Ah, the holidays: that wonderful time of year when shopping, Chinese imports, and consumerism sweep the nation. Just like Jesus intended.

Watch satirist Mark Fiore's cartoon about the magical season below:

AP ran a story today noting that after Democrats proved Sunday night that they had 60 votes to pass healthcare reform, stocks in health insurance companies rose. This suggests that investors think the Senate healthcare bill is a huge boon for insurers, and Nate Silver quantifies that boon here.

Fair enough. Healthcare reform does guarantee a considerable amount of new business for the insurance industry. But be careful.  Here's a chart showing a basket of insurance company stocks over the past six months, and as you can see they've been rising pretty steadily the entire time.1 What's more, the most recent surge began on December 3rd, well before passage of healthcare reform was assured.  And Monday's spike in the first hour of trading, though impressive, was probably pretty speculative and has lost some of its steam already. Generally speaking, you should always be wary of people attributing broad-based market rises to specific events, and this seems like a pretty good example. I'm not sure I'd read all that much into a very short-term market reaction here.

1This chart includes both accident and health insurers, but if you take a look at individual health insurance companies you see pretty much the same trend.

From Mike Konczal on the political climate in conservo-land:

Visiting home for the holidays, it’s amazing to me how certain groups of friends, who I mostly considered in the generic Republicans/conservatives camp, have been wading deeper into the Ron Paul territory. “Abolish the Fed” is one thing, but what surprised me the most was when I was at a Christmas party several people mentioned, fairly out of nowhere, how bad FDIC is for the economy....When I tried to point out how if there wasn’t FDIC and millions of savings accounts were getting wiped out in ordinary bank runs we’d almost certainly have a wave of turn-of-the-last-century style violence that is hard for us to even imagine now — think bomb throwing anarchist violence — they seemed to be ok with that.

Golly.  I wonder what could possibly account for generic conservatives increasingly being OK with bomb throwing anarchist violence? Let me think.....

Political Turncoats

Ezra Klein on today's big political news:

If any other vulnerable Democrats were thinking of following Rep. Parker Griffith's example and switching over to the Republican side, they'll probably think again after Griffith's reception today. Both Red State and the Club for Growth have greeted him with thinly-veiled threats. "We can pick this guy off and get a real Republican in that seat," says Red State's Erick Erickson. "This party switch signals Griffith's nervousness, but it doesn't signal that his incumbency is safe," concurs the Club for Growth.

If Democrats have a silver lining going into 2010, it's that Republicans seem to have forgotten how to let themselves win.

Actually, that seems pretty similar to Arlen Specter's reception from liberal activists when he switched parties.  And why not? Just as Dems feel pretty sure they can win the Pennsylvania Senate seat next year regardless of who they nominate, Republicans probably feel the same way about the Alabama 5th. So why not go for the most conservative candidate possible?

Christmas came early today when Citizens for Responsibility and Ethics in Washington revealed their "Top Ten Ethics Scandals" of 2009. It’s their third annual list, and is jam-packed with titillating/depressing breaches of ethics in both the legislative and executive branches. A must-read for all observers of crooked ambition and unchecked hubris in the political sphere. 

Republican South Carolina Governor Mark Sanford made the naughty list by taking secret trips to Argentina to see his mistress, possibly financing said trysts with state funds. (Happens to the best of us.) Filed under "Gov. Mark Sanford’s Excellent Argentinian Adventure," the scandal comes complete with a recommendation for accountability:

CREW’s holiday wish: For the South Carolina's Attorney General and the State Ethics
Commission to find the governor violated state laws, forcing him (finally!) to do the honorable
thing and resign. This would allow the state's government to focus on serving the citizens of
South Carolina, where nearly one in four adults are unemployed.

Other outrages include:

•   Federal "pay czar" Kenneth Feinberg’s failure to stop financial firms that received TARP funds from kicking up exorbitant bonuses to execs.

•   The SEC's sixteen-year failure to stop Bernie Madoff's ponzi scheme.

•   Loads of criminal and ethics violations committed by Senator John Ensign (R-NV) to cover up his affair with a campaign staffer, who also happened to be married to a member of his office staff.

Why do I suddenly feel the need to bathe? Anyway, don't forget to read the whole finger-wagging report, which won me over by having both a sense of ethical responsibility and a philosophical sense of humor. After all, at the end of the day, you just have to laugh about it. Then, once you're through laughing, feel free to weep for a few hours.

There are plenty of legitimate objections to the Senate healthcare bill, but some of them are just getting crazy.  Here's Megan McArdle:

[My biggest procedural objection] is that I am beginning to believe that in order to get this bill passed, the Democrats basically gutted the CBO.  Not because they were working with the CBO to get estimates — that's the CBO's job, to provide Congress with a cost.  But rather, because this bill was something novel in the history of legislation.  Previous congresses wrote bills, and then trimmed them to get a better CBO score: witness the Bush tax cut sunsets.  But the Congressional Democrats started out with a CBO score they wanted, and worked backward to the bill.  They've been pretty explicit about the fact that no one wants this actual bill; rather, the plan is to pass basically anything, and then go and totally rewrite it when the budget spotlight is off.  I'm not aware of any other piece of legislation that was passed this way.

