Kevin Drum

Jindal's Katrina Story

| Fri Feb. 27, 2009 3:02 PM EST
I just finished writing a post about how clownish it was for Bobby Jindal to exaggerate the Hurricane Katrina story he told in his rebuttal speech on Tuesday, but then I erased it.  After reading Ben Smith's full account, including his update, Jindal's puffery strikes me as a misdemeanor at worst.  He shouldn't have done it, but honestly, it's just not that big a deal.

Advertise on MotherJones.com

A Few Raindrops on the Rich

| Fri Feb. 27, 2009 2:18 PM EST
Andrew Sullivan says that Obama has played the budget and spending game pretty shrewdly:

Look at how Obama has framed the debate since the election. Every single symbolic act has been inclusive and sober. From that speech in Grant Park to the eschewal of euphoria on Inauguration Day; from the George Will dinner invite to the Rick Warren invocation....And now, after presenting such a centrist, bi-partisan, moderate and personally trustworthy front, he gets to unveil a radical long-term agenda that really will soak the very rich and invest in the poor. Given the crisis, he has seized this moment for more radicalism than might have seemed possible only a couple of months ago.

Italics mine.  I think Andrew's basic point is correct: by getting the centrist optics right, Obama has been able to move more boldly than he otherwise could have.  Republicans who paint him as the second coming of Karl Marx just look like idiots these days.  At the same time, let's not go overboard.  Here's how Obama is "soaking the very rich":

If Obama's tax plan is approved, a family making $500,000 a year would see its annual tax bill rise to nearly $132,000 from about $120,000, a 10 percent increase, said Clint Stretch, managing principal of tax policy at Deloitte Tax.

Over the past three decades, these families have seen their incomes double and triple while the rest of the country stagnated.  Now Obama proposes to increase their tax bill by $12,000 — not even enough to get them back to the rates they were paying when Ronald Reagan left office.  This is a very, very modest nod toward fiscal fair play, very much in keeping with Obama's modest optics.  You'd have to drink several pitchers of Rush Limbaugh's Kool-Aid to think this counts as soaking the rich.

Another Stimulus?

| Fri Feb. 27, 2009 1:27 PM EST
This is pretty remarkable.  National Journal asked a bunch of "congressional insiders" if another stimulus bill would be needed sometime in the near future, and you can see the results on the right.  65% of Democrats said yes, which might not be a big surprise, but so did 63% of Republicans.  Their reasons were a little bit different (Dems: a big recession requires a big stimulus; Republicans: the first stimulus was a crock), but it's still remarkable that even two-thirds of Republicans apparently think we'll need more stimulus in a few months.

What's more, this question was asked before this morning's dismal GDP revisions came out.  If you asked again today, I wonder if the number would be even higher?

Free Markets vs. "Free" Markets

| Fri Feb. 27, 2009 12:59 PM EST
Should the federal government provide loans to college students?  Or should it let the private sector make the loans but agree to guarantee them because otherwise the private sector wouldn't be interested?  Rep. Howard McKeon (R–Ca) thinks the latter.  Matt Yglesias, who's apparently on a first name basis with the distinguished congressman, comments:

The interesting thing here is not just the particulars of the policy, but the bizarre view of the role of government that Howard is espousing. Rather than a debate between progressives who want the government to provide a public service and conservatives who want the service to exist just insofar as it can be supported by the private market, we have a debate where both sides agree that the service ought to exist but the right thinks it’s important that it be done in a less efficient more costly manner....You have essentially the same debate over Medicare Advantage between Democrats who want the government to provide seniors with costly medical services and Republicans who want Democrats to provide seniors with an even more costly version of those services by bringing private insurance companies in as middlemen. It’s ludicrous.

This really does highlight the right's frequently bizarre notion of "free markets."  The only reason that private lenders are part of the college loan program in the first place is because the program was started in the 60s, and at the time banks were really the only institutions set up to make widescale loans.  The government didn't have much choice except to use them as their origination arm and provide guarantees as a carrot to get them to participate.

The revolution in finance during the 70s and 80s changed all that, of course.  The government doesn't need to pay banks to originate its loans any more than it needs to make the loans using gold bullion.  But Republicans are convinced that having Uncle Sugar subsidize loans so that Sallie Mae can make outsize profits is somehow ordained by natural law.  It must be more efficient because Sallie Mae is a private organization!  And everyone knows that federal programs are cesspools of waste and inefficiency.

But it ain't true, and it ain't true of Medicare Advantage either.  Sometimes the private sector does things better than the government, and sometimes it doesn't.  In particular, when the main job at hand is cutting checks, the government is actually pretty damn efficient.  There's not much to it these days, and with no middleman to get in the way the feds can provide money at a much lower cost than private lenders.

Bill Clinton tried to get rid of the private component of the college loan program, but he met a lot of resistance and didn't try all that hard.  Hopefully Obama will try harder.  After all, taxpayers deserve to have their money spent as efficiently as possible, right?

Quote of the Day - 02.27.09

| Fri Feb. 27, 2009 12:29 PM EST
From an AP story about Los Alamitos mayor Dean Grose, who sent out an email picture depicting the White House lawn planted with watermelons under the title "No Easter egg hunt this year":

Grose says he accepts that the e-mail was in poor taste and has affected his ability to lead the city. Grose said he didn't mean to offend anyone and claimed he was unaware of the racial stereotype linking black people with eating watermelons.

