“Treasure Island Trauma”: Living In A World Whose Leaders Seem Determined Not To Learn From Disaster
A couple of years ago, the journalist Nicholas Shaxson published a fascinating, chilling book titled “Treasure Islands,” which explained how international tax havens — which are also, as the author pointed out, “secrecy jurisdictions” where many rules don’t apply — undermine economies around the world. Not only do they bleed revenues from cash-strapped governments and enable corruption; they distort the flow of capital, helping to feed ever-bigger financial crises.
One question Mr. Shaxson didn’t get into much, however, is what happens when a secrecy jurisdiction itself goes bust. That’s the story of Cyprus right now. And whatever the outcome for Cyprus itself (hint: it’s not likely to be happy), the Cyprus mess shows just how unreformed the world banking system remains, almost five years after the global financial crisis began.
So, about Cyprus: You might wonder why anyone cares about a tiny nation with an economy not much bigger than that of metropolitan Scranton, Pa. Cyprus is, however, a member of the euro zone, so events there could trigger contagion (for example, bank runs) in larger nations. And there’s something else: While the Cypriot economy may be tiny, it’s a surprisingly large financial player, with a banking sector four or five times as big as you might expect given the size of its economy.
Why are Cypriot banks so big? Because the country is a tax haven where corporations and wealthy foreigners stash their money. Officially, 37 percent of the deposits in Cypriot banks come from nonresidents; the true number, once you take into account wealthy expatriates and people who are only nominally resident in Cyprus, is surely much higher. Basically, Cyprus is a place where people, especially but not only Russians, hide their wealth from both the taxmen and the regulators. Whatever gloss you put on it, it’s basically about money-laundering.
And the truth is that much of the wealth never moved at all; it just became invisible. On paper, for example, Cyprus became a huge investor in Russia — much bigger than Germany, whose economy is hundreds of times larger. In reality, of course, this was just “roundtripping” by Russians using the island as a tax shelter.
Unfortunately for the Cypriots, enough real money came in to finance some seriously bad investments, as their banks bought Greek debt and lent into a vast real estate bubble. Sooner or later, things were bound to go wrong. And now they have.
Now what? There are some strong similarities between Cyprus now and Iceland (a similar-size economy) a few years back. Like Cyprus now, Iceland had a huge banking sector, swollen by foreign deposits, that was simply too big to bail out. Iceland’s response was essentially to let its banks go bust, wiping out those foreign investors, while protecting domestic depositors — and the results weren’t too bad. Indeed, Iceland, with a far lower unemployment rate than most of Europe, has weathered the crisis surprisingly well.
Unfortunately, Cyprus’s response to its crisis has been a hopeless muddle. In part, this reflects the fact that it no longer has its own currency, which makes it dependent on decision makers in Brussels and Berlin — decision makers who haven’t been willing to let banks openly fail.
But it also reflects Cyprus’s own reluctance to accept the end of its money-laundering business; its leaders are still trying to limit losses to foreign depositors in the vain hope that business as usual can resume, and they were so anxious to protect the big money that they tried to limit foreigners’ losses by expropriating small domestic depositors. As it turned out, however, ordinary Cypriots were outraged, the plan was rejected, and, at this point, nobody knows what will happen.
My guess is that, in the end, Cyprus will adopt something like the Icelandic solution, but unless it ends up being forced off the euro in the next few days — a real possibility — it may first waste a lot of time and money on half-measures, trying to avoid facing up to reality while running up huge debts to wealthier nations. We’ll see.
But step back for a minute and consider the incredible fact that tax havens like Cyprus, the Cayman Islands, and many more are still operating pretty much the same way that they did before the global financial crisis. Everyone has seen the damage that runaway bankers can inflict, yet much of the world’s financial business is still routed through jurisdictions that let bankers sidestep even the mild regulations we’ve put in place. Everyone is crying about budget deficits, yet corporations and the wealthy are still freely using tax havens to avoid paying taxes like the little people.
So don’t cry for Cyprus; cry for all of us, living in a world whose leaders seem determined not to learn from disaster.
