Kevin Drum

Sanctions Against Putin Won't Do Much For Crimea, But We Should Impose Them Anyway

| Fri Mar. 7, 2014 3:00 PM EST

Dan Drezner, after waiting an unconscionably long four or five days, has weighed in on the efficacy of economic sanctions against Russia:

Sorry, but the fact remains that sanctions will not force Russia out of the Crimea. This doesn't mean that they shouldn't be imposed. Indeed, there are two excellent reasons why the United States should orchestrate and then implement as tough as set of sanctions on Russia as it can muster.

First, this problem is going to crop up again. Vladimir Putin has now invaded two neighbors in six years to destabilize regimes perceived to be hostile to him. Post-Crimea, any new Ukraine government will continue to be hostile to the Russian Federation. There are other irredentist areas in the former Soviet Union — *cough* Transnistria *cough* — where Putin will be tempted to intervene over the next decade. At a minimum, he should be forced to factor in the cost of sanctions when calculating whether to meddle in his near abroad again. President Obama was correct to point out the "costs" to Putin for his behavior — now he has to follow through on that pledge.

Second, while sanctions cannot solve this problem on their own, they can be part of the solution. Over the long term, Russia does need to export energy to finance its government and fuel economic growth. Even if planned sanctions won't bite in the present, the anticipation of tougher economic coercion to come is a powerful lever in international bargaining. The closer the European Union moves towards joining the U.S. sanctioning effort, the more that Russia has to start thinking about the long-term implications of its actions. Any political settlement over the future of Ukraine will require compromise by the new Ukrainian government and its supporters in the West. Imposing sanctions now creates a bargaining chip that can be conceded in the future.

This mirrors my own judgment. Putin has very plainly decided that invading Crimea is worth the price, and it's improbable that economic sanctions—especially the scattershot variety that we're likely to put together in this case—will change that. Nevertheless, it needs to be clear that there really is a price. It also needs to be clear that face-saving compromises are still available to Putin that might lower that price.

For my money, the biggest price Putin is paying comes not from any possible sanctions, but from the very clear message he's now sent to bordering countries who have long been suspicious of him anyway. Yes, Putin has shown that he's not to be trifled with. At the same time, he's also shown every one of his neighbors that he can't be trusted. Two mini-invasions in less than a decade is plenty to ramp up their anti-Russian sentiment to a fever pitch.

Putin's invasion has already cost him a lot in flexibility and maneuvering room, and it's very unlikely that tighter control over Crimea really makes up for that. At this point, it's hardly a question of whether Putin has won or lost. It's only a question of just how big his losses will be.

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Divided Government Isn't Going Away Anytime Soon

| Fri Mar. 7, 2014 1:54 PM EST

Ronald Brownstein pithily sums up our current electoral dilemma:

Republicans can't attract enough minorities to consistently capture the White House. Democrats can't win enough whites to consistently control Congress.

Neither party has a lock on any branch of government. But Republicans are getting weaker and weaker nationally, which makes it very difficult for them to capture the White House. Midterm elections, however, which feature lower turnouts and depend on state and district voting, pose a problem for Democrats.

Obviously details still count. Republicans have a good chance of taking the Senate this year because Democrats are defending a lot of weak seats. Conversely, Democrats have a good chance of taking the Senate in 2016 because Republicans will be defending a lot of weak seats. Nonetheless, we do seem to be entering an era in which Democrats have an ever stronger edge in presidential elections and Republicans have an ever stronger edge in congressional elections, especially midterms. Unless something changes, we can probably look forward to divided government for a long time.

Did Newsweek Dox the Wrong Satoshi Nakamoto?

| Fri Mar. 7, 2014 12:44 PM EST

Is Dorian Satoshi Nakamoto of Temple City, California, the same "Satoshi Nakamoto" who invented Bitcoin? Newsweek's Leah McGrath Goodman says he is in a cover story here, and Felix Salmon does a good job of running through the evidence here. Matt Yglesias is skeptical:

Here's the question of Newsweek's Bitcoin "scoop," as I understand it—is the fact that a person is named "Satoshi Nakamoto" good evidence that the person in question is the originator of Bitcoin? If it is, then all of the other evidence regarding this particular Satoshi Nakamoto is telling....But absent the name, there is very little here.

I don't agree. The key evidence is this conversation that Goodman had with Nakamoto in front of his home:

Tacitly acknowledging his role in the Bitcoin project, he looks down, staring at the pavement and categorically refuses to answer questions.

