Sunday Notes

Expect the talk this week to be about Obama's budget, which the administration claims will be "honest" (meaning it includes the costs of the wars). Obama says he plans to cut the deficit over the next four years, which is a tall task, but definitely important.

Letting the Bush tax cuts lapse will help a great deal. I was appropriately chided in a comment for suggesting that those tax cuts caused the recession. While I can't do my whole blame game post today, please rest assured that I do not think that. No one thing caused this. What I more meant was that, if tax cuts could get us out of the recession, they would have by now. In any case, cutting taxes on the wealthiest when you are in a deep recession and running up deficits is not a conservative principle; it's just plain dumb.

The thing I like best about the budget plan is that it plans for the unknown. That is, it assumes a natural or manmade disaster every year. This is awesome. For those of you who are unfamiliar with the idea of uncertainty studies, I recommend "The Black Swan" by Nassim Nicholas Taleb, recently lent to me by my friend Justin. Along with his "Fooled by Randomness" and various other seminal works by guys like James Gleick ("Chaos") John Allen Paulos ("Innumeracy") and Malcolm Gladwell ("Tipping Point," "Outliers"), I am coming to wholeheartedly believe is that what we know absolutely pales in comparison to what we don't know. Especially troublesome is that one of the characteristics of things we don't know is that we don't know we don't know them. Therefore, a smart budget should assume basic levels of ignorance on our part, especially for things like disasters, which, we have pretty good evidence suggesting, happen from time to time. Also, it's worth pointing out that the whole "plan for the worst, hope for the best" advice was a lot better than most economists gave it credit for.

Remember Rick Santorum? He talked to students at the University of Nebraska this week, and because I love student press (Nicole Getz reporting):

He said he believes that Muslims are America’s enemy because they read their religion literally and apply it to real life, instead of in historical context.

The lecture continued when Santorum pointed out what he thought were the main differences between Christians and Muslims. Santorum said Christians, who believe in Jesus Christ, never governed or conquered anyone, but Mohammed was a warrior and killed people.

Santorum said he believes Muslims’ religious views cannot be changed or altered, so Middle Easterners reject American, democratic ideals.

“A democracy could not exist because Mohammed already made the perfect law,” Santorum said. “The Quran is perfect just the way it is, that’s why it is only written in Islamic.”

So, to reprise: The crusades never happened, Turkey and Iran don't exist, there are no Muslim Americans, and the language of Israel is now called "Jewish". Have we ever had a more ignorant person in goverment? Don't answer that.

Full disclosure: Some of the comments on the story suggest Ricky might have been misquoted. No corrections yet, and I can find no comment by Santorum or his people saying he feels he was done wrong. Plus, it does sound like him, as John Micek notes, for those of you who remember the Santorum Fear And Ignorance Tour of 2006.

• Sudhir Venkatesh sends Tim Geithner a letter from some former participants of the gray economy. His message: We've forgotten the value of watching someone fail in a public and painful way. In other words: Wilt Chamberlain only had to throw one elbow, if it was on national TV.
• Design: Folio checks out what makes a good recession magazine cover.
• George Mason's homecoming queen is a transgender. Laugh all you want, these things are where Libertarians believe real progress can be observed. Once transgendered people are becoming homecoming queens (or being discussed frankly in a recent Harvard Business Review), that's more of a marker of rights and acceptance than any legislation or activist movement. I remember when, growing up, a local high school's class president came out, causing a huge discussion in the community, and how that did more for gay rights in Bethlehem than any march or protest ever could. In this case, Ms. Mason (aka Ryan Allen) won an election in Fairfax County, Virginia. Granted, it was at GMU, which houses the Institute for Humane Studies - one of the foremost educational bastions of Libertarian thinking in the country. Still, props to Ms. Mason for going where no man has gone before.
• Looks like Israel is - unsurprisingly - going to the right, as the ultranationalist Avigdor Lieberman joins with his former boss, Bibi Netanyahu, to create a conservative coalition government. Anyone who pays attention to this can't be too surprised. For one thing, the centrist Kadima party has had difficulty since Ariel Sharon - the party's founder - had his stroke. Ehud Olmert has led an inept and - at times - corrupt administration that has not been popular. Second, Israel does this. They go back and forth, electing a hard-liner (Bibi), and then a more peace-seeking one (Yitzhak Rabin, Shimon Peres), sometimes splitting the difference (Sharon, Olmert). One interesting development is that Tzipi Livni, who leads Kadima, will lead an opposition party, rather than join the coalition. That sets the popular and admired (and young) Livni up for several years as a major player and possible PM when Israel goes back left - as it inevitably does. For the record, I'm not a big backer of Likud, and I think Lieberman is an embarrassment to Israel. But in a democracy, sometimes other people win. As far as I'm concerned, shuffling the decks enough times will eventually lead to progress, even if it's unexpected. We almost had that in Sharon, an apparent hardliner who was willing to make peace happen, and the death of Yassir Arafat, which opened the door for real progress, until Sharon's stroke. The only problem in the Mideast is that, until the Palestinians have constant and reliable elections, only one deck gets shuffled.
  

