Kevin Drum

Brown Shoots

| Thu Jun. 11, 2009 1:41 PM EDT

The World Bank is fantastically gloomy about the prospects for the global economy this year:

The World Bank publicly released an update on Thursday [for] 2009, saying it expected the global economy to contract by "close to 3%." That is sharply worse than the World Bank's March estimate of a 1.75% contraction. Mr. Zoellick said that while there are signs of an easing of the recession in wealthy countries, developing nations are suffering from a drop in exports, remittances and foreign investment.

....Mr. Zoellick described the global downturn as occurring in "waves." In the first wave, the financial crisis battered the U.S. and Europe. As markets in wealthy countries dried up, a second wave, hit developing nations. Now a third wave is weakening financial institutions in those countries, which could produce a fourth wave that could further undermine financial institutions in the U.S. and Europe.

Italics mine.  That's a huge change in just three months.  Zoellick didn't provide any details about why the Bank's forecast has plummeted so dramatically since March, but their economists must be seeing some pretty sizeable deteriorations to drive a change this large.

On the bright side, the IMF thinks that the recovery in 2010 will be stronger than they previously thought.  I sure hope so.

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What the Iranian Election Means

| Thu Jun. 11, 2009 12:52 PM EDT

I don't have any special comment about the upcoming Iranian election pitting hardline incumbent Mahmoud Ahmadinejad against moderate reformer Mir Hossein Mousavi, but I thought Marc Lynch's musing was worth passing along.  Here it is:

The Iranian election has already captivated the Arab public sphere — it has been all over the headlines and the TV stations. I imagine that many of the Arabs who see democracy as an important and positive issue find this Iranian election inspiring (as they did Khatemi's 1997 campaign). The Arab public may regard a Mousavi victory as the same kind of opportunity to rethink relations with Iran as Obama's victory offered for relations with the United States. Arab leaders may find it harder to mobilize opposition to Iran with the seemingly reasonable Mousavi in office than with the cheerfully inflammatory Ahmedenejad.

....Of course, if Ahmedenejad wins, the reverse effect may take hold. When George W. Bush defeated John Kerry in 2004, a very wide swathe of Arab public opinion concluded that this meant that the American people really did bear responsibility for Bush's unpopular policies. If the U.S. is really a democracy, they asked, then didn't Bush's victory mean that his war on terror and invasion of Iraq really did represent the American popular will? If Ahmedenejad wins, the same dynamic may hit Iran in the Arab world: the Iranian people had the chance to correct their policies, and chose to continue as they were. That might lead to a hardening and deepening of anti-Iranian sentiment, at least among elites and leaders.

Payday Lending for Rich People

| Thu Jun. 11, 2009 11:30 AM EDT

Felix Salmon has the story here.  I found it unaccountably entertaining.  Cashing out Daddy's art collection after blowing through your inheritance has never been easier.

Getting to 17%

| Thu Jun. 11, 2009 11:22 AM EDT

The Waxman-Markey bill requires a 17% drop in carbon emissions by 2020.  Joe Romm explains how we can get there:

Clean energy deployment from the stimulus....carbon dioxide emissions will be some 2% lower in 2020 than in 2005....Obama’s recent fuel economy deal....Let’s call that another 2% emissions drop....Then we have Waxman-Markey itself.  It achieves huge energy efficiency savings....That’s another 5% drop.

....Let’s say 1% of the target will be met with domestic offsets....Let’s say 1% of the target will be met with international offsets....cofiring biomass....2% of the 2020 target.

That's about 13% already, and the rest of the reduction can be met simply by utilizing existing gas-fired electric plants at a higher rate than we do now:

It now appears likely that, thanks to unconventional supplies, natural gas alone could meet a great deal of the Waxman-Markey CO2 target for 2020 — without requiring gobs of new power plants to be sited and built or thousands of miles of new transmission lines.

