Kevin Drum

The Rich, Our Newest Old Problem

| Mon Jul. 19, 2010 1:15 PM EDT

Ryan Avent writes:

One of the thing that continues to surprise me about Washington, though it shouldn't, is the extent to which those involved in the policymaking process think in terms of interests — almost exclusively. This is a direct reflection of the outsized influence interests have over the policymaking process ("the people" tend not to get all that involved), and it's therefore easily understandable, but it's also pretty pernicious. A politics that seeks to balance interests will consistently give short shrift to the goal of societal good. We can think about this in terms of trade: producing industries may want trade protections, which will be good for their concentrated interest but bad for the economy as a whole. These protections could hurt other industries that use imports as inputs, and which therefore mobilise opposition. Congress subsequently buys off the opposition with subsidies, leaving all interests happy and social welfare clearly reduced.

This is obviously not a new problem. James Madison wrote about it. Mancur Olsen wrote about it. Small, intense interest groups have an advantage over large, diffuse populations, and that advantage is probably multiplied by the modern technology environment, which makes it easier to quickly mobilize communities of interest than ever before.

Still, even taking that into account, it's become worse, hasn't it? Partly this is because the Republican Party has become almost purely driven by specific corporate interests, not free market principles writ large, while simultaneously convincing a lot of ordinary citizens that all these bennies they're handing out are merely a sign of capitalism at work. Likewise, after the grim years of the 80s, Democrats decided their old interest groups were no longer enough to produce electoral victories, and decided they needed to become a party of big business too. That same technology environment that makes mobilization easier also makes campaigning more expensive, and with the skyrocketing growth in income inequality over the past 30 years, there's really only one place to get the money you need to win office: rich individuals and rich businesses. Which are, to a considerable extent, the same things.

There are still plenty of other interests: abortion groups, gun groups, environnmental groups, and so on. But they're all increasingly overshadowed by the rich as a catch-all interest group. The rich, ever since the mid-70s, have gotten ever richer, which gives them more power to push government policies that help the rich. This makes them richer still, which in turn gives them yet more power. Rinse and repeat. If the rich were a little brighter or a little more enlightened, this might not be a huge problem. But they aren't.

The Romans said cui bono. Deep Throat said "follow the money." Today neither one is really an adequate description. We need an update.

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I Just Can't Quit You, Sarah Palin

| Mon Jul. 19, 2010 12:28 PM EDT

This is, I kid you not, a screen shot from the front page of the Washington Post. In case you missed it, Sarah Palin made a mistake in a Twitter post Sunday night, using the word "refudiate" instead of "repudiate."

I repeat: this is front page news. In the Washington Post. I'm reminded of Ari Melber's piece last week about Palin's "Mama Grizzlies" video, which, it turns out, only 2% of her Facebook fans watched. Where did the rest of its 368,000 views come from? Links from the traditional media, it turns out:

It's quite a feat. Palin blasts the "lamestream" media while claiming to commune directly with her base, which draws extensive media coverage for an effort that actually reaches a tiny number of people. Without the media assist, though, Palin would just be sitting on a Facebook page with 2 percent participation and a YouTube video with niche numbers....Some reporters are catching on. "I hope we don't hear from Sarah Palin about media bias anymore," Chuck Todd recently said on MSNBC's Morning Joe, "because it is amazing the ability this woman has to get media attention with as little as she does, whether it's a Twitter or a Facebook update."

In fairness to the Post, Palin's miscue was a huge Twitter sensation among lefties last night. I swear, I think about 50% of the posts in my Twitter feed for a two or three hour period last night were lame jokes about "refudiate." And in further fairness, as long as Palin seemingly has make-or-break endorsement power in Republican campaigns and remains a possible presidential candidate, they have to cover her. But isn't it about time to limit that coverage to actual newsworthy events? If she gives a major speech on the future of national security in a multipolar world, fine. Cover away. But a mistake in a Twitter post? Maybe think twice about that.

The Ground Zero Mosque

| Mon Jul. 19, 2010 11:38 AM EDT

Does anyone know of a tick tock that explains how the "Ground Zero mosque" became a sudden cause célèbre among the tea party wing of the conservative movement? Here's a New York Times story from last December, and it doesn't so much as mention any objection to the purchase of the building in question (which is two blocks away from the World Trade Center site). By May, Newsweek was suggesting that plans for the mosque were "prompting outrage in the blogosphere," but not much of anywhere else. At the same time, CNN reported that local residents were divided but that the Community Board of lower Manhattan had approved the project unanimously.

