Kevin Drum

Financial Link Dump

| Thu Feb. 25, 2010 3:44 PM EST

Looking for something to do instead of watching more healthcare bloviating? Mike Konczal has a bunch of good posts up:

Go read. It's all good stuff.

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Obama's Hole Card: Preexisting Conditions

| Thu Feb. 25, 2010 1:45 PM EST

Here's my idiosyncratic halftime take on the White House's goal at today's healthcare summit. The one topic that Democrats keep hammering on over and over is the problem of insurance companies refusing to cover people with preexisting conditions. "This is an area where we can come together," Obama says. Republicans, in contrast, have been relentlessly trying to talk about everything but this. They've barely acknowledged the preexisting conditions problem at all.

For Obama, this is the ballgame. My guess is that he wants to maneuver Republicans into either (a) admitting that they're unwilling to regulate this, which would be highly unpopular, or (b) admitting, however grudgingly, that the practice needs to be banned. Because if they admit it has to be banned he can make the following argument:

  • If insurance companies are forced to take on all comers, then people can game the system by buying insurance only when they get sick. This would obviously decimate the private insurance industry.
  • So you have to require everyone to buy insurance at all times. It's the only way to have a broad pool that keeps costs down (another frequent Obama talking point.)
  • But obviously you can't force poor people to buy insurance they flatly can't afford. So if you mandate coverage, then you have to subsidize low-income families that can't afford insurance, and you have to provide incentives for small businesses so that they can cover their employees.
  • And if you do that, you have to have a funding source. Preferably one that also helps rein in premium costs. Like, oh, an excise tax.

This seems to be the direction he's trying to push things. The question is (a) can he force Republicans to address this? and (b) can he then make the rest of the argument in plain enough terms that it makes sense to everyone?

This is, basically, a debating trick, and Republicans obviously want to avoid getting sucked into it. This is why they try to mumble a bit about high-risk pools and then quickly move on. But the preexisting conditions problem is one of the few issues that almost universally resonates as unfair with the public, and Obama's job is to get everyone to understand what it takes to fix it. If he does, he'll come out of today's summit in better shape than he went in.

Has Pakistan Finally Turned Against the Taliban?

| Thu Feb. 25, 2010 1:15 PM EST

Following up on yesterday's post about the capture of Taliban leaders in Pakistan, the New York Times fills in some details about increased cooperation between Pakistan's ISI and the CIA:

Interviews in recent days show how they are working together on tactical operations, and how far the C.I.A. has extended its extraordinary secret war beyond the mountainous tribal belt and deep into Pakistan’s sprawling cities.

Beyond the capture of Mullah Abdul Ghani Baradar, C.I.A. operatives working with the ISI have carried out dozens of raids throughout Pakistan over the past year, working from bases in the cities of Quetta, Peshawar and elsewhere, according to Pakistani security officials. The raids often come after electronic intercepts by American spy satellites, or tips from Pakistani informants — and the spies from the two countries then sometimes drive in the same car to pick up their quarry.

....And yet for two spy agencies with a long history of mistrust, the accommodation extends only so far....Even as the ISI breaks up a number of Taliban cells, officials in Islamabad, Washington and Kabul hint that the ISI’s goal seems to be to weaken the Taliban just enough to bring them to the negotiating table, but leaving them strong enough to represent Pakistani interests in a future Afghan government.

This contrasts sharply with the American goal of battering the Taliban and strengthening Kabul’s central government and security forces, even if American officials also recognize that political reconciliation with elements of the Taliban is likely to be part of any ultimate settlement.

Italics mine. However, Spencer Ackerman suggests that far from being as sharp as the Times suggests, "the strategic differences here may be ones of degree." This seems like the better guess. Both sides now agree that the Taliban needs to be seriously beaten up, and at most, the argument is over just how much to beat them up in order to get them to sue for peace. Not only is that not a huge difference, but it's one that both sides will legitimately find difficult to calibrate anyway. If that's really the extent of their disagreement — admittedly a big if — there's a real glimmer of progress here.

The Healthcare Summit So Far

| Thu Feb. 25, 2010 11:33 AM EST

Quick comment on today's healthcare summit: John Boehner and Mitch McConnell are smart enough to know their own limitations and choose others to speak for the Republican side. And they've mostly chosen speakers who are good at this stuff and know how to talk in ways that make sense.

