MoJo Blog Posts: kevin drum

Chris Dodd vs. the Fed

By Kevin Drum — Tue, 10 Nov 2009 14:41:23 -0800

Felix Salmon has a good rundown of Chris Dodd's proposed regulatory reforms, and overall he finds them considerably better than the proposals that came out of the Treasury. But on one point he thinks Dodd has it wrong:

The Agency for Financial Stability is the agency charged with monitoring systemic risk — a job which under Treasury’s proposal would be given to the Federal Reserve. On this I think I have sympathy with Treasury: the Fed in general, and the New York Fed in particular, is better placed to monitor these risks than a brand-new agency with no direct ability to supervise banks or to break them up. A giveaway appears on page 3 of the discussion draft:

"The Agency for Financial Stability will identify systemically important clearing, payments, and settlements systems to be regulated by the Federal Reserve."

Clearly, the Fed is going to play a necessary role here, and it’s not exactly rocket science to identify key clearing and settlement systems. So why take that job from the Fed and give it to powerless technocrats in Washington?

I think I'll take Dodd's side here. As Felix says, there's no question that the Fed is going to have a major role here no matter what: it's just too big and too central to the banking system not to. But there are at least a couple of big reasons not to give it unfettered authority. First, the Fed has demonstrated pretty conclusively over the past few years that it's too close to the banking industry, and too invested in its success, to ever be objective about the broad level of risk in the banking system. Second, pronouncements from the Fed are too powerful. The Fed would (rightly) be very reluctant to make public statements about systemic risk for fear of sending markets into a tailspin. So it wouldn't.

The problem with Dodd's Agency for Financial Stability, of course, is that it might end up with a fairly limited amount of substantive power. But that's not entirely a bad thing as long as it has reputational power. Standing clearly outside the banking system would likely help it develop a reputation as an honest broker that demands attention — or, at very least, a counterweight to the institutional and industry-centric judgments of the Fed. That's no bad thing.

Overall, it's a mixed bag. On balance, though, I think there's a strong need for a non-Fed voice, one that considers systemic risk to be its primary mission, not its 17th most important one. Besides, look at the Fed's track record on assessing systemic risk so far. How much worse can a new agency be? Might as well give it a try.

UPDATE: More detail on Dodd's proposal here from Mike Konczal.

Political Correctness

By Kevin Drum — Tue, 10 Nov 2009 10:22:50 -0800

Is "political correctness" to blame for the Ft. Hood massacre? Did the military fail to confont Nidal Malik Hasan's growing disillusionment with the war because it was afraid of appearing overly critical of Muslims? Marc Lynch pushes back:

This framing of the issue is almost 100% wrong. There is a connection between what these critics are calling "political correctness" and national security, but it runs in the opposite direction. The real linkage is that there is a strong security imperative to prevent the consolidation of a narrative in which America is engaged in a clash of civilizations with Islam, and instead to nurture a narrative in which al-Qaeda and its affiliates represent a marginal fringe to be jointly combatted.

....The grand strategy of al-Qaeda and its affiliated ideologues is, and has always been, to generate a clash of civilizations between Islam and the West which does not currently exist....To make inroads with mainstream Muslim communities, they need to change the context in which they live — to render their status quo unacceptable and to make their narrative resonate. And for that to happen, they need a lot of help — for the targeted governments to take inflammatory measures against their Muslim populations, for the non-Muslim citizens in the targeted countries to discriminate against them, and for the media to fan the flames of hatred and mistrust.

....A lot of people — some well-meaning, some clowns or worse — evidently want the American response to the Ft. Hood shootings to revive the post-9/11 "war of ideas" and "clash of civilizations" anti-Islamic discourse. It's a jihad, they shout, demanding careful scrutiny of the loyalty of American Muslims. That's what they seem to mean by the demand to throw away "political correctness" and confront the ideological menace. The overall effect of their recommendations, however, would be to revive the flagging al-Qaeda brand and to greatly strengthen the appeal of its narrative. And that's exactly what we should not want.

The whole piece is worth a read. The military almost certainly has some lessons to learn from this tragedy — as do the rest of us — but that plural is deliberate. Lessons, not lesson.

Quote of the Day

By Kevin Drum — Tue, 10 Nov 2009 09:36:54 -0800

From RNC chairman Michael Steele, talking to Roland Martin on a new Sunday talk show aimed at black audiences:

MARTIN: One of the criticisms I've always had is Republicans — white Republicans — have been scared of black folks.

STEELE: You're absolutely right. I mean I've been in the room and they've been scared of me.

Via Steve Benen.

Going Big in Afghanistan

By Kevin Drum — Tue, 10 Nov 2009 08:22:25 -0800

Counterinsurgency or counterterrorism? Traditionally, the former requires lots of troops in order to root out and defeat a local insurgency while protecting the civilian population, while the latter requires only a small, light force to chase after bad guys and kill them. But Spencer Ackerman reports that in addition to top commander Gen. Stanley McChrystal, the two commanders of U.S. special forces, Vice Adm. William McRaven and Vice Adm. Robert Harward, both favor big troop increases to back up their counterterrorism efforts:

The fact that JSOC veterans like McRaven, Harward and McChrystal favor an overall counterinsurgency strategy with a counterterrorism component demonstrates that the military no longer believes distinguishing between the two is tenable in the Afghanistan war. “Special Operations Forces that were traditionally used for counterterrorism better understand how their capabilities fit into a counterinsurgency campaign than perhaps they did when the wars in Iraq and Afghanistan began,” said Andrew Exum, a veteran of both wars and a fellow at the Center for a New American Security who over the summer advised McChrystal in a review of Afghanistan strategy.