By: Paul Krugman, Op-Ed Columnist, The New York Times, March 21, 2013
“Arizona Versus The Right To Vote”: A Law Whose Sole Purpose Is To Disenfranchise Poor And Minority Voters
As part of a broader anti-immigration initiative in 2004, Arizona passed Proposition 200, a law requiring voters to provide proof of citizenship before registering to vote. One person affected by this law was Jesus Gonzalez, a custodian and naturalized American citizen who twice had his registration rejected by the state. Arizona couldn’t verify his naturalization number and erroneously identified his driver’s license as belonging to a non-citizen. Gonzalez’s case has reached the Supreme Court, which heard oral arguments about the constitutionality of Proposition 200 on Monday. The Court should rule that Arizona’s burdensome requirements are inconsistent with federal law and therefore illegal.
The Supreme Court has dealt with Republican legislators’ attempts to suppress voting before. In a highly dubious 2008 decision, the Supreme Court found that an Indiana statute—requiring a show of ID before hitting the ballot box—was not unconstitutional on its face, although it left open the possibility that the statute might be unconstitutional as applied. (The Indiana law was ultimately struck down by the Indiana Court of Appeals.) Because the Arizona law concerns voter registration, it is subject to another form of legal challenge.
In 1993, Congress passed the National Mail Voter Registration (or “Motor Voter”) Act, which among other things created a federal form that would streamline the registration requirements. The law mandates that “each State shall accept and use” the federal form. As the story of Jesus Gonzalez highlights, Prop 200 placed an additional set of requirements on Arizonans before they are able to register. The key question presented by the challenge to Prop 200 is whether the Arizona requirements are inconsistent with federal law. If so, because of the Supremacy Clause of Article VI of the Constitution, the Arizona law is “pre-empted” by the Motor Voter Act and is invalid.
The case for pre-emption in this case is clear and persuasive. The statute unequivocally requires states to use the federal form. To permit states to add additional burdens on registration is inconsistent with the text and purpose of the statute, which was designed to create a streamlined and uniform process. Determining qualifications for people voting for federal offices is a clear federal power. Justice Kagan observed at the oral argument that the Arizona law “essentially creates a new set of requirements and a new form.” Prop 200, therefore, is at war with the federal statute whose purpose was to create a clear process for registration. As the Obama administration noted in its amicus brief, to uphold the Arizona law “would thwart the central purpose of [Motor Voter]: to streamline the process of registering to vote for federal office.”
Justice Scalia, while somewhat more restrained than in the previous oral argument dealing with an Arizona law that conflicted with federal authority, was typically candid about his political support for the objectives of the Arizona vote suppression initiative. Leaving little doubt about his sympathy for the Arizona law, he mocked the federal registration requirements, which make it a criminal offense to misrepresent one’s eligibility to vote. “So it’s under oath. Big deal.” Scalia snorted. “If you’re willing to violate the voting laws, I suppose you’re willing to violate the perjury laws.”
Scalia’s arguments are problematic for two reasons. First, whether or not Scalia thinks the federal requirements are sufficient is beside the point—Article I Section IV gives Congress the power to “make or alter” state voting regulations, so the judgment about what requirements are sufficient rests with Congress, not with Arizona or the Supreme Court. And even on its own terms his argument that the threat of a perjury conviction represents an insufficient deterrent is unpersuasive. Arizona provides no evidence that this kind of voter fraud is a problem. The problems of individual voter fraud the bill allegedly addresses are essentially non-existent, and even in theory it is impossible for individual fraudulent voters to alter the course of an election. And, in particular, it is extremely implausible to think that the illegal immigrants the bill targets are likely to risk attracting the attention of federal authorities by committing perjury on a form submitted to the federal government. It is hard to avoid the conclusion of one Arizona legislator that “was never intended to combat voter fraud. It was intended to keep minorities from voting.”
Scalia also mocked the idea that the additional Arizona requirements represented a substantial burden. “Enclosing your driver’s license number is that immense barrier?” he sarcastically asked Patricia Millet, the attorney representing the challengers. But the data proves Scalia is dead wrong to dismiss the extent of vote suppression caused by the initiative. “The district court,” Millet pointed out, “found that 31,550 people were rejected from voting because of Proposition 200.” This is a serious additional burden which shows that the inconsistency with federal law is not merely formal. The vote fraud Scalia and other Republicans are purportedly concerned with is imaginary, but the burdens created by the Arizona law are quite real.
