Kevin Drum

War and Peace

| Sun Nov. 29, 2009 1:37 PM EST

On Tuesday Barack Obama will announce a major escalation of the war in Afghanistan.  A week later he'll be in Oslo accepting his Nobel Peace Prize.  Pretty good timing, no?

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Watching the World

| Sat Nov. 28, 2009 2:31 PM EST

John Judis a few days ago on the possible fallout from the Dubai World crisis:

You have to remember that the Great Depression only became “great,” that is, global, when an obscure Austrian bank went under in 1931, and set off a massive financial explosion around Europe.  Capitalism is an irrational system that is often full of unpleasant surprises. The collapse of Dubai World may turn out to be nothing.  But it could also turn out be one of those unpleasant surprises.

Hopefully not.  But this has always been my biggest concern.  A slow jobless recovery seems all but certain at this point, but I also think we'll be lucky if that's as bad as it gets.  The nightmare scenario is that something like Dubai World panics investors and sends them fleeing back to quality; Eastern Europe can't roll over its debt; Brazil goes kaboom as hot money suddenly stops flowing; Western European banks start to fail; etc.  You can fill in the rest.  I was unpleasantly reminded of all this by the lead to this story in the Washington Post today:

DUBAI CRISIS IS WAKE-UP CALL
Investors weigh risks in emerging economies

Global markets were jolted in recent days following the threat by a state-owned company in Dubai to default on its debt, as investors reawakened to the risks posed by mammoth debts in developing economies.

After the credit collapse of 2008, financial folks rushed to tell us that they had learned their lesson.  But a lot of us were skeptical: sure, maybe they'd learned their lesson for a few years while the wounds were still fresh, but what about five years from now?  Ten?

In the end, though, it didn't take five or ten years.  It took one.  Twelve months after the catastrophe of September 2008, hot money is racing around the globe, the carry trade is as big as ever, Wall Street profits are at record highs, and the chase for supposedly risk-free returns seems to be as widespread as it's ever been.  That combination didn't end well even when it took place against the background of a strong economy, so how's it likely to end against the background of a weak and fragile one now that investors are "reawakening"?

Beats me.  I sure hope I'm just a worrywart.

Thanksgiving Catblogging

| Thu Nov. 26, 2009 12:56 AM EST

It's time to stop thinking about politics for a few days and instead think about turkey and mashed potatoes and football games and 4 am sales.  And cats.  It is for me and mine, anyway.  Happy Thanksgiving, everyone.

Finance Lobby Update

| Wed Nov. 25, 2009 7:50 PM EST

I've sometimes wondered what it would take to get a guy like Dana Milbank to wipe the smirk off his face and get genuinely outraged.  Now I know: listening in on a call with the finance lobby.

On Tuesday, the American Financial Services Association even held a conference call with reporters to update them on its efforts — successful so far — to torpedo plans for a new Consumer Financial Protection Agency, which would protect people from the sort of lending abuses that led to last year's implosion.

...."It looks more and more like Senate banking won't take it up until January or February, and with next year being an election year, that does raise the concern level," [Bill] Hempler reported with satisfaction. "This could delay the overall effort." Or, with a bit of luck, kill it outright.

....In Tuesday's conference call, AFSA's executives offered the many familiar reasons why government regulations are bad....But the argument most likely to prevail for the financial firms on Capitol Hill was offered by Chris Stinebert, the trade group's chief. "Especially now, when we're in a very, very sensitive time, when the capital markets are just starting to recover," he said, "introducing a high level of uncertainty in the marketplace could be very detrimental."

Or, to put it another way: Don't regulate us now because the economy is still suffering from the mess we made because we weren't regulated the last time. Chutzpah, it appears, is recession-proof.

In other finance lobby news, Simon Johnson reads and explains a new research report from Morgan Stanley insisting that increased capital requirements for large banks would be a terrible thing for the economy:

The bottom line, translated: let us adjust our balance sheets (downwards to some degree) and continue with our existing business models (including unconstrained bonuses), and we will bring you back to growth eventually.  If you mess with us, unemployment will stay high for a long time.  And any future crises that may befall us are just a cost of doing business, and making us whole is just what you have to do.

All this lobbying and more1 will be crashing down on the United States Congress soon, insisting that any but the most anodyne new regulations will wipe out the economy, wreck the banking system, and turn the country over to the Chinese with barely a whimper.  They will be eagerly assisted by Fox News, the entire Republican Party,2 the Wall Street Journal, the business community, and — in a tremendous irony — tea partiers of all stripes, who will somehow be gulled into believing that good, hardworking bankers are under attack from the same malign forces that are trying to kill grandma.  Raise your hand if you think a majority of our members of Congress have the stones to stand up to this.

