Month: May 2009

by Lane Wallace

Back in February, I heard David Sanger, Washington correspondent for the New York Times, speak at the Commonwealth Club in San Francisco. Sanger's book The Inheritance, a fascinating read about the myriad of daunting challenges facing the new Obama administration, had just come out, and he was discussing some of the thornier issues on that list.

 In an earlier post, I talked about the Hubble's importance … and the questionable importance of human spaceflight going forward, beyond the Hubble missions. But I didn't get into another whole aspect of the mission–which is the fact that it almost didn't happen, because in 2004, the then-NASA administrator Sean O'Keefe considered the risks too high. 

by Patrick Appel

Marc diagnoses Steele:

by Patrick Appel

Matt Steinglass counters Ted Nordhaus and Michael Shellenberger: He continues the debate in the comments:

Poor people suffer more from hurricanes that swamp their cities than rich people do. There was a pretty good demonstration of this dynamic on CNN a few years ago as I recall. And there is a rather sordid moral dimension to the way [Nordhaus and Shellenberger] attempt to argue the opposite. What they are saying, in effect, is that all those poor people in New Orleans were already living squalid lives, “vulnerable” to all kinds of stuff — disease, accidents, etc. — so for them Katrina was no big deal. More of the same, really. The people who really suffered were the rich folks who had their nice homes wiped out.

On a global scale, yes, people in Vietnam’s Mekong Delta are a lot poorer than people in Miami Beach. But when their rice fields salt up due to rising sea levels and then slowly cave into the water until ultimately all the land they’ve owned, their only earthly possession, is gone and they’re destitute on the streets of Ho Chi Minh City, they really have suffered a lot more from global warming than somebody in Miami Beach who loses their expensive beachfront home as Florida goes under, and is forced to rely on the insurance systems and public emergency assistance of the richest country in the world. The attitude towards poor people this implies — that they don’t really suffer because what’s the difference between having a thatched-roof house, two rice fields and a buffalo, or being a beggar living on the streets — is pretty ugly.

by Chris Bodenner

“And something that the Democrat sponsors do not point out, a lot of the CO2 that is created in the United States is naturally created. You can’t regulate God. Not even the Democratic majority in the US Congress can regulate God," – Congressman Joe Barton (R-TX) on cap and trade.

by Richard A. Posner

In an article in Monday's Washington Post, David Cho reports that the Treasury Department is having a good deal of trouble implementing its ambitious program of recovery from the depression. Cho and the people he has interviewed attribute the problem to delays in appointments of high-level officials (the number two man in the department has yet to be confirmed), but also to an excess of cooks spoiling the broth, the excess consisting of White House officials, such as members of the staff of the National Economic Council, which is headed by Lawrence Summers, prowling the corridors of the Treasury building and distracting the denizens with demands and commands.

I have been concerned since the beginning of the Obama Administration with what seems a determined effort at overcentralization.

The tendency in American government in recent times has been to centralize power more and more in White House staff. The effect is to insert a layer of managerial control above the Cabinet officers, who themselves constitute a layer of control above a number of other political appointees in their departments (laterals), who in turn are layered over the career civil servants. A recent and very pertinent literature in economics–"organization economics"–emphasizes the costs of hierarchical management in slowing and distorting the flow of information up the chain of command and the flow of orders down it. The problem is compounded when as in the federal government the top layers are political appointees who may have little experience with the operation of the agency they find themselves managing.

Obama is extremely able and self-confident and has appointed on the whole very able people to his staff and to the departments; some of them are brilliant. But the capacity of brilliant people, appointed to high positions in the federal government from outside, to screw up is legendary. The danger is amplified when the government tries to do too much. The economist Frank Knight used to quip that although production beyond capacity is a contradiction in terms, it is observed every day in academia–to which we can add, in the U.S. government as well. There is danger that the government is trying to do too much and that the economic consequences will be negative and serious.

We begin with the fact that the federal government has spent, lent, committed to spend or lend, or guaranteed a total of almost $13 trillion to fight the depression. Something more than half of this Brobdingnagian sum consists of expenditures or commitments by the Federal Reserve, and about two-thirds of the remainder consists of expenditures or commitments by the Treasury Department; the rest consist mainly of guarantees by the Federal Deposit Insurance Corporation. The total number will probably grow. Only about a third had (as of March 31 of this year, the latest date for which the data are available) been spent, and perhaps not all of the committed funds will actually be disbursed. Even if the total amount allotted to spending (mainly buying stock in failing financial institutions, such as AIG) and lending is actually disbursed, much of it will be returned or "unwound" (I'll explain the difference in a moment), and the guarantees will not cause a loss to the government if there are no defaults in the guaranteed obligations (such as the guaranty of bank deposits if a bank fails).

Thirteen trillion dollars is more than the national debt and almost as great as a year's Gross Domestic Product. Although it is as yet largely a contingent liability, some trillions of dollars will doubtless be lost, adding to the national debt, and it is small comfort that the loss of the nation's wealth would probably be even greater if no costly depression-recovery efforts were undertaken. The Federal Reserve's share of the liability is especially worrisome, because it creates a serious risk of future inflation. As I've mentioned previously in this series of blog postings, the banks are, thanks to the Federal Reserve's "easy money" rescue efforts, awash in excess reserves (i.e., lendable cash). When recovery is well under way, and demand for loans soars, and the banks start lending those $800 plus billion in excess reserves, the amount of money in the economy will jump. And it will jump further because the Federal Reserve is continuing to pump cash into the economy by buying private and long-term private and public debt. As economic activity quickens, and confidence returns, consumers as well as businesses will spend hoarded cash, increasing the ratio of cash to goods and services.

