The (far-less-excitingly-named-than-RiskFin) CEA are a group of three sentient human beings whose job it is to advise the President on economic matters. They don't execute policy so much as suggest things for it, but these things can often have dramatic effects on how Presidents handle our money (modest claim to pop culture fame: the notorious "guns or butter" argument and West Wing episode title emerged from it a long time ago).

Why Alan Krueger? Well, as the New York Times' Catherine Rampell noted, former assistant Treasury Secretary Krueger is a microeconomist, which differentiates him from the usual pick of macroeconomists to the position. They think it sends a strong signal about the administration's intentions regarding job creation. Also, seeing as how he's "data-driven and relatively nonideological" and already been through the gauntlet that is a Senate confirmation, they probably won't have too many issues confirming him to the post. Probably. Maybe.

As the Wall Street Journal noted, former Reagan CEA chair Martin Feldstein gave Mr. Krueger his endorsement, and one of the choice ways lately to bash President Obama is to align our current economic situation with that of the one President Reagan walked into when taking office, which most people know is silly but is an argument trotted out often anyway. Maybe this will get them to shut up, though that's not likely. He's also a Springsteen fan, for what that's worth.

It's a gig with a lot of turnover: In the short time that President Obama has been in office, they've been through two CEA chairs, Edward Lazear and Christina Romer, but to be fair, since 1999, including Mr. Krueger, there have been eight chairs, one of whom barely lasted a year (Harvey S. Rosen, '05). Sometimes they just freak out and return to teaching, like the last two did. Sometimes they end up in positions to do things with those thoughts later on in their careers, for better or worse. Mostly worse.

For example: Other previous WHCEA chairs include current Federal Reserve chair Ben S. Bernanke ('05-'06), past Fed chair Alan Greenspan ('74-'77) and maybe our personal favorite, Michael Boskin ('89-'93), whose modestly-named Boskin Commission substantially changed the face of inflation as the world knows it in 1995, allowing America to underreport just how inflated the dollar is, which—long story short—we still feel the mostly negative effects of to this day, like the price of your steak lying to you and a bunch of hedge funds buying up farmland.

If confirmed, history will ideally be kinder to Mr. Krueger's legacy, though whether or not he makes it through again may depend on how everyone spins that whole Cash for Clunkers deal, which was his idea when he was Deputy Treasury Secretary not two years ago. Outlook on this? If memory serves anyone correctly, not great! This will be greatly assisted if he does not come up with some new alliterative way to endorse giving people jobs; Pennies for Positions just doesn't seem like it will—pun unintended—get the job done this time.

Obama Taps Krueger as Top Economist [WSJ]
Alan Krueger’s New White House Job [NYT Economix]

fkamer@observer.com | @weareyourfek

Fixer-upper-in-chief? (Reuters)

Good news! Foreclosures are at their lowest levels in four years!

Wait, no, that's horrible news. There are so many delinquent homes out there, the banks don't want to repossess them, and even when they want to, the bottleneck caused by the robo-signing scandal is still holding up the whole party. The Obama administration has a simple solution: Just rent it.

The White House is working on a plan to turn a vast inventory of foreclosed homes into rentals, either privately managed or sold in bulk, according to The Times.

The goal, the administration said, is to stabilize neighborhoods where large supplies of empty, foreclosed properties have hurt property values. In addition, the plan is an effort to clear the nation’s balance sheet of real estate holdings that, because they have been difficult to sell individually, have hung over the housing market and stunted sales of existing homes and new construction.

The Federal Housing Finance Agency, the Department of Housing and Urban Development and the Treasury Department are jointly requesting ideas for sales, partnership ventures or other strategies that would help to unload approximately 250,000 properties owned by Fannie Mae, Freddie Mac and the Federal Housing Administration. Those properties account for about half of all properties that have been foreclosed upon and are still awaiting resale nationwide.

[...]

Greater flexibility in disposing of the houses will have other benefits as well, Timothy F. Geithner, the Treasury secretary, said. “Exploring new options for selling these foreclosed properties will help expand access to affordable rental housing, promote private investment in local housing markets and support neighborhood and home price stability,” he said in a statement announcing the new program.

