Boss Hogg Says Something Interesting

Ben Smith at Politico:

Here’s a major moment in the nascent Republican presidential primary: Mississippi Governor Haley Barbour tonight became the first among the leading Republican candidates to suggest that the United States reduce its presence in Afghanistan and its spending on defense.

Barbour echoed the concerns of critics of the Afghan war effort when asked by reporters in Iowa about American involvement in the conflict:

He also said that the U.S. should consider reducing the number of troops in Afghanistan. “I think we need to look at that,” he said when asked if the U.S. should scale back its presence.

But he said his reasoning isn’t financial.

“What is our mission?” Barbour said. “How many Al Qaeda are in Afghanistan. … Is that a 100,000-man Army mission?”

“I don’t think our mission should be to think we’re going to make Afghanistan an Ireland or an Italy” or a Western-style democracy, he said.

Barbour’s leading Republican rivals have positioned themselves to President Obama’s hawkish right on a range of foreign policy issues. They’ve also resisted calls from some associated with the Tea Party movement for deep cuts to federal spending that would include defense cuts. In fact, two of the candidates — Mitt Romney and Newt Gingrich — have in the past backed the Heritage Foundation’s “4 percent for Freedom” initiative, which would actually raise baseline defense spending.

Joe Klein at Swampland at Time:

Ben Smith correctly identifies the first sort of interesting event in the Republican presidential primary race: Mississippi Governor Haley Barbour has had enough of Afghanistan and wants to start drawing down troops. No details about how many and when, of course–and, in the end, Barbour’s timetable may not be all that different from Obama’s, which, I expect will have lots of troops coming home next year. But this is Haley Barbour, folks–and we know two things about him: he’s not the world’s boldest policy thinker and he’s probably the smartest political strategist in the field. When Barbour decides that Afghanistan is a loser, you can bet that more than a few Republicans are heading that way–and that means interesting times for the trigger-happy neoconservatives who have dominated Republican foreign policy thinking in recent years. It also means that the foreign policy debate in the Republican primaries may be a real eye-opener.

J.F. at DiA at the Economist:

The interesting thing about Mr Barbour’s comments is not that he said them, but that he’s right: of course reining in defence spending has to at least be part of the conversation if people are going to take Republican promises of fiscal responsibility seriously. The depressing thing about his being right is that it doesn’t matter. There are plenty of other ways for Republicans to show their fiscal bonafides. Means-testing Social Security, for instance. Trimming Medicare. Backing the cost-saving measures in Obamacare. Letting the Bush tax cuts expire (sigh). Any takers, Republicans? No?

My two cents: Mr Barbour will get a pass on those comments for now—and may even get some lip service from the Romney-Gingrich camp—because his candidacy is such a long shot. If things start to improve for him, though, look for him to be pilloried as soft on national security.

Dan Amira at New York Magazine:

Of course, if Ron Paul runs, he would easily outdo Barbour on this front. But for now, Barbour is the only one, and Time‘s Joe Klein uses the opportunity to tout him as “probably the smartest political strategist in the field.”

Whether or not that’s true, you really don’t need to be a genius to know that Americans across the political spectrum are tiring of the war in Afghanistan. You just need the ability to read. According to a January Gallup poll, 72 percent of independents and 61 percent of Republicans want to “speed up withdrawal from Afghanistan.” And the sentiment is even stronger among tea partiers. According to a poll commissioned by the Afghan Study Group — in the words of founder Steve Clemons, “a bipartisan group of leading academics, business executives, former government officials, policy practitioners and journalists” — 64 percent of self-identified tea partiers want to reduce troop levels in Afghanistan or leave the country entirely. Considering the poll numbers, more surprising than Barbour taking a dovish position on Afghanistan is that the rest of his fellow candidates-to-be haven’t already done the same.

Alex Massie:

Barbour, the Boss Hogg governor of Mississippi, remains a long-shot for the GOP Presidential nomination but he’s not someone noted for policy boldness or imagination. True, his ideal timetable for withdrawal from Afghanistan may not differ from the platonic ideal of withdrawal imagined by the Obama administration; that’s not the important thing here. What matters – though this is but a tea leaf into which too much should not be read – is the hint that Republican enthusiasm for the Afghan mission may be waning. That in turn may make the foreign policy debates during the GOP primary more interesting than seemed likely six months ago.

Barbour, of course, is an impeccably-connected member of the “elite” disguised as a southern good old boy. Doubtless that’s why he’s also able to argue that conservative claims to fiscal responsibility (an interesting concept in itself) are meaningless if the Pentagon’s budget is ring-fenced and protected from future budget cuts. Again, this is the sort of “Beltway” thinking disdained by talk radio and the populist right.

Yesterday James observed that it is “worrying” that ” the United State appears to have lost interest in its role as global policeman” but it’s also worth pointing out that this is a role it has performed fitfully and inconsistently in the past. Again, parts of the Obama administration’s foreign and security apparatus – notably but not only Bob Gates – owe something to the George HW Bush/Colin Powell approach to international affairs. Leadership is certainly important but the problems of foreign policy are something to be managed, not solved. Because often there are no solutions and even rarer still is the solution that doesn’t involve hefty, perhaps expensive, trade-offs.

It Is Ezra Klein Week Here At Around The Sphere

Ezra Klein:

There’s lots of interesting stuff in Ed Glaeser’s new book, “The Triumph of the City.” One of Glaeser’s themes, for instance, is the apparent paradox of cities becoming more expensive and more crowded even as the cost of communicating over great distances has fallen dramatically. New York is a good example of this, but Silicon Valley is a better one

[…]

The overarching theme of Glaeser’s book is that cities make us smarter, more productive and more innovative. To put it plainly, they make us richer. And the evidence in favor of this point is very, very strong. But it would of course be political suicide for President Obama to say that part of winning the future is ending the raft of subsidies we devote to sustaining rural living. And the U.S. Senate is literally set up to ensure that such a policy never becomes politically plausible.

Klein again:

Yesterday afternoon, I got an e-mail from a “usda.gov” address. “Secretary Vilsack read your blog post ‘Why we still need cities’ over the weekend, and he has some thoughts and reflections, particularly about the importance of rural America,” it said. A call was set for a little later in the day. I think it’s safe to say Vilsack didn’t like the post. A lightly edited transcript of our discussion about rural America, subsidies and values follows.

Ezra Klein: Let’s talk about the post.

Tom Vilsack: I took it as a slam on rural America. Rural America is a unique and interesting place that I don’t think a lot of folks fully appreciate and understand. They don’t understand that that while it represents 16 percent of America’s population, 44 percent of the military comes from rural America. It’s the source of our food, fiber and feed, and 88 percent of our renewable water resources. One of every 12 jobs in the American economy is connected in some way to what happens in rural America. It’s one of the few parts of our economy that still has a trade surplus. And sometimes people don’t realize that 90 percent of the persistent poverty counties are located in rural America.

EK: Let me stop you there for a moment. Are 90 percent of the people in persistent poverty in rural America? Or just 90 percent of the counties?

TV: Well, I’m sure that more people live in cities who are below the poverty level. In terms of abject poverty and significant poverty, there’s a lot of it in rural America.

The other thing is that people don’t understand is how difficult farming is. There are really three different kinds of farmers. Of the 2.1 million people who counted as farmers, about 1.3 million of them live in a farmstead in rural America. They don’t really make any money from their operation. Then there are 600,000 people who, if you ask them what they do for a living, they’re farmers. They produce more than $10,000 but less than $250,000 in sales. Those folks are good people, they populate rural communities and support good schools and serve important functions. And those are the folks for whom I’m trying to figure out how to diversify income opportunities, help them spread out into renewable fuel sources. And then the balance of farmers, roughly 200,000 to 300,000, are commercial operations, and they do pretty well, particularly when commodity prices are high. But they have a tremendous amount of capital at risk. And they’re aging at a rapid rate, with 37 percent over 65. Who’s going to replace those folks?

EK: You keep saying that rural Americans are good and decent people, that they work hard and participate in their communities. But no one is questioning that. The issue is that people who live in cities are also good people. People who live in exurbs work hard and mow their lawns. So what does the character of rural America have to do with subsidies for rural America?

TV: It is an argument. There is a value system that’s important to support. If there’s not economic opportunity, we can’t utilize the resources of rural America. I think it’s a complicated discussion and it does start with the fact that these are good, hardworking people who feel underappreciated. When you spend 6 or 7 percent of your paycheck for groceries and people in other countries spend 20 percent, that’s partly because of these farmers.

More Klein here and here

Will Wilkinson at DiA at The Economist:

IN THIS chat with Ezra Klein, Tom Vilsack, the secretary of agriculture, offers a pandering defence of agricultural subsidies so thoroughly bereft of substance I began to fear that Mr Vilsack would be sucked into the vacuum of his mouth and disappear.When Mr Klein first raises the subject of subsidies for sugar and corn, Mr Vilsack admirably says, “I admit and acknowledge that over a period of time, those subsidies need to be phased out.” But not yet! Vilsack immediately thereafter scrambles to defend the injurious practice. Ethanol subsidies help to wean us off foreign fuels and dampen price volatility when there is no peace is the Middle East, Mr Vilsack contends. Anyway, he continues, undoing the economic dislocation created by decades of corporate welfare for the likes of ADM and Cargill will create economic dislocation. Neither of these points is entirely lacking in merit, but they at best argue for phasing out subsidies slowly starting now.

Mr Vilsack should have stopped here, since this is as strong as his case is ever going to be, but instead he goes on to argue that these subsidies sustain rural culture, which is a patriotic culture that honours and encourages vital military service:

[S]mall-town folks in rural America don’t feel appreciated. They feel they do a great service for America. They send their children to the military not just because it’s an opportunity, but because they have a value system from the farm: They have to give something back to the land that sustains them.

Mr Klein follows up sanely:

It sounds to me like the policy you’re suggesting here is to subsidize the military by subsidizing rural America. Why not just increase military pay? Do you believe that if there was a substantial shift in geography over the next 15 years, that we wouldn’t be able to furnish a military?

To which Mr Vilsack says:

I think we would have fewer people. There’s a value system there. Service is important for rural folks. Country is important, patriotism is important. And people grow up with that. I wish I could give you all the examples over the last two years as secretary of agriculture, where I hear people in rural America constantly being criticized, without any expression of appreciation for what they do do.

In the end, Mr Vilsack’s argument comes down to the notion that the people of rural America feel that they have lost social status, and that subsidies amount to a form of just compensation for this injury. I don’t think Mr Vilsack really believes that in the absence of welfare for farmers, the armed services would be hard-pressed to find young men and women willing to make war for the American state. He’s using willingness-to-volunteer as proof of superior patriotism, and superior patriotism is the one claim to status left to those who have no other.

Ryan Avent at Free Exchange at The Economist:

I’ll add a few comments. First, it may be that the economists who understand the economic virtues of city life aren’t doing a sufficiently good job explaining that it’s not the people in cities that contribute the extra economic punch; it’s the cities or, more exactly, the interactions between the people cities facilitate. It’s fine to love the peace of rural life. Just understand that the price of peace is isolation, which reduces productivity.

Second, the idea that economically virtuous actors deserve to be rewarded not simply with economic success but with subsidies is remarkably common in America (and elsewhere) and is not by any means a characteristic limited to rural people. I also find it strange how upset Mr Vilsack is by the fact that he “ha[s] a hard time finding journalists who will speak for them”. Agricultural interests are represented by some of the most effective lobbyists in the country, but their feelings are hurt by the fact that journalists aren’t saying how great they are? This reminds me of the argument that business leaders aren’t investing because they’re put off by the president’s populist rhetoric. When did people become so sensitive? When did hurt feelings become a sufficient justification for untold government subsidies?

Finally, what Mr Klein doesn’t mention is that rural voters are purchasing respect or dignity at the price of livelihoods in much poorer places. If Americans truly cared for the values of an urban life and truly wished to address rural poverty, they’d get rid of agricultural policies that primarily punish farmers in developing economies.

Andrew Sullivan

Arnold Kling:

Ezra Klein sounds like my clone when arguing with the Secretary of Agriculture.

James Joyner:

Essentially, Vilsack justifies subsiding farmers on the basis that rural America is the storehouse of our values, for which he has no evidence. And he’s befuddled when confronted with someone who doesn’t take his homilies as obvious facts.

Nobody argues that America’s farmers aren’t a vital part of our economy or denies that rural areas provide a disproportionate number of our soldiers. But the notion that country folks are somehow better people or even better Americans has no basis in reality.

Jonathan Chait at TNR:

Why is it so common to praise the character of rural America? Part of it is doubtless that rural life represents the past, and we think of the past as a simpler and more honest time. But surely another element is simply that rural America is overwhelmingly white and Protestant. And completely aside from the policy ramifications, the deep-seated veneration of rural America reflects, at bottom, a prejudice few would be willing to openly spell out.

The Ballad Of Daisy And Jay, Part Two

Chrystia Freeland at The Atlantic:

If you happened to be watching NBC on the first Sunday morning in August last summer, you would have seen something curious. There, on the set of Meet the Press, the host, David Gregory, was interviewing a guest who made a forceful case that the U.S. economy had become “very distorted.” In the wake of the recession, this guest explained, high-income individuals, large banks, and major corporations had experienced a “significant recovery”; the rest of the economy, by contrast—including small businesses and “a very significant amount of the labor force”—was stuck and still struggling. What we were seeing, he argued, was not a single economy at all, but rather “fundamentally two separate types of economy,” increasingly distinct and divergent.

This diagnosis, though alarming, was hardly unique: drawing attention to the divide between the wealthy and everyone else has long been standard fare on the left. (The idea of “two Americas” was a central theme of John Edwards’s 2004 and 2008 presidential runs.) What made the argument striking in this instance was that it was being offered by none other than the former five-term Federal Reserve Chairman Alan Greenspan: iconic libertarian, preeminent defender of the free market, and (at least until recently) the nation’s foremost devotee of Ayn Rand. When the high priest of capitalism himself is declaring the growth in economic inequality a national crisis, something has gone very, very wrong.

This widening gap between the rich and non-rich has been evident for years. In a 2005 report to investors, for instance, three analysts at Citigroup advised that “the World is dividing into two blocs—the Plutonomy and the rest”:

In a plutonomy there is no such animal as “the U.S. consumer” or “the UK consumer”, or indeed the “Russian consumer”. There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie.

Before the recession, it was relatively easy to ignore this concentration of wealth among an elite few. The wondrous inventions of the modern economy—Google, Amazon, the iPhone—broadly improved the lives of middle-class consumers, even as they made a tiny subset of entrepreneurs hugely wealthy. And the less-wondrous inventions—particularly the explosion of subprime credit—helped mask the rise of income inequality for many of those whose earnings were stagnant.

