Kevin Drum

Distorting the Energy Market

| Mon Jun. 7, 2010 7:26 PM EDT

The Financial Times got a look at a draft study from the International Energy Agency today and reports that "The world economy spends more than $550bn in energy subsidies a year, about 75 per cent more than previously thought." Matt Yglesias comments on the notion that removing these subsidies would move us closer to a free market in energy:

The last point really is telling and important here. I can’t think of a single significant “free market” institution in America that spends nearly as much time and energy on this set of market distortions than they do bashing enviornmentalist proposals. Operationally, conservatism in the United States just isn’t about small government or free markets.

That's true enough. However, the FT piece also includes this line:

Iran, Russia, Saudi Arabia, India and China top the ranking, according to the report.

It turns out the IEA study is about developing economies. There aren't any details about what's in the report, but it looks like they're mostly tallying consumer subsidies for things like heating oil and gasoline, not corporate welfare for Exxon Mobil. It doesn't really have much to do with the United States, and it's not really surprising that American think tanks spend more time on American legislation (which they can influence) than on petrol subsidies in Iran (which they can't).

That said, there are plenty of examples of corporate welfare for energy production in the United States, one of which has been in the news quite a bit lately: the statutory $75 million limit on liability for oil spills. This creates a significant distortion in the free market for energy, but it hasn't exactly lit the conservative world on fire. Over at the Heritage Foundation, for example, the best Nicolas Loris could say a couple of weeks ago was that raising or eliminating the cap "is a matter needing careful thought." Indeed.

This is especially noteworthy in light of today's news that climate legislation is likely to be watered down into mere energy legislation. The whole idea behind a comprehensive climate bill is that it provides some scope for political dealmaking: enviros get their cap-and-trade plan while a few conservatives hold their noses and vote for it because they get some goodies in return (nuclear power, offshore drilling, etc.). Market-distorting subsidies are, generally speaking, the price for conservative support on any bill, and now it's starting to look like they're going to get more of them without really paying any price at all. Hooray for free market capitalism!

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Killing the FCIC With Kindness

| Mon Jun. 7, 2010 6:13 PM EDT

Via Felix Salmon, CNBC reports that Phil Angelides is pretty peeved at Goldman Sachs:

Phil Angelides, the chairman of the Financial Crisis Inquiry Commission, said that while the overwhelming number of financial firms from which the FCIC has sought documents or information have complied, Goldman has not. Instead, Goldman has been “dumping” an overwhelming volume of documents on the FCIC, which has a staff of just over 50 people.

"We did not ask them to pull up a dump truck to our offices to dump a bunch of rubbish," Angelides said during a conference call following the announcement that the FCIC had sent Goldman a subpoena Friday.

....Thomas said Goldman was deliberately delaying because it knows the FCIC must wrap up its investigation and deliver a report on the crisis at the end of the year. Angelides agreed, describing Goldman as making a “very deliberate effort to run out the clock.”

This is such a classic maneuver. Thanks to technology, however, it's not as common in big class action lawsuits as it used to be. These days, if you dump a million pages of documents on the plaintiff in a big suit, they just hire a bureau with a bank of high-volume scanners to scan every page, OCR it, and then do full text indexing on the whole mess. Sometime during the mid-90s I went to a lecture given by one of the lead lawyers in the Exxon Valdez case where he described how they had done this, and it was pretty eye opening. Today, though, it's routine.

But it's only routine if you have (a) the budget to do it and (b) the time to do it. The FCIC has neither, so in a case like this it remains a pretty effective tactic. But the Washington DC area has loads of imaging bureaus. Maybe one of them should offer up their time pro bono to help out with this. It's only a million pages, after all.

BP vs. Katrina

| Mon Jun. 7, 2010 2:35 PM EDT

Here's the latest on public reaction to the BP oil spill:

A month and a half after the spill began, 69 percent in a new ABC News/Washington Post poll rate the federal response negatively. That compares with a 62 negative rating for the response to Katrina two weeks after the August 2005 hurricane.

