Fed's cheap money to invest in real-world goods and services. But apparently the real world just isn't ready for any investment yet, and the private sector has boatloads of cash on its hands anyway. So instead the money gets shoveled into whatever financial markets are the most volatile, since those are the markets that promise the highest short-term rewards. This doesn't actually benefit anyone other than Wall Street traders, but that's the world we live in these days.

Via Felix Salmon, who has some additional comments.

Fracking Takes Another Hit

| Tue May 10, 2011 12:06 PM EDT

Natural gas fracking holds out the promise of producing enormous amounts of domestic energy for the United States. But is it safe? Among other things, one concern with fracking is that it releases methane into nearby groundwater:

A 2009 investigation by ProPublica revealed that methane contamination from drilling was widespread, including in Colorado, Ohio and Pennsylvania. In several cases, homes blew up after gas seeped into their basements or water supplies. In Pennsylvania a 2004 accident killed three people, including a baby.

In Dimock, Pa., where part of the Duke study was performed, some residents’ water wells exploded or their water could be lit on fire. In at least a dozen cases in Colorado, ProPublica’s investigation found, methane had infiltrated drinking water supplies that residents said were clean until hydraulic fracturing was performed nearby.

But is this just anecdotal and coincidental, or do fracking operations really pose a systematic danger to nearby water supplies? Via Stuart Staniford, here are the results of a new study of methane concentrations in drinking water near fracking operations, and as you can see, the levels are quite high and quite dangerous anywhere within a kilometer of the gas wells. The industry will undoubtedly push back against this and demand further study while simultaneously doing everything it can to inhibit further studies. But the possibility of serious danger is pretty obvious here. Further studies really do need to be done, they need to be done quickly, and safe levels need to be established. This isn't just anecdotal anymore.

Alan Simpson, Social Security Illiterate

| Tue May 10, 2011 11:12 AM EDT

Is it true that life expectancies have gone up dramatically since 1940, when Social Security first went into effect? Sort of. In 1940, lots of children still died young, and this skewed the average way down. Fifty years later those kids mostly didn't die, so the average was higher.

But childhood mortality doesn't affect Social Security one way or the other, so we don't really care about that. What we care about is the people paying into the system — working age adults — and how long they live after they retire. So how much longer do retirees live these days? Answer: For men, life expectancy at age 65 has gone up from 78 to 83. Since the Social Security retirement age has also gone up, from 65 to 67, this means that over the past 60 years the expected payout period has increased by about three years.

Hilariously, though, Social Security scold Alan Simpson simply has no clue about this. Ryan Grim asked him about it recently:

HuffPost suggested to Simpson during a telephone interview that his claim about life expectancy was misleading because his data include people who died in childhood of diseases that are now largely preventable....According to the Social Security Administration's actuaries, women who lived to 65 in 1940 had a life expectancy of 79.7 years and men were expected to live 77.7 years.

"If that is the case — and I don’t think it is — then that means they put in peanuts," said Simpson. Simpson speculated that the data presented to him by HuffPost had been furnished by "the Catfood Commission people" — a reference to progressive critics of the deficit commission who gave the president's panel that label.

Told that the data came directly from the Social Security Administration, Simpson continued to insist it was inaccurate, while misstating the nature of a statistical average: "If you’re telling me that a guy who got to be 65 in 1940 — that all of them lived to be 77 — that is just not correct. Just because a guy gets to be 65, he’s gonna live to be 77? Hell, that’s my genre. That’s not true," said Simpson, who will turn 80 in September.

Simpson is a guy who's taken very seriously on Social Security issues inside the Beltway. He's studied it for years. And yet, as he makes clear later in the interview, he simply had no idea any of this was true. No idea. And he doesn't believe it, even though this stuff is Social Security 101.

This is the kind of thing that explains why so many people think Social Security is some kind of fiscal time bomb. They just flatly don't understand the arithmetic. The plain fact is that Social Security is only modestly underfunded and can be fixed with a basket of quite moderate changes over the next 30 years or so. Anyone who understands the numbers knows this. People like Alan Simpson don't. But guess who gets the most press coverage?

Boehner's Bluff

| Tue May 10, 2011 12:15 AM EDT

It's hard to know how to react to the latest calculated blast from John Boehner:

House Speaker John A. Boehner defined the GOP’s terms for raising the legal limit on government borrowing Monday, demanding that President Obama reduce spending by more than $2 trillion in exchange for an increase big enough to cover the nation’s bills through the end of next year....For the first time, he signaled that Republicans would come to the negotiating table with the expectation that the White House and Senate Democrats be prepared to discuss major reductions in federal spending — and enact them immediately. That’s a sharp shift from Republicans who just last week talked of finding “commonality” on less-ambitious measures.

