Playing Chicken With the Debt Ceiling

Mike Konczal is unhappy that raising the debt ceiling wasn't explicitly part of Obama's tax deal with Republicans yesterday:

This should be a no-brainer and a deal-breaker for liberals considering supporting this bill. No Democrat should support this compromise without this issue being addressed. The debt ceiling is going to be hit sometime early next year, between February and April. Alan Simpson is already bragging about how this vote will be a “bloodbath”, forcing the austerity agenda into action. It would not surprise me if the new Congress moved to cut back on the stimulus program and force deep cuts at that moment when this new stimulus is getting going, and the idea that Obama will show leadership in averting this crisis can no longer be assumed.

I'm going to put on my Slate hat and be contrarian about this. First off, it doesn't matter what Alan Simpson says. He runs off his mouth routinely and he's not even in Congress, let alone part of the Republican leadership. So who cares what he says? Second, and more important, the political incentives are different now.

With a comprehensive, budget-busting tax deal in place, the only thing left for Republicans to complain about is spending. And they will. But they're in a fairly weak position. They're already on record supporting a deal that blows up the deficit, so they can hardly claim to be simon pure on that front. And with the House in Republican hands, they're as responsible for the budget as Democrats. They'll fight for reductions here and there, but I frankly doubt that they're going to risk losing votes from important constituencies by pushing hard for significant cuts in major programs. In the end, they'll compromise with the Senate in conference, as they always do, with both sides making minor concessions. And once they've done that, they don't really have much leverage to complain about the debt ceiling. Some tea party backbenchers will blow off steam complaining about it, but the GOP leadership will let them vent and then get down to the business of rounding up the votes for passage.

I could be off base about this. But I'm just not sure that either John Boehner or Mitch McConnell has the stomach for this fight. What matters is taxes and spending, and once they've cut a deal on those two things — as I think they will — they can't really backtrack and pretend to get self-righteous about the debt ceiling. There may be a few days of drama as both sides play a bit of brinksmanship for their respective bases, but that's about it.

Is WikiLeaks founder Julian Assange guilty of rape? That's for a Swedish court to decide. But if you're interested in the details of exactly what the charges against Assange are, Richard Pendlebury has a pretty thorough rundown in the Daily Mail today. Basically, it involves consensual sex that allegedly turned unconsensual because (in one case) a condom broke and (in the other case) Assange refused to wear a condom in the first place — both of which are crimes in Sweden under the circumstances Assange is charged with (i.e., forcibly continuing with intercourse despite the withdrawal of consent). Pendlebury is very clearly skeptical of both the charges and the women who brought them ("the more one learns about the case, the more one feels that [] the allegations simply don’t ring true"), so you should ignore some of the loaded language he uses. But he does lay out the basic narrative fairly well.

It's pretty obvious that the timing of the sex charges against Assange is fishy. At the same time, it's striking — though not really surpising — how ideologically charged this has become. The motivations of the accusers aside, if there's evidence that the Swedish court system is corrupt I haven't heard it yet. Skepticism may be in order, as it is with anyone accused but not convicted of a crime, but Assange's guilt or innocence surely depends on the evidence, not on whether you approve or disapprove of WikiLeaks.

UPDATE: Reuters has more details here: "The two Swedish women who accuse WikiLeaks founder Julian Assange of sexual misconduct were at first not seeking to bring charges against him. They just wanted to track him down and persuade him to be tested for sexually transmitted diseases, according to several people in contact with his entourage at the time."

Houston, the Tax Cuts Have Landed

Apparently President Obama has reached a tax cut deal with Republican negotiators. It will extend all the Bush tax cuts for two years and do a few more things besides:

The deal includes reducing the 6.2 percent Social Security payroll tax on employees by two percentage points for a year....It also includes continuation of a college-tuition tax credit for some families, an expansion of the earned income tax credit and a provision to allow businesses to write off the cost of certain equipment purchases.

The deal, which is not yet finalized, would include a 13-month extension of jobless aid for the long-term unemployed. Benefits have already started to run out for some people, and as many as 7 million people would potentially lose assistance within the next year, administration officials said.

....The White House was also said to have agreed to Republican demands on the estate tax that would result in an exemption of $5 million per person and a maximum rate of 35 percent.

This is....not too bad. I continue to think that it's stupid to extend the tax cuts for two years instead of three, and caving in to Republican demands for an estate tax cut for the absolute wealthiest sliver of the population is grating as hell. On the positive side, the payroll tax holiday (semi-holiday, anyway) is a good idea, the extension of various tax credits is a good idea, and the 13-month extension of unemployment insurance is much better than expected. This isn't anyone's idea of dream legislation, but it could be a lot worse.

