Sunday, March 29, 2009

Useful Anger: AIG Illustrates the Importance of Pitchforks

A lot has been argued against the public's anger over AIG. But intuitively, I've been feeling that the over-the-top anger, the extreme Congressional reactions, the actual public intimidation of bankers, while vague, undirected, and perhaps counterproductive to immediate goals, has actually been important. I might not go as far as Bill Mahr and suggest that a banker or two be strung up from a tree. But I've been feeling that the kind of public intimidation and scapegoating has had a valuable aspect, and today, it occurs to me why.

But first, let's examine the reasons the anger has been counter productive. All are good arguments, and here they are:

1. From the left: That the anger makes it tougher for Geithner and company to get banks to go along with governmental plans to fix the economy.

2. From the right: That vilifying bankers makes it more difficult for capitalism to do its job in turning around the economy.

3. From the middle: That now that AIG is run by the government, hurting AIG only hurts the taxpayers.

4. From bank employees: That most of the people receiving bonuses from AIG aren't responsible for the bad bets that caused this mess, and are essential to helping successfully unwind AIG responsibly.

5. From government watchdogs: That it's a bad idea for Congress to create laws that overreact and attempt to hammer a nail with a bulldozer.

6. From debt watchdogs: That it's short-sighted to focus on 1/500th of the money involved in AIG at the risk of putting much more of that money at risk in a failed recovery.

All perfectly good arguments. But as I watch busloads of angry protesters touring rich towns in Connecticut, as I read AIG executives talk with pique in NYTimes editorials about donating some of their bonuses to charity, and I watch Congress pontificate and the mobs roil on late-night TV, I think that there is one very GOOD thing that this anger is doing. The one good thing: It helps to return the idea of moral hazard to its proper place.

What is moral hazard? As this crisis has evolved, we've seemed to have forgotten this essential concept. But moral hazard is essentially why the Fed let Lehman Brothers fail (and precipitate this mess) in the first place. Moral hazard is the idea that if there is no downside to making bad bets, because the government will step in and help you, then this only encourages even more risky behavior in the future. It seems that in order to save the economy, the government has decided it has to ignore moral hazard.

What's heartening about the AIG anger is that it seems that moral hazard can't simply be wished away. Like the concept of "momentum" in physics, perhaps moral hazard can't be destroyed but has to simply show up someplace else: like anger at AIG. If AIG employees find themselves intimidated, targets of vilification, then moral hazard has done its job: it's shown that there WILL be a price to pay, in some way, for making extremely risky bets.

My feeling is that letting this moral hazard play out is more important, in the long run, than the damage caused by points 1 - 5. And so I cheer on the AIG anger...and hope that the government sees how it can use the anger to maintain a sense of moral hazard, while also taking the short-term business-friendly steps to get our economy going again.

Saturday, March 28, 2009

Instant Revisionism: Is Obama's First 60 Days Really That Bad?

This week, The Economist - one of the international financial papers that backed Obama - produced an editorial essentially claiming buyer's remorse: that Obama's first 60 days had been a disappointment and had made them reconsider the reasons they endorsed him. While Obama has been harpooned constantly by the far right, the editorial needs to be taken seriously, as the change of heart shown by The Economist suggests that Obama's support amongst his middle-right champions may be seriously eroding - and thus eroding Obama's promise of forging a new style bipartisan politics.

There are certainly some things that team O can be doing better, but I want to look at the claims The Economist have made and ask if they are really as serious as they make them out to be, and if after only a mere 60 days, center-right supporters should start fleeing the Obama ship.

Perhaps most serious charge The Economist makes is lack of experience - that Obama has shown to be inept and is learning on the job, contributing to his slide in approval. In essence, they are criticizing Obama's leadership ability (he's been "messed around" by his own party and they exhort him to "lead, damnit.") They support their claims of lack of leadership by citing these supposed failures:

1. He subcontracted the stimulus to Congress and did a "mediocre" job on it, as most of it won't kick in for several years.
2. There are still 23 open slots at Treasuring showing a "lack of focus" on the economy and "administrative drift"
3. His stimulus "broke down" in Congress because it only got the support of three Republican senators.

