Tuesday, April 3, 2012

A new era of bank runs?

From the early years of the Industrial Revolution until the beginning of the Depression, bank runs were quite common. Every ten years or so there would usually be a banking panic which would generally result in an economic collapse. The result was a boom-and-bust cycle that can be seen in the first half of the chart on the right. After World War II, however, bank runs stopped happening, which was a big reason why the US enjoyed a long period of economic stability between 1946 and 2007 in which GDP never fell by more then 2% from year to year. The death of the bank run is generally attributed to FDR's New Deal reforms, which created the FDIC and significantly limited the degree to which banks could engage in speculation.

In 2008-2009, however, we saw a new phenomenon: the shadow bank run, which this New York Times columnist argues will continue to happen in the 21st century. The so-called shadow banking system--involving instruments of short-term credit that are not guaranteed or subject to the same regulations as traditional banks--now accounts for more than $15 trillion in assets, up from $4 trillion in 1990. Along with the trillion-dollar derivatives market, the shadow banking system can accumulate an enormous amount of short-term risk--not just for investors but for the entire economy. A rush to withdraw from money market funds or a sudden pulling of credit between banks can cause a crash just like in 1893, 1907, or 1929.

The solution is not to extend government guarantees beyond traditional banks, since that would create the possibility of bailouts that would dwarf the ones that happened in '08-09. But we need to figure out some way to better protect short-term credit so that we will not enter into a new era of bank runs and boom-bust cycles. A volatile economy like the one we had from 1890 to 1930 tends to hit the middle class and working class the hardest, leading to increased poverty, more economic insecurity, and more demand for welfare programs. Needless to say, that would be bad.

Thursday, March 29, 2012

Afghanistan violence should be a clear lesson in the futility of nation-building

On Tuesday Marine Gen. John Allen, the NATO commander in Afghanistan, told the House Armed Services Committee that the mission in Afghanistan is on track. If he really believed that, I think he'd be delusional.

Last month, the accidental burning of Korans at Bagram Air Force Base set off massive rioting. The thing is, the Korans were confiscated (and subsequently thrown into an incinerator by accident) because Afghan prisoners were writing military messages in them. The Korans that were supposedly "desecrated" by US troops had already been desecrated by the Afghans. So I really doubt that the riots--which caused at least 41 deaths--were all about the Koran burning. I think it had more to do with the fact that US troops have been occupying their country for the past ten years, and that we continue to prop up a corrupt and unpopular president who blatantly stole the last election. A common chant among protesters was "Death to America, death to Obama, death to Karzai." The Koran burning, it seems, was just the latest reason for anger toward their foreign occupiers.

On March 1, an American staff sergeant, who had served honorably during multiple tours in Iraq, broke down in Afghanistan and murdered 16 civilians, including women and children. Retired Army intelligence officer Ralph Peters says we should be surprised that this hasn't happened sooner and more often. Because of stop-loss policies, our troops are often serving multiple tours of duty--and in an environment where the mission has become less and less clear. It is indeed remarkable that more of them haven't cracked under such prolonged and outrageous stress.

Finally, since Gen. Allen still thinks that our mission is on track, one might ask him what exactly our mission in Afghanistan is at this point. The original mission, taking out the Taliban government who was supporting Al-Qaeda, was pretty much accomplished back in 2003. And yet US troops have stayed in Afghanistan for nine years since then, trying to set up a stable democratic government--in other words, nation-building. In the 2000 campaign, George W. Bush said that "I don't think our troops ought to be used for what's called nation-building...if we don't stop extending our troops all around the world in nation-building missions, then we're going to have a serious problem." Since then, thousands of US troops have been killed or maimed because Bush and Obama failed to listen to that advice.

In fact, the US record of success in nation-building missions over the last 100 years is fairly dismal. We have had two major successes, in Germany and Japan after World War II--but both those countries were fairly modern, industrialized, and had had a democratically elected legislature throughout most of the 1920's. But in Third World countries--Vietnam, Somalia, Haiti, several South American countries, Bosnia, Iraq, and Afghanistan--nation building has been largely a catastrophic failure. The scars of these wars are numerous: tens of thousands of dead and wounded (both American soldiers and local civilians) and tens of billions of dollars in spending added to the debt. Yet we never seem to learn from the past.

