Kevin Drum

Rush: "I'm Just Noting the Timing Here"

Rush Limbaugh has a theory about the Louisiana oil spill.

| Fri Apr. 30, 2010 12:23 PM EDT

Me, in email with a friend last night about the Louisiana oil spill:

I can't wait until Rush figures out how this is all actually Obama's fault. 

Honest to God, I didn't know he'd said this a few hours earlier:

I want to get back to the timing of the blowing up, the explosion out there in the Gulf of Mexico of this oil rig....Now, lest we forget, ladies and gentlemen, the carbon tax bill, cap and trade that was scheduled to be announced on Earth Day. I remember that. And then it was postponed for a couple of days later after Earth Day, and then of course immigration has now moved in front of it. But this bill, the cap-and-trade bill, was strongly criticized by hardcore environmentalist wackos because it supposedly allowed more offshore drilling and nuclear plants, nuclear plant investment. So, since they're sending SWAT teams down there, folks, since they're sending SWAT teams to inspect the other rigs, what better way to head off more oil drilling, nuclear plants, than by blowing up a rig? I'm just noting the timing here.

Plus there's this, from the friend I was emailing with: "Maybe not Obama, but the WSJ snuck it in their story yesterday: you know, if the environmentalists didn't make us drill so deep, so far out from shore, this wouldn't have happened." I haven't seen that story, but I wouldn't be surprised if this meme picks up steam in the days to come.

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Reinflating the Bubble

We're still addicted to houses.

| Fri Apr. 30, 2010 11:58 AM EDT

The LA Times reports on the homebuyer's tax credit:

Buyers can get a tax break of up to $8,000 for first-time purchasers and $6,500 for some current homeowners if they reach agreements by April 30 and seal their deals by June 30.

California lawmakers sweetened the package last month by passing a $10,000 credit that kicks in Saturday. Now, some buyers in the state can qualify for as much as $18,000 in federal and state tax relief if they time their purchases just right.

Seriously? California, which is in only slightly better fiscal shape than Greece, is handing out money to homebuyers? Jeebus. So how's that working out?

The dual incentives have created a mind-set reminiscent of the bubble years, particularly among first-timers, who stand to gain the most money. "I am looking at properties almost constantly, and it is just kind of a feeding frenzy right now, which frustrates me," said Zeenath Shareef, 30, a Venice Beach renter and finance director for a Santa Monica consulting firm who took half days off to look for a home.

"In my mind, properties are going more quickly, and in some cases for more than what they would normally sell for, because people are in such a rush to buy ahead of this deadline," she said. "I hear people saying, friends of mine saying, ‘I have to buy, I have to buy, I have to buy.' "

We are a nation of idiots.

ID, Please

A national ID card is a lot less scary than people think.

| Fri Apr. 30, 2010 11:39 AM EDT

Ezra Klein reports that the new Democratic immigration proposal includes a shiny new way to enforce employment laws:

I don't think the Democrats are going to like me calling this a biometric national ID card, as they go to great lengths to say that it is not a national ID card, and make it "unlawful for any person, corporation; organization local, state, or federal law enforcement officer; local or state government; or any other entity to require or even ask an individual cardholder to produce their social security card for any purpose other than electronic verification of employment eligibility and verification of identity for Social Security Administration purposes."

But it's still a biometric national ID card. It's handed out by the Social Security Administration and employers are required to check it when hiring new employees. Essentially, if you want to participate in the American economy, you need this card.

I've written about this before, and it's fine with me if they call it a national ID card. I'm in favor. It's not as if these things are security panaceas or anything, but they'd be pretty useful for things like reducing employment fraud or voter fraud. And what are the drawbacks? Every time this comes up I hear lots of vague but alarming talk about police states and the end of liberty, but nothing concrete about how this would really change things much from the status quo ante, in which most of us have to produce IDs multiple times a day merely to get through our lives. As for making it easier for the federal government to track us, please. They already have all the tools they need to track us. It's called a Social Security number. A non-fakable Social Security number would be an improvement, not a further infringement on our liberty.