The Housing Plan

So yesterday, Obama unveiled his housing plan. It's big, and has drawn mixed reviews.

The basic issues in the housing mess are lending rates and principal, just like in your mortgage. Because of rising principal values, long-term rates got strange, and now that the principals (actual value of the house) have plummeted, no one can pay the monthly payment, which is mostly because of rates. So, now there's lots of people who owe more money than their house is worth (according to mortgage), lots of people who couldn't make payments (houses in foreclosure), and lots of people who, given the craptastic economy, can't make the payments in the near future.

One school of thought says we need to let/make lenders write down their house principals (which are now worth less than previously), thus driving down payments and reflecting a grim reality. Another school - mostly represented by lenders - says that's bad, and will cause a massive wave of problems to an already battered industry. Obama's plan is of that school, which says that giving lenders incentives to lower rates will lower payments, even if many people, who are already in foreclosure, or who already owe more than the house is currently worth, won't get much help. There's also help for borrowers, etc., but the crux of the debate on the issue is write-downs or not. And currently, the answer is clear. Congress and the lobbyists like the plan, as do some consumer advocates, but many economists are very unhappy with the decision.

The reality is, I think, that this is a true Obama plan: centrist, moderate, consensus-driven, and pragmatic. It does not panic. It does not help everyone. It tries to prevent the problem from getting worse, and address the parts that are easiest to address. It's somewhat important to remember that home prices may not always stay as low as they currently are, and that in that event, a write-down could be quite problematic. But more importantly, I'm not sure the climate currently allows a beat-down of the lending industry. Certainly, the battle would be intense if Obama decided to piss off the lenders and their lobbyists, but I also wonder if a drastic step - as write-downs would be - wouldn't potentially make things worse.

At a basic level, we can't just ask government to make everything better. This recession is something we got into on the back of real problems, and I'm not sure smart policy can make up for two decades of decadence. Homes are going to be lost, and it sucks, but history teaches us that overreaching rarely works. Also, I tend to think of bills that lack something as leaving potential for the future. If you overreact and try to do too much, it's often not possible to fix later.

As someone who isn't losing my house, it's easy for me to think all that. It's of course also possible that the banking lobby just won this one, and there's no integrity at all. Still, after the last victory, I don't think of the Obama administration as being afraid of a fight. I do think we may want to get used to more moderate actions, though, as Obama seems to be staying true to his pragmatist identity.

• I received appropriate chiding for not actually breaking down the stimulus last post. That's in part because I don't have much faith in these things to work out exactly as planned, and in part because I'm a slacker. According to the government ministry of truth - I'm sorry, recovery transparency web site - today is the day states submit frameworks for their grants.
• Bobby Jindal continues building his case to challenge Barack Obama in 2012. He's raised more than $3 million so far for a race in 2011 that will likely have no opposition.
• I do not yet buy the talk that Sen. Chris Dodd (D-CT) is in potential trouble. It's still Connecticut, and the fact that he received a Countrywide loan does not mean that most of the nice reasonable people there will vote for a Republican-to-be-named later over their national statesman.
• Meg Whitman, former EBay CEO, is in for the California governor's primary against other very rich person Steve Poizner. I can find no idelogical history on either, because they're both business types, but with that much money in the race, we'll get plenty of exposure to both, I'm sure. That's good for the third spot on Chris Cillizza's list of best 2010 primaries.
• The warnings of brain drain from financial firms are doubly stupid when you consider banking's history. A new paper shows how bankers don't historically make a ton of money - except in the two decades leading up to a financial crash.
• PA Governor Race update: The Donny Cunningham visited the Steel City to raise some cash and plant some seeds in his rival Dan Onorato's back yard. The knock on my former mayor is that - historically - he's not up for lots of hard work, which is kind of important in this state. But if he's ready to do the grunt work and wants to make a real race out of this primary, he could still be a candidate to watch.
• For those of you - like myself - who love Trader Joe's, you may want to know that it's owned not by surfers in Hawaii but by a German conglomerate most famous for the incredibly sketchy line of discount retailers known as Aldi.
  