Wednesday, March 28, 2012

Obama's former Solicitor General: If people want Obamacare, it shouldn't matter if it's unconstitutional

A revealing quote from Neal Katyal, who served as Solicitor General from May 2010 until June 2011:

"The challengers are saying that this law is unconstitutional, which means even if 95 percent of Americans want this law, they can't have it. And that's a really profound thing for an unelected court to say."

So apparently, following the Constitution doesn't matter too much to Katyal. And these are the kinds of people Obama appoints to his cabinet.

Sunday, March 25, 2012

Can we get a serious budget plan?

Another year, another display of both parties' complete inability to propose any serious solution to the country's fiscal situation.

The Democrats have not passed a budget in years. They seem completely unwilling to do anything about the fact that entitlement spending (if left unchanged) will explode the federal budget in a decade or so. Whether faced with a budget deficit, a proposed spending cut, or a new program that they have no way to pay for, the leftists' solution is the same: "Tax the rich." The problem is, there just aren't that many rich people. There has been lots of talk about the so-called Buffett rule, which would ensure that everyone earning at least $1 million annually pays at least 30% of their income in taxes--but even the Huffington Post admits that adapting the Buffett rule would bring in only $47 billion over the next eleven years. That's about $4.3 billion per year, which is about 0.2% of the 2011 budget deficit.

We did, at one point, have a fairly reasonable center-left budget plan: the Simpson-Bowles plan. Unfortunately it was rejected, not by the Republicans, but by President Obama.

On the right, we have Paul Ryan's budget. It is perhaps a good conservative thought experiment, and it allows the Republicans to tell the Democrats, "Hey, at least we have a budget proposal." In reality, however, Ryan accomplished no more than he would have if he had proposed a budget plan for the Land of Oz. Besides being dead on arrival in the Senate, the Ryan plan seems unlikely to attract support from anywhere close to a majority of the American people.

The Ryan plan does not address the deficit at all in the short term (although a supply-sider could make the argument that his tax cuts could spur economic growth that would decrease the deficit). In the long term, Ryan would shrink all discretionary spending (everything other than Social Security, health entitlements, and interest payments) to 3.75% of GDP. Military spending (aside from Iraq and Afghanistan) is currently about 3.5% of GDP, and Ryan refuses to cut the military. So that leaves 0.25% of GDP for everything else: infrastructure, border patrol, federal law enforcement, food and water safety, veterans benefits, the safety net, etc. While non-military discretionary spending does need to be cut somewhat, slashing it from its current level (about 3.5% of GDP) to 0.25% is simply ridiculous.

One could imagine a center-right proposal, combining revenue-neutral tax reform with some cuts in discretionary spending and measures to stop the runaway growth in entitlements. But nothing like that has ever been proposed.

Right now, it is clear that Congress and the White House care much more about making political statements, upholding pledges, and sticking it to the other party than they care about actually governing the country.

Thursday, March 22, 2012

Trayvon Martin, racial profiling, and the War on Drugs

The recent killing of Florida teen Trayvon Martin, 17, is a disturbing case that has provoked outrage across the country. The black teenager was walking back to his father's house when he was spotted by neighborhood watch officer George Zimmerman, who is Latino. Zimmerman called police to report that he was suspicious of Martin and then followed him, leading to a confrontation in which Zimmerman shot and killed Martin. Martin was  unarmed; Zimmerman obviously had a gun. Authorities performed drug and alcohol tests on Martin but not on Zimmerman. Zimmerman is claiming he killed Martin in self-defense, and currently he has not been arrested or charged with a crime because there is not yet enough evidence to dispute his self-defense claim.

Over the past several days, protesters nationwide have been demanding Zimmerman's arrest. They have argued that Martin was seen as "suspicious" simply because he was a black male, and that he would still be alive if he had been white. Their claim is that Martin fell victim to a stereotype of black males as criminals.

I know far too little about the details of this case to make an informed argument for or against Zimmerman's arrest. If there is truly not enough evidence to prosecute him, arresting him would make no difference at all. But those who are angry about black males being stereotyped as criminals should look no further than the War on Drugs.

The War on Drugs, a US policy of increased enforcement and harsh sentences for drug offenses, started under Johnson and Nixon and then was significantly escalated under Reagan. Not coincidentally, the US prison population doubled between 1980 and 1990, and doubled again between 1990 and 2000. Although blacks are only 12% of the country's population, they comprise 62% of people sent to prison for drug offenses, most of them nonviolent.