....Today, dirty coal plants are being “dispatched” (or utilized) to provide electricity by grid operators first, while natural gas plants that could provide electricity with far lower emissions of carbon dioxide remain unutilized or underutilized — even though their electricity costs are only slightly higher.  This is occurring in at least two regions of the country, according to a major under-reported May study by the Energy Information Administration, “The Implications of Lower Natural Gas Prices for Electric Generators in the Southest.”  A cap on CO2 emissions and even a low price of CO2 will switch the dispatch order, generating large emissions savings at low cost (if the gas is available, as now seems likely).

Joe suggests that a carbon price of around ten bucks a ton — which is pretty low — is all that we'd need to motivate utilities to change the dispatch order of their plants enough to meet the rest of the 17% target.

Bottom line: meeting the Waxman-Markey targets for 2020 is pretty easy.  We'll have over a decade to start getting ready for the harder measures it takes to make serious cuts.  Doom mongers, take note.

The AMA Takes a Shocking Stand

| Thu Jun. 11, 2009 2:20 AM EDT

The AMA has announced that it will oppose the creation of a public option in any kind of healthcare reform.  This is not exactly a shocker, since the AMA has opposed pretty much every step toward national healthcare ever proposed — including Medicare.  Remember Operation Coffee Cup?

Still, they really ought to have better reasons than this:

In comments submitted to the Senate Finance Committee, the American Medical Association said: “The A.M.A. does not believe that creating a public health insurance option for non-disabled individuals under age 65 is the best way to expand health insurance coverage and lower costs. The introduction of a new public plan threatens to restrict patient choice by driving out private insurers, which currently provide coverage for nearly 70 percent of Americans.”

If private insurers are pushed out of the market, the group said, “the corresponding surge in public plan participation would likely lead to an explosion of costs that would need to be absorbed by taxpayers.”

The AMA's love affair with private insurance companies is truly a thing of wonder.  It's like these guys have collective Stockholm Syndrome.  Or collective battered wife syndrome.  Or something.  Given how much misery private insurers cause for most doctors, I sometimes wonder what they'd have to do to finally cause the AMA to turn on them. Start paying all claims in zlotys?  Demand that doctors have bar codes tattooed on their foreheads?  Insist that all waiting rooms show nothing but reruns of House?

Probably not even that.  Doctors must figure that the more pain private insurers cause them, the more it shows they really love them.  So back to the arguments, such as they are.  (1) A public plan wouldn't drive out private insurers unless it turns out that private insurers are actually less efficient than the post office.  In which case they'd deserve it.  (2) Nor would a public plan restrict choice — unless the AMA's members deliberately tried to sabotage it by refusing to participate.  (3) And there would only be a surge in signups if the public plan turned out to be a better deal, which would likely mean lower overall costs even if a greater percentage of those costs was paid for out of taxes.

But who cares?  Honestly, if the graybeards of the AMA didn't oppose a public plan it would probably make me rethink my support for it.  The fact that they are opposing it just means that all is right with the world.

UPDATE: Apparently the AMA is backing off slightly on its opposition to a public plan. They now say they're willing to consider "a federally chartered co-op health plan or a level playing field option for all plans" — whatever that means.  Sounds like pretty weak tea to me.  I think we can still safely say they're opposed to anything that would have a serious chance of being effective.

The Un-Bailout

| Wed Jun. 10, 2009 9:48 PM EDT

Banks that want to exit the TARP program have to do more than just pay back the money they received from the government.  They also have to buy back the warrants they issued as part of the initial deal.  But some bank CEOs are unhappy about this, and Jamie Dimon, CEO of JPMorgan Chase says that the Treasury should cancel half the warrants it holds "out of fairness." Tim Fernholz isn't amused:

Are you kidding me? The taxpayers went on the line to bail the banks out during a financial crisis produced by the banks' own excess, and now they think that debt should be canceled "out of fairness." Yikes. Luckily, the Treasury seems to be growing into a tougher negotiator after some initial criticism from Congress, and may be thinking about auctioning the warrants to third parties to drive up prices further. Or, if the banks don't want to buy them back right now, they can remain under stricter regulatory supervision until the entire financial regulation apparatus is overhauled this summer.

