Those Inscrutable Chinese

James Galbraith attends a roadshow sponsored by the Peter G. Peterson Foundation and reports back on a presentation from David Walker:

Mr. Walker warned that “foreign lenders... can’t dump their debt but can curb their appetite” for new US Treasury bonds. This was an oblique reference to the yellow peril. The idea, when you think about it, is that the Chinese central bank will acquire dollars — which it does when China runs an export surplus — and then fail to convert them into Treasury bonds, thereby choosing, voluntarily, to hold dollars in cash, which earns no interest, instead of as Treasury bills, which do. Mr. Walker did not try to explain why this would appeal to the Chinese.

Good point. Anyone in the studio audience care to take a crack at this?

Friday Cat Blogging - 11 February 2011

For some reason, Inkblot has spent the past week burrowing under the quilt on our bed for his afternoon snooze. During cold weather this is pretty normal, but it's been anything but cold around here lately. It's 70 degrees right now, and has been all week. So what's up? Domino, as you can see, has the right idea, lolling about in the sunshine before she repairs to the chaise longue for a nap. She's a Southern California cat and never forgets it.

Chart of the Day: Living With the Folks

Today's chart comes via Allison Schrager, and plots the riskiness of an economy (judged by the price of CDS coverage for its bonds) vs. the number of men aged 25-34 who are still living with their parents. The correlation is pretty striking:

It's possible, of course, that this is actually demonstrating some underlying correlation that has nothing to do with how many men live at home into their 30s. Still! It's interesting. And amenable to absolute mountains of amateur sociology. So go to it, blogosphere.

What Does the Muslim Brotherhood Want?

American conservatives have gone so far off the rails about the apocalyptic danger of the Muslim Brotherhood taking over in Egypt that it's tempting for liberals to go too far in the other direction. So when I read Robert Dreyfuss's piece about the Brotherhood today, I was all ready to criticize him for whitewashing some of the Brotherhood's less savory aspects. But he didn't. After a brief but extremely cogent summary of the Brotherhood's history, he sums up with this:

By the 1990s, despite the off-again, on-again repression by Mubarak's regime, the Brotherhood had completed what many observers say was a transformation. Step by step, its leadership renounced its violent past, engaged in politics, and tried to reinvent itself as a collection of community organizers who operated clinics and food banks, building a network of Islamic banks and companies....Nathan Brown, a political science professor at George Washington University and an expert on political Islam, is optimistic that the Brotherhood has evolved from its fundamentalist roots: "Their agenda is to make Egypt better," he told Salon recently...."They don't want to necessarily completely convert Egypt into a traditional Islamic legal system. But if the Parliament's going to pass a law, they want it to be consistent with Islamic law."

....But it's also fair to ask if Brown's interpretation is too charitable. In 2007, the Brotherhood released a draft political program that included several very troubling proposals, including the idea that Egypt's government be overseen by an unelected council of Islamic scholars who would measure the country's laws against the Koran and sharia to make sure governance would "conform to Islamic law." Since then, various Muslim Brotherhood officials have also made conflicting statements about anything from the role of women to the treatment of non-Muslim minorities.

In the end, there's no getting around the fact that the Muslim Brotherhood is, if not an anachronism, a profoundly reactionary force. Its views on marriage, the family, homosexuality, and the like are distasteful to most Western minds and many Egyptian ones. And it harbors a strong current of overt anti-Semitism, along with a penchant for conspiracy theories. Despite Egypt's drift toward a more conservative Islamic outlook since the 1970s—which paralleled similar trends across the Muslim world—the Egyptian people, especially the middle class, may in the end not be receptive to the Brotherhood's message.

The whole piece is really very good, and well worth a few minutes of your time if you want to understand a bit more about the Brotherhood than you get from the headlines — both good and bad. The truth is that it's hard to say how influential the group is likely to be in post-Mubarak Egypt, and it's also genuinely hard to know exactly what direction they'll pursue. But as Dreyfuss says, there are a couple of things we can say: "It is not Al Qaeda or the Taliban. It is a conservative, even ultra-orthodox Islamist group, but it's irresponsible to compare it to the terrorist groups and armed insurgencies that have preoccupied American foreign policy since 2001....[But] it is certain to infuse the country with a stronger strain of anti-American and anti-Israel politics....It's also likely to align Egypt more closely with other Islamist groups in the Arab world, especially Hamas."

But either way, it can hardly be ignored.

