Brett Favre, Take Two

Brett Favre's status for the upcoming season has dominated the sports news for the last three weeks or so, and is now finally resolved with his trade to the New York Jets.

But like so many of our other contemporary controversies, there was more drama than real news. Favre wanted to play, the Green Bay Packers wanted to protect their memories of him as a Packer, and failing that wanted to keep him from playing for another team that could beat them.

So, what happened? Green Bay offered to pay Favre $20 to $25 million to stay retired as a player and do some sort of more or less irrelevant front office work. I didn't get the point of that deal at all. The Packers lose a boatload of dough, and Favre doesn't get to play.

The whole thing becomes a lot simpler for either party when they take care of the things they can control instead of the ones they can't. Favre wants the freedom to play for any team that he wants, which would be a very reasonable thing to want except for the fact that he's under contract to the Packers. The Pack wishes Favre would just fade into the sunset, which conveniently ignores the fact that #4 gets a vote in that election. Once both parties understood the leverage that the other one had, the whole thing got settled in a day or two.

What have you done for me lately?

The conventional wisdom is that the Presidential race is about Barack Obama. John McCain has been around a while and the voters know what they think of him, whereas a lot of people would like to vote for Obama, but don't entirely believe that it's safe to do so. I agreed with this until a couple of days ago, then I thought about it some more and concluded it isn't so.

At this point the voters actually have a better handle on Obama than McCain, and frankly doesn't speak well of either man. Obama won the Democratic nomination by running out the clock on Hillary Clinton. Since then, he's been giving a bunch of speeches trying to be inspirational and high-minded, but which really amount to nothing but pompous windbaggery. Add it all up and he hasn't said or done anything of substance in at least six months. This isn't the time where McCain or the GOP have to go negative on Obama. The opponents are handling that just fine.

Listening to McCain though, at any moment you almost expect him to talk about how many miles he had to walk from his log cabin to the schoolhouse. What decade is this guy living in? If it's not this one, he needs to catch up in a hurry.

McCain another obvious problem as well. He's a Republican running in a Democratic year. He's got to create a motivation for his candidacy based on what it means for America if he's in the White House, one that's compelling enough to overcome the inertia in the voters' frame of mind. When push comes to shove, I fear the real self-justification McCain's candidacy is that he has moral credibility above any other national political figure because he endured a North Vietnamese prison camp. Even when he talks about how he's motivated to serve America, I ask myself what America gets out of that deal.

But somehow, if McCain can shift the object of his intent away from his own self-regard and toward the issues facing American, there's a window open to defuse both of these problems at once. He can say, that if we're willing to take the pain of seeing things as they are, we can actually do some things about our problems instead of wallowing in despair of how bad the situation is. Ie, let's talk about the elephant in the living room instead of trying to avoid it. In particular, the opportunity is ripe for McCain to emphasize his party affiliation as a Republican and to ask the voters to vote for him as a Republican and other downticket Republicans too.

1. To the voters that turned against the party last election, he can say that the GOP lost a whole bunch of seats in 2006 and deserves the low esteem it's held in right now. But 2008 is a new election and as bad as the Republicans have been and for all the flaws they have now, they are ones more in tune with the problems the country faces now.

2. Only the Republicans intend to drill for oil or intend to produce more energy in any form for that matter. The Republicans aren't against conservation or wind power or solar energy, but our economy can't function if these are the only options available.

3. The Republicans are going to bring the troops home from Iraq as soon as we're not going to lose everything they've worked for for years as soon as they're gone. In fact, as the violence in Iraq has abated, President Bush has brought some of the troops home already, and intends to bring more home later this year. The Republicans aren't maintaining the troops there out of some bloodlust, but to complete a particular mission, a mission which actually is being completed.

There are other possibilities along the same lines. Immigration would be a good possibility, but McCain is on the wrong side of it. Inflation, pork barrelling by Congress, the value of the dollar, the housing market, the crunch are also plausible if McCain or the party can find an angle on them. In any case, the essence is that McCain can credibly address the problems the voters are most afraid of in a way that cuts through blustery spin or partisan flackery.