Plus, it helps diminish the ranks of home owners, should the administration indeed put an end to the mortgage interest tax deduction.

mchaban [at] observer.com | @MC_NYC

No friend, no true ally, would ask another state to put its very existence in jeopardy. But that is precisely what the president has asked of Israel. Prime Minister Benjamin Netanyahu rightly said that the pre-1967 borders are "indefensible." So, too, is the president's proposal.

It's important to bear in mind that Mr. Obama's remarks were carefully thought out and discussed internally before they were issued on the eve of Mr. Netanyahu's visit to Washington. All the more reason to conclude that this administration simply does not appreciate the gravity of the security issues facing Israel. If Mr. Obama's remarks had been made in haste, if he had uttered them in an unscripted moment, they might be explained away as a mere gaffe. But this was no gaffe. This was an expression of the president's genuine convictions.

That's the troubling part.

Israel is surrounded by hostile, undemocratic states and an array of terrorist organizations that are nothing if not brutally candid about their objectives: they wish to wipe Israel off the face of the earth. They would do it, if they had the means and the weaponry. No other country on earth is so embattled. No other country's sovereign territory is so vulnerable to so many threats. Successive administrations in Washington have appreciated Israel's predicament, even if they occasionally disagreed with specific policies and tactics.

The Obama White House, however, has been an exception. Not long after Mr. Obama took office, Washington called on Israel to suspend new settlement construction in the West Bank, a pronouncement that did nothing to win Mr. Netanyahu's confidence in the new president's policies and attitude. The relationship between Washington and Jerusalem has been tense ever since, and, from Israel's perspective, rightly so.

Mr. Netanyahu apparently was caught off-guard by the president's proposal. Published reports said that he desperately sought changes in the president's remarks, but he was rebuffed and humiliated. These are not the actions of a true friend.

Mr. Obama's subsequent speech to the American Israel Public Affairs Committee has been interpreted as an attempt to soothe wounded feelings, even a slight pull-back from his original remarks. The president insisted that the U.S. and Israel continue to share the same basic values and reaffirmed Washington's commitment to keeping the crazed rulers of Iran from getting their hands on nuclear weapons. He insisted that Israel could not be expected to negotiate with Hamas, or with a government that includes Hamas, as long as the terrorist group refuses to recognize Israel's right to exist.

While these sentiments are welcome, they are simply statements of the obvious. The U.S., threatened as it is by Islamic extremists who already have killed thousands of Americans, could hardly insist that Mr. Netanyahu's government engage with the would-be mass murderers in Gaza.

The AIPAC speech, then, changed nothing. It asserted obvious truths. It did not take the sting out of the president's earlier remarks. Former mayor Ed Koch, a lifelong Democrat, realized the enormity of the president's dangerous and incomprehensible new course. "If President Obama does not change his position, I cannot vote for his re-election," Mr. Koch wrote. The former Mayor spoke for many when he added that the president's AIPAC speech "did not reassure me."

Nor should it have. The pattern is clear. Mr. Obama has been shifting Washington's policy of unwavering support for Israel to a more confrontational posture. His position on borders and his formula for land swaps is more in line with the Palestinian position, not with Israel's. That is a significant and highly unfortunate change in U.S. policy.

Next on the Palestinian agenda is a United Nations resolution recognizing a sovereign Palestinian state in the West Bank, Gaza and East Jerusalem. The move is expected in September, when the General Assembly meets in New York. The Obama administration must do everything in its power to make sure the resolution dies from lack of support. Opposition from Washington isn't enough. The U.S. must work behind the scenes with allies in Europe and elsewhere to make sure that this effort to isolate Israel fails.

At this point, it is probably too late to think that the Obama administration will have a change of heart about Israel. The president clearly regards Mr. Netanyahu and his government as an obstacle to U.S. strategic interests.

Israel's friends in the United States have every right to be angry and sad. Like Mr. Koch, they may be inclined to look elsewhere next year, when the president will be up for re-election. Republican strategists already are trying to drive a wedge between Democrats and Jewish voters, but they won't have to work very hard to achieve their goals. Mr. Obama, in rejecting friendship with Israel, has done the work for his prospective opponents.

He does not deserve the support of those who continue to embrace Israel as a friend, partner and ally.

