Kevin Drum

The Vision Thing

| Tue Feb. 2, 2010 12:14 PM EST

You might have missed it, but there were actually two huge, boring federal documents released yesterday. The second one was the Quadrennial Defense Review, which is — well, self-explanatory, really. It's a review of our defense strategies that's published every four years. And P.W. Singer (aka the other Peter Singer) doesn't think much of the 2010 edition:

The closest to a summary I can come to is this: We plan to do what we do now, but we'll try to do it a little bit better. That's probably not what was intended.

....For such an important effort, the report disappoints in two key areas. The first is that of vision....President Obama has made a forward-looking, positive vision of America's role in the world a centerpiece of his policy goals, and the Pentagon could have used the review to expand on that vision as it pertains to national security.

Instead, the 2010 review offers more a series of agenda items than a comprehensive vision. Even more, most of these items are belated ones that should have been worked out since the 2006 version. There is no thread that links it all together, no broader framework that lays out the journey we are on, the challenges we face and, most important, what we must do to end up at our target destination.

I understand the issue here, as well as Singer's second disappointment, the overall lack of clear goals and hard metrics. But honestly, I wonder if that's really as big a problem as he suggests. It's natural to think of these kinds of documents as a chance to change direction and create new visions, but let's be honest: do we really need a whole new vision of America's national security every four years? In 1997 the QDR's vision included the ability to fight two medium-sized wars at once, and now, 12 years later, that vision is gone. But during that time, did it really drive the Pentagon in any directions it wouldn't have gone anyway? And will its loss really make any concrete difference?

I have my doubts. Sometimes, your plan really is to keep doing pretty much the same thing, but to do it smarter and better. Maybe a QDR that avoids grand pronouncements and hard metrics that no one really takes seriously isn't such a bad thing. Sometimes honesty is a better policy.

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Peanuts

| Tue Feb. 2, 2010 11:53 AM EST

The LA Times provides a brief overview today of the programs President Obama wants to cut in order to freeze the overall level of domestic discretionary spending:

The familiar programs on the list this year include the C-17 cargo jet, a program to restore polluted industrial sites, a program for reclaimed coal mines and various scholarship programs.

....The cuts in mine grants never went anywhere last year. "We will do everything in our power to stop this attempted robbery again," Rep. Cynthia M. Lummis (R-Wyo.) said Monday.

Others on the termination list also have ready-made support. A website for Boeing's C-17 cargo plane notes that the program employs more than 30,000 people, with concentrations in Southern California, where the plane is made, and Missouri. A defense spending bill in December included $2.5 billion to buy 10 C-17s that the Pentagon did not request.

This is a familiar point, but always worth making one more time. The domestic discretionary budget is peanuts, and to make it even worse, elephants and donkeys1 both love peanuts. They won't give them up just because the president wants them to. So we'll likely end up with a peanut budget just as big as it was before — maybe bigger! — as cuts get added back into the budget while increases are happily accepted. Obama's spending freeze might be good PR, but it's lousy politics and lousy policy.

1OK, I don't really know whether donkeys like peanuts. Can someone find out for me? In the meantime, just roll with the image.

The Social Contract

| Tue Feb. 2, 2010 11:18 AM EST

David Brooks says today that old people are being selfish because they take a lot more out of the political system than they put in. Ezra Klein demurs:

It's worth making the mechanism explicit: When commentators complain that seniors are "taking money," here's what they mean: They are going to the doctor, the doctor is prescribing treatments, and Medicare is paying for those treatments.

....Brooks calls their behavior selfish. He writes that "the federal government now spends $7 on the elderly for each $1 it spends on children."....[But] it's hard to say that what seniors are doing is selfish: They're going to the same doctors as everyone else, doing the same things that everyone else does when they get there. Our health-care system is unaffordable across the board. We need to fix that, but there's no special key held by seniors (save maybe their disproportionate tendency to vote in midterm elections), and nor do they deserve special condemnation.

I agree that they don't deserve special condemnation. The social deal we made several decades ago is that those of us of working age pay taxes for programs that will be consumed by senior citizens. That deal makes perfect sense — but it also points to a way in which seniors could embrace what Brooks calls a "cause of nonselfishness." Instead of standing foursquare with the anti-tax jihadists, as they largely do, they could be working to make sure that this deal continues. That means changes in the way we deliver healthcare services and it means changes in the tax base of the federal government. By opposing both of those things in large numbers, today's seniors (and soon-to-be seniors) are helping to ensure that they're the only generation that will truly benefit from this deal.

This is obviously not what Brooks meant. But the future health of the country and the future continuation of the social deal we've made depends on raising taxes, lowering long-term deficits, and making changes to the way healthcare is delivered. Some of these changes will affect today's seniors and some will affect tomorrow's. But if they want their children to enjoy the same kind of retirement they're allowed to enjoy, these are the things they should support. In general they don't, and that deserves condemnation. Not special condemnation, since lots of other people feel the same way, but condemnation nonetheless since they know, better than most, just what those taxes are for.