But the financial crisis and its long, dismal aftermath have changed all that. A multibillion-dollar bailout and Wall Street’s swift, subsequent reinstatement of gargantuan bonuses have inspired a narrative of parasitic bankers and other elites rigging the game for their own benefit. And this, in turn, has led to wider—and not unreasonable—fears that we are living in not merely a plutonomy, but a plutocracy, in which the rich display outsize political influence, narrowly self-interested motives, and a casual indifference to anyone outside their own rarefied economic bubble.

Through my work as a business journalist, I’ve spent the better part of the past decade shadowing the new super-rich: attending the same exclusive conferences in Europe; conducting interviews over cappuccinos on Martha’s Vineyard or in Silicon Valley meeting rooms; observing high-powered dinner parties in Manhattan. Some of what I’ve learned is entirely predictable: the rich are, as F. Scott Fitzgerald famously noted, different from you and me.

What is more relevant to our times, though, is that the rich of today are also different from the rich of yesterday. Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition—and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves.

Kevin Drum:

The super rich, she writes, “are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home.” Thus the fury of the financial elite at the suggestion that perhaps they were responsible for the crash of 2008 or that they owe it to the rest of the country to do anything about it:

When I asked one of Wall Street’s most successful investment-bank CEOs if he felt guilty for his firm’s role in creating the financial crisis, he told me with evident sincerity that he did not. The real culprit, he explained, was his feckless cousin, who owned three cars and a home he could not afford.

….A Wall Street investor who is a passionate Democrat recounted to me his bitter exchange with a Democratic leader in Congress who is involved in the tax-reform effort. “Screw you,” he told the lawmaker. “Even if you change the legislation, the government won’t get a single penny more from me in taxes. I’ll put my money into my foundation and spend it on good causes. My money isn’t going to be wasted in your deficit sinkhole.”

I don’t know if this attitude is truly new. Maybe not as much as Freeland suggests. Still, it certainly feels as if America is dominated more and more by an elite class that cares less and less about the public good because they don’t really feel like they have a stake in the public good anymore: they’ve never served in the Army or the Peace Corps, their kids never come within yelling distance of public schools, they donate their money exclusively to their own churches and their own global foundations, and they whine constantly about taxes even though their incomes have skyrocketed and tax rates have fallen dramatically over the past several decades. To them, taxes aren’t part of a social contract, they’re just pure welfare: they don’t care about education or infrastructure or unemployment or healthcare because they don’t have to. Within their own bubble, they don’t need to rely on the public versions of any of that stuff.

Jamelle Bouie at Tapped:

The whole thing is very good, though I have a small quibble with this passage:

What is more relevant to our times, though, is that the rich of today are also different from the rich of yesterday. Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition — and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly.

If “ambivalent” is code for disdain — passive or otherwise — then these nouveau riche aren’t so different from their predecessors; with few historical exceptions, the rich have always been ambivalent about the poor and less fortunate. Indeed, I wouldn’t be shocked if the presence of “meritocracy” (as if these people have no prior advantages) intensified feelings of disdain. After all, if you can succeed, why can’t these people (and as a corollary, “what right do they have to my wealth”)?

To be fair, disdain for the less fortunate is completely understandable as a response to visible disparities. On some level, we all know that our position is an accident of birth. For a lot of people, a sense of class superiority is a necessary part of the illusion that they are “deserving” of their good fortune.

Felix Salmon:

It’s not that these people are utterly bereft of noblesse oblige: Chrystia points out that “in this age of elites who delight in such phrases as outside the box and killer app, arguably the most coveted status symbol isn’t a yacht, a racehorse, or a knighthood; it’s a philanthropic foundation.” But those philanthropies don’t benefit the left-behind middle classes: they tend to follow a barbell distribution, with the money going either to the world’s poorest or else to well-endowed universities and cultural institutions. The US middle class is sneered at for being fat and lazy and unworthy of their wealth:

The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.

I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”

This mindset is dangerous, but it’s not clear how dangerous it is.

The real threat facing the super-elite, at home and abroad, isn’t modestly higher taxes, but rather the possibility that inchoate public rage could cohere into a more concrete populist agenda—that, for instance, middle-class Americans could conclude that the world economy isn’t working for them and decide that protectionism or truly punitive taxation is preferable to incremental measures such as the eventual repeal of the upper-bracket Bush tax cuts.

Mohamed El-Erian, the Pimco CEO, is a model member of the super-elite. But he is also a man whose father grew up in rural Egypt, and he has studied nations where the gaps between the rich and the poor have had violent resolutions. “For successful people to say the challenges faced by the lower end of the income distribution aren’t relevant to them is shortsighted,” he told me. Noting that “global labor and capital are doing better than their strictly national counterparts” in most Western industrialized nations, ElErian added, “I think this will lead to increasingly inward-looking social and political conditions. I worry that we risk ending up with very insular policies that will not do well in a global world. One of the big surprises of 2010 is that the protectionist dog didn’t bark. But that will come under pressure.”

If this is true, then the members of the super-elite should be falling over each other to pay more in taxes out of simple enlightened self-interest—rather than saying that a perfectly sensible tax hike is “like when Hitler invaded Poland in 1939.”

But it seems to me that the inchoate anger of the masses shows no sign of cohering into anything at all, let alone protectionism, which seems to have been dying a slow death ever since the protests against Nafta. The Tea Party, which is the closest thing we have to a populist revolt, is bought and paid for by plutocrats and shows no protectionist tendencies whatsoever. If they keep on going on their present trajectory, they’re just as likely to continue unimpeded as they are to run into some kind of atavistic class warfare.

So I’m unconvinced that the plutocrats have any real incentive to restrain themselves, or to stop moaning around an Upper East Side dinner table that $20 million a year isn’t all that much—it’s really only $10 million a year, after taxes.

Matt Steinglass at DiA at The Economist:

Ms Freeland expresses the hope towards the end of her article that the global super-rich will at some point realise that in the long run, by refusing to pay the taxes that are needed to maintain the infrastructure of the countries they operate in or to educate the workers they expect to staff their businesses, they are courting a disastrous political reaction: protectionism, confiscatory taxes, or something worse and more violent. I’m not entirely sure the super-rich need fear such a reaction. Back in mid-2009, Barack Obama told the assembled plutocrats of Wall Street that they ought to be more grateful to him; he was “the only thing standing between you and the pitchforks.” The plutocrats smiled, and departed by helicopter. To the extent any pitchforks have been seen, they were applied to the Democrats’ behinds last November. Perhaps, rather than attempting to stand between Wall Street and any hypothetical pitchforks, Mr Obama should have gotten out of the way.

The other day I was on a Singapore Airlines flight in which every video feature on the inflight entertainment system was preceded by an advertisement for condominiums in a luxury beachfront apartment/shopping development with three canted, burnished-steel towers supporting a huge steel lintel with an artificial park on top, trees, lake, and all, 200+ metres up. It looked like the spoiler of some gigantic Formula 1 racecar. As the ad played, a chyron across the bottom of the screen repeated something along the following lines: “Republic of Singapore, zero capital gains tax, zero wealth tax, zero inheritance tax…” ad nauseum. I sort of think this is the world the super-wealthy are operating in, one in which every threat made by some puny government can be flicked away by the threat of moving to Singapore or some other principality slavishly devoted to wealth. Though given that I was watching this ad in economy class, it’s probably just some pathetic low-rent imitation of the real thing, which is in fact beyond the imagination of mere wage-earners like me. There’s a Victor Pelevin short story along these lines, in which a Russian neuro-physicist discovers that the possession of a certain quantity of dollars propels people’s consciousnesses into an alternative dimension; to all outward appearances such oligarchs seem to still function in our reality, but in fact they are experiencing a universe invisible and completely alien to us mortals. State security authorities promptly hook up a couple of money-nauts to a psychic imaging machine developed by the KGB and transfer billions of dollars to their accounts. It turns out that the universe, as they experience it, looks like a long corridor, lit with a faintly greenish light, with something unidentifiable just around the corner. It’s a strangely haunting, off-kilter story. As Ms Freeland says, the Russians always seem to be sharper at expressing these kinds of things.

Ryan Avent at Free Exchange at The Economist:

It’s always a little amusing (and, to me, still a bit stunning) to read about the really rich and how rich they are and what that level of really richness allows the really rich to do. But the interesting policy questions continue to be, first, what are the sources of the wealth and, second, what distortions result from it. On the first, it seems to me that we should obviously think differently about money earned from superstar effects and money derived from access and rent-seeking. Rich growth wealthy from the invention of Google or bets against an unsustainable housing bubble are in a different category from those who happened to know the people doling out government contracts or mineral rights.

But the second issue is actually the more important, and it’s the one for which we currently lack a firm grasp. What does this concentration of wealth mean? We read Ms Freeland and other similar stories, and it’s clear that the rich have strong opinions. And they channel their vast resources in support of their opinions, and they build institutions and hobnob with policymakers and opinionmakers and rotate through administrations, and one eventually asks: is the mass of non-rich people being hoodwinked? Are the elite systematically bending the rules to favour themselves and undermine a modern society based on broad improvements in living standards?

Well, are they? I don’t know. Part of the problem assessing the impact of the shadowy world of global billionaires on public policy is that it’s so shadowy. It does seem like the circuit of elite elbow-rubbing events is designed, in part, to help align the worldview of politicians and journalists with that of the very rich. And if that’s the main route through which the elite wield influence, then we could be in trouble, given the extent to which the media world’s economic troubles are pushing it toward models based on support from moneyed patrons.

Daniel Drezner:

Fifteen years ago Samuel Huntington coined the term “Davos Man” to describe the kind of globalized elite that jetted off from global conference to global conference. His point was that Davos man was an exceedingly rare bird, and that nationalism, religion, language and culture were still the most potent forces binding groups together in the world.

It’s in this context that I read Chrystia Freeland’s new cover story in The Atlantic. It’s well worth the read, but like Kevin Drum, I’m not sure that the phenomenon Freeland is identifying is all that new.

Furthermore, I’m not entirely convinced they’re as powerful as Freeland or Drum or Felix Salmon suggests. As Freeland pointed out, they fought a lot of the Obama administration’s first-half policies tooth and nail — and they actually lost a fair amount of the time. Indeed, nary a year ago some pundits were declaring the death of Davos man.

That said, there are three trends that are worth further consideration. First, as Freeland observes, the rich are now work much harder than they did a century ago. Second, more and more of the rich are coming from outside the OECD economies.

Third, the rich have attracted a lot of intellectual capital into their web. Indeed, the call for an economist code of ethics is based in no small part on the ways in which successful economists score moneymaking gigs as they move up the career ladder.

Again, I’m not sure if Freeland is right. I am sure that it’s an interesting argument however. So, in the interest of further research your humble middle-class blogger is headed off tonight to investigate the beliefs and activities of the super-rich from much closer than normal.

Bloggers Contemplate A Door That Revolves

James Fallows:

Last night, on the “Virtually Speaking” discussion about the media with Jay Rosen of NYU, we talked about the phenomenon of things that everyone in the press corp “knows” but that don’t make their way into news stories or broadcasts. One such category involves things that everyone suspects but can’t quite prove — for instance, how involved Dick Cheney and Karl Rove were in the Valerie Plame case. Or, to make it bipartisan, about Bill Clinton’s sexual behavior over the years. But another category, which I think is even more important, involves things that everyone “knows” but has stopped noticing. This is very similar to what is called “Village” behavior in the big time media.

An item in this second category has just come up: the decision of Peter Orszag, until recently the director of the Office of Management and Budget under Barack Obama, to join Citibank in a senior position. Exactly how much it will pay is not clear, but informed guesses are several million dollars per year. Citibank, of course, was one of the institutions most notably dependent on federal help to survive in these past two years.

Objectively this is both damaging and shocking.

– Damaging, in that it epitomizes and personalizes a criticism both left and right have had of the Obama Administration’s “bailout” policy: that it’s been too protective of the financial system’s high-flying leaders, and too reluctant to hold any person or institution accountable. Of course there’s a strong counter argument to be made, in the spirit of Obama’s recent defense of his tax-cut compromise. (Roughly: that it would have been more satisfying to let Citi and others fail, but the results would have been much more damaging to the economy as a whole.) But it’s a harder argument to make when one of your senior officials has moved straight to the (very generous) Citi payroll. Any competent Republican ad-maker is already collecting clips of Orszag for use in the next campaign.

– Shocking, in the structural rather than personal corruption that it illustrates. I believe Orszag (whom I do not know at all) to be a faultlessly honest man, by the letter of the law. I am sorry for his judgment in taking this job,* but I am implying nothing whatsoever “unethical” in a technical sense. But in the grander scheme, his move illustrates something that is just wrong. The idea that someone would help plan, advocate, and carry out an economic policy that played such a crucial role in the survival of a financial institution — and then, less than two years after his Administration took office, would take a job that (a) exemplifies the growing disparities the Administration says it’s trying to correct and (b) unavoidably will call on knowledge and contacts Orszag developed while in recent public service — this says something bad about what is taken for granted in American public life.

More Fallows:

I made a mistake several days ago when lamenting Peter Orszag’s decision to take a senior job with Citibank, reportedly for several million dollars per year, so soon after leaving a senior Obama Administration post. Over the past two-plus years, Obama (and GW Bush) policies played a crucial role in saving Citi — and in not holding its executives (or other senior financial-world figures) accountable for polices that brought on the world financial crisis or reining in top-end pay as profitability has returned. Now a senior member of the Obama team — Orszag was budget director — was going straight to one of those top-end jobs, even as his former colleagues in the administration have their hands full fighting the social, economic, and political effects of the crisis on “ordinary” Americans who can’t find jobs or are losing their homes.

My mistake was not in pointing out this problem, nor in identifying it as the kind of thing that is notable precisely because no one even stops to remark on it any more. It was in the sentence that said, “Objectively this is both damaging and shocking.” That’s the difference between one-draft web postings and many-times-edited print articles. What I meant was, “Politically this is damaging and should be shocking.” Because the real point is that official Washington should notice this instance of structural corruption — but won’t.

If you’re wondering just how taken for granted such arrangements are in today’s Washington/ Versailles, here’s a data point. The Washington Post, still aspiring to be official journal of politics, has not published a single story about Orszag’s new job. Here is what its search function shows just now:

“Please try another search” indeed. How about “things that are depressing”? To their credit, the Post’s Ezra Klein and Ed O’Keefe each had one-line links on their sites, pointing to (respectively) the NYT “Dealbook” and Reuters stories on Orszag. (And those links come up if you search the Post’s site for “Orszag Citigroup.” Otherwise there appears to have been no “news” coverage by the Post. Klein also had this follow-up link to an item called “Our Peter Orszag Problem” on the Economist’s site.) The gap between the things the Post considers “scandals,” and a development like this, so taken for granted as not to merit mention, says too much about our politics.

More Fallows

Will Wilkinson at DiA at The Economist:

Mr Fallows hits the nail on the head, but what this structural injustice means, politically and ideologically, remains unclear. In my opinion, the seeming inevitability of Orszag-like migrations points to a potentially fatal tension within the progressive strand of liberal thought. Progressives laudably seek to oppose injustice by deploying government power as a countervailing force against the imagined opressive and exploitative tendencies of market institutions. Yet it seems that time and again market institutions find ways to use the government’s regulatory and insurer-of-last-resort functions as countervailing forces against their competitors and, in the end, against the very public these functions were meant to protect.