As we should have learned during the 1920's, outlawing a popular product will likely lead to a large black market, the growth of gangs, and associated gang violence. As in the 20's, these gangs became most prevalent in the cities where drugs are most readily available, and in poor neighborhoods where people are looking for any way to make a buck. So law enforcement focused their efforts on those poor urban neighborhoods--which are often black neighborhoods--and a lot of black nonviolent drug offenders get caught in the dragnet. And over time, it's not hard to see how that could lead to a stereotype of black men as criminals.

Wednesday, March 21, 2012

The inexplicable focus on birth control

When President Obama ruled that religious institutions were required (under the new health care law) to cover contraception in their insurance coverage, it set off an overwhelming amount of outrage on the right.

What I find hard to explain, though, is the sudden and intense vitriol over one particular thing--birth control. Obama's ruling, after all, is just one more consequence of Obamacare, a law that 72% of Americans think is unconstitutional. The Republicans could have responded to the birth control mandate by escalating their attacks on Obamacare generally, as an infringement of liberty--and probably would have received a lot of support. Instead, for the next few weeks Rick Santorum (and to a lesser degree, Newt Gingrich) made birth control the major talking point of his campaign and the GOP debates. There was little or no mention of Obamacare or its infringement on individual liberty for everyone, just a lot of talk about religious liberty for the small minority of Catholics who take the birth control prohibition seriously. On his radio show, Rush Limbaugh called student Sandra Fluke a "slut" for advocating for birth control--and GOP frontrunners Santorum and Mitt Romney were unwilling to strongly criticize him. (On the flip side, nobody on the left seems to care about Bill Maher's history of equally appalling sexist rhetoric toward Michelle Bachmann and Sarah Palin).

This narrow focus on birth control is at best idiotic, and at worst chauvinistic. Surely Santorum, Gingrich, and Romney know that birth control is a hot-button issue for many women, and that the vast majority of Catholic women in America have used it. So why, then, do Santorum and Gingrich offer relatively tepid criticism of Obamacare prior to February, then bust into full-blown outrage over birth control? Why does Romney--who seems to have less fight than a sack of pillows--do nothing to counter them from the center? If the issue is "non-procreative sex," then why do they not seem to care that most insurance plans are already required to cover Viagra--which is probably most often prescribed for older men who have no intention or ability to procreate with their partner? Either they don't realize that they're alienating large swaths of moderate women and independents of both genders, or they actually do believe that women need to be kept under control.

Tuesday, March 20, 2012

The health care dilemma, as I see it

A huge part of the problem, IMO, is that health care today is expected to perform two unrelated and somewhat conflicting functions. The first is to insure people against unforeseen and catastrophic events at the lowest cost possible. The second is to make regular medical expenses more affordable. 

The first function (i.e. insurance in the classic sense, similar to car or home insurance) can be accomplished beautifully by the private sector as long as government stays out of the way. If there were no mandates requiring health plans to cover certain things, then premiums for a basic, catastrophic insurance plan would almost certainly be affordable to most healthy individuals. They could thus purchase a basic insurance plan and keep it for decades, not having to depend on their employers for health insurance, and not finding themselves suddenly uninsured if they lose or quit their job. Whatever happens, I think we will need to move away from employer-provided health care, simply because global competition will make it unaffordable for most companies.

One problem with this, of course, is that people with chronic conditions or past medical problems get screwed. Those who require regular medications for chronic conditions (e.g. Type 1 diabetes, bipolar, etc) would have enormous out-of-pocket costs. People who have had problems in the past (i.e. cancer, genetic heart problems) might have their premiums go up so high that they couldn't afford it. Another problem is that it gives somewhat of a financial incentive for people to wait until they get really sick rather than seek preventative care. One obvious example is maternity: if lower-income women have to pay out-of-pocket for all maternity/prenatal care (or switch to a more expensive health plan that covers maternity), a lot of them will probably decide to skip it. That of course could have really bad consequences for the babies. One could make the argument--and many on the left have--that subsidizing preventative care results in huge medical savings for society as a whole. That's probably the reason behind a lot of the mandates on coverage for maternity, routine checkups, etc.

