Tag Archives: Ross Douthat

Us And Egypt, Egypt And Us

Bruce Riedel at The Daily Beast:

The Jasmine Revolution in Tunisia has sent a shock wave through the Arab world. Never before has the street toppled a dictator. Now Egypt is shaking, Hosni Mubarak’s 30-year-old regime faces its most serious threat ever. The prospect of change in Egypt inevitably raises questions about the oldest and strongest opposition movement in the country, the Muslim Brotherhood , also known as Ikhwan. Can America work with an Egypt where the Ikhwan is part of a transition or even a new government?

The short answer is it is not our decision to make. Egyptians will decide the outcome, not Washington. We should not try to pick Egyptians’ rulers. Every time we have done so, from Vietnam’s generals to Afghanistan’s Hamid Karzai, we have had buyer’s remorse. But our interests are very much involved so we have a great stake in the outcome. Understanding the Brotherhood is vital to understanding our options.

The Muslim Brethren was founded in 1928 by Shaykh Hassan al Banna as an Islamic alternative to weak secular nationalist parties that failed to secure Egypt’s freedom from British colonialism after World War I. Banna preached a fundamentalist Islamism and advocated the creation of an Islamic Egypt, but he was also open to importing techniques of political organization and propaganda from Europe that rapidly made the Brotherhood a fixture in Egyptian politics. Branches of the Brotherhood grew across the Arab world. By World War 2, it became more violent in its opposition to the British and the British-dominated monarchy, sponsoring assassinations and mass violence. After the army seized power in 1952, it briefly flirted with supporting Gamal Abdel Nasser’s government but then moved into opposition. Nasser ruthlessly suppressed it.

Andrew McCarthy at National Review on Riedel:

One might wonder how an organization can be thought to have renounced violence when it has inspired more jihadists than any other, and when its Palestinian branch, the Islamic Resistance Movement, is probably more familiar to you by the name Hamas — a terrorist organization committed by charter to the violent destruction of Israel. Indeed, in recent years, the Brotherhood (a.k.a., the Ikhwan) has enthusiastically praised jihad and even applauded — albeit in more muted tones — Osama bin Laden. None of that, though, is an obstacle for Mr. Riedel, a former CIA officer who is now a Brookings scholar and Obama administration national-security adviser. Following the template the progressive (and bipartisan) foreign-policy establishment has been sculpting for years, his “no worries” conclusion is woven from a laughably incomplete history of the Ikhwan.

By his account, Brotherhood founder Hassan al-Banna “preached a fundamentalist Islamism and advocated the creation of an Islamic Egypt, but he was also open to importing techniques of political organization and propaganda from Europe that rapidly made the Brotherhood a fixture in Egyptian politics.” What this omits, as I recount in The Grand Jihad, is that terrorism and paramilitary training were core parts of Banna’s program. It is by leveraging the resulting atmosphere of intimidation that the Brotherhood’s “politics” have achieved success. The Ikhwan’s activist organizations follow the same program in the United States, where they enjoy outsize political influence because of the terrorist onslaught.

Banna was a practical revolutionary. On the one hand, he instructed his votaries to prepare for violence. They had to understand that, in the end — when the time was right, when the Brotherhood was finally strong enough that violent attacks would more likely achieve Ikhwan objectives than provoke crippling blowback — violence would surely be necessary to complete the revolution (meaning, to institute sharia, Islam’s legal-political framework). Meanwhile, on the other hand, he taught that the Brothers should take whatever they could get from the regime, the political system, the legal system, and the culture. He shrewdly realized that, if the Brothers did not overplay their hand, if they duped the media, the intelligentsia, and the public into seeing them as fighters for social justice, these institutions would be apt to make substantial concessions. Appeasement, he knew, is often a society’s first response to a threat it does not wish to believe is existential.

Ron Radosh:

As bad as Mubarak is, and the Egyptian people have good reason to despise him, he is a lot better than other dictators who have led regimes in the Middle East. Remember Saddam Hussein, and also recall the forces that took power in Iran after the populace ousted the shah in 1979. I vividly remember all those student protesters on U.S. campuses bearing photos of the victims tortured by the shah’s secret police, and demanding the Shah’s ouster and his replacement by the great democratic revolutionaries led by the Ayatollah Khomeini. That was a popular theme as well in precincts of the always wise American left, symbolized by the arguments of Princeton University political scientist Richard Falk, or the comment of Jimmy Carter’s UN Ambassador Andrew Young that Khomeini was a “saint.”

It is most instructive to look back at Falk’s arguments, made a scant two weeks after the shah’s government fell and he fled Iran, and the Grand Ayatollah Khomeini returned to the country. Khomeini, Falk wrote in The New York Times (Feb.16, 1979), “has been depicted in a manner calculated to frighten,” and President Jimmy Carter had “associated him with religious fanaticism.” He was also “defamed” by the news media, some of whose pundits dared to call Khomeini an advocate of “theocratic fascism.”

Rather than being a religious leader who fit any of those dire characteristics made by his enemies, the movement had “a nonviolent record.” In addition, the would-be radical Islamist was a man who pleaded with Iran’s Jews to stay in the country. Certainly, even Falk had to acknowledge that the coming leader was against Israel. But that “of course” was due to the fact that Israel “supported the shah” and had not “resolved the Palestinian question.”

Khomeini was not dissembling, Falk assured his readers, since he expressed “his real views defiantly and without apology.” Moreover, his closest advisers were “uniformly composed of moderate, progressive individuals” and those he sought to lead a new government, all of whom “share a notable record of concern for human rights and see eager to achieve economic development that results in a modern society.” The reason the entire opposition deferred to Khomeini was not due to coercion, but because they knew that he and the Shiite “tradition is flexible in its approach to the Koran and evolves interpretations that correspond to the changing needs and experience of the people.” Its main desire and “religious orientation” was concern “with resisting oppression and promoting social justice.”

He knew that Khomeini sought “not to govern,” but instead simply to “inspire.” That is why he would live in the holy city of Qum, a place removed “from the daily exercise of power.” He would simply be a “guide or, if necessary, …a critic of the republic.” He would thus be able to show the world what “a genuine Islamic government can do on behalf of its people.” Falk assured readers that Khomeini scorned “so-called Islamic Governments in Saudi Arabia, Libya and Pakistan.” Thus one could talk of “Islam’s finest hour,” in which Khomeini had created “a new model of popular revolution based, for the most part, on nonviolent tactics.” Iran, he knew, would” provide us with a desperately needed model of humane governance for a third-world country.”

And you wonder why those of us who have become conservatives no longer trust the great spokesmen of the American left/liberal intelligentsia.

Ross Douthat in NYT:

The memory of Nasser is a reminder that even if post-Mubarak Egypt doesn’t descend into religious dictatorship, it’s still likely to lurch in a more anti-American direction. The long-term consequences of a more populist and nationalistic Egypt might be better for the United States than the stasis of the Mubarak era, and the terrorism that it helped inspire. But then again they might be worse. There are devils behind every door.

Americans don’t like to admit this. We take refuge in foreign policy systems: liberal internationalism or realpolitik, neoconservatism or noninterventionism. We have theories, and expect the facts to fall into line behind them. Support democracy, and stability will take care of itself. Don’t meddle, and nobody will meddle with you. International institutions will keep the peace. No, balance-of-power politics will do it.

But history makes fools of us all. We make deals with dictators, and reap the whirlwind of terrorism. We promote democracy, and watch Islamists gain power from Iraq to Palestine. We leap into humanitarian interventions, and get bloodied in Somalia. We stay out, and watch genocide engulf Rwanda. We intervene in Afghanistan and then depart, and watch the Taliban take over. We intervene in Afghanistan and stay, and end up trapped there, with no end in sight.

Sooner or later, the theories always fail. The world is too complicated for them, and too tragic. History has its upward arcs, but most crises require weighing unknowns against unknowns, and choosing between competing evils.

The only comfort, as we watch Egyptians struggle for their country’s future, is that some choices aren’t America’s to make.

Justin Logan at Cato on Douthat:

The fact that theories are imperfect does not make them any less necessary.  We take refuge in foreign policy theories because there is no alternative.  As Ben Friedman pointed out in responding to Douthat previously, it is impossible to have foreign policies without foreign-policy theories.  The same goes for economics, domestic politics, and a whole range of human behavior.  People take (or oppose) various actions based on their expectations about what outcomes the actions will (or will not) produce.  Whether people are conscious of it or not, our expectations are products of our theories.  People disagree about which theories are good and which are bad, but we all have them.