The Democrats, who should be in better shape because they have a single leader, are insisting on letting every leader speak: Nancy Pelosi, Harry Reid, Steny Hoyer, and Max Baucus so far. These folks are not great speakers. Why are they so lame that they insist on speaking anyway? For once in their preening lives, why don't they just fade into the background and let President Obama orchestrate their side? Obama may yet come out on top in today's session, but the behavior of the Democratic congressional leadership so far constitutes political malpractice.

A Tale of Two Bernankes

| Thu Feb. 25, 2010 11:08 AM EST

Ben Bernanke testified before Congress yesterday. Here are two newspaper accounts of the exact same testimony. First, the Washington Times:

With uncharacteristic bluntness, Federal Reserve Chairman Ben S. Bernanke warned Congress on Wednesday that the United States could soon face a debt crisis like the one in Greece, and declared that the central bank will not help legislators by printing money to pay for the ballooning federal debt.

And here is the Los Angeles Times:

Federal Reserve Chairman Ben S. Bernanke acknowledged Wednesday that the government's bulging deficits are reaching levels that are unsustainable in the long run, but he said substantial action to reduce them was probably at least two years away.

The embryonic recovery from the worst economic crisis in more than half a century, especially the nation's weak job market, is much too fragile to begin cutting back on government support any time soon, he said...."I'm not advocating, I don't think anyone's really advocating trying to balance the budget this year or next year," he said in delivering the Fed's semiannual report to Congress in front of members of the House Financial Services Committee.

Of course, there's another difference between the two accounts as well. Later in its piece, the LA Times does report that Bernanke also has long-term deficit concerns. They tell the whole story. Later in its story, the Washington Times.....reports that Alan Greenspan is concerned about deficits too. You can read their entire 1000-word account and never have any idea the Bernanke thinks big federal deficits are just fine for the next couple of years. Nice job.

Afghanistan Update

| Thu Feb. 25, 2010 1:52 AM EST

Via Spencer Ackerman, the Christian Science Monitor reports that Pakistan's offensive against Taliban leaders on its territory has been far more extensive than we thought:

Pakistan has arrested nearly half of the Afghanistan Taliban’s leadership in recent days, Pakistani officials told the Monitor Wednesday, dealing what could be a crucial blow to the insurgent movement.

In total, seven of the insurgent group’s 15-member leadership council, thought to be based in Quetta, Pakistan, including the head of military operations, have been apprehended in the past week, according to Pakistani intelligence officials.

....Much about the arrests and Pakistan’s motives remain unclear, but they do reflect Pakistan’s evolving approach to the Afghan Taliban leadership inside its borders. “A year ago when this [Obama] administration was completing its first Afghanistan review and we asked the Pakistanis about the Afghan Taliban leadership operating from their country, they flatly denied it,” says Bruce Riedel, a former CIA analyst who led President Obama’s initial Afghanistan policy review. “Now not only do they say there are senior Taliban leaders in their country, but they are frankly taking action against them.”

Pakistan's motivations are still murky, but they're obviously pretty serious about this one way or another. And even if they're doing this only because they want to make sure they have a seat at the table when it comes time to negotiate a peace settlement with the Taliban, that's probably OK too. After all, no settlement is worth much of anything unless Pakistan is OK with it.

So far, Obama's Afghanistan strategy seems to be paying steady dividends. I'm still not especially optimistic about our chances of accomplishing much of lasting significance there, but things have certainly gone better than I expected. Stay tuned.

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Fun With Frank

| Thu Feb. 25, 2010 1:14 AM EST

Via TPM, we bring you tomorrow's conservative conspiracy theories today! This one comes from neocon nutcase Frank Gaffney, who has discovered treachery in the newly redesigned logo of the Missile Defense Agency:

The new MDA shield appears ominously to reflect a morphing of the Islamic crescent and star with the Obama campaign logo....Even as the administration has lately made a show of rushing less capable sea- and land-based short-range (theater) missile defenses into the Persian Gulf in the face of rising panic there about Iran’s actual/incipient ballistic missile and nuclear capabilities, Team Obama is behaving in a way that — as the new MDA logo suggests — is all about accommodating that “Islamic Republic” and its ever-more aggressive stance.

Watch this space as we identify and consider various, ominous and far more clear-cut acts of submission to Shariah by President Obama and his team.

You know who else is secretly promoting Sharia? The Pillsbury doughboy, that's who. The proof is right here.