The second function (making regular medical expenses more affordable) IMO cannot be accomplished by for-profit companies. It simply makes no sense: what service could they provide that would have any value toward accomplishing that goal? Right now, most people's health care is subsidized--but by their employers, not by government. Since it is subsidized for virtually everyone who has it, people naturally demand more of it--even more than they need--and health care costs go way up. Arthur Laffer calls this concept the health care wedge, and blames it for most of the runaway increase in health care costs (http://online.wsj.com/article/SB10001424052970204619004574324361508092006.html). And there is still the problem of people with pre-existing conditions being unable to get coverage. The only way to fix that, of course, is the way Europe does it: with an individual mandate, which is almost certainly unconstitutional.   IMO, ObamaCare is even worse than a public option like in Massachusetts, and may be even worse than a single-payer system. Not only does it have the individual mandate, but it also puts a huge burden on small business which suffocates job creation.

One way to make health care work might be to separate it into two pieces: catastrophic insurance (which would be private) and subsidized care for the poor or those with health problems (which could be subsidized by nonprofits, large corporations, or government). That way far fewer people would have subsidized health care and costs would not go up as much. Of course, tort reform and eliminating state barriers would also help keep costs down.

Tuesday, January 24, 2012

Kentucky cuts $50 million in education, preserves $43 million in tax breaks for creationist theme park

In what Forbes calls "one of the most spectacularly mis-prioritized state budgets in recent memory," Kentucky Gov. Steve Beshear is proposing $50 million of cuts to education while preserving a $43 million tax break for a biblically-themed amusement park centered around a life-sized Noah's Ark. ThinkProgress also roundly criticizes the budget plan, which marks an extremely rare instance where Forbes and ThinkProgress actually agree on something.

Meanwhile, Beshear calls the budget "inadequate for the needs of our people."

Do we need any clearer example of why government generally cannot be trusted? (Or, at the very least, why lobbyists and campaign donors have way too much influence).

Saturday, January 21, 2012

Is it not possible to reroute the Keystone XL pipeline?

President Obama has just rejected the construction of the Keystone XL pipeline from Canada to the Gulf of Mexico. Recall that Obama initially tried to postpone a decision on the pipeline until 2013--a cowardly move intended to avoid angering either of two big Democratic special interest groups (environmentalists and unions) before the election. When forced to make a decision by Congress, he decided to reject the pipeline. Newsweek, not exactly known as a right-wing publication, called it an "act of national insanity."

The Newsweek article correctly points out that environmentalists concerned about global warming emissions get nothing from this except for a symbolic PR victory. Canada has already committed to extracting the oil from the tar sands in Alberta, and they will now most likely build a pipeline to the Pacific for export to Asia. By rejecting the pipeline, Obama antagonizes a strong ally and sacrifices tens of thousands of new American jobs. The pipeline would also lower fuel prices and reduce our dependence on foreign oil.

There is, however, one very legitimate concern about Keystone XL. The proposed pipeline would have gone over the Ogallala Aquifer, a vast underground water source that makes most of Midwestern agriculture possible. Contamination of the Ogallala could have devastating effects on the region's agriculture and drinking water. While it is true that there are already numerous pipelines going over the aquifer, I would imagine that leaks are much more likely in a new pipeline (because of possible structural flaws, engineering problems, etc) than in one that has been working leak-free for decades.

The solution, then, seems obvious: reroute the pipeline around the aquifer. But that wouldn't satisfy environmental groups, who sometimes seem to want to roll back industrial society. Some would argue that they just want to switch from fossil fuels to wind and solar. But the fact remains that wind and solar are currently unreliable and not at all cost-effective. Plus, even wind and solar are vulnerable to environmentalist and NIMBY opposition--a salient example being the decade-long controversy over an offshore wind farm on Cape Cod. If people oppose even wind energy, then (assuming they are not currently living off the land in a technology-free community) where in the world do they think they can get their energy from?

Anyway, it seems that appeasing environmental special-interest groups is a bigger priority for Obama than jobs, fuel prices, or energy independence.

Thursday, January 19, 2012

GOP candidates taking full advantage of tax havens, taxpayer-funded pensions

Despite representing what is supposedly the party of fiscal conservatives, two of the five Republican presidential candidates are receiving tens of thousands of dollars in taxpayer-funded pensions, and front-runner Mitt Romney has deposited millions of his personal dollars in the Cayman Islands to avoid taxes.

Newt Gingrich is one of over 350 former US lawmakers and congressional staff receiving a federal pension of over $100,000 a year. Rick Perry gets a Texas state pension of over $92,000 a year in addition to his governor's salary. This seems questionable for two candidates who repeatedly denounce excessive government spending.

Meanwhile, Romney has between $10 million and $25 million in accounts in the Cayman Islands, a notorious tax haven. Because of his Cayman accounts--and the fact that much of his Bain income was classified as capital gains rather than ordinary income--Romney has been paying a far lower percentage in taxes (about 15 percent of his earnings) than most Americans.