We are constantly exploited by the tools meant to foil our exploitation. For a progressive to acknowledge as much is tantamount to abandoning progressivism. So it’s no surprise that progressives would rather worry over trivialities such as campaign finance reform than dwell on the paradoxes of political power. But it really isn’t the Citizens United decision that’s about to make Peter Orszag a minor Midas. It’s the vast power of a handful of Washington players, with whom Mr Orszag has become relatively intimate, to make or destroy great fortunes more or less at whim. Well-connected wonks can get rich on Wall Street only because Washington power is now so unconstrained. Washington is so unconstrained in no small part because progressives and New Dealers and Keynesians and neo-cons and neo-liberals for various good and bad reasons wanted it that way. So, what is to be done? Summon a self-bottling genie-bottling genie?

The classically liberal answer is to make government less powerful. The monstrous offspring of entangled markets and states can be defeated only by the most thorough possible separation. But public self-protection through market-state divorce can work only if libertarians are right that unfettered markets are not by nature unstable, that they do not lead to opressive concentrations of power, that we would do better without a central bank, and so on. Most of us don’t believe that. Until more of us do, we’re not going far in that direction. And maybe that’s just as well. Maybe it’s true that markets hum along smoothly only with relatively active government intervention and it’s also true that relatively active government intervention is eventually inevitably co-opted, exacerbating rather than mitigating capitalism’s injustices. Perhaps the best we can hope ever to achieve is a fleeting state of grace when fundamentally unstable forces are temporarily held in balance by an evanescent combination of complementary cultural currents. This is increasingly my fear: that there is no principled alternative to muddling through; that every ideologue’s op-ed is wrong, except the ones serendipitously right. But muddle we must.

So what is to be done about the structural injustice spotlighted by Peter Orszag’s passage through the revolving golden door? How exactly do we tweak the unjust structure? If the system is rigged, how exactly do we unrig it? In which direction can we muddle without making matters worse?

Ezra Klein:

But reading the coverage, I’ve been struck by a few things.

1. I’m not nearly so sure it’s about the money as other people seem to be. Orszag is fairly wealthy already (my understanding is he sold off an economic consulting firm when he became director of the Congressional Budget Office), and his lifetime of public service positions does not suggest a man particularly motivated by income. Rather, I think people are underestimating the lure of the job itself.

Orszag has gone as high as he’s likely to go in government, and he’s 41 years old. The guy isn’t done, but there’s not much more for him in Washington. So what is left for him?

Well, he could do academia or a think tank. But that’s a pretty sedate, low-stress existence compared with the tempo he’s kept up over the past few decades. Let’s say he doesn’t want to move into a wiseman or advisory role. New York Times columnist didn’t seem like a bad gig to me, but then, I’ve chosen to devote my life to similar pursuits. I’m not really sure why anyone would want to be a university president. You sometimes hear people say that he should’ve sat around and been fairly rich and respected, but I imagine that gets boring after the first decade or so.

Citigroup is a really big, really powerful institution. Orszag’s position in it is the sort of position that could one day lead to being president of Citigroup. If you’re him, and you’re trying to figure out an interesting and high-impact way to spend the next 40 years, I can see why it’s appealing. But it’s the power and the job and the opportunity, more than the money, that make it appealing.

2. The problem is less why Orszag wanted to go to Citigroup than why Citigroup wanted to hire Orszag. In Citigroup, you’re dealing with a bank that’s simply much more reliant than other banks are on connections with the American government, and other governments. Bank of America has similar needs, and so too do a couple of others, but it’s a short list.

Whether Orszag was a smart hire on these grounds is hard to say. It’s difficult to overstate how much bad will has developed between Orszag and the White House he used to serve. Some of that comes from perceived disloyalty in Orszag’s public statements — like his first New York Times column, which called for a short-term extension of all the tax cuts when the White House was arguing for the permanent extension of most of the cuts and the expiration of the cuts for the rich — but this move, which many in the administration consider politically problematic and personally distasteful, added considerably to the anger.

What Citigroup gets in Orszag is a brilliant policy mind and a deep understanding of government, not to mention a thick rolodex that certainly still has some friendly names on it. The reasons those things are valuable to Citigroup make most of us uncomfortable, and that goes double after the government bailed Citigroup out during the financial crisis. I highly doubt that the meetings between Orszag and Citigroup left him with the impression that he was getting hired to help with governmental affairs. His portfolio, in fact, is explicitly international. But I don’t know anyone who believes that it will stay that way.

Brad DeLong:

Look: Peter Orszag believes–as do I–that the most basic principles of good governance mandate that the American government have a long-term plan in place to match its long-term projected expenditures with its long-term projected revenues. Peter Orszag believes–as do I–that requiring that every policy initiative be paid-for in the long-term so that it does not increase the projected debt, say, ten years out into the future is the minimum low bar that policy should be able to clear.

Barack Obama has not taken Peter Orszag’s advice: he has not proposed only initiatives that are paid-for in the long-term. He has not pledged to veto bills that raise the projected debt ten years hence.

Peter Orszag is no longer in the government.

Does he now have a duty to tell those who read his New York Times columns the same things that he told Obama when he was in government?

Or does he have a duty to tell lies to his readers about what he thinks good policy is in order to advance the interests of an administration that he is no longer part of?

I would say he has the first duty.

Matthew Yglesias:

As I understand it, the concern is that the the job itself is a bribe. In a super-crass version of this, Firm A says to Regulator Z “you won’t be in this job forever, but if you make a lot of decisions favorable to Firm A then we’ll hire you after you quit.” In a more realistic version what happens is that Regulator Z observes that many of his predecessors have gone on to lucrative careers in Industry A and that they probably couldn’t have had if they’d pissed off all the Industry A CEOs. This biases his decision-making in a problematic way.

Sometimes I think this problem is more apparent than real. Any conceivable set of decisions that the FCC makes is going to be favorable to some set of large corporations. So being in the pocket of “big business” as such isn’t a big problem. But sometimes the problem is very real. The entire financial reform debate, for example, has featured a lot of ideas that put the interests of the financial sector as such at stake. Many observers, including Ezra Klein, have posited that shrinking the size of the financial sector overall should be a goal of reform. Obviously, though, people with an ambition to go get jobs in the financial sector are unlikely to espouse such goals.

Will at The League:

Peter Orszag’s new job at Citigroup is one of those under-discussed stories that makes me glad I read blogs. It also makes me depressed because I’m struggling to envision a plausible solution to the problems of regulatory capture and the revolving door between government and the financial services industry. You can imagine better policies arising in a lot of areas – farm subsidies, for example – if we magically removed certain political constraints, but even if you were given free reign to remake the United States’ political system, the problem of regulating an incredibly complicated financial sector would still be pretty tough to figure out.

If you’ll permit me to simplify things for the sake of brevity, the standard progressive view of the financial sector is that we need more and better regulators. This is complicated by the fact that regulation – particularly regulation that involves opaque financial practices – is complex and therefore vulnerable to companies gaming the system. Former high-level Administration officials accepting jobs at financial institutions that were just bailed out basically exemplifies these concerns.

The libertarian/conservative rejoinder is that less regulation equals less opportunities for politically-connected firms to hijack the system. As a safeguard against future financial meltdowns, I find this unsatisfying for a number of reasons: First, attempts to describe the roots of the financial crisis solely through the lens of government intervention sound pretty silly. And second, if the regulatory and administrative superstructure of government is fatally compromised by insiders and corporate lobbyists, are we sure we  can successfully deconstruct that system from within? I think this is part of what liberals are getting at when they suggest the conservative movement is basically a front group for rich people and big business: sure, you might make election year noises about limited government, but genuinely populist conservative impulses take a backseat to corporate interests in a political and regulatory environment dominated by insiders. In other words, the Tea Party will never beat Goldman Sachs at its own game.

The Washington Wizards Drink Our Milkshake

Tyler Cowen in The American Interest:

[…] All that said, income inequality does matter—for both politics and the economy. To see how, we must distinguish between inequality itself and what causes it. But first let’s review the trends in more detail.

The numbers are clear: Income inequality has been rising in the United States, especially at the very top. The data show a big difference between two quite separate issues, namely income growth at the very top of the distribution and greater inequality throughout the distribution. The first trend is much more pronounced than the second, although the two are often confused.

When it comes to the first trend, the share of pre-tax income earned by the richest 1 percent of earners has increased from about 8 percent in 1974 to more than 18 percent in 2007. Furthermore, the richest 0.01 percent (the 15,000 or so richest families) had a share of less than 1 percent in 1974 but more than 6 percent of national income in 2007. As noted, those figures are from pre-tax income, so don’t look to the George W. Bush tax cuts to explain the pattern. Furthermore, these gains have been sustained and have evolved over many years, rather than coming in one or two small bursts between 1974 and today.¹

These numbers have been challenged on the grounds that, since various tax reforms have kicked in, individuals now receive their incomes in different and harder to measure ways, namely through corporate forms, stock options and fringe benefits. Caution is in order, but the overall trend seems robust. Similar broad patterns are indicated by different sources, such as studies of executive compensation. Anecdotal observation suggests extreme and unprecedented returns earned by investment bankers, fired CEOs, J.K. Rowling and Tiger Woods.

At the same time, wage growth for the median earner has slowed since 1973. But that slower wage growth has afflicted large numbers of Americans, and it is conceptually distinct from the higher relative share of top income earners. For instance, if you take the 1979–2005 period, the average incomes of the bottom fifth of households increased only 6 percent while the incomes of the middle quintile rose by 21 percent. That’s a widening of the spread of incomes, but it’s not so drastic compared to the explosive gains at the very top.

The broader change in income distribution, the one occurring beneath the very top earners, can be deconstructed in a manner that makes nearly all of it look harmless. For instance, there is usually greater inequality of income among both older people and the more highly educated, if only because there is more time and more room for fortunes to vary. Since America is becoming both older and more highly educated, our measured income inequality will increase pretty much by demographic fiat. Economist Thomas Lemieux at the University of British Columbia estimates that these demographic effects explain three-quarters of the observed rise in income inequality for men, and even more for women.²

Attacking the problem from a different angle, other economists are challenging whether there is much growth in inequality at all below the super-rich. For instance, real incomes are measured using a common price index, yet poorer people are more likely to shop at discount outlets like Wal-Mart, which have seen big price drops over the past twenty years.³ Once we take this behavior into account, it is unclear whether the real income gaps between the poor and middle class have been widening much at all. Robert J. Gordon, an economist from Northwestern University who is hardly known as a right-wing apologist, wrote in a recent paper that “there was no increase of inequality after 1993 in the bottom 99 percent of the population”, and that whatever overall change there was “can be entirely explained by the behavior of income in the top 1 percent.”⁴

And so we come again to the gains of the top earners, clearly the big story told by the data. It’s worth noting that over this same period of time, inequality of work hours increased too. The top earners worked a lot more and most other Americans worked somewhat less. That’s another reason why high earners don’t occasion more resentment: Many people understand how hard they have to work to get there. It also seems that most of the income gains of the top earners were related to performance pay—bonuses, in other words—and not wildly out-of-whack yearly salaries.⁵

It is also the case that any society with a lot of “threshold earners” is likely to experience growing income inequality. A threshold earner is someone who seeks to earn a certain amount of money and no more. If wages go up, that person will respond by seeking less work or by working less hard or less often. That person simply wants to “get by” in terms of absolute earning power in order to experience other gains in the form of leisure—whether spending time with friends and family, walking in the woods and so on. Luck aside, that person’s income will never rise much above the threshold.

It’s not obvious what causes the percentage of threshold earners to rise or fall, but it seems reasonable to suppose that the more single-occupancy households there are, the more threshold earners there will be, since a major incentive for earning money is to use it to take care of other people with whom one lives. For a variety of reasons, single-occupancy households in the United States are at an all-time high. There are also a growing number of late odyssey years graduate students who try to cover their own expenses but otherwise devote their time to study. If the percentage of threshold earners rises for whatever reasons, however, the aggregate gap between them and the more financially ambitious will widen. There is nothing morally or practically wrong with an increase in inequality from a source such as that.

[…]

If we are looking for objectionable problems in the top 1 percent of income earners, much of it boils down to finance and activities related to financial markets. And to be sure, the high incomes in finance should give us all pause.

The first factor driving high returns is sometimes called by practitioners “going short on volatility.” Sometimes it is called “negative skewness.” In plain English, this means that some investors opt for a strategy of betting against big, unexpected moves in market prices. Most of the time investors will do well by this strategy, since big, unexpected moves are outliers by definition. Traders will earn above-average returns in good times. In bad times they won’t suffer fully when catastrophic returns come in, as sooner or later is bound to happen, because the downside of these bets is partly socialized onto the Treasury, the Federal Reserve and, of course, the taxpayers and the unemployed.

To understand how this strategy works, consider an example from sports betting. The NBA’s Washington Wizards are a perennially hapless team that rarely gets beyond the first round of the playoffs, if they make the playoffs at all. This year the odds of the Wizards winning the NBA title will likely clock in at longer than a hundred to one. I could, as a gambling strategy, bet against the Wizards and other low-quality teams each year. Most years I would earn a decent profit, and it would feel like I was earning money for virtually nothing. The Los Angeles Lakers or Boston Celtics or some other quality team would win the title again and I would collect some surplus from my bets. For many years I would earn excess returns relative to the market as a whole.

Yet such bets are not wise over the long run. Every now and then a surprise team does win the title and in those years I would lose a huge amount of money. Even the Washington Wizards (under their previous name, the Capital Bullets) won the title in 1977–78 despite compiling a so-so 44–38 record during the regular season, by marching through the playoffs in spectacular fashion. So if you bet against unlikely events, most of the time you will look smart and have the money to validate the appearance. Periodically, however, you will look very bad. Does that kind of pattern sound familiar? It happens in finance, too. Betting against a big decline in home prices is analogous to betting against the Wizards. Every now and then such a bet will blow up in your face, though in most years that trading activity will generate above-average profits and big bonuses for the traders and CEOs.

To this mix we can add the fact that many money managers are investing other people’s money. If you plan to stay with an investment bank for ten years or less, most of the people playing this investing strategy will make out very well most of the time. Everyone’s time horizon is a bit limited and you will bring in some nice years of extra returns and reap nice bonuses. And let’s say the whole thing does blow up in your face? What’s the worst that can happen? Your bosses fire you, but you will still have millions in the bank and that MBA from Harvard or Wharton. For the people actually investing the money, there’s barely any downside risk other than having to quit the party early. Furthermore, if everyone else made more or less the same mistake (very surprising major events, such as a busted housing market, affect virtually everybody), you’re hardly disgraced. You might even get rehired at another investment bank, or maybe a hedge fund, within months or even weeks.

