Category: The Opinionsphere

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Criticism Economics Financial Crisis Libertarianism Political Philosophy The Opinionsphere

Wall Street’s enormous profits are evidence of a poorly functioning market.

[digg-reddit-me]Matt Yglesias and Ezra Klein had 2 complementary points in posts yesterday. (Damn you, JournoList!) Yglesias:

…[L]ooking at this chart I think it’s hard to avoid the conclusion that Wal-Mart is the last thing we should be worried about. The worrying trend is the domination of the corporate landscape by super-profitable firms in the heavily regulated energy, banking, and telecom sectors.

Yglesias is making a point most commonly associated with libertarians that large firms often use the government — through favorable regulation, tax breaks and incentives, etc. — to increase their profits. For example, increasing the barriers for new firms in the industry and restraining their indirect competitors from direct competition. This follows the well-known principle that any government policy whose costs are diffused and whose benefits are concentrated will be adopted more often than not. Thus highly regulated industries tend to be dominated by a small number of large firms that make very large profits — because thanks to government regulation, there isn’t much competition. However, Ezra Klein observed:

In a competitive market, there’s really no place to make 27 cents on the dollar. Some other firm will come in and offer the same services for 24 cents, and then someone will undercut them at 19 cents, and so it will go until the profit margin narrows. Wal-Mart, for instance, has a profit margin of around 3.5 percent. Ah, capitalism.

Not so in the financial sector, though, which ever since deregulation has been posting higher and higher profit margins.

So, the exception to this trend is Wall Street — where deregulation has lead to higher profits. All of this seems quite intuitively true — both from a libertarian and from a liberal perspective — and even from a liberaltarian one.

The enormous profits taken out of every dollar (as seen in much of the the financial industry) is a demonstration of a lack of competition and thus a poorly functioning market. Of course, Goldman Sachs didn’t manage to make it on the list above — but it had more than double the amount of profit out of every dollar it took in as compared to each of the companies here. Goldman managed to take $0.26 of every dollar they made as profit to their shareholders. (And that includes the massive bonuses given to employees as expenses.) I think I need to see more data though to draw the conclusion that Klein is hinting at — that the deregulation of Wall Street increased it’s profits as a percentage of revenues — while deregulation generally has the opposite effect (as in the case of Wal-Mart).

Annie Lowery drives the point home in analyzing the 1Q results from Wall Street:

This is not quite a picture of a healthy industry. In a competitive marketplace, prices and fees at Wall Street firms should fall and margins should become thinner. On the one hand, Wall Street firms like J.P. Morgan and Goldman Sachs have seen a number of their competitors die in the past two years, and have absorbed business from the failed Lehmans and Bear Sterns of the world. But on the other hand, Wall Street profit margins have remained sky high except for a short blip during the worst of the credit crunch. And, an economist would tell you, such sustained levels of high profitability point to anti-competitive behavior…

[T]he profits point to a lack of competition. That is one thing the Dodd bill — via derivatives regulation — attempts to fix. Right now, Wall Street firms do not bid for big derivatives contracts — they simply quote a price and work over-the-counter. For that reason, derivatives are wildly profitable for the companies. The Dodd bill will force derivatives pricing to become public to the market, driving down margins as companies compete.

There’s a whole lot to unpack within these points about the nature of American capitalism and the government’s role in it.

But one key takeaway seems to be a repudiation of the most ideological take of either the left or right — and an acknowledgment that free markets are not merely what happens when the government is out of the way — but are created and maintained by a complex balancing act in which government regulates and participates. What you end up with is something less than socialism or libertarianism and more like liberalism:

Contemporary liberals reject the doctrinaire distinction between the “market” and the government that animated so much of the conflict in the 20th century. The free market should not be treated as some theoretical utopian ideal or as a perpetually lost state of innocence. And the government is not some evil force which must be reduced until it is of a size that it “could be drowned in a bathtub.” Rather the government and the free market exist together – and in a capitalist republic such as ours, each is dependent on the other. The free market does not exist in a state of nature but must be created by and maintained by the society and the state which provide the values and the rules and other conditions without which a market cannot be free. In other words, a free market is a product of a just government.

Follow-up post here.

[Image by f-l-e-x licensed under Creative Commons.]