Essentially, the Democrats have finished the process of gaming the CBO scores.  They're now meaningless.  You don't pass a piece of legislation that bears any resemblance to what you intend to end up with; you pass a piece of legislation that gets a good CBO score, and then go and alter it piece by piece.

I don't even understand this.  Why is it OK to trim a bill to meet some kind of budget target but not OK to have a budget target in the first place? What's the difference?

I'm equally mystified about how any of this amounts to "gaming" the CBO process.  Politicians routinely pass half a loaf if they can't get everything they want, and then keep trying down the road to get the rest. Sometimes they succeed, sometimes they don't. It depends on whether they can round up the votes for it — and PAYGO rules apply regardless of whether they do it this year or next. As for "totally rewriting" the bill once the budget spotlight is off, actual Democratic leaders don't seem to have any intention at all of doing this (to the dismay of some bloggers and pundits). At least, none of them have said so. Where does this come from?

Weird stuff.  But then again, Sarah Palin is already reprising her greatest hits, tweeting, "R death panels back in?" I think the answer is no, but perhaps it's one of the things Harry Reid plans to slide back in as soon as the budget spotlight is off. Better go tell grandma.

Apparently some congressman from Alabama named Parker Griffith has decided to switch from the Democratic Party to the Republican.  At first that seemed a little odd.  Yeah, he's pretty conservative for a Democrat, but despite all the pulling of hair and gnashing of these teeth these days, there's really not much chance of Republicans regaining control of the House next November. So why switch to a minority party?

My guess is that Wikipedia tells us pretty much all we need to know:

[The Alabama 5th district] last supported a Democrat for president in 1976, and George W. Bush won the district by double-digit margins in 2000 and 2004.

Due to these trends, most forecasters rated the district as a toss-up. CQ Politics forecasted the race as 'No Clear Favorite', The Cook Political Report ranked it 'Democratic Toss Up', and The Rothenberg Political Report rated it 'Pure Toss-Up'.

Griffith defeated [Wayne] Parker in a sweeping upheaval, taking 52 percent of the vote to Parker's 48 percent.

52% is a "sweeping upheaval"? Sounds more like a squeaker to me.  Most likely then, Griffith is just a reverse Arlen Specter: an ideological centrist who figured that he'd most likely lose reelection in a tough midterm environment if he didn't switch. So he switched.

"Barry from DC"

Tim Kaine, the outgoing Democratic governor of Virginia (and current chair of the Democratic National Committee), was on DC's WTOP FM this morning when a "Barry from DC" called in to the show. Here's video:

Barry, otherwise known as President Barack Obama, had some "questions about traffic in Northern Virginia," but mostly focused on praising Kaine. The American Prospect's Tim Fernholz tweets that he's "torn between thinking this is hilarious and thinking Obama has other things to do." I just think the president shouldn't bait the birthers by referring to himself as "Barry." That's just mean.

Walking Away

Should homeowners who are underwater on their mortgages just walk away the same way a business would if it were broke? Or should they try their uttermost to fulfill their promises, giving up only as an absolute last resort? Both Megan McArdle and Steve Randy Waldman agree that what's at issue here are social norms that we should tamper with gingerly if at all.  Megan says this means borrowers should do everything they can to repay mortgages even if it doesn't make financial sense:

Someone who borrowed money to buy a house in 2006 was borrowing money under the tacit moral norms of the time.  And in that normative system, it is customary and expected that people who borrow money to buy a home, will attempt to pay it back to the best of their ability, and not just walk away because they no longer feel like paying the mortgage.

....If people attached no moral force to debt repayment [...] lending standards would be vastly tighter, and much more dependent on personal relationships with bankers, which sounds all twee and sweet and community oriented but also used to quite firmly restrict access to capital to more affluent citizens who had longstanding relationships with a bank (or had cosigners who did).  It is doubtful that non-recourse mortgages could continue to exist long term — either the law would change, or the mortgage market would shrink dramatically.  Bankruptcy laws would probably become tighter, because unlike the (mostly) dreadful 2005 reform, bankers would have a valid case that loose bankruptcy was curtailing credit access too much.  Trivial blemishes on your credit score would mean that you probably couldn't get a mortgage.  The federally guaranteed mortgage debt business would probably get the same treatment that we have given tax debts and federally guaranteed student loans, which is to say that if the losses became too high, Congress would probably pass a law making it impossible to discharge those debts in bankruptcy.