Arizona’s latest attempt to interfere with federal law is particularly problematic given that it concerns the right to vote. Voting is a field in which greater uniformity is a particular virtue. The fact that standards for registration and voting vary not only between states but within states represents “local control” fetishism at its most inane. State and local administration of voting isn’t merely inefficient; the purpose and effect of this decentralization has been to disenfranchise poor and/or minority voters. In this case, Congress appropriately acted to create more uniform and streamlined standards for vote registration. Arizona should not be allowed to contradict federal law and invite other states to similarly disenfranchise voters.
By: Scott Lemieux, The American Prospect, March 19, 2013
“Why I Am No Longer A Republican”: It Has A Lot To Do With The Iraq War
This week has been filled with Iraq War recriminations and re-evaluations. While official Washington was strangely silent about the 10th anniversary of the start of the conflict, journalists and intellectuals have been (predictably) more vocal. Prominent neocons have reaffirmed, with minor caveats, their support for the war. Some (erstwhile) liberal hawks have issued full-throated mea culpas. Other liberals, meanwhile, have tried to have it both ways, denouncing the war they once supported while praising its outcome. And of course, lots of people who opposed the war from the beginning, on the right and left, have declared vindication.
My own position on the war fits into none of these categories. Ten years ago, I was working as an editor at First Things, a monthly magazine that’s aptly been described as the New York Review of Books of the religious right. (And no, that’s not oxymoronic.) The magazine strongly supported George W. Bush’s original conception of the War on Terror, and so did I. In his speech to Congress and the nation on September 20, 2001, Bush stated that the United States would seek to decimate al Qaeda as well as every other terrorist groups of global reach. To this day I remain committed to that goal and willing to support aggressive military action (including the use of drone strikes) to achieve it. But thanks in large part to the Iraq War, I no longer consider myself a Republican or a man of the right.
The reason I continue (like President Obama) to support the original vision of the War on Terror is that it was and is based on a correct judgment of the fundamental difference between (stateless) terrorists and traditional (state-based) military opponents. Even the most bloodthirsty tyrant will invariably temper his actions in war out of a concern for how his adversary will respond, and he will likewise act out of a concern for maintaining and maximizing his own power. Political leaders can thus be deterred by actions (and threats of action) by other states. Members of al-Qaeda-like groups, by contrast, seek in all cases to inflict the maximum possible number of indiscriminate deaths on their enemies and demonstrate no concern about the lives of their members. They are therefore undeterrable, which means that the only way to combat them is to destroy them.
Unfortunately, the right began to disregard the crucial distinction between terrorists and states right around the time of the January 2002 State of the Union speech, when President Bush broadened the scope of the War on Terror to include an “axis of evil” consisting of Iraq, Iran, and North Korea. After that, the mood among conservatives began to grow fierce. Some columnists denied the effectiveness of deterrence against states and advocated unilateral preventive war to overthrow hostile regimes instead. Others openly promoted American imperialism. Still others explicitly proposed that the United States act to topple the governments of a series of sovereign nations in the Muslim Middle East, including Iraq, Iran, Syria, Lebanon, Egypt, and Saudi Arabia.
And these were the intellectually respectable suggestions, published in mainstream newspapers and long-established journals of opinion. Farther down the media hierarchy, on cable news, websites, and blogs, conservatives of all stripes closed ranks, unleashing a verbal barrage on any and all who dissented from a united front in favor of unapologetic American military muscle. The participants in this endless pep rally were insistent on open-ended war, overtly hostile to dissent, and thoroughly unforgiving of the slightest criticism of the United States abroad. Self-congratulation and self-righteousness ruled the day.
Alarmed by the transformation on the right and in the magazine’s offices, I wrote a lengthy email in October 2002 to a number of my fellow conservatives, explaining why I thought it would be a serious mistake to turn Iraq into the next front in the War on Terror. My reasons had nothing to do with the administration’s claims about Saddam Hussein’s arsenal of weapons of mass destruction; like all commentators on the right, most independent observers, and large numbers of intelligence agencies around the world, I assumed that Hussein either possessed or was actively working to acquire such weapons. Neither was I overly concerned about worldwide public opinion. I objected to what I judged to be three erroneous assumptions on the part of conservatives inside and outside the Bush administration.