Categories
Barack Obama Criticism Politics The Opinionsphere

How To Identify a Member of the Tea Party

[digg-reddit-me]I met 2 members of that vibrant cultural movement pretending to be a political one, the Tea Party, last night.

When I say they were members of the Tea Party, I don’t mean one of those independents discouraged by Obama that Republican operatives always claim is the typical Tea Partier.

I don’t mean a Republican partisan who thinks this is just a good re-branding.

I don’t mean Greg O’Neil.

I mean 2 actual Tea Party wingnuts.

It is rare to see them outside of their home environment (rallies involving racial epithets and mocking those damned people with Parkinson’s disease looking to be coddled) with their identifying characteristics full on display.

However, I was able to positively identify them by cataloguing the following characteristics which can serve as the start of a general checklist of how to identify Tea Party folk (with prominent characteristics in bold):

  • White.
  • Wealthy.
  • Middle-aged to elderly.
  • Generally conspiratorial, wide-eyed, and a bit paranoid.
  • Claimed that Obama, Clinton, and the Democrats were “socialists”/”communists”/”Europeans”/”elitists”/”Nazis” with all terms used interchangeably. “Muslim” or “terrorist” can also be added to this list.
  • Explained in meticulous detail the nefarious (and “anti-American”) views that “liberals”/”socialists”/etc have.
  • Were evasive when confronted with the fact that the unprecedented tax increases sought by Obama would leave the marginal tax rate historically low* and only approximately 5% points higher than under Bush.
  • Had a messianic certainty about their views.
  • Attributed this same messianic certainty to anyone who uttered a word in support of President Obama.
  • Unable to understand how anyone at all could defend “that man [Obama] who is destroying everything great about America.” When confronted with a defense of his record, replied with, “Oooooh: we’ll see in 5 years!”
  • Admiration for that greatest of presidents, George W. Bush.
  • Blamed Democrats for the fiscal crisis/recession and government in general.
  • Full of the inchoate of the populist right that arose after the election of every young liberal (1960, 1992, and 2008 specifically.)
  • Believed their views weren’t just right but obvious and that all “real Americans” agreed with them.
  • A sense that the “real Americans” needed to take their country back before it was too late.
  • Were unaware of any information from outside the right wing cocoon and denied its validity when presented with it. (The much talked about epistemic closure.)
  • Unable to fathom how someone could read the National Review and not agree with the opinions expressed there (except to say, “Well, obviously you didn’t understand…”)
  • Under the assumption that everyone else was brainwashed or otherwise evil “socialists”/”anti-Americans”/etc.
  • Explicitly compared Obama to Hitler.
  • Made a vague but somewhat hysterical statement that could be taken as a threat to the President. [“That man cannot be allowed to stay in office.”]
  • Focused on and outraged over America’s fiscal situation.
  • Knew nothing about America’s fiscal situation. Or worse actually, knew false things.
    (For example, claimed that agricultural subsidies are $400 billion a year. Also, spouted various platitudes about waste that are too vague to debunk but are certainly misleading such as the idea that most government spending is deliberate waste and that we can leave the popular Social Security, Medicare, and military budgets in place while balancing the budget. Yet in 2009 for example, if you slashed all government spending except these things, we would still have a deficit — see income of $2.105 trillion minus expenses for Social Security — $678 billion — Medicare and Medicaid — $676 billion — and the Department of Defense — $782 billion — for a total of $2.136 trillion.)
  • Told me I wasn’t a “real American.” Nor were North Easterners. Nor was anyone who went to an Ivy League school.

I have a feeling I know what it’s like to talk to Sarah Palin (but with a Dutch accent — as these people were a rarer breed of Tea Partiers, naturalized citizens from Europe).

Some characteristics I understand to be part of the Tea Party movement that these individuals did not display (perhaps because they weren’t given the chance — I walked away when I was told I wasn’t really American):

  • A feeling of reverence for Glenn Beck and Sarah Palin.
  • Outrage over “Barack Obama’s bailout” of Wall Street in the fall of 2008.
  • Allegations that Barack Obama was born in Kenya.
  • Hysteria over Barack Obama’s projections of weakness abroad and sympathy for terrorists and our enemies.

