2009 - %3, September

No More Miracles

| Wed Sep. 9, 2009 9:23 AM PDT

Over at his new digs, Bruce Bartlett offers some belated advice on healthcare reform from the perspective of someone who was deeply involved in the 1986 Tax Reform Act:

Before the tax reform proposal ever went to Congress in 1985, Treasury already knew all the potential problem areas, which provisions were expendable and which ones were not. Consequently, Treasury was able to manage the inevitable trade-offs necessary to get a bill enacted without sacrificing the basic goal.

I would just add from my own experience that the 1986 act was the culmination of a long-term process that began with a lot of discussion on Capitol Hill, at think tanks and elsewhere about ideas such as a flat rate consumption tax, a comprehensive income tax and other options. By the time the Reagan administration sent a formal proposal to Congress the basic idea of tax reform was clear in everyone's minds. Even so, it took a solid year of work to get a final bill.

This sort of process never occurred with health reform. There was never a study from the Department of Health and Human Services laying out the options, discussing the pros and cons of various alternatives, or with the sort of reference data that is essential for developing really big policy changes. In fact, there has never really been a formal White House proposal. This has made it easy for Congress to take control of the whole health reform debate, with Obama often appearing to be a mere bystander.

For a couple of reasons, I'm not sure I buy this.  First, practically everyone seems to agree that the 1986 Tax Reform Act was little short of a miracle: not only did it manage to accomplish significant tax reform, but it did so without caving in to special interests at every turn.  That might be because Treasury was so well prepared, but lots of bills that have been equally well researched beforehand have failed.  More likely it was because of the bullheadedness of Donald Regan, virtuoso lobbying by James Baker, a Congress that genuinely wanted reform on both sides of the aisle, and the fact that the stars just happened to align.  It was sui generis, and I'm not really sure how many lessons we can learn from it.

Second, healthcare reform has been studied to death.  Granted, there isn't a three-volume HHS study sitting around, but few domestic subjects have gotten more attention from both scholars and activists over the past decade, and all the various options and the tradeoffs between them are well known to virtually everyone.  What's more, before this process ever started there were half a dozen actual proposals on the table from actual members of Congress.  There was in no way a dearth of serious, detailed thinking widely available on healthcare reform.

The real problem is that we just don't have the consensus for action that we had with tax reform in the mid-80s.  Roughly speaking, Democrats wanted to close loopholes and Republicans wanted lower top marginal rates, and both were willing fend off the special interests in order to make a deal on those terms.  This time around, there's nothing Republicans want, so there's no deal to be had.  Democrats have no choice but to bull something through on their own, and with Republicans already opposed en masse they can't afford to make too many other enemies.  The result is a mediocre bill that makes some good progress, but does so only by bribing special interests instead of standing up to them.

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What to Look for in Obama's Speech Tonight

| Wed Sep. 9, 2009 8:26 AM PDT

First, nothing specific. Here’s how the BBC reports it this morning:

When asked if Americans will find out in his speech whether or not he is willing to sign a healthcare reform bill without a public scheme, he said: “Well, I think the country is going to know exactly what I think will solve our healthcare crisis.”
Mr Obama said the speech will be directed at the American people, as well as members of Congress…

"The intent of the speech is to, A, make sure that the American people are clear exactly what it is that we are proposing," Mr Obama said. "And B, to make sure that Democrats and Republicans understand that I’m open to new ideas, that we’re not being rigid and ideological about this thing, but we do intend to get something done this year."

Overdraft Hell

| Wed Sep. 9, 2009 8:19 AM PDT

The New York Times has a nice front page piece today about overdraft fees on debit cards, and for the most part it's the usual horror show: the fees are outrageously high; banks deliberately arrange them so that you always pay the maximum number of fees, not the minimum; an enormous fraction of their operating profit now comes from overdraft fees; and they actively adopt policies designed to encourage overuse of debit cards.  And naturally this hits the hardest among those who are the most financially stressed in the first place: 93% of all overdraft charges come from 14% of bank customers, most of them lower-income consumers.

That's all blood-boiling stuff, but it's also been pretty well covered over the past year or two.  However, I did learn a couple of new things from this piece.  First, I always figured that as bad as the overdraft racket was, at least you could opt out if you want and just have the bank turn down any debit that would take your account below zero.  Nobody ever does it, but in theory you have the option.  Right?  Wrong:

Ruth Holton-Hodson discovered that the hard way. She keeps close tabs on the welfare of her brother, who lives in a halfway house in Maryland and uses what little he has in his account at Bank of America to pay rent and buy an occasional pack of cigarettes or a sandwich.

When the brother, who has a mental illness that she says requires her to assist with his finances, started falling behind on rent, Ms. Holton-Hodson found he had racked up more than $300 in debit card overdraft fees in three months, including a $35 one for exceeding his balance by 79 cents.

Ms. Holton-Hodson said she spent two years asking bank employees if her brother could get a card that would not allow him to spend more than he had. Though Bank of America does not typically allow customers to opt out of overdraft protection, it finally granted an exemption.

“I’ve been angered and outraged for many years,” she said. “When there is no money in his account, he shouldn’t be able to pay.”

