Matt Yglesias

QDR on China

The QDR seems to not have a great deal to say about China. This the most extended discussion that I can seem to find, on page 60:

China’s growing presence and influence in regional and global economic and security affairs is one of the most consequential aspects of the evolving strategic landscape in the Asia-Pacific region and globally. In particular, China’s military has begin to develop new roles, missions, and capabilities in support of its growing regional and global interests, which could enable it to play a more substantial and constructive role in international affairs. The United States welcomes a strong, prosperous, and successful China that plays a greater global role. The United States welcomes the positive benefits that can accrue from greater cooperation. However, lack of transparency and the nature of China’s military development and decision-making process raise legitimate questions about its future conduct and intentions within Asia and beyond. Our relationship with China must therefore be multidimensional and undergirded by a process of enhancing confidence and reducing mistrust in a manner that reinforces mutual interest. The United States and China should sustain open channels of communication to discuss disagreements in ordert o manage and ultimately reduce the risks of conflict that are inherent in any relationshop as broad and complex as that shared by these two nations.

I think that’s all easy enough to accept as far as it goes. But I think it also illustrates that for all the vastness of its budget, the Department of Defense has a limited relevance to the international relationships that really matter. When you think about the impact of China on the lives of Americans, the complicated interplay between trade flows, budget deficits, and currency value is far, far, far more significant than this business about how China’s defense budget isn’t fully transparent. But that’s all the Treasury Department’s problem.

This in turn highlights the fact that it seems pointless to try to draw a budgetary distinction between “security” and “non-security” agencies. Our interests around the world are inherently connected to the impact of the world on events inside our borders.

Boehner Rejects Bipartisanship

I think John Boehner has a reasonable take on the question of bipartisanship:

Despite White House overtures for congressional Republicans to work with Democrats, the top GOP official in the House said Sunday that such opportunities are limited.

“There aren’t that many places where we can come together,” House Minority Leader John Boehner of Ohio said on the NBC program “Meet the Press.”

Republicans were elected to stand by their principles, and those principles are different than the “leftist proposals” offered by President Barack Obama and congressional Democrats, Boehner said.

I think that’s right, and it’s reflected in the fact that the US House of Representative is a fairly well-functioning legislative body. It’s a body organized around two major political parties that outline competing, somewhat coherent agendas that command large-scale support from their own members and little support from the opposition. Some issues scramble the coalitions and leave the door open to large-scale bipartisanship, but the bulk of the legislative terrain consists of systematic disagreement on important issues. There are biannual elections at which the American people put either one party or the other in charge, and having won an election the winning party attempts to govern in a way that maintains the confidence of the voters.

It’s a perfectly good system. Sometimes a majority sees its margins trimmed (1996, 1998, 2000) other times it sees its margin enhanced (2002, 2008) and sometimes a majority is replaced by a rival majority (1994, 2006) and the House’s policy agenda changes accordingly. Boehner’s ideas are different from Nancy Pelosi’s ideas, and if he wants his ideas to prevail he needs to assemble a majority prepared to support him. That’s his responsibility as an opposition leader, whereas Pelosi’s responsibility is to frame a successful governing agenda that maintain’s the public’s faith in her co-partisans. It’s a system where power aligns with responsibility, and where those with power are held accountable for their use of it.

The Senate, by contrast, is a mess.

Your 2010 Quadrennial Defense Review

The final version of the 2010 Quadrennial Defense Review is now out and about on the Internet for your reading pleasure. The idea of the QDR is that it both serves as a statement of intent, indicating what high-level DOD policymakers tend to pursue in terms of budget objectives and resource-allocation, and also that it functions as high-level guidance for career personnel as to what their bosses want everyone to do.

Robert Farley makes the case for why these debates are worth delving into. I’m with Farley that the primary change in overall strategy seems to be that they’ve dropped the totalizing conceit of a “Long War” and not really replaced it with anything. I think that’s the right call. It’s good to have a unifying strategic theme, but it’s not at all good to be so devoted to coming up with one that you embrace an idea that doesn’t make sense. The fact of the matter is that the US Department of Defense is routinely asked to engage in a rather miscellaneous set of undertakings. My preference would be to pare back this set of undertakings to something more modest and coherent, but insofar as that’s not on the table at the moment it’s better to try to be clear-sighted rather than delusional.

In brass-tacks terms, this all seems to be very good news for people who make helicopters.

Obama’s Spending Priorities

More details are emerging:

The budget for the 2011 fiscal year, which begins in October, will identify the winners and losers behind Mr. Obama’s proposal for a three-year freeze of a portion of the budget. Many programs at the National Institutes of Health, the National Science Foundation and the Energy Department are in line for increases, along with the Census Bureau.

