Kevin Drum

China's Rough Seas

| Tue Jul. 20, 2010 2:28 PM EDT

On top of the jaw-dropping news that land values in Beijing have increased 800% over the past seven years, Gideon Rachman and others note that China is also losing some of its best friends: multinational CEOs, who have been a bulwark against China alarmism but are now growing tired of China's increasingly protectionist and nationalistic business policies. Rachman thinks that even taking account of its recent miscues China is still playing a pretty smart hand, but Dan Drezner disagrees:

And here I must dissent from Rachman. In some ways, I do think the Chinese government has been pretty stupid over the past year in executing its "Pissing Off As Many Countries As Possible" strategy. China rankled the Europeans over its climate change diplomacy at Copenhagen. For all of Beijing's bluster, it failed to alter U.S. policies on Tibet and Taiwan. It backed down on the Google controversy. It overestimated the power that comes with holding U.S. debt. It alienated South Korea and Japan over its handling of the Cheonan incident, leading to joint naval exercises with the United States — exactly what China didn't want. It's growing more isolated within the G-20. And, increasingly, no one trusts its economic data.

This doesn't sound like a government that has executed a brilliant grand strategy. It sounds like a country that's benefiting from important structural trends, while frittering away its geopolitical advantages. Alienating key supporters in the country's primary export markets — and even if Chinese consumption is rising, exports still matter an awful lot to the Chinese economy — seems counterproductive to China's long-term strategic and economic interests.

In the long term, yes, most of these are just nits that will soon be forgotten. Still, they add up, and China is entering a phase in which growth is almost certainly going to be harder to come by than it has been for the past three decades. My guess is that they know this and don't really know what to do about it. I expect more in the way of stormy seas ahead.

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The GOP Choice: Now With Added Science!

| Tue Jul. 20, 2010 12:57 PM EDT

Last night I suggested that whenever Republicans do something that excites their tea party base, it scares off independent voters and actually helps Democrats. But all I did was eyeball a couple of Gallup charts to come up with this theory. Political scientist Phil Klinkner decided to run some numbers, which he emailed to me:

I correlated partisan levels of enthusiasm with independents' support for Democrats in the generic ballot. Here are the results:

Dem Enthusiasm -0.05
Ind Enthusiasm -0.1
Rep Enthusiasm .17

So, Democratic and Independent enthusiasm has no relationship with Indendents' generic ballot preferences. On the other hand, as Republicans become more enthusiastic, Independent support for the Democrats goes up.

This may be the key to a Democratic victory. Get Republicans so ramped up that they drive Independents into the D column. A quick estimate says that if 100 percent of the GOP is very enthusiastic about voting, then Independents will favor the Democrats by 3 points, in which case the Democrats should win by about 11 points.

Phil goes on to joke that Democrats should "buy blocks of TV time and give them free of charge to Joe Wilson, Michele Bachmann, and Mark Williams." In any case, I just wanted to let everyone know that my gut feel is now Backed Up By Science™.

Our Big Fat Housing Problem

| Tue Jul. 20, 2010 12:47 PM EDT

National Review editor Rich Lowry tweets, "If you read one piece on housing policy — and I know you might — make it this one." Well, I think I've already read about a hundred pieces on U.S. housing policy, but hey — what's one more? So here's "We Can’t Afford This House," by Christopher Papagianis and Reihan Salam:

At the end of June, the House of Representatives voted to extend the $8,000 homebuyers’ tax credit, by an extraordinary margin of 409–5. The Senate approved the measure on a voice vote. At a polarized political moment, this near unanimity was noteworthy in itself. Conservative Republicans and liberal Democrats, from cities and suburbs and small towns across the country, joined together to shower a bit more taxpayer largesse on one of America’s favorite industries: real estate. But there’s a problem with this bipartisan idyll.

Though the homebuyers’ credit was sold as a stimulus measure, we have no reason to believe that it is anything other than another wealth transfer to a large and powerful industry, one with allies conveniently situated in every congressional district. Casey Mulligan of the University of Chicago has suggested that the credit had almost no economic impact. As Harvard economist Edward Glaeser observed, it did little more than create an incentive for “mindless house swapping.” It didn’t even have a meaningful impact on the behavior of first-time homebuyers — people already planning to make purchases simply moved them forward a few months. Yet this is where we find a consensus in policymaking: We can’t agree on balancing the budget or reforming entitlements or the tax code, but we can agree to churn the housing market so that a handful of real-estate agents can make a buck on commissions while the economy crumbles.