There are a couple of obvious reasons for this. The first is that the BP disaster has gone on for a long time. People have short memories, and within just a few days of finally getting assistance into New Orleans the outrage over Katrina had started to ease. The same thing will happen when the BP blowout is capped, but in the meantime public reaction is just going to get worse and worse.

The other reason, I suspect, is purely political: during Katrina, Republicans largely rallied around the federal response because they wanted to defend George Bush from lefty criticism. In the case of the BP spill, Democrats have been much less willing to do the same for Barack Obama. And sure enough, the poll results suggest this is exactly what's happened. The reverse-partisan split in negative reactions is about the same between the two events: 81% of Republicans are critical of federal response to the BP spill while 79% of Democrats were critical of federal response to Katrina.

But take a look at the same-party response. In 2005, only 41% of Republicans were critical of their own administration's response to Katrina. In 2010, 56% of Democrats are willing to criticize their administration's reponse to BP. That alone accounts for most of the difference in public reaction between the two events.

Climate's Canary in the Coal Mine

Later this week the Senate will give us a good sense of whether climate legislation will pass this year.

| Mon Jun. 7, 2010 12:55 PM EDT

Will Congress pass a climate bill this year? The odds look long, but one thing working in favor of passage is the background threat that if Congress doesn't act, the EPA will. The EPA has considerable authority to enact greenhouse gas regulation on its own, but pretty much everyone agrees that trying to shoehorn climate change regs into the Clean Air Act would be costly and ineffective compared to a program that's custom built to do the job. So even if you don't like the idea of cap-and-trade or a carbon tax, you might vote for one anyway if the alternative is letting the EPA handle things.

Sen. Lisa Murkowski (R–Alaska) wants to put a stop to this threat, so she's sponsoring legislation that would strip the EPA of its authority to regulate greenhouse gases. Dave Roberts puts Murkowski's resolution #1 on his list of bellwethers that will provide us with clues about the possibility of passing serious climate legislation this year:

If passed, the resolution would wreak havoc on the vehicle fuel efficiency standards worked out between the EPA, California, and auto companies (and the standards under discussion for 2017 forward). It would also disrupt the very legislative efforts Murkowski claims to support. The cap-and-trade system in the climate bill is run by the EPA, as a title under the Clean Air Act; how can that be legally kosher if the EPA is forbidden from judging greenhouse gases a danger?

But of course it won't pass; nobody, Murkowski included, thinks it has a chance. If it got through the Senate, it wouldn't get through the House; if it got through the House, Obama would veto it. It's an act of pure grandstanding on Murkowski's part.

But pundits have decided that the vote is an indicator of support for the climate change bill. The resolution needs 51 votes, to pass. If it breaks 45 votes, it's trouble. If it breaks 50, it's doom.

The vote is scheduled for Thursday and Murkowski already has 41 cosponsors. She's not likely to get 50 votes, but she's probably going to come mighty close to 45. Stay tuned.

The Helen Thomas Affair

She's gone. Now can we get back to talking about more important stuff?

| Mon Jun. 7, 2010 12:26 PM EDT

Helen Thomas is retiring. Thank God. On a substantive level, this is a good thing. Her remarks about Israel were obviously odious and she's doing everyone a favor by stepping down. Equally important, though, maybe this means we don't have to spend the next week listening to every windbag in the country rant on about Thomas's remarks, using them as an excuse to grind every axe ever invented and suck media attention away from actually important stories. Of which, you might have noticed, we have quite a few these days.

Probably a vain hope, though. The windbags aren't going to shut up regardless, are they?

The Specter of Inflation

Inflation may be coming, but not for quite a while. In the meantime, we should spend.

| Mon Jun. 7, 2010 11:31 AM EDT

David Barboza writes in the New York Times today that labor costs are going up in China, and this is having an effect that will ripple throughout the world:

Coastal factories are raising salaries, local governments are hiking minimum wage standards and if China allows its currency, the renminbi, to appreciate against the U.S. dollar later this year, as many economists are predicting, the cost of manufacturing in China will almost certainly rise.

....“For a long time, China has been the anchor of global disinflation,” said Dong Tao, an economist at Credit Suisse, referring to how the two decade-long shift to manufacturing in China helped many global companies lower costs and prices. “But this may be the beginning of the end of an era.”

