Kevin Drum

Quote of the Day - 5.19.09

| Tue May 19, 2009 1:24 PM EDT

From Richard Posner, who is decidedly unimpressed with Ben Bernanke's reputation as a great crisis manager:

He is like a general who having been defeated in battle because of his errors manages the retreat of his army competently. He does not thereby escape blame for the defeat, and should not be permitted to shift blame to the soldiers under his command who gave way under attack.

There are plenty of things that I think a reasonable person might have missed about the dangers of the Bush-era credit boom.  But I'll go to my grave not understanding how so many people missed the housing bubble.  What were they all smoking?

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Punching Your Ticket

| Tue May 19, 2009 1:17 PM EDT

Lane Wallace explains why you should go to college, even if you major in something dumb like semiotics:

I figured out the true value of a college degree not in the lofty halls of Brown University, but in a corrugated cardboard factory in New Zealand. I'd taken a "leave of absence" as they call it, after my sophomore year, to figure out if I really wanted to pay all that money learn things that seemed, well ... a tad non-essential, at best. I packed a backpack and took off for the romantic frontier-land of New Zealand with nothing but $500 and a working visa in my pocket. The six months I spent there were a far cry from what I thought the adventure would be, but it was educational. Culminating in my job at the cardboard factory — where I was surrounded by people who hated their jobs but had no other viable option.

In a flash, I grasped the true value of a college degree. It didn't matter what I majored in. It didn't even matter all that much what my grades were. What mattered was that I got that rectangular piece of paper that said, "Lane Wallace never has to work in a corrugated cardboard factory again."

Cubicle rats take note.  No matter how put upon you think you are, there are lots and lots of people worse off than you.

Truthiness

| Tue May 19, 2009 12:57 PM EDT

The CIA sure does suck at keeping even marginally accurate meeting notes, don't they?  If you're the suspicious type, you might wonder if this is deliberate.  If you're the institutional type, you might wonder what else they suck at.  And if you're the political type you might be thinking that putting together a Truth Commission to get to the bottom of this is sounding a lot better than it used to.

Financial Innovation

| Tue May 19, 2009 12:26 PM EDT

Niall Ferguson thinks that if deregulation is to blame for our recent financial collapse, then financial deregulation should also get the credit for the preceding 27 years of economic growth.  Matt Yglesias takes a look at income growth over that period and isn't so sure:

For the top one percent, that’s a pretty impressive period. For the next 19 percent, there’s something happening. But for the bottom 80 percent, there’s just very little going on in terms of real income growth. There was, however, pretty robust consumption growth fueled by the credit boom and declining savings rates. The current downturn is now threatening that and calling into question the sustainability and worth of the overall growth throughout the period.

This is a kissing cousin to the question everyone is raising these days about financial innovation.  It goes like this: the basic benefit of all the financial innovation we've seen over the past few decades has been to make credit more easily available, and that clearly had something to do with the credit boom and subsequent bust.  This in turn begs the obvious question: was it really a good idea to make credit so easily available?  If the answer is no — if the only result was to mask stagnant wages and produce a fake consumption boom — then maybe all that innovation wasn't such a hot idea in the first place.

This is rapidly becoming conventional wisdom, and Matt's point deserves more attention as part of it.  For good or ill, the modern economy is driven by middle-class consumption.  If middle class wages are rising, everything is fine.  They'll consume more, debt will stay tolerable, and rich people will benefit from the growing economy.  But if middle class wages are stagnant, then vast pools of money are increasingly directed toward the rich, who have a limited ability to spend it.  So they end up loaning it back to the middle class, collecting economic rents along the way, and the middle class laps it up, figuring that their wage stagnation is just temporary and they'll eventually pay all the money back.

But they don't, of course, because today's rich have no intention of ever allowing wage growth among the middle class.  The result, eventually, is disaster.

I realize that most economists will never believe this until someone says the same thing accompanied by several dozen pages of equations with lots of Greek characters.  So can someone please get cracking on that?

Card Check

| Tue May 19, 2009 11:58 AM EDT

Tom Hamburger writes today about the dim prospects for the Employee Free Choice Act:

The legislation has produced one of the biggest surprises in Washington since Democrats swept the White House and Congress: The nation's labor unions, which organized so effectively last year to help elect President Obama, have been outmaneuvered so far on their top priority by their opponents in the business community.