Go ahead and try to defend that.  I dare you.  And then there's this:

In 2005, after intense industry pressure, the Federal Reserve ruled that overdraft charges should not be covered by the Truth in Lending Act. That meant bankers did not have to seek consumers’ permission to sign them up, nor did they have to disclose the equivalent interest rate for the fees.

Well, of course the Fed ruled that way.  Just because banks are charging the equivalent of 3,000% interest on these fees is no reason to force banks to disclose that fact to customers.  That's our Fed!

But maybe the worst aspect of the whole thing is the almost unbearable smarminess of the bank lobbyist who blew off the whole subject with this: “Everyone should know how much they have in their account and manage their funds well to avoid those fees,” Scott Talbott told the Times.  There's a circle in hell reserved for this guy.

UPDATE: Some practical reform suggestions here.

Billions To Be Lost in Auto Bailout?

| Wed Sep. 9, 2009 8:13 AM PDT

The Congressional Oversight Panel, assigned to oversee the TARP bailout and chaired by Harvard prof Elizabeth Warren, has released another of its monthly reports, this one on the federal bailout of GM and Chrysler. No surprise, the panel finds that once again the taxpayers are not getting the best deal. The money shot, so to speak:

Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount. The estimates of loss vary. Treasury estimates that approximately $23 billion of the initial loans made will be subject to “much lower recoveries.” Approximately $5.4 billion of the loans extended to the old Chrysler company are highly unlikely to be recovered.

In other words, the taxpayers could lose up to $20 billion on the deal. But that's not all. It turns out that the Treasury Department has not legally justified—at least, in public—its use of TARP dollars for the auto bailout:

[B]ecause of the unprecedented nature of the assistance provided to the automotive industry, the Panel also recommends that Treasury provide its legal analysis justifying the use of TARP funds for this purpose. This analysis will inform policymakers‟ and taxpayers‟ understanding of the potential for Treasury to use its authority to assist other struggling industries. Treasury must be clearer, more transparent, and more accountable in its TARP dealings, providing the American public with the information needed to determine the effectiveness of Treasury‟s efforts.

Shouldn't this have already been done? Yet looking at this and previous COP reports, it does seem as if the Treasury strategy has been bailout first, answer questions later.

The report also notes:

The Panel recommends that, to mitigate the potential conflicts of interest inherent in owning Chrysler and GM shares, Treasury should take exceptional care to explain its decisionmaking and provide a full, transparent picture of its actions. The Panel recommends that Treasury use its role as a significant shareholder in Chrysler and GM to ensure that these companies fully disclose their financial status and that the compensation of their executives is aligned to clear measures of long-term success. To limit the impact of conflicts of interest and to facilitate an effective exit strategy, Treasury should also consider placing its Chrysler and GM shares in an independent trust that would be insulated from political pressure and government interference.

Again and again, this panel has to remind Treasury to be transparent. The big question is, why does Treasury always need such a reminder?

You can follow David Corn's postings and media appearances via Twitter.

Eco-News Roundup: Wednesday, September 9

| Wed Sep. 9, 2009 4:00 AM PDT

Here's what's Blue Marble-ish in our other blogs (and around the web) today:

The buck stops here: Used to be you could make a living working a facotory job in Janesville, Wisconsin. Then GM went bust. Now the town is left to pick up the pieces.

Cautious optimism: Why Kevin Drum agrees with TNR's Jon Cohn on the state of health care reform.

Earth in the balance: Researchers find that the benefits of the Waxman-Markey climate bill outweigh the drawbacks 9-to-1. [Treehugger]

Sun share: Meet the families who bought into the country's first solar farm co-op. [Wall Street Journal]

We're Still at War: Photo of the Day for September 9, 2009

Wed Sep. 9, 2009 3:30 AM PDT

Iraqi children try to cool off by swimming in a canal in Nassir Wa Salam, in western Baghdad, Sept. 2, while Pfc. Matthew Burks, an infantry grenadier from Colorado Springs, Colo., and other Soldiers from B Company, 2nd Battalion, 8th Cavalry Regiment, 2nd Brigade Combat Team, 1st Infantry Division, and Iraqi army soldiers patroll the area looking for insurgent activity. (US Army Photo by Staff Sgt. Mark Burrell.)

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Need To Read: September 9, 2009

Wed Sep. 9, 2009 3:30 AM PDT

White House photo.White House photo.President Barack Obama attended the investiture ceremony for Supreme Court Justice Sonia Sotomayor yesterday. This week, the Supreme Court is deciding whether restrictions on corporate money in federal elections are really all that necessary. Tonight, the president will address Congress (and the nation) on health care reform. Here are today's must-reads:

  • Marc Ambinder, Official Voice of Center-Left JournoWisdom: How Obama Survived August (The Atlantic)
  • Health Care Reform's Prospects Are Better Than You Think (NYT)
  • Our Own Kevin Drum Could Have Told You All This On Friday (MoJo)
  • Paul Krugman: Why The Public Option Matters (NYT)
  • The Max Baucus WellPoint/Liz Fowler Health Plan (FDL)
  • Consumers Paid Off Record Amounts of Debt in July. This Is Apparently Bad for the Economy (LAT)
  • What's Really Behind the Van Jones Attack (MoJo)
  • DOJ: Blackwater Contractor Saw Iraq As 9/11 Payback (MoJo)
  • No, I'm Not Linking to Sarah Palin's Op-Ed (It's In the WSJ)

I post articles like these throughout the day on twitter. You should follow me, of course. David Corn, Mother Jones' DC bureau chief, also tweets. So do my colleagues Daniel Schulman and Rachel Morris and our editors-in-chief, Clara Jeffery and Monika Bauerlein. Follow them, too! (The magazine's main account is @motherjones.)

