Let's Just Hope He's Serious

NEW YORK, New York -- Huzzah! Treasury Secretary-nominee Tim Geithner told a Senate committee today that he believed China was manipulating its currency, and a certain common sense that was hibernating during both the W. Bush and Clinton administrations seems to have opened an eye, however tentatively.

The yuan was estimated at 50% undervalued months ago, and it's depreciated since then. But why, we Americans who dread a debased dollar might ask, would China want to undervalue its currency? Well, it makes its goods artificially competitive, pushing out other producers'. Remember the last time you bought shoes, electronics, bags, pills, furniture, postcards, toothbrushes or for that matter long-lasting foods like garlic that were made/harvested in any place but China? Me neither. And a large part of the massive global imbalance in trade that leaves us unable to buy anything made anywhere but China even when we want to is due to the undervalued yuan/renminbi.

The Walter Duranty Report previously discussed the pivotal role that Beijing's trade and export policies played in bringing about the global downturn ("correction" might be the better term, given the utterly unsustainable course things had taken). And yet out of cowardice, paralysis before its awareness of the problematic dependency the US had developed on Chinese investment in Treasury notes, and a commitment to an ill-understood "free-trade" ideology, the Bush administration refused to call a spade a spade or lift even a finger to address the damage being done to the global economy by China's surpluses and trade policies. Ironically, then, Bush's pusillanimity did nothing but harm free trade -- both by perpetuating patently unfree trade and by doing long-term damage to trade by allowing structural problems to build.

Geithner's remarks will of course draw fire from the likes of Senate Republicans and WSJ editors who egged us into this ultimate Faustian bargain in the first place, and his timing is quite poor -- what the world does not need now is either the US or China to grow protectionist. But calling out China's protectionism is making the world less, not more, safe for protectionism at the end of the day. And the timing will never be good; China acts like a coddled, slightly autistic child that demands special treatment and bursts into a tantrum at the slightest perceived offense. Tim Geithner, here's hoping you're the man who finally says, "The gig's up."

P.S. Fact-checker: The NY Times article on Geithner's remarks includes this quote: “Things have changed quite a bit since Hank Paulson made an issue of this,” said Edward Yardeni, an independent analyst, referring to Henry M. Paulson Jr., the just-departed Treasury secretary. “The Chinese trade surplus is shrinking dramatically and China’s economy is falling into recession. I think it really wasn’t necessary. It doesn’t accomplish anything.”

Here's the truth behind this claim: China's surplus for December was indeed down 0.3% versus November, when the surplus was a record $40.09 billion. Versus the previous December, the surplus was up nearly 20%, and the total 2008 surplus was up about 15%. Exports are falling no quicker than imports, since the government is reinstating WTO-violating export rebates and subsidies and devaluing the yuan to make imports prohibitively expensive. As for "recession"? After 13% growth in 2007, China's Q408 growth was a "mere" 6.8%. Oh, poo. So yes, Mr. Yardeni, bringing this up (even if 10 years too late) does accomplish something -- and the first results are in: China Central Bank Attacks Paulson’s ‘Gangster Logic.' Well done.

Help Us Decide What to Do With Our Stimulus Checks

BOULDER, Colorado -- After the release of the economic stimulus plan proposed by Democrats in the House of Representatives, Republican Minority Leader John Boehner (it's pronounced "boner" - it really is, I promise) called the $825 billion dollar plan "disappointing."

Itchy and I are also very disappointed with this stimulus package, but probably for very different reasons than Rep. Boehner. We believe that Barack Obama and the Congress are squandering an opportunity to make this a transformational moment for the American economy. This watered-down proposal looks to be little more than a series of Reaganite tax cuts, porkbarrel road-paving projects (a side note: incoming transportation secretary Ray LaHood has very close ties to the paving industry in Illinois. Does anyone else realize that means he totally has connections to the mob?), and stupid refund checks.

As someone who does not make enough money to actually pay federal income tax, I resent the fact that government is going to send me a $500 check anyway. What about paying for all this new spending Obama has promised, like his renewable energy initiative, improving healthcare coverage, and investing in mass transit? We are tired of this populist pandering, so we are staging a protest. The government wants us to go out and spend those checks to "stimulate" the economy, but we are not going to do that.