Steve thinks the moral argument is more forceful on the other side of the lender-borrower relationship:

We have, and have long had, the expression “it’s just business”. When spoken by one businessman to another in the context of even a tragic transaction, like calling in a loan that will force a firm to fold, we recognize the words as legitimate, a kind of apology. But if a businessman uses the same phrase while creating trouble for an individual in her role as customer, tenant, or borrower, it marks the businessman as, well, a jerk (to use McArdle’s very excellent descriptor)....There have always been businesses that sought every legal cover to profitably mistreat people. But such businesses used to be disreputable.

....As McArdle acknowledges (I think) with respect to revolving debt, over the past few decades the financial industry has increasingly applied the norms of hard-nosed business to its interactions with customers....Along a whole variety of dimensions, the financial industry has increasingly violated those expectations. Lenders drafted contracts with fees and other “revenue enhancers” that borrowers are unlikely to fully understand, and profited when borrowers managed them poorly. They enthusiastically marketed loans to individuals whom they were perfectly able to foresee could not easily bear the debt, against collateral whose valuation they knew to be dodgy, then sold those loans via circuitous paths to investors who literally could not know what they were buying.

....I think that underwater homeowners ought to walk away from their loans for the very same reason McArdle want us to consider them jerks for doing so. We both want to see norms we consider valuable enforced. I think that banks violated a great many norms of prudence and fair dealing in their practices during the credit bubble, and that they violate the fundamental norm of reciprocity by fully exploiting their own legal rights while insisting that borrowers have a moral obligation not to exercise a contractual option. In order to strengthen norms I consider crucial, I hope transgressors face legal and social consequences (strategic default and reduced shame attached to default) that will alter their behavior going forward.

I'm going to punt. We have a pretty good idea of what happens when norms break down on the lender side (housing bubble, big crash, huge recession, etc.), but we don't have a very good idea of what would happen if borrower norms broke down even further than they did during the bubble. Tentatively, then, I'd side with Steve: better to deal firmly with the devil we know than to worry overmuch about the devil we're only guessing at, especially when devil #1 is the far more knowledgable and deep-pocketed one. That said, I think both Megan and Steve make good and intriguing points, and I don't feel like I've thought about this long enough to take a firm stand on either side.  But it's a good conversation, worth reading in full. Here it is: Megan #1, Steve #1, Megan #2, Steve #2.

Is Obama a Patsy?

Over at TNR, David Fontana tells the story of Barack Obama's conciliatory attempts to nominate judicial moderates:

Back in September, The New Yorker's Jeffrey Toobin reported that the administration nominated [David] Hamilton in order to show that it was taking a new, post-partisan approach to judicial appointments. And Hamilton is indeed a moderate: He was backed by Richard Lugar, a Republican senator from his home state of Indiana, and was endorsed by the head of the Indiana chapter of the Federalist Society....Yet Hamilton was voted out of the Senate Judiciary Committee on a strictly party-line vote. He was filibustered on the floor of the Senate. And, after cloture was successfully invoked, not a single Republican besides Lugar voted to confirm him.

Hamilton isn't unique. Obama's other federal appellate nominees have also been generally moderate, safe choices. A majority of them have served as prosecutors (usually considered evidence that a judge might lean more to the right than liberals would want). Beverly Martin, a nominee from Georgia, was endorsed by both Republican senators from the state. Albert Diaz was a lawyer for Big Tobacco. Barbara Keenan has upheld the death penalty for crimes committed by juveniles.

But none of this matters.  Hamilton was filibustered and only two of Obama's other 11 nominees have been approved so far. Republicans are engaged in full-on obstruction of everyone Obama nominates no matter what. So why bother trying to make nice? If Republicans are going to do the scorched-earth thing regardless, why not nominate some real liberals?  Scott Lemieux agrees:

I'm generally wary of the idea that Congress would magically start generating better policy if Obama would just become more uncompromising. But with respect to judicial appointments, Obama's preemptive concessions really have been counterproductive. It's not at all surprising that his attempts to put forward moderate appointments is not working — after all, we're dealing with conservatives willing to claim that Cass Sunstein is a wide-eyed radical.

And, what's worse, putting forward moderate nominees will continue the asymmetry in which Republican presidents take the ideological direction of the federal courts very seriously while Democratic presidents are willing to settle for moderates to focus on other priorities. There's no reason to continue this. Given that Republicans will portray anyone to the left of Anthony Kennedy as a lawless Trotskyite, Obama needs to make stronger liberal appointments and accept that not everyone will get confirmed.

I assume the question here is "when," not "if."  Obama clearly seems dedicated to a program of compromise and bipartisan comity, and he wants to keep at it long enough to give it a real chance of working.  But how long is long enough?  I never really believed Republicans were ever likely to respond to olive branches in the first place — they need a few more years in the wilderness before they're willing to really take stock of the corner they've painted themselves into — so I'm not a good judge of this.  But it's been nearly a year now and Republicans, if anything, are more intransigent than they were on inauguration day. How much longer does Obama give them? Another year? Two? At what point does he finally give up and decide that he's just being played for a patsy?