Kevin Drum

Off to Chicago

| Sat May 22, 2010 2:56 PM EDT

In a few weeks Marian and I are going to Chicago to visit for a few days. Aside from the obvious (Art Institute, Magnificent Mile, Field Museum), any recommendations? All help much appreciated!

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Friday Cat Blogging - 21 May 2010

| Fri May 21, 2010 1:57 PM EDT

Ah, the glories of a wide angle lens. Domino looks like she's a furry python or something. If furry pythons also had whiskers and paws, that is. Over on the right, we have a repeat of last week. What can I say? Inkblot was out in the garden again yesterday, Marian plonked him down on a rock, and this is the picture that came out. Anyway, I figure it won't be spring forever, so we should enjoy the flowers while we can.

(And what is Inkblot looking at? Birds, of course. There's a nest in our neighbor's tree nearby and the birds get pretty territorial about the whole thing. But their strategy is bad. All their chirping and buzzing just makes Inkblot all the more curious. Luckily for them, he's also gravity bound and has a short attention span. So they're in no danger.)

Pakistan and the Times Square Bomber

| Fri May 21, 2010 1:19 PM EDT

ProPublica fills in a few more details on the Times Square bombing:

U.S. and Pakistani investigators are pursuing a new lead in the failed Times Square bombing: That a major in Pakistan’s army knew of Faisal Shahzad’s plans to attack U.S. targets months before Shahzad tried to ignite a car bomb in the heart of New York City.

....Pakistani authorities arrested the military officer this week, officials said. U.S. investigators have been told by Pakistani officials that the major learned of Shahzad's plans from another suspect who is accused of funding the operation, according to a senior U.S. anti-terror official. The major has since resigned from the military, said the official, who requested anonymity because the case remains open.

....Allegations about the major, if confirmed, would deepen U.S. concerns about the role of the Pakistani military and intelligence in the fight against terrorism....The former military man was arrested not by the ISI, Pakistan's most powerful spy agency, but by a military intelligence service. While the ISI has played a central role in the Times Square investigation and in other major terror cases, the spy service and other branches of the security forces have also periodically been accused of colluding with Islamic extremists.

Oddly enough, we seem to have gotten this information from Shahzad without torturing him. Probably just a lucky break. Via Spencer Ackerman.

Quote of the Day: Don't Know Much About History

| Fri May 21, 2010 12:20 PM EDT

From right-wing Texas State Board of Education member David Bradley, explaining who should be included in history books and who shouldn't:

I am very reluctant to include persons who are still alive. By definition of “history,” you must be dead, because you never know when you might embarrass us later.

Actually, that might be the only sensible thing he has to say on the subject of history. I mean, look at Rand Paul. You just never know, do you?

Stuck in Neutral

| Fri May 21, 2010 11:01 AM EDT

Paul Krugman says the United States isn't in any danger of turning into Greece:

The truth is that policy makers aren’t doing too much; they’re doing too little. Recent data don’t suggest that America is heading for a Greece-style collapse of investor confidence. Instead, they suggest that we may be heading for a Japan-style lost decade, trapped in a prolonged era of high unemployment and slow growth.

.... It’s not that nobody understands the risk. I strongly suspect that some officials at the Fed see the Japan parallels all too clearly and wish they could do more to support the economy. But in practice it’s all they can do to contain the tightening impulses of their colleagues, who (like central bankers in the 1930s) remain desperately afraid of inflation despite the absence of any evidence of rising prices. I also suspect that Obama administration economists would very much like to see another stimulus plan. But they know that such a plan would have no chance of getting through a Congress that has been spooked by the deficit hawks.

In short, fear of imaginary threats has prevented any effective response to the real danger facing our economy.

That's true. But the core problem is that growing government debt is a problem in the long term. Ideally, then, what we'd do is gather support for a strong stimulus now by credibly promising to address our various fiscal imbalances in the future. But how do we do this? As far as I know, it's not possible. There's simply no way to guarantee future behavior in any way that the market would take seriously. So we're stuck.

Making Finance Safer

| Fri May 21, 2010 10:06 AM EDT

I think Edmund Andrews has a pretty solid take on the financial reform bill that passed the Senate last night:

Before all the armchair pundits begin carping and tut-tutting, let us first appreciate how much the Senate bill actually does accomplish and how difficult it is to do anything at all when the full force of the financial industry is against you. Remember also that Dodd and the other Democrats had to contend with the hardball intransigence of the Republican Party, whose leaders tried to obstruct or gut just about every meaningful reform in the bill without proposing any of their own. This was not, repeat not, a philosphical disagreement between those who believe in the wisdom of government regulation and those who believe in the wisdom of free markets. However sincere Alabama's Dick Shelby might be in his fear of overbearing government, this fight was about denying Demorats a "victory." It was all straight from Mitch McConnell's playbook for political success: just say no, no, a thousand times no — no matter how venal it makes you look.

