Feeling a little bullish about the economy? Settle down! I don't know if this forecast is new, or if it's the same one I wrote about last year, but the oil analysts at Goldman Sachs think we're very close to reaching our maximum oil pumping capacity again after a few years of looseness caused by the recession. Via Jared Bernstein, Goldman's chart is on the right. So what does it mean when oil demand starts to bump up against supply? This:

High prices, as bad as they are for an economy addicted to cheap oil, aren't the worst prospect facing us. The real problem is spare capacity....Twenty years ago, OPEC had spare production capacity of about 15 million bpd. A decade ago that had dropped to 5.5 million bpd. [Today], spare capacity has dropped almost to zero.

....In other words, it's likely that we're now in a permanent state of near zero spare capacity, which in turn will lead to an increasingly unstable world. As we enter an era in which even Saudi Arabia has no spare capacity to smooth out supply disruptions elsewhere in the world, any blip in supply, whether from political unrest, terrorism, or merely unforeseen natural events, will cause prices to carom wildly. A world with $100 per barrel oil is bad enough, but a world in which a single pipeline meltdown could cause prices to skyrocket to $300 per barrel for a few months and then back down is far worse.

More here. This was all written back in 2005, when $100 oil seemed shockingly high. Today it's the new normal. What's worse, though, is that when the global economy expands, we hit our maximum pumping capacity and prices start to oscillate quickly upwards. Result: a global recession, which reduces oil consumption a bit. A few years later, we repeat the process. More on that here.

Plus, as Jared points out, we also have Europe to worry about, as well as persistently low labor force participation at home. 2012 may be a good year compared to 2011, but that's grading on a curve. Thanks to a combination of really hard problems and really stupid politicians, our recovery is likely to remain sluggish for a long time.

From George Packer, explaining why politics is covered as spectacle these days:

How many times and ways can you say that the Republican Party has descended into unreality and extremism before you lose your viewers and readers?

In my case, I imagine the answer is "several thousand." And if I kept up Friday Catblogging, I'd probably keep a fair chunk of my audience even at that.

Still, Packer has a point. Hell, it actually makes my blogging life sort of miserable. Nearly every day I face the same decision: do I pretend to take Republican crankery seriously and write a few chart-laden posts about why they're wrong, or should I instead write a couple of rants about how lunacy has become mainstream and can hardly be fought with yet more wonkery and tedious empirical evidence?

Obviously, I usually opt for the former. But not without qualms just about every single day.

Steve Benen linked today to a Des Moines Register piece about how the Iowa caucuses work, and when I clicked through I found this graphic:

And there you have it. In one unintentionally funny graphic, the difference between Democrats and Republicans.

On a more serious note, I see that the Republican caucus really doesn't work the same way as it does on the Democratic side. Here's the Republican version:

  1. Show up at your precinct.
  2. Elect a caucus chairman, take care of "general business."
  3. Mark a ballot.
  4. Leave.

So aside from having to listen to a bit of dull throat clearing and possible electioneering before voting, is there really anything left that makes this a caucus and not just a primary? It sure doesn't sound like it.

Brendan Nyhan cautions journalists about their role in the Iowa caucuses:

Unfortunately, the “meaning” of the caucus results is not always clear. These rough edges are typically sanded away in post-Iowa reporting and commentary, [] which tends to emphasize the order of the finish (even when the margins between candidates are small) as well as unexpectedly weak or strong results.

....The result is a refraction effect in which journalists help make Iowa influential and then report on its “effects” without acknowledging their role in the process or the often arbitrary nature of the distinctions that are made among the candidates. This is a recurring problem—the norms of journalism demand that reporters exclude themselves from the stories they write, creating a troubling lack of self-consciousness about their own role in the process....These incentives are especially problematic in campaigns since journalists have a strong rooting interest in continued conflict and dramatic storylines.

For what it's worth, the Republican race has been so chaotic this year that I think the media's role has been less than usual. In fact, I'm hard put to give the press much credit for any of the ups and downs we've seen over the past few months, largely because they've simply happened too fast. They've been more the result of tea party litmus tests, serious gaffes from the candidates, and immense amounts of super-PAC spending.

As for reporters most likely emphasizing the order of finish after tonight's caucuses — well, what else would they do? Close or not, the order of finish is what everyone cares about. The media can hardly be blamed for that.

For the most part, I suspect the media reflects more than it refracts. That is, it mostly operates as a pretty reliable mirror of what party elites and Beltway thought leaders believe. This year, you can add intra-party feuding to that list. You may or may not think this is a good thing, but overall I think there's been less independent role for reporters this year than usual. Candidates just don't need the press as much as they used to, and that's shrunk both the media's role and its influence.

And one last thing: the idea that reporters are "rooting" for conflict and dramatic storylines is so common that it's practically conventional wisdom. It's true, of course, that reporters are drawn to news, which is frequently rooted in conflict of some kind. But are they actively hyping otherwise banal events because they don't want the campaign to end? That's what people mean when they say this. And it sounds good! But is there any actual rigorous evidence for it? I've never seen any.