Retirement Insecurity

My padre friend Pierre asked me what I thought about Social Security and Medicare in one of the comments, and this piece by Noah Millman is as good a place as any to start.

Noah is right is to emphasize that taxes on wage-earning, ie payroll taxes, are usually thought to be the most economically destructive of all usual forms of taxation. But, that's the one we have, and as the comments to that post illustrate, any attempt to reengineer some different form will run into strong resistance based on the fact that there is no consensus underlying rationale for these programs, something that's been more or less papered over for twenty years or so.

More important than that, the biggest problem with Social Security (and the other entitlement programs too) is that you can't put ten pounds of s**t in a five pound bag. At the moment, an individual contributes up to a maximum of $15K/year to Social Security (counting employer and employee contributions), and at retirement receives a maximum benefit of $2185/month. That latter number is very much worth dwelling on. Unless you're a monk, it's difficult or impossible to maintain one's standard of living on $2185/month (and even for monks, it only works if you're not the one responsible for the financial health of a monastery). If you're relying on Social Security to fund your retirement, you've got the same problem whether you retire in 2042 or next Tuesday. Of course, if you retire in 2042, the benefit will be higher, but it will be the wage and price-adjusted equivalent of $2185/month now. And, this is leaving aside all questions of solvency.

This means that retirees are going to have to independently fund a substantial part of their standard of living. But, the money available to do just that ($15K/year) is already going to Social Security. Oddly enough, George W Bush never went through this train of argument during his Social Security reform period right after the 2004 elections (he emphasized solvency problems instead). If we're looking for reasons to bash our hapless Prez, that would figure in my top ten somewhere.

Corruption and Paternalism

Back to our regularly scheduled programming, why hasn't McCain, with all his hard-earned independence, been able to take any advantage of the unpopularity of Congress? My theory is that McCain has demonstrated independence from (and opposition to) the greasy logrolling culture of the Congressional establishment. But unfortunately he significantly shares in its paternalist worldview.

The more I think about it, the more I suspect that explains many or most of the issues McCain has taken a position on. McCain's positions on immigration, campaign finance reform, opposition to tax cuts, ANWR, all have an ethos of "Eat your vegetables, Daddy knows best."

In the case of immigration, there's strong grassroots activism that insists that Daddy plainly does not know best, but that's a little bit of an outlier. I don't think McCain's stance on these issues affect his political fortune much one way the other. But his persona does.

The voters are hungry for someone who can talk turkey about their biggest collective fears: gas prices, Iraq, the stability of the economy. Except for Iraq, McCain has not done that yet, and maybe never will.

The Perfect Lose-Lose Proposition

This is a bit far afield of the usual topics of this blog, but this deal makes no sense to me.

A Respite Not A Reprieve

Is the price of oil today too high given the fundamentals? Could be. Is it
too low? Could be. But one thing I'm sure that's too high is the confidence
on the part of those who insist they know the answer.

James Hamilton

Particularly dramatic in this growth has been China, whose petroleum
consumption between 1990 and 2006 increased at a 7.2% annual compound rate. It's always amusing to project these impressive exponential growth rates. If that rate of growth were to continue, China would be using 20 million barrels a day by 2020, about as much as the U.S. is today. By 2030, China would be up to 40 mb/d, twice the current U.S. consumption.

.............

To summarize, I think we will see some net production gains this year, and
expect this to bring some relief for oil prices. But I cannot imagine that the
projected path for China above will ever become a reality. Oil prices have
to rise to whatever value it takes to prevent that from happening.

James Hamilton

Over the last couple of weeks, oil has gone from grasping for $150/bbl to sitting just over $120/bbl. So if oil continues to decline another couple of dollars (and I have no reason to think it won't), then strange as it seems oil will have dropped 20% from its high and we can officially declare a bear market for oil.