1And by more, yes, I mean tidal waves of campaign cash.

2Plus, as several commenters have mentioned, a dispiritingly large portion of the Democratic Party.

Messages From the Past

| Wed Nov. 25, 2009 3:46 PM EST

Wikileaks has released an archive of half a million wireless pager messages from 9/11.  Here's a random sampling:

13:37:52 All, feel free to work from home the remainder of this week.  All is fine and I am in Kansas City now.  I am attempting to get to Denver tomorrow, but do not know if I will get there or not.
13:37:52 Call me ASAP All TEA travel has been cancelled until further notice.  You will have to stay where you are for now.
13:37:54 ]!z00]"AJ];0a]<6America Under Attack  ]<4Breaking News:  ]<2The U.S. stock markets are closed u
13:37:56 National Preparedness Responce Team Update: Due to terrorist action in New York 23 DS3's leased from TCG are down
13:37:59 PLEASE CALL WIFE ON CELL OR ANYWAY YOU CAN.
13:38:50 IM GLAD YOUR SAFE. I LOVE YOU. CALL ME IF YOU CAN GET THROUGH.  SUNSHINE
13:38:56 Russ, I am going to work from home, honestly I can not concentrate here, news, radio, hope you understand
13:38:56 Mike, The Center has been asked to evacuate
13:38:57 Pizza has been ordered if you haven't had lunch yet.  Come by fish bowl.   sd
13:38:57 YOUR SISTER CALLING TO CHECK TO SEE IF YOU ARE OK.

Where did all these messages come from?  Wikileaks says: "While we are obligated by to protect our sources, it is clear that the information comes from an organization which has been intercepting and archiving national US telecommunications since prior to 9/11."  I wonder who that could be?

Phil Carter Leaves the Pentagon

| Wed Nov. 25, 2009 2:40 PM EST

Earlier this morning I said that whenever I settle down and take a serious look at the policies Barack Obama has pursued so far, "nine times out of ten" it's pretty much what I expected.  Among big-ticket items, the biggest one-time-out-of-ten where he's not doing what I expected is in the area of detainee and civil liberties issues.  Glenn Greenwald wonders if this is what led to the abrupt resignation of Phil Carter the other day:

I have no idea what actually motivated Carter's abrupt resignation, but here's what I do know:  so many of the detention and other "War on Terror" policies Obama has explicitly adopted were the very same ones which Carter (as well as Obama) repeatedly railed against during the Bush years, in Carter's case primarily in blogs he maintained both at The Washington Post and at Slate.  Whatever else is true, the policies Obama has adopted in the last six months in the very areas of Carter's responsibilities were ones Carter vehemently condemned when implemented by Bush.

Last week, the Obama DOJ announced that it would deny trials to several Guantanamo detainees and instead send them to military commissions....announced two weeks ago that Abd al-Rahim al-Nashiri, whose case originated as a criminal investigation with the FBI, would now be turned over to a military commission for prosecution....use of the "state secrets" privilege as a means of evading vital constitutional and other legal questions.

....Following Greg Craig, this is now the second high-profile resignation of a relatively devoted civil libertarian in a short period of time.  Combine that with the still-missing-and-unconfirmed Dawn Johnsen, and all of this leaves those who are indifferent or hostile to civil liberties values — people like John Brennan and Rahm Emanuel — with even fewer counter-weights than before.

I don't have any special insights here either.  Maybe Phil was disappointed in Obama, or maybe he really did resign for personal reasons.  There's no telling.  But it's a disappointment either way, as is Obama's unwillingness to fight harder for civil liberties.  The shoals of reality have just proven a little too rocky.

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More Stimulus, Please

| Wed Nov. 25, 2009 1:22 PM EST

Matt Yglesias thinks the Fed needs to do more to stimulate the economy:

I’ve had some correspondents suggest that the Fed really does want to be more accommodating but there’s nothing more they can do. That’s certainly not the way recent statements have sounded to me. On the contrary, it seems to me that Ben Bernanke and co. are just flagrantly ignoring their actual legal mandate to balance considerations of employment, growth, and price stability. If we had five percent unemployment and five percent inflation instead of 10 percent unemployment and no inflation, the Fed would be freaking out. So why not freak out at 10 percent unemployment.

Actually, I'd like an answer to that question.  What should the Fed do at this point?  When inflation is high, the answer is obvious: if it wants to, the Fed can simply keep raising interest rates until inflation is under control.  The sky's the limit.  But the other direction is harder.  With interest rates already at zero and trillions of dollars of quantitative easing already in place, what's left to bring down unemployment?  Brad DeLong suggests that the Fed announce a long-term inflation target of 3% instead of 2%, but I haven't heard a lot of other proposals.

