things will get funnier before they get better

look, let's be frank. which is really the 'red' party in these united states? surprise! the RNC knows the answer: it's the democrats, which is why otherwise-undistinguished republican party member james bopp, jr. has drafted a resolution asking the democrats to rename themselves the 'democratic socialist party.' a cunning strategem, and one that will no doubt smoke out, once and for all, those pinko sons-of-bitches and their red muscovite masters. the sun will not rise red in this east, by god.

We're Still Sinking

For now, it may all be pigs killing people and elephants becoming donkeys, but in case anyone was under the impression that we're all allowed to stop fearing economic apocalypse and commence with our more familiar expressions of outrage at such paltry and pedestrian matters as, say, officially sanctioned torture, well then think again, Lefty! The newest GDP figures are out and they're enough to make anyone overlook a little water-boarding.

GDP fell 6.1% q/q annualized in 1Q well below consensus expectation of -4.6% and even below BAS ML forecast of down 5.5% (Source: Zero Hedge)

A caveat and then another. First, annualized gives us the growth figure as if the trend for the first quarter of 2009 were to remain constant for the next three. That means that in absolute terms GDP shrank by about 1.5% between January-March. Which, don't get me wrong, still sucks. But most people assume Q2-Q4 figures will not be quite so nasty. But then again, the assumptions of most people have been mostly wrong lately, so who knows.

Which brings me to the second caveat. Apparently, "consensus expectations" were overly optimistic in their predictions. I don't know who this Mr. Consensus is, but if he's anything like Mr. WallStreet, that isn't particularly surprising. As for Mr. BAS ML, I don't know him either, but he sounds foreign.

Is there a silver lining to any of this? First, the basic decomposition of GDP growth (or negative growth as it may be), plays out as follows: Consumption, Investment, Government Expenditure and Net Exports (the difference between exports and imports). So did anything improve?

The one bright note in the report was the consumer which posted a 2.2% quarterly annualized gain, in the first upturn since 2Q 2008. (Same Source)

Sweet! People are starting to spend more again. People just like you and me. People who are frantically trying to crawl out from under mountains of debt. People who are still being laid off and therefore have a decreasing amount of money to spend. Sweet?

Early tracking into 2Q however, suggest that this positive pace will not be sustained – not surprising amid the steadily climbing unemployment rate. (Same Source)

How are people spending more when by all accounts they have less? The only explanation I've been able to find so far is that so many people tightened their belts so much in the winter of 2008 (maybe, given expectations of further deterioration, a bit more than was justified by the so-called fundamentals of real income decline) that the 2.2% increase is a positive readjustment off the bottom of the barrel. For example, if I lose my home, my job, all of my friends and most of my teeth in March, but then in April, I forge some new dentures out of the chewing gum and cigarette butts that I scrape off the bottoms of my slowly deteriorating potato-sack shoes, my living standard has increased in April. But that isn't saying much, is it?

But what do the figures say about long-term trends?


(Source: Calculated Risk)

According those in the know (Calculated Risk, hopefully), empirically speaking, recessions tend to pass on through in a fairly predictable manner. Consumption tends to be first to drop off (and the first to recover), while large-scale commercial and industrial investment projects tend to be the most hesitant to jump back as the overall economy recovers. As as the graph may or may not demonstrate, consumption has already "bottomed out." Which is to say, we the economy as a whole may be in the process of bottoming as well. But as the graph shows, nothing else is showing any sign of improvement, so even if we want to start calling this a bottom, it's going to take some time before we can start crawling back up in any serious way.

And on an unrelated note, this is a pretty big story in my mind. As America's largest banks (many of whom declared bullshit profits this month, but that's a different story) continually exemplify the economic and political danger in allowing "too big to fail" financial centers to exist, the key regulatory approach adopted by the Obama Treasury Department is not to break them up, but to indirectly provide them with even more market share.

According to Naked Capitalism, the Treasury Stress Test of the banking system will evaluate home and other consumer loans as significantly more dangerous (and therefore less valuable in risk-adjusted terms) than more complicated/sophisticated financial assets. In other words, if you are a regional bank that has, as text-book banks tend to, made many different loans to people who are trying to buy homes or cars or education, you will be regarded as significantly more at-risk than a multinational financial conglomerate that as, as multinational financial conglomerates tend to, purchased a lot of complex asset-backed securities and derivative products. The result of such an implicit bias is that when the stress-test results are officially published, smaller banks will be condemned as risky while bigger banks will be seen as safer. This will in the short run push risk-averse capital away from the regional and towards the already unhealthily and impractically engorged center. In the longer-term, this may even result in further FDIC seizures of small banks, leaving the big banks to devour the remainder of the market.