At the risk of stating the obvious, we don't know how long this will last. But now that the sheer shock of oil prices has abated a little bit, we have the opportunity to look at the bigger picture. We've all heard the story about how industrialization in China and India is going to drive the price of oil up, but the story doesn't end there. In the short term we can maximize oil production and in the long term we will be able to use electric power for transport.

The oil crisis has been brewing for a long time, and it will take a long time to unwind. By all means we need to drill for oil in ANWR or whereever we can find it, but even if we do, and even if the price of oil goes down to $70 or so, the oil crisis won't be over until we have a sustainable, reliable, and affordable source of energy for transport, and after that for energy in general.

Presidential Pincer Revisited

Six weeks ago, I was a little more bullish for McCain than I am now.

McCain's campaign seems to me to be floundering. I was optimistic that he could establish some critical distance from the Bush Administration, and I think he has. But, we've seen too much of the crotchety old guy persona, a la Bob Dole, and it's not wearing well. We're in a different spot than 1996 and there is no general desire for a changing of the generational guard like there was then.

But, we are in a difficult situation with real problems that have to be addressed. So far, McCain's energy policy is to support offshore drilling but oppose ANWR development. What is the rationale for this? If anything it makes more sense the other way, to get some more energy resources to the market without spoiling the view for some coast-dwelling Floridians. The whole thing smacks of a baby-splitting exercise from a pol who thinks the political process controls a lot bigger fraction of reality than it actually does.

If he can show that he can see outside the Beltway cocoon and really gets it wrt the scope of today's particular issues, he'll probably become President. As it happens I suspect this will be a matter of teaching old dogs new tricks.

Update: one more thing. As I mentioned before, I think I overestimated McCain's ability to swim against the tide as an independent in a Democratic year. I do think that he's established that he's not George W Bush, but that's not enough. Because the underlying environment is unhospitable for Republicans, he has to define very concretely the rationale for his candidacy, and frankly I don't know what it is.

If I were directing his campaign, I would have the candidate assert that he, John McCain appreciates the depth of our problems, and is uniquely prepared to get us through the tough times that lie ahead. It's credible (to me at least), and it ties in all the big-ticket items in this election cycle: Iraq, housing, debt, energy, inflation, etc. It also of necessity distances him from the Bush Administration, and differentiates him from Obama, who seems prepared to read from a Teleprompter and nothing else.

If he were to come up Boone Pickens-like energy plan, people will listen. If he just says, "Get off my lawn!", he'll be ignored.

The Saudis

Will the Saudis increase oil production?

Frankly, I'd be happy just to know they could if they wanted.

The oil picture

In the current oil market it doesn't make very much difference whether the price of oil is driven by speculation or by fundamentals, as this slightly geeky article points out. The quasi-circuit flow diagram about halfway down is especially useful. In any case,

The equilibrium expression is AI = DI, and when this situation prevails, s = h, and price is constant (i.e. Δp = 0)! Put another way, a stock equilibrium implies a flow equilibrium, while a flow equilibrium does not imply a stock equilibrium. In this type of model expectations are very important because of their influence on desired stocks, and in the real world expected prices are undoubtedly more difficult to describe than via the simple implicit expression shown in the figure – i.e. p^e = f(p) – but right or wrong it is these expectations that are and have always been a key element in determining the oil price, however it was only when the oil price moved past $100/b that they were given their true weight in the scheme of things.

In other words, because of demand from China, India and the usual suspects, the current expectation is that the price of oil will be dramatically higher in the future than it is now. Therefore, the market adapts by trying to build inventory. The price of oil goes up, because whatever isn't consumed goes to the inventory stock. The increase in the price ought to cause inventory to build but it hasn't. So the bullish price pressure remains.

Among other things, selling off the Strategic Petroleum Reserve doesn't fix the problem, and in an odd way represents the opposite of the solution. The price of oil will go down when people see that there's lots of oil around that nobody knows what to do with.

Dude, where's my recession?

