Kevin Drum

Helicopter Ben

| Wed Mar. 18, 2009 10:58 PM EDT
Ben Bernanke has long said that even with interest rates near zero, the Fed still has plenty of monetary ammunition left to stimulate the economy.  Today he put his money where his mouth is and announced that the Fed would be buying up a trillion bucks worth of treasury bills and mortgage securities.  This is known as quantitative easing, aka printing money.  The Wall Street Journal rounds up some reaction:

Guy LeBas of Janney Montgomery Scott provides the basics: "Even today’s announcement that the Federal Reserve plans on purchasing everything in America that isn’t nailed down raised relatively few eyebrows on our end....Effectively, the Fed is monetizing the Treasury’s debt, a strategy that appears in the encyclopedia under the heading 'how to trigger inflation.' "

David Greenlaw of Morgan Stanley says the purchase of mortgage securities is designed to drive down interest rates: "In 2008, the average mortgage rate on the outstanding stock of loans was about 6.50%. So, if the Fed brings 30-yr fixed rate mortgages down to 4.50% and all homeowners are able refi, the aggregate permanent cash flow savings would be on the order of $200 billion per year."

Paul Dales of Capital Economics isn't sure that $300 billion of Treasury purchases is enough: "This could just be the opening salvo....Overall, no one knows whether these measures will work. Much depends on whether banks loan out the cash they raise from selling Treasuries and whether households and businesses spend, rather than save, any extra borrowing....At the least, no one can say that the Fed isn’t trying."

So there you have it.  $300 billion in new money, another $200 billion over time from lower mortgage rates, and a clear message that the threat of deflation is being taken seriously.

That's what the adults were up to, anyway.  Back in make believe land, meanwhile, it was AIG bonus time 24/7.  Gotta keep Congress busy with something, I guess.

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Healthcare This Year?

| Wed Mar. 18, 2009 2:14 PM EDT
Jon Cohn's tick-tock in the New Republic about Obama's healthcare plan is mostly fairly ordinary stuff: some of Obama's advisors wanted to go slow, others wanted to seize the moment, meetings were held, etc. etc.  But through it all, Obama was Obama:

Health care, in the end, might have gotten pushed aside — except that one very senior official in the administration kept insisting that it stay on the agenda. That official was Obama himself. Repeatedly, the president made clear that he was not abandoning health care reform.

....By the end, the debate had coalesced around three options: investing around $1 trillion over ten years, offset by new revenue and some substantial reductions in Medicare and Medicaid spending; investing a slightly lower amount, in the neighborhood of $600 billion, which could be offset by more modest revenue increases and reductions in Medicare and Medicaid; or putting aside just $300 billion, offset mostly by changes to Medicare and Medicaid. A final decision wasn't made until Friday, February 13, as a deadline for setting the budget loomed. Rejecting the $1 trillion proposal, because the offsets it required seemed too severe, Obama went with the $600 billion option — $634 billion, to be precise.

This seems to be typical Obama: he really does know what he wants, and he really does insist on getting it.  At the same time, as long as things are moving in the right direction, he seems profoundly willing to compromise about how fast he gets there.  I haven't quite figured out yet whether I think this is good or bad, but it's what we've got.  We may have a liberal in the White House, but we don't have one who's temperamentally likely to knock heads and try to make history.

The Presidential Bracket

| Wed Mar. 18, 2009 1:36 PM EDT
Jeez.  Not much love for the Pac Ten from our hoops loving president.  A first round win for Washington is all he's got for us in his NCAA bracket.  Somebody needs to take this up with him when he shows up here in Orange County later today.

Essay Mills

| Wed Mar. 18, 2009 1:03 PM EDT
Alan Jacobs proposes a novel theory for the success of essay mills in cranking out low-cost papers for slothful college students:


I can feel a contest coming on: Propose a topic that's truly essay-mill-resistant.  Better yet, propose a general algorithm that makes any topic harder to fake from a distance.  Remember: extra credit for originality!