"I am no longer involved in that and I cannot discuss it," he says, dismissing all further queries with a swat of his left hand. "It's been turned over to other people. They are in charge of it now. I no longer have any connection."

Nakamoto says he was misunderstood. His English isn't great, and he was just referring to no longer being an engineer. Goodman, however, says this is nonsense. "I stand completely by my exchange with Mr. Nakamoto. There was no confusion whatsoever about the context of our conversation — and his acknowledgment of his involvement in bitcoin."

In any case, this is the key piece of evidence. If Goodman is right, then Nakamoto is now covering up after making a momentary slip. But if Goodman stretched the quote a bit to make it sound cleaner than it was in real life, then Nakamoto is very likely in the clear.

Last night there was some chatter on Twitter about whether Goodman's story sounded right. She made a mistake identifying LA County sheriff's deputies as "police officers from the Temple City, Calif., sheriff's department," for example, and some of her quotes seem a little too good to be true. Personally, I wasn't persuaded. The former is a minor error, and I didn't find the quotes all that hard to believe. What's more, Goodman was very transparent about how she tracked down this story and what her sources were. There's nothing obscure about any of it. It's a very, very public story and, thanks to Goodman's transparency, one that's pretty easy to check. If Goodman made any of it up, she sure chose a very spectacular way to commit career suicide.

All that said, Karl Smith has a piece at FT Alphaville that compares some of Dorian Nakamoto's writing to that of the Nakamoto who wrote the original Bitcoin proposal. He's pretty persuasive that they don't seem to match. This isn't a smoking gun or anything, but it definitely gives us fresh reason to be skeptical.

In any case, tracking down the real identity of "Satoshi Nakamoto" is hard, but I suspect that verifying whether Dorian Satoshi Nakamoto of Temple City is the same guy isn't. One way or another, I have a feeling that someone is going to clear this up definitively within a week or two. Maybe sooner.

Chart of the Day: Net New Jobs in February

| Fri Mar. 7, 2014 11:30 AM EST

The American economy added 175,000 new jobs in January, but about 90,000 of those jobs were needed just to keep up with population growth, so net job growth clocked in at 85,000. If we accept the notion that bad weather has been holding back the economy, that's pretty good. If we don't, it's mediocre—but still better than the past couple of months of dismal job numbers.

The unemployment rate ticked up to 6.7 percent, caused almost entirely by an increase in the number of long-term unemployed. Since long-term unemployment isn't much affected by weekly variations in the weather, my guess is that our severe winter hasn't played a big role in the job picture. This is confirmed by the establishment data, which shows that construction employment is up while retail and IT employment are down. That's not bulletproof evidence or anything, but it's not the kind of thing you'd expect to see if weather were a big factor. It's what you'd expect to see if consumer spending is weak.

Bottom line: we continue to plod along. Things could be worse, but they still aren't very good.

Texas Turns Out to Be Not So Miraculous After All

| Fri Mar. 7, 2014 12:28 AM EST

Over at the Washington Monthly, Phillip Longman rocks like it's 2012 and relitigates the question of whether Rick Perry's so-called Texas Miracle is fact or fiction. He concludes that it's mostly fiction, and he makes a good case. Not a bulletproof case, but a good one. What's more, to the extent that Texas really does have a strong economy, he says, it's largely due to fracking, immigration from across the border, and a high birth rate. It's not due to low taxes—at least, not for most Texans:

Oh yes, I know what you’ve heard. And it’s true, as the state’s boosters like to brag, that Texas does not have an income tax. But Texas has sales and property taxes that make its overall burden of taxation on low-wage families much heavier than the national average, while the state also taxes the middle class at rates as high or higher than in California....The top 1 percent in Texas have an effective tax rate of just 3.2 percent. That’s roughly two-fifths the rate that’s borne by the middle class, and just a quarter the rate paid by all those low-wage “takers” at the bottom 20 percent of the family income distribution. This Robin-Hood-in-reverse system gives Texas the fifth-most-regressive tax structure in the nation.

Middle- and lower-income Texans in effect make up for the taxes the rich don’t pay in Texas by making do with fewer government services, such as by accepting a K-12 public school system that ranks behind forty-one other states, including Alabama, in spending per student.

The chart below tells the tale (data here). Most Texans pay more in taxes than most Californians. But rich Texans pay a lot less. That's great for rich Texans, but not so much for everyone else. For the middle class, Texas isn't a low-tax/low-service state, and it's not a high-tax/high-service state either. It's the worst of all worlds: a high-tax/low-service state. Yee-haw!

