2009 - %3, February

Smoke and Mirrors

| Fri Feb. 20, 2009 2:15 PM EST | Scheduled to publish Fri Feb. 20, 2009 2:24 PM EST
No more smoke and mirrors for the Obama administration!

For his first annual budget next week, President Obama has banned four accounting gimmicks that President George W. Bush used to make deficit projections look smaller. The price of more honest bookkeeping: A budget that is $2.7 trillion deeper in the red over the next decade than it would otherwise appear, according to administration officials.

The new accounting involves spending on the wars in Iraq and Afghanistan, Medicare reimbursements to physicians and the cost of disaster responses. But the biggest adjustment will deal with revenues from the alternative minimum tax, a parallel tax system enacted in 1969 to prevent the wealthy from using tax shelters to avoid paying any income tax.

....“The president prefers to tell the truth,” said [Peter R. Orszag, director of the Office of Management and Budget], “rather than make the numbers look better by pretending.”

This is good.  Seriously.  It really is.  The cynical among us, however, might note that highballing the current deficit also makes it a lot easier to show progress in reducing it in the future.  Not that that ever occurred to them, I'm sure.

Advertise on MotherJones.com

Eric Holder Thinks Barack Obama Is Kidding Himself

| Fri Feb. 20, 2009 1:45 PM EST

I'm glad Dayo Olopade wrote about Eric Holder's speech to his staff at the Department of Justice. Holder tackles race in America in a remarkably straight-forward and clear-eyed way. Dayo calls it "confrontational," and indeed, it's hard to read sentences like these -- "in things racial we have always been and continue to be, in too many ways, essentially a nation of cowards" -- without thinking that perhaps Eric Holder has been holding something inside that he's wanted to yell at the top of his lungs for a long time.

These lines from Holder --

"On Saturdays and Sundays, America in the year 2009 does not, in some ways, differ significantly from the country that existed some 50 years ago."

"The history of the United States in the nineteenth century revolves around a resolution of the question of how America was going to deal with its black inhabitants."

"This nation has still not come to grips with its racial past nor has it been willing to contemplate, in a truly meaningful way, the diverse future it is fated to have..."

-- are so clearly at odds with Obama's re-telling of American history as a shared journey and his vision of America's future as one of shared sacrifice (and a resulting shared success) that it almost feels as though Holder is very slyly calling his boss a liar.

But we always knew that Obama's vision of race in this country, and his implied suggestion that different races could come together because of his election, was a bit too fanciful, didn't we? I think a lot of liberals knew that Eric Holder's America is the real America, but chose to believe instead in Barack Obama's America. And maybe that's not a politician using the self-deception of millions of Americans for his own gain. Maybe that's a leader inspiring people to see a better and more just alternative.

Inflating Your Troubles Away

| Fri Feb. 20, 2009 1:43 PM EST
Michael Kinsley is understandably skeptical that once we've stimulated our way out of the recession we'll all suddenly see the light and begin saving more and consuming less.  So what will happen instead?

There is another way. If it's not the actual, secret plan, it will be an overwhelming temptation: Don't pay the money back. So far, even as one piggy bank after another astounds us with its emptiness, there have been only the faintest whispers about the possibility of an actual default by the U.S. government. Somewhat louder whispers can be heard, though, about the gradual default known as inflation. Just three or four years of currency erosion at, say, 10 percent a year would slice the real value of our debt — public and private, U.S. bonds and jumbo mortgages — in half.

Inflating away debts is a time honored tradition, but hasn't its time passed in the developed world?  Most domestic debts (adjustable mortgages, credit card rates, etc.) are tied to LIBOR or the prime rate, which generally follow the inflation rate.  So if inflation goes up, so do your payments.  No help there.  As for foreign debt, inflation would weaken the dollar — assuming arguendo that other countries all kept their inflation in check at the same time — but that would cause interest rates to rise in response.  A weaker dollar would help exports and reduce domestic consumption, which is good, but higher interest rates on treasury bonds would make our fiscal situation worse, not better.  So there's no help there either.

Do I have this right?  Or is Kinsley right to be concerned?  Isn't inflation hedging too built in to our current economic system to offer the kind of benefit he suggests?

Abortion Legislation Update

| Fri Feb. 20, 2009 1:34 PM EST

Yesterday two measures included in the slew of bills across the country that would require women to view an ultrasound before having an abortion were shot down in a Virginia Senate committee. One measure would have required women to look at an image of the fetus on the day of the abortion; the other would have forced doctors to offer to anesthetize the fetus.

In related abortion news, the North Dakota House gave fertilized human eggs the legal rights of human beings. The bill now goes to the Senate for review.