Laura Rozen at Politico:

Just got late word that Dunne, Kagan and others from their group including former Bush NSC Middle East hand Elliott Abrams, as well as George Washington University Middle East expert Marc Lynch, and the National Security Network’s Joel Rubin, formerly a U.S. Egypt desk officer, have been invited to the White House Monday.

“We do think-tank sessions on an almost weekly basis,” a senior administration official told POLITICO’s Playbook. “The goal is to bring in some of the top opinion leaders and thinkers on a given subject and have a candid conversion. We’ve done it with China, Afghanistan, Iraq, etc. Today’s topic is Egypt.”

 

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“Star Wars… Nothing But Star Wars…”

Michael Lind at Salon:

On the left, technological optimists were replaced by Rousseauian romantic primitivists. In the 1970s, Green guru Amory Lovins promulgated the gospel that “hard” sources of energy like nuclear power are bad and that called for a “soft path” based on hydropower, wind and solar energy. Other Green romantics decided that even hydropower is wicked, because it is generated by dams that despoil the prehuman landscape.

The New Left of the 1960s and 1970s longed for small, participatory communities, and rejected the giant organizations that New Deal liberals had taken pride in. In the 1980s and 1990s, new urbanists converted most progressives to their nostalgia for the ephemeral rail-and-trolley based towns of the late nineteenth century. GM foods, which New Deal liberals like Franklin Roosevelt and Lyndon Johnson would have embraced as a way to feed multitudes while sparing land for wilderness, were denounced by progressives who favored “heirloom” turkey and melons that the Pilgrims might have eaten. The increasingly reactionary American left, disenchanted with nuclear power plants and rockets and suburbs, longed to quit modernity and retire to a small town with an organic farmers’ market and an oompah band playing in the town park’s bandstand.

A similar intellectual regression to infantilism took place on the right in the late twentieth century. Between the 1930s and the 1970s, conservatism was defined by big business anti-statism, not by neotraditionalism. The Republican opponents of New Deal Democrats shared the New Dealers’ faith in science, technology and large-scale industry. They just wanted business to keep more of its prerogatives.

Contrast Eisenhower-era business conservatism with the religious right of Pat Robertson, Jerry Falwell and other evangelicals and fundamentalists in the late 20th and early 21st centuries. By 2000, an entire national party, the Republicans, was intimidated by religious zealots. No Republican presidential candidate could support legal abortion or criticize the pseudoscientific “creationist” alternative to evolutionary biology. Hatred of biotechnology, in the form of GM foods and human genetic engineering, was shared by the regressives of the left and the right. First a Democratic president, Jimmy Carter, then a Republican, George W. Bush, sought votes by claiming he had been “born again” with the help of Jesus, something that no president before the 1970s would have claimed.

Today optimism about science and technology is found chiefly on the libertarian right. At least somebody still defends nuclear energy and biotechnology. But in libertarian thought, science and technology are divorced from their modernist counterparts — large-scale public and private organizations — and wedded to ideals of small producers and unregulated markets that were obsolete by the middle of the nineteenth century. Libertarian thought is half-modern, at best. To its credit, it does not share the longing of many on the left for the Shire of Frodo the Hobbit or the nostalgia of most of the contemporary right for the Little House on the Prairie.

If there was a moment when the culture of enlightened modernity in the United States gave way to the sickly culture of romantic primitivism, it was when the movie “Star Wars” premiered in 1977. A child of the 1960s, I had grown up with the optimistic vision symbolized by “Star Trek,” according to which planets, as they developed technologically and politically, graduated to membership in the United Federation of Planets, a sort of galactic League of Nations or UN. When I first watched “Star Wars,” I was deeply shocked. The representatives of the advanced, scientific, galaxy-spanning organization were now the bad guys, and the heroes were positively medieval — hereditary princes and princesses, wizards and ape-men. Aristocracy and tribalism were superior to bureaucracy. Technology was bad. Magic was good.

The Dark Age that began in the 1970s continues. Today’s conservatives, centrists, progressives — most look like regressives, by the standards of mid-20th century America. Tea Party conservatives argue that federal prohibitions on child labor are unconstitutional, that the Fourteenth Amendment should be repealed, and that the Confederates were right about states, rights. Religious conservatives, having lost some of their political power, continue to their fight against Darwinism. Fiscally conservative “centrists” in Washington share an obsession with balanced budgets that would have seemed irrational and primitive not only to Keynes but also to the 19th-century British founder of The Economist, Walter Bagehot. And while there is a dwindling remnant of modernity-minded New Deal social democrats, most of the energy on the left is found on the nostalgic farmers’market/ train-and-trolley wing of the white upper middle class.

Here’s an idea. America needs to have a neomodernist party to oppose the reigning primitivists of the right, left and center. Let everyone who opposes abortion, wants to ban GM foods and nuclear energy, hates cars and trucks and planes and loves trains and trolleys, seeks to ban suburbia, despises consumerism, and/or thinks Darwin was a fraud join the Regressive Party. Those of us who believe that the real, if exaggerated, dangers of technology, big government, big business and big labor are outweighed by their benefits can join the Modernist Party. While the Regressives secede from reality and try to build their premodern utopias on their reservations, the Modernists can resume the work of building a secular, technological, prosperous, and relatively egalitarian civilization, after a half-century detour into a Dark Age.

Cathleen Kaveny at dotCommonweal:

It strikes me that this new two-party system would also leave many Catholics without a home –for obvious reasons, which we DON’T need to discuss here. In other words, THIS IS NOT A POST ON ABORTION.

But the underlying question, which I DO want to discuss here, is what is the Catholic idea on progress?  It strikes me that it is complicated. Any ideas?

Andrew Sullivan

Daniel Larison:

One of the things that Lind’s preferred states all have in common is that they are expansive, bureaucratic, centralized states ruled by autocrats or unaccountable overseers, and they are capable of extracting far larger revenues out of their economies than their successors. Obviously, Lind finds most of these traits desirable, and he seems not terribly bothered by the autocracy. In the case of the UFP, one simply has a technocrat’s utopian post-political fantasy run riot. Indeed, the political organization of the Federation has always struck me as stunningly implausible and unrealistic even by the standards of science fiction. It was supposed to be a galactic alliance with a massive military whose primary purposes were exploration and peacekeeping, and which had overcome all social problems by dint of technological progress. If ever there were a vision to appeal to a certain type of romantic idealists with no grasp of the corrupting nature of power or the limits of human nature, this would have to be it.

Lind’s article is not very persuasive, not least since his treatment of the change from antiquity to the middle ages is seriously flawed. Lind writes:

But few would disagree that the Europe of Charlemagne was more backward in its mindset, at least at the elite level, than the Rome of Augustus or the Alexandria of the Ptolemies.

Nor are the great gains of decolonization and personal liberation in recent decades necessarily incompatible with an intellectual and cultural Dark Age. After all, the fall of the Roman empire led to the emergence of many new kingdoms, nations and city-states, and slavery withered away by the end of the Middle Ages in Europe.

Well, count me among the “few” that would disagree. For one thing, the “Europe of Charlemagne” was also the Europe of the Byzantines, and under both the Carolingians and the Macedonians later in the ninth century there was extensive cultivation of literary and artistic production that significantly undermines claims that this was an “intellectual and cultural Dark Age.” This was an era of substantial manuscript production, and one marked by the learning of Eriugena and Photios. The Carolingian period was actually one of the more significant moments of political reunification in Europe prior to the later middle ages, but it is true that Charlemagne and his successors did not have a large administrative state apparatus at their disposal. The Iconoclastic emperors in the east were hostile to religious images, but in many other respects they cultivated learning and drew on the mathematical and scientific thought that was flourishing at that time among the ‘Abbasids. Obviously, we are speaking of the elite, but it is the elites of different eras that Lind is comparing. The point is not to reverse the old prejudice against medieval Europe and direct it against classical antiquity, nor we do have to engage in Romantic idealization of medieval societies, but we should acknowledge that this approach to history that Lind offers here abuses those periods and cultures that do not flatter the assumptions or values of modern Westerners. For that matter, it distorts and misrepresents the periods and cultures moderns adopt as their precursors, because it causes them to value those periods and cultures because of how they seem to anticipate some aspect of modernity rather than on their own terms.

