So, What Happened Over The Weekend?

Ed Morrissey:

NBC has a fairly comprehensive report on the American attack on Libyan forces this morning, complete with totals thus far on cruise missiles (114 of them) and attacks by stealth bombers on air-defense systems, with 20 of those targeted. Military airstrips around the country have been bombed as well, up to 40 of them. Libya claims that 48 people have died as a result of those attacks, and Moammar Gaddafi gave the usual warning to the Muslim world that this was the start of a “crusader war” against an Arab nation. One piece of news might raise eyebrows — the US has sent fighter jets from Sicily to attack Gaddafi’s ground forces around Benghazi

That would seem to go beyond the UN mandate for a no-fly zone. The Pentagon tells NBC that their interpretation of the mandate is that they need to protect civilians, an interpretation that would leave practically no option off the table. Even without considering a ground invasion, it could mean that the US could attack Tripoli or practically any target they wish from the air or through off-shore cruise missiles. As Jim Miklaszewski reports, it looks as though the intent now is to utterly destroy Gaddafi’s army in an attempt to force him into retreat.

Not for nothing, but wasn’t that more or less our strategy in Iraq in 1990? We had a lot more firepower on target in that case, and it still took a ground invasion to eject Saddam Hussein from Kuwait — and that wasn’t his own territory, either. Had we done this four weeks ago, we could have protected a status quo, de facto liberation of Benghazi and other areas of Libya. Now, the Libyan position is so advanced that Gaddafi can likely abandon his armor in the city and reduce the rebels to destruction. It will just take a little longer. The time to stop Gaddafi from seizing Benghazi and stomping out the rebellion was when Gaddafi was bottled up in Tripoli.

Marc Lynch at Foreign Policy:

President Obama’s decision to join an international military intervention in Libya has met with a largely negative response in the United States across the political spectrum. Critics correctly point to a wide range of problems with the intervention: the absence of any clear planning for what comes after Qaddafi or for what might happen if there is an extended stalemate, doubts about the opposition, the White House’s ignoring of Congress and limited explanations to the American public, the selectivity bias in going to war for Libya while ignoring Bahrain and Yemen, the distraction from other urgent issues.  I have laid out my own reservations about the intervention here and here.

This emerging consensus misses some extremely important context, however. Libya matters to the United States not for its oil or intrinsic importance, but because it has been a key part of the rapidly evolving transformation of the Arab world.  For Arab protestors and regimes alike, Gaddafi’s bloody response to the emerging Libyan protest movement had become a litmus test for the future of the Arab revolution.  If Gaddafi succeeded in snuffing out the challenge by force without a meaningful response from the United States, Europe and the international community then that would have been interpreted as a green light for all other leaders to employ similar tactics. The strong international response, first with the tough targeted sanctions package brokered by the United States at the United Nations and now with the military intervention, has the potential to restrain those regimes from unleashing the hounds of war and to encourage the energized citizenry of the region to redouble their efforts to bring about change. This regional context may not be enough to justify the Libya intervention, but I believe it is essential for understanding the logic and stakes of the intervention by the U.S. and its allies.

Libya’s degeneration from protest movement into civil war has been at the center of the Arab public sphere for the last month. It is not an invention of the Obama administration, David Cameron or Nikolas Sarkozy.  Al-Jazeera has been covering events in Libya extremely closely, even before it tragically lost one of its veteran cameramen to Qaddafi’s forces, and has placed it at the center of the evolving narrative of Arab uprisings.  Over the last month I have heard personally or read comments from an enormous number of Arab activists and protest organizers and intellectuals from across the region that events in Libya would directly affect their own willingness to challenge their regimes. The centrality of Libya to the Arab transformation undermines arguments  that Libya is not particularly important to the U.S. (it is, because it affects the entire region) or that Libya doesn’t matter more than, say, Cote D’Ivoire (which is also horrible but lacks the broader regional impact).

The centrality of Libya to the Arab public sphere and to al-Jazeera carries a less attractive underside, though.  The focus on Libya has gone hand in hand with al-Jazeera’s relative inattention to next-door Bahrain, where a GCC/Saudi  intervention has helped to brutally beat back a protest movement and tried to cast it as a sectarian, Iranian conspiracy rather than as part of the narrative of Arab popular uprisings.  It has also distracted attention from Yemen, where rolling protests and mass government defections might finally today be bringing down the Ali Abdullah Saleh regime. The TV cameras have also largely moved on from the urgent issues surrounding the ongoing transitions in Tunisia and Egypt. Cynics might argue that the GCC and Arab League have been willing to support the intervention in Libya for precisely that reason, to keep the West distracted from their own depradations.

Finally, as I warned last week, Arab support for an intervention against Qaddafi to protect the Libyan people rapidly begins to fray when the action includes Western bombing of an Arab country. It should surprise nobody that the bombing campaign has triggered anger among a significant portion of the Arab public, which is still powerfully shaped by the Iraq war and aggrieved by perceived double standards (one of the most common lines in Arab debates right now is “where was the No Fly Zone over Gaza?”).  Amr Moussa’s flip-flopping on the Arab League’s stance towards the intervention should be seen as part of that tension between the desire to help the Libyan people and continuing suspicion of Western motives.  Skeptical voices matter too —  ignoring or ridiculing influential or representative voices simply because their message is unpalatable is a mistake too often made in this part of the world.

Amy Davidson at The New Yorker:

What are we doing in Libya? “Helping” is not a sufficient answer. President Obama said that, if we didn’t act, “many thousands could die…. The calls of the Libyan people for help would go unanswered.” But that is a motive, a desire—not a plan. Obama also said that America wouldn’t be leading operation Odyssey Dawn, just helping: our allies, particularly the French and British, had this one, and the Arab League would help by cheering. By Sunday, though, there was division in the Arab League, and there was something iffy to start with about making Nicolas Sarkozy the point man on anything. (One of the many, many things I wish I understood was what role French elections played in all of this.) Could Congress and the American people have maybe helped the Obama Administration think this one through?

Members of the Administration, including Tom Donilon, the national-security adviser, and Robert Gates, the Secretary of Defense, keep repeating the phrase “days, not weeks.” But what they are referring to is not the length of the operation but of America’s “leadership” of it. Who will take over? There is more clarity on that point than on the question of who will take over Libya if Qaddafi leaves, but that’s a pretty low bar: as Philip Gourevitch points out in his pointed summary of the questions attending this operation, we have no idea. Hillary Clinton talked about people around Qaddafi deciding to do something—the eternal desire for the convenient coup. Do we care who the plotters are?

Another thing that more people perhaps should have been clear about was the extent of Odyssey Dawn. The Times spoke of discomfort at how it had gone beyond a “simple ‘no-fly zone.’ ” But, despite the blank, pristine quality of the term, imposing a no-fly zone is not a simple, or clean and bloodless, thing, as if one simply turned a switch and the air cleared out. Pentagon spokesmen talked about hitting anti-aircraft installations, aviation centers, and “communication nodes.” Empty skies require rubble on the ground.

Lexington at The Economist:

For what it is worth, I welcome the fact that the world at last seems willing to exercise its so-called “duty to protect” people at risk from their own governments. The failures to do so in Rwanda and Darfur and so many other charnel houses is a blot on its conscience that will never be erased. But there is no escaping the fact that this new entanglement was decided upon behind closed doors at the UN and with very little public debate here in the United States. None of this will matter if the end comes quickly. But if things go wrong and America is drawn deeper in, the domestic consequences for the president could be far-reaching.

Tim Carney at The Washington Examiner:

At once presumptuous and flippant, President Obama used a Saturday audio recording from Brazil to inform Americans he had authorized a third war — a war in which America’s role is unclear and the stated objectives are muddled.

Setting aside the wisdom of the intervention, Obama’s entry into Libya’s civil war is troubling on at least five counts. First is the legal and constitutional question. Second is the manner of Obama’s announcement. Third is the complete disregard for public opinion and lack of debate. Fourth is the unclear role the United States will play in this coalition. Fifth is the lack of a clear endgame. Compounding all these problems is the lack of trust created by Obama’s record of deception.

“Today, I authorized the armed forces of the United States to begin a limited military action in Libya,” the president said. For him it was self-evident he had such authority. He gave no hint he would seek even ex post facto congressional approval. In fact, he never once mentioned Congress.

Since World War II, the executive branch has steadily grabbed more war powers, and Congress has supinely acquiesced. Truman, Johnson, Reagan, Clinton and Bush all fought wars without a formal declaration, but at least Bush used force only after Congress authorized it.

And, once more, the president’s actions belie his words on the campaign trail. In late 2007, candidate Obama told the Boston Globe, “The president does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation.”

There is no claim that Moammar Gadhafi poses a threat to the United States. But asking President Obama to explain his change of heart would be a fruitless exercise. This is a president who has repeatedly shredded the clear meaning of words in order to deny breaking promises he has clearly broken — consider his continued blatant falsehoods on tax increases and his hiring of lobbyists.

James Fallows:

Count me among those very skeptical of how this commitment was made and where it might lead.

How it was made: it cannot reassure anyone who cares about America’s viability as a republic that it is entering another war with essentially zero Congressional consultation or “buy-in,” and with very little serious debate outside the Executive Branch itself. And there the debate was, apparently, mostly about changing the President’s own mind. I recognize that there are times when national safety requires an Administration to respond quickly, without enduring the posturing and institutionalized dysfunction that is the modern Congress. Without going through all the arguments, I assert that this is not such a moment. To be more precise: the Administration has not made the public case that the humanitarian and strategic stakes in Libya are so unique as to compel intervention there (even as part of a coalition), versus the many other injustices and tragedies we deplore but do not go to war to prevent. I can think of several examples in my current part of the world.

I didn’t like the “shut up and leave it to us” mode of foreign policy when carried out by people I generally disagreed with, in the Bush-Cheney era. I don’t like it when it’s carried out by people I generally agree with, in this Administration.

