Lawrence Summers as Fed Chair: The View From Climate Policy

Lawrence Summers: Does The Emperor Have Any Clothes?
Lawrence Summers: Does The Emperor Have Any Clothes?

Lots of debate in Blogistan and elsewhere about President Obama’s apparent desire to appoint Larry Summers as Fed Chair.  We know (or at least we think we know) that he is brilliant, but he has a strange tendency to get matters of judgment wrong.  He supported the abolition of Glass-Steagall, endorsed deregulation of the financial industry, and seems to have little desire to admit that he got these things wrong.  Plus, there are sexist overtones to the seeming refusal to want to appoint current Fed vice-chair Janet Yellen, an outstanding economist in her own right.

All right.  But what does this have to do with climate policy?

Interestingly, a few years ago, Summers participated in a Council on Foreign Relations task force regarding climate policy options.  Like all CFR task forces, this one was self-consciously centrist, chaired by former New York Governor George Pataki (relatively moderate Republican, especially on climate issues) and former Iowa Governor (and now Agriculture Secretary) Tom Vilsack (moderate Democrat).  Its report, Confronting Climate Change: A Strategy for US Foreign Policy, is a quite comprehensive view of the stakes of climate policy, at least as of June 2008, when it was written.  It recommends putting a price on carbon, reducing emissions to the Kyoto level, and several other policy options.  Summers signed it.

But interestingly, Summers also appended a very short “comment” to the report, which says something about potential behavior as Fed Chair (how much is up to the reader).

Here are the two key graphs of his comment:

I have signed this report because it makes the need for urgent action on climate change clear and presents a smart and thoughtful agenda for reducing U.S. emissions, building international consensus, and promoting international action, with which I broadly concur.

The Task Force rightly notes that the costs of addressing climate change are highly uncertain, but I remain concerned that many policymakers do not sufficiently appreciate how large these uncertainties are or the consequences of paying them insufficient attention. Environmental certainty enjoys much attention while uncertainty over the cost of cutting emissions receives too little. This balance is wrong, particularly in the short term, since emissions in any given year matter little, while high costs, even for a short period, can cause substantial economic harm, particularly to the most vulnerable.

A few things jump out here:

1)  Summers gets the politics of climate change exactly 100% wrong.  The gravamen of his argument, i.e. “we are hurtling toward overregulation in the climate sphere” was wrong at the time and has been proved to be completely inaccurate.  To the extent that a Fed Chair has to be cognizant of political trends, this is not a good sign.  Anyone can get political prognostication wrong: but to go out of your way to get it wrong is a black mark.

2)  Summers makes no real substantive contribution in his comment.  He seems simply to want to emphasize, “I am thinking about things that no one else is.”  This on a task force with some of the leading thinkers in the field.  This does not bode well for a position like Fed Chair, which requires building consensus.

3)  He was wrong about what other people are thinking about.  Scholars and policymakers have been thinking about uncertainty all the time and had done so for more than a decade.

4)  To the extent that his emphasis on short-term costs and long-term benefits is a sub silentio call for a carbon tax, he was also wrong about its salience: the carbon tax idea was being promoted literally by dozens of scholars and policymakers.

5)  To the extent that his emphasis on short-term costs and long-term benefits is a restatement of the need of a high discount rate, it is not backed up by any facts or reasoning.  It also is wrong on the absence of short-term costs.

I keep hearing that Summers is a very brilliant man, and would do a wonderful job as Fed Chair.  To the extent that his intervention in climate policy is any indication, there is absolutely no evidence of this, and in fact the evidence demonstrates the opposite.  I’m assuming for the time being that the Emperor has clothes: but it would be nice to see them eventually.

A Damn Good Speech

I’m a little surprised that Mark hasn’t beaten me to the punch on this: a helluva speech by the President.  My personal favorite moment was when he noted that defending Social Security, Medicare, and Medicaid “does not make us a nation of takers; they free us to take the risks that make this country great.”  Absolutely.  (This is why, by the way, that the most pro-entrepreneurial legislation of my political lifetime has been the Affordable Care Act: it allows people to open their own businesses without fear that they will no longer be able to obtain health insurance).

And by the way, Congressmember Ryan: f*ck you.

