OK, maybe Ben Bernanke isn't willing to do much more to help out our anemic economy, but at least he did say this today:

I don't think that sharp, immediate cuts in the deficit would create more jobs. I think in the short run that we're seeing already a certain amount of fiscal drag coming from state and local governments from the withdrawal of previous federal stimulus, so I think in the short run, you know, the fiscal tightening is at best neutral and probably somewhat negative for job creation.

Am I wrong, or is this the bluntest he's been yet about the idiocy of his fellow Republicans and their austerity agenda?

Via the New York Times, the Federal Reserve announced today it's ending efforts to bolster the country's tepid economic recovery:

The nation’s central bank said Wednesday that it would complete the planned purchase of $600 billion in Treasury securities next week as scheduled, and then suspend its three-year-old economic rescue campaign, leaving in place the aid it already is providing but doing nothing more, for now, to bolster growth.

"The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee had expected," the Fed said in a statement. "The committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline."

[...]

The statement offered hope that the pace of growth would increase, noting that many factors restraining the economy are likely to be temporary, including the impact of higher energy prices and the disruptions to manufacturing caused by the Japanese earthquake. Automakers already are planning sharp increases in production to compensate for the lost volume.

So that's it. Apart from sticking with rock-bottom interest rates, the Fed is turning to a hope-and-wait strategy to see if economic growth, job creation, and consumer spending pick up in the coming months. Thanks a lot, Ben Bernanke.

Remember, front and center in the Fed's mission is crafting monetary policy "in pursuit of maximum employment." Right now, twenty-five million Americans can't find full-time jobs. Fourteen million Americans can't find any work. The Fed knows this: "Recent labor market indicators have been weaker than anticipated," the organization said today.

Ezra Klein nailed it this morning on the Fed's failure to fulfill its mission and spark a stronger, faster economic recovery:

[The Fed's efforts have had] a modest impact on the worst economy since the Great Depression. The anger at the Fed isn't coming because people have suddenly developed strong and nuanced views on quantitative easing. It's coming because people are angry about the state of the economy, and the Fed is one of the major forces in the economy. The way to have avoided it wouldn't have been to do less, but to do better, which would've meant doing more.

A growing number of economic policymakers—former Fed vice chairman Alan Blinder, former CEA chair Christina Romer, former associate director for the Fed's monetary affairs division Joseph Gagnon—believe that would've been, and in many cases, still is, possible. They argue that the bank's underwhelming impact on the recovery is evidence not of the Fed's inability to more effectively fight the recession, but its unwillingness to do what was needed to fight the recession. Larger and more aggressive asset purchases, price-level targeting, and various other dips into unconventional measures were and are needed. But all that would've been economically more effective and politically easier a year ago, or even two years ago, than it is today. Today, the Fed is under intense criticism, which limits its freedom of action. Having not done enough, they're now unable to do more.

Jose Antonio Vargas.

Kevin is on vacation, so Andy Kroll and I are filling in for a few days.

In April 2008, Jose Antonio Vargas, then a reporter at the Washington Post, shared a Pulitzer prize for the paper's coverage of the Virginia Tech shootings. Last September, he published a 6,200-word profile of Facebook's Mark Zuckerberg in the New Yorker—the result of what he later called his "dream assignment." By any yardstick of traditional journalism, Vargas had made it.

This morning, the New York Times published Vargas' confession: he's an undocumented immigrant, and he's apparently committed a number of fraud-related crimes in order to obtain the documents he needed to stay in the country and keep working. It's hard to summarize Vargas' story—he didn't even know he was undocumented until, at 16, he applied for a learner's permit—so you should read the whole thing.

I'm sympathetic to Matt Yglesias' view that we should empathize with all people who come to the United States in search of a better life, even if, unlike Vargas, they do so knowing that what they're doing is illegal. But I've also worked with foreign-born journalists who've paid thousands or tens of thousands of dollars and waded through miles of red tape and seemingly senseless regulations—including, sometimes, returning to their home countries for a period—in order to work in this country.* (This applies outside of journalism, too, of course.) I wonder how they're feeling about Jose Antonio Vargas this morning.

*UPDATE: As discussed in the comments, these senseless hurdles are a central part of the problem.

Hello there, Drum readers! I'm Andy Kroll, a reporter here in MoJo's DC bureau. For the next week, I'll be one of the guest bloggers keeping the Drumbeat lively while Kevin lounges on a beach somewhere curled up with a McKinsey report and his new camera. (Kidding—I have no idea where he is.) My email is at the end of every post, so don't hesitate to drop me a note or give me an earful. Onward...

Regulatory capture: It's the wonky name for when an industry co-opts the watchdogs that are supposed to be regulating it. And there's no clearer example of that than the banking industry and the Office of the Comptroller of the Currency (OCC), which oversees about 1,400 US banks. For instance, it was the OCC in 2003 that squashed Georgia's efforts to outlaw the most toxic home loans on the market—think negative amortizing loans, NINJA (no income, no job, no assets) loans, you name it. How prescient.