....McRaven runs a secretive detachment of Special Forces known as Task Force 714 — once commanded by McChrystal himself — that the NSC staffer described as “direct-action” units conducting “high-intensity hits.”....In a move signaling his own importance to McChrystal, Harward will arrive in Afghanistan later this month to command a new task force, known as Task Force 435, that will take charge of detention facilities in Afghanistan.

....The advice of McRaven and Harward to the White House strategy review, the [NSC] staffer said, was to push for a “heavy, heavy, heavy COIN [counterinsurgency] presence” in select population centers like the capitol city of Kabul, while relying on new or expanded counterterrorism units like Task Force 714 for hunting and killing terrorists outside of those population centers — particularly in areas like the porous border between Afghanistan and Pakistan, a key transit point for Taliban and al-Qaeda-affiliated insurgents.

Basically, there seems to be no support anywhere in the military for a light footprint in Afghanistan. In a way, that's no surprise: why not get as many troops as you can, after all? But it also highlights Obama's dilemma: regardless of where his heart is, it's almost impossible to defy military advice when it's nearly unanimous. Picking one side vs. another is one thing, but trying to impose your own strategy on the entire bureaucracy is quite another. It sounds like the light footprint never really had a chance.

Hasan and the "Koranic World View"

By Kevin Drum — Mon, 09 Nov 2009 22:55:00 -0800

Dana Priest has gotten hold of the presentation that Nidal Malik Hasan delivered to a group of fellow doctors at the end of his residency at Walter Reed Army Medical Center:

In late June 2007, he stood before his supervisors and about 25 other mental health staff members and lectured on Islam, suicide bombers and threats the military could encounter from Muslims conflicted about fighting in the Muslim countries of Iraq and Afghanistan, according to a copy of the presentation obtained by The Washington Post.

"It's getting harder and harder for Muslims in the service to morally justify being in a military that seems constantly engaged against fellow Muslims," he said in the presentation.

....The title of Hasan's PowerPoint presentation was "The Koranic World View As It Relates to Muslims in the U.S. Military." It consisted of 50 slides. In one slide, Hasan described the presentation's objectives as identifying "what the Koran inculcates in the minds of Muslims and the potential implications this may have for the U.S. military."

....The final page, labeled "Recommendation," contained only one suggestion: "Department of Defense should allow Muslims [sic] Soldiers the option of being released as 'Conscientious objectors' to increase troop morale and decrease adverse events."

Does this make the "terrorist" theory more or less likely than before? I'm not sure. But this, along with other reports, certainly suggests that this stuff had been on his mind for quite a while.

Dealing on Healthcare

By Kevin Drum — Mon, 09 Nov 2009 22:37:25 -0800

McClatchy's David Lightman takes a look at the next step in healthcare reform:

Republicans Monday had new hope that they could influence health care deliberations — influence that's so far eluded them — as the debate moves to the Senate, where the rules and the politics can work to their advantage.

Some Republicans are trying to win Democratic support for more help for small business, different medical malpractice policies and changes in how the health care overhaul would be funded.

....[Sen. Susan Collins, R-Maine] was optimistic about the GOP role, saying, "I believe we can put together a bipartisan bill that could cover so many areas where there's agreement on what should be done."

A bipartisan bill? Seriously? Baucus spent, what, three months negotiating with Enzi, Grassley, and Snowe and came away with nothing. So what's the incentive to try again?

My guess is that the Democratic leadership would be delighted to make some concessions to Republicans if they could actually get some votes out of the deal. But it's hard to see where that would come from. If Dems made some of the changes Lightman mentions, exactly which Republicans would be willing to risk the wrath of the party's base and vote for it? Are there even any possibilities aside from the two senators from Maine?

Watching the Watchdog

By Kevin Drum — Mon, 09 Nov 2009 21:56:40 -0800

The International Energy Administration is, supposedly, the gold standard for projections of future oil supply. In 2004 they projected that the world would produce 121 million barrels per day of crude oil. In 2005 they lowered that to 115 million bpd. Last year they lowered it again to 106 million bpd. Today, the Guardian reports that a "whistleblower" at the IEA says that even this number is rubbish and the IEA knows it:

The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves...."The 120m figure always was nonsense but even today's number is much higher than can be justified and the IEA knows this.

"Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible but there are fears that panic could spread on the financial markets if the figures were brought down further. And the Americans fear the end of oil supremacy because it would threaten their power over access to oil resources," he added.