So, take this checklist out into the wilds and perhaps you too can positively identify a Tea Partier!

And feel free to add more characteristics in the comments.

* This is a cartoon rather than a graph, so it should be noted it isn’t perfectly accurate — but it visually conveys the point solidly. Reagan, for example, only had 28% tax rate for the final year of his presidency. The average top marginal tax rate under Reagan was 48%.

[Image by JoeBehrSoCal licensed under Creative Commons.]

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Economics Financial Crisis The Opinionsphere

How Financial Innovation Causes Financial Crises

Ezra Klein explains how financial innovation causes financial crises:

Investors want to make more money with less risk. Someone invents a financial product that appears to make investors more money with less risk — in this case, subprime securities. Demand for this new product explodes. But few understand this new product, and even the people who do understand the new product don’t know how it performs under stress (it’s a new product, after all). At the beginning, this actually helps the product: because its risks aren’t known, they’re ignored, and so it looks like a better deal than it is and sells more of itself than it should.

Then something bad happens. The new product shows its flaws. And precisely because no one really understands it, the market cracks. Investors all run away at once, as they don’t really have the tools to assess the situation. Where lack of knowledge about the product originally drove demand, now it accelerates flight.

Categories
Barack Obama Criticism History New York City Politics The Bush Legacy The Opinionsphere

Must-Reads of the Week: Diabolical Republicans, Strategic Patience, Weiner, China, New York City, -20 Questions, & Glenn Beck’s Obsession With Woodrow Wilson

1. Diabolical Republicans. Noam Scheiber in The New Republic explains how the “diabolical” plan the Republicans have adopted to achieve their fiscal ends (discussed on this blog here) may backfire:

Ever since George W. Bush massively cut taxes back in 2001, squandering much of the $5.6 trillion, ten-year surplus he inherited from Bill Clinton, liberals have assumed that the fiscal game was rigged. Conservatives had been explicit about their starve-the-beast strategy—the practice of creating large deficits through tax cuts in order to force future spending cuts…

“Depriving the government of revenue, it turns out, wasn’t enough to push politicians into dismantling the welfare state,” Krugman wrote. “So now the de facto strategy is to oppose any responsible action until we are in the midst of a fiscal catastrophe.”

…I suspect…that Republicans believe precipitating a fiscal crisis will force Democrats to roll back entitlement spending (i.e., Medicare, Medicaid, and Social Security), which would be both politically unpopular and the realization of the right’s dearest policy fantasy. It’s an altogether brilliant, if diabolical, plan. Except for one minor flaw: There’s a good chance it could vaporize the GOP.

2. Strategic Patience in the Face of Long-Term Problems. David S. Broder, eminence of the press establishment, apostle of bipartisanship at all costs, proponent of convention, seems to have finally come around to Obama with this trenchant observation:

We are beginning to learn that the Obama presidency will be an era of substantial but deferred accomplishments — perhaps always to be accompanied by a sense of continuing crisis. His vaunted “cool” allows him to wait without impatience and to endure without visible despair. It asks the same of his constituents.

The backdrop of the serious long-term issues facing America is precisely what made Obama’s election so important in the first place — as this blog repeatedly argued. David Rothkopf put the matter in a wide-angled perspective:

[T]he reason the health care reform bill is important is not because it was the first major such piece of social legislation in the U.S. in decades, but rather because it represents the first in what will become by necessity an on-going series of efforts to fix deep and serious defects in the American economy. In a decade or two, this legislation is like to be seen by Americans as the beginning of a lengthy, brutal and spasmodic process to cut deficits and restore America’s leadership prospects in the global economy.

3. Answering Sarah Palin. Anthony Weiner meanwhile has arisen as the Democrat’s answer to Sarah Palin and our sensationalized media moment. (Others might argue for Alan Grayson.)

4. Chinese Predictions. Gordon G. Chang, for World Affairs, explains his argument for why the Beijing consensus cannot last and its power will soon begin to wane.

5. New York’s Neighborhoods. Nate Silver, baseball statistician and political polling expert, turned his skills to rating New York’s neighborhoods. Really interesting for locals.

