Saturday, March 28, 2009

How To Spot Bad Policy

Over at Political Animal, Publius gives us an easy, easy way to spot bad Obama policy.
Count me among the skeptical of Obama's new Afghanistan strategy. What really worries me is what I'll call the "reverse canary" problem. Simply put, the wrong people are too happy.

You're all familiar with the phrase "canary in the coal mine." The idea was that miners would bring canaries down into the mines as warning signals. When the air became toxic, the canaries would be affected first -- thus warning the miners of imminent danger.

With respect to the Afghanistan policy, the problem isn't that the "signaling" canaries are dropping dead. The problem is that they're too happy -- they're chirping with excessive mirth. Specifically, when Max Boot, Robert Kagan, Bill Kristol, and the Post editorial board are all excited about the policy.... well, it might be time to get out of the mine.

And that's the major, major problem with Obama's "We will defeat Al-Qaeda " policy in Afghanistan: it can't work. It weds us to another four, if not eight years in Afghanistan with precisely zero progress to show for it. The same idiotic "benchmarks" are in play, the same "surge" strategy is underway now, and the simple fact of the matter is Obama is running the Bush playbook in Kabul.

The difference now is we have a huge financial crisis on our hands, and there's simply no reason for us to be wasting time, money, and blood in Afghanistan anymore. The real problem is Pakistan, and will continue to be Pakistan, no matter what we do in Afghanistan.

Eventually somebody's going to come up with the observation that we're spending money rebuilding Afghanistan that we should be spending rebuilding America.

And So It Begins

Spain does what Obama so far has refused to do: it has opened a criminal probe into Bush-era torture policy targeting John Yoo, Doug Feith, Gonzo, and others.
The case was opened in the Spanish national security court, the Audencia Nacional. In July 2006, the Spanish Supreme Court overturned the conviction of a former Spanish citizen who had been held in Guantánamo, labeling the regime established in Guantánamo a “legal black hole.” The court forbade Spanish cooperation with U.S. authorities in connection with the Guantánamo facility. The current criminal case evolved out of an investigation into allegations, sustained by Spain’s Supreme Court, that the Spanish citizen had been tortured in Guantánamo.

The Spanish criminal court now may seek the arrest of any of the targets if they travel to Spain or any of the 24 nations that participate in the European extraditions convention (it would have to follow a more formal extradition process in other countries beyond the 24). The Bush lawyers will therefore run a serious risk of being apprehended if they travel outside of the United States.

Would that it only included Dick Cheney and George W. Bush. The same judge that brought Pinochet to justice is the same one presiding over this case. It will not be thrown aside. Spain is deadly serious about this, and it will not be the first country to want to lock up these war criminals...for that is what John Yoo and his ilk are: war criminals.

How will Obama respond to a NATO ally's extradition demands? Hopefully by having Eric Holder open his own criminal probe. Dday and Andrew Sullivan have more, and Double G has more on Britain's torture case against the CIA.

[UPDATE] Sunday's WaPo front-pager reveals that the torture regime failed miserably and completely at getting any useful intelligence.

In the end, though, not a single significant plot was foiled as a result of Abu Zubaida's tortured confessions, according to former senior government officials who closely followed the interrogations. Nearly all of the leads attained through the harsh measures quickly evaporated, while most of the useful information from Abu Zubaida -- chiefly names of al-Qaeda members and associates -- was obtained before waterboarding was introduced, they said.
Torture failed. The people who did it will be punished sooner or later. Obama should rid himself of the John Yoo playbook now before he ends up sharing the author's eventual fate.

Why Kroog Attacking Obama From The Left Is Important

Doug from Balloon Juice nails it:
What’s most important about Krugman right now isn’t whether he’s right or wrong but that he’s starting to get traction attacking Obama from the left. Obama’s stimulus package was, in my view, not as large as it should have been in large part because the debate was all about whether or not it was too big. The Geithner bank plan is drawing little scrutiny from the cable chatterers because Wall Street seems to like it and the Republicans are yet to produce their own alternative 19 page flow chart on the subject. In effect, for now, the economic debate in the mainstream media ranges from Geithner-Summers banksterism to Bachmann-Santelli-Shelby currency craziness/tax holiday idiocy/”let them fail” know nothingism. That is not a healthy situation.
I would go even further, right now the public discourse is limited to a Hobson's choice between Geithner's woefully incomplete bad bailout plan and fever-bright GOP insanity on the intellectual level of "glossolalia as financial policy". Needless to say, we need a third f'ckin choice, and that's where the Kroog comes in.
Is Krugman right? Is the Obama administration too beholden to Wall Street and to the status quo, trying to save a system that is beyond salvation? Does Obama have—despite the brayings of the right—too much faith in the markets at a time when prudence suggests that they cannot rescue themselves? We do not know yet, and will not for a while to come. But as Evan—hardly a rabble-rousing lefty—writes, a lot of people have a ‘creeping feeling’ that the Cassandra from Princeton may just be right. After all, the original Cassandra was.”
If Krugman's ideas start getting play, not only can the case be made for Plan N more succinctly, but as a useful comparison it only emphasizes how utterly useless (if not borderline absurdist) the Republican party really is right now. The ideas that Obama should be drawing from are coming from guys like Krugman on the Left, not the gaping maw of failure that is the Right in 2009.