Why is being hard on loans but not on securities a distortion? Many structured products (and most of the troubled securities fall in that category) have what is known as embedded leverage. That means an increase in defaults, or other fall in cash flow can have a disproportionate impact on the value of the instrument. That's why, for instance, some CDOs were downgraded from AAA to junk in an afternoon. That's an impossible occurrence with a loan book, absent a catastrophe like the Yellowstone caldera blowing up. Even when loan books decay, they do so in a linear fashion. Complex securities often decay much faster (with structured securities, particularly when certain levels are breached).

Of course, the tacit assumption may be that enough of this dreck can be dumped on the Fed via the TALF that it doesn't mater (yes, the TALF technically makes loans, but the TALF, like the public private investment partnership, can serve to validate phony valuations).(Source: Naked Capitalism)

In short, the very banks that should be splintered apart in the spirit of Standard Oil are now being further bulked up with the tacit support of the government.

The 60th Seat

Well, I'm sure you've all heard the big news. I'll spare you all the prentension that I have anything new to say about this nonsense; basically, voting patterns aren't going to change, this is not the dream 60th/59th seat the Democrats wanted, and it's probably more a story of optics than it is about substance. Specter will join several other conservative Democrats that are causing the Obama administration more grief than the Republicans ever could, he will be uncontested in the Democratic Primary by anyone of note, and he will be re-elected. The consensus at the moment is that, despite his mavericky tendencies, Specter didn't jump ship for any real ideological reasons: he was facing a very unpleasant primary with a hopelessly extreme candidate (Pat Toomey) who would undoubtedly lose in the general, and so he made a strategic move. He even says himself that, "I am unwilling to have my twenty-nine year Senate record judged by the Pennsylvania Republican primary electorate. I have not represented the Republican Party." He caught a lot of flak from within his party for his vote on the stimulus package, and as a seasoned politician he probably recognized sticking around was hopeless.

The interesting thing for me, though, is that this is another high-profile nail in the Republican coffin, right when congressional Republicans are making efforts to redefine their party as the one with the real, sensible ideas. Structurally, this switch doesn't mean that much, but on the P.R. level it's a disaster: it will suck up all available non-swine flu media oxygen for at least a couple of days, it loudly highlights the leprous decay that is slowly disarming and dislegging the Republican party, and it gives Obama a brief reprieve from the torture debates (which will be reigniting soon enough). More importantly, it adds more weight to the argument that the current state of partisan hostility in Washington is the fault of the Republican party, rather than of an overly assertive super-socialist administration. If the Democrats can keep a narrative like that going well into 2010, there's no way the Republicans will regain either the House or the Senate. And, in my opinion, if they can't make even moderate gains in the midterms, they probably will no longer exist as a major party.

cross your fingers

daily kos/research 2000, which got to me by way of tpm, reports that in texas, republicans support governor rick perry's assertion that the state may, if forced, have to leave the union. i think i can speak for all of us when i say: get to convincing your fellow democrats! the faster all of you toby keith-loving fucks have to pay for your own goddamn grain sorghum, the faster the kids on my block'll get healthcare. do they really think this is a threat? really? i mean, do they not know that this is my, and, i think, most democrats' dream? how much easier would life be if we could send all the crazy conservatives out to sea, and then only have to break bread with the regular-type scumbags?

also

"A decline in courage may be the most striking feature that an outside observer notices in the West today. The Western world has lost its civic courage, both as a whole and separately, in each country, in each government, in each political party, and of course, in the United Nations. Such a decline in courage is particularly noticeable among the ruling and intellectual elites, causing an impression of a loss of courage by the entire society. There remain many courageous individuals, but they have no determining influence on public life. Political and intellectual functionaries exhibit this depression, passivity, and perplexity in their actions and in their statements, and even more so in their self-serving rationales as to how realistic, reasonable, and intellectually and even morally justified it is to base state policies on weakness and cowardice. And the decline in courage, at times attaining what could be termed a lack of manhood, is ironically emphasized by occasional outburts of boldness and inflexibility on the part of those same functionaries when dealing with weak governments and with countries that lack support, or with doomed currents which clearly cannot offer any resistance. But they get tongue-tied and paralyzed when they deal with powerful governments and threatening forces, with aggressors and international terrorists.