Paul Ryan's Smoke and Mirrors

| Mon Feb. 1, 2010 6:56 PM EST

Rep. Paul Ryan recently introduced the Roadmap for America’s Future Act of 2010, a piece of legislation that claims to eliminate the long-term budget deficit. The CBO agrees, and Ezra Klein says it's "an object lesson in why so few politicians are willing to answer the question 'but how will you save all that money?'"

Well, sort of. I give Ryan credit for being more forthcoming than most supposed deficit hawks, but the truth is that for the most part he doesn't explain how he's going to save all that money. It's true that he's got a plan for Social Security private accounts, a plan for Medicare vouchers, and a plan for tax credits to replace the current tax deductibility of health insurance. It's good conservative boilerplate.

But it turns out that's all it is. Those things themselves don't really save any money. The real action comes from a collection of arbitrary spending limits, but these limits don't offer any clues about how we're going to meet them. There's a freeze on nonsecurity discretionary spending from 2010-2019 — but saying you're going to freeze spending is easy. The hard part is figuring out what to cut. There's also a limit to the growth of Medicare payments — but saying you're going to limit growth is easy. The hard part is figuring out how to limit growth and deciding what you're going to cut to meet your caps. Medicaid is treated the same way: Ryan's plan simply sets a limit on growth rates without saying how those limits will be met.

In fairness, there are a few specifics. The eligibility age for Medicare would rise gradually to about age 70. Social Security payments would be reduced. All the money in the stimulus bill that hasn't been spent yet would be eliminated.

But those are nits. For the vast bulk of the savings, Ryan simply declares that they'll happen. His bill would cap growth rates, and that's that. Whatever happens, happens — and he carefully avoids actually saying what would happen. That's not serious, and it doesn't deserve praise.

A Grim Economic Forecast

| Mon Feb. 1, 2010 1:42 PM EST

Ryan Avent is listening to a budget briefing:

OMB head Peter Orszag is giving a press conference just now with Christina Romer, head of the Council of Economic Advisors, on the president's Fiscal Year 2011 budget. Ms Romer explained the economic assumptions underlining the budget forecasts....She then gave the unemployment forecast. At the end of 2010, the unemployment rate, according to the administration's forecast, will be 9.8%. At the end of 2011, the rate will be at 8.9%. And at the end of 2012, after the next presidential election, the unemployment rate will be 7.9%.

Good God. I suppose this isn't a big surprise anymore, but it's still painful to have your nose officially rubbed in it. In any kind of normal economy, 8% unemployment would be considered disastrously high, but Orszag and Romer say we're not even going to improve to disastrous levels for another three years. A $100 billion jobs bill, even assuming it passes, is going to do very little about this.

Our economy is going to stay fragile for a very long time. I sure hope our banking system can handle that. Our political system too.

Corn and Oil

| Mon Feb. 1, 2010 1:05 PM EST

Stuart Staniford surveys various liquid alternatives to oil and concludes that the only one that's truly sensitive to oil prices is biofuels. Today, that primarily means ethanol:

Biofuel production growth appears to be extremely oil price sensitive, and increased the fastest and reached the largest volume in response to the mid-to-late 2000s oil shock.  I have argued in the past that there are structural reasons for this: given the comparatively low capital requirements and small plant size of biofuel plants, they can respond much faster to episodes of high oil prices than can the other sources, all of which tend to involve larger, slower-to-build, more capital intensive plants.  This has important implications for food and land prices in future oil price shocks.  Food prices are likely to rise quickly and markedly in response to oil shocks, public policy permitting.

Italics mine. I don't have a lot to add to this at the moment, but it's a thought-provoking, chart-laden post. Worth taking a look at.

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Money Meet Mouth

| Mon Feb. 1, 2010 12:39 PM EST

Minnesota Gov. Tim Pawlenty wants to run for president in 2012. That's been pretty obvious for the past year, ever since the once-earnest wonk took up the death panel meme, started jabbering about the tenth amendment, and began delivering stemwinding speeches to the tea party crowd. Today he writes in Politico about his outrage over the budget deficit. Bruce Bartlett is unimpressed:

Like all Republicans these days, Pawlenty wants to have it every possible way: complain about the deficit while ignoring everything his party did to create it (Medicare Part D, two unfunded wars, TARP, earmarks galore, tax cuts up the wazoo, irresponsible regulatory and monetary policies that created the recession that created the deficit, etc.), illogically insisting that tax cuts are a necessary part of deficit reduction, and never proposing any specific spending cuts.

The only specific thing Mr. Pawlenty is capable of proposing is a balanced budget amendment to the Constitution. It’s hard to know where to begin in explaining why this is such an irresponsible idea, but I will try.

And try he does. And succeeds! Until he gets to his final paragraph:

In conclusion, Tim Pawlenty is not ready for prime time. He may think he has found a clever way of appealing to the right wing tea party/Fox News crowd without having to propose any actual cuts in spending, but it isn’t going to work. It’s too transparently phony even for them.