Bitcoin Creator Now Getting the Full Clooney

| Thu Mar. 6, 2014 6:49 PM EST

After I read that Newsweek story about Bitcoin creator Satoshi Nakamoto this morning, I figured it wouldn't be too hard to find the guy. Just drive up to Temple City and look for the huge fleet of TV trucks camped out somewhere.

Well, sort of. This is currently the front page of the LA Times. Liveblog here. I wonder if Nakamoto will be featured on Access Hollywood tonight?

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Needed: More Liberal Totems for Speeches and Campaign Ads

| Thu Mar. 6, 2014 4:34 PM EST

The annual CPAC gathering, in which right-wing politicians gather to compete over who can best pander to the conservative id, started today. So Mitch McConnell, who desperately needed to demonstrate his bona fides to a skeptical audience, walked on stage waving a rifle. Paul Waldman comments:

Which got me thinking: Liberals really lack any talismanic physical objects they can display to their supporters to demonstrate their ideological bona fides....On the other hand, if you watched a hundred primary ads for a hundred Republican candidates from across the country, I'd bet at least 30 or 40 of them would have a gun in there somewhere.

....As a matter of fact, conservatives have lots of these kinds of identity markers that can easily and quickly communicate a whole set of beliefs to an audience when they're mentioned, like the Bible or Ayn Rand or country music. The fact that Democrats don't have these things is probably because their coalition is more diverse, made up of people with a variety of cultural backgrounds and life experiences. The markers that may unite certain portions of the Democratic coalition—like, say, the music of the recently departed Pete Seeger—are not anything close to universal within that coalition, so politicians can't use them so easily.

Oh, I don't know. We have wind turbines and Priuses, though I suppose those are too big to carry on stage. But that's not all. Conservatives may have pictures of jars with dead fetuses in them, but we have pictures of dead birds covered with oil. Conservatives have fences along the border, we have lovingly arranged tableaus showing off citizens of every possible gender, race, age, and disability. Conservatives have country music, we have Bruce Springsteen.

But I'll concede that this is pretty weak. Conservatives have guns, pocket copies of the Constitution, and the Bible to use as really handy props that instantly demonstrate their tribal affiliation. So why don't liberals have similar, universally-recognized totems? Waldman may be right that it's because our coalition is more culturally diverse, but I'd toss out one other possibility: almost by definition, conservatives are in favor of tradition and liberals are in favor of change. So it's easy to find simple conservative props because every culture has lots of recognizable traditional icons that it's developed over the centuries. It's a lot less easy to find liberal props because icons of progress change every decade or two. Haul out a photo of FDR these days and half the audience wouldn't know who it is. Put up a picture of a streamlined diesel locomotive and everyone would giggle. But if you use a picture of something new, it just won't be universal enough.

But them's the breaks. We still have Springsteen.

Bitcoin Founder Apparently a Fan of "The Purloined Letter"

| Thu Mar. 6, 2014 2:44 PM EST

Newsweek's Leah McGrath Goodman claims to have discovered the true identity of the mysterious "Satoshi Nakamoto" who invented Bitcoin. It turns out he's....Satoshi Nakamoto:

Far from leading to a Tokyo-based whiz kid using the name "Satoshi Nakamoto" as a cipher or pseudonym (a story repeated by everyone from Bitcoin's rabid fans to The New Yorker), the trail followed by Newsweek led to a 64-year-old Japanese-American man whose name really is Satoshi Nakamoto. He is someone with a penchant for collecting model trains and a career shrouded in secrecy, having done classified work for major corporations and the U.S. military.

...."You want to know about my amazing physicist brother?" says Arthur Nakamoto, Satoshi Nakamoto's youngest sibling, who works as director of quality assurance at Wavestream Corp., a maker of radio frequency amplifiers in San Dimas, Calif. "He's a brilliant man. I'm just a humble engineer. He's very focused and eclectic in his way of thinking. Smart, intelligent, mathematics, engineering, computers. You name it, he can do it."

But he also had a warning. "My brother is an asshole. What you don't know about him is that he's worked on classified stuff. His life was a complete blank for a while. You're not going to be able to get to him. He'll deny everything. He'll never admit to starting Bitcoin."

And with that, Nakamoto's brother hung up.

