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Tuesday, April 28, 2009

99th dream

following up on my previous post here's are highlights from the Sunday talk shows on the torture issue:

Scott Horton (Harper's) on David Broder's recent call for Obama to quash any investigation into torture:

In the frivolous world of David Broder, flitting between corporate-sponsored vacations and eating quail with his old friend Karl Rove, the question is just about a “policy difference.” In the real world, it’s about whether people will be beaten brutally in the Congo, boiled to death in a police station in Uzbekistan, or have their genitals slit in a prison in Morocco. The international prohibition on torture makes a vital difference in the lives of thousands around the world today and tomorrow. Coming from an Air Force family, I also think about the fate of an American airman captured behind enemy lines in a conflict of the future. The likelihood that this serviceman will be tortured has been greatly heightened by the Bush Administration’s reach to torture, and the failure of any subsequent administration to hold them accountable adds to that risk. But David Broder doesn’t see this. He can’t fathom the world outside the cocktail lounges, restaurants, and ballrooms of Beltwelt. Apparently, unlike Bill Clinton’s affair with an intern, the issue of torture is not a truly serious matter that affects the moral climate of Washington and the world beyond it.

It’s hard to read Broder’s effort and not conclude that he hasn’t taken the time to learn the basic facts about the torture debate, to read the documents, or to understand the issues. In the perverse world of David Broder, what counts is the equilibrium of the Washington matrix of which he is a long-established part. Broder is the perfect example of what William Wilberforce called “politics devoid of principle.”


Mark McKeon (prosecutor at the International Criminal Tribunal):

I hope that the United States has turned the page on those times and is returning to the values that sustained our country for so many years. But we cannot expect to regain our position of leadership in the world unless we hold ourselves to the same standards that we expect of others. That means punishing the most senior government officials responsible for these crimes. We have demanded this from other countries that have returned from walking on the dark side; we should expect no less from ourselves.

To say that we should hold ourselves to the same standards of justice that we applied to Slobodan Milosevic and Saddam Hussein is not to say that the level of our leaders' crimes approached theirs. Thankfully, there is no evidence of that. And yet, torture and cruel treatment are as much violations of international humanitarian law as are murder and genocide. They demand a judicial response. We cannot expect the rest of humanity to live in a world that we ourselves are not willing to inhabit.

Good news on the health care front... Obama's playing hardball:

A major overhaul of the health care system, he told the Republican leadership, would be done using a legislative process known as reconciliation, meaning that the GOP won't be able to filibuster it.

Congress has until October 15 to pass health care or student lending reform under the normal process. If it doesn't, reconciliation can be used to eliminate the 60-vote requirement.

Democratic aides said that Obama made clear to the GOP leadership that he would continue to work in a bipartisan way, but that they didn't have veto power over health care policy. GOP aides, however, said that Obama was pretty clear that reconciliation would be used. "From what was told me, it sounded more like he would almost definitely use reconciliation for healthcare. I don't think he hedged much," said one.

Under Bush Republicans used reconciliation twice to pass tax cuts for the rich, and Reagan used it to pass much of his agenda, so Republicans really can't complain too much (not that that will stop them).

This will have an effect:

It's hard to overstate how radically the reconciliation option would shift the dynamics of debate. It's not just that it would make passage of a bill more likely. It's that it would utterly redefine the conversation.

Put yourself in the shoes of a health care industry group--say, for example, the insurance industry. You probably have the power to swing at least a handful of senators your way, through advertising, astroturf organizing, and direct lobbying. If it's sixty-votes-or-bust in the Senate, reformers will probably need those senators to pass a bill. That means you have enormous leverage. You can hold out for the best possible deal and, barring that, simply walk away.

In other words, you know that there will eventually be two options on the table. A bill you like or no bill at all.

Now imagine Democrats have the option of using reconciliation. They need just fifty votes, which means they may not need your support after all. If you demand too much, they may just ignore you altogether--and craft a bill, perhaps with the help of more cooperative lobbyists, that is not in your self interest.

In this scenario, there are three options on the table. A bill you like, no bill at all, and a bill you really hate.

So what do you do? Chances are, you concentrate a lot harder on trying to get that bill you like.