Moreover, smart shareholders will acquiesce to or even encourage these gambles. They gain on the upside, while the downside, past the point of bankruptcy, is borne by the firm’s creditors. And will the bondholders object? Well, they might have a difficult time monitoring the internal trading operations of financial institutions. Of course, the firm’s trading book cannot be open to competitors, and that means it cannot be open to bondholders (or even most shareholders) either. So what, exactly, will they have in hand to object to?

Perhaps more important, government bailouts minimize the damage to creditors on the downside. Neither the Treasury nor the Fed allowed creditors to take any losses from the collapse of the major banks during the financial crisis. The U.S. government guaranteed these loans, either explicitly or implicitly.

Guaranteeing the debt also encourages equity holders to take more risk. While current bailouts have not in general maintained equity values, and while share prices have often fallen to near zero following the bust of a major bank, the bailouts still give the bank a lifeline. Instead of the bank being destroyed, sometimes those equity prices do climb back out of the hole. This is true of the major surviving banks in the United States, and even AIG is paying back its bailout. For better or worse, we’re handing out free options on recovery, and that encourages banks to take more risk in the first place.

In short, there is an unholy dynamic of short-term trading and investing, backed up by bailouts and risk reduction from the government and the Federal Reserve. This is not good. “Going short on volatility” is a dangerous strategy from a social point of view. For one thing, in so-called normal times, the finance sector attracts a big chunk of the smartest, most hard-working and most talented individuals. That represents a huge human capital opportunity cost to society and the economy at large. But more immediate and more important, it means that banks take far too many risks and go way out on a limb, often in correlated fashion. When their bets turn sour, as they did in 2007–09, everyone else pays the price.

Ross Douthat:

But it’s interesting to read it in tandem with Cowen’s earlier piece critiquing the “break up the banks” argument advanced by Simon Johnson and James Kwak, and embraced by the progressive left (along with a few libertarians and conservatives). There, Cowen argued that shrinking the banks would treat the symptoms of the bailout culture, rather than the disease:

There’s a different way to think about the bailouts, namely that the U.S. government stands at the center of a giant nexus of money raising, most of all to finance the U.S. government budget deficit and keep the whole show up and running. The perception at least is that our country requires the dollar as a reserve currency, requires New York City as a major banking center with major banks, and requires fully credible governmental guarantees behind every Treasury auction and requires liquid financial markets more generally. Furthermore the international trade presence of the United States (supposedly) requires the federal government to strongly ally with major commercial interests, just as our government sides with Hollywood in trade and intellectual property disputes. To abandon banks is to send a broader message that we are in commercial and political decline and disarray, and that is hardly an acceptable way to proceed, at least not according to the standards of the real Washington consensus.

… This analysis bears on one of the main policy recommendations of Johnson and Kwak, namely to break up the big banks so they cannot soil Washington with such powerful lobbying and privileges. I believe this recommendation will not achieve its stated ends and that Washington would find another way to assemble privileged financial institutions — no matter what their exact form — within its ruling coalition. Breaking up the large banks would be striking at symptoms rather than at root causes, namely the ongoing growth of political power and the reliance of that power upon an ongoing inflow of capital.

If you do wish to break or limit the power of the major banks, running a balanced budget is probably the most important step we could take. It would mean that our government no longer needs to worry so much about financing its activities.

This, too, seems plausible to me. But what if you wove both a balanced budget and the Johnson-Kwak bank break-up into the same agenda (as, arguably, Tom Coburn tried to do this year), simultaneously downsizing the national debt and downsizing the too-big-to-fail banks that effectively fund it? I understand that this is not the most politically realistic conceit, since it would require some sort of progressive-conservative alliance in the service of policies that (as Cowen notes) most voters reject in favor of the more appealing combination of “high government spending and relatively low taxes.” But it seems like the approach that’s implied by his arguments. And I wonder if it’s better to advance politically unrealistic solutions, in the hopes of making them more realistic, than to give up and accept a system that’s all-too-likely, in Cowen’s words, to “again bring our economy to its knees” as “the price of modern society.”

Will Wilkinson at DiA at The Economist:

I’ve long had the sense that folks in finance are getting spectacularly rich by somehow gaming the system, but the nature of the system is too inscrutable for me to formulate a sufficiently informed hypothesis on my own. But it’s not so inscrutable to Mr Cowen. He offers what sounds to me a quite plausible story about the way the financial-regulatory-political system has been, and continues to be exploited and destabilized. “It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw,” Mr Cowen writes. His account of the way strategies of “going short on volatility” both increase inequality and threaten the stability of our entire market system is too detailed to summarise here, but merits close attention. I strongly sense that some story like this one largely explains the top 1%’s dramatic separation from the rest of the income distribution. Here’s Mr Cowen’s bottom line:

For the time being, we need to accept the possibility that the financial sector has learned how to game the American (and UK-based) system of state capitalism. It’s no longer obvious that the system is stable at a macro level, and extreme income inequality at the top has been one result of that imbalance. Income inequality is a symptom, however, rather than a cause of the real problem. The root cause of income inequality, viewed in the most general terms, is extreme human ingenuity, albeit of a perverse kind. That is why it is so hard to control.

Surely there is some kind of structural injustice here. But it’s just terrifically hard to say where precisely it lurks and what ought to be done about it. We can easily treat symptomatic inequality through progressive redistribution, but this won’t cure our deeper institutional malady. The deeper problem is that Wall Street can and continues to drink our milkshake—that there is a draining hole in the social till that has already caused our economy to collapse once—not that the banker’s portions of milkshake are growing faster than ours.

Ryan Avent at DiA at The Economist

Ezra Klein

Mike Konczal at Rortybomb:

Tyler Cowen has written an article for the American Interest titled The Inequality That Matters. It’s about inequality, the financial sector and the possibility of reform. I really enjoyed the essay and recommend you check it out; I’m going to write a few critical comments.

1. The essay doesn’t tackle what I think is, in one sense, the most important question – how much did a broken financial system inflate the housing bubble, especially in the United States?  It’s one thing if the financial sector drinks our milkshake a bit;  it’s another if they are creating bubbles to profit on the way up and on the way down, either by choice or by accident.

The Magnetar Trade (given musical treatment above) is instructive here, where you can take informational asymmetries in the private securitization market combined with opaque pricing of CDS to pump hot money into housing that you profit on if it collapses. The analogy used, a correct one, is to the movie The Producers, but this is at the scale of hundreds of billions of dollars.

Research by Adam Levitin and Susan Wachter in their paper Explaining the Housing Bubble finds that mortgage debt prices were dropping in 2004-2006 as volume was rising, which is consistent with a shift of the supply curve outward.   But this supply was through private mortgage-backed securities which were both difficult to price on fundamentals and difficult to cross-compare to other instruments;  the private-financial market for these MBS are thus created as complex, heterogeneity and without regulatory standards.  So it’s not just that finance sits at the center of some profitable things;  it reorganizes the space to its own advantage, and the disadvantage of all other players.

2. The essay talks about how the financial sector goes “short on volatility”, which is a bet that things won’t go crazy in the short term, or a bet that takes on tail risk.  As Kevin Drum mentions someone is on the other side of that bet.  And what do we call a product that pays out in times of high volatility, in times when an event out of the ordinary happens?  One thing to call it is “insurance.”

Speaking at a conceptual level, I think it is fair to say that we regulate the #$@% out of people who hang the sign “insurance” on their door, and do not for those, like AIG did, that provide insurance without hanging the sign. As a result actual insurance agents who hang the sign are kind of how we idealize the boring bankers of times gone past.

There’s good reason we regulate insurance – it needs to pay out exactly at the moment when it is the least likely to get paid. I wrote a post for the Atlantic Business section that asked how should you think of zombie insurance? How would you price a contract that paid $100 if the world turned into The Walking Dead, where cities were overrun with armies of zombies?

The short answer is that you wouldn’t pay anything, since when you need to collect it the person on the other end is probably a zombie. This “who can credibly commit to backstopping bad events” goes towards a notion of the role the government can play in financial markets.

Kevin Drum:

Tyler Cowen has a big piece about income inequality in The American Interest that’s well worth reading. However, it’s not really about the growth of inequality. It’s about Wall Street. In particular, it’s about this question: why do financial professionals make so damn much money?

The answer, of course, is that they work in an industry that’s become ungodly profitable. But how? Tyler attributes it to the practice of “going short on volatility.” That is, modern finance professionals mostly gamble that what happened in the past will keep happening in the future, and disasters will never happen. In most years this makes them a lot of money (because, in fact, disasters rarely happen).

But this is mysterious. After all, not everyone is going short on volatility. In fact, by definition, only half of the punters on Wall Street are doing it. The other half are taking the other side of the bet. Tyler explains this with an analogy to a bet that the Washington Wizards, one of the worst teams in basketball, won’t win the NBA championship. If you make that bet year after year, you’ll keep making money year after year.

This is a useful analogy precisely because it wouldn’t work. After all, to make that bet, you have to find someone willing to take the other side and bet that disaster will strike and the Wizards will win. But they know just how unlikely that is, so they’re going to require very long odds. On a hundred dollar bet, they’ll want $100 if they win but will only be willing to pay off one dollar if you win. That won’t make you rich.

So how can you make money doing this? Answer: find someone who doesn’t know much about basketball and pays off two dollars on this bet instead of one. Additionally, you need to borrow money so you can make lots of bets. So instead of placing a $100 bet and making a dollar, you borrow a million dollars, make lots of bets on lots of teams, and make $20,000. It’s the road to riches.

The questions this raises should be obvious. First, why would anyone be dumb enough to offer you such mistaken odds? Second, shouldn’t the interest on the loan wipe out the profit from such a tiny betting margin? Third, why would anyone loan you this money in the first place, knowing that you have no chance of paying it back if disaster strikes, one of your teams wins, and you lose your entire stake?

As near as I can tell, the answer to #1 is that Wall Street traders are bad at pricing tail risk. The answer to #2 is that Wall Street hedge funds, using techniques pioneered in the mid-90s by Long Term Capital Management, have figured out ways to borrow large sums of money at virtually no cost. And the answer to #3 is that Wall Street lenders are also bad at pricing tail risk.

Or are they? Tyler argues that, in fact, both sides are betting that as long as everyone is doing this, the occasional disasters will be so epically disastrous that central banks will bail them out. They have no choice, after all, if the alternative is the destruction of the global economic system. So the tail risk is smaller than you think. Borrowers will make money in good years and default in bad years. Lenders, meanwhile, will also make money in good years, secure in the knowledge that on the rare occasions when everything goes pear shaped and borrowers can’t pay back their loans, the government will make them whole. As Tyler reminds us, “Neither the Treasury nor the Fed allowed creditors to take any losses from the collapse of the major banks during the financial crisis.”

But I don’t find this persuasive as a behavioral explanation. The problem is that there’s simply no evidence I’m aware of that Wall Street executives ever thought about this or priced it into their models. Sure, they may have been reckless or stupid. However, they weren’t setting prices for financial instruments based on the idea that, yes, they were taking a genuine risk of going bust, but they could price that away because they’d get bailed out by Uncle Sugar when it happened. Rather, they really, truly, believed that they weren’t exposed to very much risk. As near as I can tell, this was true on both the buy side and the sell side.

Tim F. answers Kevin:

To answer Kevin, finance is incredibly profitable because the finance sector has a greater information asymmetry between buyers and the sellers than almost any other sector on Earth. Even today most customers more or less take it on faith that the people selling them financial instruments are dealing on good faith. They do it because from FDR until the 70’s or so that was true. Financial instruments were less complicated and oversight was much stronger. That is to say that it was harder to cheat and more cheaters got caught. They also do it because they have to; if you don’t want to take your bank’s word for it then you can either keep a lawyer on retainer, or else live in a cave on public land. Too bad for us that assumption is no longer remotely true. Computers became a commodity and investors started making more bets on other people’s bets. That is to say, cheating got a lot easier because most people could no longer understand what their banks were up to. At the same time deregulation made it that much harder to catch cheaters and also opened vast new opportunities for semi-legal schemes as well as the nakedly illegal kind.

The lack of any real risk premium (after all, we’re all hostages if they fail) certainly pads the bottom line, but the meat and potatoes for Goldman and BofA is the vast gulf between how well they understand what they’re doing versus how well their customers understand it. They don’t even need to understand their own business that well. The sizable fortune that they made and kept over mortgage derivatives just emphasizes how important it is to know more than your customers, who largely had no idea about the flyblown shit that Goldman and company shoveled into each AAA-rated MBS.

These days Goldman has a supercomputer that sits on the main trading network and jumps everyone else’s bid by milliseconds. Nobody seems to care. If that isn’t a straw comfortably stuck in the social till then I don’t know what is.

Matthew Yglesias

James Joyner

“Norm!”

Max Fisher at The Atlantic with the round-up

Sarah Laskow at Capitol New York:

LONGTIME VILLAGERS OFTEN TALK ABOUT the change in their neighborhood as synonymous with the rise of bars and restaurants that create street traffic and noise unlike that in any other neighborhood. Words and phrases like rowdy, circus atmosphere, zoo are used to describe the street scene at night. When bar owners and nightlife operators argue that the East Village has always been a nightlife destination, they respond: Yes, but. Something’s different now.

Academics have a word for what the neighborhood has become: a nightscape. Bars and restaurants were once peripheral to the main drag’s primary economic drivers: supermarkets, coffeehouses, boutique shops, record stores. But in post-industrial cities, nightlife has grown into an industry in its own right. As in any industry, shop owners tend to cluster. A century ago, that meant the creation of a Garment District. Now it means the creation of a Party District.

There are a few of them of course. You’ll hear similar complaints about the Meatpacking District, about areas of Fifth Avenue or Smith Street in Brooklyn, or the side streets of the Flatiron District. But the Party District below 14th street east of Third Avenue is the largest, the densest, and still growing. To hear the people who live further up near the Stuyvesant Town end of the East Village talk, the Party District is spreading largely north, and somewhere around the summer of 2009, it wholly enveloped the stretch of Avenue A between the northwest corner of Tompkins Square Park and 14th Street.

Superdive, more than any other establishment, was the sign that the area has reached some sort of tipping point. There were already more bars in the area than there had been ever before, but none like Superdive. When Superdive opened, bright young things across the city talked about it. They also talked about keg service, the bar’s primary innovation. By calling in advance, customers could secure a keg of almost any beer imaginable: PorkS.L.A.p, Chimay, Allagash White, or any one of the hundreds of German, Czech, Belgian, or British beers on the 16-page keg menu prepared by “Kegmaster Matt.” A New York Press review noted that Superdive was “the stuff of frat-boy dreams—in a good way. We think.” Urban Daddy called it “a world of crazy—an all-out raucous, beautiful disaster of a bar.” It was rumored, briefly, that customers could pour their own well drinks.