If Goodman is right, Nakamoto is a geeky senior citizen who lives in a suburban stucco house a few miles from Pasadena. He invented Bitcoin because he wanted a currency that wouldn't make financiers rich. "He did not like the notion of banks and bankers getting wealthy just because they hold the keys," says Bitcoin's chief scientist, Gavin Andresen.

He also really, really wants to be left alone. I guess that part isn't working out so well anymore. For what it's worth, I suspect the part about inventing a currency that bankers can't make a profit from might not work out in the long run either.

The Latest Obamacare Extension Won't Have Much of an Impact

| Thu Mar. 6, 2014 1:56 PM EST

Adrianna McIntyre agrees that the optics and legality of allowing consumers to extend old health care policies is dodgy. However, she also thinks that its practical impact is pretty slight:

Senior officials reported that some 1.5 million people might be eligible for the latest administrative tweak to the Affordable Care Act, an extension of the “like it/keep it” fix that would permit individuals to maintain plans that don’t meet new coverage requirements through October 2017. The move has already been roundly criticized, but I’m inclined to believe the substantive policy impact will be small.

The thing about the individual market is that it’s volatile. The Kaiser Family Foundation found that about a third of those enrolled in nongroup plans exit within six months. Fewer than half remain after two years. This coverage is transitory for many, a bridge between employer-sponsored plans or other forms of insurance. Since the “fix” only applies to people maintaining these plans, the population eligible for the extension will dwindle over time.

There’s a fear that individuals who cling to old, less generous plans are healthier than those who already jumped to the exchanges. That might be true, but it also probably doesn’t matter much. CBO estimates that the exchange population will swell to 22 million by 2016 as people become more aware of coverage options and the penalty becomes more severe. The specter of adverse selection fades pretty fast when you set 1.5 million—a number that will erode over the life of the administrative fix—in that context.

Actually, according to research published in Health Affairs, only 17 percent of those with individual coverage keep it for more than 24 months. In other words, by the end of 2015, the number of people affected by this extension will be down to about 250,000 at most. That's not enough to affect the overall operation of Obamacare very much, and it's also a small enough number that pushback will be pretty slight by the time those remaining few folks are forced to switch to different plans. This is obviously what makes it politically attractive to the Obama administration.

Bottom line: it's legally a little dodgy but practically of little consequence. Probably not something to get too worked up about.

Flashback: Why Ronald Reagan Invaded Grenada

| Thu Mar. 6, 2014 1:21 PM EST

Here is Ronald Reagan on October 27, 1983, explaining his decision to invade Grenada in a nationally televised address:

[Earlier this month, Prime Minister Maurice] Bishop was seized. He and several members of his cabinet were subsequently executed, and a 24-hour shoot-to-kill curfew was put in effect. Grenada was without a government, its only authority exercised by a self-proclaimed band of military men.

There were then about 1,000 of our citizens on Grenada, 800 of them students in St. George's University Medical School. Concerned that they'd be harmed or held as hostages, I ordered a flotilla of ships, then on its way to Lebanon with marines, part of our regular rotation program, to circle south on a course that would put them somewhere in the vicinity of Grenada in case there should be a need to evacuate our people.

Last weekend, I was awakened in the early morning hours and told that six members of the Organization of Eastern Caribbean States, joined by Jamaica and Barbados, had sent an urgent request that we join them in a military operation to restore order and democracy to Grenada....These small, peaceful nations needed our help. Three of them don't have armies at all, and the others have very limited forces. The legitimacy of their request, plus my own concern for our citizens, dictated my decision.

Shorter Reagan: the government of Grenada was in chaos; Americans were in danger; and nearby governments requested our help. So we sent in troops. Does this sound at all familiar?

As it happens, there was little evidence that any Americans were in danger, and the nearby governments had asked for help largely because Reagan had requested it. The real reason for the invasion was that Grenada was a nearby country and Reagan was concerned that Cuba and the Soviet Union were establishing a military foothold there. Does it start to sound familiar now?

You may decide for yourself whether the invasion of Grenada was justified. The Cuban military presence was real, after all. And there's certainly no question about the instability of the Grenadian government.

Then again, the eastward expansion of NATO and the more recent EU/American attempts to increase Western influence in Ukraine have been quite real too. And there's certainly no question about the instability of the Ukrainian government. So does that mean Vladimir Putin was justified in sending troops into Crimea? Once again, you may decide for yourself. But Grenada might provide a useful framework for thinking about how regional powers react to perceived threats in their backyards.