....The extent of Boehner’s demands was unclear.

That last sentence is the tell. Unless Boehner is proposing his $2 trillion in savings to come over 20 years or so, he has to be targeting Social Security and Medicare. There's no way to save that kind of money otherwise. So what's his proposal? Answer: he wants "honest conversations."

I'll bet he does. What he really wants is probably simpler: he wants President Obama to propose something. Boehner may be talking big because otherwise his tea party base will feed him to the dogs, but the last couple of weeks have made it pretty clear that he doesn't have the stomach for putting the Republican name to a concrete proposal to slash Medicare. That hasn't worked out so well for him. Much better to have Obama put his name to it instead.

Whether Obama will be willing to do this is unclear. There's really no reason he should since he holds all the cards and knows that eventually Boehner has to cave, but he's already indicated that he's willing to compromise and Joe Biden is already leading negotiations with congressional Republicans. So maybe he is willing to put his name to something and save Boehner's bacon. If he does, though, I sure hope Boehner gets him a nice Christmas gift this year.

The Rise and Fall of Sarah Palin

| Mon May 9, 2011 6:10 PM EDT

Howard Kurtz says that Sarah Palin is losing her mojo:

16 months after   [Fox] network chief Roger Ailes closed [a $3 million TV] deal in a meeting with Palin and her husband, Todd, the excitement has cooled. Palin’s regular appearances as a commentator no longer move the ratings needle without a promotional push. Palin was supposed to host prime-time specials dubbed Real American Stories, but Fox insiders tell me the idea was shelved early on. The first one bombed, losing a chunk of its audience as the show progressed.

....Between February and April, according to an analysis for Newsweek by General Sentiment, a company that tracks and measures online content, posts involving Palin fell 38.3 percent, to 235,032, over the past 30 days. Social-media mentions dropped in lockstep, down 32 percent over the same period, to 135,421.

Maybe this is due to her Tucson misstep, or her "blood libel" inanity, or maybe her semi-defense of birthers. But I think Kurtz has missed the real reason: Dana Milbank's one-month boycott of all things Palin in February. I joined in on that, and you know what? After 30 days of cold turkey I was pretty much cured. Ignoring Sarah Palin turned out to be a lot easier than I thought, and by the time March rolled around I didn't much care about her anymore. I think I've only mentioned her once or twice since then.

Fame is a fickle thing, I'm afraid, especially when you have nothing of actual substance to be famous about. In that department, it turned out that Sarah Palin's half-life was even shorter than the Kardashian family's.

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Quote of the Day: Dumb Quiz Show Answers

| Mon May 9, 2011 3:19 PM EDT

From the Guardian, on two "Million Pound Drop" contestants who incorrectly guessed that Roger Bannister was "the first man ever to put the toilet seat down":

This may have cost them their shot at wealth, but Andrew and Vanessa shouldn't get downhearted. They've entered the immortal ranks of the all-time most stupid quiz show answers ever.

More entertaining quiz show idiocy at the link.

Toward a Unified Theory of Republican Flip-Flops

| Mon May 9, 2011 1:16 PM EDT

Why have Republicans changed their minds recently on issues like cap-and-trade and the individual mandate? My take is that they never really supported these things in the first place, and endorsed them only as a temporary tactic to fight off more liberal proposals from Democrats. But once those liberal proposals were off the table (or could be plausibly defeated in a straight-up vote), they didn't need to pretend to support alternatives anymore and simply reverted to opposing any change at all.

A couple of days ago Ezra Klein improved his counterargument that the real reason is simply partisan opposition to all things Obama. If Republican attitudes had changed gradually, that would be one thing. But if they changed almost overnight between 2007 and 2009? Then it sounds like Obama is the real source of these flip-flops.