Ioz on Larison:

I understand that Gene Roddenberry’s retromod vision of the future had Kirk kissing Nichelle Nichols, but even before the stylish sixties gave way to the weird, hierarchical, technocratic dictatorship of The Next Generation, the United Federation of Planets played barely the part of a supernumerary. The governing organization always seemed to be Starfleet, whose motto . . . to boldly go . . . and shoot with lasers . . . Their missions of exploration always seemed to lead to armed conflict, and the bold, interracial, transspecies future had as a model of its money-free, egalitarian, merit-based society something more or less directly descended from the British Admiralty, circa Trafalgar.

Meanwhile, if we must read Star Wars as something other than someone talking that old hack and fraud Joe Campbell a leeeetle bit too seriously, then let me just remind you that the “advanced, scientific, galaxy-spanning organization” was an evil empire run by a cyborg monster and an evil wizard, and that in almost every visual detail its model was not the New goddamn Deal, but the Third fucking Reich.

Ross Douthat:

So here’s my question: What did Lind think of the prequels? Because in a sense, George Lucas addressed nearly all of Lind’s issues with the “Star Wars” universe in movies one through three. (I am bracketing the more creative interpretations of those films …) Queen Amidala of Naboo, Princess Leia’s mother, turned out to be an elected queen, who moved on to senatorial duties after serving out her term as monarch. (How a teenager managed to navigate Naboo’s version of the Iowa caucuses remains a mystery …) The once-mystical Force was given a scientific explanation, in the form of the “midichlorians,” the micro-organisms that clutter up the bloodstream of the Jedi and give them telekinetic powers as a side effect. And the lost Old Republic that the rebels fight to restore in the original films was revealed to be , well, “a sort of galactic League of Nations or UN,” with the Jedi Knights as its peacekeeping force and the lightsaber as the equivalent of the blue helmet.

For Lind, then, I can only assume that watching the prequels was an immensely gratifying experience. And for the rest of us, the knowledge that Lind’s prescription for “Star Wars” helped produce three of the most disappointing science-fiction blockbusters ever made should be reason enough to reject his prescription for America without a second thought.

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The Smoked Salmon At Iwo Jima

Alexander Burns at Politico:

THE REVIEWS ARE IN – SNAP POLL FROM CBS: “An overwhelming majority of Americans approved of President Obama’s overall message in his State of the Union on Tuesday night, according to a CBS News Poll of speech watchers. According to the poll, which was conducted online by Knowledge Networks immediately after the president’s address, 92 percent of those who watched the speech approved of the proposals Mr. Obama put forth during his remarks, while only 8 percent disapproved. … Americans who watched the speech were generally more Democratic than the nation as a whole.” … FROM CNN: “A CNN/Opinion Research Corporation survey indicated that 52 percent of speech watchers had a very positive reaction, with 32 percent saying they had a somewhat positive response and 15 percent with a negative response. … Those numbers indicate that the sample is about nine to ten points more Democratic than the population as a whole.” … AND FROM GQR, VIA POLITICO44: “The firm monitored the reactions of swing voters and unmarried women from Colorado as they watched the speech. According to the analysis, before the address, the test group’s approval of the president was 30 percent – by the end of the speech, the approval rating had gone up to 56 percent.” http://bit.ly/dMdVnT and http://bit.ly/fhBhgN and http://politi.co/ffVLil

Jonathan Chait at The New Republic:

The substance of Obama’s speech was moderate liberalism — we like business, but government has a role too, neither too much nor too little, etc. It’s hard to attach that kind of case-by-case pragmatism to an overarching theme. But I do think Obama pulled it off pretty well. He took a fairly hackneyed idea — the future — and managed to weave it into issue after issue, from infrastructure to energy to deficits to education and even foreign policy.

I thought Obama explicated his idea about American unity better than he has in the past. The notion of unity has always sat in tension with the fierce ideological disagreement of American politics, and indeed the latter has served as a rebuke to the former. I thought Obama effectively communicated that the messiness of political debate is a part of what makes America great, to turn that into a source of pride. He simultaneouly placed himself both within and above the debate.

Ross Douthat:

If you were a visitor from Mars, watching tonight’s State of the Union address and Paul Ryan’s Republican response, you would have no reason to think that the looming insolvency of our entitlement system lies at the heart of the economic challenges facing the United States over the next two decades. From President Obama, we heard a reasonably eloquent case for center-left technocracy and industrial policy, punctuated by a few bipartisan flourishes, in which the entitlement issue felt like an afterthought: He took note of the problem, thanked his own fiscal commission for their work without endorsing any of their recommendations, made general, detail-free pledges to keep Medicare and Social Security solvent (but “without slashing benefits for future generations”), and then moved swiftly on to the case for tax reform. Tax reform is important, of course, and so are education and technological innovation and infrastructure and all the other issues that the president touched on in this speech. But it was still striking that in an address organized around the theme of American competitiveness, which ran to almost 7,000 words and lasted for an hour, the president spent almost as much time talking about solar power as he did about the roots of the nation’s fiscal crisis.

Ryan’s rejoinder was more urgent and more focused: America’s crippling debt was an organizing theme, and there were warnings of “painful austerity measures” and a looming “day of reckoning.” But his remarks, while rhetorically effective, were even more vague about the details of that reckoning than the president’s address. Ryan owes his prominence, in part, to his willingness to propose a very specific blueprint for addressing the entitlement system’s fiscal woes. But in his first big moment on the national stage, the words “Medicare” and “Social Security” did not pass the Wisconsin congressman’s lips.

Paul Krugman

Allah Pundit

David Frum at FrumForum:

What to like in Obama’s SOTU:

  1. The gracious congratulations to the Republicans and John Boehner.
  2. His reminders of the country’s positive accomplishments, including the country’s huge lead in labor force productivity.
  3. His explanation that the challenge to less-skilled US labor comes much more from technology than from foreign competition.
  4. Opening the door to firing bad teachers.
  5. Call for a stepped-up national infrastructure program. If only he’d explained how this would work.
  6. Call for lower corporate tax rates with fewer loopholes.
  7. Openness to amendments on healthcare reform.
  8. Endorsement of cuts to Medicare & Medicaid.
  9. Endorsement of malpractice reform.
  10. Bringing forth the designer of the Chilean miner rescue tunnel. Nice!

What’s not to like:

  1. The disingenuous suggestion that China’s growth is driven by superior Chinese education system. Don’t confuse Amy Chua’s kids with off-the-farm peasants in Chinese factories.
  2. The call for more creative thinking in American education. Creative thinking is good, obviously. But the kids who are in most trouble need more drill, not more questions about their feelings.
  3. The too clever-by-half slip from the need for government to invest in basic research (yes) to the value of government investment in development of particular energy technologies (a record of failure).
  4. The pledge to put electric vehicles on the roads. So long as 50% of our power comes from coal, electric vehicles are not “clean.”
  5. The pledge to reach 80% clean electricity by 2035. If this is done by neutral across -the-board means like carbon taxes, fine. If done by favoritism for particular energy forms – and especially by tax credits or subsidies – it’s national industrial planning and is bad.
  6. The misleading implication that bestowing more college degrees will address educational deficits. It’s the low quality of American secondary education that is the problem.
  7. The endorsement of DREAM – made worse by the total fuzz of the commitment to immigration enforcement.
  8. No mention of Colombia FTA in trade section of speech.
  9. Very backhanded comments on deregulation
  10. Repudiation of benefit cuts to future Social Security beneficiaries.
  11. Silly earmarks pledge 100% guaranteed to be broken.
  12. Graceless comment about restoring America’s standing: ill-judged from a president whose foreign policy becomes more continuous with his predecessor’s seemingly with every month.

Jennifer Rubin:

If you were expecting a moderate Obama or a bold Obama, you were disappointed, most likely, by Tuesday’s State of the Union Address. In a nutshell: Obama proposed a ton of new domestic spending, promised to freeze discretionary spending (attained by savaging defense), abstained from offering specifics on entitlement reform and largely ignored major foreign policy changes. Moreover, the delivery was so listless that this State of the Union address likely garnered less applause than any address in recent memory.

But the mystery is solved: There is no new Obama, just a less snarly one. But it was also a flat and boring speech, too long by a third. Can you recall a single line? After the Giffords memorial service, this effort seemed like Obama had phoned it in. Perhaps that is because the name of the game is to pass the buck to Congress to do the hard work of digging out of the fiscal mess we are in.

Scott Johnson at Powerline:

Obama’s domestic policy is big on “investments” — not yours, the government’s. That is, spending. It’s a throwback to the vocabulary of the Clinton era. “The kids” must not be far behind. And there they are. They need more of your dough for their education.