The Chicago Tea Party

| Fri Feb. 20, 2009 1:01 PM EST

I guess this is the rant of the day: Rick Santelli on CNBC calling for a "Chicago Tea Party" because Barack Obama has the temerity to want to help underwater homeowners.  Ezra Klein comments:

Santelli sells himself as a sort of financial sector Howard Beale: He's mad as hell, and he's not going to take it anymore. The financial industry is tired of having to clean up after someone else's mess!

....But watching the traders bray and cheer as Santelli calls for the streets to run green with the equity of the working class is an astonishing insight in the psychology of the crisis. These guys feel betrayed. America let them down!....They should lose their houses. Wall Street is tired of being ground under the thumb of the lower middle class. This country has coddled those losers long enough, and see where it's gotten us.

It's not fair to say that these folks only get upset when it's homeowners being bailed out.  After all, there's been plenty of righteous fury over the bank bailouts too.  But there's definitely a different sense to this: it's closer, more personal.  Wall Street being bailed out is one thing: it's infuriating, but in the end you just shrug your shoulders and figure this is the way the world works.  But homeowners?  Your neighbors?  The guy who installed fancy granite countertops and a new wet bar and then mocked you for carefully husbanding your money instead of living the good life?  He's going to get bailed out?  WTF?

This has always been the soft underbelly of bailing out homeowners.  It's a good idea both on broad economic grounds and on social justice grounds, but the fact is that there's no way to make it 100% fair.  There are going to be some people who get government help who don't deserve it.  And some of those people aren't going to be bankers a thousand miles away, they're going to be people you personally know and loathe.  And that's hard to take.

In the end, I think Santelli is channeling the reaction of a small minority.  Stabilizing the mortgage market and helping people in trouble is the right thing to do even if there's no way to get the focus laser perfect.  But watch out for the demagogues while you're doing it.

UPDATE: More here.

Is Obama's "Fiscal Responsibility Summit" a Sneak Attack?

| Fri Feb. 20, 2009 12:28 PM EST

Liberals are worried that next Monday's "fiscal responsibility summit," hosted by the Obama Administration, will be two things they don't like: (1) yet another sop to conservatives, and (2) the beginning of a rightward shift on entitlement reform. Will the Obama team embrace the center-right consensus that Social Security is in crisis and that the only way to fix it is to cut benefits?

Ezra Klein argues that the Obama folks understand that Social Security has little bearing on America's long-term financial solvency, and that they will use the summit to make the case that health care reform is the way to ease our entitlement problems.

That, basically, has been Orszag's project: Talk a lot about the health care crisis and longer-term problems in the budget and get people to stop talking about an illusory crisis in a made-up program called socialsecurityandmedicareandmedicaid. Because what Orszag and Krugman both realize is that Social Security's unfunded liabilities only look like the sort of problem you need to "fix" if you're mixing it in with Medicare's unfunded liabilities. If there's an "entitlements problem" that requires an "entitlements commission" then that will cut Social Security and Medicare and Medicaid. If there's no "entitlements problem" and instead a health reform problem and some small questions about a politically electric program, then what you get is health reform -- which is also a way to slow Medicaid and Medicare growth without resorting to cuts -- and an end to the fear-mongering on Social Security.

Let's hope the Obama team is this savvy. It would be pretty remarkable if they can channel the Social-Security-is-a-crisis! hysteria and turn it into even more energy behind the cause of universal health care.

Advertise on MotherJones.com

Chart of the Day - 2.20.2009

| Fri Feb. 20, 2009 12:22 PM EST
John Pfaff had an article in Slate yesterday that takes on "five myths" about prison reform.  I don't have much to say about the article in general, but it did have one very interesting factlet about America's sky-high incarceration rate:

More strikingly, if we look back historically at the lockup rate for mental hospitals as well as prisons, we have only just now returned to the combined rates for both kinds of incarceration in the 1950s. In other words, we're not locking up a greater percentage of the population so much as locking people up in prisons rather than mental hospitals.

This comes from a paper written a couple of years ago by Bernard Harcourt, who says that it's only half true to say that American incarceration rates skyrocketed starting in the 70s.  What really happened, he says, is that we've had high incarceration rates for most of the 20th century, but it was originally split between a small number of people in prisons and a much larger number of people in mental institutions.  In the 60s we suddenly emptied the mental hospitals, crime soared, and then in the 70s we started putting more people in prison.  The end result is an inversion: the incarceration rate today is about the same as it was in the 50s, but we have a small number of people in mental hospitals and much larger number of people in prison.

Harcourt discussed these findings in a series of posts at the Volokh Conspiracy back in 2007, making the point that social science research that focuses strictly on the prison population might be missing the larger picture: "Since practically none of our studies on prisons, guns, abortion, education, unemployment, capital punishment, etc., controls for institutionalization writ large, most of what we claim to know about these effects may be on shaky ground."

If you're interested in this kind of thing, the whole discussion is worth reading.  I don't have the background to endorse Harcourt's findings one way or the other, but the raw data is pretty interesting.  It's worth a look.