I was thinking about this last night, and the topic of campaign finance disclosure popped into my mind. Republicans used to be all for it. Then the Supreme Court handed down its pro-business Citizens United ruling, allowing businesses to spend freely in elections but also making it clear that Congress could require disclosure of campaign contributions if it wanted to. Suddenly Republicans were dead set against disclosure. Norman Ornstein picks up the story:

In March of 2000, a Wall Street Journal editorial said, “Our view is that the Constitution allows consenting adults to give as much as they want to whomever they want, subject to disclosure on the Internet.” That same year, Republican Senator Mitch McConnell asked, “Why would a little disclosure be better than a lot of disclosure?”....Last month, Mitch McConnell now says he views disclosure as “a cynical effort to muzzle critics of this administration and its allies in Congress.” He savaged the White House for considering an executive order to require corporations getting federal contracts to disclose its corporate spending on campaigns....What’s more, last fall, McConnell pulled out all the stops to prevent passage of the DISCLOSE Act, which would have required all corporations and unions to disclose their campaign spending. McConnell managed to pressure every Republican from supporting cloture, leaving the legislation, which had passed the House, stuck at 59 votes in the Senate.

....What to make of the turn away from support for disclosure? I can draw only one conclusion: The earlier support for disclosure was a façade. McConnell, McGahn, and the Journal, among others,don’t actually want transparency or any regulation. At base, they are for a wholly unregulated, Gilded Age-style campaign system where big and secret money rules.

This is actually evidence for both flip-flop theories, I think. Ornstein is almost certainly correct that Republicans want no regulation of campaign finance at all, and at any given time are simply adopting the most extreme position they think they can get away with. On the other hand, there's not much question either that the rock-solid Republican opposition to the DISCLOSE Act was largely motivated by pure partisan hostility. In the end, I guess maybe we don't really have to choose between these two explanations of Republican behavior at all. Why can't they both be true?

Elites vs. the Public: Round 2

| Mon May 9, 2011 12:28 PM EDT

Who's to blame for our fiscal problems of the past decade? Paul Krugman says elites deserve a lot more of the blame than the general public, but Dan Drezner disagrees: the public, he says, was in favor of tax cuts and in favor of the Iraq war, so they deserve a big chunk of the blame too.

Actually, though, I think Dan's evidence demonstrates exactly the opposite of what he thinks. He's right that polling evidence suggests the public was in favor of both these policies. But the public had been in favor of these things for well over a decade. About 60+% of the public had believed its taxes were too high going back to the beginning of polling on this question in 1957. And support for invading Iraq and overthrowing Saddam Hussein had been in the 50-60% range ever since the Gulf War.

But guess what? Despite this broad support, nobody was crying out for either huge tax cuts or invading Iraq until George Bush and the rest of the GOP started talking them up. Without that, the public would have continued to vaguely think that taxes were too high and Saddam Hussein was a bad guy before switching the TV to Monday Night Football and forgetting about it.

It's true that public support was probably necessary in order to pass the Bush tax cuts and invade Iraq. But the polling evidence is pretty clear that it was far from sufficient. Nothing about public opinion changed in 2001. The only thing that changed was the occupant of the Oval Office. The public isn't blameless in all this, but the polling evidence makes it pretty clear that it was a minor player.

Journalism vs. WikiLeaks

| Mon May 9, 2011 11:57 AM EDT

David Corn has a piece today about a Pakistani businessman who owns several pharmacies in New York City and has been fingered by a Guantanamo detainee as a "possible al-Qaida anthrax operative." So is he? Nobody knows. Maybe the Gitmo detainee was just making stuff up. Maybe it's already been exhaustively investigated and the guy has been cleared. Or maybe he really did have al-Qaeda ties at one time. The Pakistani guy can't be reached, and there's no evidence one way or the other about this aside from the detainee report, so it's impossible to say.

Normally, I'd say that even running a story this thin would be criminally irresponsible. But here's the thing: the guy's name and the accusations against him were part of the WikiLeaks release of Guantanamo documents a few weeks ago, so it's all publicly available now. Here's David:

Mother Jones contacted the FBI in Washington and New York and asked for information regarding this suspect. After all, wouldn't the bureau have thoroughly run down such a lead? Each office said that the FBI would not comment on information in a leaked document.

....With the document now in the open—and on the Internet—the public has a right to know whether this potentially dangerous matter has been resolved. (And, if turns out the intel is faulty, the Pakistani businessman deserves to have his name cleared.) The FBI has the usual bureaucratic reasons for not commenting; it does not want to legitimize leaks. But alarming information of this sort does warrant a response. The critical issue is not the leak, but the nightmarish possibility of an anthrax operative on the loose.

So how about it? Is this now a legitimate story, even though the charges are eight years old and have almost certainly been thoroughly investigated by now? Under the circumstances, should the FBI be willing to comment? Should we have run this story in the first place? What would be your call if you were running things here at MoJo?