Miscellany

President Obama signed the National Defense Authorization Act this weekend, along with a signing statement. Adam Serwer has a good rundown of how this all turned out here.

Wondering what to watch for in the Middle East in 2012? Juan Cole has a Top 5 list here.

The Iowa caucuses will be held on Tuesday. Based on the latest polling, Nate Silver has Mitt Romney ahead with 21.8% of the vote and Ron Paul in second place with 21.0% of the vote. Full projections here.

So then: Ron Paul. Should we lefties be happy he's in the presidential race, giving noninterventionism a voice, even if he has other beliefs we find less agreeable? Should we be happy that his nonmainstream positions are finally getting a public hearing? This is a depressingly common view. For example:

Can we talk? Ron Paul is not a charming oddball with a few peculiar notions. He's not merely "out of the mainstream." Ron Paul is a full-bore crank. In fact he's practically the dictionary definition of a crank: a person who has a single obsessive, all-encompassing idea for how the world should work and is utterly blinded to the value of any competing ideas or competing interests.

This obsessive idea has, at various times in his career, led him to: denounce the Civil Rights Act because it infringed the free-market right of a monolithic white establishment to immiserate blacks; dabble in gold buggery and advocate the elimination of the Federal Reserve, apparently because the global economy worked so well back in the era before central banks; suggest that the border fence is being built to keep Americans from leaving the country; claim that Social Security and Medicare are unconstitutional and should be dismantled; mount repeated warnings that hyperinflation is right around the corner; insist that global warming is a gigantic hoax; hint that maybe the CIA helped to coordinate the 9/11 attacks; oppose government-sponsored flu shots; and allege that the UN wants to confiscate our guns.

This isn't the biography of a person with one or two unusual hobbyhorses. It's not something you can pretend doesn't matter. This is Grade A crankery, and all by itself it's reason enough to want nothing to do with Ron Paul. But of course, that's not all. As we've all known for the past four years, you can layer on top of this Paul's now infamous newsletters, in which he condoned a political strategy consciously designed to appeal to the worst strains of American homophobia, racial paranoia, militia hucksterism, and new-world-order fear-mongering. And on top of that, you can layer on the fact that Paul is plainly lying about these newsletters and his role in them.

Now, balanced against that you have the fact that Paul opposes the War on Drugs and supports a non-interventionist foreign policy. But guess what? Even there, he's a crank. Even if you're a hard-core non-interventionist yourself, you probably think World War II was a war worth fighting. But not Ron Paul. He thinks we should have just minded our own damn business. And even if you're a hardcore opponent of our current drug policy—if you think not just that marijuana should be legalized, not just that hard drugs should be decriminalized, but that all illicit drugs should be fully legalized—I'll bet you still think that maybe we should retain some regulations on a few of the worst drugs. They're pretty dangerous, after all, and no matter how much you hate the War on Drugs you might have a few qualms about a global marketing behemoth like RJ Reynolds having free rein to advertise and sell anything it wants, anywhere it wants, in any way it wants. But not Ron Paul. As near as I can tell, he just wants everything legalized, full stop.

Bottom line: Ron Paul is not merely a "flawed messenger" for these views. He's an absolutely toxic, far-right, crackpot messenger for these views. This is, granted, not Mussolini-made-the-trains-run-on-time levels of toxic, but still: If you truly support civil liberties at home and noninterventionism abroad, you should run, not walk, as fast as you can to keep your distance from Ron Paul. He's not the first or only person opposed to preemptive wars, after all, and his occasional denouncements of interventionism are hardly making this a hot topic of conversation among the masses. In fact, to the extent that his foreign policy views aren't simply being ignored, I'd guess that the only thing he's accomplishing is to make noninterventionism even more of a fringe view in American politics than it already is. Crackpots don't make good messengers.

Now, if you literally think that Ron Paul's views on drugs and national security are so important that they outweigh all of this—multiple decades of unmitigated crackpottery, cynical fear-mongering, and attitudes toward social welfare so retrograde they make Rick Perry look progressive—and if you've somehow convinced yourself that noninterventionism has no other significant voices except Ron Paul—well, if that's the case, then maybe you should be happy to count Paul as an ally. But the truth is that you don't need to. Ron Paul is not a major candidate for president. He's never even been a significant presence as a congressman. In a couple of months he'll disappear back into the obscurity he so richly deserves. So why get in bed with him? All you'll do is wake up in March with a mountain of fleas. Find other allies. Make your arguments without bothering to mention him. And remember: Ron Paul has never once done any of his causes any good. There's a good reason for that.

A few weeks ago, after Michele Bachmann, Rick Perry, and Herman Cain had successively peaked and then plummeted in the Republican primary race, the conventional wisdom was simple: Newt Gingrich was the last man standing. Whether by luck or by native shrewdness, he had peaked late enough in the game that there wasn't time for Republican voters to get tired of him before the Iowa caucuses.

