Matt Yglesias:

I really liked Ezra Klein’s review of Ron Suskind’s book in the NYRB for its wholesome focus on monetary policy errors as the most plausible way the Obama administration could have made things better. Nobody was stopping them from replacing Ben Bernanke with someone more committed to full employment, and it seems likely that they could have filled two existing Board of Governors vacancies with people more committed to full employment. If the chairman and those two empty seats all felt the way Charles Evans feels, we’d be in much better shape today. None of that is to deny that fiscal policy could have been better, but as Klein says the key blocking points on fiscal policy were in Congress.

I liked Ezra's review too, but I'm not sure its focus on monetary policy was really such a strong point. I was opposed to the reappointment of Bernanke from the start, but even so, I really have to ask how likely it is that Obama could have seriously affected Fed policy if he'd only tried harder. A more activist chairman certainly would have helped, and a couple of additional activist board members would have helped too. But even assuming that the Senate would have approved those hypothetically activist Fed members, that's still only three out of 12 members of the FOMC, the committee that sets monetary policy. What's more, the three board members Obama has appointed (and gotten confirmed) haven't exactly been champing at the bit to launch money-laden helicopters over the heartland.

In other words, it strikes me that there were several problems here. The first really is Obama himself: he just isn't inclined to nominate outspoken expansionists to the Fed board. The second is the reality of the applicant pool: there's a limited supply of the kind of person who can plausibly serve on the Fed, and most of them tend to fall within a fairly narrow band of mainstream economic thinking from center left to center right. Third, Congress is still a bottleneck. The Senate will approve moderately liberal folks like Janet Yellen and Daniel Tarullo, but not anyone much further to the left. And fourth, even if Obama had miraculously managed to stack the board with more activist lefties, you still have the five regional bank presidents on the FOMC to contend with. And they tend to be pretty conservative on average.

Maybe I'm protesting too much here, since I'm on board with the need for better Fed governors and I'm on board with the importance of monetary policy. But I think there's always a tendency to be too idealistic when you think about counterfactuals. Even if Obama had been on the side of the angels here, a lot of things would have had to go precisely right for us to end up with a significantly more expansionist Fed than the one we have. And I'm not sure why this would have been more likely to go precisely right than any of the other things that actually did happen and ran into the buzzsaw of real-world politics.

POSTSCRIPT: One caveat: supposedly, it's traditional for the entire board of governors plus the New York Fed president to vote with the chairman. In other words, the chairman always has eight votes out of 12 and carries the day. If this is true — and knowledgeable feedback would be welcome on this — then nothing mattered except appointing a better Fed chairman than Bernanke. That's a far more feasible thing for Obama to have done.

Real Time Economics reports on the latest forecast for Europe's economy:

J.P.Morgan was among the first European banks to forecast a euro zone recession, meaning two-straight quarter of economic contraction, back in September. It was supposed to be a modest one, with GDP falling just 0.8% from its peak.

It now looks like things will get even worse. “We now believe that the recession will be deeper and longer lasting, and we are making forecast changes to show a peak to trough move in the level of GDP of just over 1%, with the recession lasting through the third quarter of next year. The risks around this forecast are for a deeper and even longer lasting contraction,” the bank said in its latest research note.

Urk. I'm not even sure what kind of comment to offer on this. But it strikes me as unrealistic to think that Europe can fall into a recession — possibly a deep one — and the United States won't be seriously affected. I know we have an overhang of demand for cars and houses, and that's going to spur more spending, but a recession in Europe is going to affect jobs in America, which affects incomes in America, which means there's no money for cars and houses no matter how much overhang there is.

On the other hand, maybe there's a cheerier scenario (for America, not Europe). It's possible, I suppose, that a recession in Europe will drive down demand for oil, which in turn will lower the price of gasoline, which in turn might stimulate the U.S. economy more than Europe's recession hurts it. Somebody somewhere must have modeled this, right?

The Cost of Tribalism

Will Wilkinson takes on the conventional wisdom that conservatives think people are responsible for themselves, while liberals think that luck and social forces play a big role in people's fates:

I agree that many people are in dire straits and suffering for absolutely no fault of their own, and that policies ought to be in place to provide meaningful material assistance. Still, I find I want an ethos of effort and individual responsibility to prevail....And this is why I have a hard time seeing eye to eye with some progressives. Progressives are sincerely inclined to impersonal, socio-cultural explanations of success and failure, but I think they're also generally of the opinion that an ethos of initiative, hard work, and individual responsibility will impede the political will to offer assistance to those who ought to get it. I'm not sure that they're wrong. After all, those who tend to oppose progressive transfers tend to do so partly on the basis of their disbelief in the faultlessness of the needy. In any case, it seems to me progressives' deep-seated opposition to victim-blaming and by-the-bootstraps perorations helps keep a lot of suffering people from getting the other, non-material part of what they really need: encouragement to meet the social expectation that they will continue supplying effort on their own behalf, even if that hasn't worked out well so far.