The Stimulus Breakdown

Almost two weeks away again? Sorry, friends, but things happen. Plus, I wanted to wait until the stimulus bill actually passed. And, finally, (this is not a joke) I am only now at the point where I understand how to pronounce Treasury Secretary Tim Geithner's name.

So, here goes the stimulus breakdown. No, it's not a 1980s dance; it's what I've seen over two weeks of reading and watching crap about this bill. I'll try to start with the small issues and get bigger.

Actual Content: It's fine, I guess. Although it's a little disconcerting to say you'll start small and then begin with what the bill actually says, in this case, what's in it seems to be close to irrelevant. Given how little we actually understand about economics, spending money on capital projects makes sense, tax credits make sense, and extending entitlements is one of the few things we actually know makes sense. I don't understand the GOP hatred of building schools and arts funding in the bill, especially given how small those numbers are, but those things create jobs as well, and now they're not in it. A lot of people have complained that only a few hundred billion dollars will go into the economy this year, but I actually like that the stimulus is spread out over years.

One thing of which I am sure: The tax cuts answer is not a compelling answer. For one thing, you can't cut taxes of people and businesses that are operating at a loss; they're already not paying (much) taxes. Also, I'm fairly confident Tax cuts can not be our first answer to a problem caused by eight years of tax cuts.

Let's also dispense with one piece of "wisdom" that's being floated out there. The cap on executive bonuses (currently at 1/3 of salary) may have flaws as it is written. But the strange and gravely intoned idea coming from Republicans that this will result in a "brain drain" to foreign banks is flatly bizarre.

1. As Jon Stewart said, "I don't think you fully understand the rescuer-rescuee relationship"
   
2. Are foreign banks doing really well somewhere that I haven't seen?
   
3. So we are supposed to believe that the loss of the people at the head of banks that did not see the financial crisis, and in many cases contributed to it, will be a devastating blow to our national HR? Bon Voyage.
   
4. In the midst of losing half a million jobs a month, I'm supposed to worry that the CEO of a company who gets federal bailout money might not be able to get as big a BONUS as he would be used to? As far as I'm concerned, that guy or gal (probably a guy, actually) should work for a dollar until the firm is stable enough to stop laying people off.
   
5. For every moron who does actually leave to go to another bank, there are approximately 300,000 MBAs kicking around who would love to have his job, work harder, and probably be as smart if not smarter.

Partisanship: This is arguably the most confusing thing going on. Having watched George S and the gang on "This Week" this morning, I'm struggling to find a way to agree with some of those (George Will and Cokie Roberts) who say that the parties are different, and these differences are too much to overcome. But more, I'm agreeing with Chuck Schumer (!) that saying $50 million for the arts is an obviously fake reason to vote against something. As he points out, many Republicans offered amendments that were accepted and then they STILL VOTED AGAINST IT. How is that anything other than bloc voting, which means voting sans thought?

Peter King, the GOP Rep from New York who was the guy "This Week" found to be the GOP Rep for the week, stuck to the party line despite agreeing with most of the bill. His argument: Republicans weren't brought in to help with the crafting of the bill in the House. Okay. The House Dems dispute that characterization, but let's just say it's true for the moment. And let's just forget that those same House GOP members were the ones being ruthlessly zealous under the eight years when they were in majority. While I can understand that being shut out might bruise egos, that is NOT a logical reason to vote against a bill you agree with. No, the only thing I can see is that the GOP is going to go back to the playbook they've been using for 20 years: It's our way, or no way. I understand it, but it's not enlightened. Of course, this is Congress.