....Marshall W. Meyer, a China specialist at the Wharton School at the University of Pennsylvania, says demographic changes in China are reducing the supply of young workers entering the labor force, and that’s behind some of the wage pressure. “Demography will do what the Strategic & Economic Dialogue hasn’t: raise the cost of Chinese goods,” he said, referring to U.S.-China talks on Chinese currency reform and other economic issues. “There is no way out.”

This was a point that Alan Greenspan made several years ago. He argued, basically, that he had had an easier job as Fed chairman than his successors would because the rise of cheap products from China had kept global inflation low, and that in turn meant that he could keep monetary policy loose without worrying much that it would lead to inflation down the road. But that era, he said, was now over, and central bankers in the developed countries would have to start making difficult balancing decisions again. This is one of the reasons, in addition to soaring national deficits, that so many economists are worried about inflation even though there's no sign of it in the current data.

Which leads us yet again to the same dilemma we've had for a long time: we ought to be spending our way out of the current recession, but there's a lot of reluctance to do it because more spending now means it's going to be even harder to cut spending in the future. And at some point in the future, inflation may become a serious threat yet again.

When will that happen? Nobody knows, but probably not for quite a few years. Costs in China will go up, but for a lot of goods that just means that manufacturing will move to India or Vietnam. The "China Effect" isn't completely gone yet. And the experience of Japan suggests that U.S. deficits can get quite a bit higher than they are today before they start having an inflationary effect — something that the financial markets all seem to accept regardless of what Wall Street's economists might say.

So we should be spending now. But we're not because politicians and central bankers, who trusted the market far too much when housing prices were skyrocketing, suddenly don't seem willing to trust the market at all when it says that inflation isn't a near-term problem. As Paul Krugman says, "Lost Decade, Here We Come."

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The Myth of Multitasking

You may think you can do it, but there's a 97% chance you can't.

| Mon Jun. 7, 2010 1:27 AM EDT

So you think you're a great multitasker? Research by Stanford's Eyal Ophir says you're probably wrong:

Test subjects were divided into two groups: those classified as heavy multitaskers based on their answers to questions about how they used technology, and those who were not.

In a test created by Mr. Ophir and his colleagues, subjects at a computer were briefly shown an image of red rectangles. Then they saw a similar image and were asked whether any of the rectangles had moved. It was a simple task until the addition of a twist: blue rectangles were added, and the subjects were told to ignore them.

The multitaskers then did a significantly worse job than the non-multitaskers at recognizing whether red rectangles had changed position. In other words, they had trouble filtering out the blue ones — the irrelevant information.

So, too, the multitaskers took longer than non-multitaskers to switch among tasks, like differentiating vowels from consonants and then odd from even numbers. The multitaskers were shown to be less efficient at juggling problems.

But all is not lost. According to researchers at the University of Utah, some people are "supertaskers" who really can juggle multiple information streams efficiently. How many? About 3% of the population. You might be one of them!

But probably not. So put down your iPad, close that Twitter feed, turn off your chat windows, and get to work.

Quote of the Day: Fact Checking

| Sun Jun. 6, 2010 3:39 PM EDT

From Marcy Wheeler, via Twitter:

I propose a new reality show twist to Sunday shows. Fact-checking all around. 3 major errors and you get voted off all Sunday shows.

Well, why not? I've heard worse ideas.

Spelling Bee Secrets Exposed!

| Sat Jun. 5, 2010 3:29 PM EDT

In comments yesterday, wkseattle revealed the seamy underside of the spelling-industrial complex:

Don't be too impressed with modern young spelling champs. Back in the late 80's when I was in junior high, I participated in the regional spelling bees from which winners went to the national bee (now televised on ESPN). I had the good fortune to qualify 3 years in a row for the regional contest for the greater Philadelphia area and learned the "game."

The game was that you can officially be asked any word from some version of the Merriam-Webster dictionary. So, it's it's impressive when a 12 year old kid spells a crazy word. However... they give all contestants a thin pamphlet of study words for practice. During my first year, my parents overheard that all words in the competition came from the pamphlet (I can confirm this from subsequent competitions). The pamphlet is thin enough that a studious competitor can study and memorize it within a few months. This is how the modern spelling feats are explained in the televised competitions.