“We do big things,” Obama says. I think when he says “we,” he means big government. The speech is long on domestic policy cloaked in the characteristically disingenuous rhetoric designed to conceal the substance. Obama advocates some kind of a freeze in federal spending. I’m not sure how that squares with the call for more “investments.”

Obama acknowledges the tumult in Tunisia thusly: “We saw that same desire to be free in Tunisia, where the will of the people proved more powerful than the writ of a dictator. And tonight, let us be clear: the United States of America stands with the people of Tunisia, and supports the democratic aspirations of all people.” Where does the United States of America stand tonight with respect to the people of Iran? We’re still waiting to hear from Obama on that one, but I guess we can infer he supports their aspirations as well. The people of Iran are included in “all people.”

The speech does have several good lines. Here is one of them: “I call on all of our college campuses to open their doors to our military recruiters and the ROTC.” It’s a pity that Obama has to gild it with the usual gay rights boilerplate. This line also deserves a nod: “I know there isn’t a person here who would trade places with any other nation on Earth.” Unlike most of the rest of the speech, it has the advantage, as Henry Kissinger might say, of being true.

Obama’s advent gets the usual iteration tonight: “That [American] dream is why I can stand here before you tonight.” And he includes Biden: “That dream is why a working class kid from Scranton can stand behind me.” But Biden’s rise too is a tribute to the advent of Obama.” And he includes an uncharacteristically gracious salute to Speaker Boehner: “That dream is why someone who began by sweeping the floors of his father’s Cincinnati bar can preside as Speaker of the House in the greatest nation on Earth.”

It’s a pity that Obama hasn’t found previous occasions to articulate American exceptionalism. Indeed, he has essentially denied it. Maybe he didn’t think it was true before the advent of the Age of Obama, or maybe he chooses not to share his innermost thoughts on the subject with his fellow citizens tonight.

Erick Erickson at Redstate:

Much has been made of Michelle Bachmann’s “Tea Party” response to the State of the Union.

For days the media has been playing this up as a major conflict within the Republican Party. In fact, a number of Republican leadership aides pulled out all the stops trying to get the networks to ignore Michelle Bachmann.

Kudos to CNN for its willingness to cover the speech in full.

I must admit I was deeply nervous about the speech, but I am delighted to say I was wrong. Michelle Bachmann gave the best speech of the night.

While the President sputniked and Paul Ryan went off on some high minded rhetoric, Michelle Bachmann kept to nuts and bolts. Her speech was based on actual economic data with actual, substantive policy suggestions for change.

Paul Ryan’s speech was okay. His blood shot eyes and Eddie Munster, Jr. haircut could have used some work. But he was good. Michelle Bachmann, however, shined in an easy to understand speech with a common man touch.

I’m glad I was wrong. And it just goes to show that the narrative of concern, built up in the media in large part by nervous Republicans, was silly. It yet again shows the GOP is unwilling to seriously treat the tea party movement as a legitimate player.

Mark Joyella at Mediaite:

Rep. Michele Bachmann made history tonight–not just for being the first representative of the Tea Party to give a State of the Union response, but also for flatly refusing to look America in the eye.Bachmann, who came equipped with charts and Iwo Jima photos, began her speech looking slightly off camera. As Bachmann spoke, viewers–including the former MSNBC host Keith Olbermann–took to Twitter to ask a simple question: “what’s she looking at?”

As Olbermann tweeted, “Why isn’t Rep. Bachmann LOOKING AT THE DAMNED CAMERA?” He added later, “Seriously, somebody at the Tea Party needs to run on the stage, grab her, and POINT TO WHERE THE CAMERA IS.”

On CNN, Erick Erickson reported that Bachmann mistakenly focused on a camera recording the speech for the Tea Party Express, instead of the other camera capturing the speech live for the entire country. Jeepers.

Compared to President Obama’s traditional SOTU speech, and Rep. Ryan’s response, the Bachmann speech was unique. It had charts and multimedia, and it had the weird vibe of listening to a person who seems to be talking to somebody else.

Conor Friedersdorf at Sully’s place:

He still loves his wife. But after 25 years of marriage, he has lost his enthusiasm for sex with her. Still. It is Valentine’s Day. And she has been hinting. So he takes her to a nice dinner, uncharactertistically orders an after-dinner drink, and feels extra discouraged when it only makes him more tired. He is 55. And so tired. Upon returning home, he wants more than anything to just fall asleep, but damnit, he makes the effort. He surprises her with a gift, lights candles, and dutifully makes love to her in the fashion he thinks that she will most enjoy.

It is with similar enthusiasm that some responses to the State of the Union are penned. Everyone expects that it will be covered by political bloggers, newspaper columnists and magazine writers. Especially at movement magazines on the left and right, lots of people are going through the motions,  feigning passionate intensity that isn’t there. In marriage, it is perfectly understandable for one partner to occasionally perform despite not being in the mood. Sex is built into the expectations. Justifiably so. But I’m skeptical about the system of expectations in political letters. Fresh insights are nice. I’ve read good stuff about last night’s SOTU. We’ve linked some of it here. What I find pointless is the completely predictable boilerplate that gets published. The banal right-leaning editorial inveighing against the speech. The left-leaning editorial vaguely extolling its virtues. If every possible reader will agree with everything in a piece what exactly is the point of writing it?

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Filed under Political Figures

Tucson

James Fallows:

After this horrible news from Tucson….

… let me amplify something I said half-coherently in a live conversation with Guy Raz on All Things Considered a little while ago. My intended point was:

Shootings of political figures are by definition “political.” That’s how the target came to public notice; it is why we say “assassination” rather than plain murder.

But it is striking how rarely the “politics” of an assassination (or attempt) match up cleanly with the main issues for which a public figure has stood. Some killings reflect “pure” politics: John Wilkes Booth shooting Abraham Lincoln, the German officers who tried to kill Hitler and derail his war plans. We don’t know exactly why James Earl Ray killed Martin Luther King, but it must have had a lot to do with civil rights.

There is a longer list of odder or murkier motives:
– Leo Ryan, the first (and, we hope, still the only) Representative to be killed in the line of duty, was gunned down in Guyana in 1978 for an investigation of the Jim Jones/Jonestown cult, not any “normal” political issue.

– Sirhan Sirhan horribly transformed American politics by killing Robert F. Kennedy in 1968, but Sirhan’s political causes had little or nothing to do with what RFK stood for to most Americans.

– So too with Arthur Bremer, who tried to kill George C. Wallace in 1972 and left him paralyzed.

– The only known reason for John Hinckley’s shooting of Ronald Reagan involves Jodie Foster.

– It’s not often remembered now, but Manson family member Lynette “Squeaky” Fromme tried to shoot Gerald Ford, again for reasons that would mean nothing to most Americans of that time.

– When Harry Truman was shot at (and a policeman was killed) on the sidewalk outside the White Blair House, the attackers were concerned not about Cold War policies or Truman’s strategy in Korea but about Puerto Rican independence.

– The assassinations of William McKinley and James Garfield were also “political” but not in a way that matched the main politics of that time. The list could go on.

So the train of logic is:
1) anything that can be called an “assassination” is inherently political;
2) very often the “politics” are obscure, personal, or reflecting mental disorders rather than “normal” political disagreements. But now a further step,
3) the political tone of an era can have some bearing on violent events. The Jonestown/Ryan and Fromme/Ford shootings had no detectable source in deeper political disagreements of that era. But the anti-JFK hate-rhetoric in Dallas before his visit was so intense that for decades people debated whether the city was somehow “responsible” for the killing. (Even given that Lee Harvey Oswald was an outlier in all ways.)

That’s the further political ramification here. We don’t know why the Tucson killer did what he did. If he is like Sirhan, we’ll never “understand.” But we know that it has been a time of extreme, implicitly violent political rhetoric and imagery, including SarahPac’s famous bulls-eye map of 20 Congressional targets to be removed — including Rep. Giffords. It is legitimate to discuss whether there is a connection between that tone and actual outbursts of violence, whatever the motivations of this killer turn out to be. At a minimum, it will be harder for anyone to talk — on rallies, on cable TV, in ads — about “eliminating” opponents, or to bring rifles to political meetings, or to say “don’t retreat, reload.”

Jack Shafer at Slate:

The attempted assassination of Rep. Gabrielle Giffords, D-Ariz., and the killing of six innocents outside a Tucson Safeway has bolstered the ongoing argument that when speaking of things political, we should all avoid using inflammatory rhetoric and violent imagery.