In short order, party-seekers were lined up behind the bar’s velvet rope to get in. Positive reviews came rolling in on Yelp, and private parties booked the space, night after night. Upper Avenue A had had theme bars (one of Superdive’s predecessors at the space was Korova Milk Bar, which had a Clockwork Orange leitmotif lost on many of the patrons), and the original location of the neighborhoods most notorious gay bar, The Cock. Superdive was self-conscious, though. It promised not just beer or a dance floor, but an experience directly targeted at a crowd the East Village had perhaps hoped it hadn’t overtly been catering to: Not some group of characters out of an old Lou Reed song, so much as the group of characters you’d find on Bourbon Street, or worse, North Avenue in White Plains. There was some irony in the marketing of Superdive, but not much.

Matthew Yglesias:

Street noise is a very real issue in large swathes of Manhattan and I think it’s perfectly understandable that people prefer not to have lively nightlife scenes located directly outside their windows. So when I read Sarah Laskow’s long and excellent account of liquor license battles in the East Village, I’m not-unsympathetic to the incumbent residents’ concerns. But as she observes at the end, there’s a real cost to this attitude:

At the meeting with Kao, the locals gave him the same reason for opposing him that they had given Warren, when he wanted to open a burger bar in the space: according to the current license, the only type of business that should be selling liquor at 200 Ave. A is a bookshop. With rent set at $10,000 in the East Village Party District, that’s as unlikely as it sounds.

The broader issue, as she explains, is that cities are driven by agglomeration:

Academics have a word for what the neighborhood has become: a nightscape. Bars and restaurants were once peripheral to the main drag’s primary economic drivers: supermarkets, coffeehouses, boutique shops, record stores. But in post-industrial cities, nightlife has grown into an industry in its own right. As in any industry, shop owners tend to cluster. A century ago, that meant the creation of a Garment District. Now it means the creation of a Party District.

Basically the East Village really “wants” to be full of nightlife establishments just like Qiaotou, China wants button factories. Restricting the creation of new button factories in Qiatou will help incumbent button makers (and alleviate neighborhood concerns about factory smoot) but it’s hard to call a bar scene into existence that way. Similarly, making it hard to open a new bar in the East Village isn’t going to create a button factory. It’s going to create an underutilized space. That means somewhat more unemployment in the city, somewhat less tax revenue in the city, and thus at the margin higher tax rates and fewer social services for everyone.

Meanwhile, as a policy analyst living in a different city the right way to look at the neighborhood concerns is this. Will another bar on the block make living on that block worse? I have no reason to doubt it. But it’s not like there’s some excessive quantity of affordable housing in Manhattan. If a given block becomes less desirable to live on, that just means someone else will live there. In equilibrium, we’re looking at lower housing costs and higher employment rates.

Ryan Avent:

Matt is right that “nightlife”, like a lot of other industries, often clusters. People like to have options when they go out, and they like going where there are other people around, so watering holes that cluster together often find that they do better than they might outside of a nightlife cluster, despite the impact of increased competition within the cluster. And Matt is right to say that when you limit liquor licenses in an area, you cut off the potential gains of clustering to the consumer, you cut off the potential gains of clustering to the businesses, and you cut off the potential gains of competition to the consumer, since you effectively hand existing businesses a great deal of market power.

But I’m constantly reminded of another side of this equation whenever I’m in London. London, like cities and towns across the British Isles, is filled with pubs. They vary in type, quality, and clientele. I was very lucky this time around to find a near-perfect gastropub just a five minute walk from my flat. It was quiet and well-maintained with a great menu, and while there were always people there, there was also always a free seat. Kids were welcome during the day, as were dogs. Every time I went I thought to myself how great it would be to have such a place close by back in Washington. And every time I thought that, I immediately reminded myself that such a place, back in Washington, would be perpetually packed and fairly unpleasant. In the Washington area, you can’t have a place that’s both really good and quiet in a neighborhood-y sort of way.

That’s largely because it’s very difficult to open new bars. And the result is a pernicious feedback loop. With too few bars around, most good bars are typically crowded. This crowdedness alienates neighbors, and it also has a selecting effect on the types of people who choose to go to bars — those interested in a loud, rowdy environment, who will often tend to be loud and rowdy. This alienates neighbors even more, leading to tighter restrictions still and exacerbating the problem.

Megan McArdle:

I don’t want to push this argument too far–London has a sizeable population of obnoxious drunks, many of whom decide to get into fistfights outside their local pub.  (An editor at the Economist who had recently moved to the United States was asked how he had enjoyed his first New Year’s in New York.  “It made me quite homesick,” he replied.  “All those drunks throwing up in the subway were like a breath of London.”)

But it is true that London also has more quiet pubs New York–and New York, in turn, has more of them (outside of the East Village) than DC does.  And this does make bars and cafes noticeably more unpleasant for the neighbors, as well as the customers.  Which in turn causes residents to fight like hell to keep out any business that might attract a late-night crowd.

One possible solution is upzoning–neighborhood bars aren’t so obnoxious when you’re ten floors above them. But of course, the local residents tend to fight that as well.

Matthew Steinglass at DiA at The Economist:

I think these observations are all apt, but I’m also wondering why a comparison of pub quality in these three places would focus primarily on regulatory or economic issues rather than that diffuse and confusing beast we call culture. I can think of two reasons why people tend to write disproportionately about economic and regulatory reasons for these kinds of problems. First, they’re concrete. You can investigate the regulatory issues surrounding licensing businesses in your area pretty easily, and those rules are discrete and public and clear. Then you can analyze the expected results. Second, problems with regulatory and eocnomic origins are amenable to solution. Change the regulations and you might in principle have solved the problem, even if in this case nobody can figure out quite how to do that.

But what strikes me overwhelmingly about the difference between bars/pubs in London, New York and Washington is that these three cities have completely different nightlife cultures. Those cultures are irreducible to the regulatory environment or to economic behaviour. The regulatory environment in London doesn’t do much to explain why, when you walk through Southwark on a winter’s evening at 6:30pm with the thermometer tipping 0 degrees centigrade, you see crowds of men and women in long dark coats standing on the sidewalk sipping pints of bitter. It doesn’t explain the fact that up until 1990 there basically wasn’t a decent atmospheric bar with good food in Washington, DC, or not one that would be recognised as such by someone from New York or London. It doesn’t explain the fact that even though breweries are allowed to own pubs in England, and are prevented from doing so in America, most pubs in London that are bought up by breweries or conglomerates have retained their individual characters and atmospheres, while in America they would almost certainly be swept under by company-wide branding campaigns. It doesn’t even explain why bars in Washington have gotten so much better over the past 15 years that when I go back, I barely recognise the place.

Andrew Sullivan

McArdle responds to Steinglass:

One can argue about whether our posts should reflect more on culture, but I can tell you why they do focus on regulatory issues:  we all live in DC.  And in DC, regulatory decisions are very clearly driving what the bar culture looks like.

The gentrification boom in DC has hit up against a limited supply of bars–and neighborhood commissions that are very resistant to quickly opening more of them.  The result is that no bar stays un-crowded for long; if it’s any good at all, it’s soon overwhelmed with a tidal wave of people fleeing the standing-room-only crowds at all the other bars.  The bars aren’t like this because most people in DC want to spend their Friday nights packed like cheap sardines; the bars are like this because there are so few of them in the areas where people under 35 live, that the only people who can bear to be in them are the people who will tolerate any conditions, including those of veal calves, if only they can endure them while holding a drink.

This is a new development in the areas of DC where, as it happens, Matthew Yglesias, Ryan Avent and I, all like to go out of an evening.  When I moved to DC a scant three and a half years ago, there were enough bars where you could enjoy a Thursday night seated in the company of friends. Then came January 2009, when I held a birthday get-together at a previously local place on 11th street.  Unfortunately, there wasn’t much getting together; more than half the people were turned away because of overcrowding.  Several bars had been shut down in Adams Morgan because the weren’t serving enough food to comply with their tavern licenses; the result was that Adams Morgan relocated to U Street.

Since then, this pattern has been repeated over and over; any bar that opens is pleasant for a month or so, then completely, miserably jammed.

What DREAMs May Come

John Hudson at The Atlantic with a round-up. Hudson:

In conservative blogging circles, the Democrat’s proposed DREAM Act is causing quite a stir.

Heather MacDonald at The Corner:

An illegal alien who brings his or her child into the country illegally undoubtedly assumes that that child will attend American schools at taxpayer expense.  The parent may also hope that the child will graduate from high school and go on to college. The DREAM Act, newly reintroduced by Sen. Harry Reid to the lame-duck session, puts the official imprimatur on those unofficial intentions, declaring that the U.S. expects and even welcomes such behavior.

Under the DREAM Act, any illegal alien under the age of 35 who entered the country before the age of 16 can apply for legal status if he obtains a GED or graduates from high school and begins post-secondary education. Gang members and those with DUI convictions are not barred from DREAM Act eligibility. The act signals to prospective illegal aliens the world over that if they can just get their child across the border illegally, they have put him on the path towards U.S. citizenship — and, as significant, the child will then be able to apply for legal status for his parents and siblings. And every such student will be granted in-state tuition rates by federal fiat, even if the state in which he resides bans in-state tuition for illegal immigrants.

DREAM Act beneficiaries are certainly the most sympathetic category of amnesty candidates, and opponents of the act have been accused of hard-heartedness. Yet the act indisputably encourages and incentivizes more illegal behavior. It continues to send the message that the U.S. is not serious about its immigration laws, but will always eventually confer the same benefits on people who break the law entering the country as on those immigrants who respected American law. The huge administrative costs of the act — it is conservatively expected to qualify 2.1 million illegal aliens for amnesty — will be borne by U.S. taxpayers and by legal aliens, whose fees fund the citizenship service

Will Wilkinson at Democracy in America at The Economist:

I think it’s useful in this debate to be as clear we can be. We’re mostly talking about Mexicans, so let’s just talk about Mexicans. Lots and lots and lots of Mexicans come across the border to the United States not because they’re a nation of heedless antinomians, but because this is (was?) where the work is. Many come because much of their their family resides here, legally or ilegally. It’s worth noting that the southwestern portion of the United States just was Mexico, once upon a time. There is an undeniable economic and cultural continuity between Mexico and the United States. The border distorts and disrupts it, but it cannot and will never put an end to it. The pattern of traffic between these two countries is not something to choke off, but something sensibly to regulate and rationalise.

“But we do regulate it sensibly!” you may insist. Well, suppose you’re a hardworking and ambitious Mexican with no family legally in the States and not much education, but you’ve got friends there, 50 miles away, and they tell you they’re getting steady, relatively well-paying work. One of the things that’s so attractive to you about America is it’s sound institutions, including its sturdy rule of law. You would very much like to migrate to the United States legally. So what are your options? Zip. Zilch. Zero. You have no options!  There is no way to “get in line” and “wait your turn” because there is no line for you to stand in that leads to the legal right to live and work in the United States. So you pack up one day, take a hair-raising hike through the desert with your young daughter, meet up with your friends in Tucson, and get to work on the American dream. What were you supposed to do? Consign yourself and your daughter to a life on the edge of poverty out of respect for the American rule of law? Please.

The DREAM Act sends the message that although American immigration law in effect tries to make water run uphill, we are not monsters. It says that we will not hobble the prospects of young people raised and schooled in America just because we were so perverse to demand that their parents wait in a line before a door that never opens. It signals that we were once a nation of immigrants, and even if we have become too fearful and small to properly honour that noble legacy, America in some small way remains a land of opportunity.

Yes, the DREAM Act also incentivises illegal activity. But if the activity is not one that ought to be illegal, perhaps we should consider changing the law? Something to consider, anyway. In the meantime, this small reform will make America a somewhat more decent place.

David Frum at The Week:

Well that seems compassionate! And it’s only a small group of people we’re talking about, right? Just 60,000 a year.

Wrong. Hugely wrong.

Let me give some alternative scenarios, all of which would become possible if the DREAM Act were enacted.

Possibility No. 1: You are an illegal alien who entered the country at age 21, too old to qualify for DREAM. You’ve been apprehended and are threatened with deportation. What to do? Simple — using falsified papers, you file an application under DREAM anyway. Filing an application immediately halts deportation proceedings.

Wait a minute, you wonder: won’t using false papers get me in trouble? Not a bit. Just the opposite. Even if the fraud is detected and your application is refused, you simply revert to your previous status. In the process, however, you have gained a new legal advantage: DREAM forbids the Department of Homeland Security from using any information in a DREAM application in deportation proceedings. So now you argue that the deportation proceedings are fatally tainted because you have yourself provided DHS with information that they could now use against you.

The ploy might fail. Still: what a great no-risk option!

Possibility No. 2:. You’re a 40-year-old illegal alien who entered the country as an adult. You have a third-grade education. You are barely literate even in Spanish. Your back is bothering you; you are not sure how long you can continue working. Quite frankly, no country on earth would regard you as a desirable immigrant. Don’t despair. DREAM can offer you too an amnesty and gain you access to a lifetime of taxpayer-funded disability payments.

You have kids don’t you? If they apply successfully under DREAM, they can sponsor you. While some talk about DREAM applicants as “skilled” immigrants, in fact the law’s requirements are so lenient that your kids would have to mess up very seriously to forfeit the law’s benefits. All they need to do is enroll in some institution of higher learning or the military and survive there for two years. Graduation is not required.

Does that sound expensive? Don’t worry: your kids will receive in-state tuition rates and will be eligible for federal student aid.

They’re too young for university? Don’t worry: They can file the papers at age 12. As soon as they give notice of their future intent to attend to college or join the military, they immediately receive safe haven.

They don’t find military life attractive? If they can show “significant hardship,” they can quit before their two years have been fulfilled. Honorable discharge is NOT a requirement under the DREAM law.

They have had a little trouble with the law? Maybe a history of moving violations that put people’s lives at risk? So long as they have not been convicted of a serious crime, they’re okay.

DREAM is an amnesty not only for the people described by The Economist blogger, but also for all their parents and siblings.

Possibility No. 3. I’m still living in Guatemala, but I’d dearly like to come to the United States. Can DREAM help me?

Si se puede.

DREAM sends a message to every teenager on planet Earth: Come to America. If you enter the United States before age 16, and if you can remain here for five years (or can buy papers that purport to show you have lived here for five years), you’re as good as a citizen already. No deportation proceedings. No risk that your application will be used against you. Lenient and subsidized requirements for permanent residency. What’s not to love?

Wilkinson responds:

First, it’s not quite right to think of DREAM, a narrowly tailored provision that offers a relatively small group of young people a path to citizenship only if they are able to clear a number or hurdles, as an “amnesty”. Second, the process by which our notional 40-year-old undocumented immigrant can become a citizen is precisely the same as the process by which Mr Frum’s Canadian father could become a citizen through Mr Frum’s sponsorship. It’s not amnesty, and Mr Frum is simply goading the nativist rabble by choosing to misuse language in this way. Moreover, Mr Frum effectively misrepresents his scenario by conveniently omitting the dispiritng timeline. Let’s fix that.So, you’re Mr Frum’s 40-year-old undocumented immigrant. DREAM, which requires you to be between 12 and 35 at the time of application, does nothing for you, even if you did come into the country as a child. But you have a daughter who does qualifies. Woohoo! You’re in like Flynn, right? Well, no. Probably not.