6. Negative 20 Questions. Jason Kottke describes a game that “resembles quantum physics.”

7. Glenn Beck’s Woodrow Wilson Obsession. David Frum puzzles on why Glenn Beck focuses so much on Woodrow Wilson as the beginning point of all things progressive and source of evils in the modern world. There are so many more logical choices, more progressive historical figures of greater note who are more closely aligned to contemporary progressivism. And then he answers his own question:

Here’s a president who took the United States into a very controversial war, ending in an unsatisfactory peace. In response to a domestic terrorist threat, culminating in a deadly attack in lower Manhattan, this president adopted draconian domestic security policies. Oh – and his administration concluded with an abrupt plunge into severe recession.

Any parallels come to mind?

What’s taking place on Glenn Beck’s show is a coy conservative self-conversation. Maybe it’s because I’m in China now, but it reminds me of the way Chinese intellectuals in the late 1970s would discuss the first Qin emperor, as a way of debating – and denouncing – Mao Zedong without explicitly mentioning a sensitive subject.

[Image by me.]

Categories
Criticism Domestic issues Economics Financial Crisis Politics The Opinionsphere

Republicans have an absolutely brilliant strategy on financial reform. Too bad it’s evil.

[digg-reddit-me]How did the GOP oppose Obama during the campaign? They raised fears that he was a radical, Marxist, leftist, Communist, Socialist, Muslim, Arab who hates America.

How did the GOP oppose Obama’s stimulus plan? They claimed it didn’t include tax cuts (which it did) which are the most effective way of stimulating the economy (which most research doesn’t support) that it hasn’t helped the economy at all (something which virtually all mainstream economists disagree with), and that it was part of a socialist government takeover of the economy (which it’s not).

How did the GOP oppose Obama’s health care plan? They claimed there were death panels (nope), government mandated euthanasia and abortion (nope and nope), coverage for illegal immigrants (not at all), secret socialist indoctrination of children (huh?), and that it represented a government takeover of 1/6th of the economy (so far from being true) that would increase the deficit (when it actually reduces the deficit more than any bill in history).

How does the GOP oppose net neutrality? They claim it would enable the government to control political speech on the internet – likening it to the Fairness Doctrine for radio (which is so far from what it actually does).

How does the GOP oppose cap and trade legislation? They call it a massive redistribution of wealth (which it’s not) and based on thoroughly debunked lies (which is rather dangerous bullshit).

How does the GOP oppose Obama’s national security policies? They claim he is deliberately weakening America (when his focus has been on strengthening America), abandoning all of Bush’s policies (which he is not, to the disappointment of many progressives and libertarians), along with many other debunked claims.

How then does the GOP oppose financial reform? They are claiming that it “allow[s] endless taxpayer-funded bailouts for big Wall Street banks” and creates a “slush fund” for future bailouts. And here’s the brilliant part: while trashing Wall Street and the bailouts that saved the big firms, they are simultaneously promising Wall Street and the big firms that they will block the reforms Wall Street doesn’t want in return for massive campaign contributions.

They are following — almost to the letter — Republican pollster Frank Lutz’s proposed strategy to rake in the dollars from Wall Street for blocking any reform while railing against bailouts and how Democrats are too soft on the banks. The best way to oppose something is to pretend it’s something it’s not.

Absolutely brilliant strategy. Too bad it’s evil.

The policies they are attacking include a FDIC tax on the banks to create holdover money to allow regulators to go in and dismantle the company. Contrary to some cushy authority to bailout big firms, Senator Mark Warner describes the process being created by the financial reforms in an interview with Ezra Klein:

“Resolution,” Warner continued, “will be so painful for any company. No rational management team would ever choose resolution. It means shareholders wiped out. Management wiped out. Your firm is going away. At least in bankruptcy, there was some chance that some of your equity would’ve been retained and you could come out in some form on the other side of the process. The resolution that Corker and I have tried to create means the death of the company. The institution is gone.”

The financial reform bill is far from perfect — but it’s a good bill and nothing at all like what the Republicans are describing it as.

[Image by DonkeyHotey licensed under Creative Commons.]

Categories
Barack Obama Health care National Security Politics The Opinionsphere

The Populist Right Isn’t a Political Movement. (cont.)