Good Spy, Bad Spy

Longtime CIA officer Frank Anderson writes today that we should continue to deny clemency to Jonathan Pollard, who was convicted of spying for Israel and sentenced to life in prison two decades ago:

The Pollard clemency pleas are partly based on the close relationship between Israel and the United States. Under this theory, spying for Israel was not serious because it was on behalf of an ally and a friendly government, rather than an enemy of America.

....The essential point is that any nation that steals American defense or intelligence secrets does serious damage to our nation. It might be our friend in many other important ways. In this, it is the enemy. Pollard's crime would not be less heinous had he committed it on behalf of Canada or Ireland. His betrayal would not be more serious had he acted for Russia or North Korea.

I basically agree with Anderson. In fact, I'd go a step further: spying for a friendly power ought to be punished at least as severely than spying for an enemy. This offends our natural instincts, bit it also makes sense. After all, there are already enormous cultural and conventional reasons that prevent most people from spying for national enemies. I mean, what are the odds that someone in the CIA actually wants to spy for Iran or North Korea?

But friends? It's pretty easy to convince yourself that maybe you should spy for, say, Israel or South Korea. After all, they're allies. And they're in dangerous parts of the world. But precisely because the incentives against spying break down a bit against friendly countries, the legal incentives need to step up. Everyone in the CIA or the military needs to know that if they pass secrets to friendly countries, they'll be treated at least as harshly as if they'd passed them to enemies.

Unfortunately, this reasoning applies to guys like Bradley Manning too. If he's convicted of handing classified documents to WikiLeaks, he should be treated pretty harshly.1 It needs to be clear that even — maybe especially — if you think you're acting altruistically, you're still going to get hammered. That's too bad for Manning, for whom I feel at least a bit of sympathy, but it's hard to see any way around it.

1This ought to go without saying, but apparently it still needs to be said: he should be sentenced harshly if he's convicted. He hasn't been yet.

Mubarak Finally Leaves

Wait. Now Mubarak is gone? Didn't he say he was staying last night? I'm so confused.

Anyway, the military brass and the former head of intelligence are now in charge, so I'm sure everything will be OK. Democracy is just around the corner.

Subsidizing the Arts

Conservatives want to slash federal arts subsidies and NPR funding, but Matt Yglesias points out that these costs are probably peanuts compared to the federal boost to the arts from the tax code:

I don’t know which way this cuts, but it’s worth pointing out that for all the sporadic hubub over the NEA, by far the biggest federal subsidy to the arts comes in the form of the federal income tax deduction for charitable contributions [amounting to about $50 billion per year]. This costs a ton of money, a lot of charitable donations go directly to the arts (museums, ballets, opera, etc.) and another large chunk goes to universities that, in turn, spend money on the arts. The huge advantage of subsidizing the arts this way is it lets you hide the ball. You never hear people getting mad over the fact that tax-exempt contributions are going to fund controversial or offensive art. It’s a pretty good model, and yet nobody ever talks about it, in part because it works precisely through the mechanism of people not talking about it.

I think this partly misses the point. Sure, one of the reasons conservatives are OK with this is because it's a tax break, but they're also OK with it because it fundamentally leaves the choice of what art to subsidize in private hands. There's no sense in which a federal bureaucrat is choosing which art to fund and there's no sense in which the federal government is actively approving or disapproving of certain kinds of art.

For what it's worth, I'd actually be happy to get rid of both the tax deduction for charitable contributions and federal subsidies for the arts. On the former, an awful lot of charitable contributions seem to me like "charity" only in the most technical sense, and I don't especially see why you should get a tax break for, say, contributing money to your own church or giving money to your alma mater for a new basketball arena to be named after you. Besides, I suspect that if this tax break were done away with, we'd reach a new equilibrium fairly quickly in which charitable donations weren't affected very much.

As for direct federal subsidies to the arts, I agree with Jon Chait that there really isn't much of a market breakdown here: the current market for art, broadcasting, and entertainment seems pretty robust to me without government help. The United States isn't the Florence of the Medicis, after all. I'm going to annoy my sister for repeating this, but direct spending on the arts is mostly a subsidy to the upper middle class and CPB funding is mainly a way for the upper middle class to avoid the indignity of having to listen to ads. I'm not sure that's a group that really needs this special treatment. The money could be better spent elsewhere.

But I should add that I'm pretty open to argument on both these points. These aren't deeply held sentiments or anything.

Standing Up To Glenn Beck

Glenn Beck is, for a liberal like me, far more entertaining to watch than, say, Sean Hannity or Bill O'Reilly. The latter are garden variety blowhards and their subject matter is predictable. But Beck? He's crazy! He thinks the Muslim Brotherhood is going to take over the entire Mediterranean! Fabian socialists are a fifth column working to subvert everything that makes America great! (But slowly. Sneakily.) The Tides Foundation is on a mission to "warp your children's brains"! And Obama the secret Marxist is behind it all! It all fits together!