Suppose DREAM becomes law in 2011. Your kid applies right away and earns status as a “conditional legal resident” (or “CLR”). Now, can you your kid sponsor you for legal permanent residency? No, she cannot. Only citizens can sponsor their parents. Suppose your kid goes to college and stays out of trouble. The earliest she can apply to become an “LPR” or “legal permanent resident” (ie, get a green card) is 5 1/2 years after approval for conditional permament residency. That’s some time in 2016 at the earliest. Now, a green card-holder can apply for citizenship after five years. Under DREAM, as I understand it, once a CLR is approved for a green card, the time spent as a CLR counts toward citizenship. So someone approved for a green card under the auspices of DREAM ought to be able to apply for citizenship right away. Let’s assume miracles from the bureaucracy and say all these applications are processed and approved at the speed of light. So, thanks to DREAM, your daughter will be a citizen no sooner than 2016, at which point she can finally sponsor you (as long as she’s over the age of 21). But don’t get excited yet! You entered the country illegally, and were working illegally before applying for a green card, and that means you aren’t eligible for a green card. ( See question 10 here.) So, sorry, DREAM can’t help you.

Suppose you entered the United States legally on a visa and then left your minor daughter here once your visa expired, or something like that. In that case, she could sponsor you for permanent residency after qualifying for citizenship through DREAM. In this case, you could be an American as soon as 2021, assuming magical bureaucratic efficiency. Of course, among those young people able to work their way to citizenship through DREAM, how many will have parents who qualify for sponsorship? Not many.

Mr Frum ends by spreading a falsehood. He writes:

And best of all: DREAM stands as an ongoing invitation, forever and ever. DREAM’s benefits extend not only to people who happen NOW to be illegally present inside the United States. DREAM’s benefits will be extended to all those who may enter illegally in future.

This is flat-out wrong. Unfortunately, DREAM is a niggardly, one-time affair. According to the text of the bill, DREAM applies only if “the alien has been physically present in the United States for a continuous period of not less than 5 years immediately preceding the date of enactment of this Act…” That is to say, DREAM wouldn’t apply to kids who came to America three years ago, much less to any kids who comes in the future. Mr Frum is sowing confusion when he says that

DREAM sends a message to every teenager on planet Earth: Come to America. If you enter the United States before age 16, and if you can remain here for five years (or can buy papers that purport to show you have lived here for five years), you’re as good as a citizen already.

Were Mr Frum to read the bill, he would see that he has made a serious error. DREAM is a stopgap measure of exceedingly limited scope which would slightly mitigate the injustices wrought by America’s reality-defying immigration and citizenship law. I look forward to his correction.

David Frum here, here and here. Frum:

I’ll answer Will Wilkinson’s specific points, but I first have to say this: Wilkinson’s mode of arguing exemplifies why the immigration debate doesn’t ever seem to go anywhere.

Advocates of more and more immigration habitually use a 4-stage method best identified by Antony Jay and Jonathan Lynn in the Yes Minister series. The stages go as follows:

1) Nothing is going to happen.

2) Something may be about to happen, but we should do nothing about it.

3) Maybe we should do something about it, but there’s nothing we *can* do.

4) Maybe there was something we could have done, but it’s too late now.

Immigration proponents are so convinced that more immigration is good in itself that they do not always worry as much as they should about the way in which they achieve their aims. They sell huge society-changing transformations as small incremental steps.

When the sales pitch proves wrong or hugely exaggerated, they seem untroubled. Wilkinson’s own blitheness perfectly exemplifies the pattern. Running through his first post is a persistent undertone that the very idea of immigration laws is a big mistake. “Yes, the DREAM Act also incentivises illegal activity. But if the activity is not one that ought to be illegal, perhaps we should consider changing the law?”

Then when I point out the various ways in which this incentive operates, he squawks that the law in fact is “narrowly tailored” and applies only to “a relatively small group.”

Is it too Freudian to suspect that the lurid accusation of deceit repeatedly lodged by Will Wilkinson reveal an awareness of the credibility problems on his side of the argument?

Adam Ozimek at Modeled Behavior

Mark Krikorian at The Corner:

The Democrats are trying to tinker with the DREAM Act to make it more palatable. Most notably, they’ve lowered the top age for eligibility from 35 to 30, but that misses the point. As I note in my piece on the homepage, what’s important is the age when they arrived, not how old they are now — someone who’s lived here continuously since they were 12 months old is simply not in the same boat as someone who arrived a month before their 16th birthday and is now 21, but DREAM treats them the same.

And I didn’t even address the cost issue, about which my colleague Steven Camarota writes today. He estimates that the bill’s college-attendance requirements will cost U.S. taxpayers $6.2 billion in subsidies for educating the illegal aliens who are expected to enroll to get a green card. And the roughly 1 million additional illegal-alien students at state universities and community colleges will reduce the educational opportunities that would otherwise have been available to Americans.

Jena McNeill at Heritage:

There is a big reason why the DREAM Act was a campaign promise for Reid, the same reason the White House recently hosted high-level meetings with members of the Hispanic caucus regarding the bill and has expressed so much interest in passing it: The act would be an amnesty for millions of illegal aliens inside the United States. This is something the White House and Reid have been desperately seeking through a comprehensive immigration bill, but has yet to gain traction in Congress.

Amnesty has never been a good way to solve the illegal immigration problem—whether through the DREAM Act or a mass legalization. As we learned in the 1986 amnesty, doing so simply encourages more individuals to break the law and enter the United States illegally. Among several other concerns, the DREAM Act rewards those who violated immigration laws by granting them in-state tuition while state laws deny legal aliens on student visas tuition benefits. The act’s lax standards would make it tough to police for fraudulent applicants, while the government would be prohibited using information submitted to deport anyone who files a DREAM Act application and does not qualify.

If Reid moves forward, the DREAM Act debate will almost certainly be filled with nice anecdotes about college education, military service, and additional tax revenues. Don’t be misled. Despite these seemingly humanitarian aims, the White House and Reid know what the DREAM Act debate it really about—finding a way to avoid the law and legalize illegal immigrants inside the United States. Packing amnesty in pretty paper doesn’t mean it isn’t still an amnesty. Congress and the White House need to focus instead on reforms to the immigration system that will enforce the law, maintain security, and promote the economy. Such a system requires robust enforcement of immigration laws inside the U.S., a secure border, reforms in the visa system, and cooperation with Mexico and other appropriate countries on law enforcement/public safety issues as well as free market initiatives.

David Knowles at AOL:

The Dream Act, legislation designed to give children of undocumented workers who came to the United States under the age 16 a path to citizenship in exchange for a promise to attend college or join the military, will be debated in Congress today.

Alabama Republican Sen. Jeff Sessions, a staunch opponent of the Dream Act, penned an op-ed for CNN in which he stated the following:

Because the Dream Act does not expire, or impose any numerical cap, the scope of the bill’s amnesty program could be enormous. And by rewarding illegality, the legislation will incentivize even more of it — and send the message that future illegal immigrants will be rewarded with amnesty as well.

Meanwhile, one of the bill’s sponsors, Sen. Dick Durbin, D-Ill., pointed out that punishing the children of illegal immigrants who have grown up as Americans is itself un-American.

These brave young men and women, who have all this energy and all this dedication, have no country. They have no legal status in this country. They didn’t have any voice in that decision about whether to come here. They were the kids brought in the back of a car or the back of a truck into the United States. But they grew up here believing America was home.

Gary Locke, President Barack Obama’s commerce secretary, agrees with Durbin, telling reporters:

The American taxpayer has invested in them, and unless we pass the Dream Act, we will keep throwing away this hard-earned investment. Also, a quarter of startup companies that eventually went public in the past 15 years were started by immigrants, he said, meaning some of these students could “develop the next Google or Intel.

The conservative Heritage Foundation, on the other hand, sees little to like about the proposed legislation:

Among several other concerns, the Dream Act rewards those who violated immigration laws by granting them in-state tuition while state laws deny legal aliens on student visas tuition benefits. The act’s lax standards would make it tough to police for fraudulent applicants, while the government would be prohibited using information submitted to deport anyone who files a Dream Act application and does not qualify.

 

Mele WikiLeakmaka Is The Thing To Say

David Rothkopf at Foreign Policy:

The subtitle of this blog has been “How the World is Really Run” since the day it was launched, an editor’s play on the title of a book I wrote. But I am today inclined to lend that subtitle out to the publishers of the most recent tidal wave of information from WikiLeaks. Because the 250,000 State Department cables contained in the release offer up no single revelation as striking as the overall message they contain: The dark shadowy world of diplomacy and international intrigue is working just about precisely as you suspect it is.

Jeffrey Goldberg:

Quote of the year: “Ahmadinejad is Hitler.” This from Abu Dhabi Crown Prince Muhammad bin Zayed in July 2009. And then there is this very astute comment from the Crown Prince: “‘Any culture that is patient and focused enough to spend years working on a single carpet is capable of waiting years and even decades to achieve even greater goals.’ His greatest worry, he said, ‘is not how much we know about Iran, but how much we don’t.'” Some of you recall the international kerfuffle that erupted when the U.A.E.’s ambassador to the United States told me at the Aspen Ideas Festival that a military strike on Iran may become a necessity. It turns out he was understating the fear and urgency felt by his government, and other Gulf governments.

3. Since we all know that only Israelis and their neocon supporters in America seek a military attack on Iran’s nuclear program, Bahrain must be under the control of neocons: “There was little surprising in Mr. Barak’s implicit threat that Israel might attack Iran’s nuclear facilities. As a pressure tactic, Israeli officials have been setting such deadlines, and extending them, for years. But six months later it was an Arab leader, the king of Bahrain, who provides the base for the American Fifth Fleet, telling the Americans that the Iranian nuclear program ‘must be stopped,’ according to another cable. ‘The danger of letting it go on is greater than the danger of stopping it,'” he said.

The Saudis, too, are neocons, apparently: The Bahraini king’s “plea was shared by many of America’s Arab allies, including the powerful King Abdullah of Saudi Arabia, who according to another cable repeatedly implored Washington to ‘cut off the head of the snake’ while there was still time.”

4. How does Robert Gates know this? In a conversation with the then-French defense minister about the possibility of an Israeli strike on Iran, the defense secretary “added a stark assessment: any strike ‘would only delay Iranian plans by one to three years, while unifying the Iranian people to be forever embittered against the attacker.'” I am not suggesting that I know this is untrue; I’m just puzzled at how someone could reach this conclusion so definitively.

Spencer Ackerman at Danger Room at Wired:

Foreign potentates and diplomats beware: the U.S. wants your DNA.

If that chief of mission seemed a bit too friendly at the last embassy party, it might be because the State Department recently instructed U.S. diplomats to collect biometric identification on their foreign interlocutors. The search for the most personal information of all is contained in WikiLeaks’ latest publication of tens of thousands of sensitive diplomatic cables.

A missive from the Secretary of State’s office in April 2009 asked diplomats in Africa to step up their assistance to U.S. intelligence. Not only should diplomats in Burundi, Rwanda and Congo collect basic biographical information on the people they talk to — a routine diplomatic function — but they should also gather “fingerprints, facial images, DNA, and iris scans.”

There’s no guidance listed on how exactly diplomats are supposed to collect the unique identifiers of “key civilian and military officials.” In recent years, the U.S. military in Iraq and Afghanistan has built storehouses of biometric data to understand who’s an insurgent and who isn’t, all using small, portable eye and thumb scanners. But the State Department’s foray into bio-info collection hasn’t previously been disclosed.

Peter Beinart at The Daily Beast:

The hype-to-payoff ratio approximated Geraldo’s opening of Al Capone’s vaults. “Leaked Cables Uncloak U.S. Diplomacy,” hollered the headline on NYTimes.com. The latest WikiLeaks document dump, instructed the grey lady, offers an “extraordinary look at” American foreign policy that “is sending shudders through the diplomatic establishment, and could strain relations with some countries, influencing international affairs in ways that are impossible to predict.”

Then the Times began summarizing the documents, and the banalities began. Bullet Point 1: The U.S. is worried about loose nuclear materials in Pakistan but can’t do much about it. Bullet Point 2: American leaders are “thinking about an eventual collapse of North Korea” and hoping China will accept a reunified peninsula. Bullet Point 3: Washington is “bargaining [with various allies] to empty the Guantanamo prison.” Bullet Point 4: There are “suspicions of corruption in the Afghan government.” Bullet Point 5: The Chinese regime hacks into foreign computers. Bullet Point 6: Rich Saudis still fund al Qaeda. Bullet Point 7: Italian Prime Minister Silvio Berlusconi and Russian Prime Minister Vladimir Putin are tight. Bullet Point 8: Syria arms Hezbollah, but lies about it. Bullet Point 9: The U.S. tried to get Germany not to prosecute CIA agents accused of kidnapping. Bullet Point 10: Ireland is having financial trouble. (OK, I made that one up).

But maybe this isn’t fair. Maybe the cables, while mundane when taken in isolation, combine to provide a fascinating synthesis of America’s position in the world. Or maybe not. Overall, explained the Times, “The cables show that nearly a decade after the attacks of Sept. 11, 2001, the dark shadow of terrorism still dominates the United States’ relations with the world…They depict the Obama administration struggling to sort out which Pakistanis are trustworthy partners against Al Qaeda…They show American officials managing relations with a China on the rise and a Russia retreating from democracy. They document years of painstaking effort to prevent Iran from building a nuclear weapon—and of worry about a possible Israeli strike on Iran with the same goal.” Valuable insights—if you’ve been living under a rock all century.

Matt Steinglass at DiA at The Economist:

WikiLeaks’s release of the  “Collateral Murder” video last April was a pretty scrupulous affair: an objective record of combat activity which American armed forces had refused to release, with careful backing research on what the video showed. What we got was a window into combat reality, through the sights of a helicopter gunship. You could develop different interpretations of that video depending on your understanding of its context, but it was something important that had actually taken place.

Diplomatic cables are something entirely different. It’s part of the nature of human communication that one doesn’t always say the same thing to every audience. There are perfectly good reasons why you don’t always tell the same story to your boss as you do to your spouse. There are things Washington needs to tell Riyadh to explain what it’s just told Jerusalem and things Washington needs to tell Jerusalem to explain what it’s just told Riyadh, and these cables shouldn’t be crossed. There’s nothing wrong with this. It’s inevitable. And it wouldn’t make the world a better place if Washington were unable to say anything to Jerusalem without its being heard by Riyadh, any more than it would if you were unable to tell your spouse anything without its being heard by your boss.

At this point, what WikiLeaks is doing seems like tattling: telling Sally what Billy said to Jane. It’s sometimes possible that Sally really ought to know what Billy said to Jane, if Billy were engaged in some morally culpable deception. But in general, we frown on gossips. If there’s something particularly damning in the diplomatic cables WikiLeaks has gotten a hold of, the organisation should bring together a board of experienced people with different perspectives to review the merits of releasing that particular cable. But simply grabbing as many diplomatic cables as you can get your hands on and making them public is not a socially worthy activity.