Itchy wants to just put his in the bank, but I thought we could have some fun with the refund checks and ask our readers to decide for us what we should do with the $500. So, to the left of this posting you will find a poll of what we should do with that check that really isn't beneficial to the economy on the whole. Should the voting reach a reasonable quorum, I will do (I can't really speak for my partner) what the readers desire, and post the results here for all to see. Now, there is no guarantee that refund checks will be a part of the final legislative package, but if that day should come, here are a list of things I would rather do with $500 than put it towards a new Chrysler:

1. Put it in the bank
2. Bet it all at the dog track
3. Donate it to New York City's struggling MTA
4. Donate it to the Kalamazoo Promise, so some kids in Michigan can go to college
5. Give the money to whoever is running against America's Dumbest Senator, Richard Shelby (R-AL), in the next election
6. Donate it to a Palestinian relief organization
7. Have the check framed and never collect the money, like Rickey Henderson did with a $1 million bonus from the Oakland A's
8. Buy a plane ticket to Washington, DC, and try to strike a member of Congress in the face

So vote now and vote often, and once we get this awful, compromised bill made into law (and I get my dumb, wasteful check), I will let you know the results.

The 'Thanks But No Thanks' Award

NEW YORK, New York -- And the winner is...

Dr. Steven Chu, President-elect Obama's Nobel Prize-winning nominee for Energy Secretary, and the man behind the latest Obama Cabinet disappointment.

Chu, who seems to be on top of things when it comes to recognizing the economic, geopolitical and environmental risks of fossil fuels, played to the Republitards in his Senate confirmation hearings yesterday.

Though the nominee has previously supported higher gasoline taxes (the only way to materially change Americans' driving habits and make the electric cars Congress is ordering Detroit to make marketable) and called coal his "worst nightmare," he did something of an about-face when confronted by knuckle-dragging Republican Senators from coal-producing states. Acting like the political animal many hoped he wasn't, Chu not only said gas taxes were "off the table" but added that he would support mythical "clean coal" and the quixotic quest for carbon storage technology to conveniently tuck away emissions from coal-burning plants ... under the earth. "Clean coal"? Really? Buy that one and I have a magical lute I can sell you that I saw in my Zelda game. I'd rather see Chu, and our government, jousting at windmills, in the most literal sense.

At this point, I can only ask how this guy differs substantially from Exxon McMobil, or whoever Bush's Energy Secretaries were (OK, it's Sam Bodman, not Exxon McMobil, but what's the difference, really?). Clean coal, cheap gasoline. No, we can't.

With so few smart people in politics, here's hoping Dr. Chu -- who seems to be one of them, without a doubt -- was just playing political games and intends to stay intellectually honest, and that he wasn't gaming up his own views with politics.

P.S. Walter Duranty promises (many) gas tax posts in the future, given that this is one of the most important policies America needs to embrace. Right, Dr. Chu? Or are you off "clearing brush" now?

Train Pulling Out of Station for Obama's Cabinet to Bring Real Reform

New York, NY -- President-elect Obama is  to announce today the nomination of Illinois Representative Ray LaHood as Secretary of Transportation, the New York Times reports. 

The Department of Transportation has been notable during President George W. Bush's eight years term for its astounding failures. The agency has overseen an unprecedented decline in the nation's infrastructure, best typified by the collapse of a major bridge in downtown Minneapolis; at a time when rising oil prices and growing recognition of the harm fossil fuels cause the environment, it has greeted the only nationwide passenger railroad with budget cuts and an ideological contempt; and its disembowelment of FEMA allowed New Orleans to fall apart while its lack of any vision or clout has prevented that major city from putting itself back together. Moreover, as anyone who's ridden a plane in the last year (almost anyone), our airports are antiquated and falling apart; and outdated logistics systems and lack of any expansion of runways (thanks, DoT, for pushing for that funding!) in recent years make flight delays the norm, not the exception -- an appalling circumstance.

The Lower Ninth: Brad Pitt has done more to rebuild infrastructure than the DoT.

Not only will the DoT have to fix those problems to restore itself to its pre-Bush functionality, but a sweeping set of new social, economic and environmental phenomena are facing it: In order to maximize our economic potential and reinvigorate our towns and cities across the country, we need to reconfigure our cities with light rail to make mass transit again feasible (as it was before the postwar Era of the Automobile); connect our dying Midwestern cities to one another with high-speed trains to allow for improved commerce and business (and social) interaction; and stamp out sprawl and reinvigorate the country toward dense, ecologically friendly and socially/culturally progressive transit-oriented development hubs, as David Brooks and others are fast realizing.