This is the meme for those who have noticed that the American economy isn't as bad as people think. And for now, the truth is the American economy is in decent shape. The current data wrt employment and growth are ok if not especially great.

Nonetheless we should not break any arms patting ourselves on the back. The real problem with the economy is the widespread anxiety that things will get substantially worse starting from now. This anxiety is not at all irrational in my view. The credit crisis has more or less been weathered, but we are 50-50 at best to escape the weak dollar, and at the moment there is no answer at all for high oil prices or inflation.

Ever since the Great Depression, American economic downcycles have been milder and milder according to typical common measures. This one might be an exception.

McClellan

I'm with David Frum and Peggy Noonan on this. The public pile-on of Scott McClellan isn't worth it.

It's the chickens coming home to roost for President Bush. President Bush got put a premium on loyalty, and sacrificed competence to do it. Well, the jobs in the White House are big jobs, and as a rule when people are situated in over their heads, they crack. In McClellan's case, W didn't even get loyalty. Though by now, it doesn't make much difference.

The only thing I'll add is if people like McClellan want to write books like this, I just wish they'd stick to White House dirt. I don't care very much about what Scott McClellan thinks about Iraq. Colin Powell or Chuck Hagel has the right to an independent opinion. Scott McClellan doesn't.

Presidential Pincer

Or, why I'd be bullish on John McCain. So far, we've seen that Barack Obama has a big problem with downscale white voters. "Clinging" to guns and religion, Mrs. Obama's lack of pride in America, etc., have rubbed them the wrong way. Unless Obama can pull a rabbit out of the hat with his choice of veep, I suspect that he will never be in play for states like Tennessee, West Virginia, or Kentucky. That's not good news for the Obama campaign, but when push comes to shove Mr. Obama can afford to lose them. It will also hurt in Michigan, Ohio, and Pennsylvania, which are a lot more important in the grand scheme of things. But even though this is somewhat old news, it's only half the story.

What we haven't seen yet, however, is the other half of the pincer. It has flown almost completely under radar so far, but the prospect of Barack Obama as POTUS pushes the stock market down. Expect to see a lot more of this before the election. The stock market probably prefers Republicans to Democrats in the abstract, but I expect it to be especially sensitive to the Presidential race because of the likelihood that the Dems will sweep all the elected arms of the federal government. The investor class is much bigger now than it was, say, 25 years ago. Many upscale voters would otherwise vote for Barack Obama might think again when the stock market gives a sneak preview of what the Obama Presidency might be like.

It's important to emphasize however, that this silver lining for the GOP is only good at the Presidential level, and only works there to the extent that it offsets somewhat, the huge advantage the Democrats currently enjoy. Independently of John McCain, the GOP has to figure out what it stands for and act on it, to be a credible party after this November.

You can't stop him, pt II

At the Corner, Rich Lowry suggests that the Republicans should campaign on cheap energy (tied in with other family-based cost of living issues). This is an excellent idea, and I would heartily recommend it, except for the fact that it is completely beyond our power to deliver on. And given that GOP credibility is already at a low, it's not a good idea to push it even lower.

Let's all say it together now, you can't stop high energy prices, you can only hope to contain them. This is something that both the Right and Left (as well as the people at large) have to appreciate and adapt to. We've made some progress on that front, but clearly there's still a long way to go.

Conservatives, the good news

This thumbsucker piece from George Packer in The New Yorker has been all the rage in the blogosphere over the last couple of weeks or so. Let's stipulate that the share price of American conservatism is as low right now as it's ever been in my lifetime. Still I'm less than impressed. I could quibble with this or that meme of Packer's argument, but let's look at the big picture instead.

In terms of any real integrity liberalism (and any other variant further Left) in America has been a spent force since the time Jimmy Carter Administration. It seems a bit odd now, but intelligent people of good will used to believe that the government could take money out of the private sector and solve poverty or other big-ticket societal problems. It looked good for a time, but in the Seventies that bumped up against reality, and in that respect nothing has really changed since then.