Obviously there are lots of different kinds of lefties, and they have lots of different beliefs. And I don't have an argument with the notion that lefties place more emphasis on the role of luck and social conditions in life outcomes than conservatives do. But seriously: is there really a sizeable chunk of the left that believes an "ethos of initiative, hard work, and individual responsibility" is an actively bad thing?

I don't think so. It's possible, of course, that the segment of the left that believes this is small but loud, but I don't even really believe that either. If anything, the leftiest precincts of the left are mostly shut out of mainstream discourse. They certainly don't dominate it.

Anyway, two comments on this. First, I think this kind of post suggests the dangers of spending too much time on the web, where the loudest and most extreme voices actually do have a disproportionate influence sometimes. That can lead you to believe that their beliefs are far more widespread in the real world than they really are. Second, as Will suggests, to the extent that he's correct it's because of the almost insane levels of partisanship and tribalism that we see in politics today. Speaking just for myself, there are very definitely times when my preferred policy position is some kind of melding of left and right (i.e., social forces are important and an ethos of personal responsibility is important), but I'm not really willing to say so because the American right has become so insane that it simply won't lead to anything constructive. It will just be viewed as a preemptive compromise that's immediately seized upon to move the conversation even further to the right. Supporting compromise positions only makes sense when that might actually lead to both sides compromising.  

Anytime a dominant narrative becomes hardnosed and extreme — as American conservativism has — it starts to feel like even the notion of a competing narrative has been lost. When that happens, those who believe in that competing narrative feel like the best use of their time is not to provide some kind of nuanced argument, but simply to take whatever chance they have to get a bit of airtime for their side. I think that's what the last decade has done to a lot of center lefties, especially on economic issues. Very few of us, I think, have any problem with an ethos of personal responsibility. But the dominant narrative in the post-Reagan era has so thoroughly turned a blind eye to the power of malign social and economic forces that we feel like we simply have to take every opportunity to make them part of the conversation again. What's ironic, of course, is that those malign forces really are both economic (emphasized by the left) and social (emphasized by the right), which means that in a lot of ways conservatives lose out from this dynamic just as much as liberals. Tribalism makes fools of us all.

From Brad DeLong:

The 1% have an interest in full employment, high capacity utilization, and general prosperity just as the rest of us do....The 1% have a strong material interest in the passage of the American Jobs Act. In acting to block it, the Republicans — and Senator Nelson — are betraying the interests of their contributors in the top 1% as much as they are betraying the interests of their constituents.

But here's the thing: this has been true all along. Hell, it's been true for the past decade. Sure, the rich want low taxes for themselves and they want income inequality to rise so they get most of the returns to economic growth. That's in their own self-interest. But they also want — or should want — an end to the recession and a thriving economy, and they should be pressing both Congress and the Fed to do everything possible to make that happen. But they aren't.

Is it just pure blinkered ideology? Ignorance and stupidity? Or do they really not care as long as the brightwork on their yachts stays polished? It is a mystery.

The past couple of months have been grim ones for anybody who favors federal support of renewable energy. First, Solyndra declared bankruptcy, providing gleeful conservative skeptics with weeks of anti-solar headlines. Then this week Beacon Power, a flywheel storage company, followed Solyndra into bankruptcy, and an Energy Department watchdog told Congress that the DOE had been ill-equipped to quickly distribute the $35 billion in new funding it got from the 2009 stimulus bill.

So today let's take a break from the gloom and look instead at some good news on the federally funded renewable power front. A couple of weeks ago, the National Renewable Energy Laboratory (NREL) announced a "game changing" new development in solar panel fabrication. It's not sexy: It's called the Optical Cavity Furnace, and it's a new way of manufacturing solar cells that uses optics rather than radiant or infrared heat. There are a couple of big benefits to this new technology.

First, NREL says the new furnace uses around half the energy of traditional manufacturing processes, costs 25 to 50 percent less, and has faster process times. This means that solar panels can be made both faster and cheaper than before.

Second, because its optical technology is more precise, the solar cells it creates have a higher efficiency.  "Our calculations show that some material that is at 16 percent efficiency now is capable of reaching 20 percent if we take advantage of these photonic effects," NREL principal engineer Bhushan Sopori said. "That's huge." Lauren Simenauer and Sean Pool explain what this means:

The White House has challenged the solar industry to produce clean electricity at $1 per watt. It has also set a national goal to achieve 80 percent clean energy use by 2035…The good news is that researchers are racing toward that goal at an impressive rate.