Meanwhile Kennedy and Baucus, who each chair relevant committees to this issue, are working together to create similar recommendations to submit to the Senate. Back in 1994 these committees produced very different recommendations, leaving legislators with much to fight over, which added yet another impediment to passing legislation. Fortunately we seem to be learning from past mistakes. I would love it if Kennedy could see healthcare reform happen in his lifetime.

Orszag can match Lawrence Summers in policy expertise, and has proved to be a subtle and persistent political player.

The New Yorker has an interesting profile of Obama's budget guy Peter Orszag.

TNR has a great article on Obama's philosophy for managing the economy. Here are the key bits:

Barack Obama has the type of mind--orderly, analytical, well-read--that takes naturally to the study of ideas. But he's always been uncomfortable describing himself in ideological terms.

Like the New Democrats who ultimately shaped the Clinton administration's agenda, Obama has a deep respect for the market and wants to minimize the state's footprint on it. He has little interest in fixing prices or rationing goods or reversing free-trade agreements. But, while he basically shares the New Democrats' instincts, he rejects their conclusions. Reacting against the overweening statism of their liberal ancestors, many New Democrats came to believe that if government largely got out of the way and let markets work properly, the natural result would be widely shared prosperity. You only need to view the extent of Obama's domestic agenda to know he doesn't agree.

Instead, Obama has set out to synthesize the New Democratic faith in the utility of markets with the Old Democratic emphasis on reducing inequality. In Obama's state, government never supplants the market or stifles its inner workings--the old forms of statism that didn't wash economically, and certainly not politically. But government does aggressively prod markets--by planting incentives, by stirring new competition--to achieve the results he prefers.

The problem with Clintonism was that it had partly sacrificed the goals of 1960s- and '70s-style liberalism even though it had only meant to exorcise the bogeymen. Hence Obama's challenge: to reclaim progressive goals without the economic self-sabotage of the earlier era.

There are no grand theorists in the Obama orbit, certainly no in-house ideologists. During the campaign, Obama sold himself as a green-eyeshade pragmatist, insisting every one of his proposals was "paid for." But, in fact, there is, if not an ideology, then certainly a sensibility that reigns in Obamaland.

Perhaps the easiest place to see it is in the administration's fondness for behavioral economics, the branch of the dismal science that recognizes that humans aren't utility-maximizing automatons, but flawed creatures who often screw up simple calculations and struggle with self-control. The key behavioral insight is that the way we frame choices matters enormously. Take a classic behavioral example: pensions. In a fully rational world, everyone would enroll in their company's 401(k), which provides a financial incentive to save for retirement. In the real world, we frequently put off enrollment, not wanting to weigh all the confusing options or fill out tedious paperwork. If, on the other hand, our employer enrolled us automatically but allowed us to opt out, most would stick with it. Simply by changing the "default" option from out to in, we improve workers' welfare without limiting their freedom.

Thaler and Sunstein have dubbed this policymaking approach "libertarian paternalism," and it was highly influential within the campaign. (Sunstein, a longtime contributor to The New Republic, is now a top official in Obama's Office of Management and Budget.) For example, in addition to the retirement saving reform, which Obama later wrote into his budget, the campaign also warmed to a proposal called "intelligent assignment." The idea was a response to the fact that seniors enrolled in the Medicare prescription drug program are often overwhelmed by the dozens of plans they have to choose from, sometimes to the point of paralysis. The Obama wonks favored automatically enrolling many of them in the plan that best suited their needs, based on their drug-buying histories, then allowing them to switch if they found one they liked better.

In the grand scheme of things, these "nudges" were minor tweaks designed to elicit more rational behavior. But, in many respects, what the Obama administration has done these last few months is simply scale up the logic of nudging, albeit massively. Not all of Obama's nudges fall out of behavioral economics, per se. Some involve changing incentives to encourage certain activities and discourage others. Some involve fostering competition to trigger innovation. But, as in the behavioral examples, the Obamanauts typically have an outcome they want to promote. And, like the behaviorists, they instinctively recoil from imposing it unilaterally. So, instead, they monkey around with the choices people face, seeking to influence decision-making rather than mandate decisions.