Now, a couple of months later, it seems to have erupted into a full fledged right wing frenzy. So who started it? Hannity? Rush? Sarah P.? Does anyone have a timeline showing how and when the noise machine picked up on this as the outrage du jour?

UPDATE: Here's a start from TPM, which takes the story through May 28. Anybody got something more recent that explains when the big guns started getting involved?

What Happens After November?

| Mon Jul. 19, 2010 12:49 AM EDT

Jon Chait has a good post today on a subject that's been in the back of my mind too: what lessons are Republicans taking from the Tea Party takeover of the GOP? As he points out, so far it's been a disaster. Pat Toomey's primary challenge of Arlen Specter brought us healthcare reform, Sharron Angle's victory in Nevada is likely to let Harry Reid keep his seat, and Tea Party darlings Rand Paul (in Kentucky) and Marco Rubio (in Florida) have turned safe seats into nailbiters. And of course there was Doug Hoffman's insurgency last year in New York's 23rd district, which accomplished nothing except to split the conservative vote and hand the seat to a Democrat for the first time since the Civil War:

This is four Senate seats put at serious risk by running right-wing primary challenges, plus one enormous liberal domestic policy accomplishment....I have seen no recriminations whatsoever in hindsight. And yet it seems perfectly clear that the effect of these challenges has been a disaster from the conservative perspective.

....Obviously the conservative movement is intoxicated with hubris right now. Part of this hubris is their belief that the American people are truly and deeply on their side and that the last two elections were either a fluke or the product of a GOP that was too centrist. It's a tactical radicalism, a belief that ideological purity carries no electoral cost whatsoever.

The usual way this stuff works is that a party that overreaches gets pummeled at the polls and then grudgingly moves to the center in order to win back votes. Think Republicans after Goldwater, Democrats after Reagan, and Britain's Labor Party after Thatcher. The main question is, how long does it take?

Republicans have now gotten pummeled for two elections in a row. That's not enough. Three in a row might do it, but unfortunately for the GOP, they're going to win big this year no matter what. Even if Republicans do worse than expected — say, a 20-seat pickup in the House and three or four in the Senate — that's plenty big enough for them to think of it as a resounding public endorsement. In fact, it might be the worst of all possible worlds for them: big enough to keep everyone motivated, but small enough to keep them in the minority, where they can continue to spout the most extreme Tea Party rhetoric with no need to back it up. It's the ideal combination to keep them deluded into thinking that if they just follow the one true path a little more diligently, victory will be theirs.

I haven't been able to figure out how this ends. I guess I'll just have to wait and see like everyone else. One scenario is that they pick up seats but stay in the minority for next decade or so, and that's how long it takes for them to come to their senses. Another is that they win a congressional majority and then — what? It's obvious they have no intention of taking a meat axe to spending, and equally obvious that they know how unpopular this would be no matter what the tea partiers say. Check out Sen. John Cornyn (R-TX) and Rep. Pete Sessions (R-TX) on Meet the Press today for comically convincing evidence of this. But what happens then? Is there any point at which the tea partiers will finally figure out that Republicans are willing to talk endlessly about slashing the federal government but are never willing to actually do it?

Or is John Quiggin right? Would Republicans, against all odds, actually try to live up to their rhetoric and end up shutting down the government, as Newt Gingrich did in 1995? And if so, what happens then? Sarah Palin in 2012? Followed by a Goldwater-style election debacle? It's hard to think of any way in which this ends up well for either the Republican Party or for the country.

Can California Legalize Marijuana?

| Sun Jul. 18, 2010 5:45 PM EDT

Mark Kleiman, clearly competing for killjoy of the year honors, explains why a California initiative to legalize marijuana won't work:

The federal Controlled Substances Act makes it a felony to grow or sell cannabis. California can repeal its own marijuana laws, leaving enforcement to the feds. But it can't legalize a federal felony. Therefore, any grower or seller paying California taxes on marijuana sales or filing pot-related California regulatory paperwork would be confessing, in writing, to multiple federal crimes. And that won't happen.

True, Atty. Gen. Eric H. Holder Jr. has announced that the Justice Department will not prosecute people who are selling medical marijuana in compliance with California's law. But that's an entirely different matter....The feds can afford to take a laid-back attitude toward California's medical marijuana trade because it's unlikely to cause much of a trafficking problem in the rest of the country. Because dispensaries' prices are just as high as those for black-market marijuana, there's not much temptation to buy the "medical" sort in California and resell it out of state.