Where it might lead: The most predictable failure in modern American military policy has been the reluctance to ask, And what happens then? We invade Iraq to push Saddam Hussein from power. Good. What happens then? Obama increases our commitment in Afghanistan and says that “success” depends on the formation of a legitimate, honest Afghan government on a certain timetable. The deadline passes. What happens then? One reason why Pentagon officials, as opposed to many politicians, have generally been cool to the idea of “preventive” strikes against Iran’s nuclear facilities is that many have gone through the exercise of asking, What happens then?

Launching air strikes is the easiest, most exciting, and most dependably successful stage of a modern war, from the US / Western perspective. TV coverage is wall-to-wall and awestruck. The tech advantages are all on our side. Few Americans, or none at all, are hurt. It takes a while to see who is hurt on the ground.

But after this spectacular first stage of air war, what happens then? If the airstrikes persuade Qaddafi and his forces just to quit, great! But what if they don’t? What happens when a bomb lands in the “wrong” place? As one inevitably will. When Arab League supporters of the effort see emerging “flaws” and “abuses” in its execution? As they will. When the fighting goes on and the casualties mount up and a commitment meant to be “days, not weeks” cannot “decently” be abandoned, after mere days, with so many lives newly at stake? When the French, the Brits, and other allies reach the end of their military resources — or their domestic support — and more of the work naturally shifts to the country with more weapons than the rest of the world combined?  I usually do not agree with Peggy Noonan, but I think she is exactly right in her recent warning* about how much easier it is to get into a war than ever to get out. I agree more often with Andrew Sullivan, and I share his frequently expressed recent hopes that this goes well but cautions about why it might not. (Jeffrey Goldberg has asked a set of similar questions, here.)

Josh Marshall at Talking Points Memo:

So let’s review: No clear national or even humanitarian interest for military intervention. Intervening well past the point where our intervention can have a decisive effect. And finally, intervening under circumstances in which the reviled autocrat seems to hold the strategic initiative against us. This all strikes me as a very bad footing to go in on.

And this doesn’t even get us to this being the third concurrent war in a Muslim nation and the second in an Arab one. Or the fact that the controversial baggage from those two wars we carry into this one, taking ownership of it, introducing a layer of ‘The West versus lands of Islam’ drama to this basically domestic situation and giving Qaddafi himself or perhaps one of his sons the ability to actually start mobilization some public or international opinion against us.

I can imagine many of the criticisms of the points I’ve made. And listening to them I think I’d find myself agreeing in general with a lot of it. But it strikes me as a mess, poorly conceived, ginned up by folks with their own weird agendas, carried out at a point well past the point that it was going to accomplish anything. Just all really bad.

Spencer Ackerman at Danger Room at Wired:

As the United Nations-sanctioned war against Libya moves into its third day, no U.S., French or British aircraft have been shot down by Libyan air defenses. Part of the credit should go to the Navy’s new jammer, which is making its combat debut in Operation Odyssey Dawn. But the jammer isn’t just fritzing Moammar Gadhafi’s missiles, it’s going after his tanks.

Vice Adm. Bill Gortney told the media on Sunday that the EA-18G Growler, a Boeing production, provided electronic warfare support to the coalition’s attacks on Libya. That’s the first combat mission for the Growler, which will replace the Navy’s Prowler jamming fleet. Only Gortney added a twist: not only did the Growler go after Libya’s surface-to-air missiles, it helped the coalition conduct air strikes on loyalist ground forces going after rebel strongholds.

According to Gortney, coalition air strikes “halted” the march of pro-Gadhafi troops 10 miles south of Benghazi, thanks to French, British and U.S. planes — including the Marine Corps’ Harrier jump jet — thanks in part to Growler support. There’s no word yet on whether the Growler’s jamming functions disrupted any missiles that the pro-Gadhafi forces carried, or fried any communications the Libyan loyalists attempted to make back to their command. But Robert Wall of Aviation Week notes that the continued “risk from pop-up surface to air missile firings” prompts the need for Growlers above Libya.

And expect the Growler to keep up the pressure. The Pentagon plans to transfer control of Odyssey Dawn from Gen. Carter Ham and U.S. Africa Command to an as yet undetermined multinational command entity — at which point, the U.S. is expected to take a backseat in combat missions. But it’ll continue to contribute “unique capabilities” to the Libya mission. Namely, Gortney specified, “specialty electronic airplanes” such as the Growler. (And refueling tankers, spy planes, cargo haulers and command n’ control aircraft.) No wonder Defense Secretary Robert Gates hearts it so much.

Boss Hogg Says Something Interesting

Ben Smith at Politico:

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

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

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

But he said his reasoning isn’t financial.

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

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

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

Joe Klein at Swampland at Time:

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

J.F. at DiA at the Economist:

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

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

Dan Amira at New York Magazine:

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

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

Alex Massie:

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

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

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

It Is Ezra Klein Week Here At Around The Sphere

Ezra Klein:

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

[…]

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

Klein again:

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

Ezra Klein: Let’s talk about the post.

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

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

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

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

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

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

More Klein here and here

Will Wilkinson at DiA at The Economist:

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

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

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

Mr Klein follows up sanely:

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

To which Mr Vilsack says:

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

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

Ryan Avent at Free Exchange at The Economist:

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

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

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

Andrew Sullivan

Arnold Kling:

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

James Joyner:

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

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

Jonathan Chait at TNR:

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

Choo Choo Canned Heat Collectivism

George Will in Newsweek:

So why is America’s “win the future” administration so fixated on railroads, a technology that was the future two centuries ago? Because progressivism’s aim is the modification of (other people’s) behavior.

Forever seeking Archimedean levers for prying the world in directions they prefer, progressives say they embrace high-speed rail for many reasons—to improve the climate, increase competitiveness, enhance national security, reduce congestion, and rationalize land use. The length of the list of reasons, and the flimsiness of each, points to this conclusion: the real reason for progressives’ passion for trains is their goal of diminishing Americans’ individualism in order to make them more amenable to collectivism.

To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they—unsupervised, untutored, and unscripted—are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.

Time was, the progressive cry was “Workers of the world unite!” or “Power to the people!” Now it is less resonant: “All aboard!”

Jason Linkins at Huffington Post:

One way of looking at high-speed rail systems is that they are a means by which distant communities get connected, economic development and jobs are fostered, and workers with a diverse array of marketable skills can improve their mobility and thus their employment prospects. But another way of looking at high-speed rail is that it’s some nonsense that came to a bunch of hippies as they tripped balls at a Canned Heat concert. That’s my takeaway with George Will’s latest grapple-with-the-real-world session, in which he attempts to figure out “Why liberals love trains.” It’s “Matrix” deep, yo

Sarah Goodyear at Grist:

In case you’re wondering about the provenance of that “collectivism” word — well, collectivism was a favorite demon of Ayn Rand, right-wing philosopher and the Ur-mother of libertarianism in the United States. Here’s a typical usage, from The Objectivist Newsletter of May 1962 (via the Ayn Rand Lexicon):

The political philosophy of collectivism is based on a view of man as a congenital incompetent, a helpless, mindless creature who must be fooled and ruled by a special elite with some unspecified claim to superior wisdom and a lust for power.

“Collectivism” also recalls some of the very worst communist ideas, including the “collectivization” of farms in the Stalinist Soviet Union — among the great atrocities of the 20^th century (a crowded category).

Which makes it a pretty strong term to be throwing around when it comes to funding different modes of transportation in 21^st-century America. But Will persists with his formulation:

To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they — unsupervised, untutored, and unscripted — are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.

A couple of things here. First off, automobiles are not the only vehicles capable of encouraging “delusions of adequacy.” Bicycles, one might argue, are a lot more capable of encouraging such delusions — fueled as they are entirely by the body of the “unscripted” individual. Which is perhaps why they seem to enrage people in cars, who have to worry about gasoline and the like, so very much.

Second, let’s talk about modern air travel. What mode of transport is more capable of sapping the human sense of possibility, more confining of the untrammeled human spirit? Perhaps before Will goes after high-speed rail, he should call for the defunding of the Federal Aviation Administration.

Paul Krugman:

As Sarah Goodyear at Grist says, trains are a lot more empowering and individualistic than planes — and planes, not cars, are the main alternative to high-speed rail.

And there’s the bit about rail as an antiquated technology; try saying that after riding the Shanghai Maglev.

But anyway, it’s amazing to see Will — who is not a stupid man — embracing the sinister progressives-hate-your-freedom line, more or less right out of Atlas Shrugged; with the extra irony, of course, that John Galt’s significant other ran, well, a railroad.

Matthew Yglesias:

But I do think this is a good look into the psychology of conservatives. Maybe high-speed rail is a waste of money and maybe it isn’t. I think it’s plausible to say we should just spend the cash on better regular mass transit or whatever. But I’ve long struggled to explain the right-wing’s affection for status quo American policies that amount to massive subsidization of the automobile. A small slice of that is spending on roads. A much larger amount is minimum lot size rules, parking mandates, the whole shebang. It’s a bit odd, and my instinct had been to say that this just goes to show that conservatism has nothing to do with free markets and everything to do with the identity politics of middle aged white suburban conformists. But Will offers another explanation here. Automobile use is not a sign of the free market, but an actual cause of it. Driving inculcates habits of freedom, and thus coercive pro-car regulations are, in a way, freedom-promoting.

More Krugman:

A bit more on this subject — not serious, just a personal observation after a long hard day of reading student applications. (My suggestion that we reject all applicants claiming to be “passionate” about their plans was rejected, but with obvious reluctance.)

Anyway, my experience is that of the three modes of mechanized transport I use, trains are by far the most liberating. Planes are awful: waiting to clear security, then having to sit with your electronics turned off during takeoff and landing, no place to go if you want to get up in any case. Cars — well, even aside from traffic jams (tell me how much freedom you experience waiting for an hour in line at the entrance to the Lincoln Tunnel), the thing about cars is that you have to drive them, which kind of limits other stuff.