Conn Carroll at Heritage:

There is nothing positive that can be said about the release of more than a quarter-million confidential American diplomatic cables by the rogue hacker organization WikiLeaks. WikiLeaks has recklessly and inexcusably put lives at risk. Any U.S. person who cooperated with WikiLeaks has committed a crime and should be prosecuted to the maximum extent of the law.

That said, WikiLeaks is not the end of the world. The fundamentals of U.S. relationships with other nations remain unchanged. Leaks are not going to stop nations from cooperating with the U.S., or for that matter sharing secrets with us. Nations cooperate with the U.S. because it is in their interest to do so. And no leak will stop nations from acting in their self-interest.

But what is in our best interest? This has not been a good month for the Obama Doctrine: The President came home empty-handed from Asia, North Korea fired artillery at South Korea just days after revealing nuclear facilities no one knew they had, and Obama failed to get the G-20 to take any action limiting trade imbalances. It was not supposed to be this way. After apologizing for all of our nation’s sins, the world was supposed to swoon at President Obama’s unparalleled charisma. As American military power withered away, President Obama would use soft power and the United Nations to manage world affairs. But like Woodrow Wilson and Jimmy Carter before him, this progressive foreign policy vision has failed.

Moe Lane:

Accused rapist Julian Assange* continued to justify the upcoming backlash against transparency this weekend by promising to illegally release more classified government documents on the notorious site Wikileaks. These documents in particular are apparently State Department diplomatic cables: up until, oh, today, those documents were typically much more blunt and ambiguity-free than the standard State Department bumpf, mostly because nobody out there considered that anyone would be insane enough to release them even if they had access. This will likely change – quickly – now that the diplomatic corps knows that its private communications are insecure; in other words, from now on the folks in the striped-pants brigade are going to be as mealy-mouthed in private as they are in public. As Allahpundit noted above, the Left should keep this in mind when trying in the future to boost State at Defense’s expense: Assange just made that harder for you.

And I will also note that, while I will happily ding President Obama for both his wrong actions and for not living up to his own side’s previously-established standards of behavior, this line of attack by Wikileaks is made up of pure garbage designed to weaken both my country and my government. The President needs his ambassadors to know what he wants; they need to be able to tell him what he can get. So it’s stupid to not be blunt and forthright in private about matters that require a softer public touch. It’s even more stupid for Wikileaks to keep publicly attacking the USA like this.

Because when the backlash comes, it’s going to splatter.

Steve Benen:

I would, however, like to know more about the motivations of the leaker (or leakers). Revealing secrets about crimes, abuses, and corruption obviously serves a larger good — it shines a light on wrongdoing, leading (hopefully) to accountability, while creating an incentive for officials to play by the rules. Leaking diplomatic cables, however, is harder to understand — the point seems to be to undermine American foreign policy, just for the sake of undermining American foreign policy. The role of whistleblowers has real value; dumping raw, secret diplomatic correspondence appears to be an exercise in pettiness and spite.

I’ve seen some suggestions that diplomats shouldn’t write cables that they’d be embarrassed by later if they were made publicly. I find that unpersuasive. I’m not going to pretend to be an expert in the nuances of on-the-ground international affairs, but I am comfortable with the notion of some diplomatic efforts being kept secret. Quiet negotiations between countries can lead, and have led, to worthwhile foreign policy agreements, advancing noble causes.

If the argument from the leakers is that there should be no such thing as private diplomacy, they’ll need a better excuse to justify this kind of recklessness.

Scott Johnson at Powerline:

The New York Times is participating in the dissemination of the stolen State Department cables that have been made available to it in one way or another via WikiLeaks. My friend Steve Hayward recalls that only last year the New York Times ostentatiously declined to publish or post any of the Climategate emails because they had been illegally obtained. Surely readers will recall Times reporter Andrew Revkin’s inspiring statement of principle: “The documents appear to have been acquired illegally and contain all manner of private information and statements that were never intended for the public eye, so they won’t be posted here.”

Interested readers may want to compare and contrast Revkin’s statement of principle with the editorial note posted by the Times on the WikiLeaks documents this afternoon. Today the Times cites the availability of the documents elsewhere and the pubic interest in their revelations as supporting their publication by the Times. Both factors applied in roughly equal measure to the Climategate emails.

Without belaboring the point, let us note simply that the two statements are logically irreconcilable. Perhaps something other than principle and logic were at work then, or are at work now. Given the Times’s outrageous behavior during the Bush administration, the same observation applies to the Times’s protestations of good faith.

Amanda Carey at The Daily Caller:

Former Alaska Governor Sarah Palin took to her favorite mode of communication Monday – Facebook – and harshly criticized the Obama administration’s response to the latest WikiLeaks release.

In a post titled “Serious Questions about the Obama Administration’s Incompetence in the Wikileaks Fiasco,” Palin wrote that the most recent WikiLeaks disclosure of previously classified documents raises serious concerns about the administration’s “incompetent handling of this whole fiasco.”

Palin went on to ask what steps have been taken since the first WikiLeaks release to stop the organization’s director, Julian Assange, from distributing even more harmful material. Palin barely paused long enough for any one of her fans to shout a loud “none!” at their computer screens before going on to classify Assange as an “anti-American operative with blood on his hands”.

“Assange is not a ‘journalist,’ any more than the ‘editor’ of al Qaeda’s new English-language magazine Inspire is a ‘journalist,’” wrote Palin. “His past posting of classified documents revealed the identity of more than 100 Afghan sources to the Taliban. Why was he not pursued with the same urgency we pursue al Qaeda and Taliban leaders?”

Megan Carpentier at TPM

The End? Part II: Speech, Speech, Speech!

Max Fisher at The Atlantic with an early round up.

Marc Ambinder:

President Obama has asked the television networks for 15 minutes tonight, and he’s going to pack quite a bit of messaging into that short period of time. Why do we need a speech marking the end of the combat mission in Iraq? It’s because we’re going to need, according to Obama, to understand the future of the war in Afghanistan and the interconnectedness of foreign and domestic policy in a way that reflects what Obama was able to do in Iraq.

What did he do? He set a time-frame and stuck to it. Iraq will now begin to fend for itself. He promised during his presidential campaign that he would end the Iraq war “responsibly.” He will note tonight that his administration managed to withdraw 100,000 troops from Iraq “responsibly.” He will portray this as a major milestone in his presidency.

We forget how integral Sen. Barack Obama’s decision to oppose the Iraq war was to his own political awakening, and how many contortions Hillary Clinton had to untwist in order to justify her own support for the war authority, and how, by the day of the general election, given the success of the surge (or the success of JSOC’s counterterrorism efforts), Iraq was no longer a central voting issue. Voters seemed to exorcise that demon in 2006, when they voted Democrats into Congress.

A large chunk of the speech will be taken up by the president’s careful description of the sacrifices that a million U.S. soldiers and diplomats have made by their service in Iraq, and how 4,400 Americans did not come home.

Then, a pivot point: the Iraq drawdown has allowed the president to refocus attention on the threat from Al Qaeda worldwide, and he will mention that the terrorist network is degraded, albeit still capable of waging terrorist attacks and intending to do so.

He will note that the government will be able to reap a bit of a post-Iraq transition dividend, allowing the administration to invest more in job creation, health care, and education here at home. (Subtly, the point: Obama wouldn’t have gone into Iraq, so we wouldn’t have had to spend as much as we did.) It’s time, he will say, to build our own nation.

Kevin Drum:

Since it’s a slow news day, let’s mull this over. First take: can you imagine anything that would piss off the liberal base more than acknowledging that the surge worked? You’d be able to hear the steam coming out of lefty ears from sea to shining sea. Second take: Even if he decided to do it anyway, would it be worthwhile? If he wants to be honest, Obama would have to at least mention all those other factors that Ambinder mentions, namely that the reduction in violence in 2007 was quite clearly the result of 4 S’s: Surge, Sadr ceasefire, Sectarian cleansing, and Sunni Awakening. But is this too much to talk about? And would it seem churlish to acknowledge the surge and then immediately try to take some of the credit away from it?

Third take: Forget it. Not only would mentioning the surge piss off liberals, but it would also imply some kind of “victory” in Iraq, and surely Obama can’t be dimwitted enough to come within a light year of claiming that, can he? Of course not. Not with sporadic violence back in the news and Iraqi leaders still stalemated on forming a government five months after the March elections.

So I’ll predict no direct mention of the surge. And since I’m usually wrong about this kind of stuff, I suppose you should try to lay down some money right away on Obama mentioning the surge tonight. But I still don’t think he’ll do it.

David Corn at Politics Daily:

Why is Barack Obama giving a speech on Iraq?

To mark the end of U.S. combat missions in the nation George W. Bush invaded over seven years ago, the president on Tuesday night will deliver a high-profile address from the Oval Office. Speeches from the Oval Office are usually reserved for the most pressing and profound matters of a presidency. And this partial end of the Iraq war — the United States will still have 50,000 troops stationed there — is a significant event. It demonstrates that Obama has kept a serious campaign promise: to end this war.

But with the economy foundering — many of the recent stats are discouraging — most Americans are probably not yearning above all for a report on Iraq and likely will not be all that impressed with Obama’s promise-keeping on this front. The main issue remains jobs, especially as the congressional elections approach.

Summer is essentially done. It’s back-to-school and back-to-work time for many of us. But on Obama’s first days after his Martha Vineyard’s vacation, he’s devoting (at least in public) more time and energy to foreign policy matters than the flagging economy. Worried Democrats must be livid. (Most House Democrats are still campaigning in their districts and are not yet back in Washington to gripe about their president.)

Wars are the most significant stuff of a presidency. There’s not enough media attention devoted to the Afghanistan war. But politically there’s little or no payoff for an Iraq war address. Obama can’t brag, “Mission accomplished.” (In fact, on Monday, press secretary Robert Gibbs said Obama would not be using those words.) He can’t declare victory. He can only declare a murky end to a murky war. That’s not going to rally the Democrats’ base or win over independents. It was not mandatory for Obama to deliver such a high-profile speech. Vice President Joe Biden traveled to Baghdad to commemorate this milestone. The administration has conducted other events regarding the end of combat operations. It’s been duly noted.

David Frum at FrumForum:

Just guessing, but here’s why:

The president’s biggest political problem is the disillusionment of his liberal voters. Contra Fox News, they do not see a liberal president doing liberal things. They see a consensus president rescuing Wall Street. The job situation remains dismal, the administration is deporting illegal immigrants, and where are the gays in the military?

What Obama needs to do between now and November is pound home the message: I have kept faith with my voters on their big concerns, healthcare and the Iraq war. Now those voters must keep faith with me.

Ronald Reagan could count on a cadre of conservatives to defend his actions against any and all critics. A friend once teased Bill Rusher, then publisher of National Review: “Whenever Reagan does something awful, you defend it on one of two grounds: either that Reagan had no choice, or that the full wisdom of his action will be disclosed to lesser mortals in God’s good time.” According to legend, Rusher answered, “May I point out that the two positions are not necessarily incompatible?”

Nobody seems willing to do for Obama what Rusher did for Reagan. So Obama must do the job himself. Tonight’s speech is part of that job. Message: I ended George Bush’s war. Vote Democratic.

The trouble is: This message seems unlikely to work in the way Democrats need. Obama’s speech is much more likely to alienate marginal voters than to galvanize alienated liberals, and for this reason:

Obama’s liberal voters will not abide any whiff of triumphalism in the president’s speech. For them, Iraq was at best a disaster, at worst a colonialist war crime. (Elsewhere on the Politics Daily site, David Corn’s colleague Jill Lawrence specifies what she’d like to hear the president say: “Never again.”)

But most Americans want and expect triumphs. “Americans love a winner. Americans will not tolerate a loser.” So said George Patton on the eve of D-Day, and he was right. And if President Obama declines to declare himself a winner, guess what alternative remains? Exactly.

Democracy In America at The Economist:

8:20: All in all, a nice speech by Mr Obama, in my opinion. Hit most of the right notes.

8:19: Agreed, though “they are the steel in the ship of our state” was a little much.

8:19: Call me a shallow booster, but that part about troops coming home, from the predawn dark to the excerpt below, was great prose. Just beautiful. Very affecting.

8:18: “Who fought in a faraway place for people they never knew”—that’s some beautiful iambic hexameter right there.

8:18: This turned into a rather moving tribute to the troops.

8:17: The shift from the war-ending announcement to the nation-building task reminds me of the BP speech—from the disaster to a different energy future was a stretch too far.  A good speech makes one or two strong points, not lots.

8:17: Yep—there’s the money: a post 9/11 GI bill. He’s daring Republicans to challenge it.

8:17: Is that a subtle gauntlet—the reference to doing right by our veterans?

8:16: This is starting to feel a little platitudinous. Time to dangle Beau from the upstairs window.

8:15: By one estimate, America has spent about $750 billion on the Iraq war.

8:14: Blaming the deficits on the war? True up to a point, but …

8:14: Also very nicely done—not setting a timetable for Afghan withdrawal. That makes it his more than Iraq. Double-down.

8:13: “As we approach the tenth anniversary, there are those who are asking tough questions about our mission there.” And I’m not going to answer those questions. PUNT!

8:12: Can’t explain why but the Oval Office format doesn’t play to Mr Obama’s significant strengths as a communicator. Maybe those curtains…

8:12: Having said that, I enjoyed this comment from one of Kevin Drum’s readers: “The surge worked just like stitches work to close a wound after improperly handling a knife.”

8:11: Why not thank him for the surge? It was a courageous, albeit very late in coming, policy.

8:10: Very nicely done—the reach-out to GWB. He didn’t knuckle under and thank him for the surge (as well he shouldn’t), but it was a graceful acknowledgement.

8:09: “A belief that out of the ashes of war, a new beginning could be born in this cradle of civilization.” Don’t feed the neocons.

8:09: Odd no mention of Saddam. If the war achieved anything it was toppling a mass murdering dictator. But that would be giving too much credit to Bush.

8:08: This part (Iraqis are a proud people, only Iraqis can do this and that) has the feeling of a plea.

8:08: Nice wiggle room: when a representative government is in place, then they will have a strong partner in the United States (but until then…?)

8:07: Is that true: that Iraqi forces have “taken the fight to” al-Qaeda, and have weakened them?

8:07: Credible elections, yes, but how can the US get the warring politicos to form a credible government?

8:06: It’s quite a valedictory tone, considering there are 50,000 troops still there.

8:05: Praising the courage of the armed forces is understandable and even obligatory but also a wonderful way to dodge the question of the whether the war was worthwhile

8:03: “Ahem, these are the reasons I did not support this war.”

8:02: Have other presidents had so many family pictures behind them during Oval Office addresses? Nice touch.