But how stimulative is it? Answer: not much in a positive way, but it does prevent the elimination of current programs that would have been contractionary. And the payroll tax cut will be fully paid for out of the general fund, so it won't affect Social Security's long-term solvency. The big question, of course, is whether it will be possible to allow the payroll tax cut to expire in a year without a big fight from Republicans accusing Democrats (yet again) of wanting to raise taxes. I don't think that's going to be a big problem. Partly this is because 2011 isn't an election year, which makes posturing less effective, but mainly because Republicans don't care much about taxes on the middle class. Take a look at this interview with Grover Norquist: he's pleased about the main tax cut and "especially pleased" about the estate tax cut, but he doesn't even mention the payroll tax cut. He just doesn't care.

Politically, this is probably a win for Obama. The liberal base won't like the deal much, but they won't hate it either. And the vast middle of the country will like it just fine. I continue to think that running on repeal of the high-end tax cuts in 2012 will be a problem, but apparently Obama disagrees. We'll see.

POSTSCRIPT: I hate to move the spotlight away from jobs and onto "boutique social issues," but I sure hope that Obama has gotten a side deal from three or four Republicans to support repeal of DADT now that taxes are out of the way. It would be a serious dereliction not to nail this down during the lame duck session.

Chart of the Day: Who Votes, Who Counts

Via Ezra Klein (and simplified by me), this chart largely explains why sky-high unemployment hasn't produced any real sense of urgency in our political class. It's because unemployment is high among people who don't vote and low among people who do. If the stock market were crashing or corporate profits were down, that would be one thing. But unemployment? It's just not that big a deal.

Economics and Crankery

Noah Millman writes a long post today about people — conservatives mostly — who claim to maintain a radical skepticism toward conventional economic remedies for our lousy economy. He ends with this:

What professed skepticism frequently amounts to is a vulnerability to crank theories. The people I know who tend “not to trust” doctors would, of course, go to a doctor if they broke their legs. But they believe that cancer is best treated with herbal remedies — or that vaccinations cause autism — or that mental disorders like depression have no chemical basis — and so forth. That is to say: where scientific knowledge is limited, they prefer the advice of those opposed to the establishment. That’s their heuristic.

And I see the same sort of thing with respect to economics. None of the people I know who profess to believe that “fiat money” is a fraud and that therefore we’re all doomed — and I know, many, many such people, including professional investors — actually behave in their private or professional life in the way that they would if they really believed such a thing. But professing such a believe does make them vulnerable to specific truth claims from specific fellow-adherents in areas where scientific knowledge is limited (such as debates about what the optimal monetary policy might be). Again: the heuristic is: when we are in the gray areas, I listen to the cranks. In neither case does this strike me as a particularly defensible heuristic when exposed to the light of day.

That might be it. But there's also the simple fact that conventional economics suggests that government should take actions that conservatives dislike for ideological reasons. For a lot of them, that's reason enough to oppose conventional economics, with radical skepticism merely playing a role as their chosen justification.

Fighting WikiLeaks

Clay Shirky is conflicted about WikiLeaks: he acknowledges that over the long haul human organizations of all kinds require a certain amount of backroom negotiation, but he also thinks that the appearance of a guy like Julian Assange working to subvert a bureaucracy overly addicted to secrecy is occasionally a good thing. "The periodic appearance of such unconstrained actors in the short haul is essential to increased democratization, not just of politics but of thought."

But he's not conflicted about how the United States ought to respond. If we pass a law criminalizing what WikiLeaks does, that's one thing — even if he doesn't like the law. But ignoring the law is quite another:

When a government can’t get what it wants by working within the law, the right answer is not to work outside the law. The right answer is to accept that it can’t get what it wants. The United States is — or should be — subject to the rule of law, which makes the extra-judicial pursuit of Wikileaks especially nauseating.

....I think the current laws, which criminalize the leaking of secrets but not the publishing of leaks, strike the right balance. However, as a citizen of a democracy, I’m willing to be voted down, and I’m willing to see other democratically proposed restrictions on Wikileaks put in place....The key, though, is that democracies have a process for creating such restrictions, and as a citizen it sickens me to see the US trying to take shortcuts. The leaders of Myanmar and Belarus, or Thailand and Russia, can now rightly say to us “You went after Wikileaks’ domain name, their hosting provider, and even denied your citizens the ability to register protest through donations, all without a warrant and all targeting overseas entities, simply because you decided you don’t like the site. If that’s the way governments get to behave, we can live with that.”

