Chart of the Day

From economist-blogger Arnold Kling's 50-page paper on the financial crisis:

James Kwak, who writes "The Baseline Scenario" with economist-blogger Simon Johnson, explains:

Basically, Kling says that the crisis was composed of the things along the top, which were caused by the things on the left. You can see that he places the blame squarely on poor capital requirements regulations, which gave various banks incentives to (a) originate-to-distribute instead of originate-to-hold; (b) securitize every which way they could; (c) use credit default swaps to reduce capital requirements even further; (d) stuff toxic securities into SIVs; etc.

Because he believes that weak capital requirements (which determine how much capital banks must have on hand in relation to their liabilities) were central to the crisis, Kling thinks we should "encourage financial structures that involve less debt, so that resolution of failures is less complicated" and try to "foster a set of small, diverse financial institutions." Kwak mostly agrees with Kling's recommendations, but thinks that Kling should have put more emphasis on making "key institutions" smaller. In any case, you should be reading both of them.

The climate fight in Congress this year has been dominated not by arguments about science, but economics. Opponents of cap-and-trade legislation have issued dire predictions that regulating carbon will cripple the economy and inflict soaring energy prices on already struggling consumers. They've been able to get away with such attacks by exploiting widespread confusion about what economists really think about the subject. While the scientific consensus of climate change has been well established by the Intergovernmental Panel on Climate Change, the economics of climate change aren't nearly as well understood. Recently, however, New York University's Institute for Policy Integrity released a groundbreaking survey of top US economists revealing that there is a surprisingly high level of agreement among economists on the dangers of climate change as well as an overwhelming consensus that curbing emissions will help, not hurt, the economy.

"Outside academia the level of consensus among economists is unfortunately not common knowledge," NYU Dean Richard Revesz said at a press conference following the release of the study. "The results are conclusive—there is broad agreement that reducing emissions is likely to have significant economic benefits." The 144 economists who responded to the 12-question survey have all published an article relating to climate change in one of the top economic journals in the past 15 years. Here are the study's three key conclusions:

If you really want to fight climate change, stop "going green." That's the message that Mike Tidwell, the director of the Chesapeake Climate Action Network, pushed in a Washington Post column on Sunday. Tidwell's piece has rocketed around the lefty blogosphere; Kevin wrote about it yesterday. This is the heart of Tidwell's argument:

Instead of continuing our faddish and counterproductive emphasis on small, voluntary actions, we should follow the example of Americans during past moral crises and work toward large-scale change. The country's last real moral and social revolution was set in motion by the civil rights movement. And in the 1960s, civil rights activists didn't ask bigoted Southern governors and sheriffs to consider "10 Ways to Go Integrated" at their convenience.... Don't spend an hour changing your light bulbs. Don't take a day to caulk your windows. Instead, pick up a phone, open a laptop, or travel to a U.S. Senate office near you and turn the tables: 'What are the 10 green statutes you're working on to save the planet, Senator?

Kevin says that this is the only way to fight climate change:

The only real way to address climate change is to make broad changes to laws and incentives.  It puts everyone on a level playing field, it gives everyone a framework for making their own choices, and it gives us a fighting chance of making the deep cuts we need to.

Actually, the truth is broader. The essence of liberalism is the belief that the only way to do anything important is to "make broad changes to laws and incentives." That was basically the point of Clinton labor secretary Robert Reich's awesome book Supercapitalism, which came out in 2007. Reich argued that the left had lost its way, that politics had become "diverted" to activism. Reich charged that modern liberals focused far too much on the behavior of individual people and single corporations instead of pushing for broad change.

Instead of focusing their energy on passing laws requiring that all companies offer their employees health insurance, for example, liberals simply slammed scapegoat companies—say, Wal-Mart—for not offering health insurance. But by pressuring one company to do something that other companies aren't doing, you're probably hurting that company's bottom line—and helping its non-compliant competitors.

The exact same thing applies to individual efforts to fight climate change—you can try to live a "green" life, but you're just wasting your money and time if the problem isn't solved collectively. Thankfully, we know that President Barack Obama understands this problem. Remember this Obama quote from Newsweek's election roundup?

I don't consider [debates] to be a good format for me, which makes me more cautious. I often find myself trapped by the questions and thinking to myself, 'You know, this is a stupid question, but let me … answer it.' So when Brian Williams is asking me about what's a personal thing that you've done [that's green], and I say, you know, 'Well, I planted a bunch of trees.' And he says, 'I'm talking about personal.' What I'm thinking in my head is, 'Well, the truth is, Brian, we can't solve global warming because I f---ing changed light bulbs in my house. It's because of something collective'.

Indeed. But collective action, however necessary, is hard. In the next few weeks, we'll get to see if Obama can achieve it—on health care, and, just as crucially, on climate change in Copenhagen. You can follow our full coverage on the Blue Marble.