But on a train I can read, listen to music, use my aircard to surf the web, get up and walk to the cafe car for some Amfood; oh, and I’m not restricted by the War on Liquids. When I can, I prefer to take the train even if it takes a couple of hours more, say to get to Boston, because it’s much higher-quality time.

Yes, your choices are limited by the available trains; if I wanted to take a train from beautiful downtown Trenton to DC tomorrow, I’d be restricted to one of 21 trains, leaving roughly once an hour if not more often, whereas if I wanted to drive I could leave any time I wanted. Big deal.

And don’t get me started on how much more freedom of movement I feel in New York, with subways taking you almost everywhere, than in, say, LA, where you constantly have to worry about parking and traffic.

So if trains represent soulless collectivism, count me in.

Atrios:

As Krugman says, trains really are the best way to travel, at least for travel times that are roughly competitive with air travel. That fact doesn’t automatically mean that therefore we should spend huge amounts of public money on it, but, you know, it does mean that people like trains for more reasons than their insidious collectivist promotion.

Scott Lemieux at Lawyers, Guns and Money:

Manypeoplehave, for good reason, taken their knocks at syndicated columnist William F. George’s ludicrous column about trains, with particular emphasis on the substantial amount of government subsidies that facilitate “individualistic” car travel.    In addition, I’d note that the flying experience is a good example of Republican “freedom.”   For some distances flying is of course necessary and useful, although a good high-speed train network would reduce the number of routes that make flying more practical. For the ordinary person, however, flying is a miserable experience — more waiting in line than a Soviet supermarket during a recession, the potentially humiliating security theater, and incredibly cramped and uncomfortable travel.     But — and here’s the rub — people as affluent as Will can buy their way out of the worst aspects of flying, with separate security lines, private lounges, and first-class seating.   With trains, on the other hand, the experience for the ordinary person is infinitely superior but the affluent can obtain an only marginally better experience.   So you can see why Will hates it.   The fact that trains might represent more meaningful freedom for you isn’t his problem.

More Krugman:

Some of the comments on my various pro-train posts have been along the lines of “Oh yeah, try taking the train to Los Angeles.” But that, of course, misses the point.

I think about the trains/planes comparison something like this: planes go much faster, and will continue to go faster even if we get high-speed rail; but there are some costs associated with a plane trip that can be avoided or minimized on a rail trip, and those costs are the same whether it’s a transcontinental flight or a hop halfway up or down the Northeast Corridor. You have to get to the airport at one end, and get from it at the other, which is a bigger issue, usually, than getting to and from train stations that are already in the city center. You have to wait on security lines. You have to spend more time boarding. So if we look just at travel time, it looks like this:

Suppose that I put those fixed costs at 2 hours; suppose that planes fly at 500 miles an hour; and suppose that we got TGV-type trains that went 200 miles an hour. Then the crossover point would be at 667 miles. It would still be much faster to take planes across the continent — but not between Boston and DC, or between SF and LA. Add in my personal preference for train travel, and I might be willing to train it to Chicago, maybe, but not to Texas.

Now, if we got vacuum maglevs …

More Yglesias:

I endorse Krugman’s analysis, but in some ways I think the fact that you can’t get to LA on a train actually is the point. You can’t take the train from New York to Los Angeles. You can’t drive from New York to Los Angeles. You need an airplane. But LaGuardia Airport has limited runway capacity and many daily flights to Boston. Clearly, though, you can take a train from New York to Boston. So money spent on improving the speed and passenger capacity of NYC-Boston train links is, among other things, a way to improve New York’s air links to the West Coast.

Now a separate question is whether there’s any feasible way to actually do this in a country that doesn’t have a French (or Chinese) level of central political authority empowered to build straight tracks through people’s suburban backyards. The answer seems to be “no,” but the potential gains from greater rail capacity in the northeast are large and would (via airplanes) spill over into the rest of the country.

More Goodyear:

In the dark days immediately after 9/11, Will seems to have had a revelation about how a certain mode of transportation could help our nation be stronger and more secure. In an Oct. 1, 2001 column syndicated in the Jewish World Review, Will recommended three steps in response to the attack that the nation had just sustained. First, buy more B-2 bombers. Second, cut corporate taxes. And third? Let Will speak for himself (emphasis mine):

Third, build high-speed rail service.

Two months ago this columnist wrote: “A government study concludes that for trips of 500 miles or less — a majority of flights; 40 percent are of 300 miles or less — automotive travel is as fast or faster than air travel, door to door. Columnist Robert Kuttner sensibly says that fact strengthens the case for high-speed trains. If such trains replaced air shuttles in the Boston-New York-Washington corridor, Kuttner says that would free about 60 takeoff and landing slots per hour.”

Thinning air traffic in the Boston-New York-Washington air corridor has acquired new urgency. Read Malcolm Gladwell’s New Yorker essay on the deadly dialectic between the technological advances in making air travel safer and the adaptations to these advances by terrorists.

“Airport-security measures,” writes Gladwell, “have simply chased out the amateurs and left the clever and the audacious.” This is why, although the number of terrorist attacks has been falling for many years, fatalities from hijackings and bombings have increased. As an Israeli terrorism expert says, “the history of attacks on commercial aviation reveals that new terrorist methods of attack have virtually never been foreseen by security authorities.”

The lesson to be learned is not defeatism. Security improvements can steadily complicate terrorists’ tasks and increase the likelihood of defeating them on the ground. However, shifting more travelers away from the busiest airports to trains would reduce the number of flights that have to be protected and the number of sensitive judgments that have to be made, on the spot, quickly, about individual travelers. Congress should not adjourn without funding the nine-state Midwest Regional Rail Initiative.

Now that it’s a Democratic administration advocating for rail, Will sees it not as a sensible solution for moving people from one place to another, but instead as a tool to control an unsuspecting populace:

To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they — unsupervised, untutored, and unscripted — are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.

In his recent screed against rail, Will explicitly dismissed arguments that it would be good for national security. He also didn’t mention air travel. Maybe that would have reminded him of what he himself wrote nearly 10 years ago.

David Weigel:

Good get, but if we’re going to be talking about stupid ideas people had right after 9/11, we’ll be here all day. Will’s rail fetish was a passing fancy, and since then he’s come around to the conservative consensus that rail can never, ever work as a replacement for air travel, so rail projects are essentially boondoggles.

This is an odd discussion to have as the Atlas Shrugged movie comes out. The book and the film absolutely fetishize rail; the film makes it clear that rail will become necessary once gas starts to really run out. And this is something liberal rail adherents point out, too. But I don’t see conservatives coming around to HSR, which needs a massive manpower and financial and land commitment to get going, outside of that sort of crisis thinking.

Jamelle Bouie at Tapped:

This isn’t to play “gotcha,” as much as it is to note a simple fact about our world: We’re all partisans, whether we admit it or not. Reason’s opposition to the individual mandate has almost nothing to do with the substance of what is truly a center-right policy and everything to do with current political circumstances. The mandate was implemented by a Democrat. Reason, as a right-libertarian institution, is part of the conservative opposition to the liberal president. Likewise, Will’s opposition to high-speed rail is purely a function of partisan politics.

This isn’t a bad thing. Yes, partisanship can be taken too far and veer into ideological blindness, but, in general, it is a useful way of organizing our thoughts on policies and politics. Indeed, it’s how most voters process political information. Political commentary would be much more bearable if pundits were willing to accept the partisan origins of their biases and skepticism, instead of playing a game where we pretend to be open-minded observers.  Most are anything but.

Gulliver at The Economist:

Mr Bouie might be overstating the influence of partisanship a bit, and it’s hard for people to know exactly what is driving others’ opinions—or even one’s own. Still, partisanship is certainly a useful frame through which to view both the most ardent opponents and the most passionate defenders of HSR. There is political science research that shows that a president weighing in on one side of a given debate (as Barack Obama has with high-speed rail) dramatically increases political polarization on that issue. Of course, if Mr Bouie’s theory is correct, we should be able to point to some lefty supporters of HSR whose support seems to be driven primarily by partisanship—or even a few who, like Mr Will, have switched positions on the issue. Anyone have a nomination? Let us know in the comments.

It Is 1995 Again And We Are Wearing Doc Martens, Listening To Everclear

John Hudson at The Atlantic:

Congress has until March 4 to figure out how to fund the U.S. government. And as of right now, House Republicans and Senate Democrats are more than $60 billion away from a consensus. It’s a high stakes game, given that last time the federal government shut down, all sorts of important functions were halted (passport/visa processing, toxic waste cleanup, museums, monuments and 368 national park sites all closed, etc). So who stands to benefit from all this brinkmanship?

Jay Newton-Small at Swampland at Time:

House Speaker John Boehner and Senate Minority Leader Mitch McConnell have been working behind the scenes to draft a two-week stopgap measure to avert a government shutdown that would include $4 billion in immediate cuts, according to House and Senate GOP aides.

The House would move first – the Rules Committee could meet as early as Monday. Boehner is hoping to pass the bill by Wednesday. Boehner and Senate Majority Leader Harry Reid have been in discussions but if a deal is not reached ahead of time Senate Republicans would offer Boehner’s proposal as a substitute to Reid’s bill. The cuts will include reductions that President Obama has suggested and other non-controversial items in the hopes of luring support from moderate Senate Democrats who are facing tough reelections. No details were immediately available on what cuts Boehner and McConnell are looking at. “Senator Reid’s position that they will force a government shutdown rather than cut one penny in spending is indefensible – and it will be very hard for them to oppose a reasonable short-term funding measure that will cut spending,” says a House GOP aide. If nothing is done by March 4 the government will shutdown.