UPDATE: Crime and punishment expert Mark Kleiman responds here.  He says there's much less to this than meets the eye, and adds, via email: "The explosion of drive-by shootings 1985-1994 simply can't be blamed on de-institutionalization.  More generally, adult homicide has been falling since the early 1970s; it's youth homicide that surged and receded."

Taxing Drivers

| Fri Feb. 20, 2009 11:48 AM EST
Transportation Secretary Ray LaHood wants to tax the number of miles you drive, not the amount of gasoline you buy:

"We should look at the vehicular miles program where people are actually clocked on the number of miles that they traveled," the former Illinois Republican lawmaker said.

...."What I see this administration doing is this — thinking outside the box on how we fund our infrastructure in America," he said.

I'm with Atrios on this: it's a dumb idea.  There's a place for London-style congestion charges in crowded urban cores, but outside of that a gas tax and a VMT tax are practically the same thing.  The only real difference is that a VMT tax isn't remotely feasible, and won't be for years, while we could raise the gas tax right now if we wanted to.  So jabbering about a VMT tax is basically just a good way to avoid taking any serious action to reduce gasoline consumption.

What's more, in some ways a gasoline tax is better than a VMT tax anyway.  A VMT tax motivates you to drive less, which is great, but it doesn't motivate you to go out and buy a fuel-efficient car.  A gas tax does both.  It's true that as cars become more fuel efficient — and as electric cars displace gasoline cars — the revenue from a gas tax will go down, but there's an easy fix for that: raise the tax. That accomplishes the same revenue smoothing as a VMT tax, and does it with no muss and no fuss.

Eventually, electric cars will become widespread enough that we'll need to figure out how to make them pay for using the roads even though they don't pay any gas taxes.  Maybe the answer will be VMT, maybe it will be something else.  But that's years away.  So study away, but in the meantime if you're serious about changing driving habits, raising the gas tax is the only serious alternative.

NAFTA Posturing

| Fri Feb. 20, 2009 11:01 AM EST
My overall sense is that Barack Obama is better than most politicians at saying what he really believes and avoiding outright pandering to vote-rich interest groups.  But everyone has his limits, and I never for a second believed he was serious when he ripped into NAFTA before union audiences during the Ohio primary.  And he wasn't:

President Obama warned on Thursday against a "strong impulse" toward protectionism while the world suffers a global economic recession and said his election-year promise to renegotiate the North American Free Trade Agreement on behalf of unions and environmentalists will have to wait.

....The president's message served as a reminder of last year's private assessment by Canadian officials that then-candidate Obama's frequent criticism of NAFTA was nothing more than campaign speeches aimed at chasing support among Rust Belt union workers.

"Much of the rhetoric that may be perceived to be protectionist is more reflective of political maneuvering than policy," the Canadians concluded in a memo after meeting with Austan Goolsbee, a senior campaign aide and now a member of Obama's Council of Economic Advisers.

Obama is fundamenally a liberal technocrat.  His biggest sin was never a lack of support for open trade, but simply the fact that faced with a close primary in a big state, he succumbed to demagogery — which just goes to show that even the king of "no drama" has his limits when the presidency of the United States is on the line.

Still, no harm, no foul.  The only person who was hurt by this was Hillary Clinton, who spent the Ohio primary bashing NAFTA just as loudly — and just as insincerely — as Obama.  If there's anyone out there who believes she meant what she said about NAFTA any more than Obama did, let me know.  I've got a bridge I'd like to sell you with some nice option ARM financing......

The First Consequence of the GOP's Stimulus Stonewall

| Fri Feb. 20, 2009 10:03 AM EST
We knew there would repercussions for the GOP's decision to vote against the stimulus bill en masse (provided that the economy improves), but I definitely didn't think it would be this quick. A Republican congressman in Louisiana's 2nd district, which is reliably Democratic, is facing a recall petition because of his No vote.

The kicker? The congressman is Anh "Joseph" Cao, one of a very small group of minority lawmakers in the GOP and a man who's victory in a special election caused House Minority Leader John Boehner to crow "The Future is Cao."

Cao originally promised to vote for the stimulus bill, saying, "I'm voting along what my conscience dictates and the needs of the 2nd Congressional District dictate, even if I were to be the only member of the GOP to vote for the stimulus package." He was goaded into changing his vote by the Republican leadership. Now his failure of conscience may cost him.

Update: Some interesting numbers, in light of this topic: "The [approval rating] for Congressional Democrats is at 49%-45%, while Republicans are at 33%-59%.... Only 30% say Obama hasn't done enough to cooperate with Republicans in Congress -- the GOP base vote, basically -- while 62% say he's doing the right amount and 6% say it's been too much. Flipping it around, only 27% say Republicans have done enough to cooperate with Obama."