By contrast, the non-medical cannabis industry that would be allowed if Proposition 19 passed would quickly fuel a national illicit market....As a result, pot dealers nationwide — and from Canada, for that matter — would flock to California to stock up. There's no way on earth the federal government is going to tolerate that. Instead, we'd see massive federal busts of California growers and retail dealers, no matter how legal their activity was under state law.

On his blog, Mark says, "I may vote for the proposition anyway, just as a protest against the current laws." Me too. Besides, there's really no telling what the feds will do until someone forces the issue. So why not force it? At the very least it has a chance to move the public opinion needle a bit. Besides, I think it would be entertaining to watch the tea partiers twist in the wind trying to figure out which is more important: (a) making sure the hippies don't get their dope or (b) fighting the jackbooted tyranny of federal officers interfering with the sovereign Tenth Amendment right of states to police their own borders. Or something.

In any case, my guess is that Prop 19 will fail. It probably would regardless (it's already behind 44%-48%), but Mark is right: opponents can make a pretty scary case that it would lead to California becoming the pot capital of the United States and fueling gang/mafia/DEA wars of all stripes. The ads sort of write themselves. Unfortunately, we're probably still a few years away from having any chance of seriously discussing a sane marijuana policy. Even in California.

SCADA-phobia

| Sun Jul. 18, 2010 5:19 PM EDT

I honestly don't know if this is something to take seriously or just the latest in cyberwar hype, but....

Anti-virus specialists report that a new trojan is spreading via USB flash drives, apparently exploiting a previously unknown hole in Windows.

....An investigation by malware analyst Frank Boldewin has shown that this is not just any old trojan designed to harvest passwords from unsuspecting users....During his investigation, Boldewin came across some database queries the trojan made that point towards the WinCC SCADA system by Siemens. As Boldewin explained in an email to The H's associates at heise Security, a "normal" malware programmer wouldn't have managed to do that. Boldewin continued "As this Siemens SCADA system is used by many industrial enterprises worldwide, we must assume that the attackers' intention was industrial espionage or even espionage in the government area".

Stewart Baker explains what he thinks this means:

This particular exploit is remarkably sophisticated and singleminded....Most troubling is what the malware goes looking for once it starts up. The entire attack seems designed to exploit holes in the Siemens SCADA software that runs electric grids around the world.

As far as I can tell, there’s no reason to compromise a SCADA system other than to take it down. The SCADA system doesn’t contain credit card numbers or other financial data, and I doubt that compromising it is a cost-effective way to steal power for free....There are no obvious secrets to steal from a SCADA system — other than the secret of how to bring the system down. So the logical goal of the malware is not so much espionage as sabotage.

Let me repeat that for emphasis. This elaborate, previously unseen piece of malware, which surely could have been a big moneymaker if used to create a botnet or to send spam, has instead been put to use for a purpose that has no obvious economic payoff — compromising the power grid.

The comment thread on Baker's post is lively and, needless to say, not everyone agrees with him that this is as big a deal as he thinks. And since I don't have the chops to have an independent opinion, don't take this post as an endorsement of what Baker says. But it seemed interesting and potentially ugly. Just thought I'd pass it along.

And while I'm on the subject, if you didn't read Mark Bowden's Atlantic piece about the Conficker worm, "The Enemy Within," when it came out a few weeks ago, it's well worth your time. It's pretty riveting stuff if you have even a little touch of nerd in you.

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Quote of the Day: Still Ruled by the Rich

| Fri Jul. 16, 2010 7:51 PM EDT

From Rep. David Obey (D–Wisc.), soon to retire after 40 years in Congress, on his biggest regret:

I think our biggest failure collectively has been our failure to stop the ripoff of the middle class by the economic elite of this country, and this is not just something that happened because of the forces of the market.

And despite the legislative achievements of the Obama administration so far, this hasn't changed even modestly over the past few years. In the long term, this is by far the biggest threat to our economy.

Friday Catblogging - 16 July 2010

| Fri Jul. 16, 2010 3:03 PM EDT

Inkblot and Domino are on vacation this week. (Not that you can really tell the difference, mind you.) So today we have a guest cat. This is Ditto, one of my mother's four critters, lounging in the bay window above her computer. I took the picture while I was over there doing an inventory of her IT needs prior to replacing her old PC with a shiny new one. Conclusion: moving all her stuff to a new machine shouldn't be too hard.

Yes, yes, famous last words. We'll see. In the meantime, wouldn't you like to take an online survey? Sure you would! We're running a reader survey here, and although it's got a bunch of annoying demographic questions, they're easy to answer and the whole thing doesn't take more then ten minutes. For your trouble, we'll send you a free reusable Chico grocery bag and enter you in a drawing for a $100 gift certificate to Patagonia. Thanks!