This is actually sort of entertaining in small doses. But in bigger doses, not so much. Conor Friedersdorf:

As I've said before, lots of Glenn Beck listeners aren't in on the joke. Unlike Roger Ailes, Jonah Goldberg, and every staffer at the Heritage Foundation happy hour, they don't realize that the Fox News Channel puts this man on the air fully understanding that large parts of his program are uninformed nonsense mixed with brazen bullshit.

....Conjure in your mind a retired grandfather. He served in World War II, voted twice for Ronald Reagan, and supports the Tea Party. Awhile back, he started watching Glenn Beck....

Actually, we don't have to conjure this. Richmond Ramsey has done it for us. I've mentioned before that lots of Fox viewers have the channel on all day long, basically as background noise, and Ramsey says he's noticed this too. His piece is called "Fox Geezer Syndrome":

Over the past couple of years, I’ve been keeping track of a trend among friends around my age (late thirties to mid-forties). Eight of us (so far) share something in common besides our conservatism: a deep frustration over how our parents have become impossible to take on the subject of politics. Without fail, it turns out that our folks have all been sitting at home watching Fox News Channel all day — especially Glenn Beck’s program.

....I asked my father privately why Mom, who as far as I know never before had a political thought, was so worked up about Obama all the time. "She's been like that ever since she started watching Glenn Beck," Dad said.

....Then I flew out for a visit, and observed that their television was on all day long, even if no one was watching it. What channel was playing? Fox. Spending a few days in the company of the channel—especially Glenn Beck—it all became clear to me. If Fox was the window through which I saw the wider world, for hours every day, I'd be perpetually pissed off too.

....Back home, I mentioned to a friend over beers how much Fox my mom and dad watched, and how angry they now were about politics. “Yours too?!” he said. “I’ve noticed the same thing with mine. They weren’t always like this, but since they retired, they’ve gotten into Fox, and you can’t even talk to them anymore without hearing them read the riot act about Obama.”

And that's from a conservative. It's all entertaining enough until you come face to face with the consequences. Sure, Beck's audience is relatively small: a few million, probably no more than one or two percent of the adult population of the country. But that's misleading. These are the shock troops, the true believers, the ones who have turned our politics so toxic. And worse, they're being deliberately conned by Roger Ailes and his pals, who know perfectly well that this stuff is nonsense. And it's all in the service of selling yet another con, getting the geezers to invest their money in endless gold scams.

I know this is whistling into the wind, but it's long past time for the adults in the Republican Party to speak up about this. Glenn Beck is the Father Coughlin and the Robert Welch of his generation rolled into one, and his brand of noxious conspiracy theorizing isn't something to be tolerated just because it produces a few useful idiots. It's time for this to end.

Front page image: Al Grillo/Zumapress.com

Hating on Texas

Recently we learned that the "Texas Miracle" had not been so miraculous after all. Texas seemed to be doing OK over the past two years, but it was only because they had a two-year budgeting cycle and had been able to eke through it thanks to stimulus money from the federal government. When a new budget cycle started up, Texas turned out to be $25 billion in the hole. Oops.

And now comes yet another insult. Amazon has decided to close their fulfillment center in Irving and cancel their expansion plans in the state:

In an email to staff, Dave Clark, the company's operations chief for North America, said the state's "unfavorable regulatory climate" prompted the decision....In the email, Mr. Clark said Amazon's now-cancelled expansion plans would have brought more than 1,000 new jobs to Texas, as well as tens of millions of dollars in investment.

Now, it so happens that I think Texas has the right of this. Their insistence on collecting sales taxes seems perfectly reasonable to me, and I think every state should demand the same. Still, "unfavorable regulatory climate" has gotta sting. That's Texas you're talking about, Dave!

Lowest. Inflation. Ever.

Inspired by David Leonhardt, here's the graph to show any of your friends who think that inflation might be a problem thanks to Fed monetary policy or deficit spending. It shows core inflation (inflation minus food and energy) over the past 50 years, which is a good way of visualizing basic inflationary trends in the economy without getting distracted by normal swings in volatile commodity prices. Right now, core inflation has been trending down steadily for four years and is as low as it's been since the end of World War II. There's no evidence that food and energy prices are feeding through to core inflation, and no evidence that there's even a trace of broad inflationary pressure in the economy. It's just not there. Employment and growth are our problems, not inflation.