But have other Presidents done better in their first 60 days? In his first 100 days, Clinton created an uproar over allowing gays to serve in the military, failed to get his stimulus bill passed, butted heads with Congressional Democrats who seemed to want to paint him as inexperienced, and put his wife in charge of his big initiative - health care reform - which eventually was killed without a single bill enacted. He also created a huge scandal with the White House travel office that dominated the airwaves for weeks.

Just one month after Gerald Ford took office, he pardoned Nixon, created a rift with Congressional Democrats, and never recovered to enact any significant legislation.

W. Bush had to grapple with continued protests and suspicions about the election, had no mandate, and the press was more focused on Clinton than anything Bush might have wanted to do in his first term. On average, Bush's appointments weren't confirmed until EIGHT MONTHS after his election (compared with two and a half for Kennedy).

George HW Bush was criticized for having "no agenda," received complaints about his capitol gains tax cuts, and was compared unfavorably to Ronald Reagan by his own party.

What about Ronald Reagan? His tax cuts received heated opposition and a huge uproar in Congress. Then two months into his term there was an attempt on his life: that created a surge in popularity, and his tax cut legalisation went through.

Obama's approval rating now stands at 62%. The only President since Kennedy with a significantly higher approval rating after 100 days was Reagan, who had an approval of 68% after a hundred days and the attempt on his life.

And yet, let's look at what Obama has done in a mere sixty days. He's drafted and passed the largest stimulus package ever created, and he was able to put together a package filled with more tax cuts than Democrats wanted, and attracted enough Republicans for them to pass it easily while still claiming deniability. He filled his cabinet faster than any President in recent history. He's dealt with an unprecedented financial catastrophe that no President has faced since FDR. The actions taken by Treasury and the Fed in a mere two and a half-months have stabilized the stock market (the market has risen by 20% since it's bottom in February) and have produced the first positive economic indicators after more than a year of continual and steep economic deterioration.

That's not to say that there aren't some things that Obama could do better. His experience in Congress has obviously taught him that deference and favors are the way that legislation gets passed - and he's put expediency of legislation ahead of political perception - but now that the stimulus is in gear, he does need to be more politically savvy about signaling to the public that he's the one leading Congress, and not the other way around. Letting Congress strip his cap-and-trade and middle-class tax provisions without any push back was a mistake that - even if he is looking for a way out of these promises - signals exactly the wrong message to the public (his press conference gave him ample opportunity to play this differently). He was successful in his initial baiting of recalcitrant Republicans, which help to shore up his early popularity, but now he's let the worries about the deficit get ahead of perceptions of his budget plans, and old suspicions about his far-left economics have resurfaced. And perhaps most damaging, the policy wonks in his cabinet have failed to put forth truly bold agendas - nationalizing banks in order to quickly disassemble them without the need for huge risky bailouts, touting a healthcare plan that cuts back on entitlements at the same time that it attempts to extend care, fighting for a comprehensive energy plan as part of his budget. In other words, while his early popularity was achieved by convincing people he was a left-leaning moderate who would bring establishment players into his team, his problem now seems to be that his team is coming up with policy that is TOO much a part of the left establishment and doesn't break out of mold radically or dramatically enough to deliver the change Obama's supporters are hoping for.

But it hasn't even been 100 days yet, and Obama has had his hands full just keeping the economy from tanking. Perhaps much of the credit for stabilizing the economy needs to go to the idea that Obama has been able to reassure vested interests and economic players that not too much is going to change. In terms of calculating between long-term perception and immediate need, Obama, a smart political player, has clearly identified that first things must be done first, and there will be plenty of time for radical change later.

In other words, I think that all of us who would like to now claim aha! Obama has been rocky, successful, hesitant, or whatever, just need to step back and realize how little time has gone by. Sixty days into Bush's Presidency, we would have thought it would have been completely uneventful. Sixty days into Clinton's, we would have thought it would have been completely incompetent. And if Reagan hadn't been shot, he might have ended up being considered nothing more than a retired actor with a radical idea of redistributing wealth to the wealthy.