Who Will Obama Choose to Protect Consumers?

| Fri Jul. 16, 2010 1:39 PM EDT

With the new Consumer Finance Protection Bureau mere days from being created when Obama signs financial reform into law, the question of the day is: who's going to head it up? The obvious choice is Elizabeth Warren, who's been its biggest champion from the very start. Annie Lowrey:

The idea for the CFPB is hers. She is, bar none, considered the foremost mind on the topic. As the head of the CFPB, many in Washington hoped, she would act not just as a strong leader, but as a draw for smart minds — a kind of J. Edgar Hoover, sexing up the bureau rather than letting it become just another wan regulatory agency. This might sound a bit strong. But I am serious in saying that most everyone I speak with about this issue — on the Hill, in consumer groups, in think tanks — considers Elizabeth Warren just that good.

But HuffPo's Shahien Nasiripour says Warren has a problem: Treasury Secretary Tim Geithner doesn't like her.

Treasury Secretary Timothy Geithner has expressed opposition to the possible nomination of Elizabeth Warren to head the Consumer Financial Protection Bureau, according to a source with knowledge of Geithner's views.

....It's no secret the watchdog and the Treasury Secretary have had a tenuous relationship. Geithner's critics have enjoyed watching Warren question him during his four appearances before her panel. Her tough, probing questions on the Wall Street bailout and his role in it — often delivered with a smile — are featured on YouTube. One video is headlined "Elizabeth Warren Makes Timmy Geithner Squirm."

Well, maybe this source is right, maybe it isn't. But I certainly find the whole thing plausible, and I also find it plausible that Barack Obama would be none too thrilled with a muckraking CFPB director who has little managerial or government experience. That's not really his no-drama style. What's more, there's no telling what kind of deal (if any) the White House made with Sen. Ben Nelson over who they'd appoint.

But I will say this: right now the White House has a big problem with its base. Fair or not, the left wing of the party doesn't believe that Obama either respects them or listens to them much — and this is bad news for Democratic chances in the November midterms. Now, nominating Elizabeth Warren to head up the CFPB wouldn't suddenly make everyone sing Kumbaya, but it would sure go a long way toward patching things up. It would demonstrate, at least for a moment, that he's paying attention to what his base wants, that he's willing to take a chance, and that he's serious about the CFPB having a director who genuinely wants to protect consumers. And just to piss off the entire crew of Fox News, he could even send someone to announce her nomination at Netroots Nation next week. The alternative, as Max Sawicky predicts, is to appoint "some banker d-bag." Take your pick, Mr. President.

Send the Suits to Jail

| Fri Jul. 16, 2010 12:36 PM EDT

Mike Konczal on corporate fraud:

I don’t get people who downplay the sheer volume of consumer fraud that went on in the subprime mortgage market, and the fact that the market decided to reward this fraud. Take Household Finance in the early 2000s. Their aggressive lending practices where people would learn after the fact that they were mislead to how much their total monthly payments were (as well as many other problems) lead to successful settlements in Colorado, Georgia as well as a $484 million in fines joint settlement with a group of attorney generals, the largest consumer fraud settlement in U.S. history.

....So Household Finance has to pay the largest consumer fraud fines in history. I bet you think that the investment community and elite financial institutions wouldn’t look twice at it. Well, you’d be wrong. One month later Household was acquired by HSBC, the London financial giant, for $16.4 billion. The New York Times columnist Floyd Norris called this “the deal that fueled subprime.”

This, of course, is the difference between people and corporations. (Well, one of them, anyway.) For people, crimes are considered moral lapses. Even after you pay your penalty or serve your time, a person convicted of a crime is treated as less trustworthy, less employable, and less honorable than before.

But a corporation? Civil penalties are simply considered a cost of doing business. There's no real moral valence to it at all. If the fine is small enough that the corporation is still profitable, then it's all good. So HSBC might have lowered their price for Household Finance a smidge, but certainly nothing more than that.

This is an unusually stark example of the principal-agent problem at work: a civil fine mostly just hurts shareholders, who had nothing to do with the fraud in the first place and have very little real-world ability to stop it. Criminal charges hit the executives who do — and it's one of the reasons that we probably ought to be a little more willing to pursue criminal charges against executives of companies that either knowingly commit fraud or negligently allow it. Perhaps HSBC would have been a wee bit more hesitant to buy Household Finance if they'd known that the culture of the place didn't merely cut into earnings a bit, but might end up sending a few of the suits on mahogany row to prison for a couple of years? The conservatives I talk to seem to have a considerable confidence in the deterrent power of such things.