Against that backdrop, it's astonishing that the Senate bill actually became stronger as the process dragged on. The proposed consumer financial protection agency is stronger and I believe more independent than it would have been in the original Senate bill (more on that in a moment). The multi-trillion market in financial derivatives, which is almost unregulated right now, would for the most part have to be take place on exchanges or at least through clearinghouses — either of which require greater transparency and more upfront capital by the players. Banks, whose deposits are federally insured, would be prohibited from trading derivatives. And as an added surprise bonus, from none other that freshman Senator Al Franken, the bill includes a very smart reform to fix the corrupt busines model of credit-rating agencies.

I'd add Susan Collins' amendment tightening bank capital standards to this list. If both her regs and the House's 15:1 leverage limit survive the conference committee it will have a substantial effect on the way banks do business. It's not the root-and-branch breakup of the banking system that Simon Johnson and James Kwak would like to see, but let's face it: that was never anywhere within light years of getting support from 60 senators. Given what the realm of the possible included, I'd say that clearing derivatives, limiting leverage, regulating the ratings agencies, and creating a Consumer Finance Protection bureau are surprisingly strong responses to the financial crisis. What's even more surprising is that the first three of these things got added as the bill progressed and the fourth got improved (I've come around to the view that putting the CFPB in the Fed is probably a good thing since it guarantees a stable funding source for its activities). Aside from some early losses over vanilla consumer products and reinstating a version of Glass-Steagall, the only thing that got seriously watered down was resolution authority — and frankly, I never thought resolution authority was a key part of the bill. I still don't, and I suspect that it's virtually never going to get used early enough to make a big difference. It's obviously nice to have a clear legal regime for winding up a big failed bank once its failure is obvious, but that's all we're getting out of it.

In the end, this goes to show how strong a role public opinion can play in the legislative process. It's obviously not always decisive, but in this case anti-bank sentiment was so strong that senators spent the past few months one-upping each other to introduce amendments that Wall Street hated. And the upcoming election, which normally makes serious legislating nearly impossible, actually made this legislation better. Celebrate this while you can because you're not likely to see an election year make a bill better again in your lifetime.

All in all, not bad. Not as good as I hoped for, but better than I expected. Now let's hope that Wall Street can be fended off just enough longer to get this thing through conference in decent shape. (Read Andy Kroll for more on that.) The fat lady hasn't sung quite yet.

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How Big is the Oil Spill?

| Thu May 20, 2010 7:04 PM EDT

We got a small bit of good oil spill news the other day when BP announced that its attempt to insert a smaller pipe inside the broken end of the main undersea pipe had succeeded. But it turns out there's bad news too:

BP said Thursday that it is now capturing 5,000 barrels a day of crude oil and 15 million cubic feet of natural gas from a leaking pipe at the bottom of the Gulf of Mexico, the first official admission that earlier estimates of the amount of oil spilling into sea were too small.

The amount of oil being captured is only a portion of the total because the company is catching oil from only one of two leaks. BP has also released a video that shows additional unquantified amounts of oil continuing to spurt out of the damaged pipe where the company is capturing oil through a new tube insertion. The smaller of the two leaks continues to spill unobstructed and accounts for 15 percent of the total flow, BP officials reiterated Thursday.

If BP's siphon is catching 5,000 barrels a day, the main pipe must be spilling a whole lot more than that. How much more?

The latest glimpse of video footage of the oil spill deep under the Gulf of Mexico indicates that around 95,000 barrels, or 4 million gallons, a day of crude oil may be spewing from the leaking wellhead, 19 times the previous estimate, an engineering professor told Congress Wednesday.

If that's the case, it means that probably more than 100 million gallons has already spilled into the gulf. That will soon make this, by far, the biggest peacetime oil spill in history. Kate Sheppard has more here and here.

And why has BP been so cagey about the size of the spill? Because the smaller it is, the lower their liability will be. “It’s always a bottom-line issue,” says Marilyn Heiman, a former Clinton administration Interior Department official who now heads the Arctic Program for the Pew Environment Group. “Any company wouldn’t have an interest in having this kind of measurement if they can help it.”

Sometimes a Primary is Just a Primary

| Thu May 20, 2010 1:21 PM EDT

Speaking of volatility, how about Matt Bai? He seems to swing between genuinely keen insights and the laziest of conventional wisdom on almost a weekly basis. Today, unfortunately, is the latter: Tuesday's election results, says Bai, demonstrate an anti-incumbent wave, a new era of divisive primaries, the loss of party power, and the end of issues-based politics. I'm pretty sure I've been hearing about all four of those things since at least the mid-70s, but this in particular was gobsmacking:

What all this probably means is that we are living in the era of the upstart. Thirty years ago, when you needed a party infrastructure to make a serious run for higher office, taking it to the establishment was a quixotic venture undertaken on the national level, where a Jesse Jackson or a Pat Buchanan could at least make a powerful statement along the road to obliteration. (Recall Jimmy Carter’s indictment of Jerry Brown in 1976: “Don’t send them a message, send them a president.”)