One thing people agree on is that the personal animosity that has marked the last 16 years is gone. These differences are ideological and professional, and the respect between Republicans and Obama is real. Their respect for Nancy Pelosi and Harry Reid, however, may still be lacking, and it's hard to know how much respect will mean in the years to come. But I suppose it's worth noting.

Obama: The man has been in office for three weeks, so it's obviously time to evaluate his place in history. Was he too overexposed? Was this the bipartisanship he promised? Why can't he get a Commerce Secretary?

Seriously, though, there are a few ways to see what happened. One is that Obama let his Congressional allies write a partisan bill and then had to scramble and flex their muscle to get it passed. Another is that Obama is an inveterate liar, and is not actually a pragmatist but a radical liberal pinko. Yet another is that, after weeks of rending garments in angst, the bill got passed on time and largely as he wanted it, with the support of moderate Republican senators. A true Obama lover might believe that none of this was unforseeable, and that, in the end, he got his bill, a chance to build bridges to Pelosi by letting her run the first and biggest show, a few Senatorial allies, a chance to paint the GOP as obstructionist, and a chance to lead through a crisis.

Truth be told, I'm not sure what to think, but I am fairly sure that Obama doesn't actually care. In all liklihood, now that this is over, he's on to the next thing. But I think it is worth mentioning that I am not a huge fan of the invoking of fear to get the bill passed faster. Yes, I understand time is of the essence and the government can not be seen to be standing idly. I also understand we have other things to get to. But the economic mess did not happen in one week, and it can not be fixed in one week. If it was wrong for the Bushies to use fear to win elections and political victories, then it is wrong for Obama to use it. These are big decisions, and we've made huge mistakes before by not looking long and hard enough. More to the point, this was not the type of measured, curious, open process Obama promised us. Let us hope this is not a sign of things to come.

One of those things to come is the banking rescue, which was given a universally panned soft launch by Tim Geithner (pronounced Guyt-nur). Since no one knows what it is, all anyone can agree on is that they hate it. I've been reading up on the idea of a "bad bank," which is likely what the answer will be and I think is probably the best way to go. Once we actually have a proposal, I'll be able to go into it more, but the basic idea is that the government starts a "bank" to buy toxic assets (i.e. CDOs, or collective debt obligations, those big bundles of mortgages that include subprime ones ready to default), and that helps get them out of investment circulation until they either default or pay off.

I will now be honest and say that I do not understand the Judd Gregg once-and-no-longer-Commerce-Secretary-nominee thing. So he reached out to the Obamans about the job, then took it, then remembered that he was a conservative and didn't like all of their policies? Was that news to him? And why is it only politicians have difficulty with the idea of working for someone? I don't always like the policies of every person I work for, but I do my job and be the voice of loyal opposition when I can be. That's called life. No one wants Judd Gregg to go out and push for things he doesn't believe it, they wanted him to run some big things (namely, social security) well. The only thing I can think of is the kerfuffle over the census, but that seems small enough that it could have been fixed if that was it. More likely, it seems, this was just a change of heart like everyone says it is.

Oddly, it has turned into a blow for Obama. I don't understand why. If anything, I don't like Judd Gregg as much for lobbying for a job, and then deciding he couldn't do it because he disagrees with his would-be boss on whether tax cuts or foreign wars are appropriate uses for deficit spending. But I fail to see what Obama could have done differently; he tried to get someone smart who disagrees with him and include him in the dialogue on important issues at a very high level. Perhaps what he did wrong was try to treat the position as important, when its recent history is that it is entirely political, as the Politico reports. We'll see with the next choice; if it's another centrist heavyweight, Obama is probably still trying to make the position something real. If it's a party insider, then it's a safe bet they've decided to bite the bullet and keep it the "Dept. of Partisan Perks." Although it's a little disconcerting that such an appointment would probably fly through with ease, while a more serious pick may continue to be trouble.

And, in case you're wondering, we're not that close to having a Senator from Minnesota. Norm Coleman, down by a whopping 225 votes, continues to mount legal challenges, funded by lots of Republican heavyweights, that no longer seemed designed to win as much as delay the seating of Al Franken indefinitely. Is it dirty, partisan sore-losership on the part of the GOP? This is Congress.

Back From Sixburgh

No, I didn't die in a tragic blogger-trampling inauguration accident. Nor did I die from a stray firework at the obligatory post-Super Bowl riot on Sunday. I'm just a slacker.