The main difference a national ID would make is that if the federal government provided these cards free of charge, then poor people would have a reliable form of ID too, not just rich and middle class folks. Could they be abused? Sure, but no more than our current hodgepodge of SSNs and corporate ID cards. Other countries seem to have them without descending into totalitarianism.

Unfortunately, as Ezra says, this whole thing is a nonstarter: "The oddity of this strategy, of course, is that anti-immigration sentiments run highest among the same communities that are most opposed to national ID cards." There's not much chance of this proposal getting anywhere.

Finance Reform Update

Republicans are still doing their best to kill the whole idea.

| Fri Apr. 30, 2010 1:23 AM EDT

Andy Kroll runs down the remaining problems that Republicans still have with the Senate financial reform bill:

Right now, there look to be three main sticking points between the parties. One is the proposed consumer protection agency....What to do with systemically risky, or "too-big-to-fail," banks is another prickly issue....The third issue where major differences remain is regulating derivatives.

In case you haven't been keeping score at home, those three things are pretty much the heart of the entire bill. Everything else is window dressing. And just to drive the point home, here's Andy describing Sen. Richard Shelby's take on the bill:

Today on the Senate floor, Shelby pretty much eviscerated the measure, while a red-faced and anxious-looking Chris Dodd sat across the aisle from the Alabama senator. "This bill threatens our economy," Shelby said. He added that the bill would leave taxpayers on the hook for future bailouts; the derivatives provisions would impair the economy; a new consumer bureau would stifle consumer lending; and a proposed Office of Financial Research, which would gather financial data used to predict future financial crises, would pry into Americans' lives and violate their civil liberties.

But other than that, Mrs. Lincoln, how did you like the play?

Hopefully this is just showboating, because if it's not it means that Republicans still aren't in a mood to get serious about financial reform. They just want to gut the entire measure. Either way, it's pretty reckless behavior.

(And just to address Shelby's concerns for the record: (a) actually, it would protect taxpayers, (b) no they wouldn't, (c) it might stifle predatory lending, but that's all, and (d) WTF is he talking about?)

Roller Coaster Economics

Would rationing the fun at amusement parks cut down on lines?

| Thu Apr. 29, 2010 8:20 PM EDT

Ryan Avent's baby is going to be old enough for a visit to a theme park one of these days, and he's not looking forward to it:

Specifically, I'm dreading the queues. Endless, winding queues, lasting hours, all to ride a roller coaster for two minutes.

There should be an easy solution to this: ride pricing. A long line indicates an underpriced experience. At any given moment, many more people want to ride than the ride can accommodate. By charging for individual rides, demand can be rationed until the queue is winnowed down to something reasonable, like five to ten minutes. The pricing could even vary. Operators could reduce prices for underused rides until more users are attracted, the better to keep activity evenly distributed around the park.

The problem with this is that people would hate it. But you could improve upon the system to make it less unpleasant! Specifically, you could give everyone who comes into the park a bunch of tokens, and then rides could be priced in tokens. You could then sell additional bundles of tokens for the real ride enthusiasts. I seem to recall that the old state fairs I used to visit operated on this system and didn't have long queues.

Ryan's idea sounds suspiciously familiar to this Southern California native. Throughout my childhood we visited Disneyland every year on my sister's birthday, and since Walt Disney was no communist he made sure that if you wanted to get on the more popular rides you had to pay for the privilege. This wasn't done via tokens, however, it was done via ticket books. You could pay for admission by itself, or you could pay a few dollars more for admission plus a book with a limited number of A, B, C, D, and E tickets. A and B tickets were for the junky rides. We always came home with a bunch of unused one. E tickets were for the Matterhorn or the other good rides. If you ran out you could buy more inside the park.