Reid’s office said Wednesday he still plans to move forward with a 30-day spending freeze at current levels. The House on Saturday passed a bill funding the government through the end of the fiscal year. But that bill slashes funding by $100 billion — cuts that are not likely to survive the Democratically-controlled Senate. The Senate has proposed cutting $41 billion from Obama’s 2011 request, but that translates into funding the government at roughly the same level it’s at right now. “While Republicans are making a genuine effort to cut spending and debt, Washington Democrats can’t seem to find a single dime of federal spending to cut, insisting on the status quo, even for a short-term spending bill,” McConnell said Wednesday in a statement to TIME. “But keeping bloated spending levels in place is simply unacceptable. So it is our hope that Democrats will join us in a bill that actually reduces Washington spending.” Both sides agree that more time is needed to negotiate a compromise and Boehner has said he will not allow even a temporary extension without some cuts.

The competing bills amount to a game of chicken between the Republican-controlled House and the Democrat-controlled Senate. Both sides claim they are trying to avoid a shutdown, but if one happens both are laying the ground work to blame the other. While both Parties say they want cuts, Republicans want immediate results while Democrats have been taking more of a “scapel” rather than a “meat axe” approach, as Reid put it yesterday on a call with reporters.

Annie Lowrey at Slate:

So what actually happens if Congress fails to pass a continuing resolution and the coffers dry up? Certain necessary activities would continue—anything related to defense, inpatient or emergency medical care, air traffic control, securing prisoners, or disaster assistance, for instance. But legally, federal agencies would have to wind down nonessential business. That means hundreds of thousands of employees would go on furloughs, from Treasury to Health and Human Services to the Department of Education, to be paid whenever a continuing resolution passed. Thousands more contractors would just lose their gigs. Parks would shut down. Offices would clear out. Phones would go unanswered.

Nobody knows exactly how it would shake out, not just yet. The president has broad discretion to decide what counts as necessary and what does not, says Stan Collender, a longtime budget expert and a partner at Qorvis, a D.C. communications firm. Right now, the White House Office of Management and Budget says it is helping agencies review their protocols in the event that March 4 comes and goes without a continuing resolution on Obama’s desk. (The OMB has required federal agencies to keep an updated contingency plan on file since 1980.) Officials are looking at who will go and who will stay, and how they will tell whom to go where, just in case.

But everyone dreads the prospect. The last time the government shut down was during the Clinton administration. For five days in November 1995 and 21 days between December 1995 and January 1996, the lights went off. In the first shutdown, 800,000 workers stopped heading into the office. In the second, about 284,000 stayed at home, with an additional 475,000 working on “non-pay status.” These were not just pencil-pushers either. The Centers for Disease Control and Prevention gave up on monitoring the outbreak of diseases. Workers at 609 Superfund toxic-waste sites stopped cleaning up.

Ezra Klein:

This isn’t just about the spending bill. The stakes are higher even than that. At this point, no one side really knows how the power dynamic between the House and the Senate will shake out. House Republicans feel their preferences should take priority because they won the last election. Sharp cuts to non-defense discretionary spending are nothing more than their due. Senate Democrats counter that they still control not just the Senate, but also the White House — the House Republicans are a minority partner in this play, and don’t get to decide what the government does or doesn’t do merely because they control one of the three major legislative checkpoints. An uncompromising force is meeting an unimpressed object. But this won’t get settled in an arm wrestling bout, and it’s looking less and less likely that it’ll get settled in negotiations, either. Unfortunately, it seems increasingly possible that this will ultimately get decided when both sides put their theory to the test and take their case to the people during a government shutdown.

The Economist

David Corn at Politics Daily:

What would be the reasonable course of action in a situation like this? The answer is obvious: pass a short extension of the current continuing resolution — say, for a few weeks — to cover the time needed to hammer out a compromise between the House GOPers and Senate Democrats. And House Minority Leader Nancy Pelosi has done just that, proposing a stopgap bill that would fund the government at current levels until the end of March. Boehner, though, has declared he won’t accept a temporary measure unless it includes spending cuts. So if he sticks to that extreme position and he and Senate Majority Leader Harry Reid don’t reach a compromise by March 4, much of the federal government will shut down.

In such a scenario, it would seem that Boehner would deserve most of the culpability. Just like Gingrich. But would Boehner pay the same price?

The political dynamics are different this time. And Boehner is playing to two audiences that each is looking for a different show. Much of the tea party crowd — in and out of Congress — would cheer a government shutdown. These folks see the federal government as the enemy. They’d be delighted to strangle it, even if only for a few days. Yet independent voters, whom both parties need to court, would probably not be as happy. These people usually want their representatives in Washington to make the system work. They aren’t looking for showdowns or games of chicken. By forcing a shutdown, Boehner can appease his right — but at the cost of potentially alienating the middle.

Of course, if a shutdown comes, Boehner will try to blame it on Democrats and President Obama, claiming that their unwillingness to accept spending cuts created the problem. He’ll bash them for not listening to the people, and he’ll depict himself as a champion of principle. If it comes to this, it will be the climax of the GOP’s just-say-no strategy of the past two years.

Capitol Hill Democrats say Boehner is riding the Overreach Express and risks coming across more as a tea party bomb-thrower than as a responsible legislator. At least, that’s their hope. It will certainly take some deft maneuvering for Boehner to cause a shutdown, accuse the Democrats, and be hailed as a spending-cut hero of the republic. But it’s hard to know where the American public is these days. It generally detests overall government spending, but opposes many of the individual cuts the Republicans have passed. And though the American electorate sent a band of conservative ideologues to Washington this past November, many Americans fancy the notion of bipartisan cooperation. It’s no sure bet that the public will embrace a politician who throws this switch.

Boehner might be the player who has the most to lose. Obama and the Senate Democrats are already viewed as politicians who consider government a positive force that can be used to resolve the nation’s problems. If they draw a line against severe GOP cuts and ask for more time to forge a compromise, that’s hardly a news story. But Boehner, who is still a new figure on the scene, has benefited by not being regarded as an ideologue. If he refuses to back a measure that keeps the government functioning while the politicians look for a bipartisan deal, he could end up becoming identified as an I-know-best, anti-government extremist. That will, no doubt, be a badge of honor in certain circles. But it may not go over well beyond those quarters.

Boehner has a choice: reasonableness or ideology. In 1996, Gingrich chose the latter and crashed. At that time, Boehner was in his third term as a House member. The next two weeks will show what lessons he learned — if any.

Major Garrett at The Atlantic:

House GOP leaders held a conference call with freshmen GOP members on Wednesday to lay out the strategy. More than half of the 87-member class participated in a call with House Speaker John Boehner, R-Ohio; Majority Leader Eric Cantor, R-Va.; Majority Whip Kevin McCarthy, R-Calif.; and House Republican Conference Chairman Jeb Hensarling, R-Texas. The call gave more detail to an outline of the strategy GOP leaders gave the freshmen class before it left Washington for this week’s recess.

The GOP aides said the thrust of the trimmed-down CR is to avoid a government shutdown and make the GOP spending cuts as hard as possible for Senate Majority Leader Harry Reid, D-Nev., and the White House to ignore or criticize. “What we will end up saying is we have passed two bills to prevent a shutdown and then we will ask the Senate: ‘How many bills have you passed to prevent a shutdown?’ ” an aide said.

Senate Democrats dismissed the idea that the House proposal represented any kind of concession.

“The Republicans’ so-called compromise is nothing more than the same extreme package the House already handed the Senate, just with a different bow,” said Jon Summers, Reid’s communications director. “This isn’t a compromise; it’s a hardening of their original position. This bill would simply be a two-week version of the reckless measure the House passed last weekend. It would impose the same spending levels in the short term as their initial proposal does in the long term, and it isn’t going to fool anyone. Both proposals are non-starters in the Senate.”

The GOP freshmen, according to senior House GOP aides, backed the approach, even though it amounts to a retreat from the $61 billion in cuts from enacted fiscal 2010 spending levels (and $100 billion from Obama’s fiscal 2011 budget proposal that the previous Congress ignored). The House approved the $100 billion in cuts after the freshmen rejected the GOP-leadership-backed plan to cut $32 billion from fiscal 2010 spending levels.

According to several GOP sources, the freshmen and many senior conservatives are girding for an eventual retreat from the bigger CR because they know GOP leaders are fearful of the political consequences of a government shutdown and want to wage the spending-cut battle over many cycles–instead of betting all their chips on this first showdown with Reid and Obama.

Boehner and Cantor have pleaded with the freshmen to take the long view of the budget war and not risk a political backlash over the CR dispute. GOP leaders have instead argued to win as many spending cuts as they can during the CR debate and follow up with more when Congress must raise the $14.3 trillion debt ceiling later this spring and find still more when the fiscal 2012 appropriations bills are written.

This approach reflects Boehner’s deep-seated belief that the 1995 Gingrich-led Congress risked everything in its shutdown confrontation with President Bill Clinton, and in the aftermath Republicans not only lacked the stomach to fight for more spending cuts, they veered in the opposite direction and targeted federal spending to vulnerable districts to protect the GOP majority.

“We have a totally different mindset and approach than 1995,” said a senior House GOP source. “We don’t want to shut the government down. But we do want to cut spending. And we will. And the CR will do that one way or the other.”

Silvio, Silvio, Silvio…

Rachel Donadio at NYT:

A Milan judge on Tuesday ordered Prime Minister Silvio Berlusconi to stand trial in April on charges of prostitution and abuse of office, dealing the most serious blow to his leadership in the 17 years that he has dominated Italian politics.

In a brief statement the judge said the trial would start on April 6. Mr. Berlusconi faces charges that he paid for sex with an under-age nightclub dancer nicknamed Ruby Heart-Stealer, and abused his office to help release her from police custody when she was detained for theft. The scandal has dominated political debate in Italy for months.

Mr. Berlusconi denies wrongdoing and has said he has no intention of stepping down. But in an increasingly tense climate after large anti-Berlusconi demonstrations on Sunday, analysts said the judge’s ruling makes it nearly impossible for the prime minister to govern and all but guarantees early national elections.