A new Rasmussen poll shows just how much the "Tea Party" movement has taken hold. According to the poll, given the choice between a Democrat, a Republican, and a hypothetical "Tea Party" candidate in their congressional district, 23 percent of Americans say they would vote for the tea partier. Eighteen percent would opt for the Republican, and 36 percent would choose the Democrat. Liberals should resist the temptation to celebrate. The "Tea Party" is not a real political party and most Tea Party voters will settle for voting Republican.

The only way Democrats can capitalize on this will be if Tea Party pressure creates more situations like the one in New York's twenty-third congressional district earlier this year, where a very conservative independent candidate ended up splitting the GOP-leaning vote with a moderate Republican and allowing the Democrat to win. That seems like it was probably a fluke. In most cases, the more conservative candidate will simply run in the Republican primary and win—and economic conditions in October and November 2010 will largely determine whether or not that candidate wins the general.

In a letter to Barack Obama late last week, nine swing-vote senators outlined a set of demands that any climate action—domestic or international—must include in order to get their votes. The letter can be read as a warning to Obama as he heads to Copenhagen about what these key senators will and won't support.

The five-page letter acknowledges that the goal of action should be to limit global warming to 3.6 degrees Fahrenheit, that a 50 percent reduction in global emissions by 2050 is necessary, and that developed nations must cut emissions by 80 percent. Arlen Specter of Pennsylvania, Sherrod Brown of Ohio, Carl Levin and Debbie Stabenow of Michigan, Tim Johnson of South Dakota, Kay Hagan of North Carolina, Claire McCaskill of Missouri, Amy Klobuchar of Minnesota and Mark Begich of Alaska all signed onto the letter. These senators, who mostly hail from Midwestern and fossil-fuel dependent states, are all seen as on the fence when it comes to a climate bill. They listed a set of specific conditions needed to win their support for any climate measure:




Trita Parsi, the head of the National Iranian American Council (NIAC), has been accused by some on the right of working for the Iranian regime, despite the fact that NIAC has regularly criticized Iran for human rights abuses and its illegitimate election. Today, in the Huffington Post, Parsi continues that practice, calling on President Barack Obama to be more outspoken about abuses in Iran:

[T]he failure to make human rights a prominent part of the talks has been problematic, both in terms of support for talks inside Iran, and for the long-term prospects of finding a sustainable, positive relationship with Iran. Unfortunately, fear in the White House that a forward leaning posture on human rights could jeopardize progress on the nuclear front may have prevented broadening the agenda.

The end result is a vacuum on the human rights front from the American side with several negative effects. First, the Ahmadinejad government may have been left with the impression that it can get away with almost any human rights abuses due to America's compromised position in the region. Second, the green movement—which represents a force for moderation in the country—is turning increasingly skeptical about US intentions. While opinions differ within the movement as to the wisdom of US-Iran diplomacy at this time, the neglect of human rights fuels pre-existing suspicions about the objectives of American diplomacy. That is, the fear that the US is solely interested in reaching a nuclear deal and may be willing to sacrifice the Iranian people's aspirations in the process.

It will be interesting to see if any of Parsi's critics notice his article. It's certainly critical of the regime. It's also critical of the US—and with some cause. There's an abundance of evidence that when it comes to Iran, America's main goal is reaching a nuclear deal, not helping the Iranian people. One of the many ways the nuclear program helps the regime is by drawing Western focus away from human rights issues in Iran—and towards an issue where most Iranians agree with the government. As always with Iran, there aren't any easy answers.

The Progressive Change Campaign Committee, a liberal pressure group, is up with a $40,000 internet ad campaign targeting Sen. Joe Lieberman for his opposition to the public option. It's pretty funny. But before you watch, you should know that in 2006, after he lost the Democratic primary to anti-war candidate Ned Lamont, Lieberman had to found his own party. He called it "Connecticut for Lieberman," but after he won the general election, he didn't pay much attention to it, and a progressive activist was able to get himself elected state chair of the party. Now, of course, he's using his post to hit Lieberman on health care. Here's the video:

Funny stuff. Remember, Lieberman used to support expanding the option to buy-in to Medicare to everyone 55 and older—a sort of public option for older people. I wrote about that—and got a statement from Lieberman's office on the subject—last week.

Campaign finance reformers expect a decision in a key Supreme Court case, Citizens United v. FEC, very soon—perhaps as early as Tuesday—and they're preparing for the worst. The case could allow unlimited amounts of corporate advertising in political campaigns—a devastating defeat for reformers that could make their cause appear hopeless.

So campaign finance reform groups are casting about for strategies that will allow them to convince members of Congress and the public that reform is still worth fighting for. In a confidential internal memo obtained by Mother Jones, Common Cause and Public Campaign, two leading reform groups, warn, "Without an aggressive media effort, reporters will likely call a bad decision in Citizens United another sign that campaign finance reform is a fool's errand."

A US Soldier stands against the Afghan skyline after securing a combat outpost in Rajankala in Kandahar province, Afghanistan, Nov. 26, 2009. (US Air Force photo by Tech. Sgt. Francisco V. Govea II.)

Need To Read: December 7, 2009

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