In principle, and perhaps as a technical matter in practice, the Federal Reserve can sop up all the excess cash in the economy by selling the debt that it bought in order to put cash into the economy, thus bringing the cash back into the Fed, where it can be retired. (The cash that the Fed creates it can also uncreate.) But the effect of a sudden withdrawal of huge amounts of cash from the private economy is likely to be, as in the 1979-1982 induced recession (and before that in the 1937-1937 recession that set back recovery from the Great Depression by several years), a sudden rise in interest rates and resulting contraction in economic activity.

If at the same time that the Federal Reserve is trying to unwind its stimulus efforts the Treasury is trying to pay for its heavy expenditures on recovery from the depression, the risk of inflation (and an ensuing corrective recession) will increase. As government debt mounts up, the interest rate the government must pay to service the debt is likely to rise, and so the deficit will rise farther. If tax increases to pay down the debt prove politically infeasible, the government may resort to inflation–paying its debts in cheaper dollars–to alleviate the debt burden.

But this is just the beginning. For the current depression has greatly reduced the government's tax revenues, as a result of which the budget deficit would be growing by leaps and bounds even if there were no extraordinary expenditures on recovery from the depression. The budget deficit for the current fiscal year (which ends on September 30, 2009) is estimated to be $1.8 trillion, and this may well be an underestimate. Further compounding the budget problem, the Administration wishes to spend trillions of dollars on ambitious social programs without having any good prospects of being able to finance the expenditures either by higher taxes or by reducing other spending.

And if that isn't enough to frighten one, the immense financial problems crowding in on the government, and the variety and complexity of the short- and long-range spending programs, make it extremely difficult for a poorly structured, top-heavy government to execute competently any of the multidinous problems that clamor for solution now, so that the government's efforts to speed recovery from the depression can succeed.

by Chris Bodenner

A reader writes:

With Speaker Martin now up in flames, Appleyard sifts through the ashes of the last decade under Labour.

by Patrick Appel

A reader writes:

The Soloist

author Steve Lopez writes about trying to help a homeless musician with schizophrenia: “What’s more humane,…to respect someone’s civil liberties to the point of allowing them to wither away on the street, or to intercede in the interest of their own welfare?” My relatives and I constantly asks the same question about a family member with schizophrenia, who for an entire year chose to be homeless because he thought it would help focus his poor mind. He also tries to self-medicate his symptoms –delusions, hallucinations, voices in his head – with beer. Members of my family divide pretty evenly on both sides of the debate about public policy relating to mental illness. Laws started being changed to say that people couldn’t be hospitalized against their will right around the time when Ronald Reagan started closing the nation’s largest state mental asylums. Politicians promised outpatient clinics in every community to replace the big mental hospitals, but few clinics got built. You can see the results on the streets of every major American city.

Many people want to return to the days when people with diagnosed mental illnesses were medicated by force and in locked wards if necessary. Others, arguing that this approach arouses resentment and resistance that make clients throw away their meds once they’ve been stabilized and released, advocate a “recovery” model based on trustful long-term relations with individuals in their community. According to this model, clients must each have individuals in their lives who personally support their own illness-management efforts, as well as housing with services including counseling and employment training.
Whichever side of the debate you’re on, it's clear that recent science on the physiological benefits of friendship shows there’s a chemical basis to health. People with mental illnesses need the companionship of others with more stable, friend-rich lives – people outside what my son calls “the medical-pharmacological-military-industrial complex” – and outside the family. Inherent in even the most loving family relationships are authority issues that people with mental illness shrink from even when they need those relationships the most.  

My relative still suffers from untreated schizophrenia in miserable social isolation, though fortunately now has a small apartment in a building with a landlord who's tolerant of his “weird” behavior and periodic beer binges.

There's more on The Soloist and the treatment debate at Crosscut.

Also see Frontline’s online documentaries: Prisons: The New Asylums, about the horrendous treatment of prisoners with mental illnesses, and The Released, about the revolving door that offenders with mental illnesses get stuck in between prisons and untreated life on the streets.

by Patrick Appel

Crist leads in Florida.

by Patrick Appel
Marc has a statement denying Rummy wrote bible quotes on those cover slides. Frum zooms out:

Conservatives should be focused [on one]…question – an unpleasant one, but one absolutely essential to our indispensable, inevitable but still postponed reckoning with the legacy of the Bush administration. The question is: Why did Iraq go so very badly wrong – and why, having gone wrong, did it take so ruinously wrong for the administration to shift to a more successful course?

Conservatives rightly take pride and comfort in the achievements of the surge. But the surge does not banish all the antecedent questions about Iraq. The surge may have rescued the American position in Iraq from total disaster, but nobody would describe the present situation in Iraq as anything like satisfactory.

Many, many writers have reported on this history. No definitive answer has ever been reached. Definitiveness has eluded writers in part because there is so much blame to go around. Yet there is something else too, a special factor: the mysterious personality of Donald Rumsfeld. More than any other figure in the administration, Rumsfeld is elusive, his decision-making opaque, his motives inaccessible. 

Draper shows us some of the technique by which Rumsfeld used power without leaving traces.

by Chris Bodenner

Today on the Dish, Richard Florida examined the latest rankings of financial centers, discussed the relationship creative people have to living abroad, pointed to a map of where stimulus money is going, showed how the US housing bubble is mild compared to European countries, revealed how the recession has hit the professionals, scrutinized the housing market in Pheonix, featured the booming success of P.F. Chang's, and highlighted data comparing the effects of the creative class and the working class on national wealth.

Lane Wallace defended the liberal arts (seconded by a reader) and tackled a Brooks column that touched on the subject. Richard Posner examined how the Federal Reserve erred in lowering interests rates during the housing bubble. He expanded upon that argument in a second post. And a reader responded to one of his earlier posts. The Dish also heard from our readers on prisons, libraries, and more on mental health.