The White House is not exactly denying it, either.

The Observer checked in with the White House this morning, and again this afternoon, at which point point we were directed to the Department of Health and Human Services. From there, our call was forwarded across the District line to the National Institutes of Health in Bethesda. There, spokesman Calvin Jackson admitted, "This is the first I've heard of this," before promising to ask around. So far, no reply.

In the meantime, the Centers for Disease Control has sprung into action on Twitter. "Do NOT take Potassium Iodide (KI) in US b/c of nuclear pwr plants in Japan, #japan http://go.usa.gov/4hX," the agency warned about an hour ago.

And so, Brobos, you may want to think twice before mashing up some pills in young Henry or Eleanor's organic porridge tomorrow morning.

mchaban [at] observer.com | @mc_nyo

A 1994 law established that cell and broadband network companies must design their systems so that survelliance can begin immediately after they are presented with a court order. But rapidly changing technology and regular network updates has complicated that process.

Charlie Savage of the NYT reported on two previously undisclosed instances in which court ordered wiretaps on suspected criminals and terrorists delayed for weeks and even months.

Only a few weeks ago it was reported that the government is attempting to bring web services like Gmail, Facebook and Skype under the same 1994 law, angering open internet advocates. 

"We think that the F.C.C. has already conceded too much to the bureau," said Marc Rotenberg, the president of the Electronic Privacy Information Center, told the NYT. "The F.B.I.'s ability to have such broad reach over technical standard-setting was never anticipated in the 1994 act."

Rotenberg has a sound point. Ensuring that court orders can be carried out in a timely fashion makes sense. Allowing the government to set prohibitive standards for rapidly developing technologies networks, even in the service of justice, is the recipe for a boondoggle.

Summarizing his reporting Duhigg observes that:
“Almost four decades ago, Congress passed the Clean Water Act to force polluters to disclose the toxins they dump into waterways and to give regulators the power to fine or jail offenders. States have passed pollution statutes of their own. But in recent years, violations of the Clean Water Act have risen steadily across the nation, an extensive review of water pollution records by The New York Times found.”

The Times has also created an excellent data base on violations of water pollution rules and state enforcement of those rules. In this region, New York’s legal authorities managed only 6.4 enforcement actions per 100 violations, in contrast to New Jersey’s 53.5 per 100 violations. Connecticut was even worse than New York with only 3.7 enforcement efforts per 100 violations.

Protecting our drinking water is a fundamental function of government. Just as we expect our streets to be safe from crime and our nation protected from the threat of terrorism, our health and welfare also depend on the provision of safe water to drink and clean air to breathe. This is basic and non-negotiable. A Times “quote of the day” last weekend came from this piece, when West Virginia resident, Jennifer Hall-Massey asked “How can we get digital cable and Internet in our homes, but not clean water?” 

It is of course not an issue of technical competence, but profit and political will. There is big money in the cable and internet business and plenty of competition. Water supply is a public utility that is delivered by government and funded by use fees and general revenue taxes. This monopoly means that we have no choice when selecting a water supplier. Our water supply is also more fragile and vulnerable than the infrastructure that delivers Internet and cable TV.

The cause of this attack on our water supply is untreated and poorly managed industrial dumping of toxic substances. While this is rampant in the developing world, America, from the mid-1970’s to the late 1990’s made enormous progress in reducing these practices. Apparently, part of the lasting environmental legacy of the Bush-Cheney years is the backsliding reported by the Times in this article.

The new Environmental Protection Agency Administrator, Lisa Jackson is making the right noises about increasing enforcement, and I suspect the New York Times piece will strengthen the hand of environmental professionals inside the agency that are trying to push this agenda. The article also makes the point that the focus on climate change may be pushing attention and resources away from more traditional concerns such as water pollution.  I doubt that is true, the real issue is not enough resources are going to either issue.

In any event, the issue of clean drinking water has far more political potency than climate change. Most of the impacts of global warming are in the future, and it is difficult for the average person to understand the connection between cause and effect. Moreover, the causes of climate change come from many places and the impact will also be felt in many places. Water pollution is locally caused and felt. The impact is nearly immediate and some of the impacts, like illness and skin rashes, are very visible. Because climate change is a global problem that crosses all borders, it creates real challenges for our planet’s political system which is based on sovereign nation states.  While some water pollution issues cross borders, in the U.S. the borders they cross are mainly state borders rather than national ones.