First, I believed the administration was wrong to claim that Hussein could not be deterred. In fact, he already had been. In the first Gulf War, Hussein refrained from using chemical weapons against our troops on the battlefield and against Israel in his inept Scud-missile attacks on Tel Aviv. Why? Because before the start of the war James Baker and Dick Cheney sent messages through diplomatic channels to the Iraqi dictator, informing him that we would respond to any use of WMD with a nuclear strike. Israel’s Defense Minister Moshe Arens made similar threats. And they worked. Yes, Hussein was a brutal dictator, but he could be deterred.
Second, it was foolish to believe (as Paul Wolfowitz and others on the right apparently did) that overthrowing Hussein would lead to the creation of a liberal democracy in Iraq that would, in turn, inspire democratic reforms throughout the Middle East. This view displayed an ignorance of (or, more likely, indifference toward) the competing ethnic and religious forces that prevailed in different regions of Iraq as well as a typically American optimism about the spontaneous capacity of all human beings in all times, places, and cultures for self-government. Rather than inspiring the formation of liberal democracies throughout the region, an Iraqi invasion could very well empower the very forces of radical Islam that the War on Terror rightly aimed to destroy.
Third, the right was making a serious mistake in assuming that doing nothing about Iraq was inevitably more dangerous than doing something. The U.S. got caught with its pants down on 9/11, and the fear of it happening again was leading the Bush administration to formulate policies based entirely on negative evidence. The super-hawks advocating preventive war seemed more persuasive than those urging a more cautious approach because the former placed an ominous black box at the core of their deliberations — a black box containing all the horrors of our worst post-September 11 nightmares. But reasoning on that basis could be used to justify absolutely anything, and so, I concluded, it was a reckless guide to action.
None of my friends and colleagues on the right responded to the arguments in my email, and few even acknowledged receiving it. By breaking from the right-wing consensus in favor of unconditional bellicosity, I had gone rogue. Over the next year and a half, as the victorious invasion became a bloody mess of an occupation and these same friends and colleagues refused to admit — to me or to themselves, let alone to the public — that they had made a massive mistake, I drifted away from the right and never looked back. (There were other factors, too.)
My dissent had nothing to do with principles; it was a matter of prudence or judgment. On foreign policy, Republicans had become the stupid party. And so it remains 10 years later.
By: Damon Linker, The Week, March 22, 2013
“The Devil Is In The Data”: Simply Adding More Observational Data Won’t Expand The Ranks Of The GOP
GOP’s “Growth and Opportunity Project,” which details a plan for revitalizing the Republican Party in the aftermath of the 2012 defeat, is necessarily broader than it is deep. There is, however, a topic that will need to be thoroughly explored if the Republican Party is to successfully execute this ambitious plan.
Two words were used nearly 300 times throughout the report: “data” and “testing.” One word—”experiment”—was not mentioned at all. But experiments are the only type of test that can produce the kind of data the GOP needs.
Put simply, “data” is information about the world we live in, and it comes in two types: “observational” and “experimental.” “Observational” data is static; it’s information about the things as they are, or were. For example, voters who are pro-life are also less supportive of gun control. That’s the world as it is. But it doesn’t tell us whether being pro-life causes people to be more pro-gun or whether a pro-life message will decrease support for gun control.
“Experimental” data is dynamic; it’s information about what causes things to change and how things could be. Experiments show us how specific messages or modes of contact—like telephone calls, mailers or TV ads—push or pull on voter opinion and behavior. Experiments open our eyes to a counterfactual universe: what if every citizen watched this ad, knew that fact, or was visited at their door by a volunteer? Will it shift the vote or turn more people out to the polls? Will it work with some voters, but not others, or even cause a backlash?
The experimental method is simple in concept, but difficult in practice. The core of a true experiment is random assignment of a large number of test subjects to “treatment” and “control” groups, like a clinical drug trial. With large numbers, random assignment ensures there is no systematic bias in who ends up in each group. We can then attribute any difference in the outcome between the “treatment” and “control” group, whether that’s blood pressure or support for a candidate, to the effect of the “treatment.” It’s the only way to confidently identify a causal relationship.