It's a pretty good piece, and it gives me a chance to distinguish between good and bad in this particular genre. It's almost indisputable, I think, that the federal government has massively favored the expansion of homeownership over the past six decades. Government policy in a wide variety of areas — taxes, veterans programs, mortgage securitization, etc. — have all been designed to make homeownership ever more attractive for an ever greater portion of the population.

This is the good version of this story, and Papagianis and Salam do a good job with it. The bad version, which stories like this devolve into way too often, is to specifically blame the recent housing bubble on the Community Reinvestment Act and the GSEs — Fannie Mae and Freddie Mac, who are charged with buying up and securitizing conforming mortgages. Now, as near as I can tell, the CRA simply had nothing to do with the housing bubble at all. Blaming the CRA is just a plain invention designed to somehow blame Jimmy Carter and liberal race guilt for a housing bubble that was primarily engineered by Wall Street. The Fannie/Freddie story is a little more complicated, but most of the evidence I've seen suggests that although they were far from faultless in the housing bubble, they simply weren't a big driving factor. They screwed up badly, and taxpayers are going to pay a lot of money to make up for their screwups, but they were mostly following the market, desperately trying to regain market share from private actors who were extending ever screwier loans in an effort to prop up the great derivative machine that was making so many Wall Street bankers rich. Fannie and Freddie made things worse, but it was Wall Street that was driving the show.

So that's the good and the bad. If by "government policy" you mean the CRA and the crude version of the Fannie/Freddie story, you're just demagoguing. But if by "government policy" you mean the vast panoply of federal and state preferences for homeownership that have built up over the past half century, then you have a pretty good point to make. Papagianis and Salam tell the latter story, and it's worth a read.

It's hard to imagine anything actually happening, of course, because there are far too many homeowners who are registered voters to allow all these goodies to be taken away. It's the kind of thing that could only be done on a bipartisan basis, and the odds of that are slim indeed. But without that, Democrats won't dare do anything even if they were inclined to. The status quo has us stalemated.

Can Elizabeth Warren Run the CFPB?

| Tue Jul. 20, 2010 11:52 AM EDT

I only have one real concern about Elizabeth Warren as head of the new Consumer Financial Protection Bureau, and the Washington Post's Neil Irwin outlines it here:

Warren has an exceptional track record as an intellectual and as a public spokeswoman. But those are only a small slice of the responsibilities of an agency head. The leader of the new consumer financial protection bureau will need to hire hundreds, maybe even thousands of people, create an administrative structure from scratch, and oversee what is likely to be a long and arduous process of writing regulations that will govern millions of transactions. He or she will need to be sufficiently savvy in the inter-agency rulemaking process to avoid getting rolled by other regulators, particularly Sheila Bair at the FDIC and a newly named vice-chair for supervision at the Federal Reserve. Then there's the more basic task of maintaining good relationships in the White House and on Capitol Hill.

Looking at Warren's CV, it appears that her current job, as chair of the Congressional Oversight Panel, is her most extensive experience in or around government (she has also served on the FDIC's Committee on Economic Inclusion, among other advisory roles). She may well be an extraordinary manager who can finesse the policymaking process and who would have as deft a touch at managing an agency's internal politics as she is at managing her public profile. But given that she doesn't have that experience — or much policymaking experience at all — on her resume, the burden of proof will likely be on she and her allies to make that case.

I'm not really sure how you make a judgment about this. It's a serious issue, since starting up and running a big government bureaucracy is something that requires a very specific kind of administrative talent. But how do you know if someone who lacks previous managerial experience is likely to make a good manager?

Obviously, a personal interview as well as references from people who know her would be a big part of it. Beyond that, I think my take is that I'd choose Warren but insist that she hire a couple of very experienced, very DC-savvy deputies. That's a combination that often works well.

Via Ezra Klein, who notes that Irwin also mentions the possibility that Warren could end up being too much of a consumer protection crusader. Given the institutional pressures working in the opposite direction, though, I doubt very much that this is a big issue.

The Shirley Sherrod Affair

| Tue Jul. 20, 2010 11:17 AM EDT

Hoo boy. Conservatives apparently aren't going to back down from ever more overt appeals to racial resentment this summer. "broke" a story yesterday about a speech given a few months ago by Shirley Sherrod, USDA Georgia Director of Rural Development, at an NAACP Freedom Fund dinner. In it, Sherrod tells a story from 24 years ago about not helping a white farmer as much as she could have because she was "struggling with the fact that so many black people had lost their farm land."