We know how to keep our drinking water clean. We have laws that require it and institutions capable of administering those laws. What we need is the political will and resources to use those institutions and enforce the laws we have. Unlike climate and health care, the structure is already in place and a national consensus was established long ago to ensure clean drinking water. The challenge to the Obama administration and the EPA is clear. What is less clear is if they are up to the task.

Broder seems surprised that the Obama administration is moving carefully to build consensus behind new policies aimed at reducing carbon dioxide emissions. He identifies actions the administration has taken to move climate change forward and then seems perplexed when it pauses to reflect and build consensus. I’m not sure why anyone would expect President Obama to be aggressive and reckless when everything about him seems persistent and careful.

The transition to a “green” economy will take a long time, and it will require determined, constant and strategic effort. Rapid, risky and symbolic actions may make dramatic news stories, but they are not going to do much to reduce carbon dioxide emissions.

The electricity that allows me to sit at my computer and write these words is wholly dependent on the fossil fuels that power New York City’s electrical grid. The still fragile economy, which saw the shedding of nearly 700,000 jobs in the United States last month, is fueled in the same way. It is clear to me and an increasing number of world leaders that this is not a sustainable energy future. What is less clear is how we get to one that is.

The policy prescription is obvious in general, but complex when you get to specifics. Think about congestion pricing. It is clear to many of us that when there are too many vehicles on the streets of lower Manhattan to move freely, someone needs to figure out a way to reduce traffic. But how do you do that without destroying the vibrancy of the local economy?

If you set a price on bringing a vehicle downtown, what is the correct price? In addition to policies that “push” cars off the street, you also want to make mass transit convenient and comfortable to “pull” people down underground as well. 

To make this real we need to answer specific questions. How much do we charge as a congestion fee? How much do we invest in new transit infrastructure and technology? No one really knows. We need specific answers, but do not have enough experience and hard data to do more than guess. The same is true of the transition to a fossil-fuel-free economy. What should it cost to emit carbon dioxide? How much should we invest in new energy technology? How do we push the economy off fossil fuels and pull it toward renewable energy?

There is no question that we need to reduce carbon dioxide emissions. There is also no question that we will not do this quickly enough to stop global warming. So we will also need to sequester and store the carbon dioxide we have already emitted and will continue to emit. We will need both a regulation limiting carbon emissions as well as a tax on the carbon dioxide that is emitted.  But how quickly can we reduce emissions?  What is technologically and economically feasible? What are the positive economic impacts that will come from the technological development of alternative energy and increased energy efficiency? What are the negative economic impacts of the increased price of energy that will come from a tax on carbon and/or a cap on carbon dioxide emissions? The simple answer to both of these questions is that no one knows.

I have seen plenty of compelling analyses based on many sophisticated mathematical models of what this energy future should look like. While these models help us understand the complexity of the issue, none can predict the future. We are going to have to do this the old fashioned way – through trial and error.  We will end up formulating climate policy the same way we have developed all the other environmental policies we have set to date. We will start with less stringent standards than the ones we will eventually adopt.

As Broder’s piece indicates, The Waxman-Markey climate bill, which I wrote about in an earlier piece, provides an aggressive approach that changes the political equation and allows the Obama administration to play the role of climate moderate. We’ve seen this approach before. In building a consensus approach, the White House can point to the Waxman proposal and tell industry insiders that if they don’t play ball the law will end up even more extreme.

During the debate leading to the 1970 Clean Air Act, then-Senator Gaylord Nelson proposed banning the internal combustion engine. Suddenly the catalytic converter seemed a lot more technologically feasible to auto industry lobbyists.  The climate issue will follow the same well-worn path to environmental regulation we have seen before. It will be made more complicated by the international dimension of the issue, but the general pattern will look the same.

From my perspective, the key issue is to start this trial and error process as quickly as possible. Let’s avoid the symbolic debate over the level of reductions we will achieve in 2050. Let’s focus on what we can do by 2010 and 2012. Let’s get started.