“Shooting Throws Spotlight on State of U.S. Political Rhetoric,” reports CNN. “Bloodshed Puts New Focus on Vitriol in Politics,” states the New York Times. Keith Olbermann clocked overtime on Saturday to deliver a commentary subtitled “The political rhetoric of the country must be changed to prevent acts of domestic terrorism.” The home page of the Washington Post offered this headline to its story about the shooting: “Rampage Casts Grim Light on U.S. Political Discord.”

The lead spokesman for the anti-inflammatory movement, however, was Pima County Sheriff Clarence Dupnik, whose jurisdiction includes Tucson. Said Dupnik at a Jan. 8 press conference in answer to questions about the criminal investigation:

I’d just like to say that when you look at unbalanced people, how they are—how they respond to the vitriol that comes out of certain mouths, about tearing down the government, the anger, the hatred, the bigotry that goes on in this country is getting to be outrageous. And unfortunately, Arizona, I think, has become sort of the capital. We have become the mecca for prejudice and bigotry.

Embedded in Sheriff Dupnik’s ad hoc wisdom were several assumptions. First, that strident, anti-government political views can be easily categorized as vitriolic, bigoted, and prejudicial. Second, that those voicing strident political views are guilty of issuing Manchurian Candidate-style instructions to commit murder and mayhem to the “unbalanced.” Third, that the Tucson shooter was inspired to kill by political debate or by Sarah Palin’s “target” map or other inflammatory outbursts. Fourth, that we should calibrate our political speech in such a manner that we do not awaken the Manchurian candidates among us.

And, fifth, that it’s a cop’s role to set the proper dimensions of our political debate. Hey, Dupnik, if you’ve got spare time on your hands, go write somebody a ticket.

Sheriff Dupnik’s political sermon came before any conclusive or even circumstantial proof had been offered that the shooter had been incited by anything except the gas music from Jupiter playing inside his head.

For as long as I’ve been alive, crosshairs and bull’s-eyes have been an accepted part of the graphical lexicon when it comes to political debates. Such “inflammatory” words as targeting, attacking, destroying, blasting, crushing, burying, knee-capping, and others have similarly guided political thought and action. Not once have the use of these images or words tempted me or anybody else I know to kill. I’ve listened to, read—and even written!—vicious attacks on government without reaching for my gun. I’ve even gotten angry, for goodness’ sake, without coming close to assassinating a politician or a judge.

From what I can tell, I’m not an outlier. Only the tiniest handful of people—most of whom are already behind bars, in psychiatric institutions, or on psycho-meds—can be driven to kill by political whispers or shouts. Asking us to forever hold our tongues lest we awake their deeper demons infantilizes and neuters us and makes politicians no safer.

Alex Massie:

So apparently a pretty stupid Sarah Palin poster from last year in which gunsights were slapped over 20 districts carried by John McCain from which the Democratic incumbent had voted for Obamacare, is now to be considered the inspiration for this atrocity. Mrs Palin has some influence, but let’s not get carried away. For what it’s worth – and readers know that I’m hardly her greatest fan – I do not think she is very much more responsible for this abomination than Jodie Foster was for John Hinckley’s attempt to murder Ronald Reagan. In any case, Palin’s poster was only a souped-up version of a campaign trope that both parties have been happy to employ in the past. (That said, Palin Presidential Futures, already worth shorting, took another dive yesterday.)

But the sordid temptations of politics are such that people who argue there’s little sensible connection between Hollywood “violence” and real-world violence now suddenly insist that it just takes a silly poster and plenty of over-heated rhetoric to inspire America’s Top Kooks to come out of the closet, all guns blazing. And of course the reverse is also true: people happy to blame Grand Theft Auto for just about anything now insist there’s no connection at all between the tone of political discourse (“Second Amendment Solutions!”) and some nut taking these notions just a little bit too seriously.

Clearly, things are a little more complicated than that. While you cannot legislate for lunatics there’s also little need to give them any encouragement. But the more we learn about Jared Loughner the more it seems probable – at this stage – that he’s the kind of mentally unstable person who neither needed nor took any inspiration from Palin or the Tea Party or anything other than powerful fantasies that were his own creation.

And this too is normal. Political violence of this type is almost definitionally unhinged but it’s striking how rare it turns out to be the case that the perpetrators can be fitted into one neat political profile or another. And even when they can their targets are frequently so at odds with the meaning of their supposed “philosophy” that trying to “make sense” of such matters becomes an even more frustrating task.

Anyway, we may think these are unusually turbulent times, fanned by unusual quantities of cheap and phoney populism, scaremongering and hysteria but this is not in fact the case. ‘Twas ever thus and the 1960s offer a perspective that might be worth looking at if only, despite all the huffing and puffing, to appreciate how calm and at peace America is these days. Remember McKinley and Garfield too, if you want to go still further back. America ain’t tearing itself apart these days, no matter how much Paul Krugman tries to persuade you it must be. The paranoid style has rarely lacked followers and, just as significantly, the centre has also always had a healthy paranoia of its own. Sometimes, as is the case today or in the aftermath of any other act of grim violence, this will seem unusually plausible.

Most of the time, however, the scare stories about a new era of Militiamen or whatever are seriously over-cooked. The temper of these American  times – despite what you will read everywhere today and tomorrow – is not unusually rebarbative or even uncommonly obtuse. (What might be said, mind you, is that the level of rhetoric is out of proportion to the stakes involved in the political game these days.)

The fact of the matter is that a country of 300 million people cannot help but be generously larded with oddballs, freaks, paranoids and assorted other nutters. Couple that with the American genius for self-realization and you soon begin to wonder why there isn’t more politically-themed violence than is actually the case

Radley Balko:

We’re going to hear a lot of talk in the coming days about putting an end to anti-government rhetoric. I’ve been listening to it all morning on the Sunday talk shows. Let’s get the obvious out of the way, here: Initiating violence against government officials and politicians is wrongheaded, immoral, futile, and counterproductive to any anti-government cause. As is encouraging or praising others who do. I ban anyone who engages in that kind of talk here.

But it’s worth remembering that the government initiates violence against its own citizens every day in this country, citizens who pose no threat or harm to anyone else. The particular policy that leads to the sort of violence you see in these videos is supported by nearly all of the politicians and pundits decrying anti-government rhetoric on the news channels this morning. (It’s also supported by Sarah Palin, many Tea Party leaders, and other figures on the right that politicians and pundits are shaming this weekend.)

I hope Rep. Giffords—and everyone wounded yesterday—makes a full recovery. It’s particularly tragic that she was shot while doing exactly what we want elected officials to do—she was making herself available to the people she serves. And of course we should mourn the people senselessly murdered yesterday, government employees and otherwise: U.S. District Judge John Roll, Dorothy Murray, Dorwin Stoddard, nine-year-old Christina Green, Phyllis Scheck, and Gabe Zimmerman.

That said, I long for the day that our political and media figures get as indignant about innocent Americans killed by their own government—killed in fact, as a direct and foreseeable consequence of official government policy that nearly all of those leaders support—as they are about a government official who was targeted by a clearly sick and deranged young man. What happened this weekend is not, by any means, a reason to shunt anti-government protest, even angry anti-government protest, out of the sphere of acceptable debate. The government still engages in plenty of acts and policies—including one-sided violence against its own citizens—that are well worth our anger, protest, and condemnation.

Michelle Malkin

Jonathan Martin in Politico

Keach Hagey in Politico

Nick Gillespie at Reason:

There’s no question that the GOP and its proponents are more than ready to play a similar game. Any moral lapse by a Democrat, for instance, is an ethical rot that stems directly from the malefactor’s stance on the minimum wage or Don’t Ask Don’t Tell, say, while hypocrites such as Sen. Larry Craig and Tom DeLay are ethical one-offs. The most-unbelievable response in the immediate aftermath of the 9/11 attacks was longterm GOP activist Jerry Falwell’s announcement on Pat Robertson’s TV network that gays and women wearing pants etc. were responsible for radical Islamists killing 3,000 people (even more sadly, years after Falwell apologized for his self-evidently retarded statement, conservative writer Dinesh D’Souza blew out the thesis into a full-length book). I’m not trying to be “fair and balanced” here by bringing up GOP stupidity; I’m trying to point out that we’re in a decade of this sort craptastic instantaneous spin that latches on to everything in its path. I say this as someone who was fingered as broadly responsible for the culture that produced “American Taliban” John Walker Lindh.