Jonathan Bernstein comments acerbically:

It seems that Bai has heard of Jimmy Carter. That's good! Now, my assignment for Matt Bai: go back and read about Jimmy Carter's 1976 campaign....Citing Jimmy Carter to make a point that thirty years ago "you needed a party infrastructure to make a serious run for higher office" is like citing Spiro Agnew to make the point that at forty years ago, only seriously accomplished politicians with a deserved reputation for personal integrity were considered for the Vice Presidency.

The rest is an epic takedown of the entire piece. Read it. Reporters really, really need to stop drawing monumental conclusions from a few tiny data points. Especially when they have to twist even the few data points they have in order to do it.

And speaking of things reporters should stop doing, Somerby is good on the Richard Blumenthal affair today. Be sure to read down to the summary of Christopher Keating's appearance on The NewsHour two nights ago. Blumenthal may be guilty of misstating his service record once — twice at a stretch — but Keating has been covering him for years and was never under the slightest misapprehension about Blumenthal's past. Based on the evidence to date, the New York Times seems to have overplayed its hand on this pretty seriously.

The Fear Index

| Thu May 20, 2010 12:34 PM EDT

The VIX index is a measure of stock market volatility. When it goes up, it means investors are afraid that the market is likely to swing wildly and unpredictably. Thus its nickname: the fear index.

And, as you can see on the right, the market is plenty fearful these days. Not as fearful as late 2008, when the VIX index broke 80 for a couple of months — at least, not yet — but it's heading there.

Why? Let us count the ways. Problems in the eurozone. Inflation fears in the U.S. The housing bubble in China. Persistent unemployment. The "flash crash" earlier this month that no one seems able to properly explain. Rising oil prices in the midst of flat economic conditions. Continuing global imbalances that are starting to seem nearly intractable. Mortgage delinquency rates in the U.S. that have risen to nearly 10%. Etc. And fear is the economy's worst enemy. If it doesn't abate, panic is next.

Rand Paul and Civil Rights

| Thu May 20, 2010 11:51 AM EDT

Last night Rand Paul, fresh off his primary victory in Kentucky, explained that he didn't support the Civil Rights Act of 1964. "I think it's a bad business decision to exclude anybody from your restaurant," he said in an interview, "but, at the same time, I do believe in private ownership." And if private lunch counter owners want to prevent blacks from eating there, that's their right. "This is the hard part about believing in freedom."

Bruce Bartlett, hardly an enemy of the free market, goes to town:

In 1883 the Supreme Court, then in its most libertarian phase, knocked down the 1875 [Civil Rights] act as well as many other Republican measures passed during Reconstruction designed to aid African Americans. The Court's philosophy in these cases led logically to Plessy v. Ferguson in 1896, which essentially gave constitutional protection to legal segregation enforced by state and local governments throughout the U.S.

....The libertarian philosophy of Rand Paul and the Supreme Court of the 1880s and 1890s gave us almost 100 years of segregation, white supremacy, lynchings, chain gangs, the KKK, and discrimination of African Americans for no other reason except their skin color. The gains made by the former slaves in the years after the Civil War were completely reversed once the Supreme Court effectively prevented the federal government from protecting them. Thus we have a perfect test of the libertarian philosophy and an indisputable conclusion: it didn't work. Freedom did not lead to a decline in racism; it only got worse.

....Rand's position is that [the Civil Rights Act] was wrong in principle in 1964. There is no other way of interpreting this except as an endorsement of all the things the Civil Rights Act was designed to prohibit, as favoring the status quo throughout the South that would have led to a continuation of segregation and discrimination against African Americans at least for many more years. Undoubtedly, changing mores would have broken down some of this over time, but there is no reason to believe that it would have been quick or that vestiges wouldn't still remain today. Indeed, vestiges remain despite the Civil Rights Act.

Bartlett's recommendation: "I believe that Rand should admit that he was wrong as quickly as possible." It's good advice. I'll bet Rand Paul doesn't take it.

UPDATE: I'm playing catchup here. Sorry. Here's Rand Paul's latest statement: "Let me be clear: I support the Civil Rights Act because I overwhelmingly agree with the intent of the legislation, which was to stop discrimination in the public sphere and halt the abhorrent practice of segregation and Jim Crow laws."

OK. But why did he say otherwise yesterday? Inquiring minds want to know.