“The situation is more political than judicial now,” said Stefano Folli, a political columnist for the financial daily Il Sole 24 Ore. He predicted that in the short term Mr. Berlusconi would hold on, but “in the middle-term it’s an unsustainable situation.”

Joe Gandelman at Moderate Voice

J.H. at Newsbook at The Economist:

EARLIER today a judge in Milan, Cristina Di Censo, indicted Italy’s prime minister, Silvio  Berlusconi, on charges relating to his alleged use of prostitutes. She said he should be tried for paying an underage prostitute and then attempting to cover up the alleged offence by taking advantage of his official position, which is itself an offence in Italy.

But Ms Di Censo did more than just indict Mr Berlusconi. She accepted, in full, arguments put forward by the prosecution that have potentially devastating implications for Mr Berlusconi (who denies any wrongdoing). First, she agreed with them that, because of “the obviousness of the evidence” they had gathered against him, he should be put on trial without a preliminary hearing. The full trial is due to begin on April 6th, and by a twist of fate (or, as Mr Berlusconi’s followers will no doubt contend, malevolent design) all three judges at the trial will be women.

That development seemed particularly resonant against a background of protests by Italian women against Mr Berlusconi and the entrenched machismo his female critics see him as representing. On Sunday, several hundreds of thousands took to piazzas around Italy to demonstrate “for a country that respects women”.

Their protest was the latest challenge to a prime minister whose personal popularity has fallen significantly since the scandal broke last October. Mr Berlusconi also faces daily problems attempting to get legislation through parliament following a walk-out by some of his followers last year.

The Jawa Report:

The legal age of consent in Italy is, holy cow, 14. But it is unlawful to engage in prostitution until the age of 18. Ms. Ruby, her stage name, was 17 when she let the PM boink her.

Berlusconi has said, “I didn’t pay her for the sex”. Which is a round about way of saying, “Yeah I hit that.”

Rick Moran:

Italian feminists are naturally up in arms.

On Sunday thousands took to the streets in Italian cities and worldwide in coordinated demonstrations that organizers said were aimed at restoring the dignity of Italian women amid the latest sex scandal and after years in which Mr. Berlusconi has routinely appointed television showgirls to political office.

No misogyny there. And how about Berlusconi’s lawyer’s take?

Noting that Mr. Berlusconi would be tried before a panel of three women judges, he said: “Great. Women are always appreciated, sometimes even agreeable,” the center-left daily La Repubblica reported.

Makes me wish I understood Italian so I could follow every twist and turn being reported in the Italian media.

Elspeth Reeve at The Atlantic:

Despite the scandals, the angry women, and the splitting of his political coalition, Berlusconi has managed to hold onto power. Why? The Guardian’s Alexander Chancellor says it’s because he’s a master salesman. “When he was building his media empire,” Chancellor says, he demanded his sales team have “the sun in their pockets”–they had to be sunny, smiling, non-smoking, mustache-free. The rules made Berlusconi billions. And now, despite the bad headlines, “Berlusconi still has the sun in his pocket. Addressing political rallies, he always looks hopeful, confident, and in charge. … He may have fallen from grace among many women and Catholics, but most men, apart from those of the left, seem still to like him well enough. In Britain he would probably be resented for his wealth alone, but in Italy it works in his favour.”

Libby Copeland at The XX Factor:

Berlusconi is, after all, a guy who once called Rosy Bindi, the middle-aged woman who heads the opposition Democratic party, “increasingly more beautiful than you are intelligent.” Her response was to tell him “I am not one of the women at your disposal,” which prompted an “I’m not at your disposal” campaign in support of her. (Bindi’s rejoinder may have sounded more pithy in the original Italian.) Like that exchange, the insults in the so-called Rubygate scandal are fascinating for their degree of bile, if a little stilted in the translation.

A few days ago, before Berlusconi was indicted for allegedly hiring an underage prostitute, more than 100,000 people, mostly women, came out across the country to protest his dalliances with young women. (Not to mention his penchant for institutionalizing sexism by, among other things, putting skimpily clad showgirls on the networks he owns.) This prompted Berlusconi’s education minister, herself a woman, to label the protestors “the usual snob heroines of the left.” By American standards this is a fairly stunning thing for a high-ranking politician to say. Not to mention a great band name.

Hey Kids, Tyler Cowen Wrote A Book!

Tyler Cowen’s new book, “The Great Stagnation”

Tyler Cowen:

That’s the title and it’s by me, the Amazon link is here, Barnes&Noble here.  That’s an eBook only, about 15,000 words, and it costs $4.00.  If you wish, think of it as a “Kindle single.”

Your copy will arrive on January 25 and loyal MR readers are receiving the very first chance to buy it.  Very little of the content has already appeared on MR.

Many of you have read my article “The Inequality that Matters,” but there I hardly touched on median income growth.  That is because I was writing this eBook.

Has median household income really stagnated in the United States?  If so, why?  Are the causes political or something deeper?  What are the important biases in how we are measuring national income and productivity and why do they matter for economic policy?  Are we getting enough value for all the extra money we are spending on the health care and education sectors?  What do some major right-wing and left-wing thinkers miss about this phenomenon?

How does all this relate to our recent financial crisis?

I dedicated this book to Michael Mandel and Peter Thiel, two major influences on some of the arguments.

Why did big government arise in the late 19th and early 20th centuries, what is its future, and why is science so important for macroeconomics?  How can we fix the current mess we are in?

Read (and buy) the whole thing.

Scott Sumner:

How great was Tyler Cowen’s marketing coup?  Well he forced a technophobe like me to actually learn how to use Kindle.  I wasn’t too happy about that, which makes me inclined to write a very negative review.  But that’s kind of hard to do credibly when I agree with the central proposition of the book; that technological progress (at least as traditionally measured) has slowed dramatically, and will continue to be disappointing for the foreseeable future.

In an earlier post I argued that my grandma’s generation (1890-1969) saw the biggest increase in living standards; most notably a longer lifespan (due to diet/sanitation/health care), indoor plumbing and electric lights.  Less important inventions included home appliances, cars and airplanes, and TVs.  From the horse and buggy era to the moon landing in one life.  And all I’ve seen is the home computer revolution.  Not much consolation for a technophobe like me.  I’m probably even more pessimistic than Tyler.

The parts of the book I liked best were those that discussed governance.  I had noticed that there was a correlation between cultures that are good at governance, and cultures that are good at running big corporations.    But Tyler added an interesting perspective, arguing that the technologies that facilitated the growth of big corporations also facilitated the growth of big government.  I don’t recall if he made this point, but I couldn’t help thinking that the neoliberal revolution, which led to some shrinkage in government size, was also associated with a move away from the big corporate conglomerates of the 1960s, towards smaller and more nimble businesses.

Tyler has a long list of complaints about the wasteful nature of our government/education/health care sectors, which he hinted is really just one big sector.  While reading this section I kept wondering when he was going to mention Singapore, which has constructed a fiscal regime ideally suited for the Great Stagnation.  When he finally did, on “Page” 830-37, he did so in an unexpected context, as an example of a society that reveres scientists and engineers.  He had just suggested that the most important thing we could do to overcome the stagnation was:

Raise the social status of scientists.

My initial reaction was skepticism.  First, how realistic is it to expect something like this to happen?  I suppose the counterargument is that every new idea seems unrealistic, until it actually occurs.  But even if it did, would it really speed up the rate of scientific progress?  My hunch is that if we doubled the number of people going into science, there would be very little acceleration in scientific progress.  First, because the best scientists (think Einstein) are already in science, driven by a love of the subject.  Second, with a reasonably comprehensive research regime, progress in finding a cure for cancer may require a certain set of interconnected discoveries in biochemistry that simply can’t be rushed by throwing more money and people at the problem.  Similarly, progress in info tech may play out at a pace dictated by Moore’s law.  Given Moore’s law, no amount of research could have produced a Kindle in 1983.  Could more scientists speed up Moore’s law?  Perhaps, I’m not qualified to say.  But that’s certainly not the impression I get from reading others talk about information technology.

Here’s another exhortation that caught my eye:

Be tolerant, and realize there are some pretty deep-seated reasons for all the political strife and all the hard feelings and all the polarization.

I couldn’t help thinking of Paul Krugman and Tyler Cowen, the two brightest stars of the economic blogosphere.  If only one of those two are able to have this sort of dispassionate take on policy strife, how likely are the rest of us mere mortals to be able keep a clear head and remain above the fray?  Still, it’s great advice.

Ryan Avent at Free Exchange at The Economist:

Mr Cowen’s book can be very briefly (too briefly) summarised as follows. The rich world faces two problems. The first is that a decline in innovation has reduced the growth rate of output and median incomes, making it hard for rich countries to meat obligations accepted when expectations were higher. The second is that a lot of recent innovation is occuring in places like the internet, where new products are cheap or free and create very few jobs.

Mr Sumner’s response is a good one. What Mr Cowen is essentially saying, he suggests, is that the actual price level is tumbling. Technology has created a lot of great things that are available for free, and so the price of a typical basket of household consumption is dropping like a rock. People used to spend a lot of money going to movies, buying books and records, making expensive long-distance phone calls, paying for word processing software, and so on. Now, a lot of that can be done at almost no cost. Prices are falling.

That has a couple of implications. It suggests that real incomes are actually rising, at least for those consuming the bulk of the free online content. And perhaps real incomes are too high, in some cases, for labour markets to clear. Given broader disinflation (understated because non-purchased goods aren’t included in price indexes) both prices and wages may need to adjust, but if they’re sticky, then they won’t. What’s needed is reinflation.