Readers of this site know I’m no Sarah Palin fan, but to accuse her of complicity in the murderous spree of a clearly insane person is one of the main reasons that partisan political parties are losing market share. I had myself tweeted that blaming Palin for Jared Loughner’s mass killing would be like blaming J.D. Salinger for Mark David Chapman shooting John Lennon (and as Jesse Walker pointed out, in Chapman’s case, at least we could be sure Chapman had read Salinger). Given Loughner’s fixation on grammar and the supposed lack of literacy evinced by most Americans, maybe William Safire and S.I. Hayakawa should be held responsible.

Like Matt Welch and Jack Shafer, I don’t think that today’s political rhetoric is particularly overheated or vitriolic and, even if it were, I don’t think that would be a problem. I suspect that most people are like me in that they respond to folks who actually believe something and are willing to fight for it when it comes to a particular political issue. I don’t like bipartisanship, which usually means that all of us get screwed, but it’s easy enough to respect someone you virulently disagree with if you think they are arguing in good faith.

The problem isn’t with the current moment’s rhetoric, it’s with the goddamn politicization of every goddamn thing not even for a higher purpose or broader fight but for the cheapest moment-by-moment partisan advantage. Whether on the left or on the right, there’s a totalist mentality that everything can and should be explained first and foremost as to whether it helps or hurt the party of choice.

That sort of clearly calculated punditry helps explain one of last week’s other big stories, which is how both the Dems and the GOP have really bad brand loyalty these days. In its most recent survey of political self-identification, Gallup found that the Dems were at their lowest point in 22 years and that the GOP remains stuck below the one-third mark. The affiliation that has the highest marks for the past couple of decades on average and is growing now is independent. Faced with the way that the major parties and their partisans try to bend every news story, trend, box office hit or bomb, you name it, whether truly horrific (as Saturday’s shooting was) or totally banal, is it any wonder that fewer people want to be affiliated with the Dems and Reps? This is a long-term trend. Indeed, Harris Poll numbers that stretch back to the late ’60s show the same trend: Fewer and few folks want to view themselves as Democrats and the GOP has never been popular (even though far more people consider themselves “conservative” than “liberal”). And note what Gallup are Harris are talking about there is not party registration. It’s identification and self-affiliation; how you see yourself. It’s a cultural identity.

Paul Krugman at The New York Times

Ross Douthat at The New York Times

Tom Maguire on Krugman

Nick Baumann at Mother Jones:

At 2:00 a.m. on Saturday—about eight hours before he allegedly killed six people and wounded 14, including Rep. Gabrielle Giffords (D-Ariz.), in Tucson—Jared Lee Loughner phoned an old and close friend with whom he had gone to high school and college. The friend, Bryce Tierney, was up late watching TV, but he didn’t answer the call. When he later checked his voice mail, he heard a simple message from Loughner: “Hey man, it’s Jared. Me and you had good times. Peace out. Later.”

That was it. But later in the day, when Tierney first heard about the Tucson massacre, he had a sickening feeling: “They hadn’t released the name, but I said, ‘Holy shit, I think it’s Jared that did it.'” Tierney tells Mother Jones in an exclusive interview that Loughner held a years-long grudge against Giffords and had repeatedly derided her as a “fake.” Loughner’s animus toward Giffords intensified after he attended one of her campaign events and she did not, in his view, sufficiently answer a question he had posed, Tierney says. He also describes Loughner as being obsessed with “lucid dreaming”—that is, the idea that conscious dreams are an alternative reality that a person can inhabit and control—and says Loughner became “more interested in this world than our reality.” Tierney adds, “I saw his dream journal once. That’s the golden piece of evidence. You want to know what goes on in Jared Loughner’s mind, there’s a dream journal that will tell you everything.”

Peter Beinart at Daily Beast:

Liberals should stop acting like the Tea Party is guilty of inciting Rep. Gabrielle Giffords’ shooting until proven innocent. That’s unfair. If someone finds evidence that violent anti-government, or anti-democratic, rhetoric helped trigger Jared Lee Loughner’s shooting spree, then the people making those statements should pay with their political careers. But so far, at least, there is no such evidence. Of course, Sarah Palin should stop using hunting metaphors to discuss her political opponents. She should stop doing that, and a dozen other idiotic things. But just as Tea Partiers are wrong to promiscuously throw around terms like “communist” and “death panels,” liberals should avoid promiscuously accusing people of being accessories to attempted murder. That’s too serious a charge to throw around unless you have the goods. I want Barack Obama to derail the congressional Republicans as much as anyone. But not this way.

The Giffords shooting doesn’t prove that Sarah Palin has blood on her hands. What it does prove is that when it comes to terrorism, people like Sarah Palin have a serious blind spot. On the political right, and at times even the political center, there is a casual assumption—so taken for granted that it is rarely even spoken—that the only terrorist threat America faces is from jihadist Islam. There was a lot of talk a couple of weeks back, you’ll remember, about a terrorist attack during the holiday season. And there’s been a lot of talk in the last couple of years about the threat of homegrown terrorists. Well, we’ve just experienced a terrorist attack over the holiday season, and it was indeed homegrown. Had the shooters’ name been Abdul Mohammed, you’d be hearing the familiar drumbeat about the need for profiling and the pathologies of Islam. But since his name was Jared Lee Loughner, he gets called “mentally unstable”; the word “terrorist” rarely comes up. When are we going to acknowledge that good old-fashioned white Americans are every bit as capable of killing civilians for a political cause as people with brown skin who pray to Allah? There’s a tradition here. Historically, American elites, especially conservative American elites, have tended to reserve the term “terrorism” for political violence committed by foreigners. In the early 20th century, for instance, there was enormous fear, even hysteria, about the terrorist threat from anarchist and communist immigrants from Eastern or Southern Europe, people like Sacco and Vanzetti. In the aftermath of World War I, large numbers of immigrant radicals were arrested and deported. Nothing similar happened to members of the white, protestant Ku Klux Klan, even though its violence was more widespread.

Similarly today, the media spends the Christmas season worrying how another attack by radical Muslims might undermine President Obama’s national-security credentials. But when Jared Lee Loughner shoots 20 people at a Safeway, barely anyone even comments on what it says about the president’s anti-terror bona fides. And yet Loughner’s attack is, to a significant degree, what American terror looks like. Obviously, jihadists have committed their share of terrorism on American soil in the last couple of decades—from the attempted bombing of the World Trade Center in 1993 to the 9/11 attacks to Army psychiatrist Nidal Malik Hasan’s murder of 13 people at Fort Hood in 2009. But there have been at least as many attacks by white Americans angry at their own government or society. For almost two decades, culminating in 1995, Unabomber Ted Kaczynski sent mail bombs to people he considered complicit in industrial America’s assault on nature. (A surprising amount of recent American terrorism comes from militant environmentalists.) That same year, Timothy McVeigh blew up the Alfred P. Murrah Federal Building in Oklahoma City, the second-largest recent terrorist attack on U.S. soil after 9/11. In 1996, Eric Rudolph bombed the Atlanta Olympics to protest abortion and international socialism. According to the FBI, opposition to abortion also played a role in the 2001 anthrax attacks (you know, the ones Dick Cheney were sure had been masterminded by Saddam Hussein). In 2009, Wichita, Kansas, abortion doctor George Tiller was murdered. (He had already been shot once, and his clinic had been bombed.) That same year octogenarian neo-Nazi James Wenneker von Brunn shot a security guard at the U.S. Holocaust Memorial Museum. Last February, a man angry at the federal government flew a small plane into an IRS building in Austin, Texas.

Instapundit at The Wall Street Journal

Ezra Klein:

None of this, of course, will ease the suffering of Giffords or her family, nor of any of the other individuals and families directly affected by this morning’s slaughter. For them, the process of grieving and recovering has barely begun. Loughner’s shooting might’ve been motivated by mental illness, but the people in that parking lot were motivated by democracy: It was a meeting between a congressional representative and those she represents. They were attacked for being good citizens, and nothing can ever put that right.

But one way that people might pay tribute is to follow their example and attend the next meeting held by their representative. It is so easy and safe to participate in the American political system that we sometimes take doing so for granted. Today was a horrifying look into a world in which that isn’t so, and it should leave us with renewed appreciation for, and determination to protect, the world we have. On this, Giffords was way ahead of us: When the 112th session of the House of Representatives convened to read the Constitution earlier this week, she chose to read the section guaranteeing Americans the right “peaceably to assemble.”