Among the losers would be some public works projects of the Army Corps of Engineers, two historic preservation programs and NASA’s mission to return to the Moon, which would be ended as the administration seeks to reorient the space program to use private companies for launchings. Mr. Obama is recycling some proposals from last year, including one to end redundant payments for land restoration at abandoned coal mines; Western lawmakers blocked it in 2009. Mr. Obama will propose a total of $20 billion in such savings for the coming fiscal year.

Based on what we’ve heard so far, Obama’s sense of priorities within the budget appears sensible to me. The OMB team seems to be doing a good job of identifying which programs are worth spending money on and which have lower value. But this raises the question of how the specifics will relate to the overall freeze. If it turns out that “western lawmakers” once again block cuts in “reduntant payments for land restoration at abandoned coal mines” is the White House going to pare back its planned increases in NIH programs? That, it seems to me, would be very bad policy. The case for an overall freeze is weak in macroeconomic terms. Cutting bad programs is fine, but given the current economic situation funding good ones is more important.

Why Choose?

From an interesting NYT piece on JD Salinger:

Depending on one’s point of view, he was either a crackpot or the American Tolstoy, who had turned silence itself into his most eloquent work of art.

Tolstoy was a great novelist, but wasn’t he also a crackpot?

Opportunity Knocks

Adam Nagourney writes:

At a moment of what appears to be great if unexpected opportunity, the Republican Party continues to struggle with disputes over ideology and tactics, as well as what party leaders say is an absence of strong figures to lead it back to power, from the party chairman to prospective presidential candidates.

I guess I don’t really understand what it is that the GOP has a great opportunity to do. The view they’re articulating at the moment is that (a) the deficit should be lower, (b) taxes should be lower, (c) Medicare shouldn’t be cut, (d) defense spending should be higher. With unemployment at 10 percent, this is a somewhat potent political message that helped them become only slightly less popular than the other party. That’s a huge improvement from where they were 18 months ago. But it’s not a governing agenda. What would they do if they took over?

The ECB’s Complacency

When you consider what a large share of world output is concentrated in the Eurozone, this interview with ECB Chief Jean-Claude Trichet is really terrifying. Take this:

FOCUS: Mr President, the rate of inflation in the euro area is close to zero. You have done a good job – are you now out of work?

Trichet: As you know, the latest available figure is 0.9%. What counts is price stability in the medium term. And from that point of view, my colleagues and I are proud to be able to tell the citizens of Europe that they have a credible and stable currency. We promised them that the euro would be as stable and credible as individual national currencies had been earlier. And we have kept our word.

You might think that “success” in generating near-zero inflation at the cost of anemic growth and sky-high unemployment would be nothing to brag about. And is maintaining a “rate of inflation . . . close to zero” really the EBC’s job? Well, no it’s not:

Trichet: We have made it very clear that we always take the decisions necessary to guarantee price stability over the medium term: an inflation rate below, but close to, 2%. Observers and market participants are fully aware of this. It is precisely because of the challenges posed by price stability that we stand ready for action at all times. I call that “credible alertness”.

0.9 percent is not close to 2 percent. It’s below target, falling a period of over a year when the ECB was even further above target. What’s more, it’s only as high as it is because of rising energy prices. Read the whole interview, though, and you’ll detect nary a whiff of concern for the idea that unemployment might be too high, that deflation might be a risk, that ECB policy may make it impossible for governments to get out from under their debt-loads, or anything else. It’s crazy.

Too Hot for CBS

For some reason CBS has decided that an add for a gay dating site can’t be run during the Super Bowl. The spot is amusing, but quite tame:

Meanwhile, Super Bowl calvinball about advocacy ads continues. In recent years we’ve seen MoveOn denied the opportunity to run an ad, marriage equality ads denied, but this year we’ll be treated to Tim Tebow’s forced pregnancy advocacy.

GDP Decline From Peak

Here’s a nice chart borrowed from Calculated Risk which shows that even though we’re growing again, we still haven’t recovered:

This is why the labor market is so horrible. We’re still 1.9 percent below the peak level. Probably at the end of 2010 Q1 we’ll be back where we were before the recession started. But during that time we’ll have had over two years of population growth and productivity growth, leaving tons of people out of a job until we get quite a bit above where we once were.

