Kevin Drum

The Recession Doldrums

| Mon Aug. 31, 2009 12:08 AM EDT

The Wall Street Journal asks a question today:

Can Rally Run Without Revenue?
Investors Wonder Whether Profits Based on Cost Cutting Can Long Endure

No, they can't.  Beyond the very shortest of short terms, you need rising revenue to generate rising earnings, and for that you need higher consumer spending.

But there's no sign of that.  This isn't an ordinary inventory cycle recession, which goes away when inventories tighten back up, or a Fed-induced inflation-fighting recession, which goes away when the Fed eases up on interest rates.  It's a massive deleveraging recession, and it won't go away until consumers and businesses pay down their crushing debt loads and start spending money again.

But how?  There are only a few ways for consumers to spend more money, and none of them are anywhere on the horizon.  Wages aren't going up, employment isn't going up, the glory days of credit card debt and home equity loans are over, and no one is drawing down their savings to buy bedroom sets these days.  Just the opposite, in fact.

So with consumers actively reducing their consumption in order to pay off debt, what's going to keep this recovery going?  A few hundred billion dollars in stimulus money?  Not likely.  Unfortunately, with no second stimulus likely to get serious consideration, we're stuck in the doldrums until deleveraging has run its course.  That's probably going to take another couple of years.

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The Lesson of the Town Halls

| Sun Aug. 30, 2009 2:22 PM EDT

Is there any reason for optimism on healthcare reform?  In a weird sort of way there is.

Think about this: It turns out that heathcare reform is so fundamentally popular that the only way Republicans have been able to have any impact at all on the debate is via a campaign of demagoguery so egregious and brazen that Huey Long himself probably would have hesitated a moment or two before jumping in.  For the first six months of the year nothing else had made a dent, so finally they had to resort to a full month of silly season frenzy about death panels and secret White House enemies lists and "healthcare racism" and benefits for illegal immigrants.  The only thing missing was sharks with laser beams attached to their heads.

It's been a helluva show.  But here's the weird fact: despite all this, public support for healthcare reform has declined only modestly.  In fact, less than you'd expect even without the August freak show we've just gone through.  Generally speaking, people still approve of Obama, still approve of his healthcare plan, still prefer Democrats to Republicans on the issue, and still support giving people the choice of being covered by either a public or a private plan. Fox News and FreedomWorks have managed to spin their audiences into a hysterical lather about fascism and socialism and pulling the plug on grandma, but in the end the shrieking crowds who showed up at the townhalls were tiny in number.

So that's the optimistic view: the Fox/FreedomWorks crowd has created some great political theater, but underneath it all not a lot has changed.  If Democrats can just take a deep breath after the trauma of being yelled at all summer, they'll realize that the loons at their townhalls represented about one percent of their constituency; that the public still wants reform and will reward success; that the plans currently on the table are already pretty modest affairs; and then they'll stick together as a caucus and vote for them.  And that will be that.

Unfortunately, that's also the reason for pessimism: can Democrats still think straight about all this?  When Chuck Grassley announces dolefully that maybe healthcare needs to be rethought now that the people have spoken, he says it like he really means it.  And even some Dems fall for it.  So success depends on the Democratic caucus seeing through the "heartland uprising" charade and showing some backbone.  The odds might not be so great on that.

Back to Basics

| Sat Aug. 29, 2009 11:35 AM EDT

Let's recap: the United States spends about twice as much on healthcare as any other developed nation in the world and in return receives just about the worst care.  Can someone remind me again why there's even a debate about whether we should put up with this?

Friday Cat Vlogging - 28 August 2009

| Fri Aug. 28, 2009 3:03 PM EDT

Today you get more than boring old catblogging.  You get a cat movie.  Or a short feature, anyway.

OK, fine: it's 26 seconds long.

Its star is Domino as she plonked down the stairs this morning to check out the kibble situation.  You'll notice that she has sort of a weird gait coming down the stairs, not at all like the panther-esque stride that a normal cat would display.  (Like, say, Inkblot.)  (No, really.  When he comes down the stairs you better get out of the way.)  We're not sure why this is, but she's been this way ever since we got her, and it seems to be due to some kind of abnormality in her front legs.  Nothing serious, and she gets around just fine.  She's just not very lithe about it.

Anyway, as the ending shows, this dramatic production is clearly a tragedy: there's no food in the food bowl after Domino makes the long trek downstairs.  But worry not: as soon as the cameraman was done, he filled up the bowl and Domino was there at the head of the line.  Everyone walked away happy from this movie.