On Tuesday, the OCC was at it again. Its chief, John Walsh, went before the Senate to testify against new bank capital requirements, calling for a "fundamental rethink" of rules that would force banks to keep more capital on their books to absorb losses and weather crises. "My view," Walsh said, "is that we are in danger of trying to squeeze too much risk and complexity out of banking as we institute reforms to address problems and abuses stemming from the last crisis." Translation: These rules will pinch bank profits.

Capital is the protective cushioning, if you will, that banks keep on hand in case disaster strikes. In the financial crisis of 2008 and 2009, plenty of banks didn't think it was necessary to stash away capital, and when the crisis arrived, they suffered serious enough damage to necessitate a government rescue. Research by the World Bank and the International Monetary Fund shows definitively [PDF] that large banks with too little capital suffered far more during the crisis than those who chose the safer route.

Which is where the new requirements come in. As Kevin noted last fall, the Basel III proposals would hike capital requirements three- and four-fold, depending on the type of capital. There's also a more recent proposal circulating to make larger banks hold still more capital as they grow in size. While technical, these reforms shouldn't be scoffed at: Treasury Secretary Tim Geithner has called higher capital requirements the most important piece of financial reform.

But Walsh's testimony adds to the growing drumbeat to weaken these requirements. He joins JPMorgan Chase exec Jamie Dimon and a host of other banking big-wigs in opposition.

One lawmaker who's unequivocally onboard is Sen. Carl Levin (D-Mich.). A staunch defender of tighter financial regulations, Levin was so angered by Walsh's testimony that he demanded his ouster in the middle of the hearing: "It is past time for the president to nominate new leadership at the OCC to protect American families and businesses from the excesses of Wall Street." However, it'll take more than one angry senator to beat back the banking lobby and put these rules into action.

Vacation Time

I'll be on vacation for the next week, but fear not for the blog. Nick Baumann and Andy Kroll, who are both great and who you should be following anyway, will be filling in, and a few other MoJo writers will be popping in as well from time to time. I might even pop in myself occasionally, depending on the vagaries of my mood and my WiFi connections. Catblogging, of course, will appear as scheduled.

I'll be back next Thursday. Don't let the world collapse while I'm gone.

I haven't been blogging about the great McKinsey Obamacare study flap, but in a nutshell, McKinsey conducted a survey of employers and concluded that 30% of all companies would stop providing health coverage once Obamacare kicked in in 2014. Conservatives immediately sounded the alarm, but McKinsey refused to explain their methodology or divulge anything about either the questions they asked or how they "educated" respondents before getting their answers.

Under considerable pressure, McKinsey finally released a brief summary of their methodology along with a weasely clarification that their report wasn't meant to be a prediction and had only said that 30% of companies "might" stop providing health insurance, not "would." Whatever. It was too late: the 30% estimate had long since become a piece of conservative lore about the dire effects of Obamacare.

But how likely is it to be true? No one can say for sure, but the reason the McKinsey study provoked so much outrage — aside from the peculiar fact that they refused to explain how the study was conducted — is that it was light years away from every other estimate that had been done. In fact, a team of health economists had just recently done a (very well documented) simulation of the effects of Obamacare and came to a very different conclusion: the decrease in private insurance rates would be on the order of 3%, over two decades, not 30% over two years. They looked at the likely effect of three things: (1) the expansion of Medicaid, (2) the creation of subsidized insurance via exchanges, and (3) the Cadillac tax. The chart on the right, kindly sent to me by Steve Pizer, one of the authors of the study, summarizes the results of their simulation. The number of uninsured goes down to nearly zero, the number of publicly insured goes up to about 15%, and the number of people covered by private insurance declines only a smidgen.

Is this estimate correct? Who knows. But it's carefully done and the methodology is open to all for criticism. All things considered, it's probably way more likely to be close to the mark than McKinsey's study. You probably don't have to worry much about your employer suddenly deciding to end your healthcare coverage when Obamacare starts up for real in 2014.

The NLRB, protector of management rights when Republicans are in charge and protector of labor rights when Democrats are in charge, announced today that it plans to change the rules governing union recognition elections in order to "curb unnecessary litigation, streamline procedures before and after elections, and enable the use of electronic communications, such as requiring employers to give union organizers access to electronic files containing workers' addresses and emails." Sounds boring. So why should you care? I'll let Peter Kirsanow, an avowed labor-phobe, explain:

In a nutshell, the NLRB’s proposed rules would implement “quickie elections,” a process that would allow unions to organize a workplace as easily as they could have had the Employee Free Choice Act (also known as “card check”) passed.