Monetary Policy in an Emergency

Bank of Japan Building

I found this 1999 Paul Krugman article about Japan relevant to our contemporary situation:

If a zero short-term interest rate is not enough to generate an economic recovery, and if deficit spending has reached its limits, then there are only two serious remaining policy options. One is to extend open-market operations to those assets whose prices can still be driven up – most obviously, longer-term bonds and foreign currencies. The other is to try to bootstrap a recovery by convincing savers and investors that the future will bring not deflation but modest inflation, something that can best be accomplished by announcing an explicit inflation target, but could possibly be achieved through a less explicit policy of “quantitative easing” – essentially, producing attention-grabbing increases in the monetary base. In practice such policies are not alternatives but complements: unconventional monetary policy today should be used as the opening salvo of a campaign to convince the private sector that inflation rather than deflation will prevail tomorrow.

Such proposals are the natural implication of utterly orthodox monetary analysis, applied to Japan’s unusual plight. If you believe that an economy is in a liquidity trap, and that fiscal policy has reached its limits – both propositions about Japan that are hard to deny – it is hard to avoid the conclusion that in such circumstances to adhere to conventional notions of monetary prudence is to flirt with catastrophe, and that policies that would normally be regarded as irresponsible become not only reasonable but essential.

But although this conclusion is hard to avoid, influential Japanese are still trying. Say to them that the Bank of Japan should announce a minimum inflation target of at least 2 percent, or that there should be a clear commitment to increase the monetary base at an annual rate of at least 15 percent, and you get the feeling that you have proposed an immoral act. In public the BOJ’s leadership has adopted a posture that is best described as philosophical, full of skepticism about its ability to do much to turn the economy around. And since monetary policy in a liquidity trap must work mainly through its effect on expectations, such diffidence is not only an abdication of responsibility; it undermines the effectiveness of whatever monetary expansion actually takes place.

I hear a lot of people say that Krugman was better back in the nineties before he became “shrill” and/or “partisan.” I think this is a misunderstanding. I think that if you just turned this into an article about the United States of America that was full of the names of prominent American political, economic, and media figures it would just strike people as a shrill or extreme article. The fact that it’s a piece about a far-off land full of unknown “BOJ leadership” softens the blows, and the fact that the main point is that foreigners (rather than, say, politicians you may admire) are screwing up makes people non-defensive about the argument. But it’s impossible to write clear prose about American politics for an American audience without sounding shrill or hackish or something to some large segment of the population, we all know and care too much.

Too Many Elections

Is coroner really an elected office?

Absurd.

Strange Tales of Congressional Procedure

Continuing a theme from yesterday, I think it’s more important than is generally acknowledged that most people have no idea how congress works. Consider, for example, the following hypothetical scenario. The Green Team has 13 Senators on the Senate Energy Committee and the Brown Team has 10 Senators. The President also belongs to the Green Team and he promised in a speech to pass a bill banning the use of puppy-burning power plants. The Brown team hates that idea. Then along come two Senators from the Green Team who offer an amendment saying, well, as long as you don’t burn more than three puppies a year you can do it. Then the committee takes a vote and the amendment is adopted, 12-11, with the 11 “no” votes all coming from the Green Team. Then the overall puppy bill comes up for a vote and it passes 13-11 on a party-line vote.

What happens next? Well, typically what happens is you start getting liberals complaining that the Green Team voted for a weak-ass sellout bill. Unanimously. They have the majority, they control everything, and this is the best they could do? Why didn’t they really fight? Meanwhile, the Brown Team complains that it’s been shut out of the process and the Green Team is passing these costly bills that put the interests of puppies ahead of the interests of people and that doesn’t even really stop puppy-burning anyway!

Anyways, this kind of thing happens all the time. Things happen because a small fraction of centrist Democrats side with the vast majority of Republicans, but then the overall legislative vehicle ends up being moved on a party-line vote. This leads to people criticizing “the Democrats” for doing things that only a tiny minority of Democrats actually did, and Republicans run around acting like they have nothing to do with outcomes even though they’ve actually been decisive in shaping them.

Pretend We’re Dead

I like Erin Polgreen’s review of Girl Power: The Nineties Revolution in Music, but as a sidebar she compiled “A riot-ous playlist” that suggests L7′s “Wargasm”. It seems to me that the best L7 song is pretty clearly “Pretend We’re Dead”.

The Sweet Spot

Gish Jen’s article “Why Do People Love ‘Catcher in the Rye’?” is interesting on a number of levels. But the literal question asked by the headline seems not-so-hard to answer—the book is perfectly pitched at the sensibilities of high school students, i.e. people old enough to read real books but not yet old enough that nobody can force them to read literary fiction.

Once you exit high school the universe of “people” who read novels just starts to shrink incredibly rapidly.