8:01: On the question of whether Mr Obama will give Mr Bush credit: I think he should. But I also think Mr Obama’s Afghan strategy is the sincerest acknowledgment of the surge’s success.

8:00pm: And we begin.

Instapundit:

ABSOLUT VICTORY: STEPHEN GREEN IS Drunkblogging Obama’s Iraq Speech.

Bush got a mention, the troops got two mentions — but I haven’t hear thanks to either one. . . .

What the hell is this? Seriously. We were promised an update on Iraq. Instead we’re getting a defense of Obamanomics, which unlike the Surge (anyone?), has been a total failure.

Read the whole thing. And weep, or laugh, or something. Drink!

UPDATE: More from Prof. Jacobson.

And here’s the full text of Obama’s speech.

Allah Pundit:

8 p.m. ET across the dial. It’s billed as an Iraq speech, but that’s not really what it is. The “key part,” apparently, will be a renewed call to “take the fight directly to al Qaeda” by finishing the job in Afghanistan. (Wouldn’t taking the fight to AQ require operations in Pakistan, not Afghanistan?) It’s also being billed as a “mission unaccomplished” speech, as the White House is ever mindful after Bush of the pitfalls in celebrating too early. But that’s not really what this is either. Like it or not, by investing the end of combat ops with the grandeur of an Oval Office address, The One is necessarily signaling completion of the task. And why not? The public couldn’t be clearer as to how it feels about renewing combat operations if Iraqi security starts to fall apart. This is closure, for better or worse.

Because it is closure, and closure at a moment when things are ominously open-ended in Iraq, I admit to having no appetite today for the standard left/right recriminations about how much Bush screwed up or whether Obama should credit him for the surge. (I think he will acknowledge Bush tonight, for what it’s worth, mainly to signal that this is an occasion that transcends partisanship. But never underestimate the political instincts of the perpetual campaigner.) Instead, since we’re putting a bookend on history, I offer you this grim big-picture reminiscence by star NYT correspondent John Burns, who was on the ground over there until 2007. Today is a day that’s taken forever to arrive, he says, and yet it still seems to have arrived too soon.

Ann Althouse:

Obama on Iraq: Mission Accomplished.

And now he would like you to pay attention to domestic issues. Okay?

Jennifer Rubin at Commentary:

But most of all, the bulk of the speech had nothing to do with either Iraq or Afghanistan — it was a pep talk for his domestic agenda. This cements the sense that he simply wants out of messy foreign commitments. He also repeated a number of domestic policy canards. This was among the worst, blaming our debt on wars rather than on domestic fiscal gluttony: “We have spent over a trillion dollars at war, often financed by borrowing from overseas. This, in turn, has short-changed investments in our own people, and contributed to record deficits. For too long, we have put off tough decisions on everything from our manufacturing base to our energy policy to education reform.”

He is arguing for more spending.

Obama is still candidate Obama, never tiring of reminding us that he kept his campaign pledge and ever eager to push aside foreign policy challenges so he can get on with the business of remaking America. All in all, it was what we were promised it would not be — self-serving, disingenuous, ungracious, and unreassuring.

UPDATE: COMMENTARY contributor Jonah Goldberg’s smart take is here.

UPDATE II: Charles Krauthammer’s reaction is here.

Bill Kristol at The Weekly Standard:

President Obama opposed the war in Iraq. He still thinks it was a mistake. It’s therefore unrealistic for supporters of the war to expect the president to give the speech John McCain would have given, or to expect President Obama to put the war in the context we would put it in. He simply doesn’t believe the war in Iraq was a necessary part of a broader effort to fight terror, to change the Middle East, etc. Given that (erroneous) view of his, I thought his speech was on the whole commendable, and even at times impressive.

UPDATE: Ross Douthat

George Packer at The New Yorker

Scott Johnson at Powerline

Jonah Goldberg at The Corner

Matt Welch at Reason

UPDATE #2: Bill Scher and Matt Lewis at Bloggingheads

Shave And A Haircut, Two Bits And A Whole Lot Of Red Tape

Karl Smith:

For example, in most jurisdictions cutting hair at home can legally be done with a vacuum cleaner but cutting it for pay requires schooling, examination and a licensing fee.

Matthew Yglesias:

The way I’ve been getting my hair cut for the past six months or so is that I bought a pair of hair clippers and I do it myself. I normally trim about twice a week, and this lets me keep the hair short at an acceptable cost. Once I screwed it up, then my hair looked funny for like a day until I figured out how to fix it.Meanwhile, meet the District of Columbia Board of Barber and Cosmetology:

The DC Board of Barber and Cosmetology (Board) regulates the practice of barbering and cosmetology while working diligently to raise the standards of practice; ensure quality service; establish accepted codes of ethical behavior, and protects the health, safety and welfare of the citizens and visitors of the District of Columbia by upholding the city’s Barber and Cosmetology laws and regulations. The Barber and Cosmetology license law (pdf) is defined in the Barber and Cosmetology Municipal Regulations, which took effect on May 2001.

The Board consists of eleven members appointed by the Mayor. The Board consist of three (3) barbers, three (3) cosmetologists, threes (3) specialists, all license and practicing for at least three (3) years. There are two (2) members (non-license) representing consumers. Six members of the Board constitute a quorum.

Regulation of this sort seems totally unnecessary. People don’t die of bad haircuts, and since hairstyle is a quintessential matter of taste there’s absolutely no reason to think consumers can’t figure out for themselves who has a decent reputation as a cutter of hair. You can cut your own hair perfectly safely in your own house, and if you screw it up all that happens is you need to find a real professional to fix it. But what’s more, even if regulation were somehow a good idea, the composition of the board couldn’t possibly serve a legitimate consumer protection function. It’s overwhelmingly composed of people from the industry whose incentive is to limit competition and raise prices.

Don Suber:

Congratulations, Matthew Yglesias, you have just discovered what my economics professors used to call Barriers To Entry, in much the same way Charlton Heston discovered the secret ingredient for soylent green.

All those business lobbyists in Washington? They are not there to stop legislation. They are there to write legislation. Of course BP endorsed tougher regulations on oil drilling. It helps their side businesses in alternative energy and keeps wildcatters from drilling for oil.

Those tough regulations on Wall Street? Goldman Sachs wrote them. Hey, it paid Obama a million bucks for that seat at the table.

When I get time, I will explain why Bill Gates and other billionaire liberals create tax-free — er, non-profit — foundations. A hint: John D. Rockefeller V was born a millionaire.

James Joyner:

Matt Yglesias figures that, since he’s able to cut his own hair, it’s silly to license barbers.

His commenters point out to him, fairly rudely, that people who handle straight razors probably ought to have some training and prospect of inspection from the authorities for health reasons.  And that beauticians, who handle dyes and other chemicals, really need to be regulated.   Apparently, they’ve explained this to him once or twice before, and hence their irritation.

Mostly, I think the commenters are right.  While the free market would probably regulate simple barber shops — as opposed to beauty shops — with reasonable efficiency, we’d hate to have barbers routinely cutting people with infected implements.   Let’s just say that the signaling mechanisms for that sort of thing are too slow for comfort.

Further, in terms of arguing by analogy, if Matt is an unlicensed barber, I’m an unlicensed taxi driver and restaurateur.  The idea that because people can be trusted to do something for themselves, they should therefore be allowed to do the same things for the public on a professional basis is rather thin.

Kevin Drum:

You’ll be unsurprised to know that I don’t have a lot to add on this subject. But I did get into a conversation about this with my haircutter once, and she pointed out that there’s more to this business than you might think. It’s true that clipping hair — which is the only side of the business that Matt and I ever see — isn’t especially dangerous. But for more complicated jobs, hair professionals handle a lot of dangerous chemicals and they need to know how to use these properly to insure that they don’t do some serious damage to their customers. That, apparently, is part of what they teach you at cosmetology school.

That’s what she said, anyway. Alternatively, maybe it’s all just a big scam. After all, plenty of women give themselves home perms and seem to survive the experience. Hair professionals should feel free to school us in comments.

Alex Massie:

Matt’s critics say that anyone using sharp objects or chemicals such as peroxide needs to be regulated and inspected. This, my friends, is a reminder that the American mania for credentialism (cf journalism) frequently travels well into the realm of the absurd.

Happily, this sceptered isle is a freer place entirely. No surprise then that the British Hairdressing Council is not happy. From their FAQ:

But surely everyone must be qualified before being allowed to practise?

Alas, not so; in fact, quite the opposite. Here in Britain, anyone is free to practise as a hairdresser without registration, without qualification, even without proper training. In short, hairdressing is totally unregulated.So is there no yardstick by which to judge hairdressers?

Yes, there is. In 1964, Parliament passed the Hairdressers Registration Act to give status to hairdressers and assurance to consumers. Under the Act, the Hairdressing Council (HC) was created to establish and maintain a register of qualified hairdressers. Hence, every State Registered Hairdresser (SRH) is officially recognised as qualified to practise hairdressing on the public.

Are most hairdressers registered?

Sadly, they are not. The 1964 law left registration a voluntary option. Only about ten per cent of hairdressers have ever exercised their right to a place on the official register. At the same time, with the industry unregulated, many unregistered operators might not be eligible for inclusion on the register.

Where does this leave the consumer?

In a far from ideal position. Choosing a practitioner in any unregulated industry is tricky; in an industry where part of the human person is being treated, it truly can be a lottery. While many consumers no doubt chance upon good stylists, others stray into the hands of incompetent operators and have experiences ranging from overpriced and unsatisfactory services to damaged hair and even injured scalp and facial tissue.

Surely all hairdressers are accountable for their professional actions? Isn’t this the role of the Hairdressing Council?

Had registration been mandatory, the Hairdressing Council would indeed regulate hairdressing much as the Medical and Dental Councils, for instance, regulate their sectors. However, so long as the Act remains voluntary, the HC has jurisdiction over SRHs only – complaints against whom are very few and far between.

Something must be done! To be sure…

If it can, why won’t Parliament take action?

Action by government ministers, rather than back bench MPs, is what’s needed. For the record, ministers are requested, regularly, to amend the Act. This campaign for a tightening of the law, spearheaded by the Hairdressing Council, is supported by the industry trade bodies, consumer groups, much of the media and, not least, consumers. A great many individual MPs also support the regulation of hairdressing.

And where does government stand on the regulation of hairdressing?

To begin, a few facts: First, no government is going to commit parliamentary time to bringing in legislation it feels to be unnecessary*. Second, no government is going to introduce what it regards as unnecessary regulation. Third, regulation, of pretty well any sort, is increasingly viewed at best with suspicion and at worst with contempt by business interests, including many salon owners.
Fourth, governments tend to be wary of introducing laws viewed unfavourably by large or significant sections of the community. 
As to the stances adopted by recent governments on hairdressing regulation, when in power the Conservatives refused, consistently, to contemplate action. Their argument, repeated many times, was that “market forces are a sufficient regulator”. The current Labour government has listened to and acknowledged the merits of the case for regulation but has, at least so far, declined to act on the matter.

Have other measures been tried, through ordinary MPs in Parliament to bring in regulation?

Since the voluntary registration law was introduced in 1964, initiatives such as Early Day Motions, Ten Minute Rule Bills, Ministerial Questions and Private Members’ Bills have all been tried by helpful and supportive MPs. But lacking government support, none of these has succeeded. However, be sure efforts will continue.

I’m sure they shall! Somehow, however, the country has survived an unregulated hairdressing and barber-shop industry all these years and may yet, with god’s providence, do so in the future.Mind you, Sweeney Todd was a Londoner…

*If only this were true…

More Yglesias:

A number of people, including many commenters here and even alleged conservative James Joyner think you should need a professional license to become a barber because you might hurt someone with a straight razor. Uh huh. At best this would be an argument for regulating people who do shaves with a straight razor, which would be considerably narrower than current comprehensive regulation of hair stylists.

Meanwhile, though “torts and the free market will take care of it” isn’t the answer to everything, it’s surely the answer to some things. Getting some kind of training before you shave a dude with a straight razor is obviously desirable in terms of strict self-interest. If you screw it up in a serious way, you’ll face serious personal consequences and the only way to make money doing it—and we’re talking about a very modest sum of money—is to do it properly. People also ought to try to think twice about whether their views are being driven by pure status quo bias. Barbers are totally unregulated in the United Kingdom, is there some social crisis resulting from this? Barber regulations differ from state to state, are the stricter states experiencing some kind of important public health gains?

Last you really do need to look at how these things play out in practice. If you just assume optimal implementation of regulation, then regulation always looks good. But as I noted in the initial post the way this works in practice is the boards are dominated by incumbent practitioners looking to limit supply. One result is that in Michigan (and perhaps elsewhere) it’s hard for ex-convicts to get barber licenses which harms the public interest not only by raising the cost of haircuts, but by preventing people from making a legitimate living. States generally don’t grant reciprocity to other states’ licensing boards, which limits supply even though no rational person worries about state-to-state variance in barber licensing when they move to a New Place. In New Jersey, you need to take the straight razor shaving test to cut women’s hair because they’re thinking up arbitrary ways to incrementally raise the barrier to entry.

Mike Konczal at Rortybomb:

It’s worth noting that Barack Obama, back when he was a state senator in Illinois, pushed against some of this when it came to jail sentences and prohibitions on getting regulatory licenses:

Town Hall Meetings: On August 15 and 16, 2003 the North Lawndale Employment Network sponsored the annual Town Hall meeting for Congressman Danny Davis at Malcolm X College in Chicago. Brenda Palms Barber was one of the distinguished speakers for the Congressman’s opening address. Ms. Barber and Anthony Burton participated on a panel with State Senator Barack Obama and State Representative Constance Howard to discuss the federally funded Going Home program and several new laws that were passed by the state lawmakers. The lawmakers introduced to the audience several bills that had been passed, including one that would change some of the expungement laws in the State of Illinois and one bill that would allow formerly incarcerated individuals to seek regulatory licenses in several fields including barbering, nail technicians, cosmetology and dead animal removal. Under this bill, the formerly incarcerated individual would have the opportunity to seek a license once they have served their time in prison and have been given a certificate of good standing by the State of Illinois. NLEN also set up a booth at the Town Hall meeting to highlight its program and accomplishments.

Back then if you had a jail record you couldn’t receive most regulatory licenses. So if you were trying to escape from a life of crime, or even if you were tagged with a minor crime during a wayward period in your life, you would automatically have a wide variety of occupations immediately shut off from you. You couldn’t be a barber for instance. (You also probably couldn’t be a licensed fortune teller.) Whatever the idea behind this, in practice it’s going to take people at the edges and shut off a number of crucial options to them. I don’t know if this exists in most states, but it’s an obvious way to begin to push back against the worst excesses of license overkill.

So beyond just being a hassle these licenses can be a major form of explicit job segregation and can have major distributional problems associated with them.

UPDATE: Doug J.

Jonathan Adler

UPDATE #2: More Yglesias

Conor Friedersdorf here and here

Kevin Drum

Adam Serwer at The American Prospect

UPDATE #3: Matt Steinglass at DiA at The Economist