The point of this story, told in a public venue, was that she quickly realized that she had done wrong. "That's when it was revealed to me that it's about poor versus those who have. It's not so much about is about white and black but it's not, you opened my eyes." This could easily be a heartwarming, three-hankie movie on Lifetime, but no matter:

Sherrod told CNN on Tuesday that she was told repeatedly to resign Monday afternoon after the clip surfaced. "They harassed me," she said. "I got three calls from the White House. At one point they asked me to pull over to the side of the road and do it because you are going to be on Glenn Beck tonight."

Sherrod said the calls came from Cheryl Cook, USDA deputy undersecretary for rural development. "The administration was not interested in hearing the truth. They didn't want to hear the truth," she said.

Sherrod said she and the white farmer she referred to in the video, Roger Spooner, became friends. Spooner's wife, Eloise, confirmed to CNN that she and her husband considered Sherrod friends. "She helped us save our farm by getting in there and doing everything she could do," Eloise Spooner said. "They haven't treated her right."

Sherrod said she told the story to make the point that at the time she thought that white farmers had the advantages because of their race but she learned that was not the case. "The point was to get them to understand that we need to look beyond race," Sherrod said.

In a second video, says "Ms. Sherrod confirms every Tea Partier's worst nightmare." Although this is ostensibly a reference to a joke she made about no one ever getting fired from a government job, that's not really every tea partier's worst nightmare, is it? On the other hand, a vindictive black government bureaucrat deciding to screw you over because you're white? Yeah, I'd say that qualifies.

This is just appallingly ugly, and the White House's cowardly response is pretty ugly too. This is shaping up to be a long, gruesome summer, boys and girls.

UPDATE: Agriculture Secretary Tom Vilsack, who quickly fired Sherrod after the video was posted, stands by his firing. The White House says they had nothing to do with it. The NAACP condemned Sherrod but then mysteriously deleted their statement from their website and announced they were "conducting an investigation." Andrew Breitbart says he doesn't have the entire video, just the edited version he put up. The guy who shot the video says he's sent the whole thing to the NAACP and hopes to post it when he gets permission.

That's the latest for now.

UPDATE 2: The NAACP backtracks: "With regard to the initial media coverage of the resignation of USDA Official Shirley Sherrod, we have come to the conclusion we were snookered by Fox News and Tea Party Activist Andrew Breitbart into believing she had harmed white farmers because of racial bias. Having reviewed the full tape, spoken to Ms. Sherrod, and most importantly heard the testimony of the white farmers mentioned in this story, we now believe the organization that edited the documents did so with the intention of deceiving millions of Americans."

Jeez. Fox News and Breitbart ginning up a phony outrage over some alleged liberal atrocity? Helluva hard thing to believe, isn't it?

UPDATE 3: The full video is here. The segment in question starts at 16:30 and goes for about five minutes. "You know," she starts, "God will show you things, and can put things in your path, so that you realize that the struggle is really about poor people." Then, after telling the story of Roger Spooner, she ends with this: "Working with him made me see that it's really about those who have versus those who don't. And they could be black, they could be white, they could be Hispanic."

UPDATE 4: I've already tweeted a bit about this, but it's worth a blog mention, too. The full video of Shirley Sherrod doesn't show that she's a racist. What it shows is her telling a story about how, 24 years ago, she had to overcome her own underlying racial resentments in order to do her job properly. It shows her telling a story about how, with God's help, she learned that her job was about helping the poor, not about whether you're white or black or Hispanic. In other words, it's the exact opposite of what Andrew Breitbart tried to paint it as.

This should go without saying, but Tom Vilsack needs to apologize and rehire Sherrod, and he needs to do it with the same dispatch that he fired her with in the first place. If stories like Sherrod's are out of bounds, we've truly reached a new low in conservative mau mauing and racial cowardice.

My Great JournoList Cameo

| Tue Jul. 20, 2010 10:14 AM EDT

I'm proud to announce that I have finally made a cameo appearance in the great JournoList donnybrook. (Background here if you have better things to do with your life than keep up with stuff like this.) The thousand-point headline at the Daily Caller screams "Documents show media plotting to kill stories about Rev. Jeremiah Wright" — which I suppose is accurate enough if you consider "plotting" to include things like a bunch of liberals composing an open letter to George Stephanopoulos complaining about his moderation of one of the Democratic primary debates. Which, apparently, the Daily Caller does.

