Kevin Drum

Restraint

| Tue Jun. 9, 2009 2:19 AM EDT

David Brooks on Sonia Sotomayor:

She is quite liberal. But there’s little evidence that she is motivated by racialist thinking or an activist attitude.

....When you read her opinions, race and gender are invisible. I’m obviously not qualified to judge the legal quality of her opinions. But when you read the documents merely as examples of persuasive writing, you find that they are almost entirely impersonal and deracinated.

....To my eye, they are the products of a clear and honest if unimaginative mind. She sticks close to precedent and the details of a case. There’s no personal flavor (in the boring parts one wishes there were). There’s no evidence of a grand ideological style or even much intellectual ambition. If you had to pick a word to describe them, it would be “restraint.”

Is anyone listening?

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More on Democracy

| Tue Jun. 9, 2009 1:57 AM EDT

Michael Rubin agrees with me that George Bush didn't do a bang-up job on the democracy promotion front, but thinks this shouldn't be a partisan fight:

I do agree a bit with Drum, albeit without the snark, when he says, "George Bush's main achievement in this arena wasn't to promote democracy, it was to completely cement Arab cynicism about America's obvious lack of concern for democracy." The difference between me and Drum appears to be that I don’t think partisan animus toward a previous president should excuse the abandonment of transformative diplomacy. Give Bush credit: He broke with the past and made democratization central to the debate. Cynicism toward democratization existed long before Bush was president when, in the context of the Cold War and after, Washington proved itself willing to coddle dictatorships. It is infuriating, however, that the gap between the rhetoric and reality of the Bush administration grew so large, and that in his second turn, Bush was willing to accept such backsliding in Lebanon, Egypt, and elsewhere.

I don't know enough about the literature on democracy promotion to say an awful lot about this, but I don't agree that Bush "broke with the past and made democratization central to the debate."  Rather, I think Bush and his team of old school anticommunists merely revived the Cold War context Rubin talks about, where democracy was less a real goal than it was a rhetorical cudgel to use against countries we didn't like.  In the postwar era, that mostly meant working to overthrow left-wing dictatorships while leaving the right-wing variety alone (famously given an intellectual foundation by Jeanne Kirkpatrick in "Dictatorships and Double Standards").  In the Bush era, this transitioned with barely a pause into working to overthrow Middle East dictatorships we didn't like while giving a pass to the ones that supported us.

That just doesn't seem transformative to me.  It never has.  In fact, Bush always struck me as less serious about democracy than his predecessors.  To him it was a nice slogan — every American politician is in favor of democracy, after all — but anyone who's serious about democracy knows that it's not the kind of thing you can get overnight.  It depends critically on education, on institutions, on culture, on overcoming corruption, on property rights, on the rule of law, and a dozen other things.  None of these were things that Bush ever seemed to have the patience to bother dealing with.

Obama, conversely, seems to have a better handle on this, both temperamentally and intellectually.  The result might be less bombastic and emotionally satisfying, but it's a more effective way of actually accomplishing something.  Less transformative rhetorically, perhaps, but if he follows through it's likely to be much more genuinely transformative in practice.

I'm still being partisan here, but I'm not sure that can be helped.  The approaches of Bush and Obama aren't just personal, after all, but reflect different world views.  The Bill Kristol wing of the conservative movement believes pretty strongly in a big bang approach to democratization, something that I just don't see any future in.  The Obama wing of liberalism, conversely, seems to see democracy promotion as small ball: lots of hard slogging, lots of public diplomacy, and lots of minor initiatives that fly under the radar and don't produce dramatic moments to rally around.

Unfortunately, that approach seems to elicit little but scorn from conservatives.  Like Rubin, I'd like this whole arena to be less partisan, but I'm not sure that's possible.  At least, not judging from the first few months of the Obama administration, anyway.  It's too bad.

Bad Behavior Update

| Tue Jun. 9, 2009 12:36 AM EDT

Ed Whelan has apologized to Publius.  Good for him.

Quote of the Day

| Tue Jun. 9, 2009 12:32 AM EDT

From George Will, demonstrating that he's about nine months behind the curve on state-of-the-art Obama crackpottery:

"I," said the president, who is inordinately fond of the first-person singular pronoun, "want to disabuse people of this notion that somehow we enjoy meddling in the private sector."

Jesus.  This would be an embarrassingly fatuous thing for a supposedly serious columnist to write even if it were true.  But a bare minimum of fact checking shows that it's not.  It's really, really, really not.