To a certain extent, Mr Cowen is concerned about society’s ability to pay off old obligations, and one reason society might struggle to do this is that new innovations deliver value through non-monetary transactions. But the value is still there, and that’s what should really matter for the paying-off of obligations. When you borrow, you’re offering to compensate the lender with more utility tomorrow for less utility today. Thanks to the internet, utility today is cheap, and that’s only a problem because the obligations we acquired yesterday were denominated in dollars. But we can print enough money to meet yesterday’s obligations. Indeed, we should, in order to offset the deflationary pressures from the cheap innovations.

Imagine a world in which technology has advanced to the point that robots can build robots that operate at basically no cost at basically no cost, such that people can have anything that want anytime for free; the only constraint on consumption is the time available. That would be a cashless economy, and as a result, debtors would be totally unable to pay creditors. But does that matter?

Paul Krugman:

Tyler Cowen argues that technological change since the early 1960s hasn’t been as transformative for ordinary peoples’ lives as the change that went before.

I agree. I wrote about that a long time ago, using the example of kitchens:

Better yet, think about how a typical middle-class family lives today compared with 40 years ago — and compare those changes with the progress that took place over the previous 40 years.

I happen to be an expert on some of those changes, because I live in a house with a late-50s-vintage kitchen, never remodelled. The nonself-defrosting refrigerator, and the gas range with its open pilot lights, are pretty depressing (anyone know a good contractor?) — but when all is said and done it is still a pretty functional kitchen. The 1957 owners didn’t have a microwave, and we have gone from black and white broadcasts of Sid Caesar to off-color humor on The Comedy Channel, but basically they lived pretty much the way we do. Now turn the clock back another 39 years, to 1918 — and you are in a world in which a horse-drawn wagon delivered blocks of ice to your icebox, a world not only without TV but without mass media of any kind (regularly scheduled radio entertainment began only in 1920). And of course back in 1918 nearly half of Americans still lived on farms, most without electricity and many without running water. By any reasonable standard, the change in how America lived between 1918 and 1957 was immensely greater than the change between 1957 and the present.

Now, you can overstate this case; medical innovations, in particular, have made a huge difference to some peoples’ lives, mine included (I have a form of arthritis that would have crippled me in the 1950s, and in fact almost did 20 years ago until it was properly diagnosed, but barely affects my life now thanks to modern anti-inflammatories.) But the general sense that the future isn’t what it used to be seems right.

David Leonhardt interviews Cowen at NYT

Derek Thompson at The Atlantic:

Tyler Cowen’s celebrated Kindle publication “The Great Stagnation” has received a lot of attention from the Web community. The New York Times David Leonhardt gets the author to sit for an e-interview on his e-book and asks a good first question: If our innovation motor is broken, what should we do know?

Cowen responds that we should double down on science…

The N.I.H. has done a very good job in promoting medical innovation and this is in large part because it allocates funds on a relatively meritocratic basis; Congress doesn’t control particular grants and on many important fronts the N.I.H. has autonomy. It is one reason why the United States is the world leader in medical research and development and I would expand its funding, provided it retains this autonomy. Basic research is often what economists call a “public good” and it offers economic and health returns for many years to come.

… and get realistic about clean energy.

“Clean energy” is a very important issue, for reasons of climate change, but it won’t be a job creator in a useful sense. In terms of energy production, fossil fuels are quite powerful. With green energy, at this point, we are simply looking to break even, namely to receive some of our current power but without the negative environmental consequences which accrue from carbon. That’s a worthy goal, but we shouldn’t start thinking about green energy as speeding up economic growth or creating jobs. It’s more like a necessary burden we will have to bear and the fact that these costs lie in front of us – from both the climate change and from the technological adjustments — is a sobering thought.

These are smart thoughts from a very smart guy. But let’s think about NIH funding from a jobs perspective. If the government increases science funding and this results in more pharmaceutical drugs coming online, that’s a great thing for the pharmaceutical industry. But new drugs, like any new technology, can be disruptive. For example, a drug to ease the side-effects of end-of-life diseases might replace the need for home health aides, which are projected to be one of the fastest growing jobs in the country for low-skilled workers. That’s not a reason not to develop a totally useful rug! But it throws a wrench into a claim (one that I’ve often made, too) that innovations in biosciences are pure job-creators.

Ezra Klein:

Cowen’s characterization of plumbing, fossil fuels, public education systems, penicillin and so forth as “low-hanging fruit” bugs me a bit. It took human beings quite a while to figure all that out. But Cowen is right to say that once discovered, those innovations produced extremely high returns. From the economy’s perspective, the difference between having cars and not having cars is a lot larger than the difference between having cars and having slightly better cars. A 1992 Honda Accord and a 2010 Honda Accord aren’t the same, but they’re pretty close.

The obvious rejoinder to this is, “What about the internet?” The problem, as Cowen points out, is that the Internet is not yet employing many people or creating much growth. We needed a lot of people to build cars. We don’t need many people to program Facebook. It’s possible, Cowen thinks, that the Internet is just a different type of innovation, at least so far as its ripples in the labor market are concerned. “We have a collective historical memory that technological progress brings a big and predictable stream of revenue growth across most of the economy,” he writes. “When it comes to the web, those assumptions are turning out to be wrong or misleading. The revenue-intensive sector of our economy have been slowing down and the beg technological gains are coming in revenue-deficient sectors.”

Maybe the Internet just needs some time to come into its growth-accelerating own. Or maybe the Internet is going to be an odd innovation in that its gains to human knowledge and enjoyment and well-being will serve to demonstrate that GDP and even median wage growth are insufficient proxies for living standards. Either way, we’re still left with a problem: Stagnant wages are a bad thing even if Wikipedia is a big deal.

And it’s not just the Internet. Even when we’re growing, things look bad. The sectors that are expanding fastest are dysfunctional. We spend a lot of money on education and health care, but seem to be getting less and less back. The public sector is getting bigger, but it’s not at all clear it’s getting better. For much of the last few decades, the financial sector was was generating amazing returns — but that turned out to be a particularly damaging scam. And economic malaise is polarizing our politics, leaving us less able to respond to these problems in an effective or intelligent way.

Kevin Drum:

Tyler makes a bunch of other arguments in “The Great Stagnation” too, some more persuasive than others. Like some other critics, I’m not sure why he uses median wage growth as a proxy for economic growth. It’s important, but it’s just not the same thing. Besides, median wage growth in the United States slowed very suddenly in 1973, and it’s really not plausible that our supply of low hanging fruit just suddenly dropped by half over the space of a few years. I also had a lot of problems with his arguments about whether GDP generated by government, education, and healthcare is as “real” as other GDP. For example, he suggests that as government grows, its consumption is less efficient, but that’s as true of the private sector as it is of the public sector. A dollar of GDP spent on an apple is surely more “real” than a dollar spent on a pet rock, but there’s simply no way to judge that. So we just call a dollar a dollar, and figure that people are able to decide for themselves whether they’re getting the same utility from one dollar as they do from the next.

The healthcare front is harder to judge. I agree with Tyler that we waste a lot of money on healthcare, but at the same time, I think a lot of people seriously underrate the value of modern improvements in healthcare. It’s not just vaccines, antibiotics, sterilization and anesthesia. Hip replacements really, truly improve your life quality, far more than a better car does. Ditto for antidepressants, blood pressure meds, cancer treatments, arthritis medication, and much more. The fact that we waste lots of money on useless end-of-life treatments doesn’t make this other stuff any less real.

To summarize, then: I agree that the pace of fundamental technological improvements has slowed, and I agree with Tyler’s basic point that this is likely to usher in an era of slower economic growth in advanced countries. At the same time, improvements in managerial and organizational efficiency thanks to computerization shouldn’t be underestimated. Neither should the fact that other countries still have quantum leaps in education to make, and that’s going to help us, not just the countries trying to catch up to us. After all, an invention is an invention, no matter where it comes from. And finally, try to keep an even keel about healthcare. It’s easy to point out its inefficiencies, but it’s also easy to miss its advances if they happen to be in areas that don’t affect you personally.

David Brooks at NYT

Cowen and Matthew Yglesias on Bloggingheads

Let’s Go Back To WikiLeaks And Learn Something Interesting!

John Vidal at The Guardian:

The US fears that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.

The revelation comes as the oil price has soared in recent weeks to more than $100 a barrel on global demand and tensions in the Middle East. Many analysts expect that the Saudis and their Opec cartel partners would pump more oil if rising prices threatened to choke off demand.

However, Sadad al-Husseini, a geologist and former head of exploration at the Saudi oil monopoly Aramco, met the US consul general in Riyadh in November 2007 and told the US diplomat that Aramco’s 12.5m barrel-a-day capacity needed to keep a lid on prices could not be reached.

According to the cables, which date between 2007-09, Husseini said Saudi Arabia might reach an output of 12m barrels a day in 10 years but before then – possibly as early as 2012 – global oil production would have hit its highest point. This crunch point is known as “peak oil“.

Husseini said that at that point Aramco would not be able to stop the rise of global oil prices because the Saudi energy industry had overstated its recoverable reserves to spur foreign investment. He argued that Aramco had badly underestimated the time needed to bring new oil on tap.

One cable said: “According to al-Husseini, the crux of the issue is twofold. First, it is possible that Saudi reserves are not as bountiful as sometimes described, and the timeline for their production not as unrestrained as Aramco and energy optimists would like to portray.”

It went on: “In a presentation, Abdallah al-Saif, current Aramco senior vice-president for exploration, reported that Aramco has 716bn barrels of total reserves, of which 51% are recoverable, and that in 20 years Aramco will have 900bn barrels of reserves.

“Al-Husseini disagrees with this analysis, believing Aramco’s reserves are overstated by as much as 300bn barrels. In his view once 50% of original proven reserves has been reached … a steady output in decline will ensue and no amount of effort will be able to stop it. He believes that what will result is a plateau in total output that will last approximately 15 years followed by decreasing output.”