Must one point out that from ancient times a decline in courage has been considered the first symptom of the end?"

that's a snippet from alexander solzhenitsyn's 1978 commencement address at harvard university. sounds familiar, huh?

rain and parades

it was destined to be so, and so it now is. the latest fascination of investigative journalists is the mind of the financier. david passed a piece to me in what i want to say was new york magazine--i'm sure he can provide the link, since i no longer have it--which was another of these sorts of analyses of the typical wall street psyche. it wasn't a particularly good piece of writing. if its aim was to paint vividly the outrageous narcissism of your average trader, it really succeeded, instead, in putting a sickeningly rational spin on the whole nasty business.

(David: Here it is. It's very much worth reading)

too many of the articles dealing with our very own class of robber barons have, in fact, erred in exactly the same direction: what starts off as an attempt to humanize what everyone assumes are downtown demons, most writers seem to end up painting their inarguably excessive expectations as the product of well-reasoned and, therefore, airtight calculations. to take just one example, it's often brought up, by those who are both interviewing and interviewed, that your average trader didn't get to where he (almost never she) was for free. landing his office above the battery was costly: he paid through the nose to go to business school. having spent, say, $160,000 to get through university--a necessary expense, if one is to run with the right crews--his starting salary of 120 or 140 grand is really a drop in the bucket. think of the loans that need paying back! the trader sees himself as an object deserving of sympathy. yes, he's paid x amount of dollars more than you or your doctor or even some CEOs, but one must factor in all of the work that went into making all of that bank; days stretch into nights, one lives under the constant watchfulness of one's blackberry and the whims of clients. all in all, it's really a miserable time. how can you begrudge the poor fools their pennies from heaven, then?

something along these lines has appeared in every psychological expose i've thusfar encountered. part of that is, naturally, the shallowness of many journalists, for whom boat-rocking seems like career suicide. part of it, however, is a painful lesson about us, and about the values at which we've ultimately arrived. i get a sinking feeling in my stomach every time i start into a piece like that in new york magazine, or the several i've read in the times. these writers are rationalizing the actions of the traders because, i suspect, it appears rational not just to them, but to their audience. there is a hidden message there, and i'm not so sure it isn't going to be the tagline for the chapter in future social studies books that deals with us.

the public, and the elected representatives who feed off its moods, claims to be outraged at the astounding degree of unrepentance displayed by people who are very clearly guilty parties. how can they dare to look us in the eye and tell us they deserved all of this? people ask. to the trader, the equation is simple: i worked hard, and therefore i deserve what i worked for. put in those terms--put, in other words, in the terms used by the journalists who've written about financiers--i don't know if many people would disagree. americans do not believe in limits, not, at least, until the common social space is so disastrously violated that we have no choice but to put a fence around it and start shoveling debris. personal freedom is sacred; i'd use another word, but i can't think of anything that would be remotely strong enough. we are somehow zealously convinced that individual liberty, which we've already assigned ultimate importance to, is only understood in its negative, i.e. unrestrictive, sense. if you start with that as a first principle, you can't help but end up in the shoes of the AIG trader who very eagerly took his seven-figure bonus. what right does anyone have to deny him it?

now, i know that this type of thinking is absurd, and i'm sure that the two people who constitute my readership here will agree with me. how much, though, will that be true more generally? the lack of repentance on the part of wall street is really just a lack of repentance in the behavior of americans. it's a cultural characteristic, and it comes through time and time again, no matter what the arena. what is more frustrating about the behavior of, say, reagan- through bush-era republicans, than their utter refusal, in the face of damn near treasonous conduct, to admit any wrongdoing? when a west virginian mining company strip mines an area into oblivion and then flies the coup for fresh pastures in montana, leaving behind crumbling company towns and the poisoned earth, what is this but the selfsame unrepentance? the flaw that will end america is that we don't say sorry, not when we really need to. and, as in the case of the republican party, as our crimes individually continue to mount, it becomes harder and harder for us to apologize, and therefore almost impossible to fix anything we've done.