....A second senior IEA source, who has now left but was also unwilling to give his name, said a key rule at the organisation was that it was "imperative not to anger the Americans" but the fact was that there was not as much oil in the world as had been admitted. "We have [already] entered the 'peak oil' zone. I think that the situation is really bad," he added.

It's pretty much impossible to know how seriously to take this. It's almost certainly true that analysts within the IEA disagree with each other about long-term projections, and it's also probably true that there are regional pressures of various kinds within the organization. That's pretty normal for international groups.

But is the U.S. actively pushing the IEA to produce figures that it knows to be wrong? And are these two anonymous sources the first ones to ever go public with this? Hmmm. I'm not so sure about that. But the IEA's 2009 World Energy Outlook comes out on Tuesday (last year's projections are above), and we'll see what they have to say then.

The DMCA and You

By Kevin Drum — Mon, 09 Nov 2009 16:14:44 -0800

The long arm of the law has reached out and grabbed Brad DeLong by the throat:

Well, this is new. My first ever DMCA takedown notice — from HarperCollins, publisher of Levitt and Dubner's Superfreakonomics. While other publishers these days are happy to have sample chapters of their authors' works read and distributed on the internet, not so with HarperCollins.

One thing I can do in response is — tit-for-tat — to remove my praise of and link to E.M. Halliday's Understanding Thomas Jefferson: there are other better (albeit longer) Jefferson biographies published by firms that have not sent me DMCA notices: read them instead.

I urge everybody — authors and readers alike — to just say no to HarperCollins in the future.

Well, what does everyone think about this? My first reaction is: fair use excerpts aside, authors and publishers all have the right to decide whether they want large chunks of their material available for free on the internet. If HarperCollins decides against that, fine. There's really no reason to be upset about it.

My second thought, though, is that I'd be plenty pissed off if HarperCollins did this to me without first sending me an email asking me to take down the offending material. Hauling out the lawyers and the DMCA artillery is really uncalled for unless someone refuses a polite request first.

But I don't know if that's what happened. Did HarperCollins ask first and shoot later, or was it the other way around?

Subsidizing Healthcare

By Kevin Drum — Mon, 09 Nov 2009 14:47:42 -0800

Bart Stupak's abortion amendment prevents any insurance plan that is purchased with government subsidies from covering abortions. These subsidies, of course, go only to poor and low-income workers. Ezra Klein takes it from there:

Rep. Bart Stupak's amendment did not make abortion illegal. And it did not block the federal government from subsidizing abortion. All it did was block it from subsidizing abortion for poorer women.

Stupak's amendment stated that the public option cannot provide abortion coverage, and that no insurer participating on the exchange can provide abortion coverage to anyone receiving subsidies. But as Rep. Jim Cooper points out in the interview below, the biggest federal subsidy for private insurance coverage is untouched by Stupak's amendment. It's the $250 billion the government spends each year making employer-sponsored health-care insurance tax-free.

That money, however, subsidizes the insurance of 157 million Americans, many of them quite affluent. Imagine if Stupak had attempted to expand his amendment to their coverage. It would, after all, have been the same principle: Federal policy should not subsidize insurance that offers abortion coverage. But it would have failed in an instant. That group is too large, and too affluent, and too politically powerful for Congress to dare to touch their access to reproductive services. But the poorer women who will be using subsidies on the exchange proved a much easier target. In substance, this amendment was as much about class as it was about choice.

Yes. But aside from the iron hand of path dependence, there's another dynamic at work here: most people simply refuse to view tax breaks as the equivalent of federal subsidies. But in most cases they are. In the case of health insurance, the employer tax break means that workers whose employers offer insurance pay less for coverage than they otherwise would. Likewise, subsidies mean that workers whose employers don't offer insurance pay less for coverage than they otherwise would. The differences between the two are slight.

But nobody who gets a special tax break sees it that way. So we continue to pretend.

Defining Terrorism Down

By Kevin Drum — Mon, 09 Nov 2009 11:19:12 -0800

Writing about the Ft. Hood massacre, one of Jonah Goldberg's readers offers the following: "I would say that an act which is unexpected and carried out with the intention to kill indiscriminately for the sole purpose of punishing those who do not hold your beliefs is an Islamic terrorist act." Goldberg responds:

I am very uncomfortable with the idea that I might sound like I'm trying to diminish the guy's crimes. He committed treason and murder. It was a cowardly act. If we are at war, then it was a war crime.

But I think the reader's definition of terrorism might move us into dangerous territory. In Pakistan, we launch missiles at people's homes with civilians in or around them to take out al Qaeda leadership. But I wouldn't call that terrorism. I'm just uncomfortable with the word terrorism metastasizing into "anything the bad guys do to us." Why not call what Hasan did a war crime? Terrorism is a war crime but not all war crimes are terrorism.

I think that's right, and it's nice to see some pushback from the right on this. There's a lot of evidence to suggest that Nidal Malik Hasan was (a) quite mentally disturbed and (b) motivated by religious beliefs, but that doesn't make what he did a terrorist act. Unlike, say, a suicide bomber in Jerusalem, there's hardly even a hint that he was trying to make any kind of political statement. There was no note, no videotape left behind, no explanation while he was shooting, no nothing. What kind of terrorist does that?