....Business groups [...] started work well before the election and did not stop. They feared that card check would lead to new unions and higher labor costs. Opponents included retailers, such as Bentonville, Ark.-based Wal-Mart, as well as restaurant chains, construction firms and hotels.

More than 500 business and conservative organizations had formed the Coalition for a Democratic Workplace to coordinate an array of trade associations and other groups fighting card check....Half a dozen other groups backed by corporate, GOP or conservative ideological interests have also joined the fray.

Before labor groups had fully engaged this winter, the allied business groups successfully cast the legislation as undemocratic: How could Congress oppose secret-ballot elections?

Here's what I want to know: is this really a big surprise?  Here's what I wrote just a few days after the election last year:

The prospect of unionization rouses panic among Main Street conservatives more than any other single issue — more than taxes, more than deregulation — and whether James Dobson likes it or not, the GOP is a business party first and a social conservative party second.

[From another post]: On a related note, here's a prediction: Obama will need a few votes from Senate Republicans to pass his legislative program. I'll bet he'll get it on global warming controls, healthcare reform, economic stimulus, and financial regulation. But on EFCA, he'll have trouble getting even a single Republican vote. That will be considered the make-or-break vote from the business community. Just wait and see.

Not only would I not consider that an insightful observation, I'd say it's downright banal.  It was never impossible that card check might pass, but it was always the case that it was going to produce more energy, more solidarity, and more pressure on both Republicans and moderate Dems than any other legislation.  Anyone who didn't understand this on November 5th really has no business pretending they know anything about American politics.

The Man in the Gray Flannel Suit

| Tue May 19, 2009 1:39 AM EDT

David Brooks glosses a recent study by three researchers about what traits make a good CEO:

They found that strong people skills correlate loosely or not at all with being a good C.E.O. Traits like being a good listener, a good team builder, an enthusiastic colleague, a great communicator do not seem to be very important when it comes to leading successful companies.

What mattered, it turned out, were execution and organizational skills. The traits that correlated most powerfully with success were attention to detail, persistence, efficiency, analytic thoroughness and the ability to work long hours.

In other words, warm, flexible, team-oriented and empathetic people are less likely to thrive as C.E.O.’s. Organized, dogged, anal-retentive and slightly boring people are more likely to thrive.

Oh yeah?  Then how come I'm not a CEO?  I have lousy people skills and I excel at attention to detail, persistence, efficiency, analytic thoroughness and the ability to work long hours. I'd be perfect.

Ah, well, I had my chance and turned it down.  I'm more the executive officer type.  For what it's worth, though, I think the three researchers are right.  Obviously CEOs vary considerably in their people skills, and being charismatic and sociable doesn't hurt.  But figuring out what needs to be done and then having the persistence to keep hounding everyone to do it is the real key, and it's harder than it sounds.  Vision may be important, but execution is essential.

POSTSCRIPT: But what rock did Brooks' closing paragraph come out from under?  CEOs.... people skills....persistence....yada yada yada....BANG!  America is about to go to hell because Washington is forcing CEOs to become more charismatic.  Or something.  WTF?

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Obama and Abortion

| Mon May 18, 2009 7:31 PM EDT

Ramesh Ponnuru provides his take on Obama's graduation speech on Sunday in South Bend:

President Obama's speech at Notre Dame yesterday is another sign that pro-lifers are slowly winning the political battles over abortion. It was not the speech of a man who is confident that his position is right and popular....He didn't try to make the case for his views on abortion and related issues. He just plead for mutual understanding, civility, and the search for common ground.

....Pro-lifers often get annoyed when they see politicians with hard-line records in favor of legal and subsidized abortion talk, as Obama did, about how much he wants to reduce abortion. But that type of rhetoric, however little follow-through it generates, is itself a concession to the moral and political force of the pro-life case. The more politicians who favor unrestricted, subsidized abortion talk about what a tragedy it is, the more they undermine their own premises. If it's such a terrible thing, why fund it? Why not allow states to try different methods of discouraging it, including restrictions?

On one point, I think Ponnuru is right: some liberal politicians do have a habit of overdoing the "tragic, heartbreaking decision" rhetoric.  To the extent that this is a reflection of reality for the way some women feel, it's fine.  But it also shapes reality, and when it gets repeated too often it suggests that abortion should be a tragic, heartbreaking decision.  As Ponnuru says, that's inevitably a concession to the pro-life worldview.