In fact, the cost of photovoltaic, or PV, cells had already fallen 50 percent in the past two years prior to the DOE announcement. A June 2011 projection predicted PV module prices would hit the goal of $1 per watt by 2013; now the finish line of the proverbial "race to the bottom" seems even more imminent.

In a way, this is the quiet silver lining behind Solyndra's highly publicized failure. Solyndra's goal was to produce cheaper, better solar power, and it failed because other companies beat them to the punch. But this is good news. Whether it's Solyndra or someone else, what's important is that stiff competition in the solar sector is producing dramatic gains in solar efficiency. Ramez Naam provides the numbers:

Over the last 30 years, researchers have watched as the price of capturing solar energy has dropped exponentially. There's now frequent talk of a "Moore's law" in solar energy. In computing, Moore's law dictates that the number of components that can be placed on a chip doubles every 18 months…If similar dynamics worked in solar power technology, then we would eventually have the solar equivalent of an iPhone—incredibly cheap, mass distributed energy technology that was many times more effective than the giant and centralized technologies it was born from.

…Averaged over 30 years, the trend is for an annual 7 percent reduction in the dollars per watt of solar photovoltaic cells…If the 7 percent decline in costs continues (and 2010 and 2011 both look likely to beat that number), then in 20 years the cost per watt of PV cells will be just over 50 cents…The cost of solar, in the average location in the U.S., will cross the current average retail electricity price of 12 cents per kilowatt hour in around 2020, or 9 years from now…10 years later, in 2030, solar electricity is likely to cost half what coal electricity does today. Solar capacity is being built out at an exponential pace already. When the prices become so much more favorable than those of alternate energy sources, that pace will only accelerate.

Solar power isn't the answer to all our energy needs. No matter how cheap it gets, we'll still probably need nukes or natural gas to provide baseload power. But even if solar can only provide electricity during daylight hours — and improved storage technology may change even that in the future—daylight hours are when electricity use is highest. Combine cheap solar with hydro, wind, and, maybe, biofuels, and the need for fossil fuels could diminish dramatically over the next few decades. What's more, the need for the worst of the fossil fuels, coal, could diminish even more.

All that depends a lot on how serious we get about this, but it depends even more on solar power getting cheaper than coal. Federally funded basic research, like NREL's work on the Optical Cavity Furnace, is a key part of that.

Rep. Buck McKeon, chairman of the House Armed Services Committee, writes to the New York Times to defend himself against the slander of caring about jobs:

To be clear, as a fiscal conservative I have never supported policies that advance government expenditure for the express purpose of job creation. Indeed, I believe that the private sector is far better equipped to promote lasting jobs growth than Washington will ever be.

....Congress is charged by the Constitution with providing for the common defense by raising and supporting our armed forces. We don’t spend tax dollars to protect American jobs, but to protect American lives. As such, it is accurate to point out that cuts in defense spending will cripple a critical industry, result in huge job losses and erode our ability to provide for the common defense.

Fine. McKeon doesn't care about jobs. He's a Republican, after all. But would cuts in the defense budget really "cripple" the defense industry? Adam Weinstein directs our attention to a new study from the Stimson Center that  suggests the Pentagon's cupboard isn't quite as bare as they'd like you to believe:

The study shows there's one big reason the brass are concerned about budget-cutting discussions in Congress: They've been double dipping into the taxpayer's pocket to finance weapons purchases. Of the roughly $1 trillion spent on gadgetry since 9/11, 22 percent of it came from "supplemental" war funding—annual outlays that are voted on separately from the regular defense budget. Those bills are primarily intended to keep day-to-day operations running in Iraq and Afghanistan—meaning that if a member of Congress votes against a supplemental spending bill, she exposes herself to charges that she doesn't "support the troops" in harm's way.

But once the services got the supplemental money, they managed to spend $232.8 billion of it back home on the manufacture of costly weapons like Abrams heavy battle tanks and the troubled F-22 jet fighter—neither of which has proven particularly useful in counterinsurgency warfare.

There's more at the link. Bottom line, though, is that the Stimson report suggests that the Pentagon has very successfully modernized its forces over the past decade and isn't quite the red-headed stepchild McKeon makes them out to be. If budgets need to be cut, the Pentagon will just have to figure out where its fat is like everyone else.

Dan Drezner encounters Obama Derangement Syndrome in the wild today and is revolted. You see, the Weekly Standard's Daniel Halper is outraged that at today's G-20 meeting President Obama hugged Turkish prime minister Recep Tayyip Erdogan, someone who, as Dan points out, is an American friend and ally. But Halper is outraged anyway, because "Turkey has made its hostility to Israel abundantly clear." Dan has a question:

To be blunt about it, is Israel now America's ally uber alles? If other countries disagree with Israel, does that mean, in Goldfarb's eyes, that they no longer qualify as either friend or ally? Are there any other of America's friends that fall into this super-special status? I really want to know.