A friend wrote to me to say that celebrating this speech makes liberals a “cheap date” because it isn’t necessarily followed up by action.  It was a speech: unless he was going to announce a series of executive orders in it — which as far as I know has never been done in an inaugural –  all you’re going to get is rhetoric.  But good rhetoric it is, and rhetoric that progressives can use for the future — and demand that our elected officials uphold:

[W]e, the people, understand that our country cannot succeed when a shrinking few do very well and a growing many barely make it. We  believe that America’s prosperity must rest upon the broad shoulders of a rising middle class. We know that America thrives when every person can find independence and pride in their work; when the wages of honest  labor liberate families from the brink of hardship. We are true to our  creed when a little girl born into the bleakest poverty knows that she  has the same chance to succeed as anybody else, because she is an  American, she is free, and she is equal, not just in the eyes of God but also in our own…

[O]ur journey is not complete until our wives, our mothers, and daughters can earn a living equal to their efforts. Our journey is not  complete until our gay brothers and sisters are treated like anyone else under the law – for if we are truly created equal, then surely the love we commit to one another must be equal as well. Our journey is not  complete until no citizen is forced to wait for hours to exercise the  right to vote. Our journey is not complete until we find a better way to welcome the striving, hopeful immigrants who still see America as a  land of opportunity; until bright young students and engineers are  enlisted in our workforce rather than expelled from our country. Our  journey is not complete until all our children, from the streets of  Detroit to the hills of Appalachia to the quiet lanes of Newtown, know  that they are cared for, and cherished, and always safe from harm.

President Obama cannot do this by himself, but he is doing the right things.  The fiscal cliff dealwas pretty good.  He has so far faced down the plutocrats on the debt ceiling. He appointed Jack Lew and Chuck Hagel and told the bad guys to pound sand.  He is turning Organizing for America into a 501(c)(4) instead of disbanding it.  He is, in other words, beginning to attempt to do to Movement Conservatism what Jefferson told his Attorney General he would do to the Federalist Party:

I shall . . . by the establishment of republican principles . . . .sink federalism into an abyss from which there shall be no resurrection for it.

Now THAT’S change I can believe in.

Obama’s New Leverage: Implement The Defense Sequester

There is much bemoaning in Blue Blogistan that by agreeing to the fiscal cliff deal, President Obama relinquished his leverage of the sunsetting Bush tax cuts.  (Markos says that the higher tax rates are the President’s “ONLY leverage.”).  Even those who aren’t angry think that somehow he has little leverage left.  I don’t think that that’s right.

Consider the defense sequester, which Very Serious People inside the Beltway believe to be some sort of problem.  I see no basis for this belief.

If the defense sequester is implemented, then defense budget will be — what it was in FY 2007, when we still had hundreds of thousands of troops in Iraq.  Keep that in mind the next time you read about how the sequester will give us a “hollow force.”  Did we have a hollow force during the Dubya Regency?

Micah Zenko of the Council on Foreign Relations has made the point succinctly:

The Bipartisan Policy Center projected that defense sequestration, if triggered, would lower the Pentagon’s budget (excluding war costs) for fiscal year 2013 to $498 billion. As then-Secretary of Defense Robert Gates quipped in July 2009: “If the Department of Defense can’t figure out a way to defend the United States on half a trillion dollars a year, then our problems are much bigger than anything that can be cured by buying a few more ships and planes.”

Conservatives often make similar arguments about domestic spending: “we are just going back to what we were spending five years ago!”  Progressives reject this, and I think rightfully, because our population is greater, and economic conditions are different (e.g. spending the same on Food Stamps during a recession and during an expansion makes no sense under Economics 101).  Would the same principle apply to defense spending?  Hardly.  There is noting about cyclical conditions that makes spending money on a bloated military establishment equivalent to spending on counter-cyclical policies such as Food Stamps and unemployment benefits.  Just as importantly, the terms of the defense sequester specifically allow the President to exempt salaries and benefits for military personnel, and President Obama has already ordered this exemption.  If advocates of ending the sequester believe that it is the best way to maintain counter-cyclical policies, then they must do things that thus far they have refused to do: 1) show why defense spending represent good counter-cyclical policy; and 2) give up the right-wing Republican nonsense that we should reduce spending in the first place.