Nowhere has this approach been more visible than the administration's response to the financial crisis. When it comes to the banks, many liberal economists favor seizing insolvent institutions, stripping out their toxic assets, restocking their supply of capital, and then selling them off to new owners. But the prospect of something so heavy-handed offends the administration's sensibilities. Instead, Treasury has chosen to partner with hedge funds and private equity firms to relieve the banks of their toxic assets. The thinking is that bad assets create uncertainty, which repels investors and makes it tough to raise money in the financial markets. By moving the toxic assets off their books, Treasury hopes to make the banks more attractive to investors and, therefore, less likely to need public money.

The thread that runs through these proposals is a hands-off approach to markets themselves, but a hands-on approach to the incentives and defaults that influence decisions. Obama only broaches direct intervention when he can't elicit the desired outcome through such rejiggering--as with the numerous investments the market won't finance because it can't capture the returns. Consider the scholarly consensus that every dollar of preschool spending on disadvantaged children produces enormous social returns--increasing future productivity and decreasing tendencies toward criminal activity and unplanned parenthood. Alas, there's no way for a private investor to pocket those savings. That's why Obama's stimulus allocated $2 billion to Head Start and Early Head Start. For similar reasons, Obama spent significant sums on high-speed rail, National Science Foundation research grants, and rural broadband access.

As a theory of government, this approach has much to recommend it. It's resolutely liberal in its ends, ambitious in its means, but also respectful of individual freedom. It is, in other words, a government that is activist but distinctly not socialist.

If anything, the lengths to which Obama goes to avoid impinging on the market are almost too great. In the case of the banks, temporary nationalization might be the simplest, most direct approach. By contrast, the Geithner plan, with its Public-Private Investment Program, seems to rely on a set of elaborate assumptions about bank and investor behavior. It presumes banks are willing to sell assets at a loss, that risk-shy investors will be compelled by cheap government financing, that other investors will park their capital in banks once their balance sheets are cleaner. If any of these assumptions fails, the whole effort could fall apart.

On the other hand, it's easy to underestimate the challenges of the more statist alternatives. Bank nationalization, for one, is fraught with pitfalls.

The political point is, in the end, difficult to overstate. Obama has groped toward a form of liberal activism that is eminently saleable in this country--both with the average voter, easily spooked by charges of creeping statism, and the constellation of political interests in Washington. Any economic program that lays out ambitious goals and actually has a chance of achieving them would have much to recommend it on those grounds alone. Better still, it may be the bold, persistent experimentation that the moment demands.

Illustration by Gluekit

New York Mag: The Wail of the 1%:

In a witch hunt, the witches have feelings, too. As populist rage has erupted around the country, stoked by canny politicians, an opposite rage has built on Wall Street and other arenas where the wealthy hold sway. Its expression is more furtive and it’s often mixed with a kind of sublimated shame, but it can be every bit as vitriolic.

“AIG pissed some people off, and now you’re gonna screw everyone on Wall Street?” rails a laid-off JPMorgan vice-president. (Despite the honesty of the conversation, many did not wish to be quoted by name.)

“No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?” e-mails an irate Citigroup executive to a colleague.

“I’m not giving to charity this year!” one hedge-fund analyst shouts into the phone, when I ask about Obama’s planned tax increases. “When people ask me for money, I tell them, ‘If you want me to give you money, send a letter to my senator asking for my taxes to be lowered.’ I feel so much less generous right now. If I have to adopt twenty poor families, I want a thank-you note and an update on their lives. At least Sally Struthers gives you an update.”

It is difficult to sympathize with these people, their comments laced with snobbery and petulance. But you can understand their shock: Their world has been turned on its head. After years of enjoying favorable tax rates, they are facing an administration that wants to redistribute their wealth. Their industry is being reordered—no one knows what Wall Street will look like in a few years. They are anxious, and their anxiety is making them mad.

Their anger takes many forms: There is rage at Obama for pushing to raise taxes (“The government wants me to be a slave!” says one hedge-fund analyst); rage at the masses who don’t understand that Wall Street’s high salaries fund New York’s budget (“We’re fucked,” says a former Lehman equities analyst, referring to the city); rage at the people who don’t “get” that Wall Street enables much of the rest of the economy to function (“JPMorgan and all these guys should go on strike—see what happens to the country without Wall Street,” says another hedge-funder).