This is a very big deal....Right now, initial elections normally are conducted within 38–40 days of the filing of a petition by the union....That’s not much time for the employer to get his message out. Indeed, in 2009 and 2010 unions won approximately 68 percent of elections (this does not include the number of petitions withdrawn by unions). Yet the “quickie election” rules proposed by the NLRB will shorten the time frame to a mere 10–20 days. Make absolutely no mistake: That’s not enough time for even the largest and most sophisticated employers to counter what the union has been telling employees while organizing them for the last 6–8 months. The union win rate will far exceed 68 percent. In fact, it’s likely that many employers will choose to not even go through the expense of an election that he’s sure to lose, but will simply voluntarily recognize the union upon a showing of authorization cards.

Sounds good to me! And don't get too excited about that two-thirds rate of union victories, either. It's true that in 2009 unions won 66% of all NLRB elections compared to 51% in 1997, but that's 66% of 1,304 elections compared to 51% of 3,261 elections. Contra Kirsanow, organizing a new workplace has gotten so hard in recent years thanks to corporate-friendly NLRB rule changes and increasingly aggressive union avoidance campaigns, that unions simply don't bother waging all that many recognition elections anymore. They know that most of them are hopeless. The result is that the net number of election wins has dropped nearly in half in just the last decade alone.

That's not good enough for Kirsanow and his allies, of course, who would like unions to disappear completely. But among workers themselves, the anti-union skepticism of the 70s and 80s has mostly disappeared in the face of stagnant wages and skyrocketing executive pay. Survey research a few years ago by Harvard's Richard Freeman suggests that "if workers were provided the union representation they desired in 2005, then the unionization rate would be about 58%" — almost eight times higher than the actual private sector rate of 7.4%. The fact that so many workers would welcome union representation but don't have it is compelling evidence that far from being unfair to management, the current legal regime for union elections is tilted dramatically in their favor. For workers, rule changes that slightly reduced that tilt and once again gave unions a fighting chance to organize workplaces would be a welcome change.

Obama's Spending Cuts

Matt Yglesias points out that last December, when Democrats cut a deficit-busting deal with Republicans to cut taxes and increase stimulus spending, would have been a perfect time to raise the debt ceiling. But:

It didn’t happen. Obama said he trusted John Boehner. Harry Reid said he didn’t want the debt limit to be raised by the 111th Congress because he wanted to force the incoming 112th Congress to take ownership over it. The results of these decisions have been a disaster.

What’s more, not only was the disaster predictable but even once it was visibly on the horizon the White House bungled it. There was a brief opportunity for the President to dig in his heels and simply refuse to compromise. Then the debate rapidly would have become “can John Boehner round up the votes in his caucus necessary to avoid a default.” Instead, the White House conceded the unprecedented point that even though Boehner and Obama agreed about the desirability of raising the debt ceiling that the White House should make concessions to the Speaker in order to obtain it. Consequently, you get what we have here this week.

For what it's worth, I continue to think that this probably wasn't a bungle. More likely, during his first two years in office Obama had gotten enough deficit religion from the likes of Peter Orszag and Tim Geithner that he actually welcomed the opportunity to put in place some long-term spending cuts. He couldn't very well admit that publicly, of course, since his base would go bananas, so instead he punted on the debt ceiling, knowing that Republicans would then use it to "force" spending concessions out of him. Mission accomplished: long-term spending is reduced, and Republicans get all the blame. Democrats mostly forgive him because everyone knows Republicans are crazy, and as a bonus, Republicans don't even get much of a boost from their own base out of this since any real-world spending cut won't come close to the demands of the tea party crowd.

How sure am I of this? Not very. Maybe 60%. But think of it this way: the kind of negotiating position Matt is talking about isn't rocket science. It's not even Negotiation 101. It's more like the fifth grade version. There's just no way that Obama and Reid and the rest of the Democratic brain trust were literally so stupid that they didn't understand this. A far more parsimonious explanation is that this is roughly what Obama wanted. He wanted spending cuts, but he wanted Republicans to be the ones to take the lead. And that's what happened.

Bottom line: I don't think we should try to figure out what Obama "really" thinks about stimulus spending vs. deficit reduction. His actions suggest that he wants long-term spending cuts. Like it or not, that's the real Obama.

UPDATE: Jon Chait has the same reaction as Matt, saying this about the failure last December to tie a debt ceiling increase to the tax and spending package: "It was clear that the time that Republicans were committed to pushing the boundaries of their formal powers as far as they would go, and Obama utterly failed to anticipate this."

Seriously? Does anyone really believe that Barack Obama and his team, all with high IQs and decades of Washington experience, utterly failed to anticipate this? I don't. A third grader might fail to anticipate this, but not Obama.