Sadly, my role in this drama is small, since I virtually never participated in JournoList in the first place. Still, I guess I'm now officially part of the Vast Left Wing Conspiracy. I can die happy.

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The GOP Choice: Tea Parties or Independents?

| Tue Jul. 20, 2010 12:39 AM EDT

At the risk of embarrassing myself badly if someone points out an obvious mistake, I've stitched together an interesting pair of charts for you to look at tonight. But first some background. As you may know, the latest Gallup generic poll shows a sudden surge of support for Democrats. Why? Gallup suggests it might be related to passage of the financial reform bill, but I'm skeptical of that. Democrats have gone from 2 percentage points down to 6 percentage points up in only two weeks, by far their biggest jump in the past four months. Could a complex and barely understood regulatory bill really have caused that?

Maybe, but here's another possibility. It turns out that the Democratic surge is largely due to a sudden jump in support from independents. So what caused that? Well, I was struck by an unusual correspondence between two of Gallup's charts. It turns out that whenever enthusiasm goes up among registered Republicans, preference for Republicans goes down among independents. The pasted-together chart below — it's a little messy I'm afraid — shows five cases of a jump in Republican enthusiasm (top chart) along with the corresponding drop in Republican support among independents (bottom chart). It's not a perfect correlation, but it's a pretty good one.

Anyway. Here's my guess: every time Republicans do something that gets the tea party base excited, it simultaneously turns off independents. I'm not quite sure what caused the latest jump (NBPP fever? tax cuts pay for themselves? unemployment compensation obstructionism?), but apparently it was something.

So this is the GOP's big problem for November: they need to motivate their base, but their base is so stone crazy that the only way to pander to them is with tactics so outrageous that non-crazies start to turn away. So far this hasn't hurt them too badly because the independents tend to come back until a fresh provocation hits the airwaves a few weeks later, but eventually this might catch up to them. There's obviously no rigorous statistics involved here, just sort of a gut feel. Take it for what it's worth.


| Mon Jul. 19, 2010 11:00 PM EDT

From Bruce Paquin, owner of a construction business in Washington DC, on the U.S. national security establishment:

In D.C., everyone talks SCIF, SCIF, SCIF. They've got the penis envy thing going. You can't be a big boy unless you're a three-letter agency and you have a big SCIF.

This comes from "Top Secret America," a series in the Washington Post by Dana Priest and Bill Arkin. SCIF stands for sensitive compartmented information facility, a special room "encased in metal or permanent dry wall, impenetrable to eavesdropping tools and protected by alarms and a security force capable of responding within 15 minutes." It's where you go if you're important enough to be allowed to read top secret information.

Bellesiles Followup

| Mon Jul. 19, 2010 5:52 PM EDT

Just to follow up on the Michael Bellesiles post from last week, it turns out the story he wrote for the Chronicle of Higher Education about a student whose brother was killed in Iraq was indeed fabricated. But not, apparently, by Bellesiles. For reasons left unexplained in an editor's note, it turns out the student made up the story. Very odd.

Plan B in Afghanistan

| Mon Jul. 19, 2010 1:50 PM EDT

Joe Klein last week:

Amazing how David Petraeus can just crash through impasses and get his way. He's even able to do get Hamid Karzai, who has boggled every other American who has dealt with him, to do something he doesn't want to do — set up a system of local militias in rural Afghanistan....We should have some sense whether Petraeus' resort to the tribes, which worked in Iraq, will have similar success in Afghanistan by the time the Obama policy review commences in December. But you have to be impressed by the general's ability to get his way, without much fuss and quickly.

I wonder if this explains Petraeus's success?

The Obama administration is revising its Afghanistan strategy to embrace the idea of negotiating with senior members of the Taliban through third parties — a policy to which it had previously been lukewarm. Negotiation with the Taliban has long been advocated by Hamid Karzai, the Afghanistan president, and the British and Pakistan governments, but resisted by the US.

Perhaps Petraeus offered Karzai a deal: he supports the local militia idea, the United States supports negotiation with the Taliban. Everybody wins a little something, and if this report is correct, the key to success was likely garden variety diplomacy, not Petraeus's superpowers.