Obama perhaps needs to step back and re-tune his message. And he needs to re-look at the effect of his budget on the long-term health of the country, particularly regarding entitlements and energy reform. But in a mere sixty days, in terms of the most pressing issue at hand - the economy - he's already achieved a great deal. If this downturn starts to turn around before 2010, which would be much earlier than anyone could have reasonably expected a few weeks ago, we may be hailing him as a hero.

Wednesday, March 18, 2009

A Message to Tcotters On Twitter: Get Over It Already

Not that I don't say that with love. But I really think it's time you guys worked through the five stages of grief you've been going through over the election. You know: Shock, Anger, Blame, and Denial - and finally accept that Barack Obama is our President.

(For those of you not hip to Twitter lingo, tcot is a "hashtag" or group follow symbol, short for Top Conservatives on Twitter - who have recently launched a website called tcotreport. This article, written from the contrarian view, is for them.)

That doesn't mean you have to love our new Pres. God knows, there was no love lost from Democrats for President Bush (or President Reagan, for that matter). But there's going to be no sudden scandal proving that Obama’s not a US citizen (that issue's been, shall we say, Supremely settled), no flare-up of William Ayers being invited over to torch the White House curtains, no central command order for the federal government to go around knocking on doors to confiscate your guns, resulting in a popular revolt and governmental overthrow. No, Obama is here to stay for at least the next three plus some odd years, presiding over a rather middle-of-the-road/left-of-center Administration. Wouldn’t it be better to learn to live – and dare I suggest – work with him?

I know from experience this is hard to do. After President Bush was re-elected in 2004, Democrats went through the same period of disbelief, anger, and depression. Sites and movements popped up everywhere saying "it's not my fault." And Democrats even today are loath to credit President Bush with some of his clear successes - for instance, his fight against AIDS in Africa, and especially having the fortitude to correct early mistakes in Iraq and not give up on the surge, even in the face of the war's supreme unpopularity. You are right to point out that these are clear Bush triumphs and that catcalling from the other side of the aisle has distorted the view of both the successes and mistakes of the past eight years.

Obama is a different sort of President and so his successes, and his mistakes, will be different than were Bush's. But I think, as President, he needs to be given some benefit of the doubt - some ability to set policy and show success before the catcalling about failure begins. Certainly Republicans called for such benefit to be given to President Bush. And surely the argument that conservatives made about how supporting the President during time of war is critical for the sake of America, also applies to supporting the President during the worst economic downturn since the Great Depression. And yes, of course, the far left slung some nasty invective against the last President. But surely, as principled conservatives, shouldn’t engaging in tit-for-tat (they hate Bush so we hate Obama) be above you? If you can't show that you are made of sterner stuff and can be bigger than the far left, then where are your vaunted principles?

Now, with that, of course I will be accused of wanting to sing "kumbaya" or some sad refrain of "can't we all get along." Listen, I know there are deep philosophical disagreements between left and right on issues of size of government, science versus belief, the role of the courts vis-à-vis civil rights, interpretation of the Constitution. Those disagreements aren't going away. And they shouldn't. But testing those beliefs in the sphere of public opinion is what our Democracy is all about. And I think the Founding Fathers set up a pretty well working, self-correcting system, that lets the country steer more right, left, or center as the shifting winds of history carry us to different crises. Clearly, this is a time that has the country steering back to the left. But as it does so, what I'm saying is, the Democrats still need you. They need you to engage your ideas, not your invective and resentment. For invective and resentment will only hurt the Republican Party - and in the long run, a disabled Republican party will hurt the Democrats, too.

So this is what I mean when I talk of bipartisanship. Not that we give up our principles. Not that every solution necessitate a watering down of ideas to some ineffective compromise. No, what I mean is that we get over it - we get past the name calling and invective, we accept the leadership we have, we recognize that people out of power tend not to remain so forever, and we agree to participate in a dialogue with each other with an American spirit of cooperation. We recognize that our ideas need to not only be put forth but be made convincing to the larger public, that sometimes our principles will lose out, that we can accept that, that we can argue and still retain respect for each other's positions. It's about putting what's best for the country ahead of what's best for our political position and special interests, about knowing that sometimes we may be wrong and our opinions may need to change, while sometimes we should hold out when being right also fits into the reality of the moment, and knowing how to judge the difference between the two. As President Obama himself said on Tuesday, “what we need in Washington are not more political tactics – we need more good ideas. We don't need more point-scoring – we need more problem-solving.” It’s about taking the best ideas wherever they may come from, right or left, to address pressing needs identified by the public in this election: the economy, health care, education, and energy. It's about changing the nature of the conversation, not the nature of our philosophies.