President Obama will be at Ft. Drum on Thursday to announce his plan to reduce our military presence in Afghanistan. Apparently, though, there's not much chance of doing anything more than pulling out the 30,000 troops that were added to Afghanistan in 2010. The real discussion is only over the exact pace of withdrawal for those 30,000:

Administration officials said Mr. Obama would most likely pull out the entire 30,000 troops by the end of 2012. What is still not known is how soon and how fast, though as the administration’s deliberations wind down, the outlines of the main proposals are becoming clearer.

Some senior White House officials advocate a plan under which 15,000 troops would return by the end of this year and the other 15,000 by the end of 2012....Vice President Joseph R. Biden Jr., who has long pushed for the United States to curtail its military engagement in Afghanistan, favors a plan under which all 30,000 troops would be pulled out within 12 months....Pentagon and military officials [prefer] an initial reduction this year of about 5,000 troops — the size of a brigade — followed by 5,000 over the winter, when fighting recedes. The final 20,000 troops could remain into the next autumn, through the 2012 fighting season.

So there you have it. Behind Door #1, is the 15/15 plan. Behind Door #2 is the 30/0 plan. Behind Door #3 is the 5/5/20 plan. Plus there's a Door #4, with no timeline at all. Those are your choices. Any way you slice it, though, all we're doing is getting back to 2009 levels, which themselves were more than twice as high as they were during the Bush administration.

In the New York Times a couple of days ago, David Sanger wrote that Obama "has scaled back, time and again, Washington’s goals in a country that the British, the Soviets and ultimately the Americans tried, and failed, to change." No kidding. Nation building is just a dim memory, we're negotiating a power-sharing arrangement with the Taliban instead of trying to eliminate them, and our relationship with neighboring Pakistan is as dim as it's been for the past decade. What's more, the president of Afghanistan, Hamid Karzai, has become even more hostile and mercurial than ever, lashing out at NATO a few days ago with this broadside:

“You remember a few years ago I was saying thank you to the foreigners for their help; every minute we were thanking them,” he said. “Now I have stopped saying that, except when Spanta forced me to say thank you,” referring to his national security adviser, Rangin Spanta, who was present. “They’re here for their own purposes, for their own goals, and they’re using our soil for that,” Mr. Karzai said.

Former Afghan ambassador Karl Eikenberry, as Spencer Ackerman pungently put it, basically told Karzai the next day to "shut the fuck up," and it's hardly any wonder. It's dangerous enough being deployed in Afghanistan already without having the local government essentially declare open season on you. But that's what Karzai does every time he unleashes one of these verbal cannonades.

I honestly don't know what our mission is in Afghanistan any more. It's a base for continued drone attacks against al-Qaeda strongholds in Pakistan, but our own intelligence officials have estimated that there are no more than a couple of hundred al-Qaeda members left there. It hardly seems feasible that we're ever going to get al-Qaeda presence in the AfPak border region down to zero, so the only real question left is whether it's worth hundreds of American lives and tens of billions of American dollars every year to try to reduce that number from 200 to 100, or from 100 to 50.

We really don't seem to be doing anything else useful there, the host government speaks out against us routinely, and Afghanistan continues to be a festering sore with no end in sight. So why is it that the only thing we're arguing about is whether a few thousand troops will come home in February of next year instead of October? Why aren't we arguing about whether we ought to be in Afghanistan at all?

Via Andrew Sullivan, the New Yorker's Nick Paumgarten provides some perspective on the latest dismal findings about American kids' knowledge of American history:

“We haven’t ever known our past,” Sam Wineburg, a professor of education and history at Stanford, said last week. “Your kids are no stupider than their grandparents.” He pointed out that the first large-scale proficiency study—of Texas students, in 1915-16—demonstrated that many couldn’t tell Thomas Jefferson from Jefferson Davis or 1492 from 1776. A 1943 survey of seven thousand college freshmen found that, among other things, only six per cent of them could name the original thirteen colonies. “Appallingly ignorant,” the Times harrumphed, as it would again in the face of another dismal showing, in 1976.

....The NAEP results through more than four decades have been consistently mediocre, which may prove nothing except, as Wineburg wrote in 2004, “our amnesia of past ignorance.”

My mother attended a highly-regarded Los Angeles public school in the 40s. She was an honor student who loaded up on every advanced class on offer. But she told me once that in her entire high school career she wasn't required to write a single term paper. On the math front, her school not only didn't offer calculus (nobody did in the 40s) but didn't even offer what today we'd call pre-calculus. Advanced algebra and trig was as far as things went.

I don't know how her history education fared compared to mine in the 70s — or to a contemporary high school student's in the aughts. But I'm willing to bet it wasn't any better. Kids may not know a ton of history today, but neither do adults. And why should they? They didn't learn much history when they were in high school either. Nothing much has changed, and education most likely hasn't gone to hell in a handbasket. That's cheery news, isn't it?