We should expect that the voters can and likely will send the GOP out to the wilderness for a while. But whether it's about energy, demographics, health care or Islamic radicalism ultimately the body politic will want answers instead of excuses and liberalism doesn't have any.

Oil, the good news

The big unknown in the oil market is the price elasticity of demand for the industrializing nations. In plain English, there is a price where China, India, and smaller countries which are transitioning out of the third world cannot afford the cost of the oil required for this transition, and if no substitutes are available, such transition will have to stop.

For those cheerleading for the price of oil to go down, this is a hopeful sign. Even here, things are still not simple. The demand for oil among industrializing nations is inflated by subsidies, but not created by them. If the market price per barrel of oil is $200, how many barrels does the Chinese or Malaysian consumer want, assuming he has to pay full price? Nobody knows exactly, but there is one fact that is very ominous, for me at least. Per capita consumption of oil in China could triple, and it would still be less than Mexico. My guess is that there is a lot more pain to be felt before this beast is back in the cage.

The Wire, RIP

It's been a few months now that The Wire concluded its run on HBO, and I meant to write something sooner, but better late than never I guess. It's a five-season epic about modern Baltimore and its corruptions, including (just for starters) drug dealers, cops, dockworkers, lawyers, newspapers, politicians, and the education system. If you haven't seen it, go out and get the DVDs. Otherwise, it's pretty difficult to describe the narrative immensity of the show. Critics like to throw off parenthetical comments like, "Obviously The Wire is best show ever made for television but....." I don't know if I agree with that or not, but at the minimum it's not a ridiculous idea.

There's too much in it to rehash here, but for now I'll just mention that the show sometimes succeeds in spite of itself. David Simon, one of the major creative forces behind the show, is a notoriously bitter and angry man. And he freely admits to using the show as a vehicle to settle scores, both personal and ideological. But for me at least, the show isn't compelling because of the failures of capitalism in modern urban America, but rather because we care, very much, about the characters in it, whether cops or criminals. And we care, in spite of the fact that their lives are much different than ours in bourgeois America, or maybe even because of it.

State of the Arsenal

I haven't updated this blog with any football (soccer) commentary for a while. For a moment it looked as though my football team was looking much better than my political party, but for the last two months of the season Arsenal FC went on a tailspin to make Alan Keyes proud. From first in the League and sitting in the catbird seat, the Gunners went on a stretch where the earned a whole eight out of 24 League table points (and got dumped out of the FA Cup and the Champions League for good measure). Even so, their eventual third place finish was higher than most pundits predicted before the start of the season, so some supporters see the glass half full on that score.

I personally am less optimistic, at least as with respect to the team as it currently stands. If I thought last year's relative success was a stepping stone to bigger and better things, the disappointment at the end would be tempered. But, the team's current needs are such that addressing them will require team management to do things which are outside their comfort zone. We are about to enter the summer transfer season, and the events that occur then will determine, to a substantial extent, the competitiveness of the team for next season and probably longer. For the 11 years that Frenchman Arsene Wenger has been manager, the team has preferred to buy exceptional, young, raw largely foreign talents and mold them into all-around players over the course of a couple seasons. The current squad has too few players for number of games that the team is expected to play over a season, therefore they need to acquire more immediate contributors and fewer prospects.

This is to say nothing of putting a group of individual talents together as cohesive team, or the difficulties any new acquisitions may face, in some cases adjusting to a new team, new League, new country, and new language. My fear is that Arsenal's unofficial motto will be the reverse of the Chicago Cubs', "Wait till last year."

You can't stop him.......

.........you can only hope to contain him.

Among the various things that came out of the basketball career of Michael Jordan, one of them was the introduction of this particular cliche to the sporting world. As it happens, it also describes the current oil market. The important point is that oil prices are high because of a real supply-demand imbalance that has been coming for five years or so and is likely to continue for at least another few years more. This isn't to say that there aren't lots of oil speculators around, but in the end they are not responsible for $135/bbl oil.

I've changed my my mind on this a little bit, largely because of two things.