And if President Obama isn’t your spokesman, then listen to President Bush, who said recently, "I’m not going to spend my time criticizing him [Obama.]…. I love my country a lot more than I love politics. I think it is essential that he be helped in office."

Naturally, you may not agree with this approach, and you possibly won't agree that any of these issues are pressing needs at all. Bipartisanship is a matter of perspective. All I can say is that the election and opinion polls support the idea that addressing these issues effectively is top of mind of most Americans. Ignore them at your own peril. And I'm not asking for everyone to become bipartisan, either. We need a right as much as we need a left. All I'm saying is that we need a right that doesn't just talk to itself, but also addresses those in the middle and on the left. Otherwise, you hurt no one’s prospects but your own. And the only place to start a conversation is to first have some respect for the people you're talking to.

My sense is that most of the people on tcot are willing to do that; those of us here at are willing to do the same. So let's get past the Obama boogie-man refrain, accept that he’s our leader – faults and all – for at least a while longer, dealing with the issues identified in this election. And let’s start moving the conversation forward.

Thursday, March 12, 2009

Bristol Palin Drops the Other Baby Shoe

Apparently the Bristol Palin / Levi Johnston shotgun wedding is now off.

Did anyone seriously expect them to go through with this once the campaign had called off their spin enforcement operators? Apparently Bristol "hates" Levi now and doesn't let him see the baby.

I guess Mrs. Palin didn't have enough clout, muscle, or whatever it was the RNC had on him to keep Levi interested until 2012.

Not that the lives of little Palins and their boyfriends really should be anyone's concern anymore. It's just nice to see them not having to concoct a life together just so they could be used as political pawns. I guess if anyone's glad Obama won it must be Bristol and Levi; maybe now they'll actually have a chance to live their lives.

Wednesday, March 04, 2009

How to Have Conversations Correctly on Twitter

Or actually, this post is a response to Robert Scoble's ( list of five reasons Twitter *isn't* for conversation - when I really do think conversations of a key aspect of what makes Twitter social. However, I agree that people abuse conversation on Twitter, but that's just because they don't know how to do it well.

The way to have a conversation is to make sure that every reply you post is recontextualized. Put in the proper subject nouns, avoid pronouns, and make sure that you re-reference the topic of conversation with each post. That way, others who see your post aren't lost and can jump in and take the conversation in new productive directions.

Now, specifically to respond to Scoble's complaints:

1. If you get into something with one other person all your other followers will start complaining.

Not if you apply the rule above. Your replies will seem like brilliant original thoughts. They'll have a way to jump in instead of being mystified.

2. You can't "thread" and "capture" a conversation.

No, you can't, at least not in Twitter itself. But why do you want to capture a conversation on Twitter anyway? Twitter is ephemeral, and I already have too many stored bits of data in email and elsewhere. I actually like that the conversations go away after a time, making new mental space for more thoughts.

3. Most people on Twitter that are joining lately are not people who participate.

Well, I haven't found that to be true. And even if it were, why should that negate the potential of having your own conversations? Maybe people aren't participating with Scoble because Scoble isn't replying?

4.Twitter's expected usage is "what are you doing?" Not "what would you like to chat with your friends?"

Even Evan Williams (, CEO of Twitter, says that the "what are you doing" headline is no longer appropriate for the posts on Twitter. In fact, I find the "what are you doing" posts the most boring: chats and resources the most interesting.

5. You can't bundle up a conversation and save it for later.

Maybe true. And I agree that Friendfeed and blogs offer a great way to archive conversations. If you want to do that. But Twitter is about the Twitterstream, dipping in and dipping out. It's valuable precisely because, like IM, it ISN'T archived. And as far as being able to archive some conversational threads, or follow those threads, this may be an enhancement of Twitter that will surely eventually come. It doesn't mean we should stop having conversations now.