Hah! Turns out that three weeks plus a gazillion dollars of brutal negative advertising was plenty of time. Gingrich began his fall to earth almost immediately, as the RCP poll-of-polls below shows. Because RCP is a poll average, it actually understates Gingrich's collapse, which has him barely breaking double digits in the latest Iowa polls. Instead, we're now seeing mini-boomlets for Ron Paul and Rick Santorum.

This is all amazing enough on its face, but if you ask me, it's even more amazing than that. It's not just that Republican voters can't make up their minds. And it's not just that they're really, really resisting their eventual doom of pretending to be enthusiastic about a Mitt Romney candidacy. What's really amazing is how fast every single candidate has fallen to earth after their initial surge. It turns out that even the Republican base got disillusioned with them after only a brief moment in the spotlight. The Republican base! These are people who believe the earth is cooling and Barack Obama was probably born in Kenya, and even they only needed a few weeks to realize that Bachmann, Perry, Cain, and Gingrich were nutcakes who probably shouldn't be allowed to take a White House tour, let alone occupy the Oval Office for four years.

Alternatively, of course, you might think just the opposite: what really happened was that the Republican base needed only a few weeks to decide that these folks weren't quite batshit crazy enough for their taste. Maybe so. But that's such a glass-half-empty point of view, isn't it?

From Newt Gringrich. Yes, that Newt Gingrich:

Politics has become a really nasty, vicious, negative business and I think it's disgusting and I think it's dishonest.

I realize that keen self-awareness is probably a handicap for a big-time politician, but seriously? Newt Gingrich is complaining about how vicious politics has gotten? Newt Effing Gingrich? Jesus.

In other news, Politico reports that Ron Paul has suddenly become media shy now that he too faces questions about his past positions — positions that he's lying about and doesn't want to answer for. Imagine that. He's just another garden-variety politician after all.

I have pretty much managed to blog this entire week without mentioning Iowa. True, there was that one joking reference to orcs yesterday. And that RomneyBot post on Wednesday. Still, not bad! Especially considering the dearth of news on any other subject, which forced me instead to write about pickles and the ellipsis. I even gave up (mostly) on baiting the PaulBots, who just don't seem to have the same ALL CAPS magic that they used to, possibly because their hero is now so obviously lying about his past that even they're embarrassed for him. Plus he's still a lunatic crank.

So how about we call it a year before I'm tempted to ruin my record and actually say something substantive about Iowa, which, if we're being honest, we all know we don't really care about? Consider it done. But first, some year-end thanks. First, to my copy editor, SS, who keeps my subjects and predicates matched and my hyphens on the straight and narrow. Second, to my editor, MB, who I fear because she badgers me into writing pieces for the magazine but who I love because she badgers me into writing pieces for the magazine. Third, to my regular correspondents, who actually make it worth my while to read my email in the morning. You know who you are. Finally, and preeminently, to Marian, who keeps me ticking away, and to Inkblot and Domino, who we all know are the real stars of this blog. You can see them all on the right in this year-ending commemorative photo, with Marian, as usual, buried under a pile o' cats.

Happy New Year, everyone.

This year has been the year of the Chart of the Year. Seriously. Charts on blogs, especially economic charts, have become such a big deal that I counted at least half a dozen year-end roundups of the "Best Charts of 2011." Despite my love of charts, though, I haven't chosen a chart of the year myself. There's just no single chart that explains everything.

But if there were, this one from Michael Mandel comes pretty close:

Ben Bernanke's "savings glut" got a lot of attention a few years ago as a macro-level explanation for the housing/credit bubble of the aughts: huge pools of money flowed into America, and that money flowed into housing, producing a bubble. But the flip side of that is an investment drought. After all, that tsunami of cash didn't have to flow into housing, but it did. The problem was that people with money increasingly didn't feel like they had very many productive, real-world alternatives for their investment dollars. Here's Mandel:

This chart, which runs through the third quarter of 2011, displays several disturbing patterns:

  • Despite rebounding from its recession valley, net business investment as a share of net national product is still far below historical levels.
  • Household and institutional net investment as a share of net national product is at a 40-year low.
  • And perhaps most disturbing, government net investment is only 1% of net national product, a 40-year low.

Let me repeat that: Government net investment as a share of net national product is at a 40-year low. I had to check this last one a couple of times to make sure it was really true. This is a true failure of national economic policy. Government is punking out, just at the time when a public investment surge is needed to make up for the private investment drought. As a country, we should be investing more, not less.

There are lots of things happening in the economy besides this, and if you want to, you can even convince yourself that there's not much going on in this chart except a steep drop in construction that's making the overall investment picture look worse than it is. There's a little bit to that, I think, but only a little bit. Household investment was obviously heavily impacted by the housing bust, but business investment and government investment have been on a secular decline for more than two decades now.

Is this because we're entering an era that's fundamentally less capital intensive than it used to be? After all, Facebook has built up a multi-billion dollar business with only a few thousand employees and a level of investment in plants and equipment that Andrew Carnegie would have laughed at. That may be part of it, but it's hardly comforting regardless. One way or another, American capital needs to be marshaled for use in the real world, but increasingly the real world simply doesn't look like a great investment opportunity. Recovery is going to be mighty tough as long as that remains the case.