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Filed under Crime, Political Figures, Politics

$100 Billion Here And $100 Billion There, Here A $100 Billion, There A $100 Billion, Everywhere A $100 Billion

Jackie Calmes at NYT:

Many people knowledgeable about the federal budget said House Republicans could not keep their campaign promise to cut $100 billion from domestic spending in a single year. Now it appears that Republicans agree.

As they prepare to take power on Wednesday, Republican leaders are scaling back that number by as much as half, aides say, because the current fiscal year, which began Oct. 1, will be nearly half over before spending cuts could become law.

While House Republicans were never expected to succeed in enacting cuts of that scale, given opposition in the Senate from the Democratic majority and some Republicans, and from President Obama, a House vote would put potentially vulnerable Republican lawmakers on record supporting deep reductions of up to 30 percent in education, research, law enforcement, transportation and more.

Now aides say that the $100 billion figure was hypothetical, and that the objective is to get annual spending for programs other than those for the military, veterans and domestic security back to the levels of 2008, before Democrats approved stimulus spending to end the recession.

Yet “A Pledge to America,” the manifesto House Republicans published last September, included the promise, “We will roll back government spending to pre-stimulus, pre-bailout levels, saving us at least $100 billion in the first year alone.”

Allah Pundit:

Their excuse will be that the fiscal year, which began on October 1, will already be almost half over by the time the budgetary resolution that was passed during the lame duck runs out in March. That means they’ll only have seven months to work with this fiscal year; when they said they’d cut $100 billion, they meant the first full fiscal year that they’re in charge. But wait, you say! Shouldn’t it be fairly easy to find $100 billion to cut in an annual budget that exceeds $3.5 trillion? Well, yes — except that the GOP’s limiting itself to cutting discretionary spending (Social Security and Medicare are, as ever, completely off-limits) and even within discretionary spending they refuse to touch “security” budgets, i.e. Defense and Homeland Security. That leaves just $500 billion or so for this year to play with, and since, as Rich Lowry noted earlier at the Corner, a good chunk of that will already have been spent by the time the continuing resolution expires in the spring, they’d have to make huge cuts to what’s left in order to get to $100 billion in savings overall.

The point to ponder here, I think, is that even the highly touted $100 billion figure is just a small fraction of last year’s deficit. Even with a tea-party Congress, even with a gigantic pool of expenditures to cut from, political reality is such that not only can’t they reach that modest, largely symbolic target in seven months, they’ll actually have to move heaven and earth during the next full fiscal year to get Obama and the Senate Democrats to agree to it. This is what we’ve been reduced to — the suspense of wondering whether the new Republican majority can achieve cuts that will barely make a dent in our annual budget shortfall. Hugely depressing.

Ross Douthat:

Hugely depressing, but hopefully hugely instructive as well. The pledge to cut $100 billion was always more of a symbolic sop to the Tea Parties than a real step toward fiscal discipline. The question for the new Republican majority has always been whether it will make any serious progress on entitlement reform and tax reform, not whether it will find inevitably-marginal ways to trim discretionary spending. You can’t have fiscal responsibility if you keep entitlements, tax expenditures and defense spending off the table, and the fact that these realities have been exposed in the very first week of G.O.P. control, thanks to the peculiarities of the fiscal calendar, is probably good news for fiscal conservatism. The sooner we get certain fond illusions out of the way, the better.

Peter Suderman at Reason:

I’m somewhat sympathetic to the political reality of the situation; $100 billion in cuts would have been a tall order. But the excuses given here seem designed to test one’s sympathy. Are all figures attached to campaign promises now potentially hypothetical? Were Republicans not aware of the timing of the fiscal year when making the $100 billion promise? At least the feeling isn’t universal: GOP Senator-elect Rand Paul has already responded to the article by saying that $50 billion in cuts isn’t enough.

Robert Stacy McCain:

I’m not sure that anyone will be outraged over this. The important thing is for Congress to move in the right direction and stop the kind of out-of-control deficit spending by which Nancy Pelosi and the Democrats increased the national debt by $5.2 trillion in four years.Excerpts from Speaker Boehner’s opening speech today:

“The American people have humbled us. They have refreshed our memories as to just how temporary the privilege to serve is. They have reminded us that everything here is on loan from them. That includes this gavel, which I accept cheerfully and gratefully, knowing I am but its caretaker. After all, this is the people’s House. This is their Congress. It’s about them, not us. What they want is a government that is honest, accountable and responsive to their needs. A government that respects individual liberty, honors our heritage, and bows before the public it serves.”

That’s the written text, which doesn’t include the part where he gets all choked up and starts crying. (It’s OK, Mr. Speaker, we like the crying.) Boehner’s speech — crying and all — will be livestreamed.

Steve Benen:

Oh, I see. Republican pledges are “hypothetical” promises. The Pledge to America must have included asterisks and disclaimers in font so small, the country missed the caveats.

Rep. Chris Van Hollen (D-Md.), the ranking member on the House Budget Committee, said, “I think they woke up to the reality that this will have a direct negative impact on people’s lives…. You know, it’s easy to talk about these things in the abstract. It’s another thing when you start taking away people’s college loans and Pell Grants or cutting early education programs.”

To be sure, I’m delighted Republicans aren’t actually going to pursue this indefensible goal. When political leaders start breaking high-profile promises right out of the gate, it’s generally not a positive development, but in this case, we’re all better off with GOP leaders having changed their minds.

Of course, this doesn’t change the fact that Republicans never should have made this promise to begin with, and shouldn’t have put themselves in a position in which they’re breaking their own pledge immediately after taking office.

Jonathan Chait at TNR:

The basic situation is that you have a tiny handful of principled conservatives who genuinely want to cut the size of actual government programs. But that accounts for a tiny slice of the general opposition to government programs, which is rooted in misperceptions about what government spends money on alongside strong support for the programs that actually exist. Government programs are popular. Some of them serve little purpose (think farm subsidies) but those generally exist precisely because they have powerful constituencies.

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Filed under Conservative Movement, Economics, Politics

There’s Something About Mittens

David Frum at Frum Forum:

There is an old joke that Wagner’s music is not as bad as it sounds. Something similar can be said of Romney’s campaign economics. Concealed within the triangulation are some very smart ideas. I remain convinced: this man could be a very good conservative president – if conservatives will permit it.

Mickey Kaus at Newsweek

Ross Douthat:

I hear similar things from Romney supporters (or people trying to convince themselves to be Romney supporters) with remarkable frequency. Yes, the argument runs, Romney seems serially insincere, and nearly every position he stakes out comes across as a blatant (and often inconsistent-looking) pander to a conservative electorate that regards him with suspicion. But there are good ideas concealed within the pandering — you just have to know where to look! And in your heart, you know he’s a smart guy who’d make a solid center-right president — wonkish, detail-oriented, sensible on policy, all the rest of it. He’s just a prisoner of the process! And heck, maybe his transparent insincerity is even a virtue: It shows that try as he might, he can’t give himself over completely to the carnival of a primary campaign, because he’s fundamentally too sober and serious to be a carnival barker. (He’s no Palin, is the implication …) Even when he’s mid-pander, you always know that he knows that it’s all just a freak show, and you can always sense that he’d rather be at a policy seminar somewhere, instead of just forking red meat. There’s a highly competent chief executive trapped inside his campaign persona, in other words, and the only way to liberate him is to put him in the White House!

This is an … unusual argument. That doesn’t mean it’s wrong: There were probably people who said the same thing about George H.W. Bush during his lackluster 1988 race — and he did turn out to be a reasonably good president, all things considered. But there’s still an element of absurdity about it. I believe that Mitt Romney is a more serious person, and would probably be a better president, than his campaign style suggests. But issue by issue, policy by policy, that same campaign style makes it awfully hard to figure out where he would actually stand when the pandering stops and the governing begins. In the last couple years, Romney has taken high-profile positions that I agree with (opposing the G.M. bailout), high-profile positions that I disagree with (opposing the START Treaty), and high-profile positions on issues I’m uncertain about (the current tax deal). But because everything he does feels like a pander, I don’t know where he really stands on any of them. And freak show or no freak show, base or no base, that’s no way to run for president.

Frum responds to Douthat:

I sometimes imagine that Romney approaches politics in the same spirit that the CEO of Darden Restaurants approaches cuisine. Darden owns Olive Garden, Longhorn steakhouses, and Red Lobster among other chains. Now suppose that Darden’s data show a decline in demand for mid-priced steak restaurants and a rising response to Italian family dining. Suppose they convert some of their Longhorn outlets to Olive Gardens. Is that “flip-flopping”? Or is that giving people what they want for their money?