[digg-reddit-me]Thesis #1: There is a glaring discrepancy between:

  • the populist right’s rhetorical opposition to all domestic government action on the grounds that it is incompetent, ineffective, and a threat to liberty; and
  • the populist right’s support for apparently unlimited government power on national security and law enforcement matters on the grounds that it is highly competent, effective, and the defender of liberty.

(Initial post on the subject.)

———

These contradictory views of the state have been a part of the populist right since its modern inception — you can see it in Barry Goldwater, in Ronald Reagan, in George W. Bush. In fact, despite the rhetorical agitprop that has accompanied every surge in the populist right, it is impossible to understand the inflows of energy into and out of it, or to understand how it has acted when entrusted with power, while taking seriously the anti-government views it constantly invokes.

Thesis #2: Populist right wing movements have not been historically anti-government despite their rhetoric; they have been anti-minority. They have supported the expansion of government power to check the threats from minorities and opposed the expansion of government power to benefit any minorities.

———

Rather than opposing “government” as a whole, the populist right has gained its energy and support from opposing liberal government and especially from opposing liberal government support for the rights of individuals who are members of minority groups. They have also supported programs in which the government is seen to strongly take on the interests of individuals who are members of minority groups.

Given the rhetoric in recent days from Virgina Governor Bob McDonnell and the geographical concentration of the Republican Party and populist right in the Southern states that rebelled in the Civil War, it’s worth pointing out that that conflict was described by the Confederacy at the time, and by McDonnell today, in anti-government terms — as about “states’ rights” rather than slavery.

The populist right was decimated by Franklin Delano Roosevelt’s presidency but finally began to become energized in opposition to the Civil Rights Movement as the South quickly flipped to the Republican Party; it further was energized by the feminist revolution and the rise of the counterculture in the late 1960s. Then Nixon became president and the populist right quieted down as he expanded government in every direction and the Supreme Court legalized abortion. After 2 terms of Republican rule, a liberal became president, was accused of being weak and not loving America enough, and the pro-life movement began to gather strength; and once again, the party of limited government and cheery jingoism  made a comeback with evangelical fervor. Ronald Reagan also expanded government, but reduced it’s role in helping minorities and the middle class, reduced regulations on corporations, and lowered the tax burden on everyone a little and the rich a lot. Once again, the populist right was quiet. The first Bush was never comfortable with the populist right and a splinter group broke away from his electoral coalition causing him to lose the 1992 election to a young, fresh-faced liberal. Once again, the populist right was called to arms with the militia and white supremacist movements thriving (encouraged by Ron Paul who saw them as a necessary evil). With welfare reform, budget surpluses, tax cuts for the middle class, and a humming economy, Clinton managed to quiet the populist right’s rage at government. But the right wing elites still despised the man, convinced he was somehow not a legitimate president. They fostered various conspiracy theories about his murder of Vince Foster, about drug running in Arizona, and about hundreds of women. Later, a second Bush was elected and once again trimmed regulations protecting consumers but expanded government involvement in security, in education, in helping the elderly further — but the populist right rallied to him as he invoked mythical Democrats endorsing therapy for terrorists and expanded the government’s powers to go after terrorists.

The populist right finally broke with Bush when he tried to push through immigration reform in 2006. Meanwhile, a massive investment bubble was growing under the hands-off policy of Bush and as it popped in the late summer and early fall of 2008, with the election looming, he oversaw the first steps of the cleanup of the mess — the infamous bailouts. The populist right (along with the populist left, the populist center, and most everyone) was angered and invigorated by this bailout. The populist right was further motivated by a personal animus towards Obama, as they were told that he wasn’t American in the way the rest of us were, that he was foreign, that he would “stand with the Muslims,” that he was sympathetic to terrorists.

After a brief lull after their defeat in the election, the populist right was once again galvanized by the health care debate and Obama’s treatment of suspected terrorist detainees. After some early talk of the health care bill as a secret conspiracy to give reparations to black Americans for slavery (it wasn’t) and controversy over covering illegal immigrants (it doesn’t), the attacks on the bill from the populist right centered on the idea that it was a government takeover of 1/6th of the American economy (it isn’t). Meanwhile, regarding the treatment of detainees, Obama has largely continued Bush’s policies with some attempts to… Yet despite this, the populist right has rallied to the idea that  Obama is engaged in various treasonous activities and of endangering American lives.