The Slow Death of Financial Regulation

| Wed Feb. 24, 2010 7:01 PM EST

So how is Chris Dodd doing in his negotiations with Republicans over financial reform? Felix Salmon points us to a memo from Taylor Griffin and Tony Fratto that suggests a compromise on the Consumer Finance Protection Agency is in the works: "An independent agency with its own source of funding would be established to regulate all federally chartered banks. The agency would have two divisions: one to conduct prudential regulation and one for consumer protection. The agency’s director would decide disputes between the divisions." Felix comments:

I'm not entirely clear what this means, but it seems, on its face, to imply that the FDIC, OTS, and OCC will all be combined into one agency, which would then have somewhat conflicting goals, when it comes to the zero-sum tug-of-war between banks and consumers. On the one hand, it would be responsible for ensuring that banks are profitable and well-capitalized; on the other hand, it would be responsible for ensuring that banks don't gouge consumers in their search for adequate profits.

Most worryingly, the consumer-protection part of the agency would only seem to have control over federally chartered banks. That's a very bad idea indeed, since it's precisely the non-bank financial institutions — subprime lenders, payday lenders, non-bank credit card companies, Walmart, etc etc — which need as much if not more regulation, from a consumer protection point of view, as the banks.

....So, there's no good news here, I'm afraid. And I'm inclined to agree [] that if working with Corker means losing the guts of the CFPA, it's best to ditch him altogether and just try to push something through the Senate with the support of Democrats alone.

As much as I'm in favor of a strong CFPA, I've never thought it was the linchpin of financial reform. Much more important are broad, effective limits on leverage and capital requirements. Unfortunately, the Senate bill probably won't do very much on that front either, and what limits it does put in place are likely to be limited to conventional banks. But as with the CFPA, if the bill's scope doesn't include all the non-bank financial institutions, it's really not likely to do much good.

So I agree with Felix in one sense: if you don't have rules that go beyond conventional banks, you're not doing anything very useful. But what I don't get is his belief that if Bob Corker won't bend on this, then "it's best to ditch him altogether and just try to push something through the Senate with the support of Democrats alone." How exactly can Democrats do this? This kind of regulatory stuff can't go through reconciliation, and it's certain to be filibustered. So without some Republican support, passing a bill is impossible. I don't really see what alternative there is.

What Do Conservatives Want?

| Wed Feb. 24, 2010 6:24 PM EST

NOTE: See update below.

This chart comes from John Sides, who gathered information from the 2008 American National Election Study about spending priorites. Self identified conservatives, it turns out, aren't actually in favor of cutting spending on much of anything. Child care scored the worst for some reason, getting more hostility than even perennial bogeymen like foreign aid and welfare. Still, even at that, only 20% of conservatives wanted to cut child care spending, and scores dropped precipitously from there.

What to make of this? It's a pretty good guess that if conservatives don't want to cut Social Security then they don't want to cut Medicare either. War on terrorism is probably a pretty good proxy for the defense budget. Low scores for public schools + welfare + aid to the poor suggests they don't really want to cut social safety net programs. And interest on the national debt is off limits no matter what they think. That accounts for about 90% of the federal budget right there, and spending on highways, the environment, crime, science, and foreign aid probably takes care of another 5%. And that's pretty much the whole ball of wax.

The lesson from this? It turns out that conservative politicians really do represent their base pretty well. They like to yammer endlessly about cutting spending, but when push comes to shove, there's not much they really think we're spending too much on. It's all just venting.

UPDATE: It turns out that Sides made some mistakes in his original chart. The corrected version is on the right, and a corrected post is here.

The basic point still holds: conservatives aren't in favor of cutting very much. However, foreign aid is still a bogeyman, though it represents only a tiny part of the federal budget, and conservatives are in favor of cutting "welfare" generally, though not so much in favor of cutting specific welfare programs.

This makes a little more sense: opposition to "welfare" is a longstanding conservative issue. Still, when you get down to specifics, there still aren't very many programs that more than a small fraction of conservatives actually want to cut.

"Guess Your Age" Goes Digital

| Wed Feb. 24, 2010 3:23 PM EST

According to Pew's "How Millennial Are You?" quiz, I am not, in fact, a Baby Boomer. Interpolating from the graph, they think I was born in 1969, which makes me sort of an early Gen Xer. Only 11 years off!

I'm not sure why. Is it because I have a Facebook profile? A cell phone? Because I think interracial marriage is just fine? I'm not sure. The reason I'm nowhere close to being a Millennial is obvious (no text messaging, no tattoos, no video game playing, etc.), but the reason I don't fit the Baby Boomer profile is a little more mysterious.

Anyway, this either means I retain some youthful vigor or else that I have failed to grow up. Take your pick. The quiz is here.