Brazil Preps for More Forest Fires

| Tue Sep. 8, 2009 9:13 PM PDT

What will the Brazilian Amazon turn into once global warming makes it drier and fires become more frequent? Woods Hole Research Center and the Amazon Environmental Research Institute (IPAM) are trying to answer that question by fast forwarding to the future. How? Setting a forest on fire.

IPAM and Woods Hole have been experimenting with fire in Brazil since 2004, in a 370-acre farm in the state of Mato Grosso, Western Brazil. The area is divided in three blocks: The first is the control block, which is never burned. The second is burned every three years, and the third is burned every year. This year’s burn happened from August 28th to 31st.

They hope the burn will help determine whether this forest will survive the increasing number of wildfires—or just turn into degraded scrub or grassland. In order to figure that out, they measure forest structure, which animals and insects survive, what blossoms after a fire, and how the soil fares.

IPAM researcher Oswaldo de Carvalho Jr. says that, in the every-year burn area, degradation is already obvious. “Diversity has decreased, and other species, like common grass, start invading,” he says. Woods Hole researcher Jennifer Balch documented that trend in her field notes. “This year we were really able to capture the grass-fire cycle,” she writes. “Grass invasion via fire leads to higher fuel loads and a more intense future fire, if ignition sources are plentiful in the landscape.”

The group is also trying to answer another question: What are the carbon consequences of this high-frequency burning? So far, they have calculated that combusted organic material from the initial burn has released more than 19,000 pounds of carbon—the same as 9.5 plane trips across the US—per acre.

After a few more years of burning, Carvalho says the scientists will want to take the reverse approach. “We will study how the forest will restore itself without the fire,” he says. He believes that once they understand that, they can help the fire recovery more efficiently—an important lesson to learn to prepare for the dry years ahead.

Guest contributor Gabriela Lessa is a journalist and blogger spending the summer in her native Brazil. Watch for her regular environmental dispatches on The Blue Marble.

Tough Choices

| Tue Sep. 8, 2009 7:12 PM PDT

One of the common features of the healthcare reform bills currently on the table is that they include a personal mandate combined with insurance subsidies.  What this means is that you're required to buy health insurance if you don't get it from your employer, but the government will help pay for it if you can't afford it.

But what's the right level of subsidy?  The draft bill introduced by Sen. Max Baucus today provides subsidies for families earning up to 300% of the poverty level, or $66,000 per year.  That's a problem: health insurance can easily set you back $15,000 or more, and requiring families with modest incomes to suddenly add a $15,000 item to their annual budget may be more wishful thinking than serious policy.  What's more, politically it's likely to prove to be very, very unpopular.

Much better would be 400% of the poverty level, or $88,000 per year.  There would still be some unhappy families, but a lot fewer of them.  It's a big difference.

Now, compare this to the much discussed "public option."  This would be a federal insurance plan offered in addition to private insurance, and the idea behind it is that the competition would help force down insurance prices across the board.  That would also make a big difference to a lot of families.

Ideally, we'd like to have both in the final bill.  But what if we can't?  So here's the question for the day: if someone put a gun to your head and forced you to choose between (a) a public option and (b) a higher subsidy level, which would it be?  Please show your work.

Why Sarah Palin Backfired: Parenting Makes Moms Liberal, Dads Conservative

| Tue Sep. 8, 2009 6:22 PM PDT

So this is why father thought he knew best. Parenthood pushes mothers and fathers in opposite directions on political issues. Mothers become more liberal and fathers more conservative with regards to government spending on social welfare issues like health care and education.

Researchers from North Carolina State U used data from the 2008 presidential election to evaluate the voting behavior of men and women with children living at home. The findings:

  • Women with children in the home were more liberal on social welfare attitudes and on attitudes about the Iraq War than women without children at home.
  • Men with kids were more conservative on social welfare issues than men without kids—though they did not differ in their attitudes towards the war in Iraq.
  • There was no evidence of a 'Sarah Palin effect'—even when looking exclusively at Republicans. The self-professed hockey mom and working mother of five did not attract votes of parents, especially mothers.

Smart moms.

I mean, it wasn't Father Jones, now was it?

The researchers also evaluated the data for elections going back to 1980 and found the trend is strengthening for dads to become more conservative, while the trend is holding steady for moms to become more liberal.

Which means the Republican party which calls itself the family-values party might as well call itself the daddy-values party. Or maybe the white-daddy-values party. Or the red-state-white-daddy-values party.

The research was presented at the annual meeting of the American Political Science Association.