Perhaps most importantly, we need to stand with the rest of the world in making oil use a valued good, not a cheap commodity. That means increasing taxes on it to discourage its use (as we do with luxuries, cigarettes, etc.) and account for the damage and effects oil use has (on roads that need repairs due to car use, on the environment, on people's health, etc.). The best way to do that is via a (substantial) increase in the gasoline tax. The gas tax was increased consistently through the 60s, but then the Goldwater Republican Revolution and its acolytes put a stop to that. So for years we've stagnated in that regard. To move us from oil and toward high-tech sustainable solutions -- and to come up with funding for our roads and bridges so they don't collapse and kill us -- we need to tax gasoline like the rest of the world does.

None of these phenomena crept up on us overnight. They're all long-term trends. It's just that America has been utterly stagnant the last eight years and has failed to embrace -- or even acknowledge them. These things are not news for the rest of the world, and we, unfortunately, now need to play catch-up.

Moreover, these represent truly great opportunities to improve our short- and long-term economic prospects; to improve quality of life for millions; to instill people with a newfound civic spirit through mass transit; and to inspire smart kids to become engineers and scientists to work on grand projects -- rather than Wall Street turds. Though these agencies have historically been neglected, there is now, finally, an opportunity and impetus for them to take a world-leading role in advancing new technologies and changing the way we live.

Will LaHood be able to remake the country's infrastructure, transit networks and mode of living?

That said, you have to ask, Is a Republican representative who sat by idly during our infrastructure decline as a 14-year veteran of the House Appropriations Committee the man to do this? Of the articles that major newspapers have published about him, only the WSJ even mentions LaHood's transit creds, noting that his "resume on transport matters was seen as thin." Should it fall to someone who for years lacked the vision, political fortitude or just plain common sense to increase funding for infrastructure or to push for better (or just functional) mass transit to now be the person who remakes our transit system from scratch? Someone with no experience managing a large agency, no vision regarding the work before us, and no common sense to have pushed for any change the last 14 years?

This is a great, great disappointment coming after a day of disappointments. Senator Obama was elected with a mandate to change, open, modernize and liberalize the country after our 8 years of cultural, moral, economic and geopolitical stagnation; there is a great amount of work to do. There's work to be done at the Interior Dept, where destroying our national parks for the sake of drilling (which hasn't yielded any oil yet and only keeps us addicted to a fuel that's bad for us geopolitically, economically and environmentally) and engaging in drug-and-sex binges with the companies the agency is supposed to be regulated are the norm; and at the USDA, which acts as a clearinghouse for subsidies for billion-dollar food-production conglomerates and has seen the FDA turned to a shell of itself. 

Yet Obama inexplicably appointed fairly weak, status quo figures to these departments yesterday. Is a rancher whose claim to fame is that he wears a kitschy cowboy hat the man to stamp out a corrupt Interior Dept, preserve our parks and environment, and stand up to Big Oil and resources companies to drag us into a sustainable, high-tech 21st century? Are we likely to see a shakeup of the USDA to orient it, as Nicholas Kristof suggested, toward sustainable food production and higher standards and help farmers (not farming conglomerates)?  

"Delicious," piped Warren after eating yet another gay for brunch

No. Similarly, I thought we'd finally turn a corner on THIS century's civil rights struggle -- equal rights for gays and lesbians -- while defanging America's Hamas, the fundamentalist Evangelical movement, of unfortunate political clout. But it looks like Obama is setting the stage for an indefinite extension of confusion of Church and State by embracing a latter-day "Agent of Intolerance," Rick Warren. Shame on Mr Obama for having his presidency blessed by a man whose political beliefs are more Pat Buchanan than Pat Moynihan. Given that, I would've been much happier with the Rev. Wright saying "goddamn America" and pushing us to better ourselves and cast racism aside, than with a bigoted mega-church telecaster who may say he loves America -- but doesn't love its rights or freedom so much as to see them extended to all our countrymen.

I don't know what's happening to Obama, but I'm beginning to wonder if Cheney the Evil Wizard's baleful prophesy is coming true. 

Is Obama convinced when Charles Krauthammer intone that "America is STILL a center-right nation. Bwahahaha!" Those are crass lies, and Obama should know that: America is nothing but a country of people who want to do best for themselves, whether that means being "right" or "left." Our problems are abundantly clear now, and the solutions are also fairly obvious. Obama has mostly done well in his Cabinet choices, I think, but his recent appointments -- to agencies that, while usually low-profile, now demand vision and leadership to make up for our failings and take advantage of great opportunities -- seem a missed chance. America to Obama: WTF?

Cheney: still hanging out?