If the answer is even more dramatic quantitative easing, that's fine.  But is it?  Inquiring non-economists want to know.

HIV Travel Ban Update

| Wed Nov. 25, 2009 1:13 PM EST

The HIV travel ban will officially be lifted on January 4.  It's about time.

Has Obama Fizzled?

| Wed Nov. 25, 2009 1:05 PM EST

I haven't read one of Richard Cohen's columns in a long time, but yesterday a regular reader alerted me to his latest buffoonery.  Apparently Obama's "moral clarity" has disappeared:

As president [] he has tried so hard to be the un-George Bush that the former president's overweening moralism — his insistence on seeing things as either black or white — has become an Obama gray. Human rights in general has been treated as if it's a Republican idea. Obama should reread his Philadelphia speech. He'll find a good man there.

Blah blah blah.  Obama the famously supple and nuanced campaigner saw things in black and white?  WTF?  [Oops.  Sorry.  Cohen is talking about George W. Bush here.  I misread.  But the general point stands: Cohen thinks Obama has lost his "moral clarity."] But apparently this has become a trend.  Here's Michelle Cottle:

As its "Arena" question to pundits this morning, Politico has "Obama's Charisma: Where Did He Leave it?"

The implication seems to be — and I feel as though I've heard a variation on this question asked not infrequently of late — that Obama was such a dazzling, inspirational, transformational campaigner that it's hard to fathom where this wonky, chilly, pathologically measured grind of a president came from.

What? Are we all suffering from short-term memory loss?....Yes, Obama has the juice to thrill the globe with his from-the-pulpit-esque speeches. (Which he still delivers when occasion calls.) But it's not as though the guy has ever been known for his overwhelming warmth or charisma in the daily ebb and flow of things. He is as he has always presented himself to us.

Liberals are mad at Obama for sending more troops to Afghanistan.  The gay community thinks they've been betrayed because he hasn't instantly repealing DADT.  M.J. Rosenberg is unhappy because Obama has turned out to be a "conciliator," not a fighter.  Conservatives are apoplectic because the guy who billed himself as a moderate is trying to push through healthcare reform and a climate change bill.

But this is all kind of crazy.  Obama said repeatedly that he planned to shift resources from Iraq to Afghanistan.  He made it as clear as any candidate could that he wanted to dial down the temperature on the culture wars and avoid big social issues early in his presidency.  He spent an entire primary campaign selling himself as a post-partisan reach-across-the-aisle guy in contrast to the brawling Hillary Clinton.  And healthcare reform and cap-and-trade were the main pillars of his presidential campaign.

Once you get elected, real life is messy, politics intrudes, and mistakes are made.  Sure. And Obama has disappointed me in a bunch of respects.  But nine times out of ten, when I actually think through the ways I'm disappointed, I find that things are actually going almost exactly the way I expected them too.  That disappoints me sometimes, but it's not because Obama has turned out to be a fraud or a fizzle.  It's because he hasn't.

Social Security Revisited

| Wed Nov. 25, 2009 12:23 PM EST

Atrios isn't impressed with my support of a plan to bring Social Security into long-term balance:

I really don't get why people think there's some grand deal to be cut on Social Security which would take it off the table. A couple of years after the deal is cut, new projects with slightly different facts/assumptions will show it "going broke" in "only" 65 years or something and then they'll be back to hack away at it again.

They don't want the programs to survive, they want to kill them.

I know this is a fashionable view among battle-hardened liberal bloggers, but I just don't think it's true.  The demographic basis of Social Security's finances is extremely steady and generally changes by only hundredths of a percentage point each year — and with the retirement of the baby boom generation now finally upon us and better understood than ever, this is even truer than before.  If Congress enacted a combination of small revenue increases and small benefit cuts (amounting to less than 1.5% of GDP, as shown in the chart on the right) that phased in slowly and brought the program into long-term balance, it's almost a certainty that the financial projections would continue to show long-term balance for another 20-30 years.  Granted, that's not forever, but it's as long as anything ever lasts in politics.

As for "slightly different facts/assumptions," even during the heyday of Social Security privatization in 2005, virtually everyone accepted the midpoint assumptions of the Social Security trustees report as gospel.  Obviously there will always be some fringe groups with their own doomsday scenarios who can't be satisfied no matter what, but the trustees report will satisfy virtually everyone who matters.  What's more, unlike most subjects, this is one where Democrats could almost certainly pick off enough Republican votes to get something passed.  It really would take Social Security largely off the table as a political football for a very long time.

And I'd rather take it off the table now, under some kind of reasonable terms, than have it taken off the table a decade from now when some shiny new Republican is back in power.  It's not something that's a high priority right now, but it wouldn't be a bad idea to make it a priority sometime in the near future.