Disneyland ditched the ticket books in the early 80s and went to a simple admission charge that included unlimited access to all rides. The reasons were obvious: they made more money since everyone now paid the higher admission price, and they saved money since they didn't have to print ticket books, hire people for ticket booths, or collect tickets at the rides.

Which is all well and good, but the bigger question is: Did the ticket books cut down on queuing? Answer: Not as far as I can tell. The line for the Matterhorn or Space Mountain was miles long back in the 60s and 70s, just like it is today. In theory, ride pricing should work. In practice, I think theme parks might represent a market failure.

Next Time Will Be Different

Actually, no it won't.

| Thu Apr. 29, 2010 6:40 PM EDT

Via Jonathan Chait — who owes me big time for making me read this — here is Jonah Goldberg arguing that better financial regulation is a fairly non-urgent issue because bankers have all learned their lessons:

Think of it this way. We are just as vulnerable as ever to the threat of Coca-Cola releasing another New Coke. No laws have been passed to prevent it. No new oversight authority has been created to warn of its looming threat. And yet, the odds of Coca-Cola rolling out another debacle like New Coke are severely limited. Why? Because, to paraphrase Roy Scheider in Jaws II, as God is their witness the executives at Coca-Cola don’t want to go through that Hell again.

....This is not to say that the financial crisis doesn’t justify any reforms. But let’s not forget that inherent to capitalism is the capacity for self-correction. Surely the disappearance of Lehman Brothers and the dismantling of AIG is an example that many can learn from. The real danger seems to me that people like Dodd haven’t learned the lesson that government is not the only—or best—corrective to the excesses of capitalism.

Does Jonah really think that American industry's capacity to launch stupid new products was diminished by the New Coke fiasco? Does he remember Pets.com? Or Webvan? Or, restricting ourselves just to the soft drink market, Crystal Pepsi? Or any of the other fine beverages on this list?

As for bankers learning their lesson, I'm at a loss for words. If there's a profession on the entire planet that has aggressively declined to learn any lessons from its periodic collapse over the past several millennia, it's high finance. In This Time It's Different, it takes the authors three columns of text spread over four pages just to list the banking crises since 1800. They tally up 51 of them since 1980 alone.

God knows I'm sympathetic to arguments about regulatory capture and government collusion in blowing up financial bubbles, but even Alan Greenspan has admitted that financial markets can't be trusted to self-regulate. Alan Effin Greenspan. Regulatory capture is a reason to try to build a more robust financial control infrastructure, one that at least tries to address the changes in modern finance, not a reason to shrug our shoulders and pretend, yet again, that next time will be different.

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Downgrading Europe

Nobody likes it when their debt is downgraded, and that includes sovereign governments.

| Thu Apr. 29, 2010 2:00 PM EDT

Greece, Portugal, and Spain all got downgraded by the ratings agencies this week. AP reports on the reaction:

The rating agencies that sort good investments from junk are once again injecting fear into financial markets. Only this time it's for warning investors about a possible threat — Europe's debt crisis — rather than for failing to see one coming.

....European Union officials weren't pleased by the negative ratings. ''Who is Standard & Poor's anyway?'' EU spokesman Amadeu Altafaj Tardio said Wednesday. He said the agency should better assess ''realities on the ground,'' such as financial rescue talks in Athens ''that are making rapid and solid progress.''

Color me unsympathetic. Tardio sounds like every CEO talking his book ever quoted in the Wall Street Journal. However, this does demonstrate one of the problems you'd have if you got rid of the ratings agencies and just had the SEC do the job instead. Rating the securities issued by U.S. banks is one thing, but can you imagine the United States government downgrading the sovereign debt of friendly countries? I can't. And if they did, can you imagine the reaction? I can. Oh yes, I surely can.

The ratings process, obviously, has big problems. But although putting ratings under the thumb of the U.S. government might solve one of those problems, it would also create a whole set of new ones. This remains a very difficult problem.