Kevin Drum:

This won’t come as a surprise to anyone who’s been following the oil industry over the past few years. Matthew Simmons’ Twilight in the Desert, which I reviewed six years ago, made a detailed case that Saudi Arabia’s production capacity had pretty much maxed out already, and Business Week published an article three years ago based on internal Saudi documents that said much the same: the Saudis could pump 12 million barrels a day in short spurts but only 10 million barrels on a steady basis — and that’s all there is. Production capacity just isn’t going up.

Steve LeVine at Foreign Policy:

The issue is pivotal. Put simply, the price of oil — the price you are paying at the pump, indeed the cost of everything in your home — is wholly determined by what oil traders think Saudi reserves and production capability really are. As an example, oil plunged yesterday to their lowest price of the year — $87.87 a barrel — when Saudi Arabian Oil Minister Ali al-Naimi (pictured above) suggested that the kingdom will put new oil supplies on the market to compensate for any uptick in global demand.

The thing is, the Saudis are highly secretive about these figures — unlike almost every important petro-state on the Earth outside the Middle East, the Saudis will not permit their oilfields to be independently audited. One might wonder why that would be the case, and the late Matt Simmons, for example, made much hay suggesting that the reason is that the Saudis simply don’t have as much oil as they claim. I myself got ahold of documents back in 2008 suggesting the same. Sensible voices, however, said such are the thoughts of the conspiratorial-minded, and that the Saudis genuinely possess what they claimed — they were denying the right to verify because … well because that’s just what they do.

Ryan Avent at Free Exchange at The Economist:

It’s interesting to look at recent production data with this kind of news in mind (to see production numbers you can download  this PDF, or check out charts at the Oil Drum). What we observe is that from around 2004, oil production hasn’t increased very much, even as prices have soared. Now, one reason for this plateau may be the lag in bringing new supply online. During the cheap oil 1990s, production growth and exploration were limited. As prices rose in the early 2000s, producers brought existing, high-cost facilities online, adding to supply. But once existing production was running at capacity, the industry had to wait to get new facilities up to increase supply, and that process doesn’t happen overnight. So it could be that, globally, we’re experiencing a temporary period of high prices and stagnant supply while new extraction is set up.

Of course, in an environment of growing demand, a temporary supply limit can be costly.

But let’s think about one other potential dynamic. In the old days, OPEC attempted to use its cartel status to artificially limit supply and raise prices. This, however, was difficult to orchestrate; there was always the incentive to cheat and sell more than one’s quote of oil at the artificially high price, and as more participants cheated the supply limit fell apart. But as global supply runs against natural limits, incentives begin shifting the other way.

If an individual gains information suggesting that oil reserves are overstated, then they’re likely to expect an increase in future prices. Such an individual could bet on this outcome by buying oil futures, but this behaviour is limited by the nature of the contract; at some point traders may need to take delivery of actual oil, in which case they’ll need a place to store it, and that storing activity would be highly visible in the form of rising inventories.

But what if you’re an oil producer, and you learn this information? Well, obviously you’d like to make the same bet, and hold on to your oil until you can sell it at a higher price. Fortunately for you, oil producer, nature has provided a natural storage tank. All you have to do to make your bet is not produce any more oil than you need to sell to cover costs.

All of which is to say, the world doesn’t need to experience declines in potential oil production to see a rise in oil prices. All it needs is for oil producers to see that such limits loom and begin betting on the near-certainty of rising prices. Of course, different countries will face different liquidity constraints; some leaders may find themselves producing full out in order to sustain their socialist paradise, particularly when prices temporarily dip thanks to recession. But at those times, other countries with fiscal room to spare should cut back their production further—to buy more, essentially, when prices are low in order to sell more when prices are high.

Ariel Schwartz at Fast Company:

Even Jeroen van der Veer, the chief executive of Royal Dutch Shell, has admitted that oil supply may no longer keep up with demand by 2015. But the just-released cables, which detail a back-and-forth between the U.S. consul general and geologist Sadad al-Husseini, the former head of exploration at Saudi Aramco, confirms that the situation is serious.

Weasel Zippers

Israel Matzav:

If this is taken seriously, it should accelerate the search for alternative energy sources and reduce the influence of ‘our friends the Saudis.’ Both those results would be blessings.

There’s Something Strange In The Numbers Here, Waiter

Chart via Calculated Risk

Calculated Risk:

From the BLS:

The unemployment rate fell by 0.4 percentage point to 9.0 percent in
January, while nonfarm payroll employment changed little (+36,000),
the U.S. Bureau of Labor Statistics reported today.

And on the benchmark revision:

The total nonfarm employment level for March 2010 was revised downward by 378,000 … The previously published level for December 2010 was revised downward by 452,000.

The following graph shows the employment population ratio, the participation rate, and the unemployment rate.

Ryan Avent at Free Exchange at The Economist:

LOOK almost anywhere in the recent economic data and the signs point to an accelerating recovery. A solid fourth quarter GDP report contained a truly blockbuster increase in real final sales. Manufacturing activity is soaring. Consumer spending is up and the trade deficit is down. Markets are trading at their highest level in over two years. And so economists anxiously awaited the first employment figures for 2011, hoping that in January firms would finally react to better conditions by taking on lots of new help.

Instead, the Bureau of Labour Statistics has dropped a puzzler of an employment report in our laps—one which points in many directions but not, decidedly, toward strong job growth. In the month of January, total nonfarm employment grew by a very disappointing 39,000 jobs. This was not at all what forecasters were expecting. Earlier this week, an ADP report indicated that private sector employment rose by 187,000 in January; the BLS pegged the figure at just 50,000. There were some compensating shifts. December’s employment gain was revised upward from 103,000 to 121,000. November’s employment rise, which was originally reported at 39,000, has been revised to a total gain of 93,000.

But there is bad news, as well. The BLS included its annual revision of the previous year’s data in this report, and while job growth over the year looks stronger than before, the level of employment looks worse. In March of last year, 411,000 fewer Americans were working than originally reported. And thanks to a weaker employment performance in April through October, 483,000 fewer Americans were on the job in December than was originally believed to be the case. For now, the economy remains 7.7m jobs short of its previous employment peak.

Felix Salmon:

The BLS press release makes this very clear in a box right at the top, which says that

“Changes to The Employment Situation news release tables are being introduced with this release. In addition, establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, household survey data for January 2011 reflect updated population estimates.”

The effects here are large and unpredictable: the total number of people holding jobs in December 2010, for instance, was revised down by a whopping 452,000 — but despite that, the official December 2010 payrolls number now shows an even bigger month-on-month rise than it did before. More generally the size of the total civilian labor force was revised downwards by 504,000, almost half of which came from the Latino population. That has all manner of knock-on effects: the BLS warns that “data users are cautioned that these annual population adjustments affect the comparability of household data series over time.”

This is a messy report, then — even messier than you’d expect from a monthly data series which is mainly valued for its speed as opposed to its accuracy. At the margin, it’s bad for markets, which concentrate on the headline payrolls number, and it’s good for politicians, who tend to concentrate on the headline unemployment number. But for anybody who’s neither a trader nor a politician, it’s a noisy series which is best treated with a whopping great amount of salt — especially in January, and especially also when any big-picture message is so murky.

Instapundit:

Does this mean that most of the “fall” came from discouraged workers dropping out of the workforce? That would explain the difference between this and the Gallup survey, which showed unemployment rising to 9.8% instead of falling. Or am I missing something?

Matthew Yglesias:

At first glance I thought that was people dropping out of the labor force, but it seems instead to be the conjunction of two different things. One is upward revisions of the last couple of months’ worth of jobs data. The other is a downward revision to the baseline estimate of how many people there are. Basically, more people had jobs a month ago than we thought had been the case, and also there were fewer unemployed people than we thought had been the case.

The upshot is that the new data looks a lot better than the old data. But the new data doesn’t say the situation improved dramatically over the past month, it merely says that last month’s take on the situation was too pessimistic.

Mark Thoma

Brad DeLong:

I want a trained professional to analyze this. It is not unusual for the series to do something odd around Christmastide. It is not unusual for the series to diverge. Not this much.

 

Stop! Panel Time!

Uri Friedman at The Atlantic:

Explaining something as tangled, technical, and multi-dimensional as the 2008 financial crisis is fraught with difficulty. Some have tried comparing toxic assets to supermodels, while others have given musical theater a shot.

This morning we have another answer–in the form of a 576-page book–from the congressionally appointed panel charged with investigating the roots of the meltdown. Were it not for corporate incompetence, inadequate government regulation, and excessive risk-taking by Wall Street banks in the housing market, the commission concludes, the country could have avoided financial calamity.

Keith Hennessey:

At long last, here is the dissent filed by Vice Chairman Bill Thomas, Dr. Doug Holtz-Eakin, and me to the Financial Crisis Inquiry Commission Report.  (I know, you’ve been holding your breath waiting for this.)  This dissent will be transmitted to the President and the Congress later today (Thursday, January 27th) along with the majority’s document and Peter Wallison’s separate dissent.

Our dissent is 27 pages long as a PDF.  The majority’s document is 20 times longer.  Their endnotes are 98 pages.  I am not making this up.  The full report will be available on FCIC.gov tomorrow around 10 AM EST.  Peter Wallison’s dissent is available now.

Since I know that 27 pages is too long for the overwhelming majority of readers on the web, I’ll try to suck you in by telling you that our core argument is in the first seven pages.  The last twenty flesh out in more detail each of our “ten essential causes of the crisis.”  You could stop after seven pages (I hope you won’t) and have our basic argument.

If you have followed any of the press coverage of the FCIC over the past six weeks, you may think you know what we’re going to say.  This dissent, however, makes a fundamentally different argument than the four-man document I signed onto in December.  For me this document supersedes that December document, which I looked on as a temporary placeholder.