I think the answers are Yes, Yes, and probably Yes. I'm thinking of France for question 3, but I suppose there are others too. That's life in the fever swamps.

Tim Murphy directs my attention to the very conservative Haley Barbour today. Barbour says he's having second thoughts about a Mississippi ballot measure that would define human life as beginning at the moment of fertilization:

I believe life begins at conception. Unfortunately, this personhood amendment doesn't say that. It says life begins at fertilization, or cloning, or the functional equivalent thereof....I am concerned about some of the ramifications on in vitro fertilization and ectopic pregnancies where pregnancies [occur] outside the uterus and [in] the fallopian tubes. That concerns me, I have to just say it.

Since I'm basically fine with abortion under nearly all circumstances, I don't normally pay a lot of attention to the minutiae of when, down to the second, conservatives believe that life begins. But is this for real? It's like counting angels on the head of a pin. Life, Haley is suggesting, begins not at fertilization, for some reason, but only at conception — which means what? Implantation in the uterus? But if that's the case, then the Plan B emergency contraceptive should be fine and dandy, shouldn't it?

But the anti-abortion crowd hates Plan B. And they're OK with in vitro fertilization. Even by their standards, does this make any sense? Do I really have to start reading up on this stuff, or can I continue ignoring it the way I have for the past 50 years?

(And yes, just to forestall the obvious, I know perfectly well what's going on. Plan B = sluts who can't control their animal urges. In vitro = loving married couples who just want to have a family. So one way or another, conservatives have to figure out a way to oppose the former and support the latter. But it's tougher than it sounds, isn't it?)

Ah. I see that Herman Cain has revised and expanded his remarks the other day about the nature of China's nuclear arsenal:

Maybe I misspoke. What I meant was China does not have the size of the nuclear capability that we have. They do have a nuclear capability. I was talking about their total nuclear capability. So that's what I meant by that.

Roger that. This is why I'm annoyed at Judy Woodruff for not following up on Cain's original statement in her interview on Monday. She didn't have to be confrontational about it. Just a flat, non-leading followup would have been fine. Something like this:

What exactly do you mean when you say China is "trying to develop" nuclear capability?

At that point, Cain either says something that makes it clear he knows China has nukes and he's actually talking about something else, or else Cain says something along the lines of "Well, I've seen reports in the news media that China would like to develop nuclear weapons, and that's something we can't allow."

Instead, she did nothing, and that gave Cain plenty of time to invent a cover story and then retail it to a friendly interviewer. What a wasted opportunity.

Things move fast in the eurozone. Here's the latest bullet-point summary from the Guardian as of an hour ago:

  • The plan for a referendum on Greece's membership of the eurozone has been cancelled. Prime minister admits to cabinet that it cannot go ahead.
  • There is now growing acceptance that a National Unity government may need to be created. But it is unclear if the New Democracy opposition will agree.
  • UK admits that it may have to pay more into the IMF to support financial recovery. David Cameron says it's the right thing to do
  • Finance minister Evangelos Venizelos forces PM's hand in early morning speech. Eurozone membership too important, he said
  • European Central Bank cuts interest rates. Mario Draghi lowers borrowing costs to 1.25%

Well, that whole referendum thing didn't last long, did it? What's unclear to me is what Prime Minister George Papandreou's original goal was. Option A: He wanted to use the threat of a referendum — and a possible No vote — as leverage to get a better deal out of Germany and France. Option B: He wanted to use the referendum as a way of forcing his own citizens — and his political rivals — to come firmly to grips with the cost of rejecting the deal on offer from France and Germany.

I sort of assumed originally that Option A was his motivation, but in the end it looks like maybe it was really Option B. Papandreou had spent months negotiating this deal and felt like it was the best Greece was going to get. But riots in the streets were continuing, his own party was rebelling, and the opposition was licking its chops at the possibility of the government falling. So he wanted to force everyone's hand with something dramatic. The referendum, it turns out, was probably his version of a come-to-Jesus moment. Do you really want the government to fall? Do you really want to reject the deal and (probably) exit the euro and leave the European Union? The answer, it turns out, is that everyone blinked. Maybe the deal isn't so bad after all. Maybe a government of national unity isn't a such bad idea either.

Anyway, that's the latest. Stay tuned.

(And keep in mind that even if Greece now accepts its fate and takes the deal, there's still plenty of skepticism that the deal is enough to save the eurozone. The fat lady hasn't sung yet.)