For these people, it is difficult to imagine a world in which they are not at the top of the socioeconomic heap. But a number of economists and academics are arguing that it was not always this way, and that what we’re seeing now is “a return to normalcy,” as Mitchell Moss, a professor of urban policy and planning at NYU, puts it. Until the late seventies, banking was a career choice more akin to being a corporate lawyer or a doctor than a high-flying hedge-fund manager. Until the eighties, Wall Street counted for about 20 percent of all corporate profits in America, but by the peak of the bubble, it had grown to an astounding 41 percent. “Wall Street became a high-margin business because of the deregulated environment,” Moss says. “You basically had a casino culture operating in the financial-services industry.” And that huge profitability led to great influence. “The system as a whole became unstable because Wall Street developed this disproportionate influence. It’s an entire system of belief they had to create,” says Simon Johnson, the former chief economist of the IMF. In a recent Atlantic article, Johnson describes Wall Street’s influence as a ruling oligarchy, not dissimilar to those of the crony capitalists that have controlled the levers of power in places like Russia, Argentina, and Indonesia. The solution, according to people like Paul Krugman, is to make banking regulated, less profitable, and “boring” again.

It should come as no surprise that being a banker—indeed, simply being rich—is going to be a lot less fun under an Obama administration. In winter 2007, as the Democratic-primary contest got under way, Obama showed up at a Goldman Sachs client meeting to explain his economic agenda to a conference room full of potential campaign contributors. When he opened up the session to questions from the audience, one attendee lobbed the question that was surely on the mind of everyone in the room. “Are you going to raise my taxes?”

Obama looked out across the millionaires sitting around him. “Yes,” he answered, without a flicker of hesitation, according to a person familiar with the meeting.

During the campaign, Obama was never shy about his promise to undo the Bush tax policies. But it was easy to ignore his occasional lapses into populist rhetoric and focus on his intense intelligence and Ivy League education. Now, in the wake of the crisis, Wall Street’s politics are shifting rightward. “All the rich people I know took George Bush for granted,” says an analyst at a midtown hedge fund. “I’m a Democrat, but I agree with Rush Limbaugh on a lot of this stuff,” rails the wife of a former AIG executive.

The anger masks a deeper suspicion that Obama fundamentally doesn’t respect their place at the table. “I think he doesn’t have an appreciation for how hard it is to build these companies, the blood, sweat, and tears that goes into them,” says a senior executive from a failed Wall Street firm. “It’s just that he has no passion for it. He speaks dispassionately about the whole situation, except when he’s beating up on the Wall Street fat cats.”

The argument that Obama has in fact done a great deal to help Wall Street—to the tune of trillions of dollars—doesn’t have much truck with these critics. “If you really take a look at what Obama is promising, it’s frightening,” says Nicholas Cacciola, a 44-year-old executive at a financial-services firm. “He’s punishing you for doing better. He doesn’t want to have any wealth creation—it’s wealth distribution. Why are you being punished for making a lot of money?” As a Republican corporate lawyer puts it: “It’s the politics of envy, and that’s very dangerous.”

To Wall Street people who have grown up in the bubble, the meaning of the crisis is only slowly sinking in. They can’t yet grasp the idea of a life lived on less. “Without exception, Wall Street guys have gotten accustomed to not being stuck in the city in August. So it becomes a right to have a summer home within an hour or two commute from Manhattan,” says the Goldman vet. “There’s a cost structure of going with your family on summer vacation that’s not optional. There’s a cost structure of spending $40,000 to send your kids to private school that is not optional. There’s a sense of entitlement, that you need that amount of money just to live, that’s not optional.”

“You can’t live in New York and have kids and send them to school on $75,000,” he continues. “And you have the Obama administration suggesting that. That was a very populist thing that Obama said. He’s being disingenuous. He knows that you can’t live in New York on $75,000.”

That was an argument I heard over and over: that the high cost of living like a wealthy person in New York necessitates high salaries. It was loopy logic, but expressed sincerely. “You could make the argument that $250,000 is a fair amount to make,” says the laid-off JPMorgan vice-president. “Well, what about the $125,000 that staffers on Capitol Hill make? They’re making high salaries for where they live, maybe we should cut their salary, too.”