Chart of the Day

| Fri Aug. 28, 2009 2:49 PM EDT

OK, it's not really a chart.  It's a table.  But it comes from CBPP and it takes a closer look at the recent headlines screaming that deficit projections have risen from $7 trillion to $9 trillion.  Long story short, it's not true.

Here's why.  The lower number is from the CBO and relies on its "baseline" budget calculation.  This is an estimate of what would happen if current law remains unchanged forever, and as such it bears little resemblance to reality.  In reality, the Bush tax cuts aren't going to disappear in 2011, Medicare reimbursements aren't going to be suddenly slashed, and the Alternative Minimum Tax won't be left alone to gobble up ever more income.  As usual, the law will be changed to take care of all these things, just like it is every year.

So if you take a look at what the deficit would be under current real-life policies, and compare it to estimates under Obama's proposed policies, what do you get?  As the table below shows, the real-life deficit isn't $7 trillion, it's more like $11 trillion.  And the Obama deficit isn't $9 trillion, it's about $10.5 trillion once adjustments are made so that it can be compared to CBO estimates on an apples-to-apples basis.  So the bottom line is simple: properly accounted for, the deficit actually goes down when you compare Obama's budget proposals to current policy, not up.

All the grisly details are here.  Warning: not for the faint of heart.

Quote of the Day

| Fri Aug. 28, 2009 1:38 PM EDT

From Steve Benen, responding to Steven Pearlstein's column today about a possible compromise healthcare plan:

If there's "a deal to be had here," who is the deal with?

In theory, a deal should be fairly easy.  Keep the insurance reform stuff and the increased subsidies, dump the public option, add in a few other goodies here and there for both sides, and voila.  Dinner is served.

But who's going to join us at the table?  Are there any Republicans left who will vote for any healthcare plan at all, regardless of what is or isn't in it?  Who are they?  As Michael Kinsley says morosely about a healthcare deal elsewhere in the paper: "I'd like to think that if it goes down this time — when even the insurance companies are on board, promising to eliminate their odious policies about preexisting conditions — Republicans will pay for having killed it, if indeed they do kill it. But they didn't pay the last time."

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The Rationing Canard

| Fri Aug. 28, 2009 1:24 PM EDT

Ezra Klein takes a bat to Charles Krauthammer's claim that national healthcare inevitably leads to rationing:

A 2001 survey by the policy journal Health Affairs found that 38 percent of Britons and 27 percent of Canadians reported waiting four months or more for elective surgery. Among Americans, that number was only 5 percent....There is, however, a flip side to that. The very same survey also looked at cost problems among residents of different countries: 24 percent of Americans reported that they did not get medical care because of cost. Twenty-six percent said they didn't fill a prescription. And 22 percent said they didn't get a test or treatment. In Britain and Canada, only about 6 percent of respondents reported that costs had limited their access to care.

The problem, of course, is that the U.S. rations by denying healthcare to poor people, and the Krauthammers of the world don't really care much about that.  What's more, for all that we like to think of ourselves as nice people, most middle class Americans don't care much about it either.

In any case, Krauthammer also violates two of my standard rules for figuring out when someone is completely full of it when they talk about healthcare.  #1: the old hip replacement canard.  Run for the hills when you hear it.  Krauthammer, as Ezra points out, is implicitly talking about elective surgeries like hip replacements, but there's a reason these procedures are called "elective": it's because these are the procedures that can be most effectively triaged.  We do the same thing in emergency rooms all the time, and we do it every time you have to wait a few weeks for a doctor's appointment because you're not keeling over on the street.  Every system triages something, and in some countries that something is hip replacements that can be easily monitored and scheduled.  In others — like ours — it's things like basic dental care.

#2: Krauthammer is careful to name check only Britain and Canada, which have more problems than most other national healthcare systems — and are conveniently English-speaking, which makes it easy to lazily Google complaints about care.  But he couldn't make his rationing statement at all if he'd chosen France and Germany (or Sweden or Japan) instead.  The plain fact is that universal care doesn't inevitably mean longer waits for care than in the U.S.  As any honest observer knows, plenty of actual, existing countries have proven just that.  We should emulate them.