This all might sound far too fussy and academic, even philosophical, to be a core part of a political effort. But this is the new world of politics in which we’re already living.
What made the Obama campaign so accurate in their prediction of the vote across contested states was the use of experimental results from the “lab” and the “field” in their voter modeling. Because they had a large amount of experimental data, showing them how different kinds of people shifted in response to various messages (toward or away from Obama, greater or lesser likelihood of voting), they could predict with astonishing accuracy the aggregate results of their efforts.
Simply adding more observational data won’t expand the ranks of the GOP. In Iowa’s 2008 caucus, the Romney campaign turned out just under 30,000 votes and lost badly to a late-surging Mike Huckabee. Romney maintained his database on the state’s voters. In 2011, his campaign commenced a quiet but ambitious “data-driven” effort to win Iowa. All the experience, information and algorithms hard-won over the last four years were plowed into a massive persuasion and turnout effort. But when their work was completed and the counting was done, Romney received just under 30,000 votes once again. Four years and millions of dollars later Romney had earned about 140 fewer votes and a loss to yet another late-surging social conservative.
Observational data and the modeling it generates are cold and static. And no statistical technique, regardless of its sophistication, can overcome the inherent limitations of observational data. In contrast, experimental data and the modeling it generates are alive and dynamic.
We will never know what messages, digital tactics or other campaign tools work or are a waste without experiments. As Alan Gerber, Donald Green and Edward Kaplan—two of whom are political scientists from Yale who brought experiments out of academia and into Democratic politics—conclude, “unless researchers have prior information about the biases associated with observational research, observational findings are accorded zero weight [in a test of a causal proposition] regardless of sample size, and researchers learn about causality exclusively through experimental results.”
Big, integrated, and clean observational data are a necessity. But it isn’t sufficient. Mathematician and physicist Henri Poincaré claimed, “experiment alone can teach us something new; it alone can give us certainty.” I’d only caution that certainty is not something we can expect of this world. But experiments bring us as close to glimpsing it as we can hope.
By: Adam Schaeffer, U. S. News and World Report, March 22, 2013
“A New Round Of Shame”: Michele Bachmann’s Confusion Bubbles Over
Dorsey Shaw noted late yesterday that Rep. Michele Bachmann (R-Minn.) has had a “horrible, no good, very bad week.” It’s true — even by Bachmann’s awful standards, the ignominious congresswoman has had it rough lately.
Her CPAC speech was ridiculous, and left in tatters by fact-checkers. Asked for an explanation, Bachmann literally fled from a reporter confronting her with her own words. Bill O’Reilly invited her on to get back on track, but when Bachmann refused, he turned on her.
This, however, was the moment that arguably mattered most.
“Let’s repeal this failure before it literally kills women, kills children, kills senior citizens,” Bachmann said on the House floor. “Let’s not do that. Let’s love people. Let’s care about people. Let’s repeal it now while we can.”
I’m sure this probably makes some sense to Bachmann, but for those of us living in reality, it’s just crazy.
She went on to say, “What [President Obama] demanded and insisted upon is that the government have 100 percent control over health care,” Bachmann said. “100 percent control? The American people lose control? What did they get? They get health care — health insurance, I should say — that is more expensive than anything they’ve ever paid for before. And they get less for it. Well what a deal, Mr. President, Mr. Speaker. What a deal.”
For anyone with a rudimentary understanding of the issue, this is complete gibberish. Under current law, government doesn’t have “100 percent control over health care,” but rather, private insurers have a key role providing coverage for tens of millions of people. What’s more, consumer costs are lower, not higher, and they have more expansive coverage, not less.
It’s almost as if Michele Bachmann, after having been caught saying ridiculously untrue things, has no qualms about making matters worse, bringing a new round of shame to her and her constituents.
Of course, she can at least take some comfort in the fact that the House Republican leadership kept her on the House Intelligence Committee, inexplicably giving this deeply strange and unhinged lawmaker access to the nation’s most sensitive, highly-classified secrets.
By: Steve Benen, The Maddow Blog, March 22, 2013
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