Mike Pence’s Proposed Compromise: “Well, look, you know, I was, uh, yeah, yeah, look, uh”

For an example of what I’m talking about with regards to dumb-as-a-post Representative Mike Pence, watch his answer to the question of what kind of compromise he would propose for health reform:

“Well, look, you know, I was, uh, yeah, yeah, look, uh”

Pence then pivoted away from addressing the issue to a kind of stammering evocation of the idea that the health insurance industry should be completely deregulated under the guise of allowing you to buy insurance across state lines. This, of course, is just a longstanding conservative proposal and not an idea for a compromise. It’s not “if the president would agree to x and y then I’d give him a and b.” On the subject of compromise what he has to offer is “well, look, you know, I was, uh, yeah, yeah, look, uh.”

Unfortunately, Chris Matthews didn’t seem to have the policy chops to dig deeper with Pence on the insurance regulation issue. But this is the point. Right now, health insurance is regulated at the state level. That means that if you want to sell insurance in California, you need to develop an insurance policy that’s compliant with California’s insurance regulations. It might be a better idea to instead regulate health insurance at the federal level, and say that if you want to sell insurance in the United States of America you need to develop an insurance policy that’s complaint with America’s insurance regulations.

Pence’s proposal, however, is that one revenue-hungry state should cut a deal with insurers—move your headquarters’ to Sioux Falls (or just bribe enough state legislators) and we’ll let your lobbyists write whatever lax regulations you like. Then next thing you know everyone is “allowed” to buy this unregulated South Dakota health insurance and no other kind of insurance policies are available. This is what’s been done with the credit card industry and it’s the model that Pence wants to extent to health insurance. Although I doubt he actually wants this to happen, most likely he doesn’t understand the issue at all, and just heard this talking point from a guy who heard it from a guy who got it from a lobbyist who got it from Newt Gingrich 20 years ago.

Endgame

Gotta find a way:

— How to talk to a MILF.

— Transcript of this afternoon’s presidential beat-down.

— Triangle Transit.

— How to scale up effective charter schools.

— Joe Biden presses for Comprehensive Test Ban ratification.

— Sympathy for the Clinton administration.

— Tony Blair looking shaky.

— Melina Mara’s great photo of Kent Conrad.

Kicking it back to my DOS days with “Territorial Pissing”.

The Limits to Growth

Commenter Ted says there’s a revival of “limits to growth” arguments in the UK, typified by this web video, and wants to know what I think:

I’d say the main issue here is that I don’t think anyone actually denies that there’s some theoretical limit to the possible extent of human aggregate economic growth. The laws of physics and the process of entropy, at a maximum, set some kind of limit on what’s possible. The question is whether there’s some reason to think that actually existing human society is pushing up against the limits to growth in some meaningful way.

I would say the answer is no. People normally think about this in the context of resource-scarcity in the energy sector. Note, however, that the energy intensity of our economy is steadily declining:

And this has been during a period when there’s been no real policy emphasis on improving efficiency and energy has generally been cheap, offering a limited economic rationale for efficiency. Many developed countries are far less energy-intense than the United States even with existing technologies, and over time technology will improve. It’s also the case that we’ve really only begun to exploit the energy-generating potential of solar and wind power, that there’s more that can be done with hydro and geothermal power, and that it’s very logistically possible (albeit expensive) to build more nuclear plants. And of course there’s a lot of coal that could be burned.

Talk of coal, of course, raises the question of whether we’re facing a climate-related cap on growth, rather than one that pertains to running out of resources. But the answer is no. It’s worth emphasizing that most research indicates that the world in 2050 will be richer than the world in 2010 regardless of whether environmentalists or the pollution lobby get their way:

A comprehensive report by former World Bank chief economist Nicholas Stern undertaken on behalf of the UK government documents both the costs of climate change and of options for mitigation and adaptation. The Stern report estimates the cost of a changed climate could be from 5 percent to 20 percent of global GDP. Costs include those related to losses from declining agricultural production, heat-waves, droughts, flooding events, extreme precipitation, biodiversity loss, disease spread, and soil erosion. Conversely, the study estimates that a stabilization at 500-550 ppm CO2equivalent (CO2e, a measure of the contribution of six key greenhouse gases) will cost the global community roughly 1 percent of GDP by 2050. Necessary changes would include decarbonizing 60 percent the power sector. Policies called for in the Stern report include a strong carbon signal through taxes, trading, or regulation, and research and development into low carbon-intensive technologies. In addition, Stern suggests that activities to curtail greenhouse gas emissions will be substantially more expensive if action is delayed rather than initiated in the near future: if we fail to act within the next decade or two, stabilization at 550 ppm CO2e may be too challenging to achieve at all.