Many of the most detailed arguments in favor of the defense sequester come from the Center for Strategic and Budgetary Assessments, a think tank that I admit I had not heard of before: its crucial backgrounder on the defense sequester can be found here.  Is it a real operation, or a fake think tank like the Tennessee Center for Policy Research, a Koch-funded libertarian whack job outfit that became briefly famous for “finding” that Al Gore’s home in Tennessee was an energy guzzler (a claim that has yet to be confirmed)?  CSBA looks to be the real deal, or at least hardly a left-wing front: it’s board members include David McCurdy, Pete Dupont, and James Woolsey.  Whatever else one might say about it, its people aren’t hanging out with Wavy Gravy.

The sequester method is hardly the best one to effect long-term, measured reductions in the defense establishment.  But we should not make the perfect the enemy of the good. Defense Secretary Panetta has been egregiously irresponsible with his Chicken Little warnings about what will happen if the sequester is implemented.  A new Defense Secretary cannot come too quickly.

President Obama needs to use the leverage that the defense sequester gives him.  The Republicans want to get rid of the defense sequester — badly.  By now, we should all be past the silly notion that the GOP wants to reduce spending: it only wants to reduce spending that could possibly assist low-income and working Americans.  Very well, the President has to say: I will veto any bill that gets rid of the defense sequester unless I get my own priorities in spending and revenue.  End of story. 

And conversely, if the President does not use this leverage, and instead agrees to benefit cuts in Medicare, Medicaid, Social Security, and crucial domestic priorities, he will have no one to blame but himself.

Sell-Out of the Century?

I would hardly qualify as the Obama campaign’s most important supporter, but I did give several hundred dollars to the campaign, as well as spending numerous hours making phone calls on the President’s behalf.

I did not do this so that the President could raise the Medicare age and retain the lion’s share of the Bush tax cuts for the wealthy.  But if The Shrill One and Ezra Klein are right, then this precisely what the President is intending to do.

If this is true — and right now it is a very big if — then it represents the greatest sell-out of a winning political coalition since LBJ ran on “not sending American boys to Vietnam.”

Remember when I argued that progressives need to Occupy the White House?  Yep.

A conversation, Mr. Worthing?

Obama kicks the climate breakdown can down the road. Lady Bracknell had the put-down.

In the tones of Edith Evans as Lady Bracknell (4m.20s in):

President Obama, at his first press conference after his reelection on November 14 – my emphases:

But we haven’t done as much as we need to. So what I’m going to be doing over the next several weeks, next several months, is having a conversation, a wide-ranging conversation with scientists, engineers and elected officials to find out what can — what more can we do to make short-term progress in reducing carbons, and then working through an education process that I think is necessary, a discussion, the conversation across the country about, you know, what realistically can we do long term to make sure that this is not something we’re passing on to future generations that’s going to be very expensive and very painful to deal with.

Some of us – strike that, a lot of us – have been having this conversation for a while now. We´ve even tried to engage with Mad Old Tom in the corner, who erupts from time to time with incoherent ravings about Climategate, the Hockey Stick, Agenda 17 and the like, before we can get him to take his meds and calm down. This one smallish general-interest blog, run part-time by half-a-dozen people, has published 37 posts with the climate change tag in the last 12 months, and many more posts have mentioned the subject.
These posts regularly attract plenty of informed comments – even when the blogger is a non-expert foreigner like yours truly. In this we are entirely representative, a small part of something much larger. There is a massive amount of concern in your country as in mine, matched by a massive supply of information and discussion at every level of professionalism on climatology, renewable energy, and public policy blogs.

Polls regularly show that the concern extends beyond the blogosphere into the regular American electorate. Renewable energy won Candidate Obama a lot of votes and activist labour in Iowa, Colorado and Nevada, and even Virginia and Ohio.

The person missing from the conversation, Mr. President, has been you. We hoped for leadership, and you just kicked the can down the road. Next time, do us a favour. Buy a ticket.