I don't think anything is too transparently phony for this crowd. There's a famous old Onion headline that goes like this: "Report: 98 Percent Of U.S. Commuters Favor Public Transportation For Others." This is pretty much the sentiment that Pawlenty — and the rest of the Republican Party — are pandering to in the tea party movement: 98 percent of them favor spending cuts for others. Just don't cut their Medicare or their Social Security or take away their mortgage interest tax deduction or — in Minnesota — do anything to rein in farm subsidies. Unfortunately, Pawlenty can't think of anything sizeable to cut that would affect only "others" for a large enough definition of others. So he's stuck. Just like his entire party is stuck, never willing to put its money where its mouth is because they know perfectly well that would mean having to make some hard decisions.

But I'm sure he'll do fine with the tea partiers anyway. Just think of him as a slightly less robotic Mitt Romney without the Mormon baggage and you've got his number. There's no reason that shouldn't wear pretty well with these folks.

Suburbia's Discontents

| Mon Feb. 1, 2010 12:00 PM EST

The day after Obama's State of the Union address my sister called me. "Was there anything in it for me?" she asked.

This has become sort of a running joke between us. The answer is always "no." That's because when presidents announce plans, she pretty much never benefits from them. Child tax credits? She doesn't have kids. Education loans? She graduated from college 30 years ago. Healthcare reform? She's already covered. Small business loans? She's not a corporation. Mass transit funding? She commutes to work in her car. Cap-and-trade? That'll probably cost her money in higher energy bills. Etc.

I was reminded of this by a link from Atrios to a recent Joel Kotkin piece called "The War on Suburbia":

A year into the Obama administration, America’s dominant geography, suburbia, is now in open revolt against an urban-centric regime that many perceive threatens their way of life, values, and economic future....For the first time in memory, the suburbs are under a conscious and sustained attack from Washington. Little that the administration has pushed — from the Wall Street bailouts to the proposed “cap and trade” policies — offers much to predominately middle-income oriented suburbanites and instead appears to have worked to alienate them.

And then there are the policies that seem targeted against suburbs. In everything from land use and transportation to “green” energy policy, the Obama administration has been pushing an agenda that seeks to move Americans out of their preferred suburban locales and into the dense, transit-dependent locales they have eschewed for generations.

Atrios says, "This is completely idiotic for mostly obvious reasons, including the hundreds of billions devoted to propping up single family home prices. It isn't necessarily a wise policy, but it's hardly a war on the suburbs." I agree: Kotkin is overwrought. And yet, Atrios bangs the drum pretty regularly for the notion that if Obama wants the public to support his policies, then the public better get some goodies out of it. And for the most part, suburbanites might well be feeling that they aren't getting many goodies lately. "Hundreds of billions devoted to propping up single family home prices" is overwrought too, and in any case is generally invisible. The stimulus bill, for example, might have benefited my sister in some way, but there's really no way to know. It's just too diffuse.

In other words, I wouldn't dismiss this quite so breezily. Yes, Kotkin has an agenda. But there's a real tension between good policy and good politics. Cost controls are good policy on the healthcare front, but lousy politics. Mandates are good policy but lousy politics. In the stimulus bill, metering out tax cuts a few dollars per paycheck was good policy but lousy politics. Likewise, promoting high density residential patterns might be good policy, but for suburbanites anyway, it's lousy politics. You can ridicule it all you want, but suburbanites still have lots of votes, and they want some goodies too. That's politics.

Republicans and Jobs

| Mon Feb. 1, 2010 1:35 AM EST

Here's the latest from Washington DC:

President Obama wants Congress to quickly approve a jobs bill in the range of $100 billion, a top White House official said Sunday, reflecting the growing political anxiety among Democrats about stubbornly high unemployment in an election year.

....Democrats hope to win Republican support for the measure by including tax cuts for small businesses, a GOP favorite. The tax credit is designed to encourage businesses to hire workers....Senate Minority Leader Mitch McConnell (R-Ky.) said on "Late Edition" that as long as the legislation creates jobs, "we're willing to take a look at it."

I would like to go on record now with a prediction that this jobs bill will get zero Republican votes no matter what's in it. Anyone care to take the other side of that bet?

Money on the Street

| Sun Jan. 31, 2010 1:14 PM EST

As the punchline to a nerdy joke about the efficient market hypothesis, Daniel Gross tells a story about noticing something that looked like money lying on the ground at Davos:

And so I bent down and picked up the paper. On one side, the grim visage of Queen Elizabeth. On the other, Charles Darwin. It was a 10 pound note, worth about $16.25. Just lying on the floor, unmolested by Nobel Prize-winning economists, CEOs of Fortune 500 companies, and financial journalists.

In 1967, when I was nine years old, I found a five-pound note lying on a railway platform in England. At the time, the exchange rate to dollars was 4:1, so it was worth $20. Adjusted for four decades of inflation, that comes to $128. This compares very favorably with the dimes I occasionally found at home in the coin return slots of pay phones.

It's also (by a long way) the largest sum of money I've ever found lying on the street. How about you?

UPDATE: Sorry, I must have had a historical blackout. As Anonymous says in comments, the pound in 1967 converted at $2.80. So that's $14 at the time, and $90 today. Still the largest sum I've ever picked up off the street, though.