you can debate the merits of fiscal stimulus versus market self-correction all you like--and indeed, people much prefer that sort of discussion to anything moral--but in the end, nothing will improve for the better until, culturally, we learn to have a sense of personal responsibility. without it, we can't expect progress anywhere, whether academically, politically or economically. it's long been vogue that nations, though social aggregates, do not display agglomerations of individual characteristics. how do you sum the moral compasses of millions of individual people? i'm afraid, however, that nothing is really more important, that no theory, no mathematical model, and no piece of public policy, however well designed, will fill the gap that was once occupied by robust morality. it's especially easy, in these times, to forget that morality ever was robust. i don't mean to flag the old nostalgic's line, that once we were good, that men were men, women, women, etc. it is demonstrable, however, that before modernity, social institutions, if entirely imperfect, still existed to compel individuals to admit to their crimes, and to accept a distinct set of limitations. what was a church (and i'm thinking of the catholic and old orthodox rite of confession) if not a place to repent? of course, religion mixed with politics, and individuals became, to our tastes, too heavily circumscribed. it would behoove us, now that we've come to the logical conclusion of our blind run from repentance, to take a few steps back. i can think of more than one broker who wouldn't be badly served by a priest and a few hail mary's.

an offer that will not be refused

everyone here, take note: jesus may or may not be coming back. for a limited time only, newsmax will tell you what to expect vis-a-vis armageddon, and, here's the clincher: they'll throw in a hand-crank emergency radio for free. that way, when god's judgment is cast upon all of us sinners, you'll be able to tune into premiere radio networks for the latest on attaining salvation from rush limbaugh. the radio will also be handy if obama abolishes christianity and democracy, ushering in a thousand years of islamosocialist darkness. in this scenario, limbaugh will keep you informed on the location of safehouses for true believers/patriots and also fart the star-spangled banner every morning.

Monday Quickies

I should be writing my thesis, but lots of little things have been jumping around in my head that I thought I should put down for y'all to read over:

1. This is I think the best article I've seen so far on the Tea Parties - it's not hyperbolic in its denunciations or in its praise. Sure, sure, these things were astroturfed to all hell and Fox News more or less sponsored the whole project, but it's important to note that people showed up at these things who aren't a) Brooks-Brothers-riot types b) Bircher throwbacks. Some people are genuinely scared and angry that so much money has been spent in so short a time, and those are valid concerns - Obama should feel some political pressure to keep the spending sane, or at least justifiable. It's not that I disagree with the various stimulatin' that's been going down, I just think that these protests, like any protests, mixed real grievances or fears with crazy ones.

2. This is an interesting take on the breakdown of the North Korea six-party talks. I wrote a bit about this a while ago, basically making the point that North Korea acts like a crazy person not because it is a crazy person, but because it is the best way to ensure a) its own survival and b) the maintenance of the various aid and energy agreements it is part of. Since I wrote that post, North Korea went ahead and launched the missile, a spectacular failure that nonetheless wet the pants of every neoconservative in DC, and is now backing away from the negotiating table completely (as well as threatening to restart its nuclear program).
There is probably a lively debate to be had about why, exactly, North Korea chose this point to back off, but I am less informed than would be necessary to wade into this debate. Suffice it to say that I think North Korea is a weak state in a weak international environment with a weak leader and an intense fear of being invaded, and it doesn't want anyone to forget that it (might) have nukes. What I wanted to point out, here, is that the Robert Farley post makes a very interesting (and very realist) point about international affairs in general: namely, that some problems can't be "solved". Sometimes, as with North Korea, the "solution" is either unreachable or far too costly, and so foreign policy should be designed to manage these problems rather than fix them. Farley mentions piracy, which is a very good example as pirates have been around longer than modern nation-states, and seem to have no interest in giving up anytime soon.

3. Ladies and gentlemen, Jackie Chan:

Jackie Chan believes that the Chinese people need to be controlled! He's beffudled about democracy. He doesn't know about freedom.

Speaking at the Boao Forum in southern China, Chan said this: "I'm not sure if it is good to have freedom or not. I'm really confused now. If you are too free, you are like the way Hong Kong is now. It's very chaotic. Taiwan is also chaotic."

And this: "I'm gradually beginning to feel that we Chinese need to be controlled. If we are not being controlled, we'll just do what we want."

The Chinese audience loved it.

I don't know too much about Chinese class relations (Lion? pitch in?), but the guy who wrote the post on this seems to think that Jackie is just saying what everyone's thinking: a Chinese person with democracy is a little like a mule with a spinning-wheel. Obviously, Jackie Chan's opinions on civil rights are not as well-thought out as his opinions on ladder fights, but I am interested in reading more about the upper class-lower class divide in China that this is supposed to be highlighting. Anyone seen anything else like this lately?

NSA Attempts to Wire-tap Nameless Congressman

I don't have too much to say about this, because it still seems like a developing story, but buried at the end of a large and disquieting article about NSA "over-collection" in the last year (this is a nice way of saying that the NSA is eavesdropping almost indiscriminately), we get this piece of information:

And in one previously undisclosed episode, the N.S.A. tried to wiretap a member of Congress without a warrant, an intelligence official with direct knowledge of the matter said.