There’s a vast woundedness now on Wall Street, which is hard to contemplate after the period of triumphalism so recently ended. In this conversation about money, there’s a lot to work through. Just months ago, the masses kept what anger they had to themselves, and the bankers were close-lipped about what they thought they were owed by society. There wasn’t much of a dialogue about the haves and have-nots and who was entitled to what. For the privileged, it was a lot more comfortable when things remained unspoken. Almost more than the loss of money, they are concerned with the loss of status and pride.

“I was at a cocktail party on Friday. Some guy said to me, ‘You work on Wall Street? How’s that working out for you?’ ” says the JPMorgan banker who was forced out in a recent round of layoffs. “There was a little bit of nastiness there.”

It was a feeling I heard a lot as I spoke with Wall Street bankers, analysts, and traders. They had believed Wall Street was where the winners of American capitalism went. Now they were feeling shamed for their work. “You wear a nice suit on the subway, and people look at you,” the former JPMorgan VP continues. “I know it’s not wrong to be an investment banker in New York these days, but I get that feeling. Now anyone who made money on Wall Street has done the American people wrong?”

Could this really be the new pecking order? A future where banking is boring, salaries are capped, taxes are high, and—worst of all—you get to carry the blame for the Great Recession of ’09? It’s almost too much to bear.

“I always thought what I did was somewhat honorable,” the mortgage-investment banker recently told me. He had been trading Fannie Mae and Freddie Mac securities he thought were triple-A- rated investments until his fund blew up and put him out of work. “Suddenly, the simple fact I work on Wall Street means that I’m a bad person? You know, I lost my job. I’m more of a victim.”

The American Prospect on Simon Johnson, the guy who was chief economist for the IMF who wrote this (must read!) article I linked to a couple weeks back.

Here's a fascinating article about what's been going on in Iraq.

Still with the 'Gore is a nerd' stuff? Consider this exchange from Gore's testimony the other day?:

WALDEN: I've asked every other witness this: Have you each read the bill in its entirety? Can I get a yes or no?

GORE: Congressman, I have read all 648 pages of this bill. It took me two transcontinental flights on United Airlines to finish it.

And now the AP's characterization:

"I have read all 648 pages of this bill," Gore bragged, a boast that would surprise no one who caught his teacher's-pet performance in the 2000 presidential race. "It took me two transcontinental flights on United Airlines to finish it."

Media Matters:

The schoolhouse metaphor is appropriate, if not for the reason Kellman thinks. There are perhaps only two groups of people who view knowledge as a flaw, and ignorance as an asset: Seventh-graders, and the Washington press corps.

For years leading up to the 2000 presidential election, Al Gore committed the sins of taking policy seriously, and of knowing what he was talking about. As punishment for those sins, reporters like Kellman mocked him as a "teacher's-pet" and a dull, lifeless buffoon. They propped up a dim-witted Texan (by way of Greenwich Country Day, Andover, Harvard, and Yale) who had run business after business into the ground, and skipped out on the National Guard service that kept him out of Vietnam by virtue of his father's accomplishments. On the other hand, he called reporters "Stretch," and they loved him for it. And so George W. Bush became president.

Given what happened over the following eight years, you would think the media would have enough of a guilty conscience that they would avoid treating Al Gore with precisely the same petty, stupid middle-school-cafeteria derision that led to thousands of deaths in an unnecessary war, torture, warrantless surveillance, a stunningly incompetent response to Hurricane Katrina, and a Vice President whose shooting of a friend in the face doesn't even rank among his top fifty most offensive actions.

But no: Associated Press reporter Laurie Kellman is still pointing and laughing at Al Gore, because he bothered to read legislation that deals with his life's work before testifying about it. What a nerd.

A NYT photog recently got a Pulitzer for his coverage of the Obama campaign. Here's a nice slide show of his work.

Speaking of Pulitzers, this Pulitzer winning article isn't political but is well worth your time. It's about a girl who was essentially locked in a room for the first seven years of her life. It's a story you won't soon forget.

strange but funny:


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