The IMF is forecasting 3.9 percent global economic growth for 2010 and 2010 is going to be a bad year. Which is just to say that the overall growth trend ought to swamp either the costs of avoiding a climate catastrophe or even the much higher costs of simply coping with one.

The real risk, both ecological and political, is not that we’ll reach a point in the foreseeable where we “can’t grow” anymore. Rather, there’s a risk of catastrophe. There are real low-probability climate outcomes in which things spiral totally out of control and destroy the world. There’s a risk of nuclear war. There’s a risk of cataclysmic asteroid collision. Things could go very badly wrong. But those aren’t the “limits to growth.” A growing economy isn’t like a giant hamster that eats up more and more food—it can innovate. There is a finite quantity of matter in the universe so there’s got to be some kind of limit out there. But what’s realistically happening right now is that people are (rightly!) concerned about global warming and (rightly!) concerned about the fact that the developed world is in a bad economic situation. These are, however, problems that can be solved, not “limits.”

Budget Cuts in Spain

The Spanish deficit situation is getting real:

Elena Salgado, Spain’s finance minister, said after a cabinet meeting in Madrid that spending cuts, tax rises and a return to economic growth would cut the deficit from a higher-than-predicted 11.4 per cent of gross domestic product in 2009 to 3 per cent in 2013, in line with Spain’s promises to meet EU budget rules.

To protect the long-term health of the social security system, which is currently in surplus, Spain also increased the retirement age from 65 to 67, a measure that will be introduced gradually from 2013.

Think about this when you read David Brooks say that Barack Obama should run around the country making deficit reduction his top priority. Does Brooks think that cutting Medicare is popular? That raising taxes is popular? That fighting with generals about defense cuts would be popular? A higher retirement age? All this stuff is unpopular and doing it all simultaneously is super-unpopular. Spain appears to have reached the crisis point where there’s genuinely no choice, so away they go. We should consider ourselves lucky that we’re not there yet and focus on trying to get as much economic growth as we can in the short-term. With luck, we’ll be able to tackle the deficit in a post-recession environment and avoid the sort of catastrophic depression that Spain’s going to be looking at.

Stimulus Hypocrisy

Here’s a photo of Rep Mike Castle presenting a check of stimulus money to some constituents in Delaware:

But of course Castle also voted against the stimulus bill. The trick is he just doesn’t say where the money comes from. The President noted today that Castle’s hardly the only one running this play:

And then the last portion of it was infrastructure, which as I’ve said, a lot of you have gone to appear at ribbon cuttings for the same projects that you voted against. Now I say all this not to re-litigate past, but it’s simply to state that the component parts of the stimulus are consistent with what many of you say are important things to do — rebuilding our infrastructure, tax cuts for families and businesses, and making sure that we were providing states and individuals some support when the roof was caving in.

Now Castle’s running around saying that Delaware deserves a larger share of the money that he voted against. But of course this is the problem when you make a strategic decision that everyone is going to oppose an administration initiative irrespective of its content. Castle, who is 100 percent of Delaware’s House delegation and has a moderate record over the years, could have bargained for a stimulus a bit more to his liking. But he chose to join with the hard-right and refuse to bargain.

The Old Reagan Magic

Bruce Bartlett says that what Obama could learn from Reagan is about the need to break more decisively with his predecessors. Kevin Drum says “There’s a lot to this, though I’d add that Reagan also passed his signature domestic initiatives — big tax cuts and defense spending increases — and rallied his base by firing the air traffic controllers. Obama hasn’t done any of that.”

His view of what Obama’s doing wrong:

I’m a fan of Obama’s, but this has always been his big blind spot. He came to office convinced — sincerely, it seems — that he could change the tone of Washington DC. That was always a fantasy. The way to get things done is to make a case for them, build public support for them, blast your enemies for opposing them, and just generally fight like hell for them. It can be done with a smile, but it has to be done. Obama seems to have a hard time getting that.

But was any of this really the secret to Reagan’s success at driving his agenda? I doubt it. The Reagan Revolution of 1981 was built on the twin pillars of deficit financing and majority rule in the Senate. Reagan stuffed the politically difficult part of his agenda into the Omnibus Budget Reconciliation Act of 1981. Being nice like Obama doesn’t get your agenda enacted, but neither does fighting like hell for it. What gets your agenda enacted is having the votes to enact your agenda. Having an agenda that advances the interests of politically powerful interests helps. And needing 50 votes rather than 60 also helps. At the margin I’m sure that political gambits make some kind of difference, but it ultimately all comes down to the cold hard facts of vote counts and concrete, specific, objective political pressure.