Wilkerson on Guantanamo

| Wed Mar. 18, 2009 12:31 PM EDT
Over at Washington Note, Larry Wilkerson writes about several dimensions of the debate over Guantanamo Bay that he thinks haven't gotten enough attention:

The first of these is the utter incompetence of the battlefield vetting in Afghanistan during the early stages of the U.S. operations there....The second dimension that is largely unreported is that several in the U.S. leadership became aware of this lack of proper vetting very early on and, thus, of the reality that many of the detainees were innocent of any substantial wrongdoing, had little intelligence value, and should be immediately released.

....The fourth unknown is the ad hoc intelligence philosophy that was developed to justify keeping many of these people, called the mosaic philosophy. Simply stated, this philosophy held that it did not matter if a detainee were innocent....All that was necessary was to extract everything possible from him and others like him, assemble it all in a computer program, and then look for cross-connections and serendipitous incidentals.


Read the whole thing.  He presents some compelling evidence that although shutting down Guantanamo might be politically difficult thanks to Dick Cheney's "recent strident and almost unparalleled remarks about the dangers of pampering terrorists," it's almost certainly not much of an operational challenge at all.

Damn Liberals

| Wed Mar. 18, 2009 11:33 AM EDT
ThinkProgress glosses a Roll Call story today telling us that Evan Bayh is spearheading a group of 15-20 Democratic senators "seeking to restrain the influence of party liberals in the White House and on Capitol Hill."  And it's about time, isn't it?  We've now gone nearly a full two months without Democrats forming a circular firing squad designed to bring down a Democratic president and prove that Democrats can't actually get anything done.  I say, that's two months too long.

But at least a bunch of senators will get to preen a bit about how they managed to water down progressive legislation and get the White House to beg them for their votes.  And that's what public service is all about, isn't it?

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Quote of the Day - 3.17.09

| Wed Mar. 18, 2009 12:50 AM EDT
From Sen. Judd Gregg (R–NH), on the possibility of using the budget reconciliation process to pass healthcare and cap-and-trade bills in the Senate:

"That would be the Chicago approach to governing: Strong-arm it through.  You're talking about the exact opposite of bipartisan. You're talking about running over the minority, putting them in cement and throwing them in the Chicago River."

Hell yes.  This is supposed to be a democracy.  Why, allowing legislation to pass based on nothing more than a simple majority vote would be just this side of mob rule.

Ex Post Punitive

| Tue Mar. 17, 2009 11:32 PM EDT
Would it be legal to pass a law that retroactively taxed away the bonuses of all those AIG traders who destroyed the planet?  The main constitutional objections are that such a law might be construed as either ex post facto or a bill of attainder.  So what about that?

Well, Conor Clarke talked to certified expert Laurence Tribe, and he says not to worry about bill of attainder issues: "It would not be terribly difficult to structure a tax, even one that approached a rate of 100%, levied on some or all of the bonuses already handed out (or to be handed out in the future) by AIG and other recipients of federal bailout funds so that the tax would survive bill of attainder clause challenge."

Great!  So what about the problem with it being retroactive?  The Supreme Court has upheld retroactive taxes against ex post facto arguments before, and over at Interfluidity Steve Waldman quotes Daniel Troy, author of Retroactive Legislation, on a similar objection to the Superfund legislation: "Because the ex post facto clauses do not apply to civil laws, Superfund therefore would have to be characterized as punitive in nature to be classified as an ex post facto law. The current Court, though, has suggested that unless a law is exclusively punitive, it will not come within the scope of the ex post facto clauses."

Italics mine.  So it looks like the answer here is simple: even though the purpose of this tax would pretty clearly be punitive with extreme prejudice, we need to carefully pretend that it's not.  And we need to make sure the legislative history shows that it's not (it should be "manifestly regulatory and fiscal" Tribe says).  Then everything is kosher!  We can tax their socks off!

So there you have it.  Now we just have to figure out if most of these guys are actually U.S. citizens in the first place.  I hear that New York state AG Andrew Cuomo is working on that.

Kindle Followup

| Tue Mar. 17, 2009 8:48 PM EDT
Everyone is eagerly waiting to find out how I like my new Kindle.  Right?  Well, aren't you?