The rest of his argument is flimsier, though.  Did Obama fail to make a positive case for reproductive rights?  Sure, but that's not a sign of weakness, just a sign of common sense and basic civility.  He was at Notre Dame, after all.  He wouldn't deliver a stemwinder about abortion rights on the steps of the Vatican either.

As for Obama's rhetoric about wanting to reduce abortion, that's been practically the party line in Democratic politics at least since Bill Clinton codified it as "safe, legal, and rare."  Dems have been talking that way for years and years now, and regardless of what you think about it, there's little evidence that it's a defensive reaction to long-term change in public opinion on abortion.  That's because there hasn't been any noticeable long-term change in public opinion on abortion.  Rather, it's a standard piece of political positioning designed to appeal to one group while not inflaming too many others.  There's really nothing very unusual about this.

Obama obviously feels that he (and the Democratic Party) can benefit by turning down the volume on the culture wars and marginalizing the extremist wing of the conservative movement.  Time will tell if he can do it.  But that's an aggressive pitch to broaden the Democratic tent, not a defensive crouch.

Good News on CAFE

| Mon May 18, 2009 2:23 PM EDT

Some good news on mileage standards:

President Obama will announce as early as Tuesday that he will combine California’s tough new auto-emissions rules with the existing corporate average fuel economy standard to create a single new national standard, the officials said....Under the new standard, the national fleet mileage rule for cars would be roughly 42 miles a gallon in 2016. Light trucks would have to meet a fleet average of slightly more than 26.2 miles a gallon by 2016.

....The current standards are 27.5 miles a gallon for cars and about 24 miles a gallon for trucks. The new mileage and emissions rules will gradually tighten, beginning with 2011 models, until they reach the 2016 standards.

The auto industry is not expected to challenge the rule, which provides two things they have long asked for: certainty on a timetable and a single national standard.

This is really important stuff.  Cap-and-trade is the centerpiece of the Waxman-Markey energy bill, and it's a critical part of any global warming plan.  (Krugman's column today strikes the right tone on Waxman-Markey, by the way.)  As important as it is, though, I think of it as sort of like a headwind, something that helps get all the ships moving in the right direction.  But that's not enough.  There are plenty of other currents and eddies and storm systems that, individually, aren't as important as pricing carbon, but put together are actually far more important.  Mileage standards for cars are one of them: pricing carbon can help motivate people to drive less and buy stingier cars, but federal CAFE standards can do it a lot faster and a lot more efficiently.  Cap-and-trade is no substitute.

This, of course, is why Waxman-Markey itself is about a lot more than just cap-and-trade.  Over at Climate Progress, Daniel Weiss has a guest post that explains.

Zombie Corporations

| Mon May 18, 2009 12:41 PM EDT

If you're interested in this kind of thing, John Hempton has a post over at his place examining why Korea snapped back from its late-90s banking crisis fairly quickly while Japan's crisis lingered on for over a decade.  It's interesting stuff, but the main reason I recommend reading it is that he debunks the common misconception that Japan suffered from an epidemic of "zombie banks" during the 90s.  For the most part, though, that wasn't the problem.  The problem was that their banks spent the 90s lending to zombie corporations.  Big difference.  Full story here.

The Michael Steele Diaries – Part XLVII

| Mon May 18, 2009 12:20 PM EDT

RNC chairman Michael Steele's latest brainstorm is to cast gay marriage not as a moral issue, but as a small business killer: if gays get married, then small businesses will have to provide extra health insurance.  The bottom line?  "You just cost me money," he told an audience a few days ago.  Andrew Tobias brings the snark:

He’s spot on, which is why the GOP should come out against marriage generally, not just same-sex marriage.  Married workers cost more if you provide family health insurance.  So the smart hiring order is: single people first; and then married gay people (who are less likely to have kids needing health insurance and more likely to have working spouse’s with their own health insurance), and then, if you absolutely must, married heterosexual couples.  It’s just good business.

As Steele himself says, he's the gift that keeps on giving.  I'm sort of hoping for a Palin/Steele ticket to go up against Barack Obama in 2012.