Af/Pak Dominos

| Fri Aug. 28, 2009 12:44 PM EDT

According to Mike Crowley, Bruce Riedel said this at a Brookings event earlier this week:

The triumph of jihadism or the jihadism of Al Qaeda and the Taliban in driving NATO out of Afghanistan would resonate throughout the Islamic World. This would be a victory on par with the destruction of the Soviet Union in the 1990s. And, those moderates in the Islamic World who would say, no, we have to be moderate, we have to engage, would find themselves facing a real example. No, we just need to kill them, and we will drive them out. So I think the stakes are enormous.

Riedel was chair of a White House team that reviewed U.S. policy on Afghanistan and Pakistan earlier this year, so his opinion isn't one you can easily dismiss.

But how reasonable is it?  It's probably true that Pakistani moderates are skeptical about our willingness to stick things out for the long haul, so they often hedge their bets by trying to stay on our good side while they strike deals with the Taliban on the side.  After all, Americans are a wee bit unpopular in Pakistan these days, so why not?  What's more, it's a pretty safe game since these same moderates know perfectly well that we don't have enough leverage to ever really call them out on this tap dancing.

At the same time, neither Pakistani moderates nor, more importantly, the Pakistani army, would ever put up with any serious effort by the Taliban to mount a coup.  The army plays a sometimes dangerous game, trying to use these terrorist groups as useful foot soldiers in its forever war with India, but other than that they've never had any real use for them.  The more important question, then, is what would happen if Islamist elements in the Pakistani army gained more control than they have now and started cooperating with Islamist groups more seriously?  If the U.S. withdrew from the region and radicals claimed victory, would all this stop being a game and start becoming all too real?

Nothing is impossible, but at its core this is just a sophisticated version of the same domino theory that dominated U.S. thinking in Southeast Asia in the 50s and 60s.  That led us into a disastrous war then, and it could do the same now if the Obama administration starts getting too wrapped up in febrile thinking like this.  After all, if you assume enough dominos, you can come to just about any conclusion you want.  I sure hope they're not taking this more seriously than it deserves.

More in the same vein from Michael Cohen here.

Headline of the Day

| Fri Aug. 28, 2009 11:52 AM EDT

From the Los Angeles Times this morning:

L.A. Targets Illegal Cheese

It's all about unpasteurized Mexican cheese, of course, which is "spirited into the country in suitcases and is then sold door to door to residents or restaurants and at open air markets out of coolers."  The foodies love it:

Many people know its provenance is illegal but think it tastes better. Jonathan Gold, the Pulitzer Prize-winning L.A. Weekly food critic, said he prefers it.  "I will admit that there are some groceries . . . where you do kind of buy cheese under the table, and it tastes better," Gold said. "If you're the sort of person who believes milk has a soul to it, which I guess I am, then pasteurizing is taking something away." As for the potential danger posed by unpasteurized cheese, Gold added: "Life is filled with risks."

I guess the LAT's own food critic wasn't willing to own up to buying illegal cheese under the table.  Coward.

Secrecy and Executive Power

| Fri Aug. 28, 2009 2:08 AM EDT

Today we get some bad news on the executive power front:

The Obama administration will largely preserve Bush-era procedures allowing the government to search — without suspicion of wrongdoing — the contents of a traveler's laptop computer, cellphone or other electronic device, although officials said new policies would expand oversight of such inspections.

...."It's a disappointing ratification of the suspicionless search policy put in place by the Bush administration," said Catherine Crump, staff attorney for the American Civil Liberties Union. "It provides a lot of procedural safeguards, but it doesn't deal with the fundamental problem, which is that under the policy, government officials are free to search people's laptops and cellphones for any reason whatsoever."

And also a bit of good news, from a ruling in a lawsuit brought against the CIA by a DEA agent, Richard Horn, and his lawyer, Brian Leighton:

In a highly unusual legal step, a federal judge has ordered the government to grant an attorney a security clearance so he can represent a disgruntled former narcotics officer in a lawsuit against a former CIA officer...."The deference generally granted the executive branch in matters of classification and national security must yield when the executive attempts to exert control over the courtroom," U.S. District Judge Royce Lamberth wrote in an order issued late Wednesday.

...."It is fabulous for many reasons, not the least of which is the judge doesn't believe anything the government is saying," Leighton said Thursday of the new ruling.

....In his July ruling, Lamberth denounced certain CIA and Justice Department officials for having "handcuffed the court" with delay tactics and inaccurate statements. His latest ruling similarly chastises Justice Department attorneys for "continued obstinance" and "diminished credibility."

The Horn/Leighton lawsuit has been going on since 1994.