I'd add one other thing: if you're going to declare war, you should only do it if the war is winnable. This one sure doesn't seem to be, and our ragtag offensive against WikiLeaks is doing little except making us look helpless against a pipsqueak. It's a lot like the counterinsurgencies we keep failing at in meatspace, except squared or cubed. After all, even a "war against terror" might be unwinnable but still manage to minimize terrorist attacks. But as near as I can tell, we could literally kill every person associated with WikiLeaks, impound every cent of their money, and take down all their servers, and it would have virtually no impact. All the existing documents would still be available, and other groups would pop up almost instantly to take WikiLeaks' place. I guess I might be underestimating our capabilities in this area, but I doubt it. I just don't see how you can win a war like this in the long run. I don't even see how you can degrade this kind of activity significantly short of running a Stalinesque security state.

So which is worse: losing a battle, or fighting a long, grinding war and then losing anyway? The latter, right?

Living in Fox's World

A friend from Virginia emails about Obama's deal with Republicans on extending the tax cuts:

I hate to say this but I do have my ear to the ground with a lot of "regular" folks and the way this impending "deal" is being described by most of them is that Republicans are pushing to keep the tax cuts which create jobs and the Democrats are pushing to extend unemployment benefits so lazy people can sit on their asses a while longer and live off those of us who work hard.

Is this because (a) this is just how America rolls, (b) Democrats don't know how to communicate with the American public, (c) Fox News now controls our country completely, (d) something else, or (e) all of the above?

The Problem With Clickthroughs

Ezra Klein writes about the famously low clickthrough rates for online advertising, and the famously low rate cards that go along with them:

At the beginning of Ken Auletta's "Googled," Auletta talks with Mel Karmazin, then the CEO of Viacom. Karmazin is aghast at Google's campaign to measure the effectiveness of advertising by tallying clicks. "I want a sales person in the process, taking that buyer out for drinks, getting an order they shouldn't have gotten," he frets. And if that's too subtle, Karmazin continued: "You don't want to have people know what works. When you know what works or not, you tend to charge less money than when you have this aura and you're selling mystique."

It's more evidence that the greatest advertising campaign of all time was for...advertising. Another way to phrase Karmazin's comment is, "the thing you need to know about the advertising business is that the people we're selling advertisements to are basically idiots and we routinely fleece them." And he said it to a reporter, knowing it would go into a book. It's straight gangster. The brand is so strong that the people behind it can freely admit the con at its heart.

I wonder what's really going on here? Karmazin's trash talk aside, it's not like it was ever a big secret that mass-market advertising has always been a very hit or miss game. And outside of late night TV, very little of that advertising has ever been based on the idea that people see your ads and instantly get into their cars and go buy your product. It's been about brand positioning, customer education, long-term loyalty, and so forth.

So why is internet advertising so different? Why don't advertisers accept that its benefits are largely immeasurable too? Are they blinded by the supposed precision of clickthrough rates? Or have they measured online advertising campaigns the same way they measure other kinds of advertising campaigns (measurements that are imperfect but still widely known and used) and found it wanting?

In other words, is online advertising genuinely less effective? Or does it just seem less effective because of the most common metric used to evaluate it? I imagine this is something that's been studied in some depth, but if it has been, it's odd that I almost never see anything about this in the non-trade press. What's the deal?

Ranking the Presidents

The Gallup poll below is being touted as a "ranking" of modern presidents, and it puts John F. Kennedy at the top. (I guess Eisenhower doesn't count as "modern.") This is obviously crazy, but when I clicked the link I discovered that it wasn't really a ranking of who was the best president, it was a ranking of retrospective job approval ratings:

That's not quite so crazy. It's probably still wrong, but not crazy. Kennedy did some popular things, handled the White House with style, and was assassinated before his administration had time to become widely loathed, which it likely would have been had he stayed in office for a full eight years. He never really had a chance to outlast his honeymoon, and LBJ ended up taking the hit for Vietnam and 60s unrest more generally.

In any case, the innate good sense of the American public is shown by George W. Bush's low ranking. I just hope that as time goes by, people remember what a bad president he was. He's not a president who deserves to benefit from the rosiness of faded memories.

Learning the Ropes

Dan Eggan writes in the Washington Post today about how tea party favorites like Francisco "Quico" Canseco are spending their first few days in Washington DC:

After winning election with an anti-Washington battle cry, Canseco and other incoming Republican freshmen have rapidly embraced the capital's culture of big-money fundraisers, according to new campaign-finance reports and other records.

....The aggressive fundraising efforts underscore the financial pressures facing new members of Congress even before they take their seats. The contributions also represent a symbolic challenge for the Republican class of 2010, many of whom gained office by running against the ways of official Washington and monied interests.

I'm not exactly scandalized by this, but it's still a warning sign to tea partiers everywhere: guys like Canseco will support your hot button issues for precisely as long as they align with the interests of the guys who are bankrolling him. As soon as those interests diverge, you'll be left in a ditch. Don't say you haven't been warned.