Unfortunately, Dimon has a point, thanks to the way that Henry Paulson decided to handle the bailout in the first place.  Instead of pumping money only into troubled banks, he insisted on pumping money into all the big banks, whether they wanted it or not.  Ever since, this has given some of the banks a pretty justified excuse for complaining about the restrictions they were placed under, and this is just more of the same.  Why should Dimon have to buy back a bunch of warrants when he was an unwilling participant and only surrendered them in the first place because Paulson insisted on it for the good of the country?

Now, as it happens, there are some pretty good reasons for going ahead and making JPMorgan pay up.  They may not have wanted the TARP money, but they made (and continue to make) eager use of zillions of dollars in other Fed and Treasury programs.  So shed no tears for them.  That said, we wouldn't even be having this discussion if Paulson had handled the bailout better.  His excuse at the time for the scattershot approach was that he didn't want to single out any particular bank for TARP funds since that would advertise to the whole world that they were insolvent and might lead to a market panic.  But no one was fooled.  The market knew perfectly well who was in bad shape and who wasn't.  And when Citigroup and Bank of America went back to the well a second time — an obvious sign of distress — the markets just yawned.  There was no panic, no selloff, no nothing.  Ditto for all the smaller banks that have accepted TARP money.

What's more, a more targeted approach would have cost less.  Instead of $125 billion, the first-round tab probably would have run to something like $60-70 billion or so.  It would have been a better deal all around.

But that's not what happened, so now Jamie Dimon and his pals get to mouth off about how unfair life is.  Thanks, Henry.

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Chart of the Day

| Wed Jun. 10, 2009 6:00 PM EDT

Pew's recent polling report, "Trends in Political Values and Core Attitudes: 1987-2009," is chock full of fascinating nuggets, not least of which is its surprisingly robust finding of substantially increased political polarization over the past 20 years.  Also: the continuing demise of the GOP and the continuing triumph of more liberal social values among all age cohorts.  On the downside: environmentalism is looking pretty ragged.  Bloggers looking for inspiration should have no trouble finding plenty of good stuff here.

At the moment, however, I guess I'm in the mood for some idle chitchat.  Namely, how do we explain this particular chart?  Take a look at just the last two data points, which show the effect of the current recession.  Rich people feel lousy: their financial satisfaction has plummeted 20 percentage points.  But the recession has had only a minor effect on the financial satisfaction of the upper middle class and it's had no effect at all on the lower middle class and the poor.

Why?  One possible explanation is that the bottom three classes had already gotten most of their dissatisfaction out of the way: compared to the start of the Bush era, they were already at least ten points more dissatisfied by 2007.  They just didn't have much further to fall.  The rich, by contrast, had been getting richer and more satisfied all along, so when the recession hit, it hit hard.

I'm not sure I buy that, though.  It's intuitively reasonable that when people get into a long-term funk over their stagnant (or worsening) finances, a new shock to the system just gets added to the pile and shrugged off.  But there are shocks and there are shocks, and this particular recession has produced rising gasoline prices, substantially higher levels of unemployment and underemployment, millions of home foreclosures, and a huge loss of housing wealth even for those who have kept their homes.  Those are the kinds of shocks people don't just shrug off.

The rich becoming less financially satisfied is easy to understand.  But why is it that the non-rich seem to be mostly taking things in stride?  Some kind of weird Obama optimism effect?  A sudden realization that plasma TVs aren't all they're cracked up to be?  I'm a little stumped here.

(Via Ramesh Ponnuru.)