The agency believed that the congressman, whose identity could not be determined, was in contact — as part of a Congressional delegation to the Middle East in 2005 or 2006 — with an extremist who had possible terrorist ties and was already under surveillance, the official said. The agency then sought to eavesdrop on the congressman’s conversations, the official said.

The official said the plan was ultimately blocked because of concerns from some intelligence officials about using the N.S.A., without court oversight, to spy on a member of Congress.

Two things. One, as best as I can tell, this is the product of that FISA bill that was passed last year, in the midst of election season, that outlined a really over-broad range of abilities for the NSA to "over-collect". Obama supported it and took a little bit of heat, but that anger dissipated quickly and it never stuck on him (mostly because the only people that were mad about it were people who were going to vote for him anyway). My fervent hope is that a) this becomes a big story and b) Obama takes some real heat for it now, from the suddenly libertarian tea-baggers on the right. Even if it's faux outrage, something needs to push back on this hard.

Secondly, what makes this especially disquieting is that it was not a difficult development to envision. When America invaded Iraq, even those of us who strongly opposed up were working under the assumption that it would be a very, very brief war. Its proponents also felt this. Many of the reasons why the US is still there never manifested in an obvious way until a couple of months into the occupation - myopia, poor post-invasion planning, bureaucratic rigidity, etc. - and so unless you believed America intended to stay forever you probably wouldn't have predicted what came next. This NSA wiretapping problem, in contrast, was incredibly easy to foresee. When you give sweeping, ill-defined powers to a bureaucracy, it will act in sweeping, ill-defined ways. We've known about, y'know, checks and balances for a long time now; did anyone really expect the NSA to play nice?

Scattershot

It's been a while since anyone other than trusty ol' Dave has posted on the blog, but in my defense, aside from keeping myself relatively busy and off a computer the last few weeks, lately nothing has really been jumping out at me as something that warrants a comment--or at the very least my comment. Bank failures and unemployment statistics and our brand new President and his brand new era of hope just seem so last winter.

And while I still don't have much to say, I do have very little to say about a few things. Hopefully one of these few things will spark a new round of discussion. Or if not, at the very least, I'll feel a bit better about finally posting something again.

Issue 1: Goldman Got to Get Paid

And you thought we were in a recession. The news is now officially out that the investment bank Goldman Sachs is reporting a $1.8 billion profit for the first quarter of the year. Perhaps all the hedge fund managers that frequent this blog, having had their standards and expectations goosed during the hey-day of the mid-oughts, wish to snicker at such a paltry sum. But compared to the reports of that same firm throughout last year and compared to the state of the rest of the economy (yeah, there's a "rest of the economy"), this is surprisingly good news.

Particularly if you're upper-management at Goldman Sachs. If not, maybe not so much. Because if you're like me, you might be wondering in a world of parched credit and sequential downgrades and a degree of so-called "animal spirits" befitting only roadkill, where does that kind of money come from? According to Barry Ritholz, quite a bit of it probably comes from Uncle Sam.

Remember when AIG got a whole chunk of cash from the U.S. Department of Treasury? The reason that was such an important and necessary thing to do was because, according to that Department, AIG had so many liabilities reaching out like oily tentacles across the financial globe, that chain of defaults (or only the perception of a chain of defaults) would cause the entire financial system of the world to seize (like Lehman, but worse). Luckily for Goldman Sachs, it happened to be at the other side of a disproportionate number of AIG's tentacles (namely CDSs as far as I understand, but maybe I don't fully). Luckier still for Goldman Sachs, is that when the United States Government saw fit to ensure AIG's liabilities, it failed to act as any lender of last resort would and protect its investment by renegotiating the terms of its (that is, AIG's debt). So Goldman Sachs got 100 cents on every dollar invested with AIG.

And perhaps even luckier still that Goldman Sachs' former CEO was the Treasury Departments former number-one man who, according to Ritholtz

oversaw the greatest transfer of wealth in the planets history — several trillion dollars from taxpayers to the management and shareholders of inept, incompetant, wildly irresponsible companies.(Source: Big Picture)

But those are his words, not mine.

Issue 2: China Makes Some More Noise

This story has already been beaten to death on this blog, but just to provide a quick reminder, China has a lot of U.S. dollars in the bank and should it ever decide to swap some of those dollars for another currency, the U.S. dollar would likely take a big hit. And now the slow down is continuing.