I doubt televised spelling bees have any bearing on the current state of U.S. education (my parents' 60+ years of classroom experience suggest a significant decline has indeed occurred).

No wonder these kids are expected to know how to spell terribilita, rhytidome, ochidore, juvia, and stromuhr.

UPDATE: Hold on! Wordboydave has more:

As I understand it, that booklet (which I got back in the late 70s; it may be small, but try memorizing over 1,000 obscure words sometime) only gets you out of the regionals. By Round Two of the official Bee, they've dispensed with the official booklet ("Spell It!"), and by the end, literally any word from Merriam-Webster can be used. So yes, the early stages are sort of manageable — which is nice; everyone's on sort of the same footing — but by the end, you really do need to be really lucky or really psychic.

So I guess you really do have to memorize the entire dictionary after all if you want to play in the big leagues.

Friday Newsletter: Obama and the Oil Spill

Can we all back off for a bit and allow Obama to act like an adult?

| Sat Jun. 5, 2010 11:52 AM EDT

This subject of this week's newsletter is the increasingly inane demands for Barack Obama to display more emotion over the BP oil spill. As usual, I wrote it Wednesday night, and by now it seems almost quaint. I think I've seen at least a dozen columns and blog posts saying the same thing since then. The tyranny of lead times doth make hacks of us all sometimes. Starting next week, however, we're going to cut that lead time down and publish these posts early Friday morning, the same time the newsletter is mailed out. That's only a 24-hour lead time, which should help keep these things a wee bit fresher.

In his inauguration speech Barack Obama told America "the time has come to set aside childish things." At least, I thought he was talking to America. But maybe he was really talking to the DC press corps. A few months after that speech, during a press briefing where NBC's Chuck Todd kept badgering him to provide an immediate response to the Iranian election crisis, he finally snapped back, "I know everybody here is on a 24 hour news cycle. I’m not." The message from a president who had already famously rebuked the short attention spans and inane cable chatter that absorbs official Washington could hardly have been clearer: only children demand simple answers and immediate reactions to complex situations. So how about if we act like adults instead?

But if the events of the past few weeks in the Gulf of Mexico are any indication, the press corps still isn't listening. There are plenty of things about the government's response to the gulf oil spill that are worth questioning. Why is the Minerals Management Service still in such sorry shape? Why was BP allowed to misstate the extent of the spill for so long? Are chemical dispersants just making the problem worse? Why is the press still being given the runaround more often than not?

But one thing isn't in question: when it comes to actually capping the broken pipe, BP and the rest of the oil industry are doing everything they can. What's more, they're the ones with all the expertise and President Obama can't change that. Yelling at BP or putting on a mask of faux outrage for the benefit of the cameras won't change that.

But that seems to be what the press wants anyway. At a press briefing, CBS's Chip Reid asked, "Have we really seen rage from the president on this? I think most people would say no." Maureen Dowd insisted that Obama's job is "being a prism in moments of fear and pride, reflecting what Americans feel so they know he gets it." David Gergen counseled Obama to "take command" of the oil spill and Mark Penn demanded that Obama put a bunch of smart people in a room to come up with a solution: "think Manhattan Project meets Independence Day, with fewer aliens and more eggheads." These suggestions range from useless to idiotic. As Clive Crook put it, "Apparently it is a great idea to elect a president who is calm in a crisis, except when there's a crisis. Then what you need is somebody to lead the nation in panic."

But now this is threatening to go beyond just the world of overwrought pundits. On Thursday the New York Times reported that Obama was considering cancelling a long-planned 10-day trip to Asia and Australia. There was no suggestion that this was because Obama could actually stop the spill any faster by being in Washington, just that it might look bad. "This has hijacked his entire legislative agenda," said Douglas Brinkley, a historian at Rice University. Later that day the White House confirmed that the Asia trip was indeed off.

Obama is famous for taking the long view of things. If you do the actual mechanics of governing properly, he believes, the daily media storms will all blow over eventually. Maybe he's right. At the moment, though, betting on the American media to grow up is looking like long odds indeed.