What you see is a Republican Party that exists to expand and use government to benefit large corporations, the military-industrial complex, the rich, and the elderly at the expense of everyone else. At the same time, the populist right loudly objects to the government being used to benefit anyone but them. “Them,” meaning the elderly, the rich, the white Southerners. Which is why Republicans and the populist right are in favor of Medicare — and against Obamacare. Which is why they don’t mind when people that they would never be mistaken for are held without trial, tortured, or killed — and it’s why they are so outraged when people they might be mistaken for are. Which is why they rally when a liberal is in charge and are calm when a Republican is.

The populist right has been inherently about opposition — and about cultural alienation. It is about ressentiment and anger at how the world is changing. It has indisputably been invigorated by racial tensions — from opposition to the Civil Rights Movement to absurd claims of “welfare queens driving Cadillacs” to the militia movement of the 1990s. It is about feeling shafted by the powers that be. It is a very white movement, with resentment being driven against government rights and benefits being given to different groups that are stereotypically associated with minority groups: Latinos (illegal immigrants), blacks (criminals and welfare queens), and Muslims/Arabs (terrorists).

Conclusion: Resentment of minority groups (broadly construed) makes sense of the populist right’s contradictory views on government in ways that opposition to the government cannot and explains its historical rises and falls.

N.B. I am not claiming all right wingers are racist. Or Republicans or conservatives. I am merely pointing out the fact that the populist right has historically been empowered during times of racial tensions and that it’s positions are coherent and do make sense if understood in these terms while they do not if one interprets these rises and falls from an ideology opposed to big government.

[Image not subject to copyright.]

Categories
Barack Obama Criticism Domestic issues National Security Politics The Opinionsphere

The Populist Right Isn’t a Political Movement.

[digg-reddit-me]Last week, I wrote my response to the Tea Party: Government is Good! It’s one of those pieces that I wrote 10 separate drafts of, and if I had included them all, would have written some 10 pages on the subject.

So, I’ll be following up with some further thoughts on the subject periodically.

My first follow-up, the first point that made it into previous drafts, but was excised from the final one is the glaring discrepancy between:

  • the populist right’s rhetorical opposition to all domestic government action on the grounds that it is incompetent, ineffective, and a threat to liberty; and
  • the populist right’s support for apparently unlimited government power on national security and law enforcement matters on the grounds that it is highly competent, effective, and the defender of liberty.

What you get are many arguments asserting that the state is competent and effective enough to deprive some people of liberty without any check on its power, to trample on their every right and to strip away their sanity through torture, and to kill them — all in the name of protecting liberty; but — at the same time — government is so toxic to liberty, so ineffective, and markets are so fragile, that if taxes go up 1% for those making over $250,000, if corporations can’t give money directly to candidates, if Wall Street is forced to suffer more regulations, or if people are required to purchase health insurance to provide for medical care or suffer a small penalty – that if these things happen, we have descended into abject Socialism.

The common cop-out I’ve heard to explain this is that the government’s proper role is to provide for the common defense. But it is the government’s proper role to assess income taxes and to regulate interstate commerce as well.

The populist right simply isn’t ideologically coherent. Ron Paul may be, to his great credit — but it is precisely his coherence that makes him unpalatable to the rest of the populist right, the bulk of the Tea Party, and the Republican Party. The bulk of the populist right is in favor of the government’s curtailing of the civil liberties of resented minorities in the name of a War Against Terrorism. It favors wars abroad — or at least, doesn’t favor “retreat” or anything that doesn’t look tough enough. It is enamored of the war atmosphere, of the narrative of good versus evil, that permeated Fox News’s coverage of the Bush administration. It is enamored of the revolutionary atmosphere, of a nation under assault by a Hitler-wannabe, of another narrative of good versus evil, that permeates Fox News’s coverage of the Obama administration.

From a political perspective, it makes no sense to call the government too incompetent to provide postal service and yet still consider it competent enough to detain, torture and kill anyone it deems a terrorist.

The populist right, then, cannot be properly understood as a political movement. It is a cultural movement and a media phenomenon with political overtones.

[Image not subject to copyright.]