1. The political sclerosis, NIMBYism, anti-Americanism and other bugaboos surrounding energy production are very real, to the point where we might as well consider them just as real as geological survey results. Oil exploration demands a great deal of energy _and_ time. If we had done certain things differently five or ten years ago, things would be different.

2. The limiting factor in oil production isn't the amount of oil available, but the rate at which it can be extracted. This is obvious in context, but has important consequences for time frame. A new oil field might have X billion bbls of oil there, and as technology improves the percentage that is recoverable goes up. But, the amount that can satisfy the immediate demand in the market might be marginal and in any case is determined by the extraction rate.

The world oil market won't be in equilibrium until we know the point where the price is too high for China and other countries in the early stages of industrialization to continue on that road. If we can look into the future far enough there is reason to be optimistic. Unlike the rest of the developed world, America likes to solve its problems instead of pretending that they don't exist. There's no reason why this has to be an exception. But for that to happen, the American people have to come to full appreciation of the scope of the problem and that hasn't happened yet, though it probably will soon.

Barack's supporters would like.....

.....to thank all the little people.....

.....for getting out of his way.

For the moment let's stipulate that, by now, Barack Obama has the Democratic nomination. It's been clear for a while that this race would be a victory for somebody's identity politics, it was just a matter of whose. And in Obama's case, I don't think it's exclusively, or even primarily, a racial thing. It's more that Obama represents the ever-burgeoning army of lawyers, traders, academics, and other manipulators of information that characterize the New Economy. In particular, he represents them in an identity politics, class-interest way, Presidential affirmative action for those who could care less about which NASCAR driver is switching his racing team.

A few years ago Minneapolis attorney David Lebedoff wrote a short book called _The Uncivil War_. He calls such people the New Elite, and contrasts them to the Left Behinds. The Left Behinds aren't necessarily the present-day Joads, (though clearly Obama is having big problems with those people as well). No, the Left Behinds are those who, no matter how successful they are, have allowed themselves to be defined in the context of family and local community, with all the constraints that come with it. The New Elites, in their own minds, trandscend all of that, which IMO is why so many of them are genuinely angry that to find out that the controversy over some circus clown like Rev. Jeremiah Wright is actually important to voters.

I don't intend to support Obama for President, but I'd like to have some sympathy for him on that score. The problem is, in the United States the President is the head of state as well as the head of government. Obama is just fine as head of state but is woefully unprepared as head of government. I think a fair number of Obama's supporters would see that for themselves if they willing to take a critical look at him, which unfortunately they're not.

Barack Obama just came out in favor of the most recent Farm Bill, now headed for a veto by President Bush. Even by Washington standards this was bloated, special-interest serving don't-look-at-the-sausage-making legislation. I don't think there are too many disinterested people who support this bill with a straight face. Apparently Barack Obama is one of them. There's at least a decent chance we'll have a President Obama in our future, and for me at least, the reality of a President Obama is much less appealing than the fairy tales of the Obama campaign.

Whistling Past the Graveyard, pt. II

For reasons I don't completely understand, the Democratic race is thought by many to be effectively over as of yesterday's primaries. I don't know if I believe that or not, but for the moment let's take that as a given, and that Barack Obama will be the Democratic nominee.

Barack Obama has had a bad month, but we shouldn't view this as a revival of the GOP. Jeremiah Wright, Bittergate, Rezko, and lapel pins might be reasons not to vote for Obama, but they will never be positive reasons to support the GOP. The GOP is in urgent need of rebranding, and this isn't it. You could say there isn't much to do right now anyway, but the first thing to do is regain credibility on domestic spending. The GOP has prominent figures who have fought the good fight on this, especially Sen. McCain and Sen. Coburn.

If I had to choose the between a GOP Congress and a Democratic President or the other way around, I'd rather have the Republicans hold Congress. Unfortunately, that's a total pipe dream at this point. Even if John McCain does win in November, the GOP will still have to clean out its stables to be a viable party going forward. We might as well start now.