So it seems extremely unlikely that the next president, no matter who it is, will do anything to reform the tax code. Obama and the Democrats will use Romney's low tax payments as yet another argument for raising tax rates, despite the number of millionaires and billionaires (Obama, Pelosi, Kerry, etc) in the party leadership. That's because they know that they can continue to exploit loopholes in the tax code, and only those who are less politically connected will be hit by the tax hike. Assuming he gets the Republican nomination, I cannot imagine Romney--a Wall Street millionaire with numerous accounts in the Cayman Islands--to do anything about tax loopholes. The Republicans seem to think that they can have their cake and eat it too by cutting tax rates while keeping loopholes and congressional pensions in place. Is it a coincidence that the last three Republican administrations have run massive deficits nearly every year?

Wednesday, January 18, 2012

Maximizing shareholder value: the "dumbest idea in the world"

In his book "Fixing the Game," business school dean Roger Martin introduces the idea of an NFL coach who is paid not according to wins and losses, but instead according to whether his team covered the point spread. He pictures the coach holding a Wednesday press conference to convince analysts that the point spread should be moved up or down, or the team's quarterback apologizing for only winning by 3 points when the spread was 9 points in their favor.

In this Forbes article, Steve Denning argues that large businesses today are similar to that hypothetical NFL team, where CEO's and managers have much more incentive to focus on improving stock prices rather than improving their products and making real profits. He describes a shift that took place in the 1970's and 1980's  where companies began to prioritize shareholders over customers and employees. One thing that drives this is the fact that most CEO's are compensated largely in options or stock based incentives:
    "What would lead [a CEO] to do the hard, long-term work of substantially improving real-market performance when she can choose to work on simply raising expectations instead? Even if she has a performance bonus tied to real-market metrics, the size of that bonus now typically pales in comparison with the size of her stock-based incentives. Expectations are where the money is. And of course, improving real-market performance is the hardest and slowest way to increase expectations from the existing level." 
    Also, Denning points out an obscure accounting regulation which forces the write-down of a company's real assets if the share price falls significantly, thus mandating that CEO's give significant concern to managing expectations.

There are also the stories (which progressives love to tell) of profitable companies slashing benefits or outsourcing jobs simply to make more profit. While a movie villain might do this simply to pocket more money, in the real world it is quite valuable to have satisfied and motivated employees, so an employer who is already making money would need a very good reason to do this. One reason, though, could be concern over stock prices. If the company's managers felt like they needed to cut costs to meet quarterly numbers or raise short-term expectations, they might outsource jobs or cut benefits even when making a profit.

Ironically, the emphasis on maximizing shareholder value has coincided with a decline in corporate performance since 1976. The idea may very well have contributed to the rash of accounting scandals in the early 2000's. It also gives Wall Street an inordinate amount of power over the economy. Perhaps we should listen to Jack Welch, who called this emphasis on maximizing shareholder value "the dumbest idea in the world."

Denning recommends several actions that may convince employers to shift their attention back from the stock market to the real market: eliminating the regulation that forces the write-down of assets due to falling stock prices; forbidding executives from selling stock in their company until 5 years after leaving their posts (thus limiting the incentive of stock-based compensation); and putting more restrictions and regulations on hedge funds which benefit from market volatility. I don't know if any of these are the right solution. But I do think that this over-emphasis on the stock market is a threat to the capitalism that made America great.

Sunday, January 8, 2012

Will Fawzia Koofi be Afghanistan's first female president?

The day Fawzia Koofi was born, she was left out in the sun to die. Now, 35 years old and the first female deputy speaker of the Afghan parliament, she is running for the Afghan presidency in 2014.

She was her father's 19th child. Three months before her birth, her father's newest wife--a 14-year-old girl--had borne him a son. Her mother hoped that she too would have a son to regain her husband's favor. But after Fawzia was born, nobody cared if she lived or died. While village women struggled to save her mother, Fawzia was left out in the heat for nearly a day before finally being brought inside. In much of Afghanistan, a girl is considered less valuable than a goat--a goat will give you milk and meat, while a girl is just another mouth to feed and a dowry to pay for.

Unfortunately, many women have internalized this attitude as well. Koofi remembers talking to one woman who was sick and due to give birth, but could not ask her husband to take her to the hospital because then he would have to sell one of his cattle. The woman told her, "When I die, my husband can find a new wife, but if he sells the cattle, what will my family eat?"