Categories
Foreign Policy Iran National Security The Opinionsphere

Nuclear Policy in an Age of Terrorism and Madmen

Unfortunately, you need to subscribe to get the whole thing, but Peter Scobolic has an excellent article in The New Republic on nuclear policy in an age of terrorism and madmen. Some excerpts:

That is, in the face of the most aggressive, most highly armed, most revolutionary power the United States has ever known, deterrence worked. It worked despite serious fears about the enemy’s rationality. Indeed, it may have demonstrated that rationality is not the appropriate prerequisite for nuclear stability. Rationality can produce undesirable outcomes; it does not preclude crisis situations (Khrushchev was not insane when he ordered missiles to Cuba, he was just wrong); and in the heat of nuclear battle, rationality is unlikely to guide decisions in any country, regardless of ideology. Demanding rationality of our enemies is therefore both asking too much and asking too little. It is perhaps best that, as the scholar Kenneth Waltz has noted, “Deterrence does not depend on rationality. It depends on fear.”

Fear, after all, is an evolutionary imperative in a way that reason is not, and it induces caution in a way that can be understated by cold cost-benefit analyses. No state that values its continued existence would launch an attack that meant its own certain devastation, and there is every indication—from their oppression at home and their manipulations abroad—that the leaders of Iran and North Korea have every desire to survive. True, historically, leaders have made strategic errors that resulted in their downfall. But they did so because they miscalculated their odds of success—an error that is impossible to make in launching a nuclear strike against an adversary that clearly has the capability to retaliate. The only plausible suicide would be an assisted one in which, say, Pyongyang’s leaders feared total military defeat—deterrence does not cover “dictators in the mood of Hitler when he found himself in his final dugout,” as Churchill once put it. That means the United States shouldn’t push nuclear-armed leaders to the brink of extermination, but otherwise deterrence should hold…

…In other words, Iran is already quite bold.

Even if a nuclear-armed Iran were more aggressive, the United States could still deal with it forcefully. India and Pakistan, after all, fought directly and bloodily even when both states had nuclear weapons; and an Iranian incursion into a neighboring country could be met with force. Indeed, non-nuclear states have attacked nuclear states without apocalyptic consequences: In 1973, Israel’s nascent nuclear capability was not enough to prevent Egypt and Syria from attacking it, and, of course, in the subsequent decades it has found itself under near-constant challenge from state-sponsored terrorism and even missile attack during the Gulf war. Nor are nuclear states immune from nonmilitary regime-change efforts – there is no reason we could not support the Green Movement in a nuclear-armed Iran. We simply lose the ability to invade or militarily overthrow the regime. Which makes the rationale for attacking Iran’s nuclear program seem vaguely ridiculous: Regardless of whether we stopped or even delayed the program, we would essentially be taking military action against Iran in order to preserve our ability to take military action against Iran…

Kennedy wasn’t fully in control of the U.S. nuclear arsenal, either: According to Stanford political scientist Scott Sagan, during the [Cuban missile] crisis, Air Force officers in Montana “jerry rigged their Minuteman missiles to give themselves the independent ability to launch missiles immediately,” in gross violation of military regulations.

Whatever stability they provide then, nuclear weapons also generate a distinctly non-trivial chance of total catastrophe, and today, that chance is accentuated by the threat from nuclear terrorism. It is unlikely, but certainly not inconceivable that a state like Iran, long a sponsor of terrorism, could share nuclear technology with radicals – or that a radical sympathizer could divert fissile material from one of its enrichment facilities. States have long had trouble maintaining a perfect grip on their arsenals. When the Soviet Union broke up, it found itself riddled with poorly guarded weapons and fissile material that we are still struggling to lock up today. Pakistan’s government insists that its arsenal is secure, but the government itself is not secure. Even the U. S. arsenal has suffered numerous accidents and security problems (most notably the loss of eleven nuclear bombs during the cold war), and, in January, a group of peace activists managed to break into a NATO base where U.S. tactical nuclear weapons are stored.

[Image by jtjtd licensed under Creative Commons.]

Categories
Criticism Economics Politics The Opinionsphere

Supply-side Theology

Jonathan Chait:

A perceptive student of the supply-side theology might wonder: if revenue from higher taxes will simply be spent, why wouldn’t revenue from higher growth also be spent? But this question has never been asked, because there are no perceptive students of the supply-side theology. It’s just a series of talking points.