Obama and Congress

| Mon Jun. 8, 2009 7:29 PM EDT

After quoting a Montesquieu line about corrupt legislatures foreshadowing the end of liberty, Matt Yglesias says:

I do think you can see an inkling of what Montesquieu is talking about in the fact that there’s a persistent impulse in the contemporary United States to say that if something is really important, we need to basically cut congress out of the loop. This probably happened first with the steady decline of congress’ war powers. But you also saw it in the way that the Treasury/Fed response to the financial crisis was shaped by an overwhelming desire to avoid the need to go back to congress, by the way that proposals for improving the operations of MedPAC all involve trying to circumvent congress, etc. Tellingly, the judgment that congress can’t handle these issues is a judgment largely shared by congress.

Congress is a schizophrenic body: imperiously protective of its prerogatives some of the time, but, as Matt says, surprisingly eager to avoid responsibility and simply punt to the executive or the courts at other times.  So on the one hand you get blue-ribbon panels, base-closing commissions, the CBO, and statutory language left deliberately vague so that the hard details are left to agency rulemakers and appellate judges, while on the other hand you get temper tantrums about flying on Air Force One, seemingly endless jurisdictional fights, and committee barons rewriting entire legislative programs out of personal pique.  Barack Obama seems to understand this tension better than most, and so far has shown a quite subtle sense of when he can use executive power to lead Congress and when he needs to step back and let the Capitol Hill grandees do their thing.  Here's Matt Bai on how Obama does it:

After winning the office with the same kind of outsider appeal as his predecessors, he has quietly but methodically assembled the most Congress-centric administration in modern history. Obama’s White House is run by Rahm Emanuel, a former House leader who was generally considered to be on a fast track to the speakership before he resigned to become chief of staff, and it is teeming with aides plucked from the senior ranks of both chambers. Obama seems to think that the dysfunction in Washington isn’t only about the heightened enmity between the parties; it’s also about the longstanding mistrust between the two branches of government that stare each other down from twin peaks on either end of Pennsylvania Avenue.

....During a recent conversation in his expansive West Wing office, Emanuel explained that he was well aware, as he and his fellow transition aides set out to fill the various roles in Obama’s White House last fall, that many of the aides they hired had pivotal friendships on the Hill that Obama could exploit. “That was a strategy,” Emanuel said. “We didn’t kind of parallel-park into it. We had a deep bench of people with a lot of relationships that run into both the House and Senate extensively. And so we wanted to use that to our maximum advantage.”

Read the rest to learn about Emanuel's remarkably calculated "tracking system" for doling out little favors to members of Congress — something that's probably a good idea, but also one that perhaps he should have kept to himself.  Ditto for the "spontaneous" drop-bys in the West Wing.  Successful executives should always cultivate at least a little bit of an aura of mystery, shouldn't they?

Healthcare Reboot

| Mon Jun. 8, 2009 6:36 PM EDT

I've been sort of quiet on the healthcare front lately.  This is because the news for the past few months has been mainly about committee wrangling, and that's so technical and inside-baseball-ish that even I have a hard time staying interested in it.

But things are starting to heat back up, and one of the key issues that's surfaced has been whether the final bill will include a "public option" of some kind.  I'll have more to say about that in the future, but for now you might want to check out Ezra Klein's quickie primer on the various flavors of public option currently on offer.  It's a good way of getting up to speed on this.

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Roger Federer Update

| Mon Jun. 8, 2009 2:21 PM EDT

Thanks to serious time zone issues I was half asleep while I watched the French Open yesterday, and after the exit of all the big names in earlier rounds it was hardly a surprise that Roger Federer won.  After all, he's the second best clay court tennis player in the world.

Unfortunately, that means I don't have a lot to say.  The match was, frankly, sort of routine.  Soderling never really pushed Federer at all, and there weren't many memorable moments — except for the last one, of course, when Federer hoisted #14 over his head.

Still, I can hardly let this go by, can I?  So here's your chance to sound off.  There are only two real questions left, I think.  (1) Who's the all-time best, Federer or Rod Laver? (2) How many slams will Federer win before his career is over?  On the former, I think I might still take Laver by a nose.  On the latter, I'll take a guess at 19 — and at that point I'll take Federer by a nose.  Feel free to disagree on both scores in comments.

Fear of Inflation

| Mon Jun. 8, 2009 1:39 PM EDT

Are rising interest rates on Treasury bonds a sign of future inflation?  Paul Krugman says no.  Niall Ferguson says yes.  Daniel Gross surveys their arguments here.

Count me on Krugman's side.  Fear of inflation a few years down the road isn't completely outlandish, but that's probably not what the rise in Treasury rates signals.  Basically, it's just the bursting of a bubble.  Back when Treasury rates were hovering close to zero, a lot us called this a "Treasury bubble" and wondered how long it could last.  Now we have our answer: unless there's another shock to the system it will have lasted about six months.