Krugman gives the Left the credit and heft it has so sorely needed at a time when serious ideas are badly required, and serves to further expose the barking lunacy of the intellectually bankrupt Right.

[UPDATE] Dday is right on the money: "Krugman is fulfilling that role, opening what many have called the Overton window, moving the conversation away from the failed conservative ideas of the past."

[UPDATE 2] Oliver Willis adds:
It’s also worth noting what it takes for an outspoken liberal to get on the cover of a newsweekly. You have to be on a different side of an issue than a Democratic president.

So say we all.

Global No Confidence Vote: The Next Wave

The Dow has come roaring back 20% in the last three weeks and economic data on home sales, durable goods, consumer spending and retail sales have gotten better rather than worse. More than a few prognosticators believe March 2009 now represents the bottom of this recession, and that from here on out it's slow recovery...but recovery nonetheless.
Most analysts now agree, however, that there are some encouraging shafts of light after months of pitch-black news.

"The best news now is that despite the worst . . . daily litany of horrible news, the strongest renewed bank fears, despite all of that, we've got stocks today essentially where they were in October," said James Paulsen, chief investment strategist for Wells Capital Management, owned by the giant bank Wells Fargo.

In October, all three asset classes — stocks, bonds and commodities such as oil and farm products — were in freefall. Today, stocks are up roughly 20 percent in the past two weeks, the biggest such short-term rally since 1938.

"Despite some of the worst news, stocks have stopped deteriorating and have put in what I think is a relatively strong bottom," Paulsen said.

He's not alone in spying a glimmer of hope.

"I think the worst is behind us," said James Dunigan, the managing director of investment for PNC Wealth Management in Pittsburgh.

Dunigan points to recent better-than-expected data on retail sales, which bumped up in January and held in February, as well as an unexpected February increase in sales of existing homes. New data this week showed a 3.4 percent February increase in orders of durable goods — big-ticket expenditures — which added a dose of feel-good.

"You are starting to get some whiffs of that in some of the indicators that are starting to come out. . . . All of the news isn't as consistently bad as we saw," Dunigan said. "I don't think we need to get a lot of good news. We need to get some consistently less-bad news."

If you're willing to go with that theory, then good luck to you. All this month represents is a pause before the next phase of the storm: commercial real estate.
With loan defaults rising, analysts say the struggling commercial real estate industry is poised to fall into the worst crisis since the last great property bust of the early 1990s.

Delinquency rates on loans for hotels, offices, retail and industrial buildings have risen sharply in recent months and are likely to soar through the end of 2010 as companies lay off workers, downsize or shut their doors.

This is the true heart of the problem. The residential real estate crash has triggered massive unemployment and a commercial real estate crash, giving us another roller coaster to ride downwards over the next two years. Banks and retailers damaged by the current economy most likely will not survive this second phase, especially since the residential market has another 15-20% drop in prices to go. The commercial real estate crash will only be the second tidal wave to hit America just as we've struggled to the surface for oxygen.
Deutsche Bank's Richard Parkus projects delinquency rates will keep soaring to more than 3.5 percent by year-end and as high as 6 percent by late 2010. He says the industry's woes will be "at least of a similar magnitude as those that the commercial real estate faced in the early 1990s."

Drops in property values of 45 percent from a peak in late 2007 are possible, Parkus said, exceeding those of the early 1990s, as demand for office, retail and other commercial space plummets amid a worsening economy.

Adding credence to those gloomy predictions, the government said Thursday that the U.S. economy shrank at a 6.3 percent annual pace at the end of 2008, the worst showing in a quarter-century.

Funding for commercial loans virtually shut down last year as the financial system unraveled.

There was $12.2 billion in commercial mortgage debt issued last year, the lowest figure since 1991 and down 95 percent from 2007, according to a report by Reis.

Making matters worse, about $216 billion in loans are coming due through 2012.

When the companies can't make those payments anymore, they'll get foreclosed on too, driving values down for the rest of the country's offices, factories, hotels and strip malls. More and more companies will go under. This second crash will finish off a great many businesses already on the edge...and truly put us into a depressionary scenario. Seven states are now facing double-digit unemployment, and U-6 "real" unemployment estimates ranging from 18-21%. A great many local and state economies are already so weakened by the current situation that another wave will absolutely capsize them. The banks will take another mortal blow as they lose billions on commercial real estate, throttling any nascent recovery for the financial sector in its crib. That means more bailouts, more spending, more legislation, more pain.

And the real problem is that the local banks that have kept their noses clean on subprimes are the ones that will be rocked the hardest by the global commercial real estate collapse. They're the ones that invested in the strip malls and hotels and business parks because at the time they were safe bets. Now, they'll be cutting back on loans and dealing with foreclosures just like the big boys just when the country needs those loans the most to restart the economy. The disease will be spreading. The results will be devastating. Solid banks now will become weakened. Weakened banks now will become insolvent. Insolvent zombie banks now will become more multi-billion dollar albatrosses around our necks.

The bottom? We're going to wish that March 2009 was the bottom here very, very shortly. Alas, nothing could be further from the truth. Any chance we had at recovery is about to get hit by a tsunami of commercial real estate foreclosures, skyrocketing unemployment, and a long-term depression.

Buckle in kids. As bad as it's been, it will absolutely get worse from here.

Be prepared.

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