Seriously. How does a guy who blogs about politics miss the inauguration, a senator from New York, the impeachment of a governor, and the collapse of our economy?

Well, when the Steelers go to the Super Bowl, let's just say I, like Dick Cheney, have another agenda.

Okay, let's do this quickly:

1. The inauguration: I had an amazing time seeing friends in DC, and the vibe around the city on Monday was incredible. We will never see another inauguration like this. So, when Monday night rolled around and it was clear that all of my DC friends had to work on Tuesday, I was confronted with the idea of following up a wonderful, strange trip of friends and optimism with 2 million strangers and cold. So I got into my car at 3 am Tuesday morning and drove back to watch the event with someone I love. This makes me a bad journalist, perhaps, but it made sense.

2. Gillibrand: She's good, but not a Kennedy or a Cuomo, so it's a little bit anticlimactic. I think the real story is Caroline Kennedy, who I like a lot. But the reality is that she chose to "run" for Hillary's seat, and failed all of her own media tests. It reminded me, in a sad way, of Sarah Palin, whose ambitions led her to the spotlight, where she promptly embarrassed herself in front of America. Caroline Kennedy is no Palin; she's, smart, accomplished, and cosmopolitan. But she controlled the tests she would face, and then couldn't deliver. I believe this experience will be incredibly helpful if she decides to enter public service, like maybe running for Senate in two years. Of course, it may have been rough enough that she will retreat to private life, where she's been all along. If that is the case, it is a loss for us, but politics is a business not for the faint of heart.

3. Blagoevich: Tool.

4. Economy: I just came back from a business school function where prospective students at my institution of higher learning were wined and dined to learn more about the MBA program. There were a lot of people who used to work for Merrill Lynch, some very recently. I still believe that this bad spell will not be a Great Depression-level problem, but I have little hard evidence to support that. I am unencouraged by some of the stimulus in Obama's plan, partly because it is so rote. If we're going to spend billions building things, let's build good things. There is little in the bill for light rail, little in the way of alternative transportation, and lots of highway repairs. Sooner or later, someone's going to have to start thinking a little differently about all of this.

Okay, on to Daschle and the rest of Obama's picks:

This is a strange time for government. There's a desperation/panic thing going on that makes every decision seem rushed and hugely pressing. But I'm not seeing a lot of competency when it comes to vetting. Daschle, Geithner, Richardson... who the hell interviewed these guys? Did no one think that these things would be issues in front of a GOP still smarting from defeat? Look, I think all of the guys involved are good and would be good at the jobs they won't have (except for Geithner), but you can't let this stuff happen. There's a lot to do, I understand, but this stuff isn't making the Obama administration look like pros.

And then there are moments of real encouragement. Eric Holder looked great in front of a Senate committee, answering tough questions and looking competent. The deal between Democrats and Republicans to get Sen. Judd Gregg (R-NH) as commerce chair shows a willingness to compromise for the sake of the right people (Obama not only named a Republican to Commerce Secretary, but then the Dem governor of New Hampshire appointed J. Bonnie Newman - a Republican - to take Gregg's seat, which could have given the Dems a 60-seat majority). These types of things show a willingness to think in new ways, emphasizing intention and integrity that we did not see from Bush.

Sadly, that's really the only place we're seeing that thinking. Senate Republicans, who not that long ago were talking about bipartisanship and a spirit of collegiality, now oppose the economic stimulus plan as a bloc, demonstrating just the opposite of independent, non-idealogical thinking. After doing that, of course, they demanded tax cuts and blamed the Democrats for not being bipartisan, and then asked Joe the Plumber for advice. Just in case you thought maybe two straight beatings by the American people might have changed the GOP outlook.

PA news:

There's some talk of Franco Harris running for Arlen Specter's Senate seat. Unlike former teammate Lynn Swann, Franco is a longtime workhorse for Dems in PA with connections in the party and lots of favors owed him.

Tom Wolf, the York businessman/philanthropist who was a possible big gun on the Dem side for the PA governor's race, is out.

Pat Toomey will not run for Senate, he says, but maybe governor. He's less attractive there, I'd think, seeing as how our state will occasionally elect nutjobs to the Senate (e.g. Santorum), but almost never to the governor's mansion.