The long-term chart below shows the bubble pretty clearly.  Six months from now, if rates have continued rising and are in the 8-10% range, then Ferguson will have a stronger point.  If, as seems more likely, rates are merely returning to the long-term trendline as investors come out of their fetal crouch and start buying things other than treasury bonds, then it's basically good news.  It means the financial markets are returning to normal.

Will Derivatives Ruin Cap-and-Trade?

| Mon Jun. 8, 2009 1:07 PM EDT

Rachel Morris has on online piece today suggesting that the same Wall Street rocket scientists who destroyed the global economy via derivatives trading may be getting ready to do the same thing with carbon permits from a cap-and-trade system.  After all, if they can slice and dice subprime mortgages, why can't they do the same for packages of carbon permits?

I've got a few problems with this, though.  First, there's this:

Cap and trade would create what Commodity Futures Trading commissioner Bart Chilton anticipates as a $2 trillion market, "the biggest of any [commodities] derivatives product in the next five years."

I'm not entirely sure what this means, but my best guess is that Chilton is forecasting a market with a notional value of $400 billion per year.  This is not as large as it sounds.  The notional value of the CDS market in 2007, for example, was over $50 trillion.  Chilton's estimate for the carbon market is less than 1% that size.  Likewise, the underlying value of the actual carbon permits is likely to be on the order of $50-100 billion a year, which is less than 1% of the underlying value of, say, the U.S. stock market.  Even if Wall Street went nuts with this stuff, it couldn't do too much damage.

Then there's this:

In addition to trading the allowances and offsets themselves, participants in carbon markets can also deal in their derivatives — such as futures contracts to deliver a certain number of allowances at an agreed price and time.

This is true, but carbon permits are essentially commodities, and the kinds of derivatives traded on commodity exchanges are generally forwards, futures, and options.  But while these may be derivatives, they're mostly not the rocket science kind.  They've been around forever, they're well understood, and they weren't responsible for any of the problems that caused our current meltdown.

Beyond that, these kinds of derivatives can actually be pretty helpful.  They're generally used for two purposes: (a) managing volatility and (b) speculation.  The first is an unalloyed good thing, since one of the main complaints about a cap-and-trade system is that it doesn't provide investors with a fixed carbon price they can plan around.  Futures contracts help with that.  And speculation, though it often gets a bad rap (sometimes deservedly), can be helpful too if it provides a price signal today for possible permit scarcity tomorrow.  Driving up the price sooner rather than later can actually motivate higher levels of investment in green technology.  (The downside: if Congress bollixes the law and speculators decide that there are going to be loads of permits in the future, they'll drive the price down.  But if Congress screws up that badly, the whole system isn't going to work worth a damn anyway.)

Finally, there's this:

Perhaps the biggest uncertainty hinges on how offset derivatives—such as a contract to buy offset credits at a future date for a determined price — will be monitored. This too would be left to the White House task force to figure out. It will be a tough task because the quality of offset projects is notoriously difficult to verify. Sen. Jeff Bingaman (D-N.M.) has described them as "fraught with opportunity for game playing, which will be fully exploited, I'm sure."

Offsets are a big problem, but their problems have nothing to do with derivatives.  They're a problem because it's really, really hard to insure that an offset (say, planting a million acres of trees in Brazil in order to make up for emitting a million tons of carbon) is real, that it's something that wouldn't have been done anyway, and that it's effectively monitored to make sure it's permanent.  Those are genuinely big issues, but they're issues that are inherent in the whole concept of offsets.  Making derivatives out of them doesn't change things much.

With all that said, the piece is worth a read.  I have my doubts that derivatives are really that big a problem in the carbon market, and in any case I'd just as soon see them regulated by the same mechanisms we come up with to regulate all the other derivative markets, rather than being treated as a one-off special.  Still, it's worth knowing about this stuff, and worth taking some time to address in the Waxman-Markey markup process.  For example, Bart Stupak's provisions for making sure carbon derivatives are exchange traded, which Rachel mentions in her article, are well worth trying to protect through the end of the legislative process.  After all, if Wall Street objects, it almost has to be a good thing, doesn't it?

Chart of the Day

| Mon Jun. 8, 2009 12:04 PM EDT

Nate Silver informs us today that although there aren't very many women in Congress, the women we do have are more likely to come from male-dominated congressional districts.  The effect is most pronounced in strongly Democratic districts (blue line), but it's there in Republican and neutral districts too.

Why?  Who knows.  It seems unlikely that a fairly small difference in male:female population ratio would actually be noticeable by the residents of a district, but Nate says the effect is pretty robust.  In other words, it's probably not a fluke.  So what's the answer?  Some underlying variable that drives both things?  Are women less likely to vote for a woman than men are?  (Maybe some kind of analysis of exit poll results would help here.)  Leave your guesses suggestions for further research in comments.