Likewise, the “pro-choice” concept met public demand so long as Romney Inc. was a Boston-based senatorship and governorship-seeking enterprise. But now Romney Inc. is expanding to a national brand, with important new growth opportunities in Iowa and South Carolina. A new concept is accordingly required to serve these new markets. Again: this is not flip-flopping. It is customer service.

You may say: But what does Romney think on the inside? Which of his positions is the “real” Romney? I’d answer that question with another question. Suppose an Olive Garden customer returns to the kitchen a plate of fettuccine alfredo, complaining the pasta is overcooked. What should the manager do? Say “I disagree”? Explain that it’s a core conviction to cook pasta to a certain specified number of minutes and seconds, and if the customer doesn’t like it, she’s welcome to take her patronage elsewhere? No! It doesn’t matter what the manager “really” thinks. What matters is satisfying each and every customer who walks through the door to the very best of the manager’s ability.

Ross Douthat fails to understand that meeting customer expectations is itself a principle!

Ezra Klein:

I enjoyed this analogy, but it doesn’t work. The presidency carries a four-year lock-in, while the Olive Garden doesn’t. Put it this way: If going to the Olive Garden meant only eating at the Olive Garden for the next four years, it’d be a real problem if they lured you in with pasta and breadsticks and then, three months later, turned the place into a hookah bar that served only salmon burgers. Some people might find that to be an improvement, and some people might not, but that’s not the point: A fishy hookah bar isn’t what you signed up for.

Frum is right that customer service can be a principle in and of itself. And I’d be really interested to see a presidential candidate promise to better represent the people by explicitly using polls to steer his or her presidency. But that’s not what Romney is promising. He’s promising to do certain things, and uphold certain values, when in office. If he’s lying about that, it’s not customer service. It’s betrayal yoked to a four-year contract.

Matthew Yglesias:

Ezra Klein points out some problems with this line of thought. But I think the real issue here has to do with character. The executives of Darden Restaurants are basically trying to make money. And so are the owners of the firm. And that’s fine. Most of us aren’t so distressed by the idea that the firm is, on some level, a soulless money-making machine. But on this view, Romney is . . . what? A soulless power-seeking machine?

To a large extent our political system is already biased toward promoting power-crazed sociopaths into positions of authority. The public’s aversion to people who appear to have this quality to a greater extent than other high-profile politicians seems very understandable to me. Meanwhile, at the end of the day Ross Douthat is right to say that this still leaves you necessarily puzzled by the question of what a Romney Administration would actually do. Is it so crazy for political activists and pundits to be curious about this?

Daniel Larison:

Something that helps make sense of Romney’s positioning is its largely reactive quality. Despite his past claims that he understands leadership, he never leads on any issue. During the presidential campaign, Romney endorsed granting Detroit a huge subsidy when he thought it might help him in the Michigan primary. Later the same year, he fiercely opposed bailing out Detroit, because he perceived that support for the auto industry was not useful to him. He supported the TARP when that was the default Republican leadership position to take, and has since become a fierce critic of the management of the TARP once he realized that being identified as pro-TARP was politically toxic. The candidate who famously said that he “liked mandates” and has endorsed a mandate as the “conservative position” when he wanted to brag about his achievements cannot abide the individual mandate when it positions him against the health care bill. In other words, he has the ability to position himself for short-term political advantage rather well, but seems to have no notion of how to take one position–whether he “really” believes it or not–and stand by it for more than a year or so if there is some brief advantage to be had in changing positions in the meantime. This is what creates the impression that he has no enduring goal or vision other than the acquisition of political office and influence. All the while, he has the insufferable habit of embracing each and every new position with the zeal of a convert, convinced that he now has the moral authority to denounce anyone who disagrees, and then casually abandoning or neglecting the issue when something else shiny catches his attention.

My guess is that Romney doesn’t “really” have a stand on any of these issues, but what is annoying is not simply Romney’s lack of principle. Many and possibly most politicians are not that deeply committed to principles, and that’s to be expected, but Romney attaches a degree of smugness and sanctimony to the exercise that is genuinely obnoxious. What should be bothersome to his supporters is that his pandering is so impermanent and fleeting that he inspires no confidence that he will be in the same place a year or two from now. Very simply, he can’t be counted on and can’t be trusted.

Andrew Sullivan

Jonathan Cohn at TNR:

You may not believe this, but I know how Douthat and Frum feel.

Notwithstanding my liberal beliefs and general affinity for Democratic politicians, I once had very high hopes for Romney as a presidential candidate. He had raw intelligence and management acumen, as his tenure at Bain Consulting demonstrated. In Massachusetts politics, he’d staked out moderate positions, pledging not to interfere with a woman’s right to abortion (in part because a family friend had died after an illegal procedure) and criticizing conservatives like Jesse Helms and Pat Robertson in interviews with gay community newspapers.

Most important of all, Romney had accomplished something meaningful in office, signing the Massachusetts health care reforms. In a profile for TNR, here’s how I described that episode:

Romney’s subsequent work on the health care bill showcased his best qualities–reminiscent, in many ways, of his days at Bain. For advice, he tapped some of the state’s top minds on health–even those, like MIT’s Jonathan Gruber, who had traditionally advised Democrats. For political support, he reached out to traditional champions of expanded coverage, such as former House member John McDonough, turning these would-be adversaries into allies. And, above all, he went into negotiations with an open mind. The result was a bill that had enough support to get all the way through the legislative process. Romney ended up signing the bill in a grand public ceremony on the steps of Fanueil Hall. Standing at his sidewas his old nemesis, Ted Kennedy–who, it turns out, had worked closely with Romney on sealing the deal. “I’m a partisan Democrat, and, in a lot of ways, I think he was a terrible governor,” says one high-ranking legislative staffer who worked on the measure.”But I do give him credit for participating in the health care debate and helping to advance that agenda.”

All of this made me think that Romney was the heir to the tradition of moderate Republicanism that his father, former Michigan Governor George Romney, had once championed. During the 1960s, the elder Romney had fought the good fight against the Republicans’ Goldwater wing, urging the party to distance itself from John Birchers and other conservative extremists. The elder Romney never made it as a presidential candidate but maybe the younger Romney would.

Mitt wouldn’t be getting my vote, obviously: He was still pretty conservative, particularly on economic issues. But I thought his problem-solving instincts and apparently sincere interest in public service would serve him well and that, when it was all over, he might end up doing good things in office.

But by early 2007, when I began the reporting of my profile, Romney was in full pander mode–saying whatever it took to win over the Republican base, even if that meant campaigning as precisely the sort of conservative ideologue his father had once disdained:

…if any one moment epitomized the new Mitt Romney, it was his speech before the Conservative Political Action Committee (CPAC) in February. There, gathered in one place, were the intellectual and ideological heirs to the conservative movement that first captured control of the Republican Party in the 1960s. But Mitt Romney had not come to carry on his father’s fight against the right wing. He had come, instead, to do what every other aspiring Republican presidential nominee was doing: beg for the group’s approval. After being introduced by Grover Norquist, the conservative activist perhaps most responsible for the radical makeover of government economic policy in the last decade, Romney began his speech by suggesting it was a “good thing” the crowd would soon hear from Ann Coulter, who was next on the speaking agenda. From there, he fed the crowd red meat–attacking Ted Kennedy, Nancy Pelosi, and the press; promising to fight the liberal social agenda, to close U.S.borders, and to never, ever raise taxes. “This is not the time for us to shrink from conservative principles,” Romney thundered. “It is time for us to stand in strength.”

Romney’s latest panders make me wonder not if those of us who believed in Romney were wrong about him from the beginning. After all, it was Ted Kennedy, back in 1996, who first zeroed in on Romney inconsistencies on abortion with the devastating line: “He’s not pro-choice, he’s not anti-choice. He’s multiple choice.”

Ezra Klein

Mori Dinauer at Tapped:

I think Ross Douthat is essentially correct when he says that Mitt Romney‘s policy dexterity is so extreme that it renders judgment on his hypothetical presidential administration all but futile. I used to think that because Romney will bend in any direction he could be reasoned with, and thus could be a reasonable president. Not any more. The fact that we have no idea what he would do strongly suggests that he is no longer qualified for the office in the first place.

Cynthia Tucker:

Mitt, you old chameleon, you

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Filed under Political Figures

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

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