Grim Reality From the Pentagon

Defeating the Taliban in Afghanistan may not be possible anymore.

| Thu Apr. 29, 2010 1:25 PM EDT

The Pentagon released a new report on operations in Afghanistan yesterday, just a few weeks before their make-or-break offensive in Kandahar begins:

The new report offers a grim take on the likely difficulty of establishing lasting security, especially in southern Afghanistan, where the insurgency enjoys broad support. The conclusions raise the prospect that the insurgency in the south may never be completely vanquished, but instead must be contained to prevent it from threatening the government of President Hamid Karzai.

The report concludes that Afghan people support or are sympathetic to the insurgency in 92 of 121 districts identified by the U.S. military as key terrain for stabilizing the country. Popular support for Karzai's government is strong in only 29 of those districts, it concludes.

....The report also notes that insurgents' tactics are increasing in sophistication and the militants have also become more able to achieve broader strategic effects with successful attacks. The Taliban continue to use threats and targeted killings to intimidate the Afghan population.

At the same time, Taliban shadow governments, which can include courts and basic social services, have strengthened, undermining the authority of the Afghan government, according to the report.

Following the happy-talk optimism that marked most of the Bush years, Gen. Petraeus and the rest of the Pentagon have obviously decided that it's better to manage expectations than to raise them. And managing them they are. After reading this, I'll probably be happy if McChrystal emerges next fall and announces that he's confident we'll be out of Afghanistan by the time I qualify for Medicare.

Luntz's Latest

The latest sophistry on financial reform.

| Thu Apr. 29, 2010 12:38 PM EDT

Frank Luntz, coming off his bravura performance trying to stop financial reform by labelling it a "bailout fund" regardless of what's actually in the bill, is back for an encore. In the latest display of the rhetorical pretzel bending for which he's famous, he explains why financial reform is a sham:

The Democrats supporting the current legislation have assured an anxious electorate that whatever funds are used to create whatever regulatory scheme created will come from the banks, not the taxpayers. Let me emphasize that so that even casual readers will catch it: the Democrats promise that you won't pay for their legislation, banks will.

Really?

Since when have corporations ever paid taxes, fees or penalties? Employees end up paying in the form of lower salaries and benefits. Customers end up paying in the form of higher costs.

And in this case, every account holder will be forced to pay higher fees on their checking account and savings account. That's you, my friendly reader. Can you say "checkbook tax"? I can, and I think lots of candidates will be saying it come November.

Yeah, I think Frank can say "checkbook tax." I also think he can write it, post it, put it on billboards, and tap it out in Morse code. But he might have bitten off more than he can chew this time. Tax incidence theory does indeed suggest that taxes on corporations are partly passed through to consumers, but Republicans have never had any notable success convincing Joe Sixpack of this, despite almost endless efforts to do so.

Still, forewarned is forearmed. At least we know which particular brand of sophistry is likely to sweep like a firestorm through Fox/Rush/Drudge land over the next few days. Keep your eyes peeled.

I Am Open Minded. Hooray!

According to Slate, anyway.

| Thu Apr. 29, 2010 12:11 PM EDT

Recent research suggests that web users are pretty catholic in their news reading habits. Conservatives read liberal sites and liberals read conservative sites.  Slate wants to check this theory out, so they produced an applet that tells you just how isolated you are, news-wise:

Here's how it works: When you click on the "Profile Me" button, we will check which news sites you've visited recently. Then, using the same Web site rankings Gentzkow and Shapiro used in their research, we'll tell you how "isolated" you are....We do not save the information, just your overall score, which will be used solely to compare you to other Web surfers and possibly, if enough of you try it out, other Slate readers.

My score is on the right: I clock in at +14, which means I visit more conservative sites than liberal ones. What an open-minded fellow I am!

Except for one thing: the vast majority of my reading is done via RSS — and most of it is liberal blogs. What's more, when I head off to Drudge or Michelle Malkin, it's mostly in hopes of finding something I can mock, not because I'm really interested in what they have to say.

Still, Slate says I'm officially open minded. Hooray for me!