Mark Thoma on the dissent:

Bill Thomas, Keith Hennessey, and Douglas Holtz-Eakin have a dissenting statement in response to the final report of the Financial Crisis Inquiry Commission:

What Caused the Financial Crisis, by Bill Thomas, Keith Hennessey, and Douglas Holtz-Eakin, Commentary, WSJ: Today, six members of the Financial Crisis Inquiry Commission … are releasing their final report. Although the three of us served on the commission, we were unable to support the majority’s conclusions and have issued a dissenting statement. …

We recognize that … other … narratives have popular appeal:… Had the government not supported housing subsidies (the first narrative) or had policy makers implemented more restrictive financial regulations (the second) there would have been no calamity.

Both of these views are incomplete and misleading. … We believe the crisis was the product of 10 factors. Only when taken together can they offer a sufficient explanation of what happened:

Starting in the late 1990s, there was a broad credit bubble in the U.S. and Europe and a sustained housing bubble in the U.S. (factors 1 and 2). Excess liquidity, combined with rising house prices and an ineffectively regulated primary mortgage market, led to an increase in nontraditional mortgages (factor 3) that were in some cases deceptive, in many cases confusing, and often beyond borrowers’ ability to pay.

However, the credit bubble, housing bubble, and the explosion of nontraditional mortgage products are not by themselves responsible for the crisis. Our country has experienced larger bubbles—the dot-com bubble of the 1990s, for example—that were not nearly as devastating… Losses from the housing downturn were concentrated in highly leveraged financial institutions. Which raises the essential question: Why were these firms so exposed? Failures in credit-rating and securitization transformed bad mortgages into toxic financial assets (factor 4). Securitizers lowered the credit quality of the mortgages they securitized, credit-rating agencies erroneously rated these securities as safe investments, and buyers failed to look behind the ratings and do their own due diligence. Managers of many large and midsize financial institutions amassed enormous concentrations of highly correlated housing risk (factor 5), and they amplified this risk by holding too little capital relative to the risks and funded these exposures with short-term debt (factor 6). They assumed such funds would always be available. Both turned out to be bad bets.

These risks within highly leveraged, short-funded financial firms with concentrated exposure to a collapsing asset class led to a cascade of firm failures. … We call this the risk of contagion (factor 7). In other cases, the problem was a common shock (factor 8). A number of firms had made similar bad bets on housing…

A rapid succession of 10 firm failures, mergers and restructurings in September 2008 caused a financial shock and panic (factor 9). Confidence and trust in the financial system evaporated, as the health of almost every large and midsize financial institution in the U.S. and Europe was questioned. The financial shock and panic caused a severe contraction in the real economy (factor 10). …

[I]t is dangerous to conclude that the crisis would have been avoided if only we had regulated everything a lot more, had fewer housing subsidies, and had more responsible bankers. Simple narratives like these ignore the global nature of this crisis, and promote a simplistic explanation of a complex problem. Though tempting politically, they will ultimately lead to mistaken policies.

I don’t think the conclusion that better regulation would not have stopped the crisis follows from the factors they list.

By their own admission, the reason that factors 1 and 2 led to factor 3 was “an ineffectively regulated primary mortgage market.” So right away better regulation could have stopped the chain of events the led to the crisis.

Factor 3 was “nontraditional mortgages that were in some cases deceptive, in many cases confusing, and often beyond borrowers’ ability to pay.” Sure seems like regulation might help to prevent deception and confusion (through, among other things, a financial protection agency). One thing is clear in any case. The market didn’t prevent these things on its own.

On to factor 4: Securitizers lowering credit standards, a failure of credit agencies, and buyers failing to do their own due diligence. Once again, regulation can help where the private market failed. The ratings agencies exist because they help to solve an asymmetric information problem. The typical purchaser of financial assets does not have the resources needed to assess the risk of complex financial assets (which is why saying that they should have performed their own due diligence misses the mark). Instead, they rely upon ratings agencies to do the assessment for them. Unfortunately, the ratings agencies didn’t do their jobs — perhaps due to bad incentives arising from to how they were paid — and this is where regulation has a role to play.

Factor 5 is the accumulation of correlated risk — again something a regulator can stop once the accumulation or risk is evident. This seems like an easy one — when regulators see this type of risk building up, they should do something about it. The question, however, is how to give regulators better tools for assessing these risks. Backing off on regulation, as implied above, won’t help with this.

M.V. at Newsbook at The Economist:

IT IS not the most promising script for a whodunit. Ten experts are brought together to solve a mystery, but they can’t get along and ultimately reach three different conclusions. That, sadly, is the story of America’s Financial Crisis Inquiry Commission, whose book-length report was released on January 27th.

When the six Democratic and four Republican appointees began their work, there was hope that they could clarify the causes of the financial crisis in the same way as the authors of the 9/11 commission’s report had shed light on the terrorist attacks of September 2001.

It was, though, evident well before they had finished 19 days of public hearings and over 700 interviews that ideological spats would get in the way. By November Republican members were moaning that the Democrats were more interested in crafting a document  that would bolster their party’s attacks on the new Republican majority in the House of Representatives than in revealing the truth. When a majority of the panel voted to push the report’s release beyond the December 15th deadline, the four Republicans produced their own preliminary report. Then they began to fracture too.

The result is an unfortunate loss of credibility and, confusingly, three competing narratives. The main report, endorsed by the Democrats only, points to a broad swathe of failures but pins much of the blame on the financial industry, be it greed and sloppy risk management at banks, the predations of mortgage brokers, the spinelessness of ratings agencies or the explosive growth of securitisation and credit-default swaps.

The report takes swipes at politicians, too, for overseeing a long period of deregulation that allowed Wall Street to run riot; and at regulators for not using the powers they had to curb risk-taking and for blithely assuming that markets could police themselves. It points to the Federal Reserve’s “pivotal failure” to rein in reckless mortgage lending, and to the Securities and Exchange Commission’s lax supervision of investment banks. It also fingers an over-reliance on short-term debt. These, however, are hardly novel conclusions.

Rick Moran:

You may recall the Democrats telling us that the FinReg bill would make it impossible for banks to be “too big to fail” ever again. Nobody believed it then and this inquiry apparently proves it a lie.

Despite a slowly improving economy, it could all fall apart again with another shock to the system. If that happens, the taxpayers will be left holding the bag.

Richard Eskow at Huffington Post:

his report has had a long and sometimes challenging history. But to paraphrase an old gospel song, it “may not be here when you want it, but it’s right on time.”Useful Utopians

Over three decades, our government was captured by a libertarian-inspired economic philosophy that had previously been considered radical and impractical — correctly so, as it turns out. That philosophy’s most prominent spokesman, former Ayn Rand acolyte Alan Greenspan, was celebrated as a “maestro,” until the house of cards he came to symbolize finally collapsed.

The prevailing economic myth, of an impossibly wise and genuinely free market, was as useful as it was Utopian. It provided ideological cover for the deregulation that both parties embraced. Government leaders were compromised by the lure of huge campaign contributions, and by a revolving door that ensured future wealth for cooperative politicians and regulators from both parties. The result enriched Wall Street and the Washington elite and left the rest of the country wounded.

The deregulation of the 90s allowed banks to take risks they couldn’t possibly survive. But they had been rescued in previous crises, and the cozy relationship between government and bankers assured them they’d be bailed out again. Freed from the consequences of their own actions, they gambled… and we lost.

Money for Nothing

The most surprising thing about the FCIC hearings for me personally was the lack of competence shown by so many top bankers. The Wall Street executives I worked for were smart, demanding, and driven, but bankers like Citi’s Robert Rubin and Chuck Prince… not so much. Their FCIC testimony displayed a shaky grasp of their business and a lack of concern about the risks facing their own organizations. Many of them seemed to lack even the most basic level of intellectual curiosity. A big bank is a fascinating, complex entity, but one executive after another seemed to shrug off the details of their own banks’ operations with bored indifference.

Sure, their testimony may have been especially vague because of their understandable desire to avoid self-incrimination. But even allowing for that, the low level of managerial skill they displayed was disconcerting. Today’s generation of financial executives may be enjoying the greatest disparity between income and executive performance since indolent princes inherited vast kingdoms through the divine right of kings.

Yet despite this embarrassing record, these executives want to be pampered and flattered by Washington again — and they’re getting their wish. The president and his party took some steps toward genuine financial reform with last year’s bill, but a great deal of work is still needed and their recent appointments aren’t encouraging. Meanwhile, the Washington consensus is pressuring the administration to assuage the “hurt feelings” of CEOs with some success, despite record profits that should provide more than adequate compensation for any injuries to their pride.

Unfinished Business

The president only mentioned financial reform in passing, in his comments about regulations:

When we find rules that put an unnecessary burden on businesses, we will fix them. But I will not hesitate to create or enforce commonsense safeguards to protect the American people. That’s … why last year we put in place consumer protections against hidden fees and penalties by credit card companies, and new rules to prevent another financial crisis…

Last year’s bill was a start, but more reform is urgently needed — to break up “too big to fail” banks, end runaway speculation, protect consumers, and end the incestuous relationship between banks and government. Prosecutions are needed, too. They’re the only way to ensure that bankers can’t violate laws with impunity, knowing that even if they’re caught their shareholders will pay the fines.

Barry Ritholtz at The Big Picture:

It appears we got hit with another 10-12 inches of snow overnight. Schools are cancelled, and my trains are not running into the city yet.

I need to go blow the snow off the driveway, then figure out what I am gong to do today. I was hoping to read the FCIC report, but it does not look like I will get to the store today.

And speaking of Snow Jobs, the dissenters in the FCIC continue their embarrassing foolishness.

The NYT devotes two paragraphs to Peter Wallison — they mention he was “chief lawyer for the Treasury Department and then the White House during the Reagan administration” and that he is “now at the conservative American Enterprise Institute.”

But nowhere do they mention that he was co-director of the AEI’s Financial Deregulation Project.  This is a serious omission by a major publication.

The New York Times should be much better than this . .