Uh huh.  He just happened to pick watermelons randomly.  What a dick.

GDP Meltdown

| Fri Feb. 27, 2009 11:54 AM EST
Now we know why the economy feels a whole lot worse than the official statistics suggest — and it's not because our feelings are off kilter:

The economy at the end of last year contracted at a far faster rate than initially estimated, a government report released Friday said.

....Output fell 6.2 percent at an annualized rate in the fourth quarter of 2008, revised downward from a previous estimate of a 3.8 percent decline. The drop was even steeper than many economists had feared — the consensus estimate had been a 5.4 percent decline — and was much lower than the 0.5 percent contraction from the previous quarter.

That's an enormous revision.  I wonder how Commerce screwed up so badly?

Apparently the answer is that they miscounted business inventories.  No telling how.  But the good news, such as it is, is that this means inventories are lower than we thought.  And since inventory overhang keeps businesses from ordering more stuff, the lower number means that maybe things will pick up slightly more than we expect this quarter.  Maybe.

Advertise on MotherJones.com

Cap and Trade Revenue

| Fri Feb. 27, 2009 4:32 AM EST
This is from the budget outline released by the Obama administration on Thursday:

After enactment of the Budget, the Administration will work expeditiously with key stakeholders and Congress to develop an economy-wide emissions reduction program to reduce greenhouse gas emissions approximately 14 percent below 2005 levels by 2020....

I wonder what their economic assumptions are here?  Here's the revenue timeline, starting in 2012:

At first glance, this strikes me as odd.  With only slight variations, it assumes $80 billion in revenue every year between 2012 and 2019.  But that doesn't really make sense.  What you normally expect with a carbon trading program is that you begin with a high cap (carbon emissions in 2012 will probably start out 10% higher than 2005 emissions) and then ratchet the cap down every year after that.  As the cap goes down, the price of permits goes up.  It's true that the number of permits goes down at the same time, but this shouldn't be enough to make up for the higher permit price.  Overall, until the green technology buildout hits a critical mass, the revenue from the program should go up considerably over time.

But not in this one.  I wonder why?

Tattoo Removal

| Thu Feb. 26, 2009 6:54 PM EST
Greg Sargent watches wingnut TV so you don't have to:

Conservatives are hammering the House’s new $410 billion spending bill because it contains $200,000 for what they’re derisively referring to as “tattoo removal.” Fox News’ Sean Hannity, Drudge, and at least one GOP official on MSNBC, among others, have been all over this today.

....The tattoo pork story kicked off in earnest when the New York Post flagged the “tattoo removal” pork in a story this morning. It was subsequently pushed by Drudge with the headline: “Congress: Big Bucks To Canoes And Tattoos.”

I hardly need to tell you that this is yet another crock to go along with volcano monitoring, field mouse protection, and the train to Las Vegas.  Read Greg for the whole story.  But I suppose resistance is futile.  Nothing is going to stop conservatives from combing through this bill forever looking for minusucle items to fan up some faux outrage over.  They're a tired bunch these days, and this is pretty much all they've got left.

Raining Money

| Thu Feb. 26, 2009 5:49 PM EST
James Kwak explains why the latest Treasury rescue plan is great for Wall Street, not so great for the rest of us:

There is nothing inherently wrong with convertible preferred stock. In Silicon Valley, for example, venture capitalists almost always invest by buying convertible preferred. The idea is that in the case of a bad outcome, the VCs are protected, because their shares have priority over the common shares held by the founders and employees....However, in a good outcome, the VCs can exchange their preferred shares one-for-one for common. So if the company gets sold for $100 million, the VCs convert, and they now own 50% of the common stock, so they get $50 million.

....The key in the Silicon Valley example is that the VCs have the option to convert or not. The Treasury Department's new Capital Assistance Program has this precisely backwards....The bank, AT ITS OPTION, can choose to convert the preferred shares into common, at 90% of the average closing share price during the 20 days ending on February 9.

....What's wrong with this? Well, nothing, if your goal is to give banks money. What you've just done is stick the government with the downside risk — we could get paid back in worthless stock — while the bank shareholders get all the upside potential. You've done this by giving the bank, for free, an option that has value. Back of the envelope, Peter [Boone] thinks this option is worth about 65 cents per dollar of money invested. (It's worth so much because bank stocks are so volatile these days.) Put another way, for every $10 billion of capital we invest this way, we are giving away another $6.5 billion.

The rest is a little complicated but worth reading anyway.  "There are some very clever people in Treasury these days," Kwak says, and they're expending a lot of brainpower figuring out ever more elegant ways to spend taxpayer dollars in ways that won't offend the delicate sensibilities of the folks getting the checks.

Feeding at the Federal Trough

| Thu Feb. 26, 2009 3:56 PM EST
Gail Collins on Bobby Jindal's response to Obama's speech on Tuesday:

Louisiana has gotten $130 billion in post-Katrina aid. How is it that the stars of the Republican austerity movement come from the states that suck up the most federal money? Taxpayers in New York send way more to Washington than they get back so more can go to places like Alaska and Louisiana. Which is fine, as long as we don’t have to hear their governors bragging about how the folks who elected them want to keep their tax money to themselves. Of course they do! That’s because they’re living off ours.

They are indeed.  Wonky details here.