Koofi has faced many assassination attempts and says that she "doesn't know how she is still alive." She expects that one day the Taliban will kill her for speaking out for human rights. It is truly remarkable that there are people with such amazing courage who are fighting for freedom around the world.

Friday, January 6, 2012

GOP, conservatives need to get priorities straight

Going into the election year of 2012, major polls (see here and here) highlight two issues as most important to voters. One is the economy (which includes unemployment/jobs) and the other is the budget deficit. The wave of Republicans who came into Congress in 2010 attempted to address these issues by insisting on spending cuts to reduce the deficit, resisting tax increases for fear of further damaging the economy. A number of bitter deadlocks ensued as President Obama insisted on tax increases and repeatedly balked at cutting spending.

Now, Obama has finally come up with $500 billion in spending cuts--but rather than celebrate, the editors of conservative magazine National Review attack him viciously. The reason? Obama wants to cut the Pentagon budget. In attacking the cuts, National Review calls Obama's plan a "retreat" and pulls out all the usual neocon arguments. They scold Obama for trying to return troop levels to where they were at the end of the Clinton administration--which was not coincidentally the last time we had a balanced budget.

Here is one quote: "At its Cold War peak, U.S. military strategy called for the peacetime ability to simultaneously fight and win two major theater wars and a “brushfire” conflict. The years after the Soviet collapse saw that capability pared down in the name of the “peace dividend,” just in time for the 9/11 decade to deliver . . . two major theater wars and a series of “brushfire” conflicts... But the president draws precisely the wrong conclusion from the challenges of those conflicts. Faced with our struggle to fight up to our own standards, he has elected to lower the bar."

Well, if "lowering the bar" means that less Americans die fighting for dubious causes in wars like Vietnam or Iraq, and our deficit is reduced as well, then I'm all for it. It seems to me that Obama drew exactly the right conclusion: don't start a war without an imminent threat to America and don't engage in prolonged nation-building.

Conservatives really need to realize that we can't do it all. We can't balance the budget, keep taxes low, maintain our infrastructure, keep an acceptable safety net, and continue even a stabilized version of Social Security and Medicare while continuing to act as the world's lone policeman. Not only that, but unless Republicans are willing to cut their favored programs, it would be disingenuous to ask Democrats to do the same.

Monday, January 2, 2012

2011, a year of me-first politics and taxpayers getting swindled

2011 was a year in which the wretched and hideous state of American politics became crystal clear.  

Banks love being too big to fail and have aggressively lobbied the government to stay that way.

Fannie and Freddie continue to suck money from taxpayers like giant leeches: since 2008, about $73 million in taxpayer money has been used to pay the legal bills of former executives who are fighting fraud suits.

MF Global, a derivatives firm run by former NJ senator Jon Corzine, allowed hundreds of millions of consumer dollars to simply vanish.

Minorities and low-income borrowers (those who were supposed to benefit from the federal "housing strategy") became the biggest victims of the foreclosure crisis. In a suit filed in December, the Justice Department alleged that Countrywide--once the country's largest mortgage lender--steered more than 10,000 low-income minorities into risky subprime mortgages.

The cowardly postponement of the Keystone XL pipeline prevented tens of thousands of working-class Americans from getting new jobs.

The deficit problem and the payroll-tax holiday were simply kicked down the road.

Hopefully 2012 will be better. But it might not.

Obama: I have the power to detain US citizens...but I won't

As Obama signed the NDAA into law on December 31, which authorizes the indefinite detention of US citizens without trial, he issued a signing statement where he basically told Americans to trust him not to indefinitely detain anyone.

From the statement: "I want to clarify that my Administration will not authorize the indefinite military detention without trial of American citizens. Indeed, I believe that doing so would break with our most important traditions and values as a Nation. My Administration will interpret section 1021 in a manner that ensures that any detention it authorizes complies with the Constitution, the laws of war, and all other applicable law."

Why should Obama expect anyone to trust him? First of all, he's a politician, and politicians rarely keep their promises to ordinary people. Second of all, Obama in particular has a less than stellar record of keeping promises. For one thing, he promised during his campaign to end "politics as usual in Washington," but in his first year in office engineered a Machiavellian vote-buying scheme in order to get Obamacare through Congress. Oh, and he also promised not to use signing statements to circumnavigate legislation signed into law.