Occupy the White House

We all know the famous story of FDR meeting with a group of liberal activists early in his term.  They made an impassioned plea for their policies, and the President said, “Okay, you’ve convinced me.  Now make me do it.”  This must the progressive mantra for President Obama’s second term: make him do it.

While progressives celebrated in November 2008, President Obama appointed an economic and leadership team that did some good things (the Recovery Act, for example) but in many other cases undermined the promise of the 2008 campaign. And the cossacks work for the Czar.

As I have argued before, Obama is essentially a Rockefeller Republican — a noble enough tradition in American politics, but hardly one that can grapple with the problems facing the country.  Progressives thus cannot expect that President Obama will fight for fairness, justice, and the middle class now that he is safely re-elected.  He will be exponentially, infinitely better than the alternative, which is why I contributed to him and made phone calls on his behalf.  But we should not kid ourselves.  He will not fight for us unless we push him to do so.

Progressives need to fight vigorously against the Village mentality telling him to cave before Congressional Republicans, appoint Wall Street bankers to key positions, continue massive deportations and splitting up of families, violate civil liberties, and neglect the peril to the planet.  That is our job.

Yesterday, The New Republic’s John Judis wrote a shrewd piece distinguishing between the electoral system, where Democrats emerged with a victory, and the pressure system, where the Right still dominates.  Progressives have done amazing work over the last several years to begin to equalize the imbalance, but more work needs to be done.  We will have to dig deeper, make more contributions, write more e-mails (and blog posts!), and work at building a pressure infrastructure to compete with the malefactors of great wealth who distort what remains of our democracy.

Do not trust this President.  Occupy the White House.

American “Justice”: Far Behind the Salem Witch Trials

The Obama Administration’s decision — released the Friday afternoon before Labor Day — that no one will be held accountable for the systematic policy and use of torture would be more nauseating if it were not so predictable.  I cannot add to Lemieux, Serwer, Drum, Sullivan, and Greenwald, and you should read them.

American political culture is at a particularly childish moment.  Our leaders cannot prosecute what they did in our name, and they cannot even acknowledge it.  Oh yes, President Obama did stop the policy, and he deserves credit for that, but it was all part of sweeping things under the rug: let us look to the future, not the past.  After all, looking to the past means looking at something unpalatable, and that is not allowed.  As Richard Hofstadter noted, “American use their history as an excuse for an orgy of self-congratulation.”  If anything, the Republicans are far, far worse: to the extent that they don’t want to sweep this under the rug, it is because they are proud of their crimes.

But it was not always this way.  Edmund Morgan, the world’s greatest living historian, recently published a book of essays entitled American Heroes, a work whose title appears to be the only flawed thing about it.  One (previous unpublished) essay is entitled “The Courage of Gils Cory and Mary Easty.”  Cory and Easty were residents of Salem in the 1690’s, wrongfully accused of witchcraft, and instead of turning states’ evidence and accepting a lesser punishment, they vigorously maintained their innocence, knowing that death would result.  They particularly condemned the use of “spectral evidence,” in which a person could be convicted of witchcraft simply by another person saying that he or she “was being tormented by a specter in the shape of the accused.”  Usually, courts refused to accept this evidence, knowing how unreliable it was.  But so terrorized was Salem by the prospect of witchcraft that the rule book was thrown out.  Cory and Easty, Morgan argues, were two of the most courageous people in American history.

Here is where modern times have truly become shameful.   Morgan relates that “there was another kind of courage displayed in connection with witchcraft trials that would be hard to find a parallel today”:

Five years after the trials, in 1697, the General Court of Massachusetts decided that the trials had sent innocent people to their deaths.  January 15, 1697, was appointed as a day of public fasting in which the people of the colony should ask forgiveness of God for what they had done.  And on that day Samuel Sewall, one of the judges, stood up before the congregation of the church to which he belonged, with bowed head, while the minister read a statement that Sewall had written, begging forgiveness of God and man for the part that he had played in the witchcraft trials, asking that ‘the blame and shame of it’ be placed on him.  On the same day the jury that had sat in the trials published a wirtten expression of their “deep sense of sorrow” for their decisions, “whereby we fear we have been instrumental with others, though ignorantly and unwillingly, to bring upon ourselves the guilt of innocent blood.”