Squeaky Clean

| Wed Jun. 10, 2009 2:39 PM EDT

In the Washington Post today, Al Kamen compares Barack Obama's habit of doling out plum ambassadorships to big campaign donors with Bill Clinton's squeaky clean record of ignoring the money and instead choosing people "with experience in public policy."  Bob Somerby is amused by this sudden rejuvenation of Clinton's reputation:

For years, Kamen’s coven kept insisting that Clinton’s fund-raising was corrupt — that virtually everything was up for sale, given the president’s corrupt love of cash. In the case of the Lincoln Bedroom, the coven faked especially hard — and no one embarrassed itself more than Kamen’s own newspaper. In one especially sad example, the Post belatedly added Chelsea’s Clinton’s slumber party guests to the list of Lincoln Bedroom overnight guests, thereby driving up the numbers and heightening the sense that the Clintons had been misbehaving. It’s hard to get much sicker than that, but Kamen’s coven was up to the task. A few years later, Kamen himself reviewed a Christmas card — on Christmas Eve! He thought he saw character problems.

Without going into obsessive detail, more than a decade has passed since we heard — and heard, and heard, then heard some more — about Bill Clinton’s vile corruption when it came to campaign fund-raising. (We also heard the coven’s gong-show tales about that Buddhist temple.) More than a decade has passed—and have you seen anyone do any work on all the corruption this coven alleged? By now, the coven has had plenty of time to detail and document its big loud-mouthed charges. Have you see anyone produce the book — or even the magazine piece — which documents the way Bill Clinton actually sold off the White House?

And what happened to our most recent president emeritus in all this, anyway?  Who did he send to Britain and Japan?  Click the link for the answer.

Hypocrisy Watch

| Wed Jun. 10, 2009 2:10 PM EDT

From USA Today:

Utah Republican Sen. Bob Bennett voted against the $787 billion economic stimulus package in February, declaring the day it passed that "the only thing this bill will stimulate is the national debt."

Two days earlier, however, Bennett had written to the Environmental Protection Agency and the Agriculture Department seeking stimulus money for Utah, according to copies of the letters released under the Freedom of Information Act. Using 16 identical cover letters, Bennett passed along stimulus funding requests from 14 Utah cities and counties totaling $182.5 million.

....USA Today's review of congressional correspondence with 10 federal departments or agencies found 13 Republicans who voted against the bill and sought funding for their states or districts.

This is presented as sort of a vague act of hypocrisy, but that's unfair.  If money is being doled out (or about to be doled out) despite your opposition, that doesn't mean your state shouldn't get its share.  Likewise, even if I oppose, say, the mortgage interest deduction, there's nothing wrong with me continuing to take advantage of it as long as it's still around.  There are ways in which stuff like this might rise to the level of mockable hypocrisy, but this really isn't one of them.

Who Speaks for the GOP?

| Wed Jun. 10, 2009 1:42 PM EDT

Conor Friedersdorf takes a look at a recent USA Today/Gallup poll and comes away discouraged:

Like it or not, Americans regard Rush Limbaugh as the face of the Republican Party, he is able to drive the agenda of the conservative movement, and a lot of people on the right don’t find that problematic....Should this be the last time that a talk radio host breaks the 10 percent barrier in a poll like this, the GOP and the conservative movement will be a lot better off, and so will our country.

Obviously I agree, but in a way this news isn't quite as grim for conservatives as Conor suggests.  The full poll results are below, and among Republicans themselves Limbaugh is basically tied with Dick Cheney and Newt Gingrich.  But even that's not the biggest takeaway.  What the poll really shows is simply that Republicans have no leaders at all.  This is probably fairly normal for a party that's suffered the kinds of setbacks the GOP has lately, but the good news is that even given the obviously enormous vacuum on the right, Limbaugh still can't break 10% among self-identified Republicans as the voice of the GOP.

Granted, this is grasping at straws at bit.  Still, it's better to have a vacuum from which a new leader can emerge, with folks like Limbaugh, Cheney, and Gingrich yipping around in the mud, than to have one of those guys already a clear top dog.  Plus there's this: Sarah Palin didn't make the list at all.  That shows a disturbing amount of common sense from the loyal opposition.