The quick answer is: it's pretty cool.  I like it a lot.  You know the basic drill: it's small and light, it holds lots of books, you can download new books in a few minutes, you can search your books, etc.  However, after a couple of weeks of using it there are also a few slightly less obvious things that I like and dislike about it.  First, the things I like:

1. Battery life is as good as advertised. I use it for an hour or two a day, and I haven't had to recharge it yet.

2. The leather cover Amazon sells for it is great.  It fits nicely, folds open completely, and feels good.  Well worth $30.

3. Here's an odd one: I normally have trouble skimming books, even when I'm reading sections that I'm not very interested in. I don't know why, but the Kindle makes it easier.  Although I read most stuff at my normal sluggish pace, for some reason I find it a lot easier to browse quickly through the passages I'm only marginally interested in.

4. This isn't really a like or dislike, just a suggestion: publishers should start sending review copies of books via Kindle.  Cheaper for them, more convenient for us.

And now the dislikes:

1. Different books use different fonts, and some of the fonts have pretty mediocre resolution.  The image on the right is a sample from one of the books I've downloaded.  It's not horrible, but it's definitely not the kind of resolution you get on a printed page.

(Technical note: It's surprisingly hard to photograph the Kindle accurately.  Get too close and the picture is misleading since you don't actually read the thing with a magnifying glass.  Reduce the image and it gets fuzzy.  Etc.  This image has been Photoshopped so that it looks subjectively similar to real life.  To my eyes, anyway.)

2. It's hard to page back and forth in a book.  This is by far my biggest complaint, and it might just be inherent in the medium.  In a physical book, it's easy to flip back 50 pages to re-read something, or to flip forward to the glossary to look something up.  On the Kindle, it's a pain.

3. On a related note, it's surprisingly hard to flip to a different page momentarily and then get back to your current page.  You have to bookmark your current page before you move, then move, then use the menu function to display your bookmarks, and then select the right bookmark.  Or you can repeatedly hit the Back button.  This is bizarre.  At the very least there ought to be a way to temporarily bookmark your current page and then get back to it instantly.  At best, the Kindle would keep track of it for you and offer a "Return to current page" option.

4. Pictures are sometimes several pages away from the text that references them.

5. There's occasionally odd behavior after you do a search: the Next and Previous Page buttons sometimes move you three or four pages instead of just one.

So that's that.  #2 is the only one that really bugs me, and it might not be a big deal once I get a little more fluent with menus and bookmarks.  Your mileage may vary on the other issues, or on whether you can stand to give up the feel of a good old paper book.  So far, though, I'm hooked.

POSTSCRIPT: Sorry about the lame list numbering.  That's twice in one day.  Unfortunately, our new site design doesn't seem to like HTML list commands, and I haven't been able to figure out yet how to fool it into working.  So inline numbers are all I have.  This should improve someday.

The Third Front

| Tue Mar. 17, 2009 5:40 PM EDT
Only Nixon could go to China, and maybe only a Republican Defense Secretary can make serious cuts in big-ticket weapons systems.  Bob Gates has been rumored to favor axing some major platforms for quite a while, and the Boston Globe reports today that he's serious about it:

Two defense officials who were not authorized to speak publicly said Gates will announce up to a half-dozen major weapons cancellations later this month. Candidates include a new Navy destroyer, the Air Force's F-22 fighter jet, and Army ground-combat vehicles, the officials said.

More cuts are planned for later this year after a review that could lead to reductions in programs such as aircraft carriers and nuclear arms, the officials said.

....Gates's budget plans remain closely guarded, but aides say his decisions will be guided by the time he has spent with soldiers in Iraq and Afghanistan.

One aide who has traveled with Gates more than a dozen times said the secretary "is particularly keen and aware of the urgent operational needs on the ground."  That likely means greater investments in intelligence-gathering systems such as pilotless drone aircraft, special-operations forces and equipment, and advanced cultural training for military personnel, aides said.

Obviously we've heard this all before, and there's no telling if Gates and Obama will be able to fight and win this battle.  They don't call it the Iron Triangle for nothing, after all, and a fight like this will suck down political capital faster than a dozen stimulus bills.

On the other hand, it looks as if Gates is carefully taking away equal numbers of toys from the Army, Navy, and Air Force, and it's possible that the stuff he wants to replace them with will be fairly evenly split too.  That may make his job easier.  Maybe.