In any case, it’s worth keeping in mind that the entire conservative apparatus is already cranked up to insist that no tax hikes are acceptable in the pursuit of deficit reduction. I see no way around this problem unless and until the country actually begins to undergo a deficit-created economic calamity.

Categories
Barack Obama Criticism Economics Election 2012 Financial Crisis National Security New York City Palin Politics The Opinionsphere Videos

Must-Reads of the Week: Nukes, Inconsistencies, Graphing the Economic Crisis, Half-Hookers, Palin 2012, Mailer’s Wife, & Complex Business Models

1. Nukes. Jon Stewart and Andrew Sullivan both make the same point: Obama’s nuclear policy is the fulfillment of Ronald Reagan’s vision:

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
The Big Bang Treaty
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2. Inconsistencies. Matt Yglesias:

The main difference between left and right with regard to property rights is simply that the right is invested in a lot of rhetoric about markets and property rights and the left is invested in different historical and rhetorical tropes.

… Formally, the right is committed to ideas about free markets and the left is committed to ideas about economic equality. But in practice, political conflict much more commonly breaks down around “some stuff some businessmen want to do” vs “some stuff businessmen hate” rather than anything about markets or property rights per se…

Or if you look at the energy sector, you’ll see that businessmen want to push property rights for the stuff that’s in the ground (coal, oil, whatever) and a commons model for the stuff (particulates, CO2) that’s in the air. You can call that “inconsistent” if you like, but obviously it’s perfectly consistent with what coal and oil executives want! And those industries are the most loyal supporters of “right” politics around.

3. Graphing the Economic Crisis. Ezra Klein puts out some interesting graphs about the economic crisis and nascent recovery including this one:

Klein explains:

This graph is a political problem for the Obama administration (if not, in the short-term, an economic problem). But it is also necessary for all the other graphs. The bank rescue, which added temporarily to the deficit, stabilized the stock market and set the stage for its recovery. The stimulus, which also added to the deficit, helped moderate the job losses and and has contributed to recent gains. You could’ve made the lines on this graph better, but only by letting the lines on the other graphs get worse.

4. Half-hookers. Lisa Taddeo for New York magazine writes about the burgeoning half-hooker culture which exists in a bizarre alternate reality existing so close to our own where celebrities and finance guys get their women:

The general-admission crowds dance, and the table crowds dance a little more woodenly, a little more entitledly, with their finger pads on their tables. The promoters are dancing with the models and the waitresses are dancing with the bottles and everybody finds a place on the floor.

The floor people, they are just to fill the place up. The celebrities and the athletes and the tycoons are the ones for whom this world is zealously designed. A rung below in after-work pinstripes are the money guys, the Deutsche guys and the Goldman guys and the no-name hedge-fund guys—the “whales”—guys like that one over there in a Boss suit and John Lobb shoes, standing beside the table that cost him $3,000. Standing very close to it, like a Little Leaguer who wants to steal second but has never done it before. This gentleman’s not dancing, but he’s thinking about it.

There’s quite a lot to the article. A fascinating piece of reporting.

5. Palin 2012. Chris Bowers makes the argument for why Sarah will win if she runs.

6. Mailer’s Wife. Alex Witchell profiles Norris Church Mailer, Norman Mailer’s final wife, whose story moved me as I read of it:

John Buffalo Mailer [stepson of Norris:] “People are their best selves and worst selves intermittently,” he told me, “and the best marriages navigate that ride over the hurt, which I believe they did right to the end. They both had options, and at the end of the day the life they created together won out over infidelity, illness and hard times…”

7. Complex Business Models. Clay Shirsky:

One of the interesting questions about Tainter’s thesis is whether markets and democracy, the core mechanisms of the modern world, will let us avoid complexity-driven collapse, by keeping any one group of elites from seizing unbroken control. This is, as Tainter notes in his book, an open question. There is, however, one element of complex society into which neither markets nor democracy reach—bureaucracy.

Bureaucracies temporarily reverse the Second Law of Thermodynamics. In a bureaucracy, it’s easier to make a process more complex than to make it simpler, and easier to create a new burden than kill an old one.

Read the rest.

[Image by me.]