Is this an enormous deal? Does Hu Jintao's statement a few weeks ago auger the imminent implosion of the U.S.'s international position? I seriously doubt it. The key phrase here is "slow down." China is still a net purchaser of U.S. government debt as far as I understand it. Perhaps their demand isn't keeping up with our supply (we're spending more than their lending), but given the fact that fear is still the international currency of choice, their are plenty of eager lenders out their looking for a safe place to stuff their cash.

In any event, China wouldn't benefit from a plummeting dollar anymore than the U.S. would. Though it may try to diversify its trade position and though it may try to diversify the balance sheet of its Central Bank, the U.S. still holds primary positions in both. In short, this is a marriage that neither country can afford to break-off.

Issue 3: Re-Regulating

This story is at least two weeks old, but last month, the Treasury Department released its vague notion of its unique approach to financial regulation--presumably the first of a series. The press statement can be found here, but let me pick out the tasty bits.

First, Treasury proposes a single regulator of the entire financial system. I suppose this centralizes the functions of the chairman of the Fed, the head of the SEC, the head of the CFTC, the head of the FDIC and a litany of other mysterious-sounding acronymed institutions. In what way the duties of this new regulator would be distinct and or separated from said institutions, I do not know. It is encouraging however that this regulator in chief will be charged with evaluating "what companies do, not the form they take"--which is to say, rather than solely looking at depository banks and allowing the various other permutations of this hallmark financial institution to inhabit various other levels of regulatory purgatory, if you are a company, for instance, that happens to be selling insurance on bonds, even if the insurance on the bond isn't called insurance and even if the letters that grace the front of your granite building do not read "insurance company," you will be regulated as such. Which, as I said, is encouraging.

It is then posited that the Treasury Department will work to ensure that so-called "over the counter" derivatives are brought, if not off of the counter and into some formal exchange, than onto a new semi-official counter which will be watched by some watchdog. But, as you might expected from my wording, the details are fairly slim here.

Next, the press release discussed how "capital requirements" for all relevant financial institutions will be increased. Capital requirements, generally assumed to be around 8%, is that proportion of money a bank must own its very own self for every asset that graces its balance sheet. For example, if I loan out $100 to company x, regulation may stipulate that I have to hold at least $8 in cash or stock as a safeguard against default on my loan. Unfortunately, as it stands now, capital requirements differ based on the portfolio of a particular institution. For example, if the $100 loan I make is rated very well by an esteemed rating agency, I may have to hold much less than $8, whereas if Company X turns out to be run out of someone's basement, I may have to hold much more than $8. Unfortunately, as we've seen, the rating agencies are slightly less reliable--optimism on their part go up and down with the market (or to put it in the unnecessary parlance of economics, their ratings tend to fluctuate pro-cyclically). This aspect is not addressed at all by the Treasury brief.

Lastly (at least for me), the Treasury recommends that both large Hedge Funds and the entire Money Market be regulated.

I don't have much to say about that.

Fin

Anyway, thanks for reading this far. This has been a fairly disorganized post, but I felt like I ought to write about something or other. Perhaps one of these three topics will spark someone's interest in writing another post (or just a comment).

Or maybe we can just talk about the Obama DOJ following the lead of its predecessor on both Guantanamo and state secrecy and domestic wiretapping . This kind of analysis (that is, angry and/or political) isn't something I'm particularly good, but I'd love to hear what it is that I must be missing so that this can in any way seem justified.

Also, if anyone is up for more reading, this is really entertaining, low on financial lingo and telling as all hell.

Shorter Bill O'Reilly

Shorter Bill O'Reilly: No one gives a shit about what Eminem says or does; therefore, they are sexist.

-------

I didn't even know Eminem was still making music, let alone that it sounds virtually identical to how it did back when I was in elementary school.

The Powell Conundrum

Watch:


If you don't have 8 minutes to spare, the gist of the interview is that Rachel Maddow asks Colin Powell directly if a) he thinks waterboarding is torture and b) if waterboarding, among various other acts of "enhanced interrogation", were discussed in meetings that Powell attended (the answer, we now know, is yes). Powell dodges both questions, making the very strange argument that we don't know if it was torture, and he doesn't know if he was present for any conversations, but that the answers to these two riddles lie in whatever legal and presidential scholars eventually conclude from the transcripts of the meetings. In other words, he is not himself qualified to answer the question, and so he must respectfully not answer. I understand that he may feel personally responsible to the former president and the former cabinet to dodge the question entirely, but goddamn that's some weak tea. And, to me, it highlights one of the more confusing aspects of the inside story of the Bush Administration: how did Powell remain so popular in the public?