What a moving and noble reaction from a people that was imperfect and knew it.  They could not bring back the dead, but they could restore the victims’ property, they could hold themselves accountable, and they could admit that they were wrong.  And from contemporary America: nothing.  We have instituted Regress in History. 

Morgan writes: “Can any modern people point to a similar willingness to remedy injustice, even after the event?”  In today’s United States, at least, we know the answer.

Who SHOULD be the Next Treasury Secretary?

Four days ago, Ezra Klein reported that Erskine Bowles is the front-runner for Treasury Secretary in a second Obama Administration.  It’s hard to think of any plausible Democrat who would be a greater disaster.  Bowles has a man-crush on Paul Ryan; his chairman’s mark for his eponymous commission was simply an embarrassment on both political and policy grounds; a managing director of Morgan Stanley, he is Wall Street’s creature.  He has no business running Treasury any more than I do.  Take a look:

But if that is the case, then assuming (in best chickens-counting style) that there even is a second Obama Administration, who should the next Treasury Secretary be?

This isn’t merely idle blog talk (although I am under no illusions about RBC’s awesome policy influence).  One great failing of progressives is that after the 2008 election, we simply celebrated.  Wall Street did not: it got to work making sure that its people were in key positions, and that Barack Obama’s agenda would never challenge the financial industry’s power.  That’s how we got Timothy Geithner at Treasury, Larry Summers at NEC, Ben Bernanke reappointed at the Fed, Bowles himself appointed to an absurd “deficit reduction commission”, Christy Romer sidelined at CEA, and ditto Elizabeth Warren.

So if, as anyone not committed to entrenched plutocracy should hope, President Obama wins a second term, the very next day should be devoted to making sure that President Obama does not make such disastrous picks again.  That means being prepared to push very hard against rancid appointments like Bowles and in favor of someone else.  I would hope that the day after Obama’s re-election, Al Franken and re-elected Senator Sherrod Brown call the White House and make it very clear that if they have anything to say about, Bowles will never be confirmed.

But who should be?  A couple of notes: 1) at this stage, we should not worry about confirmability too much.  The Republicans will seek to block anyone (whether by filibuster or otherwise), and at some point progressives will have to press President Obama to make a recess appointment; and 2) for what it’s worth (and it may not be worth much), there has never been a woman or a minority heading Treasury.

There are a few I can think of offhand: former FDIC chair Sheila Bair, former CFTC chair Brooksley Born, Paul Volcker (too old?), Gary Gensler, Christy Romer, Jared Bernstein.  Hillary?  I would be very wary: the Clintons created the Wall Street Democratic party, all of her advisors will be Rubinites, and if she wants to run for President in 2016, negotiating with Wall Street potential campaign contributors provides dark incentives.  Still, she could be more progressive as a way of attracting primary support. 

 Paul Campos wants The Shrill One: that would be great, but I think that’s a little too far-fetched even at this stage.  Nevertheless, Campos is asking the right question.

By the day after Election Day, progressives should have an answer.  Because Wall Street sure will.

 

New Uses for Obama T-Shirts!

So over this past weekend I’ve had something of a cold: lots of sneezing, runny nose, the works.  I could have gone through several boxes of tissues, but then I came upon an old “Environmentalists for Obama” t-shirt that I bought during the 2008 campaign.  It worked great!  I’ll make sure to tell everyone else who has one…

And no one from the White House should criticize me.  After all, if a Republican found one of those t-shirts he’d defecate on it and then burn it.  So really, sticking with me is really the best of his choices.

Really, no one could have predicted

Don’t Worry, Be Happy About the Debt Ceiling

A couple of friends asked me whether the debt ceiling deal signalled a new Age of Extortion, in which we go through this mess every time we have to raise the debt ceiling. 

Not to worry, I said.

In 2013, given President Obama’s steadfast refusal to do anything about jobs and economic growth, there will likely be a Republican President.  If the Democratic Senate minority breathes a word of doing the same thing, President Bachmann or Perry or Romney or whoever will simply announce that the 14th Amendment gives the President the right to raise the debt ceiling unilaterally.  The President will then release the OLC Opinion written by David Addington.

End of story.  The GOP understands power, unlike some other Presidents I could name….