Powell has, since 1991, been a fairly well-liked guy, both in the press and amongst the throngs of Americans with only a passing interest in politics. A lot of his credit, throughout the 90s, was built on the premise that he was a highly non-ideological thinker, so much so that he refused to answer people when they asked what party he belonged to. In the run-up to the 1996 presidential election, Powell published an autobiography, a telling sign that he was at least toying with a run at the White House, and the response to even the rumours was overwhelmingly positive. He declined, a wise move considering the problems the Republican party was facing that year, and waited on the sidelines for four years until Bush appointed him Secretary of State.

Now here's what perplexes me: the Bush Administration, throughout 2002-3, exploited the hell out of Powell's pragmatic and even-handed reputation, dragging him out in front of the UN, for example, to point out how slam-dunky the whole invasion of Iraq was going to be. Even an absurdly generous interpretation of his tenure as Secretary of State, though, has to concede that he voluntarily made these announcements and gave these presentations. His participation on the side of invasion covered the whole debacle in a thick layer of serious, practical, non-ideological glitter, and that was precisely the point.

Fast-forward 6 years. The entirety of the Bush Administration is widely and deeply disliked by the American people. Except, of course, Colin Powell. When Powell came out last year, way too late in the election cycle to make any real difference, and said he would be voting for Obama, his announcement sucked up all the media oxygen for two days straight. Chris-Matthews-types all across the pundit universe interpreted this endorsement as a crippling blow to McCain's chances, the kind of thing that was perfectly timed to inflict maximum impact, just how a great general would do it. Of course, it was largely irrelevant short of keeping a couple days of good media coverage on Obama at a very late point in the game, but that's not what matters to me. I don't understand why, after everything he was involved with, Powell came out on top. He is the only Bushie to exit unscathed, and yet it was his contribution that was probably most essential in selling the war to the more skeptical parts of the American public. To use an analogy, when a toy is defective (full of lead, let's say), we blame the people who designed it, but we also reserve scorn for those who marketed and sold it, especially if they knew what they were involved in. To use another, we all have a special place in our hearts for Wall Street for all the toxic financial mechanisms it came up with in the last half-decade, but we also make room, justifiably, for media outlets like CNBC who provided the cover necessary for Wall Street to fuck up more and more. So why does Powell get to walk away scot-free?

Even W., Oliver Stone's Freudian dream sequence of a film, comes off easy on Powell, casting him as the cautious and skeptical dissenter among a cabinet of yes-men and violent psychopaths. At worst, the movie implies, Powell is guilty of not airing his grievances publicly, of being too much of a good soldier at a time when his "real" views would have been helpful. But isn't that just as bad as anything anyone else did? Doesn't the fact that his consent was understood by the White House as essential to getting their war on mean that he was, by giving this consent, just as responsible? The same is true with torture: he was there, to some extent, during the ongoing conversation the Bush administration was having over how best to get information from "enemy combatants". Even if we give him the benefit of the doubt and assume he did have serious concerns over what the White House was planning, his silence, for Cheney et al., was golden.

Is it progressives that can't govern?

Lately there's been a lot of understandable frustration over the various degrees of congressional Democratic bickering, stone-walling and foot-dragging over the administration's agenda, something I sympathize greatly with. As with the stimulus and the 11th-hour "centrist" watering down process, a lot of this stuff is hurting genuinely valuable progressive legislation for reasons that seem political and ideological rather than practical or justifiable. The Employee Free Choice Act, for example, which is designed to strengthen America's various ailing labour unions and fend off the predations of the more dickish employers out there, is looking like less and less passable by the day, especially now that Dianne Feinstein (!) has suggested that she may not support it in the senate. Beyond that, a lot of Democrats in both the House and the Senate are very loudly and ostentatiously pointing out their "centrist" credentials every chance they get, implying more or less that a) they stand far to the right of the Obama Administration and b) this is an inherently good thing, even as poll after poll comes back showing significantly higher approval ratings for Obama than for Congress.

So the congressional Democrats, at least the loudest ones, are making it difficult for a Democratic administration to pass a series of Democratic bills. Why? Jonathan Chait of the New Republic recently wrote an article (Why the Democrats Can't Govern) trying to get to the bottom of this (which is well worth reading in full), and its been circulating the blogosphere for the past couple of days. Chait argues that the Democrats have both a structural disadvantage in maintaining strong party discipline and a long tradition of standing athwart Democratic administrations. While I don't know how much I like the tradition argument, as it requires the assumption that Democrats learned nothing about partisan cohesion from Republicans in the last thirty years, the structural critique makes more sense. Basically, congressional representatives are disproportionately and overwhelmingly favourable to the rich. For the Republicans, who are explicitly pro-business, this is great, because it often means that their national legislative goals are closely in tune with those of the wealthy of the districts they came from (where they got their money and support). For Democrats, the influence of business is far more divisive: it means that a congressman from Michigan, for example, could be solidly pro-labour but have a terrible environmental record. Because many planks of the Democratic platform are good from a policy perspective but run up against business interests, and because business interests are the financial backbone of both major American parties, there will always be dissenters within the Democratic party to stand up for the poor old billionaires.

Responding to Chait's article, Ron Brownstein made another excellent point:

Democrats today are competing across a much wider terrain than Republicans--both demographically and geographically. On Election Day, that's a great asset. That broader reach is why Obama won nearly 80 more Electoral College votes than Bush did even in his 2004 highpoint, and why Democrats today enjoy larger majorities in both the House and Senate than Republicans did at any point during their 12 years of control. But for Democrats, the price of that broader electoral reach is more ideological diversity than Republicans operate with; that's the principal reason Democrats cannot expect to consistently match the level of uniformity that Republicans achieved during their years in the majority.

Even in the best of times, Republicans are typically coming to Washington from areas that look very similar - Southern, rural, evangelical, etc. This isn't to say that there isn't/wasn't diversity within the Republican super-caucuses of yore, but that they have, since Nixon, pursued a strategy of locking down Southern votes before moving outwards. Democrats never really had a stronghold like that, and so have worked to appeal across a wide range of districts, meaning a wider variety of voters that need to be heard and incorporated. Michael Barone, a conservative pundit, put it this way:

This is similar but not identical to a point I’ve often made: that the Republican Party is the party of people who are considered, by themselves and by others, as normal Americans—Northern white Protestants in the 19th century, married white Christians more recently—while the Democratic Party is the party of the out groups who are in some sense seen, by themselves and by others, as not normal—white Southerners and Catholic immigrants in the 19th century, blacks and white seculars more recently. Thus it’s natural for the Democrats to be more fissiparous.

Now, that's a very, very dumb way to say it, but the point is roughly the same: Democrats, when successful, draw from a wide range of voters. Republicans, when successful, appeal to a specific group of voters (one of their strategies, not coincidentally, is to offer this group the moniker of "normality", but that's off-topic). The Republican strategy works great for producing partisan discipline, because it's not hard to make the voting preferences of Republican congressmen align, but if the target "normal" group is shrinking (which it is), you're going to start losing elections. Many of the candidates for the RNC Chairmanship, like Saul Anuzis of Michigan, argued that Republican future successes were predicated on regionally funded and targeted campaigns, rather than attempts at broad national cohesion. The current Democratic 50-state plan, by contrast, is a far better electoral strategy than a governing one.

Finally, and sadly, the most interesting argument I've yet heard to explain this I can't actually find at the moment. A couple weeks back, in response to the perpetually resurfacing meme that "America is fundamentally a centre-right nation", Matt Yglesias argued that, fundamentally, all countries are politically right of centre, and that as a result no progressive coalition of governing party can stay in power for a long period of time. Because progressive coalitions unite and act to change specific things, while conservative coalitions unite to maintain the status quo, progressive coalitions are goal-oriented and therefore time-sensitive - to impel change, progressives must expend political capital, which means losing votes in the long run, which means they never get to stick around. As a result, success for a progressive government should not be measured in the length or girth of party dominance, but by whether the reforms they put in place stick around well after they're booted from power. If a progressive reform succeeds, it becomes status quo, and therefore removed from the political debate entirely. So if Democrats pass universal health care and a cap-and-trade bill this year, but lose their majorities and the presidency by 2012, they will have succeeded if these two things become broadly accepted as a given within the American population.

There some obvious oversimplifications here: Republicans, like Democrats, are interested in changing the status quo, and often in ways that are considered conservative but do not actually involve the removal of prior progressive legislation; all politicians of all stripes are self-preservationists and therefore will not expend all their political capital just to pass a few laws; this perspective paints conservative governments as impassive stewards who themselves have no agenda beyond stasis; and so on. The theory is useful, though, to point out that structurally democracies have a lot of political inertia that must be overcome to bring about change, and that there is no reason why this inertia wouldn't show up in a large and unruly coalition like the Democratic Party.